TMI Blog2021 (1) TMI 561X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has accounted for sale of ₹ 1 Lacs and also cash of ₹ 1 lacs as is mentioned in the seized documents was received by assessee and was duly recorded in the books of accounts of the assessee and offered for taxation, thus, we accept the contention of the assessee to this effect. The assessee s appeal is allowed on this ground. Addition of sales outside books - assessee posting stock covered by sales in the stock register - HELD THAT:- The assessee corrected this mistake in the stock register on 31st August 2009, after conclusion of search operations. In our considered view this is a plausible and genuine human error in posting of entry in the stock register and based upon material on record, we do not find any mala fide or malice on the part of the assessee to defraud Revenue by posting this entry wrongly in stock register, rather it is a genuine human error . Under these circumstances on touchstone of preponderance of probabilities, we hold that this is a genuine and bonafide human error in posting of stock in the stock register while posting sale invoice, and the assessee cannot be saddled with tax liability merely on the ground that there was som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated:- 13-1-2021 - Shri.Vijay Pal Rao, Judicial Member And Shri Ramit Kochar, Accountant Member For the Assessee : Mr. Praveen Godbole, CA For the Respondent : Ms. Namita S. Pandey, CIT-DR ORDER PER BENCH: These four appeals filed by assessee as well by Revenue relates to three different assessment year(ay s) namely ay:2007- 08, 2009-10 and 2010-11. The assessee has filed appeals for all the three ay s viz. 2007-08, 2009-10 and 2010-11, while Revenue on its part has filed cross appeal for ay: 2009-10. The Cross Objection (C.O.) is filed by assessee for ay: 2009-10 arising out of Revenue s appeal, which is filed in support of the appellate order passed by learned Commissioner of Income-tax (Appeals), Allahabad granting part relief to the assessee. Since common issues are involved in all these appeals, hence all these four appeals and CO were heard together by Division Bench and are disposed of by this common order. These four appeals and CO were heard by Division Bench through video conferencing mode through Virtual Court. 2a. The grounds of appeals raised by assesse in ITA No. 632/Alld/2014 for ay : 2007-08 in memo of appeal filed with Income-Tax Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 5,992/- made by the assessing officer under the head dispensary expenses as maintained by the Commissioner of Income Tax (Appeal) without appreciating the true facts correctly is wrong, hence the same is liable to be deleted in the facts and circumstances of the case. 8. That in any view of the matter assessment framed and Assessing Officer's actions as partly confirmed are abinito void, unlawful and bad in law, without appreciation of facts and utter disregard of the submissions tendered by the appellant the lower authorities based on unwarranted presumptions, surmises, conjectures and imagination only without any evidence, therefore the additions/disallowance under different head so made and maintained are unwarranted hence the same are liable to be deleted. 9. That in any view of the matter no reasonable opportunity was provided to the assessee before making the additions/disallowances under different heads which is highly unjustified and illegal. 10. That in any view of the matter the penal interest charged under various provisions of the Income Tax Act is highly unjustified and illegal in the facts and circumstances of the case. 11. That in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... results are rejected u/s 145(3) of the income tax act. In fact the learned Commissioner of Income Tax (Appeals) travelled beyond his jurisdiction by recording such findings. The appellant s case is also covered by the decision of the Apex Court reported in (2009) 319 ITR 3 (Supreme Court) in the case of CIT vs. Flexi Pack. 6. That in any view of the matter in the course of survey in the premises of third party an annexure P-6 was found and facts of which was fully explained in detail to the two lower authorities and the entries of the same also tallied with the books of accounts hence the addition as maintained by the Commissioner of Income Tax (Appeals) is highly unjustified and objectionable. 7. That in any view of the matter since the main items for manufacturing is pig iron and coal which are supported by day to day stock registers and likewise for finished goods also stock registers are maintained and recorded in books therefore addition maintained by the Commissioner of Income Tax (Appeals) is unwarranted. 8. That in any view of the matter addition of ₹ 1,02,000.00 as made by the assessing officer as per Para 4 of the assessment order and the same as mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The order of C.I.T. (Appeal) is correct but the addition in part as maintained is highly unjustified. 2. That in any view of matter it is not correct to say that Commissioner of Income Tax (Appeal) has erred in law and on facts in deleting the addition of ₹ 1,03,27,195/- on account of alleged unexplained purchases but since the matter was properly examined by C.I.T. (Appeal) hence his action is correct in deleting the addition. 3. That in any view of matter the learned C.I.T. (Appeal) is perfectly justified in deleting the addition of ₹ 81,015/- on account of freight charges. 4. That in any view of matter addition of ₹ 1,16,50,023/- maintained out of the addition of ₹ 3,08,98,592/- is highly unjustified and liable to be deleted and rejection of account is not correct specially when provision of Section 145(3) is not invoked by the assessing officer hence maintained addition is liable to be deleted. 5. That in any view of matter addition of ₹ 1,02,000/- as maintained by C.I.T. (Appeal) as per para 5.2 of his order is not correct as the addition maintained without considering the facts and circumstances of the case. 6. That in an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations and findings of both the two lower authorities in their orders are incorrect and contrary to the actual facts of the case, hence the addition is liable to be deleted. 6. That in any view of the matter addition of ₹ 1,31,880/- as made and confirmed by the two lower authorities are highly unjustified and incorrect as this is not any undisclosed income as presumed by the assessing officer rather the amount is fully recorded in the books of accounts at different places, hence the addition is liable to be deleted in the facts and circumstances of the case. 7. That in any view of the matter a part sum of ₹ 5,749/- out of the disallowance of ₹ 11,498/- made under the head general expenses as maintained by the Commissioner of Income Tax Appeal is highly unjustified and illegal in the facts and circumstances of the case, hence the maintained part of the sum also deserves to be deleted. 8. That in any view of the matter a part sum of ₹ 4,136/- out of the disallowance of ₹ 8,273/- made under the dispensary expenses as maintained by the Commissioner Income Tax (Appeal) is unjustified and incorrect in the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operations conducted by Revenue on 27th August 2009, u/s 132(1) of the 1961 Act. The common legal jurisdictional ground raised by assessee in all these appeals is that the whole assessment proceedings conducted by Revenue pursuant to alleged search and seizure operations u/s 132(1) of the 1961 Act, allegedly on 27.08.2009 are null and void as there was no search and seizure operations conducted by Revenue against the assessee u/s. 132(1) of the Income Tax Act, 1961, on 27th August 2009. Since this legal jurisdictional ground raised by assessee goes to the root of the matter, the Bench on the earlier occasion when these appeals came up for hearing before the Bench, directed learned CIT-DR to file copies of warrant of authorization issued by Revenue against the assessee and Panchanama s prepared during the course of search operations claimed to be carried out by Revenue u/s 132(1) of the 1961 Act, on 27.08.2009 against the assessee. Pursuant to such directions issued by the Bench, now learned CIT DR has filed copies of warrant of authorization which were issued by Revenue against the assessee in connection with the aforesaid search and seizure operations conducted by Revenue agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the assessee u/s 132 of the 1961 Act on 27.08.2009, does not hold any merit and is hereby dismissed, for all the ay s before the Bench viz. ay: 2007-08, 2009-10 and 2010-11. We order accordingly. ITA No. 632/ALLD/2014 (Asstt. Year- 2007-08)-Assessee s Appeal 5. Now coming to the merits of the additions made by AO which were later sustained by learned CIT(A). The learned CIT(A) has allowed part relief to the assessee against the additions made by the AO. The assessee being aggrieved by additions as were sustained by learned CIT(A) for ay:2007-08 has come in appeal before the tribunal by filing second appeal, while The Revenue has not come in appeal for ay: 2007-08 against relief granted by learned CIT(A) to the assessee while adjudicating first appeal. At the outset, learned counsel for the assessee submitted before us that ground no. 1 to 4, and 6 to 11 raised by assessee in memo of appeal filed by assessee with tribunal are not being pressed and prayers are made for dismissal of these grounds as not being pressed. The learned CIT DR raised no objection to dismissal of ground no. 1 to 4 and 6 to 11 raised by assessee in memo of appeal filed with tribunal, as no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Bank draft to the tune of ₹ 1,00,000/-, which deletion of addition to income has now attained finality as it is not shown to us by either of the party that the Revenue has come in appeal against the said relief of ₹ 1 lacs granted by learned CIT(A). 7. Regarding other transactions of ₹ 1 Lac in cash payment made to assessee as is recorded in aforesaid seized material number LP-19/page 41 against which said Mr. Hulas Sharma of M/s Sudama Singh Sons asked for receipt of ₹ 1 Lac, was disbelieved by AO and also by learned CIT(A) who was pleased to confirm the addition to income of the assessee. Before us, similar contentions were made as were made earlier by assessee before learned CIT(A) and the AO, that bill no. 126 dated 28th November, 2006 for ₹ 1,00,002/- for supply of chaff cutter machine and spare parts, was raised in favour of Mr. Mukesh Kumar Singh, Purani Gurhati, Chhapra, Bihar, which bill is placed at paper book page no. 51. The copy of ledger account of M/s Mukesh Kumar and Company in the books of the assessee for financial year 2006-07 is also placed in paper book at page number 49. It is submitted that both M/s Sudama Singh Sons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uiries with these parties by invoking powers u/s 133(6), 131 and other provisions of the 1961 Act to verify and unravel the truth of assertions made by the assessee. The powers of learned CIT(A) are co terminus with the power of the AO and the learned CIT(A) could have made direct enquiries from relevant persons by issuing summons under section 131 of the Act or could have called for information by issuing notice under section 133(6) of the Act or by invoking other provisions of the 1961 Act, which the authorities below failed to do so . We have also observed that the total sale of the assessee in the year under consideration was ₹ 4,08,34,195/. The bill no. 126 dated 28.11.2006 in favour of Mr. Mukesh Kumar Singh, Purani Gurhatti, Chhapra, Bihar ( which is the same address as of M/s Sudama Singh and Sons )was issued on 28.11.2006 for ₹ 1,00,002/- for sale of chaff cutters machine and spare parts which was issued much prior to the date of search carried on by Revenue against assessee u/s 132 of the 1961 Act, on 27.08.2009. The assessee raised bill no. 125 dated 28.11.2006 for ₹ 2,06,204/- in favour of M/s Sudama Singh Sons and both the parties has same address ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed. We order accordingly. 10. The only grounds of appeal which are pressed before us and which requires adjudication by us are ground of appeals nos. 5 and 6 raised by assessee in memo of appeal filed with tribunal. As we have already held in preceding para s of this appellate order that search and seizure operations were validly conducted by the Revenue under section 132(1) of the 1961 Act against the assessee on 27.08.2009, we are proceeding to adjudicate ground of appeal nos. 5 and 6 raised by assessee in memo of appeal filed with tribunal. Vide ground of appeal no. 5, the assessee is contending that there was seizure of the stock registers of the assessee by Revenue marked as Annexure R-9 and there was a bonafide error in the said stock register, wherein there were 125 numbers of chaff cutter machines sold to M/s Raj Machinary Store, Rajendra Path, Patna, Bihar, vide bill no. 68 dated 24th June, 2009 (challan number 64 dated 24th June 2009), but due to human error entry was made in the stock register of 135 chaff cutter machines on 24th June 2009, which was a bonafide human error and the same was later corrected by the assessee suo moto after the conclusion of search proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is entry wrongly in stock register, rather it is a genuine human error . Under these circumstances on touchstone of preponderance of probabilities, we hold that this is a genuine and bonafide human error in posting of stock in the stock register while posting sale invoice, and the assessee cannot be saddled with tax liability merely on the ground that there was some human error while making postings in the stock register. There is no malice and malafide evident based on material on record on the part of the assessee to evade taxes or defraud Revenue. The assessee has already corrected the said mistake in posting of stock covered by sale invoice by reversing the said error / entry on 31st August 2009. The assessee is a private limited company and the accounts of the assessee are subject to audit. We have also observed that the turnover of the assessee during the year under consideration was to the tune of ₹ 8.38 Crore and the only discrepancy in the stock register which is found by Revenue for the year under consideration was to the tune of ₹ 25,750/- which is a very small fraction of total sales declared by assessee. Thus, on totality of circumstances and on touchsto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he items mentioned are iron, coal, Burada, Kiwad etc. in the seized document. The assessee has explained that this loose slip represents transactions with M/s Baijnath and Sons, Gazipur and ₹ 