2011 (9) TMI 996 - AT - Income Tax

Summary

Issues Involved:
1. Addition on account of under invoicing/under billing of sale of timber.
2. Addition on account of alleged difference in stock.
3. Addition on account of excess cash found at the time of survey.
4. Retraction of the assessee's statement.
5. Charging of interest under sections 234A, 234B, 234C, and 234D.

Detailed Analysis:

1. Addition on Account of Under Invoicing/Under Billing of Sale of Timber:
The assessee contested the addition of Rs. 14,74,016/- upheld by the Commissioner of Income Tax (Appeals) based on the statement of an office assistant, arguing it was arbitrary and unjustified. The survey revealed unaccounted sales and under invoicing, with the office assistant admitting sales were not fully recorded. The Assessing Officer recalculated sales at Rs. 4,36,97,200/- using an average rate of Rs. 800 per cubic foot, while the assessee reported sales of Rs. 2,34,13,736/-. The Tribunal upheld the rejection of the books of account due to discrepancies and directed the Assessing Officer to adopt a sale rate of Rs. 600 per cubic foot, allowing partial relief to the assessee.

2. Addition on Account of Alleged Difference in Stock:
The survey found discrepancies in stock, with the trading account showing a closing stock of Rs. 1.43 crores versus the physical verification of Rs. 1.54 crores. The assessee's explanation that the trading account was not properly prepared was rejected. The CIT (Appeals) upheld the addition of Rs. 10,77,898/-, and the Tribunal confirmed this, finding no merit in the assessee's retraction and emphasizing the discrepancies found during the survey.

3. Addition on Account of Excess Cash Found at the Time of Survey:
The survey revealed excess cash of Rs. 33,40,950/-, with the assessee initially surrendering Rs. 30,40,000/- but later reducing it to Rs. 3,23,999/- in the return of income. The CIT (Appeals) and the Tribunal upheld the addition of Rs. 27,16,001/-, rejecting the assessee's explanation and emphasizing the importance of reconciling cash in business operations. The Tribunal noted the assessee's failure to retract the statement timely and upheld the inclusion of the difference as additional income.

4. Retraction of the Assessee's Statement:
The assessee argued that the retraction was permissible and justified due to the finalization of the books of account. However, the Tribunal noted the absence of timely retraction and found no merit in the assessee's explanation. The Tribunal emphasized the importance of the statement recorded during the survey, supported by the Hon'ble Punjab & Haryana High Court's ruling in Bachittar Singh Vs. CIT, which held that retraction should be at the earliest point of time.

5. Charging of Interest Under Sections 234A, 234B, 234C, and 234D:
The assessee contested the charging of interest under these sections. The Tribunal noted that this issue was consequential and dismissed the ground, along with a general ground raised by the assessee.

Conclusion:
The Tribunal partly allowed the appeal, directing the Assessing Officer to recompute the income based on a revised sale rate and allowing the benefit of telescoping for additions on account of under invoicing/under billing with the stock/cash found during the survey. The additions on account of difference in stock and excess cash were upheld, and the issue of charging interest was dismissed as consequential. The retraction of the assessee's statement was not accepted due to the lack of timely action and substantial evidence found during the survey.