TMI Blog2019 (11) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... on and is liable to be rejected - even if the assessee wrongly includes certain income in his return, which is otherwise not chargeable to tax, he has a right to lodge a claim before the AO in this regard during the course of assessment proceedings. As the assessee in the instant case has challenged the suo motu inclusion of such an income before the AO, we do not find any fetters on the powers of the AO in not examining if the same is actually liable to be fully or partly included in the total income. The contention raised by the DR in this regard is, therefore, jettisoned. Coming to the merits of the case, it is seen that the assessee recorded the alleged tainted purchases of steel amounting to ₹ 99,41,075/- in his books of account for the year under consideration. The assessee is engaged in the business of manufacture of sugar machinery. Steel is a raw material for the manufacturing of the machinery. It is obvious that without raw material there cannot be any finished products. The assessee has filed stock details before the authorities which show that purchases for the disputed quantity were, in fact, made. The fact that the assessee made genuine sales, has not been di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r machinery, providing erection and installation services and setting up of sugar factories and also trading in spare parts. In response to notice u/s.153A of the Act, the assessee furnished his return of income on 29-03-2012 declaring total income of ₹ 30,82,83,420/- (including disclosure of ₹ 99,41,075/- made during the course of search). The Assessing Officer (AO) found that the original assessment in this case was completed u/s.143(3) of the Act determining total income at ₹ 29,85,67,639/- as against the declared total income of ₹ 29,81,42,340/-. He found that the search action divulged that the assessee was inflating expenses by recording bogus steel purchase bills from Mumbai based parties. Prior to search, a survey u/s.133A was carried out at the business premises of the assessee, which was converted into the instant search action. In the statement u/s.133A of the Act, the assessee was confronted with the fact that it had shown steel purchases from 30 parties in respect of which the relevant bills, purchase orders, goods received note, delivery challans etc. were not fully available. In many cases con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch relating to the year under consideration and included the same in his return of income, the AO disregarded the assessee s computation and added ₹ 99,41,075/- to the income originally determined u/s.143(3) of the Act by rejecting the assessee s contention for reduction in the amount of income offered in the return u/s.153A on account of such a mistaken notion. 3. The assessee approached the ld. CIT(A) and furnished the relevant documents in support of the genuineness of purchases. It was contended that all the purchases were genuine and payments were made by cheques in respect of the goods received pursuant to such bills. The assessee furnished details of purchases along with Octroi receipts etc. for all the years under consideration. For some of the old transactions, Octroi receipts were misplaced which could not be produced before the ld. CIT(A). The ld. first appellate authority forwarded such details to the AO vide his letter dated 07- 09-2015 and instructed him to make more detailed enquiries. The AO, vide his remand report dated 10-12-2015, reiterated the stand taken in the course of assessment made by him u/s.153A. The ld. CIT(A) forwarded the remand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings as `evidence . 6. Section 3 of the Indian Evidence Act, 1872 defines Evidence to mean and include - `(1) All statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence. (2) All documents produced for the inspection of the Court; such documents are called documentary evidence. When we read sub-section (4) of section 132 in juxtaposition to section 3 of the Indian Evidence Act, it clearly transpires that the statement made by an assessee u/s 132(4) of the Act can be construed as an oral evidence or at the most a substitution of documentary evidence. To put it simply, if an assessee states in his statement u/s 132(4) that he purchased certain asset from undisclosed income and gifted it someone else or earned income from a clandestine transaction, such a statement, in the context of section 132, by virtue of sub-section (4), would dispense with the need for any documentary evidence to corroborate the version so given. In that case, even if the bill for the purchase of the asset is not found or no other document for earning income from cland ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntrary to the legal principles, then it will be ignored to the extent of such an illegality. For instance, if an assessee agrees to forego the claim of depreciation de hors the genuineness of such a claim, such a statement, being contrary to law, cannot be acted upon, because the genuine depreciation has to be allowed as deduction. Such a statement, which is contrary to law, cannot be acted upon as an evidence against the assessee. 9. There can be still a third hybrid category, in which the statement of the assessee u/s 132(4) has certain factual admissions and also its consequential legal admissions. In such a situation, the factual admissions will be used as an evidence but the consequential legal admissions will have to be considered and decided as per law. Continuing with the earlier example, if the assessee accepts in the course of search that he purchased certain asset outside the books of account and also agrees to offer it for taxation in the statement u/s 132(4) of the Act, then the first part of the statement of having purchased an asset outside the books of account, being a factual aspect, would constitute evidence against him and he cannot later on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee cannot run away from his statement of recording bogus purchase bills, but can prove legally that the entire amount of bills should not be legally added. Therefore, the contention of the ld. DR that once the assessee had admitted in his statement u/s 132(4) to the effect that there was no proper evidence of the genuineness of the bills of purchase of steel and offered the equal amount for taxation, then he cannot take a contrary stand in the assessment proceedings, is countenanced only to the extent of non-genuineness of the bills of purchase of steel but not to the extent of offering equal amount for taxation, which would be separately examined as per the provisions of law. 11. The ld. DR has raised one more preliminary issue to the effect that income once included by the assessee in his return of income binds him and hence the assessee cannot claim for its exclusion. This contention has no legal legs to stand on and is liable to be rejected. 12. Circular No.14(XI-35) of 1955 dated 01-04-1955 states that the Officers of the Department must not take advantage of ignorance of the assessee as to his rights. The hon ble jurisdictional ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gher value so as to inflate the expenses and reduce the profit. In such circumstances, only the profit (excessive cost element) embedded in such bogus purchases can be included in the total income of the assessee, which, in the peculiar facts and circumstances of the instant case, is estimated at 10% of the bill amounts. Our view in estimating the net profit rate @10% of bogus purchases is fortified by the judgment of the hon ble jurisdictional High Court in Pr. CIT Vs. Paramshakti Distributors Pvt. Ltd. (ITA No.413/2017, dt. 15-07-2019) , in which addition at the rate of 10% of bogus purchases has been held to be sustainable in similar circumstances. To sum up, the assessee gets relief by means of deletion of addition of 90% of ₹ 99,41,075/- and accordingly the addition @10% at ₹ 9,94,107/- is sustained. 14. The additional grounds raised by the assessee were not pressed by the ld. AR during the course of hearing, which are, hereby dismissed. 15. In the result, the appeal is partly allowed. A.Y. 2008-09 : ITA No.814/PUN/2016 By assessee ITA No.950/PUN/2016 By Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which were found by the AO during the course of assessment proceedings. Since the substance of the matter is same, we, following our view, uphold the addition at 10% of such purchases at ₹ 3,66,936 /-. Thus, the ground raised by the Revenue is dismissed and that of the assessee is partly allowed. 21. The additional grounds raised by the assessee were not pressed, which hereby, stand dismissed. 22. In the result, the appeal of the Revenue is dismissed and that of the assessee is partly allowed. A.Yrs. 2009-10, 2010-11 2011-12 : ITA Nos.815 to 817/PUN/2016 By assessee ITA Nos.951 to 953/PUN/2016 By Revenue 23. The facts and circumstances of these cross appeals filed by the assessee as well as the Revenue are similar to those of the A.Y. 2008-09. Following the view taken hereinabove, we sustain the addition at 10% of bogus purchases for which surrender was made by the assessee at the time of search and also at 10% in respect of purchases made from the parties which were found during the course of assessment proceedings. 24. The additional gr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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