The ACIT, Circle-2,, Bhavnagar v. M/s. Vrujbhumi Cotton Industries, Mahuva

ITA 2210/AHD/2008 | 2004-2005
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 221020514 RSA 2008
Bench Ahmedabad
Appeal Number ITA 2210/AHD/2008
Duration Of Justice 3 year(s) 1 month(s) 12 day(s)
Appellant The ACIT, Circle-2,, Bhavnagar
Respondent M/s. Vrujbhumi Cotton Industries, Mahuva
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 22-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2004-2005
Appeal Filed On 10-06-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVNESH SAINI JUDICIAL MEMBER) ITA NO.2210/AHD/2008 [ASSTT. YEAR : 2004-2005] ACIT CIR.2 BHAVNAGAR. VS. M/S.VRUJBHUMI COTTON INDUSTRIES BYE PASS BHAVNAGAR HIGH WAY NR. GANESH MANDIR MAHUVA. ITA NO.2215/AHD/2008 [ASSTT. YEAR : 2004-2005] M/S.VRUJBHUMI COTTON INDUSTRIES BYE PASS BHAVNAGAR HIGH WAY NR. GANESH MANDIR MAHUVA. VS. ACIT CIR.2 BHAVNAGAR. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI S.K. MEENA ASSESSEE BY : SHRI S.N. SOPARKAR WITH SHRI BANDISH SOPARKAR O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THESE ARE REVENUES AND ASSESSEES APPEALS AGAINST THE ORDER OF LEARNED COM MISSIONER OF INCOME- TAX (APPEALS)-XX AHMEDABAD DATED 27.02.2008 ARISIN G OUT OF THE ORDER OF THE AO UNDER SECTION 143(3) OF THE INCOME TAX AC T 1961. SINCE THE ASSESSEE BEING SAME FOR THE SAKE OF CONVENIENCE W E DISPOSE OF BOTH THE APPEALS BY THIS COMMON ORDER. ITA NO.2210/AHD/2008 (REVENUES APPEAL): 2. IN THIS APPEAL FOLLOWING GROUNDS ARE RAISED: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION MADE ON ACCOUNT OF EXCESS STO CK OF ITA NO.2210 AND 2215/AHD/2008 -2- RS.19 65 223/- AND DIRECT TO ACCEPT THE EXCESS STOC K DECLARED BY THE ASSESSEE. 2. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE TO IGNORE THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NO T SATISFACTORY/ACCEPTABLE TO THE AO. THE ADDITION WA S MADE ON THE BASIS OF STATEMENT GIVEN BY SHRI BHARATBHAI NARANDA S CHUDASMA WHO HAS ADMITTED THE INCOME OF RS.35 LAKHS ON ACCOU NT OF VALUE OF EXCESS STOCK. 3. AT THE TIME OF HEARING BEFORE US IT IS STATED B Y THE LEARNED DR THAT SURVEY HAD TAKEN PLACE AT THE ASSESSEES BUSINESS P REMISES ON 26-2-2004 AND DURING THE COURSE OF SURVEY IT WAS FOUND THAT THE PHYSICAL STOCK AVAILABLE WITH THE ASSESSEE IS MORE THAN THE STOCK SHOWN IN THE BOOKS OF ACCOUNTS. 4. IN THE STATEMENT THE ASSESSEE ALSO ADMITTED THE AVAILABILITY OF SUCH EXCESS STOCK. THE SURVEY PARTY HAS WORKED OUT THE EXCESS STOCK OF ONE LAKH KG. WHICH WAS VALUED AT RS.35 LAKHS AND THE PA RTNER OF THE ASSESSEE- FIRM ACCEPTED SUCH EXCESS STOCK AND SURRENDERED THE SUM OF RS.35 LAKHS AS INCOME OF THE ASSESSEE-FIRM. HOWEVER IN THE RE TURN OF INCOME THE ASSESSEE HAS DISCLOSED THE STOCK OF RS.15 34 777/-O NLY THEREFORE THE AO MADE THE ADDITION FOR THE DIFFERENCE AMOUNTING TO R S.19 65 223/-. THAT THE CIT(A) ACCEPTED THE ASSESSEES EXPLANATION WHIC H WAS CLEARLY AN AFTER-THOUGHT. HE THEREFORE SUBMITTED THAT THE ORD ER OF THE CIT(A) SHOULD BE REVERSED AND THAT OF THE AO MAY BE RESTORED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OTH ER HAND POINTED OUT THAT DURING THE SURVEY THE DIFFERENCE WORKED OUT WA S ON ESTIMATE BASIS. IT WOULD ALSO BE EVIDENT FROM THE FACT THAT THE EXCESS STOCK WAS DETERMINED IN THE ROUND FIGURE OF ONE LAKH KGS. THAT SURVEY H AD TAKEN PLACE ON 26-2- ITA NO.2210 AND 2215/AHD/2008 -3- 2004 WHILE THE COMPUTERISED ACCOUNTS OF THE ASSESSE E WERE AVAILABLE UPTO 31-1-2004. THAT THE SURVEY PARTY MADE WORKING OF T HE PURCHASE AND SALE IN THE MONTH OF FEBRUARY AND ON THAT BASIS DETERMIN ED THE BOOK STOCK ON THE DATE OF SURVEY. IN SUCH WORKING SOME MISTAKE W AS DONE BY THE SURVEY PARTY WHICH RESULTED IN INCORRECT CALCULATI ON OF EXCESS STOCK. THAT AFTER THE DATE OF SURVEY BUT BEFORE THE FILIN G OF THE RETURN THE ASSESSEE WORKED OUT THE CORRECT EXCESS STOCK AND WH ATEVER WAS CORRECT EXCESS STOCK WAS DULY INCLUDED IN THE STOCK AS WEL L AS THE INCOME OF THE ASSESSEE. THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE FURNISHED COMPLETE WORKING OF THE EXCESS STOCK AND THE AO HAS NOT POINTED OUT ANY DISCREPANCY IN SUCH WORKING. THEREFORE THE CIT(A) RIGHTLY DELETED THE ADDITION MADE BY THE AO. 6. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THA T THE CIT(A) DELETED THE ADDITION MADE BY THE AO WITH THE FOLLOWING FIND INGS: 4.3 I HAVE CAREFULLY GONE THROUGH THE FACTS OF THE CASE AND WRITTEN SUBMISSION MADE BY THE ID. COUNSEL. IT IS S EEN FROM THE FACTS ON RECORD AND SUBMISSION OF THE APPELLANT THE ADDI TION IS MADE BY THE AO ON THE BASIS OF STOCK PARTICULARS PREPARED B Y THE SURVEY TEAM AND ADMISSION MADE BY ONE OF THE PARTNERS ON T HAT BASIS. THE AO HAS NOT CONSIDERED APPELLANT'S EXPLANATION IN T HE RETURN OF INCOME NOR WRITTEN SUBMISSION MADE DURING THE COURS E OF ASSESSMENT PROCEEDINGS WHICH INCLUDED STOCK SUMMARY AND STATEMENT OF POSITION OF STOCK AS PER BOOKS OF ACCO UNT AND PHYSICAL STOCK AS ON THE DATE OF SURVEY I.E. 26.02.2004 AND AS ON 31.03.2004. FROM THE DETAILS OF STOCK IT IS SEEN TH AT AS ON THE DATE OF SURVEY ACTUAL DIFFERENCE I.E. EXCESS STOCK WAS 45.361 KGS. ONLY AS AGAINST 100 000 KGS. WORKED OUT BY SURVEY TEAM. FURTHER WHEN SURVEY WAS CONDUCTED BOOKS WERE WRITTEN ONLY UP TO 31ST JANUARY 2004 AND SURVEY TEAM WORKED OUT THE STOCK AS PER B OOKS BY MAKING SUMMARY OF BILLS ETC. MANUALLY AND THEREFORE TOTALING ITA NO.2210 AND 2215/AHD/2008 -4- MISTAKE IN PREPARING SUMMARY WERE CREPT. IT IS FOUN D THAT THE AO HAS MADE THE IMPUGNED ADDITION OF RS.19 65 223/- ON LY ON THE BASIS OF STATEMENT OF PARTNER RECORDED DURING SURVE Y. HE HAS NOT EXAMINED THE VERACITY OF DOCUMENTS FURNISHED TO REC ONCILE THE STOCK AND PROVED THAT EXCESS STOCK WORKED OUT BY TH E APPELLANT CONSIDERING PURCHASES OF GOODS SUPPORTED BY RELEVAN T DOCUMENTS WAS INCORRECT. IT IS SEEN THAT DETAILS SUBMITTED BE FORE THE AO IN SUPPORT OF STOCK RECONCILIATION IS NOT PROVED TO BE UNRELIABLE. THE ASSESSING OFFICER HAS NOT GIVEN ANY ADVERSE COMMENT S ON RECONCILIATION GIVEN BEFORE HIM BY THE APPELLANT. T HEY CANNOT BE IGNORED ONLY BECAUSE ADMISSION WAS MADE BY THE PURC HASER AT THE TIME OF SURVEY. I ALSO FIND THAT THE APPELLANT'S BO OKS OF ACCOUNT ARE AUDITED BY THE CHARTERED ACCOUNTANT AND THAT NO DEF ECTS OR DISCREPANCIES ARE POINTED BY THE AUDITOR NOR THE A O HAS POINTED OUT ANY DISCREPANCY IN THE BOOKS OF ACCOUNT OF THE APPELLANT INCLUDING STOCK PARTICULARS. IT HAS BEEN HELD IN VA RIOUS JUDICIAL PRONOUNCEMENTS INCLUDING HONBLE ITAT AHMEDABAD IN THE CASE OF ASHOK MANILAL THAKKAR (SUPRA) THAT IN THE ABSENCE O F ANY MATERIAL TO PROVE THAT THE INCOME DISCLOSED BY THE ASSESSEE IN HIS STATEMENT UNDER S. 133A(3) WAS ACTUALLY EARNED NO ADDITION C OULD BE MADE. 4.4 CONSIDERING THE TOTALITY OF FACTS I DO NOT HESI TATE TO HOLD THAT THE ADDITION WAS MADE WITHOUT PROPER APPRECIATION O F ENTIRE FACTS PUT FORTH BEFORE THE ASSESSING OFFICER DURING THE C OURSE OF ASSESSMENT PROCEEDINGS AS ALSO THE FACTS BROUGHT ON RECORD AND SUBMISSION MADE. I THEREFORE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE ON THE ACCOUNT EXCESS STOCK AND A CCEPT THE EXCESS STOCK AS DECLARED BY THE APPELLANT IN THE RE TURN. THIS GROUND OF APPEAL IS THEREFORE ALLOWED. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDES A ND THE FACTS OF THE CASE WE FIND NO INFIRMITY IN THE ORDER OF THE CIT( A). THE ASSESSEE HAS NOT RETRACTED THE STATEMENT GIVEN AT THE TIME OF SU RVEY BUT HAS ONLY MADE THE CORRECT WORKING OF THE EXCESS STOCK. SINCE NO MISTAKE IS POINTED OUT BY THE REVENUE IN THE WORKING OF THE EXCESS STOCK B Y THE ASSESSEE WE DO NOT FIND ANY JUSTIFICATION FOR NOT ACCEPTING THE SA ME AND MAKING THE ADDITION ON THE BASIS OF EXCESS STOCK WORKED OUT AT THE TIME OF SURVEY IN ITA NO.2210 AND 2215/AHD/2008 -5- HURRIED MANNER OR ON ESTIMATED BASIS. IN VIEW OF T HE ABOVE WE UPHOLD THE ORDER OF THE CIT(A) ON THIS POINT AND DISMISS T HE REVENUES APPEAL. ITA NO.2215/AHD/2008 (ASSESSEES APPEAL) 7. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: I) THE LD.CIT(A) ERRED IN FACTS AS ALSO IN LAW IN SUST AINING THE DISALLOWANCE OF RS.4 53 836/- MADE BY AO OUT OF REMUNERATION/SALARY PAID TO PARTNERS. THE DISALLOW ANCE MAY KINDLY BE DELETED. 8. AT THE TIME OF HEARING BEFORE US IT IS STATED B Y THE LEARNED COUNSEL THAT FOR THE COMPUTING THE REMUNERATION TO THE PART NERS THE AO HAS REDUCED THE EXCESS STOCK DECLARED IN THE TRADING AC COUNT FROM THE PROFIT OF THE BUSINESS. HE HAS STATED THAT THE EXCESS STOCK WAS DECLARED IN THE TRADING ACCOUNT AND THEN THE RESULTANT NET PROFIT W AS DECLARED AS BUSINESS INCOME. IN THE COMPUTATION OF THE INCOME THE AO A CCEPTED THE SAME AS BUSINESS INCOME HOWEVER WHILE WORKING OUT THE REM UNERATION TO PARTNERS HE REDUCED THE SAME FROM THE PROFIT OF THE BUSINESS. HE HAS STATED THAT WHEN THE BUSINESS INCOME SHOWN BY THE A SSESSEE IS ACCEPTED AND THERE IS NO ASSESSMENT UNDER THE HEAD INCOME F ROM OTHER SOURCES ADOPTING OF DIFFERENT YARDSTICK BY THE AO FOR CALCU LATION OF THE REMUNERATION OF THE PARTNERS WAS UNJUSTIFIED. THE LEARNED DR ON THE OTHER HAND RELIED UPON THE ORDER OF THE AO. 9. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL PLACED BEFORE US. WE FIND THAT AT PAGE NO.15 OF THE ASSES SEES PAPER BOOK THERE IS STATEMENT OF TOTAL INCOME FURNISHED BY THE ASSES SEE WHICH READS AS UNDER: ITA NO.2210 AND 2215/AHD/2008 -6- AMOUNT RS AMOUNT RS. BUSINESS INCOME BUSINESS & PROFESSION. (AS PER ANNEXURE) 1196 000 11 96 000 GROSS TOTAL INCOME: LESS: DEDUCTIONS UNDER CHAPTER VI-A (AS PER CHAPTER VIA-ANNEXURE) 11 96 000 2 73 928 9 22 072 TOTAL INCOME (ROUNDED U/S.288A) 9 22 070 THUS THE ENTIRE SUM OF RS.9 22 070/- WAS OFFERED A S BUSINESS INCOME. THE AO COMPUTED THE INCOME OF THE ASSESSEE IN THE F OLLOWING MANNER: INCOME AS PER STATEMENT OF INCOME. 9 22 070 ADD: (A) STOCK DIFFERENCE DECLARED DURING THE SURVEY U/S.133(1)(B) AS DISCUSSED IN PARA 9.01 OF THE ORDER RS.19 65 223 (2) OUT OF REMUNERATION AS DISCUSSED IN PARA 9.02 OF THE ORDER. RS.4 53 836 RS.24 19 059 ASSESSED TOTAL INCOME RS.33 41 129 I.E. RS.33 41 130 FROM THE ABOVE IT IS EVIDENT THAT THE AO ACCEPTED THE INCOME OF RS.9 22 070/- DECLARED BY THE ASSESSEE AS PER THE S TATEMENT OF INCOME FURNISHED BY THE ASSESSEE. MEANING THEREBY THE BU SINESS INCOME OF RS.9 22 070/- DISCLOSED BY THE ASSESSEE WAS ACCEPTE D AS IT IS. IN THE SAME INCOME THE AO MADE FURTHER ADDITION. THUS THE EN TIRE INCOME WAS ASSESSED AS BUSINESS INCOME AND NO INCOME WAS ASSES SED UNDER THE HEAD INCOME FROM OTHER SOURCES. THE AO CANNOT ADOPT D IFFERENT YARDSTICK FOR DETERMINING ALLOWABILITY OF REMUNERATION TO PAR TNER. WE THEREFORE ITA NO.2210 AND 2215/AHD/2008 -7- DELETE THE DISALLOWANCE MADE BY THE AO OUT OF REMUN ERATIONS PAID TO PARTNERS. 6. IN THE RESULT REVENUES APPEAL IS DISMISSED WHI LE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY 2011 SD/ SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 22-07-2011 C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD