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2009 (5) TMI 951 - ITAT DELHI MUMBAI

2009 (5) TMI 951 - ITAT DELHI MUMBAI - TMI - ITA No. 444/Mum/2007 - Dated:- 7-5-2009 - D. Manmohan, Vice President and J. Sudhakar, Accountant Member For the Appellant : Percy Pardiwala and Nitish Joshi For the Respondent : J.V.D. Langstieh ORDER D. Manmohan:- 1. This appeal filed at the instance of the assessee is directed against the order dated 20.11.2006 passed by the learned Commissioner of Income-tax (Appeals)-XV, Mumbai and it pertains to the assessment year 2003-04. 2. The assessee firm .....

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ehta was threatened and compelled to declare some figure as firm's undisclosed income. 3. According to the Assessing Officer, during the course of survey two small diaries were found and impounded. The diaries contain certain notings indicating cash receipts which were not recorded in the regular books of account. As per the diaries (inventorised as Serial Nos. 34 and 35), the amount received in cash works out to ₹ 20,44,100/- and ₹ 19,10,500/- respectively. There were also certa .....

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m Shri Satish Kantilal Mehta during the course of survey proceedings wherein an amount of ₹ 1,00,31,161/- was declared as additional income. However, by an affidavit dated 16.12.2002, i.e., within ten days from the date of the original statement, the main partners of the assessee firm retracted the statement wherein it was stated that on account of terror created during the survey proceedings, they were forced to give a statement as per the convenience of the Departmental Officials and the .....

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see had not earned the so called income. 5. It may be noticed that the Assessing Officer stated to have rejected the affidavits and the same was claimed to have been brought to the notice of the assessee vide letter dated 19.12.2002; there is no evidence on record to suggest that the Assessing Officer has supplied a copy of the alleged letter to the assessee firm. The assessment was completed on 29.03.2006, wherein the Assessing Officer solely relied upon the statement dated 5th/6th December 200 .....

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pprox.) was neither offered to tax nor added by the Assessing Officer while computing the assessment. According to the Assessing Officer the impugned diaries contain the details of professional charges received in cash for providing technical know-how to various pharmaceutical manufacturers for product development and betterment of products. 6. Aggrieved by the addition made by the Assessing Officer, the assessee contended before the learned CIT(A) that the statement was recorded and signature o .....

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diately by the partners as well as by the Chartered Accountant concerned by filing affidavits. During the course of assessment proceedings the Assessing Officer has recorded a statement dated 3.3.2006 and even at that stage it was brought to the notice of the Assessing Officer that the survey team forced the partners to write down the figures in the so-called diaries and this was already brought to the notice of the tax authorities by filing affidavits. However, even in the said statement, the A .....

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Having regard to the circumstances of the case, the learned CIT(A) called for a remand report. Based upon the detailed submissions of the Assessing Officer in the remand report, the learned CIT(A) rejected the contention of the assessee and confirmed the addition of ₹ 39,54,600/- by observing as under:- "Though the appellant has retracted the statement given in the affidavit filed on 17.12.2002 raising serious objection that the diaries have been artificially manufactured at the dict .....

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Shah. It is surprising that how the said two concerned parties, i.e. Mr. Jayesh Mehta and Mr. Bhupendra M. Shah could not oppose to have a party of such unfair means committed, if at all, such things have happened. It is also not understandable how Mr. Satish Mehta could agree to write untrue thing in the diaries in his own handwriting against the interest of himself as alleged by the appellant. This does not match to the normal human understanding. It is rule of evidence that nobody is supposed .....

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t has raised several points on the content appearing in the said two diaries to say that entries in the diaries are not true. I have gone through these points raised by the appellant. I find that these are very trivial facts which do not vitiate the authenticity of the content of the diary. Therefore, I do not attach any significance to these points. Looking to all these facts and circumstances of the case i.e. the diary written in the handwriting of Mr. Satish Mehta and his unequivocal and unam .....

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fore, the AO cannot be blamed for adopting prejudiced and unreasonable approach against the appellant. In ultimate analysis, it may be pointed out that the AO has made addition of ₹ 39,54,800/- on undisclosed professional charges attributed to the entries made in these to diaries. Therefore, on considered fact. I am convinced that the addition of ₹ 39,54,800/-is fully justified and no interference is required to be made." 8. Further aggrieved, the assessee is in appeal before us .....

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of the case, the learned counsel adverted our attention to the relevant pages in the paper book to highlight that the preponderance of probabilities are in favour of holding that the so called diaries seized during the course of survey proceedings were got written by the parties at the insistence of the survey team. He further submitted that the partners having retracted the statement given during the course of survey by filing affidavits of two partners and the Chartered Accountant, the Assessi .....

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ssessee cannot be asked to prove the negative and it is for the Assessing Officer to show that the assessee in fact earned income from specified persons. However, no such verification was carried out by the Assessing Officer. He contended that merely on the strength of the statement addition cannot be made, particularly on account of the fact that the admission in the statement was retracted by filing affidavits. The learned counsel for the assessee submitted that there is no evidence on record .....

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that stage that vide letter dated 19.12.2002 the affidavits were rejected. In fact, the claim of rejection of the affidavits was noticed only from the remand report since the assessee was not served a copy of such letter, i.e. letter dated 19.12.2002. He has also referred to the statement of Shri Satish Mehta during the course of survey proceedings to submit that statement recorded on 5.12.2002 at 2.30 p.m. does not contain any question with regard 'to the so-called 'small diaries' c .....

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of voluntary declaration of an amount of ₹ 1,00,31,161/-. However, the very fact that the differential amount of ₹ 60 lakhs (approx.) was not brought to tax despite the so-called voluntary offer shows that the addition cannot be merely based upon the voluntary offer and the burden is upon the revenue to show that the assessee had in fact earned a sum of ₹ 39,54,600/-. In the instant case, except relying upon the so-called diaries no effort was made by the tax authorities to ver .....

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the test of human probabilities it cannot be said that professional charges would be received only on holidays and that too in odd figures instead of round sum figures. The partners are not Science graduates (do not have technical qualification) so as to advise others with regard to the-manufacture of pharmaceutical items and thus in order to bring to tax certain amount merely on the basis of certain figures mentioned in the diaries, by treating them as professional charges received on the groun .....

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e that alt the entries in the diaries were written on the same day with one ball point pen in the same breadth though the so-called figures are referable to payments received on several dates. Thus the addition made on the strength of the so-called diaries by holding that it reflects the income earned by the assessee is contrary to human probabilities. With regard to the burden of proof cast upon the revenue, the learned counsel placed reliance on the decision of the apex court in the case of Vi .....

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uctions dated 10.3.2003 of the CBDT wherein the officers of the Revenue Department were advised to avoid obtaining the confessional statements. In other words, addition should be based upon credible evidence and should not be merely based upon statements obtained during the course of survey/search. The learned counsel for the assessee thus submitted that there is no material on record to suggest that the assessee has earned income to the tune of ₹ 39,54,600/- in the form of professional re .....

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oerced to write the diaries in one sitting despite the presence of their authorized representative during the course of survey proceedings. He thus strongly relied upon the orders passed by the tax authorities. 11. We have carefully considered the rival submissions and perused the record. Before going into the issue on hand, it may be useful to refer to the basic principles required to be followed for the purpose of completion of assessment. It is well settled that no tax can be levied without t .....

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m. on 05.12.2002 and commenced recording the statement of Shri Satish Mehta, partner of the assessee firm from 2.30 p.m. on the same day. The first 28 questions and answers therein do not give any indication that the assessee recorded certain receipts in small diaries. The statement was temporarily concluded at 10.30 p.m. Going by the preponderance of probabilities, if the diaries are found during the course of survey, there would have been some indication in the statement recorded on 05.12.2002 .....

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ers of the firm i.e. Shri Satish Mehta and Shri Jayesh Mehta filed affidavits stating that survey was earned out from 1.00 p.m. on 05.12.2002 and it continued the whole night and then concluded at 8.00 a.m. on 06.12.2002. 13. The case of the assessee is that in the presence of the Chartered Accountant, Shri Bhupendra M. Shah, the concerned officers of the survey team compelled the partners and directed them to scribble down certain figures in a small diary and then the same was impounded by them .....

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ceedings and was a witness to the highhandedness of the survey team. It was also submitted that the contents of the said diary is not supported with any justifiable hard substance and/or corroborative documentary evidence whatsoever. Supporting the affidavits of the partners, Shri B.N. Shah stated in an affidavit that the dates and amounts mentioned in the diary are false and baseless and no such diary ever existed prior to survey. When the affidavits were filed contradicting the declaration mad .....

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never served upon the assessee. The learned' Departmental Representative could not furnish any evidence to condemn the version of the assessee. Perusal of the 'small diaries' indicate that on each page certain figures are jotted down relevant for a particular month and, contrary to the common practice followed, there is no name of the payer, nature of work, apart from the fact that most of the so-called receipts are shown on the dates which were either Sundays/holidays. When the ass .....

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