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TMI Blog2006 (6) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... re that IT Department had carried out search and seizure action under section 132(1) of the Income-tax Act, 1961 (in short "the Act") both at the business as well as residential premises of the assessee on 6th April, 2000. The assessee was also running proprietary business of brick kiln and the business premises of the kiln were surveyed under section 133A of the Income-tax Act. During the course of survey operations, stock inventory of the bricks both inside the kiln and lying outside was prepared. The Assessing Officer observed that after allowing margin of GP @ 20 per cent, the value of stock found at the time of survey worked out to Rs. 1,19,11,392 as against the stock shown at Rs. 21,13,205 in the books. When the assessee was supplied with a copy of stock inventory, several defects in the drawing of stock inventory were pointed out. It was submitted that the stock inventory was not prepared in the presence of some responsible person and the assessee was also not present at the relevant time. It was also pointed out that the capacity of the kiln was only 8 lakhs and it was not possible to stack the stock shown in the inventory in the premises of the assessee. It was also submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k kiln was 7 to 8 lakhs only and taking this fact in view, it was not possible to believe that there was a stock of bricks equal to 81,76,700 bricks. Such quantity of stock required space measuring 80234 sq.ft. as against the space available with the assessee after excluding the space under the kiln, other area was 35800 sq.ft. It was also submitted that similar action was taken at the other premises belonging to other family members of the assessee and no variation in the stock was found at the time of survey and as per books was noticed. It was also submitted that despite detailed submissions made before the Assessing Officer during the course of assessment proceedings, the Assessing Officer summarily made the addition without dealing with the objections raised by the assessee. It was also submitted that when similar deficiencies were pointed out in the quantity of coal, stock shown in the inventory, the Assessing Officer accepted the position and did not make any addition for the same. The learned CIT(A) considered the submissions and deleted the addition by accepting the submissions of the assessee that there was no space available to store/stock the quantity shown in the inven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... survey under section 133A was also carried out at the brick kiln, the proprietary concern of the assessee on 6th April, 2000. He submitted that a copy of the stock inventory drawn at the time of survey in the presence of Sh. Gian Chand, Pithaiwala and Sh. Ranjit Singh is placed on pp. 2 to 9 of the paper book filed by the assessee. He further drew our attention to pp. 8 and 9 of the paper book which indicates the difference between the stock found at the time of survey and as shown in the books. He referred to para 4.2 of the assessment order which indicates the position in regard to excess stock. He referred to pp. 10 and 11 of the paper book which indicate the value of excess stock found at the time of survey at Rs. 61,61,091. He submitted that the learned CIT(A) has deleted the entire addition simply by accepting the arguments of the assessee that space available with the assessee was inadequate to store the stack mentioned in the stock inventory. The learned senior Departmental Representative submitted that such finding is not based on proper appreciation of facts. He submitted that the stock inventory was drawn by a responsible authorised officer The same could not be based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken the number of bricks inside the kiln at 8 lakhs though it was not possible to load the kiln with more than 6 to 6.5 lakhs bricks. It was also pointed out that looking to the length, width and thickness of the bricks, the space required for stacking 2.5 lakhs bricks was 5250 sq.ft. Therefore, it was stated that the space available with the assessee could not stack the number of bricks mentioned in the inventory. The assessee also requested the ADIT (Inv.) to depute the authorized officer along with his team to visit the brick kiln and to prove that the stock shown in the inventory could be stored at the space available with the assessee. He submitted that this request was not acceded to. He further drew out attention to p. 14 of the paper book which is a copy of reply sent to Assessing Officer stating therein that the authorized officer had wrongly taken the value of stock found at Rs. 1,19,11,392 as against the correct value of stock at Rs. 21,13,215 available as per books. He further referred to p. 16 of the paper book whereagain ADIT (Inv.) was requested to personally visit the kiln in the presence of assessee and to show how the stock shown in the inventory could be kept a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Mehta Parikh Co. v. CIT [1956] 30 ITR 181 . Thus, he contended that this is absolutely clear that stock inventory was not drawn in the presence of any responsible person. It was also stated that the space required to store 81,76,700 bricks mentioned in the inventory was 80234 sq.ft. As against the same, the space available with the assessee was only 35800 sq.ft. He further drew our attention to pp. 29 and 30 of the paper book which is a detailed map of location and the space available with the assessee along with photographs indicating clearly that it was not possible to stock the number of bricks indicated in the stock inventory. He submitted that despite repeated requests made to the Assessing Officer to visit the verify premises to verify himself the contention of the assessee, his request was not acceded to. He further stated that the assessee had produced the copies of revenue record of the adjoining land to show that the same was under cultivation, where wheat was being grown. He drew our attention to copies of the revenue s record placed at pp. 26 to 28 of the paper book. Thus, he submitted that claim of the authorised officer that even the adjoining land was avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer about the discrepancies in the inventory drawn, the Assessing Officer made the addition by recording only 11 lines without dealing (with) any of the objections and contentions of the assessee. He submitted that whole exercise was only to defend the authorized officer who had not drawn the stock inventory on physical counting. Thus, he submitted that the learned CIT(A) has rightly deleted the addition. Relying on two decisions of Tribunal, Visakhapatnam Bench in the case of Smt. Bommana Swarna Rekha v. Asstt. CIT [2005] 94 TTJ (Visakhapatnam) 885 and the decision of Tribunal, Nagpur Bench in the case of Parkash Tulsidass v. Asstt. CIT [2000] 68 TTJ (Nag) 479, the learned counsel submitted that since the discrepancy, if any, in the stock was found luring the course of survey under section 133A, no addition for the same could have been made in the block assessment. Thus, the learned counsel concluded his submissions by saying that the order of the CIT(A) does not merit any interference. 6. We have heard both the parties at some length and given our thoughtful consideration to the rival contentions, gone through the evidence and material placed on record an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee was not adequate to store the stock of bricks mentioned in the stock inventory drawn at the time of survey, the Assessing Officer referred these objections to the authorized officer of the survey team. In his comments, the authorized officer submitted that apart from these two persons, one Sh. Manoj Kumar, Jamadar and Smt. Sheela (called Pardhan) who were well acquainted with the working of the kiln were also present at the time when stock inventory had been drawn. The authorized officer further mentioned that they were so expert in such work that just by having a simple look at the Chakka (lot of bricks) could easily indicate the number of bricks and their grade without physical counting and he mentioned that the assistance of these people was taken at the time of drawing stock inventory. This claim of the authorised officer has been found to be factually incorrect because the assessee immediately pointed out that there was no Jamadar by name of Sh. Manoj Kumar and there was no Smt. Sheela (called Pardhan). This fact had not been controverted by the authorized officer or by the Assessing Officer. Further, it is also a fact that neither stock inventory bears signatures ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action was also carried out at the other bricks kilns belonging to the family members/sister-concerns of the assessee. It is a fact that at four out of six places, a very negligible variation was found in the stock for which no addition was made and in two cases variation in the stock was only to the extent of Rs. 83,380 and Rs. 1,31,073. Considering the fact that the capacity of the brick kiln belonging to the assessee was also 8 lakhs, i.e., the same as the brick kilns belonging to the other family members/sister-concerns, It is not possible to believe that variation could be to the extent of value of Rs. 61,61,090. 8. Moreover, it is not possible to accept that the stock actually found was 81,76,700 bricks, i.e., equal to 11 times of the capacity of brick kiln. If the assessee had made bricks of such magnitude, it is obvious that the huge quantity of coal was also required for baking bricks, but no variation in stock of coal was found. This fact again confirm that stock inventory prepared by the survey party was not correct. Further, the assessee had also filed a certificate from District Food Supplies Controller, where it was mentioned that the assessee had made 36,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee on the other hand relied on the order of Tribunal, Amritsar Bench in the case of Dy. CIT v. Harmanpreet Singh [IT(SS) Appeal No. 3 (Asr. of 2005]) for the block period 1st April, 1990 to 6th April, 2000. A copy of this order was also placed on our file. 13. We have heard both the parties and carefully considered the rival contentions. We find that this issue is squarely covered in favour of the assessee and against the revenue by order dt. 5th April, 2006 of Tribunal, Amritsar Bench, in the case of Harmanpreet Singh ( supra ), where by relying on earlier order in the case of Dy. CIT v. Charanjit Lal Chauhan [IT(SS) Appeal No. 31 (Asr.) 2003 dated 14-6-2005], for the block period 1st April, 1990 to 1st March, 2001, the Tribunal held that since search was earned out prior to 1st June, 2002, i.e., date of amendment, no surcharge could be imposed. The relevant findings recorded in para 8.2 of the order are as under: "8.2 We have heard both the parties and considered the rival contentions. We find that the same issue came up before us in the case of Dy. CIT, Jalandhar v. R.K. Jewellers , in IT(SS)A No. 10/Asr/2004 where on identical facts, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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