SHRI KANHAIYA LAL SARAF,AMBIKAPUR (CG) V. THE INCOME TAX OFFICER, AMBIKAPUR, AMBIKAPUR (CG)

ITA 172/RPR/2017

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The case involves Shri Kanhaiya Lal Saraf, who faced an assessment order for the year 2010-11, which was initially upheld by the CIT(Appeals) but later challenged at the ITAT. The assessee withdrew his appeal to avail benefits under the Direct Tax Vivad Se Vishwas Scheme, 2020, but faced issues in obtaining the benefits due to procedural rejections. The High Court directed the ITAT to restore the appeal and decide on merits after finding procedural technicalities in the rejection of the assessee's applications. The ITAT, after hearing, decided to remand the case back to the CIT(Appeals) for a thorough examination of the merits, particularly focusing on the valuation of excess stock found during a survey and the maintenance of books of accounts by the assessee.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 774961 (ITAT-RAIPUR)
• Duration Of Justice: 8 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 07-06-2017
• Other Referred Cases: P.M. Paul vs. The State Tax Officer & Ors. {Special Leave Petition (Civil) Diary No(s). 8386/2023}
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: YOGESH SETHIA
• Keywords: Loose papers
• Section: 144

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी पाथ[ सारथी चौधरȣ, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं./ITA No.172/RPR/2017 Ǔनधा[रण वष[ /Assessment Year : 2010-11 Shri Kanhaiya Lal Saraf Sadar Road, P.O Ambikapur, Dist. Sarguja (C.G) PAN: APEPS2292D .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer, Ward-Ambikapur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri Yogesh Sethia, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 03.09.2025 घोषणा कȧ तारȣख / Date of Pronouncement : 03.09.2025 Printed from counselvise.com 2 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM This is a remand matter from the Hon’ble Jurisdictional High Court vide WPT No.65 of 2025, dated 17.06.2025. 2. The brief facts in this case are that the assessment order was passed in respect of the assessee on 28.03.2013, against which, the assessee had preferred an appeal before the Ld. CIT(Appeals) on 25.04.2013 which was dismissed vide order dated 25.03.2017. The assessee further carried the matter as second appeal before the ITAT, Raipur in ITA No.172/RPR/2017. Meanwhile, the Government of India notified the Direct Tax Vivad Se Vishwas Scheme, 2020 and for availing the aforesaid settlement scheme, the assessee as per the mandatory condition applied for withdrawal of the appeal before the Tribunal which was withdrawn vide order dated 02.07.2021. The assessee has also paid taxes on the disputed arrears on 21.10.2022 and 23.12.2022, the assessee filed Form No.4 intimating payment of taxes to the Pr. Commissioner of Income Tax, Raipur-1 and requested for issuance of Form No.5 on 10.07.2024. The assessee had also filed Form No.1 under Vivad Se Vishwas Scheme, 2024 on 24.11.2024. However, the Pr. Commissioner of Income Tax, Raipur-1 rejected Form No.1 vide order dated 28.11.2024 as no appeal was pending as on 22.07.2024. Thereafter, Printed from counselvise.com 3 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 the assessee filed miscellaneous application to recall the order passed in ITA No.172/RPR/2017 and the same was also rejected by the Tribunal on the ground of delay itself vide order dated 10.02.2025 since as per Section 254(2) of the Income Tax Act, 1961 (for short ‘the Act’), the Tribunal does not have the power to condone the delay for delayed filing of miscellaneous application. 3. The assessee further carried the matter before the Hon’ble Jurisdictional High Court. In this regard, the Hon’ble High Court vide WPT No.65 of 2025, dated 17.06.2025 had held and observed as follows: “3. Learned counsel for the petitioner would submit that he had applied for withdrawal of the appeal pending before the ITAT as a pre-condition for availing the benefit under the said scheme. He further submits that when the appellant was not allowed the benefit under the said scheme, then his appeal ought to be heard on merits but his application for restoration of the appeal has also not been allowed only on the technical grounds, which is not sustainable. He places reliance on the judgment dated 01.09.2023 rendered by Hon’ble Supreme Court in the matter of P.M. Paul vs. The State Tax Officer & Ors. {Special Leave Petition (Civil) Diary No(s). 8386/2023}. 4. Per contra, learned counsel for the respondent would support the order impugned. 5. In the case at hand, the petitioner/assessee had applied for withdrawal of the appeal only as a pre-condition for availing the said benefit, however, for one or another reason, the same could not be entertained, therefore, this Court is of the opinion that appeal preferred by the petitioner ought to have been heard on merits. Printed from counselvise.com 4 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 6. In view of the aforesaid, the ITAT is directed to restore the appeal bearing ITA No.172/RPR/2017 and the Authority shall decide the said appeal on merits, unless the petitioner is able to get benefit under any scheme of the Department. 7. With the aforesaid observation/direction, this Petition stands disposed of.” 4. That as discernible from the fore-going paragraphs of the order of the Hon’ble Jurisdictional High Court (supra), at Para 6, it is mentioned that the Tribunal “shall decide the said appeal on merits, unless the petitioner is able to get benefit under any scheme of the Department.” Thus, to ascertain the present status of the assessee, whether they have got any benefit under any scheme of the Department or not, this Bench had directed the assessee to furnish an affidavit. In compliance to the said direction, the assessee had furnished an affidavit dated 30.07.2025 which was received by the Tribunal on 08.08.2025. The said affidavit is made part of this order and extracted as follows: Printed from counselvise.com 5 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 Printed from counselvise.com 6 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 5. Coming to the merits of the case, there was survey in the premises of the assessee wherein stock of Rs.39,88,977/- was found and on the date of survey the stock was estimated at Rs.20 lacs as per purchases found with evidence. Accordingly, the A.O found excess stock of Rs.19,88,977/-. During survey proceedings, certain loose papers were also found and impounded. The total amount mentioned in the loose papers was computed at Rs.16,44,972/-. That the A.O opined the total investment including cash found of Rs.29,385/- during survey, totaling to Rs.36,63,334/-. After adding the income shown by the assessee, total Printed from counselvise.com 7 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 income was assessed at Rs.38,12,954/-. That since the assessee had not disclosed the gross sale before the Commercial Tax Authorities correctly and in the income tax return, he had shown gross sale of Rs.36,46,244/-. Therefore, the net profit was worked out at 4.1% on this turnover. The Ld. CIT(Appeals) observed that the loose papers in absence of books of accounts could not be co-related by the amounts as disclosed to the department by the assessee. Since the assessment was completed by the A.O u/s. 144 of the Act and even during appellate proceedings, there was no effective submission made by the assessee and mostly, he had sought adjournment, therefore, the assessee was not able to explain various discrepancies which were found during survey proceedings and estimation that was made. The Ld. CIT(Appeals) accordingly held that since valuation was done by the registered valuer, position of stock found during survey on physical verification cannot be doubted. The assessee had not co- operated during assessment proceedings and had retracted from statement that he maintains the books of accounts. That based on the possibility that since valuation was done by the registered valuer, it was accepted by the Ld. CIT(Appeals) and the appeal of the assessee was dismissed. 6. At the time of hearing, the Ld. Counsel for the assessee submitted that the Ld. CIT(Appeals) in his order had himself admitted that the Printed from counselvise.com 8 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 valuation of stock is found in the loose papers impounded during survey and in absence of books of account both therefore cannot be co-related regarding amounts disclosed to the department by the assessee. Therefore, there remains ambiguity as regards the exact amount of excess stock which can be brought within the purview of taxation. 7. Per contra, the Ld. Sr. DR on principle supported the findings of the sub-ordinate authorities. However, she submitted that in order to achieve a logical end and in the interest of substantial justice, a proper factual verification has to be made in this regard before arriving at a conclusion subject to the fact that assessee shall provide all relevant documents before the department. 8. Having heard the submissions of the parties herein, it is evident that regarding exact determination of the value of excess stock found during the course of survey in the premises of the assesse, on one hand there are certain loose papers which were impounded consisting a particular value, at the same time, the books of account were not produced before the Ld. CIT(Appeals) and therefore, he himself admitted that it was difficult to co-relate the amount that was disclosed to the department by the assessee. In the interest of substantial justice, this aspect needs to be verified and enquired by the Ld. CIT(Appeals) in terms with Section 250(4) & (6) of the Act. The Ld. Counsel for the assessee also Printed from counselvise.com 9 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 submitted that they are willing to furnish all relevant evidence and documents, if one opportunity is provided. Accordingly, I set-aside the order of the Ld. CIT(Appeals) and remand the matter back to his file for denovo adjudication on merits. At the same time, the assessee is directed that this being final opportunity, he shall comply with all hearing notices from the office of the Ld. CIT(Appeals) and represent his case on merits. More specifically, it is directed that the assessee shall furnish evidence as to co-relating the amounts located in the loose papers found in the premises of the assessee and the books of account of the assessee, if any. The verification of the department also shall encompass regarding the fact that whether the assessee maintains books of accounts or not. In this regard, the Ld. CIT(Appeals) may call for a remand report from the A.O after due verification. 9. As per the above terms grounds of appeal raised by the assessee are allowed for statistical purposes. 10. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 03rd day of September, 2025. Sd/- (PARTHA SARATHI CHAUDHURY) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर / Raipur; Ǒदनांक / Dated : 03rd September, 2025. Printed from counselvise.com 10 Shri Kanhaiya Lal Saraf Vs. ITO, Ward-Ambikapur (C.G.) ITA No.172/RPR/2017 SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The Pr. CIT-1, Raipur (C.G.) 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “एक-सदèय” बɅच, रायपुर / DR, ITAT, “SMC” Bench, Raipur. 5. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur Printed from counselvise.com "