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Income Tax Appellate Tribunal, DELHI BENCH: ‘D’, NEW DELHI
Before: SH. H.S. SIDHU & SH. O.P. KANT
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘D’, NEW DELHI BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER Assessment Year: 2007-08 Vs. M/s. Vikas Chain Co. (P.) Ltd., ACIT, Central Circle -23, Room No. 359, ARA Centre, E-2, 2501/8, Beadon Pura, Karol Jhandewalan Extn. New Delhi Bagh, New Delhi PAN :AAACV3351N (Appellant) (Respondent) Appellant by Sh. Umesh Chand Dubey, Sr.DR Respondent by Sh. Somile Agarwal, Adv. Date of hearing 25.05.2017 Date of pronouncement 31.05.2017 ORDER PER O.P. KANT, A.M.:
This appeal by the Revenue is directed against order dated 07/06/2010 of learned Commissioner of Income-tax (Appeals)-III, Laxmi Nagar, Delhi, for assessment year 2007-08, raising following grounds:
“1. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law on facts in deleting the addition of Rs.51,62,208/- made by the Assessing Officer on account of excess value of stock? 2. Whether on the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in not appreciating the facts that as per certificate given by the assessee to the bank, the stock was valued in the same manner as adopted for company’s audited accounts?
3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
The facts in brief of the case are that the assessee company was engaged in the business of manufacturing and resale of gold, diamond, precious stones, ornaments etc. The assessee filed return of income electronically on 26/10/2007, declaring total income of Rs.19,64,607/-. The case was selected for scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short “the Act”) was issued and served upon the assessee within the stipulated period. During assessment proceeding, the Assessing Officer asked the assessee to furnish stock statement submitted to Indian Overseas Bank in respect of the stock hypothecated to the bank for availing cash credit facility. On verification of the stock statement submitted by the assessee, the Assessing Officer found value of the stock as on 31/03/2007 mentioned in stock statement to bank higher by Rs.51,62,208/- as compared to stock shown in the audited financial statement. The contention of the assessee was that in order to avail maximum credit limit, the valuation submitted to bank was inflated and as far as books of accounts was concerned the stock was valued according to the purchases. The assessee produced all details of opening and closing stock with quantity and value alongwith books of accounts before the Assessing Officer. The Assessing Officer rejected the contention of the assessee and made addition for the difference amount of Rs.51,62,208/- as unaccounted stock. 2.1 On appeal, the Ld. CIT-A, deleted the addition holding that the Assessing Officer has not rejected books of accounts and no suppression of purchase or sales has been pointed out by the Assessing Officer. Aggrieved, the Revenue is in appeal raising the grounds as reproduced above.
Both the grounds No. 1 and 2 of the appeal are related to the deletion by the Ld. CIT-(A) of Rs.51,62,208/- on account of excess value.
Before us, the Ld. Senior DR relied on the order of the Assessing Officer and submitted that the assessee failed to explain the excess stock reported in statement of stock hypothecated to the bank and therefore the addition was justified. 5. On the other hand, ld. counsel of the assessee submitted that the Assessing Officer has neither pointed out any suppression in purchase or sales nor rejected the books of accounts and thus additions merely on the basis of inflated value of a stock submitted to bank cannot be made in the hands of the assessee. Ld. counsel relied on the decision of the Tribunal in the case of Kukra Chain and Jewellery Private Limited in for assessment year 2007-08, where identical question of value of excess stock on the basis of bank statement was involved. 6. We have heard the rival submissions and perused the relevant material on record. The ld. CIT(A) has deleted the addition with following findings: “6. It emerges from the facts that in the case before the Hon'ble Court, no acceptable evidence was produced before the Court to disbelieve the bank statement, wherein the present case, the appellant had produced the bills for the purchases & sales and the Assessing Officer had not pointed out any suppression of purchases or sales. The books of accounts were produced for the verification and the same were found to be in order. The Assessing Officer while making the impugned addition of Rs.51,62,208/- to the income of the appellant has not rejected the books of accounts. As such, the ratio of the decision relied by the Assessing Officer is not applicable on the facts of this case. The judicial Precedents as discussed above make it clear that the addition on account of difference in stock can be made only on the basis of adequate material, but not arbitrarily. Admittedly there was a difference between the value of stock declared to the bank and to the Assessing Officer. There was no dispute that the appellant was maintaining books of accounts on day
to day basis. The purchases and sales as on 31.03.2007 are supported by vouchers and the Assessing Officer had not pointed out any suppression of purchases or sales. In view of the totality of the facts and circumstances and the aforesaid judicial precedents, the adhoc addition of Rs. 51,62,208/- made by the AO to the income of the appellant is deleted.
