Income Tax Appellate Tribunal - Indore
Shri Sayyed Hamid Ali, Ujjain vs The Acit Circle 2(1), Ujjain on 19 December, 2019
आयकर अपील य अ धकरण, इ दौर यायपीठ, इ दौर
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI KUL BHARAT, JUDICIAL MEMBER
AND
SHRI MANISH BORAD, ACCOUNTANT MEMBER
ITA No.38/Ind/2017
Assessment Year: 2012-13
Sayyed Hamid Ali ACIT-2(1)
बनाम/
(Prop. Fairdeal Steel) 60-A, Vs. Ujjain
Industrial Area Maxi Road,
Ujjain
(Appellant) (Revenue)
PAN: ACMPA7063M
Appellant by Shri S.S. Deshpande, CA
Revenue by Shri K.G. Goyal, Sr. DR
Date of Hearing: 28.11.2019
Date of Pronouncement: 19.12.2019
आदे श / O R D E R
PER MANISH BORAD, A.M:
This appeal at the instance of Assessee pertaining to A.Y. 2012-13 is directed against the order of Commissioner of Income Tax(Appeals), Ujjain, (in short 'CIT'), dated 30.11.2016 which is arising out of the order u/s 143(3) of the Income Tax Act 1961(hereinafter called as the 'Act') framed on 10.03.2015 by ACIT- 2(1), Ujjain.
Sayyed Hamid Ali ITANo.38/Ind/2017
2. The assessee has raised following grounds of appeal:
"1. The Ld. CIT(A) has erred in confirming the addition of Rs.84,00,000/- on account difference between stock declared land stock offered for taxation and treating the same as retraction from surrendered amount. However, it was explained during the assessment proceeding as well as before the CIT(A) that excess stock taken on the date of survey was on estimated basis and without taking actual weighment of stock and that assessee has re-calculated the difference and tuly declared the same in the returned filed by him.
The Ld. CIT(A) has erred in confirming action of the Ld. AO making adhoc addition of Rs.2,33,227/- in the net profit."
3. Brief facts as culled out from the records are that the assessee is dealer in iron and steel scrap in the trade name of M/s Fairdeal Steel. Return of income was filed declaring total income of Rs.52,27,800/- on 30109/2012. The books are audited and Audit Report along with TAR was filed. A Survey u/s 133A was carried out on the business premises of the appellant on 12/07/2011. During the survey proceeding i.e. on 12/0712011 the value of physical stock found was of Rs.1,35,79,761.36 whereas as per books of accounts the value of stock was calculated at Rs. 18,79,761.36. Therefore, at that time a difference of stock to the tune of Rs.1,17,00,000/- was observed. Further, on the date of survey difference in cash as per books and cash physically found excess to the tune of Rs.8,00,000/- and unaccounted purchase found to the tune of Rs.3,36,150/-.
4. The case was selected for scrutiny. Consequently, assessment proceedings started by serving of notices U/s 143(2) u/s 142(1) of the Act. In compliance, accountant of assessee company alongwith 2 Sayyed Hamid Ali ITANo.38/Ind/2017 his counsel attended the proceedings from time to time and filed written submissions. Ld. AO considered the same but was not satisfied. The ld. A.O. made addition of Rs. 84,00,000/- on account of retraction of surrendered amount. He observed that the stock found during the course of survey was accepted as undisclosed by the assessee in his statement during survey and hence it is quite irrelevant and illogical on the part of assessee to furnish different facts after survey proceeding in filing of return. He noted that deliberate effort are made by the assessee to retract the surrendered income in terms of stock quantification. During the assessment proceedings it was explained by the assessee about the unaccounted purchase of Rs.3,36,150/- and excess stock of Rs.1,17,00,000/- being difference between the stock found in the books of accounts on the date of survey i.e. 12/07/2011 stating that after obtaining the stock valuation sheet from the department, it was found by the assessee that excessive stock was got declared under great mental stress and pressure, without weighment of the quantity lying in the heaps at the premises of the assessee. On the date of survey, stock inventories by the survey team was quantified at 617.183 MT, whereas as per books of accounts only stock of 85.433 MT was found. Therefore, difference of 531.750 MT was treated as excessive stock.
5. It was also submitted by the assessee that physical stock found at the time of survey was kept separately and the same was sold and the quantity of such stock sale was 250.703 M.T. The assessee 3 Sayyed Hamid Ali ITANo.38/Ind/2017 calculated the unrecorded stock of 165.27 MT (stock sale of 250.703 MT less opening stock on the date of survey 85.433 MT.) and after applying the rate of 22002.75 per M.T. the assessee declared Rs.36,36,150/- as undisclosed income found during the course of survey. However, Ld. AO was of the view that the amounts surrendered during the course of survey should have been offered to tax by the assessee and the alleged difference of Rs.84,00,000/- should be added to the income disclosed by the assessee. Addition also made on account of showing lower net profit in the year of survey at Rs.2,33,227/-. Income assessed at Rs.1,38,61,027/-.
6. Aggrieved assessee preferred an appeal before the Ld. CIT(A) but failed to succeed. Now assessee is in appeal before the Tribunal.
7. Ld. counsel for the assessee referring to the written submissions placed before lower authorities submitted that the entire physical stock found on the date of survey, i.e. 250.703 MT, was sold off separately. Thus, the excess stock on the date of survey was of 165.27 MT only and in terms of value, the same has been declared as income. Therefore, it is requested that excess stock calculated as above may please be considered instead of excess stock calculated on the date of survey. Further, the assessee could not point out these discrepancies to the AO immediately after survey proceedings because the details of stock taken on the date of survey was not provided immediately to the appellant and that exact quantity could be known only on disposing of stock, kept separately to determine difference in the stock found on the date of survey.
4Sayyed Hamid Ali ITANo.38/Ind/2017
8. During the course of survey proceedings note-pad was found and it was concluded that entries appearing therein represent unaccounted purchases made by the assessee. The total of amount written in the notebook has been calculated at Rs.1,20,36,150/- The Assessing Officer has not taken correct cognizance of the entries made in notebook. He on his own account determined that the entries made are of unaccounted purchase and asked the question accordingly. The proprietor has not been properly allowed to explain his case. Accordingly, assessee got surrender of Rs.3,36,150/- on account of investment in purchase of scrap after deducting excess stock of Rs.l,17,00,000/- observed at that time. The assessee has also shown this amount of Rs.3,3 6,150/- surrendered in the return of income filed. In fact the assessee used to purchase certain material out of books which was recorded in the said note paid. whenever, payment was made to the seller the related entries were struck off and balance has been carried out by writing it again below the name of related seller. However, during the survey all the entries have been added and treated as undisclosed purchase to the tune ofRs.l,20,36,150/-. Thus, purchase has been considered in multiple. Your honor will appreciate that purchase is always related to the subsequent sales, therefore, the difference amount involves only the net profit on such undisclosed purchase. Therefore, at the most net profit on undisclosed purchase should have been taken by the Ld. A.O. instead of taking entire purchase sales as undisclosed investment. However, the assessee has already declared separate amount of Rs.3,36,150/- besides the undisclosed investment in stock to the tune of Rs.33,OO,OOO/- and excess cash of Rs.8,OO,OOO/-.
5Sayyed Hamid Ali ITANo.38/Ind/2017 In view of above, actual difference worked out by the appellant may please be accepted and the addition of Rs.84,OO,OOO/- may kindly be deleted.
9. In support of the contention Ld. counsel for the assessee referred and relied following Judgments:
1. CIT v. Radha Kishan Goel (2006) 8 (J) ITCL 260 (AllHe) :
(2005) 278 JTR 454 (All) : (2006) 152 Taxman 290 (All),
2. Pullangode Rubber Produce Co. Ltd. vs. State of Kerala (1973) 91 ITR 18(SC)
3. Paul Mathews & Sons v. CIT [2003J 263 ITR 101 (Ker.) Hon'ble Kerala High Court
4. Ashok Hanilal Thakkar vs. ACIT-279 ITR 143 (I.T.A.T.-AHM)
5. Chawla Brothers (P.) Ltd. vs. ACIT (20 43 SOT 651 (Trib. Mum.)
6. CIT vs. Gulmohar Traders 2016 28 ITJ 382 (Trib-Indore).
10. Per contra Ld. Departmental Representative (DR) vehemently argued supporting the following finding of Ld. CIT(A):
"Though this ground of appeal the appellant has challenged the addition of Rs.84,00,000/- on account of excess stock surrendered during the survey proceedings. A survey u/s 133A was carried out at the business premises of the appellant on 12.07.2011. During the course of survey physical stock ofRs.1,35,79,761.36. Therefore, there was excess stock of Rs.1,17,00,000/- on the day of survey. During the course of recording the statement the appellant has surrendered the above excess stock as additional income. While filing the return of income the appellant has disclosed income of Rs.33,00,000/- as additional income on account of excess stock. Therefore, the 6 Sayyed Hamid Ali ITANo.38/Ind/2017 appellant has not disclosed the income of Rs.84,00,000/- while filing the return of income. The appellant furnished the explanation regarding the short disclosure shown while filing the return of income during the course of assessment proceedings as well as appellate proceedings. As regards to the evidentiary value of the disclosure statement. Section 17 to 31 of the Indian Evidence Act, 1872 deal with admission. As defined in section 17, it is a "statement (oral or documentary or contained in electronic from) which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the person, and under the circumstances, hereinafter mentioned." The general rule with regard to admission is that the party or their representative says about the matter in dispute or facts relevant thereto which throw light on the issue in dispute or consideration. It is well settled that a party's admission as defined in section 17 to 20, fulfilling the requirements of section 21 is substantive evidence proprio vigore. An admission, if clearly and unequivocally made is the best evidence and though not conclusive shifts the onus on the maker. Reliance is placed on the Thiru Jon. V. Returning Officer A 1977 (SC) 1724. Although in this case there has been no allegation of coercion, the courts have gone further and held that the confession need not be ruled out merely because of an allegation of use of coercion. Manly statutes make use of such confessional evidence as long as it is proved that it was so obtained by operation or under circumstances which indicate an inference of such operation. The confessions are to be considered as a whole and not in any edited form. In the case of the assessee there has been no allegation of any coercion. Even retracted confession was held to be binding, reference is made to the case of Surjit Singh Chhabra (1997) SCC 508,509(SC) wherein petitioner retracted his confession given to the custom officials, yet it was held to be binding. The Indian Law on confession can be understood from the following passage in a decision under criminal law in State of U.P. vs. Boota Sigh, AIR 1978 Hon'ble Supreme Court 1770. "As however, the confession was a retracted one, it could be acted upon only if substantially corroborated by independent circumstances. It is not necessary that a retracted confession 7 Sayyed Hamid Ali ITANo.38/Ind/2017 should be corroborated in each material particular, it is sufficient that there is a general corroboration of the important incidents mentioned in the confession". In the instant case the confession was correlated to the material found during the course of survey.
As held by the Supreme Court in Pullangode Rubber Produce Co. Ltd. vs. State of Kerala (1973) 91 ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged.
Thus, it is a clear and settled law that admission by a person is good piece of evidence though not conclusive and the same can be used against the person who makes it. The reason behind this is a person making a statement stops the opposite party from making further investigation. However, the statement is not conclusive and the person giving the statement can retract the same under certain circumstances.
(i) The first circumstances if where the statement is not given voluntarily but it was obtained under coercion, threat or undue influed. But the burden is upon the person making the statement to prove that the statement given by him was not voluntary. The assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement should also one of the important points to be taken into account while deciding whether the statement was voluntary or not.
(ii) The other circumstances is where the statement was given under the mistaken belief of either fact or law. Here against the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law.8
Sayyed Hamid Ali ITANo.38/Ind/2017 This view is supported by the Decision of the Tribunal Bench of Ahmedabad in the case of Manharlal Kasturchand Chokshi vs. ACIT [1997] 61 ITD 55 (Ahd), and also in the case of Hotel Kiran vs. ACIT [1971] 82 ITR 453 (Pune) Apart from the above legal lacunae, the appellant's retraction also suffers from other procedural defects. The appellant being responsible for the functioning of the business, voluntarily gave statement u/s 133A of the Income Tax Act, 1961 on 12.07.2011 which does not indicate any sort of pressure or coercion but alert presence of mind and clarity of thought of the deposing assessee. By this statement, it was categorically and unequivocally stated that the concern was not maintaining proper stock of goods. These facts were within the exclusive knowledge of the appellant, who voluntarily stated the same. Therefore, with these facts in exclusive knowledge domain once disclosed voluntarily in full consciousness, were binding on the assessee, as the contrary could not be proved. Further the Hon'ble I.T.A.T., Pune Bench, in the case of Chander Mohan Mehta vs. ACIT(inv.) [1999] 65 TTJ (Pune) 327, has come to the conclusion that seized documents along with the statement recorded under section 133A constituted valid piece of evidence, which could be used in assessing undisclosed income. However, the two taken together have to be read as a whole. In the instant case, the assessee has clearly linked the unaccounted stock of concern to undisputed income in statement u/s 133A of the Income Tax Act 1961 and hence such statement is binding on the assessee.
Subsequently, the return filed, without showing the full disclosure made during the course of survey. This is the first time the appellant has retracted from his statement given through the source of survey on 12.07.2011, after a gap of nearly 1 year and two months.
These claims are baseless as on efforts were made by the assessee to inform of any such stance during post survey inquiries. This shows that the assessee is taking a plea to get away from his voluntary statement, as an afterthought. Claims have to be discarded as the assessee has not produced any evidence in that behalf. Once the statement of 9 Sayyed Hamid Ali ITANo.38/Ind/2017 the assessee is voluntary and there has been no pressure, the same is binding on the assessee.
In the case of Council of Institute of Chartered Accountants of India vs. Makesh R. Shah (2004) 186 CTR (Guj) 579, the High Court of Gujarat has held that " a retraction so as to dislodge the admission made should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made that earlier point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction that apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction." Thus, the legal position about the assessee's belated retraction is clear that it is an afterthought.
Thus, from the above analysis it emerges that; i. The retraction was made after a period of 1 years and 2 months.
ii. It was never communicated to the departmental authorities, merely not disclosed with the return of income.
iii. From record it is impossible to hold that any threat or coercion has been exerted during the conversion statement of the assessee.
iv. Irrespective of the form or validity of the voluntary disclosure statement or of the deposition taken from the assessee on 12.07.2011, the evidence of testimony cannot be wiped out and does not become non-existent and this evidence can well be utilized to frame the assessment on this basis.
In view of the above position the appellant's unsuccessful attempt to retract from the disclosure is untenable being an after though and is rejected. Therefore, the addition made by the AO amounting to Rs.84,00,000/- is confirmed.
10Sayyed Hamid Ali ITANo.38/Ind/2017
11. We have heard rival contentions and perused the record placed before us. In ground no.1 of the assessee's appeal, the finding of Ld. CIT(A) confirming the addition of Rs.84,00,000/- has been challenged before us. This addition was made by the Ld. AO on account of difference between stock declared at the time of survey u/s 133A of the Act and stock offered for taxation and treating the same as retraction from surrendered amount. The assessee is a dealer in Iron and steel. Survey u/s 133A of the Act was carried out on 12.07.2011. As per the survey team the physical stock was quantified 617.183 MT whereas the stock recorded in the books of accounts was 85.433 MT. Following table was prepared by the survey team for the stock verification carried out with time of survey:
Particulars Quantity Rate/M.T. Amount Remarks I Iron & Steel 180.000 22002.75 39,60,495/- 12 Trucks/ (Scrap) M.T. 15.0 M.T. ' , Iron & Steel 194.000 22002.75 42,68,533/- 15 Trucks / (Scrap) M.T. 13.0 M.T. ~ Iron & Steel 175.000 22002.75 38,50,4811- 13 Trucks/ (Scrap) M.T. 13.5 M.T. Iron & Steel 68.183 M.T. 22002.75 15,00,252/- 6 Trucks / (Scrap) 11.4 M.T. i Total 617.183 135,79,7611-
M.T. 11 Sayyed Hamid Ali ITANo.38/Ind/2017
12. Before us Ld. counsel for the assessee contended that there was no basis for taking above quantity. No weighment was done and only by an eye view above table was prepared. In fact it was also not possible to store huge stock of 617.183 MT in the factory premises of the assessee looking to the availability of space. The total area of land with the assessee unit is 10,000 sq. ft. as allotted by the Development Authority, Ujjain on which besides open area, godown, factory Building and works shop erected. The space available for storing of stock is approx. 6000 Sq. ft. The nature of scrap stock, in terms of size & placing, is also haphazard. It is practically not possible to store 617.183 MT of scrap stock of haphazard shape in approx. 6000 sq. ft. area. Besides this stock, scrap of PVC (high volume with low weight covering major area of available space) pertaining to wife's concern Mis Saif Enterprises, weighing 30.767 MT was also lying. This fact was recorded in the statement and verified by the survey team "during the survey operation.
13. Ld. counsel for the assessee also contended that it was the duty of survey party to get the actual weighment of stock found during the course of survey proceedings, which was not done. It is at all not possible that exact 15MT in 12 Trucks; 13MT in 15 trucks; 13.5MT in 13 trucks; 11.4 MT in 6 trucks of scrap can be loaded in the trucks. Even otherwise, looking to the nature of scrap of variety, at the same time each truck could not be loaded by net weight of 15MT. It may be worth to note that while replying to question 15 of statement given during survey operation by Shri 12 Sayyed Hamid Ali ITANo.38/Ind/2017 Shaman Ali that whenever the goods are purchased or sold, weighment of tare trucks and loaded trucks is got done at Mahavir Taul Kania, so as to know exact quantity of goods purchased/ sold. However, during the survey operation no loading and unloading of material was done, which was must for correct weighment of stock. Moreover, no truck was used for the weighment purpose, during the course of survey and no truck wise weighment slips were prepared, which is evident from the inventory prepared.
14. We observe that there certainly seems merit in the contention of the Ld. counsel for the assessee to the extent that the area of land available with the assessee to store the scrap was only 6,000 sq. ft. Survey team have mentioned the quantity in the form of number of Trucks. There is no iota of evidence to show that the goods were loaded in a truck before weighment. It is also not practically possible to huge stock of 671.83 MT. on 6000 Sq. ft.
area, that too without stacking. Even some stock from sister concern M/s Saif Enterprises, weighing 30.767 MT was also lying, at the very same premise which has been recorded by the Revenue team. Apart from the physical stock which has been computed in the above referred table no other incriminating material was found 13 Sayyed Hamid Ali ITANo.38/Ind/2017 such as the undisclosed bank statement unrecorded purchase, sale bills or unrecorded vouchers. Therefore, the stock taken by the survey team seems to be based on a guess work, presumption and assumption. It is also undisputed fact that survey statement was recorded at late night. In the stock sheet estimated stock have been mentioned along with number of trucks whereas actually no such trucks was available at the survey site and therefore, the stock sheet prepared by the survey team does not look to be a full proof and perfectly prepared stock sheet at the time of survey.
15. We, further observe that the assessee in order to be a prudent assessee, in order to compute the actual unrecorded stock, claimed to have kept the physical stock found on the date of survey separately and as and when the goods were sold the details were prepared. The details of the quantitative details of stock before the date of survey and the date of survey during F.Y. 2011- 12 and the details of stock sold to various parties post survey on the basis of which unrecorded stock of Rs.33,00,000/- is offered to tax are mentioned below:-
14Sayyed Hamid Ali ITANo.38/Ind/2017 (Quantity in M.T.) ::.
Period Opening Purchased Sold Closing
Stock Stock
1.4.2011 to 12.07.2011 134.034 312.975 361.576 85.433
(Date of Survey)
13.07.2011 to 85.433 Not 250.703* -165.27
.) 1.03.2012 Applicable
As per date wise/party Wise list given hereunder:
SR XO DATE QTY. NAME OF PARTY 1 7/16/2011 16185 Suprem Industrial Corporation Punjab 2 7/20/2011 17085 B K Traders Indore 3 7/20/2011 16620 Suprem Industrial Corporation Punjab 4 7/29/2011 18350 Hindustan Steel Indore 5 8120/2011 16505 Saini Foundry Jaipur 6 8/2212011 24960 Saini Foundry Jaipur 7 9/9/2011 14980 S. D. Bansal Iron & Steel Pvt Ltd Mandideep 8 9/14/2011 18175 Raishree Steel Mandi Govindgarh 9 10/12/2011 15470 BK Traders Indore 10 11/24/2011 15080 Dhanlaxmi Ujjain 11 12/16/2011 18875 Nobale Matel Alloys Pvt. Ltd. Jaipur 12 1/29/2012 17860 Rajshree Trading Co. Jaipur 13 2/7/2012 18180 Him Alloys & Steel Pvt. Ltd. Amb 14 3/5/2012 4895 Sunny Enennering Works Ujjain 15 3/19/2012 17630 Laxmi Steel Ujjain Total 250850
16. We also find that the Ld. AO has made the addition on the basis of the statement recorded during the course of survey. Now whether the statement recorded during the course of survey has an evidentiary value in itself needs to be examined in the light of judicial pronouncements:-15
Sayyed Hamid Ali ITANo.38/Ind/2017
17. Hon'ble Allahabad High Court in the case of CIT v. Radha Kishan Goel (2006) 8 (J) ITCL 260 (AllHe) : (2005) 278 JTR 454 (All) : (2006) 152 Taxman 290 (All), It was observed that it is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured, harassed and put to mental agony that he loses his normal mental state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as a part of his defense.
