M/S. MATRACO INDIA LTD., MUMBAI v. ITO,3(2)(2), MUMBAI

ITA 5899/MUM/2008 | 1998-1999
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 589919914 RSA 2008
Assessee PAN AAACM3446K
Bench Mumbai
Appeal Number ITA 5899/MUM/2008
Duration Of Justice 2 year(s) 4 month(s) 2 day(s)
Appellant M/S. MATRACO INDIA LTD., MUMBAI
Respondent ITO,3(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 28-01-2011
Date Of Final Hearing 14-07-2010
Next Hearing Date 14-07-2010
Assessment Year 1998-1999
Appeal Filed On 26-09-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: MUMBAI BEFORE SHRI T.R. SOOD ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.5899/MUM/2008 (ASSESSMENT YEAR: 1998-99) M/S. MATRACO INDIA LTD. 163/164 MITTAL TOWER C-WING NARIMAN POINT MUMBAI -400 021 ASSESSEE VS INCOME-TAX OFFICER 3(2)(2) MUMBAI ....REVENUE ITA NO.6573/MUM/2008 (ASSESSMENT YEAR: 1998-99) INCOME-TAX OFFICER 3(2)(2) MUMBAI ....REVENUE VS M/S. MATRACO INDIA LTD. 163/164 MITTAL TOWER C-WING NARIMAN POINT MUMBAI - 400 021 ASSESSEE PAN: AAACM 3446 K ASSESSEE BY: SHRI VIJAY MEHTA REVENUE BY: SHRI SHRAVAN KUMAR O R D E R PER R.S. PADVEKAR JM ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 2 THESE TWO CROSS APPEALS ARE FILED BY THE ASSESSEE A S WELL AS REVENUE CHALLENGING THE IMPUGNED ORDER OF THE LD. C IT (A)-III MUMBAI DATED 22.8.2008 FOR THE A.Y. 1998-99. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS IN THE APPEAL:- 1. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS I N PARTIALLY SUSTAINING THE ORDER PASSED BY THE ASSESSING OFFICE R U/S.143(3) R.W.S. 254(1) OF THE INCOME-TAX ACT 196 1. 2. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN SUSTAINING THE ADDITION OF ` 18 14 966/- OUT OF ` 40 18 869/- MADE BY THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE ADDITION IN ENTIRETY SINCE THE VALUATION DONE BY THE ASSESSEE WAS IN CON SULTATION WITH THE STATUTORY AUDITORS AND AS PER THE MARKET V ALUE. 3. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING ADDITION OF ` 40 447/- OUT OF ` 80 895/- MADE BY THE ASSESSING OFFICER AN ACCOUNT OF ALLEGED UNACCOUNTED SALES. 3. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS IN T HE APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT (A) HAS ERRED IN RESTRICTING THE AD DITION OF ` 80 849/- TO ` 40 447/- MADE ON ACCOUNT OF UNACCOUNTED SALE WITHOUT APPRECIATING THE FACT THAT THE ASSESSING OF FICER HAS EXHAUSTIVELY BROUGHT ON RECORD NECESSARY EVIDENCES IN SUPPORT OF SUCH ADDITION. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT (A) HAS ERRED IN RESTRICTING AN ADD ITION OF ` 40 18 869/- TO THE EXTENT TO THE EXTENT OF ` 18 14 966/- BEING DIFFERENCE IN VALUATION OF STOCK AS POINTED OUT BY THE ASSESSING OFFICER WITHOUT APPRECIATING THE FACT TH AT SUCH ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 3 UNDER VALUATION OF STOCK WAS NOT SUPPORTED BY CREDE NTIAL EVIDENCES. 3. THE LD. CIT (A) HAS ERRED IN LAW AND IN FACTS IN UPHOLDING ADDITION OF ` 40 447/- OUT OF ` 80 895/- MADE BY THE ASSESSING OFFICER AN ACCOUNT OF ALLEGED UNACCOUNTED SALES. 2. THE FIRST ISSUE IS IN RESPECT OF THE ADDITION MA DE BY THE A.O. OF RS 50 08 869/- FOR THE UNDER VALUATION OF THE CLOSING STOCK. THE PRESENT APPEALS ARISING OUT OF THE ORDER PASSED BY THE A.O. IN COMPLIANCE WITH THE DIRECTIONS OF THE ITAT MUMBAI. IT IS PERTINENT TO BRING ON RECORD THE MATERIAL FACTS RELEVANT TO THE ISSUE. IN THIS CASE THE ORIGINAL ASSESSMENT OF THE ASSESSEE WAS COMPLETED U/S.143(3) VIDE ORDER DATED 28.3.2001. THE A.O. HAD A RESERVATION ON THE VALUATION OF THE CLOSING STOCK MADE BY THE ASSESSEE. THE ASSESSEE CONTENDED BEFORE THE A. O. THAT HE IS CONSISTENTLY FOLLOWING ONE SYSTEM OF VALUATION FOR MANY YEARS I.E. COST OR MARKET VALUE WHICHEVER IS LOWER AND THE SAME WAS IN ACCORDANCE WITH THE ACCOUNTING STANDARD PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANT OF INDIA (ICAI). IN THE FIRST ROUND OF APPEAL THE APPEAL THE A.O. REFERRED TO SECTION 145(3) AND NOTED THAT THE ASSESSEE HAS NOT GIVEN ANY DISCLOSURE IN RESPECT OF QUANTITY AND BASE ADOP TED IN RESPECT OF THE VALUATION OF THE STOCK. THE A.O. HAD FURTHER NOTED THAT AS PER THE DETAILS FILED BY THE ASSESSEE ANI SEEDS IN MOST OF THE CASE S WERE SOLD AT A HIGHER PRICES WITH A HUGE GROSS PROFIT AND TO REDUCE THE P ROFIT MARGINS THE ASSESSEE RESORTED TO VALUING THE CLOSING STOCK BELO W THE COST PRICE AND WHICH HAD NO BASE. THE A.O. HAS GIVEN DIFFERENT EX AMPLES IN RESPECT OF THE ARTICLES I.E. PURCHASE COST AND SALE PRICE BY T HE ASSESSEE AND WHICH WERE IN THE CLOSING STOCK. THE A.O. FINALLY MADE T HE ADDITION OF ` 50 18 869/- AS PER THE WORKING MADE IN THE TABLE GI VEN ON PAGE 2 OF THE FIRST ASSESSMENT ORDER. THE SAID ADDITION WAS CONF IRMED BY THE LD. CIT ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 4 (A) IN THE FIRST ROUND OF APPEAL. THE ASSESSEE CAR RIED THE ISSUE BEFORE THE TRIBUNAL IN ITA NO.7824/MUM/2002 AND TRIBUNAL RESTO RE THE ISSUE TO THE FILE OF THE A.O. WITH THE FOLLOWING DIRECTIONS: - 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IT IS SEEN THAT AFTER THE ASSESSEE FURNISHED ITS REPLY BEFORE THE AO BY ITS LETTER DATED 20.3.2001 AND 22.3.2001 THE LD. AO DID NOT RAISE ANY FURTHER QUESTIONS AS REGARDS UNDERVALUATION OF CLOSING STOCK. AS A MATTER OF FACT THE FINDING OF THE UNDE R VALUATION OF STOCK HAS BEEN GIVEN BY THE LD. AO IN A ROUNDABOUT MANNER ON THE GROUND THAT AUDIT REPORT WAS NOT IN ORDER WHICH WAS NOT AT ALL QUESTIONED DURING THE COURSE OF ASSESSMENT P ROCEEDING. THE OBSERVATIONS OF THE LD AO AS RESPECT AUDIT REPO RT ARE THEREFORE ARBITRARY AND WITHOUT PROPER EXAMINATION OF THE RELEVANT FACTS. UNDER THE CIRCUMSTANCES WE RE OF T HE VIEW THAT THE LD CIT (A) SHOULD HAVE ALLOWED THE ASSESSEE TO FURNISH THE ADDITIONAL EVIDENCE AS REQUESTED BY THE ASSESSEE. AS THE SAME WERE NOT FURNISHED BEFORE THE AO WE ARE OF TH E VIEW THAT THE MATTER SHOULD BE SENT BACK TO THE AO FOR T HAT PURPOSE. HE WOULD ALLOW THE ASSESSEE FURTHER REASO NABLE OPPORTUNITY TO PRODUCE SUCH ADDITIONAL EVIDENCE AS THE ASSESSEE MAY CHOOSE TO RELY UPON ON THE QUESTION OF UNDER VALUATION OF CLOSING STOCK AS ALLEGED IN THE ASSESS MENT ORDER. THEREAFTER THE LD AO WOULD DECIDE THIS ISSUE AFRESH ON MERITS IN ACCORDANCE WITH LAW. 3. NOW THE A.O. PASSED THE ORDER DATED 20.12.2007 I N COMPLIANCE TO THE DIRECTIONS OF THE TRIBUNAL. THE A.O. AGAIN MADE THE SAME ADDITION ON THE ALLEGED UNDER VALUATION OF THE CLOSING STOCK. THE ASSESSEE CHALLENGED THE SAID ADDITION IN THE SECOND ROUND BEFORE THE LD . CIT (A). BEFORE THE ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 5 LD. CIT (A) THE ASSESSEE CONTENDED THAT THE GOODS WHICH THE ASSESSEE HAS IMPORTED VARIOUS ITEMS IN EARLIER YEARS WHICH I NCLUDED (I) LONG PEPPER (II) STAR ANISEEDS (III) SYNTHETIC CAMPHOR ETC. THE COST OF THE SAME GOODS WERE WITHOUT THE PAYMENT OF THE CUSTOM D UTY TO THE EXTENT OF ` 80 50 507/-. IT WAS CONTENDED THAT EVEN ON THE LA ST DAY OF THE FINANCIAL YEAR UNDER CONSIDERATION THE SAID STOCK OF THE IMPORTED GOODS WAS TILL LYING WITH THE CUSTOM AUTHORITIES. THE AS SESSEE MADE THE VALUATION OF THE ENTIRE IMPORTED STOCK AT ` 48 05 230/-. THE ASSESSEE ALSO CONTENDED THAT THE GOODS WERE PARTLY DESTROYED . ON REGULAR METHOD OF VALUATION BY THE ASSESSEE THE VALUATION OF THE C LOSING STOCK WAS DONE AT MARKET VALUE WHICH WAS LOWER THAN THE COST OF TH E SAID GOODS. THE ASSESSEE ALSO DEMONSTRATED THE PURCHASE COST OF SOM E OF THE ITEMS AND ALSO SALE PRICE OF SAID GOODS WHICH WERE EFFECTED I N THE SUBSEQUENT YEAR. THE ASSESSEE FILED THE CHART TO DEMONSTRATE THAT TH E VALUATION WAS CORRECTLY DONE WHICH IS REPRODUCED BY THE LD. CIT ( A) ON PAGE 3 OF HIS ORDER. THE LD. CIT (A) FINALLY SUSTAINED THE ADDI TION OF ` 18 14 996/-. NOW THE ASSESSEE AS WELL AS REVENUE BOTH IN APPEAL ON THIS ISSUE FOR PARTIALLY SUSTAINING AS WELL AS PARTLY DELETING THE ADDITION MADE BY THE A.O.. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTI ES AND PERUSED THE RECORD. WE FIND THAT THE ASSESSEE FILED THE CO MPARATIVE PRICES OF THE SAID ITEMS AS ALSO IN THE SUBSEQUENT YEAR AND AS PE R THE OWN DETAILS GIVEN BY THE ASSESSEE THE REFERENCE IN THE ACTUAL VALUATION WAS WORKED OUT AT ` 18 14 966/-. ON THE PERUSAL OF THE ASSESSMENT ORD ER IT IS SEEN THAT NOWHERE IT IS CONTROVERTED BY THE A.O. THAT TH E METHOD OF THE VALUATION FOLLOWED BY THE ASSESSEE IS NOT CORRECT I .E. LOWER OF THE COST OR MARKET VALUE. IN OUR OPINION THE LD. CIT (A) HAS RIGHTLY SUSTAINED THE ADDITION WHICH IS TOTALLY BASED ON THE DATA GIVEN B Y THE ASSESSEE HIMSELF. WE THEREFORE FIND NO MERIT IN THE GROUND TAKEN BY THE ASSESSEE BEING ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 6 GROUND NO.2 AND DISMISS SAID GROUND. SAME WAY MET HOD OF VALUATION HAS NOT BEEN CONTROVERTED ANYWHERE BY THE A.O. THE WORKING MADE BY THE LD. CIT (A) IS BASED ON THE FACTUAL FIGURES OF THE SALES IN THE SUBSEQUENT YEARS. HENCE WE HAVE TO CONFIRM THE ORD ER OF THE LD. CIT (A) SUSTAINING THE ADDITION AT ` 18 14 966/-. ACCORDINGLY GROUND 2 OF THE REVENUE IS ALSO DISMISSED. 5. NOW WE SWITCH OVER TO THE NEW ISSUE I.E. ADDITI ON OF ` 80 895/- MADE BY THE A.O. FOR ALLEGED UNACCOUNTED SALES. ON THIS ISSUE THE ASSESSEE AS WELL AS THE REVENUE BOTH ARE IN APPEAL. 6. SO FAR AS THIS ISSUE IS CONCERNED THERE IS NO M UCH DISCUSSION IN THE SECOND ORDER PASSED BY THE A.O. THE CONTROVERS Y WAS IN RESPECT OF SALE OF THE COTTON FABRIC MADE BY THE ASSESSEE THE ASSESSEE CLAIMED THAT THE COTTON FABRIC WAS SOLD AT RS. 50 000/- AND A.O. DOUBTED THE GENUINENESS THE SALE PRICE SHOWN BY THE ASSESSEE AS HE WAS OF THE OPINION THAT THE VALUE OF THE SAID COTTON FABRIC AT ` 8 08 987/-. THE ASSESSEES CASE THE DETAILS OF THE SAID SALE THAT IT WAS SOLD TO SIDDHI VINAYA G.. STORES AT JALGAON. IT APPEARS THAT THE A.O. HAS CALLED INFORMATION FROM THE DDI NASIK WHO SUBMITTED HIS RE PORT TO THE A.O. IN WHICH IT WAS STATED THAT INSPECTOR VISITED DIFFEREN T AREAS OF JALGAON BUT THE SAID PARTY WAS NOT FOUND. THE A.O. THEREFORE HELD THAT IT IS DUBIOUS TRANSACTION OF SALE AND CAME TO THE CONCLUSION THAT BY THE BOGUS SALES ASSESSEE HAS BOOKED THE LOSS. THE A.O. THEREFORE TOOK 10% GROSS PROFIT ON THE SAID SALE WHICH WAS WORKED OUT AT ` 80 895/- AND MADE THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 7. IN THE FIRST ROUND OF APPEAL THE TRIBUNAL HAS R ESTORED THE SAID ISSUE TO THE FILE OF THE A.O. WHILE PASSING THE OR DER GIVING EFFECT TO THE DIRECTIONS OF THE TRIBUNAL WHICH IS A SUBJECT MATTE R OF THE PRESENT ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 7 APPEAL THE A.O. AGAIN MADE THE SAME ADDITION. THE ASSESSEE CHALLENGED THE SAID ADDITION BEFORE THE CIT (A) IN THE SECOND ROUND. THE LD. CIT (A) ADOPTED THE GROSS PROFIT AT 5% IN PLACE OF 10% AND SUSTAINED THE ADDITION AT ` 40 447/-. 8. WE HAVE HEARD THE PARTIES AND PERUSED THE REAS ONS GIVEN BY THE LD. CIT (A). IN OUR OPINION THE ASSESSEE HIMSELF INDIRECTLY ADMITTED THAT THE SAID FABRIC WAS SOLD AT A LOWER PRICE AND ALTER NATIVELY PLEADED FOR ADOPTING THE GROSS PROFIT AT 5%. ACCORDINGLY THE LD. CIT (A) SUSTAINED THE ADDITION AT 5% OF THE GROSS PROFIT. WE FIND NO MERIT IN THE GROUND TAKEN BY THE ASSESSEE AS WELL AS THE REVENUE. HENC E GROUND NO.3 OF THE ASSESSEE AND GROUND NO.1 OF THE REVENUE ARE DISMISS ED. 9. OTHER GROUNDS ARE GENERAL IN NATURE. 10. IN THE RESULT BOTH THE APPEALS THE ASSESSEES AS WELL AS THE REVENUES ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 28TH JANUARY 2011. SD/- SD/- ( T.R. SOOD ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE: 28TH JANUARY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) -15 MUMBAI. 4) THE CIT 1 MUMBAI. 5) THE D.R. B BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI CHAVAN* ITA 5899/M/2008 ITA 6573/M/2008 M/S. MATRACO INDIA LTD. 8 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 19.01.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 20.01.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER