ITO, Ward - 50(1), Kolkata, Kolkata V. M/s. Jamuna Bricks Unit - IV, North 24 Parganas

ITA 1185/KOL/2010

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0476 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2010
• Court: TRIBUNAL
• Keywords: Unexplained investment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE SHRI P.K.BANSAL, AM & SHRI MAHAVIR SINGH, JM ] ITA NO .1185/KOL/2010 ASSESSMENT YEAR : 2005 - 06 ( A PPELLANT ) ( RESPONDENT) I.T.O., WARD - 50(1 ) - VERSUS - M/S. JAMUNA BRICKS UNIT - IV, KOLKATA KOLKATA (PAN: AAEFG 2945 B) FOR THE APPELLANT: SHRI KANHIYA LAL KANAK, SR.DR FOR THE RESPONDENT: NONE DATE OF HEARING : 25.05.2015 DATE OF PRONOUNCEMENT : 25. 05.2015. ORDER PER SHRI MAHAVIR SINGH, JM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST ORDER OF THE CIT(A) - XXXII, KOLKATA IN APPEAL NO . 194 /CIT(A) - XXXII / 08 - 09/ WD - 50(1)/07 - 08/KOL DATED 18.01 .2010. ASSESSMENT WAS FRAMED BY I.T.O., WARD - 50(1), KO LKATA U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT ) FOR A.YR . 2005 - 06 VIDE ITS ORDER DATED 26.12.2007. 2. THE ONLY ISSUE IN THIS APPEAL OF THE REVENUE IS AGAINST ORDER OF CIT(A) IN DELETING THE ADDITION MADE BY AO ON ACCOU NT OF VIOLATION OF CLOSING STOCK AMOUNTING TO R S.28,85,940/ - . FOR THIS THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - A) THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.28,85,940/ - ON ACCOUNT OF VALUATION OF CLOSING STOCK OF BRICK WHICH WAS ADDED BY THE A.O. IN THE ASSESSMENT ORDER AS UNEXPLAINED INVESTMENT IN STOCK. B) THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.28,85,940/ - WITHOUT GIVING COGNIZANCE TO THE FACT THAT THE ASSESSEE DID NOT PRODUCE ANY BOOKS OF ACCOUNT BEFORE A.O. C) TH E LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.28,85,940/ - WITHOUT CONSIDERING THE FACT THAT THE ASSESSEE HAS NOT RAISED ANY OBJECTION DURING SURVEY OPERATION AND SUBSEQUENTLY INVESTIGATION THAT RITA SINHA HAD NO RIGHT TO SIGN THE SURVEY AUTHORIZATION A ND SUBMISSION OF AFFIDAVIT IN RESPECT OF RITA SINHA WHICH WAS AFTER THOUGHT. ITA NO. 1185/KOL/2010 M/S.JAMUNA BRICKS UNIT - IV A.YR. 2005 - 06 2 D) THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.28,85,940/ - WITHOUT CONSIDERING THE FACT THAT IT WILL NOT BE POSSIBLE THAT SURVEY IS BEING CONDUCTED IN THE BUSINESS PREMI SES OF THE FIRM WITHOUT NOTICE OF THE OWNERS AS WELL AS THE PERSON WHO WAS PRESENT IN THE PREMISES AND SIGNING THE AUTHORIZATION WITHOUT GETTING CONSENT OF THE OWNER OF THE FIRM. 3. THE BRIEF FACTS RELATING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE IS A REGISTERED FIRM CARRYING ON BUSINESS OF BRICK FIELD . A SURVEY U/S 133 A OF THE ACT WAS CARRIED OUT IN THE BUSINESS PREMISES OF THE ASSESSEE ON 24.08.2004. AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE BOOKS OF ACCOUNT THAT THE STOCK AS O N 24.08.2004 AS PER BOOKS OF ACCOUNT IS AT RS.5,57,260/ - . BUT AS PER INVENTORY FOUND DURING THE COURSE OF SURVEY THE STOCK IS INVENTORISED AND VALUED AT RS.34,73,200/ - . ACCORDING TO AO THERE IS LESS RECORDING OF STOCK IN THE BOOKS OF ACCOUNT TO THE EXTENT OF RS.29,15,240, WHICH WAS FOUND TO BE EXCESS STOCK DURING THE COURSE OF SURVEY ON PHYSICAL BASIS AND HENCE THE SAME SHOULD BE ADDED. THE ASSESSEE REPLIED THAT SURVEY WAS CONDUCTED IN THE PRESENCE OF A LADY NAMELY SMT. RITA SINHA, WHO HAPPENED TO BE A HO USEWIFE AND SISTER - IN - LAW OF ONE OF THE PARTNERS HAVING NO IDEA OF BRICK FIELD. BUT ACCORDING TO AO, SINCE NO OBJECTION WAS RAISED AT THE TIME OF SURVEY AND INVENTORY OF THE STOCK WAS PREPARED PHYSICALLY , NOW THE CONTENTION OF THE ASSESSEE CANNOT BE ACCEPT ED. ACCORDINGLY HE TREATED THE VALUE OF STOCK PHYSICALLY FOUND DURING THE COURSE OF SURVEY AS UNEXPLAINED INVESTMENT AMOUNTING TO RS.28,85,940/ - . AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). CIT(A) DELETED THE ADDITION ON BOTH THE COUNTS THAT THE S TOCK STATEMENT WAS TAKEN BEHIND THE BACK OF THE ASSESSEE AND THAT ALSO BEFORE AN UNAUTHORIZED PERSON NAMELY SMT. RITA SINHA . E VEN ON MERITS , THE ASSESSEE HAS RECONCILED THE ENTIRE FIGURES. CIT(A) OBSERVED IN PARAS 4,5 AND 6 AS UNDER : - 4. I HAVE CO NSIDERED THE SUBMISSION OF THE AUTHORISED REPRESENTATIVE, PERUSED THE ASSESSMENT AND SURVEY RECORDS, REMAND REPORT AND ALSO RELEVANT MATERIALS ON RECORD. IN THIS CASE, I FIND THAT, ADMITTEDLY ON THE DATE OF SURVEY NONE OF THE PARTNERS NOR ACCOUNTANT OF THE FIRM WAS PRESENT. THE ADDITION WAS ONLY ON ACCOUNT OF THE EXCESS STOCK OF BRICKS TAKEN AS PER SURVEY TEAM AND AS WITNESSED BY SMT RITA SINHA. THUS, THE ONLY BASIS OF THE ADDITION WAS THE STOCK TAKING IN THE PRESENCE OF THE LADY CLAIMED TO HAVE BEEN THE WI FE OF THE PARTNERS. UNFORTUNATELY, IN THIS CASE THE PERSON WHO IS THE INDE PENDENT WITNESS OF THE ASSESSING OFFICER HAS ITSELF VIDE AN AFFIDAVIT STATED THAT SHE WAS NOT CONNECTED TO THE BUSINESS OF THE ASSESSE NOR WAS SHE THE WIFE OF THE PARTNER AND NOR WAS SHE AWARE OF THE CONTENTS OF THE INVENTORY MADE BY THE SURVEY TEAM ON THE DATE OF SURVEY. FURTHER THE ASSESSING OFFICER IN HIS REMAND REPORT DATED 07/10/2009 HAS STATED THAT THE AUTHENTICITY OF THE AFFIDAVIT CANNOT BE DENIED . ONCE THE WITNESS TO THE C REDENTIALS OF THE SURVEY PROCEEDINGS HAS HERSELF DISPUTED THE ENTIRE PROCEEDING AND THE ITA NO. 1185/KOL/2010 M/S.JAMUNA BRICKS UNIT - IV A.YR. 2005 - 06 3 KNOWLEDGE OF THE DOCUMENTS SIGNED BY HER AND THE ASSESSING OFFICER HAS ACCEPTED SUCH DENIAL OF THE WITNESS TO BE AUTHENTIC, THEN THE EVIDENTIARY VALUE OF THE INVENTORY TAKEN BY THE SURVEY TEAM FAILS. THEREFORE, SUCH INVENTORY, PREPARED AT THE TIME OF SURVEY, LOSES ITS AUTHENTICITY TO A GREATER EXTENT AND THUS, CANNOT BE RELIED UPON FOR THE PURPOSE OF ASSESSMENT. 5. IT IS WELL SETTLED THAT ANY ASSESSMENT OF A QUASI JUDICIAL AUTHORITY HAS TO BE BASED ON MATERIAL. IN THIS CASE THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER IS THE INVENTORY STATEMENT AS COUNTER CERTIFIED BY SMT RITA SINHA WHICH HAS FOR THE FACTS AND CIRCUMSTANCES AS DISCUSSED ABOVE FOUND NOT BE FIT T O BE CONSIDERED AS RELIABLE MATERIAL FOR ASSESSMENT. 6. EVEN OTHERWISE, ON MERITS ALSO, I FIND THAT THE CERTIFICATE OF THE CAPACITY OF THE DUMPER GIVEN BY THE CHARTERED ENGINEER HAS NOT BEEN DISPUTED BY THE ASSESSING OFFICER. ONCE THIS FACT REMAINS UN DISPUTED THEN THE ESTIMATE OF 9,21,600 BRICKS IN THE DUMPER ITSELF IS FOUND TO BE IMPOSSIBLE, AND THUS, THE VALUE OF STOCK AS DETERMINED BY THE ASSESSING OFFICER ON THIS COUNT ALONE HAS TO BE REDUCED BY RS.11,05,020 (921600 - 368640 *2). FURTHER THE STOCK OF 800,000 BRICKS CLAIMED TO HAVE BEEN FOUND IN THE OPEN ALSO APPEARS EXCESSIVE CONSIDERING HUMAN PROBABILITIES AND THE FACT THAT BASED ON THE PAYMENT OF ROYALTY TO THE GOVERNMENT THE MAXIMUM BRICK PRODUCTION FOR THE ENTIRE YEAR, EVEN WITHOUT CONSIDERING ANY BREAKAGE, WAS APPROXIMATELY 800,000 BRICKS. WHILE THE STOCK ON THE DATE OF SURVEY, AS PER THE SURVEY TEAM, WAS ASSESSED TO BE 17,21,600 BRICKS. THIS ITSELF DEMONSTRATES THAT THE INVENTORY TAKEN IN THE COURSE OF SURVEY WAS PURELY ON GUESS WORK AND THE ASSE SSING OFFICER HAS NOT CONDUCTED THE STOCK VERIFICATION PROPERLY. FOR THE FAILURE OF THE ASSESSING OFFICER TO DISCHARGE HIS DUTIES PROPERLY THE ASSESSEE CANNOT BE MADE TO SUFFER. FURTHER THE ASSESSING OFFICER HAS EVEN FAILED TO EXPLAIN WHY THE VALUE OF BRIC K HAS BEEN ESTIMATED @RS.2 PER PIECE WHILE THE COST PER BRICK AS ACCEPTED BY HIM WAS RS.0.87 PAISE PER BRICK. IN VIEW OF THE ABOVE DISCUSSIONS, I AM OF THE VIEW THAT THE ADDITION OF RS.28,85,940 (ON ACCOUNT OF VALUATION OF THE BRICKS) IS NOT BASED ON ANY COGENT MATERIAL AND THE SAME DESERVES TO BE DELETED. HENCE, THE SAME IS DELETED. 4. NONE APPEARED ON BEHALF OF THE ASSESSE. WE HAVE HEARD THE LD. DR AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE SURVEY PARTY HAS ALREADY RECORDED THE STATEMENT OF ONE SMT.RITA SINHA. ADMITTEDLY SHE IS A HOUSEWIFE AND SHE HAS NO CONNECTION WHATSOEVER WITH THE BUSINESS. EVEN NO PARTNER WAS CONFRONTED EITHER DURING THE COURSE OF SURVEY OR DURING THE ASSESSMENT PROCEEDINGS . EVEN THE DOCUMENTS FOUND DU RING THE COURSE OF SU RVEY IN RESPECT OF EXCESS STOCK WERE NOT CONFRONTED TO THE ASSESSEE OR ITS PARTNERS. EVEN INVENTORISED STO CK I.E. EXCESS STOCK WAS NEVER CONFRONTED TO ANY OF THE PARTNERS OF THE FIRM. IN SUCH CIRCUMSTANCES WE FIND THAT CIT(A) HAS RIGH TLY NOT RELIED UPON THE SURVEY MATERIAL AND DELETED THE ADDITION. COMING TO THE MERITS OF THE CASE IT IS FOUND THAT THE REVENUE COULD NOT PROVE HOW THE ESTIMATION OF BRICKS AMOUNTING TO 9,21,600 BRICKS CAN BE STORED IN DUMBER ITSELF. FURTHER 8,00,000 BRICK S WERE FOUND IN OPEN THAT ALSO DURING THE RAINY SEASON IN ITA NO. 1185/KOL/2010 M/S.JAMUNA BRICKS UNIT - IV A.YR. 2005 - 06 4 AUGUST. EVEN OTHERWISE AS ON THE DATE OF SURVEY THE ASSESSED BRICKS FOUND IN OPEN IS 8,00,000 AND FOUND IN DUMPER WAS 9,21,600. THE TOTAL COMES TO 17,21,600 WHICH IS PURELY A GUESS WORK AND NO DEFIN ITE PAPERS WERE PREPARED OR INVENTORISED DURING THE COURSE OF SURVEY, WHICH SHOWS THAT THERE IS EXCESS STOCK. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT CIT(A) HAS RIGHTLY DELETED THE ADDITION. WE CONFIRM THE SAME. THUS THE APPEAL OF THE REVENUE IS DIS MISSED. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNC ED IN TH E OPEN COURT . SD/ - SD/ - [ P.K.BANSAL ] [ MAHAVIR SINGH ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 25 TH MAY, 2015 R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO : 1 . M/S. JAMUNA BRICKS UNIT - IV, SINTHI, KAZIPARA, BARASAT, 24 - PRGS (N), 700125 . 2 THE I.T.O. - WARD - 50(1), KOLKATA 3 . THE CIT, 4. THE CIT(A) - XXXII, KOLKATA 5 . C.I.T.( DR ) , KOLKATA BENCHES, KOLKATA TRUE COPY , BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES