The ITO-4(1), V. Shri Narendra Kumar Narang,

ITA 515/IND/2003

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8793 (ITAT-INDORE)
• Duration Of Justice: 6 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-06-2009
• Assessment Year: 1998-1999
• Appeal Filed On: 29-05-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K CHOWDHARY
• Keywords: Unexplained investment; Loose papers; Additional evidence; Revised return; Set aside
• Section: 133A; 139(5); 191; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI M.L.GUSIA,A.M. PAN NO. : N.A. I.T.A.NO. 515/IND/2003. A.Y. : 1998-99 INCOME-TAX OFFICER, SHRI NARENDRA KUMAR NARANG, 4(1), VS 42, SOUTH TUKOGANJ, INDORE. INDORE. APPELLANT RESPONDENT I.T.A.NO. 362/IND/2003. A.Y. : 1998-99 SHRI NARENDRA KUMAR NARANG, INCOME-TAX OFFICER, 42, SOUTH TUKOGANJ, VS 4(1), INDORE. INDORE. APPELLANT RESPONDENT DEPARTMENT BY : SHRI R.K.CHOWDHARY, CIT DR RESPONDENT BY : SHRI PRAKASH JAIN, FCA -: 2 :- 2 O R D E R PER GUSIA, A.M. THESE TWO CROSS APPEALS ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-II, INDORE, 0ON 28.3.2003 FOR THE ASSESS MENT YEAR 19898-99. FOR THE SAKE OF CONVENIENCE, WE, FIRST, DISCUSS THE REV ENUES APPEAL. I.T.A.NO. 515/IND/2003 : 2. BEFORE TAKING UP THE APPEAL, IT IS STATED THAT DURI NG THE COURSE OF HEARING, THE REVENUE HAS TAKEN ADDITIONAL GROUND OF APPEAL VIDE LETTER DATED 23.4.2008, WHICH READS AS UNDER :- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING RELIEF TO THE ASSESSEE BY CONSIDERING VARIOUS ADDITIONAL EVIDENCES WHICH ARE IN THE FORM OF ORDER PASSED BY THE COMMERCIAL TAX AUTHORITIES SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER BY THE ASSESSING OFFICER, -: 3 :- 3 WITHOUT GIVING OPPORTUNITIES TO THE AO AND IN VIOLATION TO THE RULE 46A. PRAYER : IT IS, THEREFORE, PRAYED THAT THE LD. CIT(A) IMPUGNED FINDING AND ORDER, KINDLY BE SET ASIDE AND THOSE OF THE AO RESTORED ON ALL THE EFFECTIVE GROUND INCLUDING ADDITIONAL GROUND OF APPEAL. 3. FACTS OF THE CASE ARE THAT DURING THE COURSE OF APP ELLATE PROCEEDINGS BEFORE THE CIT(A), IT IS CONTENDED THAT THE ASSESSEE CHALLENGED THE ORDER OF THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX BEFORE THE DY. COMMISSIONER (APPEALS), COMMERCIAL T AX AND THE APPELLATE AUTHORITY AFTER VERIFYING THE FACTS ON RE CORD GAVE CERTAIN DIRECTION TO THE ASSISTANT COMMISSIONER OF COMMERCI AL TAX TO RECOMPUTE THE SALES ON THE BASIS OF DIRECTION GIVEN BY THE DY. COMMISSIONER (APPEALS) OF COMMERCIAL TAX DEPARTMEN T. CONSEQUENTLY, THE ASSISTANT COMMISSIONER OF COMMER CIAL TAX PASSED FRESH ASSESSMENT ORDER. THESE ORDERS WERE MADE AVAI LABLE TO THE -: 4 :- 4 CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE CHALLE NGED THE ABOVE ADDITIONAL GROUND FOR THE REASON THAT THE ORDER PAS SED BY THE APPELLATE AUTHORITY WAS MADE AVAILABLE TO THE CIT(A) FOR REFE RENCE ONLY, AS THE AO HAD MADE ADDITION PURELY ON THE BASIS OF THE INF ORMATION GATHERED BY HIM FROM COMMERCIAL TAX DEPARTMENT. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGUED THAT THE APPELLA TE ORDER PASSED BY THE DY. COMMISSIONER (APPEALS) OF SALES TAX WAS ADD ITIONAL EVIDENCE ON WHICH THE CIT(A) HAS RELIED UPON AND CONSEQUENTL Y DECIDED THE APPEAL UNDER DISCUSSION. HE PLACED RELIANCE ON THE DECISION OF THIS BENCH IN THE CASE OF DY. CIT, INDORE. VS. RAHUL PRO DUCTS LIMITED, 6 ITJ 273. HOWEVER, WE NOTED THAT IN THAT CASE AN AFF IDAVIT WAS ADMITTED BY THE LD. CIT(A) WITHOUT PROPER OPPORTUNITY TO THE AO OR PASSING AN ORDER RULE 46A. THEREFORE, IT WAS HELD THAT RIGHT O F INVESTIGATION AND INQUIRY OF THE AO HAD BEEN CURTAILED BY THE LD. CIT (A) AND MERELY PLACING RELIANCE ON THE AFFIDAVIT AND CONFIRMATION DELETED THE ADDITION. THEREFORE, THE CIT(A) VIOLATED RULE 46A AND, THUS, THE MATTER RESTORED BACK TO THE FILE OF THE CIT(A) TO DECIDE THE ISSUE AFRESH CONSIDERING THE -: 5 :- 5 ABOVE OBSERVATION OF THIS BENCH. THE LEARNED DEPART MENTAL REPRESENTATIVE FURTHER PLACED RELIANCE ON THE DECIS ION OF JURISDICTIONAL HIGH COURT OF M.P. IN THE CASE OF CIT VS. TOLARAM H ASSOMAL, 202 CTR 317. IN THAT CASE, FOUR ADDITIONAL GROUNDS OF APPEA L WERE ACCEPTED BY THE TRIBUNAL. THE HONBLE HIGH COURT HELD THAT HAD THE CASE BEEN REMANDED BY THE TRIBUNAL, THE CIT(A) WOULD HAVE BEE N IN A POSITION TO EXAMINE THE ISSUE FOR THE FIRST TIME IN RELATION TO THOSE FOUR GROUNDS, WHICH HE DID NOT DECIDE FOR WANT OF ANY ATTACK ON T HOSE GROUNDS INITIALLY IN THE FIRST GROUND. IT IS FURTHER HELD T HAT IT CANNOT BE DISPUTED THAT THE CIT(A) HAD JURISDICTION TO EXAMINE THOSE F OUR GROUND, HAD IT BEEN RAISED BEFORE HIM ANY APPEAL EVEN IN THE FIRST ROUND. FURTHER, THE APPROACH AND THE MANNER IN WHICH THE TRIBUNAL ALLOW ED THE ASSESSEE TO RAISE ADDITIONAL GROUNDS IN APPEAL FOR THE FIRST TI ME AND THEN DECIDED THE APPEAL ON THOSE GROUNDS BY NOT ONLY SETTING ASIDE O F THE ORDER OF THE CIT(A), BUT EVEN PROCEEDINGS TO ANNUL THE ORDER OF AO ALSO CANNOT BE APPROVED. FROM THE