9911796707
TMI Blog2008 (11) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... books of account prior to the search? - HELD THAT:- The facts of the case are that the assessee himself not only agreed by way of a statement and affidavit that there has been inflation of expenditure and recording of bogus expenditure, but also filed a return disclosing certain expenditure claimed as expenditure in the regular books of account as undisclosed income. Sec. 158B(b) has been amended by the Finance Act, 2002 w.e.f. 1st July, 1995 wherein any expense, deduction or allowance claimed under the Act which is found to be false is defined as undisclosed income. When the assessee himself, suo motu declares undisclosed income under this category, it is not correct to argue to the contrary that the addition is not within the jurisdiction of Chapter XIV-B. Quantum of addition - HELD THAT:- The AO has not furnished any basis whatsoever to come to the conclusion and to the quantum except relying on the general statement made by the managing director. To certain extent, the assessee has made certain analysis of unvouched expenditure and has produced some records before the AO, which give a particular percentage of expenditure as unsupported. In a block assessment no addition can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01 in Transindia/All Cargo Group of Companies. The bifurcation of undisclosed income of Rs. 2 crores will be submitted to the Department within two days." 2.1 Further Shri Sasi Kiran Janardhan Shetty filed an affidavit on 31st Oct., 2001 which reads as follows: "During the search proceedings under s. 132 of the IT Act, 1961 conducted on 30th Oct., 2001 in the premises of Transindia/All Cargo Group of Companies, certain discrepancies on account of dock, customs and other expenses were either not fully supported by third party vouchers, bills or not incurred but wrongly claimed, to the extent of Rs. 2 crores. I therefore, offer this entire amount of Rs. 2 crores as the undisclosed income of Transindia/All Cargo Group Companies for the block period 1st April, 1995 to 30th Oct., 2001." 2.2 Later, on 27th Dec., 2001, i.e. after 58 days of the search, another statement under s. 132(4) was recorded from Shri Sasi Kiran Janardhan Shetty. In answer to question No. 9, Shri Sasi Kiran Janardhan Shetty confirmed that he had offered a sum of Rs. 2 crores on the date of search and after verification of books, records, papers seized, etc. the undisclosed income from the block period would be o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expense vouchers which were duly recorded in the regular books of account in connection with the expenses under the head 'Dock expenses, loading and unloading, customs expenses'. The assessee submits that the offer was made under pressure. He further submitted that the expenses were incurred by the staff, drivers, supervisors, etc. for work done at various sites like NJPT, Dongiri CFS, Mulund CFS, in-docks, in customs on the road during the course of transportation of goods, etc. Thus, it was pleaded that Shri Sasi Kiran Janardhan Shetty would not, be in a position to quantify or determine the extent of expenses, which though incurred in the course of business would not be having third party supporting vouchers, for the entire block period of six and half years in all the group concerns. 2.5 Referring to the statement recorded under s. 131 on 27th Dec., 2001 the assessee submits that Shri Sasi Kiran Janardhan Shetty while confirming the fact that he had offered a sum of Rs. 2 crores on the date of search, it was submitted that, he categorically pointed out and affirmed that he would, only after verifying the books of account, records and seized papers, etc., would be offering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the circulars of the Board and on the ground that the assessee had not retracted from either affidavit or statements made and came to a conclusion that the Board's Instructions referred above are not applicable in this case since there was no force used by the Revenue to extract a confession during the course of search. At para 12, he observed as follows: "12. The expenses are incurred in docks, ports mainly in respect of loading, unloading, use of cranes for shifting of container and speedy work. The assessee was asked to give full information in respect of utility of such services which are required for the speedy work and explain the circumstances which force the assessee to incur such expenditure. On the contrary assessee tried to explain the expenses through test check with a reason that the explanation of the same pertaining to the block period are voluminous." 2.7 Later, referring to s. 37 of the IT Act, on the ground that the expenditure in question is incurred by the assessee for an offence or which is prohibited by law estimated the undisclosed income of the group at Rs. 2 crores and proportionately made addition of undisclosed income in each of the cases. Aggrieved, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the addition. 6.3 The assessee himself has made certain estimates and substitution of such estimates by the AO based on factual disclosures made by the assessee should have been upheld by the first appellate authority. 6.4 Nowhere in the remand report, the AO had concluded that on the basis of test check only a certain percentage of expenditure can be considered as unvouched. Therefore, reliance on the remand report by the first appellate authority as well as by the assessee is not correct. 6.5 That the decision of the Mumbai Bench of the Tribunal in the case of A.P.L. (India) (P) Ltd. is not applicable to the facts of the case. In that case what was considered was payments made to labourers as speed money and there was no payment whatsoever made to Government officials such as customs authorities, etc, which is the issue in the present case, Hence it is wrong on the part of the first appellate authority to apply the decision of A.P.L. (India) (P) Ltd. 6.6 The learned Departmental Representative, relied on the judgment of the Hon'ble Madras High Court in the case of CIT vs. India Cements Ltd. (1999) 154 CTR (Mad) 167 : (2000) 241 ITR 62 (Mad) to submit that payments made wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rced to confess the undisclosed income during the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing the return of income. In these circumstances, such confessions during the course of search and seizure and survey operations 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 what has not been disclosed or is not likely to be disclosed before the IT authorities." 8.2 Similarly the Board vide Instruction No. F. No. 286/57/2002-IT), dt. 3rd July, 2002 issued the following instructions: "Statements under s. 132(4) should be carefully recorded to collect and marshal the facts and evidences. Disclosure of undisclosed income in statement under s. 132(4) without proper evidence in support thereof shall be adversely viewed. This instructions have been issued due to the fact that the Board has observed that there are number of cases where disclosures are taken under s. 132(4) which are subsequently retracted as they are estimated, ad hoc and not supported by proper evidenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... held that estimation can be done in a block assessment. 8.6 In view of the above discussion we reject these arguments of the assessee. As we have rejected the contention of the Revenue that the addition should be made only based on a general statement recorded from the managing director for all the five companies and apportioned a particular amount to each company as its undisclosed income and have also rejected the contention of the assessee's counsel that the addition in question does not fall within the ken of Chapter XIV-B and that the estimation is bad in law, we are left with only one issue, i.e., the quantum of undisclosed income. Here, the assessee relies upon the remand reports. As per the assessee the percentage of expenditure that can be said to be without proper supporting evidence is as follows: All Cargo Movers (India) (P) Ltd. 17% Transindia Freight Service (P) Ltd. 13.79% Contech Transport Service (P) Ltd. 20.25% All Trans Logistics (P) Ltd. 4% Indport Maritime Agencies (P) Ltd. 24.35% 8.7 We have perused the copy of the remand report. In the remand report in the case of All Trans Logistics (P) Ltd. the AO has observed as follows: "In this case, i.e., All T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re held as not against public policy and as not illegal. Only on the ground that the actual payments are not established to the extent indicated in the vouchers, ad hoc disallowance of 25 per cent was considered as fair and reasonable. In our considered opinion, this decision is not applicable to the facts of the case. The assessee himself has submitted that in the case of three companies, the entire activity is outside the port. So the question of paying speed money to dock workers does not arise. It is only in the case of two companies, viz. Indport Maritime Agencies (P) Ltd. and Contech Transport Services (P) Ltd., the question of payment of speed money arises. It is only in the case of these two companies that there is a possibility of some payments being made to customs authorities as admitted by the managing director in his statement. In other words, such situation does not arise in the case of the other three companies. Thus we do not agree with the finding of the first appellate authority that the decision in the case of A.P.L. (India) (P) Ltd. vs. Dy. CIT is applicable to the facts of the case. 8.10 This brings us to the question as to what should be the quantum of additi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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