TMI Blog2021 (5) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... /Kol/2020, C.O. No. 13/Kol/2020 (Arising out of I.T.A. No. 30/Kol/2020) - - - Dated:- 21-4-2021 - Shri P. M. Jagtap, Vice-President (KZ) And Shri A. T. Varkey, JM For the Appellant : Shri Supriyo Paul, Addl. CIT For the Respondent : Shri Akkal Dudhwewala, FCA ORDER PER SHRI A. T. VARKEY, JM: This is an appeal preferred by the Revenue and the cross objection filed by the assessee against the order of Ld. CIT(A)-3, Kolkata dated 08.11.20219 for Assessment year 2016-17. 2. The sole issue raised by the Revenue is against the action of Ld. CIT(A) in giving partial relief to the assessee by deleting partly the excess stock found during survey, which the AO has added; and also the Gross-Profit (GP) on it.. The assessee has preferred cross objection against the partial addition sustained by the Ld. CIT(A) in respect of both excess stock and GP. 3. Brief facts of the case is that the assessee has filed its return of income for AY 2016-17 disclosing the total income of ₹ 1,23,58,190/-. The AO notes that the case was selected for scrutiny manually under compulsory category as per guideline of the CBDT. The AO notes that during the relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he survey team would reveal that all other pages have been written in a hurried manner ( running hand and not legible ) and only page 76 has been written in neat and legible hand writing in a peaceful atmosphere circumstances; and further according to assessee, the inventories made also includes the dead stock of ₹ 8,79,415/-. In the assessment order the AO reproduced the relevant portion of the reply of the assessee from page 2 to 6 and thereafter the AO opined that there is no merit in the aforesaid reply and he repelled the allegation of assessee in respect of page 76 of the inventory made during survey by stating that the details of inventory were taken during the survey are written from page no. 1 to 86 wherein the signature/initial of the assessee s director is affixed and the same initial/signature is seen at page 76 of the inventory also and since there are several officers who takes part in the survey operation, according to AO, it is natural that hand-writing differ and so he rejected the said claim/allegation of the assessee. Further he observed from the details of inventories recorded at page 76 that the value of each fancy sarees has been duly recorded which ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to AO signifies that the assessee is accepting that assessee had in its godown undisclosed stock of ₹ 2.48 crores which was suppressed by it. The AO, therefore, concluded that the undisclosed stock found in the course of survey was nothing but its undisclosed investment during the relevant financial year and the dead stock of ₹ 8,79,415/- has also been purchased by the assessee by using its own undisclosed funds. Thereafter, the AO notes that in its reply the assessee has pointed out certain arithmetical mistake i.e. as per page 86 of inventory though the total amount of stock was only amounting to ₹ 6,14,928/-, however the total amount of undisclosed stock was wrongly shown as amounting to ₹ 7,37,913/- instead of ₹ 6,14,928/- which give rise to a difference of ₹ 1,22,985/- [₹ 7,37,913/- - ₹ 6,14,928/-]. The AO accepted the mathematical error and hence the AO excluded the said amount (₹ 1,22,985/-) from the undisclosed stock. Thus, balance amount of ₹ 2,47,24,399/- was added to the total income of the assessee as per Section 69B of the Act and thereafter the AO notes that the assessee has offered gross profit @ 8.49% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17, Each Page of the said inventory has description showing item, brand, quantity, selling price per unit, cost price per unit and total cost price. This is a detailed inventory showing the thickness and length of the woven fabrics. Part 3 (1st half) comprising of Pages 18 to 23 is the inventory of blouse pieces, fabrics, fabric sarees, rolls, fabric than, embroidery than, taken from the Channel Godown on the 5th Floor. Each Page of the said inventory has description showing item, brand, quantity, selling price per unit, cost price per unit and total cost price. This is a detailed inventory showing the colour of rolls, length and make of each item. Part - 2 is the inventory of laces and narrow woven fabrics, comprising of Pages 24 to 26. Each Page of the said inventory has description showing item, brand, quantity, selling price per unit, cost price per unit and total cost price. This is a detailed inventory showing the thickness and length of the woven fabrics. The number of pieces of laces and its length has also been mentioned in the inventory. Pages 27 to 40 are not found in the inventory report. Part 3 (2nd half) comprising of Pages 41 to 43 is the inventory o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this is the disputed Page of the inventory which the appellant has retracted by filing an affidavit before the AO on 21.01.2016. In this Page the total number at sarees inventorized is 5596 sarees as against 1487 sarees found on pages 61 to 69, 77 and 80 to 82 of the inventory report. The value of sarees inventorized on this Page is of ₹ 2,38,88,000/- as against ₹ 38,05,550/- found on Pages 61 to 69, 77 78 and 89 to 82 of the inventory report. Pages 77 to 78 is the inventory of fabrics, borders, laces, bandhni sarees and embroidery sarees (36 pieces), taken from order room. Each Page of the said inventory has description showing item, quantity, selling price (at some places) cost price per unit and total cost price. This is a detailed inventory showing the description of different of borders and laces. Page 79 is the inventory of ciffon synthetic, visces, cancon; taken from upper three bonks . The said inventory has description showing item, quantity, cost price per unit and total cost price. Page 80 is the inventory of embroidery sarees, taken from the 2nd row of the show room. The said inventory has description showing item, quantity, cost price pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a retraction statement claiming that Page No. 76 of the stock taking report was false. The relevant extracts of the retraction affidavit are reproduced as below: 5. That my answer to. Question No. 8 in the said statement was given under duress and coercion and without being afforded and opportunity to peruse the book of accounts, stock register and the physical stock found during the course of survey. 7. That after going through the stock statement it is noticed that the Page No. 76 of the said statement is false mid erroneous and in as much as the content therein appear to be fabricated/incorrect. 8. That the value of stock of ₹ 1,10,80,923/- stated to have been taken from the book of account of the company on 12th October 2015, also does not represent the actual stock position as on date as the books were not complete nor up-to-date and several entries in respect of purchase and sales made during the past month were pending. 9. That in view of the above averment thy answer to Question No. 8 offering sum of ₹ 2,50,00,000/- by way of different in stock was given without understanding the correct facts and provisions of law and under duress and coercion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock during the relevant year. He estimated profit at the rate of on the stock of ₹ 2,47,34,399/-, being ₹ 20,34,881/- as profit on sale of undisclosed stock and added it additionally to the appellant s total income. In the appellate proceedings the A/R of the appellant reiterated the submissions made before the AO. The contentions raised by the appellant are two-fold which are as under: (a) The physical stock taking report of fee Revenue, particularly Page No, 76 of the said report was materially false and hence it was claimed that stock of 5596 sarees recorded on that Page should be ignored. Once the same is overlooked, physical stock on the date of survey stands reconciled with books and addition of ₹ 2,47,34,399/- made u/s 69B stands deleted, and (b) without prejudice to (a), if it is held that there was discrepancy in stock even then it was only the gross profit margin embedded therein which could alone be assessed by way of undisclosed income of the appellant and not fee entire value of unexplained stock. I have given due consideration to the facts arid the observations of the AO arid also the arguments put forth by the A/R of the appellant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd lacking in Page No. 76 of the inventory report. For example. Pages Nos. 77 78 of the inventory report contained details of sarees, fabrics, borders, laces etc. stored in Order Room?, In these pages individual item wise description of the material found is given and the total serial numbers of sarees are 5 out of 29 and value of 36 sarees inventorized on these two pages was only ₹ 1,09,000/-, Pages 61 to 69 of inventory report contained detailed description of embroidered sarees which were described as fresh stock . The stock report claims this to be Part-5 of the inventory report. Front these pages it is observed that there are total 181 serially inventorized saree items giving details of the stock of 1053 sarees. On each Page the survey team recorded the quantities of sarees found of any particular description. It is observed that the number of sarees of any particular description found by the survey team ranged between 2-11 sarees. Page 70 of the inventory report contained the summary of stock of embroidered sarees detailed on Pages 61 to 69 from which k was noted that on each Page the total number of sarees recorded were as follows: Page No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 76 atone contained inventory of 5596 sarees valued at RsA27Q/- per saree in comparative terms, the number of sarees recorded on this single Page was more than three times the sarees found and recorded on 16 Pages of the inventory report. In value terms also the stock value noted on Page No. 76 was more than 6 times of the saree stock recorded on the other 16 pages. Further in respect of the stock recorded on Pages 6.1 to 70 and 80 to 82, the survey team had provided detailed description including the places from where the sarees were stored along with the code numbers etc. In respect of stock of sarees recorded on Page No. 76, it is noted no detailed description has been given nor the survey team specified the exact ideation from where such huge stock of 5596 sarees was found stored. On examination of the inventory report, I also note that the manner in which the entries were recorded by the survey team on other Pages, substantially differed from the manner in which the entries were recorded on Page No, 76. Even the handwriting of Page 76 differs significantly from the handwriting on other Pages of the inventory report. It was also noted that average value of embroidered sarees ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent that in none of past three years, the audited figures at any time showed thnr foe assessee maintained stock of 7083 sarees which the survey team Claimed to have found on the date of survey. From the details of average monthly sales, also note that average sale price realized by the assessee on sale of embroidered sarees was ₹ 3,094/-, ₹ 3,264/- Rs,3,313/- for the financial years 2012-13, 2013-14 2014-15 respectively. On the contrary the average sale price adopted for valuing stock recorded on Page 76 was in the range of ₹ 3200/- to ₹ 6500/-. This material discrepancy in value and quantity supports the assessee s contention that the stock recorded on Page No. 76 did not reflect the true state of affairs. In this factual background the AO before passing of the impugned order should have objectively considered the appellant s retraction statement dated 21.01 .2016 wherein he bad categorically dented the contents of Page No. 76 of the inventory report and the statement of the Director recorded u/s 133A with reference to the said inventory report admitting additional income of ₹ 2,50,00,000/-. This retraction statement has been filed by the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sable 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 the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee. The Hon ble High Court in the said judgment has laid down the following principles of law regarding the evidentiary value of statement recorded in the course of survey u/s 133A of the Act. (i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. vs. State of Kerala [1973] 91 ITR 18: (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(4) of the Act specifically authorizes an officer to examine a person on oath, section I33A does not permit the same. 13. The Kerala High Court in Paul Mathews Sons v, CIT[2003] M3 JTR 101 and Madras High Court in C/T v. S. Khader Khan Son [2008] 300 ITR 137 have also taken a similar view. The relevant portion of the Kerala High Court judgment in the case of Paul Mathews Sons (supra) is reproduced hereinbelow :- The provision also enables the income-tax authority to impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of account for a period not exceeding 15 days. Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A. however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorised officer only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herein regarding the discrepancies pointed out in the inventory report simply proceeded to make addition based on the statement of the Director recorded u/s 133A of the Act. Therefore, on conjoint reading of these judgments it is noted that the statement of an assessee recorded in the course of survey u/s 133 A cannot be the conclusive evidence tor justifying an addition to the asses, income. It is necessary for the AO to substantiate the said statement with corroborative evidence and in absence of any tangible material to support admission by an assessee, it is not open for the AO to make addition solely based on the admission made in the course of survey. Applying this judicial principle to the present case, it is noted that there were obvious and patent discrepancies and infirmities the inventory report prepared by the survey team. The statement of the Director on the basis of which the AO justified the addition was retracted by the Director of the appellant in writing on 21.01.2016. Thereafter the AO did not bring on record any tangible material to justify the addition. It is observed from the appellant s statement that according to them at best 2500 embroidery sarees could ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 3000]. This unilateral action of Ld. CIT(A) according to Ld. D.R cannot be accepted because there was per-se violation of Rule 46A of Income Tax Rules, 1962 (hereinafter referred to as the Rules) i.e. without giving the AO an opportunity to file his remand report against the new evidence which the assessee presented before the Ld. CIT(A). So according to Ld. D.R there was violation of natural justice and Ld. CIT(A) erred in disregarding the physical inventory carried out by the survey team on the assessee s premises. According to Ld. D.R the handwriting at page 76 of the inventory made by survey team could have been different because during survey operation, number of officers takes part and obviously some handwriting will be different from the others and therefore the allegation in respect of page 76 of the inventory was rightly disregarded by the AO. According to Ld. D.R, the stock found at page 76 i.e. of more than 5000 sarees is plausible because in a godown, the sarees are kept/stacked up at every inch of the rooms and also in the passages etc. Therefore, according to Ld. D.R, since there is a violation of Rule 46A of Rules, he prayed that the issue may be set aside back ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher profitability of the eligible Assam Unit had come on the record of the ld. CIT(A), because he had decided to examine the facts of the case in depth and then adjudicate upon the matter on the basis of evidence and material, thus, gathered. We note that the ld. CIT(A) was empowered to do so under the provisions of section 250(4) of the Act. The result of such enquiry conducted by him could have either gone to further cement or enhance the case made out by the AO or help out the assessee against the findings of the AO. In the instant case, the results of the enquiries thus conducted supported the case of the assessee and not that of the Revenue. However, the fact remains that such material was gathered by the ld. CIT(A) on his own motion, and therefore there was no requirement, in law for him, to consult the AO on the same. Our foregoing proposition is supported by the following judicial precedents: CIT vs Sagar Construction (P) Ltd. (56 taxmann.com 434) [Patna HC] PCIT vs KM Sugar Mills Ltd. [ITA No. 187 of 2016] [Allahabad HC] ITO vs Industrial Roadways (112 ITD 293)[ITAT, Mumbai] DCIT vs NE Technologies India (P) Ltd. (47 taxmann.com 405) [ITAT Hyde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out that from a perusal of the answer to question no. 8, it can be noticed that the answer was given with a caveat that for giving the answer to the said question he needs to look into the books of accounts, stock register vis-a-vis the physical stock found during the course of survey. Further it was submitted in the affidavit that after having received the copies of inventories/stock statement only on 20.11.2015, he found that page 76 of the said inventory is false and concocted, so erroneous inasmuch as the contents therein appears to be cooked up/fabricated/incorrect and according to assessee, if this page 76 is removed and some arithmetical errors are corrected, then assessee can reconcile the stock physically examined vis a vis its regular books maintained by it on that date on its computer; and according to him, the answer to question no. 8 offering sum of ₹ 2.50 crores by way of difference in stock need to be appreciated in this back ground as well as was given without understanding the correct facts and provision of law and that too under duress and coercion, so according to him could not have been acted upon by the AO against the assessee. In the light of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages i.e. 1 to 86. All these facts, according Ld. A.R when considered cumulatively support the assessee s case that page no. 76 (page 89 of PB) did not belong to it and it was an afterthought to bring/tally the value of excess stock to ₹ 2.50 cr. and for that they fabricated the same at page 76; and the Ld. CIT(A) taking note of these glaring errors, and the assessee s assertion that in its premises/show room/stock room/passages even if the entire area is stocked with sarees/designer sarees it is impossible to stock more than 2460 sarees. So the Ld. CIT(A) appreciating these facts have exercised his suo-motto power u/s 250(4) of the Act and ordered the assessee to produce the architectural drawing etc., which was necessary to unfold the mystery of page 76 (page 89 of paper book) and its irreconcilable contradiction with the space assessee had in its possession ; and the Ld. CIT(A) in the quest of truth has given the suo moto direction for finding out the excess stock of sarees which action of Ld. CIT(A) should be appreciated and upheld. Thus, after the assessee had provided all the details before the Ld. CIT(A) and the Ld. CIT(A) appreciated the same and after analyzing the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made by or on behalf of the assessee and the books of the assessee that had been looked into at the time of survey which the assessee subsequently claimed had been lost or destroyed and, in respect whereof, no complaint had been lodged by the assessee. On facts, the Commissioner (Appeals) found no grounds to interfere with the quantum of excess stocks discovered by the assessing officer in course of the survey. The Commissioner also agreed with the assessing officer as to the quantum of income which had escaped assessment. There are two aspects to the order impugned dated June 30, 2015 passed by the Appellate Tribunal: the factual findings of the Commissioner (Appeals) as appear to have been interfered with by the Appellate Tribunal; and, the direction given for taking sales of rice and bran into account before arriving at the additional income which could be said to have escaped assessment. Before the Commissioner (Appeals), the assessee had relied on a document signed by an official of the Food Corporation of India that evidenced the stock figures at the relevant point of time. The Commissioner (Appeals) dealt with such aspect of the matter in great detail and by refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee. In the circumstances and particularly since the factual findings rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. The Appellate Tribunal merely directed the gross profit that the additional purchase was capable of generating to be regarded as the additional income for tax to be assessed on such basis. Such view of the Appellate Tribunal does not call for any interference. Accordingly, ITAT No.196 of 2015 and GA No.4047 of 2015 are disposed of by modifying the judgment and order of the Appellate Tribunal dated June 30, 2015 as indicated. Therefore according to Ld AR, in a case of detection of un-disclosed stock, the value of entire stock undisclosed need not be made and only the profit embedded in it need to be taxed and he prayed that the partial addition susta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 20,34,881/- (which was supposed to have been sold). On appeal, the Ld. CIT(A) gave partial relief to the assessee by confirming ₹ 27,84,000/- [investment in undisclosed sarees numbering 928 pieces at a cost of ₹ 3000/- each] and on the same reasoning as adopted by the AO, he sustained at G.P. of 8.49 % of ₹ 27,84,000/- i.e. ₹ 2,36,362/-. Aggrieved by the aforesaid action of deletion of addition made by the Ld. CIT(A), the Revenue is in appeal and the assessee has preferred the cross objection against the addition partly sustained by the Ld. CIT(A). 9. The first question before us is whether the Ld. CIT(A) was justified to give relief to the assessee by calling for architectural plan, schematic diagram of the shelf/racks/show room, stock room, photos, etc. to interfere/discard with the physical verification carried out by the survey team. We note that the AO s case is that physical verification of stock was carried out by the survey team in the assessee s premises and the stock/sarees found therein has been inventorised by the survey team, and the director of assessee company admitted during survey his inability to reconcile the difference in stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of regular assessment. Apart from the foregoing, according to Ld. A.R there was other minor reconciliation issues, inter-alia involving valuation of dead stock and ad hoc addition of 20% on a particular page, which was also pointed out to the AO. Accordingly, a detailed reconciliation statement was filed by the assessee before the AO wherein it was claimed that there was no discrepancy between the physical stock taken at the time of survey and the stock appearing as per the books of accounts. However, according to Ld. AR, the AO completely disregarded the discrepencies/infirmities put forth regarding Page No.76 (Page 89 of PB) of the inventory report and instead took the same into account for justifying addition of ₹ 2.47 cr ₹ 20.34 lakhs. We note that the assessee has enclosed in the paper book the inventory report (Page 44 to 99 of PB) report prepared by the department in the course of survey and has brought to our notice why the other pages are not filed in the paper book and the reason for not filing along with the other pages can be discerned from a perusal of the chart itself which is self-explanatory and as discussed 26 pages out of this 86 pages a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... category or design or serial number of the alleged embroidery sarees found and inventories by the survey team. The Ld. A.R also pointed out that all the pages of the stock report, except page no. 76, indicate as to from which part of the premises the stock has been taken/accounted for. However, page no. 76 does not indicate the same and apparently stands out as completely different and an isolated page from the others as discussed. All these facts, according Ld. A.R when considered cumulatively support the assessee s case that page no. 76 (page 89 of PB) did not belong to it and was therefore incorrect/fabricated/cooked up; and on appeal, the Ld. CIT(A) taking note of these glaring errors as one of the reasons have exercised his suo-motto power u/s 250(4) of the Act and ordered the assessee to produce the architectural drawing etc. Another important fact that was brought to our notice was that the assessee runs its business involving trading of sarees from only a part of the 1st Floor premises having an area of 800 sq. ft. And according to Ld. A.R if one takes into account the area of the assessee s premises, it shall be practically impossible to fit in 5,596 embroidered sarees ov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ription is necessary ] 12. In the light of the aforesaid facts discussed in respect of infirmity of page 76 set out above, in addition to that according to Ld. A.R, the item-code of each saree are endorsed on the price tag of each sarees, however, at page 76 the details of item codes are conspicuously absent, and so according to Ld AR, we should appreciate the claim of the assessee that the page no. 76 (Page 89 of PB) of the inventory report did not belong to the assessee. And in this context, we note that these facts/infirmities were also brought to the notice of the AO vide retraction statement/affidavit filed in his office on 22.01.2016. However, the AO brushed aside the objections and made the entire addition of undisclosed stock and G.P on it. On appeal, when the aforesaid infirmities at page 76 were brought to the notice of Ld CIT(A), he in order to unravel the truth conducted enquiry u/s 250(4) of the Act to examine/satisfy himself as to whether there is any merit in the assessee s claim that even if the entire premises of the assessee is presumed to be filled with the sarees it cannot exceed 2460 pieces of sarees and therefore exercising his power suo-motto direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d stock of ₹ 2.5 crores, in order to tally this figure of ₹ 2.5 crores, the team has resorted to back calculation so as to match the inventory report with the extracted admission of ₹ 2.5 crore undisclosed stock from the assessee. Referring to the above notings made by the Survey team on the working statement [ obtained by the assessee upon inspection of records ], the Ld. AR pointed out that this sheet further substantiates the assessee s contention that the survey team had made-up Page No. 76 of the inventory report (Pg 89 of the PB) with the intent to correlate the disclosure of ₹ 2.5 crs extracted from the director of the assessee company. To substantiate this averment, the Ld. AR first invited our attention to Para 3 of the assessment order wherein the AO had observed that the stock available as per books on the date of survey was ₹ 1,10,80,923/-. Therefore, to justify the extracted disclosure of ₹ 2.5 crs, the survey team had to report the cost of physical stock at ₹ 3.6 crs [₹ 1.10 crs (as per books) + ₹ 2.5 crs (extracted disclosure)]. 15. The Ld. AR thereafter submitted that the notings across the inventory report sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tracted from the Director at midnight of 12th October 2015. Thus the Ld AR pleaded that the action of Ld CIT(A) to discard the survey teams inventory report was correct and may be upheld. 16. So, when we examine the action of the Ld CIT(A) to discard the survey report prepared by the survey team on 12 Oct 2015, we have to keep in mind that there is a presumption as per the Indian Evidence Act 1872 ( herein after in short the Evidence Act) by virtue of section 114 of the Evidence Act that the court may presume the existence of any fact which it thinks likely to have happened regard being had to the common course of natural events, human conduct of public and private business in their relation to the facts of the particular case and illustration (e) states that the court may presume the official acts to have been regularly performed . However, before presuming that the official act has been regularly performed, the court shall also have regard to such fact as to whether the official act in question was performed in exceptional circumstances . And May Presume as per the Indian Evidence Act states that whenever it is provided by the Evidence Act that the Court may presume a fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riting on the inventory prepared cannot be the same and so it would be different and therefore at page 76 hand writing might be of some other official who was in the survey team. So according to AO, the contents of page 76 (89 of PB) is true and according to AO, even in the assessee s reply, the assessee has pleaded that even if there is undisclosed stock, then also the entire stock should not be added, which plea itself according to AO is a sign of admission of undisclosed stock and the assessee was desperately trying to get some relief. So according to AO, the assessee after failing to reconcile the undisputed stock during survey followed by admission of the undisclosed stock in director s statement and offer of advance tax has hatched a new story which is nothing but an afterthought of assessee to wriggle out of the undisclosed stock found during the survey and thus he repelled the allegation/infirmities raised by assessee. So we will deal with each of the reason given by AO to justify page 76 of the inventory report of survey team. 18. First let us look at the merit of the AO s reason to rebuff the infirmities pointed out at page 76 by observing that since the director ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wherein the inventory of goods are recorded. So when there were blank sheets of 26 pages inside the survey Report which was paged in serial from 1 to 86, then the assessee s contention/allegation in respect of page 76 (89 of PB) could not have been lightly brushed aside by the AO mainly on the reason that director of assessee has initialed on it. So this reason of AO is not acceptable to us in the light of serious infirmities brought by the assessee in respect of page 76. 19. Secondly, the AO clings on the admission of undisclosed stock during survey to justify page 76. In this context, we should keep in mind that a voluntary admission about a fact is a good/best piece of evidence and that has statutory recognition given by section 58 of the Evidence Act. However, if the admission is made on threat, coercion or inducement then, there is no probative value attached to the said admission and it loses its evidentiary value. Also it has to be noted that if a statement is recorded on oath u/s. 132 of the Act (search) it stands on a higher pedestal than the statement recorded during survey u/s. 133A of the Act and the Hon ble Supreme Court has held in the case of Kader Khan Sons (s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 89,000/- whereas, the total cost of total 1487 sarees recorded on 16 pages (61-70, 77 78, and 80-82) is only ₹ 38,05,550/- . So just because number of sarees were noted on page 76 does not justify the truth of the contents of page 76. 21. Moreover, in this case, we note that even though the assessee had raised hue and cry about page 76 at the earliest possible time and also brought to the notice of the AO during the assessment proceedings why the assessee s director is retracting from the purported admission of undisclosed stock of ₹ 2.5 cr. by filing sworn affidavit, we note that AO has not rebutted the serious allegations/infirmities pointed out by the assessee in respect of page 76 of the survey stock report. When such an allegation is raised in respect of page 76 of the survey report, we presume that the AO was aware of the officers who were involved in the survey operation at the assessee s premises on 12 Oct 2015 or which fact will be available in the file; And in order to counter the allegation the AO should have found out who all prepared/had written on the pages 1 to 86 of the inventory report. So, when there is a direct attack on the contents of page 76 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... given by the Ld CIT(A) to discard page 76 of the survey report, we are not repeating the reasons for the sake of brevity 23. However, at the same time, we do not completely agree with action of Ld. CIT(A) to completely discard the survey report (1-86) and to have resorted to estimation by presuming that 2500 sarees could have been found its premises and so according to Ld CIT(A) since assessee s books on the date of survey reflected only 1572 sarees, he concluded that 928 sarees were found to be in excess and restricted the addition by valuing one saree at ₹ 3000, thus confirmed addition of ₹ 27,84,000/- and G.P on its sale at ₹ 2,36,362/-. We disagree this action of Ld CIT(A) for resorting to estimation without rejecting the books of account of the assessee as envisaged under section 145(3) read with section 144 of the Act (Best judgment assessment). Further it is to be noted that assessee has raised serious allegation/infirmities only in respect of page 76 of inventory prepared by the survey team comprising of 86 pages (including 26 blank pages). Meaning thereby that when assessee has not imputed any infirmity regarding the other pages of the inventory prepa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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