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TMI Blog2024 (5) TMI 340X X X X Extracts X X X X X X X X Extracts X X X X ..... om the partner in view of the bogus purchase said to be recorded by the assessee in its books of accounts. Being so, we do not find any merit in this ground of the assessee raised before us. This ground of assessee is rejected. Addition towards bogus purchase - sworn statement recorded in survey proceedings from the partner as later retracted - HELD THAT:- Once a statement is retracted, the contents stated in the retracted statement must be substantially corroborated by other independent and cogent evidence. It has been consistently held by various courts that a sworn statement cannot be relied upon for making any addition and must be corroborated by independent evidence for the purposes of making assessments. In view of the above, in our opinion, the lower authority erred in holding that the assessee has inserted bogus purchase into his accounts without bringing on any evidence to hold that entire transactions are not genuine and they relied upon only the statement of one of the partner Shri Uday Kumar Salian recorded on 8.2.2018, which was later retracted by all partners vide letter dated 14.2.2018 within short date of 6 days. This has been filed by assessee with department on 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to profit and that the profit declared by assessee is progressively increasing from year to year and it cannot be said that purchases were bogus without having any material to suggest that it is a bogus. Thus once the statement recorded u/s 131 or 131(1A) or 133A of the Act or 133A of the Act is retracted by assessee, AO without rejecting the books of accounts cannot make any additions towards bogus purchases. Accordingly, the addition made on the premise of bogus purchase in all these assessment years is deleted and we allow the ground taken by the assessee in all these appeals. Addition of personal expenses of partners - Since we have already held that there was no corroborative material to support this addition and the statement has already been retracted, this addition based on no supporting evidence cannot be made. - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER For the Appellant : Shi V. Srinivasan, A.R. For the Respondent : Shri D.K. Mishra, D.R. ORDER PER BENCH: These appeals by assessee are directed against different orders of CIT(A)-2, Panaji for the assessment years 2012-13 to 2015-16 2017-18 all are common dated 9.12.2022. Most of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 32(4) of the Act were retracted not once but twice and the department had accepted the retraction. No pungent and valid reasons had been assigned by the AO for re-opening the assessment. There was no good and sufficient reason for re-opening of the assessment u/s 148 of the Act against the assessee. 3. The ld. D.R. submitted that there was a survey u/s 133A of the Act in case of assessee on 8.2.2018 and a statement u/s 131(1A) of the Act and during the survey proceedings u/s 133A of the Act was recorded on 8.2.2018 by department from one Mr. Uday Kumar Salian, S/o Late Gopal T. Salian, partner of M/s. Yashasvi Fish Meal and Oil Company and in that statement he categorically confirmed answer to question No.12 that there was bogus purchase entered by the assessee in these assessment years. Hence, the said material has been used for re-opening the assessment. Further, he submitted that sworn statement of Mr. Uday Kumar Salian was also recorded u/s 131 of the Act on 1.8.2018. Then also he confirmed entering of bogus purchase in the books of accounts and agreed to declare the adhoc lumpsum additional income. He relied on the order of the lower authorities. 4. We have heard the rival sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year has escaped assessment. 4.2 The scope and effect of section 147 as substituted with effect from April 1, 1989, and also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either material facts necessary for his assessment of that year. Both these conditions were condition precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first conditions suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,02,01,134/- for the assessment year 2012-13 to 2018-19. Similarly, there was a statement u/s 133A of the Act dated 8.2.2018 which is as below: Sl. No. AY Issue Additional income 1 2012-13 Bogus purchase 5,50,00,000 2 2013-14 Bogus purchase 5,50,00,000 3 2014-15 Bogus purchase 5,50,00,000 4 2015-16 Bogus purchase 5,50,00,000 5 2016-17 Bogus purchase 5,50,00,000 6 2017-18 Bogus purchase 10,50,00,000 12,00,00,000 Partners Personal expenses debited to books 1,50,00,000 7 2018-19 Bogus purchase (Up to 6.2.2018) 4,52,01,134 5,52,01,134 Partners personal expenses debited to books 1,00,00,000 Total Rs. 45,02,01,134 5.2 However, for the assessment years 2012-13, 2013-14, 2014- 15, 2015-16 2017-18 did not include additional income offered in these assessment years, which was admitted during the course of survey proceedings and also in the statement recorded u/s 133A 133 of the Act. The AO thus made additions in these assessment years as per the income offered in statement recorded u/s 131 133A of the Act as above. Against this, assessee is in appeal before ld. CIT(A) who has confirmed the order of the AO. Against this assessee is in appeal before us. 6. The ld. A.R. submitted that there wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice. He submitted that assessee has received notices u/s 148 of the Act for the assessment years 2012-13 to 2016-17 and it is presumed that the same is for the additional income recorded in the statement as submitted earlier, as the same is due to wrong interpretation of the surrender made by Mr. Udaya kumar Salian and no income chargeable to tax has been escaped assessment. In view of the same the ld. A.R. requested to drop the proceedings initiated u/s 147 of the Act. 6.2 The ld. A.R. submitted that assessee has been declaring substantial income and net profit for various years, which are as under: Financial year Turnover (Rs.) Net profit (Rs.) Percentage 2011-12 44,77,79,591 61,84,810 1.38% 2012-13 83,75,14,526 3,23,61,301 3.86% 2013-14 179,79,56,596 7,21,64,031 4.01% 2014-15 368,05,48,941 29,07,58,136 7.90% 2015-16 326,64,53,656 22,97,71,519 7.03% 2016-17 367,90,60,017 35,33,66,621 9.66% 2017-18 382,32,87,327 41,45,73,740 10.84% He submitted that the net profit is after claiming depreciation, remuneration, and interest on capital of partners. As could be noticed there from the income declared by the assessee is substantially high as compared to other comparable cases. If at al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer which is obtained only in Financial year 2017-18 (15.06.2017). Moreover, MOU was entered on 29.03.2017 i.e 2 days prior to the financial year end. It would be irrational to estimate the investment of Rs. 5,00,00,000 in only two days. Hence the estimation of Rs. 5,00,00,000 for FY 2016-17 towards investment in SEZ unit is not correct and without any basis. 6.4 The ld. A.R. further submitted that during the survey proceedings, details about personal expenditure of the partner was asked and in response thereto it was stated that the approximate personal expenditure of all the partners put together would be around Rs. 1-1.5 crores. It may be noted that personal expenditure of the partner is met by the firm. On verification of the statement, the additional income of Rs. 1,00,00,000 for the FY 2016-17 and 1,50,00,000 for FY 2017-18 was estimated. In this regard, he submitted that the estimation is not correct and is not based on any material. No materials/evidences were detected either during the survey or search proceedings to prove that the personal expenditure of the partners are charged to the firm. The partners capital balances is in proportion to their profit sharing ratio ove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is as follows: FY 2017-18 2016-17 2015-16 2014-15 2013-14 2012-13 Turnover 3,84,46,57,493 3,67,64,40,084 3,29,88,92,109 3,68,05,48,941 1,79,79,56,596 83,75,14,526 Gross profit 87,35,70,168 88,51,14,145 58,43,90,889 66,22,54,952 26,52,12,067 13,65,93,393 GP% 22.72 24.08 17.71 17.99 14.75 16.31 Net profit % 13.71 13.93 8.16 8.87 5.24 5.89 As could be noticed there from the Net profit (before deducting interest on capital remuneration and depreciation) declared by the assessee is substantially high as compared to other comparable Cases. If at all the income is assessed as estimated in the statement, the same will result in assessment of unreasonably higher income defeating the principle of assessing the real income. Further, the sales are found to be genuine by the Revenue and thus the corresponding purchases are bound to be genuine when all the evidences related to purchases are produced and no defect is pointed out by the revenue. 6.7 Further, the ld. A.R. submitted that the allegation that partners as per their mutual understanding have agreed to take Rs. 50,00,000/- in cash per annum in addition to the remuneration, interest on capital and profit share earned during the year and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out by learned assessing officer and hence the proposed addition is totally uncalled for and would be merely based on suspicion. 6.10 The ld. A.R. further submitted that during the survey proceedings when asked about the investment in building of SEZ unit, it was stated that the approximate investment for construction of building of SEZ unit was Rs. 5,00,00,000. However, on inspection of the statement, it was observed that an additional amount of Rs. 5,00,00,000 is treated as investment in Mangalore SEZ unit during the Financial year 2016-17 met out of alleged inflated purchase. In this regard, he submitted that Memorandum of Understanding was entered into between Mangalore SEZ and assessee firm only on 29.03.2017. He submitted that as per the said agreement assessee firm is entitled to setup unit in the said land only after getting approval from the Development Commissioner of Mangalore SEZ as per the norms of SEZ act 2005 and rules 2006. As per the terms of said agreement, a sum of Rs. 3,82,50,000 being 50%, the one-time non-refundable premium amount was paid and the said amount is also duly reflected in the books of accounts of the firm. As submitted earlier as per the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... They had no opportunity to verify the contents of the printouts taken. Copies of the statements were also not furnished. Thus, in view of the above assessee had not offered any additional income as alleged in Show Cause Notice dated 27.09.2019. 6.13 The ld. A.R. further submitted that two of the partners were searched and also enquiries of partners were made during the course of survey. In none of the partners cases, including those who were searched or examined, any additional personal expense or any unaccounted assets were not found by the Revenue. Further either during the survey proceedings or search proceedings at the premises of partners no assets much less corresponding to the additional income as found in the statement recorded is detected. Meanwhile, the assessee requested that if the revenue is relying on any other statements/ evidences copy of the same may be furnished to the assessee. 6.14 Without prejudice the ld. A.R. submitted that the re-opening is not as per law. Reason recorded is merely based on factually incorrect statement. The ld. A.R. stated that the sanctioning authority also did not apply his mind for the sanction. He requested to furnish copies of the sanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence, are taken/ retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the income tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. 6.18 The ld. A.R. submitted that in the instant case no documentary evidence was found either during the survey proceedings at the premises of the assessee or during the search proceedings at the premises of the partners. In such a scenario the statement recorded would not serve any evidence as opined by the CBDT. 6.19 The ld. A.R. further submitted that in Attar Singh Gurmukh Singh V. ITO (1991) 191 ITR 667/59 Taxman 11 (SC) and CWT V. Rohtas Industries Ltd (1968) 67 ITR 283 (Pat), the Hon ble Supreme Court held that the statement can be retracted if assessee proves that, the statement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... retation of surrender made was brought to the notice of revenue immediately after receipt of the copies of statement recorded. Turnover has varied over the years and the alleged inflation of purchases has no correlation with the year wise purchases / turnover. Assessee has been declaring substantial income over the years and is much higher than the profits declared in the similar nature of trade It is normal practice in this line of business, payments have to be made to fishermen in cash and bearer cheques. No evidences about alleged inflation was found either during the course of survey or during the course of search at the residence of the partners. Details provided about investments made in SEZ unit and about personal expenditure of the partners treated as additional income, without any basis and evidences. Without prejudice reassessment proceedings is void an bad in law. Without prejudice to the above there was no reason to believe that assessee's income had escaped assessment. Without prejudice to the above, the reasons recorded for reopening of assessment proceedings u/s 147 is only based on factually incorrect statement recorded u/s 131 which is not corroborated by any e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cing bogus purchase bills. Now in order to rectify the mistakes in the books of accounts of our partnership concern, I am availing this opportunity and voluntarily offering a sum of Rs. 33,00,00,000/ - spread over the Financial Years 2011-12 to 2016- 17. The break up of the same is produced below for ready reference. Sl. No. Financial Year Additional Income offered Nature of Disallowance 1 2011-12 5,50,00,000 Bogus Purchase 2 2012-13 5 50,00,000 Bogus Purchase 3 2013-14 5,50,00,000 Bogus Purchase 4 2014-15 5,50,00,000 Bogus Purchase 5 2015-16 5,50,00,000 Bogus Purchase 6 2016-17 5,50,00,000 Bogus Purchase Total 33,00,00,000 I have already stated in my answer to the earlier question that in this year also i.e. the F. Y. 2017-18, as on date, we have made the bogus purchases bills to the tune of Rs. 4,28,47,574/ - and offering the same as additional income in the F.Y. 2017-18. 6.27 The ld. A.R. submitted that as could be noticed there from it is recorded as if Mr. Udayakumar has deposed as we the 11 partners are withdrawing . Mr. Udayakumar Salian who is well aware of the fact that there were 12 partners upto 28.04.2016 would not. have stated that 11 partners are withdrawing. This pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es under different heads and different AYs in my replies to the earlier questions. In addition, I would also like to offer additional income amounting to Rs. 2.50 Crore (Rs.1.50 Crore for FY 2016-17 and Rs. 1.00 Crore for FY 2017 18) on account of booking of various personal expenditures of the partners in the books of the firm. I would also like to offer additional income of Rs. 5 Crore on account of bogus purchases debited in the books for the FY 2016-17 which has been utilized for the investment made in our new plant coming up in the SEZ, and this additional income is over and above what is already shown in the books of the firm. To sum up the total additional income offered for taxation in the hands of the firm for the different AYs is as below - 6.31 The ld. A.R. submitted that, the question is to confirm that the person deposing it is aware of the consequences of giving false statement on oath. But the answer is recorded as if the person deposing it is agreeing to declare additional income. Further, he submitted that regarding the issue of investment in SEZ unit and personal expenditure is concerned you may appreciate that there was no whisper on these issues in the entire st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at proves that there was an arrangement to withdraw the money by the partner by inflating the expenditure or that proves that the expenses have been inflated. 6.35 The ld. A.R. submitted that our turnover for financial year 2011-12 to 2016-17 is as under: Financial Year Turnover (Rs. In 2011-12 44.78 2012-13 83.75 2013-14 179.80 2014-15 368.05 2015-16 326.65 2016-17 365.91 6.36 Even assuming but not admitting that there is inflation in purchases as noted in the statement, the inflated purchases cannot be equal in all the year, much less when there is substantial variation in the turnover. The additional income declared for the assessment year 2016-17 was only to co-operate with the department and avoid litigation. No evidence from the same was detected either during the search or survey proceedings and the quantification appears to be mere estimation without any basis. 6.37 Summary of income declared by the assessee over the years is under: (Rs. In crores) F.Y 2 20 20 20 20 20 Tur 365.91 326.65 368.05 17 83 44 Gros 88.51 58.43 66.23 26. 13 7. GP 24.19 17.89 17.99 14. 16 17 Net 40.56 ' 32.11 9.0 4. 1. Net 1 7.97 8.72% 5.0 5. 3. Note: Net profit before deducting interest on capit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was made only on 22.07.2019. Though the letter was filed confirming the declaration since the statement typed by the department officials to their convenience was in accordance with what was disposed in the letter dated 14.02.2018 is required to be treated as retracted. Thus, the assessing officer's contention that the statement was not retracted immediately is not correct. 6.42 The learned AO relied on decision of Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC) and CIT Vs. Durga Prasad More 82 ITR 540 (SC), wherein it was held that matter should be considered in the human probabilities and surrounding circumstances. But learned AO failed to appreciate the following factors before arriving at the conclusion of inflation: a. There were 12 partners upto 28.04.2016 but the allegation of AO is that 11 partners have withdrawn 50 Lakhs each from financial year 2011-12 which prima facie proves that the allegation is bald and without any substance. b. The profit sharing ratio of partners is not equal and it is beyond human probabilities that the amount earned out of alleged inflation of expenses is shared equally among the partners. c. The learned AO failed to appreciate the surrounding c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner in which the burden can be said to have been discharged, as mentioned in the underlined portion, runs contrary to the very basic tenets of law of evidence. Though the fact that the assessee therein retracted from the sworn statement, no discussion was undertaken about it. 15. The question of discharge of burden, arises in respect of a fact, to be proved. If the contents of the statement recorded from an assessee are to be proved, that very statement cannot be a proof, by itself. Such a course would bring about hypellage logic, which is illustrated by a well known example. Q: who is a doctor? Ans: The one who administers Medicine. Q: What is Medicine? Ans: The one that is administered by a doctor. Such discussion does not lead one, any further. The discharge of burden must be in respect of the plea taken by the Department and the burden can be discharged only through material, which is over and above what was stated in their case. The statement assumes the character of proven fact, only when it is not denied by the assessee. 18. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s factually incorrect for the detailed reasons stated above and in the instant case sole reliance is placed on such factually incorrect statement. 6.47 The ld. A.R. further relied on the judgement in the case of Satinder Kumar (HUF) V. CIT (1977) 106 ITR 64 (SC), wherein it was held that an admission made by an assessee constitutes a relevant piece of evidence, but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts, such an admission cannot be relied upon without first considering the aforesaid contention. The ratio is squarely applicable on the instant case as the statement itself contains incorrect facts. 6.48 He further drew our attention to Hon ble Supreme Court's decision in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC), wherein Hon ble Apex court held that a statement recorded during survey proceedings do not have any evidentiary value. Thus, the sole evidence relied upon issue of show cause notice do not have any evidentiary value in the eyes of law. 6.49 The learned AO has relied upon the decision of Hon ble Apex Court in the case of Surjeet Singh Chha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC) 6.54 The ld. A.R. further relied on the following judgements: a) Hon ble Supreme Court in the case of CIT Vs. S. Khadar Khan Sons 352 ITR 480 (SC) b) Judgement of AP High Court in the case of CIT Vs. Naresh Kumar Aggrawal (369 ITR 171) c) Order of the Tribunal Cochin bench in the case of ITO Vs. V. Thomas Enterprises (ITA No.442/Coch/2018 dated 7.2.2019 for the AY 2014-15). 6.55 In view of the above, the ld. A.R. prayed before us that the additions may be deleted appreciating the facts of the case. In the unlikely event of our proceedings taking any adverse view, then the ld. A.R. requested that an opportunity of personal hearing may be granted. 7. On the other hand, the ld. D.R. submitted that the assessee filed the reply on 4.11.2019 to the show cause notice issued by the AO vide letter dated 27.9.2019 wherein the ld. A.R. objected to the addition on various grounds whose gist is mentioned in the assessment order, which is reproduced as under: `Survey proceedings had taken place at the premises of the appellant on 08.02.2018. Copies of documents impounded and statements were not furnished even after re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s lucidly explained in the assessment order. These reasons are reproduced as under: - 6.1 As stated in the previous paragraphs a survey proceeding u/s 133A of the Income tax Act 1961 was conducted on 08.02.2018 in the case the appellant. In the statement u/s 131 recorded, the partner of the firm admitted additional income of Rs. 5,50,00,000 for this year. The appellant had sought for copies of the statement given during the course of survey. The same were provided to the appellant vide this office letter dated 19.07.2019. Subsequently, the appellant filed a letter dated 22.07.2019 explaining why the additional income admitted during the survey were not adhered to while filing the return of income. 7. Retraction of declaration: 7.1 In the statement recorded on 08.02.2018 the partner Sri Udaykumar Salian declared additional income of Rs. 5,50,00,000/- on the issue of inflated purchases for this year. It is only on 22.07.2019 appellant filed letter in this office stating that the statement of the partner was mis interpreted in as much as the additional income of Rs. 5,50,00,00/- was admitted for one year but it was recorded as for each year in the statement which was not the admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 33,00,00,000/- spread over the Financial Years 2011-12 to 2016-17. The breakup of the same is produced below for ready reference. gl. No. Financial Year Additional Income offered Nature of Disallowance 1 2011-12 5,50,00,000 Bogus Purchase 2 2012-13 5,50,00,000 Bogus Purchase 3 2013-14 5,50,00,000 Bogus Purchase 4 2014-15 5,50,00,000 Bogus Purchase 5 2015-16 5,50,00,000 Bogus Purchase 6 2016-17 5,50,00,000 Bogus Purchase Total 33,00,00,000 7.4 Hence it is this mutual understanding among the partners that has necessitated the booking of bogus purchases to fulfil the unaccounted financial obligations towards the partners. 7.5 In this background it is necessary to see the mode of payments of purchases of Rs. 36,89,88,138 during the year. As per the details furnished by the appellant the breakup of the payments for purchases is as follows: Sl. No. Description Amount 1 Cash 1,27,54,667.00 2 Bearer Cheque 21,02,95,254.00 3 RTGS/Crossed Cheque 8,82,10, 148.00 4 Credit 5,77,28,069.00 Total 36,89,88,138.00 7.6 As can be seen from the above considerable portion of the purchases, i.e 60.45% is either in cash or in the form of bearer cheques. 7.7 In Q. No. 7 of the statement the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ach of the 11 partners of the firm in the reply filed on 04.11.2019. However, the appellant is only contending that no evidence of inflated purchases have been found for all the years. 7.12 Here, it would be proper to bring out relevant legal position on the issues in these types of cases. Merely because direct evidences are not found in respect of purchase inflation, these transactions cannot be accepted as portrayed. The matter has to be viewed in its entirety and after taking into account the various facts enlisted above. 7.13 Non-existence of evidence in each of the transaction in the line of business of the appellant should not be taken as conclusive without considering the surrounding circumstances and human probabilities. There are certain features of this case which belie the documentary evidence. 7.14 In the case of Sumati Dayal Vs. CIT (1995) 214 ITR 801, the Supreme Court, inter-alia, held as under: in such cases, a superficial approach to the problem should be eschewed and the matter has to be considered in the light of human probabilities and further that any transaction about which direct evidence is rarely available should be inferred on the basis of circumstances av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly sworn affidavit or statements supported by convincing evidence. 7.20 In the instant case the statement is deemed to be retracted as the appellant has not filed any formal affidavit or letter retracting the declaration as being recorded under threat or coercion or mistaken facts. It is only vide letter dated 22.07.2019 the appellant is making a claim that the declaration made was not recorded as it was meant by him. .. 7.23 Hence the statement can only be retracted either by way of a duly sworn affidavit or statements supported by convincing evidence through which the appellant could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. Apparently in the instant case none of the above parameters have been adhered to. The appellant has not brought on record any evidence to show that the statements were recorded under pressure. 7.24 In the instant case of the appellant, the statement of the partner was recorded on 08.02.2018 whereas the letter retracting the statement was ,filed only on 22.07.2019 after i.e. after a long gap of 18 months. 7.25 In view of the above discussion it is clear that the retraction filed by the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to suggest the statement was given under a mistaken belief either of facts or law. The statement under section 132(4) has greater evidentiary value than statement given under other provisions of the statute. 7.33 It has been held by the Hon'ble Supreme Court in the case Awadh Kishore Dass vs. Ram Gopal AIR 1979 SC 861 that evidentiary admission are not conclusive proof but shift the burden of the proof to the person making them. Further, unless proved to be wrong, they are efficacious proof of facts admitted. 7.34 The submissions of the appellant as well as material available on record have been considered carefully. The crucial question is whether the addition can be made on the basis of statement recorded under section 131 and 132(4) which is now retracted by the appellant in as much as the income declared by the appellant during the course of search/survey as additional income has not been declared in the return of income. 7.35 It is settled law that admission by a person is a good piece of evidence and the same can be used against a person who makes it. The reason behind this is, a person making a statement stops the opposite party from making further investigation. 7.36 Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings in relation to block assessment, certain sheets indicating the details of stock of the appellant firm were seized The chief accountant of the firm admitted that the said stock represented unaccounted stock and offered the same as additional income. The partner as well as the chief accountant certified that the statements under section 132(4) were made voluntarily. The appellant did not retract from his statement for a period of 6 months though fully aware of the statement made by him. 7.43 The Bombay High Court did not accept the contention of the appellant that the aforesaid statements were forcibly recorded with an observation that the appellant has not produced any contemporaneous record or evidence, oral or documentary, to substantiate the allegation that he was forced to make the statement in question involuntarily. 7.44 It has been further observed that the declaration clearly fell under section 115 of the Evidence Act and hence it was not open to the appellant to retract from the same after the departmental authorities had accepted the same and altered their position by closing the search. It further observed that declarations falling under section 115 of the Ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and have a clear grasp of the issues involved. The partners claim that what was stated was stated as admission for one year was misinterpreted and recorded for six years is also baseless as he has once again confirmed the same in his statement u/s 131 on 12.02.2018. Therefore, the contention of the appellant now made that they came to know of the additional income admitted only later is not true. This deposition made by the partner on 08.02.2018 is after thorough verification of the facts and its correctness. Hence it cannot be said that there is no justification in placing reliance on the statement recorded during survey or subsequently. The evidentiary value of the statement recorded u/s. 133A(3) (iii) is based on the digital evidences found and cloned which forms the basis. The recent judgement of Hon'ble Supreme Court in SLP(CRL)No.2302 of 2017 in the case of Shaft Mohammed Vs. The State of Himachal Pradesh has upheld the validity of the digital evidences and its admissibility under sec. 65B of the evidence Act. It is not the case of the appellant that the statement is recorded based on conjectures and surmises. 10. Retraction of statement given under oath: The statement u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o also, several judicial decisions have held that admission by a person is a good piece of evidence and the same can be used against a person who makes it. The admission made in statement has great evidentiary value and is binding on a person who makes it. 10.3 Accordingly taking into account the statement of the partner, the evidence found during the course of survey and the undisclosed income of Rs. 5,50,00,000 admitted in the statement is assessed as the income of the appellant and added to the income under the head Income from Business . 7.2 The ld. D.R. submitted that the AO, in the aforesaid order, relevant portion of which has been reproduced above given sufficient reasons backed by judicial pronouncements as would justify the additions made in the assessment order. It is also not correct to state that the additions have been made only on the basis of statement of one of the partners without any evidentiary proof. The fact is that during the course of the survey proceedings, details of purchases recorded in the computer of the assessee firm containing date wise purchases made by the assessee from Malpe were found. When confronted, the partner present during the course of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh NEFT only through bulk NEFT transfers i.e., a single cheque is used to make payments to multiple persons. In respect of the bogus purchases booked by this firm, single bearer cheques are raised and handed over to any one of the partners. These bearer cheques are encashed by them. I am not aware as to specifically who encashes these bearer cheques. This excel sheet was prepared by me earlier for the purpose of working out the total bogus purchases to be accommodated during the month of January-2018 and hence the bill no. column is blank in this excel sheet. Q.9 I am sowing you a print out of the excel sheet 'Purchase Jan' with heading `MALPE PURCHASE'. Please go through the same, identify and explain the contents therein. Ans. I confirm that this excel sheet has been found from my system and has been prepared by me. This is a similar excel `sheet to the one referred to in Q.No.8. However, this contains the day wise details of cash purchases made from `Malpe' parties. I am further clarifying that these contains both genuine and the bogus purchases made by the firm during the month of January- 2018. As evident from the presence of Bill No., these are the purchases e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal of Rs. 1,74,93,630/- is correct. Q.14Please state as to where the other similar excel sheets generated for working out the bogus purchases booked for the other months are kept? Ans These excel sheets are specifically prepared for the purpose of intimation to the partners during their monthly meetings. When once the meeting is over, the hard copy as well as the soft copy, being the excel sheet, is destroyed / deleted from the system. Since, the general monthly meeting of the partners for the month of January-2018 has not yet been completed, the same is still available. Q.15 Do you have anything else to say? Ans. No. I do not have anything else to say. 7.4 Thus, the ld. D.R. submitted that the assessee has in a systematic manner made insertion of the bogus purchases in the books of accounts and the same has been accepted by the assessee in assessment year 2018-19 by settling the dispute through VSV Scheme and also accept in its return of income in AY 2016-17. 8. We have heard the rival submissions and perused the materials available on record. In this case, there was a survey proceedings u/s 133A of the Act in the case of assessee on 8.2.2018. During the course of survey proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no justification in placing reliance on the statement recorded during survey or subsequently. The evidentiary value of the statement recorded u/s. 133A(3) (iii) is based on the digital evidences found and cloned which forms the basis. The recent judgement of Hon'ble Supreme Court in SLP(CRL)No.2302 of 2017 in the case of Shaft Mohammed Vs. The State of Himachal Pradesh has upheld the validity of the digital evidences and its admissibility under sec. 65B of the evidence Act. It is not the case of the assessee that the statement is recorded based on conjectures and surmises. 8.1 The issue relevant here is that the evidences point out the modus operandi of the assessee, confirmed by the partner himself during survey proceedings and the quantum being partly declared by him in the return of income for the A.Y. 2016-17 substantiates the finding of purchase inflation as a mode to divert money for the benefit of partners. 8.2 According to ld. D.R., it is evident that it is not the case of the assessee that the purchase inflation was not pointed out without evidence nor is the case that the statement was taken under coercion. The retraction of the statement without any reason cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded u/s 131 of the Act on 1.8.2018 and u/s 131(1A) of the Act on 8.2.2018. In our opinion, as rightly contended by the ld. A.R., ld. AO cannot go with both methods for the purpose of making additions. Either the ld. AO go with the surrender on the admission of the assessee or may go to estimate the income of the assessee after rejecting the same. In the present case, ld. AO has not rejected the books of accounts u/s 145(3) of the Act. He accepted the books of accounts, then make additions on the basis of surrender of income by partner of the assessee firm during the course of search. The ld. A.R. pleaded before us that books of accounts have been produced before ld. AO and the surrender of income made by partner has been retracted vide retraction letter filed before the authorities on 14.2.2018 as against the surrender of income vide statement recorded on 8.2.2018 u/s 131(1A) of the Act. As pointed out by the ld. A.R., CBDT vide its various circulars have emphasized time to time that the Income tax authorities should not try to extract the admission of the assessee and should bring some concrete material on record for the purpose of estimating the undisclosed income of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect is on the maker and in case of failure of the maker to prove that the earlier stated facts were wrong, these earlier statements are suffice to conclude the matter. If retraction or proved sufficiently, the earlier stated facts lose their effect and relevance as binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admission will not be enough after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded was involuntary and it was made under coercion, the statement has no legal validity. 8.6 Further, there was a CBDT circular file no.286/98/2013-IT (Inv.II) dated 18.12.2014 which states as under: Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 8.9 It has been similarly held by the Hon ble Supreme Court in the case of K.T.M.S. Mohd. Anr. vs. Union of India (1992) (197 ITR 196) as under: We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO, the said letter is reproduced as under: 8.12 It is noted that the ld. AO/CIT(A), never mentioned about this retraction statement in their order and this action of lower authorities cannot be appreciated. It is the duty of ld. AO to consider the letter in true perspective and to comment on it which he failed to do so. 8.13 It is also submitted by ld. A.R. before us that the statement recorded from Ms. Amitha who is an employee of the assessee, who has confirmed bogus purchase from 1.4.2017 to 31.1.2018 at Rs. 4,28,47,574/- for the financial year 2017-18 relevant to assessment year 2018-19 and not for the all-assessment years involved herein. For clarity, we reproduce the question no.12 and answer to question no.12 recorded from Uday Kumar Salian on 8.12.2018 as under: 8.14 Being so, it cannot be considered that Ms. Amitha given any statement related to bogus purchases relating to all assessment years. This being the position, framing assessment by AO without considering the retraction of statement filed by the assessee, in our opinion, the addition cannot be sustained. 8.15 Further, in the case of CIT Vs. Vijay M. Mistry construction Ltd. 355 ITR 498 (Guj.) the Hon ble Gu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the apparent sellers were not genuine, or were acting as conduit between the assessee-firm and the actual sellers of the raw materials. Both the Commissioner (Appeals) and the Tribunal have, therefore, come to the conclusion that in such circumstances, the likelihood of the purchase price being inflated cannot be ruled out and there is no material to dislodge such finding. The issue is not whether the purchase price reflected in the books of account matches the purchase price stated to have been paid to other persons. The issue is whether the purchase price paid by the assessee is reflected as receipts by the recipients. The assessee has, by set of evidence available on record, made it possible for the recipients not being traceable for the purpose of inquiry as to whether the payments made by the assessee have been actually received by the apparent sellers. Hence, the estimate made by the two appellate authorities does not warrant interference. Even otherwise, whether the estimate should be at a particular sum or at a different sum, can never be an issue of law. In the aforesaid set of facts and circumstances of the case, the impugned order of the Tribunal is an order which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013) 351 ITR 150 (Guj), the Hon ble Gujarat High Court has held as under: The assessee was in the business of trading in iron and steel. During the reassessment proceedings for the year 2003-04, it was found that purchases worth Rs. 61.40 lakhs were not supported by sufficient evidence. Purchase of such goods from various suppliers was verified, but it was found that such parties had not supplied the goods as named by the assessee. The Assessing Officer made an addition of the entire amount of purchase of Rs. 61.40 lakhs. The Commissioner (Appeals) found that though the purchases were not made from the parties from whom the assessee claimed, there was complete quantitative tally of the materials purchased and sold. He was of the view that such materials were purchased from the open market incurring cash payment and bills were procured from various sources. He added only the profit element and not the entire amount of the purchases, for the limited addition to 30 percent of the total amount and reduced the amount to Rs. 18.42 lakhs. The Tribunal allowed further relief to the assessee and retained the addition to the level of twelve and half per cent in pursuance of the various purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form yardstick could be adopted. 8.22 Further, Hon ble Supreme Court in the case of CIT Vs. Odeon Builders Pvt. Ltd. reported in (2019) 418 ITR 315 (SC) held as under: 2. We have perused the review petition and find that the tax effect in this case is above Rs. 1 crore, that is, Rs. 6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs. 1 crore. 3. However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs. 19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reliance on the decision rendered by this Court in KONKAN MARINE AGENCIES, supra. It is pertinent to note that in CLIFFORD D'SOZA, supra, payment was made to the sub-contractors in cash as well as by Cheques. In the absence of any challenge to the entries made in the books of accounts by the authorities, in our opinion, the finding recorded by the Assessing Officer as well as the Tribunal that it denied the claim of the assessee for expenditure to the extent of 10% on account of payment of speed money, is perverse as the same is duly supported by the documentary evidence. Insofar as the submission made by the learned counsel for the revenue that in paragraph 4 of the order of the Commissioner the assessee himself had restricted the payment of speed money to 10% is concerned, it is pertinent to note that the restriction was made by the assessee in respect of Assessment Year 2004-05 and from the grounds of memorandum of appeal before the Tribunal; we find that the assessee had challenged the aforesaid finding which is evident from paragraphs 1 and 2, therefore, the aforesaid submission is of no assistance to the revenue. 8.24 The only argument of ld. D.R. is that assessee has a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to assessee did purchases, rice bran from M/s. R.K.R.K. or some other person or as did go into the process of manufacturing the oil. It was held that the cost of such purchases may be worked out on the basis of average purchase price in the entire year and substituting the same in the place of purchase price shown by the assessee in respect of the aforesaid firm. In the present case, the case of the assessee is that when the sales have been not doubted, the conclusion that the purchases were made cannot be rejected. 8.28 For this purpose, reliance was placed on the judgement in the case of CIT Vs. Ved Prakash Choudhary (305 ITR 245). In that case, the assessee had stated that there was no transfer of money between him and Sri Ravi Talwar Madhu Talwar. Mr. Ravi Talwar Mr. Madhu Talwar denied the receipt of any money from the assessee. In the face of the denial, there ought to have corroborated evidence to show that there was in fact such a transfer of money. The ld. CIT(A) and the Tribunal came to the conclusion that there was no such material on record. The ld. AO had relied on some other transactions for deriving the presumption in respect of transfer of money, but the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could not be said solely on the basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee. On appeal to the Supreme Court; the Hon ble Supreme Court dismissed the appeal in view of the concurrent findings of fact. 8.32 Further, in the case of CIT Vs. Tilak Raj Kumar (369 ITR 180) (T AP), it was held as under: The three assessees made separate voluntary disclosures of their income in response to the Voluntary Disclosure of Income Scheme, 1997, and they were also issued certificates. Most of the items mentioned in the disclosures were jewellery of gold and diamonds. For one reason or the other, the family thought of selling the jewellery. In the process, the diamonds were separated from gold and while the gold was sold at Hyderabad, the diamonds were sold at Surat. The resultant sale proceeds were shown as capital gains in the respective returns for the assessment year 1998-99. The Assessing Officer was satisfied as regards the proceeds from the sale of gold but doubted the genuineness of the sale of diamonds at Surat. After conducting a detailed enquiry, he disbelieved that and treated the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly quantity discount). In addition to that we also give cash discounts. Question:- 9- In addition to the above what are your major expenses? Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive. Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit? Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure. 8.1 As seen from the above, the managing partner stated that the assessee is getting GP at 15% and net profit at 4%. Contrary to this, the assessee has shown gross profit at 10.55%. It was also explained by the Ld. AR the reason for declaring GP at lower rate in the assessment year instead of 15% as stated in the sworn statement and this was due to offering higher discount to the customers to sustain in the market. This was the case of offering lower rate of profit on sale. The Assessing Officer rejected the contention of the assessee and he estimated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a binding evidence and the authorities cannot conclude the matter on the basis of the earlier statements alone. However, bald retraction of earlier admissions will not be enough even after retraction. Such statements cannot automatically become nullified. If the assessee proves that the statement recorded u/s. 131 was involuntary and it was made under coercion or during their admission, the statement recorded u/s. 131 has no legal validity. 8.3 There was a circular issued by CBDT issued circular in F. No. 286/98/2013- IT(Inv.II) dated 18th December 2014 stating as follows: Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded. [see Pon Adithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] ................ 8.6 Yet again in Romesh Chandra Mehta vs. State of West Bengal (1969) 2 SCR 461 although this Court held that any statement made under ss. 107 and 108 of the Customs Act by a person against whom an enquiry is made by a customs officer is not a statement made by a person accused of an offence, but as indicated hereinbefore, he being an officer concerned or the person in authority, s. 24 of the Indian Evidence Act would be attracted. 8.7 It has been similarly held by the Hon ble Supreme Court in the case of K.T.M.S. Mohd. Anr. vs. Union of India (1992) (197 ITR 196) as under: We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any imprope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decisions of the Hon ble Supreme Court referred before us, we are of the view that the legal position that emerges is that a sworn statement, though binds the assessee, it cannot be the sole basis for making the assessment. It is open to the assessee to show the circumstances in which confessional statements were recorded and once the assessee proves that confessional statements were recorded under threat and coercion and retracts from the same, the confessional statements cannot be the sole basis for making assessments or for making any addition in the hands of the assessee. 9. Further, in the case of CIT vs. S. Khader Khan Son (300 ITR 157), the Madras High Court held as follows: The principles relating to section 133A of the Income Tax Act, 1961, are as follows: (i) an admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts; (ii) in contradistinction to the power under section 133A, section 132(4) enables the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disclosed income was assessable as lawful income of the assessee. 10. On further appeal by the Department in Civil Appeal No. 13224 of 2008 and 6747 of 2012 dated 20/09/2012, the Supreme Court held as follows: Heard Counsels on both sides. Leave granted. Civil Appeal filed by the Department pertains to 2001-02. In view of the concurrent findings of the fact, this Civil Appeal is dismissed. Hence, the ratio laid down by the Madras High Court was confirmed by the Supreme Court. 11. From the foregoing discussion, the following principles can be culled out: (i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii)In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person ..... X X X X Extracts X X X X X X X X Extracts X X X X
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