TMI Blog2010 (8) TMI 1137X X X X Extracts X X X X X X X X Extracts X X X X ..... guments of the appellant that as per the Judgement of Hon'ble Kerala High Court in the case of Paul Mathews Sons Vs. CIT, 263 ITR 101, the statement recorded u/s. 133A cannot be relied upon. 4. The facts material for adjudication of Ground No. 2 and 3 are as follows. The assessee is a company and is engaged in the business of trading in readymade garments. It has a showroom selling readymade garments at Peddar Road, Mumbai, which is an up market area. The due date for filing the return of income for A.Y. 2002-03 was 30.10.2002. Assessee did not file return of income on or before the said date. On 25.11.2002, there was a survey u/s. 133A of the Act in the business premises of assessee. In the course of survey, statement of Ms. Jaya Patel, a director of the assessee, was recorded. The exact time when the survey commenced is not given in any of the orders. From answer to Question No. 3 of the statement of Ms. Jaya Patel, it is clear that she came to the business premises where the survey was being done by about 7 p.m. on 25.11.2002 and by that time inventory of stock of garments available at the premises had been taken. Ms. Jaya Patel refused to accept the inventory so prepar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed by the assessee and not obtain confession as to undisclosed income. According to the assessee the action of the Assessing Officer was contrary to the instruction of the CBDT. 7. The Assessing Officer however added a sum of ₹ 1.75 crores to the total income declared by the assessee in the return of income for the following reasons :- It may be mentioned that the statement of Jaya Patel was recorded after showing her the incriminating documents found and impounded during the course of survey u/s. 133A of the I.T. Act and at the time of the said director had disclosed the additional income after due consideration of facts before her. Hence, the retraction is nothing but an adamant non-reconciliation approach towards the facts of case. Accordingly, the income disclosed at the time of survey u/s. 133A for an amount of ₹ 1,75,00,000/- is treated as unaccounted income earned by the assessee for A.Y. 2002-03 and is added back in the total income. Penalty proceedings u/s. 271(1)(c) initiated. 8. Before learned CIT(A), the assessee reiterated the submissions made before the Assessing Officer and further relied on the decision of Hon'ble Kerala High Court i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income for taxation, whereas for A.Y. 2002-03, it was only a declaration of income for A.Y. 200203 and not additional income. The learned counsel for the assessee submitted that statement can only mean that the assessee had offered to declare a total income of ₹ 1.75 crores. According to him, ₹ 1.75 crores cannot be said to be an offer of additional income over and above income as per the books of account. Thus, at the outset, he submitted that the dispute can only be with regard to taxing the difference between the sum of ₹ 1.75 crores and income declared by the assessee only in the return of income filed for A.Y. 2002-03 viz., ₹ 1,01,69,790/-. He further drew our attention to the statement of Ms. Jaya Patel recorded at the time of survey and in particular, the answer to question No. 22 23. He submitted that the answer to the above questions would clearly show that the assessee made a declaration to offer total income of ₹ 1.75 crores for A.Y. 200203 purely due to coercion. It was also submitted that officers conducting survey were bent upon getting surrender of income for taxation purposes and the movement of this was achieved in the statement reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be binding because the said decision did not reflect the correct position of law. In this regard, learned counsel for the assessee relied on the decision of Hon'ble Madras High Court in the case of CIT Vs. Hi Tech Arai Ltd., 321 ITR 477 (Mad); wherein it was held that Coordinate Bench decision need not be blindly followed if the earlier decision did not reflect correct position of law. 13. The learned DR at the outset submitted that declaration of ₹ 1.75 crores for A.Y. 2002-03 is only an additional income over and above the income as per the books of account. According to him, no person will make surrender at the time of survey in respect of income as per the books of account. His further submission was that the assessee had not specifically retracted the statement at the time of survey. It was alternatively submitted by him that the assessee has not explained as to why he has not declared ₹ 1.75 crores in the return of income filed and as to how income of ₹ 1,01,69,790/- alone was declared in the return of income. According to him, there was no coercion exercised by the department at the time of survey and the statement was a voluntary statement. His fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any material based on which the surrender was made. Even, the Assessing Officer does not refer to any material found at the time of survey based on which surrender can be said to be correct. The law with regard to admission as the basis of making an addition is very clear. Admissions are not conclusive and person who made the admission is always at liberty to show that the admission was erroneous or was given under a mistake. We have already seen the manner in which surrender of income was made by the assessee. We do not wish to go into the question as to whether surrender was voluntary or was given under coercion. We are however of the view that in the absence of any material found in course of survey to what the assessee earned income of ₹ 1,75 crores, the impugned addition could not have been made purely based on the statement recorded at the time of survey. In this regard, we are also of the view that facts in A.Y. 2001-02 stand on different footing because surrender was additional income over and above the income as per the books of account of the assessee. The Tribunal s order for A.Y. 2001-02, in our view would not be relevant in this regard. We also further notice th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IOM Chitti 1. Paper No. 10 File No. 12 80,04,62 Oct 2002 8,80,761 5,14,664 3,66,097 2. Paper No. 06 File No. 12 1,07,03,717 Aug 2002 15,61,500 Chitti a/c is consolidated in page 284 of file No. 39. 5,85,635 9,75,865 3. Paper No. 5 File No. 12 70,56,677 Sep 2002 8,13,556 4,53,036 3,60,520 4. Page No. 9 of Executive diary A/36 3,43,000 Jan 2002 2,00,000 Given to Mr. Patel on a/c of chitti to keep in safe custody. 2,00,000 5. Page No. 13 of executive diary A/36 2,11,903 Jan 2002 84,079 84,079 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the unaccounted sales at ₹ 1,67,92,912. After making the addition of the above amount to the declared gross profit and net profit, the Assessing Officer observed that such GP comes to 33.68% and net profit comes to 12.8%. 19. He, therefore, asked the assessee to explain as to why the GP of 33.68% should not be adopted for this assessment year. The assessee objected to the same and tried to reconcile the figures found in the impounded Profit and Loss A/c. for the A.Y. ended 31st March, 2002 with the figures as per the audited accounts for the year ended 31st March, 2002. It was further submitted that as against the total amount of chitties at ₹ 23,46,864, the assessee has already declared additional income of ₹ 25 lakhs. 20. However, the various explanations given by the assessee were not accepted by the Assessing Officer. Following his order for the A.Y. 2000-01 and 2001-02 where the facts are similar to this year and rejecting the theory of consignment sale in absence of maintenance of separate records for consignment activities, he made the addition of ₹ 1,67,92,212 on account of gross profit. 21. In appeal, the CIT(A) upheld the action of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether IOM is accounted in the regular books of account or not. Referring to the copy of the assessment order passed subsequent to the order of the Tribunal, he submitted that the Assessing Officer in the said consequential order had deleted the addition by observing that cash sales recorded in the cashier s cash book tally with the cash sales recorded in the regular cash book and the IOM was duly accounted for in the regular cash book. He submitted that since all the examples pertaining to the IOM appearing on page 17 of the Paper Book No.3 have been verified by the Assessing Officer and categorical findings have been given about the recording of IOM, the addition to the extent pertaining to IOM should be deleted. 25. As far as the chitties are concerned, he submitted that the same represent the transfer of cash by the cashier to director/ management which has been brought back subsequently. Since these are internal transfers, no entries have been passed in the books of account. He submitted that since the cash sales recorded by the casher and recorded in the regular cash book tally there is no siphoning out to the extent of chitties or otherwise. Referring to some sample chitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Paper Book page 9. As far as other items are concerned where there are variations between the figures in the impounded Profit and Loss A/c. and audited Profit and Loss A/c., the learned counsel for the assessee drew the attention of the Bench to the reconciliation statement filed before the Assessing Officer as per Paper Book page 108 which reads as under and which was not considered by the Assessing Officer. VAMA APPARELS (INDIA) PVT. LTD. Working of difference between provisional Profit Loss A/c. seized and actual Profit Loss A/c. Figures in Rs. Profit as per Provisional Profit and Loss A/c. 18,250,336 Add: Revenue expense transferred to Capital A/c. 564,519 Expenses recovered from Party 1,015,670 Expenses wrongly debited now reversed 32,177 Commission received on sale 1,024,500 Closing stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered the chitties. He submitted that when the sales figures as per the impounded Profit and Loss A/c. and the audited Profit and Loss A/c. tally it cannot be said that the assessee has siphoned out the money through chitties and IOMs. Referring to Paper Book page 89, he submitted that the working of difference between provisional Profit and Loss A/c. impounded during the course of survey and the actual Profit and Loss A/c. was given before the Assessing Officer. Referring to Paper Book page 81, he submitted that details of erosion of value of stock regarding charges and readymade stock was given before the Assessing Officer justifying the erosion of market value of stock to the tune of ₹ 30,63,495. Referring to Paper Book page 82, he submitted that a detailed note on consignment sale was given to the Assessing Officer. Referring to Paper Book page 43, he submitted that the assessee has sold goods worth ₹ 2,22,90,388 at a total discount of ₹ 71,08,114. This is approximately 4% which should be reduced from the consolidated GP margin. Referring to page 40 of the Paper Book, he submitted that although this was pointed out to the Assessing Officer on 17th January, 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has not entered the purchases. Therefore, the conclusion that can be drawn after the so called reconciliation statement is that the books of account are not maintained in the regular course of business. He submitted that on the date of survey inventory was taken and there was no adverse inference drawn. Therefore, there is no no question of any purchases remaining unaccounted. If the total purchases are included as per the reconciliation statement then the physical stock found on the date of survey will be less. As regards the theory of consignment sales argued by the learned counsel for the assessee, he submitted that no invoice or stock transfer challans were found during the course of survey regarding the consignment sales/purchases. Therefore, in absence of such material on the date of survey the theory of consignment sales/purchases cannot be accepted. Further both the lower authorities have held that the theory of consignment purchases is an afterthought. Referring to page 218 of the Paper Book i.e., copy of the assessment order for the A.Y. 2000-01, he submitted that the Assessing Officer in the assessment order for A.Y. 2000-01 has thoroughly discussed the gross pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the auditors of so many other assessees. Referring to Paper Book page 424 to page 453 he submitted that the department has impounded the stock statement as on 31st March, 2002. Therefore, the learned DR is not correct in saying that the assessee does not maintain any stock register. He submitted that the directors are not signatories to the chitties found during the financial year 2000-01. However, for other years the directors are the signatories. He submitted that the assessee has recorded cash sales in full. Had the intention of the assessee was to siphon out the cash, he should not have recorded the cash sales. He submitted that the assessee s assessment was completed u/s. 143(3), books of account were not rejected, no additional income was declared for this year and since the sales tallied during the year with the impounded books, therefore, the profit declared by the assessee should be accepted. As far as the submission of the learned DR that the matter may be restored back to the file of the Assessing Officer, he submitted that the matter need not be set aside since the Assessing Officer in the order passed subsequent to the direction of the Tribunal has already considered t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vis- -vis the impounded Profit and Loss A/c., therefore, no addition on account of suppression of GP is called for. It is the submission of the learned DR that the accounts of the assessee were not prepared till the date of survey which is almost 8 months after the end of the accounting period, therefore, it cannot be said that the assessee s accounts are free from any doubt. Further there was no evidence regarding the consignment purchases. 33. We find the partner of the assessee in her statement recorded during the course of survey vide question No. 8, has stated that some of the stock are on consignment. The relevant question No. 8 and answer to the same as per Paper Book page 211 read as under: Q8. Whether stock contains all the items purchased by the company or stock is sold on commission basis. Please explain? Ans. Some are on outright purchase, some are on consignment and this is not fixed. It changes from brand to brand and from season to season. From the above it is clear that the assessee has stated about the consignment purchase which has not been controverted by the Revenue. 34. Similarly although the accounts were rejected on the allegation of siphonin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned DR that none of the directors appeared before the Assessing Officer to explain the various papers impounded during the course of survey. 36. After careful analysis of the various arguments advanced by the learned counsel for the assessee as well as the learned DR, we find neither the accounts prepared by the assessee nor the additions made by the Assessing Officer on account of suppression of GP can be held as correct. Therefore, a middle path, in our opinion, has to be adopted. Merely because advance tax of ₹ 55 lakhs was paid by the assessee, it cannot be said that the assessee has earned income corresponding to such advance tax. Further merely because the partner of the assessee has stated during the course of survey that she will file the return of income declaring profit at ₹ 1.75 crores, it cannot be said that she has to file the return at the same figure especially when according to her the profit determined on the basis of audited account is much less. In the instant case we find although large number of loose papers were impounded, those were never explained by the directors who abstained from appearing before the Assessing Officer. Similarly, the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee had in fact paid aforesaid consideration for use of premises. However, the Assessing Officer found that as per the books of account, the assessee had debited only ₹ 66,00,000/- towards rent and ₹ 77,75,236/- towards services charges. Thus, total payment made by the assessee to VPL was ₹ 1,43,75,236/- whereas as per the debit note found at the time of survey the amounts payable were ₹ 2,22,20,500/-. The Assessing Officer therefore, proposed to make an addition of the difference namely ₹ 56,45,264/- . The Assessee in reply submitted that the debit note pertain to A.Y. 1999-2000 and will not have any relevance for A.Y. 2002-03. Further, the assessee also drew attention of the Assessing Officer that in the assessment proceedings of VPL, they had given detailed reply on this aspect. As per the reply, VPL had explained that the said debit note was given to the assessee for the purpose of negotiating higher commission from the franchisee in whose products the assessee was dealing. It was explained that by showing a higher rent and service charges for the portion of occupation of the assessee, they could negotiate for better commission from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r A.Y. 2000-01 and ground Nos. 8 to 10 in the appeal for A.Y. 2001-02 are accordingly restored to the file of the Assessing Officer for a fresh decision after giving reasonable opportunity of hearing to the assessee. The Assessing Officer shall also consider the plea of the assessee regarding setting off of the rental payments made over and above the one recorded in the books against other additions on account of suppressed profits sustained by this Tribunal in accordance with law. Ground No. 2 taken by the assessee in its appeal for A.Y. 2000-01 and ground No. 8 to 10 taken in its appeal for A.Y. 2001-02 are treated as allowed for statistical purposes. 42. In line with the aforesaid decision of the Tribunal, we also restore the issue to the Assessing Officer in this year for fresh consideration. The Assessing Officer will consider the issue in the light of assertion made by the parties that the debit notes were not intended to be acted upon and also take into account the written leave and licence agreement between the parties. For the statistical purposes, ground No. 5 raised by the assessee is treated as allowed. 43. In the result, the appeal filed by the assessee is partl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
