TMI Blog2005 (4) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the discrepancies found in the stock. Accordingly, the assessee offered the amount of Rs. 8,10,000 for the purpose of taxation. However, in the return of income filed on 31-10-1997 for the year under consideration, the assessee did not include the amount offered for taxation, i.e., Rs. 8,10,000 even though he had agreed in his statement on oath recorded on the date of survey. 3. In the course of assessment proceedings, the assessee was asked to explain as to why the sum of Rs. 8,10,000 should not be added to the income of the assessee. The assessee vide letter dated 23-2-2000 submitted that he has retracted from the statement since he was completely exhausted and nervous due to other pressure at the time of survey. It was also submitted that he being a technical person did not have the accounting knowledge. On facts, he explained the discrepancies as under : "Stock statement of Geared Motor with chain feeding system was shown at Rs. 5,38,000, which he claimed that such stock never existed. It was merely duplication of the same items that covered in the entire stock statement. Moreover, such machines could only be assembled at poultry and not in the factory. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It has not appeared in the statement of stock of the assessee as on 30-11-1996, filed during the time of hearing. However, it figures at item No. 30 in the stock inventory prepared by the survey team on 4-12-1996 and signed by Mr. H.L. Thakker. His contention that it is merely duplication of item already listed in the stock statement cannot be accepted at this point of time. ( e )Assessee s retraction after a gap of more than three years is not acceptable as it is not possible to verify at this point of time the genuineness of the claim of the assessee as to whether the stock existed or not. Moreover, statement on oath of the assessee dated 4-12-1996 where he has accepted the additional excess stock along with scrap at Rs. 8,10,000 existed for which he had no explanation, and it was offered as additional income for the assessment year 1997-98 is proof enough of the excess stock declared by the assessee at the time of survey. Assessee other reasons like not knowing accounts well and he was under tremendous pressure is not also acceptable as one cannot simply make such frivolous confession, while making statement on oath. This action of the assessee amounts to disregard for the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned Departmental Representative simply supported the orders of the lower authorities but he could not inform the Bench as to who recorded the statement at the time of survey. 5. After considering submissions of both the parties, we find merit in the main contention raised by the Learned Counsel for the assessee. Section 133A of the Act confers powers on the income-tax authorities to make survey at the business premises of the assessee and for that purpose such authority may enter in any place within the limit of area assigned to him, any place occupied by any person in respect of whom he exercise his jurisdiction. In the course of such survey, he may inspect the books of account or other documents, which are found at such places; may verify the cash, stock or other valuable articles found in that place. Such authority may also record the statement of any person, which may be useful for or relevant to any proceedings under this Act. The powers to record the statement is given in clause ( iii ) of sub-section (3) of section 133A of the Act. For the purpose of this section, the words "Income-tax Authorities" has been defined in the Explanation at the end of the section accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sic ). In that case, no incriminating material was found from the possession of the assessee in the course of search but the statement under section 132(4) of the Act was recorded. The Hon ble High Court held that the Income-tax Officer was not authorised to record a statement where no incriminating material was found and, therefore, the statement so recorded, had no evidenciary value. Considering the above legal position, we further hold that no addition can be sustained merely on the ground that disclosure was made by the assessee in the aforesaid statement. Since the main contention of the Learned Counsel for the assessee is accepted, we need not adjudicate the alternate plea raised by him. However, before parting with this issue, we would like to mention that assessee would still be liable to explain the discrepancy in the stock inventory prepared in the course of survey even though the statement recorded was non est because it is the settled legal position that incriminating material found in the course of illegal search is an admissible evidence. 6. Coming to the merits of the case, it has been submitted by the Learned Counsel for the assessee that "Safex System PVC Pi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 38 of Paper Book, shows that the system was inclusive of Conduit Pipes which are commonly spoken as G.I. Pipes. In view of the above discussions, we are of the view that there was no discrepancy so far as quantity is concerned. Therefore, overvaluation, if any, has to be deleted. Stock valuation has to be done on cost basis. Therefore, valuation taken by survey party over and above cost price would be unjustified. However, the actual cost of the system found is not before us. "Bill of entry for home consumption" gives the cost price at Rs. 7,46,481 but this price may not include the expenditure which the assessee might have incurred after the goods have reached the port. It is not clear whether Custom Duty paid on such item is included in this price. He also would have incurred other expenditure in bringing the goods to his godown. It has not been shown as to what price has been debited in the books of account. In our opinion, the cost debited in the books of account should be adopted as it would be inclusive of all expenses. Accordingly, we set aside the order of the learned CIT (Appeals) on this aspect of the matter and remit the same to the file of Assessing Officer with the di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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