PARMANAND RAMAVTAR AGRAWAL, Nagpur V. PR. CIT- 1, Nagpur

ITA 141/NAG/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3104 (ITAT-NAGPUR)
• Duration Of Justice: 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 24-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 143(3); 133A; 263

Judgement Text

1 ITA NO. 141/NAG/2015 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR. BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO. 141/NAG/2015 ASSESSMENT YEAR : 2010 - 11. PARMANAND RAMAVTAR AGRAWAL, PR. COMMISSIONER OF INCOME - TAX - 1, NAGPUR. VS. NAGPUR. PAN AAOPA7025M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MANOJ MORYANI. RESPONDENT : SHRI NARENDRA KANE. DATE OF HEARING : 04 - 01 - 2016 DATE OF PRONOUNCEMENT : 26 TH FEBRUARY, 2016. O R D E R PER MUKUL K. SHRAWAT, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM THE ORDER PASSED BY LEARNED PR. COMMISSIONER OF INCOME - TAX - I, NAGPUR PASSED U/S 263 OF I.T. ACT DATED 27 TH MARCH, 2015 . 2. THE APPELLA NT HAS CHALLENGED THE VALIDITY OF THE IMPUGNED ORDER PASSED U/S 263 ON THE GROUND THAT THERE WAS NO DIFFERENCE IN THE STOCK OR CASH AS ALLEGED AS NOTHING WAS DETECTED DURING THE COURSE OF SURVEY, HENCE THE AO WAS CORRECT IN NOT DISTURBING THE BOOK RESUL T S. IN THE GROUNDS T HE APPELLANT HAS PLEADED THAT THE ORDER OF THE AO WAS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2 ITA NO. 141/NAG/2015 3. FROM THE RECORDS WE HAVE NOTED THAT AN ASSESSMENT U/S 143(3) FOR A SSESSMENT YEAR 2010 - 11 WAS PASSED BY THE AO DATED 28 - 12 - 2012. THE ASSESSEE IS AN INDIVIDUAL AND IN THE BUSINESS OF WHOLESALE TRADING OF FOOD GRAINS , PU L SES, COTTON ETC. A RETURN OF INCOME WAS FILED AT RS.24 LAKHS. THE TOTAL INCOME WAS ASSESSED AT RS.25 LAKHS. THE ALLEGATION OF THE LEARNED COMMISSIONER WHILE INVOKING THE REVISIONAL JURISDICTION WAS THAT A SURVEY U/S 133A WAS CONDUCTED ON 11 - 11 - 2009. AT THE TIME OF SURVEY THE ASSESSEE DECLARED AN INCOME OF RS.25 LAKHS WHICH WAS NOT INCLUDED IN THE INCOME DECLARED BY THE ASSESSEE. ACCORDING TO THE LEARNED COMMISSIONER THE AO HA D FAILED TO TAX THE SAID AMOUNT IN THE ASSESSED INCOME. AFTER CONSIDERING THE SUBMISSIONS, LEARNED COMMISSIONER HAS DIRECTED TO RECOMPUTE THE ASSESSMENT IN THE FOLLOWING MANNER : 3. ON THE BASIS OF WRITTEN SUBMISSIONS AND THE ARGUMENTS OF THE LD. AR, THE VARIOUS ISSUES RAISED IN THE SHOW CAUSE NOTICE ARE DISPOSED OF AS UNDER: (I) AS REGARDS THE DISCLOSURE OF RS. 25 LAKHS, IT IS SEEN THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED DUR ING THE COURSE OF SURVEY ON 11/11/2009 . IN Q . NO. 29, THE AUTHORISED OFFICER HAD POINTED OUT THE DIFFERENCE IN STOCK TO THE ASSESSEE. THE ASSESSEE HAD AGREED TO THE DIFFERENCE IN VALUATION AND IN REPLY TO Q. NO. 13, HE HAD MADE D I SCLOSURE OF ADDITIONAL INCOME OF RS. 25 LAKHS ON ACCOUNT OF DISCREPANCIES IN BOOKS OF ACCOUNT AGAINST STOCK AND CASH. HOWEVER, IN THE FINAL ACCOUNTS FILED WITH THE RETURN OF INCOME, THE ASSESSEE HAD ' NOT MADE ' ANY DISCLOSURE OF ADDITIONAL I NCOM E. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO DID NOT MAKE ANY ENQUIRY REGARDING NON - REFLECTION OF THE SAID DISCLOSURE OF ADDITIONAL INCOME . RATHER IN THE OFFICE NOTE, IT HAS BEEN STATED BY THE AD THAT THERE WAS NO DISCLOSURE OF THE ADD I T I ONAL I NCOME IN THE CASE WHICH IS CONTRARY TO THE FACTS AVAILABLE ON RECORD . THERE IS NOT ONLY DISCLOSURE OF ADDITIONAL INCOME, BUT THE ASSESSEE HAD ALSO FILED LET TE R DATED 24/2/2010 BEFORE THE AD EXPLAINING THE DISCREPANCIES IN STOCK ON THE BAS I S OF WH I CH ADDITIONAL INCOME WAS DISCLOSED. THE FACT OF DISCLOSURE AND THE ASSESSEE ' S EXPLANATION AS REGARDS THE SAID DISCREPANCIES HAS NOT BEEN CONSIDERED BY THE AO WHILE COMPLETING THE ASSESSMENT UJS 143(3). CLEARLY, THE ASSESSMENT HAS BEEN COMPLETED WITHOUT APPLICATION OF MIND. ACCORDINGLY, THE ASSESSMENT ORDER IS O NS I DERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ON THIS ISSUE. THE AO IS DIRECTED TO REDO THE ASSESSMENT AFTER TAKING INTO CONSIDERATION THE DISCLOSURE OF ADD I TIONAL INCOME OF RS. 25 LAKHS MADE B THE ASSESSEE DURING THE SURVEY AND THE ASSESSEE'S LETTER DATED 24/2/2010 EXPLAINING THE D ISCREPANCIES IN THE CLOSING STOCK. THE ASSESSEE SHOULD BE GIVEN ADEQUATE OPPORTUNITY BY THE AD TO EXPLAIN HIS CASE. 3 ITA NO. 141/NAG/2015 3.1 OUR ATTENTION HAS ALSO BEEN DRAWN THAT AS PER THE NOTICE U/S 263 THERE WAS AN ANOTHER ISSUE OF INVESTME NT MADE IN PURCHASE OF PROPERTY. H OWEVER, AFTER CONSIDERING THE REPLY OF THE ASSESSEE AND THE EVIDENCES PLACED, LEARNED COMMISSIONER HAS DROPPED THE PROCEEDINGS AS INITIATED U/S 263 OF I.T. ACT. THEREFORE, THE ONLY ISSUE FOR OU R CONSIDERATION IS REVOLVING AROUND THE NON DISCLOSURE OF RS.25 LAKHS STATED TO BE OFFERED AT THE TIME OF SURVEY , ALLEGED LY NOT TAXED BY THE AO. 4. FROM THE SIDE OF THE APPELLANT, LEARNED A.R. MR. MANOJ MORYANI APPEARED AND AT THE OUTSET DRAWN OUR ATTENTIO N ON THE STATEMENT WHICH WAS RECORDED AT THE TIME OF SURVEY. ACCORDING TO THE STATEMENT, THE ASSESSEE HAD DISCLOSED RS.25 LAKHS TO BUY MENTAL PEACE. HENCE LEARNED A.R. HAS PLEADED BEFORE US THAT THIS STATEMENT WAS RECORDED IN THE EARLY MORNING HOURS WHEN T HE ASSESSEE WAS TOTALLY EXHAUSTED AND OFFERED THE SAID AMOUNT SIMPLY TO CONCLUDE THE SURVEY PROCEEDINGS, ALTHOUGH NO INCRIMINATING MATERIAL WAS DETECTED BY THE SURVEY PARTY. THE MAIN ARGUMENT OF LEARNED A.R. BEFORE US IS THAT MERELY ON THE BASIS OF A STATE MENT WITHOUT HAVING ANY CORROBORATIVE EVIDENCE , HA D NO EVIDENTIARY VALUE TO TAX THE SAID OFFERED AMOUNT IN THE HANDS OF THE ASSESSEE. FOR THIS LEGAL PROPOSITION RELIANCE WAS PLACED ON THE DECISION OF CIT VS. S. KHADER KHAN SON 352 ITR 480 (SC). 4.1 LEARNE D A.R. HAS ALSO PLEADED THAT THE ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED U/S 44AB OF THE ACT. THE STOCK STATEMENT WAS DULY RECONCILED AND NO DISCREPANCY WAS FOUND EITHER AT THE TIME OF SURVEY OR EVEN DURING THE COURSE OF ASSESSMENT PROCEEDINGS. LEARNED A.R. HAS ALSO PLEADED THAT ALTHOUGH IT IS CORRECT THAT THE AO HAS NOT MENTIONED IN THE ASSTT. ORDER THE FACT REGARDING THE DISCLOSURE MADE DURING THE COURSE OF SURVEY IN THE ASSESSMENT ORDER BUT THAT WA S NOT THE FAULT OF THE ASSESSEE. THE ASSESSEE, ON HIS PART, HAD SUBMITTED THAT 4 ITA NO. 141/NAG/2015 THE EXPLANATION TO THE AO. R ATHER THE AO HAD CHOSEN NOT TO DISCUSS THE SAME AFTER CONSIDERING THE ACCOUNTS AND THE DETAILS FURNISHED BY THE ASSESSEE. FOR THIS LEGAL PROPOSITION RELIANCE WAS PLACED ON THE DECISION OF CIT VS. KRISH NA CAPBOX (P) LTD. 372 ITR 310 (ALL.). 5. FROM THE SIDE OF THE REVENUE LEARNED D.R. MR. NARENDRA KANE APPEARED AND SUPPORTED THE DIRECTION S GIVEN BY LEARNED COMMISSIONER PRIMARILY ON THE GROUND THAT THE AO HAD ADMITTEDLY FAILED TO DISCUSS THE OUTCOME OF TH E SURVEY IN THE ASSESSMENT ORDER AND BECAUSE OF THE SAID REASON THE INCOME WAS WRONGLY ASSESSED CAUSING LOSS TO THE REVENUE. 6. IN THE LIGHT OF THE ABOVE FACTUAL AND LEGAL BACKGROUND, WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. W E HAVE CAREFULLY PERUSED T HE STATEMENTS RECORDED AT THE TIME OF SURVEY. ON PERUSAL WE HAVE NOTICED THAT IN NONE OF THE STATEMENTS THERE WAS ANY DISCUSSION ABOUT THE NATURE OF DISCREPANCY IN THE STOCK AT ALL HAVE BEEN FOUND BY THE SURVEY PARTY. THERE IS NO MENTION SPECIFYING THAT WHAT WAS THE AMOUNT OF STOCK AS PER THE BOOKS AND WHAT WAS THE VALUE OF THE STOCK FOUND AT THE TIME OF SURVEY ? WE HAVE ALSO NOTED THAT THERE WAS NO MENTION THAT WHETHER ANY INVENTORY OF THE STOCK WAS MADE AT THE TIME OF SURVEY SO AS TO ARRIVE AT A FI GURE OF DISCREPANCY IN THE VALUE OF THE STOCK . W HICH MEANS , THAT THE SURRENDER OF RS.25 LAKHS WAS AN UNSUPPORTED SURRENDER, HENCE IT CAN BE SAID TO BE A BALD STATEMENT HAVING NO CREDENCE IN THE EYES OF LAW. WE HAVE BEEN INFORMED THAT THE SAID SURRENDER WA S EXTRACTED FROM THE ASSESSEE IN THE MID DLE OF NIGHT AT AROUND 4 - O CLOCK IN THE MORNING. WITHOUT FURTHER ELABORATING THIS POINT, WE CONFINE OURSELVES TO THE LEGAL ISSUE THAT WHETHER SUCH STATEMENT CAN BE MADE THE BASIS FOR INVOCATION OF REVISIONAL JURISDIC TION U/S 263 OF THE I.T. ACT. THIS IS NOT THE CASE OF THE LEARNED COMMISSIONER THAT AT THE TIME OF SURVEY CERTAIN SPECIFIC DISCREPANCY WAS NOTICED BY THE SURVEY PARTY WHICH REMAINED TO BE TAXED BY THE AO. THE ONLY ALLEGATION OF THE LEARNED COMMISSIONER IS THAT THE OFFER OF RS.25 LAKHS WAS LEFT TO BE TAXED BY THE AO. 5 ITA NO. 141/NAG/2015 HOWEVER, THE LEARNED COMMISSIONER HAS NOT GIVEN ANY FINDING THAT THE SAID OFFER WAS SUPPORTED BY ANY CORROBORATIVE EVIDENCE. THEREFORE, IN THE ABSENCE OF ANY SUCH FINDING, WE ARE OF THE CONSIDER ED OPINION THAT THE LEGAL PROPOSITION PRONOUNCED BY THE HONBLE SUPREME COURT IN THE CASE OF KHADER KHAN SON 352 ITR 480 SHALL APPLY WHEREIN IT WAS HELD AS UNDER : IN THE INSTANT CASE, THERE WAS A SURVEY OPERATION CONDUCTED UNDER S. 133A IN THE ASSESSEES PREMISES AND A STATEMENT WAS RECORDED FROM ONE OF THE PARTNERS. ASSUMING THERE WERE DISCREPANCIES AND IRREGULARITIES IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE, AN OFFER OF ADDITIONAL INCOME FOR THE RESPECTIVE ASSESSMENT YEARS WAS MAD E BY THE PARTNER OF THE FIRM. BUT, SUCH STATEMENT, IN VIEW OF THE SCOPE AND AMBIT OF THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY ACTION UNDER S. 133A SHALL NOT HAVE ANY EVIDENTIARY VALUE, AS RIGHTLY HELD BY THE CIT(A) AND THE TRIBUNAL, SINCE SUC H STATEMENT WAS NOT ATTACHED TO THE PROVISIONS OF S. 133A. IT COULD NOT BE SAID SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY ONE OF THE PARTNERS OF THE ASSESSEE FIRM THAT THE DISCLOSED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. SINCE THER E WAS NO MATERIAL ON RECORD TO PROVE THE EXISTENCE OF SUCH DISCLOSED INCOME OR EARNING OF SUCH INCOME IN THE HANDS OF THE ASSESSEE, IT COULD NOT BE SA I D THAT THE REVENUE HAD LOST LAWFUL TAX PAYABLE BY THE ASSESSEE. A POWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUTHORITIES ONLY UNDER S. 132(4) IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE IT ACT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CONFER SUCH POWER TO EXAMINE A PERSON ON OATH, HAS EXPRESSLY PR OVIDED FOR IT, WHEREAS S . 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH. THUS, IN CONTRADISTINCTION TO THE POWER UNDER S. 133A, S. 132(4) ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DUR ING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE IT ACT. ON THE OTHER HAND, WHATEVER STATEMENT RECORDED UNDER S. 133A IS NOT GIVEN AN EVIDENTIARY VALUE. WHAT IS MORE RELEVANT, IN THE INSTANT CASE, IS THAT THE ATTENTION OF THE CIT(A) AND THE TRIBUNAL WAS RIGHTLY INVITED TO THE CIRCULAR OF THE CBDT DT. 10TH MARCH, 2003 WITH REGARD TO THE CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS. - PULLANGODE RUBBER PRODUCE CO. LTD. VS. STATE OF KERALA 1972 CT R (SC) 253 : (1973) 91 ITR 18 (SC), PAUL MATHEWS & SONS VS. CIT (2003) 181 CTR (KER) 207 : (2003) 263 ITR 101 (KER) AND CIT VS. G.K.SENNIAPPAN (2006) 203 CTR (MAD) 447 : (2006) 284 ITR 220 (MAD) RELIED ON. 6 ITA NO. 141/NAG/2015 7. OUR ATTENTION HAS ALSO BEEN DRAWN ON THE EXAMINATION CONDUCTED BY THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE HAVE BEEN INFORMED THAT VIDE PARA 4 OF THE ASSESSMENT ORDER, THE AO HA D DISCUSSED THE T RADING R ESULTS AND COMPARED THE PROFITS OF THE YEAR UNDER CONSIDERATION WITH THE PROFIT S OF THE PAST YEARS. THE AO HAS, THEREFORE, DULY APPLIED HIS MIND ON THE BOOK RESULTS OF THE ASSESSEE WHICH WERE A TRUE AND CORRECT PICTURE OF THE BUSINESS CONDUCTED BY THE ASSESSEE, PLEADED BY LEARNED A.R. THIS PLEA OF THE ASSESSEE GETS SUPPORT FROM THE V IEW EXPRESSED BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF KRISHNA CAPBOX P. LTD. 372 ITR 310 WHEREIN IT WAS PRONOUNCED, QUOTE . I F A QUERY IS RAISED DURING ASSESSMENT PROCEEDINGS AND RESPONDED TO BY THE ASSESSEE, THE MERE FACT THAT IT IS NOT DEALT WITH IN THE ASSESSMENT ORDER WOULD NOT LEAD TO A CONCLUSION THAT NO MIND HAD BEEN APPLIED TO IT. UNQUOTE. THEREFORE, WE HEREBY CONCLUDE THAT EVEN IF THE AO MAY PROCEED TO REASSESS THE INCOME FOLLOWING THE DIRECTION OF LEARNED COMMISSIONER, NO FRUITFUL RE SULT SHALL BE OBTAINED DUE TO LACK OF EVIDENCE AGAINST THE ASSESSEE. LEARNED COMMISSIONER CANNOT INVOKE THE REVISIONAL POWERS MERELY TO START R OVING ENQUIRY. WE, THEREFORE, HOLD THAT THIS IS NOT A FIT CASE WHERE THE LEARNED COMMISSIONER W AS JUSTIFIED IN IN VOK ING THE JURISDICTION U/S 263 OF I.T. ACT. THE IMPUGNED ORDER IS HEREBY QUASHED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) ACCOUNTANT MEMBER JUDICIAL MEM BER NAGPUR, DATED: 26 TH FEBRUARY, 2016. 7 ITA NO. 141/NAG/2015 COPY FORWARDED TO : 1. SHRI PARMANAND RAMAVTAR AGRAWAL, C/O ADV. MANOJ MORYANI, 1 ST FLOOR, SUDAMA BHAVAN, BEHIND SUT MARKET, GANDHIBAGH, NAGPUR - 4400 02. 2. A.C.I.T. 3. PR. COMMISSIONER OF INCOME - TAX - I, NAGPUR. 4. D.R., ITAT, NAGPUR. 5. GUARD FILE TRUE COPY BY ORDER WAKODE. ASSISTANT REGISTRAR, ITAT, NAGPUR