Income Tax Appellate Tribunal - Kolkata
R.B. Vehicle Distributors Pvt. Ltd., ... vs Department Of Income Tax on 16 May, 2013
आयकर अपीलीय अधीकरण, Ûयायपीठ - " बी ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "B", KOLKATA
[(सम¢) ौी के.के.गुƯा,
ा, लेखा सदःय, एवं ौी महावीर िसंह, Ûयायीक सदःय]]
[Before Hon'ble Sri K.K.Gupta, AM & Hon'ble Sri Mahavir Singh, JM]
आयकर अपील संÉया /ITA No.123/Kol/2012
िनधॉरण वषॅ/Assessment Year : 2008-09
(अपीलाथȸ/APPELLANT ) -वनाम- (ू×यथȸ/RESPONDENT)
A.C.I.T., Circle-2, . R.B.Vehicle Distributors Pvt. Ltd.
Asansol -versus- Asansol
(PAN: AACCR 8875 P)
अपीलाथȸ कȧ ओर से/ For the Appellant Shri A.K.Mahapatra,
CIT(DR)
ू×यथȸ कȧ ओर से/For the Respondent Shri R.N,.Ram, Advocate
सुनवाई कȧ तारȣख/Date of Hearing : 16.05.2013
घोषणा कȧ तारȣख/Date of Pronouncement : 16.05.2013.
आदे श/ORDER
Per Shri K.K.Gupta, AM
The Revenue is in appeal raising the issue with respect to ld.CIT(A) erred in deleting the addition of Rs.1,10,44,900/- being the difference of stock admitted by the assessee and as supplied in the insurance proposal as suppression of closing stock and also on the issue with respect to the insured value of the show room and the interior decoration which alone was shown in the balance sheet by deleting the addition of Rs.24,89,682/- being difference between the proposal for the insured amount vis-à-vis as declared in the books of accounts.
2. The brief facts as have been brought on record are "The return of income was submitted at a total loss of Rs.41,13,135/-. The case comes under purview of scrutiny u/s 143(3). Notices u/s 143(2) and 142(1) were duly sent to the assessee and in reply the assessee submitted various books of accounts as called for by the Assessing Officer i.e, D.C.1.T., Circle-2, Asansol. On perusal of books of ITA No.123/Kol/2012 2 ACIT,Asansol vs RB Vehicle Distributors Pvt.Ltd.Asansol A.Yr.2008-09 accounts, the Assessing Officer, D.C.1.T., Circle-2, Asansol had made the following addition:
1. The Assessing Officer had added back Rs. 1,10,44,900/- to the total income of the assessee on account of suppression of closing stock. As there was a difference of value of stock as supplied by the assessee and as given in the insurance proposal.
2. The Assessing Officer had added back Rs. 24,89,682/- to the total income of the assessee on account of Undisclosed investment.
3. The Assessing Officer had added back Rs. 2,04,000/- and Rs. 6,25,768/- to the total income of the assessee on account of disallowance of interest on a pro rata basis as interest free advance was given to one of the director of the assessee and assessee company had also a loan.
Thus assessment was completed at a total income of Rs. 1,02,51,220/-. On being aggrieved the assessee preferred appeal before CIT(A), Asansol, where it got substantial relief amounting Rs 1,41,60,350/-. Subsequently against the order of CIT(A), Asansol revenue is before ITAT.
2.1. The assessee had referred an appeal before the First Appellate Authority who thereafter considered the submission of the assessee appellant and noted the following on the first issue raised by the Revenue as mentioned above.
"The appellant's submission is that the A.O. is in error on the total valuation of the insurance cover. The total insured value was Rs. 1,60,00,000/- inclusive of its showroom stock, stock held in trust and spare parts held at the showroom and its godown. It has further submitted that stock is not insured on a daily basis but for a maximum over the policy period. This, as per its submission is so because stock in trade fluctuates from day to day and it would not, therefore, be possible to insure stock on a daily basis. The appellant has further submitted that the A.O.'s presumption that verification of the insured stock has been done by the bank is without any basis. As regards the insured value of Rs. 1.60 crores the appellant's submission is that the total fund based limit allowed to it, as per Letter of Arrangement of its bankers, was Rs. 1.60 crores and as per the terms and conditions of the said Letter value to be insured was determined accordingly. The A.O. is seen to be acting under the belief that as on 19.12.2007 the value of stock held by the appellant and so verified by the bank was Rs.l,28;50,000/--. In my opinion, the A.O. has not been able to bring on record any evidence to support such a belief, If he had grounds for suspicion enquiries could have been conducted with the Bank or the insurer. None are seen to have been done. The A.O. has also relied on the decision of the Hon'ble Apex Court in the case of Dhansi Ram Agarwal [201 ITR 192]. In the said judgment, it was held that it was legally correct to make an addition on the basis of statement of stock given by an assessee to a bank. The facts in the instant case are different. There is no evidence whatsoever that the sum insured as value of stock was ever submitted by the appellant to its bankers. As per the facts of the instant case the issue here is insured value over a period and not stock as on a particulate date. Therefore, in my opinion, the said judgment cannot be said to be applicable to the facts of the present case. I do not think that without making an enquiry ITA No.123/Kol/2012 3 ACIT,Asansol vs RB Vehicle Distributors Pvt.Ltd.Asansol A.Yr.2008-09 with the Bank and/or the Insurer regarding actual valuation of stock in trade as on 19.12.2007, the A.O. is justified in making the addition that he has. The A.O. has also not brought any evidence on record to support his contention that stock held as on 19.12.2007 was higher than what has been shown. This addition is therefore directed to be deleted. This ground of appeal is allowed."
2.2. With respect to the second issue also he noted that "4. In this ground the appellant is disputing the A.O.'s enhancement of its declared income based on insured value, in particular, the addition made by the A.O. on the difference between the insured value of the showroom and what the A.O. felt was the value of interior decoration and the furniture and fittings. The appellant's case is that the sum of Rs.30 lacs was the sum insured of the stock-in-trade at his showroom and not the value of the showroom was such. Copy of the Insurance receipt :has been submitted. That states that stock-in-trade at the appellant's showroom at Lower Chelidanga, Asansol has been insured for Rs 30,00,000/- Thus, as per facts on record the A.O's conclusion that the showroom has been valued at Rs.30,00,000/- do not appear to be justified. Neither. has the A.O. brought on record any evidence to show that the sum added by him has been actually invested by the appellant in its showroom. No enquiry by the A.O. is apparent from the assessment order, wherein, it has been sought to be proved that the appellant had made any undisclosed investment in its showroom. Under the circumstances. I do not consider the addition made by the A.O. to be justified and the same is directed to be deleted. This ground of appeal is allowed."
3. The ld. DR submitted that the mater is fit for restoration to the file of AO for the simple reason that the ld. CIT(A) has not considered the case of the AO on the facts brought on record, in so far as the assessee could not have shown a hypothetical figure of vehicles for sale and assets held by him, in so far as the assessee obtained the cash limit from the bank which bank has also proposed the insurance amount to be an admitted figure other than what the amount of loan was granted to the assessee. In other words, the parallel business transactions of the stock and the assets was being undertaken by the assessee which has not been considered by the ld. CIT(A) in deleting the addition so made by the AO. The ld. CIT(A) therefore erred in trying to relate his direction to delete the addition by keeping in mind that the purchases and sales are documented and quantitywise details which quantity the assessee himself furnished to the bank and the insurance authorities were figures from where he got them was not the rebuttal for consideration by the ld. CIT(A). Therefore a reference back to the ld. CIT(A) or AO for concluding that the audited statements indicate the quantity of the goods by the assessee are in accordance with the provision of section 145A of the IT Act may be given.
ITA No.123/Kol/2012 4ACIT,Asansol vs RB Vehicle Distributors Pvt.Ltd.Asansol A.Yr.2008-09
4. The ld. Counsel for the assessee opposed the contention of the ld. DR by stating that a hypothetical figures cannot be brought to tax in the hands of the assessee assuming but not accepting that the closing stock in the hands of the assessee is worthy of taxation unless not sold but is insured and pledged. Further more the ld. Counsel submitted that it is a usual practice to propose a higher amount of the value of the asset as in the books of account in so far as at the time of settlement of the claim due to unforeseen circumstances such as theft or fire he choses to verify the asset by depreciating it not in accordance with the provision of the IT Act The principle on which the accounting of the assessee in respect to closing stock valuation was on account of the stock held on a particular date and not because a higher amount was to be traded as a proposal by the assessee, in so far as, the assessee being a dealer of automotive parts and vehicles used to maintain stock of only those vehicles and spare parts which were routed through purchase and sale register. It was not the AO's case to consider the optimum level of the trading of the assessee in such case in so far as on the proposal to the insurance company was to be added at a higher figure was noted by the ld. CIT(A) in accordance with the business proposition. In any case the prayer of the ld. DR to verify the closing stock as declared as on 31st March 2007 and has accepted by the bank if requires reconsideration in accordance with the proposed sales calculated in the stock register as maintained by the assessee, he had no objection if the matter is restored to the file of the ld. CIT(A) in so far as the assets being a show room which show room already had the stock of goods for display was to be insured in accordance with the policy of the insurance company not because the bank had granted cash credit limit against the stock held either in the godown or in the show room by way of a separate room was noted by the AO as well as the ld. CIT(A). For this proposition he has filed various documents relating to the proposal as were before the insurance authorities and also the bank certificate who had granted the cash credit limit by verifying the actual stock and the difference against which no infirmity has been found by the bank or insurance authorities as well.
ITA No.123/Kol/2012 5ACIT,Asansol vs RB Vehicle Distributors Pvt.Ltd.Asansol A.Yr.2008-09
5. We have heard the rival contentions and carefully perused the material available on record. On a careful consideration of the facts and circumstances of the case, we are inclined to hold that the AO has himself contradicted his findings, by holding a view that the insurance proposal was to be substantiated by the assessee, in so far as the duly audited financial statement for the impugned assessment year were before him. We have perused the financial statement and we do find that the bank has been holding the stock pledged receiving the margin allowed by it which stock quantity is in accordance with the statement furnished to the AO and not because a proposal was sent to the insurance authorities to insure the total stock at Rs.1.6 crores which included stock lying in the show room as well. In view of this mater we are unable to satisfy ourselves to the proposition when the value of show room assessed and brought to tax at Rs.30,00,000/- and the interior decoration forming part of the shown room was reduced as shown in the balance sheet was worth of Rs.24,89,682/-as unexplained investment which is fit for deletion. It is the bank alone who should verify the stock less than the stock statement filed with them. As per the prayer of the ld. DR when the stock which is lying with the assessee from middle of 2008 has been held quantitywise and it is not the case of the assessee to be taxed on the proposition of its insured value which remains at a higher figure encompassing the possible sudden addition on account of purchases or certain sales return, in so far as the insurance authorities had not identified a particular automotive part or vehicle for the purpose of insurance which is only the bone of contention in the books of account for the settlement of the claim. We restore the issue to the file of the ld.CIT(A) on the issue of deletion of Rs.1,10,44,900/- only in so far as he has to verify whether this formed part of the assessee at any point of time specially in view of the insurance proposal continued as on the closing of the financial year as well whether could hypothetically be brought to tax in the hands of the assessee for the impugned assessment year assuming but not accepting that the goods is valued as declared in the value of the stock as on 31st March, 2008 whether could be termed as concealment of stock as well as suppression is to be established by the ld. CIT(A).
ITA No.123/Kol/2012 6ACIT,Asansol vs RB Vehicle Distributors Pvt.Ltd.Asansol A.Yr.2008-09
6. In the result the appeal of the Revenue is partly allowed as indicated above.
Order pronounced in the open court on 16.05.2013.
Sd/- Sd/-
[ौी.महावीर िसंह, Ûयायीक सदःय ] [ौी के.के.गुƯा,, लेखा सदःय]
[Mahavir Singh ] [K.K.Gupta]
Judicial Member Accountant Member
(तारȣख)
तारȣख)Date: 16.05.2013.
R.G.(.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. R.B.Vehicle Distributors Pvt. Ltd., Lower Chelidanga, Asansol..
2 A.C.I.T., Circle-2, Asansol.
3. CIT Kolkata 4. CIT(A)-Asansol.
5. CIT(DR), Kolkata Benches, Kolkata.
स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches