C I T JAIPUR vs. BABU LAL GANGWAL

DATE OF JUDGMENT: 5th July 2013. PRESENT HON’BLE MR. JUSTICE DINESH MAHESHWARI HON’BLE MR. JUSTICE NARENDRA KUMAR JAIN-II Mr.R.B.Mathur ] Mr.Akhil Simlote ] for the appellant BY THE COURT: (Per Dinesh Maheshwari,J.) By way of this appeal under Section 260-A of the Income Tax Act, 1961 [‘the Act’], the revenue seeks to question the order dated 29.10.2010 passed by the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur [‘the ITAT’] in ITA No.184/JP/2010 relating to assessment year 2006-07 whereby the ITAT has allowed the appeal filed by the assessee in part. The appellant has suggested that the following substantial questions of law do arise for consideration in this case:- “i) Whether in the facts and circumstances of the case, the ITAT was justified in deleting the additions made on the basis of excess stock found during survey u/s. 133A and the assessee voluntarily surrendered the same for taxation. ii) Whether in the facts and in circumstances of the case, the ITAT was justified in deleting addition of Rs.81,14,716/- made on account of excess stock found during survey on assumptions only without there being any corroborative evidence. The assessee voluntarily surrendered the excess stock found during survey u/s 133A of the I.T.Act. Inventory of stock was prepared in presence of the son of the assessee which was accepted by assessee himself also. No objection was made to the stock taking or preparation of inventory at that time. The surrender made during survey was unconditional. Therefore, the decision of allowing relief to the assessee is perverse on facts.” After having heard the learned counsel for the appellant and having examined the detailed and considered order passed by the ITAT on 29.10.2010, we are satisfied that the matter essentially relates to the questions of fact; and that the ITAT has adjudicated on the issues involved in a proper and justified manner. Hence, this appeal does not involve any substantial question of law and does not merit admission. Briefly put, the relevant background aspects of the matter are that the assessee, who is engaged in trading of different varieties of suitings and shirtings in his proprietorship concern M/s. Babu Lal Suresh Kumar, had filed the return of income on 31.10.2006 declaring total income of Rs.1,84,84,740/-. A survey was, however, conducted under Section 133A of the Act at the business premises of the assessee on 13.07.2005. The stock found during the course of survey was inventorised at the different business premises in the presence of son of assessee and other employees. It had been the assertion of the department that the total physical stock of cloth found at the premises was valued at Rs.4,14,14,815/- whereas the assessee worked out the book stock as on the date of survey at Rs.1,15,51,248/-. Thus, an excess stock worth Rs.2,98,63,567/- was allegedly found at the premises. A post dated cheque in the sum of Rs.1,00,00,000/- against the advance tax liability on the excess stock found was also given by the assessee. However, while filing his return of income, the assessee offered the value of excess stock only at Rs.1,58,55,092/-, which was short by a sum of Rs.1,40,08,475/- from the alleged value of excess stock found at the survey i.e., Rs.2,98,63,567/-. As regards this difference, the assessee stated that there had been several discrepancies like arithmetical errors, duplication, wrong measurement, rate differences etc. in the inventory prepared by the department. The assessee quantified the discrepancies in his explanation as under:- S.No. Head of Discrepancy Amount (Rs.)

As regards item Nos.5 & 6 i.e., incapacity of godown and excess quantity of cloth, the ITAT found such additions unjustified and, with reference to its finding on re-conciliation of measurements adopted by the assessee, deleted these additions too.

As regards the stock concerning the item of ‘OCM-SD’, the ITAT found no difference in the measurement and rates and, while rejecting the suggestions on the part of assessee, did not interfere with this addition.

As regards rate difference, the ITAT found that the consistent method had been to value the stock on the basis of market price or the cost price whichever be the lower; and the cost price being lower, the stock should have been valued on that basis. The ITAT deleted this addition too while observing as under:- “28. The department authorities have taken the rates on the basis of MRP whereas the revised reconciliation filed by the assessee is on account of cost price. The ld. CIT(A) has accepted the contention of the assessee in part. He has deleted an amount of Rs.16,25,000/- or odd on account of stock valued at MRP against cost price. However, the ld CIT(A) has not taken into consideration the MRP taken by department against the cost price. He details of sales of each item have been given by the assessee showing the cost of the material purchased The AO as well as ld. CIT(A) has rejected the contention of the assessee by observing that bills submitted by assessee pertains to financial year 2001-02 to 03-04. It has been stated that the old material was lying with the assessee which was purchased during financial year 2001-02 to 03-04. Therefore, the department should have taken the rate on the basis of cost price and not on the basis of tag attached with these items which are on the basis of MRP. Contention of the assessee seems to be correct. This is settled proposition that stock of assessee should be valued on the basis of consistent method adopted. In the present case consistent method is that the value of stock is valued on the basis of market price or cost price whichever is lower. In the present case cost price is on the lower side. Therefore, the value of stock should have been taken on the basis of cost price by accepting the explanation filed by assessee, which is supported by the purchase vouchers. In view of these facts and circumstances, we hold that the ld. CIT(A) was not justified in not accepting the explanation filed on behalf of the assessee. Accordingly we delete the addition of Rs.21,38,113/- also.” A bare look at the subject-matter of the appeal and the contentions taken note of and dilated upon by the ITAT is sufficient to find that the matter relates only to factual aspects and no legal issue leading to substantial question of law is involved. Mere preparation of inventory of stock in the presence of son of the assessee or not raising of objection at the time of preparation of inventory could not have been taken as that of estoppel against assessee to the extent that the correct measurements, calculations and valuations could not have been put forth by him during the assessment proceedings. The discrepancies as referred by the assessee and accepted by the authorities had been in respect of duplication of items, arithmetical inaccuracy, wrong measurement/rate and wrong valuation. All such aspects essentially relate to the questions of fact. It has also come on record that survey was conducted only one day and there were about 2,94,777 items of different cloths. The ITAT cannot be said to be unjustified in observing that it was humanly impossible to measure accurately such huge pieces within one day; and that the inventory was prepared only on the basis of guess work. The correct measurements and calculations having been accepted by the ITAT after thorough analysis of the material on record, the impugned order does not appear suffering from any perversity or illegality so as to call for interference. In the result, the appeal stands dismissed. (NARENDRA KUMAR JAIN-II),J. (DINESH MAHESHWARI),J. Mk/cp CERTIFIED THAT ALL CORRECTIONS MADE IN THE JUDGMENT / ORDER HAVE BEEN INCORPORATED IN THE JUDGMENT / ORDER BEING EMAILED

MANOJ KUMAR PS 7