The ACIT, Ratlam V. M/s. Novelty Aluninium & Hardwares, Ratlam

ITA 430/IND/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 5925 (ITAT-INDORE)
• Duration Of Justice: 3 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 14-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHD JAVED
• Assessee Lawyers: N D PATWA
• Keywords: Unexplained investment; Loose papers; Audit objection; Retrospective amendment; Additional evidence; Question of law; Tax effect
• Section: 143(3); 133A; 260A; 12A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE (SINGLE MEMBER CASE) BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER I.T.A.NO. 430/IND/2013 A.Y. : 2005-06 ACIT, M/S. NOVELTY ALUMINIUM & HARDWARES, RATLAM VS RATLAM. APPELLANT RESPONDENT I.T.A.NO. 380/IND/2013 & 387/IND/201 5 A.Y. : 2005-06 M/S.NOVELTY ALUMINIUM & HARDWARES, ACIT, RATLAM RATLAM. VS APPELLANT RESPONDENT PAN NO. AACFN6509P DEPARTMENT BY : SHRI MOHD. JAVED DR RESPONDENT BY : SHRI ASHISH GOYAL AND SHRI N. D. PATWA, ADV. DATE OF HEARING : 30 .06 . 2016 DATE OF PRONOUNCEMENT : 30. 0 6. 2016 ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 2 2 O R D E R THESE THREE APPEALS, IN WHICH APPEAL NO. I.T.A.NO. 430/IND/2013 AND I.T.A.NO. 380/IND/2013 ARE QUANTUM APPEALS AND ARE DIRECTED AGAINST THE ORDER OF CIT(A ), UJJAIN, DATED 28.3.2013, FOR ASSESSMENT YEAR 2005-06 AND I. T.A.NO. 387/IND/2015 IS DIRECTED AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME-TAX ACT, 1961 I.T.A.NO.430/IND/2013A.Y.2005-06 (DEPARTMENTS APP EAL ): 2. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSE E AT THE OUTSET POINTED OUT THAT THIS APPEAL IS NOT MAINTAIN ABLE AS THE TAX EFFECT IS BELOW RS. 10 LAKHS. 3. THE LD. DEPARTMENTAL REPRESENTATIVE AGREED T O THIS FACT. 2. I HAVE HEARD BOTH THE PARTIES. I FIND THAT RECENTLY THE CBDT VIDE CIRCULAR NO. 21/20145 ISSUED ON 10.12.201 5 HAS REVISED THE MONETARY LIMIT FOR FILING OF APPEAL BEF ORE ITAT FIXING THE TAX EFFECT LIMIT AT RS.10 LACS. THE SAID CIRCUL AR IS REPRODUCED HEREUNDER FOR READY REFERENCE :- CIRCULAR NO. 21/2015 ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 3 3 F NO 279/MISC. 142/2007-ITJ (PT) CENTRAL BOARD DIRECT TAXES NEW DELHI THE 10 TH DECEMBER, 2015 SUBJECT : REVISION OF MONETARY LIMITS FOR FIL ING OF APPEALS BY THE DEPARTMENT BEFORE INCOME TAX APPELLATE TRI BUNAL AND HIGH COURTS AND SLP BEFORE SUPREME COURT MEAS URES FOR REDUCING LITIGATION REG. REFERENCE IS INVITED TO BOARDS INSTRUCTION NO 5/2014 DATED 10.07.2014 WHEREIN MONETARY LIMITS AND OTHER CONDITIONS FOR FILING DEPARTMENTAL APPEALS (IN INCO ME-TAX MATTERS) BEFORE APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT WERE SPECIFIED. 2. IN SUPERSESSION OF THE ABOVE INSTRUCTION, IT HAS BEEN DECIDED BY THE BOARD THAT DEPARTMENTAL APPEALS MAY BE FILED ON MERITS BEFORE APPELLATE TRIBUNAL AND HIGH COURTS AND SLP BEFORE THE SUPREME COURT KEEPING IN VIEW THE MONETA RY LIMITS AND CONDITIONS SPECIFIED BELOW. 3. HENCEFORTH, APPEALS/ SLPS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS GIVEN HEREUNDER: S.NO. APPEALS IN INCOME-TAX MATTERS MONETARY LIMIT (IN RS) 1 BEFORE APPELLATE TRIBUNAL 10,00,000/- 2 BEFORE HIGH COURT 20,00,000/ - 3 BEFORE SUPREME COURT 25,00,000/- IT IS CLARIFIED THAT AN APPEAL SHOULD NOT BE FILED MERELY BECAUSE THE TAX EFFECT IN A CASE EXCEEDS THE MONETA RY LIMITS PRESCRIBED ABOVE. FILING OF APPEAL IN SUCH CASES IS TO BE DECIDED ON MERITS OF THE CASE. 4. FOR THIS PURPOSE, TAX EFFECT MEANS THE DIFFERE NCE BETWEEN THE TAX ON THE TOTAL INCOME ASSESSED AND THE TAX TH AT WOULD HAVE BEEN CHARGEABLE HAD SUCH TOTAL INCOME BEEN RED UCED BY THE AMOUNT OF INCOME IN RESPECT OF THE ISSUES AGAIN ST WHICH APPEAL IS INTENDED TO BE FILED (HEREINAFTER REFERRE D TO AS DISPUTED ISSUES). HOWEVER THE TAX WILL NOT INCLUD E ANY INTEREST THEREON, EXCEPT WHERE CHARGEABILITY OF INT EREST ITSELF IS IN DISPUTE. IN CASE THE CHARGEABILITY OF INTERES T IS THE ISSUE UNDER DISPUTE, THE AMOUNT OF INTEREST SHALL BE THE TAX EFFECT. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 4 4 IN CASES WHERE RETURNED LOSS IS REDUCED OR ASSESSED AS INCOME, THE TAX EFFECT WOULD INCLUDE NOTIONAL TAX O N DISPUTED ADDITIONS. IN CASE OF PENALTY ORDERS, THE TAX EFFEC T WILL MEAN QUANTUM OF PENALTY DELETED OR REDUCED IN THE ORDER TO BE APPEALED AGAINST. 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX EF FECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF, IN THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN MORE THAN ONE ASSESSMENT YEAR, APPEAL, CAN BE FILED IN RESPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPEC IFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RESPECT OF AN A SSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN OTHER WORDS, HENCEFOR TH, APPEALS CAN BE FILED ONLY WITH REFERENCE TO THE TAX EFFECT IN THE RELEVANT ASSESSMENT YEAR. HOWEVER, IN CASE OF A COM POSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY, WHI CH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR, APPEAL SHALL BE FILED IN RESPECT OF ALL SUCH ASSESSMENT YEARS EVEN IF THE TAX EFFECT IS LESS THAN THE PRESCRIBED MONETARY LIMITS IN ANY OF THE YEAR(S ), IF IT IS DECIDED TO FILE APPEAL IN RESPECT OF THE YEAR(S) IN WHICH TAX EFFECT EXCEEDS THE MONETARY LIMIT PRESCRIBED. IN C ASE WHERE A