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TMI Blog2017 (9) TMI 1708X X X X Extracts X X X X X X X X Extracts X X X X ..... essee stock of ₹ 91,44,118/- is explained by the Tribunal. Thus the view taken by the Tribunal is required to be confirmed. The issue is answered in favour of assessee against the Department. - D.B. Income Tax Appeal No. 155/2014 - - - Dated:- 12-9-2017 - Mr. K.S. Jhaveri And Mr. Vijay Kumar Vyas JJ. For the Appellant(s) : Mr. Anil Mehta with Mr. Sammer Sharma For the Respondent(s) : Mr. Naresh Gupta JUDGMENT 1. By way of this appeal, the appellant has challenged the judgment and order of the Tribunal whereby the Tribunal has partly allowed the appeal of the assessee modifying the order of CIT(A) and the AO which has decided against the assessee. 2. While admitting the appeal, this court framed the following substantial questions of law on 07.12.2016:- 1. Whether the order of ITAT is perverse in deleting the addition of ₹ 1,03,44,198/- on account of excess stock and unexplained investment in shop, despite the fact that the said amount was specifically surrendered by the assessee during the course of search in statements recorded u/s 132 (4) of the Act and so also by a letter dated 22.12.2009, and specific finding has been recorded by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs found during the course of search as the assessee does not admit any understatement or concealment of income in the original return filed and the additional income accepted is only to purchases the peace and to avoid prolonged litigation particularly when the assessee is seriously engaged in business and is pressed of time. 4. He further contended that after taking into consideration the above facts additional income was made. The same was confirmed by the CIT(A) holding as under:- On merits it is submitted that the assessee has maintained all the required details and books of accounts were also audited as per the requirement of the I.T. Act, 1961. The books of accounts so maintained in the normal course of business were also tendered for verification before the Ld. AO as and when desired which is also clear from the notices issued u/s 142(1) (APB 51) and its reply dated 24.12.2009 (APB 1-50). Further the confirmation and other details as desired by the ld. AO vide letters dated 18.12.2009 (APB-86) were submitted vide letter dated 22.12.2009 (APB 61-83). The main allegation of the Ld. AO regarding the non acceptance of stock details submitted for the prriod from 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock to be acquired out of undisclosed income and offered it for taxation. At the end, it has also been mentioned that I have given the above statement in my full senses and after due consideration. I have read my statement. I am in full agreement with these statements. Later on, the appellant kept mum for about one and half year. The appellant not only kept mum but even did not file the return of income within the prescribed time u/s 139(1). The A.O. has to issue u/s 142(1) requiring the assessee to file his return of income but appellant failed to file the return of income. In view of the failure on the part of the appellant to file the return of income, the A.O. has issued notice u/s 142(1) dated 19.10.09 requiring the appellant to file various details but appellant still failed to file any detail. One more notice dated 23.10.2009 was issued to file explanation and details in view of the material seized and admission made by the appellant during the course of search but same was also not complied with. It only infers that the appellant was totally avoiding and evading complying with the notices of the A.O. and also completely avoiding and evading filing return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t what he admitted was not correct. The Nagpur Bench of the ITAT in the case of DCIT Vs. Sadhuram Wadhawani reported in 81 TTJ 839 has held that the addition made by the AO was merely based on the statement of the assessee recorded under s. 132(4) and the search continued for a long time without any real purpose indicates that the intention was to obtain disclosure of income, the disclosure cannot be considered as a voluntary disclosure. Assessee having retracted the statement successfully by adducing sufficient corroborating evidence to show that the said statement was not voluntary and that the admission made therein was incorrect. The impugned addition made by the AO on that count is not sustainable. The Jodhpur Bench of ITAT in the case of Ashok Kumar Soni Vs. ACIT reported in 26 TW 135 has held that the admission made in the statement recorded u/s 132(4) cannot be said to have the same value as an admission when it stands retracted with evidence later on. The Hon ble Supreme Court in the case of DIT Vs. Pooranmal and Sons reported in 96 ITR 390 has held that confession cannot be made foundation of the assessment. The Hon ble Apex Court in the case of Pullangode Rubber Products ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search and to support this assertion a written submission has been filed, the relevant portion therefrom is being reproduced as under: These grounds relates to the confirmation of additions of ₹ 1,03,44,198/- [1,02,25,168 + 1,19,030] made to the total income of assessee on account of alleged excess stock of ₹ 92,63,148/- stated found during the course of search and the payment of ₹ 28,76,050/- made towards the purchase of property, as reduced by the amount of additional income of ₹ 17,95,000/- declared by the assessee in its return of income filed for various previous assessment years. In the matter it is submitted that during the course of search operation conducted on 10- 11.01.2008 at the business and residential premises of the assessee and his family members, their statements were recorded. At the time of search total five (5) concerns were run by the assessee and his family members in their proprietorship who all were dealing in moorties and stock of all these firms was kept at premises situated at 1994, Khejdon ka Rasta, Chandpole Bazaar, Jaipur and house at new colony in mixed form. During the course of search the stock p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... letter submitted by the assessee wherein assessee has categorically stated that (AO page 5) without prejudice to the submission made earlier and the material available on record the following facts are submitted for your kind perusal and record. Thus the only course which was legally permissible for the Ld. AO was either to accept the so called admission in the terms indicated by the assessee in such letter or to decide the matter on merits in case the admission given by the assessee is not acceptable in toto. However, the Ld. AO fully rejecting the same insisted upon the levy of penalty therefore the assessee finally filed letter giving entire details on 24.12.2009 i.e. a day after the letter dated 22.12.2009 admitting undisclosed income (APB 30). It may kindly be seen that the Ld. AO did not accept the offer made by the assessee by stating that the assessee is liable to pay the penalty u/s 271AAA on such additional income and without considering the merits in the reconciliation and the evidences submitted by the assessee in respect to the stock available with him as per books of accounts proceeded to complete the assessment by making total addition of ₹ 1,03,44,198/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search the statements of assessee were recorded several times firstly at the time of initiation of search on 10.01.2008 and lastly in the late evening of 11.01.2008 when the search was concluded after repeated physical search and verification by ransacking the entire house and business places of the assessee. From the sequence of the events and seriatim of the statements recorded, it is quite clear that they were continual statements recorded after keeping assessee awake till the conclusion of search from its initiation which is a most torturous act and under these circumstances the statements of a normal human being like assessee could not be said to be free and voluntarily given statements and it is a serious effort of seizing the human right of a reputed citizen of this country. The human right commission of state of Bihar in the case of Rajendra Singh vide its order in file no/ comp 2665/10 has expressed this view which has been affirmed by Hon ble Patna High Court, copies of both the orders are enclosed with submissions. With the above background, it is further submitted as under: 1. That the reply to question No. 25 cannot be seen in isolation only, as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon by the AO in its entirety and hence the assessment is not an agreed assessment - Further an assessment cannot be termed as an agreed assessment since it was not consistent with all the terms and conditions of the offer made by the assessee - The instrument cannot be accepted and rejected simultaneously Whether the principle of estoppel can be applied to statutory right to appeal provided to assessee ? Held No. Further held that estoppel cannot impede the right of appeal of an assessee. 4. That with regard to excess stock found, it is submitted that at the time of search the books of the proprietorship concerns belonging to assessee and his family members were incomplete. After the search the assessee calculated its actual stock position after duly incorporating all the financial affairs and taking into account all the entries and then stock as per books of accounts was worked out at ₹ 1,20,49,893/- as against the total stock physically found with the assessee at ₹ 1,17,30,918/-. The Ld. AO did not accepted the stock details of ₹ 1,20,49,893/- as claimed by the assessee by observing in para 2 at page 4 of the order that the stock items as per assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... am and such difference is only due to the reason that for eg. Ram Mandir (APB 41 S. No. 111 and APB 169 S. No. 577) was counted as 1 item by the search team however it has been counted as 3 items in the sheet submitted by the assessee. Further in the stock sheets submitted by the assessee it has also included a column containing the relevant reference of the items referred in the list prepared by the search party, therefore, credit of the same should be allowed from the alleged excess stock work out by the department. 5. The condition of not imposing the penalty was not put to avoid any further financial burden by the assessee. The condition of non levy of penalty is not a lawfully invalid condition as the assessee has duly complied with all the conditions laid down u/s 271AAA. However the offer was not accepted by the Ld. AO in totality and therefore the assessee was not under obligation to honour the offer so made. 6. With regard to the observations that no physical inventory of stock has ever been prepared by the assessee and certificate given by the auditors that stock at the year-end has been physically taken by the assessee and valued at lower of cost or net realizabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er carefully considering the submission in this regard and perusing the material available on record, we are of the considered opinion that the assessee has been able to explain the difference in stock with sufficient evidences and difference as found during the course of search is not real. At the time of search in the statements recorded, the assessee has categorically stated that the books of accounts of all the firms of the family were incomplete and the stock was lying mixed in the godown. The inventory sheets prepared during the course of search are enclosed at pages 148 to 236 of the assessee s paper book. The detailed working of stock register maintained on day-to-day basis alongwith position of stock in all the proprietary concern of the assessee group as on the date of search as per books of accounts were submitted before the AO vide letter dated 24.12.09 and also tendered the complete books of accounts containing cash book, bank book, ledger for necessary verification. Such a copy of the letter and sheets are enclosed at pages 30 to 79 of assessee s paper book. The AO as well as the Ld. CIT(A) have failed to appreciate these evidences where the total stock in different p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. AR of the assessee submitted that the assessee has admitted additional income of ₹ 15.00 lacs towards the undisclosed investment in the acquisition of the above stated property and against which a sum of ₹ 17,95,000/- have been declared as additional income as a result of search in different assessment years on this account, therefore, there remained no unexplained investment. The Ld. AR has made written submission the extract of which is verbatim as under: As submitted above in grounds of appeal Nos. 1 to 3 that during the search total undisclosed income worked out by the department was ₹ 1,20,20,168/- including a sum of ₹ 28,76,050/- on account of alleged undisclosed investment in the property situated at Axis Mall in the hands of the assessee. The relevant statement of the assessee in this regard is mentioned at page 9 of written submission of the assessee . (APB-15) . From the reading of above statement it is quite clear that in the said property the share of the assessee and his family members was 50% only including 20% share of the assessee in whole property. A sum of ₹ 57,52,100/- was to be paid in cash out of the books and asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears as detailed above in assessee s submission which include a sum of ₹ 10,30,000/- in the assessment year 2008-09. The amount of additional income declared by the assessee has been accepted by the AO and no adverse comment was made in the assessment order. The assessee against the admission of undisclosed investment of ₹ 15,00,000/- in the statements has declared income of ₹ 17,95,000/-, therefore, there is no occasion to make any further addition more particularly when the amount of ₹ 28,76,050/- stated to have been accepted by the other party i.e. Shankar Lal Pandey in his statements recorded u/s 132(4) on 10-11.01.2008 during the course of search but no such statements were ever confronted to the assessee. Since the assessee has admitted the undisclosed investment of ₹ 15,00,000/- in his statements which has been accepted and due tax thereupon has been paid, in the circumstances we direct to delete the addition of ₹ 28,76,050/- made separately in the hands of the assessee over and above the amount already declared. Accordingly we order to delete the entire addition. Thus ground No. 4 of the assessee s appeal is allowed. 8. He has also re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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