TaxTMI 
TaxTMI 
2003 (7) TMI 254
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....)(b) is not applicable as there was no case of non-furnishing of return or case of understatement of income or excessive claim of loss deduction etc." 4. The facts of the issue are that the assessee firm carried on business of manufacture and sale of Diesel Oil Engines. Shri Baldev Singh and his two sons S/Shri Mohan Singh and Narendra Singh are partners of the assessee firm. The assessee firm filed its return of income for assessment years 1997-98, 1998-99 and 1999-2000 OD' 29-10-1997, 30-10-1998 and 28-12-1999 declaring income at Rs. 3,712, Rs. 58,049 and Rs. 58,998 respectively. All the returns were processed under section 143(1)(a) of the Income-tax Act, 1961. Later on, survey under section 133(A) of the Act was conducted on 7-7-2000. During course of survey, some books, files and loose papers were found and inventorised as Annexure-A and Annexure-S. As per Annexure-"A" prepared on 7-7-2000 shows that the same was prepared at the business premises of M/s. B.S. Agricultural Industries (India), 12/15-AA, Nawalganj, Agra and containing serial Nos. A1 to A36. However, Annexure-"S" containing serial Nos. S1 to S9 show that the same was prepared on 7-7-2000 at the business premises ....
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....icer and as a measure to co-operate with the Department, he appeared but was forced to give statement. The statement so recorded was, therefore, without any proper authorization under law. 7. The Assessing Officer in his remand report dated 21-9-2002 referred above has admitted that statement was recorded on 9-7-2000, the learned Counsel for the assessee also filed copy of statement recorded on 9-7-2000 which is placed at page Nos. 7 to 11 of the paper book to prove that the survey party had taken away all the inventorised books on the date of survey itself while summon under section 131 was issued on the same day to the assessee firm to produce the books/ documents, inventorised as per Annexures-"A" & "S" for 10-7-2000. The learned Counsel drew our attention to the statement of Shri Baldev Singh, partner wherein Assessing Officer had asked the questions by showing the sale bills, papers of Annexure-A/15 etc. but in spite of that the Assessing Officer did not admit that books/documents taken away on the date of survey i.e., on 7-7-2000. It is further argued that assuming that the same were not taken away, how the Assessing Officer had confronted Shri Baldev Singh, Partner with the....
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.... Tax Authority acting under the section shall, on no account remove or cause to be removed from the place wherein he has entered, any books of account or other documents or any cash, stock or other valuable article or thing: 10. However, an order under section 131 (3) passed by the Assessing Officer on 10-7-2000 which show that the books of account/documents inventorised as per Annexures "A" & "S" during course of survey on 7-72000 were produced before him by Shri Baldev Singh on 10-7-2000 and the same were impounded on that date for further investigation. This order indicates deliberate attempt to avoid the true and correct picture. In fact all the books, computer etc. were taken away by the survey party on 7-7-2000, otherwise the Assessing Officer could not have confronted Shri Baldev Singh, partner of the assessee firm on 9-7-2000 with the same. It appears from pages 1 & 2 of the assessment order that the assessee firm filed a writ petition in the jurisdictional High Court as it is mentioned in assessment order:-- "...04. 23-1-2001. The Counsel for the assessee filed an application with specific order passed by the Division Bench of Hon'ble High Court, Allahabad wherein the As....
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....cise paid); Gen set, four wheel trolley; base plates was shown at Rs. 12,09,854 and, therefore, the total value of closing stock at the end of the accounting period has been shown at Rs. 44,60,624 as per Annexure 8 to the audit report. However, at the time of survey operation under section 133A of Income-tax Act, 1961 conducted on 7-7-2000 at the business premises of the assessee-firm valuation register of High Speed gave the total value of the closing stock of High Speed Spare only as on 31-3-1997 at Rs. 52,33,673.08. Thus, above fact goes to show that assessee has not disclosed true and correct information about its business activity while filing the return of income for the assessment year 1997-98. In view of the facts discussed above, I have reason to believe that the income of Rs. 52,33,673.08 (-) 32,50,770 (=) Rs. 19,82,903.08 chargeable to tax has escaped assessment for the assessment year 1997-98 because the assessee has not disclosed its business affairs truly and correctly which are necessary for determining the correct taxable income of the assessee firm for the assessment year 1997-98. Accordingly notice under section 148 is being issued asking assessee firm to file i....
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....ued under section 148 the assessee informed that the returns filed earlier may be treated as returns filed in response to the notices. During the course of assessment proceedings, authenticity of the computer print outs, on the basis of which discrepancy in the stock was noticed, was vehemently challenged...." 11. During course of hearing before us the learned Counsel for the assessee strongly pleaded that the loose sheets alleged to be Valuation register of high speed spares were fabricated and interpolated by the ITO, Ward-1(3), Agra only to harass the assessee firm as it has refused to surrender the income which was neither found nor detected during the course of survey. Thus the action of the ITO, Ward 1(3) is illegal and subsequent actions are bad in law. 12. It is explained that inventorised Annexure-A contains Annexures A-1 to A-36 was prepared during course of survey. The dispute is in regard to Annexures A-17 and A-34. The Annexure A-17 is a bunch of loose papers/sheets containing pages 1 to 191 loose sheets. This annexure contains valuation register of High Speed Spares as on 31-3-1999. The learned Counsel argued that as per inventory prepared by the Survey Party it is ....
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....-17 (pages) 8 onwards". The learned D.R. has given page numbers to her paper book up to page No.8 only. Thereafter the D.R. did not give page number. However, the photocopies attached after page No. 8 includes inter alia the valuation report taken from computer which alleged to be inserted in Annexure A-17 by giving page Nos. 12/1 to 12/8. On some of the pages signature of Shri Narendra Singh appeared. However, nowhere there is signature either of the Assessing Officer or any departmental authorities. 15. It is surprising to note that page Nos. 24 to 31 of the paper book filed by the assessee firm contained signatures of the Assessing Officer but no signature of Shri Narendra Singh appeared. While the photocopy of the same inventory of stock as on 31-3-1999 supplied by the learned D.R., on some of the papers signature of Shri Narendra Singh appeared. However, nowhere signature of the Assessing Officer is appearing in any of the papers of inventory as on 31-3-1999. From the above factual position it appears that two copies were taken out from the computer out of that one copy signed by the Assessing Officer on 9-7-2000 and on another copy some of the papers of the said inventory on....
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....e inspection of the valuation register of high speed spares and the inspection was allowed to Shri Harpreet Singh assisted by Shri K.K. Jain advocate on 29-1-2002 and after inspection of the file, a letter was filed on 29-1-2002 stating therein the following objections:-- (1) No valuation register of high speed spares was provided by the Assessing Officer as it was not in existence. (2) Only loose papers of Annexure A/34 which is alleged by the Assessing Officer to be the valuation register of high speed spares were shown. (3) The loose sheets alleged to be the valuation register of high speed spares were replaced/inserted in the said annexure as each and every paper of Annexure A/34 was twice numbered. The ITO, Ward 1(3) remained silent on the objections raised by the assessee firm and as such the objections raised by the assessee firm remained uncontroverted. 18. Furthermore, it is pertinent to note the fact that in the normal course when the papers are numbered either at the time of surveyor search, the same are numbered only once serially and not twice and even assuming that the same are numbered twice, all the papers of the Annexures have to be numbered twice serially. Ref....
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....so have been correctly shown there. Since this was not done, it is difficult to accept that such pages were found at the time of survey when the inventory of the documents was prepared vide Annexure A. However, it does not mean that the appellant had no connection or relation with these papers. This is because, as rightly mentioned by the Assessing Officer in the orders, these sheets contain details of almost all the items of spare parts which are used by the appellant in manufacturing diesel engines. These sheets contain complete description including the Computer code, rate, number of pieces of each item etc. Had these sheets were not of the appellant then such minute details would not have been there. Further, some of such sheets have been signed by one of the partners namely Shri Narendra Singh (for instance page numbers 12/2, 12/4, 12/7, 12/8 of Annexure A-17; 92, 93, 95, 97 of Annexure A-34). If these sheets had no relation or connection with the appellant then there was no question of signing the same by the aforesaid person who is a partner in the firm. It maybe mentioned that after the survey the partner of the firm had refused to sign several papers. This is what has been....