COMPOSITE ORDER/ JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEALT WITH SEPARAT ELY. 6. IN A CASE WHERE APPEAL BEFORE A TRIBUNAL OR A CO URT IS NOT FILED ONLY ON ACCOUNT OF THE TAX EFFECT BEING LESS THAN THE MONETARY LIMIT SPECIFIED ABOVE, THE COMMISSIONER OF INCOME- TAX SHALL SPECIFICALLY RECORD THAT EVEN THOUGH THE DECISION IS NOT ACCEPTABLE, APPEAL IS NOT BEING FILED ONLY ON T HE CONSIDERATION THAT THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN THIS INSTRUCTION. FURTHER, IN S UCH CASES, THERE WILL BE NO PRESUMPTION THAT THE INCOME-TAX DE PARTMENT HAS ACQUIESCED IN THE DECISION ON THE DISPUTED ISSU ES. THE INCOME-TAX DEPARTMENT SHALL NOT BE PRECLUDED FROM F ILING AN APPEAL AGAINST THE DISPUTED ISSUES IN THE CASE OF T HE SAME ASSESSEE FOR ANY OTHER ASSESSMENT YEAR, OR IN THE C ASE OF ANY OTHER ASSESSEE FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, IF THE TAX EFFECT EXCEEDS THE SPECIFIED MONETARY LIMIT S. 7. IN THE PAST, A NUMBER OF INSTANCES HAVE COME TO THE NOTICE OF THE BOARD, WHEREBY AN ASSESSEE HAS CLAIMED RELIE F FROM THE TRIBUNAL OR THE COURT ONLY ON THE GROUND THAT THE DEPARTMENT HAS IMPLICITLY ACCEPTED THE DECISION OF THE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 5 5 TRIBUNAL OR COURT IN THE CASE OF THE ASSESSEE FOR A NY OTHER ASSESSMENT YEAR OR IN THE CASE OF ANY OTHER ASSESSE E FOR THE SAME OR ANY OTHER ASSESSMENT YEAR, BY NOT FILING AN APPEAL ON THE SAME DISPUTED ISSUES. THE DEPARTMENTAL REPRESENTATIVES/COUNSELS MUST MAKE EVERY EFFORT TO BRING TO THE NOTICE OF THE TRIBUNAL OR THE COURT THAT THE AP PEAL IN SUCH CASES WAS NOT FILED OR NOT ADMITTED ONLY FOR T HE REASON OF THE TAX EFFECT BEING LESS THAN THE SPECIFIED MON ETARY LIMIT AND, THEREFORE, NO INFERENCE SHOULD BE DRAWN THAT T HE DECISIONS RENDERED THEREIN WERE ACCEPTABLE TO THE DEPARTMENT. ACCORDINGLY, THEY SHOULD IMPRESS UPON T HE TRIBUNAL OR THE COURT THAT SUCH CASES DO NOT HAVE A NY PRECEDENT VALUE. AS THE EVIDENCE OF NOT FILING APPE AL DUE TO THIS INSTRUCTION MAY HAVE TO BE PRODUCED IN COURTS, THE JUDICIAL FOLDERS IN THE OFFICE OF CSIT MUST BE MAIN TAINED IN A SYSTEMIC MANNER FOR EASY RETRIEVAL. 8. ADVERSE JUDGMENTS RELATING TO THE FOLLOWING ISSU ES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LESS THAN THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE OR THERE IS NO TAX EFFECT: (A) WHERE THE CONSTITUTIONAL VALIDITY OF THE PROV ISIONS OF AN ACT OR RULE ARE UNDER CHALLENGE, OR (B) WHERE BOARDS ORDER, NOTIFICATION, INSTRUCTIO N OR CIRCULAR HAS BEEN HELD TO BE ILLEGAL OR ULTRA VIRES, OR (C) WHERE REVENUE AUDIT OBJECTION IN THE CASE HAS BEEN ACCEPTED BY THE DEPARTMENT, OR (D) WHERE THE ADDITION RELATES TO UNDISCLOSED FOR EIGN ASSETS/ BANK ACCOUNTS. 9. THE MONETARY LIMITS SPECIFIED IN PARA 3 ABOVE SH ALL NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. FILING OF APPEALS IN OTHER DIRECT TAX M ATTERS SHALL CONTINUE TO BE GOVERNED BY RELEVANT PROVISIONS OF S TATUTE & RULES. FURTHER, FILING OF APPEAL IN CASES OF INCOME TAX, WHERE THE TAX EFFECT IS NOT QUANTIFIABLE OR NOT INVOLVED, SUCH AS THE CASE OF REGISTRATION OF TRUSTS OR INSTITUTIONS UNDE R SECTION 12A OF THE IT ACT, 1961, SHALL NOT BE GOVERNED BY T HE LIMITS SPECIFIED IN PARA 3 ABOVE AND DECISION TO FILE APP EAL IN SUCH CASES MAY BE TAKEN ON MERITS OF A PARTICULAR CASE. 10. THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/ TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTI ONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEA L WAS FILED. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 6 6 11. THIS ISSUES UNDER SECTION 268A (1) OF THE INCOM E-TAX ACT 1961. 3. IN VIEW OF THE ABOVE CIRCULAR, SINCE THE TAX EFFE CT INVOLVED IN THIS APPEAL IS BELOW THE PRESCRIBED MONETARY LIMI T FOR FILING OF APPEALS BEFORE THE ITAT, THEREFORE, THE PRESENT APPEAL DESERVES TO BE DISMISSED IN LIMINE BEING NOT MAINTAINABLE IN VIEW OF ABOVE CIRCULAR NO. 21/2015 DATED 10.12.2015. 4. I FURTHER FIND THAT HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS M/S. P. S. JAIN & CO. IN ITA NO.179/1991 DA TED 02.08.2010 HAS HELD AS UNDER: THIS COURT CAN VERY WELL TAKE JUDICIAL NOTICE OF T HE FACT THAT BY PASSAGE OF TIME MONEY VALUE HAS GONE DOWN, THE COST OF LITIGATION EXPENSES HAS GONE UP, THE ASSESSEES ON THE FILE OF THE DEPARTMENTS HAVE BEEN INCREASED CONSEQUENTLY, THE BURDEN ON THE DEPARTMEN T HAS ALSO INCREASED TO A TREMENDOUS EXTENT. THE CORRIDORS OF THE SUPERIOR COURTS ARE CHOCKED WITH H UGE PENDENCY OF CASES. IN THIS VIEW OF THE MATTER, THE BOARD HAS RIGHTLY TAKEN A DECISION NOT TO FILE REFE RENCES IF THE TAX EFFECT LESS THAN RS. 2 LAKHS. THE SAME POLICY FOR OLD MATTERS NEEDS TO BE ADOPTED BY THE DEPARTME NT. IN OUR VIEW, THE BOARDS CIRCULAR DATED MARCH 27, 2 000 IS VERY MUCH APPLICABLE EVEN TO THE OLD REFERENCES WHICH ARE STILL UNDECIDED. THE DEPARTMENT IS NOT JUSTIFI ED IN PROCEEDING WITH THE OLD REFERENCES WHEREIN THE TAX ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 7 7 IMPACT IS MINIMAL. THUS, THERE IS NO JUSTIFICATION TO PROCEEDS WITH DECADES OLD REFERENCES HAVING NEGLIGI BLE TAX EFFECT. SIMILARLY, HONBLE GUJARAT HIGH COURT IN THE CASE O F CIT V. SURESHCHANDRA DURGAPRASAD KHATOD (HUF) (2012) 253 CTR 492 (GUJ) HAS SPECIFICALLY CONSIDERE D INSTRUCTION NO. 3/2011 AND HELD THAT THE SAME WOULD APPLY TO PENDING CASES AS WELL EVEN THOUGH THERE WA S A SPECIFIC CONDITION IN THAT INSTRUCTION ALSO THAT THE SAME WOULD APPLY TO APPEALS FILED ON OR AFTER FEBRUARY, 2011. HONBLE HIGH COURT HAS CONSIDERED THIS ISSUE AS UNDER:- 6. THE QUESTION ABOUT APPLICABILITY OF INSTRUCTION NO.3 OF 2011 HAD BEEN CONSIDERED AND DECIDED BY THE AURANGABAD BENCH OF THE BOMBAY HIGH COURT IN TAX APPEAL NO. 78 OF 2007, THE COMMISSIONER OF INCOME TAX V. SMT. VIJAYA V. KAVEKAR DECIDED ON 29.7.2011. THE DIVISION BENCH, AFTER CONSIDERING EARLIER INSTRUCTIONS AND VARIOUS DECISIONS OF THE COURTS ON INSTRUCTIONS, RELYING ON THE DECISION IN COMMISSION ER OF INCOME TAX VS. MADHUKAR K. INAMDAR (HUF) REPORTED I N (2010) 229 CTR (BOM) 77, HAS HELD IN PARAGRAPHS 9, 10, 11, 14 AND 17 AS UNDER: '9. AS STATED EARLIER, THE INCOME TAX ACT WAS AMEND ED AND SECTION 268A HAS BEEN INTRODUCED ON THE STATUTE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 8 8 BOOK WITH RETROSPECTIVE EFFECT. SECTION 268A CARVES OUT AN EXCEPTION FOR FILING OF APPEALS AND REFERENCES U NDER SECTION 260 A OF THE ACT. THE LEGISLATURE HAS PRESC RIBED THAT THE CBDT IS EMPOWERED TO ISSUE CIRCULARS AND INSTRUCTIONS FROM TIME TO TIME, WITH REGARD TO FILI NG OF APPEALS DEPENDING ON THE TAX EFFECT INVOLVED. THEREAFTER, IN 2008, CBDT INSTRUCTION NO. 5 OF 2008 DATED 15TH MAY, 2008 WAS ISSUED. THIS COURT IN THE CASE OF 'COMMISSIONER OF INCOME TAX V/S MADHUKAR K. INAMDAR (HUF) REPORTED IN '(2010) 229 CTR (BOM) 77, INTERPRETED THE AFORESAID CIRCULAR. THE CIRCULAR WA S ISSUED IN SUPERSESSION OF ALL EARLIER INSTRUCTIONS ISSUED BY THE BOARD. THE MONETARY LIMIT WAS INCREASED AND APPEALS WERE TO BE FILED UNDER SECTION 260A, THEREA FTER, ONLY IN CASES WHERE THE TAX EFFECT EXCEEDED RS. 4 L ACS. PARAGRAPH 11 OF THAT INSTRUCTION STIPULATED THAT IT WAS APPLICABLE TO APPEALS FILED ON OR AFTER 15TH MAY, 2 008. IT WAS FURTHER PROVIDED THAT IN CASES, WHERE APPEAL S WERE FILED BEFORE 15TH MAY, 2008, THEY WOULD BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT WHICH WERE OPERATIVE AT THE TIME WHEN SUCH APPEALS WERE FILED. THE INSTRUCTION WAS ISSUED UNDER SECTION 268A(1) OF THE ACT. THE ARGUMENT OF THE LEARNED COUNSEL FOR THE REVENUE IN THAT CASE WAS, THAT THE INSTRUCTION ISSUED ON 15TH MAY, 2008 DID NOT PRECLUDE THE DEPARTMENT FROM CONTINUIN G WITH THE APPEALS AND/OR PETITIONS FILED PRIOR TO 15 TH MAY, 2008, IF THEY INVOLVED A SUBSTANTIAL QUESTION OF LAW OF A RECURRING NATURE, NOTWITHSTANDING THE FACT THAT THE TOTAL CUMULATIVE TAX EFFECT INVOLVED IN THE APP EALS WAS LESS THAN RS. 4 LACS. IT WAS SUBMITTED, SUCH APPEALS WHICH WERE FILED PRIOR TO THE ISSUANCE OF INSTRUCTION AND WHERE SUBSTANTIAL QUESTIONS OF LAW WERE RAISED, WERE REQUIRED TO BE DECIDED ON MERITS. THE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 9 9 COURT, WHILE CONSIDERING THE ISSUE OBSERVED THAT PARAGRAPH 5 OF THE CIRCULAR MADE IT CLEAR THAT NO APPEALS WOULD BE FILED IN THE CASES INVOLVING TAX E FFECT LESS THAN RS. 4 LACS NOTWITHSTANDING THE ISSUE BEIN G OF RECURRING NATURE. RELYING ON THE JUDGEMENT IN CIT V /S POLYCOTT CORPORATION, THE COURT OBSERVED AS FOLLOWS : '6 THE AFORESAID JUDICIAL VERDICT MAKES IT CLEAR THAT THE CIRCULAR DT. 15TH MAY, 2008 IN GENERAL AND PARA (5) THEREOF IN PARTICULAR LAY DOWN THAT EVEN IF THE SAM E ISSUE, IN RESPECT OF SAME ASSESSEE, FOR OTHER ASSES SMENT YEARS IS INVOLVED, EVEN THEN THE DEPARTMENT SHOULD NOT FILE APPEAL, IF THE TAX EFFECT IS LESS THAN RS. 4 L AKHS. IN OTHER WORDS, EVEN IF THE QUESTION OF LAW IS OF RECU RRING NATURE EVEN THEN, THE REVENUE IS NOT EXPECTED TO FI LE APPEALS IN SUCH CASES, IF THE TAX IMPACT IS LESS TH AN THE MONETARY LIMIT FIXED BY THE CBDT.' 7. ONE FAILS TO UNDERSTAND HOW THE REVENUE, ON THE FACE OF THE ABOVE CLEAR INSTRUCTIONS OF THE CBDT, CAN CO NTEND THAT THE CIRCULAR DT. 15TH MAY, 2008 ISSUED BY THE CBDT IS APPLICABLE TO THE CASES FILED AFTER 15TH MAY, 20 08 AND IN COMPLIANCE THEREOF, THEY DO NOT FILE APPEALS, IF THE TAX EFFECT IS LESS THAN RS. 4 LAKHS; BUT THE SAID CIRCU LAR IS NOT APPLICABLE TO THE CASES FILED PRIOR TO 15TH MAY , 2008 I.E. TO THE OLD PENDING APPEALS, EVEN IF THE TAX EF FECT IS LESS THAN RS. 4 LAKHS. IN OUR VIEW, THERE IS NO LOG IC BEHIND THIS BELIEF ENTERTAINED BY THE REVENUE.' THE COURT HAS FURTHER HELD THAT THE PREVAILING INSTRUCTIONS FIXING THE MONETARY LIMIT FOR THE TAX EFFECT WOULD HOLD GOOD EVEN FOR PENDING CASES. ACCORDINGLY , THE COURT DISMISSED ALL THE APPEALS HAVING A TAX EF FECT OF LESS THAN RS. 4 LACS. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 10 10 10. THE NEW CBDT INSTRUCTIONS HAVE BEEN ISSUED ON 9 TH FEBRUARY, 2011, BEING INSTRUCTION NO. 3 OF 2011. TH E MONETARY LIMIT HAS BEEN RAISED AGAIN AND CLAUSE 3 O F THE INSTRUCTIONS PROVIDES THAT APPEALS SHALL NOT BE FILED IN CASES WHERE THE TAX EFFECT DOES NOT EXCEED THE MONETARY LIMITS PRESCRIBED, HENCEFORTH. THE MONETAR Y LIMITS PRESCRIBED FOR FILING AN APPEAL UNDER SECTIO N 260A BEFORE THE HIGH COURT HAS BEEN RAISED TO RS. 10 LAC S. THIS INSTRUCTION IS IDENTICAL TO THE CBDT INSTRUCTI ON NO. 5 OF 2008. CLAUSE 10 OF THIS CIRCULAR INDICATES THAT MONETARY LIMITS WOULD NOT APPLY TO WRIT MATTERS AND DIRECT TAX MATTERS OTHER THAN INCOME TAX. IT FURTHE R PROVIDES THAT WHERE THE TAX EFFECT IS NOT QUANTIFIA BLE, THE DEPARTMENT SHOULD TAKE A DECISION TO FILE APPEALS O N MERITS OF EACH CASE. CLAUSE 11, AGAIN PROVIDES THAT THE INSTRUCTION WOULD APPLY TO APPEALS FILED ON OR AFTE R ....2011 AND APPEALS FILED BEFORE ...... 