Ramavatar Shivdayal Bhutada, Ichalkaranji V. Income-tax Officer, Ward - 1, Ichalkaraji

ITA 1780/PUN/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2522 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 24-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH GAWLI
• Assessee Lawyers: K C MOONDRA

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO.1780/PUN/2017 / ASSESSMENT YEAR : 2007-08 RAMAVATAR SHIVDAYAL BHUTADA, C/O. K.C. MOONDRA & CO., CA, 22, SHRIPAL NAGAR, SAKET ASHRAM ROAD, PO : SUMERPUR 306902 RAJASTHAN PAN : ABGPB0235M . /APPELLANT VS. ITO, WARD-1, ICHALKARANJI . / RESPONDENT ASSESSEE BY : SHRI K.C. MOONDRA REVENUE BY : SHRI RAJESH GAWLI / DATE OF HEARING : 20.08.2018 / DATE OF PRONOUNCEMENT: 24.08.2018 / ORDER PER D. KARUNAKARA RAO, AM : THIS IS THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDE R OF CIT(A)-2, KOLHAPUR, DATED 15-06-2017 FOR THE ASSESSMENT YEAR 2007-08. 2. GROUNDS RAISED BY THE ASSESSEE ARE EXTRACTED HERE AS UNDER : 1. LD.CIT(A)-2 ERRED IN LAW IN CONFIRMING THE ADD ITION OF RS.19,02,040/- ON ACCOUNT OF EXCESS STOCK MERELY ON THE BASIS OF F ORCED SURRENDER OBTAINED THROUGH SO CALLED FORGED AND UNRELIABLE STOCK STATE MENTS AND TENTATIVE TRADING ACCOUNT ETC. SHOWN TO BE PREPARED DURING TH E SO CALLED UNLAWFUL, ARBITRARY, UNRELIABLE AND FORCED SURVEY PROCEEDINGS AND HENCE, ENTIRE SURVEY PROCEEDING IS LIABLE TO BE HELD UNLAWFUL AND UNRELIABLE AND ADDITION IS LIABLE TO BE QUASHED IN ITS ENTIRELY. LD. CIT( A)-2 ALSO ERRED IN LAW IN RELYING OVER AN INCOMPLETE, ESTIMATED AND IMAGINARY STOCK STATEMENT WHICH WAS FILED WITH THE BANK. ITA NO.1780/PUN/2017 RAMAVATAR SHIVDAYAL BHUTADA 2 2. LD.CIT(A)-2 ERRED IN LAW IN CONFIRMING THE ADDIT ION OF RS.2,07,880/- ON ACCOUNT OF EXCESS CASH MERELY ON THE BASIS OF FO RGED SURRENDER OBTAINED THROUGH SO CALLED UNLAWFUL, ARBITRARY UNRELIABLE AN D FORCED SURVEY PROCEEDINGS AND WITHOUT CONSIDERING/APPRECIATING TH E INCOME/SOURCES AND SUBMISSIONS OF THE APPELLANT AND PAYMENT OF ADVANCE TAX AND IN PRESUMING THAT APPELLANT HAD ZERO CASH BALANCE AND DID NOT MA INTAIN BOOKS OF ACCOUNTS. 3. LD. CIT(A)-2 ERRED IN LAW IN CONFIRMING THE IMAG INARY ADDITION OF RS.92,991/- (RS.1,60,964 RS.67,973) WITHOUT PROVI DING ANY OPPORTUNITY TO CROSS EXAMINE THE PERSONS ON WHICH AND ON WHOSE INF ORMATION, LD. AO RELIED AND MADE THE ADDITION. 4. LD.CIT(A)-2 ERRED IN LAW BY CONFIRMING THE DISAL LOWANCE OF RS.22,525/- U/S.43B WHICH IS CONTRARY TO PROVISIONS OF SEC.44AF. 5. LD.CIT(A)-2 ERRED IN LAW BY CONFIRMING THE ARBIT RARY AND IMAGINARY ADDITION OF RS.4,000/- ON ACCOUNT OF ESTIMATED INTE REST. 6. ENTIRE APPEAL ORDER SHOULD BE QUASHED AS LD.CIT( A)-2, KOLHAPUR HAD NO JURISDICTION OVER THE APPELLANT AND NO OPPORTUNI TY OF HEARING WAS PROVIDED IF THERE WAS ANY CHANGE IN INCUMBENT OF OFF ICE AS NOTHING WAS INFORMED TO THE APPELLANT. 7. ENTIRE ASSESSMENT ORDER SHOULD BE QUASHED AS IT IS THE RESULT OF AN UNLAWFUL SURVEY PROCEEDINGS. 3. BEFORE US, LD. COUNSEL FOR THE ASSESSEE FAIRLY SUBMITTED THAT GROUND NOS. 3 TO 5 ARE NOT PRESSED. ACCORDINGLY, THE SAID GROUNDS ARE DISMISSED AS NOT PRESSED IN VIEW OF SMALLNESS OF THE ADD ITIONS. GROUND NOS. 6 AND 7 ARE GENERAL IN NATURE AND THEREFORE THE SA ID GROUNDS ARE DISMISSED. THAT LEAVES GROUND NOS. 1 AND 2 FOR ADJUDICATION. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE AND THE ISSU ES RAISED IN GROUND NOS. 1 AND 2 INCLUDE THAT THE ASSESSEE IS AN INDIV IDUAL AND IS ENGAGED IN THE SALE OF PLY BOARDS AND HARDWARE ITEMS ON RETAIL BASIS. ASSESSEE FILED THE RETURN OF INCOME ON 23-10-2007 DECLARIN G TOTAL INCOME AT NIL. THERE WAS SURVEY ACTION IN THIS CASE U/S.133A OF THE ACT FROM 05-03-2007 TO 07-03-2007. DURING THE SURVEY, THE DISCR EPANCY OF (1) EXCESS STOCK AMOUNTING TO RS.19,02,040/- AND (2) EXCESS CASH OF RS.2,07,880/- AGGREGATING TO RS.21,09,920/- WERE PLACED BEFO RE THE ASSESSEE. STATEMENT OF THE CONCERNED PERSON WAS RECO RDED IN THIS REGARD ITA NO.1780/PUN/2017 RAMAVATAR SHIVDAYAL BHUTADA 3 ON 05-03-2007. DURING THE SURVEY PROCEEDINGS, ASSESSEE OFFERED THE SAID SUM OF RS.21,09,920/- ON ACCOUNT OF EXCESS STOCK AND EXC ESS CASH AS AN ADDITIONAL INCOME FOR THE YEAR UNDER CONSIDERATION. WITH TH ESE BACKGROUND FACTS, GROUND NOS. 1 AND 2 ARE TAKEN UP FOR ADJUDICATION IN THE FOLLOWING PARAGRAPHS. 5. GROUND NOS. 1 AND 2 RELATES TO THE ADDITION MADE BY T HE AO ON ACCOUNT OF EXCESS STOCK AND EXCESS CASH. IN THE FIRST APPELLATE PROCEEDINGS, THE CIT(A) CONFIRMED THE SAID ADDITIONS VIDE THE DISCUSSION GIVEN IN PARA NOS. 5.1 AND 5.2 OF HIS ORDER. FOR THE SAKE OF COMPLETENESS, THE SAID PARAS ARE EXTRACTED HERE AS UNDER : 5.1 GROUND 4: THIS IS AGAINST THE ADDITION TOWARDS EXCESS STOCK. THE APPELLANT HAS STATED THROUGH HIS WRITTEN SUBMISSION THAT THE AO HAS MADE THE ADDITION TOWARDS EXCESS STOCK FOUND ON THREE PR EMISES VIZ. (A) ON THE BASIS OF THE STATEMENT RECORDED FROM THE APPELLANT, (B) THE FALSE AND FABRICATED INVENTORY OF STOCK & (C) COMPARISON WITH THE BANK STATEMENT. A PERUSAL OF THE SUBMISSION OF THE APPELLANT SHOWS TH AT HE IS MERELY MAKING ALLEGATIONS OF MALAFIDE AGAINST THE AO AND THE SURV EY TEAM. THERE IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE STOCK INVENTOR Y WAS EITHER PREPARED BEHIND THE BACK OF THE APPELLANT OR PREPARED IN THE IT OFFICE OR ANYWHERE OTHER THAN THE BUSINESS PREMISES OF THE APPELLANT. I FIND THAT THE APPELLANT HIMSELF HAS INDICATED THE RATE APPLICABLE TO EACH I TEM OF STOCK INVENTORIZED AND ALSO CERTIFIED THE STOCK INVENTORY. I AM THEREF ORE UNABLE TO APPRECIATE THE ALLEGATION OF THE APPELLANT THAT THE STOCK INVENTORY ITSELF IS FABRICATED AND FALSE. I ALSO FIND THAT THE AO HAS N OT MERELY RELIED ON THE STATEMENT OF THE APPELLANT RECORDED DURING SURVEY, BUT HAS BASED HIMSELF ON THE STOCK INVENTORY FOUND AT THE TIME OF THE SUR VEY. BE THAT AS IT MAY, I FIND FROM THE SUBMISSIONS THAT THE APPELLANT HAS NO THING TO SAY ABOUT THE SOURCE OF THE EXCESS STOCK ADMITTEDLY FOUND AND CER TIFIED BY HIM DURING SURVEY. HE PREFERS TO MAKE UNSUBSTANTIATED ALLEGATI ONS AGAINST THE AO AND THE SURVEY TEAM. I AM OF THE OPINION THAT THE FACTS REGARDING EXCESS STOCK REMAIN UNCONTROVERTED AND THEREFORE CONFIRM THE ADD ITION OF RS 19,02,040 MADE BY THE AO. GROUND 4 IS DISMISSED. 5.2 GROUND 5: THIS IS AGAINST THE ADDITION TOWARDS EXCESS CASH OF RS.2,07,880. ONCE AGAIN I FIND FROM THE SUBMISSIONS OF THE APPELLANT THAT THERE IS NO EXPLANATION ON MERITS ABOUT THE EXCESS CASH FOUND, APART FROM MAKING ALLEGATIONS AGAINST THE AO AND THE SURVEY PA RTY. THE AO HAS REASONED THIS ADDITION PROPERLY IN THE ASSESSMENT O RDER. AS PER THE APPELLANTS OWN ADMISSION, NO BOOKS OF ACCOUNTS WERE MAINTAINED AND THEREFORE THERE IS NO CASE FOR CASH AS PER BOOKS. THE APPELLANT DID NOT HAVE ANY EXPLANATION FOR THE SOURCE FOR THE SOURCE OF TH E ACTUAL CASH FOUND AND CERTIFIED AS SUCH BY HIM. THE FACTS ARE THEREFORE UNCONTROVERTED AND I THEREFORE CONFIRM THE ADDITION OF RS.2,07,880/- TOWARDS UNEXPLAINED CASH FOUND AT THE TIME OF SURVEY. GROUND 5 IS DISMISSED . ITA NO.1780/PUN/2017 RAMAVATAR SHIVDAYAL BHUTADA 4 6. DURING THE PROCEEDINGS BEFORE US, ON THE ISSUE OF EXCE SS CASH OF RS.2,07,880/-, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXCESS CASH IS NOT CORRECT. HOWEVER, NO ARGUMENT WORTH CON SIDERATION IS MADE. HOWEVER, THE LD. COUNSEL RELIED ON THE WRITTEN SUBMISSIONS MADE BEFORE US. 7. ON HEARING THE PARTIES AND ON PERUSAL OF THE WRITTEN SUBMISSIO NS ON THIS ISSUE, WE ARE OF THE OPINION THAT THE ADDITION ON ACC OUNT OF EXCESS CASH IS REQUIRED TO BE CONFIRMED IN TOTO. NO CASE IS MAD E OUT BY THE LD. COUNSEL FOR THE ASSESSEE THAT THERE IS ANY MISTAKE IN COMPUTING THE EXCESS CASH. ACCORDINGLY, GROUND NO.2 RAISED BY THE AS SESSEE IS DISMISSED. 8. REGARDING THE ISSUE OF EXCESS STOCK, RAISED VIDE GROU ND NO.1, LD. COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ENTIRE STOCK STATEMENT, COPY OF WHICH IS PLACED FROM PAGE 53 ONWARDS T ILL PAGE 86 OF THE PAPER BOOK. ACCORDING TO THE CONTENTS ON PAGE 52 OF THE PAPER BOOK, THE TOTAL STOCK IS WORTH RS.54,65,570/-, GROSS PROFIT IS 24. 50%, STOCK AT COST PRICE IS RS.41,26,505/-, STOCK AS PER TENTATIVE TRADIN G A/C. IS RS.22,24,465/- AND FINALLY THE DIFFERENCE OF EXCESS STOCK IS A RRIVED AT RS.19,02,040/-. IN THIS CONNECTION, LD. COUNSEL FOR THE ASS ESSEE SUBMITTED THAT THE SAID INVENTORY SUFFERS FROM INCONSISTEN CIES AND CREDIBILITY. TO DEMONSTRATE THE SAME, LD. COUNSEL HIGHLIGHTE D THE INTERPOLATIONS/CORRECTIONS APPEARING IN PAGES 55, 57, 59, 60 , 63, 67, 68, 73, 74, 76, 77, 78, 79, 82, 83, 84 AND 85 AND SUBMITTED THA T THE FIGURES ARE NOT RECONCILABLE AND NOT CREDIBLE. FURTHER, BRINGING OU R ATTENTION TO THE STOCK STATEMENT MADE FOR BANK LOAN PURPOSE, A COP Y ANNEXED TO THE ASSESSMENT ORDER, LD. COUNSEL SUBMITTED THAT THE STATEM ENTS GIVEN TO THE BANK AUTHORITIES FOR AVAILING HIGHER LOAN WAS CONSIDERED AS SACROSANCT ITA NO.1780/PUN/2017 RAMAVATAR SHIVDAYAL BHUTADA 5 WHILE MAKING ADDITION. FURTHER, HE ALSO SUBMITTED THAT THE ITEMS APPEARING IN THE SAID STATEMENT GIVEN TO THE BANK AUTH ORITIES IS NO WAY IN SYNC WITH THE INVENTORY OF STOCK MADE BY THE SURVEY TE AM DURING THE SURVEY ACTION. CONSIDERING THE SAME, LD. COUNSEL MENTIONED THAT THE ADDITION OF RS.19,02,040/- MADE BY THE AO AND CONFIRMED BY THE AO REQUIRES DOWNWARD REVISION. WHEN BENCH RAISED THE ISSUE ABOUT THE LIKELY RELIEF THE ASSESSEE IS ENTITLED TO ON THIS ACCOUNT FOR THE DISCREPANCIES IDENTIFIED BY THE LD. COUNSEL BEFORE US ON ADHOC BASIS, LD. COUNSEL MENTIONED THAT THE RELIEF SHOULD BE TO THE TUNE OF AROUND 50% OF THE ADDITION OF RS.19,02,040/-. 9. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED HEAVIL Y ON THE ORDERS OF THE AO/CIT(A) AND ALSO THE INVENTORY OF STOCK T AKEN BY THE SURVEY TEAM. HOWEVER, WHEN THE BENCH POINTED OUT THE FACTS AND CIRCUMSTANCES WHICH LED TO THE OVERWRITINGS, CORRECTIONS, LA CK OF CORRELATION BETWEEN THE INVENTORY VS. THE STATEMENT GIVE N BY THE ASSESSEE TO THE BANK AUTHORITIES FOR AVAILING HIGHER LOANS, LD. DR F AIRLY RELIED ON THE ORDERS OF THE AO/CIT(A) ON THIS ISSUE. 10. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS OF THE REVENUE SO FAR AS THE ADDITION ON ACCOUNT OF DISCREPANCY IN STOCK IS CONCERNED. A PERUSAL OF THE INVENTORY FURNISHED BY THE ASSESSEE IN THE PAPER BOOK SUGGEST THAT THE INVENTORY IS FULL OF CORRECTIONS, OVERWRITIN GS ETC. THERE ARE NO COUNTER SIGNATURES BY THE SURVEY TEAM WHEREVE R SUCH CORRECTIONS ARE MADE OR INTERPOLATIONS ARE DONE. THUS, THE CONTENT S OF THE INVENTORY MADE BY THE SURVEY TEAM SUFFER FROM THE CREDIBILITY. IT IS THE ALLEGATION OF THE ASSESSEE, ALTHOUGH UNSUBSTANTIATED, THAT THE INVENTO RIES WERE MADE AT AAYKAR BHAVAN AND CREATED SUFFICIENT DOUBT ABOUT THE CO RRECTNESS OF THE INVENTORY AND ALSO THE PROCEDURE LAID DOWN IN THIS REGARD . CONSIDERING ITA NO.1780/PUN/2017 RAMAVATAR SHIVDAYAL BHUTADA 6 THE SAME, TO BRING THE LITIGATION ON THIS ISSUE TO THE CONC LUSION, AS ADVOCATED BY THE LD. COUNSEL FOR THE ASSESSEE, WE ARE O F THE OPINION THAT MAKING ADDITION OF RS.10 LAKHS ON THIS ACCOUNT OF EXCESS ST OCK SHOULD MEET THE ENDS OF JUSTICE. WE, THEREFORE, DIRECT THE AO TO GRANT THE RELIEF OF RS.9,02,040/-. GROUND NO. 1 RAISED BY THE ASSESSEE IS PARTLY ALLOWED . 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 24 TH DAY OF AUGUST, 2018. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 24 TH AUGUST, 2018 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, //TRUE COPY// SENIOR PRI VATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CIT(A)-2, KOLHAPUR 4. THE PR.CIT-2, KOLHAPUR 5. , , SMC BENCH PUNE; 6. / GUARD FILE.