Income Tax Appellate Tribunal - Pune
Aroon Auto Centre, Sangli vs Assessee on 15 June, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCHES, PUNE "B"
Before Shri I.C.Sudhir, Judicial Member and
Shri D.Karunakara Rao, Accountant Member
ITA No.605/PN/2003
Asst.Year: 1999-2000
Aroon Auto Centre
Sangli.
(GIR No.362/A) .. Appellant
Versus
Income tax Officer, Ward-1,
Sangli. .. Respondent
Appellant by: Shri C.H.Naniwadekar
Respondent by: Ann kapthauma
ORDER
Per D.Karunakara Rao, Accountant Member:
This appeal by the assessee is directed against the order of the Commissioner of income tax (Appeals), Kolhapur Pune dt.nil for the assessment year 1999-2000.
2. The assessee has raised the following grounds.
1. The ld.CIT(A), Kolhapur erred in upholding the addition of Rs.5,07,266 made by the assessing officer on the ground that submissions made before hi were not verifiable and that the appellant had not made change in the valuation of closing stock for the previous year.
2. The ld.CIT(A), Kohapur failed to deal with the submissions made before him which were supported by the facts and figures and the data collected fro the Government Agency (Regional Transport Officer). No attempt whatsoever was made to verify the details submitted before him.
3. The ld.CIT(A, Kolhapur had expressed during the course of hearing that submissions made needed verification by the assessing officer and remand report from assessing officer would have to be called for. The Appellate order passed by him is silent on this point.
4. The ld.CIT(A), Kolhapur has erred in upholding an addition of Rs.20,832 made by the assessing officer on the ground that the appellant had agreed to such an addition, which was agreed to under a mistaken belief of facts and law.
5. The ld.CIT(A), Kolhapur erred in upholding the disallowance of Rs.9980 of Telephone expenses made by the assessing officer on 2 the ground that no details was available when in fact all the details were submitted before him along with the reasons
6. The ld.CIT(A), Kolhapur erred in upholding the disallowance of Rs.4403 of depreciation.
3. The assessee firm is a reseller of auto spare parts. On 6-11- 2008 a survey u/s 133A of the Income tax Act was conducted by the department in its business premises. Stock inventorised was valued at Rs.20,84,153 at sale price. But the book value of stock was worked out at Rs.15,76,887. Thus, excess stock of Rs.5,07,266/- was found at the time of survey, which was accepted by the partner of the firm present at the time of survey. On 18-1-99, a letter was sent to the assessing officer by the another partner retracting the admission. An affidavit to this effect was also filed with the assessing officer. Resultatnly, the assessee filed the return of income dishonouring the admission made in during the survey time. During the assessment proceedings, the assessing officer did not accept the contention of the assessee and went ahead with the addition of Rs.5,07,266 while passing the assessment order, which has been challenged by the assessee in appeal before the CIT(A).
4. During appellate proceedings, assessee made various submission and they are as follows.
i. The premises of the firm could not hold so much stock as has been inventorised by the survey team as it operates from a small premises of 440 sq.ft. including 110 sft. Mezzanine floor. The stocks have been over recorded;
ii. Statement was recorded of Shri Dilip A.Shah, the partner who was not familiar with marketing and sales, which was being looked after by another partner Shri R.A.Shah;
iii. Therefore, admission made by Shri Dilip Shah was immediately retracted by filling a letter dt.18-1-99 with the assessing officer; iv. Therefore there was no need to include excess stock of Rs.5,07,266 in the return of income;
v. Possibility of committing mistakes during survey cannot be ruled out;
vi. a). Prices at MRP were taken to value stock but element of sales tax was not taken into account. This would give deduction of 4% in profit;
b) The stock included obsolete stock of Rs.1,3,202 as they belong to various old models lie Bullet, Rajdoot, Jawa Labretta, TVS moped and LML. These stocks should be treated as obsolete stock with no 3 realisable value and necessary deduction be given. These models are out of market for 8-10 years. The spares of these vehicles area either slow moving items or non-saleable ones. Even when they are sod they are required to be sold on discount to mechanics.
5. After going through the order of the assessing officer and submission, the CIT(A) mentioned confirmed the addition made by the AO. Relevant reasoning is as under.
I find that the retraction has been made on some unsubstantiated ground. The survey took place on 6-11-98 and retraction was made only on 18-1-99. There is no evidence that the admission was given under duress. It was made by the partner of the appellant firm, who was present at the time of survey. The result cannot be questioned only by saying that there might be mistake in preparing inventory, that too without any evidence. The claim that about 50% of inventory was obsolete is not verifiable. If it was so, then the appellant should have made necessary changes in its value of closing stock for the previous year, which it has obviously not done.
6. Aggrieved with the above order of the CIT(A), Ld Counsel for the assessee argued stating that the partner who is signatory to the statement is not an active partner. However, no documentary evidences such as partnership deed is brought to our notice to demonstrate the same. Referring to the nature of the stock ie spares of old brands such as Bullet, he argued that the stock pertains to old period. However, there is no purchase bills are filed to demonstrate the same and therefore, we are of the opinion, the submissions of the counsel are of general nature. He also argued stating that the most of the stock is of obsolete nature and it may be reasonably kept at nearly 50% of the excess stock arrived at by the revenue. The same is again unsubstantiated. Nevertheless, we find reality nature of the assessee's arguments on the issue of obsolete stock in this line of business activities. Therefore, in our opinion, the assessee is entitled to some relief in this regard. On estimation basis, we determine relief on account of obsolete nature at Rs one lakhs. Regarding retraction, nothing is brought to our notice by the assessee's counsel to demonstrate that there was any pressure or duress on the partner, who is equally empowered to give statement on behalf of the firm. Therefore, the admission made at the time of survey is binding on the firm. Therefore, the statement given by the assessee, which is corroborated by the excess stock physically arrived at by the revenue, is valid. In matters of retraction, the onus is on the assessee to demonstrate that the said statement is taken not under normal 4 conditions and the contents therein are not factual. In these peculiar circumstances of the instant case, in our opinion, in principle, the assessing officer as justified in making addition and in principle the CIT(A) is also justified in sustaining the same. As a result, the addition, made by the assessing officer is sustained subjected to the relief of one lakhs rupees as discussed above. Accordingly, the grounds raised by the assessee are partly allowed.
7. In the result, appeal of the assessee is partly allowed.
Order pronounced in the court on 15-6-2011.
Sd/- Sd/-
(I.C.Sudhir) (D.Karunakara Rao)
Judicial Member Accountant Member
Date: 15-6-2011
*vnr
c.c.to:
1. Assessee.
2. Assessing Officer.
3. CIT(A) concerned, Pune
4. CIT, Pune
5. DR, ITAT, Pune
True copy By order,
Asstt. Registrar, ITAT Pune