TaxTMI 
TaxTMI 
2007 (7) TMI 638
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....I have considered the facts of the case, contention of the Assessing Officer in the assessment order, the arguments of the appellant taken in the assessment proceedings and appellate proceedings as well as various Courts' decisions relied upon by the appellant. I am of the view that the statement of Shri Kamal V. Shah was taken on record based on mere suspicion and accordingly on the basis of the facts, the appellant firm has retracted the same. Hence, the same cannot be treated as an admission of the appellant and cannot be treated as material for framing the assessment. The Assessing Officer has also not brought on record any cogent material and/or evidence in respect of on-money receipts and also as evident from the assessment order, no incriminating records and materials have been identified from the seized records for making the additions on the basis of the statements of Shri Kamal V. Shah. Hence no addition can be made on the basis of his statement. Therefore, the addition of Rs. 10,00,000 made on the basis of the statement recorded under section 132(4) of the Act is hereby deleted." 3. We have heard the parties. 4. The brief facts relating to the issue and as have bee....
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....king has not been completed although the construction work is likely to be completed Rs. 30,00,000 Cash receivable Rs. 19,00,000 Household expenses Rs. 1,50,000 Year-wise details of undisclosed income, shall be submitted later on after verifying the books of account and seized materials and also I will enhance the disclosure if it is found in the loose papers and documents on verification. The disclosure enhanced later on shall be included under section 132(4) read with Explanation 5 to section 271(1)(c) for the purpose of immunity from penalty and prosecution. Another statement of Shri Kamal V.Shah was recorded after a gap of almost 3 months on 29-6-1994. In reply to question No. 7 of the statement dated 29-6-1994. Shri Kamal V. Shah enhanced disclosure to Rs. 76,00,000 which includes disclosure of Rs. 53,50,000 in M/s. Adinath Construction. The relevant statement is reproduced as under :- Q.No. 7 : Whether you wish to disclose any undisclosed income in view of Explanation 5 to section 271(1)(c) read with section 132(4)? Ans. : I wish to take advantage under this section and I disclose the following unaccounted income after consulting partners ....
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....ome offered under section 132(4) is not considered in the return of income filed." 8. The Assessing Officer, however, did not accept the assessee's explanation and made an addition of Rs. 10 lakhs after relying on the statement of Mr. Kamal V. Shah (assessee's partner) recorded at the time of search by observing as under :- "3.2 The contention of the assessee is not acceptable and is incorrect because of the following reasons :- (i )As referred in paragraph 2 above, Shri Kamal V. Shah stated on oath under section 132(4) that he was charging 'on-money' in the construction project run by Shri Kamal V. Shah and his family members. Shri Kamal V. Shah confessed additional income of Rs. 10 lakhs in his statement dated 4-5-1994 in reply to question No. 38. (ii)The statement of Shri Kamal V. Shah was again recorded on 29-6-1994 after a gap of almost two months. But even after this gap, he again confirmed the statement made under section 132(4) and in reply to question No. 3 he again confirmed the disclosure of additional amount on account of 'on-money' earned by him. (iii)The statement of Shri Kamal V. Shah dated 29-6-1994 was endors....
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.... his observations contained in paragraph No. 3.2 and we have reproduced the same as under: "3.2 I have considered the facts of the case, contention of the Assessing Officer in the assessment order, the arguments of the appellant taken in the assessment proceedings and appellant proceedings as well as various Courts' decisions relied upon by the appellant. I am of the view that the statement of Shri Kamal V. Shah was taken on record based on mere suspicion and accordingly on the basis of the facts, the appellant firm has retracted the same. Hence, the same cannot be treated as an admission of the appellant and cannot be treated as material for framing the assessment. The Assessing Officer has also not brought on record any cogent material and/or evidence in respect of on-money receipts and also as evident from the assessment order, no incriminating records and materials have been identified from the seized records for making the additions on the basis of the statements of Shri Kamal V. Shah. Hence no addition can be made on the basis of his statement. Therefore, the addition of Rs. 10,00,000 made on the basis of the statement recorded under section 132(4) of the Act is here....
