TaxTMI 
TaxTMI 
2022 (3) TMI 1183
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd totally ignoring the retraction and submissions filed. 3. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the action of Ld. A.O. wherein he made addition of Rs. 2,40,00,000/- on account of alleged unrecorded excess stock by merely relying on the statement during survey action and ignoring the retraction & submissions filed. 4. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the action of Ld. A.O. wherein he made addition of Rs. 35,70,000/- on account of alleged unrecorded wages and salaries by merely relying on the statement during survey action and ignoring the retraction & submissions filed. 5. That on the facts, circumstances and legal position of the case, the Worthy CIT(A) has erred in confirming the action of Ld. A.O. wherein he made addition of Rs. 24,30,000/- on account of alleged unrecorded expenses comprising of cutting oil and diesel oil by merely relying on the statement during survey action and ignoring the retraction & submissions filed. 6. That the appellant craves leave for any addition, deletion or amendment in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TAT. 5. The ld. AR referring to the fact that the assessee was subjected to the survey u/s. 133A on 21.09.2010 invited specific attention to para 1.1 of assessment order to highlight that the fact that the assessee fully participated in the assessment proceedings before the A.O. Relying on the said para, it was his submission that all the relevant details and facts in the replies made to the queries raised along with supporting documents were made available to the A.O. at the first instance. Thus, it was his submission that the surrender initially made in good faith believing that facts as confronted were correct was retracted when the assessee examined the complete and correct facts always available on record at the time of the Survey itself which were not properly confronted by the survey team to the Director. Attention was invited to paper book pages 396-399. 6. The record of the survey team it was submitted was made available to the assessee vide this letter dated 28/05/2011. On examining the alleged discrepancies leading to the surrender, it was submitted, it was noticed that in fact the surrender was made on incorrect facts. The detailed shortcomings in the calculations....
X X X X Extracts X X X X
X X X X Extracts X X X X
....order, it was submitted that the reasons for not adhering to the surrender made on each of these counts were elaborately explained and spelled out in factual details before the A.O. and have largely been extracted in the order by him. These have not been shown to be incorrect. The arguments in respect of each of the addition made, it was submitted, remain more or less identical before the CIT(A). The said authority also did not point out to any mistake in the submissions and sustained the addition relying on the letter of surrender made on mistakes. 12. Though placing reliance thereon for the sake of completeness, he submitted that he would sum up the arguments on facts ground-wise. The facts for challenging the addition in ground No. 2, it was submitted are extracted in para 2.1 page 2 of the assessment order. These also explained the reason for retraction. The submissions dated 10.12.2013 in response to questionnaire etc. dated 27.08.2013 is extracted. Carrying us through the said reply, it was submitted that submissions qua the alleged excess stock found in replies dated 26.12.2013 and 30.12.2013 extracted in para 2.2 at pages 4 to 9 of the assessment order are being heavily ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....own to company Accountant Shri Kamal Mehta. It was argued that a lot of irrelevant questions were asked and abruptly in Question 17 and 19 where the Director responds, "...it is possible may not be entered.......ESI, PF duly paid"; "may be verified from record" leading abruptly to assertions made in Q. 21, Q. 22, Q. 23 where the Director says "clerical mistakes". Relying on this surrender, the Tax authorities choosing to ignore the detailed submissions based on evidences, which were made available and were relied upon by the department itself repeatedly shied from the responsibility to address the shortcomings and instead chose to blindly rely on the so called voluntary surrender. Reading from the record, it was argued that the evidences to support the incorrect surrender have been repeatedly discarded without rebutting them to be unreliable. The detailed calculations, mistakes, inconsistencies, rough estimates and arbitrary conclusions which formed the basis of the surrender has repeatedly been left unaddressed by the Revenue. 15. The statement of Mr. Narendera Singh (Paper Book page No. 106-107) the packing supervisor is ignored and blind reliance is placed on it because he ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reon at the assessment stage and again at the stage of Remand by the CIT(A). 18. The issue, it was submitted, was carried in appeal before the First Appellate Authority before whom the assessee again repeated the facts as argued before the A.O. It was submitted, that it is an undisputed fact that the assessee's books were incomplete at the time of survey. It is further a fact that no defects in the books of account during the assessment proceedings had been pointed out by the A.O. The department it was submitted is merely repeating and supporting its case based on the surrender made admittedly on incorrect facts. Attention was invited to the fact argued and recorded in the impugned order that the assessee mainly deals with large companies like Hero Honda (Now Hero Moto Corp.), Honda Motor Cycles and Scooters (P) Ltd. International Tractors. Swaraj Mazda, V.E. Commercials, Premier Indo Plast (P) Ltd. Swaraj Engines, Mahindra and Mahindra Ltd. etc. It has been argued that there is long list of such reputed customers like this. The sales made to these established companies, it was submitted, has always been completely through cheques. The assessee deals in excisable commodities....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... tax authorities have never refuted this fact. 19. It was submitted, that the assessee has given its detailed submissions repeatedly on record and till date the Department has not pointed out what was the exact difference in the books of account and balance sheet and no list of debtor was prepared or referred to either by the A.O. or the CIT(A) where this difference can be said to have been found out. The assessee, it was submitted, had obtained copies of the documents taken by the search officials sometime in the end of May, 2011 and no such list was made available or provided to the assessee or referred to by the Revenue till date despite the overwhelming evidences on record to support the claim that on each of the counts the surrender was incorrect and retraction was justified. No detailed list of debtors in which difference in amount as per balance sheet as on 31.03.2010 and books of account for the year ending March 31, 2010 has been referred to by either the A.O. or the CIT(A). Mere surrender is relied upon. The assessee, it was argued, has carried a detailed exercise of reconciling each and every debtor. Reconciliation statement is enclosed. He argues that there are some ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xtracted in the orders would show that the assessee has argued that the books correctly reflect the position of the assessee's sundry debtors as on 31.03.2010 and consequently the assessee does not want to falsify his books of account by way of surrender of Rs. 2.00 crores. It has been repeatedly pleaded that accepting it as a difference in terms of the surrender would lead to many practical difficulties as fictitious payments will have to be created and adjusted etc. The surrender made on incorrect facts, it was submitted, could not be honoured because of these many practical difficulties. The assessee it was submitted, had enclosed before the CIT(A) statement of account as on 31.03.2010 received from debtors along with copy of account of each debtor appearing in assessee's books of account and reconciliation statement explaining the nature of difference and reasons thereof. These are available at Paper Book pages 282 to 299 also. The mistakes inaccuracies as per the department's Survey team's version of best without prejudice to the main arguments, it was submitted, also show that they are also full of many mistakes. Paper Book page 404 and 405 was referred to. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing that the surrender was made considering these incorrect and arbitrary calculations where rough estimation in weight and value were patently evident. Referring to the record it was submitted, that it has been argued that the sheer magnitude of the exercise required only to weigh the stock stated to have been undertaken physically the assessee has argued requires atleast 71 hours 40 minutes. Each coil to pick up weigh would require this amount of time. This assertion it was submitted has been made in the order at page 30 of CIT(A). It has also been argued that even if for a moment it is conceded that by a superhuman effort the survey team weighed it in about 10 or 11 hours then where did the equipment or gadgets used to carry out this mammoth exercise come from and used. It was submitted that practically within the limited hours of survey of about 11 hrs. or so the whole exercise was impossible. The fact that there were discrepancies in the valuation has been argued. It was his submission that actually no meaningful exercise was done. The surrender was only made when the Director on his arrival after 4 days' tour of Chennai was led to believe that the survey team had found di....
X X X X Extracts X X X X
X X X X Extracts X X X X
....000 units are priced at less than Re 1.00 per piece. The total value stock comprised in 129 items otherwise work out to Rs. 12,69,143/- This price is as per rates mentioned in the list and the same have not been compared with the sales bills to arrive at the actual Cost of Production. The total price of this quantity on the basis of average rate workout to Rs. 40,35,911. Which means the excess value worked out by the Department against these items only is Rs. 27,66,678/- which is 318 % higher than the value mentioned in the Stock statement itself One can well imagine the volume of defects in valuation of stock worked out by the Department. The working has been done purely for the sake of pressurizing the assessee to surrender. It is because of these defects in the valuation of stock that the assessee has retracted from surrender. The surrender would have done great injustice to the assessee. We are ready to submit any other information that may be required to prove our contention." Reading from the record it was submitted that the assessee had also provided detailed comparative Chart Enclosed Comparative Chart of Valuation of "Stock of Finished Goods on inspection and packed Finish....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atement in a survey u/s. 133A. The judicial precedent available on this it was submitted relied upon before the CIT(A) even in the context of statement u/s. 132(4) in favour of the assessee has also been ignored and the department's case solely and only rests on the statements of two persons incompetent to qualify the version of the Survey Team and the surrender of the Director who believed what the Survey team explained. This surrender based on facts as confronted and available on record has repeatedly been demonstrated to be a case of many mistakes of facts and law. The CIT(A) instead of looking into this as requested relied upon the AO's Remand Report which in principle again relies on the surrender and statements of these two employees who also in no way caste any doubt on assessee's version of facts. Relying on the report the Ld. CIT(A) dismissed the claim without addressing the issues referred ignoring the evidences and the judicial precedents. The evidence remains unrebutted on record. 26. Addressing ground Nos. 3 and 4, it was submitted that the addition of Rs. 60 lacs was made and sustained on account of surrender made for alleged unaccounted expenses pertai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of diesel and cutting oil i.e. M/s. Chatha Service Station and M/s. Highway Enterprises and has stated that books of account was not complete as on the date of the survey. The assessee has further stated that the Department has not provided it with bills etc from which the amount of these expenses has been found by the survey team. Therefore, by its own admission these amounts of expenses incurred out of books have been entered into the ledger accounts only after having been detected by the Department. 27. Addressing the impugned order, it was submitted that for sustaining the addition in the face of the detailed explanation the Ld. CIT(A) was required as per law to refer to atleast some evidence available to justify the addition. No such reference has been made as in the absence of any evidence he is only relying on the surrender. 28. This position of fact is common to all the addition. The said action, it was submitted, is contrary to the settled legal position which requires that if retraction is based on evidences, then giving greater sanctity to the surrender the evidences cannot be ignored they have to be examined. 29. Referring to para 7.2 of the impugned order, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Director. No evidence has been referred to nor is it available and merely reliance is placed on the surrender and when questioned by the assessee as to which is the document which was shown no document has been shown or brought on record till date. 34. Accordingly, it was his submission that considering the position of law, the additions in the absence of any evidence and based only on the ignorances of the CMD and demonstrated mistakes of the survey team the facts need to be appreciated correctly and mere reliance on the surrender letter, it was submitted, is contrary to the settled law. 35. The decisions relied upon before the CIT(A) and also filed in the Paper Book filed before the ITAT, it was submitted, supports the view canvassed. 36. The Ld. CIT DR Mr. Dahiya strongly objected to the filing of the decisions without bringing out the gist of the proposition of law for which purposes it was being relied upon. 37. The Ld. AR in response agreed to address the specific decisions cited. 37.1. Addressing the first decision in the assessee's Paper Book M/s. Asmi Stonex V. ITO, ITA No. 867/JP/2017 (available at Paper Book pages 1-47) the ld. AR carrying us through ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....surrendered sum of Rs. 3 crore only instead of Rs. 5 crore which he admitted during course of survey--Merley because Assessee had surrendered mount of Rs. 5 crore, during course of survey addition of Rs. 2 crore was made by AO--IT(A), sustained order passed by A.O. to tune of Rs. 50 lacs--ITAT deleted addition made by A.O.--Held, A.O. had not found or bothered to find or trace anything additional as result of survey from Assessee except relying on recorded statements at time of survey--This view found favour with two appellate authorities that funds were arising from same business and had a direct nexus and income was invested/utilized during the year under consideration--ITAT, after appreciation of evidence concluded that amount of Rs. 1.5 crore, which was surrendered/offered in AY 2007-08, was available as fund which came to be used partly in investment of share capital, creditors or other investments as well as other defects, unverifiable creditors etc.--In case Assessee had not adhered to surrender made during course of survey, then it was for A.O. to bring on record cogent material and other evidences to support addition rather than rely on statements simplicitor--No substanti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d upon. The onus in the present facts it was argued had repeatedly not been discharged. 37.6. For similar proposition, attention was invited to the decision at Sr. No. 6, M/s. Alankar Jewelers Vs. DCIT (Indore-ITAT) ITA No. 992/Ind/2019 (available at Paper Book pages 105 to 129) wherein without supporting evidences in the face of the retraction based on evidences retraction was permitted. 37.7. Attention was also invited to decision at Sr. No. 7 M/s. Bansal Strips (P) Ltd. & Ors. Vs. ACIT (Del-ITAT) 100 TTJ 665 (available at Paper Book pages 130 to 156) wherein similar allegation of impossibility of physical stock taking in a few hours as was challenged by the assessee before the CIT(A). The Tribunal therein deleted the addition based on surrender noting that, "simplified procedure was adopted without observing patience and perseverance". 37.7.1. It was submitted that therein also, the Revenue had relied on the fact that staff members of the assessee had put their signatures on the Inventory prepared by the Search Team. The Court therein, it was submitted, held that "It does not have the effect of rendering authenticity to the Inventory". 37.7.2. It was noticed that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas s. 133A does not empower any ITO to examine any person on oath. Thus, in contradistinction to the power under s. 133A, s. 132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under s. 133A is not given an evidentiary value. What is more relevant, in the instant case, is that the attention of the CIT(A) and the Tribunal was rightly invited to the circular of the CBDT dt. 10th March, 2003 with regard to the confession of additional income during the course of search and seizure and survey operations. Pullangode Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC), Paul Mathews & Sons vs. CIT (2003) 181 CTR (Ker) 207: (2003) 263 ITR 101 (Ker) and CIT vs. G.K. Senniappan (2006) 203 CTR (Mad) 447: (2006) 284 ITR 220 (Mad) relied on. (page 159-160). 37.9. Similarly, reliance was placed on decision at Sr. No. 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in original statement the amount of concealed income. Later on, there was retraction and it was stated that what he stated originally was in relation to the sale and not in relation to the income. Also he is a non-matriculate and the juniormost partner in the firm. The possibility of committing a mistake by him in explaining the affairs of the firm cannot be ruled out altogether. There is no cogent material on record to support or to justify the veracity or falsehood of the statement. The Revenue agreed to accept what B stated at that time. No incriminating document seized. Even on 2nd Dec, 1987, when another survey operation was conducted at the assessee's premises, nothing, significant was found. The argument of Revenue that there were possibility of getting higher figures of sales but same could not be obtained as during the survey the management stopped the A.C. room and also stopped making special preparations despite customers, requests, appears to be jejune. This allegation is not based on any material which could be relied or accepted as evidence. The principle upon which the case falls to be decided is simply this: "whether the system of law permits the assessee to alt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... physically and partly by adopting sampling method. In the facts it was held that the difference in valuation thus arrived at could not be used for addition in a search and seizure case. Heavy reliance was placed on this as facts remain identical. 37.15. Decision relied upon at Serial No. 16 Jyotibhaichand Bhaichand Saraf & Sons (P) Ltd. V DCIT (Pune ITAT)(available at Paper Book pages 218-232) was relied upon to show that even in the case of a statement recorded u/s. 132(4) it is open to the assessee while making a retraction that the statement was made on a mistaken belief of fact and law. The law requires that it be considered and addressed. Addition made accordingly it was submitted may be deleted. 37.16. Reliance was placed on the decision mentioned at Sr. No. 17 DCIT vs. Vipin Aggarwal (CHD ITAT) 46 ITR 367 (available at Paper Book pages 233 to 246). In the facts of the said case it was submitted that retraction of statement made u/s. 133A was treated as an afterthought by the Assessing Officer. In the facts of the said case it was submitted it had been held that confessional statement alone in the absence of evidence cannot be a valid stand for addition. The retraction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....referred to or relied upon. Merely saying that the presence of survey team is stressful it was submitted cannot be allowed to be pleaded as a relevant argument to show by inference that any coercive action or pressure was put on the assessee. 39. The statement of surrender was voluntary and, now after a lapse of few years it was submitted the assessee without any evidence cannot plead coercion. The assessee fully knowing the shortcoming of its business has made the surrender consciously without pressure. The employees of the assessee whose statements are relied upon now shown to be Packing Supervisor or Junior Accountant cannot be allowed to be disregarded. They were assessee's employees and during a survey etc. whosoever will come forward to help the survey team his statement and help is taken by the team. The Survey Team has confronted the assessee with all facts and the assessee has surrendered. This retraction after 2 or 3 years has correctly been discarded as an elaborate after thought. 40. The reliance placed on books of account which were admittedly incomplete, thereafter completed to suit the assessee it was submitted is a meaningless exercise. Accordingly it was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y be upheld. It was reiterated that no coercion at any stage is demonstrated, the surrender is voluntarily made. 46. The argument that survey team could not have weighed the stock within the time, it was submitted, is a meaningless argument. The survey team, it was argued was very capable and competent and these documents have been signed by the Director knowingly then the argument today so made is devoid of merits. 47. It was his submission that apart from relying on the very elaborate order of the CIT(A), he would want to rely on certain decisions of the Apex Court. It was his submission that they being latest in point of time and that also of the Apex Court are relevant hence, the orders of the ITAT and the decisions of the Courts relied upon by the ld. AR it was submitted need not be addressed as these are distinguishable and in the face of the decisions of the Apex Court and of the jurisdictional High Court have consequently no relevance. 48. Similarly, the expenditure incurred outside books of accounts, it was submitted, may also be upheld. The argument that the books were partly recorded read alongwith the meager salary of Rs. 5000/- as paid to the accountant itself....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the facts are entirely peculiar. Receipts of money over and above the disclosed amount was at issue and the evidences of receipt of cash based on a photocopy of the original document was being considered. The photocopy was supported by the statements recorded of the concerned persons. The doubts raised on its evidentiary value in the absence of original document was held to be not relevant as all the statements of the parties recorded under oath were available. This case it was submitted has no applicability to the issue at hand as, in the facts of the present case supporting documents are also available and admittedly a mistaken surrender is made. The department has not rebutted the evidence till date. The evidence showing that the surrender was a case of mistake of facts has not been upset. 52.3. Addressing the decision of the Apex Court in the case of Pradeep Kumar Biyani cited supra it was submitted that the facts are entirely distinguishable. It was submitted that apart from the confessional statement of assessee's brother in the facts of the said case, the Court had also taken note of the fact that it was a case of decline in the gross profit declared by the assessee d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m's Report etc. were signed by the Director. It was submitted is incorrect. Ld. AR invited attention to the respective statement to again highlight that the Director initially was not present at the time of survey and had reached Mohali/Chandigarh etc by Chennai flight very late at night. Thus, the alleged weighing exercise was not done in his presence he reached there when everything was more or less concluded. At that stage returning in stress, exhausted and worried, he believed whatever he was shown by the Survey Team. Till date on facts the Director is not denying the fact that surrender was made by him. He has also not raised any queries or denied that some office employee appended his signatures, to documents of Survey Team made available to the assessee. However, the submission of the DR that it was signed by the Director is contested. It was submitted that only surrender letter (Page 83-97) is signed by him. However, on facts, it was submitted that relying on the evidence placed on record, the assessee is questioning that no person reading the Survey team's documents can make a surrender. Assessee has demonstrated the calculation presented to be rough shoddy estimat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not a mere unsupported argument. All these remain unrebutted. 53.2. Addressing the arguments of the ld. CIT-DR that hard cash of an exorbitant amount was found during the survey it was submitted, is an incorrect fact argued. It was submitted that this was not even the case of the A.O. or the CIT(A). Referring to the record it was submitted that almost no cash was found. Referring to page 402 of the Paper Book Volume II, it was submitted Rs. 33,400 was found. This fact is evident from the department's record itself. The argument that a lot of cash was found and cannot be telescoped, it was submitted, is misplaced. No big amount of cash was found. The belief formed by the Survey team that payments outside books have been received is mere conjecture and surmise as it is not supported by any evidence. Maintaining that no addition can be made without prejudice argument to this main argument, it was submitted, has been advanced that the alleged payments received from sundry debtors could be telescoped to explain the alleged inconsistencies in stock which also is a without prejudice argument. The fact that there were no inconsistencies is also the main argument but without prejud....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aside, the legal position in the face of the retraction based on explanations and evidences cannot be ignored. The Revenue has to rebut it and place supporting evidences. This, we find is repeatedly missing. We have also noticed on a reading of the impugned order itself that the Director is shown to be a technocrat. Reference made to arguments extracted at Page 7 of the impugned order. The Director is claimed to be a mechanical Engineer with zero accounts background did not have benefit of financial advice and again at Page 14 of the impugned order, the pleading has been recorded by the CIT(A) that the concerned Director was a technocrat having little knowledge of accounts. On which account it is claimed that he repeatedly said; "Time and again he stated in his statement that the accountant must be knowing the details regarding accounting details. In reply to Q. No. 22 of the statement recorded the Managing Director stated that "it may be clerical error hence I offer Rs. 2.00 crore on account of his mistake'. He was under mistaken belief that there is clerical error on the part of accountant hence the clerical error is income of the appellant company". Perusal of the same page ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... raised shows that he was entirely operating on believing the version of the Survey team. The responsible person, his Accountant Mr. Kamal Mehta (Q. No. 6) it is seen was apparently never questioned. On a reading of the surrender it is seen that relatable to the surrender conclusions were presented and most questions asked were not relatable to the surrender made. The absence of knowledge of the Director and the surrender gives strength to the argument raised that he was not qualified in the day to day affairs of the company. Thus, it needs no further support. Thus, the fact that it could not be recalled that diesel expenses were being paid by cheques by the Mohali Unit is possible. No fact or evidence has been placed before us to rebut this consistent claim. Explanations have been repeatedly given that at the relevant time, activities were carried out in Mohali Unit and these payments booked by the Chandigarh Unit were consequently paid by cheque by Mohali Unit. Sometime after November, 2011, it has been claimed these have been paid by the Chandigarh Unit. This claim has been made right from the assessment stage (pages 10 to 11 of assessment order). It remains unrebutted on record....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the Director and the employees in the facts of the case in hand is under section 133A. The available legal position that retraction of statement even under section 132(4) is permissible provided the supporting evidences are made available is not in dispute. The arguments of the Revenue that statement once given does not require them to support the surrender statement with evidence when retracted by the assessee and questioned by the Courts/Tribunals also does not require them to look at the evidence made available is an incorrect appreciation of position of law. Such an argument cannot be accepted as it flouts the settled legal position on the issue. We may agree with caution with the argument on behalf of the Revenue that the claim of coercion strictly may not be successful. The Ld. DR is possibly correct in arguing that direct evidence to support the allegation of coercion cannot be said to be demonstrated in the facts of the present case. However, we cannot loose sight of the fact that mistakes of facts and law have been consistently pointed out on record. The detailed explanations reconciliation Statements and evidences available on record remaining unrebutted by the Revenue,....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... resort to such unsustainable persuasive actions is neither new nor unique in the facts of the present case. Reference at this point of time may be made to the Board's Circulars on the issue: (i) F. No. 286/2/2003-IT(Inv) 10.3.2003 No confessional statement in the course of search, seizure and survey. March 10th 2003 ............................ ............................ Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT (K. Ravi Ramchandran) Director (Inv.)-II, CBDT -........" (emphasis supplied) 56. A perusal of these would show that these mal-practices carried on in the field have been often restored to and were noticed by the Board adversely necessitating the Board to address how a survey team is to operate repeatedly. The Circular/Notification of the Board are binding on the officers is well settled by the Courts and the Tribunal. 57. Considering the facts of the present case, we find in the absence of any rebuttal by the Revenue consistently at every stage where apart from placing sole reliance on the surrender by the Director it is evident that the survey team totally flouted the procedure and did not build their case on any fact or evidence let alone credible fact or evidence. No meaningful exercise was done prior to the surrender. The arbitrary methodology applied does not have any legal sanctity. The claim that sundry debtors payment have been received outside books where admittedly no cash w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hat expenses worth Rs. 24,30,000/- had not been entered in incomplete books of account. No question where have the expenses been booked is there nor reference to any evidence etc. or question referring to it have been put. This assertion in the question without any evidence as per record, it is seen was believed to be correct by the Director. Consistently it has been argued on the basis of record available that all payments have been paid by cheques from the Mohali unit. The invoices, cheques and bank details referred to in the paper book at the time of hearing before the A.O./the CIT(A) and before us remain unrebutted by the Revenue. No argument let alone a counter evidence has been relied upon by the Revenue except for the surrender. 60. Addressing the argument advanced by the Revenue that each of the documents has been authenticated by the Director we find on considering the records is an incorrect argument. The Ld. AR has also disputed the above claim of the Revenue. We have seen on a perusal of the record that some employee(s) of the assessee have signed these and this fact is not disputed by the Ld. AR also however the submissions of the DR that it was signed by the Direct....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hows that he says that he makes the sale bill, keeps excise record and purchase bills etc. Again in response to Question No. 6 he agrees stock inventory is correctly prepared in his presence however he cannot verify it from his books as the books were not complete. Response to Question No. 7 shows that on being questioned on his knowledge as to upto which date books of accounts are complete he has responded that sales vouchers are printed upto 15/09/2010 and again Sales Vouchers are printed upto 06 June 2010. What is the meaning of two different dates. The statement is contradictory. He further goes on to say that books of account are not complete. Hence the answers clearly show that infact the Accountant cannot verify anything as possibly requisite record was not available to him as he was a junior and new Accountant. The Ld. DR's allegation that he is drawing a meager salary of Rs. 5000/- demonstrates that some salary was recorded and over and above that also paid in cash it is seen is an argument advanced without any evidence and is based on conjectures and surmises. It is not even the case of the tax authorities as per record or of the Survey team. However, on giving our ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ence to the assessee on record on 28.05.2011. The return of income was filed on 30.09.2011. In the return of income, the surrendered amount was not offered. The retraction was not after a few years. We are of the view that it is not correct to hold that retraction need necessarily be made only by way of writing a specific letter. The filing of return within a few months after carrying out a proper study of documents, considering reconciliation with its Sundry debtors, the basis of the allegations of unrecorded stock, salary wages and expenses etc. is a time consuming exercise supported by unrebutted evidences. Thus, it was a clear and categorical retraction from the surrender made and within reasonable time. The reconciliation of the stock and the sundry debtor was a mammoth exercise carried out and overwhelmingly detailed supporting evidence were relied upon before the A.O. at the first instance is an undisputed fact on record. The fact that the evidence submitted remains unrebutted on record leaving the departments case sheltering behind the flimsy straw of the surrender by the Director has already been addressed by us. On considering the entirety of facts available on record and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll facts which we have elaborated at length and the position of law which also has been addressed in the earlier part of this order, we are of the view that though in the strict term of its use, the onus placed upon the assessee to get an order in its favour holding that surrender was made under coercion may be a little difficult. The facts in favour of the assessee available on record namely; the shoddy estimates and the arbitrary exercise of quantifying and valuation which stand unrebutted on record definitely makes out a case that some level of unfair persuasive tactics were employed by the Survey team which led to the surrender. Similarly the claim that unrecorded payments have been received from sundry debtors, it is seen is based on no fact or evidence as neither cash nor any document supporting such an allegation or conclusion has been referred to be cited by the Survey team or the tax authorities. The fact is that admittedly only Rs. 33,000/- odd cash was found. Till date, no supporting evidence has been referred to or placed on record except the statement of the Director. Further, the allegation of unrecorded salaries and wages, we have seen is not supported by any documen....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on will like to get rid of the pressure cooker situation and normally offers to surrender even for their correct entries and records. It was one of such situations under which the assessee surrendered a sum of Rs. 5.0 crores. He latter found that the surrender was under confused state of affair it was later on retracted. The way the surrender has been obtained from the assessee it-self speaks of the pressure which must have been there on the director of the company which forced him to surrender this amount. Retraction from Surrender under each head is discussed here below. (emphasis supplied) 65.2. A perusal of the submissions extracted at page 9 of the assessment order again justifying the retraction of the surrender has made the following submissions extracted in the assessment order itself. "The working has been done purely for the sake of pressurizing the assessee to surrender." (emphasis supplied) 65.3. As per record, the following submissions extracted again in the assessment order necessitating the detailed reconciliation and cross checking of facts is evident from page 8 of the assessment order: "The assessee is in process of compil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ave been arrived at. The assessee has stated that PF etc has regularly been deposited. The detail was available in Mohali Office and all the entries for wages paid are entered by Mohali Office where Books were stated to be incomplete by an employee of accounts Department of the Assessee company. Now expense out of undisclosed income and expenses not recorded because the books were not complete are two different situations. If the assessee had any intention to meet expenses out of undeclared income then no PF or ESI would have been paid on the same. Photo copy of Trading Account supplied by the Department contains detail of Wages. In past also the assessee always debit Wages of Production staff to Operating Expenses and Salaries to staff and senior staff is debited/charged under the head Administrative Overheads. Total Wages and Salaries expense during the year ending 31.03.2011 is Rs. 34,14,222/- and Rs. 31,77,172 respectively. In addition to this there is bonus, ESI and provident fund payments by the assessee company. Further daily wage labour charges are Rs. 1,86,254/- The question asked by the Survey Officer regarding unrecorded Wages and Salaries expenses was wrong and....