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TaxTMI 
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TaxTMI 
2019 (6) TMI 652
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....aw and may very kindly be quashed. 2. That the learned CIT(A) erred in upholding the action of the AO in rejecting the partial retraction of statement made by the assessee during the course of survey u/s 133A. That under the facts and in the circumstances of the case, the said partial retraction of statement made by the assessee under 133A proceedings is based on facts and may very kindly be accepted. 3. That the learned CIT(A) erred in upholding the action of the AO in making an addition of Rs. 2,09,44,333/-: (i) on account of excess stock being the difference of amount surrendered during the course of survey and the amount offered in the return of income filed; (ii) based solely on the statement of the assessee made uls 133A proceedings having no evidentiary value which is bad in law, unjustified and uncalled for and it is prayed that the said addition may very kindly be deleted. 4. That the learned CIT(A) erred in giving a relief of 5 on account of defective stock out of total stock instead of deleting the entire addition made by the AO on account of excess stock of Rs. 2,09,44,333/- which was valued at an exorbitant figure. 5. That the appellant craves leave to add,....
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....s during the survey proceedings u/s 133A of the Act cannot be made solely on the basis of statement taken during survey and revenue authorities should corroborate the material available on record with the amount mentioned in the statement and to the extent nexus is established, the addition should be made. Written submission given by Ld. Counsel for the assessee reads as follows; Ground No. 1 The first ground of appeal is challenging the validity of Summons issued u/s 131 on 22.01.2014 requiring the assessee's presence on 22.01.2014 itself and then subsequently on 24.01.2014 which are in excess of jurisdiction vested in the AO by the LT. Act and thus bad in law and may very kindly be quashed. - Survey proceedings u/s 133A were conducted on 22.01.2014. ~ The survey party immediately issued two summons both dated 22.01.2014 requiring the assessee's presence at 01:00PM on 22.01.2014 i.e. during the course of survey itself (copy at page 15) and the other for 24.01.2014 at 11:30AM at the AO's office. (copy at page 16). ~ These summons u/s 131 have been issued in a routine manner without application of mind. This fact is supported by the fields in the letter of summ....
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....at 01:00PM loses its legal validity, is in excess of the jurisdiction and powers vested and in consequence the statement purported to be recorded of the assessee loses its validity and cannot form the basis of addition made in the assessment order. - So far as the second summons dated 22.01.2014 is concerned requiring compliance on 24.01.2014 at 1l:30AM (copy at page 16), it is submitted that the income tax authorities have no power to issue notice if proceeding is not pending. Thus, the second summons has still no legal sanctity as no proceedings were pending as on 24.01.2014 as there was a concluding statement recorded on 22.01.2014 and the survey proceedings had concluded (copy at pages 25 to 27). So the statement recorded on 24.01.2014 (copy at pages 37 to 39) is invalid as the summons issued on 22.01.2014 to make compliance on 24.01.2014 was itself invalid. - So if these two summons u/s 131 are expunged from the survey proceedings declaring them invalid and in excess of jurisdiction vested upon the AO by the Income Tax Act 1961 what remains is a statement recorded u/s 133A during the course of survey proceedings which has no evidentiary value as has been decided by various....
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....o issue summons and by issuing summons u/s 131 during the survey proceedings u/s 133A exceeded his jurisdiction and the powers vested in him by the Income Tax Act 1961 and thus vitiating the procedure adopted by him. It is therefore prayed that the summons issued u/s 131 being invalid and having no legal sanctity are thus had in law and may very kindly be quashed. In turn the statements recorded on 22.01.2014 and 24.01.2014 have no evidentiary value, rendering the entire assessment proceedings as invalid as the assessment order is based solely on the statements recorded and may very kindly be quashed. Ground no. 2 The second ground of appeal is challenging the order of the Ld. CIT(A) in upholding the AO's action in rejecting the retraction of the statement made by the assessee during the course of survey u/s 133A relying solely on the statement recorded during survey proceedings u/s 133A on 22.01.2014. AND Ground no. 3(i) This ground of appeal is challenging the AO's action in making an addition of Rs. 2,09,44,333/- on account of excess stock being the difference of amount surrendered during the course of survey i.e. Rs. 3,91,60,110/- and the amount offered in t....
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....B. b) During the course of survey, stock of M/s. Gayatri Processing Industries was separately marked. A separate inventory of the same was prepared. (copy at page 153) This stock was considered in the case of Harish Kumar Toshniwal who is the Proprietor of M/s. Gayatri Processing Industries where separate survey operations were carried out. c) So far as stock of M/s Gayatri Enterprises and M/s. Gayatri Coating Pvt. Ltd. was concerned, the stock was not separately identified and marked. The entire inventory was prepared in the name of M/s. Gayatri Enterprises. Thus, it is submitted that the inventory which was prepared by the survey party included the stock of M/s. Gayatri Coating Pvt. Ltd. to the tune of Rs. 51,15,200/-. This was verifiable from the records of M/s. Gayatri Coating Pvt. Ltd. This stock was purchased by M/s. Gayatri Coating Pvt. Ltd. out of its own funds. The purchases are duly reflected in the books of M/s. Gayatri Coating Pvt. Ltd. The assessee even stated that these purchases could be duly verified by the department at the assessee's cost from various suppliers. d) It would be illogical if the stand of the survey party is accepted that the stock of M/s. ....
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....e survey party. A list of sale of stock found during survey to different parties is enclosed at pages 64 to 67 and copy of sale bills in support of the same is enclosed at pages 68 to 142. All these transactions were made with unrelated persons and were done through banking channels. The assessee even went on to state to the Ld. AO that these sale transactions could be verified and the assessee was willing to bear the cost. The AO and for that matter the Ld CIT(A) did not make any efforts to controvert the assessee's submission and make independent investigation. j) The assessee even obtained quotations of the sale price from independent parties (copy at pages 143 to 152). The defective items were separately marked and sold. The assessee even asked the AO to independently verify it at his cost. (copy at page 51) k) Entries of all the defective items was separately marked as damaged in Annexure B, A separate list for the sale of defective items was also prepared and is also enclosed at pages 64 to 67. All the defective items were sold to unrelated parties and through banking channels. The assessee even asked the Ld. AO to verify all these transactions from the respective par....
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....o. 3(ii) and not controverted the assesseee's retraction on facts. Even the Ld. CIT(A) failed to controvert the submission when all documentary evidences were there before him. s) In support of the retraction of statement made uls 133A the assessee wishes to place reliance on some of the following judgments :- 1. Pullangode Rubber Products Co. Ltd. Vis State of Kerala 91 ITR 18 (SC) (copy at pages 06 to 08 of Case Laws PB) An admission in a statement recorded on oath is an extremely important piece of evidence but it cannot be said that it is conclusive and it is always open to the person who made the admission to show that it is incorrect. 2. Krishnan Vis Kurukshetra University AIR 1976 SC 376 (copy at pages 09 to 17 of Case Laws PB) Held that any admission made in ignorance of legal rights or under duress cannot bind the maker of admission. Explaining further, the Hon 'ble Apex Court observed that mere admission cannot be bedrock or foundation of an assessment and it is always open to the assessee who made the admission to show that what he admitted was not correct. t) Even the Ld. CIT(A) has dismissed this ground of the assessee stating it as consequential in....
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....l is challenging the action of Ld. CIT(A) in upholding the action of the AO in making an addition of Rs. 2,09,44,333/- based solely on the statement of the assessee made u/s 133A proceedings having no evidentiary value which is bad in law, unjustified and uncalled for and it is prayed that the said addition may very kindly be deleted. 1. As deliberated in ground no. 1 if the summons issued u/s 131(1) were invalid and in excess of jurisdiction conferred on the AO during the course of survey proceedings u/s 133A what remained was only the statement recorded u/s 133A(3)(iii) having no evidentiary value. 2. So far as the statement recorded during the course of survey proceedings u/s 133A is concerned it is reiterated once again that the AO exceeded his powers by issuing summons u/s 131 when the assessee had fully cooperated during the survey proceedings and was not covered u/s 133A(6). 3. So the statement which is heavily relied on by the AO while rejecting the retraction letter is nothing but a statement recorded u/s 133A(3)(iii). It would be apt to draw your Honour's kind attention to section 133A(3)(iii) which reads as under: 3. An income-tax authority acting under this ....
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....ivities on the basis of which the disclosure was stated to be made. The statement recorded U/S 133A cannot be given evidentiary value as such evidentiary value was not attached to it by the provisions of section 133A. Thus, it could not be said solely on the basis of the statement given by the Assessee that the disclosed income was assessable as lawful income of the Assessee. 5. Satish Chand Agarwal Vs. ITO (ITAT Jaipur) (copy at pages 115 to 126 of Case Laws PB) Section 133A, however, enables the income tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. Thus, it is trite law that Section 133A does not empower any Income tax authority to examine any person on oath and then use it as evidence to make addition. In such a situation, no addition can be made or sustained only on the basis of the statement recorded during the survey Vis 133A of the Act. Once the assessee has retracted from the statement then it was on the A.O. to establish beyond any doubt the issues on which the addition has been made. Considering all these aspects, we find no merit in sustaining the addition only based on the statement re....
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....is plea of the assessee stating it be consequential. In view of the detailed submission and the various judicial pronouncements, CBDT Instructions, it is most humbly prayed that the addition of Rs, 2,09,44,333/- made on account of difference of amount surrendered on account of valuation of stock solely based on the statement recorded during the course of survey on 22.01.2014 which has no evidentiary value may very kindly be deleted. Cases Relied: 1. Gheru Lal Bal Chand Vs. ITO (Punjab HC) (1982) 137 ITR 190 2. Vijay Pahwa Vs. Samir ukhopadhyay, Deputy CIT (Calcutta HC) (2001) 250 ITR 354. 3. Pullangode Rubber Produce Co. Vs. State of Kerala and Anr (Hon'ble Supreme Court) (1973) 91 ITR 18. 4. Shri Krishan Vs. The Kurukshetra University (Hon'ble Supreme Court) (1976) 1976 AIR 376 5. Kalpana Biri Mfg. Co. Pvt. Ltd Vs. ACIT (Kolkatta Tribunal) (2017) Income-tax Act, 1961,/1020/KOL/2014 6. CIT Vs. CIT Vs. Khader Khan ( Madras HC) (2007) 352 ITR 0480 7. CIT Vs. CIT Vs. Khader Khan (SC) (2012) 352 ITR 0480 8. DIT (Investment) & Anr. Vs. Pooran Mal & Sons & Anr (Hon'ble Supreme Court) (1974) 96 ITR 0390 9. CIT Vs. Dhingra Metal works (Delhi HC) (2010) 328 I....
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....ve a part relief by directing the Ld. A.O to reduce the value of unaccounted stock by 5% towards defective stock. Assessee is now in appeal before us raising various issues through Ground No. 1 to 5. 11. Apropos Ground No.1 validity of the survey proceedings have been challenged by pleading that during the course of survey proceedings itself without there being any compelling circumstantial evidence revenue has issued summon u/s 131(1) of the Act even when the assessee cooperated with the survey team. We however are of the considered view that Ground No.1 has no merit because the survey team and the jurisdictional Assessing Officer are well within their powers to issue the summon u/s 131 of the Act in order to complete the survey proceedings in the interest of revenue. Therefore Ground No.1 of the assessee's appeal is dismissed. 12. Apropos Ground No.2 through which the assessee has challenged the order of Ld. CIT(A) upholding the action of Ld. A.O rejecting the retraction of the statement made by the assessee filed on 28.4.2014, we find that the original statement during the course of survey proceedings u/s 133A of the Act the assessee accepted the valuation of unaccounted stock....
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....ck even when the stock of the sister concern M/s. Gayatri Coating Pvt. Ltd was duly disclosed in their regular books of accounts filed a retraction statement on 28.4.2014. It is always open for the revenue authorities to examine the correction of the retraction statement and should point out the errors in such retraction statement (if any). Therefore the action of Ld. A.O of outrightly rejecting the assessee's retraction statement without pointing out any mistake in such retraction statement is devoid of merit and is uncalled for. We therefore allow Ground No.2 raised by the assessee and hold that the revenue authorities should have not rejected the retraction statement filed by the assessee on 28.4.2014. 16. Apropos Ground No.3 raised on merits of the case, the assessee has pleaded that Ld. CIT(A) erred in upholding the action of the Ld. A.O of making the addition of Rs. 2,09,44,333/- except for giving minor relief of 5% for the defective stock. 17. We observe that the assessee is in the business of purchase and sale of grey cloth and manufacturing of printed fabrics. Survey u/s 133A of the Act was conducted on 28.3.2014. Unaccounted stock of grey clothes was recorded by the su....
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....11,53,880) Cost of stock found during survey 1,92,31,327 Less: Stock of cloth as per books (10,15,550) Revised surrendered amount of stock 1,82,15,777 20. The value of sale proceeds of the stock lying with the assessee as on the date of survey i.e. amount of unaccounted stock is duly supported by the invoices placed on record and the particulars of grey cloth mentioned therein are the same which are appearing in the inventory sheet made during the course of survey. Deduction of gross profit of 6% is also rightly claimed as the assessee shows same gross profit consistently. Thereafter there is a deduction of stock of cloth as per books which is not disputed and the remaining amount which the value of surrendered stock i.e Rs. 1,82,15,577/-. Sales realisation of the stock has already taken care of the reduced rates for sale of defective stock (if any) made by the assessee. Revenue authorities have not pointed out any mistake or error in the above mentioned computation. 21. We have also gone through the quotation of the purchases of the grey clothes placed by the assessee at page 143 to 152 of the paper book and observe that the price assigned by the survey team is much hig....