The ITO, Ward-3(2),, Ahmedabad v. Stick Well Traders, Prop.Engineer Ilesh Hareshbhai,, Ahmedabad

ITA 740/AHD/2005 | 2001-2002
Pronouncement Date: 30-04-2010 | Result: Dismissed

Appeal Details

RSA Number 74020514 RSA 2005
Assessee PAN AABPE1000B
Bench Ahmedabad
Appeal Number ITA 740/AHD/2005
Duration Of Justice 5 year(s) 1 month(s) 21 day(s)
Appellant The ITO, Ward-3(2),, Ahmedabad
Respondent Stick Well Traders, Prop.Engineer Ilesh Hareshbhai,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 30-04-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 30-04-2010
Date Of Final Hearing 21-04-2010
Next Hearing Date 21-04-2010
Assessment Year 2001-2002
Appeal Filed On 09-03-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C BEFORE SHRI MUKUL SHRAWAT JUDICIAL MEMBER AND SHRI D.C. AGRAWAL ACCOUNTANT MEMBER DATE OF HEARING : 21/04/2010 DRAFTED ON: 26/0 4/2010 ITA NO.740/AHD/2005 ASSESSMENT YEAR : 2001-02 THE INCOME TAX OFFICER WARD-3(2) AHMEDABAD VS. SHRI ENGINEER ILESH HARSHADBHAI PROP. M/S.STICKWELL TRADERS 1943/1 PITTALIA POLE SARANGPUR AHMEDABAD PAN/GIR NO. : AABPE 1000 B (APPELLANT) .. (RESPONDENT) AND CO NO.94/AHD/2005 (ARISING OUT OF ITA NO.740/AHD/2005) SHRI ENGINEER ILESH HARSAHDBHAI VS. THE ITO AHMEDABAD WARD-3(2) AHMEDABAD (CROSS OBJECTOR) .. (RESPONDENT) REVENUE BY : SHRI M.C.PANDIT SR.D.R. ASSESSEE BY: SHRI P.M. MEHTA O R D E R PER SHRI MUKUL SHRAWAT JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-IX AHMEDABAD DATED 06/12/2004 PASSED FOR ASSESSMENT YEAR 2001-02 AND CROSS OBJECTION FILED B Y THE ASSESSEE THEREOF. ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 2 - (A) THE FOLLOWING GROUNDS WERE RAISED BY THE REVENU E IN ITS APPEAL:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FAC TS OF THE CASE IN DELETING THE ADDITION ON ACCOUNT OF EXCESS CLOSING STOCK U/S.145(3) OF RS.26 01 030/-. 2. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION ON ACCOUNT OF NEGATIVE STOCK U/S.69 OF RS.11 00 764/-. (B) IN CROSS OBJECTION THE ASSESSEE RAISED THE FOL LOWING GROUNDS:- 1. IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANC ES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ER RED IN UPHOLDING THE PART OF THE DISALLOWANCE OF RS.10 453 FROM THE DISALLOWANCE OF RS.20 453 OUT OF TRAVELLING EXPENSE S WHEN HE OUGHT TO HAVE DELETED THE ENTIRE DISALLOWANCE. THIS HON'BLE TRIBUNAL MAY THEREFORE BE PLEASED TO HOLD THAT THERE IS NO JUSTIFICATION IN UPHOLDING THE DIS ALLOWANCE OF RS.10 453 OUT OF TRAVELLING EXPENSES AND DIRECT THE DELETION THEREOF. 2. IN LAW AND IN THE FACTS AS WELL AS CIRCUMSTANCES OF THE RESPONDENTS CASE THE LEARNED CIT(A) HAS GROSSLY ER RED IN HOLDING THAT THE INTEREST U/S.234B OF THE I.T. ACT IS MANDATORY WHICH OUGHT TO HAVE BEEN DELETED AS THE RESPONDENT OBJECTED TO THE VERY LEVY OF SUCH INTERE ST. THIS HON'BLE TRIBUNAL MAY THEREFORE BE PLEASED TO HOLD THAT THERE IS NO JUSTIFICATION IN UPHOLDING THE LEVY OF INTERE ST U/S.234B OF THE I.T. ACT AND DIRECT THE DELETION THEREOF. ITA NO.740/AHD/2005 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDIN G ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT 1961 DATED 31/03/2004 WERE THAT THE ASSESSEE IS IN THE BUSINESS OF PURCHASE AND SAL E OF ESSENCE AND FOOD- ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 3 - COLOUR. IT HAS ALSO BEEN NOTED BY THE ASSESSING OF FICER THAT THE GROSS PROFIT PERCENTAGE FOR THE YEAR UNDER CONSIDERATION WAS AT 6.90% AS AGAINST THE GROSS PROFIT PERCENTAGE OF IMMEDIATELY PRECEDING YEAR AT 6.28%. IN RESPECT OF THE ABOVE GROUND THE ASSESSI NG OFFICERS OBSERVATION WAS THAT THE ASSESSEE WAS NOT MAINTAINI NG DAY-TO-DAY STOCK REGISTER. THE REPLY OF THE ASSESSEE WAS THAT SINC E HE WAS DEALING WITH HUNDREDS OF SMALL ITEMS OF FLAVOURING-ESSENCE AND F OOD-COLOURS HENCE IT WAS NOT POSSIBLE TO MAINTAIN QUANTITATIVE-WISE THE ITEMS OF THE STOCK. THE ASSESSING OFFICER HAS INVOKED THE PROVISIONS OF SECTION 131(3) OF THE I.T. ACT 1961 AND IMPOUNDED THE BOOKS OF ACCOUNT PURCHASE AND SALE REGISTERS AS WELL AS PURCHASE AND SALES BILLS. THE REAFTER HE HAS PROCEEDED TO GET THE ACCOUNTS AUDITED BY USING TALLY PROGRAM 5.4 VERSION . ON THAT BASIS HE HAD WORKED OUT THAT THERE WA S A CLOSING STOCK AT THE VALUE OF RS.46 87 323/- HOWEVER AS AGAINST THAT THE VALUE OF THE CLOSING STOCK AS PER BOOKS OF ACCOUNT DECLAR ED BY THE ASSESSEE WERE STATED TO BE AT RS.13 37 932/-. THEREUPON TH E ALLEGED UNDER STATEMENT IN THE VALUE OF CLOSING STOCK WAS WORKED OUT BY THE ASSESSING OFFICER TO THE EXTENT OF RS.33 49 391/-. HE HAS AL SO COMMENTED THAT THE SAID DIFFERENCE WAS ACTUALLY SOLD OUT OF THE BOOKS OF ACCOUNT HENCE IT WAS AN UNACCOUNTED SALES TO BE TAXED IN THE HANDS OF TH E ASSESSEE BECAUSE CORRESPONDING PURCHASES HAVE DULY BEEN ACCOUNTED FO R IN THE BOOKS OF ACCOUNT. IN REST OF THE ORDER THE ASSESSING OFFICE R HAD DEALT WITH THE EXPLANATION OFFERED BY THE ASSESSEE. FINALLY AFT ER GIVING AN ADJUSTMENT OF ONE EXCISE BILL THE ASSESSING OFFICER HAS RECTI FIED THE CALCULATION MISTAKE AND ARRIVED AT THE FINAL FIGURE OF EXCESSIV E CLOSING STOCK OF ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 4 - RS.26 01 030/- WHICH WAS ADDED IN THE TAXABLE INCOM E OF THE ASSESSEE. BEING AGGRIEVED THE ISSUE WAS CARRIED BEFORE THE F IRST APPELLATE AUTHORITY. 