TaxTMI 
TaxTMI 
2018 (10) TMI 925
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....37,456/- being the value of machines (yet to be installed) and moulds for which bills were yet to be received. (c) That subsequently the bills were received, however the machines did not work properly, these were returned to vendor; and the payments of moulds, freight were made by the assessee. (d) During the assessment proceedings, the Ld. ACIT has made additions of Rs. 91,37,456/- being the value of machineries on the basis of statement taken under pressure at the time of survey carried out on 01.10.2010 without giving adequate opportunity to the assessee and no enquiries were conducted before concluding the additions. (e) That the Ld. AO had made no effort/enquiry about the genuineness of the facts and just went on to conclude that the submissions made by the assessee is nothing but an afterthought of the assessee." 2. Briefly stated facts of the case are that the assessee, a partnership firm was constituted by two partners, namely, Sh. Ashwini Kumar Sachdeva and Smt. Puja Sachdeva having profits sharing ratio of 80% and 20%. The firm was engaged in the manufacturing of footwear soles. In the case of the assessee, a survey operation under section 13....
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....njection moulding machines were purchased from M/s Aman Hydraulics (India), New Delhi, vide their invoice Nos. 84 and 87 dated 01/10/2010. Regarding 20 PVC moulds, the assessee submitted that same were purchased from M/s Kalyani Mould, Mongol Puri, New Delhi vide invoice number 112 dated 01/10/2010. The assessee submitted that those machines and moulds were received through Mallik Transport Company. The assessee explained that those injecting moulding machines broke down during trial run and could not be repaired satisfactorily and as such those were sent back. The assessee submitted that surrendered amount was without any basis and the tax paid by way of cheques against the surrender amount by including the value of above machinery , was adjusted against the advance tax liability and no separate advance tax was deposited. The above submissions of the assessee were not accepted by the Assessing Officer due to reasons summarized as under: 1. In the statement recorded, the partner of the firm mentioned that the statement was given voluntarily without any fear and thus the contention that said surrender was under pressure, was not acceptable. 2. The assessee paid inc....
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.... delivered on 1/10/2010 how can it be said late. "Any way if the order was placed in June for machinery which appears to be custom made for assessee. The normal business practice demands that the assessee must have paid some advance to the manufacturer to enable them to make the machinery which was worth Rs. 82 lac. No prudent businessman will take an order without advance to manufacture machines as per somebody else's specification requiring fabrication. Because if the machine is rejected by the buyer there will not be another buyer for that product and the manufacturer will suffer huge losses. It's common business practice even if someone wants to buy 10 Kg of sweets and wants to place order at any sweet shop, the shopkeeper will not take order unless substantial advance is given. In this case it was a question of Rs. 82 Lac. The assessee claimed that no payment whatsoever was made to M/s. Amaan Hydraaulics for supplying machines worth Rs. 82 Lac. That M/s Amaan Hydraulics supplied the machines at the assessee's premises without taking a single penny. It allowed the assesses to install the machines and to start trial production with....
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....1,37,456/- out of its undisclosed income. Once the machines were noticed in the Survey operation, the assessee disclosed additional income of Rs. 91,37,456/- and paid tax on the disclosed income. Later the assessee tried to avoid paying taxes by creating the story that the machines were returned and no payment was made to the manufacturer. The machines were taken after making payment from unknown sources. No finding is being given on what happened afterwards with the machines. If the machines were indeed returned the assessee might have received a part of money back from the manufacturer as per the industry norm. Initial acquisition of machineries and moulds was from undisclosed source of income." 5. Before us, the learned counsel of the assessee relied on the submission made before the Ld. Assessing Officer and Ld. CIT(A) and filed copy of all those submissions in the form of paper-book containing pages 1 to 142. 6. The learned counsel referred to page 127 of the paper-book, which is a photo copy of the office copy of letter dated 20/10/2010 issued by proprietor of M/s Aman Hydraulics (India). In this letter, it is mentioned that the proprietor of M/s Amaan Hydrauli....
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.... stated that bills of the machines were not received and no payment was made in respect of those machines, but however on pressurising, he offered to surrender the amount in respect to the machines and moulds. He submitted that the assessee has substantiated that machines are returned back and payment for moulds has been made through cheque subsequently, and thus no addition was called for in respect of those machines and moulds. 9. On the contrary, the Ld. DR submitted that the allegation of pressurizing the partner of the firm during the course of survey proceedings is false and without any basis. According to the learned DR, the survey team was not having any personal enmity with the assessee, for which they would pressurize or intimidate the partner of the assessee firm. He submitted that in normal course of survey proceeding, once survey is started, it is continued on day to day basis and thus statement was recorded on the next day. According to the learned DR, the allegation of recording a statement under pressure at midnight of 01/10/2010 are false and without basis, as Sh. Sachdeva in his own handwriting has written at the end of the statement that he had given above sta....
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.... the case of Avinash Mishra (supra) is not applicable over the facts of the instant case. He further submitted that machinery was received on approval and therefore same was not entered in the books of accounts. He submitted the correspondence between the assessee and M/s. Amaan Hydrolics (India) has not been discarded by the Revenue authorities. According to him the allegation that payment was made from unaccounted sources was a mere guesswork and no evidence in this regard have been found during the course of survey. He submitted that in respect of the moulds payment has already been made by the assessee and this fact has not been denied by the Assessing Officer. In view of the above submissions, the learned counsel submitted that amount of addition in dispute deserve to be deleted. 13. We have heard the rival submissions and perused the material on record including the paper-book submitted by the assessee and the orders of the lower authorities. In view of the finding of the lower authorities and the arguments of the Ld. counsel of the assessee and Ld. DR, the main issue in dispute is whether the assessee made any payment out of undisclosed sources for acquiring the 6 mouldin....
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....ccounts, the cash in hand is shown at Rs. 96,431/-. However, as physical verification cash has been found at Rs. 10,21,449/-, excess cash Rs. 9,25,018/- (ii) As per books of accounts, you have shown creditors at Rs. 2,85,33,061/- which includes the following: (a) M/s Aggarwal Trading Co., Mundka , New Delhi. Rs.2,80,800/- (b) M/s B K Plast, Timar pur, Delhi. Rs.4,55,270/- (c) M/s Crystal Plymer Impex, Nerela, Delhi. Rs. 2,32,336/- (d) M/s Daya Footwear Pvt. Ltd. . Rs. 2,21,934/- (e) M/s Laxmi Polychem, Laxmi Nagar, Delhi. Rs.1,53,660/- (f) M/s Kandla Polyplast Pvt. Ltd. Rs.4,66,454/- (g) M/s Kneader House, Mundka, Delhi. Rs.4,94,000/- (h) M/s Kutch Plymers, Bawana Industrial Area, Delhi. Rs.2,32,330/- (i) M/s Marvel Vinyls Ltd, Nehru Place, Delhi. Rs.4,20,160/- Rs.29,56,944/- As per correspondence made by you with the above parties (copies of letters) you have been disputing the above payments, please explain why it shall not be held that this liability to....
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....0,19,418/-(Sundry Creditors of Rs. 29,56,944/- + Excess cash in hand of Rs. 9,25,018/- + Machinery and Moulds as stated above of Rs. 91,37,456/-) as additional income of the firm M/s Alert India for the current Financial Year 2010-11 relevant to A.Y. 2011-12 in addition to be normal income." 16. On perusal of the statement, we find that there is no evidence that the statement of Sh. Sachdeva, particularly, the surrender was recorded at midnight. At the beginning of the statement, the date is recorded as 01/10/2010, whereas at end of the statement the date recorded is 02/10/2010. Thus, possibility of recording the statement in daylight of 02/10/2010 could not be rejected. Merely mentioning the date at the end of the statement as 2/10/2010, it cannot be presumed that it was recorded at midnight of 01/10/2010. No such fact has been asserted by Sh. Sachdeva before the lower authorities. The assessee firm, is interpreting the statements of Sh. Sachdeva according to its choices. Thus, the ratio in the case of Kailash Ben Manharlal Chokshi (supra) cannot be imported to the facts of the instant case. 17. Further, during the course of survey the assessee surrendered income of Rs. 1,30....
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.... by the Authorised Officer, which being not in accordance with law, should be ignored and not relied upon. In the case of S. Khadar Khan Son (supra) the Hon'ble Supreme Court granting the petition of special leave upheld the decision of the Hon'ble Madras High Court wherein it is held that section 133A does not empower any Income-tax Authority to examine any person on oath, hence any such statement has no evidentiary value and any admission made during such a statement cannot, by itself, be made the basis for addition. Similarly, Hon'ble Delhi High Court in the case of Dhingra Metal Works (supra) held that for a statement to have evidentiary value, the survey officer should have been authorised to administer oath and records sworn statement, but he has not been so authorised under section 133A of the Act. The Hon'ble court further held that the word "may" used in section 133A(3)(iii) of the Act clarifies beyond doubt that material collected in the statement recorded during the survey is not a conclusive piece of the evidence by itself. It is settled law that the admission is an extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person wh....
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....he judicial pronouncements discussed above, it is evident that no addition can be made merely on the basis of statement recorded during the course of survey proceeding and for making the addition the statement must be corroborated with other evidences. 21. We find that in the instant case, the Ld. CIT(A) has upheld the addition not merely in view of the statement of Sh. Sachdeva or surrender of the income corresponding to investment in machinery, but the Ld. CIT(A) has examined the addition in view of the provisions of section 69A of the Act, where if the assessee is found to be owner of a valuable article and same is not found to be recorded in the books of accounts, the assessee is required to explain satisfactorily the source of acquisition of said article and in case of failure it is deemed to be the income of the assessee. The relevant provision i.e. 69A of the Act is reproduced as under: "Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained....
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....reproduced in earlier Paras, it is again reproduced as under : "Thirdly the assessee has filed copy of its internal document scanned hereunder. On this document it has been mentioned "PARTY BILL PASSED AGAINST BILL NO. 87 OF 1/X/X". This clearly shows that the machines were received and bills were passed implying thereby payments were done." 25. The learned counsel of the assessee has not controverted this finding of the Ld. CIT(A). In normal terminology of accounting, bill passed means payment has been made by the assessee. In our opinion, when the documents of the assessee itself shows that bills for the machines were passed, which means payment was made by the assessee. 26. Secondly, the assessee has failed to furnish production report that the machines in questions were having low yield. According to the assessee, this was the main reason for return of those machines to the supplier, but this reason has not been substantiated by the assessee with evidences. Thirdly, the probability that machines worth Rs. 82 lakhs would be supplied to the assessee without any payment to the supplier is also remote. Fourthly, the receipt of the machines and return thereof ha....