TMI Blog2016 (9) TMI 1504X X X X Extracts X X X X X X X X Extracts X X X X ..... the fact that no incriminating evidence was found on the day of the survey which is a testimony to the fact that statement of Mr. Paras Jain was to be considered. Merely on the basis of the statement of another director, that also after a lapse of 20-25 days of the survey, without having any proof at all, cannot be the basis for addition or even for that matter, bringing into assessment any amount without supporting evidence. The statement recorded u/s. 133A of the Act cannot be taken on oath and therefore it cannot be said to have an evidentiary value. Accordingly addition made on the basis of statement is not sustainable. With regard to the nature of assessee s business, we found that the import of diamonds undergoes appraisal process by the appraisers appointed by the custom authorities. The officers appointed by Government of India verify physically each and every parcel of diamonds in order to ascertain the quality, quantity, rate, value and place of origin visa vis declared by the importers. All the transaction of purchase, sales, import was made through cross account payee cheques and not a single payment made to any party by way of cash. All the purchase and sales transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceeds are received on sale itself. Therefore the assessee has idle business funds which is used in temporary loan and balance is in bank account on the same appellant had earned income and same is offered under the business head. AO assessed the same as Income from other Source . The Ld. AO failed to consider that income arise from business fund is assessable under the business. The issue under consideration is squarely in the case of CIT vs. Lok Holdigns [ 2008 (1) TMI 365 - BOMBAY HIGH COURT] wherein it was held that interest received on deposits made out of advance money so received by the assessee in the course of its business is liable to be taxed as business income . Rejection of books of accounts - HELD THAT:- Action of the AO to reject the books of accounts merely on the basis of statement signed by the assessee during the survey is bad in law. There should be some valid reason to reject the books of accounts which the Income Tax Officer has not given and hence rejection of books of accounts is not justified. The assessee has got its books of accounts audited by a qualified Chartered Accountant, being one of the pre-requisites. Hence when the accounts are audited, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant by : Shri Vimal Punmiya Written submission Respondent by : Shri Uday Bhaskar Jakke ORDER R. C. Sharma, These are the appeals filed by the assessee against the order of the CIT(A), Mumbai for the A.Ys. 2008-09 and 2009-10, in the matter of order passed u/s. 143(3) r/w s. 147 of the Act. 2. Common grounds have been raised by both the assessees in both the years under consideration, therefore, all the appeals are heard together and are now decided by this consolidated order. 3. Rival contentions have been heard and record perused. Facts in brief in case of Sunshine Import Exports Pvt. Ltd., are that during the years under consideration, the assessee company is engaged in the business of manufacture and trading in precious and semi precious stones and jewellery in the name and style of M/s Shinestar Irnpex Pvt. Ltd. The assessee company has two directors namely Mr. Paras Jain and Mr. Saurabh Garg. Assessee is mainly engaged in the import of diamonds and sales in local market to exporters who export the goods. The import of diamonds is done through custom authorities and banking channels in India. There has been a sur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gaged in the business of trading in diamonds. The revenue carried out a survey operation u/s 133A of the Acton 07-07-2008 at the business premises of the assessee. The revenue also carried out survey operations in the hands of other concerns named M/s Basant Dia Jewels and M/s Mox diam. Consequent to survey operations, the ADIT (inv) recorded a statement u/s 131 of the Act from Sri Basant Jain, proprietor of M/s Basant Dia Jewels, wherein he admitted that his business concern is engaged in the business of providing accommodation entries in respect of import/purchase and sale of diamonds. He also described the modus operandi followed in this regard. It appears that an identical statement was given by M/s Mox diam also. Certain specific replies given in the above said statements about the modus operandi followed were confronted with one of the directors of the assessee company named Shri Ramesh L Jain and he also confirmed that the statement given in the cases of M/s Basant Dia Jewels and M/s Mox diam. The said reply given by Shri Ramesh L Jain was endorsed by him in the statement recorded from him on 18.7.2008 and the same is extracted below:- I have gone through the stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. The director Shri Ramesh L Jain retracted from the statement given by him by filing an affidavit on 20-08- 2008, i.e., within one month of giving statement affirming the modus operandi explained by other businessmen. In the affidavit, Shri Ramesh L Jain has stated that survey officials entered his office premises at 1.30 pm on 07-07-2008 and they left the office at 3.00 am on 09-07-2008. He was forced to accept the nature of business carried on by the assessee as that of providing accommodation bills only. It is further stated that his concern I.T.A. No.6992/M/2010, 4 7799/M/11 and 5640/M/2012 was not indulging in providing accommodation bills, but actually carrying on business transactions. 6. Subsequently, another statement was recorded from Shri Ramesh L Jain on 21-02-2009 during the course of assessment proceeding for AY 2007-08, wherein also he stood by the averments made in the affidavit. 7. The assessing officer, during the course of assessment proceedings, issued commission u/s 131(d) of the Act to the Asst. Director of Income tax (Inv.), Surat in order to verify the purchases and sales recorded by the assessee. However, the Deputy Director of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pm on 07-07-2008 and they left the office at 3.00 am on 09-07- 2008. Further, it was stated that he was forced to accept the nature of business carried on by the assessee as that of providing accommodation bills only. Hence, in our view, the assessing officer could not have placed reliance on the statement given by the director of the assessee for the following reasons:- (a) the survey officials are not entitled to record statement on oath during the course of survey operations u/s 133A of the Act. (see. DCIT Vs. Premsons (2009)(ITAT Mumbai) (b) the statement recorded during the course of survey operations do not have evidentiary value and hence the same cannot be used as evidence in the assessment proceedings. (see CIT Vs. Khader Khan sons (2012)(25 taxmann.com 413)(SC) (c) the assessee has retracted the statement given during the course of survey operations within one month by filing affidavit. The submissions made in the affidavit has not been found fault with. (d) The AO examined the director of the assessee u/s 131 of the Act subsequent to filing of affidavit, but the assessee has withstood by the averments made in the affidavit. The AO c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also dismissed these documents by observing that they are cooked up documents by making general observations, i.e., without actually establishing that the above said documents were bogus in nature. It is not known as to how the copies of income tax returns could be considered to be a cooked up documents. Thus, we notice that the said observations made by the Ld CIT(A) are baseless, not supported by any evidences and are mere surmises. Hence we are unable to sustain his conclusions. 12. We further notice that the assessee has maintained proper books of accounts. The purchases and sales recorded therein have not been found fault with, i.e., no defect has been pointed out by the assessing officer. Hence, we are of the view that there is no ground available with the assessing officer to reject the books of account. Accordingly we are of the view that the assessing officer was not justified in rejecting the books of account and consequently, in our view, the book results should have been accepted. Accordingly, we are of the view that there is no justification or proper ground warranting the estimation of profits in the assessee's hand in all the three years under conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g well enough that such a statement would not affect him. Hence, there are basically two directors wherein the main director namely Mr. Paras Jain has never admitted any accommodation purchases and sales whereas the other director namely Mr. Saurabh Garg has admitted the accommodation business entries. 6. It is a well settled law that statement recorded during the course of survey under section 133A has no evidentiary value unless supported by corroborative evidences. Whatever statement is recorded under section 133A of the Income-tax Act is not given any evidentiary value for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. In this connection, reliance can be placed on the following judicial pronouncements: ACIT Vs Dr. J. Mohan ITAT Chennai ITA Nos. 575 to 582/ (Mds)/ 2011 ACIT Vs. Smt. M. Maheswari, ITAT Chennai ITA Nos. 583 to 589/(Mds)/2011 Paul Matheuis and Sons v. CIT [2003] 263 ITR 101 (Ker.) CIT v. S. Khader Khan Son (300 ITR 157)(Mad) Ashok Manilal Thakkar v. ACIT (27 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Tribunal erred in law in holding that the valuation of the property computed in accordance with the direction of the Tribunal be not less than that returned by the assessee itself. Hon'ble High Court had held that a valuation lower than that returned may be the correct value. An admission is an important piece of evidence, but it is not conclusive and it is open to the assessee to show that it is incorrect. ii. Commissioner Of Income Tax vs. Dhingra Metal Works 328 ITR 384 [Delhi] On 14th Sept., 2004, a survey under s. 133A of the Act was conducted on the assessee's business premises. During the course of survey, the tax officials noticed some discrepancies in stock and cash in hand. During the said survey, assessee surrendered an amount of ₹ 99,50,000/- and offered the same for the purposes of taxation. The additional income offered included a sum of ₹ 45,00,000 on account of excess stock found during the course of survey and offered by one of the partners of the assessee as additional income. Subsequently, the assessee vide its letter dt. 29th Nov., 2004, contended that the statement about stock was incorrect and that the impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to income of assessee notwithstanding the subsequently retraction of the statement stating that it was made in a disturbed mind-On appeal CIT(A) holding that there being no evidence regarding undisclosed income, addition made only on the basis of statement given in a state of confusion and later retracted, could not be sustained either in part or as a whole-On further appeal held that a statement is recorded under s. 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take, any sworn statement which alone lends evidentiary value as contemplated under the law-Basis for addition was the statement of the assessee without any corroborative material or evidence on record no material brought on record by the AO to substantiate that any expenditure on renovation was incurred by the assessee nor the AO made any reference to the DVO to find out the correct state of affairs-No addition warranted in the hands of the assessee merely because she signed the statement accepting the same. v. ClT vs. P Balasubramanian 354 ITR 116 [Madras] Survey-Statement recorded u/s 133A-No corroboration-Addition-Deletio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e time of survey but the AO rejected the same solely on the ground that the assessee had made confessional statement during the survey proceedings and surrendered income from undisclosed sources in the form of cash and excess stock and such primary evidence was produced after 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 TribunalFindings recorded by both the authorities cannot be termed perverse or contrary to record-Confession made by the assessee during survey proceedings is not conclusive and it is open to the assessee to establish that the same was not true and correct by filing cogent evidence-Additions rightly deleted. vii. ClT vs. Mrs Doris S Luiz 96 ITR 646 [Kerala] The stand taken by the assessee was that the money in question is in the nature of trust money, not impressed with the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter ultimately travelled to se. se held that It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. 9. In this case, we found that the survey party did not find any incriminating evidence/material that can establish the stand taken by the AO alleging that the assessee is engaged in the business of accommodation bills. Even after searching the entire premises of the assessee, nothing against the assessee was found and there is no proof in possession of the AO to substantiate the conclusion arrived at in the assessment order. 10. There is no dispute to the fact that no incriminating evidence was found on the day of the survey which is a testimony to the fact that statement of Mr. Paras Jain was to be considered. Merely on the basis of the statement of another direc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tain the quality, quantity, rate, value and place of origin visa vis declared by the importers. Further, all the transaction of purchase, sales, import is made through cross account payee cheques and not a single payment made to any party by way of cash. All the purchase and sales transactions are carried out with reputed parties of the diamond trade and all the payment received from debtors are through cross account payee cheques and all payment made to creditors are through cross account payee cheques. The Ld. AO cannot allegedly consider the imports of goods as providing accommodation bill in the market when physical delivery of goods were confirmed by the other arm of government authorities i.e. custom authorities. From the record we found that the sales were made to reputed exporters who are assessed to tax and their identities are known to income tax department. The customers are registered under state VAT laws. The company has received payments against sales proceeds by account payee cheques. The company has also purchased diamonds from local parties to whom payment were made by account payee cheques. From the record we also found that to discharge the onus of proving transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is in bank account on the same appellant had earned income and same is offered under the business head. However, the AO assessed the same as Income from other Source . The Ld. AO failed to consider that income arise from business fund is assessable under the business. The issue under consideration is squarely covered by the Hon ble Bombay High Court in the case of CIT vs. Lok Holdigns [2009] 308 ITR 356 (Bom), wherein it was held that interest received on deposits made out of advance money so received by the assessee in the course of its business is liable to be taxed as business income . Furthermore, the Hon ble Calcutta High Court in the case of Tirupati Woollen Mills Ltd. (1992) 193 ITR 252 (Cal) held that interest arising from deposits made out of business funds lying idle, is income from business and not from other sources. Consequently any expenditure relating to the business can be deducted from that. 18. Respectfully following the decision of the Hon ble Jurisdictional High Court, we direct the A.O. to assess the interest income as income from business . 19. In the case of Shine Star Impex Pvt. Ltd., wherein facts and circumstances are similar, we f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting the assessee's contentions shall lead to rejecting the treatment given to the parties accounts also, an attempt to do so would be erroneous. 24. The action of the AO to reject the books of accounts merely on the basis of statement signed by the assessee during the survey is bad in law. There should be some valid reason to reject the books of accounts which the Income Tax Officer has not given and hence rejection of books of accounts is not justified. The assessee has got its books of accounts audited by a qualified Chartered Accountant, being one of the pre-requisites. The very purpose of getting the accounts audited by a Qualified CA is to ascertain the authenticity and reliability of the documents and in the event any discrepancy arises, the same can be brought to the knowledge of the assessee as a consequence of which either the error apparent is rectified or the auditors vide its Audit Report makes an exclusive mention of the same to give a true and a fair picture of the business. Hence when the accounts are audited, it leads to the inference that due skill and expertise has been exercised in assessing the accounts and no material discrepancy has been noticed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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