Shri Bhagwan Kumar Tapariya, JODHPUR V. ACIT, NAGAUR

ITA 188/JODH/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4919 (ITAT-JODHPUR)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 26-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: U C JAIN
• Keywords: Unexplained investment; Income from undisclosed sources; Notional interest
• Section: 133A; 234B

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL: JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 188/JODH/2012 (A.Y. 2008-09) SHRI BHAGWAN KUMAR TAPARIYA, VS ACIT, C/O. SHRI U.C.JAIN, ADVOCATE, CIRCLE, SHATRUNJAY HARI SINGH NAGAR, PALI ROAD, NAGAUR . JODHPUR. PAN NO. AAFPT6058A (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. U.C. JAIN AND SH. RAJENDRA JAIN. DEPARTMENT BY : SH. N.A. JOSHI- DR. DATE OF HEARING : 22/08/2013. DATE OF PRONOUNCEMENT : 29/08/2013. O R D E R PER HARI OM MARATHA, J.M. : THIS APPEAL OF THE ASSESSEE FOR A.Y. 2008-09 IS DI RECTED AGAINST THE ORDER OF LD. CIT(A), JODHPUR DATED 09/03/2012. 2 2. BRIEFLY STATED, THE FACTS OF THIS CASE ARE THAT THE ASSESSEE IS THE PROPRIETOR OF M/S. SUBHLAXMI OIL INDUSTRIES, NAGAUR AND HAS FILED HIS RETURN OF INCOME (ROI) FOR A.Y. 2008-09, AS INDIVID UAL, ON 30/09/2008, DECLARING TOTAL INCOME OF RS. 49,37,430/-. THE ASSE SSEE DERIVED HIS INCOME FROM THE TRADING AND MANUFACTURING OF COTTON -SEED, COTTON SEED-OIL, MUSTARD SEED-OIL, OIL-CAKES ETC. A SURVEY U/S 133A OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) WAS COND UCTED AT HIS BUSINESS PREMISES ON 24/01/2008. DURING ASSESSMENT PROCEEDINGS, VARIOUS DEFECTS WERE NOTICED BY THE A.O. IN THE BOO KS OF ACCOUNTS OF THE ASSESSEE AND, THEREFORE, HE REJECTED THEM. 2.2 DURING THE COURSE OF SURVEY, IN HIS STATEMENT R ECORDED ON 24/01/2008, THE ASSESSEE SHRI BHAGWAN KUAMR TAPARIY A, HAD ADMITTED THE FOLLOWING UNACCOUNTED INCOME, WHILE REPLYING TO QUESTION NO. 14 OF HIS STATEMENT :- (I) UNACCOUNTED INVESTMENT IN THE RESIDENTIAL PROPERTY : RS. 17,50,000/- (II) EXCESS CASH FOUND : RS. 8,97,350/- (III) EXCESS TOCK FOUND : RS. 28,70,477/- TOTAL : RS. 55,17,827/- 3 HE ALSO PAID ADVANCE TAX OF RS. 16,50,000/-. HOWEVE R, IN THE COMPUTATION OF UNACCOUNTED INCOME SO ADMITTED BY HI M HE DID NOT INCLUDE A SUM OF RS. 28,70,477/- (ON ACCOUNT OF EXC ESS STOCK. WHEN ASKED, TO EXPLAIN THIS ANOMALY, THE ASSESSEE GAVE V ARIOUS EXPLANATIONS AND RELIED ON SEVERAL DECISIONS WHICH IS GIVEN AT P AGES 7 TO 17. BUT, THE A.O. WAS NOT SATISFIED. HE HAS OBSERVED THAT TH E PROOF OF FORCIBLE SURRENDER HAS NOT BEEN PRODUCED AND THE ASSESSEE DI D NOT RETRACT HIS THIS STATEMENT EARLIER. BY TREATING IT AS AN AFTERT HOUGHT, THE A.O. HAS REJECTED THE SAME AND HAS MADE THE IMPUGNED ADDITIO N OF RS. 25,68,277/- AFTER GIVING DUE CREDIT OF MISTAKES POI NTED OUT BY THE ASSESSEE. HE HAS ALSO MADE ADDITION OF RS. 30,000/- ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(1)(III), APART FROM ADDITION OF RS. 2,19,674/- MADE ON ACCOUNT OF LOW G.P. 2.3 BEING AGGRIEVED, THE ASSESSEE FILED APPEAL AND LD. CIT(A) HAS CONFIRMED THE ADDITION OF RS. 30,000/- AND OF RS. 2 2,44,277/-ON ACCOUNT OF EXCESS STOCK AFTER GIVING SOME MORE CRED IT OF RS. 3,24,000/- BY TREATING THIS MUCH STOCK TO BELONG TO HIS SON. W HO IS THE PROPRIETOR OF M/S. SUBH LAXMI SOAP INDUSTRIES SITUATED ADJACEN T TO ASSESSEES PROPERTY. AGAINST THE ABOVE SUSTAINED ADDITION, THE ASSESSEE HAS FILED THIS SECOND APPEAL. 4 2.4 WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. THE LD. A.R. HAS REITERATED ALMOST T HE REASONS AGAINST ADDITION WHICH ARE EXTRACTED IN THE FORMER PART OF THIS ORDER. THE REITERATED THE REASONS GIVEN BY LD. CIT(A)FOR SUSTA INING THE IMPUGNED ADDITION. 2.5 REGARDING ADDITION OF RS. 22,44,277/- (SUSTAINE D BY THE LD. CIT(A)) IT HAS BEEN ARGUED THAT AS PER SETTLED PRIN CIPLE OF LAW NO STATEMENT CAN BE RECORDED U/S 133A AND IF SUCH A ST ATEMENT IS RECORDED NO FORCED SURRENDER CAN BE OBTAINED. ABOVE ALL IT WAS ARGUED THAT ONLY ON THE BASIS OF SUCH A STATEMENT, WHICH D OES NOT HAVE ANY EVIDENTIARY VALUE, NO ADDITION CAN BE MADE. THE ABO VE SUBMISSIONS HAVE BEEN REFUTED BY LD. D.R. TOOTH AND NAIL. 2.6 AFTER CONSIDERING RIVAL SUBMISSIONS WE HAVE FOU ND THAT THIS ADDITION IS BASED SOLELY ON THE STATEMENT OF THE AS SESSEE RECORDED U/S 133A OF THE ACT. THERE IS A CIRCULAR OF CBDT NO. 28 6/2/2003, AND DATED 11/03/2003, WHICH RESTRAIN THE SURVEY TEAM FROM TAK ING FORCIBLE SURRENDER. THE MERE FACT THAT THE SURVEY TEAM COLLE CTED CHEQUES IN RESPECT OF ADVANCE TAX PAYABLE ON SUCH SURRENDER, I S SELF EVIDENCE OF POSSIBLE PRESSURE WHICH MAY HAVE BEEN EXERTED ON TH E ASSESSEE. THE 5 COPY OF THIS CIRCULAR IS AVAILABLE IN 260 ITR PAGE 29 (PARA I, STATUTES SECTION. THE ASSESSEE HAS FILED DETAILED WORKING OF STOCK AVAILABLE ON THE DATE OF SURVEY, THE COPIES OF WHICH ARE AGAIN E NCLOSED IN ARS PAPER BOOK ON PAGE 28 TO 36. THE A.O. HAS MADE A AD DITION OF RS. 25,68,277/- SOLELY ON THE BASIS OF THE STATEMENT RE CORDED AT THE TIME OF THE SURVEY. THIS ADDITION HAS BEEN REDUCED BY A SUM OF RS. 3,24,000/- BY CORRECTING MISTAKES POINTED OUT IN TH E INVENTORY, AND HAS BEEN SUSTAINED AT RS. 22,46,217/-. THERE ARE A RAFT OF DECISION TO THE EFFECT THAT SOLELY ON THE BASIS OF ADMISSION OBTAIN ED IN THE STATEMENT RECORDED U/S 133A NO ADDITION CAN BE MADE. ONE SUCH DECISION IS THAT OF HONBLE KERALA HIGH COURT IN THE CASE OF PAUL MA THEWS & SONS VS CIT 263 ITR 101 (KERALA). WE HAVE ALSO FOUND THE FOLLOW ING REASON GIVEN IN THE WRITTEN SUBMISSION (PAGE 64 PARA 4) AS VALID TO DISCARD THE INVENTORY. THESE REASONS ARE :- A. NO ACTUAL WEIGHMENT OF RAW MATERIAL AND RAW OIL IN TANK WAS TAKEN. IT WAS TAKEN PURELY ON ESTIMATE BAS IS WHICH MAKES THE INVENTORY UNRELIABLE. B. THAT STOCK OUGHT TO BE AS PER BOOKS WAS WORKED BY APPLICATION OF G.P. RATE OF PRECEDING YEAR. C. THAT STOCK OF OIL IN PROCESS IN TANKS WERE VAL UED ON SELLING RATE WHICH OUGHT TO BE VALUED AS PER COST O F RAW OIL 6 AND THE PROCESS COST. D. THE STOCK LYING IN ADJUTANT PREMISES BELONGING TO THE SON OF ASSESSEE NAMELY LOW I B [P.B. PAGE 45 S.NO. 2]. THE ASSESSEE NEVER DEALS IN SUCH ITEMS. THE ASSESSEE PR ODUCED THE PURCHASE VOUCHERS BY SON AND SHOWN THAT PAYMENT WAS MADE BY ASSESSEE'S SON BY A/C PAYEE CHEQUE. E. THAT WEIGHT OF OIL IN TANK WAS TAKEN MORE THAN ITS CAPACITY AND LOST SIGHT TO THE FACT OF ACCUMULATED GAD WHICH EVEN REDUCES THE QUANTITY OF OIL IN THE TANK. F. THE ASSESSEE FILED DETAILED WORKING OF STOCK B UT THE SAME WAS REJECTED WITHOUT POINTING OUT ANY ERROR SIMPLY ON THE PRESUMPTION OF AFTERTHOUGHT. FURTHER, THE A.O. HAS ALSO ACCEPTED THE OPENING STO CK, PURCHASES, SALES AND CLOSING STOCK SHOWN BY THE ASSESSEE. THE BOOKS OF THE ASSESSEE ARE AUDITED. THE A.O. HAS REJECTED THE BOOKS OF ACCOUNT S. IN THIS REGARD THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT R ENDERED IN THE CASE OF CIT VS. MEHTA GUWAR GUM & COMPANY REPORTED IN 12 DTR 219 (COPY ENCLOSED) IS RELEVANT. AS PER THIS DECISION WHEN BO OKS ARE REJECTED NO ADDITION FOR EXCESS STOCK IS WARRANTED. FURTHER THE STOCK OF VINOLA IN BAGS AND CRUDE OIL IN TANKS WERE TAKEN WITHOUT ANY WEIGHMENT OR MEASUREMENT. IT IS NOT DENIED THAT SUCH A STOCK CON STITUTED MORE THAN 7 80% OF THE TOTAL STOCK AS PER THE INVENTORY. IN SUC H A CASE NO ADDITION CAN BE MADE. THIS BENCH HAS TAKEN SIMILAR VIEW WHIL E DECIDING THE CASES OF LATE KHOOB CHAND VS ITO IN ITA NO. 236/JOD H/2007 DATED 30/09/2010 (JODH) AND THAT OF JAKIR HUSSAIN VS DCIT IN ITA NO. 489/JODH/2003 DATED 31/07/2013. DUE TO THE ABOVE RE ASONS WE CANNOT SUSTAIN THIS ADDITION AND DELETE RS. 22,46,277/- SO SUSTAINED IN THE ACCOUNT OF EXCESS STOCK. 3. THE NEXT GROUND IS REGARDING DISALLOWANCE OF RS. 30,000/- OUT OF CLAIM OF INTEREST PAID TO THE CREDITORS. AFTER CONS IDERING THE FACTS OF THIS ISSUE WE HAVE TO DELETE THE SAME. IN FACT A SU M OF RS 2.5 LACS WAS PAID TO S.P. JAIN MANAGEMENT INSTITUTE, MUMBAI, FOR THE ADMISSION OF HIS SON IN MBA. LATER THIS AMOUNT WAS REFERRED TO T HE ASSESSEE WHO DEBITED THE SAME IN HIS BOOKS IN THE NAME OF S.P. J AIN MANAGEMENT INSTITUTE INSTEAD OF DEBITING HIS CAPITAL ACCOUNT. SO THE AUTHORITIES GUESSED THAT THIS AMOUNT HAS BEEN AVAILED OF WITHOU T PAYING INTEREST AND THEREFORE, AN ADDITION OF RS. 30,000/- AS NOTIO NAL INTEREST WAS MADE. AFTER HEARING BOTH SIDES IN THE LIGHT OF THE FACTS AND EVIDENCE PERTAINING TO THIS ISSUE IT IS UNDISPUTEDLY FOUND T HAT THERE WAS A OPENING CAPITAL OF RS. 55,97,139/-AND CLOSING CAPIT AL WAS OF RS. 75,52,870/- (APB 22) ON WHICH NO INTEREST HAS BEE N CLAIMED. IN THESE 8 CIRCUMSTANCES, THE CHARGING OF NOTIONAL INTEREST IS NOT JUSTIFIED. THE A.O. HAS NOT EVEN BEEN ABLE TO ESTABLISH NEXUS BETW EEN THE TWO. ACCORDINGLY, WE DELETE THIS ADDITION OF RS. 30,000/ - AND ALLOWED GROUND NO. (2) OF THIS APPEAL. 4 GROUND NO. (3) IS REGARDING CHARGING OF INTEREST U/S 234B AND 234C. THE CHARGING OF INTEREST UNDER THE ACT, IS MA NDATORY BUT THE ASSESSEE IS ENTITLED TO CONSEQUENTIAL RELIEF. THIS GROUND CANNOT BE ALLOWED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST, 2013. SD/- SD/- [N.K. SAINI] [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 29 TH AUGUST, 2013. VL/ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT BY ORDER 3. THE CIT 4. THE CIT(A) 5. THE DR