TMI Blog2019 (12) TMI 1201X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made by the AO for unrecorded stock of ₹ 84,00,000/- merely on the basis of recorded statement and without basis of any material evidence and there the same needs to be deleted. We, accordingly order so and allow ground no.1 raised by the assessee. Ad hoc addition for offering lower net profit stands confirmed by the CIT(A) - HELD THAT:- AO after taking average of last two years net profit rate applied the same on the turnover disclosed by the assessee and after comparing with the profits disclosed in the preceding year addition of ₹ 2,33,227/- made for lower net profit. We, observe that during the course of assessment proceedings itself it was submitted that the main reason for the lower net profit during the year was due to increase in the depreciation expenditure which increased by ₹ 2,54,512/- in comparison with the preceding year. This fact went unattended by both the lower authorities Had the AO had considered the increased amount if the depreciation expenses at ₹ 2,54,512/- then the net profit for the year under appeal would not have decreased very significantly from the preceding year and would have been consistent as per the past hist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tune of ₹ 1,17,00,000/- was observed. Further, on the date of survey difference in cash as per books and cash physically found excess to the tune of ₹ 8,00,000/- and unaccounted purchase found to the tune of ₹ 3,36,150/-. 4. The case was selected for scrutiny. Consequently, assessment proceedings started by serving of notices U/s 143(2) u/s 142(1) of the Act. In compliance, accountant of assessee company alongwith his counsel attended the proceedings from time to time and filed written submissions. Ld. AO considered the same but was not satisfied. The ld. A.O. made addition of ₹ 84,00,000/- on account of retraction of surrendered amount. He observed that the stock found during the course of survey was accepted as undisclosed by the assessee in his statement during survey and hence it is quite irrelevant and illogical on the part of assessee to furnish different facts after survey proceeding in filing of return. He noted that deliberate effort are made by the assessee to retract the surrendered income in terms of stock quantification. During the assessment proceedings it was explained by the assessee about the unaccounted purchase of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant and that exact quantity could be known only on disposing of stock, kept separately to determine difference in the stock found on the date of survey. 8. During the course of survey proceedings note-pad was found and it was concluded that entries appearing therein represent unaccounted purchases made by the assessee. The total of amount written in the notebook has been calculated at ₹ 1,20,36,150/- The Assessing Officer has not taken correct cognizance of the entries made in notebook. He on his own account determined that the entries made are of unaccounted purchase and asked the question accordingly. The proprietor has not been properly allowed to explain his case. Accordingly, assessee got surrender of ₹ 3,36,150/- on account of investment in purchase of scrap after deducting excess stock of Rs.l,17,00,000/- observed at that time. The assessee has also shown this amount of ₹ 3,3 6,150/- surrendered in the return of income filed. In fact the assessee used to purchase certain material out of books which was recorded in the said note paid. whenever, payment was made to the seller the related entries were struck off and balance has been carried ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/- as additional income on account of excess stock. Therefore, the appellant has not disclosed the income of ₹ 84,00,000/- while filing the return of income. The appellant furnished the explanation regarding the short disclosure shown while filing the return of income during the course of assessment proceedings as well as appellate proceedings. As regards to the evidentiary value of the disclosure statement. Section 17 to 31 of the Indian Evidence Act, 1872 deal with admission. As defined in section 17, it is a statement (oral or documentary or contained in electronic from) which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the person, and under the circumstances, hereinafter mentioned. The general rule with regard to admission is that the party or their representative says about the matter in dispute or facts relevant thereto which throw light on the issue in dispute or consideration. It is well settled that a party s admission as defined in section 17 to 20, fulfilling the requirements of section 21 is substantive evidence proprio vigore. An admission, if clearly and unequivocally ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o makes it. The reason behind this is a person making a statement stops the opposite party from making further investigation. However, the statement is not conclusive and the person giving the statement can retract the same under certain circumstances. (i) The first circumstances if where the statement is not given voluntarily but it was obtained under coercion, threat or undue influed. But the burden is upon the person making the statement to prove that the statement given by him was not voluntary. The assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement should also one of the important points to be taken into account while deciding whether the statement was voluntary or not. (ii) The other circumstances is where the statement was given under the mistaken belief of either fact or law. Here against the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law. This view is supporte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute of Chartered Accountants of India vs. Makesh R. Shah (2004) 186 CTR (Guj) 579, the High Court of Gujarat has held that a retraction so as to dislodge the admission made should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made that earlier point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction that apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction. Thus, the legal position about the assessee s belated retraction is clear that it is an afterthought. Thus, from the above analysis it emerges that; i. The retraction was made after a period of 1 years and 2 months. ii. It was never communicated to the departmental authorities, merely not disclosed with the return of income. iii. From record it is impossible to ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rucks/ 13.5 M.T. Iron Steel (Scrap) 68.183 M.T. 22002.75 15,00,252/- 6 Trucks / 11.4 M.T. Total 617.183 M.T. 135,79,7611- 12. Before us Ld. counsel for the assessee contended that there was no basis for taking above quantity. No weighment was done and only by an eye view above table was prepared. In fact it was also not possible to store huge stock of 617.183 MT in the factory premises of the assessee looking to the availability of space. The total area of land with the assessee unit is 10,000 sq. ft. as allotted by the Development Authority, Ujjain on which besides open area, godown, factory Building and works shop erected. The space available for storing of stock is approx. 6000 Sq. ft. The nature of scrap stock, in terms of size placing, is also haphazard. It is practically not possible to store 617.183 MT of scrap stock of haphazard shape in approx. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mption. It is also undisputed fact that survey statement was recorded at late night. In the stock sheet estimated stock have been mentioned along with number of trucks whereas actually no such trucks was available at the survey site and therefore, the stock sheet prepared by the survey team does not look to be a full proof and perfectly prepared stock sheet at the time of survey. 15. We, further observe that the assessee in order to be a prudent assessee, in order to compute the actual unrecorded stock, claimed to have kept the physical stock found on the date of survey separately and as and when the goods were sold the details were prepared. The details of the quantitative details of stock before the date of survey and the date of survey during F.Y. 2011- 12 and the details of stock sold to various parties post survey on the basis of which unrecorded stock of ₹ 33,00,000/- is offered to tax are mentioned below:- (Quantity in M.T.) ::. Period Opening Stock Purchased Sold Closing Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Dhanlaxmi Ujjain 11 12/16/2011 18875 Nobale Matel Alloys Pvt. Ltd. Jaipur 12 1/29/2012 17860 Rajshree Trading Co. Jaipur 13 2/7/2012 18180 Him Alloys Steel Pvt. Ltd. Amb 14 3/5/2012 4895 Sunny Enennering Works Ujjain 15 3/19/2012 17630 Laxmi Steel Ujjain Total 250850 16. We also find that the Ld. AO has made the addition on the basis of the statement recorded during the course of survey. Now whether the statement re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r any ITO to examine any person on oath. Statement recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn in statement which alone has the evidentiary value as contemplated under law. Therefore the statement elicited during the survey operation has no evidentiary value. Similar view is taken in CIT vs. S. Khader Khan songs (2008) 300 ITR 157 (mad) [SLP filed by the department dismissed -210 Taxman 248/254 CTR 228(SC). 21. We find that in the case of Ashok Hanilal Thakkar vs. ACIT-279 ITR 143 (I.T.A.T.-AHM) No addition in come on the basis of disclosure could be made where the assessee had retracted certain income after disclosing it and no material had been found to prove this income during the survey. 22. Hon'ble Bombay High Court in the case of Chawla Brothers (P.) Ltd. vs. ACIT (20 43 SOT 651 (Mum.)- held that merely on the basis that at the time of survey, some differences were found in stock did not mean that there would be an automatice addition on account of differences. Such differences are always subject to explanation reconcili ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y kept separate record of the sales of physical stock which was 250.03 MT whereas the book stock on the date of survey was 85.433 MT. The difference i.e. 165.27 MT is accepted as unrecorded stock which has been offered to tax by the assessee. 26. We, therefore, in the given facts and circumstances of the case and respectfully following the decision referred hereinabove are of the considered view that Ld. CIT(A) erred in confirming the addition made by the Ld. AO for unrecorded stock of ₹ 84,00,000/- merely on the basis of recorded statement and without basis of any material evidence and there the same needs to be deleted. We, accordingly order so and allow ground no.1 raised by the assessee. 27. Apropos to ground No.2 relates alleged ad hoc addition of ₹ 2,33,227/- made by the Ld. AO for offering lower net profit stands confirmed by the Ld.CIT(A). 28. Ld. counsel for the assessee challenging this addition submitted as follows: 4. The Ld. AO has further made addition of ₹ 2,33,227/- observing that during the year under consideration the assessee has shown net profit of ₹ 5,79,048/- (Excludin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed by the assessee and after comparing with the profits disclosed in the preceding year addition of ₹ 2,33,227/- made for lower net profit. 31. We, observe that during the course of assessment proceedings itself it was submitted that the main reason for the lower net profit during the year was due to increase in the depreciation expenditure which increased by ₹ 2,54,512/- in comparison with the preceding year. This fact went unattended by both the lower authorities Had the Ld. AO had considered the increased amount if the depreciation expenses at ₹ 2,54,512/- then the net profit for the year under appeal would not have decreased very significantly from the preceding year and would have been consistent as per the past history. 32. We, therefore, in the given facts and circumstances of the case are of the considered view that there was no justification with the Ld. AO of ignoring the material facts and making the addition for lower net profit of ₹ 2,33,227/- and the same deserves to be deleted. We, accordingly order so and delete the addition for ₹ 2,33,227/-. Ground No.2 of the assessee s appeal is also allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
