2023 (9) TMI 1033 - AT - Income Tax

Difference of stock of silver - Addition on account of alleged excess stock-in-trade on the date of survey - reliance on statement recorded on oath during the survey u/s 133A of the Act about stock of silver to the tune of 200 Kg of silver - according to the AO, when the physical inventory of silver was being carried out, mob of locals/association of traders came inside the shop and disrupted the survey operation; and in the ruckus created by the unruly mob, the physical inventory couldn t be completed and the papers prepared by them, were torn and resultantly, the survey team had to leave the jewellery premise without completing their assigned task. HELD THAT - As statement u/s 133A of the Act recorded on 06.01.2012 cannot be held to be voluntarily given; and the assessee s explanation shows that he made the statement on estimation which includes both pure impure silver. And since no physical inventory was prepared (due to disturbance) there is no other material in the hands of the AO/Ld. CIT(A) to make/confirm the allegation of excess stock of silver, therefore the addition made of Rs. 1,84,080/- was not warranted. As assessee has explained within 15 days the difference of stock as admitted during survey and reflected in books, which is a plausible view, so assessee s appeal is allowed. Therefore, the addition made by AO cannot be sustained and so directed to be deleted. Appeal of the assessee is allowed.

Summary

Issues involved:
The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs. 1,84,080/- on account of alleged excess stock-in-trade on the date of survey (i.e. on 06.01.2012).

Details of the Judgment:

Issue 1: Alleged excess stock-in-trade
- The survey conducted on 06.01.2012 at the business premises of the assessee revealed discrepancies in the stock of silver declared by the assessee during the survey and as per the books of account.
- The AO added Rs. 1,84,080/- as undisclosed income based on the difference in the stock of silver declared during the survey (200 Kgs) and the stock reflected in the books (113.928 Kgs).
- The assessee contended that the stock declaration during the survey was an estimation and made under mental pressure, and the stock contained both pure and impure silver.
- The AO's action was challenged on the grounds that the statement made during the survey cannot be the sole basis for drawing adverse inferences and making additions.
- The Ld. CIT(A) upheld the AO's decision, citing the voluntary nature of the statement made by the assessee during the survey.
- The Tribunal, considering the explanations provided by the assessee and the lack of physical verification due to the disruption during the survey, held that the addition of excess stock was not warranted.
- The Tribunal distinguished the case from precedents cited by the Revenue, as the assessee explained the discrepancy within 15 days and the statement during the survey was made under pressure and estimation.

Conclusion:
- The Tribunal allowed the appeal of the assessee, directing the deletion of the addition made by the AO.