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Facts
A search action led to the reopening of cases against two assessees. The Assessing Officer (AO) made additions based on the statement of Pradip Udeshi, alleging bogus purchases and expenses related to transportation. The assessees provided documentary evidence to support their transactions.
Held
The Tribunal held that the addition made by the AO was solely based on a retracted statement of a third party without corroborative evidence. The CIT(A) had rightly deleted the addition, and the Revenue's appeal was dismissed.
Key Issues
Whether additions made solely on the basis of a retracted third-party statement, without corroborative evidence, are sustainable. Whether the CIT(A) was justified in deleting such additions.
Sections Cited
37, 148, 131(1A), 132(4), 133(6), 254(1)
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PER PAWAN SINGH, JUDICIAL MEMBER;
These three appeals all by Revenue against two assesses are directed against the separate orders of ld. CIT(A) for A.Y. 2018-19, 2014-15 & 2019-20 respectively . In all appeals, the Revenue has raised certain common grounds of appeal
, facts in all appeals are almost similar except variation of figure of addition on account of alleged bogus entry, therefore, with the consent of parties all the appeals were Cable Corporation of India Limited (AY 2018
19. CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) clubbed, heard together and are decided by common order to avoid the conflicting decision. For appreciation of facts, fact in is treated as lead case. The Revenue has raised following grounds of appeal:
1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 3,41,00,672/- made by the AO on account of unexplained expenses u/s 37 of the Act and bogus purchases.
2. Whether on the facts and circumstances of case, the Ld. CIT(A) erred in allowing the appeal of the assessee by stating that the disallowance was made by the AO based only on the retracted statement of Shri Pradip Udeshi.
The appellant craves leave to add, to amend, alter/delete and/or modify the above grounds of appeal on or before the final hearing.
4. The appellant, therefore, prays that on the grounds(s) stated above, the order of the Ld. CIT(A) Mumbai, may be set aside and that of the assessing officer to be restored.”
Brief facts of the case as gathered from the orders of lower authorities are that a search action was carried out by Investigation Wing in Mumbai on 30.09.2021 on the beneficiaries of Rajiv Saxena Group of companies/ Khatau Group and others wherein the assessee was also covered. Consequent upon search action and material gathered during the search action, the case of assessee was reopened under section 147. Notice under section 148 dated 31.03.2023 was served upon the assessee. In response to notice under section 148, the assessee filed return of income on 10.04.2023 declaring Nil income. During the reassessment proceeding, the assessing officer recorded that in the search proceeding at 304, Ekta Apartment, Rajendra Nagar, FCI lane, Borivali East, Mumbai on 01.10.2021,
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) wherein statement of Pradip Udeshi was recorded. He was asked about source of generation in cash in Khatau Group of companies. Pradip Udeshi in his statement disclosed the names of few individuals and business entities like Odicee Career, Rupesh Sheth, Sanjay Jain and Roshanlal through which cash was generated in Khatau Group of companies. Pradip Udeshi, who is key person of Odicee Career admitted that during F.Y. 2013-14 to 2018-19, cash aggregating to Rs. 15-20 crores was generated in Khatau Group on account of raising invoices without actual delivery of goods. The relevant part of his statement was recorded in para 5 & 6 of assessment order. The assessing officer further recorded that Pradip Udeshi retracted his statement vide letter dated 09.10.2021. To confirm the facts, statement of Pradip Udeshi was again recorded under section 131(1A) on 28.02.2022 at Room No. 118, C-Block, SPM Civic Centre, New Delhi wherein he was confronted with his earlier statement recorded during search action. Pradip Udeshi on 28.02.2022 again admitted/ accepted that he gave statement at the time of search action with free will and without any fear. Pradip Udeshi again retracted his statement as recorded on page no. 4 of assessment. On the basis of statement, the assessing officer prepared summary accommodation bill provided by Pradip Udeshi in the following manner:
FY 2017-18 Ledger Vch Type FY 2014-15 FY 2015-16 FY 2016-17 FY 2018-19 FY 2019-20 Odicee Payment - - - 87,10,000 38,88,000 30,40,000 Carriers (P) Ltd. Odicee Payment 26,00,194 42,32,066 44,43,594 2,52,31,529 70,48,177 25,00,000 Carriers (P) Ltd. EHV Odicee Payment 20,94,162 47,87,785 29,00,000 1,59,143 - - Carriers (P) Ltd. NWK Total 46,94,356 90,19,851 73,43,594 3,41,00,672 1,09,06,177 55,40,000
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) 3. On the basis of aforesaid statement, the assessing officer was of the view that in A.Y. 2018-19, Pradip Udeshi provided bogus purchase entry of Rs. 3.41 crores. In the reasons recorded, the assessing officer recorded that assessee – Cable Corporation of India has shown purchases of Rs. 3.41 crores from Odicee Carrier whish escaped from assessment. The assessing officer further recorded that in the search action at the office of assessee a draft forensic audit was found and seized. On perusal of draft audit it was found that Cable Corporation of India (assessee) during FY 2016-17 to 2019-20 made purchases from different parties but no lorry recipe or invoices or e-way bills were found by forensic audit team.
The details of various purchases were scanned on page no. 7 & 8 of assessment order.
On the basis of such view the assessing officer issued show cause notice as to why undisclosed cash of Rs. 3.41 crore for AY 2018-19 should not be added to the income of the assessee. In reply, the assessee stated that in the show cause notice is based on draft forensic audit report which was seized during the search proceeding in the premises of assessee wherein the assessee has shown purchases from Electronic Applyances and Bhairav Metals of Rs. 52,50,000/- and Rs. 89,18,440/-. Such invoices were considered for bogus purchase for the want of invoices, E-way bill, lorry receipt. The assessee further explained that with regard to purchase from Bhairav Metals, forensic audit that invoices and lorry receipt was received for this particular transaction. Their objection was with regard to non-receipt of E-way bill. The assessee stated that they placed order
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) for copper wire rod from Bhairav Metals who in turn supplied to them from Lykos India Private Limited which is evident from the GST invoice dated 05.02.2018 issued by Lycos India Private Limited copy of which was furnished. Tax invoices and delivery challan with vehicle number was furnished. Goods were received at Nasik plant. Form 402 (declaration under section 68 of The Gujarat Goods & Services Tax Act, 2017) generated on 05.02.2018 at 07:31:02 p.m. showing the movement of goods from Gujarat to Maharashtra. For the objection of E-way bill, the assessee has stated that it was made mandatory vide Notification No. 27/2017 dated 30.08.2017. But mandatory applicability was postponed to 01.02.2018 vide Notification No. 74/2017, Central Tax dated 29.12.2017.
Similarly, for Electronic Applyances, the assessee substantiate about the delivery.
The assessing officer disregarded the reply of the assessee and made addition of Rs. 3.41 crores on the basis of statement of Pradip Udeshi.
Aggrieved by the additions in the assessment order, the assessee filed appeal before ld. CIT(A). The assessee also filed appeal against similar additions in other assessment years. The ld. CIT(A) treated appeal for A.Y. 2016-17 was as lead case. Before ld CIT(A), the assessee challenged validity of addition based on statement of third party without any corroborative addition as well as addition on merit. On merit of the addition, the assessee stated in order to prove the genuineness of purchases, the assessee furnished copy of invoices, transport booking from Odicee Carrier with vehicle number. Copy of insurance document of goods, copy of delivery challan with movement of vehicle. E-mail from Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) representative of loading and unloading charges at site, copy of delivery note from end customer’s ledger account of Odicee Career. Quotation from email Odicee Career from different destination. The assessee stated that they have proved the genuineness of purchases including the transportation of goods and the expenses incurred on transportation. The statement of Pradip Udeshi is general in nature. All the submissions of assessee are recorded at page no. 4 to 18 of order of ld. CIT(A).
The ld. CIT(A) on considering the submission of assessee recorded that assessee furnished various evidences in support of its claim for genuineness of transaction of transportations. The assessing officer not accepted such document and relied upon the statement recorded during search action. The assessing officer has not doubted the sale shown by the assessee. Majority of finished goods is supplied to Tata Power Company Ltd. at their location at Govanpada, Chembur from factory premises of appellant at Sinnar, Nasik. The invoices raised by Odicee Carrier are supported by insurance details, address of consignee and consignor and vehicle number and receipt of delivery. Though, the assessing officer doubted the delivery of goods but not given any specific reason for such conclusion. The invoices raised by Odicee Career contain all the requisite details. The copy of ledger furnished by assessee shows the sales against these consignees. The details mentioned by the invoices raised by Odicee Career matching with ledger.
Once sales are not doubted. Thus, the transportation cannot be doubted. The invoices raised by Odicee Career supported with the receipt of local RTOs levying
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) various charges of additional / excess weight against the vehicle deployed by Odicee Career. The assessing officer has not brought any evidence against the statement of Pradip Udeshi. The ld. CIT(A) also considered the statement of Pradip Udeshi and its retraction. The d CIT(A) held that his statement was neither accurate nor specific. The initial statement recorded under section 132(4) on 01.10.2021 and 02.10.2021 was retracted on 09.10.2021. Thereafter, another statement was recorded under section 131(1A) by DDIT (Inv.) Delhi on 24.02.2024 which was retracted on 02.03.2022. Despite retracting tainted deposition his statement was neither confronted with senior members of Khatau Group nor corroborative with tangible material. The ld. CIT(A) also referred the CBDT Circular dated 18.12.2024 wherein the investigation team is directed for collecting evidence instead of obtaining disclosure. The ld. CIT(A) finally held that the addition made by assessing officer is based on statement which was retracted. The assessee filed sufficient (positive evidence) in support of their claim, thus, addition cannot be sustained. Aggrieved by the order of ld. CIT(A), the Revenue has filed present appeal before Tribunal.
