HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 56 / 2014 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, department has challenged judgment and order of Tribunal whereby Tribunal has allowed appeal preferred by assessee modifying order of CIT(A) and AO. 2. While admitting matter on 22.08.2016, this Court has framed following substantial question of law:- Whether Tribunal was justified in reversing findings of CIT(A) and deleting addition made on account of undisclosed investment in stock found during course of survey under Section 133A specifically when statement of partner was recorded? 3. Counsel for appellant has taken us to order of AO relevant part of which reads as under:- On carefully gone through assessee r reply as well as impounding materials/records. (2 of 8) [ITA-56/2014] contention of assessee is acceptable point No.2 of Rs.52969/-, point No.10 of Rs.17887/- and point No.12 of Rs.65813/- reply of assessee, because assessee firm and plot belonging to sister concern M/s Jain Tiles are situated in common Khasra No. and have no separate boundaries stock worth Rs.52969/- belonging to sister concern was also there. Moreover, no separate stock relating to sister concern was found separate at time os survey. Thus, stock worth Rs.52969/- belongs to sister concern M/s Jain Tile was stored there. Photocopy of title deeds (Khasra No.101) of both concdrn, and affidavit of partner Shri Sunil Kumar Jain partner of firm and affidavit of Shri Dharmendra Jain proprietor of Sister concern of M/s Jain Tiles have already been submitted at time of survey proceedings and they have also declared in post survey statements. 4. After taking into consideration added stock which was found in excess while conducting survey under Section 133 statements on record were also considered and it was found as under:- (iv) Assessee has taken plea that stock was not physically measured at all because two blocks of rough stone procured from mines, in natural shape, can not be identical, i.e. of same shape and size it has been submitted that it was not possible to have measurement of 2500 block of rough stones and finished tiles thousands in quantity, and of different sizes in single day. It has mentioned that mining and forest department seized and measured 1008 block which were of different sized and it took them 11 days with 8-10 persons. It has put question mark on actual measurement of blocks of stone in course of survey since in inventory. These have been reflected as having identical shape and size. I have gone through entire list of stock prepared in course of survey in 7 pages. I find that different items have been mentioned in list and block rough stones have been listed only at page-7 at (3 of 8) [ITA-56/2014] Sl. No.131 to 139. Copy of Page No.7 of inventory stock is reproduced as under :-
5. Learned counsel contended that conclusion reached by CIT(A) reads as under :- In view of above discussion in Para 4.4(ii) and (iv), addition under head undisclosed investment in stock is sustained at Rs.67,15,315/- and appellant gets relief of Rs.5,99,789/- 6. Taking into consideration above, Tribunal seriously committed error. 7. We have heard counsel for appellant. 8. Tribunal while considering case in para 7 and 7.1 of its order held as under:- We have heard parties with reference to material on record. stock inventory prepared at time or survey is not shown to have been made in presence of any witness. Even though Ld. CIT (A) has recorded that survey team comprised of CIT as well as 3 (5 of 8) [ITA-56/2014] inspectors and this team was assisted in preparing stock inventory by staff and other employees of assessee firm, yet such findings are not rested with reference to any reliable material. Even in statement that is shown to have been recorded of Shri Sunil Jain claiming to be suffering from handicap of mental, physical and impaired vision, Income-tax Official who recorded statement did not draw book stock as per books of account at same time nor worked out any excess or shortage before concluding survey at assessee s premises. assessee is also not shown to have been provided with copy of stock inventory stated to have been prepared at time of survey, statedly valued at Rs.89.61 lacs, which could enable assessee to raise objections about correctness thereof before competent authority at appropriate time. It is only after about 2 months of conclusion of survey when assessee was required to explain excess stock worked out by Assessing Authority. assessee at first instance took objection about correctness of stock written in statement so prepared on alleged blank paper got signed from Shri Sunil Kumar jain and admitted correct inventory of stock of Rs.34.31 lacs that was available at time of survey in its business premises. Number of glaring discrepancies have been pointed out before authorities below nut ld. CIT (A) in impugned order proceeded to accept correctness of inventory list prepared. Even perusal of said inventory list does not reveal location of such goods found and inventirized at time of survey. Ld. CIT(A) is thus found to be speaking two things in same breath. Once he says that inventory of stock signed by Shri Sunil Jain, partner is tobe taken as correct whereas on other hand at internal page 17 of impugned order he says that thee appears to be some approximation made in measurement of certain items and gives relief of 15% of Rs.13,06,152/- i.e. Rs.1,95,923/- in order to account for possible errors on account of approximation in stock taking of such block stones. revenue is not in appeal nor has (6 of 8) [ITA-56/2014] disputed such finding reached by Ld. CIT(A). Let that as it may be, it thus is apparent that stock inventory prepared cannot be said to be result of actual physical count of stock found at business premises of assessee. For lapses committed by survey party in taking correct inventory and physical count of stock, assessee cannot be made to suffer more particularly when he has mde bona fide retraction and disputed correctness of such stock appearing in inventory list, without bringing any witness on record from departmental side or from any of staff members who can be said to have assisted in preparing stock list. Such retraction has to be accepted in light of judgment by Hon ble Chattisgarh High Court in case of ITO vs. Vijay Kumar Kesar, 327 ITR 497. assessing authority ought to have known and understood procedures properly and demolished claim of assessee by placing cogent material and reliable evidence to rebut each and every argument taken by assessee in saying that preparation of inventory stock is arbitrary exercise of survey officials and same cannot be taken as correct position of stock found at time of survey. In absence of such material or evidence and finding that element of approximation on preparing inventory of stock is not ruled out, inventory list so prepared cannot be taken to be reflected actual stock found at time or survey at business premises of assessee. list so prepared, therefore, is of no credence and hence cannot be taken as evidence against assessee for purpose of making assessment of income of year under consideration. 7.1 It, however, remains that assessee has admitted stock of value of Rs.34,31,093/- at time of survey in his business premises. Assessing Officer himself ha admitted that stock of value of Rs.52,969/- belongs to M/s. Jain Tiles and has given relief thereof. appellant has filed affidavit of proprietor of M/s. Jin Stone Industries with documentary evidence that its stock is also stored at business premises of appellant before us and (7 of 8) [ITA-56/2014] for using such business premises he is paying annual rent of Rs.12000/-. proprietor of M/s Jain Stone Industries has also admitted that stock of value of Rs.18,68,880/- found at time of survey at business premises or M/s Jain Stone Gangsaw belong to him. This person himself has appeared before Assessing Authority in assessment proceedings but no adverse comments on affidavit of this person have been made by Assessing Authority. Ld. CIT(A) also did act on affidavit of this person but gave relief only of value of Rs.4,03,866/- as amount of Rs.14,65,014/- was found unaccounted sales assessed in hands of that person. Ld. CIT(A) was not entitled to reject affidavit partly on this point on such ground as M/s. Jain Stone Industries has owned stocks of value of Rs.18,68,880/- kept at business premises of appellant on date of survey on 18.03.2008. assessee was also entitled to assume that Income-tax Authority were satisfied with affidavit as sufficient proof on this point as he was neither cross-examined on this point not called upon to produce any documentary evidence in that regard. Under these circumstances and having regard to judgment by Hon ble Allahabad High Court in case L. Sohan Lal Gupta vs. CIT (1958) XXXIII ITR 786 at pages 791 and 792, it was not open to Ld. CIT (A) to doubt correctness of claim made by assessee which was supported by affidavit of M/s. Jain Stone Industries. We, therefore, do not find any justification in decision by Ld. CIT (A) in not treating stock of Rs.18,68,880/- as belonging to M/s. Jain Stone Industries forming part of total stock of Rs.34,31,083/- admitted as actual physical stock at his business premises. In this view of matter and findings as have been reached herein before, we do not find any justification in sustenance of addition on presumption of excess stock found as result of survey at business premises of assessee. entire addition of Rs.67,15,315/- is, therefore, directed to be deleted. (8 of 8) [ITA-56/2014] 9. In our considered opinion, taking into account above findings, no interference is called for. Therefore, issue is answered in favour of assessee and against department. 10. appeal stands dismissed. (VIJAY KUMAR VYAS),J. (K.S. JHAVERI),J. Chouhan/68 Commissioner of Income-tax, Alwar v. Jain Stones Gangsaw