1. This appeal has been filed by the assessee against the order under Section 158BC, dt. 31st Dec., 1997 passed by the Jt. CIT, Spl. Range-I, Patna. The only dispute relates to the quantity of sponge iron found during the search.
2. The search took place on 28th Dec., 1996. An annexure to the Panchnama shows that an inventory was made of the stocks found during the search, as per visual estimate. At Sl. No. 1 of this annexure, sponge iron has been shown approximately at 1,600 MT. The assessee had protested against the said visual estimate, though made by an expert.
The Department ultimately agreed to the taking of the stock by weighment. On 4th Dec., 1997, another Panchnama was prepared in respect of the valuation done of the stocks. Annex. 'A' to this Panchnama was a visual estimate made on 4th Dec., 1997 and Annex. 'B' was as per actual weighment. It is seen therefrom that on 4th Dec., 1997 the visual estimate of sponge iron was 1,616 MT.3. The matter has been discussed in para 8 of the assessment order (at pp. 9 and 10). Assessment order mentions that in order to explain the excess stock found, the assessee had taken the plea that at the time of actual weighment, certain current stock of sponge iron was also weighed. The assessee states that he took objection to such weighment at the time of actual weighment but the panchnama shows that no such objection was taken at the time of weighment, but a remark has been placed after the procedure was completed that such irregularity has occurred. The AO did not accept the assessee's claim of irregular weighment on the ground that such objection was not taken when the weighment was actually taking place. The AO is of the view that if such objection was taken at the time of actual weighment itself, then it was possible to take a total weight of the sponge iron lying under deemed seizure under Section 132(3) as well as other stock of this item available in the premises of the assessee and to compare the total of the stock thus found with the figure in the assessee's books of account as on the date of weighment of 428.670 MT. Under these facts and circumstances, the AO did not give credence to the assessee's plea that the weighment was not correctly done as regards the stock lying under deemed seizure. The assessment order further mentions that against the stock found as per actual weighment of 313.200 MT, the stock of sponge iron as per the assessee's books of account was only 231.568 MT. The excess stock of 81,632 MT was treated as undisclosed excess stock which was held to be unexplained asset found in terms of Section 69A of the Act.
4. In the course of hearing before us, the learned Authorised Representative for the assessee claimed that on the date of weighment only 313.200 MT of sponge iron was lying in the premises of the assessee and that against the same there should have been 428.670 MT of this item as per assessee's books. Thus, according to the Authorised Representative, on the date of weighment the stock actually found was less than the stock as per books and this could be considered only in the assessment of asst. yr. 1998-99, which was not covered by the block assessment under Section 158BC of the Act. The Authorised Representative also filed a copy of the order dt. 27th Sept., 1999 of SMG Bench, Patna, in the case of Dina Mahabir Re-rollers (P) Ltd., etc.
which were also searched on 20th Dec., 1996 and in the case of some of whom stock weighment was done on 11th/12th Dec., 1997. The Authorised Representative points out that the decision of the Tribunal is in favour of the assessees covered by that order.
5. The learned Departmental Representative relied on the order of assessment and did not agree with the Authorised Representative that 313.200 MT of stock found by weighment on 4th Dec., 1997 included any stock other than the stock lying under deemed seizure under Section 132(3). She was of the view that the Authorised Representative by claiming that the assessee had tampered with the stock under deemed seizure, had made the assessee liable to prosecution under the IT Act.
6. On careful consideration of the facts of this case, we would like to quote from the Panchnama dt. 4th Dec., 1997 (i.e., the date when the actual weighment was done). The Panchnama mentions as under : "Shri B.N. Kar, DMI, Raw-material Div., Tata Sponge Iron Ltd. PO Joda, Distt. Keonjhar also attended and valued the stock lying in the premises on visual estimate as per Annex. A to this Panchnama.
We confirm that this is the same stock of same quantity which was found on 20th Dec., 1996. This has been done in the presence of Sri S.P. Padmakar, ITO, Patna. On being asked by Shri S.P. Padmakar, ITO, Patna, the said stock has been weighed today as per Annex. B to this Panchnama." Going by the wordings of the Panchnama quoted above, it becomes crystal clear that weighment was done only of the stock which was found on 20th Dec., 1996 and was placed under deemed seizure under Section 132(3).
Thus, as per the Panchnama the stock found as per weighment of sponge iron at 313.200 MT was only for the stock which was found on the original date of search, i.e., 20th Dec., 1996. That further stock acquired thereafter, if any, was not covered by the said weighment.
7. In the light of our categorical finding of facts given above, we find that the AO was quite justified in concluding that excess stock of sponge iron to the tune of 81.632 MT was found in search, the source of acquisition of which could net be satisfactorily explained by the assessee. Thus, in our opinion, the AO was quite justified in treating the value of this unexplained stock as representing undisclosed income of the assessee under Section 69A of the Act. We accordingly confirm the AO's action on this point.
1. I have gone through the proposed order of my learned brother. I am, however, unable to persuade myself to agree with his finding.
Therefore, I am recording a dissenting order.
2. This appeal by the assessee under Section 253(1)(b) of the IT Act is directed against order dt. 30th Dec., 1999 passed under Section 158BC of IT Act by the Dy. CIT, Special Range, Patna, for the block period, asst. yr. 1987-88 to the date of the search (as recorded by the AO and no period is given).
3. In the grounds of appeal the assessee has set forth as many as 8 grounds but, in effect, they are against the addition of Rs. 4,69,380 on account of unexplained excess stock of sponge iron of 81.630 MT.4. The assessee is a private limited company and deals in iron materials. There was a search and seizure operation in the business premises of the assessee on 20th Dec., 1996 during the course of which cash and stock of various kinds of iron materials were found. There was an order under Section 132(1) of the IT Act relating to some of the stock of iron materials.
5. It is to be noted that at the time of the search the services of S.Bahadur, Dy. Divisional Manager (HMD), Telco, Jamshedpur, were taken.
He being a technical man, his expertise was taken to determine the quantity of the seized stock on eye estimation. Consequent upon that eye estimation of the stock, an inventory was prepared and consequently order under Section 132(1) was passed in respect of some of the seized stocks. The deemed seizure of the iron stock was done in respect of 3 type of items viz., (1) sponge iron; (2) ferro alloys, and (iii) steel runners and rizers, It is to be further noted that the assessee immediately lodged objection as to the Panchnama prepared and the stock of the iron materials seized because there was no actual weighment of the seized stock. Finally, actual weighment was done on 4th Dec., 1997 almost after one year of search and much persuasions made by the assessee. Another Panchnama was prepared. At that time also, the expert services of B.N. Kar, Dy. Manager (Raw Materials Division), Telco, were taken for the eye estimation of the seized stock before the actual weighment. The following table, as prepared by the AO in his assessment order, will perhaps facilitate to appreciate the entire disputed issue : At the time of the assessment the assessee-company pointed out that the actual weighment was not properly done. According to it (assessee-company) apart from the iron materials which were kept under the deemed seizure in view of proviso to Section 132(1) of the IT Act, the current stocks were also weighed and to this regard an objection was recorded in the Panchnama. The AO, however, did not accept the objection of the assessee-company. According to him, if there was no proper weighment of the sponge iron, the assessee-company should have raised the objection during the course of the weighment itself. If the assessee-company would have raised the objection, the re-weighment would have been redone to the satisfaction of the assessee-company.
According to the AO, there was irregularity in the actual weighment, was not acceptable. He noted that as per the actual weighment the weight of the seized sponge iron was 313.200 MT whereas as per the books of accounts the stock on 20th Dec., 1996 was 213.568 MT. There was excess stock of 81.632 MT worth Rs. 4,69,380 which the AO determined at the average rate of Rs. 5,750 per MT. The AO treated the value of the said excess unexplained stock of Rs. 4,69,380 as undisclosed income of the assessee for the asst. yr. 1997-98 of the block period. So against that order now the assessee is in appeal.
6. Shri A.K. Rastogi, the learned Authorised Representative of the assessee, vehemently objected to the addition as made by the AO.According to him, the addition was based on the basis of unacceptable documents because there were irregularities in the actual weighment of the seized stock. He emphasised that the assessment was made under Section 158BC under Chapter XIV-B of the IT Act in which there was no scope of any addition on conjecture and surmises. Any addition on account of undisclosed income should be made on the basis of the materials found and seized during the course of the search. He emphasised that during search no actual weighment of the seized material was taken. The deemed seizure in view of second proviso to Section 132(1) was taken on eye estimation. There was big difference of the stock determined by the eye estimation on two occasions and the actual weighment. He further said that there were irregularities in the actual weighment also. There was no weighment chart to come to a definite conclusion that the weight determined by the AO was correct.
He emphasised that the irregularity was pointed out at the time of the weighment itself which the AO, for his convenience, did not consider in right perspective. The learned Authorised Representative emphasised that the Revenue Department was not in a mood to get the seized materials weighed. It was only after much persuasion by the assessee-company the actual weighment was taken. According to him, the assessment passed under Section 158BC was bad in law.
7. On the other hand, Smt. Anita Sinha, the learned Departmental Representative of the Revenue, supported the assessment order.
According to her, the search and seizure operation was taken in the presence of the learned Authorised Representative of the assessee-company. The Panchnama was prepared in the presence of the witnesses, a copy of which was given to the representative of the assessee-company. Even the. copy of the order passed under Section 132(1) was also served upon the Authorised Representative of the assessee-company. It was said that the seized stock of the various kinds of iron materials were not in any manner disturbed. Relating to the certificates given by the ITO of the raiding party which had gone for weighment, she said that some seized stock of sponge iron was actually weighed which was found 313.200 MT and the stock was the same as on 20th Dec., 1996 when the search and seizure operation took place but on that day in the books of accounts of the assessee-company the stock of sponge iron was 231.568 MT. There was excess stock for which the assessee offered no explanation. She said that the AO rightly did not accept the contention of the assessee that the actual weighment was made having taken from the current stock also. According to her, the undisclosed income as determined by the AO, was correct and that has rightly been brought to tax in view of the provisions under Section 158BC of the IT Act.
8. I have gone through the appeal records including the papers compiled in the paper book. From the Panchnama dt. 20th Dec., 1996 with the inventory sheets attached therewith and the order passed under the second proviso of Section 132(1) of the IT Act, which are compiled at pp. 1 to 8 of the paper book, it is to be noted that there are six different kinds of iron materials which have been inventorised but only 3 items have been put in the constructive seizure under Section 132(1) of the IT Act viz., sponge iron 1510 MT @ Rs. 6,270 per MT average Rs. 94,69,700; ferro alloys 17 MT @ Rs. 16,425 per MT average Rs. 1,01,925; steel runners and rizers scrap (melting) 150 MT @ Rs. 6,500 per MT at Rs. 9,75,000. The dispute in this appeal centres around sponge iron only. As per eye estimation done by Mr. S. Bahadur, Dy. Divisional Manager, MRD; Telco, Jamshedpur, the stock was approximately 1,600 MT worth Rs. 94,69,700 only. From the copy of the second Panchnama dt. 4th Dec., 1997 along with the inventories and the certificate of eye estimation for the second time and the copy of the actual weighment it is to be seen that again there are different weights as mentioned therein. While preparing the second Panchnama dt. 4th Dec., 1997, compiled at p. 9 of the paper book, it is to be noted that a certificate has been given by Shri B.M. Kar, Divisional Manager (HMD), Tata Sponge Iron Ltd., coupled with two witnesses viz., Ram Pravesh Prasad and Jeetendra Mishra to the effect that they were confirming that the same stock and of the same quantity which was found on 20th Dec., 1996, was being weighed. It is to be further noted that there was a fresh eye estimation of the seized materials. As per the second eye estimation, the weight has been found to be 1,616 MT of worth Rs. 1,01,30,129 but as per the actual weight it was 313.200 MT. From these documents it appears that for the same item there are 4 different figures so far as the weight is concerned. As per the first eye estimation which was done at the time of the search itself, it was 1,600 MT. The ITO who passed the order under second proviso to Section 132(1) of the IT Act, took the weight 1,510 MT, As per the second eye estimation which was done before the actual weighment it is 1,616 MT and as per the actual weighment it is 313.300 MT. Though the Revenue has claimed that S. Bahadur and B.N. Kar are experts in that line of profession and from the eye estimation they can determine approximate weight of the materials but this claim of the Revenue is apparently not correct because when the actual weight was taken, it was 313.300 MT only. Now the question arises actually what was seized in view of provisions of Section 132(1). It was 1600 MT as per the eye estimation done by S. Bahadur or 1,510 MT as per the order under the second proviso to Section 132(1) of the IT Act or 1,616 MT as per the second eye estimation done by Mr. B.N. Kar and 313.200 MT the actual weight.
There is no consistency so far as it relates to the weightage of the seized item of the iron materials. As per order passed under the second proviso to Section 132(1) of the IT Act, the seizure is 1,510 MT but on actual weighment, as said above, it is only 313.200 MT.8.2 I agree with the submissions of the learned Authorised Representative that the same sponge iron was not actually weighed. It is to be noted that at the time of the actual weighment B.N. Kar, Dy.
Manager, Raw Material Division (RMD), Tata Sponge Iron Ltd., and Shri S.P. Padmakar, the ITO, along with two witnesses viz., Ram Pravesh Prasad and Jeetendra Mishra gave a certificate to that effect that they were confirming that the weight was being taken of the same stock and of the same quantity which was found on 20th Dec., 1996. This certificate is manifestly absurd because none of these persons except Ram Pravesh Prasad, the witness, was a party of the Panchnama dt. 20th Dec., 1996. On 20th Dec., 1996 the ITOs were Mr. N. Barnwal and Shri N.N. Jha. Eye estimation was done by S. Bahadur, Dy. Division Manager, RMD, Telco. The witnesses were Bhajan Singh and Shri Ram Pravesh Prasad. So, as said above, excepting Ram Pravesh Prasad, no other person who have given certificate were parties to the earlier Panchnama and, as such, the certificate is absurd and under these circumstances, it is not proper and prudent to hold that the same seized sponge iron was actually weighed. Even the difference in eye estimation is not small. As per the first eye estimation, the heap or the mass of the sponge iron was determined approximately at 1,600 MT. The ITO took the weight at 1,510 MT whereas again on eye estimation it was to be 1,610 MT but bulk of 1,600 MT is not a small quantity. So from these facts it is manifest that it is not the same bulk or heap of the sponge iron put to actual weighment. Even assuming for the argument sake that same bulk or heap of the sponge iron which was seized under Section 132(1) of the IT Act, was put to weighment because it is presumed that once the stock is seized, it is not to be disturbed either by addition or extraction but even then as pointed out by the learned Authorised Representative of the assessee-company that there is no proper weighment. From the inventory sheet compiled at p. 12 of the paper book it appears that the seized articles were put in vehicle and the vehiclewise weight was taken. In the inventory net weight is given but in the absence of the weighment chart, the weight vehiclewise cannot be acceptable straightway. The weighment chart can only support the fact of the actual weighment. Naturally when the seized article was put in a truck and the weighment was taken, the weight of the truck has to be segregated. What is the weight of the truck in each trip of different vehicle, there is no mention. It is to be noted that the representative of the assessee, therefore, recorded an objection in the Panchnama itself that the bulk of the sponge iron put on weight through item Nos.
27 and 30 of the Panchnama were of the current stock. This objection of the assessee in view of the facts and circumstances of the case cannot be brushed aside. The AO has, while considering the objection of the assessee, recorded that the assessee should have raised the objection at the time of the weighment itself so that re-weighment should have been done but this contention of the AO could be put in otherwise also so as to say that when the Panchnama was prepared and when there was no irregularity in the actual weighment why the officer of the raiding party allowed to record the objection of the assessee on the Panchnama itself. Speaking in other words, the objection is not recorded in the copy of the Panchnama given to the assessee but in the original Panchnama which was with the officer of the raiding party. Recording of the objection, is not much after the weighment of the sponge iron. The Panchnama must have been prepared just after the weighment was taken.
From the facts as have been brought in appeal record I find that there is no proper seizure nor is the correct weighment of the seized material. In fact in identical facts and circumstance in the cases of M/s Dmo Mahabir Re-roller (P) Ltd., a sister-concern of the assessee, and similar other assessee M/s Iron Scrap & Processing Work (P) Ltd. and M/s Rainbow Estate (P) Ltd. in IT(SS) 8, 11, 12, 13-P/1998 the Tribunal, Patna Bench, by its order dt. 27th Sept., 1999 disapproved such assessment for inventory to seizure being questionable. The order dt. 27th Sept., 1999 is placed with paper book.
8.3 It is to be further mentioned that it is a case under Section 158BC of the IT Act-The undisclosed income as has been pointed out by the AO is only in connection with the excess stock found at the time of the search, but indifferently he is silent about the less stock found relating to other items of iron materials for it is to be noted that ferro alloys as per the actual weighment was found to be 17.500 MT whereas as per the books of account it was 43.585 MT. There was shortage of ferro alloys 26.085 MT which was worth Rs. 4,28,446.12.
Similarly, steel runners and rigers (melting) there is shortage of 0.585 MT of the value of Rs. 3,802.50 approximately. Thus, the shortage of the ferro alloy and steel runner and rizer suggests sale outside the books of accounts and, so, as said above, it is not understood as to why the AO has not taken care of these items while searching and determining the undisclosed income of the assessee-company in view of the provisions of Chapter XIV-B of the IT Act. In my considered view, for addition of Rs. 4,69,384, being the value of the excess stock of sponge iron, I find no merit. The assessment passed under Section 158BC is, therefore, held to be not correct so far as this issue is concerned.
As we differ in our view in the above case, we request the Hon'ble President to kindly refer the matter to the Third Member on the following point : "Whether, on the facts and in the circumstances of the case, addition of Rs. 4,69,380, being the value of alleged excess stock of sponge iron, is justified as undisclosed income of the assessee under Section 158B(b) of the IT Act when the seizure weight of seized sponge iron is questionable?" The appeal of the assessee for the block period 1987-88 to 1997-98 was heard by the Patna Division Bench. However, in regard to the addition of Rs. 4,69,380 made on account of excess stock of sponge iron found on the date of search, there was a difference of opinion between the members as a result of which I was nominated as Third Member for a decision in regard to the following point of difference : "Whether, on the facts and in the circumstances of the case, addition of Rs. 4,69,380 being the value of alleged excess stock of sponge iron is justified as undisclosed income of the assessee under Section 158B(b) of the IT Act when the seizure and weight of seized sponge iron is questionable?" 2. I have heard the learned counsel for the assessee and the standing counsel for the Department and also perused the records including the dissenting orders of the Hon'ble Members of the Division Bench.
3. For the sake of ready reference, the relevant facts may be stated even at the cost of repetition. The appellant is a private limited company and engaged in the business of iron materials. A search and seizure operation was conducted at the business premises of the assessee on 20th Dec., 1996. In course of search, cash and stock of iron materials were found. The actual weighment of the material was not made on the date of search. However, Shri S. Bahadur, Dy. Divisional Manager (RMD), Telco, Jamshedpur, being a technical man was asked to determine the quantity of the seized stock on eye estimation. On the basis of the eye estimation of weighment of various kinds of iron material, stock inventory was prepared and since some of the items of iron material were found in excess of the stock reflected in the books of account, an order under Section 132(1), second proviso, r/w Section 132(3) was passed. The deemed seizure of iron stock was done in respect of three items, i.e., (i) sponge iron (ii) ferro alloys, and (iii) steel runners and rizers. It is relevant to point out that the estimate of weight of sponge iron in respect of which addition of Rs. 4,69,380 has been made was determined at 1,600 MT. The assessee had objected to the estimation of weight of sponge iron at 1,600 MT and it requested the Department to carry out the actual weighment of the material.
Ultimately the AO accepted the request of the assessee to carry out the exercise of actual weighment of the material. Actual weighment was done between 2nd Dec., 1997 to 4th Dec., 1997 and, accordingly, fresh Panchnama was prepared on 4th Dec., 1997. At the time of actual weighment, the services of Sri B.N. Kar, Divisional Manager (RMD), Raw Material Division, Telco, were taken for the eye estimation of seized material before the actual weighment. The extract of the table prepared by the AO in the assessment order relating to sponge iron is reproduced hereunder : It is also pertinent to mention that before the weighment of the material, the heap of sponge iron was identified in the presence of Sri R.P. Prasad and Sri Jitendra Mishra. Sri R.P. Prasad was also present on the date of search, i.e., on 20th Dec., 1996. The sponge iron was loaded in trucks and as per the statement on record, 32 loaded trucks had been weighed. The aggregate weight as per the statement on record is 313.200 MT. As per the books of account on the date of search the stock after reconciliation was 231.568 MT. The assessee was asked to explain the difference of 81.362 MT. It was claimed on behalf of the assessee that some current stocks were also weighed along with the stocks seized on the date of search and, therefore, the weighment made by the AO could not be compared with the stocks reflected in the books of account. It was also pointed out that there is a huge variation in the weight as per the eye estimation and the actual weighment of the stock. Therefore, no addition could be made in the block assessment. In this connection reference was made to the Panchnama prepared on the date of actual weighment of the sponge iron, etc. where a remark has been put by the assessee's representative that items Nos. 27 to 32 as per the list were out of the current stock and not out of the stock seized on the date of search. The AO overruled the objection of the assessee on the ground that at the time of actual weighment, the assessee had not objected to the weighment of stock which is claimed to be out of the current stock. According to the AO, had the assessee objected at the time of actual weighment, then, the entire stocks on the date of actual weighment could be weighed and the claim of the assessee verified. The objection was raised only at the time of the preparation of the Panchnama which, according to the AO, is not acceptable. He thus worked out the difference of 81.362 MT of the average value of Rs. 5,750 per MT at Rs. 4,69,380. The addition was thus made. The CIT(A) has confirmed the addition.
4. When the matter had come up before the Division Bench of the Tribunal, the Hon'ble AM proposed an order confirming the addition.
However, the Hon'ble JM has proposed to delete the addition on the ground that there was no definite material about the variation in the stock found in the course of search. The Hon'ble JM also pointed out that some items of the stock were found to be less on physical verification when compared with the books of account of the assessee in respect of which the AO has not taken any action.
5. Before me the learned counsel for the assessee vehemently argued that the addition in block assessment is warranted only when there is definite material on record on the basis of which concealment of income is established. It was contended that in block assessment, addition cannot be made on surmises and conjectures. It was further contended that on the date of search, the stock of sponge iron was estimated at 1,600 MT. The assessee had requested the search party to make the actual weighment of the stock even on the date of search-However, the request of the assessee was not accepted. The assessee persisted with the request and ultimately it was on 2/3/4th Dec., 1997, i.e., after one year of the search that the Department agreed to carry "out the actual weighment of the seized stock. The weighment of the seized stock started on 2nd Dec., 1997 and the same was completed on 4th Dec., 1997.
The assessee had objected on spot about some of the material of current stock also having been weighed along with the seized stocks. This objection was recorded in the Panchnama which was duly signed by all the witnesses and the AO. No action was taken for verification of the claim of the assessee. My attention was invited to the Panchnama dt.
4th Dec., 1997 where a remark that items Nos. 27 to 32 of the list contained the weighment of the current stock. It was pointed out by the learned counsel that the weight of items Nos. 27 to 32 amounts to more than 66 MT of sponge iron and, therefore, no addition in respect of disputed weight could be made. My attention was also invited to Section 69A of the IT Act, 1961, which empowers the AO to make an addition in respect of the value of any valuable articles in respect of which the assessee is unable to explain the source of investment. Learned counsel for the assessee contended that in this case the very existence of the discrepancy of the stock is in doubt and, therefore, provision of Section 69A is not attracted. It was further contended that it is well settled law that in block assessment the AO is empowered to assess the concealed income on the basis of the material found on the date of search. On the date of search, stocks were estimated and there was no actual discrepancy found by the search party. Subsequently, the weighment of stocks was effected on persistent request of the assessee and the weighment of stocks was done partly of the seized material and partly out of the current stocks which were stacked alongside to the seized stock. The assessee objected to the same and the fact was also noted in the Panchnama. It was, accordingly, pleaded that the view expressed by the learned JM may be followed and the addition of Rs. 4,69,380 deleted. The learned counsel also pointed out that in the case of sister-concern, the SMC Bench of the Tribunal (incidentally constituted by the learned JM) on identical facts has deleted the additions and, therefore, for the sake of consistency the addition in this case also deserves to be deleted.
6. The learned counsel for the Department, on the other hand, contended that the addition in this case is fully justified, for the assessee was found to be the owner of excess stocks on the date of search. Section 69A empowers the AO to assess the income in respect of any unaccounted investment made in the valuables which in this case is sponge iron.
Referring to the objection of the assessee regarding weighment of the sponge iron, the learned counsel for the Department pointed out that the delay in weighment was on account of non-availability of the expert and was not attributable to the AO. In this connection he referred to the correspondence between the AO and the experts and pleaded that no adverse inference can be drawn from the fact of delay in weighing the actual material. In regard to the claim of the assessee that the current stocks were also weighed along with the seized stocks, it was contended that the seized stocks were identified by witnesses on the date of weighment and at that time, the assessee did not raise any objection. Even at the time of weighment, the assessee did not raise any objection. It was only at the time of preparation of Panchnama that the assessee had raised objection which is afterthought. The addition made by the AO and confirmed by the CIT(A) may thus be upheld. The learned counsel for the Department placed reliance on the decision of the learned AM and pleaded that the same view may be adopted for sustaining the addition.
7. I have given my careful consideration to the rival contentions. The dispute in this case is as to whether the addition of Rs. 4,69,380 is justified on the facts and in the circumstances of this case. It is not disputed that on the date of search in this case on the basis of eye estimation of stocks it was perceived that there is variation in the stocks physically found on the date of search when compared with the stocks reflected in the books of account. There was a deemed seizure of the stocks and the same were kept in the custody of the assessee. The assessee was not expected to mix the seized stocks with any other stocks. It is also borne out from records that from the date of search the assessee had been challenging the estimate of weight made by the expert. Assessee's request for actual weighment of stocks was ultimately accepted and the weighment of the seized stocks was carried out in presence of witnesses as well as assessee's representative. As per the Panchnama, the stocks in respect of which weighment was carried out, was the same stocks which were kept under deemed seizure. Before actually weighing the stocks, an expert had been called for eye estimation. The eye estimation made by the expert was 1,610 MT as against 1,600 MT estimated by another expert on the date of search.
Thus, on the basis of eye estimation there was no variation in the stocks seized on the date of search and the stocks in respect of which weighment was carried out subsequently. The stocks in respect of which weighment was carried out were identified by the witnesses as well as the assessee's representative to be the stocks which were under deemed seizure before the actual weighment formalities were carried out. The learned JM has pointed out that the witnesses to the second Panchnama, i.e., on the date of actual weighment, were not the witnesses on the date of search and as such their certification that the same stocks as were seized on the date of search are being weighed is absurd. However, it seems to have escaped the attention of the learned JM that one of the witnesses, viz., Sri R.P. Prasad was common. He was present on the date of search as well as on the date of actual weighment of stocks.
Therefore, his affirmation that the same stock was being weighed as was seized on the date of search could not be said to be absurd especially when the assessee's representative also did not raise any objection at the time of identification. Moreover, the stocks put under deemed seizure were in the custody of the assessee and the assessee was not expected to tinker with the same. If they have, that has been done at their peril. No objection was raised by the assessee at the time of actual weighment. It was only after the actual weighment formalities were carried out by the Department and when the discrepancy was obvious that a note was put in the Panchnama that Items Nos. 27 to 32 relate to the current stock and not to the seized stock. The sum total of items Nos. 1 to 26 is roughly the stocks which the assessee ought to possess on the date of search. Therefore, it is understandable that when the actual weighment had been carried out, the assessee got an idea that after item No. 26 whatever weighment is carried out is in excess of the stocks reflected in the books of account. Therefore, a note on the Panchnama seems to be a deliberate attempt of defence. It is well settled principle of law that the burden of proof lies on those who would fail if no evidence at all was produced. In this case the seized stocks were under the custody of the assessee. One of the witnesses was common on the date of search as well as on the date of actual weighment. Stocks were identified as seized stocks before the actual weighment formalities were carried out. After the completion of the weighment formalities and at the time of preparation of Panchnama, the assessee has claimed that the current stocks were also weighed along with the seized stocks. This claim has remained a claim without any supporting material. On the other hand, there is evidence on record to establish that there was a discrepancy in the actual stocks found on the date of search when compared with the books of account. Whereas on the one hand (i) there is a witness, namely, Sri R.P. Prasad; (ii) the officers of the Revenue Department, public servants who are presumed to have discharged their obligations strictly in accordance with law, unless proved otherwise; (iii) the assessee was the custodian of the stocks and had not made a statement at the time of identification that some stocks out of the current stocks were mixed with the seized stocks; on the other hand there is a mere claim made by the assessee that part of the current stock has also been weighed along with the seized stocks. In my view, the discrepancy in the sponge iron stock is established and the objection of the assessee has got to be rejected as afterthought and without any evidence.
8. It is not disputed by the learned counsel for the assessee that provisions of Section 69A are attracted even in block assessment.
However, contention advanced on behalf of the assessee is that Section 69A applies only when there is a definite finding about the existence of unaccounted investment or unaccounted assets. In this case, according to the learned counsel, the existence of excess stock was not established. Therefore, Section 69A was not attracted. In my considered view, this contention on behalf of the assessee is without any substance. Excess stock was found as a result of search. The mere fact that actual weighment was not carried out on the date of search does not detract from the fact that on actual weighment done subsequently, the assessee was found to possess stocks in excess of the stocks reflected in the books of account. It is not necessary that the actual determination of the value of stocks should be carried out only on the date of search. The seizure of stocks took place as a result of search.
Subsequent determination of the actual quantity of stocks found in excess does not take away the case from the ambit of "as a result or in consequence of search". The material has been found in consequence of a search and addition has also been made on the basis of such material.
Therefore, the addition of Rs. 4,69,380, in my view, is justified. I, accordingly, agree with the view expressed by the learned AM. As a result of my view, the addition of Rs. 4,69,380 is sustainable.
9. Let the matter be placed before the regular Bench for passing the consequential order in accordance with the majority view.
There was a difference of opinion between the Members of the Bench and the following question was referred to the Third Member for his opinion : "Whether, on the facts and circumstances of the case, addition of Rs. 4,69,380, being the value of alleged excess stock of sponge iron, is justified as undisclosed income of the assessee under Section 158B(b) of the IT Act when the seizure and weight of seized sponge iron is questionable?" 2. The learned Third Member has agreed with the order of the learned AM and held that the addition of Rs. 4,69,380 was justified.
3. Therefore, in accordance with the majority view, the issue is decided in favour of the Revenue and the appeal of the assessee is dismissed.