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आयकर अपीलीय अिधकरण,च"डीगढ़ "यायपीठ “ए” , च"डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A”, CHANDIGARH "ी आकाश दीप जैन, उपा"य" एवं "ी िव"म "सह यादव, लेखा सद"य BEFORE: SHRI. AAKASH DEEP JAIN, VP & SHRI. VIKRAM SINGH YADAV, AM आयकर अपील सं./ िनधा"रण वष" / Assessment Year : 2018-19 Shri Lachhman Dass Bansal बनाम The DCIT Prop. M/s Yuvraj Plastics Central Circle, Patiala Opposite Prabhat Cinema, Barnala- 148101, Punjab "थायी लेखा सं./PAN NO: AACCA9036F अपीलाथ"/Appellant ""यथ"/Respondent िनधा"रती क" ओर से/Assessee by : Shri Sudhir Sehgal, Advocate राज"व क" ओर से/ Revenue by : Smt. Amanpreet Kaur, Sr. D.R सुनवाई क" तारीख/Date of Hearing : 16/10/2023 उदघोषणा क" तारीख/Date of Pronouncement : 12/01/2024 आदेश/Order PER VIKRAM SINGH YADAV, A.M. :
This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-5, Ludhiana dt. 09/01/2023 pertaining to Assessment Year 2018-19. 2. In the present appeal, the assessee has raised the following grounds of appeal:
1 . a) That the Ld.CIT(A) has erred in not considering the retraction as made by the assessee within 14 days of the survey and confirming the addition on the basis of oral statement of the assessee without any corroborative evidence is against the facts and circumstances of the case. b). That the Ld. CIT(A) has erred in not considering the fact that the surrender was retracted immediately by way of letter and by way of affidavit and further having proved that the surrender was wrongly taken on account of excess stock, which has been accepted by the Ld. Assessing Officer during the remand proceedings and, thus, the whole basis of confirmation of addition on account of alleged advances and excess cash in hand is devoid of any valid reasoning. 2. a). That the Ld.CIT(A) has also erred in confirmation of addition of Rs. 1,26,650/- on account of alleged shortage in stock without considering the fact that the complete physical verification of stock was not carried out as pointed out in the retraction letter, b). That the Ld. CIT(A) has failed to appreciate that there was inflation in value of items as counted during survey, which was point out during the course of assessment but accepted by the Ld. Assessing Officer during the remand proceedings and, therefore, the confirmation of other addition which too were made on the basis of wrong facts and circumstances is not proper. 3. a). That the Ld. CIT(A) has erred in confirming the addition of alleged advances without appreciating the fact that there was no link or connection with such alleged advances with the business of the assessee and the facts as given in the retraction letter has not been considered. b). That the assessee is distributor of the concern at Mumbai and making the sales to the other retailers and there being no link or connection with the said advances and with no signatures of the other party and without making any requisite enquiry, the contention of the assessee in the retraction letter have been ignored summarily. 4. a). That the Ld. CIT(A) has erred in confirming the addition of excess cash of Rs. 9,25,000/- being unexplained money u/s 69A, ignoring the contention of the assessee in the retraction letter. b). Notwithstanding the above said ground of appeal
, the CIT(A) has erred in applying the provisions of section 69A r.w. provisions of section 115BBE on the alleged cash in hand of Rs. 9,25,000/- and on the alleged advances of Rs. 22,35,000/- and while doing so, the various binding judgments of Jurisdictional Chandigarh Bench of the ITAT have not been considered.
5. That the confirmation of addition is against the facts and circumstances of the case.
6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.”
3. 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 alongwith his duly sworn affidavit. Thereafter the assessee filed his return of income on 26/09/2018 which was processed under section 143(1) thereafter notices under section 143(2) and 142(1) alongiwth questionnaire were issued. Thereafter, after considering the submissions filed by the assessee but not finding the same acceptable, the AO made the addition on account of unexplained excess stock of Rs. 43,10,635/- under section 69, unexplained excess cash of Rs. 9,25,000/- under section 69A and unexplained advances under section 69 amounting to Rs. 22,35,000/- and assessed the income at Rs. 1,02,10,485/- as against the returned income of Rs. 27,39,850/- 4. 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. 5. 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.
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 quantity, as noted by the departmental official worked out to Rs. 53,09,319/- only and it was stated that such list may please, be verified and for which, a huge paper book contending pages from 1 to 617 was filed before the Assessing Officer on the income tax department IT portal and it was stated that the stock as per books of accounts come to Rs. 65,74,354.97 only and, thus, plea of the assessee was that the whole basis of extracting the amount during survey is totally devoid of any valid consideration and, thus, retraction letter as filed by the Assessee shall stand substantiated.
11. 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 Jurisdictional 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 stock of Rs. 2,90,000/- had been taken wrongly by the department and further, the value of stock arrived at as per physical verification have also been stated to be incorrectly valued during the survey and, thus, wrong surrender have been taken and, as such, the contention of the assessee as stated in 'Retraction Letter' that the surrender was made under pressure and coercion stands accepted and proved and, thus, no addition was liable to be made on the basis of alleged surrender during survey. Even, it was stated at page 25 of the order that in respect of advances, there is no link or connection with the business of assessee and further, the date mentioned in the list of advances is 05.12.2017, which proves the case that such list was asked to be made on the date of survey. Further, against the names mentioned with no address and no signatures of the persons to whom, the alleged advances have been given, proves the contention of the assessee as stated in the retraction letter and further, it is in the form of loose papers only and the Assessing Officer has not rejected the books of accounts u/s 145(3) and, thus, no addition could be made on account of such list of fake advances.
16. 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. ii). The finding of CIT(A) that the retraction should have been made immediately is without any valid reason, since within the 14 days, the retraction letter was duly filed and is very much in order and in time.
iii) Reliance is being placed on the judgment of Chandigarh Bench of the ITAT in the case of 'Atop Fasteners', copy placed at pages 219 to 302 of the judgment set, in which, though, the amount to the tune of Rs. 5 crores was surrendered during survey, which was not retracted, but it was only during assessment proceedings, it was stated that the surrender was made incorrectly on mistaken belief and it was stated that the mistaken belief had led to "Extraction of Surrender" as per para-8 of the judgment. In that judgment, various mistakes were pointed out by the assessee against valuation of stock made by the 'Survey Team' and on other issues. Reference may be made to para 34, at page 248. iv). Reliance was also placed on various case laws in that judgment on the issue of retraction of surrender read with CBDT guidelines in para 37.1, page 262 that the surrender was not voluntary. v). The finding of the Hon'ble Bench starts from page 276, para 54 and after referring to various judgments and the relevant paras are para 63 & 64, page 294 & 295, wherein, it was held that it would have taken 71 hours to weigh the stock and it was held that the surrender was made under pressure and coercion and finally, in para 66, the said addition have been deleted. Same are the facts in our case as to count complete stock of numerous parts, at least four to five days are required. vi). Similarly, is the case of 'Chandigarh Bench' of the ITAT in the case of 'Sh. Sanjeev Kumar', where also, the surrender of Rs. 75 lacs was made during survey and copy of the judgment is placed at pages 303 to 314 and after referring to the 'Board Circular' and judgement of Hon'ble Supreme Court in the case of "Pullangode Rubber Produce Co. Ltd." and many other judgments, it was stated that the addition was made wrongly and in this case also, there was certain offer of surrender on account of 'receivables' on the basis of certain loose slips was made and relevant paras are para 13,14,15 & 16 at pages 313 to 315 and it was held that surrender was made under pressure and coercion. vii) Reliance is also being placed on the judgment of 'Chennai Bench' in the case of DCIT Vs SNJ Distillers Pvt. Ltd., where also, certain addition was made on account of certain alleged scribbling in rough manner and after discussion in para 15, page 324 of the judgment. In this case also, the relevant paragraph is para 12.1, page 325, that these were dump documents and after relying upon same judgments, which are relied upon by the assessee, the finding has been given in para 12.7 onwards at pages 330 to 333. viii). Reliance is also being placed on the judgment of ITAT, Jodhpur Bench at page 339 of the Judgment Set. The relevant head notes are there from pages 339 to 341 and at page 347, where after relying upon same kind of judgments, the addition have been deleted and addition on account of statement given during survey was deleted. ix) Reliance is also being placed on the judgment of Chandigarh Bench in the case of 'Arihant' Foam, where again during survey, certain excess stock was offered, but then it was explained during the course of assessment proceedings, that the surrender was made on the basis of wrong facts and the said addition was deleted by relying upon same judgment, copy of the judgment is also being filed herewith in judgment set-II x). Reliance is also being placed on the judgment of 'Cuttack Bench’ of the ITAT in the case of Utkal Alloys (P) Ltd. Vs DCIT and other judgment of M/s Bansal Strips (P) Ltd., and where also, by relying on the same facts/ judgements, the addition on the basis of amount offered during survey was deleted. Case laws relied upon by CIT(A): i). The Reliance by the Ld. CIT(A) on the judgment of 'Delhi High Court' in the case of Sh. Avinash Satia is not relevant. That judgment is not applicable because, the retraction was made by the assessee after two years after making the declaration and, whereas, in the present case, the declaration was made within 14 days and in para 14, such distinguishing facts have been mentioned and further, as stated in para 12 of that the judgment, in the case of Dhingra Metal, the relief was given to the assessee, since the surrender was made within two years and, therefore, the finding of the Ld. CIT(A) is not proper that the surrender was retracted within 14 days and even, the retraction after two months is stated to be within short period of time.
