ACIT, CC-XXIII, Kolkata, Kolkata V. M/s. Rangoli Creation (P) Ltd., Kolkata

ITA 2213/KOL/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83075 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 04-08-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 16-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AJOY KUMAR SINGH
• Assessee Lawyers: J M THARD PER
• Keywords: Document seized; Block assessment; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA [BEFORE SHRI MAHAVIR SINGH, J.M. & SHRI SHAMIM YAHY A, A.M. ] I.T.A. NO.2213/KOL/2010 & IT(SS) A.NO.25/KOL/2010 ASSESSMENT YEAR : 2003-04 & BLOCK PERIOD 01.04.1996 TO 28.10.2002 ACIT, C.C.-XXIII, KOLKATA .. ( APPELLANT) -V S- M/S. RANGOLI CREATION (P) LTD., KOLKAT A .. ( RESPONDENT ) PAN: AABCR 4928C DATE OF CONCLUDING THE HEARING : 04.08.2014 DATE OF PRONOUNCING THE ORDER : 29.08.2014 APPEARANCES : FOR THE APPELLANT : SHRI AJOY KUMAR SINGH, CIT : FOR THE RESPONDENT : SHRI J.M.THARD, ADVOC ATE O R D E R PER SHRI SHAMIM YAHYA, A.M. THESE APPEALS FILED BY THE REVENUE ARE DIRECTED AG AINST RESPECTIVE ORDERS OF THE CIT, CENTRAL(A)-III DATED 24 TH SEPTEMBER, 2010 AND PERTAIN TO THE ASSESSMENT YEAR 2003-04 AND BLOCK PERIOD 01.04.1996 TO 28.10.2 002. SINCE BOTH THE APPEALS RELATE TO THE SAME ASSESSEE, THEREFORE, THESE APPEA LS ARE DISPOSED OF BY THIS COMMON ORDER. I.T.A. NO.2213/KOL/2010 2. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE IN T HIS APPEAL READ AS UNDER: (1) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION O F RS.23,40,110/- ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 2 MADE ON PROTECTIVE BASIS ON ACCOUNT OF EXCESS STOCK FOUND DURING SEARCH AS COMPUTED ON THE BASIS OF PHYSICAL VERIFIC ATION AND THE SEIZED DOCUMENTS, PARTICULARLY WHEN HE HAS DELETED THE SIMILAR ADDITION MADE ON SUBSTANTIVE BASIS IN THE BLOCK PRO CEEDING BY HOLDING THAT NO SUCH ADDITIONS CAN BE MADE IN THE BLOCK ASS ESSMENT PROCEEDING. (2) THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT VALUATION OF STOCK MADE DURING THE SEARCH WAS NOT DEPENDABLE WITHOUT APPREC IATING THAT THE OBJECTIONS RAISED BY THE ASSESSEE IN RESPECT OF EXC ESS STOCK WERE ALREADY CONSIDERED IN THE BLOCK ASSESSMENT ORDER U/ S 158BC/143(3) DATED 10.11.04 AND THE ASSESSEE HAD ADMITTED AND DE CLARED UNDISCLOSED INCOME ON ACCOUNT OF EXCESS STOCK. 3. IN THIS CASE, A SEARCH WAS CONDUCTED AT THE BUS INESS PREMISES OF THE ASSESSEE ON 28.10.2002. ON THE DATE OF SEARCH, INVENTORY OF SAREES WAS TAKEN, WHICH WAS VALUED AT RS.2,18,44,642/-. IT WAS NOTED BY THE AO THAT AT THE TIME OF SEARCH, IT WAS FOUND THAT THE ASSESSEE DID NOT MAINTAIN ANY STOCK REGISTER. AFTER MAKING ENQUIRIES IN THIS REGARD WITH THE ASSESSEE, THE AO WAS OF THE OPINION THAT CORRECT VALUE OF THE STOCK AS ON THE DATE OF SEARCH WAS AT RS.2,13,92,01 1/-. IN ABSENCE OF STOCK DETAILS, THE AO PROCEEDED TO COMPUTE THE BOOK VALUE OF THE S TOCK. THE AO ARRIVED AT A FIGURE OF CLOSING STOCK OF RS.1,90,51,895/-. THIS C LOSING STOCK WAS ARRIVED AT AFTER ADJUSTING OPENING STOCK FROM SALES AND PURCHASES. T HE DIFFERENCE ACCORDINGLY CAME TO RS.23,40,116/-. THE ASSESSEE IN THIS REGARD SUBMITTED THAT THE VALUATION OF THE STOCK BY THE AO WAS NOT CORRECT, SINCE THE PROF IT PERCENTAGE IN ASSESSEES COMPANY DURING THE YEAR DOES NOT REMAIN CONSTANT AN D IN THE FIRST EIGHT MONTHS OF A FINANCIAL YEAR, WHICH CONTAINS THE FESTIVE SEASON , PROFIT PERCENTAGE IS GENERALLY HIGHER AS COMPARED TO THE LAST FOUR MONTHS OF A FIN ANCIAL YEAR. HOWEVER, AO WAS NOT SATISFIED. HE HELD THAT THE ASSESSEES EXPLANAT ION IS NOT ACCEPTABLE. THAT NOTHING WAS ARGUED AT THE TIME OF SEARCH AND POST S EARCH PROCEEDINGS REGARDING THE DIFFERENCE. THAT SINCE THE ASSESSEE DID NOT MAINTAI N ANY STOCK BOOK, THE STOCK ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 3 COMPUTED BY THE AO WAS CORRECT. ACCORDINGLY, HE ADD ED THE SUM OF RS.23,40,116/. 4. AGAINST THE ABOVE ORDER, THE ASSESSEE APPEALED B EFORE THE LD. CIT(A). THE ASSESSEE MADE ELABORATE SUBMISSIONS BEFORE THE CIT( A). THE LD. CIT(A) OBTAINED REMAND REPORT FROM THE A.O. CONSIDERING THE ABOVE, THE LD. CIT(A) HELD AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT, REMAND REPORT OF THE A.O. AND THE FACTS & MATERIAL AVAILABLE ON RECORD. FROM THE OBSERVATIONS OF THE A.O. IT IS CLE ARLY APPARENT THAT AFTER VERIFICATION OF THE BILLS HE WAS SATISFIED TH AT THE CONTENTION OF THE APPELLANT WAS CORRECT. HIS OBSERVATION THAT THE BILLS INDEED REFLECT THE SAME NARRATION OF PARTICULAR VARIETY OF SAREES WHICH WERE INVENTORIZED AT THE TIME OF SEARCH AND THE SAME WER E INDEED SOLD AT MUCH LOWER RATE THAN THE VALUE ADOPTED AT THE TIME OF SEARCH GOES A LONG WAY IN VINDICATING THE CONTENTIONS OF THE APPE LLANT. HOWEVER, IN THE PENULTIMATE PARAGRAPH OF THE REMAND REPORT HE H AS TRIED TO WATER DOWN THE ISSUE BY SAYING THAT IT IS PRACTICALLY IMP OSSIBLE TO VERIFY THE GENUINENESS OF THE BILLS BECAUSE ALMOST EIGHT YEARS HAVE ELAPSED. SUCH KIND OF VEILED SUSPICION AND EQUIVOCATION HAVE NO EVIDENTIARY VALUE. 7.1 IN VIEW OF THE FACTS NARRATED IN THE PRECEDIN G PARAGRAPHS OF THE ORDER I AM INCLINED TO AGREE WITH THE APPELLANT THA T THE VALUATION OF THE STOCK ON THE DATE OF SEARCH (28.10.2002) AT RS. 2,13,92,011/- WAS NOT DEPENDABLE AND COULD NOT BE MADE THE BASIS FOR MAKING ANY ADDITION. IN HIS REMAND REPORT THE A.O. HAS VERIFIE D THAT OUT OF THE STOCK VALUED AT RS.2,13,92,011/- AS ON 28.10.2002, THE STOCK VALUED AT RS.48.43 LAKHS WAS SOLD BEFORE CLOSE OF THE YEAR ITSELF FOR RS.34.37 LAKHS AND THAT ALONE SHOWED THAT THERE WAS OVER VALUATION TO THE EXTENT OF RS.14.06 LAKHS, ONLY IN PART OF TH E STOCK. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTANCES AND THE FACT THAT THE APPELLANT HAD SHOWN G.P.@5.2% IN THIS YEAR ALSO WHI CH COMMENSURATE WITH THE G.P. SHOWN IN THE PRECEDING T HREE YEARS, THE A.O. WAS NOT JUSTIFIED IN MAKING THE ADDITION ON AC COUNT OF DISCREPANCY IN STOCK. THE ADDITION OF RS.23,40,116/ - IS HEREBY DELETED. 5. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPEA L BEFORE US. ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 4 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE ASSESSEE HAS NOT SUBMITTED THE COMPLETE DETAILS OF THE RE-CONCILIATION OF STOCK AS FOUND ON THE DAY OF SEARCH AND AS EMANATING FROM TH E ASSESSEES RECORDS. THE AO IN THE REMAND REPORT HAS NOT ACCEPTED THE VERACITY OF ASSESSEES SUBMISSION. IT IS ALSO NOT THE CASE THAT THE LD. CIT(A) HAS EXAMINED THE SUBMISSIONS OF THE ASSESSEE AND FOUND THE VERACITY OF THE SAME ACCEPTABLE. THE LD. COUNSEL OF THE ASSESSEE BEFORE US ALSO DID NOT PRODUCE COMPLETE RE-CONCILIA TION. HE ONLY SUBMITTED BY MEANS OF SEVERAL EXAMPLES THAT ASSESSEES RECONCILI ATION WAS CORRECT. HOWEVER, HE COULD NOT PRODUCE THE COMPLETE RECONCILIATION. IN T HESE CIRCUMSTANCES, IN OUR CONSIDERED OPINION, INTEREST OF JUSTICE WILL BE SER VED IF THE MATTER IS REMITTED BEFORE THE AO. THE ASSESSEE IS DIRECTED TO FURNISH THE COM PLETE DETAILS AND RECONCILIATION BEFORE HIM. AFTER EXAMINING THE NECESSARY RECONCILI ATION IN THIS REGARD, THE AO SHALL DECIDE, AS PER LAW. AS A RESULT, THIS APPEAL FILED BY THE REVENUE STANDS ALLOWED FOR STATISTICAL PURPOSES. IT(SS) A.NO.25/KOL/2010 7. THE EFFECTIVE GROUNDS RAISED BY THE REVENUE IN T HIS APPEAL READ AS UNDER: (1) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.23, 40,110/- MADE ON A/C OF EXCESS STOCK FOUND DURING SEARCH AS COMPUTED ON THE BASIS OF PHYSICAL VERIFICATION AND THE SEIZED DOCUMENTS, WIT HOUT APPRECIATING THE DETAILED REASONS GIVEN BY THE A.O. IN THE ASSES SMENT ORDER. (2) IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN HOLDING THAT NO MATERIAL WAS FO UND DURING THE SEARCH AND THAT NO ADDITION CAN BE MADE IN THE BLOC K ASSESSMENT PROCEEDING ON THE BASIS OF REGULAR BOOKS OF ACCOUNT S WITHOUT APPRECIATING THE FACT THAT REGULAR BOOKS OF ACCOUNT S WAS UTILIZED TO QUANTIFY THE EXCESS STOCK FOUND DURING THE SEARCH. ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 5 8. IN THE BLOCK ASSESSMENT, THE ADDITION WAS MADE B Y THE AO IN THE HANDS OF THE ASSESSEE ON SUBSTANTIVE BASIS AND THE SAME ADDI TION WAS MADE ON PROTECTIVE BASIS IN REGULAR ASSESSMENT. 9. AGAINST THE ABOVE ORDER OF THE AO, THE ASSESSEE WENT IN APPEAL BEFORE THE LD. CIT(A). IN THE BLOCK ASSESSMENT, THE LD. CIT(A) DEL ETED THE ADDITION HOLDING AS UNDER: 5. I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF TH E APPELLANT, REMAND REPORT OF THE A.O., THE ORIGINAL ORDER OF TH E LD. CIT(A) AND FACTS AVAILABLE ON RECORD. SINCE NO NEW FACTS HAVE EMERGED, I AM NOT INCLINED TO DEVIATE FROM THE DECISIONS OF MY LEARNE D PREDECESSOR WHICH HAVE BEEN ARRIVED AT AFTER A THOROUGH EXAMINA TION OF FACTS AND APPLICATION OF A PLETHORA OF JUDICIAL PRONOUNCEMENT S. THE OPERATIVE PARTS OF THE ORDER DATED 02.03.2005 AS GIVEN IN THE LAST PARA OF PAGE 7 AND THE LAST TWO PARAS OF PAGE 28 ARE REPRODUCED BE LOW: PAGE 7 : ' IT IS APPARENT FROM THE ASSESSMENT ORDER THAT AO WAS SATISFIED THAT TRANSACTIONS RELATED TO INCOME FOR WHICH PREVIOUS Y EAR HAD NOT EXPIRED AND THESE WERE RECORDED ON OR BEFORE THE DA TE OF SEARCH IN THE REGULAR BOOKS OF ACCOUNT AND THOUGH THERE WERE SOME PURCHASES AND SALES BILLS WHICH WERE NOT ENTERED IN THE REGULAR B OOKS OF ACCOUNT THEY WERE MAINTAINING IN THE NORMAL COURSE OF BUSINESS R ELATING TO THE PREVIOUS YEAR WHICH HAD NOT ENDED AS THE BROKEN PER IOD WAS 01.04.2002 TO 28.04.2002. THUS, THE IMPUGNED PURCHA SE AND SALE TRANSACTION SHOULD HAVE BEEN KEPT OUTSIDE THE PURVI EW OF UNDISCLOSED INCOME IN ASSESSMENT OF UNDISCLOSED INCOME FOUND AS A RESULT OF SEARCH IN OTHER WORDS, THE IMPUGNED PURCHASE AND SA LE TRANSACTIONS SHOULD HAVE BEEN EXCLUDED WHILE DETERMINING THE ASS ESSEE'S UNDISCLOSED INCOME. IT IS, THEREFORE, HELD THAT ADD ITION OF RS.23,40,110/- TO THE UNDISCLOSED INCOME WAS NOT JU STIFIED.' PAGE 28 : 'NOW THE PURPOSE OF SEARCH IS NOT TO UNEARTH REGULA R BOOKS OF ACCOUNT. IF SEARCH IS REQUIRED TO UNEARTH BOOKS OF ACCOUNT, THEN SUCH ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 6 BOOKS OF ACCOUNT CANNOT BE REGULAR BOOKS OF ACCOUNT . IN CASE NO MATERIAL IS FOUND DURING SEARCH WHICH PROVES THAT B OOKS OF ACCOUNTS WERE FALSE, THEN SUCH BOOKS OF ACCOUNT CAN ONLY BE SUBJECT MATTER OF REGULAR ASSESSMENT. IN CASE OF APPELLANT, FRAMING BLOCK ASSESSMENT ON T HE BASIS OF REGULAR BOOKS OF ACCOUNT MAINTAINED BY APPELLANT WAS NOT IN ACCORDANCE WITH LAW BECAUSE NO EVIDENCE WAS FOUND TO DISPROVE APPEL LANT'S BOOKS OF ACCOUNT. IN THE RESULT APPEAL IS ALLOWED.' TO SUM UP, FOR THE REASONS STATED ABOVE I AM INCLIN ED TO FOLLOW THE DECISION OF MY LD. PREDECESSOR IN TOTO. 10. AGAINST THE ABOVE ORDER, THE REVENUE IS IN APPE AL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THE ORDER OF THE LD. CIT(A) IS TOTALLY NON-SPEAKING AND LACONIC ORDER. HIS RELIANCE UPON THE EARLIER CIT(A)S ORDER IN THIS CASE IS NOT AT A LL RELEVANT. THE SAID CIT(A)S ORDER IS NO MORE EXISTENT AND ITAT HAS ALREADY SET ASIDE THE SAME AND REMITTED THE MATTER TO THE FILE OF THE AO. FURTHERMORE, WE NOTE THAT THE ISSUE IN REGULAR ASSESSMENT AS ABOVE HAS ALSO BEEN REMITTED BY US TO THE FILE OF THE AO. ACCORDINGLY, THIS ISSUE RAISED IN THE BLOCK ASSESSM ENT ALSO STANDS SET ASIDE TO THE FILE OF THE AO. THEREFORE, THIS APPEAL OF THE REVEN UE IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 12. IN THE RESULT, THESE APPEALS FILED BY THE REVEN UE STAND ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN THE COURT ON 29 TH AUGUST, 2014. SD/- SD/- (MAHAVIR SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 29 TH AUGUST, 2014 ITA NO.2213/K/10 & IT(SS)A.NO.25/KOL/10 A.Y.2003-04 & BLOCK PERIOD 01.04 .96 TO 28.10.2002 M/S. RANGOLI CREATION (P) LTD. 7 COPY OF THE ORDER FORWARDED TO: 1. M/S. RANGOLI CREATION (P) LTD., 101, PARK STREET, KOLKATA 700 016 2 ACIT, C.C.-XXIII, KOLKATA 3. THE CIT(A), 4. CIT, 5. DR, TRUE COPY, BY ORDER, ASSTT. REGISTRAR , ITAT, KOLKATA TALUKDAR(SR.P.S.)