TaxTMI 
TaxTMI 
TaxTMI 
2021 (1) TMI 671
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....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 there exists incriminating material pertaining to payment of Rs. 1 crore to Sri M. Chinna....
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....e 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 total income of Rs. 5,72,60,700/-. A search u/s 132 was conducted on 30.08.2016 in the group cases of Sri Arunachalam Manickavel, Guntur and ....
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....f 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 third party names as cash sales. Sri Suresh Kumar Surana also stated that the goods were sent in hired tanker / lorries and once the goods are reached the destination without b....
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....roceedings 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 and the unaccounted purchase of acid slurry. Assessee in his explanation stated that he did not indulge in under invoicing of sales. The assessee further stated that the bill dated 30.07.2016 found for Rs. 361.53 per case was the correct bill of the company issued to Sri Sai Lakshmi Agencies the distributor and duly accounted in the books of a....
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....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, thus the same cannot be used against the assessee. The assessee has asked for cross examining Sri Suresh Kumar Surana, Director of Mahaveer Surfactants Pvt. Ltd., but the AO could not provide the cross examination since the assessments were time barring. Thus, the AO relying on the admission given u/s 132(4) and the statement recorded from third part....
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....ase 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 of sales and the cash stated to received back by the assesse from the distributors, the Ld.CIT(A) given a finding that from the statements recorded from Sri Pasumarthi Chandrakanth and Sri Veesam Narasimha Reddy and others, though the AO used against the assessee, copies of the same were not supplied to the assesse and the AO also did not allow the cross examination of the witnesses. She further ob....
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....ourse 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 by the AO. The Ld.DR further argued that the assessee ought to have retracted the statement within the reasonable time. The assesse did not retract the statement within the reasonable time, thus, argued that even entries made in the books of accounts can be incriminating when the assesse failed to explain the same with the proof. The Ld.CIT(DR) further submitted that as per the circumstantial evidence, the L....
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.... 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 material, no incriminating material was found during the course of search in the business premises of the assessee, evidencing under invoicing sale bills and the receipt of cash back from the distributors. What was stated to have been explained by the assessee was that sum of Rs. 361.53 was the price for distributor and Rs. 450/- was the sale price of the end consumer. In between, there were three layers who share th....
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.... 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 accepted that he had made purchases outside the books of accounts and admitted the additional income of income of Rs. 9,46,00,000/- for assessment years 2011-12 to 2015-16 as under: A.Y. Undisclosed income (Rs.) 2011-12 2,00,49,120 2012-13 1,78,45,920 2013-14 1,93,33,080 2014-15 2,08,37,376 2015-16 1,65,60,720 9,46,26,216 10.2. In respect of under invoicing of sales the Ld.CIT(A) deleted the addition holding that the without having corrobo....
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....i 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 'evidence found as a result of search' would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such Information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the explanation to section 132(4) of the Act. However, such statements on a standalone basis without reference to any other material discove....
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....e 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 the date wise amounts paid and out of which the sums accounted in the books of accounts and unaccounted amounts were not furnished. No evidence was found in the premises of the assessee as well as the distributors evidencing the unaccounted cash payments though the premises of the distributors were also searched on random basis simultaneously. The statements recorded from the distributors are very vague and general. The assessee enclosed the assessment orders in the case of distributors and the AO did not make any addition in the hands of the distributors in respect ....
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....d 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 made. There are three stages between the Assessee and the ultimate consumer. These are Distributors, Wholesalers and retailers. The prices will vary between various stages. 2. During the course of search proceedings, the department has identified the accounted sale bill dated 30.07.2016 to Sai Lakshmi Agencies (who is the distributor) which worked at Rs. 361.53/- 3. In turn Sai Lakshmi agencies has sold the stock to the wholesaler Sri Lakshmi Kirana, Draksharamam at Rs. 367.20 4. The question posed by investigation department vide No.27 of the statement recorded on 02.09.2016 ....
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....cate 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 return filed in response to the notice issued u/s153A, the assessee filed the income originally returned and thus made it very clear at the time of filing the return itself that the admission made u/s 132(4) is retracted. In the circumstances it is the mandatory obligation of the AO to collect the evidences to support the additions and the statement recorded u/s 132(4) cannot help the AO. It is for the AO to address each and every objection raised in the written submissions made by the assessee and to bring tangible evidence to support the addition. In the assessment order we, do not find any material to support the addition except the statement recorded....
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....ssessment. 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. 11. In I. T. T. A. No. 112 of 2003 (see CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306 (AP) this court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society. The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any powe....
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.... 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 reasonably enforced was not inconsistent with the constitutional guarantee against search and seizure. It was held in that case that the search of the appellant by a police officer was not justified by the warrant nor was it open to the officer to search the person of the appellant without taking him before a Justice of the Peace Nevertheless it was held that the court had a discretion to admit the evidence obtained as a result of the illegal search and the constitution protection against search of person or property without consent did not take away the discretion of the court. Following Kuruma v. Queen [1955] A.C. 197 (P.C.) the court held that it was open to the court not to admit the evidence against the accu....
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....he 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 courts have expressed the similar views. Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd..v.State of Kerala, [1973] 91 ITR 18 (SC) held that 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. In the instant case there was no evidence found in the premises of the assessee to show that the assessee is under invoicing the sales. No other material was found and seized from the premises of the assessee with regard to receipt of cash from the distributors. No evidence was found in the premises of the distributors also to establish that the assessee was paid unaccounted cash by the distributors. The AO could n....
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....y 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 used to send hired tanker lorries through which the goods will be sent. For transport, invoice and way bill will be sent. If the goods reached the destination without being checked midway, the invoice will be destroyed at the both ends. Thus, it is amply clear from the statement recorded from Shri Suresh Kumar Surana that except the notings made in the M/s. Bharathi Group, there was no other evidence available with M/s.Mahaveer Surfactants Pvt. Ltd. to hold that it has made the sales to the assessee outside the books of account. As per their own version of the Director of M/s.Mahaveer Surfactants Pvt. Ltd. in respect of sales made to the assessee cash bills were generated in the name of fake parties, thus there were no sale bills raised in the name of the assessee outside....
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....ahaveer 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 material stated to be supplied to the assessee which is incorrect. As per settled law the AO is not permitted to use the evidence gathered behind the back against the assessee without giving opportunity to the assessee. In the instant case, search was conducted on 30.08.2016 and the assessee filed the return of income on 10.04.2017 admitting the income, which was declared in original return of income, thus, made it clear that the assessee has gone back from the admission given u/sec. 132(4). The assessee also retracted the statement subsequently, once the assessee retracted the statement recorded u/sec. 132(4), it is incumbent on the AO to prove the unaccounted purchases alleged to have been made by the assessee as discussed earlier in this order while discussing the iss....
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....n 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 the outcome of the search or any inference drawn from the search for making the addition. It is further submitted that the assessment made u/s 153 A of the IT Act for the instant assessment year is an unabated assessment and the additions in search assessment shall be based on only incriminating material found in the course of search. Since in the present assessment year under consideration the addition was made without referring to any incriminating document, the asst. becomes void and legally unsustainable. In support of the above contention the appellant relied on number of case laws in support of its contention. 10.2. I have carefully considered the appellant's submissions and the material available on record. It is seen that the statement u/s 132(4) was recorded from the ap....