Challani Ranka Jewellery, CHENNAI V. DCIT Central Circle 3(4), CHENNAI

ITA 3066/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5163 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 13-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: T BANUSEKAR
• Keywords: Search and seizure; Document seized; Opportunity of being heard; Undervalued stock; Corroborative evidences; Retraction; Documents seized
• Section: 143(3); 133A; 153A; 132

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . , . , BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 3 066/MDS/2017 / ASSESSMENT YEAR :20 12 - 13 M/S. CHALLANI RANKA JEWELLERY, NO. 119, N.S.C. BOSE ROAD, 1 ST FLOOR, SOWCARPET, CHENNAI 600 0 79 . [PAN: A A CFC8272A ] VS. THE DEPUTY COMMISSIONER OF INCOM E TAX , CENTRAL CIRCLE 3( 4 ), C HENNAI . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI T. BANUSEKAR, C.A. / RESPONDENT BY : M R S. VIJAYAPRABHA , J CIT / DATE OF HEARING : 1 1 . 0 4 .201 8 / DATE OF P RONOUNCEMENT : 05 . 0 6 .201 8 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 1 9 , C HENNAI DATED 31 . 10 .201 7 RELEVANT TO THE ASSESSMENT YEAR 20 1 2 - 1 3 . THE EFFECTIVE GROUND S RAISED IN THE APPEAL OF THE ASSESSEE ARE THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION MADE TO THE TUNE OF .8,00,00,000/ - TOWARDS UNDER - VALUATION OF STOCK, ADDITIO N TOWARDS GROSS PROFIT ON UNACCOUNTED SALES AT .84,76,360/ - I.T.A. NO.3 066/M/17 2 AND ENHANCING THE SAME TO THE EXTENT OF .88,32,619/ - IN ADDITION TO THE ADDITION MADE BY THE ASSESSING OFFICER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE BELONGS TO A GROUP OF COMPANIE S, FIRMS AND INDIVIDUALS, VIZ., CHALLANI GROUP AND THE ASSESSEE IS ENGAGED IN TRADING IN SILVER JEWELLERY. A SEARCH AND SEIZURE OPERATION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT] WAS UNDERTAKEN IN CHALLANI GROUP OF CASES ON 19.04.2012 TO WHICH THE ASSESSEE BELONGS. PROCEEDINGS UNDER SECTION 153A OF THE ACT WERE INITIATED AND NOTICE UNDER SECTION 153A OF THE ACT DATED 26.04.2013 WAS ISSUED TO THE ASSESSEE DIRECTING IT TO FURNISH A RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012. IN RESPON SE, A LETTER DATED 07.06.2013 WAS FILED INFORMING THAT A RETURN HAS BEEN E - FILED ON 06.06.2013 AND THAT THE SAME MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. ACCORDINGLY, THE RETURN FILED ON 06.06.2013 DISCLOSING AN INCOME OF .1,99,40,080/ - WAS CONSIDERED AS THE RETURN FILED IN RESPONSE TO NOTICE UNDER SECTION 153A OF THE ACT. FURTHER, IN RESPONSE TO NOTICES UNDER SECTION 143(2)/142(1) OF THE ACT, THE ASSESSEE FILED THE DETAILS CALLED FOR. AFTER VERIFICATION OF THE DETAILS FIL ED BY THE ASSESSEE, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SECTION 153A R.W.S. 143(3) OF THE ACT BY ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT .10,84,16,440/ - AFTER MAKING ADDITION TOWARDS GROSS PROFIT I.T.A. NO.3 066/M/17 3 ON UNACCOUNTED SALES AT .84,76,360/ - AS WELL AS ADDITION TOWARDS AMOUNTS OFFERED FOR UNDER VALUATION OF STOCK AT .8,00,00,000/ - . 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AS WELL AS FACTS OF THE CASE, BESIDES EN HANCING THE ASSESSMENT TO THE EXTENT OF .88,32,619/ - OVER AND ABOVE THE ADDITION MADE BY THE ASSESSING OFFICER, THE LD. CIT(A) CONFIRMING THE ADDITION S MADE TOWARDS THE AMOUNTS OFFERED FOR UNDER - VALUATION OF STOCK AT .8,00,00,000/ - AS WELL AS GROSS PROFI T ON UNACCOUNTED SALES AT .84,76,360/ - . 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. BESIDES, REITERATING THE SUBMISSIONS AS MADE BEFORE THE AUTHORITIES BELOW, BY REFERRING TO THE INSTRUCTIONS RELATING TO SEARCH & SEIZURE ISSUE D BY THE CBDT DATED 10.03.2013 VIDE F.NO. 286/2/2003 - IT(INV.II), THE LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT THE CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH & SEIZURE OPERATION AS WELL AS SWORN STATEMENTS RECORDED DURING THE COU RSE OF SEARCH, WERE THE BASIS FOR MAKING THE ADDITIONS AND THUS, PRAYED FOR DELETING VARIOUS ADDITIONS MADE IN THIS CASE. 5. PER CONTRA, THE LD. DR ARGUED THAT BASED ON THE SOLITARY EVIDENCES FOUND DURING THE COURSE OF SEARCH OPERATION, THE ADDITIONS WE RE MADE AND I.T.A. NO.3 066/M/17 4 ENHANCED THE ASSESSMENT AND PLEADED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE CONFIRMED IN TOTO. 6. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. BASED ON THE DOCUMENTS SEIZED DURING THE COURSE OF SEARCH UNDER SECTION 132 OF THE ACT, THE ASSESSING OFFICER OBSERVED THAT THE VALUE OF STOCK REPORTED BY THE ASSESSEE FIRM TO ITS BANKER WAS .28,50,66,000/ - AS ON 29.02.2012 AND .28.67,48,000/ - AS ON 16.03.2012. BUT, STOCK AS ON 31.03.2012 DISCLOSED BY THE ASSESSEE WAS AT . 1 4,99,25,790/ - ONLY. FURTHER, THE STOCK ACCORDING TO THE BOOKS OF ACCOUNTS AS ON 19.04.2012 WAS 4487.940 KGS VALUED A T .27,08,02,299.60. THUS, EVEN IF THE DEFICIT IN STOCK, WHICH WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AS UNACCOUNTED SALES ( .6, 01,48 , 179/ - ) IS REDUCED F ROM THE ABOVE FIGURE OF CLOSING STOCK, THE STOCK COMES TO THE VALUE OF .21,06,54,1 20/ - [VALUE AS PER BOOKS AND AS PER CLOSING STOCK SHOWN IN THE BALANCE SHEET]. THUS, THE CLOSING STOCK DISCLOSED IN THE BALANCE SHEET APPEARED TO BE ABNORMALLY LOW AND APPEARS TO BE REDUCED TO REDUCE THE GROSS PROFIT. AGAINST THE ABOVE DISPARITY, THE ASSES SEE WAS ASKED T O CLARIFY AND JUSTIFY THE CLOSING STOCK WITH VALUES OF SALES AND PURCHASES BETWEEN 16.03.2012 AND 19.04.2012. THE SUBMISSIONS OF THE ASSESSEE AS WELL AS OBSERVATIONS OF THE ASSESSING OFFICER THEREON ARE REPRODUCED AS UNDER: I.T.A. NO.3 066/M/17 5 IN REPLY, THE LD . AR HAS NOT GIVEN THE DETAILS OR RECONCILED THE SAME ALONG WITH THE SALES AND PURCHASES BETWEEN 16.04.2012 AND 19.04.2012. INSTEAD, HE HAS ONLY STATED THAT THE ASSESSEE FIRM HAS BEEN SANCTIONED OVER DRAFT FACILITY BY T HE BANK AND TO ARRIVE AT THE DRAWING POWER, IT IS REQUIRED TO PROVIDE STOCK STATEMENT ON MONTHLY BASIS. WHILE REPORTING ITS MONTHLY STOCK STATEMENT THE ASSESSEE HAS BEEN REPORTING THE STOCK BY VALUING THE SAME AT PREVAILING MARKET PRICE WITHOUT BEING AWARE THAT THE SAME HAS TO BE REPORTED AT COST. ON PERUSAL OF THE DOCUMENT NO. ANN/RSK/LS - I/S - I, IT COULD BE FOUND THAT THE RATE PER KILOGRAM ADOPTED IS RS.54,000/ - WHICH IS THE MARKET RATE AND NOT THE COST PRICE. THIS THE ASSESSEE FIRM HAS BEEN CONSISTENTLY DOING AND THE BANKER HAVE ALSO NOT QU ESTIONED HITHERTO BEFORE. HOWEVER, RECENTLY AFTER THIS WAS BROUGHT T O THE KNOWLEDGE OF THE BANKER BY THE STOCK AUDIT TEAM AS APPOINTED BY THE BANK, THE ASSESSEE HAS BEEN ASKED FOR CLARIFICATION FOR THE VALUE OF STOCK AS ON 31 ST MARCH, 2014 WHEREIN S IMILAR DISCREPANCY IS FOUND. THE LD. AR HAS ENCLOSED A COPY OF THE LETTER SUBMITTED BY THE ASSESSEE I N THE BANK FOR REFERENCE. HE ALSO ARGUED THAT THE VALUATION OF THE CLOSING STOCK WAS DONE AT THE RATE OF RS.60,340/ - PER KG WHEREAS THE PREVAILING MARKET RATE WA S RS.53,650/ - AT T HE T IME. THE ABOVE EXPLANATION OF THE LD. AR IS NOT ACCEPTABLE SINCE THE ABNORMALITY OF THE CLOSING STOCK FIGURE IS NOT ONLY WITH THE STATEMENT SUBMITTED TO THE BANKER BUT ALSO ACCORDING TO THE BOOKS. REGARDING THE ADOPTION O F HIGHER RA T E FOR VALUATION OF THE STOCK, IT IS OBSERVED THAT EVEN AT THE RATE O F RS.53,650/ - STATED B Y T HE A/R THE VALUE COMES TO RS.24,07,77,981/ - WHICH IS MUCH HIGHER THAN T HE CLOSING STOCK SHOWN IN THE RETURN. MR. SUMTI CHALLANI, IN HIS SWORN STATEMENT DATED 19. 04.2012 HAD ALSO ACCEPTED THAT THE STOCK VALUE WAS PREPARED BY HIM AS ON 31.03.2012 TO BE 4467.940 KGS. HE ALSO ADMITTED THAT HE HAS BEEN VALUING THE STOCK AT A LESSER RATE OF RS.33,270/ - PER KG FOR COMPUTING THE INCOME TAX. HE FURTHER RECONFIRMED THE DIF FERENCE I N STOCK AND THAT I T WAS DUE TO OUT OF CASH SALES. DURING THE SEARCH AT ASSESSEE'S BUSINESS PREMISES, DEFICIT STOCK OF SILVER OF 996.821 KGS WAS FOUND IN COMPARISON THE STOCK AVAILABLE AS PER B OOKS OF ACCOUNTS. THE PARTNER HAD ACCEPTED UNACCOUN TED SALES IN HIS SWORN STATEMENT AND HAD ADMITTED ALL INCOME OF RS.1,49.01.810/ - IN THE F. YEAR 2011 - 12 WHICH IS GROSS PROFIT ARRIVED AT THE AVERAGE GP OF LAST FOUR YEARS. HENCE, IT WAS ASKED VIDE QUESTIONNAIRE IF IT HAS ADMITTED THIS ADDITIONAL IN COME IN THE RETURN FILED FOR THE RELEVANT ASSESSMENT YEAR? IN REPLY, IT WAS SUBMITTED BY THE A/R ON 16.03.2015 THAT THE FIRM WAS SURVEYED U/S 133A OF THE I. T. ACT ON 09.03.2010 DURING THE COURSE OF WHICH EXCESS STOCK OF RS.567 KGS WAS FOUND AND THE ASSESSEE HAD DECLARED AN INCOME OF RS.1,50.24,752/ - BY VALUING THE EXCESS STOCK AT RS.25,705/ - PER KG WHICH WAS THE AVERAGE SALES PRICE IN THAT YEAR AND RS.1,08,58.050/ - WAS OFF ERED WHILE F ILING THE RETURN OF INCOME FOR A. Y. 2010 - 11. HE ALSO REQUESTED TO CONSIDER THA T THE SURVEY HAS AFFECTED THE INVENTORY BOOKS AS REMOVAL OF THE I.T.A. NO.3 066/M/17 6 SAME FROM INVENTORY BOOKS WOULD ADVERSELY AFFECT THE ASSESSEE AND HENCE THE SAME CONTINUED IN THE BOOKS OF ACCOUNTS AND HENCE, THIS SHOULD NOW BE ADJUSTED AGAINST THE SHORTAGE OF INVENTORY FOU ND DURING THE SEARCH PROCEEDINGS. AGAIN ON 24.03.2015, I T WAS SUBMITTED THAT IN THE DOCUMENT MARKED AS ANNEXURE CR/SUMTI/C, WHEREIN ONE OF THE PARTNERS HAD UNDERTAKEN TO OFFER ADDITIONAL INCOME. HE ALSO CONTENDED THAT NAME OF THE PARTNER IS NOT MENTIONED AND THE LETTER IN UNDATED, THE SOURCE OF THE RECEIPT BY THE DEPARTMENT IS NOT MENTIONED THEREIN AND ALSO IT IS NOT ON THE LETTER HEAD OF THE FIRM. ON GOING THROUGH THE CONTENT OF SAID DOCUMENT IT IS FOUND THAT A SUM OF RS.1.49,01,810/ - HAS BEEN AGAIN OFFER ED AS INCOME WITH COMPUTAT ION THEREOF BASED ON PREVIOUS FOUR YEAR'S AVERAGE GROSS PROFIT ON DEEMED SALE PROCEEDS OF 996.821 KGS AT THE PREVAILING MARKET PRICE ON THE DATE OF SEARCH. THE LD. A/R ALSO CONTENDED THAT NO ASSESSEE WILL VOLUNTARILY COME FORWARD TO ISSUE AND / OR FILE A LETTER AFTER THE SEARCH HAS BEEN COMPLETED, DISCLOSING INCOME WITHOUT ANY THREAT OR COERCION. THE A/R HAS ALSO CONTESTED THE MANNER IN WHICH SURVEY OPERATION WAS CONDUCTED AND HAS DOUBTED THE CORRECTNESS OF THE SURVEY OPERATION CIT ING VARIOUS REASONS. HE HAS ALSO CONTESTED THE ADOPTION OF AVERAGE MARKET PRICE (OR VALUATION OF THE UNACCOUNTED SALES. FINALLY HE HAS CONCLUDED SLATING CHAT THE ASSESSEE HAS ALREADY OFFERED AN INCOME OF RS.1,72,83,366/ - IN TWO ASSESSMENT YEARS IN THE FO LLOWING MANNER: ASST. YEAR AMOUNT (IN RS.) 2010 - 11 1,08,58,050 2013 - 14 64,25,316 BUT ALL THESE OBJECTIONS OR ALLEGATIONS HAVE NO LE GAL OR FACTUAL BASIS. IF THERE WAS ANY DEFAULT OR FLAW IN THE PROCESS OF INVENTORISATION OF THE STOCK EITHER DURING THE SURVEY OR DURING THE SEARCH, THE ASSESSEE COULD HAVE RAISED THE OBJECTIONS DURING THE SURVEY ITSELF A ND AT LEAST IMMEDIATELY AFTER THE SURVEY OR SEARCH, WHICH HE HAS NOT DONE. THE DOCUMENT, ANNEXURE - CR/SUMTI/C HAS BEEN SIGNED BY SHRI MAHENDRA CHALLANI , WHO WAS NOT ONLY, A PARTNER BUT A WORKING PARTNER IN THE ASSESSEE FIRM AND BROTHER OF THE ONLY OTHER PARTNER, SHRI SUMTI CHALLANI. SUBMISSION BY AN ASSESSEE DURING THE POST SEARCH PROCEEDINGS CAN NOT BE INSISTED TO BE GIVEN ONLY ON LETTER HEAD. THERE IS NO EVIDENCE OF ANY PRESSURE OR COERCION BEING EXERCISED ON THE ASSESSEE I.E. ITS PARTNERS AT ANY POINT OF TIME. THE LD. A/R'S ALLEGATIONS OF PRESSURE OR COERCION ARC UNFOUNDED. HE HAS ALSO CITED CBDT'S CIRCULAR AND LETTER THAT NO ADMISSION SHOULD BE OBTAINE D UNDER PRESSURE OR COERCION. IF THERE IS NO CREDIBLE EVIDENCE AND CAN BE LATER RETRACTED. HERE, IT MAY BE POINTED OUT THAT NOT ONL Y THERE WAS NO PRESSURE OF COERCION, THE RETRACTION COMES NOT AFT ER THE SEARCH / SURVEY BUT DURING THE ASSESSMENT PROCEEDINGS, WHICH IS ABOUT FIVE YEARS OF THE SURVEY AND AFTER ABOUT T HREE Y EARS OF THE SEARCH. THE ADMISSION WAS BASED ON THE I.T.A. NO.3 066/M/17 7 DEFICIENCY OF STOCK AND UNDERVALUATION OF STOCK AND THUS IT VERY MUCH HAD THE CREDIBILITY. ALL THESE ADMISSIONS WERE NOT ONLY THROUGH A LETTE R TO D.D.I.T.(INV.) BUT ALL THESE ADMISSION WERE MERE REITERATION OF THE ADMISSIONS MADE IN COURSE OF THE SWORN STATEMENTS DURING THE SEARCH BY THE OTHER PARTNER, VIZ. SHRI SUMTI A. CHALLANI. THUS THE RETRACTION BY THE LD. A/R DURING THE ASSESSMENT PROCEED INGS, LACKS CREDIBILITY AND CANNOT BE ACCEPTED. IN VIEW OF THE ABOVE DISCUSSION, THE GROSS PROFIT ON THE UNACCOUNTED SALES IS LIABLE TO BE ADDED TO THE TOTAL INCOME. APPLYING THE AVERAGE G.P. OF LAST FOUR YEARS, I.E. 28.10% TO THE UNACCOUNTED SALES OF 99 6.821 KGS OF SILVER THE MARKET PRICE OF RS.53,200/ - PER KG ( RS.5,30,30,877/ - ) COMES TO RS.1,49,01,676/ - . OUT OF THIS AMOUNT, RS .64,25,316/ - HAS ALREADY BEEN ADDED TO THE INCOME IN THE RETURN FILED. BALANCE RS.84,76,360/ - IS ADDED TO THE TOTAL INCOME OF T HE ASSESSEE. 6.1 WITH REGARD TO UNDERVALUATION OF STOCK, THE ASSESSING OFFICER OBSERVED THAT IN THE SWORN STATEMENT ON THE DAY OF THE SEARCH, ONE OF THE PARTNERS, HAD OFFERED .8,00,00,000/ - TO TAX TO COVER UP THE SALES RATE SUPPRESSION OF SILVER. HENCE, IT WAS ASKED VIDE QUESTIONNAIRE, WHETHER THE SAME HAS BEEN ADMITTED IN THE RETURN FILED BY THE FIRM ? IN REPLY, THE AR OF THE ASSESSEE SUBMITTED FOLLOWING TWO ARGUMENTS BEFORE THE ASSESSING OFFICER: (I) OFFER , IF AT A L L MADE DURING ANY PROCEEDINGS SHOULD BE BASED ON FA CT S AND IN C RI MI NATING DOCUMENTS FOUND DURI N G THE SEARCH PROCEEDINGS AND THE OFFER AMOUNT SHOULD HAVE A DIRECT NEXUS TO THE SAME. (II) IN THE ASSESSEE'S CASE, IT IS JUST A D - HOC AMOUNTS WHICH DO NOT CORRELATE WITH ANY FINDINGS DU RI NG THE SEARCH PROCEEDINGS. AN ADDITIONS TO THE TOTAL INCOME OR OFFER AS INCOME SHOULD B E BASED ON MATERIALS FOUND IN PROCEEDINGS INITIATED AND NOT BASED ON STATEMENTS OR OFFERS IN S WORN S TATEMENTS WITHOUT A NY UNDER LYING CORROBORATIVE EVIDENCES. BESIDES, HE HAS ALSO CITED CBDT'S CIRCULAR AND LETTER IN SUPPORT OF HIS CONTENTION. HERE, IT IS OBSERVED THAT NO PRESSURE OR COERCION WAS EVER BROUGHT UPON THE ASSESSEE TO ACCEPT ANYTHING. THE ASSE SSEE WAS FOUND TO I.T.A. NO.3 066/M/17 8 BE UNDERVALUING THE STOCK AND MAKING UNACCOUNTED SALES. HENCE, DURING THE COURSE OF SWORN STATEMENT RECORDED, WHEN HE WAS ASKED : - QUESTION 22. FINALLY, WITH PEACEFUL MIND, PLEASE EXPLAIN THE REASON FOR STOCK VALUED AT A LESSER RATE. A NS. IN ORDER TO BRING DOWN THE PROFIT FOR THE PURPOSE OF INCOME - TAX, I HAVE REDUCED THE PRICE OF SILVER PER KG AT RS.33.207/ - . TO BUY PEACE WITH THE DEPARTMENT, I AGREE FOR AN ADDITION OF SILVER VALUE OF RS.8 CRORES. THUS THE ALLEGATION AND THE RETRACT ION B Y THE AR ARE W I THOUT ANY FOUNDATION. ACCORDINGLY, AN AMOUNT OF .8.00,00,000/ - IS ADDED TO THE INCOME OF THE ASSESSEE FIRM. 7. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) OBSERVED THAT AS PER THE SEIZED DOCUMENTS ANN/RSK/LS - L1 THE ASSESSEE HAD SUBMITTED THE FOLLOWING STOCK FIGURES TO ITS BANKERS. VAL UE OF STOCK DECLARED TO BANKERS AS ON 29.2.2012 . 28,67,48,000 VALUE OF STOCK DECLARED TO BANKERS AS ON 16.3.2012 . 28,67,48,000 VALUE OF STOCK A S PER RETURN AS ON 3 1.03.2012 . 14,99,25,790 VALUE OF STOCK AS PER PHYSICAL VERIFICATION ON 19.04.2012 . 27,08,02,299 FURTHER, THE LD. CIT(A) OBSERVED THAT THE SEARCH TEAM FOUND THE DOCUMENT NO.ANN/RSK/LS - 1 /S - 1 , WHEREIN , THE ASSESSEE ADOPTED THE RATE PER KILOGRAM OF SILVER AT .54, 000/ - WHICH WAS THE APPARENT MARKET RATE. T HE ASSESSEE HAD BEEN FOUND TO H AV E BEEN CONSISTENTLY ADOPTED THE MARKET RATE AT APPROXIMATELY RS.54, 000/ - PER KG TO THE BANKERS , WHEREAS, THE ASSESSEE ADOPTED MUCH LESSER VALUE PER KG , WHILE DECLARING THE VALUE OF PHYSICAL I.T.A. NO.3 066/M/17 9 STOCK OF SILVER AS ON 31. 0 3.2012. THE ASSESSING OFFICER VERIFIED T HESE ISSUES AND BROUGHT THE SAME ON RECORD. T HE DIFFERENCE IN THE STOCK FIGURES IN THE PREMISES OF THE ASSESSEE DURING THE COURSE OF SEARCH CONDUCTED WAS AS UNDER: DATE OF SEARCH 19. 0 4.2012 STOCK AS PER BOOKS AS ON 31.3.2012 AS PER RE TURN FILED 4487.940 KG. STOCK AS PER BOOKS (AS ON 19.4.2012 ALTER TAKING NOTE OF PURCHASES AND SALES FROM 0 1.04.2012 TO 19.04.2012 4532.940 KG. STOCK AS PER PHYSICAL VERIFICATION AS ON 19.04.2012 3536.119 KG. DEFICIT STOCK FOUND AND ADMITTED ON 19.04.2012 996.821 KG. T HE ASSESSEE HAD CONSISTENTLY DECLARED A VALUE OF .54, 000/ - PER KG. WHIL E DECLARING THE VALUE OF STOCK TO THE BANKERS. THE SAID VALUE IS ALSO COMMENSURATE WITH THE PREVAILING VALUE OF SILVER DURING THAT PERIOD. IN FACT, THE ASSESSEE OBJECTED TO THE VALUE TAKEN AT .60,34 0 PER KG CLAI M ING THAT THE MARKET RATE WAS ONL Y .53,650 AT THAT TIME. GIVING THE BENEFIT OF DOUBT TO THE ASSESSEE, THE VALUE OF STOCK IS TAKEN ONLY AT .53,200 AS UNDER: DEFICIT STOCK X MARKET VALUE OF STOCK/ KG. 996.821 X 53,200 = .5,30,30,877 THE ASSESSEE DECLARED GROSS PROFIT RATIO OF 2 8 .10% IN THE LAST FOUR YEARS. CONSIDERING THE SAME, THE PROFIT EARNED ON ACCOUNT OF THE SALE OUTSIDE THE BOOKS OF ACCOUNTS AS REFLECTED IN THE DEFICIT STOCK IS WORKED OUT AS UNDER: .5,30,30,877 X 28.10 % = .1,49,01,676 OUT OF THE ABOVE, THE ASSESS ING OFFICER HAS GIVEN DEDUCTION FOR AN AMOUNT OF .64,25,316 / - DECLARED B Y THE ASSESSEE IN THE RETURN OF INCOME FOR THE I.T.A. NO.3 066/M/17 10 A SSESSMENT YEAR 2012 - 13 AND THE BALANCE OF .84,76,360 / - WAS BROUGHT TO TAX . SIMILARLY, THE ASSESSING OFFICER NOTED THE UNDERVALUATION O F CLOSING STOCK AS ON 31.3.2012 AND HAS ADOPTED A VALUE OF .8, 00,00,000/ - BEIN G THE AMOUNT DECLARED BY THE ASSESSEE TOWARDS THE UNDER VALUATION OF STO C K. HOWEVER, BEFORE THE LD. CIT(A), THE A SSESSEE CLAIM ED THAT THE STATEMENT ON OATH D E CLAR ING ADDITIONAL INCOMES WAS GIVEN UNDER DURESS AND RETRACTED THE STAT EME N T GIVEN. IN THIS REGARD, BY TAKING ON RECORD THE STATEMENTS GIVEN BY THE ASSESSEE ON 19.4.2012 AS WELL AS 10.05 .2012, THE LD. CIT(A) HAS OBSERVED THAT THE ASSESSEE HAD VERY CLEARLY DECLARED AN AMOUNT O F .8,00,00, 000/ - FOR TAXATION ON ACCOUNT OF UNDERVALUATION OF STOCK AS WELL AS PROFIT EARNED ON SALE OF STOCK OUTSIDE THE BOOKS OF ACCOUNTS. THE LD. CIT(A) FURTHER OBSERVED THAT THE STATEMENT GIVEN ON 19.4.2012 HAS BEEN REITERATED BY THE ASSESSEE ON 10.5.20 12. SUBSEQUENTLY, THE ASSESSEE RETRACTED THE ADMISSION GIVEN. HOWEVER, T HE ASSESSEE HAS NOT GIVEN ANY SPECIFIC REASON FOR RETRACTION , BUT BR O ADL Y SUGGESTED THAT THE ADMISSION WAS GIVEN UNDER DURESS WITHOUT ANY SUBSTANTIVE FACTS . UNDER THE ABOVE FACTS AND C IRCUMSTANCES AND CONSIDERING VARIOUS DECISIONS OF VARIOUS COURTS, THE LD. CIT(A) REJECTED THE RETRACTION OF STATEMENT AS SELF SERVING AND DEVOID OF MERIT S. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE COULD NOT CONTROVERT THE DETAILED STATEMENT GIVEN ON 19. 4.2012 , WHICH WAS REITERATED THE SAME VIDE ASSESSEE S STATEMENT DATED 10.5.2012 , BUT, BY RELYING ON THE CIRCULAR DATED 10.03.2003 IN F. NO. 286/2/2003 - IT(INV.II) ISSUED BY THE CBDT, IT WAS THE I.T.A. NO.3 066/M/17 11 ARGUMENT THAT THE CONFESSIONS OF ADDITIONAL INCOME DURING THE C OURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. FIRST OF ALL, IN THIS CASE, THERE WAS HUGE VARI ATION OF STOCKS AS PER BOOKS AS WELL AS FURNISHED TO THE BANKER. THE ASSESSEE HAD NO OTHER OPTION BUT TO ADMIT THE UNDERVALUAT ION OF STOCK AS WELL AS SALES BY CASH OUT OF BOOKS OF ACCOUNT. THUS, IT IS A CLEAR CASE OF EVASION OF TAXATION AND MOREOVER, THERE WAS NO EVIDENCE THAT THE STATEMENT WAS RECORDED UNDER DURESS , BECAUSE, DETAILED STATEMENT GIVEN ON 19.04.2012 WAS REITERATED BY THE ASSESSEE IN ITS SUBSEQUENT STATEMENT DATED 10.05.2012 . IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE RETRACTION IS NOTED AS MADE ONLY TO EVADE INCIDENCE OF TAXATION AND PENAL PROCEEDINGS AND THUS, THE AUTHORITIES BELOW HAVE RIGHTL Y REJECTED THE RETRACTION STATEMENT, WHICH IS OF NO MERITS AND THUS, THE ADDITION MADE TOWARDS UNDERVALUATION STANDS CONFIRMED . 8. WHILE NOTING THE OFFER OF ADDITIONAL INCOME OF .8,00,00,000/ - TOWARDS UNDERVALUATION OF STOCK AND TOWARDS THE GROSS PROFI T EARNED ON ACCOUNT OF CASH SALES/UNACCOUNTED SALES OUTSIDE THE BOOKS OF ACCOUNT, THE LD. CIT(A) FURTHER COMPUTED THE VALUE OF STOCK AND THE SAME IS REPRODUCED AS UNDER: STOCK OF SILVER DECLARED AS ON 31.3.2012 44 87.940 KGS STOCK VALUE AS ON 31.3.2012 RS.14,99,25,789 VALUE PER KG = RS.14,99,25,789 = RS.33,406.37 PER KG. 4 487.940 KGS ADOPTING A VALUE OF RS.53,200 PER KG THE UNDERVALUATION OF CLOSING STOCK AS ON 31.3.2012 IS WORKED OUT AS UNDER: 4487.940 KGS X RS.53,200 = RS.23,87,58,408 I.T.A. NO.3 066/M/17 12 ACTUAL STOCK VALUE AS ON 31.03.2012 - DECLARED STOCK VALUE = UNDERVALUED STOCK RS.23,87,58,408 - RS.14,99,25,789 = RS.8.88,32,619 IN VIEW OF THE ABOVE COMPUTATION OF UNDERVALUATION OF STOCK, THE LD. CIT(A) OBSERVED THAT AGAINST THE ACTUAL UNDERVALUED STOCK VAL UE OF . 8,88,32,619/ - , THE ASSESSING OFFICER TAKEN ONLY AN AMOUNT OF .8,00,00,000/ - . ACCORDINGLY, DURING THE APPELLATE PROCEEDINGS, A DRAFT APPELLATE ORDER ALONG WITH COVERING LETTER DATED 11.10.2017 WAS ADDRESSED TO THE ASSESSEE SEEKING EXPLANATION AS T O WHY THE UNDERVALUATION OF STOCK SHOULD NOT BE TAKEN AT .8,88,32,619 AS AGAINST THE ASSESSED AMOUNT OF .8,00,00,000/ - . THE ASSESSEE HAS NOT FILED ANY EXPLANATION BEFORE THE LD. CIT(A) WHEN THE CASE WAS POSTED FOR HEARING ON 24.10.2017. ACCORDINGLY, THE LD. CIT(A) ENHANCED THE UNDERVALUATION OF STOCK AT .8,88,32,619/ - . EVEN BEFORE THE TRIBUNAL, THE ASSESSEE COULD NOT FILE ANY EXPLANATION OR ITS REBUTT AL TOWARDS ENHANCEMENT OF UNDERVALUATION OF STOCK. ACCORDINGLY, THE ENHANCEMENT OF UNDERVALUATION OF STOC K STANDS CONFIRMED. 9. WITH REGARD TO THE DETERMINATION OF GROSS PROFIT ON UNACCOUNTED SALES, THE ASSESSING OFFICER BROUGHT TO TAX AN AMOUNT OF .84,76,360/ - ON ACCOUNT OF GROSS PROFIT EARNED ON UNACCOUNTED CASH SALES MADE. THE LD. CIT(A) OBSERVED T HAT THE ASSESSEE HAS ALREADY DECLARED AN AMOUNT OF . 64,25,316 OUT OF THE TOTAL GROSS PROFIT WORKED OUT OF .1 ,49,01,676. TO THIS EXTENT, THE ASSESSEE HAS ADMITTED A PART OF THE GROSS PROFIT BEING LIABLE FOR TAXATION IN A SSESSMENT Y EAR.2012 - 13. IN THE APPE LLATE ORDER, THE LD. CIT(A) TABULATED I.T.A. NO.3 066/M/17 13 THE PURCHASE AND SALES MADE BY THE ASSESSEE BETWEEN 1.4.2012 TO 19.4.2012 AND THAT THE GROSS PROFIT ON ACC O UNT OF UNACCOUNTED SALES DESERVES TO BE BROUGHT TO TAXATION FOR THE A SSESSMENT YEAR 2012 - 13. FURTHER, WHEN THE LD. CIT(A) ASKED THE ASSESSEE TO OFFER HIS COMMENTS IN THIS REGARD , THE ASSESSEE HAS NOT UTILISED THE OPPORTUNITY GIVEN TO SUBMIT ANY DETAILS IN THIS REGARD. THUS , THE LD. CIT(A) CONFIRMED THE GROSS PROFIT ADDITION ON UNACCOUNTED SALES OF THE ASSESSEE TO T HE EXTENT OF .84,76,360 / - . 9.1 BY FILING COPY OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013 - 14, IT WAS THE SUBMISSIONS OF THE LD. COUNSEL THAT THE ASSESSEE HAS ADMITTED INCOME OF .64,25,316/ - OUT OF UNACCOUNTED SALE IN THIS YEAR AND THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN WORKING OUT THE UNACCOUNTED SALES TO THE EXTENT OF .1,49,01,676/ - AND PRAYED FOR DELETING THE SAME. EVEN THOUGH, THE ASSESSEE HAS DECLARED A VALUE OF .54,000/ - PER KG WHILE DECLARING THE VALUE OF STOCK TO THE BANKERS, THE A SSESSEE HAS CLAIMED THAT THE MARKET RATE OF THE STOCK WAS ONLY .53,650/ - . BY GIVING BENEFIT OF DOUBT TO THE ASSESSEE, THE ASSESSING OFFICER HAS TAKEN THE VALUE OF STOCK ONLY AT .53,200/ - . THUS, THE MARKET VALUE OF THE DEFICIT STOCK FOUND AND ADMITTED ON 19.04.2012 OF 996.821 KG COMES TO .5,30,30,877/ - . SINCE THE ASSESSEE DECLARED GROSS PROFIT RATIO OF 28.10% IN THE LAST FOUR YEARS, THE PROFIT EARNED ON ACCOUNT OF THE SALE OUTSIDE THE BOOKS OF ACCOUNTS AS REFLECTED IN THE DEFICIT STOCK COMES TO .1,49,01, 676/ - . OUT OF THIS AMOUNT, THE ASSESSING OFFICER HAS GIVEN I.T.A. NO.3 066/M/17 14 DEDUCTION FOR AN AMOUNT OF .64,25,316/ - DECLARED BY THE ASSESSEE IN THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2012 - 13 AND THE BALANCE AMOUNT OF .84,76,360/ - WAS BROUGHT TO TAX. ON PERUSAL OF T HE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2013 - 14, THE ASSESSEE HAS ADMITTED INCOME OF .1,17,69,404/ - , WHICH ALSO INCLUDES .64,25,316/ - AND THE ASSESSING OFFICER ACCEPTED THE INCOME RETURNED BY THE ASSESSEE. UNDER THE ABOVE FACTS AND CIRCUMSTANCES, WE DIRECT THE ASSESSING OFFICER TO VERIFY AS TO WHETHER THE DEDUCTION ALLOWED BY THE ASSESSING OFFICER IN THE ASSESSMENT YEAR 2012 - 13 AND THE UNACCOUNTED SALES ADMITTED BY THE ASSESSEE IN THE ASSESSMENT YEAR 2013 - 14 ARE ONE AND THE SAME AND DECIDE THE ISSUE A FRESH AFTER GIVING AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES . ORDER PRONOUNCED ON THE 05 TH JUNE , 201 8 AT CHENNAI. SD/ - SD/ - (ABRAHAM P. GEORGE) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 05 . 0 6 .201 8 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPONDENT , 3. ( ) / CIT(A ) , 4. / CIT , 5. / DR & 6. / GF.