Income Tax Appellate Tribunal - Ahmedabad
Fakirchand Laxman Gupta, Surat vs Department Of Income Tax on 14 October, 2008
IN THE INCOME TAX APPELLATE TRIBUNAL AT
AHMEDABAD
AHMEDABAD "D"BENCH
Before Shri G.C.Gupta, Vice-President (AZ) and
Shri B.P. Jain, Accountant Member
ITA No.4158/ Ahd/2008
Assessment Year:2005-06
Incom e Tax Officer, बनाम Fakirchand Lachm andas
W ard-5(1), Aayakar /V/s. Gupta
Bhawan Majura Gate C/o Ravindra N. Vepari,
Surat C/A 405, River Palace-
II, Nr Navd Ovara,
Nanpura, Surat -
395001
PAN No. AB APG7777R
अपीलाथȸ/ Appellant .. ू×यथȸ/ Respondent
अपीलाथȸ कȧ ओर से / Appellant by Shri B.L. Yadav, SR-DR
ू×यथȸ कȧ ओर से /Respondent by Shri R.N.Vepari, AR
सुनवाई कȧ तारȣख / Date of Hearing 02-02-2012
घोषणा कȧ तारȣख / Date of Pronouncement 10 -02-2012
आदे श/ORDER
PER B.P. Jain, Accountant Member:-
This appeal of the Revenue arises from the order of Ld. Commissioner of Inc-tax (Appeals)-III, Surat dated 14-10-2008 for the assessment year 2005-06. The Revenue has raised the following grounds of appeal:-
"[1] On the facts and in the circumstances of the case and in Law, the Ld. CIT(A)-III, Surat has erred in deleting the addition of Rs.30,44,392/- made by the Assessing Officer on the ground of discrepancy in stock and cash.
[2] On the facts and in the circumstances of the case and in Law, the Ld. CIT(A)-III, Surat has erred in deleting the addition of Rs.2,02,804/-ITA No.4158/Ahd/2008 A.Y. 2005-06
ITO Wd-5(1) SRT v. Fakirchand L Gupta Page 2 made by the Assessing Officer on the ground of unexplained purchases."
2. In ground No.1 of the Revenue, the brief facts are that a survey u/s. 133A of the Act was conducted in the business premises of the assessee on 18-02-2005, during which inventory of stock and cash was taken. It was found that the total stock as per books of account of grey and finished goods was 3,35,411 meters as against 4,21,590 meters as per books of account. As per statement of the proprietor recorded during the course of survey, the rates of grey and finished goods varied at different points of time and Assessing Officer accepted the average rate of grey @ Rs.19/- per mt and Rs.35/- per mt for finished goods. Accordingly, valuation of deficit stock during survey was taken at Rs.29,70,425/-. Further, cash of Rs.21,260/- was also found against cash as per books of account of Rs.95,227/- which meant that the deficit was Rs.73,967/-. When required to explain the difference in stock and cash, the assessee disclosed Rs.20 lakh as additional income for the impugned year. During the course of assessment proceedings, the assessee stated that the deficit in stock was due to errors committed at the time of taking inventory of the stock which was done by estimation only. Actually, there was no shortfall of stock as explained orally during the survey proceedings. Since it was a case of deficit stock due to incorrect inventory prepared by the survey team, the disclosure taken by the survey party was not correct. Further, regarding deficit of ash, the assessee submitted that in reply to question No.19 at the time of survey, it was stated that a sum of Rs.70,00/- was lying at his residence for security reasons and the balance of Rs.3,967/- was with the Manager for petty cash expenses. The AO rejected the explanation and stated that it was contrary to the statement on oath during survey action and was after a lapse of more than a 2 and ½ year and the assessee has not furnished any reliable and cogent evidence in order to retract his earlier statement wherein assessee offered Rs.20 lakhs as his undisclosed income. The assessee further stated that during the course of survey, he signed all the documents without referring to the books of account and without counting the ITA No.4158/Ahd/2008 A.Y. 2005-06 ITO Wd-5(1) SRT v. Fakirchand L Gupta Page 3 goods and was pressurized by circumstances to make the disclosure of Rs.20 lakh. Further, the value of short stock was also ascertained on average basis and a mere admission was not sustainable nor was binding on the assessee. It was also alternatively submitted that if any addition was made on account of shortage of stock then the assessee was entitled to set off the same addition against stock already shown in the inventory. The AO was of the view that the stock was taken correctly and this was never objected to by the assessee immediately after the survey proceedings and therefore made an addition of Rs.29,70,425/- on account of deficiency of stock and Rs.73,976/- on account of shortage of cash.
3. The Ld. CIT(A) deleted the additions on both the counts for the reasons that Assessing Officer has not brought any corroborative material on record. The AO has relied upon the statement of the assessee recorded during the course of survey but has ignored the assessee's submission that inventory was not taken properly during the survey. The valuation during the course of survey was also made purely on estimated basis without any evidence. If the stock is found short, the assessee within his knowledge has to reduce the short stock in his books and credit the additional income, which will have no affect on the total income. The AO has proved the disclosure since the same was not based on the incriminating material found during survey. The AO has not invoked Section 145 of the Act. Therefore, the Ld. CIT(A) deleted the additions on account of shortage of stock and similarly, the Ld. CIT(A) deleted the addition on account of shortage of cash also.
4. We have heard the rival contentions and perused the facts of the case. There is no dispute to the fact that at the time of survey, the Department noticed the shortage of stock, which was valued by them. The assessee submitted the explanation during assessment proceedings that stock was not taken properly and was not valued properly by the Survey Team. It was ITA No.4158/Ahd/2008 A.Y. 2005-06 ITO Wd-5(1) SRT v. Fakirchand L Gupta Page 4 explained that assessee was under pressure and therefore the assessee surrendered the income before the Survey Team. Learned Counsel for the assessee invited our attention that the assessee had reconciled the stocks and had produced the quantitative tally which is a matter of record and no discrepancy in the same has been pointed out. The assessee has carried forward the same stock which was declared as per books of account on the date of survey and accordingly by taking into account the purchases and sales after the survey had declared the closing stock as at the end of the year. This fact has not been controverted by the Ld. SR-DR of the Revenue. The Ld. DR on the other hand relied upon the surrender made during the course of survey proceedings only.
5. After hearing the parties and on perusal of facts, we are of the view that the addition is an important piece of evidence but it cannot be said that it is conclusive and it is open to assessee who made the addition to show that it is incorrect. This proposition has been fortified by Hon'ble Supreme Court of India in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala And Another (1973) as reported in 91 ITR 18. Also as per Instruction No.F-286 2/2003 dated 10-03-2003 the Board has advised that there should be a focus and concentration on collection of evidence of income which leads to information on what has been disclosed before the Income-tax Department while recording statement during search/survey and no attempt should be made to obtain the confession. Assessing Officer should rely upon evidence/material gathered during the course of search/survey while framing assessment. In the present case the assessee had proved the surrender made during the course of survey was incorrect by producing quantitative tally in which no defect has been pointed out by the Assessing Officer and has not been controverted by the Ld. DR. Therefore in view of the judgment of Hon'ble Supreme Court of India in the case of Pullangode Rubber Produce Co. Ltd.
ITA No.4158/Ahd/2008 A.Y. 2005-06ITO Wd-5(1) SRT v. Fakirchand L Gupta Page 5 (supra) and the circumstances and facts of the case, we find no infirmity in the order of Ld. CIT(A).
6. As regards the shortage of cash, the Learned Counsel for the assessee had pointed out the statement of the assessee recorded during the course of survey in which he had stated that he has kept Rs.70,000/- at his residence and balance Rs.3,969/- is with the Manager for petty expenses. The statement is available at paper book-35 of the assessee. The Ld. DR has not controverted the said statement. In the circumstances and facts of the case, the Assessing Officer was not justified in making the addition. Therefore, we find no error in the order of Ld. CIT(A) who has rightly deleted the addition so made by AO. Thus, ground No.1 of Revenue is dismissed.
7. As regards ground No.2, the brief facts are that Assessing Officer observed that to verify purchases a notice u/s.133(6) of the Act was issued to a number of parties and as regards Gurukrupa Textiles, it was reported that there was no such party at the given address. The Assessing Officer therefore required the assessee to produce the party for verification but the assessee furnished copies of vouchers, challans and details of payments without producing the party. The AO therefore held that the purchases made form this party were bogus and made an addition u/s 69 of the Act.
8. Ld. CIT(A) deleted the addition for the reasons that even the assessee could not procure conformation from one of the party but had procured from all other parties. The assessee had submitted relevant bills, delivery vouchers and other relevant materials like payment through banking channel etc. ITA No.4158/Ahd/2008 A.Y. 2005-06 ITO Wd-5(1) SRT v. Fakirchand L Gupta Page 6
9. We have heard the rival contentions and perused the facts of the case. We concur with the views of the Ld. CIT(A) that the assessee had produced the confirmations of all the parties but could not procure the confirmation from one party. The assessee has submitted the relevant documents to show the genuineness of the purchases from such parties as referred in the order of the Ld. CIT(A). These facts have not been controverted by Ld. DR. Moreover there is nothing on record that the money had been received back by the assessee against the payment so made for the purchases from the creditor. In the circumstances, and facts of the case, we find no infirmity in the order of Ld. CIT(A). Thus, ground No.2 of the Revenue is dismissed.
10. In the result, appeal of Revenue is dismissed.
इस आदे श कȧ घोषणा Ǒदनांकः 10/02/2012 को खुले Ûयायालय मɅ कȧ गई । This Order pronounced in Open Court on 10/02/2012.
Sd/- Sd/-
(G.C.Gupta) (B.P. Jain)
(Vice President) (Accountant Member)
Ǒदनांकः- 10/02/2012 अहमदाबाद ।
Dkp*
आदे श कȧ ूितिलǒप अमेǒषत
ǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, /True Copy/ उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।