ITAT deletes addition for Opening Stock as existence of same was accepted in Earlier Years

ACIT Vs Madhur Jain (ITAT Delhi)

In the instant case, the sales made by assessee out of the alleged undisclosed opening stock on by assessee had been accepted by AO. The resultant trading profit had also been accepted. Further on the opening stock allegedly not existing according to AO amounting to ₹ 51,051,565/–, assessee had shown sales of ₹ 52,851,660/– and had disclosed a gross profit of ₹ 1,800,095 only. From the above gross profit assessee had incurred expenditure of almost ₹ 10 lakh and had shown meager net profit of ₹ 875,491/–. Therefore, it was apparent that assessee had only got capitalization of ₹ 875,491 where AO had alleged that the opening stock of ₹ 51,051,565/– was non-­existent and bogus. On the factual metrics itself, the allegation of AO seem to be unsustainable because why a person would show and on accounted opening stock of the magnitude of ₹ 51,000,000 just to on a meager net profit of ₹ 875,000/–. In view of this, there was no infirmity in the order of the CIT(A) in deleting the addition of ₹ 51,051,656/– made by AO holding that the opening stock of assessee was an unexplained income of the assessee as such stock in trade was not in existence. Thus, appeal filed by AO was dismissed.

The learned ITAT observed that since the entire books of account had been scrutinised and the Respondent-Assessee’s income had been accepted, it also means that the entire opening stock, sales and closing stock made during the year stood accepted. Additionally, in respect of AY 20 12-13 also, Respondent-Assessee’s trading activities were subjected to detailed scrutiny under Section 143(3) of the Act. In the said year, the AO had rejected the trading result and even enhanced the GP rate and made an addition in the trading account. The learned ITAT thus held that in respect of AY 2012-13 the opening and closing stock and trading accounts including sales has not been disturbed. In these circumstances, the learned ITAT observed that in the impugned AY 2014-15, the audited balance-sheet reflected an opening stock of Rs. 19,53,29,660/- which stood accepted by the Department either under the scrutiny proceedings or by not selecting the return for scrutiny or by not taking any action to disturb such returned income. In these circumstances, it was held that the quantum figure and the opening stock which stood accepted in the earlier years had to be taken as actual stock available with the Respondent­ Assessee. In view of these facts, the sales made by the Respondent-Assessee out of its opening stock were not treated as unexplained income, to be taxed as income from other sources. It thus manifests that the learned ITAT has taken into consideration the entire material placed on record including the report of the AO. The learned ITAT has applied the rule of consistency and rejected the enquiry made by the AO in the relevant assessment year. No doubt principles of res judicata are not applicable to the Income-Tax proceedings however, it is equally well settled law that rule of consistency is a well- established and recognised principle applicable to the Income-Tax proceedings. Pertinently, the Respondent‑Assessee had closed his business in July, 2015 after selling all the stocks and the survey carried out at a later stage would not have strong evidentiary value. Besides, all these aspects are completely factual in nature and we are unable to find any perversity in the impugned order. The factual findings recorded by the Income-Tax authorities, have been examined by the last fact-finding authority i.e. the learned ITAT. In absence of any perversity in the impugned order, we are not inclined to entertain the present appeal, which urges questions of law that are entirely resting on findings of fact. Therefore, in our view no question of law, much less substantial question of law, arises for consideration. Accordingly, the appeal stands dismissed.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. This appeal is filed by Asst Commissioner of Income Tax, Circle – 34 (1), New Delhi for assessment year 2013 – 14 against order passed by learned Commissioner of Income Tax (Appeals) – 12, New Delhi dated 29/9/20 17 raising a solitary ground of appeal that whether learned CIT (A) has not erred in deleting addition of ₹ 51,051,656/– made by assessing officer by treating opening stock of assessee to be assessee is an unexplained income. This is solitary issue in this appeal.

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