2006 (3) TMI 228 - AT - Income Tax

Summary

Issues Involved:
1. Whether the trucks were coming from Almora to Haldwani or going from Haldwani to Almora.
2. Whether the assessee had ample stock to make the above sales.
3. What was the rate of sale of the above goods.
4. Whether the requisition under section 132A(1) of the Income-tax Act, 1961, and the resultant block assessment under section 158BC were valid.
5. Whether the goods/assets were undisclosed income.

Issue-Wise Detailed Analysis:

1. Whether the trucks were coming from Almora to Haldwani or going from Haldwani to Almora:
The Assessing Officer (AO) determined that the trucks were coming from Almora and going to Haldwani based on the police FIR and the drivers' statements. The AO noted that the market for finished goods was not in Almora but in areas like New Delhi, Bareilly, and Lucknow. The AO concluded that the trucks were coming from Almora, not going to Almora, as claimed by the assessee.

2. Whether the assessee had ample stock to make the above sales:
The AO scrutinized the stock register of the Haldwani sale depot and found discrepancies. The assessee claimed to have received goods from M/s. Bhatt Industries and M/s. Rajeev Enterprises, but no bills were provided. Additionally, the assessee claimed to have manufactured goods from raw-leasa but failed to provide evidence of the purchase. The AO concluded that the stock position furnished by the assessee was not credible and held that the goods in the trucks were unexplained investments, treated as income from undisclosed sources under section 69 of the Income-tax Act, 1961.

3. What was the rate of sale of the above goods:
The AO found that the rates of the goods shown by the assessee were lower than the market rates. Local inquiries revealed higher average market rates for Rosin, Turpentine Oil, and Varnish. The AO concluded that the value of the goods in the two trucks was Rs. 4,17,300 and computed the total undisclosed income accordingly.

4. Whether the requisition under section 132A(1) of the Income-tax Act, 1961, and the resultant block assessment under section 158BC were valid:
The AO's requisition under section 132A(1) was challenged by the assessee, who argued that the goods were in the custody of the court and should not have been requisitioned. The Tribunal disagreed, stating that section 132A(1)(c) allows requisitioning assets taken into custody by any officer or authority under any other law. The Tribunal concluded that the AO rightly proceeded with the assessment due to the requisition issued under section 132A(1) and that the block assessment under section 158BC was valid.

5. Whether the goods/assets were undisclosed income:
The Tribunal upheld the AO's findings, noting that the goods were transported illegally without permission from the Forest Department and that the truck drivers were convicted for the offense. The Tribunal found that the assessee failed to provide a satisfactory explanation for the transportation of the goods and the investment in the finished goods. The Tribunal concluded that the goods/assets were undisclosed income and upheld the AO's assessment.

Additional Submissions:
The assessee's counsel argued that the goods were shown in the stock register and were not undisclosed income. The Tribunal rejected this argument, citing the lack of sufficient material to support the assessee's claims. The Tribunal also rejected the alternative submission that the auctioned amount from the confiscated goods should be adjusted against the tax demand, stating that the auctioned amount vests in the State Government as per criminal law.

Conclusion:
The Tribunal confirmed the AO's order, dismissed both appeals, and upheld the findings that the goods/assets were undisclosed income and that the requisition and block assessment were valid.