9911796707
TMI Blog2020 (1) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... idence but the assessee can demonstrate that admission was wrong. - Order of CIT(A) sustained - Decided against the revenue. Admission of additional evidences under Rules 46A - Held that:- a conflict of opinions expressed by the revenue by holding that the submissions are only reiteration of earlier submissions and having grievance for allowing them under Rule 46A by the ld. CIT (A). - the ld. CIT (A) has given adequate reasons for admitting the additional evidences - Objection of the revenue rejected. Entitlement of deduction u/s 10A of the Act on the higher profits determined owing to the survey operation in a concern having unit at SEZ - Held that:- the Section seeks to promote and boost new business undertakings situated in free trade zones by providing suitable deductions - It provides for a 100 percent deduction of profits and gains derived by undertakings engaged in export of articles or computer software. In the instant case, the amount determined by the revenue by the assessee does not partake the nature of manufacturing and export of goods or articles. Hence, the benefit of the provisions of Section 10A cannot be accorded to the assessee in the instant year. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee: 1. That on the facts and in circumstances of the case, the income determined of the assessment year 2010-11 will be entitiled for deduction u/s 10A of the Income Tax Act as the respondent is having a unit in Special Economic Zone and income from such units is exempt for the tax u/s 10A of the Income Tax Act, 1961. 2. That on the facts and in the circumstances of the case, income determined for the year after considering the addition if any will be entitled for deduction u/s 10A of the Income Tax Act, 1961. Ground No. 2 4. The facts of the case, in brief are that the assessee M/s. Jagan Automotive Pvt. Ltd. is engaged in the business of manufacturing and trading of auto parts. A survey operation under section 133A of the Income Tax Act, 1961 was conducted on 19.03.2008. In response to notice u/s 143(2) 142(1) of the Act, the assessee filed the return of income of ₹ 85,90,617/- on 28.09.2008. The Assessing Officer made addition on account of undisclosed income of ₹ 1,95,53,369/-. 5. During the course of survey, physical inventory of stock was taken and valuation of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies till date ? Ans. I have verified from my records that there is no purchase bill pending to be entered for which goods have been received. Further, after verifying my records of the company I confirm that there is no sale bill pending to be issued for the sale made till dated in the both the above mentioned companies. Q.12 You have submitted copy of cash books of both the companies. As per cash books of Jagan Lamps Limited, the cash physically available should be ₹ 2,23,533/- and Jagan Automotive Pvt. Ltd. should be ₹ 1,34,864/-. The total comes to ₹ 3,58,387/- whereas the total cash found during the survey at this premises which is also certified by you is ₹ 17,57,300/-. Please explain the difference of ₹ 13,98,903/-? Ans. After verifying my records and physical cash available at my premises, I, confirm that there is excess cash of ₹ 13,98,903/- available in the premises. I am unable to substantiate the excess cash of ₹ 13,98,903/- but I want to state that the cash belongs to Jagan Automotive Pvt. Ltd. which Is the earning of the company during the current financial year from its unacc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eated as undisclosed income of the company over and above its regular income and the company may not be treated as assessee is default. Ans. I accept that this income of ₹ 2,80,98,921/- is unaccounted income of the company and the company should not be treated as assessee in default as I on behalf of the company is ready to pay the due taxes on it with interest. Q.17 Please state how do you purpose to discharge your tax liability in this regard? Ans. The tax plus interest on the above amounts comes to ₹ 1,00,00,000/- (approximate). I wish to discharge my tax liability by submitting these cheques as detailed below: - 1. American Express Bank No.000154 ₹ 30,00,000/- 2. American Express Bank No.000155 ₹ 35,00,000/- 3. American Express Bank No.000156 ₹ 35,00,000/- I am offering this amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,000/- were submitted toward me payment of taxes and interest on the above mentioned additional income. Further, I want to state that I will deposit the due taxes before due date of filing of return. Q.4 Do you want to state any this else. Ans. No The above statement has been given by me without any threat, coercion or inducement and it is true to the best of my knowledge. I have read the above noted statement and it is correctly recorded. Signed (Suraj Prakash Aggarwal) 9. During the course of survey trading account for Jagan Automotive Pvt. Ltd. (NOIDA) from 01.04.2007 to 19.03.2008 was drawn as under: - Trading Account Particulars Amounts Particular Amount Opening stock 1484860.00 Sales 16422043.00 Purchases 1689709.00 C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the stock inventory. No document has been found during the survey which confirms that we have purchased these goods from local market. These facts were intimated earlier also as per out letter dated 26.03.2008. The value of the stock inventory taken at SDF No. H-11, NSEZ has been calculated as US$ 201857.00 which is in actual is of US$ 107643.00 due to the mistake as explained above. The amount of closing stock as per the inventory taken by your goodself on 19/03/2008 if calculated comes to ₹ 4261143.75 whereas the same was considered at ₹ 2288587.00 in the trading account furnished to your good self though the stock is carried forward and we had made the correct amount in the dosing stock while computing the income for the year ended as on 31/03/2008. The price per unit of the Stock inventory noted by the team at Punjabi Bagh Office was on ad-hoc basis which are even higher than the prevailing retail price. There was no document found during Survey that we had purchased the goods from local market. The rates has to be calculated at the import Price + Freight + Custom Duty and accordingly declared in the return. It i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The reasons for discrepancies in the statement drawn at the time of survey can be summarized as under: - 1) Delhi Stock - Rates adopted by the Survey team in respect of the Goods found were unreasonably high. - The Stock at Delhi was determined at ₹ 2,09,14,578/- as against the figure of ₹ 71,47,249/- as per rates prevalent. 2) Noida Stock - Excess Stock taken as explained in para 2 and 3 of letter dated 29.09.2008. There was no excess stock at that premises. 3) In order to work out the excess stock, a trading account was prepared at the time of survey. In the said trading account Gross Profit rate has been taken at an ad-hoc percentage of 2%. The Gross Profit earned by the assessee company is 9.13% as per the audited accounts of the company for the year ended 31.03.2008. The same has resulted determination of excess to the extent of 24 lacs, details enclosed. 12. During the course of assessment proceedings, the assessee company further submitted as under: - in continuation to our letter dated 20.11.2010 regarding the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rcion during the course of recording of his statement at the time of survey under section 133A and in the office of ITO, Ward 4(1), New Delhi on 24.03.2008. The director of the assessee company had himself admitted undisclosed income in the statement recorded during the course of survey under section 133A as well as in the office of Income Tax Officer, Ward 4(1), New Delhi and also the company has itself declared other income in its return of Income. It was held that this conclusively proves that the assessee was making sales which were not recorded in the books of account and was therefore, generating unaccounted income. The assessee s contention that hypothetical stock was recorded during the course of survey under section 133A is untenable and unverifiable as the stock inventory was certified by the Director of company and was not disputed during the course of survey or later when his statement was recorded in office. 16. The Assessing Officer held that the confession need not be ruled out merely because it was retracted. The confessions are to be considered as a whole and not in any edited form. Corroborations may invariably be required where there is retraction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the allegation of inducement, threat or coercion through the witnesses. Thus, the contention advanced by the assessee on this count was liable to be dismissed. 18. It was held by the revenue that the ratio-decidendi of the above-mentioned cases are squarely applicable to the assessee s case because of similar facts and circumstances. 19. The Assessing Officer held that in this case, the admission of undisclosed income of ₹ 2,67,00,018/- was corroborated with independent evidence in the form of inventory of excess stock found during the course of survey whereas substituted facts mentioned in retraction were found untenable as discussed above. 20. In the instant case, during the course of survey u/s 133A, cash amounting to ₹ 17,57,300/- was also found at the premises. A balance of ₹ 3,58,397/- was reflected in the cash-book of the assessee company on the date on survey. When questioned about the discrepancy in the cash found at the premises and the cash balance as reflected in the cashbook, the Director of assessee company declared unexplained cash amounting to ₹ 13,98,903/- as additional income of the assessee c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions on the proposition that no assessing authority can ignore the retraction and proceed with the assessment on the basis of surrender made at the time of search ignoring the retraction made and furthermore corroboration through an independent source is a prerequisite to make addition. He also relied on the case laws which held that the admission cannot be the foundation of assessment, admission may be an important piece of evidence but it cannot be held to be conclusive which also flows to the proposition that surrender by itself cannot be a foundation for assessment. The ld. AR took us through the statement of Sh. Suraj Prakash Aggarwal recorded on 19.03.2008 and on 24.03.2008 and also to the statement of Sh. Pankaj Tiwari, Supervisor recorded on 19.03.2008. He argued based on the inventory of stock at Noida as well as Punjabi Bagh, New Delhi. All the facts have been explained details by the ld. AR along with the balance sheets, tax audit report and report u/s 10AA of the Income Tax Act. It was also argued that at the time of recording the statement neither the inventory was verified by the assessee nor the value thereof and whatever inventoried by the reve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proper documentary evidences which prove that the documents based on which the disclosure or the additional income has been offered were faulty. 30. The second issue pertains to the stock is that the stock at item no. 62 to 67 at page no. 61 has been grossly inflated. We find that even the items at serial no. 17, 27, 44, 47 56 are also in whole numbers and the stock statement does not give any indication of interpolation of stock figures. Hence, the argument that the stock has been wrongly taken cannot be accepted. The contention of the assessee that hypothetical stock shown at the inventory at Noida cannot be accepted as the stock taking is the physical activity undertaken by going through the entire stock founded the premises. Similarly, a dispute arose about the opening and closing stock taken by the department which varies as per the accounts filed with the department. The assessee s contention that the stock determined taking GP rate at 2% is also considered. The assessee has taken another argument, the stock has been inventorised and the price has been determined at MRP i.e. the tag price. It was explained that while the cost price is ₹ 71,47,249/-. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... COST AMOUNT (Automobile Bulb) 4.50% 0.25% 34.13% 1 H4 12V 100/90 W 200000 0.22 8.756 0.39 0.023 3.13 12.304 2460720.83 2 H4 12V 100/90 CP 289159 0.18 7.164 0.32 0.019 2.56 10.067 2910843.71 3 H4 24V 100/90 W 30000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not in dispute that a survey operation was conducted u/s 133A of the Act t the business premises of the assessee company on 19.03.2008 and physical inventory of stock was taken, the valuation of which was done on the basis of the rates of the different items given by the Director of the assessee company and with the help of the employees of the company. The value of stock found at the business premises located at Punjabi Bagh, New Delhi and Noida special Economic Zone was found to the extent of ₹ 2,09,14,578/- and ₹ 80,74,007/- respectively aggregating to ₹ 2,89,88,585/-. On the other hand, as per the trading account drawn on the basis of the books of accounts on the date of survey, the value of the closing stock was disclosed that ₹ 22,88,567/- which led to the surrender on the part of the assessee as additional income on account of excess stock of ₹ 2,67,00,018/-. Apart from that, excess cash of ₹ 13,98,903/- was also offered to tax. However, the assessee company filed its objection to the above figures of excess stock as per letters dated 26.03.2008 (exactly after 7 days from the date of survey) and then on 29.09.2008. In the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ind a conflict of opinions expressed by the revenue by holding that the submissions are only reiteration of earlier submissions and having grievance for allowing them under Rule 46A by the ld. CIT (A). We also find that the ld. CIT (A) has given adequate reasons for admitting the additional evidences at para no. 3 of the order which we find appropriate and need not be interfere with. Hence, the appeal of the revenue on this ground is dismissed. 36. Ground Nos. 2.2, 2.3 2.4 are inter-related and stands dealt while dealing with the ground no. 2 above. 37. The CO relates to allowing the entitlement of deduction u/s 10A of the Act on the higher profits determined owing to the survey operation in a concern having unit at SEZ. The provisions of Section 10A are as under: 10A. (1) Subject to the provisions of this section, a deduction of such profits and gains as are derived by an undertaking from the export of articles or things or computer software for a period of ten consecutive assessment years beginning with the assessment year relevant to the previous year in which the undertaking begins to manufacture or produce such articles or thing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns for further two consecutive assessment years, and thereafter; (ii) for the next three consecutive assessment years, so much of the amount not exceeding fifty per cent of the profit as is debited to the profit and loss account of the previous year in respect of which the deduction is to be allowed and credited to a reserve account (to be called the Special Economic Zone Re-investment Allowance Reserve Account ) to be created and utilised for the purposes of the business of the assessee in the manner laid down in sub-section (1B) : [Provided that no deduction under this section shall be allowed to an assessee who does not furnish a return of his income on or before the due date specified under sub-section (1) of section 139.] (1B) The deduction under clause (ii) of sub-section (1A) shall be allowed only if the following conditions are fulfilled, namely:- (a) the amount credited to the Special Economic Zone Reinvestment Allowance Reserve Account is to be utilised- (i) for the purposes of acquiring new machinery or plant which is first put to use before the expiry of a period of three years next fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival by the assessee of the business of any such undertakings as is referred to in section 33B, in the circumstances and within the period specified in that section; (iii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose. Explanation.-The provisions of Explanation 1 and Explanation 2 to sub-section (2) of section 80-I shall apply for the purposes of clause (iii) of this sub-section as they apply for the purposes of clause (ii) of that sub-section. (3) This section applies to the undertaking, if the sale proceeds of articles or things or computer software exported out of India are received in, or brought into, India by the assessee in convertible foreign exchange, within a period of six months from the end of the previous year or, within such further period as the competent authority may allow in this behalf. Explanation 1.-For the purposes of this sub-section, the expression competent authority means the Reserve Bank of India or such other authority as is authorised under any law for the time being in force for regulating payments and dealings in foreign exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o any such allowance or deduction; (ii) no loss referred to in sub-section (1) of section 72 or subsection (1) or sub-section (3) of section 74, in so far as such loss relates to the business of the undertaking, shall be carried forward or set off where such loss relates to any of the relevant assessment years 74[ending before the 1st day of April, 2001]; (iii) no deduction shall be allowed under section 80HH or section 80HHA or section 80-I or section 80-IA or section 80-IB in relation to the profits and gains of the undertaking; and (iv) in computing the depreciation allowance under section 32, the written down value of any asset used for the purposes of the business of the undertaking shall be computed as if the assessee had claimed and been actually allowed the deduction in respect of depreciation for each of the relevant assessment year. (7) The provisions of sub-section (8) and sub-section (10) of section 80-IA shall, so far as may be, apply in relation to the undertaking referred to in this section as they apply for the purposes of the undertaking referred to in section 80-IA. [(7A) Where an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hange for the purposes of [the Foreign Exchange Management Act, 1999 (42 of 1999)], and any rules made thereunder or any other corresponding law for the time being in force; (iii) electronic hardware technology park means any park set up in accordance with the Electronic Hardware Technology Park (EHTP) Scheme notified by the Government of India in the Ministry of Commerce and Industry; (iv) export turnover means the consideration in respect of export [by the undertaking] of articles or things or computer software received in, or brought into, India by the assessee in convertible foreign exchange in accordance with sub-section (3), but does not include freight, telecommunication charges or insurance attributable to the delivery of the articles or things or computer software outside India or expenses, if any, incurred in foreign exchange in providing the technical services outside India; (v) free trade zone means the Kandla Free Trade Zone and the Santacruz Electronics Export Processing Zone and includes any other free trade zone which the Central Government may, by notification in the Official Gazette, specify for the purposes ..... 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