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TMI Blog2016 (11) TMI 1233X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence with the Revenue to conclude that the assessee was doing business in textile. The AO has assumed business only on the basis of availability of two seals. To our mind it is too hypothetical. In spite of survey, the Department was not able to lay its hand on any incriminating material indicating that active business was conducted by the assessee in retailed trading of textile items. The AO has simply assumed that since two seals are available, and assessee has shown income for two years earlier, therefore, he should have income in this year also. This observation is not based on any material. If this type of thump rule is being upheld, then there will be no end, therefore, we allow this ground and delete the addition. Unexplained investment shown as receivable - Held that:- The copy of the balance sheet is available at page no.91 of the paper book. The major amount in this loose paper is a sum of ₹ 7,81,100/-. According to the assessee, this amount was receivable from one Shri Suresbhai Nareshbhai. The assessee had entered into agreement for sale of flat at Rivera Towers. Copy of the agreement to sell was filed before the AO. This flat has been shown by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books of accounts when the assessee has produced. The assessee has also pointed out that he is an old assessee. Even in the Asstt.Year 2007-08 assessment was framed under section 143(3) r.w.s. 147. This assessment was made on 26.12.2011 i.e. after the survey. Thus, it cannot be said that the investment was not recorded in the books, and therefore, it is an unexplained one Unenvestments made through other persons - Held that:- he shares will not be available in physical form in the name of the assessee. Had the shares were available there, then, the assessee could have taken plea that these are not in his name. Thus, once the details of investment was found and the assessee has admitted the investment through other persons, then he cannot take such type of plea. As far as addition on merit is concerned, the AO has made addition on the ground that books were written upto 31.3.2008, and therefore, these investments are unexplained one. The assessee has contended that he has duly accounted these investments. These are reflected in the balance sheet. He has been filing regular return. Conclusion drawn by the AO that investment was made out of books is not sustainable. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned CIT(A) has erred in confirming the action of Assessing Officer in making addition of ₹ 11,40,920/- on account of unexplained investment in shares. 8. On the facts and circumstances of the case as well as law on the subject, the learned Assessing Officer has erred in not giving the telescoping benefit for overlapping addition. 3. Though in ground no.1 nothing substantial would turn out, but in order to appraise us as to how statement recorded during the course of survey under section 133A of the Income Tax Act, 1961 is to be appreciated, the ld.counsel for the assessee has pressed this ground of appeal. The discussion on this ground would goad us how to apply evidences and adjudicate other issues. 4. Briefly stated facts are that a survey operation under section 133A of the Income Tax Act, 1961 was carried out at the premises of the assessee on 6.3.2009. A notice under section 148 of the Act was issued on 26.12.2011, which was duly served upon the assessee. In response to the notice, the assessee did not file return within time period stipulated in the notice, but filed return on 15.3.2013. It emerges out from the record that the statement of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ld.DR relied upon the orders of the Revenue authorities. He pointed out that statement was allegedly taken under section 131 and its admissibility cannot be challenged. 6. The issue regarding evidentiary value of the statement taken during the course of survey, has fallen for consideration before the Hon ble Kerala High Court in the case of Paul Mathews and Sons (2003) 263 ITR 101 (Ker). According to the Hon ble Kerala High Court, during the course of survey, the officer could record the statement of a person under sub-section 3(iii) of section 133A of the Income Tax Act. This clause authorizes the authority to record a statement of any person which may be useful for or relevant to any proceedings under the Act. However, the officer is not authorized to record the statement on oath, and hence, the statement taken during the course of survey, has no evidentiary value. It is simply an information, which can be used for corroboration purpose for deciding any issue in favour or against the assessee. The observations made by the Hon ble Kerala High Court on page no.108 of the journal are worth to note. It reads as under: ..Section 133A(3)(iii) enables the authority to record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd after charging a nominal commission, he handed over cash. According to the AO, the assessee has earned commission income from this activity at the rate of 0.1%. The AO further observed that the turnover of the assessee was of ₹ 36,65,74,855/-. The AO proposed an addition of ₹ 3,66,575/- at the rate of 0.1% of the turnover. The assessee contended that seven bank accounts referred by the AO in the show cause notice have duly been considered by the assessee in his bank accounts. He submitted photo-copies of bank statement along his reply. The assessee contended that bank account bearing no.2737 with Surat Mahila Nagarik Cowas closed on 28.1.2008 and he has not carried out any activity through this account. The ld.AO was not satisfied. He observed that the assessee had two bank accounts bearing nos.2737 and 2998 with Surat Mahila Co-op. Bank, Bombay Market, Surat. The assessee had turnover in these accounts, and he did not include the commission income of the total turnover in these accounts available at ₹ 28,99,90,086/-. The AO has estimated the commission income at the rate of 0.1% on this turnover and made addition of ₹ 2,89,990/-. The AO, thereafter, obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal is allowed. 13. In ground no.3, the assessee has challenged addition of ₹ 15,08,836/- 14. Brief facts of the case are that during the course of survey two seals of M/s.Anjani Textiles and M/s.Ambica Textiles were found from the office premises of the assessee. According to the AO, there were three bank accounts in the names of these concerns with Adinath Co-op. Bank and Surat Mahaila Nagrik Co-op. Bank. The AO has observed that in the Asstt.Year 2007-08, the assessee has shown profit in retail trading of textile at the rate of 10.55% of his turnover. He has offered income, but in this year, the assessee has not offered any income. Thus, the AO assumed income in retail trading of textile. When the AO confronted the assessee with regard to this situation, the assessee contended that he has not been involved in the business of trading in textile business from the F.Y.2008-09. Whatever business he has done earlier was not continued. The assessee is involved only in cheque discounting business. This turnover has duly been accounted in the cheque discounting business. But the AO was not satisfied with the explanation of the assessee. He contended that the profit at 10.5 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a Joan- (Copy of ledger duly signed is attached). b) ₹ 2250/- from Parmar: It is an outstanding amount receivable from Parmar since the amount was given by the assessee as a loan. (Copy of ledger duly signed is attached). c) ₹ 1000/- from Mr. G {Ganeshbhai): It is an outstanding amount receivable from Mr. G (Ganeshbhai) since the amount was given by the assessee as a loan. (Copy of ledger duly signed is attached). d) ₹ 5400/- from Sanjay Shah: It is an outstanding amount receivable from Sanyay Shah since the amount was given by the assessee as a loan Copy of ledger duly signed is attached). e) ₹ 2340/- from Manish Damania: It is an outstanding amount receivable from Manish Damania since the amount was given by the assessee as a loan, (Copy of ledger duly signed is attached). f) ₹ 1000/- from M. D. Mama: It is an outstanding amount receivable from M. D. Mama since the amount was given by the assessee as a loan. (Copy of ledger duly signed is attached). g) ₹ 7800/-from Bharatbhai: It is an outstanding amount receivable from Bharatbhai since the amount was given by the assessee as a loan. (Copy of ledger duly sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the above explanations, ledger accounts proofs, it is clear that the assessee had simply made the total estimated fund to be received from various persons against loans advances given to various persons, from the Third Party Shroffs an estimated amount on sale of Car Flat. Considering the above facts, the amount receivable reflected in the Page 12 ofB-1 is fully explained and hence your proposed action to add ₹ 12,86,833/- is not justified and cannot be added in the income. 18. The ld.AO was not satisfied with the explanation of the assessee and observed that the assessee has failed to prove the source of such cash loans advanced by him. According to the AO, the assessee himself has admitted that these cash amounts were paid out of books, and therefore, sum of ₹ 12,86,833/- has been treated by the ld.AO has unexplained investment. He made addition. Appeal to the CIT(A) did not bring any relief to the assessee. 19. The stand of the assessee is that books of accounts were recorded upto 31.3.2008. The assessee has duly explained that books were lying with office of the Chartered Accountant. These transactions had been mentioned in the books and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discounting business. He pointed out that the assessee must have received certain cheque for discounting, but since cash was not available in his account, therefore, he took help of other shroff and discounted these cheques. He has given commission to these shroff and handed over cash to client. This explanation of the assessee was not accepted by the assessee on the ground that the assessee failed to furnish name and address of the shroff from whom he claimed to have taken cash loans. In his initial statement, he has submitted that it was a loan. The assessee has furnished a detailed reply of his position for the first time on 22.3.2013 i.e. at fag end of the assessment proceedings, and the AO could not investigate the authenticity of the claimed by the assessee. Accordingly, he made an addition of ₹ 67,75,000/- with help of section 68 of the Income Tax Act. Appeal to the CIT(A) did not bring any relief to the assessee. 22. With the assistance of the ld.representatives, we have gone through the record carefully. Section 68 of the Income Tax Act contemplates that where any sum is found credited in the books of an assessee maintained for any previous year, and the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.total ₹ 67,75,000 for the period from 1-2-2009 to 24-2-2009 and this amount has been taken by your from other Shroffs during your cheque discounting business, after giving third party cheques to them. You have also stated that in this manner, since you did not have cash amount with you, by giving third party cheques to the other Shroffs, you have taken cash amounts from them and in this manner, you have earned a commission amount of ₹ 6,000 to ₹ 8,000 every month. Hence, in this respect, furnish the names and other particulars of the said Shroffs from whom you have received an amount of ₹ 67,75,000 by giving third party cheques to them from the period of 1-2- 2009 to 24-2-2009. In the same manner, in case if you have received cash amounts from other Shroffs also, by giving them third party cheques, then give their name, address, etc. A.2 Once again I confess that the above referred amount of ₹ 67,75,000 was taken by me from the period of 1-2-2009 to 24-2-2009 on different dates from other Shroffs, by giving them third party cheques. In my statement given during 'the survey proceedings, I had told that I had taken this amount from a person w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r from the books of Mr. Samir Shah duly signed by him are attached herewith. This shroff Mr. Samir Shah has filed an affidavit also in this regard stating very clearly that he had carried out this third party ch. Discounting with the assessee and earned the the ch. /DD discounting charges offered for tax the same in his return of income. Xerox copy of the same is attached herewith. Thus , it is clear that transaction reflected in the impounded material (page 14 of B-l) were related to the cheque discounting done through Third party shroff and not regarding cash loan received by the assessee from various persons. Assessee had also earned cheque discounting income through such type of transaction during the year and during F.Y. 2007-08 also to the tune ofRs. 8,000 p.m. the same had also been offered for tax in respective years. The income earned from similar type of transactions were offered for tax in A. Y. 2008-09 also, which has been accepted by the I. Tax department while assessing the income u/s 143 (3) for A. Y. 2008- 09. Thus, ₹ 67,75,000/- is not a cash loan received by the assessee as alleged by you but actually these are the transactions of Third Party shorff Ch./ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was only a corroborative statement, because, it was taken without oath. In rest of two statements, the assessee has explained his position with more clarity. If it was a loan, then it must have been reflected in some of the transactions either at asset side along with liability. No such things were found. Therefore, in our opinion, the explanation given by the assessee, which is after 13 days of survey is a plausible one, it cannot be brushed aside without giving any specific reasons. The amount cannot be treated as loan taken by the assessee. We allow this ground of appeal and delete addition. 25. Ground no.6. In this ground of appeal, the grievance of the assessee is that the ld.CIT(A) has erred in confirming the addition of ₹ 2,50,000/- which was made by the AO on the ground that the assessee has made unexplained investment. 26. Brief facts of the case are that during the course of survey a green coloured pocket diary was found and seized. It was inventoried as B/6. On page no.1 of this pocket diary, there were different dates and amounts were found. When the assessee was confronted about narration of this diary on 6.3.2009, then the assessee has contended that one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee to complete entries upto 6.3.2009. Thus, the AO ought to have examined this aspect from the books of accounts when the assessee has produced. The assessee has also pointed out that he is an old assessee. Even in the Asstt.Year 2007-08 assessment was framed under section 143(3) r.w.s. 147. This assessment was made on 26.12.2011 i.e. after the survey. Thus, it cannot be said that the investment was not recorded in the books, and therefore, it is an unexplained one. The investment is duly reflected in the balance sheet. The AO has not conducted the inquiry that source was not explained. He made the addition being not recorded in the books. Once it is explained that investment is shown in the books, its addition cannot be made. Thus, this ground is allowed. 28. In the next ground of appeal, the assessee has agitated that the ld.CIT(A) has erred in confirming the addition of ₹ 11,40,920/-. 29. Brief facts of the case are that during the course of survey, writing pads were found and impounded, which were inventorised as B-13 . On page no.1 of B/13 there were narrations exhibiting investment in shares. When this fact was confronted to the assessee during the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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