TMI Blog2018 (1) TMI 190X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. - Decided against assessee. Disallowance u/s 40A(3) - Held that:- Where the amount has been offered to tax in the subsequent year, the same amount cannot be brought to tax in the impunged assessment year. Hence, the addition is deleted and ground of appeal is allowed in favour of the assessee. Addition u/s 40A(3) - Held that:- The fact that the payments have been made for the purposes of the assessee’s business have not been doubted by the AO. Regarding the business exigency of making payment in cash, it has been stated that first payment has been made after the banking hours for making labour payment, the second payment was necessitated on account of machine break down at site. Regarding the third payment, it has been stated that the said was paid to two labourers and payment to each is less than ₹ 20,000 and in this regard, we find that the ld CIT(A) has in similar circumstances allowed the payment in cash to the labourers not exceeding ₹ 20,000. In the entirety of facts and circumstances of the case, the disallowance made by the AO amounting to ₹ 82,200 is hereby deleted. In the result, ground of appeal is allowed. - ITA No.720/JP/2017 - - - Dated: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same and also to get the cash verified from the regular books of accounts. 3. In response to the show-cause notice, the assessee vide written submission dated 02.12.2016 submitted as under:- During the course of survey/search, the assessee has stated in reply to question No. 13 and 16 when question about cash of ₹ 70 Lacs found from the Car, he stated that the withdrawals were made from the bank account with bank of Baroda and SBBJ between 20.09.2014 to 30.09.2014 which was kept at residence and out of that amount he has kept ₹ 70 Lacs in the morning in the car for making payment to labour, tractor, material etc. Thus in survey assessee explained the amount of ₹ 98.92 Lacs (70+19.92+9) pertain to his business which is out of withdrawals from bank account. The same is evident from the extract from the accounts maintained in computer for the F.Y. 2014-15 was taken and marked as A-1 duly signed by the authorized officer. Copy of the same as Page No. 43 is enclosed for ready reference. Further, it is also submitted that the print out of incomplete books of account in computer was taken by the ADI (Investigation) team which was also part of Annexure A-1. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... od of accounting. (iii) While filing the return of income the assessee has not disclosed any undisclosed income and hence, retracted from the admission made by him during the course of search. The subsequent retraction from the surrender without having evidence in proof of retraction is not permissible in the eyes of law. The statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction. (iv) In statement recorded on 10.10.2014, in reply to question no. 8, Shri Bannalal Jat admitted that in his business of civil construction, he has inflated various expenditure and income so generated by inflating the expenditure is in form of cash which is found at his residence and the same is not recorded in his books of accounts and he surrendered the cash so found amounting to ₹ 1,21,43,210/- as undisclosed income of M/s. Bannalal Jat Construction Pvt. Ltd. (v) During the course of post search proceedings and after three months of search action, Shri Bannalal Jat vide statement recorded u/s 131 on 04.12.2014 again confirmed the admission of undisclosed cash of ₹ 1,21,43,210/- as has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e used against the person making such admission but they are not conclusive proof of the statement contained in the admission can always be explained. 4.2 It is seen that in the initial statement Banna Lal Jat, director of the company recorded on 09/10/2014, in reply to Q.No. 14, 15 16 admitted that the cash belongs to him and the source of such cash was claimed as withdrawals from bank account between 20-09-2014 to 30- 09-2014. However, the same was not corroborated during the search from the cash book of M/s Banna Lal Jat contractor, a proprietary concern and relevant copy of bank statement. Moreover, though as per the cash book of M/s Banna Lal Jat contractor, the cash balance of ₹ 1,06,76,390/- is claimed before the AO in assessment proceeding, the copy of the cash book of Shri Banna Lai Jat filed by the appellant is after incorporating number of pending entries, which itself proves that the cash book and books of accounts of Shri Banna Lai Jat were incomplete on the date of search and correctness and completeness of such cashbook is not accepted by the AO. Therefore, the cash balance worked out at ₹ 1,21,47,528/- of Shri Banna Lai Jat is nothing but an af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t case to clearly establish that the cash found relates to the assessee company. At the cost of repetition following citation with relevant excerpts are referred again to supply the emphasis. ( 1) Kanti Lai Parbhu Da Patel V/s DCIT (2005) 93 ITD 117 (Indore) Held that the assessee having owned up cash money initially in his statement u/s 132(4) as also confirming his admission while his statement recorded u/s 131 of IT. Act his attempt to explain it by way of agriculture income later on was untenable for is later retraction had no corroborative backing. ( 4) Dr. S.C.Gupta vs. CIT (2001) ITR 782 (All) In Dr. S.C. Gupta v/s CIT (2001) 248 ITR 782 (All), it was held that a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement earlier at the time of survey was wrong and infact there was no additional income. The burden does not seem to have been attempted to be discharged by the assessee. ( 6) Kantilal C. Shah vs. Asstt. CIT (2011) 133 ITD 57/14 Taxman.c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also at the residence on 11.10.2014. In the statement recorded at office u/s 132(4) dated 10.10.2014, Shri Bannalal Jat in reply to Question No. 6 stated that books of accounts of M/s Bannalal Jat Construction Private Limited is written up to 09.10.2014 but expenditure for last three to four months are not yet recorded. In respect of M/s Bannalal Jat, he stated that books of accounts are written up to 31.03.2014. A printout of the provisional/incomplete balance sheet, profit loss account and trial balance was provided. As per these accounts, the position of cash balance was as under:- Particulars Cash Balance (Rs) Trial Balance of Sh. Bannalal Jat for the period 01.04.14 to 09.10.14 Rs.1,06,76,390/- Balance sheet of M/s Bannalal Jat as on 09.10.2014 Rs.1,06,76,390/- Balance sheet of M/s Bannalal Jat Construction Pvt. Ltd. as on 09.10.2014 Rs.4,21,691/- 9. It was submitted that in search cash of ₹ 1,21,43,210/- was found at the residence and ₹ 3,380/- at the premises of M/s Bannalal Jat Construction P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,06,76,390/-. Of course this cash book was not complete but subsequently, it was completed and as per the completed cash book, cash balance on the date of search is ₹ 1,27,47,528/- which is almost the same as found in search. (iii) The AO in the assessment proceeding has not found any discrepancy in the cash book of M/s Bannalal Jat. In fact in case of Bannalal Jat, he has accepted this cash book and based on the accounts prepared on the basis of this cash book has adopted the income declared by him and accepted that cash balance as on 31.03.2015. Thus, when this cash books is accepted in case of Bannalal Jat, the same cannot be ignored for verification of the cash found on the date of search. (iv) The Panchnama of cash found and seized is in the name of Shri Bannalal Jat and not in the name of the assessee company. Thus, when the cash is found from the possession and control of Shri Bannalal Jat, it can only be considered in his case in view of the presumption laid down u/s 292C. In view of the above evidence and the legal position, the cash found in course of search cannot be considered in the hands of the assessee company. 12. It was submitted that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that though such statement has a evidentiary value but with appropriate evidence the same can be retracted. The Hon ble Supreme Court in case of Pullangode Rubber Produce Company Ltd. V. State of Kerala and Another 91 ITR 0018 (SC) has held that admission is an extremely important piece of evidence but it can t be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show the correct state of affairs. In the present case, the assessee has established that the cash found from the residence of Shri Bannalal Jat does not belong to it and therefore, only on the basis of the statement u/s 132(4) addition cannot be made. In this connection the various cases relied by the assessee as reproduced at pages 13-14 of the CIT(A) order may be considered. e) The Hon ble ITAT, Jaipur Bench in case of ACIT vs. Devendra Kumar Choudhary in ITA No. 828/JP/2016 order dated 30.06.2017 (copy enclosed) where also the assessee surrendered certain jewellery as unexplained in his statement u/s 132(4) but did not include the same while filing the return of income, deleted the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he records maintained at his Head Office at Jahajpur. Further in Question No. 16, further explanation of Shri Bannalal Jat was sought regarding the cash of ₹ 70,00,000, ₹ 19,92,500, and ₹ 9,00,000 found at his residence and he submitted that ₹ 70,000,00/- has been withdrawn by his Munsi and his sons from the Bank Account and given to him, however, from which particular bank withdrawal, this amount has been given to him is not clear to him. Regarding ₹ 19,92,500/- which is given by Shri Satya Narayain, it was stated that there is no supporting evidence available with him. In respect of ₹ 9,00,000/-, he stated the same to be his business receipts. In Question No. 22, Shri Bannalal Jat was specifically asked as to whether he maintains individual cash book given that he is the proprietor of Bannalal Jat Contractor and also the Director in M/s Bannalal Jat Construction Pvt. Ltd. In response, he submitted that he does not maintained individual cash books. 16. On perusal of the above statement of Shri Bannalal Jat recorded u/s 133A during the course of survey, it is clear that he is managing his business affairs of both his proprietary concern as wel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich he wishes to provide, he submitted that pursuant to search operations where various documents, loose papers, entries, cash, investment, advances and individual expenditure details have been found and taking all that into consideration, he surrenders ₹ 4,01,43,210/- as his undisclosed income. He also categorically stated that the said disclosure is in the hands of M/s Bannalal Jat Construction Pvt. Company in respect of unexplained cash amounting to ₹ 1,21,43,210/- and ₹ 2,50,00,000 and ₹ 30,00,000/- totalling to ₹ 2,80,00,000 in his individual capacity. He also requested that the cash so found at his residence may be adjusted against the tax which would be determined based on the said surrender of undisclosed income. 18. On perusal of the above two statements of Shri Bannalal Jat recorded u/s 132(4) at his residence and business premises during the course of search proceedings, what has clearly emerged is that he has made specific disclosure of undisclosed income in the form of cash amounting to ₹ 1.21 crores found at his residence in the hands of M/s Bannalal Jat Construction Pvt. Ltd. and similarly, he has made specific disclosure of ot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and has thus been surrendered as its undisclosed income. The said admission has been reiterated in not just one statement but two subsequent statements - one recorded u/s 132(4) and second recorded u/s 131 during post search proceedings. We therefore donot see any inconsistency in assessee s statements, rather the latter statements have been made more clearly and given that these subsequent statements have been recorded on oath u/s 132(4) will thus have a great evidentiary value. 21. Thereafter, the assessee company filed its return of income on 30.09.2015 wherein such surrender was not honoured by the assessee company and the undisclosed income in form of cash found at the residence was not offered to tax, effectively retracting from the statement recorded on oath u/s 132(4) of the Act. It is relevant to note that during the intervening period i.e, the day the statement was recorded u/s 132(4) on 10.10.2014 and day the return of income was filed on 30.09.2015, almost a period of 11 months, there is no communication from the assessee company to the Revenue authorities retracting from the statement so made and recorded during the course of search proceedings. In fact, during th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents relied on by the learned counsel which has a bearing on the issues and would then give our own view on questions posed by the Revenue. 15. In our view, the statements recorded under Section 132(4) have great evidentiary value and it cannot be discarded as in the instant case by the Tribunal in a summary or in a cryptic manner. Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly sworn affidavit or statements supported by convincing evidence through which an assessee could demonstrate that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ven by the assessee company for such delay. It is clearly an afterthought and loses its signifance. The statement recorded u/s 132(4) has great evidentiary value and there is no material which has been brought on record that such statement has been recorded and obtained forcefully/by coercion/undue influence. Further, the assessee has been consistent in his statements so recorded even during the post search proceedings when his statement was recorded under section 131. Hence, in light of above discussions, the retraction of the statement recorded u/s 132(4) cannot be accepted in the instant case. 25. In the entirety of facts and circumstances of the cases and respectfully following the decision of the Hon ble Rajasthan High Court (supra), the addition towards the undisclosed income in form of cash found during the course of search amounting to ₹ 1,21,43,210 is confirmed in the hands of the assessee company. 26. Before parting, we may add that we have gone through all the contentions raised by the ld AR and the same have been appropriately dealt with supra and also various legal authorties which have been brought to our notice each one of which has been rendered in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be directed to be deleted. 31. We have heard the rival contentions and perused the material available on record. The ld AR has contended that the amount of ₹ 29,860/- has been reversed and offered to tax in AY 2016-17. Where the amount has been offered to tax in the subsequent year, the same amount cannot be brought to tax in the impunged assessment year. Hence, the addition is deleted and ground of appeal is allowed in favour of the assessee. 32. Regarding the 3rd ground of appeal, briefly the facts of the case are that the AO, based on review of the seized documents, observed that the assessee made certain payment exceeding ₹ 20,000/- in cash as mentioned at page 12 of the assessment order and accordingly, disallowed the same u/s 40A(3). 33. The Ld. CIT(A) after considering the explanation of the assessee and the evidence filed restricted the disallowance u/s 40A(3) to ₹ 82,200/- in respect of 3 payments of ₹ 25,000/-, ₹ 28,000/- and ₹ 29,200/-. The relevant finding of the ld CIT(A) which is reproduced as under:- 13. I have considered the facts of the case, gone through assessment order and submission of the appellant. It is see ..... X X X X Extracts X X X X X X X X Extracts X X X X
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