M/s. Alfrez Pvt. Limited, Baroda V. The ACIT., Cent.Circle-2, Baroda

ITSSA 286/AHD/2005

• Counselvise Citation: [2012] 124 COUNSELVISE.COM (IT) 7571 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 4 month(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 27-04-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-03-2012
• Assessment Year: misc
• Appeal Filed On: 27-12-2005
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D P GUPTA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Unexplained investment; Opportunity of being heard; Corroborative evidences

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, D BENCH, AHMEDABAD BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER I.T.(SS)A. NO. 286/ AHD/2005 (BLOCK PERIOD 01.04.1995 TO 22.01.2002) M/S. ALFREZ PVT .LTD., 25, SUVERNAPURI SOCIETY, CHIKUWADI, BARODA VS. ACIT, CC-2, BARODA PAN/GIR NO. : AABCA6741Q (APPELLANT) .. (RESPONDENT) APPELLANT BY: SHRI S N SOPARKAR, SR. ADV. RESPONDENT BY: SHRI D P GUPTA, CIT DR DATE OF HEARING: 20.03.2012 DATE OF PRONOUNCEMENT: 27. 04.2012 O R D E R PER SHRI A. K. GARODIA, AM:- THIS IS ASSESSEES APPEAL DIRECTED AGAINST THE ORD ER OF LD. CIT(A) IV, AHMEDABAD DATED 14.10.2005 FOR THE BLOCK PERIOD FROM 01.04.1995 TO 22.01.2002. 2. GROUND NO.1(I) READS AS UNDER: 1.0 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV , AHMEDABAD HAS ERRED IN DISMISSING FOLLOWING GROUNDS OF YOUR APPELLANT: (I) THAT THE ORDER PASSED BY THE ID. A.O. IS BAD IN LAW AND IS IN VIOLATION AND BREACH OF PRINCIPLES OF NATURAL JUSTI CE. FURTHER, SUFFICIENT OPPORTUNITY WAS NOT PROVIDED TO YOUR APP ELLANT BY THE ID. A.O. AND EVEN THE SEIZED MATERIAL, ON THE BASIS OF WHICH ADDITIONS HAVE BEEN MADE, WERE NOT MADE AVAILABLE TO YOUR APP ELLANT. I.T.A.NO. 286 /AHD/2005 2 2.1 THIS GROUND WAS NOT PRESSED BY THE LD. A.R. AND HENCE, THE SAME IS REJECTED AS NOT PRESSED. 3. GROUND NO.1(II) READS AS UNDER: (II) THAT ID. A.O. HAD ERRED IN MAKING ADDITION OF RS. 1,06,06,443/- ON ACCOUNT OF UNDER VALUATION OF CLOS ING STOCK ON THE BASIS OF GODOWN SUMMARY FOUND AND SEIZED AT PAGE NO S. 364 TO 372 OF ANN. 8. 3.1 IT WAS SUBMITTED BY THE LD. A.R. THAT VARIOUS E XPLANATIONS WERE SUBMITTED BY THE ASSESSEE BEFORE LD. CIT(A) AND ALS O BEFORE THE A.O. DURING REMAND PROCEEDINGS TO EXPLAIN THE DEBIT OF R S.1,06,06,,443/- BUT THE ISSUE WAS DECIDED BY LD. CIT(A) BY WAY OF SMALL PARA 5.13 OF HIS ORDER IN WHICH, IT IS STATED BY HIM THAT THE CLAIM OF THE ASSESSEE REMAINED UNSUBSTANTIATED AND, THEREFORE, CANNOT BE ACCEPTED. HE SUBMITTED THAT THE ISSUE MAY BE RESTORED BACK TO THE FILE OF LD. CIT(A ) FOR A FRESH DECISION BY WAY OF PASSING SPEAKING AND REASONED ORDER. 3.2 LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). 3.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT LD. CIT(A) HAS STARTED DISCUSSION ON THIS ISSU E FROM PAGE 19 OF HIS ORDER AND THE FINAL DECISION IS GIVEN BY HIM ON PAG E 30-31 OF HIS ORDER BUT HIS FINDING IS ONLY THIS MUCH AS PER PARA 5.13 OF HIS ORDER WHICH IS REPRODUCED BELOW: 5.13 THIS IS THE FACT THAT THE STATEMENT SHOWING S TOCK WORTH OF RS.3,34,75,746/- HAS BEEN FOUND AND SEIZED FROM ITS PREMISES. ON COMPARISON WITH BOOK OF ACCOUNT, THE DIFFERENT OF R S.2,28,69,303/- WAS NOTICED BY THE A.O. THE APPELLANT ATTEMPTED TO EXPLAIN THE DIFFERENCE OF RS.L,06,06,443/- IN THE REMAND PROCEE DINGS, BUT NO SUPPORTING EVIDENCE I.E. STOCK REGISTER GIVING QUAN TITATIVE DETAILS WAS PRODUCED AT ANY STAGE HENCE, THE CLAIM OF APPEL LANT REMAINS UNSUBSTANTIATED THEREFORE, CANNOT BE ACCEPTED. THE ADDITION SO MADE BY THE A.O. AMOUNTING TO RS.1,06,06,443/-. I.T.A.NO. 286 /AHD/2005 3 3.4 FROM THE ABOVE PARA OF THE ORDER OF LD. CIT(A) IT COMES OUT THAT THE ORDER OF LD. CIT(A) IS NOT A SPEAKING AND WELL REASONED ORDER BECAUSE HE HAS NOT GIVEN ANY REASON AS TO WHY THE E XPLANATION GIVEN BY THE ASSESSEE ARE NOT ACCEPTABLE AND WHAT ARE THE DE FECTS IN THOSE EXPLANATIONS AND WHAT WAS SPECIFICALLY ASKED FOR FR OM THE ASSESSEE TO SUBSTANTIATE AND EXPLAIN WHICH COULD NOT BE SUBMITT ED BY THE ASSESSEE AND HENCE, WE FEEL THAT IN THE INTEREST OF JUSTICE, AND IN THE FACTS OF THE PRESENT CASE, THE MATTER SHOULD GO BACK TO THE FILE OF LD. CIT(A) FOR A FRESH DECISION. WE, THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) ON THIS ISSUE AND RESTORE BACK THIS MATTER TO HIS FILE FOR A FRESH DECISION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO BO TH THE SIDES AND HE SHOULD PASS SPEAKING AND WELL REASONED ORDER. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 4. GROUND NO.1(III) READS AS UNDER: (III) THAT LD. A.O. HAD ERRED IN MAKING AN ADDITION OF RS. 3,66,132/- AS UNDISCLOSED INTEREST ALLEGED TO BE CH ARGED ON OUTSTANDING BALANCE OF M/S. BHARAT PARENTALS LTD. @ 18% ON THE BASIS OF A PAPER (PAGE 236 OF ANN. A2) FOUND DURING THE SEARCH. 4.1 THE BRIEF FACTS OF THE CASE ARE THAT THE A.O. H AS DISCUSSED THIS ISSUE IN PARA 6 OF THE ASSESSMENT ORDER. HE REPORTED THA T ON PAGE 236-237 OF ANNEXURE A-2, INTEREST OF RS.3,66,732/- HAS BEEN SH OWN AS CHARGE OF OUTSTANDING BALANCE AS ON 31.03.2000 TO M/S. BHARAT PARENTALS LTD. IT IS NOTED BY THE LD. CIT(A) THAT IN THE ASSESSMENT PROC EEDINGS, THE ASSESSEE CONTENDED THAT NO INTEREST HAS BEEN CHARGED FROM BP L AND TO THIS EFFECT, THE ASSESSEE ALSO FURNISHED A CERTIFICATE FROM M/S. BHARAT PARENTALS LTD. THAT NEITHER THE INTEREST HAS BEEN CHARGED BY M/S. ALFREZ NOR HAS BEEN PROVIDED IN THE BOOKS BY BHARAT PARENTALS LTD. THE A.O. DID NOT ACCEPT I.T.A.NO. 286 /AHD/2005 4 THIS CONTENTION AND CONCLUDED THAT IT IS EVIDENT FR OM THE WORKING OF SEIZED PAPERS THAT IT IS INTEREST INCOME AND ACCORD INGLY, HE TREATED THIS AMOUNT AS UNDISCLOSED INCOME. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCC ESS AND NOW, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4.2 IT IS SUBMITTED BY THE LD. A.R. BEFORE US THAT THE CERTIFICATE OF BHARAT PARENTAL LTD. IS AVAILABLE ON PAGE 153 OF TH E PAPER BOOK AS PER WHICH, IT IS CERTIFIED BY THIS COMPANY THAT NO INTE REST WAS PAID BY THEM NOR PROVIDED BY THEM IN THE ACCOUNT OF THE ASSESSEE , IN THEIR BOOKS. HE PLACED RELIANCE ON THE JUDGEMENT OF HONBLE RAJASTH AN HIGH COURT RENDERED IN THE CASE OF CIT VS SMS INVESTMENT CORPN (P) LTD. AS REPORTED IN 207 ITR 364(RAJ.). 4.3 LD. D.R. SUPPORTED THE ORDER OF LD. CIT(A). 4.