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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D.KARUNAKARA RAO, AM & SHRI VIKAS AWASTHY, JM
आदेश आदेश / ORDER आदेश आदेश
PER D. KARUNAKARA RAO, AM :
This is the appeal filed by the assessee against the order of CIT(A)-2, Kolhapur, dated 15-06-2017 for the Assessment Year 2007-08.
Grounds raised by the assessee are extracted here as under :
“1. Ld.CIT(A)-2 erred in law in confirming the addition of Rs.19,02,040/- on account of excess stock merely on the basis of forced surrender obtained through so called forged and unreliable stock statements and tentative trading account etc. shown to be prepared during the so called unlawful, arbitrary, unreliable and forced survey proceedings and hence, entire survey proceeding is liable to be held unlawful and unreliable and addition is liable to be quashed in it’s entirely. Ld. CIT(A)-2 also erred in law in relying over an incomplete, estimated and imaginary stock statement which was filed with the bank.
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Ld.CIT(A)-2 erred in law in confirming the addition of Rs.2,07,880/- on account of excess cash merely on the basis of forged surrender obtained through so called unlawful, arbitrary unreliable and forced survey proceedings and without considering/appreciating the income/sources and submissions of the appellant and payment of advance tax and in presuming that appellant had zero cash balance and did not maintain books of accounts.
Ld. CIT(A)-2 erred in law in confirming the imaginary addition of Rs.92,991/- (Rs.1,60,964 – Rs.67,973) without providing any opportunity to cross examine the persons on which and on whose information, Ld. AO relied and made the addition.
Ld.CIT(A)-2 erred in law by confirming the disallowance of Rs.22,525/- u/s.43B which is contrary to provisions of sec.44AF.
Ld.CIT(A)-2 erred in law by confirming the arbitrary and imaginary addition of Rs.4,000/- on account of estimated interest.
Entire appeal order should be quashed as Ld.CIT(A)-2, Kolhapur had no jurisdiction over the appellant and no opportunity of hearing was provided if there was any change in incumbent of office as nothing was informed to the appellant.
Entire assessment order should be quashed as it is the result of an unlawful survey proceedings.”
Before us, Ld. Counsel for the assessee fairly submitted that
Ground Nos. 3 to 5 are not pressed. Accordingly, the said grounds are
dismissed as ‘not pressed’ in view of smallness of the additions. Ground
Nos. 6 and 7 are general in nature and therefore the said grounds are
dismissed. That leaves Ground Nos. 1 and 2 for adjudication.
Briefly stated relevant facts of the case and the issues raised in
Ground Nos. 1 and 2 include that the assessee is an individual and is
engaged in the sale of ply boards and hardware items on retail basis.
Assessee filed the return of income on 23-10-2007 declaring total income
at NIL. There was survey action in this case u/s.133A of the Act from
05-03-2007 to 07-03-2007. During the survey, the discrepancy of (1)
excess stock amounting to Rs.19,02,040/- and (2) excess cash of
Rs.2,07,880/- aggregating to Rs.21,09,920/- were placed before the
assessee. Statement of the concerned person was recorded in this regard
ITA No.1780/PUN/2017 Ramavatar Shivdayal Bhutada
on 05-03-2007. During the survey proceedings, assessee offered the said
sum of Rs.21,09,920/- on account of excess stock and excess cash as an
additional income for the year under consideration. With these
background facts, Ground Nos. 1 and 2 are taken up for adjudication in
the following paragraphs.
Ground Nos. 1 and 2 relates to the addition made by the AO on
account of excess stock and excess cash. In the First Appellate
proceedings, the CIT(A) confirmed the said additions vide the discussion
given in Para Nos. 5.1 and 5.2 of his order. For the sake of completeness,
the said paras are extracted here as under :
“5.1 Ground 4: This is against the addition towards excess stock. The appellant has stated through his written submission that the AO has made the addition towards excess stock found on three premises viz. (a) on the basis of the statement recorded from the appellant, (b) the false and fabricated inventory of stock & (c) comparison with the bank statement. A perusal of the submission of the appellant shows that he is merely making allegations of malafide against the AO and the survey team. There is no evidence whatsoever to show that the stock inventory was either prepared behind the back of the appellant or prepared in the IT Office or anywhere other than the business premises of the appellant. I find that the appellant himself has indicated the rate applicable to each item of stock inventorized and also certified the stock inventory. I am therefore unable to appreciate the allegation of the appellant that the stock inventory itself is fabricated and false. I also find that the AO has not merely relied on the statement of the appellant recorded during survey, but has based himself on the stock inventory found at the time of the survey. Be that as it may, I find from the submissions that the appellant has nothing to say about the source of the excess stock admittedly found and certified by him during survey. He prefers to make unsubstantiated allegations against the AO and the survey team. I am of the opinion that the facts regarding excess stock remain uncontroverted and therefore confirm the addition of Rs 19,02,040 made by the AO. Ground 4 is dismissed. 5.2 Ground 5: This is against the addition towards excess cash of Rs.2,07,880. Once again I find from the submissions of the appellant that there is no explanation on merits about the excess cash found, apart from making allegations against the AO and the survey party. The AO has reasoned this addition properly in the assessment order. As per the appellants own admission, no books of accounts were maintained and therefore there is no case for cash as per books. The appellant did not have any explanation for the source for the source of the actual cash found and certified as such by him. The facts are therefore uncontroverted and I therefore confirm the addition of Rs.2,07,880/- towards unexplained cash found at the time of survey. Ground 5 is dismissed.”
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During the proceedings before us, on the issue of excess cash of
Rs.2,07,880/-, Ld. Counsel for the assessee submitted that the excess
cash is not correct. However, no argument worth consideration is made.
However, the Ld. Counsel relied on the written submissions made before
us.
On hearing the parties and on perusal of the written submissions on
this issue, we are of the opinion that the addition on account of excess
cash is required to be confirmed in toto. No case is made out by the Ld.
Counsel for the assessee that there is any mistake in computing the
excess cash. Accordingly, Ground No.2 raised by the assessee is
dismissed.
Regarding the issue of excess stock, raised vide Ground No.1, Ld.
Counsel for the assessee brought our attention to the entire stock
statement, copy of which is placed from page 53 onwards till page 86 of
the paper book. According to the contents on Page 52 of the paper book,
the total stock is worth Rs.54,65,570/-, Gross Profit is 24.50%, Stock at
cost price is Rs.41,26,505/-, Stock as per tentative Trading A/c. is
Rs.22,24,465/- and finally the difference of excess stock is arrived at
Rs.19,02,040/-. In this connection, Ld. Counsel for the assessee
submitted that the said inventory suffers from inconsistencies and
credibility. To demonstrate the same, Ld. Counsel highlighted the
interpolations/corrections appearing in pages 55, 57, 59, 60, 63, 67, 68,
73, 74, 76, 77, 78, 79, 82, 83, 84 and 85 and submitted that the figures
are not reconcilable and not credible. Further, bringing our attention to
the stock statement made for bank loan purpose, a copy annexed to the
assessment order, Ld. Counsel submitted that the statements given to the
bank authorities for availing higher loan was considered as sacrosanct
5 ITA No.1780/PUN/2017 Ramavatar Shivdayal Bhutada
while making addition. Further, he also submitted that the items
appearing in the said statement given to the bank authorities is no way in
sync with the inventory of stock made by the survey team during the
survey action. Considering the same, Ld. Counsel mentioned that the
addition of Rs.19,02,040/- made by the AO and confirmed by the AO
requires downward revision. When Bench raised the issue about the
likely relief the assessee is entitled to on this account for the discrepancies
identified by the Ld. Counsel before us on adhoc basis, Ld. Counsel
mentioned that the relief should be to the tune of around 50% of the
addition of Rs.19,02,040/-.
On the other hand, Ld. DR for the Revenue relied heavily on the
orders of the AO/CIT(A) and also the inventory of stock taken by the
survey team. However, when the Bench pointed out the facts and
circumstances which led to the overwritings, corrections, lack of
correlation between the inventory vs. The statement given by the assessee
to the bank authorities for availing higher loans, Ld. DR fairly relied on
the orders of the AO/CIT(A) on this issue.
We heard both the sides and perused the orders of the Revenue so
far as the addition on account of discrepancy in stock is concerned. A
perusal of the inventory furnished by the assessee in the paper book
suggest that the inventory is full of corrections, overwritings etc. There
are no counter signatures by the survey team wherever such corrections
are made or interpolations are done. Thus, the contents of the inventory
made by the survey team suffer from the credibility. It is the allegation of
the assessee, although unsubstantiated, that the inventories were made at
Aaykar Bhavan and created sufficient doubt about the correctness of the
inventory and also the procedure laid down in this regard. Considering
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the same, to bring the litigation on this issue to the conclusion, as
advocated by the Ld. Counsel for the assessee, we are of the opinion that
making addition of Rs.10 lakhs on this account of excess stock should
meet the ends of justice. We, therefore, direct the AO to grant the relief of
Rs.9,02,040/-. Ground No. 1 raised by the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced on 24th day of August, 2018.
Sd/- Sd/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) �याियक �याियक सद�य �याियक �याियक सद�य सद�य /JUDICIAL MEMBER लेखा सद�य लेखा लेखा सद�य लेखा सद�य सद�य / ACCOUNTANT MEMBER सद�य
पुणे Pune; �दनांक Dated : 24th August, 2018 सतीश आदेश आदेश क� आदेश आदेश क� क� �ितिलिप क� �ितिलिप �ितिलिप अ�ेिषत �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order forwarded to : अ�ेिषत
अपीलाथ� / The Appellant 1. ��यथ� / The Respondent 2. 3. The CIT(A)-2, Kolhapur 4. The Pr.CIT-2, Kolhapur िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, “SMC Bench” 5. Pune; गाड� फाईल / Guard file. 6.
आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार
स�यािपत �ित //True Copy// Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune