Bright Bar Manufacturing Co., Ankleshwar V. The Dy.CIT, Cent. Circle-3, Vadodara

ITA 539/AHD/2023

• Counselvise Citation: [2023] 101 COUNSELVISE.COM (IT) 9649 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-10-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 02-07-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Retraction; TDS
• Section: 131; 142(1); 133A; 69B; 69A; 139(1)

Judgement Text

ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 1 of 6 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “SMC” BENCH, AHMEDABAD BEFORE Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA No.539/Ahd/2023 Assessment Year: 2019-20 Bright Bar Manufacturing Co., Old NH 8, Opp. GIDC Depot, Station Road, Ankleshwar – 393 002, Gujarat. [PAN – AABFB 9620 J] Vs. DC/ACIT, Central Circle – 3, Vadodara. (Appellant) (Respondent) Assessee by Shri Sunil Talati, AR Revenue by Shri Sanjay Jain, Sr. DR Da te o f He a r in g 05.10.2023 Da te o f P ro n o u n ce m e n t 06.12.2023 O R D E R This appeal is filed by the Assessee against order dated 08.06.2023 passed by the CIT(A)-12, Ahmedabad for the Assessment Year 2019-20. 2. The Assessee has raised the following grounds of appeal :- “1. The Ld. CIT(A) has erred in confirming the addition made by the Ld. AO Rs.25,71,025/- being unexplained stock of Rs.23,63,655/- and unexplained cash of Rs.2,07,370/-. It is submitted that the said additions so sustained are totally unjustified and illegal both on facts and law and the same is prayed to be deleted. 2. Without prejudice to the above, it is submitted that the Ld. CIT(A) has upheld the addition made by Ld. AO of Rs.23,63,655/- as unexplained stock ignoring the retraction filed by the person who was made to give disclosure. It is submitted that the inventories made by survey party was totally incorrect and baseless. It is further submitted that there was no such excess stock whatsoever and the survey party has not found out any material, paper, noting, writing or anything for that matter suggesting appellant firm or the Chief Executive involved in purchasing unaccounted goods or selling unaccounted finished products. It is therefore submitted that inventory as per the book is correct there was no extra or unaccounted stock and addition retained of Rs.23,63,655/- be deleted. The same be held now. ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 2 of 6 3. Without prejudice to the above it is submitted that as per the settled law and various judicial pronouncements including of Hon'ble Supreme Court, statement recorded during the course of survey has no legal and binding force and that too by an unauthorized person. In view of this settled law, the addition made by Ld. A.O. and confirmed by Ld. CIT(A) of Rs.23,63,655/- merely on the basis of statement recorded during the course of survey be deleted in the interest of justice. 4. The Ld. CIT(A) has erred in confirming the addition made by Ld. Assessing Officer in making addition of Rs.2,07,370/- being alleged unexplained cash noticed during the course of survey. Such difference also in cash has been not only retracted in the affidavit but tallies with the books as accepted by A.O. The books of accounts of Appellant are subject to audit and the tax auditor has not found out any difference or discrepancy in cash on hand. It is therefore submitted that the impugned addition made on account of unexplained cash of Rs.2,07,370/- be deleted. 5. The order passed by the Ld. CIT(A) is bad in law and is contrary to the provisions of law and facts. It is submitted that the same be held now.” 3. The assessee is a company manufacturer of bright bar steel bars. The assessee firm filed its return of income for A.Y. 2019-20 under Section 139(1) of the Income Tax Act, 1961 on 09.10.2019 and declared total loss at Rs.22,15,946. Thereafter, the assessee firm revised its return of income on 25.01.2020 without changing the loss as reported in the original return filed under Section 139(1) of the Act. The case of the assessee was compulsorily selected for scrutiny as per the Board’s guidelines for selection of survey cases under Section 133A of the Act which was conducted at its business premises. Accordingly, notice under Section 143(2) of the Act was issued on 24.09.20 which was duly served upon the assessee. Statutory notices were also served to the assessee. In response to the same, the assessee submitted its reply on 20.09.2021 and 28.09.2020. The Assessing Officer observed that there is discrepancies with respect to the physical stock and cash found in the figure mentioned in the books of account which were found during the survey. Consequently, statement of Shri Jugalkishore Radhavallabh Ruia, Chief Executive of the firm was recorded on 23.01.2019 by the survey party under Section 131 of the Act and he was specifically confronted related to discrepancies found during the survey. The Assessing Officer observed that Shri Ruia admitted undisclosed income to the tune of Rs.25,17,376/- ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 3 of 6 consisting of difference on account of cash balance of Rs.2,07,370/- and difference on account of stock of Rs.23,10,006/- and agreed to lay tax on the same. However, Shri Ruia retracted the statement on 27.02.2019 by way of affidavit. The Assessing Officer rejected the contentions of the assessee as well as the retraction of the Chief Executive of the firm and added back undisclosed stock found of Rs.23,10,000/- under Section 69B of the Act and undisclosed cash found of Rs.2,.07,470/- under Section 69A of the Act. Additionally, the Assessing Officer also invoked the provisions of Section 115BBE of the Act and charged to tax the related undisclosed income and added back at special rates. 4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The Ld. AR submitted that survey proceedings under Section 133A of the Act were undertaken on 23.01.2019. After verification of cash on hand and stock by the survey party, the statement of Shri Jugalkishore Radhavallabh Ruia was obtained wherein he was made to disclose a huge income of Rs.25,17,376/- being the difference on account of cash on hand of Rs.2,07,370/- and difference on account of excess stock of Rs.23,10,006/-. The survey party had thereafter gone back to Surat and the copy of the statement recorded was given to the assessee on 12.02.2019 and immediately Shri Ruia retracted the said statement by filing a duly notarised affidavit dated 06.03.2019 and filed the same before the JCIT on 08.03.2019. The Ld. AR submitted that it is settled law that a statement recorded during the course of the survey is not a statement on oath as the Officers of the survey proceedings have no authority to record a statement on oath as held by the Hon’ble Supreme Court in case of CIT vs. S. Kader Khan Sons, 352 ITR 480. The Ld. AR further submitted that as against this affidavit on oath which was filed before the Assessing Officer much before the assessment proceedings, the Assessing Officer commenced the assessment proceedings by issuance of notice under Section 142(1) of the Act on 04.09.2020 and the assessment order was passed on 28.09.2021. Thus, the Assessing Officer had more than one year at his disposal but he never cross-examined the affidavit, never countered the affidavit, never issued any summons or later to the said Ruia who retracted the statement on affidavit. The Assessing Officer only repeated that as the statement ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 4 of 6 was made by such a senior person during the course of survey and as he was present during the survey proceedings, it is a statement which is final and conclusive and cannot be retracted and, therefore, he made the addition of such disclosed amount of stock of Rs.23,10,006/- and excess cash of Rs.2,07,370/- in his assessment order. The Ld. AR submitted that the statement recorded is final and binding on decisions including the Hon’ble Apex Court’s decision clearly state that the statement recorded under Section 132(4) of the Act during the course of search is binding but not during the course of survey. The Ld. AR further submitted that the CIT(A) in his order observed that all these decisions are under Section 132(4) but while applying the said decisions in case of survey disregarded the ratio laid down by Hon’ble Apex Court as the statement recorded is final when there is no cross-examinations given to the assessee during the assessment proceedings. The retraction itself state that the statement recorded during the survey was under duress and in fact the used stock found by survey party such a huge stock just cannot be measured and valued within 24 hours by just a small party of 8 persons when the measured difference was only found out in work in progress and not in raw material or finished goods. This shows that figure was worked out of a minimum 25 lacs disclosure and, therefore, such amount of valuation considering excess stock was obtained as a disclosure which must be deleted. The Ld. AR further submitted that the cash received on sale of scrap remained to be noted for which evidences were subsequently filed and the Assessing Officer has not taken cognisance of the same and the CIT(A) totally ignored the bills of scrap sales which were a produced. The Ld. AR further submitted that when the Assessing Officer and the CIT(A) both accepted the sale of scrap by way of books of account, when TDS is deducted on such sale and when GST is charged on such sale and such sales have been accepted by GST Authorities, how Income Tax Authority can deny such genuine sale of scrap. 6. The Ld. DR submitted that the factual finding given by the Assessing Officer as well as the CIT(A) in respect of statement of Shri Ruia appears to be genuine and, therefore, addition made to that extent is justified as relates to sale of scrap. The Ld. DR relied upon the Assessment Order and the order of the CIT(A). ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 5 of 6 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that as regards to addition in respect of unexplained stock and the statement given by Shri Ruia who was Chief Executive of the firm, it appears that the said statement was retracted. The Assessing Officer while making the addition has not commented on the retraction of the statement and in fact has not given separate finding as relates to the unexplained stock as stated by the Assessing Officer. After perusing the Paper Book of the assessee which was filed before the Assessing Officer and some details were filed before the CIT(A) it appears that the said evidences were not taken into account while purchasing of goods and selling of finished products and the details thereof was accounted for by the assessee in its books of account. Thus, merely relying on the statement cannot be sole criteria for making the addition in respect of unexplained stock. As regards to unexplained cash, the assessee has duly given the details of sale of scrap and related bills upon which TDS was also deducted on such sales and GST was also charged which was accepted by the GST Authorities and all the other relevant details were available before the Assessing Officer as well as before the CIT(A). These evidences were totally ignored by the Assessing Officer as well as by the CIT(A). Hence, appeal of the assessee is allowed. 8. In the result, appeal filed by the assessee is allowed. Order pronounced in the open Court on this 6 th December 2023. Sd/- (SUCHITRA KAMBLE) Judicial Member Ahmedabad, the 6 th December, 2023 PBN/* ITA No.539/Ahd/2023 Assessment Year: 2019-20 Page 6 of 6 Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad