Sunita Vyankatesh Chilka, Solapur V. DCIT, Solapur

ITA 722/PUN/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3093 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 1999-2000
• Appeal Filed On: 18-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY DAMLE
• Assessee Lawyers: H R KARWA
• Keywords: Block assessment; Reason to believe; Reassessment proceedings; Set aside
• Section: 133A; 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 722/PN/09 (ASSTT. YEAR 1999-00) SUNITA VYANKATESH CHILKA 1339, NEW PACHHA PETH, SOLAPUR-413005 PAN NO. ACTPC8016B .... APPELLANT VS. DCIT CIR-2, SOLAPUR . RESPONDENT ITA NO. 723/PN/09 (ASSTT. YEAR 1999-00) M/S. SHRINIWAS CHILKA MILL 1339, BHADRAVATI PETH, SOLAPUR-413005 PAN NO. AAFF54054A .... APPELLANT VS. DCIT CIR-2, SOLAPUR . RESPONDENT ITA NO. 724/PN/09 (ASSTT. YEAR 1999-00) M/S. VYANKATESH CHILKA MILL 64 MIDC, AKKALKOT ROAD, SOLAPUR-413006 PAN NO.AABFV1465D .... APPELLANT VS. DCIT CIR-2, SOLAPUR . RESPONDENT APPELLANT BY : SHRI H.R. KARWA RESPONDENT BY : SHRI ABHAY DAMLE ITA NO. 722 TO 724/PN/09 A.Y 1999-00 PAGE 2 OF 5 ORDER PER D. KARUNAKARA RAO AM THESE THREE APPEALS ARE FILED BY DIFFERENT ASSESSEES AGAINST DIFFERENT ORDERS OF THE CIT(A)-III, PUNE COMMONLY DATED 30-03- 2009 FOR THE COMMON ASSESSMENT YEAR 1999-00. FOR THE SAKE OF CONVENIENCE , ALL THESE THREE ORDERS ARE BEING DISPOSED IN THIS COMPOSITE ORDER FOR THE SAKE CONVENIENCE CONSIDERING THE COMMONALITY OF THE ISSUES, REPRESENTATIVES ETC. W E PROCEED TO TAKEN THE APPEAL OF THE ASSESSEE IN THE CASE OF M/S SHRINIWAS CHILKA MILL. ITA NO. 723/PN/09 M/S SHRINIWAS CHILKA MILL 2. DURING THE PROCEEDINGS BEFORE US, AT THE VERY OUTSE T, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE IMPUGNED RE-ASSESSMENT ORDE R WAS PASSED U/S. 148 R.W.S. 143 OF THE INCOME TAX ACT. AO RECORDED THE REAS ONS BEFORE RE-OPENING THE ASSESSMENT AND TAKING US THROUGH THE PAPER BOOK, LD. COUNSEL MENTIONED THAT PAGE NO. 41 CONTAINS THE REASONS RECORDED BY THE A.O (ACIT CIRCLE-2, SHOLAPUR) FOR THE IMPUGNED REASSESSMENT. THE TEXT OF THE SAID REASONS IS GIVEN AS FOLLOWS:- THE ASSESSEE FIRM HAS FILED RETURN OF INCOME FOR THE A SSESSMENT YEAR 1999-00 ON 31-08-1999 DECLARING INCOME OF RS. 1,93,793 /- THE BLOCK ASSESSMENT WAS COMPLETED U/S. 158BC ON 30-1 1-2009 WHEREIN THE EXCESS STOCK OF RS. 77,880/- FOUND AT THE TIME O F SURVEY ARE TREATED AS UNDISCLOSED INCOME AND ADDED TO TOTAL INCOME FOR THE BLOC K A.Y. 1999-00 (PART). THIS BLOCK ASSESSMENT U/S. 158BC WAS CANCELLED BY THE CIT(A)-III, PUNE VIDE HIS ORDER DATED 15/12/2003. THE BUSINESS PREMISES OF THE ASSESSEE AT C-10/1/16, MIDC, AKKALKOT ROAD, SOLAPUR WERE SURVEYED U/S. 133A OF THE INCOME TAX ACT, 1961 ON 18/11/1998. AT THIS PLACE SIX UNITS WERE CARRIED ON THE BUSINESS ACTIVITIES 7 THE ASSESSEE IS ONE OF THOSE. AT THE TIME OF SURVEY ACTION U/S. 133A EXCESS STOCK WAS FOUND AS UNDER- STOCK AS INVENTORISED BY THE SURVEY PARTY (SIX UNITS) RS. 41,60,752/- CLOSING STOCK AS PER BOOKS AS ON THE DATE OF SURVEY (SIX UNITS) RS. 36,93,476/- EXCESS STOCK. RS. 4,67,276/- THUS, EXCESS STOCK FOUND IN RESPECT OF THE ASSESSEE WORKS OUT TO RS 77,880/- [ RS. 467276/6] NO. C 10/1/16, MIDC, AKKALKOT ROAD, SOLAPUR FOR WHICH TOTAL EXPENDITURE INCURRED BY THE ASSESSEE AT RS. 19,59,000/- IS UNDER STATED. THERE IS UNDERSTATEMENT IN COST OF CONSTRUCTION AMOUNTING TO AB OUT RS. 20/- LAKHS. I HAVE, THEREFORE, REASON TO BELIEVE THAT THE EXCESS STOCK FOUND AT THE TIME OF SURVEY ACTION CONDUCTED ON 18/11/1998 OF RS . 77,880/- AS DISCUSSED ABOVE AND EXPENDITURE INCURRED BY THE ASS ESSEE ON CONSTRUCTION OF PROPERTY ABOUT RS. 20 LAKHS ESCAPED ASSESSMENT . ITA NO. 722 TO 724/PN/09 A.Y 1999-00 PAGE 3 OF 5 3. TAKING THE QUE FROM ABOVE, LD. COUNSEL MENTIONED THAT THE AOS REASONS REVOLVE AROUND EXCESS STOCK ADDITION OF RS 77,880/- A ND UNDERSTATEMENT OF CONSTRUCTION COST TO THE TUNE OF RS 20 LAKHS. TO GIV E THE BRIEF BACKGROUND, LD AR MENTIONED THAT THE ORIGINALLY , A.O MADE THE BLOCK ASSESSMENT U/S.158 BC OF THE INCOME TAX ACT ON 30-11-2000, WHEREIN THE EXCE SS STOCK OF RS. 77,880/- IE ASSESSEES SHARE BEING 1/6 TH OF THE EXCESS STOCK FOUND OF RS. 4,67,276/- WAS ADDED. THE SAID BLOCK ASSESSMENT WAS CANCELLED BY THE CIT(A) WHICH WAS AFFIRMED BY THE TRIBUNAL AND THE MATTER IS PENDING BEF ORE THE HONBLE HIGH COURT OF BOMBAY WHERE THE REVENUE IS AN APPELLANT. SUBSEQU ENTLY, CONSIDERING THE REVENUES FAILURE TO TAX THE SAME, THE A.O INITIATE THE RE-ASSESSMENT PROCEEDINGS INVOKING THE PROVISIONS OF SECTION 148, W HICH IS BEING CHALLENGED BY THE ASSESSEE IN THESE PROCEEDINGS. IN THIS REGARD, LD . COUNSEL SUBMITTED THAT THE EXCESS STOCK IN QUESTION IS NOT REAL AND THE SAM E WAS ILLEGALLY ARRIVED AT BY THE REVENUE. FURTHER, MENTIONED THAT FACTUALLY THERE W AS NO SURVEY ACTION BY THE REVENUE ON THE ASSESSEE U/S. 133A OF THE INCOME TAX ACT ON THE ASSESSEES PREMISES. THE REASONS GIVEN BY THE A.O IS REGARDING TH E ESCAPEMENT OF RS. 77,880/- IS NOT THE REAL ESCAPEMENT OF INCOME AS TH E SAME IS WITHIN THE KNOWLEDGE OF THE REVENUE. FURTHER, AR MENTIONED THAT THE IMPUGNED EXCESS STOCK IS NOT ONLY EXCESS STOCK IF COMPUTED CORRECTLY AND EVEN IF IT IS SO, IT DOES NOT PERTAIN TO THE ASSESSEE AS IT IS AN ADMITTED FAC T THAT THE A.O RESORTED ESTIMATIONS I.E., 1/6 TH OF THE SO CALLED EXCESS STOCK IN COMING TO THE FI GURE OF 77,880/-. AS PER THE COUNSEL, THE SURVEY PARTY NEVER ID ENTIFIED THE STOCK OF THE ASSESSEE TO BE ASSESSED IN HIS HANDS. IN SUMMARY, AS PER THE COUNSEL, THE ASSESSMENT CANNOT BE RE-OPENED ON THE BASIS OF ESTIMATES, SURMISES AND PRESUMPTIONS. 4. REFERRING TO THE SECOND REASONING OF THE AO FOR REOPE NING INVOKING THE PROVISIONS OF SECTION 148 OF THE ACT, LD. COUNSEL ME NTIONED THAT THE A.O IS OF THE INCORRECT OPINION THAT THE CONSTRUCTION AT PLOT NO. C 10/1/16, MIDC, SOLAPUR WAS UNDERSTATED BY RS 20 LAKHS WITHOUT ANY BASE AND MERE LY ON ASSUMPTIONS. TAKING US THROUGH THE ASSESSMENT ORDER DATED 29-03-2005, LD. COUNSEL MENTIONED THAT THE A.O DID NOT MAKE AN ADDITION ON ACCOUNT OF THE SAID CONSTRUCTION. RELYING ON VARIOUS DECISIONS, LD. COUNSEL MENTIONED THAT THE REASONS INDICATED MERE SURMISES AND ESTIMATES, THEREFORE, THE IMPUGNED RE-OPEN ING MADE BY THE A.O IS BAD IN LAW. THE FACT NOT MAKING ANY ADDITIONS IN TH E REASSESSMENT PROCEEDINGS WAS ALSO HIGHLIGHTED. ITA NO. 722 TO 724/PN/09 A.Y 1999-00 PAGE 4 OF 5 ON THE OTHER HAND, LD. DR FOR THE REVENUE ARGUED VEHEM ENTLY STATING THAT AT THE TIME OF INITIATION OF PROCEEDINGS U/S. 1 48, THE REASONS GIVEN BY A.O ARE SUFFICIENT TO ASSUME JURISDICTION AND THEREFORE, TH E REASSESSMENT PROCEEDINGS ARE VALID. LD. DR RELIED ON THE ORDER OF THE A.O AND TH E FIRST APPELLATE AUTHORITY. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE, THE RELEVANT PROVISIONS OF THE ACT AND THE REASONS RECO RDED BY THE A.O ON 26-03- 2004 WHICH IS PLACED ON PAGE 41 OF THE PAPER BOOK. T HE DETAILS OF THE SAME WERE ALREADY NARRATED ABOVE. FROM THE ABOVE IT IS EVIDEN T THAT THE QUANTIFICATION OF RS. 77,880/- OF EXCESS STOCK IS OBVIOUSLY AND UN DISPUTEDLY ARRIVED AT BY ESTIMATES I.E, 1/6 TH OF THE TOTAL EXCESS STOCK. IT IS ALSO THE FACT THA T THE ABOVE EXCESS STOCK IS NOT DISTINGUISHABLY AND CATEGORICALL Y RELATABLE ON ASSESSEE BASIS. WE HAVE ADDRESSED TO OURSELVES WHETHER QUANTIFICATION OF EXCESS STOCK WHEN ARRIVED AT BASING ON ESTIMATES AND WHEN THERE IS UNCERTAINTY ABOUT THE OWNERSHIP OF THE STOCK AS WELL AS QUANTIFICATION OF THE STOCK, WHETHER SUCH CONCEALMENT CAN CONSTITUTE THE BASIS FOR ASSUMING JU RISDICTION BY THE A.O U/S. 148 OF THE INCOME TAX ACT. IN OUR CONSIDERED OPINION , THE ANSWER IS NEGATIVE AND THE SAME IS IN FAVOUR OF THE ASSESSEE. REGARDING UNDERSTATEMENT IN CONSTRUCTION ACTIVITY TO THE TUNE OF RS 20 LAKHS, IT IS ADMITTED FACT THAT NO ADDITION IS MADE BY THE A.O IN THE REASSESSMENT PROCE EDINGS THEREFORE, TO THIS EXTENT THIS REASONING IS NOT A PROPER ONE FOR ASSUMING JURISDICTION U/S. 148. IT IS NOT THE CASE OF THE REVENUE THEY HAVE SOME INCREMENT ING MATERIAL TO SUPPORT THE REOPENING OF CONCLUDED ASSESSMENT. CONSIDERING AB OVE STATED POSITION WE ARE OF THE OPINION THAT THE A.O HAS INVALIDLY ASSUME D JURISDICTION U/S. 148 AND THE NOTICE ISSUED U/S 147 IS INVALIDLY CONSEQUENTLY , THE ORDER OF THE CIT(A) IS SET ASIDE AND GROUNDS RAISED BY THE ASSESSEE IN MATTERS OF VALI DITY ARE ALLOWED . WE FIND NO REASON TO ADJUDICATE THE GROUNDS RELATING T O MERITS IN VIEW OF OUR DECISION ON LEGAL ISSUE. THEREFORE, ADJUDICATION OF T HE SAID GROUNDS ARE MERE A ACADEMIC EXERCISE. 6. DURING THE PROCEEDINGS, LD COUNSEL REFERRED TO CERTAIN LETTERS WITH THE REQUEST TO ENFORCE THE ATTENDANCE OF REVENUE AUTHORITIE S BY WAY OF SUMMONING THEM. ON THE OTHER HAND, LD DR VEHEMENTLY OPPOSED SU CH REQUEST TO THE BENCH AS THE SAME IS UNWARRANTED AND IS NOT THE NEED FOR ADJ UDICATION OF THE APPEALS IN QUESTION. ON HEARING THE PARTIES, WE ARE OF THE OPI NION, THE ISSUES RAISED IN CONNECTION WITH THE SAID LETTERS BY LD COUNSEL ARE NO USE CONSIDERING THE FACT THAT THE APPEALS OF THE ASSESSEE ALLOWED ON TECHNIC AL GROUND. ITA NO. 722 TO 724/PN/09 A.Y 1999-00 PAGE 5 OF 5 7. IN THE RESULT APPEAL OF THE ASSESS IS ALLOWED. ITA NO. 724/PN/09 - M/S. VYANKATESH CHILKA MILL 8. AT THE VERY OUTSET, LD. COUNSEL MENTIONED THAT TH E GROUNDS RAISED IN THIS APPEAL ARE IDENTICAL AND THE DECISION TAKEN BY THE T RIBUNAL IN THE APPEAL VIDE ITA NO. 723/PN/09 ARE DIRECTLY APPLICABLE TO THIS CASE TO O. WE HAVE PERUSED THE GROUNDS AS WELL AS THE FACTS OF THE CASE AND FIND TH AT THE DECISION IN MATER OF VALIDITY AS WELL AS THE MERITS ARE DIRECTLY APPLICABLE TO THIS APPEAL ALSO. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ITA NO. 722/PN/09 - SUNITA VYANKATESH CHILKA 10. SIMILARLY, AS THE GROUNDS RAISED IN THIS APPEAL ARE IDENTICAL AND THE DECISION TAKEN BY THE TRIBUNAL IN THE APPEAL VIDE IT A NO. 723/PN/09 ARE DIRECTLY APPLICABLE TO THIS CASE ALSO. GROUNDS IN THIS APPEAL ARE ALLOWED. 11. IN THE RESULT ALL THE THREE APPEALS OF THE ASSES SEE ARE ALLOWED. ORDER PRONOUNCED ON 21 ST DECEMBER, 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 21 ST DECEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEES 2. DCIT, CIRCLE-2, SOLAPUR 3. CIT(A)-III, PUNE 4. CIT-IV, PUNE 5. D.R. ITAT A BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE