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TMI Blog2024 (4) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... d accordingly deleted the addition made by the AO held that although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is incorrect. A statement is only a piece of evidence, and the weight to be attached to it must depend on the circumstances in which it is made. It is open for the assessee to show it to be erroneous or untrue. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross-examine the person again to ascertain the correct facts. The AO ought to conduct proper investigation into the affairs of the assessee and gather corroborative material which would negate such retraction and prove that the facts admitted originally is correct and thus retraction can be di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tories Ltd and was generated out of over-invoicing done by M/s IPCA Laboratories Ltd. Later on, it is noted that the assessee had retracted his original statement and stated that the cash found from his residential premises represented his own unaccounted income and offered the same to tax in his hands in AY 2015-16. It is noted that this offer was accepted and assessed by the AO. According to AO however his retraction was an after-thought and that he was of the view that M/s IPCA Laboratories Ltd. had indulged in over-invoicing of purchases. The AO had accordingly made substantive addition on account of over-invoicing in hands of M/s IPCA Laboratories Ltd and correspondingly made protective addition in the hands of the assessee holding him to be the beneficiary of the over-invoicing. Being aggrieved by the above action of the AO, the assessee carried the matter in appeal before the Ld. CIT(A) who was pleased to delete the same. 3. Heard both the parties. We have already held in the case of IPCA Laboratories Ltd in their ITA No.879 to 883/Mum/2021 Others that the company was not indulging in any over-invoicing of purchases and accordingly deleted the addition made by the AO, by hol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son voluntarily. The burden to prove that the statement was not correct or that it was not voluntarily obtained, but due to threat, coercion, promise etc, is upon the maker of statement. In this context, the Hon'ble Apex Court in the case of Pullengole Rubber Produce Co. Ltd. v. State of Kerala (91 ITR 18) has held that although an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It was held that, it is open to the assessee who made the admission to show that it is incorrect. A statement is only a piece of evidence, and the weight to be attached to it must depend on the circumstances in which it is made. It is open for the assessee to show it to be erroneous or untrue. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross-examine the person agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oicing. Upon query by this Bench on this aspect, the Ld. AR confirmed that there were no purchases made by the assessee from M/s M/s Reynolds Petro Chem Ltd and this admitted factual position was not controverted by the Revenue. The Ld. AR brought to our notice that only M/s Maker Laboratories Ltd had conducted transactions with M/s Reynolds Petro Chem Ltd, and that the AO had already drawn adverse inference on account of over-invoicing in the hands of M/s Maker Laboratories Ltd. The Ld. AR also brought to our notice that Shri Prashant Godha was also an erstwhile Director of M/s Maker Laboratories Ltd and that he had remitted his office only a few months prior to the date of search. The Ld. AR has therefore rightly suggested that even if the statement of Mr. Godha was to be taken at face value, i.e. the cash found on him was generated from over-invoicing, then he has mistakenly named the assessee instead of M/s Maker Laboratories Ltd in his statement. Having regard to these facts and evidences brought on record, we find force in the submissions of the Ld. AR that the statement given by Shri Prashant Godha that the cash found from his possession belonged to the assessee, which it ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aightaway. The Ld. AR has accordingly pointed out apparent fallacies in the manner in which the AO inferred over-invoicing from the vendors in question. The Ld. AR showed us that the AO had cited instances and made comparison on selective data. For instance, it was shown to us, that the AO had cherry picked six (6) transactions of M/s Sarna Chemicals Pvt Ltd as opposed to the twenty (20) transactions undertaken during the entire year. Likewise, in the case of purchases from M/s Mehta API Private Limited, the AO has picked up only two (2) out of thirteen (13) transactions actually entered into by the assessee. The Ld. AR has shown us similar cherry picking exercise in almost all cases. It was shown to us that, if the overall transactions were compared, the rates were commensurate and the differences were minimal. Hence, the purported values of over-invoicing obtained from these employees were not backed by the given facts of the case. We also find merit in the submissions of the Ld. AR that the price comparison undertaken by the lower authorities was inherently flawed as the lower authorities had failed to consider the functional, economic and risk differences amongst different vend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le material or evidence that the assessee had paid excess price and got back monies / cash from suppliers, according to us, merely because there were rates differential amongst purchases from different vendors cannot be sole reason to infer over-invoicing / inflation of purchases. We also note that the AO himself had ultimately not given any relevance to the enquiry and comparison made by him, which although was extensively discussed in the assessment order. It is noted that the AO had ultimately made the addition based on the value of over-invoicing as stated by the employees in their statements and not based on his comparison/ independent enquiry from these vendors. As already held above, the statements of the employees had no bearing in the given facts of the assessee s case as the over-invoicing component admitted by them was in relation to purchases made from M/s Reynolds Petro Chem Ltd. Hence, for the various reasons as discussed in the foregoing, we hold that the impugned addition on account of alleged over-invoicing was unwarranted on the given facts as well. 8.12 In light of the above findings, we direct the AO to delete the addition made on account of over invoicing in pu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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