The DCIT, Central Circle-2(3), Ahmedabad V. Suryadeep Salt & Refinery Works Ltd., Baroda

ITA 1783/AHD/2009

• Counselvise Citation: 178320514 RSA 2009
• Duration Of Justice: 3 year(s) 2 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-07-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHR B K S PANDYA
• Assessee Lawyers: U S BHATI
• Keywords: Unexplained investment; Additional evidence
• Section: 142(1); 69; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD B BENCH BEFORE: SHRI A.K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER DEPUTY COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-2(3), ROOM NO. 305,ANNEXE TO AAYAKAR BHAVAN, AHMEDABAD (APPELLANT) VS. SURYADEEP SALT REFINERY & CHEMICAL WORKS LTD., 206, HELIX COMPLEX, OPP. HOTEL SURYA, SAYAJIGUNJ, BARODA PAN NO. AAFCS2725Q (RESPONDENT) DEPARTMENT BY :SHR B.K.S PANDYA, CIT- D.R. ASSESSEE BY :SHRI U.S. BHATI, A.R. DATE OF HEARING : 03-07-2012 DATE OF PRONOUNCEMENT : 24-08-2012 / ORDER PER : KUL BHARAT, JUDICIAL MEMBER:- THIS PRESENT APPEAL OF THE REVENUE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS )-III, BARODA DATED 17-03-2009 FOR THE ASSESSMENT YEAR 200 5-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- I.T.A. NO.1783/AHD/2009 ASSESSMENT YEARS: 2005-06 ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 2 I)THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING T HE ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT OF RS. 3,95,41,907/-. II) THE CIT(A) HAS ERRED IN LAW AND FACTS IN DELETING T HE ADDITION RELYING ON CORRECTED BALANCE SHEET AND REPORTS WHICH WERE NOT AUTHENTICATED BY THE ASSESSEE EVEN WHEN THE ASSE SSEE HAD FAILED TO FURNISH SUCH DOCUMENTS BEFORE THE ASSESSING OFFICER AT THE TIME OF ASSESSMENT. III) THE CIT(A) HAS ERRED IN LAW AND FACTS IN NOT FO LLOWING THE PROCEDURE FOR ADMISSION OF ADDITIONAL EVIDENCE AS P ER RULE 46A(5) IN SO FAR AS THE ORIGINAL OF THE DOCUMENTS RELIE D UPON THE ASSESSEE WERE NOT MADE AVAILABLE TO THE ASSESSING OFFICER. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSE SSING OFFICER. 2. THE FACTS IN BRIEF ARE THAT CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE OF HEARING U/S. 14 3(2) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) WAS ISSUED BUT NONE ATTENDED THE ASSESSMENT PROCEED INGS. THE ASSESSING OFFICER ISSUED ANOTHER NOTICE ON 05-1 2-2007, THE DIRECTOR OF THE ASSESSEE-COMPANY ATTENDED THE PROCEEDINGS AND FILED A FEW DETAILS. THE HEARING W AS ADJOURNED ON 11-12-2007, HOWEVER, NONE ATTENDED ON THE DATE FIXED FINALLY A NOTICE U/S 142(1) OF THE ACT W AS ISSUED TO THE ASSESSEE-COMPANY. HOWEVER, IN RESPONSE THERETO NOBODY ATTENDED THE PROCEEDINGS OR FILED ANY DETAIL S. UNDER THE CIRCUMSTANCES, THE AO PROCEEDED TO FINALI ZE THE PROCEEDINGS U/S 144 OF THE ACT. THE AO WHILE FINAL IZING THE ASSESSMENT U/S 144 OF THE ACT MADE VARIOUS DISALLOWANCE/ADDITIONS AND ASSESSED THE INCOME AT R S. ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 3 5,12,99,488/- AGAINST THE NET PROFIT AS PER PROFIT AND LOSS ACCOUNT OF RS. 26,39,505/-. THE ASSESSEE FEELING A GGRIEVED BY THIS ORDER OF AO PREFERRED APPEAL BEFORE LD. CIT( A) WHO AFTER CONSIDERING THE SUBMISSIONS PARTLY ALLOWED TH E ASSESSEES APPEAL. 3. NOW, BEING AGGRIEVED BY THE ORDER OF LD. CIT(APPE AL) THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL. 4. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS AGAINS T THE DELETION OF ADDITION ON ACCOUNT OF UNDISCLOSED INVE STMENT OF RS. 3,95,41,907/-. LD. DEPARTMENTAL REPRESENTATIVE OF THE REVENUE SUBMITTED THAT ASSESSING OFFICER HAS RIGHTL Y MADE THE ADDITION AS THE ADDITION WAS BASED UPON THE BAL ANCE- SHEET FILED BY THE ASSESSEE ALONG WITH RETURN. HE SUBMITTED THAT THE SUBSEQUENT CORRECTION WAS JUST TO MANIPULA TE THE ACCOUNTS AND SUCH CORRECTION WAS NOT CONFRONTED WIT H THE AO. ON THE CONTRARY, LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THERE WAS A DISPUTE WITH TH E AUDITOR AND DUE TO MALA FIDE INTENTION, THE AUDITOR MADE SE RIOUS DEFECTS INTO THE BOOKS OF ACCOUNT, WHICH WAS SUBSEQ UENTLY, CORRECTED AND ACCOUNTS WERE SUBMITTED BEFORE CONCER NED AUTHORITIES. THE CORRECTION OF ACCOUNT CANNOT BE T ERMED AS MALA FIDE. ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT LD. CIT (A) HAS DECIDED THIS ISSUE IN PARA-4.3 OF HIS ORDER, WHICH IS REPRODUCED HEREINBELOW:- 4.3 I HAVE CONSIDERED THE SUBMISSIONS OF THE COUNSEL AND FACTS OF THE CASE. THE APPELLANT SUBMITTED BALANCE SHEET WITH THE RETURN OF INCOME SHOWING INCORRECT TOTAL AND WRONG FIGURES. THE TOTAL OF THE ASSET SIDE W AS INCORRECT. BESIDES THIS, VARIOUS FIGURES OF ASSETS SUCH AS CAPITAL WORK IN PROGRESS, INVESTMENTS ETC., ARE WRONG RESULTING IN INCORRECT TOTAL OF ASSET SIDE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE APPELLANT SUBMITTED CORRECTED BALANCE SHEET WHICH HIS SHOWN CORRECT TOTAL AND ALSO CORRECT FIGURES OF VARIOUS ASSETS INCLUDING CAPITAL WORK IN PROGRESS AND INVESTMENT. IN THE CORRIGENDUM TO THE BALANCE SHEET WAS PREPARED AND SUBMITTED TO THE CONCERNED PERSONS INCLUDING ROC. THE REASONS FOR CORRIGENDUM IS MENTIONED AS DISCREPANCIES IN TOTAL OF BALANCE SHEET AN SCHEDULES. CERTIFIED COPY OF CORRIGEND UM TO THE ANNUAL ACCOUNTS WERE FILED DURING APPEAL HEARI NG. I HAVE GONE THROUGH THE SAME AND IT IS SEEN THAT THE FIG URE OF WORK IN PROGRESS IN THE CORRECTED BALANCE SHEET HAS MARGINALLY INCREASED FROM RS. 85,41,726/- TO RS. 85,83,633/-. THEREFORE, IT IS CLEAR THAT THE INVESTM ENT OF RS. 3,95,41,907/- TREATED BY THE ASSESSING OFFICER AS UNEXPLAINED IS NOT CORRECT. THE INCREASE IN CAPITAL WIP IS ONLY RS. 41,907/-. SINCE THE SAME IS ACCOUNTED IN THE BOOKS OF ACCOUNT AND IS DULY REPRESENTED BY INCREASE IN ASSET IN THE BALANCE SHEET, THE SAME CANNOT BE TREATED AS UNEXPLAINED. THE ONLY BASIS FOR THE ASSESSING OFFICER TO TREAT THE WORK IN PROGRESS AS UNEXPLAINED IS INCORRECT BALANCE SHEET WHEREIN THE FIGURE OF CAPITAL WORK IN PROGRESS IS MENTI ONED AT RS. 4,80,83,633/- AS AGAINST RS. 85,83,633/-. IF TH E ASSESSING OFFICER ACCEPTS THE FIGURES OF CAPITAL WIP CORRECT, STILL NO ADDITION CAN BE MADE U/S 69 OR 69C. SINCE ADD ITION ON ACCOUNT OF UNEXPLAINED INVESTMENT REQUIRES THAT ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 5 INVESTMENT MADE ARE NOT RECORDED IN THE BOOKS OF ACCOUNT . BY INCLUDING THE FIGURE IN BALANCE SHEET, THE VERY BA SIS OF ADDITION REGARDING UNEXPLAINED INVESTMENT CANNOT SURVI VE. SINCE ALL ASSETS INCLUDED IN THE BALANCE SHEET ARE SOURCED FROM THE LIABILITY SIDE OF THE BALANCE SHEET AND THER EFORE ASSETS REFLECTED IN THE BALANCE SHEET ARE NOT UNEXPLAINED INVESTMENT. ASSETS FOUND BUT NOT REFLECTED IN THE BOOKS /BALANCE SHEET IS UNEXPLAINED INVESTMENT. THE ASSESSING OFFICER HAS NOT FOUND INVESTMENT IN CAPITAL WORK IN PROGRESS. THE ONLY BASIS IS THE INCORRECT BALANCE SHEET IN WHICH CAPITAL WIP IS SHOWN AT HIGHER FIGURE. IF THE ASSESSING OFFICER RELY ON THIS INCORRECT BALANCE SHEET, THE WIP CANNOT BE TREATED AS UNEXPLAINED INVESTMENT IN VIE W OF THE DISCUSSION MADE EARLIER. IF THE ASSESSING OFFICER USES THE CORRECTED BALANCE SHEET REFLECTED IN CORRIGENDUM TO ANNUAL ACCOUNTS, THEN THERE IS NO INVESTMENT IN CAPITA L WORK IN PROGRESS AND THEREFORE A QUESTION OF UNEXPLAIN ED INVESTMENT DOES NOT ARISE. IN ANY SITUATION, ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED INVESTMENT CANNOT BE SUSTAINED. UNEXPLAINED INVESTMENT CAN ONLY BE ADDED IF INVESTMENT FOUND IS NOT RECORDED I N THE BOOKS. IN THE ABSENCE OF INVESTMENT FOUND, INCORRECTLY, ADDITION ON ACCOUNT OF UNEXPLAINED INVESTME NT CANNOT BE MADE. IN THE REMAND REPORT ALSO THE ASSESSING OFFICER ONLY MENTIONED THAT THE ASSESSING OFFICER DISCUSSED THIS ISSUE IN DETAIL AND MADE THE ADDITION. THE ASSESSING OFFICER HAS NOT MENTIONED AS TO HOW THE CORRIGENDUM TO ANNUAL ACCOUNT IS NOT CORRECT PARTICULARLY WHEN IT WAS PREPARED T O CORRECT THE ERRORS AND MISTAKES IN THE BALANCE SHEET EARL IER FILED WHICH EVEN DID NOT TALLY. IF THE ASSESSING OFFICER DOUBTED ANY FIGURE OF THE AMENDED BALANCE SHEET, HE COULD HAVE VERIFIED THE SAME BY CALLING THE BOOKS OF ACCOUNTS IN THE REMAND PROCEEDINGS. BUT HE SAME WAS NOT DONE. SINCE THE APPELLANT HAS SUBMITTED THE COPY OF CORRIGENDUM SHOWING THE REVISED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET TO ROC, SHAREHOLDERS AND STOCK EXCHANGES, THERE IS NO REASON NOT TO TAKE COGNIZANCE OF SUCH DOCUMENT WHICH IS APPARENTLY PREPARED TO CORRECT THE MISTAKE IN ORIGINAL BALANCE SHEET. IN VIEW OF THE DETAILED DISCUSSION ABOVE, THE ADDITIO N ON ACCOUNT OF UNEXPLAINED INVESTMENT CANNOT BE MADE BY ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 6 THE ASSESSING OFFICER ON THE BASIS OF INCORRECT FIGURE REFLECTED IN THE BALANCE SHEET. FOR MAKING ADDITION O N ACCOUNT OF UNEXPLAINED INVESTMENT ONE HAS TO FIND THE ASSETS/INVESTMENTS NOT RECORDED IN THE BOOKS. SINCE NO SUCH INVESTMENTS WAS FOUND BY THE ASSESSING OFFICER, ADDITION CANNOT BE MADE. THE ADDITION IS THEREFORE DELETED. FROM THE ABOVE FINDINGS OF LD. CIT(A), WE FIND THAT LD. CIT(A) HAS DEALT WITH THIS ISSUE ELABORATELY AND HA S COME TO THE CONCLUSION THAT THERE WAS EX-FACIE A MISTAKE IN THE ACCOUNTS OF THE ASSESSEE THAT HAS BEEN RECTIFIED BY FILING A CORRECTED BALANCE-SHEET AND ACCOUNTS. THE LD. CIT(A ) HAS OBSERVED THAT THE ONLY BASIS FOR THE ASSESSING OFFI CER TO TREAT THE WORK IN PROGRESS AS UNEXPLAINED IS INCORR ECT BALANCE SHEET WHEREIN THE FIGURE OF WORK-IN-PROGRES S IS MENTIONED AT RS. 4,80,83,633/- AS AGAINST RS. 85,83 ,633/-. IF THE AO ACCEPTS THE FIGURES OF CAPITAL WIP IS COR RECT STILL NO ADDITION CAN BE MADE U/S 69 C OF THE ACT. SINCE TH E ADDITION ON ACCOUNT OF UNEXPLAINED REQUIRES THAT INVESTMENT MADE ARE NOT RECORDED IN THE BOOKS OF ACCOUNT. BY INCLU DING THE FIGURE IN BALANCE-SHEET VERY BASIS OF ADDITION REGA RDING UNEXPLAINED INCOME CANNOT SURVIVE. SINCE ALL ASSET S INCLUDED IN THE BALANCE-SHEET ARE SOURCED FROM THE LIABILITY SIDE OF THE BALANCE-SHEET AND THEREFORE, ASSETS REF LECTED IN THE BALANCE-SHEET ARE NOT UNEXPLAINED INVESTMENT AN D ASSETS FOUND BUT NOT REFLECTED IN THE BOOKS/BALANCE SHEET IS UNEXPLAINED INVESTMENT. THE AO HAS NOT FOUND INVES TMENT ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 7 IN WORK-IN-PROGRESS. THE ONLY BASIS IS THE INCORRE CT BALANCE SHEET IN WHICH WIP IS SHOWN AT HIGHER FIGURE. IF T HE AO RELIED ON THE INCORRECT BALANCE-SHEET, THE WORK-IN- PROGRESS CANNOT BE TREATED AS UNEXPLAINED INVESTMENT. WE DO NOT FIND ANY INFIRMITY INTO THE AFORESAID OBSERVATION O F LD CIT(A) AS THE AO HAS TREATED THE INCREASE IN CAPITAL WORK IN PROGRESS OF RS. 3,95,41,907/- AS UNDISCLOSED INVEST MENT OF ASSESSEE. THE ASSESSEE, HAS RECORDED THE WORK-IN-PR OGRESS IN HIS BOOKS OF ACCOUNT, THEREFORE, THE BASIS OF MA KING ADDITION FOR UNEXPLAINED INVESTMENT DOES NOT SURVIV E. THE ADDITION FOR UNEXPLAINED INVESTMENT CAN BE MADE BY INVOKING THE PROVISION OF SECTION 69 BUT THE AO HAS MADE ADDITION U/S 69 C OF THE ACT AND IF THE VERY BASIS OF INVOKING THE SAID PROVISION IS ABSENT THEN IN OUR VIEW THE P ROVISION OF SECTION 69 OR 69 C CAN NOT BE INVOKED. IN THIS VIEW OF THE MATTER, THIS GROUND OF REVENUES APPEAL IS DISMISSE D. 6. THE NEXT GROUND OF REVENUES APPEAL READS AS UND ER:- III) THE CIT(A) HAS ERRED IN LAW AND FACTS IN NOT FOLLOWING THE PROCEDURE FOR ADMISSION OF ADDITIONAL EVIDENCE AS PER RULE 46A(5) IN SO FAR AS THE ORIGINAL O F THE DOCUMENTS RELIED UPON BY THE ASSESSEE WERE NOT MADE AVAILABLE TO THE ASSESSING OFFICER. LD. DR SUBMITTED THAT LD. CIT(A) DID NOT GIVE OPPORTU NITY TO THE AO TO GIVE HIS COMMENT ON THE ADDITIONAL EVIDEN CE ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 8 SUBMITTED BY THE ASSESSEE. ON THE CONTRARY, LD. AR SUBMITTED THAT THE REMAND REPORT WAS CALLED FROM TH E AO AND THE LD. CIT(A) HAS CONSIDERED THE REMAND REPORT SUBMITTED BY AO. 7. WE HAVE HEARD RIVAL SUBMISSIONS PERUSED MATERIAL AVAILABLE ON RECORD. WE FIND THAT LD. CIT(A) HAS OB SERVED AS UNDER:- IN THE REMAND REPORT ALSO THE ASSESSING OFFICER ONLY MENTIONED THAT THE ASSESSING OFFICER DISCUSSED THIS ISSUE IN DETAIL AND MADE THE ADDITION. THE ASSESSING OFFICER HAS NOT MENTIONED AS TO HOW THE CORRIGENDUM TO ANNUAL ACCOUNT IS NOT CORRECT PARTICULARLY WHEN IT WAS PREPARED T O CORRECT THE ERRORS AND MISTAKES IN THE BALANCE SHEET EARLI ER FILED WHICH EVEN DID NOT TALLY. IF THE ASSESSING OFFICER DOUBTED ANY FIGURE OF THE AMENDED BALANCE-SHEET, HE COULD HAVE VERIFIED THE SAME BY CALLING THE BOOKS OF ACCOUNT IN THE REMAND PROCEEDINGS. BUT THE SAME WAS NOT DONE. SINCE THE APPELLANT HAS SUBMITTED THE COPY OF CORRIGENDUM SHOWING THE REVISED PROFIT AND LOSS ACCOUNT AND BALANCE SHEET TO ROC, SHAREHOLDERS AND STOCK EXCHANGES, THERE IS NO REASON NOT TO TAKE COGNIZANCE OF SUCH DOCUMENT WHICH IS APPARENTLY PREPARED TO CORRECT THE MISTAKE IN ORIGINAL BALANCE-SHEET. FROM THE ABOVE IT IS EVIDENT THAT REVENUES CONTENT ION THAT THE ORIGINAL OF DOCUMENTS RELIED UPON BY THE ASSESS EE WERE NOT MADE AVAILABLE TO THE AO IS ILL FOUNDED SINCE T HE AO WAS GIVEN AN OPPORTUNITY TO COMMENT IN VIEW OF THE OBSE RVATIONS OF LD. CIT(A) THAT THE ASSESSING OFFICER HAD NOT ME NTIONED AS TO HOW CORRIGENDUM TO ANNUAL ACCOUNT WAS NOT COR RECT PARTICULARLY WHEN IT WAS PREPARED TO CORRECT THE MI STAKES AND ERRORS IN THE BALANCE SHEET EARLIER FILED WHICH WE DID NOT TALLY. IN THIS VIEW OF MATTER, WE DO NOT FIND ANY INFIRMITY INTO THE ORDER OF LD. CIT(A) HENCE THIS GROUND OF RE VENUES APPEAL IS DISMISSED. ITA NO. 1783/AHD/2009 A.Y. 2005-06 PAGE NO 9 8. IN THE RESULT, REVENUES APPEAL STANDS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE AT CAPTION PAGE. SD/- SD/- (A.K. GARODIA) (KUL BHARAT) ACCOUNTANT MEMBER JUDIC IAL MEMBER A. KUMAR, P.S. / COPY OF ORDER FORWARDED TO:- 1. / APPELLANT 2. / RESPONDENT 3. / CONCERNED CIT 4. - / CIT (A) 5. , ! , '# / DR, ITAT, AHMEDABAD 6. $% &' / GUARD FILE. BY ORDER/ , ( / ' ) ! , '# * STRENGTHENED PREPARATION & DELIVERY OF ORDERS IN TH E ITAT 1) DATE OF TAKING DICTATION N.A( COPY OF PREVIOUS D RAFT) 2) DIRECT DICTATION BY MEMBER STRAIGHT ON COMPUTER/LAPTOP/DRAGON DICTATE N.A. 3) DATE OF TYPING & DRAFT ORDER PLACE BEFORE MEMBER 08-08-2012 4) DATE OF CORRECTION 09-08-2012 5) DATE OF FURTHER CORRECTION 22-08-2012 6) DATE OF INITIAL SIGN BY MEMBERS 23-08-2012 7) ORDER UPLOADED ON 24-08-2012 8) ORIGINAL DICTATION PAD HAS BEEN ENCLOSED IN THIS FILE N.A 9) FINAL ORDER AND 2 ND COPY SEND TO BENCH CLERK ON 24-08-2012