SMT. NISHA JAIN,KOTA vs. DCIT, CENTRAL CIRCLE, KOTA

During the course of hearing, the ld AR submitted that the assessee is proprietor of Quick Advertising Co. engaged in the business of advertising agency since November, 1989. Return was filed on 16.10.2016 declaring income of Rs.81,73,080/- which was revised on 16.10.2017 at income of Rs.73,45,420/-. A survey was conducted on 02.02.2017 at business premises of Naresh Jain, husband of assessee. During survey certain papers were found marked as Annexure A-8. At Pg 97 of that annexure [copy attached with the order of Ld. CIT(A)] a statement of various expenditure as per audit report and as per Income & Expenditure A/c is noted. On comparison of the amount under these heads, it is found that expenditure as per the audited accounts is higher by Rs.27,91,592/-. Statement of Naresh Jain on this difference is recorded where in reply to Q.No.23 he stated that the paper relates to Quick Advertising Co. and from the look of the paper it is seen that in FY 2016-17 genuine expenses incurred is recorded but in the P&L A/c as per the audit report the expenditure is inflated. Accordingly, he surrendered the same. Sh. Naresh Jain thereafter by filing an affidavit dt. 14.02.2017, i.e. just 12 days after the date of survey retracted from such statement after giving detailed reasons for the same as per Para 4-9 of the affidavit. In course of assessment proceedings, assessee filed detailed explanation in respect of each of the expenditure noted on the said paper. The AO, however, by relying on the statement of Sh. Naresh Jain observed that assessee has inflated the expenses which are supported only with self made cash vouchers and thus made addition of Rs.27,91,592/-. The Ld. CIT(A) held that under various heads of expenses where there is variation, they are supported only by internal vouchers and not verifiable independently. The affidavit of Naresh Jain without supporting evidence is only a self-serving document. However, with reference to the variation under the heading “bank interest”, he accepted that expenses noted at Rs.79,56,743/- under the head audit report as against Rs.76,34,216/- noted under the head income & expenditure account is correct and thus, deleted the addition to the extent of Rs.3,22,527/-. Accordingly, addition of Rs.24,69,065/- is confirmed.

In above factual background, the ld. AR submitted that the only basis of addition is the difference between the amount noted under various heads of expenses under the heading as per audit report and as per income & expenditure. The amount noted under the head income & expenditure is prepared some time during the subsequent year and is not the expenditure for the entire year. This is evident from the fact that under the head bank interest the actual expenditure is Rs.79,56,743/- whereas the amount recorded under the head income & expenditure is Rs.76,34,216/-, leaving a difference of Rs.3,22,527/- which is accepted by the Ld. CIT(A). Similarly the amount recorded under the head depreciation as per audit report is Rs.9,22,183/- whereas it is Rs.8,20,972/- as per income & expenditure leaving a difference of Rs.1,01,211/-. The claim of depreciation as per audited accounts has been accepted by AO at Rs.9,22,183/-. Hence, the addition to this extent is apparently incorrect. Similarly the difference in the interest expenditure is Rs.34,012/- which is incorrect in as much as the interest is paid either to the bank or to M/s R.C. Jain Invest & Fin Pvt. Ltd. and therefore, it cannot be a case of inflation of expenses. All these instances prove that the amount recorded under the head income & expenditure in the said paper do not reflect the correct expenditure.

It was submitted that the assessee at PB 27-28 has filed a statement giving the reasons as to why there is a variation in the amount noted on the said paper under the various heads as per audit report and as per income & expenditure account. The main reason for such difference is that expenditure incurred at Indore site is not incorporated in the said paper while mentioning the amount of expenditure as per Income & Expenditure A/c. The complete details of these expenditure are at PB 29-62. Only because the expenditure is incurred in cash or is supported only by internal voucher cannot be a basis for alleging the difference as inflation of expenses ignoring that even the expenditure which has been accepted by the lower authorities are also paid in cash and supported by internal vouchers.

It was further submitted that the lower authorities have made/ confirmed the disallowances by relying on the statement of Sh. Naresh Jain without considering the fact that the said statement stood retracted immediately after survey and the reasons for the difference has been explained in course of assessment proceedings in which the lower authorities have not pointed out any specific discrepancy after making general observations.

Per contra, the ld. DR relied upon the order of ld. CIT(A) which reads as under:- “4.3.1 The contention that the impounded document, Pg 97, Ann A-8, may have been prepared sometime during the year and not at the year end is contrary to facts. The impounded document contains a column of amount of expenses tilted "As per audit report" and these figures tally with the expenses for the whole F.Y 2015-16, appearing in the audited balance sheet for the F.Y 2015-16. Therefore it is clear that Pg 97, Ann A-8 has been prepared considering position for the entire year. It is also relevant to note that, on sample basis, it is seen that the heads of expenses, under which inflated expenses are noted. such as "Security Service Expenses" of Rs.6,05,280/- and "Travelling Expenses" of Rs.8,23,987/-, have been incurred entirely in cash, are only supported by internal vouchers, and not verifiable independently. 4.23.2 The assessee has relied on the order of the Hon. Supreme Court in the case of Pullangode Rubber Co. Ltd. vs. State of Kerala [1973] 91 ITR 18. On perusal of the cited decision, it is seen that the Supreme Court has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Any statement recorded under section 133A would have evidentiary value only if supported with materials and form the basis for assessment. The cited decision in fact supports the A.O's , and not the assessee's case, because the admission of Sh. Naresh Jain, that inflated expenses were claimed in the audited accounts, is in fact supported by material in the form of the impounded paper, Pg 97, Ann. A- 8. 4.3.3 As regards affidavit of Sh. Naresh Jain dt.14.02.2017, an affidavit, without supporting evidence, is only a self serving document; a person making a stateroath must show with evidence that his statement was wrong. This proposition is supported by the following case law authority- 4.3.4 The Hon. Bombay High Court, in the case Dr. Dinesh Jain, 45 taxmann.com 442 (Bombay), order dt. 24.03.2014, after referring to the decision of the Hon. SC in case of Khader Khan Sons, has held that where loose paper fdund in survey showed receipts in hands of assessee, and assessee admitted same as his undisclosed income but in assessment reverted back from said admission, since he could not furnish evidence to justify his stand, said receipts be treated as undisclosed income of assessee. Thus in the case before Hon. Mumbai HC, even though the assessee had filed a retraction of admission made during survey, addition on the basis of the admission made in survey was upheld because the assessee could not justify the retraction with evidence. 4.3.5 Also, the Hon. Delhi High Court, in the case of Raj Hans Towers (P.) Ltd. Vs CIF, taxmann.com 67 (Delhi), order dt. 27.01.2015, after referring to CIT v. Dhingra Metal Works 328 ITR 384, held that where assessee had not offered any satisfactory explanation regarding surrendered amount being not bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified. 4.3.6 Only with regard to 'Bank Interest", I find that the admission made during the course of survey, by Sh. Naresh Jain (assessee's husband and manager of her proprietorship concern, Quick Advertising Co.) and agreed by the assessee,

We have heard the rival contentions and perused the material available on record. It has been contended that the assessee has filed a statement before the lower authorities giving the reasons as to why there is a variation in the amount noted on the said paper marked as Annexure A-8 under the various heads as per audit report and as per income & expenditure account and the main reason for such difference is that expenditure incurred at Indore site is not incorporated in the said paper while mentioning the amount of expenditure as per income & expenditure account. We believe that this contention goes to the root of the matter and we hereby direct the Assessing officer to verify the same and thereafter, decide the matter a fresh as per law. In view of the same, rest all contentions are kept open. In the result, the ground of appeal is allowed for statistical purposes.

We have heard the rival contentions and perused the material available on record. It has been contended by the ld AR that the reason for revision of the return of income was that the order of Bhagat Singh Public School was not executed and as a result, both revenues and corresponding costs were reversed and revised return of income was filed resulting in reduction of net profits by Rs 827,656/-. Per contra, the position of the Revenue is that the assessee has not furnished any categorical statement from Bhagat Singh Public Senior Secondary School that they have not claimed expenditure of Rs.49,23,773/- in FY 2016-17. Against the said contention of the Revenue, the assessee has submitted ledger account of advertising expenses as well as assessee’s accounts in the books of Bhagat Singh Public Senior Secondary School where no such amount has been claimed or credited. We find that 11 Smt. Nisha Jain vs. ACIT/DCIT since these ledger accounts have been filed for the first time before us, the same needs to be verified by the AO and the matter is thus set- aside to the file of the AO to verify the same and decide as per law. In the result, the ground of appeal is allowed for statistical purposes.