M/s. Marvel Crafts, New Delhi V. DCIT, New Delhi

ITA 5793/DEL/2011

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8028 (ITAT-DELHI)
• Duration Of Justice: 7 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY LAXMI S; BHARAT BHUSHAN BHATIA
• Keywords: Opportunity of being heard; Set aside
• Section: 133A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E : NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5793/DEL/2011 ASSESSMENT YEAR: 2008-09 MARVEL CRAFTS, C/O KRISHNA NEERAJ & ASSOCIATES, 141, RAJENDRA PLACE, NEW DELHI. PAN: AAFFM1572J VS DCIT, CIRCLE-26(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI BHARAT BHUSHAN BHATIA & MS VIJAY LAXMI, ADVOCATES REVENUE BY : MS RINKU SINGH, SR. DR DATE OF HEARING : 08.04.2019 DATE OF PRONOUNCEMENT : 16.04.2019 ORDER PER R.K. PANDA, AM: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 29 TH SEPTEMBER, 2011 OF THE CIT(A)-XXIV, NEW DELHI, RELA TING TO ASSESSMENT YEAR 2008- 09. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PARTNERSHIP FIRM AND FILED ITS RETURN OF INCOME ON 29 TH SEPTEMBER, 2008 DECLARING THE TOTAL INCOME AT RS.8 ,71,588/-. THE ASSESSING OFFICER, DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, OBSERVED THAT THE ITA NO.5793/DEL/2011 2 ASSESSEE HAS DECLARED THE TURNOVER AT RS.5,18,67,91 1/- FOR THE YEAR UNDER CONSIDERATION AS AGAINST RS.7,02,57,563/- IN THE PRECEDING YEAR. THE NET PROFIT DECLARED IN THE CURRENT YEAR WAS RS.7,03,871/- AS AGAINST RS.6,97,5 50/- IN THE PRECEDING YEAR. HE NOTED THAT A SURVEY U/S 133A OF THE ACT WAS CONDUCT ED IN THE PREMISES OF THE ASSESSEE ON 17 TH MAY, 2007. DURING THE SURVEY, THE INVENTORY OF ST OCK AND CASH WAS MADE IN WHICH THE DISCREPANCIES WERE FOUND IN THE CASE OF S TOCK AT RS.83,75,000/- AND IN CASE OF CASH AT RS.7,24,967/-. IN VIEW OF THE ABOVE DIS CREPANCIES, THE ASSESSEE FIRM THROUGH ITS PARTNER SHRI VISHAL BHASIN HAS SURRENDERED ADDI TIONAL INCOME OF RS.90,99,967/- FOR THE YEAR UNDER CONSIDERATION AND OFFERED THE CHEQUE S OF RS.28,11,890/- TOWARDS TAX PAYABLE ON THE SURRENDERED INCOME. HOWEVER, THE ASS ESSEE, IN THE RETURN OF INCOME HAS DECLARED INCOME OF RS.8,71,588/- ONLY. HE, THEREFOR E, ASKED THE ASSESSEE TO JUSTIFY FOR NOT INCLUDING THE SURRENDERED INCOME WHICH WAS OFFE RED BY HIM DURING THE COURSE OF SURVEY OPERATIONS U/S 133A OF THE ACT ON ACCOUNT OF DIFFERENCE IN THE CLOSING STOCK AND EXCESS CASH FOUND. 3. THE ASSESSEE SUBMITTED THAT AN AMOUNT OF RS.6,85 ,000/- WHICH WAS THE CASH FOUND WAS NOT ENTERED IN THE BOOKS OF ACCOUNT AND T HE DEPOSIT OF CASH IN THE BANK ACCOUNT AMOUNTING TO RS.20,000/- AND WAGES PAID TO THE TUNE OF RS.59,940/- WERE NOT ENTERED. THE RECONCILIATION OF CASH AS ON 17 TH MAY, 2007 WAS SUBMITTED BEFORE THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT T HE STATEMENT OF SHRI VISHAL BHASIN, PARTNER, RECORDED ON 18 TH MAY, 2007 WAS MISQUOTED BY RECORDING THAT HE COULD NOT HAVE ANY EXPLANATION REGARDING RS.7,24,967/- BEING THE AMOUNT OF DIFFERENCE IN THE ITA NO.5793/DEL/2011 3 CASH. SO FAR AS THE STOCK AS ON 17 TH MAY, 2007 IS CONCERNED, IT WAS SUBMITTED THAT THE STOCK TAKEN BY THE SURVEY TEAM WAS NOT EXACT QUANTI TY, RATHER, IT WAS ON ESTIMATE BASIS. MOREOVER, THE RATE TAKEN BY THE SURVEY TEAM FOR VAL UATION OF THE STOCK WAS ALSO HYPOTHETICAL WITHOUT FOLLOWING THE GENERALLY ACCEPT ED ACCOUNTING PRINCIPLES FOR VALUATION OF THE CLOSING STOCK. THE ASSESSEE FURNI SHED THE DETAILS OF STOCK FOR FABRICS AS ON 17 TH MAY, 2007 SHOWING THE QUANTITY, RATE AND AMOUNT. IT ALSO FILED THE MOVEMENT OF STOCK DURING THE PERIOD BETWEEN 01.04.2 007 AND 17.05.2007. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE ARGUMENTS ADVANCED BY THE ASSESSEE. HE REFERRED TO THE STATEMENT RECO RDED DURING THE COURSE OF SURVEY OF ONE OF THE PARTNERS, NAMELY, SHRI VISHAL BHASIN WHE REIN HE COULD NOT EXPLAIN THE DIFFERENCES. REJECTING THE VARIOUS EXPLANATIONS GI VEN BY THE ASSESSEE, THE ASSESSING OFFICER MADE ADDITION OF RS.90,99,967/- BEING THE D IFFERENCE IN CASH AND DIFFERENCE IN THE VALUATION OF THE STOCK ON THE DATE OF SURVEY. H E ACCORDINGLY DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.99,71,560/-. 5. IN APPEAL, THE LD.CIT(A) UPHELD THE ACTION OF TH E ASSESSING OFFICER. AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN A PPEAL BEFORE THE TRIBUNAL BY RAISING THE FOLLOWING GROUNDS:- 1) THAT THE ASSESSMENT ORDER PASSED BY THE A.O. IS BA D IN LAW AS WELL AS FACTS OF THE CASE. 2) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. ASSESSING OFFICER HAS ERRED IN MAKING ADDITION OF R S. 7,24,967 /- ON ACCOUNT OF DIFFERENCE IN. CASH AS PER BOOKS OF ACCOUNTS AND AC TUAL CASH FOUND BY THE INCOME TAX OFFICIAL. 3) THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. ITA NO.5793/DEL/2011 4 ASSESSING OFFICER HAS ERRED IN MAKING ADDITION OF R S. 83,74,400/- ON ACCOUNT OF DIFFERENCE IN STOCK ESTIMATED BY THE INCOME TAX OFF ICIALS DURING SURVEY AND ACTUAL ST O CK ON THE DATE SURVEY . 4) THAT THE ORDER PASSED VIOLATES THE PRINCIPLES OF N ATURAL JUSTICE, EQUITY & FAIR PLAY. 5) THAT THE ASSESSEE CRAVES RIGHT TO ADD, ALTER OR AM END ANY GROUNDS OF APPEAL. 6. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECT ED TO THE ORDER OF THE CIT(A). REFERRING TO VARIOUS PAGES OF THE PAPER BOOK, HE SU BMITTED THAT THE AMOUNTS DRAWN FROM THE BANK ACCOUNT ON VARIOUS DATES WERE NOT ENT ERED INTO THE CASH BOOK FOR WHICH ALL THESE DISCREPANCIES WERE FOUND. FURTHER, ON TH E DATE OF SURVEY, THE MAIN PARTNER OF THE FIRM WAS OUT OF INDIA AND THE PARTNER WHO WAS P RESENT COULD NOT EXPLAIN THE THINGS PROPERLY BECAUSE HE WAS ONLY LOOKING AFTER THE PROD UCTION SIDE. HE SUBMITTED THAT THE SURVEY TEAM HAD ADOPTED IMAGINARY FIGURES FOR THE Q UANTITY AS WELL AS THE RATE WITHOUT CONSIDERING THE EXACT QUANTITY AND EXACT RATE WHICH SHOULD HAVE BEEN APPLIED FOR COMPUTATION OF CLOSING STOCK ON THE DATE OF SURVEY. HE SUBMITTED THAT THE STATEMENT OF THE PARTNER WAS FORCIBLY TAKEN AND HE WAS MADE TO S IGN THE CHEQUE FOR THE PAYMENT OF TAX LIABILITY ON ACCOUNT OF ADDITIONAL INCOME SURRE NDERED BY HIM UNDER COERCION. HE SUBMITTED THAT THE VARIOUS DISCREPANCIES REGARDING THE DIFFERENCE IN CASH AND DIFFERENCE IN VALUATION OF CLOSING STOCK WAS FILED BEFORE THE LOWER AUTHORITIES. HOWEVER, INSTEAD OF GOING THROUGH THE SAME, THE LOW ER AUTHORITIES MERELY RELIED ON THE STATEMENT OF THE PARTNER WHICH WAS RECORDED ON THE DATE OF SURVEY AND MADE THE ADDITION. HE ACCORDINGLY SUBMITTED THAT THE ENTIRE ADDITION SHOULD BE DELETED. ITA NO.5793/DEL/2011 5 6.1 IN HIS ALTERNATE CONTENTION, HE SUBMITTED THAT THE MATTER MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO R E-EXAMINE THE VARIOUS STATEMENTS FILED BY THE ASSESSEE SUBSTANTIATING THE DIFFERENCE IN TH E CASH FOUND AND THE DISCREPANCIES IN THE VALUATION OF CLOSING STOCK. 7. THE LD. DR, ON THE OTHER HAND, STRONGLY OPPOSED THE ARGUMENTS ADVANCED BY THE LD. COUNSEL FOR THE ASSESSEE AND SUBMITTED THAT THE SUBMISSION OF THE LD. COUNSEL IS FACTUALLY INCORRECT AND WRONG. SHE SUBMITTED THAT PHYSICAL VERIFICATION OF STOCK WAS DONE IN PRESENCE OF ONE OF ITS PARTNERS SHRI VISHAL BHASIN ALONG WITH OTHER EMPLOYEES OF THE SAID FIRM. FURTHER, SHRI AJAY BHASIN, ANOTHE R PARTNER OF THE FIRM RETRACTED THE SURRENDERED AMOUNT OF RS. RS.90,99,967/-, VIDE HIS LETTER DATED 6 TH SEPTEMBER, 2007 WHICH IS AFTER FOUR MONTHS OF SURVEY CONDUCTED U/S 133A OF THE IT ACT. HE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO PROVE THE ASSESS EES CONTENTION/DISAGREEMENT. EVEN DURING THE ASSESSMENT PROCEEDINGS AS WELL AS B EFORE THE CIT(A) THE ASSESSEE FIRM FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO P ROVE THE CONTENTION OF THE ASSESSEE REGARDING SUCH DISCREPANCIES. UNDER THESE CIRCUMSTANCES, THE ORDER OF THE CIT(A) SHOULD BE UPHELD AND THE ARGUMENTS OF THE LD . COUNSEL FOR THE ASSESSEE FOR SETTING ASIDE OF THE MATTER TO THE FILE OF THE ASSE SSING OFFICER SHOULD BE REJECTED. 7.1 REFERRING TO THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CASE OF PCIT VS. AVINASH KUMAR SETIA REPORTED IN 395 ITR 235 , SHE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE THE ASSESSEE SURRENDERED CERTAIN INCOME BY WAY OF DECLARATION AND WITHDREW THE SAME AFTER T WO YEARS WITHOUT ANY SATISFACTORY ITA NO.5793/DEL/2011 6 EXPLANATION, IT COULD NOT BE TREATED AS BONA FIDE A ND HENCE, THE ADDITION WOULD SUSTAIN. REFERRING TO THE HON'BLE DELHI HIGH COURT DECISION IN THE CASE OF RAJ HANS TOWERS (P) LTD. VS. CIT REPORTED IN 373 ITR 9, SHE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID DECISION HAS HELD THAT WHERE THE ASSESSEE HAS NOT OFFERED ANY SATISFACTORY EXPLANATION REGARDING THE SURRENDERED AMOUNT BEING NOT BONA FIDE AND IT WAS ALSO NOT BORNE OUT IN ANY CONTENTIONS RAISED BEFORE LOWER AU THORITIES, THE ADDITIONS SO MADE AFTER ADJUSTING EXPENDITURE WERE JUSTIFIED. SHE AL SO RELIED ON THE FOLLOWING DECISIONS:- (I) M/S PEBBLE INVESTMENT AND FINANCE LTD. VS. ITO, 201 7-TIOL-188-HC-MUM- IT; AND (II) M/S PEBBLE INVESTMENT AND FINANCE LTD. VS. ITO, 201 7-TIOL-238-SC-IT. 8. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONS IDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND A SURVEY ACTION U/S 133A WAS CO NDUCTED IN THE CASE OF THE ASSESSEE ON 17 TH MAY, 2007 DURING WHICH DISCREPANCY IN CASH AMOUNTI NG TO RS.7,24,967/- AND DISCREPANCY IN STOCK OF RS.83,75,000/- WERE FOUND. THE STATEMENT OF ONE OF THE PARTNERS SHRI VISHAL BHASIN WAS ALSO RECORDED DURIN G THE SAID SURVEY. HE WAS CONFRONTED WITH THE ABOVE DISCREPANCIES FOR WHICH H E HAD SURRENDERED ADDITIONAL INCOME OF RS.90,99,967/- FOR THE DISCREPANCIES SO F OUND AS MENTIONED EARLIER. HOWEVER, SUBSEQUENTLY, THE ASSESSEE, VIDE LETTER DA TED 9 TH JUNE, 2007 RETRACTED THE SAID STATEMENT WHICH IS AFTER FOUR MONTHS OF SURVEY COND UCTED U/S 133A OF THE IT ACT. WE FIND THE ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE THAT THE VALUATION OF ITA NO.5793/DEL/2011 7 STOCK WAS MADE ARBITRARILY BY THE SURVEY TEAM BY PU TTING HYPOTHETICAL STOCK AND ARBITRARY RATE. SIMILARLY, THE ASSESSING OFFICER A LSO REJECTED THE EXPLANATION GIVEN BY THE ASSESSEE REGARDING THE DISCREPANCY IN CASH. WE FIND THE LD.CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. IT IS THE SUBMISS ION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE HAD GIVEN RECONCILIATION STATEMEN T REGARDING THE DISCREPANCY IN CASH AND DISCREPANCY IN THE CLOSING STOCK. IT IS HIS SU BMISSION THAT THE VARIOUS WITHDRAWALS FROM THE BANK ON DIFFERENT DATES WERE NOT ENTERED I N THE CASH BOOK FOR WHICH ALL THESE DISCREPANCIES AROSE. ACCORDING TO HIM, SINCE THE WI THDRAWALS FROM THE BANK ARE UNDISPUTED THEREFORE, IF THE SAME ARE TAKEN INTO A CCOUNT, THEN, THERE WILL BE NO DISCREPANCY AT ALL SO FAR AS THE CASH IS CONCERNED. SO FAR AS THE DISCREPANCY IN THE VALUATION OF CLOSING STOCK IS CONCERNED, IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE STOCK WAS TAKEN BY THE SURVEY TEA M ARBITRARILY AND NOT IN EXACT QUANTITY AND THE RATE ADOPTED BY THE DEPARTMENT WAS ALSO NOT CORRECT. THE GENERALLY ACCEPTED ACCOUNTING PRINCIPLES HAVE NOT BEEN FOLLOW ED FOR WHICH THE DISCREPANCY AROSE. IT IS ALSO THE SUBMISSION OF THE LD. COUNSE L THAT THE STATEMENT WAS RECORDED UNDER DURESS AND COERCION. IT IS THE SUBMISSION OF THE LD. DR THAT THE ASSESSEE WAS GIVEN ADEQUATE OPPORTUNITY DURING THE COURSE OF ASS ESSMENT PROCEEDINGS AND APPEAL PROCEEDINGS AND IT COULD NOT JUSTIFY THE HUGE DISCR EPANCIES IN THE CASH AND CLOSING STOCK. THEREFORE, ONCE THE ASSESSEE HAS SURRENDERE D THE AMOUNT DURING THE COURSE OF SURVEY WHERE THE STOCK WAS INVENTORISED IN THE PRES ENCE OF ITS PARTNER AND OTHER STAFF, THEREFORE, THE MATTER COULD NOT BE SET ASIDE AND TH E ADDITION SHOULD BE SUSTAINED. ITA NO.5793/DEL/2011 8 9. WE FIND THE ASSESSEE IN THE INSTANT CASE HAS FIL ED CERTAIN RECONCILIATION STATEMENT REGARDING THE DISCREPANCY IN CASH AND VALUATION OF CLOSING STOCK. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAD FILED THE MOVEMENT OF STOCK FROM 1 ST APRIL, 2007 TILL 17 TH MAY, 2007. IT HAS ALSO GIVEN THE QUANTITY AND RAT E OF THE STOCK FOUND DURING THE COURSE OF SURVEY. WE FIND THE ASSESSING OFFICER, INSTEAD OF EXAMINING THE SAME HAS GONE BY THE STATEMENT OF THE PARTNER DURIN G THE COURSE OF SURVEY. NO DOUBT, THE ASSESSEE, IN THE INSTANT CASE, HAD SURRENDERED CERTAIN AMOUNT DURING THE COURSE OF SURVEY ON THE BASIS OF CERTAIN DISCREPANCIES POINTE D OUT TO ONE OF THE PARTNERS REGARDING THE DISCREPANCY IN CASH AND THE DISCREPAN CY IN THE VALUATION OF CLOSING STOCK. HOWEVER, THE SAME, IN OUR OPINION, CANNOT B E CONCLUSIVE AND BINDING ON THE ASSESSEE ONCE THE ASSESSEE IS ABLE TO SUBSTANTIATE WITH EVIDENCE TO THE SATISFACTION OF THE A.O. REGARDING THE DISCREPANCIES. THE LOWER AU THORITIES IN THE INSTANT CASE APPEARS TO HAVE MADE THE ADDITION SOLELY ON THE BASIS OF TH E STATEMENT RECORDED DURING THE COURSE OF SURVEY INSTEAD OF EXAMINING THOROUGHLY TH E RECONCILIATION STATEMENT FILED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS REGARDING THE DIFFERENCE IN THE CASH FOUND AND THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTERE ST OF JUSTICE, WE DEEM IT PROPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFI CER WITH A DIRECTION TO THOROUGHLY EXAMINE THE RECONCILIATION STATEMENT FILED BY THE A SSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS REGARDING THE DISCREPANCY IN CASH AND THE DIFFERENCE IN THE VALUATION OF CLOSING STOCK. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW, AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ITA NO.5793/DEL/2011 9 ACCORDINGLY. THE GROUNDS RAISED BY THE ASSESSEE AR E ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, THE APPEAL FILED BY THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSES. THE DECISION WAS PRONOUNCED IN THE OPEN COURT ON 1 6.04.2019. SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCO UNTANT MEMFBER DATED: 16 TH APRIL, 2019 DK COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI