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TMI Blog2018 (10) TMI 2051X X X X Extracts X X X X X X X X Extracts X X X X ..... te. The search action resulted in unearthing of unaccounted income. In response to the notice issued u/s. 153A of the Act, the assessee filed his return of income disclosing the additional income declared during the said search action. However, during the assessment proceedings, the Assessing Officer, against the return income of Rs. 1,26,48,170/-, made various additions determining total income of Rs. 3,72,10,313/-. Loan advanced to Shri Chetan Mehta along with the interest income accrued thereon was added for the assessment year 2005-06 and thus Rs. 1,55,00,000/-was added as unexplained investment u/s. 69 of the Act on account of loan to Shri Chetan Mehta for the said assessment year. The accrued interest on the said loan worked out to Rs. 52,50,000/-for assessment year 2005-06. The additions of Rs. 2,27,50,000/- and Rs. 1,31,00,000/- were made on account of interest on loan given to Shri Chetan Mehta for the assessment years 2006-07 and 200708. These are the additions over and above the income disclosed by the assessee during search and seizure action. The details of the addition as summarized by the Ld. AR is tabulated and the same is extracted in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed unilaterally and in the perverse manner. 6. On the facts and in the circumstances of the case the CIT (A) has erred in sustaining the addition of Rs. 25 lacs u/s. 69 on the ground that the appellant has loaned Rs. 25 lacs to Shri Rajpal Panghal on the basis of a diary found at a place where the appellant does not stay or have any control and CIT (A) has relied on the statement of Shri. Rajpal Panghal recorded at the back of the appellant and without providing adequate opportunity to cross examines him. The above grounds of appeal may kindly be allowed to be amended, altered, modified etc., in the interest of natural justice." 4. Summary of the Issues: Further, summarizing the above grounds, Ld. Counsel for the assessee summarized the issues in the following manner and the same are extracted as follows: "a) Additional Ground : Validity of assessment order/additions made u/s. 153A on the grounds that - a. Nothing incriminating was found and seized from the appellant. b. Despite the documents, loose papers alleged to have been belonging to appellant and found with other assesses in the course of search action against them and absolute reliance on those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent date of hearing, Ld. Counsel for the assessee raised following additional prayer for admitting the additional evidences: "The appellant has filed the additional evidence which is in the form of an order passed by the Sixteenth First Class Magistrate, Pune on the Regular Criminal Complaint Application No. 2733/07. Mr. Chetan Mehta had filed this criminal complaint against the appellant and others alleging the violations of section 386, 120(b), 506(2) of Rule 33 of IPC and section 32 & 33 of Bombay Money Lending Act. The search action u/s. 132 was conducted on the appellant on 24/10/2007. Simultaneously searches were conducted on Mr. Chetan Mehta, Mr. Abbas Ali Choudhary and others. In the course of search on the appellant absolutely nothing' has been found and there is no seizure either of any loose papers or cash, jewellery etc. Whereas in the course of search in case of Mr. Chetan Mehta several documents were found in his possession and custody which are seized by the department. The search also revealed that Mr. Chetan Mehta has filed a criminal complaint against the appellant for the violation of various sections of IPC and Bombay Money Lending Act. The poli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind attention is drawn to Rule 29 of the Appellate Tribunal Rules, 1963 that provides admission of additional evidence under certain circumstances and therefore the appellant believes that the relevant circumstances stand proved by the facts explained above. This admission of additional evidence is also necessary in the interest of natural justice." We shall now take up each of the said issues summarized in the following paragraphs for adjudication. A. Validity of assessment /additions - incriminating material : The first issue relates to validity of assessment/additions made u/s. 153A of the Act where no incriminating material was found and seized. Ld. Counsel also submitted that loose papers/documents relied upon by the Assessing Officer are found during search do not belong to the assessee. In this regard, Ld. Counsel for the assessee submitted that the basic documents, which suggest the payment of loan to Mr. Chetan Mehta outside the books, were not found in the premises of the assessee although the same were discovered from his premises during search action on the group of cases involving assessee, Mr. Chetan Mehta and Mr. Abbas Ali Choudhary. In this regard, Ld. Counsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This additional evidence is in form of an order passed by the judicial magistrate 1st class, Pune on the criminal complaint No 2733 of 2007 filed by complainant Shri Chetan Mehta. In the said complaint charges were leveled against the appellant and others alleging violations of provisions of sections 386,12(b), 506(2) of the Indian Penal Code and u/s. 32 & 33 of the Bombay Money Lending Act. The Hon'ble Court disposed off this criminal complaint vide its order dated 9th Sept 2016. The Court acquitted the appellant and others from all the charges leveled by the complainant. Refer Pg No 4 Para no 8 of the order mentioning therein the charges leveled and the decision taken:- Sr. No. Issues/Charges Conclusion 1. Can prosecution proved that accused No. 1 to 4 had demanded ransom money from complainant making motive of criminal conspiracy of crime between them? Negative 2. Can Prosecution proved that accused No I, 3 and 4 had taken signature on consent letter and two agreement of complaint on dated 3/05/2006 in the morning 11.30 to 12.00 noon at complainant factory of MIDC Pimpri in the motive of ransom money demand from complainant threatening with revolve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders were made by the Assessing Officer or the CIT(A). The Ld. Counsel further filed written submissions in details which have already been extracted in the preceding paragraph in line for adjudication of the issue on quantum. It is the prayer of the Ld. Counsel for the assessee that the same needs to be admitted and matter may be referred to the file of Assessing Officer for fresh adjudication after granting reasonable opportunity of being heard to the assessee. 10. The Ld. DR for the Revenue strongly and dutifully opposed regarding admission of the order of 1st Class Magistrate as additional evidence. In our considered opinion before adjudication of the merits of the addition, we need to attend to the fate of the additional evidence furnished for the first time before us. C. Preliminary issue :- On hearing both the parties on this preliminary issue, we find the order of 1st Class Magistrate is relevant for the impugned additions made u/s. 69 of the Act. The said order was delivered in the month of September, 2009 in connection with the registration of appeal in 2007 before the 1st Class Magistrate. Further, we find that CIT (A) passed the impugned order in the mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of closing stock valuation method & reliability of treatment of VAT and adjustment of inventories. In this regard, the said addition was partly confirmed by the CIT (A) in his order dated 10.01.2014. The contents of para 6 of the appellate order are relevant in this regard. 14. Aggrieved by the order of partial relief by the CIT(A), the assessee is in appeal before us by raising grounds as extracted above. 15. Before us, Ld. Counsel for the assessee brought our attention to page 3 and 4 of the paper book and made following submissions: "1. The AO has erred in invoking the provision of Sec. 145A. The reasons are - i. Books of accounts are maintained under mercantile system of accounting. The purchases and sales are shown net of VAT in trading account. The VAT account is separately maintained to which VAT paid is debited and VAT collected is credited. As on 31.3.2009 VAT Account shows Rs. 6,49,662/- as receivable/adjustable to the subsequent transactions and VAT payable. ii. Where the assessee collects the VAT on sales more than what is paid on purchases at the end of the year it is shown as liability. As per the provisions relating to the VAT, this liability is not to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lue of closing stock was to be adjusted for the said amount. The appellant has relied on case laws all of which relate to ATs prior to 1999-2000 i.e. before S. 145 A come into being. As such, the same have to no application to the facts of the present case. Accordingly, this contention of the appellant is hereby rejected. The alternate contention of the appellant is that if the closing stock is adjusted for VAT, the opening stock should also similarly be adjusted. This contention of the appellant is acceptable in view of the decisions in CIT Vs. Mahavir Aluminium Ltd.(2008) 297 ITR 77 (Del.) and CIT Vs. Ahmadabad New Cotton Mills Ltd. AIR 1930 PC 56 et al. Accordingly, this ground of appeal is partly allowed with a directed to the AO to adjust the amount of opening stock also for VAT after giving the appellant an opportunity to present the requisite details and documents in this regard." From the above, it is evident, although the CIT (A) rejected the contention of the assessee that adjustment of the valuation of inventory as per the method of accounting regularly employed by the assessee in order to include the amount of any tax, duty, cess or fee, VAT, being a tax, clearly fell ..... X X X X Extracts X X X X X X X X Extracts X X X X
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