Follow Us :

Case Law Details

Case Name : DCIT Vs Ratandeep Gold &
Appeal Number : Diamond Pvt. Ltd (ITAT Varanasi)
Date of Judgement/Order : ITA No. 136/VNS/2020
Related Assessment Year : 03/02/2023

DCIT Vs Ratandeep Gold & Diamond Pvt. Ltd (ITAT Varansi)

ITAT Varanasi held that principles of natural justice demand that both the parties, i.e. assessee as well as AO, shall be given opportunity of being heard, before being condemned and any prejudice is caused. Impugned order not satisfying the same is liable to be set aside.

Facts- Post conduct of survey, AO issued notice to the assessee asking on the basis of data retrieved from the computer and recorded statements, undisclosed profit should not be treated as unaccounted income under section 69 of the Income Tax Act.

Further, AO also contested that difference of Rs. 43 Lacs figured out under the head furniture and fixture should not be treated as unexplained investment under section 69 of the Income Tax Act.

CIT(A) accepted the appeal filed by the assessee. Accordingly, being aggrieved, revenue has preferred the present appeal.

Conclusion- Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings, and proceedings before ld. CIT(A) are quasi judicial in nature. If ld. CIT(A) was not clear as to that the AO has failed to give finding on the nature of such incriminating documents with respect to which the income was surrendered under the head Furniture and Fixtures, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments/remand report, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act.

FULL TEXT OF THE ORDER OF ITAT VARANSI

This appeal, filed by Revenue, being ITA No.136/VNS/2020, is directed against the appellate order dated 10.08.2020 passed by learned Commissioner of Income Tax(Appeals), Varanasi(hereinafter called “the CIT(A)”) in Appeal No. CIT(A)/Vns/10643/2019-20/32, for assessment year (ay): 2017-18, the appellate proceedings had arisen before Learned CIT(A)from assessment order dated 30.12.2019 passed by learned Assessing Officer (hereinafter called “the AO”) under Section 143(3)of the Income-tax Act, 1961 (hereinafter called “the Act”)(DIN & Order No. ITBA/AST/S/143(3)/2019-20/1023418835(1)).The assessee has filed Cross Objections(C.O.) which is listed as C.O. No.02/VNS/2021 , arising out of ITA No. 136/VNS/2020, for assessment year 2017-18. We have heard both the parties through physical hearing mode in Open Court proceedings.

2. The grounds of appeal raised by Revenue in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi (hereinafter called “the tribunal”) in ITA No. 136/VNS/2020 for ay:2017-18, reads as under:

“1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition on account of undisclosed profit of Rs.45,608/- factoring the value of stock, the net profit came out Rs. 74,30,135/- against disclosed Rs.73,84,527/-

2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition as unexplained expenses of Rs.11,43,944/- debited in P&L. A/c after the date of survey.

3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained purchases of Rs.45,36,423/- out of unregistered purchases of Rs.4,53,64,232/- @10%.

4. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained investment of Rs.43,00,000/- under the head furniture and fixture which admitted during survey action and retracted while filing of return of income.

5. Right is reserve to alter, modify and to file any fresh ground of appeal.”

2a. The grounds of Cross Objection(C.O.) raised by assessee in memo of Cross Objections(C.O.) filed with the tribunal, reads as under:

“1.The assessment order failed to workout basis of quantum of addition of Rs.45608 made on the basis of factoring of net profit which makes addition unjustified.

2.The learned CIT Appeal had deleted the addition of Rs.45608 by evaluating detail facts brought on record which is not distinguished by A.O.. Hence deletion of addition of 45608 is unjustified on fact.

3. Addition of Rs.1143944 against unexplained expenditure on ground that expenditure booked after the date of survey without perusing books of account and fact brought during assessment proceeding which makes addition unjustified.

4. Hon’ble CIT Appeal had perused records and deleted the addition on the basis of facts which again not distinguished in grounds of appeal . Hence deletion Rs. 1143944 is unjustified.

5. The addition of Rs.4536423 on the ground of alleged suppression of profit 10% in unregistered purchase of Rs.45364232 is against the fact which shows the unregistered purchase are much economical than registered purchase, which shows order passed is without verifying the record and make the order unjustified,

6. Hon’ble CIT Appeal has rightly deleted the addition of Rs 4536423 after verifying the fact from the record that addition is against the fact as unregistered purchase are economical in comparison to registered purchase.

7. The addition of Rs.43 lacs u/s 69A in respect of alleged excess investment in furniture fixture is void ab-initio.

8. Hon’ble CIT Appeal rightly deleted addition of Rs. 43 lacs on facts as well duly supported by judicial pronouncement.”

3. The brief facts of the case are that consequent to the authorization of survey issued by ld. JCIT , Range-3, Varanasi , survey operations were carried out by Revenue under Section 133A of the 1961 Act, on 5th October, 2017 in the business premises of the assessee and its sister concerns of the group. During the course of survey operations carried out by Revenue under Section 133A of the Act, several documents and retrieved of computer data backup etc. which were incriminating in nature as per annexures to the Survey Report drawn, were found and impounded by Revenue . The assessee filed its return of income for ay: 2017-18 ,on 7th November, 2017,returning income of Rs.76,90,500/- . The AO issued notice under Section 143(2) , dated 27.09.2018 to the assessee, which was claimed by AO to have been duly served on the assessee. Thereafter, notices under Section 142(1) were also issued by AO on 29th January, 2019 and 4th November, 2019 to the assessee, which were also claimed by AO to have been duly served on the assessee. The assessee participated in assessment proceedings conducted by the AO. The assessee is a Private Limited Company and derives income under the head business and profession at Book Profit of Rs. 73,84,528/- and paid taxes as per provisions of Section 115JB at Rs. 22,97,152/- , during the impugned assessment year. During the course of survey proceedings conducted by Revenue against the assessee under Section 133A of the Act, on 05th October, 2017, a statement was recorded on oath of Shri Manjit Singh, the Director of the company on 5th October, 2018(sic. 05th October 2017-correct date of survey ) on the issues of undisclosed income and investment, and the details of undisclosed income and signed copies of Profit & Loss account and Balance-sheet retrieved from the computer of the group M/s Ratandeep Gold & Diamond Pvt. Limited. The relevant copy of the statement, as well signed copy of P&L and Balance Sheet as retrieved from computer are reproduced by AO ,in the assessment order at page no. 3-7, which is reproduced hereunder:

assessment order

assessment order

assessment order

assessment order

assessment order

The AO issued show cause notice (SCN) dated 17.12.2019 to the assessee , asking assessee to explain as under:

“1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 2016­17 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income?

2. Apart from this during the Course of survey proceedings in your statement u/s 133 recorded on 05.10.2018(sic. 05.10.2017) for Q 23 you were asked to explain the difference in investment under the sub head furniture and fixture in B/S a difference of Rs 43.00 Lacs was noted and in answer to Q.23 you have offered total amount as undisclosed investment. However, subsequently you have retracted from the same as per your ITR, Hence, why the aforementioned amount of investments may not be treated as your income u/s 69 of the Income-tax Act, 1961?”

In reply, the assessee submitted before AO that the assessee has contested the finding during the survey (stock status at Page no. 8 of seized material) where total stock value was taken as Rs. 10,32,24,013/-, whereas actual stock as per audited statement is Rs.4,58,34,907/- for same stock without any variation(audit report filed on 07.11.2017). The assessee submitted details of valuation of closing stock , which is reproduced by the AO at page 9 of the assessment order, and the same was accepted by the AO and no adverse inference was drawn by the AO. The details of valuation of stock as aforesaid submitted by the assessee before the AO , is reproduced hereunder:

valuation of stock

Thus, so far as surrender of Rs. 5,00,00,000/-(Rs. five crores) made by assessee during survey due to differential in the stock value , wherein the assessee, infact, retracted the said surrender of income of Rs. Five Crores by not declaring the same in the return of income filed with the department , the said retraction stood accepted by the AO and no adverse view/inference was drawn by the AO on this issue . However, the AO observed that factoring in this value of stock the net profit comes to Rs. 74,30,135/-(more than Rs. 45,608/-). The AO observed that the assessee has stated in his statement recorded under Section 131, that there were some problem in the accounting software due to which it has taken an exaggerated rate for some stock which was deemed as an unexplained income of the assessee by invoking provision of Section 69A of the Act , and , thus, aforesaid income of Rs. 45,608/- was added to the total income of the assessee by the AO and brought to tax @ 60% as provided under Section 115BBE of the Act, vide assessment order dated 30.12.2019 passed by AO u/s 143(3).

3b. The AO , further observed that the assessee has provided details of expenses in Profit & Loss account as per seized documents and as per audited Balance Sheet, and while perusing this comparative chart, the AO observed that expenses debited in books of accounts ( on finalization of accounts) are mentioned as amounting to Rs.22,18,157/- (including depreciation of Rs. 5,70,537/-). Hence, the remaining expenses debited after date of survey viz. 05.10.2017 were disallowed by the AO amounting to Rs. 11,43,949/- as unexplained expenses u/s 69C.

