ISHAAN SAREE PRIVATE LIMITED,KOLKATA vs. INCOME TAX OFFICER, KOLKATA

The only issue involved in this appeal is against the confirmation of addition of Rs.58,13,658/- by ld. CIT(A) as made by the AO by way of unexplained stock.

Brief facts of the case are that the assessee is a private limited company which is engaged in the business of selling sarees. A survey operation u/s 133A of the Act was conducted upon the

The Ld. AR appearing for the assessee took us through the reconciliation statement furnished before the lower authorities. He explained that, goods worth Rs.30,16,461/- was received physically at the godown prior to the date of search whose invoices were received later or had not been entered into the tally records. He took us through the relevant challans, invoices along with bank proofs etc. He further submitted that goods worth Rs.76,62,330/- had been received back from the job- workers / karigars whose bills were received post survey and therefore had not been recorded in tally data. Taking us through the relevant challans, invoices etc., he contended that none of these evidences had been disproved by any of the lower authorities. He similarly submitted that sarees worth Rs.8,70,169/- had been sold prior to the date of survey whose entries were pending. He thus submitted that there was no difference in stock as alleged by the AO. He further pointed out that, the AO had not rejected the books of accounts under Section 145(3) of the Act and thus it was unjustified to add alleged stock difference when audited book results were not in dispute. It was argued that the impugned addition solely based on the statement recorded in survey u/s 133A of the Act and by relying on the decision of Hon’ble Supreme Court in the case of CIT Vs S Khader Khan (352 ITR 480), the Ld. AR submitted that this statement did not carry any evidentiary value and

Per contra, the Ld. DR supported the orders of the lower authorities. He submitted that the reconciliation and evidences furnished by the assessee had not been provided at the time of survey and should not be entertained. He further contended that when the Director had accepted the difference in his statement u/s 133A of the Act, the AO was justified in adding the same.

After hearing the rival contentions and perusing the material placed before us, we find that, the addition primarily based on the statement of the Director recorded u/s 131 of the Act. It is by now well settled in law that statement obtained in survey u/s 131 is not on oath and, as held by the Hon'ble Supreme Court in CIT v. S. Khader Khan Son (supra) such a statement has no evidentiary value and cannot by itself form the basis of an addition unless corroboration is there. In the case before us, it is observed that, the assessee had furnished a detailed reconciliation of the alleged difference, supported by the relevant challans, invoices, bank proofs and payment details, which remained uncontroverted before us. No discrepancy or falsity therein was pointed out by any lower authorities. We may also note that the AO has not rejected the books of accounts of the assessee under section 145(3) of the Act. We thus find that the physical stock difference found at the time of survey had been satisfactorily explained and therefore the Page 4 of 5

In the result, the appeal of the assessee is allowed.