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....ter sheets which did not pertain to the appellant. It has been contended that since there was no relevant material with the Assessing Officer, action under section 148 could not have been taken. In support of his stand the A.R. has relied on certain judicial pronouncements. I have carefully considered the facts of the case, submissions of the A.R., comments of the Assessing Officer and the position of law. In my view, this ground of appeal deserves to fail. As discussed above, the computer print outs had relation/connection with the appellant. In view of this, in my opinion, the Assessing Officer had valid grounds for taking action under section 148. It cannot be said that there was no material with the Assessing Officer or the material was vague, irrelevant or far-fetched. It is a different thing that the addition was not entirely made on the basis of these papers but certainly these papers were relevant and could be taken note of for taking action under section 147 of the Act. This is a more so as no assessments under section 143(3) were earlier made for these years. The returns originally filed were accepted under section 143(1)(a) of the Act. Thus, the appellant's case clearly....
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....rding to the learned Counsel for the assessee the closing stock declared in the said inventories tally with the books of account of the assessee which is at Rs. 32,50,770, Rs. 22,83,434 and Rs. 20,49,399.69 as on 31-3-1997,31-3-1998 and 31-3-1999 respectively and not the closing stock worked out from the so called print outs alleged to have been taken from computer at Rs. 52,33,673, Rs. 52,31,097 and Rs. 58,78,102 as on 31-3-1997, 31-3-1998 and 31-3-1999 respectively. 25. On the other hand, the learned D.R. argued that the CIT(A) at pages 2 and 3 of his order has reproduced the reasons recorded by the Assessing Officer wherein difference in stock as per books and stock as per computer printouts is at Rs. 19,82,903, Rs. 29,47,663 and Rs. 38,28,703 which justify the action taken by the Assessing Officer for initiating proceedings under section 147 of the Act. It is further argued that after initiating proceedings under section 147, there is no restrain under law to make addition on the basis of evidences available at the time of reopening of assessment. In fact, the Assessing Officer can make addition on the basis of other information gathered during reopening assessment proceedings....
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....e, the Assessing Officer could not supply second copy of valuation of closing stock alleged to be as on 31-3-1999 on which some sheets were signed by Shri Narendra Singh and placed in Annexure-A at pages 12/1 to 12/8 so that the sheets disowned by the assessee could be rebutted. 28. Furthermore, when stock was physically taken by the survey party then why the difference could not be worked out on the date of survey after verifying the books of account. Nowhere it is mentioned that any difference was deduced during survey in closing stock to prove malpractice adopted by the assessee firm, if any. Moreover, when computer sets with floppies were taken away by the survey party then why printouts could not be taken in the presence of Shri Baldev Singh partner who appeared before the Assessing Officer on 9-7-2000 i.e., just after two days of the survey. It is also not possible that Shri Baldev Singh would appear before the Assessing Officer on 9-7-2000 being Sunday at his own unless he was called upon by the Assessing Officer. Moreover, it is not understood that why the assessee was not confronted with the valuation register of high speed spares if found during course of survey and vast....
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....ions 147 and 148 of the Income-tax Act. For initiating such proceedings there must be some material which can be regarded as information on the basis of which Assessing Officer can have reason to believe. At the stage of validity of notice of reassessment, question is not whether what is stated in information or conclusion drawn, is true or not and only question at this stage is about relevance of material for information of requisite belief. Further, it is only necessary to find out whether there is prima facie reason on record on the basis of which the Assessing Officer could reopen the case. If the Assessing Officer for whatever reasons has reason to believe that the income has escaped assessment, it confers jurisdiction on him to reopen the assessment. Hon'ble Gujarat High Court in the case of CIT v. Maneklal Harilal Spg. & Mfg. Co. Ltd. [1977] 106 ITR 24 held that it may be that in respect of items regarding which the reassessment proceedings were started, the assessee may ultimately turn out to have been correctly assessed. But that does not deprive the ITO of his power to consider all the items in reassessment proceedings. Once the reassessment proceedings are validly starte....