Income Tax Appellate Tribunal Amritsar Bench in a thought-provoking decision of Smt. Kailash Devi ITA 347/ASR/ 2015 manifested on 05-04-2016 on conducting the survey and the obligations cast on Income Tax Authorities. Often income tax authorities and the assessee are at head-on dispute for assessee not performing as “required” but before alleging the assessee for not performing his part, a line needs to be drawn from where the assesse’s part of duties begins. The question that is assessee supposed to provide for facility for conducting the survey was decided in Tribunal in assessee’s favor
Facts of the case- Excess Stock found during Survey- Is assess supposed to Provide for facility for conducting the survey
A survey was concluded on the assessee’s premises and stock of cotton in excess by 155.39 quintals was found. The cotton stock was valued at INR 6, 85,270 after providing a 10 percent relaxation for non-weighted by scale.
Plea of the assessee:- No Addition on account of non standard Scale
As the cotton stock has not been weighed on the standard scale, therefore no addition of extra stock can be made.
Argument by the department- Assessee DId not arrange the facility
It is a compulsion cast by Income Tax law on the taxpayer to afford required facility for checking of stock in trade and hence the assessee has failed to arrange such facility for checking the weight of the cotton stock. If the team (survey team) had stubbornly refused to take cotton stock by standardized scale offered by an assessee, then only the assessee’s stand had been tenable.
Judgment of the Court- It was duty of Income Tax Team to educate assessee and see if he can afford the facility
Relevant Extract of Section 133A
As per the provision of the Section 133(6)” If a person who is required to afford facility to the IT department to inspect books of account or other relevant documents or to verify and check any cash, stock or other valuable thing or to have his statement recorded or to furnish any information either evades or refuses to do so, then the IT department shall have all the necessary powers under section 131(1) for enforcing compliance with the requirement made.
Section 133A is based on principles of Natural Justice
It also elaborated the word “require” in the section 133A, it is clearly based upon the principles of natural justice that nobody, much less a person can be presumed to know the law. Instead, in such a circumstance like one at hand, the person requirements must be aware, by Income tax authority, that the stock of cotton found in the survey is to be weighed as per provisions contained in the Standards of Weights and Measurement Act 1976 for which required facility is to be offered by the person to the authority.
The Bench also decided that it is also right that IT department must help the assessee. The department cannot withhold such lawful requirement from the taxpayer prejudicially and then on the contrary hold the concerned assessee liable for not providing such legal requirement.
Therefore, it is amply clear that it is “1st” for the Survey authority to “require” the person attending the location to afford the required facility.
Conclusion: A closed mouthed frog cannot catch any flies. Hence the IT departments must “first“ require the concerned assessee to provide standardized scales under the law before they expect the assessee to provide required facility to verify and check the stock. The Judgment propounds that law may forgive a kid who is afraid of dark but not a man who is afraid of the light.