TaxTMI 
TaxTMI 
2021 (1) TMI 671
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.... 1. The order of the Ld.CIT(A) is erroneous both on the facts and in law. 2. The Ld. CIT (Appeals) ought to have appreciated the probative value of voluntary admission u/s.132(4) and upheld the additions made towards under invoicing of sales and unaccounted purchase of acid slurry which is based on the assessee's voluntary admission u/s.132(4) and also based on circumstantial evidence. 3. The Ld. CIT (Appeals) ought to have appreciated the fact that the assessee failed to prove coercion in his admission of income u/s. 132[4]. 4. The Ld. CIT (Appeals) failed to appreciate that even the entry in books of account can be incriminating when the assessee failed to explain it with proof as in the instant case, the assessee failed to explain the variation in charging different rates in sale invoices and admitted the income on account of it. 5. The Ld.CIT (Appeals) while observing that the only incriminating material Found in the course of search was gold and cash failed to appreciate the fact that the source for such cash and gold was generated in earlier years to the search year. 6. The Ld. CIT (Appeals) has failed to appreciate that th....
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.... made in the Assessment Order by the Assessing Officer. 13. Any other ground that maybe urged at the time of hearing. Since the facts are identical, all the appeals are clubbed, heard together and a common order is being passed for the sake of convenience. 2.1. During the appeal hearing the Ld.DR submitted that all the grounds of appeal are related to the addition of under invoicing of sales and unaccounted purchases. 3. Brief facts of the case: The facts are taken from I.T.A No.202/Viz/2020 for the A.Y. 2011-12 which are applicable to all the appeals except change in the amounts. All the grounds of appeal are related to the addition of Rs. 5,81,04,956/- comprising of under invoicing of sales of Rs. 3,80,55,836/- and unaccounted purchase of acid slurry for Rs. 2,00,49,120/-. Shri Arunachalam Manickavel is the Proprietor of M/s Bharathi Soap Works and also the Chairman and Executive Director of the Company M/s Bharathi Consumer Care Products Pvt. Ltd., which is incorporated on 06.08.2009. The assessee is in the manufacture of detergent products in the trade name of 'XXX' since 1981. For the A.Y.2011-12 the assessee filed the return of income on 28.09.2011 admitting....
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....ho deals in acid slurry and supplies to the assessee. During the course of survey, it was noticed by investigation wing that the assessee is indulging in unaccounted purchase of acid slurry which is used in manufacturing of detergent powder and detergent cakes. During the course of survey in the premises of Mahaveer Surfactants, some material was found and marked as Annexure/KGA/MSPL/IMP-B&D, page No.76 of Annexure which shows some noting about loads of acid slurry supplied to Bharathi Group on different periods from the year 2010 to 2014. A statement was recorded from Sri Suresh Kumar Surana, the Director of M/s Mahaveer Surfactants Pvt. Ltd who has stated that they sold the acid slurry to the assessee which was not being accounted in their books of accounts. In the statement recorded u/s 133A on 30.08.2016 from Sri Suresh Kumar Surana, the Director of M/s Mahaveer Surfactants Pvt. Ltd, he stated that the notings were made by the Lab Technician for quality control and they pertain to number of loads of acid slurry sales made to Bharati group. Later on he stated that on request of M/s Bharathi Group, sales were made outside the books of accounts and the bills were generated in the ....
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.... Nil 2,60,00,000 Total 47,31,17,971 Nil 12,95,00,000 4. Hon'ble ITSC vide order dated 09.01.2019, u/s 245D(2C) of the Act treated the assessee's application as invalid and held it is not allowable, since, the application was found to be not constituting the full and true disclosure of income. Consequently, assessment proceedings were revived by the AO and the assessee has filed the writ petition on 14.02.2019 before Hon'ble High Court of Andhra Pradesh challenging the order of the ITSC which was rejected by the Hon'ble High Court of Andhra Pradesh on 30.10.2019. 5. The AO again has taken up the assessment proceedings after rejection of writ petition by the Hon'ble High Court of Andhra Pradesh and proposed to make the additions of under invoicing of sales, unaccounted purchase of acid slurry as admitted in the statement recorded u/s 132(4) apart from the income admitted before the ITSC and the assessee was called for explanation as to why the said income should not be assessed as undisclosed income. 5.1. The assessee filed explanation accepting the addition of Rs. 1.00 cr. from real estate business and objected for the addition of under invoicing of sales a....
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....ntical facts the AO made the similar additions for the A.Y.2012-13 to 2016-17. 5.3. Similarly on the basis of information collected from M/s Mahaveer Surfactants Pvt. Ltd. during the course of survey with regard to unaccounted purchase of acid slurry, the AO proposed to make the addition of Rs. 2,00,49,120/- for the A.Y.2011-12 and the assessee objected for the addition stating that the assessee has not indulged in making unaccounted purchases and the department did not find any evidence regarding unaccounted purchases of other raw material in the premises of the assessee. Therefore, argued that he did not make any unaccounted purchases. The assessee further submitted that the department also did not show any bills which were issued in the name of the assessee by M/s Mahaveer for sale of acid slurry which was not accounted by the assessee in their books. The assessee further argued that Director of M/s Mahaveer has given contradictory statements which cannot be relied upon and also submitted that the department neither provided the statement recorded u/s 133A from the Shri Suresh Kumar Surana, nor shown the evidences collected from the supplier of acid slurry to the assessee, th....
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....the A.Ys 2011-12 to 2014-15 and relied on the decisions of ITAT in the case of DCIT Vs. Lingam Tulsi Prasad [2016] 49 ITR 218 Hyderabad, the decision of AP High Court in the case of CIT Vs. AMR India Ltd. in ITTA No.354 of 2014 dated 12.06.2014 and the decision of this Tribunal in the case of Y.V.Anjaneyulu Vs. Dy.CIT reported in 88 taxmann.com 568 and also the decision of this Tribunal in the case of Bhavanasi Anjaneyulu Vs. ACIT in I.T.A.No.261,262,263, 349 & 354/Viz/2017 dated 19.01.2018. 6.2. The Ld.CIT(A) considered the submissions of the assessee and held that in completed assessments, additions should be made on the material found during the course of search, thus deleted the additions made in assessment order passed u/s 143(3) r.w.s. 153A and accordingly allowed the appeals of the assessee for the AYs 2011-12 to 2014-15. The Ld.CIT(A) relied on the decision of this Tribunal as well as the jurisdictional High Court decisions referred above apart from the number of other decisions mentioned in the appellate order. 7. On merits the Ld.CIT(A) observed that during the course of search, no material was found except gold and cash which was seized. With regard under invoicing....
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....of the supplier with regard to purchases made outside the books of accounts. Thus argued that the statement recorded u/s 133A has no evidentiary value. The AO also did not furnish the copy of the statement recorded u/s 133A and the material gathered at the premises of the supplier, did not give opportunity to cross examine the witness. Therefore, argued that in the absence of any material found during the course of search in the premises of the assessee and in the premises of M/s Mahaveer Surfactants, Pondicherry evidencing the unaccounted purchases, the additions cannot be made in the hands of the assessee. Considering the arguments of the assessee, the Ld.CIT(A) held that the additions made are unsustainable, accordingly deleted the addition. The Ld.CIT(A) also passed corrigendum order on 12.08.2020. 8. Against the order of the Ld.CIT(A), the revenue has come on appeal before us. During the appeal hearing, the Ld.DR argued that the assesse has admitted the income u/s 132(4) voluntarily, therefore, the admission made in the statement recorded u/s 132(4) is valid, hence, submitted that the same is to be considered as admissible evidence and requested to uphold the addition made ....
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.... made to sign the statements. He further argued that due to continuous recording of the statements from the assessee without giving time gap, the assessee suffered lot of pressure and signed the statements even without referring the same. He referred page No.1 of the paper book and shown us that the search was commenced in the residential premises of the assessee at 8:30 am on 30.08.2016 and concluded at 9:15 am on the next day on 31.08.2016. Similarly in the case of proprietary concern, commenced at 4 pm and concluded at 4:30 pm on 31.08.2016. Again in the case of residence of the assessee, search was commenced at 4:20 pm on 31.08.2016 and continued till 03.09.2016 and the assessee was attending the department continuously in all the days of search with few hours of interval, which shows that there was no time to apply the mind and signed the statements without even understanding what it was. Thus argued that admissions made in the statement recorded u/s 132(4) cannot be taken at face value without having corroborative evidence, which will cause huge financial injury to the assessee. The Ld.AR further submitted that from the plain reading of the assessment order, the seized mat....
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.... First we take the case on merits since, this issue covers all the appeals. Search u/s 132 was conducted in the instant case on 30.08.2016 and the search assessment was completed u/s 153A r.w.s. 143(3) on total income of Rs. 12,53,66,870/-. The assessment resulted in addition of Rs. 6,81,05,672/- relating to under invoicing of sales, un accounted purchases and un accounted payment to Chinnathorai for Rs. 1.00 crore. The allegation of the AO is that the assessee is involved in under invoicing of sales and receiving the cash back from the distributors. For this purpose, the AO referred answer to question No.27, wherein, the assessee stated that he had under invoiced the sales and received the cash back from the distributor to the extent of 8% of actual sale value and admitted the additional income to the extent of Rs. 37.84 crores from the A.Y.2011-12 to 2017-18 as under: A.Y. Unaccounted income on account of under invoicing of sales 2011-12 3,80,55,836 2012-13 5,22,20,398 2013-14 6,02,28,092 2014-15 6,59,72,863 2015-16 6,79,97,020 2016-17 9,40,17,546 2017-18 Nil 37,84,91,758 10.1. Similarly, the assessee also accepte....
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.... on presumption u/s 134(2) of the Act and there must be something more than bare suspicion to support the assessment or addition. In the present case, though the revenue's case is based on disclosure of the assessee stated to have been made during the search u/s 132(4) of the Act there Is no reference to any undisclosed cash, jewellery, bullion, valuable article or documents containing any undisclosed income having been found during the search. The appellant also relies upon the decision of the Hon'ble Delhi High Court in C.I.T Vs. Harjeev Agarwal, reported in (2016) 70 Taxmann .com 95 (Delhi). Paras 19, 20 and 21 of the above judgment are extracted below: "19. In view of the settled legal position, the first and foremost issue to be addressed is whether a statement recorded under section 132(4) of the Act would by itself be sufficient to assess the income, as disclosed by the assessee in its statement under the provisions of Chapter XIV-5 of the Act." "20. In our view, a plain reading of section 158BB(1) of the Act does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The words 'ev....
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....an under no circumstances be termed as "incriminating material". For these reasons the addition made on account of under invoicing of sales relying on the above statement is not proper and justified. The Ld.CIT(A) also relied on the case law in the case of [2005] 148 TAXMAN 35 (AHD.) (MAC.) ITAT AHMEDABAD BENCH B ASSISTANT COMMISSIONER OF INCOME-TAX V. JORAWAR SINGH M. RATHOD" 10.3. From the perusal of the assessment order, the Ld.CIT(A) order we, find that no evidence was found with regard to under invoicing of sales or unaccounted purchases in the premises of the assessee. From the assessment order, it is also seen that no excess stock was found and there was no stock difference. The AO verified the books of accounts, no defects were found during the course of assessment. As stated earlier, search was continuously conducted in the business premises of the assessee and recorded statement u/s 132(4) in multiple premises regularly without giving sufficient interval. Thus there is a possibility of building up pressure on the assessee which resulted in confusion in his mind. Though the Investigation Officer recorded statements u/s 132(4) from the distributors, they did not specify ....
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....assessee. Even otherwise the same required to be applied for A.Y2017-18 but not relatable earlier year assessments, since, no evidence was found relating to under invoicing of sales in respect of earlier years. In his statement recorded on 02.09.2016 in question No.23 the assessee clearly explained that distributor supplies the case of soaps consisting of 100 soaps to retailer at Rs. 450/-. In question No.22 the assessee clarified that the total value of case of 'mini more wash' including basic excise duty+ VAT was Rs. 361.53. Thus it is clear from the statement recorded from the assessee that it fixes the rate to distributor at Rs. 361.53 and from the distributor to the retailer it reaches at Rs. 450/- and in between one more middlemen involved is wholesaler. In response to the show cause notice also the assessee furnished detailed explanation regarding the pricing mechanism and objections with regard to admission u/s 132(4) by the assessee which reads as under: 1. During the course of search proceedings, the department has found the retailers price list but not manufacturer price list. Hence the comparison of retailer price list with assessee's sale bill cannot be mad....
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..... The department has recorded the statement without any evidence and hence there is no evidentiary value of the statement taken U/s 132(4). 9. As there is no evidence quoted in the statement recorded U/s 132(4), it cannot be taken as evidence for making the Assessment. 10. The department by showing the retailer price list made allegation and recorded the sworn statement by asking the question that it is distributor price instead of retailer. Hence the allegation by the department and price list quoted is not having correlation for indicating that the assessee is under invoicing the sales. There is no sale bill found to indicate under invoicing. In the absence of such finding allegation is not justified. 11. The allegation of the department of under invoicing was not based on the any evidences and hence addition on this ground cannot be justified, 10.5. From the plain reading of the reply of the assessee, it is clear that he has gone back from the admission and explained the pricing mechanism and margin stated to be goes to distributor, wholesaler and the retailer and emphasized that he was receiving only Rs. 361.53 which was duly accounted. In the retu....
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....cer, [2015] 59 taxmann.com 69 (Andhra Pradesh and Telangana) and held as under: 9. The Act empowers the Assessing Officers or other authorities to record the statements of the assessees, whenever a survey or search is conducted under the relevant provisions of law. The statements so recorded are referable to section 132 of the Act. Sub-section (4) thereof enables the authorities not only to rely upon the statement in the concerned proceedings but also in other proceedings that are pending, by the time the statement was recorded. 10. If the statement is not retracted, the same can constitute the sole basis for the authorities to pass an order of assessment. However, if it is retracted by the person from whom it was recorded, totally different considerations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under section 164 of the Code of Criminal Procedure. The evidentiary value of a retracted statement becomes diluted and it loses the strength, to stand on its own. Once the statement is retracted, the assessing authority has to garner some support, to the statement for passing an order of assessment. ....
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....the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under section 158BC. For the sake of convenience we extract relevant part of the order of Hon'ble High Court as under: 20. The subject matter before the Hon'ble Supreme Court was the right of appeal, and their Lordships held that no individual has a substantive right of appeal and much would depend upon the procedure that is in vogue, at the relevant point of time. 21. In Pooran Mal (supra), a Constitution Bench of the Supreme Court examined the constitutional validity of certain parts of Section 132 itself. Even while upholding the provision, their Lordships stressed the importance of fair play and reasonableness. After referring to the protection given under the constitution against self-incrimination, their Lordships observed: "In other words, search and seizure for the purposes of preventing or detecting crime....
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....itute the sole basis. It can be relied upon if (a) it is not retracted from and (b) even if it is retracted from, it is supported by other material. The communication dated 11-03-2003 of the department to its officials throws light upon this. In ITTA No. 112 of 2003, decided on 09-09-2014, this Court took the said communication and the relevant provisions of the Act, and held: If the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act." 10.7. On similar facts identical view was taken by the Hon' High court of Andhra Pradesh in Commissioner of Income-tax-II, Hyderabad. v.Naresh Kumar Agarwal, [2015] 53 taxmann.com 306 (Andhra Pradesh).The assessee relied on number of decisions including the decision of Hon'ble Madras High Court in M.Narayanan & Bros v Assistant commissioner of Income tax (Special Range) wherein Hon'ble High cour....
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....ement recorded from the supplier u/s 133A and made the assessee to admit the income. The assessee also requested for cross examining the supplier and the AO did not give opportunity to cross examine the supplier under the pretext of time barring and made the addition on the basis of statement recorded u/s 132(4). A survey u/sec. 133A was conducted in the business premises of M/s.Mahaveer Surfactants Pvt. Ltd. and during the course of survey, the department stated to have found a noting in the name of M/s. Bharathi which contain the details of acid slurry load supplied to Bharathi group. On an enquiry made from the Director of M/s.Mahaveer Surfactants Pvt. Ltd., initially he stated that the same represent the notings made by the lab technician for quality control and they pertain the number of loads of acid slurry sales made to M/s. Bharathi Group over and above the sales recorded in their books. Later on, he changed the version and stated that since M/s. Bharathi Group insisted for supplies outside the books of account, bills were generated against some other name and booked as cash sales in their books. In response to question No.18, Shri Suresh Kumar Surana also told that they us....
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....ted that 18% to 20% acid slurry constitutes main product. The AO did not make out the details of production and actual consumption of acid slurry, accounted consumption and the difference if any, to arrive at the unaccounted expenditure in slurry acid consumption. In the absence of the above exercise, it is not possible to hold that there was unaccounted expenditure incurred for the purchase of raw material. Since the assessee stated that he has accounted all the purchases, in the absence of any evidence found during the course of survey or search it is not possible to arrive at the unexplained expenditure in the manufacture of detergents and make addition. The department has recorded the statement u/sec.132(4) without even showing the statement recorded u/s 133A from Mahaveer Surfactants and the evidences gathered from the M/s Mahaveer which shows that admission was on undue stress and pressure. As observed from the orders of the lower authorities, the AO neither provided the material collected from the premises of M/s.Mahaveer Surfactants Pvt. Ltd. nor provided copies of statements recorded u/sec. 133A to the assessee and simply worked out the unaccounted income on the basis of m....
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....pleted or unabated the assessing officer is not permitted to make the additions without having the seized material. The Ld.CIT(A) followed the decision of this Tribunal as well as the decision of jurisdictional High Court in the case of A.M.R. India Pvt. Ltd. (supra) and deleted the additions. We have deleted the entire addition on merits, hence, the issue is only of academic interest. The Ld.CIT(A) deleted the addition as per the discussion made in para No.10.1 which reads as under: 10.1.CIT(Appeals) Decision Ground Nos. 2,3, 5 and 25 : In the above grounds of appeal, the appellant questioned the legality of the addition made in unabated assessment without any incriminating material, on the ground that the Assessing Officer has no jurisdiction to make the addition in an unabated assessment in the absence of incriminating material found in the course of search. The appellant's contention is that in the statement recorded from the appellant Sri Arunachalam Manickaval, no documentary evidence was referred to show that it has been under invoicing of sales and the cash back was received form the Distributors I Dealers. The asst. order does not contain any reference to....
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....liance in support of his claim that no addition can be made in an unabated assessment without any incriminating material on the following case taws: 1. 2017] 88 taxmann corn 568 (Visakhapatnam - Trib.) IN THE ITAT VISAKHAPATNAM BENCH Y, V. Anjaneyulu v. Deputy Commissioner of Income Tax, Central Circle, Vijayawada Section 153A of the Income-tax Act, 1961 - Search and seizure - Assessment in case of (Absence of Incriminating material) - Assessment years 2004-05 and 2005-06 - Assessing Officer has no Jurisdiction to make additions in respect of concluded assessments in absence of any Incriminating materials found during course of search [In favour of assessee] 2. Hon'ble A.P. High Court ma judgement dat6th12,7,2003 in JTA No266 of 2013 In case of MIs. Hyderabad House Pvt, Ltd. Upheld the decision of the ITAT Hyderabad bench, wherein it is held that computation of undisclosed income' u/s 153,4/1530 of the Act must be in reference to the incriminating material found as a result of search, 3. Where assessment proceedings on basis of return filed being already culminated by operation of law and no incriminating material being found during subsequent sea....