TaxTMI 
TaxTMI 
2015 (12) TMI 1417
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....of the facts and circumstances of the case, erred in law and on facts, in upholding the addition of Rs. 11,00,000/- which is made without any incriminating document found during survey and without pointing any defect in the books of account. 4. The CIT(A) has failed to appreciate the fact that (a) the survey of jewellery factory was carried out without any jewellery appraiser or expert, (b) the Dy. Commissioner of Custom, Noida has also held that the excess gold found during the survey was on account of wastage recovery, which was erroneously omitted to be entered in books and there was no outside source of the said gold, (c) the custom's jewellery appraiser report which was commissioned by custom department, immediately after survey also upheld that source of excess gold was from gold recovered out of wastage generated during production activity. 5. The CIT(A) has failed to appreciate that the excess stock found during survey has been exported and its export is covered u/s 10A and as such the profit is exempt from tax particularly when it is admitted by Assessing Officer that the appellant is located in SEZ area and it is a 100% export unit. 6. The obser....
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.... Apart from this, some loose papers were also found which did not tally with the entries of books of accounts. The AO while recording the statement of the working partner asked certain questions for clarification relating to jewellery weighting about 12kg. The assessee surrendered a sum of Rs. 1,31,00,000/- on account of various discrepancies. However, later on furnished a letter stating therein as under: "During the survey some stock of gold was observed by surveying team which was erroneously omitted to be entered in stock register. It was submitted before the survey team, in writing, that the same is on account of some normal loss, which accumulates for the firm during manufacturing process. The stock hence found is accumulated over a period of time. The visiting team was shown all related invoices to confirm our submission. However, the submission was not accepted, reason unknown to us and the assessee was asked to pay tax on stock. Henceforth in the absence of any other alternative and no legal advice available at hours, the assessee was forced to pay the amount hence asked for. Later, to further clarify the matter a semi judicial inquiry was conduct....
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....s gone. It has never been shown in the stock books nor any accounts has been filed during the course of assessment proceedings. III. Thirdly the submission of the assessee before survey team, was ignored is baseless. The assessee was given due opportunity by putting question during the course of statement and the assessee had out rightly accepted the mistake and surrendered the value of gold along with difference in mfg. expenses. The total surrendered value on this account was Rs. 120 lakhs. Further Rs. 11 lakhs also surrendered on account of difference in books of account. Thus the total surrendered amount was Rs. 131 lakhs. IV. Further the submission that semi judicial inquiries conducted by the Custom Authority Noida have upheld that stock was generated from normal loss during manufacturing process. First of all it is to be seems that stock taking report has not been signed by all the officers who were present at that time. Further the appraiser of stock has not upheld that stock has generated from normal loss during manufacturing process but they have mentioned as under: The unit has mentioned that excess stock is on account of recovery of gold out o....
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....ved the assessee carried the matter to the ld. CIT(A) and submitted as under: "REG: 11 LAKHS "This surrender of Rs. 11 lakhs was made because there were some loose documents found during the course of survey. As per the surrender letter dt. 03.08.2006 the surrender was made to cover up certain discrepancies. When at the time of preparation of return and finalization of books of A/c it was noted that there was no discrepancy in respect of loose papers found during search and said surrender was made inadvertently under pressure from survey team. During the course of assessment proceedings all loose papers and documents found at the time of survey were tallied with the books of accounts of the assessee and no discrepancy was found then. Notings to this effect are there in the order sheet of the A.O. It is humbly submitted that since there are no discrepancies in respect of loose papers found and checked at the time of assessment proceedings, the surrender of Rs. 11 lakhs is meaningless and no addition is called for. As stated earlier that the surrender was not voluntary and the assessee was threatened with dire consequences if the surrender was not made. This submiss....
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....s it was part and parcel of the profits of the exports made by the appellants at the time of survey such excess stock on account of recoveries made by the appellant firm was noted and also entered in books of account and used for export of jewellery during the period relevant to A.Y 07- 08. The whole income/revenue is duly account for in books of account for A.Y 07-08 and the profits are exempt u/s 10A. The AO has himself admitted that the profit shown by the appellant is 100% exempt from tax under provisions of 10A." 8. It was further submitted that the entire jewellery manufactured was exported outside India to various concerns and 12kg gold which was recovered out of wastage was entered in the books of accounts after the survey and that the jewellery made from the same was also exported. It was further stated that recovery of gold wastage and conversion to jewellery was an ongoing and a continuous process, the revenue received from the sale of this 12kg gold is also part of the regular books of accounts which were audited and produced before the AO during the course of assessment proceedings. It was emphasized that the surrender was made under undue pressure and coercion by t....
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....essee of dire consequences if it did not make a voluntary surrender. 4. The stock report prepared by the customs officers was signed by Appraiser Customs Noida SEZ and Joint Investigating Authority. Law does not require that the report be signed by all officers concerned. The survey report is also not signed by all officer of all ranks who conduct the survey. 5. The AO has accepted the fact that the income generated from export of jewellery is exempt under section 10A. Hence this proves that there was no need on part of the assessee to have gold outside the books of accounts. 6. The observation is baseless. We are challenging the very surrender made by us which was under coercion and illegal. The gold was recovered out of wastage. This has been authenticated by the customs department and it was exported. The revenues have been declared in the annual return." It was further submitted as under: "1. That the survey team directed Mr. Rajan Kohli to write the surrender letter by hand as per the wordings supplied by the survey team. The surrender letter was never voluntary and was made under coercion and pressure. Mr. Rajan Kohli is also filing an a....
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....lakhs as part of exempt export income. Similarly, it completed its books, incorporating the entries found in loose papers, and thus, tried to regularize the other part, viz; discrepancy of Rs. 11 lakhs. In my view, the declaration made during survey was because discrepancies were detected during on-the-spot inspection/survey. There is no evidence or even any sign of any pressure or coercion (apart from automatic mental pressure, which is normal during any such survey, especially when huge discrepancies are detected). The law does not promote such retraction. All the court case/judgments, on the issue of retraction of agreed surrender during survey or searches, lay down that if there is undue pressure or forced surrender, any assessee would naturally protest immediately after survey or within a reasonable period, say, a week or so. The appellant, in this case also, in case he was sure of his explanation, would not have made any such disclosure, and, in case he was unduly forced to do so, would have filed a letter/affidavit of retraction within a day or two, or within 7 days or latest (even giving all benefits of doubt) within a month. But retracting from s....
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....ge, this fact had also been accepted by the Customs Department. A reference was made to page no. 60 of the assessee's paper book wherein the Customs Department by considering the volume of operation and export accepted recovery of gold out of wastage up to 25% to 35%. The ld. Counsel for the assessee also referred to page no. 85 of the assessee's paper book and submitted that the gold weighting 11098gms was recovered on 28.02.2006 out of the wastage which was sold on 25.08.2008 and the said fact was duly entered in the stock register which had been accepted by the income tax department. It was further stated that the assessee entered sales in the books of accounts and claimed the exemption u/s 10A of the Act. Therefore, the addition made by the AO was not justified when the assessee had already shown the sales of the impugned amount in the books of accounts, as such the addition made by the AO and sustained by the ld. CIT(A) for a sum of Rs. 1,20,00,000/- was not justified. As regards to the other addition of Rs. 11 lakhs, it was stated that the assessee himself agreed for the addition of Rs. 11 lakhs on account of various shortcomings to buy peace, the said income was in the norma....
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....ey wherein the assessee agreed to surrender a sum of Rs. 1,31,00,000/- and gave the post dated cheques for the payment of taxes. It was stated that the assessee did not disclose the aforesaid income while filing the return of income, therefore, the addition was righty made by the AO and sustained by the ld. CIT(A). 13. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it is an admitted fact that the assessee was engaged in the manufacturing of jewellery, during the process of manufacturing on behalf of the customers, the gold wastage in the range of 1.65 to 1.85% was recovered from the gold of the customers, the said wastage was due to dust, impurities etc. and out of the said wastage the assessee was allowing 1% wastage to its worker. In this manner, the assessee was saving gold to the extent of 0.6% to 0.85% and recovered gold accumulated to the extent of 12kg. The gold recovered by the assessee from the wastage was in its regular course of business of manufacturing and export of gold jewellery and there was no local sale. The AO accepted that the assessee was eligible for deduction u/s ....
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....d officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement is recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law; (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in section 158BB would include the materials gathered during the survey operation under section 133A; (iv) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; and (v) the word "may" used in section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act" makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself." It has been further held as under: "In view of the scope and ambit of the ....