TaxTMI 
TaxTMI 
2018 (7) TMI 944
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.... of assessee's firm, was recorded under section 131 of the Act on 28/11/2006, wherein he stated that commission paid by the assessee and its sister group concerns to M/s. Litaka Pharmaceuticals Ltd., were admittedly not genuine. According to the deposition of Shri Kiran Somalwar, these commission payments made by the assessee are not genuine, as no services have actually been rendered by M/s.Litaka Pharmaceuticals Ltd. and the same was received back by the assessee in cash, for which M/s. Litaka Pharmaceuticals Ltd. retained an amount at 3% thereof. It was confirmed by Shri Kiran Somalwar that such commission payments have been made in the case of M/s. Kiran Agencies - the assessee and its associate concerns i.e. M/s. Usha Distributors and M/s. D.S. Agencies & Associates. From the details in the impugned orders of the authorities below, it is seen from the statement of Shri Gopal Ramorti, dated 30/10/2006, Director of Twilight Litaka Ltd. that admissions are available in respect of non-genuine payments of commission received from the assessee and its associate concerns (supra), which were returned to these parties in cash, and were collected by the assessee's staff or deliver....
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....ed as non-genuine, relying purely upon the statements made at the time of / in connection with the survey under section 133A, though validly retracted subsequently, without any cogent/ corroborating material to support and also ignoring/not appreciating in right perspective the appellant's submissions as well as the evidence produced. The appellant prays that since the said commission expenses are genuine and are incurred wholly and exclusively for the purposes of the appellant's business the same be allowed as business expenditure under section 37(1) and the addition of the same as the appellant's undisclosed income be deleted. 2) Ad hoc disallowance of various expenses (transport, travelling and guest house expenses) - Rs. 50,000/- On the facts and circumstances of the case and in law, the ld. CIT(A) erred in upholding the arbitrary and ad hoc disallowance out of various expense s to the extent of an ad hoc amount of Rs. 50,000/- holding the same to cover up various discrepancies. 3) Other / consequential reliefs On the facts and circumstances of the case and in law, and in view of the reliefs prayed for hereinabove, the appellant prays Your Ho....
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.... State of Kerala [(1973) 91 ITR 18] 4.1.3) The ld. AR also placed reliance on the following judicial pronouncements in support of the assessee's contention that relying on the statement of third party without providing assessee an opportunity for cross-examination, is bad in law:- i) M/s. Andaman Timer Industries vs. Commissioner of Central Excise (Civil Appeal No. 4228/2006, dated 02/09/2015)(SC) ii) M/s. CIT vs. M/s. Ashish International (ITA No. 4299/2009, dated 22/02/2011) (Bombay - HC) 4.1.4) Reference was also invited to CBDT Circular F.No. 286/2/2003-IT (Inv.), dated 10/03/2003 to submit that CBDT has discouraged attempts to obtain forced confession of additional income during the course of search and seizure and survey operations which are not based on credible evidence. 4.2) Per Contra, ld. Departmental Representative for the Revenue has placed reliance on the finding recorded in the orders of the authorities below to submit that the impugned order of the ld. CIT(A) ought to be upheld on this issue, as it is based on the statements recorded in the course of survey proceedings. It is submitted that the retraction by the partner of the assessee fir....
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.... was bogus and these were only accommodation entries. 10.1 We note that vide letter dated 16.01.2007 exhibited at page no. 64 to 66 of the paper book, No 1, filed by the assessee, Shri Vijay Wasudeo Somalwar partner in assessee retracted the statements recorded on 28th and 29th Nov. 2006 exhibited at page no 64-66 of paper book No.1. The retraction letter is reproduced as under:- Ref. No Dated 16-01-2007 BEFORE THE DEPUTY DIRECTOR OF INCOME TAX (INV) UNIT IV(3), MUMBAI IN THE MATTER OF: KlRAN WASUDEO SOMALWAR KlRAN AGENCIES 51, GNEREAL MERCHANT MARKET. GANDHIBBAG, NAG PUR PAN:AADFK8570A REFERENCE: Survey u/s 133A conducted at our branch office at A-40, Kalayaji Morarjee Warehousing Ltd. Prem Estate J Mazqoan, Mumbai-400010 Dear Sir, With reference to survey conducted & statement recorded of Mr Kiran asudev Somalwar partner of M/s Kiran Agencies on 28.11.2006 & again recorded on . 29.11.2006, I the undersigned partner of Kiran Agencies wish to state as under in view of Mr. Kiran W Somalwar out of India as of date & shall be available after 01/02/2007. 1. That the officers and the staff of the Income Tax Departme....
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....is paid through account payee cheques & the same was accepted by the parties. That M/s. Litaka Pharmaceuticals has nowhere mentioned that the commission paid was bogus & nor they have mentioned that the commission paid is not genuine. We have deducted & paid TDS & also paid service tax on the commission paid. 7. Therefore we hereby request that you may send inferences of your investigations to competent income tax authorities for their assessment at Nagpur as we are assessed at Nagpur. We shall pay all the income taxes that would be determined by the income tax authority at Nagpur after the assessment 8. May we request you to do the needful to the bet mutual interest and remain obliged. Thanking You For Kiran Agencies (Vijay Wasudeo Somlwar) Partner 10.2. The facts of the case are res ipsa loquitor to the extent that assessee made statements which was recorded u/s 131 during the course of survey u/s 133A and retraction of the said statements as referred to above meaning thereby that statements recorded made on 28th and 29th Nov. 2006 u/s 131 stand withdrawn the various allegation -undue influence, coercion and pressure by the su....
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....ment year 2003-04 the Mumbai Bench of Tribunal in the case of DCIT Vs. Prem Sons held that without any material to correlate the additional income surrender during the survey u/s 133A, addition cannot be made when surrender is retracted. 10.6 Further it was held in the case of Pullangod Rubber Produce Company Ltd. Vs. State of Kerala [1973] 91 ITR 18 (SC), that an admission is an extremely important piece of evidence but it cannot be said that it is a conclusive and it is open to person who made the admission to show that it is incorrect. 10.7 Vide CBDT Circular F.No. 286/2/2003/IT-(Inv.) dated 10.03.2003 it has been made clear that no attempt should be made to obtain confession as to the undisclosed income and the addition should be made only on the basis of material gathered during the course of search & survey thereby issuing instruction to the Department that no addition can be made or sustained simply on the basis of statement recorded during survey/search. In other words, in order to make any addition on the basis of surrender during search or survey, it is sine qua non that there should be' some other material to correlate undisclosed income with such s....