M/s Subarna Rice Mill, Burdwan V. ITO, Ward-2(3), Burdwan, Burdwan

ITA 1781/KOL/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 92029 (ITAT-KOLKATA)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 11-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K L KANAK
• Assessee Lawyers: A BANERJEE
• Keywords: Assessment record; Retraction
• Section: 133A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOLKATA [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM ] I.T.A NO. 1 781 /KOL/201 4 ASSESSMENT YEAR : 20 1 0 - 1 1 M/S. SUBARNA RICE MILL VS. INCOME - TAX OFFICER, WD - 2( 3 ) , BURDWAN (PAN: A BKFS2121B ) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 25 .0 5 .2015 DATE OF PRONOUNCEMENT: 30 . 0 6 . 2015 FOR THE APPELLANT: S/ SHRI SOUMITRA CHOUDHURY & A. BANERJEE, ADVOCATES FOR THE RESPONDENT: S HRI K. L. KANAK, SR. DR ORDER PER SHRI MAHAVIR SINGH, JM: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT (A) , ASANSOL VIDE APPEAL NO. 46 /CIT(A)/ ASL/W - 2(3)/BWN/13 - 14 DATED 2 5 . 0 8 .201 4 . ASSESSMENT WAS FRAMED BY ITO, WARD - 2( 3 ) , BURDWAN U/S. 1 4 3(3) OF THE INCOME - TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS THE ACT ) FOR ASSESSMENT YEAR 20 1 0 - 1 1 VIDE HIS ORDER DATED 28 . 03 .20 1 3 . 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION OF RS.3,85,01,830/ - RELATING TO UNDISCLOSED PURCHASES. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NOS. 2 TO 8: 2. FOR THAT THE ADDITION OF RS.3,85,01,830/ - IS RELATED TO THE 'UNDISCLOSED PURCHASE' WHICH IS ARBITRARY & BAD IN LAW. 3. FOR THAT THE LD. ASSESSING OFFICER HAD TREATED RS.3,85,01,830/ - AS 'U NDISCLOSED PURCHASE'. AS PURCHASE IS ALWAYS RELATED TO THE SUBSEQUENT SALES. THEREFORE, THE CONCEALMENT INVOLVES ONLY THE NET PROFIT, IF THERE IS ANY SUCH 'UNDISCLOSED PURCHASE'. 4. FOR THAT AS PER THE REPORT ON DATED 24/03/2010 THE ADDITION OF RS. 3,85,01 ,830/ - IS NOT TO BE ACCEPTED AS IN THE 'SURVEY REPORT' THE CALCULATION OF UNDISCLOSED PURCHASE IS ERRONEOUS. THE LD. A. O. NEVER MENTIONED THE UNIT DURING THE CALCULATION OF PADDY, RICE & RICE BRAN. FURTHER THE LD. APPELLATE AUTHORITY IN THE APPEAL ORDER D ID NOT CLARIFY THE UNITS OF THE ITEMS. 5. FOR THAT THE COPY OF THE DEPOSITION DATED ON 24/03/2010 IS ITSELF ERRONEOUS AS BECAUSE THE MARKED DOCUMENTS AS ' SRM - 5,6&7' ARE NOT IN EXISTENCE AS PER THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS THE LD. A.O. F AILED TO SUPPLY THE COPY OF THE SAID DOCUMENTS. SO THE ENTIRE SURVEY IS BAD IN LAW AS THERE ARE ERRONEOUS OBSERVATIONS AND NON - SUPPLY OF DOCUMENTS ON THE PART OF THE LD. A. O. 2 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 6. FOR THAT THE ASSESSEE IN THE LETTER DATED 11/12/2012 FILED HIS OBJECTION FOR EXCESS VALUATION OF THE STOCK AS ON 24/03/2010. 