INCOME TAX OFFICER, JAIPUR vs. RAKESH GOEL, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 1204/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2013-14 cuke Income Tax Officer, Rakesh Goel Vs. Jaipur 3 TA 12 Jawahar Nagar, Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACFPG0353D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. Tarun Mittal, C.A jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT lquokbZ dh rkjh[k@ Date of Hearing : 15/04/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 20/05/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

The present appeal by revenue for assessment year 2013-14 [ AY ] arise out of the order of learned National Faceless Appeal Centre, Delhi [ for short CIT(A)] dated 31/07/2024 in the matter of assessment order dated 31.03.2016 passed under section 143(3) of the Income Tax Act, 1961 [ for short “Act”] by ACIT, Circle-06, Jaipur [ for short AO ].

2. Vide this appeal revenue has raised the following grounds: -

1. Whether on the basis of facts and circumstances of the case, Id. CIT(A) is right in deleting the addition of Rs. 3,69,70,000/- and Rs. 40,00,000/- in spite of the fact that the assessee has outrightly accepted the quantum of undisclosed income during the course of survey proceedings, amounting to Rs. 4,09,70,000/- and had failed to justify its source even during the assessment proceedings.

2. Whether on the basis of facts and circumstances of the case, Id. CIT(A) is right in deleting the trading addition of Rs. 9,43,030/- in spite of the fact that discrepancies were found in cash and stock during the course of survey proceedings and the assessee has declared gross profit on lower side.

3. Whether on the basis of facts and circumstances of the case, Id. CIT(A) is right in deleting the addition of Rs. 23,88,331/- made by disallowing interest expenses debited in P&L account in spite of the fact that the assessee failed to prove any business relation with various persons to whom the assessee was giving interest free advances.

Thereafter, the case got selected under CASS and statutory notices were issued asking the assessee to file the details as required. The assessee derives income from the business activity of steel and coal, running a proprietorship in the name of M/s Arihant Traders. For the year under consideration, the assessee has declared net profit of Rs.42,64,825/- against gross receipts of Rs.16,95,59,701/- giving net profit rate of 2.51%.

3.1 In this case action of survey u/s 133(A) was conducted on 13/08/2012 at the business/office premises of the assessee. Certain loose transactions recorded in these papers, the assessee voluntarily offered an income of Rs.5,46,48,747/- for tax as under - For AY 2012-13 Rs.99,75,000/- For AY 2013-14 Rs.4,46,73,747/- 3.2 For the AY 2012-13, the assessee disclosed the income admitted during the survey but for AY 2013-14 (year under consideration), the assessee retracted from the statement made during the survey and not offered the income for taxation.

3.3 While assessment proceedings, vide notice u/s 142(1) dated 19/02/2016, the assessee was asked to explain as to why the income of Rs.4,46,73,747/- was not offered in the return of income. The assessee vide reply dated 11/03/2016, submitted that ;

During the course of survey certain loose papers are found and impounded by the department titled as Annexure A2 containing entries of transactions stated to have not been recorded in the books of accounts. Based on these entries, a sum of Rs.99,75,000/- pertaining to previous assessment year i.e. AY 2012-13 was offered for taxation. The amount so offered were the advances given by the assessee in solicitation of various land transactions as the assessee had decided to enter into real estate business in his individual capacity also however the deals could not be materialized and the amount given as advances were received back by the assessee which stood utilized for making further advances as found noted in the said annexure pertaining to the assessment year under consideration, where the advances received were re advanced to another person and on the receipt of ITO vs. Rakesh Goyel the same from such person on non materialization of deal the same was further advanced to another person. A date-wise flow chart of the advances so made and received back and further made to another person was placed on record wherein the income offered at Rs.99,75,000/- in immediately preceding assessment year has been taken as the source as on the first day of the previous year relevant, to assessment year under consideration and accordingly the peak balance is worked out which never exceeded the amount of Rs.99,75,000/- declared in the preceding assessment year and is the percolation of the said amount in various hands in the nature of advances towards the proposed land deals. It is further submitted that from the perusal of the fund flow statement assessee contended that all entries of Rs.3,69,70,000/- [found noted in pages 14-21, 26, 27-31 of Annexure A-2 forming part of alleged surrender) as were referred in the statements recorded on oath during the course of survey stood incorporated wherein the receipt back of the advance is not mentioned since for the memoranda purposes two separate sheets were prepared, one containing the entries of advances another for receipt back of the same which do not find place in the loose papers so impounded. Assessee also expressed his willingness to state on oath all the facts as narrated above. Therefore, he contended that it is a matter of fact that in the land deals advances of such a nature are to be given to opposite parties so that they could be hold for negotiation purposes and in the event such negotiation failed due to some technical reasons all the advances so made were received back. Had it not been so, the assessee would have been in possession of a number of pieces of land against such advances however it is a matter of truth that not a single piece of land was acquired out of the advances so made and were found noted in the loose papers so impounded. In the matter it is submitted that the additional income of Rs. 40 lacs so obtained is without referring to specific calculation, if any, as found noted in the loose papers and was made on lump sum on estimation basis which is also fortified from the perusal of the reply to question No.30 of the statements recorded. However, after the survey when the assessee has complied with the entries no such additional income could be adduced therefore no additional income in this account is considered in the return of income filed for the year under consideration.

3.4 Ld. AO from the fund flow chart submitted by the assessee, noticed that there are heavy cash deposits in the name of some persons regarding which the assessee not furnished any significant detail of transaction except that the amounts are received back, which were given earlier as an advance. Vide show cause notice issued along with notice u/s 142(1) dated these persons from the date of advance given to 31.03.2013 mentioning complete address and PAN of these persons. Also produce details of land deals arranged / executed / negotiated through the persons along with documentary evidence in support. In case, money is not taken as return back of advances, why the same should not be treated as cash loans taken.

In the case of loan taken, please prove the identity and credit worthiness of the creditors and establish the genuineness of the transaction. Ld. AO also pointed out that the claim of the assessee that there were two separate sheets for advance given and received back. Whereas the second sheet do not find place in the loose papers impounded. Ld. AO made a reference to the statement recorded on 13.08.2012 (question no. 23 to 30) and again on 24.08.2012, in which assessee made categorical admission regarding undisclosed income and therefore, the assessee was asked to explain the same. Against that the assessee submitted its reply on 29/03/2016, wherein the assessee contended that ;

"1. As submitted earlier, during the year under consideration a survey us 133A was conducted in the case of assessee wherein certain notings of the advances made towards the purchase of land were found and based on these entries a surrender was obtained from the assessee. The assessee during the course of assessment proceedings has submitted a fund flow statement wherein it was claimed that in cases where the deal was not materialized, the advances so given were received back and further made to fresh parties however since all these transactions were not recorded in the books of accounts and are based solely on personal persuasion and contacts therefore the precise details like addresses, PAN etc.

ITO vs. Rakesh Goyel could not be filed more particularly when the peak advance balance has already been offered for taxation being admitted as made out of the income declared in the books of accounts and stood assessed in immediately preceding assessment years in the order passed w/s 143(3) of the Income Tax Act, 1961. Further as stated earlier and also admitted in the statements of the assessee recorded during the course of survey and also treated as advances in the assessment order passed in immediately preceding assessment year therefore the nature of these amounts are the advances and the receipt back of the same could not be treated as the loan taken by the assessee. It is further submitted that the assessee has offered the additional income on the basis of the fund flow statement which is an accepted method of computation in case where the part information are available and precise linking and correlating the entries found noted in the document seized with the books of accounts and other material could not be possible therefore the fund flow statements submitted by the assessee deserves to be accepted.

3.5 Ld. AO thus noted that as the assessee could not furnish the details and the documents, as asked vide notice dated 23/03/2016. The assessee failed to furnish even the copy of ledger account of these persons. The PAN and complete addresses are also not given by the assessee. Details of property deals arranged executed/negotiated, for which the so called advances were given. In the reply earlier submitted the assessee mentioned about a sheet in which details of advances received back by him was stated to be mentioned. Despite specific requirements by the ld. AO, this so called sheet has not been submitted by the assessee. In these evidence in support of his reply and even details like PAN and address of these persons and ledgers accounts of these persons are not submitted by the assessee, the explanation furnished by the assessee is subject to verification and it is rejected. In view of categorically admission by the assessee in his statements dated 13/08/2012 and again on 24/08/2012, the income so admitted by the assessee is liable to be assessed in his hands.

Mere retraction from the statements does not make the assessee eligible for exemption from tax. The admission made by the assessee on 13/08/2012 and on 24/08/2012 was in a well thought manner and duly based on the transaction recorded in Annexure A2 (a bunch of loose papers) found and impounded from the business/office premises of the assessee. In view of Hon'ble Allahabad High Court's recent decision in the case of Sanjeev Agarwal Vs Income Tax Settlement Commission reported at 56 Taxman.com 214, the assessee can't retract from the statements recorded during survey u/s 133A. It is held by the Hon'ble Allahabad High Court that even though there was no provision to administer oath u/s. 133A, it did not mean that statement could be retracted at whim and fancy of assessee. Based on that finding ld. AO made the addition of Rs. 4,09,70,000/-. year. While doing so he noted that if the amount of excess stock excluded the gross profit remain @ 2.44 % against the previous year @ 5.47%. The ld. AO applied GP rate @ 3 % and according he made the trading addition of Rs. 9,43,030/-.

3.7 Ld. AO noted that the sundry debtors appears to be real estate business and not related to the trade of coal and iron. The names and the amount as balance as on 31.03.2013 are as under;

1. M/s Adrash Build Estate Limited Rs. 1,63,64,333/- 2. M/s Adrash Thought Works Pvt. Ltd. Rs. 52,08,312/- 3. M/s Arihant Shivank Infra Projects Ltd. Rs. 1,70,36,563/- 4. M/s Laxmi Kripa Buildhome Pvt. Ltd. Rs. 3,76,684/- 5. M/s Sun Shine Tiles Pvt. Ltd. Rs. 2,62,153/- 6. M/s Thar Cement Limited Rs. 5,30, 763/- Ld. AO also noted that the assessee has given loan of Rs. 6,25,813/- to Smt. Reena Goyal from whom also no interest is charged. The assessee also made investment of fund from the interest baring fund. Since the assessee is having negative balance and substantial fund have been given various person with whom no business relation was proved by the asseee and therefore, a sum of interest of Rs. 23,88,331/- debited in the profit and loss account held as expenditure not incurred for business purpose and was disallowed.

Circle-6, Jaipur the assessee preferred an appeal before the ld. CIT(A).

Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:

4.3 I have carefully considered the argument of appellant, submission made available on record and assessment order. After considering the factual position of the case and the documents submitted by the appellant, I am of the view that addition of Rs. 3,69,70,000/- is unwarranted and not justified in the eyes of law as the addition is made only on the basis of statement recorded from the appellant during survey proceedings. Hence, in the light of facts of the case. addition of Rs. 3,69,70,000 is hereby deleted and ground of appeal is allowed accordingly. The grounds No. 1 of the appeal is allowed. 4.4 The ground No. 2 pertains to addition of Rs.40,00,000/- admitted by assessee survey on account of loose papers impounded. In appeal proceedings, appellant has challenged the action of Ld. AD of making ad-hoc/lump sum addition of Rs. 40 lacs on the basis of certain loose papers by alleging the same as being admitted by the appellant during the course of survey but without referring to any specific entry or document to which the same relates. The appellant has submitted that during the course of survey certain loose papers were found and impounded and confronted before the appellant. The appellant submitted that amount was admitted on estimation basis. However, after compiling the details, no additional undisclosed income was found. Appellant added that addition has been made without referring to any specific paper/document containing any such entry or calculation representing income to the tune of Rs. 40 lacs, which is arbitrary and unjustified. 4.5 I have considered the argument of appellant, submission made available on record and assessment order. I found force in the argument of the appellant. It is observed that nowhere in assessment order AO has sought any clarification in this regard. AO has not pointed out any entry as found noted in loose papers impounded. Therefore, considering view that addition of Rs. 40,00,000/- is not the factual position of the case, I am of the justified and unwarranted made on the basis of statement recorded from the appellant in survey proceedings. Hence, addition of Rs. 40,00,000/- is hereby deleted and ground of appeal is allowed. The grounds No. 2 of the appeal is allowed.

In appeal proceedings, appellant has challenged that Ld. AO has made arbitrary trading addition of Rs 9,43,030/- by applying an estimated differential GP rate of 3% to the turnover of Rs. 16,95,59,701/- declared

It is observed that during survey, on physical verification of stock, the stock was found to be excess by Rs. 37,03,747/-. On the date of survey books of account was written up to 06/08/2012 and appellant was unable to clarify the difference appearing value of stock and hence excess stock of Rs. 37,03,747/-was surrender as undisclosed income.

On perusal of record, it is observed that appellant had considered the excess stock of Rs. 37,03,747/- found in survey while finalizing the books of account for the year. The stock of Rs. 37,03,747/- was duly recorded in the regular books of account drawn up for the year ended on 31.03.2013 by including the same as a part of closing stock and income has been offered to be taxed After inclusion of excess stock, appellant has declared G.P@4.65% for the year The G.P. of immediately preceding year was declared @ 5.47% thus the difference in G.P. comes to Rs. 0.82% only. Since the excess stock has already been recorded in audited books of account and reflects the true position of stock 31.03.2023 and tax has been paid on income so determined for the year after inclusion of stock I found it unreasonable to add Rs 9,43,030/- to total income on this count. It is also observed that no where in assessment AO has pointed out any discrepancy in the books of account Keeping in view of the legal and factual position of the case, the addition of Rs 9.43,030/- on estimated difference in GP rate is hereby deleted and ground of appeal is allowed.

The grounds No. 3 of the appeal is allowed.

4.7 The ground No. 4 pertains to addition of Rs.90,000/- u/s 40(a)(ia) of the Act on account of non-deduction of TDS on interest payment.

Perusal of record, it is observed that appellant had made payment of interest to Shri Umang Goyal and Shri Ram Dhani HUF during the year and had not deducted TDS. During the year appellant paid interest of Rs. 45,000/- each to Shri Umang Goyal and Shri Ram Dhani HUF. The facts were accepted by the appellant and submitted that Form No. 15G was filed with the Department. However, nо documentary evidence in this regard is submitted Therefore, it can easily be construed that appellant has not complied with the provisions of section 40(a)(ia) of the Act. Therefore, addition of Rs. 90,000/- u/s 40(a)(ia) of the Act on account of non-deduction of TDS on interest payment is hereby sustained and ground of appeal is dismissed

The grounds No. 4 of the appeal is dismissed.

4.8 The ground No. 5 pertains to disallowance of interest expenses of Rs.23,88,331/-

In assessment proceedings, AO observed that there was negative capital of Rs. 3,04,694/- as on 31.03.2023 against which substantial investments have been made in fixed asset/other investment/loans and advances. AO observed that debtors appeared to be of real estate business and not related to the trade of coal and iron. AO arrived at the conclusion that funds were given to the persons with whom no business relation was existed out of the borrowed funds on which appellant paid substantial interest of Rs. 23,88,331/-.

In appeal proceedings, appellant has contested that parties referred by AO are related to real estate business and had purchased steel from the appellant proprietorship. The parties reported by the AO are business debtors and has direct relationship with the business of the appellant.

On perusals of balance sheet for the year ended on 31.03.2013, it is observed that Appellant has shown liability as Secured loan of Rs. 40,49,776/-Unsecured loan of Rs. 43,50,398/- and other Current liabilities of Rs. 1,23,35,577/-Whereas appellant has shown investment of Rs. 43,68,152/- Loan & Advances of Rs. 8,25,813/- and Sundry Debtors of Rs. 4,09,43,884/-. It is observed from the list sundry debtors that most of the parties pointed out by the AO exist there in the list which proves that they have a direct business relation with the appellant as purchase party. It also proves that borrowed funds were not used for making investments and to advance interest free loan to relatives only. AO has failed to establish the allegation in proper manner by not pointing out specific findings in assessment order in this regard Therefore, it is my considered view that addition is made on assumptions and presumptions and hence deleted and ground of appeal is allowed.

The grounds No. 5 of the appeal is allowed.

4.9 The ground No. 6 pertains to disallowance of Rs. 12,254/- on account of sale tax and TDS demand.

In assessment proceedings, AO observed that appellant has debited Rs. 10.994/- as Demand of Sales Tax and Rs. 1,260/- as Demand of TDS AO ascertained the amount paid as penalty or otherwise and accordingly added to the total income for the year.

In appeal proceedings, appellant has not filed any explanation with regard to nature of amount paid It is proved that appellant has accepted the fact and has no explanation in this regard. Therefore, addition of Rs. 12,254/- on account of sale tax and TDS demand is hereby sustained and ground of appeal is dismissed.

5. As the revenue dissatisfied with that finding recorded by the ld. CIT(A), the present appeal was preferred by the revenue on the grounds as stated herein above before this Tribunal. Ld. DR was heard who relied on the findings of the ld. AO and more particularly advanced the similar contentions as stated in the order of the assessing officer. She vehemently stated that the assessee did not provide the details of land deal and name of the person against which the deals had not materialized and therefore, the set off the earlier advances cannot be given and therefore, the addition was required to be confirmed based on the set of facts. So far as ground no. 2 raised by the revenue for deleting the trading addition and ground no. 3 for interest disallowance she relied upon the factual finding recorded in the order of the assessment.

6. On the other hand, ld. AR of the assessee supported the finding recorded in the order of the ld. CIT(A). To support the order of the ld. CIT(A) and against the grounds raised by the revenue ld. AR of the assessee submitted following written submissions:

“Brief facts of the case are that the assessee is an individual and engaged in business of trading in steel and coal. A survey action u/s 133(A) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was carried out by the department at the business premises of the assessee on 13/08/2012, pursuant to which various papers/ documents were impounded by the departmental officers. Besides statement u/s 133A of the Act of the assessee were also recorded during the course of survey (APB- 26-39) wherein certain admissions of additional income were obtained from the assessee. The return of income for the year under appeal was filed on 28.09.2013 declaring total income of Rs.41,99,940/- (APB 01-04). Subsequently, the case of the assessee was completed u/s 143(3) of the Act whereby following additions were made by the learned Assessing Officer (hereinafter referred to as the ld. AO) :

Nature of addition Amount (Rs.) Addition on account of income admitted during survey 3,69,70,000/- Addition on account of income admitted during survey 40,00,000/- Trading addition 9,43,030/- Disallowance u/s 40a(ia) 90,000/- Disallowance of interest expense 23,88,331/- Disallowance of sales tax and TDS demand 12,254/- Total Additions 4,44,03,615/-

Aggrieved by the order of the ld. AO, assesse has preferred an appeal before the ld. CIT(A), wherein ld. CIT(A) partly allowed the appeal of the assessee and same is summarised as under— Nature of addition Amount (Rs.) Relief by CIT(A) Sustained Addition on account of income 3,69,70,000/- 3,69,70,000/- - admitted during survey 40,00,000/- 40,00,000/- Trading addition 9,43,030/- 9,43,030/- - Disallowance u/s 40a(ia) 90,000/- 90,000/- Disallowance of interest 23,88,331/- 23,88,331/- - expense Disallowance of sales tax and 12,254/- 12,254/- TDS demand Total Additions 4,44,03,615/- 4,43,01,361/- 1,02,254/-

Against the addition sustained by the ld. CIT(A) assessee has not preferred a further appeal before Hon’ble Bench. However, Department being aggrieved by the order of ld. CIT(A) has preferred a present appeal before your honour. The ground-wise submission in seriatim are presented as under: Departmental Grounds of Appeal No. 1: Under these grounds of appeal the Department has challenged the action of the ld. CIT(A) in deleting the addition of Rs. 3,69,70,000/- & Rs. 40,00,000/- by ITO vs. Rakesh Goyel alleging that the assessee has outrightly accepted the quantum of undisclosed income during the course of survey proceedings amounting to Rs.4,09,70,000/-.

Firstly, on legal it is relevant to state that the statements of the assessee were recorded during the course of survey u/s 133A ON OATH.

In this regard, it is submitted that it is settled proposition of law that statements during the course of survey cannot be recorded on oath as is clear from the provisions contained u/s 133A(3)(iii) of the Income Tax Act, 1961, which empowers the Income Tax Authorities to record the statements of any person which may be useful or relevant to any proceedings under the Act. For that purpose we have to consider the provision contained in section 133A(6) which mandates that if a person refuses or evades to give replies or does not facilitate the Income Tax Authority to inspect books of accounts or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statements recorded, either refuses or evades to do so, then they shall have all the powers under sub section (1) of section 131 for enforcing compliance with the requirement.

However, in the instant case, during the survey proceedings the assessee offered all facilities to the survey party and at no occasion any concealment of fact, disrespect or misbehaviour was noticed by the survey party. The Income Tax Authorities can examine any person on oath as per provisions contained u/s 131(1)(b) of the Income Tax Act, 1961. Thus in normal course of survey proceedings statement recorded on oath are unwarranted and unjustified and are academic in nature. No cognizance therefore can be attached on such statements. The same therefore deserves to be ignored. In this regard reliance is placed on following case law:

CIT vs S. Khader Khan Son (Supreme Court) 300 ITR 157: Relevant extracts of said judgement are reproduced herewith : “From the foregoing discussion, the following principles can be culled out: (i) …………………. (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 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, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker.);

(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 CIT v. G. K. Senniappan [2006] 284 ITR 220 (Mad.) ; (iv) The material or information 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 CIT v. S. Ajit Kumar [2008] 300 ITR 152 (Mad.); (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.

For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 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 assesses we do not see any reason to interfere with the order of the Tribunal. Accordingly, rinding no substantial question of law arises for consideration, the tax case appeal stands dismissed.

Paul Mathews and Sons Vs. CIT (Ker.) 263 ITR 101 The provision also enables the income-tax authority to impound and retain in his custody for such period as he thinks fit any books of account or other documents inspected by him, provided the authority records his reasons for doing so and also shall not retain the books of account for a period not exceeding 15 days. Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. On the other hand, we find that such a 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, there is much force in the argument of learned counsel for the appellant that the statement elicited during the At this juncture, kind attention of Hon’ble Bench is invited to relevant extracts of Budget Speech of Finance Minister for F.Y.2003-04: “Simplifying the procedure and methods employed during search and seizure, and during survey by the Income Tax department. First, hereafter, stocks found during the course of a search and seizure operation will not be seized under any circumstances. Second, no confession shall be obtained during such search and seizure operations. Third, no survey operation will be authorized by an officer below the rank of Joint Commissioner of Income Tax. Finally, books of account impounded during survey will not be retained beyond ten days, without the prior approval of the Chief Commissioner.”

The said position was further clarified by CBDT vide Circular no.10 dated 2003, which clearly stated that focus and concentration should be 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 Departments rather than on obtaining confession.

It is further submitted that Hon’ble ITAT, Jaipur Bench, Jaipur in large number of cases has held that no addition could be made solely based on the alleged admission made in the statements recorded during the course of survey conducted u/s 133A on oath without making reference to any incriminating paper / document found or without bringing on record any contrary material by making independent and fresh enquiries during the course of assessment proceedings. Such orders have also been upheld by Hon’ble jurisdictional High Court also. Few of them are as under: 1. Ratan Textiles (P) Ltd.

2. Shri Anu Milk Products (P) Ltd. upheld by Hon’ble High Court in Appeal No. 74/2014 dated 18.09.2017. 3. Maverick Share Brokers (P) Ltd. ITA No.701/JP/12, upheld by Hon’ble High Court in Appeal No.14/2016. 4. Roshan Lal Lodha Rajasthan High Court (Appeal No. 185/2014 order dated 03/11/2015)

Without prejudice to above on merits of the issue, it is submitted as under:

Submission related to Addition of Rs. 3,69,70,000/- Brief facts related to addition of Rs. 3,69,70,000/- are that, during the course of survey certain rough papers were found and impounded by the departmental officials which were inventoried as Annexure- A 2 pages 14-21, 26 and 27-30.

During the course of survey assessee was asked to explain the entries found noted in these papers in the statements recorded whereby the an admission of Rs.3,69,70,000/- was obtained from the assessee, under the heat and pressure in the mind of assessee on account of survey action, in reply to question Nos. 24 to 29 (APB 35-38). The admission of Rs.3,69,70,000/- was related to the following impounded papers: Reference of the statement Reference of the impounded papers Amount (Rs.) recorded during the course of survey Q24, pg no. 10 Annexure- A2, page nos. 14 to 21 1,75,30,000.00 Q26, pg no. 11 Annexure-A2, page no 26 25,00,000.00 Q25-30,pg no. 12 - 13 Annexure-A2, page no 27 to 30 1,69,40,000.00 Total 3,69,70,000.00

After the completion of the survey proceedings assessee collected the copies of the loose papers impounded and after making reconciliation of the same with the books of accounts and other documents available with him and preparing fund flow and has worked out the income which was declared in the return of income filed for preceding year and year under appeal. Additional income for which surrender was obtained from assessee the during the course of survey u/s 133A was not offered for tax as after incorporating these entries in the fund flow statement and considering the availability of funds so received back, undisclosed income of assessee for the year under consideration worked out as nil. However, the ld. AO while completing the assessment has made the addition of such admission without appreciating the explanation tendered by the assesse.

In this regard, at the outset it is submitted that based on the papers impounded during the course of survey, additional income of Rs.99,75,000/- was offered for taxation for AY 2012-13 by the assessee. This additional income was related to advances given by the assessee for solicitation of land deals as the assessee was aspiring to enter into real estate business in his individual capacity apart from various real estate companies where he is having directorship. However, since none of these deals for which advances were given did crystalize and accordingly the advances so given were received back. The amounts so repaid were again utilized for making further advances for other land deals which incidentally are falling in the year under appeal.

A vital fact which was skipped to explain before the survey team was that assessee was having practice of maintaining two separate sheets whereby in one sheet he used to note down the details of advances given to various parties and on other sheets he is maintaining the records of final outcome of such deals i.e. the details of advances received back or details of final deal. During the ITO vs. Rakesh Goyel course of survey, sheets containing the details of / advances given by the assessee were found and impounded however, sheets containing the receipt back of advances were not impounded, though they were available and due to the fear and heat generated as a result of survey, it had also skipped the attention of the assessee to bring those sheets on record. Therefore, at first opportunity i.e. during the course of assessment proceedings, assessee has brought the fact of the above explained sheets to the attention of the ld. AO and had explicitly submitted vide letter (APB 44-50) that, if the ld. AO so desired, the assessee would state the above facts on oath. However, no action was taken on such request of the assessee by the ld. AO during the course of assessment proceedings and the assessment was completed by making a contrary observation that the assessee failed to submit the details despite making specific request. The abstract of the assessee’s submission made vide letter is reproduced as under (APB 48-49): “……It is further submitted that from the perusal of the fund flow statement your goodself would appreciate the fact that all the entries of Rs. 3,69,70,000/- [found noted in pages 14-21, 26, 27-31 of Annexure A-2 forming part of alleged surrender] as were referred in the statements recorded on oath during the course of survey stood incorporated wherein the receipt back of the advance is not mentioned since for the memoranda purposes two separate sheets were prepared, one containing the entries of advances another for receipt back of the same which do not find place in the loose papers so impounded. Assessee is ready to state on oath all the facts as narrated above if your goodself desire so…..”

The relevant abstract of the observations of the ld. AO in this regards is also reproduced herewith for your honour’s ready reference: “In the reply earlier submitted the assessee mentioned about a sheet in which details of advances received back by him was stated to be mentioned. Despite specific requirements by the undersigned, this so called sheet has not been submitted by the assessee.” (Assessment Order page No. 13) From the above, it is clearly evident the observations of the ld. AO are completely contrary to the facts of the case where during the course of assessment proceedings assessee has prepared a fund flow statement wherein the advances received back out of the advances given to various persons as appearing in the sheets impounded pertaining to the immediately preceding assessment years were incorporated and since in the immediately preceding assessment year such advances have already been offered for tax as made out of undisclosed income and accepted by the department, therefore, the question of the details of such person has no relevance more particularly when it is not a case where the ld. AO has alleged that the advances received back from the persons different from whom the advances were made earlier.

For sake of repetition, it is once again reiterated that the advances so found noted in the impounded papers were made out of the advances that were made in the previous year but received back during the current year due to non- materialization of the land deal. No new cash, (other than the cash of Rs.99,75,000/- introduced in the real estate business in the previous year and duly offered for taxation) was introduced nor claimed as utilized for making advances during the year under appeal which were found noted in the loose papers impounded during the course of survey. The date-wise fund flow statement of the advances so received back and further utilized for making fresh advances during the year under appeal was submitted before the ld. AO during the course of assessment proceedings (APB 50).

From the perusal of the said fund flow statement titled as Annexure A-2 (APB 50) it may be evident that the amount of Rs. 99,75,000/- offered for tax in preceding year as advances to various persons was taken as the opening figure and thereafter the advances received back and made as found noted on page Nos. 14 to 21, 26 and 27 to 31 of Annexure- A2 totalling to Rs.3,69,70,000/- are duly incorporated where the receipt back of the advances have been treated as the fund and subsequent advance is taken as out flow out of such fund and the balancing figure is worked out which remained negative. As it evident from the flow chart furnished, the peak cash balance is Rs.97,68,378/- which has not exceeded Rs,99,75,000/-, i.e. the amount of cash introduced into the real estate business during the preceding assessment year and that has percolated to the current year in form of advances received back.

Therefore, as per the theory of peak cash in respect of unaccounted cash transactions the amount that can be taxed is the peak negative cash balance which in the present case is the opening cash balance of Rs.99,75,000/- on which due tax has already been offered in AY 2012-13 and same can be substantiate from the Return of Income at APB 05-08 and assessment order at APB 43 of A.Y. 2012-13. Thus no additional income with regard to the entries found noted in the loose papers as tabulated above is borne out from record, thereby no additional income has been shown in the return of income for the year under appeal.

The contention of the assessee is further fortified by the fact that at the time of survey, the assessee was neither in possession of such huge cash balance nor any investment in properties made by utilizing such cash has been found nor

In this regards reliance is placed on the following judicial pronouncements:

Pullangode Rubber Produce Co. vs State Of Kerala And Anr (Supreme Court) 91 ITR 18 (1973) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect.

PCIT vs. Texraj Realty P. Ltd (Guj HC) 612/2018 “Addition of undisclosed income cannot be made on the basis of (a) entries in dairy found during survey & (b) admission of director in s. 133A survey if assessee has filed a retraction and alleged that the entries/ statement were recorded under pressure. A s. 133A statement is merely information simplicitor and not evidence per se. Addition cannot be sustained if the Dept has not investigated the matter and find material to support the addition.”

Amod Shivlal Shah vs. ACIT (ITAT-Mum)

An admission of estimated income made during survey has no evidentiary value and is not binding on the assessee. The income has to be assessed as per the return of income and books of account.

From the above it is amply clear that it is a recognised trite law that it was open to the assessee who made an admission to show that it was actually incorrect. It is imperative upon the ld. AO to afford proper opportunity to the assessee to show the correct facts. It is settled law that the admission made on the basis of incomplete and incorrect facts is not conclusive to hold the issue against the assessee and thereby making such exorbitant additions to the income by ld AO is not justified, more particularly when assesse has furnished complete fund flow statement and also offered Rs 99,75,000 for tax in the preceding year.

Ld. CIT(A) after duly considering the submission of assesse deleted the addition of Rs. 3,69,70,000/-. Relevant extract of order is reproduced as under— “4.3 I have carefully considered the argument of appellant, submission made available on record and assessment order. After considering the factual position of the case and the documents submitted by the appellant, I am of the view that addition of Rs. 3,69,70,000/- is unwarranted and not justified in the eyes of law as the addition is made only on the basis of statement recorded from the ITO vs. Rakesh Goyel appellant during survey proceedings. Hence, in the light of facts of the case, addition of Rs. 3,69,70,000/- is herey deleted and ground of appeal is allowed accordingly.”

In view of the above facts and the submissions made in the foregoing paras of this submissions, the addition of Rs.3,69,70,000/- made solely on the basis of admission made by the assessee during the course of survey under fear and pressure and without reference to any logical calculation or basis is completely unwarranted. Thus the action of ld. CIT(A) in deleting the exorbitant addition of Rs. 3,69,70,000/- made by ld. AO should be upheld.

Submission related to Addition of Rs. 40,00,000/- Brief facts relating to the addition of Rs. 40,00,000/- are that during the course of survey certain loose paper was found and impounded by the survey team and based on these papers without referring to any specific paper / document containing any such entry or calculation representing the income / expenditure to the tune of Rs. 40,00,000/-, an admission of Rs.40,00,000/- was obtained from the assessee for any further possible undisclosed income. Further, during the course of assessment proceedings no clarifications in this regards were sought for by the ld. AO and assessment was completed by making an addition of Rs.40,00,000/- (included in the addition of Rs.4,09,70,000/-) by alleging the same as being admitted by the assessee as undisclosed income during the course of survey without pointing out any entry as found noted in the loose papers impounded during the survey representing any such undisclosed income / expenditure.

In this regards, it is submitted that the assessment order dated 31.03.2016 framed u/s 143(3) of the Act, nowhere mentions or discusses any incriminating paper or document or other evidence that was found and impounded during the course of survey, or was already on the file of the ld. AO, based on which the impugned addition of Rs.40,00,000/- has been made to the income of the assessee. The only reference in respect of the impugned addition of Rs.40,00,000/- is found in the table on page no. 14 of the assessment order whereby it is mentioned that the addition of Rs.40,00,000/- is on the basis of “other loose papers” inventoried in Annexure- A2 and the “statements of the assessee” in reply to question no. 30 made during the course of survey.

The relevant abstracts of the Assessment Order as well as the statements of the assessee are reproduced herewith for your honours ready reference:

Relevant abstract of the Assessment Order (page no. 14 of the order): The details of transactions and admission made by the assessee in his statements dated 13/08/2012 is summarized as under:

Sr. Relevant Page No. of Amount involved in Statements where the admission No Annexure A2 transaction recorded in of undisclosed income made these papers 1 14 to 21 Rs.1,75,30,000/- Reply to question No. 23 & 24 2 26 Rs.25,00,000/- Reply to question No. 25 & 26 3 27 to 31 Rs.1,69,40,000/- Reply to question No. 27 to 29 4 Other loose Rs.40,00,000/- Reply to question No. 30 papers Total Rs.4,09,70,000/- The abstract of the assesee’s statement (Page no. 14):

On perusal of the statements of the assessee recorded during the course of survey, it is clearly evident that even during the course of survey, the survey officials did not have any specific incriminating material in their possession on the basis of which the admission of Rs. 40,00,000/- was obtained from the assessee. The same is also fortified by the question No. 30 raised before the assessee during the course of survey wherein the survey officials have referred to Page no. 12 of Annexure A-2 and other remaining papers of the Annexure. Further, even in the statements of the assessee, there is a clear mention that the amount of Rs.40,00,000/- was admitted by the assessee on ad-hoc basis and not by referring to any particular incriminating paper or document as during the course of survey he was unable to contemplate and provide clarifications in respect of random unrelated loose papers. However, during the course of assessment proceedings the assessee had made specific remarks in his submission (APB 49), whereby it was clearly stated that the admission during the course of survey was made by him on estimation basis and that post-survey, on compiling the details and analysing all the papers impounded during the course of survey with a holistic view, no additional undisclosed income was found by him thus no such income was offered in the return of income filed. The ld. AO during the course of assessment proceedings has very conveniently ignored the submission of the assessee and proceeded to make the addition of Rs.40,00,000/- solely on the basis of assessee’s admission during the course of survey and without application of mind and without conducting any independent inquiry nor any entry to this effect was brought on record out of the loose papers and documents impounded during the course of survey reflecting such income.

In view of the facts as narrated above and under the circumstances of the case, the admission of undisclosed income of Rs.40,00,000/- as obtained from the assessee by putting up vague questions by the survey officials is clearly arbitrary and unjustified. Such admission of the assessee therefore, deserves to be ignored for making any additions to the income of the assessee.

It is reiterated that even during the course of assessment proceedings neither any specific query was raised by the ld. AO nor any verification of the details noted on the impugned papers was made. It is clearly evident that the addition made by the ld. AO is de-hores without having any specific material on hand. The ld. AO has not brought anything on record to establish that the impugned amount of Rs.40,00,000/- reflect undisclosed income of the assessee. Further, when statements of the assessee that is the sole basis relied upon by the ld. AO had ITO vs. Rakesh Goyel itself been retracted by the assessee by not offering the additional undisclosed income so admitted in such statements while filing the return of income, the ld. AO was duty bound to bring other credible material on record to substantiate his allegation that the impugned amount of Rs.40,00,000/- was undisclosed income of the assessee.

Under the circumstances it is amply clear that the addition of Rs.40,00,000/- has been made by the ld. AO on the basis of his presumption, surmises and conjectures. No addition can be made on the basis of conjectures more so in a situation where a detailed survey has already been conducted by the department.

As stated in the foregoing paras of this this submission, the Hon’ble Supreme Court has in the case of Pullangode Rubber Produce Co. vs State Of Kerala And Anr (Supreme Court) 91 ITR 18 (1973) has already held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect.

Ld. CIT(A) after duly considering the submission of assesse deleted the addition of Rs. 40,00,000/-. Relevant extract of order is reproduced as under—

“4.5 I have considered the argument of appellant, submission made available on record and assessment order. I found force in the argument of the appellant. It is observed that nowhere in assessment order, AO has sought any clarification in this regard. AO has not pointed out any entry as found noted in loose papers impounded. Therefore, considering the factual position of the case, I am of the view that addition of Rs. 40,00,000/- is not justified and unwarranted made on the basis of statement recorded from the appellant in survey proceedings. Hence, addition of Rs. 40,00,000/- is hereby deleted and ground of appeal is allowed..”

In light of the above submission and the decision of the Hon’ble Apex Court, in absence of any material in support of the impugned addition, ld. CIT(A) rightly deleted the addition of Rs.40,00,000/- made by ld. AO.

Departmental Ground of Appeal No.2: Under this grounds of appeal, department has challenged the action of ld. CIT(A) in deleting the trading addition of Rs.9,43,030/- on account of discrepancies found in cash & stock during the course of survey.

Brief facts related to these grounds are that during the course of survey, cash was found short by Rs.3,37,895/- whereas on physical verification the stock was found to be excess by Rs.37,03,747/-. During the course of survey conducted on 13/08/2012, the assessee had clearly mentioned that his books of accounts had ITO vs. Rakesh Goyel been written upto 06/08/2012. However, as the assessee was unable to clarify the difference appearing the value of stock, the excess stock of Rs.37,03,747/- was surrendered as undisclosed income. The stock surrendered during the course of survey, was duly recorded in the books of accounts of the assessee and the brought to tax for the year under consideration.

At the outset it is submitted that the trading addition of Rs.9,43,030/- made without rejection of books of account of the assessee in pursuance of section 145(3) of the Act is bad in law, and deserves to be deleted.

The relevant abstract of the provision of section 145(3) are reproduced herewith for your honours ready reference: “(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144.”

On perusal of the provisions of section 145(3), it is evident that the ld. AO is entitled to estimate/ compute the income of the assessee in pursuance of 145(3) only if either of the following conditions are satisfied: 1. AO is not satisfied about the correctness and completeness of accounts 2. Method of accounting provided in section 145(1) has not been followed 3. Income has not been computed in accordance with the standards prescribed u/s 145(2)

It is further a known principle the before estimating the income of the assessee, the AO has to first reject the books of accounts maintained by the assessee and further, record his satisfaction as to why the same have been found to be unreliable by him. In absence of satisfaction of the ld. AO, the income of the assessee cannot be estimated.

The ld. AO has made the addition of Rs.9,43,030/- on estimated basis without disturbing the closing stock declared by the assessee in the audited books of account. Further, the ld. AO does not have any evidence to conclude that the assessee had earned undisclosed profit on the value of closing stock surrendered during the course of survey. Such an addition is merely on the basis of presumptions, surmises and conjectures of the ld. AO. At this juncture the attention of your honour is drawn towards the decision of the Hob’ble Calcutta High Court in the matter of Swadeshi Commercial Co. Ltd. vs. CIT (ITA No. 219 of 2001 dt. 18/12/2008) (Cal),wherein it was held that gross profit cannot be estimated when books of account are not rejected.

It is submitted that the ld. AO has on the very first page of the assessment order dated 31.03.2016 observed that the books of accounts were produced for verification during the assessment proceedings and were test checked by him. No discrepancies in respect to such books of accounts have been pointed by the ld. AO while framing the assessment except the allegation that certain stock was found in excess during the course of survey and cash was found short. The estimated addition of Rs.9,43,030/- has been made solely for the reason that during the year under appeal relatively lower gross profit rate as compared to last year was declared, which in itself was a flawed observation. The Hon’ble Madras High Court has in the case of PCIT Vs. Marg Limited has held that it is sine qua non that while estimating the income the assessing officer has to come to a conclusion that the books of account maintained by the assessee are incorrect.

The comparative trading results of the year under appeal and of preceding year are reproduced herein below: Assessment Year Gross turnover Gross profit Gross profit % 2013-14 16,95,59,701.00 78,47,508.00 4.65% 2012-13 6,21,62,978.00 34,00,045.00 5.47% From the perusal of the above results, it is clearly evident that the turnover has been increased multi fold which fact is also appreciated by the ld. AO. It is an established fact that high turnover could be achieved only by lowering the profit margins. It is also a matter of fact that the gross profit includes the amount of excess stock found during the course of survey and after including the excess stock as part of trading account, the real GP of the assessee is 4.65% and not 2.44% as has been worked out by the ld. AO by excluding the amount of such excess stock. Once the income has been worked out by incorporating the excess stock as income, the same has to be considered while making the comparison with the profits of preceding years.

Under the circumstances, estimation of gross profit and consequent trading addition of Rs.9,43,030/- without rejection books of accounts deserves to be deleted. It is therefore, humble prayed before your honour that such trading addition may out rightly be deleted on this legal ground itself without even going into merit of the ground.

Without prejudice to the legal ground raised above the following submissions are made on the merits of the case:

ITO vs. Rakesh Goyel It is submitted that the excess stock of Rs.37,03,747/- found during the course of survey was on account of the fact that the books of accounts of the assessee were not written up to date i.e. 13.08.2012 and were only written up to 06.08.2012 [Please refer the answer to question No. 15 of the statements (APB 30-31)]. Therefore the transactions for the period 07.08.2012 to 13.08.2012 were pending to be incorporated in the books of accounts as on the date on survey. However, as the assessee had failed to explain the reasons for such difference in stock as on the date of survey, the same was offered for taxation. Subsequently while finalizing the books of accounts for the year under appeal, the assessee has considered the excess stock of Rs.37,03,747/- in his books of accounts drawn up for the year ended 31.03.2013 by including the same as a part of closing stock as on 31.03.2013. The value of such closing stock as on 31.03.2013 as also been duly vouched and audited by the auditor who in his report has made specific comments in this regards in the Notes appended to the audit report. (Note G) (APB- 20). Therefore, the excess stock found during the course of survey was duly recorded in the regular books of account and offered for tax in the return of income filed by the assessee for AY 2013-14. Therefore, any further addition to the income of the assessee in the order passed u/s 143(3), deserves to be deleted.

The assessee further submits that the ld. AO has estimated an incremental GP rate of 3% by solely observing that the GP rate for the year under appeal was lower as compared to the GP rate of the immediately preceding year. While comparing the GP rates of the two years, the ld. AO has conveniently excluded the amount of excess stock found during the course of survey and duly recorded in the books of accounts from the gross profit of Rs.78,47,508/- declared for the year under appeal. As a consequence the ld. AO has considered a GP rate of 2.44% for AY 2013-14 as against 4.65% declared by the assessee. Further, the ld. AO has compared this GP rate of 2.44% with the GP rate of 5.47% declared for AY 2012-13, and thereby made an addition by applying differential GP rate of 3% on the turnover declared by the assessee.

In this regard, it is submitted that the method adopted by ld. AO in estimating the gross profit of the assessee is highly unreasonable and unwarranted. Arbitrary exclusion of the Rs.37,03,747/- from the closing stock declared by the assessee while computing the Gross Profit earned during AY 2013-14 is bad in law. It is reiterated that the closing stock declared by the assessee has been duly audited and reflects the true position of stock as on 31.03.2013. Further, the taxes paid by the assessee at the time of filing of return have also been computed on the basis of results that are inclusive of such stock. In view of the above narrated clear facts, the gross profit rate of 4.65% as declared by the assessee ought to be accepted and the trading addition of Rs. 9,43,030/- deserves to be deleted.

The assessee further submits that under the situations where addition in respect of both undisclosed stock, sales and profit are made the assessee is eligible for the benefit of telescoping. Therefore, where the difference in stock found during the course of survey has already been added to the income of the assessee, no trading addition is called for on account of adjustment of gross profit.

Ld. CIT(A) after duly considering the submission of assesse deleted the addition of Rs. 9,43,030/-. Relevant extract of order is reproduced as under— “4.6 The ground No. 3 pertains to trading addition of………. In appeal proceedings, appellant……… It is observed that during survey……… On perusal of record, it is observed that appellant had considered the excess stock of Rs. 37,03,747/- found in survey while finalizing the books of account for the year. The stock of Rs. 37,03,747/- was duly recorded in the regular books of account drawn up for the year ended on 31.03.2013 by including the same as a part of closing stock and income has been offered to be taxed. After inclusion of excess stock, appellant has declared G.P. @ 4.65% for the year. The G.P. of immediately preceding year was declared @ 5.47%. thus the difference in G.P. comes to Rs. 0.82% only. Since the excess stock has already been recorded in audited books of account and reflects the true position of stock 31.03.2023 and tax has been paid on income so determined for the year after inclusion of stock. I found it unreasonable to add Rs. 9,43,030/- to total income on this count. It is also observed that no where in assessment AO has pointed out any discrepancy in the books of account...”

In light of the above submission, it is humbly submitted that the action of ld. CIT(A) in deleting the addition of Rs.9,43,030/- made by ld. AO is correct and order of ld. CIT(A) deserves to be upheld.

Departmental Ground of Appeal No.3: In this ground of appeal, department had challenged the action of ld, CIT(A) in deleting the addition of Rs.23,88,331/- made by ld. AO on account of alleging that interest expense are not incurred for business purposes.

