TaxTMI 
TaxTMI 
2024 (7) TMI 896
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.... solely on his own presumptions. 1.2 That, the Ld. CIT(A) has further erred in confirming addition of Rs. 89,94,655/- out of total addition of Rs. 1,25,60,000/- made by ld.AO on account of excess stock, solely based on the admission obtained in the statements recorded on oath during the course of Survey and without considering the submissions made and evidences adduced. Thus, the addition of Rs. 89,94,255/- deserves to be deleted. 1.3 That, the ld. CIT(A) has further erred in confirming the addition of Rs. 10,77,000/- made by ld.AO on account of bogus expenses, solely on the basis of admission obtained from assessee in the statements during the course of survey. 1.4 That the Ld. CIT(A) has further erred in confirming addition of Rs. 1,00,71,655/- (i.e. Rs. 89,94,655/- on account of excess stock and Rs. 10,77,000/- on account of bogus expenses) merely on whims & fancies and without appreciating the fact that assessee had already offered additional income of Rs. 68,00,000/- worked out after completing books of accounts wherein all the entries contained in the seized records which do not find proper mention in the regular books of accounts maintained stood i....
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....Avnesh Sharma was recorded during survey proceedings. During the recording of that statement the partner of the firm surrendered a sum of Rs. 2,04,37,000/- on the following account as undisclosed income for the year under consideration: 1. Advances Given to Various persons Rs. 68,00,000/- 2. On account of Excess stock Rs. 1,25,60,000/- 3. On account of bogus expenses Rs. 10,77,000/- Rs. 2,04,37,000/ 3.2 During the course of assessment proceedings, on perusal of return of income filed for the year under consideration, it was noticed that the assessee firm has disclosed only Rs. 68,00,000/- in its return of income filed on 17.10.2016 instead of Rs. 2,04,37,000/- as surrendered income while filling the return of income. In this manner, the assessee disclosed surrendered income less by Rs. 1,36,37,000/-. 3.3 As the case was selected for scrutiny, notice u/s. 142(1) dated 09.12.2018 was issued to the assessee firm asking them to show cause as to why the difference of Rs. 1,36,37,000/- should not be added to the income for the year under consideration on account of excess stock and bogus expenses as declared in the statement. In com....
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.... action was carried out in the business premises of the appellant partnership firm and during the survey the appellant made a surrender of additional income on account of three reasons. However in the return of income filed subsequently the appellant has not honoured the statements made by its partner and has offered additional income only partly. The two accounts where the additional income has not been offered in the ITR or has been offered by a lesser sum are namely bogus cash expenses and unexplained excess stock. Bogus cash expenses (Rs. 10,77,000) Regarding the bogus cash expenses (Rs. 10,77,000) the appellant has claimed that the same gets covered by the undisclosed cash advances (Rs. 68 lakhs) due to telescoping on which surrender was made during the survey action and income on account of the same has been offered in the ITR and the income on account of bogus cash expenses (Rs. 10,77,000) has not been offered in the ITR. The appellant has claimed the telescoping without explaining the facts of the case behind the telescoping. The factual position in this regard is required to be laid out by the appellant and onus in this regard is on the appellant....
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....00/- is added to the total income of the assessee." The appellant has not rebutted the above factual findings in the appeal. The three key findings are as under:- It is not shown by the appellant that the cash advances were given after the unaccounted cash was generated out of bogus cash expenses. It is not shown by the appellant that the cash claimed to have been given for certain expenses which were found to be bogus was not given or utilized for something else. The assessee did not show the cash flow trail to show the generation and application of unaccounted cash. Another important crucial element is that nowhere in the survey statement it is was stated that the cash out of bogus expenses was given as cash advances and this amount was offered to tax as additional income even in addition to offered additional income on account of cash advances. The statement recorded during survey cannot be brushed aside. It has some evidentiary value. Such statement also reflects the original and initial response of the person giving statement whereas the replies/statements given thereafter are likely to be improved upon versions and after thoughts. ....
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.... that the statement having been retracted, the Assessing Officer should have independently come to a conclusion that there was additional income as sought to be assessed and that there was no material to support that there was such income, this contention in our view is not correct. As held by the Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and, in fact, there was no additional income. This burden does not even seem to have been attempted to be discharged. Similarly, case P.K. Palwankar v. CGT [1979] 117 ITR 768 (MP) and CIT v. Mrs. Doris S. Luiz [1974] 96 ITR 646 (Ker.) on which also the learned counsel for the assessee placed reliance, are of no help to the assessee. The Tribunal's order is concluded by findings of fact and in our view, no question of law ....
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....ive and qualitative details of slock, therefore it cannot be said that the assessee has deduced its actual profits in the absence of such details. (f) assessee's books of account cannot be accepted as complete and correct and therefore the true profits of the assessee's business cannot be deduced (g) the trading results declared by the assessee cannot be verified. And in view of the discrepancies, the books of accounts of the assesse were rejected in the assessment order. The appellant has submitted that as per Trading Account as per finalized books for the period 01.04.2015 to 19.02.2016. the GP is worked out at Rs. 5,00,52,299.33, as against GP Rs. 4,47, 34,326/- as per the trading account as on the date of survey prepared on the basis of incomplete books of accounts. In this manner assessee has declared additional income of Rs. 53,17,973.33 (5,00,52,299.33 - 4,47,34,326) on account of excess stock. However, as per submission of appellant, it is observed that this G.P. of Rs. 5,00,52,299 is after including the excess stock found during survey i.e. taking the actual stock (Rs. 2,96,24,738) found during survey. At the turnover of....
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....survey including the purchase and sale related documents and bills etc and there is no document regarding the delivery challan or lorry details or any letter or any other document which could have shown that the goods were actually received by the appellant but the bills were not yet received. The claim of the appellant thus is highly improbable and contradictory to records found during survey. The partner replied in the statement that the stock in trade as per books of accounts was Rs. 1.5 cr. to 1.75 cr. and lateron upon the examination of the books of accounts the figure was actually found to be matching as the stock in trade as per books of accounts was found to be little over 1.7 cr. However if the claim of the appellant regarding unentered bills is accepted this takes the figure of stock in trade as per books of accounts to more than 2.5 cr which is almost 60% more than the figure informed by the partner during the survey and also is thus much less reliable than the figure which was found during the survey and which was matching with partner statement. RETRACTION Another important crucial element is that the statement recorded during survey cannot b....
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....ed as retracted. This position laid down in catena of decisions by the various High Courts in Lekh Raj Dhunna (supra), Bachittar Singh (supra), Rameshchandra & Co. v. CIT [1987] 35 Taxman 153/168 IIR 375 (Bom.), Dr. S.C. Gupta (supra), CIT v. Hotel Meriya [2010] 195 Taxman 459/[2011] 332 ITR 537 (Ker.), O. Abdul Razak (supra)." The above judgement is in the context of statement recorded u/s 132(4). However the part of the judgement providing general law regarding retraction is equally applicable to retraction of statement recorded during survey. In the case of Bachittar Singh v. Commissioner of Income-tax [2010] 328 ITR 400 it is held by the Hon'ble Punjab & Haryana High Court as under:- "6. It is not disputed that the statement was made by the assessee at the time of survey. which was retracted on May 28, 2003, and he did not take any further action for a period of more than two months. In such circumstances, the view taken by the Tribunal that retraction from the earlier statement was not permissible, is definitely a possible view. The mere fact that some entries were made in a diary could not be held to be sufficient and conclusive to hold that the....
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....ere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and, in fact, there was no additional income. This burden does not even seem to have been attempted to be discharged. Similarly cay P.K. Palwankar v. CGT [1979] 117 ITR 768 (MP) and CIT v. Mrs. Doris S. Luiz [1974] 96 ITR 646 (Ker.) on which also the learned counsel for the assessee placed reliance, are of no help to the assessee. The Tribunal's order is concluded by findings of fact and in our view, no question of law arises. The applications are, accordingly, rejected." (Emphasis supplied) (In the above case the statement was recorded during survey. The above judgement is thus in the context of evidentiary value of statement recorded during survey.) In view of the above judgements:- The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong. Even if the statement under section....
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.... and the Bills and other documents were received after that date of survey and such goods were not entered in the books. Appellant can't take advantage of the fact that no stock details were maintained. In fact any bills could be submitted by appellant with the claim that material was received earlier. It is a settled law that no one can take advantage of its own wrong. From the above it is clear that there is abnormally low gross profit shown by the appellant in the period after the survey, explanation regarding the un-entered bills is unacceptable and other discrepancies & unaccounted income were found during the survey The gross profit ratio for the period upto the date of survey (as found during the survey) (excluding excess stock) is 18.97% which is very much similar to immediately preceding year. Considering the totality of facts, trading results shown for the year are not reliable and are rejected. The decision of the ld. AO in the assessment order regarding rejecting the books of accounts is hereby upheld. The income is to be assessed considering the gross profit ratio of 18.94% (excluding excess stock i.e. the stock will be over and above this G.P.) w....
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.... to show either that the receipt was not income or that if it was, it was exempt from taxation under the provisions of the Act. In the absence of such proof, the revenue is entitled to treat it as taxable income. This was laid down as far back as 1958 when this court pointed out in A. Govindarajulu Mudaliar v. Commisioner of Income-tax [1958] 34 ITR 807, 810 (SC) that: "There is ample authority for the position that where an assessee fails to prove satisfactorily the source and nature of certain amount of cash received during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipts are of an assessable nature."" In the case of Kale Khan Mohammad Hanif v. Commissioner of Income-tax [1963] 50 ITR 1 (SC) [08-02-1963] it is held by the Hon'ble Supreme Court as under:- "It seems to us that the answer to this question must be in the affirmative and that is how it was answered by the High Court. It is well established that the onus of proving the source of a sum of money found to have been received by the assessee is on him. If he disputes liability for tax, it is for him to show either that the receipt was not income o....
