TaxTMI 
TaxTMI 
2010 (8) TMI 1137
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....o be relied as per the CBDT circular and further erred in rejecting the arguments of the appellant that as per the Judgement of Hon'ble Kerala High Court in the case of Paul Mathews & Sons Vs. CIT, 263 ITR 101, the statement recorded u/s. 133A cannot be relied upon. 4. The facts material for adjudication of Ground No. 2 and 3 are as follows. The assessee is a company and is engaged in the business of trading in readymade garments. It has a showroom selling readymade garments at Peddar Road, Mumbai, which is an up market area. The due date for filing the return of income for A.Y. 2002-03 was 30.10.2002. Assessee did not file return of income on or before the said date. On 25.11.2002, there was a survey u/s. 133A of the Act in the business premises of assessee. In the course of survey, statement of Ms. Jaya Patel, a director of the assessee, was recorded. The exact time when the survey commenced is not given in any of the orders. From answer to Question No. 3 of the statement of Ms. Jaya Patel, it is clear that she came to the business premises where the survey was being done by about 7 p.m. on 25.11.2002 and by that time inventory of stock of garments available at the premise....
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.... as to undisclosed income. According to the assessee the action of the Assessing Officer was contrary to the instruction of the CBDT. 7. The Assessing Officer however added a sum of Rs. 1.75 crores to the total income declared by the assessee in the return of income for the following reasons :- "It may be mentioned that the statement of Jaya Patel was recorded after showing her the incriminating documents found and impounded during the course of survey u/s. 133A of the I.T. Act and at the time of the said director had disclosed the additional income after due consideration of facts before her. Hence, the retraction is nothing but an adamant non-reconciliation approach towards the facts of case. Accordingly, the income disclosed at the time of survey u/s. 133A for an amount of Rs. 1,75,00,000/- is treated as 'unaccounted income' earned by the assessee for A.Y. 2002-03 and is added back in the total income. Penalty proceedings u/s. 271(1)(c) initiated." 8. Before learned CIT(A), the assessee reiterated the submissions made before the Assessing Officer and further relied on the decision of Hon'ble Kerala High Court in the case of Paul Mathew & Sons Vs. CIT, 263 ITR ....
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....s only a declaration of income for A.Y. 200203 and not additional income. The learned counsel for the assessee submitted that statement can only mean that the assessee had offered to declare a total income of Rs. 1.75 crores. According to him, Rs. 1.75 crores cannot be said to be an offer of additional income over and above income as per the books of account. Thus, at the outset, he submitted that the dispute can only be with regard to taxing the difference between the sum of Rs. 1.75 crores and income declared by the assessee only in the return of income filed for A.Y. 2002-03 viz., Rs. 1,01,69,790/-. He further drew our attention to the statement of Ms. Jaya Patel recorded at the time of survey and in particular, the answer to question No. 22 & 23. He submitted that the answer to the above questions would clearly show that the assessee made a declaration to offer total income of Rs. 1.75 crores for A.Y. 200203 purely due to coercion. It was also submitted that officers conducting survey were bent upon getting surrender of income for taxation purposes and the movement of this was achieved in the statement recorded at 6.10 a.m. on 26.11.2002 and the survey proceedings came to an en....
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....of law. In this regard, learned counsel for the assessee relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. Hi Tech Arai Ltd., 321 ITR 477 (Mad); wherein it was held that Coordinate Bench decision need not be blindly followed if the earlier decision did not reflect correct position of law. 13. The learned DR at the outset submitted that declaration of Rs. 1.75 crores for A.Y. 2002-03 is only an additional income over and above the income as per the books of account. According to him, no person will make surrender at the time of survey in respect of income as per the books of account. His further submission was that the assessee had not specifically retracted the statement at the time of survey. It was alternatively submitted by him that the assessee has not explained as to why he has not declared Rs. 1.75 crores in the return of income filed and as to how income of Rs. 1,01,69,790/- alone was declared in the return of income. According to him, there was no coercion exercised by the department at the time of survey and the statement was a voluntary statement. His further submission was that the fact that the assessee offered income surrendered at the t....
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....to any material found at the time of survey based on which surrender can be said to be correct. The law with regard to admission as the basis of making an addition is very clear. Admissions are not conclusive and person who made the admission is always at liberty to show that the admission was erroneous or was given under a mistake. We have already seen the manner in which surrender of income was made by the assessee. We do not wish to go into the question as to whether surrender was voluntary or was given under coercion. We are however of the view that in the absence of any material found in course of survey to what the assessee earned income of Rs. 1,75 crores, the impugned addition could not have been made purely based on the statement recorded at the time of survey. In this regard, we are also of the view that facts in A.Y. 2001-02 stand on different footing because surrender was additional income over and above the income as per the books of account of the assessee. The Tribunal's order for A.Y. 2001-02, in our view would not be relevant in this regard. We also further notice that on the basis on the documents found in course of survey, the Assessing Officer has already reject....
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....02 15,61,500 Chitti a/c is consolidated in page 284 of file No. 39. 5,85,635 9,75,865 3. Paper No. 5 File No. 12 70,56,677 Sep 2002 8,13,556 4,53,036 3,60,520 4. Page No. 9 of Executive diary A/36 3,43,000 Jan 2002 2,00,000 Given to Mr. Patel on a/c of chitti to keep in safe custody. 2,00,000 5. Page No. 13 of executive diary A/36 2,11,903 Jan 2002 84,079 84,079 Total 2,63,19,918 35,39,896 15,53,335 19,86,561 Percentage of cash sale 13.44 5.90 7.54 17. According to the Assessing Officer the incriminating documents revealing the gross profit tinkering exercise in which the assessee is involved are found in the shape of cash vouchers, full length pages summary sheets, month-wise sales statement showing chitties account and IOM account etc., Profit and Loss A/c. for the year ending 31st March, 2002 and also certain loose papers and a diary. The Assessing Officer noted that for the impugned assessment year also similar type of documents were found which have been duly discussed in that order. All these docum....
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.... his order for the A.Y. 2000-01 and 2001-02 where the facts are similar to this year and rejecting the theory of consignment sale in absence of maintenance of separate records for consignment activities, he made the addition of Rs. 1,67,92,212 on account of gross profit. 21. In appeal, the CIT(A) upheld the action of the Assessing Officer by holding as under: "4. Fifth ground of appeal is against the addition of Rs. 1,67,92,212/- on account of low GP shown by the appellant. This addition has been made on the basis of evidence found during the course of survey conducted at the business premises of the appellant on 25.11.2002. The addition has been made on the basis of observations made by the AO in A.Ys. 2000-01 & 2001-02. The action of the AO has been confirmed by CIT(A) for both the years. 4.1 I have carefully gone through both the orders passed by CIT(A). I agree with the reasons given by the CIT(A) for sustaining the additions made by the AO on account of low GP. Following the order of CIT(A) the addition of Rs. 1,67,92,212/- made by the AO on this count is confirmed. Therefore, ground No. 4 is rejected." 22. Aggrieved with such order of the CIT(A), the a....
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....n brought back subsequently. Since these are internal transfers, no entries have been passed in the books of account. He submitted that since the cash sales recorded by the casher and recorded in the regular cash book tally there is no siphoning out to the extent of chitties or otherwise. Referring to some sample chitties he submitted that these are fully authenticated and signatures of persons preparing, authorising and receiving payment are duly appearing along with other details. Therefore, by no means these are siphoning of the cash sales. He submitted that had there been an intention to siphon the cash sales, the gross sales would not have been entered in the regular cash book. Referring to page 389 of Paper Book No. 4 where an example has been given regarding higher amount of cash deposit into bank recorded in the regular cash book as compared to the amount recorded in the cashier's cash book, he submitted that this is possible only when the amounts given by the casher on chitties have been brought back and deposited into the bank along with cash available with the cashier. 26. He submitted that the order of the Tribunal for A.Y. 200001 and 2001-02 is not applicable as far....
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....n received on sale 1,024,500 Closing stock of Packing materials 282,345 2,919,211 21,169,547 Less: Revision of stock: Erosion of Market Value Actual stock Erosion in value (details) 38,997,565 3,063,495 3,063,495 35,934,070 Purchase-increase in value of purchase 11,705,597 Amount spent was debited to parties now transferred 259,270 Depreciation - New 150,206 15,178,568 5,990,979 ========= 29. As far as the notings in the executive diary, copies of which are placed at Paper Book pages 473 and 474, he submitted that these are some rough jottings by the cashier. He submitted that the person who had written all these figures had appeared before the Assessing Officer. He submitted that in any case the books of account wer....
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....was impounded. He submitted that although 8 months have passed after the end of the financial year where profit to the tune of Rs. 1,82,50,336 was disclosed, however, the assessee filed the return showing profit of Rs. 59,90,979 only. He submitted that if the contention of the learned counsel for the assessee that the reconciliation statement was not considered by the Assessing Officer or the CIT(A) is accepted, then the issue may go back to the Assessing Officer. He submitted that during the course of survey thousands of loose papers were found which were impounded which contained hundreds of incriminating documents. The addition made by the Assessing Officer and upheld by the CIT(A) were upheld by the Tribunal for A.Ys. 2000-01 and 2001-02. Although in the past year the assessee had honoured her admission by disclosing additional profit, however, despite her assurance given during the course of survey no such additional income was disclosed during the year. Referring to the copy of the statement recorded and placed at Paper Book pages 186 to 200, he submitted that there was no coercion or pressure on the assessee for such disclosure. Referring to Paper Book page 217, he submitted....
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....cepted in the past, however, the chitties are not yet found to be correct. Therefore, the addition made by the Assessing Officer on account of chitties has to be upheld whereas the addition on account of IOMs may go back to the Assessing Officer for verification. He submitted that no quantitative details were furnished nor the stock registers are maintained. None of the directors of the company came forward to explain the impounded papers during the course of assessment proceedings. Although the company has paid advance tax of Rs. 55 lakhs, profit corresponding to such advance tax paid has not been disclosed. He submitted that concurrent findings by the successive authorities justify the rejection of books of account for the A.Y. 2000-01 and 200102. Since the facts in the current year are identical to the facts of the preceding two years and the additions were made based on the same material found during the survey and since rejection of books and assessment of income was upheld by the Tribunal, therefore, the order of the CIT(A) for this year should be upheld. However, to the extent relief given by the ITAT on the basis of MA filed by the assessee may be given to the assessee. He ....
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....n the date of survey various incriminating papers along with an unsigned undated Profit and Loss A/c. for the year ending 31st March, 2002 were found and impounded. There is also no dispute to the fact that as against the profit of 1,82,50,336 shown in the Profit and Loss A/c. impounded during the survey, the assessee filed the return showing profit of Rs. 59,90,979 as per the audited Profit and Loss A/c. and a further sum of Rs. 25 lakhs as additional income. We find the Assessing Officer while framing the assessment u/s. 143(3) referred to the order passed by the Assessing Officer for the A.Y. 2000-01 and 2001-02 where the Assessing Officer had given the reasons for rejection of account alleging siphoning of cash through chitties and IOMs, gross profit tinkering exercise, tax planning - evasion, etc. It is also the finding of the Assessing Officer that the survey did not find unaccounted purchases or unaccounted credit sales. Accordingly following the orders of the Assessing Officer for the A.Y. 2000-01 and A.Y. 2001-02, the Assessing Officer rejected the book results and estimated the GP at 32% and made an addition of Rs. 1,67,92,212 on account of suppression of GP to the tot....
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....it is seen that IOM's of August 2002, September 2002, October 2002, shown in the cashier books are reflected in regular cash books. Most of the IOMs are pertaining to expenses such as commission, salaries, professional fees, incentive, etc. The estimation of GP was based on five instances highlighted on page 10 of the assessment order of A.Y. 2000-01 as shown in the preceding para. ... " 35. As regards the rejection of accounts for siphoning of cash through chitties, we find the assessee during the impugned assessment year has offered additional income of Rs. 25 lakhs as against the quantification of chitties at Rs. 23,46,964.50 by the Assessing Officer. Although it is the submission of the learned DR that such siphoning of cash through chitties is much more and the figure of Rs. 23,46,964.50 is the figure on the basis of some test check basis, we find no exact quantification has been made by the Revenue authorities on account of such chitties. We also find merit in the submission of the learned counsel for the assessee that when the assessee in her statement reconciled the difference in the various items appearing in the audited Profit and Loss A/c. vis-à-vis the impound....
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....on, will meet the ends of justice. We hold and direct accordingly. This ground raised by the assessee is accordingly partly allowed 37. Ground No. 5 raised by the assessee reads as follows :- "Learned CIT(A) erred in confirming the addition of Rs. 56,45,264/- to the income of the appellant on account of alleged unaccounted rent and service charges paid by the appellant by holding 'following the order of learned CIT(A) for A.Y. 2000-01 and 2001-02, I uphold the addition of Rs. 56,45,264/-." 38. We have already noticed that there was survey in the business premises of the assessee on 25.11.2002. In course of survey a debit note dated 23.2.1999 was found. This debit note had been issued by one M/s. Vama Pvt. Ltd. (VPL) addressed to the assessee Vama Apparel India Limited. The said debit note is dated 4.2.1999 and it contained following description regarding services charges payable for the shopping area admeasuring 10938.39 sq.ft. for the period of 1.4.1998 to 31.3.1999 as follows :- Particulars Rate Amount (Rs.) Being service charges payable for the shopping area admeasuring 10,938.39 sq.ft. for the period 1.4.1998 to 31.3.1999 as follows : i) show....
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....en the assessee and VPL which incorporated the correct quantum of rent as disclosed by the assessee in the books of account. The Assessing Officer, however, made the addition of difference between the same found in the debit note and sum as recorded by the assessee in the books of account by relying on the order of the Assessing Officer for A.Y. 2000-01 and 2001-02. 40. The learned CIT(A) confirmed the order of the Assessing Officer. 41. At the time of hearing it was brought to our notice that in A.Y. 2000-01 and 2001-02, this issue came up for consideration before the Tribunal in ITA No. 1916/Mum/2004 for A.Y. 200001 and ITA No. 7009/Mum/2004 for A.Y. 2001-02 in the case of the assessee. The Tribunal by its order dated 26.9.2005, which was subsequently modified in M.A. No. 282/Mum/06 and M.A. No. 571/Mum/06 dated 3.1.1999 in paragraph 10 of the order has restored the issue to the Assessing Officer for fresh consideration by holding as follows :- "At the time of hearing of the MA together with the connected ITAs, ld. counsel for the assessee submitted that similar addition made in the hands of Vama Pvt. Ltd., the lessor, had already been restored by this Tribunal vid....