9911796707
TMI Blog1990 (2) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... dice to Ground No. 3, the learned CIT(A) erred in not recording any finding on the appellant's contention that the real value of the closing stock was much less than that adopted by the Departmental valuer. 5. The learned CIT(A) erred in confirmed the interest under s. 217 amounting to Rs. 1,08,968 charged by ITO. Your appellant submits that the interest should have been waived and prays that the same be deleted." 2. In asst. yr. 1983-84 the assessee has challenged the disallowance of Rs. 18,200 being salary to Directors made by the ITO which was confirmed by the CIT(A). Thus this ground is similar to ground No. 1 in asst. yr. 1982-83. 3. Ground No. 1 for Asst. yrs. 1982-83 1983-84 The salary has been paid to two Directors at the rate of RS. 9,000 each. This has been disallowed by the ITO on the ground that no such salary was paid in the past. Further the assessee has not established the necessity for payment of such salary to the Directors. It has been further mentioned in the assessment of order that no resolution authorising such payment of salary was passed by the Board of Directors, in the absence of which such salary payment cannot be allowed. 3.1 Our attenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. In order to examine the genuiness of the aforesaid purchase a statement of Shri Chandulal M Patel was recorded by the ITO on 27th March, 1985. Shri Patel has agreed in the aforesaid that he had sold the aforesaid goods to the assessee company. The ITO, however, did not accept the genuineness of the aforesaid purchase on the ground that Shri Chandulal Patel could not satisfactorily explain the source from which the same had been acquired. Shri Chandulal Patel is a petty dealer in precious and semi precious stones and has income by way of detail on such transactions. The ITO has observed that a petty dealer could not have been held 190 Kg. Of rough emeralds and, therefore, he did not accept the source of acquisition of such rough emeralds by Shri Chandulal Patel. It was further observed by him that the payment received by Shri Patel from the aforesaid company by cheque was encashed on the same date, which, according to the ITO, further proves that the aforesaid goods were not in fact sold by Shri Patel to the assessee company. The CIT(A) observed that in the normal course the transaction would have been accepted, as genuine on the basis of statement of Shri Chandulal Patel. Howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipt of the said sum of Rs. 19,000 by way of cheque. The mere fact that Shri Chandulal Patel is a petty dealer and had withdrawn the amount of Rs. 19,000 from his bank account on the same day when he received the cheque cannot amount to an evidence to prove that the said amount of Rs. 19,000 was given back by Shri Chandula Patel to the assessee company. There is no material or evidence on records to support the wrong suspicion formed by the learned ITO and the CIT(A) in their respective orders. The learned D.R. has alsonot dispted the fact that Shri Chandulal Patel has been treated as a trader in case of M/s. Rasik Jewellers, Bombay. The mere fact that Shri Patel could not, according to the ITO, satisfactorily explain the source where from he got these rough emeralds cannot result in disallowance of the purchase made by the assessee from him. In view of the fact that the supplier had duly confirmed having supplied the aforesaid goods to the assessee and has also confirmed the receipt of a sum of Rs. 19,000 being the purchase price for the aforesaid goods purchased by the assessee company, the disallowance made by the ITO and confirmed by the CIT(A) deserves to be deleted. Accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further observed that these 300 kgs rough emeralds have subsequently been shown as purchased on 26th April, 1982, after the date of search, at the rate of Rs. 75 per kg. And have again been shown as returned on 1st July, 1982. He further mentioned in the assessment order that it is not understood why the assessee has shown these gods as having been purchased within the accounting year relevant to asst. yr. 1983-84 and then shown as against returned the first day of the accounting year relevant to asst. yr. 1984-85. According to the ITO the aforesaid circumstances indicated that the 300 kg. Of rough emeralds found on the date of search and valued by the departmental valuer at Rs. 2,98,000 are not the same as were imported by M/s. Kirtikumar Co. He, therefore, treated the aforesaid sum of Rs. 2,98,000 as unexplained assets found in the possession of the assessee and accordingly taxed the same in asst. yr. 1982-83. 5.2 The CIT(A) confirmed the aforesaid addition and has held that the 300 kg. of rough emeralds found during the course of search were different from the goods which had been claimed to have been imported by M/s. Kirti kumar Co. M/s. Kirtikumar Co is a sister concer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid facts once again to the notice of the then IAC(Asst) The IAC, after considering the entire evidence and material existing on records was again fully satisfied about the correctness of the aforesaid explanations and, therefore, while passing the order under s. 132(5) no addition in respect of the value of aforesaid 300 kgs. of rough emeralds received on jangad from M/s. Kirtikumar Co. Was made. It as further submitted that the proceedings of search were simultaneously conducted at the premises of M/s Kirtikumar Co. on the same date and these 300 kgs. Of rough emeralds imported by them were not found at their business premises. The fact that they had sent the aforesaid emeralds on approval basis to the appellant company was corroborated by them during the course of search and is also verifiable from their assessment records. Enquiries were made by the assessing authority of M/s. Kirtikumar Co. And this fact is verificable from the enquiries made by the assessing authority of that concern at Bombay. As regards entries in the books of account it was pointed out by the learned counsel that question of making any entries of the gods received on jangad does not arise as the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant firm from M/s Kirtikumar Co. Which is reproduced hereunder: 1. This stock of 300 kg emerald was found in possession of Devanbabu at Cambay on 26th Feb., 1982. The date of search but was not found entered in the assessee's books including the stock book. 2. The assessee explains that the same goods were received from Kirti kumar Co. Bombay on jangad on 25th Oct., 1981. 3. This emerald of 300 kg. Was purchased by the assessee from M/s. Kirtikumar Co. On 26th April, 1982 at Rs. 2,85,000. This transaction appear to be one to regularise the unaccounted stock of 300 kg. Which was found from the assessee's premises at Cambay. This purchase is shown in the stock book of Devanbabu of 81-82 at entry No. 37. Kirtikumar Co. Has issued invoice on 26th April, 1982 on the letter pad, copy is filed. 4. This emerald of 300 kg. Valued at Rs. 2,85,000 was returned by the assessee to Kirtikumar Co on 2nd July, 1982. In assessee's stock register for 1981-82 this stock is shown at entry No. 25. In remark column it is mentioned goods return 1st July, 1982. The voucher of Devanbabu mentions the date of goods return as 2nd July, 1982 and not 1st July, 1982. Kirtikumar Co. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aj Jems. It is also strange that there was an outstanding balance of Rs. 2,85,000 in the assessee's account in the books of account of Kirtikumar Co. For S. Y. 2038 as per the aforesaid company of accounts. Such strange coincidence of subsequent purchase, purchase returns and again selling of the same goods at the same price to M/s. Taj Jems create strong suspicion about the genuineness and correctness of this aforesaid transactions. The goods found during the course of search were not the same which were imported by Kirtikumar Co. And which are stated to have been sent on approval basis to the assessee company. He further submitted that the 300 kgs of rough emeralds of Kirtikumar Co. were of Brazilian origin as per the purchase invoice appearing at page 165 of the paper book whereas the jangad memo found during the course of search, which appears at page 14 of the paper book does not show that the rough emeralds found during search were of Brazilian origin. The learned D.R., therefore, strongly urged that in view of the detailed reasons recorded in the orders of the ITO and the CIT(A) the aforesaid addition deserves to be confirmed. 5.5. We have carefully considered the ri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . This bill was shown by me for verification of Shri A.N. Modi, ADI (Intelligence), Ahmedabad during the course of search of the above stated bungalow on 26th Feb., 1982. From the aforesaid statements it is clear that this explanation was given by the Director of the appellant company during the course of search in his statements recorded under s. 132(4) and he also produced the delivery memo dated 25th Oct., 1981 at the spot on the first day of the search on 26th Feb., 1982. The contents of such documents found during the course of sudden search and the facts stated in the aforesaid statements deserves weightly consideration. Keeping in view the aforesaid evidence in the form of statement on oath under s. 132(4) and the jangad memo, the authorised officers were apparently satisfied about the nature of possession and source of the stock of aforesaid rough emeralds found during the search and, therefore, the same was not seized. The same matter was examined during the course of proceedings under s.132(5) by the IAC (Asst.) He issued a show cause notice dated 17th May, 1982, inter alia, requiring the assessee to prove the nature of possession and the source of acquisition of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emeralds for Rs. 2,85,000 by Kirtikumar Co. And the subsequent return thereof on 2nd July, 1982 to them have also been confirmed by Kirtikumar Co. The only reason on the basis of which the aforesaid addition has been made by the ITO and confirmed by the CIT(A) is that the aforesaid quantity of rough emeralds could not have been carried in a car according to them and the subsequent entries of its purchases by the assessee and return thereof to Kirtikumar Co. And subsequent transaction made by Kirtikumar Co. with respect to the aforesaid 300 kgs. Of rough emeralds created serious doubts about in the genuineness of this transaction. The strange coincidence or doubt about the fact that the goods in question could not have been carried in a car cannot amount to evidence or proof admissible in law justifying the rejection of the valid explanations given by the assessee which was consistently the same rights from the inception, i.e., from the date of the search. The assessee's contention is clearly supported by statements recorded during the course of search and by the jangad memo produced during the course of search. The authorised officers were apparently satisfied about the na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uttal of the report given by the departmental valuer can be submitted. 6.2 The CIT(A) observed that the valuation made by the departmental valuer, who is also an approved valuer, cannot be said to be arbitrary or excessive or unrealisitic unless the assessee points out some prima facie evidence. He therefore, did not accept the assessee's request for getting the made by the ITO. The CIT(A) has not at all specifically discussed the addition of Rs. 22,614 made with respect to seized assets at Bombay. He, however, confirmed the entire addition made by the ITO. 6.3 The learned counsel for the assessee submitted that the appellant had furnished a detailed statement explaining the stock position found on the date of search compared with stock register and movement of goods on jangad. The appellant also produced the stock register before the ITO. Most of the stocks represent items of opening stock and, therefore, there is no question of any discrepancies. It was further submitted that the accounts for the year ended on 30th June, 1981 were duly audited on 4th Dec., 1981. the notes to the audited accounts clearly show the position of opening stock, purchases made and losing stock, et ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equest was also made to the learned CIT(A) in the two written submissions in the month of January, 1987. The refusal to accept such legitimate requests by the learned authorities below is contrary to the provisions of law as also contrary to all canons of natural justice. 6.4 the learned counsel for the assessee also briefly explained the aforesaid items found and seized at Cambay as under: Addition made in order Remarks 120 Difference is on account of weighment separated samples. However, total cts. tallies. 4,660 Bill dated 10th Feb., 1982-this was not entered in stock Register on 26th Feb., 1982. 1,615 Those items are not available in PM/VR 5,400 Tallies with items of Rubies 750 Bill Dt. 10th Feb., 1982-This was not entered in stock Register on 26th Feb., 1982 10,000 No specific description of goods- addition seems to be on estimate base. 1,03,360 Highly over valued-according to appellant it should be reduced and its value is approx. Rs. 10,000 only. 1,25,905 The learned counsel for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from M/s Taj Jems Bombay on 16th Feb., 1982. He, therefore, urged that the addition confirmed by the CIT(A) should be sustained. 6.5 we have carefully considered the rival submissions and have also gone through the relevant paragraphs of the assessment order and the order of the CIT(A). We have also carefully examined the various papers which to our attention was drawn during the course of hearing. As regards the addition of Rs. 22,614 in Respect of unexplained items seized Bombay the ITO has not stated a word that the assessee was required to explain these items totalling to Rs. 22,614 out of stocks seized at Bombay. It, therefore, appears that the said addition has been made without providing any reasonable opportunity to the assessee. This view is further supported by the fact that the CIT(A) in his order has not discussed about the aforesaid addition of Rs. 22,614 made with regard to the stocks found and seized at Bombay. The assessee has submitted general submissions about the over valuation of the entire items of stocks seized by the department. The assessee also made general submissions that all the stocks found during the course of search are verifiable from the stock re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r revaluation of the stocks as the departmental valuer had valued the stock exorbitantly high. He again repeated his request for providing him facility to bring his own registered valuer for valuation of the stocks seized by the department. Even after completion of the order under s. 132(5), the assessee once again wrote letter dated 27th July, 1982 to the IAC, stating that in the interest of fairness and justice the assessee's request for revaluation of the stocks should be allowed. Such repeated requests made by the assessee during the investigation stage with the DDI and during proceedings under s. 132(5) and under s. 143(3) were not accepted by the departmental authorities and the addition was made on the basis of valuation made the CIT(A) also in his written submission dated 7th January, 1985 and in the second written submission that it should be accorded permission and facilities to get the seized stocks valued by a competent registered valuer. It is now well settled law that where an authority makes an order in exercise of a quasi-judicial function it must observe rules of natural justice in the conduct of the enquiry. The ITO before placing reliance on the report of the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... directed to provide the facility to the appellant company to get all the items totalling to Rs. 1,48,519 which are lying amongst the seized stocks with the department which were seized from Cambay and Bombay, valued by any registered valuer or valuers as may be chosen by the assessee and will also grant opportunity to the assessee to cross-examine the departmental valuer with help of the registered valuer of the assessee so that a correct estimate of the value of aforesaid seized items, which have been added in the assessment as income of the assessee, may be determined. Thereafter the assessing authority will consider the assessee's explanation that all those items are verifiable from the stock-register and the movement of goods through jangad, etc., from the various parties. The ITO will also consider the explanations which may be given by the assessee with respect to each of the above referred seized items to prove that those are not unaccounted items. The ITO will thereafter make addition of the redetermined value only in respect of those seized items which he can conclusively prove as items of unaccounted stocks found and seized by the department. Ground Nos. 3 and 4 are, ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
