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Asstt. Commissioner of Income Tax Versus Shri Subhash Chandra

2015 (6) TMI 598 - ITAT DELHI

Addition on account of premium of Kerosene Oil - CIT(A) deleted the addition - Held that:- CIT(A) has carefully found that there is substance in the arguments of the Ld. Counsel that on the basis of discrepancies / defects pointed out by the AO on examination of the seized material it was not possible to draw the inference that the assessee had received premium on the account of sale of kerosene oil. We find that CIT(A) was agreed with the Counsel that the AO was not justified to rely on the let .....

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y indulging into black marketing of kerosene oil. Ld. CIT(A) further observed that there was also substance in the counsel's argument that the purchases/ sales / gross profit relating to kerosene oil business as shown in the regular books of accounts stood undisturbed by the AO. Keeping in view the facts and circumstances, we are of the view that AO has not pointed out any defect in the trading account pertaining to the oil business nor provisions of section 145 of I.T. Act were applied in asses .....

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eturned income NIL. CIT(A) has rightly held that as per the provisions of section 158BC of the Act the evidence recovered from the premises of M/s Kumar Oils and M/s Shyam Lal Bala Prasad could not be made the basis for making addition of undisclosed income in the hands of the assessee - Decided against revenue.

Addition on account of extra premium - CIT(A) deleted the addition - Held that:- Keeping in view of the facts and circumstances of the case as explained above, and also in vie .....

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gainst the Order of the Ld. Commissioner of Income Tax (Appeals)-II, Dehradun dated 28.5.2004 pertaining to Block Period 1.4.1989 to 4.2.2000 on the following grounds:- 1. The Ld. CIT(A)-II, Dehradun has erred in law in accepting the reliance placed by the assessee on the judgment, which do not have applicability in the case of the assessee. 2. The Ld. CIT(A)-II, Dehradun has erred on facts of the case in deleting the addition of ₹ 44,60,881/- on account of premium of Kerosene Oil. 3. The .....

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equest, the assessee was allowed time for filing of return till 3.12.2001. The assessee has filed the return of income on 3.12.2011 in Form 2B in which he disclosed his income (which is mentioned in AO's order at Page No. 1). In this case the assessee is sole proprietor of M/s Avinash Oil Company which holds the distributorship of Kerosene Oil. Notices u/s. 143(2) and u/s. 142(1) were issued to assessee on 4.12.2011. Another notice u/s. 142(1) was issued on 28.12.2001. In response to three n .....

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der dated 26.2.2002, assessee appealed before the Ld. CIT(A), who vide impugned order dated 28.5.2004 has partly allowed the appeal of the Assessee. 4. Against the aforesaid order dated 28.5.2004, the Revenue is aggrieved and filed the present appeal before the Tribunal. 5. Shri Ramesh Chandra, Ld. CIT(DR) relied upon the orders passed by the AO and stated that the Ld. CIT(A) has wrongly relied upon by the judgments cited by the assessee and deleted the addition in dispute which is contrary to t .....

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e that the assessee was doctoring the accounts and other records as per his convenience. The AO held that it cannot be concluded beyond doubt that oil had been sold at premium and not at the destination as per quota. But the discrepancies definitely indicated that the maintenance of accounts was not proper and various persons / employees of the assessee appeared to be maintaining records of oil movement at their will and the records are maintained just to satisfy the inspecting authorities befor .....

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umar Oils and ₹ 26,62,075/- from M/s Shyam Lal Bala Prasad. Besides, this the AO also worked out premium at ₹ 1,25,000/- on the basis of the cash memo against the sales and seized from the assessee's premises. After allowing the deduction @20% on account of transportation, establishment and other incidental expenses on estimate basis. The undisclosed income for various asstt. years from premium was computing at ₹ 45,60,881/-. He requested that the impugned order passed by t .....

