M/s Metallic Enterprise, RAJKOT-GUJARAT V. The Assistant Commissioner Of Income Tax, Circle 2, RAJKOT-GUJARAT

ITA 361/RJT/2009

• Counselvise Citation: 36124914 RSA 2009
• Duration Of Justice: 2 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-06-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 25-05-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 21-04-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S L MEENA
• Keywords: Unexplained investment; Business income; Depreciation; Tangible material
• Section: 143(3); 133A; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI N.R.S. GANESA N (JM) I.T.A. NO.45/RJT/2006 - AY 2002-03 I.T.A. NO.361/RJT/2009 - AY 2002-03 M/S METALLIC ENTERPRISE VS THE ACIT, CIR.2 GIDC, AJI-II, PLOT NO.330 CIRCLE-2, RAJKOT RAJKOT PAN : AADFM2184F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIMAL DESAI RESPONDENT BY: SHRI SL MEENA O R D E R PER N.R.S. GANESAN, JM ITA NO.45/RJT/2006 IS DIRECTED AGAINST THE ORDER O F THE ADMINISTRATIVE COMMISSIONER U/S 263 OF THE INCOME-TAX ACT. THE AS SESSEE HAS FILED THE APPEAL IN ITA NO.361/RJT/2009 AGAINST THE ADDITIONS MADE B Y THE ASSESSING OFFICER AND CONFIRMED BY CIT(A) CONSEQUENT TO THE ORDER OF THE ADMINISTRATIVE COMMISSIONER U/S 263. THEREFORE, WE HEARD BOTH THE APPEALS TOGE THER AND ARE DISPOSING OFF THE SAME BY THIS COMMON ORDER. ITA NO.45/RJT/2006 2. LET US FIRST TAKE THE ASSESSEES APPEAL IN ITA N O.45/RJT/2006. SHRI VIMAL DESAI, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT U/S 143(3) DET ERMINING THE TOTAL TAXABLE INCOME AT RS.13,61,050. DURING THE COURSE OF ASSES SMENT PROCEEDINGS, THE ASSESSING OFFICER CONSIDERED ALL THE ISSUES RAISED BY THE COMMISSIONER IN THE PROCEEDINGS U/S 263 AND THEREAFTER TAKEN A CONSCIOU S DECISION. REFERRING TO THE NOTICE ISSUED BY THE ASSESSING OFFICER AND THE EXPL ANATION SUBMITTED BY THE ASSESSEE THE LEARNED REPRESENTATIVE SUBMITTED THAT WITH REGARD TO THE UNEXPLAINED INVESTMENT IN FURNITURE THE VALUE OF TH E UNEXPLAINED INVESTMENT IN ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 2 FURNITURE WAS ESTIMATED BY THE PARTNER AT RS.1 LAKH AND IT WAS AGREED TO PAY TAX ON IT. ACCORDINGLY THE INVESTMENT OF RS.1 LAKH IN FURNITURE WAS SHOWN IN SCHEDULE 12, AS ALSO SALES AND OTHER INCOME AND TAX THEREON WAS PAID. THE ASSESSING OFFICER, AFTER EXAMINING THE EXPLANATION OF THE ASS ESSEE SATISFIED AND NO FURTHER ADDITION WAS MADE IN THE REGULAR ASSESSMENT. THERE FORE, THE ASSESSING OFFICER HAS TAKEN A CONSCIOUS DECISION WITH REGARD TO THE I NVESTMENT OF RS.1 LAKH AND THEREFORE, THE ADDITION MADE BY THE ADMINISTRATIVE COMMISSIONER TO THE EXTENT OF RS. 10,000 IS NOT JUSTIFIED. REFERRING TO THE EXCE SS CASH FOUND DURING THE COURSE OF SURVEY OPERATION, THE LD.REPRESENTATIVE SUBMITTE D THAT SHRI JAISUKHBHAI JASANI ADMITTED DURING THE COURSE OF SURVEY OPERATION THAT THE EXCESS CASH OF RS.3,00,940 BELONGED TO SHRI KARTIK JASANI. SHRI K ARTIK JASANI WAS ALSO EXAMINED DURING THE COURSE OF SURVEY OPERATION AND HE ADMITTED THAT THE EXCESS CASH BELONGED TO HIM. ACCORDINGLY SHRI KARTIK JASA NI FILED RETURN OF INCOME DISCLOSING THE ABOVE SAID SUM OF RS.3,00,940 AND PA ID TAXES ALSO. REGARDING THE UNDISCLOSED INVESTMENT IN EXCESS STOCK TO THE E XTENT OF RS.7,14,441 THE LD.REPRESENTATIVE SUBMITTED THAT DURING THE COURSE OF SURVEY OPERATION THE BOOK STOCK WAS FOUND AT RS.32,33,469. THE ASSESSEE EXPL AINED BEFORE THE ASSESSING OFFICER THE ERROR / OMISSION IN THE CALCULATION OF BOOK STOCK AT THE TIME OF SURVEY. THE CORRECT STOCK AS PER THE BOOK AS ON THE DATE OF SURVEY WAS RS.40,47,126 AND NOT RS.32,33,469. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THERE WAS NO EXCESS STOCK ON THE DATE OF SURVEY. THIS FACT W AS ALSO BROUGHT TO THE NOTICE OF THE ASSESSING OFFICER BY A LETTER DATED 27-03-20 02. THE ASSESSING OFFICER, AFTER EXAMINING THE EXPLANATION OF THE ASSESSEE FOUND THA T NO ADDITION IS REQUIRED TO BE MADE. SINCE THE ASSESSING OFFICER HAS EXAMINED THE ISSUE WITH REGARD TO ALL THE THREE POINTS RAISED BY THE ADMINISTRATIVE COMMI SSIONER, ACCORDING TO THE LD.REPRESENTATIVE, THE ASSESSMENT ORDER IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE EXERCISE O F JURISDICTION U/S 263 OF THE INCOME-TAX IS NOT JUSTIFIED. 3. ON THE CONTRARY, SHRI SL MEENA, THE LD.DR SUBMIT TED THAT ADMITTEDLY THERE WAS A SURVEY OPERATION U/S 133A OF THE ACT ON 28-12 -2001. THE STATEMENT WAS ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 3 ALSO RECORDED U/S 131(1) OF THE ACT. DURING THE CO URSE OF SURVEY OPERATION, SHRI JAISUKHLAL DHARJILAL JASANI, PARTNER OF THE ASSESSE E FIRM ADMITTED TO OFFER THE FOLLOWING INCOME FOR TAXATION: UNDISCLOSED INVESTMENT IN EXCESS STOCK RS. 7, 14,441 UNDISCLOSED EXPENDITURE IN FURNITURE RS. 1,10 ,000 EXCESS CASH FOUND DURING THE COURSE OF SURVEY OPERA TION RS. 3,00,940 INSPITE OF THIS ADMISSION MADE BY THE PARTNER OF TH E ASSESSEE DURING THE COURSE OF SURVEY OPERATION THE ASSESSING OFFICER HAS MADE NO ADDITION IN THE ASSESSMENT ORDER. ACCORDING TO THE LD.DR THE ASSES SING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER. THE AS SESSING OFFICER SIMPLY ACCEPTED THE RETURN FILED BY THE ASSESSEE AND COMPU TED THE TAXABLE INCOME WITHOUT EXAMINING THE FACTS AND THE MATERIAL AVAIL ABLE ON RECORD. SINCE THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER WITH REGARD TO THE UNEXPLAINED INVESTMENT IN FURNITURE, EXCESS CASH AND EXCESS STOCK IN THE ASSESSMENT ORDER, THE ORDER OF ASSESSMENT IS ERRONE OUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. THEREFORE, THE ADMINISTRA TIVE COMMISSIONER HAS RIGHTLY INVOKED HIS REVISIONAL POWER U/S 263 OF THE INCOME- TAX ACT. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE QUES TION ARISES FOR CONSIDERATION IS WHETHER THE ASSESSING OFFICER EXAMINED THE FACTS OF THE CASE AND THE MATERIAL AVAILABLE ON RECORD WITH REGARD TO THE UNEXPLAINED INVESTMENT IN FURNITURE, EXCESS CASH AND EXCESS STOCK FOUND DURING THE COURSE OF SU RVEY OPERATION. THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS CALLED FOR THE EXPLANATION AND AFTER EXAMINING THE EXPLANATION OF THE ASSESSEE ACCEPTED THE CASE OF THE ASSESSEE AND DECI DED NOT TO MAKE ANY ADDITION. THEREFORE, IT IS NOT A CASE THAT THE ASS ESSING OFFICER HAS NOT EXAMINED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAR EFULLY GONE THROUGH THE IMPUGNED ORDER OF THE ADMINISTRATIVE COMMISSIONER P ASSED U/S 263 OF THE ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 4 INCOME-TAX ACT. THE ADMINISTRATIVE COMMISSIONER FA IRLY STATES IN THE IMPUGNED ORDER THAT IN THE COURSE OF REGULAR ASSESSMENT, THE ASSESSING OFFICER HAS MADE NO ADDITION WITH REGARD TO THE UNEXPLAINED INVESTME NT, EXCESS STOCK AND EXCESS CASH FOUND DURING THE COURSE OF SURVEY OPERATION BY ACCEPTING THE EXPLANATION SUBMITTED BY THE REPRESENTATIVE OF THE ASSESSEE. T HEREFORE, THE FACT REMAINS THAT THE ASSESSING OFFICER ACCEPTED THE EXPLANATION WITHOUT DISCUSSING THE SAME IN THE ASSESSMENT ORDER. THE NEXT QUESTION WHICH F OLLOWS FOR OUR CONSIDERATION IS WHETHER THE APPLICATION OF MIND SHOULD REFLECT I N THE ASSESSMENT ORDER WITH REGARD TO THE MATERIAL FACTS AVAILABLE ON RECORD OR NOT. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE ASSESSIN G OFFICER. THE ASSESSING OFFICER SIMPLY SAYS THAT THE ASSESSEE HAS PRODUCED BOOKS OF ACCOUNT, INFORMATION, ACCOUNT COPIES, DOCUMENTS, ETC. AS REQ UIRED. HOWEVER, HE HAD NOT DISCUSSED ANYTHING IN THE ASSESSMENT ORDER WITH REG ARD TO THE UNEXPLAINED INVESTMENT IN THE FURNITURE, EXCESS STOCK AND EXCES S CASH FOUND DURING THE COURSE OF SURVEY OPERATION. THE LD.COUNSEL PLACED H IS RELIANCE ON THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF JCIT VS DEVELO PMENT CREDIT BANK LTD (2010) 323 ITR 206 (BOM). IN THE CASE BEFORE THE B OMBAY HIGH COURT, THE ASSESSEE BANK CLAIMED DEPRECIATION ON CURRENT INVES TMENT AT RS.622.39 LAKHS. THE ASSESSING OFFICER ACCEPTED THE CLAIM OF THE ASS ESSEE. THE ADMINISTRATIVE COMMISSIONER IN EXERCISE OF HIS POWERS U/S 263 FOUN D THAT THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO T HE INTEREST OF THE REVENUE. ON APPEAL BY THE ASSESSEE, THE TRIBUNAL FOUND THAT THE EXERCISE OF POWERS U/S 263 OF THE ACT WAS NOT WARRANTED. ON FURTHER APPEAL BE FORE THE HIGH COURT THE ORDER OF THE TRIBUNAL WAS UPHELD. THE HIGH COURT SPECIFI CALLY FOUND THAT THE