2018 (6) TMI 729 - AT - Income Tax

Unexplained stock lying at the business premises - 20957 boxes of apples (15 Kg each) lying in the business premises of the assessee were not under his ownership - non maintaining identity of customers - Held that - We find that in the absence of any rebuttal on the specific trade practice relied upon by the CIT-A which has not been upset in the present proceedings it cannot be faulted that on the receipt of the rent the goods are handed over to the person who has brought these for storage and the identification is based on a nishan / mark accepted by both the parties. We find that though the Ld. Sr. DR has relied upon the assessment order however nothing has been placed on record to rebut this argument of the assessee namely that there was no legal requirement or mandate for a cold storage facility to accept perishable goods for storage only from people who had PAN card identification proofs etc or after satisfying itself completely about the real identity of the persons storing his goods Considering the fact that the assessee has consistently been following the same method of recording details of goods stored in its cold storage facility from which rental income has been shown wherein the assessee has made available before the tax authorities copies of fruit receipt books, fruit gate pass book, stock register of fruit in the remand proceedings before the AO also wherein no discrepancy has been found or brought to our notice, we thus find no merit in the appeal of the Revenue. CIT-A while arriving at a conclusion has specifically referred to the view taken by the assessing officer in the case of the assessee itself in the immediately subsequent year wherein on similar set of facts and circumstances the assessing officer has accepted similar method of maintaining books of records and accounts of the assessee. - Decided against revenue

Issues Involved:
1. Justification of CIT(A) in deleting the addition of stock found during the survey.
2. Lack of documentary evidence by the assessee to substantiate the claim regarding ownership of apples.
3. Request to set aside CIT(A)'s order and restore the Assessing Officer's order.

Issue-wise Detailed Analysis:

1. Justification of CIT(A) in Deleting the Addition of Stock Found During the Survey:
The revenue challenged the CIT(A)'s decision to delete the addition of 20,957 boxes of apples found during a survey at the assessee's premises. The Assessing Officer (AO) concluded that these apples belonged to the assessee, valuing them at ?1,57,17,750/- based on the minimum cost of apples at the time of the survey. The AO's addition was based on the assessee's failure to provide details of the parties to whom the apples belonged. However, the CIT(A) found that the assessee, engaged in the business of running a cold storage, was not legally required to maintain the identity of the owners of the stored items. The CIT(A) noted that the assessee's business practice involved charging rent for storage, with goods being delivered back to the person who brought them upon payment of rent. The CIT(A) observed that no evidence was found during the survey or assessment proceedings to prove that the assessee was engaged in trading the stored items. The modus operandi explained by the assessee was not challenged by the AO in the remand report, leading the CIT(A) to conclude that the addition was unjustified.

2. Lack of Documentary Evidence by the Assessee to Substantiate the Claim Regarding Ownership of Apples:
The revenue contended that the assessee failed to provide documentary evidence to substantiate the claim that the apples did not belong to them. The AO had required the assessee to furnish confirmations from the parties who owned the apples, which the assessee could not provide. The CIT(A), however, found that the assessee's records, such as fruit receipt books, fruit gate pass books, and stock registers, indicated that the goods belonged to other parties. These records were produced before the AO during the remand proceedings, and no discrepancies were found. The CIT(A) noted that the assessee's rental income from storage was duly accounted for in the books of accounts, and the AO did not find any adverse evidence to prove that the assessee was the actual owner of the apples. The CIT(A) also highlighted that similar modus operandi had been accepted for other stored items like oranges, grapes, and potatoes, where the assessee did not maintain detailed records of the owners.

3. Request to Set Aside CIT(A)'s Order and Restore the Assessing Officer's Order:
The revenue requested to set aside the CIT(A)'s order and restore the AO's order. However, the tribunal found no merit in the revenue's appeal. The tribunal noted that the CIT(A) had thoroughly examined the assessee's business practices and records, and the AO had not provided any evidence to counter the assessee's claims. The tribunal observed that the assessee's method of recording details of stored goods had been consistently followed and accepted by the tax authorities in previous and subsequent years. The tribunal found that the CIT(A) had correctly concluded that the addition was unjustified, as the AO had not conducted any independent enquiry or brought any adverse material on record. The tribunal upheld the CIT(A)'s order, dismissing the revenue's appeal.

Conclusion:
The tribunal dismissed the revenue's appeal, upholding the CIT(A)'s order to delete the addition of ?1,57,17,750/- made by the AO. The tribunal found that the assessee's business practice of not maintaining detailed records of the owners of stored goods was justified and accepted by the tax authorities in other instances. The tribunal concluded that the AO had not provided any evidence to prove that the apples belonged to the assessee, and the CIT(A)'s decision was based on a thorough examination of the facts and records.

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