TMI Blog2014 (11) TMI 903X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax of ₹ 10,71,000/- which was duly encashed - the contention of the assessee cannot be accepted that the surrender was procured by exercising undue force upon the assessee. Whether on the basis of the surrendered statement and the payment of tax accrued, the addition can be made when the assessee failed to incorporate the surrendered amount in its return of income – Held that:- The assessee has not allowed the survey team to value the stock and to compare with the books of account maintained by the assessee - during the course of survey operation, the assessee herself has admitted that stock was spread over different floors of the property and godowns, which could not be valued; more so in the absence of sufficient staff - Having realized that the stock could not be valued or reconciled with the books of account, she made a voluntary surrender - She did not stop there, but she further issued a cheque to the Income-tax Department on the surrendered amount and allowed it to be encashed even after conclusion of the survey - addition was made on account of undisclosed stock with regard to which the assessee herself has made a statement that it cannot be valued on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2006. The assessee, engaged in the business of whole sale cloth trading under the name and style of partnership concern, M/s Chandra Kishore Ashok Kumar Sons at the premises 48/226, General Ganj, Kanpur, has made a voluntary surrender of undisclosed stock of ₹ 35 lakhs in the case of M/s Chandra Kishore Ashok Kumar Sons and ₹ 17 lakhs on account of undisclosed stock in the case of M/s Devi Company, which was also running its business at the same premises, having admitted that valuation of stock was not possible, as it was spread over in five floors of the property and godowns. After making surrender statement, the assessee has issued a cheque of ₹ 10,71,0000/- as income tax on the same day in the case of M/s Chandra Kishore Ashok Kumar Sons and a cheque of ₹ 5,20,000/- in the case of M/s Devi Company. Thereafter, the assessee has filed a writ petition before the Hon'ble High Court of Allahabad questioning the validity of the survey and the factum of voluntary surrender of the aforesaid amount. The Hon'ble High Court of Allahabad disposed the writ petition vide its order dated 7.1.2008 with the observation that the contention of the petitio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th regard to the stock available and in response thereto it was stated that the stocks were spread over at different floors of the building and the store situated at 55/115, General Ganj, Kanpur. The statement of the assessee, proprietor of M/s Chandra Kishore Ashok Kumar Sons, was also recorded on oath and in her statement she categorically admitted that keeping in view the nature of business, it is not possible to reconcile the stock available with the books of account. It was also deposed that the sale/purchase vouchers are also not available, as they were located in the almirah and key of the same was with her son, Shri. Gaurav Agarwal. She further deposed that in these circumstances the valuation of the entire stock is not possible, as it was spread over in five stories and godowns. It was also deposed that on account of Holi festival, the maximum staff was on leave, therefore, valuation of stock is not possible and on the basis of the information with regard to both the firms, she made a voluntary surrender of ₹ 52 lakhs in both the concerns, i.e. M/s Chandra Kishore Ashok Kumar Sons and M/s Devi Company. 7. In the case of M/s Chandra Kishore Ashok Kumar Sons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amined by the assessing authorities. During the course of assessment proceedings, the assessee has not produced even a single documentary evidence to justify that the assessee was forced to make surrender. The ld. D.R. has further contended that if the surrender was obtained by using force by the survey team, the assessee could have lodged complaint either with the Police authorities or higher authorities of the Income-tax Department. Moreover, if surrender was obtained by using force, the cheque issued by the assessee towards tax liability could have been stopped on the subsequent dates when the survey team has left the premises and there was no pressure or coercion upon the assessee. The ld. D.R. has further contended that in the remand report, the Assessing Officer had raised all these points before the ld. CIT(A), but the ld. CIT(A) has deleted the addition, having observed that the assessee was not examined by the Assessing Officer. The ld. D.R. has also made a submission with regard to the judgments referred to by the ld. CIT(A) while deleting the additions, that no doubt under section 133A of the Act the Assessing Officer or the survey team cannot record any statement on oat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn concern, M/s Chandra Kishore Ashok Kumar Sons and other sister concern, M/s Devi Company, which was owned by her son, were running their business at the same premises i.e. 48/226, General Ganuj, Kanpur. During the course of survey on 10.3.2006, the statement of Shri. Suresh Chandra Agarwal, the Manager of M/s Devi Company and of the assessee was recorded. It was deposed in the statement that stock of the assessee-firm was kept at basement and first floor; whereas the stock of M/s Devi Company are kept at second and third floor. Besides, the stocks of both the firms were also kept at 55/155, General Ganj, Kanpur. In her statement, the assessee has also deposed the same fact. It was also deposed that it is very difficult to bifurcate the stock of both the firms. She admitted that the sales and purchases were recorded in the computers. Since it was not properly recorded, it was not possible to state the correct stock. She has further deposed that keeping in view the nature of business, it was not possible to reconcile the stock with the books of account. Therefore, she voluntarily surrendered a sum of ₹ 35 lakhs on account of undisclosed stock in the hands of M/s Chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5; स्टॉक है जिनको अलग-अलग बताना मुश्किल है । प्र ॰-4 जब आपकी स्टॉक किताबों के हिसाब से आज तक की tallied नहीं है और स्टॉक रजिस्टर भी आप maintain नाही कर रही है तो ऐसी स्थिति मंे दोनों ही फर्म ोकिताबों मंे दिखाये गए स्टॉक की सत्यत ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6;ड कं॰ में surrender कर रही हूं । उपयुक्त surrender का आधार यह है कि दोनों ही फेर्म में स्टॉक रजिस्टर maintain नाही होता है अत: स्टॉक कि position को बताना संभव नही है । प्र ॰ 6 सर्व ेके दौरान दोनों ही प्रतिष्ठान ोके स्टॉक की सूची विभिन्न तलों पर & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2346;ूछने पर भी वो चाभी की ठीक-ठीक स्थिति नही बता पाया जिसकी वजह से पूरे स्टॉक का valuation संभव नही है । वैसे भी पाँच मंजिलों तथा गोदाम में फैले हुए स्टॉक का valuation करना बहुत ही मुश्किल काम है । और होली के कारण हमारा अधिकांश स्ट&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8;तथा मंे एक बार फिर मंे यह कह रही हंू कि इसे में स्वेच्छा से surrender व आयकर दे रही हूं ताकि हमारा स्टॉक और आय घोषित हो जाए तथा में भविष्य में इसका कोई विवाद भी नही करूंगी । 10. The statement was recorded during the course of survey operation on 10.3.2006. Thereafter on 13.3.2006 the assessee has filed a letter before the Assessing Officer in response to summons issued under section 131 of the Act on 10.3.2006 requiring her to produce the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax of ₹ 10,71,000/- which was duly encashed. Therefore, the contention of the assessee cannot be accepted that the surrender was procured by exercising undue force upon the assessee. 12. Now the question arises whether on the basis of the surrendered statement and the payment of tax accrued thereon, the addition can be made when the assessee failed to incorporate the surrendered amount in its return of income. 13. In this regard, our attention was invited to various judicial pronouncements. But in all those cases, it was held that during the course of survey, the Revenue authorities are not empowered to administer oath to the assessee. Therefore, the statement on oath cannot be recorded, but the statement of the assessee during the course of survey operation is a valid piece of evidence, though may not be conclusive for making an addition. If any addition is required to be made, it should be supported by some other evidence. 14. In the case of CIT vs. Dhingra Metal Works (supra), their Lordships of the Hon'ble Delhi High Court has held that from a reading of the aforesaid section, it is apparent that it does not mandate that any statement recorded under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the income-tax Department on the surrendered amount; more so she has also filed a letter before the assessing authority after three days and even in that letter she has not raised any issue or disputed the voluntary surrender of ₹ 35 lakhs in the hands of the assessee. Since the assessee herself has not allowed the survey team to value the stock available with the assessee, now she cannot take a plea that the addition on the basis of surrendered amount cannot be made, as the Assessing Officer could not place any corroborative evidence except surrender statement. Therefore, this judgment would not render any help to the assessee. 18. In the case of CIT vs. Balaji Wire (P) Ltd. (supra), the statement was recorded under section 132(4) of the Act. In that case also, it was held that since statement was recorded after search proceedings and further no incriminating material was found during the course of search showing that the assessee had any undisclosed income, addition made by the Assessing Officer solely on the basis of the statement has to be deleted. In that case, the statement was recorded during the course of search with respect to the material found. But the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue of income-tax, addition can be made on the basis of the surrendered statement, as the assessee has not made any effort to reconcile the stock available with the books of account. Accordingly, we do not find ourselves in agreement with the order of the ld. CIT(A) who has not taken into account all these facts while deleting the addition. We accordingly set aside his order and restore that of the Assessing Officer. 23. Next ground relates to the addition of ₹ 20 lakhs on account of less profit shown by the assessee. 24. During the course of assessment proceedings, the Assessing Officer has examined the gross profit rate shown by the assessee as well as its sister concern, M/s Devi Company which is also running its business in the same premises. M/s Devi Company has shown gross profit rate at 6.35% whereas the assessee company has declared gross profit rate at 4.74%. When the assessee was asked to explain the reasons for lesser gross profit rate in the assessee s cases, although both the concerns are engaged in the same line of business and at same premises, it was contended on behalf of the assessee that the assessee was engaged in wholesale business and M/s Devi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tail basis also. He has also mentioned that both the concerns were doing similar business with slight variation in terms of retail business of M/s Devi Company. But none of the authorities have mentioned nowhere in the order that how much percentage of business was wholesale and retail in the case of M/s Devi Company. Undisputedly the assessee was engaged in wholesale business and in the wholesale business the gross profit is always less compared to retail business. Moreover, while estimating the gross profit rate while making the addition in the hands of the assessee on account of less gross profit rate, the Assessing Officer has not rejected the books of account. If the Assessing Officer is not able to accept the book results declared by the assessee for any reason, he should have rejected the books of account, then estimated the gross profit, but it was not done. In the order of the ld. CIT(A) it is mentioned that the assessee has been declaring gross profit rate between 4.78% and 4.35% during the assessment year 2003-04 to 2009-10. Therefore, in the light of these facts, the gross profit rate declared by the sister concern which is engaged in different nature of business, c ..... X X X X Extracts X X X X X X X X Extracts X X X X
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