2021 (5) TMI 651 - AT - Income Tax

Addition based on survey proceeding - Unexplained stock of gold and silver jewellery - undisclosed cash found during the survey - unexplained expenditure - survey action was conducted at the business premises of the assessee firm - whether the statement given during the course of survey u/s. 133A of the Act is a statement on oath having any evidential value ? - HELD THAT - The statement given during the course of survey is not a statement on oath as given u/s. 132(4) of the Act and therefore has no evidentiary value. Reliance should be placed upon the evidence/materials gathered during the course of survey operations while framing the assessment orders. Therefore this finding of Ld. CIT(A) that the assessee was required to honour income surrendered during the course of survey and offer it to tax finds no merit. See S. KHADAR KHAN SONS 2007 (7) TMI 182 - MADRAS HIGH COURT Excess gold jewellery - Complete details of purchase of gold jewellery of 6388.66 grams is available. Complete quantitative details with invoice number and party name are available. Similarly for the sales 6962.74 grams details of sales have been filed. Since the assessee is registered under the Value Added Tax all these details of sales are filed before VAT authorities and the invoice up to the date of survey were examined by the survey team. Thus going through the above details of trading account for the period 01.04.2015 to 15.12.2015, we find that the quantity details filed by the assessee with regard to the opening stock purchase sales and closing stock are correct and are duly supported by material evidence and thus should be accepted in place of the oral statement given by the partner during the course of survey. Therefore the excess stock of gold jewellery at the time of survey was only at 108.732 grams and not the alleged figure of 5770.960 grams. Therefore no addition for excess gold jewellery was called for. Excess silver jewellery - As details of purchase and sales has not been confronted by the revenue authorities at any stage. Sales are subject to VAT, Invoices have been issued which were verified during survey and assessment proceedings. Under these facts in our considered view the Evidence needs to be given preference to the 'oral' statement given by the partner of the firm. Therefore silver jewellery as per the books has rightly been computed at 207.585 gram and therefore the excess stock of silver jewellery is only 28.91 kg (Physical stock 236.500 kg less books stock 207.585 kg). Since the value of excess stock of silver jewellery has already been offered to tax in the return of income filed u/s. 139 of the Act no addition was called for unexplained silver jewellery at ₹ 20,46,965/- by the Ld. A.O. and the same is deleted. In the result addition for excess gold jewellery and silver jewellery Excess cash - On perusal of paper book relating to the inventory of cash found at the assessee's business premises the document shows that total cash found at the time of survey was ₹ 4,58,610/- only. This inventory of cash found is signed by the Officer present during the course of survey. Thus it remains undisputed that physical cash found at the time of survey was at ₹ 4,58,610/- only and the cash as per the books has also at ₹ 4,58,610/-. Ld. Departmental Representative could not controvert this fact by placing any contrary material. Since there is no excess cash as on the date of survey we hereby delete the addition made of excess cash of ₹ 3,75,510/- made by the Ld. A.O. Thus Ground No. 3 of the assessee's appeal is allowed. Unexplained expenditure - HELD THAT - We observe that unexplained expenditure was part of the surrender made during the course of survey. Admittedly no incriminating material was found with regard to any unaccounted expenditure nor the Ld. A.O. has referred any such incriminating material in the assessment order. Ld. CIT(A) has also not referred to any such material found during the course of survey showing any proof of unaccounted expenditure not accounted for in the books. Under these given facts it is blatant that the alleged addition of ₹ 1,00,145/- for unexplained expenditure u/s. 69C is based merely on the statement made during the course of survey which has no evidentiary value and thus this addition could not stand for and the same is deleted. Thus Ground No. 4 of the assessee is allowed.

Summary

Issues Involved:

1. Validity of assessment order.
2. Addition of ?1,59,19,451/- for unexplained stock of gold and silver jewellery.
3. Addition of ?3,75,510/- for undisclosed cash found during the survey.
4. Addition of ?1,00,145/- for unexplained expenditure.
5. Levy of interest under sections 234A, 234B & 234C of the Income Tax Act.
6. Initiation of penalty proceedings under section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment Order:

The assessee challenged the validity of the assessment order, claiming it was unjust, bad in law, and without jurisdiction. However, the Tribunal found no merit in this ground as no specific submissions were made by the assessee. Therefore, this ground was dismissed as not pressed.

2. Addition of ?1,59,19,451/- for Unexplained Stock of Gold and Silver Jewellery:

The Tribunal examined the addition made by the Assessing Officer (AO) for the alleged excess stock of gold and silver jewellery. The assessee argued that the surrender of ?1,75,00,000/- during the survey was made under stress and was later retracted. The correct stock of gold and silver jewellery as per the books was provided, supported by detailed trading accounts, purchase and sales records, and VAT returns.

The Tribunal noted that the statement given during the survey under section 133A of the Income Tax Act is not on oath and has no evidentiary value. The Tribunal relied on various judicial precedents, including the Supreme Court's decision in CIT vs. S. Khadar Khan Son, which held that statements recorded during surveys do not have conclusive evidentiary value.

Upon examining the records, the Tribunal found that the physical stock of gold jewellery was 20,689.200 grams, and the correct stock as per the books was 20,580.468 grams, resulting in an excess of only 108.732 grams, which was already offered to tax. Similarly, for silver jewellery, the physical stock was 236.500 kg, and the correct stock as per the books was 207.585 kg, resulting in an excess of 28.915 kg, which was also offered to tax.

Therefore, the Tribunal concluded that no addition was warranted for the alleged unexplained stock of gold and silver jewellery, and the addition of ?1,59,19,451/- was deleted.

3. Addition of ?3,75,510/- for Undisclosed Cash Found During the Survey:

The Tribunal examined the addition made for the alleged excess cash found during the survey. The AO claimed that the physical cash found was ?8,34,120/-, resulting in an excess of ?3,75,510/- over the cash as per the books (?4,58,610/-). However, the assessee provided evidence that the physical cash found was ?4,58,610/-, as recorded in the inventory signed by the survey officer.

The Tribunal found that the physical cash matched the cash as per the books, and there was no excess cash. Therefore, the addition of ?3,75,510/- was deleted.

4. Addition of ?1,00,145/- for Unexplained Expenditure:

The Tribunal examined the addition made for unexplained expenditure. The AO made this addition based on the surrender made during the survey. However, no incriminating material was found to support the alleged unexplained expenditure.

The Tribunal noted that the addition was solely based on the statement made during the survey, which has no evidentiary value. Therefore, the addition of ?1,00,145/- was deleted.

5. Levy of Interest Under Sections 234A, 234B & 234C:

The Tribunal noted that this ground was consequential in nature and did not require separate adjudication.

6. Initiation of Penalty Proceedings Under Section 271(1)(c):

The Tribunal noted that this ground was also consequential in nature and did not require separate adjudication.

Conclusion:

The appeal of the assessee was partly allowed. The Tribunal deleted the additions made for unexplained stock of gold and silver jewellery, undisclosed cash, and unexplained expenditure, as these were not supported by any credible evidence. The grounds related to the levy of interest and initiation of penalty proceedings were noted as consequential and did not require separate adjudication.