The ITO, 4(1), Indore V. M/s Shri Siraj Siddiqui, Indore

ITA 173/IND/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5314 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 29-11-2016
• Assessment Year: 1997-1998
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALCHAND
• Keywords: Unexplained investment; Search and seizure; Procedural lapse; Reassessment proceedings
• Section: 143(3); 147; 68; 148; 132

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE .., .., % BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI O.P. MEENA, ACCOUNTANT MEMBER ITO, 4(1), INDORE. VS. SHRI SIRAJ SIDDIQUI, P/O M/S. MILAN TRADERS, 10, JAWAHAR MARG, INDORE. .. ./ PAN: ADUPS9485I / APPELLANT / RESPONDENT SHRI SIRAJ SIDDIQUI, P/O M/S. MILAN TRADERS, 10, JAWAHAR MARG, INDORE. .. ./ PAN: ADUPS9485I VS. ITO, 4(1), INDORE. / CROSS OBJECTOR / RESPONDENT / DEPARTMENT BY SHRI LAL CHAND, CIT DR / ASSESSEE BY SHRI SUDHIR PADLIYA, C. A. .. . / I.T.A. NO. 173/IND/2013 / ASSESSMENT YEAR: 1997-98 C.O.NO.56/IND/2013 (ARISING OUT OF .. ./ I.T.A. NO. 173/IND/2013) / ASSESSMENT YEAR: 1997-98 I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 2 OF 24 DATE OF HEARING 29.11.2016 # DATE OF PRONOUNCEMENT 23.12.2016 / O R D E R PER O.P. MEENA, ACCOUTANT MEMEBR. APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. COMM ISSIONER OF INCOME-TAX (APPEALS)-II, INDORE [HEREINAFTER REFERR ED TO AS THE CIT(A)] DATED 17.01.2013 AND PERTAINS TO ASSESSMENT YEAR 1997-98. 2. THE REVENUE HAS RAISED ORIGINAL GROUND OF APPEAL TH AT LD. CIT(A) WAS NOT JUSTIFIED IN DELETING ADDITION O F RS. 1,33,66,800/- MADE BY AO BY APPLYING GROSS PROFIT R ATE OF 20% ON SALES OF RS. 6,68,34,000/- AND IN DELETING A DDITION OF RS. 2,14,21,200/- MADE ON ACCOUNT OF INVESTMENT. 3. THE REVENUE FURTHER REVISED GROUNDS STATING THAT T HE LD. CIT(A) HAS ERRED IN SETTING ASIDE WHOLE ADDITION OF RS. 3,47,88,000/- ( RS. 1,33,66,800/- + RS. 2,14,21,200 /-) WITHOUT CONSIDERING THE FACT OF VDIS CERTIFICATE ISS UED ON I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 3 OF 24 03.03.1998 WAS NOT SUBJECT TO THE CREDIT OF RS. 52,0 0,000/- AS CLAIMED BY ASSESSEE AND SETTING ASIDE THE ADDITION WITHOUT CONSIDERING THE FACT THAT VDIS CERTIFICATE HAS NO S PECIFIC DECLARATION OF UNACCOUNTED SALE TRANSACTION OF RS. 6,66,34,000/- AND NOT FOLLOWING PROCEDURE OR CALLING REPORT FROM AO NOR DECIDING ADDITION ON MERIT. 4. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUP PORT OF ACTION OF THE LD. CIT(A) AND STATES AS UNDER :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED A.O. HAS SUBMITTED THE GROUNDS WITHOUT SPECIFYING THE SAME ARE AMENDED GROUNDS OR ADDITIONAL GROUNDS RAISED BEFORE THE HON'BLE BENCH. 2. THAT THE PROCEEDINGS INITIATED U/S 147 ARE NOT AS PER THE PROVISIONS AS LAID DOWN IN THE ACT. 3. THAT LD. CIT(A) WAS FULLY JUSTIFIED IN SETTING ASIDE THE WHOLE ADDITIONS OF RS. 3,47,88,000/-(1,33,66,800 + 2,14,21,200) FOLLOWING THE ORDER PASSED BY INDORE BENCH OF HON'BLE M.P. HIGH COURT DATED 21.09.2012 FOR RESTORING THE VDIS CERTIFICATE U/S 68(2) AS CANCELLED BY CIT VIDE HIS ORDER DATED 31.03.2004. I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 4 OF 24 4. THAT THE LD. A.O. HAS WRONGLY RAISED THE GROUND THAT THE VDIS CERTIFICATE ISSUED ON 03.03.1998 WAS NOT SUBJECT TO THE CREDIT OF RS. 52,00,000/- AS CLAIMED BY THE ASSESSEE AND REJECTED BY THE A.O. 5. THAT THE LD. A.O. HAS WRONGLY RAISED THE GROUND THAT VDIS CERTIFICATE ISSUED BY CIT ON 03.03.1998 DOES NOT COVER THE DECLARATION ON UNACCOUNTED SALES OF RS. 6,68,34,000 /-. 6. THAT THE LD. A.O. HAS RAISED THE PROCEDURAL LAPSE WITHIN THE MEANING OF SECTION 250(2) OF THE ACT, WITHOUT CONSIDERING THE FACT THAT LD. CIT HAS ONLY FOLLOWED THE DECISION OF HON'BLE M.P. HIGH COURT. 7. THE LD A.O. HAS WRONGLY RAISED THE GROUND FOR NOT DECIDING THE ISSUE RELATES WITH MERIT OF THE CASE. 8. THE LD. A.O. HAS WRONGLY OBJECTED THE FACT OF NOT DECIDING EACH AND EVERY GROUND OF APPEAL AS RAISED BY THE ASSESSEE BEFORE HIM, WHEN THE ASSESSEE HAS NO OBJECTION ON THE SAME. 5. SINCE THE ABOVE GROUNDS OF REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE REVOLVED AROUND THE B ASIC ISSUE THAT LD. CIT(A) HAS DELETED THE WHOLE ADDITION OF RS . 3,47,88,000/-(WHICH WAS MADE BY THE AO BY APPLYING GR OSS PROFIT RATE OF 20 % ON UNACCOUNTED SALE AND ACCOUNT OF I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 5 OF 24 UNEXPLAINED INVESTMENT) ON THE BASIS OF VDIS CERTIF ICATE ISSUED BY CIT AND WHICH WAS RESTORED BY HON'BLE HIGH COURT IN A PETITION FILED BY THE ASSESSEE, THEREFORE, THE SE ARE BEING DISCUSSED AND DEALT WITH IN CONSOLIDATED MANNER AND DECIDED IN COMMON MANNER. 6. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNER IN THE FIRM M/S. MILAN TRADER S HAVING 50 % SHARES OF PROFIT AND ALSO DRAWS REMUNERATION AND INTEREST FROM THE FIRM. A NOTICE U/S 148 OF THE ACT WAS ISSUE D ON 27.03.2003, IN RESPONSE TO WHICH, THE ASSESSEE HAS F ILED RETURN OF INCOME ON 30.04.2003 DECLARING TOTAL INCO ME OF RS. 69,590/-. A SEARCH U/S 132 WAS CARRIED OUT ON 29.08. 1996 AT THE FACTORY OF M/S. SHIVRAJ TOBACCO COMPANY, UNNAO, WHEREIN IT WAS FOUND THAT THE ASSESSEE HAS PURCHASED PAN MAS ALA FROM M/S. SHIVRAJ TOBACCO CO. WORTH RS. 6,68,34,000/ - BETWEEN 01.04.1996 TO 29.08.1996. IN ORDER TO VERIF Y WHETHER THIS AMOUNT IS DISCLOSED IN THE RETURN OF INCOME FO R THE YEAR UNDER CONSIDERATION, A NOTICE U/S 148 OF THE ACT WAS ISSUED, IN RESPONSE TO WHICH THE ASSESSEE FILED A RETURN ENC LOSING I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 6 OF 24 THEREWITH A COPY OF CERTIFICATE DATED 03.03.1998 ISSUED BY COMMISSIONER OF INCOME TAX, INDORE ACCEPTING INCOME OF RS.52 LAKHS DISCLOSED UNDER VDIS SCHEME, 1997 FOR ASSESSMENT YEAR 1992-93 TO 1997-98. IT WAS SUBMITTE D BEFORE AO THAT THIS DECLARATION OF RS. 52 LAKH COVE RS SOURCE OF INVESTMENT AS WELL AS PROFIT OUT OF UNACC OUNTED PURCHASES OF PAN MASALA OF RS. 6,68,34,000/- FROM M /S. SHIVRAJ TOBACCO COMPANY. LATER ON, THE CIT-II, INDO RE CANCELLED THE VDIS CERTIFICATE ON THE REASONING THA T THE DECLARATION UNDER VDIS WAS MADE ON 31.12.1997 AFTER DETECTION OF SUCH UNACCOUNTED PURCHASES IN SEARCH D ATED 29.08.1996. ACCORDINGLY, THE AO PASSED THE ASSESSME NT ORDER U/S 143(3) READ WITH SECTION 148 BY MAKING ADDITION OF PROFIT ON UNACCOUNTED PURCHASES WERE ESTIMATED AT RS.1,33,66,800/- AND UNACCOUNTED INVESTMENT IN SUCH PURCHASES WAS ADDED AT RS.2,14,21,200/-. ACCORDING TO THE AO, THE DECLARAT ION MADE UNDER SECTION 65 OF VDIS, 97 ON 31.12.1997 AS SUCH WAS NOT WITHIN THE SPIRIT OF SECTION 64(2) OF INCOME- TAX ACT, 1961, AND THE BENEFIT OF DECLARATION UNDER VDIS WILL NOT BE AVAILABLE FOR UNACCOUNTED PURCHASES AND SALE I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 7 OF 24 OF RS.6,68,34,000/-. CONSIDERING THE FACTS OF THE C ASE AO MADE AN ADDITION OF RS.1,33,66,800/- BY APPLYING A GP RATE @ 20% ON SALE OF RS.6,68,34,000/- AND FURTHER ALSO UNACCOUNTED INVESTMENT INVOLVED IN UNACCOUNTED TRANSACTION AT RS.2,14,21,200/- ON THE BASIS OF PEA K CREDIT. 7. AGGRIEVED WITH THE ORDER, THE ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A). 8. IT WAS CONTENDED BEFORE THE LD. CIT(A) THAT THE ASSESSEE ALSO FILED A WRIT PETITION BEFORE HON'BLE HIGH COURT OF MADHYA PRADESH, INDORE BENCH AGAINST CANCELLATION OF VDIS CERTIFICATE. THE HON'BLE HIGH COURT HAS PASSED AN ORDER DATED 20.09.2012 IN WRIT PETITI ON NO. 501/2004 SETTING ASIDE THE CANCELLATION ORDER OF VD IS CERTIFICATE OF CIT-II, INDORE DATED 31.03.2004. THE HON'BLE HIGH COURT HELD HAS HELD AS UNDER :- 'PARA 26 - THUS CONSIDERING THE AFORESAID JUDGMENT AS WELL AS THE SCHEME OF VDIS 1997, WE ARE OF THE OPINION THAT IN NORMAL CIRCUMSTANCES THE CERTIFICATE ISSUED UNDER THE VDIS CANNOT I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 8 OF 24 BE CANCELLED UNLESS THE CERTIFICATE WAS ISSUED CONTRARY TO THE SCHEME ITSELF OR IGNORING THE BAR CONTAINED IN SECTION 62(2)(II) OR WHERE THE CERTIFICATE UNDER THE VDIS ITSELF HAS BEEN OBTAINED PRACTICING FRAUD SINCE FRAUD VITIATES ANY SOLEMN ACTION. PARA 21 - IN THE PRESENT CASE, THOUGH THE STATEMENT OF THE PETITIONER RECORDED BY THE DY. DIRECTOR OF INCOME TAX ON 01.08.2002 INDICATES THAT THE PETITIONER HAD MADE THE DISCLOSURE CALCULATING THE INCOME ON THE BASIS OF THE PURCHASE WHICH WERE MADE FROM M/S. SHIVRAJ TOBACCO COMPANY BUT THERE IS NOTHING ON RECORD TO SHOW THAT THE PETITIONER HAD COMMITTED ANY FRAUD IN DISCLOSING THE INCOME. ON THE SAME AMOUNT OF SALE, THE DEPARTMENT IS CALCULATING HIGHER INCOME WHEREAS THE PETITIONER HAD DISCLOSED THE LOWER INCOME. THEREFORE, ONLY ON THAT BASIS IT CANNOT BE I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 9 OF 24 HELD TO BE A CASE OF FRAUD. PARA 24 - THERE IS YET ANOTHER REASON TO SET ASIDE THE IMPUGNED ORDER CANCELLING THE VDIS CERTIFICATE. THE NOTICE FOR CANCELLATION OF THE CERTIFICATE IS DATED 25/03/2004. IN THE IMPUGNED ORDER ITSELF IT IS MENTIONED THAT THE NOTICE WAS SERVED BY AFFIXTURE AND SPEED POST ON 26/03/2004. WITHIN 5 DAYS OF SERVICE OF NOTICE, THE FINAL ORDER WAS PASSED IN SPITE OF THE SPECIFIC REQUEST OF THE PETITIONER TO THE CHIEF COMMISSIONER VIDE ANNEXURE P- 13 FOR GRANT OF REASONABLE TIME AND PROPER OPPORTUNITY BEFORE PASSING ANY ADVERSE ORDER. PARA 25 - KEEPING IN VIEW THE AFORESAID ASPECT OF THE MATTER, THE IMPUGNED ORDER DATED 31/03/2004 CANCELLING THE VDIS CERTIFICATE DATED 03/03/1998 ISSUED UNDER SECTION 68(2) OF THE VDIS 1997 CANNOT BE SUSTAINED AND IS HEREBY SET ASIDE.' I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 10 OF 24 4. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND ASSESSMENT ORDER AS WELL AS ORDER OF HON'BLE HIGH COURT OF M.P. FOLLOWING THE ORDER OF HON'BLE HIGH COURT VDIS CERTIFICATE DATED 03/03/1998 HAS BECOME VALID AND OPERATIONAL AND AS A RESULT ACTION OF AO TO ESTIMATE THE INCOME OF RS. 1,33,66,800/- AND TO ASSESS INVESTMENT ON SUCH UNACCOUNTED TRANSACTIONS OF RS. 2,14,21,200/- IS SET ASIDE BECAUSE APPELLANT DISCLOSED INCOME OF RS. 52,00,000/- ON SUCH UNACCOUNTED TRANSACTION IN THE VDIS DECLARATION. TO THIS EXTENT APPEAL IS ALLOWED. 9. AGGRIEVED WITH THE ORDER OF CIT(A), THE REVENUE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 10. THE LD. CIT DR SUPPORTED THE ORDER OF THE AO. THE L D. DEPARTMENTAL REPRESENTATIVE CONTENDED THAT THE INC OME ON WHICH INVESTMENT DECLARED UNDER VDIS SCHEME 1997 BY THE ASSESSEE DOES NOT INCLUDE PURCHASES AMOUNTING TO RS . 6,68,34,000/- MADE BY THE ASSESSEE DURING THE PERIO D FROM I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 11 OF 24 01.04.1996 TO 29.08.1996 AS THE VDIS DECLARATION RE LATES TO THE PERIOD FROM ASSESSMENT YEAR 1992-97 TO 1997-98. THE LD. DEPARTMENTAL REPRESENTATIVE REFERRED TO PAGE 15 O F THE ASSESSMENT ORDER AND SUBMITTED THAT THE ASSESSEE HA S MADE PURCHASES OF PAN MASALA FROM KANPUR AND ANY SALE IN MADHYA PRADESH ATTRACTED 4% SALES TAX IN U. P. 1 % ENTRY TAX IN M.P. AND 15 % SALES TAX IN M.P., WHICH TOTALS TO 20%, WHICH DEFINITELY HAVE BEEN THE CONSEQUENCE OF THE ASSESSE E FROM UNRECORDED PURCHASES AND SALE OF PAN MASALA EVEN IF NO FURTHER PROFIT MARGIN IS ASSUMED. FURTHER, THE ADDI TION OF RS. 1,33,66,800/- MADE BY APPLYING 20% GROSS PROFIT ON UNRECORDED SALES ON RS. 6.68 CRORES IS CORRECTLY MA DE, WHICH IS MORE THAN THE DECLARATION OF RS. 52 LAKHS EVEN I F SET OFF TO THAT EXTENT IS CONSIDERED WAS ALLOWED TO THE ASSESSE E. THE LD. DEPARTMENTAL REPRESENTATIVE FURTHER SUBMITTED THAT LD. CIT(A) HAS FAILED TO CONSIDER TO GIVE HIS FINDING ON MERIT S OF THE ADDITION MADE BY THE AO AND MERELY FOLLOWED THE ORD ER OF HON'BLE HIGH COURT OF MADHYA PRADESH AND DELETED TH E ADDITION ON ACCOUNT OF ESTIMATE OF INCOME OF RS. 1. 33 CRORE I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 12 OF 24 AND INVESTMENT IS UNACCOUNTED TRANSACTION AT RS. 2. 14 CRORES ON THE BASIS OF DISCLOSED INCOME OF RS. 52 LAKHS UN DER VDIS DECLARATION. THEREFORE, IT WAS URGED THAT THE ORDER OF THE CIT(A) DESERVES TO BE SET ASIDE AND THE ORDER OF TH E AO MAY BE RESTORED. THE LD. DEPARTMENTAL REPRESENTATIVE HAS ALSO PLACED RELIANCE ON THE FOLLOWING :- (I) TEJENDER SINGH, HUF, (2011) 197 TAXMAN 325 ( P & H). (II) CIT VS. CHETANDAS LAXMAN DAS, I.T.A.NO. 2021/2010 DATED 7 TH AUGUST, 2012 OF DELHI HIGH COURT. (III) CIT VS. H.M. YUSUF ALI H.M. ABDUL ALI, (1973) 90 ITR 271 ( S.C.) 11. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). THE LD. AUTHORIZ ED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS ALREADY DECLARED HIS SOURCE OF INVESTMENT IN TH E SAID PURCHASES AND PROFIT ON THE SAID PURCHASE, WHICH IS FULLY COVERED BY THE INCOME DECLARED BY HIM OF RS. 52 LA KHS. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTE NDED THAT NO SEARCH AND SEIZURE ACTION WAS CARRIED OUT IN THE CASE OF THE I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 13 OF 24 ASSESSEE AND THERE IS NO BAR TO MAKE VDIS DECLARATI ON IN THE CASE OF PERSON IN WHOSE CASE THERE WAS NO SEARCH WARRA NT WAS ISSUED. IN SUPPORT OF THIS, THE LD. COUNSEL FOR THE ASSESSEE HAS RELIED THAT CLARIFICATION ISSUED BY THE CBDT IN TH E MINUTES OF ASSOCHEM MEETING WITH CBDT ON VDIS 1997 HELD ON 23.07.1997, WHEREIN IN ANSWER TO QUESTION NO. 6, THE C.B.D.T. HAD CLARIFIED AS UNDER :- QUESTION NO. 6 : SECTION 64(2)(II) PROHIBITS DISCLOSURE OF INCOME IN RESPECT OF THE PREVIOUS YEA R IN WHICH A SEARCH U/S 132 WAS INITIATED OR IN RESPECT OF EARLIER PREVIOUS YEARS. THIS IMPLIES RESTRICTION IN THE CASE OF A PERSON IN WHOSE CASE SEARCH PROCEEDINGS ARE INITIATED U/S 132 BY ISSUE O F SEARCH WARRANT. KEEPING THIS IN VIEW, CAN DISCLOSURE BE MADE FOR THE EARLIER YEARS, IN A CASE WHICH IS INTER-CONNECTED WITH SOME SEARCH PROCEEDINGS, BUT WHERE NO DIRECT SEARCH IS INITIATED OR NO SEARCH WARRANT IS ISSUED U/S 132 ? I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 14 OF 24 ANSWER : YES, THERE WOULD BE NO BAR FOR DISCLOSURE IN SUCH CASES WHERE NO DIRECT SEARCH IS INITIATED U/ S 132. 12. THEREFORE, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT THE AFORESAID CLARIFICATION OF THE CBDT MAKES IT CLEAR THAT FOR ATTRACTING PROVISIONS OF SECTION 64(2)(II), THE RE SHOULD BE DIRECT SEARCH INITIATED U/S132 ATTRACT BAR CREATED BY SECTION 64(2)(II) AND SUCH A BAR WILL NOT BE ATTRACTED IN CA SE WHICH IS INTERCONNECTED WITH SOME SEARCH PROCEEDINGS. NO DIRE CT SEARCH IS INITIATED OR NO SEARCH WARRANT IS ISSUED U/S 132 OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER S UBMITTED THAT HON'BLE MADHYA PRADESH HIGH COURT IN CIVIL WRI T PETITION NO. 501/2004 DATED 21.09.2012 HAS UPHELD THE VALIDI TY OF VDIS CERTIFICATE ISSUED U/S 68(2)BY THE CIT-II, IN DORE. HENCE, IT WAS CONTENDED THAT THE PROFIT EARNED ON ACCOUNT O F UNRECORDED PURCHASES FROM SHIVRAJ TOBACCO COMPANY, KANPUR, HAVE ALREADY BEEN DECLARED UNDER THE VDIS S CHEME AND SAME HAS BEEN ACCEPTED BY THE DEPARTMENT BY WAY OF ISSUE OF VDIS CERTIFICATE DATED 3 RD MARCH, 1998. THE LD. I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 15 OF 24 AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ALSO TOOK US THROUGH THE ORDER OF HON'BLE MADHYA PRADESH HIGH CO URT DATED 21 ST SEPTEMBER, 2012, WHEREIN IN PARA 10 AT PAGE 7 OF THE SAID ORDER, IT WAS SUBMITTED THAT THERE WAS NO S EARCH AND SEIZURE IN THE PETITIONERS PREMISES U/S 132 OF THE ACT NOR ANY SEARCH WARRANT WAS ISSUED IN THE NAME OF THE ASSESSEE . THE SEARCH WAS CONDUCTED AT THE PREMISES OF M/S. SHIVRA J TOBACCO COMPANY, KANPUR, ON 30.08.1996. AS PER THE DEPARTMENT, DURING THE COURSE OF SEARCH CERTAIN TRA NSACTIONS WERE DONE OUTSIDE THE BOOKS OF ACCOUNTS BY THE ASSES SEE, WHICH DISCLOSED MUCH HIGHER THAN WHAT WAS DISCLOSED IN THE VDIS. HOWEVER, THE ASSESSEE IN HIS STATEMENT RECO RDED ON 01.08.2002 BY THE DDIT HAD DISCLOSED THAT ON THE TRANSACTIONS FOUND OUT OF BOOKS OF ACCOUNTS IN RESP ECT OF PURCHASE MADE FROM SHIVRAJ TOBACCO COMPANY, THE ASS ESSEE HAD CALCULATED THE INCOME AND DISCLOSED IT UNDER TH E VDIS 1997. THEREFORE, IT WAS CONTENDED THAT THE WRIT PETIT ION WAS ALLOWED BY THE HON'BLE MADHYA PRADESH HIGH COURT I N FAVOUR OF THE ASSESSEE BY RESTORING THE VDIS CERTIFICATE D ATED 3 RD I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 16 OF 24 MARCH, 1998, ISSUED UNDER SECTION 68(2) OF THE VDIS 1997, WHICH WAS CANCELLED BY THE CIT VIDE ORDER DATED 25.0 3.2004. THIS MEANS THAT THE HON'BLE HIGH COURT HAS ACCEPTED THE PROFIT DISCLOSED BY THE ASSESSEE ON UNACCOUNTED PUR CHASES MADE FROM SHIVRAJ TOBACCO COMPANY, KANPUR. THEREFOR E, THE LD. CIT(A) HAS CORRECTLY DELETED THE ADDITION MADE BY THE AO. HENCE, THERE IS NO INFIRMITY IN THE ORDER OF THE LD . CIT(A) IN ALLOWING THE APPEAL OF THE ASSESSEE. THE LD. AUTHORI ZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED TH AT DURING THE COURSE OF SEARCH, A STATEMENT OF THE ASSESSEE WA S RECORDED ON 01.08.2002 BY THE DDIT, WHEREIN IN REPLY TO QUES TION NO. 7, THE ASSESSEE HAS CLEARLY STATED THAT THE ASSESSE E HAS DECLARED UNDISCLOSED INCOME OF RS. 52 LAKHS UNDER V DIS 1997. BESIDES THIS, THE OTHER PARTNERS WERE IN MAYU R STORES HAVE ALSO DECLARED UNDISCLOSED INCOME OF RS. 18 LAK HS, OF WHICH CERTIFICATE ISSUED BY THE LD. COMMISSIONER WAS ALSO PRODUCED BEFORE THE DDIT. IN THE STATEMENT, IT WAS S TATED BY THE ASSESSEE THAT THE ASSESSEE AND OTHER PARTNERS H AVE DISCLOSED TOTAL RS. 70 LAKHS UNDER THE VDIS 1997, WH ICH WAS I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 17 OF 24 BASED ON UNRECORDED PURCHASES OF RS. 6,68,34,000/- ON WHICH PROFIT WAS CALCULATED AS WELL AS INITIAL CAPITAL INV ESTED WAS ALSO CALCULATED AND ,ACCORDINGLY, THE INCOME OF RS. 52 L AKHS WAS DISCLOSED UNDER VDIS FOR WHICH A VALID CERTIFICATE D ATED 03-03- 1998 HAS ALSO BEEN ISSUED BY THE DEPARTMENT. HENCE , THERE IS NO MERIT IN THE ADDITION MADE BY THE AO. THEREFORE, THE SAME HAS BEEN RIGHTLY DELETED BY THE LD. CIT(A). 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOTH TH E PARTIES, FACTS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT A SEARCH U/S 132 OF THE ACT WAS CONDUCT ED ON 29/30-08-1996 IN THE CASE OF M/S. SHIVRAJ TOBACCO COMPANY, WHEREIN UNACCOUNTED PURCHASE OF RS. 6.68 CRORES MADE BY THE ASSESSEE IN THE NAME OF MILAN TRADERS FROM THE SAID PARTY WERE NOTICED. WE ALSO NOTE THAT THERE WAS NO SEARCH A ND SEIZURE ACTION CARRIED OUT IN THE CASE OF THE ASSES SEE NOR ANY SEARCH WARRANT WAS ISSUED IN THE NAME OF THE ASSESSEE . WE FIND THAT THE ASSESSEE HAS MADE A DECLARATION UNDER VDI SCHEME 1997 ON 31.12.1997, DECLARING THEREIN UNDISC LOSED INCOME OF RS. 52 LAKHS ON ACCOUNT OF INCOME EARNED FROM I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 18 OF 24 KIRANA AND PAN MASALA BUSINESS IN OWN NAME AS WELL AS IN THE NAME OF MILAN TRADERS AND OTHER PARTNER IN MAYU R STONES HAS ALSO DISCLOSED RS. 18 LAKHS UNDER VDIS 1997 IN RESPECT OF THESE PURCHASES. THUS, TOTAL VDIS DISCLOSURE OF RS. 70 LAKHS WAS MADE COVERING THE UNACCOUNTED PURCHASES FROM M/S . SHIVRAJ TOBACCO COMPANY, UNNAO. IT IS SEEN THAT CIT -II, INDORE, HAS ISSUED A CERTIFICATE U/S 62 OF THE INCO ME-TAX ACT, 1961, ON 3 RD MARCH, 1998, ACCEPTING THE DISCLOSURE MADE BY THE ASSESSEE. WE FIND THAT CIT-II, INDORE HAS CANCE LLED VDIS CERTIFICATE DATED 03.03.1998 VIDE LETTER DATED 31.0 3.2004, ON THE GROUND THAT UNACCOUNTED PURCHASES MADE BY THE A SSESSEE WERE DETECTED DURING THE COURSE OF SEARCH, HENCE, VD I DECLARATION IS NOT VALID. AS AGAINST THIS, THE ASSE SSEE HAS FILED CIVIL WRIT PETITION BEFORE THE HON'BLE M.P.HIGH COU RT, WHEREIN THE HON'BLE HIGH COURT HAS RESTORED THE VDIS CERTIF ICATE DATED 03.03.1998 ISSUED BY CIT-II, INDORE. WE HAVE PERUSE D THE ORDER OF HON'BLE HIGH COURT DATED 20.09.2012, PASSE D IN WRIT PETITION NO. 501/2004 SETTING ASIDE THE CANCELLATIO N OF VDI I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 19 OF 24 CERTIFICATE OF CIT-II, INDORE, WHEREIN PARA 10 OF WRI T PETITION READS AS UNDER :- [10] IN THE PRESENT CASE IT IS NOT IN DISPUTE THA T IN THE PETITIONERS PREMISES NO SEARCH OR SEIZURE U/S 132 OF THE ACT HAS BEEN DONE NOR ANY SEARCH WARRANT HAS BEEN ISSUED IN THE NAME OF THE PETITIONER. THE SEARCH WAS DONE IN THE PREMISES OF M/S. SHIVRAJ TOBACCO CO., KANPUR, ON 30.08.1996. AS PER THE RESPONDENTS DURING THE SEARCH, CERTAIN TRANSACTION DONE BY THE PETITIONER OUT OF BOOK WERE DETECTED WHICH SHOWED THE INCOME OF THE PETITIONER MUCH HIGHER THAN WHAT WAS DISCLOSED IN THE VDIS. THE PETITIONER IN HIS STATEMENT RECORDED ON 01.08.2002 BY THE DY. DIRECTOR OF INCOME TAX HAD DISCLOSED TH AT ON THE TRANSACTIONS FOUND OUT OF BOOKS OF ACCOUNTS IN RESPECT OF PURCHASE MADE FORM SHIVRAJ TOBACCO COMPANY, THE PETITIONER HAD CALCULATED THE INCOME AND DISCLOSED IT UNDER THE VDIS 1997. 14. THE PERUSAL OF THE ABOVE PARA OF THE ORDER OF THE HON'BLE HIGH COURT SHOWS THAT THE ASSESSEE HAS STATE D IN HIS STATEMENT DATED 01.08.2002 RECORDED BY THE DDIT TH AT THE INCOME FROM UNACCOUNTED PURCHASES MADE FROM SHIVRA J TOBACCO COMPANY HAS BEEN OFFERED BY THE ASSESSEE UN DER VDIS 1997. THEREFORE, THE CLAIM OF THE ASSESSEE THA T DECLARATION OF RS. 52 LAKHS MADE UNDER VDIS 1997, C OVERS THE SOURCE OF INVESTMENT AS WELL AS PROFIT OUT OF UNACC OUNTED PURCHASES OF PAN MASALA OF RS. 6.68 CRORES FROM M/S . SHIVRAJ I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 20 OF 24 TOBACCO COMPANY FOR WHICH A VALID VDIS CERTIFICATE H AS BEEN ISSUED BY THE CIT-II, INDORE. THESE FACTS HAVE ALS O BEEN DISCLOSED BY THE ASSESSEE BEFORE THE HON'BLE HIGH C OURT, WHICH HAS BEEN DULY CONSIDERED BY THE HON'BLE HIGH COURT. AND AFTER CONSIDERING THE FACTS, THE HON'BLE HIGH C OURT RELYING ON VARIOUS CASE LAWS HAS HELD IN PARAS NO. 21 TO 25, WHICH ARE REPRODUCED AS UNDER :- [21] IN THE PRESENT CASE, THOUGH THE STATEMENT OF THE PETITIONER RECORDED BY THE DY. DIRECTOR OF INCOME TAX ON 1.8.2002 INDICATES THAT THE PETITIONER HAD MADE THE DISCLOSURE CALCULATING THE INCOME ON THE BASIS OF THE PURCHASE WHICH WERE MADE FROM M/S. SHIVRAJ TOBACCO COMPANY BUT THERE IS NOTHING ON RECORD TO SHOW THAT THE PETITIONER HAD COMMITTED ANY FRAUD IN DISCLOSING THE INCOME. ON THE SAME AMOUNT OF SALE, THE DEPARTMENT IS CALCULATING HIGHER INCOME WHEREAS THE PETITIONER HAD DISCLOSED THE LOWER INCOME. THEREFORE, ONLY ON THAT BASIS IT CANNOT BE HELD TO BE A CASE OF FRAUD. I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 21 OF 24 [22] COUNSEL FOR RESPONDENTS HAS ALSO PLACED RELIANCE UPON THE SINGH BENCH JUDGMENT OF THE KARNATAKA HIGH COURT IN THE MATTER OF MYSORE PLANTATIONS LIMITED VS. CIT AND ANOTHER, REPORTED I N 262 ITR 397 BUT THAT WAS A CASE OF FRAUD WHERE THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED THE CYLINDERS FROM A NON-EXISTENT ENTITY, THEREFORE, TH E COURT HAD TAKEN THE VIEW THAT POWER TO RECALL THE CERTIFICATE IN THE EVENT OF FRAUD IS AVAILABLE. LD. COUNSEL FOR THE RESPONDENTS HAS ALSO RELIED UPON TH E SINGH BENCH JUDGMENT OF THIS COURT IN THE MATTER OF SMT. SHASHI DEVI VS. ITO & ORS REPORTED IN (2000) 241 ITR 216 (MP) BUT THAT CASE DOES NOT RELATE TO POWER TO CANCEL THE CERTIFICATE ISSUED U/S 68 OF VD IS 1997. [23] IT IS ALSO WORTH NOTING THAT THE COMMISSIONER OF INCOME TAX HAS CANCELLED THE CERTIFICATE ISSUED U/S 68(2) OF THE VDIS 1997 AT THE INSTANCE OF THE ITO W HO HAD INITIATED THE REASSESSMENT PROCEEDINGS AND ON I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 22 OF 24 THE SAME DAY OF PASSING OF THE IMPUGNED ORDER OF CANCELLATION OF THE CERTIFICATE, THE ITO HAD PASSED THE ORDER OF REASSESSMENT. [24] THERE IS YET ANOTHER REASON TO SET ASIDE THE IMPUGNED ORDER CANCELLING THE VDIS CERTIFICATE. THE NOTICE FOR CANCELLATION OF THE CERTIFICATE IS DATED 25.3.2004. IN THE IMPUGNED ORDER ITSELF IT IS MENTIONED THAT THE NOTICE WAS SERVED BY AFFIXTURE AND SPEED POST ON 26.03.2004. WITHIN 5 DAYS OF SERVICE OF NOTICE, THE FINAL ORDER WAS PASSED INSPI TE OF THE SPECIFIC REQUEST OF THE PETITIONER TO THE CH IEF COMMISSIONER VIDE ANNEXURE P.13 FOR GRANT OF REASONABLE TIME AND PROPER OPPORTUNITY BEFORE PASSING ANY ADVERSE ORDER. [25] KEEPING IN VIEW THE AFORESAID ASPECT OF THE MATTER, THE IMPUGNED ORDER DATED 31.3.2004 CANCELLING THE VDIS CERTIFICATE DATED 03.03.1998 ISSUED U/S 68(2) OF THE VDIS 1997 CANNOT BE SUSTAINED AND IS HEREBY SET-ASIDE. I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 23 OF 24 15. IN THE LIGHT OF THE FINDINGS OF HON'BLE JURISDICTIO NAL HIGH COURT OF MADHYA PRADESH IN THE AFORESAID WRIT P ETITION, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE HAVIN G BEEN DISCLOSED THE INCOME RELATING TO UNACCOUNTED PURCHA SES MADE FROM SHIVRAJ TOBACCO COMPANY UNDER VDIS 1997, AND SAME HAS BEEN ACCEPTED BY THE COMMISSIONER OF INCOME TA X, WHO HAS DULY ISSUED A CERTIFICATE DATED 03.03.1998, HEN CE, NO ADDITION ON ACCOUNT OF THE SAME COULD BE MADE BY TH E AO. THE CLAIM OF REVENUE THAT LD. CIT(A) HAS NOT DECIDED TH E ISSUE ON MERIT IS DEVOID OF ANY MERIT AS THE LD. CIT(A) HAS DULY MENTIONED IN PARA 4 OF HIS ORDER (REPRODUCED AT PAR A 8 ABOVE OF THIS ORDER) STATING THAT AS A RESULT ACTION OF A O TO ESTIMATE THE INCOME OF RS. 1,33,66,800/- AND TO ASSESS INVES TMENT ON SUCH UNACCOUNTED TRANSACTION OF RS. 2,14,21,200/- I S SET- ASIDE BECAUSE THE ASSESSEE DISCLOSED INCOME OF RS. 52,00,600 ON SUCH UNACCOUNTED TRANSACTION IN THE VDIS DECLARA TION. IN VIEW OF THAT MATTER, WE FIND THAT BOTH ADDITIONS MADE BY THE AO ARE COVERED IN WRIT PETITION AND ALSO BY ORDER OF LD. CIT(A). UNDER THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRM ITY IN THE I.T.A.NO. 173/IND/13 & C.O. NO.56/IND/2013 A.Y.: 1997-98 SIRAJ SIDDIQUE, INDORE. PAGE 24 OF 24 FINDINGS RECORDED BY THE LD. CIT(A). THEREFORE, THE GROUNDS OF APPEAL AS TAKEN BY THE REVENUE ORIGINALLY AS WELL AS REVISED AMENDED ARE DISMISSED. 16. SINCE THE APPEAL OF THE REVENUE IS DISMISSED, THE CROSS OBJECTION FILED BY THE ASSESSEE HAS BECOME IN FRUCTUOUS AND THE SAME IS ALSO DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION BOTH ARE DISMISSED. THE ORDER HAS BEEN PRONOUNCED IN OPEN COURT ON THE 23 RD DECEMBER , 2016. SD/- (..) (D.T.GARASIA) JUDICIAL MEMBER SD/- (..) (O.P.MEENA) ACCOUNTANT MEMBER * / DATED : 23 RD DECEMBER,2016. CPU*