TMI Blog2021 (1) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... billed for ₹ 361.53 per case which was accounted in the books of the assessee. The year wise unaccounted income was computed on sales declared by assessee on the presumption of cash received back @8% of actual sales which is incorrect since the distributors told that they paid the cash ranging from ₹ 50,000/- to ₹ 60,000/- per load. Admissions made under such circumstances without the corroborative evidence cannot be made basis for making the additions. Neither evidence was found nor the AO made out a case with the date wise, party wise cash of receipt from each distributor which was said to be unaccounted. In the instant case there was no evidence found in the premises of the assessee to show that the assessee is under invoicing the sales. No other material was found and seized from the premises of the assessee with regard to receipt of cash from the distributors. No evidence was found in the premises of the distributors also to establish that that the assessee was paid unaccounted cash by the distributors. The AO could not rebut the submissions of the assessee with regard to sale price and under invoicing with relevant facts and evidences. Therefore we, ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nue with the delay of 3 days along with condonation petition stating administrative reasons and requested to condone the delay. We have heard both the parties and condone the delay and admit the appeals of the revenue. 1.1. Since the facts are identical, these appeals are clubbed, heard together and disposed of in common order for the sake of convenience. The Revenue has raised the common grounds for the assessment years 2013-14 to 2016-17. During the appeal hearing, the Ld.DR submitted that all the grounds of appeals are related to the addition of under invoicing of sales and unaccounted purchases. Grounds of Appeal : 1. The order of the Ld. CIT (Appeals) is erroneous both on the facts and law. 2. The Ld. CIT (Appeals) ought not have held the assessment order passed u/s.143(3) r.w.s 153A as void when the Act prescribes issuance of notice u/s.153A for six assessment years, preceding the year of search, as mandatory when a search is initiated and also the CBDT vide para 65.5 of its Circular No.7 of 2003 (263 ITR 107 St.) explained the statute in clear terms, and the process of calling for returns u/s.153A has to end in completing the assessment. 3. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers and distributors and held as if the Assessing Officer suo-motu required to afford an opportunity the assessee to cross-examine. 11. Any other ground that may be urged at the time of hearing. 2. Ground No.1 and 11 are general in nature which does not require specific adjudication. 3. For the A.Ys 2013-14 and 2014-15, in ground No.2, the department challenged the order of the Ld.CIT(A) in holding the assessment order as void and the remaining grounds of appeals for A.Y.2013-14 to 2016-17 are related to the merits of the case with regard to deletion of addition pertaining to under invoicing of sales. 4. Brief facts of the case: The facts are taken from I.T.A No197/Viz/2020 for the A.Y. 2013-14 which are applicable to all the pending appeals except change in the amounts. For the A.Y. 2013-14 the Assessing Officer(AO) made the addition of ₹ 67,19,801/- relating to under invoicing of sales to the returned Income. Shri Arunachalam Manickavel is the Proprietor of M/s Bharathi Soap Works and also the Chairman and Executive Director of the Company M/s Bharathi Consumer Care Products Pvt. Ltd., which is incorporated on 06.08.2009. For the A.Y.2013-14 the assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Unaccounted income on account of under invoicing of sales (Rs.) 2013-14 67,19,801 2014-15 2,12,80,610 2015-16 5,58,53,658 2016-17 9,15,67,314 2017-18 Nil 17,54,21,383 4.1. Subsequently, the AO issued notice u/s 153A calling for the return of income for the A.Y. 2013-14 to 2017-18 and in response to which the assessee filed the return of income on 10.04.2017 admitting same incomes which were already admitted in the returns filed u/s 139(1) of the Act, thus retracted from the admission given u/s 132(4). The AO had issued the notices u/s 143(2) and 142(1) calling for various details and meanwhile, the assessee filed application before the Hon ble Income Tax Settlement Commission (ITSC) on 19.11.2018 for the A.Ys 2011-12 to 2017-18 u/s 245C of the Act admitting additional incomes as under : Asst.Year Unaccounted income admitted at the time of search (in Rs.) Additional income admitted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee also stated that assessee sold the stock to the distributor, distributors in turn sold the stock to the wholesaler Sri Lakshmi Kirana, Draksharamam at ₹ 367.20/- per case and the wholesaler sells the stock to the retailer. The assessee further stated that the distributor is paying the assessee a sum of ₹ 361.53/- per case and the assessee is not getting any benefit out of the difference amount of ₹ 88.47/- which is distributed among the distributor, wholesaler and the retailer. Thus, submitted that retailer gets the goods at ₹ 450/- per case and it is not the assessee who gets the sum of ₹ 450/- and there was neither under invoicing nor the assessee was receiving the unaccounted cash back from the distributors. Thus the assessee submitted that the assessee is not concerned about the price to the extent of ₹ 450/-, which is ultimate price to the end consumer and is only concerned to the extent of ₹ 361.53/- per case to the distributor. The assessee further stated that no evidence was found by the AO with regard to receipt of cash back from the distributors either in the premises of the assessee or in the premises of the distributors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted that there was no evidence whatsoever that was found by the AO during the course of search proceedings indicating under invoicing of bills or any other unaccounted income escaped from the assessment to make the additions, therefore, argued that there is no case for making the addition u/s 153A, hence requested to delete the additions made by the AO and relied on the decisions of ITAT in the case of DCIT Vs. Lingam Tulsi Prasad [2016] 49 ITR 218 Hyderabad, the decision of AP High Court in the case of CIT Vs. AMR India Ltd. in ITTA No.354 of 2014 dated 12.06.2014 and the decision of this Tribunal in the case of Y.V.Anjaneyulu Vs. Dy.CIT reported in 88 taxmann.com 568 and also the decision of this Tribunal in the case of Bhavanasi Anjaneyulu Vs. ACIT in ITA No.261, 262, 263, 349/ 354/ Viz/2017 dated 19.01.2018. 6.2. The Ld.CIT(A) considered the submissions of the assessee and held that assessment was completed u/s 143(3) on 23.03.2015 and hence viewed that the addition required to be made on the material found during the course of search, thus deleted the addition made in the assessment order passed u/s 143(3) r.w.s. 153A. Accordingly allowed the appeals of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has admitted the income u/s 132(4) voluntarily, therefore, the admission made in the statement recorded u/s 132(4) is valid, hence, submitted that the same is to be considered as admissible evidence and requested to uphold the addition made by the AO. The Ld.DR further argued that the assessee ought to have retracted the statement within the reasonable time and the assessee having not retracted within reasonable time, the admission given u/s 132(4) is valid and cannot be brushed aside. The DR further argued that even entries made in the books of accounts can be incriminating when the assessee failed to explain the same with the proof. The Ld.CIT (DR) further submitted that as per the circumstantial evidence, the Ld.CIT(A) ought to have taken the holistic view of the proof gathered during the search. The Ld.DR further submitted that the assessee, both the cashiers of the assessee, distributors together have confirmed that the assessee was receiving the cash back from the distributors which supports the view that the assessee has received the cash back, hence argued that the Ld.CIT(A) ought to have upheld the addition made by the AO. The assessee requested for cross examination i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... simply signed the statement whatever recorded by the investigation wing. Thus argued that admissions made in the statement recorded u/s 132(4) is invalid and cannot be taken at it s face value without having corroborative evidence, which will cause huge financial injury to the assessee. The Ld.AR further submitted that from the plain reading of the assessment order, the seized material, it clearly shows that there was no incriminating material that was found during the course of search in the business premises of the assessee evidencing under invoicing sale bills and the receipt of cash back from the distributors. No evidence was found with regard to concealment of income also. What was stated to have been explained by the assessee was that the sum of ₹ 361.53 was the price per case to the distributor and ₹ 450/- was the sale price of the end consumer per case. In between, there were two/three layers who share the profit that is distributor, wholesaler and the retailer. The statements recorded from the cashiers also cannot be taken against the assessee, since no supporting evidence was found evidencing the payment of cash to the assessee. The Ld.AR further submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eads as under: 11.1. CIT(A) Decision: (Against ground no. 6,8, 25) I have gone through the submissions of the appellant and the statement recorded u/s.132(4) of the 1T. Act. In the appellant's case, the Investigating Officer white recording statement u/s.131(4) from the MD of the appellant company Sri Arunachal. Manikvel was not shown / referred to any incriminating document found and seized at the time of search which makes the statement invalid. Consequently, the addition made on account of the disclosure made u/s.132(4) does not stand as it was made without reference to any incriminating document. The appellant in its written submissions filed relied upon number of case laws in support of its contention, Relevant extract of one such case laws of the Hon ble Gujarath High Court in D.C.I.T. Vs. Narendra Garg Ashok Garg (AOP reported in 2016) 72 Taxman.com 356 (Guj.) is extracted below Para 5 of the above judgement is extracted below: 1. We have duly considered the rival contentions made by the learned advocates for both the sides. It is true that the addition made by the Assessing Officer pursuant to the statement recorded u/s 132(4) of the Act. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 .. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of and material found during search. The statement recorded under section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence / material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded . The following extract of the decision in the case of CIT Vs Haraeevi Agrawal, reported in (2016) 70 Taxmann. com, 95 Delhi, relied upon by the appellant is applicable to the appellant's case. 5. .A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment, The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive evidence, asset or valuables were found in form of immovable or movable properties from his residence - Whether on facts, addition could not be sustained Held, yes Relevant paragraph of the judgment is as under We have heard the learned Representatives of the parties and perused the record. After considering the facts of the case, we find that the AO had made the addition merely on the basis of statement recorded under section 132(4) of the Act at the time of search, We find that at the time of search the evidence or material or assets, immovable or movable properties were found which supports the disclosure of ₹ 16 lakhs. The assessee had retracted from the said disclosure which has not been accepted by the Department, it is true that simple denial cannot be considered as a denial in the eyes of law but at the same time It is also to be Seen (that) the material and valuable and other assets are found at the time of search. The evidence ought to have been collected by the Revenue during the search in support of the disclosure statement, The decision cited by learned Departmental Representative is distinguishable on facts. In the said case, the disclosure was of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded the statements u/s 132(4) in multiple premises regularly without giving sufficient intervals to the assessee to apply the mind on the issues raised by the department. Thus there is a possibility of building up pressure on the assessee which resulted in confusion in his mind. Though the Investigation Officer recorded statements u/s 132(4) from the distributors, they did not specify the date wise amounts paid and out of which the sum accounted in the books of accounts and unaccounted amounts were not furnished and there was no record of having given the unaccounted amounts to the assessee. No evidence was found in the premises of the assessee as well as the distributors evidencing the unaccounted cash payments though the premises of the distributors were also searched on random basis simultaneously. The statements recorded from the distributors are very vague and general. The assessee enclosed the assessment orders in the case of distributors and the AO did not make any addition in the hands of the distributors in respect of the so-called cash payments made to the assessee u/s 69C of the Act. Thus, we cannot hold the statement recorded from the distributors as valid evidence wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained that distributor supplies a case of soaps consisting of 100 soaps to retailer at ₹ 450/-. In question No.22 the assessee clarified that the total value of case of mini more wash including basic excise duty+ VAT was ₹ 361.53. Thus it is clear from the statement recorded from the assessee that it fixes the rate to distributor at ₹ 361.53 per case and from the distributor to the retailer it reaches at ₹ 450/- and in between one more middle men involved is the wholesaler. In response to the show cause notice also, the assessee furnished detailed explanation regarding the pricing mechanism and objections with regard to admission u/s 132(4) by the assessee which reads as under: 1. During the course of search proceedings, the department has found the retailers price list but not manufacturer price list. Hence the comparison of retailer puce list with the assessee s sale bill cannot be made. There are three stages between the Assessee and the ultimate consumer. These are Distributors, Wholesalers and retailers. The Prices will vary between various stages. 2. During the course of search proceedings, the department has identified the accounted sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as evidence for making the assessment. 10. The department by showing the retailer price list made allegation and recorded the sworn statement by asking the question that it is distributor price instead of retailer. Hence the allegation by the department and price list quoted is not having correlation for indicating that the assessee is under invoicing the sales. There is no sale bill found to indicate under invoicing. In the absence of such finding allegation is not justified. 11. The allegation of the department of under invoicing was not based on any evidences and hence addition on this ground cannot be justified. 9.4. From the plain reading of the reply of the assessee, it is clear that he has gone back from the admission and explained the price difference from ₹ 361.53 to ₹ 450/- as the margins pertaining to distributor, wholesaler and the retailer and emphasized his contention that he was receiving only ₹ 361.53 which was duly accounted. In the return of income filed in response to the notice issued u/s153A the assessee filed the income originally returned and thus made it very clear that the admission made u/s 132(4) is retracted. In the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ables the authorities not only to rely upon the statement in the concerned proceedings but also in other proceedings that are pending, by the time the statement was recorded. 10. If the statement is not retracted, the same can constitute the sole basis for the authorities to pass an order of assessment. However, if it is retracted by the person from whom it was recorded, totally different considerations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under section 164 of the Code of Criminal Procedure. The evidentiary value of a retracted statement becomes diluted and it loses the strength, to stand on its own. Once the statement is retracted, the assessing authority has to garner some support, to the statement for passing an order of assessment. 11. In I. T. T. A. No. 112 of 2003 (see CIT v. Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306 (AP) this court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nience we extract relevant part of the order of Hon ble high court as under: 20. The subject matter before the Hon ble Supreme Court was the right of appeal, and their Lordships held that no individual has a substantive right of appeal and much would depend upon the procedure that is in vogue, at the relevant point of time. 21. In Pooran Mal (supra), a Constitution Bench of the Supreme Court examined the constitutional validity of certain parts of Section 132 itself. Even while upholding the provision, their Lordships stressed the importance of fair play and reasonableness. After referring to the protection given under the constitution against self-incrimination, their Lordships observed: In other words, search and seizure for the purposes of preventing or detecting crime reasonably enforced was not inconsistent with the constitutional guarantee against search and seizure. It was held in that case that the search of the appellant by a police officer was not justified by the warrant nor was it open to the officer to search the person of the appellant without taking him before a Justice of the Peace Nevertheless it was held that the court had a discretion to admit the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act. 9.6. On similar facts identical view was taken by the Hon High Court of Andhra Pradesh in Commissioner of Income-tax-II, Hyderabad. v.Naresh Kumar Agarwal, [2015] 53 taxmann.com 306 (Andhra Pradesh). The assessee relied on number of decisions including the decision of Hon ble Madras High court in M.Narayanan Bros v Assistant commissioner of Income tax (Special Range) wherein Hon ble High courts have expressed the similar views. Hon ble Supreme court in Pullangode Rubber Produce Co. Ltd..v.State of Kerala, [1973] 91 ITR 18 (SC) held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect. 9.7. In the instant case there was no evidence found in the premises of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment (P) Ltd., (2016) 72 Taxmann.com 340 (Delhi Tribunal), extract of which is extracted below : Section 153A read with section 143 of the Income Tax Act, 1961 Search and seizure Assessment in case of (in case of section 143(1) assessment) Assessment Year 2004-05 whether assessment in respect of which return has been processed under section 143(1), cannot be regarded as pending for purpose of section 153A as Assessing Officer is not required to do anything further about such a return and thus said assessment cannot be reopened in exercise of power of section 153A Held, yes [Paras 10 and 12] The Hon ble Jurisdictional High Court also express its view as under : A.P.High Court decision in the case of CIT Vs. M/s AMR India Ltd. in ITTA No.354 of 2014 dated 12.06.2014. The Hon ble High Court held that the A.O. has no jurisdiction to re-agitate the assessments which were already completed and subsiding. The relevant portion is extracted below : We have heard Sri J.V.Prasad, learned counsel for the appellant and gone through the impugned judgement and order of the learned Tribunal. It appears that the learned Tribunal found on fact that after completion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anickavel and also filed a letter confirming the advancement of loan was out of money received from Gowtham Budha Textile Park Pvt. Ltd relating to real estate business income which was admitted before the Hon ble Income Tax Settlement Commission (ITSC). The AO did not believe the contention of the assessee. In the absence of proof for receipt of the money from M/s Gowtham Budha Textile Park Pvt.Ltd, made the addition u/s 68 r.w.s. 115BBE of the Income Tax Act, 1961 (in short Act ). On appeal the Ld.CIT(A) deleted the addition. 12. We have heard both the parties and perused the material placed on record. In the instant case, the assessee had explained the source and furnished the confirmation letter and also explained the source of source. The creditor of Arunachalam Manickavel is having credit worthiness and there is no dispute. The department also conducted the search against the creditors, thus there is no dispute with regard to identification and credit worthiness of the creditor. Therefore, there is no case for making addition in the hands of the assessee. If at all the AO disbelieved the source of source, the same required to be made addition in the hands of the cre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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