ASSESSING OFFICER SPECIFICALLY CALLED FOR DETAILS FROM THE AS SESSEE WITH REGARD TO DEPRECIATION AND CAPITAL GAIN. AFTER EXAMINING THE DETAILS FURN ISHED BY THE ASSESSEE, THE ASSESSING OFFICER ACCEPTED THE EXPLANATION AND CAME TO THE CONCLUSION THAT THE DEPRECIATION OF RS.622.39 LAKHS HAS BEEN CLAIMED TO WARDS INVESTMENT HELD AND CLASSIFIED AS STOCK IN TRADE. IN THE ASSESSMENT OR DER, THE ASSESSING OFFICER HAD, AFTER MAKING AN ENQUIRY AND ELICIT IN RESPONSE FROM THE ASSESSEE CAME TO THE CONCLUSION THAT THE ASSESSEE WOULD ENTITLE FOR DEPR ECIATION ON THE VALUE OF THE ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 5 SECURITIES HELD ON THE TRADING ACCOUNT. IN SUCH CI RCUMSTANCES, THE HONBLE COURT HELD THAT IN THE ABSENCE OF ANY TANGIBLE MATERIAL T O THE CONTRARY, THE COMMISSIONER OF INCOME-TAX COULD NOT HAVE TREATED T HIS FINDING AS TO BE ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE RE VENUE. THEREFORE, IN THE CASE BEFORE THE BOMBAY HIGH COURT, THE ASSESSING OFFICER CALLED FOR DETAILS WITH REGARD TO THE DEPRECIATION ON INVESTMENT AND RECORDED A SP ECIFIC FINDING WITH REGARD TO THE ENTITLEMENT OF THE ASSESSEE TO CLAIM DEPRECIATI ON ON THE INVESTMENT. THEREFORE, THE HIGH COURT HELD THAT THE COMMISSIONE R COULD NOT HAVE TREATED THIS FINDING AS ERRONEOUS AND PREJUDICIAL TO THE INTERES T OF THE REVENUE. IN THE CASE BEFORE US, EVEN THOUGH THE ASSESSING OFFICER CALLED FOR DETAILS, NO FINDING WAS RECORDED IN THE ASSESSMENT ORDER. IN THE ASSESSMEN T ORDER, THE ASSESSING OFFICER SIMPLY COMPUTED THE TAXABLE INCOME WITHOUT RECORDING ANY FINDING AS TO HOW THE DISCREPANCIES FOUND DURING THE COURSE OF SU RVEY OPERATION, VIZ. THE UNEXPLAINED INVESTMENT, EXCESS STOCK AND EXCESS CAS H WAS NOT TO BE ADDED AS INCOME OF THE ASSESSEE. IN THE ABSENCE OF ANY SUCH FINDING, IN OUR OPINION, MERE CALLING FOR DETAILS FROM THE ASSESSEE WOULD NOT BE SUFFICIENT. IN OTHER WORDS, THE ASSESSMENT ORDER SHALL CONTAIN THE SPECIFIC FINDING WITH REGARD TO THE ISSUES DECIDED THEREIN. SINCE THE ASSESSING OFFICER HAS N OT RECORDED ANY SPECIFIC FINDING IN THE ASSESSMENT ORDER, IN OUR OPINION, TH E ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. IT IS NOT IN DISPUTE THAT THE ASSESSING OFFICER IS A QUASI JUDICIAL AUTHORITY EXERCISING JUDICIAL POWER UNDER THE INCOME-TAX ACT. THEREFORE, THE INCOME-TAX PROC EEDINGS ARE JUDICIAL PROCEEDINGS. THE ORDER PASSED BY THE ASSESSING OFF ICER IS SUBJECTED TO FURTHER APPEAL BEFORE THE COMMISSIONER, TRIBUNAL, HIGH COUR T AND SUPREME COURT. THE ORDER OF THE ASSESSING OFFICER IS ALSO SUBJECT TO R EVISION U/S 263 / 264 BEFORE THE COMMISSIONER. AGAINST THE ORDER PASSED BY THE COMM ISSIONER U/S 263 / 264 A FURTHER APPEAL IS PROVIDED UNDER THE ACT BEFORE THE TRIBUNAL, HIGH COURT AND SUPREME COURT. THEREFORE, THE ORDER PASSED BY THE ASSESSING OFFICER SHALL SPEAK FOR ITSELF. IN OTHER WORDS, THE ASSESSING OF FICER IS BOUND TO RECORD REASONS FOR THE CONCLUSION REACHED IN THE ASSESSMENT ORDER. IN THE ABSENCE OF ANY REASONS RECORDED IN THE ASSESSMENT ORDER, THE APPEA L / REVISIONAL JURISDICTION ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 6 PROVIDED UNDER THE INCOME-TAX ACT WOULD BE INEFFECT IVE. THE APPELLATE / REVISIONAL AUTHORITIES COULD NOT EFFECTIVELY EXERCI SE THEIR APPEAL / REVISIONAL POWER UNLESS THE REASONS ARE RECORDED IN THE ASSESSMENT O RDER. IT IS ALSO WELL SETTLED PRINCIPLES OF LAW THAT THE REASONS FOR CONCLUSION R EACHED IN THE JUDICIAL ORDER HAS TO CONTAIN IN THE ORDER ITSELF. THE REASONS FOR TA KING A DECISION CANNOT BE SUPPLEMENTED BY WAY OF FILING AFFIDAVIT OR FURTHER DOCUMENT BEFORE THE APPEAL / REVISIONAL PROCEEDINGS. WHAT WE ARE TRYING TO SAY IS THE ASSESSING OFFICER IS BOUND TO PASS A SPEAKING ORDER SO THAT THE APPEAL / REVISIONAL AUTHORITIES CAN EXERCISE THEIR APPELLATE / REVISIONAL POWER IN AN E FFECTIVE MANNER AS PROVIDED IN THE INCOME-TAX ACT. IN THIS CASE, THE ASSESSING OF FICER HAS NOT RECORDED ANY FINDINGS WITH REGARD TO THE DISCREPANCIES FOUND DUR ING THE COURSE OF SURVEY OPERATION, VIZ. UNEXPLAINED INVESTMENT IN THE FURNI TURE, EXCESS CASH, EXCESS STOCK. THEREFORE, IN OUR OPINION, TO THIS EXTENT, THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDINGLY, THE ADMINISTRATIVE COMMISSIONER HAS RIGHTLY INVOKED HIS REVISIONAL POWER U/S 263 OF THE INCOME-TAX ACT. 5. NOW COMING TO THE OTHER APPEAL OF THE ASSESSEE I N ITA NO.361/RJT/2009, THE FIRST GROUND RELATES TO ADDITION OF RS.7,14,441 ON ACCOUNT OF EXCESS STOCK. 6. SHRI VIMAL DESAI, THE LD.REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER EXAMINED THIS ISSUE ELABORATELY A ND FOUND THAT THERE WAS NO EXCESS STOCK AS ON THE DATE OF SURVEY. ACCORDINGLY , THE ASSESSING OFFICER HAS NOT MADE ANY ADDITION AT ALL. THE EXCESS STOCK TO THE EXTENT OF RS. 7,14,441 BEING THE DIFFERENCE BETWEEN PHYSICAL STOCK FOUND DURING THE COURSE OF SURVEY OPERATION AND THE STOCK AS PER THE BOOKS OF ACCOUNT , CANNOT BE TREATED AS INCOME OF THE ASSESSEE ON THE BASIS OF THE STATEMEN T RECORDED DURING THE COURSE OF SURVEY OPERATION. ACCORDING TO THE LD.REPRESENT ATIVE FOR THE ASSESSEE, THE STATEMENT RECORDED DURING THE COURSE OF SURVEY OPER ATION CANNOT BE BASIS FOR MAKING ANY ADDITION. THEREFORE, THE ADDITION MADE BY THE LOWER AUTHORITIES IS NOT SUSTAINABLE. FOR THIS PROPOSITION, THE LD.REPRESEN TATIVE FOR THE ASSESSEE RELIED ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 7 UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF DY .CIT VS M/S SAURAHTRA TIN & METAL INDUSTRIES ORDER DATED 30-01-2008 IN ITA NO.2 02/RJT 2007 FOR THE ASSESSMENT YEAR 2004-05. 7. ON THE CONTRARY, SHRI SL MEENA, THE LD.DR, SUBMI TTED THAT DURING THE COURSE OF SURVEY OPERATION PHYSICAL STOCK WAS VERIF IED BY THE REVENUE AUTHORITIES AND IT WAS FOUND THAT THE ASSESSEE WAS IN POSSESSIO N OF STOCK WORTH ABOUT RS.39,47,910. HOWEVER, AS PER THE BOOKS OF ACCOUNT , THE TOCK WAS ONLY RS.32,33,469. THEREFORE, THE DIFFERENCE OF R,.7,14 ,441 WHICH WAS NOT RECORDED IN THE BOOKS OF ACCOUNT WAS TREATED AS INCOME OF TH E ASSESSEE. ACCORDING TO THE LD.DR WHEN THE ASSESSEE WAS EXAMINED WITH REGARD TO THIS DIFFERENCE IT WAS ADMITTED BY ONE OF THE PARTNERS THAT IT WAS UNEXPLA INED INVESTMENT AND AGREED TO PAY THE TAX. THEREFORE, IT IS NOT CORRECT TO SAY T HAT THE ASSESSING OFFICER HAS MADE ADDITION ONLY ON THE BASIS OF STATEMENT ALONE. THE STATEMENT WAS SUPPORTED BY THE STOCK FOUND DURING THE COURSE OF S URVEY OPERATION. THEREFORE, ACCORDING TO THE LD.DR, CIT(A) HAS RIGHTLY CONFIRME D THE ADDITION. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE. DURING THE COURSE OF SURVEY OPERATION THE REVENUE AUTHORITIES FOUND PHYSICAL STOCK OF RS.39,47,910. HOWEVER, AS PER THE BOOKS OF ACCOUNT , THE STOCK WAS ONLY RS.32,33,469. WHEN QUESTIONED BY REVENUE AUTHORITI ES, ONE OF THE PARTNERS OF THE FIRM ADMITTED THAT THIS WAS THE INVESTMENT IN T HE STOCK AND AGREED TO PAY THE TAX. THE EXCESS STOCK FOUND DURING THE COURSE OF S URVEY OPERATION WAS NOT RECORDED IN THE BOOKS OF ACCOUNT. THEREFORE, AS RI GHTLY STATED BY THE LD.DR IT IS NOT A CASE OF ADDITION ONLY ON THE BASIS OF THE STA TEMENT RECORDED DURING THE COURSE OF SURVEY OPERATION. THE STATEMENT RECORDED BY THE ASSESSING OFFICER DURING THE COURSE OF SURVEY OPERATION WAS SUPPORTED BY THE EXCESS STOCK FOUND PHYSICALLY DURING THE COURSE OF SURVEY OPERATION. HAVING FAILED TO EXPLAIN THE EXCESS STOCK FOUND, THE PARTNER OF THE ASSESSEE FIR M ADMITTED THAT IT IS AN UNEXPLAINED INVESTMENT. IN SUCH CIRCUMSTANCES, IT MAY NOT BE RIGHT TO SAY THAT THE LOWER AUTHORITIES MADE THE ADDITION ONLY ON THE BASIS OF THE STATEMENT ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 8 RECORDED DURING THE COURSE OF SURVEY OPERATION. WE HAVE ALSO GONE THROUGH THE DECISION OF THIS TRIBUNAL IN SAURASHTRA TIN & METAL INDUSTRIES (SUPRA). IN THE CASE BEFORE THE TRIBUNAL IN THE CASE OF SAURASHTRA TIN & METAL INDUSTRIES, EXCESS OF STOCK WAS FOUND DURING THE COURSE OF SURVEY OPERATI ON AND THE ASSESSEE AGREED TO PAY TAX ON THE DIFFERENCE OF STOCK PHYSICALLY FO UND AND THE STOCK AS PER THE BOOKS OF ACCOUNT. ACCORDINGLY THE INCOME WAS COMPU TED AFTER RECORDING THE DIFFERENCE FOUND DURING THE COURSE OF SURVEY OPERAT ION AS INCOME ASSESSABLE. ONCE THE INCOME WAS COMPUTED AS BUSINESS INCOME WIT H REGARD TO DIFFERENCE FOUND DURING THE COURSE OF SURVEY OPERATION THIS TR IBUNAL FOUND THAT THERE CANNOT BE ANY FURTHER ADDITION U/S 69B OF THE ACT. THEREF ORE, THE TRIBUNAL FOUND THAT THE ADDITION MADE BY THE ASSESSING OFFICER AGAIN WITH R EGARD TO THE DIFFERENCE IN STOCK WAS NOT JUSTIFIED. IN THE CASE BEFORE US IT IS NOBODYS CASE THAT THE DIFFERENCE IN STOCK WAS INCLUDED IN THE INCOME COMP UTED AS BUSINESS INCOME. SINCE THE ASSESSEE EXPLAINED THAT THERE WAS NO DIFF ERENCE, THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE AND ADDED T HE SAME TOWARDS THE TAXABLE INCOME. THEREFORE, IT IS NOT A CASE OF DOUBLE ADDI TION. FOR THE FIRST TIME, THE ADDITION WAS MADE WITH REGARD TO THE EXCESS STOCK. THEREFORE, THIS DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IS NOT APPLICABLE TO THE FACTS OF THE CASE. 9. SINCE ADMITTEDLY, THE EXCESS STOCK WAS FOUND DUR ING THE COURSE OF SURVEY OPERATION, THE ASSESSEE CANNOT NOW CONTEND THAT THE RE WAS NO EXCESS STOCK. THE EXPLANATION OF THE ASSESSEE AS FOUND IN THE LET TER DATED 24-03-2002 THAT THE PURCHASE BILL WAS NOT RECEIVED ALONG WITH THE MATER IAL. THE ASSESSEE HAS ALSO CLAIMED CERTAIN MACHINE EXPENDITURE AND FACTORY EXP ENSES. WHEN THE ASSESSEE HAS RECEIVED THE GOODS, IT IS NOT KNOWN HOW THE PUR CHASE BILL WAS NOT RECEIVED BY THE ASSESSEE. IF THE CONTENTION OF THE ASSESSEE THAT THE GOODS WERE RECEIVED ON THE LAST DAY OF THE FINANCIAL YEAR, THEN THERE M AY BE JUSTIFICATION FOR NOT ACCOUNTING THE SAME IN THE BOOKS OF ACCOUNT SINCE T HE ASSESSEE MAY DO IT IN THE REGULAR COURSE. IN THIS CASE, ADMITTEDLY, THE SURV EY OPERATION WAS MADE ON 28- 12-2001. THEREFORE, THERE IS NO JUSTIFICATION FOR NOT BRINGING THE PURCHASE TO THE ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 9 EXTENT OF RS.7,14,441. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAM E IS CONFIRMED. 10. THE NEXT ISSUE IS WITH REGARD TO THE ADDITION O F RS.10,000 ON ACCOUNT OF UNDISCLOSED INVESTMENT IN FURNITURE. WE HAVE HEARD THE LD.REPRESENTATIVE FOR THE ASSESSEE AND THE LD.DR. ADMITTEDLY, DURING HE COUR SE OF SURVEY, UNDISCLOSED INVESTMENT IN OFFICE RENOVATION AND NEW FURNITURE W AS FOUND TO THE EXTENT OF RS.1,10,000. THE PARTNERS OF THE FIRM VALUED THE I NVESTMENT DURING THE COURSE OF SURVEY OPERATION AND PAID TAXES TO THE EXTENT OF RS .1 LAKH. THEREFORE, THE REMAINING AMOUNT OF RS.10,000 WAS ADDED BY THE ASSE SSING OFFICER AS UNDISCLOSED INVESTMENT. ADMITTEDLY, THE INVESTMENT WAS FOUND DURING THE COURSE OF SURVEY OPERATION AND THE PARTNERS OF THE FIRM AD MITTED THAT THERE WAS AN UNEXPLAINED INVESTMENT IN OFFICE RENOVATION AND FUR NITURE WHICH WAS NOT ENTERED IN THE BOOKS OF ACCOUNT. THEREFORE, IT IS FOR THE ASSESSEE TO EXPLAIN HOW THE REMAINING BALANCE OF RS.10,000 CAME TO BE INVESTED IN RENOVATION AND FURNITURE. IN THE ABSENCE OF ANY EXPLANATION FROM THE ASSESSEE IT IS TO BE CONSTRUED THAT THE SOURCE FOR SUCH INVESTMENT HAS COME FROM THE VERY S AME BUSINESS. THEREFORE, IT IS TO BE ADDED AS BUSINESS INCOME. SINCE THE ASSES SEE HAS NOT DISCLOSED THE SAME IN THE RETURN OF INCOME, IN OUR OPINION, THE A SSESSING OFFICER HAS RIGHTLY MADE THE ADDITION WHICH WAS CONFIRMED BY CIT(A). T HEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY THE SAME IS CONFIRMED. 11. THE NEXT GROUND OF APPEAL IS WITH REGARD TO THE ADDITION OF RS.3,00,940 TOWARDS EXCESS CASH FOUND. WE HAVE HEARD THE LEARN ED REPRESENTATIVE FOR THE ASSESSEE AND THE LD.DR. ADMITTEDLY, THE EXCESS CAS H OF RS.3,00,940 WAS FOUND DURING THE COURSE OF SURVEY OPERATION FROM THE PREM ISES OF THE ASSESSEE FROM THE TABLE DRAWER OF SHRI KARTIK JASANI, AN EMPLOYEE OF THE ASSESSEE FIRM, WHO IS SON OF ONE OF THE PARTNERS, SHRI JAISUKHLAL DHIRAJL AL JASANI. SINCE THE MONEY WAS FOUND IN THE PREMISES OF THE ASSESSEE FIRM AND IT W AS FOUND IN THE DRAWER OF THE EMPLOYEE OF THE FIRM WHO IS NONE OTHER THAN THE SON OF THE PARTNERS, THE NATURAL PRESUMPTION IS THAT THE MONEY BELONGS TO THE ASSESS EE FIRM. IT APPEARS THAT THE ITA NO.45/RJT/2006 ITA NO.361/RJT/2009 10 ASSESSEE EXPLAINED BEFORE THE LOWER AUTHORITIES THA T THE MONEY BELONGS TO SHRI KARTIK JASANI, WHO WAS KEEPING HIS PERSONAL MONEY I N HIS DRAWER. THE ASSESSEE HAS FILED THE COPY OF THE RETURN FILED BY SHRI KART IK JASANI. THE RETURN OF INCOME WAS FILED ON 02-08-2002 FOR THE ASSESSMENT YEAR 200 2-03. SHRI KARTIK JASANI HAS DISCLOSED RS.3 LAKHS SPECIFICALLY STATING CASH DISCLOSED AT SURVEY U/S 133A ON 28-12-2001. SINCE SHRI KARTIK JASANI FILED THE RETURN OF INCOME DISCLOSING RS.3 LAKHS FOUND DURING THE COURSE OF SURVEY OPERAT ION, IN THE ABSENCE OF ANY OTHER MATERIAL TO SHOW THAT THE ABOVE SAID CASH BEL ONGS TO THE ASSESSEE FIRM, IN OUR OPINION, ADDITION OF THE ABOVE SAID SUM OF RS.3 ,00,940 IN THE HANDS OF THE ASSESSEE IS NOT JUSTIFIED. IN OTHER WORDS, SHRI KA RTIK JASANI, THE EMPLOYEE OF THE ASSESSEE FIRM HAD ALREADY DISCLOSED THE SAME IN HIS PERSONAL RETURN FILED IN THE REGULAR COURSE AND PAID THE TAXES. THEREFORE, THE ADDITION IS NOT JUSTIFIED IN THE HANDS OF THE ASSESSEE. ACCORDINGLY, THE ORDER OF T HE LOWER AUTHORITY ON THIS ISSUE IS SET ASIDE AND THE ADDITION OF RS.3,00,940 IS DEL ETED. 12. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO .45/RJT/2006 IS DISMISSED AND APPEAL OF THE ASSESSEE IN ITA 361/RJT/2009 IS P ARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 03-06-2011. SD/- SD/- (A.L. GEHLOT) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER RAJKOT, DT : 03 RD JUNE, 2011 PK/- COPY TO: 1. ASSESSEE 2. REVENUE 3. THE CIT(A)-III, RAJKOT 4. THE CIT-II, RAJKOT 5. THE DR, I.T.A.T., RAJKOT (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, RAJKOT