TaxTMI 
TaxTMI 
2019 (3) TMI 1347
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....ale of goods to Toms enterprises? Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts. Question:- 9- In addition to the above what are your major expenses? Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive. Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit? Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure." 2.1 On verification of the P&L account for the AY 2014-15, the Assessing Officer found that the assessee had shown gross profit at 10.55% instead of 15% indicated by the Managing Partner. The Assessing Office issued a show cause notice to the assessee asking wh....
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....Act 1961, the assessee categorically admits that the firm is earning a Gross Profit of 15% on Sales Turnover. As the statement was given as per the Evidence Act, the assessee cannot retract from the admission made in the statement recorded as per Summons u/s 131(1) of the I.T. Act. Moreover the contention made by the assessee that the Managing Partner was not aware of the financial aspects of the firm is not true as per the facts and circumstances of the case. The application made by the assessee is rejected on the above grounds and I am fixing the Gross Profit @ 15% of the Turnover achieved during the year." 3. On appeal, the Ld. AR disputed the estimation of gross profit at 15% by the Assessing Officer. It was submitted that the assessee had merely mentioned that they plan and prepare price list in order to get approximately 15% gross profit and 4% net profit and this cannot be considered as admission. It was erroneous to interpret the statement as admission by the managing partner and the managing partner had nowhere categorically admitted of making 15% Gross Profit. According to the Ld. AR, no documentary evidences were found from the assessee by the revenue to support the a....
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....ase in discounts offered resulted in low GP compared to earlier years. It was submitted that the assessee had not attained a GP of 15% in any of the previous years. Thus, it was reaffirmed that the GP ratio as mentioned by the managing partner in his statement had no basis and had no nexus with the actual financial condition of the assessee. Thus, it was submitted that the Assessing Officer had erroneously placed his reliance on a statement given by the managing partner without having any evidences to substantiate the addition. 4. Considering the submissions of the ld. AR, the CIT(A) called for remand report on sustainability of the additions. The Assessing Officer submitted the remand report vide letter dated 23.05.2018 and the relevant part of the report is as under: "4. Statement recorded u/s.131(1) of the I.T. Act should have the same bearing as evidence defined in section 3 of the Evidence Act. Assessing Officer is vested with the same powers in a Court as under Civil Procedure Code, 1908. According to the Hon'ble High Court decision of Kerala in ITA No.551/2009 dated 26/05/2010 in the case of CIT Vs. Hotel Meriya, the statement recorded on oath cannot be brush....
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....d with powers of Court under CPC, 1908 under section 131 of the Act to record statements on oath and the same can be taken as admission of the assessee. However, the question is whether it is conclusive and the assessee is barred from retracting such statement. This question was answered by Hon'ble Supreme Court in the case of Produce Co. Ltd. vs State of Kerala ( 91 ITR 18) and held as under: "It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect." 6.1 In the light of the decision of Hon'ble Supreme Court, the CIT(A) observed that though the admission made is an important piece of evidence, the same is not conclusive and the Appellant can show that such admission was incorrect. Therefore, there is no bar on the Appellant to explain whether the admission reflects t....
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....endent chartered accountant. As noted by the Commissioner (Appeals), the financial results were fully supported by the assessee with vouchers and the books of account were complete and correct in all respects. The accounts which are regularly maintained in the course of business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the revenue to show that either the books of account maintained by the assessee were incorrect or incomplete or method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom," 6.4 Further, the CIT(A) relied on the judgment of the Delhi High Court in the case of Poonam Rani (326 ITR 0223) wherein the Court had considered issue of rejection of low net profit rate and held as under: "10. .......Similarly, if the rate of GP declared by the assessee in a particular period is lower as compared to the GP declared by him in the preceding year, that may alert the assessing officer and serve as a warning to him, to look into the accounts more carefully and to ....
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....2014 for the purpose of framing the assessment wherein he has stated as follows: "Question:- 8 - Explain the procedure of sale of goods in your firm. For e.g. I am showing a sale bill TPA 536 dated 03/01/2014 of Toms Pipes Pvt. Ltd. Please explain the sale of goods to Toms enterprises? Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts. Question:- 9- In addition to the above what are your major expenses? Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive. Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit? Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure." ....
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....be explained or shown to be wrong but they do raise an estoppel and shift the burden of proof to the person making the admission. The Supreme Court further held that unless shown or explained to be wrong, they are an efficacious proof of the facts admitted. Thus, the burden to prove "admission" as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction is proved sufficiently, the earlier stated facts loose their effect and relevance as a binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admissions will not be enough even after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded u/s. 131 was involuntary and it was made under coercion or during their admission, the statement recorded u/s. 131 has no legal validity. 8.3 There was a circular issued by CBDT issued circular in F. No. 286/98/2013- IT(Inv.II) dated 18th December 2014 stating as follows: "Instances/complaints of undue influ....
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.... under : "22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. [see Pon Adithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] ............... 8.6 Yet again in Romesh Chandra Mehta vs. State of West Bengal (1969) 2 SCR 461 although this Court held that any statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 8.7 It has been similarly held by the H....
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....contents stated in the retracted statement must be substantially corroborated by other independent and cogent evidence. It has been consistently held by various courts that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. 8.9 We are of the view that the statement recorded u/s. 131 cannot be independently used for making any addition in the hands of the assesse and the said statement cannot, in our view, be the sole basis for making any addition and must be independently corroborated by evidences. Thus, on a careful reading of the decisions of the Hon'ble Supreme Court referred before us, we are of the view that the legal position that emerges is that a sworn statement, though binds the assessee, it cannot be the sole basis for making the assessment. It is open to the assessee to show the circumstances in which confessional statements were recorded and once the assessee proves that confessional statements were recorded under threat and coercion and retracts from the same, the confessional statements cannot be the sole basis for making assessments or for making any addition in t....
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.... he agreed to an ad hoc addition. The Assessing Officer based on the admissions made by the assessee, which were directly relatable to the defects noticed during the action under section 133A of the Act, recomputed the assessment. The order was set aside by the Commissioner of Income-tax (Appeals) and this order was upheld by the Tribunal. On appeal to the High Court: "Held, dismissing the appeal, that in view of the scope and ambit of the materials collected during the course of survey action under section 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee." 10. On further appeal by the Department in Civil Appeal No. 13224 of 2008 and 6747 of 2012 dated 20/09/2012, the Supreme Court held as follows: "Heard Counsels on both sides. Leave granted. Civil Appeal filed by the Department pertains to 2001-02. In view of the concurrent findings of the fact, this Civil Appeal is dismissed." Hence, the ratio laid down by the Madras High Court was confirmed by the Supreme Court. 11. From the for....