Full Judgment
ORDER
C.L. Bakolia, A.M.
This appeal is preferred by the assessed against the order passed by the Commissioner (Appeals)-XII, New Delhi, on the ground that he has erred in confirming the addition of Rs. 1,50,000 against the facts and circumstances of this case.
2. The facts of this case are that assessed derives income as let out electrical and decorative items during the marriage ceremonies and other festivals. Survey under section 133A was carried out at the business premises of the appellant on 4-2-1992. At the time of survey, Gupta, partner of the assessed-firm, surrendered Rs. 1.5 lakhs which were not reflected in the books of account and actually utilised for purchase. This surrender was, however, retracted by a letter dated 13-2-1992. The assessing officer was, however, not impressed by the submissions made by the assessed in this letter and added Rs. 1,50,000 besides he also made an addition of Rs. 10,000 on account of profits might have earned by the assessed on the sale of goods.
3. In appeal, the Commissioner (Appeals) has deleted the addition of Rs. 10,000 on account of alleged sale of assets but, however, upheld the addition of Rs. 1,50,000. The assessed has, thereforee, come in appeal against sustaining of this addition,
4. Learned authorised representative started his arguments drawing my attention on a letter filed on 13-2-1992, and addressed to Income Tax Officer, Survey-cum-CIB, contents of which are as under :
'The assessed has informed us that he was put to undue pressure during the course of survey and that too at a time when Jai Narain Gupta, head of the family, expired on 31-1-1992. At the time when the survey took place, all the members of the family were in mourning and in a disturbed state of mind. The survey operation commenced during the day time and concluded as late as 11.,00 P.M. All through this period the assessed were put to great undue pressure and with such unwarranted pressure disclosure of Rs. 1,50,000 was extorted from the instant assessed. There is no ground nor relevance for such a disclosure to be made. It is, thereforee, requested that even the cheque which was issued payable on 15-3-1992, may kindly not be presented for encashment because it is found that the disclosure is incorrectly extorted by undue pressure and the assessed has nothing on the basis of which it can be said that such a disclosure was necessary. It is, further brought to your kind notice that there is no provision of making any disclosure, etc., during the course of survey under section 133A of the Income Tax Act and having been so done is illegal and has no binding in the eyes of law. The proceedings are vitiated by illegality in so much so that even the due notice was not served on the assessed.
You are, thereforee, requested to take legal view of the matter and in the interest of justice treat the matter as closed.'
5. Mention of the same has been duly made at page 2 of the assessment order.
6. Thereafter the assessment proceedings were taken up and the assessing officer in view of the retraction of surrender called upon the appellant to reconcile the inventories of the assets as per his books of accounts as on 4-2-1992, with those drawn during the course of survey operation. The appellant duly furnished the said details and reconciliation which can be seen at page 27 of the paper book. The total value of hirable goods available with the appellant-firm were to the tune of Rs. 3,29,015.38. This value was as per the books of accounts prior to depreciation. The appellant also reconciled the quantity of hirable goods available and duly recorded in the books of accounts with the quantity which was drawn in the various alleged lists made by the survey team during the course of survey and demonstrated that the total quantity of hirable goods available with the appellate-firm was more than the quantity inventorised by the survey team which logically would lead to the conclusion that there was no excess hirable goods and as such, there was no reason to draw any adverse inference. At page 27 of the compilation, it was further submitted before the assessing officer concerning the availability of the hirable goods in the books of the account 1-4-1988, up to the date of survey on 4-2-1992, in the following manner :
1. 1988-89 : The details of the goods purchased during this financial year was duly submitted with the purchase bills enclosed at pp 69 to 77 of the compilation.
2. For 1989-90 : The particulars were filed with purchase bills and are enclosed at pp 58-68 of the compilation.
3. Similar particulars for financial year 1990-91 were submitted which are enclosed at 50-57 pages of the paper book.
4. Particulars for the financial year from 1-4-1991, to 4-2-1992, were also filed before the assessing officer with a copy of the purchase bills based on cogent and admitted evidence which was duly accepted even under section 143(3) in the earlier year and it was submitted that when there was no shortfall in quantity of assets as per books as compared to the quantity inventorised by the survey team there was no substance nor any occasion for the appellant-firm to make any surrender which was, thereforee, obviously a forced one which the appellant made under pressure of the survey team specially since the father of the partner had expired only on 31-1-1992, and the survey being carried on 4-2-1992, when even the heat of the ashes of the deceased father had not cooled and the survey team continued to remain in the premises from morning till 11 p.m. at night under which circumstances the surrender was made and the retraction was made on the 13th day from the date of death after the family was free from attending to the customary rituals.
7. The admitted details of the goods was also available in the books of accounts with the appellant at the time of survey and which were duly signed by the survey team copy of which was filed before the assessing officer and is enclosed at page 15 of the compilation. Attention was drawn to pp 9-12 of the compilation along with a copy of the list of inventory drawn by the survey team. Perusal of the same indicates that the said inventory does not show any value determined by the survey team. It further shows that the said lists are only signed by the survey officers and has no witness to the same. The fact that there are no particulars of value, further show that entire exercise was one of over-zealousness. The appellant lawfully could only make a reconciliation of quantity which was done on the basis of cogent and admitted evidence. It is also pertinent to mention that the assessing officer has not made it a case that the addition made by him is on account of the fact that a surrender was made. He has actually made the addition on the basis of his own working based on the submissions made before him concerning the reconciliation of hirable goods. The detailed reasons for which have been given by the assessing officer from pp 3 to 7 of his order read with Annexures 1 to 3 of the same. As such, it would not be incorrect to conclude that the validity of the factum of the retraction of surrender was tacitly admitted by the assessing officer who then proceeded to make the additions for the reasons which are not sustainable being based on conjectures and surmises.
8. The additions made by the assessing officer were two-fold, firstly upon comparison of the consolidated chart of assets furnished by the appellant with the quantity inventories by the survey team, the assessing officer admitted that the quantity as per the books of accounts was more than the quantity inventorised by the survey team. This position has been stated by the assessing officer in para 3 on page 3 of the assessment order. The consolidated comparative chart of assets submitted by the appellant can be seen at page 30 of the compilation.
9. After having admitted that the quantity available as per the books of accounts was more, the assessing officer has misdirected himself by stating that under the circumstances '........ I hold that the assessed must have disposed of the goods worth Rs. 1,55,711, i.e., the value of so much of the goods/stock as have been found short by survey team and at the same time has not shown in the profit of the sale of these goods. ' Last five lines page 4 of the assessment order. On this ground, thereforee, an addition of Rs. 10,000 was made alleging the same to be alleged profit on the alleged sale of the alleged goods.
10. He further submitted that there is no proof or any evidence to show that there was any sale of assets as alleged by the assessing officer which allegation admittedly is a notional one since the assessing officer himself conjectured that the assessed must have disposed of the goods'. This is a clear-cut case of arbitrary and conjectures manner of making an assessment which as per the settled position of law, is not the proper way of making an assessment. It is vehemently submitted that once the appellant had established that the goods available as per the books of accounts duly supported with the copy of purchase bills which had been accepted in the earlier assessment, there was no room for any addition in light of the fact that the goods inventorised by the survey team were shown to the assessing officer and admitted by him to be covered by the recorded quantity of the goods in books of accounts.
11. Secondly, an addition of Rs. 1,44,660 was made by the assessing officer on account of an alleged difference in the value of goods as on 31-3-1992, as compared to the value of goods worked out by the assessing officer as on 4-2-1992. The value of goods inventorised but not valued by the survey teams and subsequently valued by the assessing officer at Rs. 1,62,122 has been given by assessing officer in Annexure III of the assessment order. The value of Rs. 3,29,015.38 for 31-3-1992, has been taken by him as per Annexure II of the assessment order. It is on comparison of these two values that the assessing officer has arbitrarily surmised that the difference between the two as further reduced by goods purchased by the appellant after 4-2-1992, up to 31-3-1992, the sum of Rs. 1,44,660 had to be added representing the alleged difference in value of goods. This interpretation drawn by the assessing officer has been discussed by him in para 2 at page 6 of his assessment order up to the last line of page 7 thereof. It can be seen that this also is based on his own arbitrary conjectures and surmises. Firstly, as can be seen at page 30 of the compilation the value of Rs. 3,29,015.38 is the value as on 4-2-1992, and not the value as on 31-3-1992. By no stretch of imagination could the assessing officer has any lawful power to superimpose the value of goods as on 4-2-1992, for the value as on 31-3-1992, to make the addition as done by him. Further, even this value of Rs. 3,29,015.38 is the value prior to depreciation since the same has been worked out on the basis of actual purchase price duly accepted and admitted by the department in the assessment for earlier year also completed under section 143(3). Even for the year under consideration depreciation has been allowed by the assessing officer on the value as declared in the balance sheet filed with the return of income indicating acceptance of the recorded version in books of accounts.
12. Assuming for the sake of argument without admitting that if the assessing officer has made an addition of Rs. 10,000 as profit on sale of goods on 4-2-1992, on an alleged sale of goods amounting to Rs. 1,55,711, then carrying the arbitrary conjecture to its logical conclusion the assessing officer was bound by law to have allowed telescoping of sale consideration towards the alleged undisclosed purchase of assets.
13. The Commissioner (Appeals) upheld the order of the assessing officer. He, however, exacted the addition to a sum of Rs. 1,50,000 equalising the same to an amount surrendered by the appellant disregarding the retraction and holding that once the assessed surrenders under survey proceedings, he cannot be allowed to retract at his whims and wishes'. This, it is submitted, is not the correct application of the law. The settled position of law is that the ultimate purpose of proceedings of assessment is to assess the tax liability correctly. It is also a settled point of law that it would not be open to assessing authorities to tax an assessed where it can be seen that there is no just reason for doing so. It is the correctness of the assessed income which is the sum and substance of the process of assessment and not otherwise. Moreover, the assessing officer in his assessment order has nowhere held that he was making the addition because the assessed had made a surrender.
In fact, the assessing officer had tacitly admitted that the assessed had retracted the surrender for the reasons as stated in the letter dated 13-2-1992. The assessing officer further admitted that the assessed was called upon to reconcile the inventory of working assets as per the books of accounts with the inventory drawn by the survey team. As such, it is a case of appreciation of merits and on merits the appellant has sufficiently demonstrated that the quantity inventorised by the survey team was available in the books of accounts which was duly signed by the survey team at the time of survey (page 15 of the compilation). The particulars of the same were duly brought on record on the basis of the admitted piece of evidence being total purchase bills from 1-4-1988, up to the date of survey based on the assessed position for those years and once having established that there was obviously no reason for the assessing authorities to introduce fiction of surmises to saddle the assessed with non-existent tax implications and the learned Commissioner (Appeals) further erred in disallowing the appeal preferred by the appellant by giving a totally different colour to the basis of assessment by the assessing officer. While the assessing officer categorically stated that addition on account of investment in assets has been made on account of the alleged arbitrary hypothesis of sale and purchase of goods and difference in value as on 31-3-1992, and 4-2-1992, the Commissioner (Appeals) altogether misdirected the proper appreciation of facts which has resulted in gross miscarriage of justice. The addition made, it is prayed, merits to be deleted in toto.
14. Learned Departmental Representative has, however, strongly relied upon the order passed by the Commissioner (Appeals).
15. I have heard the rival parties and have examined the facts of this case. It is needless to impress that assessed is not in the line of trading of electrical items. The business of the appellant is hiring out of electrical/decorative items on ceremonial occasions to various parties. thereforee, the value of the stock found at the time of search made by the survey party is apparently on a lower side particularly when the assessed has conclusively proved the purchase of various items and value of the stock. It is a different matter that the stock in such line of business deteriorate because of wear and tear and value may decline. In the instant case, the items tallied with the purchase bills and, thereforee, I am not convinced with the items which were sold and hence stock was found less. It is also a fact that just 3-4 days prior to the survey, father of the partner expired and he was not in proper state of mind to deal with the things properly and elaborately. Immediately after the rituals were over, the assessed retracted through a letter which was not properly attended nor any suitable action taken. After examining the facts of this case and hearing the learned authorised representative I am convinced that this addition deserves to be deleted. I order accordingly.
16. In the result, the appeal stands allowed.