TMI Blog2011 (10) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... screpancy in the stock of gold, gold ornament and diamond ornament was noticed and in that regard a statement of Shri Nirav J. Soni, a co-partner and son of the karta was recorded and relevant question was reproduced in the assessment order as follows : "Question 11 : Today during the course of survey proceedings the physical stock taken in as per annexure-S pages 1 to 7, and in comparison of the book stock as per answer 4 is as under : Ornaments of 22 carat gold-3036 grams excess ornaments of 18 carat gold-107 grams excess Diamond ornaments-38 carat (excess stock valuing Rs.35,29,200) is found what is your explanation regarding this discrepancy. Answer 11 : I agree with the physical stock as per annexure-S pages 1 to 7. The excess of physical stock found is a fact and we agree to pay the taxes on this amount over and above the regular income earned during this current year." On account of the said statement, during the course of survey proceedings, an additional unaccounted income of Rs. 40 lakhs was stated to be voluntarily offered for taxation. It has also been noted by the Assessing Officer that a tax of Rs. 15 lakhs has also been paid vide three cheques of Rs. 5 lakh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u are trying to conceal the unaccounted investment made in the excess stock found by the authorized officers on the day of survey. You are again reminded of the fact that from the above four bills/ vouchers not a single bill/voucher was found on the day of survey. You are therefore, requested to show cause as to why the amount of Rs. 35,29,200 should not be considered as unexplained investment and also deemed concealed income for the relevant year and added to the total income." The Assessing Officer was not convinced and noted that the four bills/ vouchers were not entered in the "computerised stock register". The Assessing Officer has also mentioned that Mr. Niraj J. Soni was very much conversant with the business. Finally, the said amount was held as unexplained investment and taxed by invoking the provisions of section 69B of the Income-tax Act. The matter was carried before the first appellate authority. While affirming the action of the Assessing Officer, the learned Commissioner of Income-tax (Appeals) has reiterated that if the allegation of the assessee was that the said statement was recorded under pressure, then why it was retracted after the lapse of five months. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 7 and on comparing the same with the stock shown in the books and as answered by you in answer 4 above, there is difference in 22 carat, 18 carat and diamond ornaments as under : 22 carat gold ornaments 3036 gm. extra 18 carat gold ornaments diamond ornaments 107 gm. extra Diamond ornaments 38 carat shown extra cost of which is Answer 11. Presently, my elder brother Shri Bharatbhai Soni, who is handling this is admitted to hospital. However, from the stock shown in the list annexure S pages 1 to 7 and the stock according to books, it is believed that this difference is there and I agree to pay the tax on the same." It was stated that the main person handling the business, having the knowledge of the business, was hospitalised at the time of survey. Due to his absence that discrepancy could not be explained then and there at the time of survey. The learned authorised representative has also stated that some of the bills/vouchers were kept by him which were relevant to explain the excess stock found at the time of survey. The learned authorised representative next plank of argument was that the stock was fully explainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n on the corresponding entries made by those parties in their respective accounts. The learned authorised representative has also referred to few bank statements in support of the payments made. He has cited few case law for the legal proposition that a statement recorded at the time of survey under section 133A of the Act has no evidentiary value. 1. Paul Mathews and Sons v. CIT [2003] 263 ITR 101(Ker) 2. Abhi Developers v. ITO [2007] 12 SOT 444 (Ahd) 3. Kailashben Manharlal Chokshi v. CIT [2010] 328 ITR 411 (Guj) 4. CIT v. Central Mall [2011] 332 ITR 320 (P H) Further, in support of the retraction, the learned authorised representative has also cited few case law as follows : 1. CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad) 2. Jain Trading Co. v. ITO [2007] 17 SOT 574 (Mumbai) 3. Deputy CIT v. Pramukh Builders [2008] 112 ITD 179 (Ahd) On the other hand, from the side of the Revenue, the learned Departmental representative Dr. Jayant Jhaveri has supported the orders of the authorities below. He has argued that the entire explanation was nothing but an afterthought. The evidence now placed were never placed before the Assessing Officer. A discrepancy in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stage of assessment proceedings. Now the totality of the circumstances demands to verify the correctness of the stock of "diamond ornaments", one from the survey records of the Revenue, and the other, from the books of account of the assessee. This can only be done by the Assessing Officer. Therefore, we deem it proper to refer this issue back to the Assessing Officer for de novo consideration, needless to say, after providing a reasonable opportunity of hearing. It has been informed that when the proprietor of the concern had resumed the business activity, then the discrepancy between the stock as per the books of account and the stock found at the time of survey was reconciled. Physical stock of gold ornaments taken by the officers on the date of survey was 28,496 out of which it was explained that 481.950 was the stock received from the customers for repairing. This fact was accepted by the Assessing Officer. However, now before us it was demonstrated that in respect of 1821.320 the explanation was that the same was purchased from "Designer Jewellers" vide bills dated December 18, 2006. It was a mistake while recording the position of the stock in the "computerised stock r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f those records/evidence it was alleged that an excess stock was unearthed. The emphasis before us is that had the proprietor of the concern was available, then there was no possibility of non-satisfaction of the Revenue Department specially when the evidence were already in existence. It has been stressed upon that no new evidence was placed therefore, it was all the more necessary to revert the issue back to the Assessing Officer to re-examine all those evidence to verify the veracity of the said claim. In view of this and conside ring the entirety of the circumstances of the case, specially when certain documents and evidence are required to be investigated afresh, we deem it necessary to restore the issue back to the stage of the Assessing Officer for de novo adjudication. Ground No. 1 of the assessee is therefore allowed but for statistical purposes. Ground No. 2 reads as under : The learned Commissioner of Income-tax (Appeals)-XVI, Ahmedabad, has erred in law and on facts of the case by confirming the addition of Rs. 4,59,392 in respect of labour charges expenses for excess stock worked out during the survey proceedings. At the outset, it has been informed that this g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are on record. Gift articles were found to be ladies hand purse, pen holders, plastic bags, leather passport holder cards with compartments, spectacle cases, jute bags, jewellery box, etc. By the very nature of these articles, it had clearly indicated that those were meant for distribution to customers to promote the sales. The learned authorised representative has also explained that it is customary to handover the gold articles in a pouch to the customers. We therefore hold that the expenditure was business related, hence allowable. In the result we hereby reverse the findings of the authorities below and direct to allow the expenditure. This ground is allowed. Ground No. 4 reads as under : The learned Commissioner of Income-tax (Appeals)-XVI, Ahmedabad, has erred in law and on facts of the case by confirming the estimated ad hoc disallowance of Rs. 3,50,000 out of stationery expenses. The observation of the Assessing Officer was that against the total turnover of Rs. 5.94 crores the assessee has claimed stationery expenses of Rs.42,078 last year, however, during the current year almost on similar turnover stationery expenses were Rs. 4.40 lakhs. The assessee has explaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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