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Income Tax Appellate Tribunal, BANGALORE BENCH C, BANGALORE
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by assessee its grievance is that AO had made an addition of Rs.5,50,000/- for unaccounted stock of pawned articles and Rs.25,00,000/- for unaccounted sales.
ITA.537/Bang/2016 Page - 2
Facts related to the case are that assessee engaged in the business of jewellery and pawn broking had filed his return for the impugned assessment year declaring income of Rs.19,35,370/-. There was a survey in the premises of the assessee u/s.133A of the Income-tax Act, 1961 (‘the Act’ in short). During the course of survey on 17.01.2008 authorities found that assessee had unaccounted stock of pawned articles of Rs.31,43,251/-.
In the statement recorded from the assessee, it seems he offered an income of Rs.25 lakhs for A. Y. 2008-09 on account of unaccounted stock and Rs.2,50,000/- on account of unaccounted sales. However in the return of income filed for the impugned assessment year assessee declared only Rs.19,50,000/-. Explanation of the assessee was that the sum of Rs.19,50,000/- covered discrepancy noted during the survey. However this was not accepted by the AO. According to him in the statement recorded on 18.02.2008, he had agreed to declare Rs.25,00,000/- and Rs.2,50,000/- as additional income in addition to the regular income for the impugned assessment year. Further as per the AO during the course of assessment proceedings for A. Y 2007-08 also assessee had agreed to declare the above mentioned income in A. Y 2008-09. Thus AO was of the opinion that assessee had not kept his word nor given valid explanation for the ITA.537/Bang/2016 Page - 3 discrepancies found at the time of survey. He made an addition of Rs.8 lakhs [Rs.5,50,000 + Rs.2,50,000].
Appeal of the assessee before the CIT (A) did not meet with any success.
Now before us, Ld. AR submitted that the additions were solely based on statements recorded at the time of survey. Relying on the judgment of Hon’ble Madras High Court in the case of CIT v. Khader Khan Son [(2008) 300 ITR 157], Ld. AR submitted that addition made solely based on the statements recorded during the course of survey would not stand since such statements had no evidentiary value. Ld. AR pointed out that SLP filed by the Department against the said judgment was dismissed on 20.09.2012 and reported as (2013) 352 ITR 480. Further reliance was also placed on Hon’ble Delhi High Court in the case of CIT v.
Dhingra Metal Works [(2010) 328 ITR 384].
Per contra, Ld. DR submitted that the additions were not solely based on the statements recorded u/s.131 of the Act. According to him there were two statements recorded from the assessee. In the second statement also assessee agreed to offer an additional income of Rs.25 lakhs and Rs.2.5 ITA.537/Bang/2016 Page - 4 lakhs. Further as per the Ld. DR assessee could not explain the discrepancy of Rs.31,43,251/- in the stock of gold pawned articles. Thus according to him additions were rightly done by the AO.
I have perused the orders and heard the rival contentions. Assessee has not disputed the contention of the Revenue that there was an unaccounted stock of pawned articles of Rs.31,43,251/- on the date of survey. It is true that statement recorded during the course of survey cannot be relied on for making an addition under the Act. Judgment of Hon’ble Madras High Court in the case of Khader Khan Sons (supra) has laid down this principle and it has been affirmed by the Hon’ble Apex Court as well. However the addition made for the impugned assessment year was not solely based on the statement recorded at the time of survey.
Assessee could not explain the difference in unexplained stock of Rs.31,43,251/-. At the same time, I find that Revenue had not made any effort for getting a reconciliation from the assessee and verifying whether the difference in stock of pawned articles were unaccounted or not. Similar is the case of unaccounted sales. In these circumstances I am of the opinion that the matter requires a verification by the lower authorities. I remit the issue regarding unaccounted pawned articles and unaccounted ITA.537/Bang/2016 Page - 5 sales back to the file of AO for consideration afresh in accordance with law.
In the result, appeal of the assessee is allowed for statistical purpose.
Order pronounced in the open court on 26th day of August, 2016.