9911796707
TMI Blog2011 (3) TMI 1791X X X X Extracts X X X X X X X X Extracts X X X X ..... er all the submission made by the assessee and accept the book results of the assessee. The Ld. CIT(A) ought to have considered the legal position that the statement recorded during survey has no evidentiary value. 3 The learned CIT(A) erred at law and on facts in confirming the addition of ₹ 23,614/- u/s 69C of the IT Act on account of difference in the closing balance as per the assessee s books and M/s Unicorn Corporation. 4 The assessee reserves right to add, amend or alter any or all grounds of appeal on or before the date of hearing of appeal. 2. Adverting first to ground nos.1 and 2 in the appeal, facts, in brief, as per relevant orders are that return declaring income of ₹ 15,58,730/- filed on 31-10-2002 by the assessee, engaged in selling plywood and allied items, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act,1961[hereinafter referred to as the Act ] on 11-12-2002 . In this case a survey u/s 133A of the Act was conducted on 31.1.2002,when the assessee stated that books of accounts of the assessee reflected stock of ₹ 4,99,032/- on the date of survey while the inventory of physical s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harges. The closing quantity is arrived at on the basis of FIFO method, and valued on cost basis as explained above. 2.1. On perusal of trading account prior to the date of survey and after the date of survey ,without including the unaccounted stock found during the survey and after considering the said unaccounted stock as detailed on page 3 4 of the assessment order , the AO observed that the assessee had shown gross profit[GP] @ 73.45% for the period prior to survey while for the post survey period, loss of ₹ 6,02,012/- was arrived at, yielding negative GP @ 48.06%. The GP for the whole year worked out at 40.38%. In view of negative GP in the post survey period, the assessee was asked to explain the reasons for abnormal results. The assessee vide letter dated 08-03-2004 submitted that (a) Sales made during the period 01-02-2002 to compared to rates quoted in survey on physical stock valuation as on 3101-2002 (b) Sales were made at lower rate due to recession in the market and there was a slack season due to riots taken place in Gujarat on 28-02-2002 onwards for two months (c) Assessee has to make payments of Rs,9,38,133 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchase value Sales value Purchase value Sales value Ply 12 mm ₹ 8/- ₹ 9.5/- ₹ 8/- ₹ 9.5/- Ply 4 mm ₹ 4/- ₹ 4.5/- ₹ 4/- ₹ 4.5/- Sun mica ₹ 140/- ₹ 175/- ₹ 140/- ₹ 175/- Ply 6 mm ₹ 6.5/- ₹ 7.5/- ₹ 6.5/- ₹ 7.50/- Ply 8 mm ₹ 7.5/- ₹ 9/- ₹ 7.5/- ₹ 9/- Ply 18 mm ₹ 10/- ₹ 12/- ₹ 15/- ₹ 17/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ference to above, We have to say as under. a) Excess stock found is of ₹ 20,09,808/- and not ₹ 21,71,063/- as recasted one. b) The above excess stock is accumulated over a no. of years and not in the current year itself. c) The excess stock of ₹ 20,09,828/- is offered for income by way disclosure and current year Return of Income is field for ₹ 15,83,726/- and the tax of ₹ 4,29,031/- is paid in due course along with the interest of ₹ 52,380/-. d) There will be duplication of Income due to inclusion of above as this is included in stock by way of discloser and in subsequent sales during the post survey periods. However, the AO did not accept the submissions of the assessee and in the absence of any satisfactory explanation in regard to the nature and source of the income invested in the excess stock found during the course of the survey, the AO brought to tax the said amount of ₹ 21,71,063/- u/s 69 of the Act. 3. On appeal, the learned CIT(A) concluded in the following terms:- At the time of the hearing of appeal, the appellant basically reiterated the submissions made b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold that the A.O. is quite justified in rejecting the books of the appellant and reworking the trading account based on the G.P. ratio of 8.67% accepted by the appellant in her submissions made before the A.O. Since, no proper explanation has been given for such drastic arbitrary fall in the G.P. ratio to (-) 48.08%, therefore, the addition made by the A.O. of ₹ 21,71,063/- u/s. 69 deserves to be sustained. However, as regarding the working of net profit at ₹ 1,74,215/- after excluding the stock difference, the A.O. was not reasonable in adopting a G.P. ratio of 10% for the post survey period as against (-)48.08% declared by the appellant on account of post Godhra riots and for other reasons given by the appellant. In the circumstances and in the interest of justice, the A.O. is directed to adopt the G.P. 8.67% for the post survey period also and rework the trading addition accordingly. 4. The assessee is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned AR on behalf of the assessee while relying upon a CBDT circular dated.10.3.2003 reiterated their submissions before the learned CIT(A) and further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id the tax on the unaccounted income. We find that the AO, while making additions on account of extra stock found during the course of survey has not placed reliance only on the statement of recorded during the course of survey . It was only in the light of statement of the assessee recorded on oath on 4.2.2002 , wherein the assessee herself admitted in reply to question no. 5 that the closing stock as per books worked out to ₹ 4,99,032/- while physical stock was ₹ 25,08,860/- that she admitted the said amount on account of excess stock as her unaccounted income of the current year and offered to pay tax thereon. Even during the course of assessment proceedings vide letter dated 4.2.2005, the assessee unequivocally reiterated that the amount of ₹ 20,09,828/- is offered to tax by way of disclosure of income for the year under consideration and tax of ₹ 4,29,031/- had been paid thereon. It may worth be mentioning that the ld. AR appearing before us did not dispute the discrepancies in the books of accounts pointed out by the lower authorities nor even disputed the findings of the lower authorities in relation to rejection of books of accounts. In these circums ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollected can be used for additions. While delivering the judgment the Hon'ble apex Court was cautious about the fact that material collected is coming out from illegal search and yet material collected was allowed to be used by the AO. The same analogy applies here for the reason that so far as the procedure undertaken by the AO is concerned, it remains same in regard to use of material either collected in search or in survey. The inventory of stock was prepared by the Inspector during the course of illegal survey and material was then used by the AO for making additions. Hence in those circumstances, we are of the opinion that in view of the two judgments of the Hon'ble apex Court, Revenue was entitled to use material collected during the course of illegal survey. 5.2 Similarly, where a survey was conducted in the premises of the assessee, a medical practitioner, and a statement was recorded from him, in which the assessee surrendered additional income and pursuant to the same, the AO reopened the assessment, but during the course of which the assessee retracted the additional income offered and contended that the statement was the result of duress, which was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permitted the Departmental Authorities to believe the declaration made by the assessee on 4.2.2002 in her statement on oath to be true and induced them to act upon such belief. During the course of assessment proceedings, the factum of unaccounted income due to excess stock found during the course of survey was again admitted. It is not open to the assessee to deny the truth of the facts stated in the said declaration nor the said declaration has been retracted at any stage. This is based on the maxim, allegans contraria non est audiendus (a person alleging contradictory facts should not be heard). In Pickard v. Sears [1837] 6 Ad EI 469, 474, it has been held that where a person by his words or conduct wilfully causes another to believe the existence of a certain state of thing, and induces him to act on that belief, so as to alter his own previous position, the former is precluded from averring against the latter a different state of things as existing at the same time. In the celebrated book titled 'Administrative Law' by Sir William Wade (Eighth Edition by Wade and Forsyth-Oxford University Press), the legal position has been explained at p. 242 as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... they did not proceed with further investigations in order to locate the whereabouts of the unaccounted stock. If the assessee had not made the said statement, the Departmental Authorities could have continued their investigations and investigated the entire matter. By making the disclosure of additional income , which she offered for taxation on oath, the assessee stopped the entire process of further investigation as the Department accepted the disclosure and closed further investigation on the said issue. Having made a voluntary declaration on oath and induced the Departmental Authorities to act upon the same at the time of survey, the assessee cannot be permitted to turn around later and deny the truth of the aforesaid declarations or the representations made therein. Section 115 of the Evidence Act prevents him from doing so. Further, declarations falling under section 115 of the Evidence Act do not require any corroboration. The plea of the ld. AR now in relying upon CBDT circular dated 10.3.2003 is baseless, when the aforesaid facts stare in the face of the assessee , who in her letter dated 4.2.2005 again voluntarily reaffirmed that she had unaccounted stock and accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or during the course of any proceedings before them then we think such statements, admissions and confessions are binding and cannot be retracted, unless and until, we repeat, unless and until it is proved by legally acceptable evidence that such admission, confession or oath statement was involuntary or tendered under coercion or duress. No such circumstances existed or proved to have existed. In saying so we are supported by the observation of their Lordships of the Supreme Court in the case of Surjeet Singh Chhabra v. Union of India [1997] 1 SCC 508. 5.8 Now adverting to decision in P.K.Noorjahan(supra) relied upon by the ld. AR , in that case facts were that the assessee a Muslim lady, aged about 20 years during the previous year relevant to the assessment year 1968-69 on November 15, 1967, purchased 16 cents of land in Ernakulam and the amount spent by her, inclusive of stamp and registration charges, for this purchase was ₹ 34,628. On November 27, 1968, she purchased another 12 cents of land at Ernakulam and the total investment for this purchase was ₹ 25,902. The explanation of the assessee regarding the source of the purchase money for these investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in refusing to make an addition of the value of the investments to the income of the assessee. Hon ble Apex Court upheld the view of the Hon ble High Court. The ld. AR appearing before us did not explain as to how this decision is of any help to the assessee, especially when the assessee, in the instant case, on being questioned in the light of material found during the course of survey, offered the amount attributable to unaccounted stock found during the survey to tax in her statement recorded only after the survey and subsequently paid tax thereon. There is nothing to suggest that at any stage, this offer has been retracted. In these circumstances, we are of the opinion that the reliance on the aforesaid decision, rendered on altogether different facts, is totally misplaced. 5.81 Moreover, the ld. AR did not explain as to which irrelevant fact has been considered by the AO or the ld. CIT(A) nor demonstrated as to how the decision referred to in ACIT vs. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) is of any assistance to the assessee. Considering the conduct of the assessee in offering the unaccounted stock to tax after the survey and subsequently paying the tax thereon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e opinion that nothing prevented the assessee to produce her husband on 4.2.2002 ,when she offered the unaccounted stock as her income to tax or even subsequently if she so desired. The onus was on the assessee to explain the unaccounted stock. As already observed, when queried, she offered the amount to tax . This statement of hers is coupled with the fact that not an iota of evidence has been placed before us so as to enable us to take a different view in the matter. In the absence of any basis, we have no hesitation in upholding the findings of the ld. CIT(A) in confirming the addition of ₹ 21,71,063/-. This view of ours also finds support from the decision in Sanjeev Kumar Pandhi(supra) as also another decision dated 21.1.2011 of TM in ACIT vs. Ratan Industries n ITA no.95/Agra/2005,wherein in similar circumstances, addition towards unaccounted stock u/s 69 of the Act has been upheld. In view of the foregoing, we do not find any merit in ground no.2 in this appeal. 6. Now adverting to ground no.1 relating to addition toward low GP in the post survey period , the ld. AR did not even whisper before us regarding rejection of book results . Undisputedly, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn estimate ignoring the books of account, without giving any reasons. Even though there was substantial decline in GP vis- -vis trading results of the pre survey period, there is nothing on records to suggest that the assessee explained this substantial fall in GP with any cogent evidence. It may be observed under the circumstances, it is difficult to catalogue various types of defects in the account books of an assessee which may render rejection of accounts on the ground that accounts are not complete and from which the correct profit cannot be deduced. Whether presence or absence of stock register is material or not, would depend upon the type of business. In the case under consideration, undisputedly, substantial stock was found to be unaccounted while no stock register or quantitative records were found to be maintained. Consequently, the closing stock was not amenable to verification. It is true that absence of stock register or cash memos in a given situation may not per se lead to an inference that accounts are false or incomplete. However, where the absence of stock register, etc. is coupled with other factors like excess stock having been found during the course of surve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence has been placed before the ld. CIT(A) or even before us in support of book results while huge unaccounted stock was detected during the survey, the ld. CIT(A) were justified in applying the GP rate[ 8.67%] of the while upholding rejection of book results, having recourse to provisions of section 145(3) of the Act. In this view of the matter and considering the totality of facts and circumstances of the case, especially when the Revenue have not placed before us any material in order to enable us to take a different view in the matter, we are not inclined to interfere with the findings of the learned CIT(A). Therefore, ground nos. 1 2 in the appeal are dismissed. 7. Ground no.3 relates to addition of ₹ 23,614/- u/s 69 of the Act. The Assessing Officer noticed during the course of assessment proceedings that the Unicorn Corporation had shown closing balance of ₹ 3500/- while the books of account of the assessee reflected ₹ 20144/-. To a query by the Assessing Officer, the assessee explained that the amount of ₹ 23,614/- was payable to M/s Unicorn Corporation Ltd. while the assessee had to receive back a deposit of ₹ 25,000/- from M/s Bhut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d essential for the purpose of consideration of the subject-matter of the issue in this appeal and to arrive at a final and ultimate decision in a fair and just manner. The Tribunal, under Rule 29 of the ITAT Rules, 1963, has power to admit additional evidence in the interest of justice or if there exists substantial cause. The cause of justice will be better served if the said credit note dated 4.8.1999 is admitted because the document has a nexus with the facts of the case and also very essential for proper appreciation and adjudication of the lis/controversy involved. Accordingly, prayer for admission of additional evidence under rule 29 of the ITAT Rules,1963 is accepted in the light of guidelines laid down in the decision of Hon ble Gujrat High Court in the case of Pari Mangaldas Girdharidas Vs. CIT,(1977) 6 CTR(Guj)647. In these circumstances, we consider it fair and appropriate to set aside the order of the ld. CIT(A) and restore the matter to his file for deciding the issue afresh in accordance with law, in the light of aforesaid additional evidence and of course after allowing sufficient opportunity to both the parties. The ld. CIT(A) is free to undertake any independent e ..... X X X X Extracts X X X X X X X X Extracts X X X X
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