TMI Blog2022 (3) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) and relied upon before the ITAT remains unrebutted till date, it clearly brings out a case that the surrender was made based on facts as confronted which resulted in the action of surrender. So these facts lead to forming of belief for making the surrender no doubt voluntarily, but admittedly was based on confusion and mis-appreciation of facts. We have taken into consideration the definition of coercion as available under Section 15 and undue influence as available in Section 16 of the Indian Contract Act. We have also taken into consideration the legal position which places the burden on the one who pleads that he has been coerced the onus to demonstrate it is on that person. The assessee possibly uses the terms coercion loosely alongwith pressure and not coercion per se. We are not so convinced with the claims advanced on behalf of the Revenue that there was no pressure whatsoever on the assessee while making the surrender, however, for the purposes of the present proceedings, we have held that the surrender admittedly on facts was made on mistaken belief of facts and law and in the face of the voluminous plethora of evidences countering each of the factors conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on or before the disposal of the same. 2. The relevant facts of the case are that the assessee who is stated to be in the business of manufacturing of automobile parts, tractor parts and spring washers was subjected to survey u/s. 133A at its business premises on 21.09.2010. During the course of survey proceedings at the business premises of the assessee at plot No Plot No. 181, Indl. Area, Phase-II, Chandigarh and C-162, Phase 8B, Industrial Area, Mohali (Punjab) certain discrepancies were noticed and confronted to the assessee. As a result thereof, the assessee's C.M.D. surrendered ₹ 5 Cr. under the following heads: a. Cash recovery from Sundry Debtors ₹ 2.00 Cr. b. Expenses incurred out of undisclosed sources ₹ 0.60 Cr. c. Excess in stock as per physical verification ₹ 2.40 Cr. 3. However, at the time of filing of the return filed on 30.09.2011, the assessee did not honour the surrender made. The Assessing Officer, accordingly, confronted this lapse to the assessee. The assessee relying on detailed objections filed submitted that the surrender was made incorrectly on mistaken facts and evidences confronted at the time of survey. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their values seen to be ad hoc estimates with many mistakes in identification in quality and value were noticed and after getting the facts confirmed were pointed out. Attention was invited to the respective orders of the authorities below and the Paper Book pages 40-42 and 43-50 in respect of debtors Reconciliation and multiple mistakes on facts and law. 7. Reliance was also placed on the pages 51 to 56 demonstrating that surrender on account of stock in hand was also based on mistaken belief of facts and law. Detailed calculation challenging valuation adopted for finished stock at pages 57 to 61 of the pages made available both to the A.O. and the CIT(A) and now filed before us was referred to. 8. Similarly, referring to pages 62-70 demonstrating incorrect facts which led to extraction of surrender for diesel and cutting oil and allegation of expenses of Salaries and Wages read with pages 71-75 and 76-82 of the Paper Book, the arguments of mistaken belief on facts and law and incorrect facts confronted by the Survey team were relied upon. 9. It was vehemently reiterated that only on receiving the calculation sheets shown to him at the time of survey which were subseque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions with respect to Ground No. 3 in support of the retraction as advanced before the A.O. it was submitted has been reproduced in pages 8 onward of the assessment order. The A.O. has extracted the reply dated 30.12.2013. 12.2. The remaining additions constituting of alleged expenses incurred out of undisclosed sources agitated vide Ground No. 5 it was submitted are extracted in para 2.3 (page 9 to 12) of the assessment order. 12.3. For addition challenged on account of alleged unrecorded wages and salaries agitated vide Ground No. 4 attention was invited to submissions recorded at pages 12 to 13 of the assessment order. 13. Carrying the Bench through these detailed submissions, it was argued that these have been rejected by the A.O. without controverting any of the shortcomings pointed out. The detailed explanation based on the evidences has been discarded as an elaborate after thought. Reliance by the A.O. was blindly placed upon the surrender of the CMD Mr. Satwant Singh Harish which it has been elaborately explained before the CIT(A) to be on multiple mistaken belief on facts and law. These submissions on facts and evidences are not controverted. 14. The Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said person, it was submitted, had no knowledge apart from his own area of expertise i.e. packing and hence, he was in no way a competent person to comment upon the quality, quantity or value of the stock. 16. Similarly, statement of Mr. Sunil Kumar the junior most Accountant aged about 24 years has also been relied upon blindly (Paper Book page 98-100). The fact that he himself accepts that he was handling only recording of purchases etc. in journals and thus cannot be expected to be conversant with the level of credibility given to him it was submitted was completely ignored. Specific attention to answers in response to Q. No. 1, 2, 4, 6 7 was invited to substantiate these facts where he clearly records, I cannot verify it from my books of accounts as this is not available in my computer . 17. Carrying us through the submissions of these two employees of the assessee on whom reliance has been placed by the department it was pointed out that the Accountant was drawing a meager salary of ₹ 5,000/- which would show his competence and at that relevant point of time. It was argued that even a domestic worker was drawing more salary than him. Thus his capability and cor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and has been seen by the A.O. The books of account have been accepted. These submission on facts made before the A.O. has been repeated before the CIT(A) also. It has been argued that there cannot be any question of sales without bills. Referring to the respective orders, it was argued that no such instance of any variation has been pointed out either by the survey team or by the A.O. or the CIT(A). The assessee's accounts for the year ending 31.03.2010 it was submitted were audited. It was re-iterated that no defect has been pointed out, therein. These have been examined by the A.O. at the assessment stage or thereafter. The surrender, it was submitted, has repeatedly been shown to have been made on account of mistaken facts and circumstances where the assessee blindly believed the department's version that there were mistakes. It was argued that infact there was no mistake. However, this fact, it was submitted was realized later on when the assessee sat down to examine the basis of the survey team's case alongwith all the records including the bills raised and payments made etc. Relying on the written submissions extracted in the impugned order itself, reading agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se differences, it was submitted, are what we would find in any normal business. These submissions being advanced, it was stated have been recorded in the respective orders and are not fresh arguments. Referring to the record, it was submitted that the assessee repeated his argument that differences many a times are on account of various normal routine nature e.g. the assessee sent the material in the last week of March 2010 but the same was received by the party after 31st March, 2010. Thus, the assessee debited the amount before 31.03.2010 and the debtor credited assessee's a/c after 31.03.2010. Similarly in some of the cases the assessee dispatched the cheque on or before 31.03.2010 but the company received the same after 31.03.2010. In some of the cases the debtor/customer deducted some amount on account of defect in material or inferior quality or even rejected the material but the assessee company has not accepted the claim of the debtor. It was submitted that there are instances where a debtor has two or three different units. The payment received from one unit was credited to the other unit of the same company. These differences get reconciled/settled after the necessar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the stand of mistaken facts which argument on facts would address ground No. 3 attention again was invited to the assessment order and the impugned order. 22. Inviting attention to page 4 of the assessment order, it was submitted, that the assessee addressing the wide range of auto components manufactured ranging in size from 4 mm to any size/thickness and diameter weighing from 1 gm to 50 gm it was submitted that all these were lumped together by the Survey team and weighed arbitrarily, values applied again arbitrarily based on the estimated weight without identifying the individual component was done. Attention was invited to the submission before the A.O. and the Ld. CIT(A) Sl. No. 13 Copies of stock statement provided by the department to the appellant (Chandigarh Unit) Paper book page 108-117) Sl. No. 14 Copy of detailed calculation of overvaluation adopted by the department in calculating finished stock (Chandigarh Unit) Paper Book page 118-123; Sl. No. 15 Copies of supporting bills to substantiate the overvaluation of finished stock done by the department at Chandigarh Unit Paper Book page 124-149; Sl. No. 16 Copies of stock statement provided by the department to the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stock recorded. The Director was led to believe that there were mistakes in the accounts which he understood to be posting and clerical mistakes. However, when the survey team's calculations and estimations were made available to the assessee then at the first instance itself it was seen that these were incorrect. They were challenged not only on the grounds of arbitrary quantification