Smt. Kusum Choudhary, Kishangarh vs Deputy Commissioner Of Income Tax, ... on 5 March, 2018

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Income Tax Appellate Tribunal - Jaipur

Smt. Kusum Choudhary, Kishangarh vs Deputy Commissioner Of Income Tax, ... on 5 March, 2018

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 IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR

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       BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM

                  vk;dj vihy la-@ITA No. 866/JP/2017
               fu/kZkj.k o"kZ@Assessment Year : 2014-15

 Kusum Choudhary,                        cuke    D.C.I.T.,
 Choudhary    Sadan,      Hamir          Vs.     Circle-1,
 Colony, Madanganj, Kishangarh.                  Ajmer.
       LFkk;h ys[kk la-@thvkbZvkj   la-@PAN/GIR No.: AEPPC 5771 H
 vihykFkhZ@Appellant                             izR;FkhZ@Respondent

      fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.L. Poddar &
                                          Ms. Isha Kanungo (Adv)
      jktLo dh vksj ls@ Revenue by : Smt. Dr. A.D. Hosmani (JCIT)

              lquokbZ dh rkjh[k@ Date of Hearing : 13/02/2018
      mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 05/03/2018

                              vkns'k@ ORDER

PER: BHAGCHAND This is the appeal filed by the assessee emanates from the order of the ld. CIT(A), Ajmer dated 09/10/2017 for the A.Y. 2014-15.

2. The assessee is an individual and proprietor of M/s Kusum Stonex.

A survey u/s 133A of the Income Tax Act, 1961 (in short the Act) was carried out on 13.09.2013 at M/s Lovely Colonizers Pvt. Ltd., Kishangarh.

Return of the income was filed by the assessee on 30.09.2014 declaring total income of Rs. 2,80,57,670/-. The Assessing Officer has completed 2 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT the assessment u/s 143(3) of the Act on 30.12.2016 assessing total income of Rs. 3,85,81,670/- inter-alia making the addition of Rs.

1,05,24,000/- on the basis of surrender during the course of survey on account of excess stock of Rs. 32,64,000/- and Rs. 72,60,000/- on account of undisclosed debtors. The ld. CIT(A) has confirmed the action of the Assessing Officer. Now the assessee is in appeal before the ITAT.

3. The only issue involved in the appeal is confirming the addition of Rs. 1,05,24,000/- by the ld. CIT(A) on the basis of statement of husband of assessee during the course of survey on account of excess stock of Rs.

32,64,000/- and Rs. 72,60,000/- on account of undisclosed debtors.

4. While pleading on behalf of the assessee, the ld. AR of the assessee has submitted as under:

The assessee is engaged in the business of manufacturing and trading of marble slabs and tiles. A survey u/s 133A was conducted on 13.09.2013. On the basis of the physical verification of stock allegedly found not at the business premises of the assessee but at the business premises of sister concern M/s Asmi Stonex, the stock found was valued at Rs. 4,73,04,940/-. Copy of the valuation report is available on paper book page number 1 to 12.Out of this stock on the basis of statement of Shri Pradeep Choudhary stock to the extent of Rs. 37,31,000/- was held to belong to the assessee firm apparently on no ground and without any basis. Further stock as per books was worked out at Rs. 4,67,000/- ( that too without any basis) and accordingly addition of Rs. 32,64,000/- has 3 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT been made by the Learned Assessing Officer on account of excess stock.

The entire exercise of survey is apparently a fraud upon the assessee on account of the following major blunders and pit holes -

2. No stock at the premises of the assessee -

It is submitted that in the assessment order itself it has been mentioned by the Learned Assessing Officer that the stock was found not at the premises of the assessee but at the premises of M/s Asmi Stonex which is the sister concern of the assessee. It is only on presumption that the stock found at the premises of M/s Asmi Stonex was bifurcated in the hands of the five sister concerns purely on estimate basis and without reference to any document or books of accounts. It is submitted that when no stock was found at the business premises of the assessee then how addition could be made in the hands of the assessee. The addition made is therefore uncalled for and deserves to be deleted. As per the books of accounts of the assessee the stock in hand as on 12.09.2013 is as under: -

(a) Marble Slabs & Tiles Rs. 5,43,657/-

The stock is fully supported with reference to purchase vouchers and books of accounts. Copies of the statement working out the above stock and supporting vouchers are available on paper book page number 13 to 26 It is submitted that the valuation of physical stock allegedly found at the time of survey has been worked out at Rs. 4,73,04,946/-. The major part of the stock consisted of marble and granite blocks which have been valued at Rs. 4,21,68,000/-. It is out of this total stock of Rs. 4,73,04,946/- that stock to the extent of Rs. 37,31,000/- has been apportioned as belonging to the assessee. It is submitted that so far as the assessee is concerned as on the date of survey it has no stock of marble blocks and granite. Therefore apportionment of stock to the 4 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT extent of Rs. 37,31,000/- as belonging to the assessee was absolutely illegal, unlawful and illogical. No effort was made to ascertain the book position of stock which has been taken at Rs. 4,67,000/-. No details are provided as how and in what manner the book position of stock was ascertained at Rs. 4,67,000/-. In view of this the entire exercise of apportionment of stock amongst various concerns was totally based on conjecture and guess work and was not based on ground realities. The survey team in fact conducted the survey in a hypothetical manner without taking into consideration the actual facts. It was concerned mainly obtaining surrender of income. Therefore all manipulations were done in making a false valuation report whereas no such stock was actually existed. Further apportionment of stock was made in the hands of various concerns just to give it a color of genuineness. In these circumstances it is submitted that addition made by the Learned Assessing Officer has no legs and deserves to be deleted. It is further submitted that as per trading account the total sales disclosed by the assessee are only of Rs. 19,51,806/- of marble slabs and tiles. For conduct of such meager sales of Rs. 19,51,806/- existence of stock to the extent of Rs. 37,31,000/- is a distant cry. The Learned Assessing Officer has not disturbed the sale of the assessee. The sales as per books of accounts stand accepted. Hence it is established that the stock valuation report is false and flimsy. No additions can be made on the basis of such an unrealistic report.

3. Stock valued in a slipshod method: -

It is submitted that the survey team conducted the survey only on 13.09.2013 in all the five sister concerns of the assessee. The survey was started on 13.09.2013 and also concluded on 13.09.2013. Statement of Shri Pradeep Choudhary also recorded running into 8 pages on the same date. Besides statement of Shri Arihant Choudhary was also recorded the 5 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT submission of the assessee is that major portion of the time of the survey team was consumed in searching the premises and recording the statement. Almost no time was left for carrying out any physical verification of stock. The stock list has been prepared in a very fictional manner without taking into consideration the ground reality. The valuation report runs into 11 pages and contains details of marble blocks of Rs. 4,21,68,000/-, Granite of Rs. 24,80,170/- and Marble Slabs of Rs. 26,56,770/-. The same has been valued on a single day i.e. on 13.09.2013 which is humanly impossible. The submission of the assessee is that in fact no physical verification was carried out by the survey team and only paper formalities were done after threatening the assessee cornering him to surrender income. The stock of Rs. 4,21,68,000/- has been worked out in five lines. If there had been a physical verification of stock the survey team was required not only to count the marble and granite blocks but take into consideration their weight and work out the cost with reference to purchase vouchers. But nothing of this sort has been done and this could not be done in a single day, it required more time. So the survey conducted is nothing but a paper formality. No physical verification of stock was done, hence no addition could be made on the basis of such survey report of stock valuation.

4. Valuation of stock of marble blocks is invalid not being with reference to weight : -

The stock of Rs. 4,21,68,000/- of Marble Blocks has been completed in five lines (first page of the valuation report). The stock has been bifurcated in big size, small size whereas the blocks are required to be valued with respect to their weight. Therefore the entire valuation of marble blocks is not only defective but invalid. It appears that during the survey the authorized officers were in a hurry to obtain surrender of income by hook or by crook. The defect of valuing marble blocks without 6 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT quantifying their weight is a major defect. This invalidates the entire valuation. The assessee has purchased marble blocks with reference to weight. Copies of vouchers of purchases of marble blocks from R.K. Marbles Pvt. Ltd are available on paper book page number cited supra. It is submitted that out of the total stock valued by the survey team at Rs.

4,73,04,940/-, more than 90% of it pertain to marble blocks and granite blocks which has been valued purely on estimate basis. The Marble blocks were purchased weight vise but the valuation has been done by counting the marble blocks as big and small which is not correct. During the year under consideration the assessee purchased 11 marble blocks weighing 133.14 tons for a sum of Rs. 2,77,294/- which gives average cost of 1 block at Rs. 25,208/- whereas in the survey valuation report the marble blocks have been valued bigger size at Rs. 40,000/- per block and smaller size at Rs. 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 12 tons each. There is no big difference in the weight of marble blocks so as to treat them big or small. Details of purchases of marble blocks along with relevant purchase vouchers, ledger account are available on paper book cited supra. The facts of purchases of marble blocks establish that the valuation done of the stock found by the survey party is totally wrong and very high. The same is totally unreliable and not actionable. The Learned Assessing Officer has erred in making addition on the basis of such a defective and incorrect valuation. It is further submitted that of the total stock found of Rs. 4,73,04,940/- the stock of marble blocks and granite blocks is of Rs. 4,21,68,000/- i.e. more than 90%. The submission of the assessee is that when 90% of the stock valuation is incorrect, then there was no case for making any addition. Further as per books of accounts the assessee had no stock of marble blocks as on the date of survey. Hence 7 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT such stock of marble blocks as calculated by the survey team could not be considered in the hands of the assessee.

5. Valuation of stock of marble blocks is invalid not being with reference to cost : -

The entire stock of marble blocks has been valued with reference to big size and small size without taking into consideration the quality of the block and its potentiality in yielding slabs. No effort was made to find out the purchase value of these blocks which was the only correct way for valuation of the stock. In view of this also the valuation of the stock found is invalid and deserves to be ignored. It is submitted that in the case of the assessee during the year under consideration the assessee purchased 11 marble blocks weighing 133.14 tons for a sum of Rs. 2,77,294/- which gives average cost of 1 block at Rs. 25,208/- whereas in the survey valuation report the marble blocks have been valued bigger size at Rs. 40,000/- per block and smaller size at Rs. 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 12 tons each. There is no big difference in the weight of marble blocks so as to treat them big or small. Details of purchases of marble blocks along with relevant purchase vouchers, ledger account are available on paper book cited supra. It is iterated that assessee has no stock of marble blocks as on the date of survey and hence it was wrong on the part of the Learned Assessing Officer to have considered to stock of Rs. 37,31,000/- in the hands of the assessee without any base and without any ground.

6. Stock of granite wrongly considered in the hands of the assessee: -

The valuation of granite has also been done in very routine and slipshod manner without taking into consideration the size, the quality and the color. The same has been valued at Rs. 24,80,170/-. So far as the 8 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT assessee is concerned she did not deal in granite. No purchase of granite was ever made by the assessee. Therefore it was wrong on the part of the Learned Assessing Officer to have taken into consideration the stock of granite in bifurcating the share of the assessee. The total stock of marble blocks, granite and marble slabs has been worked out of Rs.

4,73,04,940/- and against this stock to the extent of Rs. 37,31,000/- has been taken to be of the assessee. The submission of the assessee is that when the assessee does not deal in granite then how can the stock of granite can be considered in the assessee's hands.

7. Valuation of marble slabs is abnormally high -

The stock of marble slabs has been valued at Rs. 26,56,770/-. The valuation reports indicate that the entire slabs allegedly of 88559 square feet have been valued at a flat rate of Rs. 30/- per square feet. No consideration has been given to color and quality. Further no effort was made to ascertain the cost of the marble slabs. It is submitted that the marbles slabs in the case of the assessee have been sold at Rs. 15.76 per square feet and after deducting gross profit of. 12.03% the cost of marble slabs works out to Rs. 15.76 per square feet. Apparently the marbles slabs have been valued almost at the double of the cost price by the survey team. In view of this also the valuation report of the stocks found during survey is invalid and deserves to be ignored.

8. No addition could be made on the basis of statement alone : -

It is submitted that the Learned Assessing Officer has referred and reproduced the statement of Shri Pradeep Choudhary in the assessment order for supporting the addition. The relevant pages of the statement of Shri Pradeep Choudhary relating to the addition on account of stock are scanned below:

9 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT 10 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT 11 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT 12 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT The perusal of the above statement reveals the following: -

(a) That the entire stock was found at the business premises of M/s Asmi Stones allegedly belonging to the five sister concerns including the assessee. (Answer to question no. 6)Thus no stock was found at the business premises of the assessee. So no addition could be made in the hands of the assessee.

(b) The stock was inventoried and valued at the instance of Shri Arihant Choudhary S/o Shri Pradeep Choudhary who is the head of the family and also at the instance of employee Shri Kamlesh Rathore. (Answer to question no. 7). Thus the assessee had no say in the valuation of the stock found. The stocks required to be valued with reference to vouchers of purchase and not on the basis of statement. Therefore the entire valuation stock is defective, wrong, incorrect and overvalued and therefore deserves to be disregarded.

(c) The stock was bifurcated in the hands of five concerns at the instance of Shri Pradeep Choudhary at his oral instruction. The statement does not give any basis of bifurcating of stock in the hands of five sister concerns. (Answer to question no. 8) This has been done purely on guess work. Such bifurcation is not acceptable and not reliable being not correct.

(d) The stock as per books of all the five concerns have been taken at Rs. 1,42,17,000/- on the basis of alleged computer sheets whereas stock as per books should have been worked out with reference to individual books of accounts of each of the five concerns. There is no reference of any stock register, trading A/c etc. while working out the stock as per books on the date of survey. Thus the stock as per books taken by the revenue is invalid and deserves to be ignored. (Answer to question no. 8)

13 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT In view of the aforesaid facts it is clear that assessee had no say either in working out the stock as per books or in working out the stock found physically belonging to the assessee. The entire exercise of working out the stock both as per books as well as physically has been done in a very fictional unrealistic manner without taking into consideration the ground realities. No details have been mentioned as how the stock as per books has been worked out. Similarly no method has been given as on what basis stock found was bifurcated in the hands of five concerns. In view of this the entire exercise of survey is in futility more so clubbed with the fact that valuation of marble blocks has not been done with reference to weight and valuation of marbles slabs has not been done with reference to purchase cost. All these facts lead to one and one conclusion that the exercise of survey was an exercise in futility.

9. Surrender in violation of board circulars: -

It is submitted that time and again board has issued instruction to the officer of the department not to indulge in surrender of income by way of obtaining confessional statements. However in the case of the assessee in clear cut violation of the circulars/instructions the income tax authorities exerted pressure and obtained surrender of income in statement recorded during the course of survey. The same is therefore unlawful and illegal and addition made on such confessional statement automatically becomes unlawful and deserves to be deleted. In the case of CWT vs. Sanwarmal Shivkumar 171 ITR 337 the Jurisdictional High Court of Rajasthan held that the officers of the Department are bound by the circulars of the board. Further in the following cases the Courts have held that circulars issued by the Board are binding: -

(i) Navnit Lal C Javeri Vs. Sen (1965) 56 ITR 198 (SC)

(ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)

(iii) UCO Bank vs. CIT (1999) 237 ITR 889 (SC)

(iv) Union of India vs. Azadi Bachoo Andolan (2003) 263 ITR 706(SC) 14 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT In the above decisions the Apex Court of the Country has reiterated that wherever CBDT has issued instructions/circulars to relieve hardships the same are of binding nature. In view of this it is submitted that the surrender of income obtained in confessional statement goes against the spirit of the circulars issued by the Board quoted below. The addition made on the basis of such confessional statement deserves to be deleted. Board circulars dated 10.03.2003 and 18.12.2014 are quoted below-

(i) F. No. 286/2/2003-IT (Inv) dated 10.03.2003 No confessional statement in the course of search, seizure and survey.

March 10th, 2003 Confession of additional Income during the course of search &seizure and survey operation GOVERNMENT OF INDIA MINISTRY OF FINANCE &COMPANY AFFAIRS DEPARTMENT OF Revenue CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv.

Sir Subject : Confession of additional Income during the course of search & seizure and survey operation -regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search &seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search &seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of 15 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/-

(S. R. Mahapatra] Under Secretary (Inv. II)

(ii) F.No. 286/98/2013-IT (Inv.II) dated 18.12.2014 Admissions of Undisclosed Income under coercion/pressure during Search/Survey Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated- 18th December, 2014 To 1. All Principal Chief Commissioners of Income Tax 2. All Chief Commissioners of Income Tax 3. All Directors General of Income Tax (Inv.) 4. Director General of Income Tax (I & CI), New Delhi Subject: Admissions of Undisclosed Income under coercion/pressure during Search/Survey - reg. Ref: 1) CBDT letter F.No. 286/57/2002- IT(Inv.II) dt. 03-07-2002 2) CBDT letter F.No. 286/2/2003-IT(Inv.11) dt. 10-03-2003 3) CBDT letter F.No. 286/98/2013-IT(Inv.11) dt. 09-01-2014 Sir/Madam, Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey 16 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT (K. Ravi Ramchandran) Director (Inv.)-II, CBDT -

It is submitted that the action of the i.t. authorities in obtaining surrender of income that too under duress is against the circulars of the CBDT which are binding upon them. Hence the surrender obtained from the assessee was illegal and addition made on the basis of such surrender is unlawful and deserves to be deleted.

10. Conduct of survey is unlawful and illegal -

The admitted facts of survey are that it was conducted on 13.09.2013. As per stock list prepared which is available on paper book cited supra the physical verification of stock was completed on the same day itself. The survey was completed in the odd hours by recording the statement 17 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT of the assessee. It is submitted that pressure was built on the assessee for surrendering of income on the basis of the alleged excess stock. It is settled position of law that statement recorded during odd hours of night or in the wee hours cannot be considered as statement having been recorded in the normal course. Thus not much reliance can be placed on the statement of the assessee which was recorded during night. The perusal of the statement of Shri Pradeep Chaodhary makes it clear that it was a doctrine d statement recorded under the dictates of the survey officers. Shri Pradeep Choudhary totally surrendered before the I.T, authorities and put his signatures where ever demanded. No reliance can be placed on such statement. This is totally farce and not real.

11. Valuation of stock purely on guess work -

In the assessment order the Learned Assessing Officer has observed that valuation was done with the help of the Shri Pradeep Choudhary and his son Shri Arihant Choudhary and employee Shri Kamlesh Rathore. (Relevant question no. 7 in the statement) in para 3.1 on page 3 of the assessment order. However it is submitted that during the course of survey the Shri Pradeep Choudhary and his son Shri Arihant Choudhary were surrounded by the survey team consisting of several persons. In these circumstances Shri Pradeep Choudhary and his son were out of their wits and it could not be expected from them to state on the spot the purchase price of the stock neither they were asked to state the cost of the stock found. No time was given for making verification with reference to purchase vouchers. It is not the case of the Learned Assessing Officer that stock was valued with reference to purchase vouchers. The Learned Assessing Officer has not given reference of any purchase vouchers or the basis on which valuation has been made. In view of this the value of stock has been taken purely on guess work.

18 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT Further not only that the cost of stock was not worked out with reference to purchase vouchers but a blunder has also been committed in working out the cost of marble blocks. The Marble block was purchased weight vise but the valuation has been done by counting the marble blocks as big and small which is not correct. During the year under consideration the assessee purchased 11 marble blocks weighing 133.14 tons for a sum of Rs. 2,77,294/- which gives average cost of 1 block at Rs. 25,208/- whereas in the survey valuation report the marble blocks have been valued bigger size at Rs. 40,000/- per block and smaller size at Rs. 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 11 tons each. There is no big difference in the weight of marble blocks so as to treat them big or small. Details of purchases of marble blocks along with relevant purchase vouchers, ledger account are available on paper book page number cited supra. The facts of purchases of marble blocks establish that the valuation done of the stock found by the survey party is totally wrong and very high. The same is totally unreliable and not actionable. The Learned Assessing Officer has erred in making addition on the basis of such a defective and incorrect valuation. It is further submitted that of the total stock found of Rs. 4,73,04,940/- the stock of marble blocks and granite blocks is of Rs. 4,21,68,000/- i.e. more than 90%. The submission of the assessee is that when 90% of the stock valuation is incorrect, then there was no case for making any addition.

12. Position of books of accounts -

It is submitted that during the course of assessment proceedings books of accounts and supporting bills and vouchers and registers were produced and these were examined on test check basis. No defect was 19 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT noticed by the Learned Assessing Officer in the books of accounts. The Learned Assessing Officer has not rejected the books of accounts of the assessee. He has accepted all the figures regarding purchase and sales disclosed by the assessee. The sales and purchases have not been disturbed. It is also not the case of the Learned Assessing Officer that there was any unaccounted purchase or sale. It is submitted that no addition on account of excess stock could have been made by the Learned Assessing Officer in these circumstances.

It is further submitted that during the course of survey not a single unaccounted voucher of purchase or of sale was found. It is also not the case of the Learned Assessing Officer that there was unaccounted cash. No defect has been pointed out even in the maintenance of regular books of accounts. In these circumstances when no purchase or sales are unaccounted how could there be any unaccounted stock. Thus this also establishes that the conduct of survey was not beyond doubt. The results of survey are also not beyond doubt. Further the Learned Assessing Officer has not challenged the sales of the assessee. During the year under consideration the sales of the assessee are only of Rs. 19,51,806/-. For such a turnover physical stock is not required of Rs. 37,31,000/- as worked out by the survey team. The excess stock has been also worked out at Rs. 32,64,000/- which is more than double of the total sales of the year. Thus apparently the stock determined by the survey team/the excess stock worked out do not match the sales of the assessee which stand accepted by the Learned Assessing Officer. Not only this even during the course of survey not a single paper was found showing unaccounted purchase or sale. In these circumstances the addition made by the Learned Assessing Officer was totally unjustified on the basis of alleged excess stock. The addition made by the Learned Assessing Officer deserves to be deleted.

20 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

13. Surrender u/s 133A was under duress -

From the aforesaid facts it is clear that the survey authorities had not worked out the valuation of stock in a truthful manner. The position of physical stock has been taken purely on estimate basis and it has no relation with the ground reality. The survey team was obsessed for obtaining surrender. Hence confessional statement has been recorded which is in clear cut violation of the circulars of the Board. The statement was recorded at odd hours under treat and duress. It is a case where statement was recorded under duress, stress and threat. Therefore the surrender so obtained in the statement is invalid and deserves to be ignored. No addition can be made on the basis of such statement recorded u/s 133A of the Income Tax Act, 1961. No addition can be made on the basis of statement recorded during abnormal hours. The statement recorded u/s 133A is not on oath and carries no legal weight. The assessee was well with her in rights in retracting the surrender of income made during survey. The Learned Assessing Officer was not justified in making addition. The following case laws are quoted in support -

(a) Kailash Ben Mohanlal Choksi v/s CIT (2008) 14 DTR (Guj) 257 It is too much to give credit to a statement recorded at midnight where a person may not be in a position to make any correct and conscious discloses" Disclosure statement recorded at odd hours cannot be considered to be a voluntary statement.

(b) Contech Transport Service (P) ltd Ors V/s ACIT (2009) 19 DTR 191 (Mumbai) 28-11-08 No addition can be made only on the basis of admission in statement u/s 132 (4)

(c) Chitra Devi V/s ACIT (Jodhpur Branch) (2002) 77 TTJ (Jd) 640 Statements recorded during search are not evidences found during search. Addition cannot be made on the basis of statement alone.

21 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

(d) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna) ITAT Bench That merely because an offer was made having no cogent basis or approval of law that should not stop a taxpayer from correcting his mistake. It was the duty of the A.O. to tax only the legitimate amount from a taxpayer.

(e) CIT Vs. Bhaskar Mittal 73 Taxman 437 (Cal) The Law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic) . It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law

(f) Kailashhen Manharlal Chokshi Vs CIT (2008) 14 DTR 257 (Guj) It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months. The main grievance of the AO was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, if such 22 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT retraction is to be viewed in light of the evidence furnished along with the affidavit, it would immediately be clear that the assessee has given proper explanation for all the items under which disclosure was sought to be obtained from the assessee.

(g) Pullanguegode Rubber & Produce Co. Ltd. Vs. State of Kerala 91 ITR 18 (Supreme Court) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect.

(h) Jain Trading Co. v/s ITO (2007) 17 SOT 574 (MUM) Addition on the basis of admission made during survey retracted during assessment. An assessee offering additional income during the course of survey is not bound by the said offer for all times to come ---- During survey assesses offered an additional income of Rs/- 25 lac on being pointed by the survey party that there was under statement of stock. Assesses did not declare such income in the IT return A.O. made addition of Rs. 25 Lac. Not justified.

14. Statement recorded during survey is no evidence -

It is further submitted that the Learned Assessing Officer has made addition of the unaccounted stock which is totally based on the statement of Shri Pradeep Choudhary. In this regard it is sufficient to state that statement recorded u/s 133A is not statement on oath and it has no evidentiary value. Therefore the Learned Assessing Officer was not justified in making addition. The following case laws quoted in support -

(i) CIT Vs. Kader Khan Son 300 ITR 157 (Mad) Section 133A does not empower any ITO to examine any person on oath. In contradistinction to the power under section 133A, section 132(4) enables the authorized officer to examine a person 23 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act, 1961. On the other hand, whatever statement is recorded u/s 133A is not given an evidentiary value. The statement obtained u/s 133A would not automatically bind upon the assessee. Therefore admission made during such statement cannot be made the basis of any addition.

(ii) Paul Mathews 263 ITR 101 (Ker) Whatever statement recorded u/s 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 is statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument that the statement elicited during the survey operation has no evidentiary value.

15. Prayer: -

It is submitted that the aforesaid facts and discussion clearly establish that it is a case where surrender of income was obtained under the garb of survey. In fact no genuine survey was conducted verifying the books of accounts or the position of stock. It is because of this that the marble blocks have been valued without taking into consideration there weight and the purchase cost. The stock of five concerns has been inventorized at one place and then fictionally bifurcated in the respected hands of the five concerns without any basis. The assessee does not know on what basis the stock allegedly held belonging to it has been apportioned at Rs. 37,31,000/- particularly the marble slabs and tiles costed Rs. 15.76 per square feet as against Rs. 30/- adopted by the survey team while valuing the stock. In fact the entire exercise of valuation of stock is full of blunders and is not actionable. No addition could be made on the basis of such valuation report. Therefore it is prayed and requested to delete 24 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT the addition made by the Learned Assessing Officer and allow the appeal of the assessee on this issue.

(B) ADDITION OF RS. 72,60,000/- ON ACCOUNT OF UNDISCLOSED DEBTORS: -

1. Facts of the case -

A survey u/s 133A was conducted on 13.09.2013 in the group cases of the assessee. During the course of survey allegedly a Roshan Exercise Notebook was found at the office premises of the Lovely Colonizers Pvt Ltd situated at Hotel Arjav Palace Kishangarh. A copy of the said notebook is available on paper book page number 27 to 30. Statement of Shri Pradeep Choudhary assessee was recorded with reference to this Roshan Exercise Notebook. Copy of statement of Shri Pradeep Choudhary is available on paper book page number 31 to 38. The relevant questions put to assessee with reference to Roshan Exercise Notebook are question no. 10 to 15. On the basis of this notebook it was noticed that assessee has made advances totaling to Rs. 7,12,00,000/- in cash for purchase of land or on loan and as on the date same stood invested accordingly (reply of the assessee in question no. 12 and 13). Accordingly on the basis of the statement of the assessee surrender of income of Rs. 7,12,00,000/- was obtained by the department. The assessee survey team also found that in the group cases there was shortage of cash to the tune of Rs. 42,00,000/-. On the basis of the statement of Shri Pradeep Choudhary the survey team accepted that the cash was sought as it stood utilized in the aforesaid advances of Rs. 7,12,00,000/-. Therefore the unaccounted advances were worked out to Rs. 6,70,00,000/- (71200000-4200000). This amount was accordingly surrendered as undisclosed income in the hands of the assessee as well as in the hands of assessee's wife Smt. Kusum Choudhary.

25 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT While filing return of income the assessee surrendered an income of Rs. 2,64,20,000/- in his hands and a sum of Rs. 2,77,40,000/- in the hands of Smt. Kusum Choudhary (wife). Copies of computation of income along with acknowledge of return of income in case of Shri Pradeep Choudhary and Smt. Kusum Choudhary are available on paper book page number 39 to 47. The aforesaid working of the surrender of income etc is mentioned by the Learned Assessing Officer on page 5 of the assessment order. The same is as under: -

Sr.no.   Particulars                                                 Amount

1.       Total amount of advances as per Roshan                   71211000
         Exercise Notebook

2.       Less: Credit on account of cash found short               -4200000
         in the group

3        Undisclosed amount surrendered as income                 67011000

4        (i) Amount surrendered in the      27740000
         hands of the assesee

         (ii) Amount surrendered in the   26420000                54160000
         hands    of    the   assesee's
         husband      Shri     Pradeep
         Choudhary

5        Shortfall in surrender                                   12851000

In view of the aforesaid table the Learned Assessing Officer has made additions of Rs. 72,60,000/- in the hands of the assessee and Rs. 55,80,000/- in the hand of Shri Pradeep Choudhary both totaling to Rs. 1,28,40,000/-.

During the course of assessment proceedings the assessee agitated the addition on the ground that certain entries noted in the Roshan Exercise Notebook were entered repetitively as such these required to be ignored. A copy of the submission made before the Learned Assessing Officer in this regard is available on paper book page number 48 to 53.

26 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

2. Addition on the basis of notebook is invalid: -

It is submitted that the entire exercise of the survey was a farce. It was conducted only in the namesake for obtaining surrender. The surrender of income has been obtained in the statement recorded of Shri Pradeep Choudhary which is in violation of the Board Circulars. Further the perusal of the Roshan Exercise Notebook would reveal that apparently it has been written on the date of survey i.e. 13.09.2013 in one go, with the same pen, having the same ink, by the same person, having the same style of writing. It appears that assessee was cornered for surrender of income and the Roshan Exercise Notebook was made a basis for the same. On the Roshan Exercise Notebook statement of the assessee was recorded and surrender was obtained. Although the Roshan Notebook refers to advances for land and also contains names of persons to whom advances were made such as Ashok Deth , Lala Ram, Sita Ram, Yasoda, Ladu Ram etc. and Shri Pradeep Choudhary in his statement stated that the amount noted in the Roshan Exercise Notebook stood invested as on the date of survey (reply to question no.

13) i.e. if the survey team wanted and the Roshan Exercise Notebook contained genuine noting then it would have been natural to have asked details of the land purchased and the name and address of the persons to whom advances were made. No effort was made to corroborate the notings on the notebook either by obtaining details of land for which advances were made or by examining any of the debtors whose names were available on the Roshan Exercise Notebook. But nothing of this sort has taken place which indicate that the Roshan Exercise Notebook was just a part of a make believe story. There were no advances at all by the assessee. The assessee was made to surrender of Income in the garb of these advances. However in order to have good relations with the department the assessee surrendered a major chunk of income as promised in the statement but realized that it had exceeded.In view of 27 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT this assessee submitted before the Learned Assessing Officer that the following entries were nothing but duplicate repetitive and hence deserve to be ignored. The assessee submitted that while filing return of income and surrendering income therein he has therefore not taken into consideration the following entries: -

Entries recorded in multiple 19.08.2013 1100000 19.08.2013 1100000 19.08.2013 1100000 19.08.2013 1100000 09.09.2013 2100000 28.08.2013 2100000 09.09.2013 2100000 16.07.2013 2100000 Less recovered 51000 Total 12851000 In view of the entire facts of the case the background of the survey, the nature of the Roshan Exercise Notebook it is submitted that the surrender of income made by the assessee deserves acceptance. It is submitted that it is settled position of law that additions cannot be made simply on the basis of confessional statement.

3. Surrender in violation of board circulars: -

It is submitted that time and again board has issued instruction to the officer of the department not to indulge in surrender of income by way of obtaining confessional statements. However in the case of the assessee in clear cut violation of the circulars/instructions the income tax authorities exerted pressure and obtained surrender of income in statement recorded during the course of survey. The same is therefore 28 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT unlawful and illegal and addition made on such confessional statement automatically becomes unlawful and deserves to be deleted. In the case of CWT vs. Sanwarmal Shivkumar 171 ITR 337 the Jurisdictional High Court of Rajasthan held that the officers of the Department are bound by the circulars of the board. Further in the following cases the Courts have held that circulars issued by the Board are binding: -

(i) Navnit Lal C Javeri Vs. Sen (1965) 56 ITR 198 (SC)

(ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC)

(iii) UCO Bank vs. CIT (1999) 237 ITR 889 (SC)

(iv) Union of India vs. Azadi Bachoo Andolan (2003) 263 ITR 706(SC) In the above decisions the Apex Court of the Country has reiterated that wherever CBDT has issued instructions/circulars to relieve hardships the same are of binding nature. In view of this it is submitted that the surrender of income obtained in confessional statement goes against the spirit of the circulars issued by the Board quoted below. The addition made on the basis of such confessional statement deserves to be deleted. Board circulars dated 10.03.2003 and 18.12.2014 are quoted below-

(i) F. No. 286/2/2003-IT (Inv) dated 10.03.2003 No confessional statement in the course of search, seizure and survey.

Sir Subject : Confession of additional Income during the course of search &seizure and survey operation -regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search &seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search &seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

(S. R. Mahapatra] Under Secretary (Inv. II)

(iii) F.No. 286/98/2013-IT (Inv.II) dated 18.12.2014 Admissions of Undisclosed Income under coercion/pressure during Search/Survey 30 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Dated- 18th December, 2014 To 1. All Principal Chief Commissioners of Income Tax 2. All Chief Commissioners of Income Tax 3. All Directors General of Income Tax (Inv.) 4.Director General of Income Tax (I & CI), New Delhi Subject: Admissions of Undisclosed Income under coercion/pressure during Search/Survey - reg. Ref: 1) CBDT letter F.No. 286/57/2002- IT(Inv.II) dt. 03-07-2002 2) CBDT letter F.No. 286/2/2003-IT(Inv.11) dt. 10-03-2003 3) CBDT letter F.No. 286/98/2013-IT(Inv.11) dt. 09-01-2014 Sir/Madam, Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict 31 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT (K. Ravi Ramchandran) Director (Inv.)-II, CBDT -

4. Statement recorded during survey is no evidence -

It is further submitted that the Learned Assessing Officer has made addition of alleged unrecorded advanced which is totally based on the statement of Shri Pradeep Choudhary. In this regard it is sufficient to state that statement recorded u/s 133A is not statement on oath and it has no evidentiary value. Therefore the Learned Assessing Officer was not justified in making addition. The following case laws quoted in support -

(i) CIT Vs. Kader Khan Son 300 ITR 157 (Mad) Section 133A does not empower any ITO to examine any person on oath. In contradistinction to the power under section 133A, section 132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act, 1961. On the other hand, whatever statement is recorded u/s 133A is not given an evidentiary value. The statement obtained u/s 133A would not automatically bind upon the assessee. Therefore admission made during such statement cannot be made the basis of any addition.

(ii) Paul Mathews 263 ITR 101 (Ker) 32 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT Whatever statement recorded u/s 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 is statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument that the statement elicited during the survey operation has no evidentiary value.

5. Addition on the basis of statement alone not justified: -

It is submitted that the following entries noted on the Roshan Exercise Notebook do not carry any narration. It was on account of lot of pressure and stress that the assessee included these entries in the surrender of income whereas these were not required for taking into consideration. The revenue has no evidence in its possession, the Learned Assessing Officer has not brought any material on record to establish these advances and the only basis of addition is the statement of the assessee. It is settled position of law that addition cannot be made simply on the basis of statement. The following case laws quoted in support -

(a) Kailash Ben MohanlalChoksi v/s CIT (2008) 14 DTR (Guj) 257 It is too much to give credit to a statement recorded at midnight where a person may not be in a position to make any correct and conscious discloses" Disclosure statement recorded at odd hours cannot be considered to be a voluntary statement.

(b) Contech Transport Service (P) ltd Ors V/s ACIT (2009) 19 DTR 191 (Mumbai) 28-11-08 No addition can be made only on the basis of admission in statement u/s 132 (4)

(c) Chitra Devi V/s ACIT (Jodhpur Branch) (2002) 77 TTJ (Jd) 640 Statements recorded during search are not evidences found during search. Addition cannot be made on the basis of statement alone.

(d) Ajit Chintaman Karve V/s I.T.O. (2009) 311 ITR (AT) 66 (Puna) ITAT Bench 33 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT That merely because an offer was made having no cogent basis or approval of law that should not stop a taxpayer from correcting his mistake. It was the duty of the A.O. to tax only the legitimate amount from a taxpayer.

(f) Kailashhen Manharlal Chokshi Vs CIT (2008) 14 DTR 257 (Guj) It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months. The main grievance of the AO was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, if such retraction is to be viewed in light of the evidence furnished along with the affidavit, it would immediately be clear that the assessee 34 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT has given proper explanation for all the items under which disclosure was sought to be obtained from the assessee.

Entries recorded in multiple 19.08.2013 1100000 19.08.2013 1100000 19.08.2013 1100000 19.08.2013 1100000 09.09.2013 2100000 28.08.2013 2100000 09.09.2013 2100000 16.07.2013 2100000 Less recovered 51000 Total 12851000 35 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

6. Prayer: -

It is submitted that the aforesaid facts and discussion clearly establish that it is a case where surrender of income was obtained under the garb of survey/Roshan Exercise Notebook. In fact no genuine survey was conducted. It is submitted that additions are not called for on the basis of statement alone. Further statement recorded u/s 133A is no evidence. Addition cannot be made on the basis of entries having no narration. Addition cannot be made on the basis of confessional statement in violation of board circulars. In view of this it is prayed that addition made by the Learned Assessing Officer may kindly be deleted.

5. On the other hand, the ld DR has vehemently supported the orders of the authorities below and submitted that the appeals have no merit and may be dismissed.

6. The Bench have heard both the sides on both issues i.e. (i) addition of excess stock of Rs. 32,64,000/- & (ii) addition on the basis of notebook found in survey at Rs. 72,60,000/-. A survey U/s 133A was conducted on the assessee alongwith other concerns of group partners. The excess stock worked out by the survey team and the stock adopted by the survey team as per books of account are disputed by assessee. The assessee claimed that the survey team acted in an arbitrary manner in quantification and valuing the stock as on the date of survey as well as bifurcating the same stocks to various concerns of the group. The Assessing Officer has adopted the survey team's report as thumb rule and had not considered the detailed submissions on the defectiveness of the 36 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT survey team report with regard to working out of the stock on the date of survey. The Assessing Officer as well as the ld. CIT(A) acted only on the basis of statement of Shri Pradeep Choudhary, which was recorded under duress and force during the survey action. The assessee submitted documentary evidence in the shape of books of account, purchase and sale vouchers but the authorities below have given more weightage to the statement of Shri Pradeep Choudhary recorded during survey instead of relying on the various documents in the shape of books of account submitted by the assessee. In the case of Paramjeet Singh Vs ITO (2010) 323 ITR 588 (P&H), the Hon'ble High Court has rules that no oral evidence is admissible once the documents contain all the terms and conditions. Sections 91 and 92 of the Indian Evidence Act, 1872 incorporate the principle. The inventory prepared by the survey team also shows that the size of the marble blocks (Lafers) has been adopted only on ad hoc basis in two sizes as big and small and the rate has also been taken on ad hoc basis at Rs. 40,000/- and Rs. 26,000/- for big and small respectively. The blocks are purchased in weight not on size. Similarly in the case of granite, the blocks have been categorized as big and small the rate has also been taken on ad hoc basis at Rs. 26,000/- and Rs. 20,000/-

for big and small respectively. Thus, the valuation of the marble and granite blocks have been done in a very casual and ad hoc basis, the 37 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT same should have been done in weightwise for each blocks of both marble and granite and also to consider the quality of marble and granite of each block as there is wide variation in price due to various reasons like colour, design, patterns etc.. It is a well known fact that all the blocks cannot be categorized of the same quality and cannot be valued at the same rate. Thus, the valuation prepared by the survey team does not carry weight and quantification of the value of the stock on the date of survey. Thus, such major discrepancies in the valuation of marble and granite blocks has rendered the entire valuation done by survey team as a farce. No addition can be sustained on the basis of such casual valuation of stock. As per books of account, the stock inventory was filed and this fact has not been controverted by the revenue. Further the bifurcation of the stock among various entities is also not based on any concrete evidence. The stock statement as per books taken by the survey team is also not based on any positive evidence. It is also a fact that the cost of the granite block in the hands of the assessee was Rs. 7295/- while the survey has adopted at Rs. 26,000/- per book which itself establishes that the survey team has worked out the valuation stock completely on arbitrarily basis. Further we also hold that the case laws relied upon by the ld AR of the assessee i.e. the Hon'ble Supreme Court in the case of Pullan Gode Rubber Produce Co. Ltd vs. State of Kerala (1973)(91 ITR 18) 38 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. A statement so made cannot be the end of the matter and the Assessing Officer was expected to dig out fresh facts and corroborate its findings. A statement recorded during the course of survey operation can be made the basis of assessment U/s 143(3) of the Act only if it is linked to positive evidences.

Survey is essentially an evidence gathering exercise. A statement of facts found during the survey can be recorded. A survey party can make voluntary confession based on reliable evidences of the facts found during the survey. In the present case, the declaration is devoid of any credible/reliable evidence or material as the inventory prepared of the stock was itself based on pure guess work with regard to quality, quantity and value. For considering the statement of the assessee and the ratio laid down by the various courts in various case laws, we find that no addition can be sustained only on the basis of statement, which is not supported by any documentary or credible evidence. The Board Circular regarding the surrender of income during the survey operation also support the case of the assessee, which clearly advises the officials of the department that there should be focus and concentration on collection of evidence of income, which leads to information on what has not been 39 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT disclosed or is not likely to be disclosed before the Income Tax department. Similarly, while recording statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. The CBDT has also reiterated in its letter to all Principal Chief Commissioners of income tax, all Chief Commissioners of income tax, all Directors General of income tax, Director General of income tax (I&CI) regarding the admissions of undisclosed income under coercion/pressure during search/survey in its letter dated 09/01/2014 wherein it has been clearly stated that instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during the searches/surveys conducted by the department. The CBDT is also aware about the fact that such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. The CBDT is also aware about the fact that such actions defeat the purpose of search/survey operations as they fail to bring the undisclosed income to tax is a sustainable manner leave alone levy of penalty or launching of prosecution. Thus, such confessional statements not supported by credible evidence cannot be made basis to make and sustain the addition. Such view also gets support from the following case laws:

40 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

(a) Jain Trading Co. Vs ITO (2007) 17 SOT 574 (Mum) An assessee who makes an offer of additional income during course of an enquiry by income-tax authorities is not bound by his offer of additional income for all time to come. But at the same time, the burden cast upon an assessee, who chooses to retract his earlier statement, is very heavy. In the instant case, during the course of assessment proceedings, the assessee had completely explained entire business transactions leading up to the date of survey and had given the details of its trading activity. Thus, the assessee had demonstrated that the rate of gross profit varied from item to item and transaction to transaction and by no means any particular rate of gross profit could be correctly applied so as to work out the value of closing stock at any given date. Further, in the account statements, the assessee had collated each item of purchase with corresponding item of sale. Once every purchase was collated with the sale thereof in terms of quantum as well as value, no further burden remained to be discharged by the assessee, unless any discrepancy or falsity was pointed out in such collation. The Assessing Officer had not raised even a finger of doubt at the account statement furnished by the assessee during the course of assessment proceedings. That being so, the only course open to the Assessing Officer was to accept the disclosed trading results. Therefore, the assessee had been able to discharge the heavy burden that rested upon him while retracting from offer of additional income at the time of survey. Even at that stage, the case of the assessee was that the offer was made to buy peace and not because of any concealment of income or discrepancy in accounts detected by survey party. [Para 8] Therefore, the addition in question made to the income of the assessee was not justified and was to be deleted. [Para 9]

(b) CIT Vs. Kader Khan & Son 300 ITR 157 (Mad) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive; and it is open to the person who made the admission to show that it is incorrect.

The word 'may' used in section 133A(3)(iii ), viz., 'record the statement of any person which may be useful for, or relevant to, any proceeding under this Act', makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by themselves. The statement obtained under section 133A would not automatically bind upon the assessee.

Section 133A does not empower any ITO to examine any person on oath. In contradistinction to the power under section 133A, section 132(4) enables the authorized officer to examine a person on oath and any statement made by 41 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A is not given an evidentiary value. The statement obtained under section 133A would not automatically bind upon the assessee. Therefore, admission made during such statement cannot be made the basis of any admission.

(c) Paul Mathews & Sons Vs CIT 263 ITR 101 (Ker) Section 133A enables the income-tax authority only to record any statement of any person which may be useful but does not authorise for taking any sworn in statement. On the other hand, such power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) in the course of any search or seizure. Thus, the Act whenever 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. In contradistinction to the power under section 133A, section 132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is authorised to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated in the law. [Para 11] In the instant case, the ITO had referred to the fact that consequent upon the survey, the assessee had filed a revised return offering 8 per cent of the contract receipts as net profit before allowing deduction of salary payment made to partners. It was also found that the 8 per cent profit disclosed was deemed to have been arrived at after allowing depreciation and interest on capital paid to the partners. It was further found that the assessee had not paid the amount of ESI on due date and, accordingly, that amount and amount of P.F. were disallowed and added to the total income of the assessee. [Para 17] It could, thus, be seen that the ITO had not accepted the income declared by the assessee in a mechanical way but applied his mind to the various aspects of the matter before completing the assessment.

In the statement in the course of survey, the managing partner only stated that an amount of Rs. 19 lakhs was introduced towards advance for sale of land but confirmed only six lakhs. It was on that basis that the balance of Rs. 13 lakhs was offered for the assessment year 1998-99. That was confirmed by the creditors. The Income-tax Officer also verified the above aspects. Therefore, the assumption that what was offered in the statement as Rs. 43 lakhs was in 42 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT addition to what had been assessed and on that basis, that statement had got evidentiary value, was erroneous and materials collected during the course of survey had been borne in mind by the Assessing Officer who was well aware of the evidentiary value of the statement. At the same time, such survey conducted unearthed certain income and the ITO on the basis of accounts and offer made and admission made before him, came to the conclusion that what was offered in the written offer made by the assessee was reasonable. The alleged admission contained in the statement of the managing partner of the assessee obtained under section 133A was only a qualified one and the assessee had clearly explained the same before the Assessing Officer by cogent materials and the same was accepted by the said officer. [Para 18] The view taken by the ITO could not be said to be unsustainable in law, so as to call it an order passed erroneously. The ITO had seized books of account and elicited certain answers which had no evidentiary value. There were certain omissions and commissions on the part of the assessee and the assessee had voluntarily offered certain amounts to be treated as additional income for the assessment year in question. But the same had been explained by the assessee, which explanation was accepted after referring to the records and the assessment order passed. The ITO was satisfied about the actual amount received towards advances and only an amount of Rs. 6 lakhs out of the balance was to be further explained and they were telescoped. The entire sum of Rs. 19 lakhs was considered for the block assessment completed in the case of the creditor much before the survey. In those circumstances, the statement of the assessee that the amount of Rs. 13 lakhs offered by him in the statement during the course of survey was only a mistake of fact, could not be brushed aside. Further, in the light of the voluntary disclosure in the letter given in writing by the assessee, the facts given by him had been verified with the books of account and it was only after consideration of the various aspects of the matter and related facts, that the Assessing Officer accepted the offer made by the assessee. In such circumstances, the view taken by the ITO could not be said to be prejudicial to the revenue nor could it be said to be erroneous. Nothing was found in the order of the ITO to warrant a finding that it was unsustainable in law. The Commissioner was not justified in law in invoking the power under section 263 as the twin conditions precedent to exercise the power had not been satisfied in the instant case. Besides the decision was also erroneous. Hence, the orders of the Tribunal and the Commissioner were set aside and the order of the ITO was confirmed. [Para 20] In view of the above facts and circumstances, the appeal of the assessee on the ground of excess stock is allowed.

43 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT 6.1 We have also heard both the sides. On the issue of advances totaling to Rs. 72,60,000/- and also perused the material available on the record. We have also gone through the case laws relied upon. After hearing both the sides and considering the factual aspect of the issue, we hold that at this stage, the credibility of the entries on the basis of which the assessee has disclosed the income in her own hand and also her husband Shri Pradeep Choudhary has surrendered amount of Rs.

2,64,20,000/- and Rs. 2,77,40,000/- respectively cannot be held to be fabricated or non-genuine. However, there are multiple entries of the same amount on same date in same name. Against certain entries no name has been mentioned. Apparently the addition has been made for the same amount due to multiple entries of the same amount on the same date in same name. On 19/08/2013 there are four entries of Rs.

11.00 lacs each same name ADG. Similarly on 09/09/2013, there are two entries of Rs. 21.00 lacs each. Thus, there appears to be addition for the same amount. Therefore, the Bench is of the view that the addition for repeated entries is not justified. Hence, the assessee gets benefit to the extent the addition has been made on the basis of repeated entries and the balance is sustained.

44 ITA 866/JP/2017_ Kusum Choudhary Vs DCIT

7. In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 05/03/2018.

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     (VIJAY PAL RAO)                                  (BHAGCHAND)
     U;kf;d lnL;@Judicial Member            ys[kk lnL;@Accountant Member

Tk;iqj@Jaipur
fnukad@Dated:- 05th March, 2018
*Ranjan

vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:

1. vihykFkhZ@The Appellant- Shri Kusum Choudhary, Kishangarh.

2. izR;FkhZ@ The Respondent- The D.C.I.T., Circle-1, Ajmer.

3. vk;dj vk;qDr@ CIT

4. vk;dj vk;qDr¼vihy½@The CIT(A)

5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur

6. xkMZ QkbZy@ Guard File (ITA No. 866/JP/2017) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar

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Income Tax Appellate Tribunal - Jaipur

Smt. Kusum Choudhary, Kishangarh vs Deputy Commissioner Of Income Tax, ... on 5 March, 2018