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Facts
During a survey, the assessee surrendered an amount of Rs. 1,08,07,260/- due to suppressed sales. However, this amount was not offered for taxation in the return. The AO added this amount to the assessee's income. The CIT(A) deleted the addition.
Held
The Tribunal held that the CIT(A) was justified in deleting the addition. The CIT(A) had examined the recasted books of accounts and found that the sales figures were net of discounts, and once these discounts were added back, the discrepancy disappeared. The AO's extrapolation of a single month's discrepancy to the entire year was not justified.
Key Issues
Whether the addition made by the AO on account of surrender during survey is sustainable when the assessee has explained the discrepancy as due to discounts and provided recasted books of accounts, and whether the AO was justified in extrapolating a single month's discrepancy to the entire year.
Sections Cited
143(3), 69A, 271AAC, 133A, 132(4), 131
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI & SHRI PARESH M. JOSHI
आदेश/O R D E R
Per B.M. Biyani, A.M.:
Feeling aggrieved by order of first appeal dated 06.02.2024 passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“CIT(A)”] which in turn arises out of assessment-order dated 08.07.2021 passed by learned DCIT, Central Circle-2, Bhopal [“AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year [“AY”] 2018-19, the revenue has filed this appeal on following grounds:
“1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,08,07,260/- made on account of suppression of sales?
Page 1 of 24 AY 2018-19 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 1,08,07,260/- made on account of suppression of sales, without appreciating that the same was surrendered by partner of the assessee firm in his statement recorded during survey proceedings when he failed to explain the transactions evident in daily sales sheets which were impounded during survey? 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in accepting the version of the assessee, that difference in the sales was on account of discounts given and the sales recorded in the books was net of discounts, and accordingly, Ld. CIT(A) further erred in holding that there was no discrepancies in the sales recorded in books and the sales given by survey team, without appreciating that: a. During the survey, difference in sales (recorded in books as compared to that recorded in the (impounded) daily sales sheets, was indeed noted by the survey team and admitted by the assessee? b. Version of the assessee is an afterthought (coming too late) to avoid tax implication since, as per accounting principles, it is to be presumed that the assessee disclosed the correct (gross) sales in its books and any allowable expense has been claimed under relevant head? c. In daily sales sheets, impounded during survey, certain amounts have been mentioned as expenses, but it is nowhere mentioned that these are discounts? d. The assessee has failed to prove that the expenses mentioned in the daily sheets have not already been claimed in the Profit & Loss account? e. Without prejudice to the above, even if it is assumed (without admitting) that sales recorded in the books are net of expenses mentioned in the daily sheet, such surreptitious netting out by assessee raises the presumption that these expenses are inadmissible/ illegal expenses which are ab initio disallowable under the Income Tax Act? 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the addition made by the AO on the basis of statement given during survey is not sustainable in the absence of corroborative evidences, without appreciating that: i The surrender of Rs. 1,08,07,260/- was made by the partner of the assessee firm during survey proceedings, only when impounded daily sales sheets were confronted to him and he failed to explain the transactions made in daily sales sheet? ii. The ratio laid down in Dr. Dinesh Jain (2014) 45 Taxman.com 442 (Bombay), Roshn Lal Sancheti [2023] 150 taxmann.com 227 (Rajasthan) (SLP of assessee dismissed), Bannnalal Jat Constructions P Ltd (2019)
Page 2 of 24 AY 2018-19 106 Taxmann.com 128 (SC) and Pullan-gode Rubber Produce Co. Ltd. vs State of Kerala (1973) 91 ITR 18 (SC)?”
Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in holding that the discrepancy was only for one month and the AO extrapolated the same to 12 months without there being any evidence for the remaining months, without appreciating the surrender of Rs. 1,08,07,260/- was made by the partner of assessee firm during survey proceedings in reply to question no.16 wherein specific question regarding discrepancies noticed in sales for whole year (12 months) was asked?”
This appeal has been filed on 22.04.2024. The registry has reported a delay of 16 days in filing this appeal. The delay has been computed by taking into account the time-gap between ‘date of service’ of impugned order mentioned as ‘06.02.2024’ in Form No. 36 filed by revenue/appellant.
However, with the assistance of Ld. DR for revenue during open hearing, it is found that the correct ‘date of service’ of impugned order upon revenue authorities was ‘22.02.2024’ as reported in the authorization issued by PCIT (Central), Bhopal dated 19.04.2024. Thus, when reckoned from 22.02.2024, there is no delay. Ld. AR for assessee/respondent accepts this position explained by Ld. DR. Hence, the issue of delay is resolved. The appeal is treated as validly filed in time and hearing is proceeded therefore.
The background facts leading to present appeal are such that the assessee is a partnership firm engaged in trading of liquor. A survey u/s 133A was conducted by Income-tax authorities upon assessee on 23.01.2018 falling within previous year 2017-18 relevant to AY 2018-19.
During survey proceedings, the survey authorities compared the books of account maintained by assessee in ‘Tally’ system with the handwritten (manual) sheets of sales of December, 2017 month found/impounded
Page 3 of 24 recorded in ‘Tally’ system was lesser than the sales revealed by handwritten sheets. The survey authorities then extrapolated such figure of lesser sales of December, 2017 month for entire financial year 2017-18 by multiplying by ‘12’ and worked out suppressed sales at Rs. 1,08,07,260/-. Shri Amarjeet Singh Gill, a partner of assessee-firm, accepted such suppressed sales of Rs.
1,08,07,260/- in reply to Q.No. 15/16 as undisclosed income of current year and agreed to pay tax. However, in the return of income filed for AY 2018-19, the assessee declared total income of Rs. 62,55,350/- only without offering the surrendered income. The case of assessee was selected for compulsory scrutiny due to survey. During scrutiny proceedings, the AO asked assessee to explain two aspects, namely (i) the reason of not offering surrendered income for taxation and (ii) the reason of current year’s returned income being less than the total income of immediately preceding AY 2017-18. The assessee filed replies but the AO being unconvinced rejected assessee’s replies and made two-fold additions, namely (i) addition of Rs. 1,08,07,260/- on account of additional income surrendered during survey but not offered for taxation, and (ii) addition of Rs. 10,49,740/- being lesser income declared in current year’s return vis-à-vis the income declared in preceding year’s return [Rs. 62,55,350/- (-) Rs. 73,05,090/-]. Aggrieved, the assessee carried matter in first appeal and made submissions. The CIT(A) considered assessee’s submissions and reversed AO’s action by deleting both additions.
Now, the revenue has come in next appeal before us contesting only one
Page 4 of 24 1,08,07,260/-. The revenue has no grievance against the relief given by CIT(A) in the matter of second addition of Rs. 10,49,740/- and is not in appeal on that issue.
At first, we extract the assessment-order passed by AO making the addition of Rs. 1,08,07,260/-:
“6. During the course of survey proceedings, the assessee offered an amount of Rs. 1,08,07,260/- for taxation as his unexplained money on account of suppression of sale (as discussed in Para 2 of this order). However, assessee has retracted to offer such surrender income in his ITR for the year under consideration. In this regard, the assessee was asked to furnish explanation for retracting the same. 6.1 Counsel of the assessee has furnished reply regarding reason of above said retraction on 16.06.2021. The same is as under- “The assessee has very scant knowledge of accounts and hence under mental pressure and intimidation, he has surrendered the entire amount of Rs. 1,08,07,260/estimated and worked out by the survey team as undisclosed sales/income of F.Y. 2017-18 corresponding to subject AY 2018-19.” 6.2 Since, this retraction was made by the assessee while filing ITR for the year under consideration i.e. after a long gap i.e. 9 months from the date of original statement. In view of reply submitted by the assessee, it is clear that there was no consistency in assessee's reply. His retraction from the surrendered income is nothing but an afterthought with a purpose to avoid tax payment, on an income, which he could not substantiate during the course of survey. An admission is an extremely important piece of evidence and surrender made during survey proceedings, has evidentiary value. Reliance is placed on the judgment of Hon’ble Bombay high court in the case of Dr. Dinesh Jain Vis, Income Tax Officer 11(2) Mumbai [2014] 45 Taxman.com 442 Bombay and in other case of Pr. CIT Vs. RoshanLal Sancheti (Rajasthan High Court). 6.3 Hence, retraction after a sufficient long gap or point of time loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 133A(3)(iii), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by Page 5 of 24 AY 2018-19 external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a statement is recorded on oath, such a statement can be treated as a strong evidence assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time whereas assessee failed to do the same. 6.4 On perusal of the above findings, it is clearly evident that the retraction was made at the stage when the assessment proceedings are being finalized ie. almost after a gap of more than 9 months. Such a so-called retraction in my view is nothing but simply a self-serving statement without any material." If the statement which was made by the assessee at the time of survey was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. Reliance is placed on judgment of the Supreme Court in Pullan-gode Rubber Produce Co. Ltd. v. State of Kerala, (1973) 91 ITR 18 (SC) an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. 6.5 In view of the above discussions and findings, I am of the view that income surrendered by the assessee during the course of survey amounting to Rs. 1,08,07,260/- was made on account of suppression of sale, which had resulted in unexplained excess cash which comes under the deeming provision of section 69A of Income Tax Act, 1961. The same amount is added to the returned income. Penalty proceedings u/s 271AAC is initiated against the assessee for such default [Addition Rs. 1,08,07,260/-]” [emphasis supplied] 5. Now, we re-produce the order of first appeal passed by CIT(A) deleting the addition made by AO and giving relief to assessee:
“3.2.2. I have considered the facts of the case, submissions made and the decisions relied upon by the appellant. The appellant is a partnership firm engaged in trading of liquor. A Survey action was carried out at the appellant's premises on 23.01.2018. During the Survey proceedings,
Page 6 of 24 AY 2018-19 statement of Shri Amarjeet Singh Gill, partner, of appellant firm was recorded on oath on 23.01.2018 wherein he declared, in response to reply of question no. 16, a sum of Rs. 1,08,07,260/- as undisclosed income due to suppression of sales, considering the same out of his regular income for the year under consideration. However, this income was not shown by the appellant as additional income while filing return of income for the year under consideration. 3.2.3. I find that during Survey proceedings, manual daily stock statement sheets (daily sheets) of only one month for December, 2017 were found. These daily sheets contained mainly the followings: (i) Daily stock position - Opening and Closing (ii)Daily cash sales (iii)Daily cash discounts on sales (iv) Daily cash expenses (admissible as well as inadmissible) (v) Daily cash balance The Survey team totalled up and compared sales shown in the manual daily sheets of December, 2017 of various retail outlets with the sales accounted for in books of accounts in Tally and observed that sales have been suppressed in the books of accounts. They extrapolated the difference in sales by considering one month sales of December 2017 noted on the manual daily sheets and estimated suppressed sales of twelve months and determined difference on account of suppressed sales of Rs. 1,08,07,260/-, as above, and the same was surrendered by the appellant but this income was not shown as additional income while filing return. Thus, the surrender of income was based on the allegation of suppressed sales only. 3.2.4. The appellant explained during appellate proceedings that the surrendered amount was not included in the returned income because there was gross factual mistake in the surrendered statement/income. He submitted that it was stated to the Survey team that sales were recorded net of discount and other expenses in the books of accounts and hence were less in comparison to daily sheets impounded by the Deptt. during the survey. It was also explained that in the very daily sheets impounded, the figure of discount and other expenses alongwith total gross sales were mentioned separately. The Survey team wrongly took only the figure of daily gross sales and totalled it up but ignored the details of commission and other expenses noted in the very sheets itself. It was also explained that on the basis of just one month data of December 2017 found during survey, no extrapolation for entire year could be done. The appellant vehemently argued that they recasted the books of accounts of entire year and accounted for sales and expenses noted on the daily sheets separately. These recasted & audited books of accounts were produced before the Ld. AO during assessment proceedings who verified the entire Sales, expenses and Page 7 of 24 AY 2018-19 books of accounts and no adverse findings on account of suppressed sales, was given by the AO in his assessment order. It was hence contended by the appellant that simply because the appellant surrendered additional income on account of suppressed sales during Survey, no addition was warranted and the same needs to be deleted. 3.2.5. I have examined the facts of the case and have perused the assessment order and also the detailed submissions of the appellant. During the course of the survey proceedings, discrepancies were noticed in the sales figures for December 2017 from the outlets of the appellant at Baktara and Obaidullaganj. The suppressed sales were then computed by the survey team in the following manner:-
(i) Barkheda, Country Liquor outlet:
Sales as per daily sheets of December, 2017 29,06,015/- Less: Sales as per Books of Accounts of 22,77,950/- December, 2017 Difference of December, 2017 Month 6,28,065/- Difference of Twelve months Rs. 6,28,065/- X 12 months 75,35,780/- (ii) Obaidullanganj, Foreign Liquor outlet:
Sales as per daily sheets of December, 2017 62,77,810/- Less: Sales as per Books of Accounts of 60,03,350/- December, 2017 Difference of December, 2017 Month Rs. 2,74,460/- Difference of Twelve months = Rs. 2,74,460/- X 12 32,70,480/- Total Difference Rs. 1,08,07,260/-
The appellant contended that the difference in the sales figure was on account of discounts given and once the same was added back there was no discrepancy in the sales figure recorded in the books and the figure given by the survey team. The recasted and audited books of account were duly produced before the AO during the assessment proceedings and the same were also examined by me. The appellant's contention is correct that the sale figure being quoted by the survey team for December 2017 was net of discounts and once the same were added back the discrepancy disappeared. It is further seen that though the alleged discrepancy was only for one month, the AO extrapolated the same set of facts to a period of 12 months without there being any evidence for the months apart from December 2017. The AO was not justified in doing so.
Page 8 of 24 AY 2018-19 Further, the addition made by the AO on the basis of a statement during the course of survey is not sustainable in the absence of corroborative evidence. 3.2.6. In view of above factual matrix, the AO is directed to delete the addition of Rs. 1,08,07,260/- made on account of suppression of sales. The appeal on this ground is allowed.” [emphasis supplied] 6. Before us, Ld. DR for revenue/appellant made submissions and defended the assessment-order passed by AO and opposed the impugned order passed by CIT(A). Per contra, Ld. AR for assessee/respondent filed Written-Synopsis and Paper-Books and also made oral submissions opposing the assessment made by AO and defending the order of first- appeal passed by Ld. CIT(A).
Ld. DR for revenue/appellant raised following contentions:
(i) That the CIT(A) has not discussed seized material in his order and not given any corroboration.
(ii) That the CIT(A) has mentioned “Daily cash expenses (admissible as well as inadmissible)” in Para No. 3.2.3(iv) of his order but still not calculated “inadmissible” portion.
(iii) That the AO has rightly observed that the assessee’s retraction after 9 months was not acceptable. The CIT(A) has not given any finding qua this point.
On the other hand, Ld. AR for assessee/respondent filed following Written-Synopsis:
Page 9 of 24 Page 10 of 24 Page 11 of 24 Page 12 of 24 Page 13 of 24 Page 14 of 24
Ld. AR iterated his submissions made in Written-Synopsis re- produced above. He made a particular emphasis to following points:
(i) He drew us the Q.No. 15 raised by survey authorities and reply thereto made by assessee’s partner Shri Amarjeet Singh Gill, reading as under (Reply is wrongly numbered as “16” in statements; the correct number shall be “15”):
“�. 15 - जैसा�कआपनेपहलेबताया�कआपकेपास�मशःबरखेडा- देशीम�दरादुकान एवंओबेदु�लागंज- �वदेशीम�दरादुकान�ह�।आपके��त�ठानम�बरखेडा- देशीम�दरादुकान म�Tally बह�खात�केअनुसारमाह�दसंबर2017 क�कुल�ब���. 22,77,950/- दशा�यीगई है।जब�कइसीम�दरादुकानक�ह�त�ल�खत(manual) बह�जो�कBI - 8 म�दशा�येगये ह�, म�माह�दसंबर2017 म�कुल�ब���. 29,06,015/- �दखाईगईहै।अतःदोन�का�मलान करनेपरआपके�हसाबसेउ�तमाहम�आपनेकुल�ब���. 6,28,065/- कमदशा�ईहै। इसी�कारऔबेदु�लागंज- �वदेशीम�दरादुकानम�माह�दसंबर2017 क�कुल�ब�� Tally केअनुसार�. 60,03,350/- दशा�यीगईहै।एवंइसीमाहम�ह�त�ल�खत(manual)
Page 15 of 24 AY 2018-19 बह�(BI - 6) केअनुसार�ब��रा�श�. 62,77,810/- दशा�यीगईहै।अतःदोन�का�मलान करनेपरपाया�कआपनेमाह�दसंबर- 2017 म�कुल�ब���. 2,74,460/- कमदशा�यीहै। चूं�कआपनेअपनेदोन�म�दरादुकान�म�माह�दसंबर-2017 म�जो�ब��कमदशा�यी हैउसकेआधारपरपूरेवष�भर(12 माह) म��न�नानुसारआपने�व�यक�रा�श�छपाईहै:- बरखेडादेशीम�दरा 1. 628065/-x12 = 75,36,780/- दुकान(CL) औबेदु�लागंज�वदेशीम�दरा 2. 272540/-x12 = 32,70,480/- दुकान(FL) ------------------------ कुल �. 1,08,07,260/-
अतः�पछलेपृ�ठपरदशा�येउपरो�तचाट�केअनुसारआपनेवष�केदौरानकुल�. 1,08,07,260/- �ब��क�रा�शको�छपायाहै।अतः, �य�नआयकरअ�ध�नयमक�धारा केअधीन�छपाईगईकुल�ब���. 1,08,07,260/- कोचालू�व�वष�क�अघो�षतआय मानीजाएएवं�नयमानुसारकरवसूलाजाएॽ उ�र16 - जीहाँ।मेरे�यापारका�व�पइस�कारहै�कहमारेहैवी�ड�काऊँटएवंअ�य खच�बहुतअ�धकहोतेहैिज�ह��क�ह�कारणवशब�हय�म�नह�ं�दखायाजासकता। म�इ�ह�अ�यDiscount एवंअ�यअ��यखच�केउपरांत�ब��क�गईहै। Tally A/c इसकारणसे�. 1,08,07,260/- क�कमीआईहै।िजसेम�चालूवष�क��नय�मतआयके अलावाअघो�षतआयके�पम��वीकारकरताहूँएवंइसपरदेयकरकाभुगतानकरनेका आ�वासनदेताहूँ। [emphasis supplied] Referring to above, Ld. AR submitted that in the reply given, the assessee’s partner has instantly and clearly stated to survey authorities that due to his nature/structure of business, heavy discount and other expenses are incurred and that the sales recorded in “Tally” system was ‘net of discount and expenses’. Therefore, the sale recorded in ‘Tally’ books was lesser. Ld. AR submitted that there
That, during 2nd stage of assessment proceedings conducted by AO, (ii) the assessee filed a detailed reply on 16.06.2021 to AO accompanied by “Ledger A/cs of Sales” for the month of December, 2017 and for the entire financial year 2017-18; copy of assessee’s reply is filed at Pages
10 to 20 of Paper-Book. In this reply, the assessee explained the contents of handwritten sheets impounded by department. Futher, the assessee also made a vehement submission corroborating its original explanation made in survey proceeding that the difference in “Tally’ system and handwritten sheets was on account of discount and expenses component. The assessee also submitted that it has re- casted Trading A/c by showing ‘gross sales’ in line with the handwritten sheets and separately shown ‘discount and expenses’ in P&L A/c and by this approach, there remains no unaccounted sales as erroneously assumed by department. The assessee also filed (i) complete books of accounts incorporating sales, discount and expenses, (ii) audited Balance-sheet and P&L A/c, and (iii) IT return and Computation of Income. Ld. AR carried us to Page No. 53 of Paper-Book where audited ‘Trading and P&L A/c’ is placed. Referring to same, he showed that the sales had been shown at gross figure and after deduction of discounts, ‘net sales’ is also shown. Further, the Page 17 of 24 under the heading “Administrative Expenses” and such ‘inadmissible expenses’ have been disallowed also in computing taxable income of assessee; copy of Computation of Total Income is filed at Pages 59-60 of Paper-Book. Thus, the assessee made a sufficient submission before AO to convince that there was no difference in sales, the difference assumed during survey was on account of accounting of sales in ‘Tally” system on net basis. Ld. AR submitted that the AO has acknowledged the reply letter dated 16.06.2021 filed by assessee in Para 6.1 of assessment-order but he has re-produced a small para of assessee’s reply suitable to him without re-producing the vehement submissions made by assessee. Thereafter, in subsequent paras of assessment-order, the AO has, instead of considering valid submissions of assessee, found it convenient to brush aside assessee’s reply by making a simple observation that the retraction was afterthought and given after a long gap of over 9 months. Ld. AR also contended that the AO has proceeded to tax the income surrendered during survey and not given any consideration to the vehement submission made in assessee’s reply; such an approach of AO is not correct. He also submitted that nowhere in assessment- order, the AO has discussed anything wrong or non-acceptable in assessee’s reply. He further contended that the AO has neither
Page 18 of 24 reply of assessee made before him.
(iii) Ld. AR submitted that contrary to AO’s approach, the Ld. CIT(A) has given a proper and judicious consideration to the facts of assessee’s case. Firstly, in Para 3.2.3 of impugned order, the CIT(A) has noted his own finding that the Daily sheets of December, 2017 impounded by survey team contained the details of “Daily cash discounts on sales” and “Daily cash expenses (admissible as well as inadmissible)”.
Secondly, in Para 3.2.5 of impugned order, the CIT(A) has made a finding that the re-casted and audited books were produced before the AO and the same were also examined by him. Finally, Ld. CIT(A) has accepted the assessee/appellant’s contention as correct that the sales figure for December, 2017 was net of discounts and once the same was added back, the discrepancy disappeared. Therefore, the CIT(A) has judiciously considered assessee’s submissions with reference to documents and passed a well-reasoned order; his order must be upheld.
Without prejudice, Ld. AR also made an alternative submission that when the handwritten sheets of December, 2017 month were only found and there was no evidence for any other month, the survey authorities were grossly wrong in making extrapolation for entire year and obtain a wrong confession from assessee’s partner for the entire year as high as Rs.
Page 19 of 24 authorities.
We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. The dispute in present case relates to the income of Rs. 1,08,07,260/- surrendered by partner of assessee-firm during survey proceeding but subsequently not offered in income-tax return, however added by AO while framing scrutiny assessment but deleted by CIT(A) in first appeal. We have re-produced the assessment-order passed by AO as well as the order of first-appeal passed by CIT(A) in earlier part of this order. We have also noted the pleadings made by learned Representatives of both sides as also the material relied by them in earlier part of this order.
On a careful consideration, we find that there had been three stages of proceedings in this case before reaching to ITAT. The 1st stage was the proceeding of survey conducted by authorities wherein the handwritten sheets were found and the authorities countered assessee’s partner for difference in sales recorded in “Tally” system and the figures of sales noted in handwritten documents by means of Q.No. 15 of Statements. In his reply which is recorded by survey authorities, the assessee’s partner immediately explained the reason of difference. He stated that due to the nature/ structure of business, heavy ‘discount and other expenses’ are incurred and that the sales recorded in “Tally” system was ‘net of discount and expenses’
Page 20 of 24 conducted by AO. During proceeding before AO, the assessee filed a detailed reply dated 16.06.2021 which stands acknowledged by AO in Para 6.1 of assessment-order. The copy of assessee’s reply-letter is also filed in Paper- Book at Pages 10 to 20. In this reply, the assessee explained to AO, not only the contents of handwritten sheets impounded by department but also substantiated original explanation made in survey proceeding that the difference in ‘Tally’ system and handwritten sheets was on account of ‘discount and expenses’ component. The assessee also submitted that it has re-casted Trading A/c by showing ‘gross sales’ in line with the handwritten sheets and separately shown ‘discount and expenses’ in Trading and P&L A/c and by this approach, there remained no unaccounted sales as erroneously assumed by department. The assessee also filed (i) complete books of accounts incorporating sales, discount and expenses, (ii) audited Balance-sheet and P&L A/c, and (iii) IT return and Computation of Income.
The copy of audited ‘Trading and P&L A/c’ is also available in Paper-Book which shows sales at ‘gross’ figure, deduction of ‘discounts’ and ‘net sales’.
Further, the ‘inadmissible expenses’ are also debited in P&L A/c under the heading “Administrative Expenses” and such ‘inadmissible expenses’ have been disallowed also in computing taxable income of assessee. Thus, the assessee made a substantial reply before AO during assessment-proceeding but on perusal of assessment-order, we find a merit in submission of Ld. AR that the AO has only brushed aside assessee’s reply on the footing of time
Page 21 of 24 submission made by assessee in reply-letter dated 16.06.2021 was very much in line with the reply given to Q.No. 15 of the Statement wherein assessee’s partner categorically stated that the sales in tally system was net of discount and expenses. There is no inconsistency in the reply given by assessee’s partner to Q.No. 15 of statements raised by survey authorities and the submission subsequently made before AO in reply-letter dated 16.06.2021. Notably, the AO has himself noted in Para 6.3 of assessment- order “….Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under section 133A(3)(iii), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies.” The submission made by assessee in reply dated 16.06.2021 was a step to substantiate the true and correct submission earlier made in survey. Therefore, it cannot be said that any ‘malafide’ or ‘afterthought’ was involved in assessee’s reply dated 16.06.2021. The 3rd stage of proceeding was by way of first-appeal before CIT(A). The order passed by CIT(A) clearly shows that he has gone into the submissions made by assessee before AO and repeated before him during appeal proceedings. The CIT(A) has made categorical findings with regard to the factual aspects of assessee and the books of accounts and noted his conclusion in these words “The recasted and audited books of account were duly produced before the AO during the assessment proceedings and the Page 22 of 24 AY 2018-19 same were also examined by me. The appellant's contention is correct that the sale figure being quoted by the survey team for December 2017 was net of discounts and once the same were added back the discrepancy disappeared.” We find that the CIT(A) has given concrete conclusion in this regard and we do not find any valid reason to upset his findings/conclusion. Consequently, the order passed by CIT(A) does not require any interference from us, the same is hereby upheld and the revenue’s appeal is dismissed being devoid of any merit.
Since we have approved the order of CIT(A) deleting the entire addition of Rs. 1,08,07,260/- made by AO, the alternative claim made by Ld. AR against extrapolation for entire year done by authorities/AO, as discussed in Para 10 above, is not required to be dealt at this stage. The same is kept open, unadjudicated.
Resultantly, this appeal of revenue is dismissed.
Order pronounced in open court on 12/09/2025