Commissioner Of Income Tax vs Paramount Communications Ltd.
2010 Latest Caselaw 3589 Del

21
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*      IN THE HIGH COURT OF DELHI AT NEW DELHI


+      ITA 287/2010


COMMISSIONER OF INCOME TAX               ..... Appellant
                  Through: Ms. Sonia Mathur, Advocate


                     versus


PARAMOUNT COMMUNICATIONS LTD.          ..... Respondent
               Through: Mr. Satyen Sethi, Advocate with
                        Mr. Arta Trana Panda, Advocate.


%                                  Date of Decision: 3rd August, 2010


CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE MANMOHAN

1. Whether the Reporters of local papers may be allowed to see the judgment? No.
2. To be referred to the Reporter or not? No.
3. Whether the judgment should be reported in the Digest? No.


                              JUDGMENT

MANMOHAN, J

1. The present Appeal by the Income Tax Department has been

filed under Section 260 A of the Income Tax Act,1961 (for brevity "Act

1961") challenging the order of Income Tax Appellate Tribunal (in

short "ITAT") in ITA No. 3242/DEL/2007 dated 12-12-2008 for the

Assessment Year 2003-2004. By the impugned order, ITAT has

deleted the addition of Rs. 27,60,000/- made by the Assessing Officer

(hereinafter referred as "AO") on account of excess stock .

2. Briefly stated the relevant facts of this case are that on 24th

December, 2002, a survey operation under Section 133A of Act 1961

was carried out on the respondent-assessee which resulted in surrender

of excess stock and excess scrap amounting to Rs. 75, 00,000/- This

amount was added by the AO as unexplained investment in stock under

Section 68 of the Act 1961 as this amount was neither added as the

surrendered amount to the total income nor was mentioned in the audit

report. However, the respondent assessee contended that at the time of

survey operation under Section 133A, administrative, financial and

other expenses were not considered and excess stock and scrap was

eventually duly recorded in the books of accounts. Respondent-assessee

further contended that sale of such stock and scrap was also recorded

during the regular course of business after the survey operation.

3. An appeal was filed by the respondent assessee against the order

of AO before Commissioner of Income Tax (Appeals) [for short

"CIT(A)"] and it was observed by the CIT(A) that there was excess

valuation of Rs 47, 40,000/- in the closing stock inventory prepared

during the course of survey. A relief of Rs.47,40,000/- was thus granted

to the assessee as it was a mistake on the part of the survey team.

However, CIT (A) confirmed the addition of Rs. 27,60,000/- i.e

(Rs.75, 00,000 - Rs.47,40,000).

4. Assessee appealed against the order of CIT (A). By the

impugned order ITAT allowed respondent-assessee's appeal. ITAT

observed that the assessee had produced sales invoices of goods in

respect of which addition was made by the AO along with statement of

the parties to whom the goods were sold. ITAT also verified excise

stock register account of finished goods showing stock of goods

manufactured and sold; ledger account of scrap sales and inventory of

finished goods.

5. Ms Rashmi Chopra learned counsel for the appellant submitted

that ITAT had erred in law in deleting the addition of Rs 27, 60,000/-

made by the AO on account of unexplained investment in excess stock

and scrap surrendered by the assessee during the course of survey

operation. Ms Chopra further submitted that assessee had not produced

any material on record to dislodge the findings of AO.

6. We are of the view that as the assessee had produced each and

every invoice in respect of goods sold and produced quantity wise

details of unsold stock as well as surrendered stock vis-a-vis stock sold

before the end of the year duly supported by documents, it is not correct

to allege that stock surrendered was not reflected in the books of

account. In our opinion, the stock sold after the date of survey and the

sales proceeds were duly credited in the accounts without claiming set

off of its cost resulting in higher profits. Consequently the addition

made by the AO cannot be retained. In any event the factual finding

arrived at by the final fact finding authority cannot be said to be

perverse or contrary to record.

7. Accordingly, we find that no substantial question of law arises in

the present proceedings. Hence, the present appeal, being bereft of

merit, is dismissed in limine.

MANMOHAN, J

CHIEF JUSTICE

AUGUST 03, 2010 js