TaxTMI 
TaxTMI 
2024 (5) TMI 340
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..../s 143(1) of the Act on Processed u/s 143 of the Act 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 ass....
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....sed", which represents the bogus purchase. The said partner Mr. Uday Kumar Salian has retracted this statement vide his letter dated 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 conclu....
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....free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless 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 as....
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....edings. The same was due to various reasons affecting internally and externally. However, to purchase peace and to cover up the reduction in profit percentage and also to cover up discrepancies, commissions and omissions, if any from the assessment 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 ....
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....arable 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. During the survey proceedings, a print out containing details of purchases was found. The ld. A.R. submitted that in line of business of the assessee, 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 sta....
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....eir profit sharing ratio over the years and all the partners withdraw equal amounts from the firm. In this scenario it is very unlikely that the personal expenditure of the partners which are not common is booked in the books of accounts of the firm. In light of the above, he submitted that the estimation of additional income of Rs. 1,00,00,000 for financial 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 ag....
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....greed 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 as under: 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 Sunder G. Salian 10 Sunder G. Salian 11 T.S. Feroz Ahmed 11 T.S. Feroz Ahmed 11 T.S. Fer....
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....he said land only after getting approval from the Development Commissioner of Mangalore SEZ as per the norms of SEZ act 2005 and rules 2006. As per the terms of said agreement, a sum of Rs. 3,82,50,000 being 50%, the one-time non-refundable premium amount was paid and the said amount is also duly reflected in the books of accounts of the firm. As submitted earlier as per the terms of MOU, a unit can be set up only after obtaining necessary approval. The approval from Development Commissioner Mangalore SEZ was obtained only on 15-06-2017. In view of the same, he submitted that no 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 expendi....
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.... is relying on any other statements/ evidences copy of the same may be furnished to the assessee. 6.14 Without prejudice the ld. A.R. submitted that the re-opening is not as per law. Reason recorded is merely based on factually incorrect statement. The ld. A.R. stated that the sanctioning authority also did not apply his mind for the sanction. He requested to furnish copies of the sanction letter to the assessee and allowed to file objections against the re-opening and he drew our attention to the decision of the Supreme Court in GKN Driveshaft's case in view of passing speaking order 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 reason....
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....ings at the premises of the partners. In such a scenario the statement recorded would not serve any evidence as opined by the CBDT. 6.19 The ld. A.R. further submitted that in Attar Singh Gurmukh Singh V. ITO (1991) 191 ITR 667/59 Taxman 11 (SC) and CWT V. Rohtas Industries Ltd (1968) 67 ITR 283 (Pat), the Hon'ble Supreme Court held that the statement can be retracted if assessee proves that, the statement was not given in a proper frame of mind or was given under duress and threat or under a mistaken belief of law. It is also held that, the revenue authorities are required to corroborate the admission 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 rea....
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....nce of the partners. • Details provided about investments made in SEZ unit and about personal expenditure of the partners treated as additional income, without any basis and evidences. • Without prejudice reassessment proceedings is void an bad in law. • Without prejudice to the above there was no reason to believe that assessee's income had escaped assessment. • Without prejudice to the above, the reasons recorded for reopening of assessment proceedings u/s 147 is only based on factually incorrect statement recorded u/s 131 which is not corroborated by any evidences. Thus, such factually incorrect statement cannot form a belief of income escaping assessment much less cannot be a sole evidence for 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 ....
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.... Sl. No. Financial Year Additional Income offered Nature of Disallowance 1 2011-12 5,50,00,000 Bogus Purchase 2 2012-13 5„50,00,000 Bogus Purchase 3 2013-14 5,50,00,000 Bogus Purchase 4 2014-15 5,50,00,000 Bogus Purchase 5 2015-16 5,50,00,000 Bogus Purchase 6 2016-17 5,50,00,000 Bogus Purchase Total 33,00,00,000 I have already stated in my answer to the earlier question that in this year also i.e. the F. Y. 2017-18, as on date, we have made the bogus purchases bills to the tune of Rs. 4,28,47,574/ - and offering the same as additional income in the F.Y. 2017-18." 6.27 The ld. A.R. submitted that as could be noticed there from it is recorded as if Mr. Udayakumar has deposed as "we the 11 partners are withdrawing". Mr. Udayakumar Salian who is well aware of the fact that there were 12 partners upto 28.04.2016 would not. have stated that 11 partners are withdrawing. This proves 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 tha....
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.....1.50 Crore for FY 2016-17 and Rs. 1.00 Crore for FY 2017 18) on account of booking of various personal expenditures of the partners in the books of the firm. I would also like to offer additional income of Rs. 5 Crore on account of bogus purchases debited in the books for the FY 2016-17 which has been utilized for the investment made in our new plant coming up in the SEZ, and this additional income is over and above what is already shown in the books of the firm. To sum up the total additional income offered for taxation in the hands of the firm for the different AYs is as below - 6.31 The ld. A.R. submitted that, the question is to confirm that the person deposing it is aware of the consequences of giving false statement on oath. But the answer is recorded as if the person deposing it is agreeing to declare additional income. Further, he submitted that regarding the issue of investment in SEZ unit and personal expenditure is concerned you may appreciate that there was no whisper on these issues in the 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 D....
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....s have been inflated. 6.35 The ld. A.R. submitted that our turnover for financial year 2011-12 to 2016-17 is as under: Financial Year Turnover (Rs. In 2011-12 44.78 2012-13 83.75 2013-14 179.80 2014-15 368.05 2015-16 326.65 2016-17 365.91 6.36 Even assuming but not admitting that there is inflation in purchases as noted in the statement, the inflated purchases cannot be equal in all the year, much less when there is substantial variation in the turnover. The additional income declared for the assessment year 2016-17 was only to co-operate with the department and avoid litigation. No evidence from the same was detected either during the search or survey proceedings and the quantification appears to be mere estimation without any basis. 6.37 Summary of income declared by the assessee over the years is under: (Rs. In crores) F.Y 2 20 20 20 20 20 Tur 365.91 326.65 368.05 17 83 44 Gros 88.51 58.43 66.23 26. 13 7. GP 24.19 17.89 17.99 14. 16 17 Net 40.56 ' 32.11 9.0 4. 1. Net 1 7....
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....urvey proceedings. As could be seen from the letter the admission made is clearly explained. However, the learned AO held that the retraction was made only on 22.07.2019. Though the letter was filed confirming the declaration since the statement typed by the department officials to their convenience was in accordance with what was disposed in the letter dated 14.02.2018 is required to be treated as retracted. Thus, the assessing officer's contention that the statement was not retracted immediately is not correct. 6.42 The learned AO relied on decision of Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC) and CIT Vs. Durga Prasad More 82 ITR 540 (SC), wherein it was held that matter should be considered in the human probabilities and surrounding circumstances. But learned AO failed to appreciate the following factors before arriving at the conclusion of inflation: a. There were 12 partners upto 28.04.2016 but the allegation of AO is that 11 partners have withdrawn 50 Lakhs each from financial year 2011-12 which prima facie proves that the allegation is bald and without any substance. b. The profit sharing ratio of partners is not equal and it is beyond human proba....
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....inability to subscribe to that view. To the extent, Their Lordships have taken note of the fact that the burden of proving undisclosed income squarely rested on the Department, there is hardly any doubt. However, the manner in which the burden can be said to have been discharged, as mentioned in the underlined portion, runs contrary to the very basic tenets of law of evidence. Though the fact that the assessee therein retracted from the sworn statement, no discussion was undertaken about it. 15. The question of discharge of burden, arises in respect of a fact, to be proved. If the contents of the statement recorded from an assessee are to be proved, that very statement cannot be a proof, by itself. Such a course would bring about hypellage logic, which is illustrated by a well known example. Q: who is a doctor? Ans: The one who administers Medicine. Q: What is Medicine? Ans: The one that is administered by a doctor. Such discussion does not lead one, any further. The discharge of burden must be in respect of the plea taken by the Department and the burden can be discharged only through material, which is over and above what was ....
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....ect statement. 6.46 The 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. 6.47 The ld. A.R. further relied on the judgement in the case of Satinder Kumar (HUF) V. CIT (1977) 106 ITR 64 (SC), wherein 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 itself contains incorrect facts. 6.48 He further drew our attention to Hon'ble Supreme Court's decision in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC), wherein Hon'ble Apex court he....
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....o substantiate the allegations • The purported statement is duly retracted twice and same cannot be relied upon • Judicial pronouncements relied upon by the AO is clearly distinguished on the facts of the appellant • Various judicial pronouncements including that of the Apex Court are in favour of the appellant • Statement during survey proceedings is not binding as per the decision of Apex Court in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC) 6.54 The ld. A.R. further relied on the following judgements: a) Hon'ble Supreme Court in the case of CIT Vs. S. Khadar Khan & Sons 352 ITR 480 (SC) b) Judgement of AP High Court in the case of CIT Vs. Naresh Kumar Aggrawal (369 ITR 171) c) Order of the Tribunal Cochin bench in the case of ITO Vs. V. Thomas Enterprises (ITA No.442/Coch/2018 dated 7.2.2019 for the AY 2014-15). 6.55 In view of the above, the ld. A.R. prayed before us that the additions may be deleted appreciating the facts of the case. In the unlikely event of our proceedings taking any adverse view, then the ld. A.R. requested that an opportunity of personal hearing ma....
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....ases 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 the course of survey or during the course of search at the residence of the partners. • Details provided about investments made in SEZ unit and about personal expenditure of the partners treated as additional income, without any basis and evidences. ' 7.1 AO, however, did not accept these contentions of the assessee for reasons lucidly explained in the assessment order. These reasons are reproduced as under: - "6.1 As stated in the previous paragraphs a survey proceeding u/s 133A of the Income tax Act 1961 was conducted on 08.02.2018 in the case the appellant. In the statement u/s 131 recorded, the partner of the firm admitted additional income of Rs. 5,50,00,000 for this year. The appellant had sought for copies of the statement given d....
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....during the year. As regards the figures mentioned under the column "Total", the same represents the purchases booked by our partnership concern in its books of accounts. 7.3 The partner has further clarified the same in his reply to Q. No. 14 as follows: Ans. Sir, 1 want to state that the mutual understanding of withdrawing/taking Rs, 50,00,000/- in cash from the firm in addition to the remuneration, interest on capital share of profit was made in the year 2011- 12. From that year onwards, i.e. from F. Y 2011-12, we the 11 partners are withdrawing an amount totalling to Rs. 5,50,00,000/- per annum from M/s Yashaswi Fish Meal & Oil by introducing bogus purchase bills. Now in order to rectify the mistakes in the books of accounts of our partnership concern, I am availing this opportunity and voluntarily offering a sum of Rs. 33,00,00,000/- spread over the Financial Years 2011-12 to 2016-17. The breakup of the same is produced below for ready reference. gl. No. Financial Year Additional Income offered Nature of Disallowance 1 2011-12 5,50,00,000 Bogus Purchase 2 2012-13 5,50,00,000 Bogus Purchase 3 2013-14 5,50,00....
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.... to be drawn is: > Large part of the purchases is either through bearer cheques/cash, which gives scope for manipulation to suit the convenience of the mutual understanding of the partners. > Evidence has been found for the financial year 2017-18 in respect of inflation of Malpe purchases. > The partner has admitted purchase inflation only when confronted with evidence found. > The partner has not claimed at any point of time either after search or during assessment that the statement was given under threat, coercion or undue influence. > The appellant has never denied the evidence found during survey and confirmed in the statement regarding inflation of purchases. > As the partner Uday Kumar Salian was aware of the issues he declared additional income of Rs. 5,50,00,000 on account of purchase inflation booked in the books of the firm to accommodate the unaccounted payment of Rs. 50,00,000 per annum for the 11 partners of the firm. 7.11 It is pertinent to note that there is no reference to the aspect of mutual understanding between partners of withdrawing of Rs. 50,00,000 per annum for each of the 11 partners of the fir....
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....ifically observed as under: "Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals are applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence." 7.17 In the case of Juggilal Kamlapat Vs CIT 73 ITR 702 (SC), it was held that the Assessing Officer could go behind the legal form and find out substance having regard to the economic realities behind the legal façade. 7.18 It is very pertinent to note that the statement of Sri Uday Salian recorded during survey and u/s 131 has been confirmed by other two partners Sri Sadhu Salian and Sri Firoz Ahmed Tonse in their statement u/s 132(4) during the course of search which was simultaneously being conducted at their residence. 7.19 The statements recorded under section 132(4) and 131 of the Income- tax Act have great evidentiary value and cannot be retracted in a summary manner. Several judicial pronouncements on this issue has held that the retraction has to be genuinely made within reasonable time and immediately after such a statement has been r....
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....tablish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. 7.27 In the instant case, it can be seen that the partner of the appellant firm admitted additional income voluntarily on being specifically asked about the evidence for purchases. It is not the case of the appellant that the partner was coerced or forced to admit the income. It can be seen from the reply to Q.No. 14 of statement dated 08.02.2018 and in Q. No. 5 of 12.02.2018, it was his admission that there was purchase inflation and, on this issue, he was admitting Rs. 5,50,00,000/- as additional income. 7.28 Hence the contention of the partner made after one and half years that the statement was signed only to end the survey proceedings being unaware of what is recorded is without any merit. 7.29 The fact is when there is a clear admission, voluntarily made, by the appellant, that would constitute a good piece of evidence for the purpose of assessing the income. 7.30 There is no evidence on record that statement was obtained under coercion or threat of any kind. The appellant was completely aware of the statement he was ....
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....lant makes some admission, he debars the authorised officer from making further investigation. The sanctity of such provision would be lost if the appellant is allowed to contend that no addition can he made based on such admission. 7.38 In the case of B. Kishore Kumar vs. Deputy Commissioner of Income-tax, Central Circle-I V (1), Chennai the Hon'ble High Court of Madras in [2014] 52 taxmann.com 449 (Madras) held that where appellant himself stated in sworn statement during search and seizure about his undisclosed income, same was to be levied tax on basis of admission even without scrutinizing documents. 7.39 The Hon 'ble Supreme Court of India has upheld the decision of the Hon 'ble Madras High Court and the SLP was dismissed as reported in [2015] 62 taxmann.com 215 (SC)/[2015] 234 Taxman 771 (SC). 7.40 The important issue to be observed is that because the appellant had made the aforesaid surrender, the revenue had refrained from making any further enquiries into the matter. It was, therefore, not open to the appellant to retract from the earlier statement at the time of adjudication. 7.41 In the matter of Ranjas Nawal's case [....
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....under the mistaken belief of fact or law, he should prove the same with evidence. 7.46 The retraction should be made at the earliest opportunity and the same should be established by producing any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. 7.47 There are no mitigating circumstances to show the admission/surrender made by the appellant was retracted at the earliest part of time with corroborative evidence has substance. The fact is that the appellant surrendered undisclosed income only when he was not able to evidence found during survey and by volunteering surrender of undisclosed income, he induced the survey party not to proceed with collection of other evidence and to accept the surrendered amount. 8. Conclusion: 8.1 The discussion on various issues discussed above is summarised as below: Evidences of purchase inflation found during survey: • 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 pur....
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....two different statements, and the statement being confirmed by other two partners Sri Sadhu Salian and Sri Firoz Ahmed Tonse in their statement u/s 132(4) on 08.02.2018 there is no way the appellant can bring in the contention that the statement was given by the partner without proper understanding. • The fact is when there is a clear admission, voluntarily made, by the appellant, that would constitute a good piece of evidence for assessing the income. • It is pertinent to note that it is the partner who handles the business affairs clearly admitted that the purchase inflation is done. • The important issue to be observed is that because the appellant had made the aforesaid surrender, the revenue had refrained from making any further enquiries into the matter. It was, therefore, not open to the appellant to retract from the earlier statement at the time of adjudication. • The sanctity of such provision would be lost if the appellant is allowed to contend that no addition can be made based on such admission. • The admission undisclosed income in the revised return of income for A.Y. 2016-17 also substantiates the state....
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....e purchases, bearer cheques were issued and amounts so paid withdrawn and distributed to the partners as per the mutual understanding. No credible evidences were produced by the assessee to show that purchases recorded under "Malpe Raised" were indeed genuine and that the statement given by the partner of the firm during the course of survey proceedings were incorrect. He submitted that section 133A- of the Act states as under: - (3) An income tax authority acting under this section may: - (i) & (ii)** (iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act." Section 133A(3)(iii) of the Act therefore empowers income-tax authority to record statement of a person including the assessee. 7.3 The ld. D.R. also brought to our notice the statement given by Ms. Amitha K.Y., W/o Sri Sujith Suvarna who is working as a Manager (HR) and also looking after the accounts section who has answered question nos.8 to 14 as follows: Q.8 I am showing you print out of the excel sheet "Purchase Raised Value" consisting of columns Date, Bill No., Supplier Name, Chq Name, Item, Weight, Rate, Purc. Value, Chq ....
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.... Ans. Yes. I understand that this statement is being recorded under oath and I confirm that I have understood the consequences of giving a false statement under Oath. I am stating the truth only. Q.11. I am showing you the print outs of two excel statements taken from 'Daily Cash' maintained on your system. Please go through the same, identify and explain the contents therein? Ans. I have gone through these two printouts and confirm that the same has been prepared by me and maintained on my system. These two statements are the advance workings of the bogus purchases to be accommodated for 10-Feb-18 and 11-Feb-18. As can be seen from these statements the Bill No. column has been left blank, which shows that these bills have not yet been generated. However, I have entered the cheque No., which is the continuation cheque no. available and the same will be issued as a bearer cheque only, when once the bogus purchase bills are generated. This is done as per the directions of the partners only as stated earlier by me. Q.12 I am showing you print out of the 2nd sheet of excel sheet `Purchase Raised Value' containing day wise totals of various dat....
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....r Salian u/s 131 of the Act who has admitted additional income as recorded in para 5.1 of this order on account of inflated purchases in these assessment years. On 22.7.2019, the assessee filed a letter stating that statement of partner was misinterpreted in as much as the additional income of Rs. 5.5 Crores was admitted for one assessment year but it was recorded as per each assessment year in the statement, which was not the admission of the assessee. It was also alleged that print outs of the various papers have been taken out for which the partner's signature has got fixed and the partner in order to complete the long drawn survey proceedings, he had put the signature without reading it. However, the AO has not agreed with the retraction statement of the assessee and he concluded that there was insertion of bogus purchase into the account of the assessee and came to conclusion that the income of the assessee was understated on the reasons: Evidences of purchase inflation found during survey: • Details of purchases recorded in the computer of the firm containing date wise purchases made by the assessee from Malpe were found. • The partner stated that....
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....e 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 decisions have held that admission by a person is a good piece of evidence and the same can be used against a person who makes it. The admission made in statement has great evidentiary value and is binding on a person who makes it. 8.3 Similarly, A.O. made additions in other assessment years as discussed in para 5.1 of this order towards inflated purchases. The contention of the ld. A.R. before us is that there was no evidence found during the course of survey proceedings with regard to bogus purchases inserted by the assessee in each of the assessment years and even if it is presumed that there is inflated purchase, there cannot be same amount in each assessment year. Further, it was noted that the AO never rejected the books of accounts by assessee and it is not possible to the AO to estimate the income of the assessee without rejecting the books of accounts. It is also on record that assessee has produced books of accounts before AO for all t....
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....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 statement of one partner has been retracted by all the partners, it weighs more and the assessee has been declaring turnover, gross profit and net profit read as follows, which is progressively having increased from year to year under consideration. There is no reason to hold that the assessee has inserted the bogus purchase without rejecting the books of accounts of the assessee. FY 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 Turnover 3,84,46,57,493 3,67,64,40,084 3,29,88,92,109 3,68,05,48,941 1,79,79,56,596 83,75,14,526 Gross profit 87,35,70,168 88,51,14,145 58,43,90,889 66,22,54,952 26,52,12,067 13,65,93,393 GP% 22.72 24.08 17.71 17.99 14.75 16.31 Net profit % 13.71 13.93 8.16 8.87 5.24 5.89 8.4 Being so, the action of the ld. AO was clearly sans documentary proof, which cannot be upheld and to hold that purchases shown by the assessee ar....
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....artment. 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 launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely." From the above Circular, it is amply cle....
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.... 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 same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the ret....
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.... 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 assessee, in our opinion, the addition cannot be sustained. 8.15 Further, in the case of CIT Vs. Vijay M. Mistry construction Ltd. 355 ITR 498 (Guj.) the Hon'ble Gujarat High Court has held as under: "Held, dismissing the appeal, that the conclusion arrived at by the Tribunal was based on concurrent findings of fact recorded by the Commissioner (Appeals) as well as the Tribunal. It was not the case of the Revenue that the Tribunal had taken into account any irrelevant material or that any relevant material had not been taken into consideration. In the absence of any material to the contrary being pointed out on behalf of the Revenue, the order of the Tribunal could not be found fault with." 8.16 Further in the case of CIT Vs. Bholanath Poly Fab (P) Ltd. 355 ITR 290 the Hon'ble Gujarat High Court has held as....
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.... 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 particular sum or at a different sum, can never be an issue of law. In the aforesaid set of facts and circumstances of the case, the impugned order of the Tribunal is an order which is made in accordance with law and does not require any interference. The questions referred at the instance of the assessee as well as the Revenue are, therefore, answered in the affirmative, i.e., in favour of the Revenue and against the assessee in relation to the questions at the instance of the assessee, and in favour of the assessee and against the Revenue in relation to the questions at the instance of the Revenue." 8.18 In the case of Vijay Trading Co. vs. ITO reported in (2016) 388 ITR 377 (Guj), the Hon'ble Gujarat High Court has held as under: "Held, that it was not the entire am....
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....nd 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 amount and reduced the amount to Rs. 18.42 lakhs. The Tribunal allowed further relief to the assessee and retained the addition to the level of twelve and half per cent in pursuance of the various purchases. On appeal: Held, dismissing the appeal, that the assessee was a trader and the Tribunal having retained twelve and half per cent of the purchase towards its possible profit, there was no reason to interfere in the order of the Tribunal." 8.21 In the case of CIT Vs. Simit P. Sheth the Gujarat High Court reported in (2013) 356 ITR 451 (Guj) wherein the Hon'ble Gujarat High Court has held as under: "The assessee was engaged in the business of trading in steel on wholesale basis. During the course of the reassessment proceedings ....
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....ing 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 further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted." 4....
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....nt 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 Tribunal; we find that the assessee had challenged the aforesaid finding which is evident from paragraphs 1 and 2, therefore, the aforesaid submission is of no assistance to the revenue." 8.24 The only argument of ld. D.R. is that assessee has accepted the bogus purchase in the assessment year 2018-19 and settled the issue by VSV Scheme 2020 and also accepted the bogus purchase in the assessment year 2016-17, the addition to be sustained. In our opinion, the acceptance by assessee in one assessment year cannot lead to conclusion that in all these assessment years, the assessee has inserted bogus purchases in a similar way. It cannot be said that the principle of estoppel to be applied. In our opini....
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....ot 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 fact such a transfer of money. The ld. CIT(A) and the Tribunal came to the conclusion that there was no such material on record. The ld. AO had relied on some other transactions for deriving the presumption in respect of transfer of money, but the Tribunal rightly held that there were independent transactions and had nothing to do with the MOU. On the basis of aforesaid, it was held that no substantial question of law arises. 8.29 The case of ld. Counsel was that there should be some tangible material on record to show that the purchases were not made and in absence thereof, the purchase shown by the assessee in the accounts could not have been held to be bogus. For this purpose, he pla....
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....es 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 returns for the assessment year 1998-99. The Assessing Officer was satisfied as regards the proceeds from the sale of gold but doubted the genuineness of the sale of diamonds at Surat. After conducting a detailed enquiry, he disbelieved that and treated the amount shown as sale proceeds of diamonds in all the three assessments, as unexplained cash credits, in the respective orders of assessment passed by him. The Commissioner (Appeals) dismissed the appeals filed by the assessees but the Tribunal held in favour of the asses-sees. On appeals : Held, dismissing the appeals, that the purchaser was a dealer in diamonds. Even assuming that on certain occasions, the as....
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....et 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 assessment year instead of 15% as stated in the sworn statement and this was due to offering higher discount to the customers to sustain in the market. This was the case of offering lower rate of profit on sale. The Assessing Officer rejected the contention of the assessee and he estimated the income of the assessee on the basis of GP at 15% by placing reliance on the sworn statement recorded u/s. 131 of the Act. After careful consideration of the circumstances and facts of the this case, we are of the opinion that the statement recorded u/s. 131 of the Act was valid statement and it could be used for the purpose of ....
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.... 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 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 launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of ....
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.... 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 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 same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for th....
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....s 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 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 that the books of accounts do not correctly disclose the correct state of facts; (ii) in contradistinction to the power under section 133A, section 132(4) enables the authorized 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 Income-tax Act. On the other han....
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....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 that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii)In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act 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 Income-tax Act. On the other han....
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....f the ld. AO is that this money is generated by inflating the expenditure in the books of accounts and for this purpose, he relied on the statement recorded during the course of survey. Since we have already held that there was no corroborative material to support this addition and the statement has already been retracted, this addition based on no supporting evidence cannot be made. 9. In the result, all the appeals of the assessee are partly allowed. Order pronounced in the open court on 1st Sept, 2023 ============= Document 1 F.Y 2014-15 F.Y 2015-16 Upto 28.04.2016 Ahmed Ahmed 1 Saheb 2 F.M.Yakub 2 1 Ahmed Saheb F.M.Yakub 1 Saheb 2 F.M.Yakub Mohammed Mujeeb F.Y 2016-17 28.04.2016 to 31.03.2017 1 Ahmed Saheb F.M.Yakub 2 Mohammed Mohammed Sikandar Mujeeb Mujeeb (Retired on 3 Sikandar 3 Sikandar 3 28.04.2016) 3 Mrs. Ammabi Mrs. Muktar Ahmed 4 6 Ammabi Muktar 5 Ahmed Isak Nagamma S. Salian Nagaraja 4 Mrs. Ammabi 4 Mrs. Ammabi 4 Isak Muktar Muktar Nagamma S. 5 Ñл Ahmed Isak 10 5 Ahmed....
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....y by the department. The seized documents contain the purchase book, we are receiving pressure from our suppliers for settling their dues. To settle their payments we require reconciling the purchase book. We request to furnish copy to us as early as possible. 6. We are surprised by the action taken by the department and the pressure during the search proceedings was enormous. During the proceedings various questions were asked and the reply given was being typed in the computer by the official. At the end of the proceedings post midnight of 08.02.2018, Mr. Udayakumar Salian was-asked to sign various sheets and also the print out of the statement typed by the official. He was instructed to date signatures as 08.02.2018. Further, our partners Mr. Ahmed Saheb and Mr. F.M Yakub were asked to sign some statements. Similar excercise was also made at the residence of Mr. Sadhu Salian and Mr. Firoze Ahmed TS at their residence. We were not allowed to go through the contents of records signed by us. We had asked for copies of the same. It was also not entertained. 7. We were once again called to income tax office on 12.02.2018 and asked sign on ....
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....e may kindly be exempted from any penal consequences in relation to income declared during survey proceedings. The additional income was declared only to purchase peace and that too on an adhoc basis. With regards (MR.SADHU SALIAN) (MR.AHMED SAHEB) (MR.SADANANDA SALIAN) (MR.UDAYA KUMAR SALIAN) (MR. T.S FEROZ AHAMED) (MR.F.M YAKUB) (MR.MUQTHAR AHMED ISHAK) (MR.NAGRAJ SUVARNA) (MR.SUDHAKAR KUNDAR) 3220 (MRS.AMMABI) N. S. Salian (MRS.NAGAMMA S SALIAN) Yashaswi Fish Meal & Oil Company 9-1848, Post Pithrody, Udyavara. Udupi 574 SWIF T +91 820 2533720 [email protected]/[email protected] Recognised by Ministry of Commerce os Export House minismy of Agriculture, Chino Registered GMP-82 Aparoved by EU Establishment Ausinied by Execution Courell of an Document 5 F.Y 2014-15 FY 2015-16 Upto 28.04.2016 F.Y 2016-17 28.04.2016 to 31.03.2017 Ahmed Ahmed 1 Saheb 2 F.M.Yakub 2 1 Ahmed Saheb F.M.Yakub 1 Saheb 1 Ahmed Saheb 2 F.M.Yakub 2 F.M.Yakub Mohammed Mujeeb Mohammed Mohammed Sikandar Mujeeb Mujeeb 3 Sikandar 3 Sik....
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....y paying our tax liability regularly. We have been filing our returns of income regularly and also the profit declared is also higher. This may be verified from our income tax returns. The profit declared by us is highest among other fish meal manufacturers in costal Karnataka. 5. During the survey proceedings various documents have been verified and also some of the documents were taken from our office. We were only given a carbon copy of Yashaswi Fish Meal & Oil Company 9-1848, Post Pithrody, Udyavara, Udupi $74118 Kamatakely +91 820 2533720 [email protected] YASHASWI 15 FEB 2018 me fax Recogne by Wstry of Commerce as Export House Apiculture, China kegistered Partner Document 8 158 Yashaswi Marine Ingredients the list of documents taken. We do not have copies of the documents taken away by the department. The seized documents contain the purchase book, we are receiving pressure from our suppliers for settling their dues. To settle their payments we require reconciling the purchase book. We request to furnish copy to us as early as possible. 6. We are surprised by the action taken by the department and the pressure....
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....avare Udupi 574118 Kun 7: +91 820 2533720 E: infolifishmeal.com/adfmealyahou coin of Recognised by Ministry of Commerce as Export House Ministry of Agriculture, China Registered GVP-52 Approved by LU Establishment Approved by Export Inspection Council of Indie Document 9 Yashaswi mline ingredient 9. We wish to submit that we will abide by the declaration made and we will revise our return of income for financial year 2016-17. But due to our financial conditions we may not be able to pay the taxes on the additional income declared. Hence, we request you kindly grant us time to pay the same. 10. We once again request you to furnish us the copies of the statements and the seized documents. Further, if you note any discrepancy from the documents seized we request you to kindly grant and an opportunity to furnish our explanation to the same. 11. It is our humble prayer that we may kindly be exempted from any penal consequences in relation to income declared during survey proceedings. The additional income was declared only to purchase peace and that too on an adhoc basis. With regards (MR.SADHU SALIAN) (MR.AHMED SAHEB) ....