SHAMBHU PRASAD RASTOGI,MIRZAPUR vs. ITO, RANGE 3(4), MIRZAPUR

This is an appeal preferred by the assessee against the order of the Ld. CIT(A), Lucknow-03 dated 29.03.2023 for AY. 2012-13.

The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs.1,84,080/- on account of alleged excess stock-in-trade on the date of survey (i.e. on 06.01.2012).

Brief facts as noted by the AO is that the survey u/s 133A of the Income Tax Act, 1961 (hereinafter “the Act”) was conducted on 06.01.2012 at the business premises of the assessee (M/s. Rastogi Sarraf Jewellery Shop). According to the AO, the survey party in- charge Shri K. N. Sonkar ACIT reported that during the survey proceedings, the proprietor/assessee Shri Shambhu Prasad Rastogi admitted on oath of stock of Silver to the tune of 200 Kgs as on 06.01.2012. However, according to the AO, when the physical

During the assessment proceedings, the AO asked the assessee to file the books of account along with cash book, ledger account and stock register as well as bills/vouchers, and the sale and purchases etc, which assessee submitted and the AO acknowledges to have test- checked the same. According to the AO, the assessee/proprietor of jewellery shop during the survey operation on 06.01.2012 had admitted of stock of 200 Kg of silver jewellery in the shop worth Rs. 19 to 20 Lakhs. However, the AO notes that while recording assessee’s statement on 23.01.2012 u/s 131 of the Act he stated that the stock of silver as on the date of survey was only at 113.928 Kgs; and thereafter during the assessment proceedings, assessee had shown the books which reflected silver stock as on 06.01.2012 only to the tune of 113.928 Kgs and not 200 Kgs as admitted during the survey operation. On being confronted by the AO with the statement recorded on oath during the survey u/s 133A of the Act about stock of silver to the tune of 200 Kg of silver, the assessee submitted that he had made the statement on an estimation basis, and at that point of time was not in proper state of mind, and contended that there would be variation in estimation and that the stock declared by him contained both pure and impure silver and he pleaded that stock as on survey was only 113.928

I have heard both the parties and perused the records. The impugned addition was based on the difference of stock of silver as admitted by assessee during survey on 06.01.2012 vis a vis shown in the books of assessee as on 06.01.2012. According to the AO, on 06.01.2012, when the survey team confronted the assessee/proprietor of the jewellery shop [M/s. Rastogi Saraf Jewellers] he admitted to have silver stock of 200 Kgs as on that date. Based on the statement recorded on oath on 06.01.2012 u/s 133A of the Act, the AO concluded that the assessee had silver stock as on 06.01.2012 of 200 Kg, and since assessee’s books of account reflected only stock of silver at 113.928 Kg as on that date of survey, he added the difference of 86.072 Kg (200 Kg. – 113.928 Kg) as undisclosed stock of silver and valued it at Rs.1,84,080/- which was added as undisclosed income of the assessee. On appeal, the Ld. CIT(A) confirmed the action of AO. The main contention of the assessee is that since there was no Shambhu Prasad Rastogi physical inventory of stocks taken by survey team, the AO’s action of presuming the stock of silver as 06.01.2012 as 200 Kgs is patently erroneous. According to the Ld. AR, the AO erred in presuming the stock of silver only on the strength of statement recorded u/s 133A of the Act as erroneous and therefore according to Ld. AR, the AO erred in making addition of excess stock presuming the stock of silver as on 06.01.2012 at 200 Kgs was per-se untenable and for such a preposition, cited the decision of the Hon’ble Supreme Court in the case of CIT Vs. S. Khader Khan Son (2013) 352 ITR 480 (SC) wherein the Hon’ble Supreme Court upheld the view of Hon’ble High Court of Madras in that case [ i.e reported in 300 ITR 157 (Mad)] wherein it was held that section 133A of the Act does not empower any Income Tax Authority to examine any person on oath in contra- distinction to power given to authorities u/s 132 of the Act [ i.;e. search proceedings] to record statements under oath and which have evidentiary value. And that the statement recorded during survey cannot be equated with that of the statement recorded u/s 132 of the Act (search) and therefore cannot be given the weight of evidence as that has been recorded u/s 132(4) of the Act, And that any admission made during survey cannot by itself be made the basis of drawing adverse inference and made the basis of addition. Per-contra, the Ld. DR pointed out that assessee had given the statement during survey voluntarily and he being the owner of jewellery shop is the best person to know the stock of silver as on that date (ie. 06.01.2012) and cited inter-alia the decision of the jurisdictional Hon’ble High Court in the case of Dr. S. C. Gupta Vs. CIT [248 ITR 782 (All)] and Sanjeev Agrawal Vs. ITSC [(2015) 56 taxmann.com 214 (All)]. Further,

I take note that during survey on 06.01.2012 assessee’s statement was made to the effect that silver stock was to the tune of 200 Kgs and thereafter due to disruption of survey operation as noted (supra), the survey team could not take physical stock of the silver as on that date. However, AO had acknowledged the fact that assessee’s statement was recorded again on 23.01.2012 u/s 131 of the Act and assessee had stated inter-alia that stock of silver as on 06.01.2012 was Shambhu Prasad Rastogi only 113.928 Kgs and not 200kgs. And the AO confronted him with the statement made during survey and assessee explained to him that during survey he was under mental pressure and his admission of stock was on the basis of estimation. It was added that his estimation of stock contained both pure & impure material, and purity of silver was only to 60 to 70%. And thus it was clarified to AO that the stock of silver he stated contained both pure & impure material. So according to assesse, no adverse inference could have been drawn by the AO/Ld. CIT(A) on the basis of statement even if made by assessee during survey without rejecting the explanation given by assessee u/s 131 of the Act on 23.01.2012 and without verification of stock by physical verification. In this regard, it is noted that the AO after examining/verification of the books of the assessee including the stock register maintained by the assessee has accepted the books as acknowledged by him in the assessment order. Anyway, AO has not found any defect in the books including the stock register. Therefore, AO’s action to make addition of excess stock of silver only on the basis of statement recorded on oath by survey team u/s 133A of the Act on 06.01.2012 [ i.e.assessee had stated before survey team that he had silver stock of 200 Kgs and finding that assessee’s books only reflected 113.928 Kgs as on 06.01.2012, the difference of stock of 86.072 Kgs valued at Rs.1,84,080/-] cannot be countenanced. As per the decision of the Hon’ble Madras High Court and upheld by Hon’ble Supreme Court in the case of S. Khader Khan Son in civil Appeal No. 13224 of 2008 and 6747 of 2012 (supra) the statement of assessee recorded during survey cannot be given the same weight in contra- distinction to statement recorded us/ 132(4) of the Act. However, as Shambhu Prasad Rastogi held by Hon’ble Jurisdictional High Court in Dr. S. C. Gupta & Sanjeev Agrawal (supra), admission voluntarily made u/s 133A of the Act can be the basis of the assessment. But in this case, it is noted that assessee while recording the statement on oath on 23.01.2013 before the AO us/ 131 of the Act (i.e. after 15 days of survey) has stated that during survey on 06.01.2012, he was under pressure; and clarified that that his admission of stock as 200 Kgs was based on estimation and also that stock includes both impure & pure material and that it is common knowledge that purity of silver is 60-70%. It is noted that this explanation given by assessee [as noted in assessment order] has not been rejected by AO. And without assigning any reason to repel the clarification given by assessee regarding the stock, the action of AO to add the excess stock cannot be countenanced. The assessee’s assertion u/s 131 of the Act that while he gave statement u/s 133A of the Act, he was under pressure has not been found to be false by the AO/Ld. CIT(A). In such a case, statement u/s 133A of the Act recorded on 06.01.2012 cannot be held to be voluntarily given; and the assessee’s explanation shows that he made the statement on estimation which includes both pure & impure silver. And since no physical inventory was prepared (due to disturbance) there is no other material in the hands of the AO/Ld. CIT(A) to make/confirm the allegation of excess stock of silver, therefore the addition made of Rs.1,84,080/- was not warranted. Case laws cited by the Ld. DR are distinguishable on facts; and in the case of Dr. Gupta, he voluntarily made statement; and in the case of Sanjeev Agrawal, the assessee could not explain that statement given during survey was made on account of mistake of fact. However, in the present case, assessee has explained within 15 days the Shambhu Prasad Rastogi difference of stock as admitted during survey and reflected in books, which is a plausible view. Therefore, the other case law cited by DR cannot come to the aid of revenue because they are distinguishable on fact/law. So assessee’s appeal is allowed. Therefore, the addition made by AO cannot be sustained and so directed to be deleted.