TaxTMI 
TaxTMI 
2024 (5) TMI 340
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....ct on 2012-13 61,84,811 09.04.2013 -- 2013-14 3,23,61,300 02.02.2015 -- 2014-15 7,21,64,030 02.01.2015 -- 2015-16 29,09,36,050 06.03.2016 05.10.2016 2017-18 35,33,66,620 11.07.2018 -- 2.1 There was a survey u/s 133A of the Act on 8.2.2018 in the case of assessee firm. Consequent to this, assessment was reopened u/s 147 of the Act after recording the reasons for reopening and notice u/s 148 of the Act was issued for these assessment years as follows:- Assessment year Notice issued u/s 148 of the Act on 2012-13 21.03.2019 2013-14 14.03.2019 2014-15 01.03.2019 2015-16 01.03.2019 2017-18 No mention of any notice issued u/s 148 of the Act exists in the body of the order that an order has been passed u/s 143(3) r.w.s. 147 of the Act. 2.2 Finally, the assessment order for all these assessment years was framed u/s 143(3) r.w.s. 147 of the Act. 2.3 The first common ground in all these appeals is that the re- assessment order is bad in law and void-ab-initio for want of requisite jurisdiction especially, the mandatory requirement to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment order....
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....ted 14.2.2018 written to the Additional Director of Income tax, Pandeshwara, Mangalore and retracted the earlier statement given by him on 8.2.2018. However, the department has not considered the retracted statement and issued a notice u/s 148 of the Act in all these cases as stated above. Now the contention of the ld. A.R. is that there is no sufficient material to issue a notice u/s 148 of the Act to reopen these assessments. 4.1 In this case, the notice u/s 148 of the Act has been issued in all these assessment years on the basis of material collected during the course of survey proceedings u/s 133A of the Act conducted on 8.2.2018. During the course of survey proceedings, a statement was recorded from Uday Kumar Salian, one of the partners of the firm. In his statement recorded u/s 131 of the Act, he confirmed the bogus purchases in these assessment years. There also he offered additional income in these assessment years. That provoked the assessing officer to re-open the assessment. At the time of issuing of notice, there is no necessity of conclusive proof to suggest the escapement of income. On the other hand, the ld. AO shall have prima facie material to hold that his inco....
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....rless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. 4.4 Same view is fortified by the judgement of Hon'ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in 291 ITR 500 (SC). 4.5 The ld. A.R. relied on the judgement of Hon'ble Karnataka High Court in the case of Dr. Thippa Setty (322 ITR 525) (Karn.) In that case the Hon'ble High Court held that statement recorded u/s 132(4) of the Act which was retracted cannot be relied upon to reopen the assessment u/s 148 of the Act when the department has accepted the retraction. However, in the present case, the department never accepted the retraction statement filed by the assessee on 14.2.2018. Being so, at the stage of reopening of assessment by the AO, it is not necessary to have conclusive opinion of escapement of income. On the other hand, he must have prima facie of the opinion that income has escaped from the assessment in these assessment years. To that extent, in our opinion, at the time of reopening of assessment, the AO has reason to believe that income has escaped from assessment on the basis of the sworn statement recorded from the partne....
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....essment year 2012-13 to 2016-17, Mr. Uday Kumar Salian had agreed to declare a sum of Rs. 5,50,00,000 for the year 2016-17. Accordingly additional income of Rs. 5,50,00,000 was offered to tax and revised Return of Income for the assessment year 2016-17 incorporating the additional income was filed on 31.03.2018 vide acknowledgement no. 598177411310318. This was also brought to the notice of Assistant Director of Income Tax, Mangalore. On verification of the statement, it is understood that the additional income was quantified and recorded as Rs. 5,50,00,000 per annum from financial year 2011-12 to 2016- 17. No such admission was made, further no evidence has been found either during the survey proceedings or during the search proceeding at the premises of the partners. It appears that the quantification is based on the mis- interpretation of the surrender and not corroborated by any evidence. It may be noted that our turnover for financial year 2011-12 to 2016-17 is as under: Financial year Turnover (Rs.) 2011-12 44,77,79,591 2012-13 83,75,14,526 2013-14 179,79,56,596 2014-15 368,05,48,941 2015-16 326,64,53,656 2016-17 365,90,60,017 2017-18 382,32,87,327 6.1 The ld....
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.... the purchases are made from boat owners, these boat owners do not issue any bills for their sales and hence vouchers are raised by the assessee for the purchases. A sheet containing date wise breakup of purchases made against bills and against vouchers raised by the assessee was found. The purchases made against vouchers raised by the assessee was inferred as inflation of purchases and an additional income of Rs. 4,52,01,134 was estimated. Hence, he submitted that the purchases made are actual and are used for the purpose of the business. The dealing in fish is an unorganised sector and in this line of business it is obvious that the purchases are made against the self-made vouchers and same cannot be inferred as inflation. 6.3 He further submitted that during the survey proceedings when asked about the investment in SEZ unit it was stated that the approximate investment in the SEZ unit in the year 2017 was Rs. 5,00,00,000. However, on inspection of the statement, it is observed that an additional amount of Rs. 5,00,00',000 is treated as investment in Mangalore SEZ unit during the Financial year 2016-17 met out of alleged inflated purchase. In this regard, he submitted that M....
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....inancial year 2016-17 and 1,50,00,000 for financial year 2017-18 is not correct and appears to be misinterpretation of the answer given. 6.5 The ld. A.R. submitted that the assessee's partner Mr. Uday Kumar Salian was under the bonafide belief that the statements were recorded according to his answer and did not think that it was misinterpreted. The procedure of statement recording took long hours and various print outs were taken thereafter. Mr. Udayakumar Salian and other partners were asked to sign the print outs taken. They had no opportunity to verify the contents of the printouts taken. A request to furnish copy was made with the officials before vacating the premises and the assessee was informed that copies would be furnished at the Income Tax office. Subsequently, at the time of assessee's visit to Income Tax office, once again signatures were taken on the print outs taken by the officials. The assessee's request to furnish copies of the print outs signed by assessee at the time of survey and thereafter at the Income Tax office was not fulfilled. As the copies of the statements were not furnished earlier, assessee was under the belief that Rs. 5,50,00,000 was declared as ....
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....med Saheb 1 Ahmed Saheb 2 F.M. Yakub 2 F.M. Yakub 2 F.M. Yakub 3 Mohammed Mujeeb Sikandar 3 Mohammed Mujeeb Sikandar 3 Mohammed Mujeeb Sikandar 4 Mrs. Ammabi 4 Mrs. Ammabi 4 Mrs. Ammabi 5 Muktar Ahmed Isak 5 Muktar Ahmed Isak 5 Muktar Ahmed Isak 6 Nagaraja Suvarna 6 Nagaraja Suvarna 6 Nagaraja Suvarna 7 Sadananda Salian 7 Sadananda Salian 7 Sadananda Salian 8 Sadhu Salian 8 Sadhu Salian 8 Sadhu Salian 9 Sudhakar Kunder 9 Sudhakar Kunder 9 Sudhakar Kunder 10 Sunder G. Salian 10 Sunder G. Salian 10 Sunder G. Salian 11 T.S. Feroz Ahmed 11 T.S. Feroz Ahmed 11 T.S. Feroz Ahmed 12 Uday Kumar Salian 12 Uday Kumar Salian 12 Uday Kumar Salian 6.8 The ld. A.R. submitted that as could be noticed there were 12 partners upto 28.04.2016. As per Deed of Retirement dated 28.04.2016 Mohammed Mujeeb Sikhander retired from firm and thus the firm was left with only 11 partners thereafter. In view of the above the estimation of Rs. 5,50,00,000 per annum as withdrawn by the 11 partners was factually incorrect. Such bald and vague statements without any corroboration is neither sustainable nor is reasonable. He submitted that in the lin....
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....investment/development activity can be carried out in the SEZ unit without approval development officer which is obtained only in financial year 2017-18 (15.06.2017). Moreover, MOU was entered on 29.03.2017 i.e 2 days prior to the financial year end. Even one has to assume that investment is made it would be irrational to estimate the investment of Rs. 5,00,00,000 in only two days. Hence the estimation of Rs. 5,00,00,000 for FY 2016-17 towards investment in SEZ unit is not correct and without any basis. 6.11 Further, the ld. A.R submitted that during the survey proceedings, details about personal expenditure of the partner was asked and in response thereto it was stated that the approximate personal expenditure of all the partners put together would be around 1-1.5 crores. The personal expenditure of the partner is met out of their income and no part of it is charged in the books of account of the firm. On verification of statement the additional income of Rs. 1,00,00,000 for the FY 2016-17 and 1,50,00,000 for FY 2017-18 was estimated. In this regard, he submitted that the estimation is not correct and is not based on any material. No materials/evidences were detected either durin....
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....rder against the objections on re-opening of assessment. The admission made during the survey proceedings is brought to the notice of the revenue before issue of the Notice u/s 148 where in it is clearly stated that additional income was admitted only for assessment year 2016-17 and which is duly offered to tax. Thus, there was no reason to believe that income had escaped assessed for assessment year 2012-13 to 2015-16. 6.15 Without prejudice to the above and also to the right of the assessee to file further objections to the re-opening of the assessment, the ld. A.R. submitted that as the reasons recorded for re-opening of assessment proceedings u/s 147 is only based on statement recorded u/s 131 of the Act, in this connection he submitted that the evidentiary value of the statement recorded has been discussed by various judicial authorities and it is held that the statement recorded cannot be a sole evidence for assessment much less to re-open the assessment unless it is corroborated by documentary evidences. 6.16 The ld. A.R. further submitted that the assessment proceedings for AY 2013-14 was completed. As could be noticed there from the AO has duly verified all the vouchers ....
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....n in the statement with independent evidence. As evident from the reason recorded for re-opening of assessment is only based on statement no other corroborative evidence to substantiate the additional income quantified was detected. 6.20 The ld. A.R. submitted that Hon'ble Apex Court in Pullangode Rubber Produce Co., Ltd V. State of Kerala (1973) 91 ITR 18 (SC) held that the admission is an extremely important piece of evidence, has held that, it cannot be said to be conclusive and the maker can show that it was incorrect. The statement is factually incorrect for the detailed reasons stated above and in the instant case sole reliance is placed on such factually incorrect statement. 6.21 The ld. A.R. further submitted that in Satinder Kumar (HUF) V. CIT (1977) 106 ITR 64 (SC), it was held that an admission made by an assessee constitutes a relevant piece of evidence, but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts, such an admission cannot be relied upon without first considering the aforesaid contention. The ratio is squarely applicable on the instant case as the statement itsel....
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....or assessment. 6.23 Further, he drew our attention to the retracted statement filed before the authorities on 14.2.2018, which reads as follows: 6.24 The ld. A.R. alleged that the partners as per their mutual understanding have agreed to take Rs. 50,00,000/- in cash per annum in addition to the remuneration, interest on capital and profit share earned during the year and hence Rs. 5.50 crores is estimated as additional income for each year for the F.Ys 2011-12 to 2016-17 does not corroborate with the factual position. Details of partners for the financial years 2011- 12 to 2016-17 is asunder: FY 2011-12 FY 2012-13 FY 2013-14 1 Ahmed Saheb 1 Ahmed Saheb 1 Ahmed Saheb 2 F.M. Yakub 2 F.M. Yakub 2 F.M. Yakub 3 Mohammed Mujeeb Sikandar 3 Mohammed Mujeeb Sikandar 3 Mohammed Mujeeb Sikandar 4 Mrs. Ammabi 4 Mrs. Ammabi 4 Mrs. Ammabi 5 Muktar Ahmed Isak 5 Muktar Ahmed Isak 5 Muktar Ahmed Isak 6 Nagaraja Suvarna 6 Nagaraja Suvarna 6 Nagaraja Suvarna 7 Sadananda Salian 7 Sadananda Salian 7 Sadananda Salian 8 Sadhu Salian 8 Sadhu Salian 8 Sadhu Salian 9 Sudhakar Kunder 9 Sudhakar Kunder 9 Sudhakar Kunder 10 Sunder G. Salian 10 Sund....
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....s that, the statement recorded was prepared as per the convenience of Department at the time of survey based on the facts prevalent (11 partners) on the date of survey. 6.28 He further alleged that the expenses are inflated and a sum of Rs. 50,00,000 each is shared by the partners per annum. As could be noticed from the financial statements the profit sharing ratio of the partner varied from financial year 2014-15 onwards and their capital balances is in proportion to their profit sharing ratio. In such case it is very unlikely and beyond human probabilities that the partners will share the amount of profits earned from inflating the expenditure equally as alleged. Thus, the above facts shows that the statement is factually incorrect and not recorded as deposed by the person deposing the statement but recorded as per the convenience of the officials recording the statement. The partner deposing the statement is well aware of the facts and such factual error would not have been arisen if the statement is recorded as deposed. Mr. Udayakumar Salian has filed a letter dated 14.02.2018 immediately after the search/survey stating the facts deposed by him during the survey proceedings. A....
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.... entire statement and it suddenly crops up in question No. 21 without reference to any material found during the survey. Thus, it is clear that the statement was prepared by the Department officials and not the one that is deposed by the partner of the assessee Mr. Udayakumar Salian. He drew our attention to the decision of Honourable Andhra Pradesh High Court in the case of CIT Vs Naresh Kumar Agarwal (2015) 53 taxman.com 306 (AP), wherein it was held as under: "16. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.0 by operation of sub-se....
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....56 ' 32.11 9.0 4. 1. Net 1 7.97 8.72% 5.0 5. 3. Note: Net profit before deducting interest on capital remuneration and depreciation 6.38 He submitted that as could be noticed there from the Net profit (before deducting interest on capital remuneration and depreciation) declared by the assessee is substantially high as compared to other comparable cases. If at all the income is assessed as estimated in the statement, the same will result in assessment of unreasonably higher income defeating the principle of assessing the real income. Further, the sales are found to be genuine by the Revenue and thus the corresponding purchases are bound to be genuine when all the evidences related to purchases are produced and no defect is pointed out by the revenue. 6.39 He submitted that though repeated requests for copies of statements were made before the Assistant Director of Income Tax, Unit-2, Mangalore to furnish copies of statements recorded the same were not furnished. Consequent to the receipt of Notices u/s 148 one more round of repeated requests to furnish copies of statements recorded were made before the assessing officer as under: 1. Letter dated 22.03.2019 2.....
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....arned out of alleged inflation of expenses is shared equally among the partners. c. The learned AO failed to appreciate the surrounding circumstances that no corresponding asset is found either during search or survey to substantiate the alleged inflation of expenses. d. The learned AO failed to appreciate that the alleged inflation is equal to 12% of the total sales of Financial year 2011-12 and the resultant GP is nearly 30% which is absurd in the industry of the appellant. Thus, it is submitted that the circumstantial evidences too prove that the alleged inflation is without any basis and beyond human probabilities. 6.43 The learned AO has relied on the decision of Kerala High Court in the case of CIT Vs. O. Abdul Razak 76 ITR 350 (Ker) and held that the statement recorded during search will serve as an evidence against the assessee. It may be noted that the Honourable Andhra Pradesh High Court in the case of CIT Vs Naresh Kumar Agarwal (2015) 53 taxman.com 306 (AP) held as under: "13. In Abdul Rajaks case (supra) , the Kerala High Court took the view that a statement recorded under sub-section (4) of Section 132 of the Act can constitute the basis for passing a block ass....
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....ied by the assessee. 18. At the cost of repetition, we observe that 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." 6.44 The findings of Hon'ble Andhra Pradesh High Court is squarely applicable to the instant case for the following reasons: a. The contents of the statements are proved to be incorrect. b. The statement is retracted and the learned AO has relied on the statement for additions. No material is brought on record to substantiate the case of the Department. 6.45 The learned AO relied on decision in the case of CIT Vs. Ravi Mathur (2017) ITR-OL 245 (Raj) and held that the statement was not retracted immediately and same was made only on 22.07.2019. But the learned AO failed to appreciate that the appellant had duly filed a letter dated 14.02.2018 i.e. within a week reconfirming the admission made. The fact t....
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....issue of show cause notice do not have any evidentiary value in the eyes of law. 6.49 The learned AO has relied upon the decision of Hon'ble Apex Court in the case of Surjeet Singh Chhabra Vs. Union of India AIR 1997 SC 2560 wherein it is held that once it is shown that the statement was voluntary then, the assessee cannot retract. In the instant case, it is proved beyond doubt that the statement is not voluntary as the same contains factual inaccuracy stated above and is prepared at the convenience of Department. 6.50 The ld. A.R. further submitted that the learned AO has relied upon the decision of Hon'ble Supreme Court in the case of Awadh Kishore Dass Vs. Ram Gopal AIR 1979 SC 861 wherein it was held that unless the statement is proved wrong they are efficacious proof of facts admitted. But in the instant case as stated above it is proved that the statement relied upon by the AO is wrong and thus same cannot be considered as efficacious proof of facts admitted. Thus, he submitted that the reliance of AO on the said judgement do not substantiate the case of the department. 6.51 He further submitted that the learned AO has relied on the decision in the case of B. Kishore Kumar....
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....ist is mentioned in the assessment order, which is reproduced as under: * `Survey proceedings had taken place at the premises of the appellant on 08.02.2018. Copies of documents impounded and statements were not furnished even after repeated and persistent requests * Copies of statements were furnished only on 19.07.2019, i.e. after 17 months from the date of survey. * The additional income admitted for one year was mis-interpreted as for 6 years. * Additional income admitted during survey is immediately offered to tax by revising the Return of Income for A.Y. 2016-17 on 31.03.2018. * Mis-interpretation of surrender made was brought to your notice immediately after receipt of the copies of statement recorded. * Turnover has varied over the years and the alleged inflation of purchases has no correlation with the year wise purchases / turnover. * Appellant has been declaring substantial income over the years and is much higher than the profits declared in the similar nature of trade * It is normal practice in this line of business, payments have to be made to fishermen in cash and bearer cheques. * No evidences about alleged inflation was found either during....
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....on the issue of inflated purchases for this year. It is only on 22.07.2019 appellant filed letter in this office stating that the statement of the partner was mis interpreted in as much as the additional income of Rs. 5,50,00,00/- was admitted for one year but it was recorded as for each year in the statement which was not the admission by the appellant. The appellant also contends that several printouts of the papers where the partner had to affix his signature was kept before him and in order to complete the long-drawn survey proceedings the partner put his signature without reading it. 7.2 The basis for the declaration of Rs. 5,50,00,000/- as additional income is explained by the partner in reply to Question No. 12 of the statement, wherein inter-al is he has stated: Ans. I confirm that the document marked as Annexure 1 has been taken from the computer in our office operated by my staff Miss Amitha. Sir, these pages contains the details regarding the purchases made by M/s Yashaswi Fish Meal & Oil from Malpe for the period from 01.04.2017 to 31.01.2018. It contains date wise purchases made by our partnership concern from the fisherman, commission agent at Malpe. The figures....
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....appellant the breakup of the payments for purchases is as follows: Sl. No. Description Amount 1 Cash 1,27,54,667.00 2 Bearer Cheque 21,02,95,254.00 3 RTGS/Crossed Cheque 8,82,10, 148.00 4 Credit 5,77,28,069.00 Total 36,89,88,138.00 7.6 As can be seen from the above considerable portion of the purchases, i.e 60.45% is either in cash or in the form of bearer cheques. 7.7 In Q. No. 7 of the statement the partner has stated that raw materials are purchased from various places between the coast of Ratnagiri to Cochin but the main purchases are from Malpe. The partner has stated that major purchases are from local port Malpe. As stated by him in reply to Q. No. 9, outstation purchases are paid in cheques or banking channels but the local purchases are paid in cash as most of the fishermen prefer cash as they do not have bank accounts. 7.8 Further during the course of survey (Answer to Q. No.12) details of purchases recorded in the computer of the firm containing date wise purchases made by the appellant from Malpe were found. The partner stated that the purchases under the column "MalpePur Actual" represents the actual purchases for which payments have be....
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....stances and human probabilities. There are certain features of this case which belie the documentary evidence. 7.14 In the case of Sumati Dayal Vs. CIT (1995) 214 ITR 801, the Supreme Court, inter-alia, held as under: "in such cases, a superficial approach to the problem should be eschewed and the matter has to be considered in the light of human probabilities and further that any transaction about which direct evidence is rarely available should be inferred on the basis of circumstances available on the record. In that case, the majority opinion of the Settlement Commission was approved as it was taken after considering the surrounding circumstances and applying the test of human probabilities." 7.15 These principles apply to the present case where the documentary evidence (i.e. purchase invoices/ bills) prima facie supports the appellant's case but a closer look at the same in the light of surrounding circumstances ie. * scope for manipulation as the invoices are self-generated * need for manipulation in view of the mutual understanding of the partners * evidence of bogus booking of purchases found for FY 2017-18 during survey and applying the test of human ....
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....ment can only be retracted either by way of a duly sworn affidavit or statements supported by convincing evidence through which the appellant could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. Apparently in the instant case none of the above parameters have been adhered to. The appellant has not brought on record any evidence to show that the statements were recorded under pressure. 7.24 In the instant case of the appellant, the statement of the partner was recorded on 08.02.2018 whereas the letter retracting the statement was ,filed only on 22.07.2019 after i.e. after a long gap of 18 months. 7.25 In view of the above discussion it is clear that the retraction filed by the appellant is not a valid retraction as per the parameters laid down in the decision of the High Court of Kerala in CIT v. 0. Abdul Razak(supra) and Hon'ble High Court of Rajasthan in CIT v. Ravi Mathur(supra). This view has been followed by the Hon'ble High Court of Chattisgarh in ACIT Vs. Hukum Chand Jain in 337ITR 238. 7.26 Further the Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC), which ....
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....erson making them. Further, unless proved to be wrong, they are efficacious proof of facts admitted. 7.34 The submissions of the appellant as well as material available on record have been considered carefully. The crucial question is whether the addition can be made on the basis of statement recorded under section 131 and 132(4) which is now retracted by the appellant in as much as the income declared by the appellant during the course of search/survey as additional income has not been declared in the return of income. 7.35 It is settled law that admission by a person is a good piece of evidence and the same can be used against a person who makes it. The reason behind this is, a person making a statement stops the opposite party from making further investigation. 7.36 This principal is also embedded in the provisions of the Evidence Act. The statement recorded under section 132(4) is on a different footing. The Legislature in its wisdom has provided that such a statement may be used in evidence in any proceedings under the Income-tax Act, 1961. Therefore, great evidentiary value has been attached to such statement by the Legislature for the purpose of determining the inco....
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....lant did not retract from his statement for a period of 6 months though fully aware of the statement made by him. 7.43 The Bombay High Court did not accept the contention of the appellant that the aforesaid statements were forcibly recorded with an observation that the appellant has not produced any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. 7.44 It has been further observed that the declaration clearly fell under section 115 of the Evidence Act and hence it was not open to the appellant to retract from the same after the departmental authorities had accepted the same and altered their position by closing the search. It further observed that declarations falling under section 115 of the Evidence Act do not require any corroboration and upheld the order of the Assessing Officer in rejecting the retraction and treating the impugned sum as undisclosed income. 7.45 From the principles of law laid down in the aforesaid judgments, it may be deducted that, admission is one important piece of evidence and is rebuttable. It is open to the appellant who made admission to ....
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....hey came to know of the additional income admitted only later is not true. * This deposition made by the partner on 08.02.2018 is after thorough verification of the facts and its correctness. Hence it cannot be said that there is no justification in placing reliance on the statement recorded during survey or subsequently. * The evidentiary value of the statement recorded u/s. 133A(3) (iii) is based on the digital evidences found and cloned which forms the basis. * The recent judgement of Hon'ble Supreme Court in SLP(CRL)No.2302 of 2017 in the case of Shaft Mohammed Vs. The State of Himachal Pradesh has upheld the validity of the digital evidences and its admissibility under sec. 65B of the evidence Act. * It is not the case of the appellant that the statement is recorded based on conjectures and surmises. 10. Retraction of statement given under oath: * The statement u/s. 133(A)(3)and subsequently U/s 131was given and recorded in a sound state of mind. * There is absolutely no basis on which the appellant could partly abide with his declaration by offering Rs. 5,50,00,000 for A.Y. 2016-17 and fully retract for the subsequent years. * When there is a clear ....
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....it. 10.3 Accordingly taking into account the statement of the partner, the evidence found during the course of survey and the undisclosed income of Rs. 5,50,00,000 admitted in the statement is assessed as the income of the appellant and added to the income under the head "Income from Business". 7.2 The ld. D.R. submitted that the AO, in the aforesaid order, relevant portion of which has been reproduced above given sufficient reasons backed by judicial pronouncements as would justify the additions made in the assessment order. It is also not correct to state that the additions have been made only on the basis of statement of one of the partners without any evidentiary proof. The fact is that during the course of the survey proceedings, details of purchases recorded in the computer of the assessee firm containing date wise purchases made by the assessee from Malpe were found. When confronted, the partner present during the course of the survey proceedings, clarified that the purchases under the column "MalpePur Actual" represented the actual purchases for which payments had been made by NEFT/RTGS and that purchases recorded under "Malpe Raised" were not genuine and that in respe....
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....y one of the partners. These bearer cheques are encashed by them. I am not aware as to specifically who encashes these bearer cheques. This excel sheet was prepared by me earlier for the purpose of working out the total bogus purchases to be accommodated during the month of January-2018 and hence the bill no. column is blank in this excel sheet. Q.9 I am sowing you a print out of the excel sheet 'Purchase Jan' with heading `MALPE PURCHASE'. Please go through the same, identify and explain the contents therein. Ans. I confirm that this excel sheet has been found from my system and has been prepared by me. This is a similar excel `sheet to the one referred to in Q.No.8. However, this contains the day" wise details of cash purchases made from `Malpe' parties. I am further clarifying that these contains both genuine and the bogus purchases made by the firm during the month of January- 2018. As evident from the presence of Bill No., these are the purchases entered in the books of the firm for the month of January-2018. Q.10 I am reminding you once again that you are giving this statement under oath. Please confirm. Ans. Yes. I understand that this statement i....
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.... Ans These excel sheets are specifically prepared for the purpose of intimation to the partners during their monthly meetings. When once the meeting is over, the hard copy as well as the soft copy, being the excel sheet, is destroyed / deleted from the system. Since, the general monthly meeting of the partners for the month of January-2018 has not yet been completed, the same is still available. Q.15 Do you have anything else to say? Ans. No. I do not have anything else to say. 7.4 Thus, the ld. D.R. submitted that the assessee has in a systematic manner made insertion of the bogus purchases in the books of accounts and the same has been accepted by the assessee in assessment year 2018-19 by settling the dispute through VSV Scheme and also accept in its return of income in AY 2016-17. 8. We have heard the rival submissions and perused the materials available on record. In this case, there was a survey proceedings u/s 133A of the Act in the case of assessee on 8.2.2018. During the course of survey proceedings, statement was recorded from partner Uday Kumar Salian u/s 131 of the Act who has admitted additional income as recorded in para 5.1 of this order on account of inf....
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....tatement recorded u/s. 133A(3) (iii) is based on the digital evidences found and cloned which forms the basis. * The recent judgement of Hon'ble Supreme Court in SLP(CRL)No.2302 of 2017 in the case of Shaft Mohammed Vs. The State of Himachal Pradesh has upheld the validity of the digital evidences and its admissibility under sec. 65B of the evidence Act. > It is not the case of the assessee that the statement is recorded based on conjectures and surmises. 8.1 The issue relevant here is that the evidences point out the modus operandi of the assessee, confirmed by the partner himself during survey proceedings and the quantum being partly declared by him in the return of income for the A.Y. 2016-17 substantiates the finding of purchase inflation as a mode to divert money for the benefit of partners. 8.2 According to ld. D.R., it is evident that it is not the case of the assessee that the purchase inflation was not pointed out without evidence nor is the case that the statement was taken under coercion. The retraction of the statement without any reason cannot be treated as a valid retraction as several judicial decision referred to above have held. So also, several judicial ....
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....ended by the ld. A.R., ld. AO cannot go with both methods for the purpose of making additions. Either the ld. AO go with the surrender on the admission of the assessee or may go to estimate the income of the assessee after rejecting the same. In the present case, ld. AO has not rejected the books of accounts u/s 145(3) of the Act. He accepted the books of accounts, then make additions on the basis of surrender of income by partner of the assessee firm during the course of search. The ld. A.R. pleaded before us that books of accounts have been produced before ld. AO and the surrender of income made by partner has been retracted vide retraction letter filed before the authorities on 14.2.2018 as against the surrender of income vide statement recorded on 8.2.2018 u/s 131(1A) of the Act. As pointed out by the ld. A.R., CBDT vide its various circulars have emphasized time to time that the Income tax authorities should not try to extract the admission of the assessee and should bring some concrete material on record for the purpose of estimating the undisclosed income of the assessee. In these circumstances, particularly when the books of accounts are not rejected by ld. AO and the state....
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....earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity. 8.6 Further, there was a CBDT circular file no.286/98/2013-IT (Inv.II) dated 18.12.2014 which states as under: "Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or laun....
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....6 SCC 1] ................... 8.8 In case of Romesh Chandra Mehta vs. State of West Bengal (1969) 2 SCR 461 although Hon'ble Court held that any statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 8.9 It has been similarly held by the Hon'ble Supreme Court in the case of K.T.M.S. Mohd. & Anr. vs. Union of India (1992) (197 ITR 196) as under: "We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the sam....
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....ers vide letter dated 14.2.2018 within short date of 6 days. This has been filed by assessee with department on 15.2.2018, which is not at all considered by the AO, the said letter is reproduced as under: 8.12 It is noted that the ld. AO/CIT(A), never mentioned about this retraction statement in their order and this action of lower authorities cannot be appreciated. It is the duty of ld. AO to consider the letter in true perspective and to comment on it which he failed to do so. 8.13 It is also submitted by ld. A.R. before us that the statement recorded from Ms. Amitha who is an employee of the assessee, who has confirmed bogus purchase from 1.4.2017 to 31.1.2018 at Rs. 4,28,47,574/- for the financial year 2017-18 relevant to assessment year 2018-19 and not for the all-assessment years involved herein. For clarity, we reproduce the question no.12 and answer to question no.12 recorded from Uday Kumar Salian on 8.12.2018 as under: 8.14 Being so, it cannot be considered that Ms. Amitha given any statement related to bogus purchases relating to all assessment years. This being the position, framing assessment by AO without considering the retraction of statement filed by the assesse....
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....esaid nature of evidence it is not possible to record a different conclusion, different from the one recorded by the Commissioner (Appeals) and the Tribunal concurrently holding that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a parti....
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.... been made by the assessee and that that investment was also not disclosed, only the excess over the cost incurred could be treated as profit." 8.20 In the case of CIT Vs. Satyanarayan P. Rathi (2013) 351 ITR 150 (Guj), the Hon'ble Gujarat High Court has held as under: "The assessee was in the business of trading in iron and steel. During the reassessment proceedings for the year 2003-04, it was found that purchases worth Rs. 61.40 lakhs were not supported by sufficient evidence. Purchase of such goods from various suppliers was verified, but it was found that such parties had not supplied the goods as named by the assessee. The Assessing Officer made an addition of the entire amount of purchase of Rs. 61.40 lakhs. The Commissioner (Appeals) found that though the purchases were not made from the parties from whom the assessee claimed, there was complete quantitative tally of the materials purchased and sold. He was of the view that such materials were purchased from the open market incurring cash payment and bills were procured from various sources. He added only the profit element and not the entire amount of the purchases, for the limited addition to 30 percent of the total a....
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..... In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick could be adopted." 8.22 Further, Hon'ble Supreme Court in the case of CIT Vs. Odeon Builders Pvt. Ltd. reported in (2019) 418 ITR 315 (SC) held as under: 2. We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore. 3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to furthe....
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....ttedly the normal practice in the line of business of the assessee is to pay certain extra amounts to port labourers as speed money for promptly and speedily carrying out the labour work of handling cargo beyond working hours and has placed reliance on the decision rendered by this Court in KONKAN MARINE AGENCIES, supra. It is pertinent to note that in CLIFFORD D'SOZA, supra, payment was made to the sub-contractors in cash as well as by Cheques. In the absence of any challenge to the entries made in the books of accounts by the authorities, in our opinion, the finding recorded by the Assessing Officer as well as the Tribunal that it denied the claim of the assessee for expenditure to the extent of 10% on account of payment of speed money, is perverse as the same is duly supported by the documentary evidence. Insofar as the submission made by the learned counsel for the revenue that in paragraph 4 of the order of the Commissioner the assessee himself had restricted the payment of speed money to 10% is concerned, it is pertinent to note that the restriction was made by the assessee in respect of Assessment Year 2004-05 and from the grounds of memorandum of appeal before the Tribu....
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....ot consider as to whether the outputs were more the inputs, if the purchases from M/s. R.K.R.K. were considered as bogus. The assessee had moved a miscellaneous application, which was rejected inter-alia on the ground that no specific plea with regard to assessee did purchases, rice bran from M/s. R.K.R.K. or some other person or as did go into the process of manufacturing the oil. It was held that the cost of such purchases may be worked out on the basis of average purchase price in the entire year and substituting the same in the place of purchase price shown by the assessee in respect of the aforesaid firm. In the present case, the case of the assessee is that when the sales have been not doubted, the conclusion that the purchases were made cannot be rejected. 8.28 For this purpose, reliance was placed on the judgement in the case of CIT Vs. Ved Prakash Choudhary (305 ITR 245). In that case, the assessee had stated that there was no transfer of money between him and Sri Ravi Talwar & Madhu Talwar. Mr. Ravi Talwar & Mr. Madhu Talwar denied the receipt of any money from the assessee. In the face of the denial, there ought to have corroborated evidence to show that there was in fa....
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.... this order was upheld by the Tribunal. On appeal to the High Court, the High Court held that in view of the scope and ambit of the materials collected during the course of survey, the action under section 133A would not have any evidentiary value and that it could not be said solely on the basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee. On appeal to the Supreme Court; the Hon'ble Supreme Court dismissed the appeal in view of the concurrent findings of fact. 8.32 Further, in the case of CIT Vs. Tilak Raj Kumar (369 ITR 180) (T&AP), it was held as under: "The three assessees made separate voluntary disclosures of their income in response to the Voluntary Disclosure of Income Scheme, 1997, and they were also issued certificates. Most of the items mentioned in the disclosures were jewellery of gold and diamonds. For one reason or the other, the family thought of selling the jewellery. In the process, the diamonds were separated from gold and while the gold was sold at Hyderabad, the diamonds were sold at Surat. The resultant sale proceeds were shown as capital gains in the respective....
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....Ltd. Please explain the sale of goods to Toms enterprises? Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts. Question:- 9- In addition to the above what are your major expenses? Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive. Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit? Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure." 8.1 As seen from the above, the managing partner stated that the assessee is getting GP at 15% and net profit at 4%. Contrary to this, the assessee has shown gross profit at 10.55%. It was also explained by the Ld. AR the reason for declaring GP at lower rate in the....
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....burden to prove "admission" as incorrect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction is proved sufficiently, the earlier stated facts loose their effect and relevance as a binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admissions will not be enough even after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded u/s. 131 was involuntary and it was made under coercion or during their admission, the statement recorded u/s. 131 has no legal validity. 8.3 There was a circular issued by CBDT issued circular in F. No. 286/98/2013- IT(Inv.II) dated 18th December 2014 stating as follows: "Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backe....
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....blivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. [see Pon Adithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] ................ 8.6 Yet again in Romesh Chandra Mehta vs. State of West Bengal (1969) 2 SCR 461 although this Court held that any statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 8.7 It has been similarly held by the Hon'ble Supreme Court in the case of K.T.M.S. Mohd. & Anr. vs. Union of India (1992) (197 ITR 196) as under: "We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the ef....
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....poses of making assessments. 8.9 We are of the view that the statement recorded u/s. 131 cannot be independently used for making any addition in the hands of the assesse and the said statement cannot, in our view, be the sole basis for making any addition and must be independently corroborated by evidences. Thus, on a careful reading of the decisions of the Hon'ble Supreme Court referred before us, we are of the view that the legal position that emerges is that a sworn statement, though binds the assessee, it cannot be the sole basis for making the assessment. It is open to the assessee to show the circumstances in which confessional statements were recorded and once the assessee proves that confessional statements were recorded under threat and coercion and retracts from the same, the confessional statements cannot be the sole basis for making assessments or for making any addition in the hands of the assessee. 9. Further, in the case of CIT vs. S. Khader Khan Son (300 ITR 157), the Madras High Court held as follows: "The principles relating to section 133A of the Income Tax Act, 1961, are as follows: (i) an admission is extremely an important piece of evidence but it can....
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....rder was upheld by the Tribunal. On appeal to the High Court: "Held, dismissing the appeal, that in view of the scope and ambit of the materials collected during the course of survey action under section 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee." 10. On further appeal by the Department in Civil Appeal No. 13224 of 2008 and 6747 of 2012 dated 20/09/2012, the Supreme Court held as follows: "Heard Counsels on both sides. Leave granted. Civil Appeal filed by the Department pertains to 2001-02. In view of the concurrent findings of the fact, this Civil Appeal is dismissed." Hence, the ratio laid down by the Madras High Court was confirmed by the Supreme Court. 11. From the foregoing discussion, the following principles can be culled out: (i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show th....