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Income Tax Appellate Tribunal, DELHI BENCH ‘D’ NEW DELHI
Before: SHRI N.K. SAINI & SHRI SUDHANSHU SRIVASTAVA
the order passed by the Ld. Commissioner of Income Tax 1678/Del/2014 Assessment year 2009-10 (Appeals)- XXXIII, New Delhi vide order dated 19/11/2013 and pertains to assessment year 2009-10. has also been preferred by the Department against order dated 19/11/2013 passed by the Ld. Commissioner of Income Tax (Appeals)- XXXIII, New Delhi and pertains to assessment year 2009-10. Since the issues involved in both the appeals are similar, they were heard together and for the sake of convenience they are being disposed of through this common order.
The brief facts of the case are that the assessee deals in manufacturing and trading of diamonds and gold ornaments and jewellery. During assessment proceedings, the assessing officer noticed that the assessee was enjoying hypothecation limit from the State Bank of India wherein the value of stock on 31st March 2009 had been reported at Rs. 93,522,340/- whereas the balance sheet showed the closing stock at Rs. 87,327,287. The AO proceeded to treat the difference of Rs. 61,95,053/- as income of the assessee under section 69 of the Income Tax Act, 1961. On appeal, the Ld. CIT (Appeals) deleted the addition by holding that the purchases and sales were properly vouched and that the payments were made through cheques and that all the bills and vouchers were 1678/Del/2014 Assessment year 2009-10 properly maintained. The Ld. CIT (Appeals) further observed that the book results were not rejected and the addition had been made only on account of valuation of stock. The Ld. CIT (Appeals) further observed that the assessee was maintaining books of accounts on day to day basis and the Assessing Officer had not alleged any unaccounted purchases. The Ld. CIT (Appeals) also followed the order of the Ld. CIT (Appeals)-3 in the case of Vikas Jain Company Private Limited for assessment year 2007-08 in Appeal No. 159/9 – 10 dated 07/06/2010 and deleted the addition.
2.01 Now the Department has approached the ITAT against the deletion and has raised the following grounds of appeal –
“1. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 61,95,053/- made by the A.O on account of deemed income under section 69 of the Income Tax Act, 1961. 2. The order of the CIT (A) is erroneous and is not tenable on facts and in law.”
2.1 – On a similar set of facts as in ITA No. 1677, assessment in this case was completed by the assessing officer by treating the difference in the value of stock as
per the stock statement submitted to the bank and as per the assessee amounting to Rs. 73,48,078/-. The Ld. CIT (Appeals)
1678/Del/2014 Assessment year 2009-10 deleted the addition on account of stock difference following the decision of the Ld. CIT (Appeals) in assessment year 2007-08. On appeal by the Department before the ITAT, the ITAT allowed the Department’s appeal. However the order was recalled under section 254 vide order dated 04/07/2016 in MA No. 37/DEL/2015 on the ground that the decision of the coordinate bench in the case of ACIT versus Kukra Chain and Jewellery Private Limited was not considered by the ITAT while passing the order in assessee’s case.
2.02 The grounds of appeal raised by the revenue in this appeal are as under –
“1. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs 73,48,078/- made by the A.O on account of difference in stock. 2. On the facts and in the circumstances of the case, the CIT (A) has erred in deleting the addition of Rs. 10,66,381/- made by the A.O. on account of provision for rate difference. 3. The order of the CIT (A) is erroneous and is not tenable on facts and in law.”
At the outset, the Ld. AR placed reliance on the case of the sister concern Kukra Chain and Jewellery Private Limited in wherein vide order dated 10/11/2014, a 1678/Del/2014 Assessment year 2009-10 coordinate bench of the Delhi Tribunal had upheld the deletion of addition on account of difference in stock amounting to Rs. 10,006,656/- under similar circumstances.
The Ld. Departmental Representative relied on the order of the assessing officer and submitted that in view of the findings of the AO, the addition ought to be restored. The Ld. DR vehemently argued that the Ld. CIT (Appeals) ought not have deleted the addition in absence of any proper explanation as to why there was a discrepancy between the statement submitted to the bankers as well as the statement as per the books of accounts
We have heard the rival submissions and have perused the relevant material on record. It is seen that the Ld. CIT (Appeals) has relied on the judgement of the Hon’ble Madras High Court in the case of CIT versus N. Swami reported in 241 ITR 363 for the proposition that addition could not be made on account of difference in stock as per the statement given to the bank for enjoying overdraft facility and stock as per books of accounts.
The Ld. CIT (Appeals) has noted that the assessing officer could not point out any difference in quantity of stock as per the books of accounts vis-a-vis stock statement given to the bank. The assessee is said to be maintaining books of accounts on day to 1678/Del/2014 Assessment year 2009-10 day basis and the purchase and sales were properly vouched.
Section 34 of the Indian Evidence Act provides books of accounts, regularly kept in the course of business are relevant wherever they refer to a matter into which the court has to inquire. Thus, entries made in the books of accounts maintained in the ordinary course of business would be relevant evidence and, thus, they would, to some extent, carry with them a presumption of truth.
The books of accounts of the assessee had been duly audited as
per the requirement of section 44 AB of the Income Tax Act, 1961. The assessing officer has not pointed out any defect in the books of accounts but has simply substituted the value of stock as per books of accounts with the information supplied by the bank although the book results were held to be correct.
Moreover, in the instant appeals it is a case of hypothecation and not of pledge and as such the stock is not with the bank. The Tribunal has also, on numerous occasions, held that addition on this account was not justified where the books of accounts or the accounting system had been found to be genuine duly supported by vouchers etc. Thus, addition on account of difference in stock can be made only on the basis of adequate material and not arbitrarily. Admittedly, there was a difference between the value 1678/Del/2014 Assessment year 2009-10 of stock declared to the bank and the stock as per books of accounts but there is no dispute that the assessee had been maintaining proper books of accounts on the day to day basis and the sales and purchases were duly supported with vouchers and there was no finding as to suppression of any purchase or sales. The case of the assessee is also supported by the order of the coordinate bench in the case of ACIT versus Kukra Chain and Jewellery Private Limited in wherein vide order dated 10/11/2014, the ITAT had upheld a similar deletion by the Ld. CIT (Appeals) and dismissed the Department’s appeal. On identical facts and similar set of circumstances we find no reason to interfere with the orders of the Ld. CIT (Appeals) in these two appeals also and we deem it fit to dismiss the same.
In the final result both the appeals of the Department stands dismissed.
Order pronounced in the open court on 11th April, 2017.