TaxTMI 
TaxTMI 
2003 (11) TMI 314
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.... visual estimate of sponge iron was 1,616 M.T. 3. The matter has been discussed in para 8 of the assessment order. 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. That the Punchnama 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 Assessing Officer 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 Assessing Officer 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 4....
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....come-tax Officer, Patna. On being asked by Shri S.P. Padmakar, ITO, Patna, the said stock has been weighed today as per annexure 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 20-12-1996 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., 20-12-1996. 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 Assessing Officer 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 not be satisfactorily explained by the assessee. Thus, in our opinion, the Assessing Officer 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 Assessing Officer's action on this point. 8. In the ....
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....cilitate to appreciate the entire disputed issue: ------------------------------------------------------------------ Item Visual Visual As per Deemed As per estimate estimate actual seizure stock per Panch- per Panch- weigh - u/s regis- nama dated nama dt. ment per 132(1) ter as 20-12-96 4-12-97 Panch- on ....
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....apart from the Iron materials which were kept under the deemed seizure in view of proviso to section 132(1) of the I.T Act, the current stocks were also weighed and to this regard an objection was recorded in the Panchnama. The Assessing Officer, 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 Assessing Officer, 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 M.T. whereas as per the books of account the stock on 20-12-1996 was 213.568 M.T. There was excess stock of 81.632 M.T. worth Rs. 4,69,384 when the Assessing Officer determined at the average rate of Rs. 5,750 per M.T. The Assessing Officer treated the value of the said excess unexplained stock of Rs. 4,69,380 as undisclosed income of the assessee for the assessment year 1997-98 of ....
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....s the same as on 20-12-1996 when the search and seizure operation took place but on that day in the books of account of the assessee-company the stock of Sponge Iron was 231.568 M.T. There was excess stock for which the assessee offered no explanation. She said that the Assessing Officer rightly did not accept the contention of the assessee that if the actual weighment was made having taken from the current stock also. According to her, the undisclosed income as determined by the Assessing Officer, was correct and that has right to be 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 dated 20-12-1996 with the Inventory Sheets attached therewith and the order passed under the 2nd proviso of section 132(1) of the IT Act, which are compiled at pages 1 to 8 of the Paper Book it is to be noted that there are six different kinds of Iron Material which have been inventorised but only 3 items have been put in the constructive seizure under section 132(1) of the Income-tax Act viz., Sponge Iron 1510 MT @ Rs. 6270 per M.T. average - Rs. 94,69,700; Ferro All....
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....stency so far as it relates to the weightage of the seized item of the iron materials. As per order passed under the 2nd proviso to section 132(1) of the IT Act, the seizure is 1510 M.T. but on actual weighment, as said above, it is only 313.200 M.T. 8.1 I agree with the submissions of the Ld. AR 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, Deputy Manager, Raw Material Division, Tata Sponge Iron Limited, and Shri S.P. Padmakar the Income-tax Officer, alongwith 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 20-12-1996. This certificate is manifestly absurd because none of these persons except Ram Pravesh Prasad, the witness, was a party of the Panchnama dated 20-12-1996. On 20-12-1996 the Income-tax Officers were Mr. M. Barnwal and Shri N.N. Jha. Eye estimation was done by S. Bahadur, Deputy Divisional Manager, Raw Materials Division, Telco. The witnesses were Bhajan Singh and Shri Ram Pravesh Prasad. So as said above, excepting Ram Pravesh Pr....
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.... 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 circumstances in the cases of M/s. Dine 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,ll,12,13-P/98 the Tribunal, Patna Bench, by its Order dated 27-9-1999 disapproved such assessment for inventory to seizure being questionable. The order dated 27-9-1999 is placed with Paper Book. 8.2 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 Assessing Officer is only in connection with the excess ....
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.... 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 20-12-1996. 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, Sri S. Bahadur, Dy. Divisional Manager (MRD), 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 was found in excess of the stock reflected in the books of account, an order under section 132(1) 2nd proviso read with 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....
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.... nama dt. 20-12-96 4-12-97 -------------------------------------------------------------------- Sponge 1600 M.T 1616 M.T 313.200 M.T 1510 M.T 231.568 M.T Iron -------------------------------------------------------------------- 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 28-12-1996. The sponge iron was loaded in trucks and as per the statement on record, 32 loaded trucks had been weighed. The aggregate....
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....ock 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 1600 M.T. 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 2/3/4-12-1997, 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 2-12-1997 and the same was completed on 4-12-1997. 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 Assessing Officer. No action was taken for verification of the claim of the assessee. My attention was invited to the Panchnama dated 4-12-1997 where a remark that item Nos. ....
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....fficer. In this connection he referred to the correspondence between the Assessing Officer 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 Assessing Officer and confirmed by the CIT(A) may thus be upheld. The learned counsel for the department placed reliance on the decision of the Ld. Accountant Member 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....
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.... 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 Panchanama that Item Nos. 27 to 32 relate to the current stock and not to the seized stock. The sum total of item 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 ....