Shri Ashokkumar K.Thakkar, Patan v. The Income tax Officer,Ward-2,, Patan

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI JM AND D. C. AGRAWAL AM) ITA NO.622/AHD/2009 A. Y.: 2005-06 SHRI ASHOKKUMAR K. THAKKAR GUNJ ROAD RADHANPUR PATAN VS THE INCOME TAX OFFICER WARD-2 PATAN PA NO. ADKPT 7260 J (APPELLANT) (RESPONDENT) ITA NO.623/AHD/2009 B. Y.: 2005-06 SHRI RAMESHKUMAR K. THAKKAR GUNJ ROAD RADHANPUR PATAN VS THE INCOME TAX OFFICER WARD-2 PATAN PA NO. ABHPT 7029A (APPELLANT) (RESPONDENT) APPELLANT BY SHRI A. L. THAKKAR AR RESPONDENT BY SHRI K. MADHUSUDAN SR. DR O R D E R PER BHAVNESH SAINI: THIS ORDER SHALL DISPOSE OF BOTH THE APPEALS FILED BY DIFFERENT ASSESSEES AGAINST DIFFER ENT ORDERS OF THE LEARNED CIT(A) GANDHINAGAR DATED 17-10-2008 AND 28 -11-2008 FOR ASSESSMENT YEAR 2005-06. 2. ACCORDING TO OFFICE BOTH THE APPEALS ARE TIME B ARED BY 3 DAYS. THE ASSESSEES FILED APPLICATIONS FOR CONDONATION OF DELAY IN WHICH IT WAS EXPLAINED THAT CLOSE RELATIVE OF THE ASSESSEES WAS SERIOUSLY ILL ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 2 AND HOSPITALIZED WHICH PREVENTED THE ASSESSEE FROM FILING THE PAPERS ON TIME. THE APPLICATIONS ARE SUPPORTED BY AFFIDAVI TS OF BOTH THE ASSESSEES. THE LEARNED DR HAS NO OBJECTION IF NOMIN AL DELAY IS CONDONED. CONSIDERING THE EXPLANATIONS OF THE ASSES SEE AND THAT THE LEARNED DR HAS NO OBJECTION THE NOMINAL DELAY OF 3 DAYS IN FILING THE APPEALS ARE CONDONED. BOTH THE APPEALS ARE DISPOSED OF AS UNDER. ITA NO.622/AHD/2009 3. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.2 AND 3 IN THE APPEAL OF THE ASSESSEE. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 4. ON GROUND NO.1 OF THE APPEAL THE ASSESSEE CHALL ENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDIT ION OF RS.98 500/- OUT OF RS. 2 77 000/- MADE BY THE AO FOR THE ALLEGE D UNDISCLOSED INCOME NOT OFFERED FOR TAXATION ONLY ON THE BASIS O F STATEMENT RECORDED AT THE TIME OF SURVEY U/S 133A OF THE IT A CT ON 24-09-2004. 5. THE ASSESSEE CHALLENGED THE ADDITION OF RS.2 77 000/- BEFORE THE LEARNED CIT(A) FOR THE ALLEGED UNDISCLOSED INCO ME NOT OFFERED FOR TAXATION WHICH HAD BEEN ADMITTED IN THE STATEMENT R ECORDED AT THE TIME OF SURVEY U/S 133A OF THE IT ACT. AS PER THE A SSESSMENT ORDER DURING THE SURVEY OPERATIONS ON 24-09-2004 THE ASS ESSEE HAD MADE A VOLUNTARY DISCLOSURE OF RS.4 00 000/- AS FOLLOWS: EXCESS INVESTMENT RS.2 00 000/- EXPENSES IN REAL ESTATE RS.1 00 000/- EXCESS CASH RS.1 00 000/- TOTAL RS.4 00 000/- ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 3 HOWEVER WHEN THE RETURN OF INCOME WAS FILED THE A SSESSEE OFFERED ONLY RS.1 23 000/- UNDER THE HEAD DECLARATION OF I NCOME. THE EXPLANATION OF THE ASSESSEE WAS CALLED FOR AND ACCO RDING TO THE ASSESSEE THE ISSUE OF INVESTMENT IN REAL ESTATE TH E PROPERTY IN QUESTION WAS OWNED JOINTLY BY THE WIFE OF THE ASSES SEE AND THE WIVES OF HIS TWO BROTHERS. INDIVIDUAL SHARE OF RS.13 000/ - WAS PROVIDED BY HIS WIFE OUT OF PERSONAL STREEDHAN. RELEVANT DOCUME NTS WERE PRODUCED BEFORE THE AO. REGARDING CASH FOUND OF RS. 98 500/- THE ASSESSEE EXPLAINED IT BY REFERRING TO THE CASH BOOK WHEREIN THE OPENING CASH BALANCE ON THE DATE WAS RS.85 500/- AN D THEREFORE EXCESS CASH FOUND WAS ONLY RS.13 000/-.AS REGARDS I NVESTMENTS IN NSCS IS CONCERNED THE ASSESSEE CAME FORWARD WITH T HE EXPLANATION THAT OUT OF RS.2 00 000/- RS.20 000/- IS REFLECTED IN 2003-04 AND RS.70 000/- IS REFLECTED IN 2004-05 AND THEREFORE A SUM OF RS.1 10 000/- IS ONLY UNEXPLAINED INVESTMENT. CONSE QUENTLY THE DECLARATION OF RS.1 23 000/- WAS EXPLAINED (RS.13 0 00/- PLUS RS.1 10 000/-). THE AO HOWEVER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAD DECLAR ED UNACCOUNTED INCOME IN THE STATEMENT RECORDED U/S 133A OF THE IT ACT WITHOUT ANY UNDUE INFLUENCE OR COERCION. THE ASSESSEE WAS NOT F OUND MAINTAINING REGULAR BOOKS OF ACCOUNT AND FURTHER CO MPLETE DETAILS WERE NOT REFLECTED IN THE BALANCE SHEET. IT WAS NOT ED THAT THE ASSESSEE RETRACTED FROM THE STATEMENT WITHOUT SPECI FIC EVIDENCE. THE ENTIRE ADDITION WAS CHALLENGED BEFORE THE LEARNED C IT(A). THE LEARNED CIT(A) ACCEPTED THE EXPLANATION OF THE ASSE SSEE REGARDING EXCESS INVESTMENT IN REAL ESTATE AND NSCS AND ADDIT IONS HAVE BEEN DELETED. THEREFORE THERE IS NO NEED TO DISCUSS FUR THER THESE ISSUES. ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 4 WITH REGARD TO EXCESS CASH IT WAS EXPLAINED BEFORE THE LEARNED CIT(A) THAT VERIFICATION IS RELEVANT BECAUSE THE AS SESSEE HAD JUST COME OUT OF STATION ON THE DATE OF THE SURVEY AND T HE ASSESSEE WAS NOT IN A POSITION TO EXPLAIN THE DETAILS OF THE BUS INESS. THE AO BRUSHED ASIDE ASSESSEES SUBMISSION BY MERE OBSERVA TION THAT RETRACTION HAS COME AFTER A LAPSE OF 3 MONTHS FROM THE DATE OF SURVEY. IT WAS SUBMITTED THAT A DETAILED LETTER WITH COGENT EVIDENCES IN SUPPORT OF THE CONTENTION OF THE ASSESSEE WAS FILED WHICH WAS NEVER EXAMINED BY THE AO TILL THE DATE OF PASSING OF THE ASSESSMENT ORDER. THE AO HAS NOT BROUGHT ANY MATERIAL TO POINT OUT TH AT CASH FOUND AT RS.98 500/- WAS IN EXCESS OF CASH BALANCE OF THE BU SINESS OF THE ASSESSEE AS PER THE BOOKS OF ACCOUNTS AND THAT CASH BALANCE OF RS.1 00 000/- WAS UNEXPLAINED OR UNACCOUNTED. THE B OOKS OF ACCOUNTS OR OTHER MATERIAL IN SUPPORT OF CASH AVAIL ABILITY HAS BEEN PRODUCED AT THE TIME OF HEARING AND THE AO HAS EXAM INED THE BOOKS OF ACCOUNTS AND HAS NOT BROUGHT ANY MATERIAL TO POI NT OUT THAT CASH ON HAND ON THE DATE OF SURVEY COULD NOT BE EXPLAINE D. IT WAS STATED THAT ONCE THE BOOKS OF ACCOUNTS WERE PRODUCED AND T HE SAME HAD BEEN VERIFIED THE ONUS TO PROVE SHIFTS TO THE REVEN UE DEPARTMENT. IT WAS SUBMITTED THAT THE AO MERELY MADE THE ADDITION UNDER THE MISTAKEN NOTION THAT ADDITION CAN BE MADE ON THE ST ATEMENT RECORDED DURING THE COURSE OF SURVEY WHICH HAD NO LEGAL SANC TITY. CERTAIN DECISIONS WERE RELIED UPON IN SUPPORT OF THE CLAIM. IT WAS ALSO EXPLAINED THAT THE COPY OF THE STATEMENT OF THE ASS ESSEE RECORDED DURING THE COURSE OF SURVEY WAS NEVER FURNISHED TO THE ASSESSEE DESPITE REQUEST MADE TO THE AO AS WELL AS ADDITIONA L CIT. THEREFORE SUCH