SH. LACHHMAN DASS BANSAL,BARNALA vs. DCIT, CENTRAL CIRCLE, PATIALA

That the confirmation of addition is against the facts and circumstances of the case.

That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”

Briefly, the facts of the case were that the assessee was engaged in the business of trading of sanitary items in the name and style of M/s Yuvraj Plastic. A survey under section 133A was carried out on 04/12/2017 at the business premises of the assessee wherein the assessee surrendered a sum of Rs. 34,50,000/- in respect of allged excess cash, alleged excess stock and alleged unexplained advances. Subsequently, the assessee filed retraction letter dt. 18/12/2017 addressed to the AO with a copy of the Addl. CIT, Sangrur

Being aggrieved, the assessee carried the matter in appeal before the ld CIT(A) who has granted part relief to the assessee and against the additions sustained by the ld CIT(A), the assessee is now in appeal before us.

During the course of hearing, the ld AR submitted that there was survey operation at the business premises of the assessee on 04.12.2017 and at the time of survey, the assessee being a senior citizen and suffering from various ailments was at his residence and officials of the department along with the Police went to his residence and asked him to accompany them and took him to his business premises in their car. The survey started at about 11:30 AM and concluded next during early hours of morning on 05.12.2017. 6. It was submitted that under pressure and coercion from the survey team, the assessee surrendered a sum of Rs. 34,50,000/- on account of excess cash of Rs. 9,25,000/-, excess stock of Rs. 2,90,000/- and towards advances of Rs. 22,35,000/-Copy of the alleged inventory of cash is placed at page 77 of the Paper Book and the statement of the assessee has been placed at pages 78 to 87 of the Paper Book and the list of the so called advances have been placed at pages 88 to 93 of the Paper Book.

It was submitted that the assessee was under great shock and mental agony and could not get out of the shock for few days, being a senior citizen and also suffering from various ailments and, thereafter, he wrote a letter to the Assessing Officer with a copy to the Addl. Commissioner of Income Tax, Sangrur Range, Sangrur retracting the surrender so made by him during the course of survey and explaining in detail as to how the surrender was extracted under pressure, coercion and threatening attitude of the department officials. A copy of the letter is placed at paper book pages 28 to 31 of Paper Book alongwith that an affidavit duly attested of the assessee was also filed and this letter was filed within 14 days of the survey i.e. immediately after the assessee recovered from the shock of survey.

It was submitted that it is also a matter of record that after the receipt of letter, there was no communication from the side of the department contradicting the facts as mentioned in the retraction letter and, thus, the contents of the affidavit have not been rebutted even in the assessment order rather accepted by the department. It was stated by the assessee that nothing objectionable was found regarding the sales and purchases outside the books of accounts and also stated that there is no difference of the stock and cash and volunteered that the stock may be counted and verified again and it was also stated that the stock was not counted /valued fully and the excess stock have been arrived at only by way of guess work and further, the stock consisted of very small parts and could not have been counted within the time frame work during which the departmental officials were there at the business premises and at page 31, the request was made specifically about the retraction of offer of surrender.

It was submitted that the assessee thereafter filed his return of income as per audited books of accounts on 26.09.2018 and no offer of surrender was made while filing the return of income. Thereafter, a formal notice u/s 143(2) was issued vide notice, dated 23.09.2019 by the Assessing Officer, and nothing was asked for. Thereafter, it was intimated that the case has been transferred to Central Circle, Patiala vide notice, dated 21.10.20202. The assessee also requested vide letter, dated 04.11.2020 for copies of the statements recorded during survey, stock list as drawn and other documents. Thereafter, for the first time after more than 3 years, the notice was received from the Assessing Officer, Central Circle, Patiala, and the request was made by the assessee earlier also and again for certain documents vide communication, dated 04.11.2020 and such impounded documents during survey alongwith other records of the survey was received by the assessee on 19.02.2021. 10. Thereafter, the first questionnaire dated 17.02.2021 was issued to the assessee as per page 43 to 49 of paperbook and the relevant queries relating to survey are at pages 48 to 49 of the Paper Book. In response, a detailed reply was submitted alongwith various details. The relevant replies have been given contending that even the alleged advances/notings, the officials of the department were threatening the assessee's son for higher surrender and such notings has no link or connection with the business of the assessee and even the identity of those alleged persons is not verifiable and there are no signatures of the parties concerned and they are fake entries not connected with the business of the assessee. Thereafter, another letter was submitted to reiterate the same facts and particularly, the fact that wrong surrender of the stock have been made by taking the opening stock as on 01.04.2017 as closing stock on the day of survey i.e. on 04.12.2017 and it was pointed out that, it proves the manner of conducting the survey and the retraction by the assessee, thus, stands proved as mentioned in the retraction letter. Alongwith that, the assessee submitted the correct valuation of stocks as physically counted on the basis of items noticed during survey and correct valuation of stock having the same

It was submitted that the Ld. Assessing Officer thereafter issued a show cause notice, and accepted the contention of the assessee that the stock was wrongly taken at Rs. 2,90,000/- being excess stock and show caused that why the addition of Rs. 43,10,635/- may not be treated as unexplained excess stock (Rs. 1,08,84,989 stock alleged counted at inflated rate during survey, minus stock as per corrected trading account at Rs.65,74,354/-) and further, it was stated that since the assessee had appended his signatures on the physical verification of stock and, thus, the quantity and the valuation has correctly been taken at Rs. 1,08,84,989/-.

It was submitted that in response, the assessee filed a detailed reply, contending the various sequence of events that the documents pertaining to survey i.e. stock list and others were provided on 19.02.2021 and immediately, thereafter, the assessee had pointed out the serious mistakes by arriving at alleged excess stock of Rs. 2,90,000/- and also sought to get verification/valuation of the stock items drawn at the time of survey and which was not done and assessee further pointed out that for the sake of argument, the valuation has been made of same quantity as noted during survey, (though certain stock was not noted) and all such purchase bills had been submitted and also stated that the sufficient time was available for the purpose of such verification and particularly at page 71, it has been stated that acceptance of part mistake and not accepting the other mistakes on the basis of similar facts and circumstances, is denial of principles of natural justice, but nothing was heard from the Assessing Officer in this regard and he choose to remain silent.

It was submitted that all such facts have been given in the written submissions before the Ld. CIT(A) starting from page 5 of the sequence of assessment proceedings upto page 14 of the CIT(A) order and number of case laws have been submitted to the CIT(A) on the issue of retraction of the Juri ictional Bench of the ITAT, Chandigarh Benches and other case laws, even of the Madras High Court in the case of S. Khadar Khan & Sons, reported in 300 ITR 157, which has been approved by the Hon'ble Apex Court that no evidentiary value can been attached to the statement recorded during survey and further on retraction, please refer to page 10 to page 12 of the order of Ld. CIT(A). Further, the submissions were made about the contradictory stand adopted by the Assessing Officer that, wherever it suited the Assessing Officer, he took the figures as provided by the assessee, as in the case of stocks and while for others, he did not look into it.

It was further submitted that the Ld. CIT(A) called for the remand report from the Assessing Officer, which have been reproduced at pages 14 to page 22 of the order, in which, the Ld. Assessing Officer on the basis of evidence already placed before him during assessment proceedings has accepted the fact that as per the quantity of physical verification, the stock of the assessee in value could be taken at Rs. 53,08,867/- against the figure of Rs. 1,08,84,989/- and, thus, has accepted the mistake and taking of wrong surrender of stocks during survey.

It was submitted that in response to the remand report, a rejoinder was submitted by the assessee which has been reproduced from pages 22 to 26 of the order of Ld. CIT(A), in which, it was reiterated that the fact of alleged excess

Regarding the findings of the Ld. CIT(A) which start from page 27 and in respect of each and every finding of the Ld. CIT(A), where part relief has been given, the submission of the assessee is being reiterated as under: FINDING OF LD. CIT (A) SUBMISSIONS In para 6.2, PAGE 27 the Ld. CIT(A) has i). It is submitted that the retraction was made within 14 mentioned that the retraction was not made days and the contents in the retraction letter are detailed, immediately as it was made within a period of covering all the sequences of survey, which has been 14 days and, he has relied on two placed at pages 28 to 33 of the 'Paper Book' and judgements i.e. of Delhi High Court and of alongwith this retraction letter, an affidavit duly sworn was Madras High Court at page 27 of the order. filed, but, there was no response from the department till today. Thus, the facts as mentioned in the retraction letter, have not been rebutted at all.

