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2016 (8) TMI 601 - ITAT JAIPUR

2016 (8) TMI 601 - ITAT JAIPUR - TMI - Nature of income - Addition on account of excess stock found during the course of survey and admitted by the assessee as its undisclosed investment in stock - Held that:- It is undisputed fact that the books of account were not found during the course of survey and the admission was made by the partner of excess stock of ₹ 1.25 crores for gold and silver jewellery but he has not written this disclosure in the return itself. The ld Assessing Officer ra .....

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d and silver jewellery purchased. This calculation has been considered by the ld CIT(A) which was found justified to him, accordingly he deleted the addition. It is settled law that statement recorded during the course of survey has no evidentiary value as held by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX Vs. S. KHADER KHAN SON [2013 (6) TMI 305 - SUPREME COURT ]. - Non considering the excess stock surrendered in survey as part of book profit U/s 40(b) - Held that:- .....

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dered this disclosure U/s 69 of the Act but the Coordinate Bench held that since the excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but it is part of overall physical stock found, provisions of Section 69B cannot be invoked and assessee is entitled for higher remuneration on excess stock disclosed in the return to the partner U/s 40(b) of the Act. The other case laws relied by the assessee are also squarely applicable, .....

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rse of survey - Held that:- We have heard the rival contentions of both the parties and perused the material available on the record. This issue required to be verified from the cash book prepared after date of survey by the assessee with reference to entries made in the cash book and accordingly, we set aside this issue to the Assessing Officer and direct to verify the cash available on the date of survey and take decision as per law. - ITA No. 647/JP/2014, ITA No. 610/JP/2014 - Dated:- 17-6-20 .....

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well as on the facts and circumstances of the case in deleting the addition of ₹ 40,47,335/- made by A.O. on account of excess stock found during the course of survey and admitted by the assessee as its undisclosed investment in stock. 2. That the CIT(A). Alwar has erred in law as well as on the facts and circumstances of the case in holding that there was no justification in the action of the A.O. for making addition on account of unexplained investment in stock even though such amount wo .....

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d thereby confirming addition of ₹ 50,71,492/-. 2. That the CIT(A) has erred on facts and in law in confirming the action of the A.O. in making addition of ₹ 1,69,161/- on account of alleged unexplained cash found during the course of survey ignoring that the cash found in survey is verifiable from the cash available as per cash book. Firstly we take revenue s appeal. 2. The assessee is in trading of gold and silver jewellery and bullion. Return for the year under consideration was f .....

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were recorded in these papers, notebooks etc. No books of account were found at the premises of the assessee. Moreover the assessee had not produced books of account before the Assessing Officer in the post survey proceedings. In such circumstances the credibility of the books of account maintained by the assessee and the same cannot be acceptable to the Assessing Officer. During the course of survey proceedings, the stock of silver and gold was inventorised and valued by independent approved v .....

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.314 Kgs of silver as excess stock and agreed to pay tax on the surrendered quantity. He valued the excess stock of gold at ₹ 1,18,00,000/- (@ 1560/- per 10 gms) and excess stock of silver at ₹ 7,00,000 (@ 20400/- per kg) and thus total surrender was made at ₹ 1.25 crores by the assessee. On verification of return, it was found by the Assessing Officer that the surrender admitted by the assessee has not been returned, therefore, he gave show cause notice on this issue. The asse .....

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books of account were kept with the Accountant Shri Alok, but the said accountant denied any kind of books of account of the assessee. It is concluded that during the survey, the assessee had not maintained books of account and was furnishing return on estimate basis. The disclosure made by the assessee in the return at ₹ 84,52,665/- against the excess stock found at ₹ 1.25 crores during the survey proceedings. The ld Assessing Officer held that this disclosure was made by one of th .....

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the case of Rakesh Mahajan Vs CIT 642 of 2007 (Taxpert) and 214 CTR 218 wherein it has been held that admissions constitute best piece of evidence against own interest. He further relied on the decision of Hon'ble Supreme Court in the case of Surjeet Singh Chhabra Vs Union of India & Ors. in SLP (C) No. 14028 of 1996 order dated 25/10/1996. After considering the reply and legal position of statement, he made addition of ₹ 40,47,335/- in the income of the assessee. 3. Being aggriev .....

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er on the date of survey that the gold ornaments had been valued at 80% average purity by taking the rate as ₹ 1560 per grm., as against the rate of pure gold at ₹ 1950 per gm. For the silver items the valuation has been done at ₹ 20,400/- per kg. by taking 57% average purity, as against the rate of pure silver of ₹ 35,500/- per kg. He further found that the assessee received gold from the customers at 250 gms valued at ₹ 2,14,500/- had not been considered by the As .....

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the grounds raised by the revenue are against deleting the addition of ₹ 40,47,335/- made by the Assessing Officer and difference between working made by the ld CIT(A) and disclosure made by the assessee at ₹ 8,55,862/-. The ld DR has vehemently supported the order of the Assessing Officer and argued that the assessee had admitted during the course of survey the excess stock of ₹ 1.25 crores. He has drawn our attention on paper book submitted by the assessee particularly state .....

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course of search i.e. decision in the case of HOTEL KIRAN vs. ASSISTANT COMMISSIONER OF INCOME-TAX [2002] 82 ITD 453 (ITAT[Pune]) and argued that it has evidentiary value. There is no difference in statement recorded U/s 133(A) and 132(4) of the Act, as such, there was no coercion and undue influence from the department. There was no force disclosure, therefore, he prayed to uphold the order of the ld Assessing Officer. 5. At the outset, the ld AR of the assessee has reiterated the arguments ma .....

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.) dt. 10.03.2003 has observed that there are instances where assessees are forced to confess the undisclosed income and it was advised that in search and survey there should be focus and concentration on collection of evidences of income and no attempt should be made to obtain confession of undisclosed income in the statement. It is further directed that AO should rely on evidence/material gathered during survey operation or thereafter while framing the relevant assessment order. The fact of ge .....

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made by the assessee in survey is illegal as such statement has no evidentiary value. In course of assessment proceedings, the assessee furnished the exact quantity of stock as per the books of accounts on the date of survey and its value as per the books vis-à-vis the quantity of stock and its valuation done by the valuer on the date of survey. On this basis excess stock of gold ornaments was worked out at 5313.252 gms (5.313 kgs) and that of silver ornaments was worked out at 56801.054 .....

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8,427/- and therefore the addition of ₹ 8,55,762/- (9308427- 8452666) should be confirmed. However, in raising this ground it is ignored that at the time of survey the stock is valued by assuming the gold ornaments at average purity of 80% and silver ornaments at average purity of 57%. As against this the assessee valued the excess stock at average cost. As a result the silver ornaments which was valued at the time of survey at the rate of ₹ 20,400/- per kg is valued by the assessee .....

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he department. 6. We have heard the rival contentions of both the parties and perused the material available on the record. It is undisputed fact that the books of account were not found during the course of survey and the admission was made by the partner of excess stock of ₹ 1.25 crores for gold and silver jewellery but he has not written this disclosure in the return itself. The ld Assessing Officer raised this issue during the assessment proceedings, which was replied by the assessee b .....

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) which was found justified to him, accordingly he deleted the addition. It is settled law that statement recorded during the course of survey has no evidentiary value as held by the Hon'ble Supreme Court in the case of COMMISSIONER OF INCOME-TAX Vs. S. KHADER KHAN SON [2013] 352 ITR 480 (SC). The ld DR has not controverted the findings given by the ld CIT(A) on the basis of fact, therefore, we do not have any reason to intervene in the order of the ld CIT(A). Accordingly, we uphold the orde .....

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ey as per provisions of Section 40(b)(v) of the Act that the remuneration is allowable to the working partner only on the book profit of the business when it is authorized in the partnership deed. The amount surrendered in survey on account of excess stock cannot be said to be part of book profit. The intent of the assessee firm was to conceal the same, but it was surrendered as the survey operation was carried out at the premises of the assessee firm. After providing the reasonable opportunity .....

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this amount, he had disallowed. He further relied Hon'ble Supreme Court decision in the case of Surjeet Singh Chhabra Vs Union of India & Ors and made addition of ₹ 50,71,492/-. 8. Being aggrieved by the order of the Assessing Officer, the assessee carried the matter before the ld CIT(A), who had confirmed the addition by observing that definition of book profit has been provided in explanation 3 of Section 40(b)(i) of the Act, which means net profit has to be computed in the manne .....

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ant U/s 69 of the Act and falls within the ambit of Chapter VI of the Act, therefore, he had not allowed remuneration to the partners claimed U/s 40(b)(v) of the Act. The assessee s argument that partners have declared remuneration paid to them in the return of income, therefore, it is a double taxation, which was also not found convincing to him. He had compared the past returned income of the partners and found that by considering the remuneration paid in the year under consideration, there wa .....

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. Now the assessee is in appeal before us. The ld AR of the assessee has submitted that it may also be pointed out that to the extent remuneration is not allowed in assessment of the firm, the same can t be taxed in the hands of the individual partners. Section 28(v) of the I.T. Act, 1961 specifically deals with this proposition which reads as under:- (v) any interest, salary, bonus, commission or remuneration, by whatever name called, due to, or received by, a partner of a firm from such firm: .....

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in the assessment of the firm has not excluded the corresponding remuneration from the income in the hands of the partners. Thus, when such remuneration is taxed by the department in the hands of the partners, the same can t be disallowed in the assessment of the assessee firm. The Ld. CIT(A) has not correctly interpreted the provisions of section 40(b)(v) and therefore he has erred in upholding the order of AO in not allowing the claim of remuneration with reference to the excess stock offered .....

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s not ended. The excess stock was found but the assessee return was due to file in October, 2011 U/s 139 of the Act, which was filed on 29/9/2011. The assessee s case was auditable and computation of income was submitted alongwith the return. The assessee claimed remuneration to the partner on the basis of book profit calculated by the assessee U/s 40(b)(v) of the Act. As per explanation-3, the book profit means the net profit as shown in the P&L account of the relevant previous year compute .....

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vey U/s 133A was found. The ld Assessing Officer considered this disclosure U/s 69 of the Act but the Coordinate Bench held that since the excess stock is a result of suppression of profit from business over the years and has not been kept identifiable separately but it is part of overall physical stock found, provisions of Section 69B cannot be invoked and assessee is entitled for higher remuneration on excess stock disclosed in the return to the partner U/s 40(b) of the Act. The other case law .....

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nd No. 2 of the assessee s appeal is against confirming the addition of ₹ 1,69,161/- on account of unexplained cash found during the course of survey. The ld Assessing Officer observed that during the course of survey, cash of ₹ 1,19,161/- was found and during the course of survey, no books of account was found and also failed to produce the books of account after survey. Therefore, he made addition of ₹ 1,19,161/- (wrongly taken figure at ₹ 1,69,161), which was challenge .....

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