DCIT, JODHPUR v. Shri Mohd. Yusuf Belim, JODHPUR

ITA 660/JODH/2008 | 2005-2006
Pronouncement Date: 29-07-2011 | Result: Partly Allowed

Appeal Details

RSA Number 66023314 RSA 2008
Assessee PAN ADAPB3924D
Bench Jodhpur
Appeal Number ITA 660/JODH/2008
Duration Of Justice 2 year(s) 7 month(s) 17 day(s)
Appellant DCIT, JODHPUR
Respondent Shri Mohd. Yusuf Belim, JODHPUR
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted DB
Tribunal Order Date 29-07-2011
Date Of Final Hearing 27-07-2011
Next Hearing Date 27-07-2011
Assessment Year 2005-2006
Appeal Filed On 12-12-2008
Judgment Text
ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 1 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR JODHPUR BENCH : JODHPUR BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND AND AND AND SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER SHRI K.D. RANJAN ACCOUNTANT MEMBER ITA NOS.629 & 630/JU/2008 ASSESSMENT YEARS : 2005-06 & 2006-07 SHRI MOHD. YUSUF BELIM PROP. M/S BELIM ENTERPRISES JODHPUR. PAN : ADAPB3924D VS. DCIT CENTRAL CIRCLE-2 JODHPUR. ITA NO.660/JU/2008 ASSESSMENT YEAR : 2005-06 DCIT CENTRAL CIRCLE-2 JODHPUR VS. SHRI MOHD. YUSUF BELIM PROP. M/S BELIM ENTERPRISES JODHPUR. PAN : ADAPB3924D ASSESSEE BY : SHRI U.C. JAIN ADVOCATE REVENUE BY : DR. BANWARI LAL CIT DR O R D E R O R D E R O R D E R O R D E R PER K.D. RANJAN AM: PER K.D. RANJAN AM: PER K.D. RANJAN AM: PER K.D. RANJAN AM: THESE APPEALS BY THE ASSESSEE FOR ASSESSMENT YEAR 2005-06 AN D 2006-07 AND CROSS APPEAL BY THE REVENUE FOR ASSESSMENT YE AR 2005-06 ARISE OUT OF SEPARATE ORDERS OF CIT (APPEALS) CENTRAL JAIPUR. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVE NIENCE ARE DISPOSED OF BY THIS COMMON ORDER. ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE FOR BOTH THE YEARS ARE REPRODUCED AS UNDER- ITA NO.629/JU/2008 (ASSESSMENT YEAR : 2005-06) 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN: (A) SUSTAINING AN ADDITION OF RS.74 72 114/- THE GROS S AMOUNT OF UNRECORDED SALES AS NET INCOME WITHOUT CONSIDERING THE FACT THAT ON SUCH SALES ONLY NET PROFIT RATE CAN BE APPLIED AND AS SUCH THE ADDITION SUSTAINED IN RESPECT OF ENTIRE SALE CONSIDERATION IS ERRONEOUS A ND REQUIRES TO BE DELETED. (B) SUSTAINING AN ADDITION OF RS.11 74 287/- OUT OF PURCHASES MADE FROM FOUR PARTIES AGGREGATING TO RS.1 17 42 877/-. (C) SUSTAINING AN ADDITION OF RS.15 80 030/- U/S 68 TH E AMOUNT OF CREDIT IN THE NAME OF NITIN ALLOYS PVT. LTD. JODHPUR. 2. THAT THE PETITIONER MAY KINDLY BE PERMITTED TO RAISE A NY ADDITIONAL OR ALTERNATIVE GROUND AT OR BEFORE THE TIME OF HEARING. 3. THE PETITIONER PRAYS FOR JUSTICE & RELIEF. ITA NO.630/JU/2008 (ASSESSMENT YEAR : 2006-07) 1) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT (A) ERRED IN SUSTAINING AN ADDITION OF RS.14 94 600/- ON A/C OF STOCK ALLEGED TO BE FOUND AT E-517 MIA BASNI PHASE -II JODHPUR PARTICULARLY WHEN NO SUCH STOCK WAS LYING THERE AND THE BASIS ON WHICH SUCH ADDITION WAS MADE IS TOTALLY ERRONEOUS AND CONTAINED APPARENT MISTAKES. 2) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN NOT ACCEPTING THE EXPLANATION OF TH E ASSESSEE THAT LITTLE STOCK LYING IN THE GODOWN BERING NO.E-517 BA SNI PHASE II JODHPUR AND WAS INCLUDED IN THE FINAL INVENTORY P REPARED AT THE GODOWN LOCATED AT D-36 BEHIND NEW POWER HOUSE JODHP UR AT THE TIME OF CONCLUSION OF SEARCH. ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 3 3) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT (A) ERRED IN SUSTAINING AN ADDITION OF RS.10 43 590/- ON A/C OF ALLEGED SCRAP OF OLD BUSES PURCHASED FROM RSRTC JODHPUR PARTICULARLY WHEN THE SCRAP OBTAINED FROM SUCH BUSES W ERE TAKEN INTO ACCOUNT WHILE PREPARING INVENTORYAT THE GODOWN LOCA TED AT D-36 BEHIND NEW POWER HOUSE JODHPUR AND NO OTHER S TOCK WAS LYING AT ANY OTHER PLACE. 4) WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATIVE: (A) THAT NEITHER ACTUAL WEIGHTMENT WAS DONE NOR THE NUMBE R OF BUNDLES WERE COUNTED EITHER AT GODOWN NO.E-517 OR A T D-36. (B) THAT THE FINAL INVENTORY WAS PREPARED ON ESTIMATE BA SIS IN WHICH ALL THE STOCK BELONGING TO THE ASSESSEE LYING IN BOTH THE GODOWNS INCLUDING SCRAP OF OLD BUSES WERE TAKEN I NTO ACCOUNT. 5) THAT THE PETITIONER MAY KINDLY BE PERMITTED TO RAISE AN Y ADDITIONAL OR ALTERNATIVE GROUND AT OR BEFORE THE HEARIN G OF APPEAL. 6) THE PETITIONER PRAYS FOR JUSTICE & RELIEF. 3. IN ASSESSMENT YEAR 2005-06 THE GROUND 1 (A) RELATIN G TO SUSTAINING THE ADDITION OF ` 74 72 114/- WAS NOT PRESSED BY THE LD. AR OF THE ASSESSEE AND THEREFORE THE SAME IS DISMISSED A SUCH. 4. THE SECOND ISSUE FOR CONSIDERATION IN ASSESSEES APPEAL A ND FIRST ISSUE IN REVENUES APPEAL RELATE TO SUSTAINING THE ADDIT ION OF ` 11 74 287/- OUT OF PURCHASES MADE FROM FOUR PARTIES AG GREGATING TO ` 1 17 42 877/-. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM TRADING IRON SCRAP. A SEARCH AND SEIZURE OPERATION WAS CONDUCTED AT THE BUSIN ESS AND RESIDENTIAL PREMISES OF THE ASSESSEE ON 13.7.2005 TO 21.7. 2005. DURING THE COURSE OF SEARCH STATEMENT OF THE ASSESSEE WAS RECORDED . THE AO ISSUED NOTICE U/S 153A OF THE INCOME-TAX ACT ON 13.2.2 006. THE ASSESSEE FILED RETURN OF INCOME ON 31 ST OCTOBER 2006 IN PURSUANCE OF ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 4 NOTICE ISSUED U/S 153A OF THE INCOME-TAX ACT 1961. T HE AO DURING THE COURSE OF ASSESSMENT NOTED THAT THE ASSESSEE ALLEGED TO HAVE PURCHASED SCRAP FROM FOLLOWING FOUR PARTIES:- I) M/S MONARCH STEELS ` 47 25 900/- II) M/S NAMRATA STEELS `52 34 668/- III) M/S NITIN ALLOYS PVT. LTD. `5 04 000/- (AFTER ADJUSTING ` 15 80 030/- IV) M/S ROHINI STEELS `12 78 309/- TOTAL `1 17 42 877/- 5. THE AO ACCEPTED THE CONTENTION OF THE ASSESSEE THAT THE PARTIES BILLS WERE PRODUCED TO JUSTIFY THE ACTUAL PURCHASE MAD E FROM UNREGISTERED DEALERS. HOWEVER LD. AO FOLLOWING THE DECISION OF ITAT AHMEDABAD BENCH IN CASE OF VIJAY PROTEINS LTD. VS. ACI T 58 ITD 428 MADE ADDITION BY DISALLOWING 25% OF ` 1 17 42 877/- AMOUNTING TO ` 29 35 719/-. 6. ON APPEAL THE DISALLOWANCE OF 25% ON UNREGISTERED PURCHASES WAS AGITATED ON THE GROUND THAT THE FACTS OF M/S VIJAY PROTEINS LTD. WERE ENTIRELY DIFFERENT FROM THE FACTS OF ASSESSEES CASE. M/S VIJAY PROTEINS LTD. WAS A MANUFACTURER WHEREAS THE ASSESSEE IS A TRADER. A TRADER CANNOT SELL ANY GOODS WITHOUT CORRESPONDING PURCHASES. IN CASE OF VIJAY PROTEINS THE PARTIES FROM WHOM PURCHASES WERE MAD E WERE FICTITIOUS BUT IN THE CASE OF THE ASSESSEE THE PURCHASE BILL REFLECTED ACTUAL PURCHASES THEREFORE THE DECISION OF VIJAY PRO TEINS LTD. WAS NOT APPLICABLE TO THE FACTS OF THE ASSESSEES CASE. IT WAS ALSO SUBMITTED THAT THE AO AT ONE PLACE HAD ACCEPTED THAT ACTUAL P URCHASES WERE MADE BY THE ASSESSEE AND TO JUSTIFY THE SAME PURCHASE BILL S WERE PROCURED THEN THERE WAS NO REASON TO DISALLOW PART O F THE PURCHASES ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 5 ACTUALLY MADE. THERE WAS NO EVIDENCE ON RECORD TO J USTIFY THAT THERE WAS POSSIBILITY OF LEAKAGE. IT WAS ALSO SUBMITTED THAT T HE AO DID NOT COMPARE THE PROFIT RATE WITH THE PAST RESULT OF THE A SSESSEE OR ANY OTHER COMPARABLE CASE OF SCRAP DEALER TO WORK OUT THE DISALL OWANCES. THE AO HIMSELF MADE 100% ADDITION OF SALES RECEIPTS. THEREFORE PURCHASE PRICE COMPONENT WAS ALREADY MERGED IN SUCH SALES. HENC E SEPARATE DISALLOWANCE ON ACCOUNT OF SAME PURCHASES WOULD AMOUNT TO DOUBLE ADDITION WHICH WAS NOT PERMISSIBLE IN LAW. 7. LD. CIT (A) ON THE BASIS OF THE FACTS OF THE CASE N OTED THAT THE ASSESSEE HAD INDULGED IN THE PRACTICE OF PURCHASING GOOD S IN CASH FROM UNKNOWN PARTIES AND HAD SHOWN THE BILLS FROM UNREGISTE RED DEALERS. IN THIS TYPE OF TRANSACTION THE ASSESSEE WAS ENJOYING ADVANT AGE TO MANIPULATE THE PROFIT BY QUOTING SUITABLE PURCHASE PR ICE. THEREFORE THERE WAS CERTAINLY SOME LEAKAGE OF PROFIT UNDER SUCH TYPE OF PURCHASES. HE FURTHER NOTED THAT IT WAS IMMATERIAL WH ETHER IT WAS A TRADING CONCERN OR MANUFACTURING CONCERN. THE DECI SION RELIED UPON BY THE AO WAS NOT APPLICABLE IN THE CASE OF THE ASSESSEE. T HE CHANCES OF MANIPULATION OF PROFITS WERE POSSIBLE BY SUITABLY ADJUST ING THE PURCHASES AS IN THE CASE OF VIJAY PROTEINS LTD. A CASE L AW RELIED UPON BY THE AO. HOWEVER LD. CIT (A) FOUND THAT 25% DISA LLOWANCE FROM SUCH PURCHASES WAS NOT JUSTIFIED. HE CONSIDERED 10% DISALLOWA NCE OF SUCH PURCHASES AS REASONABLE TO PLUG THE POSSIBILITY OF LEAKAG E OF PROFIT. LD. CIT (A) THEREFORE CONFIRMED 10% OF ` 1 17 42 877/ - AMOUNTING TO ` 11 74 287/- IN PLACE OF 25% DISALLOWED BY THE AO. TH E ASSESSEE IS AGGRIEVED BY THE SUSTENANCE OF ADDITION OF ` 11 74 28 7/- AND THE REVENUE IS AGGRIEVED AGAINST DELETION OF THE BALANCE AMOUNT. 8. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS BEEN PURCHASING THE SCRAP FROM VARIOUS PARTIES IN CASH BUT IN ORDER TO ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 6 SHOW THE PURCHASES HAS OBTAINED BILLS FROM FOUR PARTIES. HE FURTHER SUBMITTED THAT WITHOUT PURCHASES SALES COULD NOT BE MADE . THEREFORE NO ADDITION CAN BE MADE ON ACCOUNT OF PURCHASES. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD SHOWN PROFIT OF 6% ON SALE OF SCRAP. HOWEVER DURING THE COURSE OF HEARING HE AGREED FOR FURTHER DISALLOWANCE OF 6% OF THE STOCK WHICH WILL RESULT IN P ROFIT OF 12%. 9. ON THE OTHER HAND LD. CIT DR SUPPORTED THE ORDE R OF THE AO. HE PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF INDIAN WOOLLEN CARPET FACTORY VS. ITAT 260 I TR 658 (RAJ.). 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE ABOUT THE F ACT THAT THE ASSESSEE HAS BEEN PURCHASING SCRAP FROM VARIOUS PERSONS WHO H AVE NOT ISSUED BILLS TO THE ASSESSEE. THE ASSESSEE IN ORDER TO SHOW T HE PURCHASES HAS OBTAINED BILLS FROM FOUR PARTIES WHO IN F ACT HAD NOT SUPPLIED ANY MATERIAL TO THE ASSESSEE. LD. CIT (A) HAS D ISALLOWED 10% OF SUCH PURCHASE IN ORDER TO PLUG THE LEAKAGE OF REVE NUE. IT IS NOT THE CASE OF THE REVENUE THAT THERE WAS DIFFERENCE IN QUAN TITATIVE DETAILS OF PURCHASES AND SALES. IN THE ABSENCE OF ANY CONTRARY MAT ERIAL ON RECORD IT HAS TO BE ACCEPTED THAT THE MATERIAL PURC HASED IN QUANTITY WAS SOLD BY THE ASSESSEE OR WAS LYING IN THE STOCK. HOWEVE R SINCE THE ASSESSEE HAD OBTAINED PURCHASE VOUCHERS FROM OTHER PERSONS THERE IS POSSIBILITY OF BILLING THE PURCHASED AMOUNTS AT HIGHER AMOUNT. LD. CIT (A) HAS DISALLOWED 10% OF SUCH PURCHASES. HOWEVER THE ENDS OF JUSTICE WILL BE MET IF 6% OF THE DISALLOWANCE IS RETAINED WHI CH HAS BEEN AGREED TO BY LD. AR OF THE ASSESSEE. WE ACCORDINGLY DIRECT TH E AO TO RESTRICT THE DISALLOWANCE OF 6% OF PURCHASES MADE FROM FOUR PAR TIES. ACCORDINGLY THE GROUND NO.1(B) IN ASSESSEES APPEAL AN D GROUND NO.1 OF REVENUE ARE DECIDED. ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 7 11. THE NEXT ISSUE FOR CONSIDERATION IN ASSESSEES APPEAL R ELATES TO SUSTAINING THE ADDITION OF ` 15 80 030/- U/S 68 IN THE NAME OF NITIN ALLOYS PVT. LTD. JODHPUR. DURING THE COURSE OF ASSESSME NT PROCEEDINGS IT WAS POINTED OUT TO THE ASSESSEE THAT M/S NITIN ALLOYS P VT. LTD. BEING A BOGUS BILL PROVIDER HAS GIVEN BOGUS BILL. IT WAS SUBMIT TED BY THE ASSESSEE THAT GOODS WERE PURCHASED IN FACT FROM PARTIES OT HER THAN PARTY WHO ISSUED THE BILLS AND PAYMENTS WERE MADE BY CH EQUE TO THE PARTY WHO ISSUED THE BILLS AND THE AMOUNT WAS TAKEN BAC K AND WAS UTILIZED IN MAKING PAYMENT TO THE PARTIES WHO ACTUAL LY SOLD THE GOODS TO THE ASSESSEE. THEREFORE NO ADDITION WAS TO BE MADE. L D. AO NOTED THAT PURCHASES MADE FROM NITIN ALLOYS WAS BOGUS AND ONLY SALES TAX PAID BILLS WERE ISSUED BY NITIN ALLOYS PVT. LTD. NO SCR AP WAS DELIVERED/SOLD TO BELIM ENTERPRISES BY THIS CONCERN. H ENCE THE AMOUNT OF ` 15 80 030 WAS SHOWN AS CREDITOR WAS NOT GENUINE. THE AO ADDED THE AMOUNT OF ` 15 80 030/-. 12. ON APPEAL LD. CIT (A) NOTED THAT THE PURCHASES I N CASH FROM UNKNOWN PARTY VIA UNREGISTERED DEALERS COULD NOT BE P ROVED AS GENUINE IN THE ABSENCE OF ITS IDENTIFICATION CONFIRMATION AN D PROOF OF CREDIT WORTHINESS. UNLESS THE AMOUNT IS PAID BY CHEQUE THERE WAS NO MATERIAL FOR THE ASSESSEE TO ESTABLISH THE LIABILITY HAD ARISEN. THEREFORE UNSUBSTANTIATED LIABILITY REMAINED AS BOGUS CREDIT AND THE AO WAS RIGHT IN MAKING THE ADDITION U/S 68 AMOUNTING TO ` 15 80 030/- ON ACCOUNT OF UNSUBSTANTIATED LIABILITY CREATED DUE T O PURCHASE IN CASH FROM UNREGISTERED DEALER. HE ACCORDINGLY UPHELD THE ADDITION OF ` 15 80 030/-. 13. BEFORE US LD. AR OF THE ASSESSEE RELYING ON THE DEC ISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. G. K. CONTRACTORS 19 DTR RAJ 305 SUBMITTED THAT WHERE AO HAD ESTIMATED THE PROFIT BY ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 8 APPLYING A HIGHER NET PROFIT RATE ON TOTAL CONTRACT RECEIPTS AFTER REJECTING THE ASSESSEES BOOKS OF ACCOUNT BY INVOKING THE PROVISIONS OF SECTION 145 (3) NO SEPARATE ADDITION COULD BE MADE ON ACCOUNT OF CASH CREDIT U/S 68 EVEN THOUGH THE ASSESSEE HAS FAILED TO DISCH ARGE ITS ONUS OF PROOF IN EXPLAINING THE AMOUNT SHOWN IN THE BOOKS OF ACCOUNT AS OUTSTANDING. HE ALSO PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF CIT VS. TYARAYAMAL BALCHAND 165 ITR 453 (RAJ) FOR THE PROPOSITION THAT WHERE ADDITIO N HAS BEEN MADE FROM UNDISCLOSED SOURCES THAT THE CASH CREDIT TO THAT E XTENT COULD NOT BE ADDED AS INCOME FROM UNDISCLOSED SOURCES. ON THE OTH ER AND LD. CIT DR SUBMITTED THAT IN CASE OF A PERSON IN WHOSE CASE BOGUS CREDITS HAVE BEEN FOUND THE ASSETS TO THAT EXTENT WILL BE UNEX PLAINED. HENCE LD. CIT (A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS.15 80 030/-. 14. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD BEEN PURCHASING T HE SCRAP FROM SMALL VENDORS AND IN ORDER TO SHOW THE PURCHASES IN BOOK S OF ACCOUNT THE ASSESSEE HAD OBTAINED TAX PAID BILLS FROM FOUR PARTI ES ONE OF WHOM IS M/S NITIN ALLOYS PVT. LTD. JODHPUR. AS PER THE MOD US OPERANDI OF THE ASSESSEE THE PAYMENTS WERE MADE THROUGH CHEQUE TO THESE PARTIES AND CASH WAS TAKEN BACK WHICH WAS UTILIZED FOR MAKING PURCHASES FROM THE OTHER VENDORS. AT THE CLOSE OF THE ACCOUNTING YE AR THERE WAS AMOUNT DUE TO M/S NITIN ALLOYS PVT. LTD. FOR BOGUS PUR CHASE OF RS.15 80 030 THOUGH ASSESSEE HAD PURCHASED EQUIVALENT AMO UNT FROM OTHER PARTIES. IN GROUND NO. 1 (B) WE HAVE ESTIMATE D THE DISALLOWANCE OF 6% ON THE PURCHASES FOR WHICH BILLS WERE TAKEN BY T HE ASSESSEE FROM THOSE PARTIES. WE HAVE SUSTAINED THE DISALLOWANCE @ 6% OF PURCHASES OF ` 1 17 42 877/- AMOUNTING TO ` 7 04 573/-. IF W E EXAMINE THE BALANCE SHEET AS ON THE LAST DAY OF THE ACCOUNTING YEA R THE OUTSTANDING AMOUNT PAYABLE TO M/S NITIN ALLOYS PVT. LT D. AT ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 9 RS.15 80 030/- IS BOGUS. IN OTHER WORDS THE ASSETS TO TH E EXTENT OF ` 15 80 030/- WILL BE UNEXPLAINED IF NITIN ALLOYS IS R EMOVED FROM CREDIT SIDE. IT IS ALSO A FACT THAT WE HAVE SUSTAINED THE ADDI TION TO THE EXTENT OF ` 7 04 573/- ON PURCHASE BILLS TAKEN FROM FOUR PAR TIES. TO THIS EXTENT ACQUISITION OF ASSETS IN THE BALANCE SHEET WILL BE EXPLA INED LEAVING THE BALANCE OF ` 8 75 457/-. THE DIFFERENCE OF ` 8 75 457/- CANNOT BE SET OFF AGAINST ANY OTHER ADDITION MADE. WE THEREFORE HOL D THAT THE DISALLOWANCE OF 6% OF ` 1 17 42 877/- SHOULD BE SET OF F AGAINST THE OUTSTANDING LIABILITY OF ` 15 80 030/- IN THE NAME O F NITIN ALLOYS. WE THEREFORE UPHOLD THE ADDITION OF ` 8 75 457/-. TH E AO IS DIRECTED TO RESTRICT THE DISALLOWANCE TO THE EXTENT OF ` 8 75 457 /- ON ACCOUNT OF CREDIT SHOWN IN THE NAME OF NITIN ALLOYS JODHPUR. 15. THE NEXT ISSUE FOR CONSIDERATION IN REVENUES APPEA L RELATES TO UPHOLDING THE INTEREST CHARGED U/S 234A 234B AND 234 C OF THE INCOME TAX ACT 1961. THE AO WHILE COMPLETING THE ASSESSMENT DIRECTED THE OFFICE TO CHARGE INTEREST AS PER RULES AND CHARGED AC CORDINGLY THE INTEREST UNDER THESE SECTIONS. BEFORE CIT (A) IT WAS SU BMITTED BY THE ASSESSEE THAT THE AO INSTEAD OF GIVING SPECIFIC DIRECTION S OF CHARGING INTEREST U/S 234A 234B AND 234C OF THE INCOME TAX AC T ONLY STATED CHARGE INTEREST AS PER RULES. THEREFORE IN THE LIG HT OF THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ZAKIR HUSSA IN VS. CIT 202 CTR (RAJ) 40 SUBMITTED THAT NO INTEREST U/S 234A 234B AND 234C OF THE INCOME TAX ACT CAN BE LEVIED. LD. CIT (A) IN VIEW OF THE DECISION OF HONBLE RAJASTHAN HIGH COURT AND ALSO IN THE LIGHT OF THE DECISION DATED 25 TH MAY 2007 IN ITA NO.319/JDPR/2007 FOR A.Y. 2004-05 OF ITAT JODHPUR BENCH IN THE CASE OF MAHESH AGGARWAL VS. ITO H AS HELD THAT THE AO WAS NOT JUSTIFIED IN CHARGING INTEREST U/S 234A 234 B AND 234C OF THE INCOME TAX ACT. ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 10 16. BEFORE US LD. CIT DR SUBMITTED THAT INTEREST U/S 234A 234B AND 234C OF THE INCOME TAX ACT IS CHARGEABLE IN VIEW OF DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ANJUM M.H. GHASWA LA252 ITR 1 (SC). ON THE OTHER HAND LD. AR OF THE ASSESSEE SUPPORT ED THE ORDER OF THE CIT (A). 17. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ASSESSMENT ORDER WE FIN D THAT THE AO WHILE COMPLETING THE ASSESSMENT DIRECTED THE OFFICE TO CHARGE INTEREST AS PER LAW. THE AO HAVE CHARGED INTEREST U/S 234A 2 34B AND 234C OF THE INCOME TAX ACT WHILE CALCULATING THE TAX DEMAND PAYABLE BY THE ASSESSEE. LD. AR OF THE ASSESSEE HAS PLACED RELIANCE ON THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF ZAKIR HUSA IN VS. CIT (SUPRA) WHEREIN HONBLE RAJASTHAN HIGH COURT HAS HELD THAT TH E RATIO LAID DOWN BY HONBLE PATNA HIGH COURT IN RANCHI CLUB LTD.S CA SE HAS BEEN APPROVED BY HONBLE SUPREME COURT REPORTED AS 247 IT R 209. HONBLE SUPREME COURT IN THE CASE OF ANJUM M.H. GHASWALA (SUPR A) HAS HELD THAT THE EXPRESSION SHALL USED IN SECTION 234A 234B A ND 234C CANNOT BE CONSTRUED AS MAY. PRIOR TO FINANCE ACT 1987 T HE CORRESPONDING SECTIONS PERTAINING TO IMPOSITION OF INTEREST USED THE E XPRESSION MAY; BUT THE CHANGE BROUGHT ABOUT BY FINANCE ACT 1987 I S CLEAR INDICATION THAT THE INTENTION OF LEGISLATURE WAS TO MAKE THE COL LECTION OF STATUTORY INTEREST MANDATORY. THAT EXPRESSION IS USED DELIBERATEL Y. THUS IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. ANUJM M.H. GHASWALA (SUPRA) IT IS CLEAR THAT THE INTEREST CH ARGEABLE U/S 234A 234B AND 234C OF THE INCOME TAX ACT IS MANDATORY AND HAS TO BE CHARGED. ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 11 18. HONBLE SUPREME COURT IN THE CASE OF KALYANKUMAR RAY VS. CIT 191 ITR 634 DESCRIBED THE ASSESSMENT PROCEDURE IN THE FO LLOWING WORDS:- ASSESSMENT IS ONE INTEGRATED PROCESS INVOLVING NOT ONLY THE ASSESSMENT OF THE TOTAL INCOME BUT ALSO THE DETERMINATION OF THE TAX. THE LATTER IS AS CRUCIAL A S THE FORMER. THE INCOME-TAX OFFICER HAS TO DETERMINE BY AN ORDER IN WRITING NOT ONLY THE TOTAL INCOME BUT ALSO THE NET SUM WHICH WILL BE PAYABLE BY THE ASSESSEE FOR THE ASSESSMENT YEAR IN QUESTION AND THE DEMAND NOTICE HAS TO BE ISSUED UNDER SECTION 156 OF THE INCOME TAX ACT 196 1 IN CONSEQUENCE OF SUCH AN ORDER. THE STATUTE DOES NOT HOWEVER REQUIRE THAT BOTH THE COMPUTATIONS (I.E. O F THE TOTAL INCOME AS WELL AS OF THE SUM PAYABLE) SHOULD BE D ONE ON THE SAME SHEET OF PAPER THE SHEET THAT IS SUPERSCRIBE D ASSESSMENT ORDER. IT DOES NOT PRESCRIBE ANY FORM FOR T HE PURPOSE. ONCE THE ASSESSMENT OF THE TOTAL INCOME IS COMPLETE WITH INDICATIONS OF THE DEDUCTIONS REBATES RELIEFS AND ADJUSTMENTS AVAILABLE TO THE ASSESSEE THE CALCULATION OF THE NET TAX PAYABLE IS A PROCESS WHICH IS MOSTLY ARITHMETICAL BUT GENERALLY TIME-CONSUMING. IF THEREFORE THE INCOME-TAX OFFICER FIRST DRAWS UP AN O RDER ASSESSING THE TOTAL INCOME AND INDICATING THE ADJUSTMEN TS TO BE MADE DIRECTS THE OFFICE TO COMPUTE THE TAX PA YABLE ON THAT BASIS AND THEN APPROVES OF IT EITHER IMMEDIAT ELY OR SOME TIME LATER NO FAULT CAN BE FOUND WITH THE PROC ESS THOUGH IT IS ONLY WHEN BOTH THE COMPUTATION SHEETS ARE SIGNED OR INITIALED BY THE INCOME-TAX OFFICER THAT T HE PROCESS DESCRIBED IN SECTION 143(3) WILL BE COMPLETE. ITNS 150 IS ALSO A FORM FOR DETERMINATION OF TAX PAYA BLE AND WHEN IT IS SIGNED OR INITIALED BY THE INCOME-TAX OFFICER IT IS CERTAINLY AN ORDER IN WRITING BY THE INCOME-TA X OFFICER DETERMINING THE TAX PAYABLE WITHIN THE MEANING OF SE CTION 143(3). IT MAY BE ONLY A TAX CALCULATION FORM FOR DEPARTMENTAL PURPOSES AS IT ALSO CONTAINS COLUMNS AND CODE NUMBERS TO FACILITATE COMPUTERIZATION OF THE PARTICULARS CONTAINED THEREIN FOR STATISTICAL PURPOSES BUT THIS DOES NOT DETRACT FROM ITS BEING CONSIDERED AS AN OR DER IN WRITING DETERMINING THE TAX PAYABLE BY THE ASSESSEE. THERE IS NO REASON WHY THIS DOCUMENT WHICH IS ALSO IN WRITING AND WHICH HAS RECEIVED THE IMPRIMATUR OF THE ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 12 INCOME-TAX OFFICER SHOULD NOT BE TREATED AS PART OF THE ASSESSMENT ORDER IN THE WIDER SENSE IN WHICH THE EXPRESSION HAS TO BE UNDERSTOOD IN THE CONTEXT OF SECTIO N 143(3). ALL THAT IS NEEDED IS THAT THERE MUST BE SOME WRITING INITIALED OR SIGNED BY THE INCOME-TAX OFFIC ER BEFORE THE PERIOD OF LIMITATION PRESCRIBED FOR COMPLETION O F THE ASSESSMENT HAS EXPIRED IN WHICH THE TAX PAYABLE IS DETERMINED. THE FORM USUALLY STYLED AS THE ASSESSMENT FORM NEED NOT ITSELF CONTAIN THE COMPUTATION OF TAX AS WELL. 19. FROM THE DECISION OF THE HONBLE SUPREME COURT I N THE CASE OF KALYANKUMAR RAY (SUPRA) IT IS CLEAR THAT THE ASSESSMENT ORDER GIVES THE DETAILS OF TOTAL INCOME INDICATING THE ADJUSTMENT S TO BE MADE AND DIRECTS THE OFFICE TO COMPUTE THE TAX PAYABLE ON THA T BASIS AND THEN APPROVES IT EITHER IMMEDIATELY OR SOME TIME LATER. I TNS 150 IS A FORM FOR DETERMINATION OF TAX PAYABLE AND WHEN IT IS SIGNE D OR INITIALED BY THE INCOME-TAX OFFICER IT IS CERTAINLY AN ORDER IN WRITING BY INCOME-TAX OFFICER DETERMINING THE TAX PAYABLE WITHIN THE MEAN ING OF SECTION 143(3). ITNS 150 GIVES THE DETAILS OF TAX PAYABLE OF INCOME DETERMINED AND ALSO INTEREST PAYABLE BY THE ASSESSEE U/S 234A 234B A ND 234C OF THE ACT. ONCE THE AO HAS SINGED BOTH THE ASSESSMENT ORDE R AS WELL AS ITNS 150 THE ASSESSMENT PROCEEDINGS U/S 143 (3) ARE COMP LETE. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KALYANKUMAR RAY VS. CIT (SUPRA) IT IS CLEAR THAT THE AO CHARGES INTEREST UNDER THESE SECTIONS THE MOMENT HE SIGNS THE ITNS 150. IN THE CASE BEFORE US THERE IS NO DISPUTE THAT ITNS 150 HAS NOT BE EN SIGNED BY THE AO. THEREFORE THE INTEREST U/S 234A 234B AND 234C OF THE ACT BEING MANDATORY IN NATURE IN VIEW OF THE DECISION OF HONB LE SUPREME COURT IN THE CASE OF ANJUM M.H. GHASWALA (SUPRA) IT CANNOT B E SAID THAT THE AO HAD NOT CHARGED INTEREST AS PER THE PROVISIONS OF LA W. WE RESPECTFULLY FOLLOWING THE DECISION OF HONBLE SUPREM E COURT IN THE CASE OF ANJUM M.H. GHASWALA (SUPRA) AND THE DECISION IN TH E CASE OF ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 13 KALYANKUMAR RAY (SUPRA) HOLD THAT THE AO HAS RIGHTLY CHARGED INTEREST UNDER THESE SECTIONS. WE ACCORDINGLY SET ASIDE THE ORD ER OF CIT (A) AND RESTORE THE ORDER OF AO. 20. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE AS WE LL AS THE REVENUE FOR ASSESSMENT YEAR 2005-06 ARE PARTLY ALLOWED. 21. COMING TO THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2006 -07 THE FIRST ISSUE FOR CONSIDERATION RELATES TO SUSTAINING AD DITION OF ` 14 94 600/- ON ACCOUNT OF STOCK FOUND AT E-517 MIA BASNI PHASE II JODHPUR. 22. THE FACTS OF THE CASE STATED IN BRIEF ARE THAT A SE ARCH AND SEIZURE OPERATION WAS CONDUCTED ON 13.7.2005 AT THE BUSINESS AN D RESIDENTIAL PREMISES OF THE ASSESSEE. DURING THE COURSE OF SEARCH IT W AS STATED BY SHRI YUSUF BELIM THAT NO STOCK REGISTER WAS MAINTAINED BY HIM. THE ASSESSEE HAD TWO GODOWNS; ONE AT D-36 NEW POWER HOUSE J ODHPUR AND THE OTHER AT E-517 MIA BASNI PHASE II JODHPUR. AS PER THE BOOKS OF ACCOUNT THE STOCK LYING AT BOTH THE GODOWNS WAS AT ` 42 LACS. THE VALUE OF STOCK FOUND AT D-36 NEW POWER HOUSE WAS AT ` 46 27 929/-. SHRI YUSUF BELIM ADMITTED AN EXCESS STOCK OF ` 4 27 929 /-. IN BASNI GODOWN ESTIMATED VALUE OF STOCK OF ` 14 94 600/- WAS F OUND. SHRI YUSUF BELIM IN HIS STATEMENT RECORDED ON 21 ST JULY 2005 CLARIFIED THAT THE ENTIRE STOCK OF BELIM ENTERPRISES LYING AT BOTH THE GO DOWNS AS PER HIS BOOKS OF ACCOUNT WAS OF ` 42 LAC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AVAILABILITY OF STOCK OF ` 14 94 600 /- WAS MADE AVAILABLE TO THE ASSESSEE. IT WAS SUBMITTED BY THE ASSESSEE THAT THE TOTAL WEIGHT OF SCRAP WAS 14.2 TONS. IT WAS FURTHER CO NTENDED BY THE ASSESSEE THAT SURVEY U/S 133A WAS CONDUCTED AT THE GODOWN OF BELIM ENTERPRISES E-517 BASNI PHASE II JODHPUR. AT THE TI ME OF SURVEY ONLY TWO PERSONS WERE PRESENT ONE SHRI FARHAD AGED 15 YEAR S WHO IS SON OF ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 14 THE ASSESSEE AND ANOTHER PERSON WAS SHRI MANGILAL WHO W AS EMPLOYEE OF THE ASSESSEE. IT WAS THEREFORE CONTENDED THAT THE INVENTORY OF STOCK TAKEN IN THE PRESENCE OF TWO PERSONS HAS NO EVIDEN TIARY VALUE. THIS OBJECTION OF THE ASSESSEE WAS REJECTED BY THE AO ON THE GROUND THAT FOR THE PURPOSE OF VALUATION OF STOCK AT THE TIM E OF SURVEY THE ASSESSEE SHOULD HAVE DEPLOYED TRAINED PERSONS. THEREFORE THE DEFAULT WAS ON THE PART OF THE ASSESSEE. FURTHER IN A STATEMENT DATED 21 ST JULY 2005 IN REPLY TO QUESTION NO.14 THE ASSESSEE HAD COMMIT TED THAT HE HAS GIVEN INVENTORY OF STOCK BY WEIGHING AND APPLYING PROPER RATE AND ADMITTED THAT THE INVENTORY AND VALUATION OF GOODS A RE BINDING ON THE AO. THE AO AFTER CONSIDERING THE DETAILS ADDED THE AMOUNT OF ` 14 94 600/- IN RESPECT OF STOCK FOUND AT BASNI GODOWN. 23. BEFORE CIT (A) IT WAS SUBMITTED THAT WHILE PREPA RING INVENTORY OF STOCK ON 21 ST JULY 2005 THE ENTIRE STOCK OF ASSESSEE LYING IN BOTH THE GODOWNS WAS INCLUDED AND AS SUCH THE ADDITION OF ` 14 96 600/- WAS ERRONEOUS. IT WAS ALSO SUBMITTED THAT VALUATION OF STOC K AT ` 14 96 600/- WAS MADE BY TAKING THE WEIGHT OF BODY SCR AP AT 100 TONS WAS ERRONEOUS. THE WEIGHT AT THE MOST MAY BE TAKEN AT ONE TON. IT WAS ALSO SUBMITTED THAT THE INVENTORY WAS PREPARED BY T HE AUTHORITIES WITHOUT ANY ACTUAL WEIGHT. THEREFORE NO ADDITION CAN BE MADE ON ACCOUNT OF EXCESS STOCK. THE ASSESSEE PLACED RELIANCE ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BA LAJI WIRE (P) LTD. (2007) 164 TAXMAN 559. RELIANCE WAS ALSO PLACED ON T HE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BANSAL HIGH CARBONS (P) LTD. (2007) 165 TAXMAN 243 (DEL). 24. LD. CIT (A) CONSIDERED THE SUBMISSIONS MADE BY THE A SSESSEE. HE NOTED THAT SHRI MOHAMMAD YUSUF BELIM HAD CLARIFIED T HAT TOTAL STOCK OF BOTH THE GODOWNS WAS ` 42 LAC AS PER HIS BOOKS OF ACCOUN T. HOWEVER ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 15 AT D-36 NEW POWER HOUSE HIA JODHPUR THE STOCK WAS FOUND VALUING ` 46 27 929/-. THE STOCK OF ` 4 27 929/- WAS ADMITTED AS HIS INCOME. AS REGARDS STOCK OF ` 14 94 600/- FOUND AT E-517 MIA BASNI PHASE II JODHPUR THE ENTIRE STOCK WAS CONSIDERED BY THE AO AS U NACCOUNTED. THE AO HAD CONFRONTED THE ASSESSEE WITH THE ABOVE STOCK VALUATION. THE ASSESSEE HAD CONTENDED IN HIS REPLY THAT THE WEIGHT OF TOTAL SCRAP WAS 14.2 TONS ONLY. THE STOCK WAS TAKEN IN THE PRESENCE OF SHRI FARHAD AGED 15 SON OF THE ASSESSEE AND SHRI MANGILAL EMPLOYEE OF THE ASSESSEE. LD. CIT (A) FURTHER NOTED THAT THE MAIN DISPU TE RELATED TO THE BODY CUTTING SCRAP OF 100 TONS. HE NOTED THAT THE PH YSICAL WEIGHT WAS TAKEN IN THE PRESENCE OF TWO PERSONS. THUS IT IS INCOR RECT ON THE PART OF THE ASSESSEE TO SAY THAT INVENTORY WAS PREPARED WITHOUT A NY ACTUALLY WEIGHT. THE EXISTENCE OF EXCESS STOCK WAS NOT DENIED BY THE ASSESSEE AT BASNI GODOWN. LD. CIT (A) IN VIEW OF THESE FACTS H AS UPHELD THE ADDITION OF ` 14 96 600/- IN RESPECT OF BASNI GODOWN. 25. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT STOCK WAS NOT PHYSICALLY WEIGHED AT THE TIME OF SURVEY. THE MINOR SON OF THE ASSESSEE WAS PRESENT ALONG WITH A SERVANT. THE SURVEY PART Y HAD TAKEN THE STOCK ON ESTIMATE BASIS. HE FURTHER SUBMITTED THAT BODY SCRAP WAS TAKEN AS 100 TON AS AGAINST ONE TON. LD. AR OF THE ASSE SSEE THEREFORE SUBMITTED THAT ADDITION MADE BY THE AO IS NOT JUSTIFIE D. ON THE OTHER HAND LD. CIT DR SUPPORTED THE ORDER OF CIT (A). 26. WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY BOTH T HE PARTIES AND ALSO HAVE PERUSED THE INVENTORY OF STOCK TAKEN DUR ING THE COURSE OF SURVEY U/S 133A AT BASNI GODOWN. FROM THE INVENTORY IT IS SEEN THAT THE TOTAL THAT OF THE STOCK HAS NOT BEEN MADE. THE W EIGHT OF THE SCRAP HAS BEEN TAKEN IN ROUND FIGURES. THE MAIN DISPUTE IS A BOUT THE BODY SCRAP WHICH HAS BEEN TAKEN BY THE AO AT 100 TONS AS AGA INST IT IS ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 16 DISPUTED BY THE ASSESSEE TO BE AT ONE TON. BEFORE US THE ORIGINAL INVENTORY WAS NOT PRODUCED BY THE REVENUE. HOWEVER IN THE ABSENCE OF ORIGINAL STOCK INVENTORY WE ARE UNABLE TO SAY THE CORRECT WEIGHT OF THE BODY SCRAP TAKEN BY SURVEY PARTY. WE ARE ALSO NOT AWARE OF THE AREA OF BASNI GODOWN WHETHER IT COULD ACCOMMODATE B ODY SCRAP WEIGHING 100 TONS IN ADDITION TO OTHER SCRAP FOUND AT THE TIME OF SURVEY. IN VIEW OF THESE FACTS WE FEEL IT APPROPRIAT E TO SET ASIDE THIS ISSUE TO THE FILE OF AO WITH THE DIRECTIONS TO ASCERTAI N FROM THE STOCK INVENTORY WHETHER THE FIGURE IS ONE TON OR 100 TONS. WHETHER THE GODOWN AT BASNI PHASE II COULD ACCOMMODATE SUCH HUGE ST OCK OF BODY SCRAP. THE AO WILL DECIDE THE ISSUE AFRESH AFTER AFFOR DING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. 27. THE NEXT ISSUE FOR CONSIDERATION RELATES TO ADDITIO N OF ` 10 43 590/- ON ACCOUNT OF ALLEGED SCRAP OF OLD BUSES P URCHASED FROM RAJASTHAN STATE ROAD TRANSPORT CORPORATION (RSRTC) J ODHPUR. THE AO NOTED THAT IN REPLY TO QUESTION NO.10 IT WAS CLARIFI ED BY SHRI YUSUF BELIM THAT RSRTC BHADWASIA HAD AUCTIONED SCRAP WORTH ` 40 LAC TO HIM ON 30 TH JUNE 2005 AND AGAINST THAT AUCTION HE HAS PURCHASED SCRAP WORTH ` 13 LAC AS ON 6/7 TH JULY 2005. THE AUCTIONED LOT FOR WHICH PAYMENT OF ` 13 LAC WAS MADE CONSISTED OF 10 BUSES WHICH WAS TAKEN TO D-36 NEW POWER HOUSE HIA ROAD JODHPUR AND THESE 10 BUSES WERE PART OF STOCK FOUND AS ON 13.7.2005. IN REPLY TO QUE STION NO.11 HE FURTHER STATED THAT FOR THE CURRENT FINANCIAL YEAR A BOUT ` 70-75 LAC HAD BEEN WITHDRAWN FOR PURCHASE OF SCRAP WHICH INCLUDED ` 13 LAC DEPOSITED WITH RSRTC. THE AO ISSUED NOTICE U/S 133(6) TO MANAGE R RSRTC WHO INFORMED THAT AS ON 22.7.2005 TEN BUSES OF LOT NO1-C H AVE BEEN LIFTED BY M/S BELIM ENTERPRISES AND ` 12 54 501 HAD BEEN DEPO SITED BY THEM FOR LIFTING TEN BUS. DURING THE POST SEARCH INVESTIGAT ION SUMMONS U/S 133(1A) WAS ISSUED TO SHRI LAXMI NARAYAN PROPRIETOR O F LAXMI NARAYAN ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 17 & CO. DURING THE COURSE OF STATEMENT U/S 131(1A) ON 2 .8.2005 SHRI LAXMI NARAYAN GAVE A DETAILED ACCOUNT OF TEN BUSES A UCTIONED BY RSRTC. IN REPLY TO QUESTION NO.8 SHRI LAXMI NARAYA N STATED THAT IN THE MONTH OF JULY 2005 BELIM ENTERPRISES HAD GIVEN HIM CONTRACT @ ` 2 800/- PER BUS FOR BREAKING THOSE TEN BUSES. IN REPLY TO QUESTION NO.9 HE STATED THAT TILL 2 ND AUGUST 2005 23 BUSES WERE GIVEN TO HIM FOR BREAKING OUT OF WHICH TEN BUSES WERE GIVEN ON 7.7.200 5 AND 13 BUSES ON 29.7.2005. IT WAS FURTHER CLARIFIED THAT TEN BUSE S WERE RECEIVED ON 7.7.2005 AND WERE CONVERTED INTO SCRAP AND WERE SENT BACK ON 2.8.2005 AFTER 25-26 DAYS. THE PROCESS OF CONVERTING AUCTIONED BUSES INTO SCRAP WAS DONE IN THE PRESENCE OF SHRI NADEEM WHO WORKS FOR BELIM ENTERPRISES. FURTHER IN REPLY TO QUESTION NO.1 1 HE STATED THAT SCRAP OF TEN BUSES WAS SENT TO BELIM STEEL (P) LTD. SITUA TED AT MOGRA PALI ROAD JODHPUR. IT WAS FURTHER CLARIFIED THAT T EN AUCTIONED BUSES WERE RECEIVED BACK FROM YUSUF BELIM AND WAS TAKEN BY HIM STRAIGHTAWAY FROM RAJASTHAN ROADWAYS DEPOT BHADWASIA T O HIS GODOWN AT KAYLANA CHORAHA AND THESE TEN BUSES WERE NOT TAKEN TO ANY GODOWN OF M/S BELIM ENTERPRISES. IN VIEW OF THE FACTS THE AO WAS OF THE OPINION THAT TEN BUSES AUCTIONED BY RSRTC ON 30 TH JUNE 2005 AND RECEIVED BY M/S BELIM ENTERPRISES ON 7.7.2005 NEVER RE ACHED THE GODOWN D-36 NEW POWER ROAD HIA JODHPUR. THEREFO RE DURING THE COURSE OF PHYSICAL VERIFICATION ON 13.7.2005 THESE TE N BUSES WERE PART OF STOCK OF THE GODOWN. THEREFORE THE STATEMENT OF SHRI YUSUF BELIM THAT THE STOCK OF HIS GODOWN CONSISTED OF TEN BUSES WAS PR OVED WRONG. THE AO BROUGHT THESE FACTS TO THE NOTICE OF THE ASSESSEE. THE ASSESSEE STATED HAT THE STATEMENT OF SHRI LAXMI NARAYAN WAS REC ORDED AT HIS BACK AND CANNOT BE USED AGAINST HIM. THE ASSESSEE HAD FI LED RETURN OF INCOME ON 15.10.2007. THE ASSESSEE WAS NOT GIVEN OPPORT UNITY TO CROSS EXAMINE SHRI LAXMI NARAYAN AND HIS STATEMENT HAD BEEN USED ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 18 AGAINST HIM. HOWEVER THIS CONTENTION OF THE ASSESSEE WA S REJECTED. THE AO ADDED THE AMOUNT OF ` 13 LAC AS UNACCOUNTED ST OCK OF BUSES. 28. ON APPEAL LD. CIT (A) CONFIRMED THE ADDITION OF ` 10 43 590/- BY OBSERVING AS UNDER:- 6.2 I HAVE CONSIDERED THE WRITTEN SUBMISSIONS OF THE LD. AR AND I HAVE ALSO PERUSED THE ASSESSMENT ORDER OF THE LD . A.O. THE LD. A.O. IN HIS ORDER AT PAGE NO. 5 & 6 HAS GIVEN FI NDINGS THAT 10 BUSES RECEIVED ON 7.7.05 WAS GIVEN TO SH. LAXMI NARA YAN FOR BREAKING. AND THE SAME WAS SENT BACK TO THE ASSESSEE AF TER BREAKING ON 2.8.05. THEREFORE THE VALUATION OF THIS S TOCK OF BROKEN 10 BUSES WERE NOT INCLUDED IN THE STOCK TAKING O F GODOWNS CONCERNED ON 13.7.05 IN PHYSICAL VERIFICATIO N DURING THE SEARCH. THEREFORE THE VALUE OF STOCK OF BROKEN 10 BUSES OF RS.13 00 000 REMAINED UNACCOUNTED AND THE SAME IS ADD ED AS UNACCOUNTED INCOME IN THE ASSESSMENT. THE LD.AR ON THE OTHER HAND CONTENDS THAT THE VALUE OF LIFTED BUSES WAS RS.10 4 3 590 THEREFORE VALUE CANNOT BE MORE THAN THIS. THE A.O. WRO NGLY PRESUMED THE BUSES WERE NOT DISMANTLED PARTICULARLY WHE N NO BUSES WERE EXISTED IN ITS ORIGINAL SHAPE. THE SCRAP O BTAINED FROM CUTTING OF BUSES WERE ALREADY REACHED TO THE ASSES SEE GODOWN AND IS PART OF TOTAL INVENTORY. THIS CONTENTION OF THE LD AR IS NOT ACCEPTABLE ON THE GROUND THAT THE CUTTING SCRAP O F 10 BUSES WAS RECEIVED ON 2.8.05 WHEREAS THE VALUATION O F STOCK WAS TAKEN ON 13.7.05 ALTHOUGH THE BUSES WERE RECEIVED BY THE ASSESSEE ON 7.7.05 BUT THE SAME WAS SENT TO SH. LAXMI N ARAYAN AT HIS GODOWN AT KALYANA CHORAHA DIRECTLY FROM THE RAJA STHAN ROADWAYS DEPOT BHADWASIA. THUS AT THE TIME OF STOCK TAK ING ON 13.7.05 THE SCRAP OF BROKEN BUSES WERE NOT AVAILAB LE IN THE ASSESSEES GODOWN. UNDER THIS CIRCUMSTANCES THE TREATIN G OF SCRAP OF BROKEN BUSES AS UNACCOUNTED INCOME IS JUSTIF IED AND HENCE IT IS CONFIRMED. SINCE THE VALUE OF 10 BUSES WA S 10 43 590 THE CONFIRMATION OF ADDITION IS RESTRICTED TO RS.10 43 59 0 BALANCE RS.2 56 410 IS DELETED. - 29. BEFORE US LD. AR OF THE ASSESSEE SUBMITTED THAT THE I NVENTORY PREPARED EITHER AT NEW POWER HOUSE ROAD GODOWN OR BH ADWASIA GODOWN COULD NOT BE RELIED UPON AS THERE WAS NO ACTUA L WEIGHTMENT AT ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 19 ALL AT BASNI GODOWN AND PARTLY WEIGHED AT NEW POWER HOUSE ROAD GODOWN AND IN THE ABSENCE OF PHYSICAL WEIGHTMENT IT C ANNOT BE SAID THAT THERE WAS EXCESS STOCK AND AS SUCH THE AO WAS NOT J USTIFIED IN MAKING THE ADDITION. IT WAS ALSO SUBMITTED THAT THE A SSESSEE HAD PURCHASED OLD AND OBSOLETE BUSES FROM RSTRC. THE PURCH ASE PRICE WAS DEBITED IN THE BOOKS OF ACCOUNT. THE VALUE OF BUSES L IFTED WAS OF ` 10 43 590/-. THESE BUSES WERE BROKEN AND THE SCRAP WAS TAKEN TO THE GODOWN AND WAS PART OF THE STOCK FOUND AT THE TIME OF SEARCH/SURVEY. THEREFORE THE AO HAS WRONGLY PRESUMED THAT THOSE BUSES WERE NOT DISMANTLED ON THE DATE ON WHICH SEARCH/SURVEY WAS CONDU CTED. ON THE OTHER HAND LD. CIT DR SUBMITTED THAT THE ASSESSEE HAD PURCHASED TEN BUSES THE VALUE OF WHICH HAS BEEN DEBITED TO PROFIT & LOSS ACCOUNT. HOWEVER THE STOCK WAS NOT TAKEN AT THE TIME OF SEARCH /SURVEY. THEREFORE LD. CIT (A) IS JUSTIFIED IN CONFIRMING THE ADDITION OF ` 10 43 590/-. 30. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. FROM THE ABOVE FACTS IT IS CLE AR THAT THE AO HAD RECORDED THE STATEMENT OF SHRI LAXMI NARAYAN ON THE BACK OF THE ASSESSEE AND HAS USED THE SAME AGAINST HIM. THE AO HAD NOT ALLOWED CROSS EXAMINATION OF SHRI LAXMI NARAYAN THE BUS BREAK ER. THE AO HAD ALSO NOT MADE ANY INVESTIGATION FROM RSRTC AS ON WHICH DATE THE STOCK WAS LIFTED BY THE ASSESSEE FROM THEIR DEPOTS. IN VIEW OF THESE FACTS WE ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD BE SET ASIDE TO THE FILE OF THE AO WITH THE DIRECTIONS TO PROVIDE CROSS EX AMINATION OF SHRI LAXMI NARAYAN THE PROPRIETOR OF LAXMI NARAYAN & CO . THE BUS BREAKER. HE SHOULD EXAMINE THE BOOKS OF ACCOUNT OF SHRI LAXMI NARAYAN. ACCORDING TO THE ASSESSEE THE PAYMENT OF ` 10 43 590/- WAS DULY ACCOUNTED FOR IN THE BOOKS OF ACCOUNT AND DELIVERY OF BUSES WAS TAKEN ON 7.7.2005. THE AO WILL EXAMINE THE MATTER TO ARR IVE AT THE CONCLUSION ITA NOS.629 & 630/JU/2008 (ASSESSEE APPEALS) ITA NO.660/JU/2008 (REVENUES APPEAL) 20 WHETHER THE BUSES FOR WHICH PAYMENT OF ` 10 43 590/- WAS MADE HAVE ACTUALLY BEEN TAKEN INTO STOCK BY THE ASSESSEE AS ON THE DATE OF SEARCH OR THE STOCK WAS LYING AT THE PREMISES OF BUS BREAKER. HE SHOULD ALSO EXAMINE THE DATES ON WHICH THE BUS BODY SCRAP WAS RECEI VED FROM SHRI LAXMI NARAYAN. THE AO WILL DECIDE THE ISSUE AFTER PR OVIDING CROSS EXAMINATION OF SHRI LAXMI NARAYAN AND AFTER PROVIDI NG PROPER OPPORTUNITY OF BEING HEARD. WE ORDER ACCORDINGLY. 31. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006-07 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29.07.2011. SD/- SD/- [RAJPAL YADAV] [K.D. RANJ AN] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED 29 TH JULY 2011 DK COPY FORWARDED TO:- 1. APPELLANT. 2. RESPONDENT 3. INCOME-TAX OFFICER 4. CIT 5. DR 6. GUARD FILE ASSTT. REGISTRAR ITAT JODHPUR