KASBA IRON TRADER'S ,KATIHAR vs. ITO, WARD, KATIHAR

आयकर अपीलीय अधिकरण, ‘एकल” न्यायपीठ, पटना IN THE INCOME TAX APPELLATE TRIBUNAL, SMC BENCH, PATNA BEFORE SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER आयकर अपील सं./ITA No.183/PAT/2018 (ननिाारण वर्ा / Assessment Year :2010-2011) M/s Kasba Iron Traders, Vs. ITO Ward-Katihar Girls School Road, Katihar-854105 स्थायी लेखा सं./PAN No. : AACFK 4928 P (अपीलाथी /Appellant) (प्रत्यथी / Respondent) .. निर्धारिती की ओर से /Assessee by : Shri K.N.Prasad, AR राजस्व की ओर से /Revenue by : Shri Supriya Biswas, JCIT-DR

सुनवाई की तारीख / Date of Hearing : 16/09/2019 घोषणा की तारीख/ : 18/09/2019 Date of Pronouncement आदेश / O R D E R This appeal is filed by the assessee against the order passed by learned CIT(A), Muzaffarpur, dated 28.11.2018 for the assessment year 2009-2010. 2. In this appeal, the assessee has raised six grounds of appeal out of which ground Nos.1, 5 & 6 are general in nature. Now, the grounds remained to be decided as ground Nos.2, 3 & 4, which reads as under :- 2. For that in the facts and circumstances of the case, the CITA is not justified in confirming the addition of Rs. 6,27,496/- made by the Assessing Officer on estimate on account of alleged excess stock. There was no excess stock. The stock inventorized / taken are not correct inspite of objection having been raised during the course of survey. It was not possible for taking such huge stock with limited manpower. The entire sales and purchases are verifiable and nothing contrary has been detected. No goods are sold on the price quoted by the assessee in as much as the assessee is a retailer. No rebate out of stock inventorised have been considered / allowed on account of damaged, discolor and outdated materials which the assessee is entitled at least 20-25 percent out of stock

2 ITA No.183/PAT/2018 inventorised in as much as the assessee has anyhow to dispose of damaged, discolor / outdated goods. The books of account of the assessee has not been rejected. The addition of Rs. 6,27,496/- as sustained is arbitrary, unjustified, void ab- initio and bad in law. In any case, the addition as sustained is fit to be deleted. 3. For that in the facts and circumstances of the case, the learned CITA is not justified in confirming the addition of Rs. 10,000/- as made by the Assessing Officer on the basis of third party statement., The addition as sustained is arbitrary and unjust and fit to be deleted. 4. For that the charge of interest u/s 234A, 234B, 234C and 234D is arbitrary and unjust. Interest charged and included in the Demand Notice is fit to be deleted. 3. With regard to ground No.2, ld. AR submitted that the ld. first appellate authority was not justified in confirming the addition of Rs.6,27,496/- made by the Assessing Officer on estimation on account of alleged excess stock. Ld. AR further submitted that the stock inventorised/taken are not correct in spite of the objection having been raised during the course of survey as it was not practically possible for taking such huge stock with limited manpower at that point of time. Ld. AR submitted that after verification of entire sales and purchases nothing contrary has been found or detected. Ld. AR further submitted that books of accounts of the assessee have not been rejected and no rebate out of stock inventorised have been considered/allowed on account of damages, discolour and outdated materials which the assessee is entitled at least 20-25% rebate on the valuation of stock done during the survey. Ld. AR also pointed out that no goods have been sold on the price quoted by the assessee and the survey team has taken maximum retail price(MRP) printed on the items without considering a fact that on such kind of items

3 ITA No.183/PAT/2018 MRP is printed on higher side and cost price/purchase price is generally 20-30% less than the MRP printed thereon. Ld. AR submitted that same prayer has been made before the lower authorities but was not accepted without any justified reasoning, therefore, in the interest of justice, reduction of 30% in the total valuation adopted by the survey team on the basis of MRP should be given to the assessee. 4. Replying to the above, ld. DR supported the action of Assessing Officer as well as the first appellate authority and submitted that the reply of the assessee dated 30.11.2012 was considered by the Assessing Officer, therefore, valuation adopted by the Assessing Officer is correct and he was right in making addition on account of excess stock found during the course of survey. 5. On careful consideration of above rival submissions and from the relevant part of the assessment order, I observe that the assessee vide its reply dated 30.11.2012 submitted that the stock was taken at sales price which include GP approximately 10% and stock was counted at tentative basis and not in actual basis due to which some difference in valuation has been occurred. Before the authorities below as well as before this bench it is also another contention of the assessee that for valuation of stock, the survey team has taken MRP which is generally 20-30% higher than the actual purchase price. Secondly while taking valuation of inventory/stock, no rebate has been allowed to the assessee on account of damaged, discolour and outdated material for which the assessee is entitled at least 20-25% rebate. In the totality of facts and circumstances

4 ITA No.183/PAT/2018 of the case, as noted above, I am of the view that for valuation of stock in hand the general rule adopted is cost price or fair market value whichever is less whereas in the present case the survey team has valued the stock of assessee by taking MRP without considering some relevant factors viz., (i) sales price includes GP approximately 8 to 10%; (ii) the stock inventorised includes old and absolute stock also and rebate onaccount of damaged, discolour and outdated materials should be allowed and (iii) MRP printed on the items cannot be taken as basis for valuation of stock because MRP is generally 20 to 25% higher than the actual purchase price charged by the manufacturer/wholesaler. In view of the above, I am of the considered view that the assessee has not disputed quantum of material/stock inventorised by the survey team. However, I am of the view that the valuation of stock should have been done by considering the said three factums as noted above, therefore, I direct the Assessing Officer to allow 20% rebate on the value adopted by the survey team for inventorised/taking valuation of stock. Accordingly, ground No.2 of the assessee is partly allowed and the Assessing Officer is directed to estimate the value of stock accordingly and to recalculate/estimate the excess tock, if any, found during the course of survey. 6. With regard to ground No.3, ld. AR submitted that the ld. first appellate authority is not justified in confirming the addition of Rs.10,000/- made by the Assessing Officer on the basis of third party statement and the addition sustained by the ld. CIT(A) is arbitrary, unjust and incorrect. Ld. AR also pleaded that the payment of Rs.10,000/- was made only on

5 ITA No.183/PAT/2018 20.01.2010 which was duly reflected in the books of accounts, accordingly the addition made by the Assessing Officer and confirmed by the CIT(A) may kindly be deleted. 7. Replying to the above, ld. DR strongly supported the assessment and first appellate orders. 8. On careful consideration of above submissions, I am of the view that the Assessing Officer has made addition without any basis and ld. CIT(A) while confirming the same noted that the assessee is continuously changing its stand about the actual date of payment, which brings his submission under serious suspicion. The Assessing Officer has also asked the assessee for the payments made by the assessee, however, the assessee could not reply the same, therefore, the Assessing Officer observed that the assessee has made the said expenditure out of books and added the same to the total income of the assessee. From the above observations of the both the authorities below, I do not find any good reason to interfere in the findings recorded by the CIT(A) and I uphold the same and dismiss the ground No.3 of the assessee. 9. With regard to ground No.4, ld. AR submitted that this issue is covered in favour of the assessee on the decision of Hon’ble Jharkhand High Court in case of Ajay Prakash Verma in ITA No.38 of 2010 reported in 2013(1) TMI 140, wherein the hon'ble High Court has held that interest u/s.234B can be levied only on the returned income and not on the assessed income. 10. Contra, ld. DR relied on the orders of lower authorities.

6 ITA No.183/PAT/2018 11. On careful consideration of the above submissions, I am of the view that the issue, being charging of interest u/s.234A, 234B, 234C & 234D of the Act, is covered by the decision of Hob'ble Jharkahnd High Court in the case of Ajay Prakash Verma in ITA No.38 of 2010 reported in 2013(1) TMI 140. The Hon'ble Court in Para23&24 held as under :- "23. Learned counsel for the appellant submitted that it has been ordered by the AO that interest be charged as per rule. Interest can be levied under Section 234A and 234B of the Act. It is submitted that in view of the judgment of Full Bench of Ranchi Bench of Patna High Court delivered in the case of Smt. Tej Kumari Vrs. Commissioner of Income-tax reported in [2001] the interest cannot be levied over the assessed income and it can be levied only on the income declared in the return. The revenue preferred SLP before Hon'ble Supreme Court against the said judgment of the Full Bench of Patna High Court, which was dismissed by the Hon'ble Supreme Court on merits vide order dated 01.08.2000 by saying that there is no merit in the appeal.

7 ITA No.183/PAT/2018 234C & 234D of the Act on the basis of total income declared by the assessee in the return filed. This ground of appeal of the assessee is allowed. 13. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 18/09/2019. Sd/- (C.M.GARG) न्यानयक सदस्य / JUDICIAL MEMBER पटना /Patna; दिनांक Dated 18/09/2019 Prakash Kumar Mishra, Sr.P.S.(on tour) आदेश की प्रनिललपप अग्रेपर्ि/Copy of the Order forwarded to : अपीलाथी / The Appellant- 1. प्रत्यथी / The Respondent- 2. 3. आयकि आयुक्त(अपील) / The CIT(A), आयकर आयुक्त / CIT 4. 5. निभधगीय प्रनतनिनर्, आयकि अपीलीय अनर्किण, पटना / DR, ITAT, Patna गार्ड फाईल / Guard file. 6. सत्यापपत प्रतत //True Copy// आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अधिकरण, पटना / ITAT, Patna