but also on valuation of finished goods. The rate adopted by the department, it was submitted, was shown as per record to be totally imaginary and arbitrary. These facts remain unrebutted. No effort to segregate even the major items like coils either in quantity or quality was made let alone effort to match item with the sale bills of the assessee. The detailed exercise done by the assessee remains unrebutted. The department, it was submitted, has adopted simple average method for valuation of finished goods lying loose for inspection at C-162, Phase-II, Mohali. The Survey Team has picked up the first 129 items noted its rates without comparing it with the Actual cost of production. The actual cost of production can be arrived at by deducting GP Margin from the sales value and sales value could h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Finished Goods on the basis of actual cost of production (Sales Value as per Bills-GP Rate) vis-a-vis value adopted by the Department. 23. These submissions referring to para 2.4 of the assessment order, and the impugned order it was submitted have not been rebutted and have instead been simply discarded on the grounds of being elaborate after thought. The so called shoddy estimated Inventory of stock wherein multiple shortcomings was blindly relied upon. The fact that it was full of shoddy estimations, incorrect weighing, identification mistakes; classification; valuing defects elaborately pointed out were all repeatedly ignored by the tax authorities. The assessee's elaborate arguments that weighing itself could not have been done in 11 hours have been dismissed in para 2.5.2 by the A.O. holding that the assessee himself accepts that there has to be a level of estimation. The statement of Shri Narinder Singh identified by the Department itself as a Packing Supervisor alongwith the surrender by Director was considered to be adequate evidences to justify that the mistakes pointed out deserves to be ignored. 24. Before the CIT(A), the assessee, it was submitted, again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penses pertaining to cutting oil and wages and salaries. It was reiterated that the surrender had been made by the Director based on facts as confronted by the Survey Team. The assessee in its confusion could not readily explain that the payments for cutting oil and diesel booked for one unit were not paid in cash as alleged by the Survey team and were infact paid for by cheque by the Mohali unit. All supporting documents along with invoices of the payments by cheques were made available on record. These details it was submitted necessarily need not be personally known to the Director and it can be seen from the record and it has been pleaded that no legal or financial advise on facts was available to the Director at the time of signing the surrender. It was submitted that the fact remains that these were not readily recalled in confusion by the Director returning hastily back from travel after four days if at all he was aware of the financial management. The fact remains that correct facts could not be recalled or accessed and admittedly could not be pointed out by him. However it was submitted all these facts were available on record before the Survey team. No doubt, posting in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned order, it was submitted, that it is evident on record that the assessee has pleaded confusion in not recalling the fact of payments made by the other unit by cheque but the department when confronted with evidences still feels shy to examine it and still chooses to blindly rely on the surrender made. 30. Similarly for sustaining the addition made on the grounds of surrender on account of salaries and wages, it was submitted, it is a matter of fact that books of account of the assessee were not completed upto date, however, the ESI and PF etc. on the salaries stood deducted. This argument supported by evidences till date has not been rebutted by the Revenue. It was submitted that merely because in the ledgers/Registers etc., it was not posted upto date, the assessee in confusion agreed to the surrender believing that the Survey Team is confronting some correct facts. However, the assessee on reconciling the record has noticed that there was no unrecorded expenditure in the true sense of the word. 31. It was submitted that it may be noted that all the surrenders are in round figures as suggested but once the record shows the position to be to the contrary, the mere reliance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g us through the facts of the said case, drew specific attention to page 3 para 8 of the said decision wherein the Revenue's insistence of relying on Survey Team's report was critically viewed. In the facts of the present case also, it was submitted, the facts confronted by the Survey Team on clearer examination can be seen to be incapable of any credible reliability as they were similarly shoddy estimates and considering principles of law in, Pullangode case of the Apex Court which is relied upon in the present proceedings also as well as the decision of the Madras High Court in Kadar Khan's case which has ultimately been upheld by the Apex Court also and the CBDT guidelines considered and relied upon by the Jaipur Bench in M/s. Asmi Stonex case (supra) in regard to extracting of surrender etc. during survey which proposition is relied upon in the present case also. It was his submission that no addition on facts was maintainable. 