M/S. ARUN KUMAR & BROTHERS,PILIBHIT vs. DCIT, CIRCLE-2, BAREILLY

A.Y.- 2015-16 M/s Arun Kumar & Brothers, DCIT, Bazar Katra Town, Bisalpur, vs. Circle-2, Bareilly Pilibhit, U.P. PAN:AALFA2839C (Appellant) (Respondent) Assessee by: Sh. P.K. Kapoor, C.A. Revenue by: Sh. Sunil Kumar Rajwanshi, Addl. CIT DR Date of hearing: 20.08.2024 Date of pronouncement: 25.10.2024 O R D E R

PER SH. NIKHIL CHOUDHARY, ACCOUNTANT MEMBER:

“1.On the facts and circumstances of the case, the order passed by the learned CIT(A) is bad both in the eye of law and on facts.

2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the action of Assessing Officer (A.O.) in adding a sum of Rs. 4,94,936/- to the income of the assessee as there was no difference in cash as counted by the survey team and as per books.

3. Aggrieved with this, among other additions, the assesse went to the ld. CIT(A). The ld. CIT(A), in considering the surrender of stock made by Shri Vishal Agarwal on the basis of difference in value of jewellery found and that estimated by the registered valuer, held in paragraph nos. 5.3 to 5.6 of his order ,that any statement recorded under section 133A had no evidentiary value; that section 133A did not empower any ITO to examine any person on oath; in this case, the statement under section 133A was not recorded of any of the partners of the assessee firm but of the son of the partner, as a result of which it had even less evidentiary value and; 2 M/s Arun Kumar & Brothers that the statement recorded of the registered valuer had not been confronted to the assessee. Therefore, on this logic and reasoning, the ld. CIT(A) held that the valuation of closing stock on the date of survey was erroneous and no addition on account of difference in stock could be made on the basis of the surrender made by Shri Vishal Agarwal. However, in the same order, the ld. CIT(A) did not accept the submission of the assessee that the surrender with regard to difference in cash was not on account of any difference with the books of accounts, but on account of a guesstimate by the son of the partner, at the commencement of survey and the actual cash found, which tallied with the books of the assessee firm. The ld. CIT(A) held that there was excess cash viz a viz books of accounts, of Rs.4,94,936/- and this addition was not made on the basis of the statement, but on account of discrepancy found during the survey. Thus, he dismissed the appeal of the assessee on this ground.

4. The assesse is aggrieved at this dismissal of its appeal on this issue and has accordingly come before us in appeal. Shri P.K. Kapoor, C.A. ( hereinafter referred to as the Ld AR) argued the case on behalf of the assessee. It was submitted that the assessee was a partnership firm running the business under the name and style, “M/s Arun Kumar & Brothers” at Chhota Chauraha, Bisalpur, District-Pilibhit. The two partners having 50% of shares each were Shri Arun Kumar Agarwal and Smt. Sharda Rani. During the course of survey operation, Shri Vishal Agarwal, who was the son of Shri Arun Kumar Agarwal was present. His statement was recorded and he surrendered an income of Rs.1,30,00,000/- of which Rs.4,94,936/- was surrendered on account of difference in cash found. It was however submitted that the partners of the firm were not present during the survey. Our attention was also invited to page 2 of submissions filed before the ld. CIT Bareilly on 16.02.2015, wherein the assessee had informed the ld. CIT, that there was no difference in the cash found and the cash as reflected in the books of accounts. It had further been submitted, that the statement that had been recorded, was not that of any partner of 3 M/s Arun Kumar & Brothers the firm, but that of Shri Vishal Agarwal and, when he was asked regarding the cash in hand, he said that it was approximately Rs.4,00,000/-, but the actual cash counted by the survey team was Rs.8,94,936/-. Since, Shri Vishal Agarwal could not explain this and was quite disturbed with such a big team of Income Tax along with police, he came under pressure and surrendered entire stock, at its valuation by the departmental valuer, and the difference between the cash as recorded in his statement and the actual cash in hand at the premises. However, after the survey, it was discovered that the cash in hand, as counted by the survey team was in agreement with the books of accounts maintained by the firm at Rs.8,94,936/-. Thus, the surrender of cash was wrongly done and was on account of inadvertent mistake. It was submitted that these facts had been brought to the knowledge of the ld. CIT(A) and it was pointed out that the statement of the son of the partner was being used against the assessee. Furthermore, it was also pointed out that the books of accounts had not been rejected by the ld. AO. It had also been submitted that the statement elicited during the survey operation had no evidentiary value and could not be the basis for making addition and furthermore, the books of accounts had been produced before the ld. AO and ld. AO had not pointed out any defects in the entries therein. However, the ld. CIT(A) had failed to consider these aspects and had incorrectly assumed, that there was a difference between the cash recorded in the books and the cash discovered during the survey. On the other hand, Shri Sunil Kumar Rajwanshi, ld. Sr. DR stated that the ld. CIT(A) had duly considered the submissions of the assessee and rejected them on the grounds that the addition had not been made on account of the statement but on account of difference between the cash found and the cash as recorded in the books of accounts.