M/s. Matching House, Valsad v. The Income tax Officer,Ward-2,, Valsad

ITA 343/AHD/2010 | 2006-2007
Pronouncement Date: 16-07-2010 | Result: Dismissed

Appeal Details

RSA Number 34320514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 343/AHD/2010
Duration Of Justice 5 month(s) 11 day(s)
Appellant M/s. Matching House, Valsad
Respondent The Income tax Officer,Ward-2,, Valsad
Appeal Type Income Tax Appeal
Pronouncement Date 16-07-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted SMC
Tribunal Order Date 16-07-2010
Date Of Final Hearing 02-07-2010
Next Hearing Date 02-07-2010
Assessment Year 2006-2007
Appeal Filed On 04-02-2010
Judgment Text
- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI JM AND D.C.AGRAWAL A M M/S MATCHING CENTRE JUNA THANA VALSAD- 396001. VS. INCOME-TAX OFFICER WARD-2 VALSAD. (APPELLANT) .. (RESPONDENT) REVENUE BY :- SHRI RAJESH UPADHYAY AR ASSESSEE BY:- SHRI K. M. MAHESH SR. DR O R D E R PER D. C. AGRAWAL ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) LEARNED AO HAS ERRED IN JAW ARID ON FACTS T O ADD AN AMOUNT OF RS.2 04 070/- ON THE BASIS OF DISCLOSURE ALLEGED TO HAVE BEEN MADE BY ASSESSEE WITHOUT FURNISHING COPY OF ST ATEMENT RECORDED DURING SURVEY. (2) ALLEGED DIFFERENCE OF STOCK OF RS.11 83 787/ - WAS NOT ACTUAL DIFFERENCE. ITO ACCEPTED MISTAKE OF INCLUDING STOCK OF SISTER CONCERN MATCH QUEEN AND DUPLICATION OF STOCK AS PER CHALANS AND AS PER BILLS TAKEN WHILE PREPARING INV ENTORY DURING SURVEY. (3) LEARNED ITO HAS ERRED IN LAW AND ON FACTS IN NOT REDUCING AMOUNT OF STOCK WHICH WAS WORKED OUT DURING COURSE OF ASSESSMENT PROCEEDING. (4) TO MAKE ADDITION ONLY ON THE BASIS OF ALLEGE D ADMISSION AND NOT BASED ON DOCUMENTARY EVIDENCE IS NOT JUST AND P ROPER. ITA NO.343/AHD/2010 ASST. YEAR :2006-07 2 (5) IN ABEYANCE OF ANY EVIDENCE OF ENHANCING PURCHA SE OR UNACCOUNTED SALES LEARNED A.O. IS NOT JUSTIFIED TO ADD ALLEGED STOCK DIFFERENCE AS INCOME FROM UNACCOUNTED SAFES. (6) LEARNED CIT(APPLS) - VALSAD HAS ALSO ERRED TO CONFIRM ACTION OF ITO. 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS A PAR TNERSHIP FIRM DOING BUSINESS OF SELLING CLOTH SAREES FALL AND LADIES W EAR ON RETAIL BASIS. A SURVEY UNDER SECTION 133 WAS CARRIED OUT AT THE BUS INESS PREMISES OF THE ASSESSEE AND ITS SISTER CONCERN ON 27.10.2005. INVE NTORY OF THE PHYSICAL STOCK AVAILABLE AT THE PREMISES WAS TAKEN AND WAS W ORKED OUT AT RS.25 60 340/-. SIMULTANEOUSLY STOCK AS PER BOOKS W ERE WORKED OUT AT RS.37 44 127/-. WHILE ARRIVING AT BOOK FIGURE THE A UTHORITIES HAVE CONSIDERED THE PURCHASE AND SALES NOT RECORDED UPTO THE DATE OF SURVEY. THUS ON PHYSICAL VERIFICATION STOCK WAS FOUND SHORT OF RS.11 83 187/-. A STATEMENT UNDER SECTION 133A WAS ALSO RECORDED ACCO RDING TO WHICH ASSESSEE DISCLOSED UNACCOUNTED INCOME OF RS.2 04 07 0/- BEING THE GP ON THE SALES REPRESENTED BY SHORTAGE OF STOCK FOUND ON PHYSICAL VERIFICATION. THIS WAS DECLARED AS ADDITIONAL INCOME OVER AND ABO VE THE REGULAR INCOME OF THE ASSESSEE AS PER BOOKS. BUT AFTER ALMO ST