TMI Blog2017 (8) TMI 1583X X X X Extracts X X X X X X X X Extracts X X X X ..... re of expenditure - revenue or capital expenditure - Addition on account of Transport expenses - HELD THAT:- We are of the view that addition made by AO was based on guess work and without bringing any cogent material on record. Therefore, we are of the view that the ITO in estimating the expenses on transportation, did not act on any material but acted on pure guess and suspicion and hence, we confirm the order passed by ld CIT(A). Addition on account of purchase of organic manures - HELD THAT:- We are of the view that AO had made addition on account of supplies of goods by Asia Udyog and P.M. Traders based on statement recorded, which was, later on retracted. During the course of hearing, the books of accounts, bills, Vouchers, and other details were submitted and the AO did not find any mistake. Details of other parties who supplied the organic manures to the assessee were also submitted before the AO and the AO accepted them. We are of the view that the said additions are purely on guess and surmise and ld CIT(A) had rightly deleted the addition, therefore, we confirm the order passed by ld CIT(A). Disallowance u/s 14A - HELD THAT:- CIT(A) noted that AO has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT DR For the Respondent : Shri Shikha Agarwal, ACA ORDER Per Bench: The captioned seven appeals filed by the Revenue pertaining to assessment Years 2006-2007 to 2011-2012, and Five cross objections filed by the Assessee pertaining to assessment years 2005-2006 to 20092010, are directed against the order passed by the ld. Commissioner of Income Tax (Appeals)-21, Kolkata, which in turn arise out of assessment orders passed by the Assessing Officer under sections 153A/143(3) of the Income Tax Act 1961, (hereinafter referred to as the Act ). 2. There is a delay in filing the cross objections. We notice that assessee has reported the delay of 498 days in filing the cross objections, in the affidavit submitted by him before us. It should be noted that delay in filing the appeal should be worked out appeal-wise and each day of delay in filing the appeal should be explained by the assessee. The Assessee filed the petition for condonation of delay in filing the all cross objections, that is, CO. Nos. 70 to 74 /Kol/2016 for A.Y. 2005-06 to 200910, stating that there was delay of 498 days in filing the appeal. In all the assessment years, the assessee worked out t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide the basis of charging monthly bill for transportation without having any agreement. 2. That in he facts and circumstances of the case and in law, the ld CIT(A)`s observation is not based on facts or documentary evidences and he also ignored the facts that the modus operandi of both the companies is made. 3. That the department craves leave to add, modify or alter any of the grounds of appeal and /or adduce additional evidence at the time of hearing of the case. Grounds of appeals raised by Assessee in Cross objections No.70/Kol/2016, A.Y. 2005-06, reads as under: 1.That the CIT(A) erred in holding that under the provisions of Sec.153A of the Income Tax Act, 1961, the AO is empowered to reassess the income for the completed assessment even in the cases where nothing incriminating document was found in the course of search. The provisions of Sec.153A neither empowers the A.O. to re-assess income of the completed assessment without having any seized material or asset to that effect nor does it allow the A.O. to review the assessment already completed. As such, the addition made in the order U/s 153A/143(3) is bad in law and need to be deleted. 2.That the Cross ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and seized/impounded. In the case of assessee the following assets were found and seized: Sl. No. Premises Assets Found Assets Seized Cash in Rs. Jewellery in Rs. Others in Rs. Cash in Rs. Jewellery in Rs. Others in Rs. 1 a) Warren Tea Ltd. b) Warren Steel Pvt Ltd. c) Maple Hotels Resorts Pvt. Ltd. d) D P l L Limited e) Suvira Properties pvt. Ltd. f) Sectra Plaza fut. Ltd. Hungerford Street, Suvira House, Kolkata 700 017 (Office) 3,29,174 Nil Nil Nil Nil Nil In consequence of above mentioned search seizure, a notice u/s. 153A has been issued for assessment year 2005-06 to 2010-11 (six years) prior to the year in which search seizure was conducted. In response to the said notice the assessee has filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... served that the assessee had been searched along with his so-called suppliers/contractors on 27.01.2011 and in consequence of such simultaneous search seizure it could be gathered that the assessee had been given accommodation of entries to claim the bogus expenses with a motive to reduce the actual profit year after year. The name of the parties (so-called suppliers/contractors) who were covered either u/s.133A for conducting survey or u/s.132 of I.T. Act, 1961 for search seizure along with the Warren group. But the AO noted, during the assessment proceedings that except one, all such so called suppliers/contractors had failed to produce books of accounts, any purchase bill and vouchers in support of their (said suppliers/contractors) purchases to supply/make available or construct/repair any asset etc. the goods for which the assessee claimed business expenditures. All such parties had admitted of providing accommodation bills to the assessee and received cheque for the same from Warren Tea Ltd, without providing any service or supplying any goods to Warren Tea Ltd. The said fact was palpable from the relevant portion of the statements given by the suppliers/contractors eithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourse of simultaneous search/survey operations in the cases of related persons of the assessee company who had either provided transport services or supplied goods and materials or rendered services in the nature of repairs and maintenance or executed work of capital in nature for the assessee company, the statement of Shri Ram Avtar Mittal, director of M/s Eastern Road Carriers Pvt. Ltd. and M/s Aska Roadways Pvt. Ltd.; statement of Shri Lalit Bagaria, Shri Pankaj Bagaria, Smt. Neema Bagaria and Smt. Pushpa Bagaria having control over the companies named as M/s Harshit Commercial Pvt. Ltd., M/s Janaki Commercial Pvt. Ltd., M/s Kalinga Commercial Pvt. Ltd., M/s Omkara Merchants Pvt. Ltd., M/s Glamour Merchandise Pvt. Ltd., M/s Prachi Commercial Pvt., M/s. Shivam Commerce Pvt. Ltd., M/s Thakurdas Sureka Engg. Corporation Limited and M/s Basant Commerce Pvt. Ltd, the statement of Shri Ajay Chokhani, director of M/s Glamour Merchandise Pvt. Ltd; statement of Shri Ramgopal Drolia, director of M/s Dholisati Business Pvt. Ltd. and Karta of Ramgopal Drolia (HUF), which was the proprietor of M/s Durga Enterprises, Saket Drolia, proprietor of M/s S.B. Commercial Company, and Smt. Bela Droli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s through their business entities. It was also contended by Shri Vinay Goenka that not a single proof has been gathered by the Department through simultaneous search and survey operations at various premises of the assessee company and its suppliers transporters and contractors which may lead to the conclusion that the assessee company had taken accommodation entries from these persons and paid commission to them. It was stated by the chairman of the company the department has failed to establish any nexus between withdrawal/realization of cheques and then returning the cash back to the assessee company. That, the assessee had been implicated falsely with preconceived notion during the course of search/survey conducted on the same day at the business places of various parties. 5.6 As per the assessment order, since the assessee company has filed the copies of affidavits before the AO, of various persons retracting their statements given u/s 132(4)/133A/131 of the Act, he issued letters to Pankaj Bagaria, Ramgopal Drolia, Pawan Kumar Goenka, Deepak Jhunjhunwala and Ram Avtar Miittal to clarify the manner in which they were tortured at their own business premises/houses and they w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee sought for an adjournment and then on 25.02.2013, 26.02.2013 and 27.02.2013, Shri B.K. Parasrampuria, duly authorized by the assessee company had appeared on behalf of the company and produce the parties with their books of account, submitted purchase bills/vouchers, payment vouchers and copy of bank statements in support of payments for their purchases/services. All of them were perused and cognizance of recorded statements was also taken to draw inference. 5.7 Thereafter, in para-8 of the assessment order the AO observed that the search seizure and simultaneous surveys did not disputed the existence of the so called transporter and contractors because all of them were either searched or surveyed at their spots. There was no dispute about debit of expenses as same had been paid in cheques by the assessee to the so called suppliers, transporter and contractors and realized by them. But, admission of providing accommodation entries to the assessee by above mentioned persons on behalf of 23 concerns/parties at the time of official proceedings were there. Though, they had retracted yet the said retraction through affidavits was not supported with any corroborative mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sport expenditure was genuine business expenditure and very much required for internal transportation of goods and other things within large gardens like the assessee has. It was explained that no written agreement was made due to irregular activities of gardens and not continued to every year. Since, the assessee company was not having any agreement with the transporter and since the details of trucks were not provided, it was held by the AO that assessee has failed to prove the genuineness of entire claim. However, as per the AO, to keep the judicious balance between the statements given by the director Shri Ram Avtar Mittal u/s132(4) and the reality and necessity of using trucks within the gardens of the assessee in Assam, 50% of entire bills for all the years from A.Y 2005-06 to 2010-11 were disallowed and added to the income of the assessee company. For the year under consideration the disallowance was worked out at ₹ 71,02,100/- i.e. 50% of ₹ 1,42,04,200/-. In this manner, for the year under consideration the Assessing Officer has made disallowance of ₹ 71,02,100/- being 50% of the payment made to M/s Aska Roadways Pvt. Ltd. treating the same as not genuine. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td, karta of Ram Gopal Drolia (HUF) having proprietorship concern M/s Durga Enterprises and Smt. Bela Drolia Director of M/s Gopal Timber Trading Company; Shri Pawan Kumar Goenka, Director of M/s PM Traders etc. All these persons, in their statement recorded U/s 132 (4)/ 133A had stated that through their various business concerns they had provided only the accommodation entries to the assessee company. But later on they had retracted their statements on 02.02.2011 i.e. within seven days of initiation of search. However, the assessing officer made various additions based on their statements, like addition on account of transportation charges, revenue expenses, capital expenses, purchase of organic manures etc. Hoever, the ld CIT(A) observed that though the statement given by a person in the course of search/survey proceedings has evidentiary value but the said statement should be supported by the corroborating materials and evidences or at least circumstantial evidences. In the absence of corroborating evidences the statement has no evidentiary value if retracted later on. The Apex court has observed in Pullengode Rubber Produce Co. Ltd. vs. State of Kerala, 91 ITR 18 (SC.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was noted by the AO and, therefore, he did not mention anything about the books of account, bills/vouchers and bank statements produced by all of them before him. He did not record the statement of any of the persons appeared before him and he did not ask any question about their business transactions with the assessee company or purchase made by them to execute the works of the assessee company. Thus, it can be said that all the persons successfully explained before the AO that the admission of providing accommodation entries to the assessee company was not correct. The retracted statement has no evidentiary value until and unless the AO proves that the retraction was not correct and the statement is substantiated by the corroborating evidences. Therefore, the ld CIT(A) deleted the additions, which were done by the AO based on the statements. (ii) The CIT(A) also deleted the addition which were based on the merits. The CIT(A) observed that in the assessment proceedings it was contended by the assessee company that the entire claim of payment to Aska Roadways Pvt. Ltd. was genuine business expenditure and such expenditure was very much required for internal transportation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fact to be recorded in the assessment order. Therefore, CIT(A) held that the AO was not justified in making ad-hoc disallowance @ 50% of the transport expenses claimed in respect of M/s Metropolitan Transport Company and therefore he directed the AO to delete the addition. 7. The ld Counsel for the Assessee has submitted, before us, that the date of search was 27.01.2011 whereas the assessments were already completed under sections 143(1)/143(3) of the Act and the date of issue of statutory notice U/s 143(2) had already elapsed on the date of search, in respect of the assessment years 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10, and no incriminating material was unearth by the search team, therefore no addition can be made in those assessment years. Therefore, in nutshell the ld. counsel submitted that no any incriminating documents were found by the Assessing Officer in unabated ( Completed) assessments. The AO made additions based on the statements recorded during search and seizure, which the assessee does not accept because these statements are not supported by any corroborative evidence. The assessee has relied on the following judgments and instruction of CBDT, wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on various authorities. We confirm the order of CIT(A). (iii).Taxmann.[2008] 300 ITR 157(Madras)S.Khader Khan Son From the foregoing discussion, the following principles can be culled out: (i).An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. V. State of Kerala [1973] 91 ITR 18; (ii).In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement is recorded u/s 133A of the IT Act is not given any evidentiary value obviously 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, vide Paul Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of CIT[A] vs. Kabul Chawla in ITA No.707/2014 dated 28th August, 2014. (ii).CIT Vs.IBC Knowledge Park(P) Ltd.HC of Karnataka (2016) 95 CCH 0253 (Kar-HC) 54.On a consideration of the relevant sections as well as judicial precedent referred to above, what emerges is that Section 158BD of the Act deals with undisclosed income of a third party. However, insofar as the incriminating material of the searched person or other person detected during the course of search is concerned, the same can be considered during the course of assessment. Further, such incriminating material must relate to undisclosed income which would empower the Assessing Officer to upset or disturb a concluded assessment of the other person. Otherwise, a concluded assessment would be disturbed without there being any basis for doing so which is impermissible in law. Even in case of a searched person, the same reason would hold good as in case of any other person. As observed by us, detection or the existence of incriminating material is a must for disturbing the assessment already made and concluded. (iii). [2016] 73 taxmann.com 149(Calcutta) CIT vs. Veerprabhu Marketing Ltd. 6.Mr. Ni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary Public and the same have been forwarded to the investigation wing. In the statements in the affidavit, the deponents have clearly stated that the statements recorded u/s.132(4) and during survey were made on coercion and undue pressure and thus the contents of the statements thus recorded u/s 132(4) and survey were vitiated and consequently lost its evidentiary value, if any. In the aforesaid backdrop, we note that these statements recorded u/s.132(4) and survey could not be treated as incriminating materials in the light of the affidavits filed by the deponents retracting the said statement recorded during search and moreover when the Assessing Officer has relied on the statements recorded u/s132(4) and statements recorded during survey, cannot be made the sole basis for additions because the said statements made by the Deponents has not been cross-examined by the assessee. If the Assessing Officer was relying on statements recorded under section 132(4) and statements recorded during survey, then the assessee should have been provided with an opportunity to cross-examine the witnesses and without doing so, the statements recorded u/s132(4) and during survey is fragile for viol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word assess in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word reassess to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -wise, which is given below: M/s. Warren Tea Ltd. Asst. Year Appeal no. Grounds of appeal 2005- 06 72/Kol/2 015 Addition on a/c of transport expenses of R.97,09,200/- in r/o M/s Aska Roadways Pvt. Ltd. and M/s Metropolitan Transport Corporation x x x x 2006- 07 73/kol/2 015 Addition on a/c of transport expenses of ₹ 63,74,625/- in r/o M/s Aska Roadways Pvt. Ltd. and M/s Metropolitan Transport Corporation Addition on a/c of revenue expenditure of ₹ 2,79,21,600/- from purchase made from concerns controlled by Sri Pankaj Bagaria and Sri Ram Gopal Drolia Addition on a/c of capital expenditure of ₹ 21,98,471/- for purchase made from concerns controlled by Sri Pankaj Bagaria and Sri Ram Gopal Drolia x x 2007- 08 74/Kol/2 015 Addition on a/c of transport expenses of & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above chart, it is clear that on the date of search i.e. on 27.01.2011, assessments pertaining to A.Y. 2005-06, 2006-07, 2008-09 and 2009-10 were not pending before the AO and the last date for issuance of Section 143(2) notice for scrutiny had elapsed. Therefore, it can be safely assumed that these assessments were not pending before the AO and as per the ratio laid by the Hon ble High Court s these assessments are concluded assessments, which cannot be tinkered with and fresh additions cannot be made without direct nexus to the incriminating materials seized during search. Therefore, no addition without incriminating materials ought to have been saddled on the assessee for A.Y. 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10 and so we allow the appeal of the assessee on the legal issue raised and direct deletion of the addition/disallowances made in these assessment years. 12 In the result, the appeals filed by the Revenue for Assessment Years 2005-06, 2006-07, 2007-08,2008-09 and 2009-10, are dismissed. Whereas Cross Objections filed by the Assessee are allowed. 13. Now let us take up pending assessment years on the date of search i.e. A.Y 2010-11 and A.Y. 2011-12, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt of capital expenditure amounting to ₹ 58,76,604/- without considering the facts the that the bills raised by the business entities controlled by Sri Pankaj Bagaria and Sri Ram Gopal Drolia in respect of said expenditure are bogus and companies are not functioning in real life. 7. That in the facts and circumstances of the case and in law, the Ld. CIT(A)'s observation is not based on facts or documentary evidences and he also ignored the facts that the no store register or store ledger was found at respective gardens which could establish that the goods sent from the head office as per bills or the material required to accomplish the work which was against the prevailing system of the company as per agreement given by Mr. Bishwajit karmakar ( Senior manager of M/s Warren Tea; Assam) and he has not retracted his statement. 8.That the department craves leave to add, modify or alter any of the grounds of appeal and oradduce additional evidence at the time of hearing of the case. The issue before us relates to various addition made by Assessing Officer, as per above grounds of appeals, which were deleted by the CIT(A). These grounds relate to abated (pending/abate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the abated proceedings also without incriminating material unearthed during search addition/assessment cannot be accepted for the simple reason that along with section 153A proceedings AO initiated scrutiny proceedings after issuing section 142(1) section 143(2) notice and completed the assessment u/s 153A read with 143(3) of the Act, since there was time left with the AO on the date of search to issue 143(2) notice and on the date of search by operation of law the assessments which were pending before the AO got abated and the abated proceedings on the date of search cannot be equated with unabated proceedings. So the said grounds raised by assessee are rejected. 15. We have already mentioned the brief facts of the case qua the assessee in our above Para Nos.5.2 to 5.8 of this order. These brief facts are same in unabated and abated assessments, therefore we do not repeat them in abated ( not completed) assessment years 2010-11 and 2011-12. We mention here only those brief facts qua the issue for abated ( not completed) assessment years 2010-11 and 2011-12, which are not discussed in para Nos.5.2 to 5.8 of this order. 16. The Assessing Officer in these assessment years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive gardens and then forwarding the same to the Corporate Office at Kolkata as per the procedure explained by Shri Karmarkar in his statement. As per the AO the assessee company could not produce copy of any document placing order to M/s Asia Udyog to purchase organic manure like mustard cake or copy of any agreement or copy of Board Resolution to allow Asia Udyog to supply the organic manure. There was no entry of receipt of manure in the store registers of the gardens. As per the AO the discreet inquiry revealed that there was no office at 7102, Block 7A, Neha Apartment, Sati Joymati Road, Guwahati as mentioned on the bills placed to assessee. Again, as per the AO, the discreet enquiry in respect of the traders/creditors of goods from where M/s Asia Udyog had shown the purchase for the items to supply to the assessee was noticed bogus due to non-existence except National Industries of Siliguri. The AO was of the opinion that during the course of survey, it was proved beyond further doubt that M/s Asia was not an established and regular trader and there was no agreement to supply of goods to the assessee company. In view of above, it was held by the Assessing Officer that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd., his wife Smt. Sunita Bagaria and his mother Smt. Pushpa Bagaria, director of M/s Kalinga Commercial Pvt. Ltd. and M/s Shivanr Commercial Pvt. Ltd. Again, Shri Ajay Chokhani, one of the directors of M/s Glamour Mercantile Pvt. Ltd also stated the same thing. At the same time Shri Ram Gopal Drolia, the key person of many so called suppliers and executors of works/contracts to the assessee company had also confirmed that the works and supplies got done from M/s Shree Vinayak enterprises, Prakash Chand Bagaria (HUF), Pankaj Bagaria (HUF) and M/s Shivam Commerce Pvt Ltd. etc. were not functioning in real life as such and mostly gave accommodation entries. Further, inquiry on suppliers to the business concerns of Bagaria and Drolia further proves bogus or in paper only. The facts come out due to compilation of various statements given at the time of search and survey operations whether retracted or not, but commensurate with result of verification of all the bills, bank statements furnished by all the parties controlled by Shri Bagaria and Shri Drolia, produced by the assessee company before the department and also the information gathered through various discreet inquiries. Furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2010-11 and capital expenditure of ₹ 1,65,62,471/- and revenue expenditure of ₹ 2,45,14,850/- in A.Y. 2011-12. As far as the disallowance of capital expenditure in various assessment years is concerned, the AO has disallowed the depreciation on the above mentioned amounts in the respective assessment years. 21. Thus, in all the assessment years i.e. from A.Y. 2005-06 to 2011-12, the AO has made various disallowances mainly on the basis of statements of different persons recorded in the course of search and survey proceedings wherein they had stated that they had given accommodation entries to the assessee company through their various business concerns and entities. Besides, the AO also relied on some discreet enquiries and that the supplies claimed to be made by various parties to the assessee company were not supported by the entries in the store registers maintained at tea gardens. 22. Aggrieved by the various additions made by the Assessing Officer, the assessee filed an appeal before the ld CIT(A), who has deleted the additions.The CIT (A) observed that all the above mentioned disallowances were also made by the AO in the immediately preceding assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the assessment order AO had mentioned that considering all aspect i.e. reality and necessity of using trucks within gardens of the assessee company in Assam, he disallowed 50% of total payment made to M/s Aska Roadways Pvt. Ltd. in each assessment year from A. Y. 2005-06 to 2010-11. The said ad-hoc disallowance had been made by him for the reason of absence of details of truck numbers and agreements and the manner in which bills were raised by Aska Roadways. The AO had also mentioned that the disallowance @ 50% was being made to keep judicious balance between the statements given By Shri Ram Avtar Mittal u/s 132(4) of the Act. In this manner, for the year under consideration, he made disallowance of Rs, 1,50,69,900/-/-. The CIT (A) deleted the addition stating that AO was not justified in making ad-hoc disallowance @ 50% in respect of payment made by the assessee company to M/s Aska Roadways Pvt Ltd, because there was no material on record which may lead to the said conclusion. It was observed by the CIT(A) that the similar was the situation in the case of another transporter i.e. M/s Metropolitan Transport Company, belonged to one Shri Vikash Kesere. In the case of Shri Vikash K ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the appeal filed by the Revenue ( on ground No.1), is dismissed. 24. Ground No. 2 raised by Revenue relates to addition on account of purchase of organic manures amounting to ₹ 2,10,37,073/- from M/s Asia Udyog. Ground No. 3 raised by Revenue relates addition on account of purchase of organic manures amounting to ₹ 1,60,55,160/- from M/s P.M.Traders. Since ground No. 2 and 3 raised by the Revenue relate to the same nature of expenses, therefore these are being adjudicated together. 24.1 The brief facts qua the issues are that the AO made the addition on account of supplies made by M/s Asia Udyog and M/s P.M. traders of organic manures. Both these concerns were controlled by Pawan Kumar Goenka. Shri Pawan Kumar Goenka in his statement recorded U/s 133A of the Act had stated that he used to provide the accommodation entries to the assessee company without making actual supplies of goods. Thereafter, within seven days said statement was retracted by Pawan Kumar Goenka by filing an affidavit before the DIT(Inv.), Kolkata on 03.02.2011, stating that the statement was given by him under pressure. Shri Pawan Kumar Goenka also appeared before the AO durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts the assesse. 25.1 The brief facts qua the issue are that the assessee company has claimed exempted income and for which interest amount has been debited in the profit and Loss account. The assessee stated before the AO that it is difficult to segregate the expenses. The assessee also stated before the AO that no expenses had actually been incurred in this regard to earn exempted income. The AO rejected the submissions of the assessee and computed the disallowance as follows: (a) Direct Expenses Nil (b) proportionate interest ₹ 12,54,722/- (c ) 0.5% of average investment ₹ 7,43,573/- Total disallowance ₹ 19,98,295/- 25.2 The CIT(A) noted that AO has not computed the disallowance as per the judgment of jurisdictional Tribunal in REI Agro Ltd. Vs. DCIT (2013) 144 ITD 141 (Kol) wherein it was held that for making disallowance U/s 14A read with Rule 8D in respect of income which is exempted and does not form part of the total income, the only investment which has given rise to the exempte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and there was no corresponding purchases to supply the goods to the assessee due to such accommodation entries provided in exchange of commission. But later on Sri Pankaj Bagaria and Sri Ram Gopal Drolia, retracted their statements within seven days of initiation of search. The AO also held that assessee did not mention these purchases in the stock register, therefore these expenses were not incurred for the purpose of business and disallowed as per the language of section 37(1) of the Act. 26.2 The ld CIT (A) held that addition made by AO based on the statement recorded by the search team, during the search would not sustain in law unless it is supported by the corroborative evidence. In the absence of corroborating evidences the statement has no evidentiary value, if retracted later on. The Apex court has observed in Pullengode Rubber Produce Co. Ltd. vs. State of Kerala, 91 ITR 18 (SC.) that an admission is an extremely important piece of evidence but it cannot be said to be conclusive. It is open to the person who made the admission to show that it was incorrect. 26.3 The ld Counsel for the assessee has submitted before us that during the search the statements were taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... store ledger was found at respective gardens which could establish that the goods sent from the head office as per bills or the material required to accomplish the work. We are of the view that since the assessee has produced all books of accounts and stock register is part of books of accounts and AO had failed to bring any mistake on the record. Besides, in this order we have treated all the purchases of the assessee, as genuine. Therefore, we dismiss the ground No.7 taken by the Revenue. 28. In Revenue`s appeal in IT (SS) No.78/Kol/2015, A.Y. 2011-12, the Revenue has raised ground No. 1 which relates to addition on account of labour charges ₹ 21,10,070/- for spray work. This ground is different and not discussed by us in the lead case selected by us, hence it is being discussed separately. The solitary grievance of the Revenue in this ground is that the said expenditure, for spray work should be recorded in store register as per statement given by Mr. Bishwajit karmakar ( Senior manager of M/s Warren Tea Limited, Assam) who has not retracted his statement. 28.1 We are of the view that since the assessee has produced all books of accounts and stock register is part of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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