M/S.sri Kavitha Jewellers v. The Deputy Commissioner Of Income Taxspecial Investigation Circleerode

M/s.Sri Kavitha Jewellers,340, Cutchery Street,Erode. .. Appellant Vs The Deputy Commissioner of Income TaxSpecial Investigation CircleErode. Prayer : Tax Case (Appeal) is filed under Section 260-A ofthe Income Tax Act, 1961, against the order of the Income TaxAppellate Tribunal, Chennai 'D' Bench, dated 26.09.2008 passedin I.T.(SS)A.NO.94/Mds/2001 for the Block Assessment Period01.04.1987 to 27.11.1997 against the order of the Commissionerof Income tax (Appeals), XII, Chennai, order dated 20/03/2001made in IT/WT/GT/Appeal No.364/99-00 for the Assessment Years1988-89 to 97-98 and against the order of the AssistantCommissioner of Income Tax, Special Investigation circle, Erodeorder dated 25.11.99 made in PAN/GIR No.S-3599(262) for theBlock Assessment for block period 01.04.87 to 27.11.97. (Judgment of the Court was delivered by DR.VINEET KOTHARI, J.) The Assesee has filed this appeal under Section 260 A of theIncome Tax, 1961 raising the substantial questions of lawarising from the order of the Income Tax Appellate Tribunal, https://hcservices.ecourts.gov.in/hcservices/ dated 26.09.2008 in respect of IT(SS) A No.94/Mds/2001 for theBlock Assessment Period 01.04.1987 to 27.11.1997. 2. This Appeal was admitted by a Co-ordinate Bench of thisCourt on 02.11.2009 on the following substantial questions oflaw: "1. Whether the Income Tax Appellate Tribunalwas right in law and had valid material to holdthat an amount of Rs.3,00,000/- has to be added asundisclosed income on account of excess stock ofjewellery for the assessment year 1998-99 in theblock assessment under section 158 BC of theIncome Tax Act, 1961? 2. Whether on the facts and in thecircumstances of the case, the Income TaxAppellate Tribunal was right in law in estimatingthe undisclosed income at Rs.3,00,000/- in theabsence of any seized material, which is acondition precedent for computation of undisclosedincome under section 158 BB of the Income Tax Act,1961? 3.The relevant portion of the order passed by the Tribunalis quoted below for ready reference : "4. We have heard both the parties andperused the material available on record. We havethoroughly gone through the order passed by theid.first Appellate authority. No doubt the Id.first Appellate authority passed a very detailedorder and allowed the appeal of the assessee bythe accepting the contention raised by theAuthorized Representative of the assessee. Theld. first Appellate authority has examined theseizedmaterialespeciallyanotebook(MD/S/B&D/34) in which the assessee has explainedabout the excess jewellery found during the searchand deleted the entire addition in dispute. But,after going through the order passed by theAssessing Officer as well as the order passed bythe ld. first Appellate authority, we find that atthe time of search, the excess stock of jewelleryweighing around 3372 gms over and above the stockfound and seized, which was also admitted by oneof the partners Shri Tamilarasu, who was examinedon oath on the date of search, offered to admit asum of Rs.13,50,000/- as undisclosed income beingvalue of 3372 gms of gold at the rate of Rs.390/-per gram. He also stated that it is true that there is some excess stock but this included somejewellery belonging to the partners for which theyhave no evidence to prove and the ld. firstAppellate authority after appreciating the seizedmaterial MD/S/B&D/34 in the form of notebook istotally ignored in the findings of the AssessingOfficer. He has not appreciated the elaboratefinding of the A.O. The assessee has not producedany evidence supporting their contention. Weshould not forget that the statement of onepartner Shri Tamilarasu who has been examined onoath at the time of search and he stated it istrue there is some excess stock for which theyhave no evidence to prove their stand. In thepresent case, the total addition for undisclosedincome of Rs.80,000/- for the assessment year1997-98 and consequent disallowance of interest ofRs.14,400/- and Rs.9,600/- for the assessment year1997-98 and 1998-99. Secondly, a sum ofRs.7,62,190/- being the excess stock of goldjewellery treated as undisclosed income for theassessment year 1998-99 and lastly, undisclosedincome of Rs.74,864/- being the value of 9358 gmsof jewellery as excess stock for the assessmentyear 1998-99.5.As regard to these two additions on account ofundisclosed income of Rs.80,000/- for theassessment year 1996-97 and disallowance ofinterest of Rs.14,400/- and Rs.9,600/- for theassessment years 1997-98 and 1998-99 andundisclosed income of Rs.74,864/- being the valueof 9358 gms of silver in the excess stock for theassessment year 1998-99, we fully agree with thefindings of the Id.CIT(Appeals). We hold that nointerference is called in the well-reasoned orderpassed by him in his order. But, in regard toaddition of 7,62,190/- being the value of excessstock of gold jewellery treated as undisclosedincome for the assessment year 1998-99, wespecifically direct the ld. counsel for theassessee to offer some undisclosed income onaccount of excess stock of gold jewellery for theassessment year 1998-99 out of Rs.7,62,190/- .The ld. counsel for the assessee relied on by theorder passed by first Appellate authority,but, heagreed for the addition of Rs.3,00,000/- out ofRs.7,62,190/- as undisclosed income for theassessment year 1998-99. The learned D.R. raisedno objection. Therefore, keeping in view of the facts and circumstances of the present case and inthe interest of justice, we are of the consideredopinion that an amount of Rs.3,00,000/- on accountof excess stock of gold jewellery to be treated asundisclosed income for the assessment year 1998-99. The Assessing Officer is directed accordinglyand modify the assessment order." 