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Income Tax Appellate Tribunal, “C” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-12, Kolkata [in short the ld CIT(A)] in Appeal No. 375/Ld. CIT(A)-12/Kol/Cir-40/2014-15 dated 28.11.2016 against the order passed by the ACIT, Circle-37, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 15.03.2014 for the Assessment Year 2011-12.
The only issue to be decided in this appeal of the revenue is as to whether the ld CITA was justified in deleting the addition made on account of undisclosed purchase of Rs 57,34,905/- in the facts and circumstances of the case.
2 M/s International Book Trust A.Yr. 2011-12 3. The brief facts of this issue are that the assessee is a partnership firm engaged in the business of book trading. A survey operation u/s 133A of the Act was conducted in the business premises of the assessee at No. 54, College Street, Kolkata – 700073 and Godown at 54/6, College Street, Kolkata – 700073 and Office of 8/B, Bhawani Dutta Lane, Kolkata – 700073 on 14.2.2011. The ld AO observed that the books of accounts together with the requisite details and documents as called for were duly produced by the assessee and the same were examined by the ld AO. During the survey proceedings, it was found that the opening stock was reflected at Rs 2,57,14,529/-, purchases reflected at Rs 3,16,78,083/- and sales up to the date of survey reflected at Rs 3,20,68,526/-. Therefore, the closing stock balance as on the date of survey was arrived at Rs 2,53,24,085/-. But during the survey, it was found in physical verification that there was a difference in stock amounting to Rs 57,34,905/-. In the survey proceeding, a question was raised in this regard. One of the partner of the assessee firm replied that “Our establishment is wide in size that I cannot look after entire dealing. But due to mistake some local purchases made during the year has not been entered into the register due to which it has not been accounted for. Therefore I have no alternative way but to offer voluntarily taxation against the diFference in stock and also agreed the value of closing stock of Rs 2,53,24,085/-.” The ld AO accordingly brought the difference in closing stock of Rs 57,34,905/- to tax and added the same to total income based on statement recorded during survey.
Before the ld CITA, it was submitted that the additions under challenge are mainly the fallout of survey that continued over 14th and 15th of February 2011. The whole rigmarole over assessment as the aftermath of the survey is for the fact that the accounts of the assessee fell behind time as the programmer maintaining the computerized accounting had been absent for a long stretch of time from September till mid – November 2010 for serious attack of jaundice. He resumed data feeding on return to duty but was yet to catch up with the lost time by the time the survey intervened. Till 2
3 M/s International Book Trust A.Yr. 2011-12 the date of survey, he could feed data in segments not showing the state of affairs as on the date of survey . So on the date of survey, the full accounts for that date was not available. There is no evidence of actual shortages on any count. The assessee pleaded that exercise of building up the account and the physical verification of stock of books as on the date of survey, despite the wide backlog is claimed to have been accomplished by the survey team in a matter of hours while the strenuous task needed many man-days and knowledge of accounting software as well. It was submitted that as for physical verification of stock , it may be said such exercise in survey, especially in a big book selling establishment, is a patent impossibility. The exercise requires suspension of sale for couple of days with enormous man-hours. It was submitted that such futile impromptu effort for constructing the accounts was of no practical use for the assessment to be made. The assessee stated that the comparative figures as on 14.2.2011 are as under:-
Particulars Figure as per Survey Report Figure appearing in Completed A/c Purchases 3,16,78,083 7,93,38,109 Stock 3,10,58,990 4,72,53,784 Cash (-) 61,38,598 * 4,20,642 * Alleged to be physically found – Rs 3,25,965 The assessee accordingly submitted the fallacies in taking the figures in the survey report which ultimately became the foundation for the addition. It was submitted that the partner of the firm Sri Dipankar Sen, who was present in the premises at the time of survey had given some statement at the time of survey under duress as he was very tired and not in his nerves after attending to survey for two continuous days. It was argued that mere statement could not be the basis of foundation for the addition when no incriminating materials were found to corroborate the statement and especially when the accounts were prepared by the survey team ignoring the primary documents maintained 3
4 M/s International Book Trust A.Yr. 2011-12 by the assessee. It was argued that the statement from Sri Dipankar Sen was extracted from him by psychological pressure, intimidation and duress. The assessee placed reliance on the CBDT Letter in F.No. 286/2/2003/IT(Inv.) dated 11.3.2003 and decision of Hon’ble Madras High Court in the case of CIT vs S Khader Khan reported in (2010) 210 Taxman 246 (Mad). There was absolutely no independent evidence corroborating the statement recorded from the partner. On the contrary, the purchase as per the assessee’s record till date of survey i.e 14.2.2011 was in the sum of Rs 7,93,38,109/- and the sum of Rs 57,34,905/- alleged as undisclosed purchase was more than covered proving the allegation as myth. Again , the actual stock of the day as per the accounts was Rs 4,72,53,784/- as against Rs 3,10,58,990/- taken by the survey team. So there could not be any excess stock on the date of survey as alleged by the survey team. The ld CITA sought for a remand report from the ld AO who in turn had reiterated what has been stated in the assessment order. In the said remand report, the ld AO had placed heavy reliance on the statement recorded from the partner of the assessee firm and had even extracted certain portions of the statement therein.
The ld CITA observed that the addition was made solely based on the statement recorded on the day of survey which is not supported by any corroborative evidences. He observed that in the present case the declaration given by the partner in the statement is devoid of any credible / reliable evidence or material. He observed that the reply to Question No. 6 in which the so called declaration has been made is premature and appears dumb to say the least. The ld CITA placed reliance on the decision of Hon’ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd vs State of Kerala reported in (1973) 91 ITR 18 (SC) wherein it was 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. Both in the post survey proceedings and scrutiny assessment proceedings, detailed explanations were submitted by the assessee which was supported by proper evidences and documents to establish 4
5 M/s International Book Trust A.Yr. 2011-12 why the statement made at the time of survey is not being adhered to. The ld CITA observed that the assessee in the assessment proceedings intimated to the ld AO what are the correct facts and filed evidences in support of its claim. The assessee had supported its contentions based on the entries in the regular books of accouns that were duly audited and submitted before the ld AO. The ld AO categorically agrees that the said books of accounts were examined by him in the assessment proceedings and no adverse remarks were passed on the same by him in his order. The books of accounts submitted by the assessee were not rejected by the ld AO. Accordingly, the ld CITA deleted the addition of Rs 57,34,905/-.
We have heard the rival submissions. The facts and figures that were stated before the ld CITA in the submissions of the assessee pointing out various fallacies in the difference in stock arrived by the survey team, remain undisputed, and hence the same are not reiterated for the sake of brevity. We find that the ld CITA had given a detailed finding which remain uncontroverted by the revenue before us. The ld DR could not produce any contrary evidence on record to prove that the addition has been made other than placing reliance on statement recorded from the partner. We find that the decision of Hon’ble Madras High Court in the case of CIT vs S.Khader Khan Sons in 300 ITR 157 (Mad) has held as under:- “An admission is an extremely important piece of evidence , but it cannot be said that it is conclusive and it is open to the person , who made it, to show it has incorrectly been made and the person, making the statement should be given proper opportunity to show that it does not show the correct state of facts.”
The materials found in the course of survey could not be the basis for making any addition in the assessment. The word “may” used in section 133A(3)(iii) makes it clear that the material collected and statement recorded during the survey u/s 133A are not conclusive piece of evidences by itself. The aforesaid decision was affirmed by the Honourable Supreme Court in CIT , Salem vs S.Khader Khan Sons in Civil Appeal No.
6 M/s International Book Trust A.Yr. 2011-12 13224 of 2008 & 6747 of 2012 dated 20.9.2012 reported in 210 Taxman 248 (SC) , wherein their Lordships of Supreme Court held as under:- “Heard Counsel on both the sides. Leave granted. The civil appeal filed by the department pertains to Assessment Year 2001-02. In view of the concurrent findings of fact, this civil appeal is dismissed. ”
6.1. In view of the aforesaid findings in the facts and circumstances of the case and respectfully following the decision relied upon supra, we find no infirmity in the order of the ld CITA in this regard. Accordingly, the grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 20.06.2018