TaxTMI 
TaxTMI 
TaxTMI 
2016 (11) TMI 1233
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....onfirming the action of Assessing Officer in making addition of Rs. 217995/- on account of difference in cheque discounting income. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs. 15,08,836/- on account of net profit on textile trading business. 4. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs. 12,86,833/- on account of unexplained investment shown as receivables. 5. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs. 67,75,000/- u/s. 68 on account of unexplained cash credit. 6. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of Rs. 2,50,000/- on account of unexplained investment. 7. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has e....
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....en by the assessee on some of the issues in the statement recorded during the course of survey instead of replies given during subsequent inquiries conducted at the Income Tax Office. On the strength of the Hon'ble supreme Court decision in the case of CIT Vs. S. Khader Khan Son, 352 ITR 480 (SC), Hon'ble Kerala High Court decision in the case of Paul Mathews & Sons Vs. CIT, 263 ITR 101 (Ker) and of Hon'ble Madras High Court decision in the case of CIT Vs. S. Khadarkhan Son, 300 ITR 157 (Mad.) contended that under sub-section 3 of section 133, officer who carried out the survey upon the premises of the assessee was not authorized to administer oath, and therefore, that statement was taken without taking any oath from the assessee. If the officer is not empowered to administer oath, then by scoring off the sections in the heads of the stationery would not authorize officer to administer oath and take statement under section 131 of the Income Tax Act, 1961 during the survey. Therefore, this statement is only a piece of information, and does not carry any evidentiary value. He has placed on record copies of these decisions. 5. On the other hand, the ld.DR relied upon the orders of th....
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....ent which alone has evidentiary value as contemplated under law. Therefore, there is much force in the argument of learned counsel for the appellant that the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this" 7. Similarly, the Hon'ble Madras High Court has also concluded that statement recorded during the course of survey has no evidentiary value. The SLP against the decision of the Hon'ble Madras High Court has also been dismissed by the Hon'ble Supreme Court. 8. As observed earlier, nothing substantial would turn out on this issue. It is a peripheral issue related to other grounds. While dealing with those issues, we would keep in mind the contentions raised by the ld.counsel, and the judgment of the Hon'ble Supreme Court in the case of S. Khadarkhan & Sons 9supra). Now we take rests of the grounds. 9. In ground no.2, the assessee has impugned addition of Rs. 2,17,995/-. 10. Brief facts of the case are that the assessee was engaged in the business of cheque discounting. In this line of business, he has used to receive cheque from different persons and after charging a nominal commission, he handed over c....
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..... Bank Ltd. were closed by the assessee or not. Without there being any clinching evidence on this issue, it will be a speculative finding at the end of the Tribunal. The AO has been emphasizing that he called for information from the bank disclosing that the assessee has made transaction, but the assessee has been refuting this information of the AO. The information is not available on the record. The assessee has challenged the AO as well as took a specific plea before the CIT(A). But the AO is silent in his remand report. Therefore, we deem it appropriate to set aside this issue to the file of the AO for re-verification and re-adjudication. The ld.AO shall provide copy of the bank statement exhibiting the turnover between January 2008 to 30th September, 2008. If the transaction is there, in these accounts, then he will be at liberty to make addition of commission income at the rate of 0.1%. But if there is no transaction in these accounts, as alleged by the assessee, then, there would not be any income on account of commission income earned in cheque discounting activity. This ground of appeal is allowed. 13. In ground no.3, the assessee has challenged addition of Rs. 15,08,836....
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....ment shown as receivable. 17. During the course of survey certain loose papers were found and impounded by the survey team. Page no.12 of the Annexure-B indicates certain amounts against the names of certain persons. The AO has observed that in the statement recorded on 6.3.2009, the assessee has explained that these are the list of parties from whom the amounts were receivable. The ld.AO has confronted the assessee to show cause why Rs. 12,86,833/- should not be considered as unexplained investment, and it should not be added as the income for the year under consideration. In response to the show cause notice, the assessee has made the following reply. "Your proposed action to add Rs. 12,86,833/- being the amount receivable as evident from Page 12 ofB-1: Page 12 of B-l found during the survey proceedings shows a list of persons from whom amount receivable by the assessee. Details regarding the same are as follows: a) Rs. 15,000/- from Chirag Shah: It is an outstanding amount receivable from Chirag Shah since the amount was given by the assessee as a Joan- (Copy of ledger duly signed is attached). b) Rs. 2250/- from Parmar: It is an outstanding amount receivable from Parmar s....
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....he amount receivable out of Third Party Shroff cheque discounting. Copy of ledger is attached. q) Rs. 1,52,319/- from Nareshbhai Jhaveri: It is the amount receivable against theagreement to sale Wagon-R car. Xerox copy of the agreement to sale is attached along with a copy of ledger. r) Rs. 7,81,100/~ from Sureshbhai - Nareshbhai: It is the amount receivable against the agreement to sale Flat @ Rivera Tower. Xerox copy of the agreement to sale is attached alongiwth a copy of ledger. From the above, items (a) to (l) were regarding the amount given to various persons as temporary advance which are recorded on the impounded page alongwith the names of respective persons. Item (m) to (p) were related to the amount receivable out of Third Party Shroff Ch./DD discounting. The assessee has earned income from such third party Ch./DD discounting and the same has also been offered for tax in the return of Income. Thus from the above explanations, ledger accounts & proofs, it is clear that the assessee had simply made the total estimated fund to be received from various persons against loans & advances given to various persons, from the Third Party Shroffs & an estimated amount on sal....
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....ed as unexplained investment at the end of the assessee. We allow this ground and delete this addition. 21. Ground No.5. The grievance of the assessee is that the ld.CIT(A) has erred in confirming the action of the AO in making addition of Rs. 67,75,000/- with the aid of section 68. As observed earlier, during the course of survey, certain loose papers were found which was inventorised as Annexure-B/1. On page no.14 of this annexure, a narration in coded word "67,750" was found. The assessee has explained that it was an amount of Rs. 67,75,000/-. In the statement given on 6.3.2009, the assessee has disclosed that it is a loan taken from one Shri Narottambhai Patel, resident of Mahidharpura Hira Bazar, dealing as diamond broker. But later on, in the statement recorded on 20.3.2009 and 30.3.2009, the assessee has submitted that it is a transaction noted during the course of cheque discounting business. He pointed out that the assessee must have received certain cheque for discounting, but since cash was not available in his account, therefore, he took help of other shroff and discounted these cheques. He has given commission to these shroff and handed over cash to client. This expla....
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....e given. As regards the rest of the amount, the cheques of the prior days were given after 25-2-2009. I do not know the Shroffs from whom I had taken the cash amounts. Out of the above referred amount, I have earned the commission amount. In this manner, since I did not have cash amount with me, I have done cheque discounting from other Shroffs, out of which I have earned an amount of about Rs. 6000 to Rs. 8000 per month." Identical question was again asked, the assessee gave reply vide question nso.2 and 3 in the statement recorded on 30.9.2009. "Q.2 On dated 20-3-2009, your statement of oath was recorded and during the recording of this statement, in your answer to question No. 4, you have stated that as per the papers impounded from your office premises during the survey proceedings, you have received an amount of Rs.total Rs. 67,75,000 for the period from 1-2-2009 to 24-2-2009 and this amount has been taken by your from other Shroffs during your cheque discounting business, after giving third party cheques to them. You have also stated that in this manner, since you did not have cash amount with you, by giving third party cheques to the other Shroffs, you have taken cash amo....
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.... received from various persons for discounting are given to Third party shroff to be deposited in that other shroff's bank account and after getting the cheques cleared, that other shroff gives cash to the assessee which he had to give to the concerned persons from whom cheques are received. This is a well known and accepted business modus operandi in the cheque discounting business. Transaction indicated in the page 14 of B-1 were entered into by the assessee with a Third party shroff Mr.Samir Shah, proprietor of Nishi Corporation having his registered office at 3024, Trade House , Ring Road , Surat. He is a regular assessee of the Income Tax Department filing his return more than 10 years. Xerox copy of Income Tax Return for A.Y. 2009-10 alongwith copies of ledger from the books of Mr. Samir Shah duly signed by him are attached herewith. This shroff Mr. Samir Shah has filed an affidavit also in this regard stating very clearly that he had carried out this third party ch. Discounting with the assessee and earned the the ch. /DD discounting charges & offered for tax the same in his return of income. Xerox copy of the same is attached herewith. Thus , it is clear that transactio....
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....m whom such entry was taken. He has filed confirmation and other details. The AO could have dig out defects in his explanation in the remand proceedings. But no such thing has been collected by the AO. The question is, what is evidence with the Revenue to harbor a belief that it was loan taken by the assessee, and he failed to explain the source ? Evidence possessed by the Revenue is the loose paper in coded word. As far as loose paper is concerned, there is no dispute about this fact. The dispute is, what inference one could draw from the page. For drawing inference, we have three statements and nature of assessee's business plus evidence produced during assessment i.e. confirmation etc. As far as statement of the assessee dated 6.3.2009 is concerned, it was only a corroborative statement, because, it was taken without oath. In rest of two statements, the assessee has explained his position with more clarity. If it was a loan, then it must have been reflected in some of the transactions either at asset side along with liability. No such things were found. Therefore, in our opinion, the explanation given by the assessee, which is after 13 days of survey is a plausible one, it canno....
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....Rs. 2,50,000/-. The ld.DR, on the other hand, relied upon the order of the AO. 27. We have duly considered rival contentions and gone through the record carefully. The AO did not examine the issue with the angle assessee has given explanation. According to the assessee he has a capital balance of Rs. 30,88,195/-. Under the current assets, he has shown advance for property at Ratan Astha of Rs. 2,50,000/-. The AO has treated this amount as unexplained investment on the ground that on the date of survey the assessee failed to produce books and failed to explain this investment as accounted for in the books. The survey was conducted on 6.3.2009. The account ought to be closed on 31.3.2009. It was not necessary for the assessee to complete entries upto 6.3.2009. Thus, the AO ought to have examined this aspect from the books of accounts when the assessee has produced. The assessee has also pointed out that he is an old assessee. Even in the Asstt.Year 2007-08 assessment was framed under section 143(3) r.w.s. 147. This assessment was made on 26.12.2011 i.e. after the survey. Thus, it cannot be said that the investment was not recorded in the books, and therefore, it is an unexplained on....