IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH : `B ' : NEW DELHI
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER
AND
SHRI T.S. KAPOOR, ACCOUNTANT MEMBER
ITA Nos. 1986 to 1991 & 2053/Del /2011
Assessment Years: 2001-02 to 2006-07 & 2007-08
M/s D.S. Doors Pvt. Ltd. Vs. Assistant Commissioner
11/7, Mathura Road, of Income Tax, Central
Faridabad. Circle-1, Faridabad.
(PAN: AAACD5805B)
(Appellant) (Respondent)
ITA Nos. 2273 to 2275& 2052/Del /2011
Assessment Years: 2004-05 to 2007-08
M/s D.S. Woodtech Pvt. Ltd. Vs. Assistant Commissioner
C/o. M/s. RRA Texindia, of Income Tax, Central
D-28, South Extension, Part-I, Circle-1, Faridabad.
New Delhi.
(PAN: AAACD2776M)
(Appellant) (Respondent)
Appellant by : S/sh. Ashwani Taneja & Tarun Kumar, Advocates
Respondent by: Smt. A. Misra, CIT, DR
ORDER
PER SHRI I.C. SUDHIR, JM: (A.Ys. 2001-02 to 2006-07):
D.S. Doors Pvt. Ltd. - ITA Nos. 1986 to 1991/Del /2011
1. In all these appeals, the assessee has questioned the first appellate
orders on the common grounds. In ground nos. 1 & 2, the validity of assessment
framed under Section 153A read with section 143(3) of the Income-tax Act,
1961 (for short "the Act") has been questioned. In ground nos. 3 & 4, the
validity of addition made on account of alleged undisclosed investment in
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construction under Section 69B of the Act on the basis of valuation report of the
D.V.O. has been questioned. In ground no. 5, the grievance raised is regarding
non-granting of the benefit of the telescoping by the authorities below and in
ground no. 6, charging of interest under Sections 234A, 234B and 234C of the
Act has been questioned.
2. We have heard and considered the arguments advanced by the
parties in view of the orders of the authorities below, material available on
record and the decisions relied upon.
3. The facts in brief are that the business premises of the assessee
group and its director were subjected to search and seizure procedure under
Section 132(2) of the Act on 07.02.2007. During the course of search operations,
several documents were seized and cash of Rs. 6,84,000/- and jewellery valued
at Rs. 23,82,493/- were found at the residential premises of the Director of the
D.S. Woodtech Ltd., Sh. Dhan Singh Sharma. Notice under Section 153A of the
Act was issued and in response the assessee filed its return of income. The A.O.
being not satisfied with the explanation of the assessee made the addition on
account of undisclosed investment in construction on the basis of valuation
report of the D.V.O. to whom the A.O. had made reference for the same. Before
the learned CIT(A), the assessee questioned validity of assessment framed under
Section 153A of the Act made in the absence of evidence found during the
course of search and has also questioned the validity of addition made by the
A.O. on the basis of valuation report of the D.V.O. to whom the A.O. had made
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reference during the assessment proceedings itself. It was submitted that
reference to D.V.O. cannot be made by the A.O. for the valuation of the property
without rejecting the books of account. It was contended that the building
existed prior to the block period i.e. 01.04.2000, hence no addition could be
made on this account. The learned CIT(A) did not agree with the assessee and
has upheld the addition in question. Hence, the present appeals have been
preferred before the Tribunal against the said first appellate order.
4. In support of the issue raised in ground nos. 1 and 2 on the validity
of assessment framed under Section 153A read with section 143(3) of the Act,
learned AR submitted that no incriminating material was found during the
course of search, nor any assessment based on the return of income originally
filed was pending on the date of search, hence the A.O. was not justified in
initiating the proceedings under Section 153A of the Act and in framing the
assessment in furtherance to the said notice. He submitted further that the
addition in question has been made by the A.O. not on the basis of seized
documents but on the basis of estimation done by the D.V.O. to whom the
valuation of the building was referred to be determined during the course of
assessment proceedings. In support he referred the following decisions:
i. MGF Automobiles Ltd. Vs. ACIT, ITA Nos. 4212 & 4213/Del/2011
(A.Y. 2004-05 & 2005-06), order dated 28.06.2013;
ii. Jaisteel (India) Ltd. Vs. ACIT, (2013) 259 CTR 281 (Raj.HC);
iii. Gurinder Singh Bawa Vs. DCIT and others, ITA No. 2075/Mum./2010
and others(A.Y. 2005-06), order dated 16.11.2012;
iv. Kusum Gupta Vs. DCIT and others, ITA No. 4873/Del/2009 and others
(A.Y. 2005-06 and others), order dated 28.03.2013;
v. CIT Vs. Anil Kumar Bhatia, (2012) 211 Taxmann.com 453 (Del.); and
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vi. All Cargo Global Logistics Ltd. Vs. CIT, 137 ITD 287 (Mum.) (SB)
5. Learned AR submitted further that the action of the A.O. in
referring the estimation of valuation of the construction of the building to the
D.V.O. without rejecting books of account of the assessee was also not valid. In
support, he placed reliance on the decision of Hon'ble Supreme Court in the
case of Sargam Cinema Vs. CIT, (2010) 328 ITR 513 (SC). He also placed
reliance on the following decisions:
i. CIT Vs. Chohan Resorts, 359 ITR 394 (P&H);
ii. CIT Vs. Raghuraji Agro Industries (P.) Ltd., (2013) 38 taxmann.com 318
(Allahabad)
6. Learned AR submitted further that the building under reference i.e.
11/7, Mathura Road with RCC covered area of 29200 sq. fts. and ACC area of
7664 sq. ft. was very much in existence prior to 01.04.2000 hence, no addition
could be made in this regard. In support, he referred contents of para nos. 2 and
5 of the assessment order and page nos. 19 to 93 which are copies of house tax
notice dated 05.11.1998 issued by Municipal Corporation, Faridabad for the
year 1999-2000 showing valuation of plot at 1000 sq.yds. and constructed
covered area in sq. ft. in basement, ground floor, RCC area in Ist floor and ACC
area; extract of assessment register, Municipal Corporation, Faridabad for the
year ending 31.3.2000 showing assessment of total built up RCC area of 29200
sq. ft. (12700 + 16,500) and ACC area of 7664 sq. ft.; notice of house tax
assessment of the business premises of the assessee company for the year 2003-
04 in respect of RCC area of 29200 sq. ft. and ACC area of 4500 sq. ft.; notice
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of house tax assessment of the business premises of the assessee for the year
2008-09 in respect of RCC area of 29280 sq. ft. and RCC area of 8600 sq. ft. etc.
corresponded with the Municipal Corporation, Faridabad regarding the building
in question as well as the copy of the ledger account of land and building
account for the period 01.01.2000 to 31.3.2007 indicating that substantial
amount of construction/renovation was recorded during the said period etc. With
assistance to the charts drawn at page Nos. 16 to 18 of the written synopsis, the
AR also tried to submit that there is negligible difference in the total area of the
property in question worked out by the DVO and the area constructed by the
assessee prior to 31.3.2000.
7. The learned DR, on the other hand, tried to justify the orders of the
authorities below. He submitted that for reference to the D.V.O. for
determination of valuation of a building/construction, rejection of books is not
necessary. He submitted that the decisions relied upon by the learned AR in this
regard having distinguishable facts are not helpful to the assessee. The assessee
had not filed any evidence in support before the A.O. that the building in
question were constructed before 01.04.2000. On the issue of validity of
assessment in the absence of incrimination material found during the course of
search, the learned DR submitted that the statements of Sh. Dhan Singh Sharma
recorded during the course of search as well as the documents found and seized
were sufficient to show that there was undisclosed income to initiate
proceedings under Section 153A of the Act. He submitted that on the basis of
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those documents only, the assessee had made surrender. He submitted that
during the course of search the property in question was visited and it was found
that lavish construction has been made for which the assessee failed to furnish
any explanation. The A.O. has made addition on account of unexplained
investment in the construction and amount in difference found between the
D.V.O. report and the investment declared by the assessee in its books of
account.
8. In the rejoinder, the learned AR submitted that in the assessment
years 2001-02 to 2006-07, undisputedly only one addition has been made which
is on account of difference in construction cost as shown by the assessee in its
books of account and as estimated by the D.V.O. in his report. It is sufficient to
establish this contention of the assessee that no incriminating material was found
during the course of search to justify the framing of assessment under Section
153A of the Act and undisputedly the return filed for these assessment years
were processed under Section 143(1) and no notice under Section 143(2) of the
Act was issued within the prescribed time limit and thus those returns have
reached its finality.
9. Considering the above submission, the undisputed fact emerging in
the assessment for the assessment years 2001-02 to 2006-07 are that no addition
other than the addition on account of difference in construction as shown by the
assessee in its books of account and as estimated by the D.V.O. in his report has
been made which impliedly supports the contention of the assessee that no
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incriminating material was found during the course of search proceedings at the
premises of the assessee. It is also an un-rebutted fact that on the date of search,
assessments based on the return of income originally filed for the assessment
years under consideration were not pending as the returns of income filed for
these assessment years and processed under Section 143(1) of the Act had
reached finality in the absence of issuance of notice under Section 143(2) of the
Act within the prescribed time limit. Thus in view of the above cited decisions
by the Learned AR that is in the cases of All Cargo Global Logistics Ltd. vs.
CIT (supra) and others, we are of the opinion that the assessments framed under
sec. 153A for the assessment years under consideration are not valid. To be
more specific, as per the decision of the coordinate bench in the case of DCIT
vs. Devi Dayal Petro Chemicals Pvt. Ltd. ITA Nos. 5430 to 5436/Del/13, C.O.
Nos. 83 to 88/Del/2014 dated 10.9.2014, proceedings under sec. 153A can be
initiated only for years to which any seized documents, found during the course
of search, belongs and not for the years to which seized documents do not
belong.
10. Even on the merits, the sole addition made in these assessment
years under consideration is on account of difference in construction as shown
by the assessee in its books of account and as estimated by the D.V.O. in his
report is also not sustainable in view of the above cited decisions including
decision of Hon'ble Supreme Court in the case of Sargam Cinema Vs. CIT
(supra) holding that the Assessing Authority could not have referred the matter
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to the D.V.O. without the books of account being rejected. It was held that
reliance placed on the report of the D.V.O. is misconceived. Similar are the facts
of the present case before us that the A.O. had referred the matter to the D.V.O.
for the determination of the value of the property in dispute without rejecting the
books of account of the assessee. Respectfully following the ratio laid down by
the Hon'ble Supreme Court in the above cited case of Sargam Cinema Vs. CIT
(supra), we hold that the reference made to the DVO and reliance placed by the
A.O. on the report of the D.V.O. for making the addition in question was
misconceived. The additions made on account of undisclosed investment in the
construction based on the valuation report of the D.V.O. are thus held as not
justified. Besides the documents made available at page Nos. 19 to 45 of the
paper book i.e. correspondences with the Municipal Corporation, Faridabad
which include notices issued time to time by them also suggest the property in
question and area constructed therein was very much in existence well before
01.04.2000. We thus direct the Assessing Officer to delete the addition in
question made during the assessment years under consideration on account of
the amount in difference between the value of consideration shown and
determined by the DVO. The issues raised in ground nos. 1 to 4 are thus
decided and allowed in favour of the assessee.
11. Ground no. 5 has not been pressed hence the same does not need
adjudication.
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12. In ground no. 6, the charging of interest under sections 234A, 234B
and 234C has been questioned, which is consequential in nature, hence does not
need adjudication.
13. The appeals of the assessee group for the assessment years 2001-02
to 2006-07 are partly allowed.
ITA No. 2053/Del /2011 (A.Y. 2007-08):
1. In ground nos. 1 and 2, the assessee has questioned validity of the
assessment framed under Section 153A read with section 143(3). In ground no.
3 the validity of addition of Rs. 24,00,000/- as undisclosed income has been
questioned. In ground no. 4, the addition of Rs. 72,00,000/- made on account of
undisclosed stock of the assessee has been questioned. In ground no. 5, the
action of the A.O. in bringing to tax the assessee's share out of the alleged
surrender of Rs. 1.6 crores has been questioned. Ground nos. 6 and 7 are again
general in nature supporting the invalidity of additions questioned in ground nos.
3 to 5 hereinabove. In ground nos. 8 and 9, the validity of addition of Rs.
27,76,029/- on account of undisclosed investment in construction under Section
69B of the Act based on D.V.O. report has been questioned. In ground no. 10,
the action of the authorities below in not granting the benefit of telescoping as
per law has been questioned. In ground no. 11, the total addition of Rs.
1,23,76,029/- on different heads discussed hereinabove has been questioned.
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The issue raised in ground no. 12 regarding the validity of charging of interest
under Sections 234A, 234B and 234C of the Act is consequential in nature.
2. Heard and considered the arguments advanced by the parties in
view of the orders of the authorities below, material available on record and the
decisions relied upon.
Ground Nos. 1 to 7
3. The facts in brief are that during the course of search, some
documents were seized by the search team. On the basis of these documents, it
was alleged that the assessee was doing business outside the books of account
also and thus the assessee had suppressed its sales, purchases and other
expenses. The assessee offered to pay taxes on the undisclosed income
aggregating to Rs. 96 lakhs out of the total offer of Rs. 1.60 crores.
4. In support of the grounds, learned AR submitted that there was no
incriminating material found during the course of search, nor the assessment
originally framed on the basis of return filed was pending and the surrender was
made as an conditional offer that the amount of Rs. 1.60 crores shall cover all
the alleged unaccounted investment in business of D.S. Woodtech in the alleged
unaccounted accumulated stocks, production, sales, profits earned, expenditure
incurred on account of unaccounted purchase, salary & wages and other
expenses for unaccounted production. It was also made clear that the
surrendered amount shall be considered in the assessment year 2007-08, as if the
entire surrendered/offered amount was earned/invested on account of
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unaccounted purchase, unaccounted production/sales and unaccounted stock in
the financial year relevant to assessment year 2007-08 i.e. the year of surrender
in the hands of D.S. Doors (P) Ltd. and D.S. Woodtech. It was also made clear
that no interest under Sections 234A, 234B and 234C will be charged and no
penalty under Section 271(1)(c) of the Act will be levied. The A.O., however,
charged the above interest and initiated penalty proceedings. The learned AR
submitted that there is no estoppel against the law even if the assessee agrees or
consents for an addition contrary to law, the A.O. has to discharge his duties of
making fair assessment of income and to compute amount of tax payable as per
law. He submitted that even surrender amount can be retracted, if surrender
represents no income. In this regard he placed reliance on the following
decisions:
i. Srikant G. Shah Vs. Income Tax Officer, (2007) 108 ITD 577 (Mum.)
ii. Pullangode Rubber Produce Co. Vs. State of Kerala and Another, 91 ITR
18 (SC)
iii. S.Arjun Singh Vs. Commissioner of Wealth Tax, 175 ITR 91(Del.)
5. The learned AR submitted further that the assessee has not earned
any profit from its undisclosed business rather loss has been incurred by the
assessee. This contention was raised before the A.O. as well as before the
learned CIT(A) but the same has been rejected without giving any cogent
reasons. He referred page no. 23 of the paper book i.e. copy of trading account
submitted by the assessee to the A.O. in respect of unaccounted sales,
unaccounted purchases and unaccounted expenditure on account of salary &
wages showing loss of Rs. 7,142/-. He also referred CBDT Circular F. No.
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286/98/2013- IT (Inv. II) dt. 18.12.2014 directing the Assessing Authority for
gathering evidences during search/survey and to strictly avoid obtaining
admission of undisclosed income under coercion/undue influence for framing
the assessment.
6. The learned AR submitted that there are many discrepancies in the
stock taking and working out the undisclosed sales and profit by the Assessing
Officer. These discrepancies were pointed out before the A.O. but the same has
been ignored without assigning any reason. In this regard, the learned AR
referred page nos. 4 to 6 and 10 to 29 of the paper book which are copies of
reply and letters filed time to time before the A.O. He also referred page nos. 24
to 44 of the paper book which are the copies of written submission filed time to
time on different dates before the learned CIT(A). He submitted that in the
above stated letters and reply to the A.O., the assessee had made clear that all
purchases, production, sales, expenditure, stock etc. have been duly accounted
for in the return filed. The A.O. was requested for computation indicating how
the value of stock has been arrived at such a huge figure so that proper
reply/reconciliation can be furnished and reply on unaccounted sales was also
submitted. Document and year-wise details of undisclosed investment and
undisclosed expenditures were furnished before the A.O. Objections with regard
to the valuation of stock was submitted to the A.O. with the request that on the
basis of said objections, valuation of stock shall get reduced to Rs. 3.8 crores
approximately. It was also pointed out to the A.O. that the area where stock was
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lying cannot by any means and ways store such huge piles of stock as alleged.
Further that the stock inventory was prepared by only two people, who were
kept on the job at the time of search to furnish the inventory within such less
time. The assessee also submitted to the A.O. that the profit earned on alleged
unaccounted purchases, sales, production was utilized for purchase of stock
found at the time of search. The assessee had also furnished reply dated
26.12.2008 to the A.O. making offer to pay tax on an amount of Rs. 1.6 crores
both in the case of D.S. Doors and D.P. Woodtech subject to non-charging of tax
under Sections 234A, 234B and 234C and non levy of penalty under Section
271(1)(c) of the Act. He also placed reliance on the decision of Hon'ble High
Court of Delhi in the case of Sonia Magu & Ors. vs. CIT (2011) 336 ITR 227
(Del.). The learned AR referred contents of Page Nos. 27-32 of the assessment
order with this contention that although the Assessing Officer ha reproduced
some replied of the assessee but he has not dealt with all these discrepancies and
has not met all the contentions of the assessee property, instead he has made
ground remarks, without specifying as to what further evidence was required by
him. Besides, queries have been raised at the fag end of the assessment
proceedings i.e. on 26.12.2008 whereas Assessing Officer has been passed on
30.12.2008 (wrongly typed in the assessment order as 30.12.2007). Thus hardly
four days time was given by the Assessing Officer to complete the reply. The
Learned CIT(Appeals) also did not deal with all the above contentions raised by
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the assessee before the Assessing Officer and reiterated before him and has
simply upheld the additions made by the Assessing Officer.
7. The learned CIT(DR), on the other hand, submitted that there was
no pressure or coercion on the assessee to make the surrender on the basis of
which the additions questioned in ground nos. 3 to 5 were made. The A.O. has
made reference to several documents/entries not recorded in the books while
making the additions in question. The assesee was not able to furnish any
satisfactory explanation about the contents of seized documents. Retraction from
the surrender was not made within short time after the surrender. She submitted
further that the penalty on surrendered income could be imposed.
8. Having gone through the orders of the authorities below on the
issue raised in ground nos. 1 to 7, we find that during the course of search in the
premises of the assessee several documents including prima facie incriminating
material were found and seized. Thus, it cannot be said that there was no
incriminating material found during the course of search to concur with the
contention of the assessee that the assessment framed under Section 153A of the
Act was not valid. The ground Nos. 1 and 2 are thus rejected. We, however, find
substance in the contention of the Learned AR that an addition cannot be made
solely on the basis of surrendered amount dehors evidence in corroboration and
ignoring subsequent retraction thereto by the assessee with valid reason. Here
the case before us is that when surrendered income was objected by the assessee
with sufficient reason then the same should have been duly considered by the
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Assessing Officer and Learned CIT(Appeals) while making and upholding the
additions. The assessee vide several letters including letter dated 17.10.2008,
22.10.2008, 13.11.2008, 05.12.2008, 24.12.2008, 26.12.2008, wrote to the
Assessing Officer and with written submissions dated 28.1.2010, 24.1.2011
before the Learned CIT(Appeals) tried to point out many discrepancies in the
stock taking and working out the undisclosed sales and profit by the Assessing
Officer but the same have been ignored without assigning any reason. Copies of
these letters have been made available at page Nos. 04 & 22, 24 to 44 of the
paper book. In the letter dated 17.10.2008 filed before the Assessing Officer, the
assessee has submitted that all purchases, production, sale, expenditure, stock
etc. have been duly accounted for in the return filed. In the letter dated
13.11.2008 to the Assessing Officer, the assessee had requested for computation
indicating how the value of stock has been arrived at such a huge figure so that
proper reconciliation can be furnished and submitted reply on unaccounted sales
also. In the letter dated 05.12.2008 to the Assessing Officer, the assessee had
submitted documents wise and year-wise details of undisclosed investment and
expenditure. In letter dated 14.12.2008 to the Assessing Officer the assessee had
raised objections with regard to the valuation of stock and requested that on the
basis of the said objections, valuation of stock shall get reduced to Rs.3.8 crores
approximately. In the letter dated 26.12.2008 to the Assessing Officer the
assessee pointed out that the area where the stock was lying, cannot be any
means and ways, store such huge piles of stock as alleged. In this letter, the
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assessee also submitted that profit earned on alleged unaccounted purchases,
sales, production was utilized for purchase of stock found at the time search. The
Assessing Officer has reproduced the contents of the some of the above stated
letter and has rejected the same mainly on the basis that no evidence was filed in
support without giving adequate opportunity to the assessee to file evidence in
support. For instance, some letters are dated 24.12.2008 and 26.12.2008 and the
assessment order has been passed on 30.12.2008 (wrongly typed as 30.12.2007).
The Learned CIT(Appeals) has also not dealt with the contents of the above
letters. We thus to meet the end of justice set aside the issues raised in ground
Nos. 3 to 7 to the file of the Assessing Officer to decide these afresh after
verifying the contents of these letters after affording adequate opportunity of
being heard to the assessee. The ground Nos. 3 to 7 are thus allowed for
statistical purposes.
Ground nos. 8 and 9:
9. These grounds are relating to the grievance of the assessee against
the addition of Rs. 27,76,029/- on account of undisclosed investment in
construction under Section 69B of the Act.
10. Similar arguments has been advanced by the parties as advanced by
them on an identical issued hereinabove in the appeals for the assessment years
2001-02 to 2006-07.
11. On an identical issue in the appeals for the assessment years 2001-
02 to 2006-07 hereinabove, we after discussing it in detail has come to the
conclusion that the action of the A.O. in making reference to the D.V.O. for
determination of the value of the property without rejecting the books of account
17
is not justified and no addition can be made on the basis of such valuation
reported by the DVO. This view is well supported by the decision of Hon'ble
Supreme Court in the case of Sargam Cinema Vs. CIT, (2010) 328 ITR 513
(SC). Respectfully following the same we decide the ground nos. 8 and 9 in
favour of the assessee with direction to the A.O. to delete the addition of Rs.
27,76,029/- made in this regard.
Ground No. 10
12. It relates to the grievances of the assessee against the action of the
learned authorities below in not allowing the benefit of telescoping as per law.
13. In support of this ground, learned AR submitted that the benefit of
telescoping ought to have been allowed by the authorities below in respect of
profits earned during the assessment years 2001-02 to 2007-08 and addition of
Rs. 12,00,000/- (out of Rs. 20,00,000) out of brought forward amount/stocks
available with the assessee company as on 01.04.2000 and also in respect of
assessee's share of Rs. 60,00,000/- towards difference in the alleged
unaccounted accumulated stock as per the books and wrongly calculated at the
time of search.
14. Learned DR opposed the above submission.
15. We find that an identical issue raised before the learned CIT(A)
vide ground no. 4(h) has remained to be adjudicated upon by the learned
CIT(A), we thus, in the interest of justice, remand the matter to the file of
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learned A.O. to address the issue after affording opportunity of being heard to
the assessee.
16. The other grounds i.e. 11 and 12 are general and consequential in
nature hence does not need independent adjudication.
17. In the result, the appeal is partly allowed.
18. In summary, the appeals relating to the assessment years 2001-02 to
2006-07 are allowed and that for the assessment year 2007-08 is partly allowed.
D.S. Woodtech Pvt. Ltd.
ITA Nos. 2273 to 2275& 2052/Del /2011: (A. Yrs: 2004-05 to 2006-07):
19. In these appeals, in ground No.1, the assessee has questioned first
appellate order on the validity of assessment framed under sec. 153A read with
section 143(3) of the Income-tax Act, 1961 upheld by the Learned
CIT(Appeals). The learned AR, however, has not pressed this ground during the
course of hearing. The same is accordingly rejected.
20. In ground Nos. 2 to 4 for the assessment year 2004-05, the assessee has
questioned validity of addition of Rs.1,05,000 on account of cash receipt upheld
by the Learned CIT(Appeals) on the basis that incorrect facts have been
recorded and the Assessing Officer has made addition without providing
opportunity of cross-examination and without confronting the entire adverse
material used against the assessee without providing adequate opportunity of
19
hearing. The ground No. 5 is general in nature and in ground No.6, charging f
interest under sec. 234A, 234B and 234C of the Income-tax Act, 1961 has been
questioned.
21. Similar are the grounds for the remaining assessment years 2005-06 and
2006-07 with the difference in amount of addition. In assessment year 2005-06,
the addition made on account of cash receipt is Rs.1,64,590 and in assessment
year 2006-07, the addition made on this account is Rs. 4 lacs.
22. The learned AR advanced his arguments in support of the issue raised on
the validity of addition made on account of cash receipts. He submitted that
there was no undisclosed/unaccounted sales/cash receipts in the seized
documents. The addition in question has been made on the basis of entries found
recorded on the documents containing account of Shri Praveen Jain. The
Assessing Officer held that the assessee has not shown the cash receipts in its
books of account and made addition of that amount. Referring the different page
Nos. 1 to 22 of Annexure A08 on the basis of which additions have been made
in these assessment years; the learned AR submitted that page 1 to 7 contains
some phone numbers of parties and rates etc., page Nos. 1 to 10 are blank, page
No. 11 is rough estimate given to parties, the page No.12 is a blank paper; page
No.13 contains transaction with Mr. K. P. Dass; page No. 14 contains
transaction of Mr. K.P. Singhla; page No. 15 contains transaction of Mr.
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Praveen Jain. There are also some estimates of Shri Raj Kumar Goswami; page
No. 16 contains an advance of Rs. 10, 000 of Mr. T.K. Bansal which was
refunded back on the same day; page No. 17 contains transaction of Mr. Satish
Sharma; page No. 18 contains some rough figures; page No. 19 contains some
dates, page No. 20 contains transaction of Mr. R.K. Rane; page No.21 contains
entries of Mr. Satender Kumar and page No. 22 contains some phone numbers.
The learned AR submitted that so far as page No. 13 is concerned, it contains
transaction with Mr. K.P. Das who is brother of Mr. S.K. Dass and all
transactions with them have been counted for in the name of Mr. S.K. Dass and
duly reflected in the books of account. On page no.12, amount of Rs.9,873.05 is
some estimate as written on the page and amount of Rs.1500, Rs. 2,000,
Rs.2,000 and Rs.2,000 may be some cash received but there is no mention of
date with amount so all the amounts would have been received on the same date.
So it can be assumed that total amount of Rs.7,500 is included in the entries of
cash received of any dues as mentioned in the ledger account. He submitted that
the copy of said ledger account has been made available at page Nos. 1 and 2 of
the paper book. He submitted further that there is one more transaction of
Rs.10,000 on page Nos. 13 relating to Mr. R.P. Jain. All transactions with Mr.
R.P. Jain have duly been accounted for in the books of account, a copy of ledger
account has been made available at page No. 3 of the paper book. Regarding
page No.14, the learned AR submitted that it contains transaction of Mr. R.P.
Singhla as mentioned in the books of account but the Assessing Officer has
21
treated the cash of Rs.10,000 as Rs. 1 lac without any basis, copy of ledger
account in this regard has been made available at page N. 4 of the paper book.
Page No. 15 contains transaction of Mr. Praveen Jain. There is some estimate of
Rs.17,815.70 but total sales to Mr. Praveen Jain is Rs.35,833.86. Against this
sale, total amount of Rs.35,833.86 has been received and has been duly reflected
in the books of account. In support, he referred page No. 5 of the paper book i.e.
copy of ledger account. He submitted further that there are also some estimate of
Raj Kumar Goswami and estimate cannot be accounted for in the books of
account. The learned AR submitted further that page No. 17 contains transaction
of Mr. Satish Sharma which is duly reflected in the books of account and
referred page No. 6 of the paper book wherein the copy of the said ledger
account has been made available. Regarding the contents of page No. 20, the
learned AR submitted that there is transaction of Mr. R.K. Rane and all the
transactions with Mr. R.K. Rane have been duly accounted for in the books of
account and referred copy of ledger account in support made available at page
No. 7 of the paper book. Regarding page No. 21, the learned AR submitted that
it contains cheque entries of Mr. Satender Kumar which has been duly
accounted for in the books of account. In the assessment year 2006-07, the
learned AR submitted that the addition has been made and sustained by the
authorities below on the basis of entries recorded on page No. 7 of Annexure A6
without verifying the correct facts.
22
23. The Learned DR on the other hand placed reliance on the orders of the
authorities below with this contention that the additions in question have been
made based on the documents found and seized during the course of search
proceedings to which the assessee was having no explanation.
24. Considering the above submissions, we find that in the assessment year
2004-05, the Assessing Officer has made addition on the basis of entries found
recorded on page No. 15 of Annexure 8 and in the assessment year 2005-06, the
addition has been made on the basis of entries found recorded on page Nos. 11,
14 & 15 of Annexure A-8 and in the assessment year 2006-07, the addition has
been made on the basis of entries recorded on page No. 7 of Annexure A-6.
25. The relevant facts are that on 07.02.2007, search was also conducted at
the residential premises of Shri Dharam Pal Sharma, director of the assessee
company and various documents as noted in the assessment order were seized
from the premises of the assessee. For the assessment year 2004-05, the
Assessing Officer observed entries on page No. 15 of the Annexure A-8
containing amount of Shri Parveen Jain. He noted that assessee has not shown
the cash receipts of Rs.1,05,000 in its books of account. The Assessing Officer
observed that the cash payments totaling to Rs.25,000 should be read as
Rs.2,50,000, have not been reflected in the books. The assessee opposed the
addition of Rs.1,05,000 by the Assessing Officer on the basis that it has been
23
made on whims and his assumption by the Assessing Officer who had decoded
the alleged coded form used by the assessee without any supporting evidence.
The Learned CIT(Appeals) did not agree and upheld the addition of
Rs.1,05,000.
26. In the assessment year 2005-06, the Assessing Officer with similar
observations of decoding of figure contain in page Nos. 11, 14 and 15 of
Annexure A-8 regarding entries relating to Shri R..P. Singhla, Shri Ramesh
Bansal and Shri Praveen Jain has made addition of Rs.1,64,590. The Assessing
Officer noted cash payments totaling to Rs.10,000 relating to Shri R.P. Singhla
as Rs.1 lac not reflected in the book. The cash payment of Rs.2,000 relating to
Shri Ramesh Bansal was read as Rs.20,000 not reflected in the books and cash
payments totaling to Rs.25,000 relating to Shri Parveen Jain has been taken as
Rs.2,50,000, not reflected in the books. The Learned CIT(Appeals) did not agree
with the contention of the learned AR that the addition in question has been
made on whims and assumption by the Assessing Officer who has decoded the
earlier code form used by the assessee without any supporting evidence. The
Learned CIT(Appeals) did not agree and has upheld the addition.
27. In assessment year 2006-07, the Assessing Officer has made addition on
the basis of entries recorded on page No. 7 of Annexure A-6 with these
observations that the entries relating to D.C. Kothari and Demco Solution (P)
24
Ltd. are in coded form. The cash payment of Rs. 10,000 in the case of Shri D.C.
Kothari has been decoded by him as Rs.1 lac not reflected in the books of
account. He noted further that entries of cheques payment of Rs.50,000,
Rs.1,50,000 and Rs.1,11,538 are, however, reflected in the books. In the case of
Demco Solution (P) Ltd., he read the cash amount of Rs.30,000 as Rs.3 lacs not
shown in the books of account by adopting the same decoding method. Learned
CIT(Appeals) upheld the addition of Rs.1 lac made on account of decoding of
receipt from Shri D.C. Kothari by following his earlier decision for the
assessment years 2004-05 and 2005-06 but he upheld the addition of Rs.30,000
out of Rs.3 lacs made on account of receipt from Demco Solution (P) Ltd. with
this observation that Rs.5,000 and Rs.25,000 which were without decimal and
zero thereafter cannot be treated as Rs.50,000 and Rs.2,50,000 totaling to Rs.3
lacs and consequently the addition of Rs.3 lacs cannot be made. Since amount of
Rs.5000 and Rs.25,000 totaling to Rs.30,000 still remained unexplained, hence,
the addition of Rs.30,000 was justified, held the Learned CIT(Appeals).
28. Considering the above submissions, we find that the authorities below
have justified decoding of those figures by making addition of zero to the figure
where after recording the figure, a zero was mentioned after putting decimal
e.g., if Rs.1,000 was written as Rs.1000.0, the Assessing Officer had decoded
the figure as Rs.10,000. Learned CIT(Appeals) upheld this action of the
Assessing Officer. But he did not agree with the Assessing Officer for adopting
25
similar decoding of figure where Rs.1,000 was written and thereafter no decimal
with zero was put. We, however, find substance in the contentions of the learned
AR that there was no concrete basis for doing so by the authorities below for the
decoding of the figure. The additions in question are thus not sustainable in
absence of any basis particularly in a search proceedings under sec. 153A of the
Act. These additions are accordingly deleted. The ground Nos. 2 to 4 are
accordingly allowed.
29. Ground No.5 is general in nature and in ground No.6, charging of interest
under sec. 234A, 234B and 234C of the Income-tax Act, 1961 has been
questioned, which is consequential in nature and does not need an independent
adjudication.
30. In result, the appeals are allowed.
ITA No. 2052/Del/2011 (A.Y. 2007-08):
31. In ground No.1, the assessee has questioned validity of assessment framed
under sec. 153A read with se. 143(3) of the Income-tax Act, 1961 without
assuming jurisdiction as per law and without serving valid notices, recording
satisfaction and obtaining requisite approval as well as without complying with
the other mandatory conditions envisaged under the Act.
32. In ground No.2, it has been alleged that the assessment is in violation of
principles of natural justice by recording incorrect facts and findings.
26
33. In ground No.3, the addition of Rs.16 lacs on account of undisclosed
income upheld by the Learned CIT(Appeals) has been questioned.
34. In ground No.4, the addition of Rs.48 lacs by treating it as undisclosed
stock of the assessee upheld by the Learned CIT(Appeals) has been questioned.
35. In ground No. 5, the action of the Learned CIT(Appeals) in upholding the
assessment order in bringing to tax the alleged assessee's shares out of alleged
surrender of Rs.1.6 crores as surrendered has been questioned.
36. Ground Nos. 6 & 7 are in support of the above ground Nos. 3 to 5 in a
more specific way. In ground No. 8 non-granting of the benefit of telescoping
has been questioned.
37. In ground No.9, the addition of Rs.64 lacs by treating it as undisclosed
income/investment of the assessee has been questioned. In ground No. 10,
charging of interest under sec. 234A, 234B and 234C of the Act has been
disputed.
38. So far as issue raised in ground Nos. 1 and 2 on the validity of assessment
framed under sec. 153A read with sec. 143(3) of the Act and violation of
27
principal of natural justice by the Assessing Officer is concerned, the parties
have adopted similar arguments as advanced by them in the case of D.S. Doors
(P) Ltd. hereinabove in ITA No.2053/Del/2011 for the assessment year 2007-08.
Following the view taken therein, we do not find any substance in these grounds
on the issue, the same are accordingly rejected.
39. Ground Nos. 3 to 7, in support of ground Nos. 3 and 4 questioning the
addition of Rs.16 lacs on account of undisclosed income and Rs.48 lacs made on
account of undisclosed stock, the learned AR submitted that both the additions
have been made by recording incorrect facts and findings. He submitted that
surrender was made by the assessee to gain peace of mind and to get the issue
settled at the assessment stage and had made the disclosure subject to immunity
from the penalty and charging of interest. The Assessing Officer has not
accepted the surrender in its totality. The assessing authority accepted the
disclosure of the assessee because there was nothing on record so quoting the
undisclosed expenditure/income/investment etc. as the department failed to
bring forth any material in support. Nothing is left thereafter to support the
allegations and subsequent additions made to the tune of Rs.64 lacs (Rs.48 lacs
plus Rs.16 lacs). In support of the contentions that the Assessing Officer has
recorded incorrect facts and have not considered the submissions of the assessee
pointing out the correct facts relating to the addition, the learned AR has adopted
the same arguments as advanced by him in the case of D.S. Doors Pvt. Ltd. for
28
the assessment year 2007-08 adjudicated hereinabove. The learned AR pointed
out further that following his action in the case of D.S. Doors Pvt. Ltd. for the
assessment year 2007-08 on identical issues, the Learned CIT(Appeals) has
upheld the action of the Assessing Officer and sustained the above additions.
40. The Learned DR on the other hand tried to justify the orders of the
authorities below on the issues.
41. After having gone through the orders of the authorities below, we find
that the Learned CIT(Appeals) has decided the issue raised in the grounds in
question simply following the first appellate order for the assessment year 2007-
08 in the case of D.S. Doors Pvt. Ltd., adjudicated hereinabove. Following the
decision taken therein on an identical issues, we set aside the matter to the file of
the Assessing Officer to decide the issues raised in ground Nos. 3 to 9 relating to
the addition of Rs.64 lacs and the related contentions raised in these grounds
afresh after verifying the submissions of the assessee made time to time before
the authorities below during assessment and first appellate proceedings and
affording adequate opportunity of being heard to the assessee in this regard.
These grounds are accordingly allowed for statistical purposes.
42. Ground No.10 is relating to charging of interest under sec. 234A, 234B
and 234C of the Income-tax Act, 1961 which is consequential in nature, hence,
does not need independent adjudication.
29
43. In result, appeal is partly allowed for statistical purposes.
44. In summary, the appeals relating to assessment years 2001-02 to 2005-06
are allowed and those relating to assessment year 2007-08 are partly allowed.
The decision is pronounced in the open court on 13 .03.2015.
Sd/- Sd/-
(T.S. Kapoor) (I.C. Sudhir)
Accountant Member Judicial Member
Dated: 12.03.2015.
*Mohan Lal*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
Asst. Registrar, ITAT, New Delhi
Date
Draft dictated on (RK & ML) 27.01.2015
Draft placed before author 27.02.2015
Draft proposed & placed before the second
member
Draft discussed/approved by Second Member. 12.03.2015
Approved Draft comes to the Sr.PS/PS 12.03.2015
Kept for pronouncement on 12.03.2015
File sent to the Bench Clerk 12.03.2015
Date on which file goes to the AR
Date on which file goes to the Head Clerk.
Date of dispatch of Order.
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