M/s. Raniganj R.C.C.Spun Pipe Industries Pvt.Ltd. v. D.C.I.T., Circle-2, Jalpaiguri
[Citation -2016-LL-1019-3]

Citation 2016-LL-1019-3
Appellant Name M/s. Raniganj R.C.C.Spun Pipe Industries Pvt.Ltd.
Respondent Name D.C.I.T., Circle-2, Jalpaiguri
Court ITAT-Kolkata
Relevant Act Income-tax
Date of Order 19/10/2016
Assessment Year 2010-11
Judgment View Judgment
Keyword Tags unaccounted investment • physical verification • evidentiary value • net profit rate • value of stock • opening stock • excess stock • raw material • actual sale
Bot Summary: The AO therefore called upon the assessee to explain as to why the assessee had not declared the income as per the undertaking at the time of survey. In reply the assessee pointed out that the method of determination of the value of stock physically found and as per the books of accounts of the Assessee at the time of survey u/s.133A of the Act was erroneous. The Assessee produced the sale bills at which the products were actually sold and from the said sale bills, the value was arrived at by the Assessee of the stock value found at the time of survey. A detail sheet of price list value and actual sale value of the stock lying with us as on 17.03.2010 was filed by the Assessee before the AO. The Assessee also submitted that the survey team had also committed a mistake in considering our opening stock as on 01.04.2009 for Rs.11,88,723/- instead of opening stock as on 17.03.2.010 in determining the value of excess stock of Rs.20,00,092/-. The Assessee pointed out that in its case excess stock had been duly accounted for, and after so accounting for an excess Income had been-declared by your assessee in its return of income. The assessee's explanation is not acceptable here for assessee's own folly. The basis on which the assessee claims that the value of the stock as per the books of accounts as determined on the date of survey as incorrect is further supported by the statement of manufacturing cost, value of finished goods and raw material as on 17.03.2010 which is placed in pages 11 and 12 of the assessee s paper book.


1 IN INCOME TAX APPELLATE TRIBUNAL, BENCH SMC KOLKATA [Before Hon ble Shri N.V.Vasudevan, JM ] ITA No.2163/Kol/2014 Assessment Year : 2010-11 M/s. Raniganj R.C.C.Spun Pipe -versus- D.C.I.T., Circle-2, Industries Pvt.Ltd.,Uttar Dinajpur Jalpaiguri (PAN:AABCR 6097 A) (Appellant) (Respondent) For Appellant: Shri Subash Agarwal, Advocate For Respondent: Shri Divakar Chakraborty, JCIT Date of Hearing : 01.09.2016. Date of Pronouncement : 19.10.2016. ORDER This is appeal by Assessee against order dated 07.11.2014 of CIT(A)-Jalpaiguri relating to A.Y.2010-11. 2. Grounds of appeal raised by assessee read as follows :- 1. For that on facts and in circumstances of cases, Ld. CIT(A) was mot justified in confirming action of Ld. A.O. in making addition of Rs.6,00,845 on account of alleged difference in value of stock. 3. Assessee is company. It is engaged in business of manufacturing of RCC spun pipe and accessories. There was survey u/s 133A of Income Tax Act, 1961 (Act) conducted in factory premises of assessee at Durgapur on 17.03.2010. In course of survey physical verification of stock was taken and stock was valued at Rs.31,88,815/-. value of stock as per books of account of assessee was Rs.11.88,723/-. There was difference of Rs.20,00,092/- between value of stock as physically found and as per books of accounts. statement u/s 131 of Act of one Shri J.N.Dutta, Managing Director of assessee was recorded ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 2 on 19.03.2010 by A.C.I.T., Circle-11, Jalpaiguri. following is question and answer relevant for present appeal :- Q.2 Do you agree to make any disclosure with respect to discrepancy of Rs.20,00,092/- found in physical stock in comparison to stock as per books of accounts ? Ans: Yes, I hereby make disclosure of Rs.15,00,000/- invested in unaccounted stock/sales on which I agree to pay taxes as applicable. 4. assessee filed return of income on 25.09.2010 declaring total income of Rs.10,04,030/-. This declaration was not in accordance with statement of managing director of assessee given on 19.03.2010 after conclusion of survey u/s 133A of Act and assessee had offered to declare sum of Rs.15,00,000/- on account of unaccounted investment in stock. AO therefore called upon assessee to explain as to why assessee had not declared income as per undertaking at time of survey. 5. In reply assessee pointed out that method of determination of value of stock physically found and as per books of accounts of Assessee at time of survey u/s.133A of Act was erroneous. Assessee produced sale bills at which products were actually sold and from said sale bills, value was arrived at by Assessee of stock value found at time of survey. Assessee pointed out that it used to sell its products at price which is far below of our price list value based on which value of stock was valued at time of survey. This practice has been followed by many manufacturing houses to attract customers. sale value of products found by survey team, as per our sale bills, was only for Rs.30,34,317/- as against its price list value of Rs.31.88,723/- adopted by Survey team. detail sheet of price list value and actual sale value of stock lying with us as on 17.03.2010 was filed by Assessee before AO. Assessee also submitted that survey team had also committed mistake in considering our opening stock as on 01.04.2009 for Rs.11,88,723/- instead of opening stock as on 17.03.2.010 in determining value of excess stock of Rs.20,00,092/-. Assessee ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 3 claimed that actual value of excess stock was only for Rs.2,58,353/- as on date of survey and gave following details: survey team had valued our stocks as on 17.03.2010 as per price list value at Rs.31 ,88,815/- Less: Valve of opening stock as on 1.04.2009(as per our list balance sheet) Rs.11 ,88,723, Wrong excess stocks determined by survey team Rs.20.00.092/- Actual value of excess stock as on 17.03.2010 Sale value of stocks found by survey team as per detail sheet enclosed Rs.30,34,317/- Cost of goods for sale value of Rs.30,34,317/- by applying last year's G.P. Rate of 18.16% i.e. cost of stock as on 17.03.2010 (81.84/100x30,34,317) Rs.24,83,785/- Less: stock as per books as on 17.03.2010 Sale value of goods from 17.03.2010 to 31.03.2010 Rs.3.01,045/- So, cost of goods sold from 17.03.2010 to 31.03.2010 is 81.84/100x3,01,045= Rs.2,46,375/- Add: stock as on 31.03.2010 as per books Rs.19,78,557/- Rs.22,24,932/- Excess stock found by survey team as on 17.03.2010 Rs.2,58,353/- 6. Assessee also pointed out that its Gross Profit (G.P.) rate during year was consideration is 44.20% including excess stock as above and same was fair and reasonable. There Assessee also took position that there was no excess stock as on 17.03.2010, attracting provisions of section 69 as per following details. Cost of goods sale value 01 Rs.30,34,317/- by applying current year's G.P. rate 0144.20% i.e. cost of stock as on 17.03.2010 (55.8/100x30,34,317) Rs.16, 93,149/- less: stock as per books as on 17.03.2010 Sale value of goods from 17.03.2010 to 31.03.2010 Rs.3,01 ,045/- So, cost of goods sold from 17.03.2010 to 31.03.2010 is 55.8/100x3,01.045/- = Rs.1,67,983/- Add: stock as on 31.03.2010 as per books.. Rs.19,78,557/- Rs.21,46,540/ Excess stock found by survey team as on 17.03.2010 Rs4,53.391/ 7. Assessee thus submitted that it had credited value of excess stock of Rs.4.53,391 / - in its books of accounts as against excess stock of Rs.2,58,353/ - found by survey team to pay more tax as per its commitment to department. Assessee also submitted that reading of section 69 of Act would make it clear that basic condition for attracting provisions of sec. 69 of Act was that Investments should have been made during financial year concerned and such ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 4 investments should not have been recorded in books of account maintained by assessee. Assessee pointed out that in its case excess stock had been duly accounted for, and after so accounting for excess Income had been-declared by your assessee in its return of income. Hence, further addition u/s. 69 of I.T. Act should not be made in view of decision of Rajasthan High Court In case of CIT vs. Mehta Gwar Gum 8. Company (2008) 219 CTR (Raj) 58. Assessee also pointed out that its net profit rate for year ending as on 31.03.2009 was 2.66% only, but in order to pay more tax on its income, including on its undisclosed incomes/investments, assessee had declared net profit of 29% during year under consideration and paid due taxes thereon. 8. assessee also pointed out that as per CBDT Instruction No.286/2/2003(Inv) dated 10.03.2003 it has been specifically instructed that no addition can be made merely on basis of statement recorded at time of survey. 9. AO however did not agree with submissions made by assessee. According to AO at time of survey CPU marked as RCC-CPU-1 was impounded on 17.03.2010 on date of survey. After declaration of income on 19.03.2010, in statement recorded u/s 131 of Act, order impounding CPU and books of account was vacated. According to AO despite request made for production of CPU which had been impounded, assessee did not produce same. According to AO CPU would have been wiped from its original form at time of survey and it was not possible to retrieve data from CPU as it existed on date of survey. AO was therefore of view that assessee ought to have given declaration of income as per disclosure made at time of survey. He therefore made addition of Rs.6,00,845/- for following reasons :- 5.5 assessee failed to produce inventorised CPU, assessee could not confirm whether it is in original form till date or not? So, applicability of section 292C cannot be denied and for want of assessee's co-operation, applicability of section 292C is not tested. As, said CPU lies with assessee, so assessee cannot deny its responsibility when director retracted from disclosure. So, explanation as filed by assessee is not applicable here for assessee's own failure to produce all ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 5 books of accounts which were to be tested under lens of section 292C of Income Tax Act 1961. So, assessee's explanation is not acceptable here for assessee's own folly. It is already stated that undersigned appreciated assessee for showing profit @ 21% which is ten fold more than normal profit(2.2%) as returned by assessee. undersigned being judicious considered excess profit within disclosure but said amount computed to Rs. 8,99,155/ -only. 5.6. So, it is presumed that assessee has failed to consider remaining sum of RS.6,00,845/- as disclosure in his hand without furnishing full and proper evidences which was with assessee after survey as inventoried books of accounts .. Each assessment is separate proceeding and all fact and circumstances of present case is not similar to those case laws as cited by assessee. All case laws as cited by assessee are not squarely applicable in this case. 10. On appeal by assessee CIT(A) confirmed order of AO by observing as follows :- 4. Submissions of Assessee- assessee did not press additions on account of applying section 44 AE for income from plying of trucks and disallowance of Rs. 5,455 as being of capital nature. assessee submitted that disclosure made during time of survey cannot be basis for addition if it is established that disclosure was not correct. assessee cited various judgements of courts in support of his arguments. 5. Conclusion- It is seen that, books of account were not impounded by survey team because assessee had voluntarily accepted discrepancy in his stock and offered Rs. 15,00,000 as income on this account. During course of assessment proceedings assessee did not produce CPU of computer and could not confirm whether CPU is in same form or not. Thus, it is seen that assessee has failed to establish that income declared during course of survey was not correct. In view of this, judgements cited by assessee are not applicable to facts of case of assessee. appeal of assessee is dismissed. 11. Aggrieved by order of CIT(A) assessee has filed present appeal before Tribunal. 12. I have heard submissions of ld. Counsel for assessee. ld. Counsel for assessee reiterated submissions as were made before revenue authorities. He further placed reliance on decision of Hon ble Madras High Court in case of CIT vs Khader Khan Son 300 ITR 157 (Mad) wherein Hon ble Madras High Court has held that there can be evidentiary value attached to statement recorded at time of survey. ld. Counsel for assessee pointed ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 6 out that decision of Hon ble Madras High Court has been confirmed by Hon ble Supreme Court in case of CIT vs S.Khader Khan Son 352 ITR 480 (SC). ld. DR placed reliance on order of AO/.CIT(A). 13. I have given very careful consideration to rival submissions. From perusal of AO as well as CIT(A)m it is clear that basis of making impugned addition is only statement recorded on 19.03.2010 u/s 131 of Act which is after conclusion of survey u/s 133A of Act. perusal of record shows that AO has not dealt with basis of valuation at time of survey and basis of value as given by assessee in statement of accounts filed along with return of income. It is clear from stand taken by assessee before revenue authorities that he has disputed manner of valuation of physical stock at time of survey and value of stock as per books of accounts maintained by assessee. basis on which assessee claims that value of stock as per books of accounts as determined on date of survey as incorrect is further supported by statement of manufacturing cost, value of finished goods and raw material as on 17.03.2010 which is placed in pages 11 and 12 of assessee s paper book. fact that ultimate sale of finished product by assesse during previous year yielded sum of Rs.30,34,317/- is also not disputed by revenue. In such circumstances action of AO in rejecting claim of assessee merely on basis that inventorised CPU was not produced cannot be sustained. It is clear from record that assessee had made declaration of income to tune of Rs.8,99,155/- on account of discrepancy found at time of survey and such disclosure has been shown to be on acceptable basis by assessee. AO has not brought on record any material to show that this declaration was not correct. impugned addition by AO is purely based on statement recorded at time of survey. In light of judicial pronouncements brought to my notice by ld. Counsel for assessee and in light of CBDT s Instruction that was brought to notice of CIT(A), I am of view that addition made by AO and sustained by CIT(A) deserves to be deleted. same is hereby directed to be deleted. ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 7 14. In result appeal of assessee is allowed. Order pronounced in open Court on 19.10.2016. Sd/- [ N.V.Vasudevan ] Judicial Member Dated : 19.10.2016. [RG PS] Copy of order forwarded to: 1.M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd., Durgapur, P.O.Bhupalpur, Dist. Uttar Dinajpur, Pin 733143. 2.D.C.I.T., Circle-2, Jalpaiguri. 3. CIT(A)-Jalpaiguri. 4. CIT-Jalpaiguri. 5. CIT(DR), Kolkata Benches, Kolkata. True Copy By order, Asst. Registrar, ITAT, Kolkata Benches ITA No.2163/Kol/2014- M/s. Raniganj R.C.C. Spun Pipe Industries Pvt. Ltd. A.Y.2010-11 M/s. Raniganj R.C.C.Spun Pipe Industries Pvt.Ltd. v. D.C.I.T., Circle-2, Jalpaiguri
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