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....ld. Counsel, further, submitted that the order of the CIT (Appeals) in the case of M/s. Adinath Construction, Ahmedabad for assessment years 1994-95 and 1995-96 were upheld by the ITAT, Ahmedabad Bench 'C' in assessee's and revenue's cross appeals in ITA Nos. 1975 and 1976/Ahd./1999 and in ITA Nos. 2167 and 2168/Ahd./1999 respectively as per its order dated 21-10-2005. In other words, according to ld. counsel for the assessee, the addition on account of 'on-money', if at all any is to be sustained, it cannot be more than 15 per cent of total 'on-money' of Rs. 10 lakhs; meaning thereby that if order of the CIT (Appeals) is reversed, then the addition can be upheld only to the extent of Rs. 1,50,000, i.e., 15 per cent of Rs. 10 lakhs. 12. After careful consideration of the rival submissions, facts and circumstances of the case and decision of the Tribunal in the case of Adinath Construction (group company) and provisions relating to the admissibility of admission made in the statement under section 132(4) of the Act as well as retraction of the same thereafter, we are of the opinion that though the assessee has option to retract the statement recorded under section 132(4) or under....
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....finding during the course of hearing of the appeal before us, we are inclined to agree with the findings of the CIT (Appeals) that "so far as present assessee is concerned, the revenue had not found any material during the course of search which could support either assessee's disclosure or revenue's presumption/ assumption for making the addition and, therefore, order of the CIT (Appeals) requires no interference; meaning thereby that addition on the basis of statement under section 132(4)/131 of the Act, etc. which later on retracted by the assessee and in absence of any material found during search, in support of justification of addition, cannot be upheld. 15.1 The aforesaid decision of ours is further supported by the decision of ITAT, Ahmedabad Bench 'B' in the case of Asstt. CIT v. Jorawar Singh M. Rathod [2005] 94 TTJ 8671 and in case of Asstt. CIT v. Hastimal K. Bhansali for assessment year 1994-95 - ITA/348/A/1998 dated 22-8-2005 wherein the Tribunal deleted the addition having been made in view of similar facts and circumstances as are of the case before us. The relevant part of the order of the Tribunal reads as under :- "6. We have heard the ld. representat....
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....probabilities, we do not find any material on record on which basis it can be said that the disclosure of the assessee for Rs. 16 lakhs is in accordance with law and in spirit of section 132(4). Under the circumstances, we find that the CIT(A) has correctly deleted the addition." 15.2 In case of Hastimal K. Bhansali, both of us were parties and had confirmed the order of the CIT(A) deleting similar addition and under similar facts and circumstances. 15.3 Respectfully following the aforesaid decision of Co-ordinate Bench, we uphold the order of the CIT (Appeals). 16.1 So far as decision in the case of Adinath Construction is concerned, we are of the opinion that the facts of the case were quite different from the facts of the present case so much so that in the case of Adinath Construction, the revenue had found a diary marked as Annexure A-3 during the course of search proceedings in which there were details relating to receipt of 'on-money'. Not only this, in that case, the assessee itself had accepted a receipt of Rs. 14,22,000, out of receipts recorded in the document, as having been received and had duly accounted for the same in the supplementary balance sheet. In oth....
