2022 (12) TMI 1309 - AT - Income Tax

Tribunal upholds Revenue's additions, deems cash deposits unexplained income under

The Tribunal dismissed the appeals of the assessees and allowed the appeals of the Revenue, upholding the additions made by the Assessing Officer. The ... Addition u/s 68 - Unexplained cash deposits made in the appellant’s bank account - statement of the assessee admitting the income at the time of survey - subsequent retraction made by assessee - as argued AO did not make any inquiries to satisfy himself about the explanation offered by the appellant although making of such inquiries is a condition prerequisite for invoking the provisions of section 68 - HELD THAT:- Retraction by the Director of the assessee - Assessee had admitted to have the entries had in the books of account, receipts and cash deposits in its bank account. Law is fairly settled with respect to the admissions made in the I.T. proceedings. Section 17 of the Indian Evidence Act also speaks about the evidentiary value of statements, both oral and documentary, in court proceedings. Admissions play a very important role in the income-tax proceedings, as admissions bound the maker. In the absence of any denial or explanation thereof, an admission is almost conclusive regarding the facts contained therein. They generally dispense with the requirement of adducing further evidence or proof to support a fact. Though section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters admitted, yet admissions in the absence of rebuttal may conclude an issue. Effect of Letter dt.17.01.2017 - Considering the Judgment of hon’ble High Court in the case of Y. Ramachandra Reddy [2015 (5) TMI 429 - ANDHRA PRADESH HIGH COURT] we are of the considered opinion that the subsequent retraction will not come for rescue of the assessee, as neither the retraction dt.17.01.2017 was made before the Assessing Officer / Investigating Wing nor it was made within reasonable time and nor any reasons for retraction of the earlier statements were given. In our view, the letter dt.17.01.2017 was after thought, motivated and against earlier conduct of assessee whereby he had accepted the income of Rs.40 Crore in the earlier statements, affidavit in PMGKY – 2016 and subsequent deposit of part of tax amount of Rs. 1 crore. Further it is not the stand alone statement of the assessee admitting the income at the time of survey rather in the present case the revenue is having other incriminating evidence in the form of 2135 invoices, CFSL evidence of computers, statements of neighbour, statements of other persons denying the purchase of bullion and recovery of KYC documents of 65 customers. In light of the above, the Assessing Officer was right in rejecting the reliance placed by assessee on letter dt.17.01.2017. Whether the ld.CIT(A) was right in deleting the addition on the basis of statement of Mr. Neel Sunder Tharad recorded by Enforcement Directorate dt.26.12.2016 ? - From the comparison of statement recorded before the Enforcement Directorate u/s 50(2) and (3) of PMLA Act and confession recorded u/s 24 of the Indian Evidence Act by the police make it abundantly clear that in the statement u/s 50(2) and (3) of PMLA Act dt.26.12.2016 which is in the nature of evidence, Mr. Neel Sunder has only provided the names of 5 persons whereas in the statement recorded u/s 24 of Indian Evidence Act by Mr. Neel Sunder while he was in custody after being arrested on 11.01.2017, there is a mention of names of 12 persons with the amounts. The above said crucial aspect has not been examined by the CIT(A) while deleting the addition. In our view, the ld.CIT(A) has swayed away by the confession extracted from Mr. Neel Sunder while he was in police custody, however, the conclusion of ld.CIT(A) is without any basis, merit and against the settled principle of law. In view of section 26 of Indian Evidence Act, we are of the opinion that the statement / confession of Mr. Neel Sunder recorded by the police while he was in custody is not admissible in the eye of law. Therefore, the conclusion of ld.CIT(A) that the statement has not been confronted by the Assessing Officer is without any basis. Authorization given by the appellant to Sri Neel Sunder and his concerns to deposit the amount in the bank account of the appellant were not examined nor contradicted - Undoubtedly, it is not the case of the assessee that efforts were made by the assessee to return the amount to the Mr. Neel Sunder. Apart from the admissibility or otherwise of the confession of Mr. Neel Sunder, another fact that stares at the face of the assessee is that, as per version of the assessee, Mr. Neel Sunder has arranged the customers, money and bullion and made delivery to the customers. This version of the ass is incongruous and against human preponderance, as why Mr. Neel Sunder will approach the assessee to route his clients’ transaction through the assessee. In that way Mr. Neel Sunder could have completed the entire transaction right from procuring to selling the gold to customers and retained the profit himself. It is also not the case of the assessee that Mr. Neel Sunder did not have the bank account in the same Axis Bank where the money was allegedly deposited by him in the account of the assessee. There is no explanation for the redundant routing of the transactions with the assessee if we have to believe Mr. Neel Sunder. This shows that the statement of Mr. Neel Sunder’s statement attributes redundancy to the role of the assessee, which we find difficult to believe. In our opinion, conduct of the assessee was incomprehensible and abnormal. The assessee either deposited its undisclosed amount or otherwise helped undisclosed, unanimous and unidentifiable persons to convert their undisclosed prohibited currency into bullion after notification of demonetization. In both circumstances, the action of the assessee was not permissible in the eyes of the law. Therefore, the order of Assessing Officer was in accordance with law, and other of ld.CIT(A) deleting the addition was without any merit. Legal sale of gold with use of prohibited currency /SBNs - SBNs were subsequently received by the assessee and were wrongfully deposited with the bank and thus, the assessee had mischievously and unscrupulously brought the SBNs into the network. In our view, the stand of the Assessing Officer is correct, as he had rightly concluded that no legal sale of gold could have made with use of prohibited currency /SBNs. Even assuming that, though legally not correct, the transactions are illegal, as opined by the AO, the income needs to be taxed, as the Income tax Act does not differentiate between legal and illegal incomes - The assessee has failed to prove the identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Therefore, the assessee had failed to discharge his onus under section 68 of the Act; hence, the order of the Assessing Officer is required to be restored and the order of the ld.CIT(A) is required to be set aside. We do it accordingly. In the result, we uphold the addition as unexplained credit in the hands of the assessee (Vaishnavi Bullion Private Limited.) - Decided in favour of revenue. Issues Involved:1. Addition of cash deposits as unexplained income under Section 68.2. Validity of cash deposits post-demonetization.3. Reliance on statements and retractions.4. Legality of transactions involving Specified Bank Notes (SBNs).Issue-wise Analysis:1. Addition of Cash Deposits as Unexplained Income under Section 68:The core issue revolved around whether the cash deposits made by the assessee in their bank accounts during the demonetization period could be treated as unexplained income under Section 68 of the Income Tax Act. The Assessing Officer (AO) added the cash deposits as unexplained credits, citing inconsistencies in the explanations provided by the assessee. The AO noted that the assessee initially claimed the deposits were from 2153 customers, but later changed the stance, stating the cash was received from a few individuals, including Mr. Neel Sunder.2. Validity of Cash Deposits Post-Demonetization:The AO argued that the deposits made after the demonetization announcement on 08.11.2016 were not legally sustainable as the Specified Bank Notes (SBNs) ceased to be legal tender. The AO emphasized that the assessee's claim of receiving cash advances for future sales of gold was not credible, given the lack of supporting evidence and the CFSL report indicating no entries were made in the systems on the claimed dates.3. Reliance on Statements and Retractions:The assessee's Managing Director, Mr. Nitin Gupta, initially admitted to receiving advances from 2153 customers but later retracted, claiming pressure from certain individuals. The AO and the Tribunal found the retraction unconvincing, noting that the assessee failed to provide a plausible reason for the retraction and did not retract the statements before the Income Tax authorities. The Tribunal emphasized that admissions made in the course of proceedings are significant unless convincingly rebutted.4. Legality of Transactions Involving Specified Bank Notes (SBNs):The Tribunal upheld the AO's view that transactions involving SBNs after 08.11.2016 were illegal. The Tribunal referred to the relevant provisions of the Sale of Goods Act, Indian Contracts Act, and the Reserve Bank of India Act, concluding that the acceptance of SBNs post-demonetization was not permissible. The Tribunal noted that the assessee's actions were contrary to the well-intended government policy aimed at curbing black money and fake currency.Conclusion:The Tribunal dismissed the appeals of the assessees and allowed the appeals of the Revenue, upholding the additions made by the AO. The Tribunal emphasized that the assessee failed to discharge the onus of proving the genuineness of the transactions and the creditworthiness of the creditors. The Tribunal also highlighted the inadmissibility of the retraction and the illegality of transactions involving SBNs post-demonetization, leading to the conclusion that the cash deposits were unexplained income under Section 68.