DCIT, Ajmer v. RAM NARAYAN BIRLA, BHIWADI

ITA 482/JPR/2015 | 2011-2012
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 48223114 RSA 2015
Assessee PAN ABEPB2314H
Bench Jaipur
Appeal Number ITA 482/JPR/2015
Duration Of Justice 1 year(s) 4 month(s) 16 day(s)
Appellant DCIT, Ajmer
Respondent RAM NARAYAN BIRLA, BHIWADI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted Not Allotted
Tribunal Order Date 30-09-2016
Assessment Year 2011-2012
Appeal Filed On 14-05-2015
Judgment Text
VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCHE S JAIPUR JH HKKXPUN] YS[KK LNL; OA JH DQY HKKJR] U;KF;D LNL; DS LE{K BEFORE: SHRI BHAGCHAND AM AND SHRI KUL BHARAT JM VK;DJ VIHY LA-@ ITA NO. 482/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2011-12. DEPUTY COMMISSIONER OF INCOME - TAX (CENTRAL) AJMER. CUKE VS. SHRI RAM NARAYAN BIRLA PROP. M/S. BIRLA BANDHU SARAFFA BAZAR BHILWARA. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. ABEPB 2314 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SHRI B.K. GUPTA (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI P.C. PARWAL (C.A) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 07.09.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 30/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT JM. THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LD. CIT (A)-2 UDAIPUR DATED 09.03.2015 PERTAINING TO A.Y. 2011-12 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A)-2 UDAIPUR HAS ERRED IN DIRECTING THE AO TO ASSESS THE UNEXPLA INED INVESTMENT SURRENDERED BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS IGNORING THE DECISION OF THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF FAKIR MOHD. HAZI HASAN 247 ITR 290 THAT UNACCOUNTED INCOM E OUGHT TO BE CATEGORIZED UNDER THE RESIDUARY HEAD OF INCOME FRO M OTHER SOURCES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A)-2 UDAIPUR HAS ERRED IN DELETING THE ADDITION OF RS. 35 06 099 /- MADE ON ACCOUNT OF CHANGE IN METHOD OF VALUATION OF CLOSING STOCK IGNO RING THAT THE STOCK WAS VALUED AT THE COST PRICE BY THE ASSESSEE TO REDUCE THE PROFIT IN THE YEAR OF SURVEY WHILE THE STOCK WAS VALUED AT THE MARKET PR ICE BY THE ASSESSEE IN ALL THE OTHER PREVIOUS YEARS. 2 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE CIT (A)-2 UDAIPUR HAS ERRED IN DELETING THE ADDITION OF RS. 5 02 010/ - MADE ON ACCOUNT OF MAKING CHARGES ON UNACCOUNTED EXCESS STOCK FOUND IG NORING THE ELEMENT OF MAKING CHARGES PAID BY THE ASSESSEE ON SUCH EXCE SS STOCK. 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT 1961 (HEREINAFTE R REFERRED TO AS THE ACT) WAS CARRIED OUT AT THE RESIDENTIAL AND BUSINESS PREMISE S OF THE ASSESSEE AND HIS FAMILY MEMBERS AS WELL AS SURVEY U/S 133A WAS ALSO CONDUCT ED AT SOME OF THE BUSINESS PREMISES OF THE ASSESSEE ON 03.02.2011. DURING THE COURSE OF SURVEY EXCESS STOCK OF GOLD AND SILVER ORNAMENTS WERE FOUND VALUING RS. 77 66 887/-. THIS AMOUNT WAS SURRENDERED FOR TAXATION IN THE HANDS OF THE ASSESS EE. FURTHER A SUM OF RS. 1 20 000/- ON ACCOUNT OF ADVANCES GIVEN FOR LAND PU RCHASE ALSO OFFERED FOR TAXATION AS OBSERVED BY THE AO. SUBSEQUENTLY A RETURN WAS FILED ON 30.09.2011 DECLARING TOTAL INCOME OF RS. 59 93 693/-. THIS RETURN WAS FU RTHER REVISED ON 08.12.2011 DECLARING TOTAL INCOME OF RS. 59 13 690/-. THE CASE OF THE ASSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT. WHILE FRAMING THE ASSESSME NT THE AO MADE VARIOUS ADDITIONS AND TREATED THE EXCESS STOCK AS UNEXPLAIN ED INVESTMENT NOT RECORDED IN THE BOOKS OF ACCOUNT AND MADE ADDITION BY INVOKING PROVISIONS OF SECTION 69B. THE AO MADE THE ADDITION ON ACCOUNT OF CHANGE INTO METH OD OF VALUATION OF CLOSING STOCK OF RS. 35 06 099/- AND ALSO MADE UNDISCLOSED MAKING CHARGES OF RS. 4 86 903/- AND RS. 15 107/-. THE ASSESSING OFFICER ALSO MADE ADDITION ON UNEXPLAINED REGISTRATION EXPENSES. THE ASSESSEE AG GRIEVED BY THIS ORDER PREFERRED AN APPEAL BEFORE LD. CIT (A) WHO AFTER CONSIDERING THE SUBMISSIONS ALLOWED THE APPEAL. 3 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA 3. NOW THE REVENUE IS IN APPEAL BEFORE US. 4. THE FIRST GROUND OF REVENUES APPEAL IS AGAINST THE DIRECTION OF LD. CIT (A) TO THE AO TO ASSESS THE UNEXPLAINED INVESTMENT BY THE ASSESSEE UNDER THE HEAD INCOME FROM BUSINESS. 4.1. THE LD. D/R SUBMITTED THAT THE LD. CIT (A) GRO SSLY ERRED IN DIRECTING THE AO TO ASSESSEE THE INCOME SURRENDERED BY THE ASSESSEE UND ER THE HEAD INCOME FROM BUSINESS. HE SUBMITTED THAT LD. CIT (A) HAS NOT FO LLOWED THE JUDGMENT OF THE HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF FAKIR MOHD. HAZI HASSAN 247 ITR 290 (GUJ.). HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF DULARI DIGITAL PHOTO SERV ICES P. LTD. VS. CIT 38 TAXMANN.COM 390 (P&H). 4.2. ON THE CONTRARY LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE IN THE WRITTEN BRIEF. HE PLACED RELIANCE ON TH E DECISION OF THE COORDINATE BENCH IN THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. D CIT 141 TTJ (AHD.) 1 WHEREIN THE HONBLE ITAT AFTER TAKING INTO CONSIDERATION TH E JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHD. HAZI HASSAN ( SUPRA) HELD THAT WHERE IN SEARCH EXCESS STOCK IS FOUND WHICH DOES NOT HAVE AN INDEPE NDENT IDENTITY AS AN ASSET BUT AS MIXED PART OF OVERALL STOCK FOUND IN SURVEY/SEAR CH THEN SUCH EXCESS STOCK WOULD REPRESENT BUSINESS INCOME ONLY. HE FURTHER SUBMIT TED THAT THE ISSUE IS WELL SETTLED THAT IF EXCESS STOCK FOUND IN SEARCH HAS NO INDEPEN DENT IDENTITY IN THAT EVENT INVESTMENT IN UNEXPLAINED ASSETS BY THE ASSESSEE BE ASSESSED AS INCOME FROM BUSINESS. 4 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA 4.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. UNDISPUTED FACTS EMERGED FROM THE RECORD T HAT AT THE TIME OF SURVEY EXCESS STOCK WAS FOUND. IT IS ALSO NOT DISPUTED THAT THE A SSESSEE IS ENGAGED IN THE BUSINESS OF JEWELLERY. DURING THE COURSE OF SURVEY EXCESS ST OCK VALUING RS. 77 66 887/- WAS FOUND IN RESPECT OF GOLD AND SILVER JEWELLERY. THE COORDINATE BENCH IN THE CASE OF CHOKSHI HIRALAL MAGANLAL VS. DCIT 131 TTJ (AHD.) 1 HAS HELD THAT IN A CASES WHERE SOURCE OF INVESTMENT/EXPENDITURE IS CLEARLY IDENTIF IABLE AND ALLEGED UNDISCLOSED ASSET HAS NO INDEPENDENT EXISTENCE OF ITS OWN OR THERE IS NO SEPARATE PHYSICAL IDENTITY OF SUCH INVESTMENT/EXPENDITURE THEN FIRST WHAT IS TO B E TAXED IS THE UNDISCLOSED BUSINESS RECEIPT INVESTED IN UNIDENTIFIABLE UNACCOU NTED ASSET AND ONLY ON FAILURE IT SHOULD BE CONSIDERED TO BE TAXED UNDER SECTION 69 O N THE PREMISES THAT SUCH EXCESS INVESTMENT IS NOT RECORDED IN THE BOOKS OF ACCOUNT AND ITS NATURE AND SOURCE IS NOT IDENTIFIABLE. ONCE SUCH EXCESS INVESTMENT IS TAXED AS UNDECLARED BUSINESS RECEIPT THEN TAXING IT FURTHER AS DEEMED INCOME UNDER SECTI ON 69 WOULD NOT BE NECESSARY. THEREFORE THE FIRST ATTEMPT OF THE ASSESSING AUTHO RITY SHOULD BE TO FIND OUT LINK OF UNDECLARED INVESTMENT/EXPENDITURE WITH THE KNOWN HE AD GIVE OPPORTUNITY TO THE ASSESSEE TO ESTABLISH NEXUS AND IF IT IS SATISFACTO RILY ESTABLISHED THEN FIRST SUCH INVESTMENT SHOULD BE CONSIDERED AS UNDECLARED RECEI PT UNDER THAT PARTICULAR HEAD. IT IS OBSERVED THAT THERE IS NO CONFLICT WITH THE DECI SION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF FAKIR MOHD. HAJIHASAN (SUPRA) WHERE INVESTMENT IN AN ASSET OR EXPENDITURE IS NOT IDENTIFIABLE AND NO NEXUS WAS ES TABLISHED THEN WITH ANY HEAD OF INCOME AND THUS WAS NOT AVAILABLE FOR SET OFF AGAIN ST ANY LOSS UNDER ANY OTHER HEAD. THEREFORE THE HONBLE COORDINATE BENCH HELD THAT W HERE ASSET IN WHICH UNDECLARED 5 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA INVESTMENT IS SOUGHT TO BE TAXED IS NOT CLEARLY IDE NTIFIABLE OR DOES NOT HAVE INDEPENDENT IDENTITY BUT IS INTEGRAL AND INSEPARABL E (MIXED) PART OF DECLARED ASSET FALLING UNDER A PARTICULAR HEAD THEN THE DIFFERENC E SHOULD BE TREATED AS UNDECLARED BUSINESS INCOME EXPLAINING THE INVESTMENT. IN THE PRESENT CASE THE EXCESS STOCK WAS PART OF THE STOCK. THE REVENUE HAS NOT POINTED OUT THAT THE EXCESS STOCK HAS ANY NEXUS WITH ANY OTHER RECEIPTS. THEREFORE WE D O NOT FIND ANY FAULT WITH THE DECISION OF THE LD. CIT (A) DIRECTING THE AO TO TRE AT THE SURRENDERED AMOUNT AS EXCESS STOCK QUA THE EXCESS STOCK FOUND. 5. GROUND NO. 2 IS AGAINST DELETION OF ADDITION OF RS. 35 06 099/- ON ACCOUNT OF CHANGE OF METHOD OF VALUATION OF CLOSING STOCK. 5.1. THE LD. D/R VEHEMENTLY ARGUED THAT THE LD. CIT (A) WAS NOT JUSTIFIED IN DELETING THE ADDITION. HE SUPPORTED THE ORDER OF TH E AO. 5.2. ON THE CONTRARY THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT (A) AND SUBMITTED THAT THERE IS NO ILLEGALITY I N THE ORDER OF LD. CIT (A). HE SUBMITTED THAT THE REASONING IN PARAS 6 TO 6.2 OF T HE ORDER OF LD. CIT (A) IS SELF EXPLANATORY. THEREFORE HE SUBMITTED THAT THERE IS NO REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). 5.3. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT (A) IN PARA 6 TO 6.2 HAS DECIDED THE ISSUE BY GIVING FINDING OF FACT AS UNDER :- 6. I HAVE CONSIDERED THE FACTS OF THE CASE GONE THROUGH THE ASSESSMENT ORDER SUBMISSION OF THE LD. AR AND THE VARIOUS CASE LAWS RELIED UPON. THE ONLY DISPUTE IN THIS GROUND IS WHE THER THE CHANGE IN THE METHOD OF VALUATION OF STOCK FROM MARKET PRICE TO COST OR NET REALIZABLE VALUE WHICHEVER IS LOWER IS BONA FIDE OR NOT. THE VARIOUS COURTS INCLUDING THE SUPREME COURT HAS HELD THAT CH ANGE IN THE 6 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA METHOD OF ACCOUNTING IS PERMISSIBLE IF THE CHANGE I S BONA FIDE AND FOLLOWED CONSISTENTLY IN THE SUBSEQUENT YEARS. 6.1. IF THE FACT OF THE PRESENT CASE IS SEEN WITH R EFERENCE TO THESE DECISIONS THEN IT IS FOUND THAT :- - THE APPELLANT WAS HITHERTO VALUING THE STOCK IN TRA DE AT MARKET RATE. - DURING THE YEAR THE APPELLANT HAS CHANGED THE METH OD OF VALUATION OF THE STOCK FROM MARKET PRICE TO COST OR NET REALI ZABLE VALUE WHICHEVER IS LOWER. - THIS CHANGE WAS CARRIED OUT DURING THE YEAR AS THER E HAS BEEN WIDE FLUCTUATION IN THE RATES OF GOLD/SILVER. - THE APPELLANT HAS SUBSEQUENTLY FOLLOWED THE SAME ME THOD CONSISTENTLY. - THE AO HAS COMPLETED THE ASSESSMENT FOR A.Y. 2012-1 3 BY ACCEPTING THE CHANGED METHOD BY ADOPTING THE CLOSIN G STOCK OF AY 2011-12 AS THE OPENING STOCK AND ALSO ACCEPTING THE CLOSING STOCK AS ON 31.03.2012 VALUED BY THE APPELLANT ON THE BAS IS OF THE CHANGED METHOD. 6.2. FROM THE ABOVE I FIND THAT THE CHANGE IN THE METHOD OF VALUATION OF THE STOCK IS BONA FIDE AND THE AO HIMS ELF IN THE SUBSEQUENT YEAR HAS ACCEPTED THE SAME. THE VARIOUS CASES LAWS RELIED BY THE LD. AR ALSO SUPPORT THE CASE OF THE APPELLAN T. I FURTHER NOTICED THAT THE HONBLE ITAT JODHPUR BENCH IN CASE OF ANIL KUMAR TANTIA V. ITO DATED 31.05.2013 FOR AY 2007-08 TO 2009-10 HELD THAT THE APPELLANT WHO WAS DEALER OF PRECIOUS METAL LIKE GOL D AND SILVER AND PREVIOUSLY ADOPTING THE METHOD OF VALUATION OF CLOS ING STOCK AT MARKET RATE BUT THE CHANGED THE SAME TO WEIGHTED AVERAGE C OST PRICE FOR WHICH BONA FIDE REASONS EXIST CONSIDERING THE FLUCT UATION IN THE RATES THE SAME NEEDS TO BE ACCEPTED. CONSIDERING ALL THE SE FACTS I FIND THAT THE CHANGE IN THE METHOD OF VALUATION OF THE STOCK IS BONA FIDE. ACCORDINGLY THE ADDITION MADE BY THE AO IS DELETED . THE ABOVE FINDING OF FACT IS NOT DISPUTED BY THE RE VENUE BY PLACING ANY CONTRARY MATERIAL. WE FIND THAT THE ASSESSEE HAS BEEN CONSI STENTLY FOLLOWING THE METHOD 7 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA SUBSEQUENTLY. THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). 6. GROUND NO. 3 IS AGAINST DELETION OF ADDITION OF RS. 5 02 010/- MADE ON ACCOUNT OF MAKING CHARGES ON UNACCOUNTED EXCESS STO CK FOUND IGNORING THE ELEMENT OF MAKING CHARGES PAID BY THE ASSESSEE ON SUCH EXCE SS STOCK. 7. THE LD. D/R SUBMITTED THAT THE LD. CIT (A) WAS N OT JUSTIFIED IN DELETING THE ADDITION. HE SUPPORTED THE ORDER OF THE AO. 7.1. ON THE CONTRARY THE LD. COUNSEL FOR THE ASSES SEE SUPPORTED THE ORDER OF LD. CIT (A) AND SUBMITTED THAT THERE IS NOTHING WRONG I N THE ORDER OF LD. CIT (A). HE SUBMITTED THAT THE LD. CIT (A) HAS RIGHTLY DELETED THE ADDITION BY OBSERVING IN PARA 9 OF HIS ORDER AS UNDER :- 9. I HAVE CAREFULLY CONSIDERED THE FINDING OF THE AO IN THE ASSESSMENT ORDER THE WRITTEN AS WELL AS ORAL ARGUM ENTS BY THE APPELLANT BEFORE ME AND THE VALUATION REPORT OF JEW ELLERY PLACED IN THE PAPER BOOK. IT IS SEEN THAT THE VALUER HAS VALUED T HE JEWELLERY AND NOT THE PURE GOLD. THE EXCESS STOCK FOUND DURING SEARCH IS VALUED BY REGISTERED VALUER AND NEITHER ANYTHING AGAINST THE SAID VALUATION IS POINTED OUT AGAINST BY AO NOR ANY ACTION AGAINST TH E VALUER HAS BEEN TAKEN BY THE DEPARTMENT UNDER THE WT ACT. OBVIOUSLY THE JEWELLERY VALUED INCLUDES MAKING CHARGES IN VERY APPLYING THE RATE BY THE VALUER. I FIND THAT AO IS NOT AN EXPERT TO CHANGE THE VALUA TION OF VALUABLES FOUND DURING THE SEARCH. THERE IS NO BASIS FOR ASSU MPTION BY THE AO THAT THE MAKING CHARGES WHICH WOULD HAVE INCURRED I N CREATING ABOVE JEWELLERY WERE NOT INCLUDED IN THE VALUATION. THE A O HAS NOT BROUGHT ANY EVIDENCE TO PROVE THAT THE VALUER HAS VALUED TH E JEWELLERY WITHOUT CONSIDERING MAKING CHARGES. NO SPECIFIC REASONS ARE ADVANCED BY THE AO FOR MAKING SEPARATE ADDITION FOR MAKING CHARGES. SUCH ADDITION CANNOT BE SUSTAINED. ACCORDINGLY THE ADDITION MADE BY THE AO IS ONLY ON ASSUMPTIONS AND THE SAME IS DELETED. 7.2. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED TH E MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. CIT (A) HAS GIVEN A F INDING OF FACT WHICH IS NOT 8 ITA NO. 482/JP/2015 SHRI RAM NARAYAN BIRLA CONTROVERTED BY THE LD. D/R BY PLACING ANY CONTRARY MATERIAL ON RECORD. THEREFORE WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT (A) THE SAME IS HEREBY UPHELD. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER IS PRONOUNCED IN THE OPEN COURT ON 30/09 /2016. SD/- SD/- ( HKKXPUN ( DQY HKKJR ) ( BHAGCHAND) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 30/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT (CENTRAL) AJMER. 2. THE RESPONDENT SHRI RAM NARAYAN BIRLA BHILWAR A. 3. THE CIT(A). 4. THE CIT 5. THE DR ITAT JAIPUR 6. GUARD FILE (ITA NO. 482/JP/2015) VKNS'KKUQLKJ@ BY ORDER LGK;D IATHDKJ@ ASSISTANT. REGISTRAR