70,000/- was sought to be explained to have been received from said M/s Baijnath and Sons, Gazipur. Thus, explanation offered is that the assessee has sold these items as mentioned in seized material to M/s Baijnath and Sons, Gazipur and purportedly cash was received by assessee from said party. Thus, we have perused the ledger account of M/s Baijnath and Sons which is filed by the assessee and placed in paper book., and it is observed that the assessee is selling material to this party. The assessee is engaged in the business of manufacturing of agricultural equipment s such as chaff-cutter machine, Osai-fan, cane-crusher and thresher etc., and sale of these agricultural equipment s. The assessee is not selling coal, Kiwad, Iron etc. which is found mentioned in the seized document, rather the assessee is buying these items. Thus, explanation of the assessee cast serious doubts and is against the normal conduct of the business of the assessee. This amount of total material value of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entioned of value ₹ 35,658/- and ₹ 9,250/- in this loose document. The amount of ₹ 25,000/- was shown to have been paid in Advance against the first supplies of material of ₹ 35,658/- and balance of ₹ 10,658/- is shown to be outstanding . The assessee is engaged in the business of manufacturing of agricultural equipment s such as chaff-cutter machine, Osai-fan, cane-crusher and thresher etc., and sale of these agricultural equipment s. These appears to be purchases made by assessee. The assessee is explaining these transaction to be cash payment made against purchases made of Silica Sand from Badri Prasad Amar Nath on 30.06.2009 vide invoice number 21 for ₹ 12,869.90 and invoice number 22 dated 01.07.2009 for ₹ 13238.90, and it is explained that the payments were made of ₹ 12869.90 on 02.07.2009 and ₹ 13,238.89 on 07.07.2009. The document clearly speaks that there was a total transaction of ₹ 35,658/- on 23.07.2009 and an advance was already paid of ₹ 25,000/-. This transaction of ₹ 35,658/- of supplies is not demonstrated to have been recorded in books of accounts. Further addition of ₹ 9250/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross appeals filed by assessee and Revenue as well C.O. filed by the assessee against the Revenue appeal. 13. At the outset, learned counsel for the assessee submitted that the assessee is not pressing ground of appeal nos. 1 to 3 and 8 to 11 raised by assessee in memo of appeal filed by assessee with tribunal in ITA No. 152/Alld/2013 for ay: 2009-10, and they should be dismissed as not being pressed. The learned CIT-DR did not object to the dismissal of ground of appeal nos. 1 to 3 and 8 to 11 raised by assessee in memo of appeal filed by assessee with tribunal as not being pressed. After hearing both the parties, we dismiss ground of appeal nos. 1 to 3 and 8 to 11 raised by assessee in memo of appeal filed by assessee with tribunal in ITA no. 152/Alld./2013 for ay: 2009-10, as not being pressed. We order accordingly. 14. Now in cross appeals filed by Assessee as well by Revenue, the issue in dispute vide ground of appeal number 4 to 7 in assessee s appeal and ground of appeal number 1 and 2 in Revenue s appeal, are with respect to the additions being made on account of purchases being made by the asessee. The learned CIT(A) has granted part relief to the assessee while adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Weight in (MT) of item in Column No.5 Value (In Rs.) of weight in Column No.6 Difference (4-7) (In Rs.) 1 2 3 4 5 6 7 8 1. Purchases during the previous year i) Pig Iron Scrap ii. Coal 771.630 No Mentioned 53146621 1075511 Purchases i) Pig Iron Scrap ii) Coal 771.630 142.025 21428923 1014301 31717698 61210 2. Consumption during the previous year i) Pig Iron Scrap ii) Coal 697.380 50740182 Issue Production + Wastage i) Pig Iron Scrap ii) Coal 697.380 19837535 1615575 29287072 3. Closing Stock i) Pig Iron Scrap ii) Coal iii) Work in Progress 80.225 Not Mentioned 13094470 1023890 1611520 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its stock and inflated its purchases of material, and it is only because of Survey carried out by Revenue that this fact has come into light . The AO, thus, re-casted the manufacturing and profit and loss account of the assessee and made additions to the income of the assessee to the tune of ₹ 3,08,98,592/-, vide assessment order dated 28.12.2011 passed u/s 153A(b) of the 1961 Act. 16. The AO further observed that there is no mention of purchases of pig iron from M/s Benaras Steel Traders, Motiakhan, Mandy, Gobindgarh, Punjab to the tune of ₹ 1,03,27,195/- in the ledger account impounded from the premises of CA, Gupta Sanjay and Associates during survey operations carried on by Revenue u/s 133A of the 1961 Act. The said ledger account impounded by Revenue is reproduced by AO at page 10 of the assessment order. The assessee was asked to explain the same. The assessee submitted that ledger account impounded from office of CA is related to Pig Iron, while no pig iron was purchased from said M/s Benaras Steel Traders, Motiakhan, Mandy, Gobindgarh, Punjab and it is only MS Angles, MS Rounds and MS flats etc. which were purchased from said concern, and these purchases a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k of Pig Iron and Coal which is a principal and main raw material required by assessee for its manufacturing activities. It was submitted that the assessee is in the business of manufacturing of agricultural implements such as chaff cutters machine, osai-fan, cane crushers, threshers etc. and there are several other raw materials and consumables such as MS Angle, iron sheets, bearings, nut bolts and other machinery parts which are required by assessee for its manufacturing activities, while pig iron and coal are the main principal raw materials required by assessee. It was submitted that the assessee s CA has given quantitative details in audit report of pig iron, but there are several other raw material and consumables which are required by assessee for its manufacturing activities. Our attention was drawn to page 56 of the paper book to show stock, purchases and consumption as per books of accounts and as per impounded annexure P-6. Our attention was also drawn to page 58 of the paper book to show that there are large number of items in closing stock as on 31.03.2009 apart from Pig Iron and coal. Our attention was also drawn to Purchases Ledger which is placed in paper book at pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and weight in quantity shown in audit report are the same. The relevant impounded paper and audit report showing quantitative detail of raw material, consumption, purchases and stock were scanned and reproduced by AO at page no. 2 to 5 of the assessment order. The comparative chart of quantitative details of purchases, consumption and closing stock of raw material and closing stock of finished goods as is reproduced by AO in its assessment order at page 4 and 5, are extracted below: Comparative Quantitative details of raw materials for F.Y. 2008-09 (A.Y. 2009-10) Sl No. Name of item as per para 28 of the Audit report dt. 02.09.09 Weight (in MT) of item in column No. 2 Value (in Rs.) of Weight column No. 3 Name of the item as per Annexure P-6 impounded Weight in (MT) of item in Column No.5 Value (In Rs.) of weight in Column No.6 Difference (4-7) (In Rs.) 1 2 3 4 5 6 7 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carried on by assessee of agricultural equipment s such as chaff cutters machine, Osai fan, cane crusher and thresher etc. . The explanation offered by assessee were disbelieved by authorities below as they were of the view that when quantity in weight are tallying between the document impounded from the office of CA during survey operations and in the audit report, there is no justification offered by the assessee for variation in the amount of purchase, consumption and stock recorded in the impounded document and the books of accounts. The AO observed that the assessee has manipulated its stock and inflated its purchases of material, and it is only because of Survey carried out by Revenue that this fact has come into light . The AO, thus, recasted the manufacturing and profit and loss account of the assessee and made additions to the tune of ₹ 3,08,98,592/- to the income of the assessee. The learned CIT(A) upheld/sustained the additions with respect to purchases to the tune of ₹ 3,08,98,592/- on the grounds that the assessee failed to brought on record evidences for purchases such as purchase invoices, vouchers, details of payment, confirmation from relevant parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness of the assessee or not. The assessee is claiming deduction from income towards purchases of raw material and consumables and the onus is on the assessee to prove that deductions are claimed in accordance with provisions of the 1961 Act . The assessee has to justify that these purchases/consumables are used for its business . The manufacturing process is to be brought on record by assessee with respect to manufacturing activities carried on by the assessee and details of raw material and consumables required in connection with the manufacturing process carried on by assessee or for other business needs of the assessee is required to be brought on record. Thus based on material on record, in the interest of justice and fairness to both the rival parties, we restore the matter back to the file of the AO for fresh consideration and denovo determination of the issues on merits in accordance with law. The AO is directed to provide proper and adequate opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law and evidences/explanations filed by assessee in support of her contentions shall be admitted by the AO and adjudicate ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
