Income Tax Appellate Tribunal - Chandigarh
Gurdev Agro Engineers, Bhawanigarh vs Assessee on 17 September, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
CHANDIGARH BENCH 'A', CHANDIGARH
BEFORE SHR I T.R.SOOD, ACCOUNTANT MEMBER
AND Ms. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.781 /Chd/2009
Assessment Year : 2006-07
Gurdev Agro Engineers, Vs. The Income Tax Officer,
Sangrur Road, Ward 1, Sangrur,
Bhawanigarh, Punjab. Punjab.
PAN: AADFG5350N
And
ITA No.128 /Chd/2010
Assessment Year : 2006-07
Daulat Ram Maghar Ram, Vs. The Income Tax Officer,
Sangrur Road, Ward 1,
Bhawanigarh, Punjab. Sangrur,
PAN: AABFD6100D
(Appellant) (Respondent)
Appellant by : Shri Rakesh Jain
Respondent by : Shri J.S.Nagar, DR
Date of hearing : 07.08.2014
Date of Pronouncement : 17.09.2014
O R D E R
Per SUSHMA CHOWLA, J.M. :
The appeal filed by the assessee M/s Gurudev Agro Engineers is against the order of the Commissioner of Income Tax(Appeals), Patiala d a t e d 2 9 . 0 6 . 2 0 0 9 r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 6 - 0 7 a g a i n s t t h e o r d e r passed under section 143(3) of Income Tax Act, 1961 (in short 'the Act'). Further the appeal filed by the assessee Daulat Ram Maghar Ram is against the order of the Commissioner of Income Tax (Appeals), 2 P a t i a l a d a t e d 1 2 . 0 1 . 2 0 1 0 r e l a t i n g t o a s s e s s m e n t ye a r 2 0 0 6 - 0 7 a g a i n s t t h e order passed under section 143(3) of Income Tax Act, 1961 (in short 'the Act').
2. The assessee in ITA No.781/Chd/2009 has raised the following grounds of appeal:
"1. Because the action of CTT(A) is under challenge in facts and law for upholding the assessment order u/ s 144 by recording contradictory findings& even further perverse in its nature .
2. Because the action of the C1T(A) is under challenge on facts and law for disallowance of salary Rs. 96,000/- and interest Rs. 97,737/- to the partners invoking provisions of section 184(5).
3. Because the action of C1T(A) is under challenge on facts and law in upholding the addition of Rs. 20.00 lacs for the surrender retracted which is even dehors the material on record for which the findings have not been returned.
4.a) Because the action of C1T(A) is under challenge on facts and law regarding addition of Rs. 3,45,000/- u/s 68 which is behind the back of assessee after declining to appreciate with holding of the records (for being provided) by the Assessing Officer.
b) Because the action is in violation of rules of natural justice and the settled principles of law. Even further the action is arbitrary and mis-
utilisation of the powers.
5.a) Because the action of C1T(A) is under challenge on facts and law regarding addition of Rs. 97158/- for payment treated outside books.
b) Because the action is in violation of rules of natural justice and the settled principles of law. Even further the action is arbitrary and mis-utilisation of the powers.
6.a) Because the action of CIT(A) is under challenge on facts and law regarding addition of Rs.1,82,400/- towards collection of outstanding towards ugrahi.
b) Because the action is in violation of rules of natural justice and the settled principles of law. Even further the action is arbitrary and mis- utilisation of the powers.
7.a) Because the action of CIT(A) is under challenge on facts and law regarding addition of Rs.30,980/- towards the previous year expenses.
b) Because the action is in violation of rules of natural justice and the settled principles of law. Even further the action is arbitrary and mis- utilisation of the powers."
3. The assessee in ITA No.128/Chd/2010 has raised the following 3 grounds of appeal:
"1. Because the action of CIT(A) is under challenge on facts and law in upholding the addition of Rs. 16.00 lacs for the surrender retracted which is even dehors the material on record and even for the pleadings advanced alongwith the material there has not been recorded any findings . Even the order is perverse in it's nature.
2. Because the action of C1T(A) is under challenge on facts and law regarding addition of Rs. 1,37,34s/- (on sales of Rs. 10,81,48s/- @ 12.70%) gross profit which is behind the back of assessee after declining to appreciate the withholding of the records (for being provided) by the Assessing Officer.
3. Because the action of CIT(A) is under challenge on facts and law regarding addition of Rs. 3,677/- for payment treated outside books of account.
4. Because the action of CIT(A) is under challenge on facts and law regarding addition of Rs. 4,998/- for payment outside books of account.
5. Because the action is in violation of rules of natural justice and the settled principles of law. Even further the action is arbitrary and mis- utilisation of the powers."
4. Both these appeals relating to the different assessee on similar issue were heard together and are being disposed off by this consolidated order for the sake of convenience.
5. The learned A.R. for the assessee at the outset pointed out that similar issue has been raised in both the appeals and facts and circumstances in both the appeals are identical. We proceed to decide the present appeals after referring to the facts in ITA No.781/Chd/2009.
6. The brief facts of the case are that survey under section 133A of the Act was carried out at the premises of the assessee on 27.9.2005, under which the assessee surrendered sum of Rs.20 lacs over and above its regular income. However, the said surrender was not declared in the return of income and the assessee claimed that it was retracted by written pleadings dated 6.1.2006. As per the assessee surrender of Rs.20 lacs comprising of surrender of Rs.15 lacs in cash and Rs.5 lacs for stock was made under pressure in haste and, therefore, the same was retracted by letter dated 6.1.2006. The assessee further pleaded that no 4 query regarding discrepancy in the stock was put to the partners of the assessee firm while recording the statement during the course of survey and the said surrender was retracted vide letter dated 6.1.2006. In respect of the surrender of cash of Rs.15 lacs, the assessee claimed that there is no discrepancy in the cash and no such discrepancy was put to the partners during the course of survey and the retraction of surrender was made vide letter dated 6.1.2006 and initial surrender was made under pressure and haste. The Assessing Officer had completed the assessment ex-parte under section 144 of the Act as the assessee failed to furnish information despite several notices being issued o the assessee. A sum of Rs.20 lacs surrendered by the assessee was added as income of the assessee. Further certain other additions were made by the Assessing Officer after examination of the books of account impounded during the course of survey.
7. The CIT (Appeals) rejecting the retraction of surrender claimed b y the assessee in the absence of any evidence upheld the addition of Rs.20 lacs in view of the surrender made by the assessee and also in view of t h e s t a t e m e n t r e c o r d e d d u r i n g t h e c o u r s e o f s u r v e y. The other addition made by the Assessing Officer was also upheld b y the CIT (Appeals).
8. Though the assessee has raised various grounds of appeal in respect of different additions made in the hands of the assessee, however, the learned A.R. for the assessee submitted that the written submissions and also made arguments in relation to addition of Rs.20 lacs. C o n s e q u e n t l y, w e t a k e u p t h e o n l y g r o u n d o f a p p e a l N o . 3 r a i s e d by the assessee for adjudication and the balance grounds of appeal have not been pressed by the learned A.R. for the assessee and the same are dismissed. In the written submissions, the learned A.R. for the assessee first agitates the addition made on account of surrender of stock of Rs.5 5 lacs. The main plea raised b y the learned A.R. for the assessee was that the said surrender was retracted by letter dated 6.1.2006 and consequently no addition could be made in the hands of the assessee. Further it was explained by the assessee that in case the trading account is drawn on 27.9.2005 then the stock available with the assessee matches with the stock found at the time of survey and there is no merit in the addition. The second plea raised by the learned A.R. for the assessee was that no defects were pointed out either in the books of account or the sales and hence, there is no merit in the said addition. In respect of the cash surrender of Rs.15 lacs, similar pleas were raised by the assessee of retraction and no details being found. Another plea raised by the assessee was that no cash was found from the possession of the assessee and on the other hand, some blank signed papers were taken by the survey team which have been mis-utilised by the said team. Another plea raised by the learned A.R. for the assessee was that the cash inventory was prepared by the survey team and signature of Shri Avtar Singh were taken, whereas on the stock list prepared by the survey team, signature of Shri Gurdev Singh was taken. Further statements of Shri Gurdev Singh and Shri Gurvinder Singh were recorded and no statement of Shri Avtar Singh, whose signature were taken on cash i n v e n t o r y a n d s u r r e n d e r l e t t e r , w a s r e c o r d e d d u r i n g t h e s u r v e y. Also no query regarding discrepancy in cash was put to the persons whose s t a t e m e n t s w e r e r e c o r d e d d u r i n g t h e s u r v e y.
9. The learned D.R. for the Revenue pointed out that on the date of s u r v e y, c a s h b o o k w a s w r i t t e n u p t o 5 . 9 . 2 0 0 5 a n d q u e s t i o n s w e r e p u t t o the partner of the firm on 27.9.2005 under which the assessee admitted that the books of account were written only up to 5.9.2005. The learned D.R. for the Revenue further pointed out that during the course of survey 6 cash inventory was prepared and the list of the said inventory was placed at page 103 of the Paper Book. The learned D.R. for the Revenue further invited our attention to the surrender letter filed by the assessee, which is placed at pages 61 and 62 of the Paper Book. In view of the said surrender of Rs.20 lacs the additional income is to be added in the hands of the assessee. It was vehementl y argued by the learned D.R. for the Revenue that there was no retraction and in any case retraction simpliciter cannot absolve the assessee from its obligation. Further reliance was placed on the ratio laid down by the Hon'ble Punjab & H a r ya n a H i g h C o u r t i n H a r b h a j a n S i n g h V s . C I T - I I i n I T A N o . 1 7 o f 2 0 1 2
- date of decision 7.5.2012.
10. We have heard the rival contentions and perused the record. The assessee was engaged in the business of manufacturing of agriculture i m p l e m e n t s , b o r i n g m a c h i n e s , t r o l l e ys , e t c . Survey under section 133A of the Act was conducted in the business premises of the assessee on 27.9.2005. During the course of survey it was noted that the books of account had been written only up to 5.9.2005 and not up to 27.9.2005. The survey team noted the difference in stock to the tune of Rs.5 lacs and further cash amounting to Rs.15 lacs was found from the premises of the assessee, which was surrendered by the assessee vide surrender letter placed at pages 63 and 64 of the Paper Book. The perusal of the letter reflects the assessee to have admitted that during the course of survey some discrepancies in cash and stock were found and in order to avoid litigation with the Department and to buy peace of mind, stock of Rs.5 lacs and cash of Rs.15 lacs was being surrendered. The said surrender w a s i n a d d i t i o n t o t h e r e g u l a r i n c o m e f o r a s s e s s m e n t ye a r 2 0 0 6 - 0 7 a n d i t was also admitted that the taxes on the surrendered amount would be paid in due course. The assessee also placed on record the statement of 7 Shri Gurdev Singh, partner of the assessee firm recorded on the date of survey i.e. 27.9.2005 in which he admitted that the books of account were written up to 5.9.2005 and the opening balance of cash in hand on 5.9.2005 was Rs.2,37,793/-. The English transcriptions of the said statement are placed at pages 65 to 70 of the Paper Book. At pages 61 and 62 of the Paper Book, a hand written letter on letter head of assessee firm dated 27.9.2005 is also placed in which the assessee had admitted to have surrendered sum of Rs.20 lacs i.e. stock of Rs.5 lacs and cash of Rs.20 lacs. At page 103 of the Paper Book, the assessee has placed inventory of cash found at the business premises of the assessee during the course of survey totaling Rs.15 lacs. The said cash of Rs.15 lacs was returned back to the assessee after counting the same. The perusal of the said list reflects that sum of Rs.12 lacs was found from the steel almirah and the balance sum was found from the table drawers of the assessee. The denomination of the currency found is also mentioned in the said sheet placed at page 103 of the Paper Book. The list of the stock inventory found during the course of survey is placed in the Paper Book. The assessee claimed that vide letter dated 6.1.2006 it had retracted from its surrender. The assessee thus did not include the said surrender amount in the return of income. The plea of assessee before us was that no defects were pointed out either in the books of account or the sales and hence there was no merit in the said addition made on account of the stock surrendered and similarly there was no merit in the addition made on account of cash surrendered of Rs.15 lacs.
11. In the facts of the present case survey team had visited the business premises of the assessee and had prepared a list of stock found from the possession of the assessee and also the list of cash found from the business premises of the assessee. A d m i t t e d l y, b o t h t h e s t o c k a n d 8 surrendered cash belong to the assessee. The books of account which were written up to 5.9.2005 did not reflect the requisite stock found from the possession of the assessee and the cash found from the business premises. As the assessee had no explanation with regard to the excess stock and cash, the same was surrendered by the assessee and the surrender letter duly signed by the partners of the assessee firm is available on record i.e. at pages 61 and 62 of the Paper Book filed by the assessee. It is an established law that where the assessee wants to retract from his earlier statement, then he has to furnish on record an e v i d e n c e t o p r o v e t h e c o n t r a r y. Mere withdrawal of earlier surrender made without any evidence cannot be accepted. A d m i t t e d l y, t h e admission made under section 133A of the Act has no evidentiary value but where during the course of survey, evidence was found as to excess stock in possession of the assessee and also cash over and above the amount recorded in he books of account, then the admission made under section 133A of the Act can be used against the assessee to make addition on account of the aforesaid stock and the cash excess found from the possession of the assessee. The assessee had placed the reliance on the ratio laid down by the CIT Vs. S.Kadar Khan Sons reported in 352 ITR 480(SC) that the admission made under section 133A has no evidentiary value. We subscribe to the said proposition laid down by the Hon'ble Supreme Court. However, in case of the assessee, the stock was found excess, for which the assessee even before us has furnished no explanation and further the cash was also found from the possession of the assessee, which was not reflected in its books of account and for which the assessee had no explanation. The explanation of the assessee before us that if the trading account is reconstructed on 27..9.2005, then there is no discrepancy in the stock, cannot be accepted at such a late stage where the assessee had failed to 9 furnish any information after the conclusion of survey order. Even the so-called retraction made on a later date i.e. 6.1.2006 cannot absolve the assessee from its liability and the surrender made, in view of the ratio l a i d d o w n b y t h e H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t i n B a c h i t t a r Singh Vs. CIT [328 ITR 400 (P&H), where it has been held that the burden was upon the assessee to establish that the admission was wrong and also that the retraction should be at the earliest point of time or within the reasonable time. Further the learned D.R. for the Revenue has placed reliance on the ratio laid down by the Hon'ble Punjab & H a r ya n a H i g h C o u r t i n H a r b h a j a n S i n g h V s . C I T i n I T A N o . 1 7 o f 2 0 1 2 - order dated 7.5.2012 and we find that the issue before us is similar to t h e i s s u e b e f o r e t h e H o n ' b l e P u n j a b & H a r ya n a H i g h C o u r t w h e r e i n t h e facts before the Hon'ble High Court cash of Rs.33,40,950/- was found during the course of survey and if the assessee had no explanation to offer, sum of Rs.30,40,950/- was surrendered by the assessee. The Tribunal confirmed the addition observing as under:
"15. The third plank of the surrender at the time of survey was the cash found from the premises of the assessee. The assessee failed to explain the source of cash of Rs.33,40,950/- found during the course of survey and as he had no explanation to offer, sum of Rs.30,40,000/- was surrendered by the assessee. The said surrender as pointed out in paras hereinabove was not on account of the total cash found but on account of the difference in cash as per the books and cash found at the time of survey. While filing the return of income the assessee reduced the said surrender on account of cash to Rs.3,23,999/- and the plea of the assessee was that this was the surplus found after reconciliation of the books of account by the auditor. The survey was carried out at the premises of the assessee on 20.3.2007 and the return of income was filed by the assessee on 5.3.2008 i.e. after a gap of nearly one year. Prior to filing the said return of income, the assessee had not retracted its statement, nor had explained the discrepancies in the cash though the said cash available with the assessee was not accounted for in the books of account at the time of survey and was surrendered. The Hon'ble Punjab & Haryana High Court in Bachittar Singh Vs. CIT (supra) have laid down the proposition that the retraction, if any, should be at the earliest time.
12. The Hon'ble High Court upholding the order of the Tribunal observed as under :
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10. A reading of the aforesaid findings clearly shows that it was recorded that during the course of survey, the assessee was not able to offer my plausible explanation for the sum of Rs.30,40,000/- which was surrendered by the assessee. Further, during the course of survey, it as found that certain sale invoices were either not recorded in the books of account or were under invoiced. The assessee had also admitted certain notings in the diary and note books to be on account of sales which were unaccounted. In the light of the aforesaid findings, the contention of the assessee that the amount of Rs.27,16,001/-
could not be included as unaccounted cash and it was Rs.3,23,999/- only does not carry any weight and the plea of the assessee has rightly been dispelled by the authorities below. In view of the concurrent findings recorded, no question of law arises in this appeal. Accordingly, the present appeal is dismissed."
13. In the facts of the present case before us also there was admittedl y evidence found against the assessee which could not be explained by the assessee and the surrender was made by the assessee totaling Rs.20 lacs. Once the assessee is unable to offer any plausible explanation for the s u m s u r r e n d e r e d b y t h e a s s e s s e e a n d m e r e l y r e l yi n g o n t h e r e t r a c t i o n m a d e o n a l a t e r d a t e , d o e s n o t a b s o l v e t h e a s s e s s e e f r o m i t s l i a b i l i t y. The CIT (Appeals) while upholding the order of the Assessing Officer had given a finding that the surrender was made by the assessee based on the material alleged to be in the possession of the Assessing Officer collected during the course of survey and the said surrender was made v o l u n t a r i l y. The assessee had failed to controvert the said findings of the CIT (Appeals) and merely because it had taken a stand after a considerable gap of time that it withdraws its surrender, is mere after thought and such retraction of surrender cannot be accepted. Further bills and cash were found from the possession of the assessee and supporting documents, which establish the case of the Revenue that the assessee was in possession of assets/cash over and above the asset declared in the books of account against which surrender was made by the assessee. Upholding the order of the CIT (Appeals) we find no merit in the grounds of appeal raised by the assessee in this regard and the said are dismissed.
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14. The learned A.R. for the assessee fairly admitted that the facts, circumstances and the issue in ITA No.128/Chd/2010 are identical to the facts and circumstances in ITA No.781/Chd/2009 and our decision in ITA No.781/Chd/2009 shall apply mutatis mutandis to ITA No.128/Chd/2010.
15. In the result, both the appeals filed b y the different assessees are dismissed.
Order pronounced in the open court on this 17th day of September, 2014.
Sd/- Sd/-
(T.R.SOOD) (SUSHMA CHOWLA)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated : 17 t h September, 2014
*Rati*
Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.
Assistant Registrar, ITAT, Chandigarh