2016 (3) TMI 1332 - AT - Income Tax

Unaccounted stock - assessee during survey proceedings had made a surrender of ₹ 2,40,00,000/- - Held that - In the present case we find that there is no material with the department to make additions to the tune of ₹ 2,40,00,000/- whereas the material available was only for ₹ 1,94,28,618/-. The calculations made by learned CIT(A) to arrive at the turnover made by assessee and thus profits estimated by him are not based upon any material and are based upon only on surmises and conjectures - we see merits in the arguments of the learned AR that the additions sustained by learned CIT(A) are not based upon any material - decided in favour of assessee

Issues Involved:
1. Validity of the Commissioner (Appeals) order.
2. Lack of incriminating material to justify the addition of Rs. 45,71,382.
3. Speculative reasoning by CIT(A) to support the addition.
4. Justification of stock estimation and gross profit calculation.

Issue 1: Validity of the Commissioner (Appeals) Order
The assessee challenged the CIT(A)'s order, arguing it was contrary to law and facts. The Tribunal found that the CIT(A) upheld the addition without proper corroborative evidence, relying instead on speculative reasoning. The CIT(A) did not counter the assessee's retraction of the initial surrender, which was made under mental stress. The Tribunal concluded that the CIT(A)'s decision was not justified as it lacked a factual basis.

Issue 2: Lack of Incriminating Material
The assessee contended that no incriminating material was found to justify the addition of Rs. 45,71,382, apart from a statement made under confusion. The Tribunal agreed, noting that the addition was based solely on the survey statement without supporting evidence. The Tribunal emphasized that statements made during surveys under section 133A have no evidentiary value unless corroborated by other material, citing the Supreme Court's ruling in CIT vs. S. Khader Khan Son and other relevant case laws.

Issue 3: Speculative Reasoning by CIT(A)
The CIT(A) used speculative reasoning to justify the addition, suggesting that the assessee's surrender aimed to cover discrepancies in stock and low sales. The Tribunal found this approach unjustified, as it was not supported by concrete evidence. The Tribunal highlighted that the retraction letter from the assessee was not countered by the Revenue, and no further investigation was conducted to substantiate the addition.

Issue 4: Justification of Stock Estimation and Gross Profit Calculation
The CIT(A) estimated sales and gross profit based on the stock inventory found during the survey. The Tribunal found this estimation unjustified, as it was based on assumptions rather than evidence. The Tribunal noted that the assessee's retraction letter, which adjusted the surrender amount to reflect the actual stock found, was not adequately addressed by the Revenue. The Tribunal concluded that the addition of Rs. 45,71,382 lacked corroborative material and was based on conjecture.

Conclusion:
The Tribunal allowed the appeal, ruling that the addition made by the Assessing Officer and upheld by the CIT(A) was not supported by any material evidence. The Tribunal emphasized the importance of corroborative evidence for additions based on survey statements and highlighted the lack of such evidence in this case. The Tribunal's decision was in line with judicial precedents, including the Supreme Court's ruling on the evidentiary value of statements made during surveys.

← Previous Next →