Judgment:
This is an appeal by assesseea registered firm pertaining to the assessment year 1991-92 aggrieved by an addition of Rs. 1,05,400 as unexplained stock and another addition of Rs. 15,015 as income from business on own account.
There was a survey under section 133A of the Income Tax Act on 27-12-1990, during the course of which an excess stock of the value of Rs. 1,05,400 was found in the shop and the managing partner, Shri Gangadhar Matpathi, who was present, at the time of survey, agreed to offer the stock as as income for the assessment year 1991-92. A letter was issued to the assessee bringing out the above facts. It was claimed that the stock found during the survey included goods that arrived on the day of survey. In para 4 of the assessment order, the assessing officer has made note of the stock as per stock register, stock found on physical verification, excess found and receipts or arrivals. When confronted with the above excess stock, the authorised representative of the assessee and also the partner, agree for the addition as income for the assessment year under appeal and the assessing officer, accordingly, completed the assessment adding the sum of Rs. 1,05,400.
Challenging the above addition the assessee went in appeal to the Commissioner (Appeals). The Commissioner (Appeals) confirmed the addition with the following observation : "I have considered the facts and merits of the case. In this case, excess stock was detected at the time of the survey and the managing partner agreed about the existence of excess stock and had offered the excess stock to tax. The return was filed after about two years of the date on which the survey under section 133A was carried out. Clearly, the appellant has not shown this amount as income in the return. The appellant has changed his mind on reconsideration and has tried to avoid the payment of tax on the undisclosed income detected at the time of survey. The explanation filed by the appellant before the assessing officer is general in nature and remains unsubstantiated. At the time of hearing, the appellant's representative expressed his inability to give any further explanation or produce any further evidence. By adding this amount, the assessing officer has done what the appellant desired at the time of survey and the addition has been made in respect of the undisclosed stock as quantified and certified by the appellant at the time of survey." Aggrieved by the above, the assessee is in further appeal before us.
The learned counsel for the assessee filed before us a paper book containing copy of the appraisal report on survey conducted under section 133A(1); copy of the sworn statement of the managing partner Shri Gangadhar Mathpathi; copy of the letter dated 30-3-1992, from the assessing officer; copy of the statement of total income, profit and loss account and copy of the intimation under section 143(1)(a). The learned counsel for the assessee contended that the addition is totally unwarranted and is made without any justification. It is pointed out that return has been filed by the assessee. The assessee also maintains a register of stock. It was pointed out that the unexplained stock found at the time of survey operation represented additional stock which had arrived during the day of survey which had not been taken into account in the stock register. It is not correct to say that no stock arrived on the day of survey. It is also contended that the partner Shri Gangadhar Mathpati only knew the local language and is not at all conversant with English except that he can sign in English. The statement was recorded in English and the managing partner was asked to sign which he did without knowing what he was supposed to have stated in the statement. Attention was invited to the answer to question No. 2 of Gangadhar Mathpati at page 4 of the paper book wherein to the question "Please state the nature of your business" the partner has replied "We are having business of commission agency only for the foodgrain and pulses, etc." He also drew our attention to answer given by the managing partner to question No. 5 at page 5 of the paper book.
Particular attention was invited to question No. 6 and the answer given by the managing partner wherein it is stated, by way of answer "We have accounted the earlier stock of the assessees in our books and also there is no stock available with us pertaining to assessees outside the books". The learned counsel for the assessee also contended that the stock was received from the constituents only and did not belong to the assessee. It is also pointed out that the assessing officer has also admitted that the assessee is a commission agent. The addition, the learned counsel argued, is liable to be deleted.
On the other hand, the learned Departmental Representative supported the orders of the authorities below. He stated that the survey was conducted on 17-2-1992. He contended that the return was not filed in time. He referred to para 4 of the order of assessment. He also invited our attention to page 10 of the paper book filed by the assessee which contains copy of a letter addresse by the assessing officer to the assessee bringing to the notice of the assessee the differer stand taken by the managing partner at the time of survey and the discussion with the assessing officer. The learned Departmental Representative also invited our attention to page 6 of the paper book, especially the answer given by the managing partner to question No. 5, which is to the following effect : "I admit that the above stock belongs to us. I am not in the position to give the specific reason for the difference and I agree to offer the value of the said stock to the extent of Rs. 1,05,400 for income-tax along with the income of the current financial year. I also agree to pay the advance tax over the said amount along with the regular income." The learned Departmental Representative placed reliance on the decisions of the Madras High Court in the case of P. Govindaswamy v.CIT (2000) 244 ITR 510 (Mad) and CIT. v. Krishnaveni Ammal (1986) 158 ITR 826 (Mad). He contended that on the admission of the managing partner, the authorities below are perfectly justified in making the addition.
We have heard the rival submissions. We have also perused the material available on record including the paper book filed by the assessee. It is the contention of the assessee that it is doing only commission agency business. The addition has been made mainly on the ground that the managing partner has admitted the excess stock to be that of the assessee and no evidence was brought either before the authorities below or before us that the excess stock was not of the assessee. The Madras High Court in the case of Krishnaveni Ammal (supra) has held that when the only piece of evidence available in a particular case is the statement of the assessee, any judicial authority can accept the same and order assessment on such sole evidence. Here also the sole evidence is the admission of the managing partner that the excess stock belongs to the assessee. Further, the managing partner has agreed for the addition equal to the amount of value of the stock found in excess.
This decision of the Madras High Court clearly supports the stand of the Department. Again in the case of P. Govindaswamy (supra), the Madras High Court has held that levy of penalty on the admission by the assessee that certain amounts added to his income constituted his concealed income is valid. It was also held therein that admitted facts need not be proved. It is also the case of the assessee that the managing partner did not know English and the statement having been recorded in English the admission so made by him was done not knowing what he was admitting. We find this hard to believe, as the assessee wants us to believe certain statements of the managing partner and, at the same time, not to believe certain statements which are not in favour of the assessee. The assessee is a firm and bereft of the partners, the firm has no locus standi. Every statement of a partner is to be taken as having been made on behalf of the firm. Further, no evidence has been brought on record to show that the facts are different from what has been stated by the partner. For all the above reasons, we hold that the authorities below are justified in adding the value of the excess stock found. at the time of survey. We, accordingly, uphold the addition of Rs. 1,05,400 to the income of the assessee.
Coming to the addition of Rs. 15,015 on account of own business, it is contended by the learned counsel for the assessee that the assessee is only a commission agent and is not doing any business on its own account. The actual amount of addition is only Rs. 15,000 and not Rs. 15,015 as mentioned, by the assessee in the grounds of appeal. The assessing officer has made the above addition on the ground that the assessee has been dealing on own account also. It is contended by the learned counsel for the assessee that no sale bill from own account has been found in the surprise check. The assessing officer has also not found any other stock or register. It is contended that no separate addition is required to be made. On the other hand, the learned Departmental Representative justified the addition.
We have heard the rival contentions and perused the material on record.
It is pertinent to note here that the managing partner has, in answer to question No. 2page 4 of the paper bookclearly stated that the assessee is having business of commission agency only. The Department has not brought out any material to show that the assessee did, in fact, do business on own account. We do not find anything to doubt this statement of the managing partner. Therefore, we are of the view that tghe addition of Rs. 15,000 is not warranted on the facts and in the circumstances of this case. We accordingly, delete the above addition of Rs. 15,000.