TaxTMI 
TaxTMI 
TaxTMI 
2015 (4) TMI 54
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....(Appeals) erred in admitting additional evidence by way of receipt from Shri Shirdi Sansthan without affording opportunity to the Assessing Officer. 4. There is one more ground by the Revenue that the Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the source of source was nothing but diversion of funds in the guise of subcontract to Sri N. Srinivasa Rao. 5. The assessee raised ground in the cross-objection with regard to sustaining addition towards donation of gold valued at Rs. 9,82,80,246. 6. The assessee also raised a ground with regard to sustaining of addition under section 68 of the Income-tax Act, 1961 at Rs. 13 lakhs received as advance against sale of agricultural produce from M/s. Lordven Enterprises and also Rs. 6 lakhs towards receipt from Mr. Veerendra Kumar. 7. The brief facts of the case are that there is a search action under section 132 of the Act in the group cases of M/s. AMR Constructions Ltd., on December 16, 2008. As part of this search action, the assessee was also covered under section 132 of the Act. Consequent to the search action notice under section 153A was issued. The assessee filed a return of income on April 5, 2010 ....
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....donors. During the post search proceedings around 60 donors were examined by the Revenue authorities on June 4, 2009, June 5, 2009, and June 6, 2009. These random 60 donors though stated that they have made donations, they failed to produce any recorded evidence to prove the genuineness of the donation. In fact, none of them filed return of income and basically they are agriculturists. From the above, the Assessing Officer drew the inference that the balance gold said to have been collected from various friends and relatives from Nellore district from where the assessee hails, as non genuine. Accordingly, the assessee was asked to file confirmation letters in support of receipt of gold as donation from various parties by the assessee. The assessee in reply to these filed a letter dated April 26, 2010 stating as follows : "A detailed note was called for asking why an amount of Rs. 11,88,00,000 should not be brought to tax as unexplained income on account of donation of 108 kgs of gold simhasana to Shirdi Saibaba Sansthan. In this regard it is hereby submitted that a detailed calcu lation of the total don....
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....erence amount as additional income of me and my family members. However, in order to avoid protracted litigations, to buy peace and in order to put a quietus to the whole issue, we have accepted to offer the difference amount as additional income of me and my family members. We have taken up the issue regarding the balance contributions, we accept to make an additional declaration of Rs. 7,67,74,956. This additional declaration made is adopted as income only for the purpose of computing tax and is otherwise is not an income. It is also prayed before your goodself that the penalty proceedings be kindly dropped by your goodself in view of the fact, elaborately explained above, that the disclosure was made voluntarily by us without the discovery of any material, pointing to the same, during the course of search. All the disclosures were made in good faith in order to buy peace and with the honest belief and conviction that no penalty proceedings would be initiated on the assessees. Hence it is also herewith requested not to initiate any penal proceedings." 10. Thus, the assessee made an additional offer of income at Rs. 7,67,74,956 in the names of following persons : Name Fi....
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....nd as the donors were already made to appear before the authorities, we are of the view that such an admission is not required. Therefore, I humbly submit that the earlier letter offering the amount of Rs. 7,67,74,956 in addition to what was declared during the course of search and seizure operations may please be treated as withdrawn. Therefore, what remains is the admission made at the time of search. Further I humbly submit that in so far as the donors of the gold for 'golden simhasanam' are concerned, they donated the gold ; the list of such donors along with their addresses and the amount of donation was already provided to the Department. Some of the donors were considered by the Department and all of them accepted to have donated the gold or amount equal to the gold. Therefore, no addition on account of the donation to Shri Shiridi Saibaba Baba may be made." 12. The Assessing Officer rejected this letter stating that this was filed on December 28, 2010 just before completion of the assessment, i.e., on December 31, 2010 and made an addition of Rs. 11.88 crores valuing 108 kg of gold at Rs. 11 lakhs per kg. In addition to this, the Assessing Officer also made additi....
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....osely related to the assessee and who have joined for the purpose of a noble cause initiated by the assessee and it was the collective effort of many like-minded people. He submitted that this fact was continuously reiterated by the assessee before the lower authorities on various occasions. However, to buy peace the assessee in his letter dated April 26, 2010 admitted to disclose additional income in the name of the assessee, A. Mahesh Reddy and A. Girish Reddy. Accordingly the Assessing Officer drafted the assessment order making such addition in respective hands as offered by the assessee in the draft assessment order and sent for approval of the Additional Commissioner of Income-tax in the month of May, 2010 and same were approved under section 153D of the Act. He submitted that the copies of same were furnished before the Commissioner of Income-tax (Appeals). According to the authorised representative instead of finalising the assessment order in accordance with the offer of the assessee to the surprise of the assessee the Assessing Officer issued a fresh notice under sections 143(2) and 142(1) in the month of November 2010 after a lapse of 6 months from the date of last heari....
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....se. In spite of confirmation from those innocent agriculturists having no knowledge of the income-tax, the Department is not ready to believe the true statements of the true donors on the reason that no evidence was found during the search regarding their donations. Further he submitted that even after offer of additional income at Rs. 7,67,74,956 by the assessee, the Department started enquiry and when the enquiry report was found favourable to the assessee, the Department is not ready to accept the same. He submitted that there is a categorical statement from the donors in favour of the assessee. The Department without bringing the evidence against the assessee simply brushed aside the same. He submitted that the fact of contribution by various friends and relatives of the assessee is not disputed much less disproved by the Department. According to the authorised representative when the assessee produced the evidence in support of the assessee's claim it cannot be brushed aside without bringing a contra evidence against the assessee. The authorised representative submitted that addition was made under section 69 of the Act as unexplained investment. Being so, the principle la....
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..... Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) ; B. T. S. Kumarasamy v. Asst. CIT [1998] 65 ITD 188 (Mad) ; and C. Hotel Kiran v. Asst. CIT [2002] 82 ITD 453 (Pune). 18. Further he submitted that the offer letter made by the assessee is not under section 132 of the Act. The offer was made subsequent to the post search enquiry. The offer is also conditional. Being so, the argument of the Department is not proper to state that the offer made by the assessee under section 132(4) is binding on the assessee. According to the authorised representative the offer was made on conditional basis and the condition on which the offer was made ceased to exist. As such the assessee cannot be forced to comply with the offer letter. Once the offer is not acted upon in accordance with the offer conditions, it cannot be said to have survived. He relied on the judgment in the case of Vinod Solanki v. Union of India [2009] 233 ELT 157 (SC) wherein it was held that evidence brought by confession, if retracted must be corroborated by independent and cogent evidence. Further he submitted that addition made only on the basis of confession statement cannot be sustainable wi....
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.... as closed till the assessee retracted at 11th hour. Thus, the Department was very much prevented by this feint and last minute withdrawal. The register was not found at the time of search at all. It was produced later. As regards the averments that from the beginning it was being told that it was not the "assessee" alone, it is submitted that of course, any person will tell that rather than own up entire thing at first outing but is saying enough ? What matters is conduct and evidences. 20. The Departmental representative further submitted that there is no mention of register in the statement. He could have easily told that it came from many whose names are recorded and details are maintained, especially since he is the lynchpin who co-ordinated the entire thing. Instead he just says ANR-family and others. The assessee offers income towards this item to protect others and who was it protecting ? Enquiries were over and dusted with in June 2009. He submitted that the Department did not doubt that agriculturalists cannot donate but the ability of a person with small income that too without getting his name registered for the same. It is different if the register was maintained by S....
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.... We have heard both parties and perused the material on record. We have carefully perused the receipts received from Shirdi Saibaba Sansthan placed on record at pages 1027, 1028, 1029, 1030, 1031 of the paper book. As per these receipts the gold donation was received from Sri Audinarayana Reddy family and associates. Accordingly the assessee taken a plea before the lower authorities that he donated gold worth Rs. 25 lakhs and the balance was collected from various friends and relatives from his native village. However, in order to avoid protracted litigation, the assessee made an offer vide his offer letter dated April 26, 2010 at Rs. 7.67 crores in the name of three persons, i.e., A. Mahesh Reddy, A. Girish Reddy and Audinarayana Reddy. Name Financial year 2007-08 (Rs.) Financial year 2008-09 (Rs.) Total (Rs.) A. Mahesh Reddy 1,63,38,890 28,54,850 1,91,93,740 A. Girish Reddy 1,63,38,890 28,54,850 1,91,93,740 A. Audinarayana Reddy 3,26,77,776 57,09,700 3,83,87,476 H. Total 6,53,55,556 1,14,19,400 7,67,74,956 24. This letter was retracted by the assessee vide his letter dated December 28, 2010 which reads as follows :  ....
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....rther I humbly submit that in so far as the donors of the gold for 'golden simhasanam' are concerned, they donated the gold ; the list of such donors along with their addresses and the amount of donation was already provided to the Department. Some of the donors were considered by the Department and all of them accepted to have donated the gold or amount equal to the gold. Therefore, no addition on account of the donation to Shri Shiridi Saibaba may be made." 25. The Department is not ready to accept the retraction statement. The plea of the assessee before us is that the offer made by the assessee is conditional stating that the Department shall not cause any enquiry. The contents of the offer letter are as follows : "To The Deputy Commissioner of Income-tax Central Circle-3 Hyderabad Dated 28.12.2010 Sir, Sub : Income-tax assessment-Assessment years 2008-09 and 2009-10-A Mahesh Reddy-Explanation submission of- Reg. Ref : Assessment proceedings in the case of Sri Audinarayana Reddy, Sri A. Girish Reddy and Mr. A. Mahesh Reddy. As the Assessing Officer is well aware, the income-tax autho rities conducted search and seizure operations at the premises of the company....
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....ities already contacted the donors and as the donors were already made to appear before the authorities, we are of the view that such an admission is not required. Therefore, I humbly submit that the earlier letter offering the amount of Rs. 7,67,74,956 in addition to what was declared during the course of search and seizure operations may please be treated as withdrawn. Therefore, what remains is the admission made at the time of search. Further I humbly submit that in so far as the donors of the gold for 'golden simhasanam' is concerned, they donated the gold; the list of such donors along with their addresses and the amount of donation was already provided to the Department. Some of the donors were contacted by the Department and all of them accepted to have donated the gold or amount equal to the gold. Therefore, no addition on account of the donation made by various others for the 'golden simhasanam' presented to Shri Shirdi Saibaba may be made. Yours faithfully, Sd/ A. Mahesh Reddy" 26. As seen from the above letter the offer was conditional. The Department is requested not to take any enquiry and also shall not levy any penalty. However, as seen from the ....
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....tment. The assessee stated the reason for retraction that the Department had not kept its promise as the offer made by the assessee is conditional that the Department shall not cause further enquiry and should not cause undue hardship to the devotees. As the basic condition and purpose for which the declaration was made ceased to be exist, the assessee went out of his earlier offer. 29. Now the question before us is whether the offer made by the assessee is to be considered or not. In our opinion, this is a case of search under section 132 of the Act. The Department framed the assessment under section 153A of the Act after the search. As per the provisions of section 153A the Assessing Officer is required to determine the income on the basis of material available on record consequent to search action under section 132 of the Act. The Assessing Officer is precluded from collection of any confession statement in the course of search action and base the addition on that basis. The Central Board of Direct Taxes Instruction No. 286/2/2003-IT (Inv.) dated March 11, 2003 strictly prohibits placing reliance on the confession statements. The Assessing Officer cannot presume the income of t....
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....; "The doctrine of 'approbate and reprobate' is only a species of estoppels it applies only to the conduct of parties. As in the case of estoppel, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppel or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose tax on the said income." 31. An assessee cannot be tied down to a wrong concession made in the return. In the case of Alapati Venkataramiah v. CIT [1965] 57 ITR 185 (SC), the hon'ble Supreme Court, affirmed the principle that merely because the assessee himself has returned the sum of Rs. 79,494 under the head capital gain leads us nowhere. "He might have done it under the advice of some 'income-tax expert'. The assessee cannot be tied down to an inadvisably made wrong statement. In the circumstances, we delete the addition." 32. We place reliance on the judgment in the ....
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....he Department could not be faulted for accepting returns filed by the assessee where he himself had offered the donations for tax. The plea of the Department cannot be accepted in view of the judgment in the case of S. D. S. Mongia v. CBDT [2007] 160 Taxman (Delhi) 101 wherein it was held that the Revenue is not entitled to tax the income which was offered by the assessee himself though it is not taxable and it should tax only that amount which is chargeable under section 4 of the Income-tax Act, 1961. 36. In the case of Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi, AIR 1960 SC 235, the hon'ble Supreme Court held that an admission in the return is not conclusive and it would be decisive only if not subsequently withdrawn or proved to be erroneous. It is well established that the object of an assessment is to determine the correct income and consequently the correct tax liability. In the light of the above well settled principles, factual position of the case and the Assessing Officer's own observation return filed in the status of Hindu undivided family should have been ignored. 37. In our opinion, the Commissioner of Income-tax (Appeals) should have appr....
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.... the same were shown to have been reflected in the income-tax returns filed for the assessment year 2008-09 onwards. The assessee has made a detailed submission replying to the queries as raised by the Assessing Officer, regarding the creditworthiness of Mr. Srinivasa Rao Nukala. It was further contended by the assessee that while coming to a conclusion that sub-contract carried by Mr. Srinivasa Rao Nukala was not genuine, the Assessing Officer did not even verify the works given on contract by M/s. AMRCL and no enquiries were carried out as to whether the receipt on account on such contract work was accounted for or whether any expenditure of the same nature in respect of the same work was separately claimed by the company, etc., and as such this observations of the Assessing Officer was solely based on suspicion, disbelief and presumptions. The assessee also contended that Mr. Srinivasa Rao Nukala was assessed to tax in his own right and the amounts advanced by him cannot be treated as unexplained credit in the case of the assessee and the taxability, if any, has to be examined in the hands of such other person who advanced money, by his Assessing Officer. 41. As regards to the ....
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....onsidered genuine, the right course for the Assessing Officer is to identify the real person to whom the money belong and assess him to tax instead of assessing the company and as such there was no justification for assessing the company. Further, the ratio of the decision of the Bombay High Court in the case of CIT v. Tania Investments P. Ltd. [2010] 322 ITR 394 (Bom) is squarely applicable in this case, wherein the creditors were examined by the Assessing Officer, during the assessment proceedings, who maintained the books of account, which could not have been brushed aside. 43. Further, it may be relevant to note that the contract works awarded by M/s. AMRCL was disbelieved and the additions were made in the hands of M/s. AMRCL on the said account. Further, the amount of contract receipts appears to have already suffered tax in the hands of the company, as such there is no basis for making the addition originating from the same amounts in the hands of the assessee, being the loanee. On this count, the addition of Rs. 18,00,000 made on account of amount standing in the name of Mr. Srinivasa Rao Nukala, as unexplained credit is not sustainable. Accordingly, deletion by the Commis....