2022 (3) TMI 1183 - AT - Income Tax

Surrender of Income during Survey u/s 133A - Surrender is voluntary or under influence of revenue (coercion) - recovery of cash from debtors by merely relying on the statement during survey action - HELD THAT - The allegation of unrecorded salaries and wages, we have seen is not supported by any document showing that the number of employees found working were more than the actual number as per record nor has any statement of any employee been recorded from where it can be seen that part salary was recorded and part was unrecorded. No such question was put to any of the employees and no evidence has been referred to. Similarly for the expenses of cutting oil etc. the Director does not question the basis of the assertion made in Q. No. 21. It appears that he does not know as he may not have been responsible as argued by ld. AR for the day today functioning of the business, the fact that ultimately it was shown that this stood paid by the other unit by cheque, all this remain unrebutted on record. The retraction is supported by evidence confronted to the A.O. CIT(A) and relied upon before the ITAT remains unrebutted till date, it clearly brings out a case that the surrender was made based on facts as confronted which resulted in the action of surrender. So these facts lead to forming of belief for making the surrender no doubt voluntarily, but admittedly was based on confusion and mis-appreciation of facts. We have taken into consideration the definition of coercion as available under Section 15 and undue influence as available in Section 16 of the Indian Contract Act. We have also taken into consideration the legal position which places the burden on the one who pleads that he has been coerced the onus to demonstrate it is on that person. The assessee possibly uses the terms coercion loosely alongwith pressure and not coercion per se. We are not so convinced with the claims advanced on behalf of the Revenue that there was no pressure whatsoever on the assessee while making the surrender, however, for the purposes of the present proceedings, we have held that the surrender admittedly on facts was made on mistaken belief of facts and law and in the face of the voluminous plethora of evidences countering each of the factors considered relevant by the Revenue for addition, we have found that reliance is only placed upon statement of the Director and the employees. The additions are directed to be deleted.

Issues Involved:
1. Contravention of Section 250(6) of the Income Tax Act, 1961 by CIT(A).
2. Addition of ?2,00,00,000 on account of recovery of cash from debtors.
3. Addition of ?2,40,00,000 on account of alleged unrecorded excess stock.
4. Addition of ?35,70,000 on account of alleged unrecorded wages and salaries.
5. Addition of ?24,30,000 on account of alleged unrecorded expenses for cutting oil and diesel oil.

Issue-Wise Detailed Analysis:

1. Contravention of Section 250(6) of the Income Tax Act, 1961 by CIT(A):
The appellant argued that the CIT(A) erred in passing the order in contravention of Section 250(6) of the Income Tax Act, 1961. The Tribunal noted that the CIT(A) failed to address the detailed explanations and evidences provided by the assessee, thereby not adhering to the principles of judicial discipline and fairness required under Section 250(6).

2. Addition of ?2,00,00,000 on account of recovery of cash from debtors:
The assessee contended that the addition was based solely on a statement made during the survey, which was retracted later. The Tribunal found that the survey team's assertion of unrecorded cash recovery from debtors was not supported by any evidence. The books of accounts were not found defective, and no substantial cash was discovered during the survey. The retraction was supported by detailed reconciliation statements and evidences, which the Revenue failed to rebut. Hence, the addition was deemed unjustified and was deleted.

3. Addition of ?2,40,00,000 on account of alleged unrecorded excess stock:
The Tribunal observed that the survey team's method of stock valuation was arbitrary, involving rough estimates without proper identification and classification. The Director's surrender was made under confusion and mistaken belief of facts. The Tribunal noted that the detailed objections raised by the assessee regarding the stock valuation were not addressed by the Revenue. The Tribunal concluded that the addition was based on incorrect and arbitrary estimates, thus directing its deletion.

4. Addition of ?35,70,000 on account of alleged unrecorded wages and salaries:
The Tribunal found no evidence supporting the claim of unrecorded wages and salaries. The Director's statement during the survey was made under confusion, and the statutory deductions for ESI and PF were regularly paid, indicating proper recording of wages and salaries. The Revenue failed to provide any evidence of unrecorded employees or payments. The Tribunal held that the addition was based on baseless allegations and directed its deletion.

5. Addition of ?24,30,000 on account of alleged unrecorded expenses for cutting oil and diesel oil:
The Tribunal noted that the expenses for cutting oil and diesel oil were paid by cheque from the Mohali unit, which was supported by invoices and bank statements. The Director's inability to recall these payments during the survey was due to confusion and lack of immediate access to records. The Revenue did not rebut the evidences provided by the assessee. The Tribunal concluded that the addition was unjustified and directed its deletion.

Conclusion:
The Tribunal found that the additions made by the Assessing Officer and confirmed by the CIT(A) were based on incorrect and arbitrary estimates, unsupported by any credible evidence. The retraction of the surrender was justified, and the detailed explanations and evidences provided by the assessee remained unrebutted by the Revenue. Consequently, all the additions were directed to be deleted, and the appeal of the assessee was allowed.

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