Shambhu Prasad Rastogi, Mirzapur V. ITO, Range 3(4), Mirzapur

ITA 66/ALLD/2023

AI Insights

The case revolves around an appeal by Shambhu Prasad Rastogi against the order of the CIT(A), which confirmed the AO's addition of Rs.1,84,080/- to the assessee's income, alleging excess stock of silver during a survey conducted on 06.01.2012. The AO had relied on a statement made by the assessee during the survey, where he admitted to having 200 Kgs of silver, contrary to the 113.928 Kgs recorded in his books. The assessee contended that the statement was an estimation made under pressure and included both pure and impure silver, and was not a factual representation of the stock. The Tribunal noted that the AO had accepted the books after examination and that the addition was made without physical verification of the stock, leading to the conclusion that the addition was not justified.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 114371 (ITAT-ALLAHABAD)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 04-09-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 23-05-2023
• Other Referred Cases: CIT Vs. S. Khader Khan Son, Dr. S. C. Gupta Vs. CIT, Sanjeev Agrawal Vs. ITSC, Ravindra Kumar Verma Vs. CIT, Bannalal Jat Constructions (P) Ltd. Vs. CIT, Pr. CIT Vs. Avinash Kumar Setia, Gurdev Agro Engineers Vs. CIT, Bachittar Singh Vs. CIT, Navdeep Dhingra Vs. CIT, Bhagirath Aggarwal Vs. CIT, Smt. Dayawanti Vs. CIT, ITO vs. B. D. Dal & Oil Ind., Kunhambu Vs. CIT, Hiralal Maganlal & co. V. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NITA GOYAL
• Section: 131; 132; 133A; 274; 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL ALLAHABAD “SMC” BENCH, ALLAHABAD BEFORE SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.66/Alld/2023 (ननधधारण वर्ा / Assessment Year: 2012-13) Shambhu Prasad Rastogi Prop. M/s. Rastogi Sarraf, Dhundhi Katara, Mirzapur- 231001. बनधम/ Vs. ITO, Range-3(4) Aayakar Bhawan, Mahant Shivala, Mirzapur- 231307. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AANPR8527Q (अपीलाथी /Appellant) .. (प्रत्यथी / Respondent) सुनवाई की तारीख / Date of Hearing: 05/09/2023 घोषणा की तारीख /Date of Pronouncement: 12/09/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. CIT(A), Lucknow-03 dated 29.03.2023 for AY. 2012-13. 2. The main grievance of the assessee is against the action of the Ld. CIT(A) confirming the addition of Rs.1,84,080/- on account of alleged excess stock-in-trade on the date of survey (i.e. on 06.01.2012). 3. Brief facts as noted by the AO is that the survey u/s 133A of the Income Tax Act, 1961 (hereinafter “the Act”) was conducted on 06.01.2012 at the business premises of the assessee (M/s. Rastogi Sarraf Jewellery Shop). According to the AO, the survey party in- charge Shri K. N. Sonkar ACIT reported that during the survey proceedings, the proprietor/assessee Shri Shambhu Prasad Rastogi admitted on oath of stock of Silver to the tune of 200 Kgs as on 06.01.2012. However, according to the AO, when the physical Assessee by: Ms. Nita Goyal Revenue by: Shri A. K. Singh (Sr. DR) ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 2 inventory of silver was being carried out, mob of locals/association of traders came inside the shop and disrupted the survey operation; and in the ruckus created by the unruly mob, the physical inventory couldn’t be completed and the papers prepared by them, were torn and resultantly, the survey team had to leave the jewellery premise without completing their assigned task. 4. During the assessment proceedings, the AO asked the assessee to file the books of account along with cash book, ledger account and stock register as well as bills/vouchers, and the sale and purchases etc, which assessee submitted and the AO acknowledges to have test- checked the same. According to the AO, the assessee/proprietor of jewellery shop during the survey operation on 06.01.2012 had admitted of stock of 200 Kg of silver jewellery in the shop worth Rs. 19 to 20 Lakhs. However, the AO notes that while recording assessee’s statement on 23.01.2012 u/s 131 of the Act he stated that the stock of silver as on the date of survey was only at 113.928 Kgs; and thereafter during the assessment proceedings, assessee had shown the books which reflected silver stock as on 06.01.2012 only to the tune of 113.928 Kgs and not 200 Kgs as admitted during the survey operation. On being confronted by the AO with the statement recorded on oath during the survey u/s 133A of the Act about stock of silver to the tune of 200 Kg of silver, the assessee submitted that he had made the statement on an estimation basis, and at that point of time was not in proper state of mind, and contended that there would be variation in estimation and that the stock declared by him contained both pure and impure silver and he pleaded that stock as on survey was only 113.928 ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 3 Kgs and not 200 kgs. The AO did not accept the explanation given by assesse and instead took note of the statement given by the assessee during the survey wherein he admitted stock of silver at 200kgs, and in his books stock of 113.198 Kgs only, AO asked the assesse to explain the difference of quantity of the silver to the tune of 86.072 kilograms (200 Kg - 113.198 Kgs) valued at Rs.1,84,080/-, which according to AO, assesse failed to explain, so AO considered it as excess stock as on 06.01.2012 which he added i.e, Rs.1,84,080/-. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the action of the AO. Aggrieved by the aforesaid impugned action of the Ld. CIT(A), the assessee is before this Tribunal. 5. I have heard both the parties and perused the records. The impugned addition was based on the difference of stock of silver as admitted by assessee during survey on 06.01.2012 vis a vis shown in the books of assessee as on 06.01.2012. According to the AO, on 06.01.2012, when the survey team confronted the assessee/proprietor of the jewellery shop [M/s. Rastogi Saraf Jewellers] he admitted to have silver stock of 200 Kgs as on that date. Based on the statement recorded on oath on 06.01.2012 u/s 133A of the Act, the AO concluded that the assessee had silver stock as on 06.01.2012 of 200 Kg, and since assessee’s books of account reflected only stock of silver at 113.928 Kg as on that date of survey, he added the difference of 86.072 Kg (200 Kg. – 113.928 Kg) as undisclosed stock of silver and valued it at Rs.1,84,080/- which was added as undisclosed income of the assessee. On appeal, the Ld. CIT(A) confirmed the action of AO. The main contention of the assessee is that since there was no ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 4 physical inventory of stocks taken by survey team, the AO’s action of presuming the stock of silver as 06.01.2012 as 200 Kgs is patently erroneous. According to the Ld. AR, the AO erred in presuming the stock of silver only on the strength of statement recorded u/s 133A of the Act as erroneous and therefore according to Ld. AR, the AO erred in making addition of excess stock presuming the stock of silver as on 06.01.2012 at 200 Kgs was per-se untenable and for such a preposition, cited the decision of the Hon’ble Supreme Court in the case of CIT Vs. S. Khader Khan Son (2013) 352 ITR 480 (SC) wherein the Hon’ble Supreme Court upheld the view of Hon’ble High Court of Madras in that case [ i.e reported in 300 ITR 157 (Mad)] wherein it was held that section 133A of the Act does not empower any Income Tax Authority to examine any person on oath in contra- distinction to power given to authorities u/s 132 of the Act [ i.;e. search proceedings] to record statements under oath and which have evidentiary value. And that the statement recorded during survey cannot be equated with that of the statement recorded u/s 132 of the Act (search) and therefore cannot be given the weight of evidence as that has been recorded u/s 132(4) of the Act, And that any admission made during survey cannot by itself be made the basis of drawing adverse inference and made the basis of addition. Per-contra, the Ld. DR pointed out that assessee had given the statement during survey voluntarily and he being the owner of jewellery shop is the best person to know the stock of silver as on that date (ie. 06.01.2012) and cited inter-alia the decision of the jurisdictional Hon’ble High Court in the case of Dr. S. C. Gupta Vs. CIT [248 ITR 782 (All)] and Sanjeev Agrawal Vs. ITSC [(2015) 56 taxmann.com 214 (All)]. Further, ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 5 according to Ld. DR, due to disruption of survey operation by local traders/mob, the survey team could not complete the physical inventory of stock. And therefore, the physical non-verification of the stock could not be used against department; and further, according to him the assessee’s statement was recorded u/s 131 of the Act on 22.01.2022 wherein he didn’t level any allegation against the survey team while recording his statement. Therefore according to Ld. DR, the admission made by assessee during survey operation cannot be doubted and the AO has rightly taken note of the excess stock of silver as on 06.01.2012 and cited the following judicial precedents to support his view: -  Ravindra Kumar Verma Vs. CIT (2013) 30 taxmann.com 367 (All)  Bannalal Jat Constructions (P) Ltd. Vs. CIT (2019) 106 taxmann.com 128 (SC)  Pr. CIT Vs. Avinash Kumar Setia (2017) 81 taxmann.com 476 (Del)  Gurdev Agro Engineers Vs. CIT (2017) 80 taxmann.com 148  Bachittar Singh Vs. CIT (2010) 328 ITR 400 (P & H)  Navdeep Dhingra Vs. CIT (2010) 56 taxmann.com 75 (P&H)  Bhagirath Aggarwal Vs. CIT (2013) 31 taxmann.com 274  Smt. Dayawanti Vs. CIT (2016) 75 taxmann.com 308 (Del)  ITO vs. B. D. Dal & Oil Ind. (1992) 40 ITD 1480 (Jaipur)  Kunhambu Vs. CIT (1996) 86 taxman 477 (Kerala)  Hiralal Maganlal & co. V. DCIT (2005) 96 ITD 113 (Mumbai) 6. I take note that during survey on 06.01.2012 assessee’s statement was made to the effect that silver stock was to the tune of 200 Kgs and thereafter due to disruption of survey operation as noted (supra), the survey team could not take physical stock of the silver as on that date. However, AO had acknowledged the fact that assessee’s statement was recorded again on 23.01.2012 u/s 131 of the Act and assessee had stated inter-alia that stock of silver as on 06.01.2012 was ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 6 only 113.928 Kgs and not 200kgs. And the AO confronted him with the statement made during survey and assessee explained to him that during survey he was under mental pressure and his admission of stock was on the basis of estimation. It was added that his estimation of stock contained both pure & impure material, and purity of silver was only to 60 to 70%. And thus it was clarified to AO that the stock of silver he stated contained both pure & impure material. So according to assesse, no adverse inference could have been drawn by the AO/Ld. CIT(A) on the basis of statement even if made by assessee during survey without rejecting the explanation given by assessee u/s 131 of the Act on 23.01.2012 and without verification of stock by physical verification. In this regard, it is noted that the AO after examining/verification of the books of the assessee including the stock register maintained by the assessee has accepted the books as acknowledged by him in the assessment order. Anyway, AO has not found any defect in the books including the stock register. Therefore, AO’s action to make addition of excess stock of silver only on the basis of statement recorded on oath by survey team u/s 133A of the Act on 06.01.2012 [ i.e.assessee had stated before survey team that he had silver stock of 200 Kgs and finding that assessee’s books only reflected 113.928 Kgs as on 06.01.2012, the difference of stock of 86.072 Kgs valued at Rs.1,84,080/-] cannot be countenanced. As per the decision of the Hon’ble Madras High Court and upheld by Hon’ble Supreme Court in the case of S. Khader Khan Son in civil Appeal No. 13224 of 2008 and 6747 of 2012 (supra) the statement of assessee recorded during survey cannot be given the same weight in contra- distinction to statement recorded us/ 132(4) of the Act. However, as ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 7 held by Hon’ble Jurisdictional High Court in Dr. S. C. Gupta & Sanjeev Agrawal (supra), admission voluntarily made u/s 133A of the Act can be the basis of the assessment. But in this case, it is noted that assessee while recording the statement on oath on 23.01.2013 before the AO us/ 131 of the Act (i.e. after 15 days of survey) has stated that during survey on 06.01.2012, he was under pressure; and clarified that that his admission of stock as 200 Kgs was based on estimation and also that stock includes both impure & pure material and that it is common knowledge that purity of silver is 60-70%. It is noted that this explanation given by assessee [as noted in assessment order] has not been rejected by AO. And without assigning any reason to repel the clarification given by assessee regarding the stock, the action of AO to add the excess stock cannot be countenanced. The assessee’s assertion u/s 131 of the Act that while he gave statement u/s 133A of the Act, he was under pressure has not been found to be false by the AO/Ld. CIT(A). In such a case, statement u/s 133A of the Act recorded on 06.01.2012 cannot be held to be voluntarily given; and the assessee’s explanation shows that he made the statement on estimation which includes both pure & impure silver. And since no physical inventory was prepared (due to disturbance) there is no other material in the hands of the AO/Ld. CIT(A) to make/confirm the allegation of excess stock of silver, therefore the addition made of Rs.1,84,080/- was not warranted. Case laws cited by the Ld. DR are distinguishable on facts; and in the case of Dr. Gupta, he voluntarily made statement; and in the case of Sanjeev Agrawal, the assessee could not explain that statement given during survey was made on account of mistake of fact. However, in the present case, assessee has explained within 15 days the ITA No.66/Alld/2023 A.Y. 2012-13 Shambhu Prasad Rastogi 8 difference of stock as admitted during survey and reflected in books, which is a plausible view. Therefore, the other case law cited by DR cannot come to the aid of revenue because they are distinguishable on fact/law. So assessee’s appeal is allowed. Therefore, the addition made by AO cannot be sustained and so directed to be deleted. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 12/09/2023. Sd/- (ABY T. VARKEY) JUDICIAL MEMBER Allahabad ददनांक Dated : 12/09/2023. Vijay Pal Singh, (Sr. PS) Copy forwarded to: 1. Appellant – 2. Respondent – 3. CIT(A) , Allahabad 4. CIT 5. DR - By order Assistant Registrar