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Dy. CIT-Central Circle-1 (3) , Mumbai Versus Studio Aethetic Health & Hospitality Pvt. Ltd And Vice-Versa

2017 (11) TMI 912 - ITAT MUMBAI

Undisclosed income worked out in sheets seized during the search - whether the addition is not based upon incriminating material found during search and, hence, the same is bad in law? - statement obtained u/s.133A in case of a survey - Held that:- There was clear admission and statement of oath u/s. 132(4) by the director of the company that the assessee was receiving income which was not disclosed in the books of account. Furthermore, the Assessing Officer has duly recorded in his order that t .....

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objection filed by the assessee challenging the validity of the jurisdiction, is dismissed. - In the statement of oath u/s. 132(4) of the Act recorded on 24.1.2011, i.e., the date of search, Smt. Madhu Chopra, the director of the company has clearly admitted to the estimate of such unaccounted income already made by Dr. Ashok Chopra said to be to the tune of ₹ 1.74 crores for two years. This admission during search corroborates the statement given by Dr. Ashok Chopra the performing sur .....

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hri Yogesh Joijode ORDER Per Shamim Yahya, A. M.: These are appeals by the Revenue and the cross objections by the assessee emanating out of the respective orders of the Commissioner of Income Tax (Appeals), Mumbai ( CIT(A) for short) for the assessment years 2010-11 and 2011-12. Since the issues are identical and the appeals were heard together, these are being consolidated and disposed off by this common order. 2. The common ground raised in the Revenue s appeals read as under: 1. Whether on t .....

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have been raised: A.Y. 2010-11 1. The assessment order passed u/s. 143(3) read with Sec 153C in appellant s case for A.Y. 2010-11 is bad-in-law because no document or valuable asset belonging to the appellant was seized u/s. 132 from any premises or person. The documents relied upon in the assessment order were impounded during action u/s. 133A from the business premises of the appellant. A.Y. 2011-12 1. The assessment order passed u/s. 143(3) read with Sec 153C in appellant s case for A.Y. 201 .....

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ome-Tax. 4. As regards the cross objection, the ld. Counsel of the assessee submitted that he shall not be pressing the cross objection for assessment year 2011-12. Hence, the same is dismissed as not pressed. 5. It is noted that there is a delay of filing the cross objection by 382 days. For reasonable cause for the condonation of the delay, an affidavit has been noted by Smt. Madhu Chopra, Director of the company. In the affidavit, the reasonable cause for the delay has been attributed as unde .....

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ays before the date of hearing, he advised us to file the cross objection against the said departmental appeal and hence has resulted in delay in filing the instant Cross Objection. 4. That I state that because of filing of the said cross objection the interest of the revenue has not been adversely affected in any manner and we have not received any undue advantage in the said matter. 6. From the above, it transpires that the assessee s claim is that the assessee s consultant, i.e., Chartered Ac .....

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a Chopra family, the company was covered u/s. 153C of the I. T. Act. The assessee company has been incorporated in the month of July, 2009 as an Hospital. Smt. Madhu Ashok Chopra and Shri Ashok Chopra, are the directors of the said company. Administrative aspects are being looked after by Smt. Madhu Chopra and Dr. Ashok Chopra is the performing surgeon. During the course of search and survey based on the impounded/seized material, it was admitted by both the directors that the company accepts ch .....

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have not been doing active practice since the last few years. I am now more of an administrator looking after the overall supervision of Studio Aesthetic including finance administration and day today affairs. I am also in the knowhow of the income and expenses of both Studio Aesthetic and of Dr. Ashok Chopra. I also oversee the financial matters of my daughter Ms Priyanka Chopra. I am aware of all the receipts and payments of Ms Priyanka Chopra also. Q.3 Please explain as to how the receipts a .....

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rietorship A/c directly. Remaining amount is transferred to the A/c of the company from wherein payments pertaining to surgery such as OT cost, surgeon cost etc. is paid. In addition to the same some cash is directly received by Dr. Ashok Chopra as surgery charges. The details of both types of receipts that is received at the front office and that received directly by Dr. Ashok Chopra is known to me. The receipt at the front office are sent to me by way of a list. The cash received directly by D .....

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he tune of ₹ 1.74 crores for 2 years. 9. The statement of Smt. Madhu Chopra, correlates with the statement of Shri Ashok Chopra recorded on 24.01.2011. His statement may be referred as under: Q.11 As per Annex A-2, you have performed more than 230 surgeries since July 2009 (Since the formation of above company). Where is it accounted in your books of account? If the average receipt per surgery performed by you is taken at ₹ 1.3 lakhs (as per your admission above), then the turnover f .....

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patient. I am from medical background and it is possible that certain number of entries of cash receipt has been inadvertently left out, since we do not have a full time accounting staff. Since I am unable to reconcile the exact amount which has been left unaccounted, I am offering the -sum of ₹ 1.74 crores, which is shortfall in the amount of receipts as the unaccounted income of my company for financial year 2009-10 and 2010-11. Q.12. Kindly give the details of how the unaccounted recei .....

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lakhs - 96.15 lakhs for F.Y.2010-11 8.5 + 11 Q.13. I am showing various loose papers impounded vide Annexure A-3. It is seen that your concerns are paying 20% incentive of the profits earned by the cosmetologist and dermatologist in cash (i.e. to Nitu Sharma, Anju Methil, Reshma Hegde, etc,) It is also seen that your concern has made cash made in many other instances also(i.e. 30% of payment made to Milan Doshi is by way of cash). Such incentives and cash payments have not been accounted in book .....

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itional income for the said years in the hands of the company Studio Aesthetique Pvt. Ltd. of which I am a Director. I also state that certain unaccounted cash payments have been made from such receipts. The balance has been spent on various lifestyle and other personal expenses which I am unable to recollect. To sum up I am offering an additional income of ₹ 174 lakhs on account of unaccounted receipts in the hands of the company for the respective financial years. Considering my stand, I .....

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to my statement in relation to answer no.3 of Statement dated 25.01.2011 (Raj Classic) in relation to unaccounted income in relation to Studio Aesthetique, it is clarified that the working for the unaccounted Income will be done based on the seized papers and books of accounts and the unaccounted income will be declared as undisclosed income. it is to clarify that an amount of ₹ 1.74 crores based on estimates done on the date of search is unjustified. 11. Upon Assessing Officer s enquiry d .....

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ed as Annexure A-2 having 61 pages) maintained at the operation theatre containing details of operations performed. It was submitted that the figures are identified on the basis of arbitrary calculation with various types of surgical performed and the rates are different. It was submitted that no addition is justified in this regard. 12. The Assessing Officer further noted during the assessment order that the assessee s ld. Counsel on 23.11.2012 was provided with the documents seized and was ask .....

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ring the search / survey operation the directors were confronted with the documents, but it could not explain the same, therefore, Smt. Madhu Chopra in consultation with Shri Ashok Chopra in his statement under section 132(4), had surrendered the said cash component as undisclosed income for the block period and further expressed his willingness to pay the taxes worked out against the surrendered undisclosed income. Smt. Madhu Chopra had further stated that she was signing her statement after re .....

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affidavit filed along with it. The assessee surrendered undisclosed income only when she/ he was not able to explain the sources of payments made to the other doctors as incentive and other documents and loose papers found during search and by voluntary surrender of undisclosed income, it induced the survey / search party not to proceed with collection of other evidence and to accept the surrendered amount and the same was accepted by the Assessing Officer. The assessee had totally failed to dis .....

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statement given by Smt. Madhu Chopra. That the assessee had not produced any contemporaneous record or evidence, documentary to substantiate the retraction. That the declaration made and answers given by Smt. Madhu Chopra with regard to the cash payments and cash received and subsequently payment of cash to other doctors and other relevant matters were in their specific knowledge and, hence, they could not have been dictated by the survey/search party. The Assessing Officer further observed that .....

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s documents impounded/ seized during the course of survey /search. That by making the disclosure which she offered for taxation on oath, Smt Madhu Chopra stopped the entire of further investigation through survey/ search as the department accepted the disclosure and closed further investigation on the said issue. That it was not open to the assessee to deny later the truth or the correctness of the declaration made at the time of search. That having made a voluntary declaration on oath and induc .....

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hu Chopra is not acceptable and as admitted the assessee company is receiving cash receipts and most of them are riot accounted for in its books of account. Therefore, as admitted by Smt. Madhu Chopra and Shri Ashok Chopra the directors of assessee company, the income undisclosed income of ₹ 1.74 crores is distributed to A.Y.2010-11 and A.Y. 2011-12 as under: 8.5 x 174 lakhs = 75.85 lakhs for F.Y. 2009-10 a. + 11 11 x 174 lakhs = 98.15 lakhs for F.Y. 2010-11 8.5 For the year under consider .....

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pped after recording the statement of directors and members. That the assessee has also retracted from the statement. That in the absence of recovery of any material during the search conducted under the premises of the assessee s group, the statement of third party recorded after the search cannot be used against the assessee as it cannot be said to be directly connected with the recovery of any incriminating during search. The ld. CIT(A) further referred to CBDT Circular that the ld. Departmen .....

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it is to their satisfaction. He further observed that no undisclosed income was found by the search authorities that no incriminating materials were found showing the receipt of cash income. He held that the declaration made by Smt. Madhu Chopra was under pressure, mental stress. The ld. CIT(A) concluded as under: It is held that the assessing officer has erred and has merely relied on the admission made during the search proceedings ignoring the clarification statements filed by the director o .....

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culated the amount or undisclosed income which is without base. Calculating on the average cost basis is vague, based on conjectures and surmises, and therefore the same is not justified and against the basic principal of natural justice. It is seen that the undisclosed income calculated by the search party is on the- basis of register maintained at the operation theatre containing the details of operations performed. It is seen that at the premises of the appellant company various types of surg .....

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etely ignoring the submissions made during the assessment proceedings, the addition made is deleted. 4.6 No addition can be made on basis of loose papers found or register found which is further not corroborated by evidence. In support of the same I rely on the decision of CIT vs F.V.Kalyanasundaram (2007) 294 ITR 49 (SC), wherein the Hon'ble Supreme Court upheld the findings of the High Court and the Tribunal that loose pieces of paper on the basis of which the initial suspicion with regard .....

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the assessee invested in any property or any corroborative evidence, addition cannot be sustained on the basis of mere rough noting on loose sheets. Uncorroborated loose sheets or registers found during the search addition is deleted. Therefore the addition is deleted. 4.7 It is seen that this addition is made on the basis of a single register which is also not further corroborated by evidence by the A.O. Uncorroborated registers or loose papers found during; search cannot be made basis for mak .....

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oss objection on validity of jurisdiction for assessment. 18. We have heard the parties, and perused the material on record. The ld. Counsel for the assessee submitted that the addition has not been based upon any material found in search. The documents and materials which are being referred were found in survey operations. The ld. Counsel of the assessee further submitted that since the assessment u/s. 153 has been made and the assessment is not based upon any incriminating seized material upon .....

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nnot be sustained. For the proposition that a statement obtained on survey de hors any corroborative material, cannot lead to any addition, the ld. Counsel of the assessee placed reliance upon the Hon ble Apex Court decision in the case of S. Kadar Khan 352 ITR 480 (SC). 19. Per contra, the ld. Departmental Representative submitted that the assessee has never contended before any of the authorities below that the addition has not been based upon any search material. He submitted that in both the .....

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based upon any arbitrary reasoning. He submitted that a register was duly found which clearly mentioned surgeries were formed by Dr. Ashok Chopra and cash receipts which were not entered into the books of the account. It was on the basis of this register seized that Dr. Ashok Chopra declared the income of ₹ 1.74 crores, which was also accepted by Smt. Madhu Chopra. Thus, it was only due to the incriminating material found, the assessee agreed for disclosure of ₹ 1.74 crores as undis .....

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the Act was obtained from Smt. Madhu Chopra, who is a director in the company. Here Smt. Madhu Chopra has clearly admitted the modus operandi and the fact of cash receipt in Q. No. 3 to the search. The same may gainfully be repeated hereunder: Q.3 Please explain as to how the receipts and payments of Dr. Ashok Chopra recorded in the books ofA/c and also as to how do you control the same ? Ans. My husband Dr. Ashok Chopra is a surgeon and he has a team of doctors assisting him in the operation. .....

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s directly received by Dr. Ashok Chopra as surgery charges. The details of both types of receipts that is received at the front office and that received directly by Dr. Ashok Chopra is known to me. The receipt at the front office are sent to me by way of a list. The cash received directly by Dr. Chopra is handed over to me. The amount received at front office is reflected in the books of accounts. The cash received directly by Dr. Ashok Chopra and handed over to me is not reflected in the books .....

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gave a statement wherein he detailed the modus operandi and admitted the earning of undisclosed income. 22. From the above, it is clear that there was clear admission and statement of oath u/s. 132(4) of the Act by the director of the company that the assessee was receiving income which was not disclosed in the books of account. Furthermore, the Assessing Officer has duly recorded in his order that the assessee s representative was duly called upon to verify the seized documents and the ld. Coun .....

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e papers found during search. Thus, the ld. Commissioner of Income Tax (Appeals) is not confirming that no incriminating material was found during search. He is holding that addition cannot be made on the basis of un-corroborative material found during search. Thus, from the above, it is clear that incriminating materials were found during search. There was clear admission u/s. 132(4). Hence, it cannot be said that the addition in the present case is not based upon incriminating material found d .....

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This admission during search corroborates the statement given by Dr. Ashok Chopra the performing surgeon which was duly based upon register found by the Revenue which disclosed surgeries performed and unaccounted cash payments. The statement of Dr. Ashok Chopra in this regard may be gainfully referred as under: Q.11 As per Annex A-2, you have performed more than 230 surgeries since July 2009 (Since the formation of above company). Where is it accounted in your books of account? If the average r .....

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s in respect to these liposuction surgeries sometimes in cheque and sometime in cash, as per the convenience of the patient. I am from medical background and it is possible that certain number of entries of cash receipt has been inadvertently left out, since we do not have a full time accounting staff. Since I am unable to reconcile the exact amount which has been left unaccounted, I am offering the sum of ₹ 1.74 crores, which is shortfall in the amount of receipts as the unaccounted incom .....

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.Y. 2010-11). The working is as under: __8.5__ x 174 lakhs 75.85 lakhs for F.Y.2009-10 8.5 + 11 _11_ x 174 lakhs = 98.15 lakhs for F.Y.2010-11 8.5 + 11 Q.13. I am showing various loose papers impounded vide Annexure A-3. It is seen that your concerns are paying 20% incentive of the profits earned by the cosmetologist and dermatologist in cash (i.e. to Nitu Sharma, Anju Methil, Reshma Hegde, etc,) It is also seen that your concern has made cash made in many other instances also(i.e. 30% of paymen .....

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unaccounted receipt estimated at ₹ 75.85 lakhs for F.Y. 2009-10 and 98.15 lakhs for F.Y.10-11 as additional income for the said years in the hands of the company Studio Aesthetique Put. Ltd, of which I am a Director. I also state that certain unaccounted cash payments have been made from such receipts. The balance has been spent on various lifestyle and other personal expenses which I am unable to recollect. To sum up I am offering an additional income of ₹ 174 lakhs on account of un .....

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tracted the above disclosure by stating as under: With regard to my statement in relation to answer no. 3 of Statement dated 25.01.2011 (Raj Classic) in relating to unaccounted income in relation to Studio Aesthtique, it is clarified that the working for the unaccounted income will be done based on the seized papers and books of accounts and the unaccounted income will be declared as undisclosed income. it is to clarify that an amount of ₹ 1.74 crores based on estimates done on the date of .....

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hu Chopra has duly retracted and that the addition was unjustified. Here we note that there were no retraction whatsoever by Smt. Madhu Chopra that there was no undisclosed income. She had only disputed the estimate of ₹ 1.74 crores and she had unambiguously submitted that the working of unaccounted income will be done based upon the seized materials and books of account. Later on, the Assessing Officer has clearly noted that the ld. Counsel of the assessee was provided with document seize .....

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ents, etc, there was no submission by the assessee. Hence, it can clearly be said that the assessee s dispute of the quantification of amount of ₹ 1.74 crores is not cogent. By accepting that the unaccounted income has been received and by not submitting the working as per her despite being provided with the seized materials, Smt. Madhu Chopra is clearly accepting that the disclosure of ₹ 1.74 crores by Dr. Ashok Chopra and which was subsequently confirmed by her also, is cogent and .....

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e so called retraction of the admission during search is not cogent. Similarly, the ld. Commissioner of Income Tax (Appeals) reliance upon the CBDT Circular of not obtaining confession is also out of place. It is clear that the registers were found which clearly detailed about undocumented surgeries performed by Dr. Ashok Chopra and unaccounted cash receipts. Based upon this Dr. Ashok Chopra has admitted offer of ₹ 1.74 crores. Dr. Ashok Chopra had also accepted the working of this figure. .....

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egister found, statement of Dr. Ashok Chopra who performed the surgeries and all other related material are basis of the addition. The decision referred by ld. CIT(A) and the ld. Counsel of the assessee are not applicable on the facts of this case. The ld. Commissioner of Income Tax (Appeals) has placed reliance upon the Hon ble Apex Court decision in the case of CIT vs. P.V. Kalyanasundaram [2007] 294 ITR 49 (SC). In our considered opinion, the said case law is not at all applicable on the fact .....

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