IN THE ITAT KOLKATA BENCH ‘SMC’
Estee Exports (P.) Ltd.
Versus
Income-tax Officer
IT Appeal No. 424 (Kol.) of 2012
[ASSESSMENT YEAR 2006-07]
AUGUST 9, 2012
ORDER
Smt. Diva Singh, Judicial Member
This is an appeal filed by the assessee against the order dated September 30, 2011 of the Commissioner of Income-tax (Appeals)-VI, Kolkata, pertaining to the assessment year 2002-03 on the following grounds :
“1. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) erred in confirming the addition made by the Assessing Officer of Rs. 2,60,020 on the ground of difference in stock as per books of account and stock statement submitted to bank, though the reasons for such difference was duly explained and that in fact the stock shown as per books of account was correct.
2. That on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) ought to have held that the appellant is maintaining regular books of account including stock ledger which contains the quantity of each purchase and sale and as such no addition could be sustained on the ground of higher 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 dis allowance 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.”
2. 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).
3. 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 difference of stock of Rs. 2,60,020. Accordingly, the authorized representative was asked to explain the difference between the stock statement filed before the bank and to that of the Income-tax Department. He was also asked to explain as to why the same should not be added to the total income. He was further asked to produce the stock book. The assessee- company, vide their letter dated March 31, 2005, explained the difference due to the fact that consignment No. 80224 made in the USA weighing 39.60 MT was in transit and delivered to the company on April 12, 2002. Since the letter of credit and all other documents were received by the bank, they have shown the same in the stock. They further contended that there was also cash sale of 7.5 mt at Rs. 35,000 per mt amounting to Rs. 2,62,500 in the month of March, 2002, which was taken in the total sales for the month of March, 2002. In this context, it is to be mentioned that the authorized representative was categorically asked to produce the stock book, which he failed to produce. The explanations furnished by the assessee- company cannot be accepted in the absence of stock book. In the absence of the stock book, the difference of stock is treated as suppression and the same is added to the total income of the assessee- company.”
4. The said action was upheld by the Commissioner of Income-tax (Appeals). However, the Tribunal, vide its order dated January 24, 2007 in I.T.A. No. 238/Kol/06, restored the issue vide paragraph 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 Income-tax (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.”
5. 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, 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, Kolkata-6. This has been stated by the assessee before the bank in the said report. The assessee in its books of account has shown a quantity of 180.927 mt. valued at Rs. 43,67,515. Thus, there is a difference of 32.211 mt. of goods and a value difference of Rs. 2,60,020. The assessee has claimed that in the stock statement given to the bank, they had included 39.60 mt. of goods which were being imported from the U.S.A. being defective/secondary T.F.S. mixed sheets lacquered. In the course of various proceedings the assessee has all throughout given the break-up of 180.927 mt. stock as per the balance-sheet as follows :
