The Allahabad bench of the Income Tax Appellate Tribunal ( ITAT ) has held that an addition under section 68 of the Income Tax Act, 1961 based on incriminating material found during the survey is valid.
Mr Neeraj Agrawal, the assessee has raised various grounds of appeal in the memo of appeal filed with the Income Tax Appellate Tribunal, Allahabad Bench. The Revenue also argued that the CIT (A) has erred in the circumstance of the case in deleting the addition made by the Assessing Officer, of Rs. 34,82,707/- under section 68 of the Income Tax Act against the assessee ignoring the findings of Assessing Officer.
The assessee is engaged in the trading business of Trading & Manufacturing Silver Jewellery and trading gold jewellery under the name and style of Raj Shree Jewellers. The assessee also runs Cinema Hall in the name and style of Rajshree Palace, Mirzapur. The assessee e-filed return of income on 15th September 2012 declaring a total income of Rs. 30,31,050/- from aforesaid businesses, under the heads business income and income from other sources.
On survey under section 133A was conducted by the Investigation Wing of the Department, Allahabad on 24th February 2012 at the business premises of the assessee at Sudiya, Varanasi and Basnahi Bazar, Mirzapur, simultaneously.
During assessment proceedings, the assessee submitted details before AO and produced books of accounts as maintained by it which were subjected to test checks by the AO. It was observed by the AO that during the course of survey proceedings conducted by Revenue on 24.02.2012, the assessee’s books of accounts were not found to be complete as of the date of the survey i.e. 24.02.2012.
The AO observed that the assessee did not keep a stock register for silver bullion and gold jewellery. Further, AO made an addition under section 69B of the Income Tax Act, 1961. Penalty proceedings u/s 271(1)(c) are being initiated separately for concealment of income.
The AO found that the assessee has not kept proper and adequate records to substantiate the quantity of the stock at any given date and time, and it was observed by the AO that the arguments were extended by the assessee.
A Coram comprising of Shri Vijay Pal Rao, Judicial Member and Shri Ramit Kochar, Accountant Member observed that incriminating material by way of excess stock of silver ornaments found during the survey vis-à-vis stock recorded in the stock register, and additions were made based on the incriminating material ( being excess stock) found during a survey conducted under section 133A.
Since the CIT(A) on appeal deleted the addition without considering the sustainability of Incriminating material, the Tribunal set aside the decision of CIT(A) and allowed the appeal.
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