SUMMARY OF CASE LAW
Mere possession of currency notes with the assessee cannot prove that payments were actually made by him particularly in the circumstances when he is claiming otherwise and to substantiate such claim the evidence is produced.
CASE LAW DETAILS
Decided by: ITAT, AGRA BENCH (THIRD MEMBER) AGRA, In The case of: Prakash Motwani v. ITO, Appeal No.: ITA NO. 48/Agr./2005, Decided on : June 11, 2009
1. There being difference of opinion between the Members, the following questions were referred for the opinion of the Third Member:-
1. Whether, in the given facts and circumstances of the case, addition of Rs. 2,95,000/- on account of alleged undisclosed advance is justified or not ?
2. Whether, in the given facts and circumstances of the case, addition of Rs. 1,00,000/- for alleged unexplained stock found during the survey is justified or not?
3. Whether, since learned JM has admitted the quantum addition, the corresponding penalty levied u/s 271(1)(c) is to be cancelled/ deleted, or in view of the finding of the Ld. AM, the same has to be kept in abeyance?”
17. I have carefully considered the rival submissions in the light fothe material placed before us. No doubt that the possession of three currency notes with the assessee has raised a presumption that the amount stated on those currency notes was paid by the assessee to the said Shri Shankar Lai. However, the same was a rebuttable presumption. The assessee has explained that these payments were made by the assessee subsequent to the date of survey i.e.., on 17th September, 2002, 28th September, 2002 and 30th September, 2002. The source of the said payments have been explained by the availability of cash in the books of account upon realization of sale value of closing stock. To corroborate such explanation the assessee has submitted the books of account. If there was any doubt regarding production of books of account before the Assessing Officer during the course of assessment proceedings, the said doubt has been removed by the assessee as during the course of remand proceedings the books were produced before the A.O. To corroborate the explanation the assessee has further produced Shri Shankar Lai twice who has confirmed to have received those payments as per version of the assessee. No concrete material has been brought on record by the revenue to suggest that the explanation of the assessee and the statement of Shri Shankar Lai was incorrect. It has not been brought on record that what was claimed to be paid by the assessee on subsequent dates were actually not paid on those dates. Mere possession of currency notes with the assessee cannot prove that payments were actually made by the assessee particularly in the circumstances when the assessee is claiming otherwise and to substantiate such claim the evidence is produced.
18. In these circumstances, I am of the opinion that the Assessing Officer had made the addition of Rs.2,95,000/- to the income of the assessee simply on the basis of presumptions by discarding the evidence produced by the assessee in the shape of books of account and also by producing Shri Shankar Lai before the A.O. for his examination. Similarly, the CIT (A) has upheld the addition simply on the basis of presumptions. I am in agreement with the findings of Ld. Judicial Member that the addition has been upheld by simply on the basis of presumption and assessee has been able to establish that payments were made subsequently from the date of survey. Therefore, Ld. Judicial Member is right in holding that such addition could not be made to the income of the assessee.
19. Now, coming to the second addition, i.e., the addition of Rs.1 lac, I have carefully gone through the relevant portion of remand report of the A.O. which has been reproduced in the order of the CIT (A) in para 6.2. It is observed by the A.O. that the assessee has filed the quantitative chart of stock which contained the name of the item, its quantity, MRP rate, value in rupees, purchase rates and sale price, the page number of the cash book on which it is entered, purchase voucher no. and date and sale memo No. and date. The A.O. has reconciled such stock which, according to him, tallied with the vouchers found except few items which are for a consolidated sum of Rs.21,334/-. It is further reiterated by the A.O. that MRP and the cost value varies in between 18 to 33%. If it is a verified fact by the A.O. that the MRP and the cost value is generally varying between 18 to 33%, then 25% as variable cannot be considered to be incorrect. Therefore, after hearing both the parties and after considering both the orders of Ld. Judicial Member and Ld. Accountant Member, I am of the opinion that 25% variable should be adopted. Therefore, Ld. Judicial Member was right in holding that the Assessing Authority should compute the closing stock of the assessee on the basis of 25% variable.
20. On the third question, which relates to levy of penalty u/s 271(1)(c), I observe that the said issue cannot be decided unless the decision on addition is taken. Now, the fate of additions has to be decided in accordance with my above order and it will be in the interest of justice if the parties are given opportunity to argue this issue after the finalization of the quantum. Therefore, I am of the opinion that the issue of levy of penalty can be decided by the Division Bench after giving effect to this order with regard to quantum proceedings. The Division Bench, if it thinks proper can dispose of penalty appeal by giving hearing to the parties on the date when the effect is, given to this order with regard to quantum proceedings. With these observations I answer to the third question in the manner aforesaid.