M/S. JYOTI SAREE HOUSE ,KOLKATA vs. ACIT, CIRCLE - 44, KOLKATA , KOLKATA

The assessee in the present case is a partnership firm which is engaged in the business of wholesale trading of sarees. A survey under section 133A of the Income Tax Act, 1961 was carried out in the business premises of the assessee on 18.02.2013. During the course of survey, the trading account of the assessee was prepared upto the date of survey on the basis of which the profit of the pre- survey period was derived at Rs. 19,02,743/-. The profit so worked out was accepted by the assessee at the time of survey and the additional advance tax thereon to the tune of Rs. 6,00,000/- was also Assessment Year: 2013-14 M/s. Jyoti Saree House voluntarily paid by the assessee. Thereafter, its return of income for the year under consideration was filed by the assessee firm on 30.09.2013 declaring a total income of Rs. 19,03,990/-. In order to verify that the additional income offered by the assessee at the time of survey had been reflected in the income declared in the return, the relevant details were called for and examined by the A.O. On such examination, he found that the purchases of pre-survey period determined at the time of survey after taking into consideration the purchases recorded in the books of accounts of the assessee as well as unrecorded purchases were to the tune of Rs. 6,02,47,120/- whereas the purchases as shown by the assessee for the pre-survey period as per the books of accounts finally prepared for the year under consideration were Rs. 6,29,59,671/-. The assessee, therefore, was called upon by the A.O. to explain the difference of Rs. 27,11,802/- in the purchases of pre-survey period. In reply, the following explanation was offered by the assessee: “At the time of survey all the purchases and other books were completed upto 20 days ago. During the intervening period many bills were received and were available in the file of the assessee. A list of the available bills was prepared and taken as ‘unrecorded purchases’ for the purpose of preparing estimated trading asset” It may also be noted that the survey was conducted from 5 p.m. to 2 a.m. next day. Under the mental pressure, the assessee had given statement at the dead of night regarding the recording of purchases. Later on, the bills pending at the time of survey were received and accounted for. We have prepared a list of such bills as well as a list of bills taken as ‘unrecorded purchase’ at the time of survey. We are enclosing herewith both the list and it may be seen that both the lists are totally exclusive. None of the bills received later was included in the amount of ‘unrecorded purchase’ taken at the time of survey.”

Assessment Year: 2013-14 M/s. Jyoti Saree House 3. The explanation offered by the assessee as above was not found acceptable by the A.O. and he proceeded to disallow the claim of the assessee for purchases of Rs. 27,11,802/- for the following reasons given in the assessment order: (a) The assessee’s contention that ‘later on’ the bills pending at the time of survey were received and accounted for’ is not accepted as during the course of survey operation, a specific query was raised about state of books of account and after updating all the entries of purchase a trading and P&L account was prepared in consultation with Mr. Dilip Kumar Sethi, one of the partners of M/s. Jyoti Saree House, and duly signed by him. Therefore, all the purchases were duly accounted for in the trading and P&L account prepared at the time of survey including unrecorded purchase of Rs. 66,77,404/-. (b) On perusal of your list of ‘purchases before 18.02.2013 not accounted for at the time of survey’, it is found that some of bill dates are as far back as 25.04.2012, 09.07.2012 etc. So your contention that these bills were not received by 18.02.2013 i.e. even after 10 months, therefore not accounted for at the time of survey is not acceptable. (c) At the time of recording of statement of Mr. Dilip Kumar Sethi, one of the partners of M/s. Jyoti Saree House, u/s 133A, he has replied as under: Q: The books of accounts maintained in this premises are completed upto which date? Ans: Sale register is completed upto 01.02.2013 Purchase register is completed upto 28.01.2013 Cash Book is completed upto 05.02.2013 Q: Please go through the recasted trading and P&L account where in the net profit is arrived at Rs. 19,02,743/- after considering purchases. Sales, stock, direct and indirect expenses. Please after your comments regarding the net profit. Ans: To meet up the above liability, I will pay advance tax to the tune of Rs. 6 lakhs within 15th March, 2013. From the above, it is clear that all the purchases were accounted for at the time of survey and there is no question of any purchases remained unaccounted for.

Most of the bills are related to the period of 3-4 months prior to survey.

Most of the bills have been paid through banking channels which may be verified from the bank statement submitted to the A.O. as well as submitted herewith.

All the sellers/creditors are duly verifiable.

If the payments have been made prior to the survey through banking channels to the genuine sellers, genuinity of the bills is lease susceptible.” The Ld. CIT(A) did not find merit in the submissions made by the assessee on this issue for almost the same reasons as given by the A.O. He accordingly confirmed the disallowance made by the A.O. on account of purchases. Aggrieved by the order of the Ld. CIT(A) the assessee has preferred this appeal before the Tribunal.

I have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the learned counsel for the assessee, besides the purchase bills as found Assessment Year: 2013-14 M/s. Jyoti Saree House unrecorded at the time of survey, there were certain bills for the purchases made by the assessee during the pre-survey period that had not been received by the assessee till date of survey. He has submitted that the said bills were received by the assessee from the concerned parties only after the date of survey and the same were duly recorded in the books of accounts of the assessee firm regularly maintained. He has referred to the relevant details of such purchase bills placed on record along with the copies of the said bills and submitted that the said purchases aggregating to Rs. 27,11,802/- were not only made by the assessee firm before the date of survey but even payments against the same to the extent of Rs. 17,04,444/- were made through bank before the date of survey. He has contended that the claim of the assessee for the purchases of Rs. 27,11,802/- thus was duly supported by the relevant documentary evidence in the form of bills, payments through bank etc. and without verifying the same, the authorities below were not justified to disallow the assessee’s claim merely because there was no mention made by the assessee during the course of survey to such purchases. He has contended that the assessee was under stress during the survey period and that was the reason he could not specifically recollect and mention the fact that bills for certain purchases made during the pre- survey period had not been received till the date of survey. I find merit in the contention of the learned counsel for the assessee. Although the learned DR has strongly relied on the orders of the authorities below in support of the revenue’s case on this issue laying emphasis on the fact that the assessee did not point out this relevant aspect of non-receipt bills for the purchases made during the pre- survey period in spite of specific opportunity given during the course