2011 WOULD BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERA TIVE AT THE TIME WHEN SUCH APPEALS WERE FILED. 11. IN OUR OPINION, WHEN A SIMILAR CLAUSE HAS BEEN INTERPRETED BY THE DIVISION BENCH OF THIS COURT IN CIT VS. MADHUKARINAMDAR (SUPRA), THE SAME PRINCIPLES MUST APPLY IN THE PRESENT CASES ALSO, AS WE HAVE FOUND T HAT THE INSTRUCTIONS OF 15TH MAY, 2008 IS PARA- MATERIA L WITH THE INSTRUCTION OF 9TH FEBRUARY, 2011. 14. SIMILARLY, THE DELHI HIGH COURT IN THE CASE OF 'COMMISSIONER OF INCOME TAX V/S DELHI RACE CLUB LTD .', DECIDED ON MARCH 03, 2011, BY RELYING ON ITS EARLIE R JUDGEMENT 'COMMISSIONER INCOME TAX DELHI-III V/S M/ S P.S. JAIN AND CO. DECIDED ON 2ND AUGUST, 2010 HAS HELD THAT THE CBDT CIRCULAR RAISING THE MONETARY LI MIT OF ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 11 11 THE TAX EFFECT TO RS. 10 LACS WOULD BE APPLICABLE T O PENDING CASES ALSO. 17. IT IS TRUE THAT THIS JUDGEMENT IN CHHAJER'S CAS E (SUPRA) WAS NOT BROUGHT TO THE NOTICE OF THE DIVISI ON BENCH, WHILE DECIDING EITHER MADHUKAR'S CASE (SUPRA ) OR THE CASE OF POLYCOT CORPORATION (SUPRA). HOWEVER, T HE INSTRUCTION OF 2005 WHICH WAS CONSIDERED IN CHHAJER 'S CASE HAS ALSO BEEN INTERPRETED IN POLYCOT CORPORATI ON (SUPRA). THE CONSISTENT VIEW OF THE COURT HAS BEEN THAT THE CBDT INSTRUCTION WOULD APPLY TO PENDING CASES A S WELL. THE MAIN OBJECTIVE OF SUCH INSTRUCTIONS IS TO REDUCE THE PENDING LITIGATION WHERE THE TAX EFFECT IS CONSIDERABLY SMALL. THEREFORE, IN OUR OPINION, THE TAX APPEALS ARE REQUIRED TO BE DISMISSED, AS THEY ARE N OT MAINTAINABLE IN VIEW OF THE PROVISIONS OF SECTION 2 68A OF THE INCOME TAX, AND THE CBDT INSTRUCTION NO. 3 OF 2011.' 7. THE SAME VIEW HAS BEEN TAKEN BY THE KARNATAKA HIGH COURT IN ITA NO.3191 OF 2005 IN THE COMMISSION ER OF INCOME- TAX VS. M/S. RANKA & RANKA DECIDED ON 2.11.2011, WHEREIN THE DIVISION BENCH HAS CONSIDERE D INSTRUCTION NO.3 AND THE NATIONAL LITIGATION, POLIC Y, HAD HELD AS UNDER: '(I) INSTRUCTION NO.3/11 IS ALSO APPLICABLE TO THE PENDING APPEALS. (II) AS THE TAX EFFECT IN THE INSTANT CASE IS LESS THAN RS.10 LAKHS, THE APPEAL STANDS DISMISSED ON THE GROUND OF MONETARY LIMIT, WITHOUT EXPRESSING ANY OPINION ON T HE MERITS OF THE CLAIM, MAKING IT CLEAR THAT THE DEPAR TMENT IS AT LIBERTY TO PROCEED AGAINST THE ASSESSEE IN FU TURE, IF THERE ANY AMOUNT DUE FROM THE ASSESSEE, ON SIMILAR ISSUE AND IF IT IS ABOVE THE MONETARY LIMIT PRESCRI BED.' ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 12 12 5. I ALSO FIND FROM THE ABOVE CASE LAW OF HONBLE G UJARAT HIGH COURT IN THE CASE OF SURESH CHANDRA DURGAPRASA D KHATOD (HUF) ( SUPRA ) THAT IN THE SIMILAR SITUATION, EXACTLY IDENTICAL INSTRUCTIONS WERE APPLIED TO THE APPEALS FILED RETROSPECTIVELY. HONBLE GUJARAT HIGH COURT HAS DIS CUSSED THAT ALMOST ALL HIGH COURTS ARE OF THE UNANIMOUS VI EW, CONSIDERING THE MAIN OBJECTIVE OF SUCH INSTRUCTIONS THAT TO REDUCE THE PENDING LITIGATION, WHERE THE TAX EFFECT IS CONSIDERABLE LOW OR SMALL, THE APPEAL IS NOT MAINTAI NABLE. THE RECENT INSTRUCTION REVISING THE MONETARY LIMIT TO R S. 10 LAKHS FOR FILING APPEAL BEFORE ITAT ON INCOME TAX MATTERS , AS ISSUED VIDE THE ABOVE CIRCULAR WILL APPLY TO PENDING APPEAL S ALSO FOR THE REASON THAT THE SAME IS EXACTLY IDENTICAL TO EA RLIER INSTRUCTIONS. 6. IN VIEW OF THE ABOVE DISCUSSION AND THE LATEST CI RCULAR ISSUED BY THE CBDT, AS REPRODUCED ABOVE, SINCE THE TAX EFFECT INVOLVED IN THE PRESENT APPEAL IS BELOW THE MONETARY LIMIT, THEREFORE, I DISMISS THIS DEPARTMENTAL APPEAL IN LIMINE BEING NOT MAINTAINABLE. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 13 13 7. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED, BEING NOT MAINTAINABLE. I.T.A.NO.380/IND/2013A.Y.2005-06(ASSESSEES APPEAL ): 3. GROUND NO. 1 IS OF GENERAL NATURE AND DOES NOT REQU IRE ANY ADJUDICATION. 4. GROUND NOS. 2, 3, 4, 5, 6,7 & 8 READ AS UNDER :- 2. THE LD. CIT(A) ERRED AND SHE WAS NOT JUSTIFIED MAINTAINING THE ADDITION OF RS. 3,10,200/- ON ACCOUNT OF CASH FOUND DURING SURVEY. 3. THE LD. CIT(A) ERRED AND SHE WAS NOT JUSTIFIED IN MAINTAINING THE ADDITION OF RS. 55,063/- ON ACCOUNT OF STOCK FOUND DURING SURVEY. 4. THE LD. CIT(A) ERRED AND SHE WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 1,89,500/- ON ACCOUNT OF ALLEGED SHORT INVESTMENT IN CONSTRUCTION. 5. THE LD. CIT(A) ERRED AND SHE WAS NOT JUSTIFIED IN MAINTAINING THE ADDITION OF RS. 31,000/- TOWARDS UNACCOUNTED INVESTMENT. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 14 14 6. THE LD. CIT(A) ERRED AND SHE WAS NOT JUSTIFIED IN CONFIRMING ADDITION OF RS. 20,16,500/- ON ACCOUNT OF HUNDIES. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN BUSINESS OF DEALING IN ALUMINIUM AND HAR DWARE BUSINESS. RETURN DECLARING AN INCOME OF RS. 9,60,88 0/- WAS FILED ON 31.01.2006. SURVEY U/S 133A WAS CONDUCTED I N THE BUSINESS PREMISES OF THE ASSESSEE ON 25.01.2005 & 26.01.2005. THE ASSESSEE HAS MADE ITEM-WISE DETAILS OF THE SURRENDER AS UNDER :- SR.NO. PARTICULARS SURVEY RETURN DURING ASSESSMENT 1. UNACCOUNTED CASH 3,10,200 3,10,200 TELESCOPED WITH SALES RS. 6,83,600 2. UNEXPLAINED STOCK 12,17,570 44,419 44,419 3. UNACCOUNTED INVESTMENT (FLOOR CONSTRUCTION) 3,52,000 1,62,500 1,62,500 4. CHEQUES RELATING TO SALES FOUND 31,000 31,000 TELESCOPED WITH SALES RS. 6,83,600 5. UNACCOUNTED HUNDIES 20,16,500 NIL NIL 6. LOOSE PAPERS (SALES) 6,83,600 6,83,600 6,83,600 46,10,870 12,31,719 8,90,519 6. THE AO HAS COMPLETED THE ASSESSMENT U/S 143(3) AFTE R MAKING ADDITIONS ON ACCOUNT OF UNACCOUNTED STOCK AT RS. 11,73,151/-, UNACCOUNTED INVESTMENT AT RS. 31,000/- , ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 15 15 UNACCOUNTED ASH AT RS. 3,10,200/-, UNACCOUNTED INVE STMENT AT RS. 1,89,500/-, INVESTMENT IN UNACCOUNTED HUNDIS AT RS. 20,16,500/-. TOTAL ADDITION AMOUNTING TO RS. 37,20, 351/-WAS MADE BY THE AO AND TOTAL INCOME ASSESSED AT RS. 43, 39,951/- VIDE ORDER DATED 26.12.2007. THE ASSESSEE PREFERRE D APPEAL BEFORE THE CIT(A) AGAINST THIS ORDER. 7. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS FURNISHED ADDITIONAL EVIDENCES IN THE SHAPE OF AFFI DAVITS OF THE PARTNER SHRI FAQRUDDIN KABA AND EMPLOYEES OF ASSESS EE SHRI MANOJ VYAS AND SHRI VIPIN KASERA, SHRI SHABBIR KABA , SHRI SIRAJ KANCHWALA, WHICH WAS NOT FILED BY IT DURING THE ASSESSMENT PROCEEDINGS AND VIDE LETTER DATED 19.03. 2010 REQUESTED TO ADMIT THE SAME. THESE ADDITIONAL EVIDE NCES WERE FURNISHED BY THE ASSESSEE IN RESPECT OF THE SURVEY PROCEEDINGS CARRIED OUT AT THE PREMISES OF THE ASSESSEE. THESE ADDITIONAL EVIDENCES WERE ADMITTED AND REMAND REPORT UNDER RUL E 46A WAS CALLED FOR FROM THE AO THREE TIMES I.E. ON 17.02 .2010, 21.02.2012 AND 20.03.2013, WHICH ARE PLACED ON PAPER BOOK PAGES 129 TO 131, 132 TO 135 AND 182 TO 184 RESPECT IVELY. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 16 16 8. GROUND NO.1 TAKEN BY THE ASSESSEE IS OF GENERAL NATURE AND DOES NOT REQUIRE ANY ADJUDICATION BY ME. 9. GROUND NO. 2. RELATES TO THE ADDITION OF RS. 3,10,2 00/- MAINTAINED BY THE LD. CIT(A) ON ACCOUNT OF CASH FO UND DURING THE COURSE OF SURVEY AND GROUND NO. 5 IS THAT THE L D. CIT(A) ERRED IN MAINTAINING THE ADDITION OF RS. 31,000/- T OWARDS UNACCOUNTED INVESTMENT. 10. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT CERTAIN LOOSE PAPERS WERE FOUND. THEY REVEALED UNACCOUNTED SALES OF RS. 6,83,600/-. THE ASSESSEE SURRENDERED THIS AMOUNT AND FILED RETURN ACCORDINGL Y. IT WAS ALSO FOUND THAT THE EXCESS CASH OF RS. 3,10,200/- A ND CHEQUES FOR SALES RS. 31,000/- WERE SURRENDERED AND OFFERED IN THE RETURN. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE ASSESSEE CLAIMED THAT THE SALE PROCEEDS OF RS. 6,83,600/- WERE REPRESENTED IN THE FORM OF CASH AND CHEQUES. TH US, TELESCOPING OF RS. 3,41,200/- BEING THE CASH AND CH EQUES WAS REQUIRED TO BE DONE. NO ADDITION OF RS. 3,41,200/- WAS TO BE DONE. ALTERNATIVELY AND WITHOUT PREJUDICE, NP @ 5% O F RS. 6,83,600/- MAY BE APPLIED, AS THE ENTIRE SALE PROCE EDS CANNOT ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 17 17 BE ADDED, BUT ONLY PROFIT RATE IS TO BE APPLIED. TH E LD. CIT (A) REJECTED ASSESSEES PLEAS AND MAINTAINED ADDITION M ADE BY LD. AO. THIS AMOUNT OF RS. 3,41,200/- WAS INADVERTENTLY SHOWN AS INCOME IN THE RETURN WHICH THE ASSESSEE RETREATED IN THE PROCEEDINGS. THE LD. AO IN THE REMAND REPORTS DID N OT COMMENT ON THIS ISSUE IN SPECIFIC TERMS. 11. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE PLACED RELIANCE ON THE FOLLOWING DECISIONS :- (I) STATE BANK OF PATIYALA, 93 TTJ 906 (TRIB. CHANDIGARH) (II) SANCHIT SOFTWARE AND SOLUTIONS PVT. LTD., (2012, 349 ITR 404 ( BOM). (III) RAMPUR DISTILLERY AND CHEMICALS CO.LTD., 187 ITR 561 (S.C.). (IV) CPA YOOSUF, 90 ITR 501 (KER) (V) BHARAT GENERAL REINSURANCE CO.LTD., 81 ITR 303 ( DEL). 12. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE CLAIM OF TELESCOPING HAS NEVER B EEN ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 18 18 DOUBTED. THE LD. AUTHORIZED REPRESENTATIVE OF THE A SSESSEE CONCLUDED THE ARGUMENTS AND PRAYED THAT THE ADDITIO NS MAY PLEASE BE DELETED. 13. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. 14. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. I HAVE ALSO GONE THROUGH CASE LAWS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE. I FIND THAT THE UNDISCLOSED SALES OF RS. 6,83,600/- AS FOUND IN THE LOOSE PAPERS REPRESENTED THE UNACCOUNT ED SALES OF THE ASSESSEE. THESE SALES WERE ACCEPTED BY THE A SSESSEE AND OFFERED IN THE RETURN. THEREFORE, THESE SALE PROCEE DS IN THE FORM OF CASH WERE AVAILABLE TO THE ASSESSEE AT THE TIME OF SURVEY. THUS, TO THAT EXTENT TELESCOPING BENEFIT SH ALL BE AVAILABLE. THE CASH FOUND DURING SURVEY OF RS. 3,10 ,200/- AND CHEQUES OF RS. 31,000/- FOUND DURING SURVEY ARE COV ERED IN THE UNACCOUNTED SALES OF RS. 6,83,600/-. THUS, NO A DDITION IS CALLED FOR IN THIS RESPECT AND THE ADDITION IS HERE BY DELETED. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 19 19 15. GROUND NO. 3 IS THAT THE LD. CIT(A) WAS NOT JUSTIFIE D IN MAINTAINING THE ADDITION OF RS. 55,063/- ON ACCOUNT OF STOCK FOUND DURING SURVEY. 16. THE FOLLOWING STOCK WAS FOUND BY THE SURVEY PARTY :- STOCK AS PER SURVEY PARTY RS. 31,91,709 PB 10-12 STOCK AS PER TRADING ACCOUNT RS. 19,74,131 PB 19. DIFFERENCE RS. 12,17,570 DIFFERENCE ACCEPTED BY ASSESSEE RS. 44,419 DIFFERENCE DISPUTED RS. 11,73,131 17. THE LD. CIT(A) CONFIRMED THE ADDITION OF RS. 55,063 /-. 18. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN RETAIL HA RDWARE BUSINESS. SUCH BUSINESS HAS THOUSANDS OF ITEMS AND EACH SUCH ITEM MAY BE FURTHER CLASSIFIED INTO VARIOUS CA TEGORIES E.G. CASE OF HANDLE MAY BE CONSIDERED. SUCH HANDLE MAY V ARY FROM SAY 3 TO 8, THEY MAY HAVE BEEN EITHER PREPARED WIT H ALUMINIUM, G.M. IRON, G.S. IRON, BRASS METAL IN DIF FERENT SHAPES, DESIGNS, COLOURS OF DIFFERENT COMPANIES HAV ING DIFFERENT VALUES/RATES. IN SHORT, THERE MAY BE ABOU T 50 SUCH VARIETIES OF HANDLES HAVING DIFFERENT RATES. A PERU SAL OF INVENTORY OF STOCK TAKEN BY THE SURVEY TEAM INDICAT ES THAT SUCH LIST IS PREPARED IN THREE PAGES AND CONTAINS O NLY 55 ITEMS ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 20 20 OUT OF WHICH S. NO. 1 TO 15 INDICATE VARIETIES OF ON LY PLYWOOD ITEMS LEAVING BALANCE ITEMS OF HARDWARE ITEMS ONLY A T 50. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTH ER CONTENDED THAT SUCH LIST OF INVENTORY OF STOCK SO P REPARED BY THE SURVEY PARTY AND ASCERTAIN THE GENUINENESS OF S UCH LIST ALSO TAKING NOTE OF THE FACT THAT A LOOSE PAPER IND ICATING VARIOUS ITEMS OF HANDLES HAS BEEN INVENTORIED BY TH E SURVEY TEAM. IN OTHER WORDS, THE ASSESSEE SUBMITTED THAT TH E SURVEY TEAM HAD PREPARED SUCH LIST ONLY ON AD HOC BASIS AN D CANNOT BE THE BASIS FOR DETERMINING THE AMOUNT OF EXCESS S TOCK. 19. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER PLACED RELIANCE ON THE DECISION IN THE CASE OF ABHINAV VASTRALAY 15 ITJ 168, THE HONBLE ITAT HELD INVENTO RY PREPARED DURING SURVEY WAS NOT ITEM-WISE OR VARIETY-WI SE. SAME WAS AD HOC. NO ADDITION CAN BE MADE FOR EXCESS STOCK U/S. 69. IN THAT CASE, DURING SEARCH, INSTEAD OF CO UNTING BUNDLES OF WIRE, SEARCH PARTY ESTIMATED IT AND MADE ADDITION. IT WAS HELD THAT ASSESSEE CANNOT BE MADE TO SUFFER T HE CONSEQUENCES OF LETHARGY ON THE PART OF THE OFFICER S OF THE REVENUE. ADDITION SHOULD NOT BE MADE. HE FURTHER PL ACED ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 21 21 RELIANCE ON THE DECISION OF CIT VS. BALAJI WIRE P. LTD, 164 TAXMAN 559 (DELHI). 20. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 21. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. I HAVE ALSO PERUS ED THE CASE LAWS RELIED UPON BY THE LD. AUTHORIZED REPRESENTATIV E OF THE ASSESSEE. I FIND THAT THE AO MADE ADDITION OF RS. 12,17,570/- TO THE INCOME FOR UNACCOUNTED STOCK. THIS WAS MADE O N THE BASIS OF INVENTORY PREPARED BY THE DEPARTMENT ON IM AGINARY BASIS WITHOUT VERIFICATION OF STOCK. IT CONTAINED SO ME GLARING MISTAKES. THE LD. CIT(A) TOOK NOTE OF THESE MISTAKE S AND REDUCED ADDITION TO RS. 55,063/-. IN THIS REGARD, I HAVE GONE THROUGH THE SUBMISSIONS AT PB 104 UNDER IMAGINAR Y STOCK TAKING AND VALUATION AND PB 121 UNDER HEAD GROU ND NO. 1(C)(II).THE ASSESSEE SURRENDERED RS. 44,419/-. A DETAILED CHART IS GIVEN BY ASSESSEE AT PB 204-205 SHOWING EA CH ITEM OF DIFFERENCE. SR. NO. 10, 49, 50, 51 EXPLAINS THE DIF FERENCE. IN VIEW OF THE ABOVE, I, THEREFORE, HOLD THAT THE ADDIT ION IS NOT CALLED FOR. IT IS HEREBY DELETED. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 22 22 22. GROUND NO. 4 IS THAT THE LD. CIT(A) WAS NOT JUSTIFIE D IN CONFIRMING THE ADDITION OF RS. 1,89,500/- ON ACCOUN T OF ALLEGED SHORT INVESTMENT IN CONSTRUCTION. 23. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE H AS CONTENDED THAT THE ASSESSEE HAS CONSTRUCTED THE SHE D AND HAS SHOWN THE INVESTMENT OF RS. 1,62,500/-, WHICH WAS VALU ED AT RS. 1,59,000/- AS PER THE REPORT OF THE APPROVED VA LUER, WHEREAS THE AO HAS TAKEN THE INVESTMENT AT RS. 3,52, 000/-. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE H AS FURTHER CONTENDED THAT THE VALUER, WHO IS AN EXPERT HAD CER TIFIED THAT THE CONSTRUCTION COST IS RS. 1,59,000/-. THE ASSESS EE HAS SURRENDERED RS. 1,62,500/-. THIS REPORT HAS NEVER B EEN COUNTERED BY THE DEPARTMENT. 24. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED THAT ASSESSEES SERVANT HAMMAL ( LABOUR) PAPPU (MANOJ VYAS) WAS MADE TO PREPARE NOTE-BOOK ON THE PART OF LABOUR REGISTER. IT IS NOT A REGULARLY WRITT EN BOOK. THE TOTALS OF ITEMS WERE MENTIONED E.G. FOR BRICKS AND F OR CEMENT ETC. IT IS A SHED OF G.I. SHEETS ON THE ROOT OF TWO STOREYED HOUSE COVERING 305.95 SQM AREA. THIS SHED IS SUPPORTED BY OLD ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 23 23 TUBULAR TRUGGES. THE WALLS HAVE BEEN RAISED OVER EXI STING PARAPET WALLS WITH NO PLASTERING ON WALLS OUTSIDE AND INSIDE. AVERAGE COST COMES TO APPROX. RS. 520/- SQM. AS EST IMATED BY VALUER AGAINST RS. 531/-SQM. SHOWN BY THE ASSESSEE. THE DETAILS NOTED IN THIS PAPER ARE ARBITRARY AS NO SPE CIFIC DETAILS ARE GIVEN AND THE VALUE OF INVESTMENTS IS TAKEN AT RS. 3,52,000/- GIVING COST @ 1150/SQM. IN THE YEAR 2004 -05 WHICH IS VERY UNREASONABLE AND IMPOSSIBLE FOR SUCH CONSTRUCTION. THERE IS NO DATE OF EXPENDITURE. IT I S NOT WRITTEN BY THE ASSESSEE. IT IS A DUMB DOCUMENT. THE ADDITIO N MAY KINDLY BE DELETED. 25. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES . 26. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THERE WAS ONLY A DUMB DOCUMENT REGARDING INVESTMENT. I FIND THAT THE ASSESSEE HAS GOT VALUATION DONE AND AS PER VALUERS REPORT, THE COST OF CONSTRUCTION COMES TO RS. 1,59,000/-. THE VALUATIO N REPORT HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT, WHEN TH E REPORT WAS AVAILABLE BEFORE THE AO AND DURING THE PROCEEDIN GS OF ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 24 24 REMAND REPORTS THREE TIMES. I FIND THAT THE ASSESSE E HAS ALREADY SURRENDERED RS. 1,62,500/- IN ITS RETURN. T HEREFORE, NO FURTHER ADDITION IS CALLED FOR. THIS GROUND IS ALLO WED. 27. GROUND NO. 6 IS THAT THE LD. CIT(A) WAS NOT JUSTIFIE D IN CONFIRMING ADDITION OF RS. 20,16,500/- ON ACCOUNT O F HUNDIES. 28. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS MADE SUBMISSIONS BE FORE THE LD. CIT(A). THE LD. AUTHORIZED REPRESENTATIVE OF TH E ASSESSEE FURTHER SUBMITTED THAT IN THE AFFIDAVIT OF PARTNER SHRI FAKRUDDIN KABA AT PAPER BOOK FROM PAGES 88 TO 92 DA TED 28- 01-08, STATING ON OATH THAT THE SURVEY PARTY DECIDE D THE ASSESSEE TO SURRENDER TOTAL AMOUNT OF RS. 46,00,000 /- AS UNDISCLOSED INCOME. SURVEY PARTY FURTHER DIRECTED T HAT THE AMOUNT OF RS. 60,00,000/- SHOULD BE DECLARED OTHERWI SE THE SURVEY WOULD BE CONVERTED INTO SEARCH. THEREFORE, T HE PLAN OF BOGUS HUNDIES WAS HATCHED BY THE SURVEY PARTY. THE SEQUENCE OF EVENTS AND THREATS ARE DETAILED IN THE AFFIDAVIT. IN THIS REGARD, THE LD. AUTHORIZED REPRESENTATIVE OF T HE ASSESSEE SUBMITTED THAT THE SURVEY PARTY MADE THE ASSESSEE A ND OTHER PERSONS TO FABRICATE THE HUNDIS. THE LD. AUTHORIZED ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 25 25 REPRESENTATIVE OF THE ASSESSEE FURTHER SUBMITTED TH AT THE PARTNERS OF THE ASSESSEE FIRM FOLLOW MUSLIM RELIGION . EARNING OF INTEREST IN THEIR RELIGION IS PROHIBITED. THIS F ACT WAS BROUGHT TO THE NOTICE OF THE SURVEY PARTY. THEY DID NOT ACC EDE TO THE REQUEST AND REBUFFED THE ASSESSEE. IT HURT THE RELI GIOUS FEELINGS OF THE ASSESSEE. FINAL ACCOUNTS FOR THE IM MEDIATELY PRECEDING AND SUCCEEDING FINANCIAL YEARS ARE ON REC ORD AND IT WILL BE REVEALED THAT THE ASSESSEE DID NOT CARRY ON MONEYLENDING BUSINESS. NO INTEREST WAS EARNED BY THE ASSESSEE. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED THAT THE ASSESSEE TOOK LOANS AND PAID INTEREST THEREON. NO INTEREST WAS CHARGED OR RECEIVE D DURING THIS YEAR OR LAST YEAR OR SUBSEQUENT YEAR. THE ASS ESSEE PAID INTEREST OF RS. 82,822/- IN THE ASSESSMENT YEAR 200 4-05, RS. 61,655/- IN THE ASSESSMENT YEAR 2005-06 (UNDER CONSIDERATION) AND RS. 67,760/- IN THE ASSESSMENT YEAR 2006-07. 29. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE FURTHER CONTENDED THAT BESIDES 43 HUNDIS PREPARED O N DIRECTION OF THE SEARCH PARTY, VARIOUS OTHER DOCUME NTS WERE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 26 26 SEEN BY THE SURVEY PARTY. THESE HUNDIS ARE AT PB 9- 45. SUCH DOCUMENTS ARE NOT COUNTERSIGNED BY THE SURVEY PARTY . HOWEVER, SERIAL NOS. WERE MARKED BY THE SURVEY PAR TY. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONTENDED THAT THE ASSESSEE REFERRED THE HAND WRITINGS IN THE HUNDIS FO R EXPERT OPINION TO ONE SHRI S.H.TUTEJA, RETIRED EXAMINER OF QUESTIONED DOCUMENT OF GOVERNMENT OF INDIA. HIS REPORT DATED 14.8.20120. HE HAS OPINED THAT THESE HUNDIS WERE SI GNED BY VIPIN KASERA (BANTI), MANOJ VYAS (PAPPU), SIRAJ AND SHABBIR AND ALSO HE HAS NOTED THAT THE HUNDIS WERE PREPARED AT THE SAME TIME IN HIS FINDING. HIS REPORT DATED 14-08-12 WITH ENCLOSURES ARE PLACED AT PB 213 TO 271. FURTHER OPI NION WAS SOUGHT FROM SHRI TUTEJA, WHO STATED THAT THE SERIAL NOS. ON THE HUNDIES WERE MARKED BY THE SAME PERSONS WHO PREPARE D THE INVENTORY. WHEN THE HUNDIS KHOKHAS ARE NOT FILLED-I N TO GIVE THE IDENTITY OF THE LENDER AND BORROWER AND NOT SIG NED BY THE BORROWER, MERELY STATEMENT U/S 133A ACCEPTING THAT THEY ARE HUNDIS IS NOT SUFFICIENT. THE LD. AUTHORIZED REPRES ENTATIVE OF THE ASSESSEE RELIED ON THE DECISION OF ABHI DEVELO PERS V ITO (2007) 12 SOT 444 (AHD. TRIB.). DURING THE COURSE O F HEARING, ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 27 27 THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE F URTHER PLACED RELIANCE ON THE DECISION OF I.T.A.T. INDORE BENCH PASSED IN ORDER DATED 28.08.2013 IN I.T.A.NO. 376/IND/2013 IN THE CASE OF SHRI DILIP KUMAR BASANTILAL DANGAD VS. ITO, MANDSAUR, ON THE SIMILAR FACTS. THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE CONCLUDED THE ARGUME NTS AND PRAYED THAT THE ADDITION OF RS. 20,16,500/- MAY BE DELETED. 30. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON TH E ORDERS OF THE LOWER AUTHORITIES. 31. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. I FIND THAT THE A SSESSEE REFERRED THE HAND WRITINGS IN THE HUNDIS FOR EXPERT OPINION TO ONE SH. S.H. TUTEJA, RETIRED EXAMINER OF QUESTIONED DOCUMENT OF GOVERNMENT OF INDIA. CBI. HE SERVED TH IS ORGANIZATION AS ASSISTANT GOVERNMENT EXAMINER FROM 22.03.1971 TILL 24.06.1991 AND AS DY. GOVERNMENT EX AMINER FROM 25.06.1991 TILL HIS RETIREMENT ON SUPERANNUATI ON I.E. 31.05.1996.SHRI TUTEJA INDEPENDENTLY EXAMINED SEVER AL CASES PERTAINING TO THE INVESTIGATION BY VARIOUS AGENCIES LIKE UNITS OF CBI, VIGILANCE COMMISSIONS, COURTS OF LAW, VIGILA NCE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 28 28 DEPARTMENTS OF PUBLIC SECTOR UNDERTAKIGNS, BANKS ET C. UNDER THE JURISDICTION OF GOVERNMENT EXAMINER OF QU ESTIONED DOCUMENTS, CALCUTTA. SHRI TUTEJA IS HAVING VAST EX PERIENCE, WHICH IS CLEAR FROM THE CERTIFICATE FILED ON PAGE NO .272. SHRI TUTEJA HAS OPINED THAT THESE HUNDIS WERE SIGNED BY VIPIN KASERA (BANTI), MANOJ VYAS (PAPPU), SIRAJ AND SHABB IR. HE HAS ALSO OPINED THAT HUNDIS WERE PREPARED AT THE SA ME TIME AND STATED THAT THE SERIAL NOS. ON THE HUNDIES WERE MARKED BY THE SAME PERSONS WHO PREPARED THE INVENTORY. HERE THE KHOKAS WERE FILLED-IN BY THE FOUR PERSONS AND SIGNED BY THEM MENTIONED EARLIER. FULL NAME AND FATHERS NAME , HAVE ALSO NOT BEEN FILLED IN. THE NAME OF PERSON WHO IS ALLEGED TO HAVE ADVANCED THE LOAN IS ALSO NOT MENTIONED. THE PERSON TAKING LOAN HAS NOT SIGNED. THE NAMES OF BORROWERS ARE BOG US. THEREFORE, I CONCLUDE THAT THESE HUNDIS WERE NOT IS SUED BY THE ASSESSEE. I RELY ON THE DECISION ON SIMILAR FAC TS IN THE CASE OF SHRI DILIP KUMAR BASANTILAL DANGAD VS. ITO, MAND SAUR, PASSED IN I.T.A.NO. 376/IND/2013 FOR THE ASSESSMENT YEAR 2007-08 VIDE ORDER DATED 28.08.2013, WHEREIN THE TRI BUNAL HAS HELD AS UNDER :- ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 29 29 4. WITH RESPECT OF ADDITION MADE ON ACCOUNT OF ENTR Y IN THE DIARY DESCRIBED AS MAYUR MOGRA AGARBATTI, IT WAS CONTENDED BY LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT SURVEY OFFICER INSISTED THE ASSESSEE TO WRITE CERTAIN NAMES AND WHICH WAS TAKEN AS A LOAN CREDITOR OF THE ASSESSEE. OUR ATTENTION WAS ALSO DRAWN TO THE PETITION FILED BEFO RE CIT, WHEREIN ALLEGATIONS WERE LEVIED AGAINST THE SURVEY OFFICERS. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS CONTENDED THAT NAMES GIVEN IN THE DIARY ARE BOGUS AND SURRENDER WAS TAKEN FROM HIM UNDER PRESSURE AND THAT HE DID NOT DEAL IN MONEYLENDING BUSINESS. FROM THE RECORD, WE FOUND THAT DEPARTMENT HAS ISSUED NOTICES TO THE CERTAIN PARTIES TO WHOM ASSESSEE WAS ALLEGED TO HAVE GIVEN LOANS, WHEREIN THEY HAVE DENIED ANY TRANSACTION WITH THE ASSESSEE. NEITHER THE AO HAS RECORDED ANY FINDING WITH RESPECT TO THE LOAN GIVEN BY THE ASSES SEE TO ANY OF THESE PERSONS, NOR THE AO HAS TRIED TO GE T THE TRANSACTION CONFIRMED WITH ANY OF THESE PERSONS . ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 30 30 THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION MERE LY ON THE BASIS OF ADMISSION BY THE ASSESSEE. WHEN THE NAMES GIVEN IN THE DIARY WERE FOUND TO BE BOGUS, MERELY BY OBSERVING THAT EVEN IF THE NAMES GIVEN I N THE DIARY WAS NOT GENUINE AND IT IS PRESUMED THAT THE APPELLANT HAS GIVEN LOANS TO VARIOUS PERSONS IN FICTITIOUS NAMES, THE LD. CIT(A) HAS CONFIRMED THE ADDITION. WE DO NOT FIND ANY JUSTIFICATION IN THE ADDITION SO MADE IN RESPECT OF FICTITIOUS NAMES ENTERED IN THE DIARY. FINANCIAL POSITION, LIVING STANDARD OF ASSESSEE DO NOT SUPPORT THE ALLEGATION MADE BY REVENUE TO THE EFFECT THAT HE HAD ADVANCED HUGE LOAN OF RS. 16,72,000/-. MERELY ADMISSION BEFORE THE SURVEY PARTY IS NOT SUFFICIENT TO MAKE ADDITION UNLESS SOME COGENT AND CORROBORATIVE MATERIAL IS BROUGHT ON RECORD TO SUBSTANTIATE THE SAME. IN THE INSTANT CASE, THE AO WAS UNABLE TO CONFIRM FROM EVEN A SINGLE PARTY REGARDING LOAN GIV EN BY THE ASSESSEE TO THEM. EVEN IN RESPONSE TO THE NOTICES GIVEN BY THE DEPARTMENT, THE PERSONS HAVE ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 31 31 DENIED ANY TRANSACTION WITH THE ASSESSEE. TOTALITY OF FACTS EMERGING FROM THE ORDER OF THE LOWER AUTHORIT IES AND MATERIAL PRODUCED BEFORE US DO NOT SUPPORT THE ADDITION SO MADE ON ACCOUNT OF ALLEGED LOAN GIVEN B Y THE ASSESSEE. ASSESSEE PERSONALLY APPEARED BEFORE THE BENCH AND HE WAS EXAMINED TO FIND OUT HIS WORTH. HOWEVER, NOTHING SUPPORTED THE CONCLUSION DRAWN BY DEPARTMENT REGARDING HIS FINANCIAL POSITION AND CAPACITY TO ADVANCE LOANS. IN THE LAST SIX YEARS, DEPARTMENT WAS NOT ABLE TO RECOVER A SINGLE PENNY FROM ASSESSEE, SINCE NOTHING WAS FOUND BY THE DEPARTMENT, WHICH ITSELF PROVE THE FINANCIA L POSITION OF ASSESSEE. IF THE DEPARTMENT FINDS THAT ASSESSEE HAD ACTUALLY ADVANCED LOANS TO VARIOUS PARTIES, THERE ARE SUFFICIENT POWERS WITH THE AO TO RECOVER AMOUNT FROM SUCH LOAN CREDITORS. 5. IN VIEW OF THE ABOVE DISCUSSION, THERE IS NO JUSTIFICATION FOR THE ADDITION MADE BY THE AO ON ACCOUNT OF ALLEGED LOAN AND INTEREST THEREON. ACCORDINGLY, WE DIRECT THE AO TO DELETE THE ADDITIO N ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 32 32 MADE ON ACCOUNT OF LOAN ALLEGED TO BE GIVEN BY HIM AND INTEREST THEREON. 32. IN VIEW OF THE FOREGOING DISCUSSIONS, I FIND THAT TH E HUNDIS WERE ONLY DUMB DOCUMENTS AND NO CORROBORATIVE EVIDENCE WAS AVAILABLE TO PROVE THEIR EXISTENCE. HE NCE, NO ADDITION U/S 69 IS CALLED FOR. 33. IN THE RESULT, THE APPEAL IS ALLOWED. I.T.A.NO. 387/IND/2015 ASSESSEES APPEAL : 33. SINCE WE HAVE DECIDED THE ASSESSEES QUANTUM APPEAL IN I.T.A.NO.380/IND/2013 AND ALLOWED THE APPEALS, T HE APPEAL IN I.T.A.NO. 387/IND/2015 FOR IMPOSITION OF PENALTY U/S 271(1)(C) IS HEREBY DISPOSED OF DELETING THE PE NALTY. 34. CONSEQUENTLY, APPEAL FILED BY THE DEPARTMENT IN I.T.A.NO. 430/IND/2013 IS DISMISSED AND APPEAL FILE D BY THE ASSESSEE IN I.T.A.NO.380/IND/2013 AND I.T.A.NO. 387/IND/2015 ARE ALLOWED. ACIT ,RATLAM VS. M/S.NOVELTY ALUMINIUM & HARDWARES, RATLAM I.T.A.NOS. 430/IND/2013 AND 380/IND/2013 A.Y.2005-0 6 33 33 THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN CO URT ON 30 TH JUNE, 2016, SD/- ( D.T.GARASIA) JUDICIAL MEMBER DATED 30 TH JUNE, 2016. CPU*