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Paper Book containing pages 1 to 100 having the copy of submissions before the CIT(A); copy of assessment order; remand report etc. Ld. Counsel of the assessee stated that in view of the written submissions and other documentary evidences filed by him in the shape of Paper Book, may be considered and Appeal filed by the Revenue may be dismissed. For the sake of convenience, we hereby reproduce the Synopsis as under:- "Initially there was action u/s 132 on 25.11.1998 upon third parties like .....

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was subject to a search operation on his business premises on 04.02.02 .AII the seized documents etc. properly explained and there was no documents in connection with the alleged premium. The respondent is a License holder/quota - holder of hill - area of Uttarkashi of Tehri District and other place where kerosene oil is a necessity for the general public. Subsequently the return u/s 158 BC was filed for the block period totaling ₹ 21,77,937/- and was finally, assessed at an undisclosed i .....

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directions to the District Supply Officer and the District Authorities (like Commissioner, District Magistrate, SDM, SDO). The main allegation of the Department, if prime facie accepted, then was there any occasion either during the search no seizure of any Slip. book, Cheque Book, Bank Statement / any other related documents relating to the allegation. It is also Very surprising that If the person who, as alleged, is dealing as a big dealer then at least something should have been found or seiz .....

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at a premium. All the allegations are just based upon a search that took place on another assessee sometime ago i.e Kumar Oil from whose possession a sheet in jotting and dotting form was recovered and on that basis the Assessing Officer has treated the goods sold at a premium and that premium income has not been disclosed to the Department. There is no' corroborative evidence found or recovered from the premises of the respondent nor any direct evidence or any circumstantial evidence to sug .....

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holder and a license holder. There are no scope for any premium because this commodity is covered under the Essential Commodities Act, regularly monitored by the various Govt. authorities like DM, SDM, SDO During the assessment proceedings the respondent has filed the written submission dt. 28.01.02 supported by the Affidavits of respondent and his brother and few license holders as appearing from PB No. 48 to 55. The respondent has also filed a letter to the AO. The modes of operands by way of .....

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leged third party, the Department would have found any statement / account of alleged parties at his premise during the search. It was further stated since these two alleged parties know Avinash Oil are the quota holders and for their own convenience, they have written the name of Avinash Oil (AOL). Based upon this the Apex Court in 88 ITR 192 in the case of Vegetable Products, if two views are possible then the, favourable view in favour of the assessee be given preference. During the recording .....

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essment has been completed at nil income u/s 158 BC vide order dt. 29.02.2000 as appears in PB No. 23 an which suggest that there is no any adverse view taken based upon the seized material. During the appellate proceeding before the CIT(A) the respondent filed a letter alongwith a certificate of DSO alongwith the details of total purchase and sale as appears from PB Nos. 9 to 15. The notice u/s 158 BC and u/s 142(1)/143(2) dt. 04.12.01 as appears on PB No. 32 and 33 has not alleged anywhere the .....

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hat he has accepted the trading and profit and loss account of the respondent. During the course of search not even a word has been whispered by the search party regarding receipt of premium to the assessee. It is important to note that the addition on account of premium has been made on the basis of loose papers found from the premises of M/s Kumar Oil and M/s. Shyam Lal Bala Prasad. The height of the thing is that no alleged addition on account of premium has been made in the case of m/s Kumar .....

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nothing has been considered in the hands of M/s Kumar Oil. Therefore the testimony of M/s Kumar Oil could not be said to be reliable. India is a democratic country and every citizen of India has the same right irrespective of the fact whether he holds highest office or is the man is no mean. in the case of V.C. Shukla and others known as 'Jain hawla' case reported in (1998) 3 SCC 410 the honorable supreme court have held that loose sheet or a diary is not a book in the preliminary invest .....

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nd at premises of the third party then there remain no room for alleged addition on account of premium as made by assessing officer. when one hundred and fifteen persons including politician and members of parliaments were scout free why not the appellant. The system and control of selling the kerosene oil, which governed by the essential commodities act is controlled, watched and supervised by the authorities:- A. Indian Oil Corporation, the only seller of kerosene oil. B. district supply offic .....

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come at nil u/s.158 be vide order-dated 29.2.2000 and is place on record. The department has no room to make the addition in case of an appellant when the case of kumar Oil is accepted. The quantity received and supplied to authorized ration dealers as per directions of district supply authorities, who have endorsed the figures by giving the certified details of receipt and supply as per their records which tally with the records of the appellant and nothing adverse have been found during the co .....

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(1) Le on the basis of evidence found as a result of search and such other material as are available with the AO and relatable to such evidence. The case does not fall in the above framework of the law. There are acatena of authorities which are being given after all the grounds. Therefore, the additions are liable to be quashed/deleted because not only on the above submission but under the constitutional provision that no notional or fictional income being brought on tax contrary to the strict .....

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Purshottam Potteries 106 ITR 1 their Lordships have held that the Department can collect the legitimate tax as per the Act and not in an arbitrary, mechanical way. It is settled law that a statute must be construed as per the plain meaning of the language. In the case of Polestar Electronic P. Ltd. vs. Addl. CST (1978) 41 STC 409 (SC) ; AIR 1978 SC 897 it has been held as under: "A statutory enactment must ordinarily be construed according to the plain natural meaning of its language and t .....

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rtion at Pg.277 is as under:- "Taking into consideration the entire circumstances of the case we are satisfied there is no material on which the AO could come to the conclusion that the firm was not genuine. There are many surmises and conjectures and the conclusion was a result of the suspicion which cannot take the place of proof in these matters." In the present case the additions were made based upon seized loose papers from the third parties without any single piece of evidence / .....

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s to. be read with computation of Total Income under Chapter IV of the Act and also undisclosed income for Chapter XIV-B relates to different accounting years in which the income is earned. The Apex Court in the case of Saraswati Industrial Syndicate 237 ITR 1. The Delhi High Court in the case of DK Gupta 308 ITR 230, 233 has held that if no corroborative or direct evidence to presume that noting or jotting had materialized into transaction, income cannot be assessed on the basis of dumb documen .....

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wal reported in 283 ITR 326, 328 Although the judgment related to the already disclosed gift the ratio is squarely applicable because it was held that post - search enquiry was unconnected with the information / material recovered during the search) 287 ITR 285 (Delhi High Court). If no evidence of concealment of income is discovered, no estimation can be made based upon 250 ITR 141 and 276 ITR 563. In another case Delhi High Court in 287 ITR 287 have defined the scope of Chapter XIV-B if no inc .....

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ound during search that might show that the assessee had made investment in property then the declared value addition could not be made (2008) 166 Taxman 75 (Delhi High Court) Hon'ble Mumbai HC in the case of Vinod Danchand (2001) 247 ITR 448, 449. The relevant portion :- Chapter XIV B of the Income Tax Act assumes proceedings on the basis that where an investment is made by the assessee it is unexplained then the Department is entitled to Block Assessment. In the present case nothing was in .....

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seeking explanations / information in respect of documents, articles, things found during the search and the question based beyond that is no statement and since the appellant's case is fully covered because the statement was not based upon any search material and secondly, the statements never suggested any undisclosed income. Mange Ram Mittal Delhi Special Bench 103 ITD 389, 489 (Para-89) that any other information as is available with the AO, relatable to such evidence, the assessment ca .....

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favour in the present case and circumstances and therefore the additions which has been rightly deleted by CIT(A) to be upheld. The Delhi High Court in the case of Mohinder Haryanvi reported in 172 Taxman 223 has held that if the seized document did not mention any particular date and year and therefore its existence could not be attributed to the Block Period under consideration and moreover on asking (for) a comment from the AO in this regard) and if he keeps silent on a (that) particular issu .....

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ition in the block assessment should be based on documents found and recovered during search. The Hon'ble Mumbai Tribunal in the case of Sunder Agencies reported in 63 ITD 245, Madras ITAT in 65 ITD 183, 206 and the Indore Bench in the case of Indore Construction Company 70 ITD 128 wherein the Hon'ble Tribunal has held that income for the Block Assessment is to be computed strictly on the basis of documents seized. It cannot proceed on conjectures, surmises and arrived at on the basis of .....

