TMI Blog2018 (3) TMI 1958X X X X Extracts X X X X X X X X Extracts X X X X ..... income declared by the assessee in a mechanical way but applied his mind to the various aspects of the matter before completing the assessment. In the statement in the course of survey, the managing partner only stated that an amount of ₹ 19 lakhs was introduced towards advance for sale of land but confirmed only six lakhs. It was on that basis that the balance of ₹ 13 lakhs was offered for the assessment year 1998-99. That was confirmed by the creditors. The Income-tax Officer also verified the above aspects. Therefore, the assumption that what was offered in the statement as ₹ 43 lakhs was in addition to what had been assessed and on that basis, that statement had got evidentiary value, was erroneous and materials collected during the course of survey had been borne in mind by the Assessing Officer who was well aware of the evidentiary value of the statement. At the same time, such survey conducted unearthed certain income and the ITO on the basis of accounts and offer made and admission made before him, came to the conclusion that what was offered in the written offer made by the assessee was reasonable. Admission contained in the statement of the managi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lved, which is against confirming the addition on account of excess stock found at the time of survey. 2. Since, in all these appeals, there is a common issue to discuss, therefore, all the appeals were heard together and for the sake of convenience and brevity, a common order is being passed. The assessee is a partnership firm and is engaged in the business of manufacturing and trading of marble/granite slabs and tiles. A survey U/s 133A of the Income Tax Act, 1961 (in short the Act) was carried out on 12/09/2013 and 13/09/2013 alongwith other group concerns of the partners namely Shri Arihant Choudhary, Shri Tilak Choudhary, Kusum Choudhary and Smt. Shweta Choudhary. The return of income was filed declaring NIL income in the case of M/s Asmi Stonex after adjusting unabsorbed depreciation on 30/09/2014, return of income declaring total income of ₹ 5,90,940/- was filed in the case of Arihant Choudhary and return of income declaring total income of ₹ 5,25,530/- was filed in the case of Tilak Choudhary. The Assessing Officer made addition on account of excess stock and short cash noted during the survey proceedings. 4. A common issue involved in all these appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid valuation that valuation of marbles block (lafers) has been done in a very causal manner. The same was required to be done with reference to weight whereas it has been done on piece basis. No weight was taken of any marble block and hence the valuation has resulted in nullity. The assessee has furnished copy of vouchers of purchase which are available on paper book page no. 13 to 124 which disclosed that the blocks were purchased weight wise. This submission of the assessee has remained untroverted which points out to a serious blunder in the valuation of marble blocks. It was also pointed out that the stock of marble blocks of ₹ 4,21,68,000/- is 90% of the total stock found during the course of survey of ₹ 4,73,04,946/-. The major discrepancy in the valuation of marble blocks has rendered the entire valuation of stock as a farce. Therefore no addition could have been made on the basis of such valuation. This submission of the assessee has remained uncontroverted by the Learned CIT(A). They have simply reiterated again and again statement of Shri Pradeep Choudhary on the basis of which valuation was done. The submission of the assessee is that in the face of docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - stock to the extent of ₹ 26,56,770/- pertained to marble slabs. The assessee submitted that the entire slabs were valued at a flat rate of ₹ 30/- per sq.ft. whereas the cost in the hands of the assessee was only of ₹ 12.21/- per sq.ft. Apparently the marble slabs have been valued almost double of the cost price. The above major discrepancies in the valuation of stock were pointed in the detailed submission made before the Learned Assessing Officer but the same were ignored and not taken into consideration. The discrepancies raised by the assessee have also remained uncontroverted. It is the submission of the assessee that the entire survey was a farce. The figures of stock valuation are fake and it was just to obtain forced surrender from the assessee. It is settled principle of accountancy that valuation of stock cannot be made on the basis of statement of the assessee. The same has to be worked with reference to purchase and sale vouchers. But in this case the survey team did not carry out any verification with reference to purchase and sale vouchers but tried its best to force Shri Pradeep Choudhary to make surrender. Thus the thrust of the survey team was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the entire addition of 1.91 Crore was deleted. It is submitted that the facts of the case of the assessees are similar to the facts of the case law. In the case of the assessee also surrender was obtained in the statement without any documentary evidences rather contrary to the position of books of accounts. The surrender so obtained, valuation of stock and additions made in the assessment order disclosed total disregard to documentary evidences and arbitrary attitude of the Learned Assessing Officer. The Learned CIT(A) has also ignored to consider the submissions made by the assessee. The assessee considers it relevant to quote the following para from the above case law:- Assistant Commissioner of Income Tax vs. M/s. AL Quresh Export, ITA