DCIT, Thrissur V. M/s Ideal Crumb Rubber Factory, Palakkad

ITSSA 34/COCH/2007

• Counselvise Citation: [2012] 121 COUNSELVISE.COM (IT) 8372 (ITAT-COCHIN)
• Duration Of Justice: 5 year(s) 28 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 10-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 25-07-2012
• Assessment Year: misc
• Appeal Filed On: 13-07-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Assessee Lawyers: C R HARISH
• Keywords: Depreciation; Block assessment

Judgement Text

1 IT(SS)A NO. 34/COCH/2007 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T(SS)A NO. 34/COCH/2007 (BLOCK PERIOD 01-04-1996 TO 28-08-2002) DY. C.I.T., CENT.CIR VS M/S IDEAL CRUMB RUBBER FACTORY THRISSUR PAZHERI PLAZA, KODATHIPADI MANNARKAD, PALAKKAD PAN : AAAFI6192D (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. A.S. BINDHU RESPONDENT BY : SHRI C.R. HARISH DATE OF HEARING : 27-07-2012 DATE OF PRONOUNCEMENT : 10-08-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF C.I.T.(A)-I, KOCHI DATED 23-04-2007 AND PERTAINS TO BLOCK PERIOD 01-04-199 6 TO 28-02-2002. 2. THE FIRST GROUND OF APPEAL IS WITH REGARD TO MAT ERIAL GATHERED BY THE ASSESSING OFFICER DURING THE COURSE OF SURVEY OPERA TION IN THE BLOCK ASSESSMENT PROCEEDINGS. 3. SMT. A.S. BINDHU, THE LD.DR SUBMITTED THAT THE C OMMISSIONER OF INCOME- TAX(A) FOUND THAT THE MATERIAL FOUND DURING THE COU RSE OF SURVEY PROCEEDINGS 2 IT(SS)A NO. 34/COCH/2007 CANNOT BE RELIED UPON IN THE BLOCK ASSESSMENT PROCEE DINGS. ACCORDING TO THE LD.DR, THE MATERIAL FOUND DURING THE COURSE OF SURV EY OPERATION ALSO A MATERIAL WHICH CAN BE CONSIDERED IN THE BLOCK ASSESSMENT PRO CEEDINGS. 4. ON THE CONTRARY, SHRI C.R. HARISH, THE LD.REPRES ENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE BLOCK ASSESSMENT PROCEEDING IS A SPECIAL PROCEEDING FOR THE PURPOSE OF COMPUTATION OF UNDISCLOSED INCOME. THE METHOD OF COMPUTATION IS PROVIDED IN SECTION 158BB OF THE ACT. THEREFORE, T HE ASSESSING OFFICER HAS TO COMPUTE THE UNDISCLOSED INCOME ON THE BASIS OF THE EVIDENCE FOUND DURING THE COURSE OF SEARCH OPERATION AND ANY INFORMATION WHIC H IS RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE OF SEARCH. IN THE ABSENCE OF ANY MATERIAL FOUND DURING THE COURSE OF SEARCH THE MATERIAL FOUN D IN THE COURSE OF SURVEY OPERATION CANNOT BE THE BASIS FOR COMPUTING THE UND ISCLOSED INCOME. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE L D.REPRESENTATIVE FOR THE ASSESSEE, THE LEGISLATURE HAS PRESCRIBED PROCEDURE FOR COMPUTATION OF UNDISCLOSED INCOME FOR THE BLOCK PERIOD IN SECTION 1 58BB OF THE ACT. SECTION 158BB(1) CLEARLY SAYS THAT THE UNDISCLOSED INCOME S HALL BE COMPUTED ON THE BASIS OF THE EVIDENCE FOUND DURING THE COURSE OF SEARCH O R INFORMATION WHICH IS RELATABLE TO THE EVIDENCE FOUND DURING THE COURSE O F SEARCH. THEREFORE, THE ASSESSING OFFICER HAS TO NECESSARILY ESTABLISH THAT THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION HAS NEXUS WITH THE EVIDE NCE FOUND DURING THE COURSE OF SEARCH OPERATION. OTHERWISE, THE EVIDENCE FOUND DURING THE COURSE OF SURVEY OPERATION CANNOT BE RELIED UPON FOR THE PURPOSE OF COMPUTATION OF UNDISCLOSED INCOME. AT THE BEST, THE ASSESSING OFFICER MAY REL Y UPON THE EVIDENCE FOUND DURING THE COURSE OF SURVEY OPERATION IN THE REGULA R ASSESSMENT PROCEEDINGS. 3 IT(SS)A NO. 34/COCH/2007 THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 6. THE NEXT GROUND OF APPEAL IS WITH REGARD TO SETT ING OFF OF LOSS OF R.16,08,681. 7. WE HAVE HEARD THE LD. DR AND THE LD.REPRESENTATI VE FOR THE ASSESSEE. IN THE MATERIAL FOUND DURING THE COURSE OF SEARCH OPER ATION AN ENTRY OF RS.20,00,108 WAS SHOWN AS LOSS ON THE REVERSE SIDE. THIS ENTRY FOUND IN THE REVERSE SIDE OF THE LOOSE SHEET WAS NOT CONSIDERED BY THE ASSESSING OFFICER. THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE SEIZED DOCUMENT SHALL BE CONSIDERED IN TOTO. THE CONTENTION OF THE ASSESSEE BEFORE THE COMMISSIONER OF INCOME-TAX(A) WAS THAT THE DEPRECIATION OF THE ASSET USED IN THE BUSINESS WAS NOT TAKEN INTO CONSIDERATION WHILE COMPUTING THE LOS S IN THE LOOSE SHEET FOUND BY REVENUE AUTHORITIES. 8. THE ASSESSEE HAS ALSO CONTENDED BEFORE THE COMMI SSIONER OF INCOME- TAX(A) THAT THE ENTIRE LOSS SHOWN IN THE LOOSE SHEE T FOUND BY THE REVENUE AUTHORITIES SHALL BE SET OFF AGAINST THE PROFIT SHO WN IN THE SAME SHEET. WHEN A LOOSE SHEET WAS FOUND BY THE REVENUE AUTHORITIES WH ICH CONTAINS PROFIT & LOSS ACCOUNT, THE PROFIT AND LOSS SHOWN IN THAT SHEET HA S TO BE TAKEN IN TOTO OR IT HAS TO BE REJECTED IN TOTO. HERE THE ASSESSING OFFICER HAS CONVENIENTLY TAKEN THE PROFIT SHOWN IN THE LOOSE SHEET AND OMITTED TO CONS IDER THE LOSS SHOWN IN THE VERY SAME LOOSE SHEET. THEREFORE, THE COMMISSIONER OF INCOME-TAX(A) FOUND THAT THE ASSESSING OFFICER CANNOT RESORT TO PICK AND CHOO SE METHOD IN RESPECT OF THE SEIZED DOCUMENT. THE COMMISSIONER OF INCOME-TAX(A) HAS RIGHTLY FOUND THAT THE ASSESSING OFFICER HAS TO ACCEPT THE SEIZED DOCUMENT IN TOTO OR REJECT THE SAME IN 4 IT(SS)A NO. 34/COCH/2007 TOTO. THE COMMISSIONER OF INCOME-TAX(A) AFTER CONSI DERING THE LOSS SHOWN IN THE VERY SAME LOOSE SHEET FOUND THAT THE LOSS RECORDED IN THE LOOSE SHEET HAS TO BE SET OFF AGAINST THE PROFIT. THE COMMISSIONER OF IN COME-TAX(A) HAS RIGHTLY TAKEN THE VIEW ON THE BASIS OF THE ENTRIES FOUND IN THE L OOSE SHEET. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY THE SAME IS CONFIRMED. 9. THE NEXT GROUND OF APPEAL IS WITH REGARD TO RS. 3,80,000 ADDED BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED STOCK. 10. WE HAVE HEARD THE LD.DR AND THE LD.REPRESENTATI VE FOR THE ASSESSEE. THE ASSESSING OFFICER ON THE BASIS OF THE MATERIAL FOUN D BY A SURVEY TEAM FOUND THAT 20,000 KGS OF CRUMB RUBBER WAS AVAILABLE IN THE TANK FOR PROCESSING. THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SUPPR ESSED THE STOCK. THEREFORE, HE ASSESSED THE VALUE OF 20,000 KGS OF SCRUMB RUBBER AS UNDISCLOSED INCOME. ADMITTEDLY, THE STOCK OF SCRUMB RUBBER WAS FOUND DUR ING THE COURSE OF SURVEY OPERATION. NO MATERIAL IS AVAILABLE IN THE SEARCH RECORD. AS WE HAVE DISCUSSED EARLIER THE DOCUMENT FOUND DURING THE COURSE OF SUR VEY OPERATION CANNOT BE THE BASIS FOR COMPUTING THE UNDISCLOSED INCOME FOR THE BLOCK PERIOD. THE COMMISSIONER OF INCOME-TAX(A) HAS ALSO FOUND THAT TH ERE WAS SOME ARITHMETICAL ERROR IN CALCULATING THE STOCK. THE COMMISSIONER OF INCOME-TAX(A) HAS ALSO FOUND THAT THE DIFFERENCE OF 20,000 KGS OF SCRUMB RUBBER W AS NOT ESTABLISHED WITH REFERENCE TO ANY PHYSICAL VERIFICATION CARRIED OUT BY THE SURVEY TEAM. THEREFORE, HE DELETED THE ADDITION. SINCE THE REVENUE COULD N OT FIND ANY MATERIAL DURING THE COURSE OF SEARCH OPERATION U/S 132A OF THE ACT THIS TRIBUNAL IS OF THE OPINION THAT THERE CANNOT BE ANY UNDISCLOSED INCOME ON THE BASIS OF THE MATERIAL FOUND DURING THE COURSE OF SURVEY OPERATION. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY THE SAME IS CONFIRMED. 5 IT(SS)A NO. 34/COCH/2007 11. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10 TH AUGUST, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 10 TH AUGUST, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH