Assessee's Surrender Retraction Denied, GP Rate Reduced on Stock Difference Calculation

The Tribunal upheld the rejection of the assessee's retraction of surrender due to lack of evidence supporting coercion. However, it directed the Assessing Officer to apply a GP rate of 22% instead of 26% for calculating the stock difference, partially allowing the appeal and modifying the addition based on the revised rate.

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Issues Involved:
1. Retraction of Surrender
2. Addition on Account of Difference in Stock
3. Application of Gross Profit (GP) Rate

Issue-wise Detailed Analysis:

1. Retraction of Surrender:
The assessee contended that the surrender made during the search was under coercion and misunderstanding of facts and law. The Assessing Officer rejected the retraction, stating that the statement was given voluntarily without any evidence of coercion. The CIT (Appeals) upheld this view, noting that the surrender was made two days after the search and the retraction occurred 11 months later, weakening the case. The Tribunal agreed, citing the lack of evidence for coercion and the principle that admissions are important but not conclusive evidence. The Tribunal referenced the Supreme Court case of Pullangode Rubber Produce Co. Vs. State Of Kerala, which allows retraction if facts warrant it, but found the assessee's claims baseless and unsupported by evidence.

2. Addition on Account of Difference in Stock:
During the search, the stock found was valued at Rs. 1,88,09,898/- against Rs. 2,79,75,096/- as per books, showing a shortfall of Rs. 91,65,198/-. The assessee surrendered this difference as unaccounted sales with a GP rate of 26%, amounting to Rs. 23.92 lacs. The retraction was rejected by the Assessing Officer and CIT (Appeals), who found no evidence supporting the claims of stock being transferred to Jain Brothers due to family settlement. The Tribunal upheld this, noting that the family dispute was settled 7½ months before the search, and no documentary evidence was provided to support the stock transfer claim. The statement of Jain Brothers' proprietor also contradicted the assessee's claim.

3. Application of Gross Profit (GP) Rate:
The assessee argued that the GP rate of 26% applied by the Assessing Officer was excessive, suggesting an average GP rate of 20.48% based on past years. The Tribunal found merit in this argument, noting that the average GP rate over the years was 20.48% and the current year's GP rate was 22%. The Tribunal directed the Assessing Officer to compute the difference in stock using a GP rate of 22% for the current year, thus partially allowing the assessee's appeal.

Conclusion:
The Tribunal concluded that the assessee's retraction of the surrender was baseless and unsupported by evidence. However, it found merit in the contention regarding the GP rate and directed the Assessing Officer to apply a GP rate of 22% for calculating the stock difference and the corresponding addition. The appeal was partly allowed, modifying the addition based on the revised GP rate.

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