DCIT, CIRCLE - 10, KOLKATA vs. M/S. SHIVA WHEELS (P) LTD.,, KOLKATA

The captioned appeal filed by the revenue pertaining to A.Y.2005-06, is directed against the order passed by the Commissioner of Income Tax –(A)-XII, Kolkata in Appeal No.687/CIT(A)-XII/07-08, dated 13.08.2008, which in turn arises out of an order passed by the Ld. Assessing Officer u/s 143(3) of Income Tax Act, 1961 (in short, the Act) dated 31.12.2007.

Aggrieved ,from the order of the ld Assessing Officer, the assessee filed an appeal before the ld CIT(A), who after going through the evidences submitted by the assessee before AO, deleted these all additions. The assessee did not furnish any additional evidence before the ld CIT(A) , therefore the ld CIT(A) did not send any remand report to AO.Hence, these above cited additions were subsequently deleted by the ld. CIT(A) and therefore, now the Revenue is in appeal before us and has taken the following grounds of appeal :- “1.The Ld. CIT(A) failed to appreciate that difference in the value of closing stock was due to difference in the value of closing stock of two wheelers per unit shown at Rs.33,083/- whereas purchase price and opening stock per unit were actually @ Rs.65,297/- and Rs.50,839/- respectively.

2. The . Ld. CIT(A) while deleting the addition on account of suppression of valuation of closing stock discussed only the mistake as found out in quantitative detail as per clause-28( a) of the Tax Audit Report with ref. to Schedule-15 of the Annual Audit Report but failed to appreciate the value of sale return of 42 no. of vehicles which could not be substantiated by the assessee though specifically asked for.

3. The Ld.CIT(A) was not justified in deleting the disallowance/addition of Rs.3,10,100/- under the head discount payable for want of necessary evidence/detail asked but not furnished by the assessee.

4. The Ld.CIT(A) was not justified in deleting the disallowance/addition of Rs.19,97,000/- under the head registration cost for which was added for want of necessary evidence/detail asked but not furnished by the assessee.

5. The Ld.CIT(A) was not justified in deleting the disallowance/addition of Rs.l,19,767/- under the head insurance realization for which was added for want of necessary evidence/detail asked but not furnished by the assessee.

M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 6. Whether on the facts and in the circumstances of the case, Ld.CIT(A) was correct in deleting the addition of interest of Rs.1,54,341/- on investment of Rs.14,03, 107/- for personal house building construction out of company account with the finding that the A.O. has mentioned no specific finding that the investment was made out of interest- bearing loan whereas the assessee has debited interest of Rs.10,99,737/- to the profit and loss account.

M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 with the certificate from the Auditor rectifying the mistake (Enclo : I) .The additions are made on the basis of Audit Report which was erroneously submitted earlier giving identical figures for the Assesssment Year 2004-05. Apparently it is a glaring and apparent and no addition can be made for alleged under valuation of closing stock on the basis of closing stock figures for Assessment year 2004-05.

There is no discrepancy in the value of closing stock if correct audit report is looked into. It is further submitted that there is no discrepancy in the stock when the survey was made. Assessee maintains day-to -day stock register, which was verified by the survey party and they found no defect therein. That being so, this addition can not be sustained. The enclosed chart will show the mistake of the A.O clearly (Enclo:II) Hence the ld. CIT(A) was right in deleting the addition.

For Sales Out Of Books -RS. 28,86,323/- the AR submitted that in schedule 15 of Company Audit Report the quantitative figure of sales was shown at 4155 units. The Auditor committed a mistake in this Report by not taking into account 42 nos. of sales Return. Against the show cause notice, the auditor accepted the mistake and .submitted the statement rectifying the mistake. The Assessee also explained the mistake. The Assessing Officer without verifying the C.D of Account Books seized and hard copy where sales Returns have already been recorded and lying with him and even without giving sufficient opportunity to the Appellant the addition of Rs. 28,86,324.00 was made merely on surmise. Purchase and Sales Return is very common in this line of business. Sales Return is only at 10% of Sales. Quantitative tally of opening stock, Purchases Sales & closing stock are shown in Enclo:III.

Regarding cost of registration, the AR for the assessee has stated that the customers pay Registration Cost for Registration of vehicles. If there is any surplus it is transferred as profit. The details of Registration cost is stated below which have been furnished to the Assessing Officer on 28.12. 2007. Amount (Rs.) Opening Balance as on 01.04.2004 11,45,703.38 (Cr)

M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 Add: Received up to 23.03.2005 1,26,01,658.00 (Rs. 1,25,85,4901 + 16,168/-) 1,37,47,361.38 (Recorded in CD lying with Dept) Add: Received during the period 23.03.2005 to 31.03.2005 4,67,040.00 1,42,14,401.38 Less: Paid up to 22.03.2005 1,17,45,157.00 (Rs. 1,17,33,393/- + 11,764/-) (Recorded in C.D lying with dept.) Less: paid during the year 23.03.2005 to 31.03.2005 2,74,474.00 21,94,770.38 Less: Transfer to P&L A/c income From registration (Sch-l1) (Recorded in C.D lying with Dept.) 13,59,817.38 Balance as on 31.03.2005 of Balance Sheet (Shown in Sch.8) 8,34,953.00 For the Assessment Year 2004-05 the total Registration Cost received from customers was opening Balance Rs. 85,550.00 plus received during the year Rs. 69,44,390.00 i.e. Rs. 70,29,940.00, out of which Rs. 58,84,236.00 has been paid for Rs. 58,84,236 and balance remains at Rs 11,45,704.00. The profit earned during the Assessment Year has not been taken into account and it remains with Closing Balance.The Assessing Officer had estimated Rs. 4,26,328.00 as Profit for the Asstt. Year 2004-05. The Assessing Officer has estimated the Income without going through the Books of Account in C.D lying with him and has not considered the Accounts in C.D seized by the Dept. and estimated the Income without assigning any reason.

Regarding Insurance Realisation the AR submitted that the Appellant received Insurance premium from the customer for Insurance of their vehicles out of which Insurance premium is paid on behalf of customers.The Appellant submitted the details

M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 of Insurance realization vide its letter dated 20.12.2007 submitted on 26.12.2007 as follows: Amount (Rs.) Insurance Cost realized: Opening Balance (Dr.) as on 01.04.2004 37,042.00 Add: Insurance Cost Paid up to 23.03.2005 17,73,141.00 (1,27,313.00 + 16,45,828.00) (Recorded in C.D lying with Dept.) Less: Insurance Cost Realised / Received up to 22.03.2005 18,69,665.00 (7546.00 + 18,62,119.00) (Recorded in C.D lying with Dept.) Closing Balance as on 22.03.2005 59,482.00 (Cr.) The Assessing Officer has disallowed the Rs. 1,19,767.00 on account of Insurance Paid only which is conceptually wrong. The Assessing Officer has not considered the submission and Accounts in C.D as all the entries upto 22.03.2005 have been recorded in Accounts in C D seized. The Assessing, Officer has misconcepted and he has taken only insurance paid. Hence the Ld. CIT(A) was correct in deleting the addition. (Kindly vide Enclosure-II).

Regarding Discount Payable the ld AR submitted that the Assessing Officer has disallowed Rs. 3,10,100.00, which constitutes of carried forward payable balance of Asstt. Year 2004 - 05 out of the said amount Rs. 2,37,500.00 has been disallowed and assessed as income for the Astt. Year 2004-05 which is disputed and under Appeal as per closing balance in Balance Sheet as at 31.03.2005 Rs. 2,37,500.00 is the brought forward balance of the Astt. Year 2004-05 embedded with the closing balance for the Asstt. Year 2005- 06. Further it may be noted that the Assessing Officer has not taken into account the figures as on 22.03.2005 for various heads excepting Discount Payable. In respect of discount payable, registration cost, insurance realization it appears that the A.O. has adopted the basis of the survey report conducted before the closing of the previous year. The Books of Accounts and Audited Balance Sheet had been produced and no discrepancy therein could be found by the Assessing Officer and there is no M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 allegation that the amounts which had been reflected in the survey report had not been tallied with the Books of Accounts. Thus the ld. CIT(A) was right in deleting the addition.

Regarding Interest the ld AR submitted that in disallowing interest the A.O did not consider the amount available to the company where no interest is payable. The amount has been invested form mixed account, which includes the sales made by the appellant which does not bear interest. Therefore, the disallowance made by the A.O is unjustified. In respect of the additions of discount payable, registration cost and insurance realization, the appellant submits that all these are recorded in the CD and the books of account seized and impounded by the department and Ld. CIT had given proper reason for giving relief. It is submitted that all these expenses are reasonable and there is not material brought into record to show that the claims were unjustified. It is submitted that the A.O had adopted the balance in CD but did not compare with the books of account produced before him, which were fully supported by the evidences. In fact, the A.O has not pointed out that any of the expenditure are not supported by the evidences. Only on the basis of CD balances no-addition can be made without rejecting the books of account produced before him. The Ld. CIT(A) was, therefore, justified in allowing these expenses. He had also given full details of the same which are found in the books of account produced before the A.O as well as Ld. CIT(A). Therefore, there is no reason for taking objection to such relief. In respect of interest also, order of the Ld. CIT(A) cannot be assailed in absence of any evidence that interest bearing loan had been invested for construction of the house property.

C.O.No.35/Kol/2009 : Regarding violation of Rule 46A, the ld AR for the assessee has submitted that assessee has made fresh arguments only and no fresh evidences were submitted by the assessee before ld CIT(A), therefore, Rule 46A does not attract in this case.

M/s. Shiva Wheels Pvt.Ltd. A..Y.2005-06 4.1 On the other hand the ld DR for the Revenue has primarily reiterated the stand taken by the ld Assessing Officer, which we have already noted in earlier para and is not being repeated for the sake of brevity. 4.2. Having heard the rival submissions we noticed that there is merit in the submissions of the assessee, as the propositions convinced by the ld. AR for the assessee are supported by the facts narrated by him and the reconciliation of each figure submitted by him. We have convinced with the reconciliation of each item submitted by the ld. AR for the assessee. We have also observed that the assesee did not submit any fresh evidence before the ld CIT(A) but he did the fresh arguments and submitted reconciliations which we have noted in our earlier para. We have heard on each ground and noted the findings. Hence, we do not find any reason to say that the order passed by the ld CIT(A) is wrong. Therefore we do not hesitate to confirm the order of the ld. CIT(A).