Short Overview Once statements had been accepted by survey team, tax should have been calculated by them for the relevant years accepted by assessee and, therefore, addition made in another assessment year could not be sustained.

During survey conducted at business premises of assessee-firm some discrepancies were noticed which were offered for taxation by the partner for  assessment year  2012-2013 which had been accepted by AO  on conditional basis, i.e., for payment of self-assessment tax of Rs. 40,00,000 but  assessee distracted from his commitment, therefore,  AO treated it as undisclosed income for the assessment year 2013-2014. Because the survey was conducted on 26-4-2012. As per assessee, AO should have made additions in the assessment year 2012-13 because at the time of survey assessee had declared income for assessment year 2012-2013.

It is held that Declaration was made by assessee only for assessment year 2012-2013 in which partner had undertaken payment of self-assessment tax of Rs. 40 lakhs in four installments. Except the said declaration, there were nowhere in the statements recorded during the course of search, any other declaration by the partners. Once statements had been accepted by survey team, tax should have been calculated by them for the relevant years accepted by assessee. In view of above, declaration was to be added in assessment year 2012-2013.

Decision: In assessee’s favour.

IN THE ITAT, CUTTACK BENCH

C.M. GARG, J.M. & L.P. SAHU, A.M.

Laxmi Narayan Jewellery v. ITO

ITA No. 394/Ctk/2018

10 July, 2020

Assessee by: P.K. Mishra, Advocate

Revenue by: Subhro Das, Departmental Representative

ORDER

L.P. Sahu, A.M.

The assessee has filed this appeal against the order of Commissioner (Appeals), Cuttack, dated 30-8-2018 for the assessment year 2013-2014, on the following grounds of appeal:-

1. For that, the order passed by the learned Commissioner (Appeals) is not just and proper under the facts and in the circumstances of the case, as such, the same is liable to be quashed in the interest of justice.
2. For that, the learned Commissioner (Appeals) should have deleted the entire addition of Rs. 1,30,26,864.00 made by the learned assessing officer treating the same as undisclosed stock instead of reducing it to Rs. 47,19,960.00. The findings given by the learned Commissioner (Appeals) being perverse and contrary to the facts on record, consequential addition sustained by him needs to be deleted in the interest of justice.
3. For that, when the closing stock as alleged by the learned assessing officer do not belong to the assessment year 2013-14, the learned Commissioner (Appeals) should have deleted the entire addition instead of reducing it to Rs. 47,19,960.00 in the interest of justice.
4. For that, when the Appellant produced Books of Account for the impugned Assessment year and previous Assessment year and the closing stock of previous Assessment year were verified and accepted by the learned assessing officer while completing the Assessment under section 143(3) of the Act, the learned Commissioner (Appeals) should have deleted the entire additions made instead of reducing it to Rs. 47,19,960.00 in the interest of justice.
5. Brief facts of the case are that the assessee is a partnership firm engaged in the business of retail trading in Jewellery at Motiganj Bazar, Balasore and Vivekanand Marg, Balasore. The assessee filed return of income on 29-10-2014 for the assessment year 2013-2014 declaring total income at Rs. 9,36,080. Subsequently the case of the assessee was selected for compulsory scrutiny and statutory notices were issued to the assessee. Thereafter the case was fixed for hearing on different dates. A survey under section 133A of the Income Tax Act, 1961 was conducted on 26-4-2012 in the business premises of the assessee and detected stock discrepancy of Rs. 1,29,53,833 at Motiganj Bazar Balasore and unexplained cash of Rs. 73,031. During the course of survey proceedings under section 133A of the Act, the assessee was agreed to pay self-assessment tax on it by accepting that the stock discrepancy noted was for the financial year 2011-2012 of Rs. 40 lakhs in four instalments.

Later on he distracted from his commitment to pay self-assessment tax for the financial year 2011-2012 of Rs. 40,00,000 in four instalments.

Accordingly, the assessing officer added the same into total income of the assessee for the financial year 2012-2013 relevant to assessment year 2013-2014 to the tune of Rs. 1,30,26,864 under the head “stock discrepancy” after observing as under :–

“However, the assessee firm distracted from his commitment and did not pay any self-assessment tax on undisclosed income of Rs. 1,30,26,864 rather the assessee paid total advance tax of Rs. 4,00,000 (Rs. 1,50,000 on 8-5-2012, Rs. 1,50,000 on 14-5-2012 & Rs. 1,00,000 on 30-4-2012) for the assessment year 2013-14 instead of self-assessment tax for the assessment year 2012-13. As the assessee has distracted from his commitment to pay the S.A. tax for the F/Y 2011-12, and the survey was conducted during the financial year 2012-13, therefore the stock discrepancies was considered for the assessment year 2013-14.

During the course of assessment proceedings the assessee firm did not produce stock register or reconcile the stock discrepancy found during the course of survey operation under section 133A of the Income Tax Act, 1961. The onus lies on the assessee to prove and reconcile the stock discrepancy with documentary evidences. During the course of survey operation the assessee firm agreed the stock discrepancy found and committed to pay the tax liability on the above stock discrepancy. As the assessee firm has not disclosed the above stock discrepancy found in the course of survey operation in its return of Income. Therefore, an amount of Rs. 1,30,26,864 is added to the total income of the assessee under the stock discrepancy.”

(Add: Rs. 1,30,26,864)

3. Feeling aggrieved from the order of assessing officer, the assessee preferred appeal before the Commissioner (Appeals). The learned Commissioner (Appeals) issued notice under section 251(2) of the Act, in response to which the assessee replied the same and after considering all the records available before him, allowed relief of Rs. 82,33,873 and sustained the addition of Rs. 47,19,960. Learned Commissioner (Appeals) noted that the assessee did not make any representation or submission regarding cash balance found in the cash box of Rs. 73,031 as unexplained cash, therefore, he dismissed this issue.
4. Feeling further aggrieved from the order of Commissioner (Appeals), the assessee is in appeal before the Income Tax Appellate Tribunal.
5. Learned Authorised Representative before us filed paper book containing page Nos. 1 to 93 and reiterated the submissions made before the lower authorities. Learned Authorised Representative also stated that the stock discrepancy noted by the survey team relates to the financial year 2011-2012 and he was agreed to pay tax during the course of survey and he also stated that the assessing officer completed the assessment for the assessment year 2012-2013 on23-3-2015 but the assessing officer did not make any addition in the assessment year 2012-2013.

He added in the next financial year 2012-2013 i.e. the year of survey only for non-payment of committed self assessment tax of Rs. 40 lakhs in the financial year 2011-2012. Learned Authorised Representative also agitated to the enhancement notice made by the Commissioner (Appeals). Further the learned Authorised Representative submitted that the assessee was maintaining regularly stock register which were sent to the Chartered Accountant for the preparation of the VAT return, therefore, at the time of survey the assessee was not able to produce the stock register.

6. On the other hand, learned Departmental Representative relied on the orders of authorities below and submitted that the survey was conducted on 26-4-2012, therefore, the assessing officer has correctly assessed in the impugned assessment year i.e. 2013-2014. He also submitted that the assessee distracted from his commitment made during the course of survey proceedings conducted at the partner’s firm. It was also contended by learned Departmental Representative that during the survey proceedings the assessee accepted that he has not maintained stock registers for the quantity of goods purchased and sold. Therefore, the learned Departmental Representative submitted that the Commissioner (Appeals) has correctly computed the addition made by the assessing officer.
7. After considering the submissions of both the parties and perusing the entire material available on record as well as the orders of both the authorities below, it is clear from the records that the survey was conducted at the business premises of the assessee and some discrepancies were noted which were offered for taxation by the partner firm for the financial year 2011-2012 and the assessee had also given undertaking to the revenue authorities that he will pay self-assessment tax of Rs. 10,00,000 each in four instalments but he did not pay. Therefore, the assessing officer treated it as income for the assessment year 2013-2014 because the survey was conducted on 26-4-2012. Later on the Commissioner (Appeals) has enhanced the income by issuing show cause notice under section 251(2) of the Act and reduced the addition made by the assessing officer. It is important to reproduce the statement of partner Shri Laxmi Narayan Rana at question No. 6 and answer given by the partner of the firm which reads as under :–

Q.6 During the course of survey operation under section 133A of the Income Tax Act, 1961 today in the business premises i.e. Motiganj, Balasore, physical stock of gold ornaments and silver has been taken as per annexure-B. The details of which are given as under :–

1.	Gold	4517.500 grams
2.	Silver (coins)	182.69 grams
3.	Stones (1000 No. ) value at	Rs. 20,000

However, during the course of survey no stock register was found in the business premises of the firm. How do you explain the stock discrepancy of gold, silver, stones and cash, since no register was found? Please furnish your explanation.

Ans. It is true that this showroom is not maintaining stock register of the firm M/s. Laxminarayan Jewellery. However the physical stock found during the course of survey (as per annexure-B) of gold 4517.500 gram, silver-182.69 grams and stones worth of Rs. 20,000 is related to the firm M/s. Laxminarayan Jewellery.

As I am unable to furnish books of account and stock registered in support of the above stock discrepancy i.e. gold, silver, and stones and cash found during the course of survey in the business premises i.e. Motiganj, Balasore. I have no other alternative but to buy peace from the department, I hereby offered the value of such gold, silver, stones and cash, as undisclosed income of the firm for the financial year 2011-12 relevant to the assessment year 2012-13 and accordingly, I will pay the self assessment tax liability of Rs. 40 lakhs approximately on the undisclosed income of Rs. 1,30,26,864. The calculation of undisclosed income is given as under:

Gold-4517.500 grams x 2840 per gram	Rs. 1,28,29,700
Silver-182.690 grams x 570 per gram	Rs. 1,04,133
Stones (1000 No. )	Rs. 20,000
Unexplained cash	Rs. 73.031
Unexplained income	Rs. 1,30, 26,864

Further, I also hereby undertake to pay the self tax liability on the above undisclosed income of Rs. 1,30,26,864 in 4 installments @ 10,00,000 on 27-4-2012 each on 1-5-2012, 17-5-2012 and 31-5-2012 respectively for the assessment year-2012-13.

Further the statement of Shri Deepak Kumar Rana is as under :–

1. 31 Do you want to disclose anything?

Ans. Since one of our partner Sri Laxmi Narayan Rana has already disclosed unexplained income of Rs. 1,30,26,864, I am also agreed with the statement of Sri Laxmi Narayan Rana. I also undertake to pay self assessment tax liability on the above undisclosed income of Rs. 1,30,26,864 in four installments @10,00,000 on 27-4-2012 and Rs. 10 lakhs each on 1-5-12, 17-5-12 & 31-5-12 respectively for the assessment year 2012-13 on account of firm M/s. Laxmi Narayan Jewellery.

1. 32 Do you want to say anything else?

Ans. As stated earlier, I hereby disclose unaccounted income of the firm at Rs. 1,30,26,864 for assessment year 2012-13 and accordingly I undertake to pay self asstt. tax of Rs. 40 lakhs in four installments as stated earlier.

8. From the above submissions of the assessee, it is clear that he has offered for taxation in the assessment year 2012-2013 which has been accepted by the assessing officer on conditional basis i.e. for payment of self-assessment tax of Rs. 40,00,000 but the assessee distracted from his commitment, therefore, the assessing officer treated it as undisclosed income for the assessment year 2013-2014. It is clear from the assessment order that the assessing officer has taken two views. It is also clear that if the assessee would have offered it as additional income for the assessment year 2012-2013, the assessing officer would have accepted it. Therefore, it is clear that in the assessment order as reproduced supra there are two views adopted by the assessing officer. As per our considered view, two views are not sustainable under the provisions of Income Tax Act. The assessing officer should have taken one view for taxing the discrepancy found during the course of survey. The Income Tax Act has provided other tools/provisions for the escapement of income done by the assessee, which has not been exercised by the assessing officer. It is worthwhile to mention here that the assessment for the assessment year 2012-2013 was completed on 23-3-2015 whereas the survey under section 133A of the Act was conducted on 26-4-2012 and documents were also available with him. The assessing officer should have made additions in the assessment year 2012-2013 because at the time of survey in the statement proceedings, the assessee had accepted for income of the assessment year 2012-2013.
9. We observe from the order passed under section 143(3) of the assessment year 2012-2013, there is no any single word found in regard to survey proceedings under section 133A of the Act, whereas the documents were available with the same assessing officer i.e. Ward-2(2), Balasore and the assessee accepted some discrepancy in stock and agreed to pay tax thereon.

Further we observe from the order of Commissioner (Appeals) that the learned Commissioner (Appeals) after taking into account of the two branches, enhanced/modified the assessment made by the assessing officer but has given substantial relief after considering all the submissions and documents available before him.

We have also gone through the statements recorded by the survey team of partners of the firm named as M/s. Laxminarayan Rana in case of Motiganj premises at Balasore and statement of Shri Deepak Kumar Rana, M/s. Laxminarayan Jewellery, Vivekananda Marg, Balasore. In both the statements the total discrepancy in stock declared of Rs. 1,30,26,864, which are evident from the para No. 6 of Annexure-4 filed in paper book at pages 42 & 43 and Question Nos. 31 & 32 in Annexure-5 at page 50 of the paper book. The total declaration made by them is Rs. 1,30,26,864 only for the assessment year 2012-2013 in which they have undertaken payment of self-assessment tax of Rs. 40 lakhs in four installments. Except the above declaration, there are nowhere in the statements recorded during the course of search, any other declaration by the partners. We noted from the order of both the authorities below that they have made additions for the financial year 2012-2013 relevant to assessment year 2013-2014. Once the statements have been accepted by the survey team the tax should be calculated by them for the relevant years accepted by the assessee. In view of the above findings noted by us, it should be taxed in the assessment year 2012-2013. Accordingly, we quash the order of both the authorities below and delete the entire addition made by the assessing officer.

10. In regard to issue of cash balance found in the cash box as agitated by the assessee in ground No. 5, we have decided the entire issue that declaration should be added in the assessment year 2012-2013, therefore, there is no question for deciding this issue again because the amount in question as stated in this ground is included in the entire amount of declaration made by the partners.
11. In the result, the appeal of assessee is allowed.