STATEMENT CANNOT BE THE BASIS OF ADDITION. THE LEARNED CIT(A) ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 5 ON CONSIDERATION OF THE SUBMISSIONS NOTED THAT HE C ANNOT AGREE WITH THE SUBMISSION OF THE ASSESSEE THAT THE STATEMENT R ECORDED IN THE SURVEY HAS NO LEGAL SANCTITY. THE LEARNED CIT(A) HO WEVER NOTED THAT THE AO HAS ALSO ON WRONG FOOTING WITHOUT VERIFICATI ON AND COUNTERING THE ARGUMENTS OF THE ASSESSEE MADE THE ADDITION ON LY BECAUSE THE STATEMENT WAS RECORDED U/S 133A OF THE IT ACT AND I NCOME WAS SURRENDERED. HE HAS HELD THAT THE AO WAS DUTY BOUND TO CONSIDER THE EVIDENCES AND MATERIAL ON RECORD. THE LEARNED CIT(A ) FURTHER NOTED THAT THE ASSESSEE HAS BEEN UNABLE TO SHOW THAT BOOK S OF ACCOUNTS WERE REGULARLY MAINTAINED AND THAT THE SAME WAS IN POSSESSION ON THE DATE OF THE SURVEY. EXPLANATION IS GIVEN ON THE BASIS OF THE RECONSTRUCTED DOCUMENTS AFTER 4 MONTHS OF THE SURVE Y; THEREFORE BOOKS CANNOT BE RELIED AFTER GAP OF SUCH PERIOD. TH E ENTIRE ADDITION OF RS.98 500/- WAS CONSIDERED UNEXPLAINED AND ADDITION WAS ACCORDINGLY MAINTAINED. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND SU BMITTED THAT THE ASSESSEE SUBMITTED A LETTER DATED 28-10-2004 (PB-13 ) FILED BEFORE THE AO ON 28-12-2004 EXPLAINING THAT CASH IS EXPLAI NED THROUGH THE CASH BOOK COPY OF WHICH WAS ALSO FILED. HE HAS TH EREFORE SUBMITTED THAT CASH WAS EXPLAINED WITH REGARD TO THE CASH BOO K (PB-10) BUT THE SAME HAS NOT BEEN PROPERLY APPRECIATED BY THE AO. H E HAS SUBMITTED THAT SINCE THE ACCOUNTANT WAS OUT OF STAT ION THEREFORE BOOKS COULD NOT BE PRODUCED AT THE TIME OF SURVEY W HICH WAS PRODUCED LATER ON IN WHICH NO DEFECTS HAVE BEEN FOU ND. NO FINDINGS HAVE BEEN GIVEN BY THE AO AND THE LEARNED CIT(A) RE GARDING THE ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 6 ENTRIES CONTAINED IN THE BOOKS OF ACCOUNT. HE THER EFORE SUBMITTED THAT THE ASSESSEE COULD RETRACTED FROM THE STATEMEN T WHICH WAS MADE ON MISTAKEN FACTS AND THAT ENTIRE EVIDENCES AN D MATERIALS WERE NOT CONSIDERED BY THE AUTHORITIES BELOW AND FURTHER THE COPY OF THE STATEMENT OF THE ASSESSEE RECORDED DURING THE COURS E OF SURVEY WAS NEVER SUPPLIED TO THE ASSESSEE. HE THEREFORE SUBM ITTED THAT ADDITION CANNOT BE MADE AGAINST THE ASSESSEE AND HAS RELIED UPON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF CIT VS S. KHADER KHAN SON 300 ITR 157 DECISION OF HONBLE CH HATTISGARH HIGH COURT IN THE CASE OF ITO VS VIJAY KUMAR KESAR 327 ITR 497 AND THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF PULLANGODE RUBBER PRODUCE CO. LTD. VS STATE OF KERALA 91 ITR 1 8 7. ON THE OTHER HAND THE LEARNED DR RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE W AS NOT FOUND MAINTAINING THE BOOKS OF ACCOUNTS DURING THE COURSE OF SURVEY AND THAT HIS STATEMENT WAS RECORDED WITHOUT ANY UNDUE I NFLUENCE OR COERCION OR THREAT THEREFORE ON THE BASIS OF VOLU NTARY STATEMENT ADDITION COULD BE MADE AGAINST THE ASSESSEE. THE LE ARNED DR SUBMITTED THAT THE ASSESSEE REMAINED SILENT FOR MOR E THAN 3 MONTHS AND LATER ON RETRACTED WITHOUT ANY BASIS. THE LEARN ED DR FURTHER SUBMITTED THAT THE ASSESSEE DID NOT HAVE ANY DOCUME NTS OR BOOKS OF ACCOUNTS AT THE TIME OF SURVEY AND THE ASSESSEE VOL UNTARILY AGREED TO SURRENDER RS.4 00 000/- ON THE ENTIRE ISSUE INCLUDI NG EXCESS CASH OF RS.1 00 000/-. THEREFORE THE ASSESSEE CANNOT RETRA CT FROM THE VOLUNTARY STATEMENT. THE LEARNED DR FURTHER SUBMITT ED THAT IF THE BOOKS OF ACCOUNTS WERE READY AND IT REFLECTED THE C ASH SO DECLARED ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 7 THE ASSESSEE SHOULD HAVE MADE THE STATEMENT AND PRO DUCED THE BOOKS OF ACCOUNTS AT THE EARLIEST ON RETURN OF THE ACCOUNTANT FROM OUTSTATION. THE LEARNED DR SUBMITTED THAT EVEN IF T HE AO HAS NOT GIVEN ANY SPECIFIC FINDINGS BUT THE LEARNED CIT(A) HAS CONSIDERED THE ISSUE IN DETAIL AND RIGHTLY CONFIRMED THE ADDITION OF RS.98 500/- ON ACCOUNT OF EXCESS CASH. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND MAT ERIAL ON RECORD. THE HONBLE SUPREME COURT IN THE CASE OF PU LLANGODE RUBBER PRODUCE CO. LTD. (SUPRA) HELD THAT THE ASSESSEE SHOULD BE GIVEN OPPORTUNITY TO SHOW THAT ADMISSION IS INCORRE CT OR DOES NOT SHOW CORRECT STATE OF FACTS. THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF KRISHAN LAL SHIV CHAND RA I VS CIT 88 ITR 293 HELD THAT IT IS AN ESTABLISHED PRINCIPLE OF LAW THAT A PARTY IS ENTITLED TO SHOW AND PROVE THAT THE ADMISSION MADE BY HIM WAS IN FACT NOT CORRECT AND TRUE. THE HONBLE CHHATTISGARH HIGH COURT IN THE CASE OF VIJAY KUMAR KESAR (SUPRA) DISMISSED THE DEPARTMENTAL APPEAL IN WHICH THE AO HAS DISREGARDED THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE DURING THE ASSESSMENT PROC EEDINGS SOLELY ON THE GROUND THAT THE ASSESSEE HAD MADE A CONFESSI ONAL STATEMENT DURING THE SURVEY PROCEEDINGS AND VOLUNTARY PAYMENT OF TAX AGAINST INCOME SO SURRENDERED IN SURVEY PROCEEDINGS . THE PRIMARY EVIDENCE IN THE FORM OF PURCHASE BILLS VOUCHERS G IFTS ETC. WERE REJECTED ON THE GROUND THAT IT WAS PRODUCED AT THE TIME OF ASSESSMENT AFTER A CONSIDERABLE PERIOD AND THE RETR ACTION WAS MADE AFTER MORE THAN 3 MONTHS. THE PARTIES FROM WHOM G OODS WERE SHOWN TO BE PURCHASED AND DONORS IN WHOSE NAMES ENT RIES WERE ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 8 MADE IN THE BOOKS OF ACCOUNTS CONFIRMED AND VERIFI ED THE TRANSACTIONS BUT THE AO DISBELIEVED THE SAME. THE LEARNED CIT(A) CONSIDERING THESE PRIMARY EVIDENCES AND ACCEPTING T HE EXPLANATION AND ADDITION WAS DELETED. THE TRIBUNAL CONFIRMED TH E ORDER OF THE LEARNED CIT(A). THE HONBLE HIGH COURT DISMISSED TH E DEPARTMENTAL APPEAL AND HELD THAT CONFESSION MADE BY THE ASSESSEE DURING THE SURVEY PROCEEDINGS IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABLISH BY FILING COGENT EVIDENCE THA T THE SAME WAS NOT TRUE AND CORRECT. CONSIDERING THE ABOVE DECISIONS IT IS CLEAR THAT ADMISSIONS WERE NOT CONCLUSIVE PROOF OF MATTER. THEY MAY BE SHOWN TO BE UNTRUE OR HAVE BEEN MADE UNDER MISTA KE OF FACT OR LAW. CIRCUMSTANCES HAVE TO BE SEEN UNDER WHICH SAME ARE MADE. IT CAN BE WITHDRAWN UNLESS IT IS ESTOPPELS AND CONCLUS IVE. CONSIDERING THE EXPLANATION OF THE ASSESSEE IN THE LIGHT OF THE ABOVE PRINCIPLE OF LAW WE ARE OF THE VIEW THE MATTER REQUIRES RECONSI DERATION AT THE LEVEL OF THE AO. THE AUTHORITIES BELOW RELIED UPON THE STATEMENT OF THE ASSESSEE FOR THE PURPOSE OF MAKING THE ADDITION WHICH WAS RECORDED DURING THE COURSE OF SURVEY. THE LEARNED C OUNSEL FOR THE ASSESSEE HAS FILED COPIES OF THE LETTERS IN THE PAP ER BOOK TO SHOW THAT REQUEST WAS MADE TO THE AO AND THE ADDL. COMMISSION ER FOR SUPPLY OF THE COPY OF THE SAME BUT ACCORDING TO THE ASSES SEE THE SAME HAVE NOT BEEN SUPPLIED TO HIM TILL THE DATE. SUCH A STATEMENT THUS CANNOT BE READ IN EVIDENCE AGAINST THE ASSESSEE UNL ESS COPY OF THE SAME IS SUPPLIED TO THE ASSESSEE. FURTHER THE ASSE SSEE EXPLAINED THAT SINCE THE BOOKS OF ACCOUNTS WERE WITH THE ACCO UNTANT WHO WAS AWAY FROM THE STATION ON THE DATE OF SURVEY THE BO OKS OF ACCOUNTS COULD NOT BE PRODUCED AT THE TIME OF SURVEY. HOWEVE R THE ASSESSEE ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 9 WHILE RETRACTING FROM THE STATEMENT SUBMITTED THAT THE BOOKS OF ACCOUNTS ARE MAINTAINED AND THE CASH IS MAINTAINED THROUGH CASH BOOK MAINTAINED IN THE REGULAR COURSE OF BUSINESS. COPY OF THE CASH BOOK SHOWING OPENING BALANCE WAS PRODUCED BEFORE TH E AO AS WELL AS BEFORE THE LEARNED CIT(A) BUT THE SAME HAS NOT B EEN APPRECIATED. NO DEFECT IN THE ENTRIES CONTAINED IN THE BOOKS OF ACCOUNTS HAS BEEN POINTED OUT. EVEN IF THE BOOKS OF ACCOUNTS WERE NOT PRODUCED ON THE DAY OF SURVEY IT IS THE DUTY OF THE AO TO HAVE EXA MINED THE EVIDENCE AND MATERIAL PRODUCES AT THE ASSESSMENT STAGE IT C OULD SHOW THAT THE STATEMENT OF THE ASSESSEE WAS RECORDED UNDER MI STAKE OF FACTS. THE AO SHOULD HAVE VERIFIED THE BOOKS OF ACCOUNTS A ND ENTRIES THEREON AND IF THE ENTRIES CONTAINED IN THE BOOKS O F ACCOUNTS ARE NOT FOUND TO BE INCORRECT THE AO COULD NOT HAVE MADE T HE ADDITION AGAINST THE ASSESSEE. THE LEGAL PROPOSITION NOTED A BOVE GIVES RIGHT TO THE ASSESSEE TO EXPLAIN THE ADMISSION THAT THE S AME WAS INCORRECT OR DOES NOT SHOW CORRECT STATE OF FACTS. THE SUBMIS SION OF THE LEARNED COUNSEL FOR THE ASSESSEE AND THE RETRACTION OF THE ASSESSEE ARE SUPPORTED BY THE ENTRIES CONTAINED IN THE BOOKS OF ACCOUNTS. THE AO DID NOT EXAMINE THE SAME AND THE LEARNED CIT(A) IGN ORED THE SAME ON THE REASON THAT THE BOOKS WERE NOT FOUND AT THE TIME OF SURVEY OR THE SAME HAVE BEEN RECONSTRUCTED DOCUMENTS. THE VIE W OF THE AUTHORITIES BELOW THUS CANNOT BE SUSTAINED IN LAW. WE ACCORDINGLY SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R ESTORE THE ISSUE OF ADDITION OF RS.98 500/- ON ACCOUNT OF EXCESS CASH T O THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE SAME ISSUE BY GI VING REASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESS EE IN THE LIGHT OF THE OBSERVATIONS IN THIS ORDER. THE AO SHALL SUPPLY THE COPY OF THE ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 10 STATEMENT OF THE ASSESSEE RECORDED DURING THE COURS E OF SURVEY. THE AO SHALL ALSO EXAMINE THE BOOKS OF ACCOUNTS PRODUCE D BY THE ASSESSEE AND THE ENTRIES CONTAINED THERE ON AND THE REAFTER SHALL PASS A REASONED ORDER ON THE MATTER IN ISSUE. IN T HE RESULT THIS GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STA TISTICAL PURPOSES. ITA NO.623/AHD/2009 9. THE LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRE SS GROUNDS NO.3 AND 4 OF THE APPEAL OF THE ASSESSEE. THE SAME ARE DISMISSED BEING NOT PRESSED. 10. ON GROUND NO.1 OF THE APPEAL THE ASSESSEE CHAL LENGED THE ADDITION OF RS.3 50 000/- MADE BY THE AO ON ACCOUNT OF EXCESS CASH. THE STATEMENT OF THE ASSESSEE WAS RECORDED DURING T HE COURSE OF SURVEY ON THE SAME DAY ON 24-09-2004 BECAUSE EXCESS CASH OF RS.5 00 000/- WAS FOUND. THE ASSESSEE AGREED TO SUR RENDER THE SAME AS UNACCOUNTED INCOME AND TO OFFER FOR TAXATIO N. THE ASSESSEE HOWEVER SURRENDERED ONLY RS.1 50 000/- INSTEAD OF RS.5 00 000/-. THE ASSESSEE SIMILARLY EXPLAINED THAT THE ACCOUNTAN T WAS OUT OF STATION ON THE DAY OF SURVEY; THEREFORE CASH COULD NOT BE RECONCILED. THE ASSESSEE EXPLAINED THE SAME EXCESS CASH IN HIS RETRACTION LETTER AND SUBMITTED THAT CASH COULD BE EXPLAINED THROUGH BOOKS OF ACCOUNTS AND THERE IS A DIFFERENCE OF ONLY RS.1 50 000/- WHICH WAS SO SURRENDERED. THE AO SIMILARLY NOTED THAT THE EXPLA NATION OF THE ASSESSEE IS AFTERTHOUGHT AND AFTER A GAP OF 3 MONTH S AND THAT NO BOOKS OF ACCOUNTS WERE FOUND DURING THE COURSE OF S URVEY. ADDITION WAS ACCORDINGLY MADE. ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 11 11. BOTH THE PARTIES SUBMITTED THAT THE ISSUE IS SA ME AS IS CONSIDERED IN THE APPEAL IN ITA NO.622/AHD/2009 IN THE CASE OF SHRI ASHOKKUMAR K. THAKKAR ABOVE. THE ADDITIONAL FACT IS THAT IN THIS CASE THE ASSESSEE WAS SUPPLIED COPY OF THE STATEMENT REC ORDED DURING THE COURSE OF SURVEY. ON CONSIDERATION OF THE ABOVE FAC TS AND SIMILAR SUBMISSION OF THE PARTIES WE ARE OF THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. THE ASSESSE E IN HIS RETRACTION SIMILARLY EXPLAINED THAT CASH IS VERIFIABLE WITH RE GARD TO THE BOOKS OF ACCOUNTS. COPY OF THE CASH BOOK WAS ALSO FILED WHIC H WAS IGNORED BY THE AUTHORITIES BELOW. SINCE THE ISSUE IS SAME AS I S CONSIDERED IN THE CASE OF SHRI ASHOKKUMAR K. THAKKAR WE ARE OF THE V IEW THE MATTER REQUIRES RECONSIDERATION AS IS ALREADY DIRECTED ABO VE. WE MAY ALSO ADD HERE THAT THE ASSESSEE IN HIS STATEMENT EXPLAIN ED THAT HE HAS MAINTAINED ALL THE RECORDS OF THE BUSINESS BILL BO OK LETTERS BOOKS STOCK STATEMENT ETC. AND FOR EACH AGENCY SEPARATE A CCOUNTS ARE MAINTAINED ALONG WITH VOUCHERS ETC. THIS WOULD THE REFORE SUPPORT THE EXPLANATION OF THE ASSESSEE THAT THE AO SHOULD HAVE VERIFIED THE ENTRIES CONTAINED IN THE BOOKS OF ACCOUNTS BEFORE M AKING ADDITION ON ACCOUNT OF EXCESS CASH. BY FOLLOWING THE SAME REASO N FOR DECISION AS IN THE CASE OF SHRI ASHOKKUMAR K. THAKKAR WE SET A SIDE THE ORDERS OF THE AUTHORITIES BELOW AND RESTORE THE MATTER TO THE FILE OF THE AO WITH DIRECTION TO RE-DECIDE THE ISSUE BY GIVING REA SONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE AO SHALL GIVE SPECIFIC FINDINGS ON THE FACTS CONTAINED IN THE BOO KS OF ACCOUNTS AS IS DIRECTED IN THE CASE OF SHRI ASHOKKUMAR K. THAKKAR. IN THE RESULT GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ALLOWE D FOR STATISTICAL PURPOSES. ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 12 12. ON GROUND NO.2 OF THE APPEAL THE ASSESSEE CHAL LENGED THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDIT ION OF RS.96 007/- OUT OF ADDITION MADE BY THE AO IN A SUM OF RS.1 73 033/- FOR DIFFERENCE IN STOCK. THE AO NOTED IN THE ASSESSMENT ORDER THAT THE ASSESSEE IN THE RETURN FILED HAD SHOWN CLOSING STOC K AS ON 31-03- 2005 AT RS.1 44 284/-. THE AO ASKED THE ASSESSEE TO PROVIDE RECONCILIATION OF THE DETAILS AS ON 24-09-2004 I.E. THE DATE OF SURVEY AND AS ON 31-03-2005 I.E. THE CLOSING DAY. IT WAS N OTICED THAT IN THE DETAILS AND RECONCILIATION FURNISHED BY THE ASSESSE E THE STOCK AS ON 24-09-2004 WAS COMPUTED AT RS.2 01 048/- AS AGAINST RS.3 74 081/- INVENTORISED AND VALUED AS ON 24-09-2004. THE AO FE LT THAT THE DIFFERENCE IS SUPPRESSED CLOSING STOCK AND MADE THE ADDITION OF RS.1 73 033/-. THE AO ALSO FOUND THAT DURING THE YE AR THE ASSESSEE HAD SHOWN GROSS PROFIT RATE OF 3.2% CONSIDERING THE FIGURE OF THE ENTIRE YEAR. AS PER THE ASSESSEE ON THE ISSUE OF CL OSING STOCK THE PROBLEM LIES IN THE PRICE AT WHICH THE STOCK WAS VA LUED DURING THE COURSE OF SURVEY. ACCORDING TO THE ASSESSEE THE ME THOD ADOPTED CONSISTENTLY BY THE ASSESSEE IS TO TAKE LOWER OF CO ST OR MARKET RATE. THE SURVEY TEAM HAS VALUED THE STOCK AT MRP. IN RES PONSE TO A SPECIFIC QUERY RAISED BY THE AO THE ASSESSEE SUBMI TTED EXPLANATION ALONG WITH COMPARATIVE STATEMENT INDICATING THE PUR CHASE PRICE AND THE MRP. IT WAS SUBMITTED THAT THE BOOKS OF ACCOUNT S HAVE BEEN SUBJECTED TO AUDIT AND NO IRREGULARITY HAS BEEN DET ECTED BY THE AUDITOR WITH RESPECT TO THE CLOSING STOCK AND THE A O HAS NOT DISPUTED THE AUDIT REPORT IN THIS CONTEXT. THE AO HAS NOT DI SPUTED THE CLOSING STOCK AS ON 31-03-2005; THEREFORE NO CASE IS MADE OUT OF SUPPRESSION OF VALUE OF THE CLOSING STOCK ON THE DA TE OF SURVEY. THE ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 13 LEARNED CIT(A) ON CONSIDERATION OF THE ISSUE RESTRI CTED THE ADDITION TO RS.96 007/-. THE LEARNED CIT(A) NOTED THAT THE AO A S WELL AS THE ASSESSEE HAS NOT BROUGHT ANYTHING ON RECORD TO SHOW WHAT SHOULD HAVE BEEN THE STOCK ON THE DATE OF SURVEY PARTICULA RLY WHEN BOOKS WERE NOT FOUND DURING THE COURSE OF SURVEY. THE ASS ESSEE LATER ON PREPARED THE BOOKS OF ACCOUNTS AND IN TWO PARTS TRA DING ACCOUNTS WERE PREPARED WHICH SHOWS GROSS PROFIT RATE OF 3.77 % ON THE DATE OF SURVEY ON 24-09-2004 AND AFTER SURVEY PERIOD TRADIN G ACCOUNT FOR THE PERIOD 24-09-2004 TO 31-03-2005 WAS PREPARED WHICH SHOWS GROSS PROFIT RATE OF 2.78%. THE LEARNED CIT(A) THEREFORE NOTED THAT ON THE DATE OF SURVEY THE VALUE OF STOCK WAS WORKED OUT WH ICH WAS DEPENDENT UPON THE RATE OF GROSS PROFIT ADOPTED. TH E ASSESSEE HAS ADOPTED HIGHER GROSS PROFIT RATE OF 3.77% FOR THE P RE-SURVEY PERIOD AS AGAINST GROSS PROFIT RATE OF 3.20% ADOPTED DURING T HE ENTIRE ASSESSMENT YEAR WHICH WAS STILL HIGHER AS COMPARED TO THE GROSS PROFIT RATE OF PRECEDING ASSESSMENT YEARS AT 2.07% AND 2.62% IN 2004-05 AND 2003-04 RESPECTIVELY. THE LEARNED CIT(A ) THEREFORE NOTED THAT DURING THE PRE-SURVEY PERIOD HIGHER GROS S PROFIT RATE WAS ADOPTED TO ENHANCE THE VALUE OF THE STOCK THEREFOR E THERE WAS NO REASON TO ADOPT GROSS PROFIT RATE OF 3.77% FOR PRE- SURVEY PERIOD. THE LEARNED CIT(A) LOOKING TO THE PAST RESULT ADOPTED G ROSS PROFIT RATE OF 3.2% AND AGREED WITH THE ASSESSEES CONTENTION THAT VALUE IS REQUIRED TO BE TAKEN AT PURCHASE PRICE AND NOT AT T HE MRP. THE LEARNED CIT(A) ACCORDINGLY CONFIRMED THE ADDITION O F RS.96 007/-. 13. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BELOW AND SU BMITTED THAT ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 14 EXCESS STOCK WAS FOUND WHICH WAS VALUED AT MRP AND THE LEARNED CIT(A) CORRECTLY VALUED AT PURCHASE PRICE BUT INST EAD OF HIGHER GROSS PROFIT RATE THE LEARNED CIT(A) ADOPTED THE LOWER G ROSS PROFIT RATE. THEREFORE THE PART ADDITION CANNOT BE SUSTAINED. O N THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDER OF THE LEARNED CIT(A). 14. ON CONSIDERATION OF THE ABOVE FACTS WE ARE OF THE VIEW NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE LEARN ED DR REFERRED TO THE SURVEY REPORT DURING THE COURSE OF ARGUMENT AND SUB MITTED THAT THE SURVEY PARTY INVENTORISED PHYSICAL STOCK AS PER ANN EXURE B AND EXCESS STOCK WAS FOUND DURING THE COURSE OF SURVEY AS COMPARED TO THE CLOSING STOCK AS ON 31-03-2005. THE ASSESSEE DI D NOT GIVE ANY SATISFACTORY EXPLANATION BEFORE THE AO. THE LEARNED CIT(A) ON THE BASIS OF RECASTED TRADING ACCOUNTS FOR THE PRE-SURV EY PERIOD AND POST SURVEY PERIOD FOUND THAT THE ASSESSEE HAS CLAIMED H IGHER GROSS PROFIT RATE DURING PRE-SURVEY PERIOD IN ORDER TO RECONCILE THE DIFFERENCE IN THE EXCESS STOCK. HOWEVER NO BASIS IS SHOWN AS TO HOW HIGHER GROSS PROFIT RATE WAS ADOPTED. EVEN IN THE PRECEDING ASSE SSMENT YEARS GROSS PROFIT RATE WAS LOWER AS COMPARED TO THE PRE- SURVEY PERIOD. FURTHER THE GROSS PROFIT RATE OF 3.20% WAS FOUND D URING THE ENTIRE ASSESSMENT YEAR. THUS THE CLAIM OF THE ASSESSEE WA S NOT RIGHTLY ACCEPTED BY THE LEARNED CIT(A). THE LEARNED CIT(A) ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD RIGHTL Y SUSTAINED PART OF THE ADDITION ON THIS ISSUE. WE THEREFORE DO NOT F IND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). WE CONFIRM HIS FIN DINGS AND DISMISS GROUND NO.2 OF THE APPEAL OF THE ASSESSEE. ITA NO.622/AND 623AHD/2009 S/SHRI ASHOKKUMAR K. THAKKAR AND RAMESHKUMAR THAKKA R VS ITO W 2 PATAN 15 15. IN THE RESULT THE APPEAL OF THE ASSESSEE IN IT A NO.623/AHD/2009 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. 16. IN THE RESULT BOTH THE APPEALS OF THE DIFFEREN T ASSESSEES ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 4-02-2011 SD/- SD/- (D. C. AGRAWAL) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 4-02-2011 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR ITAT AHMEDABAD