TMI Blog2007 (6) TMI 248X X X X Extracts X X X X X X X X Extracts X X X X ..... ,887. On being questioned about the difference in the cash balance, the assessee stated that Shri Dinesh Kumar had taken away the cash of Rs. 5,25,000 and at present he was out of station. It was further stated that as soon as he would return, the difference would be explained. The inventory of closing stock was also prepared but could not be tallied from the books because there was no complete mention of stock in computerized sheets. During the course of assessment proceedings the claim of 8127 gms pertaining to job work was made. The AO has noted that during the course of survey it transpired that the assessee was not recording complete purchase and sales in the books of account. Considering these lapses the assessee had offered a sum of Rs. 13,50,000 as income from undisclosed sources, which was, however, not offered for taxation in the return filed. The AO made the addition of Rs. 13.50 lakhs. The learned CIT (A) reduced such addition to Rs. 1,91,506 against which the Revenue has come up in appeal before us. 4. First item of addition is unexplained investment in furniture for which surrender of Rs. 6 lakhs was made. As per the books, investment in furniture was at Rs. 4,16,75 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verting to the facts of the case, we observe that the survey operation was conducted on 26th Feb., 1998 in which the statement of assessee's husband was recorded. The statements of the assessee and her husband were recorded on 26th Feb., 1998/27th Feb., 1998. However, on 10th March, 1998, the assessee made retraction from the said surrender. Thus it is observed that retraction was made within a very short time from the date of surrender. However, it would have to be seen whether retraction so made by the assessee is without any basis or is founded on some positive material. Here we find that surrender of Rs. 6 lakhs was made simply on the ground that the total amount as per insurance cover was for Rs. 10 lakhs whereas the assessee had recorded only a sum of Rs. 4 lakhs and odd on account of furniture in her account books. Clearly the remaining amount of Rs. 4 lakhs in the insurance cover note is relatable to the stock, which cannot be annexed to the investment in furniture value which has been mentioned at Rs. 6 lakhs. As against this figure, the assessee had shown only an amount of Rs. 4,16,754 under the head 'Furniture' in her books of account. In our considered opinion, the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the material on record, we find that the actual stock is 13,560 gms. [13,373.350 gms. and 187.420 gms.]. The learned Authorised Representative could not draw our attention towards the third item of 124.500 gms. considered by the learned CIT(A). Here again, we find that the addition has been restricted solely on the surrender made by the assessee without considering the actual stock vis-avis the stock as per the stock record. The position is crystal clear that the shortage in stock comes to 203.94 gms. (13,763.940 minus 13,560). When it is converted into monetary terms, its value comes to Rs. 85,655 on which GP comes to Rs. 21,414 when GP rate of 25 per cent is applied. It is settled position in law that the shortage in stock cannot be treated as income as shortage represents the sales made by the assessee out of books of account. On such sale, only profit element can be put to tax. As the learned CIT(A) has adopted 25 per cent GP rate on the value of shortage in stock which is not fully correct, we therefore, hold that the GP @ 25 per cent be applied on the correct amount of shortage of Rs. 85,655. This addition is, therefore, increased by Rs. 13,154 (Rs. 21,414 minus Rs. 8,260). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te of survey by 203.94 gms. amounting to Rs. 85,655. Apart from this shortage, there is nothing with the Department to show that the assessee had effected any sales outside the books of account. This shortage has been considered by making addition at the GP rate of 25 per cent in the foregoing para. We, therefore, hold that no addition can be sustained towards unrecorded sales and the learned CIT(A) was justified in deleting the addition made on account of such unexplained sales at Rs. 2 lakhs. 14. Last item is in respect of "order goods" for which surrendered amount is Rs. 3.50 lakhs but retracted and was not offered for taxation in the return filed by the assessee. The learned Departmental Representative referred to the statements of the assessee and her husband that a surrender was made in respect of orders received by the assessee and the entries for the receipt of gold recorded in the order books for which seven parties refused to have given order to the assessee. She referred to p. 9 of the Departmental paper book, vide which the assessee made surrender of Rs. 3.50 lakhs on this count. It was contended that the assessee ought to have honoured the surrender and offered the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose names appeared in order book but he did not refer to such proceedings in the assessment order. It is further observed from the impugned order that the assessee had explained the ordered gold by statements of 37 persons and affidavits of 23 persons confirming their order of jewellery against old gold. Only seven persons initially refused due to defects in their statements which fact was brought to the notice of the AO. Out of such seven persons, two were later contacted by the Department. One Shri R.K. Sethi stated that no person from the IT Department had ever contacted him and he admitted having given order for job work. Probably the Department had contacted a wrong person. Another person Shri Bhavani Shanker stated that no question was put by the Department regarding the job order and admitted having given the order for job work. The statements of other persons were not recorded on oath and the assessee was not allowed to cross-examine them. With reference to the persons whose statements were recorded at the time of survey on 26th Feb., 1998, it is borne out that out of the record of customer's orders, that two persons Smt. Seema Bubna and Shri R.K. Sethi had stated to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent incumbent, again vide his letter dt. 20th Jan., 2004 requested the Jt. CIT to direct the AO to make his submissions in writing and/or to appear for discussion. Despite the directions of the Jt. CIT(A) concerned, the AO did neither appear nor furnish any written submissions nor any survey record was made available. As a result of that, the learned CIT(A) decided the matter on the basis of facts on record and the paper book submitted by the assessee's representative. Moreover, the non-recording of complete facts by the AO in the assessment order clearly shows that the inundated evidence was in favour of the assessee and the AO did not consider it expedient to incorporate the same in the assessment order as he was relying simply on the surrender made at the time of survey which was duly retracted later on. 17. There is another interesting aspect of this case. On the perusal of the statement of the assessee and that of her husband it is observed that insofar as the questions regarding surrender are concerned, the answer in both the sets of statements are verbatim same. Not even a single word has changed its position in the two sets of statements recorded on different dates. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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