37.2. Referring to decision at Sr. No. 2, DCIT Vs. M/s. Hemadri Machine Tools (Mum-ITAT) ITA No. 714/Mum/2020 (available at Paper Book pages 48-80). Specific attention was invited to age 71 of the Paper Book to highlight the proposition th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements simplicitor--No substantial question of law. 37.3.1. This proposition of law in the face of a retraction of the surrender, it was submitted, has been addressed by the Hon'ble Rajasthan High Court and it fully supports the present case. 37.3.2. The assessee in the facts of the present case it was submitted, has repeatedly brought over whelming evidence on record which has not been rebutted by the Revenue and mere mistaken surrender is being relied upon. This action, it was submitted, is contrary to the settled legal position on retractions. 37.4. Referring to decision referred to at Sr. No. 4 in DCIT Vs. Vikas Jewellers (Jaipur ITAT) 63 CCH 290 (available at Paper Book page 85-93) it was highlighted that even in a case where statement u/s. 132(4) which admittedly has greater evidentiary value as it is a statement recorded 'under oath' has been looked into in regard to the calculation mistakes pointed out despite a surrender. In the facts of the present case, it was submitted, that the statement is not u/s. 132(4) but in a survey u/s. 133A and by a Director returning after hectic travel from Chennai being out of station for 4 days rushing back on acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 37.7.2. It was noticed that there was no material to show that the employees concerned were properly authorized to certify the quantity of stock physically present. Thus, the Inventories were treated to be unilateral document. 37.7.3. The legal position on similarity of facts, it was submitted, fully supports the assessee. 37.8 Drawing attention to the decision rendered at Sr. No. 8 of the Paper Book, CIT Vs. S. Khader Khan Son 352 ITR 157 (available at pages 157-158) which position of law of the Hon'ble Madras High Court was affirmed by the Apex Court as department's SLP stood dismissed in appeal. 37.8.1. Various orders of the ITAT and the High Courts referred to therein have been relied upon. The legal position namely; Addition-Addition on the basis of statement recorded during survey under s. 133A--Sec. 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition--This view is clearly supported by CBDT, circular dt. 10th March, 2003 (Paper Book page 159). 37.8.2. Heavy reliance was placed on the leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was placed on decision at Sr. No. 10 CIT Vs. Atam Valves (P) Ltd. (P H HC) 184 Taxman 6 (available at Paper Book pages 167-169). Head Note thereof was relied upon. 37.10. Attention was also invited to K.T.M.S. Mohd. ANR V. Union of India (S.C.) 197 ITR 196 (available at Paper Book pages 170 to 187). Referring to the Head Note of the said decision, it was submitted that the Court clearly held considering the statement given by a family member in FERA proceedings that the Court or any Authority intending to act upon the inculpatory statement as a voluntary statement should apply its mind to the retraction. The Court/Tribunal is expected to consider whether the statement was not under any inducement, coercion, threat or promise etc. The Court held therein that merely because a deponent has made contradictory statements at two different stages in a judicial proceeding is not by itself always sufficient to justify a prosecution. 37.11. Referring to Sr. No. 12 in Pr. CIT Vs. M/s. Sunshine Import and Export Pvt. Ltd. (Bombay HC) 424 ITR 195 (available at Paper Book pages 188 to 192), it was submitted that the Hon'ble Bombay High Court again after examining the legal positi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law permits the assessee to alter the admission made before the tax officials in the course of survey proceedings? It is incumbent on the Revenue to follow the fine norms of jurisprudence. Else the whole process of law will be set at naught................... As a matter of fact, no defect of any reckon was pointed out in the books. The addition was wholly on the basis of assessee's admission. There is absolutely nothing on record to justify that the book results were manipulated. It is quite possible, that the partner who at the time of survey gave this statement might have misunderstood the contents comprised in the statement concerning his disclosure. In the surrounding circumstances, and having regard to the given facts, it cannot be concluded that what the assessee said originally was sacrosanct and the assessee is not at liberty or it does not lie in his mouth to correct the error, originally committed by giving a different version of truth. In the absence of any other material apart from the original admission, there is nothing to support the addition. It is not possible to agree with the CIT(A). Accordingly, the Assessing Officer is directed to delete the additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition. The retraction was held to be justified. 37.17. Drawing attention to the decision mentioned at Sr. No. 18 Jain Trading Co. vs. ITO (Bom ITAT) 25 CCH 732 (available at Paper Book page 247 to 251) was specifically relied upon to support that when purchases and sales were accepted mere surrender in survey not sufficient evidence. Supporting the retraction was not upset by the A.O. The A.O. having not raised even a finger of doubt at the assessment statement furnished by the assessee, addition was held to be not justified. The position on facts is identical. The evidence has not been rebutted. 37.18. Referring to the decision mentioned at Sr. No. 18 DCIT vs. Vipin Aggarwal (CHD ITAT) 46 ITR 367 (available at Paper Book page 233-246) it was submitted, that without conceding the assessee also without prejudice to the main claim draws strength from this decision that if at all the availability of funds at assessee hands is to be considered then the benefit of telescoping these should be considered and the funds can be said to have been utilized in the alleged stocks found. Thus no addition was maintainable. Even otherwise since profit declared stands accepted as books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise. Accordingly it was his argument that on account of these facts and reasons, it has been correctly dismissed by the CIT(A). 41. Referring to page 404 405 of the Paper Book it was submitted that the assessee has led elaborate arguments to show that instead of additions of x amount on different heads, addition at best could be made of Minus x amount. It was his vehement submission that this very argument, demonstrated that the assessee's books of account even today has two versions. 42. It was his vehement stand that the assessee is trying to argue its case from all angles ignoring the vital fact that actual hard cash of huge amount was found by the survey team which lead to the addition for payments received outside books from Sundry debtors. Thus all these arguments and calculations, it was submitted, is a time wasting exercise. 43. The reliance placed on books of account not rejected, it was argued, has no meaning for unrecorded transactions. The non recording of these in books anyway, it was his submission is a meaningless exercise as hard cash has been found by the survey team of such large amounts. These facts on record cannot be ignored and the occasion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the accountant itself demonstrates that over and above the recorded salary part of it was being paid in cash and was hence not recorded. The explanation offered at this stage it was his prayer may be discarded. 49. Similarly the explanation now offered by the assessee that for addition made for cutting oil expenses the other unit was paying by cheque may be discarded. 50. The position of law it was submitted has been addressed in very categoric words and was very clear and the Revenue is heavily relying on the following case laws which are decision of the Apex Court and the jurisdictional High Court: i) Navdeep Dhingra V. CIT 56 taxmann.com 75 (P H) ii) Vikrant Dutt Chaudhary V. CIT, Panchkula 88 taxmann.com 727 (P H) iii) Pradeep Kumar Biyani V. ITO (2019) 101 taxmann.com 131 (S.C.) iv) Bannalal Jat V. ACIT (2019) 106 taxmann.com 128 (S.C.) 51. Accordingly it was his submission that relying on the decisions and the orders the grounds of the assessee may be dismissed. 52. The ld. AR in reply submitted that none of the decisions relied upon by the Revenue are applicable to the facts of assessee's case. It was submitted that before addr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee despite the evidence that profits in this very same line was noticed to be high. The fact that the assessee had repeatedly failed to provide Stock Register before the A.O. in that case despite several opportunities was also an important and glaring fact on record which lent credibility to the statement of assessee's brother. In the facts of the assessee's case, complete books of account have been made available to the A.O. at the assessment stage. No defects in the books of accounts of the assessee has been pointed out by the A.O. The books of accounts even during the survey were completed upto a specific date was not complete as due to some explained reason, they were not updated but they were presented when called forth at the assessment stage and were not faulted with by the A.O. till date. The reliance placed on a mistaken surrender in confusion can be retracted and this decision does not say that retraction is not permissible. The facts before the Apex Court, it was argued were peculiar and distinguishable and in no way this decision lays claim the proposition that retraction on facts is not maintainable. 52.4. The decision of the Apex Court in Bannalal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hoddy estimates. Incorrect facts and conclusions of the Survey team based led to the surrender. The department has not placed any supporting evidence and is only relying on a mistaken surrender letter of the Director. However signature of Director was only on the statement of surrender and not any other documents. Not repeating his submission on the facts on record namely statement of junior accountant and packing Supervisor, it was submitted that even if they have signed the Survey team's estimated arbitrary Inventory list, this fact cannot be taken to be an authentication of a shoddy arbitrary incorrect estimation confronted to the Director. Page 110 to 117 etc. and other pages of the Paper Book were referred to show that these documents of the Survey Team though signed by some employee of the assessee were not signed by the Director. The capability of the junior most accountant was addressed to say that he was not qualified to comment on the affairs of the assessee. The fact remains on record that complete books, have been shown to the A.O., the survey Reports are with him but still books of account are not rejected by him, no penalty for any such shortcoming has been levied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut without prejudice argument. The fact that the allegation of inconsistencies in stock has been shown to be rough and shoddy unsupported estimations; sales stand accepted; books stand accepted; profit stands accepted; hence even if the arguments of receipt of unrecorded payments in cash on mere conjectures and stock has been upheld by the First Appellate Authority even then accepting the prayer for telescoping as per law is permissible and consequently even then these conjectures lead to no case for maintaining either of the additions sustained. This argument is without prejudice to the main argument that surrender was on incorrect facts and law, retraction is permissible in law. Legal precedent for telescoping was also hence cited as a without prejudice argument to the main argument. 53.3. Accordingly, it was his prayer that considering the facts and the legal precedent, the additions may be directed to be deleted. 54. We have heard the rival submissions and perused the material available on record. On a consideration of the claims and counter claims of the parties we find on going through the repeated elaborate submissions advanced on behalf of the assessee before the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sal of the same page again brings out it has been pleaded that He simply believed the Survey Officers This is a repeated stand on record. Before us also it has been argued that he was not conversant with the day today running of business. These arguments have been advanced before the tax authorities and comes out from a reading of the statement recorded by the Survey team. The surrender was admittedly made in the absence of legal and professional advice from his accountants etc. It is evident from record that faced with what he was convinced to be the survey team's evidence, he agreed to make a surrender is a fact staring from the face of the record itself. When it was conveyed to the Director that there was variation in stock found vis-a-vis books and receipt of unrecorded amounts from debtors allegedly received outside books which as per arguments advanced before us, he understood this to be a case where some clerical errors were there on record. His naivety and ignorance is evident from the fact that he did not even question to wonder where is the money for the alleged unrecorded recoveries or any such evidence. He admittedly was financially ignorant of the affairs as he d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unrebutted on record. Thus the fact that he was unable to recall or was not aware of hence, the responsible Accountant should ideally have been questioned remains evident. Whatever may be the case i.e. lack of recall or knowledge, the fact remains that the evidences of their payment by cheque was readily available. This argument/explanation based on supporting evidences remains unrebutted. Similarly, allegations of unrecorded salary and wages expenses are based on no evidence except the surrender. Responses to Q. 17 at page 92 that he agrees with the Survey team's allegation and says it is possible that may not have been recorded by the Accountant, however, we have duly paid ESI P.F. regularly when read alongwith Q. 21 with abrupt surrender in the face of the bald baseless allegation as we have now seen the surrender admittedly is made operating on blind belief. Till date no rebuttal to the claim has been placed on record by the Revenue. Where books of accounts were not complete, the fact that he believed the assertions of the Survey Team to be correct and made the surrender in hand supports the argument that ad hoc amounts were suggested and accepted. It is a matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utted by the Revenue, we have seen strike at the basis of the surrender and the records of the Survey team available on record. It is seen that facts confronted by the Survey team were admittedly incorrect. We shall address these facts subsequently also while addressing the arguments of the Revenue. On an appreciation of the detailed exhaustive arguments consistently on record, we hold that the basis of retraction stands demonstrated. The shortcomings in the supporting documents of the department the survey report etc., we have seen are casual, ad hoc estimates relying on a completely unscientific method. These have been believed to be correct position on facts and law by the Director is evident. We have seen that repeatedly at two stages, these claims have not been rebutted and even today reliance is placed on the statement of the Director etc. which we on examining the rival claims have seen to be based on incorrect appreciation of facts and law. We find that the generalistic argument that there is always an element of estimation in the present facts of the case is not sufficient to give any credibility to the totally arbitrary exercise placed on record on the plea that it be hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. (emphasis supplied) (ii) F. No. F. No. 286/98/2013-IT(Inv-II) 18.12.2014 Admissions of Undisclosed Income under coercion/pressure during Search/Survey ........................ ........................ Subject: Admissions of Undisclosed Income under coercion/pressure during Search/Survey-reg. Ref: 1) CBDT letter F. No. 286/57/2002-IT (Inv. II) dt. 03-07-2002 2) CBDT letter F. No. 286/2/2003-IT (Inv. II) dt. 10-03-2003 3) CBDT letter F. No. 286/98/2013-IT (Inv. II) dt. 09-01-2014 Sir/Madam, Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im based on no facts. The argument advanced by the ld. CIT-DR that huge cash was found is not as per record. No evidence of such a claim has been referred to by the two tax authorities despite the massive reconciliation evidence on record which remains unrebutted. Admittedly as per paper book page 402 (Vol. 2) physical cash of only ₹ 33,480/- was found and not as argued by the ld. CIT-DR some huge exorbitant amounts justifying any surrender. The assessee's detailed reconciliation is available on record made available both before the A.O. as well as the Ld. CIT(A). It has been seen again by the A.O. in the remand proceedings and despite this no defect had been pointed out therein. 58. We have seen the evidence and noticed that the allegation leading to the surrender for salaries and wages paid outside books of account is also not based on any evidence. No statement of any employee is available to support the allegation. Infact no such question also appears to have been put by the Survey Team to any of the employees. No evidence of employees found working who were not found mentioned in the record has also been made available or referred to by the Revenue either on the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see and we find that the said claim of the Revenue is incorrect on facts. 61. We have examined and found that facts leading to the addition qua the unrecorded stock is a collection of unsustainable shoddy estimates which led to the surrender made and have found that retraction on facts is justified. It is also, however, relevant to address the statement of Factory Supervisor Mr. Narinder Singh (Paper Book page 106-107) which has been relied upon by the ld. CIT-DR. On considering the same in the light of the judicial precedent cited and noticing detailed objections of the assessee on his competency and capability in as much as that he was not the authorized person. We find that we have to agree with the submissions on behalf of the assessee and are of the view that neither his responses nor signatures lend authenticity to the estimates relied upon by the Revenue. The fact that an office employee of the assessee has signed the inventory list this fact read alongwith the questions put to him, we are of the view only verifies the fact that the Inventory list was made in his presence with his assistance however, it in no way can be said lead to authenticating the arbitrary estimates ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this argument, we have seen that no such question was put by the survey team to Mr. Sunil Kumar aged 24 years. No effort to bring his educational level has been made by the survey team to show that commensurate with his qualification the salary was less. No question has also been raised to ask why his salary was low as now alleged by the ld. DR. We have seen no question was put to him by the Survey team asking whether any payment of salary was also received in cash over and above the recorded salary of ₹ 5,000/-. The argument advanced without any evidence or basis at this stage is completely devoid on merit. Simple question put by Survey team was what remuneration is being paid to you as Question No. 4 and it was answered directly as I am getting salary of ₹ 5000/- per month (Rs. Five Thousands only ). The argument that salary was commensurate with his competency and skill being junior accountant maintaining record stands established as even the survey team did not caste any aspersion on the meagerness, if any on the salary being low as now being presented by the Ld. CIT-DR. The survey team satisfied with his salary of 24 years old Sunil Kumar working in the firm for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e parties, we find that we are left with no option but to delete the entire addition on account of each of the heads which have been elaborated at length in the earlier part of this order. We have also gone through the statement of the Director on which heavy reliance has been placed by the Revenue and find ourselves in agreement with the submissions of the ld. AR that the surrender was made on the basis of mistaken belief of fact and law is borne from the record. 64. Having so held, it would not be out of context to also refer to some remaining arguments of the parties. One of which being the valiant argument of the Ld. CIT DR that the survey team actually weighed the entire stock which as per the assessee's repeated submissions recorded in the orders statement would have taken over 71 hours has to be taken with a huge pinch of salt and cannot be accepted by us as an evidence that actual weighment was done. The availability of the requisite paraphernalia stated to be not available at the assessee's end to carry out the exercise has been seriously questioned by the assessee at the assessment stage which remains unrebutted on record. It has also been argued before the CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of employees found working were more than the actual number as per record nor has any statement of any employee been recorded from where it can be seen that part salary was recorded and part was unrecorded. No such question was put to any of the employees and no evidence has been referred to. Similarly for the expenses of cutting oil etc. the Director does not question the basis of the assertion made in Q. No. 21. It appears that he does not know as he may not have been responsible as argued by ld. AR for the day today functioning of the business, the fact that ultimately it was shown that this stood paid by the other unit by cheque, all this remain unrebutted on record. The retraction is supported by evidence confronted to the A.O., the CIT(A) and relied upon before the ITAT remains unrebutted till date, it clearly brings out a case that the surrender was made based on facts as confronted which resulted in the action of surrender. So these facts lead to forming of belief for making the surrender no doubt voluntarily, but admittedly was based on confusion and mis-appreciation of facts. We have taken into consideration the definition of coercion as available under Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t with its Debtors. This exercise was never conducted in past. Thus extracting the details of account statement of past years, finding the details of rejections, partial rejections, quality rejections or other amounts debited by the debtors on these or other accounts like rate difference, discounts, transportation or other charges claimed by the assessee but rejected by the debtors and not communicated to the assessee company is consuming lot of time. The debtors are not coming forward to reconcile the account statement of past years also. We have requested them to reconcile at least the account of last two years and the remaining years will be reconciled in phased manner. So this process is time consuming and we request that we should be granted at least two months time to reconcile the account statement of debtors. Detailed Note on retraction of surrender under other heads and other details asked for shall be submitted in the next hearing. 65.4. A perusal of page 12 of the assessment order again addresses the justification for retraction after pointing out the various defects etc. addressing the mental framework as under: The assessee made surrender under utter confusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion basis and hence surrender under this head has been retracted. The assessee, later on, verified all the facts including confirmation of debtors and found glaring defects in; method of stock taking, physical verification of stocks lying loose, valuation of stock and other inaccurate and false information on the basis of which the surrender was obtained by the Department; which confused the assessee and under pressure of circumstances he surrendered income to the tune of ₹ 5.00 crores which was later on retracted. We have enclosed detail of:- a) Diesel Purchased, Cutting Oil Purchased. b) Copy of Account of Highway enterprises which had supplied cutting Oil. c) Copy of Account of Chatha Filling Station who have supplied diesel. d) Copy of Machinery account and all other Fixed Assets Purchased/installed with supporting Bills/Invoices. e) Comparative Chart of Valuation of Stock of Finished Goods on inspection and packed Finished Goods on the basis of actual cost of production(Sales Value as per Bills-GP Rate) vis-a-vis value adopted by the Department. (emphasis supplied) 66. Accordingly, we are not so convinced with the claims advanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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