TaxTMI 
TaxTMI 
2008 (11) TMI 277
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....e papers and other documents were seized. The managing director of All Cargo Movers (I) (P) Ltd., Shri Sasi Kiran Janardhan Shetty was examined on oath on 31st Oct., 2001. In response to question No. 2, Shri Sasi Kiran Janardhan Shetty had stated as follows: "Ans. As regards to dock/customs expenses, I would like to state that certain expenses have been incurred for the speedy clearance of documents and goods at various dock/customs authority. However, part of the expenses are genuine business expenses are duly supported by third party vouchers and hence allowable as per the IT Act. I agree that the expenses incurred for speedy clearance of goods at dock/customs authorities and other agencies are not supported by third party vouchers and hence may be treated as undisclosed income for the block period. Part of the expenses under this head as claimed in the accounts have actually not been incurred to cover up all these discrepancies. I hereby declare a sum of Rs. two crores as the undisclosed income for the block period 1st April, 1995 to 30th Oct., 2001 in Transindia/All Cargo Group of Companies. The bifurcation of undisclosed income of Rs. 2 crores will be submitted to the Depar....
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....undisclosed income should not be assessed at Rs. 2 crores in all these cases put together on a proportionate basis. The AO observed that the assessee has neither retracted from the affidavit filed earlier on 31st Oct., 2001 nor had he reduced the quantum of disclosure of undisclosed income while making a statement on oath on 27th Dec., 2001. A show-cause notice was issued to the assessee as to why a further addition of Rs. 1,12,50,000 should not be made as undisclosed income to the returns of income filed in all the five cases under appeal. 2.4 In response to the show-cause notice the assessees replied that Shri Sasi Kiran Janardhan Shetty, the managing director of All Cargo Movers (I) (P) Ltd. and Transindia Freight Service (P) Ltd. was made to file an affidavit on 31st Oct., 2001 confirming the disclosure. However, it could be seen that there is no evidence or material found during the course of search and seizure operation, to corroborate the disclosure taken under pressure during the course of such proceedings. It was further submitted that with a view to buy peace and co-operate with the Department the assessees filed block returns in Form 2B offering in all Rs. 87.50 lakhs....
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....iness. It was also submitted that he had to travel during the period 31st March, 2001 to 27th Dec., 2001 to various places in India and that he had gone out of India from 9th Nov., 2001 to 30th Nov., 2001 and under these circumstances it was not possible for Shri Sasi Kiran Janardhan Shetty to work out the exact figures and reduced figure or retracted the quantum within that period. All the books of account, vouchers, records, etc. were produced during the course of assessment proceedings. The assessee further relied upon a number of case laws before the AO to the effect that no estimate can be made based on presumptions and additions made to undisclosed income and that Chapter XIV-B is not intended as a substitute to regular assessments and that no addition can be made without any evidence and that extrapolation cannot be made for block period for arriving at the undisclosed income. On the relevancy of the statement recorded under s. 132(4), reliance was placed on the Board's Instruction No. [F. No. 286/57/2002-IT(Inv.-II), dt. 3rd July, 2002] as well as Board's Instruction No. [F. No. 280/2/2003-IT(Inv.-II), dt. 10th March, 2003] and it was argued that assessments can be based on....
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....made before the lower authorities. We briefly make a mention of those arguments. (i) That a statement obtained under s. 132(4) or the affidavit cannot be the basis of making an addition, when there is no evidence whatsoever with the Revenue; (ii) As all the expenditures in question were recorded in the nooks of account, the provisions of Chapter XIV-B are not applicable; (iii) Ad hoc and estimate additions cannot be made and extrapolation of undisclosed income is without any proper justification; (iv) The AO has not referred to any seized material which forms the basis for making the addition. 6. Shri Rajendra, the learned Departmental Representative, on the other hand, argues that the assessee himself has come forward and offered an undisclosed income of certain amounts in the hands of each of the companies. Thus the argument, that these incomes are not undisclosed incomes is contrary to the returns filed by the assessee himself. 6.1 He submitted that, the admission made by the managing director, Shri Sasi Kiran Janardhan Shetty on 31st Oct., 2001 under s. 132(4) which is followed by an affidavit on the same date as well as a reiteration of this disclosure in a s....
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....mits that in the case of Trans India Freight Services (P) Ltd. the entire activities are outside the port. Similarly in the case of All Cargo Movers (I) (P) Ltd., the company is into multi model transport and the activity is outside the port. Similar is the case with All Trans Logistics (P) Ltd. Thus he submits that at least in these three companies, the question of any involvement or payment to customs authorities or other Government agencies does not arise. He submitted that only in the cases of Indport Maritime Agencies (P) Ltd. and Contech Transport Services (P) Ltd., there are certain activities inside the port. 8. Rival contentions heard. On a careful consideration of the facts and circumstances of the case and on perusal of the papers on record and the orders of the authorities below we hold as follows: 8.1 The first issue is whether the addition could be made on the basis of a statement or affidavit given by the managing director for all the companies put together on an ad hoc or on a very general manner. In our considered opinion, such an addition cannot be made under the facts and circumstances of the case especially in the absence of any evidence in the form of sei....
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.... authority, in our considered opinion, has rightly held that the statement under s. 132(4) would be evidence for the fact of inflation of the expenses, but at the same time it could not be evidence for the quantum of addition. 8.4 This brings us to the second argument of the assessee that the addition in question does not fall within the ken of Chapter XIV-B for the reason that all these expenses are already recorded in the books of account prior to the search. The facts of the case are that the assessee himself not only agreed by way of a statement and affidavit that there has been inflation of expenditure and recording of bogus expenditure, but also filed a return disclosing certain expenditure claimed as expenditure in the regular books of account as undisclosed income. Sec. 158B(b) has been amended by the Finance Act, 2002 w.e.f. 1st July, 1995 wherein any expense, deduction or allowance claimed under the Act which is found to be false is defined as undisclosed income. When the assessee himself, suo motu declares undisclosed income under this category, it is not correct to argue to the contrary that the addition is not within the jurisdiction of Chapter XIV-B. 8.5 On the ....
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....around 4 per cent. When Mr. Sapharia, chartered accountant attended before me on 1st Dec., 2005, he was asked to tally the copies of the bills filed along with the supporting vouchers. However, the assessee could not relate the expenditure claimed with the reimbursement he received from his clients. The assessee initially agreed to file a sample copy of the agreement/contract which he generally enters into with his clients to know the manner/procedure by which he is reimbursed. However, subsequently he refused saying that there is not any particular agreement/contract and the condition varies from clients to clients and whatever bills are raised by our assessee that is reimbursed. He accepted that it is not possible to tally as some expenses are incurred in the course of business to get the work done speedily. Hence, it is not known how there is a change in position now at* the appeal stage than what it was at the time of assessment proceedings as there is not any fresh evidence nor the assessee is able to explain fully the third party vouchers/bills." 8.8 A plain reading of the above reveals that the AO has not accepted the claim of the assessee on these percentages. Thus we re....