ACIT, UDAIPUR V. M/s. Mumal Marbles Ltd., UDAIPUR

ITA 224/JODH/1997

• Counselvise Citation: 22423314 RSA 1997
• Duration Of Justice: 14 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2011
• Assessment Year: 1993-1994
• Appeal Filed On: 14-02-1997
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K R MEENA
• Assessee Lawyers: SURESH GANG; G K GARGIEYA
• Keywords: Search and seizure; Loose papers; Document seized; Question of law; Documents seized

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL [ JODHPUR BENCH, JODHPUR ] BEFORE SHRI RAJPAL YADAV, JM AND SHRI K. D. RAN JAN, AM I. T. APPEAL NO. 224 (JODH.) OF 1997. ASSESSMENT YEAR : 199394. ASSTT. COMMISSIONER OF INCOME-TAX, M/S. MUMAL MARBLES LTD., INVESTIGATION CIRCLE, VS. N. H., A M B E R I, U D A I P U R. U D A I P U R. PAN / GIR NO. M7/CO./ACIT. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI SURESH GANG; A. R.; & SHRI G. K. GARGIEYA, A. R.; DEPARTMENT BY : SHRI K. R. MEENA [CIT] D. R.; O R D E R. PER K. D. RANJAN, AM : THIS APPEAL FILED BY THE REVENUE FOR ASSESSMENT YEA R 1993-94 ARISES OUT OF THE ORDER OF THE LD. CIT (APPEALS), UDAIPUR. 2. THE GROUND OF APPEAL RAISED BY THE REVENUE IS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.8,60,000/- MAD E BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED DOCUMENTS. 3. IN THIS CASE THE REVENUE PREFERRED APPEAL AGAINS T THE ORDER OF THE LD. CIT (APPEALS), UDAIPUR, RAISING A GROUND THAT THE LD. CIT (APPEALS ) HAD ERRED IN DELETING THE ADDITION OF 2 I. T. APPEAL NO. 224 (JODH.) OF 1997. RS.8,60,000/- MADE BY THE ASSESSING OFFICER ON THE BASIS OF SEIZED DOCUMENTS. ITAT, JODHPUR BENCH, JODHPUR, VIDE ORDER DATED 13/02/2003 DECIDED THE MATTER IN FAVOUR OF REVENUE. THE ASSESSEE PREFERRED APPEAL BEFORE HONBLE RAJASTHAN HIGH COURT AND THE FOLLOWING QUESTION OF LAW WAS FRAMED FOR THEIR LORDSHIPS OPINION:- WHETHER IN THE FACTS AND CIRCUMSTANCES WHEN THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION ON ACCOUNT OF RS.8,60,000/- MADE BY H IM, THE FACT THAT RECEIPT OF REPAYMENT OF AMOUNT FROM THE RECIPIENTS IS NOT BELI EVED BY THE INCOME TAX AUTHORITIES, ANY DEDUCTIONS CAN BE MADE IN THE INC OME? 4. THE FACTS OF THE CASE ARE THAT THE ASSESSEE PREP ARED CASH BOOK ON THE BASIS OF DOCUMENTS SEIZED DURING THE SEARCH AND SEIZURE OPERATION. AS PER CASH BOOK SO PREPARED AMOUNT OF RS.8,60,000/- WAS SHOWN TO 12 PERSONS AS ADVANCE WH ICH THE ASSESSEE HAD CLAIMED TO HAVE ADVANCED TO CERTAIN SUPPLIERS OF MARBLE. SINCE THE AMOUNT WAS PAID IN CASH THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO PROVE THE SOURCE OF SUCH T RANSACTIONS. IT WAS STATED BY THE ASSESSEE THAT THE AMOUNTS ADVANCED HAVE BEEN RECEIVED BACK IN DUE COURSE. BY REFERRING TO THESE FACTS THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE A SSESSEE AND ADDED THE SUM OF RS.8,60,000/- BECAUSE THERE WAS NO EVIDENCE FOR RETURN OF ADVANCE S OF RS.8,60,000/- EITHER IN THE BOOKS OF ACCOUNTS OR IN THE LOOSE PAPERS / DIARIES ETC. 5. BEFORE THE LD. CIT (APPEALS) IT WAS SUBMITTED THAT THE AMOUNTS GIVEN TO 12 PERSONS WAS RECEIVED BACK, BUT IN THE SEIZED DOCUMENTS THERE WA S NO CREDIT IN THE NAME OF THE PARTIES. THE LD. CIT (A) OBSERVED THAT THERE WAS NO SUCH ENTRY OF CR EDIT IN DIARY OR LOOSE PAPERS, THEREFORE, IT COULD NOT BE ESTABLISHED THAT THE AMOUNT HAD BEEN R ECEIVED BACK. HOWEVER, IT WAS A FACT THAT ADVANCES WERE GIVEN TO THE PARTIES WHO WERE DEALING IN MARBLES. THEREFORE, THE STAND TAKEN BY THE ASSESSEE HAD SOME FORCE IF THE AMOUNTS WERE NOT RECEIVED BACK AGAINST SUCH ADVANCES, THE ASSESSEE MUST HAVE RECEIVED SUPPLIES OF THE MARBLE. IT WAS ALSO STATED THAT THE ASSESSEE HAD AN UNRECORDED SALES OF RS.10.72 LAKHS INCLUSIVE OF SAL ES TAX OF RS.1.4 LAKHS. THE ASSESSEE OFFERED RS.10,72,000/- FOR TAXATION BEING PART OF TOTAL SUR RENDER OF RS.17.42 LAKHS. WHILE PREPARING PROFIT AND LOSS ACCOUNT AND THE BALANCE SHEET, THE STATUTORY AUDITORS HAVE INCREASED THE SALES BY A 3 I. T. APPEAL NO. 224 (JODH.) OF 1997. SUM OF RS.9,32,000/-. THEREFORE, IT WAS PLEADED TH AT CREDIT OF UNRECORDED SALES COULD HAVE BEEN MADE OUT OF PURCHASES OF AMOUNTING TO RS.8,60,000/- . THE LD. CIT (APPEALS), THEREFORE, OBSERVED THAT IF CREDIT OF RS.8,60,000/- WAS ALLOWE D AGAINST THE SALES OF RS.9.32 LAKHS, IT WOULD INCREASE THE LOSS BY RS.8.60 LAKHS. THEREFORE, ADD ITION OF RS.8,60,000/- WOULD BE NEUTRALIZED TO ZERO. THE LD. CIT (A) RELYING ON THE DECISION OF I TAT, PATNA BENCH IN THE CASE OF NISHANT HOUSING DEV. PVT. LTD. VS. ACIT 52 I.T.D. 103 HELD NO ADDITION COULD BE MADE IN EITHER SITUATION WHEN THE ADVANCE WAS RECEIVED BACK OR THE RAW MATERIAL WAS RECEIVED AGAINST THE ADVANCES. LD CIT(A) DELETED THE ADDITION. 6. ON FURTHER APPEAL, ITAT REVERSED THE DECISION OF CIT (APPEALS) AND RESTORED THE ORDER OF THE ASSESSING OFFICER. ON FURTHER APPEAL HONBL E RAJASTHAN HIGH COURT WHILE SETTING ASIDE THE MATTER TO THE ITAT, HAS OBSERVED AS UNDER :- THE TRIBUNALS ORDER IS SOMEWHAT OBSCURE AS TO CONTROVERSY IT WAS DEALING. REFERENCE FOR EXPENSES IN THE LIGHT OF SECTION 69-C WAS WHOLLY OUT OF PLACE. THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF EXPENSES INCURRED. HENCE REFERENCE TO UNEXPLAINED EXPENSES APPEARS TO BE BEYOND THE ISSUE IN CONTENTI ON BEFORE THE TRIBUNAL. REFERENCE TO SECTION 69-C WITH REFERENCE TO UNEXPLAINED EXPNENSE S ALSO DOES NOT GIVE A CLUE AS TO WHAT TRIBUNAL WAS ADDRESSING ITSELF. SECTION 69-C HAD NOTHING TO DO ABOUT EXPENSES. IT REFERS TO INVESTMENT FOUND OUT OF BOOKS. HOWEVER, AT ONE POINT IT WAS OBSERVED BY THE TRIBUNAL WHILE CONSIDERING THE FOURTH SUBMISSION BY THE AUTHORITIES REPRESENTATIVE OF ASSESSEE THAT INCREASE OF THE SALES BY A SUM OF RS. 9,32,000/- CANNOT LEAD US TO THE CONCLUSION THAT ADVANCE MADE TO 12 PERSONS ON DIFFE RENT DATES CAME OUT OF THESE SALES. HOWEVER, ASSESSEE HAD NOT BEEN ASKED BY THE TWO AUT HORITIES BELOW ABOUT SOURCE OF RS.8,60,000/- STATED TO HAVE BEEN ADVANCED TO TH E SUPPLIER OF MARBLES, BUT THEIR ENQUIRY WAS CONFINED WHETHER IN FACT THE TRANSACTIO N WORTH RS.8,60,000/- TOOK PLACE OR DID NOT TAKE PLACE AS THE ASSESSEE HAD CLAIMED THAT THE SAID ADVANCE HAD BEEN RECEIVED BACK BY HIM HAVING NO PROFIT CAME OUT OF IT. THIS REJECTION OF FOURTH CONSIDERATION ON THE 4 I. T. APPEAL NO. 224 (JODH.) OF 1997. GROUND WHICH THE ASSESSEE WAS NEVER ASKED TO EXPLAI N HAS SERIOUSLY PREJUDICED THE CASE OF THE ASSESSEE. IN THESE CIRCUMSTANCES THE ORDER OF THE TRIBUNAL CA NNOT BE SUSTAINED AS IT SUFFERS FROM SERIOUS DEFECTS IN REACHING THE REAL CONTROVER SY ARISING OUT OF ORDER OF THE ASSESSING OFFICER AS WELL AS CIT (APPEALS) AND THE GROUNDS RE LIED OR BY THE TRIBUNAL WAS NEVER PUT TO THE ASSESSEE SO AS TO PROVIDE HIM ANY OPPORTUNI TY TO EXPLAIN. THIS IS WITHOUT PREJUDICE TO OBJECTION, IF ANY, THAT MAY BE RAISED ABOUT SUCH ENQUIRY AT SECOND APPELLATE STAGE. IN THESE CIRCUMSTANCES, WE DEEM IT JUST AND PROPER TO SET ASIDE THE ORDER OF THE TRIBUNAL AND DIRECT THE TRIBUNAL TO DECIDE THE APPE AL FILED BY THE DEPARTMENT AFRESH IN ACCORDANCE WITH LAW AFTER CLEARLY DEFINING ISSUES I T IS DECIDING AND RECORD ITS FINDING AFTER GIVING ADEQUATE OPPORTUNITY TO THE RESPECTIVE PARTIES BEFORE IT. 7. BEFORE US THE LD. SR. DR SUBMITTED THAT NO EVIDE NCE WAS THERE IN THE SEIZED DOCUMENTS TO SUGGEST THAT THE AMOUNT OF RS.8,60,000/- WAS REC EIVED BACK. THEREFORE, ASSESSING OFFICER IS JUSTIFIED IN MAKING THE ADDITION. ON THE OTHER HAN D, THE LD. AR OF THE ASSESSEE SUBMITTED THAT MEMORANDUM OF CASH BOOK WAS PREPARED ON THE BASIS O F SEIZED DOCUMENTS. THE AMOUNT OF RS.8,60,000/- WAS RECEIVED BACK FROM THEM. 8. WE HAVE HEARD BOTH THE PARTIES. THE ASSESSEE HA D FILED COPY OF LEDGER ACCOUNT PREPARED ON THE BASIS OF SEIZED DOCUMENTS WHEREIN DEBITS OF RS.8,60,000/- WAS SHOWN IN THE NAMES OF 12 PERSONS. THE ASSESSEE HAD SHOWN RECEIPT OF AMOUNT IN RESPECTIVE ACCOUNTS, BUT NO ENTRY OF HAS BEEN FOUND RECORDED IN THE SEIZED DIARIES / DOCUMEN TS WHEN THE AMOUNTS WERE RECEIVED BACK FROM ALLEGED MARBLE SUPPLIERS. THE LD. CIT (APPEALS ) HAS RECORDED A FINDING OF FACT THAT THERE WERE NO ENTRIES IN SEIZED DOCUMENTS FOR RECEIPT OF AMOUNT FROM THE 12 PERSONS. THE ASSESSING OFFICER HAS MADE ADDITION ON THE GROUND THAT AMOUNT OF RS.8,60,000/- WAS NOT MADE BY WAY OF CHEQUE. THE LD. CIT (APPEALS), HOWEVER, HAD SET OF F THE AMOUNT OF RS.8,60,000/- AGAINST THE UN- RECORDED SALES SURRENDERED BY THE ASSESSEE AT RS.9, 32,000/-. THERE IS NO DISPUTE ABOUT THE FACT THAT THE ASSESSEE HAD MADE ADVANCES TO THE SUPPLIER S OF MARBLE. THEREFORE, THE LOGICAL 5 I. T. APPEAL NO. 224 (JODH.) OF 1997. CONCLUSION IS THAT THE ASSESSEE MUST HAVE RECEIVED THE SUPPLIES OF MARBLE AGAINST THE ADVANCES MADE. THE ADVANCE GIVEN BY THE ASSESSEE FOR PURCHA SE OF MARBLE IS UNRECORDED IN REGULAR BOOKS OF ACCOUNTS. THEREFORE, THE PRESUMPTION IS THAT TH E UNRECORDED SALES OF RS.9,32,000/- SURRENDERED BY THE ASSESSEE WOULD HAVE COME FROM UN -RECORDED PURCHASES FOR RS.8,60,000/-. HENCE, NO SEPARATE ADDITION CAN BE MADE WHEN ASSESS EE HAS OFFERED THE ENTIRE UN-RECORDED SALES OF RS. 9,32,000/- AS THE AMOUNT OF RS.8,60,000/- ON ACCOUNT OF PURCHASES AFFECTING THE SALES OF RS.9,32,000/- IS ALREADY INCLUDED IN THE SALES. ACC ORDINGLY, IN OUR CONSIDERED OPINION, THE LD. CIT (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITIO N. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON : 26 TH AUGUST, 2011. SD/- SD/- [ RAJPAL YADAV ] [ K. D. RANJAN ] JUDICIAL MEMBER ACCOUNTANT MEMBER AT NEW DELHI . DATED : 26 TH AUGUST, 2011. *MEHTA * COPY OF THE ORDER FORWARDED TO : - 1. APPELLANT. 2. RESPONDENT. 3. CIT, 4. CIT (APPEALS), 5. DR, ITAT, NEW DELHI. TRUE COPY. BY ORDER. ASSISTANT REGISTRAR, ITAT.