TaxTMI 
TaxTMI 
2001 (9) TMI 1136
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....roduction and distribution of films. 3. Search action under section 132 of the Income-tax Act was carried out in the cases of Time Video Group and as such, the assessee was also covered under search action on 24-8-1995 and the last warrant of authorisation was executed on 25-9-1995. The Assessing Officer observed that during the course of search carried out at the premises of M/s. Time Video (P.) Ltd., it was found that there was suppression of production of video cassettes on a large scale. On the basis of enquiries carried out at M/s. Time Magnetics (I) Ltd., and on the basis of statement recorded of Shri Pravin C. Shah and other materials, the Assessing Officer found that there was suppression of production of audio cassettes on large scale. The statement of Shri Dhirajlal N. Shah, one of the partners of the firm was recorded under section 132(4) of the Act and he declared undisclosed income of Rs. 3 crores from different activities as follows : (i) Rs. 1 crore out of the undisclosed income from production and distribution of the film 'Humse Hai Muqabala'. (ii) Rs. 1 crore towards undisclosed income from the production and distribution of the film 'Sabse Bada Khiladi'. ....
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....50. The assessee also filed the details regarding the estimation of income for the assessment years 1991-92 to 1995-96 at Rs. 39,37,150. The Assessing Officer, however, did not accept this estimation. The Assessing Officer referred to the statement of Shri Ashwin Visaria, employee of M/s. Time Video (P.) Ltd., which was recorded under the provisions of section 132(4) of the Act. He stated that the recording capacity of the unit is 1600 cassettes per day for 600 video cassettes recorders. He also stated that the assessee was working for two shifts. In the case of the assessee, he stated that it had 150 Nos. of VCRs. Relying on the statement of Shri Ashwin Visaria and keeping in view the statement of month-wise electricity consumption and number of cassettes submitted during the course of assessment proceedings, the Assessing Officer estimated the recording capacity at 80% during the assessment years 1993-94, 1994-95 and 1995-96. According to the Assessing Officer, the estimated production of video cassettes per year was 1,20,000 cassettes. Thus, he estimated the production of video cassettes for the assessment years 1991-92 to 1995-96 at 5,08,000 as against 3,39,882 shown in the boo....
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....iladi' and restored back the issue to the file of the Assessing Officer with directions to give a fresh finding regarding the undisclosed income earned after considering the relevant material available on record. Before setting aside the issue, the Tribunal observed that the confession might not have been retracted in accordance with law and therefore, is still relevant but it cannot be treated as conclusive. According to the Tribunal, the admission/confession is to be considered with other evidence available on record and then properly appraised. The Tribunal further observed that "It is settled law that a party to a proceeding can prove that admission made by him was erroneous and proper opportunity is to be provided to the person retracting from confession/admission. Merely because the assessee did not appear for cross-examination, it did not follow that admission has become conclusive and is not retractable. The admission could have been shown to be erroneous through other means without filing affidavit and without stepping into the witness box. Its relative importance is to be judged with reference to other material available on record. Our above conclusion is supported by ....
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.... in which M/s. Video Master a partnership firm of which the following are members of my family as per (1) Shri Dhirajlal Nanji Shah (2) Shri Hasmukh Nanji Shah (3) Shri Shamji Nanji Shah and Sabse Bada Khiladi was purchased by M/s. Time Magnetics (I) Ltd. in which myself, my brothers Shri Pravin Nanji Shah and Shri Hasmukh Nanji Shah are the Directors and India Video rights are purchased by M/s. Video Master where myself, my brother Shri Hasmukh Nanji Shah and Shri Shamji Nanji Shah are partners. The balance amount of Rs. 1 crore include the following : (1) Discrepancy on amount of the documents find seized from the office and factory and residential premises of all my family members, (2) invested in capital and the investment in jewellery and other miscellaneous household expenses." The Assessing Officer, thus, observed that from the above statements given on oath, it is quite evident that the disclosure of undisclosed income was made voluntarily and based on the facts known to him personally. According to him, subsequent retraction of statement by filing an affidavit after a month cannot dilute the evidentiary value of the statement of Shri D.N. Shah recorded on 10-3-2000. The....
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....ized documents. However, loose papers 1 to 11 seized in Annexure A-2 from assessee's office on 25-8-1995 shows the business statement which was claimed by the assessee as received to know the overflow of the film financed by it. The Assessing Officer has, thus, stated that all these papers linked with Shri D.N. Shah's statement recorded on 25-8-1995, then it would become clear that the assessee had substantial interest in the production of that film and income earned by the assessee was not disclosed in the books of account. The Assessing Officer further observed that in the books of account produced during assessment proceedings, assessee paid Rs. 1,12,50,000 to D.M.S. Films and till the date of search, received back Rs. 1,29,00,000. The excess received of Rs. 16,50,000 was accounted for in the books of account as income from the film. It is also pointed out by the Assessing Officer that the assessee was specifically asked to show contemporary evidence to prove that its interest was limited to 10% of commission and 50% of overflow. The assessee failed to produce any such evidence as no entry was made in the books of account of the assessee till the date of search to show that t....
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....s and the same was not a voluntary statement. He contended that the Assessing Officer has failed to give any reason justifying his claim that the retraction filed by Shri D.N. Shah in the form of an affidavit is not valid. The learned counsel argued that the reassessment has been made without mustering any evidence or bringing on record any information or fresh evidence to justify the addition of undisclosed income from both the films to the extent of Rs. 1,83,50,000. The learned counsel referred to the order dated 28-11-1997 of the Tribunal wherein the Tribunal set aside the original assessment order with certain directions. The Assessing Officer was directed to give a fresh finding regarding the undisclosed income relating to films 'Humse Hai Muqabala' and 'Sabse Bada Khiladi', after considering all the relevant material available on record and to pass a speaking order justifying the addition proposed. The learned counsel also pointed out that the Tribunal has given an opinion in para 14 of their order that the statement under section 132(4) of the Act of Shri D.N. Shah, partner of the firm, cannot be treated as conclusive and admission/confession is to be considered with other e....
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....ction of the film and the income earned by the assessee was not disclosed in the books of account, the learned counsel argued that it was never denied that the assessee had substantial interest but the same was in respect of the 10% commission and 50% overflow. He referred to loose papers 1 to 11 seized in Annexure A-2 for contempora- neous evidence. He also contended that letter dated 25-1-1994 addressed to D.M.S. Films constituted an understanding to finance the film 'Sabse Bada Khiladi' which was a covering letter along with a cheque of Rs. 50,000 being the first payment. According to him, there was no further agreements and the above letter of understanding itself was an agreement and it was in the office premises at the time of search. He further stated that there were several other files and documents in the office premises and not all the files and documents were seized. He also pointed out that during the course of original assessment proceedings, the explanation for loose papers 1 to 11 was called for and detailed explanation was given which has not been rejected by the Assessing Officer even in the reassessment proceedings. Regarding the contention of the Assessing Office....
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.....), (iv) Suresh Chandra Agarwal v. Asstt. CIT [IT Appeal No. 7900 (Bom.)] of 1992 dated 12-8-1996, (v) Asstt. CIT v. Mrs. Sushiladevi S. Agarwal [1994] 49 TTJ (Ahd.) 663, (vi) Deepchand & Co. v. Asstt. CIT [1995] 51 TTJ (Bom.) 421, (vii) Gaurishankar Omkarmal v. ITO [1990] 37 TTJ (Ahd.) 353. 8. The learned DR contended that the statement of Shri D.N. Shah, one of the partners of the assessee firm recorded under section 132(4) of the Act, during the course of search operation was without any pressure or duress as has been contended by the learned counsel. He argued that while computing the undisclosed income, reliance has been placed on the seized material and not on the appraisal report prepared by the search party. He invited our attention to pages 13 to 16 of the paper book filed by the Department. On page No. 13, the documents seized from the residence of Shri D.N. Shah have been discussed. Annexure-A is a bunch of 13 loose papers, pages 1 and 2 contained rough scribblings which according to the learned DR are connected with the films made by the group. He referred to the notings mentioned on the front side of page No. 1 as follows : "10 Sargam-Bangalore ....
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....ling with the production and distribution of pictures. According to him, these figures cannot be Rs. 5, Rs. 75, Re. 1, Re. 0.50, Rs. 3.57 etc., which obviously looks illogical. The learned DR also invited our attention to page No. 63 of the Departmental paper book and contended that Shri D.N. Shah, in his statement recorded under section 132(4) of the Act on 24-8-1995 has stated in response to question No. 17 as follows : Q. No. 17:During the course of search, a number of loose sheets were found in your bed room. I am showing page No. 1 of such loose paper i.e., the number of entries made in letter heads of Cine Yug. Can you please explain the entries made therein and in whose hand-writing the entries are made ? Ans.:My office is an open place for all customers who wish to do business with my company and they leaving their proposals for various projects. When we discuss the various proposals at first meeting, we used to whatever like plans as per available or any other proposals I admit on page No. 1 i.e., written by myself by black ink is related to my company. Thus, the learned DR contended that Shri D.N. Shah admitted that the loose papers seized from his residence belo....
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....venue stamp affixed at the place meant for the receiver's signatures. Thus, the learned DR contended that the books of account maintained by the assessee are defective. The learned DR also referred to page No. 37 of the Departmental paper book and argued that the assessee was keeping blank vouchers for the purpose of introduction of bogus expenses whenever assessee desires and in the name of whichever entity of the group, they find convenient. He, therefore, contended that the assessee was in the practice of inflating expenses at their own convenience with the intention to avoid the payment of taxes. The statement of Shri D.N. Shah was also recorded on 13-9-1995 under section 132(4) of the Act. In question No. 24, he was asked to explain regarding the blank debit vouchers which were having stamps and signatures over them. Shri D.N. Shah did not give any explanation, instead he claimed that he was concluding his statement. Thus, the learned DR contended that there was explanation whatsoever in the incriminating documents found by the Department. He further contended that under the circumstances, the allegation that the statement was recorded under duress is without any basis. The le....
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.... rejoinder, the learned counsel contended that 'Maidan-E-Jung' and 'Ganesh Jain', the names which are appearing in the seized paper were not connected with the assessee. He also argued that the assessee was never non-co-operative. Shri D.N. Shah replied to all the questions which were asked from him. So far as the cash amount appearing in the seized documents, the learned counsel contended that the same was accounted for in the books of account. He contended that such cash was paid to small time artists. 9. We have carefully considered the submissions made by the rival parties. We have also gone through the various documents produced before us. The search action under section 132 was carried out in the case of Time Video group and as such the assessee was also covered under search action on 24-8-1995. During the course of search, the search party recorded the statement of Shri D.N. Shah, who is the partner in the assessee firm, under section 132(4) of the Act. The search party also recorded the statement of Shri Ashvin Visaria, an employee of M/s. Video Master. During the course of statement under section 132(4), Shri D.N. Shah made the following disclosure : (i) Unaccount....
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....e has been made to frustrate the efforts of the Revenue to sniff off the unaccounted funds. (iii) Whether the disclosure made is supported by the documents seized during the course of search. Regarding the first issue whether the statement recorded under section 132(4) of the Act during the course of search on 24-8-1995 was a voluntary statement or not, we would like to refer to certain questions put to Shri D.N. Shah and his answers, during the course of search. In response to question No. 5, he has stated as follows : Ans. :Mr. Sudhir is the distributor for Mysore territory (Bangalore). Shri Sudhir (N.R. Sudhir for full) has bought a picture 'Humse Hai Muqabala'. Subsequently, my company, i.e., Video Master and Venus Group became partners for 25 per cent each in the project and the remaining 50 per cent to Shri Sudhir according to the evidence put forward by him in the form of a letter from the producer to him. He has paid or agreed to be paid Rs. 3 crores, the amount was divided into four parts and shares were divided in between Venus and myself. The question put to Shri D.N. Shah was only regarding his relationship with Shri Sudhir but Shri D.N. Shah came out with v....
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....sion of profit, I individually be considered a co-operative absence under section 17 of the Income-tax Act, 1961 avail treat it accordingly. Q. No. 9 :I am explaining to you the provisions of section 132(4) of the Income-tax Act with section 221(1)(6) of the Income-tax Act, 1961. Do you have any declaration to make under the said premises ? Ans. 9 :I want to declare that an amount of Rs. 3 crores as undisclosed income out of which an amount of Rs. 2 crores is in the form of suppression of profits from 2 films viz., Humse Hai Muqabala and Sabse Bada Khiladi. These films have been marked/produced (Negative purchased from M/s. Gentleman Film International) M/s. Vasupradha Enterprises purchased rights of Humse Hai Muqabala in which M/s. Video Master a partnership firm of which the following are members of my family as per (1) Shri D.N. Shah (2) Shri Hasmukh N. Shah (3) Shri Shamji N. Shah and Sabse Bada Khiladi was purchased by M/s. Time Magnetics (India) Ltd., in which Myself, my brothers Shri Pravin N. Shah and Shri Hasmukh N. Shah are the directors and India Video rights are purchased by M/s. Video Master where myself, my brothers Shri Hasmukh N. Shah, Shri Shamji N. Shah are ....
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....about a month makes it abundantly clear that the retraction was an after-thought and the original statement was given voluntarily without any duress or pressure. The statement of Shri D.N. Shah was recorded during the course of search in the presence of two independent witnesses. Shri D.N. Shah has not obtained any affidavits from them to the effect that there was any irregularity in the search or that there was coercion or intimidation which resulted the disclosure of Rs. 3 crores. The statement under section 132(4) of the Act was given voluntarily. The burden of proving that the statement was obtained by coercion and by duress has not been discharged by Shri D.N. Shah. There is nothing in the affidavit filed by Shri D.N. Shah which would prove that the search party intimidated him for making the disclosure of Rs. 3 crores. Thus, Shri D.N. Shah could not submit any evidence to prove that the original statement given by him was under duress and threat, therefore, the retraction filed by him is not valid. Even if we accept that the search party had given some threat to Shri D.N. Shah while recording his statement, there was nothing to stop him to either meet personally or through hi....
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....on the same day or on the following day filed the retraction. The very fact that he kept quite for almost a month after recording the statement proves beyond doubt that the statement was not recorded by using any force by the search party. Therefore, the affidavit filed by Shri D.N. Shah was an afterthought and it was simply a device to frustrate the efforts of the Department to sniff off the unaccounted income of the assessee. 11. Coming to the factor of evidence of the witnesses who were present during the course of search, the issue cannot be decided merely because Shri D.N. Shah, one of the partners of the assessee firm made a protest after the conduct of the search. There is nothing to show that the search was conducted out of any malice on the part of the officer of the Department. There is nothing in the evidence to show that the search party intimidated Shri D.N. Shah to give a confession of Rs. 3 crores in the course of search. The assessee had not discharged the burden of proving coercion and use of force during the course of recording the statement of Shri D.N. Shah under section 132(4) of the Act. The search is generally conducted in the presence of two independent w....
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.... of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922) or under this Act." Thus the authorised officer had the power to record statements on oath on all matters pertaining to the suppressed income. The statement cannot be confined only to the books of account. If Shri D.N. Shah, partner of the firm came forward to disclose Rs. 3 crores of undisclosed income of the firm during the course of search in his statement under section 132(4) of the Act, there is no reason why the Assessing Officer shall not make use of it even though there was no actual verification of the various docu- ments seized during the course of search. The statement was made voluntarily. If there had been any irregularity or use of any force or intimidation, the assessee could have made correspondence with higher authorities immediately after recording such statement appraising them of the coercion or duress used for obtaining the statement. There is nothing to stop the assessee to meet either personally or through their Authorised Representative to authorities of bringing to their notice through written communication that any statement or admission made by them b....
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.... of confessional statement cannot be considered as a valid retraction and the same is nothing but a well planned device to frustrate the efforts of the Department to unearth unaccounted funds by resorting to action under section 132(4) of the Act. In view of the discussion above, the retraction filed by the assessee is, therefore, an afterthought and the same is rejected. 13. Now the only point remains for consideration is whether the disclosure made is supported by the various documents seized during the course of search. Annexure-A is a bunch of 13 loose papers, pages 1 and 2 contains rough scribblings which are actually connected with the films made by this group. These papers were seized from the residence of Shri D.N. Shah. Page No. 1, on the front side, contains certain notings as we have mentioned above. The notings on this page indicate payment out of business receipts in India by Shri D.N. Shah. These figures cannot be in one or two digits as explained by Shri D.N. Shah. These transactions are among the film producers and distributors, therefore, such transactions must be in lakhs only as contended by the learned DR. These accounts had been maintained very systematicall....
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....roup. It was also ascertained that most of the expenditure for the film was done from the office of Times Group. All the cheques, drafts etc., were sent and received from the office of the Times Group. The papers seized from the residence of Shri Pravin Shah revealed the payment of Rs. 45,000 cash and Rs. 45,000 by cheque. Similarly, other papers seized also revealed the payments by the assessee group in cash. In view of the aforesaid discussion, it appears that the assessee firm was indulging in cash transactions which run into crores. The documents seized during the course of search also revealed that Shri Ramesh N. Shah, brother of Shri D.N. Shah has a large number of bank accounts in Dubai and Zurich in which huge cash deposits are being made. The total deposits for certain period for which pass books were found at the time of search was in excess of Rs. 35 crores. Shri Ramesh N. Shah made a gift of Rs. 4.58 crores to various individuals and concerns of Times Group in India. The assessee group was having blank signed cheque books of Shri Ramesh N. Shah and amounts were withdrawn by them by filling in the amounts at will. Thus, the learned DR contended that the assessee perhaps,....
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....atement was not correct The facts of this case, therefore, have no application to the facts of the present case. In the case of Sunder Agencies (supra), nothing was found at the time of search which could have been utilised against the assessee for establishing that expenditure on sales promotion was the undisclosed income of the assessee. But, in the present case, as we have mentioned above, the Department seized a number of incriminating documents which contained financial transactions running into several crores. Therefore, the statement recorded in the present case under section 132(4) was fully supported with the documents seized during the course of search. Therefore, the case of Sunder Agencies (supra ) is entirely different on facts than the present case. Therefore, the same has no application to the facts of the present case. In the case of Suresh Chandra Agarwal (supra) the statement under section 132(4) was recorded on 8-9-1990, and the same was retracted on 10-9-1990. But in the present case, the statement was retracted after about a month of recording the same. In the above case, the assessee also wrote a letter to the Dy. Director of Inspection on 10-9-1990, wherein h....