M/s. Banarsi Sweets P.Ltd, Pathankot V. The Dy. Commissioner of Income-tax, Pathankot

ITA 471/ASR/2011

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68235 (ITAT-AMRITSAR)
• Duration Of Justice: 2 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 04-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 05-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Unexplained investment; Search and seizure; Retraction
• Section: 133A; 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. H.S. SIDHU, JUDICIAL MEMBER AND SH. B.P.JAIN, ACCOUNTANT MEMBER I.T.A. NO.471(ASR)/2011 ASSESSMENT YEAR:2007-08 PAN :AACCB9192R M/S. BANARSI SWEETS PVT. LTD. VS. THE DY. COMMR. OF INCOME TAX, MAIN BAZAR, PATHANKOT. CIRCLE, PATHANKOT. (APPELLANT) (RESPONDENT) APPELLANT BY:SH. SALIL KAPOOR, ADVOCATE RESPONDENT BY:SH. MAHAVIR SINGH, DR DATE OF HEARING: 31/10/2013 DATE OF PRONOUNCEMENT:21/11/2013 ORDER PER BENCH ; THIS APPEAL OF THE ASSESSEE ARISES FROM THE ORDER OF THE CIT(A), AMRITSAR, DATED 01.07.2011 FOR THE ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LD. CIT(A) HAS, IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CASE, GROSSLY ERRED IN LAW AND ON FACTS IN UPHOLDING THE ASSESSMENT MADE AT INCOME OF RS.63,94,832/- AGAIN ST THE DECLARED INCOME OF RS.12,16,462/- BY CONFIRMING T HE FOLLOWING ADDITIONS: I) RS.15,00,000/- ON ACCOUNT OF ALLEGED UNEXPLAIN ED EXPENDITURE ON CONSTRUCTION OF BUILDING. ITA NO.471(ASR)/2011 2 II) RS.7,00,000/- ON ACCOUNT OF ALLEGED DIFFERENC E IN CASH IN HAND. III) RS.3,00,000/- ON ACCOUNT OF ALLEGED SHORTAGE OF STO CK. IV) RS.26,78,370/- ON ACCOUNT OF ALLEGED LOW GROSS PROF IT RATE. 2. THAT THE LD. CIT(A) HAS,GROSSLY ERRED IN CONFIRMING THE ADDITIONS MADE ARBITRARILY, WITHOUT ANY DEFECTS OR OMISSIONS IN BOOKS OF ACCOUNT AND WITHOUT ANY SUPPORTING MATERIA L ON RECORD. THE ADDITIONS MADE WERE UNJUST AND UNLAWFUL . 3. THAT THE STATEMENT RECORDED ON SURVEY U/S 133A WITH OUT ANY CORROBORATING EVIDENCE, HAS NO EVIDENTIARY VALUE AN D THE ADDITIONS MADE MERELY ON THE BASIS OF THAT STATEMEN T ARE ILLEGAL, UNJUST AND UNLAWFUL. THE ADDITIONS MADE, ON THE BAS IS OF SUCH STATEMENT, ARE IN VIOLATION OF CBDT INSTRUCTIONS F.NO.286/2/2003 DATED 10.03.2003 AND THE SAME HAVE BEEN WRONGLY UPHELD. 4. THAT IN ANY CASE, THE SURRENDER WAS NOT SUPPORTED B Y ANY EVIDENCE ON RECORD THAT THE COST OF CONSTRUCTION WA S DULY APPEARING IN BOOKS OF ACCOUNT AND THE COST OF COMPL ETE BUILDING WAS PROVED BY BOOKS OF ACCOUNT AND SUPPORTED BY VAL UATION CERTIFICATE. 5. THAT THE EVIDENCE PLACED ON RECORD, EXPLANATIONS FI LED HAVE NOT BEEN PROPERLY CONSIDERED AND JUDICIALLY INTERPRETED AND THE ADDITION HAS BEEN WRONGLY UPHELD. THAT IN ANY CASE, THE AFFIDAVIT FILED BY THE APPELLANT ADMITTED ON RECORD AND NOT CONTRADICTED BY THE DEPARTMENT OR PROVED TO BE FALS E BY THE DEPARTMENT WAS CONCLUSIVE EVIDENCE AND THE SAME HAS BEEN WRONGLY IGNORED. 6. THAT THE ALLEGED SURRENDER WAS RETRACTED AND THE EV IDENCE FILED IN RESPECT THEREOF HAS BEEN WRONGLY IGNORED. THE R EVISED SURRENDER OF RS.8,00,000/- BY LETTER DATED 27.11.20 06 AFTER DISCUSSION WITH THEN JDCIT, PATHANKOT FOR A.Y..2007 -08 ONLY HAS BEEN WRONGLY IGNORED. 7. THAT IN VIEW OF THE FACTS & CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) HAS GROSSLY ERRED IN CONFIRMING THE ADDITION OF RS.26,78,370/- MADE IN THE TRADING ACCOUNT, WITHOUT FINDING ANY DEFECTS OR OMISSIONS IN BOOKS OF ACCOUNTS AND WITHO UT CONSIDERING THE PAST ACCEPTED HISTORY OF THE CASE. THE BOOKS WERE WRONGLY REJECTED AND THE ADDITION MADE WAS UNJ UST, UNLAWFUL AND HIGHLY EXCESSIVE. ITA NO.471(ASR)/2011 3 8. THAT THE ADDITION IN THE TRADING ACCOUNT HAS BEEN M ADE MERELY N THE BASIS OF CONJECTURES AND SURMISES AND THE TRADI NG ACCOUNT HAS BEEN WRONGLY RECAST AND THE CASE OF THE APPELLA NT HAS WRONGLY COMPARED WITH AMRITSAR SHOPS AND THE ADDITI ON HAS BEEN WRONGLY MADE AND WRONGLY UPHELD. IN ANY CASE, THE REJECTION OF THE TRADING ACCOUNT, WITHOUT GIVING AN Y STATUTORY NOTICE TO THAT EFFECT, WAS ILLEGAL, UNJUST AND UNLA WFUL AND THE ADDITION MADE WAS WRONGLY CONFIRMED BY THE LD. CIT( A). 9. THAT EVEN ON THE BASIS OF STATED FACTS, THE PENALTY PROCEEDING WERE WRONGLY STARTED U/S 271(1)(C) AND THE PENAL I NTEREST CHARGED U/S 234B & 234C WAS UNJUST AND UNLAWFUL. 2. AS REGARDS GROUND NO. 1(I), (II) (III) AND GROUNDS NO. 2, 3, 4, 5 & 6, THE BRIEF FACTS ARE THAT THE ASSESSEE DERIVES INCOM E FROM MANUFACTURING AND TRADING OF SWEETS. A SURVEY U/S 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 06/.10.2006. D URING THE COURSE OF SURVEY, THE ASSESSEE VIDE LETTER DATED 06.10.2006 S URRENDERED A TOTAL SUM OF RS.53,00,000/- FOR WHICH DETAIL IS AS UNDER: DURING F.Y.2005-06 (A) ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF SHO P BUILDING RS.20,00,000 DURING F.Y.2006-07 (A) INVESTMENT IN CONSTRUCTION OF SHOP BUILDING RS .15,00,000 (B) ON ACCOUNT OF DIFFERENCE IN CASH IN HAND RS.15 ,00,000 (C) ON ACCOUNT OF SHORTAGE IN STOCK IN HAND RS. 3, 00,000 ITA NO.471(ASR)/2011 4 3. LATER ON VIDE LETTER DATED 23.11.2008 FILED BY T HE ASSESSEE, THE TOTAL SURRENDER WAS REVISED TO RS.8,00,000/-. THE AO CONF RONTED THE DISCREPANCIES WITH THE ASSESSEE WHO SUBMITTED HIS E XPLANATION VIDE LETTER DATED 11.12.2008 AND AO ULTIMATELY VIDE PARA 7 TO 1 2 MADE AN ADDITION OF RS. 25 LACS OVER AND ABOVE RS. 8 LACS SURRENDERED B Y THE ASSESSEE. IT IS PERTINENT TO REPRODUCE PARA 7 TO 12 OF AOS ORDER A VAILABLE AT PAGE 4 & 5 AS UNDER: 7. FROM THE PERUSAL OF THE SURVEY FOLDER THE FOLL OWING FACTS EMERGES: 1. THAT INVENTORY OF CASH HAS BEEN PREPARED ON THE DATE OF SURVEY DULY SIGNED BY SH. RISHI ARORA SHOWING CASH FOUND AND RECEIVED BACK BY THE ASSESSEE OF RS.14,38,310/-. EVEN DENOMINATION OF THE CASH FOUND IS CLEARLY MENTION ED. 2. THAT ITEM WISE INVENTORY OF STOCK FOUND DURING SURVEY HAS BEEN PREPARED WHICH HAS BEEN DULY SIGNED BY SH. RISHI ARORA AND SH. SUBHASH CHANDER ARORA. 3. THAT FROM COMPUTGERIZED BOOKS OF ACCOUNT OF THE ASSESSEE, PRINT OUT OF CLOSING BALANCE AS PER CASH BOOK HA S BEEN TAKEN WHICH IS DULY SIGNED BY SH. RISHI ARORA. 4. THAT FROM COMPUTERIZED BOOKS OF ACCOUNT OF THE ASSESSEE, PRINT OUT OF TRIAL BALANCE AS ON DATE OF SURVEY HAS BEE N TAKEN WHICH IS DULY SIGNED BY SH. RISHI ARORA. 5. THAT FROM COMPUTERIZED BOOKS OF ACCOUNT OF THE ASSESSEE, PRINT OUT OF MANUFACTURING ACCOUNT FROM 1.04.2006 TO 05 .10.2006 HAS BEEN TAKEN WHICH IS DULY SIGNED BY SH. RISHI AROR A AND SH. PAWAN ARORA, PARTNER OF M/S. P.P. ARORA & ASSOCIA TES, CHARTERED ACCOUNTANT. 8. PERUSAL OF THE RECORD REVEALS THAT THE ASSESSEE DEPOSITED TAX OF RS.6,23,200 + RS.50,000/- ON 06.11.2008 FOR THE A. Y. 2006-07. THE SAME WAS COMMUNICATED TO THIS OFFICE VIDE LETTER DATED 07.11.2008. ITA NO.471(ASR)/2011 5 IN THE LETTER IT IS CLEARLY MENTIONED THAT THE TAX HAS BEEN DEPOSITED ON ACCOUNT OF SURRENDER AS AGREED BY SH. RISHI ARORA. 9. ON 27.11.2008, THE ASSESSEE FILED LETTER DATED 23.11.2006 WHICH IS REPRODUCED BELOW: REFERENCE TO YOUR LETTER NO.JCIT/R-VI/PTK/2006-07/8 817 AND IN CONTINUATION OF OUR PETITION DATED 05.11.2006 A ND THE VERBAL DISCUSSION ON 22.11.2006 WITH YOUR GOOD SELF AND W ITH A VIEW TO SETTLE THE GRIEVANCE PETITION WITH YOUR DEPARTMENT AND AS ADVISED, I OFFER RS.8 LACS AS REVISED SURRENDERED IN CASH ONLY IN C URRENT YEARS INCOME SUBJECT TO NO CONCEALMENT, PROSECUTION OR HARASSME NT UNDER ANY PROVISIONS OF INCOME TAX ACT. 10. A PERUSAL OF THE RECORDS SHOWS THAT THERE IS N O EVIDENCE OF THE REVISED SURRENDER OF RS.8 LAKHS BEING ACCEPTED BY THE DEPARTMENT. THE ASSESSEE HAS ALSO FAILED TO FURNISH ANY EVIDENCE O F ITS ACCEPTANCE AS CLAIMED BY IT DESPITE BEING GIVEN ADEQUATE OPPORTU NITY. 11. KEEPING IN VIEW THE FACTS NARRATED ABOVE, IT I S CRYSTAL CLEAR THAT ASSESSEE HAS VOLUNTARILY SURRENDER A SUM OF RS.33, 00,000/- RELEVANT TO ASSESSMENT YEAR 2007-08 AND SUBSEQUENT RETRACTION IS AN AFTER THOUGHT WHICH HAS NO BASES WHERE AS THE SURRENDERED AMOUN T IS BASED ON SOLID FACTS. THEREFORE, IT IS HELD THAT THE ASSES SEE HAD VOLUNTARILY SURRENDERED A SUM OF RS.33,00,000/- FOR A.Y. 2007- 08 DURING SURVEY U/S 133A OF THE I.T.ACT ON ACCOUNT OF INVESTMENT I N CONSTRUCTION OF SHOP BUILDING (RS.15,00,000/-), DIFFERENCE IN CASH IN HAND (RS.15,00,000/-) AND ON ACCOUNT OF SHORTAGE IN ST OCK IN HAND (RS.3,00,000/-. THIS CONCLUSION IS BASED ON ABOVE DISCUSSION AS WELL AS FOLLOWING FACTS: I) THE ASSESSEE SURRENDERED THIS AMOUNT IN STATEMENT O F SH.RISHI ARORA RECORDED ON THE DATE OF SURVEY. AT T HE CONCLUSION OF THE STATEMENT IT IS CLEARLY VERIFIED BY SH. RISHI ARORA THAT THE STATEMENT HAS BEEN GIVEN WITHO UT UNDUE PRESSURE AND THAT THE SURVEY WAS CONDUCTED IN A COOPERATIVE ENVIRONMENT AND PEACEFUL MANNER. II) THE PARTNER OF THE ASSESSEE FIRM HAS, IN HIS OWN HANDWRITING AND ON LETTER HEAD OF THE ASSESSEE, ADM ITTED THE ABOVE SURRENDER OF UNEXPLAINED INVESTMENT. IN THE ITA NO.471(ASR)/2011 6 LAST SENTENCE HE HAS STATED THAT THE ABOVE MENTIONED SURRENDER OF INCOME HAS BEEN MADE VOLUNTARILY AND WITHOUT ANY UNDUE INFLUENCE AND IN A PEACEFUL MANNE R WHICH PROVES THAT THE SURRENDER WAS VOLUNTARY. III) THE STOCK INVENTORY AS WELL AS CASH INVENTORY HAVE BEEN DULY SIGNED BY SH. RISHI ARORA. IN FACT, PRINT OUT OF MANUFACTURING ACCOUNT FROM 1.04.2006 TO 05.10.2006 HAS BEEN TAKEN WHICH IS DULY SIGNED BY SH. RISHI AR ORA AND SH. PAWAN ARORA, PARTNER OF M/S. P.P.ARORA & ASSOCIATES, CHARTERED ACCOUNTANT. THIS SHOWS THAT T HEIR CHARTERED ACCOUNTANT WAS PRESENT AT THE TIME OF SU RVEY AND THE DEPARTMENT COULD NOT HAVE EXERCISED UNDUE INFLUENCE. IV) THE ASSESSEE DEPOSITED TAX OF RS.6,73,200 ON 06.11.2008 FOR THE A.Y. 2006-07. THE SAME WAS COMMUNICATED TO THIS OFFICE VIDE LETTER DATED 07.11.2008. IN THE LETTER IT IS CLEARLY MENTIONED T HAT THE TAX HAS BEEN DEPOSITED ON ACCOUNT OF SURRENDER AS AGREED BY SH. RISHI ARORA. THE ASSESSEE HAD NOT RETRACTED FROM HIS SURRENDER TILL THIS DATE. V) IN VIEW OF THE ABOVE FACTS, FILLING A LETTER SUO-MO TO REDUCING THE SURRENDER TO RS. 8 LAKHS APPEARS TO BE AN AFTER THOUGHT TO ESCAPE THE TAX LIABILITY. THERE IS NO ACCEPTANCE BY THE DEPARTMENT OF THE REVISED SURREND ER. 12. KEEPING IN VIEW THE FACTS DISCUSSED ABOVE AN AD DITION OF RS.25,00,000/- IS BEING MADE TO THE RETURNED INCOME OF THE ASSESSEE ON ACCOUNT OF AMOUNT SURRENDERED UNDER DIF FERENT HEADS DURING THE COURSE OF SURVEY. IT IS WORKED OU T AS UNDER: AMOUNT SURRENDERED AS DISCUSSED ABOVE RS.33,00, 000/- AMOUNT SURRENDERED IN THE RETURN OF INCOME RS8,00, 000/- BALANCE RS.25,00,000/- PENALTY PROCEEDINGS U/S 271(1)(C) READ WITH EXPLA NATION 1 OF THE I.T.ACT, 1961 ARE BEING INITIATED SEPARATELY. 4. BEFORE THE LD. CIT(A), THE ASSESSEE SUBMITTED TH E EXPLANATION WHICH WAS SENT FOR REPORT TO THE A.O. THE LD. CIT(A) AFTE R CONSIDERING THE REPORT ITA NO.471(ASR)/2011 7 OF THE A.O. AND THE EXPLANATION OF THE ASSESSEE CO NFIRMED THE ACTION OF THE ASSESSING OFFICER. 5. THE LD. COUNSEL FOR THE ASSESSEE, MR. SALIL KAPO OR, ADVOCATE AT THE OUTSET ARGUED THAT FACTS IN THE PRESENT CASE ARE I DENTICAL TO THE FACTS IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 WHICH MATTER HAS TRAVELED TO THE ITAT, AMRITSAR BENCH IN ITA NO.470( ASR)/2011 DECIDED ON 07/10/2013, COPY OF THE SAME WAS PLACED ON RECORD. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE, MR. SALIL KAPOOR, INVITED OUR ATTENTION TO THE ORDER OF AO FROM PAGE 1 TO 5 AND READ THE SAME ALONGWITH THE FACTS DURING THE ASSESSMENT YEAR 2006-07 IN ITATS ORDER PLACED ON R ECORD AND INVITED OUR ATTENTION THAT THE FACTS ARE IDENTICAL. IN THE PRE CEDING YEAR, THE ITAT, AMRITSAR BENCH HAS DELETED THE ADDITIONS MADE BY TH E AO AND ACCORDINGLY THE LD. COUNSEL PRAYED TO REVERSE THE ORDER OF THE LD. CIT(A). 6. ON THE OTHER HAND, THE LD. DR INVITED OUR ATTENT ION TO THE FACTS THAT THERE IS NO SIMILARITY IN THE CASE AS IN THE PRECED ING YEAR AND EACH YEAR IS AN INDEPENDENT YEAR AND THEREFORE, PRAYED TO CONFIRM T HE ORDER OF THE LD. CIT(A). 7. WE HAVE HEARD THE RIVAL CONTENTION AND PERUSED T HE FACTS OF THE CASE. ON PERUSAL OF ITAT ORDER FOR THE PRECEDING YEAR WHI CH IS PLACED ON RECORD BY THE LD. COUNSEL AND THE FACTS FOR THE FOR THE PR ESENT YEAR, WE ARE OF THE ITA NO.471(ASR)/2011 8 VIEW THAT THE FACTS IN THE PRESENT YEAR ARE IDENTI CAL TO THE FACTS IN THE PRECEDING YEAR I.E. ASSESSMENT YEAR 2006-07. MOREOV ER, BOTH THE YEARS I.E. PRECEDING YEAR AND THE IMPUGNED YEAR HAVE ALREADY B EEN DEALT VIDE PARA 7 TO 8 OF OUR ORDER IN ITA NO.470)ASR)/2011 FOR THE A.Y. 2006-07 DATED 7.10.2013 AND ADDITIONS HAVE BEEN DIRECTED TO BE DE LETED ON IDENTICAL FACTS. FOR THE SAKE OF CONVENIENCE, WE REPRODUCE HEREINBEL OW OUR ORDER IN PARA 7 & 8 IN ITA NO.470(ASR)/2011 FOR THE A.Y. 2006-07 D ATED 07.10.2013 IN ASSESSEES OWN CASE AS UNDER: 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSE D THE FACTS OF THE CASE. THERE IS NO DISPUTE TO THE FACT THAT THE ASS ESSEE HAD MADE A SURRENDER INITIALLY AMOUNTING TO RS.53 LAKH I.E. ON ACCOUNT OF INVESTMENT IN CONSTRUCTION OF SHOP BUILDING AT RS .35 LAKHS, (RS.20 LAKHS IN THE IMPUGNED YEAR AND RS.15 LAKHS IN THE FOLLOWING YEAR) AND RS. 15 LAKHS & RS.3 LAKHS IN CASH AND SHORTAGE IN STOCK IN HAND IN THE FOLLOWING YEAR. IT IS ALSO NOT UNDER DISPUTE THAT THE ASSESSEE HAD MADE THE SUBMISSIONS BEFORE THE AO WHICH ARE AVAILABLE AT PAGES 2 & 3 OF AOS ORDER AND ALSO REPRODUCED HEREINABOVE. THE AS SESSEE HAS MADE A GRIEVANCE PETITION, AS STATED, ON REALIZING THE IMPORT OF THE SURRENDER AND ON REALIZING THAT HE DOES NOT HAVE ADEQUATE KN OWLEDGE OF BOOKS OF ACCOUNT AND THERE IS NO DISCREPANCY IN THE BOOK S OF ACCOUNT VIS-- VIS INVESTMENT MADE. PERSONAL HEARING WAS GIVEN BY THE THEN JCIT ON 22.11.2006 TO SH. RISHI ARORA, PARTNER OF THE FIRM . ON 27.11.2006. THE ASSESSEE HAS REVISED SURRENDER IN TOTAL AT RS. 8 LAKHS AS AGAINST RS.53 LAKHS MENTIONED HEREINABOVE. ON REALIZING T HAT THERE IS NO FURTHER COMMUNICATION RECEIVED FROM THE DEPARTMENT , IT WAS ADDUCED BY THE ASSESSEE THAT SURRENDER MADE HAS VALIDLY BE EN ACCEPTED BY THE DEPARTMENT. THERE IS NO DISPUTE THAT THE ASSESSEE HAS PAID TAXES ON THE SAID AMOUNT. THE ONLY DISPUTE BEFORE US IS THAT TH E DEPARTMENT IS RELYING UPON THE ORIGINAL SURRENDER MADE ON THE DA TE OF SURVEY, WHICH HAS BEEN RETRACTED BY THE ASSESSEE. THE ASSESSEE IS RELYING UPON THE REVISED SURRENDER WHICH HAS BEEN DISCUSSED WITH TH E JCIT ON 22.11.2006 AND REVISED SURRENDER LETTER HAS BEEN FILED ON 27.11.2006 ITA NO.471(ASR)/2011 9 IS A MATTER OF RECORD. IN THIS REGARD, C.B.D.T. VI DE CIRCULAR DATED MARCH 10,2003, WHICH HAS BEEN REPRODUCED HEREINABO VE, HAS CLEARLY MENTIONED THAT INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHERE THE ASSESSEE HAS CLAIMED THAT THEY HAVE BEEN FORC ED TO CONFESS THE UNDISCLOSED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACTED BY THE CONCERNED ASS ESSEE WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, ON CONF ESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT WAS, THEREFORE, ADVISED BY THE C.B.D.T. THAT THERE SHOULD BE FOCUS TO INFORMATION ON WHAT HAS NOT BEE N DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME-TAX D EPARTMENT. IT WAS ALSO MENTIONED IN THE SAID CIRCULAR DATED MARCH 10 , 2003 THAT THE A.O. SHOULD RELY UPON THE EVIDENCES/MATERIALS GATH ERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS. IN THIS REGARD , IN THE PRESENT CASE, THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE WAS U NDER MENTAL TENSION AND TRAUMA AND THE SURRENDER WAS MADE ON THE DATE OF SURVEY WAS WITHOUT THE KNOWLEDGE OF THE RELEVANT FACTS. THER E IS NO INCRIMINATING DOCUMENTS FOUND DURING THE COURSE OF SURVEY OR DUR ING THE ASSESSMENT PROCEEDINGS. NOTHING HAS BEEN BROUGHT ADVERSE ON R ECORD WHICH MAY TO LEAD TO INFORMATION AND WHICH COULD PROVE THAT THE ASSESSEE IS HAVING OR HAS MADE UNDISCLOSED INVESTMENT. 7.1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE DEPARTMENT ITSELF CANNOT GO AGAINST ITS OWN CIRCULAR OF CBDT DATED M ARCH 10, 2003 (SUPRA). THEREFORE, ONLY ON THE BASIS OF THIS CIRC ULAR, THE EXPLANATION OF THE ASSESSEE SHOULD HAVE BEEN ACCEPTED BY THE A .O. AND THE REVISED SURRENDER OF RS.8 LAKHS HAS TO BE ACCEPTED IN SUC H CIRCUMSTANCES AND FACTS OF THE CASE. 7.2. THOUGH RETRACTION HAS BEEN MADE BY THE ASSESS EE WITHIN HIS OWN RIGHT AND ON THE BASIS OF FACTS ON RECORD AND IN THE ABSENCE OF ANY INCRIMINATING DOCUMENT FOUND AND THEREFORE, EVEN IF THE ADMISSION HAS BEEN MADE ON THE DATE OF SURVEY THAT CANNOT BE CONCLUSIVE AND THE ASSESSEE HAS THE RIGHT TO PROVE THAT SUCH ADMI SSION MADE WAS INCORRECT. THIS PROPOSITION HAS BEEN FORTIFIED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF PULLANGODE RU BBER PRODUCE CO. LTD. VS. STATE OF KERALA AND ANOTHER REPORTED IN (1973) 91 ITR 18, WHERE IT HAS BEEN HELD THAT ADMISSION IS AN EX TREMELY IMPORTANT PRICE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE WHO MADE THE ADMISSION TO SHO W THAT IT IS INCORRECT AND THE ASSESSEE SHOULD BE GIVEN A PROPE R OPPORTUNITY TO ITA NO.471(ASR)/2011 10 SHOW THAT THE BOOKS OF ACCOUNT DO NOT DISCLOSE THE CORRECT STATE OF FACTS. ALSO IN VIEW OF THE DECISION OF HONBLE KER ALA HIGH COURT IN THE CASE OF PAUL MATHEWS AND SONS VS. C.I.T. REPO RTED IN (2003) 263 ITR 101, WHERE IT HAS BEEN HELD THAT WHATEVER STAT EMENT IS RECORDED UNDER SECTION 133A OF THE ACT, IT IS NOT GIVEN AN Y EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT A UTHORIZED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE H AS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW. ALSO NO BOOKS OF ACCOUNT HAS BEEN REJECTED BY THE A.O. AND ON ONE HAND, THE AO IS A CCEPTING INVESTMENT MADE IN THE BUILDING AND ON THE OTHER HAND IN THE ABSENCE OF ANY INCRIMINATING DOCUMENT IS ALLEGING THAT THE ASSESS EE HAS MADE UNDISCLOSED INVESTMENT. THE AO CANNOT BLOW HOT AND COLD IN THE SAME BREATH IN THIS REGARD. THE DECISIONS RELIED UPON B Y THE LD. DR HAS BEEN PERUSED AND TAKEN INTO CONSIDERATION AND ARE ON DIFFERENT FACTS AND CIRCUMSTANCES OF THE CASE. IN SUCH FACTS AND C IRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMIN G THE ACTION OF THE ASSESSING OFFICER AND ACCORDINGLY, WE DIRECT THE A .O. TO DELETE THE ADDITION SO MADE. ACCORDINGLY, ALL THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.470(ASR)/2011 FOR THE ASSESSMENT YEAR 2006-07 I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7TH OCT.., 2013. 7. IN VIEW OF OUR ORDER IN ITA NO.470(ASR)/2011 FOR THE ASSESSMENT YEAR 2006-07 DATED 07/10/2013 HEREINABOVE, WHICH IS IDEN TICALLY APPLICABLE ON THE PRESENT ISSUE, AND ACCORDINGLY, THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRMING THE ACTION OF THE AO AND WE DIRECT THE A .O. TO DELETE THE ADDITIONS SO MADE AND OUR ORDER IN PARA 7 TO 7.2 AS REPRODUCED HEREINABOVE IS IDENTICALLY APPLICABLE IN THE PRESENT GROUNDS BE FORE US. THUS, GROUNDS NO. 1((I), (II), (III), 3, 4, 5 & 6 OF THE ASSESSEE ARE ALLOWED. ITA NO.471(ASR)/2011 11 8. NOW, WE TAKE UP GROUNDS NO.1 (IV), 2, 7 & 8 WHER E THE FACTS ARE THAT THE ASSESSEE HAS DECLARED A G.P. RATE OF 20.09% DU RING THE YEAR AS COMPARED TO 19.88% IN THE PRECEDING YEAR AND 20.93% IN THE Y EAR BEFORE PRECEDING YEAR. MR. RISHI ARORA, DIRECTOR OF THE ASSESSEE-COM PANY WAS EXAMINED WITH REGARD TO THE COST OF PRODUCTS MANUFACTURED AND PRO FIT EARNED WHICH IS AVAILABLE AT PAGE 6 OF AOS ORDER. THE AO ARRIVED A T THE CONCLUSION THAT THE ASSESSEE IS EARNING VERY HIGH PROFITS AND ACCORDING LY ARRIVED AT THE CONCLUSION ITEM-WISE WHICH IS REPRODUCED AT PARA 14 TO 16.3 OF AOS ORDER. THE AO THEN PROCEEDED TO APPLY GP RATE OF M/S. BANS AL SWEETS SHOP, LAWRENCE ROAD, AMRITSAR. THE AO OBSERVED THAT THE A SSESSEE IS NOT MAINTAINING PROPER BOOKS OF ACCOUNT I.E. NO STOCK R EGISTER IS BEING MAINTAINED EVEN THE RECORD OF CONSUMPTION OF RAW MA TERIAL AND PRODUCTION OF SWEETS IS NOT MAINTAINED THEREFORE, IT IS NOT PO SSIBLE TO VERIFY THE TRADING RESULT OF THE ASSESSEE IN VIEW OF THE NON-COOPERATI VE ATTITUDE OF THE ASSESSEE. ACCORDINGLY, THE AO INVOKED THE PROVISIONS OF SECTI ON 145(3) OF THE ACT AND APPLIED A G.P. RATE OF 40% ON THE BASIS OF M/S. BAN SAL SWEETS, LAWRENCE ROAD, AMRITSAR AND MADE AN ADDITION OF RS.26,78,370 /- BY ESTIMATING HIGHER SALES, AS IS AVAILABLE IN AOS ORDER AT PAGE 9. 9. THE LD. CIT(A) CONFIRMED THE ACTION OF THE A.O. VIDE PARA 9 OF HIS ORDER. ITA NO.471(ASR)/2011 12 10. THE LD. COUNSEL FOR THE ASSESSEE, MR. SALIL KAP OOR ADVOCATE ARGUED THAT IT IS NOT POSSIBLE FOR THE ASSESSEE TO MAINTAI N THE STOCK RECORD SINCE THE NUMBER OF ITEMS USED IN MANUFACTURING VARIOUS PRODU CTS OF SWEETS AND NUMBER OF PRODUCTS MANUFACTURED. AS REGARDS THE STA TEMENT MADE BEFORE THE AO BY THE DIRECTOR, MR. RISHI ARORA, NO RECORD WAS REFERRED AT THE TIME OF MAKING STATEMENT. AS REGARDS THE COMPARABLE CASE OF M/S. BANSAL SWEETS, AMRITSAR, THE SAME DOES NOT HAVE THE IDENTICAL FACT S AS THAT OF THE ASSESSEE FOR THE REASONS THAT PATHANKOT IS A SMALLER PLACE T HAN AMRITSAR. SECONDLY, M/S. BANSAL SWEETS PREPARES SWEETS ONLY IN DESI GHE E AND THIRDLY M/S. BANSAL SWEETS SHOP, LAWRENCE ROAD, AMRITSAR HAS ITS OWN NAME AND SELLS THE PRODUCTS AT ITS OWN PRICE, WHICH IS NOT POSSIB LE IN ASSESSEES CASE. MOREOVER, THE AO AND THE LD. CIT(A) HAS NOT BROUGHT ON RECORD ANY IDENTICAL FACTS OF BANSAL SWEETS WITH THAT OF THE A SSESSEE AND THEREFORE, THE SAID CASE CANNOT BE COMPARABLE WITH THAT OF THE ASS ESSEE. THEREFORE, THE PAST HISTORY OF THE ASSESSEE SHOULD HAVE BEEN FOLLOWED. THE ASSESSEES RESULTS ARE BETTER DURING THE YEAR AS COMPARED TO THE PRECEDING YEAR, AS WAS SUBMITTED BEFORE THE LD. CIT(A), WHICH FOR THE SAKE OF CLARIT Y IS REPRODUCED AS UNDER: THE HISTORY OF THE SALES AND G.P. RATE IS AS UNDE R: A.Y. SALES G.P.RATE REMARKS 2005-06 RS.1,04,21,887/- 20.93% ACCEPTED 2006-07 RS.1,06,90,429/- 19.88% ACCEPTED ITA NO.471(ASR)/2011 13 2007-08 RS.1,33,31,113/- 20.09% APPLIED 40% UNDER APPEAL 2008-09 RS.2,73,19,151/- 20.07% ACCEPTED 2009-10 RS.4,42,69,592/- 22.57% ACEEPTED 11. THE LD. DR, ON THE OTHER HAND, ARGUED THAT THE ASSESSEE HIMSELF AGREED ABOUT THE COST OF THE MATERIAL USED AND THE PROFIT SO EARNED AND THEREFORE, THE ORDER OF THE LD. CIT(A) SHOULD BE CO NFIRMED. THE LD. DR ALSO ARGUED THAT THE FACTS IN M/S. BANSAL SWEETS ARE SIM ILAR TO THE FACTS IN ASSESSEES CASE SINCE BOTH THE SWEETS SHOPS ARE REN OWNED ONE AND MANUFACTURING SWEETS IN DESI GHEE. ACCORDINGLY, THE LD. DR PRAYED TO CONFIRM THE ORDER OF THE LD. CIT(A). 12. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE FACTS OF THE CASE. THE ASSESSEE IS NOT MAINTAINING STOCK REGISTER AND THEREFORE, IT IS NOT POSSIBLE FOR THE ASSESSEE TO DEDUCE ACCURATE INCOME AND ACC ORDINGLY WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS RI GHTLY CONFIRMED THE ACTION FOR INVOKING THE PROVISIONS OF SECTION 145(3) OF TH E ACT. AS REGARDS THE ESTIMATION OF INCOME, THERE IS NO IDENTICAL FACTS O F BANSAL SWEETS SHOP, LAWRENCE ROAD, AMRITSAR TREATED AS COMPARABLE CASE HAVE BEEN BROUGHT ON RECORD AND THEREFORE, THE RESULTS OF BANSAL SWEETS SHOP CANNOT BE APPLICABLE IN THE PRESENT FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE AS MENTIONED HEREINABOVE, HAS DECLARED ALMOST SIMILAR RESULTS AS IN THE PRECEDING YEAR. IN THE FACTS AND CIRCUMSTANCES AND THE PAST RESULTS OF THE ASSESSEE AND IN ORDER ITA NO.471(ASR)/2011 14 TO MEET BOTH ENDS OF JUSTICE, WE DIRECT THE AO TO A PPLY 22% GP RATE ON DECLARED TURNOVER WHICH WILL MEET BOTH ENDS OF JUST ICE. ACCORDINGLY, GROUNDS 1(IV), 2, 7 & 8 ARE PARTLY ALLOWED. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO.471(ASR)/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21ST NOVEMBER., 2013. SD/- SD/- (H.S. SIDHU) (B.P. JAIN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21ST NOVEMBER, 2013 /SKR/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE:M/S. BANARSI SWEETS (P) LTD. PATHANKOT . 2. THE DCIT, CIRCLE, PATHANKOT. 3. THE CIT(A), AMRITSAR. 4. THE CIT, AMRITSAR. 5. THE SR DR, ITAT, AMRITSAR. TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSAR.