TMI Blog2007 (7) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... uted the correctness of this finding and hence the conclusion reached by the CIT(A) has to be accepted. The alternative contention of the revenue, on the basis of the order of the Tribunal in the case of Adinath Construction that at least 15 per cent of the receipts should be treated as undisclosed income was also rejected on the ground that in the case of Adinath Construction, a diary was found in which the details relating to the receipt of on-money were found to be recorded. Moreover, in that case, the assessee itself has accepted a receipt of ₹ 14,22,000, but in the present case, there was no such diary nor was there such admission. Order Ld AM - The learned AM took note of the conduct of the assessee in so far as that the disclosure was made by the managing partner of the assessee-firm, he had explained the modus operandi of charging on-money, explained the investment of such money and absence of duress while recording the statement. The learned AM held that these facts confirmed the factum and practice of charging on-money. Finally, though he did not much agree with the alternate contention to treat only 15 per cent of the gross on-money as the assessee s income, y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounded and unwarranted allegation against the assessee. Further, it is interesting to note that though the learned AM has observed that the alternate argument of treating 15 per cent of the gross on-money as income defects the assessee s case in this regard. Despite this observation, ultimately, he sustains the addition to that extent only. Therefore, I am convinced that there being no spectre of evidence regarding undisclosed income, no addition can be sustained. I am in agreement with the view taken by the learned JM. In view of majority decision, the addition of ₹ 10 lakhs on account of undisclosed income having been sustained by the CIT(A) stands deleted and assessee s appeal allowed on this point. - PRADEEP PARIKH, VICE PRESIDENT, (AS A THIRD MEMBER) I.S. VERMA, JUDICIAL MEMBER AND SANJAY ARORA, ACCOUNTANT MEMBER For the Petitioner : Y.B. Oza For the Respondent : Dhiren Shah ORDER Per I.S. Verma, Judicial Member. In this appeal, the revenue has objected to the Order of the CIT (Appeals)-VII, Ahmedabad dated 4-8-1999 passed for assessment year 1994-95 wherein the ld. CIT (Appeals) has deleted the addition of ₹ 10 lakhs made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad ignoring the oblique. These are the amounts given to some persons which is out of my undisclosed income. For example, 200 pertains expenses paid to Ranchhod 250/00 Kiritbhai means ₹ 25,000 given to Kiritbhai on 27-1-1996 which is not accounted for in our books of account. Q. No. 38 : Please submit your explanation on concealed income as stated in reply to Q.No. 37 above? Ans. 38 : I have already explained in replies to question Nos. 14 and 16 about the undisclosed income of ₹ 34,38,000 earned by our firm M/s. Adinath Construction. We have earned the above unaccounted money as on-money in our schemes Shatrunjay Apartment and Dawa Bazaar. We have taken on-money in our other firm M/s. Parmukh Builders amounting to ₹ 10 lakhs in our schemes Vrajbhoomi and Rajbhoomi. We have collected ₹ 10 lakhs as on-money in the hands of M/s. Suhani Builders in our schemes Devbhoomi and Dhasrambhoomi. Out of the above on-money we have invested some money in giving cash loans on which we have earned ₹ 62,000 as interest which is also being disclosed as income. (iii)In reply to question No. 39, Shri Kamal V.Shah admitted under :- I wish to disclose m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een earned by our different firms as under :- Name of the firm Assessment year Undisclosed income (1) Suhani Bldrs. 1994-95 ₹ 12,50,000 (2) Pramukh Bldrs. 1994-95 ₹ 10,00,000 (3) Adinath Constn. 1994-95 Rs.47,50,000 1995-96 ₹ 6,00,000 Total ₹ 76,00,000 The above income as shown in different firms earned as on-money from different schemes are invested in different assets as under :- (i)Unaccounted income of M/s. Suhani Bldrs. has been distributed amongst Partners. I have invested my share in gold ornaments and I do not know the Investments made by other partners - Suhani Builders ₹ 12,50,000 (ii)Pramukh Builders Investment in schemes ₹ 10,00,000 (iii)Adinath Construction ₹ 53,50,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the disclosure of additional amount on account of on-money earned by him. (iii)The statement of Shri Kamal V. Shah dated 29-6-1994 was endorsed and signed by all the partners and the statement was given after consultation amongst all the partners The Panchnama prepared during the course of search. Clearly indicate that statement recorded under section 132(4) was recorded in the presence of panchas and also without any coercion, threat and undue influence. Even the assessee has not objected to the bona fides of the statement recorded by the Authorised Officer. The bona fide of the statement recorded under section 132(4) has not been challenged by the Authorised Representative during the course of search and after search. Mere excuse and argument placed by the representative is that the Department could not get any documents in writing regarding collection of cash money over and above the cheque receipts. (iv)The statement of Shri Kamal V. Shah was not the only one statement recorded during the course of search, but statements of other persons viz., Shri Harshad F. Patel and Shri Kantilal N. Patel and nowhere the bona fides of recording the statement by the Authorised Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt. Therefore, the addition of ₹ 10,00,000 made on the basis of the statement recorded under section 132(4) of the Act is hereby deleted. 10. It was, in view of above facts and circumstances of the case, the ld. DR supported the order of the Assessing Officer by pointing out that the assessee s partner, Mr. Kamal V. Shah had not only admitted an income of ₹ 10 lakhs in the statement recorded under section 132(4) of the Act on 4-5-1994, but had again, admitted the income of ₹ 10 lakhs to have been earned by the assessee-firm in his statement recorded on 29-6-1994 - as per answers to question Nos. 37, 38 39 in the statement which have been duly taken care of by the Assessing Officer. He, therefore, submitted that the CIT (Appeals) was not justified in deleting the addition. 11. The ld. counsel for the assessee, first of all, supported the order of the CIT (Appeals) by re-submitting the revenue having not found any material during the search nor thereafter to show that the assessee had earned any income of ₹ 10 lakhs (outside the books of account) and also having not found any unexplained asset during the course of search, the addition made only on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act as well as retraction of the same thereafter, we are of the opinion that though the assessee has option to retract the statement recorded under section 132(4) or under section 131(1) of the Act, but the retraction is acceptable only if it is substantiated by the plausible evidence or material that the admission made in statement under section 132(4) or 131(1) of the Act cannot be sustained either in law or in facts. 13. So far as present case is concerned, there is no dispute that the assessee s partner, Mr. Kamal V. Shah had admitted an income of ₹ 10 lakhs claimed to have been earned by the assessee-firm outside the books of account, both in statements recorded under section 132(4) as well as 131(1) of the Income-tax Act, 1961, but the revenue having not found either any material or any asset, which could be correlated to the alleged undisclosed income, the assessee was quite justified in retracting his disclosure statements. 14. Coming to the findings of the CIT (Appeals) contained in paragraph No. 3.2 of his order, which has been duly reproduced by us in paragraph No. 8 (supra), we are of the opinion that the CIT (Appeals) deleted the addition after making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of similar facts and circumstances as are of the case before us. The relevant part of the order of the Tribunal reads as under :- 6. We have heard the ld. representatives of the parties and perused the record. After considering the facts of the case, we find that the Assessing Officer had made the addition merely on the basis of statement recorded under section 132(4) at the time of search. We find that at the time of search no evidence or material or assets , immovable or movable properties were found which supports the disclosure of ₹ 16 lakhs. The assessee had retracted the said disclosure which has not been accepted by the department. It is true that simple denial cannot be considered as a denial in the eyes of law but on the same time it is also to be seen the material and valuable and other assets found at the time of search. The evidence ought to have been collected by the revenue during the search in support of the disclosure statement. The decision cited by ld. DR is distinguish- able on facts. In the said case the disclosure was of ₹ 7 lakhs which was supported by investment in house property, unaccounted cash, unaccounted investment in furniture and u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had accepted a receipt of ₹ 14,22,000, out of receipts recorded in the document, as having been received and had duly accounted for the same in the supplementary balance sheet. In other words, the revenue as well as the assessee had proceeded on the basis of seized documentary evidence - marked as Annexure A-3. It was, therefore, in view of this evidence found during the search that the Tribunal confirmed the order of the CIT (Appeals) sustaining an addition equal to 15 per cent of receipts admitted by the assessee. 