2016 (7) TMI 1585 - HC - Income Tax

Addition of payment made on account of Mehta Sukhadi - HELD THAT - As decided in own case 2016 (5) TMI 490 - BOMBAY HIGH COURT it is an agreed position between the parties that Question No.(a) as framed herein above stands concluded against appellant and in favour of the revenue. Addition on account of inflation of labour charges - appellant is a partnership firm engaged in the business of trading in tarpaulins including renting the tarpaulins for hire and erection of Monsoon Sheds as required by its Customer - HELD THAT - No basis to make any addition on account of labour charges. We notice that in the statement dated 15th September 1988 Mr. T. V. Goshar has stated that labour expenses are inflated. It is pertinent to note that the order of the CIT(A) which partly deleted additions made on account of labour charges and restricted it up to 10% of Rs. 10.97 lakh had itself rendered a finding that there was a shortcoming in the accounts of the labour charges till the date of search. In the above context reliance by the Tribunal upon the statement made under Section 132(4) of the Act after considering the retracted statement could not be faulted with. The view taken by the impugned order of the Tribunal is a possible view in the facts and circumstance of the present case. Thus substantial question (b) as framed is answered in the affirmative i.e. in favour of the revenue and against the appellant-assessee. Addition on account of wrong billing - HELD THAT - Impugned order does record that the Assessing Officer had rendered a finding that the appellant has not entered bills for hiring charges in its books of account in daytoday running of the business. Thus the contention of the appellant is not sustainable. Reliance is placed upon the decision of Gujarat High Court in N. K. Paper Board 1998 (3) TMI 102 - GUJARAT HIGH COURT to hold against the appellant. We find that the citation is incorrect and does not assist the revenue. However the impugned order of the Tribunal even in the absence of the above decision cannot be held to be bad in law. In the above circumstance the view of the Tribunal in upholding the order of the Assessing Officer to add an amount to the appellant s income cannot be faulted. This is a possible view on facts found. - Decided in favour of revenue

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

(a) Whether the Tribunal was right in sustaining the addition of Rs. 1,37,375 as payment made on account of 'Mehta Sukhadi'.

(b) Whether the Tribunal was correct in holding that the addition of Rs. 4 lakhs on account of inflation of labour charges was justified despite the appellant maintaining proper books of accounts.

(c) Whether the Tribunal was justified in holding that the addition of Rs. 6 lakhs on account of wrong billing was proper.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Addition of Rs. 1,37,375 on account of 'Mehta Sukhadi'

This issue was resolved based on prior judgments for other assessment years, where the court had already ruled against the appellant. Therefore, the question was answered in favor of the revenue.

Issue (b): Addition of Rs. 4 lakhs for inflation of labour charges

- Relevant Legal Framework and Precedents: The court examined the statement made by a partner under Section 132(4) of the Income Tax Act, which was later retracted. The Tribunal relied on this statement to justify the addition.

- Court's Interpretation and Reasoning: The court found that the retraction of the statement was not effectively made, as it was not done by the original deponent but by another partner. The court held that the statement made during the search was voluntary and indicative of knowledge about the business.

- Key Evidence and Findings: The statement made by Mr. T. V. Goshar indicated inflated expenses, supported by blank signed vouchers and loose papers found during the search.

- Application of Law to Facts: The court upheld the Tribunal's decision, finding that the retraction was an afterthought and not supported by evidence.

- Treatment of Competing Arguments: The appellant argued that the statement was unsupported by corroborative evidence and that the accounts showed no discrepancies. The court dismissed these arguments, emphasizing the validity of the original statement.

- Conclusions: The court concluded that the Tribunal's reliance on the original statement was justified and answered the question in favor of the revenue.

Issue (c): Addition of Rs. 6 lakhs for wrong billing

- Relevant Legal Framework and Precedents: Similar to Issue (b), this issue involved the reliance on a statement made under Section 132(4) and its subsequent retraction.

- Court's Interpretation and Reasoning: The court found that the appellant failed to show any error or discrepancy in the accounts that would negate the addition for wrong billing.

- Key Evidence and Findings: The Tribunal noted that the appellant did not enter bills for hiring charges in its books of account, supporting the addition.

- Application of Law to Facts: The court upheld the Tribunal's decision, finding the addition justified based on the facts presented.

- Treatment of Competing Arguments: The appellant argued that the absence of discrepancies in the accounts should negate the addition. The court rejected this, citing the Tribunal's findings.

- Conclusions: The court concluded that the Tribunal's decision was a possible view based on the facts and answered the question in favor of the revenue.

3. SIGNIFICANT HOLDINGS

- Preserve Verbatim Quotes of Crucial Legal Reasoning: "In the above view, reliance upon the statement dated 15th September, 1989 given by Mr. T. V. Goshar to the authorities under Section 132(4) of the Act cannot be found fault with."

- Core Principles Established: The court established that a statement made under Section 132(4) of the Act, if not effectively retracted, can be relied upon for additions to income. The burden of proof lies on the deponent to establish that the statement was incorrect if retracted.

- Final Determinations on Each Issue: All questions (a), (b), and (c) were answered in the affirmative, in favor of the respondent-revenue and against the appellant-assessee.

In conclusion, the appeal was dismissed, with all issues resolved in favor of the revenue, and the court upheld the Tribunal's reliance on the original statement made during the search under Section 132(4) of the Income Tax Act.