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Income Tax Appellate Tribunal, “C”, BENCH KOLKATA
Before: SHRI S.S.GODARA, JM &DR. A.L.SAINI, AM
आदेश / O R D E R Per Dr. A. L. Saini:
The captioned appeal filed by the assessee, pertaining to assessment year 2010-11, is directed against the order passed by the Commissioner of Income Tax (Appeals)-4, Kolkata, in appeal no. 255/CIT(A)-4/Ward-12(2)/Kol/14-15, which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (in short the ‘Act’) dated 21/03/2013.
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11
Grounds of appeal raised by the assessee are as follows:
1. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the disallowance of transportation charges amounting to Rs. 8,82,059/- on the ground that the assessee has not furnished all supporting evidence. However, the assessee furnished all supporting evidence i.e. ledger, bills and relevant bank statement, before the ld. A.O. as well as ld. CIT(A) therefore, the aforesaid disallowance is not justified.
2. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition of share application money of Rs. 15,37,400/- on the ground that the assessee has not furnished any supporting evidence. However, the assessee furnished all supporting evidence i.e. ledger, bank statement, ITR Acknowledgement, Balance Sheet of all the share applicant, but without considering the same the ld. CIT(A) confirm the addition of share application money which is not justified.
3. That on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in confirming partially addition of Rs. 12,22,515/- on account of undervaluation of closing stock.
4. That the appellant craves leave to add / alter and / or delete any of the grounds of appeal on or before the date of hearing.
3. Ground no. 1 raised by the assessee relates to disallowance of transportation charges amounting to Rs. 8,82,059/-.
Brief facts qua the issue are that during the scrutiny proceedings, the Assessing Officer made an addition of Rs. 8,82,059/- on account of transportation charges as claimed by the assessee. The Assessing Officer had issued notices u/s 133(6) to two transporters which were returned back unserved. As narrated in the assessment order, the Assessing Officer was of the view that the identity of the parties as well as the genuineness of the transactions was not established. It is in this backdrop that the Assessing Officer proceeded on the premise that these transactions were bogus in nature and addition of Rs. 8,82,059/- was made accordingly.
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11 5. On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer observing the following:
“4.2. I have considered the submission of the appellant’s A.R in the light of the assessment order on the issue at hand. I find that Assessing Officer has discussed this issue on page 1 and 2 of the assessment order. According to the Assessing Officer since the notices u/s 133(6) were not served upon the parties and the appellant also could not establish the identity & genuineness of such parties. Therefore, the transaction undertaken by the appellant remains unsubstantiated. The appellant did not furnish any supporting evidence in support of its contentions during the appellate proceedings also. Thus, I have no option but to confirm the action of Assessing Officer. Therefore, the disallowance of transportation charges amounting to Rs. 8,82,059/- is upheld. This ground of appeal is rejected.”
6. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee has relied on the submission before the authorities below and on the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. We note that the assessee was engaged in the business of trading of mines and minerals during the F.Y. 2009-10. In the business of trading of mines and minerals it incurred a high volume of transportation charges. Sometimes the assessee hired local transport for the transportation of goods. The ld. Counsel submitted that in the year under consideration the assessee incurred transportation charges amounting to Rs. 5,76,26,254/-, out of which it paid Rs. 8,82,059/- to M/s Shakti Transport during the F.Y. 2009-10. The assessee received bill and invoices from Shakti Transport and thereafter made the payment through account payee cheque. The ld. Counsel submitted that during the assessment stage the party called M/s Shakti Transport did not cooperate with the assessee,therefore, the assessee could not produce the Page | 3
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11 said party before the ld. Assessing Officer, but assessee submitted the bill, ledger and relevant bank statement for the payment made. We note that there is merit in the submission of the ld. Counsel as the assessee produced bills, ledger copy, bank statement( transaction done through banking channel) to prove the bona fide of the transaction, therefore, we delete addition of Rs. 8,82,059/-.
Ground no. 2 raised by the assessee relates to the addition of share application money of Rs. 15,37,400/-.
Brief facts qua the issue are that the assessee company received share application money of Rs. 15,37,400/-. Assessing Officer was of the view that assessee failed to explain the identity of the share subscribers therefore he made addition u/s 68 of the Act to the tune of Rs. 15,37,400/-.
On appeal, the ld. CIT(A) confirmed the addition made by the Assessing Officer observing the following:
“5.2. I have considered the submission of the appellant’s A.R on the issue in the backdrop of the assessment order. I find that the Assessing Officer has dealt with this issue on 3 and 4 of the assessment order. According to Assessing Officer the appellant has furnished some incomplete details in respect of share application money received during the year. Assessing Officer further observed that the quantity and value of Share application money is not matching. The A.R. appearing on behalf of the appellant has tried to justify the discrepancy with regard to quantity and value of share application money received by the appellant, but he has failed to file any supporting evidence in substantiate its claim. Neither before the Assessing Officer nor before me the appellant has furnished evidences to establish the identity and creditworthiness of the share applicants nor has he established the genuineness of the said transaction. In view of the above the addition of Rs. 15,37,400/- made by the Assessing Officer is upheld. This ground is dismissed.”
12.Aggrieved by the order of ld CIT(A), the assessee is in appeal before us.
The ld. Counsel for the assessee has relied on the submissions made before lower authorities. On the other hand, the ld. DR has primarily reiterated the stand
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11 taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. The ld. Counsel submitted that the assessee raised share capital of Rs. 7,77,400/- and securities premium of Rs. 7,60,000/- during the F.Y. 2009-10. The ld. Assessing Officer added the entire share capital and securities premium amounting to Rs. 15,37,400/- on the ground that the quantity and value of share application money is not matching. The ld. Counsel submitted that the assessee issued 4000 shares to TejsviVintrade (P) Ltd on 05 09 2009 and 73,740 shares to two parties (38,370 shares to Kishore Madnani and 39,370 shares to Vasu Madnani) on 31 03 2010. The company duly filed Form No.2 with the Registrars of Companies for the aforesaid shares issued. The quantity and value in respect of share application money has been properly accounted for in the books of accounts of the company and explained properly to the Assessing Officer. Further, the Ld AO added the share application money as unexplained cash credit as per section 68 of the Income Tax Act 1961 whereas the assessee is a company (not being a company in which the public are substantially interested), and shares were issued to the existing Directors/shareholders therefore identity of the share subscribers are not in doubt. The Assessing Officer made addition on the ground that quantity and value in respect of share application money is not matching. We note that assessee filed reconciliation and submission as noted above and there is no mismatching. Hence, we delete the addition of Rs. 15,37,400/-.
Ground no. 3 raised by the assessee relates to partially addition of Rs. 12,22,515/- on account of undervaluation of closing stock.
Brief facts qua the issue are that this ground is directed against the action of the AO, making addition of Rs. 18,08,689/- on account of undervaluation of stock. The extract of the assessment order in this regard is as follows: Page | 5
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11 “The valuation of closing stock in respect of the item Iron Ore Fines was shown by the assessee as: Quantity Rate Value 1630.02 MT 550/- Rs. 24,86,961/-
Multiplying quantity with rate the value of closing stock comes to Rs. 8,96,511/-. The value shown by the assessee is not correct. Thiswasalso noticed from the transportation bills of Sri Abhijit Chatterjee that iron ore fines of 2550 MT and 2509 MT were purchased from M/s DD International and M/s Satyam Iron & Steel Co. Pvt. Ltd. on 31.03 2010. It also reveals from the bills of M/s Unity Carriers that a stock of iron ore fine of 641.88 MTwasreceived in the month of April 2010. No evidencewasfound whether the stock of iron ore was sold by the assessee on the same date i.e. on 31.03.2010. So the quantity of closing stock shown by the assessee is not correct It has also been noticed from the transportation bills of M/s Unity Carriers that on average amount transportation charges of Rs. 950/- was paid to the said concern for carrying an average of 45 MT of iron ores fines. It is also not clear from the above value that whether the assessee has taken incidental costs into the value of closing stock. Considering the above facts and circumstances valuation of closing stock is calculatedRs. 950/- instead of@ 550/- proportionately Rs 18,08,689./- is added (closing stock valuation is calculated as 24,86,961/550 x 950) to the total income of the assessee on account of undervaluation of closing stock.”
On appeal, the ld. CIT(A) deleted partly the addition made by the Assessing Officer observing the following: “6.2. I have considered the submission of the appellant’s A.R in the backdrop of the assessment order. I find that the Assessing Officer has pointed out various discrepancies in the quantity as well as value of the closing stock adopted by the appellant. I find that the rate adopted by the Assessing Officer is Rs. 950/- MT as compared to Rs. 550 adopted by the appellant. Since the discrepancies pointed out by the Assessing Officer has not been explained in totality I deem it proper to estimate the rate @ Rs. 750/- MT for the closing stock of 1630.02MT shown by the appellant. Thus, the Assessing Officer is directed to consider the value of closing stock at Rs. 12,22,515/- (1630.03MT x Rs.750MT) instead of Rs. 18,08,689/- adopted by him. Thus the appellant gets relief of Rs. 5,86,174/- (Rs. 18,08,689/- minus Rs. 12,22,515/-). This ground is decided accordingly.”
Aggrieved, the assessee is in appeal before us,
The ld. Counsel for the assessee has relied on the submission made before the lower authorities. On the other hand, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity.
Shaping Dream Projects Pvt. Ltd. Assessment Year:2010-11 20. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials available on record. The ld. Counsel submitted before us that as per Accounting Standard-2, the cost of inventories should comprise all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and conditions. Further the costs of purchase consist of the purchase price including duties and taxes (other than those subsequently recoverable by the enterprise from the taxing authorities), freight inwards and other expenditure directly attributable to the acquisition. Trade discounts, rebates, duty drawbacks and other similar items are deducted in determining the costs of purchase. We note that the total value of closing stock is Rs. 29,80,494/- of which Rs. 4,93,533/- comprises of Non iron Ore Fines Products and Rs. 24,86,961/- comprises of Iron Ore Fines Products. The said value includes cost of purchase, freight inwards and loading and unloading charges. The aforesaid method of valuation of closing stock is as per Accounting Standard-2 and the assessee has been applying the same method regularly. We note that the Assessing Officer allowed such valuation in all previous assessment years, therefore,based on the principal of consistency the assessee’s claim should be allowed in this year also. As the assessee was applying the method of valuation of closing stock as per Accounting Standard-2 on a regular basis without any deviation, the addition of Rs. 12,22,515/- sustained by ld. CIT(A) on account of undervaluation is directed to be deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the Court on 26.02.2020