M/s Manoj Metal Udyog, Kolkata V. ITO, WD-35(4), KOLKATA, Kolkata

ITA 857/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 1207 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 11-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: A K CHAKRABORTI; S K SEN
• Section: 133A

Judgement Text

1 ITA NO.857/KOL/2015 MANOJ METAL UDYOG., AY, 2009-10 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) . . , . ' # $% % , '( ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 857/KOL/2015 ASSESSMENT YEAR: 2009-10 MANOJ METAL UDYOG (PAN: AAJFM0829N) VS. INCOME-TAX OFFICER, WARD-35(4), KOLKATA APPELLANT RESPONDENT DATE OF HEARING 07.09.2017 DATE OF PRONOUNCEMENT 18.10.2017 FOR THE APPELLANT S/SHRI A. K. CHAKRABORTI & S. K. SEN, ADVOCATES FOR THE RESPONDENT SHRI SAURABH KUMAR, ADDL. CIT, D R ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-10, KOLKATA DATED 30.03.2015 FOR AY 2009-10. 2. THE MAIN GRIEVANCE OF THE ASSESSEE IS THAT THE E NTIRE ADDITION HAS BEEN MADE BASED ON THE DIFFERENCE IN STOCK OF PIG IRON AND SCRAP AND S OME CASH FOUND DURING SURVEY DATED 29.09.2008. ACCORDING TO THE ASSESSEE, THE ASSESSE E FIRM HAS BEEN TAKEN OVER BY A PRIVATE LIMITED COMPANY CALLED MMU METALIKS UDYOG (P) LTD. (HEREINAFTER REFERRED TO AS THE COMPANY). BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS A FIRM CARRIES OUT BUSINESS OF WHOLESALE TRADING OF IRON AND STEEL. THE ASSESSEE FIRM WAS TAKEN OVER BY A COMPANY IN THE NAME AND STYLE OF M/S. MMU METALIKS UDYOG (P) LTD. ON AND FROM 01.09.2008 BY AN AGREEMENT OF TAKE OVER DRAWN OUT ON 28.08.2008. (T HE AO NOTES THAT THIS FACT WAS NOT INTIMATED TO THE DEPARTMENT). ON 29.09.2008, A SURV EY WAS CONDUCTED U/S. 133A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS TH E ACT) IN THE BUSINESS PREMISES WHERE THE ASSESSEE FIRM USED TO CONDUCT BUSINESS BEFORE 0 1.09.2008. THE FIRMS ENTIRE BUSINESS HAS BEEN TAKEN OVER AS A GOING CONCERN WITH EFFECT FROM 01.09.2008 WITH ALL ASSETS AND PROPERTIES THEREOF INCLUDING STOCK IN TRADE. DURIN G SURVEY, THE SURVEY PARTY FOUND OUT CERTAIN DISCREPANCIES IN THE STOCK OF PIG IRON AND STOCK OF SCRAP. THE DISCREPANCIES FOUND IN STOCK OF PIG IRON WAS 87.670 TONS AND DISCREPANCIES FOUND IN SCRAP WAS 4.06 TONS AND CASH. 2 ITA NO.857/KOL/2015 MANOJ METAL UDYOG., AY, 2009-10 ACCORDING TO THE AO, DURING THE SURVEY WHEN THE PAR TNER OF THE ASSESSEE SHRI RAMESH KUMAR MAHESWARI WAS CONFRONTED WITH THE DISCREPANCY IN THE STOCK, THE SAID PARTNER STATED UNDER OATH THAT HE COULD NOT EXPLAIN THE DIFFERENCE IN CASH RIGHT THEN, AND WOULD EXPLAIN THE DIFFERENCE LATER ON. REGARDING THE DIFFERENCE FOUN D IN THE STOCK, HE STATED THAT THERE IS HARDLY ANY DIFFERENCE IN THE STOCK OF SCRAP FOUND P HYSICALLY. BUT PIG IRON IS AROUND IN EXCESS OF 88 TONS APPROX. THIS STOCK BELONGS TO M/ S. MANOJ METAL UDYOG WHICH WAS THE UNDISCLOSED PURCHASE FROM 01.04.2008 TO 31.08.2008 . BASED ON THE AFORESAID STATEMENT WHICH WAS RECORDED DURING SURVEY ON OATH AS STATED BY THE AO AT PAGE 2 LAST PARA, THE ASSESSEE WAS ASKED TO EXPLAIN FOR WHICH ACCORDING T O AO, THE ASSESSEE DID NOT GIVE ANY REPLY SO, TAKING THE VALUATION OF THE UNDISCLOSED P URCHASE AN AMOUNT OF RS.23,74,476/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS I TS UNDISCLOSED PURCHASE. ANOTHER ADDITION OF RS.20,257/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE AS UNDISCLOSED PROFIT ON UNDISCLOSED SALES FROM THE UNDISCLOSED PURCHASE. ANOTHER ADDITION OF RS.45,921/- WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED CASH. AGGRIEVED BY THE AFORESAID ADDITIONS MADE BY THE AO, THE ASSESSEE PR EFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO WAS PLEASED TO CONFIRM THE SAME. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE IS BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H THE FACTS AND CIRCUMSTANCES OF THE CASE INCLUDING THE HONBLE HIGH COURTS ORDER IN AS SESSEES VARIOUS WRIT PETITIONS FILED AT VARIOUS STAGES OF THE ASSESSMENT PROCEEDINGS. THE ONLY QUESTION THAT NEEDS TO BE ADDRESSED IS WHETHER THE DISCREPANCY FOUND IN STOCK OF PIG IR ON, SCRAP AND CASH CAN BE ASSESSED IN THE HANDS OF THE ASSESSEE FIRM OR NOT. THE HONBLE SUP REME COURT IN ITO VS. CH. ATCHAIAH (1996) 218 ITR 239 (SC) HAS HELD THAT THE INCOME S HOULD BE ASSESSED ON THE RIGHT PERSON, RIGHT YEAR AND IT SHOULD BE ON THE RIGHT INCOME. F ROM THE AFORESAID DECISION OF THE HONBLE SUPREME COURT ONLY THE RIGHT PERSON AND THE RIGHT P ERSON ALONE IS LIABLE TO BE TAXED AND NOT THE WRONG PERSON. HERE, WE NOTE THAT ASSESSEE FIRM HAS FILED ITS RETURN OF INCOME IN THE ASSESSMENT YEAR UNDER CONSIDERATION DISCLOSING THE INCOME FROM 01.04.2008 TO 31.08.2008, WHEREAS M/S. MMU METALIKS UDYOG (P) LTD. HAS FILED ITS RETURN OF INCOME DISCLOSING INCOME FROM 01.09.2008 TO 31.03.2009. BY AN AGREEM ENT OF TAKING OVER THE BUSINESS OF THE FIRM WAS DRAWN ON 28.08.2008 WHICH WE NOTE HAS BEE N DULY NOTARIZED; AND THE ASSESSEE FIRM HAS BEEN TAKEN OVER FROM 01.09.2008 AS A GOING CONCERN WITH ALL ASSETS AND LIABILITIES INCLUDING STOCK IN TRADE WHICH IS EVIDENT FROM PAGE 2 OF THE AGREEMENT OF TAKING OVER OF 3 ITA NO.857/KOL/2015 MANOJ METAL UDYOG., AY, 2009-10 FIRM. THE CHALLENGE OF THE ASSESSEE FIRM THAT THE SURVEY WAS ILLEGAL CANNOT BE ACCEPTED FOR THE SIMPLE REASON THAT THE ASSESSEE HAS NOT INTIMAT ED TO THE DEPARTMENT THAT IT HAS DISCONTINUED ITS BUSINESS. ACCORDING TO THE ASSESS EE FIRM, SECTION 176 IS NOT APPLICABLE TO THE ASSESSEE SINCE IT HAS NOT DISCONTINUED ITS BUSI NESS BECAUSE IT WAS A TAKE-OVER OF THE BUSINESS BY ANOTHER COMPANY AND SO BUSINESS DID NOT DISCONTINUE. THIS CONTENTION OF THE ASSESSEE CANNOT BE ACCEPTED FOR THE SIMPLE REASON T HAT THE ASSESSEE HAS FILED THE RETURN OF INCOME DISCLOSING INCOME FROM 01.04.2008 TO 31.08.2 008 WHICH GOES ON TO SHOW THAT THE ASSESSEE FIRM DISCONTINUED THE BUSINESS FROM 01.09. 2008, SO IT WAS DUTY BOUND TO INTIMATE WITHIN FIFTEEN DAYS AS PER SEC. 176 OF THE ACT TO T HE DEPARTMENT THE FACT OF BUSINESS BEING TAKEN OVER BY THE PRIVATE LIMITED COMPANY. SO, THE DEPARTMENTS SURVEY U/S. 133A OF THE ACT CANNOT BE FAULTED WITH WHEN THE FACTS REMAIN AS PER THE EXPLANATION TO SECTION 133A(1) OF THE ACT, UNDISPUTEDLY, THE BOOKS OF ACCOUNT OF THE ASSESSEE FIRM IDENTIFIED AS MMU-1 TO MMU-4 WERE FOUND FROM THE BUSINESS PREMISES. EVEN IF THE SURVEY FOR ARGUMENT SAKE IS HELD TO BE ILLEGAL, STILL THE EVIDENCE COLLECTED TH EREIN ARE ADMISSIBLE IN EVIDENCE BECAUSE IN INDIA, LIKE ENGLAND ADMISSIBILITY OF THE EVIDENCE I S BASED ON RELEVANCY AS HELD BY THE HONBLE SUPREME COURT IN POORAMAL VS. DIT 97 ITR 50 5 (SC). 4. NOTWITHSTANDING ANYTHING WITH THE AFORESAID LE GAL POSITION, THE QUESTION THAT IS TO BE ADJUDICATED IS WHETHER THE DISCREPANCY IN THE STOCK OF PIG IRON, SCRAP AND CASH CAN BE ASSESSED IN THE HANDS OF THE ASSESSEE FIRM, WHEN UN DISPUTEDLY IT HAS BEEN TAKEN-OVER FROM 01.09.2008 BY A PRIVATE LIMITED COMPANY. ADMITTEDL Y, WHEN THE SURVEY WAS CONDUCTED ON 29.09.2008, THE ASSESSEE FIRMS BUSINESS INCLUDING THE STOCK IN TRADE HAS BEEN TAKEN-OVER BY THE COMPANY AND IF ANY DISCREPANCY IS FOUND WHEN PH YSICAL VERIFICATION IS DONE ON 29.09.2008 IT SHOULD HAVE BEEN ANSWERED BY THE COMP ANY WHICH IS AN ARTIFICIAL JURISTIC PERSON AND IS ASSESSED AS A SEPARATE ASSESSEE. WHE N THE DEPARTMENT WAS AWARE OF THE TAKE- OVER WHEN THE SURVEY HAS HAPPENED, WE DO NOT UNDERS TAND WHY THE COMPANY WAS NOT PROCEEDED AGAINST. WE NOTE THAT THE ENTIRE ADDITIO N HAS BEEN BASED ON THE STATEMENT GIVEN BY THE ONE OF THE PARTNER OF THE FIRM WHICH HAS BEE N TAKEN ON OATH. THERE ARE TWO DEFICIENCIES/FLAW FOR THIS. FIRSTLY, THE PARTNER I S NOT THERE IN THE EYES OF LAW, WHEN THE FIRM IS NOT EXISTING . SECONDLY, THE SURVEY TEAM DOES NOT HAVE POWER TO RECORD STATEMENT ON OATH. THE HONBLE SUPREME COURT IN CIT VS. S. KADER KHAN & SON (2013) 352 ITR 480 (SC) HAS HELD THAT DURING SURVEY THE STATEMENT CAN NOT BE TAKEN ON OATH AND, THEREFORE, THERE IS NO EVIDENTIARY VALUE GIVEN ON THE RECORDED STATE MENT ON OATH DURING SURVEY AND ADDITIONS 4 ITA NO.857/KOL/2015 MANOJ METAL UDYOG., AY, 2009-10 CANNOT BE MADE SOLELY ON THE BASIS OF STATEMENT REC ORDED UNDER OATH. WE FIND THAT THE SOLE BASIS OF ADDITION IS THE STATEMENT RECORDED UNDER O ATH OF ONE OF THE PARTNERS OF THE ASSESSEE FIRM WHICH DID NOT EXIST ON THE DATE OF SURVEY ON 2 9.09.2008 CANNOT BE THE BASIS FOR MAKING THE ADDITION. THEREFORE, WE FIND FORCE IN THE GROU NDS RAISED BY THE ASSESSEE AND WE ALLOW THE APPEAL OF THE ASSESSEE. BESIDES, WE ALSO OBSER VE THAT AS PER HONBLE SUPREME COURTS DECISION IN ITO VS. CH. ATCHAIAH (SUPRA) INCOME SH OULD BE TAXED IN THE HANDS OF THE RIGHT ASSESSEE, RIGHT YEAR AND IT SHOULD BE THE RIGHT INC OME AND NOT ON THE WRONG PERSON. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18TH OC TOBER, 2017 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 18TH OCTOBER, 2017 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. MANOJ METAL UDYOG, 138, B. R. B . BASU ROAD, 1 ST FLOOR, KOLKATA-700 001. 2 RESPONDENT ITO, WARD-35(4), KOLKATA. 3. THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR. PVT. SECRETARY