ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, TRICHY, TRICHY vs. AHAMED BROTHERS , TRICHY

आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C BENCH: CHENNAI
श्री यस यस विश्वनेत्र रवि, न्यावयक सदस्य एवं श्री अविताभ शुक्ला, लेखा सदस्य के समक्ष
BEFORE SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No.934/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2018-19
आयकर अपील सं./ITA No.935/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2019-2020
आयकर अपील सं./ CO72/Chny/2024, निर्ाारण वर्ा /Assessment Years: 2019-2020

Asst. Commissioner of Income Tax,
Central Circle-1,
Trichy

Ahamed Brothers,
No.21/1, Singarathope,
Trichy
Tamil Nadu-620008. [AAHFA7608P]

(अपीलार्थी/Appellant)

(प्रत्यर्थी/Respondent)
अपीलार्थी की ओर से/ Assessee by :
Shri T.Vasudevan, Advocate.
प्रत्यर्थी की ओर से /Revenue by Ms.R.Anita, Addl.CIT
सुिवाई की तारीख/Date of Hearing
:
21.11.2024
घोर्णा की तारीख /Date of Pronouncement
:
15.01.2025
आदेश / O R D E R

PER AMITABH SHUKLA, A.M :

S.
No.
Appeal
Nos.
AYs
Appel-lant
CIT(A) Order Details
Respondent
A B
C
D
E
F

ITA No.
934
/
Chny
/
2024
2018-19
Asst.
Commissioner of Income Tax,
Central Circle-1,
Trichy

DIN & Order No.ITBA / APL / S /
250 / 2023-24 / 1060848283 (1) dated 13.02.2024
Ahamed
Brothers,
No.21/1,
Singarathope,
Trichy
TamilNadu-
620008. [AAHFA7608P]

ITA No.
935/
Chny
/
2024
2019-20
Asst.
Commissioner of Income Tax,
Central Circle-1,
Trichy

DIN & Order No.ITBA / APL / S /
250 / 2023-24 / 1060865924(1) dated 13.02.2024
Ahamed
Brothers,
No.21/1,
Singarathope,
Trichy
TamilNadu-
620008. [AAHFA7608P]

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CO-72 /
Chny /
2024

2019-20
Ahamed
Brothers,
No.21/1,
Singarathope,
Trichy
TamilNadu-
620008. [AAHFA7608P]

Asst.
Commissioner of Income Tax,
Central Circle-1,
Trichy

ITA No.935/Chny/2024, Assessment Year: 2019-2020

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that the average markup was 30%. The survey party therefore proceeded to apply the same so as to arrive at closing stock at price of Rs.12,05,36,952/-. Thus as per assessment order in para 7 on page 2 a difference of Rs.5,53,29,831/- was noted. However, it is seen that the same should have been taken as Rs.5,61,57,415/- being difference between Rs.17,66,94,367 and Rs.12,05,36,952. When this issue was confronted to Shri Hussain Abdul Kareem the managing partner, he in his sworn statement admitted that there appears to be some technical glitch in the software as some part of sale is shown as “Memo discount”. The Ld. AO had also noted that there were variations in the sales figures appearing in the books of accounts viz a viz those prepared by the sales floors in-charge in assessee’s premise, the latter being higher than those recorded in the books of account. The same were also confronted to Shri
Hussain Abdul Kareem the managing partner, who in his sworn statement admitted that there appears to be some variations.
3.3
The Ld. AO accordingly concluded that suppression of sales has been admitted by the assessee and issued show cause notice as to why impugned amount of Rs.5,53,29,831/- be not added to the income as undisclosed income. In response the assessee vide its reply dated
05.02.2021 objected to the proposed addition. The assessee challenged the validity of its sworn statements in the light of decision of Hon’ble

