The ACIT(OSD)., Circle-5,, Ahmedabad v. Parikh Enterprises Ltd.,, Ahmedabad

ITA 3337/AHD/2010 | 2007-2008
Pronouncement Date: 25-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 333720514 RSA 2010
Assessee PAN AAACP9275D
Bench Ahmedabad
Appeal Number ITA 3337/AHD/2010
Duration Of Justice 2 year(s) 10 month(s) 9 day(s)
Appellant The ACIT(OSD)., Circle-5,, Ahmedabad
Respondent Parikh Enterprises Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 25-10-2013
Date Of Final Hearing 15-10-2013
Next Hearing Date 15-10-2013
Assessment Year 2007-2008
Appeal Filed On 16-12-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMADABAD BEFORE SHRI N. S. SAINI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER ITA NO. 3337/AHD/2010 ASSESSMENT YEAR :2007-08 ACIT(OSD) CIRCLE-5 C.U. SHAH BUILDING ASHRAM ROAD AHMEDABAD. V/S . PARIKH ENTERPRISES PVT. LTD. PLOT NO. 442 GIDC ESTATE ODHAV AHMADABAD. PAN NO. A A A C P9 275 D (APPELLANT) .. (RESPONDENT) BY APPELLANT SHRI O. P. BATHEJA SR. D.R. /BY RESPONDENT SHRI J. M. SHAH A.R. /DATE OF HEARING 15.10.2013 /DATE OF PRONOUNCEMENT 25.10.2013 O R D E R PER : SHRI N. S. SAINI ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A)-XI AHMEDABAD DATED 28.10.2010. 2. THE SOLE GROUND OF APPEAL TAKEN BY HE REVENUE IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 19 19 952/- M ADE ON ACCOUNT OF EXCESS STOCK OF COPPER SCRAP AND DELETING THE ADDITION OF RS.10 86 248/- MADE ON ACCOUNT OF DIFFERENCE IN VALUATION OF IMPORTED COPP ER SCRAP. 3. THE BRIEF FACTS OF THE CASE ARE THAT A SURVEY U/ S. 133A WAS CONDUCTED ON 26.02.2007 AND EXCESS STOCK OF COPPER SCRAP OF 6 087 KGS. AMOUNT TO RS. 19 19 952/- WAS FOUND. FURTHER DIFFERENCE IN VALU ATION OF IMPORTED COPPER SCRAP OF RS.10 86 248/- WAS ALSO FOUND. THE SAME W AS OFFERED AS ADDITIONAL ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 2 INCOME VIDE STATEMENT RECORDED U/S. 133A ON 26.02.2 007 OF SHRI PARESH KRISHNAKANT PARIKH IN ANSWER TO QUESTION NUMBERS 19 AND 20. DURING THE COURSE OF ASSESSMENT PROCEEDING THE ASSESSEE SUBMI TTED THAT THERE IS NOTHING WHICH WAS TO BE DISCLOSED. THE DIFFERENCE IN STOCK AND VALUATION WAS NORMAL AND PART OF PRODUCTION WHEN BOOKS OF ACCOUN TS ARE NOT CLOSED AND ADJUSTED COMPLETELY FOR FINALIZATION. DURING SURVE Y NOTHING WAS FOUND AS UNDISCLOSED SALES UNDISCLOSED INVESTMENT ASSETS CASH STOCK SHORTAGE IN CASH AND UNEXPLAINED EXPENDITURE. IT WAS THEREFOR E SUBMITTED THAT THERE WAS NO DISCLOSURE. THE ASSESSING OFFICER DID NOT A CCEPT THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NO T FURNISHED ANY EVIDENCE INDICATING THAT THE SUBSEQUENT STOCK INVENTORY WAS WORKED OUT AFTER CONSIDERING EXCESS STOCK FOUND DURING THE COURSE OF SURVEY. THE A.O. OBSERVED THAT SIMILARLY THOUGH THE SOCK WAS VALUED AT MORE THAN THE PRICE WORKED OUT DURING SURVEY IN RESPECT OF IMPORTED COP PER SCRAP ASSESSEE HAD NOT FURNISHED TOTAL VALUATION OF STOCK INVENTORY AS ON DATE OF SURVEY AND AS ON 31.03.2007. ACCORDING TO THE A.O. CLOSING STOCK IN VENTORY DOES NOT REFLECT THE ABOVE POSITION IN AS MUCH AS IT IS NOT WORKED OUT A FTER CONSIDERING THE OPENING STOCK INVENTORY AS WELL AS VALUE ON CLOSING DATE OF SURVEY. THE EXPLANATION OF THE ASSESSEE WAS ONLY AN ACCOUNTING EXPLANATION AND WAS IN ROUND-ABOUT MANNERS. IT DOES NOT EXPLAIN WHY EXCES S STOCK WAS FOUND AND WHY THERE WAS DIFFERENCE IN VALUATION. THEREFORE THE ASSESSING OFFICER MADE ADDITION OF RS. 30 06 200/- TO THE INCOME OF THE AS SESSEE. 4. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A) AND SUBMITTED THAT THE ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 3 ASSESSEE HAS MAINTAINED COMPLETE STOCK RECORDS AND NO UNDISCLOSED STOCK/INVESTMENT WAS FOUND DURING SURVEY NO DEFECT S IN PURCHASE/SALE OPENING STOCK/TRADING ITEMS WAS FOUND DURING SURVEY . NO EXCESS CASH WAS ALSO FOUND. THE ASSESSEE MAINTAINED EXCISE STOCK R ECORDS AND NO DEFECT WAS FOUND IN THESE REGISTERS. IT WAS SUBMITTED THAT OU T OF MORE THAN 50 ITEMS OF RAW MATERIALS AND FINISHED GOODS ONLY STOCK OF COP PER SCRAP WAS ESTIMATED AND NOT ACTUALLY WEIGHTED BY THE SURVEY OFFICIALS. THE DIFFERENCE WAS 0.27% ONLY OF TOTAL CONSUMPTION OF 2200 M. T. IT WAS SUB MITTED THAT STOCK WAS VALUED EVERY MONTH ON THE BASIS OF EXCISE REGISTER TAKING BILL RECEIVED OF PRIOR MONTH. THE SURVEY PARTY TOOK THE VALUE AS ON 23.02 .2007 AS RS.251/- WHICH WAS NOT CORRECT AND THE CORRECT VALUE WAS RS.261.33 AS ON 31.01.2007. THE STOCK WAS VALUED ON 28.02.2007 ON REGULAR BASIS AND ON 31.03.2007 BY ACTUALLY TAKING PHYSICAL STOCK AS ON 31.03.2007 AT THE RS.274.87/-. IT WAS THEREFORE SUBMITTED THAT LOOKING TO THESE FACTS W HEN SURVEY PARTY ESTIMATED COPPER SCRAP AND ASKED THE ASSESSEE TO PAY TAX WHI CH WAS WITH THE UNDERSTANDING THAT THERE IS NO DISCLOSURE THE AMOU NT PAID WAS ADVANCE TAX. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE DELETED THE ADDITION BY OBSERVING AS UNDER: 3.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY TH E A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. ON PERUSAL OF THE MATERIALS ON RE CORD IT IS SEEN THAT DURING THE COURSE OF SURVEY INVENTORY OF STOCK WAS NOT TAKEN PHYSICALLY ON WEIGHMENT. ONLY ESTIMATE OF STOCK (TH AT TOO ONLY OF COPPER SCRAP) WAS MADE. QUESTION NOS. 19 AND 20 AND ANSWER THERETO IN THE STATEMENT RECORDED FROM THE M. D. OF THE APPELLANT ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 4 COMPANY (DURING THE COURSE OF SURVEY ON 26-02-2007] ARE REPRODUCED BELOW :- Q.NO.19 DURING THE COURSE OF SURVEY PROCEEDING ON PHYSICAL VERIFICATION OF COPPER SCRAP (AS PER ANNEXURE-5) TH ERE IS EXCESS STOCK OF 6087.500 KGS AMOUNTING TO RS. 19 19 952/-. AS PER BOOKS STOCK OF COPPER IS 1 13 443 KGS AND PH YSICAL STOCK TAKEN AS ON DATE COME TO 1 19 530 KGS. THE TO TAL VALUE OF EXCESS COPPER SCRAP IS WORKED OUT TO RS. 19 19 9 52/- TAKING THE RATE OF RS.315.39. YOU ARE THEREFORE REQUESTED TO GIVE THE EXPLANATION OF UNACCOUNTED EXCESS STOCK AND WHY THE SAME SHOULD NOT BE TREATED AS UN-ACCOUNTED INVESTMENT/IN COME OF THE CO. AND ADDED TO YOUR TOTAL INCOME FOR THE CURR ENT FINANCIAL YEAR ? ANS. OUR YEARLY CONSUMPTION OF COPPER SCRAP IS ABOUT 22 MT. WE TAKE PHYSICAL STOCK VERIFICATION ON ACTUAL WEIGH TMENT. THE DIFFERENCE OF 6087 KGS. IS ABOUT 0.27 OF TOTAL CONS UMPTION. AT THE END OF THE YEAR WE ALWAYS CONSIDER THE ACTUAL W EIGHT WHICH NORMALLY COVERS SUCH DIFFERENCE. HOWEVER AS O N DATE WE ACCEPT THE DIFFERENCE AND AGREE TO PAY THE TAX O N IT. Q.NO.20. ON VERIFICATION OF STOCK SUMMARY DATED 26-02-2007 IT IS NOTICED THAT RATE OF COPPER FOR IMPORTED SCRA P SHOWN IS RS. 251.22 WHEREAS PURCHASE BILL OF M/S. AI-BADWAWI FOR MONTH OF FEB. SHOWS THE RATE AS RS. 261.33. THUS THERE IS U NDER VALUATION OF COPPER SCRAP STOCK BY RS. 10.11 PER KG . TOTAL IMPORT OF COPPER SCRAP IS 107443 KGS. AND UNDER VAL UATION OF WHICH WORKS OUT TO RS.10 86 248/-. PLEASE GIVE EXPL ANATION IN THIS REGARD AND AS TO WHY THE SAME SHOULD NOT BE TR EATED AS UNDER VALUATION OF STOCK AND ADDED TO THE TOTAL INC OME OF THE CURRENT YEAR AS UNACCOUNTED/UNDERVALUATION OF STOCK . ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 5 ANS. NORMALLY ALL THESE MINOR DIFFERENCES ARE BEING TAKE N CARE OF WHILE MAKING FINAL STOCK TAKING. HOWEVER FO R EXISTING DIFFERENCE OF RS. 10 86 248/- WE AGREE TO PAY THE I NCOME-TAX ON IT. 3.2.1. AS SEEN FROM THE ABOVE REPLIES NO DISCLOSUR E OF ADDITIONAL INCOME WAS MADE. IT WAS STATED THAT ACTU AL WEIGHT OF STOCK WOULD BE TAKEN AT THE END OF THE YEAR. 3.2.2. AS REGARDS 'UNDER-VALUATION' OF IMPORTED CO PPER SCRAP AS AGAINST THE VALUE OF RS. 261.33 ADOPTED BY THE S URVEY PARTY THE VALUE ADOPTED BY THE APPELLANT AS ON 31-03-2007 WAS HIGHER AT RS. 274.87. 3.2.3. IN VIEW OF THE ABOVE FACTS I AM OF THE CONSIDERED VIEW THAT THE ADDITION MADE OF RS. 30 06 200/- (RS.19 19 952/- TOWARDS DIFFERENCE IN STOCK + RS. 10 86 248/- TOWARDS UNDER -VALUATION) IS NOT SUSTAINABLE. IT IS DELETED. THIS GROUND OF APPEAL I S ALLOWED. 5. LD. SR. D.R. SUPPORTED THE ORDER OF THE ASSESSIN G OFFICER. 6. ON THE OTHER HAND LD. A.R. OF THE ASSESSEE SUPP ORTED THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) AFTER APPRECIATING THE ENTIRE FACTS OF THE CASE HAS COME TO THE CONCLUSION THAT THERE W AS NO DISCLOSURE OF ADDITIONAL INCOME AND THAT THE ASSESSEE SUBMITTED T HAT ACTUAL PHYSICAL STOCK WOULD BE TAKEN AT THE END OF THE YEAR. THE CIT(A) HAS ALSO RECORDED THE FINDING THAT THE SURVEY PARTY ADOPTED THE VALUE OF COPPER SCRAP AT RS.261.33/- AS AGAINST THE VALUE ADOPTED BY THE ASSESSEE AT A H IGHER FIGURE OF ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 6 RS.274.87/- ON 31.03.2007. HENCE HE SUBMITTED THA T THE ORDER OF THE LD. CIT(A) SHOULD BE CONFIRMED. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE A SURVEY U/S. 133A WAS CONDUCTED ON 26.02.2007. ACCORDING T O THE ASSESSING OFFICER ON PHYSICAL VERIFICATION OF COPPER SCRAP DURING THE COURSE OF SURVEY EXCESS STOCK OF 6087 KGS WAS FOUND WHICH WAS VALUED AT R S.19 19 952/-. FURTHER DURING THE COURSE OF SURVEY IT WAS FOUND THAT IMPO RTED COPPER SCRAP WAS VALUED IN THE SUMMARY OF STOCK STATEMENT @ RS.251.2 2/- PER KG WHEREAS THE ACTUAL COST WAS @ RS.261.33/- PER KG AND THEREFORE STOCK OF 113443/- KGS. WAS UNDER VALUED BY RS.10 86 248/-. THE ASSESSEE HAS NOT DISCLOSED INCOME IN RESPECT OF AFORESAID EXCESS STOCK OF RS.1 9 19 952/- AND RS.10 86 248/- ON ACCOUNT OF UNDER VALUATION OF STO CK. THEREFORE THE ASSESSING OFFICER ADDED RS. 30 06 200/- TO THE INCO ME OF THE ASSESSEE. ON APPEAL LD. CIT(A) DELETED THE AFORESAID ADDITION O N THE GROUND THAT DURING THE COURSE OF SURVEY STOCK OF COPPER SCRAP WAS TAKEN O N ESTIMATE BASIS THE ASSESSEE EXPLAINED THAT AT THE END OF THE YEAR CLOS ING STOCK WAS PHYSICALLY VERIFIED AND STOCK FOUND ON PHYSICAL VERIFICATION W AS TAKEN AS THE CLOSING STOCK AND CLOSING STOCK OF IMPORTED COPPER SCRAP WA S VALUED @ RS.274.87/- PER KG. WHICH WAS MORE THAN RS.261.33/- PER KG. TAK EN BY THE SURVEY OFFICIALS. BEFORE US THE LD. SR. D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND THE LD. A.R. SUPPORTED THE ORDER OF THE CIT(A). WE FIND THAT IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT CLOSING STOCK OF IM PORTED COPPER SCRAP WAS ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 7 VALUED BY THE ASSESSEE @ RS.274.87/- PER KG. IN ARR IVING AT ITS PROFIT AS DECLARED IN ITS P & L ACCOUNT. NO DISCREPANCY IN T HIS VALUATION WAS POINTED OUT BY THE ASSESSING OFFICER. THE VALUATION SO MAD E WAS MORE THAN THE VALUE ADOPTED BY THE SURVEY OFFICIALS. THUS WE DO NOT F IND ANY REASON FOR MAKING SEPARATE ADDITION OF RS.10 86 248/- AS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF VALUATION OF STOCK AT AND INTERMEDIARY D ATE DURING THE YEAR. WE THEREFORE CONFIRM THE ORDER OF THE CIT(A) IN RESPE CT OF THIS PART OF THE GROUND OF APPEAL AND DISMISS THIS PART OF THE GROUND OF AP PEAL OF THE REVENUE. 8. IN RESPECT OF EXCESS STOCK OF COPPER SCRAP OF 60 87 KGS. WE FIND THAT THE LD. CIT(A) HAS OBSERVED THAT AT THE TIME OF SURVEY STOCK OF COPPER SCRAP WAS TAKEN ON ESTIMATE BASIS AND NOT ON THE BASIS OF ACT UAL PHYSICAL VERIFICATION. HOWEVER WE FIND THAT NO MATERIAL IN SUPPORT OF THE ABOVE FINDING WAS BROUGHT ON RECORD BY THE LD. CIT(A). FURTHER THE LD. CIT( A) OBSERVED THAT THE ASSESSEE STATED AT THE TIME OF THE SURVEY THAT ACTUAL WEIGHM ENT OF THE STOCK WOULD BE TAKEN AT THE END OF THE YEAR. BUT WE FIND THAT NO FINDING WAS RECORDED BY THE LD. CIT(A) TO SHOW THAT ACTUAL STOCK OF COPPER SCRA P WAS PHYSICALLY VERIFIED BY THE ASSESSEE AT THE END OF THE YEAR AND THE QUANTIT Y OF STOCK WHICH WAS FOUND ON PHYSICAL VERIFICATION WAS TAKEN BY THE ASSESSEE AS CLOSING STOCK AT THE CLOSE OF THE ACCOUNTING YEAR FOR CALCULATING ITS NE T PROFIT. IN THE ABOVE CIRCUMSTANCES WE HAVE NO OPTION BUT TO RESTORE THE MATTER BACK TO THE FILE OF THE LD. CIT(A) FOR RE-ADJUDICATING THE SAME AFR ESH BY PASSING SPEAKING ORDER ON THE ISSUE IN LIGHT OF THE DISCUSSIONS MADE ABOVE. NEEDLESS TO MENTION THAT LD. CIT(A) SHALL ALLOW REASONABLE OPPO RTUNITY OF HEARING TO BOTH ITA NO. 3337/AHD/10 A.Y. 2007-08 PAGE 8 THE PARTIES BEFORE ADJUDICATING THE ISSUE AFRESH. THUS THIS PART OF THE GROUND OF THE APPEAL OF THE REVENUE IS ALLOWED FOR STATIST ICAL PURPOSES. 9. IN THE RESULT THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 25 TH OF OCTOBER 2013 AT AHMADABAD. SD/- SD/- ( KUL BHARAT ) (N. S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA ! ! ! ! '! '! '! '! / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. '(' ) * / CONCERNED CIT 4. *- / CIT (A) 5. !./ ) ) 12( / DR ITAT AHMEDABAD 6. /45 67 / GUARD FILE. BY ORDER/ 8/ 1 ': ) 12( ;