Judgment:
ORDER
R. M. MEHTA, A. M. :
This is an appeal directed against the order passed by the CIT(A) raising for our consideration various issues, the first of which is the addition of Rs. 1,74,956 by resort to the provisions of S. 145(2).
2. The assessed is a registered firm engaged in the business of purchase and sale of iron goods. Its previous year ends on 31st May, 1986. There were search and seizure operations on 30th May, 1986 at the business premises and the residential premises of the partners pursuant to such operations being carried out on the premises of the sister concern, M/s. Pramod Kumar Vinod Kumar, Loha Mandi, Agra. During these operations, the stock was quantified and valued by the authorised officers with the assistance of one Shri S. K. Mittal at a figure of 62.285 MT (see inventory pages 7 & 8 of Paper Book). Later on, in June 1986, the said Shri Mittal sent a valuation report to the Assessing Officer (pages 9 and 10) whereby he recalculated the weight at a figure of 104.642 MT. This figure underwent a further change in March, 1989 when Shri Mittal sent another valuation report to the ITO revising the weight to 97.117 MT. The Assessing Officer in the subsequent assessment framed on 22nd March, 1990, however, adopted a higher figure of 110.130 MT. To the aforesaid figures came to be added another 10 MT which the assessed explained was its stock lying in godown located Ghas-Ki-Mandi, Agra, which was under the control and possession of the sister concern namely, M/s. Pramod Kumar Vinod Kumar. As against the aforesaid figures, the stock as per the stock register maintained by the assessed was 77.490 which included 10 MT stated to be lying at the Ghas-Ki-Mandi godown.
3. On being asked to explain the aforesaid figures, the assessed made detailed submissions which can be summarised as under :
(i) That stock found physically at the time of search was less than that recorded in the stock register.
(ii) That Shri S. K. Mittal was not an Approved Valuer, vis-a-vis the items in question.
(iii) That the valuation report drawn up by him suffered from innumerable defects regarding weight and rates.
(iv) That the stock found and weighed on the date of search be taken as the correct figure.
(v) That is was not allowable under the provisions of law to change the weight subsequent to the quantification and valuation carried out on 30th May, 1986, viz., the date of the raid.
(vi) That the assessed dealt in old and depreciated rails and it was not proper to evaluate them on the basis of any manual or other approved rates which were applicable to standard and high quality material.
4. The Assessing Officer rejected the arguments advanced and held in the ultimate analysis that since the stock found at the premises was more than that reflected in the stock register the provisions of S. 145(2) were applicable. According to him, the authorised officers had not physically weighed the entire stock and their figure was only a rough estimate. He was also of the view that the stock physically counted and weighed by the authorised officers could be replaced by a different figure subsequently. He also observed that rails were manufactured in India by 'Tata' only and by applying the 'ISI for structural Engineers' he proceeded to recalculate the various figures to arrive at the addition impugned. As regards the items other than rails, namely, angles and sheets, he took the figures as per the stock register which reflected a larger quantity than the one found at the time of the search.
5. Being aggrieved, the assessed came up in appeal before the CIT(A) who upheld the action of the Assessing Officer on the following main grounds :
(a) That if only one company, namely, Tata was manufacturing rails in the country then it was only the standard weight which was to be taken and not any other on an estimate.
(b) That deterioration in the weight of rails was not substantial and the Assessing Officer himself had given the necessary deduction on account of depreciation.
(c) That in case there was an 'apparent mistake' in the inventory prepared at the time of search, then it could be modified subsequently on the 'basis of standard weight of rails manufactured by only one company in India.'
6. It is in the aforesaid circumstances that the assessed is in appeal before the Tribunal. The learned counsel reiterated the arguments advanced before the tax authorities by reference to the material on record. He, however, highlighted the following :
(i) That the raid on 30th May, 1986 was mainly in the case of the sister concern, namely, M/s. Pramod Kumar Vinod Kumar and the search at the assesseds premises was consequential.
(ii) That the dispute was only about the weight and not the quantity.
(iii) That provisions of S. 145(2) were not applicable there being no adverse reference to the other items of the trading account such as purchases, sales, etc.
(iv) That trading results had been accepted in the preceding assessment year and the subsequent assessment years, viz., 3.2% for 1986-87 in 143(3) assessment completed after the raid and 5% in asst. yr. 1988-89. In comparison, the rate for assessment year in appeal was 4%.
(v) That as a result of the addition, the effective GP rate for assessment year under appeal was 10.7% which was not normal in the assesseds line of business.
(vi) That the stock was physically weighed by the authorised officers, assisted by Shri S. K. Mittal on 30th May, 1986 and the weight stated in the inventory should be adopted rather than any other figure subsequently worked out.
7. In support of his arguments, the learned counsel placed reliance on the decision of the High Court of Punjab (Circuit Bench at Delhi) in the case of Pandit Bros. vs . CIT . The learned Departmental Representative, on the other hand, vehemently supported the action of the tax authorities in applying provisions of S. 145(2) and making the impugned addition. The subsequent arguments advanced by him were a reiteration of the reasons recorded by these authorities in rejecting the view point canvassed on behalf of the assessed. In support of his arguments, he placed reliance on the decision of the Madras High Court in the case of Coimbatore Spinning & Wvg. Co. Ltd. vs . CIT : [1974]95ITR375(Mad) .
8. We have examined rival submissions and have also perused the material on record to which our attention was invited. The decisions cited at the bar were also considered. At the outset, we hold that in a given case, the tax authorities would be justified in modifying a valuation report in case there emerged mistakes which were apparent from the record but these could be elementary mistakes such as those of calculation. The facts before us are, however, different since what was sought to be substituted by later reports was not under the category of a 'calculation mistake' but substantial change effected vis-a-vis the weight of the material itself. The fact that the stock was actually weighed on 30th May, 1986 at the time of the search and the inventory duly signed by the authorised officers as also by Shri S. K. Mittal has not been controverter on behalf of Revenue. If that be so, then subsequent modifications on the basis of a manual which the assessed asserts and reasserts is not applicable to him hold no good. It is a matter of record that Shri S. K. Mittal changed his figures twice, once in June, 1986, and again as late as in March, 1989. The assessed in various letters addressed to the Assessing Officer asserted that he dealt in old and used rails and it was not proper to apply weights which were relevant to new rails by reference to a 'manual'. A request was also made a number of times to the Assessing Officer to allow an opportunity to cross examine Shri Mittal (see copies of correspondence placed on the paper book) but as stated by the learned counsel before us and not contradicted by the Departmental Representative, there was no response from the side of the Assessing Officer. The assessed also categorically stated before the Assessing Officer that the stock on 30th May, 1986 had been physically weighed in the presence of the authorised officers and Shri Mittal and there were the Dharam Kanta receipts to the same effect. This factual assertion has not been challenged by the Departmental Representative.
9. In the final analysis and on the facts of the case, we hold that the addition of Rs. 1,74,956 was not warranted and the same is hereby deleted.
10. The second issue pertains to the addition vis-a-vis the stock stated to be lying in a godown located at Ghas-ki-Mandi, Agra and stated to be belonging to the assessed. In the course of proceedings before the tax authorities, it was stated on behalf of the assessed that the said godown although belonging to the sister concern, M/s. Pramod Kumar Vinod Kumar, yet the stock placed in the said godown belonged to the assessed. The aforesaid Explanationn was rejected by the Assessing Officer on the ground that since the godown belonged to the sister concern, the presumption was that the stock placed therein also belonged to the said sister concern. He also took note of the fact that the stock register of the assessed did not indicate the place at which any particular item of stock was lying. In the final analysis he made an addition of Rs. 69,855 being the value of the said stock of 10 MT but on a protective basis observing that the same would be added in the case of sister concern on substantive basis.
11. The CIT(A) upheld the findings recorded by the Assessing Officer, but proceeded to delete the addition in the case of the assessed on the ground that the same would be considered in the hands of M/s. Pramod Kumar Vinod Kumar.
12. We have heard both the parties at some length in respect of the specific ground raised in the assesseds appeal. The learned counsel at one stage indicated that the ground need not be adjudicated upon, inasmuch as, necessary relief had been allowed by the CIT(A) although confirming in the process the findings recorded by the Assessing Officer. This statement on the part of the learned counsel has to be viewed in the light of the fact that the assessed is in appeal and not the Revenue, the latter having accepted the decision of the CIT(A) to delete the addition in the assesseds case by not filing a second appeal before the Tribunal. In view of the aforesaid situation, we do not find it necessary to interfere with the decision taken by the CIT(A), specially when necessary relief has been allowed to the assessed and there can be no grievance for the time being on its part. The relevant ground in the appeal is rejected.
13. The last issue in the appeal pertains to an addition of Rs. 2,33,000 on account of certain cash credits Along with the consequential add back of interest amounting to Rs. 8,814. The Assessing Officer, on a scrutiny of the books of account, came across certain amounts deposited in the names of Smt. Abhilasha Jain, Kumari Sangeeta Jain, Smt. Kamini Jain, Smt. Rukmani Devi Jain and Smt. Alka Jain. On being asked to explain the aforesaid deposits, the assessed contended that these were genuine, inasmuch as, with the exception of Smt. Alka Jain, (the evidence on record to say so) the other four were income-tax assesseds regularly being assessed to tax at Agra itself. Their Ward, and GIR No. were also given to the Assessing Officer. Copies of the accounts in the books of the assessed-firm, their bank statements, their confirmations and the copies of the assessment orders were also furnished to the Assessing Officer. On the basis of the aforesaid, it was contended that since the identity and the creditworthiness of the lenders had been duly proved, the deposits were required to be accepted as genuine.
14. The Assessing Officer, however, proceeded to examine the bank accounts of the various depositors and found that, on certain dates, deposits had been made and which he asked the assessed to explain and substantiate. Being dissatisfied with the reply tendered, he in the ultimate analysis, proceeded to make the impugned addition vis-a-vis Smt. Abhilasha Jain, Kumari Sangeeta Jain, Smt. Kamini Jain and Smt. Rukhmani Devi Jain. As regards Smt. Alka Jain, the Assessing Officer noted that she was a partner of the firm and had deposited a sum of Rs. 4,500 on 24th April, 1986. On being asked to explain the source, it was submitted by the assesseds counsel that she had deposited the same by withdrawing a sum of Rs. 5,000 from the firm on 8th Feb., 1986. The Explanationn tendered was rejected on the ground that no nexus had been established between the amount withdrawn on 8th Feb., 1986 and that deposited on 24th June, 1986. The addition in respect of this amount was also made. As a consequence of the aforesaid addition of Rs. 2,33,000 the ITO disallowed interest paid amounting to Rs. 8,814. On further appeal, the CIT(A) upheld the action of the Assessing Officer observing further in the process :
(i) That although the assessments of the depositors had been framed by the Department, but, inasmuch as, these were under S. 143(1), the Assessing Officer had no chance to examine the deposits.
(ii) That filing of confirmatory letters and furnishing the Ward and GIR Nos. was not sufficient in view of the Procedural Changes in the assessments whereby the returns were accepted without any question.
(iii) That the Assessing Officer could look into the accounts from where account payee cheques were issued and when no Explanationn was forthcoming in respect of the deposits in those accounts, it could not be said that the assessed had discharged the burden.
(iv) That this was a case where four of the depositors were closely connected with the assessed-firm being the relatives of the partners and, under these circumstances, credits in their individual bank accounts were also required to be explained.
15. On the basis of the aforesaid observations, the CIT(A) held that the onus had not been discharged and the addition on account of the deposits as also the interest thereof were required to be confirmed.
16. The learned counsel for the appellant reiterated the arguments advanced before the authorities below. According to him, the onus which lay on the assessed stood discharged in case the following undisputed facts were considered :
(a) With the exception of Smt. Alka Jain, the other four were tax assesseds, who were regularly being assessed to tax at Agra. The particulars of the Word and GIR No. had also been made available.
(b) Copies of the assessment orders of the four depositors other than Smt. Alka Jain were also furnished.
(c) Copies of their bank accounts had also been filed before the authorities below.
(d) Confirmation letters in respect of the deposits had also been filed.
(e) That all deposits were made by account payee cheques and even the subsequent refund had been effected by the same mode.
(f) No distinction in law could be drawn in between the assessments completed under S. 143(3) and those finalised under S. 143(1).
17. The learned counsel, thereafter, invited our attention to the copies of the various documents/evidence placed on the compilation filed during the course of hearing contending in the process that since the onus which lay on the assessed had been duly discharged, there was no basis, whatsoever, to sustain the addition. He also made a further statement that the Assessing Officer after receiving the aforesaid documents/evidence from the assessed did not raise any further queries although the assessed in a letter dt. 12th March, 1990 undertook to furnish further information or evidence if called for. In support of his arguments, the learned counsel placed reliance on the following decisions :
(a) Sarogi Credit Corp. vs . CIT : [1976]103ITR344(Patna) ;
(b) Addl. CIT vs . Bahri Bros. P. Ltd. : [1985]154ITR244(Patna) ;
(c) CIT vs . Orissa Corp. P. Ltd. : [1986]159ITR78(SC) .
18. The learned Departmental Representative, on the other hand, supported the order passed by the CIT(A) and the subsequent arguments advanced by him were a reiteration of the reasons recorded by the tax authorities in rejecting the view point canvassed on behalf of the assessed.
19. We have examined the rival submissions and have also perused the material on record to which our attention was invited by the parties. The decisions cited at the bar have also been duly considered. In our opinion, the assessed had duly discharged the onus which lay on it vis-a-vis the various cash credits by placing on record cogent and positive material in the shape of (i) confirmations, (ii) assessment orders, (iii) bank statements and (iv) copies of accounts in the books of the assessed-firm. To this was coupled the fact that the deposits were made by account payee cheques and refunds wherever applicable were also by the same mode. It also transpires that in some of the cases, there were cash deposits in the respective bank accounts and, thereafter, substantial amounts were advanced to other parties and then received back from them and advanced to the appellant firm. In the case of Smt. Abhilasha Jain the opening balance of Rs. 37,000 is also added. We are not in agreement with the view expressed by the CIT(A) to the effect that in respect of the relatives and others, where assessments have been completed under S. 143(1), the onus is not discharged unless and until the deposits in the bank accounts from where account payee cheques were issued are not explained. On the facts of the present case, we are unable to subscribe to this view specially when the assessed after having placed on record relevant material and evidence specifically asked the Assessing Officer whether anything else was required to be done. At this stage, the onus shifted to the Assessing Officer and in case, he did require any further information or desired to examine the depositors with a view to ascertain the genuineness of the cash credits, then the next step should have come from his side. Inasmuch as, he failed to take any further action, we in the final analysis, conclude that the onus which lay on the assessed, stood discharged and there was no good ground to reject the Explanationns given and make the impugned additions on account of the deposits and the consequential interest. These are, hereby deleted.
20. In the result, the appeal is partly allowed.