Chandrakant S. Lodha (HUF), Nashik V. Assistant Commissioner of Income-tax,

ITA 20/PUN/2015

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The case involves Shri Chandrakant S. Lodha (HUF) appealing against the order of the CIT(A)-I, Nashik, which confirmed the additions made by the Assessing Officer (AO) during a block assessment period from April 1, 1990, to December 22, 2000. The primary issues revolved around the additions made for unaccounted stock and undisclosed profits, as well as the improper application of a surcharge. The Tribunal examined the legal arguments and evidence presented, including the application of Section 292C of the Income Tax Act, which presumes correctness of assets found during a search, and the retrospective application of the surcharge provision.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 137027 (ITAT-PUNE)
• Duration Of Justice: 14 year(s) 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowedPartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 06-12-2022
• Assessment Year: misc
• Appeal Filed On: 05-07-2008
• Other Referred Cases: CIT vs. S. Ajeet Kumar [2018] 93 taxmann.com 294 [SC], CIT vs. K. Raheja Hotels and Estate (P.) Ltd., [2014] 51 taxmann.com 258 (SC), CIT vs. Veerdeep Rollers (P) Ltd. [2010] 323 ITR 341 (Guj.)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Opportunity of being heard; Principle of natural justice; Retrospective amendment; Retraction
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH “A” : PUNE BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND DR. DIPAK P. RIPOTE, ACCOUNTANT MEMBER ITA.No.20/PUN./2015 Block Period 01.04.1990 to 22.12.2000 Shri Chandrakant S. Lodha (HUF), F.No.3 & $, Chitrakut, Peth Road, Panchavati, Nashik-422003 PAN ASSHL3927P vs., The ACIT, Circle – 3 (1), Nashik. (Appellant) (Respondent) For Assessee : Shri Pramod S. Shingte For Revenue : Shri Ramnath P. Murkunde Date of Hearing : 07.12.2022 Date of Pronouncement : 23.12.2022 ORDER PER SATBEER SINGH GODARA, J.M. This assessee’s appeal for block period 01.04.1990 to 22.12.2000, arises against the CIT(A)-I, Nashik’s order dated 29.10.2014, passed in case No. Nsk/CIT(A)-I/414/2013-14, involving proceedings under Section 143(3) r.w.s.158BC(c) r.w.s.254 of the Income Tax Act, 1961 (in short “the Act”). 2. Heard both the parties. Case file perused. 3. The assessee raises the following substantive grounds in the instant appeal : 1. “On the basis of facts and in the circumstances of the case and as per law, the order passed by the AO and confirmed by the CIT(A) please be quashed as the directions given by the Hon'ble 2 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. ITAT, Pune in the order dated 16/06/2011 are not followed by the AO while making the assessment. 2. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.80,03,975/- on account of unaccounted stock of M / s. Akshay Traders in the hands of the appellant. 3. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.80,03,975/- on account of unaccounted stock of M/s. Akshay Traders in the hands of the appellant, particularly when the addition is not made on the basis of any evidence found or seized during the course of search action. 4. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.46,64,553/- on account of excess stock. 5. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.46,64,553/- on account of excess stock, particularly when the said addition is not made on the basis of any evidence found or seized during the course of search action. 6. On the basis of facts and in the circumstances of the case whether the space of the godowns namely Pantle Chambers & 3 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. Shiv chhaya Appts was sufficient to accommodate the stock worth of Rs.1,04,65,375/-, particularly when the approved valuer has categorically certified that the space of the said godown i.e. 17,612.5 cubic feet is insufficient to accommodate the stock requiring storage space of 46,360.35 cubic feet. 7. On the basis of facts and in the circumstances of the case; the CIT(A)is not justified in confirming the addition of Rs.2,82,323/- & Rs.7,58,692/- on account of undisclosed profit. 8. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.2,82,323/- & Rs.7,58,692/- on account of undisclosed profit, particularly when the said addition is not made on the basis of any evidence found or seized during the course of search action. 9. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.7,63,309/- on account of undisclosed profit due to difference in profit and loss account submitted to bank as per returns of the income filed for the year 1997-98, 1998-99, 1999-00 & 2000-01. 10. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in confirming the addition of Rs.7,63,309/- on account of undisclosed profit due to difference in profit and loss account submitted to bank as per returns of the income filed for the year 1997-98, 1998-99, 1999-00 & 2000-01, 4 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. particularly when the said addition is not made on the basis of any evidence found or seized during the course of search action. 11. On the basis of facts and in the circumstances of the case, the levy of surcharge at 17% amounting to Rs.14,76,230/- please be deleted. 12. On the basis of facts and in the circumstances of the case, the CIT(A) is not justified in deciding the appeal without giving proper opportunity of being heard to the appellant. 13. On the basis of facts and in the circumstances of the case, the assessment order passed by the AO as well as confirmed by CIT(A) please be quashed as the principles of natural justice are violated by the AO as well as CIT(A). 14. The appellant craves for the addition to, deletion, alteration, modification of the above grounds of appeal.” 4. Learned counsel states that the assessee's 1 st , 12 th to 14 th substantive grounds are general/consequential in nature. Rejected accordingly. 5. Learned counsel next submits that both the lower authorities have erred in law and on facts in not completing the impugned block assessment solely on the basis of the alleged incriminating material found during the course of search. We are afraid that the assessee's instant legal argument hardly deserves 5 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. any acceptance once the hon'ble apex court’s recent landmark decision in CIT vs., S. Ajeet Kumar [2018] 93 taxmann.com 294 [SC] has settled the law that the Assessing Officer could very well frame the block assessment not only on the basis of the seized material but also in view of any other document(s)/evidence(s) found during post-search enquiries. The assessee's instant legal argument stands declined accordingly. 6. We next prepone assessee’s 11 th legal ground that both the lower authorities have erred in law and on facts in levying 17% surcharge u/s.113 Proviso of the Act. We find merit in the assessee's stand once it has come on record that the learned lower authorities levy the impugned surcharge under the foregoing statutory proviso inserted by the Finance Act, 2002 w.e.f.01.06.2002 whereas the department had carried out the search in assessee's case on 22.12.2000 only. Hon'ble apex court in CIT vs., K. Raheja Hotels and Estate (P.) Ltd., [2014] 51 taxmann.com 258 (SC) has already settled the law that the foregoing proviso does not carry retrospective effect since causing hardships to the taxpayers. We thus accept the assessee's instant 11 th substantive ground in very terms. 7. This leaves us with the assessee's 2 nd to 10 th substantive grounds, inter alia, raising various issues of unaccounted stock addition found with M/s. Akshay Traders of Rs.80,03,975/-; excess stock of Rs.46,64,553/- as per the inventory drawn during 6 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. the course of search, addition(s) of undisclosed profits of Rs.2,82,323/- and Rs.7,58,692/-, pertaining to M/s. Akshay Traders and addition of Rs.7,63,309/- on account of it’s own difference in stock qua bank documents vis-à-vis actual books, respectively. 8. We deal with this first and foremost issue of addition(s) pertaining to M/s. Akshay Traders so far as its alleged unaccounted stock of Rs.80,03,975/- as well as undisclosed profits of Rs.2,82,323/- and Rs.7,58,692/- hereinabove. A perusal of the assessee's detailed paper book reveals at page-1 that this first addition is based on the Assessing Officer’s post-search enquiries from M/s. Godavari Urban Co-operative Bank Ltd., that M/s. Akshay Traders had availed loans against hypothecation of shop nos.11 and 12 at Vidhi Bank, Nashik, fixed deposit receipts of Rs.5 lakhs and book stock of the assessee only. 8.1. There is no dispute between the parties that Smt. Kanchan Lodha [assessee's eponymous kartha’s wife] had floated M/s. Akshay Traders, who in turn, availed loan in issue. The assessee's sworn search statement had also admitted these very facts. Learned counsel, inter alia, raises vehement contentions that the stock in issue belongs to the taxpayer herein only. And that there would be no dispute about the impugned addition being made qua already declared stock. 7 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. 8.2. The assessee further continued it’s arguments regarding the 7 th and 8 th substantive grounds that once M/s. Akshay Traders has been found to be a fictitious entity only neither having own stock nor profits derived therefrom, it’s P & L A/c found and seized as an incriminating material during the course of search would hardly lead to any addition. 8.3. All these assessee's arguments fail to evoke our concurrence. This is for the precise reason that not only it has not been able to file its corresponding physical stock statement either on the day of availing loan in the month of June, 2000 nor it could reconcile the corresponding figure(s) till date right from the first round of assessment framed on 30.12.2002, CIT(A)’s order dated 23.12.2013, this tribunal’s remand order dated 16.06.2011, the Assessing Officer’s yet another consequential assessment dated 28.03.2013 as well as lower appellate order forming subject matter of instant appeal. We further deem it appropriate to observe that the Assessing Officer had also submitted his remand report(s) before CIT(A)’s in both rounds of the lower appellate proceedings. Faced with the situation, we express our disagreement with the learned counsel’s vehement arguments seeking to delete this first and foremost addition of excess stock of Rs.80,03,975/- in second and third substantive grounds. The same stands upheld in very terms. 8 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. 9. The outcome would be no different in assessee's 7 th and 8 th substantive grounds seeking to reverse both the lower authorities action assessing undisclosed profits of Rs.2,82,323/- and Rs.7,58,692/- in same terms as the necessary corollary. These assessee's 2 nd, 3 rd, 7 th and 8 th substantive grounds fail therefore. 10. We now advert to the assessee's 4 th to 6 th substantive grounds that both the lower authorities have erred in adding the alleged excess stock of Rs.46,64,553/- in issue. 10.1. Learned counsel could hardly dispute that this figure is very much based on the physically inventorised stock during the course of search [pages 5 to 8 at both sites] which contain panchas as well as his signatures. Mr. Shingte at this stage referred to the alleged architect’s affidavits that the said twin go-downs could not store such exaggerated stocks. He also referred to the alleged retractions by the concerned panchas as well as assessee's search statement expressing his disagreement to the Authorised Officer’s queries regarding the alleged excess stock. This is indeed followed by the assessee's last argument that the bank authorities had physically verified the assessee's stock on 27.12.2000 [pages 37 and 38] i.e., within a week of the foregoing inventory and, therefore, all these development support the taxpayer’s case that the former physical inventory had not been correctly drawn. 9 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. 10.2. All these assessee's averments hardly deserve to be accepted. We wish to make it clear that the impugned addition of excess stock is indeed based on the physically inventorised statement which duly contain panchas as well as assessee's signatures. That being the case, we quote section 292C of the Act that such assets found during the course of search indeed carry presumption of correctness which hardly stands rebutted by the above stated subsequent developments. We accordingly affirm this excess stock addition of Rs.46,64,553/- in very terms. 10.3. The fact also remains that we have already upheld the foregoing excess unaccounted stock of Rs.80,03,975/-. Faced with the situation, we deem it appropriate to conclude that the Assessing Officer needs to give credit to the impugned latter sum of Rs.46,64,553/- against the other addition of Rs.80,03,975/- by applying the necessary telescoping so as to avoid double addition. Necessary computation shall follow as per law. The assessee’s instant 4 th to 6 th substantive grounds are partly accepted to the foregoing limited extent. 11. This leaves us with assessee's 9 th and 10 th substantive grounds wherein both the learned lower authorities have added an amount of Rs.7,63,309/- on account of the alleged difference between the stock statement submitted to the bank(s) for availing credit facilities vis-à-vis stock figures duly audited books of accounts. 10 ITA.No.20/PUN/2015 Shri Chandrakant S. Lodha (HUF), Nashik. 12. The Revenue could hardly dispute that the assessee's loan application(s) submitted in this regard to the bank had never claimed to have physically verified the actual stock as against its duly audited books of accounts. We thus accept the assessee's instant 9 th and 10 th substantive grounds in line of CIT vs. Veerdeep Rollers (P) Ltd. [2010] 323 ITR 341 (Guj.). Ordered accordingly. 13. No other ground or argument has been pressed before us. 14. The assessee’s instant appeal is partly allowed in above terms. Order pronounced in the open Court on 23.12.2022. Sd/- Sd/- [DR. DIPAK P. RIPOTE] [SATBEER SINGH GODARA] ACCOUNTANT MEMBER JUDICIAL MEMBER Pune, Dated 23 rd December, 2022 VBP/- Copy to 1. The appellant 2. The respondent 3. The Ld. CIT(A) concerned. 4. The CIT concerned 5. D.R. ITAT, Pune “A” Bench, Pune 6. Guard File. //By Order// Assistant Registrar, ITAT, Pune Benches Pune.