CHANCHAL KUMAR SAMANTA, Purba Medinipur V. ASST. CIT, CIR.-27, Purba Medinipur

ITA 910/KOL/2017

• Counselvise Citation: [2023] 102 COUNSELVISE.COM (IT) 0758 (ITAT-KOLKATA)
• Duration Of Justice: 6 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 13-09-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 01-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: WAY OF ADDITIONAL GROUNDS OF APPEAL
• Keywords: Unexplained investment; Set aside
• Section: 143(3); 142(1); 133A; 250; 143(2); 139(1)

Judgement Text

| आयकर अपीलीय अिधकरण ᭠यायपीठ, कोलकाता | IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, KOLKATA BEFORE DR. MANISH BORAD, HON’BLE ACCOUNTANT MEMBER & SHRI SANJAY GARG, HON’BLE JUDICIAL MEMBER I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta Stall No. C-3, Mohana Marketing Complex Haldia Township Haldia - 721607 [PAN : ATEPS7626R] Vs Asst. Commissioner of Income Tax, Circle – 27, Haldia अपीलाथᱮ/ (Appellant) ᮧ᭜ यथᱮ/ (Respondent) Assessee by : Shri S. Jhajharia, A.R. Revenue by : Shri P.P. Barman, Addl. CIT, Sr. D/R सुनवाई कᳱ तारीख/Date of Hearing : 14/09/2023 घोषणा कᳱ तारीख /Date of Pronouncement: 16/10/2023 आदेश/O R D E R PER DR. MANISH BORAD, ACCOUNTANT MEMBER : The above captioned appeal is directed at the instance of the revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 7, Kolkata, (hereinafter the “ld. CIT(A)”) dt. 13/02/2017, passed u/s 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year 2013-14. 2. The assessee has raised the following grounds of appeal:- “1. For that on the facts and in the circumstances of the case and in law, the Id. CIT(A) was unjustified in upholding the addition of Rs. 60 , 86,100/- made by the Ld. AO on account of alleged undisclosed stock of jewellery. 2. For that on the facts and in the circumstances of the case and in law, the Id. CIT(A) as well as the Assessing Officer failed to correctly appreciate the explanations furnished by the assessee with regard to the discrepancy/difference in the quantities of gold found by the survey team and the stock as per records and in that view of the matter both the CIT(A) as well as the AO were unjustified in assessing the aforesaid alleged difference of Rs.60,86,100/- by way of undisclosed stock. 2 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta For that on the facts and in the circumstances of the case, the AO having not found any defects in the stock records regularly maintained and quantitative details certified by the auditor and also without rejecting the books of accounts by invoking Section 145(3), acted in excess of jurisdiction by alleging that the stock records were not correctly maintained and therefore the addition of Rs.60,86,100/- on account of alleged undisclosed stock was both factually as well as legally unjustified. For that on the facts and in the circumstances of the case and in law, the Id. AO be therefore directed to delete the impugned addition of Rs.60,86,100/- in full. For that the appellant reserves the right to add to, alter or amplify the above grounds of appeal. 3. The assessee has raised the following additional grounds of appeal:- “That on the facts and on the circumstances, the appellant was not served with an appropriate order for transfer of jurisdiction either from - a) ITO Ward - 1, Haldia to ITO, Ward - 27(1), Haldia and also b) to ACIT, Circle - 27, Haldia and accordingly, it is submitted that the assessment framed under section 143(3) of the Act, is bad in law, illegal and void abinitio and the entire assessment is liable to be quashed / cancelled / set aside That on the facts and on the circumstances, no notices under section 143(2) was served on the appellant either by the ITO, Ward - 27(1), Haldia or by the ACIT, Circle - 27, Haldia (who ultimately framed the assessment) and accordingly, it is submitted that the assessment framed under section 143(3) of the Act, is bad in law, illegal and void abinitio and the entire assessment is liable to be quashed / cancelled / set aside Without prejudice to ground No. 2, above, the ITO Ward - 1, Haldia before issuing the notice under section 143(2), was fully aware that he never had the jurisdiction to assesses the appellant and accordingly, the notice issued by the ITO, under section 143(2) of the Act, is bad in law, abinitio void and the entire assessment is to be quashed / cancelled / set as Without prejudice to Ground Nos. 1 and 2 above, that on the facts and on the circumstances of the case, the AO had relied entirely on the findings of an impugned survey party without appreciating the fact that the survey was conducted on 13 