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Income Tax Appellate Tribunal, “C” BENCH: KOLKATA
Before: Shri Mahavir Singh, JM & Shri M. Balaganesh, AM]
M/s. JSIS Iron & Steel India Pvt. Ltd. Vs. Assistant Commissioner of Income-tax, (PAN: AAACJ8302P) Central Circle-XXIII, Kolkata (Appellant) (Respondent) Date of hearing: 07.09.2015 Date of pronouncement: 29.10.2015 For the Appellant: S/Shri Anil Kochar & S. L. Kochar, Advocates For the Respondent: Shri S. S. Alam, JCIT ORDER Per Shri Mahavir Singh, JM:
This appeal by assessee is arising out of order of CIT(A)-Central-III, Kolkata in Appeal No. 177/CC-XXIII/CIT(A)/C-III/09-10 dated 27.09.2011. Assessment was framed by ACIT, CC-XXIII, Kolkata u/s. 143(3) of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2007-08 vide its order dated 31.12.2009.
The only issue in this appeal of assessee is against the order of CIT(A) in confirming the addition of undisclosed stock of Rs.1.05 cr. For this, assessee has raised following effective ground nos. 2 to 5: “2. For that the Ld. CIT(A) ought to have taken note of and properly considered the submissions of the appellant with regard to the total amount of undisclosed income admitted and declared by Sri Jodh Singh, head of the JIS Group u/s 132 (4) of the Income Tax Act, 1961 who had admitted the discrepancy found in production/stock u/s 133A at the appellant's factory at Ranigunge.
3. For that the observations made by the Ld. CIT(A) without taking note of and giving credit to the admission of the income made by Sri Jodh Singh in respect of the entire JIS Group was not proper and accordingly the CIT(A) erred in dismissing the appeal of the appellant on the alleged grounds.
4. For that the contention of the appellant that the undeclared production/stock found at the factory premises of the appellant at Ranigunge u/s 133A having been owned and accepted by Sri Jodh Singh and who conceded and accepted the same as belonging to him being head of the JIS Group and the amount realized on disposal of the same having been deposited in the Bank account, the source whereof was accepted by the A.O. in the assessment proceedings of the said Sri Jodh Singh, ought to have been accepted.
5. For that the Ld. CIT CA) erred in confirming the addition of Rs.1.05 crores as income of the appellant without considering the totality of factual aspect of action u/s 132 as well as u/s 133A of the entire group headed by Sri Jodh Singh.”
Briefly stated facts of the case are that the assessee filed its return of income on 30.10.2007 showing total income of Rs.2,77,780/-. A search and seizure operation u/s. 132 of the Act was conducted at the residence of Sardar Jodh Singh, the main person of JSIS Group and a survey u/s. 133A of the Act was carried out at the office
JSIS Iron & Steel India P. Ltd.. AY 2007-08 and factory premises of the assessee company on and from 16.11.2006. During the course of survey operation, certain books of account were impounded from where under casting of production/sale by 412.045 MT valued at Rs.1.05 cr. was detected. Further, during the survey at the factory premises physical stock of different products aggregating to 290.37 MT was found whereas as per RG-1, pages 19, 20 and 21 this stock amounted to 792.516 MT. Hence, there was difference of stock of finished goods of 502.146 MT the value of which was taken at Rs.1.25 crores. Accordingly, AO made addition of undisclosed investment in stock at Rs.1.05 cr. Aggrieved, assessee preferred appeal before CIT(A), who also confirmed the action of AO by observing as under: “8. I have carefully considered the rival submissions. This is a undisputed fact that the appellant does not rebut the fact regarding the under casting of production/sales of finished goods and the discrepancy in stock. He accepted such discrepancy. The appellant has mainly taken the plea that the undisclosed income arising out of under casting of production and sales & due to discrepancy in stock have already been included in the disclosure of Rs.4,05,00,000/- made by the head of the Group, Sardar Jodh Singh in his individual capacity. Its contention is that since the disclosure was made on behalf of the entire Group, the amount of Rs.l.25 crores added back as undisclosed income in the hands of the assessee-company, should have been considered as a part of the disclosure of Rs.4.05 crores as the assessee-company is also a group company. In the details of the disclosure an amount of Rs.2,19,05,000/- was on account of the deposits in new Account opened with the Corporation Bank after the date of search. The appellant contended, that the excess stock found in the course of survey has been disposed off and the sale proceeds were deposited in the new bank account opened with the Corporation Bank and offered to tax as the undisclosed income of Sardar Jodh Singh. In view of this the appellant contended that the addition of Rs. 1.25 crore is unwarranted since the entire amount has been disclosed and taxed in the hands of Sardar Jodh Singh.
Now the only question remains to be answered is whether the amount of Rs.1.25 crores relating to under casting of production/sales and discrepancy in stock belonging to the assessee-company was included in the total disclosure made by Sardar Jodh Singh in his own hands. In a statement recorded u/s.132(4) of the Act on 09.01.2007 Sardar Jodh Singh admitted an amount of Rs.5 crores to be the undisclosed income of the entire Group. However, he stated that the break-up of Rs.5 crores will be provided later. Further, Sardar Jodh Singh filed returns of income in his individual capacity disclosing only Rs. 4,05,000/- (4.01 crore for AYr. 2007-08). During the course of assessment proceedings another statement was recorded on 17.12.2008. There also he could not furnish the break-up of the disclosure made by him. Not only so, he also stated that the disclosure was made by him out of the undisclosed income in the business of cattle, cattle feed etc. The statement showing details of disclosure of Rs.4.05 crore reflects only the manner in which the undisclosed income offered for taxation was applied (cash seized, deposits in bank, share application, gifts made etc.). As far as the source from which this income was generated only a generic statement was given that these are out of undisclosed income in the business of cattle, cattle feed etc. So, in this statement nothing was mentioned about the appellant-company which obviously is not involved in the business of cattle and cattle feed. The survey in the appellant’s premises was conducted on 16.11.2006and Sardar Jodh Singh’s statement was recorded u/s. 132(4) on 09.01.2007 almost after two months. So it is obvious that the discrepancy in the sales JSIS Iron & Steel India P. Ltd.. AY 2007-08 and stock of goods was already known to him as on the date of the recording of statement. But nothing was mentioned by him to the effect that such disclosure includes the income generated out of such discrepancy in the case of the appellant. Even in the statement recorded on 17.12.2008 he did not mention anything on this issue. In view of the above I am not inclined to accept that the total disclosure of Rs. 4.05 crore made in the hands of Sardar Jodh Singh also included Rs.1.25 crore of the appellant company on account of understatement of production/sales and stock discrepancy.
The appellant further contended that in the details of disclosure an amount of Rs.2,19,05,000/- was on account of deposits in new account opened with the Corporation Bank after the date of search. It was further contended that the excess stock found in the course of survey has been sold and the entire sale proceeds deposited in the new bank account which has been disclosed in the hands of Sardar Jodh Singh.
I find that this contention of the appellant is not supported by even an iota of evidence. There is absolutely no evidence to suggest that the cash deposits made in the new account is out of the sale proceeds of undisclosed stock or undercasting of sale.
In view of the above I hold that the A.O. is fully justified in making the addition of Rs.1.25 crore and his action is confirmed. These three grounds of the appellant are hereby dismissed.” Aggrieved, now assessee is in second appeal before Tribunal.
We have heard rival submissions and gone through facts and circumstances of the case. The facts of the case are that as per impounded books of account and documents there is difference in sale/production of under-cast stock of 412.045 MT, which is valued at Rs.1.05 cr. The assessee during the course of assessment proceedings as well as during appellate proceeding before CIT(A) explained that the discrepancy in stock was explained that during the course of survey u/s. 133A of the Act with reference to the deposition of Sardar Jodh Singh u/s. 132(4) of the Act wherein Sardar Jodh Singh made a disclosure of Rs.4.05 cr. out of which disclosure for this AY 2007-08 was Rs.4,01,20,000/-. The assessee admitted the discrepancy but explained that this stock is covered in the disclosure made by Sardar Jodh Singh. Sardar Jodh Singh has given complete quantification of disclosure in his own case and also before the AO during the assessment proceeding, which reads as under: Sl. No. Amount Particulars 01 Rs. 7,000,000.00 Cash seized 02 Rs.370,000.00 Recurring deposit with bank 03 Rs.10,000.00 Opening of new Bank account with Canara Bank 04 Rs.3,500,000.00 Share application with HS Infrastructure P. Ltd. 05 Rs.3,500,000.00 Capital account with Sardar Jodh Singh Iswar Singh 06 Rs.21,905,000.00 New Account opened with Corporation Bank 07 Rs.682,500.00 Gift to Taranjit Singh 08 Rs.682,500.00 Gift to Haranjit Singh
JSIS Iron & Steel India P. Ltd.. AY 2007-08 It was explained that the breakup of Rs.4.05 cr. includes the deposits made in newly opened bank account with Corporation Bank at Rs.2,19,05,000/-, which was made out of the sale of undisclosed stock which includes this stock of Rs.1.05 cr. In this disclosure of Rs.2.19 cr. this disclosure includes the excess stock found during the course of survey from the premises of the assessee i.e. JSIS Iron & steel India Pvt. Ltd. We find that revenue during the course of search u/s. 132 of the Act found many papers and documents and valuables and also stock of various concerns, which includes this stock and assessee explained the same that this is undisclosed stock and accordingly, he made disclosure of Rs.4.05 cr. for the relevant AY 2007-08. This disclosure was made by Sardar Jodh Singh in his hand being main person of this group. The assessee explained before us now that this amount of Rs.2.19 cr. deposited in the newly opened bank account with Corporation Bank is a disclosure and over and above this, no further item was found. When a query was put to ld. Sr. DR, whether this amount of Rs.2.19 cr. is deposited after the date of search i.e. on 16.11.2006? Ld. CIT, DR fairly stated that yes, the amount was deposited in the month of February and March, 2007. Ld. Counsel for the assessee also drew our attention to copy of bank account of Corporation Bank, which was open on 20.02.2007 wherein cash to the tune of Rs.2,19,05,000/- was deposited. He also demonstrated before us now that these deposits are mainly made in February and particularly after 05.03.2007 till 31.03.2007. In view of the above facts and circumstances, we are of the considered view that neither the AO nor CIT(A) could prove that the assessee has earned over and above the income disclosed by the assessee at Rs.4,01,20,000/- in the relevant assessment year. And moreover there is no evidence before the department even though a search was conducted and various incriminating documents were seized, which clearly revealed that the income is to the extent of Rs.4,01,20,000/- only.
In view of the above facts and circumstances, we are of the view that this excess stock of 412.045 MT of steel i.e. finished goods found during the course of survey is properly explained by the assessee being deposits made in the Corporation Bank being sales out of the proceeds of unaccounted stock disclosed by the assessee as an income. This cannot be made as addition again because this tantamount to doubt addition. Hence,