Block assessment under s.158BC and s.143(3) upheld; s.132(4) partner statements voluntary, seized records treated as income

ITAT upheld the block assessment under s.158BC read with s.143(3), finding that statements recorded under s.132(4) by partners at the time of search were voluntary and that the seized records reflected unaccounted stock offered as income. The tribunal rejected the assessee's months-later claim that the statements were coerced and that the records were mere estimates, characterizing the reversal as an afterthought to frustrate assessment. Having considered the evidence and submissions, ITAT dismissed the appeal and sustained the addition.

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Issues Involved:
1. Addition of Rs. 2,00,00,000 u/s 158BC as undisclosed income.
2. Nature of seized sheets as estimates or actual stock.
3. Voluntariness and validity of statements made during the search.
4. Retraction of statements and its impact on the assessment.
5. Adequacy of Department's investigation regarding unaccounted stock.
6. Alternative plea for addition based on discrepancy between book value and seized sheets.

Summary:

Issue 1: Addition of Rs. 2,00,00,000 u/s 158BC as Undisclosed Income
The assessee contested the addition of Rs. 2,00,00,000 made by the AO u/s 158BC, arguing it was based on the statement of Prataprai M. Sanghvi, who had a medical history of depression, and no physical stock was found. The AO relied on seized papers showing stock worth Rs. 1.99 crores, which were not accounted for in the books. The Tribunal upheld the addition, noting that the statements made by the assessee's representatives during the search were voluntary and corroborated by documentary evidence.

Issue 2: Nature of Seized Sheets as Estimates or Actual Stock
The assessee claimed that the seized sheets were merely estimates of future stock requirements. However, the Tribunal found that the seized sheets contained detailed stock statements and were corroborated by the statements of the Chief Accountant and the partner, who admitted the stock was unaccounted for. The Tribunal rejected the assessee's claim, noting that the seized sheets were treated as actual stock during the search.

Issue 3: Voluntariness and Validity of Statements Made During the Search
The assessee argued that the statements made by Prataprai Sanghvi and Jhaverchand Momaya during the search were coerced and made under duress. The Tribunal found no evidence of coercion or undue influence, noting that the statements were made voluntarily and were consistent with the documentary evidence. The Tribunal also verified with Prataprai Sanghvi during the hearing, who denied any coercion.

Issue 4: Retraction of Statements and Its Impact on the Assessment
The assessee retracted the statements made during the search, arguing they were made under pressure. The Tribunal held that the retraction was not effective as it was made several months after the search and was not supported by any independent or reliable evidence. The Tribunal emphasized that the statements made during the search had great evidentiary value and could form the sole basis for the assessment.

Issue 5: Adequacy of Department's Investigation Regarding Unaccounted Stock
The assessee contended that the Department did not make adequate efforts to locate the unaccounted stock. The Tribunal noted that the Department persistently questioned the assessee about the whereabouts of the stock, but the assessee was evasive. The Tribunal held that the Department was justified in accepting the assessee's admission of unaccounted stock and did not need to pursue further investigation.

Issue 6: Alternative Plea for Addition Based on Discrepancy Between Book Value and Seized Sheets
The assessee alternatively argued that only the discrepancy between the book value of stock and the value recorded in the seized sheets should be added. The Tribunal rejected this plea, noting that the seized sheets were treated as actual stock and the assessee's own statements during the search confirmed the unaccounted nature of the stock. The Tribunal upheld the addition of Rs. 2,00,00,000 as undisclosed income.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, upholding the addition of Rs. 2,00,00,000 as undisclosed income based on the voluntary statements made during the search and the corroborating documentary evidence.

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