HIGH COURT OF PUNJAB AND HARYANA
Commissioner of Income-tax-II, Chandigarh
IT Appeal No. 17 of 2012
May 7, 2012
Ajay Kumar Mittal, J
This appeal has been filed by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 27.9.2011 passed by the Income Tax Appellate Tribunal, Chandigarh Bench ‘A’, Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 432/CHD/2011 for the assessment year 2007-08 claiming the following substantial questions of law:-
“A. Whether the ITAT is justified in directing the AO to take the rate of Rs. 600/- against Rs. 428/- shown by the assessee and arbitrarily adopted at Rs. 800/- by the AO merely on the uncorroborated statement of a low-paid employee?
B. Whether the order of the Tribunal is perverse as it has failed to appreciate that the discrepancies found at the time of survey were later on reconciled and to the extent of reconciliation, the additions ought not to have been upheld?”
2. Briefly stated the facts necessary for adjudication of the present appeal are that on 20.3.2007, a survey under Section 133A of the Act was conducted at the business premises of the assessee. During survey, the assessee surrendered Rs.50 lacs as under:-
|“(i) Difference in stock||10,00,000/-|
|(ii) Income on a/c of unaccounted sales||9,60,000/-|
|(iii) Difference in cash||30,40,000/-|
3. The books of account of the assessee were found incomplete. The assessee filed his return on 5.3.2008 for the assessment year 2007-08 declaring a total income of Rs. 21,34,780/-which included surrender of Rs. 12,93,999/- on the following heads:-
|“(i) Income on a/c of unaccounted sales||9,60,000/-|
|(ii) Difference in cash||3,23,999/-|
4. The assessment was completed on 30.11.2009 at an income of Rs. 74,42,709/- against returned income of Rs. 21,34,780/-after making addition of amount surrendered during survey. The assessee took the matter in appeal before the Commissioner of Income Tax (Appeals) [in short “the CIT(A)”] who vide order dated 1.3.2011 upheld all the additions made by the Assessing Officer and dismissed the appeal. Still being dissatisfied, the assessee filed an appeal before the Tribunal. The Tribunal vide order dated 27.9.2011 partly allowed the appeal. Hence, the present appeal.
5. Learned counsel for the appellant fairly submitted that he does not press question (A). Accordingly, the same is dismissed as not pressed.
6. Learned counsel for the appellant submitted that though the cash in hand was found to be Rs.30,40,000/- whereas unaccounted cash was to the tune of Rs.3,23,999/- only. The addition of the entire amount was, thus, bad in law and the assessee was entitled to relief to the extent of Rs. 27,16,001/-.
7. After hearing the learned counsel for the appellant and perusing the record, we do not find any merit in the same. The Assessing Officer while rejecting the aforesaid contention of the assessee had recorded as under:-
“At the time of the survey on 20.03.2007, inventory of cash of Rs. 33,40,950/- was prepared. On the date of survey, Sh. Harbhajan Singh, Prop. Sohana Timber was asked to explain the source of this cash. He submitted that he has no explanation and surrender an amount of Rs. 30,40,000/- for taxation. However, at the time of filing of the return this amount was reduced to Rs.3,23,999/-. During the assessment proceedings the counsel of the assessee was asked to explain this back track. In his reply he has stated that on the date of survey the books of account were not complete and the exact cash in hand could not be worked out and it was at the time of the audit it was found that the difference in cash in hand and cash found is Rs. 3,23,999/- and this amount was surrendered at the time of filing of return. The reply of the counsel of the assessee is not acceptable because:
(a) The assessee in the period between the date of survey and the date of filing of return (nearly a year) never ever raised this question. The retraction of the assessee is bad on law. Reliance is placed on the decision of Hira Lal Maganlal & Company v. DCIT 96 ITD 113 and on the judgment of Punjab and Haryana High Court in M/s Shiv Shakti Steel Tubes v. Commissioner of Excise  (C.E.A. No. 18 of 2007).
(b) If the cash book or cash in hand position were not clear on the date of survey Sh. Harbhajan Singh should have pointed this out to the survey party. But he did not do so. The surrender made by him was without any influence or coercion.
(c) If the mistake was detected at the time of audit or even before that the assessee should have brought this to the notice of the department. However, at no stage did the assessee point this issue.
The above facts was confronted to Sh. D.S. Sandhu vide order sheet entry dated 19.11.2009 and his reply in this regard has already been reproduced in para 3. Thus excess cash of Rs.27,16,001/- is added to the income of the assessee.”
8. The above said finding on appeal was affirmed by the CIT (A) with the following observations:-
“15. Assessee himself in his letter dated 20.03.2007 offered for addition of Rs.30,40,000/- on account of “Difference in Cash as per books and found at the time of survey. In the return of income, assessee declared Rs.3,23,999/- and suppressed income of Rs.27,16,0001/-.
16. During the assessment proceedings, the assessee tried to justify his contentions by taking various pleas – that books of accounts were not complete at the time of survey and that exact cash could not be determined in books. According to the assessee, it was found at the time of Audit in September, 2007, that the difference was not Rs. 27,16,001/- as determined during the survey but merely Rs.3,23,999/-.
17. Counting of daily cash is very important in running of any business. It does not appear logical that from 20.03.2007 (date of survey) till the date of audit in the month of September, 2007, the appellant failed to reconcile cash of his business by physical counting of cash.
18. It is a fact that cash was physically counted and verified by the assessee at the time of survey, from the regularly maintained books of accounts. In fact, the assessee had himself admitted to the difference of Rs.30,40,000/-.
19. I do not find any force in the argument of learned counsel that entire amount of cash found during the survey was treated as unaccounted cash. This argument is not based on any evidence & material on record. There is also no force in the argument that assessee was too much perplexed at the time of survey. In fact, there was no stress and undue pressure on assessee when he submitted his offer letter admitting Rs.30,40,000/- as difference in cash on account of physical counting and cash available in books of accounts.
20. Under the circumstances, the addition of Rs.27,16,001/- made is confirmed, dismissing this ground of appeal.”
9. On further appeal, the Tribunal affirmed the aforesaid findings by noticing as under:-
“15. The third plank of the surrender at the time of survey was the cash found from the premises of the assessee. The assessee failed to explain the source of cash of Rs. 33,40,950/- found during the course of survey and as he had no explanation to offer, sum of Rs. 30,40,000/- was surrendered by the assessee. The said surrender as pointed out in paras hereinabove was not on account of the total cash found but on account of the difference in cash as per the books and cash found at the time of survey. While filing the return of income the assessee reduced the said surrender on account of cash to Rs. 3,23,999/- and the plea of the assessee was that this was the surplus found after reconciliation of the books of account by the auditor. The survey was carried out at the premises of the assessee on 20.3.2007 and the return of income was filed by the assessee on 5.3.2008 i.e. after a gap of nearly one year. Prior to filing the said return of income, the assessee had not retracted its statement, nor had explained the discrepancies in the cash though the said cash available with the assessee was not accounted for in the books of account at the time of survey and was surrendered. The Hon’ble Punjab & Haryana High Court in Bachittar Singh v. CIT (supra) have laid down the proposition that the retraction, if any, should be at the earliest time.
16. In the facts of the present case, on the date of survey the books of account of the assessee were found to be incomplete, though the survey had taken place towards the close of the accounting period i.e. 20.3.2007. Finding was concluded by the survey team that the assessee was indulging in sales outside the books of account. Even sale invoices were found during the course of survey which were confronted to the assessee who in turn admitted that the said invoices were either not recorded in the books of account or were under invoiced. Certain notings in diary and note books were also found which when confronted to the office Assistant of the assessee were admitted to be on account of sales. The statement of the office Assistant was recorded on the date of survey and even the statement of the assessee was recorded on the said date. Further, the assessee was found in the possession of cash in hand which was not accounted for in the books of account and the assessee offered no explanation as to the source of the said cash found from his possession. However, when confronted, the assessee declared income element in the unaccounted sales, difference in stock and cash in hand as its additional income for the year under consideration over and above the income as per the books of account. The said surrender was made by the assessee in the presence of his counsel and admittedly after the documents found during the course of survey were confronted to the assessee, for which the necessary explanation was not available with the assessee. The assessee did not retract its statement though it had voluntarily offered a sum of Rs.50 lacs as additional income. Thereafter, a gap of one year the assessee had furnished its return of income in which the surrendered income was reduced by the assessee and the claim of the assessee is that it had retracted its earlier officer of additional income. However, the assessee has failed to clarify the discrepancies noted at the time of survey except to point out that the figures have been reconciled by the auditor and the present figures are based on the audit report. The books of account produced by the assessee during the assessment proceedings cannot be relied on as even after so-called reconciliation by the auditor there is gap in sales as the assessee had offered additional sales of Rs.80 lacs being outside the books of account and the income on the said sales of Rs.9,60,000/- has been surrendered as additional income by the assessee in the return of income, which was also earlier offered as part of surrender of Rs.50 lacs. The statement recorded in the present case in an important piece of evidence and cannot be brushed aside as the assessee has failed to prove its case, in view of the documents/evidence found during the course of survey in addition to unaccounted stock and cash in hand.”
10. A reading of the aforesaid findings clearly shows that it was recorded that during the course of survey, the assessee was not able to offer any plausible explanation for the sum of Rs.30,40,000/- which was surrendered by the assessee. Further, during the course of survey, it was found that certain sale invoices were either not recorded in the books of account or were under invoiced. The assessee had also admitted certain notings in the diary and note books to be on account of sales which were unaccounted. In the light of the aforesaid findings, the contention of the assessee that the amount of Rs. 27,16,001/- could not be included as unaccounted cash and it was Rs.3,23,999/- only does not carry any weight and the plea of the assessee has rightly been dispelled by the authorities below. In view of the concurrent findings recorded, no question of law arises in this appeal. Accordingly, the present appeal is dismissed.