TMI Blog1995 (10) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee was of 10,572.911 gms. only. There was, therefore, undisputedly an excess stock of 8,473.256 gms. of gold jewellery found during the survey. The said stock was valued at the purchase rate of the jewelleries to be Rs. 33,89,302. The officers of the Department prepared a trading account of the business of the assessee during the relevant accounting year up to the date of the survey, the taking into consideration the actual stock of jewelleries found. According to the trading account also, the amount of Rs. 33,89,302 was liable to be treated as unexplained income of the assessee. During the course of the survey itself on 16-9-1993, the deposition of one of the partners of the assessee-firm present at the relevant time, viz., Shri Srinivasa Shetty was taken. In the said sworn statement, Shri Srinivasa Shetty admitted the existence of excess stock available in the shop in respect of 8,473,256 gms. which, if valued, at the rate of Rs. 400 per gm., came to Rs. 33,89,302. When asked to explain the difference between the stock as per the books and as found during the survey, the partner Shri Srinivasa Shetty not only admitted the existence of the excess stock but also offered the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ributable to unrecorded transactions in the books of account. He resiled his earlier version of distributing the total amount of excess stock over the three years and stated that the entire excess stock found during the survey related to accounting year ended on 31-3-1994 corresponding to assessment year 1994-95 only. He furthermore stated that at the time of the survey, the assessee was under the notion that there would be a substantial deduction in tax liability if the income was apportioned among the three assessment years and that on account of misapprehension in that line, the assessee had engaged in the earlier working in its communication and offered the same by breaking it up over the three years. Shri Srinivasa Shetty stated that that was factually incorrect and hence, the entire sum of Rs. 31,43,104 was to be offered legally and factually in respect of assessment year 1994-95 only. He thus requested the Assessing Officer to read his earlier communication dated 16-9-1993 as duly modified accordingly. 6. During the course of the assessment proceedings, the Assessing Officer once more took the deposition of the partner Shri P. Kishore Kumar on 21-12-1993. During the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's request that the entire excess stock found during the course of the survey should be taken for the assessment year 1994-95 was not acceptable in view of the abovementioned fact. The Assessing Officer also stated that the statement on 21-12-1993 had been recorded not through any coercion and inducement. Finally therefore, he added back Rs. 9,42,931 being 30 per cent of the value of the gross amount of excess stock, i.e., Rs. 33,89,302. The assessment order for assessment year 1993-94 was also passed on the same day, i.e., 15-3-1994. In this assessment order, however, the Assessing Officer added back the entire value of the excess stock being Rs. 33,89,302 as income of this year. However, since a sum of Rs. 9,42,931 had already been added back in the assessment for assessment year 1992-93, the addition to this extent out of the abovementioned total addition was considered by the Assessing Officer to be on protective basis. 8. The appeals filed by the assessee against the abovementioned two assessment orders were taken up by the CIT(A) together, After discussing the facts of the case, the CIT(A) stated that the Assessing Officer had made addition for assessment year 1992-93 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Bombay High Court in the case of Ramanlal Kacharulal Tejmal v. CIT [1984] 146 ITR 368 and of the Madhya Pradesh High Court in the case of Harlal Mannulal v. CIT [1984] 147 ITR 11 in support of his contention. Alternatively, it was pleaded by him that the entire amount be spread over the three assessment years 1992-93,1993-94 and 1994-95 in the ratio of 30 per cent, 30 per cent and 40 per cent respectively as originally proposed. Shri Prasad strongly objected to assessment of the entire disputed amount in assessment year 1993-94 alone. 10. On the other hand, Shri P.S. Puniha, learned DR, took us through the depositions given by the two partners at different points of time. He read from some of the questions and the answers given thereto by the said partners and stated that no element of coercion or misrepresentation could be found therein. Shri Puniha also contended that immediately after the survey, both the partners had voluntarily offered the entire amount for taxation over the three assessment years at the rate of 30 per cent, 30 per cent and 40 per cent and also filed revised statements of income for assessment years 1992-93 and 1993-94 based on the revised trading acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can be relied upon unless it is successfully withdrawn. Shri Puniha argued that in this particular case, the earlier admission made by the partners of the assessee-firm cannot be considered to have successfully been withdrawn in their later statements claiming that the entire amount should be assessed in the assessment year 1994-95. In support of his contention that admissions made earlier should act as best evidences in deciding the issue, Shri Puniha relied on the following further decisions : (i) C. Vasantlal Co. v. CIT [1962] 45 ITR 206 (SC) (ii) CIT v.Durga Prasad More [1971] 82 ITR 540(SC) (iii) Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and (iv) Mriganka Mohan Sur v. CIT [1979] 120 ITR 529 (Cal.). 11. In reply, Shri Prasad, learned counsel for the assessee argued that the Department had not fully acted upon the first version of the partners of the assessee-firm. He also pointed out that inducements at the time of search or survey operations are never recorded and that on the other hand, they are first of all given along with threats, in certain cases, and thereafter the statement is recorded as per the suitability of the departmental officers. Shri Prasad thus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpletely overruled the idea that at least a part of the excess stock could have been acquired by the assessee-firm, during the period from 1-4-1993 to 16-9-1993 corresponding to assessment year 1994-95. Stranger is the behaviour of the CIT(A). He has upheld both the additions, thereby suggesting that he also accepts the first as well as the third versions of the assessee (that too partially), which are again mutually contradictory to each other, As an appellate authority, it was the duty of the CIT(A) to have determined which portion of the excess income was assessable in which year. Instead, he has accorded his approval to assessment of the same amount of Rs. 9,42,931 in both the years viz., assessment years 1992-93 and 1993-94. It is really inconceivable that an appellate authority would come out with such a patently incorrect order. We strongly feel that by confirming the additions for both the years, when the Assessing Officer himself had treated a part of the addition in assessment year 1993-94 merely on protective basis, the CIT(A) has made a travesty of justice. His order, in this regard, deserves a strong condemnation. 13. Now coming to the crux of the problem, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cquisition of the stock was made during the accounting year corresponding to assessment year 1994-95 only. There is again, nothing on record to show as to how much of the jewelleries was acquired in which year. Application of the formula of 30 per cent : 30 per cent and 40 per cent for the three years respectively is merely an estimation procedure and that by itself does not at all lead to the conclusion that the assessee had definitely made investments towards acquisition of the jewellery in the respective years and also to the extent of exactly 30 per cent : 30 per cent and 40 per cent respectively of the total amount of jewelleries found during the survey operations. The decisions, all cited by Shri Puniha relate to cases of admissions about the existence of certain sources of income, estimation of income during different years and similar other things. In the present case, simply a statement made by the partners of the assessee-firm (leaving aside the question of deciding the veracity of inducement or threat to the partners) to the effect that some portions of the jewelleries had been acquired in past years, cannot lead to assessment of some estimated amount of income in such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 9,42,931 for assessment year 1992-93 and of Rs. 33,89,302 for assessment year 1993-94. 14. In some of the other grounds, the assessee contends that the actual value of the excess stock found should not be Rs. 33,89,302 but Rs. 26,78,906 only. One of the arguments of the assessee in this regard is that a deduction of 7.5% should have been allowed on account of impurities present in the gold required for soldering purposes etc. It is found that towards the end of para 3 of his appellate order, the CIT(A) actually agreed with the assessee's contention that deduction at the rate of 7.5% should have been allowed by the Assessing Officer from the gross income of the jewellery before taxing the unaccounted excess stock. In the operative portion of his order however, he did not mention this issue and ultimately dismissed the appeals. We therefore, feel that the CIT(A) himself has allowed this deduction. 14(a). The assessee has also raised the point that gold ornaments to the extent of 651.800 gms. included within the excess stock found represent stock of gold ornaments not belonging to the assessee but received by it for approval purpose. At the same time again, the assessee also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... artners of the assesseefirm, some genuine mistakes which were very much probable to happen, did actually occur and that is why these two items were left out from being entered in the stock book. He, therefore, urged that the matter might be remanded back to the Assessing Officer for the purpose of examination of the vouchers and related papers in this connection to come to a conclusion as to whether these two items should also not be included to the amount of stock as per the stock book. 14(c). Now that the entire additions made for both the years under the present appeals before us, have been deleted by us fully, the issue raised in this regard becomes of academic value only. We have already expressed our view that the entire unexplained stock found during the survey operation is liable to be assessed to tax in assessment year 1994-95. We have learnt from the representatives of both the sides that the assessment proceeding for that year is still lying pending before the Assessing Officer. We do not find any reason why this issue cannot be taken up by the assessee during the course of the said assessment proceeding. The assessee may very well take up the issue before the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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