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TMI Blog2019 (7) TMI 2040X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 970 made as unexplained income on the basis of loose paper seized during search and seizure operation. 4. On the facts and in the circumstances of the case the CIT(A) erred in directing the AO to charge interest under s. 234A from September, 2013 as he found that the cause of delay in filing of return not attributable to the assessee. 5. The CIT(A) has erred in passing the appellate order wherein he has acted in a perverse manner while passing the order which has been made in haste without giving reasonable opportunity to the AO to give his submissions on the issues." Cross objection No. 58/Rpr/2015 "1. Learned CIT(A) erred in not adjudicating upon the issue raised by the appellant about charging of interest under s. 234B in ground No. 5 of appeal. In the facts of the case, interest charged by the AO under s. 234B for the period during which the cross-objector was not in default, is not justified. 2. The cross-objector reserves the right to add, amend or alter any of the grounds of cross-objection." 2. The ITA No. 296/Rpr/2014 of the Revenue is the substantial appeal which includes in ground No. 4 the issue raised in the CO of the assessee. Therefore, we first take u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee was submitted before the Jt. Director of IT (Inv.), Raipur wherein she stated that the inventory of stock taken at the time of search was on estimate basis without taking the actual weight/count/measurement and that she had signed the inventory under coercion. It was also stated that to protect stock and finished goods from fire, there is no provision of electricity inside the godown. The assessee also submitted affidavit dt. 24th March, 2012 of Shri Manish Sharma, family members of the assessee, before Jt. Director of IT (Inv.), Raipur on 28th March, 2012 wherein he affirmed that he was not fully conversant with hindi and therefore did not truly understand the scope and import of the statement given by him before the authorised officer during search. He further stated that the inventory was signed by him under coercion. 3.2. The AO rejected the explanation of assessee observing that at the time of search, stock of raw material was taken in the presence of Kumari Dulari Mandal, employee and Shri Manish Sharma, family member of the assessee and that Kumari Dulari Mandal signed the inventory in presence of two witnesses in token of her being satisfied with methodology of ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... two affidavits were not cross-examined later on also. Admittedly, the appellant has been claiming since beginning, and it has also been stated in the affidavit of Ku. Dulari Mandal that there was no light in the godown of appellant due to security reasons and stock was haphazardly and hurriedly taken by the search team in duskiness with the help of torch and some unskilled workers. Moreover, the appellant also objected that it was impossible to physically verify such huge stock correctly in a limited time frame within which the search team claims to have verified it. In view of the above facts, in my considered view, the inventory of stock prepared during the search cannot be regarded as sacrosanct and merely on the basis of such inventory, conclusion could not have been arrived at. However, the AO proceeded to make addition only on the basis of inventory, which was seriously disputed by appellant. The AO seems to have simply ignored the serious objections raised by the appellant merely stating that the affidavits submitted by the appellant are merely an afterthought. It is also not the case of AO that any unrecorded purchases were found during search. 6.3 The appellant has maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aps and rejects and small or nil if the items are of lesser difference of size and weight. Both the AM and JM agree on the point that the correct method of valuation is physical weighment and the assumption by sampling does not result in actual valuation in the opinion of the AM. Contention that the assessee itself has accepted the existence of 28,000 M.T. which is nearing the valuation of the stock estimated by the Department and, therefore, the addition was bound to be made is not sustainable. The letter dt. 21st Sept., 1996 written by the assessee on the basis of which the contention has been raised by the counsel of the Department was in connection with and for pointing out the impossibility of having valued the stock physically. In that connection it was stated that the stock 28,000 M.T. would require 7 to 10 days even all handling the equipments in the factory were employed. That is not an admission of the existence of the stock to that extent but a statement to show largeness of the stock and might have been made because the Revenue had estimated the stock to that extent. That cannot be a statement of admission of existence of stock to that extent by the assessee. Assessee&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of search itself. Any dispute, he argued, should have been raised at the time of search and not subsequently. He also argued that the allegation of stock having been taken in duskiness and with the help of torchlight has remained unsubstantiated and that there is nothing on record contrary to the inventory of stock which shows that there was excess stock of Rs. 66,94,273 and therefore, it was rightly added by the AO and therefore, the learned CIT(A) was not justified in deleting the addition. 6. Per contra, learned Authorised Representative of the assessee argued that assessee is maintaining regular books of accounts, which are audited and no qualification has been expressed by the auditors and no defect in the books of account have been found by the AO. He submitted that the assessee also maintains day to day stock register of major items of raw material and finished goods and no discrepancy whatsoever was found by the AO in the stock records; that in the past, books of account of the assessee have never been rejected by the AO at any time nor any addition has been made on account of any discrepancy found in the stock or purchases or sales of the assessee; that even d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re packed, the quantity in a bag cannot be 50 kg but it would be less because of the volume having been gained, whereas in the inventory, standard weight of 50 kg has been taken. He further argued that Kumari Dulari Mandal did not know english and therefore, she denied to sign the inventory but she was made to sign the inventory under threat and coercion. He argued that after the search was over and when the inventory of stock was verified by the assessee in detail, it was found that the quantities contained therein are excessive and therefore, Kumari Dulari Mandal deposed in affidavit dt. 24th March, 2012 i.e. just within 3 days of search, stating all the above facts and such affidavit is filed at page Nos. 14 to 16 of paper book-1. He argued that this affidavit was submitted before the Jt. Director of IT (Inv.), Raipur on 28th March, 2012 i.e. within a period of 7 days from commencement of search. He argued that after submission of the affidavit, no cross-examination of the deponent was done either by the Jt. Director of IT (Inv.) or by the AO during the assessment proceedings and therefore, the affidavit of the employee remained uncontroverted and needed to be accepted. He furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find that the AO has observed that assessee's relative Shri Manish Sharma was also present in the factory premises, which the assessee has disputed before us that the learned counsel contended that Shri Manish Sharma visited the factory subsequent to completion of stock-taking process; that he was shown the inventory which was already prepared before his arrival at the factory and that he was asked to state whether he agreed with the inventory or not. On perusal of the inventory, (APB-2, pp. 7-11) we observe that it has not been signed by Shri Manish Sharma. Had he been present during stock verification, his signature would have been obtained on the inventory as rightly contended by the learned Authorised Representative of the assessee; that the fact that assessee's son Shri Manish Sharma thus was not present during the stock verification process, was not disputed, by the learned CIT Departmental Representative. The inventory of physical stock was prepared on 21st March, 2012 i.e., on the first day of search and it is undisputed fact as per record that neither the assessee nor his employee or his son disputed the quantity of different items till the time of completion of se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ck inventory prepared cannot aspire confidence and no inference can be drawn only on the basis of such of inventory as it renders it unreliable. It is not the case that the stock inventory was brought finder dispute by the assessee after a long gap or that the assessee did not produce the concerned employee before the authorities when called. It is not the case of Revenue that during search or during the assessment proceedings, any material evidence establishing unrecorded purchases or sales was found or brought on record. In other words, no corroborative material has been brought on record. This is one circumstance which weighs, in favour of the assessee. Search under s. 132 is one of the strongest tools in the hands of Revenue and when such serious allegations were levelled in connection with such an action, no addition could have been made without bringing something more on record. It also appears that ino enquiry whatsoever was conducted from the assessee also on this issue. In this view of the matter, we are of the considered view that the amount of discrepancy found during search on the basis of inventory prepared, which has been brought under severe doubt by the assessee wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of the year under consideration is a combined order of asst. yrs. 2006-07 to 2012-13 and we. observe that in none of the years, except asst yr. 2012-13, any addition was made by the AO and the returned income of all the years has been accepted. In respect of none of the years including the year under appeal, any finding has been rendered by the AO that books of accounts were not properly maintained or that they were not complete. The assessee has maintained regular books which have been audited year after year. It is also a fact that day to day stock register has been maintained by the assessee. Without pointing out any defects in the books and stock records and without having on record any corroborative material, no addition could have been made only on the basis of inventory prepared during search, especially when such inventory was claimed by the assessee to be not reliable and such a claim of assessee has remained uncontroverted. The contents of the two affidavits have remained unrebutted and therefore, has substantial bearing on the issue in dispute. Therefore, in the facts of the case, cumulatively considering all our, above findings, we are of the considered opinion that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and written submission of the appellant. During the course of search, cash was found from different rooms of the three residential premises of Sharma family namely Sharma Pariwar, Panchvati and Janinotri and also from different business premises belonging to the members of Sharma family. From the factory of appellant, cash balance of Rs. 4,05,552 was found which has been added by the AO as unexplained cash. The appellant has claimed that cash balance of family members of Sharma family and all the business concerns were generally not kept with the respective owners and that the particular person of the family looking after the financial matters of respective individuals/business concerns kept the cash balance of such individuals/business concerns with them. It is noticed that the assertion of the appellant is supported by the fact that from the residential premises 'Panchvati' (occupied by the family of Shri Kailashchand Sharma) cash balance of members/business concerns of the family of Shri Laxmikant Sharma and Shri Brijmohan Sharma (two brothers of Shri Kailashchand Sharma) were found and the evidence of such cash balance belonging to the individuals/business concerns of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st son of Shri Laxmikant Sharma, who has advanced in age and therefore, it stands to reason and logic that the appellant would be in control of the cash balance of the entire family and in this sense of the matter, the cash balance found at the factory premises of appellant is required to be seen. The declared cash balance of the appellant, his family members and HUFs was undisputedly Rs. 39,96,312 against which cash balance found from Sharma family was Rs. 30,78,340 and when the cash balance of members of Sharma family found from other premises is considered, the total cash found comes to Rs. 41,15,889. i.e. there was excess cash balance of Rs. 1,19,577. This excess cash balance has been stated to be covered by undisclosed income offered by Shri Laxmikant Sharma. I have verified the records of Shri Laxmikant Sharma (whose appeal is also pending before the undersigned) and have found the contention of appellant to be correct. Therefore, on an overall basis, undisputedly, there was no excess cash pertaining to members of Sharma family. 10.3 In view of the facts and circumstances of, the case, there being no overall excess cash, I am of the considered opinion that the AO was not ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , being the eldest family member. It is undisputed material fact that during search, cash balance pertaining to the respective assessees of the group was not found in the possession of the respective person owning the cash and that cash balance of various business concerns of the group was found in one premises only. At the same time, it is also undisputed that during search, the cash balance was not identified with reference to particular assessee and no statement appears to have been recorded at the time of search to make enquiry in respect of the ownership of cash found during search, as we do not find, reference of any such statement either in the assessment order or in the arguments taken by either party. It is an accepted practice in business that the financial matters in a particular family or group are invariably in the hands of some of the persons of that family or group only and therefore, it would be reasonable to presume that cash balance of the group would be controlled by the persons who manage the funds and therefore, the best course of action is to see whether in an overall situation, there is excess cash or not. We are inclined to agree with the learned Authorised ..... X X X X Extracts X X X X X X X X Extracts X X X X
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