ONE YEAR THREE MONTHS ASSESSEE SUBMITTED A LETTER ON 10.1.2007 RET RACTING THE DISCLOSURE ON THE GROUND THAT CALCULATION OF BOOKS STOCK IS FA ULTY INASMUCH AS CERTAIN BILLS AND CHALANS PERTAINING TO ASSESSEE WERE NOT C ONSIDERED WHEREAS BILLS AND CHALANS PERTAINING TO SISTER CONCERN WERE CONSI DERED. ASSESSEE FILED THE RETURN OF INCOME NOT SHOWING THE DISCLOSURE OF INCOME OF RS.2 04 070/- AS DISCLOSED BY HIM AT THE TIME OF SU RVEY. THE AO HOWEVER DID NOT ACCEPT THIS RETRACTION AS IT WAS B ELATED AND PROPOSED THE ADDITION OF RS.2 04 070/- IN THE RETURN INCOME OF R S.22 791/-. 3 3. THE MATTER WENT BEFORE THE LD. CIT(A) AND HE CON FIRMED THE ADDITION RATHER SUMMARILY BY OBSERVING AS UNDER :- 5. THE FIRST GROUND OF APPEAL RELATES TO ADDITION OF RS.2 04 070/- AS INCOME ON THE BASIS OF STATEMENT OF DISCLOSURE. THE AO HAS MADE THIS ADDITION STATING THAT DISCLOSURE HAS BEEN MADE DURI NG THE COURSE OF SURVEY. THE AO IN THE ASSESSMENT ORDER HAS GIVEN DE TAILED REASONING FOR MAKING THE ADDITION INCLUDING THE OTHER ISSUES DISC USSED. THE APPELLANT IN THE STATEMENT OF FACTS STATED THAT STATEMENT RECORD ED WAS NOT MADE AVAILABLE TO HIM AND AS SUCH ON THIS SCORE AS ALSO AS PER THE CBDT CIRCULAR AND AS DECIDED THAT SECTION 133A DOES NOT GIVE POWER TO RECORD THE STATEMENT ON OATH REQUESTED TO DELETE THE ADDI TION MADE. THE ARGUMENT PUT FORTH BY THE APPELLANT CANNOT BE ACCEP TED. THE AO HAS GIVEN HIS DETAILED REASONS BEFORE COMING TO THE CON CLUSION. ON THE OTHER HAND THE APPELLANT EXCEPT DISCUSSING ABOUT THE STA TEMENT HAS NOT SUBMITTED ANYTHING IN SUPPORT OF HIS VERSION. IN VI EW OF THE FACTS THE ADDITION MADE BY THE AO STANDS CONFIRMED AND THE GR OUND OF APPEAL ON THIS ISSUE DISMISSED. 4. BEFORE US THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE ADDITION OF RS.2 04 070/- COULD NOT BE MADE BY THE AO AS THE SA ME IS COVERED IN THE GP WORKED OUT BY THE ASSESSEE IN THE TRADING ACCOUN T PREPARED UPTO THE DATE OF SURVEY WHEREIN HE HAS IN FACT ADOPTED HIGHE R FIGURE OF CLOSING STOCK BEING AT RS.33 22 215/- AS AGAINST RS.25 60 3 40/- WORKED OUT BY THE OFFICERS AT THE TIME OF SURVEY. IF PHYSICAL STOCK A S DETERMINED BY THE OFFICERS AT THE TIME OF SURVEY IS SUBSTITUTED IN TH E TRADING ACCOUNT UPTO THE DATE OF SURVEY THEN GP OF THE ASSESSEE WILL GO INTO MINUS AND FURTHER IN THE POST SURVEY TRADING ACCOUNT SIMILAR CHANGES WIL L HAVE TO BE MADE. 5. AGAINST THIS LD. DR SUBMITTED THAT ONCE ON PHYS ICAL VERIFICATION STOCK IS NOT FOUND MATCHING WITH THE BOOKS OF ACCOU NT THEN THE BOOKS OF ACCOUNT ARE LIABLE FOR REJECTION AND PROFITS ARE RE QUIRED TO BE ESTIMATED. IN VIEW OF THIS ADDITION OF RS.2 04 070/- HAS NECESSA RILY TO BE MADE. 4 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW IT IS NECESSARY T O CONSIDER TRADING ACCOUNT PREPARED BY THE ASSESSEE IGNORING THE PHYSI CAL STOCK FOUND ON THE DATE OF SURVEY WHICH READS AS UNDER :- PARTICULARS 1/4/05 TO 26/10/05 27/10/05 TO 31/3/06 1/4/2005 TO 31/3/2006 SALES 30 82 684/- 22 43 120/- 53 25 804/- CLOSING STOCK 33 22 215/- 32 75 415/- 32 25 415/- TOTAL 64 04 899/- 55 18 535/- 86 01 219/- OPENING STOCK 33 26 500/- 33 22 215/- 33 26 500/- PURCHASES 25 68 471/- 18 25 538/- 43 94 009/- KHARAJAT 16 699/- 10 088/- 26 787/- SUB-TOTAL 59 11 670/- 51 57 841/- 77 47 296/- GROSS PROFIT 4 93 229/- 3 60 694/- 8 53 923/- TOTAL 64 04 899/- 55 18 535/- 86 53 219/- G.P. IN % 15.99% 16.08% 16.035 COMPARATIVE GP CHART WITH EARLIER YEARS PARTICULARS ASST. YEAR 2004-05 ASST. YEAR 2005-06 ASST. YEAR 2006-07 SALES 65 75 355/- 64 73 768/- 53 25 804/- GROSS PROFIT 11 06 507/- 10 41 602/- 8 53 923/- GP IN % 16.09% 16.09% 16.03% WE UPHOLD THE CONTENTIONS OF LD. DR THAT ONCE PHYSI CAL STOCK DOES NOT MATCH WITH BOOK STOCK THEN INCOME CANNOT BE CORRECT LY DEDUCED AND PROVISIONS OF SECTION 145(3) HAD TO BE INVOKED AND THEREFORE PROFIT HAS TO BE ESTIMATED. SINCE THERE IS DEFICIENCIES OF STO CK AND SUCH DEFICIENCY IN STOCK HAS BEEN TREATED AS SALES OUTSIDE THE BOOKS T HEN AUTHORITIES WERE JUSTIFIED IN ESTIMATING THE PROFIT THEREON WHICH WA S ALSO DISCLOSED DURING THE COURSE OF SURVEY. THEREFORE ONE CANNOT GO ACCO RDING TO THE TRADING ACCOUNT PREPARED BY THE ASSESSEE FOR THE PRE AND PO ST SURVEY PERIOD. THEREFORE ESTIMATION OF PROFIT OF SUCH SALES OUTSI DE THE BOOKS AT 5 RS.2 04 070/- IS JUSTIFIED. AS A RESULT APPEAL FIL ED BY THE ASSESSEE IS DISMISSED. 7. THE ASSESSEE HAS RAISED AN ADDITIONAL GROUND AS UNDER :- IF ADDITION MADE BY THE AO FOR RS.2 04 070/- IS UPH ELD FULLY OR IN PART THEN THE FIRM MAY BE ALLOWED DEDUCTION U/S 40 (B)(V) OF THE ACT AGAINST ENHANCED INCOME AS GP ADDITION MADE BY AO AND SUSTAINED LD. CIT(A) VALSAD IS BUSINESS INCOME ELI GIBLE FOR SUCH DEDUCTION. 8. WE HAVE HEARD THE LD. AR & LD. DR ON THE ISSUE. IN OUR CONSIDERED VIEW THE ADDITIONAL GROUND CANNOT BE ADMITTED AT TH IS STAGE BECAUSE IT REQUIRES INVESTIGATION INASMUCH AS IT HAS TO BE FOU ND AS TO WHAT WERE THE TERMS OF PROFIT SHARING RATIO AND BETWEEN PARTNERS AS PER PARTNERSHIP AGREEMENT WHETHER PARTNERS REMUNERATION WOULD CONT INUE TO INCREASE IF ASSESSED INCOME ALSO INCREASES. IN FACT CLAIM OF RE MUNERATION BY THE PARTNERS DEPEND UPON THE TERMS IN THE AGREEMENT BET WEEN THE PARTNERS. THEN EXPENDITURE WOULD BE ACTUAL WHICH HAS BEEN INC URRED BY THE ASSESSEE. IN OTHER WORDS WHAT IS ACTUALLY INCURRED BY THE ASSESSEE ALONE WOULD BE ALLOWABLE EXPENDITURE SUBJECT TO THE LIMIT S PROVIDED UNDER SECTION 40(B))(V). THERE IS NO PROVISION IN THE STA TUTE THAT REMUNERATION OF PARTNERS WILL INCREASE EVEN IF IT IS NOT INCURRED B Y THE ASSESSEE ON THE INCREASE OF ASSESSED INCOME. ASSESSED INCOME MAY NO T BE EXACTLY REAL INCOME CLAIMED BUT REMUNERATION IS WHAT THE ASSESSE E HAS ACTUALLY INCURRED. THIS INCURRING OF REMUNERATION CANNOT BE VARIED BY INCREASE IN THE ASSESSED INCOME. THEREFORE WE DECLINE TO ENTER TAIN THIS ADDITIONAL GROUND WHICH IS REJECTED. 6 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 16/7/2010 SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 16/7/2010 MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD