I.T.O WD - 43(3),KOLKATA, KOLKATA vs. SRI BISWESWARLAL NAKHATMAL, KOLKATA

This appeal by revenue is arising out of order of CIT(A)-XXX, Kolkata vide Appeal No. 86/CIT(A)-XXX/Wd-43(3)/2010-11 dated 26.09.2012. Assessment was framed by ITO, Ward- 43(3), Kolkata u/s. 143(3)/263 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for Assessment Year 2004-05 vide his order dated 31.12.2008.

The only issue in this appeal of revenue is against the order of CIT(A) in deleting the addition made by AO on account of unaccounted stock during the course of survey. For this, revenue has raised following ground no.1:

Briefly stated facts of the case are that a survey u/s. 133 of the Act was carried out on the business premises of the assessee on 24.12.2003. During the course of survey the revenue department has inventorised the stock to the tune of Rs.70,75,322/-. The assessee before the AO claimed that this stock belongs to Bisweswar Lal Nakhatmal Cotts Pvt. Ltd., 16, Pagya Putty Street, Kolkata-700 007. The AO required the assessee to explain how the stock belongs to Bisweswar Lal Nakhatmal Cotts Pvt. Ltd. and to produce all purchase and sale bills, vouchers, challans and consignment notes of the transporters to establish the claim that the stock belongs to the company. The assessee filed his written submissions stating that complete books of account, bank statement, purchase bills, stock registers and other details were produced. As per the books of account of Bisweswar Lal Nakhatmal Cotts Pvt. Ltd identical stock is recorded in the same. It was also explained that in the same address where assessee firm exists and other associate companies exist and carry on business from common premises as per the practice in the commercial area of Burrabazar. The assessee produced complete details called for by the Bisweswarlal Nakhatmal AY 2004-05 AO which are recorded by the AO in his assessment order but the AO denied having produced these documents. According to AO, even while checking the books of Bisweswar Lal Nakhatmal Cotts Pvt. Ltd., the stock was not found recorded. Accordingly, he treated the stock as belonging to the assessee and made addition of Rs.70,75,322/- treating the same as unexplained stock even during the course of survey. Aggrieved, assessee preferred appeal before CIT(A), who deleted the addition by observing as under: “4. The submissions of the Appellant have been considered and I have also gone through the Assessment records in the case of the Appellant as well as that of the company M/s.Biseswar Lal Nakhatmal Cotts Pvt. Ltd. which is presently assessed with ITO, Ward-9(2). It is seen that the issue is in respect of the stock of Rs.70,75,322/- found by the survey party during the course of survey u/s.133(A) of the Appellant from its premises as on 24.12.2003. It is further seen that this stock has been explained to be that of the company M/s.Biseswar Lal Nakhatmal Cotts Pvt. Ltd. and it was explained during the Assessment proceedings that the Appellant firm had been wound up and the business activities were being conducted by the company from 01.08.2003. In view of the submissions of the Appellant it was considered fit to verify from the survey proceedings and subsequent Assessment proceedings as to whether the submissions made by the Appellant regarding the claim that the stock found during survey belong to the company and not to the Appellant. It is seen that the A.O. of the Appellant had made a reference to the A.O. of the company M/s. Biseswar Lal Nakhatmal Cotts Pvt. Ltd. vide letter dated 31.05/02.06.2005, in which it was mentioned that during course of survey and deposition of the Partner it had been mentioned that the firm had no stock on the date of survey i.e. on 24.12.2003 but on physical verification an inventory, stock was found at Rs.70,75,322/- which appeared to be the stock of the above mentioned company M/s. Biseswar Lal Nakhatmal Cotts Pvt. Ltd. and the fact also reiterated by Shri B. Sarda.

The A.O. of the Appellant passed on the copy of stock inventory etc. to the A.O. of the Company for necessary action at his end. It is also seen that Partner of the Appellant firm has stated that during the course of survey the stock belonged to the company and stated that closing stock of the firm on the date of survey was Nil. It is also seen from the documents at page no.33 of the survey records the trading account of the company M/s. Biseswar Lal Nakhatmal Cotts Pvt. Ltd. for the period 23.05.2003 to 21.12.2003 clearly showed that there was closing stock of Rs.79,39,298.91 in the hands of the company. It is also seen that in respect of the assessment of the company the A.O. had not made any adverse inference in respect of the stock found during the survey and had considered the information passed on by the A.O of the Appellant before completing the assessment of the company or A.Y.2004-05. It is therefore clear that from the records and evidences available that the Appellant has clearly explained with evidence that the stock found during the course survey u/s.133(A) of the Appellant's premises on 24.12.2003 and that the same did not belong to the Appellant firm but was that of the company M/s. Biseswar Lal Nakhatmal Cotts Pvt. Ltd. In fact this information have been passed on by the A.O. of the Appellant to the A.O. of the company. All these facts indicate that the submission of the Appellant are justified and that the AO had no grounds or evidence to consider that the stock found during the course of survey on the Appellant’s premises belong to the Appellant and not to the Company M/s. Biseswar Lal Nakhatmal Cotts Pvt. Ltd. Therefore, there was no justification on the part of the AO to consider and assess this stock in the hands of the appellant. The addition is there not justified and the same is deleted.” Aggrieved, revenue came in appeal before Tribunal