C.I.T. BIKANER vs. MOHD. ISMAIL

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ITA/7/2014HC RajasthanRJHC01018294201425 May 20166 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the findings of the CIT(A), as affirmed by the ITAT, were findings of fact arrived at after due consideration of the material on record and the settled position of law. Regarding cash credits, both the CIT(A) and ITAT concurrently found them to be properly explained by the assessee, and the AO made no efforts to prove them as non-genuine. Concerning excess stock, the CIT(A) found the AO's valuation method unjustified and determined the value of excess stock after considering individual item valuations. For household expenses, the CIT(A) noted no evidence was found during the search to suggest expenditure beyond disclosed amounts, and the AO's estimation was outside the purview of block assessment. Regarding interest under Section 158BFA, the CIT(A) observed that the delay in providing seized materials was not attributable to the assessee. Consequently, no substantial question of law arose for consideration.

What were the facts?

A search and seizure operation under Section 132(1) of the Income Tax Act, 1961, was conducted at the business premises of M/s. Popular Iron Store, a proprietorship of Shri Mohd. Ismail (the assessee). Books of accounts were seized, and the assessee's statement was recorded under Section 132(4). Following a notice under Section 158BC, the assessee declared undisclosed income of Rs.1,21,500/- for the Assessment Year 2000-01. The Assessing Officer (AO) determined the total undisclosed income at Rs.47,81,150/-. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the assessee's appeal, deleting some additions but confirming an addition of Rs.2,21,013/- for excess stock. Both the assessee and the Revenue appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT allowed the assessee's appeal and partly allowed the Revenue's appeal.

What were the issues?

1. Whether the Tribunal erred in confirming the deletion of Rs.42,45,030/- made on account of cash credits and interest thereon under Section 68 of the Act? The assessee contended that the cash credits were reflected in the balance sheet and regular books of accounts, and their nature and source were explained. The Revenue argued that the ITAT erred in confirming the CIT(A)'s deletion. 2. Whether the Tribunal erred in confirming the deletion of Rs.1,83,563/- out of Rs.4,04,573/- made on account of excess stock found during the search? The assessee argued that the AO's valuation method was unjustified. The Revenue contended that the ITAT erred in confirming the partial deletion. 3. Whether the Tribunal erred in confirming the deletion of Rs.1,58,246/- on account of inadequate household expenses? The assessee argued that no evidence was found during the search to suggest expenditure beyond disclosed amounts. The Revenue contended that the ITAT erred in confirming the deletion. 4. Whether the directions issued by the CIT(A) for levy of interest under Section 158BFA w.e.f. 1.1.01 onwards are justified? The assessee argued that the delay in providing seized materials should not be attributed to them. The Revenue contended that the interest levy is justified.

Which sections of the Income-tax Act were involved?

Section 132(1),Section 132(4),Section 158BC,Section 143(3),Section 68,Section 158BFA

AI-generated summary — verify with the full judgment below

COMMISSIONER

OF INCOME

TAX-BIKANER

VS. SH.MOHD.ISMAIL Dated:- 25.5. 16. HON'BLE MR.JUSTICE SANGEET LODHA HON'BLE MR.JUSTICE KAILASH CHANDRA SHARMA Mr.Ravindra Purohit, for the appellant.

1.

This appeal is directed against the order dated 31.7.13 of Income Tax Appellate Tribunal (ITAT), Jodhpur Bench, Jodhpur, whereby the cross appeals filed by the Revenue and the assessee against the order of the Commissioner of Income Tax (Appeals) [CIT(A)], Bikaner, dated 22.10.03, stand disposed of.

The appeal preferred by the assessee has been allowed and the appeal of the Revenue is partly allowed.

2.

The facts relevant are that pursuant to warrant of authorisation under Section 132(1) of the Income Tax Act, 1961 (for short “the Act”), search and seizure operation was carried out in the business premises of M/s. Popular Iron Store, Gajner Road, Bikaner, a proprietorship concern of Shri Mohd. Ismail. During the course of search, stock found was inventorised, the books of accounts were seized, panchnama was prepared and the statement of Mohd. Ismail, the assessee was recorded under Section 132(4) of the Act. Pursuant to the notice issued under Section 158BC, the assessee furnished return for the block period showing undisclosed income of Rs.1,21,500/- in the Assessment Year 2000-01. The Assessing Officer passed the assessment order under Section 158BC (c)/143(3) of the Act determining yearwise undisclosed income of the assessee quantified at Rs.47,81,150/-. Aggrieved thereby, the appeal preferred by the assessee has been partly allowed by the CIT (A) whereby the various additions made by the AO were deleted, however, the addition of Rs.2,21,013/- made by the AO on account of excess stock found as against the stock declared by the assessee at Rs.1,21,500/- was confirmed. In these circumstances, the assessee as also the Revenue both preferred

the appeal before the ITAT. The ITAT while relying upon the reasoning given in Jakir Hussain's case decided by common order, allowed the appeal preferred by the assessee and partly allowed the appeal preferred by the Revenue.

3.

In Jakir Hussain's case, the appeal preferred by the Revenue being the Appeal No.8/14 already stands dismissed by this court as withdrawn vide order dated 10.5.16 inasmuch as the tax effect therein did not exceed the monetary limit of Rs.20 lacs as prescribed under Circular No.21/2015 issued by the Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, Government of India, New Delhi. That apart, yet another appeal preferred by the Revenue in Mohd. Yasin's case decided by the common order of the ITAT impugned in the present appeal, also stands withdrawn inasmuch as, the tax effect therein also less than the monetary limit prescribed.

4.

Learned counsel would submit that the ITAT has also erred in confirming the order of the CIT (A) deleting addition of Rs.42,45,030/- made on account of cash credits and interest thereon under Section 68 of the Act of 1961. Learned counsel submitted that the ITAT has erred in confirming the order passed by the CIT (A) deleting addition of Rs.1,83,563/- out of the addition of Rs.4,04,573/- made on account of excess stock found during the course of search. Learned counsel further contended that the ITAT has erred in confirming the order of CIT (A) deleting the addition of Rs.1,58,246/- on account of inadequate household expenses. Learned counsel submitted that the directions issued by the CIT(A) for levy of interest under Section 158BFA w.e.f. 1.1.01 onwards is not justified.

5.

Indisputably, the cash credits and relatable interest are shown in the balance sheet as also in the regular books of accounts for the Assessment Year 1990-91 to 2000-01. On being asked, the assessee had explained the nature and source of credits. The CIT (A) after due examination of the material on record categorically observed that no efforts were made by the AO for proving the credits as non genuine. The CIT (A) and the ITAT have concurrently found that the credits aggregating Rs.42,45,030/- are properly explained by the assessee.

6.

Regarding the addition on account of excess stock found during the course of search , it is to be noticed that the search party made physical inventory of the stock on 6.8.99 but the rate was not written in the inventory list of different items. The stock consisted of various items viz. Pipe, iron, iron scrap, iron sheet, railway girder scrap, rail line scrap sheet, scrap etc. which was valued by the AO adopted average rate of Rs.15/- per kg. on the basis of three bills which relate to pipes only. After due consideration, the CIT (A) arrived at the finding that it would have been both scientific and correct if the items found during the course of search are valued individually on the basis of the individual bills after proper identification. After due consideration of all relevant aspects, the CIT (A) arrived at the finding that the basis for valuation adopted by the AO is unjustified. The CIT (A) after taking into consideration the stock of the individual items determined the value of the excess stock. The finding arrived at by the CIT (A) has been affirmed by the ITAT.

7.

Coming to the addition made on account of estimated household expenses, the CIT (A) found that there was no evidence or material found during the course of search, which could suggest that any expenditure over and above disclosed was incurred by the assessee. The CIT (A) observed that the AO has not made the assessment of the household expenses on the basis of the documents seized in search but made a case of estimation of household expenses which is outside the purview of block assessment. The issue with regard to the addition on account of estimated household expenses was examined by the CIT(A) thread bear keeping in view the position of the law settled by various decisions. The finding arrived at by the CIT(A) has been affirmed by the ITAT, observing that no addition de hors any evidence found during the search can be made in block order. The ITAT found that the expenses required to meet the assessee's household requirements have been duly explained.

8.

Regarding the charging of interest under Section 158BFA, the CIT(A) after due examination of the proceedings found that the assessee had made an application on 11.4.2000 for supply of copies of statement, inventory of stock and other seized materials which were made availabe to him in the month of November, 2000. In this view of the matter, the CIT (A) observed that the period upto the December,2000 should not be treated as period of delay caused cannot be attributed to the assessee. The findings arrived at by the CIT(A) has been affirmed by the ITAT.

9.

In the considered opinion of this court, the findings arrived at by the CIT(A), affirmed by the ITAT, discussed hereinabove, remain findings of facts arrived at after due consideration of the material on record as also the settled position of law and thus, no substantial question of law arises for consideration of this court in this appeal.

10.

No other point has been pressed by the counsel for the appellant.

11.

In the result, the appeal is dismissed. (KAILASH CHANDRA SHARMA),J. (SANGEET LODHA),J. Aditya/

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