ITO 24(3)(1), MUMBAI V. M/S. JALLARAM WRITING INSTRUMENTS, MUMBAI

ITA 504/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4112 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 10-07-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 18-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Block assessment; Retraction
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI .. , !'# $ $ $ $ ! %, & !'# !' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M !./ I.T.A. NO. 504 /MUM/2011 ( &) % $*% &) % $*% &) % $*% &) % $*% / / / / ASSESSMENT YEAR : 2006-07) INCOME TAX OFFICER 24(3)(1), R NO. 703, C-11, 7 TH FLOOR, BKC, BANDRA (E), MUMBAI 400 051. ) ) ) ) / VS. M/S JALLARAM WRITING INSTRUMENTS, 10, DEVAN INDUSTRIAL ESTATE, I.B. PATEL ROAD, GOREGAON (E), MUMBAI 400 063. #+ !./ PAN : AABFJ1693H ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) +, / 0 ! / APPELLANT BY : SHRI O.P. SINGH -.+, / 0 ! / RESPONDENT BY : SHRI NARESH JAIN !)$ / / // / DATE OF HEARING : 10-07-2013 12* / / DATE OF PRONOUNCEMENT : 31-07-2013 '3 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) 34, MUMBAI DATED 09-11-2010 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVENUE HAS CHALLENGED THE ACTION OF T HE LD. CIT(A) IN DELETING THE ADDITION OF RS. 44 LACS MADE BY THE A.O. ON ACCOUNT OF DISCREPANCY FOUND IN THE STOCK AT THE TIME OF SURVEY U/S 133A OF THE INC OME TAX ACT, 1961 (THE ACT). ITA 504/MUM/2011 2 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSH IP FIRM WHICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF BALL PEN INSTRU MENTS. A SURVEY U/S 133A OF THE ACT WAS CARRIED OUT IN THE CASE OF THE ASSES SEE ON 28-09-2005 DURING THE COURSE OF WHICH STATEMENT OF SHRI ASHOK D. JAIN , PARTNER OF THE ASSESSEE FIRM WAS RECORDED. IN THE SAID STATEMENT, SHRI ASH OK D. JAIN AGREED TO SURRENDER ADDITIONAL INCOME OF RS. 44 LACS OF THE A SSESSEE FIRM. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, T HE ASSESSEE, HOWEVER, DECLARED TOTAL INCOME OF RS. 1,45,690/- ONLY THEREB Y RETRACTING THE DECLARATION MADE DURING THE COURSE OF SURVEY. THIS RETRACTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE A.O. AS THE SAME WAS NOT MA DE IMMEDIATELY AFTER THE SURVEY ACTION. HE ALSO DID NOT ACCEPT THE STAND OF THE ASSESSEE THAT THE AMOUNT OF RS. 44 LACS REPRESENTING SALE PROCEEDS OF THE STOCK OF EARLIER YEAR WAS DULY REFLECTED IN THE BOOKS OF ACCOUNT REGULARL Y MAINTAINED. ACCORDING TO HIM, THERE WERE SEVERAL DISCREPANCIES IN THE STOCK FOUND DURING THE COURSE OF SURVEY AND THE PARTNER OF THE FIRM HAD CLEARLY ACCE PTED THE SAID DISCREPANCIES WHILE SURRENDERING THE INCOME OF RS. 44 LACS. ACCO RDINGLY, ADDITION OF RS. 44 LACS WAS MADE BY THE A.O. TO THE TOTAL INCOME OF TH E ASSESSEE ON ACCOUNT OF DISCLOSURE MADE IN THE STATEMENT RECORDED DURING TH E COURSE OF SURVEY FOR THE FOLLOWING REASONS AS SUMMARIZED BY HIM IN THE ASSES SMENT ORDER:- I) THE PARTNER OF THE ASSESSEE DURING THE COURSE OF SURVEY PROCEEDINGS AFTER PHYSICAL VERIFICATION HAS VOLUNTA RILY MADE THE DISCLOSURE OF EXCESS STOCK OF RS. 44 LAKH. II) THE ASSESSEE HAS NOT PROVIDED ANY STOCK INVENTO RY OR RECONCILIATION OF STOCK TO PROVE THAT THERE IS NO E XCESS STOCK AT THE TIME OF SURVEY IN ITS PREMISES. III) THE ASSESSEE HAS PROVED IRRELEVANT INFORMATION THAT WHAT DEPARTMENT HAS CLAIMED AS EXCESS STOCK HAS BEEN SOL D TO M/S LALIT ENTERPRISES AND INCLUDED ANY DOCUMENTARY EVID ENCE TO PROVE THAT THE ASSESSEE HAS SOLD THE SAME STOCK AND THE SAME STOCK HAS BEEN SOLD TO M/S LALIT ENTERPRISES. 3. THE ADDITION MADE BY THE A.O. ON ACCOUNT OF DISCLOS URE MADE DURING THE COURSE OF SURVEY WAS CHALLENGED BY THE ASSESSEE IN AN APPEAL FILED BEFORE ITA 504/MUM/2011 3 THE LD. CIT(A) AND AFTER CONSIDERING THE SUBMISSION S MADE ON BEHALF OF THE ASSESSEE AS WELL AS MATERIAL AVAILABLE ON RECORD, T HE LD. CIT(A) DELETED THE ADDITION OF RS. 44 LACS MADE BY THE A.O. ON THIS IS SUE FOR THE FOLLOWING REASONS GIVEN IN PARA 2.2 AND 2.3 OF HIS IMPUGNED O RDER:- 2.2 L HAVE GONE THROUGH THE CONTENTS OF IMPUGNED A SSESSMENT ORDER, GROUNDS OF APPEAL, ARGUMENTS AND WRITTEN SUBMISSION S OF THE APPELLANTS AUTHORISED REPRESENTATIVE ALONG WITH TH E CASE LAWS RELIED UPON BY HIM ON THIS ISSUE. I FIND THAT THERE IS A R ETRACTION OF THE IMPUGNED STATEMENT AND THE DEPARTMENT IS NOT IN POS SESSION OF ANY ADVERSE MATERIAL TO MAKE AN ADDITION OF 44,00,000/- EXCEPT THE SAID STATEMENT OF SHRI ASHOK D. JAM, PARTNER RECORDED DU RING THE SURVEY THAT HAS BEEN RETRACTED. THE ASSESSING OFFICER HAS HEAVILY RELIED ON THE DECISION OF ITAT IN THE CASE OF HIRA LAL MAGANLAL & CO. VS DCIT SR-52, IT(SS) A NO.117/MUM/1996 (BLOCK ASSESSMENT), THE CO NTENTS OF WHICH HE HAS REPRODUCED IN PARA 4 OF THE IMPUGNED ASSESSM ENT ORDER. I FIND THAT THE SAID DECISION IS NOT APPLICABLE IN THE FAC TS AND CIRCUMSTANCES OF THE INSTANT CASE AS IT IS NOT A CASE OF SEARCH A ND SEIZURE BUT ONLY OF A SURVEY. FURTHERMORE, THE HONBLE BOMBAY HIGH COURT. IN THE CASE OF CIT-21 VS UTTAM CHAND JAM IN ITA NO.634 OF 2009 HAS CLEARLY HELD THAT ADDITION CAN HE MADE DESPITE THE RETRACTION OF THE SURRENDER PROVIDED THE ASSESSING OFFICER HAS SUFFICIENT MATER IAL TO SUBSTANTIATE THE ADDITION. THE RELEVANT PORTION OF THE DECISION OF HIGH COURT (SUPRA) IS REPRODUCED HEREUNDER: 14. IN THE PRESENT CASE, THE STATEMENT OF MR. TRIV EDI RECORDED ON 31/03/2000 HAS BEEN RETRACTED BY HIM VI DE LETTER DATED 4/4/2000 (RECEIVED BY THE ASSESSING OF FICER ON 17/4/2000). IN THE LIGHT OF THE DECISION OF THE APEX COURT IN THE CASE OF VINOD SOLANKI VS UNION OF INDI A REPORTED IN 2008 (16) SCALE 31, THE RETRACTED CONFE SSION OF MR. TRIVEDI CAN BE RELIED UPON ONLY IF THERE IS IND EPENDENT AND COGENT EVIDENCE TO CORROBORATE THE STATEMENT OF MR. TRIVEDI MADE ON 31/03/2000. 2.3 I FURTHER FOUND THAT AS PER PROFIT AND LOSS ACC OUNT FOR THE YEAR ENDED 31/03/2005, CLOSING STOCK IS DISCLOSED TO THE TUNE OF RS. 39.08.524/- WHEREAS OPENING STOCK WAS RS. 44,58,159 .84. THIS SUGGESTS THAT THE BUSINESS IS ALMOST IN THE PROCESS OF BEING CLOSED DOWN AND THE APPELLANT IS SELLING THE STOCK ONLY R IGHT FROM THE A.Y. 2005-06. DURING THE SURVEY ALSO NO BUSINESS ACTIVI TY WAS FOUND AND THEREFORE, THERE IS NO COGENT REASON FOR WHICH THE APPELLANTS EXPLANATION SHOULD NOT BE ACCEPTED THAT THE CLOSING STOCK OF THE LAST YEAR WHICH BECAME THE OPENING STOCK OF THIS YEAR, H AS BEEN SOLD DURING THIS YEAR ACCORDINGLY, THEY HAVE FILED THEIR RETURN OF INCOME IN ACCORDANCE WITH THEIR ACCOUNT BOOKS. NO WHERE IN TH E IMPUGNED ASSESSMENT ORDER, THE ASSESSING OFFICER HAS FOUND T HAT THE SALES DISCLOSED TO THE TUNE OF ? 