9911796707
TMI Blog2010 (8) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in rejecting the arguments of the appellant that as per the Judgement of Hon'ble Kerala High Court in the case of Paul Mathews & Sons Vs. CIT, 263 ITR 101, the statement recorded u/s. 133A cannot be relied upon. 4. The facts material for adjudication of Ground No. 2 and 3 are as follows. The assessee is a company and is engaged in the business of trading in readymade garments. It has a showroom selling readymade garments at Peddar Road, Mumbai, which is an up market area. The due date for filing the return of income for A.Y. 2002-03 was 30.10.2002. Assessee did not file return of income on or before the said date. On 25.11.2002, there was a survey u/s. 133A of the Act in the business premises of assessee. In the course of survey, statement of Ms. Jaya Patel, a director of the assessee, was recorded. The exact time when the survey commenced is not given in any of the orders. From answer to Question No. 3 of the statement of Ms. Jaya Patel, it is clear that she came to the business premises where the survey was being done by about 7 p.m. on 25.11.2002 and by that time inventory of stock of garments available at the premises had been taken. Ms. Jaya Patel refused to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the instruction of the CBDT. 7. The Assessing Officer however added a sum of ₹ 1.75 crores to the total income declared by the assessee in the return of income for the following reasons :- "It may be mentioned that the statement of Jaya Patel was recorded after showing her the incriminating documents found and impounded during the course of survey u/s. 133A of the I.T. Act and at the time of the said director had disclosed the additional income after due consideration of facts before her. Hence, the retraction is nothing but an adamant non-reconciliation approach towards the facts of case. Accordingly, the income disclosed at the time of survey u/s. 133A for an amount of ₹ 1,75,00,000/- is treated as 'unaccounted income' earned by the assessee for A.Y. 2002-03 and is added back in the total income. Penalty proceedings u/s. 271(1)(c) initiated." 8. Before learned CIT(A), the assessee reiterated the submissions made before the Assessing Officer and further relied on the decision of Hon'ble Kerala High Court in the case of Paul Mathew & Sons Vs. CIT, 263 ITR 101 (Kerala) wherein it was held that statement recorded in a survey us/. 133A has no evidentiary value. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee submitted that statement can only mean that the assessee had offered to declare a total income of ₹ 1.75 crores. According to him, ₹ 1.75 crores cannot be said to be an offer of additional income over and above income as per the books of account. Thus, at the outset, he submitted that the dispute can only be with regard to taxing the difference between the sum of ₹ 1.75 crores and income declared by the assessee only in the return of income filed for A.Y. 2002-03 viz., ₹ 1,01,69,790/-. He further drew our attention to the statement of Ms. Jaya Patel recorded at the time of survey and in particular, the answer to question No. 22 & 23. He submitted that the answer to the above questions would clearly show that the assessee made a declaration to offer total income of ₹ 1.75 crores for A.Y. 200203 purely due to coercion. It was also submitted that officers conducting survey were bent upon getting surrender of income for taxation purposes and the movement of this was achieved in the statement recorded at 6.10 a.m. on 26.11.2002 and the survey proceedings came to an end. Thus according to him, statement recorded at the time of survey does not have any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39;ble Madras High Court in the case of CIT Vs. Hi Tech Arai Ltd., 321 ITR 477 (Mad); wherein it was held that Coordinate Bench decision need not be blindly followed if the earlier decision did not reflect correct position of law. 13. The learned DR at the outset submitted that declaration of ₹ 1.75 crores for A.Y. 2002-03 is only an additional income over and above the income as per the books of account. According to him, no person will make surrender at the time of survey in respect of income as per the books of account. His further submission was that the assessee had not specifically retracted the statement at the time of survey. It was alternatively submitted by him that the assessee has not explained as to why he has not declared ₹ 1.75 crores in the return of income filed and as to how income of ₹ 1,01,69,790/- alone was declared in the return of income. According to him, there was no coercion exercised by the department at the time of survey and the statement was a voluntary statement. His further submission was that the fact that the assessee offered income surrendered at the time of survey for A.Y. 2000-01 would itself show that the statement was volunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be said to be correct. The law with regard to admission as the basis of making an addition is very clear. Admissions are not conclusive and person who made the admission is always at liberty to show that the admission was erroneous or was given under a mistake. We have already seen the manner in which surrender of income was made by the assessee. We do not wish to go into the question as to whether surrender was voluntary or was given under coercion. We are however of the view that in the absence of any material found in course of survey to what the assessee earned income of ₹ 1,75 crores, the impugned addition could not have been made purely based on the statement recorded at the time of survey. In this regard, we are also of the view that facts in A.Y. 2001-02 stand on different footing because surrender was additional income over and above the income as per the books of account of the assessee. The Tribunal's order for A.Y. 2001-02, in our view would not be relevant in this regard. We also further notice that on the basis on the documents found in course of survey, the Assessing Officer has already rejected the books of account of the assessee and estimated income of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13,556 4,53,036 3,60,520 4. Page No. 9 of Executive diary A/36 3,43,000 Jan 2002 2,00,000 Given to Mr. Patel on a/c of chitti to keep in safe custody. 2,00,000 5. Page No. 13 of executive diary A/36 2,11,903 Jan 2002 84,079 84,079 Total 2,63,19,918 35,39,896 15,53,335 19,86,561 Percentage of cash sale 13.44 5.90 7.54 17. According to the Assessing Officer the incriminating documents revealing the gross profit tinkering exercise in which the assessee is involved are found in the shape of cash vouchers, full length pages summary sheets, month-wise sales statement showing chitties account and IOM account etc., Profit and Loss A/c. for the year ending 31st March, 2002 and also certain loose papers and a diary. The Assessing Officer noted that for the impugned assessment year also similar type of documents were found which have been duly discussed in that order. All these documents suggest that the assessee is declaring the profit on the basis of manipulated figures rather than actual profits of the business. He noted that the situation for the impugned assessment year remains the same as there is no difference in facts and the circumstantial evidence point out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Assessing Officer by holding as under: "4. Fifth ground of appeal is against the addition of ₹ 1,67,92,212/- on account of low GP shown by the appellant. This addition has been made on the basis of evidence found during the course of survey conducted at the business premises of the appellant on 25.11.2002. The addition has been made on the basis of observations made by the AO in A.Ys. 2000-01 & 2001-02. The action of the AO has been confirmed by CIT(A) for both the years. 4.1 I have carefully gone through both the orders passed by CIT(A). I agree with the reasons given by the CIT(A) for sustaining the additions made by the AO on account of low GP. Following the order of CIT(A) the addition of ₹ 1,67,92,212/- made by the AO on this count is confirmed. Therefore, ground No. 4 is rejected." 22. Aggrieved with such order of the CIT(A), the assessee is in appeal before us. 23. The learned counsel for the assessee submitted that the Assessing Officer has made the addition on the ground that the cash sales were siphoning out without passing through the regular books of account and that the IOM and chitties are not accounted in the regular books of account. Ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es he submitted that these are fully authenticated and signatures of persons preparing, authorising and receiving payment are duly appearing along with other details. Therefore, by no means these are siphoning of the cash sales. He submitted that had there been an intention to siphon the cash sales, the gross sales would not have been entered in the regular cash book. Referring to page 389 of Paper Book No. 4 where an example has been given regarding higher amount of cash deposit into bank recorded in the regular cash book as compared to the amount recorded in the cashier's cash book, he submitted that this is possible only when the amounts given by the casher on chitties have been brought back and deposited into the bank along with cash available with the cashier. 26. He submitted that the order of the Tribunal for A.Y. 200001 and 2001-02 is not applicable as far as chitties are concerned. He submitted that in the operative portion of the order of the Tribunal, there is no mention of the chitties. He submitted that the MA filed by the assessee on the ground that chities have not been correctly decided was dismissed by the Tribunal on the ground that various questions have not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... far as the notings in the executive diary, copies of which are placed at Paper Book pages 473 and 474, he submitted that these are some rough jottings by the cashier. He submitted that the person who had written all these figures had appeared before the Assessing Officer. He submitted that in any case the books of account were not rejected during the year, no defects were found in the books of account and when the assessee was able to explain item-wise, the Assessing Officer cannot reject the books of account by relying on the order for A.Y. 2000-01. Referring to page 260 of the Paper Book, he submitted that the Assessing Officer has calculated the chitties for the A.Y. 2002-03 at ₹ 23,46,964.50 whereas the assessee in its return of income has disclosed ₹ 25 lakhs on account of such chitties which is as per the computation statement placed at Paper Book page 1. He submitted that although full details were filed before the CIT(A), he has not considered the chitties. He submitted that when the sales figures as per the impounded Profit and Loss A/c. and the audited Profit and Loss A/c. tally it cannot be said that the assessee has siphoned out the money through chitties an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit, however, despite her assurance given during the course of survey no such additional income was disclosed during the year. Referring to the copy of the statement recorded and placed at Paper Book pages 186 to 200, he submitted that there was no coercion or pressure on the assessee for such disclosure. Referring to Paper Book page 217, he submitted that the additions were not made on the basis of the 5 entries alone, but there are still other entries on the basis of which the Assessing Officer has made the additions. Referring to Paper Book page 80 giving the reconciliation between the Profit and Loss A/c. impounded during the course of survey and actual Profit and Loss A/c. he submitted that the same should be read with impounded Profit and Loss A/c. placed at Paper Book page 115. He submitted that when the financial year ended on 31st March, 2002 and the date of survey was 25.11.2002 i.e., 8 months after the financial year, it cannot be said that the assessee has not entered the purchases. Therefore, the conclusion that can be drawn after the so called reconciliation statement is that the books of account are not maintained in the regular course of business. He submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years and the additions were made based on the same material found during the survey and since rejection of books and assessment of income was upheld by the Tribunal, therefore, the order of the CIT(A) for this year should be upheld. However, to the extent relief given by the ITAT on the basis of MA filed by the assessee may be given to the assessee. He submitted that the statutory auditor in the instant case is an employee of the company. Therefore, it cannot be said that the accounts are prepared in an impartial manner. He also relied on the decisions reported in 288 ITR 10 and 309 ITR 196. 31. The learned counsel for the assessee, in his rejoinder, submitted that the assessee has furnished details of purchases which were not disputed or objected by the Assessing Officer. The gross profit is not the balancing figure as alleged by the learned DR. He submitted that Mr. Ved is not an employee of the assessee company but is the statutory auditor and also the auditors of so many other assessees. Referring to Paper Book page 424 to page 453 he submitted that the department has impounded the stock statement as on 31st March, 2002. Therefore, the learned DR is not correct in saying tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer that the survey did not find unaccounted purchases or unaccounted credit sales. Accordingly following the orders of the Assessing Officer for the A.Y. 2000-01 and A.Y. 2001-02, the Assessing Officer rejected the book results and estimated the GP at 32% and made an addition of ₹ 1,67,92,212 on account of suppression of GP to the total income of the assessee. It is the submission of the learned counsel for the assessee that since the IOMs in the earlier have been accepted by the Assessing Officer after the direction of the Tribunal in the order passed on the basis of the MA and since the assessee has offered additional income of ₹ 25 lakhs on account of chitties as against the quantification by the Assessing Officer at ₹ 23,46,964.50 and since the order was passed u/s. 143(3) without rejecting the books of account and since the assessee was able to explain each and every item in the audited Profit and Loss A/c. vis-à-vis the impounded Profit and Loss A/c., therefore, no addition on account of suppression of GP is called for. It is the submission of the learned DR that the accounts of the assessee were not prepared till the date of surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test check basis, we find no exact quantification has been made by the Revenue authorities on account of such chitties. We also find merit in the submission of the learned counsel for the assessee that when the assessee in her statement reconciled the difference in the various items appearing in the audited Profit and Loss A/c. vis-à-vis the impounded Profit and Loss A/c., the Assessing Officer has not brought anything on record to disprove the purchases which were entered subsequent to the date of survey. At the same time, when the accounts of the assessee were not finalised till the date of survey which is after 8 months from the end of the accounting year, it cannot be said that all the purchases have not been entered. We also find some merit in the submission of the learned DR that if such purchases which were not accounted for are considered now then the physical stock on the date of survey will be less. We also find merit in the submission of the learned DR that none of the directors appeared before the Assessing Officer to explain the various papers impounded during the course of survey. 36. After careful analysis of the various arguments advanced by the learned cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd it contained following description regarding services charges payable for the shopping area admeasuring 10938.39 sq.ft. for the period of 1.4.1998 to 31.3.1999 as follows :- Particulars Rate Amount (Rs.) Being service charges payable for the shopping area admeasuring 10,938.39 sq.ft. for the period 1.4.1998 to 31.3.1999 as follows : i) show-room facing Peddar Road, Area 5745.36 sq.ft. ii) shopping area : 5193.03 sq.ft. ₹ 200/- per sq.ft. per month ₹ 100/-per sq.ft. per month 1,37,88,864 6,231,636 Total 2,22,20,500 (Rupees two crores twenty thousand five hundred only) 39. The Area of space referred to in the debit note was owned by the VPL and was in occupation of the assessee. According to the Assessing Officer, the assessee had in fact paid aforesaid consideration for use of premises. However, the Assessing Officer found that as per the books of account, the assessee had debited only ₹ 66,00,000/- towards rent and ₹ 77,75,236/- towards services charges. Thus, total payment made by the assessee to VPL was ₹ 1,43,75,236/- whereas as per the debit note found at the time of survey the amounts payable were ₹ 2,22,20,500/-. The Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored the issue to the Assessing Officer for fresh consideration by holding as follows :- "At the time of hearing of the MA together with the connected ITAs, ld. counsel for the assessee submitted that similar addition made in the hands of Vama Pvt. Ltd., the lessor, had already been restored by this Tribunal vide its order dated 26.9.2005 to the file of the Assessing Officer for a fresh decision in terms of the directions given therein and hence similar addition made in the hands of the assessee should also have been restored to the file of the Assessing Officer to ensure consistency in the decision. We find sufficient force in the submission of the assessee in this behalf. Issues raised in ground No. 2 in the assessee's appeal for A.Y. 2000-01 and ground Nos. 8 to 10 in the appeal for A.Y. 2001-02 are accordingly restored to the file of the Assessing Officer for a fresh decision after giving reasonable opportunity of hearing to the assessee. The Assessing Officer shall also consider the plea of the assessee regarding setting off of the rental payments made over and above the one recorded in the books against other additions on account of suppressed profits sustained by this ..... 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