7. FOR THAT DURING THE APPEAL PRECEDING THE A/R OF THE ASSESSEE PRODUCED THE TOTAL AREA OF THE STOCK ROOM WITH THE VERIFICATION REPORT OF THE F CI & ORIENTAL BANK. BUT THE LD. APPELLATE AUTHORITY DID NOT CON SIDER THE FACT & PASSED THE ORDER. 8. FOR THAT DURING THE SURVEY PRECEDING NO OTHER EVID ENCE WAS FOUND, SUCH AS 'UNDIS CLOSED' BANK STATEMENT, CASH BOOK AND PURCHASE BILL TO SUPPORT THE EXCESS PURCHASE. ONLY THE METHOD OF CALCULATION IS DULY SUPPORTED THE SURVEY REPORT. SO THE CALCULATIONS OF EXCESS PURCHASE OF RS. 3 , 85, 01, 830/ - IS UNJUSTIFIED. 3. BRIEFLY STATED FACTS ARE THAT A SURVEY U/S. 133 OF THE ACT WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 24.03.2010. THE ASSESSEE FIRM IS ENG AGED IN THE BUSINESS OF RICE MILLING. THE ASSESSEE HAS DISCLOSED PURCHASE OF PADDY AT RS.3,45,62,335/ - AND SALE OF RICE AND BRAN AT RS.3,53,60,711/ - . IT HAS DISCLOSED GROSS PROFIT AT RS.34,72,298/ - AND AFTER CLAIMING EXPENSES DISCLOSED NET PROFIT AT RS.14,33,482/ - . DURING THE COURSE OF SURVEY WHILE COMPARING THE STOCK AS PER AUDITED ACCOUNTS AND THE STOCK REGISTER IN FORM NO. IV THE SURVEY PARTY NOTICED CERTAIN DISCREPANCIES I.E. UNDISCLOSED PURCHASE OF PADDY AT 37647.20 QUINTALS, EXCESS STOCK OF RIC E AT 581.15 QUINTALS AND UNDISCLOSED STOCK OF BRAN AT 45.52 QUINTALS. THE RELEVANT CALCULATIONS MADE BY SURVEY PARTY AS REPRODUCED IN THE ASSESSMENT ORDER READS AS UNDER: DETERMINATION OF CLOSING STOCK OF PADDY (IN QUINTAL) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON 01.04.2009 4545.20 STOCK ON THE DATE OF SURVEY 24.03.2010 43447.20 ADD: PURCHASE DURING THE YEAR 36755.00 ADD: PURCHASE DURING 25.03.2010 TO 31.03.2010 100.00 TOTAL 41300.20 TOTAL 43547.20 LESS: MILLING DURING THE YEAR 35600.20 LESS: MILLING DURING 25.03.2010 TO 31.03.2010 200.00 CLOSING STOCK AS ON 31.03.2010 5700.00 CLOSING STOCK AS ON 31.03.2010 43347.20 UNDISCLOSED PURCHASE OF PADDY = (43347.20 5700.00)= 37647.20 QUINTAL DETERMINATION OF CLOSING STOCK OF RICE (IN QUINTAL) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON 01.04.2009 1513.58.20 STOCK ON THE DATE OF SURVEY 24.03.2010 3760.00 ADD: PRODUCTION DURING THE YEAR 24206.00 ADD: PURCHASE DURING 25.03.2010 TO 31.03.2010 136.00 TOTAL 25720.02 TOTAL 3896.00 LESS: SALE DURING THE YEAR 22545.17 LESS: SALE DURING 25.03.2010 TO 31.03.2010 140.00 3 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 CLOSING STOCK AS ON 31.03.2010 3174.85 CLOSING STOCK AS ON 31.03.2010 3756.00 EXCESS STOCK OF RICE = ( 3756 . 0 0 3174 .00) = 581.15 QUINTAL DETERMINATION OF CLOSING STOCK OF RICE BRAN (IN QUINTAL) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON 01.04.2009 45.00 STOCK ON THE DATE OF SURVEY 24.03.2010 146.00 ADD: PRODUCTION DURING THE YEAR 1780.01 ADD: PURCHASE DURING 25.03.2010 TO 31.03.2010 10.00 TOTAL 1825.01 TOTAL 156.00 LESS: SALE DURING THE YEAR 1714.53 LESS: SALE DURING 25.03.2010 TO 31.03.2010 NIL CLOSING STOCK AS ON 31.03.2010 110.48 CLOSING STOCK AS ON 31.03.2010 156.00 UNDISCLOSED PURCHASE OF BRAN = ( 156 . 0 0 11 0. 48 ) = 45 . 52 QUINTAL THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE DISCREPANCY IN RESPECT TO UNDISCLOSED PURCHASE, EXCESS STOCK OF RICE AND UNDISCLOSED STOCK OF BRAN. THE ASSESSEE FOR THE FIRST TIME DENIED THE EXCESS STOCK OF RICE, UNDISCLOSED PURCHASES AND UNDIS CLOSED STOCK OF BRAN VIDE LETTER DATED 11.12.2012 DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE AO TREATED THE PURCHASE OF PADDY AT 38501.83 QUINTALS AS UNDISCLOSED INVESTMENT AND TREATED THE INCOME AT RS.3,85,01,830/ - . AGGRIEVED, ASSESSEE PREFERRED AP PEAL BEFORE CIT(A) . 4. THE CIT(A) CONFIRMED THE ACTION OF THE AO BY CONFIRMING THE ADDITION BY OBSERVING AS UNDER: 19. IN COMING TO A DECISION ON UNACCOUNTED STOCK DOCUMENT MARKED SRM - 5 IS VITAL. IN THE INVENTORY THE ITEM CONTRIBUTING MAXIMUM TO VALUE IS PADDY. AS PER FORM - IV THE STOCK OF PADDY IS 5800 QUINTAL. AS PER DOCUMENT MARKED SRM - 5 THE STOCK IS 66892 BAGS I.E. 40135.20 QUINTAL AND PHYSICAL INVENTORY IS 43447.20 QUINTAL. THUS IT CAN BE SEEN THAT THE PHYSICAL INVENTORY IS IN CLOSE PROXIMITY WITH A P RE - EXISTING EVIDENCE VIZ. DOCUMENT MARKED SRM - 5 WHICH ESTABLISHES EXISTENCE OF STOCK OVER AND ABOVE WHAT IS RECORDED IN BOOKS OF ACCOUNTS. IN ASSESSMENT STAGE IT WAS UPTO ASSESSEE TO PRODUCE DOCUMENT MARKED SRM - 5, GIVE NECESSARY EXPLANATION AND ESTABLISH T HAT HIS REGULAR BOOKS OF ACCOUNTS ARE TRUE AND CORRECT. THE KNOWN CONTENTS OF DOCUMENT MARKED SRP - 5 ARE NOT REBUTTED. SECTION 292 (C)( 1)(II) STAGES IN REGARD TO BOOKS OF ACCOUNTS FOUND DURING SURVEY THAT THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNTS AND OTHE R DOCUMENTS ARE TRUE. SINCE THE CONTENTS OF DOCUMENT MARKED SRM - 5 ARE NOT REBUTTED, THE ONUS WHICH IS ON ASSESSEE, THE EVIDENCE SANDS AS A STRONG EVIDENCE AGAINST ASSESSEE. BY NOT DOING SO HE HAS NOT ESTABLISHED THAT THE STOCK INVENTORY TAKEN BY ASSESSING OFFICER AS INCORRECT. 20. IN REGARD TO CAPACITY OF GODOWN, THE ASSESSING OFFICER DOING HEARING SUBMITTED THAT THE STOCK WAS NOT MERELY IN GODOWN BUT IN OPEN AND TEMPORARY SHEDS. KEEPING THE FINDINGS AND BACKGROUND IN PARAGRAPH 18 AND 19 I HOLD THAT THE ARGUMENT OF 4 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 APPELLANT IN THIS REGARD CARRIES NO WEIGHT SINCE THERE ARE SUPPORTIVE EVIDENCES MAINLY DOCUMENT SRM - 5 ESTABLISHES EXISTENCE OF UNACCOUNTED STOCK. 21. IN REGARD TO FCI INSPECTION, THE FACT THAT ASSESSING OFFICER HAS CONDUCTED A PHYSICAL VERIFICATION AND PREPARED AN INVENTORY. THE REPORT OF ASSESSING OFFICER IS AS UNDER: THE SECOND POINT IS REGARDING THE BOOKS MAINTAINED BY THE ASSESSEE UNDER D.C.F.