9911796707
TMI Blog2024 (9) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... cted to TDS. The major expenditure claimed related to discount and rebate in support of which copies of ledger account of all the payees were submitted and available at Pg 62 to 181. No enquiry appears to have been made by the AO from these parties directly. The salary expenses were verifiable from the salary sheet. It is noticed that copies of the ledger account and other supporting evidence were furnished. Thus, if in the final accounts, which are duly audited, there is an increase in the expenditure as compared to the sheet found during the course of survey, such increase itself cannot result in an income and the allegation of the Revenue of having claimed excessive and bogus expenses is nothing more than a suspicion. DR failed to rebut all these factual findings and evidence brought on record by the assessee during the course of hearing. Very pertinently, the accounts were neither rejected directly by invoking section 145 nor indirectly in any manner and therefore, we find no substance in the grounds taken by the Revenue. Relevance of document relied upon by the AO - We are also in agreement with the finding of the ld. CIT(A) that the impounded document relied upon by the AO, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udit report which is enhanced expenditure and the second was related to what was the actual expenditure incurred as per Income and expenditure 2 Whether on facts and in circumstances of the case. the CIT (A) is justified in not appreciating the statement of Naresh Jain (Main dealing person) recorded on oath under section 131, where he, himself explained the nature of transactions and admitted the increased expenditure of Rs 1,71,72.858/- during the filing of return and also that he did not have bill vouchers and when return was filed, all these enhanced expenses are entered on estimated basis. 3 Whether on facts and in circumstances of the case, the CIT(A) is justified in appreciating the plea of the assessee that, it was incomplete record, as the explanation of Naresh Jain recorded on path where he himself admitted the facts that the expenses are charged over and above the actual amount appearing in true transactions recorded in Income Expenditure A/c. 4 Whether in facts and circumstances of the case, the CIT(A) is justified m applying decision of Hon'ble Kerala High Court in the case of K. Abdul Azeez vs Commissioner of Income Tax, Central Circle, Calicut [2019] 111 taxmann.c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the Assessee is only with respect to the deletion of the addition made by the AO of Rs. 1,71,72,858/-, which has been challenged on various grounds. Revenue however, has completely ignored the substantive and vital fact that in the Remand Report-II dated 19.12.2023, reproduced at pg. 52, pr. 5.10 of the CIT(A) order, the AO appears to have carried out extensive verification of the entire related record and noted his factual findings w.r.t. each and every expenditure, i.r.t. which the AO alleged inflated claim of expenditure made with Bank Charges, Bank Interest, Interest to other parties, Discount, Hoarding Rent, Electric Expenses, Repair Maintenance expenses, salary and miscellaneous expenses, etc., aggregating to Rs. 2,07,65,446/-, to the effect that they were genuinely claimed expenditure, supported by evidences, bills, vouchers, bank statement and third-party information. There is absolutely no adverse comment made by him on this aspect, nor he claimed that such expenditure were bogus / inflated as initially alleged by the then AO in the impugned asst. order. He even stated that all these details supporting bills, vouchers, etc. were submitted during the course of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ledger account of respective heads, as produced by the assessee during the course of re-verification proceedings. After verification, it is noticed that out of total expenses most of the expenses are related to discount of Rs. 1,29,68,729/- mainly to their major clients namely (i) M/s Allen Career Institute, Kota, (ii) Career Point Ltd., Kota (iii) Vakrangi Ltd., (iv) Motion Education Pvt. Ltd., Kota. The assessee has submitted the copy of ledger of the respective concerns along with bills/vouchers for verification, which is found verified. The assessee has also submitted the ledger of remaining expenses along with its bills/vouchers related to hording rent of Rs. 11,10,529/-, electricity expenses of Rs. 4,70,637/-, Repair Maintenance expenses of Rs. 8,17,444/-, Salary Expenses of Rs. 49,60,000/- Misc. expenses of Rs. 4,38,107/-. On perusal of such documentary evidences it is noticed that most of expenses are made through banking channel and supported with bills/vouchers except some self-made vouchers for which payment was made in cash. 6. Although it is noticed from the assessment record that the assessee had already submitted these supporting bills/vouchers related to aforesaid e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts 19 Staff Welfare 8,20,750 6,09,760 2,10,990 covered by A.O 20 Telephone 4,16,137 93,024 3,23,113 covered by A.O 21 Travelling Exp 7,96,312 4,82,562 3,13,750 covered by A.O 22 Vehicle Running Exp 5,99,946 3,69,726 2,30,220 covered by A.O 23 Water Exp 74,178 49,978 24,200 covered by A.O 24 Misc Exppenses 4,38,107 - 4,38,107 Recorded in books of accounts TOTAL 4,11,94,715 2,30,76,029 1,81,18,746 4.2 It is submitted that the assessee has explained each and every entries found recorded in impound records being Exhibit 8 Page no. 97 and 99 (APB 32-35). Also being honest taxpayer, the assessee bona fidely submitted that there was totaling mistake and the total of the expenses recorded in the impounded sheet is Rs. 1,81,18,746/- and not Rs. 1,71,72,858/-. Had it been tax evasion intent of person, he would never disclose this error. 4.3 Explanation / Clarifications submitted in detail: It is submitted that with regard to difference Rs. 1,71,72,858/- as appearing in the chart above, detailed point-wise submission dt.18.07.2023 as made before CIT(A) (also at Pg.10 pr.5.2) are reproduced as under: (vii) Clarifications with regard to Difference Rs. as appearing in the Chart above- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eets of paper the difference being Rs. 1307117/- by any stretch of imagination and inference, can be taken and treated as inflated and bogus expenditure, booked on higher side and under provisions of Income Tax Act 1961 and on the side of justice does not requir to be disallowed. Under the present day legal provisions, the business entities have to transact their business activities through Banking Channel at the maximum and consequent Bank charges are meant for business purpose only. Difference 13,07,117/- judiciously cannot be taken as Bogus/ inflated expenses and have been spent for business purpose only. (APB 193-195) (v) Electricity Expenses actual being Rs. 4,70,637/- as per Books of Accounts under Audit Report and Rs. 3,55,837/- in the Impounded papers, having difference of Rs. 1,14,800/-. Electricity Expenses Rs. 4,70,637/- is well justifiable as major amount involves Electricity bills from Service Agency and leaves no room for any maniipulation and have been spent for business purpose only. (APB 197-199) (vi) Interest charges- other than to Bank (APB 196) (a) It is very humbly submitted that on the self speaking quantum/size of loans and advances availed by the appellant f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment and Appellate Order in the first round: It is an eye-opening fact that there are various expenses, (listed below in the chart), and found in the impounded papers amounting to Rs. 49,32,482/- which were already subjected to Scrutiny Assessment u/s 143(3) vide order dated 30.11.2017 (APB 207-213) whereby disallowance of Rs. 26,60,897/- was made on account of Security Service expense, Business Promotion Expense, Traveling Expenses and various other expenses u/s 37(1) were made. In the first appeal the ld. CIT(A) vide its order dt. 12.02.2019 reduced these disallowances to Rs. 5 Lakhs (APB 214-221). Thus, the expenses to the extent of Rs. 49,32,482/-, were already subjected to the scrutiny and the appellate proceedings. Notably, these disallowances were made by the AO, while examining the same very audited books of accounts, which contained the total expenditure of Rs. 4,11,94,715/-, shown in the table above in pr.4.1 (and alleged by the AO to have been inflated). Needless to say, that had there been bogus / inflated claim of expenditure made by the assessee, the AO himself would have made huge disallowances (which is now suspected to be Rs. 1.71 crore by the AO corrected at R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with difference being of Rs. 1,04,16,049/- and in support of the same, detailed submission were made before lower authorities along with copy of relevant Ledger Accounts (APB 62 to 206). S No Head Of Account Amount Appearing in Income Expenditure Account of Audit Report As on 31/03/2015 Amount Appearing In Income Expenditure- (impounded document) Page- 97, Annex- 8 Difference 1 Discount Rebate 1,29,68,729 50,64,851 79,03,878 2 Hoarding Rent 11,10,529 6,69,116 4,41,413 11 Electricity Exp 4,70,637 3,55,837 1,14,800 17 Repair Maintenance 8,17,444 6,44,593 1,72,851 18 Salary 49,60,000 36,15,060 13,45,000 24 Misc Exppenses 4,38,107 - 4,38,107 TOTAL 1,04,16,049/- 4.7 The aggregate of above referred three categories works out to Rs. 49,32,482 + 27,70,215 + 1,04,16,049 totaling Rs. 1,81,18,746/-. Thus, detailed submission already submitted before the authorities below and already gone through detailed scrutiny assessment earlier leaves no scope for suspicion that assessee might have made any excessive claims of said expenses. 5.1 Contradictory approach of AO - not sustainable in the eyes of law: Interestingly, on this aspect, it is pertinent that the finding of the AO at page 9 of order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sclosed income for the reason that, only the finally prepared annual accounts, which are based for computing total income and is relied upon by the assessee. In fact, assessee never placed reliance on such rough notings for the purposes of declaring income and merely because it was found and impounded during the course of survey does not make it credible. 2. Complete Audited Accounts Maintained: Undisputedly, the ld. Tax Auditor had already audited these accounts (APB19-31), long back on dated 29.09.2015, i.e. almost 2 years prior to the date of the survey, and had tendered his Audit Report (APB 5-18), without any qualification or adverse remark as such. In other words, in his (ld. Tax Auditor s) view, the final accounts produced before him represented the true and correct state of affairs which fact is not rebutted by the lower authorities. Admittedly, no inquiry was made from the ld. Auditor if there was something wrong found by the AO, nor any complaint against him has been filed before the Institute of Chartered Accountants of India (for short ICAI ). Equally, he did not even, thought it fit to refer the matter to, for the special audit, provided u/s, 142(2A) of the Act even th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o act on material which may not be accepted as evidence in a Court of law, but in making the assessment under sub-s. (3) of s. 23 the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all There must be something more than bare suspicion to support the assessment under s. 23(3) ITO and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion In arriving at its estimate of gross profits and sales Tribunal should give full opportunity to the assessee to place any relevant material on the point that it has before the Tribunal, whether it is found in the books of account or elsewhere and it should also disclose to the assessee the material on which the Tribunal is going to found its estimate and then afford him full opportunity to meet the substance of any private inquiries made by the ITO if it is intended to make the estimate on the foot of those enquiries. 5. AO failed to discharge its onus-no inquiry made: It is pertinent to note that the AO, despite having found the impounded document based on which he alleged bogus / inflated expenditure, he did not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive material used by the AO wherein the assessee admitted, was fully explained and thereafter, in absence of any other corroborative evidence such admission alone could not be made a basis of the addition. Therefore, it is wrong to say that the CIT(A) completely ignored the admission made by the assessee. 1.2 Prayer u/r 27 of the ITAT Rules, 1963: Though, assessee is not in appeal or co. against such findings of the CIT(A) on this legal aspect, however assessee is entitled to support his order on the issue decided against him u/r 27 of the Income-tax (Appellate Tribunal) Rules, 1963 which provides that The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him . Since the CIT(A) did not appreciate that these were survey statement recorded u/s 133A(3)(iii) but not u/s 131 having no evidentiary value at all, hence this prayer. The said rule clearly support the assessee, because such aspect is inherently related to the ground taken by the assessee before him wherein, on merits he deleted the addition but on this particular legal aspect held against the assessee. Reliance is placed on the cases of ITO Vs IME Interna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y case) and u/s131 (for general inquiry). These provisions operate independently in their respective fields and cannot be used interchangeably. S.133A(3)(iii) is separate and independent from S. 131, as evident from the further fact that S. 133A (6), refers to use of the powers u/s 131 only in a given fact situation (as stated above), which manifests the legislative intention that statement of the assessee can be recorded under any of these three provisions as the situation may demand. Further, S.132(4) provides that such statement recorded during search may be used as evidence against the assessee in any proceedings, which is not the situation with S. 133A(3)(iii) nor with S. 131. In other words, though statement may be recorded on oath u/s 131, yet the statute not having provided such statement to be used as evidence against the assessee in any proceedings, the statement recorded under these two provisions loses their evidentiary value on the strict interpretation of the fiscal statute. Ignoring this significant difference will render the use of these words intendedly u/s 132(4), purposeless or nugatory. Therefore, to say that statement recorded u/s 133A(3)(iii) is equivalent to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 133A(3)(iii) of the Act. 41. This distinction was noticed by this Court in Dhingra Metal Works (supra). The Court there referred to the decision of the Kerala High Court in Paul Mathews Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 and of the Madras High Court in S. Khader Khan Son (supra) and observed that the word 'may' occurring in Section 133A(3)(iii) of the Act clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself. Incidentally, the decision of the Madras High Court in S. Khader Khan Son (supra) has been affirmed by the Supreme Court by the dismissal on 20th September, 2012 of SLP (Civil) No. 13224/2008 filed by the Revenue against the said decision after granting leave. To the same effect is the decision of this Court in Sunrise Tooling System (P.) Ltd. (supra) and of the Jharkhand High Court in Shree Ganesh Trading Co. (supra). The CBDT's instructions dated 10th March, 2003 and 18th December, 2014 have also emphasized that there should be no recording of statement during search/seizure/other proceeding under the Act under undue pressure or coercion . 42. Therefore ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Kerala High Court in the case of K. Abdul Azeez v. Commissioner of Income Tax, Central Circle, Calicut [2019] |11 taxmann.com 74 (Kerala) ignoring the fact that statement was recorded on oath u/s 131(1), as also mentioned by the assessee and not recorded u/s 133(3)(iii) which was the main substance of the decision in above case law. 5. Whether in facts and Circumstances of the case, the CIT(A) is justified in not appreciating the facts that the section 133A(6) empowered the Income Tax Authority to record the statement on oath, therefore the recording of statement u/s 131 in this case was not ultra-vires. Submission: 1. S.133(6)- Not applicable: At the outset it is submitted that, such a contention, on a bare perusal of the related provision, is completely devoid of merit and rather a misreading and misinterpretation of the provision. For ready reference S. 133A(6) is being reproduced hereunder: (6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ual position on this aspect. 3. In addition, also kindly refer our detailed submission on this legal aspect towards DGOA-2 7. Thus, under totality of the facts circumstances detailed above, the CIT(A) deleted the disallowance of Rs. 1,71,72,858/-. Therefore, grounds taken by the revenue as also entire appeal deserves to be dismissed. DGOA-6: Assessee accepted addition in AY 2016-17: 6. Whether facts and circumstances of the case, the CIT(A) is justified in not appreciating the in other important fact that during the assessment proceedings of the assessee for AY 2016-17 , the assess had claimed / accepted that the undisclosed income offered during survey at Rs. 1,71,72,858/- was related to AY 2015-16 and therefore, the same is considered for the AY 2015-16 Submission: In fact, this ground is based on the finding recorded by the AO at page 9 and 10 of the impugned assessment order. The crux of the finding of the AO was that Shri Naresh Jain had admitted that expenses to the extent of Rs. 1,71,72,858/- were increased/inflated. In addition, it was also argued alternatively that they pertain to AY 2015-16. This is clear from the finding recorded by the AO and the very ground taken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cuments are incomplete records. Since ground no. 1 and 3 taken by the Revenue are common in nature, hence the same are being dealt with jointly hereunder. The case of the AO is that what was found during the survey was the real and actual expenditure incurred, whereas the claim of expenditure made by the assessee now through the audited accounts at Rs. 4,11,94,715/- as against 2,30,76,029/- shown in the impounded documents, (which results into the alleged excessive and bogus expenses of Rs. 1,71,72,858/- but corrected by the assessee at Rs. 1,81,18,746/-). As against this, the case of the assessee is that all these expenses were genuinely incurred and claimed, properly supported by bills and vouchers, duly accounted for and even the same were audited, and were not even rejected by the AO. Some of these expenses had even faced scrutiny assessment u/s 143(3) and were subject to first appeal. More importantly, in the 2nd remand report dated 19.12.2023, the AO himself has verified the complete accounts and thereafter given his positive report. Hence, Revenue s appeal on this ground is not maintainable. 3.2 We have carefully gone through the order of the first appellate authority and fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the same is considered for the AY 2015-16. Accordingly, the amount of Rs. 1,71,72,858/- was added to the total income of the assessee on account of excessive and bogus expenses claimed. Per contra the appellant argued that more emphasis has been given to the recorded statement of husband of appellant Shri Naresh Kumar Jain wherein, in reply to Q No 23 has interalia accepted that Page No 97 is a chart, showing expenses for F/Y 2015-16 and F/Y 2016-17 Rs. 1,71,72,858/-. The appellant explained that the there was totalling mistake and the total of the expenses recorded in the impounded sheet is Rs. 1,81,18,746/- and not Rs. 1,71,72,858/-. The appellant furnished following details as summary with regard to impounded documents exhibit 8 page 97 to 99: -------xxx-------xxx-------xxx-------xxx-------xxx-------xxx------- The appellant argued that the expenses- S No 3, 4, 6, 7, 8, 9, 12, 14,15, 16, 19, 20, 21, 22 and 23 (total Expenses heads- No 15 ) of the Chart above, working out to difference of Rs. 49,32,482/- have been duly covered in the previous Assessment Order as well as the Order in Appeal, Copy of Chart showing difference of Rs. 49,32,482/- in the expenses was enclosed- Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nses was enclosed- Annexure-4 Page No 17. It is argued that the then AO, during assessment proceedings, has even dis -allowed the claim of appellant with regard to Bank Interest, Bank Charges and Electricity expenses which has been paid as per the demand raised to such financial institutions and have been paid to the recipient through Banking channel only. Even a lay man would not agree to such unethical and arbitrary dis-allowance to the Tax Payer. Likewise the standardized provisioning of depreciation on fixed assets, claimed and booked by the appellant as per accounting norms, have been disallowed to the appellant is against provisions under Income Tax Act 1961 and principles of Natural Justice and necessitates justice to the appellant. The appellant explained that these expenses are duly recorded in the books of accounts and are allowable business expenses. These expenses were verified by the AO in the remand proceedings and no adverse remarks were made except mentioning that the AO during the original assessment order held that the assessee manipulated the expenses and the clarification given is afterthought. The assessee has explained these expenses as bank charges, bank inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the addition of only Rs. 1,71,72,858/- was made. The AO in the remand proceedings has verified the details with regard to expenses of Rs. 49,32,482/-, Rs. 27,70,215/- and Rs. 1,04,16,049/-. Total of these expenses comes to Rs. 1,81,18,746/-. The AO stated in the remand report that enhancement of the difference may be made in the appellate order. However, the appellant has furnished evidences, to establish that all the expenses are recorded in the regular books of accounts. The AO has reported that the expenses are supported by bills and vouchers. The payment is made mainly thorough banking channel. Therefore, no adverse view is taken on the difference of Rs. 9,45,888/- pointed out by the appellant. The appellant further argued that the AO treated the explanation of the assessee as afterthought adjustment to evade tax liability. It is argued that the AO recorded that amounts appearing under various heads of expenses in the Audit Report and the impounded loose papers are exactly same and at the time of Survey Action, the Assessing Authority sans any logic and rationale and ignoring the facts and supporting documents, has made addition on the basis of impounded papers but only the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded in the regularly maintained books of accounts, and even the AO (at Pg 9.) himself has agreed that the details appearing in the loose papers are exactly matching with the expenses claimed in the P L account, which support this inference. 3.4 The facts are not denied that the assessee has been maintaining regular books of accounts consisting of cash book, ledger, journal and all the expenses are fully supported by bills and vouchers and were subjected to audit. 3.5 It is not the case of the AO that the ld. Tax Auditor has made adverse remarks or has qualified the audit report. The accounts were audited long back on 29.09.2015 that is almost 2 years prior to the date of the survey and copy of the same is placed at Pg 5 to 18 of assessee s paper book, wherein the ld. Tax Auditor has certified the account showing the true and correct state of affairs. Admittedly no enquiry was made from the ld. Tax Auditor. We also find force in the contention of the ld. AR that Section 44AB of the Act was inserted with a definite purpose, which is explained in CBDT Circular No. 387 dated 06.07.1984 to ensure that accounts are properly maintained and that they faithfully reflect the income of the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,529/-, electricity expenses of Rs. 4,70,637/-, Repair Maintenance expenses of Rs. 8,17,444/-, Salary Expenses of Rs. 49,60,000/- Misc. expenses of Rs. 4,38,107/-. On perusal of such documentary evidences it is noticed that most of expenses are made through banking channel and supported with bills/vouchers except some self-made vouchers for which payment was made in cash. A careful perusal of the above remand report shows that the AO appears to have carried out extensive verification of the entire related record and noted his factual findings w.r.t. each and every expenditure, i.r.t. which the AO alleged inflated claim of expenditure made with Bank Charges, Bank Interest, Interest to other parties, Discount, Hoarding Rent, Electric Expenses, Repair Maintenance expenses, salary and miscellaneous expenses, etc., aggregating to Rs. 2,07,65,446/- , to the effect that they were genuinely claimed expenditure, supported by evidences, bills, vouchers, bank statement and third party information. We find that there is absolutely no adverse comment made by him on this aspect, nor he claimed that such expenditure were bogus / inflated as initially alleged by the then AO in the impugned asst. o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that ld. CIT(A) has ignored the basic fact that the assessee had already admitted income in statement on oath u/s 131 dated 04.02.2017, and in particular Question Answer No. 23 (copy of the statements are placed at assessee s paper book Pg 36 to 39). On the other hand, the assessee has also made a prayer under Rule 27 of the ITAT Rules, 1963 in as much as the ld. CIT(A) had rejected the contention of the assessee that survey statements do not have any evidential value and therefore cannot be taken into consideration. Similar grounds and contentions have already been dealt with by us in detail in the cases of Naresh Jain in A.Y. 16- 17 in ITA no. 349/JPR/2024(D) and in ITA no. 358/JPR/2024(A) and in A.Y. 17- 18 ITA no. 374/JPR/2024(D) and also similar prayer under Rule 27 of ITAT Rules, has been admitted therein. Therefore, the Department's grounds of appeal No. 1 and 3 taken by the Revenue are hereby dismissed. 5.1 In the grounds no. 4 5 taken by the Revenue, we find that, we have dealt with these issues in detail in the case of Naresh Jain for A.Y. 16-17 while deciding AGOA-2 of our order dated 05-08-2024 in ITA No. 349 (D) and 358 (A)/JPR/2024. At the same time, we are als ..... X X X X Extracts X X X X X X X X Extracts X X X X
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