16.2 So far as present case is concerned, neither the Assessing Officer has referred to any such material/evidence/document found during the search, for making addition on account of on-money nor the ld. DR referred to any such material during the course of hearing the present appeal before us. The revenue s case throughout the proceedings, i.e., from assessment stage to hearing of the appeal before us has been only the reliance on the statements of Mr. Kamal V. Shah, wherein an income of ₹ 10 lakhs was disclosed. 17. In view of above facts, we are unable to agree with the ld. DR that in any case, an addition to the extent of 15 per cent of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, remained the same, i.e., at ₹ 10 lakhs, and the entire amount as disclosed allocated to the current year (assessment year 1994-95), save ₹ 6 lakhs in the hands of M/s. Adinath Construction for assessment year 1995-96. In respect of the assessee-firm in the asset break-up of the enhanced disclosure, the amount was, again, declared as investment in schemes ; (f)Both the statements were recorded under oath, the second statement made after almost two months of the first one, in fact, only confirmed the former, and was endorsed and signed by all the partners, who were stated therein to have been consulted in the matter; carried signatures of independent witnesses; and further, carried reference to the penalty sparing clause of Explanation (5) to section 271(1)(c), as also with regard to having been made without any coercion, threat or undue influence; (g)The assessee filed its return of income for the year on 14-3- 1995 at an income of ₹ 48,910, i.e., without including the impugned sum of ₹ 10 lakhs, on the ground that no evidence of charging of on-money was found during the course of search and, therefore, addition on the basis of the statement c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y an approximate and tentative figure, but only fit , which they indeed do. Rather, the assessee s contention, submitted by way of an alternate plea, that only 15 per cent of ₹ 10 lakhs be brought to tax, i.e., as directed in the case of Adinath Construction for assessment years 1994-95 and 1995-96 by the ITAT in cross appeals (i.e., IT Appeal Nos. 1975 and 1976 (Ahd.) of 1999 and IT Appeal Nos. 2167 and 2168 (Ahd.) of 1999 dated 21-10-2005), and addition in which stood also made on the basis of the same statement, contradicts the assessee s stand, besides proving, by implication, the revenue s stand of the impugned statement not having been obtained under duress, and which is also not the assessee s case. In view of the foregoing, the holding of the statement as not amounting to an admission becomes unsustainable. 3.2 Even otherwise, it is for the assessee to establish its case, i.e., of the admission being based on an incorrect understanding or assumption of facts, and which it has not done. The law in the matter is crystal clear; the onus to establish the admission as not true, or based on incorrect or wrong facts, is squarely on the assessee, and is heavy, as the adm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which finding has been accepted by both the parties, the same is no-longer res integra. 3.4 The net profit for the two Schemes upon completion works out to 6.10 per cent and 2.58 per cent, for the Vrajbhoomi and Rajbhoomi, respectively. The net profit rate, as per the assessee, the revenue, and by adopting the income of 15 per cent as per the ITAT in the case of M/s. Adinath Construction, worked out with reference to the receipt for the current year, is as under :- Receipt Profit/Assessee Revenue ITAT Vrajbhoomi 1921500 117212 Rajbhoomi 1835001 47343 Profit 164555 1164555 314555 Sales 3756501 3756501 4756501 4756501 % Profit 4.38 24.48 6.61 3.5 The conten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the same activity of construction business, i.e., even for those for which he was neither a partner or director. He is one of the main persons, with other family members as partners/directors in other group firms, and both the statements, specially the second, which affirms the first, carrying their conscious and willing consent. In the statements, he explains the modus operandi of the charge of on-money; the rates being charged in respect of different Schemes; their construction status; the avenues and destination of the on-money received, etc. On seizure of a diary, wherein such receipts stood recorded, as also its application in the firm(s) day-to-day (business) expenditure, the disclosure was made, separately for each firm, also delineating the period of its earning and the manner of its investment. For the assessee-firm, it was stated to be in the construction Scheme itself, i.e., Vrajbhoomi, which was nearing completion. The disclosure was subsequently, i.e., after about two months, enhanced by a sum of ₹ 21 lakhs, even as the share of the assessee-firm, at ₹ 10 lakhs, remained unchanged. These are the undisputed incidents of the disclosure statements, and on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .); -Dr. S.C. Gupta v. CIT [2001] 248 ITR 7822 (All.); -ITO v. Bipin Faraskhana [2000] 73 ITD 334 (Ahd.); -Hiralal Maganlal Co. v. Dy. CIT [2005] 96 ITD 113 (Mum.). 4.3 As regards the contention of non-discovery of any corresponding assets, I find the same is only an outcome of the acceptance of the retraction as legally valid, so that the question of the same would not arise in the first place, if it is not considered as so. It is only on its acceptance as such, that the onus would shift to the Department, which, in order to establish its case, would be required to adduce evidence/material. The said proposition, as aforestated becomes legally unsustainable in view of the express provision of section 132(4) of the Act, besides sections 114 and 115 of the Evidence Act. The alternate argument of the assessee, i.e., to treat only 15 per cent of the gross on-money as its income; the balance 85 per cent being expended on the construction activity (i.e., stock-in-trade) rather defeats the assessee s case in this regard. One could consider some merit in the argument, howsoever marginal, i.e., given the position of law in the matter placing the onus squarely on the assessee/d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the same would not be out of place. Search under section 132 of the Act was conducted at the premises of the assessee on 4-5-1994 resulting into seizure of incriminating documents. Statement of Shri Kamal Shah, a partner of the assessee-firm was recorded on the same day. In this statement, he admitted an undisclosed income of ₹ 34,38,000 in M/s. Adinath Constructions, an associate concern of the assessee-firm. Undisclosed income of ₹ 10 lakhs was disclosed in another associate concern M/s. Suhani Builders and an equal amount was also disclosed in the hands of the assessee. In all, total disclosure of ₹ 55 lakhs was made and it was also explained as to how the same has been invested. Another statement of Shri Kamal Shah was recorded on 29-6-1994 in which he enhanced the disclosure to ₹ 76 lakhs, retaining the disclosure of ₹ 10 lakhs in the hands of the present assessee. The investment of the enhanced disclosure was also explained in the statement. However, in the return filed by the assessee, the disclosed amount of ₹ 10 lakhs was not included and only a total income of ₹ 48,910 was returned. On being questioned as to why the disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arging on-money. Finally, though he did not much agree with the alternate contention to treat only 15 per cent of the gross on-money as the assessee s income, yet, he sustained the addition to that extent only, i.e., at ₹ 1,50,000. 5. Before me, the learned Counsel at the outset, referred to paragraph 19 in the order of the Tribunal in the case of Adinath Construction [ITA Nos. 1975 1976/Ahd./1999 dated 21-10-2005] to contend that the statement given by Shri Kamal Shah was not sacrosanct insofar as that the figures in the seized material were stated to be approximate figures and that it was categorically stated by him that he would state the exact disclosure only after examining all the papers and the account books. Extending this argument, it was submitted that no incriminating material was put before the assessee nor any asset was found or seized. The prohibitory orders continued till 29-6-1994 and the statement dated 4-5-1994 was later retracted, in the interregnum there was no material found by the Assessing Officer to support the addition. In the case of Adinath Construction also, it was contended, the CIT(A) had stated that no addition can be made on the basis of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had an undisclosed income of ₹ 10 lakhs. The second reason given by the learned AM is that enhancing the figure of disclosure two months later shows proper application of mind and also absence of any duress while giving the statement. Well, there may not be any evidence of coercion being exercised by the search party, there may not be any duress also, but existence of confusion cannot be ruled out. Duress has to be distinguished from confusion. Duress is a constraint illegally exercised to force a person to perform some act. This, as mentioned earlier, may be absent. But confusion means something thrown into disorder wherein a person may be perplexed or embarrassed or thrown into turmoil. The entire family is likely to be in a state of perdition during and in the aftermath of the search. In fact, the revision of the earlier statement does not reflect application of mind but a state of compounded confusion only. When such are the state of affairs, no sanctity can be attached to the statement and that cannot form the sole basis to determine undisclosed income. It is not the question of throwing the burden on the revenue as observed by the learned AM, but certainly when search i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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