TaxTMI 
TaxTMI 
2015 (12) TMI 1459
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.... and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in upholding the arbitrary addition as the appellant's undisclosed income a sum of Rs. 2,04,84,477 in respect of commission expenses treated as non-genuine, relying purely upon the statements made at the time of/in connection with the survey under section 133A, though validly retracted subsequently, without any cogent/corroborating material to support and also ignoring/ not appreciating in right perspective the appellant's submissions as well as the evidence produced. The appellant prays that since the said commission expenses are genuine and are incurred wholly and exclusively for the purposes of the appellant's business the same be allowed as business expenditure under section 37(1) and the addition of the same as the appellant's undisclosed income be deleted. 2. Ad hoc disallowance out of repairs and maintenance expenses- Rs. 20,000 On the facts and in the circumstances of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in not disposing of the concerned ground of appeal and thereby erred in upholding the arbitrary and ad hoc disa....
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....nces of the case and in law, the learned Commissioner of Income-tax (Appeals) erred in not directing the Assessing Officer to grant deduction under section 80G in respect of the donation of Rs. 5,00,000 made by the appellant. 3. The first ground raised is against the disallowance of commission expenses of Rs. 2,04,84,477, being non-genuine and bogus. 4. The facts in brief are that the assessee was engaged in the business of suppliers and distributors of pharmaceutical products, etc., to various Government and other agencies. In order to obtain order from various Government agencies, the assessee engaged companies for doing liasioning on its behalf. One such company was M/s. Litaka Pharmaceuticals Ltd. A survey under section 133A was conducted on October 30, 2006 on M/s. Litaka Pharmaceuticals Ltd. and its sister-concern M/s. Twilight Mercantile Ltd. at 206, Shiva Industrial Estate, 89, Andheri Kurla Road, Sakinaka, Andheri(E), Mumbai 72 and a statement of Shri Gopal Ramourti, director of the above companies was recorded under section 131 of the Act on the same day which is exhibited at pages 59 to 63 of the paper book No. 1, filed by the assessee. In reply to question Nos. 11 and....
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.... not genuine and the recipient had not rendered any services. On January 16, 2007, Shri Vijay Wasudeo Somalwar, another partner of the assessee and its sister concerns retracted the statements by Shri Kiran Somalwar on November 28, 2006 and November 29, 2006 by stating that the survey team of the Department put undue pressure, misguided the partner of the assessee and compelled him to confess the commission to be bogus. Mr. Somalwar was threatened that if the confession in the statement was not made, it shall be followed by raids and searches on all the offices of the firm. The retraction letter further stated that our mother who was 82 years old was diabetic and cardiac patient who could not have withstood the hearing of the news of the raid. The retraction letter also mentioned that statements made by Mr. Kiran Somalwar should not be treated as binding on the partners or on the firm and further stated that the commissions were paid by account payee cheques and the same were accepted by the parties on which TDS has been deducted and also the service tax was duly paid. 6. The learned Assessing Officer disallowed the commission of Rs. 2,04,84,477 to M/s. Litaka Pharmaceuticals Ltd.....
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....e yet these statements were retracted by the another partner of the assessee on January 16, 2007, citing various reasons for such retraction which, inter alia, include coercion and undue pressure by the survey team. He also argued that the statement made under section 131 during the survey proceedings under section 133A has no evidentiary value in the eyes of law unless the Assessing Officer brought on record any corroborative evidences and materials during the course of assessment proceedings on record. Learned counsel for the assessee drew our attention towards memorandum of understanding exhibited at pages 67 and 68, debits notes with details of sales by Litaka Pharmaceuticals exhibited at pages 71 to 75, bank statements evidencing the payments exhibited at pages 76 to 93, receipts for payment received pages 94 to 99 and other documents such TDS certificates, challans for deposit of TDS, service tax receipts, etc., pages 100 to 103 of the paper book No. 1, and lastly chart showing commission linked to increase in sales pages 104 to 107 of the paper book No. 1, filed by the assessee and submitted that the assessee had proved the genuine of commission for business considerations. ....
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..... CIT [1980] 125 ITR 713 (SC) ; (b) CIT v. Land Development Corporation [2009] 316 ITR 328 (Karn) ; (c) CIT v. Ashwani Gupta [2010] 322 ITR 396 (Delhi) ; (d) Ashok Lalwani v. ITO [2010] 328 ITR 272 (Delhi) ; and (e) CIT v. Sanjeev Kumar Jain [2009] 310 ITR 178 (P&H). 12. The learned authorised representative also argued that no addition/ disallowance could be made on the basis of the statement of the third party when there were documentary evidences in favour of the assessee. The oral adverse statement of third party had to be proved and corroborated by documentary evidences. He further submitted that the assessee had submitted all the documentary evidences before the learned Assessing Officer and also before the first appellate authority such as copy of the memorandum of understanding with M/s. Litaka Pharmaceuticals Ltd., copies of debit notes with details of sales by Litaka Pharmaceuticals, bank statements evidencing the payments, receipts for payment received, TDS certificates, challans for deposit of TDS, service tax receipts and correlation of commission paid which increased turnover, etc. The learned authorised representative relied on the following judgments : (i) CIT....
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.... at pages 64-66 of paper book No. 1. The retraction letter is reproduced as under : Ref No. Dated 16-01-2007 Before the Deputy Director of Income-tax (Inv) Unit IV(3), Mumbai In the matter of : Kiran Wasudeo Somalwar Kiran Agencies 51, Gnereal Merchant Market, Gandhibbag, Nagpur PAN : AADFK8570A Reference : Survey under section 133A conducted at our branch office at A-40, Kalayaji Morarjee Warehousing Ltd., Prem Estate, Mazgoan, Mumbai-400010 Dear Sir, With reference to the survey conducted and statement recorded of Mr. Kiran Wasudev Somalwar partner of M/s. Kiran Agencies on November 28, 2006 and again recorded on November 29, 2006, I the undersigned partner of Kiran Agencies wish to state as under in view of Mr. Kiran W. Somalwar being out of India as of date and shall be available after February 1, 2007. 1. That the officers and the staff of the Income-tax Department (survey team) entered our branch office situated at A-40, Kalyanji Morarji Ware- housing Corporation Pvt. Ltd., Santa Savta Marg, Mustafa Bazar, Mazagaon, Mumbai-400 010 to conduct survey under section 133A of the Income-tax Act, 1961 at 10.30 a.m. on November 2....
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....ucted and paid TDS and also paid service tax on the commission paid. 7. Therefore we hereby request that you may send inferences of your investigations to the competent Income-tax authorities for their assessment at Nagpur as we are assessed at Nagpur. We shall pay all the Income-taxes that would be determined by the Income-tax authority at Nagpur after the assessment. 8. May we request you to do the needful to the best mutual interest and remain obliged. Thanking You For Kiran Agencies (Vijay Wasudeo Somalwar) Partner 18. The facts of the case are res ipsa loquitor to the extent that the assessee made statements which was recorded under section 131 during the course of survey under section 133A and retraction of the said statements as referred to above meaning thereby that the statements recorded made on November 28, 29, 2006 under section 131 stands withdrawn on the various allegation undue influence, coercion and pressure by the survey team. Now the issue before us for adjudication is whether a statement made during the survey proceedings can solely form the basis of assessment without any cogent and corroborative material being brought on record to strengthen the s....
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.... to correlate the additional income surrendered during the survey under section 133A, addition cannot be made when surrender is retracted. 22. Further it was held in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC), that an admission is an extremely important piece of evidence but it cannot be said that it is a conclusive and it is open to person who made the admission to show that it is incorrect. 23. Vide Central Board of Direct Taxes Circular F. No. 286/2/2003/IT-(Inv.) dated March 10, 2003 it has been made clear that no attempt should be made to obtain confession as to the undisclosed income and the addition should be made only on the basis of material gathered during the course of search and survey thereby issuing instruction to the Department that no addition can be made or sustained simply on the basis of statement- recorded during survey/search. In other words, in order to make any addition on the basis of surrender during search or survey, it is sine qua non that there should be some other material to correlate undisclosed income with such statement. 24. In view of the above judgment of the hon'ble Supreme Court and hon'ble....