Gujarat High Court
M/S vs Assistant on 23 February, 2010
Author: K.A.Puj
Bench: K.A.Puj
Gujarat High Court Case Information System
Print
TAXAP/2186/2009 27/ 27 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX
APPEAL No. 2186 of 2009
For
Approval and Signature:
HONOURABLE
MR.JUSTICE K.A.PUJ
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
YES
2
To
be referred to the Reporter or not ? YES
3
Whether
their Lordships wish to see the fair copy of the judgment ?
NO
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder? NO
5
Whether
it is to be circulated to the civil judge?NO
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M/S
M KANTILAL EXPORTS
Versus
ASSISTANT
COMMISSIONER OF INCOME TAX
======================================
Appearance :
MR
J.P SHAH, SENIOR COUNSEL WITH MR MANISH J SHAH for Appellant
MR.
M.R. BHATT, SENIOR COUNSEL WITH MRSS MAUNA M BHATT for
Respondent
======================================
CORAM
:
HONOURABLE
MR.JUSTICE K.A.PUJ
and
HONOURABLE
MR.JUSTICE RAJESH H.SHUKLA
Date
: 23/02/2010
CAV
JUDGMENT
(Per : HONOURABLE MR.JUSTICE K.A.PUJ) 1 The Appellant Assessee has filed this Tax Appeal, under Section 260-A of the Income Tax Act, 1961, for Assessment Year 2000-01, proposing to formulate the following substantial questions of law for determination and consideration of this Court.
i) Whether on the facts and in the circumstances of the case, the Tribunal was right in law in upholding the addition of Rs. 17,50,00,000/- as unexplained expenditure under Section 69-C?
ii) Whether on the facts and in the circumstances of the case, there was any evidence before the Tribunal to hold that the assessee had incurred unexplained expenditure of Rs.17,50,00,000/- in purchase of rough diamonds and/or whether such finding is perverse?
iii) Whether on the facts and in the circumstances of the case, the addible amount ought to have been the peak investment of Rs. 72,91,666/- and not the alleged purchase of Rs. 17,50,00,000/- throughout the year?
iv) Whether on the facts and circumstances of the case, the Tribunal ought to have sent the matter back to CIT (Appeals) to adjudicate the ground of appeal before him of Section 80HHC deduction in respect of the above added or addible income of Rs. 17,50,00,000/- or Rs. 72,91,666/-?
2 The appellant - assessee has also filed Civil Application No. 470 of 2009, praying for stay of the demand of Rs. 9,86,37,022/- till the final disposal of the Tax Appeal.
3 This Court has issued Notice in Tax Appeal as well as in Civil Application on 17.11.2009. Since the Revenue had seized diamonds worth about Rs. 10 crores and the respondent was likely to sell off the same by auction, as indicated in the newspaper Gujarat Samachar, dated 17.11.2009, this Court has granted stay to the effect that there shall be no auction of the diamonds seized from the appellant. Thereafter, on 04.12.2009, this Court has Admitted the Tax Appeal and detailed order was passed in Civil Application directing the respondent to release the diamonds on deposit of the first installment of Rs. 10 lacs and thereafter to deposit the same amount every month with the respondent against its outstanding demand till the Appeal is finally heard. The Court has further directed the partners of the appellant firm to file an Undertaking before this Court giving therein a detailed description of the assets belonging to them and further stating that they will not transfer or alienate those assets during the pendency of the Appeal. The Court has further directed that the appellant-firm shall maintain stock of diamond to the knowledge of the Assessing Officer, equivalent to the demand outstanding, till the appeal is finally disposed of. The Court has also directed the Registry to notify the Appeal for final hearing on 12.01.2010. The Appeal was accordingly heard on 02.02.2010 and kept for order.
4Brief facts giving rise to the present Tax Appeal are that the appellant is a partnership firm, engaged in the business of import of rough diamonds, manufacturing and export of polished diamonds. During the course of assessment proceedings for the Assessment Year 2001-2002, the Assessing Officer noticed that as per Annexure-D to Form No. 3CD to the Audit Report, the quantitative details of rough diamonds available for consumption were reported as under :
Opening Stock : 1,01,995.17 carats Purchases during the Year : 2,40,066.36
---------------------------------
Total : 3,42,061.53 carats ============== 5 The
Assessing Officer noted that, as against this, the consumption of rough diamonds was shown at 4,30,701.14 carats. There was an excess consumption of rough diamonds by 1,40,000 carats as against the rough diamonds available at 3,42,061.53 carats. The appellant-assessee was asked to explain the difference in the consumption of rough diamonds with reference to the audit report and the figure reported in the submission. The appellant assessee has given its explanation that it was only a typographical error and the actual consumption of the rough diamonds during the year is only at 2,90,701.14 carats. The appellant-assessee submitted a correction certificate to the Assessing Officer. The Assessing Officer recorded the statement of the Auditor under Section 131 of the Act on 12.2.2004, in which, the Auditor admitted to have committed the typing mistake by the Typist. The Assessing Officer recorded the statement of Shri Himmatbhai Kheni, Partner of the appellant, on 3.3.2004. The partner pointed out that the actual consumption of rough diamonds was 2,90,701.14 carats, tallies with manufacturing jhangds, stock and consumption register of rough diamonds, labour register and manufacturing bills of polished diamonds sent from Surat Office to Mumbai Office. Despite this explanation, the Assessing Officer made addition of difference between wrongly typed figure and the correct figure of rough diamonds consumption. On 1,40,000 carats, @ Rs.1,250/- per carat was applied and the Assessing Officer made addition of Rs. 17,50,00,000/- under Section 69-C of the Act.
6 Being aggrieved by the said Order of the Assessing Officer, the appellant has preferred an Appeal before the Commissioner of Income Tax (Appeals), who, vide his order dated 19.10.2004, deleted the said addition. While deleting the said addition, the CIT (Appeals) has observed that the Assessing Officer should not have passed the order under Section 144 of the Act without giving adequate opportunity of being heard especially when such huge addition of Rs. 17,50,00,000/- was being contemplated. The Assessing Officer was not justified in making presumption or assumption or estimation of such a high magnitude on the back of the appellant especially when day-to-day hearings were conducted in the regular course of assessment proceedings. The Assessing Officer was also not justified in ignoring the evidences and explanations with regard to the typing mistake in the audit report. If the Assessing Officer had seen the Books of Account, then why the figures regarding opening stock, closing stock and relevant consequential figures of sale, purchase or consumption should not be accepted. The Assessing Officer's finding is that the appellant might be having other books of account is a wild guess and no action is required to be taken unless adverse evidence other than evidence recorded in the Books of Account is detected or found. The method and manner under which the Assessing Officer has worked out the yield is far away from reality and practice adopted by the appellant. The estimation of higher yield, if any, cannot be made without corroborative evidence in the form of sales or closing stock in its books. The entire addition is based on a typographical error that crept into while typing out the consumption figure, which is typed as 4,30,701.14 carat, instead of correct consumption of 2,90,701.14 carat as per books of accounts. The Assessing Officer's presumption and belief is unfounded whereas he was supposed to take into account the other opening and closing figures. After recording this finding, he deleted the addition of Rs. 17,50,00,000/- made by the Assessing Officer under Section 69 of the Act.
7 Being aggrieved by the order of the CIT (Appeals), the Revenue has preferred an Appeal before the Income Tax Appellate Tribunal and the Tribunal vide its Order dated 11.09.2009 reversed the order of the CIT (Appeals) and held that the CIT (Appeals) was not correct in deleting the addition made by the Assessing Officer. The excess consumption of rough diamonds represents only the purchase of the rough diamonds outside the books of account of the assessee.
8 The appellant assessee has contended before the Tribunal that the entire addition, being the addition of unexplained expenditure, will be allowable under Section 28 and/or under Section 37 of the Act. The Tribunal rejected the said contention of the appellant with the aid of proviso to Section 69C of the Act. The appellant assessee has also contended before the Tribunal that the alleged purchases were not made by the appellant at one stroke but throughout the year. The rough diamonds purchased on a particular date were manufactured and sold within a period of 15 days from the date of purchase. Since the manufacturing, sales and realization of sale proceeds is covered in a cycle of period of 15 days, the sale proceeds realized will be reinvested in another purchase and the cycle will go on. Therefore, the maximum moneys that will be required would be Rs. 72,91,666/- i.e. Rs. 17,50,00,000/- divided by 24 cycles. The appellant has also contended that the appellant was entitled to relief under Section 80 HHC on the income assessed by him. The alternative contentions were also rejected by the Tribunal and, hence, the Question Nos. 3 and 4 were proposed by the Appellant, which are in respect of its alternative contentions.
9 Mr. J. P. Shah, learned Senior Counsel appearing with Mr. Manish J Shah, learned Advocate, for the appellant has submitted that the Tribunal has erred in reversing the well reasoned order of the CIT (Appeals) and in upholding the order of the Assessing Officer, taxing the huge amount of Rs. 17,50,00,000/- based only on the typographical mistake in the Audit report under Section 44-AB of the Act. He has further submitted that the Tribunal has not appreciated the veracity of all other figures (other than consumption of 4,30,701.14 carats) in Annexure-D of the said report as all other figures were accepted by the Department, as, if that is so, the inexcusable conclusion is that the consumption has to be 2,90,701.14 carats and not 4,30,701.14 carats, which was a typographical mistake in the Audit report. He has further submitted that except this typographical mistake in the report of the Chartered Accountant, which he himself acknowledged by a letter, supported by affidavit of the Typist and the Chartered Accountant before the CIT (Appeals) and before the Assessing Officer in remand, there was no evidence of any unexplained expenditure and, therefore, there was no justification for the addition of income of such a huge amount of Rs. 17,50,00,000/-. He has further submitted that the Assessing Officer in his remand report, could only support this addition by pointing out in the remand report that there were duplicate books of accounts from where this figure was arrived at by the Auditor . In other words, according to books of account which were audited, the consumption figure is 2,90,701.14 carats and not 4,30,701.14 carats. He further submitted that the books of accounts which were audited and on the basis of which, this audit report was prepared and produced before the Assessing Officer, showed the consumption figure of 2,90,701.14 carats only and, therefore, there was no iota of doubt that 4,30,701.14 carats was a typographical mistake. He has further submitted that the Tribunal has done gross injustice to the appellant by importing in the matter sub-judice affairs of M/s Kantilal & Co. Limited , as if, M/s Kantilal & Co. Limited was the assessee before the Tribunal and its affairs were the affairs of the appellant assessee. Mr. Shah, therefore, submitted that the order of the Tribunal was unjust and contrary to the evidence on record and it was based on non-application of mind and it being perverse, deserves to be quashed and set aside.9
Mr. M.R. Bhatt, learned Senior Counsel appearing with Mrs. Mauna M. Bhatt, learned Standing Counsel, for the Revenue, on the other hand, has supported the order passed by the Tribunal. He has submitted that the appellant made the submission before the Assessing Officer and furnished the percentage of yield of finished diamonds, which shows the yield for the Assessment Year 2001-02 shown at 15.64%. He further submitted that the yield for the Assessment Year 2001-02 comes to 15.64% only when the consumption figure is taken at 4,30,701.14 carats. On the other hand, if the figure is taken at 2,90,701.14 carats, the yield comes to 24.61% and the same is above average use admittedly shown by the assessee from Assessment Year 1999 -2000 to Assessment Year 2003-2004. Therefore, he has submitted that consumption of rough diamonds at 4,30,701.14 carats, as per the audit report, stands corrected.
10 Mr. Bhatt further submitted that during the course of Appeal proceedings before the Tribunal, in the Index to the Paper Book, the Assessee has certified that the page Nos. 17 to 183 were produced before the Assessing Officer and CIT (Appeals). However, it can be seen that the affidavits appearing at page Nos. 20 to 28 are dated 10.04.2004, whereas the Assessment Order was passed on 31.3.2004. He has, therefore, submitted that those papers were never filed before the Assessing Officer when the assessment order was passed on 31.03.2004. He has, therefore submitted that when those papers were never filed before the Assessing Officer, the contents of the Affidavit of Shri Suresh Kanani, Typist and affidavit of the Chartered Accountant, certifying that there crept into a typographical error in the figure of consumption of rough diamonds were not considered by the Assessing Officer. The Tribunal has observed that since the affidavit dated 10.04.2004 is made after the passing the assessment order, these affidavits were not before the Assessing Officer at the time of assessment proceedings and cannot be accepted as a piece of evidence which is a product of an after thought from the assessee as the assessee could not produce any additional evidence to prove its case before the Tribunal.
11 Mr. Bhatt further submitted that a search action was conducted on 07.01.1999. During the course of search, various documents and books of accounts showing unaccounted manufacturing and trading activity carried out by the assessee were found. In the case of M. Kantilal & Company Limited, a sister concern of the assessee, the assessment was completed on a huge addition of Rs. 2,59,22,64,015/- on being found that most of the entries in the seized papers were not accounted in the regular books of accounts. He has further submitted that the assessee was carrying out its activities outside the books of accounts, which is clear from the fact that the appellant assessee has thrown out the box of floppies seized during the course of search, which contains the unaccounted business transaction of the assessee, during the course of verification in the post search inquiry in the presence of Shri Himmatbhai Kheni, one of the partners and his employees. He further submitted that a criminal case was lodged immediately on the misconduct of the appellant - assessee and the investigation by the police is still going on in this case.
12 Mr. Bhatt further submitted that the Tribunal has also endorsed that the conduct of the appellant assessee was not proper right from the beginning and all the time they tried to interrupt the ongoing assessment proceedings by the Department by obstructing the discharge of duties of the officers and staff by way of threat and coercion.
13 Mr. Bhatt further submitted that Section 139(5) of the Act allows an assessee to rectify, in case there is a mistake being found in the return of income submitted by him by filing a revised return at any time before the expiry of one year from the end of the relevant Assessment Year or before the completion of assessment, which ever is earlier. It is an admitted position that the assessee has not submitted any revised return in accordance with the provisions of Section 139(5) of the Act pointing out the omission in the original return. It is only when the Assessing Officer has asked for the explanation, on the consumption of raw materials, the appellant-assessee came out with the submission that there was a mistake on the part of the Auditor i.e. only after the expiry of more than 2 and half years, when the tax audit for the succeeding assessment year also was completed by the Chartered Accountant. In support of this submission, Mr. Bhatt has relied on the decision of the Apex Court in the case of CST vs. Esufali (HM) Abdulali (HM), reported at (1973) 90 ITR 271 (SC) wherein it is held that the assessee cannot be permitted to take advantage of his own illegal acts and that it was his duty to place all the facts truthfully before the Assessing Officer. If he fails to do his duty, he cannot be allowed to call upon the Assessing Officer to prove conclusively what turnover he has suppressed. That fact must be within his personal knowledge and the burden of proving that fact is on him.
14 Mr. Bhatt further submitted that on verification of the month wise purchase and production, it is seen that, the assessee has not shown any rejection from April to 23rd October, 2000. It is also noticed that the quality of rough diamonds purchased before October, 2000 is of inferior quality, as it appears from the analysis of the rate shown by the assessee. The higher quality diamonds have been purchased from October to March, 2001. The rate of rejection of rough diamonds during this period is also higher or the rate of rejection of rough diamonds depends upon the quality of rough diamonds and vice versa. In this case, despite there being inferior quality of diamonds, there was no rejection as per the submission of the appellant - assessee and, hence, it can be assumed that the appellant assessee has not disclosed the true state of affairs in the Return of Income filed.
15 Mr. Bhatt further submitted that the total quantity of rough diamonds purchased comes to 2,35,695.91 carats as against 2,40,066.36 carats as claimed by the assessee in the Audit report and submission filed during the course of assessment proceedings. There is no reporting of 4,370.45 carats and the appellant assessee has failed to reconcile the same with the value of purchase of rough diamonds shown. He has, therefore, submitted that the state of affairs of the appellant assessee is not at all reliable and should be rejected.
16. In rejoinder, Mr. Shah, while clarifying some of the issues raised by Mr. Bhatt, submitted that, whatever the yield was shown in all the years, i.e. Assessment Year 1999-2000 to Assessment Year 2003-04, except Assessment Year 2001-2002, is accepted by the Department in the Assessment Orders passed under Section 143(3) of the Act. He has, therefore, submitted that if 11.89% yield of Assessment Year 2002-2003 is acceptable to the Department, what is the objection to higher yield of 15.64% in Assessment Year 2001-02. He has further submitted that the method of calculating the yield has not been adopted by the Department in any of the years, except Assessment Year 2001-2002. The yield which is shown by the Assessee is not decreasing, on the contrary it is increasing. As a matter of fact, the Assessing Officer had come out with a new method of finding out the yield. He has further submitted that the rejection of rough diamonds cannot be included in the yield as it was done by the Assessing Officer inasmuch the rejection of rough diamonds is taken out and rejected right at the threshold and it yields nothing. It does not undergo any processing for bringing polished diamonds. If that is so,to include it in the rough diamonds from which the polished diamonds are produced, would be travesty of reality.
17 Mr. Shah further submitted that in the Assessment Year 1999-2000, the labour charge of rough diamonds is Rs. 222/-, in the Assessment Year 2000-01 at Rs. 239/- and in Assessment Year 2001-02 it is Rs. 271/- . Based on this, the Assessing Officer adopted the rate of Rs. 271, which is considered to be high. He further submitted that the Assessing Officer nowhere in the order mentioned that Rs. 271 per carat was not paid and, hence, no portion of labour charges was disallowed by him. Even otherwise, this is little more than 10% over Rs. 239/-of last year, as Rs. 239/- of last year is more by little less than 10% of Rs. 222/- of Assessment Year 1999-2000. He has further submitted that the Assessing Officer has missed the point that for 4,30,701.14 carats, the labour rate would be Rs. 183.25 per carat and Rs. 56/- less than last year's Rs. 239/- per carat. He has, therefore, submitted that the correct rate of labour paid is at Rs. 271/- per carat and the correct consumption is 2,90,701.14 carats.
18 Mr. Shah, therefore, submitted that on none of the counts, the order passed by the Tribunal will be sustained. The Appeal of the appellant therefore be allowed by the Court.
19 Mr. Bhatt, in support of his submission that excess consumption of rough diamonds is not due to a typographical error but it is due to purchase of fresh diamonds made by the appellant outside the books of accounts, and that this finding was recorded by the Tribunal as finding of fact, which cannot be interfered with by this Court in this Tax Appeal filed under Section 260-A of the Income Tax Act, 1961, has relied on the following decisions of the Apex Court.
Nalinakshi N. Rai & Ors vs. Indira Shetty, (1999) 9 SCC 248;
State of Kerala & Anr vs. Mohd. Kunhi (Dead) By Lrs & Ors., (2005) 10 SCC 139;
Chandrika Singh (Dead) By LRs and Anr vs. Sarjug Singh & Anr., (2006) 12 SCC 49;
Dharmarajan & Ors vs. Valliammal & Ors., AIR 2008 SC 850;
Dnyanoba Bhaurao Shemade vs. Maroti Bhaurao Marnor, AIR 199 SC 864; and Hero Vinoth (Minor) vs. Seshammal, AIR 2006 SC 2234.
20 Having heard the learned Counsel Mr. J.P. Shah for the appellant and Mr. M.R. Bhatt, the learned Senior Counsel for the respondent and having gone through the orders passed by the authorities below as well as the pleadings of the parties and the documents produced before the Court, we are of the view that the moot question to be decided by the Court is as to whether the alleged consumption of excess stock is merely a typographical error or as to whether the appellant assessee has, in fact, purchased rough diamonds outside the books of accounts and whether the provisions of Section 69-C of the Income Tax Act, 1961 are rightly invoked by the Assessing Officer by treating such excess consumption as unexplained expenditure incurred by the appellant assessee for purchase of rough diamonds. The CIT (Appeals) has held that it is merely a typographical error whereas the Tribunal has not accepted the assessee's theory of being it a typographical error. Since two appellate authorities have recorded different findings of fact and the Tribunal's finding is merely based on inference and unsupported by any evidence on record, this Court will have to consider the assessee's plea regarding typographical error in light of the various documents produced before the authorities below. It is the consistent stand of the assessee that the actual consumption is 2,90,701.14 carats and not 4,30,701.14 carats as erroneously reflected in Annexure-D to Form No. 3-CD of the Audit Report. The actual consumption of 2,90,701.14 carats is tallied with all other figures. It is also duly supported by the statement of the Auditor, the statement of the partner of the appellant firm as well as the affidavit of the Typist. These documents were brushed aside by the Tribunal only on the ground that the same were not available with the Assessing Officer. The Tribunal, has, however, failed to take note of the fact that the CIT (Appeals) has called for the Remand Report from the Assessing Officer and the Assessing Officer had opportunity to consider these documents. Hence, they cannot be treated as the fresh evidence produced before the Tribunal for the first time.
21 It is found from the record that during the year under consideration, the opening stock, purchases, rejections, consumption and closing stock of rough diamonds as per stock register, manufacturing register, job work register, Jhangds of rough diamonds, import invoices, bills of manufacturing, job work bills of rough diamonds are as under:
Particulars Carats Opening Stock Add:
Purchases during the year Less:
Consumption during the year Rejections Closing Stock 1,01,995.17 2,40,066.36 3,42,061.53 2,90,701.14 26,555.00
------------------------
24,805.39 ========= In the Audit Report under Section 44AB of the Act, Annexure-D is as under:
Particulars Carats Opening Stock Add:
Purchases during the year Less:
Consumption during the year Rejections Closing Stock 1,01,995.17 2,40,066.36 3,42,061.53 4,30,701.14 26,555.00
------------------------
24,805.39 ========= From the above charts, it is clear that the Auditor has deducted 3,17,256.14 carats (2,90,701.14 + 26,555.00 carats) from 3,42,061.53 carats. Out of Opening stock + purchases = 1,01,995.17 carats + 2,40,066.36 = 3,42,061.53 carats i.e. consumption + rejections = 2,90,701.14 + 26,555.00 = 3,17.256.14 carats were reduced. The correct figure of consumption of rough diamonds is 2,90,701.14 carats while making subtractions also the figure of 2,90,701.14 carats was considered. The only mistake occurred is the typing mistake by a Typist of the Auditors. The Typist typed wrong figure of 4,30,701.14 carats instead of correct figure of 2,90,701.14 carats. The Auditor has also submitted a correction certificate to the Assessing Officer. The Assessing Officer recorded the statement of the Auditor under Section 131 of the Act on 12.02.2004 in which the Auditor admitted to have committed typing mistake by his Typist. The Assessing Officer recorded the statement of Shri Himmatbhai Mohanbhai Kheni, Partner of the appellant, on 3.3.2004. The partner pointed out that the actual consumption of 2,90,701.14 carats tallied with manufacturing Jangads, stock and consumption register of rough diamonds, labour register and manufacturing bills of polished diamonds sent from Surat Office to Mumbai Office.22
If the Affidavit of the Typist i.e. Suresh Natverbhai Khetani, dated 10.4.2004, is considered, he clearly admitted that he carried out the typing of audit report, financial statements and Form No.3CD including all its annexures of M/s M. Kantilal Exports and M/s Anjana Exports, for the year ending 31st March, 2001. He also admitted that he also entered first the data of M/s Anjana Exports in the form of Form No. 3CD, Balance sheet, Profit & Loss Account including all annexures thereto. He thereafter copied the entire set of audit report, Form No. 3CD, annexures, balance sheet and profit and loss account of Anjana Exports for the purpose of entering the data of M/s M. Kantilal Exports. He further admitted that he followed the method of typing by copying the format of M/s Anjana Exports to the typing of M/s M.Kantilal Exports because the nature of business of both firms was similar. The particulars i.e. alphabetical contents and information such as stock, purchases, consumption, rejections, sales and head of the expenses remain the same. In the method of copying and then typing in case of similar formula, he saved his time of typing inasmuch he has to type only numerical digits and not typing the alphabetical details which remains the same and unchanged. He admitted that he verified the pencil written copies of Umesh J Shah, Chartered Accountant and he confirmed that in the pencil written copies the figure of consumption has been written at 2,90,701.14 carats and he committed a mistake in typing the figure and wrongly typed it as 4,30,701.14 carats. He also explained the possibility of committing such mistake is only due to the method of copying followed by him. He further clarified that he copied the data of M/s Anjana Exports for typing the Annexure-D and all other annexures of Form No. 3CD, balance sheet, profit & loss account and audit report of M/s M. Kantilal Exports. He further admitted that in the case of Annexure-D in copied data, the figure of consumption of Anjana Exports was 43,881.70 carats. He typed the figure of 2,90,701.14 near the figure of 43,881.70 carats. He erased 881.70. Instead of erasing thereafter the digits 43, he erased 29 and, therefore, the wrong figure of 4,30,701.14 carats appear in Annexure-D. 23 Affidavit of Shri Umesh J. Shah, Chartered Accountant, dated 10.04.2004 also supports the case of the appellant. He admitted that after receipt of Notice under Section 142(1) of the Act dated 15.12.2003, pointing out the different consumption figure in his Annexure-D to Form No. 3CD of M/s M. Kantilal Exports. On the basis of figure of consumption submitted by M/s Kantilal Exports to the Assessing Officer on 05.08.2003, he carried out the verification with his records of Audit. During the course of Audit, he obtained copies of manufacturing register and labour register. He had also obtained the details of total yearly purchase, consumption and stock of rough diamonds. He verified the figure of consumption with these details kept on his records during the course of audit as well as with the copy of pencil written Annexure-D kept on his records. He confirmed from his records that the correct figure of consumption of rough diamonds is 2,90,701.14 carats. He also admitted that he carried out the investigation as to how the wrong figure of consumption of 4,30,701.14 carats was typed and thereafter he found that the mistake was committed by the Typist. He further admitted in his Affidavit that his statement dated 12.2.2004 was recorded by the Assessing Officer under Section 131 of the Act and he explained all these facts to him. He also explained that primary data were correctly prepared but due to negligence of Typist, the mistake occurred.
24 The statements on affidavits of the Typist as well as the Chartered Accountant clearly reveal that the Typist has committed the mistake in typing the figures of consumption during the year. The Chartered Accountant, being a professional, having his responsibility of submitting of a correct report, when a mistake was committed, which was admitted by him as well as his Typist, there is no reason not to believe these vital documents.
25 As against the above version of the appellant, which was accepted by the CIT (Appeals), the Tribunal has arrived at the finding on the basis of the yield shown by the appellant at 15.64% for the Assessment Year under appeal becomes acceptable only when the consumption figure is taken at 4,30,701.14 carats and if the figure is taken at 2,90,701.14 carats, the yield comes to 24.6% which is very much above the average use of rough diamonds. The Tribunal further considered the Affidavit of the Chartered Accountant, Typist and the Partner of the appellant firm as inadmissible evidence as the same were not filed before the Assessing Officer, which is also not correct from the evidence on record. The Tribunal has also taken into consideration the proceedings taken by the Department in the case of sister concern, namely, M/s M. Kantilal & Company. The Tribunal further observed that the Revised Return was not filed by the appellant under Section 139(5) of the Act. The fact still remains that there is no documentary evidence which would even slightly prove the allegation that the alleged consumption of rough diamonds is nothing but the purchases made by the appellant outside the books of accounts. The huge addition of Rs. 17,50,00,000/- were made and confirmed by the Tribunal merely on the basis of assumption and presumption and no document is relied upon for such addition, it is difficult to sustain such order. The Court cannot refuse to entertain such appeals merely on the ground that the finding recorded by the Tribunal is finding of fact and no question of law much less any substantial question of law arises out of the order of the Tribunal. The Court would be failing in its duties if the mistake committed by the Tribunal is not corrected in this Tax Appeal. We are, therefore, of the view that the typing error in Annexure-D of Form No. 3CD of the Tax Audit Report is committed by the Typist of the Auditor, the consumption of rough diamonds was deducted at 2,90,701.14 carats in Annexure-D. The figure of 4,30,701.14 carats was never deducted. If figure of 4,30,701.14 carats is deducted from the total Opening Stock + Purchases = 3,42,061.53 carats, the Annexure-D would have shown negative stock, which does not appear in Annexure-D. The Closing Stock of 24,805.39 carats in Annexure-D is a conclusive proof of deduction of 2,90,701.14 carats as consumption. All manufacturing records, stock records and cost records as per the books of accounts of the appellant reveal the consumption of 2,90,701.14 carats. The yield working given in Assessment Order is not correct in view of yield is always calculated on `Chadel Rough' i.e. makable diamonds. On dust i.e. rejections yield cannot be calculated because polished diamonds manufactured from rejections is Nil because of no diamond/gem contents in rejections.
26 In the above view of the matter and the finding recorded by us, we are of the view that the authorities cited by Mr. Bhatt, learned Senior Counsel, are not applicable to the facts of the present case. Considering the facts of the case and looking to the approach adopted by the Tribunal, the Court has no hesitation to hold that the impugned Order passed by the Tribunal is devoid of any merits, based on assumptions and presumptions and relevant evidence are not considered. We, accordingly, hold that the Tribunal was not right in law in upholding the addition of Rs. 17,50,00,000/- as unexplained expenditure under Section 69C of the Act as there was no evidence before the Tribunal to hold that the appellant assessee had incurred unexplained expenditure of Rs. 17,50,00,000/- in purchase of rough diamonds.
27 In view of our finding in relation to the Question Nos. 1 and 2 referred to earlier, it is not necessary for us to decide the Question Nos. 3 and 4.
28 This Appeal is allowed without any order as to costs. The interim order passed by us earlier on 04.12.2009 is now merged into the final order and the appellant and/or its partners are relieved from their obligations as well as Undertaking and the amount deposited by them pursuant to the said interim Order either be refunded to the appellant or be adjusted against the outstanding demand, if any.
(K. A. PUJ, J.) (RAJESH H. SHUKLA, J.) pnnair Top