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Income Tax Appellate Tribunal, Conducted through E-Court, Rajkot
Before: SHRI WASEEM AHMED & SHRI T.R SENTHIL KUMAR
आदेश/O R D E R
PER WASEEM AHMED ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals), Rajkot, (in short “Ld. CIT(A)”) arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-16.
The only effective issue raised by the revenue is that the Ld. CIT(A) erred in deleting the addition made by the AO for Rs. 2,12,30,216/- on account of unexplained expenditure/investment u/s 69/69C of the Act.
Briefly stated facts are that the assessee in the present case is a partnership firm and engaged in the business of manufacturing of brass rods & wires. The assessee was subject to survey operation u/s 133A of the Act, dated 27/11/2014. As on the date of survey, the physical quantity of stock 359522.33 kg valued at Rs. 8,89,05,304/- was found which was reconciled by the assessee with the books of accounts. The physical valuation of stock and the valuation of stock shown in the books was also admitted by the partner of firm being the assessee in the statement furnished u/s 131 of the Act. However, the AO during the assessment proceedings found that the assessee has shown value of the closing stock in the books of accounts as on the date of survey for Rs. 6,76,75,088/- only leading to difference of Rs. 2,12,30,216/- only (Rs. 8,89,05,304/- minus 6,76,75,088.00). On question about such difference, the assessee submitted that there were certain goods received from certain parties for the job work. But mistakenly, such goods were included in the value of the closing stock shown in the books of accounts as on the date of survey. The assessee in support of its contention furnished the details of the parties whose stock was lying as on the date of survey at its premises along with the challan maintained for the purpose of Central Excise Audit. The assessee also furnished the affidavit stating that the value was admitted as on the date of survey under pressure and the partner was also busy as there was marriage in his family.
However, the AO disbelieved the contention of the assessee on the reasoning that physical stock found as on the date of survey was matching with the value of closing stock shown in the books of accounts at that relevant point of time. The correctness of the value of closing stock was also admitted by partner of the assessee in the statement furnished on oath. It was also noted by the AO that the assessee at the time of survey has not pointed out that it was also engaged in the activity of job work. According to the AO, the assessee has not furnished any explanation for including stock received by it on job work in the books of accounts as on date of survey. The AO also found that there was no reason to take any confirmation from the parties whose goods were claimed to be lying for the job work as on the date of survey. As such, as per the AO, the contention of the assessee is nothing but afterthought and furthermore considerable time of 37 month have lapsed from the date of survey. Accordingly, the AO treated the impugned amount of Rs. 2,12,30,216/- as income and added to the total income of the assessee under the provision of sections 69 of the Act. On appeal, the assessee reiterated the submissions made before the Ld. CIT(A), who has deleted the addition made by the AO. The relevant extract of ld. CIT-A finding is available on pages 35 to 47 of his order.
Being aggrieved by the order of the Ld. CIT(A), the revenue is in appeal before us.
The Ld. DR before us contended that the assessee has received goods on job work from various parties on different dates in different months which were claimed to be lying as on the date of survey, but such fact was not intimated in the excise returns furnished by the assessee. Accordingly, it was contended by the Ld. DR that the assessee’s contention for having received goods on job work from parties is devoid of merits.
On the other hand, the Ld. AR filed a paper book running from pages 1 to 398 and besides reiterating the submissions made before the authorities below, further contended that the goods received on job work were duly disclosed in day- to-day register of quantity received and dispatched. According to the Ld. AR, there was no column in the monthly excise return to show the quantity of stock received on job work basis but there were columns with respect to the quantity manufactured and cleared thereof of the final products. Thus, the quantity of stock of raw materials received on job work basis was not appearing in the monthly excise return. The Ld. AR further contended that the stock and its valuation shown by the assessee in excise record were duly accepted by the Excise Department in the Audit return of Excise.
Both the ld. AR and DR vehemently supported the order of the authorities below as favourable to them.
We have heard the rival contentions of both the parties and perused the materials available on record. The facts of the case have already been elaborated in the preceding paragraph which are not in dispute, therefore for the sake of brevity and convenience, we are not inclined to repeat the same. The limited controversy before us revolves on whether the difference in the physical value of stock viz a viz value of stock as per audited books of account shown as on the date of survey as pointed out by the AO amounting to Rs. 2,12,30,216/- represents the unexplained expenditure/investment of the assessee and therefore the same is liable to be added to the total income of the assessee under the provisions of section 69/69C of the Act.
10.1 Certainly, the assessee has taken a different stand with respect to the value of stock recorded in the books till the date of survey and the value of stock finally declared in audited books as on the date of survey. It is the trite law that the income has to be assessed in the hands of the assessee within the four corners of law. Merely, the assessee has admitted something at one point of time and changes at a later point of time, that does not mean that the assessee is guilty and therefore the addition has to be sustained. As such, it is the duty of the revenue to disregard the revised/ changed contention raised by the assessee after recording the cogent reasons. In simple words, we express that the assessee should not be made to suffer without pointing out the defect in the revised/ changed contention raised by the assessee.
10.2 In the present case, as per the survey record, the value of stock as on the date of survey i.e. 27th November 2014 as per regular books of account was at Rs. 8,89,05,304/- whereas in the final books of account, the assessee has shown the value of stock as on the date of survey at Rs. 6,76,75,088/- leading to difference of Rs. 2,12,30,216/- only. The assessee during the assessment proceedings explained there were certain raw materials weighing 67,951 kg valued at Rs. 2,12,30,216/- were received from other business enterprises for the purpose of job work only. As such these stocks were not belonging to the assessee but mistakenly and under the pressure of survey, the same was included in the value of stock shown in the books at the time of survey. The assessee in support of its explanation furnished following documentary evidence: a) Affidavit of partner. b) CA certificate for actual quantity with the unit. c) Final audit report issued by the central excise department on the basis of the records maintained by the firm. d) Excise job work challans specifying that the goods or not for sell but for job work. e) Excise quantity records which has been audited by independent Chartered Accounts acted as Tax auditor. f) Quantitative records for day to day receipt and dispatched of the goods. 10.3 The assessee has also furnished the party wise details from whom the goods were received for the purpose of the job work which was lying on its premises as on the date of survey which are available on pages 10 to 11 of the assessment order.
10.4 All the above details were furnished by the assessee during the assessment proceedings and no defect of whatsoever has been pointed out by the AO during the assessment proceedings. It is also important to note that the AO did not even bother to cross verify the details of the aforesaid parties whose stocks were lying with the assessee as on the date of survey despite specific requests made by the assessee in this regard. On the contrary, the AO denied issuing a notice under section 133(6) of the Act on the reasoning that there is sufficient time gap between the date of survey and the date on which the details were furnished by the assessee. To our understanding, the time gap can be a serious matter of concern but cannot be the grounds for rejecting the contention of the assessee. Thus, we are of the view that on this reasoning alone, the additions made by the AO are not sustainable.
10.5 Even on merit of the case, from the excise records, such as monthly excise return, day to day stock register maintained for the purpose of excise law and delivery challan, we note that the assessee was engaged in the activity of job work. Regarding the contention of the learned DR, that the monthly excise return does not match with quantity of the goods received by the assessee for the purpose of the job work, we have perused the monthly excise returns and note that this return contains the information about the final clearance of finished goods. As such, these excise returns showing the quantity of finished goods manufactured by the assessee and clearance thereof. Such returns also contain information about the quantity of final goods manufactured by the assessee under the job work category and the clearance thereof. These returns do not speak about the quantity of raw material received by the assessee on account of purchase or on account of job work purpose. Thus, in such a situation, the argument of the learned DR that the goods received by the assessee on job work does not match with the excise monthly returns does not hold good. It is because there is no possibility of making any match/ reconcile with the quantity received by the assessee either on the purchase or for job work purposes with the monthly excise return as there is no column or system to reflect such quantity in the monthly excise return. All the excise returns are showing the details of the final products whereas the assessee is claiming that there was raw material as on the date of survey received for the purpose of the job work which is also matching with the day-to-day stock register maintained by the assessee which is placed on pages 126 to 295 of paper book.
10.6 From the above discussion and documentary evidence furnished by the assessee, it is established that the assessee was engaged in the activity of job work and received raw material from other parties for the purpose of job work. The AO during the assessment proceeding without verifying and bringing any contrary material on record rejected the documentary evidence furnished by the assessee in support of the explanation provided by it. As such, the AO merely on surmise and conjecture held the explanation furnished by the assessee regarding difference in the value of stock as an afterthought.
10.7 In view of the above and after considering the facts in totality, we do not find any infirmity in the order of the learned CIT-A and accordingly we uphold the same. Thus, the AO is directed to delete the addition made by him. Hence the ground of appeal raised by the revenue is hereby dismissed.
In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the Court on 08/09/2023 at Ahmedabad.