2019 (9) TMI 149 - AT - Income Tax

Addition made on account of valuation of stock found in the survey proceedings - reliance upon statement by the son of the proprietor who is partner in another partnership firm - evidence to show that the excess stock alleged to have been found at the warehouse premises as surveyed - HELD THAT - In view of the decision of Hon ble Supreme Court in the case of S. Khader Khan sons 2013 (6) TMI 305 - SC ORDER it is to be noted that there cannot be addition made on account of statements recorded under survey proceedings conducted u/s 133A of the Act and therefore the addition made in the present case in the hands of assessee is not maintainable only for the reason that the addition was made by Assessing Officer and confirmed by the CIT(A) is solely based on the statement of Shri Ajoy Kr. Das which was alleged to have been confirmed by the assessee during the course of survey. In the present case there was no evidence to show that the excess stock alleged to have been found at the warehouse premises bearing no.54/14, this belongs to assessee and the addition made in the hands of assessee is not maintainable. Therefore in view of our discussion made hereinabove paras, we delete the addition made by the Assessing Officer and confirmed by the CIT(A). Thus order of CIT(A) is set aside, only ground raised by the assessee is allowed.

Summary

Issues Involved:
1. Justification of the addition made on account of the valuation of stock found during survey proceedings.

Issue-wise Detailed Analysis:

1. Justification of the Addition Made on Account of Valuation of Stock Found During Survey Proceedings:

The primary issue in this appeal is whether the Commissioner of Income Tax (Appeals) [CIT(A)] was justified in confirming the addition made by the Assessing Officer (AO) on account of the valuation of stock found during survey proceedings. The assessee, an individual engaged in the manufacturing of electrical goods, was subjected to a survey which revealed a stock discrepancy of ?85,83,834 and a cash discrepancy of ?3,17,000. The AO added these amounts to the total income of the assessee, alleging suppression of stock and cash discrepancies.

The assessee contended that part of the stock found during the survey did not belong to him but to another concern, M/s Shree Durga Metal Products, a proprietary concern of his son, Shri Ajoy Kr. Das. The premises of the two concerns were situated back-to-back, and it was argued that the stock of the latter was mistakenly counted as belonging to the assessee. However, the CIT(A) did not accept this submission, noting that no material evidence was provided to explain the presence of stock from another business concern on the surveyed premises. The CIT(A) also observed that both the assessee and his son had confirmed during the survey that no stock from any other concern was present on the premises.

The assessee argued that the survey team mistakenly included the stock of M/s Shree Durga Metal Products in the valuation of his stock. Despite providing documentary evidence like rent agreements, trade licenses, and audited accounts, the AO and CIT(A) did not consider these documents. The assessee also pointed out that the statement given by his son, who was not connected with his business, should not have been taken into consideration.

The Tribunal noted that the survey was conducted at premises bearing no.12/5, Musalman Para Lane, Howrah, which was claimed to be the business premises of M/s Shree Durga Metal Products. The Tribunal found that the assessee had provided sufficient documentary evidence to establish that the premises at 56/14, Benaras Road, Howrah, belonged to M/s Shree Durga Metal Products and not to the assessee. The Tribunal also referred to the decision of the Hon’ble High Court of Madras in the case of CIT vs. M/s. S. Khader Khan Son, which held that statements recorded under Section 133A of the Income Tax Act do not have evidentiary value.

The Tribunal concluded that no addition could be made solely based on the statements recorded during the survey, especially when there was no corroborative evidence. The Tribunal held that the addition made by the AO and confirmed by the CIT(A) was not maintainable, as it was based solely on the statement of Shri Ajoy Kr. Das, which was alleged to have been confirmed by the assessee during the survey.

Conclusion:

The Tribunal deleted the addition made by the AO and confirmed by the CIT(A), allowing the appeal of the assessee. The Tribunal emphasized that statements recorded during survey proceedings under Section 133A do not have evidentiary value unless supported by credible evidence. The Tribunal's decision was based on the lack of evidence to prove that the excess stock found at the warehouse belonged to the assessee. The appeal was allowed, and the order of the CIT(A) was set aside.