DY. CIT CC -7(40), MUMBAI vs. SHREE AMBICA GEMS, MUMBAI

Aggrieved, the assessee filed the appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assessee by restricting the disallowance to the extent of 2.5% of Rs.2.50 crores which comes to Rs.5 lac. The relevant part of the decision of CIT(A) is reproduced as under: “8.3 DECISION: 8.3.1 I have considered the facts of the case and the submissions of the appellant I find that this issue had come up for consideration before me in the case of the appellant for A Ys 2012-2013 2014-2015, 2015-2016, 2016-2017 and 2017-2018 and the same was decided by me vide a combined order dated 10.12.2021 for the aforesaid assessment years with following findings: 9.31 I have considered the facts of the case and the submissions of the appellant The primary contentions raised by the appellant are that the additions cannot be made solely on the basis of the statement recorded during the course of the survey and that Shri Ghanshyam Kalsariya whose statement has been relied upon in the assessment order has subsequently retracted the said statement, and therefore, the addition could not have been made on the basis of the statement A copy of & 1770/Mum/2022 4 C.O.101 & 102/Mum/2022 DCIT,CC-7(4) Vs. Shree Ambica Gems affidavit dated 17/09/2019 was filed which was claimed to have been filed before the AO, retracting the statement of Shn Ghanshyam Kaisanya. 9.32 As to the contention of the appellant that the addition could not have been made merely on the basis of the statement recorded during the course of survey, it is pertinent to note that the said statement dated 21/01/2019 was recorded us 131 of the Act after administering oath, and as such, it is not a statement recorded u/s 133A which could not be relied upon The judicial decisions referred to by the appellant in its submissions are in respect of statements recorded u/s 133A of the Act during the course of survey, and therefore, those are not applicable to the facts of this case as the statement under consideration was recorded on oath u/s 131 of the Act 9.3.3 Hon’ble Bombay High Court in the case of Pebble Investment and Finance Ltd vs. ITO in Income Tax Appeal No 988 of 2014 held that statement made us 133A can be relied upon for purposes of assessment. in absence of any contrary evidence or explanation as to why such statement made is not credible Operative part of the judgment is reproduced below: 9. We note that a statement made under Section 133A of the Act is not bereft of any evidentiary value The same may not be conclusive but in the absence of any contrary evidence or explanation as to why the statement made under Section 133A of the Act is not credible, it can be acted upon. The decision of Madras High Court in CIT v/s S Khader Khan Son reported in 300 ITR 157 as upheld by the Apex Court, is not of any assistance to the Appellant in the facts before the Court in S Khader Khan (supra), the person who made the statement under Section 133A of the Act had retracted it before the Assessment Order was passed. Moreover, in the absence of the Appellant Assessee offering any explanation as to why the statement cannot be relied upon, no fault can be found on the reliance upon the statement of the Director of M/s. Omega Further, so far as request for cross examination is concerned, we find that Appellant- Assessee during the first round of proceedings before the Assessing Officer did not raise any such Issue At that point of time, the person who make the statement, could have been produced by the Assessing Officer it was only in the second round of proceedings when the Appellant-Assessee was not able to contact the Director of M/s Omega, that they came up with a request for his cross examination Therefore, the submission on part of the Appellant that the delay has led to it being unable to produce evidence is of no avail as the delay was in seeking cross examination by it Further, the documents which were produced were considered along with and/or the facts viz. nonproduction of vital documents This coupled with the fact that the owner of the Furnace i.e Appellant did not have any knowledge about its whereabouts at the time of adjudication" SLP filed in the above case of Pebble Investment and Finance Ltd vs. ITO was dismissed by Hon'ble Supreme Court in Petition(s) for Special Leave to Appeal (C) No(s) 11784/2017 vide order dated 05.07 2017 9.3.4 Hon’ble Madras High Court in the case of B. Kishore Kumar vs. DCIT [2014] 52 taxmann.com 449 (Madras) held that where assessee himself stated in sworn statement during search and seizure about his undisclosed income, same was to be levied fax on basis of admission without scrutinizing documents Operative part of the judgment is reproduced below: & 1770/Mum/2022 5 C.O.101 & 102/Mum/2022 DCIT,CC-7(4) Vs. Shree Ambica Gems

With regard to the undisclosed income of Rs 52,73,920 supported by printouts, in the sworn statement dated 29.8.2006 the assessee says that he had separate business income which was not included in his income tax returns. Therefore, admission of undisclosed income of Rs 52.73.920/15 categoric and undisputed The assessee in the sworn statement made on 10.10.2006, stated that outstanding loans to the tune of Rs.25 Lakhs to 30 Lakhs are to be recovered with interest at the rate of 18% This is a clear admission. This amount has also been calculated and added as undisclosed income When there is a clear and categoric admission of the undisclosed income by the assessee himself in our considered opinion, there is no necessity to scrutinize the documents The document can be of some relevance, if the undisclosed income is determined higher than what is now determined by the department. Moreover, it is not the case of the assesso that the admission made by him was incorrect or there is mistake in fact when there is a clear admission voluntarily made, by the assessee that would constitute a good piece of evidence for the Revenue 7. The learned counsel for the assessee relied upon a decision of the Doth High Court in CIT v Girish Chaudhary (2008) 296 ITR 619 to plead that loose sheets of papers should not be taken as a bass for determining undisclosed income. However, in the case on hand loose shoots found during the search are not the sole basis for determining the tax liability. It is a piece of evidence to prove undisclosed income. The printout statements of undisclosed income is not disputed by the assess00 and in his sworn statements it is accepted in fact he admitted that outstanding loans to be recovered are in the range of Rs 25 Lakhs to 30 Lakhs. We find no error in the procedure followed by the Assessing Officer on admitted facts. The entire exercise by the department to bring to tax undisclosed income we find has been generous and simple. There appears to be no confusion in the quantification of the tax liability and we uphold the order of the Tribunal SLP filed in the case of B. Kishore Kumar vs. DCIT was dismissed by Hon'ble Supreme Court in Special Leave To Appeal (C) Nos. 0153 TO 9159 of 2015 reported in (2015) 62 taxmann.com 215 (SC). 9.3.5 In this regard, I have also taken note of the fact that the said statement, ie, answer to question No.69, which has been relied upon by the AO is not a mere declaration or disclosure of unaccounted income, but it is specific to fact which is apparent from the books of accounts of the appellant. The said question No.69 and its answer are reproduced below for the sake of clarity: “Q.69. It is observed from books of accounts that there are many entries in which money is transferred to partner's account from M/s Ambica Gems and from there, it is withdrawn For example, on 11-02-2013 amount of Rs 92,00,000/- was transferred to Partner Shri Ghanshyam C Kalsariya which was withdrawn on 12-02-2013 Please explain Ans. My father withdraws cash on my behalf and this cash is being utilized in purchasing the stock This stock is sold in cash out of books. This is approx Rs.2 to 2.5 cr cash purchase annually.”

The Court is not satisfied that the retraction made by the assessee two years after the declaration was bonafide. There was no satisfactory explanation for not including the said amount in the return of income filed by the Assessee on 26.9.2009 17. In the circumstances, there was no justification whatsoever for the Tribunal to have deleted the additions made by the Assessing Officer which were upheld by the Commissioner (Appeals). The question framed is answered in affirmative. 9.3.8 Further, it is found that in the said affidavit Shri Ghanshyam Kalsariya has merely stated that the unaccounted purchases and sales of the current year, te FY 2018-19 relevant to AY 2019-20, is of Rs.8 Lakhs to Rs 10 Lakhs and that the average profit earned on the same is to the tune of 1.5% 2% and that to avoid litigation and disputes, he had agreed to disclose profits at the rate of 2% on Rs 1.2 Cr. which amounts to Rs.2.40 Lakhs it is, therefore, evident that this affidavit has no reference of any facts pertaining to AY 2012-2013 and A Ys 2014-2015 to 2017-2018, which are under consideration in these appeals In the said affidavit, he has not given any explanation as to the withdrawal of cash from the partner's account specifically referred to in Question No 69 of his statement. He has rather not even said that the statement made earlier was incorrect In fact, he has admitted the modus operandi of making purchases and sales out of the books and the only fact which has been disputed is that during the FY 2018-19, the unaccounted sales and purchases were in the range of Rs 8 Lakhs to Rs 10 Lakhs As such, this affidavit has no relevance for adjudication of the appeals for AY 2012-13 and A Ys 2014-15 to 2017-18 Furthermore, even for A.Y 2018-19, the assertions made in respect of the facts stated in the affidavit are not corroborated by any evidence. The affidavit merely proposes to alter the unaccounted income admitted during the course of the survey admitting the modus operandi, whereas such alteration in the unaccounted purchases and sales as stated in the affidavit is not supported by any evidence, and, therefore, the affidavit has to be rejected as afterthought and not supported by any evidence Hence, in my considered view the retraction cannot be accepted to discredit altogether what has been stated in the statement In the given facts of the case, I do not find any reason to discard the statement given by Shn Ghanshyam Kalsariya Ground No.2, therefore, deserves to be dismissed and the same is, accordingly, DISMISSED. 9.3.9 Vide ground No.3, the appellant has raised the contention that even if the statement is believed to be true, only the net profit imbedded in the unaccounted sales should have been considered for taxation The appellant placed reliance on the statement of Shri Chaturbhai Kalsariya, who is father of Shri Ghanshyam Kalsariya and one of the Partners of the appellant firm The statement of Shri & 1770/Mum/2022 8 C.O.101 & 102/Mum/2022 DCIT,CC-7(4) Vs. Shree Ambica Gems Chaturbhai Kalsariya was also recorded u/s 131 of the Act on 22/01/2019, Le, on the very next day on which the statement of Shri Ghanshyam Kalsariya was recorded. The appellant submitted that in response to Question No 14, Shri Chaturbhar Kalsariya had categorically stated that around Rs 2.5 Cr is annual unaccounted sale and he had agreed to offer profit at the rate of 2% on the said unaccounted sales in the submissions before me, the appellant has contended that the learned AO has relied on only one statement which is of Shn Ghanshyam Kalsanya, whereas the statement of Shri Chaturbhal Kalsariya was ignored it was further contended that if one statement recorded during the course of survey is to be believed, there is no reason to disbelieve the other statement, and if both the statements are considered simultaneously the addition has to be restricted to 2% of the unaccounted turnover of the business of the appellant. The appellant placed reliance on several judicial decision to substantiate this claim. 9.3.10 On perusal of the statement of Shri Ghanshyam Katsariya dated 21/01/2019, it is evident that in answer to question No.69, he had stated that his father withdraws cash on his behalf and the cash so withdrawn is being utilized in purchasing stock, which is sold out of the books. The statement of Shri Chaturbhai Kalsariya was also recorded on the very next day, ie 22/01/2019, wherein, in response to question No. 14, he had stated that the annual unaccounted turnover of the firm is Rs.25 Cr and ho proposed to offer the profit on the same at the rate of 2%. The relevant question No 14 and its answer of the statement of Shri Chaturbhai Kalsariya are reproduced below: Q.14. So you agree that there is an unaccounted sale of around 2.5 crores annually and should be added to your income and taxed accordingly. Ans. Yes I agree that around Rs 2.5 crores is my annual unaccounted sales carried out from Surat office and thus agree to offer profit at the rate of 2% on above unaccounted sale for tax. 9.3.11 It is evident that the learned AO has not referred to this statement in the assessment order it is also evident from perusal of the statement of Shri Ghanshyam Kalsariya that in the said answer to question No 69, he had explained the source of cash being utilized for purchase of unaccounted cash, which is withdrawal from the partner's account, and as such, it cannot be held that the purchases made by the appellant for selling the goods out of the books are made out of any unaccounted income There is no evidence referred to in this regard, which could be said to have been found during the course of the survey As evident from the assessment order, for this addition, the learned AO has solely relied on the statement of Shri Ghanshyam Kalsariya, specifically his answer to question No 69 If this statement is referred to, it is very evident that he has explained the source of the money which was utilized for purchase of unaccounted stock The AO also referred to provisions of section 40A(3), although the addition has been made u/s 69A of the Act. However, I have taken note of the fact that even the amount withdrawn from the Partner's account pertain to AY 2013-14, there are no specific identified transactions for AYS under reference which could be said to have in violation of provisions of section 40A(3) The unaccounted Purchases and sales have been determined on estimate basis solely on the basis of statement and therefore the question of any disallowance u/s 40A(3) does not arise.

Furthermore, this Court is of the opinion that in the circumstances of the case both the CIT(A) and ITAT were correct in adding back the amount of Rs.63.33,260/- after adjusting the expenditure indicated. The explanation given by the assessee, in the course of the appellate proceedings, that the surrender was in respect of a certain portion of the receipt which had remained undisclosed or that some parts of it were supported by the books, is nowhere borne out as a matter of fact, in any of the contentions raised by it before the lower authorities For these reasons this Court is of the opinion that no substantial question of law arises The appeal is accordingly dismissed 9.3.7 In this case, Shri Chaturbhai Kalsariya, in his statement dated 22/01/2019, in answer to question No.14 reproduced previously, has categorically stated that the profit embedded in the unaccounted purchases and sales is 2% of the annual unaccounted turnover. There is no evidence on record to disbelieve this statement. It is not even the case of the learned AO that this statement is incorrect, as he has not even referred to this statement and has also not referred to any other evidence found during the course of survey or assessment proceedings to hold a presumption as against this statement. In the given facts of the case, I am of the considered view that the amount which could be taxed, during the year under reference as unaccounted income of the appellant, ITA No. 1969 & 1770/Mum/2022 11 C.O.101 & 102/Mum/2022 DCIT,CC-7(4) Vs. Shree Ambica Gems is 2% admitted to be the profit on the unaccounted sales of Rs.25 Cr. As such, the addition made by the AO. is restricted to Rs.5 Lakhs being 2% of Rs.25 Cr. Ground No.3 is, accordingly, ALLOWED.” 8.3.2 The material facts remain the same for AY 2018-19. The learned AO has made of Rs 25 Cr. u/s 69A of the Act in this assessment year, relying on the same answer to question No 69 of the statement of Shri Ghanshyam Kalsariya The submissions of the assessee also remain the same for this assessment year. The above findings, therefore, apply mutatis mutandis to this assessment year as well Hence, following my above findings and decision, the AO is directed to tax Rs 5,00,000/-, being 2.5% of Rs 25 crore of the unaccounted turnover, as unaccounted income of the appellant for AY 2018-19 as well Grounds No.1 and 2 are dismissed and Ground No.3 is accordingly allowed.” During the course of appellate proceedings before us the ld. Counsel vehemently contended that the A.O had made the addition merely on the basis of statement of the partner and the assessee had retracted the same vide filing affidavit and further clarification was given. The ld. Counsel also submitted that not a single evidences was brought on record by the A.O to prove that assessee was indulged in unaccounted purchases and sale transaction. The ld counsel also submitted that no evidence was brought on record by the A.O to prove that assessee was having unaccounted purchases and sale transaction of Rs.2.50 crores for every year. On the other hand the ld. D.R placed reliance on the order of A.O and referred provision of Sec. 40A(3) of the Act.

Heard both the sides and perused the material on record. Without reiterating the fact as elaborated above it is undisputed fact that the impugned addition was solely made on the basis of statement of Shri Ghanshyam Kalsariya partner of the assesse firm recorded during the course of survey which was retracted subsequently. The A.O also referred to provision of Sec. 40A(3), however, the addition has been made u/s 69A of the Act. On the perusal of the material on record it is observed that there were no specific identified transaction for assessment year under consideration which could be in violation of provision of Sec. 40A(3). The & 1770/Mum/2022 12 C.O.101 & 102/Mum/2022 DCIT,CC-7(4) Vs. Shree Ambica Gems unaccounted purchases and sales have been determined on estimate basis solely on the basis of statement. It was stated in the statement that the purchases and sales have been made out of books on which the assessee has earned unaccounted profit. The source of purchases was withdrawal from partners account which was explained as source of making purchases. The ld. CIT(A) has elaborated all these facts in his finding as discussed supra in this order wherein he has also stated that in the statement dated 22.01.2019, it was also explained that profit embedded in the unaccounted purchases and sale was 2% of the annual unaccounted turnover. After taking into consideration the material on record, finding of the ld. CIT(A) it is clear that A.O has not referred to any other evidence found during the course of survey or assessment proceedings except the retracted statement of the partner, therefore, we don’t find any infirmity in the decision of ld. CIT(A) in sustaining the addition to the extent of 2% of Rs.2.50 crores. Therefore, the appeal of the revenue stand dismissed.

As the facts and the issue involved in this appeal are the same as mentioned supra in ITA No. 1770/Mum/2022, therefore, applying the same mutatis mutandis, this appeal of the revenue is also dismissed.

In the result, both the appeals of the revenue are dismissed and Cross Objection filed by the assessee are dismissed.