2012 (10) TMI 87 - AT - Income Tax

Addition on account of unaccounted sales During survey u/s 133A - Out of books sales was detected - Assessee admit during survey unaccounted income - Held that - Undisclosed sales represented the gross sales & gross sales cannot be subjected to tax. As the statement recorded u/s. 133A has no evidentiary value and same cannot be sole basis of addition. Therefore sales after deducting profit element are subject to addition. Appeal decide in favour of assessee Addition on account of suppression of stock During survey u/s 133A AO found difference in stock as per the books of account and in the trading accounts - Assessee claims that the some quantity of gold out of stock was received on jangad (delivery for sale on approval) basis for sale - Held that - As the statement accepted the fact that certain gold ornaments were sent to the assessee firm on Jangad basis for sale was submit by the authorized signatory. Therefore to the extent of gold ornaments received by the assessee on Jangad basis is deleted from addition. Appeal partly allowed. Disallowance of unexplained expenditure u/s 69C Assessee is in jewelry business AO made addition because assessee failed to explain labour expense - Assessee has submitted the wage register in which laborers put their signature Held that - Merely production of the wage register is not sufficient. Assessee failed to corroborate from other evidences as what kind of work was got done and also it was not acceptable that nobody would in for precious metal as gold to any person whose permanent address is not known. Therefore appeal decides in favour of revenue.

Summary

Issues Involved:
1. Addition on account of undisclosed sales.
2. Addition on account of stock suppression.
3. Disallowance of labor expenses.
4. Penalty initiation under sections 271-B and 271(1)(c).

Issue-wise Detailed Analysis:

1. Addition on Account of Undisclosed Sales:
The assessee challenged the confirmation of an addition of Rs.8,54,286 made by the Assessing Officer based on a statement recorded during a survey under section 133A of the Income-tax Act, 1961. The assessee argued that the statement, obtained under duress, lacked evidentiary value and could not be the sole basis for the addition. The assessee cited various judgments to support their contention that statements recorded under section 133A are not conclusive evidence. The Tribunal found that the lower authorities did not consider the assessee's argument regarding the non-evidentiary value of the statement. The Tribunal deleted the addition, noting the absence of material evidence to prove that Rs.8,54,286 was net profit from undisclosed sales.

2. Addition on Account of Stock Suppression:
The assessee disputed the addition of Rs.24,36,693 for unexplained investments in stocks, claiming that part of the stock was received on a Jangad basis from M/s. Shakti Exports. The Commissioner of Income-tax (Appeals) [CIT(A)] partially accepted the assessee's claim, reducing the addition by the value of 4.280 kg of gold ornaments received on a Jangad basis. The Tribunal upheld the CIT(A)'s decision, finding no defect in the reasoning that the stock received on a Jangad basis was substantiated by sufficient proof, including impounded documents and statements from M/s. Shakti Exports.

3. Disallowance of Labor Expenses:
The assessee contested the addition of Rs.4,07,134 for disallowed labor expenses, arguing that the wage register was submitted as evidence. The Tribunal noted that the assessee failed to provide corroborative evidence, such as the addresses and confirmations from the laborers. The Tribunal agreed with the lower authorities, stating that merely producing a wage register without further substantiation was insufficient, especially given the nature of the business involving precious metals. The addition was thus confirmed.

4. Penalty Initiation under Sections 271-B and 271(1)(c):
The assessee also appealed against the initiation of penalty proceedings under sections 271-B and 271(1)(c). However, the Tribunal did not provide a detailed analysis or ruling on this issue within the provided text, focusing instead on the substantive additions and disallowances.

Revenue's Appeal:
The Revenue appealed against the deletion of Rs.20,97,200 out of the total addition of Rs.24,36,693 for unexplained investment in stock. The Tribunal found that the CIT(A) had correctly considered the evidence of stock received on a Jangad basis, which was impounded during the survey. The Tribunal dismissed the Revenue's appeal, confirming the CIT(A)'s decision to reduce the addition based on the substantiated Jangad transactions.

Conclusion:
The Tribunal partly allowed the assessee's appeal by deleting the addition for undisclosed sales but upheld the additions for stock suppression (partially) and labor expenses. The Revenue's appeal was dismissed, confirming the CIT(A)'s partial relief to the assessee regarding the stock suppression.