Income Tax Appellate Tribunal - Chandigarh
M/S G.S. Auto International Ltd., ... vs Acit, Cc-Ii, Ludhiana on 28 February, 2019
आयकर अपील य अ धकरण,च डीगढ़ यायपीठ, "ए", च डीगढ़
I N T H E I NC O ME T A X A P PE L L A T E T RI B U N AL
D I VI S I O N B E NC H , ' A ' , CH A ND I G AR H
ी संजय गग , या यक सद य एवं ीमती अ नपण
ू ा ग&ु ता, लेखा सद य
BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND
Ms. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
आयकर अपील सं./ ITA No. 1 0 1 8 / C H D / 2 0 1 8
नधा रण वष / Assessment Year : 2015-16
M/s G.S. Auto International बनाम The ACIT, Central Circle-II,
Limited, G.S. Estate, Ludhiana
G.T. Road,
Ludhiana -141010
थायी लेखा सं./PAN No: AAACG6090R
अपीलाथ /Appellant यथ /Respondent
नधा रती क ओर से/Assessee by : Shri Sunil Arora, Advocate &
Sh. P.K.Goyal, CA
राज व क ओर से/ Revenue by : Smt. Chandrakanta, Sr. DR
सन
ु वाई क तार%ख/Date of Hearing : 21.02.2019
उदघोषणा क तार%ख/Date of Pronouncement : 28.02.2019
आदे श/Order
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 22.5.2018 of the Commissioner of Income Tax (Appeals)-5, Ludhiana [hereinafter referred to as CIT(A)].
2. In this appeal, the assessee has raised the following grounds:-
1. That the Ld. C1T(A) while sustaining addition of Rs. 2,83,07,733/-
representing excess stock found has grossly erred on facts and in law by not considering the statements of Sh. Jasbsir Singh Ryait, Director, recorded U/s 132 of I.T.Act on 4.12.2014 and Sh. Surinder Singh Ryait, Director, who had specifically explained the discrepancies in stock while making statement U/s 132 of the I.T.Act on 02.01.2015 and also ignored other relevant records of the appellant company. Hence addition sustained is per se bad on ITA No. 1018/Chd/2018- M/s G.S. Auto International Limited, Ludhiana 2 facts and in Law.
2. That the Ld. C1T(A) has erred both in law and on facts in sustaining addition of Rs. 2,83,07,733/- on account of excess stock found U/s 69A of the Income Tax Act, 196l instead of business income of the appellant company.
3. That while upholding the addition of Rs. 2,83,07,733/-, the Ld. CIT(A) did not appreciate that benefit of set-off of Current year Business Loss of Rs. 6.15,44,794/- duly assessed by the Ld. A.O. is to be allowed against addition made U/s 69A on account of excess stock found while calculating lax payable U/s 115BBE of the I.T.Act, 1961 during the captioned year.
4. That the Ld. CIT(A) has also erred both in law and on facts in not allowing the set- off of current year business loss U/s 70/71 of the Income Tax Act against the additions made on account of excess stock found U/s 69A of the I.T.Act. 1961.
5. That the Ld. CIT(A) has erred both in law and on facts in enhancing the assessment by reducing loss by Rs.2,83,07,733/- and also increasing the tax payable from NIL to Rs. 96,03,610/- without providing any opportunity to the appellant to show cause against such enhancement as is mandated U/s 251(2) of the Income Tax Act, 1961.
6. That the Ld. CIT(A) has further erred in law and on facts by causing DOUBLE JEOPARDY to the appellant by reducing the loss by the amount of addition sustained and also paying the tax on the same.
7. That the appellant craves permission to add / alter or to taken afresh grounds of appeal either before or during the course of hearing.
3. The brief facts relating to the issue are that search action u/s 132 of the Act was carried out by the Income Tax Authorities at the premises of the assessee and certain excess stock was found. The Assessing officer made additions in respect of the excess stock found u/s 69A of the Income- tax Act, 1961 (in short 'the Act'). Before the Assessing officer, the assessee contested that no excess stock was found. That the Investigation ITA No. 1018/Chd/2018- M/s G.S. Auto International Limited, Ludhiana 3 authorities have wrongly recorded on account of mistake in counting / calculation that the excess stock was found at the premises of the assessee. However, the Assessing officer rejected the above contention of the assessee and made the impugned additions on account of excess stock found. The Ld. CIT(A), in appeal, enhanced the addition so made by the Assessing officer by way of disallowing the loss claimed against addition of income made by the Assessing officer by applying the provisions of section 115BBE of the Income Tax Act.
4. Before us, the Ld. Counsel for the assessee has submitted that there was an error committed by the Investigating authority while calculating / counting the stock of the assessee. The Ld. counsel has invited our attention to the statement recorded of the partners of the assessee firm during the search action u/s 132(4) of the Act. The Statement of one of the director of the company was recorded which has been reproduced at page 4 of the assessment order by the Assessing officer. When confronted about the excess stock found u/s 132(4) on 4.1.2.2014, at the premises of the assessee, Shri Jasbir Singh Ryait, Director of the assessee company answered that there seemed to be an arithmetical error which he would tr y to reconcile soon by rechecking the quantity. A separate statement of another director of the company Shri Surinder Pal Singh Ryait was also recorded, he was also confronted with the same discrepancy in the stock to which he also answered that there was a mistake in counting / taking stock. He also specifically denied the excess stock computed by the department item wise. The relevant part of the statement recorded of Shri Surinder Singh Ryait is as under:-
ITA No. 1018/Chd/2018-
M/s G.S. Auto International Limited, Ludhiana 4 "029. During the course of initial search conducted at the premises of M/s G.S.Auto International Ltd and other group companies of G.S. Estate on 3.12.14 and 4.12.14, physical verification and counting of stock was undertaken by the department with the help of competent persons deputed by the company. Now I am showing you the stock summary sheet with respect of M/s G.S.Auto International Unit-1 made as a result of the above mentioned stock taking duly signature by you. This shows that the stock as per trading account as on 3.12.2104 was Rs. 1027 lacs while the stock as per physical verification and valuation came out to the worth Rs. 1502 lacs. Please explain this excess stock of amount of Rs. 475 lacs with respect of Unit 1 of M/s G.S. International Ltd, on the date of search.
Ans. The stock as pear trading account of Rs. 1027 lacs is on cost basis. I am categorically denying the excess stock to the extent of Rs. 475 lacs. During physical verification and counting of the stock by the department on dated 3.12.2014 and 4.12.2014, finished goods worth Rs. 151.79 lacs were lying in the premises for which sale bills were already raised. Finished goods amounting to Rs. 338.78 lacs on amount of three items code No. GCA5105,GCA5111, GPP5105 was wrongly excess physically counted on the physical verification. G.30. It may be noted that as already mentioned above, the stock was taken and valued with the help of competent employees deputed by the company taking the stock, the CEO of the company was categorically asked to whether the person deputed are competent enough and stock taking and valuation to which he replied in affirmative. Further you have duly signatured stock file and stock summary and stock taking documents during the course of search without raising objection with respect to the quatity of excess stock. Furthermore, the chairman of the company Shri Jasbir Singh Ryait in reply to the question while recording of statement during initial search pertaining to the particulars excess stock has replied that this is because of arithmetical error. Please comment on this in light of our reply to the question No. 29 above. Ans. I admit that the stock was taken with the help of competent employees of the company and was duly signed by me. However, there might be mistake in stock taking. ITA No. 1018/Chd/2018-
M/s G.S. Auto International Limited, Ludhiana 5 Shri Jasbir Singh's reply in the matter of stock excess is as per his knowledge."
5. Apart from that, Ld. Counsel for the assessee has also invited our attention to paper book pages 20, 21 & 22 of the paper book and has submitted that there was doubt about counting of certain items and that even certain items have been added by pen in the end which have already been included in the typed list.
6. On the other hand, the Ld. DR submitted that the assessee during the search action the Director of the assessee had signed the statement and admitted that a competent person was involved in counting the stock.
7. We have considered the rival submissions and heard the Ld. Representatives of the parties on this issue. A very pertinent fact on the file is that the assessee during the search proceedings itself disputed the figure of the stock recorded by the search party. Both the directors of the company had categorically disputed the figure of the stock taken by the search party. Their plea was that there was a mistake in counting the stock. However, despite specific objections by the assessee there is nothing on the file as to whether the search party took cognizance of the said objections. If the directors of the assessee company were disputing the counting / calculation of the stock, it was incumbent upon the search party to recheck / reconcile the stock and duly confront the assessee in this respect. The objections raised by the directors of the assessee company remained unrebutted. Moreover, the Ld. Counsel for the assessee also tried to demonstrate from the list of stock also that certain items were taken twice. Since the director of the assessee company had taken specific stand about the counting / calculation of the stock and there was ITA No. 1018/Chd/2018- M/s G.S. Auto International Limited, Ludhiana 6 no action on the part of the search party to address those objections, under the circumstances, the list given by the search party of the stock cannot be made the sole basis for addition. The addition made on this account is liable to be deleted. We order accordingly.
8. Since we have deleted the additions made by the Assessing officer on account of excess stock, the other grounds taken by the assessee being consequential in nature, become infructuous and are rendered academic in nature.
9. In view of our findings given above, the additions made by the lower authorities are ordered to be deleted.
In view of this, the appeal of the assessee is treated as allowed Order pronounced in the Open Court on 28.02.2019 Sd/- Sd/-
(अ नपण ू ा ग&ु ता / ANNAPURNA GUPTA) (संजय गग / SANJAY GARG) लेखा सद य/ Accountant Member या यक सद य/ Judicial Member Dated : 28.02.2019 "आर.के."
आदे श क त,ल-प अ.े-षत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent
3. आयकर आय/ ु त/ CIT
4. आयकर आय/ ु त (अपील)/ The CIT(A)
5. -वभागीय त न2ध, आयकर अपील%य आ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदे शानस ु ार/ By order, सहायक पंजीकार/ Assistant Registrar