1. This is the, assessee's appeal for the assessment year 2011-12, against the order dated 25.05.2015, passed by the Ld. CIT(A), Bathinda. The assessee has raised the following grounds of appeal:
| "1. |
That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in upholding the addition of Rs. 685,270/- on account of alleged excess stock of Narma at 155.39, quintals which was found excess on using carton for weighment during survey. |
2. |
That on the facts and in the circumstances of the case and in law, the learned CIT(A) ignored the fact while upholding the addition, that it is an offence to weigh the goods without standardized weight as per the provisions of The Standard of Weights and Measurement Act, 1976 (Act No. 60 of 1976). |
3. |
That on the facts and in the circumstances of the case and in law, the learned CIT(A) erred in giving a finding that there is no evidence of the appellant providing the necessary facility of weighment by a standardized scale and did not keep the facility of scale at business premises without seeing the audit report. |
4. |
That on the facts and in the circumstances of the case and in law, the learned CIT(A) has given the less relief at Rs. 1,00000/- out of Rs. 15,000/- disallowed by the AO out of various expenses." |
2. Apropos Ground Nos. 1 to 3, the facts are that the assessce, during the year, was running a cotton factory. A survey was conducted at the premises of the assessee. Excess stock of Narma was found. The AO made addition for an amount of Rs.6,85,270/- on account of this excess stock of Narma. The excess stock of Narma was to the extent of 155.39 Qtls. The survey party drew inventory of the said excess stock, on the basis of weighment of the Narma. The grievance of the assessce is that such weighment was not done in accordance with the provisions of the Standards of Weights and Measures Act, 1976, by any standardized scale using standard weights and measures, but by ad hoc weighing of the Narma by using cartons. Such method of weighment, pertinently, was objected to on behalf of the assessee at the very time of survey and also during the assessment proceedings. The AO over-ruled the assessee's objection and computed the monetary value of the excess stock of Narma at the prevailing market rate of Rs.4900/- per qtl., amounting to Rs.7,61,111/-. However, the AO gave allowance of moisture and non-weighment by scale and thereby allowed a relief of 10% to the assessee, thus, making the addition of Rs.6,85,270/-.
3. The ld. CIT(A) confirmed the addition by holding as follows:
"The submissions of the appellant have been considered. While it is true that the method of weighing of Narma was ad hoc, there is no evidence of the appellant providing the necessary facility of weighment by a standardized scale. The appellant did not keep the facility of scale at the business premises and therefore, it can safely be presumed that the recording of the stock by the appellant himself was also on the same basis. The provisions of section 133A of the Act which provides the power of survey, mandates that the survey team has to be afforded the necessary facility to check or verify cash, stock or other valuable article or thing which may be found in the surveyed premises. Had it been the case that the survey team stubbornly refused to take inventory of stock by the standardized scale provided by the appellant or the employee or any other person who may at the time and place of the survey, be attending in any manner to, or helping in, the carrying on of such business of profession, then the aforesaid assertion of the appellant could have been tenable. In the absence of such facility having been afforded to the survey team, the appellant's contention cannot be accepted, more so as the Assessing Officer has acted fairly and reasonably in allowing a discount of 10% in the value of the excess stock of Narma reckoned at the prevailing market price. In this view of the matter, the grounds of appeal pertaining to this addition stand rejected.
The Assessing Officer's ground for making an estimated disallowance of the expenses viz incomplete self made vouchers cannot be faulted as there was no mechanism for verifying the purported expenses being recorded in the books of the appellant. However, disallowance of Rs. 1,50,000/- is definitely a higher estimate given the fact that the appellant had returned an income of only Rs. Two Lacs and odd. The Assessing Officer is, therefore, directed to restrict the addition on this ground to Rs.50,000/-. It is ordered accordingly."
4. From the above, it is seen that the reason for the ld. CIT(A) to have confirmed the addition made is that it was the assessee who, as per the provisions of section 133A of the Income-tax Act, 1961, was enjoined and mandated to afford to the survey team, the necessary facility to check the stock found in the surveyed premises. According to the Id. CIT(A), however, there is no evidence that the assessee provided to the survey team the necessary facility of weighment by a standardized scale. The ld. CIT(A) further goes on to say that it is not a case where the assessee provided to the survey team the necessary facility of weighment of the Narma found in the survey, by a standardized scale, but it was the survey team, which refused to take inventory of the stock by the standardized scale so provided. The assessee's objection has been dismissed by concluding that the said requisite necessary facility of weighment by a standardized scale was not provided by the assessee to the survey team and that the AO had been fair and reasonable in allowing a discount of 10% in the value of the excess stock of Narma reckoned at the prevailing market price.
5. The ld. counsel for the assessee has reiterated the aforesaid objection raised before the Taxing Authorities, whereas the ld. DR has staunchly stood by the impugned order.
6. That the survey team was obliged to make weighment of the excess stock of Narma found during the survey, in accordance with the provisions of the Standards of Weights and Measures Act, 1976, does not stand disputed at any stage. The said Act is an Act brought into establish standard weights and measures to regulate trade or commerce in weight, measure and other goods which are sold or distributed by weight, measure or number and to provide for matters connected therewith, or incidental thereto. As per section 3 of the said Act, the provisions of the said Act are to override the provisions of any other law.
7. The ld. CIT(A) has, while confirming the addition made, made reference to section 133A of the Act. At the outset, therefore, it would be appropriate to examine the said section. Section 133A(1) reads as follows:
"133A. (1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter—
| (a) |
any place within the limits of the area assigned to him, or |
(b) |
any place occupied by any person in respect of whom he exercises jurisdiction, (or) |
(c) |
any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place, |
at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession—
| (i) |
to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place, |
(ii) |
to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and |
(iii) |
to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act." (Emphasis supplied) |
8. A bare perusal of the portion of the above section 133A(1) succeeding sub-section (c) and preceding clause (i) shows that on entering the premises being surveyed, it is for the Income Tax Authority so entering to require the person attending to, or helping in the carrying on of any business or profession at the premises to be surveyed, to afford to him the necessary facility to check or verify the stock which may be found at the place surveyed, as is the requirement of section 133(1)(ii) of the Act. The operative word here is 'require'. Thus, the mandate of the section is that it is the surveying Authority who is to 'require' the person attending to or helping in the business carried on at the premises under survey to be afforded the necessary facility to check or verify the stock found during the survey. It follows that it is only on such requirement having been expressed by the surveying Authority, that the said authority shall essentially be afforded such facility for checking or verification of the stock found in the survey.
9. The above view, arisen from to the plain language employed by the legislature by use of the word 'require' in the section, as discussed above, is clearly based on the natural justice principle that nobody, muchless a person as referred to in the section, can be presumed to know the law. Rather, in a situation like the one at hand, the person needs must be made aware, by the statutory Authority, i.e., the Income-tax Authority, that the stock found in the survey is to be weighed as per the provisions of the Standards of Weights and Measures Act, 1976, for which purpose, the necessary facility is to be provided by the person to the Authority. It is also trite that the Income-tax Authorities must help the assessees, not otherwise. The Authority cannot withhold such legal requirement from the assessee prejudicially and then, on the contrary, hold the assessee liable for not making good such legal requirement. Even the CBDT, in its Circular No.14(XL-35) of 1955, dated 11.4.55, has directed that: "Officers of the department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way, particularly in the matter of claiming and securing relief and in this regard the officers should take the initiative in guiding a tax payer where the proceedings or other particulars before them indicate that some refund or relief is due to them."
10. Further, the aforesaid view is also fortified by the presence of section 133A(6) in the Act. This section (relevant portion) reads as follows:
"Section 133A(6): If a person under this section is required to afford facility to the income-tax authority to check or verify any stock either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made." (Emphasis supplied)
11. The opening and closing words of this section are eloquent. Respectively : "If a person under this section is required to afford facility " and "... for enforcing compliance with the requirement made." The section unequivocally states that where a person is required to afford facility to the surveying Authority to check or verify any stock and he either refuses, or evades to do so, the said Authority shall have all the powers under section 131(1) for enforcing compliance with the requirement made. In other words, if a surveying Authority requires a person to afford facility to check or verify any stock found and such person refuses or evades to do so, the Authority shall have the powers vested in a court under the Code of Civil Procedure, 1908, when trying a suit, for enforcing compliance with the requirement made. The 'required' in the opening portion of the section is explained by the concluding words ' requirement made'.
12. Thus, it becomes amply clear that it is first for the surveying Authority to require the person attending to, or helping in the carrying on of any business or profession at the surveyed premises to afford the necessary facility to check or verify the stock found during the survey. Only then can the person afford such facility to the Authority.
13. Section 133A(6), thus, vests the surveying Authority with the powers under section 131 for enforcing compliance with the requirement arisen during the survey. This is also the view of the CBDT under Circular No.20D, dated 07.07.1964, qua inspection of books of account and other documents:
"The section casts an obligation on any proprietor, employee or other person who may be attending to or helping in carrying on the business or profession to afford the Income-tax Officer or the authorized Inspector of Income-tax necessary facilities for inspecting the books of account and other documents which may be available at the place and may be required by the Income tax Officer or the Inspector. If such persons refuses to afford facilities to the Income-tax Officer or the authorized Inspector for inspecting the books of account or documents or evades or the authorized Inspector for inspecting the books of account or documents or evades to do so, the Income-tax Officer (not the Inspector) is empowered to enforce compliance by taking recourse to powers under sub-sections (1) and (2) of section 131." (Emphasis supplied).
14. The above position is indisputably directly equally applicable to a case of excess stock having been found during a survey.
15. In the present case, however, the ld. CIT(A) has remained oblivious of the above extant provisions of law and has, therefore, erroneously put the shoe on the wrong foot. The ld. CIT(A) has illegally cast the burden on the assessee by observing that it was the assessee who did not provide the requisite facility of weighment under the Standards of Weights and Measures Act, 1976 to the surveying Authority, whereas, as discussed hereinabove, the position is quite diametrically opposite. So, it was the surveying Authority who arbitrarily never required the assessee to provide him with the weightment facility and it was not the assessee who refused to do so. Per contra, the assessee in fact did not have any occasion whatsoever to make such a refusal. Rather, remarkably, as noted in para 2 hereinabove, it was the assessee who objected, at ground zero itself, against the action of the survey Authority, of weighing the Narma not as per the provisions of the Standards of Weights and Measures Act, 1976 , but by using cartons. This objection, however, was overruled. This fact has also not been repudiated by the Department, though it is patent on record. Therefore, the reasoning adopted by the ld. CIT(A) is unsustainable in law, for which, the addition could not have been made and the same cannot be upheld. The same, accordingly, is deleted. Ground Nos. 1 to 3 are, hence, allowed.
16. So far as regards the surviving issue of disallowance out of various expenses, as made by the AO., i.e., Rs. 1,50,000/-, as scaled down by the ld. CIT(A) to Rs.50,000/-, there has been no dispute on the part of the assessee that as observed by the ld. CIT(A), there was no mechanism for verifying the purported expenses being recorded in the books of the assessee. The only grievance raised is that the relief granted is less. As to how it is so, nothing has been brought on record. Therefore, this action of the ld. CIT(A) is justified and is confirmed. As such, Ground no.4 is rejected.
17. In the result, the appeal is partly allowed.