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TMI Blog2015 (12) TMI 1459X X X X Extracts X X X X X X X X Extracts X X X X ..... t deducted tax at source from such payments - Held that:- The transportation expenses on which no TDS has been stated to be deductible and also the transportation charges stands paid before March 31, 2006. However, the issue is being restored back to the file of the Assessing Officer to verify the claim of the assessee whether the amount was paid or payable at the end of the year and if the amount is found to be paid then it has to be allowed in the light of the aforesaid decision from hon'ble Allahabad High Court in the case of CIT v. Vector Shipping Services P. Ltd. [2013 (7) TMI 622 - ALLAHABAD HIGH COURT]. - Decided in favour of assessee for statistical purposes. - I. T. A. Nos. 33 and 34 /Nag/ 2011 (assessment year 2006-07). - - - Dated:- 4-9-2015 - JOGINDER SINGH (Judicial Member) and RAJESH KUMAR (Accountant Member) Jignesh R. Shah for the appellants. Shiv Dhameja for the respondent. ORDER The order of the Bench was delivered by 1. Rajesh Kumar (Accountant Member).-These two appeals by two different assessees are directed against the orders of the Commissioner of Income-tax (Appeals) (hereinafter referred to as (the CIT(A)) of even dated December 28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses of ₹ 7,97,259. The appellant prays that since ad hoc disallowance is impermissible in law and since all the travelling expenses are genuine and are supported by proper vouchers/evidences, the above ad hoc disallowance of ₹ 25,000 be deleted. 4. Disallowance of transportation expenses under section 40(a)(ia)- ₹ 13,88,405 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in not disposing of the concerned ground of appeal and thereby erred in upholding the disallowance of ₹ 13,88,405 under section 40(a)(ia) in respect of trans portation expenses on the ground that the appellant has not deducted tax at source from such payments. The appellant prays that since tax was either not deductible or was properly deducted and paid into the Government treasury the provisions of section 40(a) are not attracted to the concerned transportation expenses and therefore this disallowance of ₹ 13,88,405 made under section 40(a) be deleted. 5. Ad hoc disallowance out of transportation and octroi expenses- ₹ 1,00,000 On the facts and in the circumstances of the case and in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee was recorded on November 28, 2006 and November 29, 2006 under section 131 of the Income-tax Act, which are exhibited at pages 46 to 58 of the paper book No. 1, filed by the assessee. During the course of survey, the partner of the assessee admitted that during the year under reference commission was paid to M/s. Litaka Pharmaceuticals Ltd. by the assessee amounting to ₹ 2,04,84,477. In the statement recorded under section 131 on November 28, 2006, Shri Somalwar admitted, in reply to question No. 7, that commission was paid to Litaka Pharmaceuticals Ltd. Further in reply to question No. 8, Shri Somalwar replied that the commission charges paid to Litaka Pharmaceuticals Ltd. were bogus and not genuine and no services were ever rendered by the Litaka Pharmaceuticals Ltd. and the payments were only book entries. In reply to question No. 9 of the said statement Mr. Somalwar replied that the commission paid through account payee cheques were received back in cash. He replied to question No. 10 that commission to Litaka Pharmaceuticals Ltd. was not genuine as the same were book entries. He further stated that commission was paid by cheques, TDS was deducted and depo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fterthought and it could not be considered when the original statement recorded on November 28 and 29, 2006 were before him. 7. Aggrieved by the order of the learned Assessing Officer, the assessee carried the matter in appeal before the learned Commissioner of Income- tax (Appeals). 8. The learned Commissioner of Income-tax (Appeals) observed that the assessee, who was engaged in supplying and distribution of pharmaceuticals products since 1987, has entered into an agreement with M/s. Litaka Pharmaceuticals Ltd. only in the financial year 2005-06 and no such commission was paid to the said company either prior or subsequent to the financial year 2005-06 and rejected the contention of the assessee qua the liasioning services rendered by personnel of M/s. Litaka Pharmaceuticals Ltd. He further noted that the assessee had not filed any proofs or details of the manpower of M/s. Litaka Pharmaceuticals Ltd. who were doing liasioning work for the assessee. Thus the assessee had not proved its claim either during assessment proceedings or in the appellate proceedings and, therefore, the commission payments were held to be non-genuine as admitted in the statements recorded during sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on November 28, 2006 and November 29, 2006 after a survey on M/s. Litaka Pharmaceuticals Ltd. on October 30, 2006. The learned authorised representative further drew out attention to the statement recorded on October 30, 2006 of Mr. Gopal Ramourti director of M/s. Litaka Pharmaceuticals Ltd. which had no reference at all of the assessee. In para 11 of the assessment order dated December 29, 2008, it was stated by the learned Assessing Officer that during the course of survey on M/s. Litaka Pharmaceuticals Ltd., its director admitted that the said company issued bogus commission bills to the assessee whereas no such fact was mentioned in the statement of Mr. Gopal Ramourti. He contended that a general statement without taking the name of the assessee cannot be made basis for disallowance by placing reliance upon the following judicial pronouncements : (i) Shri Kirti Chandulal Oswal v. Deputy CIT [2009] 317 ITR (AT) 285 (Pune) ; (ii) CIT v. Uttamchand Jain [2010] 320 ITR 554 (Bom) ; (iii) CIT v. M. K. Brothers [1987] 163 ITR 249 (Guj) ; (iv) ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC) ; (v) CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) ; and (vi) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judgments were cited in support of the assessee's contention namely Mobile Communication (India) P. Ltd. v. Deputy CIT [2011] 7 ITR (Trib) 219 (Delhi), Radhasoami Satsang v. CIT [1992] 193 ITR 321 (SC), CIT v. Neo Poly Pack P. Ltd. [2000] 245 ITR 492 (Delhi) and others. 14. He also referred to the Central Board of Direct Taxes Instruction F. No. 286/2/2003/IT-(Inv.) 3, dated March 10, 2003 which provided that no surrender or addition should be made during the course of survey which was not based on the concrete evidences. 15. The learned Departmental representative on the other hand, relied upon the orders of the authorities below and submitted that the order of the Commissioner of Income-tax (Appeals) should be upheld as the same is based upon the statement recorded during survey proceedings. The retraction of statements on January 16, 2007 was only an afterthought and should not be relied upon. 16. We have considered the rival submissions, the facts on record before us and various judicial pronouncements referred to by the learned authorised representative. We first refer to the relevant queries and answers to the statement recorded on November 28, 2006. In reply to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc., to find out any irregularity, errors or concealment of our income and no discrepancies were found in the books of account nor in the stock. In the course of survey he was co-operating though he was extensively tired and exhausted. 3. The survey team has recorded his statement again on November 29, 2006 at the Income-tax Office and his statement was recorded under section 131 of the Income-tax Act, 1961. Both the statements were recorded under coercion. 4. That the survey team and the officers put undue pressure and misguided him and compelled to confess the commission paid to Litaka Pharmaceuticals Ltd. recorded in the books of account of the firms namely M/s. Kiran Agencies, M/s. Usha Distributors, M/s. D. S. Agencies and Associates as non-genuine and bogus in his statement recorded on the day of survey on November 28, 2006 and again on November 29, 2006. He was not at all in a proper state of mind due to 11 Income-tax executives in our office threatening him of dire consequences like raid and search at our Nagpur office and residence. Our mother who is 82 years old is diabetic and cardiac patient could not have stood of even hearing the news of raid. Hence we wanted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013] 352 ITR 480 (SC) affirmed the decision of the Madras High Court in the same case, i.e., CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad), thereby dismissing the appeal in view of the concurrent finding of fact. The hon'ble High Court in the case of CIT v. S. Khader Khan Son (supra) has held that in view of the scope and ambit of material collected during the course of survey action under section 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the assessee-firm that disclosed income was assessable as lawful income of the assessee. 20. In the case of Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker), the hon'ble Kerala High Court, has gone into the evidentiary value of the statement recorded under section 131 during survey proceedings under section 133A and the statement recorded under section 132(4) of the Income-tax Act. In the said decision it has been held that section 133A enables the Income-tax authorities to record any statement of any person which may be useful but does not authorise taking any sworn statement. On the other hand, the hon'ble High Court finds that such a power to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... addition unless the Assessing Officer has corroborative material in hand to make such addition. We also note the statement of third party has been relied upon against the assessee without affording cross-examination of that party despite the assessee specifically asking for that which is not permissible under law. The principle of audi alteram partem requires that no person should be condemned unheard. In this the Assessing Officer did not allow the assessee to cross-examine Mr. Gopal Ramourti which is against spirit of law. In the case before us, the Assessing Officer has made addition purely on the basis of statement made during the course of survey under section 133A, which was later on retracted by the assessee, therefore, we are of the considered view that any addition made on the basis of these statements is without any basis and deserves to be deleted as there is no corroborative materials on record. It seems that addition has been made merely on the basis of statement/presumptive basis and no corroborative material has been brought on record. Presumption cannot take the shape of evidence, however, strong it may be. It is also noted that the statement on oath, claimed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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