We have heard the submissions of learned Commissioner of Income Tax – Departmental Representative (ld. CIT-DR) for the Revenue and the learned Authorised Representative (ld. AR) of the assessee. The ld. CIT-DR for the Revenue supported the order of assessing officer. The ld. CIT-DR for the revenue submits that during the assessment proceeding, the assessing officer made addition on the basis of statement of Pradip Udeshi recorded under section Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) 132(4). In the statement, Pradip Udeshi clearly stated about generation of cash by way of issuing invoices without actual delivery of goods. Pradip Udeshi was in the business of transportation of goods. The assessing officer was having sufficient material while making addition against the assessee in the form of statement of transporter. The assessing officer, thus, made addition on the basis of material available before him. The initial statement, when it was retracted, Pradip Udeshi was called to confirm his stand wherein he again accepted that he made statement without any coercion and fear and confirm the statement recorded under section 132(4) which is sufficient for making addition against the assessee.
On the other hand, the ld. AR of the assessee by referring the statement of Pradip Udeshi submitted that initially his statement was recorded on 02.10.2021 and 03.10.2021 which was immediately retracted by making communication to Investigation Wing on 09.10.2021. Surprisingly, after six months he was called to Delhi for recording his statement. He again retracted his statement immediately on 02.03.2022. The assessing officer made addition of Rs. 3.41 crores. There is no corroborative evidence to support the statement of Pradip Udeshi. The addition is based on third party statement which is not permissible. Rather, during assessment, the assessee furnished complete evidence about genuineness of transportation of goods. The assessee furnished invoices of purchase, transport booking, delivery of challan, payment receipt and ultimate sale below goods transported. The CBDT in its circular dated 10.03.2023 and dated
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) 18.12.2014 made it clear that during the search proceeding, efforts be made for gathering evidence, rather than relying on the statement. The ld. CIT(A) on the basis of evidence furnished by the assessee deleted the entire addition. The ld. CIT(A) clearly held that there was no corroborative evidence to support the statement of Pradip Udeshi. To support his submission, the ld. AR relied upon the decision of Delhi High Court in PCIT vs Pavitra Realcon (P) Ltd. 340 CTR 225.
The ld. AR by referring the provision of section 131(1A) submits that statement of Pradip Udeshi recorded on 28.02.2022 is illegal and bad in law, such statement can be recorded only in pre search proceeding. Moreover, such statement has no evidentiary value. No verification was made by assessing officer form the customers of the assessee that is Tata Power Co. Ltd. by making independent investigation or issuing any notice under section 133(6). The ld. AR further submits that the assessee has huge brought forward losses worth several crores which are being left year after year; therefore, the assessee has no incentive to book any bogus expenditure.
We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various case laws relied by ld. CIT(A) in his order as well as relied by ld. AR of the assessee while making his submission. On independent consideration of fact, we find that assessing officer made addition in the assessment order solely on the basis of statement of third party. The assessee furnished sufficient evidence to substantiate their claim of expenses. All the evidences furnished by assessee
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20)
& 5097/Mum/2024) is duly recorded in para 7.5 of order of ld. CIT(A). The assessing officer made in a casual manner. No finding was given on various evidences furnished by assessee. The casual approach of assessing officer is clearly indicative from contents of para 16 of assessment order. The assessing officer has not specified as to how the reply furnished by assessee is not acceptable to him. In sub-para (i) of para 16, the assessing officer recorded that the purchases shown from Bhairav Metals NWK and Electronic Applyances is not tenable and acceptable and still no addition is made, rather additions were made on account of alleged bogus purchase from Odicee Group. In fact, the assessee has not shown any purchase from Odicee Group. Odicee Group is in transport business and transported the goods purchased or delivered at the instances of the assessee.
We find that Hon’ble Delhi High Court in PCIT vs Pavitra Realcon (P) Ltd. (supra) held that the Act does not contemplate computing of undisclosed income solely on the basis of statements made during a search. However, these statements do constitute information, and if they relate to the evidence or material found during the search, they can be used in proceedings under the Act, as specified under section 132(4). Nonetheless, such statements along, without any other material discovered during the search which would corroborate said statements, do not grant the assessing officer the authority to make an assessment. Thus, we affirmed the order of ld. CIT(A) on our independent finding. In the result, grounds of appeal raised by Revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Cable Corporation of India Limited (AY 2018-19 CCI Project Pvt Ltd (AY 2014-15 & 2019-20) & 5097/Mum/2024)
ITA No. 5097/Mum/2024 (A.Y. 2019-20)
We find that in both the appeals, the revenue has raised similar grounds of appeal, the basis of additions in the assessment order are same, the assessing officer made similar addition on the basis of statement of third party by disallowing the expenses despite filing sufficient evidences by assessee. The assessing officer solely relied upon the statement of Pradip Udeshi as made in case of Cable Corporation of India which we have decided in ITA No. 5126/M/2024. Thus, following principle of consistency, the appeal of Revenue in both the years is dismissed with similar observation.
In the result, all the appeals of the Revenue are dismissed.