18. Hon'ble Apex Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerela (1973) 91 ITR 18 (SC), It was held that it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts.
19. We find that in the case of Harshad L. Thakker v. A CIT [2005J 3 SOT 277 (MUM.) It was held that if assessee can demonstrate that valuation of stock adopted by survey party during survey proceedings under section 133A was wrong with reference to material on record, then addition under section 69 on account of unexplained investment in excess stock could not be justified merely 16 Sayyed Hamid Ali ITANo.38/Ind/2017 on ground that said addition was offered by assessee during survey proceedings.
20. Hon'ble Kerala High Court in the case Paul Mathews & Sons v.
CIT [2003J 263 ITR 101 (Ker.) has held that - section 133A enables the income tax authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn-in statement. On the other hand, such a power to examine a person on oath is specifically conferred on the authorized officer only under section 132(4) in the course of any search or seizure. Thus, the Income-tax Act, whatever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided, whereas section 133A does not empower any ITO to examine any person on oath. Statement recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated under law. Therefore the statement elicited during the survey operation has no evidentiary value. Similar view is taken in CIT vs. S. Khader Khan songs (2008) 300 ITR 157 (mad) [SLP filed by the department dismissed -210 Taxman 248/254 CTR 228(SC).
21. We find that in the case of Ashok Hanilal Thakkar vs. ACIT-279 ITR 143 (I.T.A.T.-AHM) No addition in come on the basis of disclosure could be made where the assessee had retracted certain income after disclosing it and no material had been found to prove this income during the survey.
17Sayyed Hamid Ali ITANo.38/Ind/2017
22. Hon'ble Bombay High Court in the case of Chawla Brothers (P.) Ltd. vs. ACIT (20 43 SOT 651 (Mum.)- held that merely on the basis that at the time of survey, some differences were found in stock did not mean that there would be an automatice addition on account of differences. Such differences are always subject to explanation reconciliation. Where, the assessee had reconciled the differences with reasons and the revenue authorities did not point out anything contrary that how the reconciliation done by the assessee was incorrect no addition was warranted.
Coordinate Bench Indore in the case of CIT vs. Gulmohar Traders 2016 28 ITJ 382 (Trib-Indore).Suspicion cannot take the shape of evidence, however, strong it may be Assessment.
23. In light of the above judicial pronouncement laying donw the ratio that section 133A of the Act enable the Income Tax Authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn-in statement. Since, such a power to examine a person on oath is specifically conferred on the authorized officer under section 132(4) of the Act in the course of any search or seizure. For making addition on the basis of action carried out u/s 133A of the Act revenue authority need to correlate the surrender with the incriminating material or unrecorded transactions found during the course of survey.
24. We observe that the decision of Chawla Brother (P.) Ltd. vs ACIT [2011] 43 SOT 651 (Mum) squarely applied on the facts of the 18 Sayyed Hamid Ali ITANo.38/Ind/2017 assessees wherein it has been held that merely on the basis that at the time of survey, some differences were found in stock did not mean that there would be an automatic addition on account of differences. Such differences are always subject to explanation and reconciliation. Where, the assessee had reconciled the differences with reasons and the revenue authorities did not point out anything contrary that how the reconciliation done by the assessee was incorrect no addition was warranted
25. In the instant case also no other incriminating material was found during the course of survey relating to unaccounted stock, excess physical stock was calculated by Revenue authority on estimative and presumptive basis. The stock statement prepared by the survey team on the date of survey itself seems to be on a loose wicket since the remarks column mentioning about the weighment of stock in trucks do not correlate with any actual weighment slip and also the alleged unrecorded stock is practical impossible to be stored on the available space with the assessee. Even after the retraction assessee had not retracted the total surrender but he prudently kept separate record of the sales of physical stock which was 250.03 MT whereas the book stock on the date of survey was 85.433 MT. The difference i.e. 165.27 MT is accepted as unrecorded stock which has been offered to tax by the assessee.
26. We, therefore, in the given facts and circumstances of the case and respectfully following the decision referred hereinabove are of 19 Sayyed Hamid Ali ITANo.38/Ind/2017 the considered view that Ld. CIT(A) erred in confirming the addition made by the Ld. AO for unrecorded stock of Rs.84,00,000/- merely on the basis of recorded statement and without basis of any material evidence and there the same needs to be deleted. We, accordingly order so and allow ground no.1 raised by the assessee.
27. Apropos to ground No.2 relates alleged ad hoc addition of Rs.2,33,227/- made by the Ld. AO for offering lower net profit stands confirmed by the Ld.CIT(A).
28. Ld. counsel for the assessee challenging this addition submitted as follows:
4. The Ld. AO has further made addition of Rs.2,33,227/-
observing that during the year under consideration the assessee has shown net profit of Rs.5,79,048/- (Excluding surrendered amount during survey) i.e. 1.07% of Turnover, whereas in the preceding previous year income of Rs.8,l2,275/- was shown and as the assessee has surrendered the amount other than the regular income shown, there should be income at least to the extent of come considering the consistency of business. Therefore, he has made addition ofRs.2,33,227/-. The observation of Ld. A.O. is incorrect, unjustified and without an basis. I was explained during assessment proceeding that as regards to the net profit of Rs.5,79,048/- shown in the profit and loss account before amount surrendered during survey, it is submitted that the main among others, for low NP incurred during the year is that the depreciation increased to the tune of Rs.2,54,512/- as compared to the last year in view of additions made in the fixed assets. Thus, if the same is considered there would be income of Rs.8,33,560/- which does not significantly varies from the income of Rs.8,12,275/- shown in the last even if consistency of business is considered. Therefore, actual result shown by the assessee should be accepted.
20Sayyed Hamid Ali ITANo.38/Ind/2017 In view of above actual result shown by the assessee should have been accepted by the Ld. A.O . Therefore, it is prayed that the addition so made may kindly be deleted. We would also like to draw your kind attention to the following judgments. In making an assessment U/s 143(3), the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support an assessment U/s 143(3). Dhakeswari Cotton Mills Ltd~ V. CIT, AIR 1955 SC 65: (1954) 26 ITR 775, 782 (SC) An Assessment based on mere presumption is unsustainable in law. Banshidar Onkarmal vs. CIT, (1953) 23 ITR 353 (Ori). Surrounding circumstances must be considered while scrutinizing document 82 ITR 540 Hon'ble Supreme Court- CIT vs. Durgaprasad Mure.
29. Per contra Ld. Department Representative (DR) vehemently argued supporting the orders of both lower authorities.
30. We have heard rival contentions and perused the record placed before us. Ld. AO after taking average of last two years net profit rate applied the same on the turnover disclosed by the assessee and after comparing with the profits disclosed in the preceding year addition of Rs.2,33,227/- made for lower net profit.
31. We, observe that during the course of assessment proceedings itself it was submitted that the main reason for the lower net profit during the year was due to increase in the depreciation expenditure which increased by Rs.2,54,512/- in comparison with the preceding year. This fact went unattended by both the lower authorities Had the Ld. AO had considered the increased amount if the depreciation 21 Sayyed Hamid Ali ITANo.38/Ind/2017 expenses at Rs.2,54,512/- then the net profit for the year under appeal would not have decreased very significantly from the preceding year and would have been consistent as per the past history.
32. We, therefore, in the given facts and circumstances of the case are of the considered view that there was no justification with the Ld. AO of ignoring the material facts and making the addition for lower net profit of Rs.2,33,227/- and the same deserves to be deleted. We, accordingly order so and delete the addition for Rs. 2,33,227/-. Ground No.2 of the assessee's appeal is also allowed.
33. In the result, the appeal of the assessee stands allowed. Order was pronounced in the open court on 19.12.2019.
Sd/- Sd/-
(KUL BHARAT) (MANISH BORAD)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Indore; दनांक Dated : 19/12/2019
ctàxÄ? P.S/. न.स.
Copy to: Assessee/AO/Pr. CIT/ CIT (A)/ITAT (DR)/Guard file.
By order Assistant Registrar 22