th . February, 2013 whereas the previous year ended was 31 st March, 2013, relevant to assessment year 2013-14 and accordingly it is prayed that no cognizance could be made on the observations of the survey parly as such survey took place 45 days prior to the end of the previous year. 3 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta Without prejudice to Ground Nos. 1 and 2 above, that on the facts and on the circumstances of the case, the AO had failed to appreciate the fact that since the return of Income was filed, even after the survey, under the specific provisions of section 44AF of the Act, the assessee was never duty bound to maintain any separate books of accounts or stock register and also the feet that no additions could be made arbitrarily and mechanically based on certain impugned stock found by the survey party, is bad in law, abinitio void and illegal and the addition of Rs. 60,86,100/- may kindly be deleted. That the appellant craves leave to alter modify or amend the above grounds at the time or any time before the Appeal is heard.” 4. Brief facts of the case are that the assessee is an individual running business of retail trading in jewellery in the name of sole proprietorship concern M/s. Samanta Jewellers. Survey u/s 133A of the Act was carried out on 13/02/2013, wherein certain discrepancies in stock were found. Thereafter, the assessee e-filed the return for Assessment Year 2013-14 on 20/03/2014 declaring total income of Rs. 30,48,200/- which interalia included Rs.25,00,000/- offered to tax on account of discrepancies found in the stock during the survey proceedings. Case selected for scrutiny through CASS followed by serving of notice u/s 143(2) and 142(1) of the Act. Various details as called for were filed. The ld. Assessing Officer mainly examined the issue of difference in stock found physically vis-à-vis the stock maintained in the books. As per the ld. Assessing Officer, gold stock as per physical inventory was found at 3731.380 gms, whereas the stock as per books was 806.722 gms. Thus, the excess gold stock worth of 2924.658 gms was calculated. As regards the silver stock, physical quantity found was 10,000.000 gms but in the books it was 9191.190 gms. Thus, the excess stock of silver was 808.91 gms. The ld. Assessing Officer applying the rate of gold jewellery @Rs.2920/- per gram and 4 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta silver @ Rs.57/- per gram, computed the excess stock value at Rs.85,86,102/- [excess gold stock of Rs.85,40,000/- (+) excess silver stock of Rs.46,102/-]. The assessee was asked to explain the alleged difference. It was stated by the assessee that his two sons, namely, Apratim Samanta & Supratim Samanta are also carrying on the business of trading in jewelers and the stock held by his sons is also part of the total stock of gold jewellery and silver items found at the time of survey. However, since the assessee did not give any detail of stock held by his sons during the course of survey, the ld. Assessing Officer disregarded this contention mainly on the ground that both the sons were not income tax assessees at the time of survey and the returns filed by the assessee company is a mere afterthought. However, the ld. Assessing Officer gave benefit of income offered to tax by the assessee towards discrepancy found in the stock amounting to Rs.25,00,000/- and completed the assessment making addition of unaccounted stock at Rs. 60,86,102/-. Income assessed at Rs.91,34,300/-. 4.1. Aggrieved the assessee preferred appeal before the ld. CIT(A) and reiterated the submissions as filed before the Assessing Officer but failed to succeed. 5. Aggrieved, now the assessee is in appeal before this Tribunal raising additional grounds on the legality of the assessment proceedings contending them to be bad in law as the notice u/s 143(2) of the Act was not issued by the Assessing Officer having jurisdiction over the assessee. 5 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta 6. As far as the merits are concerned, ld. Counsel for the assessee made two fold contentions. Firstly, that the lower authorities ought to have taken into consideration the stock of goods owned by his two sons engaged in trading business of jewellery and if the same had been considered then the impugned addition would not have been made. Second fold of the contention is that, only the profit element forming part of the unaccounted investment in the stock deserves to be added in the hands of the assessee and not the value of entire excess stock. The ld. Counsel for the assessee also took us through various details filed in the paper book containing 21 pages which also includes the income tax return and financial statement of the business carried out by two sons of the assessee. Reference was also made to various judgments in support of the legal grounds as well as merits of the case. 7. On the other hand, the ld. D/R referring to the written submission filed on 06/09/2023, mainly argued on the legal issues stating that the Assessing Officer having the PAN jurisdiction has issued notice to the assessee u/s 143(2) of the Act and assessment has been completed by the Assessing Officer having valid jurisdiction as per the income criteria. He further submitted that the assessee has not challenged the validity of notice u/s 143(2) of the Act within one month from the date of service of the notice and, therefore, assessee has no right to challenge the jurisdiction of the Assessing Officer at this stage. It was also submitted as per Section 127(3) of the Act that since both the Assessing Officers were located in the same city, which in this case falling under the jurisdiction of same Commissioner of Income Tax, 6 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta there is no requirement of any opportunity to be given to assessee before transferring the case from one Assessing Officer to another. 8. We have heard rival contentions and perused the material placed before us as well as carefully gone through the decisions and judgments referred both on the legal issues as well as on the merits of the case. 9. So far as the legal issues raised in the additional Ground Nos. 1 to 4 are concerned, the assessee has stated that a valid notice u/s 143(2) of the Act was not served upon the assessee which thus renders the assessment proceeding bad in law void ab initio. We observe that the ITO, Ward-27(1), Haldia validly served notice u/s 143(2) of the Act dt. 10/09/2014 upon the assessee before 30/09/2014. Now, the contention of the assessee is that as per the income declared by the assessee, the jurisdiction to assess vests with ACIT, Haldia and, therefore, the jurisdiction for issuing notice u/s 143(2) of the Act ought to have been served by the ACIT, failing which the proceedings are bad in law. We, however, fail to find any merit in this contention of the assessee because the ITO having PAN jurisdiction over the assessee issued the notice u/s 143(2) of the Act after receiving information through CASS and thereafter since the income of the assessee was more than Rs.15,00,000/- , the case was transferred to ITO, Ward-27(1), Haldia. Further, it also remains uncontroverted fact that the assessee has not disputed the validity of jurisdiction during the course of assessment proceedings and more specifically not within 30 days of the issuing of the notice u/s 143(2) of the Act. Recently, Hon’ble Apex Court in the case of Kalinga Institute of Industrial Technology v. Dy. CIT [2023] 151 taxamann.com 433 7 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta held that if the assessee had participated pursuant to the notice issued u/s 142(1) of the Act, and had not questioned the jurisdiction of the Assessing Officer then as provided u/s 124(3)(a) of the Act, the said provision precludes the assessee from questioning the jurisdiction of the Assessing Officer if he does not do so within 30 days of receipt of notice u/s 142(1) of the Act. 9.1. On perusal of provisions of Section 124(3)(a) of the Act, we find that the same provides that no person shall be entitled to call in question the jurisdiction of the Assessing Officer where he has made a return u/s 115WD (1) or Section 139(1) of the Act after an expiry of one month from the date on which he was served with the notice u/s 142(1) of the Act or 115WE(1) or Section 143(2) of the Act or after completion of the assessment whichever is earlier. Thus, examining the facts of the instant case, in the light of the ratio laid down by the Hon’ble Apex Court in the decision cited (supra) and on going through the provisions of Section 124(3)(a) of the Act, we find that in the instant case valid notice u/s 143(2) of the Act was issued and served by the Assessing Officer having PAN jurisdiction over the assessee and the assessee has not challenged the validity of such notice within one month of its issuance and thus, at a later stage, he cannot challenge the validity of the jurisdiction. Even otherwise, when the Assessing Officer having PAN jurisdiction has issued a notice u/s 143(2) of the Act, which he ought to have issued in case of CASS wherein through online system the Assessing Officer having PAN jurisdiction and PAN is selected for scrutiny, ld. Assessing Officer receives the information on the income 8 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta tax portal and he is duty bound to issue notice u/s 143(2) of the Act. Therefore, in the instant case, since at the time of issuance of notice u/s 143(2) of the Act, the ITO issuing notice was having valid PAN jurisdiction and also the assessee failed to challenge the jurisdiction within one month of issuance of notice all the legal issues raised in the additional grounds are hereby dismissed. 