&S/FCI GUIDELINE - REGISTERS IN FORM - I, II,III AND IV ARE MAINTAINED BY THE RICE MIL LS UNDER D.C.F.&S/FCI GUIDELINE. AS SEEN IN THE ABOVE POINT THAT THERE WERE DIFFERENT STOCKS NOTED, BY THE ASSESSEE FIRM ITSELF, IN THE FORM REGISTERS (REGISTER - IV) AND IN PADDY STOCK REGISTER SRM - 5, AS EVIDENT FROM SURVEY STATEMENT (QUESTION NO.8) HOWEVE R, FOR ASSESSMENT PURPOSE THE STOCK CONSIDERED ARE AS PER PHYSICAL STOCK FOUND FOR DIFFERENT ITEMS IN THE PREMISES OF THE ASSESSEE ON THE DAY OF SURVEY. NO REASONS ARE ADDUCED AS TO WHY FCI INSPECTOR HAS TO PREVAIL OVER THE PHYSICAL VERIFICATION MADE BY A SSESSING OFFICER THE MANNER AND EFFORT PUT IN SUCH CERTIFICATION BY FCI IS A FACT NOT ESTABLISHED BY ASSESSEE. IT IS NOT PROVED THAT FCI INSPECTOR DID TAKE STOCK AND NO IN MECHANICAL MANNER WHERE INSPECTORS VISIT GODOWN AFTER ANOTHER FOR PERIODIC CHECKING. FURTHER THE STOCK TAKEN BY ASSESSING OFFICER IS LEGAL AND IN ACCORDANCE WITH PROVISIONS OF SECTION 133A BY A TEAM. ON THE OTHER HAND THE FCI INSPECTOR HAS MERELY SIGNED A DOCUMENT PREPARED BY ASSESSEE AND THERE IS NO ENTRY OF HAVING VERIFIED STOCK AND FOU ND CORRECT. ALSO ON 24.03.2010, THE DAY OF SURVEY, THERE WAS NO ENTRY OF VERIFICATION BY AN FCI INSPECTOR. 22. IN THE FINAL HEARING THE EMPHASIS LAID BY APPELLANT IS THAT THE EVIDENCE ISSUED BY ASSESSING OFFICER IN FARMING ASSESSMENT IS ON BASIS OF CONFESS IONAL STATEMENT. HE RELIED ON THE INSTRUCTION OF CBDT IN F. NO.286/2/203 - IT (INV) DATED 10.03.2003 WITH EMPHASIS ON LINE 2. THE INSTRUCTION UNDER SUBJECT CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATION READS AS UNDER: - INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHERE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH & SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURNS OF INCOME IN THESE CIRCUMSTANCES, ON CONFESSIONS, DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THER E SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENTS. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH IT SEIZURES AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDINGS ALSO, ASSESSING OFFICERS SHOUL D RELY UPON THE EVIDENCES/MATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT ORDERS. 23. THE AUTHORISED REPRESENTATIVE ALSO STATED THAT SRM - 5 NEVER FINDS MENTION IN ASSESSMENT ORDER AND THAT HE HOLDS THAT SR M - 5, 6 AND 7 NEVER EXISTED AND ITS RECORDING IN SURVEY PROCEEDINGS IS PART OF CONFESSIONAL STATEMENT. 5 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 24. THE MATTER IS CONSIDERED. THE EVIDENCED IN POSSESSION OF ASSESSING OFFICER HAS SUPPORT OF LAW. STATEMENT RECORDING DURING SURVEY IS P ERMITTED UNDER SECTION 133A(3)(III). STOCK TAKING IS PERMITTED UNDER SECTION 133A(3)(II). PLACING MARKS OF IDENTIFICATION IN DOCUMENTS LIKE SRM - 5 IS PERMITTED UNDER SECTION 133A(3)(I). HENCE EVERY EVIDENCE OBTAINED BY ASSESSING OFFICER IS ONE THAT IS LEGAL LY OBTAINED. 25. IN REGARD TO ALLEGED CONFESSION, THE REMEDY IS AVAILABLE IN FORM OF RETRACTION SUBJECT TO FULFILLING CERTAIN CONDITIONS SPELT OUT IN JUDICIAL DECISIONS SPELT OUT IN PARAGRAPH 13 OF THIS ORDER. THE MATTER IS DISCUSSED IN PARAGRAPH 13 OF THIS ORDER. THE APPELLANT HOLD THAT FILING A RETURN OF INCOME WITH BOOK RESULTS TANTAMOUNT TO RETRACTION AND FOR THIS HE RELIES ON LINE 2 OF CBDT INSTRUCTION. LINE 2 HIGHLIGHTS THE BACKGROUND OF ISSUE OF INSTRUCTION AND NOT THAT FILING OF RETURN OF INC OME IN VARIATION WITH STATEMENT TANTAMOUNT TO RETRACTION. IN FACT THE INSTRUCTION IS INTENDED TO DISCOURAGE DISCLOSE OF ADDITIONAL INCOME NOT BASED ON EVIDENCES. IN THE INSTANT CASE THERE IS NO DISCLOSURE OF ADDITIONAL INCOME . ONLY PERMISSIBLE ACTS HIGHLIG HTED I PRECEDING PARAGRAPH HAS BEEN CONDUCTED BY ASSESSING OFFICER. HENCE THE CONTENTS OF F.NO.286/2/2003 - IT(INV) IS NOT APPLICABLE IN THE CONTEXT OF THE CASE. IT IS ADDED HERE THAT THE ASSESSING OFFICE WHO (A) HAD CONDUCTED SURVEY, (B) RECORDED STATEMENT OF 06.11.012 AND COMPLETED ASSESSMENT AND (C) WHO HAD GIVEN REPORT ON 20.08.2014 ARE DIFFERENT AND NO BIAS CAN BE ATTRIBUTED I THEIR FINDINGS. 26. ANOTHER OBJECTION TAKEN BY AUTHORISED REPRESENTATIVE IS THAT THE ASSESSING OFFICER PARTLY USED FIGURES IN HIS BOOKS OF ACCOUNTS IN DETERMINING UNACCOUNTED STOCK. THE STOCK WAS TAKEN ON 24.03.2010. THE ASSESSING OFFICER CONSIDERED TRANSACTIONS IN THE PERIOD BETWEEN DATE OF SURVEY AND 31.03.2010 TO MAKE A COMPARISON WITH THE DISCLOSED ST OCK AS ON 31.03.2010. COMPAR ISON CAN AND SHALL ALWAYS BE BETWEEN L I KES. HENCE T HE STANDARDIZATION WAS MADE BY ASSESSING OFFICER. HE CAN EITHER WORK OUT FIGURE AS DONE BY HIM TO MAKE STANDARDIZED COMPARISON AS ON 31.03.2010 OR RETRO - WORK FROM THE FIGURES IN THE BOOKS OF ACCOUNTS TO CO MPUTE ACCOUNTED STOCK AS ON 24.03.2010. HE CHOSE ONE OF THE OPTIONS AND SUCH STANDARDIZATION EXHIBITS FAIRNESS ON PART OF ASSESSING OFFICER AND THERE IS NO INFIRMITY ON ANY COUNT. THIS OBJECTION THEREFORE IS NOT ACCEPTED. 27. THE APPELLANT ALSO STATED THAT THE STOCK INVENTORY OF THE MAGNITUDE CANNOT BE TAKEN IN THE LIMITED TIME OF 12 HOURS AS WEIGHING AND DETERMINING THE STOCK IS A JOB OF COLOSSAL MAGNITUDE. I FIND FROM THE SURVEY PROCEEDINGS THAT WEIGHING IS NOT DONE BUT INVENTORY OF BAGS (EXCEPT A SMALL P ART IN FORM OF LOOSE RICE) IS TAKEN BY COUNTING THE NUMBER OF BAGS IN THE STACK. 28. IN PAGES 6 AND 7 THE CASE DECISIONS RELIED UPON BY APPELLANT IS MENTIONED. THE ASPECTS OF RETRACTION AND VALUE OF STATEMENT HAS BEEN ADDRESSED IN THIS ORDER. THE ADDITION MADE BY ASSESSING OFFICER IS NOT EXCLUSIVELY BASED ON STATEMENT AND THE STATEMENT IS SUPPORTED BY DOCUMENT DOCUMENT MARKED SRM - 5. 29. THE APPELLANT ALSO STATED THAT DOCUMENT MARKED SRM - 5 FINDS NO MENTION IN ASSESSMENT ORDER AND HENCE SHOULD NOT BE CONSIDER ED ION THE APPEAL STAGE. THE CONTENTS OF SRM - 5 IS PART OF ASSESSMENT RECORDS AND FINDS MENTION IN THE REPORT OF ASSESSING OFFICER DATED 20.08.2014 WHICH THE APPELLANT HAD OPPORTUNITY TO GO THROUGH DURING APPEAL PROCEEDINGS. THE CONTENTS OF SRM - 5 ADS SUPPOR T TO THE OVERALL FINDING OF THE ASSESSING OFFICER. THE EVIDENCE IS A PRE - EXISTING ONE AND BY MERELY NOT MENTIONING THE SAME EXPLICITLY IN ASSESSMENT ORDER DOES NOT MAKE IT A DOCUMENT NOT PART OF THE ONGOING PROCEEDINGS OR VITIATE THE ASSESSMENT ORDER. IN A NY CASE POWER OF CIT(APPEALS) IS CO - TERMINUS WITH THAT OF ASSESSING OFFICER AND CAN BE CONSIDERED AT APPEAL STGE. EXPLANATION 1 T O SECTION 251 READS IN DISPOSING OF AN APPEAL, THE COMMISSIONER (APPEALS) MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF TH E PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTER WAS NOT RAISED BEFORE THE COMMISSIONER (APPEALS) 6 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 BY THE APPELLANT. THE ARGUMENT RAISED BY APPELLANT IN THIS REGARD IS ALSO NOT ACCEPTED. 30. IN THE COURSE OF HE ARING ON 20.08.20104, NEW EVIDENCE WAS FILED. THIS IS A COPY OF STOCK STATEMENT GIVEN BEFORE ORIENTAL BANK OF COMMERCE AND IS TO JUSTIFY THE STOCK BALANCE REPORTED IN BALANCE SHEET. THIS EVIDENCE COMES IN PAR WITH THE NATURE OF EVIDENCE WITH REGARD TO FCI INSPECTION RELIED ON BY APPELLANT AND A DECISION ON THE SAME IS ALREADY MADE. AS MATTER OF FAIRNESS EVIDENC E ON FCI WAS ADMITTED AND ADJUDICATED. THE STATEMENT GIVEN ORIENTAL BANK OF COMMERCE WAS IN POSSESSION OF ASSESSEE EVEN DURING ASSESSMENT PROCEEDINGS , NOT PRODUCED. AS NO JUSTIFICATION EXISTS TO BE COVERED UNDER RULE 46A THE EVIDENCE IS ORDINARILY INADMISSIBLE. HOWEVER THE SAME IS FOUND TO BE A SELF - DECLARATION AND AGAIN NO THERE IS O ENTRY OF ANY INDEPENDENT VERIFICATION. THEREFORE, EVEN IF ADMITTED, THE SAME DOES NOT HELP APPELLANT IN ANY MANNER. 31. IN SUMMARY THE FACTS ARE: - A. STOCK INVENTORY TAKEN DURING SURVEY IS NOT FAULTY AS ALLEGED. B. THERE IS MATERIAL IN POSSESSION OF ASSESSEE VIZ DOCUMENT MARKED SRM - 5, FOUND DURING SURVEY, BUT NOT PRODUCED WHEN NOTICE UNDER SECTION 131 WAS ISSUED, ESTABLISHING EXISTENCE OF UNACCOUNTED STOCK. C. CONDITION FOR A VALID RETRACTION NOT SATISFIED. D. ALL LEGAL AND FACTUAL ARGUMENTS ARE FOUND TO BE INAPPLICABLE/VALIDLY REBUTTED BY ASSESSING OFFICER AND ALSO IN THI S ORDER. 32. IN VIEW OF DISCUSSION ABOVE, CONSIDERING ALL ASPECTS, I UPHOLD THE ADDITION OF RS.3,85,01,830 TO RETURNED INCOME MADE BY ASSESSING OFFICER AND DISMISS THE GROUND OF APPEAL. THE FACTORS THAT GUIDED IN ARRIVING AT SUCH A DECISION INCLUDE (A) NON PRODUCTION OF DOCUMENTS MARKED SRM 5, 6 AND 7 (LAST KNOWN POSSESSION IS WITH ASSESSEE HIMSELF) DURING SURVEY BEFORE ASSESSING OFFICER DURING AS PROCEEDINGS, (B) EXISTENCE OF SUPPORTIVE MATERIAL VIZ DOCUMENT MARKED SRM - 5 (THE CONTENTS OF WHICH ARE KNOWN AND ITS EXISTENCE IS ACKNOWLEDGED AS LATE AS 6.11.2012) WHICH ESTABLISHES THAT THE PHYSICAL STOCK MATCHED CLOSELY WITH STOCK RECORDED IN THE DOCUMENT, (C) PRESUMPTION AS PER SECTION 292C WHICH IS NOT REBUTTED. (D) NO CASE IS ESTABLISHED THAT A CONFES SIONAL STATEMENT IS TAKEN DURING SURVEY AND (E) CONDITIONS FOR A VALID RETRACTION, IF WARRANTED, KEEPING IN VIEW THE SETTLED JUDICIAL POSITION ON THE MATTER ARE NOT MET. ALL ABOVE (A) TO (E) AND OTHER POINTS RAISED BY APPELLANT ARE ADEQUATELY ADDRESSED IN THIS ORDER IN PRECEDING PARAGRAPHS. 5 . WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE HAS NOT PRODUCED BOOKS OF ACCOUNT BEFORE THE AO OR BEFORE CIT(A) DURING THE COURSE OF ASSESSMENT PROCEE DINGS OR APPELLATE PROCEEDINGS. THE AO WHILE FRAMING ASSESSMENT HAS GONE THROUGH THE AUDITED ACCOUNTS AND THE STOCK REGISTER MAINTAINED IN FORM NO IV . HE A FTER COMPUTING CLOSING STOCK OF PADDY TREATED THE DIFFERENCE AS UNDISCLOSED PURCHASE OF PADDY AT 376 47.20 QUINTALS. SIMILARLY, THE AO TREATED THE EXCESS UNDISCLOSED STOCK OF BRAN AT 45.5 QUINTALS. THE AO FOR COMPUTING THESE THREE DIFFERENTIAL ITEMS TAKEN THE CLOSING STOCK AS PER AUDITED ACCOUNTS AND CLOSING STOCK AND ALSO ADDED THE TOTAL PURCHASES AND MILLED PADDY AND ALSO THE COMPARATIVE STOCK FOUND DURING THE COURSE 7 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 OF SURVEY AS ON THE DATE OF SURVEY. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US CLARIFIED THAT THE AO NOTED A FACT THAT STOCK WAS NOT MERELY IN GODOWN BUT WAS IN OPEN TEMPORARY SHED ALSO. BUT HE CONTESTED THAT THIS MUCH STOCK CANNOT BE WEIGHED WITHIN ONE DAY BECAUSE SURVEY WAS CONCLUDED ON THAT VERY DATE I.E. ON 24.03.2010. LD. COUNSEL FOR THE ASSESSEE ALSO PRODUCED A PHYSICAL VERIFICATION REPORT AS PREPARED BY FCI WHILE INSPECTING THE STO CK OF PADDY. WE FIND THAT THE AO HAS NEVER DENIED THAT THE SALES ARE NOT OUT OF THESE UNACCOUNTED PURCHASES. THE SALES MADE ARE ACCEPTED AS IT IS. ONCE THE SALES ARE ACCEPTED, THE ENTIRE UNDISCLOSED PURCHASES CANNOT BE ADDED FOR COMPUTING THE INCOME OF T HE ASSESSEE EXCEPT BY APPLYING A PROFIT RATE I.E. GROSS PROFIT AS DECLARED BY ASSESSEE IN REGULAR BOOKS OF ACCOUNT OR THE GROSS PROFIT DECLARED BY OTHER CONCERNS IN THE SIMILAR TRADE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND PARTICULARLY WHEN THE B OOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO, THE BOOK RESULTS CANNOT BE ACCEPTED AND THE SAME ARE TO BE REJECTED. IN ANY CASE, THE COMPUTATION METHOD OF THE AO FOR DETERMINING UNDISCLOSED PURCH A SES IS TAKEN THROUGH MATHEMATICAL EXERCIS E. WE FIND THAT THE ASSESSEE MAINTAINING THE STOCK AND PRODUCTION REGISTERS AS PER THE GUIDELINES OF FCI, WHICH ARE FORM NO.I TO IV. THE REGISTERS ARE REGULARLY CHECKED BY FCI FOR THE REASONS THAT 40% OF THE PRODUCTION WOULD HAVE BEEN SOLD TO FCI AS PER GO VERNMENT ORDER. THE AO SHOULD HAVE VERIFIED THE CLOSING STOCK IN VIEW OF STOCK REGISTER MAINTAINED FOR THE PURPOSES OF FCI. EVEN OTHERWISE, THIS STOCK INVENTORY OF THE MAGNITUDE OF 43,447.20 QUINTALS IS IMPOSSIBLE TO BE WEIGHED AND DETERMINE THE CLOSING ST OCK WITHIN THE TIME - LIMIT OF 12 HOURS, WHICH WAS THE PERIOD DURING WHICH THE SURVEY PARTY STAYED IN THE BUSINESS PREMISES OF THE ASSESSEE. FROM THE FINDING OF SURVEY, IT IS CLEAR THAT WEIGHING IS NOT DONE BUT ONLY COUNTING OF BAGS OR INVENTORY OF BAGS IS T AKEN BY THE SURVEY PARTY COUNTING THE NUMBER OF BAGS IN THE STACKS. WE FIND THAT THE FCI INSPECTOR HAS SIGNED THE STOCK REGISTER AS ON 31.03.2010 BY MENTIONING THE 5700 QUINTALS OF PADDY, WHEREAS THE AO DETERMINED THE STOCK AS 43,347.20 QUINTALS. THE ASSES SEE HAS MAINTAINED STOCK REGISTER IN FORM NO I, II, III & IV UNDER DCF&S/FCI GUIDELINE AS MAINTAINED BY THE RICE MILL. NEITHER AO NOR CIT(A) HAS CROSS - VERIFIED THE REGISTERS MAINTAINED BY ASSESSEE. IN SUCH CIRCUMSTANCES, WE DIRECT THE AO TO RECOMPUTE THE INCOME BY APPLYING GROSS PROFIT RATE ON THE UNACCOUNTED PURCHASES, WHICH ARE SOLD OUT . THE 8 ITA NO. 1781 /K/201 4 SUBARNA RICE MILL AY 20 1 0 - 11 ASSESSEE HAS DISCLOSED THE GROSS PROFIT AND COMPARATIVE STATEMENT OF TURNOVER AND GROSS PROFIT FILED DURING THE COURSE OF HEARING BEFORE US, WHICH READS AS UNDER: - A SSTT. YEAR TURNOVER (RS) G.P. (RS) RATIO 2010 - 11 3,53,60,711.00 34,72,298.00 9.82% 2009 - 10 3,59,63,785.00 24,34,389.00 6.76% 2008 - 09 2,72,28,511.00 24,77,402.00 9.09% 2007 - 08 NIL NIL NIL IN VIEW OF THE ABOVE GROSS PROFIT DECLARED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THESE ARE UNDISCLOSED PURCHASES AS SOLD BY THE ASSESSEE AND SALE IS ADMITTED BY THE REVENUE, A REASONABLE GP RATE WILL BE 10% FOR COMPUTING PROFIT OF THE ASSESSEE. ACCORDIN GLY, WE DIRECT THE AO TO RECOMPUTE THE INCOME AFTER DELETING THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED PURCHASES BUT APPLY GP RATE OF 10% ON THE UNDISCLOSED PURCHASES. THE AO IS DIRECTED ACCORDINGLY. 6 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED . 7 . ORDER IS PRONOUNCED IN THE OPEN COURT ON 3 0 / 0 6 / 2 0 1 5 . S D / - S D / - ( P. K. BANSAL ) (MAHAVIR SINGH) ACCOUNTANT MEMBER J UDICIAL MEMBER DATED : 3 0 T H J UNE , 201 5 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . A PPELLANT M/S. SUBARNA RICE MILL, VILL. KHETURA, P.O. GALSI, BURDWAN - 713 406 2 RESPONDENT ITO, WARD - 2( 3 ) , BURDWAN . 3 . THE CIT (A), ASANSOL 4. 5. CIT, ASANSOL DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .