IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "B", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
And
DR. B.R.R. KUMAR, ACCOUNTANT MEMBER
I.T.A. No. 3898/DEL/2016
A.Y. : 2012-13
MNP TURNMATICS ITO, WARD-2, ROHTAK
C/O DEVINDER PROOTHI VS.
PARTNER M/S MNP TURNMATICS,
342/1, HISAR ROAD,
ROHTAK
(PAN: AAEFM9419R)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Ved Jain, Adv.
Department by : Sh. Saras Kumar, Sr. DR.
ORDER
PER H.S. SIDHU : JM
This appeal by the Assessee is directed against the impugned Order
of the Ld. Commissioner of Income Tax (Appeals), Rohtak dated
16.05.2016 pertaining to assessment year 2012-13. The assessee has
filed the following concise grounds of appeal:-
1. On the facts and circumstances of the case, the order passed
by the learned Commissioner of Income Tax (Appeals) 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
addition of RS.9,70,640/- made by AO on account of cash
surrendered at the time of survey.
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3. On the facts and circumstances of the case, the learned CIT(A)
has erred both on facts and in law in confirming the addition
of an amount of Rs.31,80,470 /- made by AO on account of
stock surrendered at the time of survey.
4 On the facts and circumstances of the case, the learned CIT(A)
has erred both on facts and in law in confirming the addition
of an amount of Rs.18,98,000/- made by AO on account of
expenditure incurred on renovation and addition in factory
building and Shed.
5 On the facts and circumstances of the case, the learned
CIT(A) has erred both on facts and in law in confirming the
addition of an amount of Rs.14,49,550/- made by AO on
account of unaccounted wages.
6. On the facts and circumstances of the case, the learned
CIT(A) has erred both on facts and in law in confirming the
adhoc disallowance of RS. 60,000/- made by the AO on
account of various expenses incurred during the year.
7. The appellant craves leave to add, amend or alter any of the
grounds of appeal.
2. The brief facts of the case are that the assessee has filed the return
of income on 30.9.2012 declaring total income of Rs. 14,62,390/-. The
return of the assessee was processed u/s. 143(1) of the Income Tax Act,
1961 (in short "Act") accepting the income returned. In this case a
Survey action was carried out u/s. 133A of the Act on 23.3.2012 and
statement of assessee was recorded on 23.3.2012 alongwith this,
surrender letter and post dated cheques for payment of demand was
submitted by the assessee wherein total disclosure of Rs. 75,00,000/-
was made on account of various counts i.e. excess cash found; excess
stock found; unaccounted wages and renovation and addition in factory
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building and shed. However, the assessee, later on, retracted its
statement without filing any supporting documents into substantiate his
retraction and did not include the disclosed income in his return for AY
2012-13. During the proceedings, the assessee was asked to produce the
books of accounts for verification vide notice u/s. 142(1) of the Act dated
3.12.2014. Further vide notice u/s. 142(1) of the Act dated 10.10.2014,
the assessee was asked to submitted its reply. After considering the
replies, the AO held that assessee has filed retraction without any
grounds and he failed to substantiate the same even during the
assessment proceedings, hence, the disclosure made by him wroth Rs. 75
lacs during the survey proceedings was added to the total income of the
assessee and income of the assessee was assessed at Rs. 90,22,400/-
vide order dated 31.3.2015 passed u/s. 143(3) of the Act. Against the
assessment order dated 31.3.2015, assessee appealed before the Ld.
CIT(A), who vide his impugned order dated 16.5.2016 has dismissed the
appeal of the assessee. Against the impugned order dated 16.5.2016,
assessee is in appeal before the Tribunal.
3. During the hearing, Ld. Counsel for the assesee submitted that the
lower authorities erred in rejecting the explanation of the assessee with
respect to the circumstances under which the surrender was made and
also rejected the contention of the assessee that the amount of
Rs. 75 lacs was not the real income of the assessee and hence cannot be
exigible to tax irrespective of the same being surrendered at the time of
survey. Hence, the addition in dispute may be deleted.
4. On the contrary, Ld. DR relied upon the orders of the authorities
below.
5. We have heard the rival submissions and perused the order passed
by the authorities below and the paper book filed by the assessee. We
find that the issue in dispute is that addition of Rs.75,00,000/- was made
by the AO on the basis of the survey carried out at the premises of the
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assessee on 23.03.2012. The AO has mentioned in the assessment order
dated 31.3.2015 that a survey action was carried out u/s. 133A of the Act
and statement of assessee u/s. 131 of the Act was recorded on
23.03.2012. It is noted that the assessee has made disclosure of
Rs.75,00,000/-. The AO has alleged that the assessee later on retracted
its above statement without filing any supporting document to
substantiate its retraction and has not included the income disclosed in
the return filed for the assessment year in dispute. The AO has rejected
the retraction on the ground that the same was obtained was under
threat. The AO has stated that this retraction is an afterthought and self-
serving statement as he has not substantiated the same with supporting
document. The Ld. CIT(A) has confirmed the action of the AO holding that
no explanation was offered by the assessee and no books of accounts are
produced. The explanation given is vague and cursory. On going through
the paper book we note that the above facts are not correct. A survey
was carried out at the premises of the assessee on 23.03.2012. A
statement of the assessee was recorded at the time of the search on
23.03.2012 which continue till 24.03.2012 as is evident from the
statement placed at paper book pages 25 to 30. In this statement there is
no surrender or additional income admitted by the assessee. Thereafter
assessee had filed a letter dated 24.03.2012 placed at paper book page
46-47 addressed to Ld. Addl. Commissioner of Income Tax, Rohtak range
whereby he has offered additional income of Rs.75,OO,OOO/- to cover up
discrepancies on account of excess stock, wages and expenditure on
renovation of building. The assessee thereafter on 30.03.2012 has filed
an ITR with Ld. CIT, Rohtak Range Rohtak, placed at paper book pages
48-49 whereby he has stated that on 23.03.2012 a survey was carried
out and around 35 people barged into his premises around 12:00 PM and
he was forced to sign some paper along with cheque of Rs.23,17,500/. It
was also stated in the said letter that the liability generated is totally
unjust. The assesse has filed another letter dated 02.07.2012 addressed
to the Income Tax Office, Ward (1), Rohtak placed at paper book page
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50-51 again reiterating that he was coerced to surrender the income. The
assessee also retracted the statement. During the course of assessment
when the matter was taken up by the AO the assessee made submissions.
Vide letter dated 25.03.2015 placed at paper book page 55-58 the
assessee made detailed submissions in respect of the each of the item on
which additional income was disclosed. The assessee explained that the
valuation of the closing stock as per the assessee books of account is at
cost whereas the valuation of the stock done at the time of survey was
taken inclusive of taxes i.e. Excise and VAT. The assessee also submitted
reconciliation statement which is placed at paper book page 59. In
support of this reconciliation the assessee submitted complete details of
the inventory and the invoices placed at paper book page 60 to 432.
Regarding the excess cash it was explained that no excess cash was
actually found but just to cover up the figure of Rs.75 lacs, the amount of
Rs.9,70,640/- was got declared under pressure from the assesse. We
note that as per the Board Circular, if during the course of search/survey
any unrecorded cash found in excess of Rs.5,00,000/- the Department is
duty bound to seize the same which was not done because no excess cash
was found. The assessee also submitted the details of wages placed at
paper book page 435 to 439 along with supporting evidences at pages
440 to 450. The assessee also pointed out that it is simply stated "as per
observation of survey team" which indicate that assessee has been
pressurized to make the declaration. The assessee also asked the AO to
provide the details of Rs.14,49,550/- of unaccounted wages as is being
alleged. The assessee also submitted the details of building maintenance
expenses placed at paper book pages 451-453 along with supporting
evidences placed at paper book page 454 to 529. It was further submitted
by the assessee that no paper/incriminating document relating to
repair/addition to building was found during survey. The assessee further
asked the AO if there any such document to provide the copy of the
same. The assessee also asked the AO to provide the details of any
expense or any map on the basis of which allegation is being made about
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expenditure on renovation/addition to the building. The AO has referred
to this letter dated 25.03.2015 in the assessment order in para 2 on page
2 wherein it has been admitted by the AO that assessee has filed these
submission. Thus the contention of the AO and the Ld. CIT(A) that the
retraction by the assessee is vague and assessee has failed to
substantiate the same is incorrect. In fact on going through these details
we note the assessee has given explanation for each Item under which
the additional income was offered. Further on going through the
statement recorded at the time of survey in respect to the difference in
the stock, the assessee clearly stated that he will explain the discrepancy
after consulting the records. Further, in the statement recorded there is
no allegation coming out on account of any discrepancy in job work or
expenditure on account of renovation. In the assessment order also the
AO has not pointed out or referred to any material or evidence to
substantiate the allegation that there was an discrepancy in the wages or
expenditure incurred on the renovation. The difference in the stock has
been duly explained by the assessee vide letter dated 25.03.2015 along
with supporting evidences. The AO has simply ignored the same and has
made the addition merely on the basis of the letter submitted by the
assessee on 24.03.2012 which stand retracted later on by the assessee
vide letter dated 30.03.2012 and 02.07.2012. It may be germane to
mention here that reference to these letter dated 30.03.2012 has been
stated by the assessee in its letter dated 25.03.2015 which has been
quoted by the AO in its assessment order. Thus, this letter dated
30.03.2012 was filed by the assessee and there is no rebuttal to this
letter. The entire addition is based on the surrender on the basis of a
letter dated 24.03.2012 which stand retracted by letter dated 30.03.2012
and 02.07.2012. Moreover, this surrender is not under oath. The AO has
not brought any material to rebut the explanation of the assesse. Further,
the issue is also covered by the judgment of the Hon'ble Supreme Court
in the case of CIT vs. Khader Khan Son reported in (2012) 254 CTR 229
wherein the Court has held that section 133A of the Act does not
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empower any Income Tax Authority to examine any person on oath and
therefore any admission made in a statement recorded during survey
cannot by itself be made the basis of addition. Keeping in view of the
above facts and circumstances as explained above and respectfully
following the precedent as aforesaid, we are of the considered opinion
that the addition in dispute made by the AO and confirmed by the Ld.
CIT(A) is not tenable in the eyes of law, hence, the same is deleted.
6. In the result, the Appeal filed by the Assessee stands allowed.
Order pronounced in the Open Court on 02/01/2020.
Sd/- Sd/-
[DR. B.R.R. KUMAR] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
Date 02/01/2020
"SRB"
Copy forwarded to: -
1. Appellant -
2. Respondent -
3. CIT
4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Assistant Registrar,
ITAT, Delhi Benches
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