10. Now, coming to the merits of the case, we notice that survey u/s 133A of the Act was conducted on 13/02/2013 which means that the time limit for filing the ITR for Assessment Year 2013-14 did not expire. The discrepancy in dispute before us is only with regard to the unaccounted stock amounting to Rs.60,86,102/-. The assessee had already offered Rs.25,00,000/- towards discrepancy in stock. As far as the quantitative details of discrepancy in stock is concerned, we notice that 3731.380 gms of gold stock of jewellery was found at the time of survey. The ld. Assessing Officer was satisfied with the explanation of 806.722 gms and the remaining was 2924.658 gms. The assessee contended that his two sons also carry on the business of trading in jewellery and as on the date of survey, gold stock of 1488.960 gms was held as per the books of Apratim Samanta and another 1614.892 gms was held by Supratim Samanta. We also notice that during the course of survey, when the assessee was asked to give replies to various questions, such statement was recorded on 26/02/2013. In reply to question no. 6, while stating about the occupation of his family members he stated that his two sons, namely, Apratim Samanta and Supratim Samanta are carrying on the business of trading of gold and 9 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta silver jewellery. Further during the course of assessment proceedings, assessee again submitted that at the time of physical verification, the total gold stock including the stock owned by his two sons also. He also submitted that the income tax return for Assessment Year 2011-12, 2012-13 and 2013-14 has been filed by both his sons. Financial statements were submitted. However, ld. Assessing Officer disregarded these documents mainly on the ground that they were not assessed to tax when the survey was carried out. We fail to find any justification in this view of the Assessing Officer because when the survey was conducted on 13/02/2013, the time limit to file ITR for Assessment Year 2013-14 did not expire and, therefore, the returns filed by the two sons of the assessee being valid returns ought to have been considered by the Assessing Officer before making addition in the hands of the assessee. If the ld. Assessing Officer has considered the financial statements of the relevant year under appeal of Apratim Samanta and Supratim Samanta, then there would have been no discrepancy in the stock and the physical stock would have tallied with the stock in the books. Therefore, if we consider the stock of gold jewellery held by Apratim Samanta and Supratim Samanta i.e., on the date of survey, there would be no discrepancy in the stock. But, still the assessee had offered Rs.25,00,000/- as unaccounted investment in the stock. Thus, in our considered view, no more addition was called for over and above the unaccounted income surrendered by the assessee. We thus, set aside the finding of the ld. CIT(A) and delete the addition of Rs.60,86,102/- and allow all the grounds raised on the merits of the case by way of Ground 10 I.T.A. No. 910/Kol/2017 Assessment Year: 2013-14 Chanchal Kumar Samanta Nos. 1 to 4 of the main grounds of appeal. As far as the alternate Grounds raised by the assessee by way of additional grounds of appeal, the same needs no adjudication since we have already deleted the impugned addition. 11. In the result, appeal of the assessee is partly allowed as per terms indicated hereinabove. Order pronounced in the Court on 16 th October, 2023 at Kolkata. Sd/- Sd/- (SANJAY GARG) (DR. MANISH BORAD) JUDICIAL MEMBER ACCOUNTANT MEMBER Kolkata, Dated 16/10/2023 *SC SrPs आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy of the Order forwarded to : 1. अपीलाथᱮ / The Assessee 2. ᮧ᭜यथᱮ / The Respondent 3. संबंिधत आयकर आयुᲦ / Concerned Pr. CIT 4. आयकर आयुᲦ)अपील (/ The CIT(A)- 5. िवभागीय ᮧितिनिध ,आयकर अपीलीय अिधकरण, कोलकाता/DR,ITAT, Kolkata, 6. गाडᭅ फाई/ Guard file. आदेशानुसार/ BY ORDER TRUE COPY Assistant Registrar आयकर अपीलीय अिधकरण ITAT, Kolkata