SURESHCHANDRA D KHATOD (HUF) V. INCOME TAX OFFICER, WARD 1(3)

TAXAP/783/2008

AI Insights

The case revolves around a dispute concerning the ownership of excess stock found during a survey at the business premises of the appellant, Sureshchandra D Khatod (HUF), who operates a proprietary concern named Nirav Industries. The Income Tax Officer (ITO) had added the value of this excess stock to the appellant's income, which was contested. The CIT(A) initially ruled in favor of the appellant, but the Tribunal reversed this decision, leading to the present appeal. The High Court examined the procedural and substantive aspects of the Tribunal's decision, focusing on whether the Tribunal had appropriately considered the evidence and arguments presented.

• Counselvise Citation: [2020] 140 COUNSELVISE.COM (IT) 769036 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 18-02-2020
• Assessment Year: misc
• Other Referred Cases: Omar Salay Mohamed Sait v. Commissioner of Income Tax, Madras
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT; KARAN SANGHVI
• Assessee Lawyers: B S SOPARKAR; SWATI SOPARKAR
• Keywords: Assessment; Excess stock; Income Tax; Job Work; Survey
• Section: 251; 133A; 260A; 250(6)

Judgement Text

"C/TAXAP/783/2008 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 783 of 2008 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? ====================================== SURESHCHANDRA D KHATOD (HUF) Versus INCOME TAX OFFICER, WARD 1(3) ====================================== Appearance: MR. B. S. SOPARKAR ADVOCATE WITH MRS SWATI SOPARKAR(870) for the Appellant MRS MAUNA M BHATT(174) WITH MR. KARAN SANGHVI, ADVOCATE for the Opponent ====================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 18/02/2020 Page 1 of 30 C/TAXAP/783/2008 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) 1. This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 (for short ‘the Act, 1961’) and is arising out of the order dated 18th August 2007 passed by the Income Tax Appellate Tribunal, Rajkot Bench, Rajkot (for short “the Tribunal”) in ITA no.396/Rjt/2002 for A.Y. 2001­02. 2. This Court vide order dated 18th April 2009 admitted the appeal on the following substantial questions of law. “(a) Whether on the facts and in the circumstances of the case, the ITAT was right in holding that the assessee was owner of the excess stock of Rs.14,83,420? (b) Whether on the facts and in the circumstances of the case, the ITAT was right in reversing the order of CIT(A) without giving any cogent reasons whatsoever and without giving any finding for deciding the appeal against the appellant? (c) Whether in the facts and under the circumstances of the case, the decision of the Page 2 of 30 C/TAXAP/783/2008 JUDGMENT ITAT was not perverse inasmuch as: (i) all the details were filed before the Tribunal and the same ought to have been looked into and decided the appeal; (ii) while deciding the appeal extracts of assessment order and finding of CIT(A) has been reproduced; (iii) only stating that CIT(A) has not given finding for holding in favour of appellant; (iv) detailed paper book ought to have been looked into which has not been done.” 3. The appellant assessee is a HUF having a proprietary concern by the name Nirav Industries. It is engaged in the business of trading in non­traders metal working as commission agent. A survey under Section 133A of the Act, 1961 was carried­out on 13th September 2000 at the business premises of the appellant assessee. During the course of survey, discrepancy of 25115 kg. of stock was worked­out. The appellant assessee submitted the explanation that the scrap material was received in two parts from M/s. Shubham Enterprise vide bill nos.5 and 6 and such bills were received during the course of survey in front of Page 3 of 30 C/TAXAP/783/2008 JUDGMENT survey officials. 4. The assessing officer during the course of assessing proceedings issued show cause notice calling upon the appellant assessee to explain the discrepancy in the stock of scrap found during the course of survey. The assessee vide letter dated 16th February 2004 explained that during the course of survey itself the stock was cross verified. However, the assessing officer rejected the explanation of the assessee and made addition of Rs.14,83,420/­ being the value of the excess stock of 22115 kg. and sum of Rs.2437/­ being difference in cash. 5. The appellant assessee being aggrieved and dissatisfied with the assessment order preferred appeal before the CIT(A). 6. The CIT(A) allowed the appeal on the ground that proper explanation was submitted during the survey proceedings and it was duly cross verified by the department and found to be correct and therefore, there was no reason for the Assessing Officer to treat the said discrepancy as unexplained and to make addition thereof. 7. The order passed by the CIT(A) was challenged before the Tribunal. The Tribunal by the impugned order set aside the order passed by the CIT(A) with following observations. Page 4 of 30 C/TAXAP/783/2008 JUDGMENT “7. We have considered the rival contentions and found from the record that excess stock of 22115 kg was found during the course of survey u/s.133A at assessee’s business premises. It was submitted that the excess stocks belong to third party and has been sent to the assessee for job work. Statement was recorded by the survey team of different persons and there was contradiction in the statements. No documentary evidence with regard to transportation of goods and octroi duty payment for entry of goods to the city, in respect of goods belonging to third party, having been sent to assessee for job work, could be produced either during course of survey proceedings or thereafter at the time of assessment proceedings, even the assessee has denied the identity of the person to whom goods were claimed to be belonging as per the finding recorded by the Assessing Officer. In view of these observations, the Assessing Officer has concluded as under: 1. Goods of Bill no.5 & Bill no.6 were found at the business premises of the assessee at 424/2, GIDC, Udyognagar and Naghedi Godown. 2. The assessee says that the goods belongs to Shubam Enterprise, which is the concern situated at Bhavnagar whereas the goods are found at Jamnagar. Why the firm situated at Bhavnagar would send the goods for cutting to Jamnagar. If the goods are send from Bhavnagar to Jamnagar for cutting job work there must be fixed Page 5 of 30 C/TAXAP/783/2008 JUDGMENT rate/charges of cutting otherwise how huge stock more than 10,000 Kg would have been sent to Jamnagar. 3. On verification of the copies of the bill it is clearly mentioned in the Bill “Sold to M/s. Nirav Industries, Post Khodiyar Colony, Village – Naghedi, Jamnagar”. 4. The assessee could not produce transporter receipt at the time of survey as well as during the course of assessment proceedings. 5. At Bhavnagar no godown was found only open plot of land was found where no goods of brass can be stored. 6. These bills were not found at the time of survey. 7. There is no proof for any payment of octroi or any cartage charges paid for bringing the goods to Naghedi. 8. The assessee has denied the identity of the Shri Sagarmal J. Shah and the goods are claimed to be belonging to Shri Sagarmal J. Shah. 9. Shri Sagarmal J. Shah has filed revised Page 6 of 30 C/TAXAP/783/2008 JUDGMENT return on 29.10.2001 i.e. after date of survey in the case of Sureshchandra D. Khatod. 10. Shri Pankajbhai Shah has stated in his statement that he is doing the business of Shri Sagarmal J. Shah who is his relative i.e. uncle however on the other side he says that he does not know the rates, transporters etc., during the course of survey.” 8. Without controverting any of the above categorical findings and observations in the order of the Assessing Officer, the CIT(A) has deleted the entire addition by passing a non­speaking order in which the CIT(A) alleged that there was no logical reason for the AO for rejection of explanation of the assessee. It appears that the CIT(A) has just accepted the AR’s submission on its face value as given by the AR during the course of appellate proceedings and no reason has been assigned for accepting the assessee’s version or for rejecting the Assessing Officer’s finding with respect to the excess stock found during survey, discrepancy in the statement recorded during the course of survey vis­à­vis documentary evidence for transportation of goods to Naghedi and the octroi duty which ought to have been paid for the same, either at the time of survey or even during the course of assessment proceedings. As the excess stock was stated by the assessee as having been received from some other party for undertaking the also octori duty etc., paid if any, for such transportation and ownership of such materials and third Page 7 of 30 C/TAXAP/783/2008 JUDGMENT party. In his first Para of his order the CIT (A) observed that the assessee is engaged in the business of trading in non­ ferrous metal and working as commission agent, we fail to understand as to how a trader or commission agent can undertake the job work of cutting of metals etc., when undisputedly such job work require sufficient plant machinery. No finding has been recorded by the CIT (A) regarding assessee's owning any plant and machinery for carrying out the job work undertaken by it. Nor any finding was recorded that either during the year under consideration or in the earlier or subsequent year any such job work was undertaken by the assessee or he was doing only trading business. As the assessee was unable to explain the excess stock of Rs 14,83,420/­ found during the course of survey, the Assessing Officer while framing the assessment has given one more opportunity to the assessee to give reason as to why the excess stock found, which could not be satisfactorily explained at the time of survey, be added as assessee’s income. We do not find anything wrong in AO's asking the assessee to explain the excess stock and rather it was in the interest of natural justice in giving one more opportunity to the assessee to explain at the time of framing the final assessment. No material has been brought on record by the CIT (A) for holding that excess stock was anyhow explained by the assessee either neither during the course of survey nor during the course of assessment proceedings nor during the course of appellate proceedings before him. There is no discussion in the order of the CIT (A) as to how he reached to the conclusion that statement given during the course of Page 8 of 30 C/TAXAP/783/2008 JUDGMENT survey was verified and found to be correct. 9. As per provisions of sub­section 6 of section 250, the order of the CIT (A) disposing of the appeal should mandatorily state the points of determinations and decision thereon and the reasons for the decision. Therefore, while exercising the powers u/s. 251, the CIT (A) should mandatorily give reasons and justification in writing for reaching to the decision. Provisions contained under sub­ section 6 of section 250 are not directory but mandatory in nature, which reads as under: \"Section 250(6): The order of the Commissioner (Appeals) disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision.\" 10. The use of word \"shall\" in place of \"may” itself indicate that these directions are mandatory in nature and not merely directory. Had the Statute used the word \"may\", it could be said that it is the discretion of CIT (A) while passing the order, either to pass order verbally or in writing or to give reasons for the decision and to state the points for determination. The CIT (A) is required to follow these mandatory provisions while exercising its quasi­judicial powers given u/s. 251 of the Income tax Act. In the instant case the CIT (A) has neither controverted any of the observations and the findings recorded by the Assessing Page 9 of 30 C/TAXAP/783/2008 JUDGMENT officer while making addition on account of excess stock, nor had recorded any justification for accepting assessee's version of excess stock found during the course of survey and for deleting the same in entirety. No any justification for deleting the addition made on account of discrepancy of cash found during the course of survey was given by the CIT (A). Thus, the order passed by the CIT (A) are not as per clear mandatory provisions contained u/s. 250 (6). We, therefore, set aside the order of the CIT (A) as his conclusion is not based on any material much less cogent material, and in the interest of justice, matter is restored back to his file for deciding the issue afresh by recording his clear findings for reaching to the conclusion that excess stock found during survey did not belong to the assessee. He should also give reasons for deleting the addition made on account of discrepancy of cash found during the course of survey. He should also record reasons for controverting the specific and categorical findings recorded by the Assessing Officer.” 8. On remand of the matter from the Tribunal, the CIT(A) again examined the matter having regard to the observations made by the Tribunal. The CIT(A) on perusal of the paper­book and the submissions made by the appellant assessee with regard to the issues raised by the Assessing Officer allowed the appeal by deleting the addition on account of the difference in stock and held as under :­ “7. On the basis of above submissions and documents, Page 10 of 30 C/TAXAP/783/2008 JUDGMENT statements placed on record, it emerges that : a) On 13/9/2000, statement of the appellant's brother Shri Satyanarayan Khatod was recorded u/s 133A and in response to that statement he stated that the goods of Pankajbhai was received for cutting and was lying at the godown. He further stated that the goods for job work were received before four days of survey and further goods were received in the morning of the date of survey. b) On the same day statement of Shri Pankajbhai was also recorded by survey party and Shri Pankajbhai confirmed the above facts. c) Shri Pankajbhai also gave the copies of bills of shubham enterprises whose goods were sent for job work. d) Statement of appellant was also recorded wherein he stated that goods of bill no 5 were lying at shed non 424/2 and goods of bill No 6 were lying at Naghedi Godown. He further stated that these goods were received for job work. e) Proof of goods lying at godown were delivered to the principal after job work were also produced in the form of bills for job work. Page 11 of 30 C/TAXAP/783/2008 JUDGMENT f) Copy of confirmation charges of Job work and copy of acknowledgement of return of the principal were also produced. g) In Para No. 5 of assessment order quoted above it is stated that goods of bill Nos. 5 & 6 were found at the time of survey. These bills were of M/s Shubham Enterprises.\" h) Regarding transport charges its submitted that it was the responsibility of Pankajbhai to deliver the goods for cutting at the appellant's doorstep after cutting Bills of Shubham Enterprises show the truck No in which the goods were received. j) Naghedi godown of the appellant is beyond octroi limits k) Scarp of the kind found is normally kept in open plot and there is therefore nothing unusual if at Bhavnagar, no godown was found but it was only open plot. From the above facts it is abundantly clear that the goods in question belonged to M/s Shubham Enterprises. These facts were stated by the appellant and M/s Shubham enterprises also. The conduct of the appellant, the overwhelming evidence placed in the paper book, spontaneous replies submitted by the appellant and others including the Page 12 of 30 C/TAXAP/783/2008 JUDGMENT principal, during the course of survey conclusively established that the goods do not belong to the appellant but to M/s Shubham Enterprises. Para No 5 of the assessment order also clearly brings out all these facts and therefore supports the above finding. In view of this the addition on account of difference in stock is deleted.” 9. The revenue being aggrieved preferred the appeal before the Tribunal. The Tribunal after recording the findings of the CIT(A) held as under :­ “7. We have heard the rival contentions of both the parties and perused the material on record. We have also gone though the replies of the assessee the statements of Shri Pankajbhai P Jain and Shri Shagarmal J Shah, proprietor of M/s Shubham Enterprises We have also gone through the order of the Tribunal, whereby the Tribunal set aside the order of the CIT(A) for deciding the issue afresh by recording his clear findings for reaching to the conclusion that excess stock found during the survey did not belong to the assessee. We find that as the assessee was unable to explain the excess stock of Rs.14,83,420/­ found during the course of survey, the AO while framing the assessment had given one more opportunity to the assessee to give reason as to why the excess stock found, which could not be satisfactorily explained at the time of survey, be added as assessee's income. No material has been brought on record by the CIT(A) for holding that excess stock was explained by the Page 13 of 30 C/TAXAP/783/2008 JUDGMENT assessee during the course of survey or during the course of assessment proceedings nor during the course of appellate proceedings. The onus is clearly on the assessee to prove that the goods in question belonged to M/s Shubham Enterprises and, not the assessee, which has been discharged by the assessee. The onus is on the assessee to prove the actual transportation of goods in question and also payment of octroi, etc., paid, if any for such transportation and ownership of such goods by the third party. There is no discussion in the order of the CIT(A) as to how he reached to the conclusion that the statements given during the course of survey were verified and found to be correct. No such finding was recorded by the CIT(A) regarding assessee's ownership of such goods and transportation thereof. We therefore do not agree with the findings of the CIT(A) and reverse the order of the CIT(A) and restore that of the AO.” 10. Mr. B. S. Soparkar, learned advocate appearing for the appellant assessee submitted that after the matter was remanded back to the CIT(A), the assessee explained in detail each of the points raised by the Assessing Officer, which is recorded by the CIT(A) in his order as under:­ “6. As the matter was restored to the file of CIT(A), the matter was fixed for hearing. During the course of hearing, AR of the appellant submitted a paper book and made submission on the issues raised by AO which are reproduced as under :­ Page 14 of 30 C/TAXAP/783/2008 JUDGMENT 1. Goods of Bills No.5 and Bill No.6 were found at the business premises at 424/2, GIDC, Udyognagar, and Naghedi Godown. a) The lose scrap material was received in two parts from M/s.Subham Enterprises vide bill No.5 and 6. The copies of the bill are attached in the paper book. The bill No.5 contains brass scrap material for cutting of 9365 Kg and bill no.6 contains the 12450 kgs of brass scrap material. These bills were not available during the course of survey proceedings, but were received during the course of survey in front of the survey officials. b) Therefore, it is not correct that the bills were found at the business premises at Udyognagar but bills were received by the appellant at the udyognagar premises during the course of survey in front of survey party. c) This explanation was filed with the learned AO at the time of assessment and the same is produced at Page no.8 Paragraph No.2 of Paper Book filed with Hon. ITAT. 2. The assessee says that the goods belong to Subham Enterprise, which is the concern situated at Bhavnagar whereas the goods are found at Jamnagar. Why the firm a) Shri Pankajbhai Parasmal Shah (Jamnagar), the person who has delivered the Propeller on behalf of his uncle Mr.Sagarmal Shah Page 15 of 30 C/TAXAP/783/2008 JUDGMENT situated at Bhavnagar would send the goods for cutting at Jamnagar. If the goods are sent from Bhavnagar to Jamnagar for cutting Job Work, there must be fixed rate/charges of cutting otherwise how huge stock more than 10,000 Kg would have been sent to Jamnagar. (Bhavnagar) has been called for during the course/ time of survey only and the learned Officers has obtained his statement also. b) Please refer Q Nos.3 to 5 of the Statement of Shri Pankajbhai (Please refer to page No.35, 36 & 38 of Paper Book filed with Hon. ITAT) and he has specifically mentioned that he has delivered the goods for Job Work as per his uncle’s instructions. c) All contacts information including copy of Income Tax Return of Shri Sagarmal J. Shah was submitted to the learned AO at the time of assessment only. Please refer to page No.7 of Paper Book filed with Hon. ITAT. d) If all evidences draw attention to the fact that the Propeller was sent only for Job Work, ownership cannot be shifted merely on the basis that Job Work rate was not pre fixed. e) It was a business decision of a businessman and in business it happens many times. In addition, it is evident that afterwards Job Work rate has been decided and paid to the assessee. Page 16 of 30 C/TAXAP/783/2008 JUDGMENT Copy of the bills were produced before the learned A. O. and the same is produced at Page No.20 & 21 of Paper Book filed with Hon. ITAT. 3. On verification of the copies of the bill it is clearly mentioned in the bill “Sold to M/s.Nirav Industries, Post Khodiyar Colony, Village­ Naghedi, Jamnagar.” a) Copies of the bills were produced at the time of Survey. Page No.16 & 17 of Paper Book filed with Hon. ITAT. If one refer the bills, it is clearly making out that actually copies of the bills are used as Delivery Memo. “Sold to”, the word highlighted is just pre printed word. b) If one reads the bill fully, it is clearly mentioned that the goods are sent for Job Work and that’s why Rate and Amount column was kept empty. c) If the goods were sold to the assessee, then bill would not have prepared in such a way where rate and amount is not mentioned and “For Cutting Job­Work” is mentioned. To throw the light it seems that the sender may have prepared the same for the Octori purpose because, if the goods are not for the local consumption/sale, Octori cannot be levied. As the goods were not meant for local sale, this bill, if carried with the goods, Octroi cannot be levied. The learned AO has put more Page 17 of 30 C/TAXAP/783/2008 JUDGMENT stress on the pre­printed word Sold To, however, he has not mentioned the other important facts about the bill though bills were with them right from the time of Survey. d) The goods are returned after job work cutting and the bills for the job work were also furnished to AO. That appears at page No.18 to 21 of the paper book. 4. And The assessee could not produce transporter receipt at the time of survey as well as during the course of assessment proceedings. ­­­­­­­­­­­­­­­­­­­­­­­ There is no proof of payment of any Octroi or any Cartage Charges paid for bringing the goods to Naghedi. a) It was explained right from the time of the survey and reiterated repeatedly during the assessment proceedings that it was responsibility of Shri Pankajbhai to deliver and collect the goods from my doorstep. (Please refer page No.7, 9 & 10 of Paper Book filed with Hon. ITAT). b) Bills of Shubham Enterprises show the truck Nos in which the goods were received. c) Transportation was not assessee’s burden and hence he cannot have those records. However, assessee has prepared Delivery Challan when Shri Pankajbhai has collected the goods after job work. Transport Receipt for delivery is also not available with the assessee as his liability was to deliver the goods to Shri Pankajbhai at his (assessee’s) door step. Page 18 of 30 C/TAXAP/783/2008 JUDGMENT d) Naghedi is situated at around 10 kms away from Jamnagar city. In Naghedi there is no octori applicable. Furthermore, as the goods were sent by principal, it was not the responsibility of the appellant. e) Copies of Delivery Challan were attached at Page No.18 & 19 of Paper Book filed with Hon. ITAT. 5. At Bhavnagar no godown was found only open plot of land was found where no goods of brass can be storage. a) Generally these types of goods are kept in open plot only. b) Please refer Para 2 at page No.11 of Paper Book filed with Hon. ITAT where copy of the letter filed with the learned AO during the assessment proceedings explaining in details that Propeller having weight of 20 Tons are of very big size and can block High Way. c) It can neither be loaded on a Truck nor can be kept in any closed godown. Open plots are used to keep these type of propellers. It can be loaded on a truck only after cutting. 6. These Bills were not found at the time of survey. a) Please refer Q 13 at page No.50 and Q 7 at Page 36 of Paper Book filed with Hon. ITAT. The bills were found/ produced at the time of Survey only. b) Please refer issue no.1 where AO has stated that Page 19 of 30 C/TAXAP/783/2008 JUDGMENT bills were found at the time of survey. c) This contradicts the stand of AO. 7. The assessee has denied the identity of Shri Sagarmal J. Shah and the goods are claimed to be belonging to Sagarmal J. Shah. a) The assessee has in fact never denied the identity of Sagarmal Shah, however, he has mentioned that he was not knowing and has not met Mr. Sagarmal before. However, is it necessary for all time to meet/ know the person personally before doing business and further to do only Job Work, which involves lower amount of income and risk. Mr. Sagarmal has talked on phone with the assessee. Without prejudice the assessee has produced all information at the time of survey, that’s why the department could visit Bhavnagar place. All further information including copy of Income­tax Return of Shri Sagarmal J. Shah was also submitted to the learned AO at the time of assessment. Please refer page No.7 of Paper Book filed with Hon. ITAT. b) since the party were not met/ knowing, the transaction was a transaction of mere Job Work involving lesser amount and risk and it cannot be a transaction of sale. Page 20 of 30 C/TAXAP/783/2008 JUDGMENT c) Overwhelming evidences produced by the appellant should justify that the transaction is of job work and the material does not belong to the appellant. 8. Shri Sagarmal J. Shah – HUF filed revised return on 29.10.2001 i.e. after date of survey in the case of Sureshchandra D. Khatod. a) Shri Sagarmal J. Shah – HUF has sent the account confirmation, which was filed with the AO, and nothing contrary to the assessee’s claim was found. Please refer page No.22 of Paper Book filed with Hon. ITAT. b) Appellant is not concerned about the facts of revising return of income by its principal who has sent goods for job work. c) It is a matter between the IT department and that person who has revised the return of income and just by this fact the goods in question does not belong to the appellant. 9. Shri Pankajbhai Shah has stated in his statement that he is doing the business of Shri Sagarmal J. Shah who is his relative i.e. uncle however on the other side he says that he does not know the rates transporters etc., during the course of survey. Please refer page No.10 of Paper Book filed with Hon. ITAT. 11. Relying upon the same paper­book which was filed before the CIT(A) and the Tribunal, it was submitted that the CIT(A) after considering the explanation with regard to each of the issue has arrived Page 21 of 30 C/TAXAP/783/2008 JUDGMENT at finding of facts as recorded in para­7 of the order for the deletion of the addition. 12. It was submitted that the Tribunal without considering the aforesaid aspect and facts emerging from the record and without assigning any reason for not agreeing with the findings of fact arrived at by the CIT(A) has passed the impugned order without giving any reason whatsoever by holding that the assessee was unable to explain the excess stock found during the course of survey. 13. Learned advocate for the assessee submitted that the Tribunal did not look into the details filed by the assessee in form of bills and delivery challans issued by M/s. Shubham Enterprise, transportation details, copy of delivery challans received from Ms/. Shubham Enterprise by the assessee. It is, therefore, submitted that the impugned order passed by the Tribunal is a perverse order as the Tribunal failed to take into consideration the relevant factors and has taken into consideration irrelevant factors and documents in form of statements of Pankajbhai Jain and Shri Sagarmal J. Shah, proprietor of M/s. Shubham Enterprise and the Tribunal has arrived at the conclusion that the assessee was unable explain the excess stock found during the course of survey without discussing as to how on the basis of such statements, such conclusion could be arrived at by the Tribunal. Learned advocate also Page 22 of 30 C/TAXAP/783/2008 JUDGMENT submitted that in the first round of litigation before the Tribunal, directions were given to the CIT(A) to give reasons and justification in writing for reaching to the decision for deletion of the addition of value of excess stock. Accordingly, the CIT(A) has given detailed reasons in paras­7 and 8 of the order passed after remand. The Tribunal has not given any reason as to how the findings arrived at by the CIT(A) were not justified on the basis of material available on record. 14. It was further submitted by Mr. Soparkar that the Tribunal has also not given any reason to come to the conclusion that the assessee failed to discharge the onus to prove the actual transportation of goods and also payment of octori etc., and has not considered the delivery challan received with regard to the material received by the appellant assessee for job work. 15. It was, therefore, submitted that the impugned order passed by the Tribunal is contrary to the facts and evidence on record as well as the findings arrived at by the CIT(A) resulting into perverse order and therefore, the same is liable to be quashed and set aside and the order passed by the CIT(A) is required to be restored. 16. On the other hand, Ms. Mauna Bhatt, learned standing counsel for the revenue assisted by learned advocate Mr. Karan Sanghvi Page 23 of 30 C/TAXAP/783/2008 JUDGMENT submitted that the CIT(A) has not given any reason to arrive at findings of fact on the basis of the submissions and documents and statements placed on record by the assessee in para­7 of the order. 17. It was submitted that the Tribunal has rightly come to the conclusion that the assessee was unable to explain the excess stock found during the course of survey and CIT(A) has not given any reason to reach to the conclusion that the statements given during the course of survey were verified and found to be correct so as to discharge the onus of the assessee to prove the actual transportation of the goods in question and also payment of octroi etc., paid if any for such transportation and ownership of such goods by the third party. 18. It was submitted that the Tribunal is the final fact finding authority and therefore, no interference is required to be made as the Tribunal has passed the impugned order after considering the materials on record. 19. Having heard learned advocates of the respective parties and having gone through the materials placed on record along with the paper­book filed on behalf of the assessee, it emerges from the record that bill nos.5 and 6 issued by M/s. Shubham Enterprise were found during the course of survey conducted on 30th September 2000, which is Page 24 of 30 C/TAXAP/783/2008 JUDGMENT corroborated by the statement of Shri Satyanarayan Khatod recorded under Section 133A of the Act, 1961, wherein he has stated that the goods of Pankajbhai were received for cutting and was lying at godown and the goods were received four days prior to the date of survey for job work and some of the goods received in the morning of the date of survey. Pankajbhai in his statement recorded by the Survey Party also confirmed the facts stated by Shri Satyanarayan Khatod. The statement of Sureshchandra Khatod was also recorded, wherein he stated that goods of bill no.5 were lying at Shed no.424/2 and goods of bill no.6 were lying at Naghedi godown. He also confirmed that the said goods were received for job work. By way of job work charges, the proof of goods lying at godown delivered after the job work was over were also produced in the form of bills for job work. M/s. Shubham Enterprise also issued confirmation with regard to return of the goods after the job work was over. The Assessing Officer has also recorded in the assessment order that the bill nos.5 and 6 were found at the time of survey pertaining to the goods of M/s. Shubham Enterprise received by the assessee for job work. With regard to the transportation charges, the assessee explained and submitted that it was the responsibility of the Pankajbhai to deliver the goods for job work at the door step of the appellant assessee and the bills of M/s. Shubham Enterprise also show the truck number in which the goods were received by the appellant Page 25 of 30 C/TAXAP/783/2008 JUDGMENT assessee. 20. The CIT(A) after considering such facts, came to the conclusion that the goods in question belonged to M/s. Shubham Enterprise, which is also confirmed by both the parties and considering submissions as well as the documentary evidence produced by the appellant assessee, the CIT(A) has come to a clear finding of fact that the goods in question did not belong to appellant but belonged to M/s. Shubham Enterprise. 21. The Tribunal, however, has failed to consider the relevant documents on record and has taken into consideration the irrelevant facts with regard to the onus of the assessee to actual transportation of the goods in question, payment of octroi etc., and thereby discarded findings of facts arrived at by the CIT(A) based upon the material on record resulting into a perverse order. 22. In such circumstances, it would be relevant to refer to the decision of Supreme Court in case of Omar Salay Mohamed Sait v. Commissioner of Income Tax, Madras reported in (1959) 37 ITR 151(SC), wherein the Apex Court has held as under :­ “26. We have set out the facts in minute detail as we are setting aside the order of the Appellate Tribunal Page 26 of 30 C/TAXAP/783/2008 JUDGMENT and remanding the matter back to it in order to reconsider the same. The limits of our jurisdiction in regard to the finding of fact reached by courts of fact have been laid down by us in several decisions of this court. In Dhirajlal Girdharilal v Commissioner of Income­tax, we expressed the opinion that when a court of fact arrives at its decision by considering material which is irrelevant to the enquiry, or acts on material partly relevant and partly irrelevant, where it is impossible to say to what extent the mind of the court was affected by the irrelevant material used by it in arriving at its decision, a question of law arises: Whether the finding of the court of fact is not vitiated by reason of its having relied upon conjectures, surmises and suspicions not supported by any evidence on record or party upon evidence and partly upon inadmissible material. 27. It was similarly observed by us in Dhakeswari Cotton Mills Ltd. v. Commissioner of Income tax, that the powers given to the income tax Officer under section 23(3) of the Income­tax Act, however wide, did not entitle him to base the assessment on pure guess without reference to any evidence or material. An assessment under section 23(3) of the Act could not be made only on bare suspicion. An assessment so made without disclosing to the assessee the information supplied by the departmental representative and without giving any opportunity to the assessee to rebut the information so supplied and declining to take into consideration all materials which the assessee wanted to produce in support of his case constituted a violation of the fundamental rules of justice and called for exercise of the powers under article 136 of the Constitution. 28. The last case to which reference need be made in this context is that of Sree Meenakshi Mills, Madurai V. Commissioner of Income­tax, where this court observed at page 720 : “The position that emerges on the authorities may thus be summed up : Page 27 of 30 C/TAXAP/783/2008 JUDGMENT (1) When the point for determination is a pure question of law such as construction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (2) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (3) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (4) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact.” 29. On the facts and circumstances of this case we shall have to determine whether the finding of fact reached by the Appellate Tribunal was vitiated inasmuch as it was unsupported by evidence or was unreasonable and perverse in nature having been arrived at by improper rejection of evidence available in the record of the proceedings or having been based partly on evidence and partly on conjectures, surmises and suspicions. Xxx 34. We are aware that the Income­tax Appellate Tribunal is a fact finding Tribunal and if it arrives at its own conclusions of fact after due consideration of the evidence before it this court will not interfere. It is necessary, however, that every fact for and against the assessee must have been considered with due care and the Tribunal must have given its finding in a manner which would clearly indicate what were the questions which arose for determination, what was the evidence pro and Page 28 of 30 C/TAXAP/783/2008 JUDGMENT contra in regard to each one of them and what were was the reached on the evidence on record before it. The conclusions reached by the Tribunal should not be coloured by any irrelevant considerations or matters of prejudice and if there are any circumstances which required to be explained by the assessee, the assessee should be given an opportunity of doing so. On no account whatever should the Tribunal base its findings on suspicions, conjectures or surmises nor should it act on no evidence at all or on improper rejection of material and relevant evidence or partly on evidence and partly on suspicions, conjectures or surmises and if it does anything of the sort, its findings, even though on questions of fact, will be liable to be set aside by this court.” 23. In view of the above proposition of law laid down by the Supreme Court in the aforesaid decision, we are of the opinion that the Tribunal has committed an error in reversing the order passed by the CIT(A) without giving any cogent reasons for the same in the impugned order. It is expected from the Tribunal to arrive at such conclusion of fact after due consideration of the evidence before it as the Tribunal is a fact finding Tribunal and as such it was the duty of the Tribunal to give its finding in a manner after due consideration of every facts for and against the assessee in a manner which could clearly indicate what were the questions which arose for determination and what was evidence pro and contra in regard to each of them and what were the findings based on the evidence on record before it. In the facts of the case, it appears that the conclusion reached by the Tribunal is coloured by the irrelevant consideration ignoring the relevant documents produced by the appellant assessee, resulting into the findings based on such conjecture Page 29 of 30 C/TAXAP/783/2008 JUDGMENT and surmises without reference to the material and relevant evidence and therefore, such findings of the Tribunal even though on question of fact are liable to be set aside by this Court. 24. In view of the above, we are of the opinion that the impugned order passed by the Tribunal being perverse is liable to be quashed and set aside though it is on the facts of the case. As the CIT(A) has arrived at findings of fact based on material on record, which was also produced before it, it would not serve any purpose to remand the matter back to the Tribunal after the period of 12 years and in peculiar facts of this case, we reverse the findings of the Tribunal and restore those of the CIT(A). 25. Accordingly, the appeal is allowed. The substantial questions of law are answered in favour of the assessee and against the revenue. No order as to costs. (J. B. PARDIWALA, J.) (BHARGAV D. KARIA, J.) AMAR RATHOD... Page 30 of 30 "