2017 (11) TMI 1900 - AT - Income Tax

Unexplained stock of gold - survey u/s 133A of the Act in the business premises of the assessee - HELD THAT - It is now well settled by the decision of the Hon ble Supreme Court in the case of CIT vs S Khader Khan Son 2013 (6) TMI 305 - SC ORDER that no addition could be made based on statement recorded during survey as the survey powers u/s 133A of the Act does not empower the ITO to examine any person on oath and hence the statement recorded thereon has got no evidentiary value. We find that the assessee had duly reconciled the entire stock of gold found in the showroom at the time of survey with proper facts and records. Hence we have no hesitation in deleting the addition sustained by Ld CIT-A to the tune of ₹ 18,50,000/- and the remaining portion deleted by the ld CIT-A also does not require any interference. Accordingly the grounds raised by the assessee are allowed and that of the revenue are dismissed.

Summary

Issues Involved:
1. Addition towards unexplained stock of gold.

Detailed Analysis:

Issue: Addition towards unexplained stock of gold

Facts of the Case:
The assessee, an individual running a proprietory concern named 'Abir Jewellers', engaged in Jewellery and Money Lending Business, filed a return of income for the assessment year 2009-10. A survey under section 133A of the Income Tax Act, 1961, was conducted on 26.9.2008, revealing 8448.820 grams of gold and 7 kgs of silver at the business premises. The total valuation of the stock was ?1,09,19,490/-. The survey team did not find any stock register, and the assessee acknowledged a stock difference of ?18,50,000/-.

Assessment Proceedings:
The Assessing Officer (AO) issued a notice under section 142(1) of the Act, asking the assessee to produce quantitative details and valuation of stock. The assessee provided details from the Pledged Register and Purchase and Sales Register. The AO observed that the assessee bifurcated the stock into pledged stock and trading stock. The AO disbelieved the existence of pledged stock and treated the entire stock found during the survey as trading stock, resulting in an addition of ?78,65,239/- towards unexplained stock of gold.

First Appellate Proceedings:
The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the existence of pledged stock maintained by the assessee and observed that the survey team had noted the pledged stock in the list of documents inspected. The CIT(A) found that the AO had failed to correlate the stock found during the survey with the pledged stock and that the assessee had reflected the stock under pledged items as stock in trade in the balance sheet. The CIT(A) concluded that the AO's decision to treat all the stocks over ?23 lacs as undisclosed was arbitrary and without basis. The CIT(A) partially upheld the addition to the extent of ?18,50,000/- based on the assessee's admission during the survey and deleted the remaining addition of ?60,15,239/-.

Tribunal's Findings:
The Tribunal noted that the assessee had filed a reconciliation statement for the stock of gold found during the survey, including pledged stock. The Tribunal observed that the assessee had maintained a pledged stock register, which was part of the survey records. The Tribunal found that the CIT(A) had rightly accepted the existence of the money lending business based on pledged stock and that the assessee had duly explained the difference in stock found during the survey. The Tribunal also referred to the decision in the assessee's case for assessment year 2007-08, where the pledged stock of gold received as a gift from the assessee's grandfather was accepted as genuine.

The Tribunal held that the addition based on the statement recorded during the survey could not be sustained, as per the Supreme Court decision in CIT vs S Khader Khan Son, which states that statements recorded during a survey have no evidentiary value. The Tribunal concluded that the assessee had reconciled the entire stock of gold found during the survey with proper facts and records. Therefore, the Tribunal deleted the addition of ?18,50,000/- sustained by the CIT(A) and upheld the deletion of ?60,15,239/-.

Conclusion:
The appeal of the revenue was dismissed, and the appeal of the assessee was allowed. The Tribunal held that no addition could be made based on the statement recorded during the survey, and the assessee had duly explained the stock difference with proper records. The entire addition towards unexplained stock of gold was deleted.

Order Pronounced:
The order was pronounced in the Court on 10.11.2017.