We find that in the case of M/s Kukra Chain and Jewellery Private Limited (supra) also the Assessing Officer made addition of Rs.1,00,06,656/-on account of excess value stock reflected in the bank statement. The grounds raised in the said appeal are reproduced as under:
“1. Whether on the facts and in the circumstances of the case, the learned CIT(A) has erred in law on facts in deleting the addition of Rs.1,00,06,656/- made by the Assessing Officer on account of excess value of stock? 2. Whether on the facts and in the circumstances of the case, the learned CIT(A) has erred in law on facts in not appreciating the facts that as per certificate given by the assessee to the bank, the stock was valued in the same manner as adopted for company’s audited accounts? 3. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
We further find that grounds of appeal raised in the said case are identical to the grounds raised in the present appeal except amount of addition. The Tribunal(supra) deleted the addition with following findings:
“4. We have heard both the counsel and perused the records. We find that Ld. CIT(A) has elaborately discussed the issue in question, after dealing the various High Court decisions, and concluded his finding vide para no. 6 as under:-
“6. It emerges from the facts in the case before the Hon’ble Court (viz. Recon Machine Tolls Pvt. Ltd. reported in 286 ITR 637 Karnataka High Court decision), no acceptable evidence was produced before the Court to disbelieve the bank statement, wherein the present case, the appellant had produced the bills for the purchases and sales and the Assessing Officer had not pointed out any suppression of purchases or sales. The books of accounts were produced for the verification and the same were found to be in order. The Assessing Officer while making the impugned addition of Rs. 1,00,06,656/- to the income of the appellant has not rejected the books of accounts. As such, the ratio of the decision relied by the Assessing Officer is not applicable on the facts of this case. The judicial precedents as discussed above make it clear that the addition on account of difference in stock can be made only on the basis of adequate material, but not arbitrarily. Admittedly, there was a difference between the value of stock declared to the bank and the Assessing Officer. There was no dispute that the appellant was maintaining books of accounts on day to day basis. The purchases and sales as on 31.3.2007 are supported by vouchers and the Assessing Officer had not pointed out any suppression of purchases or sales. In view of the totality of the facts and circumstances and the aforesaid judicial precedents, the ad-hoc addition of Rs. 1,00,06,656/- made by the AO to the income of the appellant is deleted.” 4.1 In view of the above, we find considerable force in the view taken by Ld. CIT(A) and the contention raised by the Ld. Counsel of the assessee through his written synopsis as aforesaid and the precedents relied that there was no dispute that the asssessee was maintaining books of accounts on day to day basis. The purchases and sales as on 31.3.2007 are supported by vouchers and the Assessing Officer had not pointed out any suppression of purchases or sales. Therefore, we find Ld. CIT(A) has rightly deleted the ad- hoc addition of Rs. 1,00,06,656/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A).”
In view of the identical facts and circumstances of the case, respectfully following the above decision of the coordinate bench of Tribunal (supra), we uphold the order of the Ld. CIT(A) on the issue in dispute deleting the addition of Rs.51,62,208/-.
In the result, the appeal filed by the Revenue stands dismissed. The decision is pronounced in the open court on 31st May, 2017.