ABOVE, IT IS PERTINENT TO NOTE T HAT THE FACTS ARE ENTIRELY DIFFERENT IN THAT CASE ALSO. HOWEVER, IN T HIS CASE, THE AO HAS -: 6 :- 6 MADE ADDITION FULLY ON THE BASIS OF THE ORDER PASSE D BY THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX AND THE ASSESSEE COU LD NOT GET THE ORDER OF DY. COMMISSIONER OF COMMERCIAL TAX ( APPEA LS ) AT THE TIME OF ASSESSMENT STAGE, BECAUSE THE SAME PASSED SUBSEQ UENT TO THE ASSESSMENT ORDER. THE CERTIFIED COPY OF DY. COMMISS IONER OF COMMERCIAL TAX (APPEALS) IS A PUBLIC DOCUMENTS AND ITS GENUINENESS IS BEYOND DOUBT AND DISPUTE. THE ORDER OF DY. COMMI SSIONER OF COMMERCIAL TAX (APPEALS) WAS ADMITTED BY THE LD. CI T(A) AS PER PROVISIONS OF RULE 46A(4) OF INCOME TAX RULES TO DI SPOSE OF THE APPEAL OF THE ASSESSEE. THUS, IN OUR CONSIDERED OPINION, T HERE WAS NO VIOLATION OF RULE 46A OF THE INCOME TAX RULES. HENCE, THIS AD DITIONAL GROUND OF APPEAL RAISED BY THE REVENUE IS REJECTED. 4. NOW DISCUSSING THE GROUND TAKEN IN THE APPEAL MEMO, THE FIRST GROUND OF APPEAL IS THAT THE LD.CIT(A) ERRED IN AL LOWING RELIEF TO RS. 42,11,822/- MADE U/S 69 OF THE INCOME-TAX ACT, 1961 . 5. FACTS OF THE CASE ARE THAT DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION , THE SURVEY/SE ARCH WAS CONDUCTED -: 7 :- 7 BY COMMERCIAL TAX DEPARTMENT ON 31.5.1997 AND THERE AFTER SURVEY WAS CONDUCTED BY THE INCOME TAX DEPARTMENT UNDER SE CTION 133A ON 6.6.1997. 6. DURING THE COURSE OF SURVEY CONDUCTED BY COMMERCIAL TAX DEPARTMENT, PHYSICAL STOCK WAS FOUND EXCESS BY RS. 60,70,322/-. HOWEVER, AFTER FIVE DAYS DURING THE SURVEY BY THE I NCOME TAX DEPARTMENT, PHYSICAL STOCK WAS FOUND IN EXCESS OF R S. 2,51,507/-. THE AO MADE ADDITION OF RS. 66,70,329/- U/S 69 OF THE I NCOME-TAX ACT, 1961, TOWARDS ALLEGED DISCREPANCIES IN STOCK FOUND ON THE BASIS OF INFORMATION COLLECTED FROM COMMERCIAL TAX DEPARTMEN T. INCOME TAX DEPARTMENT CONDUCTED SURVEY ON 6.6.1997, DURING WHI CH ONLY STOCK OF RS. 2,51507/- WAS FOUND IN EXCESS. IT WAS HELD BY T HE ASSESSING OFFICER THAT STOCK OF RS. RS. 60,70,322/- WAS SOLD BY THE A SSESSEE DURING THE INTERVENING PERIOD FROM 31.5.1997 TO 6.6.1997 AND, ACCORDINGLY, HE ADDED THIS AMOUNT AS UNEXPLAINED INVESTMENT U/S 69 OF INCOME-TAX ACT, 1961. IT IS ARGUED BEFORE THE CIT(A) BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE SEARCH CONDUCTED BY THE COMMERCIA L TAX DEPARTMENT -: 8 :- 8 WAS COMMENCED AT 1 OCLOCK AND CONCLUDED AT 5 O CL OCK I.E. TOTAL TIME TAKEN WAS FOUR HOURS. WITHIN SUCH A SHORT TIME , THE COMMERCIAL TAX AUTHORITIES INSPECTED THE BUSINESS PREMISES OF THE ASSESSEE ALONGWITH TWO GODOWNS AND SISTER CONCERNS, NAMELY, INDORE IRON SYNDICATE AND CLAIMED TO HAVE FOUND GOODS WORTH OF RS. 1,87,56,790/- AS AGAINST THE STOCK AVAILABLE IN THE BOOKS AT RS. 1,03,59,135/- THEREBY WORKING OUT EXCESS STOCK OF RS. 83,97,685/-. THEREA FTER, THE ASSESSEE IDENTIFIED AND POINTED OUT CERTAIN GLARING MISTAKES IN THE LOOSE STOCK SHEETS PREPARED BY THE SALES TAX AUTHORITIES. AFTER RECTIFYING THE SAID MISTAKES, THE DIFFERENCE OF RS. 83,97,685/- WAS RED UCED TO RS. 66,70,322/- BY THE ASSISTANT COMMISSIONER OF COMMER CIAL TAX VIDE ORDER DATED 13.10.2000. IT IS CONTENDED BEFORE THE CIT(A) THAT IT IS AN ADMITTED FACT THAT STOCK WAS NOT WEIGHED PROPERLY, RATHER IT WAS CARRIED OUT BY ADOPTING SAMPLING METHOD. THE TURNOVER WAS C OMPUTED ON THE SAMPLING BASIS AND AS SUCH ESTIMATE MADE BY THE SEA RCH PARTY WAS ARBITRARY AND APPARENTLY NOT ARRIVED AT ON RATIONAL BASIS. IT IS ALSO SUBMITTED THAT AGAINST THE ORDER OF ASSISTANT COMMI SSIONER OF -: 9 :- 9 COMMERCIAL TAX, THE ASSESSEE FILED AN APPEAL BEFORE THE APPELLATE AUTHORITY I.E. DY. COMMISSIONER OF COMMERCIAL TAX ( APPEALS) AGITATING THE ENTIRE ADDITION OF RS. 66,70,70,322/- MADE BY THE ASSISTANT COMMISSIONER OF COMMERCIAL OF TAX AND ENH ANCEMENT IN SALES ON BEST JUDGMENT BASIS. THE DY. COMMISSIONER OF COMMERCIAL TAX (APPEALS ) VIDE ORDER DATED 30.12.2002 HAS OBSE RVED THAT THERE HAVE CREPT IN VARIOUS MISTAKES IN TAKING THE PHYSIC AL STOCK. IT IS NOT POSSIBLE TO PHYSICALLY ACCOUNT OF 69,10,500 M.T. ST OCK IN 3 4 HOURS. THE LETTER DATED 9.6.2001 OF INDORE IRON MERCHANT A SSOCIATION WAS ALSO PLACED ON RECORD IN WHICH IT WAS CERTIFIED THAT IT WILL TAKE ATLEAST 12- 15 MINUTES TO WEIGH ONE M. T. AND ACCORDING TO THIS, I F ONE EXACTLY WANTS TO PHYSICALLY ACCOUNT THIS STOCK, HE HAS TO SPENT A BOUT 8400 MINUTES I.E. 140 MEN HOURS. 7. IT IS FURTHER ARGUED BEFORE THE CIT(A) THAT DY. COM MISSIONER OF COMMERCIAL TAX (APPEALS) HAS CLEARLY GIVEN FINDI NG THAT STOCK WAS TAKEN ON ESTIMATED BASIS AND NOT ON ACTUAL BASIS. H OWEVER, HE SET-ASIDE THE ASSESSMENT WITH THE DIRECTION TO COMPLETE THE A SSESSMENT AFTER -: 10 :- 10 EXAMINING THE STOCK INVENTORY PREPARED DURING COURS E OF SEARCH AND EVIDENCES PRODUCED BY THE ASSESSEE DURING THE COURS E OF ASSESSMENT AND APPELLATE PROCEEDINGS. THE ASSESSEE DID NOT ACC EPT THE ORDER OF THE APPELLATE DY. COMMISSIONER OF COMMERCIAL TAX AND FI LED AN APPEAL BEFORE THE BOARD OF REVENUE ( I.E. THE TRIBUNAL ) O N 12.1.2002, WHICH IS STILL PENDING. IN THE MEANWHILE, SINCE THE SET ASID E ASSESSMENT WAS GOING TO BECOME BARRED BY LIMITATION. THE AO COMPLE TED THE SET ASIDE ASSESSMENT, WHEREIN HE RECORDED ENHANCEMENT OF STOC K FROM RS. 66,70,322/-TO RS. 49,16,627/- THEREBY ALLOWING RELI EF OF 17,53,695/- AND ENHANCEMENT ON THE POINT OF LOOSE PAPER FROM RS . 68,68,517/- TO RS. 9,98,242/-. AS SUCH THE TOTAL ENHANCEMENT IN TU RNOVER WAS REDUCED FROM RS. 1,31,58,639/- TO RS. 59,14,869/-. THE BEST JUDGMENT ASSESSMENT MADE ON THE BASIS OF THESE DISCREPANCIES ALSO STAND REDUCED FROM RS. 7,08,06,353/- TO RS. 5,88,06,353/-. IT IS ALSO SUBMITTED BEFORE THE CIT(A) THAT IN THE SET-ASIDE ASSESSMENT IN THE CASE OF SISTER CONCERN OF THE ASSESSEE FIRM, NAMELY, M/S. INDORE IRON SYND ICATE ON SIMILAR FACTS, THE APPELLATE DY. COMMISSIONER OF COMMERCIAL TAX HAS GIVEN -: 11 :- 11 CLEAR FINDING THAT PHYSICAL VERIFICATION OF STOCK W AS NOT ACTUALLY CONDUCTED BY THE OFFICIALS OF COMMERCIAL TAX DEPART MENT AND HAS HELD THAT AS THE STOCK WAS TAKEN ON ESTIMATE BASIS, THE ADDITION EQUAL TO 50 % ONLY COULD BE MADE. THIS ORDER WAS NOT RELIED UPON BY THE ASSESSING OFFICER IN INCOME TAX PROCEEDINGS. ON THE OTHER HAN D, THE ASSESSEE HAS NOT ACCEPTED THE REMAND ASSESSMENT ORDER PASSED BY THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX AND FILED AN APPEAL BEFORE THE APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX. IT IS FURTHER ARGUED THAT FROM THE BARE READING OF THE SAID ORDER , IT IS CLEAR THAT THE APPELLATE DY. COMMISSIONER OF COMMERCIAL TAX HAS, I NTER ALIA, ACCEPTED THE FACT THAT THE COMMERCIAL TAX AUTHORITI ES DID NOT TAKE THE PHYSICAL STOCK PROPERLY. THE AUTHORITIES HAD COUNTE D THE NUMBER OF BUNDLES AND MULTIPLIED THESE BY STANDARD WEIGHT AND DETERMINED THE STOCK. MOREOVER, IT IS INTERESTING THAT AT THE TIME OF SURVEY BY COMMERCIAL TAX DEPARTMENT, THE DIFFERENCE WAS FOUND MORE THAN 70 % WHILE AT THE TIME OF SURVEY BY INCOME TAX DEPARTMEN T, THERE WAS -: 12 :- 12 DIFFERENCE OF 1% ONLY. THE DETAILS OF THE SAME WERE FURNISHED BY THE ASSESSEE ARE REPRODUCED. COMMERCIAL TAX DEPARTMENT 31.5.097 INCOME TAX DEPARTMENT 6.6.97 PARTICULARS WEIGHT AMOUNT WEIGHT AMOUNT STOCK AS PER BOOKS 403.687 1,03,59,135/- 548.577 1,40,35,803/- PHYSICAL STOCK 691.500 1,87,56,790/- 562.600 1,42,87,310/- DIFFERENCE 287.813 83,97,655/- 4.023 2,51,507/- 8. THE LEARNED AUTHORIZED REPRESENTATIVE FURTHER SUB MITTED BEFORE THE CIT(A) THAT THE AO HAS IN PARA 4.4 STATE D THAT SINCE COMMERCIAL TAX DEPARTMENT HAS COUNTED EXCESS STOCK OF RS. 83,97,655/- ON 31.5.1997, WHICH WAS FURTHER ARRIVED AT RS. 66,70,322/- AFTER REMOVING CERTAIN MISTAKES IN STOCK TAKING, BU T THE SAID STOCK WAS NOT FOUND IN EXCESS DURING THE SURVEY PROCEEDINGS O F INCOME TAX AUTHORITIES ON 6.6.1997. THE AO REACHED ON THE CONC LUSION THAT THE ASSESSEE HAD SOLD THE STOCK WORTH RS. 66,70,322/- B ETWEEN 1.6.1997 TO -: 13 :- 13 6.6.1997 I.E. WITHIN 5 DAYS AND ADDED THE SAME U/S 69 OF THE INCOME-TAX ACT, 1961. IN THIS RESPECT, IT HAS BEEN SUBMITTED T HAT THE COMMERCIAL TAX DEPARTMENT COUNTED THE HUGE INVENTORY OF 691.50 0 M. T. WITHIN 4 5 HOURS PARTICULARLY WHEN EVEN THE HAMMAL/MUKADDA M TAKES AROUND 10 -15 MINUTES TO WEIGHT ONE TON GOODS. IT IS FURTH ER ARGUED THAT DURING THE COURSE OF SURPRISE SURVEY PROCEEDINGS CONDUCTED BY INCOME TAX DEPARTMENT, NO LOOSE PAPERS INDICATING PURCHASES/SA LES MADE OUTSIDE THE BOOKS AND HAVE BEEN FOUND. IT IS PERTINENT TO N OTE THAT THE AO HAS NOT MADE ANY INDEPENDENT INQUIRY BEFORE MAKING THIS ARBITRARY ADDITION. THE AO HAS MADE THIS ADDITION ONLY ON THE BASIS OF THE EXCESS STOCK FOUND ON 31.3.1997 HAVING BEEN SOLD DURING TH E INTERVENING PERIOD FROM 1.7.1997 TO 5.6.1997 AND HE WAS PATENTL Y WRONG. THE LEARNED AUTHORIZED REPRESENTATIVE PLACED RELIANCE O N THE DECISION OF I.T.A.T. CUTTACK BENCH IN THE CASE OF UTKAL ALLOYS PRIVATE LIMITED VS. DY. CIT REPORTED IN 82 ITD 120 (T.M.). THE LEARNED AUTHORIZED REPRESENTATIVE ALSO EMPHASIZED THAT THE ORDER OF SA LES TAX AUTHORITIES OR EXCISE AND CUSTOM AUTHORITIES ARE NOT BINDING ON INCOME TAX -: 14 :- 14 OFFICER AND IN SUPPORT OF HIS CONTENTION, HE PLACED RELIANCE ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CE NTRAL PROVINCES MANGANESE ORE CO.LIMITED VS. ITO, REPORTED IN 191 ITR 662. HE, THEREFORE, ARGUED THAT THE ADDITION MADE SO BY THE ASSESSING OFFICER MERELY ON THE BASIS OF THE ORDER OF THE SALES TAX A UTHORITIES IS WRONG. THE COGNIZANCE OF THE FINDING OF THE COMMERCIAL TAX OFFICER CANNOT BE TAKEN, WHICH, ITSELF IS TOTALLY UNRELIABLE AS HAS A LSO BEEN HELD BY THEIR OWN APPELLATE AUTHORITY. HE ALSO CONTENDED THAT IN THE CASE OF YOGRAJ NARANG, PROPRIETOR, INDORE IRON SYNDICATE FOR THE A SSESSMENT YEAR 1998-99, WHEREIN THE SAME BACKGROUND AND SIMILAR CI RCUMSTANCES, THE ADDITION MADE BY THE COMMERCIAL TAX OFFICER WAS RES TRICTED TO 50 % AFTER ALLOWING THE RELIEF TO ASSESSEE. ACCORDINGLY, FOR INCOME TAX PURPOSES ALSO, THE CIT(A) VIDE HIS ORDER DATED 15.1 .2003 IN APPEAL NO. IT-16/01-02/763, IN THE SAME BACKGROUND ON IDENTICA L ISSUE ACCEPTED THE ADDITION TO THE EXTENT OF 50 % ONLY. BUT, IN TH E INSTANT CASE, BECAUSE THERE WAS VARIOUS MISTAKES IN PREPARING THE STOCK I NVENTORY, WHICH NEEDED CORRECTION, THE MATTER WAS SET-ASIDE FOR CRO SS EXAMINATION AND -: 15 :- 15 RECTIFICATION AND ULTIMATELY DIFFERENCE FINALLY WOR KED OUT BY THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX AT RS. 49, 16,627/-. THE CIT(A), ACCORDINGLY, RESTRICTED THE ADDITION OF RS. 24,58,500/- I.E. 50 % OF RS. 49,70,000/- ( RS. 66,70,322/- (-) RS. 17,53, 322/-). THUS, HE ALLOWED RELIEF OF RS. 42,11,822/-. 9. IT WOULD NOT BE OUT OF PLACE TO MENTION THAT THE C IT(A) DECIDED THIS ISSUE ON THE BASIS OF THE APPELLATE OR DER PASSED FOR ASSESSMENT YEAR 1998-99 IN THE CASE OF SHRI YOGRAJ NARANG, PROPRIETOR, INDORE IRON SYNDICATE. IN THAT CASE, WE HAD OCCASIO N TO DECIDE THE APPEAL IN I.T.A.NO. 233 & 172/IND/2003 FOR THE ASSE SSMENT YEAR 1998- 99 DATED 29 TH AUGUST, 2008, IN WHICH IN PARAS 12 & 13, IT IS HEL D AS UNDER :- 12. AFTER HEARING THE RIVAL CONTENTIONS, WE NOTED THAT IN THIS CASE SEARCH WAS CARRIED OUT BY THE COMMERCIAL TAX DEPARTMENT ON 31.5.1997 AND JUST THEREAFTER SURVEY U/S 133A WAS CARRIED OUT ON 6.6.1996. THE SEARCH & SURV EY WERE COMPLETED BETWEEN 5 TO 6 HOURS. THE APPELLATE -: 16 :- 16 AUTHORITIES OF COMMERCIAL TAX DEPARTMENT OBSERVED VARIOUS MISTAKES IN THE STOCK TAKING AND, ACCORDING LY, THE FIRST APPELLATE AUTHORITY REDUCED THE ADDITION BY 5 0 % AND, THUS ALLOWED RELIEF OF RS. 6,47,969/-. WE ALSO NOTED THAT THE ASSESSEE HAD NOT ACCEPTED THE ORDER OF THE FIRST APPELLATE AUTHORITY I.E. DY. COMMISSIONER OF COMMER CIAL TAX (APPEALS) AND APPEAL WAS PREFERRED BEFORE THE M.P.COMMERCIAL TAX APPEAL BOARD,BHOPAL. ANYHOW, IT IS ALSO A FACT THAT THE ASSESSEE DURING THE COURSE OF SURVEY U/S 133A OF THE INCOME-TAX ACT, 1961, SURRENDERED AN IN COME OF RS. 25,000/- TO MEET THE DISCREPANCIES FOUND DUR ING THE COURSE OF SURVEY. THUS, ONCE THE ASSESSEE HAS MADE SURRENDER OF AMOUNT, THE BOOKS ARE CONSIDERED AS NO T RELIABLE. THIS VIEW IS SUPPORTED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ACTION ELECTRICALS VS. DY. CIT, 258 ITR 188. HOWEVER, THE HONBLE RAJASTHAN HI GH COURT IN THE CASE OF CIT VS. GOTAN LIME KHANIJ UDYO G, -: 17 :- 17 256 ITR 243, HAS HELD THAT ADDITION IN THE PROFIT A ND GAINS RETURNED BY THE ASSESSEE WERE NOT A NECESSARY CONCOMMITMENT OF AN ORDER MADE U/S 145(1) OR 145(2) OF THE INCOME-TAX ACT, 1961. THE ONLY DISCREPANCY FOUN D WAS IN RESPECT OF PHYSICAL STOCK, WHICH WAS TAKEN WITHI N 5-6 HOURS, WHICH IS IMPOSSIBLE TO TAKE ACCURATE WEIGHT OF THE IRON AND STEEL LYING AT THE GODOWN OF THE ASSESSEE. WE AGREE WITH THE SUBMISSION OF THE LD. AUTHORIZED REPRESENTATIVE THAT THE ASSESSEE WAS BUSY IN EXPLAI NING VARIOUS PAPERS FOUND DURING COURSE OF SURVEY AND TH E STOCK WAS TAKEN WITH THE HELP OF THE EMPLOYEE BY THE AUTH ORITIES. IN SUCH CIRCUMSTANCES, THE STOCK WAS NOT PROPERLY T AKEN. THEREFORE, NO ADDITION IS CALLED FOR. THIS VIEW IS SUPPORTED BY THE I.T.A.T., CUTTACK BENCH (THIRD MEMBER) IN TH E CASE OF UTKAL ALLOYS PRIVATE LIMITED VS. DY. CIT, 82 ITD 120, WHEREIN IT IS OBSERVED BY THE THIRD MEMBER AS UNDER :- -: 18 :- 18 IT WAS AN ADMITTED FACT THAT THE STOCK WAS NOT WEIGHTED PHYSICALLY IT WAS PARTLY PHYSICAL AND PA RTLY ADOPTING SAMPLING METHOD. WHEN A SAMPLING METHOD IS ADOPTED, SOME DIFFERENCE HAS TO BE THERE AS IT CANNOT BE 100 PER CENT TRUE ACCOU NT OF THE WEIGHMENT. IT MAY REPRESENT A DISCREPANCY OR IT MAY BE A DIFFERENCE OVER OR BELOW WHAT IS RECORDED BY THE AS SESSEE. IN VIEW OF STAMPING BY THE STEEL AUTHORITY/RSP FOR THE SIZE AND WEIGHT, THERE MIGHT NOT BE MUCH DIFFERENCE IN V ALUATION IF IT GOES BY WEIGHT INSCRIBED THEREIN BUT IT HAS B EEN TAKEN AS A SAMPLE IN A CUBIC FEET STORAGE WHERE SCRAPS OF DIFFERENT SIZES ARE STORED. THE DIFFERENCE IS BOUND TO BE THE RE, BECAUSE SAMPLE ALWAYS DOES NOT REPRESENT ACTUAL. IT MAY BE LESS OR IT MAY BE MORE. DIFFERENCE MAY BE LARGE IF THERE IS A LARGE SCALE DIFFERENCE IN VARIOUS SCRAPS AND REJECT S AND SMALL OR NIL IF THE ITEMS ARE OF LESSER DIFFERENCE OF SIZE AND WEIGHT. BOTH THE ACCOUNTANT MEMBER AND JUDICIAL MEM BER -: 19 :- 19 AGREED ON THE POINT THAT THE CORRECT METHOD OF VALU ATION IS PHYSICAL WEIGHMENT AND THE ASSUMPTION BY SAMPLING D OES NOT RESULT IN ACTUAL VALUATION IN THE OPINION OF TH E ACCOUNTANT MEMBER AND IS THE NEXT BEST METHOD AS PE R THE JUDICIAL MEMBER. 13. DURING THE COURSE OF HEARING BEFORE US, THE LEA RNED AUTHORIZED REPRESENTATIVE FILED TWO PAPER BOOKS CONTAINING TOTAL PAGE 97. HE INVITED OUR ATTENTION TO PAGE 95, WHICH IS A PHOTOCOPY OF M.P. COMMERCIAL TAX APPELLATE BOARD DATED 21.8.2007, WHICH WAS PASSED SUBSEQUENT TO ORDER OF THE CIT(A). IN THE SAID ORDE R, THE APPELLATE BOARD HAS DELETED THE ENTIRE ADDITION MAD E ON ACCOUNT OF DIFFERENCE IN STOCK. IN SUCH CIRCUMSTANC ES, THE INFORMATION GATHERED FROM THE COMMERCIAL TAX DEPARTMENT BY THE ASSESSING OFFICER CANNOT BE SUSTA INED. FURTHER, THIS YEAR, THE ASSESSEE HAS DECLARED DOUBL E TURNOVER AND HIGHEST GROSS PROFIT IN LAST 3 YEARS. UNDER THE SE -: 20 :- 20 CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THUS, THIS GROUND OF APPEAL IS DIS MISSED. 10. HOWEVER, THE LEARNED DEPARTMENTAL REPRESENTATIVE AR GUED THAT THE ABOVE ORDER CANNOT BE RELIED UPON, BECAUSE IN T HAT CASE, THE M.P. COMMERCIAL TAX APPELLATE BOARDS ORDER DATED 21.8.2 007 WAS AVAILABLE TO THIS BENCH, WHILE IN THE INSTANT CASE, THE MATTER IS STILL PENDING BEFORE M.P. COMMERCIAL TAX APPELLATE BOARD. 11. THE LEARNED DEPARTMENTAL REPRESENTATIVE CONTENDED T HAT THE BOOKS OF ACCOUNT OF THE ASSESSEE ARE NOT RELIABLE A S IN THE STATEMENT RECORDED DURING THE COURSE OF SURVEY U/S 133A SHRI NARENDRA KUMAR NARANG, PROPRIETOR OF SUPER STEEL TRADERS STATED TH AT THE DIFFERENCE IN STOCK INVENTORIZED AT RS. 1,42,87,310/- AND THE CLO SING STOCK AS PER PROVISIONAL TRADING ACCOUNT PREPARED DURING COURSE OF SURVEY WAS RS. 1,40,35,803/- AND THE DIFFERENCE WAS ON ACCOUNT OF VALUE OF SUCH PACKING MATERIAL AND SCRAP WAS ADMITTED BY HIM TO T HE TUNE OF RS. 2.5 LAKHS TO RS. 3 LAKHS. BESIDES THIS, HE ADMITTED FOR DISCLOSING AN AMOUNT OF RS. 1 LAKH ON ACCOUNT OF UNACCOUNTED INVESTMENT IN CONSTRUCTION OF -: 21 :- 21 GODOWN. THUS, SHRI NARANG MADE A DISCLOSURE OF RS. 4 LAKHS IN VIEW OF THESE DISCREPANCIES AND SURRENDERED THE SAME. 12. ON THE OTHER HAND, THE LEARNED AUTHORIZED REPRESENT ATIVE REITERATED THE ARGUMENTS MADE BEFORE THE CIT(A) AND FURTHER CONTENDED THAT AT THE TIME OF COMMERCIAL TAX SEARCH, THE ASSE SSEE WAS KEPT ENGAGED BUSY IN OFFICE AND RESIDENCE FOR INQUIRIES AND TO RECORD STATEMENT ON OATH, WHICH TOO WAS RECORDED IN DURESS COERCION AND UNDER INFLUENCE AND BY PRESSURE GOT STATED THAT IT WAS RECORDED IN CORDIAL MANNER. THE AUTHORITIES TOOK STATEMENT OF S TOCK ON ESTIMATE BASIS IN THE ABSENCE OF THE ASSESSEE WITH THE HELP OF DELIVERY BOYS, WHO HAVE NO KNOWLEDGE OF VALUE OF QUALITY OR WEIGHT AND MEASUREMENT AND ALL FAKE INFORMATION WITHIN TWO HOURS TIME WERE REC ORDED OF THE STOCK, WHICH IS EVIDENT FROM THE REMAND ORDER OF THE ASSIS TANT COMMISSIONER OF COMMERCIAL TAX AND APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX IN APPEAL AGAINST THE ORIGINAL AND R EMAND ASSESSMENT. IT IS FURTHER ARGUED THAT THE COMMERCIAL TAX DEPART MENT HAS CARRIED OUT THE SEARCH ON 31.5.1997 AND INCOME TAX DEPARTMENT H AS CONDUCTED THE -: 22 :- 22 SURVEY ON 6.6.1997 AND ON PHYSICAL VERIFICATION OF STOCK WHEN NO LARGE DIFFERENCE WAS FOUND BY THEM. THEY PRESUME THAT THE ASSESSEE SOLD THE EXCESS STOCK FOUND DURING THE COURSE OF SEARCH OUTS IDE THE BOOKS OF ACCOUNT. THE LEARNED AUTHORIZED REPRESENTATIVE CONT ENDED THAT IF WE ACCEPT THIS CONTENTION OF INCOME TAX DEPARTMENT, TH EN THE QUESTION ARISES WHERE THE PAPERS RELATED TO SALE OF UNACCOUN TED STOCK WITHIN THE SPAN OF 5 DAYS HAVE GONE ? THROUGH WHICH TRANSPORT THE SAID STOCK WAS DISPATCHED AND WHETHER THE INCOME TAX DEPARTMENT MA DE ENQUIRIES FROM THE TRANSPORTER/ HAMMAL REGARDING THE TRANSPOR TATION, LOADING AND UNLOADING OF GOODS WITHIN THOSE FIVE DAYS. NO S UCH EXERCISE HAVE BEEN DONE BY THE SURVEY PARTY. IT IS CONTENDED THAT IN FOUR WORKING DAYS ( SINCE 1.6.1997 BEING SUNDAY), IT IS NOT POSS IBLE TO SELL/CLEAR SUCH HUGE EXCESS GOODS OF MORE THAN RS. 65 LAKHS. IT IS FURTHER ARGUED THAT DURING THE SURVEY PROCEEDINGS INDEPENDENTLY CONDUCT ED BY THE INCOME TAX DEPARTMENT AND ASSESSMENT PROCEEDINGS, NO DISCR EPANCIES IN MAINTENANCE OF BOOKS WERE FOUND, NO BILLS WERE FOUN D UNACCOUNTED OR NO EVIDENCE FOUND OF SALE OUTSIDE THE BOOKS. THE ON LY DISCREPANCIES -: 23 :- 23 WERE FOUND IN RESPECT OF PHYSICAL STOCK TAKING, WHI CH IS NOT PROPER AS STATED ABOVE AND THE QUANTUM OF EXCESS STOCK, IF AN Y, HAS NOT YET BEEN FINALLY DETERMINED AS DISCUSSED IN FOREGOING PARAGR APHS. 13. AFTER CONSIDERING THE RIVAL CONTENTION AND MATERIAL AVAILABLE ON RECORD, WE NOTED THAT COMMERCIAL TAX DEPARTMENT HAS NOT MADE PROPER INVENTORY ON THE BASIS OF PHYSICAL VERIFICAT ION. THE STOCK HAS BEEN TAKEN ON SAMPLING METHOD BASIS. IT IS EVIDENT FROM THE FACT THAT VAST DIFFERENCE NOTED IN THE STOCK IN THE ORIGINAL ASSESSMENT ORDER PASSED BY THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX AND THE ASSESSMENT COMPLETED SUBSEQUENTLY, AFTER SETTING AS IDE THE ORIGINAL ORDER BY THE APPELLATE DEPUTY COMMISSIONER OF COMME RCIAL TAX, NOTING VARIOUS DISCREPANCIES IN THE STOCK TAKING. I T IS NOT HUMANLY POSSIBLE TO TAKE THE STOCK 691.500 M. T. OF STEEL W ITHIN 4 TO 5 HOURS. WHEN EVEN THE HAMMAL AND MUKADDAM TAKE 10 15 MINU TES TO WEIGH ONE TON GOODS. THIS IS ALSO CERTIFIED BY THE PRESID ENT OF INDORE IRON MERCHANTSASSOCIATION VIDE HIS LETTER DATED 9.6.200 1. THE AO HAS MADE ADDITION OF RS. 66,70,322/- PURELY BASED ON OR DER OF ASSISTANT -: 24 :- 24 COMMISSIONER OF COMMERCIAL DEPTTT AND WITHOUT BRING ING INDEPENDENT EVIDENCE ON RECORD. NO EVIDENCE HAS BEEN BROUGHT ON RECORD TO PROVE THAT THE ASSESSEE HAS SOLD OUT EXCESS GOODS OF MORE THAN 65 LAKHS IN INTERVENING PERIOD OF FIVE DAYS BETWEEN 31.5.1995 T O 6.6.1997. IT IS FURTHER NOTED THAT JUST AFTER FIVE DAYS OF THE SEAR CH OF COMMERCIAL TAX DEPARTMENT, A SURPRISE SURVEY U/S 133A WAS CARRIED OUT BY THE INCOME TAX DEPARTMENT ON 6.6.1997 AND DURING COURSE OF SUR VEY, THEY FOUND DIFFERENCE OF EXCESS STOCK OF RS. 2,51,507/- I.E. 4 .023 TONS. NO ENQUIRY WAS CONDUCTED EITHER BY THE SURVEY PARTY OR BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS THAT WITHIN A SPAN OF FIVE DAYS, HOW THE VAST DIFFERENCE WAS FOUND BETWEEN THE STOCK TAKEN B Y THE COMMERCIAL TAX DEPARTMENT AT RS. 83,97,655/- AND BY THE INCOME TAX DEPARTMENT AT RS. 2,51,507/-.THE ORDER PASSED BY THE APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX DEPARTMENT, WAS NOT ACCEPTED BY THE ASSESSEE AND THE MATTER IS STILL PENDING BEFORE THE M.P. COMMERCIAL TAX APPELLATE BOARD. -: 25 :- 25 14. DURING THE COURSE OF SURVEY, THE INCOME TAX DEPARTM ENT HAS NOT FOUND ANY TRANSPORT CHALLAN, WHICH HAS NOT BEEN NOTED IN THE BOOKS OF ACCOUNT. DURING THE SURVEY PROCEEDINGS CONDUCTED BY THE INCOME TAX DEPARTMENT, NO DISCREPANCIES IN MAINTENANCE OF BOOKS OF ACCOUNT WAS FOUND. NO BILL WAS FOUND UNACCOUNTED AND NO EVI DENCE FOUND FOR SALE OUTSIDE THE BOOKS. THE ONLY DISCREPANCIES WERE FOUND IN RESPECT OF PHYSICAL STOCK TAKING AND SURRENDER MADE BY THE ASS ESSEE DURING THE COURSE OF SURVEY. THEREFORE, THE LEARNED DEPARTMENT AL REPRESENTATIVE HAS RIGHTLY CONTENDED THAT THE BOOKS OF ACCOUNT ARE NOT RELIABLE IN VIEW OF THE DECISION OF DELHI HIGH COURT IN THE CASE OF ACTION ELECTRICALS VS. DY. CIT, 258 ITR 188. HOWEVER, AT THE SAME TIME, TH E HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. GOTAN L IME KHANIJ UDYOG, 256 ITR 246 HAS HELD THAT ADDITION IN THE PROFIT AN D GAINS RETURNED BY THE ASSESSEE IS NOT A NECESSARY COMMITMENT OF ORDER U/S 145(1) OR 145(2) OF THE INCOME-TAX ACT, 1961. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, WE ALSO PLACED RELIANCE ON THE DECISION O F THIS VERY BENCH IN THE CASE OF YOGRAJ NARANG (SUPRA). AS WE HAVE ALREA DY STATED THAT THE -: 26 :- 26 COMMERCIAL TAX DEPARTMENT HAS TAKEN STOCK ON SAMPLI NG METHOD BASIS, THE AO HAS MADE ENTIRE ADDITION ON THE BASIS OF THE ORDER PASSED BY ASSISTANT COMMISSIONER OF COMMERCIAL TAX DEPARTM ENT. HE HAS NOT TAKEN COGNIZANCE OF THE STOCK DEDUCTED BY ITS O WN DEPARTMENT. THE I.T.A.T. CUTTACK BENCH ( T.M. ) IN THE CASE OF UTKA L ALLOYS PRIVATE LIMITED VS. DY. CIT, 82 ITD 120, WHEREIN IT IS HELD AS UNDER :- CAN, THEREFORE, IN SUCH A SITUATION ANY ADDITION B E MADE IN ASSESSMENT ? THE ORISSA HIGH COURT IN THE CASE OF HARIBHAGAT AGARWALLA V. STATE OF ORISSA [1982] 51 STC 355, A CASE UNDER THE SALES-TAX ACT, HAS STATED THAT NO ADDITION CAN BE MADE ON THE BASI S OF DIFFERENCE OF THE STOCK ARRIVED AT BY SAMPLING METHOD. THIS BEING A BINDING DECISION OF THE JURISDICTIONAL HIGH COURT, IT WAS TO BE HELD THAT N O ADDITION COULD BE MADE IN THE INSTANT CASE. THE ACCOUNTANT MEMBERS VIEW WAS, THEREFORE, TO BE UPHELD. -: 27 :- 27 15. THE I.T.A.T., JODHPUR BENCH, IN THE CASE OF ITO VS. PREMANAND , 107 TTJ 395, HELD THAT NO ADDITION CAN BE MADE IN THE HANDS OF THE ASSESSEE ON THE BASIS OF OBSERVATION M ADE BY A THIRD PARTY. THE ADDITION RESTS MAINLY ONLY ON THE OBSERVATIONS OF THE SALES TAX DEPARTMENT. THE ASSESSEE WAS NEVER ASSOCIATED WITH THE ENQUIRIES MADE BY THE SALES TAX DEPARTMENT TO THAT EXTENT. TH E SATISFACTION OF THE AO HIMSELF IS OF THE PRIMARY IMPORTANCE, WHILE MAKING ASSESSMENT OF AN INCOME AND THOSE DUTIES CANNOT BE PERFORMED B Y SUBSTITUTING THE SATISFACTION OF SOMEONE ELSE. 16. IT IS ALSO SUBMITTED THAT THE ASSESSEE AGGRIEVED WI TH THE ADDITION OF RS. 24,58,500/- SUSTAINED U/S 69 BY TH E LD. CIT(A). THEREFORE, IN HIS APPEAL, HE HAS TAKEN GROUND NO. 2 THAT THE LD.CIT(A) ERRED IN RESTRICTING THE ADDITION OF RS. 24,58,500/ - U/S 69 ON ACCOUNT OF EXCESS STOCK WORKED OUT BY THE COMMERCIAL TAX AUTHO RITIES ON SAMPLING BASIS. 17. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES, WE P LACED RELIANCE ON THE DECISION OF THE I.T.A.T. CUTTACK BE NCH, WHICH HAS -: 28 :- 28 DECIDED THE ISSUE ON THE BASIS OF DECISION OF HONB LE HIGH COURT OF ORISSA IN THE CASE OF HARIBHAGAT AGARWAL VS. STATE OF ORISSA, 51 STC 355. FURTHER, WE RELY ON THE DECISION OF I.T.A.T., JODHPUR BENCH. WE ALSO NOTED THAT DURING THE COURSE OF SURVEY, THE ON LY DIFFERENCE NOTED BY THE INCOME TAX DEPARTMENT AT RS. 2,51,507/-, WHICH HAS ALSO BEEN SURRENDERED BY THE ASSESSEE DURING THE COURSE OF SU RVEY PROCEEDINGS. IT IS ALSO PERTINENT TO NOTE THAT THE AO IN THE ASSESS MENT ORDER PARA 3.2 HAS MENTIONED THAT THE ASSESSEE DURING THE COURSE O F ASSESSMENT PROCEEDINGS FILED A REVISED RETURN OF INCOME DECLAR ING THE SURRENDERED AMOUNT OF RS. 4 LAKHS SURRENDERED DURING COURSE OF SURVEY. HOWEVER, THE AO DID NOT CONSIDER THE SURRENDERED AMOUNT FOR THE REASON THAT THE SAME WAS FILED BEYOND THE PRESCRIBED TIME LIMIT U/S 139(5) OF THE ACT. SINCE THE UNDISCLOSED INCOME OF RS. 3,62,410/- EXCL UDING THE SALES OF PACKING MATERIAL CREDITED IN THE BOOKS (OF RS. 37, 590/-) WAS NOT OFFERED IN THE RETURN, HE MADE THE SEPARATE ADDITIO N OF RS. 3,62,410/- INCLUDING THE AMOUNT OF EXCESS STOCK OF RS. 2,51,50 7/- FOUND DURING COURSE OF SURVEY WHICH HAS ALREADY BEEN TAXED SEPAR ATELY BY THE -: 29 :- 29 ASSESSING OFFICER. THEREFORE, NO FURTHER ADDITION I S CALLED FOR. HENCE, THE GROUND NO. 1 OF THE REVENUE IS DISMISSED AND GR OUND NO. 2 OF THE ASSESSEE IS ALLOWED. 18. SECOND GROUND OF APPEAL OF THE REVENUE IS THAT THE LD. CIT(A) ERRED IN ALLOWING A RELIEF OF RS.1,89,532/- ON ACCOUNT OF GROSS PROFIT ADDITION. 19. IN ASSESSEES APPEAL, THERE IS GROUND NO.4 WHEREIN THE ASSESSEE HAS CHALLENGED THE MAINTENANCE OF ADDITION OF RS.1,10,6 32/- BEING GROSS PROFIT @ 4.5% ON ALLEGED UNRECORDED SALES OF RS.24,58,500/ -. 20. SINCE THE ADDITION MADE U/S 69 OF THE IT ACT BY THE LD. AO AT RS.66,70,322/- HAVE ALREADY BEEN DELETED WHILE DEAL ING WITH GROUND NO.1 OF THE REVENUES APPEAL AND GROUND NO.2 OF THE ASSESSE ES APPEAL, THEREFORE, NO ADDITION IS CALLED FOR IN REGARD TO GROSS PROFIT ON THE AMOUNT OF RS.66,70,322/-. THUS, GROUND NO.2 OF THE REVENUES APPEAL IS DISMISSED AND GROUND NO.4 OF THE ASSESSEES APPEAL IS ALLOWED. 21. GROUND NO.3 OF THE REVENUES APPEAL IS THAT THE LD. CIT(A) ERRED IN ALLOWING RELIEF OF RS.50,31,668/- MADE U/S 69 AS SA LES OUTSIDE THE BOOKS. -: 30 :- 30 22. GROUND NO.5 IN ASSESSEES APPEAL IS THAT THE LD. CI T(A) ERRED IN MAINTAINING ADDITION OF RS.44,920/- ON ACCOUNT OF G ROSS PROFIT @4.5% ON ALLEGED UNRECORDED SALES OF RS.24,58,500/-. 23. IN THIS REGARD, IT IS CLARIFIED THAT THE LD. CIT(A) HAS DELETED THE ADDITION U/S 69 OF RS.50,76,588/-. HOWEVER, THE REV ENUE HAS ERRONEOUSLY TAKEN A FIGURE IN ITS GROUNDS OF APPEAL AT RS.50,31 ,668/-. 24. FACTS OF THE CASE ARE THAT DURING COURSE OF SEARCH BY THE COMMERCIAL TAX DEPARTMENT, THEY ALSO SEIZED CERTAIN DOCUMENTS. ON THE BASIS OF SEIZURE NO.9 TO 16, THE LD. AO MADE ADDITION OF RS.50,76,588/- AS UNEXPLAINED INVESTMENT OF THE ASSESSEE U/S 69 OF TH E IT ACT AND FURTHER MADE THE ADDITION OF RS.2,91,983/- BEING GROSS PROFIT @4 .5% ON SALES OF RS.64,88,517/- BEING TOTAL OF UNRECORDED SALES AS P ER SEIZURE NO. 1 TO 18. THE LD. CIT(A) DELETED THE ADDITION OF RS.50,76,588/- B EING ADDITION ON ACCOUNT OF UNDISCLOSED INVESTMENT IN TOTO BY HOLDING AS UND ER: 4.2 HAVING CONSIDERED THE DETAILED SUBMISSIONS MADE BY SHRI JAIN, I AM OF THE CONSIDERED VIEW THAT AO FOLLOWED THE FIGURES OF LOOSE PAPERS AS ARRIVED AT BY THE COMMERCIAL TAX DEPARTMENT. THE RELIEF GIVEN TO THE APPELLANT BY THE COMMERCIAL TAX AUTHORITIES CANNOT BE -: 31 :- 31 DENIED. AT THE SAME TIME, THE CASE-LAW CITED BY THE APPELLANT DO GIVE FULL SUPPORT TO THE CASE OF THE APPELLANT. HOWEVER, IN ANY CASE, THE SALES AMOUNT STANDS REDUCED TO RS.9,98,242/- AS PER THE COMMERCI AL TAX DEPARTMENT ORDER ITSELF. AS REGARDS TELESCOPING OF THE SAID ADDITION, I AM IN AGREEMENT WITH THE ARGUM ENT OF THE APPELLANT. THE EXCESS STOCK WAS FOUND ON 31.5.1997 WHICH HAS BEEN DETERMINED AT RS.24,58,500 /-. THAT WAS THE RESULT OF TRADE INCOME IN THE EARLIER PERIOD. THE LOOSE PAPERS SUGGESTING SALES OUTSIDE T HE BOOKS OF ACCOUNT REPRESENTED SUCH TRADING OUTSIDE T HE BOOKS. WHEN THE RESULTANT INVESTMENT IS CHARGED TO TAX, THE UNACCOUNTED INVESTMENT IN THE EARLIER PERIOD CA N BE TO THE EXTENT IT EXCEEDS THE UNACCOUNTED STOCK FOUN D ON 31.5.1997. SUCH AN INVESTMENT CAN BE DETERMINED ONL Y ON THE BASIS OF PEAK METHOD WHICH THE AO HAD FAILED TO DO OR HAD NO SUFFICIENT MATERIAL TO REACH THAT CONCLUSION. UNDER THE CIRCUMSTANCES, IT IS CONCLUDE D THAT THE STOCK FOUND IN THE EXCESS WAS RESULT OF TH E REINVESTMENT OF THE ALLEGED SALES PROCEEDS RELATING TO THE PERIOD BETWEEN 26.5.97 TO 31.5.97 AND NO ADDITI ON ON ACCOUNT OF INVESTMENT CAN BE MADE AS THE EXCESS STOCK FOUND ON 31.5.97 ALREADY STAND CHARGED TO TAX . AT THE MOST, THE ADDITION CAN BE MADE FOR THE GROSS PR OFIT -: 32 :- 32 THAT THE APPELLANT EARNED ON THE SALES. THE TOTAL ADDITION ON ACCOUNT OF GROSS PROFIT @4.5% ON THE UNACCOUNTED SALES ULTIMATELY DETERMINED BY THE C.T. DEPARTMENT AT RS.9,98,242/- WORKS OUT TO RS.44,920/ - AND THE SAME IS CONFIRMED TO THAT EXTENT. THUS, THE APPELLANT GETS RELIEF OF RS.50,31,668/-. 25. DURING COURSE OF HEARING, THE LD. DR PLACED RELIANC E ON THE ASSESSMENT ORDER. 26. ON GOING THROUGH THE ASSESSMENT ORDER DATED 13.10.2 000 OF THE ASSISTANT COMMISSIONER OF COMMERCIAL TAX WHICH IS O N PAGE NO.118 TO 143 OF THE PAPER BOOK AND RELEVANT PAGE AT 142, IT IS GATHERED THAT ON ACCOUNT OF LOOSE PAPERS SEIZED BEING SEIZURE NO.9 TO 16 AND 18 , THE TOTAL CONCEALMENT ON ACCOUNT OF TURNOVER IS FOUND AT RS.64,88,517/-, ON THE BASIS OF THAT, THE LD. AO HAS MADE ADDITION ON ACCOUNT OF INVESTMENT AT RS .50,76,588/- AND ON ACCOUNT OF GROSS PROFIT AT RS.2,91,983/-. 27. THE LD. CIT(A) DELETED THE ENTIRE ADDITION OF RS.50 ,31,668/- (CORRECT FIGURE RS.50,76,588/-) BEING MADE ON ACCOU NT OF UNDISCLOSED INVESTMENT AND UPHELD THE ADDITION OF RS.44,920/- B EING GROSS PROFIT @4.5% ON RS.9,98,242/- BEING THE AMOUNT OF CONCEALED TURN OVER AND REDUCED FROM -: 33 :- 33 RS.64,88,517/- BY THE ASSISTANT COMMISSIONER OF COM MERCIAL TAX VIDE REMAND ORDER DATED 30.11.2002 ON THE BASIS OF SEIZU RE NO.9 TO 16 & 18 WHICH IS ON PAGE 10 TO 30 OF THE PAPER BOOK AND REL EVANT PARA IS AT 4 OF THE PAGE 29. 28. THE DEPARTMENT HAS NOT TAKEN ANY GROUND FOR REDUCTI ON OF ADDITION ON ACCOUNT OF GROSS PROFIT FROM RS.2,91,984/- TO RS .44,920/- THOUGH THE ASSESSEE HAS TAKEN THE GROUND NO.5 ON THIS ACCOUNT WHICH IS ALSO SUBJECT MATTER OF THE DISCUSSION. THE LD. AR CONTENDED THAT THE CONCEALED TURNOVER ON THE BASIS OF SEIZURE NO.9 TO 16 AND SEIZURE NO.1 8 IS REDUCED BY THE APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX VID E APPEAL NO.16/2003 ORDER DATED 21.12.2004 (WHICH WAS FILED AGAINST THE REMAND ASSESSMENT ORDER) TO RS.55,807/- FROM RS.9,98,242/- (PAPER BOO K PAGE 53 TO 57 RELEVANT PARA 5 OF PAGE 55). THUS, ACCORDING TO HIM, THE ADD ITION AT THE MOST COULD BE MADE ON ACCOUNT OF GROSS PROFIT @4.5% OF RS.55,807/ - WHICH WORKS OUT TO RS.2,512/- INSTEAD OF RS.44,920/-. 29. AFTER HEARING RIVAL SUBMISSIONS AND GOING THROUGH T HE RECORD, IT IS FOUND THAT THE COMMERCIAL TAX DEPARTMENT HAS WORKED OUT CONCEALED TURNOVER OF RS.64,88,517/- ON THE BASIS OF SEIZURE NO.9 TO 16 & 18 WHICH IS -: 34 :- 34 EVIDENT FROM THE COMMERCIAL TAX ASSESSMENT ORDER FO R THE PERIOD 1.4.97 TO 31.3.98 DATED 13.10.2000 (PLACED AT PAGE 121 TO 143 OF THE PAPER BOOK RELEVANT SECOND PARA OF PAGE 142). THE SAID ASSESSM ENT ORDER WAS SET ASIDE BY THE APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX VIDE APPEAL NO.22/01 DATED 9.8.2001 (PLACED AT PAGE 268 TO 277 OF PAPER BOOK). IN THE LIGHT OF THE DIRECTION GIVEN BY THE APPELLATE DEPUT Y COMMISSIONER OF COMMERCIAL TAX, THE ASSESSING OFFICER OF COMMERCIAL TAX PASSED A FRESH ASSESSMENT ORDER ON 30.11.2002 (PLACED AT PAGE 10 T O 30 OF THE PAPER BOOK). ACCORDING TO PAGE 16 TO 29, THE ASSESSING OFFICER O F THE COMMERCIAL TAX ISSUED SUMMONS TO VARIOUS PARTIES WHOSE NAMES ARE G IVEN IN SEIZURE NO.9 TO 18 AND AFTER EXAMINING THEM, HE CONCLUDED THAT THE CONCEALED TURNOVER WORKS OUT TO RS.9,98,242/- (PARA 4 OF PAGE 29 OF TH E PAPER BOOK). THE APPEAL AGAINST THE REMAND ASSESSMENT ORDER WAS DECIDED BY THE APPELLATE DEPUTY COMMISSIONER OF COMMERCIAL TAX DATED 21.12.2004 (AP PEAL NO.16/2003 PAGE 53 TO 57 OF THE PAPER BOOK) AND ACCORDING TO T HE SAID ORDER, THE AMOUNT OF CONCEALED TURNOVER AS PER SEIZURE NO.9 TO 18 IS REDUCED TO RS.55,807/- FROM RS.9,98,242/-. -: 35 :- 35 30. IT IS PERTINENT TO NOTE AS ALREADY DISCUSSED THAT A SEPARATE ADDITION OF RS.3,62,410/- WAS MADE BY THE ASSESSING OFFICER ON THE BASIS OF SURRENDER MADE BY THE ASSESSEE IN THE REVISED RETURN OF INCOM E. THE REVISED RETURN WAS FILED BELATEDLY, THEREFORE, THE AO CONSIDERED THE S AME NON EST BUT MADE THE ADDITION OF RS.3,62,410/- AS SURRENDERED BY THE ASS ESSEE DURING COURSE OF SURVEY U/S 133A OF THE IT ACT. THE SET OFF OF AMOUN T OF RS.2,51,507/- HAS ALREADY BEEN GIVEN WHILE DEALING WITH GROUND NO.1 O F THE REVENUES APPEAL AND GROUND NO.2 OF THE ASSESSEES APPEAL IN FOREGOI NG PARAGRAPHS. THUS, BALANCE AMOUNT REMAINED AT RS.1,10,903/-. AGAINST T HIS BALANCE AMOUNT, SET OFF OF RS.58,807/- IS GIVEN ON ACCOUNT OF CONCEALED TURNOVER AS PER SEIZED NO.9 TO 18 ARRIVED AT BY THE APPELLATE DEPUTY COMMI SSIONER OF COMMERCIAL TAX AS DISCUSSED ABOVE. THE GROSS PROFIT @4.5% ON R S.55,807/- COMES TO RS.2,512/-, THEREFORE, THIS AMOUNT IS ALSO CONSIDER ED AGAINST THE BALANCE SURRENDER AMOUNT OF RS.1,10,903/-. THUS, THE GROUND NO.3 OF THE REVENUES APPEAL IS DISMISSED AND GROUND NO.5 OF THE ASSESSEE S APPEAL IS ALLOWED. 31. GROUND NO.7 OF THE ASSESSEES APPEAL IS THAT THE LD .CIT(A) HAS ERRED IN UPHOLDING THE AOS ACTION IN RESPECT OF CH ARGING OF INTEREST UNDER SECTION 234-B. -: 36 :- 36 32. THIS GROUND IS CONSEQUENTIAL IN NATURE AND CHARGING OF INTEREST IS MANDATORY. HOWEVER, THE AO IS DIRECTED TO RECOMPUTE THE SAME ON THE BASIS OF TOTAL INCOME ARRIVED AT AFTER GIVING EFFECT TO T HIS ORDER. 33. DURING THE COURSE OF HEARING, THE LEARNED AUTHORIZE D REPRESENTATIVE DID NOT PRESS GROUND NOS. 3.1, 3.2 A ND 6. THEREFORE, THE SAME ARE DISMISSED. 34. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED AND APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED ON 10TH JULY, 2009. SD/- SD/- (BHAVNESH SAINI) (M.L.GUSIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 10TH JULY, 2009. CPU* 27D87