3c. The AO further observed that the assessee has made unregistered purchases amounting to Rs. 4,53,64,232/- out of total purchases. The AO observed that the assessee has not provided any details to enable its verification. Thus, the AO observed that the assessee company has suppressed its profit by making unregistered purchases. The AO rejected books of accounts of the assessee company. Considering the facts and circumstances of the case, the AO disallowed 10% of the total unregistered purchases which were treated as deemed income of the assessee and brought to tax by AO under Section 69C of the 1961 Act, which stood added by the AO to the total income of the assessee u/s 69C for taxation at the rate of 60% as provided u/s 115BBE of the 1961 Act.

3d. Further, the AO observed that the assessee has not provided detail regarding the undisclosed investment of Rs. 43,00,000/- under the head furniture and fixture. The AO observed that the assessee could not produce any verifiable explanation or evidence. The AO added the same to the total income of the assessee as unexplained investment u/s 69A of the 1961 Act and brought to tax the same at the rate of 60% as provided under Section 115BBE of the Act.

4. Aggrieved by assessment order passed by the AO, the assessee filed first appeal withLearnedCIT (A).

4b During the appellate proceedings before learned CIT(A), the assessee submitted with respect to addition of Rs. 45,608/-made by the AO u/s. 69C read with Section 115BBE regarding differential in valuation of stock, as under:

“The addition of Rs. 45,608 in accordance with the Para-8 of the assessment order is not fully explained the assessee want to mention that as the A.O has accepted the valuation of closing stock shown by assesseeRs. 4,58,34,907/- against value shown in the statement of account seized during survey operations which shows closing stock of Rs.10,32,24,013. There does not remain any difference of Rs. 45,608 as referred in para 8 of assessment order. The difference in figures pertaining to trading account in statement seized during survey and final audited balance sheet is only a minor difference in purchase as the same is shown in audited balance sheet Rs. 17,49,71,132/- against the value shown in seized document Rs.17,49,39,516/-. Thus, there is difference of just Rs. 31,616 which pertains to few purchases not recorded in purchase after reconciliation with Vat return, which for entered in books at the time of finalization of accounts. The copy of bills and ledger is enclosed at page no 119- 126.

There is also minor difference in sales as sales shown in audited balance sheet Rs 15,57,07,088/- against sales reflected in seized document is Rs. 15,56,91,097/- there is difference of 15,991 which is also in respect of sales not recorded properly and at finalization of account and after reconciliation with vat return the same was entered. The copy of sales bill and ledger is enclosed at page no 127-130. Therefore, the addition of Rs. 45,608 is totally unjustified as not supported by any reasoning.”

4ba. The learned CIT(A) accepted the aforesaid contentions of the assessee, and deleted the addition of Rs.45,608/- as were made by the AO , vide appellate order dated 10.08.2020, by holding as under:

“Decision:

I have gone through the facts and circumstances of the case. Appellant submitted the reconciliation of the value of the stock found during the survey with the value of actual stock as per audited statement and no adverse inference is drawn on this issue by AO. AO mentioned in the order that ‘Factoring in this value of stock the net profit comes out to be Rs. 74,30,135/- (more than Rs. 45,608/-) and added this amount as unexplained income u/s 69A of the Income Tax Act, 1961 without giving any reason whatsoever of any kind in support of this observation. Once AO has accepted the valuation of closing stock shown by assesseeRs. 4,58,34,907/- against value shown in the statement of account seized during survey operations which shows closing stock of Rs.10,32,24,013/-, AO cannot make such a small amount of addition that too u/s 69A without bringing nay(sic. any) material on record. Appellant has tried explaining the difference due to late posting of the purchase and sale vouchers. In view of the same the addition is deleted.”

4c. With respect to addition of Rs. 11,43,944/- made by the AO w.r.t. expenses which represented the difference between the expenses reflected in the impounded material vis-à-vis audited accounts, the assessee submitted before ld. CIT(A) as under:

“The A.O has made addition of Rs.11,43,949 u/s 69C in respect of difference in expenditure debited in audited statement and statement seized during survey u/s 133A. The assessee has submitted the expenses pertains to heads where entries are made at the time of finalization of account. The copy of comparison sheet of expenses as per seized document and audited profit and loss account is enclosed at page no 4­24. The same shows the addition in expenses as accepted by the A.O and expenses not accepted and added u/s 69C. The addition of Rs.11,43,949/ also includes expenses of tax audit fees accounting charges which as per A.O. should be allowed. The assessee has enclosed the copy of all said expenses which shows that the difference amount has been first debited in books of account in separate head which at the of audit had been properly entered in correct head of expenditure The detail of same alongwith the supporting are enclosed at page no.28-78. The vouchers of all the expenditure mentioned in the ledger accounts are available for verification and if required same may be uploaded.

The aforesaid details show that all the expenditure had already been recorded in the books of account therefore the addition cannot be made u/s 69C Hence addition of 11,43,944 should be deleted.”

4ca. The learned CIT(A) after considering the reply of the assessee, deleted the aforesaid addition of Rs. 11,43,944/- , vide appellate order dated 10.08.2020,by holding as under:

“Decision:

I have gone through the facts and the written submissions filed along with the details filed enclose therein. There is no dispute that the expenditure has been incurred for the purposes of business. It is also an admitted fact that the accounts have been tax audited and the auditors have not given any adverse comments on these expenses recorded in the books. It is also clear that theassessee had filed all the details of the expenses under various heads. AO has not pointed out any specific defects in these details filed. The AO has failed to bring any material on record to demonstrate that these expenses have not been incurred and are not verifiable. Mere statement that the parts of the expenseshave been incurred after survey would not be sufficient enough to call for any addition. The appellant is a private limited company and complete records havebeen maintained as certified by the auditor. No disallowance can be made on mere suspicion. Keeping in view, the ratio laid down by the Judgment of the Hon’ble High Court of Allahabad in the case of CIT-I vs. M/s S.T. Advari Sc. Company [ITA No. 425 of 2012] & by Hon’ble Apex Court in the case of J.J. Enterprises vs. CIT 254 ITR 216 (SC), the disallowances made by the AO cannot be sustained.

Considering the facts and circumstances of the case and keeping in view the judicial pronouncements, the additions made by the AO u/s 69C is hereby deleted.

This ground is allowed.”

4d. With respect to the addition of Rs. 45,36,423/- made by the AO on account of unexplained purchases being 10% of the unregistered purchases, the assessee submitted before ld. CIT(A) as under:

“The A.O had made addition of Rs. 45,36,423 u/s 69C being 10% of purchase made shown as unregistered purchase of Rs.4,53,64,232. The contention that assessee has under the garbage of unregistered purchase suppressed its profit. The assessee first of all want to mention that the query has never being confronted to the assessee during course of assessment proceeding as theassessee would have explained it the same at the time of assessment itself. The assessee has enclosed herewith at page no 25-27, the copy of stock sheet showing purchase of registered purchase as well as unregistered purchase which shows average purchase of unregistered purchase is 2413.35 per gram which is in the case of registered purchase within Uttar Pradesh and outside Uttar Pradesh is Rs.2790.5 and 2968.23 per gram respectively. This shows that when purchase price of unregistered purchase is already less than other purchases there remains no scope for suppression of profit in this respect.”

4da. The Ld. CIT(A) after considering the aforesaid reply of the assessee deleted the aforesaid additions of Rs. 45,36,423/- made by the AO, vide appellate order dated 10.08.2020, by holding as under:

“Decision:

AO mentioned in the order that the appellant has made unregistered purchases amounting to Rs. 4,53,64,232/- out of the total purchase. Since these unregistered purchases cannot be verified, 10% of total unregistered purchases was treated as deemed income u/s 69C of the I.T. Act, 1961. Appellant has submitted that AO never asked for any such details during assessment proceedings from the appellant to explain. Appellant is showing purchase of registered purchase as well as unregistered purchase which shows average purchase of unregistered purchase is 2413.35 per gram which is in the case of registered purchase within Uttar Pradesh and outside Uttar Pradesh is Rs.2790.5 and 2968.23 per gram respectively. This shows that when purchase price of unregistered purchase is already less than other purchases there remains no scope for suppression of profit in this respect.

I have gone through the facts and circumstances of the case. Appellant submitted the reconciliation of the value of the stock found during the survey with the value of actual stock as per audited statement and no adverse inference is drawn on this issue by AO. All purchases, sales and closing stock were accepted by AO. There is no dispute that the unregistered purchases have been made for the purposes of business. Mere statement that the purchases are unregistered would not be sufficient enough to call for any addition. AO has failed to explain what inference he is trying to achieve at. No adhocaddition @ 10% can be made without giving any reason, that too u/s 69C of ITA Act. Keeping in view, the ratio laid down by the Judgment of the Hon’ble High Court of Allahabad in the case of CIT-I vs. M/s S.T. Advari Sc. Company [ITA No. 425 of 2012] & by Hon’ble Apex Court in the case of J.J. Enterprises vs. CIT 254 ITR 216 (SC), the disallowances made by the AO cannot be sustained. Considering the facts and circumstances of the case and keeping in view the judicial pronouncements, the additions made by the AO u/s 69C is hereby deleted.”

4e. With respect to the addition of Rs. 43,00,000/- made by the AO to the income of the assessee, on account of unexplained investment under the head ‘Furniture and Fixture’ , the assessee submitted before learned CIT(A) , as under:

“The learned AO has made addition of Rs. 43 lacs on the basis of statement recorded during course of survey u/s 133A in reference with the question no. 23 appearing at page no. 4 of assessment order. The such addition pertains to alleged under investment shown in furniture fixture reflected books of account against so called speculated figure of Rs. 60 lacs considered by survey team. The addition of Rs. 43 lacs considered as unexplained investment u/s 69A. The assessee want to mention that any addition u/s 69A can be made only in respect of unexplained money bullion, jewellery or other valuable article which is not recorded in books of account maintained by assessee for any source of income. Therefore, addition made u/s 69A for alleged excess investment in furniture and fixture is void ab initio.

The assessee further want to mention that in the reply given during course of assessment proceeding the assessee had mentioned that amount shown in books of account is Rs. 18,54,126 and not Rs. 16,98,326 as referred in question no.23 in the statement recorded at the time of assessment proceeding.

The assessee has enclosed herewith copy of fixed assets alongwith the bills and vouchers in respect of same at page no. 79-118 which are self-speaking and not denied by the AO. The all bills and vouchers were impounded during course of survey moreover, the AO have failed to bring any material on record which can show that investment made by the assessee exceeds the amount recorded in books of account.

The assessee relies upon judicial pronouncement which categorically hold that any addition on the basis of statement recorded during course of survey /search cannot be taken ground for making addition unless until any incriminating document is not found by the AO. The judicial pronouncement of Apex CIT VS Mantri Share Broking Pvt Ltd 257 Taxman 337 is being relied. Moreover, the recent decision in case of Rohitaswa Das v. Asstt. CIT I.T.A No. 1949/Kol/2017 further confirms the assessee’s contention that addition of Rs. 43 lacs made on the basis of statement of the director of the assessee cannot be treated tenable in the eyes of law. The copy of judicial pronouncement are enclosed at page no. 131-149. Therefore, it should be deleted.”

4ea. The learned CIT(A) after considering the aforesaid reply of the assessee, deleted the aforesaid addition of Rs.43,00,000/-, vide appellate order dated 10.08.2020, by holding as under:

“Decision:

A survey u/s 133A was conducted on 05.10.2017 at the business premises of appellant and its sister concerns. During the course of survey several documents and retrieved of computer data backup were found and impounded by the authorized parties. Appellant surrendered certain amounts under various heads of stock, furniture &fixtures, etc. However, appellant filed original return of income on 07.11.2017 showing total income of Rs. 76,90,500/- and paid taxes as per provisions of section 115JB at Rs. 22,97,152/- without disclosing the surrendered amount in the return filed. The relevant portion of the statement are scanned in the order. AO asked appellant that in your statement recorded on 05/10/2017, you had surrendered an undisclosed income of Rs. 5,00,00,000/- on account of difference in stock Rs. 43,00,000/- on account of difference in furniture and fixture and had offered the same as undisclosed investment, which subsequently have been retracted too while filing the ITR. You did not disclose this surrender made during survey and did not pay any of the due taxes. In reply the appellant has explained the discrepancies found during the survey pertaining to the stock value that was accepted by the AO as correct. However, AO did not accept the reply of the appellant pertaining to the difference in the amount of investments shown in the Furniture & Fixtures amounting to Rs. 43,00,000/-. With regards to investment in the Furniture & Fixtures appellant enclosed copy of all the bills and vouchers in respect of fixed assets. These bills and vouchers were impounded during course of survey as submitted by appellant. AO had no other material other than the statement taken during the Survey of the Director, on record which can show that investment made by the assessee exceeds the amount recorded in books of account. Appellant relies upon judicial pronouncement which categorically hold that any addition only on the basis of statement recorded during course of survey cannot be taken ground for making addition unless until any incriminating document is not found by the AO. It is not clear from the order of AO, who has not given any finding on the nature of such incriminating documents with regard to which the income was surrendered under the head Furniture & Fixtures.

It is well settled legally that once the appellant has retracted from the statement recorded by the survey team, then the AO is duty bound to investigate the issue further, mention specific adverse material found during the survey to make the addition. Here, the additions made by the AO in this case is purely based on the statement recorded during the survey and such statement has no evidentiary value in view of the decision of Hon’ble Supreme Court in the case of CIT VS S. Khader Khan Son 300 ITR 157 (SC) where Hon’ble Supreme Court has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission toshow that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts.

Appellant retracted from the main surrender of Rs. 5,00,00,000/- and AO accepted the retraction on the basis of the submissions given by AO. Similarly, appellant submitted details about difference on the value of Furniture & Fixtures, which the AO rejected without any basis and made addition on the basis of statement given without referring to any document found during the survey. It is well settled legal proposition that an admission cannot be the sole foundation for an assessment. It is always open to an appellant to demonstrate that a particular income is not taxable in his hands and that it was returned under an erroneous impression of law or facts. The principle can be applied in a case where the disclosure made u/s 133A did not match with the material collected in survey. No income can be taxed when no corroborative evidence or asset or valuables were either found during the survey from the business premises or are brought on record by AO during assessment proceedings after examination and verification of books of accounts produced by appellant. The well-settled position that while the admission is a piece of evidence that can be used against the person who has given the statement. For an admission to be effective corroboration with, third party evidence is required. But what a party himself admits to be true, may reasonably be presumed to be so, unless it is satisfactorily explained or successfully withdrawn. So long as they do not operate as estoppel, persons making admissions are at liberty to contradict them or to show that they are untrue or mistaken or made under a misapprehension. Thus, the effect of an admission is to shift the burden of proof to the party making the admission. Admissions play a very important role in the income-tax proceedings, as they generally bind the maker i.e. assessee. In the absence of any denial or explanation therefore, an admission is almost conclusive regarding the facts contained therein. They generally dispense with the requirement of adducing further evidence or proof to support a fact. Though section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters admitted, yet admissions in the absence of rebuttal may conclude an issue. Under the Income-tax Act also admissions bind the maker when these are not rebutted or retracted. Burden to prove the ‘Admission’ as incorrect is on the maker and in case there is a failure of the maker to prove that earlier stated facts were wrong, his earlier statements are sufficient to conclude a matter. However, if retraction is proved sufficiently then the earlier stated facts or admissions, loose their effect and relevance as a binding evidence and the AO cannot conclude a matter on the basis of such earlier statement alone. At the same time, bald retractions of earlier admissions will not be enough and even after retraction such earlier statements/admissions cannot automatically become nullities. Merely because a statement is retracted, it cannot become as involuntary or unlawfully obtained. For any retraction to be successful in the eyes of law the maker has to show as to how earlier recorded statements do notstate the true facts or that there was coercion, inducement or threat while recording his earlier statements.

AO has not found any fault with the sales, purchase or any expenses in the books of accounts finalized after the survey. AO has not pointed out any specific document or evidence impounded during the survey that shows the unexplained investments made by appellant. In view of the above facts the addition of Rs. 43,00,000/- cannot be sustained and is deleted as it is made without any basis.”

5. Aggrieved by appellate order passed by ld. CIT(A) allowing the appeal filed by the assessee, the Revenue is now aggrieved and has come in appeal before the tribunal. The Ld. CIT DR opened arguments before the Bench and submitted that survey under Section 133A was conducted by Revenue in the case of the assessee, on 5th October, 2017 and statement was recorded on oath of Sri Manjit Singh, Director of the assessee, wherein, inter-alia, he surrendered Rs. 43,00,000/- under the head furniture and fixture during the course of survey. Our attention was drawn by ld. CIT-DR to the appellate order passed by ld. CIT(A)and assessment order passed by the AO w.r.t. additions of Rs. 45,608/- on account of suppressed profits owing to differential in the value of stock made by the AO which stood deleted by ld. CIT(A). The Ld. Counsel for the assessee submitted in rebuttal that there is no basis of making additions specified by the AO in the assessment order , with respect to suppressed profit of Rs. 45,608/-on account of differential in the value of stock. With respect to the additions of Rs. 11,43,944/- made by the AO w.r.t. unexplained expenditure, the ld. CIT-DR drew our attention to the relevant para’s of the assessment order and the appellate order passed by the AO. The Ld. CIT DR submitted that there was a difference between the impounded material during survey and the audited Balance Sheet with respect to expenses , and owing to this difference of Rs. 11,43,944/-, an addition was made towards unexplained expenditure by the AO to the tune of Rs. 11,43,944/- , which stood deleted by ld. CIT(A). The Ld. Counsel for the assessee in rebuttal drew our attention to page No. 28 of the paper-book , wherein comparative chart(chart is reproduced by us in this order at later part) of expenses disallowed by the AO is placed. It was submitted by ld. Counsel for the assessee that tax audit of the accounts was duly conducted and these expenses are duly reflected in the books of accounts of the assessee. It was submitted that return of income was filed on 07.11.2017, while survey u/s 133A took place on 5th October 2017. It was submitted that the return of income for ay:2017-18 was filed after the date of survey viz. 05.10.2017. It was submitted that reply was filed before the AO which is placed in paper-book at Page No. 25-27. It was submitted that the impounded material is placed at page No. 148-149 of the paper book . The ld. CIT DR submitted that the matter can be set aside and restored back for fresh adjudication. The Ld. Counsel for the assessee objected and submitted that the matter cannot be set aside as details were given/furnished before the AO, and it is the AO who failed to take cognizance of the same . With respect to the next issue of addition of Rs. 45,36,423/- made by AO @10% of unregistered purchases towards suppressed profits, the Ld. CIT-DR submitted that there were unregistered purchases to the tune of Rs. 4,53,64,232/- out of total purchases made by the assessee, and no details were furnished by the assessee before the AO. It was submitted by ld. CIT DR that the AO invoked provisions of Section 69C. It was submitted that the AO did not asked any question on these unregistered purchases, while Ld. CIT(A) simply accepted the contentions of the assessee without any verification. The ld. Counsel for the assessee submitted that the unregistered purchases were more economical. With respect to next issue of addition of Rs. 43,00,000/- made by the AO towards undisclosed investments in Furniture and Fixture , the ld. CIT DR submitted and drew our attention to para no. 11 of the assessment order passed by the AO , and it was submitted that during survey investment to the tune of Rs. 43,00,000/- were made in furniture and fixture including decoration and furnishing of showroom , which were found to be not recorded in books of accounts. It was submitted by ld. CIT DR that statement was recorded of the Director of the assessee namely Mr. Manjit Singh during survey, and he surrendered the aforesaid amount of Rs. 43 lacs being invested in unrecorded furniture and fixture including decoration and furnishing of showroom premises , out of undisclosed sources of income. The Ld. CIT DR submitted that return of income was filed on 07th November, 2017, and the physical verification of stock was conducted during survey on 05.10.2017. The Director of the assessee Mr. Manjit Singh vide statement recorded on 6th October, 2017, surrendered an amount of investment in furniture and fixture including decoration and furnishing of showroom , to the tune of Rs. 43 lacs being made out of undisclosed sources. It was submitted by ld. CIT DR before the Bench that during assessment proceedings, the assessee retracted from the surrender of undisclosed income of Rs. 43 lacs as was made during survey. Our attention was drawn by ld. CIT-DR to the reply filed by the assessee before the AO during assessment proceedings, which is placed at page No. 27 of the paper-book, and submitted that the assessee retracted from surrender during assessment proceedings. It was submitted that even in return of income filed by assessee, the said undisclosed income of Rs. 43 lacs surrendered was not declared and disclosed. The ld. CIT DR submitted that ld. CIT(A) simply accepted the contentions of the assessee, without any further enquiry and verification . Our attention was drawn to page 4-5 of the assessment order passed by the AO , wherein vide question No. 23 while recording statement on 06.10.2017, question was put to Mr. Manjit Singh, Director of the assessee regarding undisclosed investments in furniture and fixture including decoration and furnishing of showroom, during the survey proceedings. It was submitted by ld. CIT DR that the assessee himself surrendered an amount of Rs. 60 lacs as income from undisclosed sources, and now the assessee cannot retract from the surrender of the undisclosed income during survey .The Ld. Counsel for the assessee on the other submitted that an expenditure of Rs. 18,54,126/- were incurred towards furniture and fixture. It was submitted by ld. Counsel for the assessee that Section 69A has no applicability. It was submitted by ld. Counsel for the assessee that addition of Rs. 43 lacs was made merely based on surrender made during survey , and the department does not have any incriminating material with it. It was submitted by ld. Counsel for the assessee that no verification of furniture and fixture including decoration and furnishing of showroom ,were made by authorities to identify actual investments made by the assessee in the furniture and fixtures including decoration and furnishing of showroom. It was submitted that there is no evidence that the assessee spent Rs. 60 lacs on furniture and fixture including decoration and furnishing of showroom. It was submitted that Rs. 45 lacs were taken as housing loan by the landlord of the premises , who invested in furniture and fixture including decoration and furnishing of showroom, and investments were not made by the assessee who is merely a tenant in the said premises. It was submitted that vide question no. 11 of the statement recorded on 06.10.2017 of Mr. Manjit Singh, it was submitted that Rs. 80 lacs was invested in Building which included investments made by the owners of the building and the assessee only invested Rs. 18.50 lacs in the furniture and fixture. The ld. CIT-DR objected at this stage and submitted that this theory of owner spending the amount in furniture and fixtures including decoration and furnishing of showroom , is introduced for the first time now before tribunal , and the same need to be rejected. The ld. Counsel for the assessee relied upon the following case laws:

a) Dismissal of SLP by Hon’ble Supreme Court in the case of CIT v. Mantri Share Broking Private Limited, (2018)96 com 280(SC)

b) Judgment and Order passed by Hon’ble Rajasthan High Court in the case of CIT v. Mantri Share Broking Private Limited (2018) 96 com 279(Raj.HC)

c)Appellate Order passed by ITAT, Kolkatta Bench in the case of Rohitaswa Das v. ACIT in ITA no. 1949/Kol/2017

d) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT , Central-III v. Krutika Land Private (2019)261 Taxman 454(SC)

e) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT v. B G Shrike Construction Technology Private Limited (2019) 265 taxman 543(SC)

The Ld. Counsel for the assessee submitted that the Department has no evidence of the assessee investing Rs. 60 lacs in the furniture and fixture including decoration and furnishing of showroom. The ld. Counsel for the assessee also relied upon CBDT instruction number F.No. 286/2/2003-IT(Inv II), dated 10.03.2003. The ld. Counsel for the assessee has filed copy of the said instructions, which are placed in file on record. The ld. Counsel for the assessee submitted that the C.O. is filed by the assessee which is only in support of the appellate order passed by ld.CIT(A).

6. We have considered the rival contentions and perused the material on record including cited case laws. The assessee is engaged in the business of jewellery. We have observed that there was a survey operations conducted by Revenue u/s 133A in the business premises(show room) of the assessee and its sister concerns of the group , on 05th October, 2017. During the course of survey operations carried out by Revenue under Section 133A of the Act, it is claimed by Revenue that several documents and retrieved of computer data backup etc. which were incriminating in nature as per annexures to the Survey Report drawn, were found and impounded by Revenue . The assessee filed its return of income for ay: 2017-18 ,on 7th November, 2017,returning income of Rs.76,90,500/- . The AO issued notice under Section 143(2) , dated 27.09.2018 to the assessee, which was claimed by AO to have been duly served on the assessee. Thereafter, notices under Section 142(1) were also issued by AO on 29th January, 2019 and 4th November, 2019 to the assessee, which were also claimed by AO to have been duly served on the assessee. The assessee participated in assessment proceedings conducted by the AO. During the course of survey proceedings conducted by Revenue against the assessee, a statement was recorded on oath of Shri Manjit Singh, the Director of the company , on the issues of undisclosed income and investment, and the details of undisclosed income and signed copies of Profit & Loss account and Balance-sheet retrieved from the computer of the group M/s Ratandeep Gold & Diamond Pvt. Limited. The relevant copy of the statement, as well signed copy of P&L and Balance Sheet as retrieved from computer are reproduced by AO ,in the assessment order at page no. 3-7 of the assessment order, which is reproduced hereunder:

assesment order

assesment order

assesment order

asssment order

assesment order

The AO issued show cause notice(SCN) dated 17.12.2019 to the assessee , asking assessee to explain w.r.t. surrender of undisclosed income of Rs. 5.0 crores and Rs.

0.43 Crores, made during the course of survey proceedings , but which were not declared and disclosed by the assessee in the return of income filed with the Revenue. The said SCN dated 17.12.2019 , is reproduced hereunder:

“1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 2016­17 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income?

  1. Apart from this during the Course of survey proceedings in your statement u/s 133 recorded on 05.10.2018(sic. 05.10.2017) for Q 23 you were asked to explain the difference in investment under the sub head furniture and fixture in B/S a difference of Rs 43.00 Lacs was noted and in answer to Q.23 you have offered total amount as undisclosed investment. However, subsequently you have retracted from the same as per your ITR, Hence, why the aforementioned amount of investments may not be treated as your income u/s 69 of the Income-tax Act, 1961?”

In reply, the assessee claimed before the AO that the assessee has contested the finding during the survey (stock status at Page no. 8 of seized material) where total stock value was taken as Rs. 10,32,24,013/- whereas actual stock as per audited statement was claimed by assessee isRs.4,58,34,907/- for same stock without any variation(audit report filed on 07.11.2017). The assessee submitted details of valuation of closing stock before the AO, which is reproduced by the AO at page 9 of the assessment order, and the same was accepted by the AO and no adverse inference was drawn by the AO. The details of valuation of stock as aforesaid submitted by the assessee before the AO , is reproduced hereunder:

Thus, so far as surrender of Rs. 5,00,00,000/-(Rs. five crores) made by assessee during survey due to differential in the stock , wherein the assessee in-fact retracted the said surrender of income by not declaring the same in the return of income filed with the department , and the said retraction stood accepted by the AO and no adverse view/inference was drawn by the AO on this issue, and consequently no additions were made by the AO while framing assessment. However, the AO observed that factoring in this value of stock the net profit comes to Rs. 74,30,135/-(more than Rs. 45,608/-). The AO observed that the assessee has stated in his statement recorded under Section 131 , that there were some problem in the accounting software due to which it has taken an exaggerated rate for some stock which was deemed as an unexplained income of the assessee by invoking provision of Section 69A of the Act , and , thus, aforesaid income of Rs. 45,608/- was added to the total income of the assessee by the AO and brought to tax @ 60% as provided under Section 115BBE of the Act, vide assessment framed u/s 143(3). Before ld. CIT(A) , the stand of the assessee was that the AO has not explained in assessment order, the basis of arriving at the addition of Rs. 45,608/- . It was submitted when the AO has accepted the stock figure of Rs.4,58,34,907/- for the same stock , as at 31.03.2017 as reflected in the audited Balance Sheet as against the closing stock of Rs. 10,32,24,013/- , then no additions can be made for small amount of Rs. 45,608/-. The assessee submitted before ld. CIT(A) there were difference of Rs. 31,616/-which pertains to few purchase invoices not recorded in purchase after reconciliation with VAT return , which were entered in books at the time of finalization of accounts . It was also submitted by the assessee that there was some minor difference of Rs. 15,991/- in sales between impounded document as well audited accounts, which were also sales not recorded properly and at the time of finalization and reconciliation with VAT returns, the same were entered. The ld. CIT(A) deleted the addition on the grounds that once AO has accepted the closing stock as per audited accounts, no small addition could be made. It was held by ld. CIT(A) that the AO did not gave any reasons for making addition on account of unexplained income owing to factoring in the value of stock as per audited accounts. The ld. CIT(A) accepted the contentions of the assessee. We are afraid that the appellate order passed by ld. CIT(A) cannot be sustained on this issue. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co-terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under :

“Powers of the Commissioner (Appeals) 251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers-

(a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment

***                                            ***                                          ***                                                        ***

***                                              ***                                          ***                                                         ***

Further, there are two parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under:

Procedure in appeal

250. (1) ***                ***                ***                ***

(2) The following shall have the right to be heard at the hearing of the appeal-

(a) the appellant, either in person or by an authorized representative ;

(b) The Assessing Officer , either in person or by a representative.

***                       ***                        ***                       ***”

Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. In the instant case before us, it is observed that the AO made additions of Rs. 45,608/- towards suppressed profits in the audited accounts vis-à-vis seized document impounded during survey(reproduced by AO in assessment order at page 6-7-also reproduced by us in this order ). The ld. CIT(A) simply accepted the contentions of the assessee that the AO has not given any basis/reasons for making small additions although the AO accepted closing stock as per audited accounts as at 31.03.2017. The AO had allowed retraction of surrender of undisclosed investment of Rs. 5,00,00,000/-in the stock made by Mr. Manjit Singh, Director of the assessee company which was made based on the closing stock of Rs. 10,32,24,013.58 as at 31.03.2017 as is reflected in the impounded document being Trading and Profit and Loss account of the assessee company(reproduced by the AO at page 6 of assessment order- also reproduced by us in this order), but the AO accepted closing stock of Rs.4,58,34,907/- as is reflected in the audited accounts as at 31.03.2017(page 21/paper book), but however the AO made addition of Rs . 45,608/- on account of differential in profit as per impounded document and audited accounts. The presumption u/s 292C is applicable with respect to the documents found during survey u/s 133A, that it belongs to the assessee from whose possession the same was found and contents are true. If ld. CIT(A) was not clear as to the basis of arriving the figure of Rs. 45,608/- which stood added by AO due to suppressed profit in the audited accounts vis-a-vis impounded material after having accepted the closing stock as per audited accounts, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/ comments before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute correct income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. This appellate order passed by ld. CIT(A) on this issue cannot be sustained and is hereby set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication, after giving proper opportunity of being heard to both the rival parties before ld. CIT(A) viz. the assessee as well the AO. We order accordingly.

6b. The next issue concerns itself with addition of Rs. 11,43,949/- made by the AO on account of differential in the expenses between as recorded in the impounded document being Profit & Loss account and as per audited Balance Sheet. The AO observed that there is a difference in the comparative chart submitted by the assessee to the tune of Rs. 11,43,949/- , which stood disallowed by the AO as unexplained expenses u/s 69C. The said chart is provided by the assessee in paper book/page 28, which is also reproduced hereunder:

Details of expenses in P & L account as per seized documents and audites talance sheet

Particulars Previous Addition Allowed Addition Disallowed Total (Dr)
DISCOUNT A/C 99193 0 0 99193.00
SALARY EXP. 1261000 0 587451 1848451.00
BANK CHARGES A/C 565027 71 0 18950 583977.71
DEPRECIATION A/C 0 570537 0 570537.00
SHOP EXP 140775 0 72114 212889.00
Telephone Ex. 14908 0 0 14908 00
Miscellaneous Exp. 18990 0 0 18990 00
SCHEME A/C 126010 0 116137 242147.00
ELECTRICITY CHARGES 292301 0 0 292301 00
Diesel A/c 17250 0 11906 29156 00
PACKING MATERIAL 17900 0 0 17900.00
LUNCH FOR STAFF & PANTRY EXP. 357370 0 3920 361290 00
COMPUTER EXPENSES 4000 0 0 4000.00
INSURANCE STOCK 53139 0 0 53139.00
PRINTING & STATIONARY EXP. 6220 0 68890 75110.00
BANK INTREST 1278044.43 0 0 1278044.43
Generetor & Repair Exp 35869 0 0 35869 00
Lr                    DIRECTOR REMUNERATION 2400000 800000 0 3200000 00
RENT A/C 960000 0 0 960000.00
Travelling Expenses 0 79581.53 79581.53
INTREST ON UN-SECURED LOAN 795120 0 795120.00
AMOROTIZATION OF PRE-OPERATIVE EXPENSES 25000 0 25000.00
STATUTORY AUDIT FEES 27500 0 27500.00
TAX AUDIT FEES 0 25000 25000.00
ACCOUNTING CHARGES 0 160000 160000.00
25 7647997.14 2218157 1143949.53 11010103.67

The ld. CIT(A) deleted the additions by accepting the contentions of the assessee that entries were made while finalization of accounts. The assesse has claimed that these expenses were first debited in the books of accounts in separate heads which at the time of audit were properly entered in correct head of expenditure. The ld. CIT(A) held that there is no dispute that these expenditures have been incurred for the purposes of business. The ld. CIT(A) went ahead in observing that the accounts of the assessee are tax-audited and the auditor has not given any adverse finding. The ld. CIT(A) also observed that the AO has not pointed out any specific defects in these details and the AO has not brought on record any material to demonstrate that these expenses have not been incurred and are not verifiable. The ld. CIT(A) observed that mere statement that the parts of the expenses have been incurred after the survey , would not be sufficient enough to call for any addition. The ld. CIT(A) held that the assessee is a private limited company and complete records have been made as certified by the auditors, and no additions can be made based on mere suspicion. We have observed that survey was conducted by Revenue u/s 133A in the business premises(show room) of the assessee, on 05.10.2017. The incriminating documents were found during survey u/s 133A , and presumption u/s 292C shall apply that the documents belong to the assessee and the contents are true. This presumption is rebuttable , but the onus is entirely on the assessee to rebut this presumption by credible and cogent evidences/explanation. The Trading and Profit and Loss account for the financial year 2016-17 & Balance Sheet as at 31.03.2017 was impounded during survey , which is reproduced by AO at page 6-7( also reproduced in this order ) . Thus, as per Section 292C, there will be presumption that the contents of this documents found during survey are true and the documents belong to the assessee. This presumption is rebuttable, for which the assessee has to bring on record cogent/credible evidences to rebut the said presumption. There is a difference of Rs. 11,43,944/- in expenses as are recorded in the impounded Profit and Loss accounts and the audited Profit and loss account. The survey took place on 05.10.2017 and return of income was filed on 07.11.2017, and the financial year under consideration is 2016-17, thus the financial year has already closed prior to the date of survey . The assessee has claimed that these expenses of Rs. 11,43,944/- were all debited in the books of accounts in separate head’s and at the time of finalization /audit , these expenses were transferred to correct head , and hence no addition is warranted which explanation was simply accepted by ld. CIT(A), by holding that the accounts are audited by auditors and they have not pointed out any discrepancies . Further, the ld. CIT(A) observed that these are business expenses, but ld. CIT(A) never did the analysis of these differential in expenses . He did not consider that the presumption u/s 292C shall apply to documents found during survey, and onus is on the assesee to rebut the said presumption . The entire basis of ld. CIT(A) in deleting addition are fallacious and rejected. The ld. CIT(A) failed to see that as per Balance Sheet and Profit and Loss found and impounded during survey for the year ended 31.03.2017, there was cash balance of Rs. 11,38,773.25 as at 31.03.2017 as found recorded in aforesaid impounded documents , while in the audited accounts, the cash balance certified by the auditors was merely Rs. 27,252.98 as at 31.03.2017, and there is a difference of Rs.11,11,520.27 wherein cash balance is shown to be lower in audited accounts vis-vis cash balance reflected in the impounded Balance Sheet as at 31.03.2017 . The financial year 2016-17 had already ended when the survey took place on 05.10.2017. The cash as on 31.03.2017 as certified in the audited accounts, is as under:

audited accounts

The aforesaid comparative chart reflected differential in expenses as reported in the impounded document and audited accounts, is provided by the assessee in paper book/page 28, which is also reproduced hereunder:

Details of expenses in P & L account as per seized documents and audites talance sheet

Particulars Previous Addition Allowed Addition Disallowed Total (Dr)
DISCOUNT A/C 99193 0 0 99193.00
SALARY EXP. 1261000 0 587451 1848451.00
BANK CHARGES A/C 565027 71 0 18950 583977.71
DEPRECIATION A/C 0 570537 0 570537.00
SHOP EXP 140775 0 72114 212889.00
Telephone Ex. 14908 0 0 14908 00
Miscellaneous Exp. 18990 0 0 18990 00
SCHEME A/C 126010 0 116137 242147.00
ELECTRICITY CHARGES 292301 0 0 292301 00
Diesel A/c 17250 0 11906 29156 00
PACKING MATERIAL 17900 0 0 17900.00
LUNCH FOR STAFF & PANTRY EXP. 357370 0 3920 361290 00
COMPUTER EXPENSES 4000 0 0 4000.00
INSURANCE STOCK 53139 0 0 53139.00
PRINTING & STATIONARY EXP. 6220 0 68890 75110.00
BANK INTREST 1278044.43 0 0 1278044.43
Generetor & Repair Exp 35869 0 0 35869 00
Lr                    DIRECTOR REMUNERATION 2400000 800000 0 3200000 00
RENT A/C 960000 0 0 960000.00
Travelling Expenses 0 79581.53 79581.53
INTREST ON UN-SECURED LOAN 795120 0 795120.00
AMOROTIZATION OF PRE-OPERATIVE EXPENSES 25000 0 25000.00
STATUTORY AUDIT FEES 27500 0 27500.00
TAX AUDIT FEES 0 25000 25000.00
ACCOUNTING CHARGES 0 160000 160000.00
25 7647997.14 2218157 1143949.53 11010103.67

We have perused the aforesaid comparative chart furnished by the assessee being representing differential of the expenses as per audited accounts and as per impounded Balance Sheet , and we have observed that there are differences in the head of the expenses namely, salary, bank charges, shop expenses, scheme account, diesel account , lunch for staff and pantry expenses, printing and stationary expenses , travelling expenses, tax audit fees and accounting charges , and the differential amount of Rs. 11,43,949.53 was disallowed by the AO which stood later deleted by ld. CIT(A). The AO has already partially allowed the differential between impounded material and audited accounts, to the tune of Rs. 22,18,157, while Rs. 11,43,949.53 stood disallowed by the AO. The assessee has also enclosed the ledger accounts of these expenses which stood disallowed , at page 29-42. It is observed that salary expenses of Rs.18,48,451/- – Rs.1,75,000/- =Rs.16,73,451/- (excluding Rs. 1,75000 being salary payable) were all paid in cash. The AO has allowed Rs.12,61,000/- . There is an entry in Ledger account of ‘Salary’ by way of transfer of ‘other expenses’ to the tune of Rs 5,87,451/- on 31.03.2017 debited to salary account , which on perusal of ‘Other Expenses’ account reveals that it were all paid in cash aggregating to Rs. 5,87,451/- as could be seen from ledger account of office expenses, were all paid in cash. Thus, the salary account include ‘other expenses’ of Rs. 5,87,451/- which were all paid in cash , stood disallowed by the AO. We confirm the addition as made by the AO to the tune of Rs. 5,87,451/- as it was merely an afterthought and these cash expenses were incorporated in the books of accounts, post survey, just to reduce profits. What was the necessity of maintaining separate head of account for ‘Other Expenses’ and what was the reasons for transferrin/merging the same with ‘Salary’ Account on 31.03.2017 , were not explained by the assessee. We say so also as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by introducing bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the contents of document found during survey shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed Thus, we confirm addition to the tune of Rs. 5,87451/- under the head ‘Salary’. Proceeding further, there is an addition of Rs.18,950/- on account of bank charges made by the AO, the said entry is dated 31.03.2017 under the head ‘Bank Charges’ and has been entered by transferring from another account in the ledger titled ‘other bank charges’ incurred on 16.03.2017 and it is mentioned in ledger account(page 39/PB) that they are debited by SBI(CC/AC) , We accept this explanation of the assessee and sustain the appellate order of ld. CIT(A) on this deletion of Rs. 18,950/-, as we have observed that rest of the bank charges debited by SBI(CC/AC) are allowed by the AO itself, and further these Bank charges expenses to the tune of Rs. 18,950/- were all paid through banking channel and there is no finding of the AO that these bank charges paid through banking channel were personal expenses or capital expenses . The deletion of Rs. 18,950/- as made by ld. CIT(A) is sustained by us , and the appellate order of ld. CIT(A) is sustained/confirmed on this issue. The next addition is ‘Shop expenses’ which aggregated to Rs.2,12,889/- , out of which one entry is of Rs. 72,114/- by way of single entry of transfer from ‘Petty Expenses A/c’ to ‘Shop Expenses’ account of Rs. 72,114/- on 31.03.2017. This amount of Rs. 72,114/- stood added by the AO, which stood deleted by ld. CIT(A).We confirm the addition as made by the AO to the tune of Rs. 72,114/- as it was merely an afterthought and these cash expenses were incorporated in the books of accounts, post survey, just to reduce profits. What was the necessity of maintaining separate account for ‘Petty Expenses A/c ’ and what was the reasons for transferring the same to the ‘Shop Expenses’ Account on 31.03.2017 , were not explained by the assessee. We also say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the contents of the documents found during survey will be presumed to be correct, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition to the tune of Rs. 72,114/- under the head ‘shop expenses’. Next addition was with respect to ‘Scheme Account’ of Rs. 1,16,137/- . This entry has come to the debit of ‘Scheme Account’ from ‘Other Scheme Account’ , on 31.03.2017 . In the other scheme account, there are four debits namely Khanna Radios of Rs. 1,80,000/­, Mr. Ganesh Electronics Rs. 9,865/- , Varanasi Marketing Private Limited Rs. 12601/- and Rs. 11,971/-. If we see account of Ganesh Electronics, there are cash payments of Rs. 5,185/- and Rs. 4,680/- on 18.10.2016 and 19.10.2017 , while Varanasi Marketing Pvt Ltd has cash payments of Rs. 11,971/- and Rs. 12601/-, on 21.10.2016, while some other payments are reflected to have been paid through banking channel. The assessee has also enclosed some of the invoices. This account need verification as to genuinity or otherwise of these expenses, as well payments claimed to have been made in the cash, also keeping in view that there is a differential of cash balance as at 31.03.2017 between cash as per impounded document and the audited accounts, for the year ended 31.03.2017. We are setting aside this issue to the file of ld. CIT(A) to verify the authenticity/genuinity of these expenses as also claim of cash payments being made to these parties, before allowing/disallowing the same. Next entry is ‘Diesel expenses’ of Rs. 29,156/- , out of which Rs. 11,906/- was transferred from ‘Other Diesel Expenses’ on 31.03.2017 to ‘Diesel expenses’ Account. Perusal of ‘Other Diesel Expenses’ Account reveals that all expenses were paid in cash . There is no reason for maintaining two different accounts, and more so there are no payments through banking channel and all payments are in cash. These are merely cash entries to reduce profit and consequently income-tax, and are held by us to be bogus entries. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents will be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition as was made by the AO to the tune of Rs. 11,906/- under the head ‘Diesel expenses’ and reverse the order of ld. CIT(A) on this issue. Next entry is ‘Lunch for Staff and Pantry Expenses’ of Rs. 3,61,290/- , out of which Rs. 3,920/- was transferred from ‘Other Expenses for Staff and Pantry’ on 31.03.2017 to the ‘Lunch for Staff and Pantry Expenses’ Account. Perusal of ‘Other Expenses for Staff and Pantry’ reveals that all expenses were paid in cash . There is no reason for maintaining two different accounts, and more so there are no payments through banking channel and all payments are in cash. These are merely cash entries to reduce profit and consequently income-tax, and are held by us to be bogus entries. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. Thus, we confirm addition as was made by the AO to the tune of Rs. 3,920/- under the head ‘Lunch for Staff and Pantry expenses’ and reverse the order of ld. CIT(A) on this issue. Next addition was with respect to Printing and Stationary expenses of Rs. 68,890/- . This entry has come to the debit of ‘Printing and Stationary’ account from ‘Others Printing and Stationary’ Account , on 31.03.2017 . In other ‘Others Printing and Stationary’ Account, there are eight debits namely Gopal Book Depot of Rs. 3,280/-, Rs.9,546/- , Rs.9,700/-, Kamal Book Depot of Rs. 9,503/- ,Rs.9,550/- and Rs.9,700/- & Mahakal General Stores of Rs. 9,700/-and Rs.7,911/- . However, the party accounts are not enclosed in paper book and information is not sufficient before us to conclude ,whether payments against aforesaid invoices were made by cash or through banking channel. The assessee has also enclosed some of the invoices of the vendors .Further, we have observed that all the three parties/vendor raised their respective invoices exactly in similar formats/pattern and there is absolutely no variation. This also cast doubts about authenticity of these invoices. This is for assessee to satisfactorily explain the same. This account need verification as to genuinity or otherwise of these expenses, as well payments were made in cash or through banking channel, also keeping in view that there is a differential of cash balance as at 31.03.2017 between cash as per impounded document and the audited accounts, for the year ended 31.03.2017. We are setting aside this issue to the file of ld. CIT(A) to verify the authenticity/genuinity of these expenses and modes of payments for making payments against these invoices, before allowing/disallowing the same. The next disallowance is of Rs. 79,581.53 towards travelling expenses. On perusal of ledger account, we have observed that all the travel bills relates to Skyline Travels. The ledger account of Skyline Travel is enclosed. The payments are majorily made by banking channel. Thus, out of Rs. 79,581.53, payments of Rs. 73,770/-( Rs. 24,770+ Rs. 22,000+Rs. 14,000+Rs. 13,000) were made through banking channel during the year, while rest are through cash. When the invoices are paid , the majorily amount was paid by cheque and there is no reason for making differential payment being minor amounts through cash, which is against preponderance of human probabilities, and hence such minor differential amount to the tune of Rs. 2840/- ( Rs. 100 + Rs. 2200+ Rs. 540) shown to have been paid in cash in-fact represented discounts ( going by preponderance of probabilities) offered by Skyline Travels which is squared off by showing cash payments to clear the account and hence stood disallowed. We say so as because, the cash in hand as at 31.03.2017 as per impounded Balance Sheet is Rs. 11,38,773.25, while as per audited Balance sheet as at 31.03.2017, cash in hand is merely Rs. 27,252.98, which clearly reflects that cash was reduced to the extent of Rs.11,11,520.27 by incorporating bogus expenses in books of accounts to suppress profits and reduce tax liability. The presumption u/s 292C shall apply that the impounded material belong to assessee and contents shall be presumed to be true, and the assessee having failed to rebut the same, the said addition stood confirmed. This leaves us with two travel bills of March , 2017, of Rs. 1,400/- and 1,800/- , against which cash payments were reflected of Rs. 1354.79 and 1616.74 to be paid in March 2017 , we allow these payments on the preponderance of probabilities. Thus, expenses to the tune of Rs. 2840/- stood disallowed. This leaves us with the tax-audit fee of Rs. 25,000/- and Accounting charges to the tune of Rs. 1,60,000/- , which stood disallowed by AO and was later allowed by ld. CIT(A). We are remitting this issue of claim of expenses towards tax-audit fee and accounting charges back to the file of ld. CIT(A) to verify its genuinity including compliance of income-tax deduction at source under Chapter XVII-B of the 1961 Act , as the evidences before us are not sufficient to conclude this issue and hence being set aside to ld. CIT(A) for re-adjudication . This issue is restored to the file of the ld. CIT(A) for re-adjudication, after providing proper opportunity of heard to the assessee as well the AO. This ground of Revenue is partly allowed for statistical purposes. We order accordingly.

6c. The next issue concerns itself with addition of Rs. 45,36,423/- made by the AO u/s 69C on account of 10% of total unregistered purchases , as the unregistered purchases to the tune of Rs. 4,53,64,232/- could not be verified by the AO in the absence of any details provided by the assessee. The AO observed that the assessee has suppressed profits , by making unregistered purchases . The AO rejected books of accounts and made additions to the income of the assessee to tune of Rs. 45,36,423/- being 10% of unregistered purchases . The ld. CIT(A) deleted the aforesaid additions. The assessee contended before ld. CIT(A) that the AO never asked any details from the assessee with respect to this additions and hence there was no occasion for the assessee to submit explanation. The assessee submitted details before ld. CIT(A), and the ld. CIT(A) observed that the average purchase price w.r.t. unregistered purchases is lower than the average price of registered purchases , and hence there could not be suppression of profits so far as unregistered purchases. The assessee submitted before ld. CIT(A) reconciliation statement of the value of stock found during survey with that of the value of stock as per audited accounts. The ld. CIT(A) observed that the mere statement that unregistered purchases were made is not sufficient to make disallowance. The ld. CIT(A) also observed that the AO has failed to explain what inference he is trying to achieve. The ld. CIT(A) also observed that ad-hoc disallowance was made by the AO without giving any reasons. Thus, ld. CIT(A) deleted the entire additions. We are afraid that appellate order passed by ld. CIT(A) cannot be sustained, as ld. CIT(A) completely misdirected itself. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co-terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under :

“Powers of the Commissioner (Appeals)

251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers-

(a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment

*** *** *** ***
*** *** *** ***”

Further, there are two rival parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under:

Procedure in appeal

250. (1) ***                       ***                       ***                       ***

(2) The following shall have the right to be heard at the hearing of the appeal-

(a) the appellant, either in person or by an authorized representative ;

(b) The Assessing Officer , either in person or by a representative.

***                       ***                       ***                       ***”

Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. If the ld. CIT(A) was not clear as to that the AO has failed to explain what inference he is trying to achieve at while disallowing 10% of unregistered purchases, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. Proceeding further, the assessee has claimed that the AO made additions without calling for explanation from the assessee. Thus, the assessee filed its submissions/explanation for the first time before ld. CIT(A) , which were by way of additional evidence. It was incumbent on ld. CIT(A) to have forwarded these additional evidences to the AO for rebuttal , and ld. CIT(A) ought to have called for remand report/comments from AO on the additional evidences filed by the assessee. There is clearly breach of principles of natural justice. There is violation of Rule 46A of the Income-tax Rules, 1962, and hence ld. CIT(A) order cannot be sustained on this issue and liable to be set aside. Further, on merits also ld. CIT(A) misdirected itself, as the AO has made the additions of 10% of unregistered purchases in the absence of any details being furnished by the assessee and the said unregistered purchases remained unverifiable. There was thus the allegation of the AO as to the genuinity of the entire unregistered purchases being made by the assessee of which one of the components is the price at which the unregistered purchases were made vis-à-vis registered purchases, but one of the main reason for disallowance by AO was that the assessee has suppressed profits by inflating unregistered purchases which could be by way of introducing bogus unregistered purchases to inflate expenses and to suppress profits, and for which additions were estimated by the AO @10% of unregistered purchases in the absence of verification by the AO as no details were furnished by the assessee , but ld. CIT(A) completely misdirected himself by only seeing the average price of unregistered purchases vis-à-vis price of registered purchases, and coming to erroneous conclusion that since average price of unregistered purchases is less than average price of registered purchases and hence there is no possibility of suppression of profits. Thus, this appellate order passed by ld. CIT(A) on this issue cannot be sustained and is hereby set aside and matter is restored back to the file of ld. CIT(A) for fresh adjudication, after giving proper opportunity of being heard to both the rival parties viz. the assessee as well the AO. This ground of appeal raised by Revenue is allowed for statistical purposes. We order accordingly.

6d. The next issue concerns itself with addition of Rs. 43,00,000/- made by the AO u/s 69A on account of undisclosed investment under the head furniture and fixture , as the assessee could not provide verifiable explanation or evidences, and hence the said amount was added by the AO to the income of the assessee u/s 69A of the 1961 Act as unexplained investment. The ld. CIT(A) deleted the addition. There was a survey action u/s 133A conducted by Revenue on the business premises(showroom) of the assessee, on 05.10.2017 . The Revenue officials who were conducting survey found furniture and fixtures including decoration and furnishing of the showroom . The assessee was confronted by Survey team to explain whether the same is recorded in the books of accounts of the assessee. The assessee’s Director Mr. Manjit Singh stated in statement recorded during survey that Rs. 60 lacs was spent on furniture and fixtures including decoration and furnishing of the showroom, while the amount stood recorded in the books of accounts of the assessee was Rs. 16,98,326/- .The assessee stated in statement recorded during survey, that with respect to most of the expenses incurred towards furniture and fixtures including decoration and furnishing of the showroom , the assessee could not obtain bills/invoices and hence the same was not shown in the books of accounts of the assessee, and the assessee came forward to surrender Rs. 43 lacs as undisclosed income for ay: 2017-18 because some of the investments in furniture and fixtures including decoration and furnishing of the showroom was made by the assessee in financial year 2016-17. Later on when the return of income was filed by the assessee on 07.11.2017, the assessee did not declare and disclose the said surrendered income of Rs. 43 lacs in the return of income filed with the department. Now, the assessee is contending that the said surrender of undisclosed income of Rs. 43 lacs towards furniture and fixture including furnishing and decoration, was not voluntary and also that the department does not have incriminating material to fasten the tax liability . The ld. CIT(A) accepted the contentions of the assessee and deleted the additions. The ld. CIT(A) was of the view that the bills for furniture and fixture which were reflected in the books of accounts, were impounded during survey and the AO did not have any incriminating material to fasten the liability of Rs. 43 lacs on the assessee, except statement of Mr. Manjit Singh, Director of the assessee recorded during survey, which was retracted by the assessee. The ld. CIT(A) also referred in his appellate order that it is not clear from assessment order wherein the AO has not given any finding on the nature of such incriminating documents with regard to which the income was surrendered under the head Furniture and Fixture. The ld. CIT(A) was also of the view that the assessee has retracted the statement and hence it has now no evidentiary value. We are afraid that the ld. CIT(A) order cannot be sustained and needs to be set aside . The ld. CIT(A) fell into error in giving a finding that no incriminating material was found, while the fact of the matter is that the Revenue officials who were conducting survey u/s 133A on 05.10.2017, found furniture and fixtures including decoration and furnishing of the showroom to the tune of Rs. 60 lacs , and the assessee was asked to explain whether all the furniture and fixtures including decoration and furnishing of the showroom which was existing on the date of survey was duly recorded in the books of accounts. The assessee came out with an explanation that only Rs. 16.98 lacs stood reflected in books of accounts, while the total investments made by the assessee in furniture and fixtures including decoration and furnishing of the showroom, were to the tune of Rs. 60 lacs, and since the assessee could not get bills/invoices for the amount spent on furniture and fixtures including decoration and furnishing of the showroom, the same were not recorded in the books of accounts , and the assessee surrendered an amount of Rs. 43 lacs as income from undisclosed sources being invested in furniture and fixtures including decoration and furnishing of the showroom. Thus, physical existence of unrecorded investment to the tune of Rs. 43 lacs made by assessee in furniture and fixtures including decoration and furnishing of the showroom was itself an incriminating material found during survey , which was not recorded in the books of accounts of the assessee , and presumption u/s 292C shall apply . The assessee admitted that such unrecorded investments in furniture and fixtures including decoration and furnishing of the showroom, was made out of undisclosed income and surrender of undisclosed income of Rs. 43 lacs was made. This surrender of undisclosed income of Rs. 43 lacs made by assessee during survey foreclosed/prevented further enquiry/investigation by the Revenue , otherwise the Revenue would have proceeded further to investigate /enquire into details as to the unrecorded investments in furniture and fixtures including decoration and furnishing of the showroom and the sources thereof of the assessee for making such investments. The assessee resiled from its own position later on and did not declare and disclose the said surrendered income of Rs. 43 lacs in the return of income filed with Revenue, on 07.11.2017 and also during assessment proceedings it retracted from surrender of income . The ld. CIT(A) instead of making enquiries and persuing the entire material on record including statements recorded, entered into fault finding mission to find defects with the assessment framed by the AO. The appellate proceedings before ld. CIT(A) are merely extension of assessment, the purport of the same is to compute correct income of the assessee chargeable to income-tax as per mandate of the 1961 Act, so that correct income for the assessment year could be brought to income-tax in the hands of the correct assessee, and correct amount of income-tax be computed , levied and collected by Revenue from the correct assessee for the correct assessment year. That is also the reasons that the powers of ld. CIT(A) are co-terminus with the powers of the AO, which also included powers of enhancement. Reference is drawn to the provisions of Section 251(1)(a) of the 1961 Act, which reads as under :

“Powers of the Commissioner (Appeals)

251(1) In disposing of an appeal , the Commissioner(Appeal) shall have the following powers-

(a) In an appeal against an order of assessment , he may confirm , reduce, enhance or annul the assessment

***                                               ***                                                   ***                                                               ***

***                                                  ***                                                  ***                                                                ***

Further, there are two rival parties before ld. CIT(A) in an appellate proceedings conducted by ld. CIT(A) , firstly the assessee who being aggrieved by an assessment framed by the AO has filed an appeal, secondly the AO whose assessment order is subject matter of appeal before ld. CIT(A). Principles of natural justice demand that both the parties shall be given opportunity of being heard , before being condemned and any prejudice is caused. Reference is drawn to provisions of Section 250(2) of the 1961 Act, which reads as under:

Procedure in appeal

250. (1) ***                       ***                       ***                       ***

(2) The following shall have the right to be heard at the hearing of the appeal-

(a) the appellant, either in person or by an authorized representative ;

(b) The Assessing Officer , either in person or by a representative.

***                              ***                              ***                                    ***”

Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings , and proceedings before ld. CIT(A) are quasi judicial in nature. If ld. CIT(A) was not clear as to that the AO has failed to give finding on the nature of such incriminating documents with respect to which the income was surrendered under the head Furniture and Fixtures, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments/remand report, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act. Now, at this stage , the assessee has also come forward with plea , and ld. Counsel for the assessee made statement to that effect before the Bench that Rs. 45 lacs was invested by landlords of the said premises in Furniture & Fixture including decoration and furnishing, by taking loan from HDFC bank, and the entire investment in furniture and fixtures including decoration and furnishing of the showroom, were duly recorded. This statement made by ld. Counsel for the assessee before the Bench requires verification by authorities below . So far as case laws relied upon by the assessee are concerned, they are distinguishable , firstly the incriminating material by way of undisclosed furniture and fixture including decoration and furnishing of the showroom, to the tune of Rs. 43 lacs was found by Revenue officials during survey u/s 133A and when confronted, the Director of the assessee company could not explain the factum of recording of these furniture and fixture including decoration and furnishing in the books of accounts of the assessee, and rather admitted that with respect to these furniture and fixture including decoration and furnishing of the showroom, bills/invoices could not be obtained to the tune of Rs. 43 lacs and the aforesaid amount was spent out of undisclosed income, thus, the additions are not made merely on the basis of statement of the Director of the assessee surrendering an amount of Rs. 43 lacs during survey, rather during survey there was discovery of incriminating material by way of furniture and fixture including decoration and furnishing of the showroom. Had there been no survey, the said amount of undisclosed investment would have remained undetected. Thus, in our considered view, CBDT instruction no. F.No. 286/2/2003-IT(Inv. II) dated 10.03.2003 shall not come to rescue of the assessee. These furniture and fixture including decoration and furnishing of the showroom were found from the business premises of the assessee and presumption u/s 292C shall apply that it belongs to the assessee. This presumption is rebuttable but the assessee has to bring on record cogent and credible evidences/explanation to rebut the presumption. The assessee has now stated that Rs. 45 lacs was spent by landlords/owners of the premises by taking loan from HDFC Bank and the assessee is only tenant in the premises. In our considered view, keeping in view the entire factual matrix and in the interest of justice, we are inclined to set aside and restore this issue back to the file of ld. CIT(A) for fresh adjudication , after giving proper opportunity of being heard to the assessee as well the AO. In case any incriminating material found during survey including statements recorded during survey , are relied upon by ld. CIT(A) to prejudice assessee, the copies thereof shall be provided to the assessee in adherence to principles of natural justice , before any prejudice is caused to the assessee. This ground of appeal filed by Revenue is allowed for statistical purposes. We clarify that we have not commented on the merits of the issue in appeal. We order accordingly.

7. Thus, the appeal filed by Revenue in ITA no. 136/VNS/2020 for ay: 2017-18 is partly allowed for statistical purposes, and the C.O. filed by the assessee is only in support of the appellate order passed by ld. CIT(A) and the same shall stand dispose off accordingly . We order accordingly.

Order pronounced on 03.02.2023 at Allahabad, U.P , in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963

Join Taxguru’s Network for Latest updates on Income Tax, GST, Company Law, Corporate Laws and other related subjects.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Post by Date
April 2024
M T W T F S S
1234567
891011121314
15161718192021
22232425262728
2930