M/s. Kanak Metal Industries, JODHPUR V. ITO, JODHPUR

ITA 71/JODH/2012

• Counselvise Citation: 7123314 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-08-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N A JOSHI
• Assessee Lawyers: NAURATAN MERTIA; H M GANDHI
• Keywords: Rejection of books of accounts; Depreciation; Opportunity of being heard; Revised return; Unabsorbed depreciation
• Section: 143(3); 133A; 131; 145; 69

Judgement Text

IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENCH : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO. 71 /JODH/2012 (A.Y. 200 7 - 08 ) M/S. KANAK METAL INDUSTRIES, 8/2, JODHANA INDUSTRIAL ESTATE, ROAD NO. 8, BASNI, JODHPUR. VS. ITO, WARD - 1(2), JODHPUR. PAN NO. AAEFK 8206 A (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI NAURATAN MERTIA & SHRI H.M. GANDHI. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 04 / 0 8 /201 4 . DATE OF PRONOUNCEMENT : 23 /0 9 /201 4 . O R D E R PER N.K. SAINI, A.M TH IS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 15/01/2010 OF L D . CIT(A), J ODHPUR . 2 IN THIS APPEAL , THE ASSESSEE ORIGINALLY RAISED 11 GROUNDS, BUT LATER ON CONCISE GROUNDS WERE FILED VIDE LETTER DATED 0 2 /07/2013 WHICH READ AS UNDER : 2 1. THAT I N THE FACTS AND IN THE CIRCUMST ANCES OF THE CASE, THE LD. CIT(A) ERRED IN LAW AND IN FACTS IN UPHOLDING THE REJECTION OF BOOKS OF ACCOUNTS AND APPLICABILITY OF SECTION 145 OF THE ACT, MADE BY THE LD. A.O. 2. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN FACTS AND LAW IN MAINTAINING THE TRADING ADDITION OF RS. 2,51, 344/ - MADE BY LD. A.O. BY APPLYING G.P. RATE OF 4.50% AS AGAINST 4.22% DECLARED BY THE APPELLANT. THIS TRADING ADDITION IS ALS O ERRONEOUSLY CALCULATED EXCESS BY RS. 1,000/ - 3. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN VIEW OF SUBMISSI ONS AND OBJECTIONS MADE BY THE APPELLANT BEFORE THE AUTHORITIES BELOW, THE LD. CIT(A) ERRED IN LAW AND FACTS IN MAINTAINING THE ADDITION OF RS. 48,79,731/ - MADE U/S. 69 OF THE ACT ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ON THE BASIS OF NON - COGNIZ ABLE AND UNRELIABLE STOCK INVENTORY PREPARED IN AN UNLAWFUL MANNER AND DETERMINED NON - EXISTENCE EXCESS STOCK AND ALSO ON THE BASIS OF THE RETRACTED ALLEGED SURRENDER MADE BY THE APPELLANT FOR SUCH EXCESS STOCK. 4. THAT IN THE FACTS AND I N THE CIRCUMSTANCES OF THE CASE, AND IN VIEW OF SUBMISSIONS AND OBJECTIONS MADE BY THE APPELLANT BEFORE THE AUTHORITIES BELOW , THE LD. CIT(A) ERRED IN LAW AND FA C TS IN MAINTAINING THE ADDITION OF RS. 1,20,000/ - MADE U/S. 69 OF THE ACT FOR ALL E GED EXCESS CA SH FOUND DURING THE COURSE OF SURVEY ON THE GROUND OF RETRACTED ALLEGED SURRENDER BY THE APPELLANT FOR SUCH EXCESS CASH, WHEREAS NO SUCH EXCESS CASH WAS INEXISTENCE. 5. THAT IN THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED AND WAS UNJUSTIFIED IN LAW IN MAINTAINING THE ADDITIONS U/S. 69 OF RS. 50 LACS , ON ACCOUNT OF RETRACTED ALLEGED SURRENDER DURING THE COURSE OF UNLAWFULLY CARRIED OUT SURVEY, WHICH SURRENDER ITSELF WAS AN INVALID, UNAUTHORIZED AND UNSUSTAINABLE ACT IN THE EYE OF L AW. 6 . THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY SUBSTITUTE OR DELETE ANY OF THE GROUNDS HERE IN ABOVE TAKEN ON OR BEFORE APPEAL HEARING. 7. THE APPELLANT PRAYS THAT ITS APPEAL MAY KINDLY BE ALLOWED ON THE GROUNDS TAKEN. 3 3. GROUND NO S . 6 & 7 ARE GENERAL IN NATURE , SO DO NOT REQUIRE ANY COMMENTS ON OUR PART. VIDE GROUND NO. 1 & 2 , THE GRIEVANCE OF THE ASSESSEE RELATES TO THE REJECTION OF BOOKS OF ACCOUNTS AND THE TRADING ADDITION BY APPLYING GROSS PROFIT RATE MADE BY THE ASSESSING OF FICER AND SUSTAINED BY THE LD. CIT(A) . GROUND NOS. 3 TO 5 RELATES TO THE ADDITION ON ACCOUNT OF EXCESS STOCK, EXCESS CASH AND SURRENDER OF INCOME. 4. FACTS RELATING TO THIS CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 26/10/2007 BY DECLAR ING TOTAL INCOME AT RS. 2,89,850/ - . IN THIS CASE, A SURVEY WAS CARRIED U/S. 133A OF THE I.T. ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT IN SHORT) ON 21/09/2006 . THIS CASE WAS SELECTED FOR COMPULSORY SCRUTINY . IN THE MEANWHILE, THE ASSESSEE HAD ALSO FILED A REVISED RETURN ON 23/12/2008 , AFTER CLAIMING SET OFF OF UNABSORBED DEPRECIATION AMOUNT ING TO RS. 3,32,494/ - . HOWEVER, THE ASSESSEE DID NOT DISCLOSE SURRENDER INCOME OF RS. 50 LAC IN ITS REVISED RETURN OF INCOME. THE ASSESSING OFFICER FRAMED THE ASSESSMENT AT AN INCOME OF RS. 51, 96,420/ - IN THE FOLLOWING MANNER: - INCOME SHOWN AS PER COMPUTATION OF TOTAL INCOME BEFORE SET OFF OF B/F UNABSORBED DEPRECIATION 3,32,494 . 00 ADD: ADDITIONS DISCUSSED AS ABOVE. 1. TRADING ADDITION 2. ADDITION U/S. 69 BEING THE INCOME SURRENDERED DURING THE SURVEY BUT NOT 2,51,344.00 4 SHOWN IN THE RETURN OF INCOME 50,00,000.00 GROSS TOTAL INCOME 52,51,344.00 55,83,838.00 LESS: B/F UNABSORBED DEPRECIATION AS PER ORDER U/S. 143(3) RELATING TO A.Y. 2006 - 07 TOTAL INCOME R OUNDED OFF TO 3,87,416.00 51,96,422.00 51,96,420.00 5. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) , WHO SUSTAINED THE ADDITIONS MADE BY THE ASSESSING OFFICER FOR THE REASONS STATED IN THE IMPUGNED ORDER. NOW THE ASSESSEE IS IN APPEAL. 6 . AT THE FIRST INSTANCE, LEARNED COUNSEL FOR THE ASSESSE E ARGUED THE ISSUES RAISED IN GROUND NOS. 3 TO 5 RELAT ING TO THE ADDITIONS ON ACCOUNT OF ALLEGED EXCESS STOCK, EXCESS CASH AND SURRENDERED INCOME . D URING THE COURSE OF HEARING, AN AFFIDAVIT OF PARTNER NAMELY MOHAMMAD HUSAIN GHORI WAS FILED STATING THEREIN AS UNDER: - 1. THAT I AM A PARTNER IN M/S KANAK METAL INDUSTRIES, 8/2 J ODHANA INDUSTRIAL ESTATE, ROAD NO.8, BASANI - II PHASE, JODHPUR. 2. T HAT A SURVEY, U/S 133A OF THE ACT, WAS CARRIED OUT AT THE F ACTORY PLACE ON 21.09.2006 IN TH E PRESENCE OF THE OTHER PARTNER OF THE FIRM SH. PRAVEEN LALWANI. 3. THAT I WAS OUT OF JODHPUR AND ONLY CAME ON 22.09.2006. 4. THAT SINCE THE DATE OF SURVEY PRESSURE WAS EXERTED BY THE SH. A.K. BHARDWAJ, ACIT, JODHPUR, CONDUCTING THE SURVEY FOR M AKING SURRENDER OF INCOME. 5. T HAT DURING THE COURSE OF ST ATEMENT RECORDED ON 25.09.2006, I WAS ASKED TO CONFIRM THE CORRECTNESS OF PHYSICAL STOCK TAKEN AND RECORDED IN THE INVENTORY AS THE OTHER PARTNER SH. PRAVEEN LALWANI WAS NOT 5 KNOWING THE RATE ETC. AND I WA S ASKED TO GET IT VALUED. 6. THAT I RESPONDED AT THAT TIME THAT FOR THIS PURPOSE I WOULD BE NEEDING THE BOOKS OF ACCOUNTS, PURCHASES , SALES BILLS ETC., THEREFORE, THIS WORK WOULD BE GOT DONE BY ME ON 27.09.2006 ON RECEIPT OF THESE DOCUMENTS . APART FROM THAT, AT THAT TIME 6:00 O'CLOCK IN THE EVENING HAS ALREADY GONE, THEREFORE, MY STATEMENT WAS DISCONTINUED ON THAT DATE TO BE RESUMED ON 27.09.2006. 7. THAT NO STATEMENT WAS FURTHER RESUMED ON 27.09.2006 BUT THESE WERE RESUMED AND RECORDED ON 29.09.2006. 8. THAT DURING THIS PERIOD I.E. FROM 25 TH SEPTEMBER, 2006 TO THE TIME OF RECORDING OF STATEMENT ON 26.09.2006 PRESSURE WAS CONTINUOUSLY EXERTED ON ME FOR MAKING SURRENDER AND ULTIMATELY I HAVE TO SURRENDER RS.50 LACS FOR EXCESS STOCK AND CASH. 9. THAT, THE FACT OF MY SURRENDER OF INCOME WAS ONLY DUE TO EXERTION OF PRESSURE ON ME. NO DOCUMENTARY SUPPORT OR BOOKS OF ACCOUNT IN THE POSSESSION O F DEPARTMENT WERE MADE AVAILABLE TO ME WHICH I WAS REQUIRED FOR VALUATION AND VERIFICATION OF STOCK SO THAT I COULD VERIFY THE QUANTUM AND RATE. 10 THAT, HOWEVER, ON SEEING THE STOCK INVENTORY AT PAGE NO. 1, I OB JECTED WEIGHT MENTIONED AT PAGE NO. 1 AGAINST THE STEEL PATTAS BY ASSERTING THAT THESE ARE INCORRECT AND THE CORRECT WEIGHT CAN BE VERIFIED FROM THE MARKET OR FROM ANYWHERE ELSE. THEN SH. A.K. BHARDWAJ RECORDED THIS FACT IN THE ORDER SHEET WITH THE ASSURANCE THAT THIS ASPECT WOULD BE LOOKED I NTO AT THE TIME OF ASSESSMENT PROCEEDING. 11. THAT THE BOOKS OF ACCOUNTS AND OTHER RECORDS SEIZED BY THE INCOME TAX OFFICIALS DURING THE COURSE OF SURVEY WERE ONLY MADE AVAILABLE TO ME ON 5 TH OCTOBER, 2006, THEREFORE, THIS FACT ITSELF ESTABLISHED THAT THE SURRENDER OBTAINED FROM ME WAS NOT BASED ON THE BASIS OF VERIFICATION OF THE WEIGHT AND RATE FROM THE RECORDS OF THE FIRM. 7. DURING THE COURSE OF HEARING, T HE BENCH DIRECTED THE DEPARTMENT TO FURNISH COMMENTS ON THE AFORESAID AFFIDAVIT OF THE ASSESSEE. IN RESPONSE, THE ASSESSING OFFICER VIDE LETTER DATED 25/06/2014 STATED AS UNDER: - 6 THE PARA - WISE COMMENTS / REPORT ON THE AFFIDAVIT FILED BY SHRI MOHD. HUSAIN GHORI ON PAGE NO - 29 TO 31 OF THE PAPER BO O K IS SUBMITTED AS UNDER: - 1. NO COMMENTS 2. NO COMMENTS 3. NO COMMENTS 4. IN THIS REGARD IT IS SUBMITTED THAT NO PRESSURE WAS EXERTED FOR MAKING SURRENDER OF INCOME. WHATEVER AMOUNT SURRENDERED BY THE PARTNER OF THE FIRM DURING THE COURSE OF SURVEY WAS DONE ON THE BASIS OF EXCESS STOCK AS WELL AS EXCESS CASH. ON 25/09/2006 SHRI MOHD. HUSAIN GHORI PARTNER OF THE FIRM GIVE HIS STATEMENT ON OATH U/S. 131 WHICH WAS CONTINUED ON 29/09/2006 . IN HIS STATEMENT HE HAS CATEGORICALLY ADMITTE D THAT HE IS READY TO PA Y TAX ON EXCESS STOCK AS WELL AS EXCESS CASH FOUND DURING THE COURSE OF SURVEY. HENCE IT CAN BE SAID THAT PRESSURE WAS NOT EXERTED DURING THE COURSE OF SURVEY ON THE ASSESSEE. 5. NO COMMENTS. 6. NO COMMENTS. AS REGARD DISCONTINUATION OF STATEMENTS AFTER 6.00 PM IT IS SUBMITTED THAT IN REPLY TO QUESTION NO.7 SHRI MOHD. HUSAIN GHORI REQUESTED TH E SURVEY PARTY TH A T HE MAY BE GIVEN SOME TIME FOR VALUATION OF STOCK AS HE REQUIRED BOOKS OF ACCOUNT, PURCHASE AND SALE BILL FOR THIS PURPOSE. HENCE THE STATEMENT WAS DISCONTINUED ON THE REQUEST OF SHRI MOHD. HUSAIN GHORI. 7. NO COMMENTS. 8. IN THIS REGARD, ON THE BASIS OF THE INFORMATION AVAILA BLE ON RECORD NO PRESSURE WAS CONTINUOUSLY EXERTED ON THE ASSESSEE. WHATEVER AMOUNT SURRENDERED BY THE PARTNER OF THE FIRM DURING THE COURSE OF SURVEY WAS DONE ON THE BASIS OF EXCESS STOCK AS WELL AS EXCESS CASH. IN RESPECT OF SURRENDER OF INCOME MADE B Y EXERTION OF PRESSURE UPON THE ASSESSEE IT IS STATED THAT THERE WAS NO EXERTION OF PRESSURE DURING THE COURSE OF SURVEY THE COPY OF TWO CPU WAS PROVIDED TO THE ASSESSEE ON 26/09/2006 (COPY OR ORDER SHEET ENTRY DATED 26/09/200 6 ENCLOSE D FOR READY REFERENCE). HENCE THE DOCUMENTS HAVE BEEN PROVIDED TO THE ASSESSEE WELL WITHIN THE TIME I.E. BEFORE SURRENDER . 9. NO COMMENTS. 7 10. AS REGARD RELEASE OF BOOKS OF ACCOUNT IMPOUNDED DURING THE COURSE OF SURVEY IT IS SUBMITTED THAT THE MAIN DATA WHICH WAS STORED IN TWO CPU WERE RELEASED TO THE ASSESSEE ON 26/09/2006 AND SURRENDER OF INCOME WAS MADE BY THE ASSESSEE ON 29/09/2006 . HENCE IT IS ESTABLISHED THAT THE DAT A WHICH WAS LYING IN TWO CPU WAS HANDED OVER TO THE ASSESSEE BEFORE SURRENDER (COPY OF ORDER SHEET ENTRY DATED 26/09/2006 RELEASING TWO CPU IS ENCLOSED.) 8 . IN THE PRESENT CASE, IT IS AN ADMITTED FACT THAT THE AFFIDAVIT HAS BEEN FILED BY THE PARTNER OF THE ASSESSEE FIRM , FIRST TIME BEFORE THE TRIBUNAL AND CERTAIN NEW FACTS HAVE BEEN BROUGHT ON RECORD WHICH WERE NOT AVAILABLE TO THE LD. CIT(A) . 9. THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT A PRESSURE WAS EXERTED ON THE PARTNER OF THE ASSESSEE FOR MAKING THE SURRENDER AND THE ALLEGATION OF RECONCILIATION OF FACTS AND FIGURES PRIOR TO MAKING SURRENDER WAS ILLOGICAL , BASELESS BECAUSE SURRENDER WAS FORCIBLY OBTAINED BACK DATED FOR 29/09/2006 . IT WAS ALSO STATED THAT THE COPIES OF STATEMEN T S RECORDED AND STOCK & CASH INVENTORY , WERE PROVIDED TO THE ASSESSEE ON 05/10/2006 WHEREAS THE SURRENDER WAS OBTAINED FORCIBLY ON 29/09/2006 . IT WAS FURTHER STATED THAT THE PARTNER OF THE ASSESSEE PUT HIS GRIEVANCE BEFORE THE ASSESSING OFFICER THAT HE WAS NOT SATISFIED WITH THE STOCK TAKEN DURING THE COURSE OF SURVEY, BUT NEITHER ASSESSING OFFICER NOR LD. CIT(A) HAD GIVEN ANY COGNIZANCE TO THE V ARIOUS LETTERS WRITTEN TO THEM. 8 HE DREW OUR ATTENTION TOWARDS PAGE NOS. 65 TO 69 , 165 TO 177 & 178 TO 186 OF THE ASSESSEES PAPER BOOK . IT WAS CONTENDED THAT A DUE AND REASONABLE OPPORTUNITY OF BEING HEARD WAS NOT PROVIDED TO THE ASSESSEE AND THE FACTS WERE NOT A PPRECIATED IN RIGHT PERS PECTIVE. HE THEREFORE, SUBMITTED THAT THE MATTER MAY BE REMANDED BACK TO THE LD. CIT(A) FOR THE REASON OF A S SERTION IN ASSESSEES AFFIDAVIT FOR ARBITRARY AND EXCESS STOCK TAKEN AT THE TIME OF SURVEY BY THE DEPARTMENT . HOWEVER, HE REQUESTED THAT A DIRECTION MAY BE GIVEN TO THE LD. CIT(A) TO DECIDE THE REMAND/SET ASIDE MATTER WITHIN A REASONABLE TIME LIKE 6 MONTHS. 10 . IN HIS RIVAL SUBMISSIONS, LEARNED D.R. ALTHOUGH SUPPORTED THE ORDER OF THE AUTHORITIES BELOW, BUT DID NOT OBJECT IF THE MATTE R IS REMANDED TO THE LD. CIT(A) IN VIEW OF THE AFFIDAVIT FIRST TIME FILED BY THE PARTNER OF THE ASSESSEE. 11 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES . A FTER CONSIDERING THE SUBMISSIONS AND THE TOTALITY OF THE FACTS , PARTICULARLY THIS VITAL FACT THAT THE AFFIDAVIT HAS BEEN FILED BY THE PARTNER OF THE ASSESSEE FIRM FIRST TIME BEFORE THIS BENCH OF THE TRIBUNAL AND CERTAIN FACTS MENTIONED IN THE SAID AFFIDAVIT PERHAPS WERE NOT IN THE KNOWLEDGE OF THE LD. CIT(A) . WE THER EFORE, BY KEEPING IN VIEW THE PRINCIPLES OF NATURAL 9 JUSTICE , DEEM IT APPROPRIATE TO REMAND THIS CASE BACK TO THE FILE OF THE LD. CIT(A) TO BE DECIDED AFRESH , EXPEDITIOUSLY , AFTER PROVIDING DUE AND REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . 1 2 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ( ORDER PRONOUNCED IN THE COURT ON 23 RD SEPTEMBER , 201 4) . SD/ - SD/ - ( HARI OM MARATHA ) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 23 RD SEPTEMBER , 201 4 . VR/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD. CIT 4. THE CIT(A) 5. THE D.R SR. PRIVATE SECRETARY , ITAT, JODHPUR .