TMI Blog2016 (1) TMI 802X X X X Extracts X X X X X X X X Extracts X X X X ..... ince been reconciled by the assessee. It is also pertinent to note that the assessing officer did not make any addition on account of alleged excess stock, meaning thereby, he was also satisfied with the reconciliation statement furnished by the assessee. We have already taken the view that the admission of ₹ 6.00 crores is related to the alleged excess stock found during the course of search. We have also noticed that the assessee has reconciled the difference in stock, meaning thereby, the assessee has rebutted the admission made by it, which was under pressure and mistaken belief. In the instant case, we have already held that the conduct of the proceedings shows that the search team has put up pressure upon the assessee and further the assessee was under mistaken belief that there was actually excess stock. Hence the assessee has agreed to surrender ₹ 6.00 crores under the mistaken belief that there was alleged excess stock. The assessee has maintained books of account and further the alleged difference in stock has been duly reconciled. Thus we are of the view that the Ld CIT(A) was justified in deleting the addition - Decided in favour of assessee Unexplained i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of arguments, the Ld A.R submitted that the weight of physical gold was measured by the search team themselves and hence there is always possibility of weight difference. Accordingly it was submitted that the excess stock of 685.650 grams, which work out to 0.7% of the physical stock could be the result of weight difference or on account of other minor factors like beeds, alloys, tie slips etc. In our view, there is merit in the said explanations of the assessee that the above said minor difference should be ignored, in the facts and circumstances of the case. On legal grounds also, we find merit in the contentions of the assessee. The Ld CIT(A) while altering the head of income and also in enhancing the addition has violated the provisions of sec. 251(2) of the Act in not providing opportunity to the assessee. In view of the foregoing discussions, we do not find merit in the decision of Ld CIT(A) and accordingly direct the assessing officer to delete the addition directed to be made by the Ld CIT(A). - Decided in favour of assessee - I.T.A. No. 2250 and 2251/Mum/2013, I.T.A. No. 2860 and 2861/Mum/2013 - - - Dated:- 4-11-2015 - SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of assessee company named Shri Nand Kishore Zaveri, wherein he agreed to offer a sum of ₹ 2.00 crores in AY 2009-10 and ₹ 4.00 crores in AY 2010-11, vide the answer given to question no.43. For the sake of ready reference, the relevant question and the answer given thereto are extracted below:- Do you want to say anything else? Ans :- I hereby voluntary agree to declare sum of Rs. Six crores. In this F.Y. 2008-09. I declare Rs. Two crores and in the F.Y. 2009-10 Rs. Four crores. I undertake to pay the taxes as applicable. There is dispute between the parties with regard to the purpose of this disclosure. At the time of search, the stock of diamond was inventorized by the search officials at 7531 carats and the same was valued at ₹ 35,62,85,369/-, whereas the books of account revealed stock of 7370.29 carats of diamond valued at ₹ 30,17,08,349/-. Therefore, the difference of 161.29 carats of diamonds valued at ₹ 5,45,77,020/- was taken as excess stock. According to the assessee, the alleged excess stock pointed out by the search officials has forced the director to offer a sum of ₹ 6.00 crores as additional income in two years a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee company or its Director(s) and he was under tremendous pressure with distress and disturbed state of mind after 72 hours of continuous grueling questions/answers and mental pressure, he had no other alternative but to surrender to the illegal dictates of Search Party in duress. Accordingly, he has agreed in any way to voluntarily declare an income of ₹ 6.00 crores against so-called alleged difference in stocks worked out by them without even allowing to verify from the financial and other records. After conclusion of the search, our Accounts Dept. has recalculated and rechecked the working of stock inventory prepared by the Dept. and found that there was no tangible difference in the stocks which, too, has also been explained elsewhere in this letter in response to your Query at Sl. No.3 and 4 and, as such, the basis of disclosure itself has no factual legs/foundation to stand/justify and, consequently, the declaration although made voluntarily, have no valid/ cogent ground, basis/ supportive plausible material and as such would be unfounded being indefensible in the eyes of law. Thus, the assessee claimed that he was forced to agree to surrender ₹ 6.00 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... res with the value of excess stock only during the course of post search enquiries and not at the time of search. Further, during the fag end of assessment proceedings only, the assessee has pointed out that there are computational errors in the valuation done by the search officials, so that the liability on account of voluntary disclosure of ₹ 6.00 crores can be done away with. Accordingly, the assessing officer concluded that the availability of unaccounted stock was within the knowledge of the assessee and the additional income of ₹ 6.00 crores was offered only to prevent search officials to investigate further. Accordingly he held that the attempt of the assessee to correlate the voluntary disclosure with computational error in the valuation done by the search officials is totally baseless. The Assessing officer further held that the assessee did not retract from its offer on the earliest available occasion, but only after fourteen months. He further held that the admission made in the statement recorded u/s 132(4) of the Act falls squarely within the ambit of section 115 of the Indian Evidence Act, 1872 and hence the same is neither open for retraction nor require ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Ld D.R further submitted the assessee has not only offered the additional income of ₹ 6.00 crores voluntarily at the time of search proceedings, but also confirmed the said fact during the course of post search enquiries by pleading that the entire amount of ₹ 6.00 crores should be assessed in AY 2010-11. He further submitted that the assessee did not retract from the statement given by him by filing any letter or affidavit. Hence the addition made by the assessing officer should be upheld as held by the Hon ble Delhi High Court in the case of Bhagirath Aggarwal Vs. CIT (2013)(351 ITR 143). He further submitted that there is no allegation that the statement was obtained from the assessee under coercion or duress and further the assessee did not retract from the statement immediately after the search was over. Hence the assessing officer was justified in assessing the income surrendered in the statement given u/s 132(4) of the Act as held by the Hon ble High Court of Chhattisgarh in the case of ACIT Vs. Hukum Chand Jain (2011)(337 ITR 238). Accordingly he submitted that the Ld CIT(A) was not justified in deleting the additions of ₹ 2.00 crores and ₹ 4.0 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the search operation. He submitted that this conduct of the search official would amply make it clear that the confession was obtained by force. He submitted that the search officials did not find any incriminating material, even though the search operations were conducted for almost four days and hence they had no other option but to put pressure upon the assessee. 13. He submitted that the kind of action of the search officials is against the dictates of the CBDT Circular dated 10th March, 2003, wherein the CBDT has clearly instructed that confessional statements should not be obtained. He submitted that the above said conduct would show that the search officials were pressuring the assessee to offer additional income. 14. The Ld A.R further submitted that the assessing officer was not correct in observing that the additional income of ₹ 6.00 crores surrendered by the assessee is independent of the alleged excess stock found at the time of search. He submitted that search officials simply stated to the director of the assessee that there was excess stock of diamonds without furnishing a copy of inventory taken by them and thus, they were putting pressure upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee company, it can be seen that the search officials conveniently omitted the difference diamond stock arrived at by them at ₹ 5.45 crores and has taken admission without referring to any of the seized material or any transaction giving rise to the income. He submitted that the admission was retracted by the assessee immediately before the ADI and is also deemed to have been retracted in view of return of income filed in pursuance to the notice u/s 153A of the Act. He submitted that though the admission is the best piece of evidence, yet the same is not conclusive and the assessee is well within his right to demonstrate that the same was incorrectly made and not voluntary. In support of his contentions, the Ld A.R placed his reliance upon various case laws, to which we will refer in the subsequent paragraphs. 17. In the rejoinder, the Ld D.R submitted that the assessee did not file any letter or affidavit to retract the statement given by him u/s 132(4) of the Act. However, with regard to the specific query as to whether there was any other material or evidence, other than the alleged excess stock/diary, the Ld D.R admitted that no other incriminating material supporti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grilling of any person, that too for four days, would put lot of mental pressure on any person. Under these set of facts, it is difficult to accept that the disclosure was voluntary. 20. The next question that arises is whether the surrender of ₹ 6.00 crores is independent of the alleged excess stock computed by the search officials or not. A careful perusal of the sworn statement would show that the search team did not put any question to the assessee about the alleged excess stock, which was claimed to the huge amount of ₹ 5.45 crores. It is quite strange, since normally the explanations of the assessee with regard to any incriminating material/difference would be sought in the sworn statement recorded u/s 132(4) of the Act. However, the assessee has contended before the tax authorities that the search team was pointing out the excess stock without furnishing copy of inventory statement. We have also noticed that the search took place for about four days continuously and only a diary containing certain trade transactions was found. Barring the pocket diary, referred earlier, the only incriminating material that was found during the course of search was the alleged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not a case that the search was completed within a short period from the time of commencement of search because of surrender of additional income. If no incriminating material supporting the offer of ₹ 6.00 crores was found in four days, then it is not correct to say that the search team could have found some other thing, if the offer of ₹ 6.00 crores had not been made. Hence, in our view, the assessee was justified in claiming that the additional income of ₹ 6.00 crores was offered only in connection with the alleged excess stock. 22. The Ld A.R placed reliance on the decision rendered by Hon ble Gujarat High Court in the case of Kailashben Manharlal Choksi V/s. CIT (328 ITR 411), wherein it was held as under: It is true that in normal circumstances this Court would not interfere in the finding of fact arrived at by the authorities. It is, however, to be seen as to whether the explanation tendered by the assessee would be considered by the authorities below . It is also to be seen as to whether an addition made is merely based on the statement recorded by the Assessing Officer under section 132(4) of the Act and whether any cognizance may be taken of the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., Question no.43 was posed on 21.09.2009, possibly by 3.00 a.m., without discontinuing the recording of statement on 20-09-2009. Hence, even if the view of the assessing officer that the surrender of ₹ 6.00 crores is independent of alleged excess stock is considered to be correct for a moment, the very fact that the surrender was made in odd hours, that too after grilling the assessee for almost four days, would only take us to the conclusion that the assessee should have been pressurized to offer additional income, without which the search team was not ready to conclude the search proceedings. It is further stated that the search was concluded immediately after the surrender of ₹ 6.00 crores. A careful perusal of the assessment order would show that the assessing officer has not brought on record any corroborative material to support the surrender of ₹ 6.00 crores. Hence, in our view, there is merit in the claim of the assessee that the above said surrender of ₹ 6.00 crores was made only on account of alleged excess stock. 23. At this juncture, we may extract the instruction dated 10.3.2003 issued by the CBDT, wherein it has advised the search officials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either eligible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income. (emphasis supplied.) Hence, mere admission of additional income would not automatically entitle the assessing officer to assess the same, if the assessee disputes the same subsequently with corroborative evidences. Hence, in our view, the assessing officer was not justified in placing sole reliance on the provision of section 115 of the Indian Evidence Act. 25. The Ld D.R as well as the assessing officer has reiterated that the admission was made in the sworn statement recorded u/s. 132(4) and the same is admissible in evidence. A careful perusal of provisions of sec. 132(4) as well sec. 292C would show that the said provisions state that the statement taken u/s 132(4) may be used in evidence in any proceeding under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be a figure lower than that returned by the assessee. The principles for determining the annual letting value under section 23 are now well-settled and if the value returned is not in accordance with such principles, it is open to the assessee to contend that the value as may be determined upon correct application of the law should form the basis of assessment. The revenue authorities, in our view, cannot be heard to say that merely because the assessee has returned a figure which is higher than the annual value determined in accordance with the correct legal principles, such higher amount and not the correct amount should be lawfully assessed. An assessee is liable to pay tax only upon such income as can be in law included in his total income and which can be lawfully assessed under the Act. The law empowers the ITO to assess the income of an assessee according to law and determine the tax payable thereon. In doing so he cannot assess an assessee on an amount, which is not taxable in law, even if the same is shown by an assessee. There is no estoppel by conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not produce any record, books of account or income tax record to rebut the presumption. Hence the decision was taken against the assessee. However, in the instant case, the assessee has maintained books of account and further the alleged difference in stock has been duly reconciled. In the case of Bhagirath Aggarwal (supra), the Tribunal has given a specific finding that there was no allegation of any threat or intimidation having been meted out by the revenue authorities. This factual aspect distinguishes the facts prevailing in the instant case. The decision rendered by the Hon ble Supreme Court in the case of Padmausundara Rao was relied upon by Ld D.R only to reiterate certain legal principles. 29. Hence, in our view, the various case laws relied upon by Ld D.R is either distinguishable on facts or not applicable to the facts prevailing in the instant case. 30. In view of the foregoing discussions, we are of the view that the Ld CIT(A) was justified in deleting the addition of ₹ 2.00 crores and ₹ 4.00 crores made by the assessing officer in AY 2009-10 and 2010-11 respectively. 31. We shall now take up the appeal filed by the assessee for assessment year 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. He further submitted that the assessee was not aware of any person by name Naresh Gupta and the assessing officer has also not taken any steps to locate or make enquiries with Naresh Gupta. Further, Shri Yashovardan Kishore Zaver , whose name is considered to be the abbreviation of YKZ has filed an affidavit explaining that the same is not related to him. Accordingly he submitted that the Ld CIT(A) was not justified in confirming the addition of ₹ 62,21,950/- made on the basis of a dumb document. 34. On the contrary, the Ld D.R submitted that the entries found in the pocket diary tallied with the transactions carried on by the assessee and it also contained the name of one of the directors and hence the same cannot be considered as dumb document. He further submitted that the assessee could not rebut the presumption placed upon it u/s 132(4A) of the Act. He submitted that the assessee has merely disowned the pocket diary and the same cannot be considered as rebuttal of presumption placed u/s 132(4A) of the Act. 35. We have heard rival contentions on this issue and perused the record. There is no dispute with regard to the fact that the pocket diary was found in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e could be resolved by estimating the gross profit that would have been earned on sale of the above said jewelleries. The assessee has furnished details of sales and gross profit ratio in page 34 of the paper book. We notice that the assessee has declared gross profit rate of 8.69% in AY 2009-10. Accordingly, we are of the view that the gross profit on ₹ 62,21,950/- computed @ 9% should be assessed in respect of the transactions noted down in the diary and the same works out to ₹ 5,59,975/- or say ₹ 5,60,000/- (rounded off). Accordingly, we modify the order of Ld CIT(A) on this issue and direct the AO to restrict the addition to the above said sum of ₹ 5,60,000/- on this issue. 37. We shall now take up the appeal filed by the assessee for assessment year 2010-11. The issue arising therein is whether the Ld CIT (A) was justified in facts and in law in converting the addition made by the AO from unaccounted sales into unexplained stock and in that process enhancing the addition in violation of sec.251(2) of the Act. 38. The facts relating to the above said issue are discussed in brief. During the course of search, the physical stock of gold jewellery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... old gold, broken pieces, standard gold bars and items receivable from karigars aggregating to 5251.100 grams. By including the same, the physical stock worked out to 98302.400 grams. However, the Ld CIT(A) did not accept the claim of the assessee that it had received 2261.150 grams on sale or return basis from suppliers. Accordingly, the Ld CIT(A) held that the physical stock should be taken at 98,302.400 and the difference between the above said physical stock and book stock of 95365.600 should be assessed as income of the assessee as unexplained investment u/s 69A of the Act. It is pertinent to note that the Ld CIT(A) did not consider it necessary to give an opportunity to the assessee as mandated in sec.251(2) of the Act on the following reasons:- 4.7.8 In view of the above factual legal analysis, I am of the firm view that the actual stock found on the datge of seartch was to be calfulated at 98302.400 gms as against which the admitted stock as per appellants books of accounts as on th same date was 95365.600 and therefore an addition of 2936.800 gms of excess stock is to be made and to that extent the addition needs to be rvised. 4.7.9 However, in view of the decisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ked by the search team and whenever such kind of questions were posed, he has replied that he needs to consult his accountant. Hence, in our view, it may not be correct to place full reliance on the statement given by the director to the effect that the gold stock belonging to others were not available with the assessee. We notice that the director had also stated that the gold stock belonging to the assessee were not kept with others. However, the Ld CIT(A) has accepted that the gold stock belonging to the assessee was available with the karigars, which is in contradiction to the stand taken by him when the assessee submitted that it has received jewelleries on sale or return basis from the suppliers. Thus, we notice that the Ld CIT(A) has chosen to accept the explanations on pick and choose basis, which is not permissible. Since the documentary evidences furnished by the assessee in support of claim of receipt of goods on sale or return basis have not been controverted by the tax authorities, in our view, the explanation of the assessee should be accepted. In the reconciliation statement prepared by the assessee, the assessee has arrived at excess stock of 685.650 grams. During t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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