ITAT Amritsar Bench in an interesting decision of Smt. Kailash Devi ITA 347/ASR/ 2015 pronounced on 05-04-2016 on conduct of survey had an occasion to ponder over the obligations cast upon Income Tax Authorities under the law. Often assessee and income tax authorities are at logger-heads for assessee not acting as “required” but before authorities allege the assessee for not doing his part of obligation, a line has to be drawn from where assesse’s part of obligations commence, because it is easy to tell a person how best to carry his pack until the burden is on one’s own back.
Facts of the case:
A survey was conducted on the assessee and stock of cotton was found in excess by 155.39 quintals. The stock was valued at Rs. 6,85,270/- after allowing 10% relief for non weighment by scale.
Plea of the assess:
Since the stock has not been weighed on the standardized scale , no addition for excess stock can be made.
Argument of the department and CIT A
It is obligation cast by law on the assessee to afford necessary facility for checking of stock and hence assessee has failed to provide weighment facility for checking of the stock of cotton. Had the survey team stubbornly refused to take inventory of stock by standardized scale provided by asseessee , only then the stand of the assessee had been tenable.
Judgement of the Court
Relevant Extract of Section 133A
As per Section 133A (1) “ ……an income authority may enter any place……at which a business or profession is carried on, ……………………………, 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……………….to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein
As per Section 133(6)” If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded 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
Weighment has to be done as per Standards of Weighment and Measurement Act
The ITAT in para 6 of its Judgement has mentioned that it is not in dispute that weighment has to be done in accordance with provisions of Standards of Weights and Measurement Act 1976 (Now Legal Metrology Act 2009). As per section 3 of the said Act, its provisions override the provisions of any other law.
What is Mandate of section 133A
The Hon’ble Court also noted that provisions of section 133A are marked times and again by words “require” , “is required”. Thus the mandate of section 133A is that it is the surveying authority who is to “require” the person attending the business to afford necessary facility to check or verify the stock. 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. Hence it was obligatory on surveying authority to “require” assessee to make available standardized scales for weighment . The assessee is not obliged to provide what he is not “required”
Section 133A is based on principles of Natural Justice
The Hon’ble bench of ITAT Amritsar also elaborated that use of word “require” in the section is clearly based on natural justice principle that nobody , muchless a person as referred to in the section can be presumed to know the law. Rather, in such a situation like one at hand, the person needs must be aware, by statutory authority i.e. Income tax authority, that the stock found in the survey is to be weighed as per provisions of Standards of Weights and Measurement Act 1976 for which necessary facility is to be provided by the person to the authority.
The Bench also held that it is also trite that Income tax authority must help the assessee. The authority can not withhold such legal requirement from the assessee prejudicially and then on the contrary hold the assesssee liable for not making good such legal requirement.
This it is amply clear that it is “first” for the surveying authority to “require” the person attending the premises to afford the necessary facility.
Conclusion: A closed mouthed frog can not catch any flies. Hence the income tax authorities must “first “ require assessee to provide standardized scales under the law before they aspire or expect the assesee to provide necessary facility to check or verify stock. The Judgement also casts duty on the knowledgeable one to enlighten the ignorant ones. In this case survey team abstained from requiring and educating the assessee about need to provide standard weighment scales inspite of express provisions of Standards of Weights and Measuresment Act, 1976. And the Judgment propounds that law can forgive a child who is afraid of dark but not the men afraid of light.