TMI Blog2014 (1) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... be storage of 94,000 kg and physically stock quantified by the survey team at 1,14,974 kg was due to the fact that quantity of butter was in process. This fact has been ignored by the authorities below because when the AO himself quantified the butter in process at 4,930 kg then how the same could be at 20,974 kg . Further, we are satisfied that inventory sheet prepared during the course of survey was not provided to the assessee despite repeated requests made by it. AO has accepted the declared results and has not invoked the provision of Section 145(3) of the Act. The AO has not found any material defect in the books of account. Accordingly, the impugned addition on merits is also not sustainable and the same is deleted. Thus Ground Nos. 1 and 1.1 of the assessee are allowed. Bogus purchases - purchases made from unregistered dealers - HELD THAT:- Purchases made from villages cannot be doubted as they are not found to be related to the director of the assessee company. AO has not made any direct enquiry and has failed to bring any corroborative material on record to support his conclusion and has based the addition solely on the statement of the director recorded during s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of employees contribution to PF and ESI on the reasoning that these payments were delayed - disallowance has been confirmed by the ld. CIT(A) on the ground that the provisions of Section 43(b) are applicable in respect of employer s contribution to PF or ESI and not to employees contribution - HELD THAT:- This issue now stands covered to the effect that employees/ employer s contribution to PF or ESI are deposited or paid before filing of return. These are allowable. The Hon'ble Apex Court in the case of CIT vs. Vinay Cements [ 2007 (3) TMI 346 - SC ORDER] has replied to various queries raised in this regard by different decisions/ orders. This issue has been further churned with reference to Hon'ble Supreme Court decision reported in the case of CIT vs. Vinay Cement (supra) by Hon'ble Gauhati High Court while deciding the case of CIT vs. George Williamsons Ltd. [ 2006 (6) TMI 71 - GAUHATI HIGH COURT] . Accordingly, we order to delete this addition from the hands of the assessee and allow the Ground of the assessee. Unaccounted receipt of share capital - unaccounted income of the assessee company - HELD THAT:- The law on this subject is settled to this ext ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of office premises simply on the basis of surrender obtained during survey arbitrarily. 3.1 That the Ld. CIT(A) has further erred in ignoring the fact that the premises is on rent and minor repair were done which are properly accounted for an other fixtures are separately debited under respective heads. Hence the addition of ₹ 4,00,000/- so made deserves to be deleted. 3.2 That the Ld. CIT(A) has failed to appreciate the fact that the A.O. has not brought on record a single instance of expenses incurred on office renovation which was not accounted for thus the addition of ₹ 4,00,000/- deserves to be deleted. 4. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the disallowance of ₹ 66,439/- (Being 20% of the amount claimed) on account of Telephone expenses claimed in the profit Loss Account as incurred not for the purpose of business arbitrarily without considering the fact that the said expense has suffered FBT at the prescribed rate. In the circumstances the disallowances deserves to be allowed. 5. On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in confirming the disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Net from as per balance sheet Add (as per computation sheet) Rs. (-) 5632971/- Depreciation disallowed ₹ 735319/- Disallowed u/s 37 ₹ 183041 ₹ 918360/- Addition as discussed above i. Disallowance out of Telephone expenses as discussed above ₹ 66439/- ii. Delayed PF and ESI ₹ 72157/- ₹ 138596/- --------------------- Total (A) Rs. (-) 4576015/- Income from other sources Addition as discussed above Rs. (-) 4576015/- i. Excess undisclosed stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee or of any other persons. It is stated that this contention of the assessee is supported by various judicial pronouncements including one rendered in the case of M/s. Unique Age Art vs. ACIT (ITA Nos. 271/JP/2013 and 458/JP/2013 for the assessment year 2008-09) vide order dated 18-12-2013 from this very Bench. In addition to this, the ld. AR has also relied on the decision of Hon'ble Apex Court in the case of CIT vs. Khader Khan (2012) 254 CTR 229. 3.2 To contradict the above, ld. DR stated that the Revenue authorities have powers to record the statement even during survey proceedings and that any admission made during survey proceedings is justified. 3.3 After considering the rival submissions, we have found that the impugned addition is solely based on admission made by the Director Shri Hem Raj Jain, recorded on oath during survey proceedings. We have gone through the relevant portion of this statement also. The submissions of the ld. AR that any statement recorded during survey proceedings conducted u/s 133A of the Act has no evidentiary value is found to be a correct position of law. The Hon'ble Apex Court has clearly laid down this principle in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f it is made under the proceedings conducted u/s 132 of the Act. Therefore, we ignore the admission part of the statement recorded u/s 133A. Accordingly, by respectfully following the legal position, we exclude the admission made in the statement for supporting the impugned addition. Now we have to see as to whether de hors this statement can any addition in this item be made or sustained. It was stated by the ld. AR that there is no discrepancy in the stock found during survey and to support this version, the ld. AR has submitted written submission which is being extracted verbatim as under:- That a survey operation in this case was carried out u/s 133A of The Income Tax Act, 1961 at the business premises of the assessee and during the course of survey it was informed to the directors of the appellant company that the entire stock stated to have been taken physically and available was quantified by the survey team and accordingly excess stock was worked out and a surrendered towards the excess stock was obtained from the directors of the appellant company in their statements recorded on oath, though actually there was no excess stock available with the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same in a short period of time again renders it humanly impossible to take physical and actual measurements. The director who made the surrender had signed on the dotted lines on account of ignorance (not being aware of the consequences). He was unaware of the technicalities and was only looking after the production work and was not knowing anything about the maintenance of books of account, stock register etc. This is also submitted that the very seriatim of the questions and answers is suggestive of unusual manner of recording of statement during the survey. The flawless and highly incriminating admissions made by the director puts the veracity of the statements in doubt as no sane person would make such admissions under normal circumstances, the fact that the atmosphere during the course of survey and search conducted by the Income Tax Department is a charged atmosphere and the department s action generates heat. Thus the person deposing the statement is bound to suffer from the persecution-mania and the statements as recorded deserves to be viewed by taking into consideration the entire set of facts. The stock stated to be found in the business premises is an impossible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were brought to the notice of the Ld. CIT (A) in the appellate proceedings who has summarily rejected the contention of the assessee by making following observations:- 1. The statements of Shri Hemraj Jain was not recorded under duress or threat and physical inventory of stock was taken by the officers in presence of his brother, another director namely Shri Pradeep Kumar Jain and Shri Pawan Kumar Sharma, one of the employees and the assessee could not establish the fact that the statement was record under duress and threat. 2. The storage capacity of cold storage was 94,000 Kg. as per the report of technical expert and survey team had quantified the same at ₹ 1,14,974/- and assumed the difference in quantity was due to the fact that quantity of butter was in process and not required to be stored in the cold storage as it depended on the age of cream or butter. All the above observations / allegation of the Ld. CIT (A) do not find force in view of following facts:- 1. On the perusal of the statement of the assessee recorded u/s 133A it would be evident that the statement recorded are nothing more than the written papers signed by the assessee and are the obtaine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were not invoked meaning thereby that the books of accounts maintained by the assessee are free from any defects. Further except the so called admission of excess stock, ld. AO has failed to bring on any corroborative evidence with regard to the allegations made. It is fourth year of business and trading results declared were never doubted thus, there was no source from where assessee could have earned such a huge income. The assumptions made and approximations done in stock inventorisation has been disapproved by the Hon ble Income Tax Appellate Tribunal, Delhi Bench in the case of Bansal Strips (P) Ltd. Vs. ACIT reported in 99 ITD 177 wherein it has been held that During the course of search proceedings, the search authorities had attempted to verify the stock details kept by the assessees by comparing the stock as per books with inventory of physical stock taken during the course of search. The entire exercise in the cases of about half a dozen business concerns was commenced and completed within a few hours . That being so, the finding of excess stock being found during the course of search operation had been given by the authorities below on grossly inadequate mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 133A cannot be given evidentiary value as such evidentiary value was not attached to it by the provisions of section 133A. Thus, it could not be said solely on the basis of the statement given by the assessee that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee. The view adopted by the Assessing Officer in the assessment order passed under section 143(3) was not unsustainable in law and was one possible view. Thus, the Commissioner had wrongly exercised his power under section 263 for both the years and his orders were quashed for both the years. 3.4 In contra to the above submissions, the ld. DR has supported the orders of the authorities below and has justified the impugned addition. 3.5 However, after carefully considering the rival submissions on this issue and after relying on the relevant decisions thereto, we are of the considered opinion that difference in stock is not real. The survey party has quantified the stock of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted the trading results declared by the assessee. During assessment proceedings, the assessee had furnished the following evidence to prove these purchases. 1. Complete name of the suppliers. 2. Complete Address of the suppliers. 3. Copy of Ration Card/Voter ID to prove their existence and address. 4. Purchase Vouchers wherein their signatures were obtained. The AO issued summon u/s 131 of the Act to 09 suppliers as listed at pages 15 and 16 of the assessment order. These summons were duly served upon them and has not been disputed by the AO. However out of the total 09 suppliers to whom summons were issued, two appeared before the AO who had deposed their statements wherein they both admitted the fact of supply of Milk Cream to the assessee company but the AO did not accept their evidences. After hearing the above submissions, we are left with no other inference that the contention of the ld. AR is correct. The assessee has maintained day to day quantitative details for the consumption of raw material and production thereof. It has also maintained the quantity of input of raw material vis-a-vis the out put of the finished goods. The method of accounting and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has based the addition solely on the statement of the director recorded during survey. Thus we do not find any reason to uphold the findings of the ld. CIT(A) who has treated some part of these purchases as bogus. The assessee has discharge its burden by establishing the identity of the suppliers and there is no evidence to suggest that there is inflation in purchase price. Therefore, we cannot ignore the purchase price recorded in the purchase vouchers found during the course of survey which are duly recorded in the stock inventory and the consumption and production have not been doubted with the help of any evidence on record. Therefore, the sustained addition of ₹ 27,45,862/- is also uncalled for. Thus the Ground No. 2 of the assessee is allowed and the Ground Nos. (ii) and (iii) of the Department are dismissed. 5.1 The Ground No. 3, 3.1 and 3.2 of assessee's appeal is regarding the sustained addition of ₹ 4.00 lacs made on account of investment in the construction of office by holding the same as unexplained. 5.2 The facts to this ground are that during the course of survey , a surrender of ₹ 4.00 lacs was made on account of renovation of office prem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the usage of telephone etc. on account of non-business purposes cannot be added in the hands of the company, particularly because the company has a separate legal entity and its entire business is conducted through the directors. In case any benefit is drawn by the director, the director has to suffer the Fringe Benefit Tax at the prescribe rates which it has already suffered. Accordingly, we order to delete the entire expenditure. Thus the Ground No. 4 of the assessee is allowed. 7.1 The Ground No. 5 of the assessee is regarding disallowance of ₹ 72,157/- made out of employees contribution to PF and ESI on the reasoning that these payments were delayed. 7.2 This disallowance has been confirmed by the ld. CIT(A) on the ground that the provisions of Section 43(b) are applicable in respect of employer s contribution to PF or ESI and not to employees contribution. 7.3 After hearing both the sides, we are of the considered opinion that this issue now stands covered to the effect that employees/ employer s contribution to PF or ESI are deposited or paid before filing of return. These are allowable. The Hon'ble Apex Court in the case of CIT vs. Vinay Cements reporte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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