4. The learned counsel for the Assessee Mr.R.Sivaraman,submitted that though the learned CIT (Appeals) had deleted theadditions made on account of alleged undisclosed income to theextent of Rs.7,62,190/- on the basis of the details of jewellerybelonging to the partners of the firm, the Tribunal whileconcluding that the order passed by the CIT (Appeals) is wellreasoned, but it still directed the learned counsel for theAssessee to make concession with regard to some amount foraddition as undisclosed income on the alleged excess stock ofgold jewellery and, though no such concession was made by thelearned counsel for the Assessee, still recording such aconcession, albeit wrongly the learned Tribunal made an additionof Rs.3,00,000/- as against Rs.7,62,150/- addition made by theAssessing authority, which was completely deleted by the CIT(Appeals) and modified the order illegally. 5.The relevant portion of the order passed by the CIT(Appeals) is extracted hereunder:"7. I have carefully considered thesubmissions made on behalf of the appellant.Under Sec.158 BB(1) of the Act., undisclosedincome of the block period is to be determined onthe basis of the evidence found as a result ofsearch. The A.O.,was, therefore, not justified inignoring the notebook (MD/S/B&D/34) which wasseized during the course of search on 15.12.97.In the said note-book, details of jewellerybelonging to the partners are stated to be asunder: Namequantum of gold (gms.)1. S.Tamilarasan298.5202. P.Susila Devi265.1903. T.Jayalakshmi489.1504. V.B.Ponnusamy274.2905. C.Chandrasekaran116.9006. N.Palanisamy423.0007. S.Rajamanickam 337.960 8. C.Sivakumar365.910 ----------Total 2570.920 ---------- https://hcservices.ecourts.gov.in/hcservices/ 6. The learned counsel for the Revenue Mr.T.R.Senthikumarwas also unable to support the Impugned Order of the Tribunal tothis extent. 7. Having considered the rival submissions we areconstrained to observe that the learned Tribunal being a factfinding body has failed to discharge its duty in an appropriatemanner by recording the findings of facts on the basis ofmaterials on record. We find that the learned CIT (Appeals) bygiving an acceptable finding as quoted above on the basis of theseized material during the course of search, found that thealleged excess jewellery belonged to the partners of the Asseseefirm and therefore the addition made in the hands of theAssessee firm to the extent of Rs.7,62,190/- towards 1859 gmsjewellery was not justified. Though the learned Tribunal had nocontra material before it, but for the reasons best known to thelearned members of the Tribunal, they stated in paragraph 5 that"We specifically direct the ld. counsel for the assessee tooffer some undisclosed income on account of excess stock of goldjewellery for the assessment year 1998-99 out ofRs.7,62,190/-". Thereafter, the learned Tribunal proceeded tostate that "The ld. counsel for the assesee relied on the orderpassed by the first Appellate authority but, he agreed for theaddition of Rs.3,00,000/- out of Rs.7,62,190/- as undisclosedincome for the assessment year 1998-99." 8. We are unable to reconcile ourselves with the doubtfulobservations made by the learned Tribunal in the aforesaidmanner. It was not at all open to the learned Tribunal to seekfor any concession from the Assessee much less direct thelearned counsel to make any such concession. No such concessionis said to have been made by the learned counsel for theAssessee. We are rather pained and surprised at the aforesaidtenor of the order passed by the learned members of the IncomeTax Appellate Tribunal. We do not want to say anything more onthe same. We are unable to find any relevant material or basison which the said addition of Rs.3,00,000/- was made by thelearned Tribunal. 9. Accordingly, while allowing the present Appeal of theAssesee and answering the aforesaid questions against theRevenue, we set aside the order passed by the learned Income TaxAppellate Authority dated 26.09.2008 and restore the order ofthe learned CIT (Appeals) dated 20.03.2001,on the aforesaidissue. 10. In the result, this Tax Case Appeal of Assessee isallowed. No order as to costs. arr Sd/- Assistant Registrar //True Copy// Sub Assistant Registrar To1.The Income Tax Appellate Tribunal,Chennai 'D'Bench.2.The Commissioner of Income Tax(Appeals-XII),chennai.3.The Assistant Commissioner of Income Tax,Special Investigation Circle,Erode.+1cc to Mr.T.R.Senthil Kumar, Advocate, SR.No.21905+1cc to Mr.R.Sivaraman, Advocate, SR.No.21825T.C.(A).No.1019 of 2009Kak(23/04/2019)