2018 (7) TMI 66 - AT - Income Tax

Addition made on statement made during survey proceedings - Held that - Revenue has made additions by heavily relying upon the statement made by the partners during survey proceedings without making much effort to corroborate the same with some further evidences which could be found during survey proceedings. At the same time the assessee has also failed to demonstrate any bonafide of the retraction made subsequently and the reasons given in this regard are not much plausible in nature. More of factual in nature and the decision has to be arrived at on the basis of factual matrix and observations made by lower authorities during assessment 3.12 Lacs u/s 41(1) on account of remission of trading liability could not be sustained since Ld. First appellate authority after appreciating the ledger of the concerned entity namely Sterling Lab has noted that the said party had in fact debit balance on the date of survey and the amount was never written off by the assessee in his books of accounts. No infirmity in the stand of first appellate authority in this regard. Addition excess stock found during survey proceedings could also not be sustained since we find that no working whatsoever has been given by the survey team so as to arrive at the impugned additions. The assessee has alleged that the stock was lying at three places which were never visited by the survey team. Out of these three godowns / warehouses it is undisputed fact that the survey team never visited two places and only dispute is with regard to godown situated at Bhiwandi. This very fact supports the stand of the assessee that no effort whatsoever has been made to arrive at actual discrepancy if any between physical stock vis- -vis stocks as per books of accounts. This is further corroborated by the fact that working of discrepancies in the physical stock valuation thereof position as per books of accounts and the method of arriving at the impugned addition could not be adduced / demonstrated by the revenue. Therefore we find no reason to interfere with the stand of Ld. CIT(A) in this regard. Addition of excess cash found during survey proceedings we find that stand of revenue plausible one. It is noted that the addition represent excess cash found at the time of survey proceedings which the partners of the assessee firm also admitted by way of statement during survey. Now merely by way of retraction the aforesaid fact could not be negated. No effort has been made by the assessee to reconcile the actual cash found vis- -vis cash as per books of accounts on the date of survey rather the AR is merely harping on the point that the statement was made by the partners under pressure. Since the complete onus to reconcile the cash balance on the date of survey rest upon assessee which has remained un-discharged. Therefore this addition to the extent of 8, 99, 749/- stand confirmed. FAA stand reversed to that extent. - Decided partly in favour of revenue.

Summary

Issues involved:
Appeal by revenue contesting deletion of additions in quantum assessment order for AY 2008-09.

Analysis:
1. The appeal by the revenue challenges the deletion of certain additions made in the quantum assessment order for Assessment Year 2008-09. The assessment was framed by the Income Tax Officer, Mumbai, wherein the assessee was saddled with additions totaling Rs. 55,90,559. The additions were related to excess cash, investment in furniture & fixture, unaccounted stock, and a liability that ceased to exist.

2. During the assessment year, the assessee, a resident firm engaged in wholesale trading, was subjected to a survey action where discrepancies in stock, cash, investments, and liabilities were found. The partners' statements were recorded during the survey, with one partner retracting the statement after 20 days. The Assessing Officer added the amounts offered during the survey to the income of the assessee, totaling Rs. 62.24 lakhs.

3. The assessee contested the additions before the Commissioner of Income-Tax (Appeals) who deleted all the additions, citing lack of corroborative evidence to sustain them. The revenue appealed this decision.

4. The Departmental Representative argued that the retraction of the statement lacked bona fides, and the assessee failed to provide a plausible explanation for the initial statement made during the survey. The Authorized Representative for Assessee contended that the CIT(A) provided relief after considering the factual matrix and the lack of corroborative material for the initial statement.

5. The Tribunal noted that statements made during survey proceedings must be corroborated and that the assessee should provide bona fide reasons for retraction. In this case, the revenue heavily relied on the partners' statements without additional evidence. The Tribunal found the matter factual and decided based on observations from lower authorities.

6. The Tribunal held that the addition for excess investment in furniture & fixture and the remission of trading liability were not sustainable due to lack of proper working and evidence. Similarly, the addition for excess stock found during the survey was not sustained as discrepancies were not adequately demonstrated.

7. Regarding the excess cash found during the survey, the Tribunal upheld the revenue's stand as the partners admitted the excess cash, and the assessee failed to reconcile the actual cash balance. The revenue's appeal was partly allowed based on the above findings.

This detailed analysis covers the issues involved in the legal judgment, providing a comprehensive overview of the case and the Tribunal's decision on each aspect.