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Facts
The assessee, a partnership firm engaged in trading of gold, silver ornaments and money lending, was subjected to a survey assessment. Additions were made by the Assessing Officer on account of cash surrendered during the survey and difference in valuation of stock.
Held
The Tribunal set aside the issue of cash addition to the Assessing Officer for verification. The AO is directed to verify if the amount was duly recorded in the assessee's books of account and if the source was explained. If proven, the addition would be deleted.
Key Issues
Whether addition on account of cash surrendered during survey is sustainable without verifying the assessee's books of account and explanation of source.
Sections Cited
143(2), 133A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “B”, LUCKNOW
Before: SHRI KUL BHARAT & SHRI ANADEE NATH MISSHRA
PER KUL BHARAT, VICE PRESIDENT.:
This appeal, by the assessee, is directed against the order of the Learned Commissioner of Income-tax (Appeals), Bareilly, dated 05.05.2020, pertaining to the assessment year 2015-16. The assessee has raised the following grounds of appeal: - “1 On the facts and circumstances of the case, the order passed by the Ld. CIT(A) is bad both in the eyes of law and on facts.
2. On the facts and circumstances of the case, the learned CIT(A) in adding a sum of Rs.400000/- to the income of the assessee as there was no difference in cash as counted by the survey team and as per books.
Page 2 of 6 3. On the facts and circumstances of the case, the assessment order being passed in violation of the principles of natural justice.
On the facts of the case, there is no concealment of income. Hence, initiation of penalty proceedings is also against law.
Any other ground that may be taken during the course of appellate proceedings.”
Briefly stated, facts are that in this case, the assessee is the partnership firm and is engaged in the business of trading of gold and silver ornaments and money lending. The case of the assessee was taken up for scrutiny assessment. A notice u/s 143(2) of the Income Tax Act, 1961 (hereinafter referred as “the Act”) was issued on 14.09.2016 and duly served upon the assessee. In response to the statutory notices, the Ld. Authorized Representative of the assessee attended the assessment proceedings and submitted the details as called for. The Assessing Officer proceeded to make additions on account of cash surrendered during the course of survey of Rs.4,00,000/- and in respect of difference in valuation of stock of Rs.31,75,000/-. Aggrieved against this, the assessee preferred an appeal before the Ld. CIT(A) who partly allowed the appeal of the assessee. Thereby, he sustained the addition made on account of cash surrendered by the assessee during the course of survey proceedings and other addition was deleted. Now, the assessee is in appeal before this Tribunal.
Apropos to the grounds of appeal, the Ld. Counsel for the assessee Shri P.K. Kapoor, C.A. vehemently argued that authority below failed to appreciate facts of the case in right perspective. Further, he contended that the assessee during the course of survey voluntarily surrendered of Rs.4,00,000/-. He also contended that before the survey team, it was contended that the Page 3 of 6 assessee had been maintaining the books of account and the books of account for the relevant period were kept with the Ld. Counsel for the assessee. Furthermore, he contended that as per the books of account, there was no excess cash on hand as alleged by the Assessing Officer. He drew our attention to page no. 52 of paper book. To buttress the contention that as per the cash book a sum of Rs.8,65,500/- was available with the assessee on the date of survey. Thus, merely because the assessee surrendered without verifying from the books of account cannot be the basis for sustaining the addition. Further, he reiterated the submissions as made in the written submissions and prayed that the impugned addition may be deleted.
4. On the other hand, the Ld. Sr. Departmental Representative (“DR”, for short) representing the Department opposed the submissions and contended that it was categorically stated before the survey team that the assessee was voluntarily surrendering a sum of Rs.4,00,000/-. Further, he drew our attention to the assessment order where the Assessing Officer has reproduced the explanation offered by the assessee. As per this, it is categorically stated that the assessee was not in a position to explain the difference of Rs.4,00,000/-. Therefore, Ld DR prayed for sustaining the impugned addition.
5. We have heard rival contention and perused the materials available on record. There is no dispute that the basis for making impugned addition is with regard to difference of cash of Rs.4,00,000/- found during the course of survey and the statement made by the assessee before the survey team. The Ld. CIT(A) has given the finding in para no. 6.2, by observing as under: - Page 4 of 6 “6.2 The above submission has been considered vis-a-vis the facts mentioned in the assessment order. Though, as discussed above, the statement recorded u/s 133A has no evidentiary value and no addition can be made by just relying on the statement but it is equally true that even if it has no evidentiary value then also addition can still be made on the basis of the facts available on record. In this case, the excess cash vis- a-vis books of account of Rs.4,00,000/- was found during Survey. This is a factual finding and is not based on any disclosure made during Survey. This addition is not based only on the Statement but on the discrepancy found during the Survey. On the issue of valuation of Stock the actual weight of Gold and Silver Jewellery taken on the day of Survey u/s 133A was not disputed by the appellant. It only disputed its method of valuation which is not the case in respect of excess cash found. Here the appellant is submitting that there was no excess cash in view of books of account which cannot be accepted as books of account were available on the day of survey and excess cash was determined on the basis of the books of account available as on the day of Survey. Thus, the submission of the appellant is devoid of merit.”
As per the above finding, it is evident that the Ld. CIT(A) came to the conclusion on the basis that the excess cash viz-a-viz the books of account was found by the survey team. Further, Ld. Counsel for the assessee has pointed out that at the time of survey the assessee was not having books of account at the business premises. To buttress this contention, the Ld. Counsel for the assessee drew our attention to question no. 9 posed to the assessee during the course of survey wherein he was asked whether he maintained books of account in response thereto he stated in affirmative but explained that the books of account were lying with the advocate of the assessee. Further, in answer to question no. 12, the assessee had stated that at the premises there is a sum of Rs.4,65,000/- but as per cash book this amount was Rs.8,65,000/-. It was categorically stated by the Ld. Counsel for the assessee that during the course of assessment the assessee had produced books of account including the page no. 52 enclosed with the paper books. However, we find that no finding has been given by the lower authorities on this issue. In our considered opinion, the AO ought to have considered the Page 5 of 6 submission of the assessee. If the amount was duly recorded in the books of account and the assessee had explained the source, thereof. In that event, the AO would not be justified for making addition merely on the basis that during the course of survey the assessee failed to explain the source. We, therefore, considering totality of facts, we deem it proper to set aside this issue to the file of AO for verification. The AO is hereby directed to verify the correctness of the claim of the assessee that the amount is duly recorded in the books. If the assessee is able to prove the recording of such amount in his books of account and also source thereof, the AO would delete the addition. The grounds raised in the appeal are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open Court on 18/03/2025.