TaxTMI 
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2025 (9) TMI 693
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....No.21/1, Singarathope, Trichy Tamil Nadu-620008. [AAHFA7608P] Asst. Commissioner of Income Tax, Central Circle-1, Trichy ITA No.935/Chny/2024, Assessment Year: 2019-2020 2.0 For the purposes of clarity we would like to take the revenue's above appeal first. The revenue has altogether raised 3 grounds of appeal. Ground of appeal no.1 is general in nature and does not require any specific adjudication. 3.0 The first issue raised by the revenue through ground of appeal no.2 including its sub-grounds is that the Ld. CIT(A) has erred in giving relief to the assessee by adopting 15% as markup price, as against 30% markup taken by the Ld. AO to arrive at physical value of stock found at the time of survey. The revenue has further contended that Ld. CIT(A) has failed to appreciate the evidence found during the survey indicating floor wise sale report and viz-a-viz those recorded in the tally account. The revenue is also aggrieved with the directions of Ld. CIT(A) to adopt 15% GP of unaccounted sales to determined undisclosed income without considering the sworn statement of managing partner. 3.1 Before proceeding further we deem it appropriate to examine the fa....
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....n those recorded in the books of account. The same were also confronted to Shri Hussain Abdul Kareem the managing partner, who in his sworn statement admitted that there appears to be some variations. 3.3 The Ld. AO accordingly concluded that suppression of sales has been admitted by the assessee and issued show cause notice as to why impugned amount of Rs. 5,53,29,831/- be not added to the income as undisclosed income. In response the assessee vide its reply dated 05.02.2021 objected to the proposed addition. The assessee challenged the validity of its sworn statements in the light of decision of Hon'ble Madras High Court in the case of Khader Khan sons 352 ITR 0480 holding that sworn statements recorded u/s 133A do not have any evidentiary value. Reliance was also placed by the assessee upon CBDT instructions bearing no. 286/2/2003 - IT (INV.II) dated 10.03.2003 stipulating, inter-alia, that the statements recorded during survey proceedings have little relevance if not supported by credible evidence on records. The Ld.AO proceeded to distinguish the above decision of Hon'ble Madras High Court supra on facts observing that there was sufficient material on record to esta....
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....ually the physical stock arrives after sometime. It was submitted that this was part of the reason for stock variations and that such variations shall always invariably be present in assessee's business. Similarly goods sent for job work were also not considered for the physical variance. 3.6 The Ld. First Appellate Authority after analyzing the controversy in para 6.2.8 to 6.2.9 of his order concluded that the actual difference in stock comes to Rs. 3,03,60,117/- and not Rs. 5,53,29,831/-. On the issue of adoption of GP rate to the suppressed sales, the Ld. CIT(A), after considering assessee's GP in preceding three years, chose to estimate the same at 15%. Detailed findings have been given in para 6.2.11 of his order. Thus by applying the rate 15% on deficit stock of Rs. 3,03,60,117/-, the Ld. CIT(A) confirmed addition to the extent of Rs. 45,54,017/- as against Rs. 5,53,29,831/- made by the Ld.AO. 3.7 Before us the Ld. Counsel for the assessee reiterated the same arguments taken before the Ld. First Appellate Authority including reliance upon judicial pronouncements qua veracity and admissibility of statements taken during proceeding u/s 133A. In support of its cont....
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.... urged that as the foundation gets knocked off, the consequential super structure of undisclosed income also falls down. 3.10 We have noted that Hon'ble Madras High Court in the Khader Khan Sons has laid the following ratio on the issue of validity of statement under statement 133A. " ... .. 5.3. A power to examine a person on oath is specifically conferred on the authorities only under Section 132(4) of the Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, 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 during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 26....
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....ression "such other materials or information as are available with the Assessing Officer" in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, came up for consideration before this Court in Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220], a Division Bench of this Court, in which one of us was a party (P.P.S.JANARTHANA RAJA, J.), answered the question in the affirmative, against the Revenue and in favour of the assessee, holding that the materials collected during the survey under Section 133A cannot be taken into consideration while determining the undisclosed income in respect of block assessment as per section 158BB, as the same has no evidentiary value. 5.6. Again, when an identical question whether the material found in the course of survey in the premises of the builder could be used in the block assessment of the assessee, came up for consideration before this Division Bench in an unreported case in T.C.(A) No.2620 of 2006, this Court, by order dated 22.11.2006, of course, following the earlier decision of this Court in G.K.Senniappan's case reported in (2006) 284 I....
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.... 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. Commissioner of Income-tax [(2003) 263 I.T.R. 101]; (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 Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220]; (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); (v) Finally, the word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be u....
