Tuesday, June 25, 2013

Admissions made during survey are not conclusive unless supported by convincing evidences

Addition on the basis of seized material was unjustified if assessee was able to show that the admissions made during survey were incorrect

In the instant case, during search and seizure operation on assessee-firm, the survey party worked out the certain value of excess stock by preparing a provisional trading account. The partners of assessee-firm, not being able to explain the excess stock, surrendered the same and agreed to pay tax on the value of excess stock. The excess cash found during survey was declared by the partners as income of firm other than regular income. The return filed after survey didn’t disclose the excess stock and excess cash found during survey. Consequently, the AO made addition for excess stock under section 69 and on account of excess cash under section 69A. The CIT(A), substantially reduced the addition made by the AO. Aggrieved by the order of CIT(A), revenue filed the instant appeal.

The Tribunal held in favour of assessee as under:

1) It is a well-settled law that admissions are not conclusive proof of the matter. They may be shown to be untrue or having been made under mistake of fact or law. Circumstances have to be seen under which same are made;

2) Admissions could be withdrawn unless it was conclusive. The Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18, had held that the assessee was to be given opportunity to show that admission was incorrect or didn’t show correct state of facts. The Punjab & Haryana High Court in the case of Kishan Lal Shiv Chand Rai v. CIT [1973] 88 ITR 293, had held that it was an established principle of law that a party was entitled to show and prove that admission made by it, was, in fact, not correct and true;

3) The sole basis of making addition, i.e., provisional trading account was not found to have correct figures of purchase and sales. Whatever items had been declared by the assessee on account of excess stock were correctly considered by the CIT(A). Since the figures of the sales and purchases were based on factual figures, it was a case of factual mistake committed by the Survey party as well as by the AO, which had been rightly corrected by the CIT (A);

4) Thus, the assessee on the basis of seized material had been able to show that the admission made at the time of survey, surrendering the additional income on account of excess stock was not correct and did not show correct state of facts. The CIT(A) correctly deleted the addition as no addition could be made against the assessee on the basis of mere admission. Therefore, the departmental appeal was to be dismissed – ACIT V. MAYA TRADING CO. [2013] 34 taxmann.com 144 (Agra - Trib.)

No comments: