Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “F”, MUMBAI
Before: Shri Sanjay Garg, & Shri Ashwani Taneja
आदेश / O R D E R Per Bench: These appeals have been filed by the Assessee and Revenue against the order of Ld. Commissioner of Income Tax (Appeals)-27, Mumbai {(in short ‘CIT(A)’}, dated 15.01.2014 for the assessment year 2011-12, passed against the assessment order passed by the Assessing Officer (in short ‘AO’) u/s 143(3) of the Act.
First we take assessee’s appeal ITA No.1238/M/2014
The assessee has raised following grounds of appeal: “1. The learned CIT(A) erred in not taking the value of stock as per second valuation report submitted of valuer Shri Sharad Mehta at Rs.5,41,93,485/-. Whereas the learned CIT(A) as taken the value as per Shri Dinesh Salvi report at Rs. 8,51,67,748/-.
2. Without prejudice Id. CIT (A) failed to consider that value as per Dinesh Salvi's Report at Rs. 8,51,67,748/- is the market value and has to give adhoc allowances for differences in valuations since the valuation is subjective.
3. Without prejudice the Id. CIT(A) erred in not giving consequential effect as to allowing the business loss of Rs.3,09,52,303/- as the value of total stock is taken as 3 V.M. Star per valuation report of Shri Dinesh Salvi at Rs.8,51,67,748/-
During the course of hearing, arguments were made by Shri K. Sivaram, Authorised Representative (AR) on behalf of the Assessee and by Shri G.M. Doss, Departmental Representative (DR) on behalf of the Revenue.
The issue involved in all the grounds is common. The assessee has challenged the action of lower authorities in adopting the value of stock found during the search at Rs.8,51,67,745/- as against a sum of Rs.5,41,93,485/-. The assessee has also contended that the lower authorities have erred in not granting the benefit of business loss of Rs.3,09,52,303/-, incurred by the assessee on account of sale of the aforesaid stock.
4.1. The brief facts are that the assessee is a partnership firm engaged in the business of trading exports of diamonds. A search action had taken place at the premises of the assessee, wherein inter alia stock of diamonds was found by the search team. Physical verification of the stock of diamond was taken and the same was valued by the Government Approved Valuer. Total stock of the diamonds found was Rs. 16772.32 carats, but the stock of diamonds as per books as on date of search i.e. 13th July 2010 was only Rs.3113.60 carets. The department valued for an aggregate amount of Rs.
4 V.M. Star 8,51,67,745/-. But the assessee claimed that the value of the said diamonds was Rs.5,41,93,485/-.
4.2. Being aggrieved, the assessee contested the matter before the Ld. CIT(A), where part relief was given. But, the assessee was not satisfied and the appeal was filed before the Tribunal.
4.3. During the course of hearing before us, Ld. Counsel has contested the action of lower authorities in not accepting the value of stock as claimed by the assessee. It has further been submitted that, without prejudice to Ground nos. 1 & 2, the assessee challenged in ground No.3, the action of lower authorities in not granting a benefit of business loss incurred by the assessee on account of sale of aforesaid stock amounting to Rs.3,09,52,303/-. It has been further submitted by the assessee that submissions in this regard were made before the AO as well as Ld. CIT(A), but the this contention has not been met by Ld. CIT(A), and no discussion has been made in the appellate order passed by the Ld. CIT(A) in regard to business loss of Rs.3,09,52,303/-. It has been further submitted that complete documentary evidences have been submitted evidencing sale of 100% stock by the assessee. During the year itself, nothing has been brought on record by the lower authorities to negate the claim of the assessee and thus, sale has been found to be genuine. On the other hand Ld. DR has not controverted factual submissions made by the assessee.
5 V.M. Star 4.4. We have gone through the orders of lower authorities and carefully considered the submissions made by both the sides. Without going much deeper into the whole controversy raised before us, it is noted by us, at the very outset, that facts with respect to sale of 100% of the aforesaid stock and incurring of business loss of Rs.3,09,52,303/- was raised by the assessee before Ld. CIT(A) also. The relevant part from the written submissions of the assessee filed before the Ld. CIT(A) as has been reproduced in its order by the Ld. CIT(A) is reproduced below:
“4.1.10. Without prejudice to above grounds, the Learned Assessing Officer has failed to allow the business loss of Rs.3,09,52,303/-, if the value of total shock is taken as per valuation report of Dinesh Salvi at Rs.8,51,67,745/-. 4.1.12. The appellant has disposed off all the 100% stock (accounted as well as unaccounted) till the end of the relevant financial year i.e. 2010-11. Hence, the redrafted profit and loss account of the appellant which is worked out by substituting the cost of the book stock at market price of the book stock as taken in the valuation report by Dinesh Salvi is to be accepted and the business loss of Rs.3,09,52,303/- arising after taking the value of books stock as per Dinesh Salvi report is to be set off against the business income added in the assessment order under section 72 of the Income Tax Act, 1961.”
6 V.M. Star 4.5. We have noted from the perusal of the order passed by the Ld. CIT(A) that these contentions have not been dealt with by either of the authorities, and no discussion at all has been made by AO or by Ld. CIT(A) in their orders on this issue. Thus, as requested by both the parties jointly, we find it appropriate to send this issue back to the file of the AO. The assessee shall furnish complete documentary evidences before the AO evidencing sale of the aforesaid stock and incurring by of the consequent loss there-upon, for which the AO shall give adequate opportunity of hearing to the assessee. The assessee shall extend requisite cooperation to the AO for ascertaining correct facts, by furnishing information and documents as may be required by the AO, as per law. Thus, with these directions, this issue is sent back to the file of the AO for verification of these facts and if these facts are found to be correct, then the aforesaid claim of loss should be allowed to the assessee. As per the law and facts, the AO shall decide the whole issue afresh without being influenced by the earlier orders passed by him or by Ld. CIT(A) and after taking into account all the facts and circumstances and all the legal and factual issues as may be raised by the assessee before the AO. Thus, with these directions, this ground is sent back to the file of the AO and is treated as partly allowed for statistical purposes.
7 V.M. Star Now, we take Revenue’s Appeal
In the grounds raised by the Revenue before us, it has been contended that the Ld. CIT(A) has erred in sustaining the addition only to the extent of Rs.1.19 crores out of addition of Rs.3.60 crores made by the AO in respect of value of unaccounted stock found during the course of search. It has been contended by the Ld. Counsel that a bill dated 08.06.2010 found during the course of search was not entered in the books of accounts. The AO denied the claim of the assessee. But Ld. CIT(A) After verification of facts allowed the claim. On the other hand, Ld. DR, submitted that complete facts have not been submitted by the assessee and this issue also require re-examination on the same pattern as the issues raised by the assessee in its appeal.
5.1 We have gone through the orders of the lower authorities in this regard. It is noted by us that issues raised by the assessee in its appeal have been sent back to the file of the AO for re-adjudication, therefore, in pursuance to the request and as per agreement conveyed by both the parties during the course of hearing, issues raised by Revenue in its appeal are also sent back to the file of the AO. The AO shall re-adjudicate this issue and after examining the claim of the assessee shall decide the same afresh in respect of our directions as have been given in the appeal filed by the assessee.
8 V.M. Star 6. In the result, appeal of the assessee as well as revenue is partly allowed for statistical purposes.
Order pronounced in the open court on 20th January, 2016.