ITAT Upholds ₹37.20 Lakh Addition Because Survey Found Unaccounted Excess Stock

Rajinder Singh Bhasin Vs DCIT (ITAT Raipur)

The Income Tax Appellate Tribunal (ITAT), Raipur, dismissed the assessee’s appeal and upheld the addition of ₹37,20,800 as undisclosed income arising from excess stock found during a survey conducted under Section 133A of the Income Tax Act, 1961. The assessee had initially challenged both the addition relating to excess stock and a disallowance of interest expenditure. However, the ground relating to interest expenditure was not pressed and was dismissed accordingly.

During the survey conducted on 25 January 2011, the survey team found that the assessee had not maintained proper stock records, bills, vouchers, and related documentation. Physical verification of stock and cash was carried out in the presence of the assessee and employees. The survey revealed excess stock valued at ₹37,20,800. In response to questions raised during the survey, the assessee categorically admitted that the excess stock represented stock outside the books of account and voluntarily agreed to pay taxes on the amount. The assessee also confirmed that the stock belonged exclusively to him and that there were no pending bills requiring accounting entries.

Subsequently, while filing the return of income, the assessee did not offer the surrendered amount for taxation and retracted the earlier admission. The assessee contended that the statement made during the survey was given under fear, pressure, and duress. The Assessing Officer rejected the retraction, noting that it was made after approximately ten months and was unsupported by any evidence. The Assessing Officer observed that the assessee had remained silent for a considerable period, had not approached higher authorities with any complaint, and had partially paid taxes on the surrendered income. The Assessing Officer further found that bills later produced by the assessee were an afterthought and did not satisfactorily explain the excess stock discovered during the survey. Accordingly, the addition of ₹37,20,800 was made and penalty proceedings were initiated.