SHRI VIPIN GUPTA, Jaipur V. INCOME TAX OFFICER, Jaipur

ITA 137/JPR/2012

• Counselvise Citation: 13723114 RSA 2012
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-11-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 09-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Keywords: Income from undisclosed sources; Loose papers; Principle of natural justice
• Section: 143(3); 133A; 131; 68; 145; 132

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR ( BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAINI ) ITA NO. 137/JP/2012 ASSESSMENT YEAR: 2008-09 PAN: ABRPG 5291 P SHRI VIPIN GUPTA VS. THE ITO PROP. M/S. S.V. AGENCIES WARD 3(3) 15, BICHUN BAGH, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 296/JP/2012 ASSESSMENT YEAR: 2008-09 PAN: ABRPG 5291 P THE ITO VS. SHRI VIPIN GUPTA WARD 3(3) PROP. M/S. S.V. AGENCIES JAIPUR 15, BICHUN BAGH, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MANISH AGARWAL DEPARTMENT BY : SHRI D.C. SHARMA DATE OF HEARING : 29.01.2014. DATE OF PRONOUNCEMENT : 11.03..2014 ORDER PER HARI OM MARATHA, J.M. THESE ARE THE CROSS APPEALS PERTAINING TO A.Y. 200 8-09 HAVING BEEN FILED AGAINST THE ORDER OF THE LD. CIT(A) I, JAIPUR, DATED 02.0 1.2012. 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS I N HIS APPEAL :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS. 21,57,256/- MADE BY THE LD. AO ON ACCOUNT OF ALLEGED EXCESS STOCK FOUND DURING THE COURSE OF SURVEY ARBITRARILY. 2 1.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN SUSTAI NING THE ADDITION OF RS. 21,57,256/- ON ACCOUNT OF ALLEGED EXCESS STOCK SOLELY RELYING U PON THE FORCED STATEMENT MADE BY THE ASSESSEE THUS THE ADDITION OF RS. 21,57,256/ - DESERVES TO BE DELETED. 1.2 THAT THE LD. CIT(A) HAS FURTHER ERRED IN SUSTAI NING THE ADDITION WITHOUT CONSIDERING THE SUBMISSIONS MADE AND EVIDENCES ADDU CED AND BY IGNORING THE FACT THAT THE INVENTORY TAKEN BY DEPARTMENT DURING THE S URVEY CANNOT BE STORED IN THE PLACE AVAILABLE IN APPELLANTS GODOWN WHICH FACT RE MAINED UNCONTROVERTED, THUS THE ADDITION OF RS. 21,57,256/- DESERVES TO BE DELE TED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS GROSSLY ERRED IN SUSTAINING AN ADDITION OF RS. 5,32,702/- O N ACCOUNT OF EXCESS CASH FOUND DURING THE COURSE OF SURVEY ARBITRARILY. 2.1 THAT THE LD. CIT(A) HAS FURTHER ERRED IN RELYIN G UPON THE FORCED SURRENDER IN STATEMENTS DURING THE COURSE OF SURVEY AND HAS BRUS HED ASIDE THE EVIDENCES FURNISHED IN SUPPORT OF THE AVAILABILITY OF CASH IN HAND WITH VARIOUS FAMILY MEMBERS AS ON THE DATE OF SURVEY THUS, THE RESULTAN T ADDITION OF RS. 5,32,702/- DESERVES TO BE DELETED. 2.2 THE REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL:- 1. REDUCING THE ADDITION FROM RS. 42,65,371/- TO RS . 21,08,115/- MADE ON ACCOUNT OF EXCESS STOCK FOUND AT THE TIME OF SURVEY. 2. REDUCING THE ADDITION FROM RS. 7,00,000/- TO RS. 5,32,702/- GIVING THEREBY RELIEF OF RS. 1,67,298/- MADE ON ACCOUNT OF EXCESS CASH FOUND DURING THE COURSE OF SURVEY. 3. DELETING THE ADDITION MADE U/S 68 OF THE I.T. AC T, 1961 ON ACCOUNT OF UNSECURED LOANS TAKEN FROM FRIENDS / RELATIVES. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS AN INDIVIDUAL AND DERIVES INCOME FROM TRADING OF PLYWOOD. FOR THE A.Y. 2008-09, HE F ILED HIS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCOME AT RS. 2,09,680/- . HOWEVER ,THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T. ACT, 1961 (THE AC T FOR SHORT) AT A TOTAL INCOME OF RS. 54,29,600/-. THE INCOME OF THE ASSESSEE HAS BEEN CO MPUTED AS UNDER:- INCOME AS PER RETURN RS.2,09,680/- ADD:- 1. DISALLOWANCE OUT OF TELEPHONE EXPENSES AS DISCUSSED ABOVE. RS. 4,544/- 3 2. ADDITION ON ACCOUNT OF EXCESS CASH AS DISCUSSED ABOVE. RS. 7,00,000/- 3. ADDITION ON ACCOUNT OF SHORTAGE OF STOCK AS DISCUSSED ABOVE. RS.42,65,371/- 4. ADDITION U/S 68 AS DISCUSSED ABOVE RS.2,50,000/- RS.52,19,915/- TOTAL INCOME RS.54,29,595/- OR SAY RS.54,29,600/- 2.4 AGGRIEVED, THE ASSESSEE WENT IN APPEAL AND THE LD. CIT(A) HAS ALLOWED PART RELIEF TO THE ASSESSEE. 2.5 NOW BOTH THE PARTIES ARE AGGRIEVED AND HAVE FIL ED THEIR RESPECTIVE APPEALS BY RAISING THE ABOVE INCORPORATED GROUNDS. 2.6 THE GROUND NOS. 1 TO 1.2 OF THE ASSESSEES APPE AL AND GROUND NO. 1 OF THE REVENUES APPEAL ARE IN RELATION TO THE ADDITION OF RS. 42,65 ,371/- MADE ON ACCOUNT OF STOCK BY TREATING IT AS UNEXPLAINED. IN FACT, A SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 08.02.2008 AT THE BUSINESS PREMISES OF THE ASSESSEE AND DURING THE COURSE OF THE SURVEY PROCEEDINGS, THE STOCK WAS PHYSICALLY QUANTIFIED AN D VALUED. DURING THE SURVEY PROCEEDINGS, THE STATEMENTS OF THE ASSESSEE AND HIS UNCLE SHRI SHYAM GUPTA WERE ALSO RECORDED. IN THE RETURN FILED FOR THIS YEAR, THE AS SESSEE HAS DISCLOSED THE INCOME OF RS. 2,09,680/-. THE ADDITIONS OF RS. 42,65,371/- HAS BE EN, ADMITTEDLY, MADE ON ACCOUNT OF STATEMENTS OF THE ASSESSEE RECORDED BY THE SURVEY P ARTY U/S 133A OF THE ACT, AND TOO ON OATH, WITHOUT ANY CORROBORATIVE EVIDENCE BEING AVAI LABLE ON RECORD TO SUPPORT THE ADDITION SO MADE. COPIES OF THE STATEMENTS OF THE ASSESSEE AND HIS UNCLE SHRI SHYAM GUPTA, RECORDED U/S 133A OF THE ACT, ARE ENCLOSED AT PAGES 193 TO 218 OF THE ASSESSEES PAPER BOOK. REGARDING POSITION AND EVIDENTIARY VAL UE OF A STATEMENT RECORDED ON OATH U/S 133A OF THE ACT, IT WAS SUBMITTED AS UNDER:- REVENUE AUTHORITY IS NOT VESTED WITH POWER IN SURV EY PROCEEDINGS CONDUCTED U/S 133A OF THE ACT TO RECORD THE STATEME NT ON OATH OF THE 4 ASSESSEE OR OF ANY OTHER PERSONS. IT IS STATED THAT THIS CONTENTION OF THE ASSESSEE IS SUPPORTED BY VARIOUS JUDICIAL PRONOUNCE MENTS INCLUDING ONE RENDERED IN THE CASE OF M/S. UNIQUE AGE ART VS. ACI T (ITA NOS. 271/JP/2013 AND 458/JP/2013 FOR THE ASSESSMENT YEAR 2008-09) VIDE ORDER DATED 18-12-2013 FROM THIS VERY BENCH. IN ADDITION TO THIS, THE LD. AR HAS ALSO RELIED ON THE DECISION OF HON'BLE APEX COURT I N THE CASE OF CIT VS. KHADER KHAN SON (2012) 254 CTR 229. 2.7 TO CONTRADICT THE ABOVE, LD. DR STATED THAT THE REVENUE AUTHORITIES HAVE AMPLE POWERS TO RECORD STATEMENTS EVEN DURING SURVEY PRO CEEDINGS AND THAT ANY ADMISSION MADE DURING SURVEY PROCEEDINGS IS LEGALLY JUSTIFIED . 2.8 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE HAV E FOUND THAT THE IMPUGNED ADDITION IS SOLELY BASED ON ADMISSION MADE BY THE A SSESSEE IN THE STATEMENTS RECORDED,ON OATH, DURING SURVEY PROCEEDINGS. WE HAVE GONE THRO UGH THE RELEVANT PORTION OF THIS STATEMENT ALSO. THE SUBMISSIONS OF THE LD. AR THAT ANY STATEMENT RECORDED DURING SURVEY PROCEEDINGS CONDUCTED U/S 133A OF THE ACT HAS NO EV IDENTIARY VALUE IS FOUND TO BE A CORRECT POSITION OF LAW. THE HON'BLE APEX COURT HAS CLEARLY LAID DOWN THIS PRINCIPLE IN THE CASE OF CIT VS. KHADER KHAN SON (SUPRA). THIS BENCH HAS CLEARLY SPELT OUT THIS ISSUE IN FAVOUR OF THE ASSESSEE VIDE PARA 3.4 OF ITS ORDE R IN THE CASE OF M/S. UNIQUE ART AGE VS. ACIT (SUPRA). FOR READY REFERENCE, WE EXTRACT PARA 3.4 OF TRIBUNAL ORDER AS UNDER:- 3.4 .AFTER CONSIDERING THE ABOVE SUBMISSIONS VIS -A-VIS THE REFERRED TO PORTIONS OF THE RECORDS, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED STATEMENT RECORDED U/S 13 3A OF THE ACT AND THAT TOO ON OATH DO NOT HAVE ANY EVIDENTIARY VA LUE. IN THIS REGARD, THE DECISION OF HON'BLE SUPREME COURT RENDE RED IN THE CASE OF CIT VS. KHADER KHAN SON REPORTED IN (2012) 254 CTR 229 IS RELEVANT. IN THIS CASE, THEIR LORDSHIPS HAVE HEL D THAT SECTION 133A OF THE ACT DOES NOT EMPOWER ANY INCOME TAX AUT HORITY TO EXAMINE ANY PERSON ON OATH, AND THEREFORE, ANY ADMI SSION MADE IN A STATEMENT RECORDED DURING SURVEY CANNOT, BY ITSEL F, BE MADE THE BASIS FOR ADDITION. THE HON'BLE MADRAS HIGH COURT W HILE DECIDING THE CASE OF CIT VS. S. KHADER KHAN SON REPORTED IN (2008), 300 ITR 157, WHICH HAS BEEN UPHELD BY THE HON'BLE APEX COURT AS DISCUSSED ABOVE, HAS HELD THAT IN VIEW OF THE SCOPE AND AMBIT OF 5 THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY ACTION U/S 133A SHALL NOT HAVE ANY EVIDENTIARY VALUE. IT COULD NOT BE SAID SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY ONE O F THE PARTNERS OF THE ASSESSEE FIRM THAT THE DISCLOSED INCOME WAS A SSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. SIMILAR VIEW HAS BEE N TAKEN BY HON'BLE KERALA HIGH COURT WHILE DECIDING THE CASE P AUL MATHEWS AND SONS VS. CIT REPORTED IN (2003) 263 ITR 101. IN THE VERY STRONG WORDS, THE HON'BLE KERALA HIGH COURT OBSERVE D THAT DURING SURVEY OPERATION, IF ANY STATEMENT IS RECORDED, IT HAS GOT NO EVIDENTIARY VALUE AND IF THE ASSESSEE HAVING FOUND THAT THERE WERE SOME OMISSIONS ON ITS PART, OFFERED CERTAIN AMOUNTS AS ADDITIONAL INCOME FOR THE YEARS IN QUESTION AND GAVE A WRITTEN OFFER. SIMILAR VIEW HAS BEEN TAKEN BY HON'BLE GUJARAT HIGH COURT AND THE HON'BLE MADRAS HIGH COURT. THEREFORE, IN VIEW O F THE SETTLED POSITION OF LAW , THE STATEMENT OF ADMISSION OBTAIN ED ON OATH FROM THE ASSESSEE WOULD NOT EFFECT OR WOULD BE MADE A BASIS FOR ADDITION EVEN IF ADMISSION WAS MADE IN THOSE STATEM ENTS AND THE ASSESSEE MADE SURRENDER OF INCOME. THE ASSESSEE HAS A RIGHT TO RETRACT ANY ADMISSION EVEN IF IT IS A VALID ADMISS ION AND TO DISPROVE ANY SUCH ADMISSION EVEN IF IT IS MADE UNDE R THE PROCEEDINGS CONDUCTED U/S 132 OF THE ACT. THEREFORE , WE IGNORE THE ADMISSION PART OF THE STATEMENT RECORDED U/S 13 3A. ACCORDINGLY, BY RESPECTFULLY FOLLOWING THE ABOVE L EGAL POSITION, WE EXCLUDE THE ADMISSION MADE IN THE STATEMENT FOR SUPPORTING THE IMPUGNED ADDITION. NOW WE HAVE TO SEE AS TO WHETHER DE HORS THIS STATEMENT CAN ANY AD DITION, IN THIS ITEM,BE MADE OR SUSTAINED OR NOT 2.9 IT WAS STATED BY THE LD. AR THAT THERE IS NO DI SCREPANCY IN THE STOCK FOUND DURING SURVEY AND TO SUPPORT THIS VERSION, THE LD. AR HAS SUBMITTED WRITTEN SUBMISSION WHICH IS BEING EXTRACTED, VERBATIM, AS UNDER: THE BRIEF OF THE STOCK PHYSICALLY MEASURED AND QU ANTIFIED BY THE SURVEY TEAM DURING THE COURSE OF SURVEY IS TABULATED AS UNDER: STOCK FOUND AT 15 & 9, BICHUN BAGH 52,66,840/ - STOCK FOUND AT 329, NAHARGARH ROAD 2,60,041/ - 55,26,881/- AFTER VALUING THE SAME AT THE PRICE BEST KNOWN TO T HE SURVEY TEAM, A REDUCTION OF 7% (CONSIDERING THE G.P. RATE AT 7%) WAS GIVEN AND THE REBY ARRIVING AT A FIGURE OF RS. 6 51,40,000/- [55,26,881 3,86,881] BEING THE STOCK STATED TO HAVE BEEN FOUND AT THE BUSINESS PREMISES / GODOWNS OF THE ASSESSEE AND BY REDUCING AN AMOUNT OF RS. 8,74,629/- TOWARDS THE STOCK STATED AS RECORDED IN THE BOOKS O F ACCOUNTS AS ON THE DATE OF SURVEY THE BALANCING FIGURE OF RS. 42,65,371/- WAS TREATED AS THE STOCK EXCESS FOUND DURING THE COURSE OF SURVEY. IT IS RELEVANT TO MENTION THAT TH E BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT COMPLETE AS ON THE DATE OF SURVEY WHICH WAS ALS O STATED IN HIS STATEMENTS RECORDED DURING THE COURSE OF SURVEY IN REPLY TO Q.NO.14 (ST ATEMENT IN HINDI) .. IT IS FURTHER SUBMITTED THAT DURING THE COURSE OF S URVEY WHILE CALCULATING THE CLOSING STOCK AS ON THE DATE OF SURVEY A TRADING ACCOUNT WAS PREP ARED (APB-241) WHEREIN THE OPENING STOCK HAS BEEN TAKEN AT RS. 6,70,307/- AS AGAINST T HE OPENING STOCK OF RS. 12,32,473/- AS PER THE BALANCE SHEET AS AT 31.03.2007 (APB-245) TH US THE FIGURE OF THE OPENING STOCK DESERVES TO BE SUBSTITUTED TO RS. 12,32,473/- AND T HE CONSEQUENT CLOSING STOCK WORKED OUT AT RS. 8,74,629/- SHOULD BE ENHANCED TO RS. 14,36,7 95/-. THE LD. AO IN SUMMARY MANNER WITHOUT APPRECIATING T HE FACTS OF THE CASE AND SUBMISSIONS MADE, HAD CONCLUDED THE ASSESSMENT BY O BSERVING IN PAGE 10 IN PARA 2 OF THE ASSESSMENT ORDER AS UNDER: ..THE SURRENDER MADE BY THE ASSESSEE WAS UNEQUIV OCAL AND UNDER NO DURESS. THE CLAIM NOW MADE THAT INVENTORY OF STOCK HAS BEEN MADE BY THE SURVEY TEAM ON IMAGINARY BASIS, HAS NO SUBSTANCE AN D IS NOT PALATABLE. WHILE OBSERVING SO LD. AO HAS FAILED TO APPRECIATE THE DEFICIENCIES AS POINTED OUT BY THE ASSESSEE IN THE INVENTORY SHEETS PREPARED DURING TH E COURSE OF SURVEY. THE POINT WISE SUBMISSION TO THE DISCREPANCIES BROUGHT TO THE NOTI CE OF THE LD. AO IS AS UNDER: A) VALUATION OF STOCK: THE SURVEY TEAM VALUED THE STOCK AT A PRICE BEST K NOWN TO THEM WHICH WAS NEITHER THE COST PRICE NOR THE PREVAILING MARKET PRICE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A DETAILED WORKING OF THE TRUE VALUE OF STOCK AVAILABLE WITH ASSESSEE AS ON THE DATE OF SURVEY BY TAKING THE COST PRICE OF T HE GOODS WAS ALSO SUBMITTED ACCORDING TO WHICH THE VALUE WAS WORKED OUT AT RS. 38,25,650.10 AS AGAINST TOTAL VALUE OF RS. 55,26,881/- BY SURVEY PARTY. COPIES OF STOCK SHEETS AS VALUED BY THE SURVEY OFF ICIALS (APB 219-229 ) AS WELL AS BY THE ASSESSEE ADOPTING THE COST PRICE ARE AT (APB 14 8-153) ALONGWITH THE COPIES OF FEW BILLS ON SAMPLE BASIS AS SUBMITTED BEFORE THE LD. A O ARE AT APB 154-165. LD. CIT(A) AFTER VERIFICATION HAS ACCEPTED THIS CONTENTION, CI T(A) PAGE 7 PARA 1. THE LD. AO HAS FAILED TO REBUT ALL THESE EVIDENCES FILED IN THE SHAPE OF CHART ALONGWITH BILLS IN VERIFICATION OF COST PRICE ADOPT ED AND HAS SUMMARILY CONCLUDED THE MATTER BY OBSERVING THAT THE AMOUNT HAS BEEN SURREN DERED DURING THE COURSE OF SURVEY AND APART FROM THAT NO OTHER MATERIAL TO CONTROVERT THE SUBMISSION MADE BY THE ASSESSEE WAS BROUGHT ON RECORD. 7 AS REGARDS TO THE OBSERVATION OF THE LD. AO MADE O N THE LOOSE PAPERS IMPOUNDED DURING THE COURSE OF SURVEY AS ANNEXURE A-1 AND A-7, IT IS SUBMITTED THAT ASSESSEE HAS FILED DETAILED SUBMISSION WITH REGARD TO THE LO OSE PAPERS FOUND DURING THE COURSE OF SURVEY (APB 127-128) EXPLAINING THE TRUE NATURE OF THE TRANSACTIONS CONTAINED THEREIN HOWEVER, THE LD. AO HAS MISERABLY FAILED TO CONTROVERT THE SUBMISSION MADE BY THE ASSESSEE BY BRINGING RELEVANT MATERIAL ON RE CORD AND HAS BASED HIS WHOLE ASSESSMENT ORDER SOLELY ON THE SO CALLED ADMISSION OF THE ASSESSEE IN THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY VALIDITY OF WH ICH HAS ALREADY BEEN DOUBTED IN THE SUBMISSIONS MADE HEREIN ABOVE. B) STOCK AS PER BOOKS OF ACCOUNTS: THE STOCK AS TAKEN BY THE SURVEY OFFICIALS WAS A S UMMARY ONE, AS THE BOOKS OF ACCOUNTS WERE NOT COMPLETE, WHICH IS ALSO EVIDENT F ROM THE REPLY GIVEN BY THE ASSESSEE IN THE STATEMENTS RECORDED DURING THE COUR SE OF SURVEY, THE RELEVANT ANSWER AS REPRODUCED SUPRA. THE STOCK AS PER THE BOOKS OF ACCOUNTS AS ON THE DATE OF SURVEY IS RS. 16,68,394/- FOR WHICH THE DETAILED SHEETS SH OWING VARIOUS ITEMS ARE AT (APB 166-167). THE SAID STOCK SHEETS ARE FULLY SUPPORTED BY THE NECESSARY PURCHASES BILLS AND SALES BILLS, WHICH WERE TENDERED AND OPEN FOR V ERIFICATION, HOWEVER NO ERROR OF WHATSOEVER NATURE WAS POINTED OUT BY THE LD. AO ON VERIFICATION OF THE BOOKS OF ACCOUNTS. C) QUANTITY OF STOCK AS TAKEN BY THE SURVEY OFFICIALS: IN THE MATTER IT IS SUBMITTED THAT EVERY PLACE OF STORAGE HAS A CAPACITY IN TERMS OF AREA, VOLUME ETC. WITHIN WHICH GOODS CAN BE STORED AT A P ARTICULAR PLACE. IN THE CASE OF ASSESSEE THE STOCK WAS KEPT AT 2 (T WO) GODOWNS (1) AT 15, BICHUN BAGH AND (2) AT 9, BICHUN BAGH. BOTH THE GODOWNS HAVE A MAXIMUM CEILING OF QUANTITY WHICH CAN BE STORED. AT 15, BICHUN BAGH THERE ARE 4 ROOMS OF WHICH THE SIZES ARE FIXED AND AN OPEN AREA WHICH ALSO HAS ITS OWN LIMITATION. FURTHER THE OTHE R GODOWN SITUATED AT 9, BICHUN BAGH HAS A SINGLE ROOM. THE AFORESAID TWO PROPERTIE S HAS A MAXIMUM STORAGE CAPACITY OF AROUND 5500 TO 6000 SQ. FT. OF GOODS WH ICH IS NOT AN IMAGINATION BUT ARE BASED ON MATHEMATICAL CALCULATION WHEREIN NO GUESS WORK IS ALLOWED AND PERMITTED. PRECISE CALCULATION OF THE SIZES OF THE ROOMS IS AT (APB 246). HOWEVER THE STOCK AS QUANTIFIED BY THE SURVEY TEAM IF WORKED OUT IN SQ. FT. MEASUREMENT COMES TO MORE THAN 14,500 SQ. FT. WHICH LOOKING TO THE TOTAL STORAGE AREA AVAILABLE IN ITSELF IS PROVED TO BE AN IMAGINA RY FIGURE AND CLEARLY DEPICTS THE PICTURE AS TO HOW THE STOCK WAS MEASURED AND QUANTI FIED DURING THE COURSE OF SURVEY. THE PRECISE WORKING OF THE STOCK ALLEGED TO BE MEAS URED AND QUANTIFIED BY THE DEPARTMENT OFFICIALS IS AT (APB 219-229) . IT IS A MATTER OF COMMON KNOWLEDGE THAT IN AN AREA HAVING STORAGE CAPACITY OF 1 SQ. FT. CANNOT ACCOMMODATE THE QUANTITY MORE THAN THAT. IN THE CASE OF THE ASSESSEE THE SPACE AVAILABLE WITH THE ASSESSEE CAN AT THE MOST ACCOMMO DATE GOODS HAVING 5500 SQ. FT. TO 8 6000 SQ. FT. OF THE QUANTITY IN TERMS OF THE TOTAL AREA OCCUPIED, THEREFORE, THE QUANTITY MEASURED AND QUANTIFIED BY THE SURVEY TEAM IS A FLI GHT OF IMAGINATION NOTED DOWN ON THE PAPER TO SOMEHOW OBTAIN ADMISSION OF THE EXCESS STOCK AND SURRENDER OF INCOME. THE LD. AO ON THIS SCORE PREFERRED NOT TO COMMENT AND KEPT SILENT AND HAS NOT REBUTTED THE SUBMISSIONS FILED ON THIS ISSUE FROM W HICH IT CAN BE SAFELY PRESUMED THAT HE HAS NOTHING TO SAY AS SUBSTANCE OVER FORMS ALWAY S PREVAILS AND IF HE WAS OF THE VIEW THAT THE INFORMATION FURNISHED AND SUBMISSION MADE WERE FALSE, HE COULD HAVE DEPUTED THE WARD INSPECTOR OR REFER THE MATTER TO T HE EXPERT WHO AFTER PHYSICAL INSPECTION OF BOTH THE PLACES COULD HAVE REPORTED T HAT THE CONTENTION RAISED BY THE ASSESSEE WAS NOT CORRECT. HOWEVER THE LD. AO WITH A PRECONCEIVED NOTION OF MAKING THE ADDITIONS BASED ON THE SO CALLED ADMISSION HAS COMPLETED THE ASSESSMENT BY RELYING UPON THE SO CALLED ADMISSION OF THE ASSESSE E IN HIS STATEMENTS WITHOUT IN ANY MANNER MAKING INDEPENDENT ENQUIRIES WHICH COULD ENA BLE HIM TO DEPART JUSTICE TO THE HUMBLE ASSESSEE. ALL THESE FACTS WERE BROUGHT TO THE NOTICE OF THE L D. CIT (A) IN THE APPELLATE PROCEEDINGS AND FURTHER FOLLOWING DETAILS/FACTS ALSO SUBMITTED IN THE APPELLATE PROCEEDINGS VIDE SUBMISSIONS MADE ON VARIOUS DATES (APB 1-115): A) THE ASSESSEE AT THE END OF THE RESPECTIVE YEAR, THE GOODS LYING IN GODOWN AND SHOP ARE PHYSICALLY QUANTIFIED AND VALUED ON THE BASIS O F COST PRICE TO THE ASSESSEE WHICH IS DULY BACKED BY NECESSARY PURCHASES INVOICES. THI S PRACTICE HAS CONSISTENTLY BEEN FOLLOWED BY ASSESSEE SINCE INCEPTION OF BUSINESS AN D NEVER BEEN DOUBTED BY THE DEPARTMENT. NECESSARY LIST OF OPENING STOCK AS AT 0 1.04.2007 WAS ENCLOSED ALONGWITH THE COPIES OF PURCHASES INVOICES IN SUPPO RT OF THE RATES TAKEN FOR THE VALUATION THEREOF (APB 15-26). THE PURCHASES BILLS AND VOUCHERS WERE ALSO PRODUCED BEFORE LD. AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS AND THERE WAS NO DISCREPANCY POINTED OUT BY THE AO IN THE VALUATI ON OF OPENING AND CLOSING STOCK. B) IN SUPPORT OF THE RATES CLAIMED BY THE ASSESSEE COP IES OF CERTAIN PURCHASES BILLS WERE ALSO SUBMITTED AVAILABLE AT PAPER BOOK PAGES 154-16 5. IN THE SAID BILLS THE RATE PER ITEM WAS MENTIONED IN TERMS OF PER SQ. MTR. HOWEVER , IN THE INVENTORY SHEET PREPARED BY THE DEPARTMENT SINCE THE MEASUREMENT WA S TAKEN IN PER SQ. FT. THEREFORE, THE VALUE IN PER SQ. MTR. WAS DIVIDED BY A FACTOR O F 10.764 TO CONVERT IT AT PER SQ. FT. RATE. COPIES OF THOSE BILLS HAVING PER SQ. FT. RATE S CONVERTED BY APPLYING THE ABOVE STATED FACTOR WAS SUBMITTED (APB 3-14) . C) WITH REGARD TO THE DIFFERENCE IN SALES IT WAS SUBMI TTED THAT THE AMOUNT OF VAT CHARGED FROM THE CUSTOMERS ON THE SALE OF THE GOODS WAS INCLUDED IN THE GROSS VALUE OF THE SALES WHICH WAS CONSIDERED WHILE WORKI NG OUT THE SALES AS ON THE DATE OF SURVEY. SUCH BILLS ARE HAVING SL. NO. 1691 TO 17 03. AS THE ASSESSEE HAS SEPARATELY ACCOUNTED FOR THE VAT AND THE SALES IS N ET OF VAT WHICH HAS RESULTED INTO THE DIFFERENCE, NECESSARY DETAILS WERE ENCLOSE D AT (APB 30-47). D) WITH REGARD TO THE DIFFERENCE BETWEEN THE PURCHASES AND SALES APPEARING IN THE TRADING ACCOUNT PREPARED DURING THE COURSE OF SURVE Y AND SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS EXPLAINED T HAT THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE INCOMPLETE AS ON THE DATE OF SURV EY WHICH FACT WAS ALSO BROUGHT TO THE NOTICE OF THE SURVEY PARTY AND AFTER COMPLET ION OF THE BOOKS OF ACCOUNTS THE 9 TRADING ACCOUNT WAS PREPARED WHEREIN THE BILLS OF P URCHASES OF GOODS REMAINED UNRECORDED AT THE TIME OF SURVEY WERE RECORDED AND ACCORDINGLY THE PURCHASES WAS AS ON THE DATE OF SURVEY COMES TO RS. 32,64,648 /- AS AGAINST THE PURCHASES RECORDED AT RS. 31,24,668/- IN THE TRADING ACCOUNT PREPARED DURING THE SURVEY. THE COPY OF THE BILLS TOTALING TO RS. 74,847/- OUT OF T HE TOTAL DIFFERENCE OF RS. 1,41,139/- WAS SUBMITTED. THE LD. CIT (A) AFTER APPRECIATING THE SUBMISSION M ADE AND EVIDENCE ADDUCED BY THE APPELLANT ACCEPTED THE CONTENTION OF THE ASSESSEE T O SOME EXTENT AND ALLOWED THE RELIEF TO THE ASSESSEE ON FOLLOWING ISSUES AND THEREBY REDUCE D THE ADDITION OF EXCESS STOCK TO RS. 21,57,256/- : A) SUBSTITUTED THE FIGURE OF THE OPENING STOCK TO RS. 12,32,473/- AS AGAINST THE RS. 6,70,307/- TAKEN AT THE TIME OF SURVEY. B) IN CASE OF DIFFERENCE IN PURCHASES ONLY BENEFIT OF RS. 74,847/- WAS ALLOWED AS THE BILLS WERE SUBMITTED WHICH WERE DULY VERIFIED BY TH E LD. AO IN THE REMAND PROCEEDINGS (APB-27). C) THE LD .CIT(A) HAS ACCEPTED THE CONTENTION OF THE A SSESSEE REGARDING VALUATION OF STOCK TO BE TAKEN AT COST AS PER BILLS SUBMITTED WH ICH WERE DULY VERIFIABLE WITH THE VALUATION DONE BY THE ASSESSEE, THEREFORE VALUE OF STOCK ON THE DATE OF SURVEY IS TAKEN AT RS. 38,25,650/- AS VALUED BY THE ASSESSEE. D) AFTER NECESSARY VERIFICATION, VALUE OF STOCK AS PER BOOKS WAS ACCEPTED AT RS. 16,68,394/- ON THE BASIS OF THE ABOVE FINDINGS/OBSERVATIONS, TH E LD. CIT(A) HAS REDUCED THE ADDITION TO RS. 21,57,256/- ON ACCOUNT OF EXCESS STOCK BY AL LOWING SET OFF OF THE STOCK AS PER BOOKS AT RS. 16,68,394/- OUT OF VALUE OF STOCK AT P URCHASE PRICE OF RS. 38,25,650/-, HOWEVER THE LD. CIT(A) HAS GROSSLY REJECTED THE CON TENTION OF THE ASSESSEE REGARDING STORAGE CAPACITY OF PLACE WHERE THE GOODS WERE FOUN D DURING THE COURSE OF SURVEY BY OBSERVING THAT AT NO POINT OF TIME SHRI SHYAM GUPTA AGITATE THE QUANTIFICATION OF STOCK. SUBSEQUENT TO THE SURVEY IT IS NOT POSSIBLE TO GIVE ANY BENEFIT TO THE ASSESSEE ON ACCOUNT OF QUANTIFICATION OF THE STOCK ON MERE CONJECTURES AND SURMISES AND NO RELIEF CAN BE GRANTED 3 YEARS LATER ON HYPOTHETICAL CALCULATION O F AREA ETC. WITHOUT ANY EVIDENCE ON RECORD. ALL THE ABOVE OBSERVATIONS / ALLEGATION OF THE LD. CIT (A) DO NOT FIND FORCE IN VIEW OF FOLLOWING FACTS:- 1. ON THE PERUSAL OF THE STATEMENT OF THE ASSESSEE REC ORDED U/S 133A IT WOULD BE EVIDENT THAT THE STATEMENT RECORDED ARE NOTHING MOR E THAN THE WRITTEN PAPERS SIGNED BY THE ASSESSEE AND ARE THE OBTAINED STATEM ENTS SIGNED ON DOTTED LINES. THE ASSESSEE HAS MADE SURRENDER OF RS. 49,65,371/- ON VARIOUS ISSUES AS UNDISCLOSED INCOME OF THE ASSESSEE WITHOUT IN ANY M ANNER LINKING OR REFERRING THE BOOKS OF ACCOUNTS MAINTAINED IN THE NORMAL COURSE O F BUSINESS. AFTER THE SURVEY, ASSESSMENT PROCEEDING WAS FIRST OPPORTUNITY AVAILAB LE TO THE ASSESSEE, WHEN HE COULD HAVE POINTED OUT ANY IRREGULARITY IN THE SURV EY PROCEEDINGS AND FURTHER THE ASSESSEE HAS RETRACTED THE STATEMENT AT THE TIME OF FILING OF RETURN OF INCOME WHEREIN THE INCOME ADMITTED DURING THE COURSE OF SU RVEY WAS NOT INCLUDED IN THE 10 INCOME DECLARED, THUS THE STATEMENTS OF THE ASSESSE E RECORDED DURING THE SURVEY ON OATH DESERVES TO BE IGNORED AND EXCLUDED WHICH H AVE BEEN MADE THE SOLE BASIS FOR MAKING SUCH A HUGE ADDITIONS. 2. THE LD. AO AS WELL AS LD. CIT (A) HAVE NOT GIVEN AN Y FINDING ABOUT THE IRREGULARITIES POINTED OUT BY THE ASSESSEE IN THE S URVEY. THE STOCK STATED TO BE FOUND IN THE ASSESSEE GODOWNS IS AN IMPOSSIBLE QUAN TITY WHICH COULD BE STORED IN THE AVAILABLE AREA WITH THE ASSESSEE. 3. THE LD. CIT(A) HAS FAILED TO APPRECIATE THE PIN POI NT WORKING SUBMITTED BY THE ASSESSEE REGARDING THE STORAGE CAPACITY OF AREA WHE REIN THE GOODS FOUND TO BE KEPT DURING THE COURSE OF SURVEY. IN THE REMAND REPORT ( APB-27) THE LD. AO FAILED TO EVEN COMMENT UPON THE CONTENTION RAISED. HOWEVER, T HE LD. AO AS WELL AS THE LD. CIT(A) BOTH HAD REJECTED THE CONTENTION WITHOUT CONTROVERTING THE FINDINGS AND EVIDENCE BROUGHT ON RECORD BY THE APPELLANT. TH US THE OBSERVATION OF LD. CIT(A) DESERVES TO BE IGNORED AND EXCLUDED. 4. THE LD. CIT (A) HAS NOT APPRECIATED THE FACT THAT T RADING RESULTS DECLARED BY THE ASSESSEE COMPANY WERE ACCEPTED AND PROVISION OF SEC TION 145 (3) WERE NOT INVOKED MEANING THEREBY THAT THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE ARE FREE FROM ANY DEFECTS. FURTHER EXCEPT THE SO CA LLED ADMISSION OF EXCESS STOCK, LD. AO HAS FAILED TO BRING ON ANY CORROBORATIVE EVI DENCE WITH REGARD TO THE ALLEGATIONS MADE. THE PURCHASES AND SALES HAVE BEEN ACCEPTED. 5. FURTHER, LD. CIT(A) HAS IGNORED THE FACT THAT IN TH E EVENT THE STOCK QUANTITIES AS NOTED AND VALUED ARE RELATED TO ITS IMPACT ON THE P ROFIT & LOSS AND IN PARTICULAR THE GROSS PROFIT OF THE TRADING PART OF THE ASSESSE E, IT LEADS TO AN ABSURD TRADING RESULT GIVING 120% OF GROSS PROFIT WHICH IS AN IMPO SSIBILITY NOR THE DEPARTMENT HAS BEEN ABLE TO BRING ON RECORD A COMPARABLE CASE WITH SUCH A HIGH TRADING PROFIT. IT WOULD BE RELEVANT TO NOTE HERE THAT THE SALES AS WELL AS THE PURCHASES MADE BY THE ASSESSEE HAD NOWHERE BEEN DOUBTED EITHE R DURING THE SURVEY OR THE ASSESSMENT PROCEEDINGS, THUS BY TAKING THE SALES AN D PURCHASES AS AN ERROR FREE PHENOMENA IT IS PROVED BEYOND DOUBT THE ADDITIONS M ADE DESERVES TO BE STRUCK DOWN IN TOTO. THE ASSUMPTIONS MADE AND APPROXIMATIONS DONE IN STO CK INVENTORISATION HAS BEEN DISAPPROVED BY THE HONBLE INCOME TAX APPELLATE TRI BUNAL, DELHI BENCH IN THE CASE OF BANSAL STRIPS (P) LTD. VS. ACIT REPORTED IN 99 ITD 177 WHEREIN IT HAS BEEN HELD THAT DURING THE COURSE OF SEARCH PROCEEDINGS, THE SE ARCH AUTHORITIES HAD ATTEMPTED TO VERIFY THE STOCK DETAILS KEPT BY THE A SSESSEES BY COMPARING THE STOCK AS PER BOOKS WITH INVENTORY OF PHYSICAL STOCK TAKEN DURING THE COURSE OF SEARCH. THE ENTIRE EXERCISE IN THE CASES OF ABOUT H ALF A DOZEN BUSINESS CONCERNS WAS COMMENCED AND COMPLETED WITHIN A FEW HOURS. THAT BEING SO, THE FINDING OF EXCESS STOCK BEING FO UND DURING THE COURSE OF SEARCH OPERATION HAD BEEN GIVEN BY THE AUTHORITIES BELOW ON GROSSLY INADEQUATE 11 MATERIAL. THAT FINDING WOULD NOT BE SUSTAINED EVEN UNDER THE PARAMETERS OF INCOME TAX ASSESSMENT PROCEEDINGS NOT BOUND BY TECH NICAL RULES OF EVIDENCE. THEREFORE, THE ADDITIONS MADE BY THE AUTHORITIES BE LOW, ON THE ALLEGED EXCESS STOCK, SHORTAGE OF STOCK PHYSICALLY FOUND DURING TH E COURSE OF SEARCH PROCEEDINGS IN ALL THE APPEALS WERE DIRECTED TO BE DELETED. IT IS FURTHER SUBMITTED THAT THE ASSESSEE IS MAINTA INING REGULAR BOOKS OF ACCOUNTS CONSISTING OF CASH BOOK, LEDGER, BANK STATEMENTS AN D VOUCHERS FOR EXPENSES. THE ACCOUNTS OF THE ASSESSEE HAVE BEEN AUDITED BY A FIRM OF CHAR TERED ACCOUNTANT WHO HAVE NOT REPORTED ANY DEFECTS IN THE MAINTENANCE OF ACCOUNTS . THE PURCHASES AND SALES OF THE ASSESSEE ARE FULLY VOUCHED AND BACKED BY NECESSARY EVIDENCE AND NO DEFECTS OF WHATSOEVER NATURE HAS BEEN POINTED OUT AND ASSESSEE IS IN A REGULAR PRACTICE OF PHYSICALLY VERIFYING THE STOCK SO AS TO GET RID OF ANY POSSIBL E LEAKAGE. IN THE CIRCUMSTANCE, IT IS SUBMITTED THAT THE ADDIT ION MADE AND SUSTAINED SOLELY ON THE BASIS OF THE SURRENDER MADE DURING THE COURSE OF SU RVEY WHICH WAS NOT ACCEPTED AND WHEN THE QUANTIFICATION AND VALUATION OF THE STOCK DURING THE COURSE OF SURVEY SUFFERS SERIOUS DEFECTS AND, THE SAME CANNOT BE RELIED UPON THUS THE STOCK AS RECORDED IN THE BOOKS OF ACCOUNTS DESERVES TO BE ACCEPTED AND THE A DDITION OF RS. 21,57,256/- SO SUSTAINED DESERVES TO BE DELETED. 2.10 PER CONTRA , THE LD. DR HAS SUPPORTED TO THE ORDERS OF THE ASSESSING AUTHORITY AND HAS JUSTIFIED THE ADDITIONS MADE BY THE AO. 2.11 AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSI ON ON THE ISSUE, AND AFTER PERUSING THE MATERIAL AVAILABLE ON RECORD, WE ARE O F THE CONSIDERED OPINION THAT THE DIFFERENCE IN STOCK IS NOT REAL. THE SURVEY PARTY H AS PHYSICALLY QUANTIFIED THE STOCK WHICH RUNS INTO 11 SHEETS HAVING 121 ITEMS HAVING DIFFERE NT QUANTITY, QUALITY AND MEASUREMENTS. THE QUANTIFICATION OF SUCH A HUGE QUANTITY OF STOC K IS HUMANLY IMPOSSIBLE ON THE SAME DAY. FURTHER THE STOCK WAS VALUED AT RS. 55,26,881/ - BY THE SURVEY TEAM WHICH IS BASED ON THE SALE PRICE AND THE ASSESSEE AFTER SUBSTITUT ING THE COST PRICE HAS WORKED OUT THE ACTUAL COST OF THE TOTAL STOCK AT RS. 38,25,650/-, WHICH FACT IS ADMITTED BY THE LD. CIT(A), WHO HAS MADE SPECIFIC OBSERVATIONS IN PARA 1 AT PAGE 7 OF HER ORDER, AS UNDER: I HAVE CAREFULLY PERUSED THE EVIDENCE FILED BY WAY OF BILLS OF PURCHASES ALONGWITH THE SUBMISSIONS. ON VERIFICATIO N, IT IS SEEN 12 THAT IT IS POSSIBLE TO CORRELATE THE PURCHASE PRICE I.E. THE COST AS PER PURCHASE BILLS. THE COST PRICE OF THE STOCK WAS VERIFIED ON A RANDO M BASIS WITH THE PURCHASE BILLS FILED. THE SUBMISSIONS OF THE AR REGARDING VALUATION OF STOCK TO BE TAKEN AT COST ARE ACCEPTED BECAUSE IT IS AS PER THE ACCOUNTING PRINCIPLES THAT STOCK IS TO B E VALUED AT COST OR SALE PRICE WHICHEVER IS LOWER. THE VALUATION OF COST PRICE IS TO BE TAKEN AS PER BILLS SUBMITTED SINCE IT IS POSSIBL E TO CORRELATE THE SAME WITH STOCK AS PER STOCK INVENTORY MADE DUR ING SURVEY. THEREFORE, THE VALUE OF STOCK ON THE DATE OF SURVEY IS TO BE TAKEN AT RS. 38,25,650/-. WE FIND THAT THE OBSERVATIONS OF THE LD CIT(A) ARE BASED ON THE FACTS AND ARE MADE AFTER DUE VERIFICATION OF THE RECORDS. THEREFORE, IN OUR CONSIDERED OPINION THE VALUE OF STOCK PHYSICALLY AVAILABLE WITH THE ASSESSEE SHOULD BE TA KEN AT RS. 38,25,650/- AS AGAINST RS. 55,26,881/- TAKEN BY THE SURVEY TEAM. THIS WILL RES ULT INTO THE DEDUCTION OF RS. 17,01,231/- IN THE TOTAL ADDITION MADE ON ACCOUNT O F STOCK. FURTHER THE SURVEY TEAM HAS TAKEN THE VALUE OF STOCK AS PER BOOKS OF ACCOUNTS A S ON THE DATE OF SURVEY AT RS. 8,74,629/- AS AGAINST THE ACTUAL VALUE OF STOCK AS PER BOOKS OF ACCOUNTS BEING AT RS. 16,68,393/. THEREFORE, THE CREDIT OF THE DIFFERENT IAL AMOUNT OF RS. 7,93,764/- CANNOT BE DENIED OUT OF THE TOTAL ADDITIONS MADE. WE DIRECT ACCORDINGLY TO REDUCE THE SAME FROM THE TOTAL ADDITION SO MADE ON ACCOUNT DIFFERENCE I N THE STOCK. BOTH THE LOWER AUTHORITIES HAVE FAILED TO APPRECIATE THE FACT THAT THE STOCK O F SUCH A HUGE QUANTITY CANNOT BE HUMANLY POSSIBLE IN SUCH A SHORT TIME AND VALUED ON A SAME DAY AND THE ARGUMENT OF THE ASSESSEE THAT THE TOTAL STORAGE CAPACITY OF THE ARE A WAS INSUFFICIENT TO STORE THE GOODS. THE AO HAS ACCEPTED THE TRADING RESULTS DECLARED AND HA S NOT INVOKED THE PROVISION OF SECTION 145(3) OF THE ACT. THE AO HAS NOT FOUND ANY MATERIA L DISCREPANCY IN THE BOOKS OF THE ACCOUNTS. THEREFORE, WE FIND FORCE IN THE ARGUMENT OF THE LD. AR THAT IF THE VALUE OF THE SO CALLED EXCESS STOCK IS ADDED TO THE TRADING RESU LTS IT WOULD GIVE UNREALISTIC FIGURE OF THE 13 G.P. RATE AT 120%. THAT BEING SO, THE FINDING OF EX CESS STOCK , ALLEGEDLY FOUND DURING THE COURSE OF SURVEY OPERATION, HAS BEEN GIVEN BY THE AUTHORITIES BELOW ON GROSSLY INADEQUATE MATERIAL. THAT FINDING COULD NOT BE SUST AINED EVEN UNDER THE PARAMETERS OF INCOME TAX ASSESSMENT PROCEEDINGS. THE VERIFICATION OF STOCK CANNOT BE DONE ON IMAGINATION AND THE TASK INVOLVED IS VERY FASTIDIOU S, PAINSTAKING TASK REQUIRING CERTAIN AMOUNT OF PATIENCE AND PERSEVERANCE WHICH IT APPEAR S THAT THE SURVEY TEAM DID NOT EXERCISE FOR THE REASONS BEST KNOWN TO THE DEPARTME NT. WHILE COMPLETING AN ASSESSMENT THE ASSESSING OFFICER IS NOT A COURT AND NOT BOUND BY TECHNICAL RULES OF EVIDENCE. HE MAY CONSIDER MATERIAL WHICH ARE WHOLLY IN-ADMISSIBLE I N A COURT OF LAW. HE MAY DRAW HIS OWN CONCLUSIONS AND INFERENCES ON THE CUMULATIVE EF FECT OF VARIOUS CIRCUMSTANCES BASED UPON HIS SUBJECTIVE HUMAN PROBABILITY. THE TECHN ICAL RULES OR EVIDENCE DO NOT APPLY TO INCOME TAX PROCEEDINGS BUT THE ASSESSING OFFICER I S BOUND BY THE PRINCIPLES OF NATURAL JUSTICE. HE CANNOT DRAW HIS INFERENCES ON THE BASIS OF SUSPICION, CONJECTURES AND SURMISES. SUSPICION HOWSOEVER STRONG IT MAY BE, CA NNOT TAKE SUBSTITUTE EVIDENCE. THE ASSESSING OFFICER SHOULD ACT IN A JUDICIAL MANN ER; PROCEED WITH A JUDICIAL SPIRIT AND COME TO A JUDICIAL CONCLUSION AS HAS BEEN HELD BY H ONBLE ALLAHABAD HIGH COURT IN THE CASE OF SWADESHI COTTON MILLS CO. LTD. VS. ITO, [19 78] 112 ITR 1038. WHILE RECOGNIZING THAT THE ASSESSING OFFICER IS NOT FETTE RED BY TECHNICAL RULES OR EVIDENCE, HONBLE SUPREME COURT HAS LAID DOWN , AS BACK AS T HE YEAR 1954, IN THE CASE OF DHAKESHWARI COTTON MILLS LTD. VS. CIT [1954] 26 ITR 775 THAT THE ASSESSING OFFICER HAS TO ACT FAIRLY AS A REASONABLE PERSON AND NOT ARBITR ARILY AND CAPRICIOUSLY. AN ASSESSMENT BASED ON NO MATERIAL AT ALL OR BASED ON INADEQUATE MATERIAL IS , THEREFORE, BAD IN LAW LIABLE TO BE SET ASIDE. THE ASSESSEE IS A TRADER IN THE LI NE OF PLYWOOD AND DID NOT MAINTAIN DAY TO 14 DAY QUANTITATIVE RECORDS. DURING THE COURSE OF SURV EY PROCEEDINGS AN ATTEMPT WAS MADE TO VERIFY THE STOCK KEPT BY THE ASSESSEE WITH THE S TOCK DETAILS AS PER BOOKS OF ACCOUNTS. HOWEVER, WHILE COMPLETING THIS EXERCISE, THE SIMPLE PROCEDURE IS TO BE ADOPTED AND THE FACT THAT THE STORAGE CAPACITY OF THE GODOWNS WHICH COULD NOT HAVE SUFFICIENT PLACE, FOR GOODS AS HAS BEEN QUANTIFIED AND MEASURED BY SURVEY TEAM, HAS BEEN GROSSLY IGNORED. THE ASSESSEES CONTENTION IN THIS REGARD REMAINED U NANSWERED. THEREFORE, AFTER CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THI S CASE, WE ARE OF THE CONSIDERED OPINION THAT THE IMPUGNED ADDITION OF RS. 42,65,371/- MADE ON ACCOUNT OF EXCESS STOCK IS NOT SUSTAINABLE ON MERITS AND HENCE THE SAME IS DELETE D. THUS GROUND NOS. 1 TO 1.2 OF THE ASSESSEES APPEAL ARE ALLOWED AND GROUND NO. 1 OF REVENUES APPEA IS DISMISSED. 3.1 GROUND NOS. 2 AND 2.1 OF THE ASSESSEES APPEAL AND GROUND NO. 2 OF THE REVENUES APPEAL, ARE IN RELATION TO THE ADDITION O F RS. 7,00,000/- MADE ON ACCOUNT OF CASH FOUND IN EXCESS DURING THE SURVEY PROCEEDINGS. THIS ADDITION HAS BEEN REDUCED TO RS. 5,32,702/- BY LD CIT(A). 3.2 AGAINST THIS FINDING, BOTH THE ASSESSEE AND TH E DEPARTMENT ARE IN APPEAL BEFORE US. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CI RCUMSPECTED THE ENTIRE RECORD. . IT WAS ARGUED BY THE LD. AR THAT DURING THE SURVEY PRO CEEDINGS, IN THE STATEMENTS RECORDED ON OATH OF THE ASSESSEE, THE IMPUGNED SURRENDER WA S MADE WITHOUT REFERRING TO THE BOOKS OF ACCOUNTS. AT THE TIME OF SURVEY PROCEEDING S, THE BOOKS OF ACCOUNTS WERE INCOMPLETE AND AFTER THE COMPLETION OF THE SAME TH E CASH AS PER CASH BOOK, AS ON THE DATE OF SURVEY, WAS RS. 4,06,748/- AS AGAINST THE TOTAL CASH FOUND AT RS. 9,39,450/-,. THUS THE EXCESS CASH, IF ANY, WOULD BE RS. 5,32,702/- WH ICH HAS BEEN CONFIRMED BY LD. CIT(A). HOWEVER, R THE FACT WHICH WAS NOT CONSIDERE D BY THE AUTHORITIES IS THAT OUT OF THE 15 TOTAL CASH FOUND A SUM OF RS. 7,07,910/- WAS FOUND FROM THE PLACE WHICH DOES NOT BELONG TO THE PROPRIETARY CONCERN OF THE ASSESSEE ALONE AN D IT WAS THE RESIDENCE OF ASSESSEE WHO LIVED JOINTLY WITH HIS UNCLE SHRI SHYAM GUPTA AND T HE CASH FOUND CONSISTED OF THE CASH BELONGING TO THE FAMILY- MEMBERS AND THEIR BUSINESS CONCERNS. THE TOTAL CASH BALANCE AVAILABLE IN THE BOOKS OF ACCOUNTS OF ALL THE FAMIL Y MEMBERS FOR WHICH THE NECESSARY COPIES OF THE CASH BOOK ARE ENCLOSED AT PAGES 52 TO 91 OF ASSESSEES PAPER BOOK. HOWEVER, THE AO AS WELL AS THE LD. CIT(A) WERE NOT CONVINCED AND THAT IS WHY THIS GROUND HAS RAISED BEFORE US. 3.4 AFTER CONSIDERING THE RIVAL SUBMISSION, WE HAV E FOUND THAT THE IMPUGNED ADDITION DESERVES TO BE DELETED. BOTH THE AUTHORITIES BELOW HAVE IGNORED THE FACT THAT THIS ADDITION IS ALSO BASED ON SIMPLY THE SURRENDER MADE BY THE A SSESSEE IN HIS STATEMENTS RECORDED, ON OATH, DURING SURVEY WHICH STANDS DISPROVED WITH TH E HELP OF EXISTING EVIDENCES WHICH WERE NOT PROVED TO BE WRONG. THE ASSESSEE HAS FILED ALL THE NECESSARY DETAILS OF THE CASH AVAILABLE WITH OTHER FAMILY MEMBERS AS ON THE DATE OF SURVEY WHICH ARE ALSO ENCLOSED WITH THE ASSESSEES PAPER BOOK FILED BEFORE US. THE AO HAS NOT POINTED OUT ANY DEFECT ON THE SAME, THEREFORE, WITHOUT BRINGING ANY CONTRARY MATERIAL TO SUBSTANTIATE THE ADMISSION MADE BY THE ASSESSEE THAT TOO DURING THE COURSE OF SURVEY, CANNOT BE UPHELD. THE CASH BALANCE AVAILABLE WITH THE ASSESSEE AS PER BOOKS OF ACCOUNTS WHICH WERE NOT DOUBTED BY THE AO AND THE CASH BALANCE WITH OTHER FAMILY MEMBE RS AS PER THEIR BOOKS OF ACCOUNTS WERE ALSO NOT DISPROVED BY THE AUTHORITIES BELOW. T HEREFORE, WE ORDER TO DELETE THE IMPUGNED ADDITION AND ALLOW THE GROUND NOS. 2 & 2.1 OF THE ASSESSEES APPEAL AND DISMISS THE GROUND NO. 2 OF THE REVENUES APPEAL. 16 4.1 THE GROUND NO. 3 OF REVENUES APPEAL RELATES TO THE DELETION OF ADDITION OF RS. 2.50 LACS WHICH WAS MADE BY THE AO U/S 68 OF THE A CT BY HOLDING THE CASH CREDITS AS UNEXPLAINED AND AS UNACCOUNTED INCOME OF THE ASSES SEE. THE LD. CIT(A) HAS DELETED THIS ADDITION. 4.2 WE HAVE HEARD BOTH THE PARTIES. BOTH THE PARTIE S HAVE REITERATED THEIR EARLIER STANDS BEFORE US. THE LD CIT(A) AFTER CONSIDERING T HE FACTS HAS DELETED THE ADDITION BY OBSERVING IN PARA 7.3 & 7.4 OF THE ORDER, WHICH ARE BEING EXTRACTED VERBATIM, AS UNDER: 7.3 I HAVE CAREFULLY PERUSED THE ORDER OF THE AO A ND THE SUBMISSIONS OF THE AR. REGARDING INTRODUCTION OF CAPITAL BY THE ASSESS EE OF RS. 70,000/- FROM HIS PERSONAL BOOKS OF ACCOUNTS, I TEND TO AGRE E WITH THE OBSERVATION OF THE AO THAT NO DOCUMENTARY EVIDENCE WAS FURNISHED BY THE ASSESSEE OR WAS FOUND AT THE TIME OF SURVEY REG ARDING ANY SEPARATE PERSONAL BOOKS OF ACCOUNTS OF THE ASSESSEE BEING MA INTAINED. ON PERUSAL OF THE CAPITAL ACCOUNT AND THE BALANCE SHEE T OF THE ASSESSEE FOR THE YEAR ENDING 31.03.2007 CASH IN HAND IS SHOWN AT RS. 4,285/- ONLY. THOUGH THE TOTAL OF BALANCE SHEET SHOWS RS. 16,78,0 14/- THE ASSESSEE DID NOT GIVE ANY INFORMATION REGARDING FROM WHERE THIS AMOUNT OF RS. 70,000/- WAS INTRODUCED IN THE BALANCE SHEET. HOWEV ER, ON PERUSAL OF THE APPELLATE ORDER, IT IS SEEN THAT IN PARA 6.2 TH E EXCESS CASH FOUND DURING THE COURSE OF SURVEY TO THE EXTENT OF RS. 5, 32,702/- HAS BEEN CONFIRMED AS AN ADDITION OF UNACCOUNTED CASH IN THE HANDS OF THE ASSESSEE. SINCE THIS AMOUNT IS MORE THAN RS. 70,000 /-, IT IS HELD THAT THE ASSESSEE HAD AVAILABILITY OF RS. 70,000/- FOR INTRO DUCING IT IN THE CAPITAL ACCOUNT. 7.4 REGARDING CASH CREDITORS OF RS. 1,80,000/-, IT IS SEEN THAT THE ASSESSEE HAS FURNISHED THEIR NAMES, ADDRESSES AND PAN. I CON CUR WITH THE AR OF THE ASSESSEE THAT AFTER HAVING FURNISHED SUCH INFOR MATION REGARDING THE IDENTITY, CREDITWORTHINESS, FINANCIAL CAPACITY OF T HE CREDITORS THE ONUS HAD SHIFTED TO THE AO FOR REBUTTING THIS EVIDENCE B EFORE HAVING MADE THIS DISALLOWANCE. SINCE NO EVIDENCE WAS BROUGHT ON RECORD BY THE AO TO REBUT THIS EVIDENCE THE CASH CREDITORS ARE HELD TO BE GENUINE TRANSACTIONS. THEREFORE, THE ADDITION OF RS. 2,50,0 00/- IS DELETED. THE ASSESSEE HAS FURNISHED THE COMPLETE DETAILS LIK E THEIR COMPLETE NAME AND THEIR COMPLETE ADDRESSES AND THEIR PAN FROM WHOM THE LO ANS WERE TAKEN AND ALSO SUBMITTED THEIR CONFIRMATIONS WHICH WERE NOT REBUTTED BY THE AO BY BRINGING ANY ADVERSE MATERIAL 17 ON RECORD NOR ANY SUMMONS WERE ISSUED TO THE PARTIE S FOR MAKING VERIFICATIONS. THE BURDEN CAST ON HIM HAS BEEN DISCHARGED BY THE ASSES SEE. THE HONBLE SUPREME COURT IN THE CASE OF ORISSA CORPORATION LTD. VS. CIT REPORTE D IN 159 ITR 78 HAS HELD THAT ONCE THE ASSESSEE HAS FURNISHED COMPLETE DETAILS OF THE CRED ITORS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUES CASE AND IN O RDER TO SUSTAIN ADDITION THE REVENUE HAS TO PURSUE THE INQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND THE MERE ISSUE OF NOTICE U/S 131 IS NOT SUFFICIENT. IN THE PRESENT CASE, THE ASSESSEE BY FILING THE RELEVANT DETAILS OF THE CREDITORS HAS DISCHARGED HIS BURDEN AND THE AO HAS FAILED TO MAKE ANY FURTHER INQUIRY. THEREFORE, UNDER THESE CIRCUMSTANC ES, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THIS ADDITION IS DELE TED FROM THE HANDS OF THE ASSESSEE. THUS GROUND NO. 3 OF THE REVENUES APPEAL IS DISMIS SED. 5.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 11-0 3-2014. SD/- SD/- ( N.K. SAINI ) (HARI OM MARATHA ) ACCOUNTANT MEMBER JUDICIAL MEMBER *MISHRA COPY FORWARDED TO :- 1. SHRI VIPIN GUPTA JAIPUR 2. THE ITO, WARD 3 (3), JAIPUR 3. THE LD.CIT(A) 3. THE LD CIT 4. THE D/R 5. GUARD FILE (ITA NO.137 & 296/JP/2012) BY ORDER, AR ITAT, JAIPUR 18 19 20