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....h (APB 32- 67),wherein surrender of Rs. 2,04,37,000/- was obtained from him for the year under appeal on following items, based on incomplete books of accounts: 4. Advances Given to Various persons Rs. 68,00,000/- 5. On account of Excess stock Rs. 1,25,60,000/- 6. On account of bogus expenses Rs. 10,77,000/- Rs. 2,04,37,000/ After completion of survey, assessee completed the books of accounts, duly incorporating all the items noted in loose papers found and impounded and also purchases worth Rs. 82,40,125/-, which though were physically available at assessee's premises, however bills were not entered in the books of account. As the books of accounts were incomplete on the date of survey, the same were completed later on and got audited. Accordingly, in the return of income filed u/s 139(1) of the Act, on 17.10.2016: 1. Additional income of Rs. 68,00,000/- was offered under the head "Income from Business or Profession" [as additional income actually determined on the basis of alleged advances found noted in the loose papers and not recorded in books and accounts on the date of survey]. 2. Cash expenses....
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....us year was computed and in this manner the income of the assessee is increased by the amount of profit of Rs. 53,17,973.33 due to variation in the actual value of stock and as recorded in the books of accounts. Trading Account Pre & Post Survey 01.04.2015 To 19.02.2016 Particulars Before Completion of Books After Completion of Books Particulars Before Completion of Books After Completion of Books Opening Stock 2,14,82,640.00 2,14,82,640.00 Sales 23,39,63,879.98 23,58,21,589.98 Purchases 11,75,81,188.50 12,58,21,313.50 Closing Stock 1,70,65,394.00 2,96,24,738.00 Direct Expenses 6,72,31,118.95 6,80,90,075.15 Gross Profit 4,47,34,326.53 5,00,52,299.33 Total 25,10,29,273.978 26,54,46,327.98 Total 25,10,29,273.978 26,54,46,327.98 Thus to summarize, it is submitted as under: Stock as per Books of Accounts as on Date of Survey 1,70,65,394/- Add: Excess Stock found during the course of survey 1,25,59,344/- Total Value of Closing Stock as on 19.02.2016 (Just after survey) 2,96,24,738/- ....
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.... action of ld. CIT(A) in computing income of assessee on notional basis, without showing any discrepancy in trading results shown by assessee, though no evidence was found in support of income being earned by assessee actually. As all the grounds of appeal, revolve around admission obtained from the assessee during survey, the same are inter-connected and are being dealt with together for the sake of convenience. At the outset, it is submitted that as is evident from order passed by ld. CIT (A), invocation of provisions of section 145(3) was upheld primarily, because no day to day quantitative stock register was maintained by assessee and stock physically available at the time of survey was found in excess to the stock as per books of accounts. In this regard, it is submitted that the assessee has maintained regular books of accounts on day to day basis which are duly audited by a reputed firm of Chartered Accountant who had not pointed out any defect therein. It is an admitted fact that at the time of survey, books of accounts were incomplete and department has impounded certain loose papers containing the purchases bills, sales bills and expenses vouche....
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....rely stating that the books of accounts were not complete at the time of survey and without pointing out any error in the entries incorporated after the survey, it cannot be said that claim made by the assessee on account of said incorporated entries is wrong merely on assumptions and presumptions as has been held in the present case by the ld. Ao as well as by ld. CIT(A). It is further submitted that as per section 145(3), books of accounts can be rejected only if AO records satisfaction that books of accounts maintained by assessee are either incomplete or incorrect, however in the instant case, ld.AO has failed to point out even a single discrepancy in books of accounts completed after the survey and audited by qualified chartered accountants and produced before him for examination. In this regard reliance is placed on the following: 329 ITR 336 CIT v. Forech India Ltd. (Delhi) Undisclosed stock- Books of account incomplete at time of survey- Finding of Commissioner (Appeals) and Tribunal that stock related to import purchases verifiable from customs records- Accounts reconciled later- Finding of fact- Income-tax Act, 1961. 396 ITR 580 -Princi....
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....lear and unambiguous terms stated that certain bills, vouchers etc. pertaining to the period prior to the date of survey were not received from parties and were yet to be recorded in books though the value to this extent has been applied on the goods physically available and valued by the department. Relevant extracts of the statements so recorded are reproduced herein below: During the course of assessment proceedings, it was submitted before ld. AO that there was raw material available with the assessee which was yet to be recorded in the regular books of accounts as some procedural formalities prior to its inclusion in the books were yet to be completed. Since the books of accounts were not complete in all respect as on the date of survey, the stock as per books of accounts as on the date of survey was Rs. 1,70,65,394/- as against stock physically found at Rs. 2,96,24,738/-. The survey team, after comparing the value of the stock physically verified and value of stock recorded as per its books of accounts, worked out the excess stock at Rs. 1,25,59,344/. After completion of survey, during the course of assessment proceedings, assessee supplied copy of revised T....
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....and bills etc and there is no documents regarding the delivery challan or lorry details or any letter or any other document which could have shown that the goods were actually received by the appellant but the bills were not yet received. The claim of the appellant thus is highly improbable and contradictory to records found during survey." In this regard, so far as observation of ld. CIT(A) that there were 47 purchases, however not a single document was found showing actual delivery of goods prior to the date of survey, though bills thereof were received afterwards, is concerned, it is submitted that firstly, such purchases were made from 15 parties (and not 47), and all of them were regular suppliers of assessee. In fact, the purchases which were entered while completing the books of accounts are majorly from those entities with whom the assessee is dealing regularly and such invoices are issued in regular course. However, no effort was made by ld.CIT(A) to even verify such purchases. At this juncture List of inventory of documents found and seized during the course of survey is reproduced as under for ready reference: It is submitted that out of above documents....
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.... In this regard, statements referred by ld.CIT(A) and conclusions drawn are discussed as under: Ld. CIT(A) has concluded that there is no mention regarding stock received but not recorded in books. In this regard, it is submitted that in this question, query was raised if stock of firm was lying somewhere else or stock of assessee is kept somewhere else/sent out of job work. As there was no specific query about stock received but not yet entered in books, no specific reply was given on this aspect. Query was raised that how much stock was available "as per books of accounts" and it was stated by assessee that stock as per books would be around 1.5 to 1.75 crores and on actual verification also, stock as per books was found at Rs. 1,70,65,394/-, which tallied with such statements. However, ld. CIT(A) has stated that after inclusion of Rs. 82,40,125/- (i.e. purchases not recorded in books on the date of survey), stock value comes to Rs. 2,53,05,519/-, which is materially different from statements, In this regard, it is submitted that query was raised regarding stock as per "books" and such purchases was not yet recorded in books at that time and the reply was given ....
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.... the day books of respective day and can be verified from copy of day books impounded during the course of survey. Alter physical receipt of goods in the shape of bale, the same is got opened and measurement is being done. Thereafter the same is tested to check for quality and when the quality is approved the goods inward memo is prepared. On the basis of such goods inward memo, final entry in the books of accounts is made. A chart of total purchases of Rs. 82,40,125/- is enclosed containing the details like date of bill, name of party, bill no., amount, page number of inventory sheet prepared during the survey and its serial number. In support of the claim, we are also enclosing herewith the copies of all the bills of such purchases, copies of the goods delivery memo issued by the transporter at the time of taking the delivery of goods, copies of measurement sheets, copies of goods inspection reports and final goods inward memo prepared, based on which, final entry of purchases and stock records is made by the assessee." This claim was then made before the ld. CIT(A), who also failed to appreciate the facts and completely ignored the fact that after survey, books of accou....
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....s of accounts which has resulted into the increase in % of profits offered for taxation. Whereas ld. CIT(A), without considering this, has computed GP rate of 23.9% by completely ignoring the fact that there is almost 50% rise in turnover and it is not possible for any business to achieve both increase in turnover and a simultaneous jump in profit also. In fact, in normal circumstances, increase in turnover is coupled with decrease in GP rate, whereas assessee has been able to maintain GP rate. It is submitted that Income Tax Act provides two basic mechanisms for computing income, i.e. (i) presumptive taxation, whereby profit is computed by applying a fixed rate to turnover in the event assessee does not maintain proper books of accounts and (ii) profit computed on the basis of regular books of accounts maintained by assessee and duly audited. Whenever, department is not satisfied with the income declared by the assessee on the basis of regular books of accounts, it resorts to make trading addition. However, it is trite law that such addition cannot be arbitrary as has been done by ld.CIT(A) in present case. Ld. CIT(A) has grossly ignored the fact that if....
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....hus a credit for the same deserved to be allowed. It was further submitted that all the payments of such purchases were made through payees account cheque and as stated above, Assessee even furnished confirmation of some of the suppliers duly confirming sale of such goods to assessee and receipt of payments in due course, thus the due credit of such goods should be allowed for working out any excess stock. It was further submitted that as per page No. 18 of the inventory sheets prepared by the survey team which contained the details of goods available in "Grey Outside packed" and the goods are in 'Bale', which further proves the contention of the assessee that certain goods were available with the assessee which was in packed form and was not yet opened. Thus, assessee clarified the reason for difference in value of stock found and recorded in books of accounts along with all the possible documentary evidences in support of such submission. On the other hand, explanation so furnished and documentary evidences filed were brushed aside, without assigning a single reason /discrepancy in the same. It was also submitted that certain expenses were also incurred which re....
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....he basis of admission made by assessee during survey. Legal Submission: Kind attention of the hon'ble bench is also invited to the fact that the statements as recorded during survey are not the statements capable of giving any credence as the same were recorded on oath u/s 133A without there being any circumstances to record such statements on oath and the Hon'ble Supreme Court time and again affirmed such statements to be of no legal consequence. This hon'ble bench in numerous cases has held that no addition could be made on the basis of the admission taken on oath from the assessee in the statements recorded u/s 133A and such orders also get confirmation from the hon'ble jurisdictional high court. Few of the decisions are as under: • Shri Anu Milk Products (P) Ltd., ITA No. 122/JP/12 upheld by Hon'ble High Court in Appeal No. 74/2014 dated 18.09.2017. • Maverick Share Brokers (P) Ltd., ITA No. 701/JP/12, upheld by Hon'ble High Court in Appeal No. 14/2016. • Roshan Lal Lodha, Rajasthan High Court (Appeal No. 185/2014 order dated 03/11/2015) • Ratan Textiles (P) Ltd. ITA No.525-528/JP/2016 As a matter of repetiti....
