Income Tax Appellate Tribunal - Amritsar
Ram Kumar Bansal,, Bathinda vs Department Of Income Tax on 10 February, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL,
AMRITSAR BENCH; AMRITSAR
BEFORE SH. A.D. JAIN, JUDICIAL MEMBER
AND SH. T.S. KAPOOR, ACCOUNTANT MEMBER
ITA Nos.459 & 461(Asr)/2014
Assessment year:2010-11 & 2011-12
PAN:AAHFR9629R
The Asstt. Commr. of Income tax, vs. M/s. Ram Kumar Bansal,
Circle-1, Bathinda. Contractor, Bibiwala Road,
Bathinda.
(Appellant) (Respondent)
C.O.Nos.49& 48(Asr)/2014
(Arising out of ITA Nos.459 & 461(Asr)/2014)
Assessment year:2010-11 & 2011-12
PAN: AAHFR9629R
M/s. Ram Kumar Bansal, vs. The Asstt. Commr. of Income tax,
Contractor, Circle-1, Bathinda.
Bibiwala Road,
Bathinda.
(Appellant) (Respondent)
ITA No.479(Asr)/2014
Assessment Year: 2011-12
PAN: AABC!2581A
The Asstt. Commr. of Income tax, vs. M/s. Ishar Infrastructure
Circle-1, Bathinda. Developers Pvt. Ltd.
Bathinda.
(Appellant) (Respondent)
Department by: Sh. S.S. Kanwal, DR
Respondent by: Sh. P.N. Arora, Advocate
Date of hearing: 08/02/2016
Date of pronouncement: 10/02/2016
ORDER
PER BENCH;
These are three appeals filed by the Revenue against the separate orders of the ld. CIT(A), Bathinda, dated 30.05.2014, 30.05.2014 and 2 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 27.05.2014 respectively. The assessee in ITA Nos. 459 & 461 has also filed C.Os against the appeals filed by the Revenue. These appeals & cross objections were heard together and there are common issues, therefore, these are being disposed off through this consolidated order.
2. At the outset, the ld. AR invited our attention to an order passed by the Amritsar Bench of the Tribunal, dated 26.03.2015 and submitted that in the case of the assessee itself, similar issues have been decided in favour of the assessee and the Departmental appeals in these cases were dismissed. Explaining the facts of the case, the ld. counsel for the assessee submitted that the AO had made addition on account of difference in valuation of closing stock and book debts, as submitted to the Bank and as filed alongwith the return of income. In this respect, the ld. counsel for the assessee invited our attention to ITA No.457(Asr)/2013 for the assessment year 2009-10 and ITA No.198(Asr)/2013 for the assessment year 2009-10 dealt by the Tribunal in its consolidated order dated 26.03.2015. The ld. counsel further submitted that in the bunch of cases decided by the Tribunal in its order dated 26.03.2015, the case of Ishar Infrastructure Developers Pvt. Limited, has been taken as the lead case and other cases have been decided following the same.
3. The ld. DR, on the other hand, conceded that if the cases are covered in favour of the assessee then he had no objection, if similar decision is passed by the Tribunal, in the present cases.
3 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014
4. We have heard the rival contentions and have perused the material placed on record. We find that the ld. CIT(A) in the case of Ram Kumar Bansal, had deleted the additions made by the AO on account of difference in figures of book debt and stock by holding as under:
"5. Ground no.4 relates to addition of Rs.33,41,815/- on account of discrepancy in the book debts as on 31.03.2010 reported to the bank and book debts as per balance sheet as on 31.03.2010. The issue involved has already been adjudicated for the AY 2009-10 vide appellate order dated 22.03.2013. In the assessment year 2009-10 the addition so made has been deleted by me by observing as under:
"Ground no.4 relates to addition of Rs.1,04,19,771/- on account of discrepancy in the book debts as on 31.03.2009 reported to the bank and book debts as per balance sheet as on 31.03.2009. During the appellate proceedings the A/R of the assessee argued that the AO has not taken into consideration all the debit balances of the audited balance sheet at the time of making addition. If the balance sheet is properly examined, the debit side of the balance sheet comes to Rs.6,30,03,625/- and after deducting there from the value of fixed assets and closing stock the debts comes to Rs.5,41,36,103/- against reported to the bank at Rs.2,88,37,441/-. I have examined the balance sheet of the assessee and also the details of debts considered by the AO as per page 25 of the assessment order and find that in these debts the advances made to M/s. Silver Oaks Township has not been considered whereas these advances are very much connected with the business of the assessee, as such, if this advance of Rs.35718463/- is considered, there is no discrepancy in the book debts declared to the bank. Hence, addition made on this account amounting to Rs.1,04,19,771/- is deleted and this ground of appeal of the assessee appellant is allowed."
5.1. From the examination of the balance sheet, I find that this year the assessee has made an advance of Rs.3,06,63,992/- to Silver Oaks Township which has not been considered by the AO at the time of working of book debts. So keeping in view, my observations during the appellate proceedings for the AY 2009-10, the addition made of Rs.33,41,815/- in this year is also not in order. Hence, the same is deleted and this ground of appeal of the assessee is allowed."
4 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014
5. Similarly, for the assessment 2011-12, the ld. CIT(A) had deleted the addition by holding as under:
"Ground of appeal No.2,3& 4 related to addition of Rs.1,70,83,4441/- on account of discrepancy in closing stock as reported to the bank in the stock statement as on 31.03.2011 and as reflected in the book of account. After examination of the assessment record, I find that the addition on account of difference in closing stock has been made on the basis of similar facts as made in the assessment year 2009-10. In the assessment year 2009-410, the addition so made has been deleted by me by observing as under:-
" Ground of appeal No.2&3 related to addition of Rs.28736186/- on account of discrepancy in closing stock as reported to the bank in the stock statement as on 31.03.2009 and as reflected in the books of account. The issue involved in this case has already been adjudicated by me in the case of M/s Ishar Infrastructure Developer Pvt.Ltd., in appeal No425- IT/CIT(A)BTI/11-12 dated 31.01.2012. in this case I have deleted the addition by holding as under:-
"The following are the undisputed facts:
1. The appellant filed audited accounts alongwith tax audit report during the course of assessment proceedings. The books of account alongwith bills/voucher were also produced and examined during the course of assessment proceedings and the AO has confirmed this fact in paragraph 2 on page-1 of the assessment order.
2. The AO has not pointed out any defects in the book of account or the purchases made by the appellant or the receipts from the work contract in the assessment order.
3. The appellant is availing cash credit limit from bank against hypothecation of stock and collateral securities of the properties. As rightly pointed out by the A/R of the appellant the real difference between pledging and hypothecation is that in the case of pledging the goods remained under the lock and key of the bank authorities and, therefore, liable to be physically checked and examined. But in the case of hypothecation, such goods remain in the custody of the assessee.
4. i) The appellant filed stock statement before the bank on31.03.2009 and the stock as declared in the stock statement did not tally with the stock as per books. The AO confronted this fact to the appellant during the course of assessment proceedings and the appellant stated during the course of assessment proceeding s that the bank does not attach much significance to the stock statement and also no 5 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 physical verification of the stock is carried out because the interest of the bank is covered by the collateral securities provided by the appellant to the ban. The A/R of the appellant has also relied on the fact that the stock statement as on 31.03.2009 on which the AO has relied and on the basis of which addition has been made, is unsigned. But the AO did not accept this plea on the basis of statement of bank manager recorded in the case of Munish Kumar Bansal Contractor as the bank manager stated in that case that the stock are physically verified by the bank.
ii) The A/R of the appellant has stated in his written submission reproduced supra that the AO has failed to prove that any physical verification of the stock as on31.03.2009 was carried out by the bank . It has been stated that it was not possible for the bank staff to inspect or physically verify by stock. The reliance has been placed on the dictionary meaning of physical verification and on the judgment of Hon'ble Delhi High Court in the case of CIT Vs. Balaji Wire Pvt.LT.,304 ITR 393.
iii) The A/R of the appellant has relied on the various judgment of High Court and Benches of the ITAT and the copies of the same has been placed on record.
5. The AO has made addition u/s 69 while relying on the judgment of Devgon Rice and Gen. Mills 263 ITR 391.
In view of the arguments of the A/R of the appellant raised during the course of assessment proceedings before the AO and in the appellate proceedings before me, the findings on issue of physical verification of stock as on 31.03.2009 by the bank on the basis of which the AO has made the addition, are as under:-
i) I am convinced with the arguments of the A/R of the appellant that the bank does not attach much significance to the stock statement because the cash credit limit was extended to the appellant on the hypothecation of the stock in which the control and possession of the stock remained with the appellant and the interest of the bank was covered by collateral security provided by the appellant to the bank.
ii) The AO in the present case has tried to prove that the stock was physically verified by recording the statement of bank manager in the case of M/s Munish Kumar Bansal Contractor.
But in my opinion unless the AO proves that the stock was physically verified in the case of appellant, no addition can be upheld.
6 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014
iii) The only conclusion which can be drawn from the above stated facts is that no inspection/physical verification of the stock was carried out by the bank in the case of the appellant on 31.03.2009 and the AO erred in making addition on account of discrepancy of stock as recorded in the stock statement and as reflected in the books of account b solely replying on the stock statement as on31.03.2009 and the AO has failed to bring any evidence on record to justify the addition. This conclusion is based on the fact that it was not possible by the bank staff to count/weigh the stock worth crore of rupees and lying in op[en at various places in different state. The Hon'ble Madras High Court in the case of CIT vs. N Swamy (reproduced supra) held that the mere fact that assessee had made such a statement to the bank by itself cannot be treated as having resulted in an irrebutable presumption against the assessee and the burden of showing that the assessee had undisclosed income is on the revenue. Similary, the Hon'ble Punjab & Haryana High Court has held in the case of Santosh Box Factory that it is for the revenue to bring material on show that the appellate in fact possessed larger quantity of stock then the stock recorded in the books of account.
As discussed supra, I find that the AO has failed to bring any material on record, except the stock statement submitted to the bank, to justify the addition."
The facts and circumstance of the case of assessee appellant are similar as the addition of Rs.28736186/- made in this case is also not in order. Hence, addition made of Rs.28736186/- is deleted and this ground of appeal of the assessee appellant is allowed."
4.1 So keeping in view, my observations during the appellate proceedings for the assessment year 2009-10, the addition made of Rs.1,70,83,441/- in the year also not in order. Hence, the same is deleted and these grounds of appeal of the assessee appellant are allowed.
6. The findings of the ld. CIT(A) in the case of Ishar Infrastructures and Developers Pvt. Limited are contained in para 3.1. to 3.4, which are reproduced below:
7 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014 "3.1 After careful perusal of the assessment order and written submissions filed by the A/R of the appellant I am convinced with the arguments of the A/R of the appellant that the issue is covered by the earlier appellate order 425-IT/2011-12 vide order dated 31.01.2013 for AY 2009-10 and 200-IT/2013-14 vide order 30.05.2014.
In view of the arguments of the A/R of the appellant raised during the course of assessment proceedings before the AO and in the appellate proceedings before me, the findings on issue of physical verification of stock as on 31.03.2009 by the bank on the basis of which the AO has made the addition, are as under:
i) I am convinced with the arguments of the A/R of the appellant that the bank does not attach much significance to the stock statements because the cash credit limit was extended to the appellant on the hypothecation of the stock in which the control and possession of the stock remained with the appellant and the interest of the bank was covered by collateral security provided by the appellant to the bank.
ii) The AO in the present case has tried to prove that the stock was physically verified by recording the statement of bank manager in the case of M/s. Munish Kumar Bansal Contractor. But in my opinion unless the AO proves that the stock was physically verified in the case of the appellant, no addition can be upheld.
iii) The only conclusion which can be drawn from the above stated facts is that no inspection/physically verification of the stock was carried out by the bank in the case of the appellant on 31.03.209 and the AO erred in making addition on account of discrepancy of stock as recorded in the stock statement and as reflected in the books of account by solely relying on the stock statement as on 31.03.2009 and the AO has failed to bring any evidence on record to justify the addition. This conclusion is based on the fact that it was not possible by the bank staff to count/weigh the stock worth crore of rupees and lying in open at various places in different states. The Hon'ble Madras High Court in the case of CIT vs. N. Swamy (reproduced supra) held that the mere fact that assessee had made such a statement to the bank by itself cannot be treated as having resulted in an irrefutable presumption against the assessee and the burden of showing that the assessee had undisclosed income is on the revenue. Similarly, the Hon'ble P & H High Court has held in the case of Santosh Box Factory that it is for the revenue to bring material on record to show that the appellate in 8 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 fact possessed larger quantity of stock then the stock recorded in the books of account.
As discussed supra, I find that the AO has failed to bring any material on record, except the stock statement submitted to the bank, to justify the addition:
3.3. In appellate order for AY 2001-12 the relevant findings in para 2 on page 11 is as under:
"2. In view of the facts discussed supra, I find that although the AO has relied on the statement of the bank manager in which he stated that physical verification of the stock was carried, in support of his finding that the appellant possessed larger quantity of stocks than the stock as per the books of account, but the AO has not been able to prove that the stocks lying at various sites at Madhya Pradesh as per stock statement dated 20.03.2010 were actually inspected/counted to substantiate the above said finding because the bank officers has not been able to produce the record of the movement of any bank officer from Bathinda to Madhya Pradesh and the records relating to actual counting of stock. As far as the finding of the AO that the physical verification was proved from the drawing power register, I find that the drawing power register is not authentic on account of non recording of vital information by the bank officers with regard to date of filing of stock statement and date of physical verification of stock. The AO has also not been able to rebut the stock statement to avail credit from the bank. Thus, the action of the AO of relying on the statement of the bank manager, the stock statement and the account of difference in stock, is not justified on facts."
3.4. From the perusal of the assessment order u/s 143(3) passed by the AO for AY 2011-12 t transpires that no new fact has been brought on record and the AO has only reiterated the findings as recorded in assessment orders for AY 2009-10 & 2010-11 to make the addition in AY 2011-12 on account of difference in the stock as recorded in the stock statement submitted to the bank and stock as reflected in the balance sheet as on 31.03.2011. The AO has once again not been able to prove that the stock as reflected in the stock statement dated 31.03.2011 was physically verified by the bank officers. The Hon'ble P & H High Court has already held in the case of Sheena Exports 20 Taxman .com 664 that no addition can be made on the basis of difference in stock as per stock statement and as per balance sheet in the case of the appellant who is availing cash credit limit against hypothecation of stock and no difference in 9 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 the quantity of stock has been proved. The AO has also failed to prove that the appellant possessed larger quantity of stock then the stock reflected in the balance sheet. He has relied only on the stock statement to make the addition in violation of principles of law as enunciated by Hon'ble P & H High Court in the case of Sidhu Rice Mills 281 ITR 428 & Santosh Box Factory 44 IT Rep. 473. Hence, in view of the detailed finding recorded in the appellate order for AY 2009-10 & 2010-11 and the fact that findings of the AO stands rebutted by the arguments of the A/R of the appellant on facts and law as enunciated by the jurisdictional bench of the Hon'ble ITAT & Hon'ble P & H High Court discussed supra, the grounds of appeal no.3 is allowed and the AO is directed to delete the addition of Rs.2,09,79,175/- made on account of difference in stock as reported in stock statement submitted to the bank and closing as reflected in the balance sheet as on 31.03.2011."
7. We further find that the Amritsar Bench of the Tribunal, vide its consolidated order dated 26.03.2015, in the case of Ram Kumar Bansal in ITA No.457(Asr)/2013 for the A.Y. 2009-10 had noted down the following grounds of appeal:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.2,99,50,000/- as its closing stock as at 31.03.2010 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.12,13,814/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence.
3. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in deleting the 10 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 addition made by the AO on the basis of difference in the value of book debt as per Drawing Power Register of the Bank vis-à-vis value of book debts as per Balance sheet filed before the department."
8. Similarly, we find that the Hon"ble Tribunal in the case of Ishar Infrastructure and Developers Pvt. Ltd., in ITA No.198(Asr)/2013 for the AY 2009-10, had noted down the grounds of appeal as under:
"1. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in not appreciating that on the face of the fact that the assessee had himself supplied a figure of Rs.6,39,30,292/- as its closing stock as at 31.03.2009 to its bank, the onus of proving to the department that the closing stock as disclosed in its I.T. return at Rs.4,66,13,761/- was the correct figures, had squarely shifted on it, which it has failed to discharge.
2. That in the facts and circumstances of the case the ld. CIT(A) has erred both in law and on facts in opinioned that the AO has failed to bring any evidence on record to justify the addition because it was not possible by the bank staff to count or weigh the stock worth crores of rupees lying in open at various places. He has held that the AO has failed to bring material on record to show that the appellant in fact possessed larger quantity of stock than the stock recorded in the books of account and that a mere reference to the Drawing Power Register was not sufficient evidence."
8.1. We find that grounds of appeals taken by the Revenue in the present appeals are similar to the grounds of appeal which has already been adjudicated by the Hon'ble Tribunal in its order dated 26.03.2015.
9. The Amritsar Bench of the Tribunal in its order dated 26.03.2015 had taken the case of Ishar Infrastructure & Developers Pvt. Ltd., as a lead case and has decided the issue in favour of the assessee by holding as follows:
11 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014 "32. The decisions relied upon by the ld. CIT(A) of the Hon'ble Punjab & Haryana High Court, in the cases of M/s.Santosh Box Factory, M/s. Sidhu Rice Mills and in the case of M/s. Devi Dayal Rice Mills are squarely applicable to the facts of the present case as the Revenue as the Revenue has not brought on record during the assessment proceedings or before the ld. CIT(A) or even before us that physical verification of the stock has actually been done and accordingly stock statements so submitted before the bank authorities and DP register cannot be relied upon.
33. In the case of CIT vs. Veerdip Roller (P) Ltd. (2010) 323 ITR 341 (Guj), the facts are that the AO made addition on account of difference in the value of closing stock furnished to the bank and the value of the stock found in the books of account furnished to the Income Tax Authorities - inflated stock was hypothetical and not pledged and the bank officials had not verified the statement showing inflated stock so produced by the assessee. The addition on account of difference furnished to the bank as per books of account u/s 69B of the Act can not be sustained. Consequently, the appeal was dismissed by the Hon'ble Gujrat High Court against the said decision, the Revenue went in appeal before the Hon'ble Supreme Court and the Hon'ble Supreme Court vide its order dated 13.12.2008 dismissed the SLP filed by the department.
34. Similar decisions have been made by various courts of law referred to hereinabove:
i) CIT vs. Sidhu Rice & General Mills reported in 281 ITR 428 (P&H)
ii) CIT vs. Santosh Box Factory (P) Ltd.., 44 IT Reps. 472 (P&H)
iii) CIT vs. N. Swamy reportede in 241 ITR 363 (Madras)
i) ITO vs. Devi Dayal Rice Mills reported in 75 TTJ 24 (ITAT, Amritsar Bench.
ii) CIT vs. Sirohi Steel Rolling Mills, reported in 200 CTR 595 (All.)
iii) Ashok Kumar vs. ITO, reported in 201 CTR 178 ( J & K)
iv) CIT vs. Das Industries, reported in 303 ITR 199 (All.)
v) CIT vs. Sri Padmavathi Cotton Mills, reported in 236 ITR 340 (Mad.)
vi) Jai Sharda Rice Mills. Vs ITO reported in 36 ITD 254 (ITAT, Asr.)
vii) CIT vs. Riddhi Steel and Tubes (P) Ltd. reported in 220 Taxman 148 (Guj.)
viii) CIT vs. Apcom Computers P. Ltd. reported in (2007) 292 ITR 630 (Mad.).
35. In the facts and circumstances, the arguments made by the ld. DR in his written submissions and counter submissions cannot help the Revenue and accordingly, we find no infirmity in the order of the 12 ITA Nos.459, 461 & 479/2014 CO. No. 48 & 49(Asr)/2014 ld. CIT(A) in the case of M/s. Ishar Infrastructure Developers (P Ltd. in ITA No.198(Asr)/2013 in the impugned year."
10. The Tribunal had recorded its final conclusion in para 41, which is reproduced as under:
41 In the result, all the six appeal of the Revenue ITA Nos. 198 (Asr)/2013, ITA No.536(Asr)/2013, 199(Asr)/2013, ITA No.200(Asr)/2013 ITA No.571(Asr)/2013 and in ITA No.457(Asr)/2013 and C.O. of the assessee bearing No.16(Asr)/2014 are dismissed."
11. Finding grounds of appeal taken by the Revenue are pari-materia to the issues already decided by the Tribunal in its order dated 26.03.2015, respectfully following the same, the grounds of appeal taken by the Revenue are dismissed.
12. As regards the C.Os filed by the assessee, the ld. counsel for the assessee submitted that these are supportive to the order of the ld.
CIT(A), therefore, the same are dismissed having become infructuous.
13. In view of the above, the appeals filed by the Revenue as well as C.Os filed by the assessee are dismissed.
Order pronounced in the open court on 10/02/2016
Sd/- Sd/-
(T.S. KAPOOR) (A.D. JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 10/02/2016
/skr/
Copy of order forwarded to:
1. The Assessees: i) Ram Kumar Bansal, Bathinda (ii) M/s. Ishar Infrastructure Developers Pvt. Ltd. Bthinda.
2. The ACIT, Circle-1, Bathinda
3. The CIT(A), Bathinda
4. The CIT, Bathidna.
5. The Sr. DR, ITAT, ASR.
13 ITA Nos.459, 461 & 479/2014CO. No. 48 & 49(Asr)/2014 True copy By order (Assistant Registrar) Income Tax Appellate Tribunal Amritsar Bench: Amritsar.