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2018 (10) TMI 1024 - AT - Income TaxDisallowance on account of difference in physical stock vis-à-vis books of accounts - addition based on statement recorded u/s 133A - Held that:- The statement recorded u/s 133A of the act has no evidentiary value. Therefore, no addition can be made on the basis of statement. Therefore, we do not take any shelter from the statement u/s 133A for deciding the issue on hand. We also note that in the absence of any documentary evidence, the addition cannot stand merely on the basis of statement recorded during survey proceedings. CBDT has emphasized to its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/ undue influence. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the impugned under valuation of stock other than the statement.- Decided in favour of assessee. Disallowance on account of unaccounted stock in gold ornaments - Held that:- In the instant case, the issue relates whether the unaccounted stock as observed by the AO during the survey operation represents the unaccounted income of the assessee. As such, there was a survey operation on the premises of the assessee where difference in the quantity of stock was observed by the survey team, which was added to the total income of the assessee as unaccounted income. However, we note that none of the lower authorities has pointed out any defect in the purchase or sales shown in the books of accounts. Thus, we note that the purchase and sales has been duly accepted by the lower authorities which were disclosed in the audited financial statement. We find forces in the alternate contention of the assessee that at the most the net profit can be added to the total income of the assessee on account of mismatch in the stock of gold ornament. There was no discrepancy pointed out by the lower authority in the purchase/sales of the gold ornaments reported in the audited financial statement. Therefore, in such circumstances the amount of net profit can be added to the total income of the assessee on account of difference in the stock of gold ornaments - assessee has shown its net profit in its books of accounts @9.95%. Thus, we direct the AO to make the addition of the net profit amounting to ₹ 16,67,895/- to the total income of the assessee. Rejection of books of accounts u/s 145(3) and estimating the GP@ 5% - books of accounts were duly audited u/s 44AB - Held that:- We note that the stock register was duly maintained by the assessee as the AO has worked out the difference between the physical stock and book stock at the time of survey. Therefore, the allegation of the AO that the assessee is not maintaining any stock register is contrary to the facts available on record. We also note that the sales and purchases have been duly accepted by the lower authorities and there was no whisper either less reporting/ under reporting of purchase and sales. Therefore, in our considered view books of accounts cannot be rejected. We also note that the AO in the instant case has made the addition on account of difference in the stock of gold ornaments as well as by estimating the profit @5% after rejecting the books of accounts. Once, the books of accounts have been rejected then no addition can be made by disallowing the expenses under/ over reporting of sales, purchases etc. Thus, the taxable income will be determined on the basis of reasonable estimate. In this regard, we find support and guidance from the judgment of INDWELL CONSTRUCTIONS VERSUS COMMISSIONER OF INCOME-TAX [1998 (3) TMI 121 - ANDHRA PRADESH HIGH COURT]. However, in the case before us we have reversed the order of authorities below for rejecting the books of accounts. Therefore, the ground of appeal of the assessee is allowed.
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