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.... summons u/s 131 served on 07.02.2019". 3.13 A perusal of the above shows that the Ld.AO has used the word "sworn statement" which gets hit by the decision of Hon'ble Madras High Court and Kerala High Court supra. It is also noted that the Ld. AO has stated that the statement was recorded "....during the course of Survey u/s 133A conducted on 05.02.2019 in response to summons u/s 131 served on 07.02.2019....". Now whereas statement u/s 131 can be recorded independently by an Income Tax Authority, there cannot be any inter-dependence between matter u/s 131 and u/s 133A as has been indicated here. 3.14 This brings us to the next question as to when the basis for determination of undisclosed income arising from survey proceedings, comprising a statement u/s 133A has become redundant in view of decision of Hon'ble Jurisdictional High Court, then whether an assessee would be liable for any delinquency or not. The answer lies in the available circumstantial evidences. In the event of the disclosure of the assessee becoming inadmissible we have to examine the other evidences collected by the Ld. AO to make the impugned addition of variations in stock of Rs. 5,53,29,831/-. The only o....
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....Rs. 42,67,534/-. The value has been ascertained by taking the floor stock value as on 05.02.2019, the godown stock at cost, bale stock and stock in transit at cost, job work stock at cost, purchases from 05.02.2019 to 31.03.2019 etc. This analysis appears to be more scientific for arriving at the figure of actual variations in stock as compared to the estimated and imaginary figures adopted by the Ld. AO. We have also taken note of the fact that while making his estimations the Ld. AO has not rejected the books of accounts of the assessee u/s 145 of the act. Rejection of books of account of the assessee ought to have been a natural corollary to survey findings particularly when they alluded towards variations in stock and consequential profit of the assessee. Thus, we are of the view that the actual variation in the stock of the assessee comes to Rs. 42,67,534/- and not Rs. 5,53,29,831/-. In view of the same the value adopted by the Ld. CIT(A) of confirming addition to the extent of Rs. 45,54,017/- becomes unsatisfactory. Considering assessee's own calculations as above, the value of unaccounted stock ought to have been Rs. 42,67,534/-. The assessee is however liable for taxation o....
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....Ld. First Appellate Authority the assessee had submitted that the impugned cash belong to another family firm namely M/s.Ahmed Fab which had operated till FY-2017-18. Due to complexities in GST taxation ecology, the said firm was closed. It was submitted that receivables, in cash, were continued to be received in AY-2018-19 and that the said cash belonged to M/s. Ahmed Fab supra. In support of its contentions, the assessee filed before Ld. CIT(A) balance sheet of M/s. Ahmed Fab for FY-2017-18 showing closing cash in hand of Rs. 16.85 lakhs app. The Ld. Counsel for the assessee had therefore argued that the cash found during the survey was relatable to the impugned in hand of Rs. 16.85 lakhs app. The Ld. CIT(A) considered and accepted the above arguments qua the source of cash found of Rs. 12.14 lakhs app. However, considering the arguments of the assessee he proceeded to apply the telescoping benefit to the said cash and treated it as part of the overall addition of Rs. 45,54,017/- which was confirmed by him. We have noted in para 3.16 above that the excess stock, at costs, which is relatable to survey is, as per assessee's own admission works out to Rs. 42,67,534/- and the same ha....
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....was made in sales as per books and sales as per floor wise reports. The latter comprised loose excel sheets of paper. Thus it was noted that between the period 02.03.2018 and 31.03.2018 the sales as per books was Rs. 2,51,10,501/- and the same as per floor wise sales reports was Rs. 2,74,10,910/- leading to a difference of Rs. 23,00,409/-. The Ld. AO noted that the suppression of sales for the month of March appeared at 9.16% of the sales recorded in the books of accounts. The authorized officer then proceeded to apply the said deficit percentage rate of 9.16% to the entire books sales of Rs. 33,22,58,141/- and arrived at undisclosed sales of Rs. 3,04,34,845/. The matter was queried to the managing partner who in his sworn statement recorded on 07.02.2019 confirmed the understatement of sales and offered the said amount of Rs. 3,04,34,845/-as his undisclosed income for AY-2018-19. However, the managing partner also alluded towards a technical glitch in his software as a result of which correct sales was not been recorded in the books. The authorized officer had also confronted the assessee with a separate head maintained in the books as "Memo Discount" aggregating to about Rs. 4,91....
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....s in principle related to the floor sales, noted during the course of survey proceedings which should the difference of Rs. 23,00,409/-. The addition is attributable to the sworn statement of the managing partner recorded by the authorized officer during survey as well as alleged absence of any valid documentary justification for the same. As regards the relevance and admissibility of the sworn statement of the managing partner recorded by the authorized officer during survey, we have held, herein above in this order that, in respectful compliance to the order of Madras High Court in the case of Khader & Sons supra the same is inadmissible. Thus, we hold that no addition in this case is sustainable as far as reliance upon any alleged sworn statement of the managing partner is concerned. 9.1 Coming to the next part of the controversy as to the justification for the determination of unaccounted sales by telescoping of sales variation noted viz a viz entire calendar year, we have noted that in the absence of any cogent and credible evidences brought on record by the Ld. AO, the same is also impermissible. Whereas with the availability of cogent evidences, the Ld. AO had the authori....