Further, reliance was placed on the judgment of Khader Khan Son, reported in 300 ITR 157, which have been approved by the Hon'ble Apex Court that no evidentiary value can be attached to the statement recorded during survey and this has been discussed in the case of Sh. Sanjeev Kumar in para 11, page 311 of the Judgment Set.

It was further submitted that it is trite law that Section 133A does not empower any Income tax authority to examine any person on oath and then use it as evidence to make addition. In such a situation, no addition can be made or sustained only on the basis of the statement recorded during the survey under section 133A of the act. Once the assessee has retracted from the statement then, it was on the Assessing Officer to establish beyond any doubt the issues on which the addition has been made. From the above facts, it is very much clear that retraction was made by filing a letter to the Ld. AO & copy of the same was sent to the Worthy Addl. CIT which copy has been placed at pages 28 to 31 and along with that, an affidavit duly sworn by the assessee was filed as per page 32 to 33 of the paper book and reliance is being placed on the judgment of Hon'ble Madras High Court in the case of MAC Public Charitable Trust vs. CIT reported in [2022] 144 taxmann.com 54 (Madras) in which it has been held that retraction is required to be made as soon as possible and it should be supported by an affidavit that the contents as given in the statement was incorrect and it was obtained under force, coercion and lodging a complaint with higher officials. The same thing has been done in the present case in as much as within 14 days of the statement, the letter was written to the higher authorities with a copy to the Ld. AO and accompanied by the sworn affidavit of the assessee. Thus, this judgment is squarely applicable to the facts of our case. Further, the Circular of the CBDT Vide No. 286/2/2003-IT (Inv) dated 10.03.2003 is very much clear on the issue and which have been followed in number of judgments and the circular of the CBDT are binding upon all the officers working under their charge. Copy of the circular is placed in the paper book pages

It was further submitted that no defects have been pointed out in the books of accounts and other information as submitted during the course of assessment proceedings and even there was a serious mistake pointed out by the assessee with regard to calculation of excess stock of Rs.2,90,000/- and which proves that the whole exercise of survey was only extraction of surrender and even later on, it was proved and accepted by the Assessing Officer in appellate proceedings that the valuation of stock was incorrectly made as mentioned in the remand report of the Assessing Officer.

It was further submitted that similarly, in the case of alleged advances as already pointed out that such notings on the loose sheet was made at the time of conclusion of survey under pressure and coercion, which is evident from the copy of the seized documents reproduced at page 29 of the Paper Book, where the date has been mentioned as 5/17, which clearly proves that this was noted as per the direction of the departmental officials. How could the date be there of the conclusion of survey, because the survey started on 4th of December 2017 and how the notings could be made on 05.12.2017, proves the contention of the assessee. Further, if for the sake of argument, it is accepted as advance then why the signatures of the other parties are not there and there is no nexus of such advances viz-a-viz the business model of the assessee as explained above and which proves that these loose sheets were prepared under pressure and coercion during the course of survey. The above contention cannot be disapproved looking into the documentary evidence which establishes that the notings was asked to be made to the assessee at the conclusion of the survey i.e. on 05.12.2017 which is next day to the survey which was started on 04.12.2017 and thus it proves beyond any iota of doubt that this was prepare under pressure and coercion. Further, once the assessee had retracted then it was the duty of the Assessing Officer to examine such person to establish the truthfulness and, as such, there is no merit in sustaining the addition only on the basis of statement recorded during survey as held in the case of Sh.

It was submitted that ground No. 2A and 2B deals with the addition of Rs. 1,26,650/- on account of alleged shortage in stock without considering the fact that complete physical verification of stock was not carried out and there was inherent defect in the working of excess stock and difference in valuation for which, the contentions were made in the retraction letter filed immediately and proved during assessment proceedings with documentary evidences and accepted by the Assessing Officer. Thus, when on three accounts, the defects pointed out by the assessee have been accepted and it is also the fact, which is pointed out that there is no evidence of purchases and sales outside the books of accounts and neither the books of accounts have been rejected u/s 145(3) and above all, the contention of the assessee right from beginning having been that the stock was not property counted, nor valued correctly and the same contention stands accepted by the Assessing Officer and, therefore, the addition by applying the gross profit of 10% on the alleged shortage in stock to the tune of Rs. 12,66,486/- is devoid of any valid consideration. Alternative, though, not accepting, it may be stated that the G.P. rate was 8.02% and enhancement by 10% is against the facts and circumstances of the case.

Regarding Ground no. 6 & 7, It was submitted that these grounds are regarding excess cash of Rs. 9,25,000/- and money advanced to few persons on the basis of alleged notings. The Ld. Assessing Officer after reproducing part statement of the assessee as commented upon at page 34 about the alleged irrelevancy of retraction letter filed within two weeks and thus, had held, the said

It was submitted that the Ld. CIT(A) at page 35 have referred to the circumstantial evidence to sustain the addition of cash and advances and the assessee’s submission in this regard are as under: OBJECTION OF Ld. CIT(A) SUBMISSIONS i). Impounded documents show money The notings on the impounded documents have been advanced to various persons. proved to be wrong and the same having been prepared on 05.12.2017 as per date on the impounded document and further, no signatures of the persons, who allegedly received the amount are there and the same has been retracted within 14 days and, thus, the onus shift to the Assessing Officer, which he has failed to discharge and, thus, on the basis of above said judgment as cited, no addition is called for. Further, there is no nexus of the amount advanced viz business of the assessee. The assessee is carrying on the business of PVC Pipes & Fittings and the so called notings are not related to the business activities of the assessee at all and, further, once the assessee had retracted the surrender within 14 days, the Ld. AO was duty bound to make necessary enquiries from the parties concerned and verify its correctness of the same. The same thing has been mentioned in the Circular dated 10.03.2003 of CBDT wherein it is clearly mentioned that no addition should be made merely on the basis of statement during survey and no attempt should be made to obtain

It was further submitted that by way of Ground No.4A, 4-B, which are alternative grounds, the assessee has challenged the findings of the Ld. CIT(A)

Per contra, the ld DR has relied on the findings of the ld CIT(A). It was submitted that the AR has contended that as the assessee had filed retraction letter to the surrender after 14 days, hence the whole surrender is without basis and all the additions should be deleted. The AR has submitted that the said surrender was withdrawn after a period of 14 days after the date of survey. In case, the assessee had any doubts on the surrender made the said retraction should have been made on an immediate basis i.e. within a matter of few days. In case, there was any coercion and pressure from the department, then the surrender in the survey should have been retracted on an immediate basis. The above view is supported by the decision of Hon'ble High Court of Delhi in the case of Principal Commissioner of Income-tax (C)-2, New Delhi vs. Avinash Kumar Setia reported at 2017] 81 taxmann.com 476 (Delhi). In similar circumstances, it has been held by the Hon'ble High Court of Madras in the case of Commissioner of Income-tax vs. MAC Public Charitable Trust reported at [2022] 144 taxmann.com 54 (Madras) as under: "Section 132 of the Income-tax Act, 1961 - Search and seizure - General (Retraction of statement) - Assessment years 2011-12 to 2014-15 - Whether statement recorded under section 132(4) and later, confirmed in statement recorded under section 131, cannot be discarded simply by observing that assessees have retracted same - Held, yes - Whether such retraction is required to be made as soon as possible or immediately after statement of assessees was recorded - Held, yes - Whether statements given to Assessing Officer under section 132 (4) have legal force and unless retractions are made within a short

From the reading of the above judgments, it is clear that the retractions not filed on an immediate basis loose relevance after a course of time and appear to be afterthought to evade the due taxes. Moreover, in case the surrender made in statement during the course of survey is supported by documentary evidence, the retraction of the said surrender becomes all the more insignificant. Hence, these grounds of appeal are dismissed.

It was further submitted that in the assessment order, the AO has observed that during the course of survey, a total stock of Rs. 1,08,84,989/- was found. As per the books, the stock was found to be valuing Rs. 1,05,94,990/-. Hence, an excess stock of Rs. 2.9 lacs was reported. During the course of assessment proceedings, the assessee brought some discrepancies to the knowledge of AO which had erroneously crept into the calculation done by the survey team leading to the consideration of the closing stock as on date of survey as Rs. 1,05,94,990/-. The assessee during the assessment proceedings, contended that the actual closing stock was of Rs. 65,74,354/-. The said contention of the assessee was accepted by the AO after perusal of the survey record. In above circumstances, the AO held that there was now an excess stock of Rs. 43,10,635/-(Rs. 1,08,84,989 - Rs. 65,74,354). The AR contended during the assessment proceedings that the valuation of stock was done at highly exaggerated rates and the same should be done on the basis of the prices as mentioned in the invoices. The AO did not accept the contentions of the assessee and the excess stock amounting to Rs. 43,10,635/- was treated as unexplained investment of the assessee. During the appellate proceedings, the AR furnished complete detail of the stock calculation done during survey as per purchase bills vide letter dated 24.05.2022. The said evidence was forwarded to the Assessing Officer in remand proceedings for report. The Assessing Officer vide his report sent vide letter no. 776 dated 30.11.2022 submitted the complete calculation of the stock found during the course of survey and gave a tabular representation to the value of stock. A comparison was drawn between the rates of items taken during the course of survey and the rates as per the purchase bills. The value of stock as per stock inventory of survey comes to Rs. 1,08,82,313/- whereas, the value of stock as calculated by the AO in the remand report on the basis of actual bills & invoices comes to Rs. 53,07,868/-. The AO has further conveyed that the said data has been made after verifying the copy of bills/invoices submitted by the assessee. From the above report of the AO, it is seen that the value of the stock found during the course of survey as per the purchase bills comes to Rs. 53,07,868/- rather than Rs. 1,08,82,313/-. The value of closing stock as per the assessment order is Rs. 65,74,354/-. In above circumstances, there is a shortage of stock to the extent of Rs. 12,66,486/- (65,74,354 - Rs. 53,07,868). Hence, the addition under the head of unexplained investment in excess stock cannot be sustained. Simultaneously, the stock found short is considered as nothing but out of books sale to which the GP rate needs to be applied to arrive at the correct profits. The GP rate of the assessee for the year under consideration is 8.02%. As there is always a component of fixed expenses in the trading account, the benefit of the same cannot be allowed to the assessee while calculating the unaccounted income from unaccounted sales. Hence, the GP rate is enhanced to 10% of the total of unaccounted sales made during the year (Rs. 12,66,486/-). Hence, an addition of Rs. 1,26,650/- is made to the income of the assessee for the year under consideration as unaccounted income of the assessee.

It was further submitted that during the course of survey, excess cash amounting to Rs. 9,25,000/- was found which was assessed as unexplained money u/s 69A. Also, documents were impounded reflecting money advanced

It was submitted that the Hon'ble Supreme Court in the case of CBI vs. V. C. Shukla reported at [1998] 3 (SC) 410 has clearly laid down that as per the Section 34 of the Evidence Act, entries in loose sheets cannot be considered as book till the time the revenue bring some corroborative evidence to show that the said loose sheets contained some transactions which is undisclosed from the department. The above judgment clearly supports the view of the department as a full-fledged document has been impounded with respect to the assessee which contains clear details of transactions made by the assessee along with a clear statement of the assessee firm acknowledging the unaccounted nature of the said transactions. The Hon'ble High Court of Punjab & Haryana in the case of Vikrant Dutt Chaudhary vs. CIT, Panchkula reported at [2017] 88 taxmann.com 727 (P& H) has held that “Photostat copies of documents, in absence of their original constitute material in hands of Assessing Officer if they

It was further submitted that the provisions of Section 292C make it very clear that the impounded documents belong to the assessee and the contents of the same are true. In view of above discussion, it is held that the documents related to advances to the persons are a genuine piece of evidence and its evidentiary value cannot be denied just because the assessee has filed a retraction letter. In the present case, the department has got both the statement of the assessee recorded during the course of survey and the corroborative evidence in the nature of impounded document to justify the said addition.

The advances to persons have been duly noted on the impounded document. The assessee during the course of statement has clearly recorded the fact that the said advances are from unknown sources. The circumstantial evidence helps us to crystallize the following issues: (i) Impounded documents show money advanced to various persons (ii) The said documents have been found at the premise of the assessee (iii) Similarly, the cash inventory shows the excess cash in hand available with the assessee on the date of survey. (iv) The contents of the same have been verified by the assessee in the statement recorded during the course of survey. (v) The said entries were confirmed by the assessee to be unaccounted transactions. (vi) The AR has taken different stands on the issue of excess stock and excess cash in hand and advances. On one hand, the assessee has contended that the whole surrender is withdrawn consequent to the retraction letter and simultaneously the assessee is also submitting

It was accordingly submitted that the arguments of the AR that the advances to persons and excess cash in hand should be treated as out of business income is not acceptable and the addition made u/s 69A & 69, is to be treated separately and it would not be possible to classify such deemed income falling under Chapter-VI, under any of the heads including 'income from other sources' but they will be aggregated along with the incomes computed under Chapter IV. The judgments cited supra i.e.: (1) Fakir Mohammed Haji Hasan Vs. CIT ([2001] 247 ITR 290 (Guj.) (2) PCIT vs. M/s. Khushi Ram & Sons Pvt. Ltd., the Hon'ble High Court of Punjab & Haryana in ITA No. 126 of 2015 dated 21.07.2016 (3) SVS Oil Mills vs. ACIT, Chennai, the Hon'ble High Court of Madras in ITA No. 765 (5) The Hon'ble Supreme Court in the cases of Roshan Di Hatti vs. CIT [1977] 107 ITR 938 (SC) (6) Hon'ble ITAT Cochin Bench, Cochin in the case of M/s. Bhima Jewellers vs. PCIT Kozhikode in ITA No. 208/Coch/2018, Assessment Year 2013-14

We have heard the rival contentions and purused the material available on record. In this case, survey operations u/s 133A was conducted at the business premises of the assessee on 04/12/2017 wherein the statement of the assessee was recorded u/s 131 of the Act. It is a settled proposition of law that the statement recorded u/s 131 during the course of survey has no evidentiary value in absence of any corroborative evidence on record and in this regard, reference can be drawn to the decision of Hon’ble Madras High Court in case of CIT vs Khader Khan Son reported in 300 ITR 157 where the SLP against the said decision has been dismissed by the Hon’ble Supreme Court as reported in 352 ITR 480. In the said decision, the Hon’ble Madras High Court has held that the statement recorded during the course of survey u/s 133A has no evidentiary value as the officer is not authorized to administer the oath and to take any sworn statement which alone has evidentiary value as contemplated under law and reference was drawn to provisions of section 132(4) which enables the authorized officer to examine person on oath and where any such statement so recorded can be used in evidence under the Act. In that case, it was held by the Hon’ble High Court that basis statement of one of the partner’s of the assessee firm, it cannot be held that disclosed income was assessable as lawful income of the assessee firm since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee and it cannot be held that Revenue has lost lawful tax payable by the assessee and the legal position has been summarized as under:

Similar view has been taken by the Hon’ble Madras High Court in subsequent decision in case of CIT vs P. Balasubramium (supra) where the Hon’ble High Court has referred to the decision in case of S Khader Khan Son (supra) in paragraph 15 and thereafter, at paragraph 18, referring to the decision of the Hon’ble Supreme Court in case of Pullangode Rubber Produce Co. Ltd 91 ITR 18, has held as under:

Therefore in the instant case, the statement of the assessee recorded under section 131 during the course of the survey on a standalone basis has no evidentiary value, at the same, the said statement can be considered as relevant material, but for that, there has to be further material to corroborate and substantiate the same. Further it is open to the assessee who made the admission to show that it was an incorrect admission on his part and equally it is for him to substantiate the same with material evidence.

In the instant case, a survey operation were conducted at the business premises of the assessee on 04/12/2017 which were continued during the intervening night of 04/12/2017 & 05/12/2017 and completed in the early morning hours of 05/12/2017. It has been claimed that the assessee being a senior citizen and suffering from various ailments was under a great shock and mental agony and could not get out of the shock of the survey operations for few days and thereafter, on 18/12/2017 the assessee filed a letter of retraction from surrender so made during the course of survey proceedings which was addressed to ITO-Ward-1, Barnala with a copy to the Additional CIT, Sangrur, Range Sangrur alongwith an affidavit duly addressed by the Notary Public. The contents of the retraction letter dt. 18/12/2017 reads as under:

The retraction letter is supported by an affidavit of even date of the assessee and the contents thereof read as under:

We therefore find that the retraction was made within a period of two weeks from the date of conclusion of the survey proceedings and for the intervening period, the assessee has explained that being a senior citizen, he was under great shock and mental agony besides suffering from various ailments and because of which, he could not file the retraction letter earlier. Regarding excess stock, the assessee has stated that during the course of survey, he has informed the officials of the Department that all the purchases are made on the basis of bills issued by the parties and the payments have been made through normal banking channel and as far as sales are concerned, they are also made to registered dealers or to some other petty shopkeepers and the books of accounts and the copy of the trial balance was duly provided to the officials wherein all the purchases and sales up to 04/12/2017 were duly recorded and there was no difference in the stock which were noted by the Department officials. It was further submitted that how the alleged excess stock of Rs 2,90,000/- has been worked out was not clear to him as the stock was neither counted fully nor valued properly and given the nature of the business and number of stock items, it was practically not possible to count the whole stock within the short duration of the survey period. Similarly for cash, he has stated that no inventory or cash was drawn and how the excess cash of Rs. 9,25,000/- was determined is not known to him. Regarding alleged unexplained advances of Rs 22,35,000/-, it has been claimed that on a small pad, certain notings were dictated by the officials of the Department to his son and he was made to write certain alleged advances in the name of certain unknown persons in round figures which he did under pressure and because of his ill health. It has been claimed that the so called alleged unexplained advances are totally false, unreliable even going by the nature of his business as the sales are to the registered dealers and to retail shopkeepers and there

We find that there is no whisper in the order of the AO rebutting the contents of the retraction letter as well as the affidavit so filed by the assessee within two week of conclusion of the survey proceedings even though the assessee in response to the initial notices and the subsequent show cause notice has reiterated the contents of the retraction letter during the course of assessment proceedings, and he has summarily rejected the retraction so made by the assessee, and proceeded and made the additions in the hands of the assessee.

The Ld. CIT(A) has rejected the contention of the assessee regarding the retraction of the surrender so made holding that the retraction should be made on an immediate basis i.e; within a matter of few days and where the retraction is not made on an immediate basis, the same loose relevance after a course of time and appear to be an afterthought to evade the due taxes. It has been further held that the surrender made in statement during the course of survey is supported by documentary evidence and therefore the retraction of the said surrender becomes all the more insignificant and cannot be accepted.

In this regard, we find that firstly the retraction letter has been filed within a short span of two weeks from conclusion of the survey proceedings duly supported by an affidavit of the assessee which has been filed before the AO as well as copy thereof has been filed before the senior authority i.e; Addl. CIT, Sangrur. As far as the intervening period is concerned, the assessee duly explained that being a senior citizen, he was under great shock and mental

Now, coming to the basis of retraction of the surrender so made by the assessee, we find that the surrender was originally made in respect of alleged excess stock, alleged excess cash and alleged unexplained advances. Regarding excess stock, we find that the assessee has duly demonstrated before the AO as well as during the appellate proceedings that the surrender

Therefore, where the AO during the assessment proceedings has accepted that as against the value of stock as per books of account taken at the time of survey amounting to Rs. 1,05,94,990/-, the actual stock as per the books of account was Rs. 65,74,354/- the same supports the contention advanced by the assessee that the surrender has been wrongly taken by survey team based on the incorrect facts. Further, even in respect of the physical stock found and valued by the survey team at Rs. 1,08,84,990/-, the assessee has duly demonstrated through actual purchase bills that the valuation of the stock has been wrongly done by the survey team and that during the appellate proceedings, the AO in the remand report has verified the purchase bills and duly admitted that the value of physical stock was only Rs. 53,07,868/- as against Rs 1,08,84,990/-. We therefore find that both the value of stock as per books of account and stock physically found, the survey team has completely faltered in determining and seeking surrender and therefore where the assessee in the retraction letter claims that there was no excess stock found during the course of survey and surrender taken under coercion and threat, we have no hesitation in accepting the said contention advanced by the assessee. Therefore, the retraction towards excess stock is concerned, the assessee has duly demonstrated that the statement initially recorded during the course of survey was factually incorrect and was therefore recorded under coercion and threat by the survey team.

Now, coming to the issue of alleged advances, we have gone through the seven pages of the diary marked as “Prince” seized during the course of survey and find that there are certain names and the amounts which have been written against these names. There are no dates, no description in terms of whether the amount written against the respective names are received by the assessee or paid by the assessee and the date of receipts / payments and falling under which financial year. No other documentary material has been found during the course of survey which corroborates such entries /contains complete identity details of these persons so found mention in the said diary and the nature of transaction so referred therein. We are therefore of the considered view there is no tangible material in possession of the survey team which demonstrate the assessee has undertaken any such transaction with so called persons so mentioned in the diary seized during the course of survey. The nature of the transaction, the identity of the person and the date of entering into such transaction are completely absent in the instant case. The entries in the diary and contents thereof are clearly incomprehensible in terms of minimum particulars to establish any authenticity of the transactions so claimed to be undertaken by the assessee and which stand corroborated with any other material found during the course of survey. Therefore where the assessee has retracted from the surrender so made stating that so called alleged unexplained advances are totally false, unreliable even going by the nature of his business as the sales are to the registered dealers and to retail shopkeepers and there cannot be any question of advancing any amount to any other person, it was the duty of the AO to at least examine such person(s) to establish the truthfulness of the transaction so claimed to be undertaken which the AO has failed to carry out. We therefore have no hesitation in accepting the contention advanced by the assessee that such notings have no link or connection with the business of the assessee and even the identity of those alleged persons was not verified and therefore there was no material in possession of the survey team to seek surrender and the surrender so taken was therefore a surrender under coercion and threat and which cannot be sustained in the eyes of law. Therefore, the retraction as far as alleged advances is concerned, we again find that the assessee has duly demonstrated that the statement initially recorded in this regard during the course of survey was factually incorrect and was therefore recorded under coercion and threat by the survey team.

Coming to the matter relating to excess cash, we find that there was cash physically found at the time of survey and cash inventory was duly prepared by the survey team. As per copy of the cash inventory available at page 77 of APB, there was cash amounting to Rs 982,579/- which was found, counted in presence of the assessee and subsequently handed over to him. It is also not in diospute that cash as per books of accounts as on the date of survey was Rs 57,579/-. Therefore, as far as retraction regarding differential cash over and above recorded in the books of accounts of Rs 9,25,000/- is concerned, we find that the retraction so made by the assessee is not factually correct and the same therefore cannot be accepted. The action of the AO in bringing to tax excess cash of Rs 925,000/- so found during the course of survey and upheld by ld CIT(A) is hereby confirmed and the contentions advanced in this regard on behalf of the assessee are rejected.

In light of aforesaid discussion, as far as excess stock of Rs 2,90,000/- and alleged advances of Rs 22,35,000/- is concerned, there is no basis to make the addition solely basis the statement so made by the assessee as the assessee has duly demonstrated that the surrender so made was factually incorrect and taken under coercion and threat and the same deserve to be set-aside.

We find that the ld CIT(A) has already directed the deletion of addition towards the excess stock of Rs 2,90,000/-. Therefore, the addition towards the alleged advances of Rs 22,35,000/- which has been sustained by the ld CIT(A) is hereby directed to be deleted whereas findings regarding excess cash of Rs 9,25,000/- are hereby confirmed for reasons stated above.

Coming back to the findings of the ld CIT(A), we find that the ld CIT(A) while deleting the addition towards the excess stock of Rs 2,90,000/- had recorded a finding that there was in fact shortage of stock to the tune of Rs 12,66,486/-. We have no hesitation in confirming the same as the same has been arrived at basis material provided by the assessee during the assessment and appellate proceedings, duly verified by the AO during the remand proceedings and thus basis material available on record and therefore, cannot be in dispute. Therefore, the various contentions so raised by the assessee which are more in the context of survey proceedings cannot be accepted. The ld CIT(A) has considered the shortage of stock as out of books sales and directed to apply gross profit rate of 10% which is hereby restricted to 8.02% as per accepted gross profit rate for the year under consideration and to this limited extent, the alternate contention of the assessee is accepted.

In light of aforesaid discussion and in the entirety of facts and circumstances of the case, the various grounds of appeal taken by the assessee are disposed off and the appeal of the assessee is partly allowed. Order pronounced in the open Court on 12/01/2024. आकाश दीप जैन िव"म "सह यादव (AAKASH DEEP JAIN) ( VIKRAM SINGH YADAV) उपा"य" / VICE PRESIDENT लेखा सद"य/ ACCOUNTANT MEMBER AG Date: 12/01/2024 आदेश क" "ितिलिप अ"ेिषत/ Copy of the order forwarded to : 1. अपीलाथ"/ The Appellant

""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File