URVASHI, MUMBAI v. ITO 12(3)(4), MUMBAI

ITA 50/MUM/2014 | 2009-2010
Pronouncement Date: 31-07-2015 | Result: Partly Allowed

Appeal Details

RSA Number 5019914 RSA 2014
Assessee PAN AAAFU1086C
Bench Mumbai
Appeal Number ITA 50/MUM/2014
Duration Of Justice 1 year(s) 6 month(s) 27 day(s)
Appellant URVASHI, MUMBAI
Respondent ITO 12(3)(4), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-07-2015
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted F
Tribunal Order Date 31-07-2015
Assessment Year 2009-2010
Appeal Filed On 03-01-2014
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F MUMBAI BEFORE MS.SUSHMA CHOWLA JM & SHRI N K BILLAIYA AM ITA NO.50/MUM/2014 : ASST.YEAR 2009-2010 URVASHI LA CITADELLE 99 QUEENS ROAD M.K.ROAD MUMBAI- 400 020 . APPELLANT PAN : AAAFU1086C VS. THE ITO 12(3)(4) MUMBAI . RESPONDENT APPELLANT BY : SHRI RAHUL HAKANI RESPONDENT BY : SHRI PAWAN KUMAR B DATE OF HEARING : 20 .0 7 .201 5 DATE OF PRONOUNCEMENT: 31 . 0 7 .2015. O R D E R PER SUSHMA CHOWLA (JM) : THE PRESENT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS) DATED 06.11.2 013 RELATING TO ASSESSMENT YEAR 2009-2010 AGAINST ORDER PASSED U/S 143(3) OF T HE INCOME-TAX ACT 1961. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APP EAL:- 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW THE CIT(A)-23 ERRED IN CONFIRMING THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.7 19 345/- AS UNEXPLAINED INVESTMENT IN STOCK. 2. IN ANY EVENT AND UNDER THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW CIT(A)-23 HAS ERRED IN REJECTING TH E CLAIM OF THE APPELLANT OF THE AVERAGE CASH DISCOUNT GIVEN @7.33% FOR THE ALLEGED GROUND OF NOT PRODUCING THE CASH MEMOS IN SUPPORT O F SUCH CLAIM SPECIALLY WHEN THE APPELLANT HAD SUBMITTED THE ENTI RE DETAILS OF CASH ITA NO.50/MUM/2014 M/S. URVASHI 2 DISCOUNT OF EACH AND EVERY CASH DISCOUNT VIDE OUR L ETTERS DATED 8 TH DECEMBER 2012 AND 21 ST AUGUST 2013 TO HIM. 3. IN ANY EVENT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) -23 OUGHT TO HAVE ALLOWED THE CLAIM OF THE APPELLANT FOR DEDUCTION OF THE AVERAGE CASH DISCOUN T GIVEN TO THE CUSTOMER @7.33% FROM THE TAG PRICE ESPECIALLY WHEN THE DETAILS OF SUCH CASH DISCOUNT IN THE CASH DISCOUNT IN THE CASH MEMOS WERE GIVEN TO THE CIT(A)-23 VIDE LETTERS DATED 8 TH DECEMBER 2012 AND 21 ST AUGUST 2013 PERSONALLY. 4. IN ANY EVENT AND UNDER FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW CIT(A)-23 COMMITTED AN ERROR BY REJECTIN G THE CLAIM OF THE APPELLANT FOR CASH DISCOUNT BY WRONGLY COMPARIN G THE SYSTEM OF DETERMINING THE GROSS PROFIT IGNORING THE ISSUE BEF ORE HIM OF WORKING OUT THE VALUE OF THE CLOSING 5. IN ANY EVENT AND UNDER THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW THE CIT(A)-23 ERRED IN CONFIRMING T HE ALLEGED DIFFERENCE IN CASH BALANCE OF RS.15 378/- WITHOUT C ONSIDERING THE EXPLANATION OF THE ASSESSEE THAT THE CASH BALANCE D EBITED IN CASH BOOK HAS REMAINED TO BE WITHDRAWN BY THE PARTNER. 6. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW CIT(A)-23 ERRED IN NOT DELETING THE ADDITION OF RS. 5 100/- BEING THE ALLEGED UNDISCLOSED SALES OF GOODS WHICH WOULD HAVE GONE TO INCREASE THE CASH BALANCE FROM THE DIFFERENCE OF CA SH BALANCE TAKEN PHYSICALLY AND AS PER BOOKS OF ACCOUNTS. 7. IN ANY EVENT AND UNDER THE FACTS AND CIRCUMSTAN CES OF THE CASE AND IN LAW THE CIT(A)-23 ERRED IN CONFIRMING T HE ADDITION MADE BY THE ASSESSING OFFICER BOTH AS ALLEGED UNRECORDED SALES OF RS.5 100/- AND THE DIFFERENCE BETWEEN THE ACTUAL CA SH FOUND ON DAY OF THE SURVEY WITH TOTAL OF CASH BALANCE ARRIVED AT IN BOOKS OF ACCOUNT. 8. THE ORDER APPEALED FROM IS AGAINST THE WEIGHT O F EVIDENCE ON RECORD AND CONTRARY TO JUSTICE EQUITY AND GOOD CON SCIENCE. 3. THOUGH THE ASSESSEE HAS RAISED SEVERAL GROUNDS O F APPEAL THE ISSUE RAISED VIDE GROUNDS OF APPEAL NOS. 1 TO 4 IS AGAINST THE A DDITION OF RS.7 19 345/- AS UNEXPLAINED INVESTMENT IN STOCK. GROUND OF APPEAL NOS. 5 TO 7 RAISED BY THE ASSESSEE ARE NOT PRESSED HENCE THE SAME ARE DISMIS SED AS NOT PRESSED. ITA NO.50/MUM/2014 M/S. URVASHI 3 4. THE FACTS RELATING TO THE ISSUE IN GROUNDS OF AP PEAL NOS. 1 TO 4 IS THAT THE ASSESSEE IS DEALING IN SAREES DRESS MATERIAL BORD ERS AND SILK MATERIAL OF ALL KINDS OF SEMI WHOLESALE AND RETAIL BASIS. THE SURVEY ACTION U/S. 133A OF THE ACT WAS CONDUCTED ON THE BUSINESS PREMISES OF THE ASSESSEE ON 19.01.2009. DURING THE COURSE OF SURVEY AN INVENTORY OF STOCK FOUND AT THE PREMISES OF THE ASSESSEE WAS TAKEN BY THE SURVEY AUTHORITY AS PER TAG PRICE AT R S.1 00 06 975/-. THE SURVEY TEAM ALLOWED GROSS PROFIT RATE OF 20% AND THE VALUE OF CLOSING STOCK WORKED OUT TO RS.80 05 580/- WHEREAS THE STOCK AS PER THE BOOKS OF ACCOUNT WORKED OUT TO RS.37 64 080/-. THE PARTNER OF THE ASSESSEE FIRM W AS ASKED TO RECONCILE THE DIFFERENCE OF RS.42 41 497/- . DURING THE COURSE O F ASSESSMENT PROCEEDINGS THE ASSESSEE STATED THAT THE OPENING STOCK WAS INCORREC TLY ADOPTED AND THE SAME WAS TAKEN AS ON 01.04.2007 AND NOT OF 01.04.2008 AND FU RTHER CERTAIN PURCHASE BILLS AND PURCHASE RETURNED WERE NOT ACCOUNTED FOR. CERT AIN SALES WERE ALSO REFERRED TO IN THE RECONCILIATION STATEMENT. ANOTHER CONTENTIO N RAISED BY THE ASSESSEE WAS THAT CERTAIN GOODS WERE DAMAGED AND HENCE SAME COULD N OT BE ADOPTED AT TAG PRICE LESS THAN 20%. THE AO ON RECONCILIATION OF THE DIF FERENT ASPECT OF THE STOCK INVENTORY AND ALSO RECONCILIATION OF THE BILLS/INVO ICES REWORKED THE STOCK POSITION AS ON THE DATE OF SURVEY BY ADOPTING THE GROSS PROFIT AT 25%. CONSEQUENTLY THE VALUE OF STOCK AS PER THE BOOKS AS ON THE DATE OF SURVEY WAS RS.67 85 886/- AS AGAINST THE VALUE OF STOCK FOUND AS PER TAG PRICE AT RS.1 0 0 06 975/- LESS 25% THE VALUE OF THE STOCK WORKS OUT TO RS.75 05 231/- THE AO NOTED THAT THERE WAS DIFFERENCE OF RS.7 19 345/- IN THE STOCK FOUND DURING THE COURSE OF SURVEY FROM THAT RECORDED IN THE BOOKS OF ACCOUNT AND THE SAME WAS ADDED AS UNEX PLAINED INCOME OF THE ASSESSEE INVESTED IN STOCK. 5. BEFORE THE CIT(A) THE MAIN CONTENTION OF THE ASS ESSEE WAS THAT EVEN THE SURVEY TEAM WAS INFORMED THAT THE ASSESSEE WAS GIV ING CASH DISCOUNT TO ITS CUSTOMERS ON THE PURCHASES AND THE GROSS PROFIT WOR KS OUT TO 33 1/3 % ON THE SELLING PRICE HOWEVER THE AO HAD ONLY CONSIDERED THE GROSS PROFIT RATIO @25%. IN THE ABSENCE OF ANY OTHER DETAILS AND ALSO WHERE THE SALE PRICE WAS NET OF CASH DISCOUNT GIVEN TO THE CUSTOMERS ADDITION MADE BY T HE AO WAS UPHELD BY THE CIT(A). ITA NO.50/MUM/2014 M/S. URVASHI 4 6. AGGRIEVED THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF THE CIT(A). THE LEARNED AR POINTED OUT THAT NO REBATE OF CASH DISCO UNT WAS GIVEN TO THE ASSESSEE THOUGH DURING THE SURVEY PROCEEDINGS AND EVEN BEFOR E THE ASSESSMENT AND APPELLATE PROCEEDINGS THE CASE OF THE ASSESSEE WAS THAT IT WAS NORMALLY OFFERING CASH DISCOUNT TO ITS CUSTOMERS AND ITS GROSS PROFIT RATE WAS NOT 25%. OUR ATTENTION WAS DRAWN TO THE STATEMENT OF THE PARTNERS RECORDED DURING THE COURSE OF SURVEY WHICH WAS PLACED AT PAGES 91 TO 94 OF THE PAPER BOO K. FURTHER THE LEARNED AR DREW OUT ATTENTION TO THE SPECIMEN COPIES OF THE CA SH MEMO OF THE SAREES/DRESS MATERIAL IN WHICH DISCOUNT WAS GIVEN TO THE PARTIES . 7. THE LEARNED DR PLACED RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE ISSUE ARISING IN THE PRESENT APPEAL IS THE VALUATION OF STOCK FOUND DURI NG THE COURSE OF SURVEY AND WHETHER THE SAME IS RECONCILABLE TO THE BOOKS OF AC COUNT. ADMITTEDLY DURING THE COURSE OF SURVEY STOCK WAS FOUND FROM THE POSSESSI ON OF THE ASSESSEE AND CERTAIN EXPLANATIONS WITH REGARD TO CERTAIN PURCHASES/SALES WERE FILED AND THE SAME WERE RECONCILED BEFORE THE AO. THE AO ACCEPTED THE EXPL ANATION OF THE ASSESSEE HOWEVER APPLIED THE GROSS PROFIT RATE OF 25% TO TH E TAG PRICE OF THE MATERIAL FOUND DURING THE COURSE OF SURVEY IN ORDER TO WORK OUT TH E STOCK IN HAND AS ON THE DATE OF SURVEY WHICH IN TURN DIFFERED FROM THE BOOKS OF AC COUNT. FIRST OF ALL THE AO HAD APPLIED GROSS PROFIT RATE OF 25% IRRESPECTIVE OF T HE NATURE OF GOODS FOUND I.E. NO CONSIDERATION FOR OBSOLETE MATERIAL WAS ALLOWED TO THE ASSESSEE. ANOTHER CONTENTION OF THE ASSESSEE WAS THAT OUT OF THE GROS S PROFIT IT WAS FURTHER PASSING ON CASH DISCOUNT TO ITS CUSTOMERS WHICH WAS ALSO PART AND PARCEL OF THE GROSS PROFIT RATE AND CREDIT FOR THE SAME SHOULD BE ALLOWED IN T HE HANDS OF THE ASSESSEE. WE FIND MERIT IN THE PLEA OF THE ASSESSEE IN THIS REGA RD AND CONSEQUENTLY WE HOLD THAT THERE IS NO MERIT IN THE ADDITION MADE BY THE AO ON THIS ACCOUNT ON HYPOTHETICAL BASIS. IN CASE THE CREDIT IS ALLOWED TO THE ASSESS EE ON ACCOUNT OF THE CASH DISCOUNT IT IS PASSING TO ITS CUSTOMERS WHICH IN TURN IS TO BE REDUCED FROM THE SALE PRICE OF THE GOODS AND ALSO TAKING INTO ACCOUNT THE OBSOLETE ITEMS AVAILABLE WITH THE ASSESSEE WHICH HAVE NO MARKET VALUE AS SUCH WE FI ND NO MERIT IN THE ADDITION OF ITA NO.50/MUM/2014 M/S. URVASHI 5 RS.7 19 345/- MADE IN THE HANDS OF THE ASSESSEE. A CCORDINGLY WE DIRECT AO TO DELETE THE SAME AND GROUNDS OF APPEAL NOS. 1 TO 4 A RE ALLOWED. 9. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 31 ST DAY OF JULY 2015. SD/- SD/- ( N K BILLAIYA ) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED : 31 ST JULY 2015. SA COPY OF THE ORDER FORWARDED TO : BY ORDER //TRUE COPY// ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT MUMBAI. 4. CIT(A) - CONCERNED MUMBAI 5. DR ITAT MUMBAI 6. GUARD FILE.