2020 (10) TMI 622 - HC - Income Tax

Discrepancy of stock - excess stock of 22115 kg - discrepancy in the stock of scrap found during the course of survey - survey proceedings - as per CIT- A no reason for the Assessing Officer to treat the said discrepancy as unexplained and to make addition thereof - ITAT set aside the order passed by the CIT(A) - HELD THAT - By way of job work charges, the proof of goods lying at godown delivered after the job work was over were also produced in the form of bills for job work. M/s. Shubham Enterprise also issued confirmation with regard to return of the goods after the job work was over. The Assessing Officer has also recorded in the assessment order that the bill nos.5 and 6 were found at the time of survey pertaining to the goods of M/s. Shubham Enterprise received by the assessee for job work. With regard to the transportation charges, the assessee explained and submitted that it was the responsibility of the Pankajbhai to deliver the goods for job work at the door step of the appellant assessee and the bills of M/s. Shubham Enterprise also show the truck number in which the goods were received by the appellant assessee. CIT(A) after considering such facts, came to the conclusion that the goods in question belonged to M/s. Shubham Enterprise, which is also confirmed by both the parties and considering submissions as well as the documentary evidence produced by the appellant assessee, the CIT(A) has come to a clear finding of fact that the goods in question did not belong to appellant but belonged to M/s. Shubham Enterprise. Tribunal, however, has failed to consider the relevant documents on record and has taken into consideration the irrelevant facts with regard to the onus of the assessee to actual transportation of the goods in question, payment of octroi etc., and thereby discarded findings of facts arrived at by the CIT(A) based upon the material on record resulting into a perverse order. Tribunal has committed an error in reversing the order passed by the CIT(A) without giving any cogent reasons for the same in the impugned order. The conclusion reached by the Tribunal is coloured by the irrelevant consideration ignoring the relevant documents produced by the appellant assessee, resulting into the findings based on such conjecture and surmises without reference to the material and relevant evidence and therefore, such findings of the Tribunal even though on question of fact are liable to be set aside by this Court. We are of the opinion that the impugned order passed by the Tribunal being perverse is liable to be quashed - Decided in favour of assessee.

Summary

Issues Involved:
1. Ownership of excess stock.
2. Reversal of CIT(A)'s order by ITAT without cogent reasons.
3. Perverse decision by ITAT due to failure to consider details and evidence.

Detailed Analysis:

Issue 1: Ownership of Excess Stock
The primary issue was whether the excess stock of ?14,83,420 found during the survey belonged to the assessee or a third party. The survey conducted under Section 133A of the Income Tax Act, 1961, revealed a discrepancy of 25115 kg of stock at the appellant's premises. The assessee claimed that the stock belonged to M/s. Shubham Enterprise and was received for job work. The Assessing Officer rejected this explanation, citing lack of documentary evidence for transportation and octroi duty payment, and added the value of the excess stock to the assessee's income.

Issue 2: Reversal of CIT(A)'s Order by ITAT Without Cogent Reasons
The CIT(A) had allowed the appeal, accepting the assessee's explanation and deleting the addition. The CIT(A) found that the goods belonged to M/s. Shubham Enterprise, supported by statements and documentary evidence. However, the ITAT reversed this order, stating that the CIT(A) had passed a non-speaking order and failed to provide reasons for rejecting the Assessing Officer's findings. The ITAT restored the matter to the CIT(A) for fresh consideration.

Issue 3: Perverse Decision by ITAT Due to Failure to Consider Details and Evidence
Upon remand, the CIT(A) again deleted the addition, providing detailed reasons and evidence supporting the assessee's claim. The CIT(A) noted that the goods were received for job work, confirmed by statements from the assessee and M/s. Shubham Enterprise, and supported by delivery challans and job work bills. Despite this, the ITAT once again reversed the CIT(A)'s order, maintaining that the assessee failed to prove the actual transportation and ownership of the goods. The High Court found this decision perverse, as the ITAT failed to consider the relevant evidence and relied on irrelevant factors.

High Court's Conclusion:
The High Court held that the ITAT's decision was perverse and not based on the evidence on record. It emphasized that the ITAT, as a fact-finding authority, must consider all relevant evidence and provide cogent reasons for its conclusions. The High Court set aside the ITAT's order and restored the CIT(A)'s order, which was based on a thorough consideration of the evidence. The appeal was allowed, and the substantial questions of law were answered in favor of the assessee.