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TMI Blog2018 (3) TMI 1958X X X X Extracts X X X X X X X X Extracts X X X X ..... ite slabs and tiles. A survey U/s 133A of the Income Tax Act, 1961 (in short the Act) was carried out on 12/09/2013 and 13/09/2013 alongwith other group concerns of the partners namely Shri Arihant Choudhary, Shri Tilak Choudhary, Kusum Choudhary and Smt. Shweta Choudhary. The return of income was filed declaring NIL income in the case of M/s Asmi Stonex after adjusting unabsorbed depreciation on 30/09/2014, return of income declaring total income of Rs. 5,90,940/- was filed in the case of Arihant Choudhary and return of income declaring total income of Rs. 5,25,530/- was filed in the case of Tilak Choudhary. The Assessing Officer made addition on account of excess stock and short cash noted during the survey proceedings. 4. A common issue involved in all these appeals, is sustaining the addition of Rs. 1,99,37,946/- in the case of M/s Asmi Stonex, Rs. 37,73,000/- in the case of Arihant Choudhary and Rs. 31,43,000/- in the case of Tilak Choudhary on account of excess stock. 5. The assessee claimed that the ld. CIT(A) has not considered the submissions of the assessee and confirmed the addition without any basis. The brief facts in this regard are that during the survey operation, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee has remained untroverted which points out to a serious blunder in the valuation of marble blocks. It was also pointed out that the stock of marble blocks of Rs. 4,21,68,000/- is 90% of the total stock found during the course of survey of Rs. 4,73,04,946/-. The major discrepancy in the valuation of marble blocks has rendered the entire valuation of stock as a farce. Therefore no addition could have been made on the basis of such valuation. This submission of the assessee has remained uncontroverted by the Learned CIT(A). They have simply reiterated again and again statement of Shri Pradeep Choudhary on the basis of which valuation was done. The submission of the assessee is that in the face of documentary evidence oral statement cannot prevail. (iii) It was submitted before the Learned CIT(A) that as per books of accounts of the assessee the stock in hand as on the date of survey 12.09.2013 was of Rs. 1,88,820 of Marble Blocks and of Rs. 18,79,542/- of marble slabs and tiles. In support of this book position of stock necessary papers are available on paper book page number on page no. 13 to 124. This fact has remain uncontroverted. (iv) The stock of Rs. 3,20,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessee have also remained uncontroverted. It is the submission of the assessee that the entire survey was a farce. The figures of stock valuation are fake and it was just to obtain forced surrender from the assessee. It is settled principle of accountancy that valuation of stock cannot be made on the basis of statement of the assessee. The same has to be worked with reference to purchase and sale vouchers. But in this case the survey team did not carry out any verification with reference to purchase and sale vouchers but tried its best to force Shri Pradeep Choudhary to make surrender. Thus the thrust of the survey team was not on carrying out a genuine survey but was in recording statement of the assessee under duress. It is submitted that mere statement cannot be basis of any addition unless the same is substantiated. In the remand report as well as in the appellate order the Learned Assessing Officer and the Learned CIT(A) have taken shelter of the statement of Shri Pradeep Choudhary for making and sustaining the addition. In fact the revenue has used the statement of Shri Pradeep Choudhary as an umbrella to cover all the discrepancies committed in the valuation of st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions made by the assessee. The assessee considers it relevant to quote the following para from the above case law:- Assistant Commissioner of Income Tax vs. M/s. AL Quresh Export, ITA No.6733/Mum/2008 (Assessment Year: 2005-06) dated 15th February 2011. Thus it is obvious that the additional income disclosed by the appellant was not based on any documentary evidence. No material is found or impounded in the survey to corroborate the confession of concealed income nor investigated and declared later in post survey or assessment proceeding which followed. A statement so made cannot be the end of the matter and the AO was expected to dig out fresh facts and corroborate its findings. A statement recorded during the course of survey can be made the basis of assessment u/s.143(3) only it if it is linked to evidences. The reply to Q. No.11 in which the so called declaration has been made is premature and appears dumb to say the least. The transaction or manner in which such additional income was earned and the documents on the basis of which such income was offered to tax was never established at the time of survey or thereafter in any proceedings under the Act Survey is essentia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay that since "I am not able to reconcile the discrepancy on purchase for which bills were yet to be received, as such I offer an income of Rs. 1.91 Crores", no clinching evidence or material based on valid inquiry is placed on record by the AO which could persuade the appellate authority to confirm the addition so made. In CIT vs. Ramdas Motor Transport {(1994)(238 ITR 177) (183) (A)} and Jaikisan R. Agarwal vs. ACIT {(2000) 66 TTJ 704} it has been held that if the admission in the statement is not supported by any asset or document, the retraction may be genuine. The Allahabad High Court in the case of Abdul Qayinne vs. CIT {(1990) 184 ITR 404 (All.)} made the categorical observation to the effect that an admission or an acquiescence cannot be foundation for an assessment when the income is returned under an erroneous impression or misconception of law. It was always open to ITA 6733/M/2008 M/s. AL Quresh Export assessee to demonstrate any satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under an erroneous impression of facts and law. In the present case the appellant in the post survey proceedings as well as conseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er first allegedly worked out the stock at Rs. 4,73,04,946/- and later-on on presumption and assumption divided the same in all the five sister concerns and a sum of Rs. 3,20,73,946/- was held as belonging to the assessee. There are no details as how this stock was held to belong to the assessee. The entire exercise of survey does not give any details of the manner in which the working was done either of the stock as per books or of the stock found physically. There are no details of purchases and sales before working out the stock as per books. There is no reference to the cost of purchases before valuing the stock found physically. The stock as per books as well as the stock found physically has been worked out and valued on the basis of statement of Shri Pradeep Kumar Choudhary which was recorded under threat, duress and stress. Such statement recorded u/s 133A does not carry any evidentiary value. It is only on presumption that the stock found at the premises of M/s Asmi Stonex was bifurcated in the hands of the five sister concerns purely on estimate basis and without reference to any document or books of accounts. The addition made is therefore uncalled for and deserves to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existed. Further apportionment of stock was made in the hands of various concerns just to give it a color of genuineness. In these circumstances it is submitted that addition made by the Learned Assessing Officer has no legs and deserves to be deleted. It is further submitted that as per trading account the total sales disclosed by the assessee are only of Rs. 1,37,45,932/- of marble slabs and tiles. For conduct of such sales existence of stock to the extent of Rs. 3,20,73,946/- is a distant cry. The Learned Assessing Officer has not disturbed the sale of the assessee. The sales as per books of accounts stand accepted. Hence it is established that the stock valuation report is false and flimsy. No additions can be made on the basis of such an unrealistic report. The figure of stock of Rs. 3,20,73,946/- indicate that some exact working would have been under taken otherwise how could one reach to a figure so exact upto 00003946. But no details are available of any such working. It has been done simply on the basis of statement of Shri Pradeep Chaudhry. Thus the valuation of stock is totally wrong. No addition should have been made on the basis of such valuation. 3. Stock valued in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This invalidates the entire valuation. The assessee has purchased marble blocks with reference to weight. Copies of vouchers of purchases of marble blocks from R.K. Marbles Pvt Ltd are available on paper book page number cited supra. It is submitted that out of the total stock valued by the survey team at Rs. 4,73,04,940/-, more than 90% of it pertain to marble blocks and granite blocks which has been valued purely on estimate basis. The Marble blocks were purchased weight vise but the valuation has been done by counting the marble blocks as big and small which is not correct. During the year under consideration upto the date of survey the assessee purchased 43 marble blocks weighing 436.64 tons for a sum of Rs. 7,39,513/- which gives average cost of 1 block at Rs. 17,198/- tons whereas in the survey valuation report the marble blocks have been valued bigger size at Rs. 40,000/- per block and smaller size at Rs. 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 10 tons each. There is no big difference in the weigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of survey and hence it was wrong on the part of the Learned Assessing Officer to have considered the stock of Rs. 3,20,73,946/- in the hands of the assessee without any base and without any ground. 6. Stock of granite wrongly considered in the hands of the assessee: - The valuation of granite has also been done in very routine and slipshod manner without taking into consideration the size, the quality and the color. The same has been valued at Rs. 24,80,170/-. It is submitted that so far as the assessee is concerned as on the date of survey it had purchased 61 granite blocks weighting 625.25 tons of the value of 4,45,000/-. The average cost of per blocks works out of Rs. 7295/- whereas in the valuation report the granite blocks have been valued bigger size @ 26000/- per block and smaller size at Rs. 26000/- per block. The valuation made by the survey team is totally wrong. The assessee had purchased granite blocks with reference to weight. The average price per ton of granite blocks works out to Rs. 700/- per ton. The survey team was required to work out the valuation with reference to weight and also with reference to purchase vouchers. But this has not been done. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and overvalued and therefore deserves to be disregarded. (c) The stock was bifurcated in the hands of five concerns at the instance of Shri Pradeep Choudhary at his oral instruction. The statement does not give any basis of bifurcating of stock in the hands of five sister concerns. (Answer to question no. 8) This has been done purely on guess work. Such bifurcation is not acceptable and not reliable being not correct. (d) The stock as per books of all the five concerns have been taken at Rs. 1,42,17,000/- on the basis of alleged computer sheets whereas stock as per books should have been worked out with reference to individual books of accounts of each of the five concerns. There is no reference of any stock register, trading A/c etc. while working out the stock as per books on the date of survey. Thus the stock as per books taken by the revenue is invalid and deserves to be ignored. (Answer to question no. 8) In view of the aforesaid facts it is clear that assessee had no say either in working out the stock as per books or in working out the stock found physically belonging to the assessee. The entire exercise of working out the stock both as per books as well as physically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003 Confession of additional Income during the course of search &seizure and survey operation GOVERNMENT OF INDIA MINISTRY OF FINANCE &COMPANY AFFAIRS DEPARTMENT OF Revenue CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir Subject : Confession of additional Income during the course of search &seizure and survey operation -regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search &seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search &seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT (K. Ravi Ramchandran) Director (Inv.)-II, CBDT - It is submitted that the action of the i.e. authorities in obtaining surrender of income that too under duress is against the circulars of the CBDT which are binding upon them. Hence the surrender obtained from the assessee was illegal and addition made on the basis of such surrender is unlawful and deserves to be deleted. 10. Conduct of survey is unlawful and illegal - The admitted facts of survey are that it was conducted on 13.09.2013. As per stock list prepared which is available on paper book cited supra the physical verification of stock was completed on the same day itself. The survey was completed in the odd hours by recording t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verage cost of 1 block at Rs. 17,198/- whereas in the survey valuation report the marble blocks have been valued bigger size at Rs. 40,000/- per block and smaller size at Rs. 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 10 tons each. There is no big difference in the weight of marble blocks so as to treat them big or small. Details of purchases of marble blocks along with relevant purchase vouchers, ledger account are available on paper book page number cited supra. The facts of purchases of marble blocks establish that the valuation done of the stock found by the survey party is totally wrong and very high. The same is totally unreliable and not actionable. The Learned Assessing Officer has erred in making addition on the basis of such a defective and incorrect valuation. It is further submitted that of the total stock found of Rs. 4,73,04,940/- the stock of marble blocks and granite blocks is of Rs. 4,21,68,000/- i.e. more than 90%. The submission of the assessee is that when 90% of the stock valuation is i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eserves to be deleted. The following case is quoted in support: - Shekhawati Art Palace Vs. CIT (2008) 116 TTJ (JP) 552 Mere rejection of account would not mean that it must lead to addition. 13. Surrender u/s 133A was under duress - From the aforesaid facts it is clear that the survey authorities had not worked out the valuation of stock in a truthful manner. The position of physical stock has been taken purely on estimate basis and it has no relation with the ground reality. The survey team was obsessed for obtaining surrender. Hence confessional statement has been recorded which is in clear cut violation of the circulars of the Board. The statement was recorded at odd hours under treat and duress. It is a case where statement was recorded under duress, stress and threat. Therefore the surrender so obtained in the statement is invalid and deserves to be ignored. No addition can be made on the basis of such statement recorded u/s 133A of the Income Tax Act, 1961. No addition can be made on the basis of statement recorded during abnormal hours. The statement recorded u/s 133A is not on oath and carries no legal weight. The assessee was well with her in rights in retract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at such odd hours. Moreover, this statement was retracted after two months. The main grievance of the AO was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, if such retraction is to be viewed in light of the evidence furnished along with the affidavit, it would immediately be clear that the assessee has given proper explanation for all the items under which disclosure was sought to be obtained from the assessee. (g) Pullanguegode Rubber & Produce Co. Ltd. Vs. State of Kerala 91 ITR 18 (Supreme Court) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. (h) Jain Trading Co. v/s ITO (2007) 17 SOT 574 (MUM) Addition on the basis of admission made during survey retracted during assessment. An assessee offering additional income during the course of survey is not bound by the said offer for all times to come ---- During survey assesses offered an additional income of Rs/- 25 lac on being pointed by the survey party that there was under statement of stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as against Rs. 30/- adopted by the survey team while valuing the stock. In fact the entire exercise of valuation of stock is full of blunders and is not actionable. No addition could be made on the basis of such valuation report. Therefore it is prayed and requested to delete the addition made by the Learned Assessing Officer and allow the appeal of the assessee on this issue." Similar identical submissions have also been taken by the ld AR of the assessees in two other appeals. 7. On the other hand, the ld DR has vehemently supported the orders of the authorities below and submitted that the appeals have no merit and may be dismissed. 8. The Bench have heard both the sides on this issue. A survey U/s 133A was conducted on the assessee alongwith other concerns of group partners. The excess stock worked out by the survey team and the stock adopted by the survey team as per books of account are disputed by assessee. The assessee claimed that the survey team acted in an arbitrary manner in quantification and valuing the stock as on the date of survey as well as bifurcating the same stocks to various concerns of the group. The Assessing Officer has adopted the survey team's report a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o 124 of the paper book and this fact has not been controverted by the revenue. Further the bifurcation of the stock among various entities is also not based on any concrete evidence. The stock statement as per books taken by the survey team is also not based on any positive evidence. It is also a fact that the cost of the granite block in the hands of the assessee was Rs. 7295/- while the survey has adopted at Rs. 26,000/- per book which itself establishes that the survey team has worked out the valuation stock completely on arbitrarily basis. Further we also hold that the case laws relied upon by the ld AR of the assessee i.e. the Hon'ble Supreme Court in the case of Pullan Gode Rubber Produce Co. Ltd vs. State of Kerala (1973)(91 ITR 18) has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. A statement so made cannot be the end of the matter and the Assessing Officer was expected to dig out fresh facts and corroborate its findings. A statement recorded during the course of survey operation can be made the basis of assessment U/s 143(3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also gets support from the following case laws: (a) Jain Trading Co. Vs ITO (2007) 17 SOT 574 (Mum) An assessee who makes an offer of additional income during course of an enquiry by income-tax authorities is not bound by his offer of additional income for all time to come. But at the same time, the burden cast upon an assessee, who chooses to retract his earlier statement, is very heavy. In the instant case, during the course of assessment proceedings, the assessee had completely explained entire business transactions leading up to the date of survey and had given the details of its trading activity. Thus, the assessee had demonstrated that the rate of gross profit varied from item to item and transaction to transaction and by no means any particular rate of gross profit could be correctly applied so as to work out the value of closing stock at any given date. Further, in the account statements, the assessee had collated each item of purchase with corresponding item of sale. Once every purchase was collated with the sale thereof in terms of quantum as well as value, no further burden remained to be discharged by the assessee, unless any discrepancy or falsity was pointed out in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or seizure. Thus, the Act whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any ITO to examine any person on oath. In contradistinction to the power under section 133A, section 132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is authorised to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated in the law. [Para 11] In the instant case, the ITO had referred to the fact that consequent upon the survey, the assessee had filed a revised return offering 8 per cent of the contract receipts as net profit before allowing deduction of salary payment made to partners. It was also found that the 8 per cent profit disclosed was deemed to have been arrived at after allowing depreciation and interest on capital paid to the partners. It was further found that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tire sum of Rs. 19 lakhs was considered for the block assessment completed in the case of the creditor much before the survey. In those circumstances, the statement of the assessee that the amount of Rs. 13 lakhs offered by him in the statement during the course of survey was only a mistake of fact, could not be brushed aside. Further, in the light of the voluntary disclosure in the letter given in writing by the assessee, the facts given by him had been verified with the books of account and it was only after consideration of the various aspects of the matter and related facts, that the Assessing Officer accepted the offer made by the assessee. In such circumstances, the view taken by the ITO could not be said to be prejudicial to the revenue nor could it be said to be erroneous. Nothing was found in the order of the ITO to warrant a finding that it was unsustainable in law. The Commissioner was not justified in law in invoking the power under section 263 as the twin conditions precedent to exercise the power had not been satisfied in the instant case. Besides the decision was also erroneous. Hence, the orders of the Tribunal and the Commissioner were set aside and the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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