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TMI Blog2000 (1) TMI 147X X X X Extracts X X X X X X X X Extracts X X X X ..... mputed and in accordance with the provisions of Chapter IV and on the basis of evidence found as a result of search and no more. In doing so, the manner and the basis provided under s. 158BB has to be strictly followed and complied which in the instant case has not been even attempted and complied. 8. That the learned Dy. CIT has failed to appreciate that no addition can be made on the mere admission, particularly when it had been established that admission was made on complete misconception and on vague assumptions and as such no addition was warranted. The various circumstances under which the statement was given has been blissfully ignored. The learned Dy. CIT had failed to appreciate that the deponent was a highly diabetic and was suffering from high blood pressure and had been discharged just a few days before the search and had been re-admitted immediately thereafter. That the assessment made is thus totally untenable both on facts and in law and is without jurisdiction. "10. That without prejudice to the above and in the alternative, the learned Dy. CIT has erred in making an addition of Rs. 1,15,00,000 on account of alleged unexplained investment in stocks. The submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t framed in violation of provisions of ss. 158BB and 158BC(c) of the Act, the grounds at Sr. Nos. 8 and 10 to 14 relate to another issue i.e. addition of Rs. 1,15,00,000 on account of alleged unexplained investment and the grounds at Sr. Nos. 15 to 17 challenge another addition of Rs. 1,03,437 made on account of alleged sales outside books of accounts. 2.4. During the course of hearing, the learned counsel for the assessee submitted that the issues and the questions for consideration on merits, in respect of grounds at Sr. Nos. 8 and 10 to 14 can be set out as under: "1. Whether, on the aforesaid facts, the addition made of Rs. 1.15 crores and allegedly representing the undisclosed investment in stocks, on the basis of a mere statement under s. 132(4) by Shri R.P. Monga is valid and is sufficient in sustaining in law the addition in disregard of the voluminous evidence adduced to establish the entire value of stocks found was duly recorded in books and no stock was found unrecorded? 2. Whether the addition of Rs. 1.15 crores made as undisclosed investment in stocks under Chapter XIV-B of the IT Act is sustainable in the law disregarding the burden under the aforesaid chapter to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the basis of retail price list whereas the assessee sells its stocks as per the wholesale price list. A revised working of stock on the basis of wholesale price list was filed in which the value was arrived at Rs. 1,91,44,195. It was claimed that there was no discrepancy in the stocks found during the course of search. 3.4. The AO observed that in the statement recorded during the course of search on30th Aug., 1995, Shri R.P. Monga had surrendered a sum of Rs. 1.15 crores as undisclosed investment in stocks. He further pointed out that the assessee's authorised representative. Rawla & Co., had also vide their letter dt. 26th Oct., 1995, submitted before the ADI (Inv.) that the unexplained investments in stock of M/s R.P. Lock & Co. (the assessee) was Rs. 1.15 crores and an undertaking was also given that this amount will be disclosed in the return for the block period and taxes would be paid. The AO, therefore, required the assessee to show cause as to why addition of Rs. 1.15 crores be not made in the undisclosed income of the assessee for the block period when the surrender of this amount was made at the time of search which was confirmed subsequently after due consideration an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigations." 3.5 The facts concerning the other addition of Rs. 1,03,437 are that during the course of search on14th Aug., 1995, at the residential premises of the partners of the assessee's firm at 9/8. East Patel Nagar,New Delhi, a list of stocks was found which was listed at pp. 6-18 of Annexure A-3. As per order of the AO, the list was of the stocks "found at the premises of Bashiruddin & Co.". The AO required the assessee to state as to whether the stock as per the aforesaid list was taken into account in the regular books of accounts. In reply, the assessee submitted vide letter dt.30th July, 1996, that M/s Bashiruddin & Co. were selling duplicate material under the assessee's trade-mark ofHarrisonlocks. The premises of the said persons were raided and material seized. It was contended that the assessee had filed a case in a Court of law against the aforesaid party. However, the relevant file was not produced despite more than one opportunity allowed by the AO. The AO, therefore, refused to accept assessee's contention. He inferred that the assessee had actually made sales outside the accounts books to M/s Bashiruddin & Co. and the story put forth by it was a made up stor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th Aug., 4,48,177 30th Aug., 1995 7,13,248 Bazar 1995 (PB p/77-84) (PB p/397-400) Punjabi -do- 2,64,900 - - Bagh (PB p/95) Patel 14th Aug., 9,26,717 - 77,99,175 Nagar 1995 (PBp/100-124) (PB p/420-430) Aligarh 21st Aug., (incomplete) 30th Aug., 1995 2,65,09,340 1995 (P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; 2,00,000 Sundry balances 2,50,000 Transactions as per seized documents 4,00,000 ----------- Total 2,25,00,000 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ving substantial amounts were pointed out. According to the learned counsel, at the time of approval by the learned CIT also, the mistakes in valuation were pointed out and the learned CIT had directed the AO to get the position clarified from the ADI. The learned counsel prayed that the file of the learned CIT may be called to verify this fact. 4.5. The learned counsel also referred to the entries in the order-sheets, copy placed at pp. 127 to 139 of the paper book and submitted that this was not a case where the addition had been made solely on the basis of statement recorded under s. 132(4) of the Act. He contended that in the course of assessment proceedings, the AO had made enquiries and investigation as was evident from the order-sheet entries. The learned counsel submitted that the facts and material available on record clearly indicated that as a result of adopting the retail sale price and the mistakes committed in valuation, the stock was valued at exaggerated figure. He further submitted that the valuation of stocks was a question of fact and if demonstrated that it was not correctly done, the statement given by Shri R.P. Monga under s. 132(4) of the Act, surrendering a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted that the AO has not gone beyond the block period and has also not included the regular income of the assessee in the present assessment. It was submitted that in the circumstances even if there were some procedural lapse on the part of the AO, it did not go to the root of the matter and the assessment could not be held to be invalid, as was contended by the learned counsel. 5.2. For the addition of Rs. 1,15,00,000 on account of unexplained investment in the stock, the learned Departmental Representative referred to the points raised by the AO. It was stressed that Shri R.P. Monga had made a composite disclosure of Rs. 2.25 crores in the statement given, on30th Aug., 1995, on the basis of assets found during the course of search. He challenged the assessee's contention that the statement was vague or was given under any mistaken belief of facts. The learned Departmental Representative drew our attention to the letter dt. 26th Oct., 1995, of M/s Rawla & Co. copy placed at p. 176 of the assessee's paper book, with which "revised break up of additional income, offered for taxation of Rs. 2,25,00,000" was enclosed, copy at p. 479 of the paper book and it was stated that due to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould go back to the AO. 6. We have given our utmost consideration to the facts and circumstances of the case, the material to which our attention was invited and the rival submissions. We would first take up the issues relating to the impugned addition of Rs. 1.15 crores made on account of unexplained investment in stocks. From the AO's discussion under the head "Unexplained Investment in Stocks", it would be seen that he has initially proceeded on the basis of valuation of the stocks found at the 4 premises, taken at Rs. 3,50,21,763 (gross) and at Rs. 2,99,43,607 (net). He has finally quantified the discrepancy in the stocks found during the course of search at Rs. 1,14,75,911. It was with a view to supporting the addition that the surrender made by Shri R.P. Monga in respect of stocks (total Rs. 1.40 crores out of which stock of Rs. 25 lakhs appears to have been considered in the case of assessee's sister-concern) is referred to. The controversy thus primarily revolves round the valuation of stock found at the time of search. In this connection, the first aspect that we would like to point out, as is referred to in para 4.2 above, is that in respect of the stocks found at Sadar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its stocks as per retail price list was not correct. Also, it had further pointed out various calculation mistakes in the valuation, which aspect has not at all been considered by the AO. We had ourselves looked into the two sets of lists and found various discrepancies in calculation itself. To give an example, in one list, in respect of East Patel Nagar, the value of 18 pieces of Mortice Locks of Code No. 121 is taken at Rs. 3,888 @ Rs. 216 per piece (item 13 of inventory at p. 100). However, in the other list, of the same premises, the same quantity of the same item is valued @ Rs. 335.10 per piece and that too at Rs. 6,03,180 (item 13 of inventory at p. 420). It is thus quite evident that even the calculation of the values taken at retail price suffers from mistakes. 6.2 The other aspect of the matter relates to the surrender made by Shri R.P. Monga during the course of search. After the insertion of Expln. to s. 132(4) w.e.f.1st April, 1989, the authorised officer has power to record statement on all matters pertaining to the suppressed income. The scope of statement is thus widened. Therefore, the statement of Shri R.P. Monga under s. 132(4), surrendering certain amounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various aspects, including the following. Ordered accordingly. (i) As to what is the method adopted by the assessee in earlier years and in the year under consideration for the valuation of the closing stock as on the last day of the previous year relevant to asst. yr. 1996-97. (ii) For determining the value of stocks as per the abovementioned method of valuation. In doing so, the calculation mistakes pointed out by the assessee should be specifically taken care of. (iii) To quantify the difference, if any, in the value of stock as per the above method and that worked out as per the accounts books, to be treated as undisclosed income for the block period, independent of the surrender made by Shri R.P. Monga. 7. Regarding the other issue, the list related to the stocks found at the premises of Bashiruddin & Co. and the assessee gave an explanation in this behalf. No doubt it failed to produce any documentary evidence to show that the list related to a Court case against M/s Bashiruddin & Co. who were stated to be indulging in manufacturing duplicate goods under the trade name of the assessee but, we are of the considered opinion that on the basis of this list alone, an infer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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