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Madras High Court in the case of Khader Khan sons 352 ITR 0480
holding that sworn statements recorded u/s 133A do not have any evidentiary value. Reliance was also placed by the assessee upon CBDT instructions bearing no. 286 / 2 / 2003 – IT (INV.II) dated
10.03.2003 stipulating, inter-alia, that the statements recorded during survey proceedings have little relevance if not supported by credible evidence on records. The Ld.AO proceeded to distinguish the above decision of Hon’ble Madras High Court supra on facts observing that there was sufficient material on record to establish delinquency of a tax payer. In support of its argument, the Ld.AO again relied upon sworn statement of the assessee extracted on page-10 and 11 of his order.
The Ld. AO primarily argued that there was no credible evidence on records to support the variations particularly qua Memo discounts of about Rs.4,91,55,644/-. The Ld. AO concluded that no expenses on Memo discounts were actually incurred. As regards the CBDT instruction, it was concluded that it is not a case of any forced confession and therefore impugned circular would not apply. On the issue of admissibility of the sworn statement the Ld.AO relied upon following extract of the impugned statement on page-14 of his order “Sworn statement recorded from Shri Hussain Abdul Kareem, S/o. Shri Abdul
Kareem Ahamed, aged 66 years, Managing Partner of M/s.Ahamed

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Brothers, No.21, Singarathope, Tiruchirappalli during the course of Survey u/s 133A conducted on 05.02.2019 in response to summons u/s 131 served on 07.02.2019”.
3.4
Consequently as evident from para 40 on page 18 of the assessment order, relying upon the statement of the managing partner and stock inventories prepared, Ld. AO concluded that the assessee has failed to reconcile actual stock with the book stock and hence proceeded to make the impugned addition of Rs.5,53,29,831/- as unaccounted income under the head business and profession.
3.5
As regards the adoption of GP ratio of 30% by the Ld. AO, the assessee averred before the Ld. First Appellate Authority that considering its business results of last three years that is 2017-18, 2018-19 and 2019-
20, the average GP comes only to 13.78%. On the issue of admissibility of sworn statement it reiterated the arguments taken before the Ld. AO including judicial pronouncements, inter-alia, of Hon’ble Madras High
Court in the Khader Khan Sons supra. It was argued that the Ld. AO ought to have rejected assessee’s books of account if assessee’s book results was not to be accepted. Explaining the variations in stock the assessee argued that the Ld. AO has failed to consider the figures of GST, discounts paid, stock in transit and stock sent for job work. It was submitted that post introduction of GST regime the appellant maintains its ITA No.934 & 935 & CO-72 /Chny/2024

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books of accounts on the basis of invoices. Thus the moment invoices for purchase of any item is received it is entered in the system even though actually the physical stock arrives after sometime. It was submitted that this was part of the reason for stock variations and that such variations shall always invariably be present in assessee’s business.
Similarly goods sent for job work were also not considered for the physical variance.
3.6
The Ld. First Appellate Authority after analyzing the controversy in para 6.2.8 to 6.2.9 of his order concluded that the actual difference in stock comes to Rs. 3,03,60,117/- and not Rs. 5,53,29,831/-. On the issue of adoption of GP rate to the suppressed sales, the Ld. CIT(A) , after considering assessee’s GP in preceding three years, chose to estimate the same at 15%. Detailed findings have been given in para 6.2.11 of his order. Thus by applying the rate 15% on deficit stock of Rs.3,03,60,117/-, the Ld. CIT(A) confirmed addition to the extent of Rs.45,54,017/- as against Rs.5,53,29,831/- made by the Ld.AO.
3.7
Before us the Ld. Counsel for the assessee reiterated the same arguments taken before the Ld. First Appellate Authority including reliance upon judicial pronouncements qua veracity and admissibility of statements taken during proceeding u/s 133A. In support of its contentions by way of its paper book, the assessee had filed evidences

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indicating stock w.r.t. job work. Additionally the assessee has also filed its appeal vide CO No.72/Chny/2024 contesting the order of Ld.CIT(A) in sustaining the addition to the extent of Rs.45,54,017/-. The assessee has argued that Ld.CIT(A) failed to appreciate that regular books of accounts were maintained and that there was no deficit stock actually. It was argued that in the absence of no defects pointed in the books of accounts confirming the estimate of gross profit on assumed deficit was unjustified.
The assessee also argued that the survey team had adopted improper methodology of taking stock on sale price as against cost price which has resulted into variance in book stock qua physical stock quantification. In support of its contentions the assessee has filed a detailed paper book containing details of stock on job work, details of stock where purchase are made but physical delivery was pending receipt etc.
3.8
We have heard the rival submissions in the light of material available on records. The first and foremost controversy that deserves our consideration is regarding the admissibility of sworn statement recorded by the revenue authorities during the course of survey proceedings. As per facts on record the authorized officer of the revenue doing the survey had recorded, inter-alia, sworn statement of the managing partner of the assessee firm namely Shri Husain Abdul
Kareem, while confronting him with survey findings. The Ld. AO has ITA No.934 & 935 & CO-72 /Chny/2024

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alluded in assessment order regarding certain admissions of the managing partner qua survey findings treating them as unsatisfactory and proceeded to draw adverse conclusions. Thus, it is seen that the Ld AO has heavily based his conclusions upon the observations/admissions of the managing partner while determining alleged undisclosed income of the assessee.
3.9 It is the case of the assessee that the alleged sworn statement recorded during the survey was subsequently retracted and hence it looses its evidentiary value or for that matter any relevance to the facts of the case. The Ld. Counsel has further relied upon the decision of Hon’ble
Madras High Court in the Khader Khan Sons to allude that since the statement recorded u/s 133 A doesn’t have any evidentiary value in the laws , its reliance by the Ld AO is inconsequential. It has been urged that as the foundation gets knocked off, the consequential super structure of undisclosed income also falls down.
3.10 We have noted that Hon’ble Madras High Court in the Khader Khan
Sons has laid the following ratio on the issue of validity of statement under statement 133A.
“…..5.3. A power to examine a person on oath is specifically conferred on the authorities only under Section 132(4) of the Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas section 133A does not empower any Income-tax Officer to examine any ITA No.934 & 935 & CO-72 /Chny/2024

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person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised 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 recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101].
5.4. The scope of Sections 132(4) and 133A also came up for consideration before the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income- tax [(2003) 263 I.T.R. 101]. In the said case, the assessee therein made an attempt to draw a distinction between the two provisions, viz., Sections
132(4) and 133A. According to the assessee, there is no provision to administer oath or to take any sworn statement and that a mere admission or an acquiescence cannot be a foundation for an assessment and that any statement given during a survey has no effect as an "admission" nor can it be a statement on oath. According to the assessee, his statement during the survey with reference to any books of account can hardly be the basis for any assessment. It was also contended on behalf of the assessee that any material collected or any statement recorded during the survey under Section 133A cannot be put against the assessee, as the same has no evidentiary value. The Division Bench of the Kerala
High Court, appreciating the stand taken by the assessee and after referring to Section 133A of the Act, held as hereunder:
".. we find that the power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax 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 does not empower any Income-tax
Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised 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 of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this."
(emphasis supplied) 5.5. Similarly, when the issue, whether the expression "such other materials or information as are available with the Assessing Officer"
in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, came up for consideration before this Court in Commissioner of Income-tax v.
G.K.Senniappan [(2006) 284 I.T.R. 220], a Division Bench of this Court, in which one of us was a party (P.P.S.JANARTHANA RAJA, J.), answered the question in the affirmative, against the Revenue and in favour of the assessee, holding that ITA No.934 & 935 & CO-72 /Chny/2024

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the materials collected during the survey under Section 133A cannot be taken into consideration while determining the undisclosed income in respect of block assessment as per section 158BB, as the same has no evidentiary value.
5.6. Again, when an identical question whether the material found in the course of survey in the premises of the builder could be used in the block assessment of the assessee, came up for consideration before this Division Bench in an unreported case in T.C.(A) No.2620 of 2006, this Court, by order dated 22.11.2006, of course, following the earlier decision of this Court in G.K.Senniappan's case reported in (2006) 284 I.T.R. 220, while confirming the order of the Tribunal, answered the question in favour of the assessee, in limine.
6. What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central
Board of Direct Taxes dated 10.3.2003 with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated 10.3.2003 reads as follows:
" Instances have come to the notice of the Board wher assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income.
Any action on the contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders."
7. From the foregoing discussion, the following principles can be culled out:-
(i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18];
(ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised 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 of the Income-tax Act it is not given any evidentiary

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value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101];
(iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220];
(iv) The material or infomration found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C.(A) No.2620 of 2006 (between Commissioner of Income-tax v. S.Ajit
Kumar);
(v) Finally, the word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself.
8. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal….”
3.11
A perusal of the above indicates that Hon’ble Juri ictional High
Court has held that the statement recorded u/s 133A does not has requisite evidentiary value. The views have also been echoed by Hon’ble
Kerala High Court as well in the case of Paul Mathews & Sons. Thus we find sufficient force in the arguments of the assessee that the determination of undisclosed income of the assessee cannot be based upon admissions made by the managing partner of the assessee firm.
We have however noted that the reliance of the assessee upon the circular issued by CBDT is not based upon proper understanding of the facts. The assessee has urged that CBDT circular also prohibits taking of any surrender during survey proceedings. It is seen that the circular of ITA No.934 & 935 & CO-72 /Chny/2024

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the CBDT primarily attempts to prevent forced surrenders or disclosure by the authorized officer during the survey. Thus in the impugned circular
CBDT primarily postulates that the authorized officer should concentrate upon collecting substantive material, during survey proceedings, so as to establish any undisclosed income, rather than merely obtaining surrenders. The hypothesis behind the circular appears to be that demonstrative evidences collected during survey to allude undisclosed income are far better than mere statements.
3.12
We have noted the wordings of statement of the assessee recorded during the course of survey proceedings. For the purposes of clarity the opening part is reproduced hereunder:-
“Sworn statement recorded from Shri Hussain Abdul Kareem, S/o. Shri Abdul
Kareem Ahamed, aged 66 years, Managing Partner of M/s.Ahamed Brothers,
No.21, Singarathope, Tiruchirappalli during the course of Survey u/s 133A conducted on 05.02.2019 in response to summons u/s 131 served on 07.02.2019”.
3.13
A perusal of the above shows that the Ld.AO has used the word
“sworn statement” which gets hit by the decision of Hon’ble Madras High
Court and Kerala High Court supra. It is also noted that the Ld. AO has stated that the statement was recorded “….during the course of Survey u/s 133A conducted on 05.02.2019 in response to summons u/s 131
served on 07.02.2019….”. Now whereas statement u/s 131 can be recorded independently by an Income Tax Authority, there cannot be any ITA No.934 & 935 & CO-72 /Chny/2024

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inter-dependence between matter u/s 131 and u/s 133A as has been indicated here.
3.14
This brings us to the next question as to when the basis for determination of undisclosed income arising from survey proceedings, comprising a statement u/s 133A has become redundant in view of decision of Hon’ble Juri ictional High Court, then whether an assessee would be liable for any delinquency or not. The answer lies in the available circumstantial evidences. In the event of the disclosure of the assessee becoming inadmissible we have to examine the other evidences collected by the Ld. AO to make the impugned addition of variations in stock of Rs.5,53,29,831/-. The only other evidence which is available is the stock found in the premise viz a viz stock available in the book. It is noted that the Ld. AO has applied an estimated GP rate of about 30% to arrive at the value and the variations of the stock. To begin with the AO’s import of GP rate of 30% has not been found to be supported by facts on records. The assessee has stated that its GP rate in last about three years hovers around 14%. Now therefore to substitute the same by an average value of 30% by relying upon again “sworn statement” of some employees cannot be an acceptable method of valuation. We have also noted that the Ld. AO has not been able to satisfactorily counter the submissions of the assessee qua GST stock

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and job work stock. It is also been noted that the stock valuation on the underline principle of “cost or market price” whichever is lower was also not done either by the authorized officer during the survey proceedings or by the Ld. AO.
3.15
Before us the Ld. Counsel for the assessee has provided a detailed paper book, inter-alia, containing reconciliation of stock, at costs, as on 31.03.2019 that is the last day of the financial year in which survey was done. The position enumerated by the assessee is reproduced hereunder:-
STOCK RECONCILIATION TABLE AS ON 31.03.2019 – ON CONSIDERING
BOOK STOCK VALUE AS IN TABLE-1 – Margin @ 14%
1. Floor stock value as on 05.02.2019
7,43,55,308.00
2. Godown stock as on 05.02.2019 @ cost
7,96,39,897.00
3. Bale stock received and goods in transit as on 05.02.2019 @ cost
2,22,75,413.00
4. Job work for processing @ cost
4,23,749.00
5. Total stock value as on 05.02.2019 as per books of accounts (1+2+3+4)
17,66,94,367.00
6. Stock value excl gross margin @ 14% on S.No.1
6,52,23,954.00
7. Stock value at cost (2+3+4)
10,23,39,059.00
8. Add: Purchases from 05.02.2019 to 31.03.2019
10,19,31,252.00
9. Add: Cost of purchases from 05.02.2019 to 31.03.2019
6,75,083.00
10. Less : Cost of goods sold @ 14% margin
4,77,77,115.00
11. Closing stock as on 31.03.2019 (6+7+8+9-10)
22,23,92,233.00

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stock found. In the present case Ld. AO had applied GP of 30%
whereas according to assessee the same should be at 14%. We are of the view that GP @ 15% would be reasonable in this line of business and also considering past history of the case. Accordingly, we confirm the addition on account of unaccounted stock to the extent of 15% of.
Rs.42,67,534/- ie. Rs. 6,40,130/- and direct the Ld. AO to delete the balance addition made by him. All the grounds of appeal raised by the revenue on the issue of stock are therefore partly allowed.
4.0
The next ground of appeal raised by the revenue is regarding the deletion of addition made by the Ld. AO of Rs.12,14,508/- on account of unaccounted cash found during survey and the telescoping benefit given to assessee as making it part of his confirmation of addition to the extent of Rs.45,54,017/-. The Ld. Counsel of the assessee informed that cash of Rs.12,14,508/- was found during the course of survey. According to averments made by the Ld. AO, the managing partner of the assessee in its sworn statement had stated that the cash found pertains to some sister concerns of the assessee which had long closed their operations.
The Ld. CIT(A) accepted the argument of the assessee that the cash found was part of suppressed sales evident from variations in stock of Rs.
45,54,017/-. The Ld. CIT(A) relying upon the decision of Hon’ble
Juri ictional High court in the case of KSM Gurusamy Nadar and Sons

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19 Taxmann 533 holding that where there is an addition on account of suppression of profits, it is open to assessee to claim telescoping of unproved cash, proceeded to accord benefit to the assessee of telescoping and held that cash of Rs.12,14,508/- forms part of suppressed sales of Rs.45,54,017/-.
4.1
Before us the Ld. DR argued that the telescoping done by the Ld. CIT(A) was not in order. It was urged that the assessee ought to have explained through evidences that the impugned cash belong to its sister concerns and that the Ld. AO had made the addition for want of necessary evidences. It was accordingly urged that the addition made by the Ld. AO deserves to be confirmed and the order of the Ld.CIT(A) be set aside on this account.
4.2
We have heard the rival submissions in the light of material available on records. It is noted from the paper book filed by the assessee, that before the Ld. First Appellate Authority the assesse had submitted that the impugned cash belong to another family firm namely
M/s.Ahmed Fab which had operated till FY-2017-18. Due to complexities in GST taxation ecology, the said firm was closed. It was submitted that receivables, in cash, were continued to be received in AY-2018-19 and that the said cash belonged to M/s. Ahmed Fab supra. In support of its contentions, the assessee filed before Ld. CIT(A) balance sheet of M/s.

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Ahmed Fab for FY-2017-18 showing closing cash in hand of Rs.16.85
lakhs app. The Ld. Counsel for the assessee had therefore argued that the cash found during the survey was relatable to the impugned in hand of Rs.16.85 lakhs app. The Ld. CIT(A) considered and accepted the above arguments qua the source of cash found of Rs.12.14 lakhs app.
However, considering the arguments of the assessee he proceeded to apply the telescoping benefit to the said cash and treated it as part of the overall addition of Rs. 45,54,017/- which was confirmed by him. We have noted in para 3.16 above that the excess stock, at costs, which is relatable to survey is, as per assessee’s own admission works out to Rs.42,67,534/- and the same has been confirmed as against the addition of Rs.5,53,29,831/- done by the Ld. AO as unaccounted income in the hands of the assessee. We therefore find that the telescoping done by the Ld. CIT(A) is not in order. The argument raised by the revenue contesting the action of the Ld.CIT(A) to the extent of, telescoping being incorrect, has therefore been found to be correct. We are however inclined to accept the source of the cash in assessees favour so far as it is alluded to be relatable to the family concern namely M/s.Ahmed Fab.
The balance sheet of the party as on 31.03.2018 shows that there was cash in hand of Rs.16.85 lakhs app. We find force in the arguments that even though the firm was closed, its past debtors continue to repay their

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debts and that therefore the cash found belonged to the said M/s. Ahmed
Fab. The order of the Ld. CIT(A) is therefore set aside and the Ld. AO is directed to delete the impugned addition of Rs. 12,14,508/- made by him in his assessment order. As we have found the source of cash to be validly explained and directed the Ld. AO to delete the impugned addition of Rs. 12,14,508/-, the ground of appeal raised by the revenue is dismissed.
CO-72/Chny/2024, Assessment Year: 2019-2020

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ITA No.934/Chny/2024, Assessment Year: 2018-2019

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partner also alluded towards a technical glitch in his software as a result of which correct sales was not been recorded in the books. The authorized officer had also confronted the assessee with a separate head maintained in the books as “Memo Discount” aggregating to about
Rs.4,91,55,644/-. The authorized officer had relied upon sworn statements of floor supervisors conveying that no discount is offered to the customers on the point of sales. During the course of assessment proceedings, the assessee had argued that the difference in sales figures was on account of discounts given to the customers, not being factored in the floor wise sales figures. The Ld. AO however observed that memo discount is merely a ploy to suppress sales and that the assessee was not actually offering any discounts to its customers. The Ld. AO further argued that the assessee’s arguments regarding the inadmissibility of sworn statements recorded during survey proceedings, for determination of any undisclosed income are irrelevant and that the assessee is merely harping on a dilatory tactic to divert the main issue of suppression of sales.
7.0
The Ld. Counsel submitted that it had provided complete details before the Ld.CIT(A) and had challenged the addition both in terms of inadmissibility of sworn statements as well as the details of discounts

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actually offered to its customers. The Ld. Counsel relied upon the following data which was given to the Ld. CIT(A):-
SALES DATA AS PER 1.12 OF SWORN STATEMENT – TABLE 2
A Sales as per floor wise report
2,74,10,910.00
B(i) Taxable value
2,38,69,076.58
(ii)
Tax value
12,37,686.81

Taotal (taxable value + tax value) (i+ii)
2,51,06,763.39
C
Discount
23,04,146.61
D
Round off
3,737.61
E
Net difference (A-(B+C+D))
23,00,409.00

Difference as mentioned in Survey Report
(Q.No.12)
23,00,409.00

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Rs.23,00,409/-. The addition is attributable to the sworn statement of the managing partner recorded by the authorized officer during survey as well as alleged absence of any valid documentary justification for the same. As regards the relevance and admissibility of the sworn statement of the managing partner recorded by the authorized officer during survey, we have held, herein above in this order that, in respectful compliance to the order of Madras High Court in the case of Khader &
Sons supra the same is inadmissible. Thus, we hold that no addition in this case is sustainable as far as reliance upon any alleged sworn statement of the managing partner is concerned.
9.1
Coming to the next part of the controversy as to the justification for the determination of unaccounted sales by telescoping of sales variation noted viz a viz entire calendar year, we have noted that in the absence of any cogent and credible evidences brought on record by the Ld. AO, the same is also impermissible. Whereas with the availability of cogent evidences, the Ld. AO had the authority to make an addition in respect of suppressed sales found of Rs.23,00,409/-, its telescoping for the entire year is not correct. An offence cannot be compounded by relying upon the law of averages. Accordingly, we are of the view that the issue of suppression of sales has to be examined only w.r.t. any credible justification for the amount of Rs.23,00,409/-.

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given. The appellant has argued that once we consider taxes paid and discounts given there will actually be no difference in the two sales figures.
9.3
We have noted that grant of discounts for expansion as well as retention of customer base is an accepted business principle and cannot be faulted. Similarly payment of due government taxes is a bounden duty of every businessman. In the instant case also the assessee was liable to pay taxes on its taxable sales. We have noted from the order of the Ld.
CIT(A) and also the paper book filed by the assessee that it has been giving discounts to its customers making cash or credit purchases as well as paying due taxes regularly. Thus, we have noted that the order passed by the Ld.CIT(A) is based upon on correct understanding and appreciation of the facts of the case. We therefore hold the view that there is no case for any interference to the same at this stage.
Accordingly, all the grounds of appeal raised by the revenue are dismissed.

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Partly Allowed.
ITA-934/Chny/2024
2018-19
Dismissed
Order pronounced on 15th , January-2025 at Chennai. (यस यस नवश्विेत्र रनव)
(SS VISWANETHRA RAVI)
न्यानयक सदस्य / Judicial Member (श्री अनमताभ शुक्ला)
(AMITABH SHUKLA)
लेखा सदस्य /Accountant Member
चेन्नई/Chennai, नदिांक/Dated: 15th , January-2025. KB/-
आदेश की प्रतितिति अग्रेतिि/Copy to:
1. अिीिार्थी/Appellant
2. प्रत्यर्थी/Respondent
3. आयकर आयुक्त/CIT - Madurai
4. तिभागीय प्रतितिति/DR
5. गार्ड फाईि/GF