2023 (4) TMI 1096 - AT - Income Tax

Difference in stock (difference in physical stock on the date of survey and the stock shown in stock register - assessee was maintaining stock register for silver ornaments/jewellery, while no stock register was maintained for Gold Jewellery and Silver Bullion dealt with by the assessee - HELD THAT - There are two parties before ld. CIT(A) and principles of nature justice demand that fair hearing be granted to both the parties. Reference is drawn to Section 250(1) and 250(2) as well Rule 46A of the Income-tax Rules, 1962 - one more opportunity is required to be granted to the assessee to rebut through cogent evidences the valuation report of the registered valuer as to both weighment of the silver ornaments found during survey as also as to the purity of silver ornaments adopted by the registered valuer - it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of excess stock of silver ornaments found during survey vis- -vis stock recorded in stock register, and additions were made based on the incriminating material ( being excess stock) found during survey conducted u/s 133A. The orders of the authorities are set aside on this issue of silver ornaments, and matter so far as additions made based on silver ornaments found at Mirzapur HO during survey, is restored to the AO for denovo assessment on merit, after giving proper and adequate opportunity of being heard to the assessee. Gold jewellery at Mirzapur HO - Assessee claimed that stock as per books of accounts as on 24.02.2012 was 1033.80 gms but no working was submitted. Thus, we are restoring this matter back to the file of the AO for verification of the claim of the assessee on merit, after giving proper and adequate opportunity of being heard to the assessee. We order accordingly. Gold ornaments found during the survey on 24.02.2011 - As based on facts and circumstances of the case and in the interest of justice, the appellate order passed by ld. CIT(A) granting relief to the assessee w.r.t. 850 gms of gold ornaments found during survey allegedly belonging to his wife Mrs. Suman Agrawal is set aside and matter is restored to the file of the AO for fresh adjudication on merit, after providing opportunity of being heard to the assessee. The burden is heavy on assessee as claim is set up that personal jewellery of the wife is kept at business premises and that too without making any entry in the business records. 202 gms of gold ornaments found during survey belonged to one Mrs. Poonam Tripathi who gave the same for valuation purposes to the assessee s employee Mr. Sharad Agrawal on 24.02.2012 at 10.30 AM as the assessee was not available at that time, is merely an afterthought, as during the course of survey proceedings, the assessee never stated that the said gold ornaments weighing 202 gms belonged to Mrs. Poonam Tripathi. Even initial statement of Mr. Sharad Agrawal was recorded on the date of survey on 24.02.2013, but he never disclosed that 202 gms of gold ornaments were received by him on 24.02.2012 itself at 10.30 AM allegedly from Mrs. Poonam Tripathi for valuation purposes and the same is to be excluded while determining the stock of the assessee, it is completely unbelievable. Thus, after considering the entire material on record, we uphold the appellate order of ld. CIT(A) in upholding the addition w.r.t. 202 gms of gold ornaments claimed to be allegedly belonging to Mrs Poonam Tripathi, by holding that this is the undisclosed stock of gold ornaments of the assessee. Thus, the addition made by the AO and as confirmed by ld. CIT(A) is sustained. We order accordingly. Silver Bullion of 6.18 Kgs physically found during survey on 24.02.2012 at business premises of the assessee - As one more opportunity is required to be granted to the assessee to rebut through cogent evidences the valuation report of the registered valuer as to both weighment of the silver ornaments found during survey as also as to the purity of silver ornaments adopted by the registered valuer, as also assessee is required to prove the claim of stock of 5.751 kgs of Silver ingot in stock on date of survey. So far as legal precedents relied upon by the assessee, it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of excess stock of silver bullion(silver ingot) was found during survey vis- -vis stock recorded in stock register, and additions were made based on the incriminating material ( being excess stock) found during survey conducted u/s 133A. The orders of the authorities are set aside on this issue of silver bullion, and matter so far as silver bullion at Mirzapur HO is restored to the AO for denovo assessment, after giving proper and adequate opportunity of being heard to the assessee. Differences in Stock at Varansi B.O. - Explanation of alleged purchase of 177.50 kgs of artificial silver ornaments being Gillet Payal is merely an afterthought by the assessee to wriggle out of tax liability. Thus, we set aside the appellate order passed by ld. CIT(A) and uphold/sustain the addition as was made by the AO. So far as legal precedents relied upon by the assessee, it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of excess stock of silver ornaments was found during survey vis- -vis stock recorded in stock register, and additions were made based on the incriminating material ( being excess stock) found during survey conducted u/s 133A. The orders of the ld. CIT(A) is set aside on this issue of excess silver ornaments and the assessment order is upheld. We order accordingly. Difference of stock of gold jewellery found during Survey on 24.02.2012 at Varanasi, U.P. of 128 gms vis- -vis no stock shown in the stock register - No infirmity in the orders passed by authorities below, and we sustain the appellate order passed by ld. CIT(A) and the addition is sustained, on the touchstone of preponderance of human probabilities as the explanation offered by the assessee is held to be mere after thought to wriggle out of tax liability. So far as legal precedents relied upon by the assessee, it is not the case of surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of stock of gold ornaments was found during survey for which no satisfactory explanation could be given by the assessee, and additions were made based on the incriminating material ( being excess stock) found during survey conducted u/s 133A. The order passed by ld. CIT(A) on this issue is upheld. 4.958 kgs of silver Bullion found during survey u/s 133A on 24.02.2012 at Varanasi BO vis- -vis no stock shown in the stock register - It is incomprehensible to believe that Mr. Shiv Bachan Yadav, Manager of the assessee of Varanasi BO could not disclose these material facts during survey on 24.02.2012 (i.e. one day after alleged receipt of 4.958 kgs of Silver Bullion from Mr. Ghurahu Yadav on 23.02.2012), to the department official who conducted survey as well to the valuer who weighed and valued the silver bullion on 24.02.2012 that this silver bullion belonged to and owned by Mr Ghurahu Yadav. No ledger account of Silver Bullion was found during survey proceedings at Varanasi BO. We do not find any infirmity in the orders passed by authorities below, and we sustain the appellate order passed by ld. CIT(A) and the addition is sustained. So far as legal precedents relied upon by the assessee, it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of stock of silver bullion which was found during survey for which no satisfactory explanation could be given by the assessee, and additions were made based on the incriminating material ( being excess stock) found during survey conducted u/s 133A. The orders of the ld. CIT(A) on this issue is upheld. Unexplained Cash Deposits in Cash book - AO rejected the contentions of the assessee, as the credibility of source of cash in the proprietary concern could not be proved - CIT(A) accepted the contentions of the assessee, as sources of cash receipts as entered in its cash book, were held to be substantiated by ld. CIT(A) - HELD THAT - Both the concerns are proprietary concern and assessment was framed by the AO after including, inter-alia, income of both the concerns. The records were available before the AO during assessment proceedings, and these entries were made prior to the date of survey. Thus, We do not hold infirmity in the appellate order passed by ld. CIT(A) deleting addition with respect to cash received by one proprietary concern of the assessee namely M/s Raj Shree Jewellers from another proprietary concern of the assessee namely M/s Raj Shree Palace. The appellate order passed by ld. CIT(A) deleting addition is confirmed. Excess Cash found During Survey - HELD THAT - As affidavits filed are self serving and are not corroborated with any evidence found during survey. Even, receipts which ought to have been issued at the time of receipt of cash were not issued( no such receipt found during survey) and no evidence whatsoever was found during survey to substantiate the contentions of the assessee, and it is merely an afterthought to wriggle out of tax liability and stand rejected, and we hold that the cash found at Varanasi during survey after excluding as recorded in cash book, is an undisclosed income of the assessee. The appellate order passed by ld. CIT(A) w.r.t. unexplained cash found at Varanasi BO stands confirmed. So far as legal precedents relied upon by the assessee, it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of excess cash was found during survey for which no satisfactory explanation could be given by the assessee, and additions were made based on the incriminating material ( being excess cash) found during survey conducted u/s 133A. The orders of the ld. CIT(A) on this issue is upheld. Rejection of Books of accounts by invoking provisions of Section 145(3) - HELD THAT - We uphold the rejection of books of accounts u/s 145(3) by authorities below, keeping in view facts and circumstances of the case that the books of accounts were not updated as on the date of survey as well that there were discrepancies in the stock as well cash physically found on the date of survey vis- vis as recorded in the records/books of accounts, and we have already confirmed additions on both the account of differences in cash as well stock vide this order. Additions with respect to unexplained Sundry Creditors - HELD THAT - All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make additions u/s. 68 of the Act as an income of the tax-payer. Regarding one creditor Mr. Sati Ram, the balance appearing was the opening balance with no transaction reported for the year under consideration, and claim is made that the said amount is written back and offered for taxation in the next year, but, however no evidence to that effect is filed on record - entire matter regarding unexplained sundry creditor need to be restored back to the AO for fresh adjudication. Addition on account of Unsecured loans raised by assessee - HELD THAT - It is true that the assessee received loans from the aforesaid persons vide cheques which stood credited in his bank account and confirmations were filed, ITR etc. were filed( except in the case of Mr. Gopi Nath Agrawal) but the cheque issued by the lenders is preceded by cash deposit in their bank account, and hence onus is very heavy on the assessee. Thus, in the facts and circumstance of the case and in the interest of justice and in all fairness to both the parties, we are setting aside the appellate order passed by ld. CIT(A) and restore the matter back to the file of the AO for fresh adjudication of this issue on merits. Chargeability of Interest u/s 234B and 234C - HELD THAT - Merely because there is an clerical error in the ITNS 150 will not vitiate the liability of the assessee to pay interest u/s 234B and 234C, which is mandatory and consequential to assessment framed by the AO. Reference is drawn to provisions of Section 292B of the 1961 Act. Thus, we do not find any merit in the contention of the assessee and uphold levy of interest u/s 234B and 234C and dismiss the ground raised by the assessee.

Summary

Issues Involved:

1. Differences in Stock at Mirzapur H.O.
2. Differences in Stock at Varanasi B.O.
3. Cash Deposits in Cash book of Rs. 10,15,000/-
4. Excess Cash found During Survey
5. Rejection of Books of accounts by invoking provisions of Section 145(3).
6. Additions with respect to unexplained Sundry Creditors to the tune of Rs. 34,82,707/-
7. Addition on account of Unsecured loans raised by assessee to the tune of Rs. 28,12,000/-
8. Chargeability of Interest u/s 234B and 234C

Summary:

1. Differences in Stock at Mirzapur H.O.:
The physical stock found during the survey at Mirzapur H.O. was compared with the stock recorded in the stock register, revealing discrepancies in silver items, gold jewelry, and silver bullions. The AO made additions based on these discrepancies, which were partly upheld and partly modified by the CIT(A). The Tribunal remanded the matter back to the AO for fresh adjudication, providing the assessee another opportunity to substantiate the objections regarding weighment and purity of silver items.

2. Differences in Stock at Varanasi B.O.:
The survey at Varanasi B.O. revealed excess stock of silver items, gold jewelry, and silver bullions. The AO made additions based on these discrepancies. The CIT(A) accepted the assessee's explanation for a part of the silver items but upheld the additions for gold jewelry and silver bullions. The Tribunal upheld the CIT(A)'s decision regarding gold jewelry and silver bullions but set aside the deletion of additions for silver items, directing the AO to reassess the matter.

3. Cash Deposits in Cash book of Rs. 10,15,000/-:
The AO added Rs. 10,15,000/- to the income of the assessee, treating it as unexplained cash credits. The CIT(A) deleted the additions, accepting the assessee's explanation that the amounts were advances received from related parties. The Tribunal upheld the deletion of Rs. 3,15,000/- received from a proprietary concern but remanded the matter of Rs. 7,00,000/- received from M/s Shambhoo Nath Agrawal Saraf back to the AO for fresh adjudication.

4. Excess Cash found During Survey:
The AO added Rs. 5,87,424/- to the income of the assessee, treating it as unexplained cash found during the survey. The CIT(A) granted partial relief of Rs. 18,074/- but upheld the remaining addition. The Tribunal remanded the matter back to the AO for verification of the assessee's claim regarding the reconciliation of cash at Mirzapur H.O. and upheld the addition of cash found at Varanasi B.O.

5. Rejection of Books of accounts by invoking provisions of Section 145(3):
The AO rejected the books of accounts of the assessee, citing discrepancies in stock and cash found during the survey. The CIT(A) upheld the rejection of books of accounts. The Tribunal also upheld the rejection of books of accounts by the AO, noting the discrepancies and incomplete records.

6. Additions with respect to unexplained Sundry Creditors to the tune of Rs. 34,82,707/-:
The AO added Rs. 34,82,707/- to the income of the assessee, treating it as unexplained sundry creditors. The CIT(A) deleted the additions, accepting the confirmations filed by the assessee. The Tribunal set aside the appellate order and remanded the matter back to the AO for fresh adjudication, directing the AO to verify the confirmations and other details.

7. Addition on account of Unsecured loans raised by assessee to the tune of Rs. 28,12,000/-:
The AO added Rs. 28,12,000/- to the income of the assessee, treating it as unexplained unsecured loans. The CIT(A) deleted the additions except for Rs. 5,75,000/- from Mr. Gopi Nath Agrawal. The Tribunal set aside the appellate order and remanded the matter back to the AO for fresh adjudication, directing the AO to verify the genuineness of the transactions and the creditworthiness of the lenders.

8. Chargeability of Interest u/s 234B and 234C:
The assessee challenged the chargeability of interest u/s 234B and 234C. The CIT(A) upheld the levy of interest. The Tribunal also upheld the levy of interest, noting that it is mandatory and consequential to the assessment order.