9911796707
TMI Blog2017 (12) TMI 988X X X X Extracts X X X X X X X X Extracts X X X X ..... appeared on behalf of assessee and Shri Saurabh Kumar, Ld. Departmental Representative appeared on behalf of Revenue. 2. Solitary issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of Rs.3,06,28,425/- on account of unexplained investment u/s 69 of the Act. 3. Briefly stated facts are that assessee is a private limited company and engaged in manufacturing / trading of bidi and trader of electronic goods. The assessee carries on its manufacturing of bidi activity under the trade name M/s Kalpana Biri Manufacturing Co. Pvt. Ltd. The assessee has its manufacturing units / branches for bidi at three places as detailed under: a) Aurangabad factory b) Omarpur Branch c) 16 Mile Malda Branch Similarly, assessee was carrying on its electronic business under two names at two different places as detailed under:- i) KBM Electronics, having its address at 1/32, Man Vikas Marg, New Delhi- 92 ii) Kalpana Digital World, having its address at 1/10, 12 Main Vikash Marg, New Delhi-92 The assessee filed its return of income dated 29.09.2010 declaring its total consolidated income of Rs.2,35,99,186/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rden) 1,47,600 kg 56,800 kg 3280 bg of 45 kg 948 bags of 60 kg) Omarpore (factory) 4050 kg 5700 kg 90 bags of 45 kg 95 bags of 60 kg Malda (factory) 1,98,600 kg 3310 kg of 60 kg bag Total 10,62,880 kg. Bidi:- Bidi variety Manu-13 Man 25 Kalpa 25 Bhanat 25 Parbadi Aurangabad (factory) 150 pkt x 37440 56,16,000 stock 115 pkt x 48000 55,20,000 stock 82 pkt x 48000 39,36,000 stock 82 pkt x 48000 3936000 stock 178 pkt x 31680 56,39,040 stock 2,4647,040 stock Malda 162 pkt x 37440 60,65,280 stock 123 pkt x 48,000 59,04,000 stock 93 pkt x 48000 44,64,000 stock 117 pkt x 48000 56,16,000 stock 184 pkt x 31680 58,29,120 stock 478784 stock Omarpur 58 pkt x 37440 21,71,520 82 pkt x 48000 34,36,000 62 pkt x 48000 29,76,000 58 pkt x 4800 27,84,000 53 pkt x 31680 16,79,040 43546 Total 6,60,72,000 Above mentioned valuation (physical) is done in front of your employee as you stated and mentioned as employed. Are you satisfied with the above valuation and diff. arisen due to mis value with your answer. Ans 5: Sir, I am stated with valuation made by Survey team as it is taken in front of me on my employee. But I am n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thank you. The above statement given by me to the best of my knowledge and belief and without any force or coercion and second mind. Sd/- Alauddin Biswas 29.3.10" From the above statement, it is clear that assessee during the course of survey proceedings accepted under valuation of closing stock for Rs.3,06,28,425/-. However, assessee has not offered the same in its return of income. Therefore, AO called upon the assessee to explain why the stock found during the course of survey should not be added to its total income. In response to the notice the assessee made the submission as detailed under:- a) The survey was conducted at the Aurangabad factory of the assessee only but there were two more branches of assessee as disclosed but no survey was conducted at other branches. Thus, no physical inspections of the stocks lying on the branches were carried out by survey team. b) No discrepancy of whatsoever has been pointed out by the survey team in the books of account of assessee. Therefore, there is no question of any under valuation of closing stock which is not recorded in the books of account. c) The statement u/s 131 of the Act was recorded under coercion. The assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey Team. However none of the survey team members physically visited those Branches. c) We also afforded them the necessary facility to check and verify the cash, stock of raw materials and finished goods and other valuable articles or things which were found in the our company's Aurangabad factory. d) An inventory of cash of Rs. 14,96,160.00(Rupees fourteen lacs Ninety Six Thousand One Hundred Sixty) only of Aurangabad Factory was prepared. e) An inventory of books of account, (of those Books of accounts which they thought necessary) was also prepared, placed marks of identification on the books of account or other documents and out of that list some of the books of account were impounded under section133A(2)(ia) of the Income Tax Act, 1961. f) All the books of account, cash inventory, inventory of Books of account were duly signed by me, one of the director of the company. g) I also furnished such information / statement as the survey team required under section 133A of the Income Tax Act, 1961. 3. That the Survey Team did all the work at the our Company's Aurangabad Factory only. None of the members of the Survey Team paid physical visit to the other two branche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce/Factory at about 11.30 A.M as I generally come to the factory taking break first only. After starting of survey operation I was the with the survey team. I not even moved for taking lunch so that my absence may not cause any hardship to the survey team. I not even moved to take information of situation of my father, Sri Siddique Biswas, aged about 84 years (Then), who is suffering from prolong illness. The survey was continuing more than 10 hours. All these cumulatively affected my mental and physical strength and broke down. At about 11 p.m. I put my signature mechanically wherever the authorized officer directed to get rid of this most pathetical and humiliating situation. 8. After signing the alleged statement claimed to have been taken under section 131 of the Income Tax Act, 1961, the authorized officer delivered me two notices u/s 131 after signing thereon and graciously said that he had considered my submission and for this Rs. 1 Crore would not be required to be deposited by 31/03/2010. Only Rs. 50,00,000.00 would be required to be deposited by 31/03/2010 and theist amount of Rs. 50,00,000.00 required to be deposited in two installment of Rs. 25,00,000 each on 30/04/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sits of tax which were made after survey would result huge refund only which was unwanted and further requested to return the cheque dated 30/04/2010. But no response was received. 14. On 22/09/2010, we further prayed for stop collection of rest amount of Rs. 25,00,000.00 stating detailed facts of it's financial position and placing a cheque of blank amount and blank dated (vide No.430951) issued in favour of the Income Tax Department as per instruction of the then Ld. ACIT, Circle Murshidabad. The Ld. ACIT Murshidabad ultimately ordered for stop collection of rest amount of Rs. 25,00,000.00 which was due to be paid on 30/06/2010 against the above stated security in the form of Bank Cheque with blank date with a commitment that if after assessment, demand arises, that will be recovered through that cheque. 15. On 29/09/2010 your assessee company fled the return of income for Assessment Year 2010-2011 (related to financial year 2009-2010, in which the survey was conducted) and that return has been selected for scrutiny assessment. 16. Our company further prayed for certified copy of order sheet, alleged deposition claimed to have taken u/s. 131 signature on which was taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in filing the retraction statement. iv) The assessee immediately after the receipt of the statement submitted a letter dated 27.03.2012 narrating the fact that the statement was obtained under coercion. The assessee also submitted that even during assessment proceedings it was denied that the assessee has accepted in his statement u/s. 131 of the Act that there was under valuation of closing stock. The delay in filing the retraction statement occurred due to the fact that the revenue did not provide the certified copy of the statement. v) The survey team did not visit to other branches of assessee and therefore the physical stock of those branches cannot be relied upon. The physical stock statement was neither signed by any store keeper nor it was prepared in presence of any person. Therefore, the valuation of alleged suppressed stock is without any basis. vi) The assessee in its statement u/s. 131 of the Act has clearly stated in question No.5 that he is not sure with the difference of the stock taken by the survey team vis-a-vis stock register. The director of the assessee-company fully co-operated during survey proceedings and produced all the necessary books of account in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gabad on 29.03.2010. During the course of survey, physical stock was inventoried which was compared with the stock maintained in the books of account. The AO found the difference between the physical stock recorded in the books of account for Rs.3,06,28,425/-only. Accordingly, the AO recorded the statement of the assessee u/s 131 / 133A wherein the assessee admitted the suppression / under value of closing stock and agreed for the addition of the impugned amount. However, the assessee did not offer the amount of suppressed stock as income in its return filed u/s. 139(1) of the Act. Therefore, AO made the addition to the total income of the assessee on the basis of discrepancy observed in the stock as discussed above. The view taken by the AO was subsequently confirmed by Ld. CIT(A). However, we find that the orders of Authorities Below suffer from several infirmities as detailed under:- a) The survey team has not visited to the other branches of assessee as discussed above. Therefore, the information about the availability of physical stock on the date of survey collected by Revenue during the survey proceedings cannot be relied. It is because the revenue failed to discharge the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny for the purpose of their inspection. According to the direction of the Survey Team, your assessee brought those books from those Branches and produced those books for the purpose of inspection of the Survey Team. However none of the survey team members physically visited those Branches. c) Your assessee also afforded them the necessary facility to check and verify the cash stock of raw materials and finished goods and other valuable articles or things which were found in the Company's Aurangabad factory." Therefore, we hold that Revenue has no jurisdiction to resort the powers under subsection (1) & (2) of Section 131 of the Act while surveying the accounts of assessee u/s. 133A of the Act. It is because, in the instant case the assessee neither refused nor evaded with the competent authority. In this regard, we find support and guidance from the Hon'ble jurisdictional High Court in the case of Dr. Vijay Pahwa vs. DCIT reported in 250 ITR 354 (Cal) wherein the relevant extract of the judgment is reproduced below:- "Summons can be served under section 131(1) only in case of obstruction by the person concerned or when some sort of hindrance is put up by him. In the instant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacturing unit. Q. No.3: Give the address of the sales unit of this company? A. 3: We have two sale units (1) At Pandua, Kalna Road, Hooghly (2) At 1/32, L.P Main Vikash Marg, Laxmi Nagar, Delhi-92 Q. No.4: On your accounts it is seen that there is two divisions named (1) KBM Electronics & (2) Kalpana Digital World exist, what are the legal provision and business of these units? A.4: These are the sister concern of M/s Kalpana Biri Mfg. Co. (Pvt) Ltd. And profit of those units are merged with the profit of the company. Both the units are carrying on electronics business. Q.No.5 What are the books of accounts are maintained by you? A.: Cash book, ledger, stock registers of all raw materials, sales register, production register etc. are maintained manually. Q.No.6: Give the details of cash in hand and bank balance? A.6: Cash in hand would be approx. 15 lakhs and OD balance approx. 2 crores. Q.No.7 Explain the modus of operendi of your business and labour payments? A.7: Raw materials are purchased directly from markets, distributed through medium of Munshi amongst the Home workers who are directly engaged by the company. We deduct the TDS from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely." From the above circular it is amply clear that the CBDT has emphasized to its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/ undue influence. Keeping in view the guidelines issued by the CBDT from time to time regarding the statements obtained during search and survey operation, it is undisputedly clear that the lower authorities have not collected any other evidence to prove the impugned under valuation of stock other than the statement. Therefore under such facts & circumstances we are inclined to reverse the order of authorities below. 7.2 We also note that had there been any difference between physical stock and stock declared in the books of assessee then AO should have rejected the books of account by invoking the provision of Section 145(3) of the Act. It is because the books of accounts in such a situation cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax Act, 1961, signature on which was taken under duress, is full of facts and figures which are not true. xxxxx" 7.3 It was also observed that the CBDT vide File No.414/105/2008-IT-(InV1) has directed to its officers to record the proceedings during survey in specified format. The relevant format for recording inventory is reproduced below:- "V Inventory of stocks found during the course of survey carried out on (date of survey) In the case of M/s _________________ at (address) ________ stock was found as under: S No. Description Quantity (in Nos./wt.) Value (in R s) Basis of valuation Remarks However, from the survey proceedings, we find that prescribed format has not been used by the survey team. Therefore, the information gathered during survey proceedings cannot be relied upon. 7.4 Simply the tax paid by assessee during survey proceedings does not mean that assessee has admitted undisclosed income. In our considered view, for finding out the undisclosed income of assessee there had to be tangible materials available on record which in the instant case are mi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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