TaxTMI 
TaxTMI 
2024 (4) TMI 977
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....account of excess stock, which has been accepted by the Ld. Assessing Officer during the remand proceedings and, thus, the whole basis of confirmation of addition on account of alleged advances and excess cash in hand is devoid of any valid reasoning. 2. a). That the Ld.CIT(A) has also erred in confirmation of addition of Rs. 1,26,650/- on account of alleged shortage in stock without considering the fact that the complete physical verification of stock was not carried out as pointed out in the retraction letter, b). That the Ld. CIT(A) has failed to appreciate that there was inflation in value of items as counted during survey, which was point out during the course of assessment but accepted by the Ld. Assessing Officer during the remand proceedings and, therefore, the confirmation of other addition which too were made on the basis of wrong facts and circumstances is not proper. 3. a). That the Ld. CIT(A) has erred in confirming the addition of alleged advances without appreciating the fact that there was no link or connection with such alleged advances with the business of the assessee and the facts as given in the retraction letter has not been considered. b). That the as....
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....rt relief to the assessee and against the additions sustained by the ld CIT(A), the assessee is now in appeal before us. 5. During the course of hearing, the ld AR submitted that there was survey operation at the business premises of the assessee on 04.12.2017 and at the time of survey, the assessee being a senior citizen and suffering from various ailments was at his residence and officials of the department along with the Police went to his residence and asked him to accompany them and took him to his business premises in their car. The survey started at about 11:30 AM and concluded next during early hours of morning on 05.12.2017. 6. It was submitted that under pressure and coercion from the survey team, the assessee surrendered a sum of Rs. 34,50,000/- on account of excess cash of Rs. 9,25,000/-, excess stock of Rs. 2,90,000/- and towards advances of Rs. 22,35,000/-Copy of the alleged inventory of cash is placed at page 77 of the Paper Book and the statement of the assessee has been placed at pages 78 to 87 of the Paper Book and the list of the so called advances have been placed at pages 88 to 93 of the Paper Book. 7. It was submitted that the assessee was under great shock....
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....ime after more than 3 years, the notice was received from the Assessing Officer, Central Circle, Patiala, and the request was made by the assessee earlier also and again for certain documents vide communication, dated 04.11.2020 and such impounded documents during survey along with other records of the survey was received by the assessee on 19.02.2021. 10. Thereafter, the first questionnaire dated 17.02.2021 was issued to the assessee as per page 43 to 49 of paperbook and the relevant queries relating to survey are at pages 48 to 49 of the Paper Book. In response, a detailed reply was submitted along with various details. The relevant replies have been given contending that even the alleged advances/notings, the officials of the department were threatening the assessee's son for higher surrender and such notings has no link or connection with the business of the assessee and even the identity of those alleged persons is not verifiable and there are no signatures of the parties concerned and they are fake entries not connected with the business of the assessee. Thereafter, another letter was submitted to reiterate the same facts and particularly, the fact that wrong surrender o....
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....bmitted and also stated that the sufficient time was available for the purpose of such verification and particularly at page 71, it has been stated that acceptance of part mistake and not accepting the other mistakes on the basis of similar facts and circumstances, is denial of principles of natural justice, but nothing was heard from the Assessing Officer in this regard and he choose to remain silent. 13. It was submitted that all such facts have been given in the written submissions before the Ld. CIT(A) starting from page 5 of the sequence of assessment proceedings upto page 14 of the CIT(A) order and number of case laws have been submitted to the CIT(A) on the issue of retraction of the Jurisdictional Bench of the ITAT, Chandigarh Benches and other case laws, even of the Madras High Court in the case of S. Khadar Khan & Sons, reported in 300 ITR 157, which has been approved by the Hon'ble Apex Court that no evidentiary value can been attached to the statement recorded during survey and further on retraction, please refer to page 10 to page 12 of the order of Ld. CIT(A). Further, the submissions were made about the contradictory stand adopted by the Assessing Officer that, ....
