ACIT, New Delhi v. M/s Lahore Watch House, New Delhi

ITA 54/DEL/2010 | 2006-2007
Pronouncement Date: 25-10-2013 | Result: Dismissed

Appeal Details

RSA Number 5420114 RSA 2010
Assessee PAN AABFL5500H
Bench Delhi
Appeal Number ITA 54/DEL/2010
Duration Of Justice 3 year(s) 9 month(s) 20 day(s)
Appellant ACIT, New Delhi
Respondent M/s Lahore Watch House, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 25-10-2013
Date Of Final Hearing 10-10-2013
Next Hearing Date 10-10-2013
Assessment Year 2006-2007
Appeal Filed On 05-01-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D: NEW DELHI) BEFORE SHRI U.B.S. BEDI JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.54/DEL/ 2010 (ASSESSMENT YEAR: 2006-07) ACIT CIRCLE 33 (1) VS. M/S. LAHORE WATCH HOUSE NEW DELHI. 112 113 (FF) GAFFAR MARKET KAROL BAGH NEW DELHI. (PAN : AABFL5500H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI VED JAIN CA RESPONDENT BY : SHRI VIV EK KUMAR DR O R D E R PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXVI NEW DELHI DATED 14.01.2009. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF RETAI L TRADE OF WATCHES AND CLOCKS. A SURVEY U/S 133A WAS CONDUCTED ON 29.1 1.2005 AT THE BUSINESS PREMISES OF THE ASSESSEE. THE ASSESSEE IS A PARTNERSHIP FIRM HAVING THREE PARTNERS. THE RETURN OF INCOME WAS FIL ED ON 31.10.2006 DECLARING INCOME AT RS.31 45 130/-. AT THE TIME OF SURVEY THE ASSESSEE HAS MADE A DISCLOSER OF RS.35 LACS. DURING THE SURV EY THE CASH WAS FOUND OF RS.4 67 075/- AND THE CASH BALANCE AS PER CASH B OOK ON THAT DAY WAS ITA NO.54/DEL/2010 2 ONLY RS.1 54 066/-. THUS EXCESS CASH OF RS.3 13 00 9/- WAS FOUND. THE TOTAL STOCK INVENTORY MADE AT THE TIME OF SURVEY VA LUED AT RS.1 34 91 790/-. THIS INVENTORY WAS MADE ON TAG PR ICE. THE TRADING ACCOUNT OF THE ASSESSEE FIRM WAS DRAWN UP TO THE DA TE OF SURVEY AND THE CLOSING STOCK AS PER BOOKS WAS WORKED OUT AT RS.71 00 000/-. THUS THERE WAS A VARIATION IN THE VALUE OF STOCK FOUND ON THE DAY OF SURVEY AND THE INVENTORY WAS MADE ON THE BASIS OF TAG PRICE. THE S TOCK INVENTORY WAS WORKED OUT AS PER THE TRADING ACCOUNT DRAWN UP ON T HE COST PRICE. ON THAT BASIS A MARGIN OF PROFIT @ 27% WAS REDUCED FROM TH E VALUE OF STOCK INVENTORISED AT THE TIME OF SURVEY. CONSIDERING TH E EXCESS CASH AND VALUE OF STOCK A DISCLOSER OF RS.30 LACS WAS MADE AT THE TIME OF SURVEY. THE ASSESSING OFFICER DID NOT ACCEPT THIS AND MADE AN A DDITION OF RS.17 53 940/-. THE CIT (A) DELETED THIS ADDITION B Y HOLDING AS UNDER :- 5. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CA SE. I FIND THAT THE LD. AO HAS ACCEPTED THE CONTENTION OF THE APPELLANT THAT THE VALUATION OF THE STOCK FOUND AT THE TIME O F SURVEY WAS MADE BY TAKING THE VALUE OF THE STOCK AT MRP BA SIS WHICH REQUIRED ADJUSTMENT BY REDUCING THE MARGIN OF PROFIT THERE FROM. THE LD. AO HAS ALSO ACKNOWLEDGED THAT D URING THE CURRENT YEAR THE G.P. RATE SHOWN BY THE ASSESS EE WAS 14.34% WHICH WAS INCLUDED IN THE VALUATION OF CLOS ING STOCK TAKEN BY THE SURVEY PARTY. THEREFORE LD AO H AS WORKED OUT THE EXCESS STOCK AFTER ALLOWING DEDUCTI ON FOR G.P. OF 14% AT RS.45 02 940/-. HOWEVER THE APPELL ANT HAD DISCLOSED THE UNEXPLAINED STOCK AT RS.27 49 000/- AFTER ADJUSTING THE MARGIN OF PROFIT @ 27% WHICH INCLUDE D THE G.P. RATIO OF 14% AND VAT OF 12.5%. THE DIFFERENCE BETWEEN THE TWO I.E. RS.17 53 940/- WAS ADDED BY TH E LD. AO TOWARDS THE UNDER VALUATION OF CLOSING STOCK. BEFOR E ME THE LD. APPELLANT COUNSEL ARGUED THAT THE LD. AO HAD TA KEN NO ITA NO.54/DEL/2010 3 COGNIZANCE OF SUBMISSION MADE BY THE APPELLANT THAT THE MARGIN OF 27% AS ALLOWED BY THE SURVEY PARTY AND A S CLAIMED BY THE APPELLANT IN VALUING THE CLOSING STO CK IN THE RETURN OF INCOME WAS GENUINE AS IT ALSO INCLUDED T HE AMOUNT TOWARDS VALUE ADDED TAX WHICH IS CHARGEABLE @ 12.5 %. AS PER THEIR EXISTING PRACTICE THE AMOUNT OF VAT I S NOT TAKEN INTO THE PROFIT AND LOSS ACCOUNT BUT IS MAINT AINED SEPARATELY IN LEDGER AS VAT A/C. THEREFORE OUT OF THE EXCESS MARGIN OF 13% WHICH WAS ADDED BACK TO THE I NCOME BY THE LD. AO DUE ACCOUNT NEED TO BE GIVEN FOR THE VAT PAID @ 12.5%. THE LD. APPELLANT COUNSEL INFORMED ME THAT AS PER THEIR BOOKS OF ACCOUNTS WHICH WERE ACCEPTED BY THE LD AO AS WELL THE G.P. COMES TO 14.34% AND NOT 14% AS WAS ALLOWED BY THE LD AO. THEREFORE IF THE MARGIN OF 0.34% IS ALSO ADJUSTED THE VALUE OF UNEXPLAINED ST OCK TO BE ADDED TO THE INCOME REMAINS ONLY 0.12%. THE LD APPE LLANT COUNSEL SUBMITTED THAT GENERALLY THE APPELLANT IS I N THE PRACTICE OF OFFERING DISCOUNT ON SALES WHICH SHOUL D COVER THE MARGIN OF 0.12%. I FIND THAT SUBMISSIONS OF THE ID APPELLANT COUNSEL ARE VALID SO FAR AS AMOUNT OF VAT IS CONCERNED AND THE LD. AO HAS NOT GIVEN ANY GROUND A S TO WHY THE ADJUSTMENT IN RESPECT OF VAT @ 12.5% SHOULD NOT BE MADE WHILE VALUING THE EXCESS STOCK FOUND AT THE TIME OF SURVEY. SIMULTANEOUSLY I ALSO FIND THAT THE AO HAS ACCEPTED THE TRADING RESULTS AT 14.34% BUT HAS ONLY GIVEN A LLOWANCE OF 14% WHILE WORKING OUT THE EXCESS CLOSING STOCK. THIS IS AN ARITHMETICAL ERROR AND THE APPELLANT IS ENTITLED TO REDUCE THE VALUE OF UNEXPLAINED STOCK ACCORDINGLY. HOWEVER I DO NOT FIND MERIT IN THE SUBMISSION MADE BY THE APPELL ANT THAT THE VALUE OF THE STOCK SHOULD ALSO BE TAKEN TO ACCO UNT FOR THE DISCOUNT TO BE GIVEN BY THE APPELLANT SINCE DISCOU NT IS GENERALLY GIVEN ON A CASE TO CASE BASIS AND IS DISC RETIONARY THEREFORE ONE CANNOT VALUE THE STOCK BY ASSUMING T HAT DISCOUNTS WILL BE GIVEN WHICH IS A CONTINGENT LIAB ILITY. IN VIEW OF THIS I DIRECT THE LD AO TO REDUCE THE ADDI TION ON ACCOUNT VALUATION OF STOCK TO BE RESTRICTED BY ALLO WING MARGIN OF 26.88% FROM THE VALUE OF EXCESS STOCK FOU ND DURING SURVEY WHICH WAS VALUED ON MRP BASIS. 3. WE HAVE HEARD BOTH THE SIDES ON THIS ISSUE. WE H AVE ALSO PERUSED THE RECORD AVAILABLE. IT IS AN UNDISPUTED FACT THAT THE INVENTORY WAS MADE ITA NO.54/DEL/2010 4 AT THE MRP DURING THE SURVEY OPERATION. AFTER MAKIN G ADJUSTMENT @ 27% THE ACTUAL DIFFERENCE IN THE STOCK WORKED OUT AT RS.27 49 000/- AND AFTER ADDING THE CASH DIFFERENCE A LUMP-SUM DISCLOS ER OF RS.30 LACS WAS MADE. WE HAVE ALSO CONSIDERED THE ASSESSEES PLEA R EGARDING THE ADJUSTMENT FOR VAT WHICH WAS 12.5% DURING THE RELEV ANT PERIOD ON THE GOODS SOLD BY THE ASSESSEE. THEREFORE CONSIDERING TOTALITY OF THE FACTS WE FIND THAT THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION AND DIRECTING THE ASSESSING OFFICER TO REDUCE THE ADDITION ON ACC OUNT OF VALUATION OF STOCK TO BE RESTRICTED BY ALLOWING MARGIN OF 26.88% FROM THE VALUE OF EXCESS STOCK INVENTORISED AT THE MRP DURING THE SUR VEY OPERATION. 4. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF OCTOBER 2013. SD/- SD/- (U.B.S. BEDI) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 25 TH DAY OF OCTOBER 2013 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT NEW DELHI