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ACIT, Cen. Circle-4, Surat and Others Versus M/s. Sarna Chemicals Pvt. Ltd. and Others

2015 (12) TMI 364 - ITAT AHMEDABAD

Assessment u/s 153A - CIT(A) deleted the addition - Held that:- We find that the ld.CIT(A) has given a finding that papers were found in the premises of Shri H.S.Sarna and not in the company’s premises or in Shri S.S.Sarna, Director of the company. Further, the papers were not related to the assessee-company as these were related to Shri H.S.Sarna, hence no addition is called for in the assessee’s hands. Undisputedly, the impugned addition has been made on the basis of the statement of Shri S.S. .....

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77; 44.40 lacs during the course of survey which includes stock discrepancy - Held that:- The contention of the ld.counsel for the assessee is that the entire addition is based upon the statement of Shri S.S.Sarna. The Revenue has not brought any corroborative material on recorded. Admittedly, the auditors have not recorded any adverse remarks. Under these facts, the penalty ought not to have been levied. We find merit into the contention of the ld.counsel for the assessee as the addition is sol .....

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The appellant’s submission in respect of excess stock of raw material that these are in the form of liquid and the exact measurement is not possible as they are lying in the tanks is acceptable. The explanation that they are liquid and exact measurement is not possible, was accepted by the Assessing Officer in respect of oleum and diesel wherein the deficit stock was found but the appellant’s explanation for minor difference in stock due to being liquid was accepted. Accordingly, the appellant .....

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II, Ahmedabad. Since common issues and facts are involved in these appeals, these were heard together and are being disposed of by way of this consolidated order for the sake of convenience. 2. First, we take up the Revenue s appeal in ITA No.915/Ahd/2010 for AY 2007-08 in the case of M/s.Sarna Chemicals P.Ltd. and Assessee s appeal (M/s.Sarna Chemicals P.Ltd.) in ITA No.2830/Ahd/2012. The Revenue is in quantum proceedings and the Assessee is in penalty proceedings. Revenue s appeal is directed .....

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- in the statement recorded u/s 132(4) dated 26.02.2007 on account of discrepancies found in the loose paper files seized. 2. The Ld.CIT(A) has erred in law and on facts in holding that the assessment of income only on the basis of statement, without considering the evidence found in the survey is not justified, ignoring that the assesse has neither filed any retraction note nor filed any submission rebutting the action of the Assessing Officer . 3. The Ld.CIT(A) has erred in law and on facts in .....

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wing case laws while deciding to delete the additions based on the disclosure of the assessee which was not retracted by the assessee. Decision of Hon,ble ITAT,Ahd in the case of Nilesh C Shah Vs ACIT (2007) Bombay High Court in the case of Rameshchandra and Co.Vs CIT(1987) 168 ITR 375 Thiru John Vs Returning Officer, AIR 1977 (SC)1724 Surjit Singh Chhabra (1997) ISCC 508,509(SC) Hon,ble Supreme Court in Pulangode Rubber produce Co Ltd Vs State of Kerala(1973) 91 ITR 18 Hotel Kiran Vs ACIT (1971 .....

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ral in nature which require no independent adjudication. 3.1. Briefly stated facts are that search and seizure operation was carried out in the case of Sarna Group of Vapi, on 23/01/2007. A survey action u/s.133A of the Income Tax Act,1961 (hereinafter referred to as the Act ) was conducted at the business premises of the assessee. Subsequently, a return of income declaring total income of ₹ 2,68,77,143/- was filed on 29/10/2007. The case was selected for scrutiny assessment and assessment .....

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f discrepancy in stock and unaccounted sales. The assessee being aggrieved by the assessment order, preferred an appeal before the ld.CIT(A), who after considering the submissions of the assessee partly allowed the appeal, thereby restricted the addition to the extent of ₹ 12,19,203/-. Aggrieved by the order of the ld.CIT(A), the Revenue is further in appeal before us. 4. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in deleting the addition. He submitted that, in this case, .....

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n person of H.S.Sarna group, he has made disclosure of ₹ 36.10 lakhs in his individual case and ₹ 5,20,036/- in the partnership firm M/s.S.S. Enterprise and ₹ 44,19,964/- in the case of M/s.Sarna Chemicals Pvt.Ltd., which includes ₹ 15 lakhs disclosed in respect of stock difference and an amount of ₹ 29,19,964/- for covering the discrepancies found in the loose-papers seized during the course of search. It can be seen that the disclosure of ₹ 44,19,964/- is no .....

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further contended that no specific disclosure was made in the hands of the company at the time of search, therefore under these facts, the AO was not justified in making the addition in the hands of the assessee-company. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding in para-5.2 that papers were found in the premises of Shri H.S.Sarna and not in the company s pre .....

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verted by the Revenue by placing any contrary material on record, therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. Thus, ground Nos.1 to 5 of Revenue s appeal are rejected. As a result, Revenue s appeal in ITA No.915/Ahd/2010 for AY 2007-08 is dismissed. 5.1. Now, we take up the assessee s appeal in ITA No.2830/Ahd/2012 for AY 2007-08. The only effective ground in this appeal is against confirmation of penalty u/s.271(1)(c) of the Act. 5.2. .....

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submitted that under the facts of the present case, the penalty is not justified. The AO had made addition on the basis of estimation of GP. The ld.counsel for the assessee submitted that during the course of survey, the stock difference, if any, was duly reconciled. The ld.counsel for the assessee submitted that the assessee is engaged in the business of manufacturing and also subjected to Central Excise Act. The ld.counsel for the assessee submitted that the assessee is maintaining the records .....

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s out of books. 5.5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. The ld.counsel for the assessee has submitted that as per clause (iii) of Annexure A to auditor s report of the assessee for relevant assessment year, the assessee has maintained proper records of its inventory and no material discrepancies were noticed on physical verification and method of valuation adopted by the assessee is followed consiste .....

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d by not offering such income to tax, assessee has willfully concealed its income. However, the contention of the ld.counsel for the assessee is that the entire addition is based upon the statement of Shri S.S.Sarna. The Revenue has not brought any corroborative material on recorded. Admittedly, the auditors have not recorded any adverse remarks. Under these facts, the penalty ought not to have been levied. We find merit into the contention of the ld.counsel for the assessee as the addition is s .....

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owed. 6. Now, we take up the Revenue s appeal in ITA No.916/Ahd/2010 for AY 2007-08 in the case of Supreet Chemicals P.Ltd. The Revenue has raised the following grounds of appeal:- 1. The Ld.CIT(A) has erred in law and on facts in holding that the assessment of income only on the basis of statement,without considering the evidence found in the survey is not justified, ignoring that the assessee has neither filed any retraction note nor filed any submission rebutting the action of the Assessing O .....

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red in law and on facts in ignoring the ratio of the following case laws while deciding to delete the additions based on the disclosure of the assessee which was not retracted by the assessee. Decision of Hon,ble ITAT,Ahd in the case of Nilesh C Shah Vs ACIT (2007) ; Bombay High Court in the case of Rameshchandra and Co.Vs CIT(1987) 168 ITR 375 Thiru John Vs Returning Officer,AIR 1977 (SC)1724 Surjit SinghChhabra(l 997) ISCC 508,509(SC) Hon,ble Supreme Court in Pulangode Rubber Produce Co Ltd Vs .....

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same are decided together. Ground Nos.5 & 6 are general in nature which require no independent adjudication. 6.2. Briefly stated facts are that a search and seizure operation was carried out in the case of Sarna Group of Vapi, on 23/01/2007. A survey action u/s.133A of the Income Tax Act,1961 (hereinafter referred to as the Act ) was conducted at the business premises of the assessee. Subsequently, a return of income declaring total income of ₹ 3,01,91,197/- was filed on 29/10/2007. Th .....

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e order of the ld.CIT(A), the Revenue is further in appeal before us. 7. The ld.Sr.DR submitted that the ld.CIT(A) was not justified in restricting the addition. He submitted that the assessment was completed on total income of ₹ 3,37,37,700 on 31/10/2008 after making the addition of ₹ 35,46,503/- on account of stock discrepancies. The addition were made in three heads; i.e. discrepancies in respect of stock of finished products of ₹ 20,14,600/-, discrepancies in respect of sto .....

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on real basis (billable quantity) and material as per physical count is on as is basis which contains moisture, which leads to weight difference. The ld.CIT(A) further stated that the submission of the assessee is verifiable from the entries made in the stock register, excise register and invoices, which the AO has refused to verify during the course of assessment proceedings on the ground that the assessee has not explained the same at the time of survey. The ld.Sr.DR submitted that a survey ac .....

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mainly on account of moisture and its purity is not acceptable since the same was never raised while taking the stock during the course of survey nor in the course of assessment proceedings. The ld.Sr.DR submitted that as per the bifurcation fo disclosure of ₹ 85.5 lakhs made by Shri H.S.Sarna, the main person of H.S.Sarna group, he has made disclosure of ₹ 57 lakhs in his individual case and ₹ 28.5 lakhs in the sister concern M/s.Supreet Chemical Pvt.Ltd., which includes S .....

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during the physical verification, the stock is taken by converting as per calibration taken and minor difference arise on this count as the material is lying in the tanks and correct measurement is not possible. 8. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has given a finding on fact at para-4 to 4.5 of his order, which are in the following terms:- 4. I have considered the facts a .....

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it is seen that in respect of NAPSA as per Invoice No.273 dtd. 20/01/2007, real weight is 2064 kg @ ₹ 174/- per kg. and the billing amount is ₹ 3,59,136/- but on the Invoice itself it is mentioned that net is 3000 kg. and purity is 68.8% and the real weight is 2064kg. The corresponding entry in the stock register on 20/01/2007 is for real weight of 2064 kg. and the value shown is ₹ 3,59,136/-. In another Invoice taken for the test check dated 25/01/2007, real weight is 2538 kg. .....

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RE/R- 149/2006-07 dtd. 21/08/2006, the real weight is 4483 kg. @ ₹ 330.90 per kg., total amounting to ₹ 14,83,425/-, the real weight is 4483 kg. and net weight is 4800 kg. On the stock register, real weight is written as 4483 kg. similar is the case of MABS. Therefore, the appellant s submission is acceptable. The submission of the appellant supported by the evidences and entries in the registers and sales invoices cannot be rejected and ignored merely on the ground that the same wer .....

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ten. Hence, the appellant s explanation in respect of this product of CLPPD, is not verifiable from the records. Therefore, the explanation for this is rejected and the addition is confirmed to the extent of ₹ 8,08,200/-. 4.5. The appellant s submission in respect of excess stock of raw material that these are in the form of liquid and the exact measurement is not possible as they are lying in the tanks is acceptable. The explanation that they are liquid and exact measurement is not possib .....

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rd to discrepancies in inventory of stock. This explanation was not taken into account by the AO. Therefore, we do not see any reason to interfere with the order of the ld.CIT(A), same is hereby upheld. As a result, Revenue s appeal is dismissed. 9. Finally, we take up the assessee s appeal in ITA No.2832/Ahd/2012 for AY 2007-08. The only effective ground in this appeal is against confirmation of penalty u/s.271(1)(c) of the Act of ₹ 6,95,550/-. 9.1. Brief facts of the case are that the AO .....

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e authorities below were not justified in initiating the penalty proceedings and levyig the penalty. The ld.counsel for the assessee submitted that the penalty has been levied on the amount of addition sustained by the ld.CIT(A) in respect of discrepancies into stock. The ld.counsel for the assessee reiterated the submissions as were made before the ld.CIT(A). The ld.counsel for the assessee submitted that the books of account of the assessee are duly audited. The accounts are subjected to the i .....

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py of statement of discrepancies in inventory found during the course of survey Under Section 133A of the Income Tax Act, 1961 at the factory premises of Supreet Chemicals Private Limited. The major two items for which additions to total income is confirmed by the Learned Commissioner of Income Tax (Appeals), are being highlighted for your ready reference. 4. In respect of excess stock of CLPPD of ₹ 8,08,200/-, excess quantity determined by the Learned Assistant Commissioner of Income Tax .....

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