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....ome-tax Act, 1961 ('Act' hereinafter), conceded to have received, among others, 'on-money' amounting to Rs. 10 lakhs in respect of its two schemes, 'Vrajbhoomi' and 'Rajbhoomi'; (d)Accordingly, the amount of Rs. 10 lakhs was disclosed as the undisclosed income in the hands of the assessee as a part of the total disclosure of Rs. 55 lakhs made in respect of the total group, for which the break-up of the corresponding assets was also given as a part of the statement itself, and which included Rs. 30 lakhs in the building(s) under construction (under various Schemes; the other two firms also being in the construction business), and work on which was stated to be substantially completed (refer question Nos. 37 to 39/4-5-1994); (e)On 29-6-2004, the total disclosed amount stood enhanced to Rs. 76 lakhs, for which, i.e., a subsequent enhancement, leave was taken by the assessee in his statement under section 132(4) dated 4-5-1994. The amount of disclosure for the assessee-firm, however, remained the same, i.e., at Rs. 10 lakhs, and the entire amount as disclosed allocated to the current year (assessment year 1994-95), save Rs. 6 lakhs in the hands of M/s. Adinath Constru....
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....22 (per sq. yd.). The assessee has effected sales of about 2640 sq. yards during the year under reference, i.e., under the Vrajbhoomi and Rajbhoomi Schemes, and in respect of which the disclosure stands made. If this amount (of disclosure) is spread over the quantity (area) sold, it works to an average rate of Rs. 379 per sq.yd. For the Vrajbhoomi Scheme, therefore, it would total to Rs. 2,501 (Rs. 2,122 + 379), i.e., in terms of the disclosed rate. Now, firstly, it is inconceivable, specially in the light of the diary (material) recording the receipt of on-money, that it was not being actually received. Secondly, the amount disclosed in respect thereof corroborates the booking rates for the relevant scheme, i.e., when considered in aggregate, so that the veracity of each, in a way, stands proved. It is not essential, it may be added, that the calculation as made on the basis of the statement corresponds exactly with the rates; the figure of Rs. 10 lakhs being itself only an approximate and tentative figure, but only fit', which they indeed do. Rather, the assessee's contention, submitted by way of an alternate plea, that only 15 per cent of Rs. 10 lakhs be brought to tax, i.e., as....
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.... question of fact and law, i.e., of the entire receipt as representing its income liable to tax irres-pective of the amount of business expenditure incurred therefrom. As such, there is no reason for not adopting the same ratio in the assessee's case as well; the modus operandi of receiving and expending money by the management being uniform for the different concerns (or not having been shown to be not so); and particularly in view of the fact that the expenditure in the assessee's case stood invested, by its own admission, in the construction schemes only. It would not be correct to accept, therefore, one part of the diary (material), i.e., of acceptance of 'on-money', and not the other, i.e., of investing the same under the Schemes. No doubt, the assessee states the entire amount as having been invested in Schemes (stock-in-trade), but the Tribunal having come to a finding of fact that assessee's expenditure thereon is only to the extent of 85 per cent thereof, and which finding has been accepted by both the parties, the same is 'no-longer res integra. 3.4 The net profit for the two Schemes upon completion works out to 6.10 per cent and 2.58 per cent, for the Vrajbhoomi and R....
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.... Prasad More [1971] 82 ITR 540. 4.2 In Durga Prasad More's case (supra), in fact, the Supreme Court has clarified that in view of the fact that Science has not been able to yet come up with any instrument that could determine the reliability of the evidence placed before the Courts and Tribunals, they would judge the same on the basis of the test of human probabilities. The conduct of the assessee, in the facts and circumstances of the case is a crucial pointer in this regard. The disclosure was made by the managing partner of the assessee-firm, not only for it, but for all the group concerns, being engaged in the same activity of construction business, i.e., even for those for which he was neither a partner or director. He is one of the main persons, with other family members as partners/directors in other group firms, and both the statements, specially the second, which affirms the first, carrying their conscious and willing consent. In the statements, he explains the modus operandi of the charge of on-money; the rates being charged in respect of different Schemes; their construction status; the avenues and destination of the on-money received, etc. On seizure of a diary, wher....
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....ss of the search and seizure proceedings; the deposition under oath; and the law in the matter including the plethora of legal pronouncements. As held by the Apex Court in the case of Durga Prasad More (supra), the taxing authorities are not supposed to put blinkers on their eyes while inter-preting material or evidence they come across. In arriving at this infer- ence in law, I draw support from, among others, the following case law- -CST v. H.M. Esufali [1973] 90 ITR 271 (SC); -Sumati Dayal v. CIT [1995] 214 ITR 8011 (SC); -Council of ICAI v. Mukesh R. Shah [2004] 134 Taxman 265 (Guj.); -Dr. S.C. Gupta v. CIT [2001] 248 ITR 7822 (All.); -ITO v. Bipin Faraskhana [2000] 73 ITD 334 (Ahd.); -Hiralal Maganlal & Co. v. Dy. CIT [2005] 96 ITD 113 (Mum.). 4.3 As regards the contention of non-discovery of any corresponding assets, I find the same is only an outcome of the acceptance of the retraction as legally valid, so that the question of the same would not arise in the first place, if it is not considered as so. It is only on its acceptance as such, that the onus would shift to the Department, which, in order to establish its case, would be required to adduce evide....
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....l, in this case, the Hon'ble President was pleased to appoint me as a Third Member vide his order dated 24-4-2007 under section 255(4) of the Income-tax Act, 1961 ('the Act'). The point of difference referred to the Third Member is as follows : "Whether, on the facts and in the circumstances of the case, should the Tribunal delete whole of the undisclosed income of Rs. 10 lakhs or should restrict the addition on account of 'on-money' to Rs. 1,50,000." 2. The facts in the present case, as admitted by both the Members, are not in dispute. However, a brief recapitulation of the same would not be out of place. Search under section 132 of the Act was conducted at the premises of the assessee on 4-5-1994 resulting into seizure of incriminating documents. Statement of Shri Kamal Shah, a partner of the assessee-firm was recorded on the same day. In this statement, he admitted an undisclosed income of Rs. 34,38,000 in M/s. Adinath Constructions, an associate concern of the assessee-firm. Undisclosed income of Rs. 10 lakhs was disclosed in another associate concern M/s. Suhani Builders and an equal amount was also disclosed in the hands of the assessee. In all, total disclosure o....
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....orded. Moreover, in that case, the assessee itself has accepted a receipt of Rs. 14,22,000, but in the present case, there was no such diary nor was there such admission. 4. The learned AM took note of the conduct of the assessee in so far as that the disclosure was made by the managing partner of the assessee-firm, he had explained the modus operandi of charging on-money, explained the investment of such money and absence of duress while recording the statement. The learned AM held that these facts confirmed the factum and practice of charging on-money. Finally, though he did not much agree with the alternate contention to treat only 15 per cent of the gross on-money as the assessee's income, yet, he sustained the addition to that extent only, i.e., at Rs. 1,50,000. 5. Before me, the learned Counsel at the outset, referred to paragraph 19 in the order of the Tribunal in the case of Adinath Construction [ITA Nos. 1975 & 1976/Ahd./1999 dated 21-10-2005] to contend that the statement given by Shri Kamal Shah was not sacrosanct insofar as that the figures in the seized material were stated to be approximate figures and that it was categorically stated by him that he would state ....
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....anything that might have been unearthed during the search. There may have been hundreds of reasons and thoughts crossing in the mind of the deponent during the search and it is not expected that whatever is reeled out during the search is only after proper application of mind. He may have explained the modus operandi of charging on-money, or the avenues and the destination of such money. Again, this may be true for the group as a whole but the retracted statement does not lead to the conclusion that the particular assessee before us had an undisclosed income of Rs. 10 lakhs. The second reason given by the learned AM is that enhancing the figure of disclosure two months later shows proper application of mind and also absence of any duress while giving the statement. Well, there may not be any evidence of coercion being exercised by the search party, there may not be any duress also, but existence of confusion cannot be ruled out. Duress has to be distinguished from confusion. Duress is a constraint illegally exercised to force a person to perform some act. This, as mentioned earlier, may be absent. But confusion means something thrown into disorder wherein a person may be perplexed ....