TMI Blog2020 (12) TMI 19X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome of ₹ 750/- per sq.ft. was accepted without taking into consideration of the land owners share. The assessee from the beginning explained that the additional receipts were received for earning the additional work. All these facts and circumstances support that only profit required to be brought to tax but not the entire receipts. The assessee had admitted the income @ 30% on additional receipts which appears to be fair and reasonable.The AO cannot make addition solely on the basis of statement u/sec. 132(4) without considering the entire facts and the expenditure, therefore we do not find any reason to interfere with the order of the ld.CIT(A) and the same is upheld and the appeal of the Revenue is dismissed for both the assessment years. Addition u/s 147 - As argued that the assessment made u/sec. 143(3) r.w.s. 147 is bad in law - HELD THAT:- . During appeal hearing, ld.DR did not place the reasons recorded by the AO for reopening the assessment before us. However, as seen from the assessment order the assessee has accepted the additional income u/sec. 132(4) on the basis of information collected by the AO during the search proceedings thus there was escapement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 27,82,500/- (i.e. 55,75,000 29,92,500). In response to question No.8, Shri Anil Kumar stated that Shri T. Hanumantha Rao has purchased the flat of 1575 sq.ft. by registered sale deed dated 16/11/2017 for ₹ 29,92,500/-. When the Investigation team asked to explain the amount of ₹ 55,75,000/- which includes additional amount of ₹ 27,82,500/-, the accountant stated that the amount of ₹ 27,82,500/- was received for additional works for the flats. He further stated that he had received the agreement document for ₹ 7,90,000/- and did not receive any document for the remaining amount of ₹ 19,92,500/- and nor received the balance amount of ₹ 19,92,500/-. It was also explained that the amount of ₹ 7,90,000/- mentioned in the agreement was also not received by him. From the statement recorded from Shri Motamarri Naga Anil Kumar u/sec. 131 on 29/11/2017, the AO inferred that the assessee had received sale consideration of ₹ 55,75,000/-from Shri T.Hanumantha Rao, SBI, Sattenapalli and accounted only a sum of ₹ 29,92,500/- as recorded in registered sale deed dated 16/11/2017 and understated the receipts to the extent of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 000/- and filed the return of income. The assessee submitted that it has admitted the additional receipts during the search but not the additional income and further submitted that the entire additional receipts cannot be treated as income, since, the assessee carried out the additional work for which assessee incurred the expenditure. The assessee explained that the normal profit in this line of business would be around be 12.5%, but keeping in view of the fact that the receipts were not accounted, income was estimated @ 30% which is fair and reasonable. The AO did not accept the argument of the assessee since, the assessee had admitted the additional income in a statement recorded u/s. 132(4) which is having evidentiary value and binding on the assessee. Hence, the AO treated the entire estimated unaccounted receipts of ₹ 2,34,30,000/- as undisclosed income and brought to tax. 4. For the A.Y. 2016-17, the AO issued notice u/sec. 148 on 30/09/2019 and the assessee filed return of income admitting total income of ₹ 98,74,400/- which includes the additional income of ₹ 70,29,000/- and the AO completed the assessment on total income of ₹ 2,87,20,500/- and b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x by the AO hence requested to set aside the order of the ld. CIT(A) and allow the appeal of the Revenue. 8. Per contra, ld.AR supported the order of the ld. CIT(A) and argued that the assessee has admitted the income @ 30% of the additional receipts which is fair and reasonable. The assessee s further argument is that no evidence whatsoever was found by the department during the course of search. The only evidence found by the department is Whatsapp messages from the mobile phone of Shri Motamarri Naga Anil Kumar, accountant but not in the premises belonging the assessee. The Ld.AR further stated that Shri Naga Anil Kumar also confirmed the fact regarding the additional receipts were for meeting the expenditure related to the additional works for flats. Ld.AR further argued that the Whatsapp messages found in the mobile phone of third party cannot be used as evidence against the assessee unless there is a cogent material to prove that the assessee has earned the additional income. In the instant case, the AO has conducted enquiries from the flat buyers on sample basis and collected information with regard to total consideration and the sale consideration as per the sale deed bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itional works of the said flats. He further stated that he had received only agreement for ₹ 7,90,000/-, but neither received the cash of ₹ 7,90,000/- nor balance amount of ₹ 19,92,500/-. Thus, submitted that the facts regarding the sale price of ₹ 55,75,000/- as per the message received through Whatsapp is known to be Shri Satish Kumar but not to him. During the course of search from the table of the accountant, a rough notings of receipts and expenditure details were found which revealed that certain additional amounts were received for carrying out additional works in respect of flat Nos. 215, 312 404 of Nandamuri Nagar project, Flat No.404 307 of Amaravati Road project. A statement was recorded u/sec. 132(4) from the assessee in respect of flat No.302 of Amaravati Road Project sold to Golla Venkata Pitchaiah, the assessee explained that cost of flat was ₹ 41,12,500/- as against the recorded value of ₹ 22,05,000/- in the books of accounts and there existed unaccounted cash receipts in sale of flats. Thus, the assessee had accepted that there was cash receipts for additional works. The assessee also admitted the additional income of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s share minus expenditure is the profit which required to be brought to tax as income. The AO did not make any such exercise to arrive at the true and correct profit of the assessee which required to be brought to tax. When there is no information available and AO has suspected the cash receipt alternatively he ought to have referred the cost of construction to DVO and taxed the difference u/sec. 69C of the Act. In the instant case except the statements recorded from the flat buyers on sample basis and the whatsapp message in mobile phone of the accountant, no other evidence is available to the AO. The said information was related to the total consideration and the accounted in books and unaccounted cash received for some flats. No details are available with regard to expenditure incurred from the unaccounted cash receipts. The statement recorded from the flat buyers does not indicate at what stage sale deed was registered whether it is semi finished stage or at completed stage and what was additional work carried out by the assessee etc. In absence of any such information, the statement recorded u/sec. 132(4) cannot be completely relied upon for making the addition. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact of additional work being carried by appellant was emphasized right the beginning by the accountant, buyers as well as the appellant. The same cannot be ignored placing reliance only on disclosure made in the statement u/s. 132(4). The ratio of decisions relied on by the appellant cannot be ignored and the disclosure itself cannot be sole basis for admission/ assessment of additional income ignoring the facts/material on record. In view of the above, the receipts for additional works has to be treated as turnover and reasonable profit thereon has to be estimated. -The contention of the appellant is reasonable and acceptable in the facts of the case. The income@30% offered by the appellant is reasonable and the AO is directed to accept the same and restrict the addition to 30% of the additional receipts. The grounds are disposedoff with above directions. 11. From the above, we observe that the AO made the addition solely on the basis of statement recorded u/sec. 132(4) without considering the other issues and facts involved in construction with regard to the additional expenditure related to construction of flats. No other evidence was brought on record by the AO to con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tute the basis for making block assessment even if the department does not have any other material to buttress its case. However, if the statement is retracted by the person from whom it is said to have been recorded, it has to be subjected to the same test, as is done in matters of similar nature. This is particularly so, when the person, from whom it is recorded, is going to be visited with penal consequences. Sub-section (4) of section 132 of the Act cannot be taken as a provision laying down any new principle in the law of evidence. 12. For all practical purposes, the statement recorded under sub-section (4) of section 132 of the Act, partakes the character of the one recorded by an investigating officer under section 162 of the Code of Criminal Procedure. Howsoever desirable, it may appear to be; it cannot be ascribed the status of a proven fact. At the most, it would constitute the basis for the prosecution to frame its case and correspondingly be a material for the defence to ensure that the prosecution sticks to its version. The question of a statement of that nature being treated as the clinching evidence, by itself, leading to any penal action does not ari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred. The Hon'ble Supreme Court in the case of Pullngode RubberProducts Co. Ltd. Vs. State ofKerala (reported in (1973) 91 ITR 18) held as under: An admission is a extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to showthat it is incorrect. The above decisions would establish that any statement made U/s 132(4) of the I.T Act', cannot be taken as conclusive and if it is retracted it cannot be considered at all for making any assessment. They have to be independently proved for making assessment that the assessee has earned the undisclosed income accepted in such a statement u/s 132 (4) of the I.T.Act. The statement recorded u/s 132(4) of the IT Act if not retracted may be used for making the assessment, but only to the extent of incriminating evidence/material u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2006-07 - Whether where a person can explain exclusively with supportive evidence/material or otherwise that true state of affairs was different from that he presented in his statement of admission, tax liability should be fixed on basis of correct and true affairs as ascertained from material on record - Held, yes - During search operation, assessee, in his statement, surrendered ₹ 18 crores on account of investment made in purchase of jewellery, precious stones and ₹ 6 crores as cash in hand duly shown in books of account ₹ 7 crores were surrendered in stipulation that details of same would be given in due course of time - However, no incriminating materials or documents had been brought on record for said amount of ₹ 7 crores - No assets of ₹ 7 crores were found by authorities, nor such assets were identified or declared by assessee - Whether it could be inferred that no such assets actually existed Held, yes - Whether Tribunal was right in holding that addition in respect of ₹ 7 crores was not based on any evidence - Held, yes [Pares 17 and 21] [In favour of assessee] Receipt of on-money-No addition on the basis of stat ..... 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