The Commissioner Of Income Tax, Alwar v. M/S Jain Stones Gangsaw, Weir Road, Bhim Nagar, Bayana,Bharatpur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 56 / 2014 The Commissioner of Income Tax, Alwar. ----Appellant Versus M/S Jain Stones Gangsaw, Weir road, Bhim Nagar, Bayana,Bharatpur. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain with Ms. Shiva Goyal For Respondent(s) : None Present _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 11/09/2017 1.By way of this appeal, the department has challengedthe judgment and order of the Tribunal whereby the Tribunal hasallowed the appeal preferred by assessee modifying the order ofCIT(A) and AO. 2.While admitting the matter on 22.08.2016, this Court has framed the following substantial question of law:- “Whether the Tribunal was justified in reversing thefindings of the CIT(A) and deleting the additionmade on account of undisclosed investment instock found during the course of survey underSection 133A specifically when the statement of thepartner was recorded?” 3.Counsel for appellant has taken us to the order of AO relevant part of which reads as under:- “On carefully gone through the assessee’r reply aswell as impounding materials/records. The contention of the assessee is acceptable point No.2of Rs.52969/-, point No.10 of Rs.17887/- and pointNo.12 of Rs.65813/- reply of the assessee, becausethe assessee firm and the plot belonging to thesister concern M/s Jain Tiles are situated incommon Khasra No. and have no separateboundaries the stock worth Rs.52969/- belongingto the sister concern was also there. Moreover, noseparate stock relating to the sister concern wasfound separate at the time os survey. Thus, thestock worth Rs.52969/- belongs to the sisterconcern M/s Jain Tile was stored there. Photocopyof title deeds (Khasra No.101) of both the concdrn,and affidavit of partner Shri Sunil Kumar Jainpartner of the firm and affidavit of ShriDharmendra Jain proprietor of Sister concern ofM/s Jain Tiles have already been submitted at thetime of survey proceedings and they have alsodeclared in the post survey statements.” 4.After taking into consideration the added stock whichwas found in excess while conducting survey under Section 133the statements on record were also considered and it was foundas under:- “(iv) Assessee has taken the plea that stock was notphysically measured at all because two blocks of roughstone procured from the mines, in the natural shape,can not be identical, i.e. of same shape and size it hasbeen submitted that it was not possible to havemeasurement of 2500 block of rough stones andfinished tiles thousands in quantity, and of differentsizes in a single day. It has mentioned that mining andforest department seized and measured 1008 blockwhich were of different sized and it took them 11 dayswith 8-10 persons. It has put a question mark on theactual measurement of blocks of stone in course ofsurvey since in the inventory. These have beenreflected as having identical shape and size. I have gone through the entire list of stockprepared in the course of survey in 7 pages. I find thatthe different items have been mentioned in the list andblock rough stones have been listed only at page-7 at Sl. No.131 to 139. Copy of Page No.7 of the inventorystock is reproduced as under :- I have gone through the entire list of stockprepared in the course of survey in 7 pages. I find thatthe different items have been mentioned in the list andblock rough stones have been listed only at page-7 at Sl. No.131 to 139. Copy of Page No.7 of the inventorystock is reproduced as under :- Inventory of Stock M/s Jain Stone Gangsaw, Bayan 123456121 ikfV;k 6’x4”x30”57 ihl32/- sq- ft.43,776/-Pink122----do-----5’x4’x30”62 ihl32/- sq- ft.39,680/-123----do-----6’x3½’237 ihl[32/- sq- ft.]1,59,264/-124----do-----6’x3½’302 ihl[32/- sq- ft.]2,02,944/-125ikfV;k 5½’x4’275 ihl[22/- sq-ft.]1,33,100/-yky126----do-----6’x3½’231 ihl[22/- sq-ft.]1,06,722/-127HkxZ iRFkj4’x3’5 ihl6/- sq ft.360/-128----do-----1’x12’3 ihl11/- sq ft.396/-129ikfV;k 5’x3’20 ihl7/- sq ft.2100/-Pink HkxZ130ikfV;k jQ5’x3x57 ihl7/- sq ft.5985/-Pink131Pink 6’x4’x1½’10 ihl100/- sq. ft.36,000/-cyksn iRFkj132----do-----7’x4’x2’7 ihl100/- sq ft.39,200/-133----do-----6½’x2½’x1½’3 ihl100/- sq ft. 73,125/- 658127312/-134----do-----5’x4’x1¼’3 ihl100/- sq. ft.7,500/-135Pink cyksn6’x4’x2’68 ihl100/- sq. ft.3,26,400/-iRFkj136Red----7’x4’x2½’36 ihl100/- sq. ft.2,52,000/-do----- 137Pink Bloch5’x4’x2½’27 ihl100/- sq. ft.1,35,000/-iRFkj138----do-----74”x36’x28’42 ihl100/- sq ft.1,81,300/-139Red iRFkj82”x48”36”56 ihl70/- sq. ft.3,21,440/-140jQ cM+k 25 fQLy2,500/-iRFkjTotal Page No.7 Rs. 20,68,792/-Grand total Page 1 to 7 Rs. 89,61,007/-65812/-88,95,195/- 5.Learned counsel contended that the conclusion reached by CIT(A) reads as under :- “In view of above discussion in Para 4.4(ii) and(iv), the addition under the head undisclosedinvestment in stock is sustained at Rs.67,15,315/-and the appellant gets relief of Rs.5,99,789/-” 6.Taking into consideration the above, the Tribunal seriously committed an error. 7.We have heard counsel for the appellant. 8.Tribunal while considering the case in para 7 and 7.1 of its order held as under:- “We have heard parties with reference tomaterial on record. The stock inventory preparedat the time or survey is not shown to have beenmade in the presence of any witness. Eventhough the Ld. CIT (A) has recorded that thesurvey team comprised of the CIT as well as 3 reached by CIT(A) reads as under :- “In view of above discussion in Para 4.4(ii) and(iv), the addition under the head undisclosedinvestment in stock is sustained at Rs.67,15,315/-and the appellant gets relief of Rs.5,99,789/-” 6.Taking into consideration the above, the Tribunal seriously committed an error. 7.We have heard counsel for the appellant. 8.Tribunal while considering the case in para 7 and 7.1 of its order held as under:- “We have heard parties with reference tomaterial on record. The stock inventory preparedat the time or survey is not shown to have beenmade in the presence of any witness. Eventhough the Ld. CIT (A) has recorded that thesurvey team comprised of the CIT as well as 3 inspectors and this team was assisted inpreparing the stock inventory by the staff andother employees of the assessee firm, yet suchfindings are not rested with reference to anyreliable material. Even in the statement that isshown to have been recorded of Shri Sunil Jainclaiming to be suffering from handicap of mental,physical and impaired vision, the Income-taxOfficial who recorded the statement did not drawthe book stock as per books of account at thesame time nor worked out any excess or shortagebefore concluding the survey at assessee’spremises. The assessee is also not shown to havebeen provided with the copy of the stockinventory stated to have been prepared at thetime of survey, statedly valued at Rs.89.61 lacs,which could enable the assessee to raiseobjections about the correctness thereof beforethe competent authority at an appropriate time. Itis only after about 2 months of conclusion ofsurvey when the assessee was required to explainthe excess stock worked out by the AssessingAuthority. The assessee at the first instance tookthe objection about the correctness of the stockwritten in the statement so prepared on thealleged blank paper got signed from Shri SunilKumar jain and admitted the correct inventory ofstock of Rs.34.31 lacs that was available at thetime of survey in its business premises. Numberof glaring discrepancies have been pointed outbefore the authorities below nut the ld. CIT (A) inthe impugned order proceeded to accept thecorrectness of the inventory list prepared. Eventhe perusal of said inventory list does not revealthe location of such goods found and inventirizedat the time of survey. The Ld. CIT(A) is thusfound to be speaking two things in the samebreath. Once he says that the inventory of stocksigned by Shri Sunil Jain, partner is tobe taken ascorrect whereas on the other hand at internalpage 17 of the impugned order he says that theeappears to be some approximation made in themeasurement of certain items and gives relief of15% of Rs.13,06,152/- i.e. Rs.1,95,923/- in orderto account for possible errors on account ofapproximation in the stock taking of such blockstones. The revenue is not in appeal nor has disputed such a finding reached by Ld. CIT(A). Letthat as it may be, it thus is apparent that thestock inventory prepared cannot be said to beresult of actual physical count of the stock foundat the business premises of the assessee. For thelapses committed by the survey party in takingthe correct inventory and physical count of thestock, the assessee cannot be made to suffermore particularly when he has mde a bona fideretraction and disputed the correctness of suchstock appearing in the inventory list, withoutbringing any witness on record from thedepartmental side or from any of the staffmembers who can be said to have assisted inpreparing the stock list. Such a retraction has tobe accepted in the light of judgment by Hon’bleChattisgarh High Court in the case of ITO vs.Vijay Kumar Kesar, 327 ITR 497. The assessingauthority ought to have known and understoodthe procedures properly and demolished the claimof the assessee by placing cogent material andreliable evidence to rebut each and everyargument taken by the assessee in saying thatthe preparation of inventory stock is an arbitraryexercise of the survey officials and the samecannot be taken as correct position of stock foundat the time of survey. In the absence of suchmaterial or evidence and the finding that theelement of approximation on preparing theinventory of stock is not ruled out, the inventorylist so prepared cannot be taken to be reflectedactual stock found at the time or survey atbusiness premises of the assessee. The list soprepared, therefore, is of no credence and hencecannot be taken as evidence against the assesseefor the purpose of making assessment of incomeof the year under consideration. 7.1 It, however, remains that the assessee hasadmitted the stock of the value of Rs.34,31,093/-at the time of survey in his business premises.The Assessing Officer himself ha admitted thatthe stock of the value of Rs.52,969/- belongs toM/s. Jain Tiles and has given the relief thereof.The appellant has filed affidavit of the proprietorof M/s. Jin Stone Industries with documentaryevidence that its stock is also stored at thebusiness premises of the appellant before us and 7.1 It, however, remains that the assessee hasadmitted the stock of the value of Rs.34,31,093/-at the time of survey in his business premises.The Assessing Officer himself ha admitted thatthe stock of the value of Rs.52,969/- belongs toM/s. Jain Tiles and has given the relief thereof.The appellant has filed affidavit of the proprietorof M/s. Jin Stone Industries with documentaryevidence that its stock is also stored at thebusiness premises of the appellant before us and for using such business premises he is payingannual rent of Rs.12000/-. The proprietor of M/sJain Stone Industries has also admitted that stockof the value of Rs.18,68,880/- found at the timeof survey at the business premises or M/s JainStone Gangsaw belong to him. This personhimself has appeared before the AssessingAuthority in assessment proceedings but noadverse comments on the affidavit of this personhave been made by the Assessing Authority. TheLd. CIT(A) also did act on the affidavit of thisperson but gave relief only of the value ofRs.4,03,866/- as an amount of Rs.14,65,014/-was found unaccounted sales assessed in thehands of that person. The Ld. CIT(A) was notentitled to reject the affidavit partly on this pointon such a ground as M/s. Jain Stone Industrieshas owned the stocks of the value ofRs.18,68,880/- kept at the business premises ofthe appellant on the date of survey on18.03.2008. The assessee was also entitled toassume that the Income-tax Authority weresatisfied with the affidavit as sufficient proof onthis point as he was neither cross-examined onthis point not called upon to produce anydocumentary evidence in that regard. Under thesecircumstances and having regard to the judgmentby Hon’ble Allahabad High Court in the case L.Sohan Lal Gupta vs. CIT (1958) XXXIII ITR 786 atpages 791 and 792, it was not open to the Ld. CIT(A) to doubt the correctness of claim made by theassessee which was supported by the affidavit ofM/s. Jain Stone Industries. We, therefore, do notfind any justification in the decision by Ld. CIT (A)in not treating the stock of Rs.18,68,880/- asbelonging to M/s. Jain Stone Industries formingpart of the total stock of Rs.34,31,083/- admittedas actual physical stock at his business premises.In this view of the matter and the findings ashave been reached herein before, we do not findany justification in sustenance of addition on thepresumption of excess stock found as result ofsurvey at the business premises of the assessee.The entire addition of Rs.67,15,315/- is,therefore, directed to be deleted.” 9.In our considered opinion, taking into account theabove findings, no interference is called for. Therefore, issue isanswered in favour of assessee and against the department. 10.The appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/68