TMI Blog2005 (4) TMI 244X X X X Extracts X X X X X X X X Extracts X X X X ..... nce against the assessee. However, the statement is not conclusive and the person giving the statement can retract the same under certain circumstances (i) The first circumstance is where the statement is not given voluntarily but it was obtained under coercion, threat or undue influence. But the burden is upon the person making the statement to prove that the statement given by him was not voluntary. The assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised Officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement would also one of the important points to be taken into account while deciding whether the statement was voluntary or not. (ii) The other circumstance is where the statement was given under the mistaken belief of either fact or law. Here again the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law. Thus, we have already held that the statement given by Shri K.B. Kandoi was voluntary and there were corroborative evidences to support such statement, therefore, how the above sum o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... All these appeals are directed against the orders of the CIT(A) for assessment years 1992-93 and 1993-94. They are disposed of by this common order for the sake of convenience. 2. ITA No. 4780/Ahd./96-for assessment year 1993-94- By assessee M/s. Bhogilal Mulchand Kandoi and ITA No. 51/Ahd./97- assessment year 1993-94- By the Revenue in the case of M/s. Bhogilal Mulchand Kandoi: In the assessee's appeal the following grounds were raised: The following grounds are without prejudice to each other. In view of the facts of the case as well as law. Learned CIT(A) erred: (1) In making out new case of addition by applying gross profit rate of 25 per cent upon so-called unaccounted sales of Rs. 13,50,799/- thereby making gross profit addition of Rs. 3,37,700/- which is a new source of addition not made by the Assessing Officer and no particular show-cause notice was given, hence, prayed that this addition is to be deleted which is decided as per the CIT(A)'s order page 28 para 11. (2) In not appreciating the facts that no specific defect has been pointed out in books itself and the appellant has already reconciles Annexure-Assessment order 24 with Annexure-A/51 and as such there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tanpole, Ahmedabad. During the course of search operations, statement of Shri Kamleshbhai B. Kandoi (Shri K.B. Kandoi)- a partner of the assessee-firm was recorded under section 132(4) of the Act on 6-11-1992. In his statement recorded under section 132(4), Shri K.B. Kandoi disclosed an additional income of Rs. 24 lakhs for taxation. He has also specified the assets acquired and the expenses incurred out of the above income of Rs. 24 lakhs. However, in the return of income the amount of Rs. 24 lakhs which was disclosed under section 132(4) was not shown as income. The Assessing Officer after seeking explanation of the assessee in this regard made an addition of Rs. 24 lakhs. Shri K.B. Kandoi in his return of income has offered an additional income of Rs. 6,15,800/- to explain the unexplained cash, bank deposits and investment in shares, etc. However, the Assessing Officer was of the opinion that the above cash, bank deposits, investment in shares, etc., were part of the disclosure of Rs. 24 lakhs by the assessee-firm. Therefore, the Assessing Officer assessed the sum of Rs. 6,15,800/- in the hands of Shri K.B. Kandoi on protective basis. 5. On appeal, the CIT(A) was of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT [1971] 82 ITR 453 (Pune). 7. On the other hand, the learned counsel for the assessee argued at length and contended that the addition of Rs. 24 lakhs made by the Assessing Officer was not at all justified. He submitted that the CIT(A) ought to have deleted the entire addition of Rs. 24 lakhs, rather than sustaining a part of the addition, i.e., Rs. 3,37,700/-. He heavily relied upon the retraction made by Shri K.B. Kandoi in the form of affidavit dated 23-2-1993. He pointed out that the affidavit dated 23-2-1993 Shri K.B. Kandoi has explained the circumstances under which the disclosure was extracted from him. In the affidavit he has clarified that he was only looking after the purchase and sale and he did not know the production of sweets. The search has started on 5-11-1992 at about 6.30 in the morning and the statement was concluded on 6-11-1992 at 12.30 noon. Shri K.B. Kandoi was fully fired and he gave the statement as was persuaded by the search party. He has also stated that the search party had stated to Shri K.B. Kandoi that unless the sum of Rs. 24 lakhs is declared, harassment will follow. In the above circumstances the disclosure was made. The learned counsel furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profit is correct. Q. 11 During the search of your house cash of about Rs. 3,95,000/- is found. You inform as to whom this cash belongs? Ans. This is my own cash. Q. 14 Who is looking after sales in your shop? Ans. I am looking after the sales of Manekchock shop and my younger brother Nitin is looking after the sales of Ashramroad shop. Q. 18 Today during search cash of Rs. 68,990/- is found from your shop whereas as per the cash book it is Rs. 66,196/-. Give information for the excess cash of Rs. 2,794/-. Q. 22 To whom the cash of Rs. 3,95,000/- found from your residence belong to? Ans. Yes, it is my cash. It belongs to my firm. Q. 23 From where you have received this cash? Ans. This is the income of the sales made during Diwali which is not recorded in the books of account. This entire Rs. 3,95,000/- are not recorded in the books. Q. 33 What is your daily expenses and what kind of it is? Ans. I daily eat five (pan) masala. At present I have reduced it. One masala costs rupees five thus the expense on masala is Rs. 25. Q. 34 Do you agree that during the course of search books of account and other papers found it is proved that you make sales out of books? Ans. Yes, I fully agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and silver utensils and ornaments worth Rs. 45,500/- found that seized by you during the search of our house are purchased out of unrecorded income. The remaining jewellery (ornaments) which is 380 gms. found during the search is received during marriages of my brother and myself. Also the ornaments of diamond worth Rs. 50,000/- arc received at the time of marriage. (vi) During the course of search of our house valuable articles as per Annexure P are found. Out of these only Maruti Van valued at Rs. 55,000/- is recorded in the books of account of the remaining are purchased out of unrecorded income. The total value of the same is Rs. 1,01,200/-. (vii) I declare unrecorded stock worth Rs. 2,00,000/- found during the search of our house, shop and factory. (viii) I declare Rs. 3,00,000/- spent in renovation and furniture of our house which is out of unrecorded income. (ix) I further declare Rs. 3,50,000/- which is not recorded in our books of account which comprises of sweets supplied to our various customers during Diwali and Rakshabandhan. (x) I further declare Rs. 3,00,000/- given over to our various relatives and friends during some occasion or as loans which is out of unrecorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement can retract the same under certain circumstances (i) The first circumstance is where the statement is not given voluntarily but it was obtained under coercion, threat or undue influence. But the burden is upon the person making the statement to prove that the statement given by him was not voluntary. The assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised Officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement would also one of the important points to be taken into account while deciding whether the statement was voluntary or not. (ii) The other circumstance is where the statement was given under the mistaken belief of either fact or law. Here again the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law. 11. This view of ours is supported by the decision of the Tribunal Ahmedabad Bench in the case of Manharlal Kasturchand Chokshi and Hotel Kiran's case. 12. The learned counsel for the assessee has relied upon several decisions to support his contention that the additio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atements. But additions made only on the basis of disclosure statements normally should not be confirmed in the absence of corroboration. In the eyes of law the general rule of practice is that it is unsafe to rely upon a confession only without any corroboration. Hence, the revenue ought not to have made the additions. The additions are deleted. 15. Let us examine the facts of the case in the light of the legal provisions as enumerated above. From question Nos. 5 and 6 of the statement it is evident that Shri K.B. Kandoi admitted that the correct gross profit should be 30% to 40%. It is not in dispute that the gross profit disclosed in the books of account was even less than 25%. Therefore, Shri K.B. Kandoi was aware that the gross profit disclosed by the assessee in the books was less. With regard to question No. 18, Shri K.B. Kandoi admitted that the assessee did not show small sale in the books. From question Nos. 22 and 23, it is clear that the cash of Rs. 3,95,000/- was found from the assessee with Shri K.B. Kandoi has admitted to be unrecorded cash and he has also admitted that it is from the unrecorded sale made during Diwali period. With regard to question No. 33 he admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in valuables found from the residence which in total amounts to Rs. 6,15,800/- were disclosed by Shri