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....NG OF LD. CIT (A) SUBMISSIONS In para 6.2, PAGE 27 the Ld. CIT(A) has mentioned that the retraction was not made immediately as it was made within a period of 14 days and, he has relied on two judgements i.e. of Delhi High Court and of Madras High Court at page 27 of the order. i). It is submitted that the retraction was made within 14 days and the contents in the retraction letter are detailed, covering all the sequences of survey, which has been placed at pages 28 to 33 of the 'Paper Book' and along with this retraction letter, an affidavit duly sworn was filed, but, there was no response from the department till today. Thus, the facts as mentioned in the retraction letter, have not been rebutted at all. ii). The finding of CIT(A) that the retraction should have been made immediately is without any valid reason, since within the 14 days, the retraction letter was duly filed and is very much in order and in time. iii) Reliance is being placed on the judgment of Chandigarh Bench of the ITAT in the case of 'Atop Fasteners', copy placed at pages 219 to 302 of the judgment set, in which, though, the amount to the tune of Rs. 5 crores was surrendered during survey,....
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.... viii). Reliance is also being placed on the judgment of ITAT, Jodhpur Bench at page 339 of the Judgment Set. The relevant head notes are there from pages 339 to 341 and at page 347, where after relying upon same kind of judgments, the addition have been deleted and addition on account of statement given during survey was deleted. ix) Reliance is also being placed on the judgment of Chandigarh Bench in the case of 'Arihant' Foam, where again during survey, certain excess stock was offered, but then it was explained during the course of assessment proceedings, that the surrender was made on the basis of wrong facts and the said addition was deleted by relying upon same judgment, copy of the judgment is also being filed herewith in judgment set-II x). Reliance is also being placed on the judgment of 'Cuttack Bench' of the ITAT in the case of Utkal Alloys (P) Ltd. Vs DCIT and other judgment of M/s Bansal Strips (P) Ltd., and where also, by relying on the same facts/ judgements, the addition on the basis of amount offered during survey was deleted. Case laws relied upon by CIT(A): i). The Reliance by the Ld. CIT(A) on the judgment of 'Delhi High Court' in the ca....
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....r authorities with a copy to the Ld. AO and accompanied by the sworn affidavit of the assessee. Thus, this judgment is squarely applicable to the facts of our case. Further, the Circular of the CBDT Vide No. 286/2/2003-IT (Inv) dated 10.03.2003 is very much clear on the issue and which have been followed in number of judgments and the circular of the CBDT are binding upon all the officers working under their charge. Copy of the circular is placed in the paper book pages 19. It was further submitted that no defects have been pointed out in the books of accounts and other information as submitted during the course of assessment proceedings and even there was a serious mistake pointed out by the assessee with regard to calculation of excess stock of Rs. 2,90,000/- and which proves that the whole exercise of survey was only extraction of surrender and even later on, it was proved and accepted by the Assessing Officer in appellate proceedings that the valuation of stock was incorrectly made as mentioned in the remand report of the Assessing Officer. 20. It was further submitted that similarly, in the case of alleged advances as already pointed out that such notings on the loose sheet ....
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.... and proved during assessment proceedings with documentary evidences and accepted by the Assessing Officer. Thus, when on three accounts, the defects pointed out by the assessee have been accepted and it is also the fact, which is pointed out that there is no evidence of purchases and sales outside the books of accounts and neither the books of accounts have been rejected u/s 145(3) and above all, the contention of the assessee right from beginning having been that the stock was not property counted, nor valued correctly and the same contention stands accepted by the Assessing Officer and, therefore, the addition by applying the gross profit of 10% on the alleged shortage in stock to the tune of Rs. 12,66,486/- is devoid of any valid consideration. Alternative, though, not accepting, it may be stated that the G.P. rate was 8.02% and enhancement by 10% is against the facts and circumstances of the case. 22. Regarding Ground no. 6 & 7, It was submitted that these grounds are regarding excess cash of Rs. 9,25,000/- and money advanced to few persons on the basis of alleged notings. The Ld. Assessing Officer after reproducing part statement of the assessee as commented upon at page 34 ....
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....03 of CBDT wherein it is clearly mentioned that no addition should be made merely on the basis of statement during survey and no attempt should be made to obtain confession as to the undisclosed income and further mentions that the addition should be made on the basis of evidence. ii). The said documents have been found at the premise of the assessee. The said documents were prepared under pressure and coercion as already discussed above on 05.12.2017 read with retraction letter. iii). Similarly, the cash inventory shows the excess cash in hand available with the assessee on the date of survey. The said documents were prepared under pressure and coercion as already discussed above read with retraction letter. iv). The contents of the same have been verified by the assessee in the statement recorded during the course of survey. The statement is in respect of alleged excess cash of Rs. 9,25,000/- have been proved to be wrong, which is part of the statement and, thus, from this, it is proved that no authenticity can be relied upon on the statement recorded during survey. v). The said entries were confirmed by the assessee to be unaccounted transactions. The assessee has filed ....
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....raction letter, no addition called for. Besides that our following contentions may, please, considered. a). During the survey, the assessee was found to be carrying on the same business of 'having distribution of Prince Pipe and Fittings Ltd.', Mumbai of the plastic goods at Barnala and almost all the purchases were made from the said company and during the course of survey, the assessee was found to be carrying on the same business and no other business activity or any evidence of carrying on other activity was noticed. b). Even, the books of accounts of the same business was found to be maintained and both cash in hand and stock was calculated and offer of surrender was extracted under pressure and coercion by comparing it, with the regular books of accounts, meaning thereby that the source of alleged cash and advances was out of the same business activity, the provisions of section 69 read with 115BBE are not applicable. c). The statement of the assessee, which have been placed in the Paper Book also prove that nature of business carried out by the assessee and the stock was found to be of the same business and further reference to the cash book have been made at p....
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....levant para of the judgment is para 8 at page 164. g). Reliance is being placed on the judgment of 'Surya Hatchery' at pages 177 to 218, where all the judgments with regard 115BBE and on deemed income have been discussed at length and the relevant discussion is there at page 200 onwards, where the reliance on the various judgment as discussed earlier in the case of M/s Khurana Rolling Mills (P) Ltd and M/s Khurana Steels Ltd. have been discussed. h). Similarly, reliance is also being placed on the judgment of Jodhpur Bench in the case of Smt. Rekha Shekawat at pages 1-3 of judgment set and of Andhra Pradesh High Court at pages 4 to 8 and on the judgment of Dev Raj Hi-tech Machines Ltd. at pages 113 to 128. Thus, in view of above said facts and circumstances, alternatively also, the provisions of section 115BBE are not applicable. 25. Per contra, the ld DR has relied on the findings of the ld CIT(A). It was submitted that the AR has contended that as the assessee had filed retraction letter to the surrender after 14 days, hence the whole surrender is without basis and all the additions should be deleted. The AR has submitted that the said surrender was withdrawn after a....
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....eedings, the assessee brought some discrepancies to the knowledge of AO which had erroneously crept into the calculation done by the survey team leading to the consideration of the closing stock as on date of survey as Rs. 1,05,94,990/-. The assessee during the assessment proceedings, contended that the actual closing stock was of Rs. 65,74,354/-. The said contention of the assessee was accepted by the AO after perusal of the survey record. In above circumstances, the AO held that there was now an excess stock of Rs. 43,10,635/-(Rs. 1,08,84,989 - Rs. 65,74,354). The AR contended during the assessment proceedings that the valuation of stock was done at highly exaggerated rates and the same should be done on the basis of the prices as mentioned in the invoices. The AO did not accept the contentions of the assessee and the excess stock amounting to Rs. 43,10,635/- was treated as unexplained investment of the assessee. During the appellate proceedings, the AR furnished complete detail of the stock calculation done during survey as per purchase bills vide letter dated 24.05.2022. The said evidence was forwarded to the Assessing Officer in remand proceedings for report. The Assessing Off....
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....he survey proceedings. From the statement of the proprietor of the firm, it is clear that the documentation related to excess cash and the unaccounted advances were duly confronted to the assessee during the course of survey. The impounded documents related to advances are duly signed by the assessee acknowledging the contents of the same. Post survey, the assessee filed a retraction letter denying the surrender made. The irrelevance of retraction filed 2 weeks after the date of survey has already been discussed above. The Department has cogent evidence in the nature of the impounded document which is further supported by the statement of the assessee recorded during the course of survey wherein he has acknowledged that the said advances are from unknown sources. 29. It was submitted that the Hon'ble Supreme Court in the case of CBI vs. V. C. Shukla reported at [1998] 3 (SC) 410 has clearly laid down that as per the Section 34 of the Evidence Act, entries in loose sheets cannot be considered as book till the time the revenue bring some corroborative evidence to show that the said loose sheets contained some transactions which is undisclosed from the department. The above judgm....
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....stock details to the Assessing Officer during the remand proceedings. (vii) Hence, the assessee is taking stands suitable to his need wherein, on one hand he is retracting the whole surrender and on other hand is claiming benefit on account of valuation of stock. 32. It was accordingly submitted that the arguments of the AR that the advances to persons and excess cash in hand should be treated as out of business income is not acceptable and the addition made u/s 69A & 69, is to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The judgments cited supra i.e.: (1) Fakir Mohammed Haji Hasan Vs. CIT ([2001] 247 ITR 290 (Guj.) (2) PCIT vs. M/s. Khushi Ram & Sons Pvt. Ltd., the Hon'ble High Court of Punjab & Haryana in ITA No. 126 of 2015 dated 21.07.2016 (3) SVS Oil Mills vs. ACIT, Chennai, the Hon'ble High Court of Madras in ITA No. 765 of 2018 dated 26.03.2019 (4) Kim Pharma Pvt. Ltd. vs. CIT in ITA No. 106 of 2011 dated 27.04.2011, (5) The Hon'ble Supreme Co....
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....tion 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 during 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, 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 Vs. G.K.Senniappan, [2006] 284 ITR220(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 of 2006 between Commissioner of Income Tax v. S. Ajit Kumar (2008) 300 ITR 152 (Mad); (v) Finally, the word "may" used....
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....to show that it was an incorrect admission on his part and equally it is for him to substantiate the same with material evidence. 36. In the instant case, a survey operation were conducted at the business premises of the assessee on 04/12/2017 which were continued during the intervening night of 04/12/2017 & 05/12/2017 and completed in the early morning hours of 05/12/2017. It has been claimed that the assessee being a senior citizen and suffering from various ailments was under a great shock and mental agony and could not get out of the shock of the survey operations for few days and thereafter, on 18/12/2017 the assessee filed a letter of retraction from surrender so made during the course of survey proceedings which was addressed to ITO-Ward-1, Barnala with a copy to the Additional CIT, Sangrur, Range Sangrur along with an affidavit duly addressed by the Notary Public. The contents of the retraction letter dt. 18/12/2017 reads as under: "Sub: Letter of Retract from Surrender made during Survey proceedings u/s 133Aof the Income Tax Act, 1961. This has a reference to the survey proceedings u/s 133A carried out at my business premises on 4th of December 2017 and it continued u....
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.... there is no difference in the stock or cash and we have nothing to hide and you can count my stock and search my premises, which they were already doing it. 7. That till the late evening, they could not find any objectionable item or papers from my premises and in, meanwhile, I asked the officials of the department that since I am a Senior citizen suffering from sugar and high blood pressure and other diseases, I needed rest and i wanted to go home, but l was not allowed and due to which, my mental condition did not remain normal. 8. That then in the late night, I was asked by way of pressure, coercion and threatening attitude of the department to make a huge surrender of income and which I refused very politely that my business is as per my books of accounts and I have no additional income to offer and, whatever, income is there, the same has been reflected in my regular books of accounts and there is no difference in my stocks as per the books of accounts and neither any documents had been found for any undisclosed transactions. 9. That I gave the print outs of trial balance from 1.4.2017 to 4.12.2017, which was taken in possession by the official concerned and, particular....
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....d figures and which he did under pressure and keeping in view my health since I was not feeling well and wanted to go home and these nothings were made only for the purposes of extracting the unreasonable and uncalled for surrender. 15. That the above alleged unexplained advances are also totally false, unreliable even going by the nature of my business, where my sales are to the registered dealers and to some retail shopkeepers only and, a s such, there cannot be any question of advancing any amount to any other persons. 16. That all my assessments havelseen completed regularly without any addition. Thus, the whole of the offer was extracted under pressure, coercion and threatening attitude of the department officials and because of my ill health, of mine and my wife and, this offer of surrender is totally bad in law and, accordingly, is retracted from the -date, when it had been made, as there is nothing on record for the purposes of such illegal offer as extracted from me during the course of such survey on 4.12.2017 and which continued till early morning hours of 5.12.2017. 17. That during the past few days i.e. ever since date of survey, I was completely shocked, unwel....
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....cts." 38. We therefore find that the retraction was made within a period of two weeks from the date of conclusion of the survey proceedings and for the intervening period, the assessee has explained that being a senior citizen, he was under great shock and mental agony besides suffering from various ailments and because of which, he could not file the retraction letter earlier. Regarding excess stock, the assessee has stated that during the course of survey, he has informed the officials of the Department that all the purchases are made on the basis of bills issued by the parties and the payments have been made through normal banking channel and as far as sales are concerned, they are also made to registered dealers or to some other petty shopkeepers and the books of accounts and the copy of the trial balance was duly provided to the officials wherein all the purchases and sales up to 04/12/2017 were duly recorded and there was no difference in the stock which were noted by the Department officials. It was further submitted that how the alleged excess stock of Rs 2,90,000/- has been worked out was not clear to him as the stock was neither counted fully nor valued properly and give....
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.... be accepted. 41. In this regard, we find that firstly the retraction letter has been filed within a short span of two weeks from conclusion of the survey proceedings duly supported by an affidavit of the assessee which has been filed before the AO as well as copy thereof has been filed before the senior authority i.e; Addl. CIT, Sangrur. As far as the intervening period is concerned, the assessee duly explained that being a senior citizen, he was under great shock and mental agony and once he was able to recover from the shock of the survey proceedings, he has written the letter to the AO retracting from the surrender so made. Therefore as far as period within which the retraction has been made, we find that the same has been made within a reasonable period of two weeks of close of the survey proceedings and therefore it is not a case where the assessee has filed the return of income retracting from the surrender so made and/or waited for issuance of the show cause by the AO and thereafter, he has retracted from the surrender so made. We are therefore unable to subscribe to the view of the ld CIT(A) where he says that where the retraction is not made on an immediate basis, the sa....
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....e valuation of stock was done at highly exaggerated rates and the same should be done on the basis of the prices as mentioned in the invoices. The AO did not accept the contentions of the assessee and the excess stock amounting to Rs. 43,10,635/- was treated as unexplained investment of the assessee. During the appellate proceedings, the AR furnished complete detail of the stock calculation done during survey as per purchase bills vide letter dated 24.05.2022. The said evidence was forwarded to the Assessing Officer in remand proceedings for report. The Assessing Officer vide his report sent vide letter no. 776 dated 30.11.2022 submitted the complete calculation of the stock found during the course of survey and gave a tabular representation to the value of stock. A comparison was drawn between the rates of items taken during the course of survey and the rates as per the purchase bills. The value of stock as per stock inventory of survey comes to Rs. 1,08,82,313/- whereas, the value of stock as calculated by the AO in the remand report on the basis of actual bills & invoices comes to Rs. 53,07,868/-. The AO has further conveyed that the said data has been made after verifying the c....
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....r coercion and threat, we have no hesitation in accepting the said contention advanced by the assessee. Therefore, the retraction towards excess stock is concerned, the assessee has duly demonstrated that the statement initially recorded during the course of survey was factually incorrect and was therefore recorded under coercion and threat by the survey team. 44. Now, coming to the issue of alleged advances, we have gone through the seven pages of the diary marked as "Prince" seized during the course of survey and find that there are certain names and the amounts which have been written against these names. There are no dates, no description in terms of whether the amount written against the respective names are received by the assessee or paid by the assessee and the date of receipts / payments and falling under which financial year. No other documentary material has been found during the course of survey which corroborates such entries /contains complete identity details of these persons so found mention in the said diary and the nature of transaction so referred therein. We are therefore of the considered view there is no tangible material in possession of the survey team whic....
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....in the books of accounts of Rs 9,25,000/- is concerned, we find that the retraction so made by the assessee is not factually correct and the same therefore cannot be accepted. The action of the AO in bringing to tax excess cash of Rs 925,000/- so found during the course of survey and upheld by ld CIT(A) is hereby confirmed and the contentions advanced in this regard on behalf of the assessee are rejected. 46. In light of aforesaid discussion, as far as excess stock of Rs 2,90,000/- and alleged advances of Rs 22,35,000/- is concerned, there is no basis to make the addition solely basis the statement so made by the assessee as the assessee has duly demonstrated that the surrender so made was factually incorrect and taken under coercion and threat and the same deserve to be set-aside. 47. We find that the ld CIT(A) has already directed the deletion of addition towards the excess stock of Rs 2,90,000/-. Therefore, the addition towards the alleged advances of Rs 22,35,000/- which has been sustained by the ld CIT(A) is hereby directed to be deleted whereas findings regarding excess cash of Rs 9,25,000/- are hereby confirmed for reasons stated above. 48. Coming back to the findings of ....