Income Tax Appellate Tribunal - Raipur
Uttam Kumar Agrawal, Raigarh vs Assistant Commissioner Of Income Tax, ... on 20 March, 2024
आयकर अपील य अ धकरण, रायपुर यायपीठ, रायपुर
IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR
ी र वश सूद, या यक सद य एवं ी अ ण खोड़ पया, लेखा सद य के सम ।
BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM
(ITA No. 145/RPR/2022)
(Assessment Year: 2019-20)
Uttam Kumar Agrawal, Asst. Commissioner of Income Tax,
Sadar Bazar, Central Circle,
Raigarh, (C.G.) Bilaspur, (C.G.)
PAN: ACIPA0221F
(अपीलाथ /Appellant) . ( यथ / Respondent)
.
नधा रती क ओर से /Assessee by : Shri R.B. Doshi, CA
राज व क ओर से /Revenue by : Smt. Ila M. Parmar, CIT DR
सुनवाई क तार ख/ Date of Hearing : 07.02.2 024
घोषणा क तार ख/Date of : 20.03.2 024
Pronouncement
आदे श / O R D E R
Per Arun Khodpia, AM:
The present appeal is filed by the assessee against the order of Commissioner of Income Tax, Appeals-3, (in short 'CIT(A)') dated 30.06.2022 u/s 250 of the Income Tax Act, 1961 (In short 'The Act') for the assessment year 2019-20, which in turn arose from the order u/s 143(3) of Act by the Assistant Commissioner of Income Tax, Central Circle, Bilaspur, (In short 'The AO') dated 21.06.2021.
2. The grounds of appeal raised by the assessee are as under:
1. In the facts and circumstances of the case and in law, Ld. CIT(A) erred in confirming addition of Rs.8,98,49,037/- out of the addition of Rs.2 ITA No. 145/RPR/2022
Uttam Kumar Agrawal 9,19,34,043/- made by the AO [Rs.5,55,65,732/- u/s 69B & Rs. 3,63,68,311/- u/s 69A] on account of excess stock of jewellery found during search. The addition made by AO and sustained by CIT(A) is illegal and not justified.
2. Without prejudice to ground no. 1 of appeal, Ld. CIT(A) erred in confirming the action of AO in invoking provisions of sec. 115BBE in relation to the addition made by AO, without appreciating the facts of the case properly and judiciously.
3. The appellant reserves the right to add, amend or modify any of the ground/s of appeal.
3. The Brief facts culled out from the records are, that the appellant is an individual and engaged in jewellery business, as proprietor of M/s N.R. Jewellers. The appellant is also a director of M/s Suraj Rolling Pvt Ltd. In this case search and seizure operations u/s 132 were carried out on the business as well as residential premises of the appellant on 22.11.2018. Return u/s 139(1) was filed on 05.11.2019, declaring total income at Rs.3,62,22,870/-, Notice u/s 143(2) of the I.T. Act, 1961 was issued on 30.09.2020. During the course of search proceedings, appellant made voluntary surrender of gold, diamond jewellery and silver articles found from the residential premises amounting to Rs.3,63,68,311/- and excess stock of Rs.6,23,94,369/- from the business premises. However, at later stage the appellant during post search investigation vide letter dated 03.04.2019 retracted from surrender made during the course of search. However, vide the said letter he surrendered Rs.1,34,79,989/- in total, i.e., on account of excess cash found (Rs. 53,70,000/-), unaccounted expenditure (Rs.12,81,352/-) and excess stock (Rs. 68,28,637/-). The appellant 3 ITA No. 145/RPR/2022 Uttam Kumar Agrawal has also offered the said income of Rs. 1,34,79,989/- while filing return of income. The appellant's submission was considered, but not found tenable by the AO. Therefore, the AO made addition of Rs.6,23,94,369/- on account of unexplained stock of gold, diamond & silver jewellery found on business premises u/s 69B and on account of unexplained assets i.e. gold, diamond & silver jewellery found on residential premises u/s 69A and charged to tax as per provisions of 115BBE of the Act. Total addition made was of Rs.9,87,62,680/-, the appellant has already disclosed income of Rs.68,28,637/- on account of excess stock in his return for AY 2019-20. Resulting thereby, the balance amount of Rs.9,19,34,043/- (Rs.9,87,62,680 - Rs.68,28,637) has beenn added to the total income of the appellant.
4. Being aggrieved by the assessment order, the assessee has preferred an appeal before the Ld. CIT(A), however the same has been partly allowed, therefore, the assessee is before us with the present appeal against the additions made by Ld. AO to the extent sustained by the Ld. CIT(A).
5. At the threshold of the hearing, Ld. AR on behalf of the assessee has submitted before us a request for admission of additional ground of appeal assailing the validity of assessment on the basis of illegality in the approval of Addl. CIT u/s 153D of the Act. The application for additional ground submitted by the assessee is extracted as under:
4 ITA No. 145/RPR/2022Uttam Kumar Agrawal Before the Hon'ble Income Tax Appellate Tribunal, Raipur Bench, Raipur Request for admission of additional grounds of appeal Name of assessee : Uttam Kumar Agrawal, Raigarh AY : 2019/20 ITA no. : 145/RPR/2022 (Assessee) Date of hearing : 22.11.2023
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Respected Sirs,
1. Search u/s 132 was conducted in the case of assessee on 22.11.2018 as a result of which assessment was framed u/s 143(3) for AY 2019/20. Against such assessment order, the assessee has filed an appeal before the Hon'ble Tribunal, which is pending.
2. As per sec. 153B(1)(b) the assessment order in respect of the assessment year relevant to the previous year in which search is conducting (AY 9/20 in the case of present assessee) is required to be completed within a period of 21 months from the end of the financial year in which the last authorization of search was executed.
3. Sec. 153D provides that no order of assessment or reassessment shall be passed by AO, in respect of each assessment year referred to in sec.
153B(1)(b), except with the prior approval of the Joint Commissioner. "therefore, the assessment order for the year of search was also required to be passed with the prior approval of the Joint Commissioner. The assessment order was passed by the AO on 21.06.2021 and in para 15 of the assessment order, it has been mentioned that the order was passed with the prior approval of the Addl. CIT, Range-central, Raipur dated 17.06.2021.
4. The "approval" of higher authority, as contemplated u/s 153D, necessarily requires that the approving authority is required to apply his mind to the seized material, queries raised by the AO during assessment, replies given by the assessee and the draft assessment order passed by the AO etc. Such application of mind should be evident from the records and the approval given u/s 153D should also show the application of mind on the part of the approving authority.
5. However, in the case of assessee, the approval has been granted by Addl. CIT, Range, Central in a mechanical manner, without application of mind and therefore, conditions of sec. 153D have been grossly violated. Also, the proposal letter addressed by the AO to Addl. CIT (Central) for grant of approval u/s 153D and approval granted by Addl. CIT (Central) u/s 153D both letter dt. 17.06.2021 does not contain Document Identification No. (DIN) which is in violation of CBDT Circular No. 19/2019 dated 14.08.2019. In view of this, the assessee most humbly prays that he may kindly be allowed to raise & argue upon the following grounds as additional grounds of appeal:
5 ITA No. 145/RPR/2022Uttam Kumar Agrawal
1. "The assessment order passed by the AO and confirmed by Id. CIT(A) is illegal, ab initio void inasmuch as the approval given by Id. Addl. CIT u/s 153D is not in accordance with provisions of law. The assessment order is liable to be quashed in absence of valid approval 153D. "
2. The assessment order passed by the M) and confirmed by Id. CIT(A) is illegal, al) initio void inasmuch as no valid approval u/s 153D was taken/given, which is violation of mandatory requirement of law, as the proposal letter sent by AO to Addl. CIT (Central) and approval given by Id. Addl. CIT (Central) Il/s 153D is in violation of CBDT circular and is consequently non est. "
6. It is most humbly and respectfully submitted that the above ground could not be taken at the time of filing appeal for the reason that the case of assessee. up to the stage of first appeal. was looked after by the earlier counsel of the assessee. For preparing 2nd appeal and for arguing the matter before the Hon'ble Tribunal, the assessee has appointed another counsel. During preparation of appeal, the new counsel so appointed required various documents/details which were not available with the assessee. Since the assessee did not have copy of the approval given by Addl. CIT, Range-Central, Raipur, the assessee filed application before AO to provide copy of same. Vide letter dt. 07.11.2023, the AO intimated the assessee that required document has already been provided on 04.10.2021. These documents were provided by AO to the earlier counsel, who did not give the same to assessee while handing over the file and which has been made available by him to the assessee very recently (via e-mail) , when assessee approached him after receipt of letter dated 07.11.2023 of AO. Thus, the communications for approval u/s 153D were not available with the assessee at the time of filing 2nd appeal.
For this reason, ground challenging validity of the approval u/s 153D could not be taken in the grounds of appeal. Your honours would kindly appreciate that the assessee was prevented by sufficient and reasonable cause for not taking the above ground in the grounds of appeal in the appeal memo and therefore, it is most humbly and respectfully prayed that the above additional ground may kindly be admitted, and the appellant may very kindly be allowed to argue on the same, per need of justice.
7. The above ground is a legal ground touching jurisdictional aspect, going to the root of the matter and all the facts relating to such ground are already on record. In the following cases, it was held that additional ground going to the root of the matter, can be taken at the second appeal stage, even if it was not taken before the A()/CIT(A):
- National Thermal Power co. Ltd vs CIT (1998) 229 ITR 383 (SC)
- Jute Corporation of India Ltd. vs CIT (1991) 187 ITR 688 (SC).6 ITA No. 145/RPR/2022
Uttam Kumar Agrawal
- CIT vs Pruthvi Brokers & Shareholder (P) Ltd. (2012) 349 ITR 336 (Mum.)
- CIT vs Jai Parabolic Springs Ltd. (2008) 306 ITR 42 (Del.)
- Ramco Cements Ltd. vs DCIT (2015) 373 ITR 146 (Mad.) Hence, it is most humbly and respectfully submitted that the assessee may kindly be permitted to take additional grounds.
Thanking you.
Yours faithfully (Uttam Kumar Agrawal)
6. The issue raised in the additional ground by the Ld. AR is observed to be legal ground challenging the jurisdiction of the assessment, going to the root of the matter for which facts relating to the ground are already on record therefore, respectfully following the judgment of Hon'ble Apex Court in the case of NTPC (supra) and other judgments as referred to in the application for additional ground, the additional ground raised by the assessee is permitted to be admitted.
First, we shall be deliberating upon the main grounds of the appeal as under:
7. Ground No. 1: Confirmation of addition u/s 69B and 69A on account of excess stock of jewellery found during the search.
Apropos addition u/s 69A and 69B of the Act the brief facts as culled out by the Ld. CIT(A), for the sake of completeness and understanding of the facts same is extracted as under:
7 ITA No. 145/RPR/2022Uttam Kumar Agrawal 3.1 Ground Nos. 1 and 2:- Through these grounds of appeal, the appellant has challenged the addition made of Rs.9,19,34,043/- on account of unexplained/excess stock assets i.e. gold, diamond & silver jewellery found on residential premises as well as business premises u/s 69A and 69B of the Act.
During the course of search, hold/ silver jewellery and precious stones valued at Rs. 3,63,68,311/- were found from residential premises of the appellant out of which jewellery and precious stones of Rs. 3,42,83,305/- were seized. The details of which has been tabulated on page no 10 & 11 of the assessment order. The jewellery also contain mix jewelry 767.60 gms valued at Rs. 20,85,006/- which has not be seized, in view of CBDT Circular No 1916 dated 11.05.1994. Similarly, gold/silver jewellery and precious stones valued at Rs. 10,83,10,938/- were found from business premises of the appellant. During the course of search statement of Shri Rajat Agrawal, son of the appellant, was recorded on oath on 23.11.2018 wherein in reply to Q. No 6 he admitted that jewellery weighing 1 ko belongs to his mother and regarding balance jewellery and cash neither he nor his mother have any knowledge and the same could only be explained by his father, the appellant.
3.1.1 Statement of appellant was also recorded on oath on 22.11.2018, wherein in reply to Q. No 1 1 the appellant has clearly admitted that the stock of the firm is kept only at the business premises and not kept at any other place. However, the appellant during post search investigation vide letter dated 30.11.2018 requested to consider the jewellery found from residence as stock of M/S NR Jewellers. The AO by rejecting claim of the appellant stated that the appellant itself during the course of search has admitted that the stock of the firm is not kept elsewhere except at the shop located at Sadar Bazar, Raigarh. Further, statement of the appellant was continuously recorded on 22nd, 23rd and November 2018 but within three days he never stated that the gold, silver and diamond jewellery found from residence belongs to NR Jewellers- Further, in reply to Q. No 52 of the statement, the appellant admitted that the unexplained cash and jewellery found from business and residential premises are his undisclosed income.
3.1.2 Further, on physical verification of stock found from business premises it was round that the appellant has stock of Rs. 10,83,10,938/-, however, the stock as per books of account is only Rs. 4,59,16,569/-. Therefore, there was unaccounted stock of Rs. 6,23,94,369/- (Rs.10,83,10,938 - Rs.4,59,16,569). When confronted the appellant in reply to Q. No 47 admitted that he had never taken any physical stock and the stock found in excess is accumulated out of past unaccounted income. However, the appellant during post search investing as well as during assessment proceedings has claimed that the books of account of the appellant remains incomplete for want of bills against jewellery purchased on approval during the festival season of Diwali. Further, soon after diwali, the season for marriages start and as per business practice the stock are placed in show case during the business hours and at the time of closure of shop the same were kept in safety lock in almirah. Due to daily hectic job, the appellant has kept some goods at his residence. The appellant has also furnished details of pending bills for the jewelleries received on approval. The details have been tabulated on page no 24 to 26 of the assessment order. Statement of Sri Suklal Patel, accountant of M/S NR Jewellers was also recorded on oath wherein he admitted that books of 8 ITA No. 145/RPR/2022 Uttam Kumar Agrawal account of the firm are complete till 19th November 2018. Thus, the AO held that the appellant has furnished counterfeit bills and the claim of the appellant that bills are pending for entry in books of account is clearly an afterthought. 3.1.3 The AO during the course of assessment proceedings, on verification of ledger account of the parties from which purchase bills have been claimed, found that except the firm AT Plus and Briana Jewells, the appellant has never purchased any goods from theses 18 parties in earlier times. The AO on further investigation found that the appellant during FYs 2012-13 to 2016-17 has not made any purchase from the said parties, however, during FY 2017-18 purchase of Rs. 7,73,848/- was made from M/S AT Plus Jewellers Pvt Ltd and Rs. 2,80,522/- from M/S Briana Jewels. However, during FY 2018-19 (Ay 2019-20) the appellant has purchased major portion of jewellery from M/S Saheli Jewellers Pvt Ltd Durg, M/S Saheli Gems and Jewellers, Bhilai, M/S Saheli Jewellers, M/s KR Diamonds, M/s Shahswat Creations LLP, M/S Empire Bullions, M/S AT Plus Jewellers Pvt Ltd and M/S Briana Jewels. Further, majority of purchase have been made during the month of November between 3rd to 17th November 2018 from the said concern. The appellant during entire year has shown purchase of Rs.9,93,61,343/- out of which purchase of Rs. 79199209775/- has only been made during the month of November which is nearly 73%. The appellant has also furnished bills of Rs. 8,33,99,443/- (including approval/jangad voucher) before the AO. Further, GST returns were also filed showing the purchase dates of November 2018.
3.1.4 The AO Further observed that out of all the purchase made by the appellant, jewellery valuing Rs. 4,51,58,324/- were retuned back to the sellers by showing sales return. The purchase from the said parties have been made on credit out of which majority of goods have been returned back and the payments have been made after 3-4 months. Also, none of the payments have been made before the date of search. During the course of search, various incriminating documents were found and seized. Page no 19, 24 & 32 of BS- 4 contain details of purchase made by the appellant. The appellant when confronted admitted that the stock was purchased before the search operations as noted in BS-4, however, no bills had been received. The AO further found that no sale bill/delivery order/delivery challan was available with the appellant at the time of search. The AO also receipts, delivery challan, however, nothing was furnished by the appellant. Therefore, the AO considering entire factual matrix, statement of the appellant and other concerns held that the, bills furnished by the appellant at later stage are afterthoughts and colourable device adopted by the appellant to cover [he undisclosed stock. Hence, the AO by treating stock found from hop of the appellant as unexplained stock u/s 69B made addition of Rs. 6,23,94,369/- in the hands of appellant. Further, the stock valued at Rs. 3,63,68,311/- found from residence of appellant was treated as unexplained investment u/s 69A of the Act.
9 ITA No. 145/RPR/2022Uttam Kumar Agrawal A detail submission against the aforesaid additions have been furnished before the Ld. CIT(A) which were considered by the Ld. CIT(A) and have decided the issue by observing as under:
3.1.13 During the course of search at residential premises of the appellant jewellery amounting to Rs. 3,63,68,311/- was found out of which jewellery of Rs. 3,42,83,305/- was seized and balance jewellery of Rs. 20,85,006/- (mixed jewellery weighing 767.50 gms) was not seized placing reliance on CBDT Circular No. 1916. However, the AO has made addition of entire jewellery found in possession of the appellant from his residential premises. Since, the appellant was residing with his entire family, therefore, the benefit of CBDT Circular No 1916 ought to have been given by the AO. Keeping in view the interest of natural justice the jewellery to the tune of Rs. 20,85,006/-
which has not been seized during search is treated as explained. Therefore, out of total addition of Rs. 3,63,68,311/- addition amounting to Rs. 20,85,006/- made u/s 69A is, hereby, deleted.
3.1.13 Another Question which arise out here is whether the jewellery found during the course of search, from business premises of the appellant, can be treated as unexplained stock u/s 69B of the Act. During the course of search total stock of Rs. 10,83,10,948/- was found from business premises of the appellant out of which stock of Rs. 4,59,16,574/- was found fully recorded in books of account and therefore, stock of Rs. 6,23,94,369/- was found excess from shop of the appellant. Further, from residential premises of the appellant stock of Rs. 3,63,68,311/- was found out of which stock of Rs. 20,85,006/- was not seized in view of CBDT Circular No 1916 and the same has already been held genuine vide para 3.1.12 of this order. Therefore, unrecorded stock of Rs. 3,42,83,305/- (Rs. 3,63,68,311/- - Rs. 20,85,006/-) was found from residential premises of the appellant. Therefore, total unrecorded stock of jewellery of Rs. 9,66,77,674/- was found during the course of search. Various loose papers were found and seized which contain details unaccounted purchase of jewellery to the tune of Rs. 8,33,99,441/-. The brief details of noting made on page no 19, 24 & 32 of BS-4, which has also been prepared by the appellant are as under:-
10 ITA No. 145/RPR/2022Uttam Kumar Agrawal Sr. Item Weight (gms) Amount Noting in No. (in Rs.) loose paper
1. Gold Ornaments 4,570.340 1,27,33,654 BS-4/32
2. Pure Gold 260.650 8,38,967 BS-4/32
3. Pure Gold 310.290 9,98,746 BS-4/32
4. Pure Gold 205.140 6,60,295 BS-4/32
5. Pure Gold 228.920 7,36,837 BS-4/32
6. Studded Jewellery 445.00 25,42,298 BS-4/19
7. Studded Jewellery 443.10 24,55,144 BS-4/19
8. Gold Jewellery 22k 1,120.20 34,58,547 BS-4/19
9. Gold Jewellery 6,972.450 2,14,82,120 BS-4/32
10. Silver Jewellery 24,930 7,30,450 BS-4/32
11. Silver Jewellery 25,540 7,48,322 BS-4/32
12. Gold Jewellery 6,840.000 2,10,67,200 BS-4/32
13. Silver Jewellery 69,320 20,38,000 BS-4/32
14. Silver Jewellery 42,340 12,44,790 BS-4/32
15. Gold Ornament 143.150 9,41,893 BS-4/24
16. Diamond and Gold Diamond 97,35,494 BS-4/24 Jewellery 1701.650 Gold-508.45
17. Silver Utensils 31,400 8,03,840 BS-4/24
18. Diamond Jewellery 31.880 1,82,844 BS-4/19 Total 8,33,99,441 Thus, out of total excess stock of Rs. 9,66,77,674/- stock of Rs.
8,33,99,441/- was found noted in the seized material BS-4 for which no explanation has been advanced by the appellant. I have found that the Stock of jewellery as per BS-4 was kept at two places i.e. in the residence and shop premises of M/S. N. R. Jewellers. Out of such stock of Rs. 8,33,99,441/-, stock of Rs.3,42,83,305/- was kept at residence and balance stock of Rs. 4,91,16,136/-{Excess stock at shop Rs. 6,23,94,369/- - (Rs. 8,33,99,441/- - Rs.3,42,83,305/-)} was kept at shop which is part of total excess stock found at business premises. Transaction mentioned in seized material BS-4 have never been entered in the regular books of account of M/S. N. R. Jeweller or any of the books of account separately maintained in individual capacity by the appellant. The appellant also failed to prove contrary to it, Therefore, jewellery stock of Rs. 8,33,99,441/- as per BS-4 cannot be treated as unaccounted stock of regular business of M/S. N.R. Jeweller. This amount of stock had actually been held in the individual 11 ITA No. 145/RPR/2022 Uttam Kumar Agrawal capacity by the appellant för which he failed to explain the nature and source of its acquisition as per the provisions of section 69A of the Act. Accordingly, in my opinion, out of total excess stock of Rs. 9,66,77,674/-, stock of Rs. 8,33,99,441 being total of stock of Rs. 3,42,83,305/- kept at residence and stock of Rs. 4,91,16,136/- kept at shop of M/s. N. R. Jewellers is treated as deemed income within the provisions of section 69A of the Act.
Regarding remaining stock of Rs. 1,32,78,233/- {Rs. 6,23,94,369/- - Rs. 4 91 16 136/- , it can be safely held that this amount is unaccounted stock of M/s. N.R. Jewellers for which explanation offered by the appellant about its source of acquisition is not found satisfactory within the meaning of section 69B of the Act. The appellant has offered additional income of Rs. 68,28,637/- on account of excess stock of M/S. N.R. Jewellers which is being treated as part of unaccounted stock of Rs. 1,32,78,233/-. Therefore, the actual stock which is to be treated as unexplained excess stock u/s 69B of the Act is Rs. 1,32,78,233/-.
Therefore, the AO is hereby directed to treat the excess stock of Rs. 8,33,99,441/- found during the course of search from business & residential premises of the appellant as undisclosed investment u/s 69A of the Act and excess stock of Rs. 1,32,78,233/- found from business premises as unexplained excess stock u/s 69B of the Act.
It is further clarified that the AO has made addition of Rs.6,23,94,369/- being excess stock found at business premises u/s.69B of the Act out of which Rs.4,91,16,136/- has now been held as deemed income u/s.69A of the Act and Remaining amount of Rs.1,32,78,233/- has now been held as deemed income u/s.69B of the Act. It has been held by the various Courts that misquoting of a section not fatal to the case of revenue. Hon'ble ITAT, Indore in the case of Om Prakash Patidar, HUF, ITA No. 220/Ind/2017 has confirmed the view of the CIT, Appeal, who placed reliance upon the decision of Hon'ble ITAT, Bangalore, in the case of PV Ajay Narayan, 57 TTJ 159, wherein, it has been held that mentioning of wrong section is not fatal to making an assessment under any other section. In the case of M/s SVS Oils Mills, tax appeal no. 765/2018, Hon'ble Madras High Court has held as under:-
12 ITA No. 145/RPR/2022Uttam Kumar Agrawal "8. In our opinion, Section 69B providing for amounts of investments in Bullion, Jewellery or other valuable articles (including excess Stocks as well) would have been more appropriate Section to be indicated in the orders passed by the Authorities below rather than Section 69C Unexplained Expenditure. Nonetheless, we are of the clear opinion that mentioning of wrong section would not upset the Additions made by the Assessing Authorities below in the present case. All these 5 provisions enumerated above have been enacted with a view to bring to tax the unexplained debit balances in the Balance Sheet of the Assessee either in the form of Unexplained Investments, Expenses or Stocks, etc., or unexplained Assets, Money, Bullion, Jewellery, etc., and therefore, such unexplained investments and expenses intended to be brought to tax as Undisclosed Income, these provisions are not only clearly worded but also indicated to plug the loopholes and check the menace of black money. Likewise, unexplained credits in the Balance Sheet are also brought to tax under Section 68 of the Act ".
Hon'ble High Court of MP in the case of VISP Pvt Ltd, 265 ITR 202, in the similar circumstances held as under:-
"4. Learned counsel, appearing for the assessee placing reliance on the decision of the Supreme Court reported in Baladin Ram v. CIT [1969] 71 ITR 427 and the decisions the Mumbai and Allahabad High Courts reported in CIT v. Bhaichand Il. Gandhi [1983/ 141 ITR 67 and Sundar Lai Jain v. CIT [1979] 117 [TR 316, respectively, contended, t/'la! Section 68 of the ACI can be invoked only, when, the books of account of the assessee show the cash entry and not otherwise.
5. We are afraid, such a narrow and restricted interpretation of the provisions, contained in Section 68 was advanced by learned counsel for the appellant/assessee, cannot be accepted. If the liability shown in the said account, which, is found to be bogus and in the absence of any plausible and reasonable explanation offered by the assessee, then, certainly, the amount can be added towards the income of assessee and brought to tax in the hands of the assessee ".
Accordingly, correct provisions have been applied here.
8. Aggrieved by the confirmation of additions though part relief is granted as per the aforesaid decision of the Ld. CIT(A), the assessee has preferred an appeal before us.
13 ITA No. 145/RPR/2022Uttam Kumar Agrawal
9. While assailing Ground No. 1 of the present appeal, at the outset, Ld. AR of the assessee has submitted a written synopsis, which for sake of clarity, extracted as under:
Ground no. 1 Submission of assessee l. Addition made on account of:
Particulars Amount Rs.
Alleged excess stock of jewellery at business 6,23,94,369/-
premises u/s 69B
Alleged unexplained investment in 3,63,68,311/-
jewellery found at residence u/s 69A
Total (A) 9,87,62,680/-
Less: income offered in return on a/c of excess 68,28,637/-
jeweller
Net addition made 9,19,34,043/-
i) Jewellery found at shop (page no. 59 of assessment order) Value of jewellery stock found Rs. 10,83,10,938/-
Less : Value of stock as per books Rs. 4,59, 16,569/-
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Addition made u/s 69B Rs.6,23,94,369/-
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ii) Jewellery found at residence (page no. 59 of assessment order) Value of jewellery found at Rs. 3,63,68,311/-
residence Added entire value u/s 69A.
2. Reason for difference
i) Stock of jewellery (a) received on approval and (b) purchase bills in respect of some jewellery purchased, both before search, not accounted in books till date of search. Summary of such claim at PN 138 of PB-I. 14 ITA No. 145/RPR/2022 Uttam Kumar Agrawal
ii) Stock of business kept at residence also, which has not been considered by the AO.
If both these items are considered, there will be no excess stock of jewellery, neither at shop nor at residence, because considering both claims, there was excess stock of Rs. 68,28,637/- which has already been offered in the return filed by assessee.
3. Reconciliation of stock considering claim of assessee Chart placed at PN 138 of PB-l .
4. Parties confirmed in enquiry u/s 133(6)
i) Reply received by AO from 5 parties u/s 133(6) at PN 31 1 to 352 of PB-2.
ii) All parties confirmed.
5. Stock received on approval & purchases not entered in books, both found recorded in seized diary
i) Entries of items in stock reconciliation placed at PN 138 of PB (purchases and received on approval not entered in books till search), found entered in seized diary being BS-4, LP no. 19, 24 & 32, which are at PN 218 to 220 of PB-I.
ii) Quantity of gold ornaments received on approval and for which purchases not entered in books, as per above referred 3 LPs is 23,781 .220 grams (net), which is the same as is taken in reconciliation chart at PN 138 of PB. Summary of 23,781.220 gms:
LP no. 218 (31.880 + 888.10 + 1120.20) 2,040.180
LP no. 210 (143.150 + 1701.650 + 508.450) 2,353.250
LP no. 220 (13,812.450 + 4,570.370 + 1,005) 19,387.820
----------------
23,781.250
---------------
iii) Silver quantity claimed similarly is 1,93,530 grams which is entered on LP no.
24 (31,400 grams) (PN 219 of PB-I) and LP no. 32 (1,62,130 grams being 50,470 + 1,11,660 grams) (PN 220 of PB-1).
6. Since impugned quantity of gold & silver items found recorded in seized diary, while calculating any difference between book & physical stock, these quantities are required to be considered as book stock, as availability of this stock is substantiated by the entries in diary.
7. Presumption u/s 132(4A) and 292C
i) Presumption under above sections has not been rebutted and so contents of BS-4, LP no. 19, 24 & 32 have to be treated to be correct.
iii) Going by entries in above referred LPs, receipt of quantities referred to therein has to be treated to be correct. Seized documents establish that certain quantities of gold and silver items were received by assessee before search and as per the 15 ITA No. 145/RPR/2022 Uttam Kumar Agrawal narration given in such LPs, bills thereof were not received till the date of search. It is equally established that such quantities have not been entered in books.
iv) As per sec. 132(4A) and 292C, these quantities have to be taken to be received before search and so receipt of such quantities cannot be disputed. Have to be given credit for while calculating any discrepancy in stock.
v) If impugned quantities are so considered, there is no further difference.
8. Observations of AO and CIT(A) All adverse observations of AO and CIT(A) are to the effect of objecting the receipt of respective quantities before the search, as claimed by assessee. Since receipt of impugned quantities cannot be disputed in view of provisions of sec. 132(4A) and sec. 292C, all adverse observations of both the authorities are irrelevant.
9. Impugned transactions accounted after search, routed through regular books, payment thereof recorded in regular books It is undisputed that against the entries in seized diary covered by LP no. 19, 24 & 32, all t the pending bills have subsequently been recorded in regular books while many of the items received on approval are also so accounted, as some of the goods received on approval were later purchased. Payments made against such transactions recorded in books either through cheque or through sales made to the parties.
10. Business stock lying & found at residence
i) AO has disputed that stock of business was kept by assessee at residence also, mainly for the reason that (a) in the preliminary & other statements recorded during search, such claim was not made and (b) there was no shortage found at shop to support the claim that business stock was kept at residence also.
ii) Even if claim was not made in preliminary & other statements, claim substantiated by following facts: -
Common practice among jewellers to keep stock at safe place.
At page 1 19 of appellate order, CIT(A) admits that out of stock of Rs. 8,33,99,441/- found recorded in BS-4, stock of Rs. 3,42,83,305/- kept at the residence (last 4 lines). He thus admits that business stock was kept residence. He again reiterated this on page 120, 1st para, last 5 lines.
Stock found bear tags.
Stock items of business, found at residence, they all bear tags containing:16 ITA No. 145/RPR/2022
Uttam Kumar Agrawal Diamond jewellery - gross & net gold weight, carat of diamonds, MRP of diamonds.
- Silver items - Most of it was payal, all the payals contain engrossing of trade name of "NR/SPL".
Strong circumstantial evidence that such items pertained to business of assessee.
In answer to question no. 25 of statement dated 23.1 1.2018 (PN 104 of PB) assessee stated that in all the jewelleries tags are attached.
Silver items in the form of payal are of repetitive designs and such payals of similar design are large in number.
Weight of items found, like payal, bichiya etc. all aggregating to about 243.801 kg of silver - such huge quantity cannot be personal jewellery/item.
Informed ADIT (Inv.) within 6 days of conclusion of search Immediately after conclusion of search on 24.1 1.2018, assessee addressed letter to ADIT (Inv.) on 30.1 1 .2018 intimating the correct facts. Letter placed at PN 136 & 137 of PB-I. ADIT (Inv.) did not take any steps to verify claim of assessee.
Reliance on DCIT vs Rajendra Shanna in ITA no.
296/RPR/2014 dated 01.07.2019 (2019) 202 TTJ 6 (Raipur) (PN 362 to 372 of PB-2).
iii) Shortage found at shop Considering the entries of reconciliation statement, there would be shortage of stock found at shop of assessee, which is another circumstantial evidence that stock of business was kept at residence also.
iv) AO himself observed on page no. 17, para no. (v) (starting from 7 th line from top), that if there was shortage in the business premises, then it could have been considered that items found in residence was of business concern of the assessee.
ll. Neither sec. 69A nor sec. 69B attracted i) AO & CIT(A) have invoked sec. 69A & 69B for making/sustaining addition. ii) Sec. 69A
- Pre-supposes that there is investment made by assessee.
17 ITA No. 145/RPR/2022Uttam Kumar Agrawal
- Entire stock of jewellery considered as excess, whether found at residence or shop, covered by entries of purchase found recorded in BS, LP no. 19, 24 & 32. Bills not received and so no question of making any payment.
- No evidence found during search or in assessment that against such entries, any unrecorded investment/payment was made by assessee. On the contrary, investment made out of regular books, maybe after the search.
- Sec. 69A fails. Initial burden on AO to establish that any investment made by assessee, which is not recorded. Burden not discharged, addition liable to be deleted. Reliance on: -
CIT vs Dinesh Jain HUF (2013) 352 ITR 629 (Del.), PN 373 to 380 of PB-2, relevant finding on PN 377 & 378, para no. 8. CIT vs Naresh Khattar HUF (2003) 261 ITR 664 (Del.) Ushakant N. Patel vs CIT (2006) 282 ITR 553 (Guj.) C. K. Sudhakaran vs ITO (2005) 279 ITR 533 (Ker.).
iii) Sec. 69B is attracted when an assessee is found to have made investment or if it is found that amount expended on making such investment exceeds amount recorded in books.
- No such finding.
- Same submission as in the case of sec. 69A.
12. Reason for the answers given in statement
i) During search, assessee was under pressure and anxiety and was not in a proper frame of mind.
ii) Under such circumstances, assessee was not aware that his residence was also covered and so he did not inform the search team about stock lying at residence.
iii) Further, statement dated 23.1 1.2018 was recorded up to late midnight of 23/24.
I I .2018. Answers given without verifying books and seized material.
iv) About goods received on approval and against purchases not entered in books, assessee could not mention the facts due to anxiety & tension.
v) Surrender was made by the assessee on the basis of working prepared by the search team and the assessee did not go into correctness of such working. For these reasons, in answer to question no. 52 of the statement dated 23.1 1.2018 (PN 1 18 of PB) the assessee stated that whatever excess stock etc. was found, complete details would be given by him within 7 days of conclusion of search, which also shows that the surrender made by him was subject to verification.
vi) Reliance on: -
CIT vs Radha Kishan Goel (2005) 278 ITR 454 (AIL), PN 381 to 386 of PB- 2, relevant findings on PN 385, para no. 10.
Sayyed Hamid Ali vs ACIT (2020) 205 TTJ 453 (Indore), para no. 17. CIT vs Mrs. Sushiladevi S. Agarwal (1994) 50 ITD 524 (Ahd.), para 7.
18 ITA No. 145/RPR/2022Uttam Kumar Agrawal Surinder Pal Verna vs. ACIT (2004) 89 ITD 129, 176 (Chd.)(TM), para 24.
vii) Moreover, assessee accepted the quantities and was unaware of valuation aspect and the search team posed questions on the basis of value only.
13. Retraction made by assessee Since surrender made during search was on mis-appreciation of facts and without considering the contents of books of accounts and seized documents, assessee retracted the same, letter dated 03.04.2019, at PN 83-84 of PB-I . Affidavit of assessee at PN 199- 202 of PB-I .
14. Comments on adverse observations of AO Separate sheet attached herewith explains each of the adverse observation of AO.
15. Statement of assessee's son Rajat Agrawal Question was raised to him about the business cash at home and about personal cash, jewellery etc. (question no. 8 of statement, PN 123 of PB). Vide question no. 12 (PN 124 of PB-I), he was asked to whether anybody else's cash/jewellery was kept. Since the stock was own and not of anybody else, he thought that he was not required to state so.
16. CIT(A)'s findings
i) Ld. CIT (A) observed at page 1 18, paragraph 3.1.13 that out of excess stock of Rs. 9,87,62,680/- worked out by the AO (at page no. 60, 2nd para of assessment order), items worth Rs. 20,85,006/- found from residence covered by CBDT Circular no. 1916, which was deleted by him vide para 3.1.12. Therefore, balance excess stock comes to Rs. 9,66,77,674/-
ii) As per the notings on LP no. 19, 24 & 32 of BS-4, there was unaccounted purchases of jewellery worth Rs. 8,33,99,441/-, for which no explanation has been submitted by assessee. At page 120, he concluded that jewellery worth Rs. 8,33,99,441/- as per BS4 cannot be treated as unaccounted stock of regular business but it is stock held in individual capacity for which nature and source is not explained, attracting sec. 69A. Out of this, stock of Rs. 3,42,83,305/- was kept at residence and stock of Rs. 4,91,16,136/- was kept at the business premises, which is treated as deemed income u s 69A.
iii) Out of addition of Rs. 6,23,94,369/- made by the AO on account of excess stock found at shop, stock worth Rs. 4,91,16,136/- was treated by the CIT(A) u/s 69A and the balance amount of Rs. 1,32,78,233/- was held to be unaccounted stock of business concern and since an amount of Rs. 68,28,637/- was already offered in the return on account of excess stock, the remaining unaccounted stock of Rs. 1,32,78,233/- was considered by him to be unexplained excess stock u/s 69B.
iv) CIT(A) observed at page 121 that it has been held by various Courts that misquoting of a section is not fatal, relying upon 0m Prakash Patidar HUF in ITA no. 220/1nd/2017 and M/S SVS Oils Mills in tax appeal no. 765/2018 of Hon'ble Madras High Court. On page 122, he concluded that correct provisions have been applied by him.
19 ITA No. 145/RPR/2022
Uttam Kumar Agrawal
v) Summary of AO's & CIT(A)'s findings: -
Particulars Addition made by Addition confirmed b Remarks
AO Id. CIT A
Sec. (IQs.) sec. (Rs.)
Unexplained 69B 6,23,94,369/- 69A 4,91,16,136/-
stock of
jewellery at
shop
69B 1,32,78,233/-
Sub-total (A) 6,23,94,369/- 6,23,94,369/-
Unexplained 69A 3,63,68,311/- 69A 3,42,83,305/- CIT(A)
jewellery found deleted Rs.
at residence 20,85,006/-
the basis of
CBDT circular
no. 1 91 6.
Total (B) 9,87,62,680/- 9,66,77,674/- Difference of
Rs.20,85,006/-
Less: Amount 68,28,637/- 69B 68,28,637/-
disclosed in
return
Net addition 9,19,34,043/- 8,98,49,037/- Difference of
(c) Rs.20,85,005/-
10. On the basis of the aforesaid written submission by the Ld. AR, it is submitted that the excess stock of jewellery found at the shop and residence of the assessee pertains to the business, to justify the same the reasons explained are that the stock of jewellery was either received on approval or some of jewellery items which were received before the date of search, but could not have been accounted for till the date of search for the reason that purchase bills are yet to be received. It is further argued that the stock of business was also kept at residence of the assessee but such clarification by the assessee was not considered by the Ld. AO. Summary of such claim of the assessee is in form of a reconciliation statement is furnished at page no. 138 of the assessee's PB No.1, and accordingly, the actual excess stock conceded by the assessee was 20 ITA No. 145/RPR/2022 Uttam Kumar Agrawal offered for taxation adding the same in return of income filed. For the sake of completeness of facts, Page no. 138 of the assessee's PB showing the reconciliation of stock is extracted as under:
11. Carrying the argument further, Ld. AR submitted that the stock received on approval and the purchase not entered in the books of account both were found recorded in the diary and loose papers seized during the search and such transactions were never disputed by the assessee. To substantiate this fact, Ld. AR drew our attention to the aforesaid reconciliation statement of the stock a/w the copy of seized diary being BS-4, LP No.19, 24 and 32 which are placed at page no. 218 to 220 of the PB No.1. In order to peruse the factual aspect of the transaction Page no. 218-220 are extracted here under:
21 ITA No. 145/RPR/2022Uttam Kumar Agrawal LP-19 LP-24 22 ITA No. 145/RPR/2022 Uttam Kumar Agrawal LP-32
12. Regarding quantity of gold ornaments received on approval for which purchase transaction was not entered in the books, Ld. AR submitted that according to LP No. 19, 24 & 32, the total Gold Ornaments in quantity were 23,781.220 grams (Net), which is tailing with the quantity as evident from the said loose papers, for which the details are culled out as under:
LP No / Quantities in Gms Total Qty in
Gms
LP no. 218 (31.880 + 888.10 + 1120.20) 2,040.180
LP no. 210 (143.150 + 1701.650 + 508.450) 2,353.250
LP no. 220 (13,812.450 + 4,570.370 + 1,005) 19,387.820 Total (In grams) 23,781.220
13. Regarding quantity of the Silver Ornaments, Ld. AR shown us LP No. 24 & 32 at Page 219 & 220 of the PB, wherein the silver received was recorded at LP No.24 from M/s Empire Bullion of 31,400 grams dated 16/11 and at LP No.32 of 1,62,130 grams consisting of two entries being 50,470 grams dated 4/11 and 23 ITA No. 145/RPR/2022 Uttam Kumar Agrawal 1,11,660 grams dated 14/11 from M/s Saheli Jewellers. In total, the silver ornament quantity of 1,93,530 grams have been explained as either received on approval basis or goods received but purchase bills are yet to be received, therefore, the same have not been accounted for.
14. It was the submission that since impugned quantity of the gold and silver items/ ornaments which were duly recorded in the seized diary wherein it is also categorically mentioned by the assessee that the bill for such purchases are yet to be received (fcy vkuk ckdh @ fcy ugha vk;k gSa ) , this shows that the quantities available in stock are yet to be entered in the books of accounts, which is a practice in the trade of the assessee, wherein goods are purchased on approval basis and physically brought in the business premises and once the transaction is finalized, the bills are received in due course and accounted for subsequently.
Under such circumstances, the availability of stock with the assessee is duly substantiated by the entries in the seized diary and Loose papers confiscated by search team.
15. To support the aforesaid contentions, Ld. AR further drew our attention to page no. 311 to 352 of the assessee's PB, showing the replies received from Five parties u/s 133(6) of the Act consisting of submission, confirmation of account, copy of bank statement, copy of ITR, copy of Jangad voucher (the document prepared for transaction of delivery of goods on approval only) etc. The proceedings initiated by the Ld. AO to verify the genuineness of entries in the seized diary and loose papers from the respective parties have been duly 24 ITA No. 145/RPR/2022 Uttam Kumar Agrawal responded by all the five parties and the transactions were confirmed. Ld. AR further took us to page no. 142 to 145 showing copies of bills of suppliers from whom goods were received on approval basis, page no.146 to 149 of PB containing copies of final bill of suppliers whose goods were received on approval basis, page no. 152 to 155 having copies of ledger accounts of suppliers whose bills were pending to be entered in books of accounts, page no.156 to 169 showing copies of bills which were pending to be entered in books of accounts, page no. 170 to 174 containing copies of sales bills of goods sold to suppliers whose payments were pending and who were eventually paid by selling of the goods.
16. In terms of aforesaid submissions, Ld. AR further claimed that the presumptions u/s 132(4A) and 292(C) were not rebutted, therefore, the contents of BS-4 i.e., the seized diary and LP-19, 24 & 32 being the loose papers seized should be treated as correct accordingly the quantities mentioned in the seized documents regarding gold ornament, silver ornament, diamond ornament and gold bullion which were physically received by the assessee and are available at the time of the search, for which bills were yet to be received by the assessee, consequently the entries in books of accounts are pending. This shows and establishes that the quantities found in the premises of the assessee are on account of regular business practice of the assessee only, since the same were not entered in the books of accounts thus does not qualify to be treated as ingenuine and unexplained. Ld. AR further submitted that as per provisions of section 132(4A) and 292C, the quantities found during the search are to be 25 ITA No. 145/RPR/2022 Uttam Kumar Agrawal considered as received before the search and thus, such quantities cannot be disputed, accordingly, credit for such quantities must be given while verifying the physical stock of the assessee. It is submitted that if the impugned quantities are considered, there is no further difference other than the difference already offered to tax by the assessee. It is submitted that since the receipt of quantities cannot be disputed in view of provisions of section 132(4A) and 292C, no adverse inference can be drawn leading to any addition on this count.
17. Ld. AR in order to substantiate the arguments and contentions raised in the foregoing paras have further submitted that the pending entries of the physical stock found during the search have been duly routed through the regular books of accounts also the payment of such transactions are duly recorded in the regular books, therefore, such transactions which are misconstrued and branded as individual transactions of the assessee, are actually business transactions, therefore, such finding of the Ld. Revenue Authorities are without any reasonable basis or evidence, thus are nothing but factual misinterpretation.
18. As per Ld. AR, the stock lying and found at residence was also business stock of the assessee however, the same was not accepted by the Ld. AO on account of preliminary and other statements recorded during the search. It is further submitted that as per reconciliation of the stock after adding physical quantities from the diary and loose papers seized by the department, the shortage in physical quantity of stock found at the shop was matched with the 26 ITA No. 145/RPR/2022 Uttam Kumar Agrawal stock at the residence of the assessee, therefore, the contention of the Ld. AO that there was no shortage found at shop to support the claim that business stock was kept at residence was a mistaken belief contrary to the factual position which cannot be a basis for adverse inference against the assessee. To support this contention further, it was the submission that it is a common practice in the jewellery business to keep stock at a safe place. Ld. AR further argued that at page no. 119 of the appellate order Ld. CIT(A) also observed that out of stock of Rs.8,33,99,441/-, the stock of Rs.3,42,83,305/- was kept at the residence which shows that he had admitted that business stock was kept at residence.
Similar observation was repeated at page 120, first para last five lines of the Ld. CIT(A)'s order. Ld. AR further mentioned that the stock found at the residence of the assessee was found fastened with tags containing information like for diamond jewellery- gross weight and net gold weight, carat of diamond, MRP of diamond, for silver items most of it was payal containing name of the assessee's business NR/SPL engrossed on it. Such strong circumstantial evidence also shows that these items pertains to business of assessee. Ld. AR further submitted that the weight of silver articles like Payal, Bichiya etc. found at residence of the assessee was in aggregate of about 243.801 Kgs, such huge quantity cannot be the personal jewellery of the assessee, therefore, there is no justified reason to treat them as individual personal stock of the assessee.
19. Ld. AR of the assessee further submitted that all such clarifications and explanations were furnished on 30.11.2018 before the Ld. ADIT (Inv.) within 6 days of the conclusion of the search on 24.11.2018. Copy of letter so furnished 27 ITA No. 145/RPR/2022 Uttam Kumar Agrawal before the Ld. ADIT(Inv.) have been placed before us at page no. 136-137 of assessee's PB. Ld. AR further pleaded that no steps to verify the claim of the assessee have been initiated by the Ld. ADIT(Inv.). Regarding no further enquiry by the concerned revenue authority even after clarification by the assessee disputing the excess stock determined by the department, Ld. AR placed his reliance on the decision of ITAT Raipur in ITA no. 296/RPR/2014 vide order dated 01.07.2019 in the case of DCIT vs Rajendra Sharma, wherein on this aspect tribunal has observed as under:
7. We have heard both the parties and perused the material on record.
It is undisputed fact that during search, the assessee was not present at the factory premises, where stock verification was carried out and the inventory of stock of raw material was prepared in the presence of one employee of the assessee, who has signed the inventory. We find that the AO has observed that assessee's relative Shri Manish Sharma was also present in the factory premises, which the assessee has disputed before us; that the Id. Counsel contended that Shri Manish Sharma visited the factory subsequent to completion of stock-taking process; that he was shown the inventory which was already prepared before his arrival at the factory and that he was asked to state whether he agreed with the inventory or not On perusal of the inventory, [APB-2, Pg. 7-11] we observe that it has not been signed by Shri Manish Sharma. Had he been present during stock verification, his signature would have been obtained on the inventory as rightly contended by the Ld. AR of the assessee; that the fact that assessee's son Shri Manish Sharma thus was not present during the stock verification process, was not disputed by the Id. CIT DR. The inventory of physical stock was prepared on 21.03.2012 i.e. on the first day of search and it is undisputed fact as per record that neither the assessee nor his employee or his son disputed the quantity of different items till the time of completion of search. We observe the on 24.03.2012, the employee, in whose presence stock verification was done and who had signed the inventory, deposed an affidavit stating that during stock verification, individual items were not weighed and the stock was verified in duskiness with the help of torchlight and that so she had denied to sign the inventory but she was made to sign the inventory under 28 ITA No. 145/RPR/2022 Uttam Kumar Agrawal coercion. We also observe that this affidavit was filed by the assessee before the JDIT (Inv.), Raipur on 28.03.2012. Although, the inventory prepared during search, which has been signed by the employee of the assessee, cannot be called into question but, at the same time, we also observe that the concerned employee had immediately on the next date of conclusion of search, deposed affidavit bringing out certain discrepancies in the stock verification process by way of making allegation that she had signed the inventory under coercion. Not only this, the affidavit was also submitted before an authority, as high as JDIT(lnv.) immediately on 28.03.2012. In other words, the assessee brought out certain facts before the JDIT(Inv.) within the shortest possible time. In such a case, the revenue was required to immediately cause further enquiry into the matter, especially when such grave charges were levelled about the stock verification process. However, we find that no enquiry whatsoever was done either by the JDIT or by the DDIT conducting the search. The assessee not only disputed the quantities, he also claimed that the stock verification was carried out in duskiness with the help of torchlight and that the standard weight of tobacco leaves had been wrongly taken in the inventory. The assessee also explained that due to threat of fire, there was no electricity connection in the godown where materials were stored. All these claims of assessee have remained uncontroverted. We are of the considered opinion that in absence of any further enquiry conducted by the search team and without verifying the veracity of various claims of the assessee made through the affidavit of the employee, no adverse view could have been taken in the case of the assessee even keeping in mind the circumstance that stock inventory was signed by the employee. In our considered view, in such peculiar facts, the stock inventory prepared cannot aspire confidence and no inference can be drawn only on the basis of such of inventory as it renders it unreliable. It is not the case that the stock inventory was brought under dispute by the assessee after a long gap or that the assessee did not produce the concerned employee before the authorities when called. It is not the case of Revenue that during search or during the assessment proceedings, any material evidence establishing unrecorded purchases or sales was found or brought on record. In other words, no corroborative material has been brought on record. This is one circumstance which weighs in favour of the assessee. Search u/s 132 29 ITA No. 145/RPR/2022 Uttam Kumar Agrawal is one of the strongest tools in the hands of Revenue and when such serious allegations were levelled in connection with such an action, no addition could have been made without bringing 'something more on record. It also appears that no enquiry whatsoever was conducted from the assessee also on this issue. In this view of the matter, we are of the considered view that the amount of discrepancy found during search on the basis of inventory prepared, which has been brought under severe doubt by the assessee within the shortest possible time, could not have been added just on the basis of the inventory prepared during search. In our considered view, the objection raised by the assessee has remained undisposed of and therefore, in the peculiar facts of the case, no adverse view could be taken against the assessee.
20. Referring again to the circumstantial evidence, Ld. AR submitted that after reconciliation of the stock, the quantity of stock reduced by stock physically available at the shop of the assessee was found to be short and the said shortage was matched with the stock physically found at the residence of the assessee, therefore, in aggregate the stock at shop and residence was representing the actual business stock of the assessee for which quantities are received on approval basis but book entries were pending or because of bills to be received. Ld. AR further drew our attention to assessment order page no. 17 para (v), wherein Ld. AO himself have also observed that, if there was shortage in the business premises then it could have been considered that items found at residence was of business concern of the assessee, this observation of the Ld AO is fortified by the evidences furnished by the assessee and confirmed by the concerned suppliers. With such submissions, Ld. AR appealed that the quantity of stock found at residence also pertains to business of the assessee.
30 ITA No. 145/RPR/2022Uttam Kumar Agrawal
21. Regarding applicability of sec. 69A and sec. 69B, it was the submission of Ld. AR that since there was no investment proved to be made by the assessee provisions of section 69A & 69B are wrongly triggered by the Ld. AO.
As per seized documents, it is a fact that there were entries of purchase found recorded with the narration that bills not received therefore, question of making any payment does not arise. It was also the contention that no evidence for any unrecorded investment or payment made by the assessee was found by the investigating team. Since all the payments pertaining to the entries in the seized documents were duly settled by the assessee from the regular books of accounts may be after the search therefore, the genuineness of such transaction cannot be doubted. According to Ld. AR, the provisions of section 69A invoked in the present case fails, because the initial burden to prove that investment was made by the assessee could not be substantiated by the Ld. AO by way of bringing on record any cogent evidence to prove so. Ld. AO, therefore, grossly failed in discharging the burden cast upon him. Similar argument has been offered by the Ld. AR w.r.t. provisions of section 69B, where the investment made by the assessee or investment made in excess of amount recorded in the books, could not be proved by the revenue. On this aspect, Ld. AR placed his reliance on following judgments:
CIT vs Dinesh Jain HUF (2013) 352 ITR 629 (Del.)
8. These arguments are certainly attractive but the language employed by Section 69B is the first stumbling block which Mr. Sabharwal has to overcome. The section is in the following terms:
"SECTION 69B - AMOUNT OF INVESTMENTS, ETC., NOT FULLY DISCLOSED IN BOOKS OF ACCOUNT.31 ITA No. 145/RPR/2022
Uttam Kumar Agrawal Where in any financial year the assessee has made investments or is found to be the owner of any bullion, jewellery, or other valuable article, and the Assessing Officer finds that the amount expended on making such investments or in acquiring such bullion, jewellery or other valuable article exceeds the amount recorded in this behalf in the books of account maintained by the assessee for any source of income, and the assessee offers no explanation about such excess amount or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the excess amount may be deemed to be the income of the assessee for such financial year."
The section in terms requires that the Assessing Officer has to first "find" that the assessee has "expended" an amount which he has not fully recorded in his books of account. It is only then that the burden shifts to the assessee to furnish a satisfactory explanation. Till the initial burden is discharged by the Assessing Officer, the section remains dormant.
CIT vs Naresh Khattar HUF (2003) 261 ITR 664 (Del.)
10. There is no gainsaying that to invoke the provisions of Section 69B of the Act, the burden is on the Revenue to prove that the real investment exceeds the investments shown in the books of account of the assessed. As observed by the apex court in K.P. Varghese v. ITO [1981] 131 ITR 597, to throw the burden of showing that there is no understatement of the consideration received, on the assessed would be to cast an almost impossible burden upon him to establish a negative, namely, that he did not receive any consideration more than what has been declared by him. Therefore, if the Revenue seeks to hold that the assessed has received more than what has been declared by him in respect of the assessment in question, the onus would lie on the Revenue to prove this fact by bringing some material on record. 11. In the instant case, the Tribunal has noted that before it the parties were ad idem that the addition in question was made only on the basis of the observations in the interim order passed by the court in a civil suit between the three parties, including the assessed. We feel that the Tribunal was correct in holding that merely because counsel for the assessed made a statement in a civil court that the total investment in the property was Rs. 13 crores and odd, it would not be sufficient material to come to the conclusion that the said figure represents the actual investment. There has to be something more than that. We are, therefore, of the view that the Tribunal's finding that the Revenue has failed to place on record any material to show how the total investment of the assessed was determined at Rs. 13 crores cannot be said to be perverse for having taken into consideration some irrelevant factors or that its decision is such that no reasonable person could have come to 32 ITA No. 145/RPR/2022 Uttam Kumar Agrawal the same conclusion. In our opinion, while deleting the addition, the Tribunal has taken into consideration the relevant factors, extracted hereinabove. The issue raised by the Revenue essentially pertains to a question of fact and does not involve the application of any legal principles to the facts established by evidence. 12. Consequently, in our view, no question of law, much less a substantial question of law, arises from the impugned order of the Tribunal. We accordingly decline to entertain the appeal. Dismissed.
Ushakant N. Patel vs CIT (2006) 282 ITR 553 (Guj.)
14. Even if the contention of Revenue that provisions of Section 132(4A) of the Act are available to Revenue during course of regular assessment proceedings is accepted for the sake of argument, yet nonetheless, the prerequisite conditions of Section 69 of the Act cannot be given a go-by and have to be met with. The view expressed by this Court derives support from the ratio of the apex Court decision in case of Prem Dass v. ITO . While dealing with a case relating to prosecution under Sections 276C and 277 of the Act, it was laid down by the apex Court that the presumptions under Section 132(4A) of the Act would not establish the ingredients contemplated by Sections 276C and 277 of the Act, and that the High Court was not justified in setting aside the order of acquittal on the basis of Section 132(4A) of the Act. Therefore, even if, the presumption available under Section 132(4A) of the Act can be raised against the assessee, the ingredients, by way of prerequisite conditions of Section 69 of the Act have to be satisfied and cannot be presumed to have been established on the basis of Section 132(4A) of the Act simpliciter. 15. In the light of what is stated hereinbefore the impugned order of Tribunal is held to be incorrect in law, in the facts and circumstances of the case and material on record. The Tribunal was not justified in remanding the matter to the CIT(A). It was necessary for the Tribunal to have dealt with the applicability of provisions of Section 69 together with provisions of Section 132(4A) of the Act after dealing with the reasons given by CIT(A) instead of recording "we are also at a loss to understand as to what to do with the issue at hand" as recorded in paragraph No, 20 of the impugned order.
16. The question referred is, therefore, answered in the negative, i.e. in favour of the assessee and against the Revenue. The appeal shall stand restored to the file of the Tribunal and in light of the judgment of this Court, the Tribunal shall rehear the appeal after giving adequate opportunity of hearing to both the sides.
C. K. Sudhakaran vs ITO (2005) 279 ITR 533 (Ker.).
4. We have considered the contentions raised by both sides meticulously and have gone through the decisions referred to by counsel. The terms and conditions mentioned in the agreement dated May 12, 1997, are revealing. The agreement clearly stipulates an amount of Rs. 49,91,842 as the value of shop room No. 115. The fact that the assessee had paid advance has also been mentioned in the agreement dated May 12, 1997. There is no dispute to that effect. Further, it is also clear that the assessee had declared payment of Rs.
33 ITA No. 145/RPR/2022Uttam Kumar Agrawal 12,50,000 at the time of the agreement under the Voluntary Disclosure of Income Scheme. As held by the apex court in K. P. Var-ghese's case , the burden of proof is on the respondent to show that the assessee had actually paid more than what was actually disclosed. This burden has been discharged by the Revenue. The burden can be discharged by the Revenue by establishing the facts and circumstances from which reasonable inference can be drawn that the assessee had not correctly declared or disclosed the consideration received by him and there is understatement or concealment of consideration. On the facts we are in full agreement with the authorities below. In such circumstances, we find no reason to entertain this appeal. The same would stand dismissed. I. A. No. 1657 of 2005 is also dismissed.
22. Backed by aforesaid submissions, Ld. AR submitted that the assessee during the search was under pressure and anxiety and was not in proper frame of mind, therefore, the entries in books pending for purchases of goods on approval could not be explained by him. In order to verify the position of excess stock which is worked out and prepared by the search team assessee has mentioned in answer to question no. 52 that complete details qua the excess stock would be submitted by him within 7 days from the date of conclusion of search, this also shows that the surrendered on account excess stock was subject to verification. It is also argued that the assessee has only accepted the quantities and was unaware of valuation aspect whereas the search team have posed questions on the basis of value only. To support this contention, Ld. AR placed his reliance on following judgments:
CIT vs Radha Kishan Goel (2005) 278 ITR 454 (AIL)
10. It is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually, telephone and all other connection are disconnected, and all ingress and egress are blocked are blocked. During the course of search person is so tortured, harassed and put to a mental agony that he loses his normal mental state of mind and at that stage it 34 ITA No. 145/RPR/2022 Uttam Kumar Agrawal cannot be expected from a person pre-empt the statement required to be given in law as a part of his defence.
Sayyed Hamid Ali vs ACIT (2020) 205 TTJ 453 (Indore)
17. Hon'ble Allahabad High Court in the case of CIT v. Radha Kishan Goel (2006) 8 (J) ITCL 260 (AllHe) : (2005) 278 JTR 454 (All) : (2006) 152 Taxman 290 (All), It was observed that it is a matter of common knowledge, which cannot be ignored that the search is being conducted with the complete team of the officers consisting of several officers with the police force. Usually telephone and all other connections are disconnected and all ingress and egress are blocked. During the course of search person is so tortured, harassed and put to mental agony that he loses his normal mental state of mind and at that stage it cannot be expected from a person to pre-empt the statement required to be given in law as a part of his defense.
CIT vs Mrs. Sushiladevi S. Agarwal (1994) 50 ITD 524 (Ahd.),
7. It is well-known and admitted fact that search operations, particularly under the Income-tax Act is a lawful invasion on the privacy, life and property of a citizen which may affect him/her mentally also, besides causing several other inconveniences, hardships, embarrassment and harassment. There is every likelihood of a statement tendered to or recorded by the searching officers on the search day being incoherent or at variance with subsequent statements tendered to or recorded in any further or collateral proceedings. But to make addition to the returned income or to put such person to sufferance or to adverse consequences on such statement is not justified in law. By this we are not saying or laying down that every statement recorded on the search day has to be ignored as of no consequence or that no reliance or credence should be placed on such search day statement. All that we wish to say but with little emphasis, is that all that is stated by any deponent on the search day should not be taken as the truth, the whole truth and nothing but the truth. Such statements indubitably have evidentiary value and credibility in law, but the same should be viewed with great caution particularly when the same is denied, varied or retracted or established by the defendant to have been obtained or given under mental stress, coercion, undue influence or due to any other abnormal condition and circumstances when such statement was given. Any person may state different stories/versions to different persons/authorities on different occasions about certain facts. But when it comes to be tested or examined in a judicial or quasi-judicial proceedings before any Court, Tribunal or authority, then the question which arises for determination is as to which of the story/ Statement is right, truthful and/or reliable and believable. Though strict rules of evidence do not apply to income-tax proceedings yet, the substantive and normal rules of evidence do 35 ITA No. 145/RPR/2022 Uttam Kumar Agrawal apply as an ingredient of rules of natural justice (refer Central Bank of India Ltd. v. Prakash Chand Jain AIR 1969 SC 983 and the decision of the Supreme Court in the case of Chiiharmal v. CIT [1988] 172 ITR 250 at page 255. Therefore, the statement recorded on the search day has to be tested in accordance therewith. If a person at a later stage retracts from the statement given on the search day, then the Court or the Tribunal should try to ascertain reasons or circumstances from such person for doing so and if satisfied, not to place heavy reliance on such earlier statement which has subsequently been denied and retracted. Now let us examine, whether there were any compelling or justifiable reasons or circumstances on the part of the assessee for giving different statements on different occasions before different officers. It is common knowledge, open secret and admitted fact in this ancient and cultured country that woman/females are heavily dependent on males more particularly, husbands to look after and manage, on implied authority, their business matters, property dealings, tax and legal matters and, therefore, no eyebrow should be raised in astonishment nor any adverse inference should be drawn by any Tribunal or authority that a particular Indian lady or woman is unable to say with precision the true state of affairs of her business, properties or for that matter regarding her tax and legal matters or when she says that her husband has full knowledge and information about certain facts or dealings made on her behalf on such an implied authority. The assessee, we were informed, during the course of hearing, is an illiterate, aged, rustic, domestic and tradition-bound Marwadi lady, who is not exposed to the vagaries of this now cruel world and she was, therefore, wholly dependent on her husband in relation to the entire transaction of the said shop. It is also evident from the deposition of the authorised officer in the prosecution case launched against the assessee and her husband in the Criminal Court to which our attention was drawn and which is found in the assessee's paper-book that the assessee was unwell during the course of search operations on 26-6-1981 when her husband was out of Ahmedabad and that a Doctor was summoned for her treatment on that day. In such circumstances, the statement of the assessee will surely be incoherent and will be at variance with that of her husband in further/collateral proceedings. After the search, perhaps the assessee was informed by her husband about the true facts and state of affairs in relation to the transaction of the said shop and it is at that later stage, the assessee came forward and gave a different but perhaps true statement requiring credence. The Assessing Officer, therefore, was not justified in drawing adverse inference against the assessee or her husband oblivious of such circumstances enumerated by us above and ultimately resorting to the addition under Section 69 impugned in the appeal.
Surinder Pal Verma vs. ACIT (2004) 89 ITD 129, 176 (Chd.)(TM) 36 ITA No. 145/RPR/2022 Uttam Kumar Agrawal
24. It is well known fact that confessional statements made during the search are often vulnerable on the ground that the persons giving such statements remain under a great mental stress and strain. They also do not have the availability of relevant details, documents and books of account at the time of giving such statements in the absence of which precise information relating to the mode of utilization of such income and the year of such investment cannot be correctly furnished. The assessees are, therefore, entitled to modify/clarify the statements after verifying the necessary details from the relevant records at a later point of time. Smt. Neelam Verma had consistently taken the same stand from the stage of filing of the return that the sum of Rs. 1 lac has been utilized in construction of these three SCOs.
23. It is further submitted by the Ld. AR that since the surrendered made during the search was under misappreciation of facts without considering the contents of the books of accounts and seized documents, therefore, the assessee retracted the same vide letter dated 03.04.2019 a/w affidavit.
24. In terms of aforesaid submissions, Ld. AR submitted that since the assessee has reconciled the quantities of stock which were found to be in agreement with the physical quantities available at the shop and residence of the assessee. Assessee has established by way of furnishing the documentary evidence wherein it is apparent that the quantities purchased / received by the assessee on approval basis for which bills are received or yet to be received on the date of the search, there was no occasion for the assessee to complete the books in absence of final approval of the stock so received or in absence of the bills which are yet to be received. Merely the statement of the assessee under pressure and anxiety cannot be the sole basis for addition. The addition should be based on corroborative evidence which rather are in favour of the 37 ITA No. 145/RPR/2022 Uttam Kumar Agrawal assessee in the present case. Even the quantities as per seized documents are duly accounted for there was only a difference of Rs. 68,28,637/-, which the assessee has suo moto offered for taxation. The revenue has squarely failed in substantiating that the excess stock found was on account of any bogus/ unexplained investment by the assessee. On the contrary, when the proceedings u/s 133(6) have been initiated by the Ld. AO all the parties put to notice have come forward and responded affirmative in the favour of the assessee. Under such facts and circumstances, the addition made under 69A & 69B are bad in law, illegal, unjustified without any basis thus, are liable to be deleted and the orders of the revenue authorities deserves su to be quashed.
25. Per contra, Ld. CIT DR on behalf of the revenue strongly placed his reliance on the order of Ld. CIT(A). Ld. CIT DR drew our attention to the order of Ld. CIT(A) wherein it is observed by the Ld. CIT(A) that on perusal of the bills furnished by the appellant obtained after the search the appellant had never purchased any goods during FY 2012-13 to 2017-18 from five concern parties. The appellant during the year under consideration have made huge purchases of Rs.7.98 Crores from the said five concerns between the period 03.11.2018 to 16.11.2018 is against total purchase of appellant during the entire year to the tune of Rs.9.94 Crores i.e., 72.40% of the total purchase was made during the month of November 2018. It is the observation of Ld. CIT(A) that the goods purchased have been returned back by the assessee for Rs.4.52 Crores. i.e., more than 75% to 95% of the goods was returned by the assessee after 3-4 months. It was also observed that one of the supplier 38 ITA No. 145/RPR/2022 Uttam Kumar Agrawal concern M/s Saheli Jewellers Pvt. Ltd. has only made one transaction during the year of total invoice value of Rs.1.59 Crores which is enquired by the Ld. AO from GST department. It was the submission that the bills produced by the appellant are nothing but colourable device and clearly an after thought. Ld. CIT(A) also observed that the assessee has arrange bills after the date of search which related to the month of November 2000 only and not for the earlier period. There were no supporting bills/ vouchers/ challans/ approval slips for goods send for approval etc. not found during the search. With such observations, Ld. CIT(A) has rightly rejected the contentions of the assessee and uphold the addition with part relief in terms of CBDT Circular No. 1916. Ld. CIT DR with such submissions have requested to uphold the order of Ld. CIT(A).
26. Regarding settlement of payments for goods purchase and approval by way of goods returned, in rejoinder, Ld. AR of the assessee submitted that since the major stock of the assessee was seized by the department the assessee was under financial stress. The assessee has to settle the payments towards the quantities received on approval for which bills have been received and on account of scarcity of funds the accounts of the creditors were settled by way of selling the stock lying with him to the said creditors. As per Ld. AR, this is a regular and common practice in the trade of the assessee.
27. We have considered the rival submissions, perused the material available on record and the case laws relied upon by the parties. On perusal 39 ITA No. 145/RPR/2022 Uttam Kumar Agrawal of the factual matrix of the present case, it is an undisputed fact that there was a difference in physical and recorded stock of the assessee. The stock was found to be in excess than the value of stock in the books of accounts. Certain documents have been confiscated by the investigation team when the search was conducted on the business and residential premises of the assessee. The documents which became the basis for addition are seized diary (BS-4), Loose papers marked as LP No. 19, 24 & 32 (copies of same are extracted here in above). The main reason for difference in physical and stock as per books as explained by the assessee was that the quantity of goods received on approval but not entered in the books and the quantities received but bills are pending or the bills are yet to be received from the supplier therefore, entries of such stock was pending on the date of search. The quantities shown in the seized documents have been further fortified by the assessee by way of producing the bills for same quantities from the suppliers, assessee also completed his books of accounts and have reconciled the quantities and there after the excess stock worked out was offered as income in the returned filed by the assessee for Rs.68,28,637/-. Such working of quantities of stock under the head gold jewellery, silver jewellery, diamond jewellery and gold bullion prepared and furnished by the assessee was not disputed by the department but have made the addition of entire excess stock without considering the entries of quantities in the seized documents with their conviction on the ground that (i) as per seized documents which were written by the assessee in his hand writing regarding various transactions purchase of jewellery for which bills are awaited, however no purchase or sales bills were found during the search and 40 ITA No. 145/RPR/2022 Uttam Kumar Agrawal seizure which were pending for posting in the books of account, (ii) it is observed by the Ld. CIT(A) that the appellant had never purchased any goods during the FY 2012-13 to 2017-18 from the five concern namely M/s Saheli Jewellers, Durg, M/s Saheli Gems & Jewellers, Bhilai, M/s K R Diamonds, M/s Shashwat creations LLP and M/s Empire Bullions. It is observed that during the year under consideration the assessee has made a major purchase of Rs.
7.98 Crore from these five concern between 03 to 16.11.2018 out of total purchase in the entire year for Rs.9.94 Crore. It is further observed that 72.40% of total purchase of the assessee was in the month of November 2018. It is also observed that goods of Rs.4.52 Crores were returned back by the appellant as sales returns. Regarding M/s Saheli Jewellers Pvt Ltd, It was the observation that as per GST details the impugned party has made only on transaction in the entire year of Rs.1.59 Crores with the assessee on 03.11.2018. For which payments have been made in the month of January 2019, this transaction are considered as suspicious in nature, similar observations were recorded by the Ld. CIT(A) regarding M/s Saheli Gems & Jewellers Pvt. Ltd., accordingly , the transactions were considered as managed for making unaccounted stock into accounted, (iii) It is also observed by the Ld. CIT(A) that the assessee had made purchase of jewellery from 7 parties in the month of November within 15 days before the date of search and the total purchase made was more than 72 % of the entire years purchase and the appellant did not remember their names, during statement recorded on oath on 3 consecutive days, (iv) It is also noted by the Ld. CIT(A) that during the course of search no document relating to delivery of the impugned excess 41 ITA No. 145/RPR/2022 Uttam Kumar Agrawal jewellery like delivery challan, delivery memo, courier details etc. was found from the possession of the assessee, this shows that bills have been prepared after the course of search proceedings, had there been any actual purchase of said excess jewelllery there ought to have been any evidence of delivery of goods even when the same have been return back by the appellant with such observations Ld. CIT(A) concluded that the bills produced by the appellant are nothing but colourable device and clearly and after thoughts and managed, (v) It was also contended by the revenue that assessee himself during the statement recorded on oath have admitted that excess stock have found during the course of search have been acquired out of unaccounted income of past few years.
28. On perusal of the aforesaid observations of the Ld. CIT(A), we find that the allegations of the department against the assessee are all based on presumptions and probabilities but are unsubstantiated in terms of any corroborative evidence that the transactions recorded in the seized documents showing specific quantities a/w categorical mentioned about the status of pending bills are not genuine transactions. The assessee had matched the quantities by furnishing the bills received from the respective suppliers whose name are reflecting in the seized documents, such quantities have never been disputed by the department they only placed their reliance on probabilities and surmises whereas the physical documentary evidence are indicating on the contrary. The statement of the assessee recorded during the search cannot be the sole basis for addition unless the same is duly supported by the evidence, 42 ITA No. 145/RPR/2022 Uttam Kumar Agrawal more over the assessee requested a time of 7 days to verify the correctness of the facts, which after verification are furnished before the revenue authority in after requisite corrections supported with documentary evidences. On this issue, we have already taken a view in the case of ACIT vs PSA Constructions in ITA No. 145/RPR/2018 dated 17.07.2023, observing as under:
15. We have considered the rival submissions, perused the material available on record and the case laws placed before us to support the contentions by the parties. On perusal of the order of the ld. AO, it is discernible that the assessee has produced the books of accounts, bills and vouchers during the assessment proceedings, however, since the same could not be provided to the survey team during the survey proceedings, the AO has not accepted the same with the observations that such books and documents prepared were an afterthought and are manipulated. Assessee's claim that the survey team has not provided them with sufficient time to produce the documents, was not found convincing by the ld. AO. When the issue was assailed before the ld.CIT(A) after going through the facts of the case and the relevant case laws, ld. CIT(A) has decided the matter in favour of the assessee deleting the addition made by the AO with the observations that rejection of books and estimation of profit is based on merely the statement of assessee's partner u/s.133A of the Act, there are several facts which were discussed in the appellate order, considering the same, the action of the ld.AO based on no material, cannot be sustained. Ld. CIT(A) while discussing the issue has taken support from the judgment of the Hon'ble Jurisdictional High Court of Chhattisgarh in the case of ITO Vs. Vijay Kumar Kesar, reported in 327 ITR 497, wherein Their Lordship had held that the addition based on mere confession and not based on any document during survey cannot be sustained.
The issue was addition of unexplained investment u/s.69B of the Act, where the addition was based solely on assessee's confession during the survey which was later retracted and Commissioner (Appeals), after considering material produced by assessee during assessment proceedings and on due appreciation thereof, had accepted explanation of assessee for retraction of his admission as bona fide and further accepted books of account prepared by assessee on the basis of duly verified primary evidence and Tribunal had confirmed order of CIT(A), in view of retraction of admission by the assessee, deletion of addition was held to be justified by the Hon'ble High Court. Ld. CIT(A) has further relied on the decision of ITAT Mumbai Bench of the Tribunal in the case of Chawla Brothers (P) Ltd., 43 ITA No. 145/RPR/2022 Uttam Kumar Agrawal reported in [2011] 43 SOT 651 (Mum), wherein it is held that the declaration in survey u/s.133A of the Act is subject to explanation and reconciliation by the assessee and if explained, it has to be considered.
16. On a thoughtful analysis of the factual matrix of the present case, apparently the assessee has provided its books of accounts maintained on computer, however, supporting documents and vouchers were not produced before the survey team during the survey proceedings u/s.133A of the Act but all the books of accounts, bills and vouchers with supporting evidences were submitted by the assessee before the AO during the assessment proceedings but the same were summarily rejected by the ld. AO stating that it seems that assessee has manipulated the books of accounts and other documents, hence, the same cannot be relied upon. Such an observation of the ld.AO shows that ld. AO has made an observation on his own preconceived notion, without taking into the documents i.e. books of accounts etc. submitted by the assessee, which is against the principle of law laid down by the Hon'ble Jurisdictional High Court in the case of Vijay Kumar Kesar (supra) as well as against the settled principle of law laid down by the Hon'ble Supreme Court in the case of S Kader Khan Son (supra), wherein it was held that undue emphasis should not be given to confessional statement without material on the same. The settled position of law was further supported by the CBDT Circular No.F.No.286/2/2003-IT(Inv), dated 10th March, 2003 and Circular No.F.No.286/98/2013-IT (Inv.II), dated 18th December, 2014, thereby issuing guidelines to the revenue authorities to be observed/overseen and to be followed by collecting the evidence during the course of search/survey operations.
17. In view of the aforesaid observations on the first contention of the assessee that merely on the basis of confessional statement of the assessee which were recorded u/s.133A of the Act which could not be considered as sacrosanct or decisive having no supporting evidence to substantiate such confession, any addition made by the AO is subjected to be set aside. This contention of the assessee is worth acceptance in terms of judicial pronouncements by the Hon'ble Apex Court and Hon'ble Jurisdictional High Court as referred to supra. Ld. CIT(A) has accepted the said contention of the assessee under the situation when books of accounts and bills and vouchers along with supporting evidence etc. were submitted by the assessee, however, the same were summarily rejected by the AO without examining the same on the basis of presumption, surmises and 44 ITA No. 145/RPR/2022 Uttam Kumar Agrawal having a preconceived notion. Therefore, the ld.CIT(A) has rightly reversed the finding of the ld. AO by deleting the addition made in the assessment order. Since the observation of the ld. CIT(A) was based on the facts, settled position of law and on proper appreciation of submissions along with material on record, respectfully following the judicial pronouncements which are binding to decide the issue in hand, we find no interference in the findings of the ld. CIT(A) in this regard and, therefore, without hesitation, the same is upheld. Thus, the controversy raised by the revenue in its grounds of appeal is dismissed.
29. In view of aforesaid decision, the revenue authorities are under abounded obligation by virtue of CBDT's circular to focus on gathering evidence during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. Such instructions from CBDT shows that corroborative evidence should be given preference over the oral statements of assessee or preferably the statement should be correlated with the material evidence to reach at a true and correct conclusion. In the present case all the evidence may be after the search but are substantiated and could not be dislodged by the revenue. Even when the proceedings u/s 133(6) have been initiated all the concern parties have submitted their response and confirmed the transactions recorded in the seized documents.
Such facts and circumstantial evidence favours the submissions of the assessee, at the same time the presumptive thoughts of the revenue authorities dehors any cogent support that the transactions in the seized documents which on the contrary were supported by the assessee by submitting evidence in the form of bills of the supplier parties considering the same as just a concocted story, after thought, colourable device cannot be concurred with.
45 ITA No. 145/RPR/2022Uttam Kumar Agrawal
30. The observation of the department regarding the high ratio of purchase transactions and return of goods by the assessee should be considered as nothing but managed for making the unaccounted stock to accounted, cannot be subscribed to for the reason that such transactions have been duly found in the GST return of the counter parties and the said parties have also submitted relevant documents and confirmed such transactions while the enquiry was made under the provisions of Section 133(6) of the Act, none of such evidences could be dislodged by the revenue, neither any evidence or material could be brought on record by the revenue to rescue their findings
31. Regarding retraction by the assessee, Ld CIT(A) observed that the appellant has admitted and surrendered the entire excess stock during the search, also the stock found at residence of the assessee was not stated by the assessee as business stock during the course of search when the statement of the assessee were recorded. The retraction was only a concocted story and after thought. The appellant has failed to discharge his onus regarding substantiating the retraction. On this issue, after thoughtfully deliberating upon the submission of the assessee and various evidence, we are of the considered view that the supporting evidence like confirmation from the supplier parties, quantity tally between the seized documents and the final bills from the suppliers and similar quantity of stock in aggregate from the shop and the residence establishes that the onus cast upon the assessee to support the retraction has been duly discharged, therefore, the contention raised 46 ITA No. 145/RPR/2022 Uttam Kumar Agrawal through retraction substantiated with corroborative evidence cannot be rejected at threshold, therefore, we do not found any substance in finding of Ld. CIT(A), which are totally on the foundation of assumptions, therefore, on this count also the decision of Ld. CIT(A) is liable to be struck down.
32. In view of aforesaid observations, we find force in the submissions and contentions raised by the assessee that the excess stock pertains to the business of the assessee, difference in such stock which is physically found at the time of search with the recorded stock in the books of the assessee was duly explained by way of reconciliation of the same supported with corroborative evidence like bills from the suppliers, much less the same has been fortified when the parties were put to notice u/s 133(6) and they have submitted the requisite documents a/w their confirmation, validating the contentions of the assessee. Assessee has submitted a letter to the ADIT (Inv.)-II, Raipur, dated 03.04.2019 i.e. within seven days of the conclusion of the search offering unaccounted stock of Rs. 68,28,637/-, but the same was never disposed off by the authority concern, this is against the mandate of law and in violation of principle of natural justice, as decided by the ITAT, Raipur in the case of DCIT vs. Rajendra Sharma (supra). Under such facts and circumstances, we do not find any substance in the decision of the Ld. CIT(A) to approve the same.
47 ITA No. 145/RPR/2022Uttam Kumar Agrawal
33. Consequently, we set aside the order of Ld. CIT(A) to the extent the addition made by the Ld. AO has been sustained and direct to vacate the entire addition made u/s 69A & 69B.
34. In result, ground No. 1 of the present appeal of the assessee is allowed in terms of our aforesaid observations.
35. Ground No.2: Confirmation of action of Ld. AO in invoking provisions of section 115BBE In terms of our observations and decision in qua ground No. 1 of the present appeal, since it is concluded that the excess physical stock found at the business premises and residence of the assessee and the same pertains to business of the assessee, accordingly, provisions of Section 115BBE cannot be triggered in the present case. Resultantly, ground no. 2 of the assessee is also decided affirmative in favour of the assessee .
36. Since, we have decided the present appeal in favour of the assessee on merits of the case considering the factual aspects, we refrain ourselves to deal with the legal contentions raised by the assessee by way of additional grounds assailing validity of the assessment on the basis that the approval u/s 153D by the Addl. CIT is not in accordance with the provisions of the Act. The same is thus, left open.
37. In the result, the present appeal of the assessee is allowed.
48 ITA No. 145/RPR/2022Uttam Kumar Agrawal Order pronounced in the open court on 20/03/2024.
Sd/- Sd/-
(RAVISH SOOD) (ARUN KHODPIA)
या यक सद य / JUDICIAL MEMBER लेखा सद य / ACCOUNTANT MEMBER
रायपुर/Raipur; दनांक Dated 20/03/2024
Vaibhav Shrivastav
आदे श क त ल प अ े षत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant-
2. यथ / The Respondent-
3. आयकर आयु (अपील) / The CIT(A),
4. The Pr. CIT -1, Raipur, (C.G.)
5. िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, // True Copy // (Assistant Registrar) आयकर अपील य अ धकरण, रायपुर/ITAT, Raipur