MANOJ KUMAR KHANDELWAL,KOLKATA vs. DCIT, CENTRAL CIR 4(4), KOLKATA

The issue raised in Ground No. 2 to 8 is against the confirmation of addition of Rs. 5,00,00,000/- by ld. CIT (A) as made by the ld. AO

The facts in brief are that the assessee is engaged in the business of manufacturing and trading of paan masala products. A search and seizure action under Section 132 of the Act was conducted on Paras Paan Masala Group of Companies and key individuals on 11- 07-2018, including assessee. During the course of the search, various documents were seized from the assessee with identification mark MKK/1, MKK/6, MKK/PD/1. During the course of the search proceedings, statement of the assessee was recorded under Section 132(4) of the Act. In the statement recorded, the assessee offered as undisclosed income of ₹20 crore in various assessment years the details whereto are given on page no. 3 of the assessment order. The ld. AO stated at page no. 2 that the assessee was confronted with material found during the search investigation and consequently, he admitted to have generated huge sum of undisclosed and unrecorded income to different companies, which was the basis for making disclosure of income. The ld. AO noted from the Schedule no. 1 and 2 of page no. 3 of the assessment order that assessee has disclosed ₹5,08,04,000/- in F.Y. 2012-13, relevant to A.Y. 2013-14 and out of this undisclosed income, the assessee utilized₹5,02,55,790/- during the year. The ld. AO further noted that out of ₹5,02,55,790/-, a sum of ₹4,96,12,000/- was infused in different companies of Paras Group in the guise of bogus share capital and ₹6,43,790 was utilized in miscellaneous expenses. The ld. AO thereafter noted that the assessee in the disclosure petition has shown income of ₹5 crore claimed to be earned from commission of the commodity profit during A.Y. 2013-14. Thereafter, the ld. AO noted that the assessee has alleged in the written submission dated 24-06-2021 that the disclosure was made

In the appellate proceeding, the Learned CIT (A) confirmed the order of the ld. AO by holding that the incrementing documents seized during the course of search namely; MKK/1, MKK/6, MKK/PD/1, were confronted to the assessee and he admitted in the statement recorded u/s 132(4) of the Act that these were not disclosed in the books of accounts. The learned CIT (A) noted that the disclosures made by the assessee were retracted very late during the course of assessment

The learned AR vehemently admitted before us that during the course of search, though certain materials were impounded, but those cannot be described as incriminating material as there is no information contained in those seized documents. The learned AR has submitted that the statement was recorded under Section 132 / 131 of the Act under huge pressure and duress and he was not allowed to have any access of books of accounts maintained by the group. Therefore, he made a disclosure of Rs 20 crore in the group companies. The ld. AR has stated that the disclosure made by the assessee was retracted on 10-12-2018 after just 7 days and the finding of the ld. CIT (A) that retraction was made during the assessment proceedings is wrong and is against the facts on record. The learned AR has submitted that the learned AO relied primarily on the basis of statements of the assessee dated 11-07-2018 and 3-12- 2018. The learned AO further submitted that the ld. AO extracted the annexure to this statement on page 3 of the assessment order and noted that assessee has disclosed ₹5,02,55,790/- as income on the basis of share capital introduced, of Rs 4,96,12,000 and miscellaneous expenses of ₹6,43,790.The learned AR further submitted that the said finding of the learned AO was in contraction to the fact noted by the AO himself that the share capital raised during the year was only ₹2,46,12,000 but since the disclosure made was higher the same was treated as undisclosed income. The learned AR also submitted that the learned AO added ₹8,04,000 as income in

The ld. AO further submitted that as per disclosure made on 03.12.2018, assessee has earned ₹5 crore from commission/ commodity, however, there was no incriminating material for the same nor any said incriminating document was referred by the ld. AO in the assessment order. The learned AR submitted that the entire disclosure was linked to the share capital raised by the assessee during the year which was presumed to be ₹ 4,96,12,000 during the year whereas as a matter-of-fact actual amount was only ₹ 2,46,12,000. The learned AO submitted that no addition could be made on the basis of disclosure made by the assessee which was not based on incriminating documents. The learned AR further submitted that it was admitted that share capital raised by three companies was only ₹2,46,12,000/- during the year and the assessment of these companies were completed by the same AO u/s 153A of the Act on 03.06.2021 and the share capital raised was accepted as genuine. The learned AR referred to the assessment order enclosed at page no.85 to 87, 150/151, 245/246, in respect of these companies. The learned AR submitted that there is no observation of the learned AO that the share application was accepted because of the disclosure made by the assessee. The learned Authorized Representative further submitted that the decision relied on by the learned AO and the learned CIT (A) in the case of B. Kishore Kumar (supra) is not applicable since in that case the incriminating documents were found from the assessee and disclosure was made with reference to these incriminating materials, however, in the instant case, the addition was not made on the basis

The learned DR on the other hand, heavily relied on the orders of the learned lower authorities and submitted that during the course of search several documents were found and impounded during the course of search and confronted to the assessee. The learned DR submitted that this is only on the basis of the said documents, the assessee made a disclosure of 20 crores in various companies of the group. The learned DR submitted that assessee has made disclosure

After hearing the rival contentions and perusing the materials available on record, we find that a search was conducted on the Paras Group of companies of which assessee was key personnel. The said search was conducted on 04.07.2018. During the course of search the some incriminating documents were seized which were confronted to the assessee while recording the statement u/s 132(4) of the Act on 11.07.2018 and 03.12.2018. We note that the assessee has made disclosure as claimed therein that ₹5 crores was earned from commission/ commodity profit. We note that the statement recorded during the course of search was retracted on 10.12.2018, immediately after 7 days before DIT (Investigation), claiming that the statement was made under undue pressure and duress. Now, after examining the assessment order and the appellate order, we observe that the addition has been made by the learned AO by relying on the statements recorded during the course of search without any reference to any incriminating material found during the course of search. Similarly, the learned CIT (A) relied primarily on the statement recorded during the course of search and have recorded a wrong finding that the disclosure made during the search on 03.12.2018, was retracted very late during the course of assessment proceedings, whereas the facts on record and as per the arguments of the learned Authorized Representative we observe that the same was

In the result, the appeals of the assessee are allowed.