C I T vs. M/S VINAYAK PLASTO

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JAIPUR BENCH, JAIPUR O R D E R D.B. INCOME TAX APPEAL NO.204/2011 Commissioner of Income Tax, Jaipur-II, Jaipur Vs. M/s Vinayak Plasto Chem (P) Ltd. DATE OF ORDER : 04/12/2013 HON'BLE MR. JUSTICE AJAY RASTOGI HON'BLE MR. JUSTICE J.K. RANKA Mr. R.B. Mathur, for the appellant BY THE COURT: (Per Hon'ble Ranka J.) This appeal under Section 260A of the Income Tax Act is directed against the order of the Income Tax Appellate Tribunal, Jaipur Bench, Jaipur (for short ITAT) dated 21.11.2008 and is relevant for the block period 1.4.1995 to 20.3.2002. 2. The brief facts emerging on the face of record are that search operation came to be carried out by the authorised officers of the Income Tax Department on 20/03/2002 at the residential and business premises of Vaidya Shri Narayan Das Swami at Phulera. During the course of search, incriminating documents in the nature of computerized project report was found and seized, which pertained to the respondent-assessee, as per Annx.A-23 pages 1-12 of the Panchnama dated 20.3.2002. On the basis of the said proceedings, notice under Section 158BD read with Section 143(3) of the Income Tax Act came to be issued requiring the assessee-respondent to file a 2 return as contemplated under Section 158BD read with Section 158BC. The assessee submitted a return for the block assessment in form No.2B declaring nil income. It is the case of the respondent that the assessee is a private limited company and was incorporated on 12.1.1996 with an object of manufacturing cables, conductors, electrical transformers etc. and is in the same business since 1997 and has been submitting its return of income regularly. It revealed from the Annx.A-23 seized from the premises of Vaidya Narayan Das Swami and as per the project report it transpired that the assessee had prepared a project report for availing loan from the financial institutions on plot of land bearing F- 551-A, Road no.6 VKIA, Jaipur and thereafter, after initial purchase, work shed building construction was made and respondent assessee started production from 15.1.1997. On being queried about the project report, the assessee replied that the assessee to obtain loan got prepared the project report for submitting to various financial institutions from where the assessee was willing to obtain loan namely Rajasthan Financial Corporation (RFC) and/or State Bank of India and/or SBBJ and it was submitted that it is a tentative project report so that the company may obtain a loan and effectively make alteration and modification and construction necessary for the industry, which was needed by it. On being queried to prove the source of income and the investment as per 3 the project report is concerned, it was submitted that whatever investment has been made is duly reflected in the books of accounts. However, the books of accounts have been lost and even an intimation report was submitted with the Vishwakarma Police Station. Further, in the alternative, it was submitted that it contains only projection of the figures and do not suggest that assessee has made any investment or incurred cost to that extent. In the last alternative, it was also submitted that the project report did not pertain to it and merely because the name of the assessee finds place, there is neither signatures of any of the Directors or relatives on these papers nor the date has not been mentioned and even the authenticity of the report is doubtful. However, the assessing officer was not satisfied and dis-satisfied with the explanation offered by the assessee an addition of Rs.36,21,692 was made as per the figures mentioned in the project report. 3. On the objection of initiating proceedings under Section 158BD of the Act that the proceedings have wrongly been initiated, the assessing officer held that the proceedings have been validly initiated and accordingly assessment came to be finalised. 4. Dis-satisfied with the assessment order, an appeal came to be preferred before the CIT (A) on both the issues namely challenging the proceedings under Section 158BD so also the aforesaid addition of 4 Rs. 36,21,692/-. However, in so far as initiation of proceedings under Section 158BD is concerned, the CIT (A) came to the conclusion that the order is within jurisdiction. In so far as the addition made on the basis of project report is concerned, after considering the entire factual matrix and explanation offered by the assessee, the CIT (A) came to the conclusion that there is no justification for the said addition and accordingly deleted the said addition. 5. Dis-satisfied with the said order of the CIT (A), an appeal came to be preferred by the revenue before the Tribunal while cross objections were filed by the respondent-assessee. The revenue challenged the deletion of the addition on the basis of the project report to the extent of Rs.36,21,692/-, the assessee challenged the initiation of proceedings under Section 158BD. 6. The Tribunal after considering the entire issue came to the conclusion that not only the addition has rightly been deleted by the CIT (A) amounting to Rs.36,21,692/-, but also accepted the contention on behalf of the assessee that the proceedings initiated under Section 158BD was bad and even quashed the assessment. It is this order of the Tribunal, which has been assailed before us. 7. Shri R.B. Mathur, learned counsel for the revenue submitted that the Tribunal has in a summary manner come to the conclusion that proceedings under 5 Section 158BD is not proper without bringing any material on record. He contended that the incriminating document namely project report having been found in the search, an assessing officer could validly form his opinion on such project report and proceedings under Section 158BD could have been initiated. He would further contend that the Tribunal has erred in law in quashing the assessment. He would further contend that the proceedings under Section 158BD have rightly been initiated as incriminating documents were found in a search on the premises of Vaidya Narayan Das Swami, which pertained to the respondent and the assessing officer assessing Vaidya Narayan Das Swami could not have acted upon the said incriminating documents as it did not pertain to him and related to the present assessee and only assessing officer having jurisdiction could have initiated proceedings under Section 158BD and which was rightly initiated. He would further contend that there had been proper basis and prima facie evidence to initiate the proceedings under Section 158BD and only prima facie basis has to be formed and once the incriminating document relating to the assessee, may be they were signed or not, does not make any difference. The assessing officer having the jurisdiction over the assessee had no option except to initiate the said proceedings. 8. He would further contend that the assessee got prepared the project report and naturally acted 6 upon it and the figures did not match/tally with the figures shown in the return of income over the years. He would further contend that the books of accounts were stated to be lost when queries were raised to produce the books of accounts. If the said figures were part of books of accounts and the assessee came out with the plea that the books had been lost and just to create evidence requisition slip of one of the police station was produced, which is insufficient to come to the said conclusion. The Tribunal ought not to have decided the issue on merits and to give its own conclusion and in deleting Rs.36,21,692/- on merits. 9. He would further contend that none of the figures in the project report matched with the figures even as per the return of income and/or profit and loss account/balance-sheet, which were on record over the years. He contended that substantial questions of law arise out of the order of the Tribunal for consideration of this Court. 10. We have heard the learned counsel for the appellant/revenue and have perused the impugned