9911796707
TMI Blog2015 (12) TMI 1417X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts, in upholding the addition of Rs. 11,00,000/- which is made without any incriminating document found during survey and without pointing any defect in the books of account. 4. The CIT(A) has failed to appreciate the fact that (a) the survey of jewellery factory was carried out without any jewellery appraiser or expert, (b) the Dy. Commissioner of Custom, Noida has also held that the excess gold found during the survey was on account of wastage recovery, which was erroneously omitted to be entered in books and there was no outside source of the said gold, (c) the custom's jewellery appraiser report which was commissioned by custom department, immediately after survey also upheld that source of excess gold was from gold recovered out of wastage generated during production activity. 5. The CIT(A) has failed to appreciate that the excess stock found during survey has been exported and its export is covered u/s 10A and as such the profit is exempt from tax particularly when it is admitted by Assessing Officer that the appellant is located in SEZ area and it is a 100% export unit. 6. The observation of CIT(A) are unwarranted, baseless and not based on the any material on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts. The AO while recording the statement of the working partner asked certain questions for clarification relating to jewellery weighting about 12kg. The assessee surrendered a sum of Rs. 1,31,00,000/- on account of various discrepancies. However, later on furnished a letter stating therein as under: "During the survey some stock of gold was observed by surveying team which was erroneously omitted to be entered in stock register. It was submitted before the survey team, in writing, that the same is on account of some normal loss, which accumulates for the firm during manufacturing process. The stock hence found is accumulated over a period of time. The visiting team was shown all related invoices to confirm our submission. However, the submission was not accepted, reason unknown to us and the assessee was asked to pay tax on stock. Henceforth in the absence of any other alternative and no legal advice available at hours, the assessee was forced to pay the amount hence asked for. Later, to further clarify the matter a semi judicial inquiry was conducted by Custom authorities, NOIDA. The inquiry continued for 3 days and after the inquiry a semi judicial judgment was passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y team, was ignored is baseless. The assessee was given due opportunity by putting question during the course of statement and the assessee had out rightly accepted the mistake and surrendered the value of gold along with difference in mfg. expenses. The total surrendered value on this account was Rs. 120 lakhs. Further Rs. 11 lakhs also surrendered on account of difference in books of account. Thus the total surrendered amount was Rs. 131 lakhs. IV. Further the submission that semi judicial inquiries conducted by the Custom Authority Noida have upheld that stock was generated from normal loss during manufacturing process. First of all it is to be seems that stock taking report has not been signed by all the officers who were present at that time. Further the appraiser of stock has not upheld that stock has generated from normal loss during manufacturing process but they have mentioned as under: The unit has mentioned that excess stock is on account of recovery of gold out of wastage. However, the unit is not maintaining records of wastage, but as per interaction with their production supervisor it seems they have got knowledge & facility of recovery of gold out of wastage, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er letter dt. 03.08.2006 the surrender was made to cover up certain discrepancies. When at the time of preparation of return and finalization of books of A/c it was noted that there was no discrepancy in respect of loose papers found during search and said surrender was made inadvertently under pressure from survey team. During the course of assessment proceedings all loose papers and documents found at the time of survey were tallied with the books of accounts of the assessee and no discrepancy was found then. Notings to this effect are there in the order sheet of the A.O. It is humbly submitted that since there are no discrepancies in respect of loose papers found and checked at the time of assessment proceedings, the surrender of Rs. 11 lakhs is meaningless and no addition is called for. As stated earlier that the surrender was not voluntary and the assessee was threatened with dire consequences if the surrender was not made. This submission was made before the A.O. also but was ignored by him. REG: 1.2 CRORES This surrender was made since there was pressure and threat from the survey team to make the surrender for the excess gold of about 12kg found from the factory premi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income/revenue is duly account for in books of account for A.Y 07-08 and the profits are exempt u/s 10A. The AO has himself admitted that the profit shown by the appellant is 100% exempt from tax under provisions of 10A." 8. It was further submitted that the entire jewellery manufactured was exported outside India to various concerns and 12kg gold which was recovered out of wastage was entered in the books of accounts after the survey and that the jewellery made from the same was also exported. It was further stated that recovery of gold wastage and conversion to jewellery was an ongoing and a continuous process, the revenue received from the sale of this 12kg gold is also part of the regular books of accounts which were audited and produced before the AO during the course of assessment proceedings. It was emphasized that the surrender was made under undue pressure and coercion by the survey team. It was stated that the custom department made a complete investigation and prepared a report on 14.08.2006 wherein it was mentioned that that the excess gold of 12kg was a result of the wastage accumulated and recovery made there from. In the said report it was accepted that 1.6% to 1.7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer of all ranks who conduct the survey. 5. The AO has accepted the fact that the income generated from export of jewellery is exempt under section 10A. Hence this proves that there was no need on part of the assessee to have gold outside the books of accounts. 6. The observation is baseless. We are challenging the very surrender made by us which was under coercion and illegal. The gold was recovered out of wastage. This has been authenticated by the customs department and it was exported. The revenues have been declared in the annual return." It was further submitted as under: "1. That the survey team directed Mr. Rajan Kohli to write the surrender letter by hand as per the wordings supplied by the survey team. The surrender letter was never voluntary and was made under coercion and pressure. Mr. Rajan Kohli is also filing an affidavit stating all these facts. Hence it would be incorrect to assume that Rajan Kohli himself stated that he would not claim any further exemption or deduction from the surrendered amount. In fact in the surrender letter it is stated by Rajan Kohli himself that this surrender of excess gold is on account of wastage suppression. This was accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt from automatic mental pressure, which is normal during any such survey, especially when huge discrepancies are detected). The law does not promote such retraction. All the court case/judgments, on the issue of retraction of agreed surrender during survey or searches, lay down that if there is undue pressure or forced surrender, any assessee would naturally protest immediately after survey or within a reasonable period, say, a week or so. The appellant, in this case also, in case he was sure of his explanation, would not have made any such disclosure, and, in case he was unduly forced to do so, would have filed a letter/affidavit of retraction within a day or two, or within 7 days or latest (even giving all benefits of doubt) within a month. But retracting from such surrender after more than a year, certainly indicates that appellant, strategized its defense, which took a long time, and that appellant planned its affairs before making formal retraction in form of return of income. Such belated, cooked-up retraction cannot be given any weightage." 10. The ld. CIT(A) observed that there cannot be any valid and bonafide justification of not accounting for any recovery out of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8.02.2006 out of the wastage which was sold on 25.08.2008 and the said fact was duly entered in the stock register which had been accepted by the income tax department. It was further stated that the assessee entered sales in the books of accounts and claimed the exemption u/s 10A of the Act. Therefore, the addition made by the AO was not justified when the assessee had already shown the sales of the impugned amount in the books of accounts, as such the addition made by the AO and sustained by the ld. CIT(A) for a sum of Rs. 1,20,00,000/- was not justified. As regards to the other addition of Rs. 11 lakhs, it was stated that the assessee himself agreed for the addition of Rs. 11 lakhs on account of various shortcomings to buy peace, the said income was in the normal course of business, therefore the deduction u/s 10A of the Act was allowable on the said income disclosed by the assessee. The ld. Counsel for the assessee referred to page no. 123 of the assessee's paper book which is the copy of the order sheet wherein it is mentioned that the assessee furnished purchase & sales register, cashbook, bankbook etc. which were checked & tallied and the assessment was framed u/s 143(3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd. In the present case, it is an admitted fact that the assessee was engaged in the manufacturing of jewellery, during the process of manufacturing on behalf of the customers, the gold wastage in the range of 1.65 to 1.85% was recovered from the gold of the customers, the said wastage was due to dust, impurities etc. and out of the said wastage the assessee was allowing 1% wastage to its worker. In this manner, the assessee was saving gold to the extent of 0.6% to 0.85% and recovered gold accumulated to the extent of 12kg. The gold recovered by the assessee from the wastage was in its regular course of business of manufacturing and export of gold jewellery and there was no local sale. The AO accepted that the assessee was eligible for deduction u/s 10A of the Act being 100% Export Oriented Unit established in Noida Special Economic Zone. The assessee disclosed the gold recovered from the wastage in its books of accounts after the survey and the same was sold which was also entered in the stock register. The department had accepted the books of accounts maintained by the assessee in its regular course of business. The assessee disclosed the sale of the gold weighing 12kg which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other materials or information as are available with the Assessing Officer" contained in section 158BB would include the materials gathered during the survey operation under section 133A; (iv) the material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; and (v) the word "may" used in section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act" makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself." It has been further held as under: "In view of the scope and ambit of the materials collected during the course of survey action under section 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the partners of the assessee firm that the disclosed income was assessable as lawful income of the assessee." 14. In the present case, the assessee agreed during the course of survey for the addition only when discrepancies in the loose papers were found. The assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
