Appeal details
Counselvise Citation
[2016] 133 COUNSELVISE.COM (IT) 5372 (ITAT-JAIPUR)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 5 month(s) 12 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2016
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
B
Assessment Year
2003-2004
Appeal Filed On
04-10-2013
Judgement Text
ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 1 VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH FOE FLAG ;KN O] YS[KK LNL; DS LE{K BEFORE:SHRI R.P.TOLANI, JM & SHRI VIKRAM SINGH YADA V, AM VK;DJ VIHY LA-@ ITA NOS.761,1016,762, 1017,1018, 1019 & 1020/JP/201 3 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2003-04 TO 2009-10 M/S. MITTAL GRANITE (P) LTD. ROAD NO. 15, VKI AREA, JAIPUR CUKE VS. THE DCIT CENTRAL CIRCLE- 3 JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO .: AABCM 6234 A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI VIJAY GOYAL, CA AND SHRI GULSHAN AGARWAL, CA JKTLO DH VKSJ LS@ REVENUE BY : SHRI M.S. MEENA, CIT -DR LQUOKBZ DH RKJH[K@ DATE OF HEARING : 17/02/2016 ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 16 /03/2016 VKNS'K@ ORDER PER BENCH:- THIS IS A SET OF ASSESSEES APPEALS AGAINST 07 SEP ARATE ORDERS OF LD. CIT(A), CENTRAL, JAIPUR DATED 22-07-2013, 30-10-201 3, 22-07-2013 AND 30-10-2013 (FOUR APPEALS) FOR THE ASSESSMENT YEARS 2003-04 TO 2009-10 ARISING FROM THE SEARCH ASSESSMENTS FRAMED U/S 153A RWS 143(3). FOLLOWING GROUNDS ARE RAISED IN THESE APPEALS:- ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 2 2.1 GROUND NO.1 OF THE ASSESSEE WHICH IS COMMON TO ALL THE YEARS CHALLENGES REJECTION OF BOOKS U/S 145(3) WITHOUT PO INTING OUT ANY SPECIFIC DEFECTS THEREIN. 3.1 COMMON GROUND NO. 2 OF THE ASSESSEE CHALLENGES ESTIMATION OF GROSS PROFIT RESULTING IN ADDITIONS AS UNDER IN IMPUGNED AYS 2003-03 TO 2009-10:- A.Y. GROSS PROFIT RATE DECLARED BY THE ASSESSEE G.P. RATE ESTIMATED BY THE AO G.P. RATE CONFIRMED BY THE LD. CIT(A) 2003-04 28.74% 30% 30% I.E. AMOUNTING TO RS. 52,726/- 2004-05 23.75% 25% 25% I.E. AMOUNTING TO RS. 65,213/- 2005-06 23.77% 25% 25% I.E. AMOUNTING TO RS. 59,711/- 2006-07 16.72% 20% 20% I.E. AMOUNTING TO RS. 2,76,545/- 2007-08 17.20 20% 20% I.E. AMOUNTING TO RS. 2,05,698/- 2008-09 -13.12% 17% 17% I.E. AMOUNTING TO RS. 21,41,926/- 2009-10 19.41% 20% 20% I.E. AMOUNTING TO RS. 60,746/- 4.1 AT THE OUTSET ASSESSEE REFERRED TO PETITION FOR ADMISSION OF ADDITIONAL GROUND IN APPEALS FROM AY 2003-04 TO AY 2008-09, RE ADING AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE PROCEEDING UNDER S. 153A OF THE IT ACT, 1961 IS NOT LEGAL AND VOID AB INITIO AND THE IMPUGNED ASSESSMENT U/S.153A R/W.143 (3) OF THE INCOME-TAX ACT, 1961 IS LIABLE TO BE ANNULLED AS DE PARTMENT HAS NOT CARRIED OUT SEARCH OPERATIONS OVER THE ASSESSEE BUT SURVEY U/S 133A OF INCOME TAX ACT AND NO SEARCH WARRANT SERVED ON THE APPELLANT. ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 3 4.2 LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT:- I. THE GROUND BEING RAISED IS PURELY LEGAL IN NATURE A ND DOES NOT REQUIRE ANY FRESH VERIFICATION OF FACTS. II. IT IS PROVIDED BY THE INCOME TAX ACT AND SETTLED BY HONBLE SUPREME COURT AND VARIOUS OTHER HIGH COURTS THAT AS SESSMENT U/S 153A CAN BE MADE ONLY CONSEQUENT TO A SEARCH U/ S 132(1) BY ISSUING, AUTHORIZING, SERVING THE SEARCH WARRANT IN CONFORMITY WITH THE RELEVANT PROVISIONS OF LAW . IN THE CASE OF THE ASSESSEE NO VALID SEARCH WAS CARRIED ON ASSESSE COMPANYS PREMISES. ONLY A SURVEY U/S 133A WAS CARRIED OUT. THEREFORE, THERE BEING NO SEARCH IN TERMS OF SEC. 132(1) THE I MPUGNED ASSESSMENT FRAMED U/S 153A ARE BAD IN LAW AND DESER VE TO BE ANNULLED. III. IN THIS BEHALF FOLLOWING PROPOSITIONS ARE RAISED BY THE ASSESSE: - THERE WAS NO SEARCH U/S 132(1) IN THE ASSESSEES PREMISES:- A) IT IS CONTENDED THAT M/S MITTAL GRANITES (MG FOR BREVITY) HAS A FACTORY FOR CUTTING AND POLISHING OF GRANITES SITUATED AT P LOT NO A-301(E) ROAD NO 14, VKI AREA, JAIPUR. ADMITTEDLY NO SEARCH WAS CARR IED OUT THERE AND ON THE DEPARTMENT CARRIED OUT ONLY SURVEY PROCEEDINGS U/S 133A OF INCOME TAX ACT 27/08/2008, DURING THE COURSE THEREOF, BOOKS OF ACC OUNT AND DOCUMENTS WERE IMPOUNDED AND INVENTORIED U/S 133A. DESPITE RE CORDING THESE FACTS ORDERS IMPUGNED ASSESSMENTS HAVE BEEN ARBITRARILY C OMPLETED U/S 153A BY LD. AO MISDIRECTED HIMSELF BY CONFUSING SURVEY WITH SEARCH. THIS IS APPARENT FROM HIS FINDINGS IN ASSESSMENT ORDER ITSE LF AT PG 2 OBSERVING THAT- ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 4 DURING SEARCH THE FOLLOWING ASSETS/DOCUMENTS HAVE BEEN FOUND AND SEIZED:- (A) BOOKS OF ACCOUNT/DOCUMENT AS PER ANNEXURE A1 TO A47 IT IS VEHEMENTLY CONTENDED THAT THIS CRUCIAL OBSERV ATION IS FACTUALLY INCORRECT IN AS MUCH AS THESE BOOKS OF AC COUNTS WERE FOUND NOT FOUND DURING THE SEARCH BUT IMPOUNDED IN THE COURSE OF SURVEY. ASSESSEE EMPHATICALLY CLAIMS THAT THERE WAS NO SEARCH IN TERMS OF SEC 132, ON ITS PREMISES. B) ASSESSEES HEAD OFFICE AND REGISTERED OFFICE IS SITUATED AT B-18, CHOMU HOUSE, JAIPUR, WHICH WAS NOT COVERED UNDER TH E ALLEGED SEARCH U/S 132(1). ONLY SURVEY U/S 132A WAS CONDUCTED AT ITS FACTORY PREMISE SITUATED AT VKI AREA, JAIPUR. SURVEY PARTY RECORDED THE STAT EMENT OF SHRI SUBHASH GUPTA ON 27/08/2008 WHO CLEARLY STATED IN ANSWER TO QUESTION NO 8 (PB PG 15) THAT THE APART FROM FACTORY AT VKI AREA, MG ASS ESSEES HEAD OFFICE IS SITUATED AT B-18, C-SCHEME; CHOMU HOUSE, JAIPUR AND DOES NOT HAVE ANY OTHER OFFICE, GODOWN OR BRANCH AT ANY OTHER PLACE. THIS STATEMENT WHICH IS ACCEPTED BY THE DEPARTMENT CLEARLY MENTIONS THAT TH ERE ARE NO OTHER PREMISES OF THE ASSESSE IN QUESTION. THUS THE ALLEGED SEARCH U/S 132(1) WAS NOT CONDUCTED AT ANY OF ITS PREMISES; NEITHER AT REGIST ERED OFFICE AT 18 CHOMU ROAD NOR AT FACTORY I.E. VKI INDL. AREA. ONLY SURVE Y PROCEEDINGS U/S 132A WERE CARRIED OUT ON 27/08/2008 AT VKI AREA FACTORY PREMISES. THE STATEMENT OF SHRI SUBHASH GUPTA WAS RECORDED, INVENTORY WAS P REPARED AND BOOKS ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 5 WERE IMPOUNDED ALL UNDER THE SURVEY PROCEEDINGS U/S 132A AND NOT UNDER ALLEGED SEARCH PROCEEDINGS. RECORD THUS CLEARLY IND ICATES THAT NONE OF THE PREMISES OWNED, OCCUPIED OR POSSESSED BY ASSESSE WE RE EVER SEARCHED 132(1). 4.3 IT IS CONTENDED THAT CHOMU HOUSE IS A BIG COM PLEX AND VARIOUS GROUP COMPANIES HAVE DISTINCT SPACES OCCUPIED BY THEM. CO MPANY IS AN INCORPORATED ENTITY AND SEARCH ON ONE COMPANY CANNO T BE ASSUMED TO BE DEEMED TO BE A SEARCH U/S 132 ON A CONCERN WHO HAS NO CONNECTION WHATSOEVER WITH THESE PREMISES. THE RESIDENTIAL PO RTION USED BY SH. MADAN LAL MITTAL, SMT. SANGITA MITTAL, SH. LAL CHAND MIT TAL, SH. RADHEY SHYAM MITTAL, SMT. SHARDA MITTAL, SH. MURARI LAL MITTAL, SMT. SHAKUNTALA MITTAL, SH. SURESH MITTAL, SH. MAYANK MITTAL, SH.RAJESH MIT TAL, SH. ANKIT MITTAL. SMT. VAISHALI MITTAL, SH. AASHISH MITTAL, SH. PRAFF UL MITTAL, SH. SHUBHAM MITTAL, SH. DEEPAK MITTAL, AND SH. SAURABH MITTAL W ERE ALSO SEARCHED. PANCHANAMA AND INVENTORY PREPARED CONSEQUENT TO SEA RCH AT B-18, CHOMU HOUSE, JAIPUR, DOES NOT MAKES ANY REFERENCE TO ASSE SSEES NAME. PAPER BOOK REFERENCE IS MADE TO SUCH PANCHANAMA AND INVENTORY PREPARED AT B-18, WHICH ARE NOT THE PREMISES OF ASSESSE COMPANY. C) B-19, CHOMU HOUSE, SARDAR PATEL ROAD, JAIPUR. (P B PG 360 TO 364):- ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 6 THE ASSESSEE HAS NO OFFICE OR BUSINESS IN THIS PREM ISE. THIS IS RESIDENTIAL PREMISE OF SH..MADAN LAL MITTAL, SMT. S ANGITA MITTAL, SH. LAL CHAND MITTAL, SH. RADHEY SHYAM MITTAL, SMT. SHARDA MITTAL, SH. MURARI LAL MITTAL, SMT. SHAKUNTALA MITTAL, SH. SURESH MITT AL, SH. MAYANK MITTAL, SH.RAJESH MITTAL, SH. ANKIT MITTAL. SMT. VAISHALI M ITTAL, SH. AASHISH MITTAL, SH. PRAFFUL MITTAL, SH. SHUBHAM MITTAL, SH. DEEPAK MITTAL, AND SH. SAURABH MITTAL. THE NAME OF ASSESSEE IS NOT APPEARING ON TH E PANCHANAMA AND INVENTORY PREPARED FOR SEARCH AT B-19, CHOMU HOUSE, IN THE ABSENCE THEREOF, IT CANNOT BE ASSUMED THAT THERE WAS SEARCH IN TERMS OF SEC. 132(1) ON THE ASSESSE IN QUESTION. D) D-42, CHOMU HOUSE, SARDAR PATEL ROAD, JAIPUR: THE ASSESSEE HAS NO OFFICE OR BUSINESS IN THIS PREM ISE. THIS IS RESIDENTIAL PREMISE OF SH..MADAN LAL MITTAL, SMT. S ANGITA MITTAL, SH. LAL CHAND MITTAL, SH. RADHEY SHYAM MITTAL, SMT. SHARDA MITTAL, SH. MURARI LAL MITTAL, SMT. SHAKUNTALA MITTAL, SH. SURESH MITT AL, SH. MAYANK MITTAL, SH.RAJESH MITTAL, SH. ANKIT MITTAL. SMT. VAISHALI M ITTAL, SH. AASHISH MITTAL, SH. PRAFFUL MITTAL, SH. SHUBHAM MITTAL, SH. DEEPAK MITTAL, AND SH. SAURABH MITTAL. (PB PG 365-370). SINCE THE NAME OF ASSESSEE IS NOT APPEARING ON THE PANCHANAMA AND INVENTORY PREPARED FOR SEARCH AT D-4 2, CHOMU HOUSE, IT ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 7 CANNOT BE NOTIONALY DEEMED THAT SEARCH OPERATIONS W ERE CARRIED OVER THE ASSESSEES PREMISES. E) MITTAL CHAMBERS, C-1, SHIV HEERA PATH (OPP- ROAD WAYS DEPOT, CHOMU HOUSE, JAIPUR. THE COMMON PANCHANAMA AND INVENTORY FOR ALL THE GRO UP CONCERNS WAS PREPARED BY THE SEARCH PARTY FOR THE PREMISE SI TUATED AT C-1, MITTAL CHAMBERS, HEERA PATH CHOMU HOUSE, JAIPUR BUT THIS P REMISE ALSO DOES NOT BELONG/OCCUPIED BY THE ASSESSE. THIS IS SO AS FROM THIS PREMISE, ONLY PHARMACEUTICAL BUSINESS OF OTHER GROUP CONCERNS I.E . M/S MITTAL ENTERPRISES AND M/S MITTAL ASSOCIATES ARE CARRIED OUT. THIS PRE MISE DOES NOT BELONGING TO OR IS OCCUPIED OR SHARED BY ASSESSE, THEREFORE, THE ALLEGED SEARCH WARRANT WAS NEVER SERVED UPON THE ASSESSEE. IN THE ABSENCE OF PROPER EXECUTION OF SEARCH WARRANT, THERE CANNOT BE ANY VALID SEARCH. T HE SEARCH PARTY RECORDED STATEMENTS ABOUT THE LOCATION OF OFFICE OF VARIOUS BUSINESS CONCERNS OF THE GROUP WHICH IS TABULATED AS UNDER:- S.NO STATEMENT MADE BY PLACE WHERE RECORDED WHAT STATED IN STATEMENT PB PG 1 SHRI MURARI LAL MITTAL STATEMENT DATED 27-08- 2008 D-42, CHOMU HOUSE OFFICE OF MITTAL ENTERPRISES IS AT C-1, CHOMU HOUSE, OPP ROADWAYS WORKSHOP JAIPUR 375 ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 8 OFFICE OF M/S MITTAL GRANITE IS AT ROAD NO 14, VKI AREA, JAIPUR 2 SHRI MURARI LAL MITTAL STATEMENT DATED 28-08- 2008 C-1, MITTAL CHAMBER, C- SCHEME, JAIPUR OFFICE OF MITTAL ENTERPRISES IS AT C-1, MITTAL CHAMBER, CHOMU HOUSE, OPP ROADWAYS WORKSHOP JAIPUR OFFICE OF M/S MITTAL GRANITE IS AT ROAD NO 14, VKI AREA, JAIPUR 411 3 SHRI RADHEY SHYAM MITTAL STATEMENT DATED 05-09-2008 C-1, MITTAL CHAMBER, C- SCHEME, JAIPUR ANSWER TO QUESTION NO 2 IS THAT OFFICE OF M/S MITTAL ENTERPRISES, MITTAL ASSOCIATES, MITTAL BROS, AND MITTAL & CO IS AT C-1, SHIV HEERA PATH, CHOMU HOUSE, JAIPUR 415 FROM THE ABOVE STATEMENTS, IT IS CLEAR THAT THE ASS ESSEE HAS NO OFFICE AT C-1, MITTAL CHAMBER, SHIV HEERA PATH, CHOMU HOUSE, JAIPU R, THEREFORE, WARRANT IN ITS NAME WAS NEITHER SERVED NOR EXECUTED UPON TH E ASSESSE. CONSEQUENTLY THERE BEING NEITHER VALID SERVICE NOR EXECUTION OF SEARCH WARRANT ON ASSESSEE THE IMPUGNED SEARCH ASSESSMENTS FRAMED U/S 153A ON ASSESSE ARE VOID AB INITIO FOR WANT OF THESE VITAL INGREDIENTS. THE ASS ESSEE HAVING NO EXISTENCE IN THE SEARCHED PREMISES OF OTHER GROUP CONCERNS; IT C ANNOT BE ASSUMED THAT BECAUSE THERE WAS SEARCH IN GROUP CONCERN THEREFORE IT CAN BE ASSUMED OR NATIONALLY ASSUMED THAT ASSESSEE WAS ALSO SEARCHED U/S 132(1). ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 9 4.4 LD. COUNSEL PLACED RELIANCE ON JUDGMENTS OF HON BLE SUPREME COURT JUDGMENT IN THE CASE OF NTPC LTD. VS. CIT, 229 ITR 383 (SC), JURISDICTIONAL HIGH COURT IN ZAKIR HUSSAIN V. CIT 202 ITR 40 (RAJ) AND OTHER MENTIONED IN WRITTEN SUBMISSIONS TO SUPPORT ADMISSION. 4.5 LD. DR OPPOSED THE ADDITIONAL GROUND CONTENDING THAT ASSESSE NOWHERE RAISED THIS PLEA BEFORE ANY OF THE LOWER AU THORITIES. THE DIRECTOR DISCLOSED ADDITIONAL INCOME IN THE HANDS OF THE ASS ESSE CONSEQUENT TO IMPUGNED SEARCH PROCEEDINGS, RETURNS OF INCOME U/S 153A WERE FILED AND TAXES WERE PAID. RAISING THIS LEGAL PLEA AT THIS ST AGE IS AN ATTEMPT TO FRUSTRATE THE ASSESSMENT PROCEEDINGS AND AVOID ADJUDICATION O F MERITS. THEREFORE IT IS PRAYED THAT THE ABOVE ADDITIONAL GROUND BEING RAISE D BY THE ASSESSE MAY BE NOT ADMITTED. 4.6 LD. COUNSEL FOR THE ASSESSE IN REJOINDER CONTEN DS THAT ITS TRITE LAW THAT A LEGAL GROUND WHICH GOES TO THE ROOT OF JURISDICTI ON CAN BE RAISED AT ANY TIME DURING THE APPELLATE PROCEEDINGS. THERE IS A S TATUTORY PROVISION IN THIS BEHALF AND VARIOUS JUDICIAL PRONOUNCEMENT INCLUDING HONBLE SUPREME COURT JUDGMENT IN THE CASE OF NTPC (SUPRA) HAVE UPH ELD SUCH RIGHTS OF THE ASSESSE. THEREFORE, THERE IS NO MERIT OR RELEVANCE IN THE CONTENTIONS OF LD. DR, THE DEPARTMENT CANNOT SHY AWAY FROM DEMONSTRATI ON EXERCISE OF VALID JURISDICTION IN A SERIOUS ENFORCEMENT ACTION LIKE S EARCH, ANY UNAUTHORIZED ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 10 SEARCH AND SUBSEQUENT PROCEEDINGS AMOUNT TO SERIOUS INVASION ON THE FUNDAMENTAL CIVIL RIGHTS OF THE ASSESSEE, ADJUDICAT ION THEREOF CANNOT BE DENIED MERELY BECAUSE IT IS RAISED BEFORE ITAT. THE RE BEING A STATUTORY PROVISION CONFERRED BY THE INCOME TAX ACT AND SUPPO RTED BY A PLETHORA OF JUDICIAL PRECEDENTS INCLUDING HONBLE SUPREME COURT JUDGMENT IN THE CASE OF NTPC (SUPRA); THE ASSESSEES ADDITION GROUND IS FULLY ELIGIBLE FOR ADMISSION AND PROPER ADJUDICATION. 4.7 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN RESPECT OF THE ADDITIONAL GR OUND. IN OUR CONSIDERED VIEW THE ADDITIONAL GROUND RAISED BY THE ASSESSEE I S PURELY LEGAL IN NATURE, GOES TO THE ROOT OF THE ASSESSMENTS, NO FRESH VERIF ICATION OF FACTS IS REQUIRED. RESPECTFULLY FOLLOWING HONBLE SUPREME COURT JUDGME NT IN THE CASE OF NTPC (SUPRA), THE ADDITIONAL GROUND RAISED BY THE A SSESSEE IS ADMITTED. 5.1 ADVERTING TO ARGUMENTS ON THERE BEING NO SEARCH ASSESSMENT U/S 132(1) ON THE ASSESSEE, LD. COUNSEL REITERATED THE FACTS MENTIONED ABOVE AND CROSS TALLIED THEM WITH RELEVANT PAGES OF DETAILED PAPER BOOKS FILED IN THIS BEHALF. RELIANCE IS PLACED ON FOLLOWING DECISIONS: - (I) MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF J.M . TRADING CORPORATION VS. ACIT, 20 SOT 489 (MUM), WHEREIN, I T WAS HELD THAT WHERE A SEARCH IS CARRIED OUT AT THE PREMISES OWNED BY THE ASSESSEE, ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 11 BUT RENTED TO OTHER CONCERN, THE SAME DOES NOT RESU LT INTO A VALID SEARCH U/S 132 ON THE ASSESSEE. (II) HONBLE HIGH COURT OF BOMBAY, IN THE CASE OF C IT VS. J.M. TRADING COMPANY IN ITA NO.589 OF 2009 DISMISSED TH E APPEAL FILED BY THE DEPARTMENT AGAINST THE AFORESAID TRIBUNAL JU DGMENT BY FOLLOWING OBSERVATIONS: THE TRIBUNAL HAS CATEGORICALLY RECORDED A FINDI NG OF FACT OF INITIATION OF THE SEARCH THAT NON COMPLIANCE TO THE PROVISIONS OF THE ACT BY THE AUTHORISED OFFICER, SUCH SEARCHES ARE INVALID AND ILLEGAL. NO SEARCH WAS CONDUCTED AGAINST THE AS SESSEE AS THE PREMISES OCCUPIED BY THE ASSESSEE WERE NOT ENTE RED UPON AND SEARCHED BY THE AUTHORISED OFFICER FURTHER VIDE ORDER DATED 06.09.2010, THE HONBLE SU PREME COURT, IN CIT, MUMBAI VS. M/S J.M. TRADING CORPORATION LTD. IN CC NO.13456/2010, HAS DISMISSED THE DEPARTMENTAL SLP A GAINST THE HONBLE BOMBAY HIGH COURT ORDER. (III) ITAT DELHI BENCH IN THE CASE OF ACIT VS SARMA NGALAM BUILDERS & DEVELOPERS PVT LTD ITA NO 196 TO 198/DEL /2011 ORDER DATED 14 TH MARCH 2014 HELD IN PARA 11 TO 13 AS UNDER (COPY OF ORDER IS AT PB PG 462-472):- 11. IT CANNOT BE DENIED THAT THIS IS AN ISSUE PERT AINING TO JURISDICTION. IT GOES TO THE VERY ROOT OF THE MATTE R. THE FACTS WITH REGARD THERETO ARE AVAILABLE BEFORE US. AS SUCH, WE CAN VERY WELL GO INTO THIS ISSUE AT THIS STAGE. THE WARRANT OF AUTHORISATION (APB PAGE 177-178) SHOWS THE ADDRESS OF THE PREMISES TO BE SEARCHED AS 3 RD FLOOR, GLOBAL ARC ADE, MG ROAD, GURGAON. THE ASSESSMENT ORDER AS WELL AS THE ORDER UNDER APPEAL HAVE TAKEN NOTE OF THE FACT OF THIS A DDRESS BEING THE ADDRESS OF THE PREMISIS SEARCHED. THE ASSESSEE CONTENDS THAT THIS PREMISES IS NOT OWNED BY IT AND, THEREFOR E, THE SEARCH CARRIED OUT IS INVALID QUA THE ASSESSEE. THE DEPART MENT HAS NOT DISPUTED THE FACTUM OF THE SAID PREMISES NOT BELONG ING TO THE ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 12 ASSESSEE. EVEN THE DOCUMENT PERTAINING TO THE ASSES SEE, WHICH WAS FOUND FROM THIS PREMISES IN THE SEARCH WAS, AS STATED BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US ON QUERY, OW NED UP BY THE VIPUL GROUP AND SURRENDER WAS MADE BY THEM ON T HE BASIS THEREOF. THUS, INDISPUTABLY, THERE IS NOTHING ON RE CORD TO CONNECT THE ASSESSEE WITH THE PREMISES SEARCHED. NO W, IN JM TRADING CORPORATION, 20 SOT 489 (MUM) (SUPRA), IT HAS BEEN OBSERVED, INTER ALIA, THAT MERE SEARCH OF THE PREMI SES OWNED BY THE ASSESSEE BUT RENTED TO ANOTHER CONCERN DOES NOT BY ANY IMPLICATION, PROVE THE CONDUCT OF SEARCH AGAINST TH E ASSESSEE, IN VIEW OF THE FACT THAT THE ASSESSEE WAS NOT AVAIL ABLE AT THE ADDRESS SEARCHED UPON. IN THE PRESENT CASE, THE SIT UATION IS RATHER MORE IN FAVOUR OF THE ASSESSEE. HERE, IT IS NOT THAT THE PREMISES WAS OWNED BY THE ASSESSEE BUT WAS RENTED O UT. RATHER, UNDISPUTEDLY, THE PREMISES SEARCHED DOES NOT BELONG TO THE ASSESSEE. THE DEPARTMENTS APPEAL IN THE CASE OF J M TRADING CORPORATION WAS DISMISSED IN LIMINE FOR WANT OF SU BSTANTIAL QUESTION OF LAW BY THE HONBLE HIGH COURT OF BOMBAY . WHILE DOING SO, THE FINDING OF THE TRIBUNAL TO THE EFFECT THAT NON- COMPLIANCE OF THE PROVISIONS OF THE INCOME-TAX ACT BY THE AUTHORIZED OFFICER RENDERS A SEARCH INVALID AND ILL EGAL. THE HONBLE SUPREME COURT HAS ALSO DISMISSED THE SLP FI LED BY THE DEPARTMENT. IN DR. MANSUKH KANJIBHAI SHAH VS. ACIT , CENTRAL CIRCLE-2, 129 ITD 376 (AHM) (SUPRA) ALSO, SINCE, I NTER ALIA, NO SEARCH OPERATION WAS CONDUCTED IN THE PREMISES OF T HE ASSESSEE, IT WAS HELD THAT THE PROCEEDINGS U/S 153A OF THE AC T WERE INVALID AND BAD IN LAW. 12. NO DECISION TO THE CONTRARY HAS BEEN BROUGHT TO OUR NOTICE. 13. IN VIEW OF THE ABOVE DISCUSSION, WE HOLD THAT S INCE NO SEARCH WAS CONDUCTED ON THE PREMISES OF THE ASSESSE E AND THE SEARCH CONDUCTED WAS CONDUCTED ON A PREMISES NOT OW NED BY THE ASSESSEE, THE PROCEEDINGS U/S 153A OF THE ACT ARE INVALID AND BAD IN LAW. ACCORDINGLY, THE ORDERS OF THE AUTH ORITIES BELOW ARE SET ASIDE AND QUASHED. HENCE, CO NO.1 IS ACCEPT ED AND CO NO.2 IS REJECTED. CO NO.3, BEING ON MERITS, REQUIRE S NO ADJUDICATION. ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 13 5.2 SINCE THE SEARCH U/S 132 WAS NOT ON ASSESSEE AN D SOME DOCUMENTS INDICATING UNDISCLOSED INCOME OF ASSESSEE WERE FOUN D AT DIRECTORS RESIDENCE. IN THAT CASE, THE LEGAL COURSE FOR REVENUE WAS TO I NITIATE THE PROCEEDINGS U/S 153C AND FRAME THE ASSESSMENT AFTER RECORDING APPRO PRIATE SATISFACTION. LD. DR CONCEDED THAT NO ACTION U/S 153C WAS TAKEN AND O NLY SURVEY U/S 133A WAS CARRIED OUT. THUS SEC. 153C ALSO CANNOT BE DEEM INGLY APPLIED TO ASSESSMENTS IN QUESTION AS THE LD AO HAS NEITHER RE CORDED STATUTORY SATISFACTION IN THIS BEHALF NOR ISSUED ANY NOTICE U /S 153C. AN ASSESSMENT WHICH OUGHT TO HAVE BEEN COMPLETED U/S 153C CANNOT BE FRAMED IN THE GUISE OF SEC. 153A FOR THIS PROPOSITION RELIANCE PLACED O N FOLLOWING DECISIONS:- 1. SIKSHA VS CIT ORISSA HC (2011) 336 ITR 112 HELD THA T: (I) THUS, WE ARE OF THE VIEW THAT IN ABSENCE OF ANY SEARCH WARRANT IN THE NAME OF AN ASSESSEE, SEARCH CONDUCTE D IN ITS PREMISES IS NOT A VALID SEARCH AS CONTEMPLATED UNDE R S. 132 OF THE IT ACT, 1961 (PARA 7) (II) IN VIEW OF THE ABOVE, WE ARE NOT INCLINED TO A CCEPT THE CONTENTION OF MR A. MOHAPATRA THAT EVEN IF THERE IS ANY ILLEGALITY IN THE SEARCH WARRANT, THE SAME WILL NOT INVALIDATE THE SEARCH ASSESSMENT PROCEEDING INITIATED UNDER S. 153 A OF THE IT ACT, 1961. THEREFORE, WE ARE OF THE VIEW THAT INITIATION OF A VALID SEARCH AS CONTEMPLATED UNDER S. 132 OF THE IT ACT, 1961 IN CA SE OF A PERSON IS A PREREQUISITE TO ISSUE NOTICE FOR MAKING ASSESSMENT/REASSESSMENT UNDER S. 153A OF THE IT ACT , 1961 IN RESPECT OF SUCH PERSON. (PARA 8) ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 14 (III) THE APPELLANT RAISED AN ADDITIONAL. GROUND TH AT AS NO SEARCH WARRANT WAS SERVED ON THE APPELLANT, PROCEED INGS INITIATED UNDER S. 153A OF THE IT ACT, 1961 ARE NOT LEGAL. ADDITIONAL GROUND WAS ADMITTED. 2. CIT VS SMT VASHODA SHETTY (KARNATAKA HIGH COURT) (2015) 371 ITR 75 (KARN) ON, SEARCH ASSESSMENT CANNOT BE M ADE ON THE BASIS OF SURVEY. RELIANCE IS PLACED ON THE DECISION OF HONBLE ORISS A HIGH COURT IN THE CASE OF SIKSHA VS. COMMISSIONER OF IN COME TAX & ORS. (2011) 336 ITR 0112 WHEREIN HONBLE HIGH COURT HAS HELD THAT:- ... IF SEARCH AS CONTEMPLATED UNDER S. 132 OF THE IT ACT, 1961 IS CONDUCTED IN THE PREMISES OF A PERSON WITHOUT ANY WARRANT OF AUTHORIZATION IN THE NAME OF THE PERSON SEARCHED, OR ON THE BASIS OF A WARRAN T OF AUTHORIZATION IN THE NAME OF SOME OTHER PERSONS, THAT WOULD BE A CLEAR C ASE OF NON-APPLICATION OF MIND OF THE EMPOWERED IT AUTHORITIES AND SUCH A SEARCH CANNOT BE HELD TO BE VALID. IT IS SO, BECAUSE THE BELIEF WHICH FORMS THE FOUNDATION OF SEARCH RELATES TO A DEFINITE PERSON WHO IS TO BE SUBJECTED TO SEARCH. IF THE CONTRARY IS THE FACT SITUATION, THE SAME WOULD AMOUNT TO SER IOUS LAPSES AND WOULD BE IN CLEAR VIOLATION OF THE PROVISIONS CONTAINED IN S . 132(1) OF THE IT ACT, 1961, AS IT DOES NOT STAND TO THE TEST OF S. 132 OF THE I T ACT, 1961. THEREFORE, THE MOST SERIOUS CONTENT OF THE WARRANT OF AUTHORIZATIO N IS THE NAME AND DESCRIPTION OF THE PERSON WHOSE PREMISES, ETC., ARE SOUGHT TO BE SEARCHED. THE PUNJAB & HARYANA HIGH COURT IN JAGMOHAN MAHAJAN & ORS. VS. CIT & ORS. 1976 CTR (P&H) 316 : (1976) 103 ITR 579 (P&H) HELD THAT A SEARCH AUTHORIZED IN THE ABSENCE OF MATERIAL NECESSARY TO FORM THE REQUISITE BELIEF UNDER S. 132(1) ON THE BASIS OF BLANK WARRANT OF AU THORIZATION SIGNED BY THE CIT WAS ILLEGAL AND NO ORDER UNDER S. 132(5) ON THE BASIS OF SUCH A SEARCH COULD BE MADE. THE DELHI HIGH COURT IN AJIT JAIN'S CASE (SUPRA) HE LD THAT IT IS AXIOMATIC THAT SEARCH UNDER S. 132 HAS TO BE A VALID SEARCH. AN IL LEGAL SEARCH IS NO SEARCH ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 15 AND AS A NECESSARY COROLLARY IN SUCH A CASE CHAPTER XIV-B WOULD HAVE NO APPLICATION. THIS JUDGMENT OF THE DELHI HIGH COURT HAS BEEN UPHELD BY THE APEX COURT IN UNION OF INDIA VS. AJIT JAIN & ANR. ( SUPRA). THE DELHI HIGH COURT IN CIT VS. ROHINI S. WALIA (SUPRA) HELD THAT IT WOULD BE A FUTILE EXERCISE TO ENTERTAIN THE APPEALS WHERE ADMITTEDLY NO SEARCH WARRANT WAS ISSUED IN CASE OF THE ASSESSEES AND THE TRIBUNAL HE LD THAT UNLESS A SEARCH WARRANT WAS ISSUED, THE AO COULD NOT INVOKE THE PRO VISIONS OF S. 158BC OF THE IT ACT, 1961 FOR INITIATION OF BLOCK ASSESSMENT PROCEEDINGS AGAINST THE ASSESSEES. THUS, WE ARE OF THE VIEW THAT IN ABSENCE OF ANY SEA RCH WARRANT IN THE NAME OF AN ASSESSEE, SEARCH CONDUCTED IN ITS PREMISES IS NOT A VALID SEARCH AS CONTEMPLATED UNDER S. 132 OF THE IT ACT, 1961 . 5.3 LD. DR INITIALLY CONTENDED THAT THERE WAS NO WA RRANT IN THE NAME OF ASSESSEE, HOWEVER IN THE INTEREST OF JUSTICE FURTHE R TIME WAS GIVEN BY THE BENCH TO DEPARTMENT TO TRACE THE WARRANT IF ANY AVA ILABLE. AT THE SUBSEQUENT HEARING LD. DR CLAIMED THAT WARRANT IS AVAILABLE A COPY THEREOF WAS FILED TO WHICH LD. COUNSEL RESPONDED THAT THIS IS NOT A NEW DOCUMENT AS IT IS ALREADY ON RECORD AND FILED BY THE ASSESSEE. MERE MENTION O F ASSESSE ON THE AUTHORIZATION OF SEARCH DOES NOT AUTOMATICALLY RESU LT INTO A SEARCH IN TERMS OF SEC 132. UNLESS THE WARRANT IS EXECUTED ON ASSESSEE S AND A SEARCH IS ACTUALLY CARRIED OUT ON ASSESSEES PREMISES AND THEREAFTER A PANCHNAMA IS PREPARED IN THE NAME OF ASSESSE, IT CANNOT BE HELD THAT THERE W AS A VALID SEARCH IN TERMS OF SEC. 132. ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 16 5.4 THEREAFTER, LD. DR VEHEMENTLY CONTENDS THAT, RE SIDENTIAL PREMISES OF ONE OF THE DIRECTOR WERE SEARCHED WHO ACCEPTED UNDI SCLOSED INCOME IN THE NAME OF ASSESSE. RESIDENTIAL PREMISES OF A DIRECTOR ARE AKIN TO THE PREMISES BELONGING TO COMPANY. THEREFORE, A HARMONIOUS PERUS AL OF DEPARTMENTAL RECORD WILL REVEAL THAT THERE WAS A VALID WARRANT O N ASSESSE BASED ON AN AUTHORIZATION WHICH WAS VALIDLY EXECUTED ON ONE OF THE DIRECTORS. THEREFORE, THERE IS NO INFIRMITY IN THE IMPUGNED SEARCH PROCEE DINGS. 6.1 ADVERTING TO THE MERITS OF APPEALS LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT GROUND NO. 1 & 2 CHALLENGE THE ARBITR ARY REJECTION OF BOOKS OF ACCOUNTS BY APPLYING THE PROVISIONS OF SECTION 145 (3) OF INCOME TAX ACT, 1961 AND TRADING ADDITION BY ESTIMATING THE GP ON DECLARED SALES. NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF ALLEGED ILLEGAL SEARCH. THERE IS NEITHER REFERENCE TO ANY INCRIMINATING MAT ERIAL NOR RELIANCE ON ANY INQUIRY CONSEQUENT TO SEARCH IN THE ENTIRE LENGTH A ND BREADTH OF ORDERS OF LD. AO OR LD. CIT(A). THE ARBITRARY APPROACH OF LOWER A UTHORITIES IS APPARENT FROM THE FACT THAT WHILE FRAMING THE IMPUGNED 153A ASSES SMENTS LD. AO HAS ONLY INCREASED THE GP ALREADY DECLARED BY ASSESSE IN ORI GINAL RETURNS BASED ON AUDITED ACCOUNTS. THE REJECTION OF BOOKS AND HIGHER ESTIMATION OF GP BEING NOT BASED ON ANY INCRIMINATING MATERIAL, COGENT REA SONS OR APPLICATION OF MIND ARE GROSSLY UNSUSTAINABLE IN POST SEARCH ASSESSMENT . IT IS A SETTLED LAW THAT IN ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 17 153A ASSESSMENT ADDITIONS CANNOT BE MADE IN THE ABS ENCE OF ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF S EARCH ANY INQUIRY CONSEQUENT TO SEARCH. 153A ARE NOT ENACTED SO AS TO BE USED AS AN ARBITRARY MEANS TO REVIEW OWN ORDERS AND UNSETTLE THE ISSUES WHICH ARE SETTLED. THE IMPUGNED ADDITIONS ARE BEREFT OF ANY BASIS AND PURE LY PRODUCTS OF A PERCEPTION THAT SINCE THERE IS A SEARCH, THEN EVEN IF NO INCRI MINATING MATERIAL IN FOUND THE ADDITIONS ARE SOMEHOW OR OTHER TO BE MADE IN 153A A SSESSMENTS AS A MATTER OF RIGHT. SUCH PERCEPTION IS UNTENABLE, ILLEGAL AND DE NOUNCED BY HIGHER COURTS. WITHOUT QUOTING ANY SPECIFIC DEFECT IN THE BOOKS, L D. AO ARBITRARILY REJECTED THEM AND SIMPLY BY INCREASING THE DECLARED GP, MADE FOLLOWING TRADING ADDITIONS WHICH ARE CONFIRMED BY CIT(A):- AY GP RATE DECLARED BY ASSESSEE ESTIMATION OF GP BY AO GP ADDITION MADE BY AO AND CONFIRMED BY CIT(A) 2003-04 28.74% 30% 52726 2004-05 23.75% 25% 65213 2005-06 23.77% 25% 59711 2006-07 16.72% 20% 276545 2007-08 17.20% 20% 205698 2008-09 -13.12% 17% 2141926 2009-10 (UP TO 27.08.08) 19.41% 20% 60746 6.2 LD. COUNSEL FURTHER CONTENDS THAT:- ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 18 THE BOOKS OF ACCOUNTS OF THE ASSESSEE REJECTED AND ESTIMATION OF GP WAS MADE BY THE ASSESSING OFFICER FOR FOLLOWING MAI N REASONS: - (I) STOCK REGISTER NOT MAINTAINED. (II) THE ASSESSEE IS INDULGED IN UNACCOUNTED SALES/ PURCHASES. (III) VARIANCE IN GP THE SUBMISSION ON THE POINT TO POINT DEFECTS POINTE D BY THE AO IS AS UNDER: - (I) STOCK REGISTER NOT MAINTAINED: - A) THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING/JOB WORK AND TRADING OF GRANITES AND IT IS PRACTICALLY NOT POSSIBLE FOR THE ASSESSEE TO MAINTA IN THE DAY TO DAY STOCK REGISTER BECAUSE OF NUMBER OF QUAL ITY AND VARIETIES AND COLOURS. EACH LOT CONTAINS THE D IFFERENT QUALITY, VERITY, COLOUR, THEREFORE IT IS PRACTICALL Y NOT POSSIBLE FOR ASSESSEE TO MAINTAIN STOCK REGISTER. H OWEVER, EVEN IF SEPARATE RECORD IS NOT MAINTAINED THE BOOKS OF ACCOUNTS CANT BE REJECTED ON THIS GROUND. RELIANCE IS PLACED ON FOLLOWING DECISIONS: - CIT VS JAS JACK ELEGANCE EXPORTS 324 ITR 95 (DELHI) :- HONBLE DELHI HIGH COURT HELD THAT NO PROVISION EIT HER IN THE ACT OR IN THE RULES REQUIRING AN ASSESSEE CARRY ING BUSINESS OF THIS NATURE, TO MAINTAIN A STOCK REGIST ER, AS A PART OF ITS ACCOUNTS. HARIDAS PARIKH VS ITO 113 TTJ 274 (ITAT JODHPUR):- HONBLE ITAT JODHPUR BENCH HAS HELD THAT UNLESS THE AO IS ABLE TO POINT OUT CERTAIN TRANSACTIONS WHICH HAVE BEEN LEFT TO BE ENTERED IN THE BOOKS OF ACCOUNT OR THAT THE ASSESSEE HAS SOLD SOME OF THE ITEMS AT A PRICE HIGH ER THAN WHAT IS DISCLOSED IN THE BOOKS OF ACCOUNT OR IF PRO PER PARTICULARS, BILLS, VOUCHERS, ARE NOT FORTHCOMING E TC., THE BOOKS OF ACCOUNT CANNOT BE REJECTED WITHOUT ASSIGNI NG SPECIFIC REASONS. IN THE INSTANT CASE MERELY BECAUS E DIFFERENT RANGE AND NATURE OF ITEMS ARE BEING DEALT WITH ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 19 BY THE ASSESSEE AND THE MAINTENANCE OF QUANTITATIVE STOCK OF EACH AND EVERY ITEM IS NOT PRACTICALLY POSSIBLE, THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WHICH A RE FREE FROM ANY DEFECT CANNOT BE REJECTED MERELY BECA USE THE AVERAGE GP RATE WAS SLIGHTLY LOWER THAN THE AVE RAGE GP RATE OF THE EARLIER YEAR. VISHAL INFRASTRUCTURE LTD VS ACIT 104 ITD 537 (ITAT HYDERABAD) :- HONBLE ITAT HYDERABAD A BENCH HELD THAT THE UNDISPUTED FACT IS THAT THE ASSESSEE WHICH IS A LIMITED COMPANY HAS BEEN CONSISTENTLY FOLLOWING A PARTICULAR METHOD OF ACCOUNTING. ITS ACCOUNTS ARE A UDITED BOTH UNDER THE COMPANIES ACT AS WELL AS UNDER S. 44 AB. SUCH AUDITED ACCOUNTS ARE BEING FILED WITH THE REGI STRAR OF COMPANIES AS WELL AS WITH THE IT DEPARTMENT FOR MORE THAN 7 YEARS. THE REVENUE HAS SCRUTINIZED THE ACCOU NTS AND THE METHOD OF ACCOUNTING REGULARLY EMPLOYED AND ADOPTED BY THE ASSESSEE YEAR AFTER YEAR HAVE NOT BE EN FOUND FAULT WITH. AUDITORS OF THE COMPANY BOTH UNDE R THE COMPANIES ACT AND THE IT ACT HAVE BEEN CONSISTENTLY CERTIFYING THAT THE ASSESSEE HAS BEEN REGULARLY FOL LOWING THE METHOD OF ACCOUNTING AND THAT THE ANNUAL PROFIT S CAN BE PROPERLY DEDUCED FROM SUCH METHOD OF ACCOUNTING EMPLOYED BY THE ASSESSEE. THE AUDITORS OVER THE YEA RS HAVE ALSO BEEN CERTIFYING THAT THE ACCOUNTS ARE REG ULARLY MAINTAINED AND ARE COMPLETE IN THE SENSE THAT THERE IS NO SIGNIFICANT OMISSION THEREIN. THIS FINDING HAS BEEN ACCEPTED BY DIFFERENT AOS OVER A PERIOD OF SEVEN YE ARS. THOUGH THE PRINCIPLES OF RES JUDICATA DO NOT APPLY TO INCOME-TAX PROCEEDINGS, EACH ASSESSMENT YEAR BEING A UNIT BY ITSELF, YET IN CASES, WHEN A FUNDAMENTAL AS PECT PERMEATING THROUGH THE DIFFERENT ASSESSMENT YEARS H AS BEEN FOUND AS A FACT ONE WAY OR THE OTHER AND PARTI ES HAVE BEEN ALLOWED THAT POSITION TO BE SUSTAINED BY NOT CHALLENGING THE ORDER, IT MAY NOT BE APPROPRIATE TO ALLOW THAT POSITION TO BE CHANGED IN A SUBSEQUENT YEAR. F OR REJECTING THE VIEW TAKEN FOR THE EARLIER ASSESSMENT YEARS, THERE MUST BE A MATERIAL CHANGE IN THE FACT SITUATI ON. HONBLE ITAT PLACED RELIANCE ON RADHASOAMI SATSANG ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 20 VS. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), CIT VS. A.R.J. SECURITY PRINTERS (2003) 183 CTR (DEL) 323 : (2003) 264 ITR 276 (DEL) AND CIT VS. NEO POLY PACK (P) LTD. (2000) 245 ITR 492 (DEL). ASHOK REFRACTORIES PVT LTD VS CIT 279 ITR 475 (CAL) AVDESH PRATAP SINGH ABDUL REHMAN & BROS VS CIT (1994) 210 ITR 406 IN ALL THESE CASES A CLEAR PROPOSITION HAS BEEN LAI D THAT ABSENCE OF STOCK REGISTER PER SE MAY NOT LEAD TO AN INFERENCE THAT B OOKS ARE INCOMPLETE, UNRELIABLE OR FALSE SO AS TO BE REJECTED WITHOUT AN Y COGENT REASONS:- PANDIT BROS VS CIT (1954) 26 ITR 159 (PUN) HELD THA T ABSENCE OF STOCK REGISTER IS NOT SUFFICIENT GROUND TO REJECT THE BOOKS OF ACCOUNT. 6.3 IT IS CONTENDED THAT ASSESSEES BOOKS ARE AUDIT ED AS PER LAW, PURCHASES/SALES/TRADING EXPENSES ARE DULY SUPPORTED BY BILLS AND VOUCHERS AND ARE DULY VERIFIABLE. THEREFORE, THE CORRECTNESS OF ACCOUNT BOOKS AND TRADING RESULTS CANNOT BE ARBITRARILY QUESTIONED OR INTERFERED. LAW DOES NOT ENVISAGE TO VEST THE ASSESSING OFFICERS WITH SUCH U NBRIDLED POWERS TO ARBITRARILY REVIEW THEIR OWN ORDERS ONLY BECAUSE SE ARCH IS CONDUCTED. THEREFORE THE PROVISIONS ARE WELL QUALIFIED WITH SU FFICIENT RIDERS IN THE FORM OF WORDS ON THE BASIS OF INCRIMINATING MATERIAL FOU ND DURING THE COURSE OF SEARCH OR INFORMATION RECEIVED BASED ON SEARCH PROC EEDINGS AND OTHER WORDS. ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 21 BESIDES BY A PLETHORA OF JUDGMENTS HONBLE SUPREME COURT AND VARIOUS HIGH COURTS, INCLUDING THE JURISDICTION RAJASTHAN H IGH COURT HAS INTERPRETED THESE EXIGENCIES AND IN UNISON HELD THAT ADDITIONS CANNOT BE MADE UNLESS THEY ARE BASED INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH OR INFORMATION RECEIVED BASED ON SEARCH PROCEEDINGS. THE BOOKS OF ACCOUNT CAN BE REJECTED ONLY WHERE THE CORRECT PROFITS CANN OT BE DEDUCED FROM THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE AND EVEN I F BOOKS ARE REJECTED ADDITIONS IN SEARCH ASSESSMENTS U/S 153A CANNOT BE MADE IN THE ABSENCE OF INCRIMINATING MATERIAL. IN THE CASE OF THE ASSESSEE , THE TAXABLE PROFITS ARE ASCERTAINABLE FROM THE COMPLETED, DULY CLOSED AUDIT ED RECORD AND BOOKS OF ACCOUNT REGULARLY MAINTAINED BY THE ASSESSEE. 7.1 APROPOS THE ARBITRARY ESTIMATION OF GP, IT IS V EHEMENTLY CONTENDED THAT, FOR EACH YEAR GP CANNOT REMAIN SAME WHICH IS RECOGNIZED BY ACCOUNTING PRACTICES ALSO. BESIDES THE ASSESSEE IS ENGAGED IN THE PURCHASE OF GRANITES BLOCK WHOSE QUALITY, STRENGTH VARIES FROM BLOCK TO BLOCK. THE SAME IS PROCESSED BY CUTTING MACHINES AND POLISHING MACH INES. THE QUALITY OF PRODUCT VARIES FROM BLOCK TO BLOCK DUE TO VARIOUS R EASONS INCLUDING CRACKS, DEFECTS, COLOUR, SHAPE ETC. ALL THESE DEFECTS AND I MPERFECTIONS CAUSE HUGE VARIATION IN THE YIELD AND PROFITABILITY FROM THE T RADING. THUS ITS FUTILE TO ASSUME THAT ASSESSEE WILL BE ALWAYS ABLE TO SHOW SA ME OR BETTER GP YEAR ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 22 AFTER YEAR. BESIDES ACUTE COMPETITION IN THIS TRADE , IT MAKES DIFFICULT TO MAINTAIN CONSISTENT GP. THE LD. AO ESTIMATED THE G P OF THE ASSESSEE 30% TO 17% TABULATED AS UNDER:- AY ESTIMATION OF GP BY AO GP RATE DECLARED BY ASSESSEE 2003-04 30% 28.74% 2004-05 25% 23.75% 2005-06 25% 23.77% 2006-07 20% 16.72% 2007-08 20% 17.20% 2008-09 17% -13.12% 2009-10 (UP TO 27.08.08) 20% 19.41% 7.2 LD AO HIMSELF ESTIMATED THE GP AT DIFFERENT RAT ES FOR DIFFERENT YEARS THUS CONTRADICTING HIS OWN OBSERVATIONS AND INDICAT ES HOW SHAKY IS THE BASIS TO REJECT BOOKS OF ACCOUNTS AND ESTIMATE GP ON PATE NT GUESS WORK. LD. AO HAS NOT EVEN ENDEAVORED TO PROVIDE ANY COMPARABLE C ASE TO JUSTIFY THE ESTIMATION. IN THESE CIRCUMSTANCES APART FROM BEING NOT BASED ON ANY INCRIMINATING MATERIAL THE ESTIMATION OF GP IS ONLY A WORK OF WILD ESTIMATION UTTERLY LACKING ON COGENCY IT WAS IMPERA TIVE ON THE PART OF LD. TO GIVE COGENT AND TENABLE REASONS FOR REJECTION OF BO OKS AND IF GP WAS TO BE ESTIMATED TO GIVE ANY RELIABLE COMPARABLE CASE OR R EASONS TO DEMONSTRATE THAT THE GP DECLARED BY THE ASSESSEE WAS LOWER IN C OMPARISON TO OTHER ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 23 TRADERS OR OTHER VALID GROUNDS. IT IS SETTLED POSIT ION OF LAW THAT THE, REJECTION OF AUDITED BOOKS OF ACCOUNTS AND RECORD IS A SERIOU S ACT AND CANNOT BE RESORTED TO BY ASSESSING AUTHORITIES IN CASUAL AND SLIP SHOD MANNER. FURTHER EVEN IF THEY ARE REJECTED THE ESTIMATION OF PROFITS CANNOT BE BASED ON WILD ESTIMATION AND WITHOUT COMPARABLE CASES. LD. AO WIT HOUT CITING ANY COMPARATIVE CASES FOR EVERY YEAR ESTIMATED DIFFEREN T GP RATE WITHOUT OFFERING ANY IOTA OF JUSTIFICATION. RELIANCE IS PLA CED ON FOLLOWING DECISIONS: - I. DHANKESHWARI COTTON MILLS LTD V/S CIT 26 ITR 775 (S C) II. LAL CHAND BHAGAT AMBICA RAM V/S CIT 37 ITR 288 (SC) III. OMAR SALARY MOHAMAD V/S CIT 37 ITR 151 (SC THERE BEING NO SEARCH, DEPARTMENT REALIZED THE FALL ACY IN THEIR PROCEEDINGS AND THEREFORE, CARRIED OUT A SURVEY ON ASSESSEE ON 27.08.2008 AND DURING THE COURSE OF SURVEY PREPARED THE INVENTORY OF PHYSICAL STOCK AT RS. 13,73,232/-. TAKING THE PHYSICAL STOCK FOUND TO THE DEPARTMENT A T THE TIME OF SURVEY AS CLOSING STOCK OF 27.08.2008 THE CONSOLIDATED GP OF THE ASSESSEE FOR THE PERIOD 01.04.2003 TO 27.08.2008 CAN BE COMPUTED AND THE SAME CAN BE COMPARED FROM THE TOTAL GROSS PROFIT DECLARED BY TH E ASSESSEE. THE CALCULATION IS AS UNDER: - A) YEAR TO YEAR TRADING RESULTS DECLARED BY THE ASSESS EE IN REGULAR BOOKS OF ACCOUNTS AND AOS ACTION IN ESTIMA TION OF GP WAS AS UNDER:- ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 24 PB PG OPENING STOCK PURCHASES & EXP GROSS PROFIT TOTAL DEBIT SIDE SALES + JOB WORK CLOSING STOCK TOTAL CREDIT SIDE % GP DECLARED BY ASSESSEE GP RATE ESTIMATED BY AO GP ADDITION MADE BY AO AY (IN RS.) (IN RS.) 2003-04 24,31 47500 3527821 1204732 4780053 4191525 588528 4780053 28.74 30% 52726 2004-05 44,47 588528 4950077 1236763 6775368 520790 5 1567463 6775368 23.75 25% 65213 2005-06 60,63 1567463 4450764 1151361 7169588 48442 87 2325301 7169588 23.77 25% 59711 2006-07 76,79 2325301 6911738 1411624 10648663 8440 846 2207817 10648663 16.72 20% 276545 2007-08 93, 96 2207817 6060773 1262825 9531415 7342616 2188799 953 1415 17.20 20% 205698 2008-09 110; 113 2188799 8906413 -932956 10162256 7111586 3050670 10 162256 -13.12 17% 2141926 2009-10 (UP TO 27.08.08) 3050670 1943903 734860 5729433 3787948 2664366 64 52314 19.40 20% 60746 WEIGHTED AVERAGE GP 6069209 40926713 14.83 TOTAL GP ADDITION BY AO 2862565 B) CONSOLIDATED TRADING A/C FOR THE PERIOD FROM 01. 04.2003 TO 27.08.2008 CONSIDERING THE CLOSING STOCK FOUND T O THE SURVEY PARTY AS CLOSING STOCK: - PARTICULARS AMOUNT PARTICULARS AMOUNT TO OPENING STOCK (AS ON 01.04.03) 47,500 BY SALES + JOB CHARGES 4,09,26,713 TO PURCHASES 2,70,51,663 AY AMOUNT AY AMOUNT 03-04 41,91,525 03-04 16,18,043 04-05 52,07,905 04-05 28,63,591 05-06 48,44,287 05-06 28,36,648 06-07 84,40,846 06-07 54,32,810 07-08 73,42,616 07-08 47,59,059 08-09 71,11,586 08-09 75,97,609 09-10 (UP TO 27.08.08 37,87,948 09-10 (UP TO 27.08.08 19,43,903 BY CLOSING STOCK (AS FOUND TO SURVEY PARTY) 13,73,232 ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 25 TO MFG. EXP. 1,04,22,707 AY AMOUNT 03-04 19,09,778 04-05 20,86,486 05-06 16,14,116 06-07 14,78,928 07-08 13,01,714 08-09 13,08,804 09-10 (UP TO 27.08.08 7,22,881 TO GROSS PROFIT (11.67%) 47,78,075 TOTAL 4,22,99,945 TOTAL 4,22,99,945 THESE FIGURES ARE SELF EXPLANATORY, AS PER THIS CO NSOLIDATED TRADING ACCOUNT ASSESSEES TOTAL GP FOR THE PERIOD FROM 01.04.2003 TO 27.08.2008 COMES TO RS. 47,78,075/- RESULTING IN G P @ 11.67%. COMPARED TO THIS ASSESSEES GP DECLARED IN BOOKS CO MES TO RS. 60,69,209/- I.E. GP (@ 14.82%, FROM THIS PARAMETER ALSO ASSESSEE IN FACT HAS OFFERED BETTER GP. LOOKING FROM ANY ANGLE I.E: I. IN THE ABSENCE OF SEARCH IN ASSESSEES PREMISES, IMPUGNED ASSESSMENTS U/S 1532A ARE AB INITIO VOID AS HELD BY JUDICIAL PRECEDENTS INCLUDING THOSE CITED ABOVE. II. BOOKS OF ACCOUNTS HAVE BEEN REJECTED WITHOUT C ITING ANY SPECIFIC DEFECTS. ONLY DEFECT CITED IS A SWEEPING O BSERVATION THAT QUALITY WISE STOCK REGISTER IS NOT MAINTAINED. VARI OUS COURTS HAVE CLEARLY HELD THAT THE ABSENCE OF STOCK REGISTER CAN NOT BE THE SOLE GROUND FOR REJECTION OF BOOKS. THIS IS SO BECAUSE H ONBLE SUPREME COURT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD. , 358 ITR 295 HAS HELD THAT VALUATION OF STOCK IS BASICALLY REVENUE N EUTRAL AS THE EXCESS VALUE IF ANY DETERMINED IS TO BE ALLOWED AS DEDUCTI ON IN NEXT YEAR AS OPENING STOCK. III. NO COGENT REASON HAS OFFERED BY LD. AO FOR HOL DING THAT DECLARED GP IS INAPPROPRIATE, NO COMPARABLE CASE HA S BEEN CITED AND ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 26 DIFFERENT % OF GP ESTIMATION HAS BEEN RESORTED TO I N DIFFERENT YEARS BY LD. AO. THUS THERE IS CLEAR SELF-CONTRADICTION IN A OS ESTIMATE AND PROPOSITION THAT DECLARED GP SHOULD BE IDEALLY SAME . THE GP ESTIMATE BEING BASELESS, ILLOGICAL, OVERLOOKING THE REALITIE S OF GRANITE STONE TRADE AND WITHOUT CITING ANY COMPARABLE IS LIABLE T O BE DELETED ON MERITS ALSO. IV. ASSUMING BUT NOT AGREEING THAT AOS ACTION IS C ORRECT EVEN THEN THE ADDITIONS ARE UNJUSTIFIED IN AS MUCH AS THESE A DDITIONS WOULD RESULT IN THE INCREASE IN OPENING AND THEN CLOSING STOCK O F SUCCESSIVE YEAR. THIS WOULD OVERALL INCREASE THE BOOK STOCK OF ASSES SEE AS ON THE DATE OF SEARCH BY 28,62,565/-. IN ASSESSMENT FOR AY 2009 -10, THE LD AO HAS TAKEN BOOK STOCK AT RS. 26,64,366/- AND COMPARE D IT FROM STOCK PHYSICALLY FOUND BY SURVEY PARTY AT RS. 13,73,232/ - AND ARRIVED AT SHORT STOCK OF RS. 12,91,134/-. IF THE GP IS INCREA SED BY RS. 28,62,565/-, THE BOOK STOCK AT THE TIME OF SURVEY W OULD COME AT RS. 26,64,366+28,62,565= RS.55,2.6,931/- THIS CALCULATI ON ALSO DEMONSTRATES THAT THE IMPUGNED GP ADDITION APART FR OM THE ABOVE MENTIONED FACTORS ARE UNWARRANTED. V. IN THE NAME OF ALLEGED SEARCH WHICH IS VOID AB I NITIO, INTENSIVE SURVEY OPERATION WHICH IS CLAIMED TO BE SUCCESSFUL AND RESULTED IN EXTRACTING AN ALLEGED SURRENDER FROM A DIRECTOR, D EPARTMENTAL AUTHORITIES HAVE NOT RELIED ON ANY SCRAP OF INCRIMI NATION MATERIAL WHICH CAN SUBSTANTIATE THEIR ALLEGATIONS. THIS IS S O BECAUSE DURING THE ALLEGED OPERATIONS NO INCRIMINATING MATERIAL WHATSO EVER WAS FOUND TO EVEN REMOTELY SUGGEST JUSTIFICATION FOR REJECTION O F BOOKS OF ACCOUNTS OR SUPPRESSION OF GP IN ANY MANNER BY THE ASSESSEE. 7.3 LD. DR ON MERITS RELIED ON THE ORDERS OF LD. CI T(A). 7.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. FIRST WE SHOULD ADVERT TO THE MAIN GROUNDS OF THE ASSESSE ON MERITS AND THEREAFTER WE SHALL DEAL WITH THE ADDITIONAL GROUND OF THE ASSESSE. ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 27 (I) APROPOS MERITS THE RECORD REVEALS THAT THE AD DITION IN QUESTION HAVE BEEN MADE ONLY BY REJECTING THE ASSES SEES AUDITED BOOKS AND ESTIMATING THE GP. LD. AO ALSO HA S NOT ADOPTED ANY UNIFORM STANDARD OF ESTIMATION. IN SOME YEARS IT HAS BEEN ESTIMATED AT HIGHER RATES AND IN SOME AT L OWER RATES, THUS THE METHODOLOGY OF ESTIMATION IS NEITHER SCIEN TIFIC NOR OBJECTIVE BUT A PRODUCT OF CONJECTURES AND SELF CON TRADICTORY. NO SPECIFIC REASONS HAVE BEEN ASCRIBED AS TO THE DE FECTS IN THE BOOKS OF ACCOUNTS, THERE EFFECT ON ASCERTAINING THE CORRECT INCOME AND REASONS FOR REJECTION OF BOOKS. LD. CIT( A) HAS UPHELD THE REJECTION OF BOOKS HOWEVER, ACCORDED SOM E RELIEF BY REDUCING GP ESTIMATE. NO COGENT REASONS ARE AGAIN G IVEN BY LD. CIT(A) IN THIS BEHALF. (II) APROPOS STOCK REGISTER, ASSESSE HAS EXPLAINED THAT IN THE BUSINESS OF MANUFACTURING/JOB WORK AND TRADING OF G RANITES AND IT IS PRACTICALLY NOT POSSIBLE FOR THE ASSESSEE TO MAINTAIN THE DAY TO DAY STOCK REGISTER BECAUSE OF NUMBER OF QUALITY AND VARIETIES AND COLOURS HOWEVER, EVEN IF SEPARATE RECORD IS NOT MAINTAINED THE BOOKS OF ACCOUNTS CANT BE REJECTED ON THIS GRO UND BASED ON ITS RELIANCE ON THE ABOVE CITED CASES OF - JAS J ACK ELEGANCE EXPORTS,HARIDAS PARIKH (ITAT JODHPUR):- HONBLE ITA T JODHPUR, VISHAL INFRASTRUCTURE (ITAT HYDERABAD), RA DHASOAMI SATSANG NEO POLY PACKS, ASHOK REFRACTORIES, AVDESH PRATAP SINGH ABDUL REHMAN & BROS. IN ALL THESE CASES A CLEAR PROPOSITION HAS BEEN LAI D THAT ABSENCE OF STOCK REGISTER PER SE MAY NOT LEAD TO AN INFERENCE THAT B OOKS ARE INCOMPLETE, UNRELIABLE OR FALSE SO AS TO BE REJECTED WITHOUT AN Y COGENT REASONS. IN THE GIVEN FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW TH AT RATIO OF THESE JUDGMENTS IS APPLICABLE TO THE CASE OF THE ASSESSE, THEREFORE, WE UPHOLD THE BOOKS OF ACCOUNTS OF THE ASSESSEE. BESIDES ASSESSEE S BOOKS ARE AUDITED AS ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 28 PER LAW, PURCHASES/SALES/TRADING EXPENSES ARE DULY SUPPORTED BY BILLS AND VOUCHERS AND ARE DULY VERIFIABLE. THEREFORE, THE CO RRECTNESS OF ACCOUNT BOOKS AND TRADING RESULTS CANNOT BE ARBITRARILY QUE STIONED OR INTERFERED AND PROFITS ESTIMATED FOR NO COGENT REASONS. APROPOS TH E ESTIMATION OF GP IT CANNOT REMAIN SAME YEAR AFTER YEAR WHICH IS A RECOG NIZED COMMERCIAL PROPOSITION. THE QUALITY OF GRANITE VARIES FROM BLO CK TO BLOCK DUE TO VARIOUS REASONS INCLUDING CRACKS, DEFECTS, COLOUR, SHAPE ET C. ASSESSEES CONTENTION ABOUT ACUTE COMPETITION IN THIS TRADE AS A FACTOR F OR VARIATION IN GP% HAS ALSO NOT BEEN DISPUTED. LD AO HIMSELF ESTIMATED TH E GP AT DIFFERENT RATES FOR DIFFERENT YEARS, THUS THE ESTIMATION OF GP ON B Y LD. AO IS BASED ON ONLY GUESS WORK. LD. AO HAS NOT PROVIDED ANY COMPARABLE CASE TO JUSTIFY THE ESTIMATION. RELIANCE ON THE JUDGMENTS OF - DHANKESH WARI COTTON MILLS, LAL CHAND BHAGAT AMBICA RAM, OMAR SALARY MOHAMAD (SUPRA ) IS WELL PLACED. THE ASSESSEE HAS PROVIDED A DETAILED CONSOLIDATED W ORKING AS MENTIONED ABOVE BASED ON INVENTORY OF PHYSICAL STOCK AT RS. 1 3,73,232/- TAKEN DURING THE COURSE OF SURVEY. PHYSICAL STOCK FOUND AT THE T IME OF SURVEY AS CLOSING STOCK OF 27.08.2008 AND THE CONSOLIDATED GP OF THE ASSESSEE FOR THE PERIOD 01.04.2003 TO 27.08.2008 AS MENTIONED ABOVE. THE CO NSOLIDATED TRADING ACCOUNT REVEALS ASSESSEES TOTAL GP FOR THE PERIOD FROM 01.04.2003 TO 27.08.2008 COMES TO RS. 47,78,075/- RESULTING IN G P @ 11.67%. COMPARED ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 29 TO THIS ASSESSEES GP DECLARED IN BOOKS COMES TO RS . 60,69,209/- I.E. GP (@ 14.82%, THIS PARAMETER INDICATES THAT AT THE END OF THE DAY, ASSESSEE HAS OFFERED BETTER GP. LOOKING FROM ALL THESE ANGLES, I N ALL THE IMPUGNED YEARS, WE SEE NO JUSTIFICATION IN REJECTION OF THE BOOKS O F THE ASSESSE U/S 145(3) WHICH ARE UPHELD. BESIDES BASED ON OUR ABOVE OBSERV ATIONS, CASE LAWS AND THE FACTS THAT BOOKS OF ACCOUNTS STAND UPHELD WE DE LETE THE ADDITIONS OF GP AS RETAINED BY LD. CIT(A).ASSESSEES GROUNDS IN THI S BEHALF ARE ALLOWED. 8.1 ADVERTING TO THE ADDITIONAL GROUND RAISED BY TH E ASSESSEE, THOUGH THE IMPUGNED ADDITIONS HAVE BEEN DELETED ON MERITS, HOW EVER BEING A LEGAL GROUND DULY ADMITTED BY US, ITS ADJUDICATION BECOME S NECESSARY. THE ASSESSEE IS PART OF A GROUP WHICH IS PRIMARILY ENGA GED IN PHARMA TRADE AS C/F AGENT. ASSESSEE COMPANY IS IN A TOTALLY DIFFERE NT FIELD I.E. GRANITE MANUFACTURING AND TRADING AND HAVING REGISTERED OFF ICE AT 18 CHOMU ROAD AND ITS FACTORY I.E. VKI INDL. AREA. SEARCH OPERATI ONS U/S 132 ARE ADMITTEDLY NOT CARRIED OUT IN THESE PREMISES AND ONLY SURVEY P ROCEEDINGS U/S 132A WERE CARRIED OUT ON 27/08/2008 AT VKI AREA FACTORY PREMI SES. IT HAS NOT BEEN DISPUTED BY THE DEPARTMENT THAT THOUGH ASSESSEES N AME APPEARS IN SEARCH AUTHORIZATION, AS A GROUP SEARCH DIRECTORS RESIDEN CE WAS SEARCHED. ACTUALLY NO PREMISES OF THE ASSESSE COMPANY WERE SEARCHED WH ICH IS EVIDENT AS THERE IS NO PANCHNAMA OR INVENTORY IN ASSESSE COMPANYS N AME. DEPARTMENTS ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 30 RELIANCE IS MAINLY ON THE SEARCH ON THE RESIDENCE O F DIRECTOR, HIS ADMISSION FOR DISCLOSURE OF ASSESSES INCOME AND A PLEA TO CO NSTRUE THE RECORD HARMONIOUSLY TO HOLD THAT SEARCH WAS THERE ON ASSES SEE. ASSESSEE HAS RAISED SERIOUS OBJECTIONS TO THE EFFECT THAT SEARCH IS A S EVER ACTION AND INVASION OF PERSONAL RIGHTS AND SUCH ACTIONS MUST STAND THE STR ICT SCRUTINY OF RELEVANT PROVISIONS. IT IS CONTENDED THAT SUPERIOR COURTS IN NO OF JUDGMENTS HAVE HELD THAT JURISDICTIONAL ISSUE ARE TO BE SERIOUSLY VIEWE D AND THE EXECUTIVE ACTION MUST CONFORM TO THE STRICT INTERPRETATION AND NOT H ARMONIOUS ASSUMPTIONS. SURVEY PARTY RECORDED THE STATEMENT OF SHRI SUBHASH GUPTA ON 27/08/2008 WHO CLEARLY STATED IN ANSWER TO QUESTION NO 8 THAT THE APART FROM FACTORY AT VKI AREA, MG ASSESSEES HEAD OFFICE IS SITUATE AT B -18, C-SCHEME; CHOMU HOUSE, JAIPUR AND DOES NOT HAVE ANY OTHER OFFICE, GODOWN OR BRANCH AT ANY OTHER PLACE. THUS ASSESSE CLAIMS THAT ITS PROPER AD DRESS WAS DULY COMMUNICATED TO THE DEPARTMENT. IT SHOULD HAVE BEEN VIGILANT ABOUT THEIR ACTION AND IF THERE WAS NEED THERE WAS NO BAR TO CO NDUCT A LEGAL SEARCH. FAILURE OF DEPARTMENT TO TAKE PROPER LEGAL STEPS CA NNOT RESULT IN JEOPARDY FOR ASSESSE. THIS STATEMENT IS ACCEPTED BY THE DEPARTME NT, WITH FULL DISCLOSURE IT WAS FOR THE DEPARTMENT TO TAKE A CALL. DEPARTMENT S HOULD NOT BE REWARDED FOR ITS JURISDICTIONAL MISTAKES. CHOMU HOUSE IS A BIG C OMPLEX HOUSING GROUP COMPANIES HAVE DISTINCT SPACES OCCUPIED BY THEM. AS SESSEE HAS PLEADED THAT ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 31 EACH COMPANY IS AN INCORPORATED ENTITY AND SEARCH O N ONE COMPANY CANNOT BE ASSUMED TO BE DEEMED TO BE A SEARCH U/S 132 ON A CONCERN WHO HAS NO CONNECTION WHATSOEVER WITH THESE PREMISES. THE RES IDENTIAL PORTIONS USED BY VARIOUS DIRECTORS OF THE GROUP COMPANIES MENTION ED ABOVE WERE ALSO SEARCHED AND CONSEQUENT PANCHANAMA AND INVENTORIES WERE PREPARED, THERE IS NO REFERENCE TO ASSESSEES NAME. B-19, CHOMU HOU SE, SARDAR PATEL ROAD, JAIPUR, IS RESIDENTIAL PREMISES OF VARIOUS DIRECTOR S. IN NONE OF PANCHANAMA AND INVENTORY ASSESSEES NAME APPEARS. THE COMMON P ANCHANAMA AND INVENTORY OF ALL THE GROUP CONCERNS WAS PREPARED BY THE SEARCH PARTY FOR THE PREMISE SITUATED AT C-1, MITTAL CHAMBERS, HEERA PAT H CHOMU HOUSE, JAIPUR BUT THIS PREMISE ALSO DOES NOT BELONG / OCCUPIED B Y THE ASSESSE. THIS IS SO AS FROM THIS PREMISE, ONLY PHARMACEUTICAL BUSINESS OF OTHER GROUP CONCERNS I.E. M/S. MITTAL ENTERPRISES AND M/S. ASSOCIATES AR E CARRIED OUT. THIS PREMISE DOES NOT BELONGING TO OR IS OCCUPIED OR SHA RED BY ASSESSE DEALING IN GRANITE BUSINESS ONLY. THESE FACTS ARE UNCONTROVERT ED. 8.2 APPRECIATING ALL THESE RIVAL CONTENTIONS, FACTS AND MATERIAL AVAILABLE ON RECORD IT IS APPARENT THAT THOUGH ASSESSEES NAM E APPEARS ON AUTHORIZATION BUT THE SAME WAS NOT EXECUTED ON THE ASSSESSEES PR EMISES AND NO PANCHNAMA OR INVENTORY WAS PREPARED. NOW WE ADVERT TO THE VEHEMENT ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 32 CONTENTION OF LD. DR THAT DIRECTOR IS ASSESSE COMPA NYS REPRESENTATIVE AND SEARCH ON HIS PREMISES SHOULD BE HARMONIOUSLY CONST RUED AS A VALID SEARCH IN TERMS OF SEC. 132. WE ARE UNABLE TO AGREE WITH T HIS PROPOSITION, VARIOUS COURTS HAVE HELD THAT SEARCH ACTIONS ARE IN THE NAT URE OF ENFORCEMENT WHICH INVOLVES INVASION IN THE PRIVACY OF ASSSESSEE; SUCH ACTION HAS TO BE IN FULL CONFORMITY WITH RELEVANT LEGAL PROVISION. SUCH JURI SDICTION OR ACTION CANNOT BE VALIDATED IN CASUAL MANNER. IN THE ABSENCE OF AN Y SEARCH U/S 132 AND NO ACTION U/S 153C AS MENTIONED ABOVE THE ASSESSMENTS IN QUESTION CANNOT BE VALIDATED ON ASSUMPTIONS TO FALL UNDER THESE PROVIS IONS. THUS SEC. 153C CANNOT BE DEEMINGLY APPLIED IN THE ABSENCE OF MANDA TORY RECORDING OF STATUTORY SATISFACTION AND REQUISITE NOTICE U/S 153 C, THUS WHAT HAS NOT BEEN DONE DIRECTLY CANNOT BE DONE INDIRECTLY. WE FULLY A PPRECIATE THE MANDATE OF SUPERIOR COURTS WHILE CONSIDERING THE VALIDITY OF A SSESSMENT CONSEQUENT TO SEARCH. MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF J.M. TRADING CORPORATION VS. ACIT, 20 SOT 489 (MUM) HELD THAT W HERE A SEARCH IS CARRIED OUT AT THE PREMISES OWNED BY THE ASSESSEE, BUT RENTED TO OTHER CONCERN, THE SAME DOES NOT RESULT INTO A VALID SEAR CH U/S 132 ON THE ASSESSEE. REVENUE APPEAL HAS BEEN DISMISSED IN THIS CASE BY H ONBLE HIGH COURT OF BOMBAY ( ITA NO.589 OF 2009) BY FOLLOWING OBSERVATI ONS: ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 33 THE TRIBUNAL HAS CATEGORICALLY RECORDED A FINDI NG OF FACT OF INITIATION OF THE SEARCH THAT NON COMPLIANCE TO THE PROVISIONS OF THE ACT BY THE AUTHORISED OFFICER, SUCH SEARCHES ARE INVALID A ND ILLEGAL. NO SEARCH WAS CONDUCTED AGAINST THE ASSESSEE AS THE PREMISES OCCU PIED BY THE ASSESSEE WERE NOT ENTERED UPON AND SEARCHED BY THE AUTHORISE D OFFICER FURTHER VIDE ORDER DATED 06.09.2010, THE HONBLE SU PREME COURT, IN CIT, MUMBAI VS. M/S J.M. TRADING CORPORATION LTD. IN CC NO.13456/2010, HAS DISMISSED THE DEPARTMENTAL SLP AGAINST THE HONBLE BOMBAY HIGH COURT ORDER. SIMILAR VIEW HAS BEEN TAKEN BY ITAT DELHI B ENCH IN ACIT VS SARMANGALAM BUILDERS & DEVELOPERS PVT LTD ITA NO 19 6 TO 198/DEL/2011 ORDER DATED 14 TH MARCH 2014 WHICH IS REPRODUCED ABOVE. SIKSHA VS CI T (2011) 336 ITR 112 (ORISSA HC). CIT VS SMT VASHODA SHETTY (KARNATAKA HIGH COURT) (2015) 371 ITR 75 (KARN), SEARCH ASSESS MENTS U/S 153A OR 153C CANNOT BE MADE ON THE BASIS OF SURVEY. IN VIEW OF T HE FOREGOING WE ARE OF THE VIEW THAT THERE BEING NO VALID EXECUTION OF SEA RCH AUTHORIZATION ON ASSESSE IN TERMS OF SEC. 132 AND THERE BEING ONLY V ALID SURVEY PROCEEDINGS, NO ASSESSMENTS CAN BE FRAMED U/S 153A BY AO. THE PL EA OF THE DEPARTMENT THAT A HARMONIOUS CONSTRUCTION OF RECORD AND PROVIS IONS SHALL BE MADE WHICH IS AN IMPLIED REFERENCE TO SEC. 292B ALSO CANNOT BE ACCEPTED. THIS IS SO BECAUSE JURISDICTIONAL ERRORS CANNOT BE CURED BY SU CH INDIRECT MEANS. A SEARCH ON DIRECTOR CANNOT BE DEEMED TO BE A SEARCH ON DISTINCT AND SEPARATE INCORPORATED ENTITY I.E. COMPANY. SINCE ASSESSMENTS ARE BAD IN LAW ANY ITA NO. 761/JP/2013 M/S. MITT AL GRANITE (P) LTD. VS. DCIT, CENTRAL CIRCLE- 3, JA IPUR 34 ADMISSION OF UNDISCLOSED INCOME BY DIRECTOR CANNOT MAKE ANY RELEVANCE. CONSEQUENTLY WE HOLD THAT THE IMPUGNED ASSESSMENTS FRAMED U/S 153A ARE BAD IN LAW NOT BEING IN CONSEQUENCE TO PROVISIONS O F SEC 132. HOWEVER WE MAY HASTEN TO ADD THAT ASSESSE WILL NOT BE ELIGIBLE FOR ANY TAXES PAID TOWARDS THE RETURNS OF INCOME FOR TH ESE ASSESSMENTS. VARIOUS COURTS HAVE HELD THAT TAX PAID ALONG WITH RETURNS W HOSE ASSESSMENTS ARE HELD AS BAD IN LAW CANNOT BE REFUNDED TO ASSESSEE. 9.0 IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 /03/201 6. SD/- SD/- FOE FLAG ;KNO VKJ-IH-RKSYKUH (VIKRAM SINGH YADAV) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16/03/ 2016 *MISHRA VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S. MITTAL GRANITE (P) LTD., JAIP UR 2. IZR;FKHZ@ THE RESPONDENT- THE DCIT, CENTRAL CIRCLE- 3, JAIPUR 3. VK;DJ VK;QDRVIHY ) @ CIT(A) 4. VK;DJ VK;QDR@ CIT 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO.761/JP/2013) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR
