TaxTMI 
TaxTMI 
2021 (5) TMI 19
X X X X Extracts X X X X
X X X X Extracts X X X X
....the total income of Rs. 1,23,58,190/-. The AO notes that the case was selected for scrutiny manually under compulsory category as per guideline of the CBDT. The AO notes that during the relevant assessment year, the assessee was engaged in the business of trading in fabrics, lace, borders and sarees. The AO notes that a survey u/s 133A of the Income Tax Act, 1961 (hereinafter referred to as the Act) was conducted in the office premises as well as godown of the assessee company on 12.10.2015. And in the course of survey, according to AO, physical stock of sarees were inventorised and stock aggregating to Rs. 3,59,51,307/- was found. However the AO notes that the computerized books of account of the assessee reflected stock only at Rs. 1,10,80,923/- on the said date. Thus, according to AO, undisclosed stock of sarees amounting to Rs. 2,48,70,384/- was found [Rs. 3,59,51,307/- - Rs. 1,10,80,923/-]. According to AO the assessee's director failed to reconcile the said stock on the day of survey and then, offered the same as its undisclosed stock for the purpose of taxation by making payments of additional advance tax amounting to Rs. 75 Lacs. Thereafter according to AO, during the asses....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llegation of the assessee. Further he observed from the details of inventories recorded at page 76 that the value of each fancy sarees has been duly recorded which ranges between Rs. 3,200/- to Rs. 6,500/- and that the quantity of each saree in stock has also been recorded. And according to AO, the value of the sarees recorded in other pages is more or less same as that recorded in this page i.e. page 76. Thereafter the AO reproduced at page 6 and 7 of the assessment order few statements given by the Director of assessee company Shri Gopal Singrodia i.e. question and answer of question no. 8, 9 and 10 which is reproduced as under: "Q.8. In course of survey u/s 133A of the I.T. Act, 1961 stock found and inventorised aggregated to Rs. 3,59,51,307/- whereas the books of a/c shown the stock at Rs. 1,10,80,923/- as on date. Please explain the discrepancy? Ans: At the present moment I am not in a position to explain the discrepancy without going through the books of a/c. It may also be noted that the stock inventorised by you contains some dead stock. However, in order to by peace of mind I am disclosing the difference in stock of Rs. 2,50,00,000/- as my unexplained sto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee as per Section 69B of the Act and thereafter the AO notes that the assessee has offered gross profit @ 8.49% of its turnover. The AO justified the addition of entire stock of sarees by reasoning out that the assessee might have already claimed all the expenses to its profit and loss account for the relevant assessment year, so the undisclosed stock is nothing but the undisclosed investment of the assessee. Further the AO observed that the assessee has not reflected the undisclosed stock in its books, which fact, according to AO, signifies that the assessee did not include the undisclosed stock in its closing stock, so according to AO, the assessee must have sold the said excess stock during relevant assessment year. While calculating the gross profit of the undisclosed stock which was supposed to have been sold, the AO excluded the dead stock of Rs. 8,79,415/- and thereafter the AO calculated the gross profit of the assessee @ 8.49% of Rs. 2,39,67,969/- [Rs. 2,48,47,384/- - Rs. 8,79,415/-] and thus made another addition of G.P of Rs. 20,34,881/-. 4. Aggrieved by the aforesaid action of AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to give parti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re not found in the inventory report. Part 3 (2nd half) comprising of Pages 41 to 43 is the inventory of fancy fabrics. Each Page of the said inventory has description showing item, brand, quantity, selling price per unit, cost price per unit and total cost price. This is a detailed inventory showing the length and breadth of fancy fabrics. Pages 44 to 45 are not found in the inventory report. Part 4 comprising of Pages 46 to 48 is the inventory of printed fabrics, dupian fabrics, saree borders, chinki fabrics etc. Each Page of the said inventory has description showing item, brand, quantity, selling price per unit, cost price per unit and total cost price. This is a detailed inventory showing the length and breadth of different kinds of fabrics. Pages 49 to 60 are not found in the inventory report Part 5 comprising of Pages 61 to 70 is the inventory of embroidery sarees which is described as 'fresh stock - finished goods'. Each Page from 61 to 69 of the said inventory has description showing Item, brand, code, quantity, selling price per unit. This is a detailed inventory showing the code of embroidery sarees. Page 70 contains ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Page 80 is the inventory of embroidery sarees, taken from the 2nd row of the show room. The said inventory has description showing item, quantity, cost price per unit and total cost price. This is a detailed inventory showing the description of embroidery sarees found from each rack on the 2nd row of the showroom. Page 81 is the inventory of embroidery sarees, taken from the 3rd row of the show mom. The said inventory has description showing item, quantity, cost price per unit and total cost price. This is a detailed inventory showing the description of embroidery sarees found from each rack on the 3rd row of the showroom. Page 82 is the inventory of embroidery sarees, taken from the 4th row of the show room. The said inventory has description showing item, quantity, cost price per unit and total cost price. This is a detailed inventory showing the description of embroidery sarees found front each rack oh the 4th row of the showroom. Pages 83 to 84 is the inventory of satin, viscose, different nets etc. taken from raw material room, Each Page of the said inventory has description showing item, quantity, cost price per unit and total cost price. This....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... averment thy answer to Question No. 8 offering sum of Rs. 2,50,00,000/- by way of different in stock was given without understanding the correct facts and provisions of law and under duress and coercion. 10. That there is no understatement or undisclosed stock of M/s Shree Anjani as on 12th October 2015 and hence no income shall be offered on this account at the time of tiling of return of income for the period 1st April, 2015 to 31st March 2016." The appellant therefore in a sworn statement submitted that the contents of Page No, 76 were false and hence required to be ignored, it was therefore argued that other than the items inventoried on Page No. 76, the physical stock actually found during survey stood reconciled and matched with the stock as per the books on the date of survey. Accordingly while filing the return of income for AY 2016-17, the appellant did not take into consideration the value of alleged stock difference. The AO did not take any cognizance of the retraction letter filed by the appellant. No verification or enquiry was made to ascertain the veracity of the retraction statement In feet fee crux of the retraction statement was that it would im....
X X X X Extracts X X X X
X X X X Extracts X X X X
....osed income of the appellant and not fee entire value of unexplained stock. I have given due consideration to the facts arid the observations of the AO arid also the arguments put forth by the A/R of the appellant. The moot point in this appeal is regarding the veracity of Page No. 76 of the inventory report prepared during fee course of survey. The A/R of the appellant argued that the inventory was erroneous because it was physically impossible to store 7038 sarees in the appellant's premises surveyed by the AO, In order to verify this contention, the following details/documents were called from the assessee along with the architect's plan of the premises. - Layout plan of the shop and store room area covered during survey, - Diagrams of the rack sizes and the layout showing capacity and storage volume. - Photographs of the different sections of the shop and storage area to show how much sarees can be stored therein. - Closing stock of sarees and other fabrics for the last three years, - Monthly stock as per books in last thirty six months, and - Month- wise details of embroidery sarees sold in last three years. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... team ranged between 2-11 sarees. Page 70 of the inventory report contained the summary of stock of embroidered sarees detailed on Pages 61 to 69 from which k was noted that on each Page the total number of sarees recorded were as follows: Page No. Number of sarees Value 61 115 3,32,300 62 101 2,64,700 63 135 4,38,200 64 81 2,41,400 65 116 2,89,850 66 97 3,53,700 67 106 3,08,800 68 84 2,27,100 69 218 4,42,000 Total 1053 28,98,050/- From the said summary it is noted that on each Page the quantity of sarees found did not exceed maximum of 218 sarees and the value of sarees found was maximum at Rs. 4,42,000/-.The aggregate value of sarees noted on nine pages totalled Rs. 28,98,050/-. Similarly Page Nos. 80 to 82 of the inventory report contained details of sarees found on 2nd , 3rd & 4th rack in the showroom. While preparing the inventory report, the survey party also noted the number of sarees in each rack. The maximum number of sarees inventoried in one particular rack is 16 sarees i.e. in Rack No. 6 of 2nd row of the showroom. From these Pages it was noted that the number of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s recorded on Page No. 76 of the inventory report. From the material brought before me, I find that the assessee's business premises at P-16, Kalakar Street, 5th Floor, Kolkata - 700 007 which was subjected to survey admeasures only 800 sq, ft. As directed during the course of hearing, the A/R of the appellant furnished the layout plan of the showroom prepared by M/s Vikash Furniture which contained the detailed description of the internal storage spaces along with few photographs of the showroom and storerooms where the stock of sarees and fabrics was stored. On examination of the schematic drawings of the showroom and the photographs, it is observed that the number of racks located in the showroom & storerooms did not have adequate capacity to store 7083 embroidered sarees which is also been corroborated by the architect. In fact it is noted that on Page Nos. 61 to 70 and 76 to 82 where the survey party noted stock of other embroidered sarees, the average numbers of sarees stored per rack was in the range of 2-16 sarees. However on Page No. 76 the survey party has noted sarees in the range of 390 to 526 sarees per rack. The architect after having personally visited the p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he contents of Page No. 76 of the inventory report yet the addition was made solely on the ground that the Director in his statement u/s 133A had admitted to pay tax on income of Rs. 2,50,00,000/-, However this statement has subsequently been retracted on the ground that it was given under duress in a stressful state of mind during the course of survey without properly going through the inventory report. The appellant after having critically examined the stock inventory report has filed a retraction statement with a detailed explanation as to why the inventory is not correct, particularly with, regard to Page No. 76 of the inventory report. The AO however has not made any enquiry or investigation in the context of the retraction statement filed. Except relying on the statement u/s 133A, the AO did not bring on record any further material to negate the appellant's contention or to corroborate the addition. In this background therefore, the material question to be answered is whether based solely on the statement recorded in the course of survey (which was subsequently retracted) any addition can be made. This very issue was considered by the Hon'ble Madras Court in the case of C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker): (iii) The expression such other materials or Information as are available with the Assessing Officer" contained in section 158BB of the Income-tax Act. 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniuppan [2006] 284 ITR 220 (Mad): (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, vide decision of this court in T. C (A) No. 2620 of2006 (between CIT v. S Ajit Kumar [2008] 300 ITR 152 (Mad) (v) Finally, the word "may" used in section !33A(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", as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section !33A are not conclusive piece of evidence by itself. The above judgment of the Hon'ble Madras Court was upheld by the Hon'ble Supreme Court in 352 ITR 480. Similar view was expressed by the Hon'ble Delhi High Court in it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person daring such examination can also be used in evidence under the income-tax Act. On the other hand, whatever statement is recorded under section 133A of the income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much force in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this," 14. Moreover, the word 'may' used in section 133A(3)(iii) of the Act clarifies beyond doubt that the material collected and the statement recorded during, the survey is not a conclusive piece of evidence by itself. 15. In any event, it is settled law that though an admissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uted by the appellant either before the AO or before the undersigned that the stock physically found on the date of survey could be fully reconciled with the stock records maintained. The case of the appellant rests on the fact that maximum upto 2500 sarees could be accommodated at his own premises, Therefore, even by assesses's own admission the capacity of the appellant's showroom to hold sarees was approximately 2500 sarees, whereas as per the appellant's books number of sarees held in stock at the time of survey was 1572. Apparently therefore the number of sarees available with the assesses at the time of survey was excess by 928 sarees. As per the appellant's books for the relevant year, the average cost of embroidered sarees was approximately Rs. 3000/- and therefore 1 hold that at the time of survey the value of excess stock of 928 sarees was Rs. 27,84,000/- (928 X 3000) I thus uphold the addition of Rs. 27,84,000/- being value of excess stock of 928 sarees and the remaining sum o1 Rs. 2,19,40,399/- (2,47,24,399 - 27,84,000) stands deleted. Since the said stock did not reflect in the appellant's books for the relevant financial year, I agree with the AO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cess stock of saree] and gross profit of Rs. 17,09,519/- submitted that the Ld. CIT(A) suo-motto has exercised his powers under sub-section (4) of Section 250 of the Act and directed the assessee to produce the architectural drawings, schematic diagram of the premises/show-room/shop/stock room/passages which were surveyed inter alia including the details of area, measurement of racks, stock rooms etc as well as the photographs of the fully stocked showroom and the stock room etc. and also the Ld. CIT(A) gave direction to produce the statement giving month-wise details of sales along with average rate per sarees sold and sarees held in stock. And pursuant to the direction of Ld. CIT(A), these documents were produced before him. According to Ld. AR, the Ld. CIT(A) while exercising his appellate powers u/s 250 of the Act has power even to suo-motto pass orders and this power can be seen located under subsection (4) of Section 250 of the Act and, therefore, according to Ld. AR, there was no necessity for the Ld. CIT(A) to confront the AO or call for the remand report from the AO as contended by the Ld D.R. Therefore according to Ld. A.R., the grounds of appeal of the department allegin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he ld. CIT, DR was also unable to point out any perversity in the factual findings recorded by Ld. CIT(A), therefore, sending this issue back to AO will be abuse of process of law." 7. Thereafter coming to the merits, the Ld. A.R submitted that survey took place on 12.10.2015 and it would be clear from the reply given by the assessee to question no. 8 (supra) that the assessee's director expressed his inability to explain the discrepancy without going through the books of accounts; and since the survey was continuing till early hours of night and next day morning, and the director being an elderly person was under tremendous pressure and had made the statement under duress with a view to buy peace of mind. So according to him, the conditional offer disclosing the difference of stock as unexplained stock cannot be the basis for addition of entire stock. And thereafter according to Ld. A.R, the assessee had moved an application before the AO to give a copy of the inventories prepared by the survey team; and pursuant to same, the assessee received the copy of inventory prepared by the survey team only in the month of December, 2015; and after going through the contents of the inven....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nt we note has been notarized. According to Ld. A.R since the survey statement recorded u/s 133A has been retracted in few weeks after receipt of the copy of inventories recorded and since the admission made was on the basis of mistake of fact which the assessee could demonstrate, the admission made by the assessee during the survey operation cannot be used against him (assessee) as held by the Hon'ble Supreme Court in CIT vs. S. Khader Khan & Sons in [2013] 352 ITR 480 (SC)] and since it (survey statement) was based on wrong facts and given under duress does not have any evidentiary value, it cannot be used against the assessee. According to Ld. A.R, from a perusal of page 76 of inventory (placed at pg.89 of PB) it can be seen that all other pages of the inventory found placed from page 44 to 99 (Pg 1 to 86) have been written in an illegible manner, in hurry and it included the code numbers of designer sarees which fact can be specifically seen. However, according to Ld. AR, a perusal of page 76 would reveal that it has been written legibly and in good hand writing and the total quantity of sarees in that page 76 alone is more than 5,596 pieces of sarees in numbers whereas in all ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of it which does not require any inference from our part and so he prayed for dismissal of Revenue Appeal. 7. Coming to cross objection filed by the assessee, it is noted that assessee has preferred the same against the partial confirmation of addition by Ld CIT(A). According to Ld. A.R, the Hon'ble Calcutta High Court in a similar case i.e. PCIT vs. Subarna Rice Mills in [2-18] 96 taxmann.com 286 (Cal) has held that in a case of detection of un-disclosed stock, the value of entire stock undisclosed need not be made and only the profit embedded in it need to be taxed and drew our attention to the Hon'ble High Court decision wherein it was held as under: "The legal issue that the Revenue has raised in this appeal is whether the Appellate Tribunal could have disregarded the value of the unaccounted purchases made by the assessee and required additional tax to be imposed by taking into account notional sales when no corresponding sales had taken place during the relevant assessment year. In course of survey operations conducted on March 24, 2010 at the rice mill of the assessee, it was discovered that there were large quantities of undisclosed stocks. The assessi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee, concluded that it was the physical verification of the stocks undertaken by the Assessing Officer in course of the survey operation that was to be given primacy. Indeed, the Commissioner (Appeals) found that there was no evidence that the FCI official who had issued the certificate had undertaken any physical verification of the stock at the rice mill of the assessee and the document appeared to have been filled up by the assessee and merely signed by the FCI official. Such part of the order of the Commissioner (Appeals) was unexceptionable and could not have been interfered with by the Appellate Tribunal. Indeed, no reasons have been furnished by the Appellate Tribunal in disregarding the physical verification of the stocks carried out by the Assessing Officer. Further, the area of the godown as indicated in the FCI certificate was of no consequence since the Assessing Officer found stocks piled outside the godown at the time of the survey. Accordingly, to the extent that the Appellate Tribunal accepted the quantum of additional stocks on the basis of the certificate issued by the concerned FCI official, such order is unacceptable and is set aside. The order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....if any. 8. We have heard both the parties and perused the records. We note that the assessee in this relevant assessment year (AY 2016-17) returned an income of Rs. 1,23,58,190/-. It is noted that the assessee is engaged in the business of trading in fabrics, laces, borders and sarees. A survey u/s 133A of the Act was carried out at the business premises of the assessee on 12.10.2015. According to AO, during the survey physical stock of sarees/goods were inventorized and stock amounting to Rs. 3,59,51,307/- was discovered. But, according to AO the computerized books of the assessee as on the date (12.10.2015) reflected only stock of Rs. 1,10,80,923/-. Thus, according to AO, there was a stock difference of undisclosed stock amounting to Rs. 2,48,70,384/- was discovered in the shop & godowns. According to AO, during survey, the assessee was confronted with the difference of stock which was discovered, but the director of assessee Shri Gopal Singrodia failed to reconcile or give satisfactory explanation regarding the undisclosed stock and in fact in his statement the director of assessee Shri Gopal Singrodia has admitted the fact of undisclosed stock and agreed to remit the advance....
X X X X Extracts X X X X
X X X X Extracts X X X X
....survey, the assessee had sought copies of the stock taking report (inventory report), and the impounded documents like impounded books of accounts and the statement given u/s 133A of the Act, so as to enable them to arrive at the final disclosure and the correct income which has to be offered to tax in the financial year 2015-16/AY 2016-17. And we note that a copy of survey report was provided to the assessee in December 2015 which comprised of 86 pages which corresponds to page 44 to 99 of PB. However, we note that in the PB filed before us there are only 55 pages (Page 44 to 99) of the inventory report prepared by the survey team. On an enquiry from us, as to the remaining pages the Ld. A.R filed the following chart reconciling the pages of PB with that of the inventory report which is self explanatory [i.e. 26 blank pages (27-40, 44-45 & 49-60) among page 1to 86 were not given to assessee by AO and the Ld CIT(A) has noted about this fact at page 10 of the impugned order supra]. The chart is given below: 10. We note that after receipt of the stock taking report in December 2015, and other impounded documents, the assessee noticed that the quantitative details as well as the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s altogether different from the other pages when we compare with the rest of the report. Unlike the other total 85 pages, it is apparent that this Page No. 76 (Page 89 of PB) was written by some other person in good handwriting in a leisurely manner which makes it standalone page from all other pages of inventory report, which raises doubt as to whether it was written at the time of physical stock taking in to consideration the flow of writing, the language used and the way of writing which is completely distinguishable. We note that when all other pages appear to have been written in a hurry in running hand (illegibly) and callous manner, Page 76 is written with good hand writing giving an impression as if someone was just copying the contents on it after it has been prepared/finalized elsewhere. In the other 85 pages abbreviations have been used and the sign '-do-" have been used wherever same items were found and repeated in the stock report. However in Page No.76 it can be seen that each of the 13 line item although being of the exact same nature has been written and repeated every time which normally during survey etc. officers don't have the luxury to sit and write patiently ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....craft involved in making these sarees, they are generally not kept together because it will damage the saree kept below. And so only maximum 4 or 5 embroidered sarees are kept in an average rack space and also because it is easy to take out the sarees and display before the customer. Thus taking into account the total area available with the assessee for storing the sarees and presuming that each and every available places/racks are filled up with only embroidery sarees (although the assessee also maintains stock of fancy sarees and fabrics) then also it can be seen that utmost 2460 number of sarees could have been stored at the assessee's premises. In view of the foregoing facts, it was pointed out by the assessee that it is highly improbable that the survey team could have found a total by 7083 sarees at the assessee's premises when it was practically impossible to maintain stock of such stock of sarees in such little space; and according to Ld AR, the Ld. CIT(A) in order to examine this factual claim of assessee along with the other infirmities pointed out at page 76, exercised his power u/s 250(4) of the Act calling for photos, drawing etc. 11. Be that as it may let us exami....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in its possession, area of racks, stock rooms etc. photographs of a fully stocked showroom and the stock room and also the statement giving month wise details of sales along with average rate per sarees sold and sarees held in stock etc. And pursuant to the Ld CIT(A) direction, when the assessee provided the same, the Ld. CIT(A) appreciated the merit of the assessee's aforesaid contention and came to the conclusion that not more than 2500 sarees cannot be stocked in assessee's premises. And since assessee on the date of survey has only shown 1572 sarees in its books, the remaing sarees 928 sarees (2500- 1572) were undisclosed stock of sarees. And restricted the addition to Rs. 27,84,000/- (928 multiplied by Rs. 3000/-) and G.P @ 8.49% of it at Rs. 2,36,362/-. 13. Further in order to bolster his plea of fudging carried out at page 76, the Ld. AR brought to our notice certain interesting facts/coincidence which can be seen at page 101 of paper book and on a perusal of it (which is not part of the inventory report of survey team, but it is the working sheet which was provided to the assessee along with inventory report in December 2015) we note that there are writing /calculation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rrive at the cost price of the products. Having regard to the foregoing, the Ld. AR now invited our attention to the right hand corner of the sheet (Pg. 101 of the Paper book), where the survey team had taken the figure of cost price (hereinafter referred to as 'C/P') of stock at Rs. 3,59,51,307/- (equivalent to Rs. 3.60 crs). This C/P was back calculated according to him by applying the gross profit rate of the preceding FY 2014-15 i.e., 6.74% so as to arrive at the approximate selling value of Rs. 3,81,89,000/-. According to him, this figure was further adjusted and back calculated with reference to the selling value of stock which was actually physically found and noted on the 85 pages of the inventory report [except Pg. No. 76] i.e. Rs. 1,43,00,000/- (noting on top left hand corner of the Sheet placed at page 101 of paper book) so as to arrive at the difference of Rs. 2,38,89,000/-, which the survey team had to add to the inventory report so as to justify the extracted disclosure of Rs. 2.5 crs. He further pointed out that this figure of Rs. 2,38,89,000/- was further broken up and divided by the survey team into 13 line items with the corresponding selling value and number o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le examining the action of Ld. CIT(A) to call for external evidence in the form of diagram, photos etc. and his final action of discarding the survey report (1-86) we need to see whether there is any exceptional circumstances which warrant interference as stated in illustration (e) to section 114 of Evidence Act. In this context, we have to examine the allegation/infirmities pointed out by the assessee in respect of page 76 of the survey report. We have considered the notings found on Page No. 76 of the inventory report along with the other pages of the inventory report and also the working sheet of the survey team enclosed at Pg 101 of the PB. Having regard to the discussions made in the preceding paragraphs, we find force in the findings of the Ld. CIT(A) that the veracity of Page No. 76 of the inventory report was indeed in serious doubt and it could not be said to contain the true details of stock found in the course of survey, and so he rightly discarded it. And for the following reasons, we also concur with the Ld CIT(A) to discard page 76 of survey report. We note that even though at the earliest of point of time the assessee has pointed out the infirmities the AO has bru....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the same along with the other pages of Survey Report, since they were blank sheets in the Survey Report comprising of total 86 pages. This fact that certain pages in Survey Report (1-86) were blank pages has been taken note by the Ld. CIT(A) at page no. 10 of the impugned order that pages 27-40, 44-45 and 49-60 of the Survey Report are not found in the inventory report. This finding of Ld. CIT(A) has not been challenged/assailed in the grounds of appeal by the Revenue. So this finding of fact crystallizes. It was pointed out by the Ld. A.R that these blank sheets in the survey Report i.e. pages 27-40, 44-45 & 49-60 in the survey Report from pages 1-86 were also found to have been initialed by the director of assessee, which fact he discovered during inspection and that is the reason why copies of blank sheet though paged between 1-86 was not provided to assessee. The Ld. AR explained that after the survey was over after the midnight, the assessee's director who was an elderly person was exhausted & tired and when pages were shown to him, he mechanically without looking into the contents of pages kept on initialing it so that he will be left free from the survey operation going ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it was a conditional offer. The director has stated in his reply to question no. 8 that he was not in a position to explain the discrepancy (stock difference) which was alleged without going through the books of accounts. So it can be seen that assessee's director though expressed his inability to explain the discrepancy has given the offer of undisclosed stock at Rs. 2.5 crores subject to discrepancy, if any, found in the regular books vis-a-vis physical stock taking report prepared by the Department. Thus, from the aforesaid statement recorded of the director of the assessee we are of the opinion it was a conditional admission which was based on verification after looking in to the books. So the reply given by the director cannot be termed as an admission of the undisclosed stock and the AO erred in assuming so. And we note that at the earliest point of time the director has even retracted the conditional admission after going through its books and infirmities inter alia about page 76 of survey report . And it should be borne in mind that if an admission is based on mistake of fact (not mistake of law) then the maker of the admission can validly retract it. So, from any angle we ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... page since to count 5596 sarees and calculate the cost of Rs. 2.38 crores could not have been a one man task; and thus the AO could have brought some material on record which unfortunately the AO has not done other than erroneously harping on the assessee's purported admission and initial put on the page 76 and other flimsy reasons which cannot be countenanced for the reasons given (supra). 22. And the AO's justification about the obvious difference in hand writing of page 76 since several officers take part in survey operation and the handwriting may be different also does not inspire confidence to believe that page 76 was prepared during survey for the same reason stated (supra) that nothing prevented the AO to have identified the officer who prepared page 76 and brought evidence on record, which AO did not and the general observation made to justify cannot be accepted in the light of the glaring infirmities discussed supra which cast serious doubt about the veracity of the contents of page 76. Therefore we cannot accept the aforesaid reasons given by AO to justify page 76 of the inventory prepared by survey team. And during the appellate proceedings the Ld. CIT(A) in order t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to bear in mind that our Hon'ble Supreme Court has not accepted the maxim falsus in uno, falsus in omnibus meaning false in one thing, false in everything. So, after ignoring Pg. No. 76 of the said report and having regard to the working statement of the survey team (Page 101 of the PB), it cannot be denied that the survey team had physically found stock having selling value of Rs. 1,43,00,000/-. Applying the GP rate of 6.74%, the cost price of such stock works out to Rs, 1,33,97,040/-. As noted earlier, and also at Para 3 of the assessment order, the stock available in the books as on the date of survey was Rs. 1,10,80,923/-. Giving the benefit of the dead stock of Rs. 8,79,415/-, as allowed by the AO at Para 5 of the impugned order, the discrepancy in the stock works out to Rs. 14,36,702/-[Rs. 1,33,97,040 - Rs. 1,10,80,923 - Rs. 8,79,415]. Considering the aforesaid facts and circumstances, we are of the view that the value of excess physical stock found in the course of survey can be reasonably estimated at Rs. 14,36,702/- and G.P rate of 6.74% on it are sustained (BOTH). The CO of the assessee is partly allowed to this extent. 24. In the result, the appeal of the revenue is d....