TMI Blog2020 (11) TMI 873X X X X Extracts X X X X X X X X Extracts X X X X ..... iness 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. - ITA 348/2019 & CM APPL. 15854/2019, CM APPL. 15852/2019, CM APPL. 15853/2019 - - - Dated:- 17-11-2020 - HON BLE MR. JUSTICE MANMOHAN HON BLE MR. JUSTICE SANJEEV NARULA Appellant Through: Mr. Ajit Sharma, Senior Standing Counsel and Mr. Luqman Hasan Advocate. Respondent Through: None. JUDGMENT SANJEEV NARULA, J. (ORAL) C.M.No.15854/2019 (Exemption) 1. Allowed, subject to all just exceptions. C.M.No.15852/2019 (delay in filing) 2. In view of averments made in the application, the delay of 70 days in filing the present appeal is condoned. 3. Accordingly, the applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had his business also at Mumbai, and there was no business at Delhi, why had it been consistently been filing its ITRs in Delhi with Delhi address. xxxxxxxxxxxxxxxxxx a. All the sales undertaken by its proprietary concern M/s Loraiya Trading were in cash only. b. During FY 2013-14, no purchases were made, all the sales were made out of the opening stock available at the beginning of the year. c. On perusal of the sample voucher of cash sales, they appeared to be fresh, computer printouts, recently signed and back-dated to FY 2013-14. d. The business of the assessee was trading in fabrics, however as per the balance sheet of M/s Loraiya Trading there is no weighing machine in the fixed asset schedule. It was pertinent to note that as per the stock register, the unit of opening stock of cloth fabric is in Kilogram and not prepackaged units like boxes or crates which may or may not require being weighed. e. The assessee had neither shown any building in its fixed asset schedule nor any rent expense in his P/L Account. The assessee had shown huge opening stock of 19,85,109.530 kg. valued at over ₹ 30 crores which would require considerable storage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d sources and consequently, addition made by the AO, sustained by the CIT(A) of ₹ 4,20,62,550/- was deleted. As a result, the appeal of the Respondent-Assessee was allowed. 9. Mr. Ajit Sharma, learned Senior Standing Counsel for the Appellant- Revenue urged that the learned ITAT was not justified in ignoring the specific findings given by the AO in the assessment order dated 31.12.2016. He submitted that the AO after conducting a detailed enquiry had rightly concluded that Respondent- Assessee s intention was to get assessed at a remote place in Delhi, rather than before the appropriate authorities in Mumbai. He submitted that the very absence of the business place and even a weighing machine in the balance-sheet, coupled with the fact that there was no expenditure on account of rent, depreciation etc. in the profit and loss account of the Respondent-Assessee, the inferences drawn by the AO were correct. He submitted that maintaining a huge inventory of stock in the range of ₹ 20 to 30 Crores year after year and making comparatively small amount of sales, itself raised serious doubts about the genuineness of the business. He further submitted that the finding of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed building and even on enquiry, nobody could confirm running of such business. It has been alleged by the AO that similar inquiry was done in the case of assessee s father and mother where again business premises was found to be untraceable at the given addresses. She had also repudiated many evidences as well as explanation given by the assessee which we have already discussed above. Even the Ld.CIT(A) has reiterated and confirmed the said observations of the AO in a very detailed manner. From such finding and observations it does appear that at the time of inspection on 5.11.2016, no trace of assessee s business or business premise could be found. The counter of the assessee on this issue had been that it was carried out form the space provided by M/s S.K. Wheels Pvt. Ltd., however, for that also AO observed that no credible evidence has been brought on record. For other evidences also like electricity bill to prove the location of M/s S.K. Wheels Pvt.Ltd. alongwith rental receipts from where M/s S.K. Wheels was functioning has not been accepted by the AO due to lack of any corroborative and independent evidence. On the issue where such a huge stock of fabrics have been alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h purchases have been reflected in the books of account and audited accounts; and in the assessment year 2007-08, the opening stock of fabric/cloth was valued at ₹ 31,65,48,236/- and in that year itself there was sales of around ₹ 5.89 crores leaving behind the stock of ₹ 25.83 crores thereof. Again huge purchases have been shown in the A.Y. 2008-09 and sales have also been made. The details of opening stock, purchases, sales and closing stock for various years has already been incorporated above. As on 31st March, 2014 there was a closing stock of R.19,53,79,660/- which was also the opening balance in this year and out of the said opening stock, sales of ₹ 4,20,62,550/- have been made and closing stock of ₹ 15,48,57,470/- has been shown on which gross profit of ₹ 15,40,360/- has been disclosed. The controversy to resolve here is, whether the stock in the books have been sold or not; or the entire deposits claimed out of sales in unaccounted money of the assessee. Going by the history of trading account in the earlier years, viz., opening stock, purchases, sales, closing stock, gross profit and the assessments made by the department, we find that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 19,85,109.530 0.000 4,11,716.260 15,73,393.270 Grand Total 19,85,109.530 0.000 4,11,716.260 15,73,393.270 15. Ld. AO or Ld. CIT (A) in the impugned orders have neither said anything about the opening stock or the closing stock coming from the earlier years nor they rejected the trading result or gross profit but instead have treated the entire sales on the credit side as income from unexplained sources. Even if the contention of the AO is accepted that assessee has not made any sales, then in that case the opening stock which has been accepted by the department in earlier years continues to be with the assessee and the same should be reckoned to be reflected as closing stock on the credit side of the trading account. Not only that, if the gross profit is also not disturbed then the GP which is the balancing figure of opening stock and purchases on debit side and sales and closing stock on the credit side has not been disturbed then how the entire stock could have been disposed of by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng stock at the year ending 31st March, 2014. This finding of stock available in books has not been dealt at all by the authorities below. Not only that, in the subsequent years also once the assessee s stock which has been sold and said sale and income derived there from has not been disturbed then it quite difficult proposition to hold that the sales made by ht assessee out of its opening stock should be treated as income from unexplained sources. 17. Thus, in our opinion the sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as income from other sources ; firstly, the stock was available with the asssessee in his books of account and trading in such stock including purchase, sale, opening and closing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld; secondly, the sale of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 equall ..... X X X X Extracts X X X X X X X X Extracts X X X X
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