TaxTMI 
TaxTMI 
2024 (11) TMI 1650
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.... the residence of the assessee and the same were seized. The assessee is the proprietor of M/s. Puneeth Associates, Mysuru, and partner in Bhagirathi Enterprises, Mysuru. The assessee is a document writer and also derives income from house property. Consequent to the search action, a notice under section 153A of the Act was issued on 11.08.2015. In response to the notice, assessee filed return of income on 16.09.2015 declaring total income of Rs.81,26,510/-. Subsequently, other statutory notices were issued to the assessee. During the course of assessment proceedings, it was noticed that the amount declared during the course of search proceedings in respect of Chitravana Resorts, Mysuru, and Belur Project of Rs.1.3 Crores was accepted as additional income in statements recorded during the course of search operations. However, this amount was not declared in the return of income. It was further noticed that the assessee was a partner in M/s. Bhagirathi Enterprises which had constructed a Convention Hall in the name "Sindhur Convention Hall". As per question answered No. 07, 08, & 09 during the course of search proceedings, the assessee had accepted over and above the investment made....
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....ard to advance to Sri Ventures is as per ANN-I enclosed" 4.6 The submissions of the appellant were considered by the AO but found not acceptable for the following reasons. ⮚ The admission by the appellant that payment of Rs.90,00,000 for Chitravanais not routed through the books was said by the appellant at the time of beginning of the search. ⮚ The appellant once again confirmed the preliminary statement subsequently in the final statement. ⮚ The appellant has not made any submission controverting the statement given during the search. ⮚ The AO relied upon B. Kishore Kumar vs. Deputy Commissioner of Income-tax, Central Circle-IV (1), Chennai the Hon'ble High Court of Madras in [2014152 taxmann.com 449 (Madras). 4.7 In view of the findings discussed above, the AO rejected the claim of the appellant and the undisclosed income of Rs.1,30,00,000 admitted by the appellant during the course of search but not declared in the return of income filed in response to notice u/s 153A was brought to tax u/s 69 of the I.T. Act." 4.19 I have considered the rival submissions and the assessment order. It....
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....r of Jagdishchandra K. Shah v Income Tax Officer (2016) 288 CTR 0579 (Guj). Commissioner of Income Tax v Jagdish Narain Ratan Kumar (2015) 373 1 I R 0394 (Raj.) and Gajjam Chinna Yellappa v Income Tax Officer (2015) 370 1TR 0671 (AP) etc. in support of his claim that addition cannot be made merely on the basis of statement recorded, which was retracted later, leaving no evidence to rely upon to sustain the addition. 4.23 In this case, the appellant initially stated that he had made advances to Chitravana Resorts which was not passed through the books of account but later retracted and stated that the advances paid a Rs.75,00,000/- to the owners of the land on which the Chintravana Resorts project was to be constructed, was the same transaction referred to him in the statement and that these were paid through the banking channel and passed through the books of account. Similarly, helater stated that one more advance or Rs.40,00,000/- in Belur Project mentioned in the statement was actually the advance paid to Sri Ventures of Rs.52,72,011/-. The appellant filed the confirmation and the bank statements of the corresponding parties to justify the claim. Since, these transactio....
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.... to anybody? Ans : I have already declared the advance of Rs. 1.3 crores as additional income for A.Y. 2014-15 vides my answer to Q.no.4. I have not received any advance from others. I now remember that I have paid a sum of Rs. 50 lakhs this year towards marketing of sites to Krishna (8095101091), which I disclose as my additional income for A. Y. 2015-16. Q.No.19. Have you got anything else to say? Ans: I have already voluntarily disclosed additional income of Rs.1.8 crores for A.Y.2014-15 & 2015-16. I further assure you that if I am not able to explain about anything found during search, I will disclose the income corresponding to such findings. However, the assessee had not offered the above additional income in the return of income filed in response to notice u/s 153A of IT Act, 1961. In view of this, vide this office letter dated 27.10.2016 the assessee was requested to show cause why the sum of Rs.1,30,00,000 should not be assessed as his income for the year. In reply to the said letter, the assessee had filed his response. The relevant portion of the reply of the assessee on this issue was as under: With regard to unexplained adva....
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....ance made to Sri Prasanna Murthy Rs.60,00,000/ - and Sri Raghavendra Murthy Rs. 15,00,000/ - is toward Chitravana as the they are the owners of the land belonging to Chitravana.. 2. There is no written Agreement made towards the advance, as it was an oral agreement between me and Sri Prasanna Murthy and Raghavendra Murthy. 3. The advance made to Sri Ventures is debited in my books of accounts which is Rs. 52,76,011/ - is for the Belur Project. As at the time of search, it is mentioned as Rs. 40,00,000/ - is out of the anxiety and difficulty in remembering at the time. 4. The above advances are all made by cheque vide detailed as under: a. Raghavendra Murthy Rs. 15,00,000/ - on 06. 11. 2012 Chq No.460862 Karnataka Bank Ltd. b. Prasanna Murthy Rs. 50,00,000/ - on 13.12.2012 Chq No. 460868 Karnataka Banl Ltd. c. Prasanna Murthy Rs 10,00,000/- on 18.12.2013 RTGS No.40732 During the assessment proceedings, the submissions of the assessee were carefully considered. However, it was not accepted for the following reasons: * The admission by the assessee that payment of Rs. 90,00,000-/- for Chitravana not routed through....
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....ing the course of search u/s 132, it was seen that the assessee is a partner in M/s Bhagirathi Enterprises which had constructed a Convention 1-lall by name "Sindhur Convention Hall". The investment of the assessee and the sources for the same were questioned and the assessee had replied as under: "Q. No. 7. : It is observed that the built up area of the said convention hall is about 31,000 sq.11. and the construction is of superior quality. As such the amount of Rs. 2.75 crores stated by you appears to he on a lower side. So, please state the correct amount of investment and also explain the sources thereof Ans. : Sir, I have not maintained proper records in respect of construction. Though according to me the amount of investment stated by me above is correct, in the absence of proper records I do not want to get into litigation with the department. Hence I state that the investment may be around Rs. 3.5 crores. As regards sources, loan of Rs.1.5 crores from KSFC has been, utilized for the construction. Later on I took further loan froin Axis bank and ING Vysya Bank, out of which were used for construction. In the absence of books of accounts and non-maintenance ....
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....vested Rs.1.5 crores which were routed through his books of accounts as on the date of search. The explanation given by the assessee stating that the same had to be assessed in the hands of Sindhoor Convention Hall which is a Partnership Firm under the name M/s. Bhagirathi Enterprises was not acceptable, as the investment was out of the undisclosed income of the assessee. In the case of B. Kishore Kumar vs. Deputy Commissioner of Income-tax, Central Circle-IV (1), Chennai the Hon'ble High Court of Madras in [2014j 52 taxmann.com 449 (Madras) held that where assessee 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. The Hon'ble Supreme Court of India has upheld the decision of the Hon'ble Madras High Court and the SLP was dismissed in [2015] 62 taxmann.com 215 (SCY[2015J 234 Taxman 771 (SC). In view of the above, the sum of Rupees One Crore Fifty Lakhs admitted as undisclosed investment during the course search has been brought to tax as unexplained investment under section 69 of IT Act, 1961 by passing order under section 143(3) ....
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.... of Rs.50 lakhs and RTGS dated 18.12.2013 for Rs.10 lakhs and amount to Raghavendra Murthy of Rs.15 lakhs by cheque No.460862 dated 06.11.2012 of Karnataka Bank Ltd. During the course of assessment proceedings on 04.11.2016 and 25.11.2016 had brought out the details of payment to the parties and the assessee's bank accounts have been verified by the AO and entries are depicted in the bank account. During the course of search, there was no incriminating material found by the search team which can be treated as unexplained investments in Chitravana Resorts / Sri Ventures and these entries are recorded in the books of accounts and appeared in the balance sheet which was given to the search team during the course of search. The AO has made addition only on the basis of preliminary statement recorded at the time of search as assessee was in a shocking state of mind and nervousness. These amounts were paid through banking channel, many questions were posed to assessee to give details of movable assets like Fixed Deposits, Term Deposits, vehicles. The assessee in anxiety gave his answers regarding the investments in Chitravana Resorts, Mysuru. His answers needs to be examined thoroughly. ....
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....1.5 crores as my additional income in my individual capacity for the AY 2014-15 over and above my normal income." This declaration was made for the construction of convention hall which was in physical existence. The CIT (A) has wrongly allowed this ground of the assessee raised on this issue without considering the statements recorded. The case laws relied upon by the learned Counsel are distinguishable on the facts. 10. Considering the rival submissions, during the course of search proceedings, the preliminary statements were recorded and assessee had accepted that there is undisclosed investments( additional income) towards Chitravana Resorts, Belur projects and Sindhur Convention Hall to the tune of Rs.1,30,00,000/- and Rs.1,50,00,000/- respectively. The CIT(A) has, after considering the submissions, deleted these two additions. We note from the statements recorded at the preliminary stage of search. It is noted that advance made of Rs.90 lakhs towards Chitravana Resorts, Mysuru, and Rs.40 lakhs made to Belur Project have not been passed through the bank account. However, while filing the return of income, it was not declared as additional income and during the course of ass....
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....) has noted that it should be taxed in the hand of the Bhagirathi Enterprises and no valuation was done of the construction of Convention Hall. It is clear from the statement recorded at question and answer Nos.6, 7 and 8 which is placed in Paper Book. We are reproducing the statement recorded as under: "Q.No. 06 Please produce the detail of receipts and booking register of Sindhoor Convention Hal J P Nagar Mysore, whether separate books of accounts are maintained for above mentioned business activities Ans. 06. Yes all the bills and booking register are maintained with us as such there are no books of accounts maintained and the said Sindhoor Convention Hall is constructed and completed in October 2013 and Rs. 2.75 crores is invested in construction of said convention Hall. Q No. 7 It is observed that the built up area of the said convention hall is about 31,000/ sq Ft and the construction is of superior quality. As such. the amount of Rs 2.75 crores stated by you appears to be on a lower side. So please state the correct amount of investment and also explain the sources thereof Ans: Sir I have not maintained proper records in respect of constru....
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....filed return of income on 30.10.2015 in ITR-5 declaring loss of Rs. 17,28,900. The statements recorded are corroborated with the construction of the building and not providing the investments of other partners are itself incriminating statements for substantiating the additional income accepted by the assessee. Therefore, as per the Hon'ble Apex Court judgment in the case of Roshan Lal Sancheti Vs. PCIT reported in (2023) 150 taxmann.com 228 (SC) dated 28.11.2022, the Hon'ble Apex Court has dismissed the SLP filed by the assessee against Order passed by the Hon'ble High Court of Rajasthan in the case of PCIT Vs. Roshan Lal Sancheti reported in (2023) 150 taxmann.com 227 (Rajasthan). We have gone through the judgment of the Hon'ble High Court of Rajasthan. The relevant part of the judgement are as under:- 9. Learned counsel argued that the Assessing Officer has not given any reason in the assessment order as to why the explanation given by the assessee in the affidavit was not acceptable. Learned CIT(A) has given detailed reasons in respect of each deletion of the addition made by the Assessing Officer. Learned counsel in support of his arguments relied upon the judgment of....
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....ce of two witnesses who were called at the choice of the assessee from his own locality. The assessee in the proceedings of search agreed to surrender Rs. 2.25 crores as per seven papers found during the search by the Department. Five out of those seven papers were marked as Annexure AS-1 and other two were marked as Annexure AS-2. Various amounts disclosing investments and constructions amounting to Rs. 2,28,44,545/-were written on these papers. Therefore, statement of the assessee about these papers was recorded on 27-9-2012, wherein he surrendered the aforesaid amount. This statement was again reconfirmed by the assessee in his statement recorded under section 131 of the Act on 15-10-2012 and 17-12-2012 before the ADIT. In this statement, the assessee confirmed the entries made on the papers seized as AS-1 and AS-2. In fact, the assessee in his statement dated 25-10-2012 acknowledged further surrender of Rs. 10,00,000/- which he again confirmed in subsequent statement dated 17-12-2012. The affidavit of retraction was filed by the assessee with inordinate delay of 237 days on 20-5-2013. The said affidavit runs into four pages. In para 5 of the affidavit, the assessee admitted tha....
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....acted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. We deem it appropriate to reproduce para 15 of the said judgment, which reads thus, '15. In our view, the statements recorded under section 132(4) have great evidentiary value and it cannot be discarded as in the instant case ITA No. 720/JP/2017 M/s BannalalJat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer by the Tribunal in a summary or in a cryptic manner. Statements recorded under section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded....
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....on in law and is simply a self-serving statement without any material.' 13. The judgment of the Delhi High Court in Sunil Aggarwal, supra, relied on by the assessee does not in any manner extend any assistance to him because that was a case in which the court found that the assessee, apart from retracting the statement, also discharged the onus on him through cogent material to rebut the presumption that stood attracted in view of the statement made under section 132(4) of the IT Act with reference to the entries in the books of accounts of the sales made during the year and the stock position. Similar was the position in Kailashben Manharlal Chokshi (supra) wherein the High Court of Gujarat found that the assessee gave proper evidence in support of his retraction. The High Court of Madras in M. Narayanan and Bros. (supra), held that when assessee had explained his statement as not correct in context of materials produced, no amount could be added to his income on the basis of his statement. Similarly, what has been held by the High Court of Bombay in Omprakash K. Jain (supra) was that the assessing officer, while considering whether retraction was under duress or coer....
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....that the statement earlier made was false. The assessee failed to produce books of account which may have been maintained during regular course of business or any other authentic contemporaneous evidence of agricultural income. In the circumstances, the statement of the assessee could certainly be acted upon." 16. The High Court of Kerala in O. Abdul Razak,(supra), in para nos.8, 9 and 10 of the report, held as under:- "8. It cannot be doubted for a moment that the burden of proving the undisclosed income is squarely on the shoulders of the department. Acquisition of properties by the assessee are proved with the documents seized in search. Since under statement of consideration in documents is the usual practise the officer questioned the assessee on payments made over and above the amounts stated in the documents. Assessee gave sworn statement honestly disclosing the actual amounts paid. The question now to be considered is whether the sworn statement constitutes evidence of undisclosed income and if so whether it is evidence collected by the department. In our view the burden of proof is discharged by the department when they persuaded the assessee to state det....
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....ourt in Pullan-gode Rubber Produce Co. Ltd. v. State of Kerala, (1973) 91 ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. Similarly, P.K. Palwankar v. CGT, [1979] 117 ITR 768 (MP) and CIT v. Mrs. Doris S. Luiz, [1974] 96 ITR 646 (Ker) on which also learned counsel for the assessee placed reliance are of no help to the assessee. The Tribunal's order is concluded by findings of fact and in our view no question of law arises. The applications are, accordingly, rejected." 18. All the aforementioned judgments were considered by this Court in M/s. Bannalal Jat Constructions Pvt. Ltd. (supra)wherein also the assessee retracted from his statement initially given under section 132(4) of the Act on 10.10.12014 followed....