Sanwarmal Poddar, Kolkata V. DCIT, Dhanbad

ITSSA 36/RAN/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 9566 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 05-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDERJI T SINGH
• Keywords: Search and seizure; Document seized; Assessment record; Retraction; Documents seized
• Section: 143(3); 133A; 153A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI S.S.GODARA, JUDICIAL MEMBER AND DR. A.L. SAINI, ACCOUNTANT MEMBER IT (SS) A NO. 36 / RAN / 201 5 ASSESSMENT YEAR :2010-11 SANWARMAL PODDAR CHHAPARIA & ASSOCIATES, CHARTERED ACCOUNTANTS, 8, CAMAC STREET, SHANTINIKETAN BUILDING, 5 TH FLOOR, ROOM NO.2, KOLKATA-700017 [ PAN NO.ADCPP 1457 F ] V/S . DCIT, CENTRAL CIRCLE, AAYAKAR BHAWAN, L.C. ROAD, 3 RD FLOOR, ROOM NO.405-8, DHANBAD- 826001 /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DEVESH PODDAR, ADVOCATE /BY RESPONDENT SHRI INDERJIT SINGH, CIT-DR /DATE OF HEARING 09-01-2019 /DATE OF PRONOUNCEMENT 15-02-2019 / O R D E R PER BENCH:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2010-11 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-3 PATNAS ORDER DATED 28.08.2015 PASSED IN CASE NO.127/CIT(A)-3/PAT/2014-15 INVOLVIN G PROCEEDINGS U/S 153A R.WS. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE PERUSED 2. IT TRANSPIRES FROM THE INSTANT CASE FILE THAT BO TH THE LOWER AUTHORITIES HAVE ADDED THE ALLEGED UNDISCLOSED TRADING PURCHASE OF RS.92,29,434/- AS THE IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 2 TAXPAYERS ALLEGED UNDISCLOSED INCOME IN ENTIRETY. THE CIT(A)S DETAILED DISCUSSION TO THIS EFFECT READS AS FOLLOWS:- BRIEF FACTS : THERE WAS SEARCH AND SEIZURE ACTION IN THE CASE O F PODDAR GROUP ON 22.06.2011. THE APPELLANT IS ONE OF THE DI RECTORS OF THE SAID GROUP. IN RESPONSE TO NOTICE U/S. 142(1), THE APPEL LANT FILED RETURN OF INCOME SHOWING TOTAL INCOME AT RS.64,08,830/- WHICH INCLUDED RS.60,00,000/- AS ADDITIONAL INCOME OFFERED FOR TAX ATION APART FROM REGULAR INCOME FROM BUSINESS AND OTHER SOURCES. THE AO FINALIZED THE ASSESSMENT AT RS.96,38,264/- MAKING ADDITION OF RS. 32,29,434/- TO THE TOTAL INCOME. THIS APPEAL IS FILED AGAINST THIS ADD ITION OF RS.32,49,434/-. GROUND NO.1 & 2 : THE APPELLANT HAS RAISED OBJECTION TO THE TREATME NT OF ENTIRE UNDISCLOSED TRADING PURCHASES OF RS.9229434/ - AS UNDISCLOSED INCOME OF THE APPELLANT AS AGAINST RS.60,00,000/- O FFERED BY THE APPELLANT AS ADDITIONAL INCOME. ASSESSING OFFICER'S CONTENTION DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE SEIZED DOCUMENTS MKA-6 COMPRISED OF LOOSE SHEETS WHEREIN P AGE NO.14 OF THE LOOSE SHEETS INDICATED TOTAL PURCHASES TRANSACT ION OF RS.60,57,680/- . THIS PAGE ALSO CONTAINED NOTING OF SALES TRANSACT IONS, ALTHOUGH THE SALES WERE NOT COMMENSURATE WITH THE TOTAL PURCHASE TRANSACTION OF RS.60,57,680/-. THE AO TREATED THIS AMOUNT AS UNDIS CLOSED INVESTMENTS IN THE HANDS OF THE APPELLANT. SIMILARLY, ANOTHER S EIZED DOCUMENT PAGE NO.1 OF MKA-6 INDICATED PURCHASE TRANSACTIONS WORTH RS.31,71,764/- FROM NEETU SINIGH. THIS WAS ALSO ADDED BY THE AO AS UNDISCLOSED PURCHASES OUTSIDE THE BOOKS OF ACCOUNT. THUS, TOTAL ADDITION OF RS.92,29,434/- WAS TREATED AS UNDISCLOSED PURCHASES AND AFTER GIVING CREDIT FOR RS.60,00,000/- OFFERED AS ADDITIONAL INC OME, RS.32,29,434/- WAS ADDED TO THE TOTAL INCOME OF THE APPELLANT. APPELLANTS CONTENTION: DURING THE COURSE OF APPELLATE PROCEEDINGS, APPELLA NT CONTENDED THAT DISCLOSURE OF ADDITIONAL OF RS.60,00,000/- WAS MORE THAN SUFFICIENT TO COVER THE UNDISCLOSED CAPITAL INFUSION AS WELL AS P ROFITS FROM THE TRANSACTION ON THE LOOSE SHEET SEIZED BY PAGE NO.1 & 14 OF MKA-6. THE GIST OF APPELLANTS CONTENTIONS ARE: THE AO HAS ADDED THE AGGREGATE UNDISCLOSED TRADING PURCHASE TO THE TOTAL INCOME OF THE ASSESSEE INSTEAD OF ADDI NG EARNINGS (DIFFERENCE BETWEEN UNDISCLOSED SALES- UNDISCLOSED PURCHASES) FROM UNDISCLOSED TRADING ACTIVITIES DURING THE YEAR . THE AO DID NOT APPRECIATE THE FACT THAT A BUSINESS MAN DOES NO T MAKE ONLY PURCHASE THROUGHOUT THE YEAR WITHOUT MAKING SALES A ND HAS FAILED TO APPRECIATE THE CONCEPT OF ROTATION TURNOVER IN A NY TRADING ACTIVITY. IT IS WORTH MENTIONING THAT SINCE NO UNDI SCLOSED BOOKS OF ACCOUNT WERE FOUND DURING SEARCH / SURVEY AND SEIZE D / IMPOUNDED DOCUMENT MKA6 ARE ONLY A BUNCH OF LOOSE DOCUMENTS (REFER PAGE 24-25 OF PAPER BOOK 1) AND NO T BOOKS OF IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 3 ACCOUNT. IT IMPLIES THAT THE DOCUMENTS ON THE BASIS OF WHICH INFERENCE WERE DRAWN BY THE ASSESSEE AO DOESNT REP RESENT THE COMPLETE SET OF RECORDS. THUS, WHILE DRAWING ANY IN FERENCE FROM THE SEIZED RECORDS, ONE HAS TO PRACTICAL TO REACH T O A LOGICAL CONCLUSION. THE MERE FACT THAT NO DOCUMENTS RELATIN G TO UNDISCLOSED SALES WAS FOUND DURING SEARCH/SURVEY DO ES NOT MEAN THAT THERE WERE NO SALES OUTSIDE BOOKS. THUS, THE ASSESSING OFFICER HAS ERRED IN TREATING T HE ENTIRE UNDISCLOSED TRADING PURCHASES OF RS.92,29,434/- AS UNDISCLOSED INCOME. 1) SUBMISSIONS WITH RESPECT TO GROUND NO.2 IN THE INSTANT CASE THE APPELLANT OFFERED RS.60,00, 000/- AS UNDISCLOSED INCOME DURING THE YEAR WHICH INCLUDES UNDISCLOSED CAPITAL INFUSION AND EARNING FROM UNDIS CLOSED TRADING ACTIVITIES DURING THE YEAR. BUT STILL THE A O HAS ADDED RS.92,29,434/- TO THE TOTAL INCOME OF THE ASSESSEE. THE AO FAILED TO APPRECIATE THE FACT THAT A BUSINESS MAN D OES NOT MAKE ONLY PURCHASES AND HE MUST HAVE MADE UNDISCLOS ED SALES DURING THE YEAR. THE AO CANNOT IGNORE CONCEPT OF ROTATION TURNOVER IN ANY TRADING ACTIVITY. HON'BLE HIGH COURT OF GUJARAT IN THE CASE OF COMMI SSIONER OF INCOME TAX VS. BHOLANATH POLY FAB (P) LTD. [2013] 4 0 TAXMANN.COM 494 (GUJARAT) HAS HELD THAT ENTIRE PURC HASES CANNOT BE SUBJECT MATTER OF ADDITIONS AND ONLY THE PROFIT MARGIN EMBEDDED IN SUCH PURCHASES WOULD BE SUBJECT TO TAX. THUS IT IS SUBMITTED THAT THE ASSESSING OFFICER HAS ERRED IN TREATING UNDISCLOSED INCOME AT RS.92,29,434/- AS AG AINST RS.60,00,000/- OFFERED BY THE APPELLANT. APPELLATE FINDING AND DECISION: AFTER GOING THROUGH THE FINDINGS OF THE AO IN THE A SSESSMENT ORDER AND APPELLANTS SUBMISSION DURING APPELLATE PROCEEDINGS , I FIND THAT THE APPELLANT HAS FILED A PAPER BOOK CONTAINING DETAILE D SUBMISSION AND ANALYSIS OF CASH INFLOW AND OUTFLOW YEAR-WISE FOR T HE WHOLE GROUP CONTAINING PAGES 1 TO 214. AT PAGE NO.24 OF THE PAP ER BOOK SUBMITTED BY THE APPELLANT, IT IS FOUND THAT FOR THE FINANCIA L YEAR 2009-0-10, APPELLANT HAD SHOWN ONLY CASH OUTFLOW OF RS.31,71,7 54/- RELATED TO SEIZED DOCUMENT PAGES NO1. OF MKA-6 AND CASH OUTFLO W OF RS.60,57,680/- RELATE TO SEIZED DOCUMENT PAGE NO. 1 O TO 13 OF MKA-6. THIS EXPLANATION OF THE APPELLANT CLEARLY INDICATE THAT THE APPELLANT HAS ITSELF ACCEPTED THAT THERE WAS NO SALES AND ANY CAS H INFLOW RELATING TO TOTAL PURCHASES WORTH RS.92,29,434/- INDICATED BY T HE SEIZED DOCUMENTS. THEREFORE, THERE IS NO FORCE IN APES CO NTENTION THAT THE TOTAL PURCHASES SHOULD NOT HAVE BEEN TAKEN AS UNDISCLOSED INCOME OF THE APPELLANT. HENCE, I AM INCLINED TO ACCEPT THE ASSES SING OFFICER'S VIEW THAT THE WHOLE OF PURCHASES RS.92,29,434/- SHOULD B E TREATED AS IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 4 UNDISCLOSED INVESTMENT ON UNACCOUNTED PURCHASES OF THE APPELLANT. THEREFORE, THE ADDITION OF RS.32,29,434/- MADE BY T HE AO IS HEREBY CONFIRMED. 3. WE HAVE HEARD RIVAL CONTENTIONS. THERE IS HARDLY ANY DISPUTE THAT BOTH THE LEARNED LOWER AUTHORITIES HAVES ADDED ASSESSEE S ENTIRE TRADING PURCHASE IN WHOLESOME AS UNDISCLOSED. THIS TRIBUNALS CO-ORD INATE BENCH IN M/S SUBARNA RICE MILL VS. ITO IN ITA NO.1781/KOL/2014 DECIDED ON 30.06.2015 (AS UPHELD BY HON'BLE CALCUTTA HIGH COURTS IN CORR ESPONDING TAX APPEAL REPORTED AS (2018) TAXMANN 509) HOLDS THAT IT IS ON LY THE PROFIT ELEMENT EMBEDDED IN SUCH A CASE THAT NEEDS TO BE ASSESSED A S INCOME AS FOLLOWS: 3. BRIEFLY STATED FACTS ARE THAT A SURVEY U/S. 133 OF THE ACT WAS CARRIED OUT ON THE BUSINESS PREMISES OF THE ASSESSEE ON 24.03.2010 . THE ASSESSEE FIRM IS ENGAGED IN THE BUSINESS OF RICE MILLING. THE ASSESS EE HAS DISCLOSED PURCHASE OF PADDY AT RS.3,45,62,335/- AND SALE OF RICE AND B RAN AT RS.3,53,60, 711/-. IT HAS DISCLOSED GROSS PROFIT AT RS.34,72,298/- AND AF TER CLAIMING EXPENSES DISCLOSED NET PROFIT AT RS.14,33,482/-. DURING THE COURSE OF SURVEY WHILE COMPARING THE STOCK AS PER AUDITED ACCOUNTS AND THE STOCK REGISTER IN FORM NO. IV THE SURVEY PARTY NOTICED CERTAIN DISCREPANCI ES I.E. UNDISCLOSED PURCHASE OF PADDY AT 37647.20 QUINTALS, EXCESS STOC K OF RICE AT 581.15 QUINTALS AND UNDISCLOSED STOCK OF BRAN AT 45.52 QUI NTALS. THE RELEVANT CALCULATIONS MADE BY SURVEY PARTY AS REPRODUCED IN THE ASSESSMENT ORDER READS AS UNDER: DETERMINATION OF CLOSING STOCK OF PADDY (IN QUINTAI ) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON 4545.20 STOCK ON THE DATE OF 43447.20 01.04.2009 SURVEY 24.03.201 0 ADD: PURCHASE DURING THE 36755.00 ADD: PURCHASE-DURING 100.00 YEA R 25.03.2010 TO 31.03.2010 TOTAL 41300.20 TOTAL 43547.20 LESS: MILL ING DURING THE 35600.20 LESS: MILLING DURING 200.00 YEAR 25.03.201 0 TO 31.03.2010 CLOSING STOCK AS ON 5700.00 CLOSING STOCK AS ON 433 47.20 31.03.2010 31.03.2010 UNDISCLOSED PURCHASE OF PADDY = (43347.2 0 - 5700.00)= 37647.20 QUINTAL DETERMINATION OF CLOSING STOCK OF RICE (IN QUINTAL) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON STOCK ON THE DATE OF3760.00 01.04.2009 1513.58.20 S URVEY 24.03.2010 ADD: PRODUCTION DURING THE ADD: PURCHASE DURING 136 .00 YEAR 24206.00 25.03.2010 TO 31.03.2010 TOTAL 25720.02 TO TAL 3896.00 LESS: SALE DURING THE YEAR 22545.17 LESS: SALE DURI NG 140.00 25.03.2010 TO 31.03.2010 SUBAMA RICE MILL AY 2010-1 1 CLOSING STOCK AS ON 3174.85 CLOSING STOCK AS ON 3756.00 31.03.201 0 31.03.2010 EXCESS STOCK OF RICE = (3756.00 - 3174.00) = 581.15 QUINTAL DETERMINATION OF CLOSING STOCK OF RICE BRAN (IN QUI NTAL) AS PER AUDITED ACCOUNT AS PER SURVEY FINDINGS OPENING STOCK AS ON 45.00 STOCK ON THE DATE OF 146.00 01.04.2009 SURVEY 24.03.2010 ADD : PRODUCTION DURING THE YEAR 1780.01 ADD: PURCHASE DURING 10.00 25.03.2010 TO 31.03.2010 TOTAL 1825.01 TOTAL 156.00 LESS: SALE DU RING THE YEAR IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 5 1714.53 LESS: SALE DURING NIL 25.03.2010 TO 31.03.2 010 CLOSING STOCK AS ON 31.03.20 110.48 CLOSING STOCK AS ON 156.00 3 1.03.2010 UNDISCLOSED PURCHASE OF BRAN = (156.00 - 110.48) = 45.52 QUINTAL THE AO REQUIRED THE ASSESSEE TO EXPLAIN THE DISCREPANCY IN RESPECT TO UNDISCLOSED PURCHASE, EXCESS STOCK OF RICE AND UNDI SCLOSED STOCK OF BRAN. THE ASSESSEE FOR THE FIRST TIME DENIED THE EX CESS STOCK OF RICE, UNDISCLOSED PURCHASES AND UNDISCLOSED STOCK OF BRAN VIDE LETTER DATED 11.12.2012 DURING THE COURSE OF ASSESSMENT PROCEEDI NGS. THE AO TREATED THE PURCHASE OF PADDY AT 38501.83 QUINTALS AS UNDISCLOSED INVESTMENT AND TREATED THE INCOME AT RS.3,85,01,830 /-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A). 4. THE CIT(A) CONFIRMED THE ACTION OF THE AO BY CON FIRMING THE ADDITION BY OBSERVING AS UNDER: '19. IN COMING TO A DECISION ON UNACCOUNTED STOCK D OCUMENT MARKED SRM-5 IS VITAL. IN THE INVENTORY THE ITEM CONTRIBUT ING MAXIMUM TO VALUE IS PADDY. AS PER FORM-IV THE STOCK OF PADDY IS 5800 QUINTAL. AS PER DOCUMENT MARKED SRM-5 THE STOCK IS 66892 BAGS I.E. 40135.20 QUINTAL AND PHYSICAL INVENTORY IS 43447.20 QUINTAL. THUS IT CAN BE SEEN THAT THE PHYSICAL INVENTORY IS IN CLOSE PROXIMITY WITH A PRE -EXISTING EVIDENCE VIZ. DOCUMENT MARKED SRM-5 WHICH ESTABLISHES EXISTENCE O F STOCK OVER AND ABOVE WHAT IS RECORDED IN BOOKS OF ACCOUNTS. IN ASSESSMENT STAGE IT WAS UPTO ASSESSEE TO PRODUCE DOCUMENT MARKED SRM -5, GIVE NECESSARY EXPLANATION AND ESTABLISH THAT HIS REGULA R BOOKS OF ACCOUNTS ARE TRUE AND CORRECT. THE KNOWN CONTENTS OF DOCUMEN T MARKED SRP-5 ARE NOT REBUTTED. SECTION 292(C)(1)(II) STAGES IN R EGARD TO BOOKS OF ACCOUNTS FOUND DURING SURVEY THAT ' THAT THE CONTENTS OF SUCH BOOKS OF ACCOUNTS AND OTHER DOCUMENTS ARE TRUE. ' SINCE THE CONTENTS OF DOCUMENT MARKED SRM-5 ARE NOT REBUTTED, THE ONUS WH ICH IS ON ASSESSEE, THE EVIDENCE SANDS AS A STRONG EVIDENCE A GAINST ASSESSEE. BY NOT DOING SO HE HAS NOT ESTABLISHED THAT THE STO CK INVENTORY TAKEN BY ASSESSING OFFICER AS INCORRECT. 20. IN REGARD TO CAPACITY OF GODOWN, THE ASSESSING OFFICER DOING HEARING SUBMITTED THAT THE STOCK WAS NOT MERELY IN GODOWN BUT IN OPEN AND TEMPORARY SHEDS. KEEPING THE FINDINGS AND BACKG ROUND IN PARAGRAPH 18 AND 19 I HOLD THAT THE ARGUMENT OF SUB ARNA RICE MILL AY 2010-11 APPELLANT IN THIS REGARD CARRIES NO WEIGHT SINCE THERE ARE SUPPORTIVE EVIDENCES MAINLY DOCUMENT SRM-5 ESTABLIS HES EXISTENCE OF UNACCOUNTED STOCK. 21. IN REGARD TO FCI INSPECTION, THE FACT THAT ASSE SSING OFFICER HAS CONDUCTED A PHYSICAL VERIFICATION AND PREPARED AN I NVENTORY. THE REPORT OF ASSESSING OFFICER IS AS UNDER: 'THE SECOND POINT IS REGARDING THE BOOKS MAINTAINED BY THE ASSESSEE UNDER D.C.F.&S/FCI GUIDELINE-REGISTERS IN FORM-I, II, III AND IV ARE MAINTAINED BY THE RICE MILLS UNDER D .C.F.&S/FCI GUIDELINE. AS SEEN IN THE ABOVE POINT THAT THERE WE RE DIFFERENT STOCKS NOTED, BY THE ASSESSEE FIRM ITSELF, IN THE F ORM REGISTERS (REGISTER-IV) AND IN PADDY STOCK REGISTER SRM-5, AS EVIDENT FROM SURVEY STATEMENT (QUESTION NO.8) HOWEVER, FOR ASSESSMENT PURPOSE THE STOCK CONSIDERED ARE AS PER PHYSICAL ST OCK FOUND FOR IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 6 DIFFERENT ITEMS IN THE PREMISES OF THE ASSESSEE ON THE DAY OF SURVEY.' NO REASONS ARE ADDUCED AS TO WHY FCI INSPECTOR HAS TO PREVAIL OVER THE PHYSICAL VERIFICATION MADE BY ASSESSING OFFICER THE MANNER AND EFFORT PUT IN SUCH CERTIFICATION BY FCI IS A FACT N OT ESTABLISHED BY ASSESSEE. IT IS NOT PROVED THAT FCI INSPECTOR DID T AKE STOCK AND NO IN MECHANICAL MANNER WHERE INSPECTORS VISIT GODOWN AFT ER ANOTHER FOR PERIODIC CHECKING. FURTHER THE STOCK TAKEN BY ASSES SING OFFICER IS LEGAL AND IN ACCORDANCE WITH PROVISIONS OF SECTION 133A B Y A TEAM. ON THE OTHER HAND THE FCI INSPECTOR HAS MERELY SIGNED A DO CUMENT PREPARED BY ASSESSEE AND THERE IS NO ENTRY OF HAVING VERIFIE D STOCK AND FOUND CORRECT. ALSO ON 24.03.2010, THE DAY OF SURVEY, THE RE WAS NO ENTRY OF VERIFICATION BY AN FCI INSPECTOR. 22. IN THE FINAL HEARING THE EMPHASIS LAID BY APPEL LANT IS THAT THE EVIDENCE ISSUED BY ASSESSING OFFICER IN FARMING ASS ESSMENT IS ON BASIS OF CONFESSIONAL STATEMENT. HE RELIED ON THE I NSTRUCTION OF CBDT IN F. NO.286/21203-IT (LNV) DATED 10.03.2003 WITH EMPH ASIS ON LINE 2. THE INSTRUCTION UNDER SUBJECT ' CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OP ERATION ' READS AS UNDER:- 'INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED T O CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEA RCH & SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURNS OF INCOME IN THESE C IRCUMSTANCES, ON CONFESSIONS, DURING THE COURSE OF SEARCH & SEIZU RE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND C ONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME TAX DEPARTMENTS. SIMILARLY, WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH IT SEIZURES A ND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONF ESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRA RY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES/M ATERIALS GATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATI ONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT OR DERS. 23. THE AUTHORISED REPRESENTATIVE ALSO STATED THAT SRM-5 NEVER FINDS MENTION IN ASSESSMENT ORDER AND THAT HE HOLDS THAT SRM-5, 6 AND 7 NEVER EXISTED AND ITS RECORDING IN SURVEY PROCEEDIN GS IS PART OF CONFESSIONAL STATEMENT. SUBARNA RICE MILL AY 2010-11 24. THE MATTER IS CONSIDERED. THE EVIDENCED IN POSS ESSION OF ASSESSING OFFICER HAS SUPPORT OF LAW. STATEMENT REC ORDING DURING SURVEY IS PERMITTED UNDER SECTION 133A(3 )(III). ST OCK TAKING IS PERMITTED IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 7 UNDER SECTION 133A(3)(II). PLACING MARKS OF IDENTIF ICATION IN DOCUMENTS LIKE SRM-5 IS PERMITTED UNDER SECTION 133A(3)(I). H ENCE EVERY EVIDENCE OBTAINED BY ASSESSING OFFICER IS ONE THAT IS LEGALLY OBTAINED. 25. IN REGARD TO ALLEGED CONFESSION, THE REMEDY IS AVAILABLE IN FORM OF RETRACTION SUBJECT TO FULFILLING CERTAIN CONDITIONS SPELT OUT IN JUDICIAL DECISIONS SPELT OUT IN PARAGRAPH 13 OF THIS ORDER. THE MATTER IS DISCUSSED IN PARAGRAPH 13 OF THIS ORDER. THE APPELL ANT HOLD THAT FILING A RETURN OF INCOME WITH BOOK RESULTS TANTAMOUNT TO RE TRACTION AND FOR THIS HE RELIES ON LINE 2 OF CBDT INSTRUCTION. LINE 2 HIG HLIGHTS THE BACKGROUND OF ISSUE OF INSTRUCTION AND NOT THAT FIL ING OF RETURN OF INCOME IN VARIATION WITH STATEMENT TANTAMOUNT TO RETRACTIO N. IN FACT THE INSTRUCTION IS INTENDED TO DISCOURAGE DISCLOSE OF A DDITIONAL INCOME NOT BASED ON EVIDENCES. IN THE INSTANT CASE THERE IS NO DISCLOSURE OF ADDITIONAL INCOME. ONLY PERMISSIBLE ACTS HIGHLIGHTE D I PRECEDING PARAGRAPH HAS BEEN CONDUCTED BY ASSESSING OFFICER. HENCE THE CONTENTS OF F.NO.286/2/2003-IT(INV) IS NOT APPLICAB LE IN THE CONTEXT OF THE CASE. IT IS ADDED HERE THAT THE ASSESSING OFFIC E WHO (A) HAD CONDUCTED SURVEY, (B) RECORDED STATEMENT OF 06.11.0 12 AND COMPLETED ASSESSMENT AND (C) WHO HAD GIVEN REPORT ON 20.08.20 14 ARE DIFFERENT AND NO BIAS CAN BE ATTRIBUTED I THEIR FINDINGS. 26. ANOTHER OBJECTION TAKEN BY AUTHORISED REPRESENT ATIVE IS THAT THE ASSESSING OFFICER PARTLY USED FIGURES IN HIS BOOKS OF ACCOUNTS IN DETERMINING UNACCOUNTED STOCK. THE STOCK WAS TAKEN ON 24.03.2010. THE ASSESSING OFFICER CONSIDERED TRANSACTIONS IN TH E PERIOD BETWEEN DATE OF SURVEY AND 31.03.2010 TO MAKE A COMPARISON WITH THE DISCLOSED STOCK AS ON 31.03.2010. COMPARISON CAN AN D SHALL ALWAYS BE BETWEEN LIKES. HENCE THE STANDARDIZATION WAS MAD E BY ASSESSING OFFICER. HE CAN EITHER WORK OUT FIGURE AS DONE BY H IM TO MAKE STANDARDIZED COMPARISON AS ON 31.03.2010 OR RETRO-W ORK FROM THE FIGURES IN THE BOOKS OF ACCOUNTS TO COMPUTE ACCOUNT ED STOCK AS ON 24.03.2010. HE CHOSE ONE OF THE OPTIONS AND SUCH ST ANDARDIZATION EXHIBITS FAIRNESS ON PART OF ASSESSING OFFICER AND THERE IS NO INFIRMITY ON ANY COUNT. THIS OBJECTION THEREFORE IS NOT ACCEP TED. 27. THE APPELLANT ALSO STATED THAT THE STOCK INVENT ORY OF THE MAGNITUDE CANNOT BE TAKEN IN THE LIMITED TIME OF 12 HOURS AS WEIGHING AND DETERMINING THE STOCK IS A JOB OF COLOSSAL MAGNITUD E. I FIND FROM THE SURVEY PROCEEDINGS THAT WEIGHING IS NOT DONE BUT IN VENTORY OF BAGS (EXCEPT A SMALL PART IN FORM OF LOOSE RICE) IS TAKE N BY COUNTING THE NUMBER OF BAGS IN THE STACK. 28. IN PAGES 6 AND 7 THE CASE DECISIONS RELIED UPON BY APPELLANT IS MENTIONED. THE ASPECTS OF RETRACTION AND VALUE OF S TATEMENT HAS BEEN ADDRESSED IN THIS ORDER. THE ADDITION MADE BY ASSES SING OFFICER IS NOT EXCLUSIVELY BASED ON STATEMENT AND THE STATEMENT IS SUPPORTED BY DOCUMENT DOCUMENT MARKED SRM-5. 29. THE APPELLANT ALSO STATED THAT DOCUMENT MARKED SRM-5 FINDS NO MENTION IN ASSESSMENT ORDER AND HENCE SHOULD NOT BE CONSIDERED ION THE APPEAL STAGE. THE CONTENTS OF SRM-5 IS PART OF ASSESSMENT RECORDS AND FINDS MENTION IN THE REPORT OF ASSESSING OFFICE R DATED 20.08.2014 WHICH THE APPELLANT HAD OPPORTUNITY TO GO THROUGH D URING APPEAL PROCEEDINGS. THE CONTENTS OF SRM-5 ADS SUPPORT TO T HE OVERALL FINDING IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 8 OF THE ASSESSING OFFICER. THE EVIDENCE IS A PRE-EXI STING ONE AND BY MERELY NOT MENTIONING THE SAME EXPLICITLY IN ASSESS MENT ORDER DOES NOT MAKE IT A DOCUMENT NOT PART OF THE ONGOING PROC EEDINGS OR VITIATE THE ASSESSMENT ORDER. IN ANY CASE POWER OF CIT(APPE ALS) IS CO- TERMINUS WITH THAT OF ASSESSING OFFICER AND CAN BE CONSIDERED AT APPEAL STGE. EXPLANATION I TO SECTION 251 READS ' IN DISPOSING OF AN APPEAL, THE COMMISSIONER (APPEALS) MAY CONSIDER AND DECIDE ANY MATTER ARISING OUT OF THE PROCEEDINGS IN WHICH THE ORDER APPEALED AGAINST WAS PASSED, NOTWITHSTANDING THAT SUCH MATTE R WAS NOT RAISED BEFORE THE COMMISSIONER (APPEALS) SUBARNA RICE MILL AY 2010-11 BY THE APPELLANT. ' THE ARGUMENT RAISED BY APPELLANT IN THIS REGARD I S ALSO NOT ACCEPTED. 30. IN THE COURSE OF HEARING ON 20.08.20104, NEW EV IDENCE WAS FILED. THIS IS A COPY OF STOCK STATEMENT GIVEN BEFORE ORIE NTAL BANK OF COMMERCE AND IS TO JUSTIFY THE STOCK BALANCE REPORT ED IN BALANCE SHEET. THIS EVIDENCE COMES IN PAR WITH THE NATURE OF EVIDENCE WITH REGARD TO FCI INSPECTION RELIED ON BY APPELLANT AND A DECISION ON THE SAME IS ALREADY MADE. AS MATTER OF FAIRNESS EVIDENC E ON FCI WAS ADMITTED AND ADJUDICATED. THE STATEMENT GIVEN ORIEN TAL BANK OF COMMERCE WAS IN POSSESSION OF ASSESSEE EVEN DURING ASSESSMENT PROCEEDINGS, NOT PRODUCED. AS NO JUSTIFICATION EXIS TS TO BE COVERED UNDER RULE 46A THE EVIDENCE IS ORDINARILY INADMISSI BLE. HOWEVER THE SAME IS FOUND TO BE A SELF- DECLARATION AND AGAIN N O THERE IS OF ENTRY OF ANY INDEPENDENT VERIFICATION. THEREFORE, EVEN IF AD MITTED, THE SAME DOES NOT HELP APPELLANT IN ANY MANNER. 31. IN SUMMARY THE FACTS ARE:- A. STOCK INVENTORY TAKEN DURING SURVEY IS NOT FAULT Y AS ALLEGED. B. THERE IS MATERIAL IN POSSESSION OF ASSESSEE VIZ DOC UMENT MARKED SRM-5, FOUND DURING SURVEY, BUT NOT PRODUCED WHEN NOTICE UNDER SECTION 131 WAS ISSUED, ESTABLISHING E XISTENCE OF UNACCOUNTED STOCK. C. CONDITION FOR A VALID RETRACT ION NOT SATISFIED. D. ALL LEGAL AND FACTUAL ARGUMENTS ARE FOUND TO BE INAPPLICABLE/VALIDLY REBUTTED BY ASSESSING OFFICER AND ALSO IN THIS ORDER. 32. IN VIEW OF DISCUSSION ABOVE, CONSIDERING ALL AS PECTS, I UPHOLD THE ADDITION OF RS.3,85,01,830 TO RETURNED INCOME MADE BY ASSESSING OFFICER AND DISMISS THE GROUND OF APPEAL. THE FACTO RS THAT GUIDED IN ARRIVING AT SUCH A DECISION INCLUDE (A) NON PRODUCT ION OF DOCUMENTS MARKED SRM 5, 6 AND 7 (LAST KNOWN POSSESSION IS WIT H ASSESSEE HIMSELF) DURING SURVEY BEFORE ASSESSING OFFICER DUR ING AS PROCEEDINGS, (B) EXISTENCE OF SUPPORTIVE MATERIAL VIZ DOCUMENT M ARKED SRM-5 ( THE CONTENTS OF WHICH ARE KNOWN AND ITS EXISTENCE IS AC KNOWLEDGED AS LATE AS 6.11.2012 ) WHICH ESTABLISHES THAT THE PHYSICAL STOCK MATCHED CLOSELY WITH STOCK RECORDED IN THE DOCUMENT, (C) PR ESUMPTION AS PER SECTION 292C WHICH IS NOT REBUTTED. (D) NO CASE IS ESTABLISHED THAT A CONFESSIONAL STATEMENT IS TAKEN DURING SURVEY AND ( E) CONDITIONS FOR A VALID RETRACTION, IF WARRANTED, KEEPING IN VIEW THE SETTLED JUDICIAL POSITION ON THE MATTER ARE NOT MET. ALL ABOVE (A) T O (E) AND OTHER POINTS IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 9 RAISED BY APPELLANT ARE ADEQUATELY ADDRESSED IN THI S ORDER IN PRECEDING PARAGRAPHS.' 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSE E HAS NOT PRODUCED BOOKS OF ACCOUNT BEFORE THE AO OR BEFORE CIT(A) DURING TH E COURSE OF ASSESSMENT PROCEEDINGS OR APPELLATE PROCEEDINGS. THE AO WHILE FRAMING ASSESSMENT HAS GONE THROUGH THE AUDITED ACCOUNTS AND THE STOCK REG ISTER MAINTAINED IN FORM NO IV. HE AFTER COMPUTING CLOSING STOCK OF PADDY TR EATED THE DIFFERENCE AS UNDISCLOSED PURCHASE OF PADDY AT 37647.20 QUINTALS. SIMILARLY, THE AO TREATED THE EXCESS UNDISCLOSED STOCK OF BRAN AT 45.5 QUINTA LS. THE AO FOR COMPUTING THESE THREE DIFFERENTIAL ITEMS TAKEN THE CLOSING ST OCK AS PER AUDITED ACCOUNTS AND CLOSING STOCK AND ALSO ADDED THE TOTAL PURCHASE S AND MILLED PADDY AND ALSO THE COMPARATIVE STOCK FOUND DURING THE COURSE SUBAMA RICE MILL AY 2010-11 OF SURVEY AS ON THE DATE OF SURVEY. THE LD. COUNSEL FOR THE ASSESSEE BEFORE US CLARIFIED THAT THE AO NOTED A FACT THAT S TOCK WAS NOT MERELY IN GOD OWN BUT WAS IN OPEN TEMPORARY SHED ALSO. BUT HE CON TESTED THAT THIS MUCH STOCK CANNOT BE WEIGHED WITHIN ONE DAY BECAUSE SURV EY WAS CONCLUDED ON THAT VERY DATE I.E. ON 24.03.2010. LD. COUNSEL FOR THE ASSESSEE ALSO PRODUCED A PHYSICAL VERIFICATION REPORT AS PREPARED BY FCI W HILE INSPECTING THE STOCK OF PADDY. WE FIND THAT THE AO HAS NEVER DENIED THAT TH E SALES ARE NOT OUT OF THESE UNACCOUNTED PURCHASES. THE SALES MADE ARE ACC EPTED AS IT IS. ONCE THE SALES ARE ACCEPTED, THE ENTIRE UNDISCLOSED PURC HASES CANNOT BE ADDED FOR COMPUTING THE INCOME OF THE ASSESSEE EXCEPT BY APPL YING A PROFIT RATE I.E. GROSS PROFIT AS DECLARED BY ASSESSEE IN REGULAR BOO KS OF ACCOUNT OR THE GROSS PROFIT DECLARED BY OTHER CONCERNS IN THE SIMILAR TR ADE. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES AND PARTICULARLY WHEN THE B OOKS OF ACCOUNTS WERE NOT PRODUCED BY THE ASSESSEE BEFORE THE AO, THE BOOK RE SULTS CANNOT BE ACCEPTED AND THE SAME ARE TO BE REJECTED. IN ANY CA SE, THE COMPUTATION METHOD OF THE AO FOR DETERMINING UNDISCLOSED PURCHA SES IS TAKEN THROUGH MATHEMATICAL EXERCISE. WE FIND THAT THE ASSESSEE MA INTAINING THE STOCK AND PRODUCTION REGISTERS AS PER THE GUIDELINES OF FCI, WHICH ARE FORM NO. I TO IV. THE REGISTERS ARE REGULARLY CHECKED BY FCI FOR THE REASONS THAT 40% OF THE PRODUCTION WOULD HAVE BEEN SOLD TO FCI AS PER GOVER NMENT ORDER. THE AO SHOULD HAVE VERIFIED THE CLOSING STOCK IN VIEW OF S TOCK REGISTER MAINTAINED FOR THE PURPOSES OF FCI. EVEN OTHERWISE, THIS STOCK INV ENTORY OF THE MAGNITUDE OF 43,447.20 QUINTALS IS IMPOSSIBLE TO BE WEIGHED AND DETERMINE THE CLOSING STOCK WITHIN THE TIME-LIMIT OF 12 HOURS, WHICH WAS THE PERIOD DURING WHICH THE SURVEY PARTY STAYED IN THE BUSINESS PREMISES OF THE ASSESSEE. FROM THE FINDING OF SURVEY, IT IS CLEAR THAT WEIGHING IS NOT DONE BUT ONLY COUNTING OF BAGS OR INVENTORY OF BAGS IS TAKEN BY THE SURVEY PARTY C OUNTING THE NUMBER OF BAGS IN THE STACKS. WE FIND THAT THE FCI INSPECTOR HAS S IGNED THE STOCK REGISTER AS ON 31.03.2010 BY MENTIONING THE 5700 QUINTALS OF PA DDY, WHEREAS THE AO DETERMINED THE STOCK AS 43,347.20 QUINTALS. THE ASS ESSEE HAS MAINTAINED STOCK REGISTER IN FORM NO I, 11, III & IV UNDER DCF &S/FCI GUIDELINE AS MAINTAINED BY THE RICE MILL. NEITHER AO NOR CIT(A) HAS CROSS-VERIFIED THE REGISTERS MAINTAINED BY ASSESSEE. IN SUCH CIRCUMSTA NCES, WE DIRECT THE AO TO RECOMPUTE THE INCOME BY APPLYING GROSS PROFIT RATE ON THE UNACCOUNTED PURCHASES, WHICH ARE SOLD OUT. THE SUBARNA RICE MIL L AY 2010-11 ASSESSEE HAS DISCLOSED THE GROSS PROFIT AND COMPARATIVE STAT EMENT OF TURNOVER AND IT(SS)A NO.36/RAN/2015 A.Y. 2010 -11 SANWARMAL PODDAR VS. DCIT CC-DHANBAD PAGE 10 GROSS PROFIT FILED DURING THE COURSE OF HEARING BEF ORE US, WHICH READS AS UNDER:- ASSTT. YEAR TURNOVER (RS) G.P. (RS) RATIO 2010-11 3,53,60,711.00 34,72,298.00 9.82% 2009-10 3,59,63,785.00 24,34,389.00 6.76% 2008-09 2,72,28,511.00 24,77,402.00 9.09% 2007-08 NIL NIL NIL IN VIEW OF THE ABOVE GROSS PROFIT DECLARED BY THE A SSESSEE, WE ARE OF THE VIEW THAT THESE ARE UNDISCLOSED PURCHASES AS SOLD BY THE ASSE SSEE AND SALE IS ADMITTED BY THE REVENUE, A REASONABLE GP RATE WILL BE 10% FOR C OMPUTING PROFIT OF THE ASSESSEE. ACCORDINGLY, WE DIRECT THE AO TO RECOMPUTE THE INCO ME AFTER DELETING THE ADDITION MADE ON ACCOUNT OF UNDISCLOSED PURCHASES BUT APPLY GP RATE OF 10% ON THE UNDISCLOSED PURCHASES. THE AO IS DIRECTED ACCORDING LY. LEARNED CIT-DR FAILS TO DISPUTE THAT ASSESSEES DIS CLOSURE HAVING SEARCH AMOUNTING TO 60 LAC (SUPRA) VERY WELL SURPASSES THE PROFIT ELEME NT IN THE IMPUGNED TRADING PURCHASES ADDITION OF 92.29 LAC IN ISSUE. WE THEREFORE DELETE THE IMPUGNED ADDITION FOR THIS PRECISE REASO N ALONE. 4. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN ACCORDANCE WITH RULE 34(4) OF ITAT RULES BY PUTTING ON NOTICE BOARD ON 15/02/2019 SD/- SD/- ( ) ('# ) (DR. A.L. SAINI) (S.S.GODARA) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP $- 15 / 02 /2019 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-SANWARMAL PODDAR, CHHAPARIA & ASSOCIATES , CHARTERED ACCOUNTANTS 8, CAMAC ST, S HANTINIKETAN BLDG. 5 TH FL. R. NO.2, KOLKAT-17 2. /RESPONDENT-DCIT, CENTRAL CIRCLE AAYAKAR BHAWAN, L. C. ROAD,3 RD FLOOR, ROOM NO.405-8, DHANBA D-826001 3. 0 3 / CONCERNED CIT RANCHI 4. 3- / CIT (A) RANCHI 5. 6 ##0, 0, / DR, ITAT, RANCHI 6. < / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.PS, I TAT, RANCHI