17. 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 19. 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. 20. 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. Satish Chand Aggarwal Prop. Sumit Medical Hall Vs ITO vide order, dated 12.04.2018, ITAT, Jaipur. The Ld.CIT(A) has grossly erred in giving finding that the retraction was not made immediately and as regards the documentary evidences are concerned, the valuation of stocks have been proved to be wrong, accepted by the Assessing Officer and the fact that even the basis of conclusion of alleged excess cash is also without any basis and about the loose slips, we have already pointed out in what, manner they have been made. 21. 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 offer is in order. We have attached in the 'Paper Book' complete statement of Sh. Lachhman Dass and the relevant page for the purpose of this addition are page 83, where, he has stated that al the sales and purchases are reflected in the books of accounts. He also explained the nature of business at page 94 and page 85. He was also put a question with regard to alleged closing stock as per books of accounts to the tune of Rs. 1,05,94,990/- instead of correct valuation of stock at Rs. 65,74,354.97 and the excess stock offer of Rs. 2,90,000/- was taken. This fact is being highlighted that when on one fact that offer of stock has been accepted as incorrect as per facts stated above and, therefore, the whole statement cannot be relied upon and the contention of CIT(A) that the advances are genuine and evidencery value cannot be accepted and devoid, is out of context, because no evidencery value could be attached to the statement recorded during survey as per the judgment of 'Khader Khan Son' as stated supra.
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 confession as to the undisclosed income and further mentions that the addition should be made on the basis of evidence. ii). The said documents have been found at The said documents were prepared under pressure and the premise of the assessee. coercion as already discussed above on 05.12.2017 read with retraction letter. iii). Similarly, the cash inventory shows the The said documents were prepared under pressure and excess cash in hand available with the coercion as already discussed above read with retraction assessee on the date of survey. letter. iv). The contents of the same have been The statement is in respect of alleged excess cash of Rs. verified by the assessee in the 9,25,000/- have been proved to be wrong, which is part of statement recorded during the course of the statement and, thus, from this, it is proved that no survey. authenticity can be relied upon on the statement recorded during survey.
v). The said entries were confirmed by the The assessee has filed the retraction letter, which has not assessee to be unaccounted transactions. been commented upon at all till now. vi). The AR has taken different stands on the The assessee had though, retracted but then in order to issue of excess stock and excess cash in prove the allegation in the retraction letter, it has been hand and advances. On one hand, the proved beyond any iota of doubt that the manner, in which, assessee has contended that the whole survey was carried out was only to extract the surrender surrender is withdrawn consequent to the without any documentary evidence, which has been retraction letter and simultaneous the proved that in respect of excess stock. Apparently, the assessee is also submitting the valuation of whole basis of extracting the offer was on wrong facts and stock details to the Assessing Officer during which proves the case of assessee and even the contention the remand proceedings. that there was no shortage in stock and the department ought to have gone for physical verification of stock, once the retraction letter had been filed. This has not been done and the said stock being so voluminous, being in small parts, which could have taken minimum weeks' time to note down the same and the facts are in line with the department as stated above. vii). Hence, this assessee is taking stands The assessee is not claiming any benefit on account of suitable to his need wherein, on one hand valuation of stock, but only trying to prove the facts he is retracting the whole surrender and on mentioned in the retractin letter and here the department the other hand is claiming benefit on has been proved to be wrong in, as much as, against the account of valuation of stock. addition allegedly agreed upon at Rs. 2,90,000/- in respect of excess stock, the addition of Rs. 43,10,635/- has been made by the Assessing Officer since lateron the department agreed that the physical verification as per the quantity noted, its value was only to the tune of Rs. 53,07,868/- against the figure of Rs. 1,08,82,313/- has wrongly been calculated. This, the contentions of the CIT(A) is not tenable.
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)
regarding applicability of provisions of section 115BBE and in this regard, it is submitted as under:- i) Our first contention is that in view of retraction letter, no addition called for. Besides that our following contentions may, please, considered. a). During the survey, the assessee was found to be carrying on the same business of 'having distribution of Prince Pipe £t Fittings Ltd.', Mumbai of the plastic goods at Barnala and almost all the purchases were made from the said company and during the course of survey, the assessee was found to be carrying on the same business and no other business activity or any evidence of carrying on other activity was noticed. b). Even, the books of accounts of the same business was found to be maintained and both cash in hand and stock was calculated and offer of surrender was extracted under pressure and coercion by comparing it, with the regular books of accounts, meaning thereby that the source of alleged cash and advances was out of the same business activity, the provisions of section 69 read with 115BBE are not applicable. c). The statement of the assessee, which have been placed in the Paper Book also prove that nature of business carried out by the assessee and the stock was found to be of the same business and further reference to the cash book have been made at page 84 for extracting the offer of excess cash as per question No. 13 and at page 85 from the statement of the assessee, it proves beyond any iota of doubt that the offer was extracted under pressure and coercion, was related to same business. Thus, the nature and source of the offer was in respect of same business. Reliance is being placed on the judgment of Chandigarh Bench of the ITAT, in the cash of Sh.Harish Sharma, placed at pages 77 to 85 of the Paper Book, in which, similar facts were there and the finding have been given in para 7, page 80 onwards, where the earlier judgment in the case of 'Sh.
Bhuvan Goyal' has been cited and referred to and it has been held that since in the absence of any adverse finding by the Assessing Officer on the source of earning of assessee, the income cannot be taxed under the provisions of section 115BBE. d) Similar is the judgment in the cases of M/s Khurana Rolling Mills (P) Ltd. in and ITA No. 1134/Chd/2016 in case of M/s Khurana Steels Ltd. copy placed at pages 86 to 112 and has given findings in para 8, page 96 and para 12 at page 108, in such judgment, wherein all the judgements cited by the Ld. CIT(A) of Kim Pharma, Khushi Ram £t Sons have been analyzed and discussed at length and relied upon the judgment of Fimina Knit Fab, which have been quoted at length at page 97 onwards and finally, at page 104 onwards and at page 107, the appeal of the revenue was dismissed. e) There is judgment of the department in the case of 'M/s Arora Alloys Ltd', at pages 9 to 18 of Chandigarh Bench and here again, the Hon'ble Bench has relied upon the judgment of 'Femina Knit Fab' and also the finding has been given and the reliance has been placed on the judgement of Famina Knit Fab and finally at page 17, it has been held to be the business income. Reliance is being placed on the judgment of 'Sham Jewellers & Others' at pages 19 to 76 of the judgment set and on the issue u/s 115BBE, the discussion starts from page 68 in para 10.17 and after referring to number of judgments including 'Femina Knit Fab' and of Andhra Pradesh High Court, the finding has been given from page 71 onwards. f). Reliance is being placed on the judgment of 'Shri Gandhi Ram', placed at pages 155 to 170 and the relevant discussion on the issue starts from page 159, para 5 and the relevant para of the judgment is para 8 at page 164. g). Reliance is being placed on the judgment of 'Surya Hatchery' at pages 177 to 218, where all the judgments with regard 115BBE and on deemed income have been discussed at length and the relevant discussion is there at page 200 onwards, where the reliance on the various judgment as discussed earlier in the case of M/s Khurana Rolling Mills (P) Ltd and M/s Khurana Steels Ltd. have been discussed. h). Similarly, reliance is also being placed on the judgment of Jodhpur Bench in the case of Smt. Rekha Shekawat at pages 1-3 of judgment set and of Andhra Pradesh High Court at pages 4 to 8 and on the judgment of Dev Raj Hi-tech Machines Ltd. at pages 113 to 128. Thus, in view of above said facts and circumstances, alternatively also, the provisions of section 115BBE are not applicable.
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 span of time, supported by affidavit swearing that contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, same cannot be treated as retracted - Held, yes [Para 61] [In favour of revenue] "
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.
27. 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.
28. 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 to few persons totaling to Rs. 22,35,000/-. The said amounts are clearly mentioned on the impounded documents named 'Prince Piping Systems'. The AO has treated the said excess cash & advances as unexplained investment u/s 69A & 69 of the Income Tax Act, 1961 as the assessee could not offer any explanation regarding the same during the survey proceedings. From the statement of the proprietor of the firm, it is clear that the documentation related to excess cash and the unaccounted advances were duly confronted to the assessee during the course of survey. The impounded documents related to advances are duly signed by the assessee acknowledging the contents of the same. Post survey, the assessee filed a retraction letter denying the surrender made. The irrelevance of retraction filed 2 weeks after the date of survey has already been discussed above. The Department has cogent evidence in the nature of the impounded document which is further supported by the statement of the assessee recorded during the course of survey wherein he has acknowledged that the said advances are from unknown sources.
29. 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 are relevant for purpose of assessment and if they are not successfully rebutted by assessee" The facts of the above case are fully applicable to the case of the assessee.
30. 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.
31. 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 the valuation of stock details to the Assessing Officer during the remand proceedings. (vii) Hence, the assessee is taking stands suitable to his need wherein, on one hand he is retracting the whole surrender and on other hand is claiming benefit on account of valuation of stock.
32. 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 of 2015 dated 21.07.2016 (3) SVS Oil Mills vs. ACIT, Chennai, the Hon'ble High Court of Madras in ITA No. 765 of 2018 dated 26.03.2019 (4) Kim Pharma Pvt. Ltd. vs. CIT in ITA No. 106 of 2011 dated 27.04.2011, (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:
“(i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala, [1973] 91 ITR 18; (ii) In contradistinction to the power under Section 133A, Section 132(4) of the Income Tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act. On the other hand, whatever statement is recorded under Section 133A of the Income Tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT (2003) 263 ITR 101 (Ker);
(iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income Tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide CIT Vs. G.K.Senniappan, [2006] 284 ITR220(Mad)];
(iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C. (A) No. 2620 of 2006 between Commissioner of Income Tax v. S. Ajit Kumar (2008) 300 ITR 152 (Mad);
(v) Finally, the word "may" used in Section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself."
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:
18. The Hon'ble Supreme Court in Pullangode Rubber Produce Co.Ltd. vs. State of Kerala, (1973) 91 ITR 18 held that an admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Any statement recorded under Section 133A would have evidentiary value only if supported with materials and form the basis for assessment. In his explanation, the assessee stated that he has been doing job work and the remaining 2100 gms had been given to 3 Asaris. The Officers had not verified whether the gold was available with the said Asaris nor chosen to examine the said Asaris. The statement recorded during survey operation under Section 133A may be a relevant material. But in the absence of further materials to substantiate the same, such statement recorded under Section 133A can hardly be the basis for assessment. During the survey, 900 gms of gold was found in the premises of the assessee and the statement of the assessee was supported only to the extent of actual seizure of 900 gms. Since the statement of assessee in respect of the remaining gold was not substantiated, the Tribunal rightly set aside the addition in respect of the gold.
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:
“Sub: Letter of Retract from Surrender made during Survey proceedings u/s 133Aof the Income Tax Act, 1961. This has a reference to the survey proceedings u/s 133A carried out at my business premises on 4th of December 2017 and it continued upto the morning hours of next day i.e. 5th of December 2017 and it was concluded at 4.00 A.M. The sequence of the said survey is as under:-
1. 1. That I am a Senior Citizen aged about 73 years of age and not keeping good health and my wife Smt. Usha Rani Bansal is aged about 67 years of age were at home, when somebody knocked at our residential premises and my daughter-in-law went outside to check the person concerned and I was informed by my daughter-in-law that some persons from the Income Tax department accompanied by policemen are calling me and my wife outside.
2. That when I came out, I saw one person in the porch, who asked me and my wife to accompany with them at our business premises and, then, when I and my wife went outside, I saw some policemen and one lady sitting in the car, (which lateron, I came to know that she is from Income tax department). I and my wife besides number of other policemen were asked to sit in the car, which took us to our business premises. As I reached my business premises, I saw more persons, who had entered into our business premises. I and my wife just went inside the business premises and, thereafter, it came to my notice that there has been survey operations at my business premises and my wife's business premises.
3. That during the course of survey, certain statements of mine and my wife were recorded and, whatever, was being asked for, we answered the same and full cooperation was rendered to the officials concerned.
That, we told very politely to the officials of the department that I am Prop., of M/s Yuvraj Plastics and such concern is having dealership of "Prince Pipe and Fittings Pvt. Ltd., Mumbai" for the past many years and I am engaged in the business of resale of Pipes and Fittings on wholesale basis.
That I further informed the officials of the department that all the purchases are made on the basis of bills issued by that party and the payments are being made through normal banking channels mainly by RTGS. I also informed that the sales are made mainly to registered dealers or to the other petty shopkeepers. 6. That I also produced the relevant books of accounts and copy of the trial balance as on 4.12.2017 was given on demand to the officials present in the shop and I also informed them that all the purchases and sales upto 4.12.2017 have been duly recorded in the books of accounts and there is no difference in the stock or cash and we have nothing to hide and you can count my stock and search my premises, whicy they were already doing it. 7. That till the late evening, they could not find any objectionable item or papers from my premises and in, meanwhile, I asked the officials of the department that since I am a Senior citizen suffering from sugar and high blood pressure and other diseases, I needed rest and i wanted to go home, but l was not allowed and due to which, my mental condition did not remain normal. 8. That then in the late night, I was asked by way of pressure, coercion and threatening attitude of the department to make a huge surrender of income and which I refused very politely that my business is as per my books of accounts and I have no additional income to offer and, whatever, income is there, the same has been reflected in my regular books of accounts and there is no difference in my stocks as per the books of accounts and neither any documents had been found for any undisclosed transactions. 9. That I gave the print outs of trial balance from 1.4.2017 to 4.12.2017, which was taken in possession by the official concerned and, particularly, having not found any difference in the stock or any other unaccounted item, the departmental officials started pressurizing me to surrender some amount and also threatened with dire consequences.
10. That I stated very politely that there is nothing with me to offer any additional income and I told them to count whole of the stock, which was not counted fully , though some notings of the stock was made and which according to me was not the complete counting of stocks.
That in the early hours of the morning, I again insisted that it is a very cold and I am not feeling well and ! want to go home for some rest but again, it was not allowed and I was told that they will continue to sit till I do not make a surrender as per the wishes of the officials there and due to the above said circumstances and to get out of the situation, I succumbed to the pressure and coercion of the said officials, due to my ill health and age, then a surrender letter was typed by the official of the department from my computer at the business premises and I was made to sign the offer letter of Rs. 34,50,000/-, in respect of alleged excess cash, excess stock and on account of socalled alleged unexplained advances as per evidence got created by the officials present at the time of survey. 12. That there was no excess cash found and neither excess stock was determined, which could be verified from the figures of the stocks noted by the departmental officials and the stock was not counted fully and nor valued and, how, the alleged excess stock has been arrived at, can be anybody guess and there was no material for working out the figures of alleged excess stock. It is worthwhile to mention here that due to the nature of my business and item of stock, the same stock cannot be counted in toto even in the duration of survey period. 13. That, similarly that cash as far as I remember, no inventory of cash was drawn and neither any cash was available at the shop and as such, how much the total cash was found and what was the cash as per books of accounts, neither arrived at nor calculated and how the excess cash of Rs. 9,25,000/- has been determined, is not known to me. 14. That even on small pad, certain notings were dictated by the officials of the department, to my son and he was made to write certain alleged advances in the name of certain 'unknown persons' in round figures and which he did under pressure and keeping in view my health since I was not feeling well and wanted to go home and these nothings were made only for the purposes of extracting the unreasonable and uncalled for surrender. 15. That the above alleged unexplained advances are also totally false, unreliable even going by the nature of my business, where my sales are to the registered dealers and to some retail shopkeepers only and, a s such, there cannot be any question of advancing any amount to any other persons.
That all my assessments havelseen completed regularly without any addition.
Thus, the whole of the offer was extracted under pressure, coercion and threatening attitude of the department officials and because of my ill health, of mine and my wife and, this offer of surrender is totally bad in law and, accordingly, is retracted from the -date, when it had been made, as there is nothing on record for the purposes of such illegal offer as extracted from me during the course of such survey on 4.12.2017 and which continued till early morning hours of 5.12.2017.
That during the past few days i.e. eversince date of survey, I was completely shocked, unwell, and was under medication and is not into my complete senses as to what has happened to me and, therefore, I take this opportunity to request you very humbly to accede to my humble request of retraction of my offer of Rs. 34,50,000/- and, as such, the proceedings of survey may, please, be closed due to the above said facts and circumstances.”
The retraction letter is supported by an affidavit of even date of the assessee and the contents thereof read as under:
“I, Lacchman Dass S/o Sh. Suraj Bhan aged about 72 years of age prop. ,of M/s Yuvraj Plastics, Prabhat Cinema Road, Barnala do hereby solemnly state and affirm as under:-
1. 1. That I am Prop. , of M/s Yuvraj Plastics and having dealership of M/s Prince Pipes and Fittings, Mumbai and carrying on the business at Prabhat Cinema Road, Barnala.
2. That there was survey at my business premises in the morning hours of 4.12.2017 at 11.00 A.M. and which continued during the early hours of 5.12.2017.
3. That due to the pressure, coercion and threatening attitude of the departmental officials, who were accompanied by many policemen, I was made to offer a sum of Rs. 34,50,000/- and which letter was typed by the officials of the department in the early morning hours on 05.12.2017 on my computer and I merely penned my signatures on that letter due to my ill health, being a patient o| sugar and high blood pressure.
4. That the said surrender was totally unwarranted, uncalled for and even certain documents were got prepared illegally from my son, who has been assisting me in my business on account of alleged advances to certain persons/parties, which are against the factual facts and circumstances and, this was done by my son since I was not allowed to go home due to my ill health and then looking to my condition, he succumbed to such pressure of the department.
5. That no physical counting of complete stock was undertaken nor any full counting of stock was made by the departmental officials and nor any inventory of cash was prepared in order to arrive at the alleged excess cash.
6. That I have already explained in detail in my letter, dated 18,12.2017 to the Assessing Officer, the reason of such unlawful offer and how I have appended my signatures on the letter of offer and, as such, the said offer of surrender is retracted forthwith from the date, it was made.
7. That I confirm the above said facts.”
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 cannot be any question of advancing any amount to any other person. And it has accordingly been claimed that the whole of the surrender was extracted under pressure, coercion and threatening attitude of the Department officials and because of his ill health, the offer of surrender of Rs 34,50,000/- was totally bad in law and was accordingly retracted from the date the same was made.
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 agony and once he was able to recover from the shock of the survey proceedings, he has written the letter to the AO retracting from the surrender so made. Therefore as far as period within which the retraction has been made, we find that the same has been made within a reasonable period of two weeks of close of the survey proceedings and therefore it is not a case where the assessee has filed the return of income retracting from the surrender so made and/or waited for issuance of the show cause by the AO and thereafter, he has retracted from the surrender so made. We are therefore unable to subscribe to the view of the ld CIT(A) where he says that 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. The decision of the Hon’ble Delhi High Court in case of Avinash Satia (supra) doesn’t support the case of the Revenue as in that case, the retraction was made after a gap of two years. Similarly, the decision of Hon’ble Madras High Court in case of MAC Public Charitable Trust (supra) doesn’t support the case of the Revenue as in that case, the retraction was made after a period of eight months. In our considered view, given the fact that the retraction has been made within a short period of two weeks of conclusion of the survey proceedings and even for intervening period of two weeks, the assessee has provided the necessary explanation which we find reasonable given the facts and circumstances of the present case, the retraction so made doesn’t loses its significance and clearly cannot be held as an afterthought.
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 towards excess stock has been wrongly taken by the survey team and the same is evident from the findings of the Ld. CIT(A) which read as under:
Grounds of Appeal Nos. 3, 4 & 5: In brief, in the assessment order the AO “6.3 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.”
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.