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TMI Blog2012 (11) TMI 618X X X X Extracts X X X X X X X X Extracts X X X X ..... ales as discussed above. The Assessing Officer is directed accordingly. Addition deleted. Issue in favour of assessee - ITA NO. 08 /PN/2011 - - - Dated:- 27-7-2012 - Shri Shailendra Kumar Yadav and Shri R.K. Panda, JJ. Appellant by : Sri Vipin K. Gujrathi Respondent by : Sri Adarsh Kumar Modi, CIT ORDER PER SHAILENDRA KUMAR YADAV, JM: This appeal filed by the assessee is directed against the order of CIT(A) dated 30-03-2010 relating to Block Period 1996-97 to 2002-03 on following grounds : 1. On the facts and in the circumstances of the case and in law, the Hon ble Commissioner of Income Tax (Appeal) erred in confirming addition of Rs. 50,00,000/- as undisclosed income on account of declaration of income during the course of search action on account of shortage of stock of gold without appreciating the facts of the case in the proper perspective. The Hon ble CIT(A) failed to appreciate the fact that no evidence in respect of additional investment in the agricultural land was found during the course of search action. The appellant prays that the disallowance may please be deleted. 2. On the facts and in the circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the unrecorded sales were invested in purchase of agricultural land and instead contended that said investment was in fact shown as an advance of respective members of the family by company. Accordingly in the return filed on 23-07-2002 in response to notice issued u/s.158BC, assessee declared undisclosed income of Rs. 4,01,321/- which included gross profit of Rs. 3,80,518/- on account of unaccounted sales relatable to shortage of gold ornaments. Assessing Officer accepted the contention of the assessee and assessed undisclosed income of Rs. 4,01,321/- as disclosed by assessee in the return filed. Subsequently the CIT (Central), Pune set aside the assessment order passed by the Assessing Officer u/s.158BC dated 25-07-2003 vide his order u/s.263 dated 14-03-2006 on the ground that said order of the Assessing Officer was erroneous and prejudicial to the interest of revenue in so far as Assessing Officer accepted the retraction of statement made u/s.132(4) by Mr. Shantikumar Shah without verifying investment made in purchase of agricultural land at Malad, Tal: Daund, Dist. Pune and development expenses incurred to the tune of Rs. 50,00,000/- which was admitted by Mr. Shantikuma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purchases were accounted for properly but only sales were not accounted for. Therefore in respect of such unaccounted sales only gross profit ought to have been added instead of adding the entire unrecorded sales because investment in agricultural land was found at the time of search. Moreover the development expenses in respect of said land were incurred through crossed cheque by various family members/shareholders which are duly reflected in their respective books. Without prejudice to the above, it was contended that in case the Assessing Officer proceeds to assess the entire undisclosed sale of Rs. 50,00,000/- as undisclosed income same should be reduced by Rs. 4,01,321/- being gross profit already disclosed by assessee on the said unrecorded sales. However, the Assessing Officer refused to accept the retraction of statement made by Director of the company u/s.132(4) at the time of search offering to declared undisclosed investments of Rs.50,00,000/- holding that such retraction is clearly an afterthought as assessee failed to prove by leading evidence that said statement during search was given under threat or coercion. Accordingly retraction made by assessee vide his let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etraction is clearly an afterthought as assessee has failed to prove by cogent reasoning that said statement was given under threat or coercion. The retraction made by assessee vide his letter dated 21-06-2002 was rightly rejected by the Assessing Officer and entire amount of Rs. 50 lakhs declared in statement recorded u/s.132(4) was rightly held as undisclosed income of the assessee for block period under consideration. It was also submitted that CIT(A) was justified to direct the Assessing Officer to assess the gross profit of Rs.4,73,263 separately after giving opportunity of being heard to the assessee. Accordingly the appeal filed by the assessee should be dismissed. 7. After going through rival submissions and material on record, we find that the assessee is a private limited company and is engaged in business of dealing in gold ornaments and jewellery at Baramati, District Pune. A search and seizure action under section 132 of the Income Tax Act, 1961 was conducted at the business premises of the assessee situated at Jayashree Complex, Station Road, Pune on 06-11-2001. During the course of search action physical inventory of gold ornaments was taken by the search party. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Block Period. We have received the copy of the statement of Mr.Shantikumar Shah on or about 20th May 2002. During the course of search action jewelry/gold ornaments found as per physical inventory was 95,069.96 Grams (Net) whereas jewelry/gold ornaments as per books of account were 110870.75 Grams (Net). Thus there was short fall of 15,214.28 grams. Mr.Shantikumar Shah was asked the explanation for shortage of jewelry/gold ornaments. Mr.Shantikumar Shah brought to the notice of search party that there was theft in the shop and jewelry weighing 2,300 grams was stolen and FIR was lodged with the concerned Police Station. Therefore, there was actual shortage of jewelry to the tune of 13,514.28 grams. Mr.Shantikumar Shah in reply to question No.27 of his statement stated that the shortage was due to unrecorded sales that is sale without bills. The total amount of unrecorded sale was arrived at Rs.50,00,000 by applying gold rate of Rs.3,700 per 10 grams to the shortage of 13514.28 grams. Mr.Shantikumar Shah further stated that the amount of unrecorded sale was invested in purchase and development of land at Malad, Tal Daund, Dist. Pune. He further agreed to declare the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. There was no intention to declare Rs.50,00,000 as undisclosed income which may kindly be noted. Your honour is requested to consider the mistake in the statement of Mr.Shantikumar Shah. Therefore, considering the above factual position the company declines to abide by the declaration made the director Mr.Shantikumar Shah and refuses to declare the undisclosed income of Rs.50,00,000 (Rs.Fifty Lacs only) as agreed by Mr.Shantikumar Shah. Kindly take note of the above and oblige. Thanking you, Yours faithfully, For J.B.S Sons Pvt. Ltd. Sd/- Director Subsequently the assessee submitted return of income declaring undisclosed income at Rs. 4,01,321/-. The undisclosed income was unaccounted profit on gold found short at the time of search action treating it as suppressed sale. The Assessing Officer completed assessment at Rs. 4,01,321/- on 25th September 2003 u/s.158BC (c) r.w.s. 143(3) of the I.T. Act, in its first round. 10. The CIT set aside the assessment order vide his Order under section 263 of the I.T. Act dated 14th March 2006 on the ground that the said order was erroneous in so far as it was prejudicial to the interest of revenue. According to CIT t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to examine and verify the issue dealt with by the CIT in his order and pass order afresh. 13. The Assessing Officer initiated the assessment proceedings afresh in pursuance of the directions of the ITAT, Pune, as discussed above. The concern Assessing Officer asked the assessee vide letter dated 5th December 2008 to explain as to why Rs. 50,00,000/- should not be added as undisclosed income. Same was replied vide letter dated 18th December 2008. The assessee also submitted the valuation report of the approved valuer dated 20th December 2008 along with sale instance inter alia, the Government approved valuer Mr. Chintamani T. Ganpule certified the value of the agricultural land for the year 2001 at Rs.34,46,667/-. Same is placed at page 71 of paper book which reads as under: This is to certified that, the undersigned has visited the village Madlad-Patas, Tal Daund, Dist. Pune for valuation of Agricultural land situated in Gat No.678/1 to 678/15, 662, 664, 311 admeasuring 37 Hector and 82 R i.e., 94 Acres and 22 guntha of Shri Shantikumar Jambukumar Shah and others 11, As per Index II 2001 which is enclosed here with the total valuation of Agricultural land for the yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ikumar J Shah 3451575 14. The Assessing Officer did not agree with the contention of the appellant and assessed the undisclosed income at Rs. 50,00,000/- being the sale value of gold jewellery found short. The Assessing Officer held that the gross profit of Rs. 4,73,262/- (Declared by the assessee in the block) is included in the undisclosed income of Rs. 50,00,000/- and hence, a separate addition on this account would amount to double taxation of the undisclosed income. Therefore, he restricted the total addition of Rs. 50,00,000/-. 15. The assessee preferred appeal before the CIT(A) against the order of the Assessing Officer who confirmed the addition of Rs. 50,00,000/- as the undisclosed income. The shortage of gold stock found at the time of search/survey action as compared to the stock as per books of account, the presumption is about unaccounted sale of difference between the actual stock found on physical verification and the stock as per book of accounts. The entire unaccounted sale price should not be treated as an undisclosed income. It is the gross profit embedded in the suppressed or unaccounted sale which should be added. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of Rs.34,51,575/- as indicated above. The Assessing Officer as well as CIT(A) have brushed aside the above mentioned valuation report as well as details of purchase of agricultural land at Malad by various family members as detailed above. 17. The Revenue authorities have heavily relied on the evidentiary value of the statement recorded u/s. 132(4) during the course of search action without appreciating the fact that the statement was given under mistaken belief of law that the suppressed sale is unaccounted/undisclosed income instead of correct legal position that the gross profit arising from unaccounted sale is the undisclosed income. It is a settled position that admission made by the assessee u/s.132(4) is an important piece of evidence but the same is not conclusive. It is open to the assessee who made the admission to show that it is incorrect and the same is given under mistaken belief of fact or law. Statement of Mr. Shantikumar Shah indicate that he was not mentally composed at relevant point of time. There is nothing on record to suggest that said undisclosed income declared on behalf of assessee has nexus with undisclosed investment in the said agricult ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee agreed to treat certain expenditure as a capital expenditure both before ITO and CIT. No evidence was furnished to show that the assessee was coerced to make concession. The allegation of compulsion or coercion cannot be accepted on a mere statement of the assessee. The assessee cannot be allowed to go back on his own stand before the authorities below. The case of the assessee before us is that the statement has been made under mistaken belief of law and fact and there has been wrong interpretation of his admission to mean that the assessee has made declaration of income at Rs. 50,00,000/- being suppressed sales and not the gross profit arising thereof. The assessee before us has tried to discharge the burden that the statement was incorrect since it was given under mistaken belief of the fact and law. The assessee tried to clarify the mistake in the statement immediately on receipt of the same so it can be inferred that assessee has retracted from his statement on realizing the mistake in the statement soon after receiving the same as stated above. 19. We also find that the assessee in assessment proceedings has produced all evidences in respect of investment in agri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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