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2016 (5) TMI 622 - ITAT KOLKATA

2016 (5) TMI 622 - ITAT KOLKATA - TMI - Undisclosed stock found during survey u/s 133A - Held that:- We find that the stock difference is duly explained by the assessee by offering the sum of ₹ 1.80 crores in Asst Year 2008-09 which would offset all the discrepancies found during the course of survey and there is no scope for making further addition towards discrepancies in stock of jewelleries either in Asst Year 2007-08 or in Asst Year 2008-09. Hence we hold that the Learned CIT(A) had r .....

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inst the order of assessment framed by the Learned AO for the Asst Year 2007-08 u/s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ). 2. The only issue to be decided in this appeal is as to whether a sum of ₹ 83,45,740/- which according to Learned AO is an undisclosed stock found during survey u/s 133A of the Act could be added in Asst Year 2007-08 in the facts and circumstances of the case. 3. The brief facts of this issue are that assessee is a partnership-firm r .....

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nt appeal. In the succeeding Financial Year 2007-08, Survey u/s.133-A of the I. T. Act was carried out on 18-03-2008 at the assessee's shop at Salt Lake. In course of the said Survey, some Exercise Books and Computer Printouts were impounded and inventorised as twelve items marked with Identification Nos. BBD-1 to BBD-12 respectively. Such impounded books and records inter alia included one Bound Register marked as BBD- 2 which became the central point of controversy in the assessment for th .....

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e of ₹ 1,80,27,100/- after payment of Advance-tax of ₹ 53,80,000/- and self-assessment tax of ₹ 9,49,782/- . Coming back to the assessment year 2007-08 now under appeal, the assessee states that the Return u/s.139(1) for this assessment year was filed electronically within time on 08-10-2007, declaring Total Income of ₹ 5,76,027/- . Alongwith the said Return, Tax-audit Report was also electronically furnished and the Hard-copy of the same was filed in course of scrutiny a .....

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by the assessment order that no defect whatsoever was found on such examination. The relevant lines from the impugned assessment order are quoted herein below: During the course of hearing, the books of A/cs for the A. Y. 2007-08 were produced by the A/R of the assessee and those were examined and tallied with the impounded books of a/cs. and documents .... " However, the Learned AO called for the Books of Account for the succeeding Financial Year 2007-08 and obtained from the assessee, the .....

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h of Computer Printouts for the Financial Year 2006-07, collectively marked as BBD-10. At the hearing on 27-11-2009, the Authorised Representative explained the contents of the aforesaid Exhibits. In regard to the alleged Gold Ornaments Stock Book, marked as BBD - 2, it was inter alia explained that the said Book was started for keeping control over the stock displayed in the show-case at the assessee's show-room at Salt Lake. The idea for maintaining the said Book was mooted for exercising .....

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reiterating that as no question had been put by the Survey Party to Sri Kanak Dutt, Partner, about the contents of any of the Exhibits, including BBD-2, there was no occasion for the assessee to comment on the Book BBD-2 in course of recording his statement u/s.133- A of the Act. The Learned AO not satisfied with the replies and explanations of the assessee, sought to make an addition of ₹ 83,45,740/- towards undisclosed closing stock based on entries found in BBD -2. 4. Before the Learned .....

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o limbs, namely, that the exercise book BBD-2 bore evidence of undisclosed stock, and that the entries therein, excluding on three pages 89,90 & 99, related to the Financial Year 2006-07. In reply to the first limb, the assessee submits that it has been explained althroughout that the Book BBD-2 was started for keeping control over the stock displayed in the show-case at the shop. This Book was for memoranda purposes only, which would become manifest on a bare look at it. It would be kindly .....

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7 . For proving this fact beyond doubt, the assessee prepared a statement giving details of some of the items recorded in the Book BBD-2 which were sold within the relevant Financial Year and duly recorded in the regular Books of Account. The said Statement was enclosed as Annexure A to the written submission. For the reply to the other limb of the allegation that the entries in BBD-2, excluding on three pages, related to the Financial Year 2006-07, it was stated that reference may kindly be mad .....

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ose on pages 89, 90 & 99, related to the Financial Year 2006-07. For driving home this allegation, he has noted the contents of the said Book BBD-2 on pages 2, 3, 4 & 5 of the impugned assessment order. The assessee proceeds to deal with the said notings in the following lines. The Book BBD-2, with written pages from 1 to 119, has four columns, namely, Entry Date , Item code , Weight and Date of Delivery . It was argued that the Entry Date column of the Register has been filled up at pag .....

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lusion against the assessee. On a close look into the aforesaid allegation, it would be kindly envisaged that in making such unfounded allegation, the Learned AO in fact has treated the entries bearing no dates at all, as relating to Financial Year 2006-07. It was further submitted that any attempt to read the said undated entries as relating to the Financial Year 2006-07 is wholly unwarranted as only 14 entries bore dates falling within the Financial Year 2006-07. In this context , the assessee .....

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that it has been noted by the Learned AO that some of the items bear the Delivery Date as falling in the succeeding Financial Year 2007-08. It has also been found by him that as many as 59 items were delivered before the date of Survey, obviously in the Financial Year 2007-08. It has been further found that two Delivery Dates were noted as 21-12-2008 and 16-04-2008 i.e. falling in the Financial Year 2008-09. It was argued that the aforesaid observation of the Learned AO also goes against his al .....

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ssee submitted that the said noting on the cover page of the Book BBD-2 was made in course of the Survey on 18-03-2008, at the insistence of the then Learned AO as would be envisaged on a bare look at it. It was explained that had the said Register been for the financial year 2006-07 alone, there could not have been any entry of dates falling in the Financial Year 2007-08 and 2008-09 as admitted by the Learned AO in the impugned order, and pointed out herein before. The attention of the Learned .....

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y on account of undisclosed stock for the Financial Year 2006-07. 4.3. Version of the Learned AO - The delivery date column shows prospective dates. Some of the items show the delivery dates falling in the Financial Year 2007-08. It was explained that this point has already been dealt hereinabove in the preceding paragraphs. 4.4 Version of the Learned AO - In as much as the assessee accepted the fourteen items, against which dates had been mentioned in the proper column of the register, as undis .....

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s, bearing dates falling within the Financial Year 2006-07, as its income for that year and paid tax on it. This was done for buying peace and proving bonafides of the assessee. On these facts, it has been alleged by the Learned AO that the assessee conceded that the entries in the Book BBD-2 were of undisclosed stock. It was argued that while making the aforesaid allegation, the Learned AO failed to take note of the assessee's contention that the aforesaid offer was made without prejudice t .....

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asis. This point has been dealt with in the preceding paragraphs. 4.6. Version of the Learned AO - The circumstantial evidences suggest that the Book BBD-2 was for the Financial Year 2006-07 and entries in three pages related to Financial Year 2007-08. It was impounded as register for the Financial Year 2006-07 when the assessee did not raise any objection. It was explained that the Learned AO had relied on the circumstantial evidences to support his allegation that the Book BBD-2 ( excepting th .....

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material times were that during the Survey on 18-03-2008, full inventory of stock was prepared by the Survey Party with the help of a Registered Valuer and the excess stock, not recorded in the regular Books of Account, was declared by the assessee as representing his income for the assessment year 2008-09. It was further submitted that on weighing the aforesaid circumstantial evidences in their proper perspective, it would be kindly appreciated that after offering the undisclosed trading stock .....

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ound at the shop premises, which were inventorised and valued by a Registered Valuer of the Department. The assessee drew the attention of the Learned CITA to Question - 14 of the said sworn statement of the Partner, wherein it could be found that the Survey Party made comparison of the stock physically found and those as recorded in the Stock Book and noted the difference. It was argued that from the said noting, it would be seen that the difference in case of one item alone i.e. Gold Ornaments .....

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t of the assessment proceeding. Accordingly it was submitted that on the aforesaid admitted facts borne out by record, if the Learned AO proceeds again to tax the assessee in respect of a part of the same undisclosed stock for the immediately preceding assessment year 2007- 08, then it would be a case of double taxation of the same income which in any event is not sustainable in law. The Learned CIT(A) appreciating the aforesaid contentions, deleted the addition made by the Learned AO. Aggrieved .....

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ertaining to the year of survey i.e Asst Year 2008-09 , for which year, the assessee had made offered a sum of ₹ 1.80 crores at the time of survey followed by filing of return and paid taxes thereon. Hence there cannot be any separate addition based on the document BBD /2 either in Asst Year 2007-08 or in Asst Year 2008-09 as it is already part and parcel of disclosure made in the sum of ₹ 1.80 crores. In response to this, the Learned DR vehemently supported the order of the Learned .....

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aving stated that the said document is memoranda register had come forward to offer a sum of ₹ 2,12,400/- for the Asst Year 2007-08 based on dates found in the entries pertaining to financial year 2006-07. Apart from this, it is not in dispute that the assessee had already offered a sum of ₹ 1.80 crores for the Asst year 2008-09 towards difference in book stock and physical stock found during the course of survey on 18.3.2008. 6.1. It is not in dispute that the said impounded documen .....

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t the assessee had come forward to offer some items for the Asst Year 2007-08 in the sum of ₹ 2,12,400/- based on the same impounded document BBD/2. Based on this alone, it would be unfair to ask the assessee to explain the contents of the document which are undated. However, we find that the assessee had tried to explain that the said document is only memoranda register maintained by the salesman in order to have better control of the stocks available in the showcase. We find from the per .....

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basis. It has been observed that on certain pages, delivery dates are subsequent to the date of survey. We find that the assessee had stated that the stock register is maintained in computer and the survey party also had given cognizance to this fact by questioning the assessee only for the stock difference found between the physical stock and the stocks as per computer. Hence the contention that the impounded document is a memoranda register maintained by the salesman for better control of stoc .....

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books of accounts found from the premises of M/s.Benud Behari Dutta of B.E 103, Sector-I, Salt Lake City, Kolkata-700 064 during survey operation U/s. 133A of Income Tax Act 1961 on 18-03-08 and are impounded/not impounded Sl. No. Description Identification mark 1. Green Covered Exercise book BBD-1 2. one binding Register of Gold ornaments Stock Book BBD-2 3. one exercise book BBD-3 4. one black cover exercise book BBD-4 5. one Binding Red cover Exercise book BBD-5 6. one black cover exercise bo .....

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our business premise, valuation of stock has been determined as per Departmental approved Valuer as per his Report dated 18.3.2008 containing SL No. 1 to 27 in 4 pages to the value shown as ₹ 3,21,59,196/- as well as net weight 20166.000 gms. Diamond ct. 115.520ct. Please explain the source of investment on the said stock. Ans. The rate adopted by the valuer is not accepted at present because the rate mentioned in the valuation Report is not tallied in the valuation item-wise. However, I h .....

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0gms 3980.358 gms 15333.612gms Gold net wt(18ct) 700.000 10.044 689.956 Gold (24 CT) NIL 765.490 (-)765.490 Diamond 115.520 ct 21.700 ct 93. 82ct Gold ornaments 152.000 gms NIL 152.000 gms Please explain why the above discrepancies will not be treated as undisclosed investment in stock. Ans: The above mentioned difference in weight is our undisclosed income of current Accounting Year 2007-08 which I have voluntarily disclosed before you on your arrival on which I am ready to pay advance tax on o .....

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