ORDER
Krishan Swarup, A.M.
This is an appeal by the assessee against the order of the Deputy Commissioner, Spl. Range 29, New Delhi (hereinafter referred to as ‘assessing officer’) dated 29-8-1996, under section 158BC(c) of the Act, 1961, for the block period ending 9-8-1995.
2. In the appeal petition, as many as 17 grounds were taken. At the time of hearing, the learned counsel for the assessee withdrew 6 of these grounds (Sr. Nos. 1, 3, 5 to 7 and 9). The other grounds run as under i
“2. That in making the impugned assessment the learned Deputy Commissioner has erred in proceeding to make assessment under section 158BC(c) of the Income Tax Act and has also erred while making the assessment not to have followed the procedure for making the block assessment as is envisaged under section 158BC(c) of the Income Tax Act.
4. That the learned Deputy Commissioner has failed to appreciate that it is only the undisclosed income of the block period (which is the total income of the block period), is required to be computed and in accordance with the provisions of Chapter IV and on the basis of evidence found as a result of search and no more. In doing so, the manner and the basis provided under section 158BB has to be strictly followed and complied which in the instant case has not been even attempted and complied.
8. That the learned Deputy Commissioner has failed to appreciate that no addition can be made on the mere admission, particularly when it had been established that admission was made on complete misconception and on vague assumptions and as such no addition was warranted. The various circumstances under which the statement was given has been blissfully ignored. The learned Deputy Commissioner had failed to appreciate that the deponent was a highly diabetic and was suffering from high blood pressure and had been discharged just a few days before the search and had been re-admitted immediately thereafter- That the assessment made is thus totally untenable both on facts and in law and is without jurisdiction.
“10. That without prejudice to the above and in the alternative, the learned Deputy Commissioner has erred in making an addition of Rs. 1,15,00,000 on account of alleged unexplained investment in stocks. The submissions made and evidence produced by the assessee have all arbitrarily been brushed aside.
11. That while making the aforesaid addition, the learned Deputy Commissioner has failed to appreciate that the inventory prepared at the time of search was wholly unreliable as the value of stock had been worked out on the basis of retail price list instead of wholesale price list, and on the basis of which sales were claimed to have been made by the assessee.
13. That the learned Deputy Commissioner has further failed to appreciate that since the valuation of stock had not been properly done, no credence could be given to the alleged surrender made at the time of search.
14. That the finding of the learned Deputy Commissioner that sales are made at retail price is wholly incorrect and unsustainable. The aforesaid finding has been arrived at in complete disregard of the submissions made by the assessee. The learned Deputy Commissioner has in fact, proceeded on mere surmises and conjectures before making the impugned addition.
15. That the learned Deputy Commissioner has further erred in making an addition of Rs. 1,03,437 on account of alleged sales outside the books of account. The learned Deputy Commissioner has failed to appreciate that as no document or the alleged stocks had been found in possession of the assessee in respect of the aforesaid transaction, no addition could be justifiably made in the hands of the assessee on this account. The addition has been made in complete disregard of the submission and without providing a fair and proper opportunity.
16. That the finding of the learned Deputy Commissioner that the discount given to the parties is debited to the P&L a/c is wholly incorrect, The learned Deputy Commissioner has failed to appreciate that the assessee had been making sales on the basis of wholesale price list and the discount given was being reduced from the retail sales itself instead of debiting the same in the P&L a/c.
17. That the learned Deputy Commissioner has further failed to appreciate that Bashiruddin & Co. had been illegally using the trademark of the assessee for which the assessee had filed a case against him. The finding that the assessee failed to produce the case file has been arrived at without granting to the assessee a fair and proper opportunity and in any case the impugned addition is not warranted on facts or in law.”
2.3. It was clarified that the grounds at Sr. Nos. 2 and 4 relate to one issue, namely, validity of the assessment framed in violation of provisions of sections 158BB and 158BC(c) of the Act, the grounds at Sr. Nos. 8 and 10 to 14 relate to another issue i.e. addition of Rs. 1,15,00,000 on account of alleged unexplained investment and the grounds at Sr. Nos. 15 to 17 challenge another addition of Rs. 1,03,437 made on account of alleged sales outside books of accounts.
2.4. During the course of hearing, the learned counsel for the assessee submitted that the issues and the questions for consideration on merits, in respect of grounds at Sr. Nos. 8 and 10 to 14 can be set out as under :
“1. Whether, on the aforesaid facts, the addition made of Rs. 1. 15 crores and allegedly representing the undisclosed investment in stocks, on the basis of a
2. mere statement under section 132(4) by Shri R.P. Monga is valid and is sufficient in sustaining in law the addition in disregard of the voluminous evidence adduced to establish the entire value of stocks found was duly recorded in books and no stock was found unrecorded ?
2. Whether the addition of Rs. 1. 15 crores made as undisclosed investment in stocks under Chapter XIV-B of the Income Tax Act is sustainable in the law disregarding the burden under the aforesaid chapter to establish there was an undisclosed income rested with the department ?”
3. The assessee-firm derived income mainly from manufacture and sale of locks of the brand name ‘Harrison’. The facts of the case as they emerge from the order of the assessing officer are that search operations at the business premises of the assessee and residential premises of the partners and other connected persons were stated on 9th Aug., 1995, which concluded on 9th Sept., 1995. During the course of search, certain documents were found and seized. Statements of various persons were recorded, including the statement of Shri R.P. Monga, partner in the assessee-firm in representative capacity, being director of M/s Anil Locks Ltd., which was recorded on 30th Aug., 1995. A notice under section 158BC(a) was issued by the assessing officer on 5th Dec., 1995, which was followed by the questionnaire dated 6th May, 1996. In response to the said notice under section 158BC(a), the assessee filed return on 31st July, 1996, declaring undisclosed income for the block period at ‘nil’.
3.2. The assessing officer first proceeded to consider the question of unexplained investment in stocks. He pointed out that the value of stock as per books (upto the date of search) worked out at Rs. 1,96,67,696. He then referred to the fact that the valuation of stock found at 4 different premises was done by the partners of the assessee-firm and the details submitted to the Investigation Wing, as per which the value of stock on the basis of latest catalogue price was worked out at Rs. 3,50,21,763. Since the assessee was showing a G.P. rate of 14.52 per cent, the cost of the stocks, after deducting the gross profit at the above rate, was worked out to Rs. 2,99,43,607. The difference between the value of stock as per books and that valued as per inventories worked out to Rs. 1,02,75,911 (Rs. 2,99,43,607 – 1,96,67,696). Besides this, some stock of toilet brushes was also found and initially valued at Rs. 2 lakhs but subsequently valued at Rs. 10 lakhs. The assessing officer, however, took the value of this stock at 12 lakhs and, according to him, the total discrepancy was of Rs. 1,14,75,911. Vide questionnaire dated 7th May, 1996, the assessee was required to state why an amount of Rs. 1,14,75,911 be not treated as undisclosed income of the assessee for the block period.
3.3. In reply, vide letter dated 30th July, 1996, the assessee submitted that the Investigation Wing had valued the stock on the basis of retail price list whereas the assessee sells its stocks as per the wholesale price list. A revised working of stock on the basis of wholesale price list was filed in which the value was arrived at Rs. 1,91,44,195. It was claimed that there was no discrepancy in the stocks found during the course of search.
3.4. The assessing officer observed that in the statement recorded during the course of search on 30th Aug., 1995, Shri R.P. Monga had surrendered a sum of Rs. 1. 15 crores as undisclosed investment in stocks. He further pointed out that the assessee’s authorised representative. Rawla & Co., had also vide their letter dated 26th Oct., 1995, submitted before the ADI (Inv.) that the unexplained investments in stock of M/s R.P. Lock & Co. (the assessee) was Rs. 1.15 crores and an undertaking was also given that this amount will be disclosed in the return for the block period and taxes would be paid. The assessing officer, therefore, required the assessee to show cause as to why addition of Rs. 1. 15 crores be not made in the undisclosed income of the assessee for the block period when the surrender of this amount was made at the time of search which was confirmed subsequently after due consideration and examination of facts. In reply, the assessee submitted that the surrender was made since the working of stock was done on the basis of retail price and the assessee could not understand its implication. In another reply filed on 9th Aug., 1996, the assessee pointed out certain calculation mistakes in the stock valuation. It was contended that no addition was called for on this score. By giving the following reasons, the assessing officer negatived assessee’s contention that no excess stock was found at the time of search and an amount of Rs. 1.15 crores surrendered by the assessee “before the Investigation Wing” was treated as undisclosed investment in stocks and assessed accordingly in the assessment for the block period :
“I have carefully examined the submissions of the assessee and do not agree with them. The main reasons are as under :
(a) As mentioned earlier the surrender of Rs. 1,15,00,000 was made by the assessee on 30th Aug., 1995 in the statement of Sh. R.P. Monga and the same was confirmed by assessee’s authorised representative on 26th Oct., 1996. There was a gap of more than two and a half months and assessee’s surrender was thus after due consideration and examination of its records. Since the confirmation of assessee’s authorised representative was after two and half months it cannot be said that the surrender was due to stock or pressure due to search and seizure action.
(b) The assessee is the best judge of his affairs and in case assessee’s partner and authorised representative have surrendered a sum of Rs. 1,15,00,000 they were fully aware that this is excess stock of the assessee.
(c) Assessee’s theory that sales are effected at -wholesale price is not acceptable. The sale bills of Delhi branch have been verified and it is found that sales are effected at the retail price. After effecting the sales some discounts are given which are essentially a charge to P&L a/c and can not be charged to the trading a/c.
(d) The search in Aligarh was conducted on 9th Aug., 1995, but had to be suspended due to trouble and could be resumed on 21st Aug., 1995, only. The possibility of some stocks getting un-inventoried in the process cannot be ruled out.
(e) By surrendering the amount of Rs. 1,15,00,000 the assessee has prevented the investigation for conducting further investigation. In other words, the surrender was used by the assessee as tactics to stop any further investigations, ”
3.5 The facts concerning the other addition of Rs. 1,03,437 are that during the course of search on 14th Aug., 1995, at the residential premises of the partners of the assessee’s firm at 9/8. East Patel Nagar, New Delhi, a list of stocks was found which was listed at pp. 6-18 of Annexure A-3. As per order of the assessing officer, the list was of the stocks “found at the premises of Bashiruddin & Co.” The assessing officer required the assessee to state as to whether the stock as per the aforesaid list was taken into account in the regular books of accounts. In reply, the assessee submitted vide letter dated 30-7-1996, that M/s Bashiruddin & Co. were selling duplicate material under the assessee’s trade-mark of Harrison locks. The premises of the said persons were raided and material seized. It was contended that the assessee had filed a case in a court of law against the aforesaid party. However, the relevant file was not produced despite more than one opportunity allowed by the assessing officer. The assessing officer, therefore, refused to accept assessee’s contention. He inferred that the assessee had actually made sales outside the accounts books to Ws Bashiruddin & Co. and the story put forth by it was a made up story. The value of listed stock was taken at Rs. 1,03,437 and addition for this amount was made on account of sales outside the accounts books.
3.6. The assessment was thus completed on total undisclosed income of Rs. 1, 16, 03,437 as against the ‘Nil’ income declared in the return.
4. Shri C.S. Aggarwal, the learned counsel for the assessee, argued the matter at great length in respect of the grounds taken on the issues, which for the sake of convenience can be broadly classified under three heads. His first submission was about the validity of the assessment. He referred to the provisions of clause (c) of section 168BC and emphasised upon the words “such assessment” used therein. He then referred to the provisions of section 158BB(l) providing the basis for computation of undisclosed income for the block period and specific attention was drawn to the words “as reduced by the aggregate of the total income, or as the case may be, as increased by the aggregate of losses of such previous years, determined The learned counsel also referred to the definition of total income contained in section 2(45) of the Income Tax Act. He then referred to the assessment order to point out that instead of specifying the previous years falling under the block period, the assessing officer had merely mentioned, “block period ending 9th Aug., 1995”. According to him, it was not known as to which previous year(s) the income has been computed and thus the requirements of a provisions having not been met, the assessment was bad in law. In this connection, the learned counsel referred to the decision of the Tribunal Bench ‘E’ in the case of Express Movers (P) Ltd. v. Dy. CIT (1997) 59 7TJ (Del) 227: (1997) 61 1TD 528 (Del).
4.2. On the second issue i.e., addition of Rs. 1.15 crores made on account of undisclosed investment in stocks, the learned counsel filed a synopsis stating the position as under :
Stock found and inventorised :
Premises at
Date of valuation of stocks
Valuation
Rs.
(Re) valuation value taken on
Rs.
Sadar Bazar
9th Aug., 1995
4,48,177
30th Aug., 1995
7,13,248
(PB p/77-84)
(PB p/397-400)
Punjabi Bagh
-do-
2,64,900
(PB P/95)
Patel Nagar
14th Aug., 1995
9,26,717
77,99,176
(PB p/ 100- 124)
(PB p/420-430)
Aligarh
21st Aug., 1995
(incomplete)
30th Aug., 1995
2,65,09,340
(PB p/5-70)
(PB p/401-419)
4.3. In the above background, the learned counsel for the assessee contended that in the statement given by Shri R.P. Monga on 30-8-1995, copy placed at pp. 169 to 175, he went mainly by the second valuation of stocks at Aligarh and Patel Nagar (Delhi) taken at Rs. 2,65,09,340 and Rs. 77,99,175, respectively. What he had stated was that, “I voluntarily disclose a sum of Rs. two (2) crores twenty-five lakhs and offer the same as additional income in excess of income(s) already declared before the IT department. “According to the learned counsel, the statement related to all assessees of the group. The learned counsel then drew our attention to following break-up given by Shri Monga as per details given at pp. 173-174
Rs.
Cash found at Punjabi Bagh and Patel Nagar
5,50,000
Unexplained investment in stock found at Aligarh and Delhi
1,40,00,000
Unexplained and unaccounted investment in immovable properties
35,00,000
Unexplained investment in jewellery
20,00,000
Unexplained investment in plant & machinery
10,00,000
Unexplained investment in dyes & tools
5,00,000
Unexplained investment in household goods
1,00,000
Unaccounted gifts, etc.
2,00,000
Sundry balances
2,50,000
Transactions as per seized documents
4,00,000
Total
2,25,00,000
4.4 The learned counsel submitted that insofar as admission with regard to unexplained investment in stocks, made at Rs. 1,40,000 was concerned, it was solely because of the revaluation of the inventories done on 30th Aug., 1995. In this connection the learned counsel stated that on receipt of a notice from ADI on 15th Sept., 1985, the assessee appointed M/s Rawla & Co. as their representative who vide their letter dated 29-12-1995, copy placed at p. 179 of the PB, pointed out to the assessing officer that Shri R.P. Monga had surrendered certain amounts as undisclosed income before the ADI, which was made on account of certain documents and calculations primarily conducted by the department but during the course of inspections and verifications, certain discrepancies and mistakes have been found in the working. It was informed that recalculations are being done and full details of the undisclosed income would be submitted in the return Form 2B of the Income Tax Act. A request was also made to provide photostat copies of the books and other records to enable them to compile figures. It was contended by the learned counsel that till 27th July, 1996, these documents were not provided. Narrating the further sequence, the learned counsel submitted that on 30th July, 1996, a detailed reply was furnished, copy placed at pp. 370-389 along with a note regarding valuation of stock, copy placed at pp. 391-392 of the paper book. In the said note, it was, inter aha, pointed out that the departmental officers have valued the stock on the basis of prices appearing as per price list circulated to various shopkeepers on which they were expected to sell various items. Out attention was also invited to a statement placed on p. 431 of the paper book as per which the total value of stock on wholesale price basis, after excluding the gross profit of 15 per cent was worked out at Rs. 1,91,44,196. Various workings placed on record was also referred to. The learned counsel contended that since the stock found during the course of search was well within the value of stock as per books. In the return filed on 31st July, 1996, undisclosed income for the block period was shown at ‘nil’. Further, in other letters, copy placed at pp. 469-474, specific instances of mistake in valuation involving substantial amounts were pointed out. According to the learned counsel, at the time of approval by the learned CIT also, the mistakes in valuation were pointed out and the learned CIT had directed the assessing officer to get the position clarified from the ADI. The learned counsel prayed that the file of the learned CIT may be called to verify this fact.
4.5. The learned counsel also referred to the entries in the order-sheets, copy placed at pp. 127 to 139 of the paper book and submitted that this was not a case where the addition had been made solely on the basis of statement recorded under section 132(4) of the Act. He contended that in the course of assessment proceedings, the assessing officer had made enquiries and investigation as was evident from the order-sheet entries. The learned counsel submitted that the facts and material available on record clearly indicated that as a result of adopting the retail sale price and the mistakes committed in valuation, the stock was valued at exaggerated figure. He further submitted that the valuation of stocks was a question of fact and f demonstrated that it was not correctly done, the statement given by Shri R.P. Monga under section 132(4) of the Act, surrendering an amount of Rs. 1,25,00,000 on account of valuation of stocks, would lose its legal sanctity. Relying on certain judicial decision, he submitted that an admission, even insofar as the facts are concerned, cannot be regarded as conclusive and it was open to the party making admission to show that it was not true. While admitting that an admission was a substantive evidence, in fact, the best evidence that an opposite party can rely upon, the learned counsel stressed that it was not conclusive and could be proved as erroneous. The learned counsel further submitted that valuation of stock has to be done as per method adopted by assessee and the valuation could not be made a source of profit. The sum and substance of the arguments of the learned counsel was that as the value of stock found at the time of search was not more than the value of stock as per accounts books, addition of Rs. 1,15,00,000 made on account of alleged unexplained investment would be unwarranted even if, in the peculiar circumstances, the assessee had surrendered this amount in the statement given during the course of search.
4.6. About the list of locks found at the residential premises at Patel Nagar, on the basis of which an addition of Rs. 1,03,437 is made, the learned counsel stressed on the fact that it was in respect of duplicate material of the assessee’s trade name found in raid at the premises of M/s Bashiruddin & Co. The facts stated before the assessing officer were reiterated and it was submitted that for reasons beyond assessee’s control, the relevant papers relating to litigation could not be placed before the assessing officer. It was pointed out that the list was prepared on the orders of Hon’ble High Court appointing a person as “Commissioner”, a copy of the Hon’ble High Court orders dated 9th Nov., 1987, was placed before the Bench. It was argued that in any case, merely because the list was found, it could not be legally concluded that the assessee has made the sales outside the accounts books.
5. The learned departmental Representative submitted that Chapter XIV-B of the Income Tax Act prescribed a special procedure for assessment of search cases. According to him, two significant features of the procedure are that the income is to be computed for “block period” defined in section 158B(a) and the assessment made under the Chapter is in addition to the regular assessment. The learned departmental Representative submitted that the assessing officer has not gone beyond the block period and has also not included the regular income of the assessee in the present assessment. It was submitted that in the circumstances even if there were some procedural lapse on the part of the assessing officer, it did not go to the root of the matter and the assessment could not be held to be invalid, as was contended by the learned counsel.
5.2. For the addition of Rs. 1, 15, 00, 000 on account of unexplained investment in the stock, the learned departmental Representative referred to the points raised by the assessing officer. It was stressed that Shri R.P. Monga had made a composite disclosure of Rs. 2.25 crores in the statement given, on 30th Aug., 1995, on the basis of assets found during the course of search. He challenged the assessee’s contention that the statement was vague or was given under any mistaken belief of facts. The learned departmental Representative drew our attention to the letter dated 26th Oct., 1995, of M/s Rawla & Co. copy placed at p. 176 of the assessee’s paper book, with which “revised break up of additional income, offered for taxation of Rs. 2,25,00,000” was enclosed, copy at p. 479 of the paper book and it was stated that due to scarcity of time, it was not possible to exactly work out the allocation of additional tax in a period of 10 years. The learned departmental Representative stressed upon the fact that statement and bifurcation were given after two months from the date of search, which implied that it was after proper application of mind. The learned departmental Representative contended that the assessee cannot be allowed to take a plea that the statement was given under pressure or coercion. In this connection he relied upon the apex court decision in the case of Sumeet Singh Chhabra v. Union of India AIR 1997 SC 2560. Further relying on the Kerala High Court decision in the case of V. Kunhambu & Sons v. CIT (1996) 131 CTR (Ker) 396: (1996) 219 TTR 235 (Ker), it was argued that if a person had come forward to disclose excess stock during the course of search, the assessing officer could use the statement even though there was no actual verification of the stock. The learned departmental Representative also made a reference of certain Tribunal decisions, including the Delhi Bench decisions in Giggles (P) Ltd. v. Income Tax Officer (1992) 43 ITD 388 (Del) and Smt. Vasant Sethi v. Assistant Commissioner (1993) 45 TTJ (Del) 503 (1992) 43 ITD 447 (Del). The learned departmental Representative then submitted that at p. 2 of his order, while referring to the facts about valuation of stocks, the assessing officer has categorically recorded that the valuation of the stocks was done by the assessee itself at Rs. 3,50,21,763. According to the learned departmental Representative there was no scope for the assessee contending that this valuation was not correct. When the Bench drew the attention of the learned departmental Representative to the factual mistakes in calculations, as pointed out by the assessee to the assessing officer vide its letter dated 5th Aug., 1996, copy placed at pp. 469-470 of the paper book, he submitted that on the limited issue the matter could go back to the assessing officer for verification of facts.
5.3. About the list of stocks found at the residence, the submission of the learned departmental Representative was that since the assessee did not make available any documentary evidence in support of its plea, the assessing officer had no other alternative but to draw an adverse inference. He further submitted that if in the light of High Court order, copy of which is now placed before the Bench, it is felt that the matter requires reconsideration, it could go back to the assessing officer.
6. We have given our utmost consideration to the facts and circumstances of the case, the material to which our attention was invited and the rival submissions. We would first take up the issues relating to the impugned addition of Rs. 1.15 crores made on account of unexplained investment in stocks. From the assessing officer’s discussion under the head “Unexplained Investment in Stocks”, it would be seen that he has initially proceeded on the basis of valuation of the stocks found at the 4 premises, taken at Rs. 3,50,21,763 (gross) and at Rs. 2,99,43,607 (net). He has finally quantified the discrepancy in the stocks found during the course of search at Rs. 1,14,76,911. It was with a view to supporting the addition that the surrender made by Shri R.P. Monga in respect of stocks (total Rs. 1.40 crores out of which stock of Rs. 25 lakhs appears to have been considered in the case of assessee’s sister-concern) is referred to. The controversy thus primarily revolves round the valuation of stock found at the time of search. In this connection, the first aspect that we would like to point out, as is referred to in para 4.2 above, is that in respect of the stocks found at Sadar Bazar and Patel Nagar premises, the valuation was revised during the course of search itself, by a substantial amount for the stocks at the latter premises. In respect of premises at Aligarh, the inventory was not valued originally, which was done at a subsequent date. The other aspect, which is more important, is about the method of valuation. The accepted principle is that the closing stock could be valued at the option of the assessee at cost or market price, whichever was lower and that there should be a definite and consistent method of valuation. The contention of the assessee in the present case is that it has consistently been valuing the closing stock at cost. We, however, find that the stocks found at the time of the search have ultimately been valued on the basis of retail price, though it appears that originally the stocks at Sadar Bazar and Patel Nagar were valued on the basis of the price at which the goods were sold by the assessee to its dealers. From the facts narrated above, it would be seen that the assessee had repeatedly pointed out to the assessing officer that value of stocks at retail sale price was not correct method. This connection has, however, been rejected by the assessing officer, inter alia, on the ground that from the sale bills of Delhi branch, it was found that sales were effected by the assessee at the retail price and that the valuation of the stock at Rs. 3.50 crores was done by the assessee itself and/or its representative. Of course, ultimately, the surrender made by Shri R.P. Monga has been exphasised upon, which aspect we would discuss later. Insofar as the reference of the sale bills of Delhi is concerned, we would only say that no details are given in the assessment order nor the learned departmental Representative was able to throw any light on this aspect. About the controversy as to who had actually valued the inventories, we would only say that the fact that stocks have been valued at retail sale price is more important, because even if it was the assessee who had prepared the list on the basis of retail sale price, it was incumbent upon the assessing officer to ascertain the correct valuation as per the method adopted by the assessee. In our considered opinion no significance can be attached to the fact that the assessee was itself a party to the process of valuation at the initial stage, particularly when the assessee has been crying hoarse that valuation of its stocks as per retail price list was not correct, Also, it had further pointed out various calculation mistakes in the valuation, which aspect has not at all been considered by the assessing officer. We had ourselves looked into the two sets of lists and found various discrepancies in calculation itself. To give an example, in one list, in respect of East Patel Nagar, the value of 18 pieces of Mortice Locks of Code No. 121 is taken at Rs. 3,888 @ Rs. 216 per piece (item 13 of inventory at p. 100). However, in the other list, of the same premises, the same quantity of the same item is valued @ Rs. 335.10 per piece and that too at Rs. 6,03,180 (item 13 of inventory at p. 420). It is thus quite evident that even the calculation of the values taken at retail price suffers from mistakes.
6.2 The other aspect of the matter relates to the surrender made by Shri R.P. Monga during the course of search. After the insertion of Expln. to section 132(4) with effect from 1-4-1989, the authorised officer has power to record statement on all matters pertaining to the suppressed income. The scope of statement is thus widened. Therefore, the statement of Shri R.P. Monga under section 132(4), surrendering certain amounts on account of undisclosed income, is legally relevant. However, the judicial authorities, including the apex court have held that an admission though relevant is not conclusive. In fact what a party himself admits may reasonably be presumed to be so until the presumption is rebutted. Thus, it is open to a party making an admission, to explain, clarify and demonstrate on the basis of positive material, under what circumstances the admission was made or to prove that what was stated was not correct. Insofar as the present case is concerned, the sequence of events indicates that when Shri R.P. Monga made the statement surrendering an amount of Rs. 2.25 crores on account of valuation of stocks, he acted on the basis of valuation figures arrived at Rs. 3.60 crores (gross) and Rs. 2.99 crores (net). However, certain facts and figures were later on referred to before the assessing officer to plead that the aforesaid valuation was not correct. In fact, the assessee had pleaded that the statement was given under a mistaken belief of facts. When the assessee had made this representation, it was incumbent upon the assessing officer to verify the facts and record a positive finding in the matter. We find that the assessing officer had not even made any such attempt but has gone by the fact that even after 2-1/2 months from the date of search, the assessee did not dispute the valuation, it had itself made the sales at retail price and that due to some troubles, the search at Aligarh had to be suspended for sometime and, as such, “the possibility of some stocks getting un-inventoried in the process cannot be ruled out.” We have already pointed out above that even though the assessee had challenged the method of valuation but the assessing officer has not given any basis or data for valuing the stock at retail sale price. About the last aspect i.e., some stock remaining univentorised, we would only say that this is a mere presumption and hence it cannot be given any weight. Above all, there is not even a whisper that by making a surrender, the assessee stalled further investigation in the matter. We would also point out that even the calculation mistakes pointed out by the assessee, were ignored by the assessing officer.
6.3. On a careful consideration of the facts and circumstances of the case and in view of the foregoing discussion, we are of the considered opinion that the matter has to go back to the assessing officer for a fresh decision on consideration of various aspects, including the following. Ordered accordingly.
(i) As to what is the method adopted by the assessee in earlier years and in the year under consideration for the valuation of the closing stock as on the last day of the previous year relevant to assessment year 1996-97.
(ii) For determining the value of stocks as per the abovementioned method of valuation. In doing so, the calculation mistakes pointed out by the assessee should be specifically taken care of.
(iii) To quantify the difference, if any, in the value of stock as per the above method and that worked out as per the accounts books, to be treated as undisclosed income for the block period, independent of the surrender made by Shri R.P. Monga. 7. Regarding the other issue, the list related to the stocks found at the premises of Bashiruddin & Co. and the assessee gave an explanation in this behalf. No doubt it failed to produce any documentary evidence to show that the list related to a court case against M/s Bashiruddin & Co. who were stated to be indulging in manufacturing duplicate goods under the trade name of the assessee but, we are of the considered opinion that on the basis of this list alone, an inference could not be drawn that the assessee had made sales outside the accounts books to M/s Bashiruddin & Co. The minimum that was expected from the assessing officer was to examine M/s Bashiruddin & Co. This having not been done, the inference is a mere assumption. The assessee has now stated that it is in a position to corroborate its statement by producing documentary evidence. In fact, a copy of the Hon’ble Delhi High Court order has been placed before us. Therefore, in the interest of justice, the matter has to go back to the assessing officer for a fresh decision in the matter, in accordance with law, after hearing the assessee. Order accordingly.
8. About the legal objections raised by the assessee, we would only say that the procedural defects cannot render the assessment invalid. The defects, if any, are curable defects. The judicial decision cited by the assessee does not support its contention that the assessment is invalid. The contention is, therefore, rejected. However, since the assessment is being set aside as such, the assessing officer would look into the point raised by the assessee and complete a fresh assessment as per provision of law. He would particularly take into consideration the provisions of sections 158BC(c) and 158BB(l) of the Act.
9. For statistical purposes only, the appeal will be treated as partly allowed.