AO Must Re-Examine Income After Considering Stock Records: ITAT Remands Addition Based on Survey Statement [Read Order]
ITAT remanded the addition after finding that the AO relied only on the assessee’s survey statement and must re-examine income by properly verifying stock records and supporting details.
The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) remanded the addition made during assessment, holding that the Assessing Officer (AO) had relied only on the assessee’s statement during the survey under Section 133A of the Income Tax Act, 1961 without examining the stock records, and that the matter required fresh verification.
The assessee, Narayan Dalmia, engaged in milling wheat supplied by the Food Corporation of India and earning milling charges as the major source of revenue, filed his return of income for Assessing Year (AY) 2018-19 declaring ₹20,60,150. The case was selected under “compulsory criteria” and a notice under Section 143(2) was issued.
A survey under Section 133A was conducted in the office of the assessee. During the course of the survey, the assessee committed to pay advance tax of ₹8,00,000 on “additional income instead of his regular income.” However, he later paid ₹7,80,000 and claimed a refund of ₹3,64,800.
During the assessment, the AO asked the assessee to furnish details of income corresponding to tax of ₹4,35,200, which worked out to ₹14,50,666.
The AO rejected the assessee’s explanation and treated the amount determined at the time of survey as undisclosed income, adding it to the total income and assessing it at ₹35,10,815. Penalty proceedings under Section 270A were also initiated.
Before the CIT(A), the assessee contended that all details such as the stock register and other relevant records had been furnished, and that the return was filed strictly according to the books of account. The CIT(A), however, dismissed the appeal, holding that the assessee failed to submit supporting documents either before the AO or during appellate proceedings.
Before the Tribunal, the assessee reiterated that he had submitted all details, including the stock register, and that the AO relied only on the survey statement regarding advance tax.
The assessee submitted that no incriminating material was found except a difference in stock, which occurred because the accountant was absent and the stock register was not updated. The assessee later recorded all stock and filed the return of income accordingly.
The Department argued that no stock register or sales register was furnished at any stage and that the AO had no option but to make the addition since the assessee had admitted liability for advance tax during the survey.
The Bench comprising Duvvuru RL Reddy (Vice President) observed that the assessee had made a statement during the survey, he later filed the return of income without paying the advance tax admitted.
The Tribunal noted that except for the stock difference there was no incriminating material found, and that the assessee claimed the stocks were subsequently recorded. However, the assessee did not place the stock register before the Tribunal.
The Tribunal held that the issue required proper verification and that the AO must examine all stock records and other details afresh.
The matter was therefore remitted to the file of the AO with a direction to provide one more opportunity to the assessee, and with a caution that the assessee must fully cooperate, failing which the AO would be free to pass an appropriate order based on material available.
The assessee was represented by Amit Agarwal, while Manas Mondal appeared for the Revenue.
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