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TMI Blog2014 (7) TMI 675X X X X Extracts X X X X X X X X Extracts X X X X ..... ces as unreliable evidences to establish his allegation that these were nothing but accommodation entries only - an addition cannot be made merely on the basis of statements recorded during search or survey surrendering an amount for the addition unless it is corroborated by further evidence. CIT(A) has rightly held the action of the AO in making the addition u/s 68 of the Act as unjustified – Relying upon CIT Vs. Lovely Exports (P) Ltd [2008 (1) TMI 575 - SUPREME COURT OF INDIA] - even if the share application money received by the appellant company is from alleged bogus shareholder, whose identity is produced by the appellant company, the revenue can always proceed against such shareholders and if necessary re-open their individual assessment - CIT(A) has passed a comprehensive and reasoned order after discussing the case of the parties on issue in details – Decided against Revenue. Adjustment of unexplained expenses against credits – Held that:- The contention of the assessee cannot be accepted that entries made in the ledger account are rough work as the entries are narrative mentioning the date, mode of payment page no of folio with the amount debited and credited as we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vey.(Ground No.1) (Revenue) 3. The Revenue has also questioned the first appellate order on the ground that the Ld. CIT (A) has erred in adjusting the unexplained expenditure against unexplained credits when the nature of these two transactions is different and requires different treatment. (Ground No.2). 4. The assessee on the other hand has impugned first appellate order on the following grounds:- (ITA No. 4257/Del/2011) 1(i). That on the facts and circumstances of the case, the CIT(A) was not justified in sustaining addition of ₹ 6,65,00,000/- on account of alleged undisclosed cash receipt. (ii) That whole basis of addition is illegal, arbitrary and misconceived and merely based on presumption and surmises in the absence of any material or evidence in support of alleged cash receipt either at the time of survey or during the course of assessment proceedings and as such the impugned addition is not sustainable on facts and under the law. (iii) That alleged addition is not even in conformity with relevant annexure and in the absence of particulars of party, project or period in respect of alleged cash receipt, there is no legal or factual basis for any suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,65,00,000/- 3 Unexplained cash credits in the cash book (page 11 of the statement of Sh. R. C. Goyal) 1,25,00,000/- Total disclosed amount 15,00,55,000/- 7. The assessee, however had not included its above unaccounted income declared at the time of survey in its return of income. A show cause notice was issued to the assessee by the AO specifically asking therein as to why the disclosed unaccounted amount by Shri R.C. Goyal on behalf of the assessee company at the time of survey may not be added back in the total income of the assessee company? In reply, the assessee alleged that so called surrendered was not voluntary and bonafide and the same was obtained in an illegal and arbitrary manner, particularly in the absence of any evidence or material in relation to such surrender was called for and as such the alleged surrender was retracted. Reference of CBDT Circular No. 286 dated 10/3/2003 was made. It was contended that surrender at the time of search or survey cannot be a sole basis of addition without corroboration and proper apperception of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... concerned companies or from office of Registrar of Companies and adverse inference was drawn on mechanical manner merely on the ground that surrender was made at the time of survey. The AO was not agreeable with these contentions of the assessee and made addition of ₹ 7,10,55,000/- u/s 68 of the Act on account of bogus accommodation entries. The Ld. CIT (A) has however deleted the addition being satisfied with the explanation/contention of the assessee. This action of the Ld. CIT (A) has been impugned by the Revenue in Ground No. 1 of it its present appeal. 8. In support of the Ground, the Ld. DR has basically placed reliance on the assessment order. She submitted that the assessee has retracted its statement made during the course of survey making the surrender of ₹ 7,10,55,000/- after the lapse of 3 months from the date of survey thus it was nothing but an afterthought. There is no evidence that the statements of Shri R.C. Goyal were recorded during the course of survey under duress or coercion nor any to their effect immediately after the survey. The documents found during the course of survey was sufficient to support the allegation of the AO that entries of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided any opportunity for cross-examination of Shri. S. K. Gupta and as such general statement of Shri S. K. Gupta is not relevant and admissible. While referring decisions relied upon by the assessee before the authorities below, the Ld. AR also placed reliance on the following decisions:- CIT Vs. Madhsy Films P. Ltd 301 ITR 384 (Delhi) CIT, Kerala Vs. manick Sons 74 ITR 1 (SC) CIT Vs. S. Khader Khan Son (2012) 79 DTR (SC) 184 Sonia Magu Vs. CIT (2011) 336 ITR 227 (Delhi) CIT Vs. Anil Bhalla (2010) 322 ITR 191 (Delhi) 10. Considering the above submissions, we find from the assessment order that during the course of survey by the Investigation Wing at the office premises of Shri S. K. Gupta, Chartered Accountant by profession some computers and laptops were impounded. The back up files relating to ledger accounts were retrieved and it was revealed that during the year under consideration Shri S. K. Gupta had provided accommodation entries to the assessee company through its Director Shri R. C. Goyal. The summary of these ledger accounts is as under:- Sl No. Particulars Closing Balance Remarks Debit Credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Estate Business. 12. During the course of assessment proceedings the assessee company was also confronted on this issue by supplying the copy of statement as well as impounded materials. The assessee contended that the only observation made in the said statement is that this amount was received from various fake companies which was without any basis and highly arbitrary and uncalled for. It was without proper opportunity or investigation. It was contended that there is no reference to names of the companies or how and in what manner the inference was drawn relating to alleged accommodation entries. The assessee claimed that all these transactions are genuine made through banking channels and correctness of all these transactions are fully supported and verifiable. The assessee has enclosed copies of account, income tax and assessment particulars, balance-sheet of all the parties in support of these entries under the certificate below the index of the paper book that those were filed before the authorities below and with this submission that all these entries have been duly recorded in the books of accounts and there is no case of any adverse inference. It was submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se primary evidences as unreliable evidences to establish his allegation that these were nothing but accommodation entries only. It is now an established proposition of law that an addition cannot be made merely on the basis of statements recorded during search or survey surrendering an amount for the addition unless it is corroborated by further evidence. Experiencing failure of Revenue s case made solely on the basis of statement recorded during the course of survey/search, the CBDT vide its Circular No. 286 dated 10/3/2003 has made it clear that the AO should avoid making addition solely on the basis of surrender made during the course of search/survey and should make effort to gather evidence in support so that in case of retraction of the surrender subsequently, the case of Revenue should not be failed. There is no denial by the AO that the above stated documents were furnished by the assessee before him to establish the genuineness of the claimed unsecured loan from the above stated parties nor is there any allegation by the AO that on verification those documents filed by the assessee was found bogus or unreliable. The AO has arrived at the conclusion that the claimed unsecu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of search regarding assets, the acquisition of which she could subsequently explained, there cannot be any addition regarding unexplained assets basing on the statement given at the time of search. It is also an established proposition of law that the loan amount pertaining to earlier years cannot be added during the year under consideration as per the provisions of Section 68 of the Act. The Hon ble Supreme Court in the case of CIT Vs. S. Khader Khan Son (Supra) has been pleased to held that provisions u/s 133A does not empower any income tax authority to examine any person of authority and therefore any admission made in a statement recorded during survey cannot by itself be made the basis for addition. In the case of CIT Vs. Anil Bhalla (supra), the decision of the Tribunal deleting the addition after examining the entire evidence on record including the statements made by the assessee during the search proceedings as well as before the Assessing Officer, with this finding that the addition could not be sustained in the absence of any other corroborative evidence, has been upheld by the Hon ble Delhi High Court. In that case there was no independent material to show that jotting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not recorded in the nature of actual transaction of receipts and expenditure and accordingly the addition made by the AO should be deleted. In alternative, it was also argued that if any addition is to be made in respect of alleged receipts of ₹ 1,11,12,860/-, then the benefit of expenditure of ₹ 47,79,600/- which were found recorded in the very same annexure should be considered and the net amount of ₹ 63,33,260/- can only be brought to tax. The ld. CIT(A) did not agree with the above contention of the assessee but he agreed with the alternative argument of the Ld. AR that if any addition is to be made in respect of alleged receipt of ₹ 1,11,12,860/- then the benefit of expenditure of ₹ 47,79,600/- which were found recorded in the very same annexure should be considered and the net amount of ₹ 63,33,260/- can only be brought to tax. The revenue has questioned this action of the Ld. CIT(A) whereby an addition of ₹ 95,59,200/- has been deleted. The assessee on the other hand has impugned the action of the Ld. CIT(A) in sustaining the addition to the extent of ₹ 63,33,260/-. 15. In support of Ground No. 2 (Revenue), the Ld. DR has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Assessing Officer considered addition in respect of both these items at ₹ 1,58,92,460/-. He submitted that there is no corroborative evidence in support of the receipt and expenditure which are not recorded in the regular books of accounts. These are only rough and provisional entries and not in the nature of actual transactions of receipt or expenditure and the Assessing Officer himself having observed in the context of expenditure of ₹ 47,79,600/- that same is not supported from bills and vouchers has on the basis of similar logic, made addition, in respect of receipt of ₹ 1,11,12,860/- without appreciating that same is also not supported from any corroborative details. He submitted that these are rough scrubbings and in the absence of any supportive and corroborative evidence, there can be no case of any addition. In support, he placed reliance on the decision of Hon ble Delhi High Court in the case of CIT Vs. Anil Bhalla 322 ITR 191 (Delhi) holding that additions could not be sustained in absence of any other corroborative evidence. He also placed reliance on the following decisions:- CIT Vs. Anil Bhalla 322 ITR 191 (Delhi) CIT Vs. Indigo Airways ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same is not supported by bills and vouchers. The addition of ₹ 1,58,92,460/- was accordingly made by the Assessing Officer. The further contention of the assessee remained that the contents of Annexure A-17 and Annexure A-18 was only rough entries on which addition cannot be made, merely on the basis of statements made on behalf of the assesssee during the course of survey which is not supported by any corroborative evidence. Copies of these anneuxres have been made available at Page No. 111 to 130 of the paper book, filed on behalf of the assessee. 19. Having gone through the contents of these annexures, we are unable to agree with the contention of the assessee that entries made in this ledger account are rough work as the entries are narrative mentioning the date, mode of payment page no of folio with the amount debited and credited as well as the balance. We thus find that the surrender made by Shri R. C. Goyal was corroborated with the annexure found during the course of survey which was confronted with him and thereafter Shri R. C. Goyal had surrendered the amount for tax. The Ld. CIT(A) has thus rightly upheld this action of the AO with this finding that the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r book at page-72. The relevant facts and observation of the Assessing Officer are extracted hereunder:- 23. During the course of assessment proceedings, the assessee company was confronted on this issue by supplying the copy of statement as well as impounded materials vide notice u/s 142(1) dated 27/11/2010. In response to the notice the reply submitted by the assessee is reproduced as under:- The above query no. 23 with reference to ₹ 6,65,00,000/- alleged to have been received in cash against the booking of flats/shops during the period F. Y 2007-08. The relevant question and answer is reproduced hereunder.:- Ques.23 During the course of the survey, it is seen that you have received advance on account of booking of flats and shops from various persons, which contains cash contents as per one sheet/paper found from your premises. The total amount of booking of flats/shops is ₹ 6.65 Crores. Please explain the nature of these receipts. Ans:- These receipts of ₹ 6.65 Crores are on account of booking of flats/shops which I received in cash from various persons and this amounts has not been included in the regular books of accounts. I hereby also surrend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee company admitted that the said amount had been received in cash from various persons on account of booking of flats/shops and the said amount had not been included in the regular books of account of the assessee and he officer the same for taxation. During the assessment proceeding, it was contended by the assessee that there was a totaling mistake in the said sheet and the amount of the figures written therein worked out to ₹ 3,05,00,000/- and the amount was wrongly considered ₹ 6,65,00,000/- and that no addition should be made on this count. The AO has, however, rejected the contention of the assessee by observing that in the settlement, Sh. Goel had categorically admitted that ₹ 6.65 Crores had been received in the cash booking of flats/shops and that in the said sheet one has been left out inadvertently in the first two entries, whereas the total has been clearly mentioned as ₹ 6.65.00.000/- which has been accepted by Sh. Goel. The AO has accordingly added the above amount as income on account of undisclosed cash receipts. 6.3 On careful examination of the matter, I find that the impounded sheet found during the survey (Annexure A-17), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as voluntary action on his part. 28. Considering above submission we find that there is no dispute that retraction was made by the assessee and as such the survey statement is even otherwise not admissible. Further, survey statement was relied in total disregard to guidelines issued by the CBDT instruction No. 286 dated 10/3/2003. To, All Chief Commissioner of Income Tax (Cadre Contra) All Directors General of Income Tax Inc., Sir, Sub: Confession of additional income during the course of search seizure and survey operation-regarding. Instance have come to the notice of the Board where assessee have claimed that they have been force to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are retracted by the concerned assessees while filing returns of income. In this circumstances, on confessions during the course of search and seizure and survey operations do not serve and useful purpose. It is, therefore, advised tht there should be focus and concentration collection of evidence of income which leads to information on what has not been disclosed or is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom books of the company as relating to the project undertaken by it and finding of the Tribunal that additions should not be sustained in absence of any other corroborative evidence is pure finding of fact, hence does not warrant any interference. In that case search and seizure was carried out in the premises of the assessee and the premises of a company of which the assessee was a director. The Assessing Officer made additions under the head of unexplained expenditure u/s 69C of the Income Tax Act, 1961. The Commissioner (Appeals) and the Tribunal examined the entire evidence on record including the statements made by the assessee in the proceedings as well as before the Assessing Officer and then came to the conclusion that the additions could not be sustained in the absence of any other corroborative evidence. The Commissioner (Appeals) deleted the additions and this was confirmed by the Tribunal. On appeal. 32. There is no dispute tht the whole addition is based on seized annexure A-5 which has been extracted in the assessment order itself. The Ld. DR has not disputed the fact that there is totaling mistake in the said annexure. The total of various figures referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seized annexure was a hypothetical document merely to extract surrender in the absence of any supporting details or corroboration. 34. Further, the Assessing Officer has not found actual cash or any unaccounted investment during the course of survey and on the contrary alleged cash was stated to have been used in the construction of the properties as per contents of the survey statement as extracted above and as such case of so called receipt or expenses are revenue neutral and it is not open to contemplate any undisclosed income. The decision of Hon ble Delhi High Court in the case of CIT Vs. Indeo Airways Pvt. Ltd. 349 ITR 85 is relevant and applicable to the facts of the case under hand. The statement recorded during the survey, which is the only basis for addition, if considered in totality, cannot be considered as a basis to contemplate any undisclosed income as the receipt and expenses are revenue neutral in the light of the above decision of Hon ble High Court. 35. In the light of facts as brought on record, it is self evident that addition was made on mechanical basis as Assessing Officer has not been able to clarify the reasons or ground for totaling mistake which g ..... X X X X Extracts X X X X X X X X Extracts X X X X
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