Rameshwar Dass Surinder Kumar, Karnal V. ITO, Karnal

ITA 3814/DEL/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 3665 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 01-07-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 07-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMNT BANITA DEVI NEROM
• Assessee Lawyers: S P GARG
• Keywords: Opportunity of being heard; Principle of natural justice; Documents seized; Set aside
• Section: 271(1)(c); 133A

Judgement Text

I.T.A. NO.1894 & 3814 /DEL/08-09 1/8 IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH F NEW DELHI) BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.1894 & 3814 /DEL/2008 & 09 ASSESSMENT YEAR : 2004-05 M/S RAMESHWAR DASS SURINDER KR., ITO, 128-ANAJ MANDI,TARAORI, DISTT. WARD-3, KARNAL. V. KARNAL. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.P. GARG, C.A. RESPONDENT BY : SMNT. BANITA DEVI NEROM, SR. DR. ORDER PER A.K. GARODIA, AM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE WHICH ARE DIRECTED AGAINST TWO SEPARATE ORDERS OF LD CIT(A), KARNAL DATED 12.3 .2008 IN QUANTUM PROCEEDINGS AND DATED 15.7.2009 IN PENALTY PROCEEDI NGS U/S 271(1)(C) OF THE INCOME TAX ACT, 1961. IN BOTH THESE APPEALS, THE AS SESSMENT YEAR INVOLVED IS 2004-05. FOR THE SAKE OF CONVENIENCE, BOTH THESE AP PEALS ARE BEING DISPOSED OFF BY THIS COMMON ORDER. 2. FIRST, WE TAKE UP THE QUANTUM APPEAL I.E. I.T.A. NO.,1894/DEL/2008. 3. GROUND NO.1 OF THE APPEAL WAS NOT PRESSED BY THE LD AR OF THE ASSESSEE AND HENCE THE SAME IS REJECTED AS NOT PRESSED. 4. GROUND NO. 2 TO 6 ARE INTER-CONNECTED WHICH READ AS UNDER:- . I.T.A. NO.1894 & 3814/DEL/08-09 2/8 2. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.6,89,899/- U/S 68 OF THE INCOME TAX ACT, 1961, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, 3. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ADDITION OF RS.6,89,899/- U/S 68 OF THE INCOME TAX ACT, 1961 MADE WITHOUT COMPLYING WITH CANONS OF NATURAL JUSTICE AND WITHOU T DISCHARGING THE ONUS THAT LAY ON THE REVENUE IN THE FACTS AND CIRCUMSTAN CES OF THE CASE. 4. THAT THE ASSESSING OFFICER AS WELL AS LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE TRANSACTIONS FOUND RECORDE D AT PAGES 4-7 OF DOCUMENT NO.22 IMPOUNDED DURING SURVEY ON 23.7.2003 , IN THE ASSESSMENT OF THE ASSESSEE DESPITE THE ADMITTED PO SITION THAT THE ABOVE TRANSACTIONS ALSO FOUND RECORDED IN DOCUMENT NO.33 ALSO IMPOUNDED DURING SAME SURVEY OPERATION PERTAIN TO M/S RD INDU STRIES, A SISTER CONCERN OF THE ASSESSEE. 5. THAT THE LD CIT(A) HAS ERRED IN LAW ON FACTS IN CONFIRMING THE ADDITION OF RS.6,89,899/- U/S 68 OF THE INCOME TAX ACT, 1961 ON THE BASIS OF TRANSACTIONS WHICH THE REVENUE ITSELF HAD BEEN CLAI MING TO BELOW TO M/S RD INDUSTRIES IN THE PROCEEDINGS BEFORE HON'BLE INC OME TAX SETTLEMENT COMMISSION WHERE APPLICATION OF M/S RD INDUSTRIES F OR SETTLEMENT OF THEIR CASES FOR ASSESSMENT YEAR 2001-02 TO 2004-05 WAS PE NDING. 6. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF RS.6,89,899/- WITHOUT SUBSTANTIATING TH E FINDING THAT THE TRANSACTIONS / ENTRIES FORMING THE BASIS OF ADDITIO N WERE OF INCOME NATURE. 5. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.2 OF THE ASSESSMENT ORDER THAT DURING THE COURSE OF SURVEY U/S 133A, SOME LOOSE DOCUMENTS WERE SEIZED AND SHRI RAMESHWAR DASS STATED THAT THESE . I.T.A. NO.1894 & 3814/DEL/08-09 3/8 DOCUMENTS WERE PERTAINED TO BOTH THE CONCERNS NAMEL Y M/S RD INDUSTRIES AND M/S RAMESHWAR DASS SURINDER KUMAR. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT SOME OF THE LOOSE DOCUMENTS SEIZED FROM THE PR EMISES OF M/S RD INDUSTRIES I.E. DOCUMENT NO.20,21,22 & 24 WERE SHOWN TO THE PA RTNER SHRI NAVIN KUMAR AND HE STATED THAT ALL THESE DOCUMENTS RELATE TO M/S RD INDUSTRIES. IT IS FURTHER NOTED BY THE ASSESSING OFFICER THAT PAGE NO.4-7 OF DOCUME NT NO.22 WERE SHOWN TO SHRI NAVIN KUMAR WHICH HAS ENTRY OF CASH RECEIPTS A ND PAYMENTS. THE ASSESSING OFFICER HAS ALSO NOTED THAT CASH BOOK AND LEDGER OF M/S R.D INDUSTRIES WERE ALSO SHOWN AND SOME ENTRIES WERE VERIFIED WITH THE REGULAR BOOKS OF ACCOUNTS. THEREAFTER, IT IS NOTED BY THE ASSESSING OFFICER THAT BALANCE ENTRIES AMOUNTING TO RS.6,89,899/- COULD NOT BE VERIFIED WI TH THE BOOKS OF M/S RD INDUSTRIES NOR WITH THE BOOKS OF M/S RAMESHWAR DASS SURINDER KUMAR. THEREAFTER, THE ASSESSING OFFICER HAS COME TO THE C ONCLUSION THAT THE ASSESSEE HAS RECEIVED A SUM OF RS.6,89,899/- FOR THE PERIOD 2.6.2003 TO 1.7.2003 AS PER PAGE NO.4 OF DOCUMENT NO.22 SEIZED DURING THE SURVE Y U/S 133A IN THE PREMISES OF THE ASSESSEE AND M/S RD INDUSTRIES. HE MADE ADDI TION OF THIS AMOUNT IN THE HANDS OF THE ASSESSEE. BEING AGGRIEVED, THE ASSESSE E CARRIED THE MATTER IN APPEAL BEFORE LD CIT(A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 6. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THA T THESE ENTRIES ON PAGES 4-7 OF THE DOCUMENT NO.22 ARE ENTERED IN DOCUMENT N O.33 WHICH BELONGS TO M/S RD INDUSTRIES. IT IS ALSO SUBMITTED BY HIM WITH THE CASE OF M/S RD INDUSTRIES IS PENDING FOR SETTLEMENT BEFORE SETTLEMENT COMMISSION AND HENCE, NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON THE BAS IS OF THESE DOCUMENTS. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHO RITIES BELOW. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GON E THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS CLAIM WAS MA DE BY THE ASSESSEE BEFORE LD CIT(A) ALSO AND A CLEAR FINDING IS GIVEN BY HIM IN PARA NO.8 OF HIS ORDER THAT THE ASSESSEE HAS NOT FILED ANY EVIDENCE WHICH CAN SHOW THAT M/S RD INDUSTRIES HAS . I.T.A. NO.1894 & 3814/DEL/08-09 4/8 OWNED UP THESE ENTRIES AND INCOME ON THIS ACCOUNT H AS BEEN OFFERED FOR TAXATION BY M/S RD INDUSTRIES BEFORE THE ASSESSING OFFICER O R BEFORE SETTLEMENT COMMISSION AND HENCE THE ASSESSEE CANNOT GET ANY BE NEFIT OF THIS THAT THE CASE OF M/S RD INDUSTRIES IS PENDING BEFORE SETTLEMENT C OMMISSION. BEFORE US ALSO, THE ASSESSEE COULD NOT PRODUCE ANY EVIDENCE SHOWING THAT M/S RD INDUSTRIES HAS OWNED UP THESE ENTRIES AND THE INCOME HAS BEEN OFFERED BY THAT PARTY FOR TAXATION BEFORE THE ASSESSING OFFICER OR BEFORE THE SETTLEMENT COMMISSION. HENCE, THIS ARGUMENT OF THE ASSESSEE CANNOT BE ACCE PTED THAT MERELY BECAUSE M/S RD INDUSTRIES HAS GONE BEFORE THE SETTLEMENT CO MMISSION, THIS ADDITION IN THE HANDS OF THE PRESENT ASSESSEE SHOULD BE DELETED BUT AT THE SAME TIME, WE FIND THAT THE FINAL ORDER OF SETTLEMENT COMMISSION IN THE CASE OF M/S RD INDUSTRIES SHOULD BE AWAITED AND THEREAFTER THIS AS PECT SHOULD BE DECIDED A FRESH. IF IT IS FOUND THAT INCOME ON ACCOUNT OF TH ESE ENTRIES ON PAGES 4-7 OF DOCUMENT NO.22 IS FINALLY INCLUDED BY SETTLEMENT CO MMISSION IN THE HANDS OF M/S RD INDUSTRIES THAN NO ADDITION CAN BE MADE IN T HE HANDS OF THE ASSESSEE FOR THE SAME DOCUMENT. HENCE, IN THE INTEREST OF JUSTIC E, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION AS PER ABOVE DISCUSSIO N. THE BURDEN IS ON THE ASSESSEE TO FURNISH A COPY OF ORDER OF SETTLEMENT C OMMISSIONER IN THE HANDS OF M/S RD INDUSTRIES AND THE ASSESSEE HAS TO POINT OUT BEFORE THE ASSESSING OFFICER AS TO WHAT IS THE ULTIMATE FINDING OF SETTL EMENT COMMISSION IN THE CASE OF M/S RD INDUSTRIES REGARDING THESE ENTRIES ON PAGES 4-7 OF DOCUMENT NO.22 SEIZED IN THE COURSE OF SURVEY U/S 133A AND THEREAF TER, THE ASSESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AFTER PROVID ING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. THE ISSUE INVOLVED IN GROUND NO.2 TO 6 STAND STA NDS RESTORED BACK TO THE FILE OF THE ASSESSING OFFICER. 9. GROUND NO.7 TO 9 ARE INTER-CONNECTED WHICH READ AS UNDER:- . I.T.A. NO.1894 & 3814/DEL/08-09 5/8 7.THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE TRADING ADDITION OF RS.1,50,884/- BY APPLYING IMAGI NARY GP RATE OF 17.95% ON THE SALES EFFECTED DURING THE YEAR. 8. THAT THE LD CIT(A) HAS ERRED IN LAW AND ON FACTS IN REJECTING THE DECLARED VERSION OF THE ASSESSEE AND TAKING INTO CO NSIDERATION IRRELEVANT MATERIAL IN THE FACTS AND CIRCUMSTANCES OF THE CASE . THE LD CIT(A) HAS FURTHER ERRED IN LAW IN FINDING THAT THE ASSESSEE W AS NOT ENTITLED TO VALUE ITS CLOSING STOCK AT MARKET VALUE IN VIEW OF SOME A LLEGED NORMAL PRACTICE OF VALUING THE STOCK AT COST OF MARKET VALUE WHICHE VER IS LESS. 9. IN VIEW OF GROUND OF APPEAL NO.8 ABOVE, THE LD C IT(A) HAS OUGHT TO HAVE DIRECTED THE ASSESSING OFFICER TO ADOPT THE VA LUE OF CLOSING STOCK ON THE BASIS OF SAID NORMAL PRACTICE AND GRANT CONSEQU ENTIAL RELIEF TO THE ASSESSEE. 10. BRIEF FACTS OF THE CASE REGARDING THIS ISSUE AR E THAT IT IS NOTED BY THE ASSESSING OFFICER IN PARA NO.3 OF THE ASSESSMENT OR DER THAT THE ASSESSEE HAS DECLARED GP OF 1,31,930/- IN RICE ACCOUNT ON SALE O F RICE AMOUNTING TO RS.15.75 LAKHS. IT IS NOTED BY THE ASSESSING OFFICER THAT PE RCENTAGE OF GP IS 8.33 WHEREAS THE VALUE OF CLOSING STOCK PURCHASED FOR RS.7,27,20 0/- HAS BEEN DECLARED AT RS.,8,57,708/-. THE ASSESSING OFFICER HAS NOTED THA T THE INCREASE IN THE VALUE OF CLOSING STOCK AMOUNTS TO RS.1,30,507/- YIELDING PER CENTAGE OF INCREASE IN CLOSING STOCK VALUE OVER PURCHASE VALUE TO THE EXTENT OF 17 .95%. THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT KEEPING IN VIEW THE INC REASE IN THE VALUE OF CLOSING STOCK OF RICE, GP RATE OF 17.95% IS TO BE APPLIED O N THE VALUE OF RICE SOLD TO ITS SISTER CONCERN AND ON THAT BASIS, HE MADE ADDITION OF RS.1,50,884/-. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L BEFORE LD CIT(A). BEFORE LD CIT(A), IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE ASSESSEE HAS MAINTAINED COMPLETE DAY TODAY PURCHASE AND SALE RECORD OF RICE ACCOUNT ALONG WITH QUANTITY DETAILS AND HENCE ADOPTION OF GP RATE OF 17.95% IS UNJUSTIFIED AND BASELESS. LD . I.T.A. NO.1894 & 3814/DEL/08-09 6/8 CIT(A) WAS NOT SATISFIED AND HE CONFIRMED THE ADDIT ION AND NOW THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 11. LD AR OF THE ASSESSEE SUBMITTED THAT CLOSING ST OCK WAS VALUED BY THE ASSESSEE AT MARKET PRICE ON A GIVEN DATE AND THIS I S NOT DOUBTED BY THE ASSESSING OFFICER. IT IS SUBMITTED THAT MERELY BECA USE THE INCREASE IN VALUE OF CLOSING STOCK WAS HIGHER AS COMPARED TO PURCHASE PR ICE, IT CANNOT BE HELD THAT FOR THE ENTIRE YEAR, SAME GP RATE IS TO BE APPLIED. LD DR OF THE REVENUE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GO NE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS IS NOT THE C ASE OF THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT MAINTAINED PROPER BOOKS OF ACC OUNTS. IT IS ALSO NOT THE CASE OF THE ASSESSING OFFICER THAT THE PURCHASES AN D SALES ARE NOT VOUCHED. HE HAS NOT POINTED OUT ANY DEFECT IN BOOKS. THERE IS N O SPECIFIC ALLEGATION ABOUT SALE AT LOWER RATE BY BRINGING ON RECORD ANY EVIDEN CE TO SHOW THAT SALE ON ANY GIVEN DATE DURING THE YEAR WAS AT A LOWER RATE WHER EAS ON THE GIVEN DATE, THE MARKET RATE WAS HIGHER. MERELY BECAUSE ON THE DATE OF BALANCE SHEET, THE MARKET RATE WAS HIGH AND FOR THAT REASON THE INCREASE IN V ALUE OF CLOSING STOCK OVER ITS PURCHASE PRICE WAS HIGHER BY 17.95%, IT CANNOT BE H ELD THAT FOR THE ENTIRE YEAR, SUCH MARGIN WAS AVAILABLE ON EACH AND EVERY SALE. W E ARE WELL AWARE THAT PRICES OF GOODS ARE FLUCTUATING ON DAY TODAY BASIS AND HENCE IN THE ABSENCE OF ANY OTHER ADVERSE MATERIAL ON RECORD TO SHOW THAT O N ANY GIVEN DATE, THE ASSESSEE HAS RECORDED ITS SALE AT A LOWER PRICE WHE REAS THE MARKET PRICE OF THAT GOODS WAS HIGHER ON THAT GIVEN DATE, THE ADDITION M ADE BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. WE, THEREFORE, DELE THIS ADDI TION. 13. IN THE RESULT, THIS APPEAL OF THE ASSESSEE STAN DS ALLOWED IN TERMS AS INDICATED ABOVE. 14. NOW, WE TAKE UP THE PENALTY APPEAL I.E. I.T.A. NO.3814/DEL/2009. . I.T.A. NO.1894 & 3814/DEL/08-09 7/8 15. WE FIND THAT PENALTY HAS BEEN IMPOSED BY THE AS SESSING OFFICER WITH REGARD TO THREE ADDITIONS OF RS.23,544/-, RS.6.89,8 99/- AND OF RS.1,50,884/-. LD CIT(A) HAS ALREADY DELETED THE PENALTY WITH REGARD TO TWO ADDITIONS I.E. THE ADDITION OF RS.23,544/- AND RS.1,50,884/-. HENCE, T HE PENALTY IS CONFIRMED BY HIM ONLY WITH REGARD TO ONE ADDITION OF RS.6,89,899 /-. WHILE DECIDING THE QUANTUM APPEAL OF THE ASSESSEE, WE HAVE RESTORED BA CK THIS ADDITION TO THE FILE OF THE ASSESSING OFFICER FOR A FRESH DECISION AND H ENCE, THE PRESENT PENALTY OF THIS ADDITION OF RS.6,89,899/- ALSO CANNOT BE SUSTA INED. HOWEVER, THE ASSESSING OFFICER WILL BE AT LIBERTY TO IMPOSE THE PENALTY AG AIN IF ANY ADDITION IS MADE ON THIS ACCOUNT WHILE PASSING APPEAL EFFECT ORDER AS P ER OUR DIRECTION IN QUANTUM APPEAL. THIS PENALTY IS ALSO DELETED. 16. IN THE RESULT, THIS APPEAL OF THE ASSESSEE STAN DS ALLOWED. 17. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE STAND ALLOWED AS INDICATED ABOVE. 18. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE OF HEARING I.E. IST JULY, 2010. SD/- SD/- (C.L. SETHI ) (A.K. GA RODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 01.7.2010. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. (ITAT, NEW DELHI). . I.T.A. NO.1894 & 3814/DEL/08-09 8/8