SHRI PAWAN KUMAR JAIN, Ajmer V. DCIT, Ajmer

ITSSA 19/JPR/2011

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9478 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 22-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 07-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A K KHANDELWAL
• Assessee Lawyers: G C JAIN
• Keywords: Unexplained investment; Income from undisclosed sources; Document seized; Block assessment; Documents seized
• Section: 143(3); 133A; 246

Judgement Text

1 ITSSA 19-11 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH : JAIPUR. BEFORE SHRI B.R. JAIN AND SHRI KUL BHARAT ITSSA NO. 19/JP/2011 BLOCK PERIOD : 1990-91 TO1999-2000 & UPTO 09.08. 2000. SHRI PAWAN KUMAR JAIN, VS. THE DCIT, CENTRAL CIRC LE, P.R. SCRAP TRADERS, AJMER. 758/30, TIKAM GANJ, AJMER. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI G.C. JAIN RESPONDENT BY : SHRI A.K. KHANDELWAL DATE OF HEARING : 21.08.2013. DATE OF PRONOUNCEMENT : 22.08.2013. ORDER PER B.R. JAIN, A.M. THIS APPEAL BY ASSESSEE AGAINST THE ORDER DATED 2. 9.2011 OF LD. CIT (A) RAISES THE FOLLOWING GROUNDS :- 1. THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FACT S IN HOLDING THAT THE ASSESSMENT WAS NOT BARRED BY LIMITATION. 2. THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FACT S IN HOLDING THAT THE DIRECTION U/S 142(2A) WERE JUSTIFIED INSPITE OF THE FACT THAT THERE WAS NO COMPLEXITY REQUIRING SPECIAL AUDIT. 3(1). THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON F ACTS IN CONFIRMING THE ADDITION OF RS. 1073210/- MADE BY THE LEARNED D CIT IN RESPECT OF STOCK IN TRADE WITHOUT APPRECIATING THE FACTS. (2) THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS. 1073210/- MADE BY THE LEARNED D CIT IN RESPECT 2 OF STOCK IN TRADE INVENTORISED ON ESTIMATE BASIS WI THOUT ACTUAL WEIGHMENT. (3) THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS. 1073210/- MADE BY THE LEARNED D CIT IN RESPECT OF STOCK IN TRADE INVENTORISED ON ESTIMATE BASIS WI THOUT PHYSICAL WEIGHMENT DURING SURVEY U/S 133A AND NOT DURING SEA RCH U/S 132. (4) THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FAC TS IN CONFIRMING THE ADDITION OF RS. 1073210/- MADE BY THE LEARNED D CIT IN RESPECT OF STOCK IN TRADE INVENTORISED ON ESTIMATE BASIS WI THOUT PHYSICAL WEIGHMENT ON 14/8/2000 AFTER COMPLETION OF BLOCK AS SESSMENT PERIOD I.E. 09.08.2000. 4(1) THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FA CTS IN NOT ALLOWING THE SET OFF OF TRADING ADDITIONS OF RS. 176347/- MA DE U/S 143(3) IN ASSESSMENT YEAR 2000-01 AGAINST TANGIBLE ADDITIONS MADE IN BLOCK ASSESSMENT. (2) THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FAC TS IN NOT ALLOWING THE SET OFF OF ADDITION OF RS. 120000/- MADE IN RES PECT OF CASH DIFFERENCE U/S 143(3) IN ASSESSMENT YEAR 2000-01 A GAINST TANGIBLE ADDITIONS MADE IN BLOCK ASSESSMENT. 5. THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING THE LEVY OF INTEREST U/S 158BFA(1) FOR THE PERIOD U PTO WHICH THE COPY OF SEIZED RECORD WERE MADE AVAILABLE TO THE AP PELLANT. 6. THE LD. CIT (A) GROSSLY ERRED IN LAW AND ON FACT S IN CONFIRMING THE LEVY OF SURCHARGE THOUGH THE PERIOD OF BLOCK AS SESSMENT EXPIRED BEFORE THE AMENDMENT I.E. 01/06/2002. THE L EVY OF SURCHARGE DESERVES TO BE DELETED. 2. GROUND NOS. 1 & 2 HAVE NOT BEEN PRESSED. THE SAM E ARE DISMISSED AS NOT PRESSED. 3. IN GROUND NO. 3, THE ASSESSEE HAS ASSAILED THE A DDITION ON ACCOUNT OF EXCESS STOCK WORKED OUT WITHOUT MAKING ACTUAL PHYSICAL VERIFICAT ION OF THE STOCK FOUND AS A RESULT OF SURVEY, LATER CONVERTED INTO SEARCH BY THE AUTHORIZ ED OFFICER. 4. BRIEFLY THE FACTS ARE THAT THE ASSESSEE DERIVES INCOME FROM TRADING OF SCRAP IRON AND OTHER SOURCES. A SURVEY WAS CARRIED AT ASSESSE ES PREMISES ON 9.8.2000 WHICH WAS 3 LATER CONVERTED INTO SEARCH. DURING THE COURSE OF S URVEY INVENTORY OF STOCK WAS PREPARED WITHOUT MAKING PHYSICAL WEIGHMENT OF THE ITEMS OF I RON HELD IN STOCK. THE ASSESSEE HAD MAINTAINED STOCK REGISTER. ON THAT BASIS DIFFERENCE OF STOCK WAS WORKED OUT. 5. ANOTHER SEARCH ON 14.8.2000 WAS ALSO CARRIED OUT AT THE PREMISES OF THE ASSESSEE AND THEREAFTER A RESTRAINT ORDER UNDER SECTION 132( 1) WAS PLACED ON THE STOCK OF IRON SCRAP AS IT WAS NOT POSSIBLE/PRACTICABLE TO TAKE PHYSICAL POSSESSION OF SUCH STOCK OF IRON SCRAP AND OTHER TRADING GOODS. THE ASSESSING OFFICER AT INTERNAL PAGE 12 HAS DISCUSSED THE ISSUE AT LENGTH BY STATING THAT THE ASSESSEE WAS RE QUIRED TO EXPLAIN THE DIFFERENCE BETWEEN THE STOCK FOUND WEIGHING 259.2 MT VALUED AT RS. 26, 36,306/- AND THE BOOK STOCK OF 122 MT. THE ASSESSEE, HOWEVER, PROTESTED THAT THERE IS NO ACTUAL DIFFERENCE BETWEEN STOCK FOUND AND STOCK AVAILABLE AS PER BOOKS. THE DIFFER ENCE WORKED OUT BY THE INCOME TAX DEPARTMENT HAS ARISEN DUE TO THE INVENTORY TAKEN ON ESTIMATE BASIS. THE ASSESSING OFFICER DID NOT AGREE WITH THIS PLEA OF THE ASSESSE E AS THE APPELLANT HIMSELF DURING THE COURSE OF SURVEY ON 9.8.2000 HAD AGREED THAT THE IN VENTORY PREPARED IS BY TAKING RIGHT WEIGHT OF ITEMS AND HAS ALSO HIMSELF MADE A SURREND ER OF RS. 2,00,000/- AS HIS INVESTMENT IN UNACCOUNTED STOCK IN THE GODOWN. THE ASSESSING O FFICER, THEREFORE, AFTER CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE CASE AND CORRECTING THE DISCREPANCY IN THE TOTALING MISTAKES IN THE INVENTORY LIST, WORKED OUT THE CORRECT STOCK AT 241.200 MT AS AGAINST BOOK STOCK OF 133.879 MT WORKED OUT AS PER BOOKS PRODUCED BEFORE HIM. THE DIFFERENCE OF EXCESS STOCK WEIGHING 107.321 MT HAS BEEN TREATED AS UNEXPLAINED INVESTMENT AND BY VALUING THE SAME @ RS. 10000/- PE R MT, THE RESULTANT ADDITION IS THUS MADE AT RS. 10,73,210/-. 4 6. IN APPEAL BEFORE LD. CIT (A), HE HELD THAT NO AC TUAL WEIGHTMENT OF THE IRON SCRAP WAS DONE AS THE SAME WAS VOLUMINOUS AND COULD NOT H AVE BEEN PHYSICALLY POSSIBLE EVEN IN 5 DAYS AS HAS BEEN MENTIONED BY THE LD. A/R OF T HE APPELLANT BUT THE WEIGHMENT WAS MENTIONED BY THE SEARCH /SURVEY TEAM AS TOLD BY THE APPELLANT. HE ACCORDINGLY HELD THAT THE WEIGHMENT OF THE PHYSICAL INVENTORY OF IRON SCR AP SO TAKEN IS QUITE FAIR AND REASONABLE AND ACTUAL WEIGHT WAS AVOIDED BECAUSE TH AT COULD HAVE RESULTED INTO DISRUPTION/CLOSURE OF BUSINESS OF THE APPELLANT FOR AT LEAST 5/6 DAYS TILL THE TAKING OF WEIGHMENT IS OVER. HE ALSO MENTIONED THAT STOCK IN VENTORY HAS BEEN SIGNED BY THE APPELLANT HIMSELF. HE ACCORDINGLY CONFIRMED THE ADD ITION OF RS. 10,73,210/- MADE BY THE ASSESSING OFFICER AS UNACCOUNTED INCOME BEING UNEXP LAINED INVESTMENT IN STOCK. 7. THE LD. COUNSEL FOR THE ASSESSEE, DURING THE COU RSE OF ARGUMENT VEHEMENTLY ARGUED THAT UNLESS AND UNTIL THE STOCK IS PHYSICALL Y WEIGHED, THE DIFFERENCE COULD NOT HAVE BEEN ASCERTAINED. HE ALSO CONTENDED THAT NO ADDITIO N ON THE BASIS OF ESTIMATE COULD BE MADE IN SUCH ASSESSMENT IN AS MUCH AS THE FACT THAT THE INVENTORY OF THE STOCK-IN-TRADE WAS PREPARED ON ESTIMATE BASIS AS TOLD BY THE APPEL LANT CANNOT BE SUBSTITUTED FOR ACTUAL WEIGHMENT FOR ASCERTAINING THE ACTUAL DIFFERENCE IN THE STOCK AS PER THE BOOKS OF ACCOUNT FOUND AT THE TIME OF SURVEY UNDER SECTION 133A. IN REPLY TO QUESTION NO. 17 OF THE STATEMENT RECORDED OF SHRI PAWAN KUMAR JAIN UNDER S ECTION 132(4)(A), THE APPELLANT HAS CLEARLY STATED THAT NO ACTUAL WEIGHMENT WAS TAKEN A ND THE VALUE HAS ALSO BEEN TAKEN ON ESTIMATE BASIS. HE ALSO SUBMITTED THAT FOR CORRECT VALUATION WEIGHMENT IS NECESSARY. HE AGREED TO OFFER THE AMOUNT OF DIFFERENCE, IF ANY, A S HIS INCOME AFTER ACTUAL PHYSICAL WEIGHMENT IS DONE. IN SUPPORT OF HIS CONTENTION, RE LIANCE WAS PLACED ON THE FOLLOWING DECISIONS :- 5 CIT VS. VIKAS ELECTRONICS (INTERNATIONAL)(P) LTD. 166 TAXMAN 137. CIT VS. BALAJI WIRE P. LTD. (2008) 304 ITR 393 (DELHI) CIT VS. UTKAL ALLOYS LTD. (2009) 319 ITR 339 (ORISSA) 8. ON THE OTHER HAND, THE LD. D/R RELIED UPON THE O RDER OF THE LD. CIT (A). THE APPELLANT HAD ACCEPTED THE QUANTITY AND VALUATION T O BE CORRECT DURING THE SURVEY PROCEEDINGS. HAD HE OBJECTED TO THE CORRECTNESS THE REOF AND INSISTED UPON THE ACTUAL WEIGHMENT, THE SURVEY PARTY COULD HAVE RESORTED TO SUCH EXERCISE. IT WAS TOO LATE FOR THE APPELLANT TO OBJECT TO THE CORRECTNESS AFTER MAKING SUCH ADMISSION. THE LD. CIT (A) HAS CONSIDERED THE PLEA OF THE APPELLANT AND FOUND NO M ERIT THEREIN. THE APPELLANT HIMSELF HAD SURRENDERED AN AMOUNT OF RS. 2,00,000/- ON ACCO UNT OF EXCESS STOCK. THE REST OF THE DISCREPANCY IN STOCK THAT REMAINED UNEXPLAINED HAS BEEN BROUGHT TO TAX BY THE ASSESSING OFFICER. SUCH AN ADDITION STANDS SUSTAINED BY LD. C IT (A). IN SO FAR AS THE CASE LAWS REFERRED BY LD. COUNSEL FOR ASSESSEE, THE SAME ARE DIFFERENT ON FACTS IN AS MUCH AS IN THE APPELLANTS CASE, HE HIMSELF HAS ACCEPTED THE QUANT ITIES FOUND AS A RESULT OF SURVEY LATER CONVERTED INTO SEARCH, WHEREAS IN THE CASE RELIED T HE INVENTORY WAS TAKEN ON ESTIMATE BASIS AS PER INFORMATION PROVIDED BY THE EMPLOYEES. THAT APART THE REVENUE IN THE APPELLANTS CASE HAS SOUGHT TO TAX UNEXPLAINED INVE STMENT NOT ON THE BASIS OF PHYSICAL STOCK FOUND BUT BECAUSE OF ADMISSION MADE IN HIS ST ATEMENT UNDER SECTION 132(4) OF THE ACT. RELIANCE HAS BEEN PLACED IN THE CASE OF SUKH RAM REPORTED AT 99 ITD 417 (DEL.)(TRIB) WHERE ADDITION WAS UPHELD ON THE BASIS OF CASH FOUND DURING SEARCH BUT REQUISITION MADE AFTER CLOSE OF THE SEARCH. THE ASS ESSEES GROUNDS IN APPEAL, THEREFORE, NEED TO BE REJECTED. 6 9. WE HAVE HEARD PARTIES WITH REFERENCE TO MATERIAL ON RECORD AND THE CASES BROUGHT TO OUR NOTICE. THE PERUSAL OF RECORD REVEALS THAT T HE INVENTORY OF STOCK FOUND AT THE PREMISES OF THE ASSESSEE WAS PREPARED ON ESTIMATE B ASIS. INITIALLY THE APPELLANT ACCEPTED THE QUANTITY AND VALUE TAKEN TO BE CORRECT BUT IN T HE STATEMENT RECORDED UNDER SECTION 132(4) OF THE ACT, THE APPELLANT ON 9.8.2000 IN REP LY TO QUESTION NO. 17 CATEGORICALLY STATED THAT THE STOCK HAS BEEN INVENTORIZED ON ESTI MATE BASIS AND NO ACTUAL PHYSICAL WEIGHMENT THEREOF HAS BEEN DONE. FOR MAKING CORREC T VALUATION IT IS NECESSARY TO HAVE THE ACTUAL WEIGHMENT OF THE STOCK. THE ASSESSEE AL SO STATED THAT THERE MAY BE SOME DIFFERENCE BUT IT COULD NOT BE TO THE EXTENT AS SUG GESTED BY THE AUTHORIZED OFFICER. THE APPELLANT IN THIS STATEMENT ALSO ADMITTED OF MAKING THE SURRENDER OF THE AMOUNT OF DIFFERENCE, IF ANY, AS HIS UNDISCLOSED INCOME. IN T HE RETURN OF INCOME FILED BY THE APPELLANT IT IS FOUND THAT HE HAS MADE AN ADHOC SUR RENDER OF RS. 2,00,000/- ON ACCOUNT OF DIFFERENCE IN STOCK. ADMITTEDLY, THE STOCK WAS NOT PHYSICALLY WEIGHED AND THE LD. CIT (A) VIDE PARA 4.3 OF THE IMPUGNED ORDER HAS NARRATE D THE DIFFICULTY IN MAKING ACTUAL WEIGHMENT BECAUSE THAT WOULD HAVE RESULTED INTO DIS RUPTION/CLOSURE OF BUSINESS OF THE FIRM FOR AT LEAST 5-6 DAYS TILL THE WEIGHMENT IS OV ER AND THUS ACCEPTED THAT THE STOCK WAS TAKEN ON ESTIMATE BASIS. WE, THEREFORE, ARE SATISF IED THAT THE DIFFERENCE WORKED OUT BY THE ASSESSING AUTHORITY BETWEEN THE INVENTORY OF STOCK SO TAKEN AND THE INVENTORY AS PER BOOKS WAS NOT A RESULT OF ACTUAL PHYSICAL COUNT OF STOCKS FOUND AT THE APPELLANTS PREMISES. THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT BY HON'BLE ORISSA HIGH COURT IN THE CASE OF UTKAL ALLOYS LTD. (2009) 319 ITR 339 (ORI.) WHERE IT HAS BEEN HELD THAT NO ADDITION COULD BE MADE ON THE BASIS OF DISC REPANCIES WORKED OUT ON ESTIMATION. SIMILAR VIEW HAS BEEN ENTERTAINED BY HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. 7 VIKAS ELECTRONICS (INTERNATIONAL)(P) LTD., (2008) 1 66 TAXMAN 137 (DEL.) AND AGAIN THE CASE OF CIT VS. BALAJI WIRE PVT. LTD. (2008) 304 IT R 393 (DEL.). IN THE OVER ALL CONSPECTUS AND APPRECIATION OF FACTS, WE ARE SATISF IED THAT IN THE ABSENCE OF ACTUAL PHYSICAL WEIGHMENT OF THE STOCKS OF IRON, THE DIFFE RENCE WORKED OUT BETWEEN THE INVENTORY SO PREPARED ON ESTIMATION BASIS AND AS PE R BOOK STOCK COULD NOT BE TREATED AS EXCESS STOCK FOR BRINGING THE SAME TO TAX AS UNDISC LOSED INCOME OF THE BLOCK PERIOD. THE ADDITION SO MADE IS, THEREFORE, DIRECTED TO BE DELE TED. AS A RESULT, GROUND RAISED IN APPEAL STANDS ALLOWED. 10. GROUND NO. 4(1) & 4(2) HAVE NOT BEEN PRESSED. THE SAME STAND DISMISSED AS NOT PRESSED. 11. IN GROUND NO. 5 THE APPELLANT AGITATED THE CHAR GING OF INTEREST UNDER SECTION 158BFA FOR DELAYED SUBMISSION OF RETURN FOR THE BLO CK PERIOD. SOON AFTER THE COMPLETION OF THE SEARCH, THE APPELLANT HAD APPLIED FOR SUPPLY OF COPIES OF THE SEIZED DOCUMENTS AS PER HIS REQUEST AVAILABLE AT PAGES 108 TO 113 OF TH E PAPER BOOK. BUT THE COPIES WERE SUPPLIED ONLY IN MAY 2002 AND THE APPELLANT FILED T HE RETURN ON 10.7.2002. THE DELAY IN FILING OF THE RETURN WAS THUS NOT ATTRIBUTABLE TO T HE APPELLANT AND HENCE NO INTEREST IS CHARGEABLE. THE LD. COUNSEL RELIED ON THE VARIOUS JUDGMENTS AS UNDER :- MASCO AIRLINES LTD. VS. ACIT (2008) 24 SOT 389 (DELHI.) BACHHUBHAI S. ATROLIA VS. ACIT 288 ITR (AT) 57 (RAJKOT) RATI RAM GOTEWALA VS. DCIT 84 TTJ 516 (DELHI) 8 12. WE HAVE CONSIDERED THE FACTS IN THE LIGHT OF MA TERIAL AVAILABLE ON RECORD. WE ARE OF THE OPINION THAT NO INTEREST IS CHARGEABLE SINCE THE DELAY WAS NOT ATTRIBUTABLE TO THE ASSESSEE. THE GROUND IS THEREFORE, ALLOWED IN FAVOU R OF THE ASSESSEE. 13. IN GROUND NO. 6 THE ASSESSEE HAS AGITATED THE L EVY OF SURCHARGE ON THE GROUND THAT THE AMENDMENT TO SECTION 113 TO LEVY SURCHARGE WAS INSERTED WITH EFFECT FROM 1.6.2002 WHEREAS THE SEARCH IN THE CASE OF THE APPELLANT WAS CONDUCTED ON 9.8.2000. THEREFORE, THE AMENDMENT IS NOT APPLICABLE. THE LD. A/R RELIED UP ON THE DECISION IN THE CASE OF OM PRAKASH SHARMA VS. DCIT (2004) 83 TTJ 246 AND CIT V S. VATIKA TOWN PVT. LTD. (2009) 221 CTR 409 (SC). 14. WE HAVE CONSIDERED THE FACTS AND WE ARE OF THE OPINION THAT THE CASE OF THE APPELLANT IS COVERED BY THE JUDGMENT IN THE CASE OF OM PRAKASH SHARMA (SUPRA). AS THE AMENDMENT IS PROSPECTIVE AND HAS NO APPLICATION, TH EREFORE, THE CHARGING OF SURCHARGE IS NOT APPLICABLE IN THE PRESENT CASE. AS A RESULT, GR OUND IN APPEAL STANDS ALLOWED. 15. IN THE RESULT, APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.8.2013. SD/- SD/- ( KUL BHARAT ) ( B. R. JAIN ) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 22/08/2013. D/- COPY FORWARDED TO :- SHRI PAWAN KUMAR JAIN, AJMER. THE DCIT, CENTRAL CIRCLE, AJMER. THE CIT (A) THE CIT BY ORDER, THE D/R GUARD FILE (ITSSA NO. 19/JP/2011 AR ITAT JAIPUR. 9