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2016 (3) TMI 76
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....s. 29,78,771.69. During the year, a survey was conducted u/s 133A of the Income Tax Act, 1961 (hereinafter 'the Act') on 09.08.2007 in the business premises at B-1/637, Janakpuri, New Delhi. Subsequently, the assessment was completed u/s 143(3) of the Act making the two additions i.e. (i) Rs. 65.50 lakhs as undisclosed income u/s 69A of the Act in respect of cash receipts found and impounded during the course of survey action and Rs. 8,27,275/- on account of deferred revenue expenses on account of advertisement expenses for the month of March 2007. The ld. CIT (A) confirmed the additions made by the AO. 3. Now, the assessee being aggrieved is in appeal against the aforesaid two additions. 4. Revised Grounds No.1 to 3 are against the sustenance of the addition of Rs. 65.50 lakhs as undisclosed income u/s 69A of the Act in respect of cash receipts found and impounded during the course of survey action. 5. Brief facts to the aforesaid ground are that during the year, a survey was conducted u/s 133A of the Act on 09.08.2007 and during the course of survey, various cash receipts were found and impounded. These cash receipts were correlated with the ledger account for the releva....
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....S.K. Suri, the Managing Director. (iv) The A.O. has also highlighted that the contention of the assessee that no cash was found during the survey and, therefore, these receipts in cash amounting to Rs. 65.50 lakhs is not supported by the evidence found. In this regard it was also observed that as per the books of accounts there was a cash balance of Rs. 1,00,217/-, which had also not been found at the premise. The A.O. has, therefore, stated that such huge amount of cash could not be kept idle at the business premises and, therefore, could not be found at this particular premise. (v) The A.O. has stated with regard to the contention that Shri Suri was in bad mental state and accordingly had given the statement regarding Rs. 65.50 lakhs was also not accepted since from the nature of the statement given by Shri S.K. Suri specifically reproduced on page 8 & 9 of the assessment order, it is clear that the statement was given with alertness and balanced frame of mind. Accordingly, after considering the details of statements which was also reproduced on page 10 to 12 of assessment order, it was clear that Sh. S.K. Suri was fully in control of the running of the business....
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....khs made during the course of survey. However, it was only during filing of the income tax return, after completion of few months from the survey that the appellant decided to retract from his surrender. In this regard, no proper explanation or justification for the delayed retraction was put forward by the A.R. of the appellant either before the assessing officer or during the appellate proceedings. It is pertinent to note that Sh. S.K. Suri, the Managing Director of the company was a person looking after the day to day affairs including financial transactions of the company and it is difficult to accept that he would not be in a position to explain the primary documents found during the course of survey. From the details elaborated in the assessment order as well as submissions of the A.R. of the appellant, it only shows that the nature of these receipts were different from the receipts issued normally to various students against fee received from them. In fact, this would also clearly establish that the difference in the nature of receipts was only because these amounts were received in cash and not accounted for in the regular books of accounts. Therefore, the counter argument ....
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...., in view of the above observations, I am convinced that the addition made by the assessing officer amounting to Rs. 65.50 lakhs is fully justified and this ground of the appellant is treated as dismissed." 6. The assessee, being aggrieved, is in appeal before us on this issue. 7. Ld. AR for the assessee reiterated the submissions made before the ld. CIT (A) and also filed the written submissions. For the sake of clarity, the written submissions filed by the ld. AR are reproduced as under :- "1) Inapplicability of Section 69A: (I) Section 69A states that addition u/s 69A of the I.T Act can be made only when the following conditions are satisfied: i. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and, ii. such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, iii. and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the AO, satisfa....
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....urvey, Sh SK Suri was confronted with the cash receipts found. Sh Suri was unable to provide any explanation and accepted that the amount involved in these receipts was unaccounted receipts for FY 2006-07. ii. However, while filing the return of income, the assessee declared a loss of Rs. 29,78,771/- whereby the amount of cash receipts was not reflected. iii. A detailed explanation was given by the assessee as to why the amount surrendered was never the income of assessee and was just a record of internal transfer of cash from one centre to another. iv. In question no 21, the authorised officer confronted Sh. SK Suri with slips seized and pointed out that cash has been written thereon and required him to give details thereof. In response to this question, the assessee submitted "I cannot provide details of the receipts at present". (Relevant extract of statement attached at PB 45-56) v. However, the authorised officer again vide question no 22 required him to co-relate those receipts with the books of accounts of the assessee company for that year. Sh Suri had already explained that he cannot give the details of such 'receipts' at that ti....
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....aid "receipts". ii. The assessee pointed out that the format of these "receipts" were different from the format of fee receipts issued by the assessee in the regular course of business as the same neither included the head of service tax nor included the cheque number and bank name and also did not include the course and class for which the fees is being alleged to be received. Accordingly the same could not be used for issuing receipts to students from whom fees was received in regular course and therefore were used only as a memoranda account for internal transfer of funds by the assessee company. iii. It was also explained that no income or revenue was earned by the assessee against such receipts since the original receipts prepared were found during the course of survey (PB 63-162) and therefore it cannot be said that the assessee had received any fees from any student since in case of actual receipt from students the original copy would have to be given to the payer and the assessee would have retained only a carbon copy. It was pointed out to the learned Assessing Officer that in fact all the 208 "receipts" were the original copy which could not be available....
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....ppens that the student gives a lump sum amount of tuition fees. As can be seen from the sample receipts and student-wise statement of tuition fees received during the year (PB 57-62), it has hardly happened that the amount received is a lumpsum fees amount of about Rs. 30,000 or more. However, in the seized receipts, there are hardly any bills of amounts less than Rs. 30,000/- and almost all bills are of lumpsum amounts ranging between Rs. 30,000 to Rs. 65,000/-, which is a rare transaction in the routine of the assessee's business. xii. Besides and most importantly, the assessee company provides coaching for exams that are held in March every year. Because of this reason, it is an established routine every year that the faculty at the centres complete the course by January each year. It is therefore very uncommon that a student takes admission in a batch whose course has been completed. Also, one would not pay fees in lumpsum much before the start of batches i.e, in April-May. The fact that there is a very meagre number of new admissions in Jan-Feb- March every year can be established from the ledger of tuition fees received by the assessee company of FY 2006....
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....statement with. ii) Reliance is placed on the decision by the Hon'ble Supreme Court in the case of CIT v. S. Khader Khan Son [2012] 254 CTR 228 whereby it was held; "Section 133A of the Income Act, 1961 - Survey - Whether Section 133A does not empower any ITO to examine any person on oath; so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition - Held, yes" iii) As per CIT v. Dhingra Metal Works [2010] 328 ITR 384 (Delhi HC); "Para 2; During the course of survey, the tax officials noticed some discrepancies in stock and cash in hand. During the said survey, respondentassessee surrendered an amount of Rs. 99,50,000/- and offered the seine for the purposes of taxation. The additional income offered included a sum of Rs. 45,00,000/- on account of excess stock found during the course of survey and offered by one of the partners of the respondent-assessee as additional income. 5. However, subsequently, the respondent-assessee vide its letter dated 29th November, 2004 contended that the statement about stock was incorrect and that the impugned discrepan....
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....conciled the receipts found during survey and has explained the receipt as that of inter branch transfer and without examining the veracity of the claim of the assessee, the AO jumped into a conclusion based only on the admission made by Shri Suri during survey cannot be countenanced. The Hon'ble Supreme Court in the case of CIT v. S. Khader Khan Son [2012] 254 CTR 228 has held as under :- "Section 133A of the Income Act, 1961 - Survey - Whether Section 133A does not empower any ITO to examine any person on oath; so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition - Held, yes" And we take note of the decision the Hon'ble jurisdictional High Court in a similar case i.e. CIT v. Dhingra Metal Works [2010] 328 ITR 384 (Delhi HC) wherein the Hon'ble High Court held as under :- "2 During the course of survey, the tax officials noticed some discrepancies in stock and cash in hand. During the said survey, respondent-assessee surrendered an amount of Rs. 99,50,000/- and offered the seine for the purposes of taxation. The additional income offered included a sum of Rs. 45,00,0....
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.... light of the following explanation given by the assessee :- That receipts issued to students which are placed from page 93 is different and as explained by the ld. AR that the 208 "receipts" found at Janakpuri centre were on the formats of unused receipts earlier printed for use in the centre but were not used due to printing irregularities in the said "receipts". The ld. AR pointed out that the format of these "receipts" were different from the format of fee receipts issued by the assessee in the regular course of business as the same neither included the head of service tax nor included the cheque number and bank name and also did not include the course and class for which the fees is being alleged to be received. Accordingly the same could not be used for issuing receipts to students from whom fees was received in regular course and therefore were used only as a memoranda account for internal transfer of funds by the assessee company. In the light of the above facts and circumstances, we are of the considered opinion that the ld. CIT (A) erred in upholding the conclusion of the AO based only on the admission during survey made by Shri Suri at the wee hours (i.e. bet....
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....nse had been disallowed in the earlier year and the assessee had offered for taxation why in this year this practice has been discontinued. Accordingly, it appears that the assessing officer has followed the rule of consistency in accounting as well, as in allowing advertisement expenses and has accordingly disallowed this amount. I do not find any reason for interfering with the findings of the assessing officer and accordingly, this addition is upheld and this ground of the appellant is dismissed. 13. Ld. AR submitted the written submission which are reproduced as under :- "The complete details of advertisement expenses including the ledger and bills of 'advertisement expenses' (PB --) incurred by the assessee were furnished before the ld. AO and it was explained that the entire expenditure had been incurred wholly and exclusively for the purpose of business. In no possible way had the AO pointed out any discrepancy or any expenditure of inadmissible nature as per section 37 of the I.T Act, 1961. The disallowance was made only on the ground that during AY 2006-07, the expenses incurred in March 2006 had been offered for tax by the assessee, w....