Shreya Grh Udyog, v. The Income tax Officer,Ward-2,, Nadiad

ITA 3144/AHD/2008 | 2004-2005
Pronouncement Date: 09-02-2012 | Result: Dismissed

Appeal Details

RSA Number 314420514 RSA 2008
Assessee PAN AASFS3024Q
Bench Ahmedabad
Appeal Number ITA 3144/AHD/2008
Duration Of Justice 3 year(s) 5 month(s) 5 day(s)
Appellant Shreya Grh Udyog,
Respondent The Income tax Officer,Ward-2,, Nadiad
Appeal Type Income Tax Appeal
Pronouncement Date 09-02-2012
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 01-04-2010
Date Of Final Hearing 06-02-2012
Next Hearing Date 06-02-2012
Assessment Year 2004-2005
Appeal Filed On 04-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI JM AND SHRI A. MOHAN A LANKAMONY AM) ITA NO.3144/AHD/2008 A. Y.: 2004-05 SHREYA GRUH UDYOG NR. BUS STATION UTARSANDA TAL. NADIAD DIST KHEDA PA NO . AASFS 3024 Q VS THE INCOME TAX OFFICER WARD 2 BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. T. THAKKAR AR RESPONDENT BY SHRI B. L. YADAV SR. DR DATE OF HEARING: 06-02-2012 DATE OF PRONOUNCEMENT: 09-02-2012 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV BARODA DATED 08 TH FEBRURY 2008 FOR ASSESSMENT YEAR 2004-05 CHALLENG ING THE ADDITION OF RS.7 62 538 MADE U/S 69B OF THE IT ACT. 2. EARLIER THIS APPEAL WAS DISMISSED IN DEFAULT VID E ORDER DATED 01-04-2010 WHICH ORDER WAS RECALLED BY ALLOWING THE MISC. APPLICATION OF THE ASSESSEE IN M.A.NO.107/AHD/2010 VIDE ORDER DATED 10-12-2010. THE APPEAL WAS THEREFORE RE-FIX ED FOR HEARING ON MERIT. ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 2 3. THE ASSESSEE CHALLENGED THE ADDITION OF RS.7 62 538 /- AND RS.83 588/- MADE BY THE AO U/S 69B OF THE IT ACT BE FORE THE LEARNED CIT(A). THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 30-10-2004 DECLARING TOTAL INCOME OF RS.2 68 908/-. SURVEY PROCEEDINGS U/S 133A OF THE IT ACT WAS CARRI ED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 27-08-2003. DU RING THE COURSE OF SURVEY IT WAS NOTICED THAT THERE WAS A STOCK DIF FERENCE OF RS.7 62 538/- BETWEEN THE STOCK AS PER BOOKS AND TH E PHYSICAL STOCK TAKEN AND FOUND AS ON THE DATE OF SURVEY. STATEMENT OF SHRI KANUBHAI HARMANBHAI PATEL SOLE RESPONSIBLE PERSON LOOKING AFTER THE BUSINESS AFFAIRS AND POWER OF ATTORNEY HOLDER W AS RECORDED WHEREIN; HE ADMITTED THE ABOVE EXCESS STOCK AND AGR EED TO PAY TAXES ON UNDISCLOSED EXCESS STOCK. IN ITS RETURN OF INCOME THE ASSESSEE CLAIMED THAT HE HAD DECLARED THE UNDISCLOS ED STOCK IN ITS CLOSING STOCK. THE AO WAS NOT SATISFIED BY THE METH OD OF DISCLOSURE MADE AND HELD THAT THE ENTIRE UNDISCLOSED AMOUNT SH OULD HAVE BEEN OFFERED FOR TAX IN THE ASSESSEES COMPUTATION OF IN COME. THE AO INVOKED JUDGMENT OF THE HONBLE GUJARAT HIGH COURT 247 ITR 290 AND STATED THAT THE INVESTMENT IN EXCESS STOCK IS T HE DEEMED INCOME U/S 69B OF THE IT ACT. THE AO THEREFORE MADE ADDI TION OF RS.7 62 538/- AS UNDISCLOSED INCOME OF THE ASSESSEE U/S 69B OF THE IT ACT. THE AO ALSO WORKED OUT THE DIFFERENCE OF ST OCK FOUND DURING THE COURSE OF SURVEY AND THE DETAILS FURNISHED AS P ER THE BOOKS OF ACCOUNTS AND NOTED THAT DIFFERENCE OF STOCK AS PER T HE BOOKS WORKS OUT TO BE RS.8 95 330/- AND NOT AS DISCLOSED FOR RS .7 62 538/-. THE AO ADDED RS.83 588/- BEGIN THE DIFFERENCE IN DISCLO SURE OF INCOME AS DEEMED INCOME U/S 69B OF THE IT ACT. BEFORE THE LEA RNED CIT(A) IT ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 3 WAS SUBMITTED THAT THE ASSESSEE HAD DURING THE COUR SE OF SURVEY DISCLOSED EXCESS PHYSICAL STOCK OF RS.7 62 538/- FO UND AT THE TIME OF SURVEY WHICH WAS INCLUDED IN THE CLOSING STOCK AT T HE YEAR END AND THE DETAILED EXPLANATION FOR THE SAME WAS A LSO GIVEN BEFORE THE AO. REGARDING ADDITION OF RS.83 588/- ON ACCOUN T OF DIFFERENCE IN SOCK THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTE D THAT THE STOCK DISCLOSED ON THE DAY OF SURVEY CANNOT BE REJECTED S TRAIGHTWAY BY SUBSTITUTION WITH ANOTHER FIGURE DUE TO THE REASON THAT IF THE ULTIMATE BOOK FIGURES ARE CONSIDERED THEN THE PHYSICAL STOCK LYING AT THE TIME OF SURVEY MAY ALSO HAVE TO BE RECTIFIED AS IT MAY A LSO CONSIST OF STOCK FOR WHICH BILLS WERE ON THAT DATE STILL TO BE RECEI VED OR BILLS ISSUED BUT GOODS NOT DISPATCHED. THE LEARNED COUNSEL FOR THE A SSESSEE SUBMITTED THAT THE DISCLOSURE WAS MADE AS THE ACCOU NTS WERE NOT READY AND THE PHYSICAL STOCK WITH BOOK STOCK COULD NOT BE RECONCILED. NOW AFTER RECTIFYING PHYSICAL STOCK FIGURE NO DIFFE RENCE IN DISCLOSED STOCK FIGURE CAN BE ARRIVED AND ADDITION OF RS.83 5 88/ U/S 69B OF THE IT ACT DESERVES TO BE DELETED. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IF THE BOOKS OF ACCOUNTS FORMED THE BASIS FOR CALCULATING THE ST OCK DIFFERENCE THE GROSS PROFIT OF THE CURRENT YEAR SHOULD BE TAKEN WH ICH IS AT 30% AND NOT 14.97% AND THAT IF THE SAME IS DONE THEN THE S TOCK DIFFERENCE GOES DOWN AND NO ADDITION IS CALLED FOR. 4. THE LEARNED CIT(A) CONSIDERING THE FACTS OF THE CASE FOUND MERIT IN THE CONTENTION OF THE ASSESSEE AS REGARDS ADDITION OF RS.83 588/- AND NOTED THAT THE FIGURES IN THE BOOKS OF ACCOUNTS CANNOT BE TAKEN TO SUIT THE CONVENIENCE OF THE AO. ADDITION OF ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 4 RS.83 588/- WAS ACCORDINGLY DELETED. THE LEARNED CI T(A) FURTHER WENT ON TO DECIDE THE REMAINING ADDITION OF RS.7 62 538/ - AND CONFIRMED THE ADDITION. HIS FINDINGS IN PARA 5.7 AND 5.8 IN T HE IMPUGNED ORDER ARE REPRODUCED AS UNDER: 5.7 I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORD ER AND SUBMISSIONS OF THE A. R. OF THE APPELLANT WITH REGARD TO THE A ADDITION OF RS.7 62 538/-. THE APPELLANTS PLEA THAT THE ASSESSING OFFICER HAS SOUGHT TO TAX INCOME TWICE IS NOT ACCEPTABLE. THE APPELLANT HAS BEEN FOUND IN POSSESSION OF EXCESS STOCK OF THE VALUE OF RS.7 62 538/-. THE INVESTMENT IN SUCH STOCK IS FROM SALES MADE OUT SIDE THE BOOKS OF ACCOUNTS. THIS AMOUNT SHOULD BE BROUGH T TO TAX AS IT CONSTITUTES SALES MADE OUTSIDE THE BOOKS OF ACCOUNTS. TO MY UNDERSTANDING THERE ARE TWO STAGES AT WHICH THE INCOME INVESTED IN UNACCOUNTED STOCK SHOU LD BE CONSIDERED FOR THE PURPOSE OF TAXATION. THE FIRS T STAGE IS THAT ENTIRE INCOME SHOULD BE BROUGHT TO TAX AS I T IS INCOME EARNED WHICH HAS NOT BEEN DISCLOSED BY THE APPELLANT. IN THE SECOND STAGE THE INCOME IS THEN INVESTED IN THE BUSINESS IN THE FORM OF STOCK WHICH SHOULD BE BROUGHT INTO BOOKS OF ACCOUNTS ON THE DATE OF S URVEY. REGULAR SALES SHOULD THEN BE MADE FROM THE BOOKS OF ACCOUNTS. THE G. P. EARNED ON THIS STOCK WOULD THEN BE OFFERED FOR TAX. 5.8 IN THE APPELLANTS CASE HE HAS ONLY OFFERED FOR TAX THE FRUIT OF THE UNACCOUNTED INCOME AND NOT THE UNACCOUNTED INCOME ITSELF. THE ASSESSING OFFICER WA S THEREFORE JUSTIFIED IN BRINGING TO TAX THE AMOUNT OF RS.7 62 538/-. AND THE SAME IS CONFIRMED. 4.1 THE LEARNED CIT(A) FURTHER CONSIDERED THE SUBMI SSION OF THE ASSESSEE THAT THE ABOVE ADDITION SHOULD NOT BE TREA TED AS DEEMED INCOME U/S 69B OF THE IT ACT AND IN PARA 5.9 OF THE ORDER HELD THAT THE ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 5 ADDITION SHOULD BE BROUGHT TO TAX AS BUSINESS INCOM E OF THE ASSESSEE AND NOT DEEMED INCOME U/S 69B OF THE IT ACT. 5. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LEARNED CIT(A) AND SUBM ITTED THAT NO DIFFERENCE IN CASH WAS FOUND IN SURVEY. NO EVIDENCE OF UNACCOUNTED SALES OR PURCHASES WAS FOUND. THE ASSESSEE HAS ALRE ADY INCLUDED THE ENTIRE EXCESS STOCK IN THE VALUATION OF THE CLO SING STOCK. THE AMOUNT OF SALES CANNOT REPRESENT INCOME OF THE ASSE SSEE AND AT THE MOST PROFIT COULD BE ADDED BY APPLYING GROSS PROFIT RATE AND SUBMITTED THAT SECTION 69B OF THE IT ACT IS NOT APP LICABLE TO THE CASE OF THE ASSESSEE. HE HAS SUBMITTED THAT SINCE EXCESS STOCK IS INCLUDED IN THE CLOSING STOCK THEREFORE GROSS PRO FIT HAS BEEN WORKED OUT AT 18.17% AS AGAINST 14.97% OF THE PRECEDING AS SESSMENT YEAR. 6. ON THE OTHER HAND THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT SINCE EXCESS S TOCK WAS NOT EXPLAINED THEREFORE ADDITION WAS RIGHTLY CONFIRME D BY THE LEARNED CIT(A). THE DR SUBMITTED THAT THERE IS NO DEPARTMEN TAL APPEAL FILED ON THIS ISSUE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. IT IS NOT IN DISPUTE THAT DURING THE COURS E OF SURVEY EXCESS STOCK WAS FOUND IN THE PREMISES OF THE ASSESSEE. T HE POWER OF ATTORNEY HOLDER OF THE ASSESSEE FIRM ALSO ADMITTED EXCESS STOCK IN HIS STATEMENT AND AGREED TO PAY TAXES ON UNDISCLOSE D EXCESS STOCK. THE ASSESSEE INSTEAD OF SURRENDERING THE ENTIRE EXC ESS STOCK FOR THE PURPOSE OF TAXATION AND TO PAY TAX THEREON TRIED TO EXPLAIN BEFORE THE ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 6 AO THAT THE SAME IS INCLUDED IN THE VALUE OF THE CL OSING STOCK. THE CONTENTION OF THE ASSESSEE WAS THUS NOT RIGHTLY ACC EPTED BY THE AUTHORITIES BELOW. THE ASSESSEE HAS DECLARED TOTAL INCOME OF RS.2 68 908/- IN THE RETURN OF INCOME AND HAS NOT D ISCLOSED THE VALUE OF EXCESS STOCK OF RS.7 62 538/- IN THE RETURN OF I NCOME. SINCE EXCESS STOCK WAS FOUND DURING THE COURSE OF SURVEY AND THE ASSESSEE AGREED TO PAY TAX THEREON BEING THE UNDISC LOSED EXCESS STOCK THE LEARNED CIT(A) WAS JUSTIFIED IN CONFIRMI NG THE ADDITION ON ACCOUNT OF BUSINESS INCOME OF THE ASSESSEE BECAUSE THE ASSESSEE HAS NOT DISCLOSED THE ENTIRE UNDISCLOSED INCOME IN THE RETURN OF INCOME SO FILED. SINCE EXCESS STOCK WAS GENERATED O UT OF UNACCOUNTED INCOME OF THE ASSESSEE THEREFORE THE ASSESSEE SHALL HAVE TO EXPLAIN THE SOURCE OF MAKING INVESTMENT IN EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. HOWEVER THE ASS ESSEE FAILED TO EXPLAIN THE SOURCES OF INVESTMENT IN EXCESS STOCK F OUND DURING THE COURSE OF SURVEY THEREFORE IT WAS RIGHTLY TAKEN A S INVESTMENT MADE IN EXCESS STOCK OUT OF UNACCOUNTED INCOME WHICH WAS NOT OFFERED FOR TAXATION. SINCE THE RETURNED INCOME ITSELF WAS LESS ER THAN THE AMOUNT OF EXCESS STOCK THEREFORE THE METHOD EMPLOYED BY THE ASSESSEE COULD NOT HAVE BEEN ACCEPTED BY THE AUTHORITIES BEL OW. ON EXCESS STOCK EVEN GROSS PROFIT RATE COULD NOT BE APPLIED B ECAUSE THE ENTIRE EXCESS STOCK WAS FROM UNACCOUNTED INCOME OF THE ASS ESSEE. IF THE THEORY OF THE ASSESSEE IS APPLIED IT WOULD RESULT THAT NO ADDITION COULD BE MADE OF THE AMOUNT DISCLOSED DURING THE CO URSE OF THE SURVEY FOR THE PURPOSE OF TAXATION. THE AO WAS THE REFORE JUSTIFIED IN COMPUTING THE BUSINESS INCOME OF THE ASSESSEE ON TH E FIGURE DISCLOSED IN THE RETURN OF INCOME AND BY MAKING FUR THER ADDITION OF ITA NO.2137 AND 3127/AHD/2007 DAVARIYA BROTHERS SURAT 7 RS.7 62 538/- ON ACCOUNT OF EXCESS STOCK FOR THE PU RPOSE OF TAXATION. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE VIEW THE LEARNED CIT(A) ON PROPER APPRECIATION OF T HE FACTS AND MATERIAL ON RECORD RIGHTLY CONFIRMED THE ADDITION. THE APPEAL OF THE ASSESSEE HAS NO MERIT AND IS ACCORDINGLY DISMISSED. 8. NO OTHER POINT IS ARGUED OR PRESSED. 9. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ABOVE. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR ITAT AHMEDABAD