VARALAKSHMI LAKKISETTY ,MANCHERIAL vs. INCOME TAX OFFICER, WARD-1, MANCHERIAL

Brief facts of the case are that the assessee runs a business under the name of M/s. Laxmi Prasanna Jewellers. There was a survey operation u/s 133A on 7.11.2012 in the presence of the husband and two sons of the assessee who were effectively conducting the business on behalf of the assessee. During the survey, an excess stock of gold/ornaments weighing 2803.082 grams of gold and 99.114 grams of diamond jewellery was found. The value of such excess stock was about Rs.83,01,000/. At the time of survey, the husband of the assessee gave a statement admitting that there was excess stock of gold and diamond jewellery worth about Rs.83,01,000/- and it was an additional income in the hands of the assessee who happens to be the proprietor of the business. Again, the husband of the assessee stated on 8.11.2012 that on that day he paid a sum of Rs.5.00 lakhs for the ay 2013-14 towards advance tax and produced copy of challan.

The assessee however, disowned the statement given by her husband by letter dated 18.12.2014 questioning the authority of her husband to confirm any additional stock or to admit the tax liability of the assessee. The assessee also gave a sworn statement on 1.3.2016 wherein she stated that by about 1000 hours on 7.11.2012, she came to know of the survey operations and at that time her husband and her two sons were available at the business premises to facilitate Income Tax Authorities to carry out survey operations. Subsequently, the husband of the assessee produced three bills dated 1.11.2012, 29.10.2012 and 2.11.2012 for an amount of Rs.27,34,929/- to state that the gold covered under these three bills weighing 921.610 grams of ornaments was entered in the books after the survey proceeding corresponding profit was declared in the P&L A/c and prayed to provide credit of the said bills.

The assessee filed the return of income for the A.Y 2013-14 declaring an income of Rs.18,12,000/- after claiming deduction of Rs.92,364/- under chapter VIA of the Income Tax Act, 1961.

Learned Assessing Officer, however, did not believe the version of the assessee as to the bills produced subsequently and he proceeded to complete the assessment by order dated 11.3.2016 u/s 143(3) of the I.T. Act by making the addition of Rs.83,01,000/-

Aggrieved by such an action of the learned Assessing Officer, the assessee preferred appeal before the learned CIT (A) expressing grievance that no proper opportunity of being heard was given to her and the search was not conducted with the knowledge of the assessee. The assessee subsequently challenged the addition of Rs.27,34,929/- covered by three bills produced by the husband of the assessee stating that not accepting such bills giving credit thereto is not correct on the part of the Assessing Officer.

Learned CIT (A) on an appraisal of the evidence before him was of the view that the three bills produced by the husband of the assessee for a total amount of Rs.27,34,929/- cannot be brushed aside because the payment under those bills was through Banking channels and the clearance of said amount was also well before the conduct of the survey. On this ground, the CIT (A) recorded a finding that these bills are not created for the purpose of lessening the tax liability and as a matter of fact even the Assessing Officer also did not dispute the genuineness of the bills or the transaction thereunder.

The learned CIT (A), however, declined to accept the contention of the assessee that no reasonable opportunity was granted to the assessee during the survey operation or that the assessee is not aware of the same.

Aggrieved by the order of the learned CIT (A) confirming the addition to the extent of Rs.55,66,071/- the assessee preferred this appeal. It is argued on behalf of the assessee that the statement given by the husband of the assessee during the course of survey cannot be any basis to make addition because such a statement was neither signed nor accepted by the assessee. Further argument of the learned AR is that there was no proper inventory nor any proper valuation of the excess stock and therefore, if we exclude the statement of the husband of the assessee, there is no material to support the addition. He further pleaded that the closing stock value as on 31.3.2013 as disclosed by the assessee was Rs.1,56,96,234/- in the return of income which includes the entire stock including the disputed stock and therefore, the addition cannot be sustained.

Per contra, it is the submission of the Revenue that the law does not require that the survey must be conducted in the presence of the owner of the business alone and it requires the presence of proprietor or the employee or any other person carrying on such business or profession. Consequently, he submitted that, as rightly observed by the learned Assessing Officer, at the first opportunity when the assessee filed the letter dated 18.12.2014, the assessee questioned the authority of her husband to make any statement binding her but she does not dispute the fact of survey or the evidence of any excess stock worth Rs.83,01,000/- at that time. Further, the issue relating to the valuation of property was not raised by the assessee at any stage of the proceedings and nothing prevented the assessee or her husband to bring it to the notice of the authorities as to the fact of the so called excess stock containing the ornaments given by the customer for repairs/re-modelling available at the stock at the time of the survey. At no point of time, the assessee challenged the manner of survey and at this length of time is not possible to resort to revaluation of the excess stock and taking such a plea at this stage is preposterous.

We have gone through the record in the light of the submissions made on either side. The assessee is the proprietor of M/s.Laxmi Prasanna Jewellers. One Shri L.V. Bhaskar Rao is her husband and he along with his two sons is effectively managing the business on behalf of the assessee. There was a survey conducted at the business premises of the assessee on 7.11.2012 and stated the fact was known to the assessee by 10 am on the day itself as is evident from her statement recorded on 1.3.2016. It is also not in dispute that the summons, u/s 131 of the Act were issued to the assessee on 7.11.2012 itself requiring her presence on 8.11.2012 before the Income Tax Authorities. The assessee did not present herself as required in the summons but on the other hand, the husband of the assessee was present on 8.11.2012 before the authorities and he submitted before the authorities that in part performance of his promise, he paid a sum of Rs.5.00 lakhs for the A.Y 2013-14 towards advance tax and produced the copy of challan. Subsequently on 18.12.2014, though the assessee challenged the authority of her husband to give any statement binding her, did not dispute the fact of survey or the findings of any excess stock during that survey worth Rs.83,01,000/-. Even at that time also, the assessee did not plead about the errors, if any, in the valuation of jewellery or that part of excess stock contains the gold ornaments received from or being given by certain customers for repairs/re-modelling available in the shop. Even during the appeal before us also, no details of such customers or the gold ornaments attributable to them are produced.

There was a time gap of more than 3 ½ years between the survey operation and the assessee giving her statement before the Income Tax Authorities. If the plea taken by the assessee is correct, the assessee should have brought it to the notice of the authorities her grievance in respect of the manner of conducting the survey or manner of valuing the excess stock or the details about the gold ornaments that were given for repairs/re- modelling by the customers.

It could be seen from the record that even during the stage of first appellate proceedings, the assessee did not mince many words nor had she took any such plea on those aspects. The assessee is taking several pleas at several stages and they di not fit in the conduct of an ordinary prudent person. We are therefore, not inclined to accept the plea taken by the assessee before us and the learned CIT (A) considered these aspects in a proper way while granting relief to the tune of Rs.27,34,929/- and declining to delete the addition to the extent of Rs.55,66,071/-. We, therefore, do not propose to interfere with the findings of the learned CIT (A). The appeal of the assessee is accordingly found to be devoid of merits and dismissed.

In the result, appeal of the assessee is dismissed.