No.6733/Mum/2008 (Assessment Year: 2005-06) dated 15th February 2011. Thus it is obvious that the additional income disclosed by the appellant was not based on any documentary evidence. No material is found or impounded in the survey to corroborate the confession of concealed income nor investigated and declared later in post survey or assessment proceeding which followed. A statement so made cannot be the end of the matter and the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings intimated to the A.O what are the correct facts and filed evidences that supported his claim. The AO was unable to bring any material or evidence to the contrary. The Supreme Court in Pullan Gode Rubber Produce Co. Ltd vs. State of Kerala (1973)(91 ITR 18) has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. In the present case apart from answer given by the partner Shakir Qureshi to question at S. no.11 on survey day that since I am not able to reconcile the discrepancy on purchase for which bills were yet to be received, as such I offer an income of ₹ 1.91 Crores , no clinching evidence or material based on valid inquiry is placed on record by the AO which could persuade the appellate authority to confirm the addition so made. In CIT vs. Ramdas Motor Transport {(1994)(238 ITR 177) (183) (A)} and Jaikisan R. Agarwal vs. ACIT {(2000) 66 TTJ 704} it has been held that if the admission in the statement is not supported by any asset or document, the retraction may be genuine. The Allahabad High Court in the case of Ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) basically erred in making total reliance on the confessional statement of the assessee ignoring the documentary evidences brought on record by the assessee. A copy of submission made before the Learned CIT(A) is available on paper book page number 129 to146. 2. Stock at the premises of the assessee It is submitted that entire exercise of survey u/s 133A was a farce. The survey team on paper worked out stock of ₹ 4,73,04,946/- allegedly found at the business premises of the assessee whereas virtually there was no such stock at the business premises of the assessee. The survey team on the paper first allegedly worked out the stock at ₹ 4,73,04,946/- and later-on on presumption and assumption divided the same in all the five sister concerns and a sum of ₹ 3,20,73,946/- was held as belonging to the assessee. There are no details as how this stock was held to belong to the assessee. The entire exercise of survey does not give any details of the manner in which the working was done either of the stock as per books or of the stock found physically. There are no details of purchases and sales before working out the stock as per books. There is no reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was made to ascertain the book position of stock which has been taken at ₹ 1,21,36,000/-. No details are provided as how and in what manner the book position of stock was ascertained at ₹ 1,21,36,000/- In view of this the entire exercise of apportionment of stock amongst various concerns was totally based on conjecture and guess work and was not based on ground realities. The survey team in fact conducted the survey in a hypothetical manner without taking into consideration the actual facts. It was concerned mainly obtaining surrender of income. Therefore all manipulations were done in making a false valuation report whereas no such stock was actually existed. Further apportionment of stock was made in the hands of various concerns just to give it a color of genuineness. In these circumstances it is submitted that addition made by the Learned Assessing Officer has no legs and deserves to be deleted. It is further submitted that as per trading account the total sales disclosed by the assessee are only of ₹ 1,37,45,932/- of marble slabs and tiles. For conduct of such sales existence of stock to the extent of ₹ 3,20,73,946/- is a distant cry. The Learned A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion could be made on the basis of such survey report of stock valuation. 4. Valuation of stock of marble blocks is invalid not being with reference to weight : - The stock of ₹ 4,21,68,000/- of Marble Blocks has been completed in five lines (first page of the valuation report). The stock has been bifurcated in big size, small size whereas the blocks are required to be valued with respect to their weight. Therefore the entire valuation of marble blocks is not only defective but invalid. It appears that during the survey the authorized officers were in a hurry to obtain surrender of income by hook or by crook. The defect of valuing marble blocks without quantifying their weight is a major defect. This invalidates the entire valuation. The assessee has purchased marble blocks with reference to weight. Copies of vouchers of purchases of marble blocks from R.K. Marbles Pvt Ltd are available on paper book page number cited supra. It is submitted that out of the total stock valued by the survey team at ₹ 4,73,04,940/-, more than 90% of it pertain to marble blocks and granite blocks which has been valued purely on estimate basis. The Marble blocks were purchased weight ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 436.64 tons for a sum of ₹ 7,39,513/- which gives average cost of 1 block at ₹ 17,198/- whereas in the survey valuation report the marble blocks have been valued bigger size at ₹ 40,000/- per block and smaller size at ₹ 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treating a marble block big or small. So far as the assessee is concern the blocks have ranged around 10 tons each. There is no big difference in the weight of marble blocks so as to treat them big or small. Details of purchases of marble blocks along with relevant purchase vouchers, ledger account are available on paper book cited supra. It is iterated that assessee has no stock of marble blocks as on the date of survey and hence it was wrong on the part of the Learned Assessing Officer to have considered the stock of ₹ 3,20,73,946/- in the hands of the assessee without any base and without any ground. 6. Stock of granite wrongly considered in the hands of the assessee: - The valuation of granite has also been done in very routine and slipshod manner without taking into consideration the size, the quality and the colo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the statement of Shri Pradeep Choudhary relating to the addition on account of stock are scanned below: - The perusal of the above statement reveals the following: - (a) That the entire stock was found at the business premises of M/s Asmi Stones allegedly belonging to the five sister concerns including the assessee. (Answer to question no. 6). (b) The stock was inventoried and valued at the instance of Shri Arihant Choudhary S/o Shri Pradeep Choudhary who is the head of the family and also at the instance of employee Shri Kamlesh Rathore. (Answer to question no. 7). Thus the assessee had no say in the valuation of the stock found. The stocks required to be valued with reference to vouchers of purchase and not on the basis of statement. Therefore the entire valuation stock is defective, wrong, incorrect and overvalued and therefore deserves to be disregarded. (c) The stock was bifurcated in the hands of five concerns at the instance of Shri Pradeep Choudhary at his oral instruction. The statement does not give any basis of bifurcating of stock in the hands of five sister concerns. (Answer to question no. 8) This has been done purely on guess work. Such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitLal C Javeri Vs. Sen (1965) 56 ITR 198 (SC) (ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC) (iii) UCO Bank vs. CIT (1999) 237 ITR 889 (SC) (iv) Union of India vs. Azadi Bachoo Andolan (2003) 263 ITR 706(SC) In the above decisions the Apex Court of the Country has reiterated that wherever CBDT has issued instructions/circulars to relieve hardships the same are of binding nature. In view of this it is submitted that the surrender of income obtained in confessional statement goes against the spirit of the circulars issued by the Board quoted below. The addition made on the basis of such confessional statement deserves to be deleted. Board circulars dated 10.03.2003 and 18.12.2014 are quoted below- (i) F. No. 286/2/2003-IT (Inv) dated 10.03.2003 No confessional statement in the course of search, seizure and survey. March 10th, 2003 Confession of additional Income during the course of search seizure and survey operation GOVERNMENT OF INDIA MINISTRY OF FINANCE COMPANY AFFAIRS DEPARTMENT OF Revenue CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to state the cost of the stock found. No time was given for making verification with reference to purchase vouchers. It is not the case of the Learned Assessing Officer that stock was valued with reference to purchase vouchers. The Learned Assessing Officer has not given reference of any purchase vouchers or the basis on which valuation has been made. In view of this the value of stock has been taken purely on guess work. Further not only that the cost of stock was not worked out with reference to purchase vouchers but a blunder has also been committed in working out the cost of marble blocks. The Marble block was purchased weight vise but the valuation has been done by counting the marble blocks as big and small which is not correct. During the year under consideration the assessee purchased 43 marble blocks weighing 436.64 tons for a sum of ₹ 7,39,513/- which gives average cost of 1 block at ₹ 17,198/- whereas in the survey valuation report the marble blocks have been valued bigger size at ₹ 40,000/- per block and smaller size at ₹ 26,000/- Per block. In any case both the sizes stand overvalued. Further it is not known as what was the criteria of treati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey are also not beyond doubt. Further the Learned Assessing Officer has not challenged the sales of the assessee. During the year under consideration the sales of the assessee are only of ₹ 1,37,45,932/-. For such a turnover physical stock is not required of ₹ 3,20,730946/- as worked out by the survey team. The excess stock has been also worked out at ₹ 1,99,37,946/- which is more than double to the total sales of the year. Thus apparently the stock determined by the survey team/the excess stock worked out do not match the sales of the assessee which stand accepted by the Learned Assessing Officer. Not only this even during the course of survey not a single paper was found showing unaccounted purchase or sale. In these circumstances the addition made by the Learned Assessing Officer was totally unjustified on the basis of alleged excess stock. The addition made by the Learned Assessing Officer deserves to be deleted. The following case is quoted in support: - Shekhawati Art Palace Vs. CIT (2008) 116 TTJ (JP) 552 Mere rejection of account would not mean that it must lead to addition. 13. Surrender u/s 133A was under duress From the aforesaid facts it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conduct against law nor is there any waiver of the legal right as much as the legal liability to be assessed otherwise than according to the mandate of the law (sic) . It is always open to an assessee to take the plea that the figure, though shown in his return of total income, is not taxable in law (f) Kailashhen Manharlal Chokshi Vs CIT (2008) 14 DTR 257 (Guj) It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months. The main grievance of the AO was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument that the statement elicited during the survey operation has no evidentiary value. 15. Prayer: - It is submitted that the aforesaid facts and discussion clearly establish that it is a case where surrender of income was obtained under the garb of survey. In fact no genuine survey was conducted verifying the books of accounts or the position of stock. It is because of this that the marble blocks have been valued without taking into consideration there weight and the purchase cost. The stock of five concerns has been inventorized at one place and then fictionally bifurcated in the respected hands of the five concerns without any basis. The assessee does not know on what basis the stock allegedly held belonging to it has been apportioned at ₹ 3,20,73,946/- particularly the marble slabs and tiles costed₹ 12.21 per square feet as against ₹ 30/- adopted by the survey team while valuing the stock. In fact the entire exercise of valuation of stock is full of blunders and is not actionable. No addition could be made on the basis of such valuation repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 26,000/- and ₹ 20,000/- for big and small respectively. Thus, the valuation of the marble and granite blocks have been done in a very casual and ad hoc basis, the same should have been done in weightwise for each blocks of both marble and granite and also to consider the quality of marble and granite of each block as there is wide variation in price due to various reasons like colour, design, patterns etc.. It is a well known fact that all the blocks cannot be categorized of the same quality and cannot be valued at the same rate. Thus, the valuation prepared by the survey team does not carry weight and quantification of the value of the stock on the date of survey. Thus, such major discrepancies in the valuation of marble and granite blocks has rendered the entire valuation done by survey team as a farce. No addition can be sustained on the basis of such casual valuation of stock. As per books of account, the stock inventory was filed, which is placed at page No. 13 to 124 of the paper book and this fact has not been controverted by the revenue. Further the bifurcation of the stock among various entities is also not based on any concrete evidence. The stock stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax, all Chief Commissioners of income tax, all Directors General of income tax, Director General of income tax (I CI) regarding the admissions of undisclosed income under coercion/pressure during search/survey in its letter dated 09/01/2014 wherein it has been clearly stated that instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during the searches/surveys conducted by the department. The CBDT is also aware about the fact that such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. The CBDT is also aware about the fact that such actions defeat the purpose of search/survey operations as they fail to bring the undisclosed income to tax is a sustainable manner leave alone levy of penalty or launching of prosecution. Thus, such confessional statements not supported by credible evidence cannot be made basis to make and sustain the addition. Such view also gets support from the following case laws: (a) Jain Trading Co. Vs ITO (2007) 17 SOT 574 (Mum) An assessee who makes an offer of additional income during course of an enquiry by inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... automatically bind upon the assessee. Section 133A does not empower any ITO to examine any person on oath. In contradistinction to the power under section 133A, section 132(4) enables the authorized 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, whatever statement is recorded under section 133A is not given an evidentiary value. The statement obtained under section 133A would not automatically bind upon the assessee. Therefore, admission made during such statement cannot be made the basis of any admission. (c) Paul Mathews Sons Vs CIT 263 ITR 101 (Ker) Section 133A enables the income-tax authority only to record any statement of any person which may be useful but does not authorise for taking any sworn in statement. On the other hand, such power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) in the course of any search or seizure. Thus, the Act whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le. The alleged admission contained in the statement of the managing partner of the assessee obtained under section 133A was only a qualified one and the assessee had clearly explained the same before the Assessing Officer by cogent materials and the same was accepted by the said officer. [Para 18] The view taken by the ITO could not be said to be unsustainable in law, so as to call it an order passed erroneously. The ITO had seized books of account and elicited certain answers which had no evidentiary value. There were certain omissions and commissions on the part of the assessee and the assessee had voluntarily offered certain amounts to be treated as additional income for the assessment year in question. But the same had been explained by the assessee, which explanation was accepted after referring to the records and the assessment order passed. The ITO was satisfied about the actual amount received towards advances and only an amount of ₹ 6 lakhs out of the balance was to be further explained and they were telescoped. The entire sum of ₹ 19 lakhs was considered for the block assessment completed in the case of the creditor much before the survey. In those circums ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
