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TMI Blog2021 (4) TMI 529X X X X Extracts X X X X X X X X Extracts X X X X ..... bout the legal position that the survey team has no authority to record the statement of person on oath, meaning thereby the statement recorded during survey is per se not admissible in the evidence. In the present case, not only one partner of the assessee made discloser of additional undisclosed income, but it was endorsed by two other partners in presence of their CA. The statement was acted upon by making the payment of tax of ₹ 2.10 Crore till 29.03.2012, on such undisclosed income. During first appellate stage the assessee try to introduce new facts that the undisclosed additional income was earned from the business of sarees and dress material for which no separate accounts were maintained. Before, Tribunal the assessee has filed Audit report, as duly signed by learned CA, who was present during the survey action and endorsed the statement of the partner of assessee. In para 8(a) of the Audit report the assessee/auditor has shown its business of Land Building Development , in para 8(b) which relates to change in the business or profession the assessee has written N.A. - in Audit report it is reported that the books of accounts are maintained in computer syst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Circumstances, the Honorable CIT(A)-II has erred in confirming the addition made by the Ld. A.O. only on the basis of disclosure made during the survey conducted u/s. 133A of the I.T. Act rejecting the facts and explanation offered by assessee on the very material found during the survey. (3) On the facts and Circumstances, the Honorable CIT(A)-II has erred in rejecting the additional Evidences produced by the assessee. (4) On the facts and in the circumstances of the case and in law the addition stated above deserve to be deleted, hence, it is prayed to your honour to delete the same and do the justice. (5) The appellant craves leave to add, alter or vary any of the grounds of appeal. 2. Brief facts of the case are that the assessee is a partnership firm engaged in the business of development of land and building. A survey action was conducted on 05.07.2011, under section 133A of Income Tax Act on the business premises of assessee. During the course of survey action certain incriminating documents were found in possession of partners of assessee firm, which was impounded by survey party as Annexure-BF-16(BI-1) and BF-17(BI-2). The statement of one of the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. Net Profit of ₹ 4 Crore shown in ITR for F.Y. 2011-12. 18 This paper contains business receivables for May 2011. It has been written in coded language deleting 5 zeros. The figures written are gross business receipt written as 280 Ughrani baki meaning thereby 280 total to be receivable. Actual gross receivables as per this paper shall be ₹ 2,80,00,000/-. The receivables are gross receipts of unaccounted business transaction. Assessee has voluntarily shown net profit from these transaction in the return of income amounting to ₹ 4,00,00,000/-. Net profit of ₹ 4 Crore shown in ITR for F.Y. 2011-12. 4. The aforesaid explanation furnished by assessee was not accepted by Assessing Officer. The Assessing Officer held that during the survey, the statement of partner was recorded on oath. The partner disclosed unaccounted income of ₹ 10.78 Crore as net income for A.Y. 2012-13. The partner also affirmed that no other expenses or deduction would be claimed. The other partners of the firm also endorsed the correctness of the statement. The Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 280 2,80,00,000 Total 9,75,00,000 7. It was explained that while filing return of income, the partner of assessee-firm realized their mistake that the disclosure of unaccounted income has been made on the basis of business receivables, which is gross receipts of unaccounted transaction. The tax is always payable on profit and not on the transaction whether accounted or unaccounted. All the partners were under mental pressure and in such situation all agreed for disclosure of unaccounted income, taken into consideration business receivables which are gross receipts only. The assessee also filed retraction-affidavit of all the partners' inter alia stating therein that at the time of recording the statement of partner, they were under the impression that transaction recorded in the impounded paper is net unaccounted profit, which is actually gross business receipts. The assessee also relied on certain case law on the ratio that there is no evidentiary value of the statement recorded during survey action under section 133 of the Act. 8. The contention/explanation furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) while upholding the addition held that during the statement recorded in the survey proceeding the partners specifically stated that the amount is distributed among the partners are unrecorded and unaccounted receivables of the firm. The statement of partner of assessee was recorded in the presence of Chartered Accountant. The professional advice was available to the assessee at the time of recording the statement. The assessee filed return of income after one year and has paid tax of ₹ 2.10 Crore till 29.03.2013 which is more than 50% of total income returned, which clearly indicates that income was reduced while filing return of income being afterthought. No plausible explanation was offered by the assessee for paying tax of ₹ 2.10 Crore as an advanced tax. The retraction statement after two years is an afterthought. It was also held that in normal circumstances, the appellant realizes mistake immediately and would have not waited for two years. The admission is an important piece of evidence. The burden to prove that statement was obtained by pressure or intimidation was on the assessee. The assessee claimed that he made statement under the mistaken belief of fact o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by Ms. Urvashi Shodhan Advocate (ld. Counsel/ld. AR) and Shri S.T. Bidari, ld. CIT(DR) for the Revenue and have gone through the order of the lower authorities carefully. The learned Sr. Counsel for the assessee submits that a survey action under section 133A was conducted on the business premises of the assessee on 5th July 2011. During the course of survey, some loose papers were found and impounded and were inventorised at the BF-16 and BF-17. The statement of one of the partner of was recorded. During the course of survey proceeding the impounded material was shown to the partner and was asked to explain the contents of the paper. In question was 27 and 30, the partner was asked to explain the page number 12, 17 and 18 of seized material. In answer to the question, the partner replied that sum mentioned on the page in lakhs and those are unaccounted business receivable, the summary was explained to that of ₹ 9.75 crore. The partner further admitted in answer to question number 33 that difference of cash founded as per books amounting to ₹ 7,86,857/- was unaccounted cash of assessee form. Further in answer to question number 34 partner admitted unaccounted total inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on money' in respect of flats. In that case the assessee offered 8% on the total receipt which was considered as reasonable and fair. The learned senior counsel for the assessee submits that decision of Tribunal was challenged by revenue before jurisdictional High Court in Income tax Appeal No. 411 of 1999. The appeal of the revenue was dismissed vide order dated 24.04.2000. The learned senior counsel by referring the said decision invited our attention on the question No. 2, as framed by Hon'ble High Court, whether on the facts and circumstances of the case, the ITAT having held that only the profit of undisclosed income has to be taxed in the block assessment was justified in admitting the claim of expenditure on the basis of oral evidence department has clearly discharged its onerous to prove the undisclosed received in the form of on money on the basis of material found and seized during the course of search . The learned Senior Counsel submits that Hon'ble High Court while deciding the said question No. 2 held that Tribunal has rightly considered that in absence of any financial record or account being maintained by the respondent-assessee, the profit earned by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to S.C.N. dated 03/03/2015 8 Details of documents impounded during Survey 9 Statement recorded u/s 131 of the Act a) Divyang Mandwila (In Gujarati) b) Brijesh Mandwila (In Gujarati) c) Hemish Mandwils 10 Explanation for documents impounded during survey 11 Application for additional evidence made before CIT(A) along with details of flat booking as on 05/07/2011 12 Remand Report dated 07/03/2016 along with Balance sheet for A.Y. 2011-12 13 Rejoinder to remand report dated 1 5/03/20 1 6 14 Free English translation of documents recorded originally in Gujarati a) Statement of Divyang Mandwila b) Statement of Brijesh Mandwila 16. On the other hand the ld. DR for the revenue supported the order of the lower authorities. The ld. DR for the revenue further submits that during the survey action certain incriminating material in the form of various documents was found at the premises of assessee. The documents were inventorised and seized. During the course of survey proceeding, the statement of one of the partner of assessee was recorded, in the statement the said partner disclosed unaccounted income of ₹ 10.78 crore as income for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessee has made a general statement in the affidavit, which is not supported by any evidence; the retraction was made after two year of initial statement, which itself created serious doubt. 17. The statement made by one partner, endorsed by two other partners, during the survey was in his exclusive knowledge. The learned DR for the revenue submits that the retraction made by partner is general statement, is not retraction in the eyes of law and is liable to be discarded. The learned DR further submits that even, if it is presumed for the sake of argument that the disclosure was made for a gross profit/receivable and the assessee incurred expenses for earning such gross receipt, the assessee has not filed any evidence to substantiate the fact that they have actually incurred any expenses. The assessee is making inconsistent statement which is far from truth. The assessee failed to produce any evidence in the form of bills, voucher to establish that expenditure had been incurred to earn the undisclosed income, which required to be set off against the claim of alleged gross receivable. The netting of income out of unaccounted income disclosed is not allowable under the law. E ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her raised during assessment or at the time of filing appeal. The assessee claimed that source of unaccounted income and the nature of unaccounted business that is was from trading of sarees and dress material and not from land and building development. The assessee claimed that of the business of sarees and dress material business the assessee maintained record of its business on loose papers. The Ld. CIT(A) discarded the submissions of assessee by taking view that it is a 'make believe story'. No such claim of business of sarees and dress material, either during the survey action or in assessment or while filing retraction-affidavit was made. The incriminating material found during the survey was confronted with the partner, who disclosed unaccounted income which was confirmed by two other partners and their CA. The claim of assessee with regard to undisclosed textile business/sarees business and profit of ₹ 4 Crore on unaccounted business receivable of ₹ 9.76 Crore giving a profit @ 41% in unimaginable and rejected the additional ground raised by the assessee. 20. On the primary contention of the assessee that the partners of the assessee made statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Senior Counsel confined his submissions mainly on the facts that the undisclosed income officer by the partner was business receivable of the assessee. And that said business receivable is the gross business receipt of assessee and the assessee is eligible for expenses and the under the income tax only income component is taxable and not the entire receipt. We are fully agreed with the submissions of the learned Senior Counsel that only income component is taxable under the income tax Act and not the entire gross receipt. However, the assessee is under obligation to prove that for earning such income the assessee has incurred expenses. As noted above the partner of the assessee during the survey action offered undisclosed income of ₹ 10.78 Crore, undisclosed income was declared in the presence of CA, paid advance tax to the extent of ₹ 2.10 Crore. No retraction was made despite the fact that statement made during the survey was made in the presence of well known CA. The same CA prepared the Audit report. There is no dispute about the legal position by various High Courts that the survey team has no authority to record the statement of person on oath, and the state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le explanation in retracting the statement was offered except simply stating that they realised their mistake later on. If the mistake was realised later on the statement should have been retracted immediately. In the retraction affidavit the partners of the assessee has no where stated that there was any pressure or any coercive measure was used against them while recording the statement. Before Ld. CIT(A), the assessee raised another story of business of sarees and dress material, which was not substantiated. Thus, the additional plea of the assessee was not allowed. Strangely, again the decision of Ld. CIT(A) in not accepting the additional plea no grounds of appeal was raised before this Tribunal. The aforesaid distinctive plea raised by the assessee does not inspire confidence. In view of the aforesaid discussions, we do not find merit in the grounds of appeal raised by the assessee. 24. The ratio of case laws relied by learned Senior Counsel in Kishore Mohanlal Telwala (supra) is not applicable of the facts of the present case as the assessee has taken inconsistent stand before the lower authorities. However, in case of Kishore Mohanlal Telwala (supra), the assessee initia ..... 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