3. THE LEARNED CIT(APPEALS) HAS EXAMINED THE FACTS OF THE CASE IN DETAIL AND ALSO PROVIDED AN OPPORTUNITY OF HEARING TO THE REVENUE DEPARTMENT BY CALLING FOR A REMAND REPORT FROM THE CONCERNED ASSESSING OFFICER. VIDE PARAGRAPH NO.4.2 OF THE IM PUGNED APPELLATE ORDER OF THE LEARNED CIT(APPEALS) IT IS EVIDENT TH AT THE REMAND REPORT WAS SUBMITTED BY THE CONCERNED ADDL.COMMISSIONER OF INCOME TAX DATED 30/10/2004 WHICH HAS DULY BEEN CONSIDERED. THE LEARNED CIT(APPEALS) HAS ALSO REPRODUCED THE EXPLANATION OF FERED BY THE ASSESSEE. THEREAFTER HE HAS ARRIVED AT THE CONCL USION VIDE PARAGRAPH NO.4.4; RELEVANT PORTION REPRODUCED BELOW:- 4.4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. ON PERUSAL OF THE DETAILS AND SUBMISSIONS FILED IT IS NOTICED THAT THE APPELLANT WAS HAVING BETTER GROSS PROFIT RATIO AS C AN BE SEEN FROM THE FOLLOWING DETAILS SUBMITTED TO THE A.O. VIDE LE TTER DATED 25/03/2004: YEAR G.P. FOR THE ASSTT.YR 2001-02 6.90% FOR THE ASSTT.YR 2000-01 6.28% FOR THE ASSTT.YR 1999-00 6.87% THE A.O. HAS NOT DISPUTED THESE FIGURES AND NOTED T HE SAID FIGURES IN PARA 3 OF THE ASSESSMENT ORDER. IF THE FACT THA T APPELLANT HAD INCURRED LOSS ON ACCOUNT OF INSURANCE CLAIM IS CONS IDERED THE GROSS PROFIT RATE WOULD EFFECTIVELY BE ABOUT 9% FO R THE YEAR UNDER CONSIDERATION BECAUSE AS AGAINST THE LOSS OF GOODS OF RS.12 LACS CLAIM WAS GRANTED TO THE EXTENT OF ONLY RS.6.48 LAC S. THE ONLY REASON FOR DISALLOWANCE MADE BY THE A.O. IS THAT AC CORDING TO HIM THE ASSESSEE OUGHT TO HAVE MAINTAINED DAY TO DAY ST OCK REGISTER ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 5 - AND THAT THE ASSESSEE HAD NOT MAINTAINED THE SAME. THE A.O. HAS THEREFORE WORKED OUT THE STOCK BY APPLYING COMPUTE R PROGRAMMING AND HELD THAT THERE WAS EXCESS STOCK IN CERTAIN ITEMS AND THERE WERE SHORTAGE ALSO IN CERTAIN ITEMS. HE HAS THEREFORE MADE THE ADDITIONS AS ABOVE. THE ASSESSEE ON THE OTHER HAND EXPLAINED THAT MAINT ENANCE OF DAY TO DAY STOCK REGISTER WAS NOT POSSIBLE LOOKING TO T HE NATURE OF BUSINESS AND THE QUANTUM OF BUSINESS. THESE ACCOU NTS ARE AUDITED U/S.44AB. ON PERUSAL OF THE WORKING OF THE ADDITIONS MADE BY THE A.O. AND THE SUBMISSIONS ON BEHALF OF T HE APPELLANT IT IS NOTICED THAT THERE ARE SIMILARLY IN THE NAMES AN D DESCRIPTION OF VARIOUS ITEMS OF COLOURS AND FLAVOURS. THERE ARE CHANCES OF POSTING CERTAIN ITEMS HAVING SIMILAR NAME OR COLOUR IN THE ACCOUNT OF OTHER ITEMS. THUS THERE ARE CHANCES OF COMPENS ATORY ERRORS ON THIS ACCOUNT. THE FACT THAT THERE ARE SIMILARITIES IN THE NAMES AND COLOURS AND FLAVOURS IS ALSO ACCEPTED IN THE REMAND REPORT GIVEN BY THE A.O. WHICH CAN BE SEEN FROM PARA 2(G) OF THE REMAND REPORT. THAT APART ON PERUSAL OF THE STATEMENT PR EPARED BY THE A.O. SUCH COMPENSATORY ITEMS CAN BE FOUND. FOR INS TANCE IN THE STATEMENT OF EXCESS STOCK ON PAGE 1 COLA FLAVOUR S 3896 IS SHOWN AS EXCESS TO THE EXTENT OF 19 LTRS. WHEREAS IN THE STATEMENT OF NEGATIVE STOCK COLA FLAVOUR S3218 IS SHOWN NEGAT IVE AT 12 LTRS. SIMILARLY COLOUR LEMON YELLOW IS SHOWN AS EXCESS STOCK TO THE EXTENT OF 210 KGS VALUED AT RS.323.53 PER KG. ON T HE OTHER HAND LEMON YELLOW JH 6597 IS SHOWN AS NEGATIVE STOCK I N THE SECOND STATEMENT AT 169.4KGS AND IT IS VALUED AT RS.310 PE R KG. SIMILARLY MANGO 3104 IN FIRST STATEMENT IS SHOWN AT 10 KG. EXCESS WHEREAS IN THE SECOND STATEMENT MANGO 3181 IS NEG ATIVE TO THE EXTENT OF 8 KIGS. HAVING REGARD TO THE ABOVE THE APPELLANT WAS CORRECT IN SUBMITTING THAT THERE ARE COMPENSATORY E RRORS AND IN SUCH CIRCUMSTANCES THE EXCESS STOCK AND NEGATIVE ST OCK WORKED OUT BY THE A.O. CANNOT BE ADDED TOGETHER BUT THE DIFFE RENCE ONLY COULD BE CONSIDERED. THE A.O. IS DIRECTED TO REDUCE THE ADDITION ACCORDINGLY. 3.1. AFTER HEARING BOTH THE SIDES WE ARE OF THE CO NSCIENTIOUS VIEW THAT THERE IS NO FALLACY IN THE FINDINGS OF THE LEARNED CIT(APPEALS). WE ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 6 - HAVE NOTICED THAT THE LEARNED CIT(APPEALS) HAS ARRI VED AT THE SAID CONCLUSION AFTER CONSIDERING CERTAIN RELEVANT FACTS SUCH AS THAT THE PURCHASES AS WELL AS SALES OF THE ASSESSEE WERE FUL LY VERIFIABLE AS PER THE SALES/PURCHASE BILLS REGISTERS MAINTAINED IN THE RE GULAR COURSE OF BUSINESS. AN ANOTHER FACT HAS ALSO BEEN APPRECIATE D BY THE LEARNED CIT(APPEALS) THAT MORE THAN 90% OF THE PURCHASES WE RE FROM ONE PARTY I.E. BUST BOOKE ALLEN (I) LTD. IN THIS REGARD TH E ASSESSEES EXPLANATION WAS THAT THE PURCHASES WERE FULLY ACCOUNTED FOR BEI NG A TRANSACTION WITH A COMPANY. ONE MORE FACT HAS ALSO BEEN APPRECIATE D BY THE LEARNED CIT(APPEALS) THAT ALL THE CUSTOMERS TO WHOM THE SAL ES WERE MADE WERE ALSO IDENTIFIABLE BEING PHARMACEUTICAL COMPANIES. THE LEARNED CIT(APPEALS) HAS ALSO RECORDED THAT MAJOR PORITION OF THE SALES WERE DIRECTLY DELIVERED FROM BUST BOOKE ALLEN (I) LTD. T O THE CUSTOMERS. IT WAS FURTHER APPRECIATED THAT THE TRANSFER OF STOCK INSTEAD OF FIRST BEING DELIVERED AT THE ASSESSEES PREMISES HAD IN FACT BEEN DIRECTLY DELIVERED FROM THE END OF THE SAID COMPANY TO THE CUSTOMERS. DUE TO THIS REASON THERE WAS NO POSSIBILITY OF EXECUTION OF SALES OUT OF THE BOOKS OF ACCOUNT OF THE ASSESSEE. TWO MORE VITAL FACTS HAVE ALSO BE EN APPRECIATED BY THE LEARNED CIT(APPEALS) I.E. THE ASSESSING OFFICER HA S NOT GIVEN ANY CREDIT OF NEGATIVE STOCK AGAINST THE EXCESS OF STOCK CALCU LATED BY HIM. IN OTHER WORDS THE LEARNED CIT(APPEALS) HAS APPRECIATED THE COMPUTATION OFFERED BEFORE HIM WHEREIN SUCH NETTING WAS DONE B Y THE ASSESSEE. MEANING THEREBY ON ONE HAND THERE WAS A VALUE OF E XCESS STOCK OF RS.26 01 030/- HOWEVER ON THE OTHER HAND THERE A S A NEGATIVE STOCK OF RS.11 00 764/- WHICH WAS HELD TO BE ADJUSTED AND TH E NET DIFFERENCE WAS THEN LEFT FOR FURTHER EXPLANATION. IN RESPECT OF SAID DIFFERENCE THE SECOND ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 7 - VITAL FINDING ON FACTS GIVEN BY THE LEARNED CIT(APP EALS) WAS THAT STOCK FOR THE VALUE OF RS.12 LACS WAS DESTROYED DUE TO RA INS. IN THIS REGARD AN EVIDENCE PERTAINING TO INSURANCE CLAIM OF RS.6.48 L ACS HAVE ALSO BEEN APPRECIATED BY THE LEARNED CIT(APPEALS). IN VIEW OF THIS CONSIDERING THE ENTIRETY OF THE CIRCUMSTANCES OF THE CASE AND T HE FINDINGS ON FACTS DELIBERATED UPON BY THE LEARNED CIT(APPEALS) WE HE REBY AFFIRM THE SAME PARTICULARLY WHEN THOSE FINDINGS ON FACTS HAVE NOT BEEN CONTROVERTED BY PLACING ANY CONTRARY EVIDENCE FROM THE SIDE OF THE REVENUE. WITH THE RESULT WE FIND NO FORCE IN THI S GROUND OF THE REVENUE HENCE HEREBY DISMISSED. 4. APROPOS GROUND NO.2 THE OBSERVATION OF THE ASSE SSING OFFICER WAS THAT THERE WAS NEGATIVE STOCK IN RESPECT OF 53 ITEMS OF THE ESSENCE ETC. DUE TO THIS REASON THE ASSESSING OFFICER HAS ARRIVED AT THE CONCLUSION THAT THE SALES HAVE BEEN EXECUTED BY THE ASSESSEE IN RESPECT OF CERTAIN ITEMS WHICH IN FACT WERE NOT AVAILABLE AS PER THE STOCK STATEMENT PREPARED BY HIM. BY INVOKING THE PROVISIONS OF SEC TION 69 OF THE I.T. ACT 1961 THE ASSESSING OFFICER HAS HELD THAT TO T HAT EXTENT THERE WAS INVESTMENT NOT RECORDED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE HENCE AN ADDITION OF RS.11 00 764/- WAS MADE. BEING AGGRIE VED THE ISSUE WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY. 5. THE LEARNED CIT(APPEALS) HAS CONSIDERED THIS A SPECT OF NEGATIVE STOCK ALONGWITH THE MAIN ALLEGATION OF DIFFERENCE I N THE STOCK VALUE AND THEREUPON ARRIVED AT THE CONCLUSION IN A CONSOLIDAT ED MANNER AS FOLLOWS:- ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 8 - THE LD. A.R. ALSO POINTED OUT THAT THE A.O. HAS TA KEN THE NEGATIVE FIGURE AT THE MAXIMUM FIGURE AT ANY TIME DURING THE YEAR INSTEAD OF THE CLOSING FIGURE OF THE NEGATIVE STOCK ON THE CLO SE OF THE YEAR. THAT APART THE APPELLANT SUFFERED LOSS ON ACCOUNT OF FLOODS DUE TO HEAVY RAINS AND IT WAS EXPLAINED TO THE A.O. IN THE ASSESSMENT PROCEEDINGS. THOUGH THE APPELLANTS CLAIM WAS ACCE PTED BY THE INSURANCE COMPANY AT RS.6.48 LAKH THE CLAIM WAS TO THE EXTENT OF COST OF GOODS AT RS.12 LAKH. THE FACT THAT THE FLO ODS DESTROYED THE STOCK CANNOT BE DISPUTED IN VIEW OF THE FACT THAT T HE INSURANCE COMPANY ALSO ACCEPTED THE CLAIM FOR THE SAME. IN THE CIRCUMSTANCES SUCH STOCK DESTROYED WHICH IS NOT CON SIDERED IN THE WORKING OF THE A.O. HAS TO BE DEDUCTED BECAUSE WHEN STOCK WAS WORKED OUT ON TALLY PROGRAMME BY TAKING INTO ACCOUN T ACTUAL SALES AND PURCHASES NO DEDUCTION FOR THIS LOSS OF STOCK DUE TO RAINS WAS GIVEN. AS DISCUSSED EARLIER THIS CLAIM WILL ALSO RESULT IN EFFECTIVE G.P. RATE OF ABOUT 9% TO THE YEAR UNDER CONSIDERATI ON AS COMPARED TO G.P. RATE OF 6.28% IN THE EARLIER YEAR. APART FROM THIS THE A.O. HAS TAKEN THE SALE RATES FOR VALUATI ON OF EXCESS CLOSING STOCK AS AGAINST THE COST. THE STOCK HAS T O BE VALUED AT COST OR MARKET VALUE WHICHEVER IS LOWER. THIS FACT IS ALSO APPARENT FROM THE WORKING GIVEN BY THE A.O. WHEREIN HE HAS G IVEN THE VALUE ON THE BASIS OF THE SALE RATES. THE LD. A.R. ALSO POINTED OUT THAT EVEN ON CERTAIN ITEMS THE VALUE ADOPTED BY THE A.O. IS NOT OF THE SALE RATE BUT AN EXCESSIVE VALUE. IN THIS REGARD AS AN EXAMPLE REFERENCE WAS MADE TO WORKING ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 9 - NEGATIVE STOCK OF CARMOSINC SUPRA WHICH IS SHOWN AS NEGATIVE TO THE EXTENT OF 42 KG AND ITS VALUE IS DETERMINED AT THE RATE OF RS.3200 PER KG. THE LD.A.R. POINTED OUT THAT THIS VALUE IS TOTALLY INCORRECT AS THE LAST PURCHASE PRICE OF THE SAID IT EM IS RS.260 PER KG. THERE IS A SALE BILL DATED 12.3.2001 WHEREIN T HE SAID ITEM IS SOLD AT RS.290/- PER KG. THUS EVEN ON THE BASIS OF SALE RATE IT IS RS.290 PER KG AND CAN NEVER BE RS.3200 PER KG. IN THIS REGARD THE APPELLANT ALSO FURNISHED COPY OF THE STATEMENT GIVE N BY THE A.O. ALONGWITH SHOW CAUSE NOTICE WHEREIN THIS ITEM IS SH OWN AT NEGATIVE FIGURE OF 60 KGS AT THE RATE OF RS.258/- P ER KG. THUS ONLY IN THESE ITEMS ITSELF THERE IS EXCESS ADDITION TO T HE EXTENT OF ABOUT RS.1 21 000/-. IF ONLY THE ABOVE FACTORS ARE CONSI DERED THE ADDITIONS REQUIRES TO BE REDUCED AS UNDER: ADDITION FOR EXCESS STOCK 26 01 030 LESS:COMPENSATORY ADDITION FOR NEGATIVE STOCK 11 00 764 ------------- 15 02 266 LESS: STOCK TO BE VALUED AT COST AND NOT SALE PRICE AND FROM THE ABOVE ADDITION IS REQUIRED TO BE REDUCED BY EFFECTIVE GROSS PROFIT RATE OF 9% 1 35 026 ------------ 13 77 250 LESS: COST OF STOCK DESTROYED BY FLOOD 12 00 000 ------------- 1 77 240 ------------ THE ABOVE DIFFERENCE IS TO BE CONSIDERED IN THE LIG HT OF THE FACT THAT CERTAIN ITEMS OF STOCK ARE VERY OLD AND THE FACT TH AT THE STOCK OF ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 10 - COLOURS AND FLAVOURS IS NOT SALEABLE AFTER SIX MONT HS AS IT GETS EXPIRED AND ITS SALE WOULD BE A CRIMINAL OFFENCE. APART FROM THE ABOVE THE MISTAKE POINTED OUT BY THE APPELLANT AS ABOVE IS ALSO TO BE CONSIDERED WHICH SHOWS THAT THE WORKING OF THE A .O. IS NOT CORRECT. THAT APART THERE ARE BREAKAGES IN THE TR ANSPORTATION AND HANDLING OF THE PACKING ON ACCOUNT OF WHICH LOSS AR ISES TO THE APPELLANT. THUS THE DIFFERENCE WORKED OUT AS ABOVE IS COVERED BY SUCH FACTORS IF TURNOVER OF BUSINESS OF ABOUT 2.69 CRORES IS TAKEN INTO ACCOUNT. IN VIEW OF THE ABOVE AND CONSIDERING THE BETTER BOOK RESULTS THESE TWO ADDITIONS OF RS.26 01 030/- AND RS.11 00 764/- ARE DIRECTED TO BE DELETED. 6. WE HAVE HEARD BOTH THE SIDES. ON THE BASIS OF THE REASON ALREADY ASSIGNED HEREINABOVE WE HEREBY HOLD THAT THERE WAS NO FALLACY IN THE ABOVE REPRODUCED PARAGRAPH OF THE LEARNED CIT(APPEA LS). WE HAVE OBSERVED THAT HE HAS NOT ONLY APPRECIATED THE PRELI MINARY CONTENTION OF THE ADJUSTMENT OF THE NEGATIVE STOCK AGAINST THE DI FFERENCE IN THE VALUE OF STOCK ALLEGED BY THE ASSESSING OFFICER BUT HE HAS A LSO EXAMINED THE FACT PERTAINING TO THE LOSS OF A STOCK DUE TO RAINS. T HE LEARNED CIT(APPEALS) HAS ALSO APPRECIATED THAT THE STOCK BEING ESSENCE COLOURS AND FLAVOURS HAS LIMITED SHELF LIFE WHICH ACCORDING TO HIM WAS N OT SALABLE AFTER SIX MONTHS. RATHER IT WAS INFORMED BY THE ASSESSEE T HAT THE SALE OF SUCH PRODUCT AFTER THE EXPIRY PERIOD WAS TREATED AS A CR IMINAL OFFENCE. THE LEARNED CIT(APPEALS) HAS ALSO NOTED THE ASPECT OF POSSIBILITY OF BREAKAGE IN TRANSPORTATION. THUS CONSIDERING THOS E FACTUAL ASPECTS IT WAS DIRECTED TO DELETE THE ADDITION MADE IN RESPEC T OF THE NEGATIVE STOCK ITA NO .740/AHD/2005 AND CO NO.94/AHD/2005(BY ASSESSEE) ITO VS. SHRI ENGINEER ILESH HARSHADBHAI ASST.YEAR 2001-02 - 11 - AND RIGHTLY HELD SO. IN THE ABSENCE OF ANY CONTRA RY EVIDENCE FROM THE SIDE OF THE REVENUE WE HEREBY AFFIRM THE FINDINGS ON FACTS OF LEARNED CIT(APPEALS). WITH THE RESULT THIS GROUND OF TH E REVENUE IS ALSO DISMISSED. ASSESSEES CO NO.94/AHD/2005 (ARISING OUT OF ITA NO .740/AHD/2005) 7. AT THE TIME OF HEARING THE LD. COUNSEL FOR T HE ASSESSEE DID NOT PRESS GROUNDS RAISED IN THE CROSS OBJECTION AND HENCE THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 30 TH APRIL 2010. SD/- SD/- ( D.C. AGRAWAL) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 30/04/2010 T.C. NAIR SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESP ONDENT 3. THE CIT CONCERNED. 4. THE LD. CIT(A PPEALS)-IX AHMEDABAD 5. THE DR AHMEDABAD BENCH. 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD