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TMI Blog2016 (8) TMI 601X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to him, accordingly he deleted the addition. It is settled law that statement recorded during the course of survey has no evidentiary value as held by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX Vs. S. KHADER KHAN SON [2013 (6) TMI 305 - SUPREME COURT ]. Non considering the excess stock surrendered in survey as part of book profit U/s 40(b) - Held that:-Assessing Officer can make certain adjustments in the book profit but change of income held is subject to be examined by the appellate authority but as the facts of the case are that the assessee’s books were not closed on the date of survey as such. The Coordinate Bench of Ahmadabad ITAT in the case of Chokshi Hiralal Maganlal vs. DCIT [2011 (1) TMI 125 - ITAT, AHMEDABAD ] has considered this issue where excess stock during the course of survey U/s 133A was found. The ld Assessing Officer considered this disclosure U/s 69 of the Act but the Coordinate Bench held that since the excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but it is part of overall physical stock found, provisions of Section 69B cannot be invoked and assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has erred on facts and in law in confirming the action of the A.O. in restricting the claim of remuneration paid to the partners at ₹ 13,65,321/- as against ₹ 64,36,813/- claimed by the assessee by not considering the excess stock of ₹ 84,52,665/- surrendered in survey as part of book profit for the purpose of section 40(b) and thereby confirming addition of ₹ 50,71,492/-. 2. That the CIT(A) has erred on facts and in law in confirming the action of the A.O. in making addition of ₹ 1,69,161/- on account of alleged unexplained cash found during the course of survey ignoring that the cash found in survey is verifiable from the cash available as per cash book. Firstly we take revenue s appeal. 2. The assessee is in trading of gold and silver jewellery and bullion. Return for the year under consideration was filed on 29/09/2011 declaring total income of ₹ 41,41,208/-. The case was scrutinized U/s 143(3) of the Income Tax Act, 1961 (in short the Act). There was a survey U/s 133A of the Act at the business premises of the assessee on 20/10/2010. The ld Assessing Officer observed that during the course of survey proceedings, at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s furnishing return on estimate basis. The disclosure made by the assessee in the return at ₹ 84,52,665/- against the excess stock found at ₹ 1.25 crores during the survey proceedings. The ld Assessing Officer held that this disclosure was made by one of the main partner namely Shri Harish Kumar Khandelwal after examining the record and loose vouchers found during the course of survey. He further relied on the decision of Hon ble Kerala High Court in the case of V.Kunhambu and Sons Vs CIT 219 ITR 235 to 243 wherein excess stock found during the course of search and statements made therein cannot be held mistakenably of the fact or law and the statement being voluntary. He further relied on the decision of Hon ble Punjab Haryana High Court in the case of Rakesh Mahajan Vs CIT 642 of 2007 (Taxpert) and 214 CTR 218 wherein it has been held that admissions constitute best piece of evidence against own interest. He further relied on the decision of Hon'ble Supreme Court in the case of Surjeet Singh Chhabra Vs Union of India Ors. in SLP (C) No. 14028 of 1996 order dated 25/10/1996. After considering the reply and legal position of statement, he made addition of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lso gave advance tax of ₹ 13,75,000/- through three cheques of Axix bank. He has also drawn the Hon ble ITAT Pune Bench decision on statement recorded during the course of search i.e. decision in the case of HOTEL KIRAN vs. ASSISTANT COMMISSIONER OF INCOME-TAX [2002] 82 ITD 453 (ITAT[Pune]) and argued that it has evidentiary value. There is no difference in statement recorded U/s 133(A) and 132(4) of the Act, as such, there was no coercion and undue influence from the department. There was no force disclosure, therefore, he prayed to uphold the order of the ld Assessing Officer. 5. At the outset, the ld AR of the assessee has reiterated the arguments made before the ld CIT(A). He further submitted that it is a fact on record that in course of survey, the books of accounts were not found. In the absence of books, it was not possible to determine the exact quantity of stock. Therefore, the assessee by assuming excess stock of gold item at 7.564 kgs and silver item at 34.314 kgs offered ₹ 1.25 crores for tax. The AO has made the addition on the basis of this surrender only. He ignored that even the CBDT in Instruction No. 286/2/2003-IT (INV.) dt. 10.03.2003 has observed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the rate of ₹ 20,400/- per kg is valued by the assessee at the rate of ₹ 24,310/- per kg (i.e. at higher rate) and the gold ornaments which was valued at the time of survey at the rate of ₹ 1,560/- per gm is valued by the assessee at the rate of ₹ 1,331/- per gm. Therefore, CIT(A) at Para 4.14 has held that stock is to be valued on the basis of cost or market price whichever is less and thus rightly deleted the entire addition made by AO. In view of above, the order of Ld. CIT(A) on this issue be upheld by dismissing the ground of the department. 6. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the books of account were not found during the course of survey and the admission was made by the partner of excess stock of ₹ 1.25 crores for gold and silver jewellery but he has not written this disclosure in the return itself. The ld Assessing Officer raised this issue during the assessment proceedings, which was replied by the assessee but he has not convinced with the assessee s reply. Again this issue has been considered by the ld CIT(A) and who found that valuation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowed. He further relied Hon'ble Supreme Court decision in the case of Surjeet Singh Chhabra Vs Union of India Ors and made addition of ₹ 50,71,492/-. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that definition of book profit has been provided in explanation 3 of Section 40(b)(i) of the Act, which means net profit has to be computed in the manner laid down in Chapter (iv)(B) as per this Chapter, the income has to be computed u/s 28 to 44DB of the Act. In the present case, the unexplained investment was found in the stock at the time of survey operation and by no stretch of imagination be considered to have been recorded under this provision. Since the surrender of income on account of excess stock, does not fall within the purview of any Section U/s 28 to 44DB of the Act. The unexplained investment in stock is surrendered by the appellant U/s 69 of the Act and falls within the ambit of Chapter VI of the Act, therefore, he had not allowed remuneration to the partners claimed U/s 40(b)(v) of the Act. The assessee s argument that partners have declared remun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,492/- made by him out of the remuneration claimed by the assessee u/s 40(b)(v). 10. At the outset, the ld DR has vehemently supported the order of the ld CIT(A). 11. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that a survey U/s 133A was carried out on 20/10/2010, which means previous year for A.Y. 2011-12 has not ended. The excess stock was found but the assessee return was due to file in October, 2011 U/s 139 of the Act, which was filed on 29/9/2011. The assessee s case was auditable and computation of income was submitted alongwith the return. The assessee claimed remuneration to the partner on the basis of book profit calculated by the assessee U/s 40(b)(v) of the Act. As per explanation-3, the book profit means the net profit as shown in the P L account of the relevant previous year computed in the manner laid down in chapter (IVD) subject to specified adjustments. The ld Assessing Officer can make certain adjustments in the book profit but change of income held is subject to be examined by the appellate authority but as the facts of the case are that the assessee s books were not closed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that actual cash found during the course of survey was ₹ 1,19,161/- not ₹ 1,69,161/-, therefore, it is a factual mistake. During the course of survey, books of account was not found at the business premises but kept with Accountant but during the course of assessment proceedings, the assessee has produced the books of account. As per cash book, cash balance as on 20/10/2010 was ₹ 1,57,046/-, therefore, cash was found as explained but both the authorities have ignored the explanation submitted by the assessee. 12.2. At the outset, the ld DR has vehemently supported the order of the Assessing Officer as no books of account was found at the business premises during the course of survey, which was also not produced before the Assessing Officer at the time of assessment proceedings, therefore, the same may be confirmed. 12.3 We have heard the rival contentions of both the parties and perused the material available on the record. This issue required to be verified from the cash book prepared after date of survey by the assessee with reference to entries made in the cash book and accordingly, we set aside this issue to the Assessing Officer and direct to verify th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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