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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy]
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘SMC’ BENCH, KOLKATA [Before Sri J. Sudhakar Reddy, Accountant Member] Assessment Year: 2010-11 Sri Dilip Kumar Seraogi HUF…..……………………...……………………..……….Appellant 134, Salkia School Road Sukhi Sansor, Block-E Flat No. 218, Salkia Howrah – 711 106 [PAN : AHHPD 7072 M] Income Tax Officer, Ward No.-48(4), Kolkata…..…………….…….……...Respondent 3, Government Place (W) Kolkata – 700 001 Appearances by: None, appeared on behalf of the assessee. Shri Robin Choudhury, Addl. CIT, DR appearing on behalf of the Revenue. Date of concluding the hearing : February 7th, 2018 Date of pronouncing the order : March 9th, 2018 O R D E R Per J. Sudhakar Reddy :-
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-14, Kolkata, (hereinafter the ‘ld. CIT (A)’), passed u/s 250 of the Income Tax Act, 1961 (the ‘Act’), dt. 31/05/2017.
None appeared on behalf of the assessee at the time of hearing. Written submissions were filed along with a paper book. A request was made to the Bench by the person present on behalf of the assessee that the appeal be disposed off based on the written submissions and the papers filed.
3. The assessee is a HUF and is in the business of wholesale dealing in cloth items. He filed its return of income on 20/08/2011, declaring total income at Rs.8,25,828/-. Subsequently, it filed a revised return on 22/08/2011 and yet another revised return on 21/12/2011. The last revised return filed on 21/12/2011, was processed u/s 143(1) of the Act, 2 Assessment Year: 2010-11 Sri Dilip Kumar Seraogi HUF on 01/02/2012. A survey u/s 133A of the Act, was conducted on 15/03/2011, in the business premises of the assessee. During the course of survey, the Assessing Officer alleged that the stock which was physically found, was valued at cost price, which comes to Rs.98,87,810/- and that as per the accounts of the assessee, as on 15/03/2011, the closing stock was Rs.79,77,805/-. Hence, he held that there was under statement of closing stock to the tune of Rs.19,10,005/-(Rs.98,87,810 – Rs. 79,77,805). A statement was recorded from Shri Dilip Kumar Seraogi, karta of the HUF and as per the Assessing Officer he accepted the discrepancy in response to the question no.
The Assessing Officer records that he also expressed no objection regarding stock taking done by the department and agreed to disclose the excess stock as undisclosed income. It is found that in response to summons u/s 131, the assessee in reply to the question no. 3 & 4, stated as follows:- “Q.3. As per your computerized accounting system generated final accounts as on 15/03/2011, i.e. on the date of Survey u/s.133A, the closing stock of your business stood at Rs. 79,77,805/- but, however, from the inventory of closing stock taken physically by the departmental officials, it was valued at cost price at Rs.98,87,810/-. Therefore, there was a clear discrepancy of Rs. 19,10,005/-. Please explain about such discrepancy. Ans. Yes, I accept this discrepancy as understatement of closing stock and offer the same for taxation. Q.4. Do you agree with the method applied by the departmental officials for stock taking? Ans. Yes, I agree.”
3.1. At the time of filing of return, the assessee did not offer this alleged undisclosed stock as income. On a query made by the Assessing Officer, he stated as follows:- “Most respectfully I would like to inform you that I received your above letter asking for explanation regarding difference in closing stock. Please note that our accountant was out of state as on the date of Survey (15/03/2011) and books of accounts were incomplete and the same was informed to survey persons, and you have taken printout on the date of survey on an estimate basis as per your valuation of Rs. 79,77,805/- from my system. But the closing stock was actually valued for Rs. 98,07,259.75 as per the entry one my accountant, after completion of the books of accounts as on the date of survey. Hence, valuation done by your survey persons on the date of survey on an estimate basis for Rs.98,87,810/- should not be relied upon and valuation should be relied on actual figures for Rs.98,07,259.75. Hope above explanation will satisfy you.”
3 Assessment Year: 2010-11 Sri Dilip Kumar Seraogi HUF 4. The assessee submitted the copies of invoices, evidencing purchase of material and explained the differences. The Assessing Officer rejected this explanation of the assessee and made the addition based on the statement given on oath by the assessee recorded u/s 131 of the Act. Aggrieved the assessee carried the matter in appeal without success.
Further aggrieved, the assessee is before us. As already stated the assessee has filed written submissions before us.
The ld. D/R submitted that the assessee had agreed to the physical stock taking by the revenue officials and has also agreed that there is a variation in closing stock figures during the course of survey and under those circumstances it is wrong on part of the assessee to have retracted the statement, without any basis. Referring to the various invoices and reconciliation statement filed by the assessee, he submitted that the payments for these invoices were made by way of a common cheque, and that these invoices cannot be relied upon for this reason. On a query from the bench as to whether an addition can be made simply based on a statement recorded during survey, especially when the same is retracted, without verifying the reconciliation statement submitted by the assessee and without rebutting the various documents filed by the assessee in support of the purchases made etc., the ld. D/R, though not leaving his ground, submitted that it would have been better if the Assessing Officer dealt with the contentions of the assessee on merits. Nevertheless, he argued that purchases have been made pre-dominantly from one firm Sarada Saree Creations, which has huge outstanding payable from the assessee and hence these purchases are doubtful and hence the reconciliation submitted by the assessee is to be rejected. 6.1. In my view, it is well settled that addition cannot be made merely based on a statement recorded and without any corroborating evidence specifically when the statement is retracted. Admittedly, there were no up to date books of accounts found during the course of survey. The books of account were incomplete. While so, we do not understand as to how the Assessing Officer arrived at the book value of the stock when the books of account itself are incomplete. The CBDT has issued circulars directing the Assessing Officers to make additions based on 4 Assessment Year: 2010-11 Sri Dilip Kumar Seraogi HUF evidences found during the course of search and surveys, and not based on statements. This has not been done in this case.
6.2. I am convinced that the explanation given by the assessee. The reconciliation statement of stock given by the assessee has not been rejected or adversely viewed by the Assessing Officer. The ld. D/R cannot make out a new cone and has to only support the finding of the Assessing Officer The books of the assessee have been audited, and based on these audited books, there is not difference in stock valuation on the date of survey. Hence I delete the addition made on account of undisclosed stock and allow Ground No. 1 of the assessee.
Ground No. 2, is against the addition of Rs.56,042/-, on account of difference in sundry debtors. 7.1. The assessee submitted a reconciliation statement where it is explained that there were goods returned in the case of these parties, The difference in account balances were explained. The Assessing Officer should have examined these statements with evidences. Addition cannot be made without such examination or finding contrary evidences. Mere rejection of explanation cannot be countenanced. Accordingly, I delete this addition and allow this ground of the assessee.
In the result, appeal of the assessee is allowed.