TMI Blog2015 (4) TMI 54X X X X Extracts X X X X X X X X Extracts X X X X ..... icer cannot presume the income of the assessee for the period covered by section 153A on the basis of confession statement. The Assessing Officer is required to bring on record positive material in support of the addition. The addition made by the Assessing Officer in the present case is contrary to the evidence brought on record. The addition made on the basis of statement recorded from the assessee or from the assessee's son which is not recorded under section 132(4) of the Act. It is recorded consequent to the post search enquiry and that statement was also retracted by the assessee. The Assessing Officer herein made the addition only on the basis of statement of the assessee's son dated April 26, 2010. The contents of this statement were retracted vide letter dated December 28, 2010. Being so, the assessment is not based on any cogent material. The assessment cannot be made on the basis of probability. It should be based on the evidence brought on record. In our opinion, tax can be collected only as provided under the Act. If an assessee, under a mistake, misconception or on not being properly instructed, is over assessed, the authorities under the Act are required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther, the amount of contract receipts appears to have already suffered tax in the hands of the company, as such there is no basis for making the addition originating from the same amounts in the hands of the assessee, being the loanee. On this count, the addition of ₹ 18,00,000 made on account of amount standing in the name of Mr. Srinivasa Rao Nukala, as unexplained credit is not sustainable. Accordingly, deletion by the Commissioner of Income-tax (Appeals) is confirmed.- Decided in favour of assessee. Addition of ₹ 13 lakhs under section 68 in the name of Lordven Enterprises - Held that:- The onus is on the assessee to prove the transaction by explaining the same with reference to the above three factors on cumulative basis. In the absence of the same, the transaction cannot be treated as genuine one and as such the credit will be treated as unexplained credit. The ratios of the case laws cited by the Assessing Officer in the assessment order, more specifically the decision of the jurisdictional High Court in the case of R. B. Mittal v. CIT [2000 (8) TMI 54 - ANDHRA PRADESH High Court] are very much relevant for the facts of the case. Accordingly, the treatment m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue also raised a ground that the Commissioner of Income-tax (Appeals) erred in admitting additional evidence by way of receipt from Shri Shirdi Sansthan without affording opportunity to the Assessing Officer. 4. There is one more ground by the Revenue that the Commissioner of Income-tax (Appeals) erred in not appreciating the fact that the source of source was nothing but diversion of funds in the guise of subcontract to Sri N. Srinivasa Rao. 5. The assessee raised ground in the cross-objection with regard to sustaining addition towards donation of gold valued at ₹ 9,82,80,246. 6. The assessee also raised a ground with regard to sustaining of addition under section 68 of the Income-tax Act, 1961 at ₹ 13 lakhs received as advance against sale of agricultural produce from M/s. Lordven Enterprises and also ₹ 6 lakhs towards receipt from Mr. Veerendra Kumar. 7. The brief facts of the case are that there is a search action under section 132 of the Act in the group cases of M/s. AMR Constructions Ltd., on December 16, 2008. As part of this search action, the assessee was also covered under section 132 of the Act. Consequent to the search action notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amily members stated in their sworn statement that they have donated 16 kg gold and balance was collected from friends and relatives, the assessee failed to furnish the details of register maintained by the assessee for collection of such balance gold from the friends and relatives and details of the receipts issued to the donors. During the post search proceedings around 60 donors were examined by the Revenue authorities on June 4, 2009, June 5, 2009, and June 6, 2009. These random 60 donors though stated that they have made donations, they failed to produce any recorded evidence to prove the genuineness of the donation. In fact, none of them filed return of income and basically they are agriculturists. From the above, the Assessing Officer drew the inference that the balance gold said to have been collected from various friends and relatives from Nellore district from where the assessee hails, as non genuine. Accordingly, the assessee was asked to file confirmation letters in support of receipt of gold as donation from various parties by the assessee. The assessee in reply to these filed a letter dated April 26, 2010 stating as follows : A detailed note was call ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell explained and demonstrated before the Department. However, to be co-operative with the Department and just to purchase peace with the Department we have accepted to offer the difference amount as additional income of me and my family members. However, in order to avoid protracted litigations, to buy peace and in order to put a quietus to the whole issue, we have accepted to offer the difference amount as additional income of me and my family members. We have taken up the issue regarding the balance contributions, we accept to make an additional declaration of ₹ 7,67,74,956. This additional declaration made is adopted as income only for the purpose of computing tax and is otherwise is not an income. It is also prayed before your goodself that the penalty proceedings be kindly dropped by your goodself in view of the fact, elaborately explained above, that the disclosure was made voluntarily by us without the discovery of any material, pointing to the same, during the course of search. All the disclosures were made in good faith in order to buy peace and with the honest belief and conviction that no penalty proceedings would be initiated on the assessees. Hence it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade, the Department would not contact the donors and would not verify the veracity of the donations. Therefore, we thought it would be proper to purchase peace by paying tax and offered the said amount. However, we understood that the income-tax authorities have already conducted verification with many/majority of the donors by recording the statements from them with regard to the donations made by them. As the income-tax authorities already contacted the donors and as the donors were already made to appear before the authorities, we are of the view that such an admission is not required. Therefore, I humbly submit that the earlier letter offering the amount of ₹ 7,67,74,956 in addition to what was declared during the course of search and seizure operations may please be treated as withdrawn. Therefore, what remains is the admission made at the time of search. Further I humbly submit that in so far as the donors of the gold for 'golden simhasanam' are concerned, they donated the gold ; the list of such donors along with their addresses and the amount of donation was already provided to the Department. Some of the donors were considered by the Department and all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reme Court judgment in the case of Hari Shankar Rastogi v. Sham Manohar 2005 AIR (SCW) 1712 wherein it was held that cross-objection is like an appeal. It has all the trappings of an appeal. Even when the appeal is withdrawn or is dismissed, cross-objection can still be heard and determined. 16. The learned authorised representative submitted with regard to the assessee's first ground that the assessee's son A. Mahesh Reddy while recording statement under section 132(4) of the Act while answering to question No. 20 has categorically stated that the entire contribution of gold was not made by the assessee's family members alone. But the assessee's friends and relatives who are closely related to the assessee and who have joined for the purpose of a noble cause initiated by the assessee and it was the collective effort of many like-minded people. He submitted that this fact was continuously reiterated by the assessee before the lower authorities on various occasions. However, to buy peace the assessee in his letter dated April 26, 2010 admitted to disclose additional income in the name of the assessee, A. Mahesh Reddy and A. Girish Reddy. Accordingly the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t as per sworn statement recorded under section 131 of the Act on January 12, 2009 from Mr. A. Mahesh Reddy son of the assessee who has clearly mentioned that it was donated by different donors in his village. Accordingly he drew our attention to the list of donors produced before the lower authorities placed before us in paper book I page numbers 44 to 381. Further he submitted that during the post search enquiry, the Revenue authorities have summoned 70 persons and recorded statements under section 131 of the Act who are poor and innocent agriculturists having no knowledge of the income-tax Act and given a firsthand information that they donated gold according to their capacity for the noble cause. In spite of confirmation from those innocent agriculturists having no knowledge of the income-tax, the Department is not ready to believe the true statements of the true donors on the reason that no evidence was found during the search regarding their donations. Further he submitted that even after offer of additional income at ₹ 7,67,74,956 by the assessee, the Department started enquiry and when the enquiry report was found favourable to the assessee, the Department is not read ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable explanation, the Assessing Officer failed to produce any evidence to show that the assessee had actually incurred any expendi ture which was not accounted for or was diverted to the old concern. There was no infirmity in the order of the Commissioner (Appeals) deleting the addition. 17. Further he submitted that originally the assessee made a surrender and offered income which was duly retracted by the assessee as the Department disregarded the contents therein as per which the Department cannot cause further enquiry and the Department cannot pick and choose to its convenience. He relied on the following judgments : A. Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) ; B. T. S. Kumarasamy v. Asst. CIT [1998] 65 ITD 188 (Mad) ; and C. Hotel Kiran v. Asst. CIT [2002] 82 ITD 453 (Pune). 18. Further he submitted that the offer letter made by the assessee is not under section 132 of the Act. The offer was made subsequent to the post search enquiry. The offer is also conditional. Being so, the argument of the Department is not proper to state that the offer made by the assessee under section 132(4) is binding on the assessee. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. He submitted that the first thing that may be noted is that the addition flows out of statement made at the time of search. In fact, as remarked by the counsel in his opening remarks, the very search is attributed to this issue of donation of golden simhasan. The assessee made continuous offers-first some amount, then some more and culminating in the offer letter dated April 26, 2010. The final offer came 12 months after conclusion of enquiries and examination. So nothing to provoke by way of pressure or a noble impulse to protect other donors . There were no enquiries by the Assessing Officer at all because this issue was considered as closed till the assessee retracted at 11th hour. Thus, the Department was very much prevented by this feint and last minute withdrawal. The register was not found at the time of search at all. It was produced later. As regards the averments that from the beginning it was being told that it was not the assessee alone, it is submitted that of course, any person will tell that rather than own up entire thing at first outing but is saying enough ? What matters is conduct and evidences. 20. The Departmental representative further subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to May to June 2009 period when the Investigation Wing was enquiring. This disclosure was in June 2010 and withdrawal was in December, 2010 on the eve of time barring date for the assessments. The learned Departmental representative drew the attention of the Bench to pages 44 and 45 of the paper book 1. The entire labour of the assessee and his counsel in filing 2000 pages is only to justify about 9 kg of gold and there is no evidence for the rest of 90 per cent. of gold. Accordingly, he submitted that the addition made by the Assessing Officer and as modified by the Commissioner of Income-tax (Appeals) may be upheld. Further he relied on the assessment order. 23. We have heard both parties and perused the material on record. We have carefully perused the receipts received from Shirdi Saibaba Sansthan placed on record at pages 1027, 1028, 1029, 1030, 1031 of the paper book. As per these receipts the gold donation was received from Sri Audinarayana Reddy family and associates. Accordingly the assessee taken a plea before the lower authorities that he donated gold worth ₹ 25 lakhs and the balance was collected from various friends and relatives from his native village. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above circumstances, we were of the view that if a decla ration were to be made, the Department would not contact the donors and would not verify the veracity of the donations. Therefore, we thought it would be proper to purchase peace by paying tax and offered the said amount. However, we understood that the income-tax authorities have already conducted verification with many/majority of the donors by recording the statements from them with regard to the donations made by them. As the income-tax authorities already contacted the donors and as the donors were already made to appear before the authorities, we are of the view that such an admission is not required. Therefore, I humbly submit that the earlier letter offering the amount of ₹ 7,67,74,956 in addition to what was declared during the course of search and seizure operations may please be treated as withdrawn. Therefore, what remains is the admission made at the time of search. Further I humbly submit that in so far as the donors of the gold for 'golden simhasanam' are concerned, they donated the gold ; the list of such donors along with their addresses and the amount of donation was already provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the balance of gold was pooled/donated by various persons, the list of whom was already provided. (d) We were asked to furnish evidence in respect of the said other devotees. (e) We were of the view that we should not trouble the devotees, who made voluntary contributions, who donated gold by making them appear before the authorities. Therefore, we, myself and my family members accepted to declare balance quantity of gold as well, which was quantified at ₹ 7,67,24,956. In the above circumstances, we were of the view that if a declaration were to be made, the Department would not contact the donors and would not verify the veracity of the donations. Therefore, we thought it would be proper to purchase peace by paying tax and offered the said amount. However, we understood that the income-tax authorities have already conducted verification with many/ majority of the donors by recording the statements from them with regard to the donations made by them. As the income-tax authorities already contacted the donors and as the donors were already made to appear before the authorities, we are of the view that such an admission is not required. Therefore, I humbl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A. Audinarayana Reddy 3,26,77,776 57,09,700 3,83,87,476 Total 6,53,55,556 1,14,19,400 7,67,74,956 28. It was also made clear in the sworn statement recorded on December 16, 2008 from A. Mahesh Reddy that the entire contribution of gold was not made by the assessee himself or his family members alone but many other friends and relatives closely associated with the assessee's family. Further, it was also made clear that to avoid any inconvenience to the devotees and to purchase peace with the Department, the difference amount of ₹ 7,67,74,956 was accepted as additional income of the assessee and his family members. This amount was declared vide letter dated April 26, 2010. However, in the meantime the Department started enquiry with the various devotees and recorded statements and collected evidences regarding donations made by them. It is also on record that about 70 donors appeared before the Department and confirmed the donations. When this was going on the assessee filed a letter dated December 28, 2010 retracting the earlier letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 91 ITR 18 (SC) the apex court held that admission made by the assessee is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts. (b) In the case of T. S. Kumarasamy v. Asst. CIT [1998] 65 ITD 188 (Mad) wherein it was held that the entries in books of account found in the search operation under section 132 have to be accepted as true and it is not open to the Assessing Officer to turn around and say that in making the block assessment the entries in the books of account are untrue or false unless it is proved by legally acceptable evidence that the admission involuntary and the same could not be retracted. (c) In the case of Hotel Kiran v. Asst. CIT [2002] 82 ITD 453 (Pune) wherein held that addition can be made on the basis of admission in the statement under section 132(4) in the absence of any evidence indicating that the statement under section 132(4) was obtained under coercion, threat, duress or undue influence or that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1962 SC 361, State of West Bengal v. Administrator, Howrah Municipality, AIR 1972 SC 749 and Babhutmal Raichand Oswal v. Laxmibai R. Tarte, AIR 1975 SC 1297, that the State authorities should not raise technical pleas if the citizens have a lawful right and the lawful right is being denied to them merely on technical grounds. The State authorities cannot adopt the attitude which private litigants might adopt. (S. R. Koshti v. CIT [2005] 276 ITR 165 (Guj). 34. Further the Central Board of Direct Taxes Circular 14(XL-35) of 1955, dated April 11, 1955 states that, officers of the Department must not take advantage of the ignorance of an assessee as to its rights. It is settled law that the Central Board of Direct Taxes Circulars are binding on Revenue authorities. This circular of the Board is in consonance with the constitutional provision that no tax can be levied without the authority of law. This also accords with the principles enunciated by the courts. 35. If the assessee out of ignorance included income as taxable in the return and it approached the court to direct the Assessing Officer to exclude said amount from assessable income then an appropriate decision is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come, even though an offer to that effect might, in certain circumstances, have been made by the assessee. As explained, the shifting of some transactions of some others to the hands of the assessee is not justified in view of the absence of any incriminating material found in the course of search as belonging to present assessee. 39. In view of the above discussion, in our opinion, the evidence brought on record is not enough to sustain the addition in the hands of the assessee. The ground raised by the assessee in his cross-objection with regard to addition towards donation of gold to Shiridi Saibaba Sansthan is allowed. Being so, the ground raised by the Revenue regarding sustaining of addition on this count is dismissed as infructuous. 40. The next ground in the Revenue's appeal is with regard to deletion of addition of ₹ 18 lakhs in the name of Sri N. Srinivasa Rao under section 68 of the Act. The brief facts of the issue are that it has been explained by the assessee that the sources for the advances of ₹ 18,00,000 given to the assessee, are out of the withdrawals made from Reliant Metropolitan Developers P. Ltd and M/s. Live-in Shelters P. Ltd., who wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld to have discharged the primary onus where the amount representing the credit in question was received by account payee cheques, with the details of creditors, their income-tax particulars and written confirmations from such persons were filed, as per the rulings of various courts. In this regard, the assessee relied on the decisions of the Supreme Court in the case of CIT v. Orissa Corporation P. Ltd. [1986] 159 ITR 78 (SC) and the decision of the Supreme Court in the case of CIT v. Gujarat Heavy Chemicals Ltd. [2002] 256 ITR 795 (SC). 42. The Commissioner of Income-tax (Appeals) deleted this addition by observing that the Assessing Officer could not form an opinion as regards to the creditworthiness of the creditor based on the facts that have emerged and explained to him and drawn his own conclusions treating the said credits as the unexplained credits for want of more information/evidence on the issue of creditworthiness. This conclusion do not constitute the correct decision based on the ratio that have emanated from the decisions of the Supreme Court in the case of CIT v. Gujarat Heavy Chemicals Ltd. [2002] 256 ITR 795 (SC), wherein the hon'ble Supreme Court express ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ish the mere details of the identity without bringing or explaining the relevant information regarding genuineness of the transaction and the creditworthiness of the creditor. The onus is on the assessee to prove the transaction by explaining the same with reference to the above three factors on cumulative basis. In the absence of the same, the transaction cannot be treated as genuine one and as such the credit will be treated as unexplained credit. The ratios of the case laws cited by the Assessing Officer in the assessment order, more specifically the decision of the jurisdictional High Court in the case of R. B. Mittal v. CIT [2000] 246 ITR 283 (AP) are very much relevant for the facts of the case. Accordingly, the treatment meted out by the Assessing Officer for the credit of ₹ 13,00,000 from M/s. Lordven Enterprises is held to be sustainable and as such the addition made on this count is confirmed. 45. The next ground in cross-objection is with regard to sustaining of ₹ 6 lakhs in the name of Sri Veerendra Kumar. The brief facts of the issue are that an advance of ₹ 6,00,000 shown to have been received from Shri Veerendra Kumar towards the advance of prope ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