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW AND THE JUDGEMENT CITED BY THE LD. A.R. OF THE ASSESSEE. W E FIND THAT ON PAGE 8 OF THE ASSESSMENT ORDER, THE A.O. HAS REPRODUCED TH E NOTING ON THE SEIZED PAPER ON THE BASIS OF WHICH, THIS ADDITION WAS MADE BY HIM. WE FIND THAT AS PER THIS NOTING REPRODUCED BY THE A.O. IN THE AS SESSMENT ORDER, THERE IS DEBIT BALANCE OF CAPITAL ACCOUNT AS ON 31.03.2000 O F RS.19,45,076/- AND THEREAFTER, INTEREST AMOUNT AS ADDED OF RS.2,45,677 /- BEING INTEREST UP TO DECEMBER 1999 AND RS.1,12,055/- BEING INTEREST FROM JANUARY 2000 TO MARCH 2000. IT IS NOT THE CASE OF THE A.O. THAT TH IS DEBIT BALANCE OF CAPITAL ACCOUNT OF RS.19,45,076/- IS AN UNDISCLOSED AMOUNT. IF THIS IS A DISCLOSED AMOUNT THEN DEBITING OF INTEREST HAS TO B E IN THE BOOKS AND IT CANNOT BE ACCEPTED THAT MERE NOTING IN A SEIZED PAP ER WILL AMOUNT TO EARNING OF INTEREST INCOME. MANY A TIMES, CLAIM OF INTEREST IS MADE BY I.T.A.NO. 286 /AHD/2005 5 ONE PARTY FROM THE OTHER BUT MERE MAKING OF A CLAIM DOES NOT AMOUNT TO EARNING OF INTEREST INCOME UNLESS THE OTHER PARTY A GREES TO PAY THE INTEREST. IN THE PRESENT CASE, THE PARTY I.E. BHAR AT PARENTAL LTD. HAS SPECIFICALLY STATED IN THE CERTIFICATE AVAILABLE IN THE PAPER BOOK THAT NO INTEREST WAS PAID BY IT TO THE ASSESSEE IN RESPECT OF OUTSTANDING BALANCE OF RS.19,45,076/-. UNDER THESE FACTS, WE FEEL THAT SU CH ADDITION OF INTEREST CANNOT BE SUSTAINED BECAUSE NO EVIDENCE COULD BE BR OUGHT OUT ON RECORD BY THE REVENUE TO CORROBORATE THAT NOTING IN THE SE IZED PAPER THAT INTEREST INCOME WAS ACTUALLY EARNED BY THE ASSESSEE. HENCE, THIS ADDITION IS DELETED. THIS GROUND IS ALLOWED. 5. GROUND NO.1(IV) IS AS UNDER: (IV) THAT ID. A.O. HAD ERRED IN MAKING ADDITION OF RS. 2,16,150/- ON ACCOUNT OF UNRECORDED CASH SALES ON THE BASIS OF A JOTTING FOUND IN A DIARY. 5.1 NO SERIOUS ARGUMENT WAS MADE BY THE LD. A.R. IN RESPECT OF THIS GROUND OF THE ASSESSEE AND HENCE, WE DO NOT FIND AN Y REASON TO INTERFERE IN THE ORDER OF LD. CIT(A) ON THIS ISSUE. THIS GRO UND IS REJECTED. 6. GROUND NO.1(V) IS AS UNDER: (V) THAT ID. A.O. HAD ERRED IN MAKING AN ADDITION OF RS. 3,31,146/- ON ACCOUNT OF ALLEGED VIOLATION OF IMPOR TED GOODS ON THE BASIS OF A FAX PAPER (PAGE NO. 260 OF ANN A.8) SEIZ ED FROM THE PREMISES). 6.1 BRIEF FACTS TILL THE ASSESSMENT STAGE ARE NOTED BY LD. CIT(A) IN PARA 8 OF HIS ORDER WHICH IS ON PAGES 34 & 35 OF HIS ORD ER. THIS PARA OF THE ORDER OF LD. CIT(A) IS REPRODUCED BELOW: 8. IN THE NEXT GROUND OF APPEAL, THE APPELLANT HAS DISPUTED AN ADDITION OF RS.351149/-/- ON ACCOUNT OF ALLEGED UND ER INVOICING OF IMPORTED GOODS. THE A.O. HAS DISCUSSED THIS ISSUE I N PARA 8 OF HIS ORDER. HE REPORTED THAT: I.T.A.NO. 286 /AHD/2005 6 'THE ASSESSES WAS ASKED TO EXPLAIN FACSIMILE MEMO F ROM ALFREZ P. LTD. TO M/S. EMPIRE FOOD BROKERS I AD. OF U.K., WHI CH IS SEIZED ON PAGE NO. 2 60 OF ANNEX. A. 8 FROM ITS OFFICE PRE MISES. IN THE SAID PAPER M/S. ALFREZ P. LTD. HAS REQUESTED THE OV ERSEAS SUPPLIER TO PREPARE THE INVOICES AT THE HALF OF THE PRICE OR AT A 20% DISCOUNTED RATE TO SAVE CUSTOM DUTY AND OTHER GOVER NMENT LEVIES. THE ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXP LANATION IN THIS REGARD. FROM THE BOOKS OF ACCOUNTS SEIZED DURING TH E COURSE OF SEARCH IT IS SEEN THAT THE ASSESSEE HAS IMPORTED GO ODS WORTH RS.16,55,748/-. ON VERIFICATION OF THE ACCOUNT, I T IS ALSO NOTICED THAT THE IMPORTED GOODS ARE INVOICED AT 20% DISC OUNT, WHICH MAKES IT CLEAR THAT THE ASSESSEE HAS UNDER INVOICED THE IMPORTED GOODS BY 20%. ACCORDINGLY, DURING THE BLOCK PERIOD ASSESSEE HAS UNDER INVOICED IMPORTED PURCHASES BY RS.3,31,149/-. THE PAYMENT OF THIS AMOUNT HAS NOT BEEN EXPLAINED AND THEREFORE IT IS TREATED AS UNEXPLAINED INVESTMENT IN STOCK AND ADDED TO THE UN DISCLOSED INCOME OF THE ASSESSEE FOR THE BLOCK PERIOD.' 6.2 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE LD. CIT(A) BUT WITHOUT SUCCESS AND NOW, THE ASSESSE E IS IN FURTHER APPEAL BEFORE US. 6.3 LD. A.R. OF THE ASSESSEE REITERATED THE SAME AR GUMENTS WHICH WERE MADE BEFORE LD. CIT(A). LD. D.R. SUPPORTED THE ORD ER OF LD. CIT(A). 6.4 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUS ED THE MATERIAL ON RECORD AND HAVE GONE THROUGH THE ORDERS OF AUTHORIT IES BELOW. WE FIND THAT IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDE R THAT THE ASSESSEE WAS ASKED TO EXPLAIN THE FAX FROM THE ASSESSEE COMPANY TO M/S. EMPIRE FOOD BROKERS LTD., AVAILABLE ON PAGE 260 OF ANNEXURE A8. HE HAS FURTHER NOTED THAT IN THE SAID FAX, THE ASSESSEE HAD REQUES TED OVERSEAS SUPPLIER TO PREPARE INVOICES AT HALF OF THE PRICE OR AT 20% DIS COUNT PRICE TO SAVE CUSTOM DUTY AND OTHER GOVERNMENT LEVIES. HE HAS FU RTHER NOTED THAT THE ASSESSEE HAS NOT FURNISHED ANY SATISFACTORY EXPLANA TION IN THIS REGARD. BEFORE LD. CIT(A), IT WAS SUBMITTED BY THE ASSESSE E THAT THE A.O. HAS I.T.A.NO. 286 /AHD/2005 7 NOT BROUGHT OUT ANY CLINCHING EVIDENCE TO SUGGEST T HAT ANY UNACCOUNTED PAYMENT WAS MADE BY THE ASSESSEE TO THE SAID OVERSE AS SUPPLIER. LD. CIT(A) HAS NOT ACCEPTED THIS CONTENTION. ONE MORE CONTENTION WAS RAISED BEFORE LD. CIT(A) THAT DATE OF THE FAX WAS DATED 14 .03.2000 AND HENCE, THE EFFECT OF THE SAME SHOULD BE ON THOSE SUPPLIES WHICH ARE EFFECTED BY THE SUPPLIER AFTER THIS DATE. IN THIS REGARD, CLEA R DIRECTION WAS GIVEN BY LD. CIT(A) TO THE A.O. THAT THE CONCERNED FAX SHOUL D BE MADE APPLICABLE ONLY TO THE IMPORT MADE AFTER 14.03.2000, THE AMOUN T OF WHICH ACCORDING TO THE ASSESSEE IS RS.4,49,773/- AND NOT TO THE ENT IRE IMPORTS OF RS.16,55,748/-. SINCE MAJOR RELIEF IS ALREADY ALLO WED BY CIT(A), ASSESSEE COULD NOT BRING ANY EVIDENCE ON RECORD TO SHOW THAT THE SAID FAX WAS NOT GIVEN EFFECT TO BY THE SUPPLIER, WE FEEL TH AT NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. THIS GROUND IS ALSO REJECTED. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. 8. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE M ENTIONED HEREINABOVE. SD./- SD./- (KUL BHARAT) (A. K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER SP COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD BY ORDER 6. THE GUARD FILE AR,ITAT,AHMEDABAD I.T.A.NO. 286 /AHD/2005 8 1. DATE OF DICTATION24/4 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER25/4. OTHER MEMBER 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P .S./P.S. 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 27/4 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. P.S./P.S.27/4 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 27/4/12 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK .. 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 9. DATE OF DESPATCH OF THE ORDER. .