2012 (5) TMI 2 - HC - Income Tax

Addition u/s 68. Appellant submitted that the persons who had made statements had declared the jewellery under the VDIS scheme and the said statements were later on retracted in as much as it was stated by all of them that the earlier statements were recorded under coercion and duress. Held that the benefit of VDIS scheme where various persons had declared the jewellery thereunder was not available which could have been taken by the appellant. There was huge cash deposit of Rs. 16.28 crores in a period of 1 month and 7 days from 13.2.1998 to 20.3.1998 in the bank account of the assessee for which heavy onus lay upon it to satisfactorily tender explanation along with supportive material to substantiate its plea which the assessee had failed to do. Even with regard to the retraction of statement, it may be noticed that the earlier statements of these persons were recorded in the year 2000 whereas they had sought to resile therefrom in the year 2003. Appeal is dismissed

Issues Involved:
1. Justification of ITAT in not considering retraction of statements.
2. ITAT's consideration of appellant's request for documents.
3. Double addition due to VDIS-1997 scheme.
4. Justification of Tribunal in reversing CIT(A) order.
5. Tribunal's confirmation of A.O.'s commission rate application.
6. Overall legality of the Tribunal's order.

Detailed Analysis:

1. Justification of ITAT in Not Considering Retraction of Statements:
The appellant argued that the ITAT was unjustified in not considering the retraction of statements made by individuals who initially claimed no actual sale of jewellery but later stated that their statements were made under pressure. The court noted that retraction from a statement must occur at the earliest opportunity, and in this case, the retractions occurred three years after the initial statements. The court found that the ITAT and assessing authority did not base their findings solely on these retracted statements but on several other factors indicating that the jewellery business was not genuinely conducted.

2. ITAT's Consideration of Appellant's Request for Documents:
The appellant contended that the ITAT failed to consider their request for various documents such as confirmation, affidavit, and valuation report under the VDIS scheme, which were crucial for proving the legitimacy of the transactions. The court observed that the ITAT had considered the totality of the circumstances, including the lack of supportive material and the appellant's failure to satisfactorily explain the huge cash deposits in their bank account.

3. Double Addition Due to VDIS-1997 Scheme:
The appellant claimed that since the jewellery was declared under the VDIS-1997 scheme and taxes were paid, any further addition would result in double taxation. The court held that the benefit of the VDIS scheme was not applicable to the appellant because the findings of the assessing authority and ITAT indicated that the jewellery business was not genuinely carried out, and the scheme could not validate fictitious transactions.

4. Justification of Tribunal in Reversing CIT(A) Order:
The Tribunal reversed the CIT(A)'s order, which had partly allowed the appellant's appeal. The court found that the CIT(A) had reversed the assessing authority's findings without cogent reasons and based on conjectures. The ITAT, upon appreciating the entire matter, upheld the assessing authority's order, concluding that the appellant's business activities were not genuine.

5. Tribunal's Confirmation of A.O.'s Commission Rate Application:
The appellant argued against the A.O.'s application of a 2% commission rate on the purchases, resulting in an addition of Rs. 32,55,740/-. The court noted that the assessing authority had observed several alarming factors, such as the lack of business infrastructure and the unverifiable nature of sales, which justified the application of the commission rate. The ITAT's confirmation of this finding was based on substantial evidence.

6. Overall Legality of the Tribunal's Order:
The appellant contended that the Tribunal's order was perverse and against the provisions of law. The court concluded that the findings of the assessing authority and ITAT were not based solely on the retracted statements but on a comprehensive examination of the appellant's business operations. The court found no merit in the appeal, holding that no substantial question of law arose.

Conclusion:
The court dismissed the appeal, affirming the findings of the assessing authority and ITAT and concluding that the appellant's jewellery business was not genuinely conducted. The retraction of statements was not timely, and the appellant failed to provide satisfactory explanations and supportive material for the huge cash deposits. The Tribunal's order was upheld as it was based on substantial evidence and not found to be illegal or perverse.

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