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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 ..... walla v. CIT [1992 (11) TMI 55 - GAUHATI High Court] - Decided against assesee. Expenses in relation to income not forming part of total income – section 14A – Constitutional validity of section 14A - Held that: - no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to such income which does not form part of the total income under the Act, by virtue of the provisions of Section 14A(1) - The company is chargeable to tax on its profits as a distinct taxable entity and it pays tax in discharge of its own liability and not on behalf of or as an agent for its shareholders. In the hands of the shareholder as the recipient of dividend, income by way of dividend does not form part of the total income by virtue of the provisions of Section 10(33). Income from mutual funds stands on the same basis - The provisions of sub sections (2) and (3) of Section 14A of the Income Tax Act 1961 are constitutionally valid - The provisions of Rule 8D of the Income Tax Rules as inserted by the Income Tax (Fifth Amendment) Rules 2008 are not ultra vires the provisions of Section 14A, more particularly sub section (2) and do not offend Article 14 of the Constitution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame, 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 reference. "1. Suppression of stock-Addition thereof During the course of hearing, it has been observed that the assessee-company availed itself of cash credit facility with the Punjab National Bank, Brabourne Rd. Br., Kol. A reference was made to the Manager, Punjab National bank to furnish details regarding the securities pledged for availing the cash credit facility, it was informed by the Punjab National Bank that no security was pledged. However, the stocks belonging to the company and in the name of the company are hypothecated/charged to the bank. Copies of stock statement for the financial year 2001-02 are also furnished. A perusal of the stock statement submitted to the bank, by the assessee-company as on March 31, 2002, reveals that total stock on that date was 213.138 mt, value of which was Rs. 46,27,535 as against Rs. 43,67,515 reflected in the profit and loss account. Therefore, there was a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder. 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, the assessee had included the possession of the stock, which was in transit at the high seas and as per what has been given along with the return, the value of the said goods were not included, which has resulted in the discrepancy in the figures. A perusal of the impugned order shows that the Assessing Officer, vide his report No. ITO Wd-5(3)/Kol/R.R./11-12/109, dated June 23, 2011 made the following detailed submission : "The assessee-company has/had filed stock statement before Punjab National Bank, Brabourne Road branch as on March 31, 2002. The copy of the stock statement is enclosed herewith for your records and perusal. As per this statement filed by the assessee, the assessee was in possession of 213.138 mt. of goods having a value of Rs. 46,27,535. It is relevant to bring to your notice that as per the statement the entire stock of 213.138 mt. of goods were lying at 87, M.D. Road, Kolkat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 is 180.927 m.t., which is arrived after considering the sale of 7.5 m.t. on March 14, 2002 the sale being a cash sale would have been duly incorporated in the assessee's books of account on the date of sale and as a result of sale entry the stock had already stood reduced. This being so there is no reason as to reduce 7.5 m.t. This is also an afterthought to make a weak attempt to reconcile the difference between the stock quality finished before the bank and stock quality as per books. The statement given before the bank was on or after March 31, 2002 while the sale had taken place on March 14, 2002. The assessee had not given any explanation to justify the fact of not considering the sale of 7.5 m.t. at the time of preparation of stock statement which was filed before the bank. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-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 report. In compliance whereof the undersigned duly appeared and explained the reasons of difference between the stock as per books of account and stock statement given to the bank and the Assessing Officer was satisfied with the said explanation and did not raise any query. The stock ledger was also in the file of the Assessing Officer for which in the assessment order he mentioned that "no stock ledger was produced". The said stock ledger/stock register was regularly maintained showing all the items of purchases and sales day to day showing quantity of each purchases and sales. Besides all the books of account including purchase bills and sales bills were produced before the then Assessing Officer at the time of assessment proceedings and no false purchases and/or sales were found at that time nor any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 observed that except for the photocopy of the stock statement allegedly furnished to the bank, the Assessing Officer has not brought any material on record to show that the assessee, in fact, possessed stocks as reflected in the said statement as against the stock depicted in the balance-sheet. It was also found that the books of account were regularly maintained by the assessee and had been accepted by the Department . . . The Tribunal and the Commissioner of Income-tax (Appeals) on the basis of the material on record have taken a possible view which has not been shown to be perverse. Thus, in the absence of any substantial question of law no case has been made out for interference in the concurrent findings of fact recorded by the two authorities. Accordingly, the appeal is dismissed in limine. Recent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment 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-tax Appellate Tribunal setting aside the original assessment order. The register produced does not inspire confidence that it was a part of the original software programme since if it was being generated on every entry then there was no chance for the assessee to calculate the closing stock wrongly by any chance and further fact of non-production of the same and non-submissions any explanation regarding the difference between the closing stock reflected in the books of account and submitted to the bank. Even after categorical direction given by the Assessing Officer, the assessee did not produce any type of closing stock. The explanation of the assessee regarding taking into consideration of the purchases in advance receipt of the material and subtracting twice the quantity of cash sales are not reliable as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is 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-tax (Appeals). As per the assessee, the amount of closing stock available with the assessee including the goods in transit have been given to the bank, even in such a case, the figures do not reconcile. Inviting attention to the same, it was submitted that first the assessee states that the entire stock of 213.138 m.t. of goods were lying at 87, M.D. Road, Kolkata-700 006. As per the statement given before the bank and as per the books of account of the assessee, it is 180.927 m.t. Then the assessee states that the goods weighing 39.60 m.t. were imported from the U.S.A. Thus, attempting to reconcile the difference considering the fact that the document referred to February 26, 2002 which is placed at paper book page 39 talks about 40.173 m.t., stock of defective/secondary T.F.S. mixed lacquered sheets, it was his ..... X X X X Extracts X X X X X X X X Extracts X X X X
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