Appeal Details
Counselvise Citation
17022714 RSA 2012
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 4 month(s) 16 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
12-08-2013
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
DB
Assessment Year
2007-2008
Appeal Filed On
26-03-2012
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO.170/IND/2012 A.Y. 2007-08 SYED FARID SYED IDU BURHANPUR PAN AHMPS 8573P :: APPELLANT VS ADDL. CIT, RANGE KHANDWA H.O. INDORE :: RESPONDENT APPELLANT BY SHRI R.TARWALA AND SHRI S.K. JAIN RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 4.7.2013 DATE OF PRONOUNCEMENT 1 2 . 8 . 2 0 1 3 O R D E R PER SHRI R.C. SHARMA, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) DATED 2.12.2011 FOR THE A.Y . 2007- 08 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE ACT. 2 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE RUNS A PROCESS HOUSE WHERE BLEACHING, DYEING ETC. OF CLOTH IS DONE. A SURVEY U/S 133A WAS CONDUCTED AT THE BUSINE SS PREMISES OF THE ASSESSEE ON 21.3.2007 AND BOOKS OF ACCOUNT, DOCUMENTS, CASH AND STOCK OF CLOTH BALES F OUND WERE INVENTORIED BY THE OFFICER CONDUCTING SURVEY. EXCESS CASH OF RS. 8,50,962/- AND EXCESS STOCK OF CLOTH OF RS. 52,49,400/- WAS FOUND. AS THE EXCESS CASH AND STOCK WAS UNACCOUNTED, THE ASSESSEE MADE SURRENDER OF RS. 61,00,362/- (RS. 8,50962+52,49,400). HOWEVER WHILE FILING RETURN OF INCOME THE ASSESSEE SHOWED THE VAL UE OF STOCK AT RS. 32,63,800/- AND RETRACTED VALUE OF STO CK AT RS. 19,85,600/- ON THE GROUND THAT OUT OF 931 BALES OF CLOTH FOUND AT THE TIME OF SURVEY ONLY 145 BALES WE RE OF GOOD CLOTH AND REMAINING 786 BALES WERE OF DAMAGED, DEFECTIVE AND SECOND QUALITY CLOTH. THE AO ASKED EXPLANATION FOR RETRACTION DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE FILED AFFIDAVIT EXPLAINI NG THE 3 REASONS FOR RETRACTION. HIS STATEMENT U/S 131 WAS A LSO RECORDED BY THE AO ON 5.11.2009. IN THE STATEMENT SO RECORDED THE ASSESSEE ADMITTED THAT CONTENTS OF AFF IDAVIT FILED ON 30.10.2009 WERE NOT KNOWN TO HIM. THE AO ACCORDINGLY MADE ADDITIONS OF RS. 1061/- AND RS.19,85,600/-. 3. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF THE AO AFTER HAVING MADE THE FOLLOWIN G OBSERVATIONS :- 4.0 THE FACTS ON RECORD, THE AOS ORDER, SUBMISSIONS OF THE APPELLANT AND AOS REPORT ALL HAVE BEEN GONE THROUGH CAREFULLY, THE FOLLOWING FINDINGS ON ONLY GROUND OF APPEAL IS RECORDED AND DECISION IS TAKEN ACCORDINGLY. 4.1 ADDITIONAL EVIDENCES SOUGHT TO BE FILED BY THE APPELLANT ARE IN THE NATURE OF GENERAL CERTIFICATIONS OBTAINED BY THE 4 APPELLANT THAT DURING THE PROCESS OF BLEACHING AND DYEING 5 TO 10% CLOTH WAS SPOILED DUE TO BREAK DOWN OF MACHINES, FAILURE OF ELECTRICITY AND OTHER ACCIDENTS. THESE CERTIFICATE STRICTLY SPEAKING CANNOT BE TERMED TO BE EVIDENCES AS SUCH AND ARE CONSIDERED AS PART OF APPELLANTS SUBMISSION IN SUPPORT OF ISSUE AGITATED IN APPEAL. 4.2 MAIN THRUST OF THE APPELLANT IS ON THE FACT THAT THE APPELLANTS ONLY BUSINESS WAS OF JOB WORK AND HE NEVER PURCHASED OR SOLD CLOTH. THE BALES OF CLOTH FOUND IN THE BUSINESS PREMISES WERE OF CLOTH WHICH WAS DAMAGED DURING THE PROCESS OF BLEACHING AND FINISHING DELIVERY OF THE SAME WAS NOT TAKEN BY THE CUSTOMERS AND ALSO DID NOT MAKE PAYMENT OF JOB WORK TO THE EXTENT OF 5 THE VALUE OF CLOTH DAMAGED. SUCH STOCK OF CLOTH WAS ACCUMULATION OF YEARS. THE APPELLANT WAS COMPELLED TO SUBSCRIBE HIS SIGNATURES ON THE STATEMENT RECORDED DURING SURVEY. STATEMENT RECORDED DURING SURVEY OR SEARCH MAY BE GOOD EVIDENCE BUT NOT A CONCLUSIVE PROOF. IN SUPPORT OF HIS CONTENTIONS THE APPELLANT HAS CITED A CATENA OF COUNT DECISIONS. AFTER GOING THROUGH THE WRITTEN SUBMISSIONS IT IS SEEN THAT THE APPELLANT IS SIMPLY TRYING TO JUSTIFY HIS BELATED AND ILLEGAL RETRACTION BY TAKING SHELTER OF PRESSURE DURING SURVEY AND VARIOUS COURT DECISIONS BUT FROM THE FACTS ON RECORD NO SUCH CASE IS MADE OUT WHICH IS DISCUSSED HEREIN BELOW. 4.3 THE APPELLANT HAS CLAIMED THAT THE EXCESS STOCK OF CLOTH IN THE FORM OF 931 6 BALES OF CLOTH BELONGED TO PARTIES WHO DID NOT TAKE THE DELIVERY OF CLOTH DUE TO DAMAGE DURING PROCESS AND WAS LATER ON ADJUSTED AGAINST JOB WORK CHARGES DUE FROM THEM. NOTHING HAS BEEN BROUGHT ON RECORD BY THE APPELLANT IN SUPPORT OF THIS CONTENTION. THE NAMES AND ADDRESSES OF THE CONCERNED PARTIES HAVE NOT BEEN BROUGHT ON RECORD NOR HAVE THE YEARS BEEN SPECIFIED IN WHICH SUCH BALES OF CLOTH WERE ADJUSTED AGAINST JOB WORK, FILING COPIES OF THEIR ACCOUNTS AND PRODUCING THEM FOR CROSS VERIFICATION REMAINING APART. YEARWISE DETAILS OF NON- PAYMENT OF JOB WORK CHARGES AND ADJUSTMENT OF BALES OF CLOTH AGAINST THEM HAVE NOT BEEN FURNISHED. EVEN IF THE CONTENTION OF THE APPELLANT IS ACCEPTED THAT THE CLOTH BALES WERE NOT TRADED BY HIM AND THE BALES FOUND DURING SURVEY HAD COME 7 FROM THE PARTIES WHO DID NOT MAKE PAYMENT OF JOB CHARGES ON ACCOUNT OF DAMAGE TO THEIR CLOTH, IT IS NOT KNOWN FROM WHERE 145 BALES OF GOODS AND FIRST CLASS CLOTH CAME IN POSSESSION OF THE APPELLANT IN ADDITION TO 786 BALES OF DAMAGED CLOTH CLAIM TO BE AS A RESULT OF MACHINE FAILURE. 4.4 THE MAIN CONTENTION OF THE APPELLANT PIVOTS AROUND THE COURT DECISIONS THAT STATEMENT RECORDED DURING SURVEY IS NOT CONCLUSIVE AND THE APPELLANT CAN RETRACT AND DISPROVE THE CONTENTS OF STATEMENT LATER ON. BUT IN VIEW OF THE FACTS ON RECORD SUCH A CONTENTION CANNOT BE ACCEPTED AS NO MATERIAL HAS BEEN BROUGHT ON RECORD IN SUPPORT OF CONTENTION AND CONSEQUENT RETRACTION. THE SURRENDER OF THE INCOME AT RS. 32,76,964/- IS IN ITSELF A CONCLUSIVE 8 PROOF OF THE FACT THAT THE EXCESS STOCK FOUND DURING SURVEY WAS UNACCOUNTED STOCK AND THE APPELLANT COULD NOT OFFER ANY EXPLANATION FOR THE SAME. IF IT WAS NOT SO THEN WHAT WAS THE NEED FOR SURRENDER OF THIS MUCH INCOME ALSO. THE CONTENTION OF THE APPELLANT THAT HE MAINTAINS PROPER, REGULAR, CLOSE AND ADJUSTED BOOKS SUBJECTED TO AUDIT IS ALSO NEGATED BY THE EXCESS CASH AND EXCESS STOCK FOUND DURING SURVEY WHICH HAS NOT BEEN DISPUTED. 4.5 THE APPELLANTS NEXT CONTENTION IS THAT HE WAS PRESSURISED DURING SURVEY TO MAKE SURRENDER AND HE WAS FREE TO RETRACT FROM SUCH PRESSURISED SURRENDER. BUT THERE IS NOTHING ON RECORD TO SUGGEST THAT SURVEY WAS CONDUCTED WITH THE HELP OF POLICE OR PARA MILITARY FORCE AND ANY PRESSURE WAS 9 IMPOSED ON THE APPELLANT TO MAKE SURRENDER DURING SURVEY. IF NOTHING OF THE SORT IS FOUND ON RECORD HOW THE APPELLANT CAN BE SAID TO HAVE BEEN PRESSURISED BY THE SURVEY TEAM. EVEN IF THE APPELLANT WAS PRESSURISED BY THE SURVEY PARTY AND SURRENDER WAS MADE UNDER PRESSURE, THE APPELLANT WAS FREE TO TAKE REMEDIAL ACTION AFTER THE SURVEY WAS OVER. HE SHOULD HAVE APPROACHED THE HIGHER ADMINISTRATIVE AUTHORITIES AND SHOULD HAVE MADE CLEAR HIS POSITION BEFORE THEM IMMEDIATELY WITH THE HELP OF MATERIAL IN HIS POSSESSION SHOULD HAVE EXPLAINED THE DISCREPANCIES AND RETRACTED THEN AND THERE ITSELF. BUT THE APPELLANT INSTEAD OF TAKING TIMELY ACTION WENT ON WAITING TILL FILING AUDIT REPORT AS LATE AS 31.12.07 WHEN THE SURVEY WAS CARRIED ON 21.3.2007. SUCH A BELATED RETRACTION AFTER ABOUT NINE MONTHS IS A 10 RESULT OF DELIBERATE AND PLANNED STRATEGY TO AVOID PROPER TAXATION AND IS NOTHING BUT AN AFTER THOUGHT FOR WHICH THERE IS NO EXPLANATION WITH THE APPELLANT. NOT ONLY THIS, EVEN AFTER ADMITTING HIS MISTAKE IN THE STATEMENT RECORDED BY AO U/S 131 ON 5.11.2009, THE APPELLANT DID NOT REVISE THE RETURN AND PAY TAXES ON THE RETRACTED INCOME OF RS. 19,85,000/- FOR WHICH RETRACTION WAS WITHDRAWN BY HIM IN RETURN. 4.6 THE APPELLANT HAS FILED CERTAIN CERTIFICATES TO THE EFFECT THAT DURING PROCEEDINGS CLOTH GETS DAMAGED . 5. AGAINST THE ABOVE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US WHEREIN FOLLOWING G ROUNDS HAVE BEEN TAKEN :- 11 A. GENERAL 1. THAT THE ORDER PASSED BY CIT(A) CONFIRMING & MAINTAINING THE ORDER OF ADDL. CIT, RANGE KHANDWA IS ILLEGAL WRONG AND BAD IN LAW. B. LEGAL GROUNDS 2. THAT THE LD. CIT(A) & AO ERRED IN FACTS AND IN LAW IN APPRECIATE THE FACTS & CIRCUMSTANCES OF THE CASE THAT SURVEY STATEMENT DATED 21.3.2007 NOT SIGNED BY ANY OFFICER OF SURVEY TEAM IS JUST SIMPLY A WEST PAPER & HAS NO SIGNIFICANT & LEGAL VALUE. 3. THAT THE UNSIGNED STATEMENT OF SURVEY TEAM IS TO BE EXCLUDED AND THEREAFTER REMAINS NO EVIDENCE DOCUMENT AND ADDITIONS ARE UNCALLED FOR AND NEEDS TO BE DELETED. 12 4. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE AND CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE IN WHICH SURVEY WAS CARRIED OUT AND APPELLANT WAS NERVOUS ON AND HER STATEMENT WAS RECORDED UNDER UNDUE PRESSURE COERCION AND APPELLANT SURRENDERED UNDER MISTAKEN BELIEF AND WITHOUT APPRECIATE THE FACTS AND ASKED BY SURVEY TEAM FORCIBLY 61,00,362/- 5. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE AND CONSIDERED THE FACTS APPELLANT BEFORE AO FILED AFFIDAVIT AND DEPONENT WAS PRESENT BEFORE AO FOR CROSS EXAMINATION AND IT IS THE LAW OF THE LAND LAID DOWN BY HON. SUPREME COURT IN THE CASE OF IF THE FACTS OF AFFIDAVIT ARE NOT PROVED FALSE OR WRONG 13 IN VIEW OF HON. SUPREME COURT ORDER IN CIT VS. MEHTA PAREKH 1956 30 ITR PAGE 187 SC HELD FACTS HAVE HAS BECOME CONCLUSIVE & FINAL 6. THAT THE LEARNED CIT(A) FAILED TO APPRECIATE AND CONSIDERED THE FACTS STATED IN AFFIDAVITS CIRCULAR OF CBDT WRITTEN SUBMISSION AND REASONS FOR RETRACTION FOR RS.19,85,600/- AND CASE LAW RELIED. D. PENAL INTEREST CHARGED U/S 234A, 234B, 234C, 234D 7. THAT THE LEARNED CIT(A) ERRED IN CONFIRMING & MAINTAINING THE PENAL INTEREST LEVIED U/S 234A RS. 30,930/- 234B RS. 3,84,784/- 14 234C RS. 42,814/- 234D RS. 1,628/- IS UNCALLED FOR IMPROPER AND BED IN LAW AND NEEDS TO BE CANCELLED OR DELETED. 6. ON 5 TH JULY, 2012 AN APPLICATION WAS FILED UNDER RULE 11 OF THE INCOME TAX (APPELLATE TRIBUNAL) RULES, 1963 FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL. THE ASSESSEE SUBMITS AS UNDER : 1. THAT IT HAS BEEN CONTENTION OF THE ASSESSEE SINCE BEGINNING AND THIS IS ALSO A FACT AND IS ALSO BORNE OUT FROM THE BOOKS OF ACCOUNTS AND ALL OTHER DOCUMENTS OF THE ASSESSEE DULY SCRUTINISED BY THE DEPARTMENT THAT THE ASSESSEE NEVER DEALT IN SALE AND PURCHASE OF ANY TYPE OF CLOTH AND THAT THE BUSINESS OF THE ASSESSEE IS ONLY JOB WORK OF 15 BLEACHING AND FINISHING OF CLOTH AND THAT THE BALES OF CLOTH FOUND IN THE PREMISES WERE THOSE LEFT BY THE CUSTOMERS SINCE THEY WERE DAMAGED DURING THE PROCESSING. 2. THAT THE ASSESSEE SOLD THESE BALES NOT AS OWNER BUT AS BAILEE OF THE RESPECTIVE CUSTOMERS FOR RS. 32,63,800. THE ASSESSEE WANTED TO DEMONSTRATE THAT THE VALUE OF THESE BAILS SHOWN BY THE SURVEY PARTY WAS ARBITRARY AND WITHOUT ANY BASIS. IN SUCH ATTEMPT UNDER MISAPPREHENSION THE ASSESSEE SHOWED IT AS INCOME SURRENDERED. 3. UNDER THESE CIRCUMSTANCES THE ASSESSEE SEEKS LEAVE OF THE 16 HONBLE TRIBUNAL TO ADMIT THE FOLLOWING ADDITIONAL GROUND OF APPEAL . THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE ASSESSEE UNDER MIS- APPREHENSION SURRENDERED VALUE OF CLOTH NOT BELONGING TO HIM, AT RS. 32,63,800 WHICH BE DELETED. 4. IT IS SUBMITTED THAT THE APPLICATION BE ALLOWED. 7. SHRI S.K. JAIN AND SHRI R. TARWALA, APPEARED ON BEHALF OF THE ASSESSEE AND CONTENDED THAT SINCE SUR VEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 31.3.2007 THE CASE OF T HE ASSESSEE WAS SELECTED FOR SCRUTINY. THE ACIT KHAND WA ISSUED NOTICE U/S 143(2) ON 12.8.2008 TO THE ASSESS E WHICH WAS SERVED UPON HIM. THUS THE ACIT KHANDWA HA S 17 PROCEEDED FOR MAKING ASSESSMENT. HOWEVER, AT THIS S TAGE, AS STATED IN THE ASSESSMENT ORDER, THE CASE WAS ASS IGNED TO THE ADDL. CIT, RANGE KHANDWA, HEAD QUARTER INDOR E VIDE ORDER U/S 120 DATED 20.8.2009 BY THE CIT, IHDO RE. THE ADDL. CIT ISSUED ANOTHER NOTICE U/S 143(2) OF T HE ACT ON 26.8.2009 TO THE ASSESSEE WHICH WAS SERVED UPON THE ASSESSEE ON 27.8.2009. THE ADDITIONAL CIT FURTHER ISSUED NOTICE TO THE ASSESSEE U/S 142(1) OF THE ACT WITH THE QUESTIONNAIRE ON 13.10.2009 DIRECTING THE ASSES SEE TO PRODUCE ALL THE BOOKS OF ACCOUNTS AND VOUCHERS. THE ASSESSMENT WAS MADE ON 29.12.2009 AT AN INCOME OF RS.64,12,760/-. 8. IN VIEW OF THE ABOVE IT WAS SUBMITTED THAT THE ASSESSMENT ORDER IS WITHOUT JURISDICTION AND AS SUC H A NULLITY. AS PER THE LEARNED COUNSEL FOR THE ASSESSE E, THE ASSESSMENT PENDING BEFORE THE ACIT, KHANDWA WAS ASSIGNED BY THE CIT-II, INDORE TO THE ADDL. CIT, IN DORE BY ORDER DATED 20.8.2009. THE ASSESSEE DOES NOT KNOW W HAT IS MENTIONED IN THE SAID ORDER OF THE CIT-II, INDOR E. IT WAS 18 NOT SERVED UPON THE ASSESSEE NOR SHOWN TO HIM. HE FURTHER CONTENDED THAT MENTION OF S. 120 IN THE ORD ER BY THE CIT IS MEANINGLESS. IT HAS NO RELEVANCE REGARDI NG TRANSFER OF A CASE. IT DEALS WITH JURISDICTION OF I NCOME TAX AUTHORITIES.PROPER PROVISION FOR TRANSFER OF A CASE FROM ONE PLACE (KHANDWA) TO ANOTHER (INDORE) IS S. 127 O F THE IT ACT, ADDITIONAL CIT HAS THOUGH JURISDICTION CONC URRENT TO MAKE ASSESSMENT IN THE CASE OF THE ASSESSEE IN H IS RANGE BUT THE CASE PROPERLY PENDING AT THE STATION CANNOT BE TRANSFERRED IN VIOLATION OF S. 127 OF THE IT ACT . THE CIT INDORE COULD THOUGH TRANSFER THE CASE FROM KHANDWA TO INDORE BUT NOT WITHOUT GIVING THE ASSESSEE A REASON ABLE OPPORTUNITY OF BEING HEARD AND WITHOUT RECORDING RE ASONS FOR TRANSFERRING THE CASE FROM ACIT, KHANWA TO ADDL . CIT, INDORE. THUS, THE TRANSFER OF THE CASE IN VIOLATION OF SECTION 127 OF THE ACT IS ILLEGAL. IT DOES NOT CONF ER JURISDICTION ON THE ADDITIONAL CIT. THE ASSESSMENT ORDER IS WITHOUT JURISDICTION. IT DESERVES TO BE QUASHED. HE FURTHER PLACED RELIANCE ON THE FOLLOWING CASES :- 19 1. M/S ASHA & CO. V.ACIT(2006) 6 ITJ 215(INDORE TRIBUNAL.) 2. M/S BHAGAT PALACE V.ACIT(2008)11 ITJ 253 (INDORE BENCH.) 3. M/S MANOHAR SWEETS,INDORE VS. CIT(2008) 11 ITJ 326 (MP HIGH COURT) 4. WEST BENGAL STATE ELECTRICITY BOARD VS.DCIT (200 5) 278 ITR 218 (CAL.) 9. WITH REGARD TO THE MERIT OF THE ADDITION IT WAS CONTENDED BY THE LEARNED COUNSEL THAT THE AO VERY M UCH RELIED UPON THE SURVEY REPORT. IN THIS CONNECTION A FFIDAVIT OF THE ASSESSEE (PB PAGE 13) AND THE FACTS OF THE C ASE SUBMITTED BEFORE ACIT, KHANDWA (PB PAGE 15 TO 18) B E PERUSED. STATEMENT OF THE ASSESSEE RECODED ON OATH AND THAT TOO BY UNAUTHORISED PERSON AND NOT SIGNED BY ANYBODY IS INADMISSIBLE. HE FURTHER CONTENDED THAT DURING THE ASSESSMENT PROCEEDINGS THE ADDL. DCIT AG AIN RECORDED STATEMENT OF THE ASSESSEE ON 5.11.2009 UND ER COERCION AND AFFIDAVIT OF THE ASSESSEE. AFFIDAVITS DATED 26.10.2009 AND 24.12.2009 NEED TO BE PERUSED. SEE 3 0 20 ITR 181 (SC), 16 ITR 96 (IND.TRI) 17 ITJ 648 (MP HC ) AND 13 ITJ 37(AGRA). 10. ON THE OTHER HAND, THE LEARNED SENIOR DR, SH RI R.A. VERMA APPEARED ON BEHALF OF THE REVENUE AND CONTENDED THAT THERE WAS ONLY ASSIGNMENT OF CASE WI TH ADDITIONAL CIT U/S 120 IN THE SAME STATION AND THER E WAS NO TRANSFER OF CASE U/S 127 FROM ONE STATION TO ANO THER. HE PLACED ON RECORD THE REMAND REPORT CALLED FROM T HE AO DATED 14.3.2013 AD DESIRED BY ITAT WHICH READS A S UNDER :- II(B) ON VERIFICATION OF CASE RECORDS, IT IS FOUND THAT IT IS CORRECT THAT SCRUTINY ASSESSMENT FOR THE ASSESSMENT YEAR UNDER APPEAL WAS PENDING BEFORE ACIT, KHANDWA. HOWEVER, VIDE ORDER U/S 120 OF ITACT, 1961 DATED 20.8.2009, THE CASE WAS ASSIGNED TO ADDL. CIT, KHANDWA RANGE FOR LIMITED PURPOSES OF PASSING THE ASSESSMENT ORDER UNDER CONSIDERATION. THE HEADING UNDER 21 WHICH SECTION 120(1) HAS BEEN PLACED IN THE INCOME TAX ACT, 1961 IS JURISDICTION OF INCOME TAX AUTHORITIES. UNDER CLAUSE (A) OF SUB-SECTION (4) OF THIS SECTION, THE BOARD MAY EMPOWER THE COMMISSIONER OF INCOMETAX TO ISSUE ORDERS IN WRITING THAT POWERS OF ASSESSING OFFICER OF A PERSON WILL BE EXERCISED BY THE ADDITIONAL COMMISSIONER OF INCOME TAX. UNDER THIS EMPOWERMENT, THE COMMISSIONER HAS ASSIGNED THE CASE TO ADDITIONAL CIT, KHANDWA FOR PASSING ORDER U/S 143(3). THERE WAS NO NEED FOR SERVING OR SHOWING ORDER U/S 120 OF IT ACT, 1961 TO THE ASSESSEE. THERE WAS NO TRANSFER OF CASE AS SPECIFIED IN SECTION 127 IN THE CASE OF THE ASSESSEE. ADDL. CIT HAS CONCURRENT JURISDICTION WITH AO. HENCE ASSESSEES ARGUMENTS IN THIS REGARD ARE NOT TENABLE AND REQUIRE TO BE REJECTED OUTRIGHTLY. 22 II(C) HERE AGAIN THE ARGUMENTS OF THE ASSESSEE ARE MISLEADING. AS PER DEPARTMENTAL PROCEDURE EVERY YEAR AN ACTION PLAN IS PREPARED BY THE BOARD AND MADE AVAILABLE TO AUTHORITIES OF DEPARTMENT FOR PLANNING THEIR WORK IN VIEW OF THE REQUIREMENTS OF SUCH ACTION PLAN. THE AUTHORITIES ARE ALSO REQUIRED TO ISSUE ORDERS WHEREVER REQUIRED TO WORK WITH THE SPIRIT OF ACTION PLAN. THIS ACTION PLAN, INTER ALIA, REQUIRES THE ADDL/JOINT COMMISSIONER OF A PARTICULAR RANGE TO MAKE ASSESSMENTS BY THEMSELVES IN SOME OF IMPORTANT/REVENUE YIELDING/COMPLICATED CASES WHERE THE MORE EXPERIENCED SKILL IS REQUIRED TO BE APPLIED. KEEPING IN VIEW THE SPIRIT OF ACTION PLAN, EVERY YEAR, THE COMMISSIONERS OF INCOME TAX BY EXERCISING THE POWERS ASSIGNED TO THEM U/S 120 OF IT ACT, 1961 ALLOT SOME CASES OF 23 THE NATURE GIVEN ABOVE TO ADDL/JOINT CIT OF PARTICULAR RANGE FOR PASSING ORDER IN A PARTICULAR ASSESSMENT YEAR U/S 143(3) AFTER PROPERLY SCRUTINISING THE CASE. ALL FURTHER PROCEEDINGS I.E. ENTERING OF ASSESSMENT/PENALTY PROCEEDINGS IS DONE IN THE REGISTER OF ACIT. FURTHER ACTIONS IF ANY ARE ALSO TAKEN BY THE ACIT ITSELF. THIS ASSIGNMENT IS DIFFERENT THAN TRANSFER OF CASE U/S 127 WHERE THE ASSESSEE IS REQUIRED TO BE GIVEN THE OPPORTUNITY BEFORE TRANSFER OF CASE FROM ONE STATION TO ANOTHER STATION. U/S 127 THE ENTIRE FURTHER PROCEEDINGS INCLUDING COLLECTION OF DEMAND, FINALISATION OF PENALTY AND OTHER PROCEEDINGS PENDING ON THE DATE OF TRANSFER ARE FINALISED BY THE OFFICER TO WHOM CASE IS TRANSFERRED. THE TRANSFER OF CASE U/S 127 IS PERMANENT IN ITSELF AND CAN BE 24 REVERTED BY ANOTHER ORDER UNDER THIS SECTION ITSELF. IN THE PRESENT CASE, THE ADDL. CIT, KHANDWA WAS ASSIGNED THE POWERS TO FRAME ASSESSMENT. THERE WAS NO TRANSFER OF CASE FROM KHANDWA TO INDORE. THERE IS POST OF ADDL/JOINT COMMISSIONER OF INCOME TAX AT KHANDWA. IT IS BY CHANCE THAT IN THAT PERIOD ONE ADDL.CIT REGULARLY POSTED IN RANGE 4, INDORE WAS ALSO GIVEN CHARGE OF ADDL. CIT, KHANDWA AND ACCORDING TO CONVENIENCE, HE HAS PASSED ORDERS BY SITTING AT INDORE DEFINITELY WITH THE CONSENT OF ASSESSEE AND THEIR COUNSELS. HAD THE ASSESSEE WAS HAVING ANY DIFFICULTY IN GETTING THE HEARINGS DONE AT INDORE HE SHOULD HAVE ASKED THE ADDL. CIT TO HEAR HIS CASE SAT KHANDWA ITSELF. IN THAT SITUATION, THE ADDL. CIT SHOULD HAVE HEARD HIS CASE AT KHANDWA. 25 IN VIEW OF ABOVE DISCUSSION, I MAY SUBMIT THAT IN THE PRESENT CASE THERE WAS ONLY ASSIGNMENT OF CASE WITH ADDL.CIT U/S 120 IN THE SAME STATION AND NOT TRANSFER OF CASE U/S 127 FROM ONE STATION TO ANOTHER. FURTHERMORE, THE ASSESSEE IS NOW NOT ENTITLED TO CHALLENGE THE JURISDICTION. IF THERE WAS ANY DISPUTE REGARDING JURISDICTION THE JURISDICTION SHOULD HAVE BEEN CHALLENGED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF. 11. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. WE HAVE ALSO DELIBERATED ON THE CASE LAWS CITED BY THE LEARNED COUNSEL FOR THE ASSESSEE WITH REFERE NCE TO TRANSFER OF CASE IN VIOLATION OF SECTION 127 OF THE ACT. FROM RECORD WE FIND THAT SCRUTINY ASSESSMENT WAS CARRIED ON DUE TO SURVEY HAVING BEEN CONDUCTED AT T HE BUSINESS PREMISES OF THE ASSESSEE ON 21.3.2007. BY PASSING ORDER U/S 120 OF THE ACT, THE CASE WAS ASSI GNED 26 TO ADDL. CIT, KHANDWA, FOR PASSING THE ASSESSMENT O RDER. THERE WAS NO TRANSFER OF CASE FROM KHANDWA TO INDOR E. THERE WAS ONLY ASSIGNMENT OF CASE WITH THE ADDL. CI T U/S 120 IN THE SAME STATION AND NOT TRANSFER OF CASE U/ S 127 OF THE ACT FROM ONE STATION TO ANOTHER. IT IS ALSO A MATTER OF RECORD THAT THE ASSESSEE HAS NOT CHALLENGED THE JURISDICTION EITHER BEFORE THE AO OR THE CIT(A). IT IS ONLY BEFORE US THAT THE ASSESSEE HAS CHALLENGED THE JURISDICTION AND CONTENDED THAT IT WAS TRANSFER OF CASE U/S 127 AND SINCE THE CASE WAS PENDING AT ONE STATI ON, CANNOT BE TRANSFERRED WITHOUT GIVING OPPORTUNITY OF BEING HEARD AND WITHOUT RECORDING REASONS FOR TRANSFERRIN G THE CASE FROM ACIT, KHANDWA, TO ADDL. CIT, INDORE, THE TRANSFER OF CASE IS IN VIOLATION OF SECTION 127 OF THE ACT, THEREFORE, THE SAME IS ILLEGAL. IT WAS, ACCORDINGLY , PLEADED BY THE LEARNED AR THAT THE ASSESSMENT FRAMED BY THE ADDL. CIT WAS WITHOUT JURISDICTION AND DESERVES TO BE QUASHED. WE FIND THAT IT WAS MERE ASSIGNMENT OF CA SE BY THE CIT TO THE AUTHORITY WORKING UNDER HIS JURISDIC TION. 27 IT WAS NOT A CASE OF TRANSFER FROM ONE STATION TO A NOTHER WHICH REQUIRES PASSING OF ORDER U/S 127. IT WAS MER ELY ASSIGNMENT OF CASE WITH THE ADDL. CIT U/S 120 IN TH E SAME STATION AND THERE WAS NO TRANSFER OF CASE U/S 127 FROM ONE STATION TO ANOTHER. UNDER CLAUSE (A) OF S UB- SECTION (4) OF SECTION 120, THE BOARD MAY EMPOWER T HE CIT TO ISSUE ORDERS IN WRITING THAT THE POWERS OF T HE AO OF A PERSON WILL BE EXERCISED BY THE ADDL. CIT. UNDER THIS EMPOWERMENT, THE CIT HAS CORRECTLY ASSIGNED THE CAS E TO ADDL. CIT, KHANDWA, WHO WAS ALSO WORKING UNDER THE SAME CIT FOR PASSING ORDER U/S 143(3). THERE WAS N O REQUIREMENT FOR SERVING AND SHOWING ORDER PASSED U/ S 120 TO THE ASSESSEE SINCE IT WAS NOT A CASE OF TRAN SFER U/S 127. FURTHERMORE, THE ADDL. CIT HAS CONCURRENT JURISDICTION WITH THE AO HENCE THE CONTENTION OF TH E ASSESSEE THAT ASSESSMENT FRAMED BY THE ADDL. CIT WA S ILLEGAL, HAS NO LEGS TO STAND. 28 12. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIN D ANY MERIT IN THE CONTENTION OF THE LEARNED AR WITH REGARD TO LEGALITY OF THE ORDER PASSED U/S 143(3) OF THE A CT. 13. NOW COMING TO THE MERIT OF THE ADDITION MADE B Y THE AO WITH REGARD TO THE STOCK FOUND DURING THE CO URSE OF SURVEY AND WHICH WAS SURRENDERED BY THE ASSESSEE . HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASS ESSEE SHOWED VALUE OF STOCK AT RS. 32,63,800/- IN PLACE O F STOCK VALUED BY THE SURVEY TEAM AT RS. 52,49,400/-. THUS, THE VALUE OF STOCK AMOUNTING TO RS. 19,85,600 /- WAS RETRACTED ON THE GROUND THAT OUT OF 931 BALES A ND CLOTH FOUND AT THE TIME OF SURVEY, ONLY 145 BALES W ERE OF GOOD CLOTH AND REMAINING 786 BALES WERE DAMAGED, DEFECTIVE AND SECOND QUALITY CLOTH. THE AO ASKED EXPLANATION FOR RETRACTION. THE ASSESSEE FILED AFFI DAVIT EXPLAINING THE REASONS FOR RETRACTION. THE AO ALSO STATED THAT VIDE TAX AUDIT REPORT U/S 44AB FILED ALONGWITH THE RETURN ON 30 TH OCTOBER, 2007, THE ASSESSEE REVALUED THE STOCK OF CLOTH AS FOLLOWS :- 29 THAT AFTER PROPER VERIFICATION THE VALUE OF COMPLETE 931 BALES (145 FRESH QUALITY AND 786 BALES OF DEFECTIVE DAMAGED AND SECOND QUALITY) ARE REVALUED AT RS. 32,63,800/- VALUE OF STOCK DURING SURVEY RS.52,49,400/- (-) REVISED VALUE OF STOCK IN RETURN RS.3 2,63,800/- RETRACTION VALUE OF STOCK RS.19,85,600/- 4.3 VIDE QUESTIONNAIRE ISSUED ALONGWITH NOTICE U/S 142(1) DATED 13.10.2009 IN THE POINT NO. 10, TH E ASSESSEE WAS ASKED TO SHOW CAUSE WHY CHANGE THE VALUE OF STOCK OF CLOTH SURRENDERED DURING THE SURVEY:- AS YOU HAVE SUBMITTED THAT THERE IS A CHANGE IN VALUE OF STOCK OF CLOTH SURRENDERED DURING THE SURVEY. PLEASE EXPLAIN AND JUSTIFY THIS. ALSO GIVE DETAILS OF PURCHASE OF 931 BALES AND HOW YOU HAVE VALUED IT. 4.4 IN THE WRITTEN SUBMISSION OF ASSESSEE DATED 30.10.2009, THE ASSESSEE SUBMITTED THAT (I) CHANGE IN VALUE OF STOCK OF CLOTH SURRENDERED DURING SURVEY (II) DETAILS OF PURCHASE OF 931 BALES . IT IS RESPECTFULLY SUBMITTED THAT THERE WAS 133A S URVEY PROCEEDINGS ON 21.03.2007 AND DURING SURVEY ON 21.0 3.2007 APPLICANT WAS AT BHOPAL VALLABH BHAVAN WITH SHRI NANDKUMARSINGH MEMBER OF PARLIAMENT AND HEARING SUR VEY INFORMATION APPLICANT LEFT BHOPAL IMMEDIATELY AND I N NIGHT CAME TO BURHANPUR. HE WAS IN GREAT FRIGHTENED STATE OF AFFAIR AND SAW TEAM OF 10-12 PERSONS. FOR KIND CONSIDERATION AND READY REFERENCE DETAILE D SUBMISSIONS IS ENCLOSED. PLEASE SEEN ANNEXURE. 30 IT IS RESPECTFULLY SUBMITTED THAT THE APPLICANT HA VE NOT PURCHASED POWER LOOM CLOTH. IT IS THE OUT COME OF P OWER BREAK DOWN, BRAKE DOWN OF MACHINERY, WRONG MIXING DAMAGE DUE TO MAN OR MACHINE WORKING ETC. WHENEVER DEFECT DAMAGE OR LOSS IS CAUSED TO QUALIT Y OF CUSTOMERS GOODS, HE REFUSES TO TAKE DELIVERY. UNDER THE FACT AND CIRCUMSTANCES OF THE CASE BEYON D APPLICANTS CONTROL HAS TO ACCEPT DEFECTS, DAMAGED QUALITY GOODS. AGAIN IT IS RESPECTFULLY SUBMITTED 931 BALES STOCK FOUND DURING SURVEY WAS THE ACCUMULATION OF 10-12 YEARS W ORKING. HERE THE APPLICANT WILL LIKE TO SUBMIT WHEN, CUSTO MERS REFUSES TO TAKE DELIVERY OF LOT, NATURALLY SOME GOO DS REMAINED OF FIRST QUALITY. IN THIS WAY THE APPLICANT WAS IN POSSESSION OF 931 BALES. 4.5 THE FACTS MENTIONED (AS DISCUSSED IN PARA 4.1 ABOVE) WERE ALSO STATED IN FORM OF AN AFFIDAVIT DATED 26.10.2009 (BESIDES SOME OTHER FACTS ARE ALSO MENTIONED IN AFFIDAVIT WHICH ARE NOT RELATED T O THE INCOME SURRENDERED OR RETRACTION THEREOF AND THEREFORE IS NOT DISCUSSED. THE RELATED AFFIDAVIT I S PLACED ON RECORD.) 4.6 VIDE QUESTIONNAIRE ISSUED ALONGWITH NOTICE U/S 142(1) DATED 13.10.2009 IN THE POINT NO. 13, ASSESSEE WAS ASKED : PLEASE EXPLAIN HOW YOU HAVE TREATED THE INCOME SURRENDERED DURING THE SURVEY, I N YOUR BOOKS OF A/C. 4.7 ON HEARING DATED 30.10.2009 LD. COUNSEL FILED FIRST AFFIDAVIT WHICH WERE PLACED IN RECORD. IN POINT NO. 10 IT WAS WRITTEN : THAT THERE CANNOT BE ANY DISPUTE THAT OUT OF 931 B ALES OF POWERLOOM CLOTH, 786 BALES WERE OF DAMAGED CLOTH AND 145 BALES OF GOOD CLOTH. 31 THESE BALES WERE GIVEN MORE THAN A YEAR AGO. 786 BA LES CONTAINED DAMAGED CLOTH. NOBODY WOULD TRADE IN DAMA GED CLOTH. IT IS DAMAGED DURING THE PROCESS AND LYING S INCE LONG. IN THE WRITTEN SUBMISSION OF THE ASSESSEE DATED 30.10.2009, THE ASSESSEE SUBMITTED IN RESPONSE OF INCOME SURRENDER DURING THE SURVEY THAT :- TREATMENT OF INCOME SURRENDERED DURING SURVEY IN BOOKS. IT IS RESPECTFULLY SUBMITTED THAT ON 21.03.2007 AP PLICANT HAD SURRENDERED ON THE BASIS OF WORKING PREPARED BY SURVEY TEAM PRICE AND RATES SUGGESTED BY CLERICAL STAFF. POWERLOOM CLOTH 931 BALES RS. 52,49,400/- EXCESS CASH RS. 8,50,962/- RS.61,00,362/- THAT AFTER SURVEY ON 21.03.2007 AND BEFORE FILING RETURN APPLICANT HAD TRIED TO SALE 931 BALES. THAT 786 BAL ES ARE OF DAMAGED DEFECTIVE SECOND QUALITY AND 145 BALES OF F RESH QUALITY. 14. THE ASSESSEE ALSO FILED MANY JUDICIAL PRONOUNCEMENTS WITH REGARD TO STATEMENT RECORDED DURING SURVEY AND ITS BINDING NATURE WHEN THE ASSES SE PUTS DIFFERENCE FACTS ON RECORD. 15. THE CRUX OF ARGUMENTS OF THE LEARNED COUNSEL FO R THE ASSESSEE, VIS-A-VIS THE FACTS EMERGING FROM RECORD IS THAT THE ASSESSEE WAS ENGAGED IN THE JOB WORK OF CLOTH PROCESSING. HOWEVER, DURING SURVEY STOCK OF CLOTH WAS FOUND WHICH WAS VALUED BY THE SURVEY TEAM AND THE 32 ASSESSEE ALSO SURRENDERED THE AMOUNT OF STOCK FOUND . HOWEVER, IN THE RETURN FILED THE ASSESSEE REVALUED THE STOCK AND THERE WAS PART RETRACTION WITH REFERENCE TO THE INCOME SURRENDERED ON ACCOUNT OF STOCK OF CLOTH FOU ND. IT WAS CLAIMED THAT THE BALES OF CLOTH FOUND IN THE BU SINESS PREMISES WERE OF CLOTH WHICH WERE DAMAGED DURING PROCESS OF BLEACHING AND FINISHING, DELIVERY OF THE SAME WAS NOT TAKEN BY THE CUSTOMERS AND THE CUSTOMERS AL SO DID NOT MAKE PAYMENT OF THE JOB WORK TO THE EXTENT OF THE VALUE OF CLOTH DAMAGED. IT WAS ALSO CLAIMED THAT SU CH STOCK OF CLOTH WAS ACCUMULATION OF YEARS. IT IS AL SO A MATTER OF RECORD THAT NO BILL OR VOUCHER OF PURCHAS ES OF SUCH STOCK WAS FOUND DURING SURVEY OR ON SUBSEQUENT INQUIRY BY THE DEPARTMENT. IT WAS ALSO THE CLAIM O F THE ASSESSEE THAT EXCESS STOCK OF CLOTH IN THE FORM OF 931 BALES OF CLOTH BELONGED TO PARTIES WHO DID NOT TAKE DELIVERY OF CLOTH DUE TO DAMAGE DURING PROCESS AND LATER ON ADJUSTED AGAINST JOB WORK CHARGES DUE FROM THEM. EVEN THOUGH THE ASSESSEE COULD NOT SUBSTANTIATE 33 SATISFACTORILY BY PLACING ON RECORD EVIDENCE REGARD ING DAMAGED GOODS TO THE EXTENT ALLEGED BY HIM. HOWEVER , KEEPING IN VIEW THE ASSESSEES NATURE OF BUSINESS A ND THE POSITION OF STOCK WHICH WAS FOUND IN DAMAGED CONDIT ION AFTER THE LAPSE OF SO MANY YEARS, WE DIRECT THE AO TO GIVE REBATE OF 25% (TWENTY-FIVE PERCENTAGE) IN VALUE OF STOCK SO FOUND WHILE MAKING THE ADDITION ON ACCOUNT OF SUCH STOCK. WE DIRECT ACCORDINGLY. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. ORDER PRONOUNCED IN OPEN COURT ON 12 TH AUGUST, AUGUST, 2013. SD SD (JOGINDER SINGH) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 12.8.2013 COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR DN/-87&58&68 34
Other Referred Cases
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Laws Referred To
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1:1 Consultation on Business Valuations
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1:1 Consultation on Legal Requirements
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1:1 Consultation on Tax Litigation
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CRM Implementation Plan
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No Objection Letter for Use of Property – Partnership Firm
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