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TMI Blog2016 (3) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... amined during post search and assessment proceeding and no incriminating material was found. Subsequent statements were recorded by the Investigation Wing as mentioned in the assessment order. However no question was asked in furtherance of the statement regarding the contents of the seized document. During original statement also subsequent details of work-inprogress, such as address, quantum of work done, accounted Work-in-progress and undisclosed work in progress were not asked for. The assessee companies during post search proceedings had twice informed the Investigation Wing that the surrender of work- in-progress has been made without pinpointing any seized material. No action was apparently taken even by the Assessing Officer, when effectively the statement got retracted. Thus we are of the considered opinion that the additions based on the statement of Shri Balwant Singh alone, cannot be sustained - Decided in favour of assessee Disallowance of Interest - Held that:- Apex Court in the case of SA Builders Ltd vs. CIT (2006 (12) TMI 82 - SUPREME COURT ) held as agrreing with the view taken by the Delhi High Court in CIT v. Dalmia Cement (Bharat) Ltd. [2001 (9) TMI 48 - DEL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mprastha Greens (P) Ltd. in the same group. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal, the Department has challenged the deletion of addition of ₹ 2 crores, again on the basis of alleged retraction of statement. 4. I.T.A. No. 3240 pertains to yet another assessee Ramprastha Promoters Developers Pvt. Ltd. in the Ramprastha group of companies. The impugned order is dated 20.2.2013 and has been passed by the Ld. CIT (A)-XXXIII, New Delhi. In this appeal for Assessment Year 2010-11, the Department is agitating the deletion of ₹ 14 crores based on alleged retraction of statement by the Chairman of the Group. Another dispute in this appeal is regarding the deletion of addition of ₹ 7,31,89,263/- on account of pro rate notional interest on interest free advances given to associated concerns. 5. I.T.A. 3241 pertains to Assessment Year 2009-10 and the assessee is Ramprastha Promoters Developers Pvt. Ltd. This appeal has been preferred against the order dated 20.2.2013 passed by the Ld. CIT(A)-XXXIII, New Delhi. The issues in dispute in this appeal are deletion of addition of ₹ 55 crores (a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) Head 1. Corporate Exim Pvt. Ltd. 2007-08 3,60,87,765 (as per page 1 2 of the statement) Disallowance u/s 40A(3)(1) 2. Excellent Advertising Marketing (P) Ltd. 2007-08 4,71,56,625 (-do-) -do- 3. Ramprastha Builder (P) Ltd. 2007-08 2,00,320 -do- -do- 4. Kamla Vallabh Developers (P) Ltd. 2007-08 2,00,000 -do- -do- 5. Corporate Exim Pvt. Ltd. 2008-09 1,74,90,400 As per page 2 3 of the statement -do- 6. Ramprastha SARE Land Holding Co. Pvt. Ltd. 2008-09 27,94,000 -do- -do- 7. Ramprastha Greens Pvt. Ltd. 2008-09 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unaccounted trade advance to Satvir son of Ram Kumar Harsaroop, Gurgaon. 20. Other discrepancies to be accounted for in the hands of various persons of the assessee group 2010-11 3,08,00,000 ----- Total admitted additional income ₹ 52,00,00,000/- only * Q. No. 2 Please state how will you pay tax on this voluntarily admitted additional income of ₹ 52,00,00,000/- in the hands of persons mentioned above by you? Ans.2 The taxes on this admitted additional income of ₹ 52,00,00,000/-admitted by me on behalf of various persons mentioned above would be paid out of sale proceeds of our various business projects. I assure you that the taxes would be paid as due, as far as possible, on this income. 6.2 Again, during the course of post search enquiries, the ADIT (Inv.) Unit V (2) New Delhi recorded the statement of Shri Balwant Singh under section 131 of the Income-tax Act, 1961 on 17.9.2009. The relevant portion of his statement is reproduced as under: - Q1 During the course of search and seizure operation on the Ramprastha gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, undisclosed expenditure already offered for tax shall take care of the amount of undisclosed receipts, if any, emanating from the documents seized from the residence of the Directors/offices of various group companies. Again, the authorised representative of this assessee vide letter dated 13.11.2009 filed before the Investigation Wing, submitted, inter-alia, as under: This is also again emphasized, in continuation of statement given by Ch. Balwant Singh during the course of search that surrender of income made by him is subject to the condition that no penalty or any- other adverse proceedings shall be initiated against any of the group companies and their directors by the Income-tax department. The surrender of income made by him is contingent to the said condition. The aforesaid condition was also asserted by him before the authorised officer. 6.4 In response, the assessee was informed vide Investigation Wing's letter dated 25.11.2009 as under: Please refer to the letter of your authorised representative Rajesh Jain Associates dated 30th October,2009 on the above cited subject. It has been stated in the letter that Without prejudice to the above, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orce or coercion. Regarding evidence in support of the surrender, the Assessing Officer mentioned that during the course of search as per AO-4 (Annexure 5, pages 1 to 15) were letter heads of different contractors duly signed which could be used to write out bills to suite the requirements of the assessee. The Assessing Officer also contended that the surrender was made by Shri Balwant Singh after the perusal of the seized documents. 7.2 All the three assessees in their appeals before the first appellate authority challenged the additions made on the basis of statement of Shri Balwant Singh. The Ld. CIT(A) in the appeals of all the three assessees while allowing their appeals has given almost a similar finding that neither the Investigation Wing nor the Assessing Officer had correlated any seized document with the surrender of stock or work-in-progress. The Ld. CIT (A) was of the view that Shri Balwant Singh was never confronted with the seized documents so as to establish their incriminating nature. As far as the blank letter heads were concerned, the Ld. CIT (A) was of the view that such blank letter heads will in no way prove unaccounted payment to the contractors specially s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that specific provisions of the Income tax Act itself as contained under section 132(4), 133A (5) etc. provide that a statement recorded in the income tax proceedings has an evidentiary value. The Hon ble Supreme Court in the case of Avadh Kishore Das Vs. Ram Gopal AIR 1979 page 61 has held that the admission is best evidence that the opposite party can rely upon. He submitted that although it is not conclusive proof of the facts admitted, but it does raise an estoppel and shifts the burden of proof on the person making the statement. He submitted that the Hon ble Supreme Court has further held that unless shown or explained to be wrong, a statement is efficacious proof of the facts admitted. On the issue of retraction of statement recorded u/s 132(4), the courts have taken the view that statement u/s 132(4) of the Income Tax Act is a piece of evidence against the assessee. However, the same is not conclusive and if the assessee wants to retract from such statement/admission, the burden lies on him to prove that the statement was obtained under coercion, threat duress, undue influence, under mistaken belief of facts and law. The Ld. DR emphasized that the courts have taken th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Act was not voluntary and was recorded under coercion, threat and compulsion. He submitted that this allegation is only an afterthought and an attempt to wriggle out of the situation. It is also contrary to the material on record and is not backed by any documentary evidence. Apart from the statement of Sh. Balwant Singh recorded on 31.07.2009 admitting additional income of ₹ 52 crores, Sh. Balwant Singh reiterated the total surrender of ₹ 52 crores in his statement recorded by the Investigation Wing on 17.09.2011. Thus the disclosure of additional income was not only made during the search but the same was reiterated during the course of post search investigation. Therefore, it is incorrect to say that the statement of Sh. Balwant recorded on 31.07.2009 was under coercion, threat and compulsion. The Ld. DR submitted that in para 6 of the Panchnama at the residence of Sh. Balwant Singh, it has clearly been mentioned that no pressure was put on the various persons whose statements were recorded during the search. The Panchnama has duly been signed by Shri Balwant Singh, the authorised officers and two independent witnesses. A perusal of the statement of Sh. Balwant Si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the date of search without analysing the statement and without appreciating the facts stated therein. He drew our attention to the AO s order wherein in question no. 1 of the statement quoted on Pg. 2 Para 3 of the AO s order, Shri Balwant Singh was shown the seized documents A-2 to A-27. The Ld. AR pointed out that in response thereto Shri Balwant Singh had categorically stated as under: These pages and annexure relate to financials of various group companies of Ramprastha group. The pen drive and the hard disks mentioned as annexure contain details of the business of Ramprastha group. The detailed explanation of these annexures of loose pages/hard disk/pen drive would be submitted by me later, most of the transactions mentioned in these annexures are reflected in the books of accounts of various companies of Ramprastha group. However, after prime facie going through these documents, I admit that some of the transactions are not reflected and recorded in the books of accounts of various companies of Ramprastha group. On account of non recording/non- reflection of these transactions, I hereby voluntarily admit following additional income for taxation. 11.1 The Ld. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of accounts of the assessees to ensure whether the same were reflected and recorded or not in the books of accounts. He further submitted that the AO during the course of assessment had sought explanations to seized documents and each of the seized documents was duly explained and it is not the case of the AO that the assessees had failed to explain the seized documents. Thus it is evident that the AO had made the additions merely on the basis of the statement. The Ld. AR also submitted that the judgments relied on by the Department are not applicable to the facts of the case and distinguishable. The Ld. AR also placed reliance on the direction given by the CBDT vide instruction letter No. 286/2/2003-IT (Inv) dated 10.3.2003 on Confession on additional income during the course of search and seizure and survey operation. Reliance was also placed on Instruction No. F. No. 286/57/2002-IT), dt. 3rd July, 2002. The Ld. AR submitted that in the present cases, the AO has not been able to bring any material or evidence to substantiate the additions. The AO has ignored the fact that an addition can be made only when there is material. In case the addition is to be based solely on the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disallowance of ₹ 55 lacs paid in cash for payment towards purchase of land and disallowed by the Assessing Officer u/s 40A(3) of the Act. Learned Departmental Representative submitted that the meaning of expenditure and constitutional validity of section 40A (3) has been discussed by the Hon'ble Apex Court in the case of Attar Singh Gurmukh Singh vs CIT 191 ITR 667 (SC) where the Hon'ble Apex Court has held that all outgoings including purchase for stock in trade are covered u/s 40A (3) of the Act. He submitted that in view of this judgment, the Ld. CIT(A) has erred in deleting the addition and prayed that the order of the AO should be restored. 13.1 In response the Ld. AR submitted that section 40(A)(3) of the Act provides for disallowance of an expenditure in respect of which payment in a sum exceeding the specified limit is made otherwise than by a crossed cheque and crossed bank draft unless the case falls within the exceptions specified in Rule 6DD. He submitted that the exceptions provided in Rule 6DD are not exhaustive and therefore the provision of section 40A (3) shall not be attracted if the parties are identified and there is not material on reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that the Ld. CIT has passed a reasoned order on the facts of the case and as such the same should be upheld. 14. We have heard the rival submissions and have perused the material on record. First and foremost issue is the issue with regard to additions made on the basis of the surrender statement of Shri Balwant Singh. The said surrender is highlighted in Answer to question no. 5 of impugned statement of Shri Balwant Singh, inter alia stating that ...The detailed explanation of these annexure of loose pages/hard disks/pen drive would be submitted by me later. Most of the transactions in these annexure are reflected in the books of accounts of various companies of Ramprastha Group. However, after prima facie going through these documents, I admit that some of the transactions are not reflected and recorded in the books of accounts of various companies of Ramprastha Group. On account of non recorded/non reflection of these transactions, I hereby voluntarily admit following additional income for taxation... It is further explained in Answer to Question No. 15, 16 wherein it is stated inter alia that I have voluntarily admitted additional income of ₹ 52 crores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted their officers to base their assessments on the evidence collected during the course of search and. during the course of assessment proceedings. It was specifically directed that no addition should be based solely on confession or disclosures made at the time of search. The Hon ble Gujarat High Court in Kailashben Manharlal Chokshi (supra), has held that a statement recorded at midnight need not be given any credit as the person may not be in a position to make any correct or conscious disclosure in a statement, if such statement is recorded at such odd hours. In view of the above and also in view of the fact that the assessee has never, at any, given point of time, stated or agreed that the purchase and sale of shares were not genuine, we are of the opinion that the Assessing Officer was wrong in basing his entire assessment order on this one answer given by the assessee at the time of search, that too, without investigation, subsequent to a retraction. Coming to the variation in statement recorded under section 131 of the Act during the course of assessment proceedings, we do not find any merit in the conclusions drawn by the Assessing Officer which are presumably, based on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration, rightly the Commissioner of Income Tax (Appeals) accepted the case of assessee to cancel the assessment on ₹ 4.00 lakhs. Thus when the assessee had explained his statement as not correct in the context of the materials produced, as held by the Apex Court in the decision reported in (1973) 91 ITR 18 (Pullangode Rubber Produce Co. Ltd. V. State of Kerala and another), we do not think that the Tribunal would be justified in its conclusion that the statement made would clothe the assessment with legality. Quite apart from that, the case of the assessee also stands supported by the Circular dated 10th March, 2003 of the Central Board of Direct Taxes, which has given categorical directions to the officers, who are entrusted with the job of assessment that undue emphasis should not Be placed on the statements recorded In fact, it had given a mandate not to obtain confession as to the undisclosed income. Thus applying the Circular dated 10th March, 2003 to the facts of the case, which is binding on the Revenue, we have no hesitation in setting aside the order of the Tribunal. . 16.2 The Hon ble Delhi High Court in the case of Dhingra Metal Works (ITA No. 1111 of 2010) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue of admission in the case of Chikkam Koteswara Rao v. Chikkam Subarao AIR (1971) (SC) 1542, wherein the Hon'ble Apex Court has stated that an admission, however, binds the person making it only in so far as facts are concerned but an admission is not a conclusive proof of the matter admitted, though it may, in certain circumstances, operate as estoppel. But in such cases, there should be no doubt or ambiguity about the alleged admission. However, an admission or acquiescence on the part of the assessee cannot be the foundation of assessment, where the income is returned under an erroneous impression or misconception of law. It is always open to the assessee to demonstrate and satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under erroneous impression. In the present case before us, the assessee has proved that the disclosure made was neither the undisclosed / unaccounted income of the assessee-company and not even a single piece of incriminating paper or document or evidence of any nature were found from the impounded materials. Even the AO has made addition just on the basis statement recorded. There is no iota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... behalf of various companies of Ramprastha Group and other persons. In the substantive part of answer, Sh. Balwant Singh has stated that mostly the transactions are recorded in books of accounts and some parts are unaccounted. Ld. AR has argued that entire seized document was examined during post search and assessment proceeding and no incriminating material was found. Subsequent statements were recorded by the Investigation Wing as mentioned in the assessment order. However no question was asked in furtherance of the statement regarding the contents of the seized document. During original statement also subsequent details of work-inprogress, such as address, quantum of work done, accounted Work-in-progress and undisclosed work in progress were not asked for. The assessee companies during post search proceedings had twice informed the Investigation Wing that the surrender of work- in-progress has been made without pinpointing any seized material. No action was apparently taken even by the Assessing Officer, when effectively the statement got retracted. After considering entire facts and circumstances of the case and judicial pronouncements referred to hereinabove, we are of the cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the issue of disallowance of ₹ 55 crores in ITA No. 3241 is concerned, after going through all the relevant records and after giving a careful consideration to the rival submissions, it is seen that the fact remains unassailed on record that the expenditure disallowed by the AO, which has been upheld by the Ld. CIT (A), was never claimed as an expense by the assessee. Section 40A starts with the non-obstante clause setting out that the provisions of this section shall have effect notwithstanding anything to the contrary contained in any other provisions of the Act relating to the computation of income under the head profits and gains of business or profession . Subsection (3) of section 40A is an exception to the deductibility of expenditure under the computation provisions of profits and gains of business or profession . Thus consequently what does not fall within the computation of income will not attract the provisions of section 40A (3). On this issue the judgement of the Hon ble Rajasthan High Court in the case of Motilal Khatri (2008) 218 CTR 602 (Raj.) is very clear. Their Lordships before arriving at their decision categorically took note of the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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