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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI NABIN KUMAR PRADHAN
PER SAKTIJIT DEY, J.M.
Instant appeals by the assessee are directed against the separate orders dated 6th March 2014, passed by the learned Commissioner (Appeals)–I, Thane, for the assessment year 2006–07.
./2014 Grounds raised by the assessee are as follows:–
2 Rajan Jaju
“1. The Hon. CIT (A) erred in confirming addition of ` 23,79,954/- on account of unexplained investment in excess stock found during the course of survey u/s 133A– (a) by solely relying upon the statement recorded in the course of survey action which was without any corroborative evidence. (b) not appreciating that the appellant at the time of survey was mentally unstable as he was suffering from chronic alcoholism which had resulted in factually incorrect statement. (c) without examining the actual existence of such "excess stock" as per impounded records.”
Brief facts are, the assessee an individual is engaged in the business of manufacturing and sale of grey cloth through his proprietor concern Rajan Textile. A survey under section 133A was carried out in the business of the assessee on 18th January 2006. As alleged by the Department, during the survey, certain records were impounded which revealed existence of excess stock. During the survey, a statement was also recorded from the assessee wherein he admitted to the discrepancies in stock. As the assessee did not file any return of income for the impugned assessment year, the Assessing Officer exercising his power under section 147 of the Ac t, re–opened the assessment by issuing a notice under section 148. In response to the notice issued under section 148 & 142(1), as alleged by the Assessing Officer there was no response from the assessee. As the assessee did not comply to the notices issued, the Assessing Officer finally proceeded to complete the assessment under section 144, on the basis
3 Rajan Jaju of material available on record. He noted that as per the information available from the survey action, discrepancies were found in physical stock. He observed, as per physical stock found at the time of survey, it was valued at ` 60,36,487, whereas as per the books of account, the stock was shown at ` 36.56.530. He also noted that the assessee in the statement recorded under section 133A, on 18th January 2006, had accepted the discrepancies in stock. Accordingly, he proceeded to complete the assessment by adding the excess stock found as per the physical verification amounting to ` 23,79,954. Of–course, the Assessing Officer also made some other additions with which we are not concerned in the present appeal. Against the assessment order so passed, assessee preferred appeal before the learned Commissioner (Appeals).
3. The learned Commissioner (Appeals), however, confirmed the addition made on account of excess stock amounting to ` 23,79,954.
Learned Authorised Representative submitted before us, the assessee during the relevant period was mentally unstable as he was suffering from chronic alcoholism and undergoing treatment. He submitted, for the same reason, he was not able to attend to his normal activity as a result of which assessment was completed ex– parte due to non–compliance. He submitted, before the learned
4 Rajan Jaju Commissioner (Appeals) also, the appeal was filed with delay and learned Commissioner (Appeals) appreciating the physical and mental condition of the assessee condoned the delay. The learned Authorised Representative submitted, as the assessee was not able to properly represent his case by verifying the impounded document to find out whether in reality there is difference in stock, he requested for one more opportunity to verify the same and represent his case accordingly before the Assessing Officer.
Learned Departmental Representative, however, justified the addition made by relying upon the observations of the Assessing Officer and the learned Commissioner (Appeals). However, he did not object to one more opportunity being granted to the assessee to explain his case before the Assessing Officer.
We have considered the submissions of the parties and perused the material available on record. It is evident that in spite of statutory notices being issued by the Assessing Officer, the assessee did not comply with the same by appearing before him. As a result of which the assessment was completed ex–parte on the basis of material found as a result of survey. We have noted that the entire addition on account of discrepancies in physical stock is on the basis of assessee’s statement recorded at the time of survey as well as the valuation
5 Rajan Jaju made of the physical stock at the time of survey. The fact that the assessee was suffering from chronic alcoholism which has made him mentally and physically unstable and the same has been accepted by the learned Commissioner (Appeals). In our view, due to the aforesaid factor, the assessee most probably was prevented from properly complying before the Departmental Authorities either himself or by properly instructing his authorised representative as he was not in a proper physical and mental frame to assist his authorised representative. Considering the aforesaid fact and taking a lenient view, we are inclined to restore the matter back to the file of the Assessing Officer for affording an opportunity to the assessee to explain the discrepancies in stock found at the time of survey. We, therefore, set aside the impugned order of the learned Commissioner (Appeals) in so far as it relates to addition made on account of stock discrepancies and restore the matter back to the file of the Assessing Officer for deciding afresh after due opportunity of being heard to the assessee. We further make it clear that the assessee must comply to the notices issued by the Assessing Officer and co–operate in finalising the proceedings.
In the result, assessee’s appeal is allowed for statistical purposes.
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ITA no.4460/Mum./2014
In this appeal, assessee has challenged imposition of penalty under section 271(1)(c) on the basis of addition made on account of discrepancies on stock in the quantum proceedings.
2. We have considered the submissions of the parties and perused the material available on record. While deciding assessee’s appeal in ITA no.4461/Mum./2014, we have restored the issue relating to addition made of ` 23,79,954, on account of stock discrepancies and directed the Assessing Officer to decide afresh. As the addition on the basis of which penalty was imposed under section 271(1)(c) no longer exists, the penalty, for the present, cannot survive. Accordingly, the impugned order of the learned Commissioner (Appeals) confirming imposition of penalty under section 271(1)(c) is set aside.
In the result, ITA no.4461/Mum./2014 is allowed for statistical purposes and ITA no.4460/Mum./2014 is allowed. Order pronounced in the open Court on 19.08.2016