Shri Dilipbhai P. Thakkar (HUF), Ahmedabad V. The Income tax Officer, Ward-2(4), Ahmedabad

ITA 1480/AHD/2004

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9348 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-07-2009
• Assessment Year: 2000-2001
• Appeal Filed On: 05-05-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOVIND SINGHAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Unexplained investment; Income from undisclosed sources; Corroborative evidences; Assessment record; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI R.V. EASWAR, VICE PRESIDENT AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 29.07.09 DRAFTED ON: 17.08.09 ITA NO.1480/AHD/2004 ASSESSMENT YEAR : 2000-01 SHRI DILIPBHAI P.THAKKAR (HUF) KARTA, PROPRIETOR OF DILIP TEXTILES 452/41/42, PREM GATE KAPAD BAZAR AHMEDABAD VS. THE ITO, WARD-2(4) AHMEDABAD PAN/GIR NO. :AAAHT 3105 P (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI S.N. DIVATIA RESPONDENT BY: SHRI GOVIND SINGHAL O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDE R OF THE LD.CIT(APPEALS)-VI, AHMEDABAD DATED 13/01/2004 PA SSED FOR ASSESSMENT YEAR 2000-01. THE FOLLOWING GROUNDS HAV E BEEN TAKEN BY THE ASSESSEE:- 1. THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ONF ACTS IN CONFIRMING ACTION OF THE AO IN ADDING RS.10,19,959 /- ON ACCOUNT OF ALLEGED UNEXPLAINED INVESTMENT IN STOCK U/S.69 OF THE ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 2 - ACT. UNDER THE FACTS AND THE CIRCUMSTANCES, LD. CI T(A) OUGHT TO HAVE DELETED THE SAID ADDITION. 2. THE LD. CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACT S IN NOT CONSIDERING THE EXPLANATIONS AND THE DOCUMENTARY EV IDENCE SUBMITTED IN THE ASSESSMENT PROCEEDINGS TO SHOW TH E CORRECT VALUATION OF THE STOCK FOUND AT THE TIME OF THE SUR VEY. 3. THE LD. CIT(A) AS WELL AS LD. AO HAVE ERRED IN NOT TAKING INTO ACCOUNT SEVERAL LEGAL INFIRMITIES IN THE PROCEDURE FOLLOWED TO RECORD THE STATEMENT OF THE APPELLANT U/S.131(2); A ND THAT SUCH STATEMENT WHICH WAS RECORDED IN CLEAR VIOLATION OF THE PROCEDURE PRESCRIBED UNDER LAW HAS NO EVIDENTIARY V ALUE AND THE SAME DESERVED TO BE IGNORED. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT CONSIDERING THE FACT THAT THE WRITTEN STATEMENT OF THE APPELLAN T WAS RECORDED UNDER PRESSURE TAKING ADVANTAGE OF THE LOW EDUCATIONAL QUALIFICATIONS OF THE APPELLANT. 5. BOTH THE LOWER AUTHORITIES HAVE ERRED IN LAW AND ON FACTS IN NOT CONSIDERING VARIOUS EXPLANATIONS, SUBMISSIONS AND E VIDENCES PLACED ON RECORD BY THE APPELLANT IN ITS PROPER PER SPECTIVE AND FURTHER ERRED IN NOT APPRECIATING THE LEGAL AS WELL AS JUDICIAL VIEW POINT AS CANVASSED BY THE APPELLANT. 2. SINCE THE FACTS AND ISSUE INVOLVED IN THE ABOVE STATED GROUNDS OF APPEAL ARE COMMON, THEY ARE DISPOSED OF TOGETHER AS UNDER:- 3. THE BRIEF FACTS OF THE CASE ARE THAT THE SURVEY U/S.133A OF THE I.T. ACT, 1961 WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASSESSEE ON 15/02/2000. DURING THE COURSE OF SURVEY, EXCESS ST OCK OF RS.10,20,001/- WAS FOUND AND THE ASSESSEE ADMITTED THAT IT WAS ACQ UIRED OUT OF ITS ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 3 - UNDISCLOSED INCOME AND OFFERED THE SAME FOR TAX. D URING THE COURSE OF ASSESSMENT, THE ASSESSEE VIDE HIS LETTER DATED 16/0 1/2003 STATED THAT STOCK FOUND AT THE TIME OF SURVEY AND VALUED AT RS.21,90, 180/- WAS ON ESTIMATE BASIS AND WITHOUT CONSIDERATION OF THE PURCHASE PRI CE. THE REAL VALUE OF THE STOCK LYING AT THE TIME OF SURVEY WAS RS.18,33, 289/- AND FURNISHED COPIES OF BILLS, ETC. FURTHER, HE ALSO STATED THA T THERE ARE TWO FIRMS RUNNING IN THE SAME PREMISES NAMELY, (I) DILIP TEXT ILES (PROP: DILIPKUMAR PRABHUDAS HUF) AND (II) DILIP ENTERPRISE (PROP : DI LIP PRABHUDAS THAKKAR INDIVIDUAL) AND THE FIRMS ARE ASSESSED TO TAX WITH THE SAME ADDRESS. STOCK LYING IN THE PREMISES BELONG TO BOTH THE FIRM . HOWEVER, THE STOCK OF DILIP ENTERPRISE HAS NOT BEEN CONSIDERED IN CALCULA TION OF THE STOCK OF DILIP TEXTILES. IF THE STOCK OF BOTH THE FIRM IS CALCULATED, ON THE SAME WAY, I.E. ON THE BASIS OF GROSS PROFITS, THEN, THER E WOULD BE STOCK OF RS.18,37,767/-. HE ALSO FURNISHED THE CALCULATION OF AVAILABLE STOCK ON THE DAY OF SURVEY. THE STOCK CALCULATION AS PER BO OKS WAS RS.18,33,259/- AND AS PER GROSS PROFIT ESTIMATE THE STOCK OF BOTH THE FIRM WAS RS.18,37,767/-. THUS, IF BOTH THE FIRMS PURCHASE , SALE ARE CONSIDERED AT THE TIME OF SURVEY, THEN THERE SHALL BE NO EXCESS S TOCK LYING AT THE PREMISE. ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 4 - 4. THE ASSESSING OFFICER DID NOT FIND THE EXPLANAT ION OF THE ASSESSEE CONVINCING FOR THE FOLLOWING REASONS:- (I) THE ASSESSEE IS NOT MAINTAINING ANY STOCK REGI STER. (II) THE ASSESSEE HIMSELF FURNISHED THE STOCK AS PE R HIS BOOKS OF ACCOUNT AT RS.11,70,791/- AS STATED IN ANSWER TO QU ESTION NUMBER IN HIS STATEMENT RECORDED U/S.131 OF THE I.T . ACT, 1961, DURING THE COURSE OF SURVEY ACTION. (III) AS PER ANSWER TO QUESTION NO.8, THE ASSESSEE ALSO ADMITTED THAT PHYSICAL STOCK WAS TAKEN IN HIS PRESENCE AND I T WAS WORKED OUT AT RS.21,90,790/-. AND IT WAS ALSO DUE TO THE FACT THAT SOME PURCHASE BILLS WERE NOT ENTERED IN HIS BO OKS. FURTHER, HE WAS ALSO UNABLE TO PRODUCE SUCH PURCHAS E BILLS AT THE TIME OF SURVEY, PROCEEDINGS. 5. FURTHER, THE ASSESSING OFFICER ALSO OBSERVED THA T THE ASSESSEE IN HIS STATEMENT ON OATH HAS CATEGORICALLY ADMITTED VIDE A NSWER TO QUESTION NO.10 THAT THE EXCESS STOCK WHICH HE DECLARED AND O FFERED FOR TAXATION FOR THE YEAR UNDER REFERENCE AND ALSO AGREED TO PAY THE TAX ON THE SAME. THE CONTENTS OF HIS STATEMENT RECORDED ON OATH WAS REPRODUCED HERE AS UNDER: ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 5 - Q.7. WHAT IS THE STOCK AS PER YOUR BOOKS OF ACCOUNT S TO PAY? ANS.AS PER ANNEXURE-P. THE STOCK AS PER BOOKS IS W ORKED OUT AT RS.11,70,791/-. Q.8. BEING THE COURSE OF SURVEY THE STOCK HAS BEEN INVENTORISED IN YOUR PRESENCE. THE PHYSICAL STOCK IS RS.21,90,790/ -. HENCE, THERE IS A DIFFERENCE BETWEEN THE PHYSICAL STOCK FOUND AN D YOUR BOOKS OF ACCOUNT. WHAT DO YOU SAY IN THIS REGARD? ANS. CERTAIN PURCHASE BILLS ARE NOT ACCOUNTED FOR A ND THAT IS THE REASONS FOR THAT. Q.9. PLEASE PRODUCE THOSE BILLS NOT ACCOUNTED FOR NOW. ANS. I CANNOT SAY ANYTHING. Q.10. DO YOU WANT TO SAY ANYTHING? ANS. AS PER BOOKS THE STOCK IS RS.11,70,791 AND TH AT OF PHYSICALLY FOUND IS RS.21,90,790/-. THE DIFFERENCE OF RS.10,2 0,001/- IS MY UNACCOUNTED STOCK WHICH I OFFER FOR TAXATION. 50% OF THE TAX DUE ON THIS AMOUNT WILL BE PAID BY ME WITHIN SEVEN DAYS. 6. FROM ABOVE, THE ASSESSING OFFICER CONCLUDED THA T THE FACTS STATED BY THE ASSESSEE NOW ARE AFTER-THOUGHTS. THE AMOUNT OF RS.10,20,001/- REPRESENTS HIS UNACCOUNTED STOCK. ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 6 - 7. IN APPEAL BEFORE THE LD.CIT(APPEALS), THE LD. A UTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE SURVEY U/S.133A WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE APPELLA NT HUF ON 15.2.2000. THE SURVEY OFFICIALS WORKED OUT THE VALUE OF STOCK FOUND AT THE TIME OF SURVEY AT RS.21,90,750/-. THE STATEMENT OF SHRI DIL IPBHAI PRABHUDAS THAKKAR, KARTA OF THE APPELLANT HUF, WAS ALSO RECOR DED AT THE TIME OF SURVEY. IN RESPONSE TO THE QUESTION NO.7 AS REGARDS THE STOCK AS PER BOOKS, SHRI DILIPBHAI PRABHUDAS THAKKAR STATED THAT THE ST OCK AS PER BOOKS WORKED OUT AT RS.11,70,791/- BY THE SURVEY OFFICIAL S WAS CORRECT. HE ALSO STATED THAT THE DIFFERENCE IN THE STOCK ACTUALLY FO UND AND THAT WORKED OUT AS PER BOOKS WAS ON ACCOUNT OF THE FACT THAT CERTAIN PURCHASE BILLS WERE NOT ACCOUNTED FOR IN THE BOOKS. AS SHRI DILIPBHAI PRA BHUDAS THAKKAR WAS NOT A VERY EDUCATED PERSON HAVING QUALIFICATION ONLY U P TO 8 TH STANDARD, HE WAS PRESSURIZED BY THE SURVEY OFFICIALS TO SURREND ER THE DIFFERENCE IN THE STOCK ACTUALLY FOUND AND THAT WORKED OUT AS PER BOO KS, AS HIS UNDISCLOSED INCOME AND PAY THE TAX THEREON. THE KARTA OF THE AP PELLANT HUF UNDER PRESSURE FROM THE SURVEY OFFICIALS RELUCTANTLY ACCE PTED THIS DIFFERENCE AS HIS UNACCOUNTED STOCK AND ALSO OFFERED TO PAY TAX T HEREON. THE LEARNED COUNSEL HAS SUBMITTED THAT THE SURRENDER WAS NOT VO LUNTARY AND FURTHER THIS SURRENDER WAS NOT BASED ON THE ACTUAL FACTS ON RECO RD. HE HAS STATED THAT ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 7 - FROM THE SAME PREMISES AT 452/41/42, PREM DARWAJA, KAPAD BAZAR, AHMEDABAD THE BUSINESS OF TWO CONCERNS NAMELY M/S.D ILIP ENTERPRISE AND M/S.DILIP TEXTILES WAS BEING CARRIED OUT. M/S.DILIP ENTERPRISE IS THE PROPRIETARY CONCERN OF SHRI DILIPBHAI PRABHUDAS THA KKAR, INDIVIDUAL AND THE CONCERN M/S.DILIP TEXTILES BELONGED TO THE HUF WHEREOF SHRI DILIPBHAI PRABHUDAS THAKKAR WAS KARTA. IN HIS STATE MENT, SHRI DILIPBHAI PRABHUDAS THAKKAR CLEARLY STATED THAT THE BUSINESS OF TWO CONCERNS WAS BEING RUN FROM THE SAME PREMISES AND THAT THE RETUR N FOR THE A. Y. 1999- 2000 IN RESPECT OF HIS INDIVIDUAL CONCERN M/S.DILIP ENTERPRISE WAS ALREADY FILED WHEREAS IN THE CASE OF M/S.DILIP TEXTILES, TH E AUDIT REPORT WAS FILED AND THE RETURN WAS YET TO BE FILED FOR THE A. Y. 19 99-2000. HOWEVER, WHILE WORKING OUT THE STOCK AS PER BOOKS THE SURVEY OFFIC IALS TOOK INTO ACCOUNT ONLY THE STOCK OF M/S.DILIP TEXTILES AND NOT THE ST OCK OF M/S.DILIP ENTERPRISE, THE PROPRIETARY CONCERN OF SHRI DILIPBH AI PRABHUDAS THAKKAR AS INDIVIDUAL. IT WAS, FURTHER, SUBMITTED THAT AS BOTH THE CONCERNS DEALING IN CLOTH PARTICULARLY 'SARIS' ON RETAIL BASIS, THE SEGREGATION OF PHYSICAL STOCK HAD NOT BEEN POSSIBLE AT THE TIME OF SURVEY. HE HAS STATED THAT SHRI DILIPBHAI PRABHUDAS THAKKAR IN HIS STATEMENT ALSO CLARIFIED THAT THE MAINTENANCE OF STOCK REGISTER WAS NOT POSSIBLE IN THE RETAIL BUSINESS OF CLOTH. HE HAS ARGUED THAT THE SURVEY OFFICIALS TAKI NG ADVANTAGE OF LOW ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 8 - QUALIFICATION OF SHRI DILIPBHAI PRABHUDAS THAKKAR M ADE HIM TO ADMIT THAT THE DIFFERENCE IN THE STOCK ACTUALLY FOUND AND THAT WORKED OUT AS PER BOOKS WAS HIS UNACCOUNTED STOCK AND ALSO PRESSURIZED HIM TO OFFER SUCH EXCESS STOCK FOR ASSESSMENT. HE HAS FURTHER SUBMITTED THAT THERE WAS ALSO MISTAKE IN THE VALUATION OF STOCK MADE BY THE SURVEY OFFICI ALS IN AS MUCH AS SUCH VALUATION WAS MADE TAKING INTO ACCOUNT THE TAG PRIC E AND THAT THE CORRECT VALUE OF STOCK AS PER PURCHASE BILLS WORKED OUT TO RS.18,33,259/-. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THIS EXPLANATION OF THE APPELLANT EVEN THOUGH THE SUPPORTING EVIDENCE WAS A LSO FILED WITH SUCH EXPLANATION. HE HAS FURTHER STATED THAT IF THE STOC K OF BOTH THE CONCERNS M/S.DILIP TEXTILES AND M/S.DILIP ENTERPRISE IS TAKE N INTO ACCOUNT, THE STOCK AS PER BOOKS AS ON THE DATE OF SURVEY WOULD H AVE WORKED OUT TO RS.18,37,767/- AS AGAINST THE STOCK ACTUALLY FOUND AT THE TIME OF SURVEY AT' RS.18,33,259/- MEANING THEREBY A SHORTAGE OF STOCK AT RS.4,508/- AS AGAINST THE EXCESS STOCK WORKED OUT BY THE SURVEY O FFICIALS AT RS.10,20,001/-. FURTHER, THE ASSESSEE ALSO POINTED OUT SEVERAL LEGAL INFIRMITIES IN THE PROCEDURE FOLLOWED TO RECORD THE STATEMENT OF SHRI DILIPBHAI PRABHUDAS THAKKAR AT THE TIME OF SURVEY I N AS MUCH AS THE NAME OF THE INCOME-TAX OFFICER WHO RECORDED THE STATEMEN T WAS NOT MENTIONED NOR SUCH STATEMENT WAS SIGNED BY THE SUCH INCOME-T AX OFFICER NOR HIS ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 9 - OFFICE SEAL WAS APPENDED AND THAT THE OATH WAS NOT ADMINISTERED TO THE APPELLANT AND THAT SUCH STATEMENT WAS NOT WITNESSED BY ANY PERSON BECAUSE THE SIGNATURE OF ANY WITNESS WERE NOT OBTAI NED ON SUCH STATEMENT AND THAT THE CORRECT VERSION GIVEN BY THE APPELLANT AS REGARDS HIS BUSINESS AFFAIRS WAS NOT PROPERLY REPRODUCED IN THE WRITTEN STATEMENT AND THAT THE STATEMENT WAS RECORDED UNDER PRESSURE TAKING ADVANT AGE OF LOW QUALIFICATION OF THE APPELLANT AND THAT THE SURREND ER OF ALLEGED EXCESS STOCK WAS OBTAINED UNDER DURESS. THE ASSESSEE CONTENDED THAT SUCH STATEMENT WHICH WAS RECORDED IN CLEAR VIOLATION OF THE PROCED URE PRESCRIBED UNDER LAW AND THE PRACTICE HAD NO EVIDENTIARY VALUE AND T HE SAME DESERVES TO BE IGNORED. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFICER PAID NO HEED TO THE EXPLANATION AND THE DOCUMENTARY EVID ENCE SUBMITTED IN THE COURSE OF ASSESSMENT PROCEEDINGS TO SHOW THAT THE C ORRECT VALUATION OF THE STOCK FOUND AT THE TIME OF SURVEY WORKED OUT TO RS. 18,33,259/- AS AGAINST THE VALUATION MADE BY THE SURVEY OFFICIALS AT RS.2 1,90,750/-. THE ASSESSEE URGED THAT THE ADDITION OF RS.10,20,001/- MADE IN THE INCOME OF THE APPELLANT ON ACCOUNT OF' UNEXPLAINED INVESTMENT IN THE ALLEGED EXCESS STOCK MAY BE DELETED AS SUCH ADDITION IS NOT BASED ON SOUND FOOTING AND THAT IT WAS CONTRARY TO THE FACTS ON RECORD. THE A SSESSEE PLACED RELIANCE ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 10 - ON THE DECISIONS REPORTED IN 91 ITR 18, AIR 1956 SC 9, 106 ITR 64, 109 ITR 324 AND 20 ITD 483. 8. THE LD.CIT(APPEALS) CONFIRMED THE ADDITION MA DE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 3.1. I HAVE GIVEN A CAREFUL CONSIDERATION TO THE SUBMISSIONS OF THE LEARNED COUNSEL AND I HAVE ALSO PERUSED THE DET AILS ON RECORD. I HAVE ALSO GONE THROUGH THE DECISIONS CITED BY THE LEARNED COUNSEL. I HAVE ALSO PERUSED THE ASSESSMENT RECORDS OF THE APPELLANT HUF AS ALSO THAT OF SHRI DILIPBHAI PRABHUDAS THAKKAR , INDIVIDUAL. FROM A LOOK INTO THE ASSESSMENT RECORDS OF SHRI DIL IPBHAI PRABHUDAS THAKKAR, INDIVIDUAL, IT TRANSPIRES THAT T HE RETURN FOR THE A.Y. 1999-2000 WAS FILED ON 28.9.1999 ENCLOSING THE REWITH THE TRADING AND PROFIT & LOSS ACCOUNT AND BALANCE SHEE T IN RESPECT OF HIS PROPRIETARY CONCERN M/S.DILIP. THIS RETURN WA S SUBSEQUENTLY REVISED ON 11.10.1999. THE RETURN FOR THE A.Y.2000- 01 WAS FILED ON 31.10.2000. IN THE CASE OF THE APPELLANT HUF, A DEC LARATION UNDER THE VDIS.1997 WAS FILED ON 19.12.1997 DISCLOSING TH EREIN INCOME AND INVESTMENTS IN RESPECT OF A.YRS. 1983-84 AND 19 93-94 TO 1997- 98 AT RS.1,87,765/- WHICH WAS ACCEPTED BY THE CIT-I , AHMEDABAD AND A CERTIFICATE U/S.68(2) OF THE FINANCE ACT, 199 7 WAS ALSO ISSUED ON 8.1.1998. THE AUDIT REPORT IN TERMS OF SECTION 44AB FOR THE A.Y.1999-2000 WAS FILED ON 29.12.1999 AND THE RETUR NS FOR THE A.YRS. 1999-2000 AND 2000-01 WERE FILED ON 29.3.200 1. IN THE STATEMENT OF TOTAL INCOME FOR THE A.Y. 1998-99 FILE D WITH THE RETURN FOR THE A.Y.1999-2000. ON 29.3.2001, NO INCOME FROM BUSINESS HAS BEEN SHOWN NOR ANY TRADING AND PROFIT & LOSS ACCOUN T AND BALANCE SHEET IN RESPECT THEREOF HAS BEEN FILED. FROM THESE FACTS, IT IS CLEAR THAT THE CONCERN M/S.DILIP TEXTILES CAME INTO EXIST ENCE DURING THE A.Y.1999-2000 FOR THE FIRST TIME AND THE AUDIT REPO RT IN TERMS OF SECTION 44AB ALONG WITH THE TRADING AND PROFIT & LO SS ACCOUNT AND BALANCE SHEET IN RESPECT OF M/S.DILIP TEXTILES FOR THIS ASSESSMENT YEAR WAS FILED ON 29.12.1999 I.E. PRIOR TO THE DATE OF SURVEY U/S.133A WHICH WAS CONDUCED ON 15.2.2000. HOWEVER, THE RETURN FOR THE A.Y.1999-2000 WAS FILED ON 29.3.2001 I.E. A FTER THE SURVEY. IN THE RETURN FOR THE A.Y.1999-2000, THE CLOSING ST OCK AS ON ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 11 - 31.3.1999 IN M/S.DILIP TEXTILES HAS BEEN SHOWN AT R S.3,32,970/- AND THE CLOSING STOCK IN THE PROPRIETARY CONCERN OF SHR I DILIPBHAI PRABHUDAS THAKKAR, IN HIS INDIVIDUAL CAPACITY, M/S. DILIP ENTERPRISE, AS ON 31.3.1999 HAS BEEN SHOWN AT RS.11 ,06,381/- IN THE RETURN FOR THE A.Y.1999-2000 FILED ON 28.9.1999 I.E . PRIOR TO THE DATE OF SURVEY. IN THIS MANNER, THE TOTAL OPENING STOCK IN BOTH THE CONCERNS M/S.DILIP TEXTILES AND M/S.DILIP ENTERPRIS E HAS BEEN SHOWN AT RS.14,39,351/- (RS.3,32,970/- + RS.11,06,3 81/-) AS ON 1.4.1999. AS THE AUDIT REPORT FOR THE A.Y.1999-2000 IN THE CASE OF THE APPELLANT HUF AS ALSO THE RETURN FOR THE A.Y.19 99-2000 IN THE CASE OF SHRI DILIPBHAI PRABHUDAS THAKKAR, INDIVIDUA L WERE FILED PRIOR TO THE DATE OF SURVEY WHICH WAS CONDUCTED ON 15.2.2000, THE CLOSING STOCK SHOWN AS ON 31.3.1999 AT RS.14,39,35 1/-, WHICH BECAME THE OPENING STOCK AS ON 1.4.1999, MAY BE TAK EN AS CORRECT. THE STOCK AS ON 15.2.2000 I.E. ON THE DATE OF SURV EY AS PER BOOKS WAS WORKED AT RS.11,70,791/- BY THE SURVEY OFFICIAL S WHICH WAS ALSO ACCEPTED AS CORRECT BY SHRI DILIPBHAI PRABHUDAS THA KKAR IN HIS STATEMENT RECORDED AT THE TIME OF SURVEY. THIS STOC K WORKED OUT AS PER BOOKS APPEARS TO BE IN ORDER LOOKING TO THE STO CK OF RS.14,39,351/- BROUGHT FORWARD AS ON 1.4.1999 IN TH E BOOKS OF BOTH THE CONCERNS M/S.DILIP TEXTILES AND M/S.DILIP ENTER PRISE. THEREFORE, THE CLAIM OF THE APPELLANT NOW THAT STOC K OF RS.11,70,791/- WORKED OUT AS PER BOOKS BELONGED ONL Y TO M/S.DILIP TEXTILES AND THAT THE STOCK REFLECTED IN THE BOOKS OF M/S.DILIP ENTERPRISE WAS NOT TAKEN INTO ACCOUNT, IS NOT CORRE CT. IN HIS STATEMENT, SHRI DILIPBHAI PRABHUDAS THAKKAR ALSO AC CEPTED THAT THE ACTUAL STOCK FOUND AT THE TIME OF SURVEY WAS RS.21, 90,750/-. HE THOUGH STATED THAT THE DIFFERENCE IN THE ACTUAL STO CK FOUND AND THE STOCK REFLECTED IN THE BOOKS WAS ON ACCOUNT OF THE FACT THAT CERTAIN PURCHASE BILLS WERE NOT ACCOUNTED FOR BUT HE COULD NOT PRODUCE SUCH PURCHASE BILLS WHEN HE WAS CALLED UPON TO DO S O BY THE SURVEY OFFICIALS. FROM HIS INABILITY TO PRODUCE THE ALLEGE D PURCHASE BILLS AT THE TIME OF SURVEY, IT IS CLEAR THAT IN FACT NO SUC H PURCHASE BILLS EXISTED AS ON THE DATE OF SURVEY I.E. 15.2.2000 AND THAT SUCH PURCHASE BILLS MUST HAVE BEEN OBTAINED BY THE APPEL LANT AFTER THE COMPLETION OF SURVEY IN ORDER TO EXPLAIN THE EXCESS STOCK FOUND AT THE TIME OF SURVEY WHICH FACT IS ALSO SUPPORTED BY THE APPELLANT'S FAILURE TO PRODUCE THE DETAILS OF PAYMENTS MADE FOR SUCH PURCHASES. AS THE GENUINENESS OF THE PURCHASE BILLS OBTAINED L ATER WAS IN ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 12 - DOUBT, THE ASSESSING OFFICER WAS ABSOLUTELY JUSTIFI ED IN REJECTING THE APPELLANT'S CLAIM THAT THE COST OF ACTUAL STOCK AS ON THE DATE OF SURVEY WORKED OUT TO RS.18,33,259/-ONLY AS AGAINST THE COST OF SUCH STOCK WORKED OUT BY THE SURVEY OFFICIALS AT RS.21,9 0,750/-. IN CASE, THERE WAS ANY DISCREPANCY IN WORKING OUT THE COST O F STOCK BY THE SURVEY OFFICIALS, IT SHOULD HAVE BEEN POINTED OUT B Y SHRI DILIPBHAI PRABHUDAS THAKKAR TO THE SURVEY OFFICIALS AT THE TI ME WHEN HIS STATEMENT WAS RECORDED WHICH HE DID NOT DO. ON THE CONTRARY, HE ACCEPTED THE EXCESS STOCK FOUND AT THE TIME OF SURV EY AS HIS UNACCOUNTED STOCK AND ALSO OFFERED TO PAY TAX THERE ON. THE CHARGE OF EXERCISING PRESSURE UPON SHRI DILIPBHAI PIABHUDA S THAKKAR FOR ACCEPTING THE EXCESS STOCK AS HIS UNACCOUNTED STOCK AND FOR SURRENDERING THE SAME AS HIS UNDISCLOSED INCOME, BE ING LEVELED NOW, IS NOT ESTABLISHED FROM THE FACTS AND MATERIAL ON RECORD. SIMILARLY, THE ALLEGATION THAT UNDUE ADVANTAGE WAS TAKEN BY THE SURVEY OFFICIALS FROM THE LOW EDUCATION OF THE APPE LLANT IS ALSO NOT CORRECT BECAUSE SHRI DILIPBHAI PRABHUDAS THAKKA R HAS BEEN MANAGING HIS BUSINESS OF BOTH THE CONCERNS SUCCESSF ULLY AND, THEREFORE, IT CANNOT BE BELIEVED THAT HIS LOWER QUA LIFICATION COULD HAVE STOOD IN HIS WAY IN COMING OUT WITH THE CORREC T AFFAIRS OF HIS BUSINESS IN HIS STATEMENT RECORDED BY THE SURVEY OF FICIALS AND, THEREFORE, THIS ALLEGATION IS REJECTED. TAKING INTO ACCOUNT THE TOTALITY OF FACTS AND MATERIAL ON RECORD, IT IS HELD THAT TH E COST OF ACTUAL STOCK FOUND AT THE TIME OF SURVEY DETERMINED BY THE SURVEY OFFICIALS AT RS.21,90,750/-WAS CORRECT AND THAT THE STOCK OF BOTH THE CONCERNS M/S.DILIP TEXTILES AND M/S.DILIP ENTERPRISE AS PER BOOKS AS ON THE DATE OF SURVEY WAS CORRECTLY WORKED OUT BY THE SURV EY OFFICIALS AT RS.11,70,791/- AND THAT THERE WAS EXCESS STOCK AT T HE TIME OF SURVEY AS ON 15.2.2000 AT RS.10,19,959/- (RS.21,90,750/- ( -) RS.11,70,791/- ) WHICH WAS ACQUIRED BY THE APPELLANT HUF OUT OF IT S INCOME FROM UNDISCLOSED SOURCES. THEREFORE, AN ADDITION OF RS. 10,19,959/- WAS CALLED FOR TO THE APPELLANT'S INCOME ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE EXCESS STOCK AS AGAINST THE ADDIT ION MADE BY THE ASSESSING OFFICER AT RS.10,20,001/-. ACCORDINGLY, T HE ADDITION ON ACCOUNT OF UNEXPLAINED INVESTMENT IN THE EXCESS STO CK TO THE EXTENT OF RS.10,19,959/- IS CONFIRMED AND THE APPELLANT WO ULD GET A RELIEF OF RS.42/- ON THIS ACCOUNT. ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 13 - 9. THE LD. AUTHORISED REPRESENTATIVE OF THE ASSESS EE RELIED ON THE SUBMISSIONS MADE BEFORE THE LD.CIT(APPEALS). THE LD.DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTED THE OR DER OF THE LD.CIT(APPEALS). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE, THE ASSESSEE DEALS IN CLOTH AND SAREES ON RE TAIL BASIS UNDER THE NAME AND STYLE OF M/S.DILIP TEXTILES AS A PROPRIETOR THE REOF. IN THE BUSINESS PREMISES OF THE ASSESSEE, A SURVEY U/S.133A OF THE I.T. ACT, 1961 WAS CONDUCTED ON 15/02/2000. DURING THE SURVEY, THE REVENUE INVENTORISED THE PHYSICAL STOCK FOUND AND VALUED THE SAME AT RS. 21,90,750/-. THE VALUE OF STOCK AS PER BOOKS OF ACCOUNT BY ADDING PU RCHASES WITH OPENING STOCK AND THEREBY DEDUCTING COST OF SALES ARRIVED A T BALANCE STOCK OF RS.11,70,791/-. THUS, EXCESS STOCK FOUND DURING T HE COURSE OF SURVEY WAS WORKED OUT TO RS.10,19,959/- WHICH WAS ADDED TO THE INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER. THIS ADDITION WAS ALSO CONFIRMED BY THE LD.CIT(APPEALS). THE ASSESSEE CONTENDED THAT VALUATION OF STOCK FOUND ON PHYSICAL VERIFICATION WAS MADE BY TAKING E STIMATED VALUE, WHEREAS THE ACTUAL COST PRICE OF THE SAME WORKS OU T TO RS.18,33,269/-. ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 14 - THEREFORE, THE ACTUAL EXCESS STOCK WAS RS.6,62,478/ - AND NOT RS.10,19,959/-. THE ASSESSEE FURTHER CONTENDED T HAT FROM THE SAME PREMISES BUSINESS OF M/S.DILIP ENTERPRISE WHOSE PRO PRIETOR WAS SHRI DILIP PRABHUDAS THAKKAR IN HIS INDIVIDUAL CAPACITY WAS AL SO CONDUCTED. THE INVENTORY OF THIS FIRM WAS ALSO LYING IN THE SAME P REMISES WHICH WAS INCLUDED IN THE INVENTORY FOUND ON PHYSICAL VERIFIC ATION AS PREPARED BY THE SURVEY TEAM. THUS, ACCORDING TO THE ASSESSEE, EXC ESS STOCK WAS ACTUALLY OF RS.4,498/-. THE LOWER AUTHORITIES HAVE NOT ACCE PTED BOTH THE ABOVE CONTENTIONS OF THE ASSESSEE. IT IS OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL BEFORE US TO SHOW THAT STOCK O F M/S.DILIP ENTERPRISE WAS ALSO KEPT IN THE PREMISES OF ASSESSEE AT THE TI ME OF THE SURVEY. THE ASSESSEE COULD NOT PRODUCE BEFORE US ANY MATERIAL T O SHOW THAT BOOKS OF ACCOUNT AND OR PURCHASE BILLS OR SALE BILLS WERE FO UND BY THE SURVEY TEAM IN THE PREMISES OF THE ASSESSEE. FURTHER, NOWHERE IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY ASSESSEE INDIC ATED THAT THE STOCK OF M/S.DILIP ENTERPRISE WAS ALSO LYING IN HIS PREMISES . IN ABSENCE OF ANY SUCH MATERIAL, IN OUR CONSIDERED OPINION, THE LOWE R AUTHORITIES WERE JUSTIFIED IN NOT ACCEPTING THE ABOVE CONTENTION OF THE ASSESSEE. HOWEVER, IN RESPECT OF VALUATION OF PHYSICAL INVENTORY FOUND DURING THE COURSE OF THE SURVEY, WE FIND FORCE IN THE ARGUMENTS OF THE ASSES SEE. WE FIND THAT THE ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 15 - ASSESSEE HAS PRODUCED COPY OF PURCHASE BILLS BEFORE THE LOWER AUTHORITIES IN SUPPORT OF ITS CONTENTION THAT THE VALUE ADOPTE D BY THE SURVEY TEAM WHILE VALUING THE PHYSICAL INVENTORY WAS MORE THAN THE ACTUAL COST. THE ASSESSEE ALSO SUBMITTED THAT THE VALUE ADOPTED BY T HE SURVEY TEAM FOR VALUING THE PHYSICAL STOCK WAS TAKEN ONLY ON ESTIMA TE BASIS AND NOT AT ACTUAL COST BY LOOKING AT THE PURCHASE BILL OF THE ASSESSEE. WE FIND THAT THE REVENUE HAS BROUGHT NO MATERIAL ON RECORD TO CO NTROVERT THE ABOVE CONTENTION OF THE ASSESSEE EXCEPT STATING THAT THE VALUE ADOPTED BY THE SURVEY TEAM WAS ACCEPTED BY THE ASSESSEE AT THE TIM E OF SURVEY. IN OUR CONSIDERED OPINION, AN ADDITION CANNOT BE MADE MERE LY ON THE BASIS OF SUCH AN ACCEPTANCE BY THE ASSESSEE WHEN LATER ON TH E ASSESSEE PLEADS THAT THE ACCEPTANCE WAS GIVEN UNDER A MISTAKE AND THE AC TUAL VALUE WAS LESS WHICH WAS SUPPORTED BY THE PURCHASE BILLS. IT IS OPEN TO THE ASSESSEE TO SHOW THAT THE EARLIER ACCEPTANCE WAS DUE TO SOME B ONA FIDE MISTAKE OF FIGURE, FACTS OR LAW. THE REVENUE HAS NOT BROUGHT ANY MATERIAL TO SHOW THAT THE VALUATION WAS MADE AT ACTUAL COST AFTER V ERIFYING THE PURCHASE BILLS OF THE ASSESSEE AND NOT ON THE BASIS OF SOME ESTIMATE OR ASSUMED FIGURE FOR WHICH THE ASSESSEE ALSO AGREED. FURTHE R, IT IS OBSERVED THAT THE LOWER AUTHORITIES HAS EXPRESSED DOUBT ON THE GENUIN ENESS OF THE PURCHASE BILLS SUBMITTED BY THE ASSESSEE AS AN EVIDENCE OF ITS ACTUAL COST ONLY FOR ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 16 - THE REASON THAT SUCH BILLS WERE NOT FOUND DURING TH E COURSE OF THE SURVEY. WE FIND THAT DURING THE COURSE OF THE SURVEY, PURCH ASES OF THE ASSESSEE UPTO THE DATE OF THE SURVEY WAS FOUND AT RS.78,38,2 45/- WHICH WAS ALSO ACCEPTED BY THE LOWER AUTHORITIES AND ONLY ON THE B ASIS OF THAT BOOKS STOCK WAS ARRIVED AT RS.11,70,791/-. THUS, AFTER ACCEPT ING THE PURCHASES ENTERED IN THE BOOKS UPTO THE DATE OF THE SURVEY AS GENUINE, IT WAS NOT OPEN TO THE REVENUE TO REJECT THE SUPPORTING BILLS FOR CALCULATION OF VALUE OF STOCK FOUND ON PHYSICAL VERIFICATION WITHOUT BRI NGING ON RECORD MATERIAL TO SHOW THAT THE AFORESAID STOCK WERE NOT PART OF P URCHASE OF RS.78,38,245/- WHICH WAS ACCEPTED BY THEM. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, IT SHALL BE IN THE INTER EST OF JUSTICE, TO SET ASIDE THIS PART OF THE GROUND OF APPEAL BACK TO THE FILE OF ASSESSING OFFICER FOR PROPER VERIFICATION. THE ASSESSING OFFICER IS DIRE CTED TO VERIFY THE ACTUAL COST OF THE INVENTORY FOUND ON PHYSICAL VERIFICATIO N AND THEREAFTER TO MAKE THE ADDITION IN RESPECT OF THE EXCESS STOCK FOUND DURING SURVEY ONLY ON THE BASIS OF ACTUAL COST. WE, ACCORDINGLY, SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE MATTER BACK TO THE FILE O F ASSESSING OFFICER FOR ADJUDICATION AFRESH IN LIGHT OF THE DISCUSSIONS MAD E HEREINABOVE, AFTER ALLOWING PROPER OPPORTUNITY OF HEARING TO THE ASSES SEE. THUS, THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS INDI CATED ABOVE. ITA NO .1480/AHD/2004 SHRI DILIPBHAI P.THAKKAR (HUF) VS. ITO ASST.YEAR 2000-01 - 17 - 11. GROUND NO.6 OF THE APPEAL IS DIRECTED AGAINST L EVY OF INTEREST U/S.234B AND 234C OF THE I.T. ACT, 1961. AT THE TI ME OF HEARING, NO ARGUMENTS WERE MADE BY THE LD. AUTHORISED REPRESENT ATIVE OF THE ASSESSEE. WE HOLD THAT CHARGING OF INTEREST IS CON SEQUENTIAL AND, ACCORDINGLY, DISPOSE OF THIS GROUND OF APPEAL. 12. GROUND NO.7 OF THE APPEAL IS DIRECTED AGAINST I NITIATION OF PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT, 1961. W E DISMISS THIS GROUND OF APPEAL AS PREMATURE. 13. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS P ARTLY ALLOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 21 / 08 / 2009. SD/- SD/- ( R.V. EASWAR ) ( N.S. SAINI ) VICE PRESIDENT ACCO UNTANT MEMBER AHMEDABAD; DATED 21/ 08 /2009 T.C. NAIR COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT.2. THE RESPONDENT. 3. THE CIT CONCERNED.4. THE LD. CIT(APPEALS)-VI, AH MEDABAD 5. THE DR, AHMEDABAD BENCH.6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD