ACIT, New Delhi V. M/s. K.P. Sugandh Ltd., Bilaspur

ITA 903/DEL/2014

• Counselvise Citation: 90320114 RSA 2014
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC 1
• Next Hearing Date: 06-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 17-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR ANJULA JAIN
• Assessee Lawyers: SANTOSH AGGARWAL; SSH ML JAIN
• Keywords: Principle of natural justice
• Section: 133A; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH SMC-1 NEW DELHI) BEFORE SHRI I.C. SUDHIR: HONBLE JUDICIAL MEMBER ITA NO. 903/DEL/2014 ASSESSMENT YEAR: 2009-10 ASSISTANT CIT, VS. K.P. SUGANDH LTD., CENTRAL CIRCLE-8, C/O SHRI R.S. MEHTA, OPP. NEW DELHI. ORIENTAL BANK OF COMM., BILASPUR. (PAN: AACCK9524A) (APPELLANT) (RESPONDENT) CROSS OBJECTION NO. 225/DEL/2015 ( IN ITA NO. 903/DEL/2014 ) ASSESSMENT YEAR: 2009-10 K.P. SUGANDH LTD., VS. ASSISTANT CIT, C/O SHRI R.S. MEHTA, OPP. CENTRAL CIRCLE-8, ORIENTAL BANK OF COMM., NEW DELHI. BILASPUR. (PAN: AACCK9524A) (APPELLANT) (RESPONDENT) ASSESSEE BY: S/SH. ML JAIN & SANTOSH AGGARWAL, ADV. DEPARTMENT BY: DR. ANJULA JAIN, SR. DR DATE OF HEARING : 06.08.2015 DATE OF PRONOUNCEMENT: 02 :11.2015 ORDER THE REVENUE HAS QUESTIONED FIRST APPELLATE ORDER O N THE FOLLOWING GROUNDS: I) THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS OF THE CASE IN DELETING THE ADDITION OF RS.13,76,676 MADE BY THE A.O. 2 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY WITHOUT EXAMINING AND ADJUDICATING UPON THE MERITS OF THE CASE. II) THAT THE LEARNED CIT(APPEALS) ERRED IN LAW AND ON F ACTS OF THE CASE IN DELETING THE ADDITION OF RS.3,60,132 MADE B Y THE A.O. ON ACCOUNT OF SHORT STOCK FOUND DURING THE COURSE O F SURVEY WITHOUT EXAMINING AND ADJUDICATING UPON THE MERITS OF THE CASE. III) WHETHER CIT(A) HAS ERRED IN LAW AND FACTS AS WELL I N NOT INVOKING THE PROVISIONS OF SEC. 250(4) OF THE INCOM E-TAX ACT, 1961 WHICH EMPOWERS THE LEARNED CIT(APPEALS) TO CON DUCT FURTHER ENQUIRY ON THE ISSUES INVOLVED IN THIS CASE . IV) (A) THE ORDER OF THE CIT(A) IS ERRONEOUS AND NOT TE NABLE IN LAW AND ON FACTS. (B) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY/ALL OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURS E OF THE HEARING OF THE APPEAL. 2. HEARD AND CONSIDERED THE ARGUMENTS ADVANCED BY T HE PARTIES IN VIEW OF ORDERS OF THE AUTHORITIES BELOW, MATERIAL AVAILA BLE ON RECORD AND THE DECISIONS RELIED UPON. 3. THE ASSESSEE COMPANY IS ENGAGED IN THE MANUFACTU RING OF GUDKA. THE ASSESSEE WAS SUBJECTED TO SURVEY OPERATION UNDE R SEC. 133A OF THE INCOME-TAX ACT, 1961 AT ITS BUSINESS PREMISES. DURI NG THE COURSE OF SURVEY, THE SURVEY TEAM VERIFIED THE STOCK OF THE ASSESSEE AND FOUND DISCREPANCY. ON 3 THE BASIS OF THE SAME, THE ASSESSING OFFICER WORKED OUT THE EXCESS STOCK AT RS.13,76,673 AND SHORTAGE OF STOCK OF RS.3,60,132. THE SURVEY TEAM HAD ALSO RECORDED THE STATEMENT OF SHRI PRAMOD JAIN, DI RECTOR OF THE ASSESSEE COMPANY AND ON THE QUERY RAISED REGARDING DISCREPAN CY FOUND IN THE STOCK. HE HAD SURRENDERED AN AMOUNT OF RS.13,76,676 AS HIS UNDISCLOSED INCOME FOR THE FINANCIAL YEAR 2008-09 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ON 29.4.2008. HE ALSO UNDERTOOK TO PAY TAXES ON THE SURRENDERED AMOUNT WITHIN 2 3 DAYS. THE ASSESSEE , HOWEVER, DID NOT DISCLOSE THE SURRENDERED AMOUNT IN ITS RETURN OF IN COME FILED IN RESPONSE TO THE NOTICE ISSUED BY THE ASSESSING OFFICER TO HIM. THE ASSESSING OFFICER ALSO NOTED THAT NO EXPLANATION WAS FILED IN RESPECT OF SHORT STOCK OF RS.3,60,132 AND THUS THE ASSESSING OFFICER TREATED BOTH THE AMOUNT OF RS.13,76,676 AND RS.3,60,132 AS UNDISCLOSED INCOME OF THE ASSESSEE AND ADDED THE SAME IN THE TOTAL INCOME. BEING SATISFIED WITH THE EXPLANATION OF THE ASSESSEE, THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITIONS IN QUESTION WHICH HAS BEEN IMPUGNED BY THE REVENUE IN THE PRESE NT APPEAL. 4. IN SUPPORT OF THE GROUND, THE LEARNED SENIOR DR HAS BASICALLY PLACED RELIANCE ON THE ASSESSMENT ORDER. SHE SUBMITTED THA T SURRENDER WAS MADE BY 4 THE ASSESSEE DURING THE COURSE OF SURVEY VOLUNTARIL Y AND WITHOUT APPRECIATING THIS MATERIAL ASPECT, THE LEARNED CIT(APPEALS) HAS DELETED THE ADDITIONS. 5. THE LEARNED AR ON THE OTHER HAND PLACED RELIANCE ON THE FIRST APPELLATE ORDER. HE REITERATED HIS SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. HE ALSO REFERRED THE DECISION RELIED UPON BY THE ASSESSEE BEFORE THE LEARNED CIT(APPEALS). 6. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW, I FIND THAT AFTER MAKING SURRENDER OF RS.13,76,676 IN HIS STATE MENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS ON 29.4.2008, THE ASS ESSEE VIDE LETTER DATED 30.4.2008 HAD WITHDRAWN THE SURRENDERED AMOUNT WITH COPY OF THE SAID LETTER TO DIRECTOR GENERAL OF INVESTIGATION STATING THEREI N THAT DUE TO MENTAL PRESSURE AND DURESS, MR. PRAMOD JAIN, THE DIRECTOR OF THE CO. HAD SIGNED TO PAY TAXES ON SURRENDERED AMOUNT. AGAIN, VIDE LETTER DATED 18.7.2008 IN RESPONSE TO THE NOTICE ISSUED BY THE DIT(INV.), THE ASSESSEE REITERATED THE EARLIER STAND TAKEN BY IT VIDE LETTER DATED 30.6.20 08, THE ASSESSEE HAD MADE A REQUEST TO THE DDIT TO PROVIDE IT THE COPIES OF SEI ZED DOCUMENT AS WELL AS IMPOUNDED DOCUMENT WITH THIS FURTHER SUBMISSION THA T NO DISCREPANCY IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE WERE FO UND AND THAT ELABORATE EXPLANATION IN RESPECT OF DIFFERENCE OF 4,805 KGS. OF SUPARI WAS SUBMITTED. IT 5 WAS CONTENDED THAT THE ASSESSEE HAD MADE A REQUEST TO THE ASSESSING OFFICER FOR PROVIDING THE STATEMENT RECORDED ON OATH AT THE TIME OF SURVEY AND THE NOTING OF THE DETAILS OF THE STOCK FOUND AT THE FAC TORY PREMISES, WORK IN PROGRESS INSIDE AND OUTSIDE THE PLANT BUT INSPITE O F DEPOSITING OF REQUISITE AMOUNT WITH PRO, CR BUILDING, NEW DELHI, THE SAME W AS NOT PROVIDED TO THE ASSESSEE. IT WAS SUBMITTED THAT THE DIRECTOR OF THE ASSESSEE COMPANY WAS UNDER TENSION ON THE DATE OF SURVEY AND HIS STATEME