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Shri Bhupinder Kumar Gambhir C/o Gaurav Kumar Gupta, Adv. Gurgaeon House no. 404/7, Subhash Nagar Near Jacobpura, RamLila ground, Gurgaon vs. ITO, Ward 2
September, 18th 2012
               IN THE INCOME TAX APPELLATE TRIBUNAL
                   DELHI BENCHES: "A" NEW DELHI

                     BEFORE SHRI AD JAIN, JM AND

                     SHRI J.SUDHAKAR REDDY, A.M.


                             ITA No: 1966/Del/2011
                        Assessment Year : - 2007-08



Shri Bhupinder Kumar Gambhir             vs.   ITO, Ward 2
C/o Gaurav Kumar Gupta, Adv.                   Gurgaeon

House no. 404/7, Subhash Nagar

Near Jacobpura,

RamLila ground, Gurgaon.

PAN: ACMPG 6187 C

(Appellant)                                        (Respondent)

                    Appellant by: Shri Gautam Jain, C.A.
                     Respondent: Shri Pirthi Lal, Sr.D.R.




                       ORDER

PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER



     This is an appeal filed by the assessee directed against the order of the

Commissioner of Income Tax (Appeals), Panchkula dt. 11.3.2011 pertaining to

the Assessment Year 2007-08.


2.   The assessee is an individual carrying on the business of iron and steel

fabrication under the name and style of "Instrumentation and Engineering

Enterprises". It filed its return of income on 31/10/2007 declaring an income
                                     ITA 1966/Del/2011            Page 2 of 9
                               Assessment Year 2007-08
                             Sh.Bhupinder Kumar Gambhir

of Rs.51,440/-. The Assessing Officer          passed an order u/s 143(3) on

31/12/2009 assessing the income at Rs.76,01,510/- inter-alia making

additions on account of difference in stock, u/s 145 A, difference in

confirmation of balances etc. Aggrieved the assessee carried the matter in

appeal before the First Appellate Authority. The first appellate authority

considered various submissions of the assessee. He called for remand report

from the A.O. and thereafter granted part relief. Aggrieved the assessee is in

appeal before us on the following grounds :-


"1. That the ld.CIT(A)-Panchkula has erred both in law and on facts in upholding
the addition of Rs. 1 lakh on account of alleged understatement of closing stock.

1.1. That the ld.CIT(A) has sustained the addition by failing to appreciate that
purchase made on 1.4.2007 had been erroneously taken into opening stock and
as such, error in the accounts could not be held to be an after thought and hence,
addition sustained is not tenable.

2.That the Ld.CIT(A) has erred both in law and on facts in directing the
Assessing Officer to verify that the refund of Noida application of the equivalent
amount had been received by the appellant instead of deleting the addition of Rs.
1,08,212/- made by ;assuming that, there is difference between closing balance
of capital account as on 31.3.2007 and opening balance as on 1.4.2007.

3. That the Ld.CIT(A) has erred both in law and on facts in upholding the
addition fo Rs. 5,79,619/- by invoking the provisions contained in s.145A of the
Income Tax Act, 1961.

3.1. That the Ld.CIT(A) has erred both in law and on facts in upholding the
addition holding that "the appellant has snot explained as to how VAT balance is
accounted for while valuing the closing stock. The appellant's explanation is
therefore rejected as unsubstantiated and without merit." The finding is
factually incorrect, legally misconceived and untenable.

4. That the Ld.CIT(A) has erred both in law and on facts in upholding the
addition of Rs.11,47,668/- representing the balance as per books of accounts of
the appellant and balance as per the confirmation dt. 23.12.2009.

4.1. That the Commissioner of Income Tax (Appeals) has failed to appreciate that,
the confirmation dt. 23.12.2009 could not have been adopted as a basis to
sustain the addition as the same did not pertain to the instant year, more
                                        ITA 1966/Del/2011                Page 3 of 9
                                  Assessment Year 2007-08
                                Sh.Bhupinder Kumar Gambhir

particularly when the confirmation for the instant Assessment Year had been
placed on record.

5. That the Ld.CIT(A) has erred both in law and on facts in upholding the
addition of Rs.14,51,791/- representing the alleged difference between the
balance of the following creditors as per the books of accounts and confirmation
from the creditors:-

            Sl.No. Name of the Creditors                     Alleged

                                                             difference ­ Rs.

            1.     M/s Lakshmi Ind.Corp.                     1,79,060/-

            2.     M/s Sagar Steel Corp.                     1,53,779/-

            3.     M/s Techno Plastic & Engg. Works          9,95,517/-

            4.     M/s Puneet Steel Corp.                      4,329/-

            5.     M/s Steel Mongers                         1,19,106/-

                   Total:                                    14,51,791/-



     6.     That the Ld.CIT(A) has sustained the additions of Rs. 11,47,668/- and
            Rs.14,51,791/- without appreciating that alleged difference in balances
            of the parties from whom purchases have been made could not be held
            as income of the appellant.

     7.     That the Ld.CIT(A) has otherwise made the order without granting fair
            and proper opportunity to the appellant which is contrary to the
            principles of natural justice.

     It is therefore prayed that, it be held that, additions made by AO and
     sustained by Ld.CIT(A) may kindly be deleted and, appeal of the appellant be
     allowed."

3.        We have heard Mr. Gautam, C.A. the Ld. Counsel for the assessee and

Mr. Pirthi Lal, the Ld. Sr.DR. On a careful consideration of the facts and

circumstances of the case and on a perusal of the papers on record, and the

orders of the authorities below, as well as case laws cited, we hold as follows:-
                                     ITA 1966/Del/2011               Page 4 of 9
                               Assessment Year 2007-08
                             Sh.Bhupinder Kumar Gambhir

4.      Ground no.1 is against the addition of Rs. 1,00,000/-         on account of

alleged understatement of closing stock. The closing stock as on 31/03/2007

was Rs.1,44,90,480/-. On 1/04/2007 the opening stock was taken at

Rs.1,45,90,480/-. The assessee explained the same as a clerical mistake. The

authorities below did not accept the same. The Ld. Counsel for the assessee

points out that for the purpose of S.145 A computation the AO himself has

taken the closing stock figure as on 31/03/2007.


5.      Closing stock of the Previous Year has to be taken as opening stock of

the subsequent year. The assessee`s explanation that this was a clerical

mistake should have been accepted by the revenue authorities and the correct

figure taken into account. No addition can be sustained on this count. Thus

ground no. 1 and 1.1 is allowed.


6.      Ground no.2 is not pressed by the assessee and hence dismissed as

such.


7.      Ground no.3 and 3.1 are on the addition made u/s 145A of the act.

S.145A refers to the valuation of purchases and           sale of goods,   as well as

inventory for the purpose of determining the income chargeable under the head

"profits and gains of business or profession". The Hon`ble Delhi High Court in

the case of Mahaveer Alluminum has laid down that both the opening stock as

well as the closing stock have to be adjusted in terms of S 145A of the Income

Tax Act, 1961. In view of the above we set aside the issue to the file of AO for

fresh adjudication in accordance with law. The AO shall include VAT not only
                                       ITA 1966/Del/2011             Page 5 of 9
                                 Assessment Year 2007-08
                               Sh.Bhupinder Kumar Gambhir




in the opening stock but also on purchases, sales, as well as closing stock. In

the result this ground is set aside to the file of AO.


8.    Ground no.4 and 4.1 is against the addition of Rs.11,47,668/-. The

assessee filed paper book to demonstrate that the difference was wrongly

considered. He submitted that the payments made during the year were not

taken into account. He further submits that the second confirmation of balance

supposed to have been taken by the Revenue by M/s. Karan Arjun Industrial

Corporation, has not been given to the assessee. After considering the finding

of the AO as well as the CIT(A), we find that the opening balance with M/s

Karan Arjun Industrial Corp. as on 01/04/2006 was Rs.16,96,027/-. There

are repayments to the tune of Rs.16,46,000/- made during the year. Most of

the payments were through crossed account payee cheques. There is a receipt

of Rs.5 lacs through an account payee cheque. If these payments and receipts

are considered, the question of there being a variation does not arise. The AO

as well as the CIT(A) have not considered these bank transactions. The addition

is made based on surmises and conjectures. The assessee has not been

confronted with so called confirmations received by the A.O. from M/s Karan

Arjun Industrial Corporation. Repayments through a/c payee cheques are not

considered.    Addition is based on opening balances.           In any event, such

difference in balances if any cannot become income.         Under the circumstances

we delete the addition of Rs.11,46,668/- on the ground that the same is not

made on cogent material and not made in accordance with law. In the result

ground no.4 and 4.1 are allowed.
                                       ITA 1966/Del/2011             Page 6 of 9
                                 Assessment Year 2007-08
                               Sh.Bhupinder Kumar Gambhir

9.      Ground no.5 is against the addition representing the difference between

the balances in the accounts of the creditors as per the books of accounts of

the assessee and confirmations received. The assessee`s submissions are as

follows:-


     a. In the case of M/s. Lakshmi Industrial Corporation, it is submitted that

        entry of the bills along with Dharam Kanta, Slip and VAT form was filed.

        It is argued that mere non receipt of confirmation, cannot lead to the

        amount being treated as income. It was submitted that the purchases

        have been accepted and in such circumstances no addition can be made

        u/s.68. Reliance was placed on the following case laws :-


        CIT vs. Pancham Dass Jain 205 CTR 444(All)

        Elnad International P.Ltd. vs DCIT, 124 TTJ 554(Delhi)

        Manoj Aggarwal vs. DCIT, 113 ITD 377(SB)(Delhi)


        b) In the case of Sagar Steel Corporation it was submitted that it is

        factually incorrect on the part of the CIT(A), to state that no confirmation

        was filed. Confirmation was placed on record.       It was further submitted

        that purchases have been accepted and hence the question of addition

        u/s 68 does not arise. Copies of the accounts statement were filed.


        c)    In the case of Techno Plastic and Engineering Works, similar

        submission were made. It was further submitted that transactions are by

        account payee cheques and that the party is assessed to Income Tax.

        Copy of confirmation is placed on record.
                                        ITA 1966/Del/2011             Page 7 of 9
                                  Assessment Year 2007-08
                                Sh.Bhupinder Kumar Gambhir

      d)       In the case of M/s Puneet Steel Corporation it was submitted that

      confirmation was placed on record and there was a difference of

      Rs.4,329/- only. This difference was explained.


      e)       In the case of M/s. Steel Mongers it was submitted that the

      balance has come down. It was submitted that no purchases to have

      been made in the year and under these circumstances Sec.68 cannot

      apply.


10.   Ld. DR on the other hand submitted that the assessee`s submissions

that confirmations have been received in the office of the AO was considered by

the CIT(A) and a Remand Report was called for. He submitted that the CIT(A)

has considered each and every creditor on merits, after giving the assessee

ample opportunity and also calling for the Remand Report from the AO, and

then he has decided the issue. He prayed that the findings of the ld.CIT(A) be

upheld.


11.   Rival contentions heard. We find from the papers on record that it is not
correct on the part of CIT(A) or the AO to state that no confirmations have been
placed on record by the assessee, before the authorities below in respect to
these creditors. At pages 63,64,65,66 and 67 of the paper book confirmation of
balances from respective parties as filed before the Assessing Officer are placed
before us. The Ld.D.R. could not demonstrate that this claim of the assessee is
wrong.     In the case of Lakshmi Industrial Corporation an invoice has been
raised from the parties Entry bills, Dharmakathas slip, VAT form etc. being
contemporary       documents,    cannot      be    ignored   and   rejected     without
investigation. On the face of these documents, it would not be correct for the
                                     ITA 1966/Del/2011               Page 8 of 9
                               Assessment Year 2007-08
                             Sh.Bhupinder Kumar Gambhir

AO to reject the claim of the assessee without any adverse material. Even in the
case where there are differences the issue whether the difference become
income or not during the year has to be considered in the light of the decision
of the jurisdictional High Court in the case of CIT Vs. Vardhaman Overseas
Ltd., 343 ITR 408; CIT Vs. Hotline 205 Taxman 245 and other cases. In our
view the Assessing Officer as well as the Commissioner of Income Tax (Appeals)
have misdirected themselves on this issue.

12.   We are of the considered opinion that this issue has to be re examined in
the light of the material submitted by the assessee before the lower authorities,
which in our considered view has not been properly appreciated by them. The
lower authorities have also to consider the legal submissions made by the
assessee.   In the result this ground is set aside to the A.O. for fresh
adjudication in accordance with law. In the result this ground is allowed for
statistical purposes.

13.   Ground no.6 is general in nature.

14.   Ground no.7 is not pressed by the assessee.

15.   In the result the appeal of the assessee is allowed in part.

      Order pronounced in the Open Court on 17th September, 2012.



                   Sd/-                                   Sd/-

            (A.D. JAIN)                          (J.SUDHAKAR REDDY)

      JUDICIAL MEMBER                           ACCOUNTANT MEMBER



Dated: the 17th September, 2012


*Manga
                                    ITA 1966/Del/2011        Page 9 of 9
                              Assessment Year 2007-08
                            Sh.Bhupinder Kumar Gambhir




Copy of the Order forwarded to:

   1. Appellant; 2.Respondent; 3.CIT; 4.CIT(A); 5.DR; 6.Guard File


                                                By Order




                                             Dy. Registrar




  1.   Date of Dictation:
  2.   Draft placed before the Author on:
  3.   Draft proposed and placed before Second Member on:
  4.   Draft discussed/approved by the Second Member on:
  5.   Approved draft came to Sr.P.S. on:
  6.   Date of Pronouncement :
  7.   File sent to Bench Clerk on :
  8.   Date on which file given to Head Clerk on:
  9.   Date of dispatching the Order on:
 
 
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