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TMI Blog2013 (9) TMI 46X X X X Extracts X X X X X X X X Extracts X X X X ..... gher stock shown to bank as the stock was hypothecated and not pledged and the stock as per books of account was accepted by the Department as opening stock in the subsequent year. 3. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in confirming the disallowance of Rs. 94,244 out of interest incurred for the appellant's business. 4. That your appellant reserves the right to adduce any further ground or grounds, if necessary, at or before the hearing of the appeal." The relevant facts of the case are that the assessee, who is engaged in the business of trading in iron and steel, returned an income of Rs. 42,866 by way of filing a return on October 30, 2002. After having been processed under section 143(1), the same was subjected to scrutiny and the total income was computed at Rs. 3,54,260 by the Assessing Officer. Being aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). A perusal of the impugned order shows that the facts qua the addition made by the Assessing Officer in the first round are discussed in paragraph 1 of the same, which is reproduced for ready refer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... graph 5.1 observing as under : "We find that the addition of Rs. 2,60,020 was made by the Assessing Officer and confirmed by the learned Commissioner of Incometax (Appeals) in absence of production of books of account as well as stock register and availability of physical stock. Considering the submissions of learned counsel for the assessee that given an opportunity he will reconcile the difference in the stock as well as produce the stock register, we, therefore, in the interest of justice, are of the considered opinion that the matter should go back to the file of the Assessing Officer for fresh adjudication. The Assessing Officer shall give adequate opportunity of being heard to the assessee as per law." The proceedings before the Assessing Officer under section 143(3) read with section 254, which has given rise to the present proceedings, have been extracted in paragraph 4 of the impugned order. Aggrieved by which the assessee went in appeal before the Commissioner of Income-tax (Appeals), who, vide his detailed findings in paragraphs 7 to 13, confirmed the action of the Assessing Officer, considering the arguments of the assessee that as per the details given to the bank, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .S. mixed lacquered sheet in the stock statement given to the bank which was yet to be reviewed in transit is an incorrect statement. The import invoice dated February 26, 2002 clearly mentions that 39.6 m.t. was defective/secondary T.F.S. mixed lacquered sheets being imported by the assessee, This invoice is not in dispute rather depending on this invoice the assessee tried to reconcile its stock difference. As stated above that there is no difference between the stock as per books and stock as per bank in import of defective//secondary T.F.S. mixed lacquered sheets. The submission of the assessee and its attempt to reconcile the stock difference is a false submission, mainly to escape the imposition of tax. From the above, it is evident that the explanation of the assessee with respect to 39.6 mt is found to be false and the said import invoice does not support the case of the assessee, as being the excess stock is arriving out of different items not being secondary/defective T.F.S. mixed lacquered sheets. With respect to the cash sale of 7.5 mt of defective/secondary T.F.S. mixed lacquered sheets, it is submitted that the closing stock as per books of account, of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tative stated that the stock register is self-generated. Then it is shown to the authorised representative that the assessee under his signature has given the stock statement before the bank as stock as on March 31, 2002. The authorised representative also filed a copy of bill entry regarding sale of goods as endorsed by the Customs Department, which is placed on file after examination. The assessee is being asked to file explanation in this regard by November 26, 2007. In respect to sale of share and disallowance of interest under section 36(1)(iii) about rate of interest the assessee's books of account are verified and found o.k." The assessee filed further written submissions on August 4, 2011 which are reproduced in paragraph 9 of the impugned order of the Commissioner of Income-tax (Appeals). For ready reference, the same is also reproduced : "With reference to the above, we duly made our submission earlier and also submitted our letter of June 28, 2011 in reply to your various queries. Besides, we received a letter No. ITO Wd. 5(3)/Kol/10-11/61 dated May 31, 2011 fixing the date on June 7, 2011 along with necessary documents in connection with remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ite unjustified in holding "that the submission of the assessee and its attempt to reconcile the stock difference is a false submission mainly to escape the imposition of tax". Due to his failure to understand the real impact he has wrongly stated that the submission of the assessee and its attempt to reconcile the stock difference is a false submission, mainly to escape the imposition of tax. In case the Assessing Officer could not understand our submission regarding reconciliation of stock he should have asked us again by making a query which he did not, as a result we presumed that he has understood the stock reconciliation. It is submitted before your honour that the goods was hypothecated to the bank and not pledged. Moreover, the explanation given by your appellant is true and correct. We have also to draw your kind attention to the following observation of the hon'ble High Court of Punjab and Haryana in the case of CIT v. Sidhu Rice and General Mills [2006] 281 ITR 428 (P&H) "that the Commissioner of Income-tax (Appeals) and the Tribunal have recorded concurrent findings of fact that the credit facility was against hypothecation of stock and not against pledge. It was also o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee files a computer generated stock register whereas as per the order sheet on March 31, 2005 of the Assessing Officer, the learned authorised representative for the assessee failed to produce the stock register. In these facts, the Commissioner of Income-tax (Appeals), vide paragraphs 11 to 13, upheld the action of the Assessing Officer observing as under : "11. I have perused the earlier assessment records and did not find the copy of stock register (now being produced by the assessee) so it was not produced during the original assessment. The assessment records have a purchase register, general ledger but not the copy of the stock register. The stock register produced by the assessee is a computer generated stock ledger. The said stock ledger was never produced by the assessee in the earlier assessment proceedings or appellate proceedings before the Commissioner of Income-tax (Appeals) before the matter was set aside by the hon'ble Income-tax Appellate Tribunal. The assessee produced this computer generated print out of two pages only during the reassessment proceedings before the Assessing Officer being carried out in response to the directions of the hon'ble Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was his submission that the assessee had included in the stock position given to the bank the goods which were at high seas in order to obtain a higher loan and it was the case of hypothecation. The learned Departmental representative, on the other hand, heavily relying upon the impugned order, submitted that all along the case of the assessee has been that stock register was not called for by the Assessing Officer and when opportunity was given to the assessee, he is relying upon the computer generated stock register and the impugned order sufficiently demonstrates that opportunity to produce the stock register was given by the Assessing Officer in the first round. It was his argument that he relies on the orders for the finding that the same is not reliable. Inviting attention to paper book page 29, it was his submission that if the closing stock figure is taken along with the submission of the assessee stating that the goods of 40.80 m.t. were in transit then the total closing stock would be 220 mt Inviting attention to page 5 of the Commissioner of Income-tax (Appeals), it was his submission that this document has been taken into consideration by the Commissioner of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Co. Ltd. v. CIT [1974] 95 ITR 375 (Mad) and Ramanlal Kacharulal Tejmal v. CIT [1984] 146 ITR 368 (Bom) ; Dhansiram Agarwalla v. CIT [1993] 201 ITR 192 (Gauhati). The assessee's ground is rejected. Qua the second issue agitated by the assessee wherein an addition of Rs.94,244 made as attributable to investments resulting in earning exempt income, which action was confirmed by the Commissioner of Income-tax (Appeals) holding that the money was invested out of own kitty and the assessee's common fund of share capital and reserve in surplus were not sufficient to make it as investment out of own capital. The learned authorised representative placed reliance on the decision of the co-ordinate Bench of the Tribunal in the case of Deputy CIT v. Bush Tea & P. Ltd. in I.T. A. No. 994/Kol/2010 stating that disallowance at one percent may be made relying upon the accepted practice of the Kolkata Benches, which is consistently being followed. The learned Departmental representative did not oppose the said prayer, stating that the accepted legal precedence at the Kolkata Benches may be applied. Accordingly, in the light of the arguments advanced by the parties taking note of the judgment of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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