B.K.Muralikrishna, CHENNAI V. DCIT, CHENNAI

CO 102/CHNY/2015

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2343 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 22-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 22-02-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 31-08-2015
• Court: TRIBUNAL
• Department Lawyers: R VENKATARAMANITP
• Keywords: Rejection of books of accounts; Retraction
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , ! ' #! ' $ . %& ' () BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO.1429 /MDS./2015 ( / ASSESSMENT YEAR :2007-08) & C.O. NO.102/MDS./2015 DEPUTY COMMISSIONER OF INCOME TAX, NON-CORPORAE CIRCLE-5, KANNAMMAI BUILDING, 511,ANNA SALAI, CHENNAI 600 006. VS. MR.B.K.MURALIKRISHNA , 199/200,KKR GARDEN, 1 ST MAIN ROAD, MADHAVARAM, CHENNAI 600 060. PAN AFAPM 2381 R ( *+ / APPELLANT ) ( ,-*+ / RESPONDENT / CROSS OBJECTOR ) / APPELLANT BY : DR. B.NISCHAL,JCIT,D.R / RESPONDENT BY : MR.R.VENKATARAMAN,ITP / DATE OF HEARING : 22.02.2016 ! /DATE OF PRONOUNCEMENT : 22.04.2016 . / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL BY THE REVENUE AND CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE LEA RNED ITA NO.1429/MDS/2015 CO NO.102/MDS./15 2 COMMISSIONER OF INCOME TAX(A)- 5, CHENNAI DATED 23. 03.2015 PERTAINING TO THE ASSESSMENT YEAR 2007-08. SINCE IS SUES INVOLVED IN THIS REVENUES APPEAL & CROSS OBJECTIONS ARE COMMON IN NATURE, THESE ARE CLUBBED TOGETHER, HEARD TOGETHER, DISPOSE D OFF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2.1 THE FIRST GROUND RAISED REVENUES APPEAL IS TH AT THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF ` 1,86,05,187/- MADE ON ACCOUNT OF EXCESS STOCK. 2.2 THE ASSESSEE HAS RAISED GROUNDS IN ITS C.O IN SUPPORT OF THE ORDER OF THE LD.CIT(A). 3. THERE WAS A SURVEY U/S.133A OF THE ACT AT THE B USINESS PREMISES OF ASSESSEE ON 27.02.2007. DURING THE COU RSE OF SURVEY, THE REVENUE AUTHORITIES HAD TAKEN INVENTORY OF HUMA N HAIR STOCK IN THE PRESENCE OF ASSESSEE AND THE VALUE OF PHYSICAL STOCK WAS WORKED OUT AT ` 1,71,53,950/-. THE DETAIL OF THIS STOCK WAS PUT TO THE USE AND ITA NO.1429/MDS/2015 CO NO.102/MDS./15 3 RECORDED HIS STATEMENT ON THE SAME DAY. FOR CLARIT Y, WE PRODUCE THE FOLLOWING QUESTIONS AS FOLLOWS:- Q. DURING THE COURSE OF SURVEY UNDERTAKEN T ODAY IN YOUR BUSINESS PREMISES THE STOCK WAS TAKEN WITH THE HELP OF YOUR EMPLOYEES. IT IS FOUND THAT STOCK TO THE VALUE OF ` 1,71,53,950/- WAS INVENTORIED. DO YOU AGREE THAT T HE STOCK WAS TAKEN CORRECTLY AND ARE YOU MAINTAINING ANY STO CK BOOK IN YOUR PREMISES? ANS YES, I AGREE THAT THE STOCK WAS TAKEN CORRECTLY. THOUGH WE MAINTAIN STOCK BOOK, IT IS WRITTEN ONLY FROM 01. 01.2006 TO 25.09.2006. AFTER THAT THE FACTORY CUM OFFICE WAS SHIFTED AND THE ENTRIES ARE YET TO BE MADE IN THE STOCK REGISTE R. Q. IN ANSWER TO Q. YOU HAVE STATED THAT YOU HAVE WR ITTEN STOCK BOOK FOR THE YEAR 2006-07 UPTO 25.09.2006. I AM SH OWING YOU THIS STOCK BOOK DO YOU CONFIRM THE SAME? ANS YES I CONFIRM. Q. IN THE ABSENCE OF PROPER STOCK BOOK WHICH WILL CONTAIN THE INFLOW AND OUTFLOW OF MATERIALS, DATE WISE THE BOOK STOCK AS ON TODAY I.E.27.02.2007 COULD NOT BE DETERMINED IN THA T CASE THE VALUE OF THE ENTIRE PHYSICAL STOCK INVENTORIES TODA Y WILL BE TREATED AS UNACCOUNTED STOCK HELD BY YOU AND ACCORD INGLY BOUGHT TO TAX. WHAT IS YOUR EXPLANATION FOR THIS? ITA NO.1429/MDS/2015 CO NO.102/MDS./15 4 ANS I HAVE TO ACCEPT THAT THE RECORDS FOR STOCK KEEPIN G MAINTAINED BY ME ARE INADEQUATE. I AM ENABLE TO EX PLAIN THE STOCK POSITION AND ALSO REGARDING THE STOCK POSITIO N OF 1.71 CRORE NON MAINTENANCE OF PROPER STOCK RECORD HAS LE AD TO THE DIFFICULT FOR ME. HOWEVER, TO SET RIGHT ANY SHORTC OMING IN THIS REGARD I HERE BY ADMIT 50% OF THE STOCK FOUND SAY A BOUT 85 LAKH AS MY UNACCOUNTED STOCK FOR THE YEAR 2006-07. IN THE ABSENCE OF PROPER STOCK BOOK MAINTAINED BY T HE ASSESSEE, THE BOOK STOCK IS WORKED OUT AS FOLLOWS. OPENING STOCK AS ON 01.04.2006 22,12,000 SALES 5,38,50,631 PURCHASE 4,25,99,841 CLOSING STOCK (-)14,51,237 GROSS PROFIT 5% OF SALE 75,87,553 5,23,99,394 5,23,99,394 THUS, THE AO CONSIDERED THE DEFICIENCIES IN STOCK A S PER BOOKS OF ACCOUNTS AT ` 14,51,237/- AND EXCESS STOCK FOUND AT ` 1,71,53,950/-, TOTALING OF ` 1,86,05,187/- AS EXCESS STOCK AND MADE ADDITION TO THE INCOME OF ASSESSEE. AGAINST THIS ACTION OF AO, THE ASSESSEE CARRIED ON APPEAL TO THE LD.CIT(A). THE LD.CIT(A) GIVEN RE LIEF TO THE ASSESSEE ON THE REASON THAT ASSESSEES BOOKS OF ACC OUNTS HAS BEEN ITA NO.1429/MDS/2015 CO NO.102/MDS./15 5 ACCEPTED BY COMMERCIAL TAX DEPARTMENT OF STATE GOVE RNMENT AND IN VIEW OF THE JUDGEMENT OF JUDICIAL HIGH COURT IN THE CASE OF CIT VS. ANANDHA METAL CORPORATION REPORTED IN [2005] 273 IT R 262 (MAD) AND CIT VS. SMT. SAKUNTALA DEVI KHETAN REPORTED IN [2013] 352 ITR 484 (MAD), THE ACTIONS OF ASSESSEE TO BE CONSIDERED AS TRUE AND CORRECT. FURTHER, STATEMENT RECORDED DURING THE SU RVEY U/S.133A OF THE ACT CANNOT BE RELIED UPON IN VIEW OF THE JUDGME NT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN S ON REPORTED IN [2008] 300 ITR 157 (MAD). AGAINST THIS, THE REVENU E IS IN APPEAL BEFORE US. 4.1 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE ON SURVEY U/S.133A OF THE ACT PHYSICAL STOCK OF HUMAN HAIR WAS TAKEN IN THE PRESENCE OF THE ASSESSE E. AFTER TAKING THE STOCK THE DETAILS, THE SAME WAS COMPARED WITH T HE BOOKS OF ACCOUNTS OF THE ASSESSEE. WHEN THE TRADING ACCOUNT OF THE ASSESSEE WAS PREPARED, THERE WAS DEFICIENCY IN THE STOCK OF ` 14,51,237/- . THE AO CONSIDERED THIS DEFICIENCY AND ADDED TO THE STOC K TAKEN BY THE ASSESSEE AND ARRIVED AT THE FINAL STOCK FIGURE AT ` 1,86,05,187/-. THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 6 AO HAD GIVEN A FAIR CHANCE FOR RECONCILIATION OF TH E PHYSICAL STOCK FOUND DURING THE SURVEY WITH THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BUT, THE ASSESSEE ADMITTED AT THE TIME OF SURVEY TH AT THE STOCK WAS TAKEN BY THE DEPARTMENT WAS CORRECT AND THE STOCK R EGISTER WAS NOT COMPLETED AND SAID THAT 50% OF THE PHYSICAL STOCK V ALUE AT ` 85 LAKHS WOULD BE OFFERED AS INCOME OF ASSESSEE. THE ASSESS EE HAS NOT KEPT HIS PROMISE. ON 07.03.2007, ASSESSEE RETRACTED THE EARLIER STATEMENT WHICH READS AS FOLLOWS:- TO THE INCOME-TAX OFFICE (INV.) UNIT1, CHENNAI-600 034 SIR, SUBSEQUENT TO THE SURVEY IN MY OFFICE PREMISES AND RESIDENCE WHICH COMMENCED ON THE 27 TH FEBRUARY, 2007 AND CLOSED AT 7.00 AM ON THE 28 FEBRUARY, 2007, YOU HAD FORCED ME TO ISSUE FOUR CHE QUES AMOUNTING TO RS.70 LAKHS DRAWN ON INDIAN BANK FOR RS.10 LAKHS AND CENT RAL BANK OF INDIA FOR RS.60 LAKHS, I WAS FORCED BY YOU TO ISSUE THESE CHEQUES D ESPITE MY PROTEST THAT THERE IS NO DEMAND AGAINST ME AND NO TAX OR OTHER SUCH IS PA YABLE BY ME TO THE INCOME TAX DEPARTMENT I HAD ALSO INFORMED YOU THAT I DO NO T HAVE BANK BALANCE TO THE EXTENT OF RS.70 LAKHS AND HENCE I CANNOT ISSUE ANY CHEQUE. THIS PROTEST OF MINE WAS ALSO IGNORED BY YOU. I AM NOT AN EDUCATED PERSO N AND WAS FORCED TO GIVE THE ABOVE FOUR CHEQUES UNDER THREAT OF DETENTION IN YOU R OFFICE TILL I ISSUED THE CHEQUES. SINCE THERE IS NO OUTSTANDING DEMAND OF TAX AGAINST ME AND I AM NOT AN ASSESSEE IN DEFAULT, THE RECOVERY OF THE FOUR CHEQU ES FROM ME UNDER THREAT AS AFORESAID IS NOT LEGAL. UNDER THESE CIRCUMSTANCES I REQUEST YOU TO IMMEDIATELY ITA NO.1429/MDS/2015 CO NO.102/MDS./15 7 RETURN THE FOUR CHEQUES AND NOT TO PRESENT THE CHEQ UES FOR ENCASHMENT TO THE RESPECTIVE BANKS. PLEASE NOTE THAT SINCE THE CHEQUE S HAVE BEEN OBTAINED FROM ME WITHOUT THE AUTHORITY OF LAW, I HAVE INSTRUCTED THE BANKERS NOT TO HONOUR THE CHEQUES. THANKING YOU, YOURS FAITHFULLY (B.K. MURALIKRISHNA) THE ASSESSEE ALSO FILED AN AFFIDAVIT TO THIS EFFECT ON THE SAME DAY. THE MAIN ALLEGATION OF THE ASSESSEE IS THAT DURING THE COURSE OF SURVEY, THE STATEMENT WAS TAKEN FROM THE ASSESSEE B Y EXERTING FORCE, AND ON THAT REASON ASSESSEE OFFERED THE ADDITIONAL INCOME AND GIVEN A CHEQUE TO THE INVESTIGATION TEAM. 4.2 NOW, THE SIMPLE QUESTION BEFORE US IS WHETHER THE EXPLANATION OF ASSESSEE IS CREDIT WORTHY OR NOT. IT IS IMPORTA NT TO MENTION HEREIN THAT IN HIS STATEMENT RECORDED AT THE TIME OF SURVE Y, THE ASSESSEE PUT HIS SIGNATURE AND ACCEPTED THAT BOOKS OF ACCOUNTS A RE NOT KEPT PROPERLY AND OFFERED ADDITIONAL INCOME. AFTER CONSI DERING THE OFFER MADE BY THE ASSESSEE, THE SURVEY TEAM STOPPED FURTH ER INQUIRY. THUS, IT MEAN THAT ASSESSEE BY HIS CONDUCT STOPPED FURTHER INVESTIGATION OF THE FACTS AND DROVE THE SURVEY TEA M OUT OF THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 8 BUSINESS PREMISES OF ASSESSEE. LATER, THE ASSESSEE RETRACTED THE EARLIER STATEMENT ON 07.03.2007 AND ALSO FILED A WR IT PETITION BEFORE THE HONBE JURISDICTIONAL HIGH COURT. WE FAILED TO UNDERSTAND THAT, WHEN ONE SIDE THE ASSESSEE SAYS IN HIS STATEMENT RE CORDED BY SURVEY TEAM THAT HE HAD AGREED TO OFFER ADDITIONAL INCOME AND ANOTHER SIDE ASSESSEE SAYS, THERE WAS COERCION BY T HE SURVEY TEAM. HOWEVER, HE HAS NOT BROUGHT ON RECORD WHAT KIND OF FORCE EXERTED ON HIM BY THE SURVEY TEAM TO SURRENDER THE ADDITIONAL INCOME AND ALSO NOT GIVEN ANY REASON AS TO WHY THE SURVEY TEAMS FOR CE HIM TO MAKE SURRENDER ADDITIONAL INCOME. ADMITTEDLY, IN THIS C ASE WHEN THE SURVEY TEAM HAD TAKEN PHYSICAL STOCK OF THE HUMAN H AIR, THE ASSESSEE HIMSELF ADMITTED THAT HE HAS NOT MAINTAINE D THE STOCK RECORD PROPERLY, BOOKS OF ACCOUNTS ARE NOT COMPLETE AND OFFERED ADDITIONAL INCOME AND ISSUE A CHEQUE. WHEN THE ASS ESSEE ISSUED A CHEQUE TO THE DEPARTMENT BY PROPERLY PREPARING IT A ND SIGNING IT, IT CANNOT BE SAID THAT THE SURVEY TEAM EXERTED FORCE O N HIM. ADMITTEDLY WHEN THE SURVEY PARTY CORNERED THE ASSESSEE REGARDI NG THE UN- RECORDING OF PURCHASE OF STOCKS ON THE BASIS OF EXI STENCE OF PHYSICAL STOCK, THE ASSESSEE CAME OUT WITH THE OFFERING OF A DDITIONAL INCOME. IT ITA NO.1429/MDS/2015 CO NO.102/MDS./15 9 IS ALSO IMPORTANT TO NOTE THAT THE SURVEY TEAM CONC LUDED THE SURVEY IMMEDIATELY AFTER THE SURRENDER MADE BY THE ASSESSE E AND DID NOT MAKE ANY FURTHER ENQUIRY. IN OTHER WORDS, IT MEANS THAT ASSESSEE WAS INDIRECTLY BENEFITTED FROM ITS DISCLOSURE, BECA USE THE SURVEY TEAM THEREAFTER WAS DEPRIVED FROM DETECTING FURTHER UN-R ECORDING TRANSACTIONS BY ASSESSEE, IF ANY. SO IN THESE FACTS AND CIRCUMSTANCES, THE RETRACTION BY THE ASSESSEE FROM THE SWORN IN STATEMENT RECORDED ON 27.02.2007 HAS ONLY AFTER THO UGHT AND IT CANNOT BE GIVEN ANY IMPORTANCE TO HAVE. 4.3 NOW COMING TO THE RELIEF GIVEN BY THE LD.CIT(A ), IN OUR OPINION, HE PLACED RELIANCE ON THE JUDGMENT OF JURISDICTIONA L HIGH COURT WHEREIN HELD THAT WHEN ONE WING OF THE GOVERNMENT AUTHORITY ACCEPTED THE BOOKS OF ACCOUNTS OF THE ASSESSEE AS T RUE, OTHER WING OF THE GOVERNMENT AUTHORITY CANNOT DOUBT THE SAME. BUT IN THE PRESENT CASE, THE CIRCUMSTANCES SHOW THAT THE REVEN UE DEPARTMENT CARRIED ON THE SURVEY U/S.133A OF THE ACT AND FINDI NG DISCREPANCY IN PHYSICAL STOCK OF HUMAN HAIR EXISTING AT THE PREMIS ES OF THE ASSESSEE WHEN COMPARED TO THE BOOKS OF ACCOUNTS AND QUANTIFI ED IT AND THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 10 QUANTIFICATION WAS ACCEPTED BY THE ASSESSEE IN HIS STATEMENT. IN THE CASE RELIED ON BY THE LD.CIT(A) IN THE CASES OF M/S.ANANDHA METAL CORPORATION (SUPRA) AND SMT. SAKUNTALA DEVI KHETAN (SUPRA) WHEREIN THERE WAS NO SURVEY REPORT AVAILABLE BEFORE THE AUT HORITIES TO DIFFERENTIATE THE SALES/STOCK. IN SUCH CIRCUMSTANC ES, THE RATIO LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THOSE CASE S CANNOT BE APPLIED. HENCE, IN OUR OPINION, THE CONCLUSION REA CHED BY THE CIT(A) ARE NOT BASED ON PROPER APPRECIATION OF ENTIRE FACT S AND CIRCUMSTANCES OF THE CASE, BECAUSE HE IGNORED THE F ACTS THAT THE ASSESSEE HIMSELF ADMITTED THAT THERE IS AN EXISTENC E OF EXCESS PHYSICAL STOCK AS COMPARED TO THE BOOKS OF ACCOUNT AND OFFERED ADDITIONAL INCOME ON HIS OWN. THEREFORE, WE FIND N O FORCE AS WELL AS JUSTIFICATION IN THE ORDER OF THE LD.CIT(A) WHILE O BSERVING THAT ASSESSEES BOOKS OF ACCOUNTS HAS TO BE ACCEPTED. I N THE PRESENT CASE, THERE IS A REASONABLE MATERIAL FOUND IN THE C OURSE OF SURVEY IN THE HANDS OF AO TO DETERMINE THE EXCESS STOCK FOUND IN THE PRESENCE OF THE ASSESSEE, WHICH IS NOT ACCOUNTED. 4.4 FURTHER, THE ASSESSEE HAS RIGHT TO RETRACT HIS STATEMENT, BUT IT HAS TO BE BASED ON EVIDENCE BROUGHT ON RECORD TO TH E CONTRARY AND ITA NO.1429/MDS/2015 CO NO.102/MDS./15 11 THERE MUST BE JUSTIFIABLE REASON AND MATERIAL ACCEP TING RETRACTION. THE COGENT AND SUFFICIENT MATERIAL HAS TO BE PLACED ON RECORD FOR ACCEPTANCE OF RETRACTION. IT WAS NOT A CASE OF PRE SSURE OR COERCION HAS BEEN APPLIED ON ASSESSEE. IT WAS A STATEMENT M ADE BY THE ASSESSEE DURING THE COURSE OF SURVEY NOT BY AN EXER TION FROM THE ASSESSEE BY THE REVENUE AUTHORITIES. IN OUR OPINIO N, SELF-INTEREST TALKS IN ALL SHORTS OF TONGUES AND PLAYS ALL SHORTS OF ROLES. THE INDIFFERENCE ATTITUDE OF THE ASSESSEE AT THE TIME O F SURVEY, AND AFTER THE SURVEY CLEARLY INDICATES THAT ASSESSEE IS NOT T RUTHFUL AT ANY TIME. THE AO NOT ONLY DOUBTED THE ASSESSEES BOOKS OF ACC OUNTS, BUT ALSO ATTITUDE OF THE ASSESSEE IN PLACING THE NECESSARY E VIDENCE BEFORE THE ASSESSMENT PROCEEDINGS. HENCE, HE REJECTED THE BOO KS OF ACCOUNTS AND MADE ASSESSMENT ON THE BASIS OF EVIDENCE COLLE CTED AT THE TIME OF SURVEY U/S.133A OF THE ACT. IN THIS CASE, FACTS SPEAK LOUDLY AND CLEAR THAN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BEING SO, THE REJECTION OF BOOKS OF ACCOUNTS IS JUSTIFIED, THOUGH THE CONCLUSIONS OF THE CIT(A) HAVE A COLOUR OF FACTUAL FINDINGS, STILL NOT CONSIDERING THE FACTS RELEVANT TO THE MATERIAL FACTS AND HAS ACTED IN IRRELEVANT MATERIALS SO AS TO PLACE RELIANCE ON THE DECISION O F JURISDICITIONAL HIGH ITA NO.1429/MDS/2015 CO NO.102/MDS./15 12 COURT CITED ABOVE. THE FACTS THAT THOSE DECISIONS R ELIED BY THE CIT(A) WHEREIN THERE WAS NO SURVEY ACTION. LOOKING INTO TH E CIRCUMSTANCES OF THE CASE, THERE IS A HUGE DIFFERENCE BETWEEN PHY SICAL STOCK FOUND DURING THE COURSE OF SURVEY AND STOCK FIGURES REFLE CTED IN THE BOOKS OF ACCOUNTS, THE ADDITION IS WARRANTED. THE ASSESSEE IS NOT WILLING TO COME CLEAN AND HENCE ONE WILL HAVE TO TAKE RECOURSE FOR ARRIVING AT A CONCLUSION ON THE BASIS OF MATERIAL ON RECORD. IN THE PRESENT CASE, THE AO USED THE MATERIAL AVAILABLE ON RECORD AND MA DE ASSESSMENT ON WHICH ONE CANNOT FIND ANY FAULT IN IT. ACCORDIN GLY, WE ARE CONFIRMING THE ADDITION TOWARDS EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ACTION. LD.A.R PLACED MUCH RELIANCE ON T HE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON (SUPRA) WHICH IS RELATING TO THE ASSESSMENT YEAR 20 01-02. LATER, THERE WAS A NEW SECTION WAS INSERTED BY FINANCE ACT, 2007 WITH RETROSPECTIVE FROM 01.10.1975 NAMELY SECTION 292C W HICH READS AS FOLLOWS:- (1) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS, MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING ARE OR IS FOUND IN THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 13 POSSESSION OR CONTROL OF ANY PERSON IN THE COURSE O F A SEARCH UNDER SECTION 132, IT MAY, IN ANY PROCEEDING UNDER THIS A CT, BE PRESUMED SEC.292C (I) THAT SUCH BOOKS OF ACCOUNT, OTHER DOCUMENTS, MO NEY, BULLION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING BELONG OR BELONGS TO SUCH PERSON ; (II) THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNT AND OTHER DOCUMENTS ARE TRUE ; AND (III) THAT THE SIGNATURE AND EVERY OTHER PART OF SU CH BOOKS OF ACCOUNT AND OTHER DOCUMENTS WHICH PURPORT TO BE IN THE HAND WRITING OF ANY PARTICULAR PERSON OR WHICH MAY REASONABLY BE ASSUME D TO HAVE BEEN SIGNED BY, OR TO BE IN THE HANDWRITING OF, ANY PARTICULAR PERSON, ARE IN THAT PERSONS HANDWRITING, AND IN THE CASE O F A DOCUMENT STAMPED, EXECUTED OR ATTESTED, THAT IT WAS DULY STA MPED AND EXECUTED OR ATTESTED BY THE PERSON BY WHOM IT PURPO RTS TO HAVE BEEN SO EXECUTED OR ATTESTED. (2) WHERE ANY BOOKS OF ACCOUNT, OTHER DOCUMENTS OR ASSETS HAVE BEEN DELIVERED TO THE REQUISITIONING OFFICER IN ACCORDAN CE WITH THE PROVISIONS OF SECTION 132A, THEN, THE PROVISIONS OF SUB-SECTION (1) SHALL APPLY AS IF SUCH BOOKS OF ACCOUNT, OTHER DOCU MENTS OR ASSETS WHICH HAD BEEN TAKEN INTO CUSTODY FROM THE PERSON R EFERRED TO IN CLAUSE (A) OR CLAUSE (B) OR CLAUSE (C), AS THE CASE MAY BE, OF SUB- ITA NO.1429/MDS/2015 CO NO.102/MDS./15 14 SECTION (1) OF SECTION 132A, HAD BEEN FOUND IN THE POSSESSION OR CONTROL OF THAT PERSON IN THE COURSE OF A SEARCH UN DER SECTION 132. BEING SO, THE RATIO LAID DOWN IN CIT VS. S. KHADER KHAN SON CANNOT BE APPLIED. THIS GROUND OF THE REVENUE IS ALLOWED. 5.1 THE NEXT GROUND RAISED REVENUES APPEAL IS T HAT THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF ` 21/- LAKHS MADE ON ACCOUNT OF INFLATION ON PURCHASE OF RAW MATERIALS AS THERE IS NO CORROBORATIVE EVIDENCE WAS BROUGHT ON RECORD BY THE AO. 5.2 SINCE WE HAVE UPHELD THE ADDITION TOWARDS EXCE SS STOCK FOUND DURING THE COURSE OF SURVEY AT ` 1,86,05,187/-, IF THERE IS ANY INFLATION PURCHASE, IT IS TAKEN CARE OF BY THE ABOVE ADDITION S AND SUSTAINING OF THESE ADDITIONS WOULD AMOUNT TO DOUBLE ADDITION. A CCORDINGLY, THE DELETION OF ADDITION IS CONFIRMED ON THIS REASON. T HIS GROUND OF THE REVENUE IS DISMISSED. ITA NO.1429/MDS/2015 CO NO.102/MDS./15 15 6.1 THE THIRD GROUND RAISED REVENUES APPEAL IS TH AT THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF ` 16.50 LAKHS BEING ON-MONEY PAYMENT BY THE ASSESSEE FOR PURCHASE OF LAND AT K ANNIGAI VILLAGE AT MADHAVARAM. DURING THE COURSE OF SURVEY, IT WAS CO ME TO KNOWLEDGE OF DEPARTMENT THAT THE ASSESSEE HAD PURCH ASED A PROPERTY AT KANNIGAI VILLAGE,CHENNAI IN JULY 2006 F OR A REGISTERED VALUE OF ` 25 LAKHS AND SAID PROPERTY ACTUALLY WAS BROUGHT AT CONSIDERATION OF ` 41.50 LAKHS. THUS, THE ADDITION OF ` 16.50 LAKHS WAS MADE. ON APPEAL, THE LD.CIT(A) DELETED THE SAM E ON THE REASON THAT THERE IS NO EVIDENCE TO SUGGEST THAT ON -MONEY PAYMENT AND HE PLACED RELIANCE ON JUDGMENT OF JURISDICTIONA L HIGH COURT IN THE CASE OF CIT VS. S. KHADER KHAN SON REPORTED IN [200 8] 300 ITR 157 (MAD). AGAINST THIS, REVENUE IS IN APPEAL BEFORE U S 6.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, ASSESSEE HAS ACCEPTED DURING THE COURSE OF SURVEY IN HIS STATEMENT RECORDED U/S.133A OF THE AC T, HE HAS PAID ON- MONEY PAYMENT TO ONE MR.K.G.MURALI KRISHNAN, WHO HA D ALREADY ACCEPTED THE RECEIPT OF THE MONEY ` 16.35 LAKHS. THOUGH THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 16 CONSIDERATION SHALL SHOW THAT ` 2.25 LAKHS FOR LAND AT KANNIGAI VILLAGE, ASSESSEE WAS NOT ABLE TO PROVE ANY EVIDENCE CONTRAR Y TO THIS, THE ASSESSEE PLACED RELIANCE ON THE RETRACTED STATEMENT . SINCE WE HAVE UPHELD THE ADDITION MADE TOWARDS EXCESS STOCK FOUND DURING THE COURSE OF SURVEY IN EARLIER PARA OF THIS ORDER ON T HE SAME REASONS, WE WILL CONFIRM THE ADDITION MADE BY THE AO TOWARDS O N MONEY PAYMENT. ACCORDINGLY, WE REVERSE THE ORDER OF THE LD.CIT(A) ON THIS ISSUE AND RESTORE THAT OF LD. ASSESSING OFFICER. A CCORDINGLY THIS GROUND OF REVENUE IS ALLOWED. 7.1 THE FOURTH GROUND RAISED IN REVENUES APPEAL I S THAT THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF ` 16.35 LAKHS BEING ON- MONEY PAYMENT FOR PURCHASE OF FACTORY LAND ON THE REASON THAT ASSESSEE HIMSELF HAD ACCEPTED THAT HE HAS PAID 17 L AKHS TOWARDS PURCHASE OF LAND IN HIS SWORN STATEMENT RECORDED U/ S.131 OF THE ACT. THIS FACT IS ALSO CONFIRMED BY THE VENDOR K.G.MOHAN A KRISHNAN. ON APPEAL, THE LD.CIT(A) DELETED THE ADDITION ON THE B ASIS OF RETRACTED STATEMENT MADE SUBSEQUENTLY BY ASSESSEE AND ALSO ITA NO.1429/MDS/2015 CO NO.102/MDS./15 17 OBSERVED THAT IN THE ASSESSMENT YEAR 2005-06, NOT I N THE ASSESSMENT YEAR 2007-08. AGAINST THIS, THE REVENUE IS IN APPE AL BEFORE US. 7.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN THIS CASE, THE SALE DEED FOR THE PURCHAS E OF THE FACTORY LAND GOT EXECUTED BY THE ASSESSEE ON 07.03.2015, WHICH I S COMING UNDER THE PREVIOUS YEAR 2004-05 RELEVANT TO THE ASSESSMEN T YEAR 2005-06. BEING SO, IT CANNOT BE BROUGHT TO TAX IN THE ASSESS MENT YEAR 2007-08, WHICH IS BEFORE US. ACCORDINGLY, IN OUR OPINION, T HE LD.CIT(A) RIGHTLY DELETED THE ADDITION AND THE TRANSACTION IS NOT REL EVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. HENCE, THE DEL ETION OF ADDITION MADE BY THE LD.CIT(A) IS CONFIRMED. 8.1. THE LAST GROUND IS WITH REGARD TO DELETION OF ADDITION OF ` 30,38,312/- BEING CASH PURCHASE DISALLOWED U/S.40A( 3) OF THE ACT. THE FACTS OF THE CASE ARE THAT THE ASSESSEE PURCHAS ED HAIR AND MADE PAYMENTS IN EXCESS OF ` 20,000/- TOTALING ` 1,51,91,560/-. HENCE, THE AO WORKED OUT 20% OF ` 1,51,91,560/- TO ` 30,38,312/-, WHICH WAS DISALLOWED U/S.40A(3) OF THE ACT. THE MAIN CONTENTI ON OF THE ITA NO.1429/MDS/2015 CO NO.102/MDS./15 18 ASSESSEE WAS THAT HE PAID MONEY BELOW ` 20,000/- TO AGENT WHO IN TURN PAY CASH TO THE ULTIMATE SELLERS OF THE HAIR. PERUSAL OF THE COPIES OF CHEQUES ISSUED TO THE AGENTS PROVE THAT THE PAYM ENTS ARE MADE IN LUMP SUM IN VARIOUS DENOMINATIONS. THE ASSESSEE EXPLAINED TO THE AO THE EXCEPTIONAL CIRCUMSTANCES UNDER WHICH THE TR ADE HAS BEEN CONDUCTED AND RELIED ON THE JUDGMENT OF JURISDICTIO NAL HIGH COURT IN THE CASE OF CIT VS.KOTHARI SANITATION AND TILES PVT LTD. [ (2006) 282 ITR 117(MAD.) ]. THE AO EXAMINED THE BOUGHT NOTES IMPOUNDED AT THE TIME OF SURVEY AND DOUBTED THE GENUINENESS OF S UCH BOUGHT NOTES AS THERE ARE DISCREPANCIES IN THEM SUCH AS ON LY ASSESSEES SIGNATURE, ONLY SELLERS SIGNATURE, NO SIGNATURE OF COMMISSION AGENTS, NOT SERIALLY NUMBERED, ETC. HENCE, THE AO REJECTE D THE APPLICABILITY OF RULE 6DD TO THE ASSESSEES CASE. AGAINST THIS, THE ASSESSEE WENT IN APPEAL BEFORE CIT(A). ON APPEAL, LD.CIT(A) OBSE RVED THAT WHEN THE ASSESSEE IS COMPELLED MAKE CASH PAYMENTS EITHER DIRECTLY OR THROUGH AGENTS, CONSIDERATION OF BUSINESS EXPEDIENC Y AND OTHER RELEVANT FACTORS ARE TO BE GIVEN IMPORTANCE AS PER SEC.40A(3) OF THE ACT. FURTHER, CIT(A) OBSERVED THAT WHEN THE PURCH ASES ARE MADE FROM UNORGANIZED SECTOR, CASH PAYMENTS ARE UNAVOI DABLE. ITA NO.1429/MDS/2015 CO NO.102/MDS./15 19 REFERENCE WAS MADE ON THE DECISION IN THE CASE OF C IT VS.K K S K LEATHER PROCESSORS PVT LTD. [ [2007] 292 ITR 669 ]. LD. CIT(A) CAME TO A CONCLUSION THAT ASSESSING OFFICER RESORTED TO WHOLESOME DISALLOWANCE WHICH IS NOT PERMITTED IN TERM OF SEC. 40A(3) OF THE ACT. ACCORDINGLY, LD.CIT(A) DELETED THE ENTIRE DISALLOWA NCE MADE BY AO. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 8.2 WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. THE MAIN CONTENTION OF THE LD.D.R IS THAT:- A) ALL THE BOUGHT NOTES ARE ONLY SELF MADE PURCHAS E VOUCHERS BY THE ASSESSEE AIMED AT INFLATING THE PURCHASES. B) MOST OF THE VOUCHERS CONTAIN ONLY ASSESSEES SIG NATURE.(AS A BUYER) C) ALL THE VOUCHERS HAVE NOT BEEN SIGNED BY THE SEL LERS. D) THE BOUGHT NOTES DONT CONTAIN COMMISSION AGENT S SIGNATURE. E) THE IDENTITY OF THE SELLER IS NOT VERIFIABLE AS COMPLETE ADDRESS OF THE SELLER IS NOT MENTIONED IN THE VOUCHERS. ITA NO.1429/MDS/2015 CO NO.102/MDS./15 20 F) THE VOUCHERS ARE NOT BOUND AND SERIALLY MACHINE NUMBERED WHICH GIVES WIDE SCOPE FOR THE ASSESSEE TO MANIPULA TE THE PURCHASES TO SUIT HIS NEEDS. CONTRARY TO THIS FINDINGS, THE CIT(A) OBSERVED THAT DUE TO COMPELLING BUSINESS REASONS, PAYMENTS WERE MADE BY CASH. HOWE VER, FACTS BROUGHT ON RECORD DOES NOT SHOW ANY COMPELLING REAS ONS AND ALSO IT DOES NOT THE DUTY OF THE AO TO PROVE THE BUSINESS E XIGENCIES AND IT IS THE DUTY OF THE ASSESSEE TO PROVE THAT DUE TO BU SINESS EXIGENCIES, THE ASSESSEE MADE PAYMENT IN CASH IN VIOLATION OF S EC.40A(3) OF THE ACT AND ALSO THE PAYMENTS ARE LESS THAN ` 20,000/-. WITHOUT EXAMINING OF THESE FACTS, THE LD.CIT(A) DELETED THE ADDITION ON IRRELEVANT CONSIDERATIONS, WHICH CANNOT BE UPHELD. ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE REMIT THIS ISSUE TO THE FILE OF LD. ASSESSING OFFICER FOR FRESH CONSIDERATION AND IT NEEDLESS TO SAY THAT THE AO SHALL GIVE ADEQUATE OPPORTUNITY OF HEARING TO THE A SSESSEE, BEFORE DECIDING THE SAME AND HE SHALL NOT BE INFLUENCED BY THE FINDINGS OF CIT(A). ITA NO.1429/MDS/2015 CO NO.102/MDS./15 21 9. IN THE RESULT, THE APPEAL OF REVENUE IS PARTLY A LLOWED FOR STATISTICAL PURPOSES, AND SINCE THE SAME ISSUE RAIS ED IN CROSS OBJECTIONS IS ALREADY DECIDED IN REVENUES APPEAL, CROSS OBJECTIONS FILED BY THE ASSESSEE IN SUPPORT OF THE LD.CIT(A) IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED ON FRIDAY , THE 22 ND OF APRIL,2016 AT CHENNAI. SD/- SD/ - ' # $ . % & ' ( DUVVURU RL REDDY ) ) ( ( ( ) * + ) ) ' CHANDRA POOJARI ', JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND APRIL,2016. K S SUNDARAM. -.,, /0,10 /COPY TO: , 1. /APPELLANT 2. /RESPONDENT 3. , 2,'' /CIT(A) 4. , 2 /CIT 5. 034, 5 /DR 6. 4,6 /GF