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Income Tax Appellate Tribunal, MUMBAI BENCH “F” MUMBAI
Before: SHRI C.N. PRASAD & SHRI N.K. PRADHAN
ORDER
PER N.K. PRADHAN, AM
This is an appeal filed by the Revenue. The relevant assessment year is 2012-13. The appeal is directed against the order of the Commissioner of Income Tax-45, Mumbai [in short ‘CIT(A)’] and arises out of the assessment completed u/s 143(3) of the Income Tax Act 1961, (the ‘Act’).
The 1st ground of appeal
Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting an addition of Rs.2,36,31,402/-made by the AO u/s 68 of the Act on account of difference in sales to 'Iron Traders-Punjab' accounted for by the assessee in its books and the credits appearing against the said party in its ledger accounts appearing in the books of assessee. While deleting the addition, the Ld. CIT(A) has neither given a cogent reasoning giving the correctness of the assessee's submission at the appellate stage nor giving an opportunity to the AO to verify the facts presented by the assessee before Ld. CIT(A) which is in violation of Rule 46A of the I.T. Rules, 1962.
3. Briefly stated, the facts are that the assessee-company, engaged in Ship breaking activity, filed its return of income for the assessment year (AY) 2012-13 on 18.09.2012 declaring total income at Rs.67,65,550/-. During the course of assessment proceedings, the Assessing Officer (AO) noticed that in respect of one party viz. the Iron Traders-Punjab, the assessee has shown sales of Rs.4,41,82,684/- and consignment dispatch at Rs.2,65,52,480/-. However, as per the ledger account of the above party in the books of the assessee, the total debit and credit entry has been shown at Rs.9,43,47,123/- and Rs.9,43,66,566/- respectively. In response to a query raised by the AO vide order sheet entry dated 27.03.2015 to explain the above difference of Rs.2,36,31,402/- (Rs.4,41,82,684/- + Rs.2,65,52,480/- = to Rs.7,07,35,164/- minus Rs.9,43,66,566/-), the assessee failed to file any explanation. Therefore, the AO made an addition of Rs.2,36,31,402/- u/s 68 of the Act.
4. In appeal, the CIT(A) observed that the main reason for estimating the addition is the fact that according to the AO the assessee has shown M/s J.K. Industries the consignment sales in its turnover. As per him this addition is under the wrong belief that consignment sales should be included in the turnover of the assessee, which is clearly against the guidelines issued by the Institute of Chartered Accountants of India. Therefore, the CIT(A) held that the AO has failed to take into account the corresponding purchases and give any opportunity to the assessee to explain and adduce evidence as to why consignment sales should not be included in the sales-turnover. As the AO has not considered the party-wise details of consignment sales filed by the assessee and the assessee has been consistently following a particular method of accounting and its accounts are audited u/s 44AB of the Act, the CIT(A) deleted the addition of Rs.2,36,31,402/- made by the AO u/s 68 of the Act to the total income of the assessee on account of excess credit entry.
5. Before us, the Ld. DR relies on the order of the AO and submits that the CIT(A) has violated the provisions of Rule 46A of the Income Tax Rules, 1962 (the Rules) by not giving an opportunity to the AO to verify the facts presented by the assessee before him. On the other hand, the Ld. counsel submits that the AO himself has annexed copy of the sales summary party-wise and consignment dispatch summary party-wise as Annexure A to the assessment order dated 31.03.2015. Similarly, the AO has annexed the ledger account of Iron Traders-Punjab in the books of assessee (the total debit and credit entry) as Annexure B to the said assessment order. As no new facts or evidence or materials were filed before the CIT(A), the question of M/s J.K. Industries Rule 46A does not arise. Further, the Ld. counsel supports the order passed by the CIT(A).
We have heard the rival submissions and perused the relevant materials on record. As mentioned earlier, the AO has annexed to the assessment order (i) copy of sales summary party-wise and consignment dispatch summary party-wise and (ii) copy of accounts of Iron Traders-Punjab in the books of the assessee. It is well-settled that after the assessee has adduced evidence, the onus shifts to the Department for addition u/s 68 of the Act. It has been held so in Shankar Ind v. CIT 114 ITR 689; Prakash Textile v. CIT 121 ITR 890; CIT v. United 187 ITR 596; Rajshree v. CIT 256 ITR 331; Ashokpal v. CIT 220 ITR 452, 454; CIT v. Metachem 245 ITR 160; CIT v. Shree Gopal 204 ITR 285. In the instant case, the AO has failed to discharge the onus shifted to him. He has made the addition on surmises. Therefore, we confirm the order of the CIT(A) and dismiss the 1st ground of appeal
7. The 2nd ground of appeal Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the additions made on account of undisclosed sales to Rs.3,25,000/- as against the addition of Rs.2,41,81,000/- made by the AO on account of difference in the Daily Stock register maintained by the assessee under Rule 10 of Central Excise Rule 2002 and Schedule P of 3CD report. While restricting the addition of Rs.2,41,81,000/- to Rs.3,25,000/-. the Ld. CIT(A) has neither given a cogent reasoning giving the correctness of the assessee's submission at the appellate stage nor giving an opportunity to the M/s J.K. Industries AO to verify the facts presented by the assessee before Ld. CIT(A), which is in violation of Rule 46A of the I.T. Rules 1962.
During the course of assessment proceedings, the assessee produced before the AO the Daily Stock Register (under Rule 10 of the Central Excise Rule, 2002). The AO observed that as per the aforesaid stock register, the total manufactured Iron & Steel items comes to 235943.672 (Mts. Kg.) as against 24561.640 (Mts. Kg.) shown in Schedule P to 3CD Report. The difference thus comes to 967.278 (Mts. Kg.). As the assessee failed to file any reply to explain the above difference, the AO made an addition of Rs.2,41,81,000/- (calculated average rate @ Rs.25 per Kg. x 967.2728) as undisclosed sales.
In appeal, the CIT(A) having gone through the details found that apparently there is no difference and minor difference in reconciliation may be due to error of omission or commission. Therefore, he deleted the addition of Rs.2,41,81,000/- made by the AO. However, the CIT(A) held that only error in the stock register was of 13 MT due to hand written stock register and computerized account and reconciliation. Therefore, he directed the AO to restrict the disallowance to the value of 13 MT of closing stock valued at the average rate of Rs.25 per Kg. which comes to Rs.3,25,000/-.
Before us, the Ld. DR relies on the order of the AO and submits that the CIT(A) has violated the provisions of Rule 46A of the Income Tax Rules, 1962 (the Rules) by not giving an opportunity to the AO to verify the facts presented by the assessee before him.
M/s J.K. Industries On the other hand, the Ld. counsel for the assessee supports the order passed by the CIT(A). It is further stated by him that no new evidence/documents/materials were filed before the CIT(A) which would attract the provisions of Rules 46A.
We have heard the rival submissions and perused the relevant material on record. In the instant case the CIT(A) has rightly restricted the addition/disallowance to error of 13 MT in the stock register which arose because of difference in the hand written stock register and computerized account and reconciliation. Rightly he has directed the AO to restrict the value of 13 MT of closing stock valued at the average rate of Rs.25 per Kg. which comes to Rs.3,25,000/-. Facts being so, we uphold the order of the Ld. CIT(A).