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meaning of the word is to be gathered from the scheme of the Act having regard to its ordinary grammatical meaning. The Act requires the assessment of the income of the assessee and for the purpose of assessment the income is to be computed. The ordinary grammatical meaning of the word 'computation' as given in Shorter Oxford Dictionary, 3rd Edition, is: - the action or process of computing a method of reckoning and the word 'compute' means: - clear a subtle (account) reckon. Th .....

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umbai Special Bench reported in 95 ITD 1, 78-79(PARA 86), 85 (para93), (Undisclosed Income should be computed on the basis of evidence found during search / direct nexus with the search proceedings Pg.No. 78 - 79 Para 86 Hon'ble Mumbai Tribunal in case of Sigma Securities reported in 286 ITR 80,87,96,99/-. The Hon'ble bench is of the view that there should be some evidence collected during the course of search exhibiting the falsity of the claim. In the present case nothing was found or .....

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.Shah reported in 63 ITD 153 the ratio of the case that the assessee's income should be on the basis of documents seized and the onus is on the Department to prove that alleged receipts were assessee's income and therefore the addition being merely on basis of suspicion could not be sustained. 3rd member of Mumbai Bench in the case of SP Goyal 77 TTJ 1 where it was held that addition of ₹ 60 lacs on the basis of noting on loose sheets, diary seized at the premises of the assessee w .....

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ails in any of the seized documents. The Chandigarh Bench in the case of Kapoor Sons Jewellers 119 Taxman Magazine 113,115 held that the scheme of XIV - B does not give power to the Revenue to draw the presumption in regard to undisclosed income. Jodhpur Bench reported in (2008) 113 DJ 337 has held that undisclosed income could not be framed for block assessment unless any details or narrations for written on plain paper seized during search. In the present appeal nothing seized/found and whatev .....

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aterial. The Lucknow Bench in the case of Smt. Savitri Devi 76 DJ 628 where it was held that since no material was found addition can not be made in block assessment cases. Smt. Chitra Oevi 77 DJ 614 the additions can be made only on the basis of incriminating evidence / material found as a result of search not otherwise. The Jodhpur Bench in the case of JRC Bhandari 79 TTJ 1 held that addition in the hands of the assessee on the basis of loose sheets recovered from third party was not legally s .....

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held that scope of these two had to be considered with reference to DOS. In para. 23 at Pg. 416, the Tribunal considered the natural meaning of the word undisclosed income after referring to various dictionary meanings:- In the light of the arguments on facts and law and a number of precedents relied upon the Departmental appeal may kindly be dismissed." 7. We have heard both the counsel and perused the relevant records available with us, especially the impugned orders passed by the Revenu .....

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on account of extra premium. We find that the Ld. CIT(A) has carefully considered the facts and submissions and have perused the relevant record and thereafter found that there is substance in the arguments of the Ld. Counsel that on the basis of discrepancies / defects pointed out by the AO on examination of the seized material it was not possible to draw the inference that the assessee had received premium on the account of sale of kerosene oil. We find that Ld. CIT(A) was agreed with the Coun .....

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s to infer that the assessee was receiving premium by indulging into black marketing of kerosene oil. Ld. CIT(A) further observed that there was also substance in the counsel's argument that the purchases/ sales / gross profit relating to kerosene oil business as shown in the regular books of accounts stood undisturbed by the AO. Keeping in view the facts and circumstances, we are of the view that AO has not pointed out any defect in the trading account pertaining to the oil business nor pro .....

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gainst the assessee once the assessment in the case of M/s Kumar Oil was made on the returned income NIL. In support of this contention, reliance was placed on the order of the ITAT, Mumbai Bench dated 5.4.2002 of the 3rd Member Bench in the case of SP Geol vs. DCIT, wherein the Apex Court decision in the case of CBI vs. VC Shukla (1998) 35 SCC 410. Ld. CIT(A) noted that in the impugned order, the AO had made the loose papers / diaries recovered from the premises of third parties i.e. M/s Kumar .....

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