TaxTMI 
TaxTMI 
2022 (3) TMI 1017
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....r. First we shall take IT(SS)A Nos.01,02, 04,05 and 06 pertaining to assessment years 2008-09, 2009-10, 2011-12, 2012-13, 2013-14 and 2014-15. For the sake of convenience, the grounds as well as the facts narrated in IT(SS)A No.01/SRT/2018, and CO.No.02/SRT/2018, for assessment Year 2008-09, have been taken into consideration for deciding the above appeals en masse. Note: IT(SS)ANo.03/SRT/2018 and CO.No.04/SRT/2018 for A.Y. 2010-11, contain different issue, therefore, these are being adjudicated separately in this order. 3. First, we shall take Revenue's appeals and assessee's Cross Objections for Assessment Years 2008-09, 2009-10, 2011-12, 2012-13, 2013-14 and 2014-15. To adjudicate the Revenue's appeals and assessee's Cross Objections, we have taken the "lead" case in Revenue's appeal in IT(SS)A No. 01/SRT/2017 and CO.No.02/SRT/2017, for AY.2008-09. The grounds of appeal raised by the Revenue in IT(SS)A No.01/SRT/2017 for AY2008-09 are as follows: 1) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made by the Assessing Officer on account of suppressed production / sales of IMFL and CL for the AYs 2008-09 to 2009-10 and from AY 201....
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....edings were pending. Thus, no abatement of the proceedings had taken place. In absence of any incriminating material re-determination of income u/s 153A is bad in law and the same may be quashed. 3. Your Respondent craves leave, to add to, amend, modify or alter, the aforesaid grounds and /or adduce further evidence, before or at the time of hearing." 5. Brief facts as discernable from the orders of lower authorities are that assessee firm has filed its return of income on 10.10.2008 declaring total income of Rs. 1,76,57,136/-. The case was selected for scrutiny under CASS and accordingly, assessment order u/s143(3) was passed on 25.03.2010 with assessed income of Rs. 1,76,57,136/-. Further, a search action u/s 132 of the Income-tax Act, 1961 was carried out on the business and residential premises of the Tandel Group of Daman on 18.06.2013 and the premises of the said assessee was also covered in the aforestated search. Subsequently, a questionnaire and notice u/s142(l) was issued to the assessee on 09.04.2015 by DCIT Central Circle-1, Surat. In response to the said notices, Shri Anoop Pandya, C.A. and an authorized representative of the assessee alongwith Shri Kanjibhai B. Tan....
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.... wise summary is reproduced by the assessing officer in his assessment order, vide page no.5 to 7 of the assessment order. 8. In response to question number no. 1 of statement u/s 132(4) dated 19.06.2013, Shri Kamlesh Lad has stated that there are two tanks of demineralized water of 5000 ltrs each, two RO Water tanks of 5000 ltrs each and a raw water tank of 10,000 Ltrs capacity. The DM water is stored in tanks and then it sent to the blending tank through fixed pipes. Whatever amount of D M water is needed for production is appropriated by the Production Department in the said manner. Further, in response to question no. 2 of the said statement, Shri Kamlesh Lad stated that apart from production around 1000 liters of DM water is also used for washing of DM water tank. Shri Kamlesh Lad also submitted DM plant summary of several years which are re-produced by Assessing Officer in his assessment order, vide page no.9 and 10 of assessment order. 9. Statement of Shri Kanjibhai B. Tandel recorded u/s 132(4) of the I.T. Act dated 18.06.2013 wherein in response to question no. 6, he stated that the rectified spirit is used as base material in all products manufactured by us. Roughly for....
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.... DM Water for several Months. In response to question number no. 1 of statement, Shri Kamlesh Lad stated that DM water is stored in tanks and it is sent to the blending tank through fixed pipes. There is no leakage or exit point between the DM water tank and Blending Tank. Whatever amount of DM water is needed for production is appropriated by the Production Department in the said manner. Further, ld DR argues that in response to question no. 2 of the said statement, Shri Kamlesh Lad stated that apart from production (usage) around 1000 liters of DM water is also used for washing of DM water tank. In response to question no. 3, he has also stated that the apart from washing of DM water tank, there is no other wastage that he is aware of. Therefore, ld DR contends that the difference in the consumption of DM Water is a direct indicator of suppressed production. Hence, addition made by the assessing officer based on DM water consumption should be upheld. 12. Regarding cross objection raised by the assessee, ld DR argues that Tribunal does not have power to examine the validity of search action therefore ground raised by the assessee may be dismissed. 13. Shri K. Gopal, Learned Coun....
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....the assessee`s paper book. Therefore, ld Counsel submits that addition was made by assessing officer without application of mind and without considering the documentary evidences and the submissions filed by the Assessee and that is way the ld CIT(A) has deleted the addition. Hence, ld Counsel defended the order passed by ld CIT(A) and argued that order passed by ld CIT(A) is a reasoned and speaking order and therefore the same may be upheld. 14. Learned Counsel further pleads that search action taken by the Department against the assessee is not valid and therefore assessee is in cross objections before this Tribunal. The Ld Counsel contended that no valid action u/s 132(1) of the Act was initiated against the Assessee. The condition precedent to initiate action u/s 132(1) of the Act is not satisfied in the assessee`s case. The Competent authority did not have any information in his possession to have a reason to believe that Assesseehas undisclosed income or property. Thus, the proceedings, initiated u/s 153A and the Assessment order passed pursuant to the same are void ab initio and therefore the same may be quashed. 15. We have heard both the parties and carefully gone throug....
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....m the register were submitted by the assessee before the Bench. Mr. Ramesh Ramu Halpati's statement was recorded during the post search investigations at the Assessee's premises on 17/08/2013. He is one of the employees of the Assessee looking after the blending work carried out at the Assessee's plant. The statement recorded in Gujarati is at pages 131 to 136 and English translation of the same is at pages 121 to 130 of the Paper Book.During the course of the search, the register of Rectified sprit was verified by the departmental officers, who were part of the search team, and have placed their mark on the same. Sample copies of the same are compiled at pages 137 to 142 of the assessee`s paper book. Similarly, the Bottling Register, maintained by the Assessee, was also verified. The sample copies are compiled at pages 143 to 190 of the paper book. It is important to note that no discrepancy was found in the same. The Inspection Report by the Audit Officer of the Excise department is at pages 423 of the Paper Book. This report covers the period 01/04/2010 to 30/09/2011.Excise Returns are at page 425 of the paper book. 17. We note that in first ground of appeal, the Re....
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....any other purposes. For manufacturing the alcoholic beverages, the substantial ingredient used is the rectified spirit and to make this alcoholic beverage to drinkable level, the Assessee uses DM water. The cost of DM water is very low in comparison to the total cost of production of liquor and the same can be substantiated from the Profit and Loss Accounts of the relevant years. The Assessee being manufacturer of alcoholic beverages needs to maintain the record of rectified spirit and finished goods of IMFL and CL under the strict supervision of the State Excise Department. The movement of rectified spirit and finished products are made under the signature of authorized person in the State Excise Department. The State Excise Audit Report is enclosed at pages 423-425 in the paper book. The Assessee maintains the register showing the details of opening balance, consumption and finished product and the same is enclosed at pages 137 -190 of the paper book. We note that the department (Revenue), neither in the process of search action, nor in the assessment proceedings, could point out any fault in the books of accounts maintained by the Assessee as well as stock register provided befo....
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....om the beginning has contended that the register which is maintained to have control over the demineralized water is not an incriminating document. The various documents found and seized during the course of the search, the register maintained to have control on demineralized water and the statements recorded during the course of the search do not point out any material evidence which shows that the manufacturing or sale of IMFL and CL was suppressed. The ld Counsel also submits that the register maintained for the production of demineralized water was not subjected to any audit or verification. Thus, relying on the same, the allegation of suppression of sales is totally unjustified. Thus it is abundantly clear that there was no incriminating material found by the department in the process of search action. The ld CIT(A) also observed that there is no incriminating material unearthed during the search. The Ld. CIT(A) has categorically observed that there is no substance in the allegations of the Ld. A.O. Even after a thorough search action under section 132, not a single instance of sale outside books, purchase of basic raw material or even packing material or any instance of discr....
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....ing that the entire production is used for blending with spirit, without any wastage, other usages claimed by the assessee. We note that in spite of thorough search action u/s 132 of the Act, not a single instance of sale outside books, purchase of basic raw material or even packing material, or any instance of discrepancy in the stock of finished goods, spirit, bottles or even labels etc. was detected. The ld CIT(A) observed that major and costly ingredients of production of IMFL and CL are Rectified sprit, malt spirit, scotch concentrate, colour and Essences. Obviously because of that the record of the Rectified Spirit, issue of spirit or malt or scotch concentrate for blending and the finished goods of IMFL and CL is required to be mandatorily maintained and under the strict supervision of the State Excise Department. Besides, there are significant items like bottles, boxes, caps, labels and gum tapes etc. which are essential for the manufacturing. Not a single evidence of any purchase or stock outside books of account of any of these has been detected even after a thorough search u/s 132 of the Act. No sale or movement out of books of IMFL or CL have been proved. The DM water i....
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....sessment can be made. The word 'assess' in Section 153A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. Completed assessments can be interfered with by the assessing officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search. The completed assessments would mean those assessments which were not pending and have not abated due to the search. The completed assessments would include 143(1) orders, where time to issue notice u/s 143(2) has elapsed. In case of abated assessments and where the assessment has not become final due to time remaining for issue of notice u/s 143(2) under the Act; the entire income including that not unearthed as a result of search, can be and has to be assessed. We note that despite of thorough search action under section 132 of the Act, not a single instance of sale outside books, purchase of basic raw material or even packing material, or any instance of discrepancy in the stock of finished goods, spirit, bottles or even labels etc. was detected. The assessing officer ma....
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....made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the LD AO. (vii) Completed assessments can be interfered with by the LD AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." 38. The present appeals concern AYs 2002-03, 2005-06 and 2006-07, on the date of the search the said assessments already stood completed. Since no incriminating material was unearthed during the search, no additions could have been made to the income already assessed." 24. O....
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....nd accordingly the addition made by the assessing officer has been rightly deleted by the ld CIT(A). Thus, ground no.2 of cross objection no.02/SRT/2018 filed by the assessee is allowed. With similar observations, ground no.2 of other cross objections nos.03, 05, 06, 07 and 08/SRT/2018, are allowed. 27. At the cost of repetition, we state that the stock, consumption of basic material i.e. spirit, scotch and malt and production of finished productions both IMFL and CL are under statutory supervision. The consumption/production record of the Rectified Spirit and the finished goods of IMFL and CL are required to be mandatorily maintained under the strict supervision of the State Excise Department. The movements of the same are being monitored by the Sub-Inspector of the State Excise Department stationed at factory premises throughout the year and the movements of the Rectified Spirit and the Finished Products are made under his signature. We note that for assessment year 2014-15, the assessee took alternative ground before ld CIT(A) against the addition made by the extrapolation of production figures, for the period before search to the whole year. The ld CIT(A) held that once the en....
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....ion- For the removal of doubts, it is hereby declared that the reason to believe, as recorded by the income-tax authority under this sub-section shall not be disclosed to any person or any authority or the Appellate Tribunal." 33. It is abundantly clear from the above explanation that Tribunal does not have power to examine the "reason to believe", as recorded by the income-tax authority under section 132 of the Act. Therefore, ground no.1 of cross objection no.02 raised by the assessee is dismissed. With similar observations, we dismiss ground no.1 of other cross objections nos. 03,05, 06, 07 and 08/SRT/2017. 34. In IT(SS)A No.03/SRT/2017 for AY.2010-11 and CO. No.04/SRT/2018 for AY.2010-11. Now, we shall take IT(SS)A No.03/SRT/2017 for AY2010-11 and Cross Objection No.04/SRT/2018 for AY2010-11. Since, we have adjudicated all the grounds of cross objections raised by the assessee in above para no. 26 of this order. It is an admitted fact that in assessment year 2010-11, the assessee has disclosed the capital gain on the alleged property and paid the due taxes thereon, hence such property cannot be an incriminating material. Therefore, our above findings shall apply mutatis mut....
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....try has stated that the prevailing market rates for the Devka Beach area for FY 2009-10 (period of sale) was 17,500/- per sq meter. Therefore, the fair value of consideration for the sale of the said immovable properties works out at Rs. 6,21,25,000/-. Hence, assessing officer held that assessee has suppressed capital gains therefore made addition for difference amount at Rs. 5,55,25,000/- (Rs. 6,21,25,000- Rs. 66,00,000). 37. On appeal, Learned CIT(A) deleted the addition made by the Assessing Officer. Aggrieved, the Revenue is in appeal before us. 38. Learned DR for the Revenue submits that addition was made by assessing officer based on incriminating material. Learned DR argues that a valuation report dated 21.05.2012, prepared by M/s Space Architects (prop. Mr. Pankaj Mistry) for the purpose of M/s Dhangra Hotels & Beach Resorts Pvt. Ltd., for getting a bank loan from ICICI Bank, which has also been impounded, by search team, which mentions the market value of the said land as Rs. 7,65,02,500/-.The valuer, Mr. Pankaj Mistry, was examined u/s 131 and his statement was recorded to establish the veracity of the said valuation report, therefore, addition made by the assessing off....