TMI Blog2006 (5) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... t in executing additional work is generally 8 to 10 per cent. The Managing Director of the company was fully aware of the facts at the time of filing declaration. It cannot be said that declaration was under any misconception of facts. The appellant-company has failed to discharge the onus that declaration was under any misconception of facts. In the instant case declaration is vide letter dated 22-1-1999 i.e., it is not on the day when search was commenced. The only reason given for not showing such undisclosed income is that for additional civil work, margin of profit is only 8 to 10 per cent. Such fact was known to the appellant and is mentioned in the letter. Hence, no valid reason is given for retraction of statement. During the course of proceedings, the learned AR pointed out that revenue has not been able to establish that assets or expenses corresponding to undisclosed income have been found during search. The appellant has shown undisclosed income to the extent of around Rs. 68 lakhs and has not explained as to where such amounts stood invested. It is not the case of the appellant that undisclosed income has been returned on the basis of assets or expenses not recorded in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the Assessing Officer and CIT(A) erred in holding that the assessee had disclosed unaccounted income at half the turnover of Rs. 2,14,12,715/- as unaccounted income. The assessee in his statement dated 22-1-1999 had mentioned only 107 lakhs as undisclosed turnover as income out of Rs. 2,14,12,715/- relating to peripheral works. (viii) Both the Assessing Officer and CIT(A) erred without having supporting evidence in search, for estimating the turnover as income at Rs. 1,00,000/- by Assessing Officer and at Rs. 1,07,06,088/- by CIT(A). The Assessing Officer and CIT(A) ought to have treated the turnover of Rs. 2,14,12,715/- relating to peripheral job works done by carpenters, plumbing works etc. The Assessing Officer ought to have accepted the income of Rs. 68,51,696/- disclosed by the assessee on a turnover on Rs. 1,07,06,088/- which is based on normal profit in this type of business. (ix) Both the Assessing Officer and CIT(A) erred in not giving any comparative cases in support of estimate of income at 50 per cent of the peripheral turnover amounting to Rs. 2,14,12,715/- [vide K. Baliah v. CIT [1965] 56 ITR 182 (Mys.)]. (x) For these and any other grounds that may be urged at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k, margin of profit cannot be 50 per cent. Vide letter dated 12-12-2000, the assessee made following submissions:- (a) The investigation wing of the department had assessed the total undisclosed turnover of works contract at Rs. 2.14 crores and after estimating an expenditure of 50 per cent thereof estimated the undisclosed income at Rs. 1.07 crores. (b) We have, in great detail, in our submission to the investigation wing of the department explained the nature of work involved in the said escaped turnover of Rs. 2.14 crores as determined by the department. These being in the nature of works contract for work such as plumbing, civil, electrical, painting, tiling etc., there cannot be a margin of 50 per cent in the value of such contracts. (c) As already explained in our submission to the investigating authorities that they had arrived at the value of escaped turnover in respect of such works contracts based on a document seized during the search proceedings, which has also not been supported by any material evidences to indicate there was indeed suppression of such turnover and, therefore, the income thereon. Thus, the assumption of 50 per cent margin in such contracts to us seems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2-1998. The declaration was made after considering the contract work which was not accounted in the books of account. The assessee has not maintained complete records and profits cannot be correctly arrived at. It is for the assessee to identify the investments or expenditure made out of the undisclosed income. The learned Assessing Officer relied on the following judgments to hold that subsequent retraction is not permissible: (a) Narayan Bhagwantrao Gosavi Balajiwale v. Gopal Vinayak Gosavi AIR 1960 SC 100: Admission is the best evidence though not conclusive, decisive unless proved erroneous . (b) Surjeet Singh Chhabra v. Union of India AIR 1997 SC 2560 : Custom officials are not police and, therefore, confession made before them is to be taken accordingly and that principles of natural justice cannot be said to be violated. (c) Manharlal Kasturchand Chokshi v. Asstt. CIT [1997] 61 ITD 55 (Ahd.), Param Anand Builders (P.) Ltd. v. ITO [1996] 59 ITD 29 (Mum.): for retraction of statement the assessee should prove threat or coercion. (d) V. Kunhambu Sons v. CIT [1996] 219 ITR 235 (Ker.) : Assessment on the basis of voluntary statement is valid . The Assessing Officer accepted the u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ew our attention to letter dated 22-1-1999 filed before the Assessing Officer. As per this letter, it was submitted that main business of the assessee-company was to import and supply kitchens. For this purpose, the assessee was required to suggest other work like plumbing, altering electrical wiring, false ceiling, wood work etc., so that kitchen can be installed in the existing premises. Such work was undertaken at the instance of customer as the assessee was interested to get the execution of main work for the customer. The cash component, towards supply of kitchen has been accounted in the books. The intention of preparing statement as found during the course of search was to arrive at the estimated value of additional work done at the client's premises. Such additional work has not been executed on a turn-key basis. During the course of search, it was stated that estimated expenditure is around 50 per cent to 60 per cent on the additional work. The estimate was always made on higher side to cover any calculation error. The assessee is not in a position to provide material evidence for the actual amount spent but looking to the nature of work, the margin of profit will be 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no evidence or vouchers to support the claim of expenses. The expenses have been allowed to the extent of 50 per cent on the basis of statement made by assessee. It is not the case that entire unaccounted receipts in cash represented the receipts corresponding to additional work. Moreover, gross profit of 32 per cent in regular business cannot be applied to compute undisclosed income on the turnover not disclosed. 5. We have heard both the parties. Search under section 132 was conducted on 18-12-1998. In the statement, Managing Director of the company Shri Ravi Karumbiah stated that he has to find out from the accounts as to whether all the cash receipts are accounted? A paper showing following narration was shown: Karthick (SACFM) Rs. 50,000 16-12-1998 Payment 70 per cent cash Cheque 30 per cent Iftekar (Mohd. Ebrahim) Rs. 1,00,000 16-12-1998 Managing Director of the company stated that the paper is in the handwriting of Executive Director. The amounts received in cash was in respect of the said parties for the material to be supplied to them. Such cash receipts were not found noted in the cash book. It was stated that these cash receipts were for buying raw material from the mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... supported by any documentary evidence. Vide statement dated 27-1-1999, the Managing Director of the company voluntarily declared 50 per cent of the cash receipts as undisclosed income. Such unaccounted cash receipts were of Rs. 2,14,12,175/-. The assessee vide letter dated 11-1-1999 submitted that entries in second column do not represent the amounts received through cheque. Advance received through cash is also entered in fourth column. Hence, entries in fourth column do not represent the amounts received by cheque only and also include cash. In respect of Raghavender Rao, the amount entered in column 3 is Rs. 9,50,776/- and he has been billed for Rs. 6,00,000/-. It is stated that balance is for additional work. In respect of Raju Sachdev, amount in third column is Rs. 3,74,140/- and he has been billed for Rs. 1,50,000/-. The Assessing Officer has verified that appellant has done some additional work. The assessee-company vide letter dated 22-1-1999 submitted as under:- As already explained in a few cases, the additional work was executed for enabling us to promote our prime business of supply/installation and commissioning of kitchens, without any profit element. We do not inten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted its business in 1994. The assessee has made declaration vide letter dated 22-1-1999 and such letter is not alleged to have been obtained under threat or coercion. This was voluntary declaration. The assessee estopped the department for making further investigation. In case the assessee felt that such declaration was not correct then it was having sufficient time to say that declaration be not accepted. The acts of receipt of unaccounted cash was in the exclusive knowledge of the directors and they were a ware of the expenses, if any incurred. During the course of proceedings, the assessee has not made any attempt to co-relate the unaccounted cash receipts from a particular client vis-a-vis the additional work done to establish that profit margin is not 50 per cent. There is no evidence to suggest that unaccounted cash receipts were only for additional work. Perusal of printout available at pages 1 to 6 of paper book filed by the learned DR shows that it has been signed by witnesses on 29-12-1998. It means that search continued up to 29-12-1998. Statement of Shri Ravi Karumbaiah has been recorded on 29-12-1998 under section 132(4) of the Income-tax Act. This is a statement on oa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a person having the same name as the assessee had operated the bank account as proprietor of Oriental Traders. (b) The premises of Oriental Traders was partially owned by the assessee. (c) There was no other person having the same name as that of assessee in the premises of Oriental Traders. (d) The assessee, an established constituent of the bank and related to the persons in management of the bank had other accounts in his own name and in respect of his other businesses concerns. (e) It was inconceivable that a stranger would operate the account of Oriental Traders in the name of the assessee. (f) The two other admitted accounts of the assessee in the bank had not been disclosed in the original assessment. The learned High Court upheld the finding of the Tribunal as it cannot be said that the conclusions arrived at by the Tribunal was based on no evidence or material or perverse in the sense that no reasonable man could come to such a conclusion on such material. While upholding the finding of Tribunal, the learned High Court quoted the observations of Danckwerts, J. in Rosette Franks (King Street) Ltd. v. Dick [1955] 36 TC 100 (Ch.D.) vide which the learned Judge observed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tant case, declaration was given to DDI (Inv.) and subsequently the appellant has not taken any steps to rectify such declaration before the authorities before whom such declaration was filed. We are also aware of the observation made by ITAT, Ahmedabad Bench in the case of Asstt. CIT v. Mrs. Sushiladevi S. Agrawal [1994] 50 ITD 524. The learned Bench observed: All that is stated by any deponent on the search day should not be taken as the truth, the whole truth and nothing but the truth. Such statements inclubitably have evidentiary value and credibility in law, but the same should be viewed with great caution, particularly when the same is denied, varied or retracted or established by the defendant to have been obtained or given under mental stress, coercion, undue influence or due to any other abnormal condition and circumstances when such statement was given. If a person at later stage retracts from the statement given on the search day, then the Court or Tribunal should try to ascertain the reasons or circumstances from such person for doing so and if satisfied, not to place heavy reliance on such earlier statement which has subsequently been denied and retracted. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X
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