44,92,376/- ARE OUT OF T HE PURCHASES DURING ITA 504/MUM/2011 4 THE YEAR ONLY AND NO PART OF THE SAME PERTAINS TO T HE OPENING STOCK, THUS, IN VIEW OF THE ABOVE DISCUSSION, IT IS HELD T HAT THE ASSESSING OFFICER IS NOT IN POSSESSION OF ANY INDEPENDENT AND COGENT EVIDENCE TO CORROBORATE STATEMENT OF MR. ASHOK D. JAIN, THAT HA S BEEN RETRACTED LATER ON. ACCORDINGLY, THE IMPUGNED ADDITION IS DEL ETED IN VIEW OF THE DECISIONS OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT-21 VS UTTAMCHAND JAM (SUPRA) AND HONBLE APEX COURT IN TH E CASE OF VINOD SOLANKI VS UNION OF INDIA REPORTED IN 2008 (16) SCA LE 31, RESPECTIVELY IN THE FACTS AND CIRCUMSTANCES OF THE INSTANT CASE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LD. D.R. STRONGLY RELIED ON THE ORDER OF THE A.O. IN SUPPORT OF THE REVENUES CASE ON THIS ISSUE. HE INVITED OUR ATTEN TION TO THE RELEVANT PORTION OF THE STATEMENT OF THE PARTNER OF THE ASSESSEE FIR M AT PAGE 69 & 70 OF THE ASSESSEES PAPER BOOK AND SUBMITTED THAT THE STOCK THAT HAD BEEN LYING IN THE FACTORY PREMISES AT DAMAN WAS ADMITTED TO BE SOLD B Y THE PARTNER OF THE ASSESSEE FIRM DURING THE YEAR UNDER CONSIDERATION F OR RS. 44 LACS AND INCOME TO THAT EXTENT WAS VOLUNTARILY DECLARED BY HIM. HE SUBMITTED THAT EVEN THE ADVANCE TAX ON THE SAID INCOME WAS ALSO PAID BY THE ASSESSEE FIRM. HE CONTENDED THAT THE LD. CIT(A), HOWEVER, IGNORED THI S VOLUNTARY SURRENDER MADE ON BEHALF OF THE ASSESSEE AND DELETED THE ADDI TION MADE BY THE A.O. ON THIS ISSUE BY SIMPLY ACCEPTING THE STAND OF THE ASS ESSEE THAT SALE PROCEEDS OF STOCK WERE DULY REFLECTED IN THE BOOKS OF ACCOUNT. 5. THE LD. COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, INVITED OUR ATTENTION TO THE BALANCE SHEET OF THE ASSESSEE FIRM AS ON 31 ST MARCH, 2005 TO SHOW THAT CLOSING STOCK OF RS. 39,08,524/- WAS LYIN G WITH THE ASSESSEE. HE THEN INVITED OUR ATTENTION TO THE PROFIT AND LOSS O F THE ASSESSEE FIRM FOR THE YEAR UNDER CONSIDERATION PLACED AT PAGE 41 OF HIS P APER BOOK TO SHOW THAT THE SAID STOCK WAS SOLD BY THE ASSESSEE FOR RS. 44,92,3 76/- AND THE SAID AMOUNT WAS DULY DISCLOSED IN THE BOOKS OF ACCOUNT REGULARL Y MAINTAINED. HE THEN INVITED OUR ATTENTION TO THE RELEVANT PORTION OF TH E STATEMENT OF THE ASSESSEES PARTNER RECORDED DURING THE COURSE OF SURVEY PLACED AT PAGE NO. 62 TO 70 OF ITA 504/MUM/2011 5 HIS PAPER BOOK TO POINT OUR THAT THERE WAS NO ACTIV ITY OF THE ASSESSEE FIRM AT DAMAN UNIT AFTER 31 ST MARCH, 2004 AND THE SAME WAS STATED TO BE SOLD DUR ING THE FINANCIAL YEAR 2004-05 AND 2005-06 RELEVANT TO A.Y. 2005-06 AND 2006- 07. HE CONTENDED THAT IT WAS THUS A CASE OF SALE OF STOCK LYING WITH THE ASSESSEE ON THE CLOSURE OF BUSINESS AND SINCE THE S AID SALE PROCEEDS WERE DULY DECLARED BY THE ASSESSEE FIRM IN THE REGULAR B OOKS OF ACCOUNT, THERE WAS NO UNDISCLOSED INCOME OF THE ASSESSEE. HE CONTENDED THAT THE SURRENDER OF INCOME WAS WRONGLY MADE BY THE PARTNER OF THE ASSES SEE FIRM IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY AND SINCE THERE WAS NO EXCESS STOCK OR ANY DISCREPANCIES IN THE STOCK FOUND DURIN G THE COURSE OF SURVEY, THE ADDITION MADE BY THE A.O. RELYING MERELY ON THE SUR RENDER MADE DURING THE COURSE OF SURVEY WAS RIGHTLY DELETED BY THE LD. CIT (A). IN SUPPORT OF THIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE DECISION OF HONBLE CHATTISGARH HIGH COURT IN THE CASE OF INCOME-TAX OF FICER V. VIJAY KUMAR KESAR (2010) 327 ITR 497 AND THAT OF THE DECISION O F HONBLE ALLAHABAD HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME-TAX V. SIR SHADI LAL ENTERPRISES LTD. (2008) 300 ITR 137 (ALL.) 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT T HE IMPUGNED ADDITION OF RS. 44 LACS WAS MADE BY THE A.O. RELYING ON THE SURREND ER OF INCOME MADE BY THE PARTNER OF THE ASSESSEE FIRM IN HIS STATEMENT RECOR DED DURING THE COURSE OF SURVEY. A COPY OF THE SAID STATEMENT IS PLACED AT PAGE 62 TO 70 OF THE ASSESSEES PAPER BOOK AND A PERUSAL OF THE SAME SHO WS THAT IT WAS CLEARLY STATED THEREIN THAT THERE WAS NO BUSINESS ACTIVITY AT DAMAN UNIT OF THE ASSESSEE AFTER 31 ST MARCH, 2004. IT WAS ALSO STATED THAT THE STOCK RE CORD MAINTAINED AT DAMAN UNIT WAS BROUGHT TO MUMBAI AFTE R THE CLOSURE OF DAMAN UNIT BUT THE SAME GOT DESTROYED DURING FLOOD ON 26 TH JULY, 2005. IT WAS FURTHER STATED THAT SOME OF THE STOCK LYING IN DAMAN FACTORY WAS SOLD IN THE FINANCIAL YEAR 2004-05 AND THE BALANCE WAS SOLD DURING THE YEAR UNDER ITA 504/MUM/2011 6 CONSIDERATION FOR RS. 44 LACS. IT WAS THUS NOT A CA SE OF ANY EXCESS STOCK FOUND DURING THE COURSE OF SURVEY NOR THERE WAS ANY DISCR EPANCY FOUND DURING THE COURSE OF SURVEY IN THE STOCK AS IS EVIDENT FROM TH E STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM RECORDED DURING THE COURSE OF SURVEY. EVEN IN THE ASSESSMENT ORDER, THERE WAS NO SUCH DISCREPANCY SPE CIFICALLY POINTED OUT BY THE A.O. HAVING REGARD TO ALL THESE FACTS OF THE CA SE, WE AGREE WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ADDITION OF RS. 44 LACS MADE BY THE A.O. MERELY ON THE BASIS OF STATEMENT O F THE PARTNER OF THE ASSESSEE FIRM RECORDED DURING THE COURSE OF SURVEY WAS NOT SUSTAINABLE. ON THE OTHER HAND, THE SALE PROCEEDS OF OLD STOCK AMOU NTING TO RS. 44,92,376/- WERE DULY DISCLOSED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT REGULARLY MAINTAINED AND THE BOOK RESULTS SHOWN BY THE ASSESS EE HAVING BEEN ACCEPTED BY THE ASSESSEE, WE ARE OF THE VIEW THAT THE ADDITI ON OF RS. 44 LACS MADE BY THE A.O. ON THIS ISSUE MERELY ON THE BASIS OF STATE MENT RECORDED DURING THE COURSE OF SURVEY WAS RIGHTLY DELETED BY THE LD. CIT (A). WE, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED O RDER OF THE LD. CIT(A) GIVING RELIEF TO THE ASSESSEE ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS THIS APPEAL FILED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMIS SED. 4 5 #$ / 4 / 67 ORDER PRONOUNCED IN THE OPEN COURT ON 31-07-2013 . '3 / 12* 8')5 31-07-2013 2 / SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) & !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; 8') DATED 31-07-2013. ITA 504/MUM/2011 7 $.&).!./ RK , SR. PS '3 / -&9: ;:* '3 / -&9: ;:* '3 / -&9: ;:* '3 / -&9: ;:*/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. < () / THE CIT(A)- 34, MUMBAI 4. < / CIT 24, MUMBAI 5. :$? -&&) , , / DR, ITAT, MUMBAI I BENCH 6. @% A / GUARD FILE. '3)! '3)! '3)! '3)! / BY ORDER, !.: -& //TRUE COPY// B B B B/ // /!6 !6 !6 !6 ( DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI