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ACIT 21 (2) , Mumbai Versus Oriental Decorators

2018 (1) TMI 333 - ITAT MUMBAI

Additions on the basis of forced statements made during survey action u/s. 133A - addition on account of alleged discrepancies in the books - addition on the basis of loose paper - unaccounted expenditure - cash transactions - retracted statements - Held that:- CIT-A has rightly appreciated the stand of the assessee in deleting the additions as the revenue has no cogent incriminating materiel with it to justify the addition of ₹ 1.2 crores apart from the forced confessional statement which .....

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ned CIT(A) has rightly appreciated the entire factual matrix of the case and deleted the additions vide his appellate order. - In the instant case, if we eschew the said retracted forced confession from record, then we are afraid there are no incriminating material on record to justify additions as was made by the AO which learned CIT(A) has rightly appreciated in deleting the additions vide his appellate orders. The Revenue in the instant case has not even bothered to cross examine the par .....

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n record to prejudice the assessee speak loudly and points to one and only one irresistible conclusion that Revenue has obtained forced confession from the assessee to surrender income of ₹ 1.20 crores and we have no hesitation in confirming the well reasoned order of the Ld. CIT-A which we affim/sustain. - Decided against revenue - I.T.A. No. 820/Mum/2015 - Dated:- 5-1-2018 - SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Revenue : Shri. Rajat Mittal .....

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inafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). 2. The grounds of appeal raised by the Revenue in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the tribunal ) read as under:- 1) On the facts and circumstances of the case and in law, the Id. CIT (A) has erred in rejecting the statement of one of the partners Shri Inderjit Singh Khokhar recorded u/s 133A of the I. T. Act during the survey conducted on 19/09 .....

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erred in accepting that assessee had disclosed an amount of ₹ 1.20 Cr during the survey proceeding, though the circumstantial evidence, impounded papers & impugned cash transactions and admission by the assessee, purported that these cash transaction were done in the relevant financial year. 4) For this and other reasons it is submitted that the order of the CIT (A) may be set aside and that of the AO restored. 5) The appellant craves leave to amend or alter any ground or add a new gro .....

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urrender of an income of ₹ 1.20 crores, as per details below. Sr.No Points on which disclosure was made. Amount . of . disclosure.(Rs.) 1. Cash receipts 62,00;000 2. On account of purchases ·.:·:20,00,000 3. On account of labour charges 8,00,000 4. On account of site expenses 3,67,000 5. On account of octroi & transportation 1,10,000 6. On account of wages & salaries 12,77,000 7. On account of travelling & conveyance 46,000 8, On account of capital introduced by p .....

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he statement recorded by Revenue during the course of survey operations u/s. 133A of Shri. Inderjit Singh Khokhar was not voluntarily recorded as the same was recorded by Revenue after threatening the partners of the assessee. These facts were also brought by the assessee to the notice of the learned Chief Commissioner of Income Tax-X,Mumbai and Commissioner of Income Tax-18, Mumbai . The assessee also filed writ petition with Hon‟ble Bombay High Court which was later withdrawn by the asse .....

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, submitted that an income of ₹ 1.20 crores which was declared during the course of survey operations u/s 133A on 19-09-2008 was not included in the return of income filed with Revenue as the said statement was taken forcefully by Revenue from partner of the assessee and the same was retracted by the assessee. It was also submitted that the statement recorded during the course of survey operations u/s 133A does not have any evidentiary value as the officer is not empowered to administer oa .....

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urvey operations u/s 133A, which is placed in paper book at page no. 155, on the ground that the assessee has voluntarily surrendered and disclosed income of ₹ 62.00 lacs based on this loose paper vide statement recorded of partner Sh. Inderjit Singh Khokhar . The perusal of page 175 of the impounded material during survey operations u/s 133A which is a loose paper reveals that it has notings as under: Seven K-05/4 Five K-01/5 Eleven-K-5/6 Two K-18/06 Twelve K-15/7 Ten K-12/08 Fifteen K-17 .....

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ing the course of survey operations and it was not shown by the assessee that the statement was taken forcefully or under coercion except that letters were written to the higher authorities and writ petition was filed with Hon‟ble Bombay High Court which was later withdrawn by the assessee. The AO also observed that the statement recorded by Revenue during the course of survey operations u/s 133A is relevant and useful for proceedings under the 1961 Act. The AO referred to decisions of the .....

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tenance of books of accounts. The AO also noted that the assessee as well its counsel has not co-operated with the Revenue during assessment proceedings and many details/evidences as were sought by the AO was not furnished /made available and to beat the time barring limitation, the assessment was framed based on the material available on records. Thus, the AO made additions to the tune of ₹ 1,20,00,000/- to the income of the assessee on account of amount surrendered by the assessee during .....

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I have perused the assessment order passed by the AO as well as the submissions made by the AR of the appellant and all other material placed on record carefully. 25. The AO has made the following additions on account of additional income declared by the appellant during the course of survey u/s. 133A at their premises on 19/09/2008. The heads under which the disclosure was made are as under:- Amount of disclosure (Rs) 1 Cash receipts 62,00,000 2 .On account of purchases 20,00,000 3 On account o .....

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, recorded during the survey u/s 133A. The first major addition made is on account of the loose paper no. 175 found during the course of survey, containing the writings on it as under:- Seven K - 05/4 Five K - 01/5 . Eleven K - 5/6 Two K - 18/06 Twelve K - 15/7 Ten K - 12/08 Fifteen K - 17/08 30. 'According to AR,,in the circumstances explained above, the additions made on the basis of these impounded document (page 175) is merely on the basis of assumptions and presumptions in the absence o .....

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documents, in the absence of any supportive acceptance by the appellant, are not a conclusive proof of the unaccounted cash receipts of ₹ 62,00,000/- by the appellant for the period under consideration. 31. The above arguments of the AR of the appellant has merit. The contents of the statement recorded during the course of survey were retracted by the appellant vide letter dated 16/10/2008, which is within a month of the survey conducted at the premises of the appellant the contents of the .....

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same and was forced to sign the same under the circumstances as mentioned in our letter dated 29/09/2008. Thus, we state that the said statement has not been given voluntarily and therefore the statement may be treated as retracted as the disclosure of additional income of ₹ 1,20,00,000/- was taken through intimidation and threats given during the survey. As we have already requested not to deposit the four post dated cheque of ₹ 10,00,000/- each taken forcibly from us, we may state .....

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ement. The AO should have taken such allegations leveled seriously and cross examined the appellant for the allegations leveled. Once the retraction statement was made by the appellant alleging the threat and coercion along with the allegation of forcefully getting the statement signed from the partner of the firm, the AO was to examine the contents of the retraction statement and should have afforded an opportunity to the partner of the firm to explain the circumstances which led to the retract .....

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o establish that the contents of the statement recorded during the survey were not true and correct by filing cogent evidence, which in the instant case was the letter filed by the appellant before the ACIT 18(1), Mumbai dated 16/10/2008. Specific provisions of the Income-tax Act as contained under Section 132(4), 133A(5), etc., provide that statements recorded in the income-tax proceedings under the above sections have evidentiary value. In the instant case the statements made by Sh. Inderjit S .....

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statements made by the deponent in their affidavits later on, if no cross examination with reference to the statements made in the affidavits is done. 35. It is also a well-accepted principle that an admission is not conclusive evidence as to the truth of the matter stated therein. It is only a piece of evidence the relevancy of which is required to be judged basing on the material evidence and circumstances in which it is made. 36, In the decision in Pullangode Rubber Produce Co, Ltd. vs. Stat .....

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300 ITR 157 (Mad), it has been held that Sec. 133A does not empower any IT authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition, 39. In the case of INCOME TAX OFFICER vs. VIJAY KUMAR KESAR, (2010) 231 ITR (Chattisgarh) 165 : (2010) 327 ITR 497 : (2010) 36 DTR 13, recently the Hon ble High Court has held that Addition on the basis of statement recorded during surve .....

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excess stock and such primary evidence was produced otter considerable period - On appeal, CIT(A) accepted the explanation offered by the assessee and the books of account produced by him as the entries in the books were supported by primary evidence - CIT(A) also accepted the explanation that the statements were made by the assessee without understanding the import of the same as he was under stress due to the death of his daughter - Order passed by CIT(A) has been confirmed by the Tribunal-Fin .....

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u Dayal Kanojia (2011) Tax World Vol. XLV Part-l, page 23, ( January 11)] 40. Perusal of the paper placed at page 175 of the impounded material shows that it is a plain paper, showing some words not even figures, without any corroborative evidence to show that the, words written on it represent the money received in cash by the appellant. The contention of the AO is that the appellant had admitted in the statement recorded during the survey that this document represent cash money received from v .....

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tement recorded during the survey has already been retracted in the post survey proceedings. Since the statement was already retracted by the appellant the AO, should have made further independent investigations to prove that the appellant had received the above cash payments. But no efforts were made in this direction and the AO proceeded to make the additions on the basis of the admission of additional income in the statement recorded during the course of survey u/s 133A. 41 The addition made .....

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t looking into the fact that the appellant had brought the facts of the survey proceedings and incidents of their harassment to the knowledge of the higher authorities of the department including Central Board of Directs Taxes and had also filed the writ petition before the High Court of Bombay narrating the events and, irregularities committed by the authorized officer during the course of survey. The AO has not rebutted the above arguments of the appellant in the assessment order, though the A .....

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are not required to make a statement admitting or denying any concealment of income during the course of survey statement recorded during the survey, if any, cannot be the only basis of making any addition to the income of the assessee unless and until the statement is supported by corroborative evidence. This has been made clear by the CBDT instruction F. No. 286/2/2003-IT(lnv) dated 10.3.2003 has ....... Instances have come to the notice of the Board where assessees have claimed that they hav .....

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s to information on what has not been disclosed or is not likely to be disclosed before the IT Department. Similarly, while recording statement during the course of search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, AOs should rely upon the evidences/materials gathered during the' course of search/survey operation .....

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the statements or confession taken during the survey do not serve any useful purpose. 44, In view of the facts and' circumstances explained above, in my considered opinion, there is no justification for making addition of ₹ 62,00,000/- to the income of the appellant on account of cash receipts as there is no credible evidences placed on record to prove the same. As far as the paper placed at page 175 of the impounded material is concerned, it is a plain paper or a dumb document, showi .....

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e further additions to the income of the appellant as under:- On account of purchases 20,00,000/- On account of labour charges 8,00,000/- On account of site expenses 3,67,000/- On account of octroi & transportation 1,10,000/- On account of wages and salaries 12,77,000/- On account of travelling & Conveyance 46,000/- Capital introduced by the partners 12,00,000/- Total 58,00,000/- 46. The above additions are also made purely on the basis of the statement recoded during the course of surve .....

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s 8,00,000/- On account of site expenses 3,67,000/- On account of octroi & transportation 1,10,000/- wages and salaries 12,77,000/- We admit that these expenses are not properly supported by bills & vouchers. In the absence of any documentary evidence to substantiate the same, in the circumstances to buy peace of mind, I offer a sum of ₹ 46,00,000/- to cover up the possible leakage on the part of the purchases and expenses notified above. Q.17. Your attention is drawn to the ledger .....

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akhs only) on account of cash receipts, ₹ 46,00,000/- (Rupees forty six lakhs) on account of unproved vouchers/expense, ₹ 12,00,000 (Rupees Twelve lakhs) on a/c of capital introduced by the partners during the period 01/04/2008 to 31/08/2008 totalling to ₹ 1,20,00,000/- (Rupees One crore Twenty lakhs only) over and above our regular income to buy peace of mind and to avoid any penal action. We anticipated that no penal action will be imposed/initiated upon us taking cognizance .....

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e, AO to conclude that the above income had not been disclosed by the appellant for the period under consideration. The AO has neither placed any evidence on record nor has referred to any impounded material in the assessment order before making the above additions to the income of the appellant for the period under consideration, The AO has not even discussed the different heads under which the additions are made in the, assessment order. What are the unaccounted purchases of ₹ 20,00,000/ .....

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corroborative evidence to prove the unaccounted nature of these expenses. All these additions made by the AO are purely on the basis of statement recorded during the course of survey on the basis of the questions and answers at sr. no. 16, 17 and 18 of the statement recorded without any supporting evidences. The AO has not even discussed these issues, in the assessment order and straightaway added back total amount of Rs, 58,00,000/- to the income of the appellant firm. Such an action of the AO .....

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279 ITR 143 (ITAT-AHM). Merely the statement cannot be made the basis for making additions to the income of the assessee while completing' the assessment proceedings. This issue has already been discussed in detail in the preceding paras above. 49, In view of the facts and circumstances explained above, in my considered opinion, there is no justification for making addition of ₹ 58,00,000/- to the income of the appellant on account of unaccounted purchases, labour charges, site expense .....

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ch addition made cannot be sustained and hence additions made amounting to ₹ 58,00,000/- is hereby deleted. 50. Regarding the instances of additions made in the case of the appellant for the AY 2007-08 and 2008-09 quoted by the AO in the assessment order, there is no relevance of quoting these instances for the year under consideration as every assessment year is separate assessment year and the principle of res judicata does not apply to the income tax proceedings. The additions made in t .....

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observation that at page 5 of the impounded material is the account of Deccan Lime Depot, wherein a bill amounting to. ₹ 88,004/- dated 09/09/2008 was not accounted for in the final accounts. From this the AO conclude that the account of the appellant are defective. Similarly, at the page 12 of the impounded material, the AO pointed that there is an account of Pyramid Ply Veneers and Laminates and a bill amounting to Rs, 27,000/- dated 26/05/2000 was not accounted for in the final accounts .....

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e same can be due to an oversight which was explained to the survey party during the survey proceedings. During the assessment proceedings also, the same explanation was given to the AO which was accepted by him. Such explanation is placed at page 139 to 152 of the paper book filed during the appellate proceedings. 54. The above contention of the AR of the appellant is correct. The appellant had filed the explanations regarding the impounded material which included the explanation in respect of .....

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sessee. the only explanation offered by the appellant is that these bills were not accounted for due to oversight. Such an explanation cannot be accepted. The AO is directed to add back the above amounts of ₹ 88,004/- and ₹ 27,000/- as unaccounted expenditure u/s. 69C of the I.T Act 1961. 55. Regarding the other discrepancy of two bills of M/s Weather Cool Sales, of ₹ 61,03,450/- and ₹ 21,19,636/- were recorded in the final accounts as ₹ 60,40,584/- and ₹ 20,9 .....

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f the amount of ₹ 21,19,636/-, out of which TDS of ₹ 21,832/- has been deducted and net amount credited to the account of the above party is ₹ 20,97,804/-. So, there is no discrepancies in the above amounts as pointed out by the AO. 5. Aggrieved by the appellate order dated 10-11-2014 passed by learned CIT(A), Revenue has come in an appeal before the tribunal. 6. The Ld. DR submitted that the assessee made disclosure of ₹ 1.2 crores during the course of survey operation u .....

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raction letter dated 16-10-2008 of the assessee is placed . Our attention was also drawn to page no. 34 to 42 wherein the statement of assessee recorded on 19-09-2008 during the course of survey operations u/s 133A is placed . our attention was also drawn to page no. 5 of the assessment order passed by the AO, wherein several discrepancies as were found by the AO in the material impounded and books of accounts were found by the AO. Our attention is also drawn to para 5.4 to 5.6 of the assessment .....

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the course of survey operations wherein the assessee was asked by survey team to prepare the said document. Our attention was also drawn by learned counsel for the assessee to page no. 80-101 of paper book which is a report of the tally data base of the assessee prepared by P systems which shows that there were tampering and manipulation in the computer system and the files were updated/altered in the mid-night of 19th/20th September 2008 to manipulate the books of accounts to have the forced co .....

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ht of 19/20-09-2008 to suit the forced confession from the partner of the assessee. It was submitted that survey started on 19.09.2008 and ended on 20.09.2008 and letter was written by the assessee on 29.09.2008 retracting the said surrender of income through an advocate. It was also submitted that retraction letter dated 16-10-2008 was given before the tax authorities retracting from the surrender of the income to the tune of ₹ 1.20 crore. It was submitted that the writ petition was filed .....

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d merely based on forced extraction of confession/admission of undisclosed income to the tune of ₹ 1.20 crores. It was submitted that there was some bills which were not entered into the books of accounts when survey took place on 19-09-2008 but it is not a ground for making additions otherwise there is no discrepancy in the books of accounts and whatever differences in the books of accounts as is referred in the assessment order of the A.O. was on account of VAT/TDS for which reconciliati .....

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assessee relied upon decision of Hon‟ble Delhi High Court in the case of CIT v. Dhingra Metal Works in ITA no. 1111/2010 vide orders dated 04-10-2010. 7. We have considered rival contentions and perused the material on record carefully including orders of the authorities below and case laws relied upon. We have observed that the assessee is an interior decorator undertaking contracts for various corporate clients for the interior decoration. The survey operations u/s. 133A was carried out .....

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000' 2. On account of purchases ·.:·:20,OO,OOO 3. On account of labour charges 8,00,000 4. On account of site expenses 3,67,000 5. On account of octroi & transportation 1,10,000 6. On account of wages & salaries 12,77,000 7. On account of travelling & conveyance 46,000 8, On account of capital introduced partners by 12,00,000 Total disclosure 1,20,00,000 " . The assessee filed return of income on 30.09.2009 declaring total loss of ₹ 44,18,980/- . The asse .....

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ubmitted that the statement recorded by Revenue during the course of survey operations u/s. 133A of Shri. Inderjit Singh Khokhar was not voluntarily recorded as the same was recorded by Revenue after threatening/coercing the partners of the assessee. These facts were also brought by the assessee to the notice of the learned Chief Commissioner of Income Tax-X,Mumbai and Commissioner of Income Tax-18, Mumbai immediately after the conclusion of survey on 19/20-09-2008, vide advocate letter dated 29 .....

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urvey on 19.09.2008, vide notice of the advocates dated 29.09.2008 written to the Chief Commissioner of Income Tax as well as to the Commissioner of Income Tax intimating about the threats and coercion exerted by officials of Revenue in extracting forced confession/admission vide statement recorded on 19-09-2008 during survey operations u/s 133A which was alleged by the assessee to be involuntary in nature, wherein detailed account of survey proceedings being conducted by Revenue in an objection .....

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ibunal . It is also alleged by the assessee that fictitious entries were also introduced in the tally software in the computer of the assessee wherein books of accounts were maintained of the assessee at the behest of the survey team wherein books of accounts were manipulated/tampered with and the partner of the assessee was coerced/threatened by survey team to give forced statement to voluntarily disclose an concealed income of ₹ 58 lacs based on such tampering of books of accounts . Henc .....

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counts although some of the bills were not entered in the books of accounts when survey took place and so far as discrepancies in the books of accounts and bills are concerned, same were explained to be on account of differential due to VAT/TDS. The assessee has also explained that preceding years additions as made by Revenue stood deleted at appellate forums . All these contentions of the assessee had remained un-rebutted by Revenue even before us. It was also explained by the assessee that Wri .....

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statement and to surrender income of ₹ 1.20 crore as well to prepare documents reflecting concealed income to the tune of ₹ 62 lacs vide impounded page no 175 which is placed at paper book 155 . We have also carefully gone through the impounded document marked at page 175 . The said document has following written on it, as under : Seven K-05/4 Five K-01/5 Eleven-K-5/6 Two K-18/06 Twelve K-15/7 Ten K-12/08 Fifteen K-17/08 There is no further evidence regarding the names and addresses .....

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/evidences on record which in the instant case is lacking. It was also explained by the assessee that tally software containing account books was tempered/manipualted in the night of 19/20-09-2008 to introduced fictitious entries to justify surrender of income to the tune of ₹ 58 lacs. The assessee has also brought report from software / technical experts to substantiate tampering in tally software in the night of 19/20-09-2008 which has remain un-rebutted by Revenue even before us . The R .....

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9 permitting withdrawal of the writ petition by Hon‟ble Bombay High Court is placed in paper book at page no. 106, wherein Hon‟ble Bombay High court permitted assessee to raise all grievances relating to entries in books of accounts before the authorities during the course of assessment proceedings. CBDT vide letter dated 03-11-2008 has also written letter to the assessee assuring suitable action to resolve grievance of the assessee which is placed on record in paper book. The assess .....

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aced in record in paper book filed with the Revenue. It is also pertinent to mention that Revenue chose not to cross examine assessee‟s partner Mr Inderjit Singh Khokhar pursuant to retraction of the voluntarily disclosure of ₹ 1.2 crores made by the assessee . The Revenue has also chosen not to place on record report of vigilance and other enquiries initiated by it as directed by CBDT. Now under these circumstances, we have to see whether there is sufficient incriminating material o .....

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ussing on confession of undisclosed income, as under:- Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search and seizure and survey operations do not .....

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of pending assessment proceedings also, AOs should rely upon the evidences/materials gathered during the' course of search/survey operations or thereafter while framing the relevant assessment orders. We have observed that the A.O has referred to minor discrepancies in the books of accounts and the bills which has not been entered in the books of accounts which has been suitably explained by the assessee that these minor variations were on account of VAT/TDS differentials which stood reconc .....

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e deleted by appellate authorities which has also remained un-rebutted by Revenue even before us and in any case merely because additions on some grounds in preceding years have been made does not warrant that the books of accounts have become unreliable for even the subsequent years as principles of res judicata are not applicable to income-tax proceedings as additions in every year is to be made on its own merits. There were additions made to the tune of ₹ 58 lacs on account of alleged d .....

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ce 46,000 8 On account of capital introduced by partners 12,00,000 Total disclosure 1,20,00,000 With Respect to the aforesaid additions to the tune of ₹ 58 lacs, there is no whisper in the assessment order as to how these additions are being made in context of the books of accounts by referring to any incriminating material impounded during the survey or even otherwise apart from merely relying on the statement of Mr Inderjit Singh Khokhar which stood retracted. No doubt the statement reco .....

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s to see whether the said retracted statement inspire confidence to fasten tax liability or is vitiated by coercion, threat, force or fraud which will make it not reliable enough to fasten tax liability on the tax-payer being involuntary in nature . The assessee in the instant case has consistently raised serious allegation against survey team at various forums of the tax authorities including CBDT, Hon‟ble Bombay High Court as well before us as to the statement being obtained by threat, f .....

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y proceedings vide advocates letter dated 29-09-2008 as well retraction letter dated 16-10-2008 filed by the assessee. The Ld. CIT-A has rightly appreciated the stand of the assessee in deleting the additions as the revenue has no cogent incriminating materiel with it to justify the addition of ₹ 1.2 crores apart from the forced confessional statement which is involuntary in nature. The loose document impounded being page no 175 during survey operations is held by us to be dumb document wh .....

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ee has rightly relied upon the decision in the case of CIT v. Dhingra Metal Works in ITA no. 1111/2010 vide orders dated 04-10-2010. Search and Surveys conducted under the provisions of the 1961 Act is an serious infringement of Right to life and liberty of the person searched/surveyed as enshrined in Article 21 of the Constitution of India as it impinges on Right to Privacy and it cannot be carried out in a casual manner except through the procedures established by law which also entailed that .....

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