Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, Hyderabad ‘ A ‘ SMC Bench, Hyderabad
Before: Smt. P. Madhavi Devi
This is assessee’s appeal for the A.Y 2013-14 against the order of the CIT (A)-10, Hyderabad, dated 31.08.2017.
At the outset it is seen that there is a delay of 12 days in filing of the appeal and the assessee has filed an application for condonation of delay stating that the period of 60 days for filing of the appeal before the Tribunal ended on 05.01.2018 but since he was not well and the Doctor advised him bed rest, he could not file the appeal immediately and hence there is a delay of 12 days in filing of the appeal. A medical certificate is also annexed to the condonation delay petition. Taking the same into consideration, I am inclined to condone the delay and dispose of the appeal on merit.
Brief facts of the case are that the assessee is a proprietor of M/s. Madhava Cloth Merchants doing cloth business of 2018 D Satyadas Mahaboobnagar.
in Mahaboobnagar. The assessee filed his return of income on 12.3.2015 admitting a total income of Rs.8,01,219/-. There was a survey action u/s 133A in the business premises of M/s. New Madhava Cloth Merchants, Mahaboobnagar on 7.11.2012 during the course of which, it was found that the assessee was not maintaining proper books of account and that as on the date of survey, the same were not updated. As per the inventory, the closing stock was arrived at Rs.1,31,12,560/-. Since the assessee did not file the return of income for the A.Y 2013-14, a notice u/s 148 was issued to the assessee on 13.01.2014, in response to which, the assessee filed the copy of the return of income on 12.03.2015.
After examining the impounded material found during the course of survey, books of account and the information filed by the assessee, the AO found that the closing stock as per the books was arrived at Rs.1,03,68,400/- whereas the closing stock found at the time of survey was Rs.1,31,12,560/- and therefore, the difference in closing stock was Rs.27,44,160/-. The assessee was therefore, asked to show cause as to why the difference of Rs.27,44,160/- should not be added back towards the excess stock found in the course of survey. The learned Counsel for the assessee explained that the stock shown in the books was the stock which was saleable in the market whereas the stocks arrived at during physical verification includes stocks salable as well as stock which was not saleable due it being out of fashion or being found with manufacturing defects in materials etc., It was submitted there was no variation in stock as per the books and physical verification. The AO, however, was not convinced with the assessee’s contention. He held that the excess stock of of 2018 D Satyadas Mahaboobnagar.
Rs.27,44,160/- is to be brought to tax. He accordingly added it to the returned income of the assessee and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A), who confirmed the order of the AO and the assessee is in second appeal before the Tribunal by raising the following grounds of appeal: “1. The order of the learned Commissioner of Income-Tax (Appeals) is erroneous both on facts and in law.
2. The learned Commissioner of Income-Tax (Appeals) erred in not deciding the matter of issue of notice u/s 148 of the I.T Act before the end of the assessment year.
3. The learned Commissioner of Income-Tax (Appeals) erred in confirming the action of the Assessing Officer in holding that there is any difference in the physical stock and further erred in arriving at the value of such stocks at Rs.27,44,160/- and in making addition to the income admitted.
4. The learned Commissioner of Income-Tax (Appeal) erred in not considering the submissions of the appellant that the physical stock includes the damaged stock.
5. The learned Commissioner of Income-Tax (Appeals) erred in confirming charging of interest u/s 234A, 234B and 234C of the Income-Tax Act.
6. Any other ground that may be urged at the time of hearing”.
As regards 2nd ground of appeal against not deciding the matter of issue of notice u/s 148 of the Act, I find that the assessee had not raised any specific ground before the CIT (A) but had raised only an argument and the CIT (A) has rejected the said argument by observing that the assessee has not raised any specific ground. Even before the Tribunal, the assessee has not raised it as an additional ground of appeal. Therefore, this ground cannot be entertained. of 2018 D Satyadas Mahaboobnagar.
6. As regards the merits of the addition is concerned, the learned Counsel for the assessee reiterated the submissions made by the assessee before the authorities below while the learned DR supported the orders of the authorities below.
7. I find that the assessee has filed the details of the stock which it claims to be either out of fashion or damaged. Having gone through the same, I am of the opinion that the entire difference in the stock cannot be considered as defective stock. The learned Counsel for the assessee has also not been able to file any evidence to show that the entire stock is defective or is out of fashion. Therefore, I am unable to accept the said contention of the assessee. However, since there could be some stock which could be out of fashion or defective, I am, therefore, inclined to allow relief particularly I direct the AO to allow 20% of the stock of Rs.27,44,160/- as defective stock and the balance addition is confirmed. The assessee’s appeal is accordingly partly allowed.
In the result, assessee’s appeal is partly allowed.
Order pronounced in the Open Court on 17th January, 2020.