9911796707
TMI Blog2020 (1) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... as not considered the statement of retraction given by Sri. P.K.Kunjumoideen and also not accepted that wheat is sold by the appellant Company. 4) The Assessing Officer has gone wrong in omitting to consider the facts that Sri. P.K.Kunjumoideen is engaged in purchase and sale of wheat and purchases are made by him from Government Agencies through tenders and purchases from others. 5) The Commissioner of Income Tax (Appeals) has gone wrong in sustaining the addition to the extent of 50% after finding that wheat is sold by the appellant company to Sri. P.K.Kunjumoideen. 6) For the above grounds and evidences produced at the time of hearing, the appellant may request the Hon'ble Income Tax Appellate Tribunal to cancel the assessment order. 3. The Revenue has raised the following common grounds of appeals: 1) The order of the CIT(A) is opposed to law, weight of evidence and facts of the case. 2) The CIT(A) erred in restricting the addition made by the Assessing Officer, on the issue of suppressed sales to 50%, without any reasoning, whereas the addition made by the Assessing Officer was arrived at scientifically on the basis of production data of the assessee's recorded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tory itself and was sold as Wheat flour in its various forms (Atta, Sooji. Maida and Bran). The assessee used to bill the Wheat at 1% markup on its funding cost to M/s. Teekay Rice Mill. In Reality, the assessee used to mill the wheat and sell it at a higher profit in the market. The difference is the additional income to the assessee from this circumrouting activity. 4.2 Shri. P.K. Kunjumoideen was questioned about his business activities on the day of the search to which he has described his Grocery business at Chengamanad as his source of income. This individual was not aware of the trading activities in his name at M/s. Teekay Rice Mill. He said that Shri. Abdul Kareem and Shri. Ameer Ali are his cousin brothers living at Palakkad and are owning the Prince Group of concerns and added that they are running some business in his names, for which he has given various signed forms and cheques to them and he is not aware of exactly what kind of business is run in his name. When questioned about his bank account, he could recall only his bank account at the local bank at Aluva and not that of the one at Palakkad. Eventually when reminded of the bank account in his name at Palakkad, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1/J3- 14/EAM/A- 38 as the sales collection made on the milled flour by PRFM from these sales and the said sums were not entered in the Tally accounts and the amounts were given to Shri. Abdul Kareern direct. 4.6 From the above depositions it was evident that the assesses was resorting to methods to understate its true sales revenue and incomes. There cannot be any situation where three of the active participants of a trade will depose on the modus operandi used by them in the same manner. Hence, there were no reasons to disbelieve their depositions. The assessee tried to save on its actual GP on the Wheal Quantity routed through M/s. Teekay Rice Mill and also on the VAT tax components therein. 4.7 Sales of Wheat to M/s Teekay Rice Mill The assesseswas found to have made the following Raw Wheat sales to M/s Teekay Rice Mills: FY Raw wheat sales to M/s. Teekay Rice Mill in Metric Tonnes 2007-08 - 2008-09 162,000 2009-10 7877.000 2010-11 5431.400 2011-12 2995.800 2012-13 3088.000 2013-14 2178.100 As per the finding of the search and related materials, the above quantum of Wheat was milled in the premises of PRFM itself and was sold to the market in its normal busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [24,15,802 x 3%] Rs. 64,940/- [2] The assessee when pricing the product in the open market would not differentiate between its VAT levied and non levied items and could have priced it at the same rate. VAT rates were 4% for F.Y. 2008-09. Thus there was an unfair enrichment of Rs. 3,16,070/- (1) +(2) in the hands of the assesses out of this activity. Addition: Rs. 3,16,070/- Penalty proceedings u/s. 271(1)(c) of the Income Tax Act were initiated separately. Accordingly, the assessment was completed as under: Income from Business[as returned] Rs. 30,93,270/- Addition (as per para 5.3] Rs. 3,16,070/- Addition as per order u/s. 143 (3) dt. 13.7.2011 Rs. 1,50,000/- Total Income Assessed Rs. 35,59,340/- Deemed income u/s. 115JB Rs. 28,73,031/- AY 2010-11 Table 1 Sl. No. Products Qty. Produced in Production yield % Sale Value Sale Quantity Average Selling Rate per tonne 1. Maida 7558.224 60.38 138827637.94 7614.544 18231.90 2. Sooji 1068.949 8.54 1991985411 1060.039 18791.62 3. Atta 920.527 7.35 15766326.52 901.821 17482.77 4. Bran 2807.850 22.43 27385048.00 2758.495 9927.53 98.70% &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld was derived in Column 4 and the average selling rate on real time basis was worked out in Column 7. On the above basis, the sale value of wheat products that could be produced from the circumvented sale of 5431.400 MT for the A Y was worked out below: Table-2 Sl. No. Products Qty. Produced in Production yield % Average Selling Rate per tonne Sale Value 1. Maida 3187.989 58.70 19467.24 6261351.64 2. Sooji 468.502 8.63 19796.26 9274582.38 3. Atta 348.986 6.43 1848.45 6424289.66 4. Bran 1351.588 24.88 10956.94 14809277.27 92569500.95 Wheat sold to P.K. Kunjumoideen 5431.400 Sale value of wheat to P.K. Kunjumoideen 83439379.67 Profit 914121 5.3 The assessee's unaccounted income from the above trade practice was worked out below: Sale: Value of milled Wheat Flours (as in Table 2) Rs. 9,25,69,501 Less: sale value of Wheat to P.K. Kunjumoideen Rs. 8,34,39,3809 Income undisclosed in the hands of the Assessee Rs. 91,40,121 [1] Savings on VAT on the said Rs. 9,25,69,501 [4-1] = 3% [9,25,69,501x3%] Rs. 27,77,084/- [2] The assessee when pricing the product in the open market would not differentiate be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t at the same rate. VAT rates were 4% for F.Y. 2011-12. Thus, there was an unfair enrichment of Rs. 1,42,80,581/- (1) + (2) in the hands of the assesses out of this activity. Addition: Rs. 1,42,80,581/- Penalty proceedings u/s. 271(1)(c) of the Income Tax Act were initiated separately. Accordingly, the assessment was completed as under: Income from Business [as returned] Rs. 4919560/- Addition (as per para 5.3] Rs. 14280581/- Total Rs. 192900141/- Less: Chapter VIA Deduction (80G) Rs. 2500/- Total Income Assessed Rs. 19197641/- Deemed income u/s. 115JB Rs. 44,69,606/- AY 2013-14 Table 1 Sl. No. Products Qty. Produced in Production yield % Sale Value Sale Quantity Average Selling Rate per tone 1. Maida 12165.779 61.74% 265845916..6 12322.247 21574.47 2. Sooji 1506.042 7.64% 33669626.72 1514.622 19796.26 3. Atta 1206.178 6.12% 23768699.99 1198.925 19825.01 4. Bran 429.225 22.99% 64357599 4552.91 14135.42 98.49% Wheat milled 19704.550 5.5 The production yield was derived in Column 4 and the average selling rate on real time basis was worked ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be produced from the circumvented sale of 2178.200 MT for the A Y was worked out below: Table-2 Sl. No. Products Qty. Produced in Production yield % Average Selling Rate per tonne Sale Value 1. Maida 1323.653 60.77% 25378.26 33592009.98 2. Sooji 167.883 7.71% 25772.55 4318378.862 3. Atta 154.544 7.10% 22115.51 3417819.377 4. Bran 498.124 22.87% 15630.47 7785912.238 49114120.46 Wheat sold to P.K. Kunjumoideen 2178.200 Sale value of wheat to P.K. Kunjumoideen 38276401.16 Profit 10837719.3 The assessee's unaccounted income from the above trade practice was worked out below: Sale:Value of milled Wheat Flours (as in Table 2) Rs. 4,91,14,120 Less: sale value of Wheat to P.K. Kunjumoideen Rs. 3,82,76,401 Income undisclosed in the hands of the Assessee Rs. 1,08,37,719 The assessee when pricing the product in the open market would not differentiate between its VAT levied and non levied items and could have priced it at the same rate. VAT rates were 4% for F.Y. 2013-14. Thus, there was an unfair enrichment of Rs. 1,08,37,719/- in the hands of the assesses out of this activity. Addition: Rs. 1,08,37,71 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. The AO reached this conclusion on the basis of statements recorded during the course of search, whereas the assessee contended that only the raw material, with low profit margin was sold, that the statements were given under pressure and duress which were subsequently retracted and no material was found during the course of search evidencing sale of finished products like Maida and Sooji. According to the CIT(A), the Assessing Officer's working of profit from sale of finished products was an estimation which was not based on any cogent material, but on assumption, presumption and surmises. It was observed that the amount of wheat claimed to have been sold to M/s. Teekay Rice Mill was available and the AO had applied the manufacturing ratio of the assessee to work out production finished product and had then applied the market rate to reach the profits on the presumed sale of the same. On the facts and circumstances of the case, CIT(A) was of the opinion that the claim of the assessee was not correct and on the other side, the AO's estimation of profit, was definitely on the higher side. According to the CIT(A), since, such material was not available, on the basis of whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur Mills (P) Ltd started in the year 1990 only i.e., 4 years after he started his business. Shri P.K. Kunjumoideen ran his business independently as proprietor. His trading activities included purchase and sale of wheat, steel scrap, paddy, gunny bags etc. He was an assessee under the rolls of the Income Tax Department from very early period which can be cross checked. He purchased wheat not only from M/s. Prince Roller Flour Mills (P) Ltd. but from various parties in North Indian Stales like Uttar Pradesh, Madhya Pradesh, Rajastan etc., through Railway Wagons. He purchased wheat from Food Corporation of India and Kerala State Civil Supplies Corporation Ltd. also through open sales wheat tender. He was supplying wheat purchased from open market to many established companies in and around Malabar even during the eighties. Hence, it was not correct to state that he was not carrying out any trading operations. The Ld. AR drew our attention to the summary of major purchases effected by him over the years to establish that the transactions were not limited to one or two dealings, but there were continuous transactions, involving substantial quantities. It was submitted that he was not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers (Quantities in Metric Tonne) for various years as follows: Sl. No. Name of Party A.Y. 2010-11 A.Y. 2011-12 A.Y.2012-13 A.Y. 2013-14 A.Y. 2014-15 1. Bindu Traders 125.60 86.310 2. Central Stores 62.090 3. Coimbatore Roller Flour Mills 239.230 4. Essem Traders 54.100 5. Harikrishna Agencies 31.480 40,700 148.960 6. Maliakkal Roller Flour Mills 159.690 7. Periyar Agro Products 70.760 8. Premier Agro Products 10.080 506.280 9. Retail Sales 4760.600 625.600 83.500 10. S.R. Traders 93.410 41.600 11. Sreerama Roller Flour Mills 263.90 12. Srinivasa Roller Flour Mills 70.990 13. Star Trading Co. 308.475 14. V.P. Roller Flour Mills 332.850 15. Veliyath Agro 191.030 Total 4770.680 1884.285 406.00 240. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on. This statement was retracted by him as he had written the same under coercion and threat. It was submitted that retraction statements by way of Affidavit were prepared on 06.09.2013 without seeing the copies of the statement recorded on the previous date from the respective persons who felt that the statements given were wrong and the same was given under pressure from the Investigating Officers. Subsequently both Shri Sabarigireesan and Shri P.K. Kunjumoideen have applied for the copies of statements on 18.11.2014 and it was received on the same day. The Ld. AR drew our attention to the copies of the retraction statements of these two persons which were placed in Paper Book, Page Nos. 57 to 66 and 109 to 140 filed before us. The Assessing Officer had not made any reference to the retraction statements filed by these persons in the Assessment Order, though it was placed before him. 7.7 It was submitted that sworn statements were taken from Shri T.K. Abdul Karim, Managing Director of the Company on 05.09.2013 and 30.09.2013 and no specific question was asked to him whether the sale to Shri P.K. Kunjumoideen were sale of Wheat or Wheat Products. 7.8 It was submitted that the on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld as Wheat Products is illegal and liable to be cancelled. 7.8.2 The Ld. AR submitted that the CIT(A) assumed that the assessee sold wheat products to Shri P.K.Kunjumoideen of M/s. Teekay Rice Mill without any evidence. The Assessing Officer and the CIT(A) had come to the conclusion that wheat products were sold without any evidences seized at the time of search. It was submitted that the Assessing Officer verified the stock, production and sales records of wheat products and could not find out any mistake. In addition to this, the sale of wheat products to Shri P.K.Kunjumoideen was not evidenced at the time of search by supporting documents. The Ld. AR submitted that the CIT(A) sustained the addition of 50% of the addition made by the Assessing Officer as per the observation in Page No. 24 of the appellate order. It was submitted that in the absence of any evidence seized at the time of search regarding the sale of wheat products, the estimated addition assuming the sale is wrongly made and the addition may be cancelled completely. 7.9 Regarding assessment of VAT as income, the Ld. AR submitted that the Assessing Officer made additions of Income by way of VAT for all the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der in all the assessment years. FINDINGS :- 9. We have heard the rival submissions and perused the material on record. The assessments herein were framed in these six assessment years u/s 143(3) r.w.s. 153A of the Act, consequent to search action u/s 132 of the Act on 05.09.2013. Once a search takes place under Section 132 of the Act, notice under Section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax. Although S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have a PAN No. (A) No 6. In which banks you are operating your bank accounts (A) Aluva Urban Co-operative Bank, Chengamanad Branch (A/c No. 6433) and Indian Bank, Chengamanad Branch (A/c No. 746281754) 7. Do you have any Bank account in Palakkad (A) Yes, I have an account in SB1, Palakkad branch, I don't remember its number. That account is operated by T.K. Abdul Karim and T.K. Ameeraly. They are running Prince Steel and Prince Roller Flour Mills (P) Ltd., Kinassery, Palakkad. They are operating this account. 8. What is your relationship to this firm, (A) The License, Registration, KVAT registration of flour mill is on my name. I have taken PAN there. It was taken by them for the purpose of Prince Roller Flour Mills (P) Ltd. They are my mother's elder sister sons (My Cousins). Their family is also from Mambra in Thrissur District. 9. We are showing a Bank Account statement of A/c No. 00000010620044052 SB1, Palakkad Branch which is in your name. Please explain. (A) There is a firm named Teekay Rice_Mills in my name. The day-to-day business are carried out by Shri T. K. Abdul Karim and Ameerally T. K. The cheque book of that account are already sign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siding at Padiyath House, Chengamanad, PIN : 683578, Ernakulam District solemnly state as under. I state that I am a business man doing business at Thathamangalam, Palakkad District and Chengamand, Ernakulam District. I state that the Income Tax Officials conducted a search u/s 132 of the Income Tax Act in the business premises of Prince Group of Companies, Palakkad on 05.09.2013 and as part of this investigation, I was called to the Office of Income Tax at Aluva and the officers recorded my statement on the same day. The officers forced me to sign the statement written and prepared by them which was not according to the facts. I state that the statement recorded on 05.09.2013 is not true and voluntary. I was forced, threatened and compelled to sign and write the declaration in the statement without my consent. I therefore hereby retract the statement signed by me before the Income Tax Officials on 05.09.2013. I state that, I am executing this sworn affidavit so that I may make use of this affidavit in case the Income Tax Officials use my statements either against me or the above mentioned Companies." 9.3 Similarly, statement was recordedu/s. 132(4) of the Act from Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no actual sale of Wheat to ShriKunjumoideen. Only Bills were prepared and accounted in the tally software. Likewise bogus purchase bills were also prepared against Shri Kunjumoideen. Out of the total purchases recorded against him, certain transactions are genuine, which were obtained directly from FCI godown. Q. No. 6 From the answers given to the last two questions, it is very clear that the wheat shown as bogus sale to Shri Kunjumoideen have been processed and sold as its bye products Maida, Sooji , Atta and Bran. Since all the expenses related to the purchase and production has been accounted in the books of accounts maintained there will be a higher gross profit from the transaction. Please explain more about this. A. No. 6. Accounts of Prince Roller Flour Mills is looked after by Shri Sabari Gireesh. It is true that, all the expenses related to purchase and manufacturing have been fully accounted in the books of account. The profit from the above referred transaction can be explained in detail by Shri Sabari Gireesh. Q. No.7. How do you maintain the daily physical cash statements? Please explain the method of reporting to the MD. A. No. 7. The cashier prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ooji, Atta, Bran etc., and sells in the market. In addition wheat is also purchased from F.C.I. under open sale and sometimes small quantities are procured from local traders also. Mill is situated in Kinassery. Godown adjacent to Mill and a nearby Gajendra Rice Mill are main places where wheat is stocked. The processed products like Maida, Atta, etc., are kept stored inside the Mill itself. The sales Proceedings, bill preparation and collection from Cash Sales are done from the ground floor of this building (Counter). 4) How are the books of accounts maintained in M/s. Prince Roller Flour Mill (P) Ltd (A) Books of Accounts of the financial transactions are maintained in Computer software Viz., Tally. My self is updating the accounts. In addition, I am also maintaining details related to purchase, expenses along with copy of Invoices, Bills and vouchers. 5) What is the approximate percentage of yield from the processing of wheat in M/s. Prince Roller Flour Mill (P) Ltd (A) The approximate percentage of yield from the processing of wheat is as under 1. Maida 59% 2. Atta 7% to 8% 3. Sooji 24% 4. Bran 25% 59% Depending upon the quality of wheat there will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director Sri. T. K. Abdul Karim and the amount he gives will be remitted to Sri. P. K. Kunjumoideen's bank account. These cash remittances are shown in the accounts as made out of retail sales accounted in P.K.Kunjumoideen's books. 8) While showing wheat sales to Sri. P. K. Kunjumoideen what is percentage of margin you have added? (A) We have added 1% of profit margin over the landing cost of wheat pure from inter-state. 9) You are selling wheat to Sri. P. K. Kunjumoideen by showing 1% of profit margin over the landing cost of wheat, but in reality while these wheat are processed and products sold not only you could earned a high rate of profit margin especially since expenses like purchases cost freight and coolie charges, production expenses are already shown in books of accounts. Considering these facts profit from these transactions should be very high. What is your comment on this. (A) As you said by processing these wheat into products and selling it could have earned more than 1% shown in the books of accounts. The cost of purchases as well as production costs are included in the books of accounts. 10) What will be the approximate profit margin earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act in the above company on 05.09.2013 at around 10.30 am and in the course of investigation the officers recorded my statement at the late night on the same day. The officers forced me to sign the statement written and prepared by them which was not according to the facts. I state that the statement recorded on 05.09.2013 is not true and voluntary. I was forced, threatened and compelled to sign and write the declaration in the statement without my consent. I therefore hereby retract the statement signed by me before the Income Tax Officials on 05.09.2013. I state that, I am executing this sworn affidavit so that I may make use of this affidavit in case the Income Tax Officials use my statements either against me or the above mentioned Company." 10. On the statements recorded from Sri.P.K. Kunjumoideen and the employees, the Assessing Officer noticed that the assessee group in the Wheat flour manufacturing front, resorted to different methodologies to generate unaccounted sales and income from the trade. The assessee had used Shri. P.K. Kunjumoideen (PAN- AHDPK83Q1E) as a front. Shri. P.K. Kunjumoideen was shown as the proprietor of M/s. Teekay Rice Mill with premises at P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... He said the amounts are required to meet his living expenses as also the medical expenses of his ailing mother. He said Prince Group has taken a PAN in his name and is filing the Return of Income at Palakkad in his name. From the enquiries with him, it was evident that Shri P.K. Kunjumoideen is just a name lender to this concern and in actuality was not at all involved in Us transactions. The statements of other officials of Prince Roller Flour Mills ratify and strengthen his version. 10.3 Shri Premil Deep, Manager of M/s. Prince Roller Hour Mills P Ltd. Kinassery, (PRFM) Palakkad had also deposed on the day of the search that the accounts for the concern of M/s. Teekay Rice Mill were actually controlled from the business premises of M/s Prince Roller Flour Mills P Ltd. Kinassery, Palakkad and the accounts were maintained by one Subramaniyam. Shri Premil in his deposition had stated that actually no raw wheat was passed on to the firm M/s. Teekay Rice Mill and the wheat billed in the name of M/s Teekay Rice Mill was milled at M/s Prince Roller Flour Mills itself and is sold in the market as Wheat flour in the form of Atta. Maida, Sooji etc. The Billing to M/s. Teekay Rice Mill is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... profit @ 1%on sales. After reducing this profit the assessing officer has made the following additions in respect to the following assessment years. AY Sale value of wheat to P.K.Kunjumoideen Excluding VAT (Amount in Rs.) Mark up profit @1% included in Col.2 (Amount in Rs.) 2009-10 2164672.00 21432.00 2010-11 106326114.00 1052734.00 2011-12 83439380.00 826132.00 2012-13 37373850.00 370038.00 2013-14 42118437.00 417014.00 2014-15 38276401.00 378974.00 11.2 Shri P.K. Kunjumoideen started his business in Palakkad by taking M/s Teekay Rice Mill at Thathamangalam in 1986. He was given KCST Registration in the same year. M/s. Prince Roller Flour Mills (P) Ltd started in the year 1990 only i.e., 4 years after he started his business. Shri P.K. Kunjumoideen ran his business independently as proprietor. His trading activities included purchase and sale of wheat, steel scrap, paddy, gunny bags etc. He was an assessee under the rolls of the Income Tax Department from very early period which can be cross checked. He purchased wheat not only from M/s. Prince Roller Flour Mills (P) Ltd. but from various parties in North Indian Stales like Uttar Pradesh, Madhya Pradesh, Raja ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remises or from the premises of Prince Roller Flour Mills (P) Ltd. The entire sale of wheat effected by the assessee to P.K.Kunjumoideen were duly supported by credit invoices issued by the assessee and entries in the stock register, receipt of sale proceeds from him through proper banking channels, various statutory returns, monthly as well as annually filed by us and him before the VAT Authorities, remittance of tax to the state exchequer on such sales etc. The assessment proceedings under the VAT Rules also stands completed without any adverse remarks.The assessee was selling wheat without manufacturing or processing to others (Quantities in Metric Tonne) for various years as follows: Sl. No. Name of Party A.Y. 2010-11 A.Y. 2011-12 A.Y.2012-13 A.Y. 2013-14 A.Y. 2014-15 1. Bindu Traders 125.60 86.310 2. Central Stores 62.090 3. Coimbatore Roller Flour Mills 239.230 4. Essem Traders 54.100 5. Harikrishna Agencies 31.480 40,700 148.960 6. Maliakkal Roller Flour Mills 159.690 7. Periyar A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, it was stated that there was no actual sale of Wheat to Shri P.K. Kunjumoideen but the items sold were wheat products viz. Maida, Sooji, Atta and Bran. However, the statement was also said to be recorded under tremendous pressure situation. However, the statement recorded from Shri Sabarigireesan also suffered from serious mistakes and it was on recognising this that he had retracted from his own findings, before the assessing authority. 11.6 In the statement of Shri Premil Deep M., Manager, he had just stated that he was looking after the administration side of the Group of companies, and had not concurred with the statements made by Mr Sabarigireesan nor had pointed out any unaccounted transaction. It was only said that since the matter was personally being handled by Mr. Sabarigireesan, he would be a better person to throw light on the facts and this cannot be termed as an admission by itself of unaccounted transaction, by any stretch of imagination. This statement was retracted by him as he had written the same under coercion and threat. Retraction statements by way of Affidavit were prepared on 06.09.2013 without seeing the copies of the statement recorded on the previous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was entered in the accounts. Thus, the entire search and survey operation that took place at the premises of Prince Roller Flour Mills (P) Ltd. or Shri P.K. Kunjumoideen did not unearth even a single piece of paper which can point out any unaccounted dealings like list of Sundry Debtors or collection. In a search assessment, additions can only be made on the strength of material evidences unearthed during the course of such proceeding or found during the course of post search, which in the present case was absent. 11.8.3 In these cases, there were no evidence or incriminating documents seized at the time of search and no documentary evidence to prove that the sale was effected as wheat products were obtained at the time of search both at the premises of the assesses and in the premises of Shri P.K. Kunjumoideen and hence, the assessments cannot be upheld. 11.8.4 Further, there are no evidences or incriminating documents seized at the time of search. No documentary evidence to prove that the sale was effected as wheat products, are obtained at the time of search both at the place of assessee company and in the place of Shri P.K. Kunjumoideen. In the absence of any such evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties too: A.Y S.No. Bill No. & Date Amount Name of Supplier 2009-10 1 2502/29.12.08 3,30,55,700.00 K.S. Enterprises, Mahwa, Rajasthan 2 020/18.05.09 70,98,537.00 Shree Balaji Rice Mill, Shajahanpur 3 018/18.05.09 38,69,712.00 Sewak Industries, Shjahanpur 2010-11 4 01-018 18.05.09 23,29,219.00 Ram Ji Industries, Shajahanpur 5. 01-017/18.05.09 31,54,906.00 Shree Garg Industries, Shajahanpur 2010-11 6. 10/18.05.09 7,88,727.00 Maa Bhagavathi Industries, Shajahanpur 7. 01-015/18.05.09 23,66,179.00 Shiv Om Trading Co., Shajahanpur 8. 01-015/18.05.09 7,88,727.00 Anilkumar Sanjaykumar, Shajahanpur 9. 0911615/31.12.09 20,38,800.00 Kerala State Civil Supplies Corporation Ltd. 2011-12 10. 043/01.05.10 39,40,700.00 R.L. Enterprises, Shajahanpur 11. 3522/01.05.10 31,91,214.00 Rahul Rice Traders, Delhi 12. 01-41/01.05.10 22,97,403.00 Ambey Edible Food Products (P) Ltd., Shajahanpur 13 027/01.05.10 23,71,950.00 Sudhir Trading Co., Shajahanpur 14 682/-34/01.05.10 26,36,100.00 Food Corporation of India, Palakkad 15 269-18/07.09.12 1,33,46,300.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded from Shri P.K. Kunjumoideen on 05/09/2013 was not confronted to the assessee for cross examination. From that point of view also the statement recorded u/s. 132(4) is not having any evidentiary value. 12.1 Further, u/s. 153A of the Act, the statement recorded u/s. 132 of the I.T. Act, the books of accounts, or other documents or any assets or requisition u/s. 153A, the Assessing Officer after issuing notice to furnish income of the assessee in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition made, the Assessing Officer shall assess or reassess the total income of each assessment year falling within six assessment years immediately preceding the assessment year relating to the previous year in which the search is conducted or requisition made,as the case may be, of bringing on record material to show that there is undisclosed income of the assessee. In other words, there should be material on record to show that income is assessed on the basis of material or documents in the hands of the assessee and the addition cannot be made in vaccum. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133Aof the Income-tax Act it 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; (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A; (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; (v) Finally, the word "may" used in Section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. A surv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the IT Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely." 12.9 From the above Circular, it is amply clear that the CBDT has emphasized on its officers to focus on gathering evidences during search/survey operations and strictly directed to avoid obtaining admission of undisclosed income under coercion/under influence. Keeping in view the guidelines issued by the CBDT from time to time regarding statements obtained during search and survey operations, it is undisputedly clear that the lower authorities have not collected any other evidence to prove that the impugned income was earned by the assessee. 12.9.1 In view of the above discussion, the statement of Shri P.K. Kunjumoideen cannot be the basis to hold that he is acted and carried on business of wheat products on behalf of the assessee. On the other hand, the evidence brought on record by the assessee shows that Shri P.K. Kunjumoideen is not carrying on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heat products. There is no basis for such assessment order. The Assessing Officer had not examined any of the parties mentioned therein and he presumed that Shri P.K. Kunjumoideen was acted on behalf of the assessee and he was selling the wheat products like maida, sooji, atta and bran. For this, the Assessing Officer relied on the sworn statement of Shri P.K. Kunjumoideen, Shri Premil Deep and Shri Sabarigireesan. Further, these statements have no evidentiary value in view of retraction made by these persons immediately the next day. Hence, what was left to rely on was the seized document cited supra. The seized document suggest that the assessee was engaged in the sale of wheat products from Tee Kay Rice Mills. The sole basis on which the Assessing Officer presumed that the assessee was selling the wheat products through Shri P.K. Kunjumoideen is collapsed. The estimation of production of wheat products and selling thereof have no basis and it is only a presumption without any basis. The CIT(A), though agreed that estimation made by the Assessing Officer is wrong, he sustained the estimation of profit to 50% of the profit that was estimated by the Assessing Officer. In our opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on account of transactions of M/s. Teekay Rice Mill in the hands of the present assessee by treating the entire transactions as pertaining to assessee's business. Similarly there cannot be any addition on savings on account of VAT collections in the hands of the assessee as we are of the opinion that there is no undisclosed sales of wheat products. Accordingly, we delete the additions made by the Assessing Officer towards undisclosed sales of wheat products for all the assessment years. Thus, the appeals of the assessee are allowed.
16. Since we have allowed the appeals of the assessee, the appeals filed by the Revenue have become infructuous and hence, they are dismissed as infructuous. Even otherwise Revenue appeals in ITA Nos.36, 38 to 41/Coch/2019 for the assessment years 2009-10 and 2011-12 to 2014-15, wherein the tax effect involved herein is less than Rs. 50 lakh and as per CBDT Circular No.17/2019 dated 8th August, 2019, and the Department is precluded from filing the appeals before the Tribunal.
17. In the result, appeals of the assessee are allowed and the appeals of the Revenue are dismissed.
Order pronounced in the open court on 20th December, 2019. X X X X Extracts X X X X X X X X Extracts X X X X
|
