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TMI Blog2012 (8) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... excluding the expenditure part reflected in the same seized material, provided the expenditure part is allowable as business expenditure - as the expenses represent turning charges, overtime payments, payments to temporary workers, remuneration to excise consultants, incentives etc.are expenses incurred by the assessee for the purpose of the business deletion of disallowed expenses is thus warranted - in favour of assessee. Levy of surcharge u/s 113 - ITAT deleted the levy - Held that:- According to the judgment of in Commissioner of Income Tax v. Suresh N. Gupta (2008 (1) TMI 396 - SUPREME COURT ) it was held that “even without the proviso under Section 113, the Finance Act, 2001 was applicable to a block assessment year passed under Chapter XIV-B. The amendment made by inserting the proviso to Section 113 was merely clarificatory and that the Finance Act of the year in which the search was initiated would apply" - Tribunal therefore was in error in holding that since the search was conducted on 29.08.1996, at a time when the proviso to Section 113 was not in existence, the levy of surcharge was not proper - against assessee. - ITA NO.896/2008 - - - Dated:- 3-8-2012 - MR. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock there was excess and in respect of certain other stock there was shortage. A reconciliation was prepared and on that basis the assessment of the undisclosed income for the block period 1.4.1996 to 29.8.1996 was completed on 29.4.1998. The assessment was made under Chapter XIV-B of the Act. 3. The aforesaid assessment was taken up in appeal before the Tribunal in ITA(SS) No.69/Del./1998 and several contentions were taken. The Tribunal in its order dated 1.3.2001 found no merit in the contention vis- -vis limitation for completing the assessment, reference to the special audit and the defects in the grant of approval by the CIT for completing the block assessment under Section 158BC. However, the Tribunal found merit in the assessee s claim that the block assessment was completed without regard to the rules of natural justice. It therefore set aside the assessment order and restored the same to the Assessing Officer with directions to decide the case afresh and pass a fresh assessment order after giving adequate opportunity of being heard to the assessee and in accordance with law. 4. Pursuant thereto the Assessing Officer completed the block assessment on 26.3.2003. In the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer the assessee contended that the inventory prepared as above by the income tax authorities was wrong and unreliable and cannot form the basis of any addition. It was pointed out that the physical verification of the stock at the time of the search was not properly carried out by the revenue authorities. There were several omissions and commissions while taking stock such as incorrect names of items being taken and in some instances raw material was taken as semi-finished goods and vice versa, etc. It was submitted that it was impossible for the income tax authorities to have completed the inventorisation of such huge stock amounting to crores of rupees in value and consisting innumerable items in such a short time of one day. The assessee also submitted that the process of inventorisation took place in the absence of Directors and that has given rise to several mistakes, discrepancies and inconsistencies in the inventory and in estimating the value of the stock. The assessee also pointed that physical inventory of the stock had been taken by its bankers much earlier to the date of search i.e., on 12.3.1996 and 1.8.1996 and also after the search i.e., on 23.11.1996 and no discrep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,182 items of semi-finished goods had not been counted by the authorities conducting the search. It was also pointed out that the difference in the finished goods was minor, being only 299 items. In the same chart presented before the Tribunal the assessee has also set out the reasons for the variations in the inventory prepared by the income tax authorities. These reasons are the following: A. Some items were omitted while counting the stock though they were physically present in the factory premises and this amounted to 15,66,990 items of raw material and 33,182 items of semi-finished goods; B. There were some raw materials purchased but yet to be used in the processing and they were considered as semi-finished goods. Details of these were given in annexure to the chart; C. 118 items were specifically noted to have been omitted from the list when these were physically present. Details given in Annexure II; D. During the inventory taken on 23.10.1996, some items which were found on 29.8.1996 (date of search) were still found lying in the stock; E. In some cases there was double counting of the same items, as for instance 1,960 pieces of Tata 1312 UJ Cross 1 were included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l in its order dated 1.3.2001 that the assessee has to be given adequate opportunity to put forth its case and it has to be told the reasons for rejecting its submissions, the direction was not carried out in letter and spirit. According to the assessee the Assessing Officer simply repeated the earlier assessment order and the additions made therein. 11. Before the Tribunal the assessee explained how stock checking is to be carried out and what are the steps involved in the same and submitted that the departmental personnel had not followed any of the basic steps and had proceeded to inventorise the stock in a haphazard manner. These steps are recorded by the Tribunal at pages 19 to 21 of its order. 12. The assessee also pointed out that its products are excisable and the excise authorities were present in the premises to monitor the production and dispatches from the bonded section. They had not reported any discrepancy in the production or sale of the products for the period under consideration or any of the earlier years. This fact was missed by the Assessing Officer who, contrary to the excise records, erroneously concluded that there were discrepancies, in the finished goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he explanation and reconciliation furnished by the assessee in the course of the remand proceedings was in violation of the clear directions of the Tribunal in its order dated 1.3.2001. e. The reliance placed by the Assessing Officer on the statement of Sudershan Kumar the factory manager, without putting it to test by calling for the assessee s explanation vis- -vis the statement also amounted to violation of the direction of the Tribunal in its earlier order. There were at least five different teams which carried out the exercise of stock taking and in the face of these exercises, the Assessing Officer was not justified in placing reliance on the stock inventory prepared by the income tax authorities in the span of just one day and seeking to support the same by the statement of Sudershan Kumar, who is stated to have assisted them during the search in the inventorisation. Therefore, the statement of Sudershan Kumar, according to the Tribunal, should not be given importance in the context of total accuracy of the stock taking exercises. What is apparently improbable cannot become sacrosanct merely because it was so agreed by the person stating so. The statement cannot therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer by letters dated 17.1.2003, 14.2.2003 and 24.2.2003, but none of these contentions or explanations were considered by the Assessing Officer. On the basis of the above findings, the Tribunal deleted the additions of Rs.1,98,37,054/- and Rs.1,16,73,019/-. 15. It will be seen from the above discussion that the findings of the Tribunal are findings of fact arrived at on the basis of the assessment record and the contentions advanced before the Assessing Officer as well as before it. The findings are the result of appreciation of the evidence and the rival submissions. No material has been brought before us to show that the findings are perverse. In this regard, we may note that since the revenue had raised the question of perversity in the conclusion/ findings of the Tribunal, this Court had directed it to place on record documents and material on the basis of which the charge can be established. By orders dated 10.2.2012 which were reiterated by order dated 23.4.2012, the revenue was directed to place on record the documents or material on the basis of which it can be said that the factual findings recorded by the Tribunal are mentioned. In fact costs of Rs.5,000/- were also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer was not justified in taking only that portion which suited the revenue. The objection of the department before the Tribunal was that though the expenses were also recorded in the seized papers, it should be examined whether those expenses were incurred for the purpose of business, for which there was no evidence. The Tribunal on a consideration of the facts in the light of the rival submissions and the seized material deleted the additions on the following reasoning : 14. We have considered rival submissions. We are in agreement with the submission by ld. Counsel for the assessee. The seized material is to be considered in its entirety and no part there of can be ignored for the purpose of computing undisclosed income. If the seized material contains details of income, the very same seized material also contains details of income, the very same seized material also contains details of expenses incurred. We have perused the pages 215 to 240 of the paper book. The expenses are in respect of expenses for turning charges, overtime charges, payment to temporary workers, excise consultants remuneration, incentives etc. Thus, these expenses are found to be incurred out of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Finance Act, 2002 w.e.f. 1.6.2002 provides that the tax shall be increased by a surcharge, if any, provided by any Central Act and applicable in the assessment year relevant to the previous year in which the search is initiated under Section 132 or the requisition is made under Section 132A. In the present case, the search was conducted on 29.8.1996 under Section 132. This falls in the previous year ended 31.3.1997, relevant to the assessment year 1997-98. According to the judgment of the Supreme Court in Commissioner of Income Tax v. Suresh N. Gupta, (2008) 297 ITR 322 (SC) it was held that even without the proviso under Section 113, the Finance Act, 2001 was applicable to a block assessment year passed under Chapter XIV-B. The amendment made by inserting the proviso to Section 113 was merely clarificatory. The Supreme Court further clarified that the Finance Act of the year in which the search was initiated would apply . In respect of the assessment year 1997-98, the Finance Act of 1996 would apply. If that Finance Act provides for the levy of surcharge, then the levy of surcharge in the present case would be valid. The Finance Act (No.2) of 1996 authorises the levy of surc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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