DCIT Vs Neeraj Agrawal (ITAT Allahabad)
ITAT Allahabad held that additions made based on the incriminating material (being excess stock) found during survey conducted u/s 133A of the Income Tax Act is justifiable.
Facts- The assessee is engaged in the trading business of Trading & Manufacturing Silver Jewellery and trading gold jewellery under the name and style of Raj Shree Jewellers, and assessee also runs Cinema Hall in the name and style of Rajshree Palace, Mirzapur. The assessee e-filed return of income on 15th September 2012 declaring a total income of Rs. 30,31,050/- from aforesaid businesses, under the heads business income and income from other sources.
In this case, the survey u/s. 133A was conducted at the business premises of the assessee at Sudiya, Varanasi and Basnahi Bazar, Mirzapur, simultaneously. During the course of assessment proceedings, the assessee submitted details before AO and produced books of accounts as maintained by it which were subjected to test checks by the AO. It was observed by the AO that during the course of survey proceedings conducted by Revenue on 24.02.2012, the assessee’s books of accounts were not found to be complete as of the date of the survey i.e. 24.02.2012.
The AO observed that the assessee did not keep a stock register for silver bullion and gold jewellery. Further, AO made an addition under section 69B of the Income Tax Act, 1961. Penalty proceedings u/s 271(1)(c) are being initiated separately for concealment of income. The AO found that the assessee has not kept proper and adequate records to substantiate the quantity of the stock at any given date and time, and it was observed by the AO that the arguments were extended by the assessee.
AO has also made various additions u/s 68.
CIT(A) after considering reply of the assessee, partly allowed the relief. Being aggrieved, both revenue and assessee has preferred the present appeal.
Conclusion- We set aside the appellate order passed by ld. CIT(A) and uphold/sustain the addition as was made by the AO. So far as legal precedents relied upon by the assessee, it is not the case of the surrender of the undisclosed income during the course of survey proceedings, but incriminating material by way of excess stock of silver ornaments was found during survey vis-à-vis stock recorded in stock register, and additions were made based on the incriminating material (being excess stock) found during survey conducted u/s 133A. The orders of the ld. CIT(A) is set aside on this issue of excess silver ornaments and the assessment order is upheld . We order accordingly.
These creditors are appearing in the books of accounts of the assessee, and the onus/burden is on the assessee to prove that the transactions recorded are genuine and mandate of Section 68 of the 1961 Act is fulfilled/complied with by the assessee. Section 68 cast obligation on the tax-payer where any sum is found credited in the books of an tax-payer maintained for any previous year, and the taxpayer offers no explanation about the nature and source of credit thereof or the explanation offered by the taxpayer is found not satisfactory in the opinion of the AO, the entire sum so credited in books of the tax-payer may be treated as income and charged to income-tax as income of the taxpayer of that previous year. The burden/onus is cast on the taxpayer and the taxpayer is required to explain to the satisfaction of the AO cumulatively about the identity and capacity/creditworthiness of the creditors along with the genuineness of the transaction to the satisfaction of the AO. All the constituents are required to be cumulatively satisfied. If one or more of them is absent, then the AO can make additions u/s. 68 of the Act as an income of the tax-payer.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
These cross appeals, filed by assessee, being ITA Nos.100/Alld./2017 for assessment year(ay): 2012-13 , and appeal filed by Revenue , in ITA No. 138/Alld/2017 for ay: 2012-13ted against an appellate order dated 07.03.2017 in Appeal No.10/DCIT/R-III/MZP/15-16 , passed by learned Commissioner of Income Tax (Appeals), Allahabad (hereinafter called “the CIT(A)”),for assessment year(ay):2012-2013, the appellate proceedings had arisen before learned CIT(A) from assessment order dated 20th March, 2015 passed by learned Assessing Officer (hereinafter called “the AO”) under Section 143(3) of the Income-tax Act,1961(hereinafter called “ the Act”). We have heard these cross appeals in Open Court proceedings through physical hearing mode.
2. The assessee has raised following grounds of appeal in memo of appeal filed with Income Tax Appellate Tribunal, Allahabad Bench, Allahabad, U.P. (hereinafter called “ the tribunal”), in ITA No. 100/Alld./2017 for ay; 2012-2013, which reads as under:-
“The following grounds of appeal are independent of , and without prejudice to one another:
1. That on the facts and in the circumstances of the appellant’s case, the Ld. CIT(Appeals) grossly erred both in fact and in law in confirming the addition of the Assessing Officer (“AO”) on account of difference in stock (difference in physical stock on the date of survey and the stock shown in stock register without considering the books of accounts impounded) in Mirzapur premises of the appellant merely on the basis conjectures and surmises and also without appreciating the submissions filed and documents submitted and without analyzing the quantitative and value-wise details of opening stock, purchases / transfer, sales/ transfer and closing stock for the financial year under consideration.
1.1 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the appellant has failed to give any reasons as to why the weight of the silver jewellery was incorrect at the time of survey apart from making general averments.
1.2 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the purity percentage of the silver jewellery on an estimated basis should be 55% without appreciating the submissions made.
1.3 Hence, the addition on account of weight and purity of silver jewellery as confirmed by Ld. CIT(Appeals) on account of undisclosed investment is bad in law and is liable to be deleted.
1.4 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the affidavit of Smt. Poonam Tripathi in regard to the gold jewellery weighing 202 gm is an afterthought without considering the submissions filed, documents/affidavit filed on the issue and not considered the Hon’ble Supreme Court judgment in the case of CIT v. S.Khadar Khan & Sons (254 CTR 228) on the issue. Hence, the addition on gold jewellery as confirmed by Ld. CIT(Appeals) on account of undisclosed investment is bad in law and is liable to be deleted.
1.5 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in not giving benefit of the opening stock of the silver bullion weighing 5.751 kg in Mirzapur premises without considering the submissions filed and evidences adduced on the issue. Hence, the addition on silver bullion as confirmed by Ld. CIT (Appeals) in regard to the opening balance on account of undisclosed investment is bad in law and is liable to be deleted.
1.6 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the no stock register being maintained by the appellant for the silver bullion and the appellant has failed to give any reasons or basis of the weight without considering the submissions filed, the documents submitted and the case laws mentioned. Hence, the addition on silver bullion as confirmed by Ld. CIT (Appeals) in regard to the weight of silver bullion of undisclosed investment is bad in law and is liable to be deleted.
2. That on the facts and in the circumstances of the appellant’s case, the Ld. CIT (Appeals) erred both in fact and in law in confirming the addition on account of difference in stock (difference in physical stock on the date of survey and the stock shown in stock register without considering the books of accounts impounded) in Varanasi Branch of the appellant merely on the basis conjectures and surmises and also without appreciating the quantitative and value-wise details of opening stock, purchases/ transfer, sales / transfer and closing stock for the financial year under consideration. Hence, the confirmation of addition on account of undisclosed investment is bad in law and is liable to be deleted.
2.1 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in giving direction to the Ld. AO to only exclude the weight of 177 kg of silver jewellery/gillatepayal. Though the weight taken by the Ld. AO is of 177.174 kg which is all from same bill. Hence, the addition on account of weight of silver jewellery as confirmed by Ld. CIT(Appeals) on account of undisclosed investment is bad in law and is liable to be deleted.
2.2 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the appellant has failed to explain the source of the stock of gold jewellery weighing 0.128 gm without considering the submissions filed, documents submitted and also not considered the Hon’ble Supreme Court judgment in the case of CIT v. S.Khadar Khan & Sons (254 CTR 228) on the issue. Hence, the addition of INR 2,68,800 on gold jewellery as confirmed by Ld. CIT(Appeals) on account of undisclosed investment is bad in law and is liable to be deleted.
2.3 That on the facts and the circumstances of the case and in law, the Ld. CIT (Appeals) grossly erred in holding that the pleading of the appellant with respect to the stock of 4.958 kg of silver bullion is hereby rejected as being an afterthought without considering the submissions filed, documents submitted and also not considered the Hon’ble Supreme Court judgment in the case of CIT v. S.Khadar Khan & Sons (254 CTR 228) on the issue. Hence, the addition of INR 78,059 on silver bullion as confirmed by Ld. CIT(Appeals) on account of undisclosed investment is bad in law and is liable to be deleted.
3. That on the facts and in the circumstances of the appellant’s case, the Ld. CIT (Appeals) erred both in fact and in law in making addition of INR 5,87,424/-on account of undisclosed cash in Varanasi branch only on the basis of conjectures and surmises without considering the submission regarding source of the said cash along with evidence filed by the appellant and also not considered the Hon’ble Supreme Court judgment in the case of CIT v. S. Khadar Khan & Sons (254 CTR 228) on the issue. Hence, the addition of INR 5,84,124 on excess cash found as confirmed by Ld. CIT(Appeals) on account of undisclosed cash credit u/s 68 in bad in law and is liable to be deleted.
4. That on the facts and in the circumstances of the appellant’s case, the Ld. CIT (Appeals) erred both in fact and in law in confirming the rejection of the books of accounts of the appellant u/s 145(3) only on the basis of conjectures and surmises without considering the submission along with evidence filed by the appellant. Hence, rejection of the books of accounts without considering the evidences and the submissions is bad in law and is liable to be deleted.
5. That on the facts and in the circumstances of the appellant’s case, the Ld. CIT(Appeals) erred both in fact and in law in confirming the addition of INR 5,75,000/- on account of unexplained Unsecured Loan of Gopinath Agrawal (now deceased) u/s 68 only on the basis of conjectures and surmises without considering the submission and evidence filed by the appellant and without giving opportunity to the appellant to substantiate the same. Hence, the confirmation of the addition of INR 5,75,000/- on account of unexplained unsecured loan u/s 68 is bad in law and is liable to be deleted.
6. That the Ld. CIT (Appeals) erred on the facts and circumstances of the case and in law in confirming the charging of interest u/s 234B and 234C of the Income Tax Act, 1961 whereas there is no specific order in the assessment order for charging such interest and as such charging of interest under sections 234B and 234C of the Income Tax Act by way of Demand Notice u/s 156 is wholly illegal and liable to be quashed.
7. That, in any view of the matter interest under section 234B and 234C is chargeable on the income, as declared in the return of income and not on the assessed income.
8. That the appellant craves leave to add, to alter or to amend grounds of appeal before the appeal is heard and disposed off.”
2. The Revenue has raised following grounds of appeal in memo of appeal filed in ITA No. 138/Alld./2017 for ay; 2012-2013with the tribunal,, which reads as under:-
“1. That the Ld. CIT(A), Allahabad has erred in law and on facts in reducing the addition of Rs. 1,24,732/- of unaccounted stock of Silver Jewellery without any basis and without appreciating the facts.
2. That the Ld. CIT(A), Allahabad has erred in law and on facts in reducing the addition of Rs. 42,00,560/- of unaccounted stock of Gold Jewellery by assumption of unaccounted jewellery of wife of Neeraj Agarwal and mere on the basis of affidavit filed and without appreciating the facts.
3. That the Ld. CIT(A), Allahabad has erred in law and on facts in deleting Rs. 56,32,361/- u/s 69B of unaccounted stock of Silver Jewellery found at Varanasi premises without the appreciating the facts stated by the Assessing Officer.
4. That the Ld. CIT(A), Allahabad has erred in law and on facts in deleting Rs. 56,32,361/- u/s 69B of unaccounted stock of Silver Jewellery found at Varanasi premises without providing opportunity to the Assessing Officer on the additional evidences filed during appellate proceedings.
5. That the Ld. CIT(A), Allahabad has erred in law and on facts in reducing Rs. 18,074/- out of Rs. 5,87,424/- on account of difference in the Cash Book without appreciating the finding of Assessing Officer.
6. That the Ld. CIT(A), Allahabad has erred on facts and in law in deleting Rs. 10,15,000/- which has been added by the Assessing Officer on account of undisclosed cash credit u/s 68 of the Income Tax Act, 1961 as the assessee had not produced any evidence during the course of survey or assessment proceedings.
7. That the Ld. CIT (A) has erred in law and on fact and in the circumstance of the case in deleting the addition made by the Assessing Officer, of Rs. 34,82,707/- u/s 68 ignoring the findings of Assessing Officer.
8. That the Ld. CIT (A) has erred in law and on fact and in the circumstance of the case in deleting the addition made by the Assessing Officer, of Rs. 34,82,707/- while not providing opportunity to the Assessing Officer on the additional evidences filed during appellate proceedings.
9. That the Ld. CIT(A) has erred in law and on facts in deleting Rs. 22,37,000/- out of addition of Rs. 28,12,000/- made on account of unexplained secured loan u/s 68 of the Income Tax Act, 1961 without appreciating the facts.
10. That the Ld. CIT(A) has erred in law and on facts in deleting Rs. 22,37,000/- out of addition of Rs. 28,12,000/- made on account of unexplained secured loan u/s 68 of the Income Tax Act, 1961 while not providing opportunity to the Assessing Officer on the additional evidences filed during appellate proceedings.
11. The appellant craves right to add, alter or amend any grounds of appeal that may be taken at the time of hearing.”
3. The brief facts of the case are that the assessee is engaged in business of Trading & Manufacturing of Silver Jewellery and trading of gold jewellery under the name and style of Raj Shree Jewellers , and assessee also runs Cinema Hall in the name and style of Rajshree Palace, Mirzapur. The assessee e-filed return of income on 15th September, 2012 declaring total income of Rs. 30,31,050/- from aforesaid businesses, under the heads business income and income from other sources.
4a. In this case, the survey under section 133A was conducted by Investigation Wing of the Department, Allahabad on 24th February, 2012 at the business premises of the assessee at Sudiya, Varanasi and at Basnahi Bazar, Mirzapur, simultaneously. The case of the assessee was selected by Revenue for framing scrutiny assessment under Section 143(3) r.w.s. 143(2) of the Act for impugned assessment year ,and statuary notices were issued by AO to the assessee, both under Section 143(2) and 142(1) of the Act, from time to time as recorded in the assessment order, which were claimed by AO to have been duly served upon the assessee. The assessee participated in the assessment proceedings. During the course of assessment proceedings, the assessee submitted details before AO as also produced books of accounts as maintained by it which were subjected to test check by the AO. It was observed by the AO that during the course of survey proceedings conducted by Revenue u/s 133A on 24.02.2012, the assessee’s books of accounts were not found to be complete as on date of survey i.e. 24.02.2012. The valuation of physical stock was done by registered valuers at prevailing rates as on the date of survey viz. 24.02.2012, both at Mirzapur Head Office and Varanasi Branch office of the assessee. The AO observed on perusal of records, that the assessee habitually does not file any quantitative details of closing stock of various items, which has to be mandatorily part of the audited books of account as well as audit report/Form No. 3CD. The AO observed that it was seen during the course of survey proceedings conducted by Revenue u/s 133A, that the stock register has been prepared only for silver jewellery. The AO observed that the assessee did not kept stock register for silver bullion and gold jewellery .On reconciliation of physical stock and stock as per books of account/records kept by the assessee, the AO observed that the following differences were worked out in the case of Mirzapur premises(HO) of the assessee , detailed as under:
