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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 ..... ppeals relate to the Ld. CIT(A)'s action of deleting the protective addition made in the hands of the assessee on account of over-invoicing of purchases by M/s IPCA Laboratories Ltd. Briefly noted, the AO had observed that the assessee was found in possession of cash in the course of search conducted u/s 132 of the Act on 23.12.2014 and he had admitted in his statement recorded u/s 132(4) of the Act that the amount belonged to M/s IPCA Laboratories 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tement is an oral testimony of relevant fact; and an admission of a fact- in-issue is an important piece of evidence, provided it has been voluntarily given without any inducement, promise, threat or coercion. Once a statement recorded of a person who is in possession of any valuable thing or control of books found during search then it can be used as evidence in any proceedings under the Act and the presumption would be that it has been given by that person 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, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who had made purchases from M/s Reynolds Petro Chem Ltd. It is not the Revenue's case that the assessee had made any purchases from M/s Reynolds Petro Chem Ltd. The AO instead is noted to have used these statements to allege that purchases made from other vendors, namely, M/s Sarna Chemicals Pvt Ltd, M/s Anuh Pharma Ltd, M/s Mehta API Pvt Ltd, M/s Calyx Chemicals and Pharmaceuticals Ltd and M/s Farmson Pharmaceuticals Pvt Ltd were also subjected to over-invoicing. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions made in this regard in the hands of the assessee is held to be unsustainable. 8.10 Before us, the Ld. AR for the assessee has also demonstrated through the details of purchases that the purported statements obtained from the three (3) employees regarding over-invoicing was also not corroborated by the given facts of the case. He has thus shown us that the admission obtained by them was untrue and hence their retractions should not be discarded straightaway. 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgency/need of the assessee, place of delivery and terms of credit, etc. He also showed us that the purchases of these raw materials were made from both MSME vendors as well as reputed manufacturers. He thus contended that it is common in any industry that the rates would vary based on the reputation of the manufacturers. Having considered the foregoing, we find force in these submissions put forth by the assessee. Unless, the AO is able to bring on record tangible 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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