Shakti Traders, Rajpura V. ITO, Patiala

ITA 1062/CHANDI/2008

• Counselvise Citation: 106221514 RSA 2008
• Duration Of Justice: 2 year(s) 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1995-1996
• Appeal Filed On: 08-12-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: PANKAJ JAIN
• Keywords: Search and seizure; Document seized; Opportunity of being heard; Principle of natural justice; Retraction; Documents seized
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES B CHANDIGARH BEFORE MS. SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1062/CHD/2008 ASSESSMENT YEAR: 1995-96 M/S SHAKTI TRADERS, VS THE ITO, RAJPURA (PUNJAB) WARD-3, PATIALA (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PANKAJ JAIN RESPONDENT BY : SHRI AKHILESH GUPTA DATE OF HEARING : 19.10.2011 DATE OF PRONOUNCEMENT : 17.11.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER PASSED BY THE CIT(A), PATIALA DATED 24.10.2008 RELA TING TO ASSESSMENT YEAR 1995-96 UNDER SECTION 143(3) OF THE INCOME TA X ACT, 1961 (IN SHORT THE ACT). 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. BECAUSE THE ACTION OF LD. CIT(A) IS BEING CHALL ENGED ON FACTS AND LAW IN SUSTAINING THE ADDITION OF RS. 4,9 1,765/- TREATING IT AS AN AFTER THOUGHT WHEREAS PER THE ASS ESSEE THE MATERIAL ON RECORD, EVIDENCES AND PROPOSITION O F LAW HAVE NOT BEEN APPRECIATED AND THERE IS A MISAPPLICA TION OF LAW IN PURSUANCE TO THE DECISION OF THE COORDINA TE BENCH OF THE TRIBUNAL. B. ALTERNATIVELY AND WITHOUT PREJUDICE TO THE ABO VE THE ASSESSEE DISPUTES THE QUANTUM OF ADDITION. 2 2. BECAUSE THE CONCLUSIONS ARE PERVERSE IN ITS NATURE WHICH ARE NOT IN CONSONANCE WITH THE MATERIAL ON RECORD A S EVIDENT FROM THE NON-EXAMINATION OF PRATAP BHANGU SOLVES PVT LTD (VIOLATION OF EVIDENCE ACT, 1871) AS NO PERSON CAN EARN INCOME OUT OF HIMSELF. 3. BEFORE US, THE LD. AR CONTENDED THAT SURRENDER WAS MADE AT RS. 4,50,000/- AND THE SAME WAS DULY DISCLOSED IN THE R ETURN OF INCOME. HOWEVER, THE RETURN OF INCOME WAS FILED DECLARING I NCOME AT RS. 6,020/-. HE ALSO POINTED OUT THAT THE FIRM SUFFERED A LOSS. HE WAS OF THE OPINION THAT IT WAS A PECULIAR YEAR WHERE THE ASSESSEE SUFF ERED LOSS. HE REFERRED TO PARA 15 OF THE PAPER BOOK AND PARA 8 OF THE TRIB UNAL ORDER WHEREBY THE CASE WAS RESTORED TO THE FILE OF CIT(A). HE DREW O UR ATTENTION TO PAGE 5 OF THE CIT(A), ORDER WHICH CONTAINED THE FINDINGS O F THE LD. CIT(A). HE ALSO REFERRED TO PARA 42 TO 47 OF THE PAPER BOOK WH ICH IS AN ORDER IN ITA NO. 281/CHD/1998 FOR THE ASSESSMENT YEAR 1995-96 IN THE CASE OF ITO, WARD-1, PATIALA V S.K. TRADERS, RAJPURA. HE DREW O UR ATTENTION TO PAGE 52 OF THE PAPER BOOK WHEREBY THE SURRENDER AMOUNT H AS BEEN DISCLOSED. THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECIS IONS OF COORDINATE ITAT, CHANDIGARH BENCH:- 1) ITO, PATIALA V M/S DEHRA BROTHERS, RAJPURA, ITA NO. 156/99 FOR ASSESSMENT YEAR 1995-96 ORDER DATED 6.11.2003. 2) ITO PATIALA V M/S DEHRA BROTHERS, RAJPURA, ITA N O. 431/98 FOR ASSESSMENT YEAR 1994-95 ORDER DATED 9.1.2004 3) ITO PATIALA V M/S SACHDEVA TRADERS, RAJPURA, ITA NO. 32/99 FOR ASSESSMENT YEAR 1995--96 ORDER DATED 6.2.2004 4) ITO, PATIALA VS M/S SUNIL TRADERS, RAJPURA, ITA NO. 3/98 FOR ASSESSMENT YEAR 19950-96 ORDER DATED 20.7.2005. 4. LD. DR ON THE OTHER HAND REFERRED TO THE MANIP ULATIONS RESORTED TO BY THE ASSESSEE IN THE PRE AND POST SURVEY OPERATIO N. THE LD. DR 3 REFERRED TO ORIGINAL ASSESSMENT ORDER, PAGE 4, WHER EBY ADDITION OF RS. 4,47,818/- WAS MADE. LD. DR PLEADED THAT ASSESSE E HAS FAILED TO FILE ANY EXPLANATION SUPPORTED BY COGENT AND CREDIBLE EV IDENCE TO SUPPORT HIS RETRACTION OF SURRENDER. LD. DR PLACED RELIANCE ON THE ORDER OF CIT(A). 5. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE RELEVANT RECORDS INCLUDING THE PAPER BOOK F ILED BY THE ASSESSEE. THE BRIEF FACTS NECESSARY FOR DISPOSAL OF THE CASE ARE THAT A SEARCH WAS CONDUCTED AT THE BUSINESS PREMISES OF M/S PARTAP BH ANGU SOLVED PVT LTD. THE SEARCH OPERATION LED TO DISCOVERY OF DUPLICATE BOOKS OF ACCOUNT MAINTAINED BY THE PARTY SEARCHED WHEREBY PURCHASES MADE FROM VARIOUS PARTIES INCLUDING THE PRESENT ASSESSEE WERE RECORDE D. AS A RESULT OF SUCH INCRIMINATING DUPLICATE SET OF BOOKS OF ACCOUNT, TH E PRESENT ASSESSEE MADE A SURRENDER OF RS. 4,50,000/-. THE RETURN OF INCOM E WAS FILED DECLARING INCOME AT RS. 6,020/-. THE ASSESSING OFFICER FRAME D THE ASSESSMENT MAKING VARIOUS ADDITIONS AND FINALLY DETERMINED THE ASSESSED INCOME AT RS. 6,51,450/-. THE ASSESSING OFFICER INTER ALIA M ADE AN ADDITION OF RS. 4,27,818/- ON ACCOUNT OF ALLEGED UNDER BILLING OF R ICE BASMATI. THE REVENUE FILED APPEAL AGAINST THE ORDER OF CIT(A), B EFORE THE TRIBUNAL. THE APPEAL WAS DISPOSED OF BY HON'BLE TRIBUNAL VIDE ORDER DATED 1.4.2006 IN ITA NO. 282/CHANDI/1998. THE FINDINGS OF THE HO N'BLE TRIBUNAL AS RECORDED IN PARA 8 OF THE ORDER ARE REPRODUCED HERE UNDER:- 8. WE HAVE HEARD BOTH THE PARTIES AT LENGTH AND CAREFU LLY GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE ITSEL F HAD SURRENDERED A SUM OF RS. 4,50,000/- DURING THE COUR SE OF SURVEY AND ADMITTED THAT THERE WERE UNDER BILLINGS. LD. CIT(A) HAD NOT DISCUSSED, WHERE THE AMOUNT SURRENDE RED BY THE ASSESSEE HAD GONE. IT IS NOT CLEAR WHETHER THE SURRENDER SO MADE WAS ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND IF IT WAS ACCOUNTED FOR WHAT WAS ITS FA TE. IT IS NOT CLEAR WHY THE INCOME SURRENDERED HAD NOT INCREASED THE PROFITABILITY OF THE ASSESSEE. LD. C IT(A) 4 HAD NOT THROWN ANY LIGHT ON THE ISSUE. IT APPEARS THAT THE LD. CIT(A), SIMPLY ACCEPTED THE CONTENTION OF T HE ASSESSEE AND MADE THE DELETION. THE ASSESSING OFFI CER SPECIFICALLY POINTED OUT THE DEFECTS RELATING TO TH E PURCHASE RATE, SALE RATE AND THE VALUATION OF CLOSI NG STOCK. LD. CIT(A) ACCEPTED THIS CONTENTION OF THE ASSESSEE THAT THE PADDY WAS PURCHASED AT THE AVERAG E RATE OF 690.17 PER QTL IN THE EARLIER YEAR BUT HE H AD NOT DISCUSSED HOW MUCH PADDY WAS AVAILABLE WITH THE ASSESSEE OUT OF THAT INFERIOR QUALITY PURCHASED AND WHETHER THAT WAS USED FOR MANUFACTURING OF RICE OR NOT. IN OUR OPINION, THE LD. CIT(A) HAD NOT APPRECIATED THE FACTS IN THE RIGHT PERSPECTIVE AND MERELY HAD ACCEP TED THE CONTENTION OF THE ASSESSEE, AND DELETED THE ADD ITION. IT IS ALSO NOTICED THAT THE ASSESSING OFFICER WAS P RESENT BEFORE HIM BUT HE HAD NOT MENTIONED ABOUT THE ARGUMENTS PUT FORTH BY THE ASSESSING OFFICER TO DEF END HIS CASE. IN THE IMPUGNED ORDER, THE LD. CIT(A) HAD DISCUSSED THE CONTENTION OF THE ASSESSEE ONLY BUT N OT OF THE ASSESSING OFFICER. WE, THEREFORE, CONSIDERING THE TOTALITY OF FACTS, DEEM IT PROPER TO SET ASIDE THE ISSUE BACK TO THE FILE OF LD. CIT(A) FOR FRESH ADJUDICATI ON IN ACCORDANCE WITH LAW AFTER PROVIDING DUE AND REASONA BLE OPPORTUNITY OF BEING HEARD TO BOTH THE PARTIES. 6. THE LD. CIT(A) UPHLED THE ADDITION OF RS. 4,91,7 65/- MADE BY THE ASSESSING OFFICER. THE RELEVANT PARA CONTAINING TH E FINDINGS OF LD. CIT(A) IS REPRODUCED BELOW:- 7. FURTHER, THE PLEAS TAKEN BY ASSESSEE AT THIS STA GE IS SUPERFLUOUS IN NATURE AND IS AN AFTER THOUGHT AND T HAT CAN NOT BE CONSIDERED FOR RETRACTION OF DECLARATION WHICH THE ASSESSEE HIMSELF HAS MADE DURING THE COURSE OF SURVEY AND IS NOT TRYING TO RETRACT THE SAME ON ONE PRETEXT OR THE OTHER. H ENCE, CONSIDERING THE TOTALITY OF FACTS AND THE PECULIAR CIRCUMSTANCES OF THE CASE, IT IS NOTICED THAT THE T OTAL INCOME WAS DETERMINED BY THE ASSESSING OFFICER AT RS. 6,51 ,470/- AGAINST RETURNED INCOME OF RS. 6,020/- THUS, THE A GGREGATE ADDITION MADE TO THE RETURN INCOME AT RS. 6,45,450/ -. OUT OF THE ADDITION MADE, MY PREDECESSOR DELETED ADDITION OF RS. 4,27,808/- ON ACCOUNT OF UNDER BILLING OF RICE BASM ATI, RS. 18,585/- FOR UNDER BILLING OF NAKOO, RS. 6,930/- O N ACCOUNT OF UNDER BILLING OF PHUK. HE FURTHER ALLOWED PARTIAL R ELIEF IN RESPECT OF DIFFERENCE IN SURRENDER AMOUNT AS WORKED OUT BY THE ASSESSING OFFICER AT RS. 95,946/- BY REDUCING THE A DDITION OF RS. 82,879/-. SIMILARLY, THE ADDITION IN UNDER VAL UATION OF STOCK OF RICE BRAN WAS REDUCED TO RS. 1,933/- AGAIN ST RS. 10,913/- RESULTING IN AN ADDITION OF RS. 8,980/-. THE OTHER ADDITIONS MADE WERE SUSTAINED. FROM THE REVISED GR OUNDS OF APPEAL APPEARING IN THE FILE OF THE ASSESSING OFFI CER, IT IS NOTICED THAT THE SECOND APPEAL WAS NOT FILED IN RES PECT OF 5 ADDITION OF RS. 62,879/- IN RESPECT OF DIFFERENCE O F SURRENDER AMOUNT AND RS. 6,930/- IN RESPECT OF PHUK ACCOUNT. THUS, THE ADDITION AGGREGATING TO RS. 4,91,765/- WAS THE SUBJ ECT MATTER OF THE APPEAL BEFORE THE ITAT. AS PER DISCUSSION A BOVE, I RESTORE THE ORIGINAL ORDER OF THE ASSESSING OFFICER TO THE EXTENT OF ADDITIONS CONTESTED BEFORE THE TRIBUNAL B Y THE DEPARTMENT INVOLVING THE ABOVE AMOUNT OF RS. 4,91,7 65/-. 7. WE HAVE ALSO PERUSED THE DECISION OF THE COORDIN ATE BENCH IN THE CASE OF ITO, WARD-I, PATIALA V M/S DEHRA BROTHERS R AJPURA IN ITA NO. 156/CHD/1999 RELATING TO ASSESSMENT YEAR 1995-96 DA TED 6.11.2003. IN THIS CONTEXT, THE GROUND OF APPEAL APPEARING AT SR. NO.3 IS REPRODUCED HEREIN UNDER:- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS FURTHER ERRED IN REDUCING ADDITION O F RS. 2,73,072/- BY APPLYING REDUCED SALE RATE OF RIC E BASMATI. 8. THIS GROUND OF APPEAL IS ALSO THE GROUND OF APPE AL IN THE PRESENT APPEAL WHICH IS IDENTICAL AND DEALS WITH THE SALES OF BASMASTI RICE. THE PRESENT ASSESSEE IS SITUATED AT RAJPURA AND THE CAS E OF THE ASSESSEE RELIED UPON BY THE ASSESSEE NAMELY M/S DEHRA BROTHERS IS A LSO SITUATED AT RAJPURA. THE PRODUCT INVOLVED IN BOTH THE CASES IS THE SAME I.E. BASMATI RICE. THE ASSESSMENT YEAR IN BOTH THE CASES IS 199 5-96. BOTH THE CASE ARE LINKED TO M/S PARTAP BHANGU SOLVED PVT LTD. TH EREFORE, THE FINDINGS IN THE CASE OF M/S DEHRA BROTHERS, RAJPURA IN THE C ONTEXT OF GROUND NO.3 RAISED THEREIN IS APPLICABLE TO THE FACTS OF THE PR ESENT CASE AS IS EVIDENT FROM THE RELEVANT FINDINGS AS REPRODUCED HEREUNDER. THE GROUND OF APPEAL RAISED BY THE REVENUE IN THIS CASE WAS DISMISSED. 12. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO EXAMINED THE FACTS, EVIDENCE AND MATERIAL ON RECORD . IT IS A FACT THAT THE INCOME TAX AUTHORITIES HAD CARRIED OUT SEARCH AND SEIZURE ACTION AT THE BUSINE SS PREMISES OF THE ASSESSEE WHICH RESULTED IN SEIZURE OF INCRIMINATING DOCUMENTS. THE SEIZED DOCUMENTS SPECIFICALLY INDICATED THAT THE ASSESSEE HAD 6 UNDERSTATED SALE CONSIDERATION OF RICE BRAN AND PHUCK. THE ASSESSEE ALSO SURRENDERED INCOME OF RS. 4 LACS TO COVER SUCH DISCREPANCIES. HOWEVER, THE ASSESSEE HAD NOT ADMITTED UNDERSTATEMENT OF SALE CONSIDERATION OF MAIN ITEM I.E. RICE. THERE IS NO EVIDENCE IN THE SEIZED DOCUMENTS, WHICH COULD SHOW UNDERSTATEMENT OF SALE PROCEEDS OF RICE PR-106 OR BASMATI RICE. IN THE ABSENCE OF ANY SUCH MATERIAL, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN COMING T O THE CONCLUSION THAT ASSESSEE HAD UNDERSTATED SALE PRICE OF RICE PR-106 OR BASMATI RICE. THE ASSESSIN G OFFICER HAS RELIED ON CERTAIN COMPARABLE CASES. THESE WERE NOT CONFRONTED TO THE ASSESSEE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS. THEREFORE, SUCH ACTION OF THE ASSESSING OFFICER, WITHOUT CONFRONTIN G THESE CASES TO THE ASSESSEE, VIOLATED THE PRINCIPLE S OF NATURAL JUSTICE. APART FROM THE JUDGMENTS REFERRED TO BY THE LD. CIT(A) IN HIS IMPUGNED ORDER, THE JUDGMENT OF ANDHRA PRADESH HIGH COURT IN THE CASE OF YAGGINA VEERAGHAVULU & MAVULETI SOMARAJU & CO V CIT, SUPRA ALSO SUPPORTS THIS VIEW. MOREOVER, THE ASSESSEE HAS SUBMITTED PROPER EXPLANATION, WHICH INDICATED THAT THE AVERAGE SALE PRICE OF BASMATI RI CE BY EXCLUDING TWO SALES OUT OF THE OPENING STOCK AND UNPOLISHED / SEMI FINISHED RICE WORKED OUT TO RS. 1351.26 PER QUINTAL, WHICH EXCEEDED SALE PRICE SHOWN IN THE CASE OF M/S SACHDEVA TRADERS, I.E. ONE OF THE CASES REFERRED TO BY THE ASSESSING OFFICER O N PAGE 6 OF THE ASSESSMENT ORDER AND ALSO ESTIMATED B Y THE ASSESSING OFFICER. THE SALE PRICE OF UNPOLISH ED AND SEMI FINISHED RICE COULD NOT BE SAME. SIMILARL Y, THERE IS NO BASIS FOR MAKING ANY ADDITION ON ACCOUN T OF SALE OF RICE PR-106. EVEN IN THE CASES RELIED U PON BY THE ASSESSING OFFICER THERE IS SUBSTANTIAL VARIATION IN THE RATES. MOREOVER, SALE PRICE OF RIC E DEPENDS UPON THE QUALITY OF RICE, THE TIME AT WHICH SOLD AND THE FINANCIAL CAPACITY OF THE OWNER. THIS CAN NEVER BE THE SAME. FURTHER, WE NOTICE THAT ASSESSEE HAD DISCLOSED INCOME OF RS. 4 LACS AT THE TIME OF SEARCH. OUT OF THE SAME, ADDITION OF RS. 2,83,075/- REPRESENTED UNDERSTATEMENT OF SALE PROCEEDS OF RICE BRAN AND PHUCK. THIS STILL LEFT A BALANCE OF RS. 1,16,925/-, WHICH WOULD BE SUFFICIEN T TO COVER POSSIBLE SUPPRESSION IN THE SALE CONSIDERATION OF RICE. IN THE ABSENCE OF ANY EVIDE NCE AND MATERIAL ON RECORD AND FOR THE REASONS STATED ABOVE AND ALSO FOR THE REASONS STATED BY THE CIT(A) IN THE IMPUGNED ORDER WITH WHICH WE AGREE, WE ARE OF THE CONSIDERED OPINION THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION. THEREFORE, WE CONFIRM THE ORDER OF CIT(A) AND DISMISS BOTH THE GROUNDS OF REVENUES APPEAL. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. 7 9. HAVING REGARD TO THE FACTS OF THE PRESENT CASE A ND THE CASE RELIED UPON BY THE ASSESSEE, BEING SIMILAR IN NATURE, THE ISSUE AS RAISED BY THE ASSESSEE IN THE PRESENT APPEAL VIDE GROUND NO.1 IS SQUARELY COVERED BY THE ABOVE DECISION OF THE COORDINATE BENCH. INCIDE NTALLY, IT IS MENTIONED THAT THE OTHER CASES RELIED UPON BY THE ASSESSEE RE LATE TO VALUATION OF CLOSING STOCK. IN VIEW OF THE ABOVE DISCUSSION, TH E ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH REPRODUCED ABOVE. IN VIEW OF THIS , THE ORDER OF THE CIT(A) CANNOT BE SUSTAINED. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 TH DAY OF NOVEMBER, 2011. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 17 TH NOVEMBER, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR