2002 (1) TMI 265 - AT - Income Tax

Issues Involved:
1. Confirmation of Rs. 1,50,000 addition by the CIT(A).
2. Alleged undue pressure during the survey.
3. Reconciliation of inventories and the validity of the surrender.
4. Arbitrary additions by the AO based on conjectures and surmises.
5. Misappreciation of facts by the CIT(A).

Issue-wise Detailed Analysis:

1. Confirmation of Rs. 1,50,000 Addition by the CIT(A):
The assessee appealed against the CIT(A)'s decision to uphold the addition of Rs. 1,50,000. The CIT(A) had deleted a Rs. 10,000 addition related to alleged asset sales but maintained the Rs. 1,50,000 addition. The CIT(A) justified this by stating that once an assessee surrenders an amount during survey proceedings, they cannot retract it whimsically.

2. Alleged Undue Pressure During the Survey:
The assessee claimed that the Rs. 1,50,000 surrender was made under undue pressure during a survey conducted on 4th Feb., 1992, shortly after the death of a family member. The survey was conducted under distressing conditions, and the surrender was retracted on 13th Feb., 1992, through a letter explaining the undue pressure and the lack of legal grounds for such a disclosure during a survey under s. 133A of the IT Act.

3. Reconciliation of Inventories and the Validity of the Surrender:
The assessee reconciled the inventories from the books of accounts with those drawn during the survey, showing no excess hirable goods. The total value of hirable goods was Rs. 3,29,015.38, which was more than the quantity inventorised by the survey team. The AO did not base the addition on the surrender but on his own working of the reconciled inventories, indicating a tacit acceptance of the retraction.

4. Arbitrary Additions by the AO Based on Conjectures and Surmises:
The AO made two arbitrary additions:
- Rs. 10,000 as alleged profit from the notional sale of goods worth Rs. 1,55,711.
- Rs. 1,44,660 as the alleged difference in the value of goods as on 31st March, 1992, compared to 4th Feb., 1992.

The AO's basis for these additions was deemed conjectural and not supported by evidence. The value of Rs. 3,29,015.38 was prior to depreciation and was accepted in earlier assessments under s. 143(3).

5. Misappreciation of Facts by the CIT(A):
The CIT(A) upheld the AO's order by misappreciating the facts, giving a different basis for the assessment than the AO. The AO had admitted the retraction of the surrender and called for reconciliation of inventories, which the assessee duly provided. The CIT(A) failed to appreciate that the inventory reconciled with the books of accounts, leading to a miscarriage of justice.

Conclusion:
The Tribunal concluded that the assessee's business of hiring out electrical/decorative items, the reconciliation of inventories, and the undue pressure during the survey justified deleting the Rs. 1,50,000 addition. The appeal was allowed, and the addition was ordered to be deleted.

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