K.B. Kandoi as his personal income in his return of income. However, when a specific query was raised at the time of hearing whether Shri K.B. Kandoi has any independent source of income, the learned counsel fairly admitted that the only source of income of Shri K.B. Kandoi is the share income from the firm. Moreover we also find that in reply question Nos. 22 and 23 Shri K.B. Kandoi has clearly admitted that unrecorded cash is out of unrecorded sale of the assessee-firm. 17. In the above circumstances the contention of the assessee that there was no undisclosed income of the assessee-firm but there was undisclosed income of the partner Shri K.B. Kandoi, cannot be accepted. The learned counsel for the assessee has also contended that there was no unexplained investment in gold ornaments, stock, furniture/renovation. He also contended that there were no loan and advances to the friends and no money was recoverable from the customers. However, we find that the Revenue has made the addition of Rs. 24 lakhs as the income disclosed by Shri K.B. Kandoi in his statement recorded at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the High Court on merits. The High Court has only declined to entertain the Revenue's application under section 256(2) whereby the Revenue has requested the High Court to direct the Tribunal to refer the question of law. 20. The learned counsel for the assessee has also relied upon the decision of the Hon'ble Calcutta High Court in the case of S.M. Omer. However, we find that in the case of S.M. Omer, the assessee has received a cheque of Rs. 1,13,603/- from the Controller of Defence Accounts (Navy). The Assessing Officer treated the entire sum as income of the assessee. On appeal, the CIT(A) directed to apply the net profit rate on the above receipt. The decision was upheld by the Tribunal. On a reference by the Revenue, the Hon'ble Calcutta High Court has held- that section 69 of the Income-tax Act, 1961, was not applicable in the instant case. The assessee supplied the goods after incurring certain cost and after manufacturing the goods and the amount that was received from the Defence Department could not represent the net income but it was the sum received including the profit and expenditure. The Tribunal was justified in upholding the deletion of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndoi on protective basis. The CIT(A) did not uphold the finding of the Assessing Officer with regard to the addition of Rs. 24 lakhs in the hands of the assessee-firm. Therefore, he had directed the Assessing Officer to assess the sum of Rs. 6,15,800/- in the hands of Shri K.B. Kandoi on substantive basis. However, while disposing of Ground No. 1 of Revenue's appeal, we have upheld the order of the Assessing Officer with regard to the addition of Rs. 24 lakhs which was made by him on the basis of disclosure made by Shri K.B. Kandoi in the case of the assessee-firm, therefore, no addition of Rs. 6,15,800/- is required to be made in the hands of Shri K.B. Kandoi. We therefore allow Ground No. 2 of Revenue's appeal. 25. Ground No. 3 of Revenue's appeal is against deletion of GP addition of Rs. 7,22,770/-. We have heard both the sides and perused the material placed before us. The assessee has disclosed the Gross Profit of Rs. 14,86,87/-1 on the turn over of Rs. 73,65,473/-. The GP rate works out to 20.18%. The Assessing Officer rejected the books of account and applied GP rate of 30% which resulted in the addition of Rs. 7,22,770/-. The CIT(A) deleted the addition. Hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Revenue vide Ground No. 2 in the case of M/s. Kandoi Bhogilal Mulchand wherein Shri K.B. Kandoi is partner. For the detailed discussion in para 24 we hold that no separate addition of Rs. 6,15,800 is required to be made in the case of Shri K.B. Kandoi. Accordingly, the addition made by the Assessing Officer on protective basis and which was directed to be made on substantive basis by the CIT(A), is deleted. ITA No. 2455/Ahd./99- Assessment year 1992-93 - Revenue's appeal in the case of M/s. Bhogilal Mulchand Kandoi- 31. The only ground raised in this appeal by the Revenue reads as under:- The ld. CIT(A) has erred in law and on facts in deleting the addition made by the Assessing Officer for the amount of Rs. 2,13,941 on the ground of estimation of GP at the rate of 24%. 32. We have heard both the parties and perused the material placed before us. For the year under consideration the assessee has disclosed the sales of Rs. 65,62,616 on which gross profit of Rs. 13,61,123 was disclosed. The Assessing Officer rejected the books of account and applied the GP rate of 24% which resulted in the addition of Rs. 2,13,941. The same is deleted by the CIT(A). Hence this appeal by the Reve ..... X X X X Extracts X X X X X X X X Extracts X X X X
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