AI Drafter 
TaxTMI 
TaxTMI 
2016 (8) TMI 601
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....r making addition on account of unexplained investment in stock even though such amount works out to Rs. 8,55,862/- (Rs. 93,08,427-8452665) as per para 4.13 of the order of ld CIT(A), Alwar." Grounds of assessee's appeal "1. That the CIT(A), has erred on facts and in law in confirming the action of the A.O. in restricting the claim of remuneration paid to the partners at Rs. 13,65,321/- as against Rs. 64,36,813/- claimed by the assessee by not considering the excess stock of Rs. 84,52,665/- surrendered in survey as part of 'book profit' for the purpose of section 40(b) and thereby confirming addition of Rs. 50,71,492/-. 2. That the CIT(A) has erred on facts and in law in confirming the action of the A.O. in making addition of Rs. 1,69,161/- on account of alleged unexplained cash found during the course of survey ignoring that the cash found in survey is verifiable from the cash available as per cash book." Firstly we take revenue's appeal. 2. The assessee is in trading of gold and silver jewellery and bullion. Return for the year under consideration was filed on 29/09/2011 declaring total income of Rs. 41,41,208/-. The case was scrutinized U/s 143(3) of the Income Ta....
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....th the Accountant Shri Alok, but the said accountant denied any kind of books of account of the assessee. It is concluded that during the survey, the assessee had not maintained books of account and was furnishing return on estimate basis. The disclosure made by the assessee in the return at Rs. 84,52,665/- against the excess stock found at Rs. 1.25 crores during the survey proceedings. The ld Assessing Officer held that this disclosure was made by one of the main partner namely Shri Harish Kumar Khandelwal after examining the record and loose vouchers found during the course of survey. He further relied on the decision of Hon'ble Kerala High Court in the case of V.Kunhambu and Sons Vs CIT 219 ITR 235 to 243 wherein excess stock found during the course of search and statements made therein cannot be held mistakenably of the fact or law and the statement being voluntary. He further relied on the decision of Hon'ble Punjab & Haryana High Court in the case of Rakesh Mahajan Vs CIT 642 of 2007 (Taxpert) and 214 CTR 218 wherein it has been held that admissions constitute best piece of evidence against own interest. He further relied on the decision of Hon'ble Supreme Court in the ca....
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....er valuation made by the department of stock found was acceptable to him and total excess stock was admitted at Rs. 1.25 crores unaccounted. He also gave advance tax of Rs. 13,75,000/- through three cheques of Axix bank. He has also drawn the Hon'ble ITAT Pune Bench decision on statement recorded during the course of search i.e. decision in the case of HOTEL KIRAN vs. ASSISTANT COMMISSIONER OF INCOME-TAX [2002] 82 ITD 453 (ITAT[Pune]) and argued that it has evidentiary value. There is no difference in statement recorded U/s 133(A) and 132(4) of the Act, as such, there was no coercion and undue influence from the department. There was no force disclosure, therefore, he prayed to uphold the order of the ld Assessing Officer. 5. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A). He further submitted that it is a fact on record that in course of survey, the books of accounts were not found. In the absence of books, it was not possible to determine the exact quantity of stock. Therefore, the assessee by assuming excess stock of gold item at 7.564 kgs and silver item at 34.314 kgs offered Rs. 1.25 crores for tax. The AO has made the additi....
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....his the assessee valued the excess stock at average cost. As a result the silver ornaments which was valued at the time of survey at the rate of Rs. 20,400/- per kg is valued by the assessee at the rate of Rs. 24,310/- per kg (i.e. at higher rate) and the gold ornaments which was valued at the time of survey at the rate of Rs. 1,560/- per gm is valued by the assessee at the rate of Rs. 1,331/- per gm. Therefore, CIT(A) at Para 4.14 has held that stock is to be valued on the basis of cost or market price whichever is less and thus rightly deleted the entire addition made by AO. In view of above, the order of Ld. CIT(A) on this issue be upheld by dismissing the ground of the department. 6. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the books of account were not found during the course of survey and the admission was made by the partner of excess stock of Rs. 1.25 crores for gold and silver jewellery but he has not written this disclosure in the return itself. The ld Assessing Officer raised this issue during the assessment proceedings, which was replied by the assessee but he has not convince....
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....e course of survey is not the part of book profit and the salary claimed on this amount, he had disallowed. He further relied Hon'ble Supreme Court decision in the case of Surjeet Singh Chhabra Vs Union of India & Ors and made addition of Rs. 50,71,492/-. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that definition of book profit has been provided in explanation 3 of Section 40(b)(i) of the Act, which means net profit has to be computed in the manner laid down in Chapter (iv)(B) as per this Chapter, the income has to be computed u/s 28 to 44DB of the Act. In the present case, the unexplained investment was found in the stock at the time of survey operation and by no stretch of imagination be considered to have been recorded under this provision. Since the surrender of income on account of excess stock, does not fall within the purview of any Section U/s 28 to 44DB of the Act. The unexplained investment in stock is surrendered by the appellant U/s 69 of the Act and falls within the ambit of Chapter VI of the Act, therefore, he had not allowed remuneration to the part....
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....ssessee. In view of above, the AO be directed to delete the disallowance of Rs. 50,71,492/- made by him out of the remuneration claimed by the assessee u/s 40(b)(v). 10. At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 11. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that a survey U/s 133A was carried out on 20/10/2010, which means previous year for A.Y. 2011-12 has not ended. The excess stock was found but the assessee return was due to file in October, 2011 U/s 139 of the Act, which was filed on 29/9/2011. The assessee's case was auditable and computation of income was submitted alongwith the return. The assessee claimed remuneration to the partner on the basis of book profit calculated by the assessee U/s 40(b)(v) of the Act. As per explanation-3, the book profit means the net profit as shown in the P&L account of the relevant previous year computed in the manner laid down in chapter (IVD) subject to specified adjustments. The ld Assessing Officer can make certain adjustments in the book profit but change of income held is subject to be examined by the appellate ....