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TMI Blog2015 (7) TMI 1019X X X X Extracts X X X X X X X X Extracts X X X X ..... id amount u/s.40A(9) of the I.T. Act on the ground that as per provisions of section 40A(9) the contribution to own funds/trust/company is allowable only when the same is approved by the CIT. In appeal the Ld.CIT(A) upheld the action of the Assessing Officer for which the assessee is in appeal before us. 4. The Ld. Counsel for the assessee at the outset referred to the decision of the Tribunal in assessee's own case for A.Y. 2007-08 and A.Y. 2008-09 vide ITA Nos. 1043 & 1044/PN/2013 order dated 25-11-2014 and submitted that the Tribunal has decided the issue against the assessee on the ground that no such approval has been received from the CIT till date. In view of the above and following the decision of the Coordinate Bench of the Tribunal in assessee's own case for the preceding two assessment years, the grounds raised by the assessee on this issue are dismissed. 5. In grounds of appeal No.2 to 2.4 the assessee has challenged the order of the CIT(A) in confirming the addition of Rs. 16,83,500/- made by the Assessing Officer on account of receipt of cash of Rs. 16,83,500/- from M/s. Rajendra Trading Company. 6. Facts of the case, in brief, are that the assessee is Private Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en giving substantial unaccounted cash to M/s Fasttrack Packers Pvt. Ltd. / Malpani Group. In view of the above you are requested to explain as to how this unaccounted cash received by your company has been accounted in your regular books of accounts for AY 2006-07 to AY 2010-11." 8. The assessee in his reply submitted that he has not received any such unaccounted cash from Shri Rajendra S. Raka. It was stated that although Shri Rajendra S. Raka has given initial statement he has clarified later that no such amount of Rs. 500/- per bag was paid in cash. It was stated that it is impossible for him to pay Rs. 500/- per bag by way of cash since his margin was about Rs. 500/- per bag out of which he has to incur all the expenses for selling the goods. It was argued that his premises were also covered during the course of search action and no incriminating documents showing assessee's name has been found in his premises. Even during the survey in the assessee's premises no incriminating document was found. It was stated that initial statement given by Shri Rajendra S. Raka was totally incorrect and this fact was also clarified by him in the statement recorded u/s.131 on 27-01-2010. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oup Shri. Rajesh Malpani vide his statement dated 03/12/2009 recorded on oath u/s 132(4) of the IT Act. As per this modus operandi discovered by the Department, Malpani Group used to receive unaccounted cash back from its dealers, as the dealers were under the control and influence of the group. The instant case is one such example of receipt of unaccounted cash from one of its dealer Shri Rajendra S. Raka @ Rs. 500/- per bag of Gaichhap Jarda. 2) Shri Rajendra S Raka is a dealer of Malpani Group for its tobacco product in the name of Gai Chhap Jarda for last many years. He used to purchase bags of Gai Chhap Jarda from M/s Sargam Retails Pvt. Ltd. @ Rs. 2,350/bag upto 31/12/2008 and suddenly and inconceivably, w.e.f. 01/01/2009, he started purchasing the same bags of Gai Chhap Jarda from Malpani Group's sister concern, M/s FastTrack Packers Pvt. Ltd. @ Rs. 1,850/ big i.e. at a lesser cost of @ Rs. 500/bag of Gai Chhap Jarda. 3) When confronted with the evidences gathered during the Search, Shri. Raka, dealer of M/s FastTrack Packers Pvt Ltd (a concern of Group) admitted in his sworn statement u/s 132(4), that this was H windfall gain for him in the form of enhanced profit o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that no such amount of Rs. 500/- per bag was paid by him to the assessee company in cash. 12. It was argued that Shri Rajendra S. Raka was originally buying goods from Sargam Retails Pvt. Ltd. Subsequently, because of his personal contact with the Director of the Company M/s. Fasttrack Packers Pvt. Ltd., the assessee obtained dealership directly from the assessee. Accordingly, he entered into a settlement with Sargam Retails Pvt. Ltd. thereby paying a total sum of (Rs.15.20 lakhs @ Rs. 95/- per bag for 16000 bags) towards compensation in respect of non compete fees. It was clarified that at the time of survey Shri Rajendra S. Raka confused the said payment to be the alleged payment to the assessee which was incorrect. Thus, from January 2009 onwards, the assessee availed the goods at discounted price of Rs. 1,850/- per bag from the assessee. It was accordingly stated that the assessee has not received any consideration over and above the amount of Rs. 1,850/- per bag as recorded in the books of the assessee. 13. The assessee further argued that the Assessing Officer has no where disputed that the sale price declared in the books of M/s. Rajendra Trading Company is under stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs in the case of Malpani group, the modus operandi of the generation of unaccounted cash receipts which has been unearthed has been accepted by the Malpani group and that the assessee company is a sister concern of the Malpani group, it was argued that the assessee company is no way related as a sister concern of Malpani group. The directors and shareholders of the assessee company are different. The directors of the assessee company are in no way related with the partners or directors of the company or the partnership firms of Malpani group. It was stated that the control, management and source of funds of the assessee company are totally independent. It was further submitted that it is not in any way related to M/s. Sargam Retails Pvt. Ltd. Finally, it was argued that the statement of Shri Rajendra S. Raka may be relevant for deciding the case of Shri Rajendra S. Raka. However, on that basis no addition should be made in the case of the assessee in the absence of any incriminating evidence found as a result of the search. It was accordingly argued that no such addition should be made in the hands of the assessee. 16. However, the CIT(A) was not satisfied with the arguments adva ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of account but represents the cash amount returned back to the assessee. He had also stated that since he was the dealer of Malpani group, it was as per the direction of that group that he had to show Rs. 1,850/- as purchase cost in books and pay the difference of Rs. 500/- per bag in cash to the assessee. Thus, the assessee is not correct in stating that no incriminating evidence was found during the course of search at its premises. She noted that the survey covered the business premises of Shri Rajendra S. Raka and therefore his deposition subsequently that he was not in possession of the accounts and seized documents is also seen to be totally incorrect. She further noted that it is also an admitted fact that during the course of search on the premises of Sargam Retails Pvt. Ltd. at Sangamner the seized documents found during the search showed that Shri Rajendra S. Raka had paid Rs. 95/- per bag to Sargam Retails Pvt. Ltd. as per the MOU dated 12-10-2009 which has not been disclosed to the Department. This fact was also accepted by Sargam Retails Pvt. Ltd. who is the recipient. Shri Rajendra S. Raka has offered to disclose additional income on this account. She further noted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31-12-2008 and thereafter the sudden decrease of the purchase price from 01-01-2009 @ Rs. 1,850/- per bag of the same Gai chhap Jarda. 21. She further noted that the original statement recorded on oath on 06-10-2009 was retracted by Shri Rajendra S. Raka only on 27-01-2010, i.e. almost 3 ½ months later. There is no substantiation of the claim that Shri Rajendra S. Raka had indeed made a plea to the Investigation unit on 10-10-2009 to allow him to be heard again. In absence of any evidence to support the same the CIT(A) held that a statement voluntarily recorded under oath cannot be allowed to be disbelieved or rejected through a mere retraction and rethinking unless evidence is brought on record that undue influence or coercion was applied at the time of recording the initial statement. Relying on various decisions the Ld.CIT(A) held that the retraction by Shri Rajendra S. Raka is not be relied upon and the totality of the facts and circumstances including the discovery of incriminating and uncontrovertible evidence during the course of search clearly show that the unaccounted cash received from M/s. Rajendra Trading Company, proprietor Shri Rajendra S. Raka of Rs. 16,83,50 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be deleted. 25. The Ld. Departmental Representative on the other hand heavily relied on the order of the CIT(A). He submitted that Shri Rajendra S. Raka has retracted his statement after a gap of 4 months and therefore such retraction has no evidentiary value which is after considerable time. Again referring to the letter addressed to the ADIT (Investigation) seeking for clarification he reiterated the findings of the CIT(A) that the said letter was undated and unsigned and therefore such socalled letter addressed to the Investigation Unit after 4 days from the recording of statement u/s.132(4) is doubtful. He submitted that the assessee has to first explain as to why he gave such a statement stating that Rs. 500/- per bag has to be given to the assessee in cash when there was no threat or coercion. 26. So far as the argument of the Ld. Counsel for the assessee that assessee has got nothing to do with Malpani group, he submitted that nothing has been brought on record to substantiate that assessee is not related to the Malpani group. He submitted that the same sets of people are the Directors in both the companies. Further, when Sargam Retails Pvt. Ltd. was supplying the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ag for 3367 bags. The same was on the basis of the reply of Shri Rajendra S. Raka in response to Question No.10 to 14 of the statement recorded u/s.132(4) on 06-10-2009. We find the CIT(A) upheld the addition made by the Assessing Officer on the ground that Shri Rajendra S. Raka in his statement u/s.132(4) had confirmed the payment of Rs. 500/-per bag to the assessee from 01-01-2009 to 06-10-2009 and the amount received by the assessee was substantiated by a number of irrefutable evidences gathered during the search. Further, the modus operandi of the Malpani group had been disclosed before the Settlement Commisison and Shri Rajendra S. Raka was under the influence and control of the Malpani group. The possibility of such unaccounted payments made by Shri Rajendra S. Raka to the assessee could not be denied. It is also the observation of the CIT(A) that retraction of statement by Shri Rajendra S. Raka was only an after thought. It is the submission of the Ld. Counsel for the assessee that no incriminating material or evidence was found in the course of the search on the assessee that it had received Rs. 500/-per bag from M/s. Rajendra Trading Company and that the assessee is no way ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the Target Discount to Malpani Group from the cash collected on behalf of them on sales made through us, to further period from Jan 2009 onwards, to avoid cut throat competition, we compromised with Sargam Retails Private Ltd. and paid them an amount of about Rs. 15.20 Lacs for 16000 No. of bags (at the rate of Rs. 95 per bag) as a sort of compensation for SRPL not entering my jurisdictional area and also for leaving their dealership and accepting that of Fasttrack Packers Pvt. Ltd. Out gross margins are reflected in our books of accounts which are seized by the department. I have not paid any cash to Fast Track Packers (P) Ltd. or Mr. Sachin Palod. Q.7 You have already stated in your earlier statement that you have paid Rs. 49,24,500/- to Fasttrack Packers Private Limited. A.7 Since I was little tense at the time of search, and was not in possession of the accounts and seized documents from different premises, my replies were not totally as per facts. Earlier our gross margins were about Rs. 500/- per bag out of which Rs. 95/-per bag were collected on behalf of Malpani Group. I therefore wrongly multiplied the number of bags purchased by this gross margin and gave the answ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders of the assessee company are different. It is to be noted that directors of the assessee company are nowhere related with the partners, directors, company and partnership firms of the Malpani group. It is further clarified that the control, management and source of funds of the appellant company are totally independent. The assessee also states that it is not in any way related to M/s. Sargam Retails Pvt. Ltd. Therefore, it is submitted] that the learned A.O. is not justified in holding that the assessee has received unaccounted income in cash to the extent of Rs. 16.83,500/-." Therefore, we find merit in the submission of the Ld. Counsel for the assessee that when the assessee is no way related to the Malpani group and since Shri Rajendra S. Raka has retracted from his statement, though belatedly, and in absence of any corroborative evidence that the assessee has received cash of Rs. 500/- per bag for 3367 bags, therefore, no addition can be made in the hands of the assessee. 31. We further find merit in the submission of the Ld. Counsel for the assessee that when Shri Rajendra S. Raka has purchased the goods from the assessee @ Rs. 1,850/- per bag and sells the same at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier year for purchase of car to run it on hire basis has been found to be misappropriated by forgery by person to whom advances are given. He also observed that legal criminal case has been filed in the month of May 2009. The assessee accordingly claimed such loss on account of forgery as business loss. Since neither running of car on hire basis nor giving advance is one of the objects of the assessee company the Assessing Officer held that the said loss is not an allowable expenses for the business purpose of the assessee. He therefore directed the assessee to substantiate the claim made by it. It was argued that the loss has occurred for the business purpose and therefore the same should be allowed as a deduction. The decision of Hon'ble Bombay High Court in the case of CIT Vs. Sasoon J. David and Company reported in 146 ITR 390 was relied upon, according to which embezzlement of money by the Director is a business loan. 37. However, the Assessing Officer did not accept the above submission of the assessee. According to him, assessee had given advance of Rs. 36 lakhs for purchase of car to run on hire basis. The car is nothing but a capital asset and therefore this advance ..... X X X X Extracts X X X X X X X X Extracts X X X X
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