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.... under appeal. It is submitted that such admission was made by Sh. Avnesh Sharma, without deeply and properly referring to the regular books of accounts and also without fully and properly cross verifying the entries in loose papers with the entries already made in books of accounts which were not complete as on that day (as same was also not possible in the short time and also due the psychological pressure of presence of so many Income Tax officials). It is pertinent to note here that sum of Rs. 2,04,37,000/- (additional income admitted) represented receipts as well as payments as appearing in the loose papers which were alleged as not recorded in the books of accounts without full and proper verification and also the value of excess stock. Such admission was made on the dotted lines as was asked to be admitted as additional income over and above the regular income by the survey officials who recorded the statements (APB 32-67). After the survey, upon receipt of the copies of loose papers and documents so impounded, books of accounts were completed and whatever additional income was noticed on completion of books of accounts, same was offered for taxation. However, ld. AO observe....
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....evidence by itself. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A would not automatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal. Accordingly, finding no substantial question of law arises for consideration, the tax case appeal stands dismissed. Paul Mathews and Sons Vs. CIT (Ker.) 263 ITR 101 The provision also enables the income-tax authority to impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of account for a period not exceeding 15 days. Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may b....
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....disclosure. DCIT v. Pramukh Buildings (2008) 112 ITR 179 (Ahd), It was held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, mere absence of proof of pressure, threat, coercion or inducement is not proved the statement cannot be held as conclusive and additions cannot be made by solely relying on statement or a letter. In view of above, it is submitted that trading addition made by ld.CIT(A) by re- computing gross profit solely on the basis of excess stock worked out during survey, is not in accordance with law and deserves to be deleted. Further, it is a cardinal principle of law that only real income should be taxed and no hypothetical income could be added. In the case of assessee, books of accounts were duly audited by chartered accountant without any adverse remarks and thus did not call for any addition. However, ld .CIT (A) has re computed profit of assessee on his own presumptions without bringing any rebutting documentary evidences, on the basis of assessee has computed excess stock. By doing so, ld. CIT(A) has taxed the income, which was never earned by assessee....
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....e benefit of telescoping solely by alleging that assessee has failed to establish the nexus between cash advances and bogus expenses. In this regard, it is submitted that so far as expenses were treated as bogus, i.e. not incurred actually, cash to that extent was available with assessee throughout the period. Moreover, no instance whatsoever has been brought on record by ld.AO, of utilization of cash so generated elsewhere nor any material was found during the survey indicating the use of such money elsewhere rather these advances favours the contention of the assessee, therefore denial of telescoping merely alleging that cash flow trail was not furnished by assessee is not correct. It is submitted that ld. CIT(A) has relied upon certain case laws related to peak working and has thus concluded that assessee could not provide the linking between cash available and advances made. In this regard, it is submitted that peak credit theory is usually applied to compute additional income in the case assessee has borrowed as well as lent money/ made cash deposits as well as withdrawals whereas in the instant case, cash available with assessee is of its own and though expenses were booked, ....
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....de during survey in a statement it cannot by itself be made the basis for making the addition. Therefore, the addition made by ld. AO and sustained by ld. CIT(A) has no merits and is required to be deleted based on the set of evidence placed on record. 7.1 Without prejudice to that the ld. AR of the assessee submitted that the assessee has not disputed the valuation as well as the value derived at Rs. 1,25,59,344/- being the amount of alleged excess stock found at the time of survey. But while arriving that excess stock, the assessee contended that value of purchase bills for an amount of Rs. 82,40,125/- which were pending to be entered into the accounts required to be reduced from the amount of the excess stock found by the survey team. He demonstrated that if those purchases are considered then the difference as alleged excess stock amounts to Rs. 53,17,973/-. The said amount was considered by the assessee as part of the closing stock and is part of the books of account of the assessee and therefore, without considering that aspects no additions can be made. 7.2 In the assessment proceeding the assessee submitted as to how they have adhered to the disclosure and the said fa....
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....zance of the bills/ vouchers not recorded in the books of accounts, which is a legal right of assessee." 7.3 Even before the ld. CIT(A) the assessee clarified the issue of declaration of excess stock and stated said fact is part of the submission reproduced at page 26 of the order of the ld. CIT(A). The said clarification made by the assessee reads as under ; "The appellant has submitted that as per Trading Account as per finalized books for the period 01.04.2015 to 19.02.2016. the GP is worked out at Rs. 5,00,52,299.33, as against GP Rs. 4,47,34,326/- as per the trading account as on the date of survey prepared on the basis of incomplete books of accounts. In this manner assessee has declared additional income of Rs. 53,17,973.33 (5,00,52,299.33 - 4,47,34,326) on account of excess stock." 7.4 The ld. AR of the assessee submitted that there is reference of these aspect of the matter in the order of the lower authority but there is no finding of the ld. CIT(A) on this issue except analysis of the gross profit and statement recorded at the time of survey. The relevant observation of the ld. CIT(A) while dealing with the issue is reproduced here in below: "As p....
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....ed in books only after survey: 3. That, differential amount of stock, i.e. Rs. 53,17,973/- (viz. 1,25,59,344/- less Rs. 82,40,125/-), stood incorporated in closing stock in Trading account as on the date of survey and (which stood carried over to Trading account for post survey period) and corresponding gross profit was declared by assessee and due taxes were paid on the same; 4. That, although the same facts were before the CIT(A) also however same did not receive proper appreciation while adjudicating the appeal; 5. That, the fact of such incorporation of excess stock in books of accounts was duly examined by auditor conducting tax audit in the case of assessee; 6. That, in order to clarify the above factual position, which was evident from Financial Statements already furnished and further explained in submission made before Id.AO and Ld. CIT(A) (however not considered), assessee as obtained certificate from Auditor duly clarifying the fact of "Incorporation of Excess Stock in regular books", which is being submitted now for your honours kind consideration; 7. That, the certificate from Auditor is being furnished for the first time, h....
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....dated prior to the date of survey and the payment thereof were made to the subject suppliers through banking channels and the balance amount of Rs. 53,17,973/- (being difference of (1,25,59,344.00- 82,40,125.00) was included in the closing stock taken on 18.02.2016 as well as 31.03.2016. Thus the tax audit conducted by us of your firm in accordance with the provisions of section. 44AB of the Income Tax Act, 1961 for the year ended on 31.03.2016 and has issued the tax audit report dated 15.10.2016 which has also been filed with the Income Tax Department. While finalizing the Tax Audit for the year under consideration, Balance Sheet along with Profit & Loss Account and Schedules were prepared and signed by us. Relevant set to the same stood already shared with you long back. This certificate is issued in response to the clarification sought with respect to the closing stock appearing on the Balance Sheet date i.e. 31.03.2016 which is as under: Closing Stock as per Books of Accounts as on 31.03.2016 2,97,90,227/- Add: Excess Stock found during the course of survey and offered for tax 53,17,973/- Total Value of Closing Stock as on 31.03.2016 ....
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....the assessee placed on record all the details of reconciling the disclosure with that of the amount in fact required to be disclosed were placed on record. The ld. AR of the assessee referring to page three of his submission before us submitted that the assessee has not disputed the working and the valuation of stock. The only factual error remained that the purchase to the extent of 82,40,125/- remained to be accounted, so the excess stock so computed is required to be reduced to that extent. For these purchases which remained to be entered in the books, details showing the bill of each party showing name, address and details of the item purchased along with the payment details were placed on record. Considering that aspect of the matter the computation of the actual excess stock found was computed by the assessee and was explained to the ld. AO. The breakup of the excess stock found vis a vis amount offered is explained as under: Stock as per Books of Accounts as on Date of Survey 1,70,65,394/- Add: Excess Stock found during the course of survey 1,25,59,344/- Total Value of Closing Stock as on 19.02.2016 (Just after survey) 2,96,24,738/- Break up of....
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....r. Therefore, the issue raised by the assessee is nothing but an after thought. The ld. DR also submitted that the purpose of the survey to check the records and working of the assessee on real time basis. Based on the contention and verification done by the survey team the assessee in a statement explained the amount to be considered as income and the said disclosure so made was not adhered to by the assessee. If that statement which is recorded after verifying the records and if that statement is not admissible then what is. Legality of the proceeding and the purpose of the proceeding be seen prevailing at that time. Based on that statement he heavily relied upon the disclosure recorded in the statement recorded by the survey team. In the proceedings before the ld. CIT(A) he has incorporated all aspects and given substantial relief to the assessee. As regards the telescoping of bogus expenses with that of the advances declared by the assessee the same cannot be considered in the absence of the any specific evidence or detailed cash flow made available by the assessee. Thus, on that telescoping aspect ld. DR relied upon the finding of the ld. CIT(A), who has rightly denied that be....
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....ee. Whereas the assessee has submitted the daybook and bills for all these purchases and their payment details. All this evidence has not been challenged or controverted. None of the purchases are in cash and the payment details shows all were by banking channel and even in some of the case payment has been done in advance and the bill has been recorded subsequently. 16. We have heard the rival contentions and perused the material placed on record. The fact related to the disputes as emerges from the record is that assessee is a partnership firm and engaged in the manufacturing of garments and home furnishing items for domestic retail chain companies. Assessee is also engaged in export of home furnishing items. A survey action u/s 133A was carried out at the business premises of the assessee. In the proceeding so conducted certain loose papers / documents were found and impounded, and the statements of the partner of the assessee firm, Shri Avnesh Sharma were recorded. In the statement so recorded partner of the firm made surrender of Rs. 2,04,37,000/- consisting of Rs. 68,00,000/- on account of Advances Given to Various persons, Rs. 1,25,60,000/- being the amount found as exces....
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....rst, we are taking up ground no. 1 raised by the assessee challenging the rejection of the books of accounts. The ld. AO in para 4 of his order noted that the assessee has not maintained stock register and the valuation of closing stock is on estimated basis. In the column no. 35(a) and 35(b) in the report of the Chartered Accountant in form no. 3CD while reporting the quantitative details mentioned nil. Based on this observation he invoked the provision of section 145(3) and hold that books of account of the assessee cannot be accepted as compete and correct and therefore, true profit of the assessee's business cannot be accepted. The ld. CIT(A) has confirmed the action of the ld. AO by holding that assessee does not maintained day to day quantitative stock register and the stock found physically was found in excess. 19.1 Before us the ld. AR of the assessee submitted that the survey team physically taken the stock and arrived the working of the excess stock and there is no dispute so far as the computation of that amount of Rs. 1,25,60,000/- is concerned. In the assessment proceeding as it is evident from the order of the ld. AO that the assessee has submitted all the details ....
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.... • When the method of accounting provided in Section 145 (1) has not been regularly followed by the assessee. • When the accounting standards notified under Section 145 (2) have not been regularly followed by the assessee. 19.3 From the observations recorded in the order of the lower authority none of the condition is satisfied and thus same is not evident from the finding of the lower authority. Not only that the bench also observed that when the provision of section 145(3) is to be invoked the assessment is to be completed as per the manner provided in section 144 of the Act and the proper opportunity is required to be given by pointing out the defects in the books of account which we observe that the same is not followed and the order is passed u/s. 143(3) of the Act which is also not correct. We get strength to support our view based on the provision of the Act and decision of the Hon'ble Jurisdiction Rajasthan high court in the case of CIT Vs. Pink City Developers [99 taxmann.com 422 (Rajasthan) ]. In that case the Hon'ble High court held that; 7. The counsel for the respondent contended that the Tribunal while considering the objection of....
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....urvey 1,25,59,344/- Total Value of Closing Stock as on 19.02.2016 (Just after survey) 2,96,24,738/- Break up of Excess Stock found during the course of Survey 1,25,59,344/- Less: Pertaining to pending entries of Purchases 82,40,125/- Excess Stock offered for Tax as part of Closing Stock 53,17,973/- 20.2 During the assessment proceeding ld. AO noted that assessee has not disclosed undisclosed excess stock as income in the return of income filed by the assessee. That is why the assessee was asked to show cause as to why the said amount of Rs. 1,25,60,000/- being the amount of excess stock should not be added to the income of the assessee. The assessee filed a reply explaining the fact that as on the date of survey as stated by the partner that books were not complete and thereafter the survey on verification of the evidences the assessee noted that the purchases worth Rs. 82,40,125/- for which the goods were received by the assessee but the bills remained to be recorded in the books of account of the assessee. The assessee submitted a list of such bills stating the details of the purchases remained to be accounted for. The assessee also submitt....
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....rsion of the assessee at the time of hearing of the appeal from the list of purchases made available at page 84-85. The transaction tested are tabulated herein below: Date of survey 16.02.2016 Name of party Bill at page in paper book & date of invoice Invoice Amount Payment proof at page in paper book Payment made with date Matushree 461 Dt.15.02.2016 411153 545 Rs. 4,11,153 Dt. 15.02.2016 Manglam 394 Dt. 21.1.2016 172589 544 Rs.13,00,000 Dt.12.02.2016 Vikram Traders 435 Dt. 05.02.2016 525868 Submitted vide letter dated 31.05.2024 Rs. 5,25,868 Dt. 12.04.2016 As it is seen that the purchases are made before the date of survey and it is also evident from the chart available at paper book page 84-85 from where we note that all the bills were before the date of survey. The bills were placed on record along with the supporting evidences before the ld. AO. The ld. AO through the ld. DR did not controvert these basic details placed on record and we note that not a single enquiry with any of the parties from whom the purchases claimed to have been made were not made even though all the details placed on record by the assesse....
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....by itself be made the basis for making the addition. Thus, merely the assessee has disclosed the unaccounted excess stock in the statement the purchases which remained to be accounted and subsequently demonstrated with evidence that none of the purchases were in cash and is supported by the relevant evidence, we do not find any single reason not to believe the contention of the assessee. As we also note that all the parties are regular from where the assessee has already made purchases and the transaction are not solitary transactions, all the relevant evidence for purchases made were submitted showing the bill, transport receipt and freight payment etc. Merely this list is of 47 parties and the amount was for Rs. 82,40,125/- based on the documents placed on record that purchases cannot be considered as undisclosed, and the credit of that purchases cannot be denied. 20.5 As regards the balance amount of Rs. 53,17,973/- since the assessee has already based on the affidavit and Chartered Accountant Certificate demonstrated that the same is forming part of the closing stock declared by the assessee. The bench noted that this certificate of CA is of the same CA who has signed the an....
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....57,710/- Balance Rs. 53,17,973/- Amount disclosed in the closing stock as certified by CA Rs. 53,17,973/- Balance addition to be made Nil 20.7 As it is seen that the credit for purchase remained to be accounted for an amount of Rs. 82,40,125/- expenses vouchers of Rs. 8,58,956/- and sales bills of Rs. 18,57,710/- the actual excess stock figure works out at Rs. 53,17,973/- is incorporated in the books as part of the closing stock by the assessee and thereby offered the additional income we hold that there is no separate addition is required to be made in the hands of the assessee. Based on these observations ground no. 1.1 & 1.2 are allowed. 21. Ground no. 1.3, 1.4, 1.5 & 1.6 relate to the addition of Rs. 10,77,000/- being the alleged bogus expenses declared by the partner of the assessee firm at the time of survey. During the assessment proceeding it was contended that the cash generated out of the bogus expenses were utilized to give advances to various persons. The ld. AO did not accept this contention of the assessee as the assessee has not proved the nexus between the amounts of bogus expenses booked and were utilized for the advances given. Based on tha....
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.... instant case, cash available with assessee is of its own and though expenses were booked on paper was in fact not booked and thus, the cash of that expenses was very well available and remained with assessee to advance the money to the job worker. Therefore, the contention that the assessee was having the cash balance to the extent of Rs. 10,77,000/- to make the advances so disclosed and the benefit of the telescoping cannot be denied merely on the ground that there is no cash flow statement made available by the assessee. Based on these observations the ground no. 1.3, 1.4, 1.5 & 1.6 raised by the assessee are allowed. 22. Ground no. 2 raised by the assessee being general in nature does not require our adjudication. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 10/07/2024. ============= Document 1 G.P. Ratio as per results submitted by appellant as As per appellant books of accounts for the year Turnover till 19.02.2016 {A} Gross Profit till 19.02.2016 (X) G.P. Ratio Turnover for the FY (B) Gross Profit (Y) G.P. Ratio 23,58,21,590 5,00,52,299 21.22% 25,89,59,093 5,26,11,541 20.32% ....
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.... correct. Reply to Q These are with reference to several 38, 39 loose papers found during survey including the challans, labour biils, job work, financial results etc. आयॠun-entered The delivery documents, challan, bilti etc. w.r.t. the claimed purchases Rs. 82,40,125 were not found during the Document 5 survey and submission retracting from the survey statement in this regard is made by the appellant to the ld. AO much lateron. It is completely surprising and beyond probabilities that out of 47 such un-entered purchases the documents were not found not even of such w.r.t. one purchases. 41 Reply to Q This is with reference to sale and purchase related documents which were impounded during the survey. The delivery documents, challan, bilti etc. w.r.t. the claimed un-entered purchases Rs. 82,40,125 were not found during the survey and submission retracting from the survey statement in this regard is made by the appellant to the ld. AO much lateron. It is completely surprising and beyond probabilities that out of 47 such un-entered ....
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....ªà¤¾à¤°à¥à¤Ÿà¥€ के हसà¥à¤¤à¤¾à¤•à¥à¤·à¤° (नाम à¤à¤µà¤‚ हैसियत सहित ) Ma 'Rraer of Document 9 पà¥à¤°à¤¶à¥à¤¨ 28 आपके इस Premised में कà¥à¤¯à¤¾ आज की तारीख में किसी अनà¥à¤¯ फरà¥à¤® का Stock या कोई अनà¥à¤¯ सामान Cash आदि है या आपका Stock Cash कà¥à¤¯à¤¾ कही अनà¥à¤¯ जगह पर पड़ा है तो जानकारी दे और किसका पड़ा है बताये? उतà¥à¤¤à¤° 28. हमारे यहां पर à....
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....आपकी लेखा बहियों के अनà¥à¤¸à¤¾à¤° अà¤à¥€ आपके पास कितना सà¥à¤Ÿà¥‰à¤• है बतायें ? उतà¥à¤¤à¤° 30 मेरे हिसाब से करीब 1.5 से 1.75 करोड़ का सà¥à¤Ÿà¥‰à¤• जिसमें कि रॉ मेटैरियल, Finished, WIP कà¥à¤² मिलाकर होगा जिसकी सà¥à¤¥à¤¿à¤¤à¤¿ मैं आपकों लेखा बहियों से सतà¥à¤¯à¤¾à¤ªà¤¿à¤¤ कर दूंगा। Document 12 पà¥à¤°à¤¶à¥à¤¨ -43 उतà¥à¤¤à¤°-43 ....
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....®à¥‹à¤¤à¥€à¤²à¤¾à¤² 600 महावीर 500 घीसूराम 500 इसà¥à¤®à¤¾à¤‡à¤² 600 Total 3600 Total 3200 Due Date 22/02/2016 Due Date 07/03/2016 मैं आपको यह बताना चाहता हूं कि Ann. 9 के Page 4 à¤à¤µà¤‚ उसके Back Side में जो नाम लिखे हैं उनकों उनके सामने लिखे हà¥à¤ Amount या राशि में 3 शूनà¥à¤¯ और लगाने के बाद जो राशि बनती है उतना Advance Job Work के पैटे नकद दिया गया à....
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....ोषित सà¥à¤¤à¥à¤°à¥‹à¤¤à¥‹à¤‚ दà¥à¤µà¤¾à¤°à¤¾ अरà¥à¤œà¤¿à¤¤ की गई आय मानते हà¥à¤ चालू वितीय वरà¥à¤· है। चालू वितà¥à¤¤ वरà¥à¤· की आय मानते हà¥à¤ करारोपण के समरà¥à¤ªà¤¿à¤¤ करता हू और इस पर नियमानà¥à¤¸à¤¾à¤° जो à¤à¥€ Tax Liabilities बनेगी उसकों में 31 मारà¥à¤š से पहले जमा करा दूंगा। Document 13 TONIO SCRIVER IT MAY CONCERN AFFIDAVIT REGARDING SUBMISSION OF ADDITIONAL EVIDENCE I, Subodh Pugalia, Partner of M/s J.C. Hom....