NT WAS RECORDED IN DURESS AND WHEN HE WAS TOLD THAT THERE IS A DIFFERENCE IN STOCK THEN TO BUY PEACE WITH THE DEPARTMENT, HE SURRENDERED THE ABOVE STATE D AMOUNT. REGARDING THE VERIFICATION OF STOCK, ASSESSEE SUBMITTED THAT THE STOCK NOTED BY THE OFFICER WAS INCORRECT AND QUANTITIES WERE INFLATED/DEFLATED OF THE CERTAIN ITEMS. THE LEARNED CIT(APPEALS) CALLED FOR THE REMAND REPORT F ROM THE ASSESSING OFFICER ON THE SUBMISSIONS AND DETAILS OF STOCK FIL ED BY THE ASSESSEE BEFORE HIM. HE ALSO ASKED THE ASSESSING OFFICER FOR HIS EX AMINATION AND COMMENTS ON THE SUBMISSION FILED BY THE ASSESSEE ALONG WITH THE PAPER BOOK. THE ASSESSING OFFICER SUBMITTED HIS REMAND REPORT THERE AFTER THE ASSESSEE WAS ASKED TO FURNISH REJOINDER THERETO, WHICH WAS COMPL IED WITH. DISCUSSING ALL THESE ASPECTS IN DETAILS, THE LEARNED CIT(APPEALS) HAS COME TO THE FOLLOWING FINDING: 6 9.8. EVEN ON MERIT THE ADDITION IS NOT SUSTAINABLE FOR THE REASONS. FIRSTLY, IT IS NOT MADE KNOWN BY THE ASSES SING OFFICER AS TO HOW STOCK AS PER BOOKS HAS BEEN WORKED OUT, W HETHER APPELLANT HAD CLOSED THE ACCOUNTS AND WORKED OUT TH E STOCK OR SIMPLY G.P. RATE WAS APPLIED TO FIND OUT THE STOCK ON A PARTICULAR DAY. IN ABSENCE OF EXPIRATION OF PROCEDU RE ADOPTED FOR WORKING OUT THE STOCK AS PER BOOKS, THE STOCK S O MENTIONED BY THE A.O. BEING AS PER BOOKS FOR COMPARING WITH P HYSICAL STOCK CANNOT BE TREATED AS CORRECT, THEREFORE, DIFF ERENCE WORKED OUT ON THAT BASIS CANNOT BE ACCEPTED AS CORRECT. SE CONDLY, NEGATIVE DIFFERENCE IN STOCK CANNOT BE TREATED AS U NDISCLOSED INCOME LIKE POSITIVE DIFFERENCE IN STOCK AS HELD IN ITO VS. JEWELS EMPORIUM - 48 ITD 164 (INDORE) RELIED BY TH E APPELLANT. SECTION 69 AND SECTION 69B ONLY SUPPORT THE PROPOSITION THAT IF ACTUAL EXPENDITURE OR INVESTMEN T INCURRED BY THE APPELLANT IS ORE THAN THE EXPENDITURE OR INVEST MENT RECORDED IN THE BOOKS THEN THE SURPLUS EXPENDITURE OR INVEST MENT WILL BE TREATED AS APPELLANTS INCOME IN ABSENCE OF ANY SAT ISFACTORY EXPLANATION. THEY DO NOT LAY DOWN THE PROPOSITION T HAT IF ACTUAL INVESTMENT OR EXPENDITURE IS LESS THEN WHAT IS RECO RDED IN THE BOOKS THEN STILL THE APPELLANT HAS TO EXPLAIN THE D IFFERENCE WITHIN THE MEANING OF THOSE SECTIONS. AS A MATTER O F FACT THESE TWO SECTIONS DO NOT APPLY TO THIS SITUATION. THEREF ORE, ASSESSING OFFICER WAS INCORRECT IN INVOKING THESE SECTIONS FO R MAKING AN ADDITION ON NEGATIVE DIFFERENCE IN STOCK. HONBLE I TAT DELHI IN ACIT VS. SMT. USHA RANI TALLA (2010) 6 ITR (TRIB .) 37 (DELHI) HAS ALSO HELD THAT IF STATEMENT IS RECORDED IN SURVEY IS 7 RETRACTED ON THE GROUND THAT SUCH STATEMENT WAS MAD E UNDER COERCION AND THERE IS NO MATERIAL EVIDENCE TO SUSTA IN THE ADDITION THEN ADDITION MADE WAS NOT JUSTIFIED. IN T HE PRESENT CASE ONCE MATERIAL COLLECTED DURING SURVEY IS NOT C ONFRONTED TO THE ASSESSEE, IT CAN BE DEEMED AS NOT EXISTING AND THEREFORE, NO ADDITION CAN BE MADE ON THE BASIS OF STATEMENT ALON E WHICH IS RETRACTED. THIRDLY, THE ASSESSING OFFICER HAS NOT P OINTED OUT EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REP ORT WHAT WAS THE PROCEDURE ADOPTED FOR PHYSICAL VERIFYING THE ST OCK. IN VIEW OF THIS NO ADDITION SO MADE BY THE ASSESSING OFFICE R CAN BE SUSTAINED. THIS VIEW IS ALSO SUPPORTED BY HON'BLE D ELHI HIGH COURT IN CIT VS. BALAJI WIRE PVT. LTD. (2007) 164 T AXMANN 559 (DELHI). IN VIEW OF THE ABOVE, ADDITION OF RS.13,76 ,676 AND OF RS.3,60,132 MADE BY THE ASSESSING OFFICER IS DELETE D. 7. I AGREE WITH THE VIEW OF THE LEARNED CIT(APPEALS ) THAT ONCE THE SURRENDER DURING SURVEY WAS RETRACTED IMMEDIATELY, THEN IT WAS INCUMBENT UPON THE ASSESSING OFFICER TO PROVIDE TO THE ASSESS EE THE INVENTORY SHOWING THE ALLEGED DIFFERENCE IN STOCK AND IF NO SUCH INVE NTORY IS PROVIDED TO THE ASSESSEE THEN IT IS NOT ONLY A VIOLATION OR PRINCIP LES OF NATURAL JUSTICE BUT ALSO CASTS DOUBT ON THE VERACITY OF STOCK TAKING ITSELF. THERE CANNOT BE AN AUTOMATIC ADDITION EITHER ON T HE BASIS OF STATEMEN T RECORDED DURING SURVEY OR ON THE BASIS OF STOCK INVENTORY WHOSE COPY WAS N EVER PROVIDED TO THE ASSESSEE. IN THE REMAND REPORT, THE ASSESSING OFFIC ER HAS NOT COUNTERED THE ALLEGATIONS OF THE ASSESSEE THAT COPY OF THE INVENT ORY WAS NOT PROVIDED TO 8 HIM. I THUS CONCUR WITH THE FINDING OF THE LEARNED CIT(APPEALS) THAT ADDITIONS HAVE BEEN MADE WITHOUT FOLLOWING THE DUE PROCESS OF LAW AND PRINCIPLES OF NATURAL JUSTICE. THE ASSESSING OFFICE R EITHER IN THE ASSESSMENT ORDER OR IN THE REMAND REPORT, HAS NOT REVEALED THE PROCEDURE ADOPTED FOR PHYSICALLY VERIFYING THE STOCK. KEEPING THESE MATER IAL ASPECTS OF THE CASE, I AM OF THE VIEW THAT THE LEARNED CIT(APPEALS) HAS RI GHTLY DELETED THE ADDITION IN QUESTION. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE GROUND NOS. 1 TO 3 ARE THUS REJECTED. 8. IN RESULT, THE APPEAL IS DISMISSED. 9. C.O. NO. 224/DEL/2015 : DURING THE COURSE OF HEARING, THE ASSESSEE WHO HAS PREFERRED THIS CROSS OBJECTION ON THE ISSUE THAT LEARNED CIT(APPEALS) SHOULD HAVE ANNULLED THE ASSESSMENT OR DER BECAUSE THE PROCEDURE LAID DOWN UNDER SEC. 153C OF THE INCOME-T AX ACT, 1961 RELATING TO THE RECORDING OF THE SATISFACTION IN THE CASE OF SE ARCHED ASSESSEE AS WELL AS IN THE CASE OF PRESENT ASSESSEE WAS NOT FOLLOWED BY TH E ASSESSING OFFICER, HAS NOT BEEN PRESSED. THE CROSS OBJECTION IS ACCORDINGL Y REJECTED AS NOT PRESSED. 10. IN SUMMARY, BOTH THE APPEAL AND CROSS OBJECTION ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 02.11.2015 SD/- ( I.C. SUD HIR ) JUDICIAL MEMBER DATED: 02 /11/2015 MOHAN LAL 9 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR DATE DRAFT DICTATED ON COMPUTER 02.11.2015 DRAFT PLACED BEFORE AUTHOR 02.11.2015 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. APPROVED DRAFT COMES TO THE SR.PS/PS 02 .11.201 5 KEPT FOR PRONOUNCEMENT ON 02.11.2015 FILE SENT TO THE BENCH CLERK 02.11.2015 DATE ON WHICH FILE GOES TO THE AR DATE ON WHICH FILE GOES TO THE HEAD CLERK. DATE OF DISPATCH OF ORDER.