Income Tax Appellate Tribunal - Delhi
Empire Metal Store, New Delhi vs Assessee
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'B': NEW DELHI)
BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER
And
SHRI T. S. KAPOOR, ACCOUNTANT MEMBER
ITA No. 4905/DEL/ 2012
(Assessment Year: 2006-07 )
Empire Metal Store. Vs. DCIT
58, Khanna Market Circle-31(1), Room No. 217,
C. R. Building,
New Delhi. New Delhi.
PAN: AABFE2292B
(APPELLANT) (RESPONDENT)
ASSESSEE BY :Shri Mohit Sachdeva, Adv,
REVENUE BY : Mrs. Y. Kakkar, Sr..DR.
ORDER
PER T. S. KAPOOR, AM
This is an appeal filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-XXVI, New Delhi dated 12.06.2012 for the assessment year 2006-07. The grounds taken by the assessee are as under:
"1. On the facts and circumstances of the case the order of Ld. CIT (A) is erroneous in facts and in law and in based on extraneous consideration and against the provision of the Act.
2. On the facts and circumstances of the case the Ld. CIT (A) erred in law and on facts in presuming that the certificate 2 ITA No.4905 /Del/2012 issued by Shalimar Paints Ltd. is in respect of purchase rates effective from 08.12.2005.
3. On the facts and circumstances of the case the Ld. CIT (A) erred in law and on facts in rejecting the application of the appellant for admission of additional evidence under Rule 46A.
4. On the facts and circumstances of the case the Ld. CIT (A) erred in law and on facts in stating that no explanation for difference of Rs.8,06,847/- in the value of excess of stock calculated and surrendered on the basis of books of account was not furnished before the Assessing Officer.
5. The appellant craves leave or reserving the right to amend, modify, alter, add or forgo any ground(s) of appeal at any time before or during the hearing of this appeal."
2. Brief facts of the case are that a survey was conducted on the premises of assessee on 08.12.2005 and during the course of survey proceedings the assessee had made a surrender of Rs.31,15,202/- in the valuation of stock. However, later on the assessee moved a letter before the Assessing Officer and recalculated the excess stock of Rs.27,74,658/- instead of Rs.31,15,202/-. However while filing the income tax return for the captioned assessment year, the assessee added back only a sum of Rs.19,67,811/- in stead of 27,74,658/-. Therefore, during assessment proceedings vide questionnaire dated 12th September, 2008, assessee was asked to explain the difference between the undisclosed stock surrendered and that offered for the purpose of taxation in the return of income. 3 ITA No.4905 /Del/2012
3. The assessee in its reply accepted the difference and surrendered the additional amount of Rs.08,06,847/-. The relevant extract of the letter submitted by assessee as noted in the assessment order is reproduced below:
"As per discussion with your honor, I surrender the difference in stock of Rs.08,06,847/- on above count for treating the same as the income of the firm for the Assessment Year 2006-07 to expedite the assessment proceedings and buy peace with the department subject to the condition that no penalty proceedings are initiated against the firm."
Therefore, assessment was completed after making addition of Rs.27,74,658/-
4. Dissatisfied with the order the assessee filed appeal before CIT (A) and submitted that the difference of Rs.08,06,847/- was on account of difference between MRP and cost price of stocks. It was further submitted that these facts were brought to notice of Assessing Officer at the time of assessment proceedings but these were not brought out in the assessment proceedings and were ignored by the Assessing Officer. It was further submitted that the amount was surrendered subject to the condition that no penalty proceedings were to be initiated against the firm whereas Assessing Officer at page 1& 2 of Assessing Officer has mentioned the 4 ITA No.4905 /Del/2012 above facts and at the same time has initiated penalty proceedings u/s 271(1) (c) of the Act.
5. Reliance in this respect was placed in the case of Harnam Singh Bishan Singh Jewellers (Pvt.) Ltd. Vs. Asst. CIT (2009) reported in 69 TTJ (Delhi) 14 with the proposition that in the case of conditional surrender Department cannot chose to accept part of the proposal favourable to it and deny the other part of the same proposal, which is not favourable to it.
6. The Ld. CIT (A) after obtaining remand report from Assessing Officer upheld the addition made by Assessing Officer and also rejected the acceptance of additional evidence under rule 46A by holding as under:
"15. I have gone through the material on record, (Assessing Officer's order, survey folder written submissions of the appellant, Assessing Officer's remand reports, rejoinder filed by the appellant and considered the facts of the case.
15.1. First of all, I will decide on the admissibility of additional evidence filed by the appellant under sub-rule (1) of Rule 46A of the IT Rules. On perusal of the assessment record, I find that the submissions made by the appellant for admission of additional evidences is not borne out of the facts n the assessment record of the appellant. In the course of the assessment proceedings, the appellant was asked by the Assessing Officer to submit the details on the basis of which the value of stock has been arrived at Rs.19,67,711/-. However, it is seen, that the same was not furnished by the appellant either during the assessment proceedings or further during the remand of the case. It is pertinent to mention here that at no stage of pending proceedings of assessment, the appellant filed as additional evidence under Rule 46A. However, it is noted that this certificate filed now does not help the appellant at this 5 ITA No.4905 /Del/2012 stage, as the certificate issued is in respect of purchase rates effective from 08.12.2005, the date on which the survey was conducted. In other words, the purchase rates mentioned on the certificate of M/s. Shalimar Paints Ltd. relate to the purchases made after 08.12.2005 and not to purchase made before 8.12.2005,i.e. the date of survey.
15.2. According to Rule 46A, the appellant shall not be entitled to produce before the Commissioner of Income Tax (Appeals) any evidence, whether oral or documentary, which was not produced in the course of assessment proceedings except in the following cases:
(a) Where the Assessing Officer refused to admit evidence which ought to have been admitted; or
(b) Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the Assessing Officer; or
(c) Where the appellant was prevented by sufficient cause from producing before the Assessing Officer any evidence which is relevant to any ground of appeal; or
(d) Where the Assessing Officer has made the order appealed against without giving sufficient opportunity to appellant to adduce evidence relevant to any ground of appeal.
15.3. The appellant did not point out any specified circumstance under Rule 46A according to which, the appellant could not produce the evidence, which is now sought to be produced. The requirements of Rule 46A are not observed by the appellant. The case of the appellant, therefore, does not get covered under the circumstances enumerated in sub rule (1) of Rule 46A. The additional evidence now sought to be produced through the application under Rule 46A is not admitted and the applicant's application under Rule 46A is hereby rejected, due to non- observance of any specified circumstances enumerated in sub-rule (1) of the Rule 46A.
6 ITA No.4905 /Del/2012
15.4 on merits of the case, I find that at the time of survey, the appellant surrendered excess stock found amounting to Rs.31,15,202/-. However, later on reconciliation of books of account with purchases and turnover, the appellant recalculated the value of excess stock at Rs.27,74,658/- which the appellant surrendered and offered for taxation. But, in its return of income the appellant declared the value of excess of stock at Rs.19,67,811/-. When the Assessing Officer notices his feature and asked the appellant to explain the difference of Rs.08,06,847/- between the value of excess stock calculated and surrendered on the basis of books of account at Rs.27,74,658/- and the value of stock of Rs.19,67,811/- declared in the return of income, the appellant explained that it was on account of difference of opinion. Since no plausible explanation to the satisfaction of the Assessing Officer could not be furnished, the appellant surrendered the difference of Rs.8,06,847/- for taxation resulting in a total surrender of Rs.27,74,658/-."
7. Aggrieved the assessee is in appeal before us. At the outset, the Ld. AR submitted that at the time of survey on 08.12.2005 the books of accounts were not available and tentative amount of Rs.31,15,000/- was surrendered which after calculation from books of accounts and after preparing trading account was reduced to Rs.27,74,658/-. It was further submitted that survey team had prepared the inventory of stock on the basis of MRP whereas it should have been on the basis of cost price. He further submitted that quantity of stock remained same in both calculations. Our attention was invited to paper book page 9 and 10 where a copy of letter dated 24.10.2008 was placed and our specific attention was invited to para 6 onwards of the letter wherein the assessee had explained 7 ITA No.4905 /Del/2012 as to why a lower amount of Rs.19,67,811/- was declared as excess stock in stead of Rs.27,74,658/-. Our attention also invited to paper book page 11 wherein the difference amount of Rs.08.06,847/- was admitted to be income of assessee subject to no penalty proceedings. Our attention was also invited to paper book page 31 to 37 of paper book wherein itemwise working of stock was placed. Similarly we were taken to paper book page 32 where a certificate from Shalimar Paints Ltd. showing rates effective from 08.12.2005 was placed. In view of the above documents it was argued that these were necessary evidences which were required for arriving at the true valuation of stock which the Ld. CIT (A) had not admitted and in view of the above it was submitted that the appeal of the assessee be allowed or in the alternative it may be remitted back to Assessing Officer for re adjudication.
8. The Ld. Departmental Representative on the other hand, invited our attention to page 21 of paper book where a copy of audit report was placed and in view of this submitted that auditor had the opportunity to go through all records and further submitted that assessee itself had surrendered the difference of Rs.806847/- as is apparent from assessment order.
9. Regarding additional evidence the Ld. Departmental Representative submitted that at every stage assessee tried to improve its case and 8 ITA No.4905 /Del/2012 commenting upon the certificate issued by Shalimar Paints Ltd, the Ld. Departmental Representative submitted that this certificate indicates that rates are effective from 08.12.2005 whereas the survey was conducted on 08.12.2005 and stocks laying at the premises must have been purchased prior to the date 08.12.2005. Commenting further upon additional evidence, the Ld. Departmental Representative submitted that it does not specify as to what were the rates prior to 08.12.2005 which could be used for calculation of stock. He further argued that besides Shalimar Paints Ltd, there were stocks belonging to other companies also like Burger Paints and Asian Paints etc. for which there was no certificate. In view of the above arguments, the Ld. Departmental Representative submitted that assessee had been changing its stand from time to time whereas it itself have offered the additional amount and our attention was invited to paper book page 11 where a copy of letter written by assessee was placed.
10. In his rejoinder, the Ld. AR argued that quantity of stocks surrendered remained same and the difference in amount of surrender was only due to the difference in MRP and cost price which is a fact on record. We have heard the rival parties and have gone through the material placed on record. The present case involves change of mind of assessee at various stages. At the initial stage during survey, the assessee had agreed for a 9 ITA No.4905 /Del/2012 surrender of Rs.31,15,202/- which was reduced to Rs.27,74,658/- after preparing trading account up to 08.12.2005 as placed in paper book page 5. In the trading account closing stock was taken of Rs.21,40,544/- which was less than physical stock of Rs.49,51,202/-. The contention of Ld. AR is that this physical stock was valued at MRP whereas it should have been valued at cost price. The assessee had filed additional evidence in the firm of a certificate from Shalimar Paints certifying rates from 08.12.2005 and had also filed detailed calculation of difference between cost price and market price but Ld. CIT (A) rejected the same as in his opinion, the assessee was not covered by provisions of Rule 46A. We also are of the opinion that assessee was not prevented by circumstances covered by Rule 46A. Therefore, application for additional evidence was rightly rejected. Moreover we observe that this is drastic differences between MRP Prices and Cost Prices in respect of some of the items such as on paper book page 34, the MRP for item no.97 and 98 are Rs.211/- & Rs.240 and cost price is Rs.65/- and Rs.90/- respectively. Similar is the position in respect of items 271 to 278 at page 36 wherein MRP is Rs.380/- whereas cost price is Rs.12/50 only which does not seem to be possible as there cannot be such a huge difference. From the above it appears that stock details has been prepared casually and do not represent true value of stock. Therefore, 10 ITA No.4905 /Del/2012 additional evidence does not support the case of assessee even on merits also. Moreover the assessee itself had offered differential amount for taxation.
In view of the above, we do not find any infirmity in the order of Ld. Commissioner of Income Tax (appeals).
The appeal filed by assessee is dismissed.
Order pronounced in Open Court on 20th /09/ 2013
Sd/- Sd/-
(U. B. S. Bedi) (T.S. Kapoor)
Judicial Member Accountant Member
Dated the 20th day of September, 2013
S.Sinha
Copy forwarded to
1. APPELLANT
2. RESPONDENT
3. CIT
4. CIT (A)
5. CIT(ITAT), New Delhi.
AR,ITAT
NEW DELHI.