TMI Blog2013 (11) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... o be proved on the basis of material and evidences, and not on the basis of affidavits and counter affidavits – Decided against the Assessee. Deduction u/s 37 of the Income Tax Act - Rs.8 lakhs, being compensation paid to the local fishermen in connection with the construction of a temporary Jetty at Cuddalore - The assessee claimed to have met the said expenditure out of the cash generated from the accommodation bills procured from M/s. Sachin Crane Service; M/s. Rajesh Hiring; and M/s. Jayesh Crane & Transport Co., for an aggregate of Rs.8.22 lakhs – Held that:- There is no question of any double deduction in respect of Rs.8 lakhs. The same is being claimed and would stand to be allowed in terms of our foregoing order, u/s.37(1), separate and distinct from the addition qua the accommodation bills for Rs.8.22 lakhs, which have under the facts and circumstances of the case been considered as the source of funding of the said expenditure. Disallowance for the sum being stated to be paid on account of commission for obtaining bogus accommodation bills – Held that:- The said expenditure is not for generating any income per se, but rather depressing artificially the income alre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 05.01.2000, whereat he conceded to the assessee-company having obtained bogus (accommodation) bills from various parties so as to generate cash to meet obligations which were not allowable as expenditure, i.e., for income-tax purposes. Per his last statement (i.e., dated 05.01.2000/assessee s PB pages 1-2), after confirming to be a power of attorney holder of the assessee company, and competent to make a statement on its behalf, he offered Rs. 50 lacs as the company s net undisclosed income (UDI) for the last 10 years, i.e., for the block period ending 02.12.1999, on account of bogus accommodation bills, and on which due taxes would be paid. This was followed by a letter dated 06.01.2000 to the concerned DDIT (Investigation) (before whom the depositions were made), submitting along with a break-up of the UDI surrendered (as in fact agreed to in the statement of the previous day), aggregating to Rs. 50.81 lakhs, deducting in fact commission said to be paid thereon (Rs.3.30 lakhs at the rate of 6.5 percent) (PB pgs. 3-4). Subsequently, however, the assesee only returned an undisclosed income of Rs.16,58,238 for the block period vide return filed on 07.06.2000. This was accompanied by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction at serial number two of the table reproduced above. The same is in respect of bills of three parties, as under (refer pages 4-5 of the assessment order):- Sl. No. Particulars Financial Year Amount (in Rs.) 1. Central Tyres 1991-1992 5,37,350/- 2. Indian Freightways 1997-1998 7,45,167/- 3. Nilesh Transport Co. 1999-2000 6,00,000/- 18,82,517/- The basis of the assessee s claim of the bills being genuine, representing actual expenditure, is that the disclosure during search was made without reference to the records, which had been sealed by the Department at the time of the search. The cabin of Sh. S. Natrajan, the group finance manager, where the search records were locked up, was opened only on 30.03.2000, and copies of the seized documents made available to it in the first week of April, 2000. Only thereupon, after consulting the records, it was discovered by the assessee that some genuine bills had by mistake been classified as non-genuine and, accordingly, their value not returned as undisclosed income. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on record to show that the relevant purchases by the assessee were not genuine but only accommodation entries. The addition was, accordingly, directed to be deleted. Aggrieved, the Revenue is in appeal. 4. Before us, the respective cases of the parties were along with the same lines as stated hereinabove, each relying on the order of the authority below as favourable to it. As per the ld. DR, the retraction in the instant case was after nearly two months of the records being made available and, therefore, could not be accepted. A confession, though retracted, is an admission, binding the confessor [Chuharmal v. CIT (1988) 172 ITR 250 (SC)]. Retraction made after a lapse of time looses credence and, thus, cannot be accepted, for which reliance was placed on the following decisions: Video Master vs. Jt. CIT [2003] 78 TTJ (Mum.) 264; Manoharlal Kasturchand vs. Asstt. CIT [1997] 57 TTJ 639 (Ahd.) (placing copies of the same on record); and Ramesh T. Salve vs. Asstt. CIT [2000] 75 ITD 75 (Mum.). Similarly, when not based on material or evidence, the retraction is to be ignored - Manmohan Singh Vig vs. DCIT [2006] 6 SOT 18 (Mum). 5. We have heard the parties, and perused the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... say, on checking up with the concerned party/s. And which gives rise to the next question: How did the asseessee furnish the name of the parties as well as the amounts in relation thereto, i.e., if it did not have access to the relevant records? How, again, it may be asked, did it arrive at the figure of Rs. 50 lacs? It is for these reasons that we insist on some reliable record, as (say) of the cash generated out of bogus bills and its disposal, so as to base the retraction on and place it on a firm footing. In the absence of any such, the same is only a bald assertion. The assessee s stating of the retraction as having been made after checking the record, without as much as clarifying as to what was checked, what examination was carried out, and what was found as a result thereof, is only an alibi. 5.2 Further, the initial disclosure was admittedly voluntary. Even as the ld. DR was at pains to bring home, even the assessee does not contend of it being not so, or of having been made under pressure or under physical or mental stress, as the ld. CIT(A) mentions. In the absence of any charge of coercion, mis-representation or fraud, the onus on the assessee to show as to what mist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further clarifies of the disclosure of Rs. 50 lakhs to be the minimum amount thereof, and which could, on subsequent verification of the record as to the accommodation bills availed of, be subject to an upward revision. The statement was, as promised, followed by a letter by the assessee company the next day, furnishing the party wise break-up of the disclosure (along with the respective amounts) vide letter dated 06.01.2000. Could the same be without access to the relevant bills? Even if the assessee may not have actually called for its copy of the bills, that retained by the issuer/s as well as his statement, was at hand. Further, the said letter refers to statements of the various officials of the company recorded on 02.12.1999, 06.12.1999, 22.12.1999, 03.01.2000 and 05.01.2000. The disclosure, thus, was a culmination of a series of statements and discussions in the matter, with reference to specific record and bills, corroborative in nature (inasmuch as the assessee s suppliers had also deposed of having raised bogus bills), after extensive deliberations extending to over a month, involving even the top management of assessee-company and, thus, after presumably consulting the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to the actual dates of the payments (of which record had been maintained by the assessee), as well as that of the cash generated (by receiving cash in lieu of payment by cheques), it was clarified by him that the expenditure could be considered as sourced from the cash thus received. Reliance was placed by him on the decision in the case of Anantharam Veerasinghaiah and Co. vs. CIT [1980] 123 ITR 457 (SC) for the proposition that the secret profits or undisclosed income earned in an earlier year could form a source that the assessee may draw upon subsequently for meeting an expenditure or introducing an amount in his account books. The payment to fishermen was reflected in the inter-office memos. The same was made to elicit their cooperation for constructing the Jetty and, thus, commercial in nature and purpose. Further, there was nothing illegal about the said payments. They definitely constituted neither any offence under law nor were prohibited by law, so as to be hit by Explanation below section 37(1). Also, there was no merit in the A.O.'s argument that the assessee had not claimed this expenditure. When the source of the expenditure, i.e., the cash generated out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -Ro jetty had to be erected. It was enquired from the ld. AR during hearing if the assessee had claimed the expenditure on the construction of the jetty in its regular books of account, to which he could not furnish any definite reply. The same would undeniably establish the commercial purpose for which the jetty was constructed. Also, in our view, there is no question of the assessee not claiming the expenditure on its construction; the same forming part of the direct cost of the transportation contract with M/s. Nagarjuna Fertilisers Chemicals Ltd. As such, subject to the assessee demonstrating the building up of the jetty on the basis of the expenditure on its construction per its regular books of account and/or other relevant records, so that the impugned expenditure of Rs.8 lakhs gets established as being paid for the said purpose, the assessee is eligible for deduction in its respect. We decide accordingly, disposing, thus, the Revenue s ground no. 2. 8.2 With regard to the assessee s ground no. 2, we observe no ambiguity whatsoever in the findings by the ld. CIT(A) in the matter. So, however, it may be clarified that there is no question of any double deduction in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , as well as under the Act; the income under the certain heads (viz. business income) being required to be determined only on the basis and on the strengthens of the books of account (s. 5 r.w.s. 145 of the Act). As such, procuring bills, which do not represent any expenditure actually incurred, does not represent any business transaction. And the stated purpose of booking the expenditure in the accounts is an illegal activity. The same is definitely an offence under, and in any case prohibited by, the law, including the Act, so as to be hit by Explanation to section 37(1). We have also perused the order by the co-ordinate bench of the tribunal which has taken a view that this expenditure is for generating the said income. We have already explained that the same does not represent any economic activity, and is deemed to be an income under the Act for the simple reason that it leads to artificially depressing the actual profit/income as reflected by the assessee s books of account. No business purpose as such is served and neither has the tribunal found it to be so. In the absence of any definite finding with respect to the business purpose served by such bills by the tribunal, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P.) Ltd. [2006] 284 ITR 319 (Bom.), is, therefore, of no moment. The assessee s ground no.4 is, accordingly, dismissed. 14. Ground no. 5 of the Revenue s appeal was not pressed during hearing, and is accordingly dismissed as not pressed. 15. Ground No.6 relates to the deletion of the surcharge levied by the A.O., i.e., on the tax on the undisclosed income. The ld. DR during hearing cited the decision in the case of CIT vs. Suresh N. Gupta [2008] 297 ITR 322 (SC), which it was contented was clearly on the point. The ld. AR did not object to the said averment by the ld. DR. 16. We have heard the parties, and perused the material on record. The Hon ble apex court per its decision in the case of Suresh N. Gupta (supra) has clarified the amendment to section 113 by Finance Act, 2002 w.e.f. 01.06.2002 (which pertains to the tax in case of a block assessment) by way of proviso thereto, as being clarificatory in nature. It would, thus, operate even to pending assessments. As such, the surcharge stands rightly levied by the A.O., and its deletion by the ld. CIT(A) per the impugned order is hereby deleted. We direct accordingly, allowing the Revenue s ground #6. 17. The seventh and ..... 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