TaxTMI 
TaxTMI 
2006 (1) TMI 450
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.... interest thereof without appreciating the fact that the Assessing Officer has rightly made the addition as the assessee could not explain the sources of the creditors. 3.On the facts and in the circumstances of the case, the learned CIT(A) has erred in deleting the addition of Rs. 1,04,379 on account of cash loans along with interest holding that the onus cast upon the assessee has been discharged by filing confirmation letters when in fact the assessee could not produce the loan creditors to prove that they have advanced the loans." 2. In this case, search operation was conducted in January 1992. The assessee-firm is engaged in the business of financing and investment in shares. During the course of search statement of Shri Laxmichand Jivraj Gosar was recorded. He is a partner in the firm with 30 per cent share. The premises located at G-6 Balakrishna Apartment, Chipunkar Road, Ram Nagar, Dombivli(E) which is the head office of another group concern M/s. Shah Enterprises in which also Shri Laxmichand was partner, 1131 files containing the records of clients of M/s. Gosar & Co. were found. Substantial amount was advanced by these clients to concern of Doda/Gosar Emp. The assesse....
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.... letters in respect of all creditors except one. Summons were served in all cases except two cases. Out of those upon whom summons were served, only three persons responded. 6. The Assessing Officer vide his office note in the assessment order has mentioned that summons have been issued to those from whom cash has been borrowed and to those from whom money above Rs. 20,000 has been taken by cheques. 7. There are two categories of loans. One is the loans taken in the name of nine persons amounting to Rs. 1,33,000 in cash; interest thereon amounts to Rs. 4,901 as under : Sr. No. Name of the person Amt. of loan Rs. Amt. of Int. Rs. 1. Shri Hemchand Jessang Gada, Bapat Marg, Dombivli (E) 15,000 1,000 2. Shri Vasant Laxman Patel, Thane 15,000 1,000 3. Dr. Kaushik R. Gada, Tilak Road, Dombivli(E) 15,000 -- 4. Shri Pandurang Raghunath Kane (HUF), Ayre Road, Dombivli(E) 15,000 795 5. Navin Shviji Veera (HUF) Station Road, Dombivli(E) 15,000 876 6. Mangaldas N. Thakkar, G.G. Road, Dombivli (E) 15,000 522 7. Vasant Khimji Nagada, Ayre Road, Dombivli (E) 15,000 306 8. Delip Mavji Gosar, Data Nagar, Dombivli(E) 15,000 201 9. Narayanji Vasanji....
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....egory of loans: These loans were taken by cheques. The Assessing Officer had considered only those items, where loan above Rs. 20,000 is involved. The Assessing Officer points out that cash was deposited in their bank account on the same day or a few days earlier and money was transferred to assessee by transfer entries. No evidence regarding bank accounts were filed. Summons were issued to these parties. They were served except in one case i.e. in the case of creditors at Sr. Nos. 7 (Anil Nanji Gada). In response to summons only two persons Sr. No. 10 and 14 (Mr. Jagdish & Rupen Zaverchand) attended. The Assessing Officer found from their statements that they do not have capacity to advance the loans. They could not explain the source from which the money was deposited in the Bank. Regarding the persons in whose case summons returned back, opportunity was given to the assessee to produce him. But he did not produce any creditor. Regarding other persons upon whom summons were served and who did not respond, assessee was given opportunity to produce all these loan creditors, but they were not produced. The Assessing Officer mentions that bank pass books in respect of person at Sr. N....
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....the Assessing Officer is not justified in placing reliance upon it for the purposes of making the impugned addition. So far as the retraction of declaration under section 132(4) is concerned, I find that the decision of Honourable ITAT, Bombay Bench 'D' in the case of M/s. Pushpa Vihar, Bombay, (supra) quoted above, is in favour of the appellant. It has been held in the said case "that any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. It is an accepted position that what is admitted by the party to be true, must be presumed to be true, unless the contrary is demonstrated. However, mere admission cannot be bed rock or foundation of an assessment." It is, thus, clear that as per CIT(A), the addition was made only on the basis of statement of an assessee, without there being any corroborating evidence and it cannot form basis for addition especially when the assessee has retracted from the same. This addition of Rs. 6,00,000 was, accordingly, deleted. The main thrust of CIT(A) is that under section 132(4) an assessee can declare only unaccounted money, bullion, jewellery or article or things and not bogus credits/loans and where ....
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....iled loan a confirmation letters. 4.Copies of the Balance Sheet and income-tax particulars of these persons were filed. 5.The addition relating to Mangaldas upon whom summon could not be served and it was returned back, the matter was restored to the file of Assessing Officer. 11. Regarding addition of Rs. 3,82,263 the learned CIT(A) deleted the addition by observing as under : "I have considered the submissions of the learned counsel and gone through the facts and circumstances of the case. So far as the loan of Rs. 80,000 from Anil Nanji Gada, Bombay, is concerned, since summons could not be served upon him on account of his having shifted from his old address, I feel that it would be in the interest of justice, if this addition is restored to the file of the Assessing Officer with the direction that summons can be served at his new address. The interest claim of Rs. 6,681 will also be considered afresh after looking into the genuineness of the said loan. Similarly, so far as the advance of loan of Rs. 60,000 (Rs. 30,000 each) from Shri Rupen Zaverchand Gada, Dombivli and Shri Jagdish Govindji Joshi, Mulund, Bombay are concerned, I find that the Assessing Officer is of the op....
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....oposition learned DR relied on : (i) CIT v. United Commercial and Industrial Co. (P.) Ltd. [1991] 187 ITR 596 (Cal) (ii) Nanak Chandra Laxman Das v. CIT [1983] 140 ITR 151 (All). The learned DR also submitted that mere establishment of identity is not sufficient to prove the loan. He relied on M.A. Unneeri Kutty v. CIT [1992] 198 ITR 147 (Ker). The assessee has also to prove creditworthiness and genuineness of transactions. Mere filing of confirmatory letters does not discharge the onus that lie on the assessee. He relied on Bharati (P.) Ltd. v. CIT [1978] 111 ITR 951 (Cal). Regarding the disclosure made under section 132(4), learned DR submitted that the assessee had in his knowledge that loans are not genuine. He was confronted with bank pass books/cheque books belonging to the creditors, found in the search. Further the retraction was delayed. Return was filed after 11 months of the search and retraction letter was submitted in October 1993 (22 months after the search). He finally submitted that in the alternative, the matter may be restored back to the file of Assessing Officer for such enquiries/opportunities. 14. On the other hand learned AR submitted that-- (i )He had f....
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.... case for the assessment year 1992-93. A perusal of these orders do not reveal that they had considered the facts as pointed out in this case i.e. during the course of search authorised officer had found bank pass books, cheque books and pay-in-slips and signed blank cheques in respect of some of the clients; spot enquiries were done and some of the clients were not found genuine. They were either not in existence or addresses were fictitious etc.; that some of the clients have denied to have paid any money to G. Doda. Therefore, we cannot say that ratio of the above decisions would be squarely applicable to the facts of the present case. The principles of res judica are also not applicable in income-tax proceedings particularly in the cases relating to applicability of section 68. Each loan is independent in itself. In each case, the assessee has the onus to prove the identity of the creditor, his creditworthiness and the genuineness of the transaction. In some cases, the assessee might be able to prove and the authorities concerned may be satisfied with the evidence furnished by the assessee but that does not lead to the inference in all cases either in the same year or in subseq....
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.... have also been found. Most of these files are apparently cases prepared to capitalization cases. What is your explanation in this respect? Ans: It is a fact that there are loans from some assessee clients as mentioned by you, which were taken by Gosar and Gada group of concerns. Some of these loans may not be genuine and some of the parties may not appear for confirmation of the loans given to Gosar and Gada group of concerns, also it is a fact that there are inter firm transactions. Considering all these facts, we have made a scheme of declaration of additional income in respect of our various concerns before the ADIT (Inv.), Thane during the course of action under section 132 of the Income-tax Act, 1961 at this premises. As per the scheme of declaration given by us, we are hereby declaring given by us, we are hereby declaring a sum of Rs. 12,00,000 in respect of loans from various parties in the case of M/s. Expresso Investments. However, at this time, it is not possible to pin point such assessees, which are not genuine. But myself Shri Bhagwanji Gosar, Amarchand Gada, Chandrakant Gosar, Dhiraj Gosar and Ramesh Gada had discussed the extent of non-genuine loans in the group of....
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....ve declaration of Rs. 12,00,000 made by you in the case of M/s. Expresso Investments is in addition to the declaration made by you of Rs. 12,92,389 in your individual capacity? Ans : I hereby confirm that I have already made a declaration of Rs. 12,92,389 in my individual capacity and that this is over and above the declaration made in the case of M/s. Expresso Investments of Rs. 12,00,000. Q.No. 9 : Do you wish to say anything other than what is stated above? Ans: The above declaration has been made by me under section 132(4) of the Income-tax Act, 1961 in the case of M/s. Expresso Investments, Dombivli (E). It is my request that capitalisation of the amount declared may be allowed to me in the books of M/s. Expresso Investments, and to give immunity from penalty and prosecution. Whatever stated above is true to the best of my knowledge and belief and nothing has been concealed therefrom. The statement has been given voluntarily and no coercion or threat was exercised on me by the authorised officer. Signature of Panchas Signature of the officer recording the statement (with name & designation) Signature of the deponent (with name and position) 1. 1. 2. 2. 17. From the....
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....R has rightly relied on the decision of Hon'ble Karnataka High Court in the case of M.A. Unneeri Kutty (supra). In this case, the special leave petition was dismissed by the Hon'ble Supreme Court as reported in 201 ITR (st) 23 (SC). Neither furnishing of particulars is sufficient nor payment of account payee cheque is sacrosant. This was held by Hon'ble Calcutta High Court in CIT v. Precision Finance (P.) Ltd. [1994] 208 ITR 465 and by Hon'ble Allahabad High Court in the case of Nizam Wool Agency v. CIT [1992] 193 ITR 318. The Tribunal in B. Tex Corporation Ltd. v. ITO [1993] 202 ITR 17 (ST) (Bom.) also held that mere filing of confirmatory letters does not discharge the onus cast on the assessee. It is incorrect on the part of the learned counsel for assessee to cast the onus on the Assessing Officer to establish that parties are not genuine. So far as acceptance of retraction is concerned, we are of the view that this submission is not acceptable because once return is filed by the assessee not declaring the undisclosed income under section 132(4), the Assessing Officer is duty bound to carry enquiries on the basis of material found in the search. Merely because Assessing Officer....
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...., who are generally well known to the party searched. There are often members or officers from other organisations or from different part of the department accompanying the search party. Warrant is shown to the assessee concerned or to the inmates of the premises. After the search is over, a panchnama is drawn in the presence of the witnesses and panchnama contains as to whether any special event took place during the course of search. If it happened, the same is required to be recorded in panchnama. If there is any pressure or coercion on assessee, he is at liberty to report the matter to higher authorities. Entire event relating to alleged pressure or duress can be reported either to the higher authorities in the investigation wing or to the CIT/CCIT/CBDT. No such report was made by the group for 11 months till return was filed or till 22 months when clarificatory letter was submitted. It is enough to prove that there was no real/unreal pressure or coercion. It was clearly an afterthought so as to support the alleged retraction or non-disclosure of undisclosed income in the return. Whenever such an event takes place like duress/pressure etc., the witnesses can also be brought for....
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....another to act to his detriment in reliance on the truth of it is not allowed to deny it later, even though it is wrong. Justice here prevails over truth. Estoppel is often described as a rule of evidence, but more correctly it is a principle of law. As a principle of common law it applies only to representations about past or present facts". 22. In Evidence Act also, it is clearly laid down in section 115 thereof, that when one person has by his declaration or act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative to deny the truth of that thing. Section 115 of the Evidence Act also incorporates a statutory principle of common law that a person alleging contradictory facts should not be heard. If the assessee had not made the said declaration, or statement, the departmental authorities could have continued enquiries and could have investigated the entire matter on the basis of various documents seized during the course of search like blank cheques with bank pass books etc. By makin....
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....tly true. When the statement is given that loans are not genuine, it should be accepted as true because it is in the very personal knowledge of the assessee. What he knows only he can state. Once he states on oath, something personal and only known to him, it must be true. About facts and events like this, only he is privy and he also knows the consequences of stating the truth that he has to pay taxes thereon on such disclosure, then the truth becomes an inseparable ingredient of the disclosure. On the other hand falsity has no legs to stand. When the assessee is compelled to state something, then the assessee knows, and also the officers present and recording the statement, that such statements are withdrawn the next day or immediately at the earliest available opportunity. Here the time is the essence. It is the deciding factor. The delay is the life support to the belief that whatever is stated is true. More delay affirms such belief. Inordinate delay in retraction establishes, that it was a truth and nothing else but truth. This is when substantive evidence was found in the search that some loans are not genuine. And revenue is on a solid wicket to tax those loans. When there ....
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....s covered by the provisions of section 115 of the Evidence Act, are binding on the declarant. They can neither be retracted nor do they require any corroboration. Such declarations can form the sole basis for assessment. The declaration made by Shri Prataprai Sanghvi, partner in the assessee-firm through his statement recorded under section 132(4) of the Income-tax Act, 1961 falls squarely within the ambit of section 115 of the Evidence Act and hence the same was neither open to retraction nor required any further corroboration. The Assessing Officer could, therefore, base the impugned addition on the said declaration. (ii)Statements which are not in the nature of declarations under section 115 of the Evidence Act are also binding and can form the sole basis for assessment if they are not effectively retracted. Effective retraction is possible in two situations. First situation is where it is not voluntarily made. A statement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the ....
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.... been raised by the CIT(A). It is that statement under section 132(4) would not tantamount to a declaration since under that section what can be declared is any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, which has been acquired out of his income not disclosed so far in his return of income. Further, the learned CIT(A) observed that the assessee has to specify in his statement the manner in which such income has been earned. The immunity will be available only if the assessee declares such an asset or income in the return to be furnished. In our view, the view held by the CIT(A) is misconceived. Section 132(4) reads as under :-- "(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. Explanation : For the removal of doubts, it is hereby declared that....
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.... as such statement was not in accordance with the provision of section 132(4) inasmuch as much as such statement could be recorded and when any money, bullion, jewellery or valuable article or thing was found from the premises of assessee and (ii) such statement was retracted by assessee. We are unable to uphold the reasons given by CIT(A) for deleting the addition of Rs. 6 lakhs. We have already held that statement was not given under any duress consequently retracted on facts, was not justified. Further, we find that number of incriminating material including bank pass books of creditors, cheque books and pay-in-slips, were found from the premises of the assessee during the course of search. Such materials in our opinion fall within the ambit of the words "other valuable articles or things". Therefore, the statement under section 132(4) could validly be recorded. Accordingly it is not possible for us to sustain the reasons given by the CIT(A) for deleting the sum of Rs. 6 lakhs. 28. We further find that CIT(A) deleted the addition of Rs. 1 lakh for the reasons (i) that onus on assessee was discharged as identity of creditors were established and (ii) genuineness was proved by th....