CIT Vs. SHEENA EXPORTS

JUDGEMENT

(1.) The instant appeal filed under Section 260A of the Income Tax Act, 1961 (for brevity the Act) is directed against order dated 21.04.2011 passed by the Income Tax Appellate Tribunal, Delhi Bench G, New Delhi (for brevity the Tribunal) passed in ITA No. 2957/D/2008 for the assessment year 2004-05. The revenue-appellant has claimed the following three substantive questions of law by taking the plea that these questions emerge from the order of the Tribunal. The questions are as under:

(2.) In respect of question No. (i) it is conceded as a fact that the appeal of the revenue against the same assessee-respondent for different assessment year, namely, CIT v. Sheena Industries Ujha Road [IT Appeal No. 916 of 2008, dated 23.11.2009]. This is stated by the revenue-appellant in the last para of the memorandum of appeal itself. Accordingly, the deduction under Section 80HHC of the Act on the export incentive received by the assessee-respondent as a supporting manufacture has been rightly availed by treating them to be at par with direct exporter.

(3.) On question No. (ii), the Assessing Officer has made an addition on the basis of difference of Rs. 8,38,77,635/- between the value of stock as on 31.3.2004 as computed on 25.3.2004. It is based on the stock statement submitted to City Bank, New Delhi and the value of closing stock as on 31.3.2004, as shown in the balance sheet. Accordingly it was added to the income of the assessee, as deemed income under Section 69 of the Act. The basic reason for the Assessing Officer to take the aforesaid view was that the assessee-respondent did not have any explanation about the source of investment in stocks of Rs. 8,38,77,635/-. When the assessee filed an appeal, the CIT(A) deleted the additions on the ground that in a case where the difference in the quantity of stock is not proved and the stock is neither pledged nor verified by the bank official then no addition could be made. It is further evident that the assessee filed various documents relating to VAT assessment, excise records including valuation of the stock and invoices and bills for valuation of the stock. The stock has been accepted by the VAT department of Government of Haryana and the same stock has been taken for the purposes of excise records. The Assessing Officer did not find any defect in the maintenance of the record which lead to the rejection of stock records or books of account. The assessee-respondent claimed that the statement submitted to the bank is merely a figure, not supported by any quantitative details and valuation thereof. The statement given to the bank has not been affirmed on oath. The method of preparing manufacturing-cum-trading account by the Assessing Officer for 5 days namely from 26.3.2004 to 31.3.2004 was also assailed by submitting that the manufacturing expenses do not have any correlation with turn over. The credit limit availed was not only against the stock but also against book debts. It has been recorded as a fact that in the case of assessee the stock is not pledged but it was merely hypothecated. There was neither any quantity of the details given nor the stock was verified by the bank officials. It has been further held that the Assessing Officer has not been able to brought on record any evidence to show that there was difference in the quantity of stock given to the bank and the one shown in the books of account. It was on the aforesaid basis that additions were deleted. The CIT(A) after considering the aforesaid fact held that the addition could be made only if quantity of stock submitted to the bank was higher than the quantity as per books, which were pledged counted or verified by the bank officials. In this case quantitative details were not given to the bank and the stock was not pledged to the bank. It was also not verified by any bank official. Therefore, statement given to the bank could not be relied upon. The aforesaid finding has been accepted by the Tribunal in paras 9.1 to 9.9.