2015 (6) TMI 6 - AT - Income Tax

Restoration of original appeal - Rule 10 of Income Tax Rules regarding filing of affidavit - Claim of unlawful survey proceedings - A crude attempt to influence independent judgment process for petty professional ends - Held that - It may be pertinent to mention that ld. Counsel Shri K C Moondra FCA and Mukul Moondra ACA, seem to be ignorant about filing a proper power of attorney, which is to be given on a NON JUDICIAL stamp paper. Whereas they have filed a plain printed paper with ₹ 10/- court fee stamp which is not a valid and prescribed power of attorney. Thus their appearance could have been lawfully denied by the bench. This again shows the lenient approach of the bench bellying his wild allegations.Furthermore the ICAI guidelines provide that every chartered accountant shall mention his registration no. on the power. Sadly both of them i.e. S/shri K C Moondra and Mukul Moondra have not mentioned their ICAI registration no. Making their power of attorney again defective, inadmissible and in violation of ICAI guidelines.Under these facts and circumstances, we find that the ld. Counsel for the assessee Shri K.C. Moondra and his son Shri Mukul Moondra are liable for suitable proceedings for their professional misconduct, misbehavior, wasting the time of court and unlawfully attempting to interfere in the process of judicial dispensation. Considering all the facts, circumstances and material on record by invoking rule 32A of the ITAT Rules we hold that Shri K.C, Moondra and Shri Mukul Moondra are liable for levy of costs as prescribed by said rule 32A. Consequently, we impose cost of ₹ 25,000/- on Shri K.C. Moondra and ₹ 10,000/- on Shri Mukul Moondra for their delinquencies as mentioned above. Separate proposal under Contempt of Court Act will be duly forwarded to Hon ble Rajasthan High Court.The cost is recoverable u/r 32A(2) of the ITAT Rules and shall be deposited in the Prime Minister Relief Fund. Copy of this order to be sent by registry to Institute of Chartered Accountants of India to take appropriate disciplinary action against them in terms of ICAI rules and guidelines. Matter of main appeal - Right from the time of survey and thereafter appellant and his CA Shri K.C. Mundra did not cooperate with the department in finalizing the assessment proceedings. Only wild allegations were made against all the officers of the department without any basis thereof. From these facts it is clear that survey action was conducted in a normal manner by the survey team. However, Shri Shiv Ratan Mundra tried every possible trick to obstruct Government officers in discharge of their official duty. Search and survey operations are carried out by the income tax department as per the powers conferred by the statute. Members of survey team go to the business premises of a tax payer as representatives of the Government of India. The appellant used the terms as so called survey and alleged survey showed that he has no respect for law enforcement agency. It has been held by the ld CIT(A) that there is absolutely no material on record on the basis of which survey proceeding can be called unlawful or arbitrary. Accordingly, he dismissed the ground No. 1 of the appeal. As per Section 133A of the Act the concerned Assessing Officer authorized income tax authority to conduct a survey. The income tax authority go to the business premises to verify the stock as well as cash position on the date of survey. The survey team showed the authorization to the Director of the company in the case of company and asked to sign on it. Thereafter the authorized officer starts to verify the cash on the date of survey and make inventories of stock and books of account found during the course of survey. As per stock register/ledger, they prepared stock position as on date of survey. The part of the survey team is deputed to verify the stock physically and prepared stock inventory with the help of staff or assessee himself. It is found that assessee was non cooperative with the survey team as he has not given statement U/s 133A and also not signed on it. From the record, it is fact that a survey took three days to complete the survey proceeding which shows that there was non-cooperation from the Director of the company. As per assessment order also, there was non-cooperation and the survey team had impounded 51 books of account, which were relevant to various assessment years, which has been reproduced by the Assessing Officer on page 2 to 4 of the assessment order but no adverse inference has been drawn by the Assessing Officer. Only discrepancy was found in the stock position on the date of survey which has been calculated by both the authorities judiciously. Therefore, we do not find any reason to intervene in the order of the ld CIT(A). According we uphold the order of the ld CIT(A). The assessee submitted a list of closing stock during the assessment proceedings at ₹ 2,54,98,772.93 and physical stock during the course of survey was found at ₹ 1,41,16,603/-. There was a shortage in stock at ₹ 1,13,82,169/-. The assessee has shown G.P. rate in immediate preceding year @ 16.22% on the basis of this GP rate, the total GP addition was made by the Assessing Officer and confirmed by the ld CIT(A) had ₹ 18,46,187/- is justified. There was a discrepancy during the course of survey on the basis of stock inventory prepared physically as well as stock position on the basis of books of account. Therefore, the Assessing Officer rightly rejected the book result U/s 145(3) of the Act. We do not find any reason to interfere with the order of the ld CIT(A). Accordingly, grounds No. 2,3,4 and 6 of the appeal are dismissed. The Assessing Officer had afforded opportunity to the assessee to explain the reason for decline in G.P. rate compared to preceding years. He had not given any cogent reply to explain the reasons for decline in G.P. before both the authorities. Before us also no reply was submitted. The ld Assessing Officer applied the preceding years G.P. rate in absence of any reply from side of assessee. Therefore, we uphold the order of the ld CIT(A). Accordingly, this ground of appeal of the assessee is dismissed.The ld CIT(A) found that 143(2) notice was dispatched through speed post on 18/8/2009. Therefore, he found that allegation of the appellant that notice U/s 143(2) of the Act was fabricated by the Assessing Officer is baseless and not acceptable. The appellant also had not brought any evidence regarding fabrication of notice as well as allegation made in anonymous letter. Therefore he dismissed the assessee s ground of appeal. We have gone through the order of lower authorities. The assessee had not brought on record any evidence against the notices issued by the Assessing Officer even his objection has been considered by the Assessing Officer. The alleged anonymous complaint had no relevance with reference to service of notice U/s 143(2) of the Act in absence of evidence. The assessee alongwith his authorized representative appeared before the Assessing Officer and had cooperated in assessment proceedings, therefore, as per Section 292BB of the Act where as assessee has appeared in any proceeding or cooperated in any enquiry relating to an assessment or reassessment, it shall be deemed that any notice under any provisions of this Act, which is required to be served upon him, has been duly served upon him in time in accordance with the provisions of this Act and assessee shall be precluded or taking any objection in any proceeding or inquiry under this Act that the notice was not served upon him, no served upon him in time and served upon him in improper manner. The assessee can raise objection before completion of the assessment. Therefore, the Hon ble Punjab & Haryana High Court in the case of VRA Cotton Mill Pvt. Ltd. Vs. Union of India (2013) 359 ITR 495 (P&H) has held that the moment, the notice is signed and put in the course of transmission by the department, the notice is deemed to be served, unless the contrary is proved. The assessee had not proved contrary, therefore, notice U/s 143(2) of the Act has been served on the assessee properly by the Assessing Officer. Therefore, the assessment passed by the ld Assessing Officer is valid. This ground of appeal is dismissed. - Decided against the assessee.

Summary

Issues Involved:
1. Validity of survey proceedings.
2. Discrepancies in stock valuation and trading addition.
3. Decline in Gross Profit (G.P.) rate and trading addition.
4. Service of notice under Section 143(2) of the Income Tax Act.

Detailed Analysis:

1. Validity of Survey Proceedings:
The assessee challenged the survey proceedings as unlawful, arbitrary, hypothetical, fabricated, unfair, and unreliable. The tribunal found that the survey was conducted under proper authorization as per Section 133A of the Income Tax Act. The survey team showed the authorization to the Director, who signed it. The tribunal noted that the assessee was non-cooperative, as evidenced by the three-day duration of the survey and the impounding of 51 books of account. The tribunal upheld the findings of the lower authorities, stating that the survey proceedings were conducted in a normal manner and the allegations of harassment were unfounded.

2. Discrepancies in Stock Valuation and Trading Addition:
The assessee contested the discrepancies in stock valuation and the resultant trading addition of Rs. 18,46,187. The tribunal noted that the stock inventory was prepared by the survey team with the assistance of the assessee's employees and was duly signed by the Director. The tribunal found that the assessee failed to reconcile the differences in stock figures generated from the computer and the stock register. The tribunal upheld the rejection of the books of account under Section 145(3) of the Act and confirmed the addition based on the gross profit rate of 16.22%, which was the rate declared by the assessee in the previous year.

3. Decline in Gross Profit (G.P.) Rate and Trading Addition:
The assessee did not provide satisfactory reasons for the decline in the G.P. rate during the year. The tribunal noted that the Assessing Officer had applied the G.P. rate of the preceding year (16.22%) on the declared sales, resulting in a trading addition of Rs. 16,53,869. The tribunal upheld the findings of the lower authorities, stating that the assessee had not given any cogent reply to explain the reasons for the decline in G.P. rate.

4. Service of Notice under Section 143(2) of the Income Tax Act:
The assessee claimed that the notice under Section 143(2) was not served, making the assessment order invalid. The tribunal noted that the notice was issued and dispatched by speed post, and the assessee had cooperated in the assessment proceedings. The tribunal referred to Section 292BB of the Act, which precludes the assessee from raising objections regarding the service of notice if they have cooperated in the proceedings. The tribunal also cited the Punjab & Haryana High Court's ruling in VRA Cotton Mill Pvt. Ltd. Vs. Union of India, which states that a notice is deemed to be served once it is signed and put in the course of transmission unless proven otherwise. The tribunal concluded that the notice was properly served, and the assessment order was valid.

Conclusion:
The tribunal dismissed the appeal of the assessee, upholding the findings of the lower authorities on all grounds, including the validity of survey proceedings, discrepancies in stock valuation, decline in G.P. rate, and the service of notice under Section 143(2) of the Income Tax Act.