In this regard, it is submitted that the ld. AO has alleged that the assessee has shown debtors which appears to be real estate and not related to the trade of coal and iron besides this, certain investments have been made and advances were given. As against this, assessee has taken unsecured loan and paying interest on such loans which is claimed as expenditure in the Profit & Loss

In this regard, your attention is invited for the balance sheet of the proprietorship firm of the assessee M/s Arihant Traders (APB 21), a perusal of which it is evident that on liability side, there are six items including other current liability of Rs. 1,23,35,577/- which is the credit balance of bank account and Rs. 3,88,99,201/- under the heads “Sundry Creditors” on both these accounts no interest is paid by the assessee. Further the ld.AO has wrongly alleged that the parties grouped under the head “Sundry Debtors” in schedule 11 of Balance Sheet are not related to coal and iron business (APB 21 & 25). The six parties referred by the AO at page 17 of the order are related to real estate business and had purchased steel from assessee company which fact is ignored by the ld. Assessing Officer. With regard to the investment, it is submitted that no direct nexus has been established by the ld. AO in support of the allegation that the interest has been paid on the investments so made. It is further submitted that the six parties alleged as engaged in real estate transaction are business debtors and therefore has direct relationship with the business of the assessee and the amount outstanding at the end of the year are for the business purposes and therefore no disallowance could be made.

It is further submitted that, the Ld. AO has miserably failed to even show / indicate any nexus of whatsoever nature between the advances / investments made by assessee and the funds borrowed by the appellant company; and without establishing any such nexus merely on the basis of assumptions and presumptions, the Ld. AO has treated the balances with debtors as non business advances.

Ld. CIT(A) after duly considering the submission and audited financial statement of assessee deleted the addition of Rs. 23,88,331/-. Relevant extract of order is reproduced as under— “4.8 The ground No. 5………………………..

In assessment proceedings…………………………..

In appeal proceedings………

On perusals of balance sheet for the year ended on 31.03.2013, it is observed that Appellant has shown liability as Secured loan of Rs. 40,49,776/-, Unsecured loan of Rs. 43,50,398/- and other Current liabilities of Rs. 1,23,35,577/-. Whereas appellant has shown investment of Rs. 43,68,152/-, Loan & Advances of Rs. 8,25,813/- and Sundry

Debtors of Rs. 4,09,43,884/-. It is observed from the list sundry debtors that most of the parties pointed out by the AO exist there in the list which proves that they have a direct business relation with the appellant as purchase party. It also proves that borrowed fund was not used for making investments and to advance interest free loan to relatives only. AO has failed to establish the allegation in proper manner by not pointing out specific findings in assessment order in this regard. Therefore, it is my considered view that addition is made on assumptions and presumptions and hence deleted and ground of appeal is allowed.”

In the circumstances it is submitted that the action of ld. CIT(A) in allowing the deduction of Interest Expense of Rs. 23,88,331/- deserves to be upheld.”

7. To support the contention so raised in the written submission reliance was placed on the following evidence / records:

PAGE S. No PARTICULARS NOS.

2. Copy of Return of Income and computation of total income for AY 2012-13 05-08

Copy of audited financial statements for AY 2013-14 and Tax Audit Report along 3. 09-25 with FORM 3CD

Copy of reply made before the Ld. AO duly explaining the documents impounded 8. 47-50 during the course of survey

9. Copy Written Submission Dated 14.07.2023 filed before Ld. CIT(A) 51-71

PAGE S. No PARTICULARS NOS.

in deleting the addition of Rs. 3,69,70,000/- and Rs. 40,00,000/- although the assessee has outrightly accepted the quantum of undisclosed income while survey proceedings, amounting to Rs. 4,09,70,000/- and had failed to assessment proceedings ld. AO noted that the assessee has not offered the income disclosed and therefore, the assessee was asked to explain as to why the income was not offered. The assessee filed a detailed reply on 11.03.2016 contending that during the course of survey certain loose papers were found and impounded by the department titled as Annexure A2 containing entries of transactions stated to have not been recorded in the books of accounts. Based on these entries, a sum of Rs.99,75,000/- pertaining to previous assessment year i.e. AY 2012-13 was offered for taxation. The amount so offered were the advances given by the assessee in solicitation of various land transactions as the assessee had decided to enter into real estate business in his individual capacity also however the deals could not be materialized and the amount given as advances were received back by the assessee which stood utilized for making further advances as found noted in the said annexure pertaining to the assessment year under consideration, where the advances received were re advanced to another person and on the receipt of the same from such person on non materialization of deal the same was further advanced to another person. A date-wise flow chart of the advances so made and received back and further made to another person was placed on record wherein the income been taken as the source as on the first day of the previous year relevant, to assessment year under consideration and accordingly the peak balance was worked out which never exceeded the amount of Rs. 99,75,000/- declared in the preceding assessment year and is the percolation of the said amount in various hands in the nature of advances towards the proposed land deals. The assessee submitted a fund flow statement assessee contending that all entries for an amount of Rs. 3,69,70,000/- [found noted in pages 14-21, 26, 27-31 of Annexure A-2 forming part of alleged surrender] as were referred in the statements recorded on oath during the course of survey stood incorporated wherein the receipt back of the advance is not mentioned since for the memoranda purposes two separate sheets were prepared, one containing the entries of advances another for receipt back of the same which do not find place in the loose papers so impounded. Assessee also expressed his willingness to state on oath all the facts as stated in the assessment proceedings. Therefore, he contended that it was a matter of fact that in the land deals advances of such a nature are to be given to opposite parties so that they could be hold for negotiation purposes and in the event such negotiation failed due to any technical reasons all the advances so made received back. Had it not been land against such advances however it is a matter of truth that not a single piece of land was acquired out of the advances so made and were found noted in the loose papers so impounded. Even in the assessment proceeding after submitting the detailed reply by the assessee ld. AO did not bring anything contrary on record. But the ld. AO made the addition for that amount. As regards the other part of the addition for an amount of Rs.

40 lacs the assessee contended that addition was made without referring to specific calculation, if any, as found noted in the loose papers and was made on lump sum and on estimation basis which also fortified from the perusal of the reply to question No.30 of the statements recorded. However, after the survey when the assessee has complied with the entries no such additional income could be adduced therefore no additional income in this account was considered in the return of income filed for the year under consideration. Ld. AO did not considered the explanation filed by the assessee and made the addition. Based on the record available with the ld. AO he noted that there are heavy cash deposits in the name of some persons regarding which the assessee not furnished any significant details of transactions except that the amounts are received back, which were given earlier as an advance.

23/03/2016, the assessee was asked to furnish copy of ledger account of these persons from the date of advance given to 31.03.2013 mentioning complete address and PAN of these persons. Also produce details of land deals arranged / executed / negotiated through the persons along with documentary evidence in support. In case, money is not taken as return of advances, why the same should not be treated as cash loans taken. In the case of loan taken, please prove the identity and credit worthiness of the creditors and establish the genuineness of the transaction. Ld. AO also pointed out that the claim of the assessee that there were two separate sheets for advance given and received back. Whereas the second sheet do not find place in the loose papers impounded. Ld. AO made a reference to the statement recorded on 13.08.2012 (question no. 23 to 30) and again on 24.08.2012, in which assessee made categorical admission regarding undisclosed income and therefore, the assessee was asked to explain the same. Against that show cause notice the assessee submitted its reply on 29/03/2016, contending that while survey us 133A in the case of assessee wherein certain notings of the advances made towards the purchase of land were found and based on these entries a surrender was obtained from the assessee. The assessee during the course of assessment proceedings has the deal was not materialized, the advances so given were received back and that fund was used to make further fresh advances to the parties. As all these transactions were not recorded in the books of accounts and are based solely on personal persuasion and contacts therefore the precise details like addresses, PAN etc. could not be filed more particularly when the peak advance balance has already been offered for taxation being admitted as made out of the income declared in the books of accounts and stood assessed in immediately preceding assessment years in the order passed w/s 143(3) of the Income Tax Act, 1961. Further as stated earlier and also admitted in the statements of the assessee recorded during the course of survey and also treated as advances in the assessment order passed in immediately preceding assessment year therefore the nature of these amounts are the advances and the receipt back of the same could not be treated as the loan taken by the assessee. It is further submitted that the assessee has offered the additional income on the basis of the fund flow statement which is an accepted method of computation in case where the part information are available and precise linking and correlating the entries found noted in the same document seized with the books of accounts and other material could not be possible therefore the fund flow the other part of the addition it was submitted that the same were recorded without properly referring to the books of accounts maintained in the regular course of business and after the survey assessee has obtained the copies of those papers and after reconciling the same net income in the shape of the advances to the tune of Rs. 99,75,000/- have already been offered for the preceding assessment year which has been duly considered in the fund flow statement prepared for the year under consideration.

Ld. AO did not considered this explanation furnished by the assessee contending that the assessee could not furnish the details and the documents, as asked vide notice dated 23/03/2016. The assessee failed to furnish even the copy of ledger account of these persons. The PAN and complete addresses are also not given by the assessee. Details of property deals arranged executed/negotiated, for which the so called advances were given. In the reply earlier submitted the assessee mentioned about a sheet in which details of advances received back by him was stated to be mentioned. Despite specific requirements by the ld. AO, this so called sheet has not been submitted by the assessee. In these circumstances, when the assessee is not furnishing any documentary evidence in support of his reply and even details like PAN and address of these persons and ledgers explanation furnished by the assessee was rejected and even though the assessee admitted the income in his statements dated 13/08/2012 and again on 24/08/2012, the income so admitted by the assessee is liable to be assessed in his hands. Mere retraction from the statements does not make the assessee eligible for exemption from tax. The admission made by the assessee on 13/08/2012 and on 24/08/2012 was in a well thought manner and duly based on the transaction recorded in Annexure A2 (a bunch of loose papers) found and impounded from the business/office premises of the assessee. Based on that finding ld. AO made the addition of Rs. 4,09,70,000/-.

The matter carried before the ld. CIT(A) he considered the explanation furnished by the assessee before the ld. AO by way of fund flow statement and he directed to delete the addition of Rs. 3,69,70,000/- as unwarranted and not justifiable in the eyes of law as the addition is made only on the basis of statement recorded from the appellant during survey proceedings.

As regards the other part of the addition ld. CIT(A) noted that the addition was made without referring to any specific entry or document to which the same relates. The assessee submitted it was a mere estimation. Ld. CIT(A) noted that ld. AO has not pointed out any entry as found noted in loose 40,00,000/- as he considered it as unjustified and unwarranted since it was merely based on the statement recorded from the appellant in survey proceedings.

We have gone through the records and submission advanced by both the parties, as is evident the assessee has explained by way of fund flow chart that the overall balance of advance does not exceed Rs. 99,75,000/- the working of the chart was submitted before the ld. AO, the same was not disputed before the ld. AO and not before us at the time of hearing of the present appeal. The contention of the assessee that if that contention is not accepted the assessee would have been in possession of the various assets which were in fact not found and the ld. AO did not made any contrary enquiries at the time of assessment proceeding or at the time of the first and second appellate stage and therefore, we do not find any infirmity in the finding so recorded by the ld. CIT(A) while deleting the addition in the matter. Based on that set of facts ground no. 1 raised by the revenue stands dismissed.

10. Vide ground no. 2, revenue challenges the finding of the ld. CIT(A) while deleting the addition of Rs. 9,43,030/- although discrepancies were found in cash and stock while survey proceedings and the assessee has are that while survey proceeding cash was found short by Rs.3,37,895/- whereas on physical verification the stock was found to be excess by Rs.37,03,747/- in the survey conducted on 13/08/2012. While explaining the difference the assessee submitted that his books of accounts were written up to the date of 06/08/2012. The assessee surrendered the difference appearing for the value of stock, for Rs.37,03,747/- as undisclosed income and the same were found recorded in the books of account of the assessee and assessee paid tax on that amount. The ld. AO noted that had the stock not been found recorded in the books then the gross profit offered by the assessee is lower then compared with the earlier year and therefore, he made the trading addition of Rs.9,43,030/-. That was made without rejecting the books of account of the assessee as per provision of section 145(3) of the Act. When the matter was carried before the ld. CIT(A) he noted that since the excess stock is duly recorded in the books and the difference is the gross profit is only 0.82 %, he directed to delete the trading addition of Rs. 9,43,030/-. The bench noted that in this case the revenue conducted a survey and the excess stock so computed was duly recorded by the assessee in the books of accounts and that fact was not disputed. Except for the difference in the gross profit in the preceding year there was no addition. While doing so ld. AO did not invoke the provisions of section 145(3) of the Act and made the addition. Thus, when the assessee surveyed in that the difference appearing value of stock excess stock of Rs. 37,03,747/- was found and accordingly adhered to that excess stock as income by the assessee. The stock of Rs. 37,03,747/- was duly recorded in the regular books of account drawn up for the year ended on 31.03.2013 by including the same as a part of closing stock and income has been offered to be taxed. After inclusion of excess stock, appellant has declared G.P@4.65% for the year The G.P. of immediately preceding year was declared @ 5.47% thus the difference in G.P. comes to Rs. 0.82% only.

Since the excess stock has already been recorded in audited books of account and reflects the true position of stock 31.03.2023 and no other defects were pointed in the books of account the book results cannot be disbelieved, and no separate addition is required to be made. Thus, we do not find any infirmity in the order of the ld. CIT(A) while dealing with that ground of the assessee. Based on that observation ground no. 2 raised by the revenue stands dismissed.

When the matter carried before the ld. CIT(A) has deleted the addition after considering the balance sheet for the year ended on 31.03.2013.

While doing so he noted that” the assessee- appellant has shown liability as Secured loan of Rs. 40,49,776/-, Unsecured loan of Rs. 43,50,398/- and other Current liabilities of Rs. 1,23,35,577/-. Whereas appellant has shown investment of Rs. 43,68,152/-, Loan & Advances of Rs. 8,25,813/- and Sundry Debtors of Rs. 4,09,43,884/-. It is observed from the list sundry debtors that most of the parties pointed out by the AO exist there in the list which proves that they have a direct business relation with the appellant as purchase party. It also proves that borrowed fund was not used for making failed to establish the allegation in proper manner by not pointing out specific findings in assessment order in this regard. Therefore, it is my considered view that addition is made on assumptions and presumptions and hence deleted, and ground of appeal is allowed.”

Records reveals that the balance sheet of the proprietorship firm of the assessee M/s Arihant Traders (APB 21), a perusal of which it is evident that on liability side, there are six items including other current liability of Rs.

1,23,35,577/- which is the credit balance of bank account and Rs. 3,88,99,201/- under the heads “Sundry Creditors” on both these accounts no interest is paid by the assessee. Further the ld.AO has wrongly alleged that the parties grouped under the head “Sundry Debtors” in schedule 11 of Balance Sheet are not related to coal and iron business (APB 21 & 25). The six parties referred by the AO at page 17 of the order are related to real estate business and had purchased steel from assessee company which fact is ignored by the ld. Assessing Officer. With regard to the investment, it is submitted that no direct nexus has been established by the ld. AO in support of the allegation that the interest has been paid on the investments so made. It is further noted that the six parties alleged as engaged in real estate transaction are business debtors and therefore has direct at the end of the year are for the business purposes and therefore no disallowance could be made.

Before us there is no material contrary to that fact were presented by the ld. AO through ld. DR and therefore, we see no reason to sustain the addition and therefore, we concur the finding of the ld. CIT(A). In the light of this fact ground no. 3 raised by the revenue is dismissed.

In the result, the appeal of the revenue is dismissed.

Order pronounced in the open court on 20/05/2025. Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20/05/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Income Tax Officer, Jaipur izR;FkhZ@ The Respondent- Rakesh Goel, Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 1204/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत