Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, A Bench, Mumbai
Before: Shri G.S. Pannu & Shri Ravish SoodShri Liladhar Majethia
O R D E R
Per Ravish Sood, JM
The present appeal before us arises from the recalling of the earlier order passed by the Tribunal in the appeal of the revenue i.e ACIT, Central Circle-2, Mumbai Vs. Shri Liladhar Majethia, Mumbai ( 18.01.2017). On a Miscellaneous Application No. 736/Mum/2017 filed by the assessee the Tribunal had vide its order passed under Sec. 254(2) of the Income-tax Act, 1961 (for short „Act‟), dated 01.06.2018, recalled its earlier order for the limited purpose of readjudicating the issue arising from the Ground of appeal No. 4 raised by the revenue, which read as under:
P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia “4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting addition of Rs. 50 lacs declared by the Assessee in statement recorded u/s. 131 of the Act on the ground of no documents being unexplained without appreciating the fact that the assessee failed to discharge the onus cast on him to explain the impounded materials/loose papers on account of which additional income of Rs.50 lacs was disclosed on oath.”
Briefly stated, the facts pertaining to the issue under consideration are that Search & seizure proceedings under Sec. 132 of the Act were carried out on 07.01.2009 at the residential premises of the brother of the assessee viz. Shri Haresh Majethia. Further, a survey action under Sec. 133A of the Act was also carried out in the case of M/s Jalaram Enterprises, a proprietary concern of Shri Haresh Majethia on the same date. In the course of the survey proceedings certain loose papers were found and impounded, some of which were found to be belonging to the assessee. It was observed by the survey officials that the assessee had not maintained and written any books of account since 31.03.2008. On being asked to explain the contents of the material found during the course of the survey proceedings, the assessee in his statement recorded under Sec. 131 of the Act, dated 07.01.2009 admitted that no books of account were maintained by him since 31.03.2008 and offered an additional income of Rs.50 lac for the Financial year: 2008-09. However, the assessee by way of a letter filed with the investigation wing on 10.01.2009 resiled from his aforesaid statement that was recorded during the course of the survey proceedings.
During the course of the assessment proceedings it was observed by the A.O that the aforesaid additional income of Rs. 50 lac was not offered by the assessee in his return of income for the year under consideration viz. A.Y 2009-10. The assessee was called upon by the A.O to explain as to where the additional income of Rs. 50 lac that was admitted by him in the course of the survey proceedings was reflected in the return of income. Further, the assessee was also directed to explain with evidence as where all the entries mentioned in the documents and the loose papers impounded during the course of the survey proceedings were reflected by him in his books of account. In his reply, it was stated by the assessee that the books P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia of account for the financial year 2008-09 were written after the date of the survey action for correlating the source and application of funds. Further, the assessee vide his letter dated 09.10.2010 furnished complete details along with the page numbers of the books of account in context of the entries as were found on each page of the impounded Annexure-A7 belonging to him. However, the A.O not being impressed with the explanation of the assessee and being of the view that the assessee had admitted an additional income of Rs.50 lac in his statement recorded on oath during the course of the survey proceedings, added the said amount to the total income of the assessee.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). In the course of the appellate proceedings it was submitted by the assessee that the statement recorded under Sec. 131 of the Act, dated 07.01.2009, wherein he had admitted an additional income of Rs. 50 lac for F.Y 2008-09 was retracted by him, vide a letter filed with the investigation wing on 10.01.2009. It was further submitted by the assessee that he had during the course of the assessment proceedings duly reconciled the entries appearing in Annexure A7 with the books of account which he had got prepared with the help of a Chartered accountant in order to prove the source and application of funds. The assessee submitted before the CIT(A) that the adhoc addition of Rs.50 lac was made by the A.O merely on the basis of his bald statement recorded during the course of the survey proceeding, loosing sight of the fact that the same was retracted by him within a short period of two days. Further, it was the contention of the assessee that the addition of Rs. 50 lac made by the A.O was not supported by any entries or material evidencing any undisclosed income of the assessee.
The CIT(A) after deliberating on the contentions of the assessee was persuaded to subscribe to the same. It was observed by the CIT(A) that a standalone surrender statement recorded in the course of survey proceedings cannot be taken as a conclusive piece of evidence for making an addition in the hands of the assessee. The CIT(A) noticed that it was the claim of the assessee that he had offered the aforesaid amount of additional P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia income, for the reason that he was made to understand by the survey officials that as he was owning properties and there was evidence of cash payments for purchase of properties by him, which on account of his failure to comply with the statutory obligation of maintaining the books of accounts for the year under consideration viz. A.Y 2009-10 had thus remained unrecorded in the books of account, making him liable to declare a lump sum undisclosed income of Rs. 50 lac.
Be that as it may, the CIT(A) observed that the addition of Rs. 50 lac was made by the A.O merely on the basis of the statement of the assessee which was recorded during the course of the survey action, but thereafter had been retracted. The CIT(A) held a strong conviction that as the A.O had made the addition of Rs 50 lac without making any effort to determine as to what formed the basis of the said undisclosed income, thus the same could not be sustained and was liable to be vacated. It was further observed by the CIT(A) that the observation of the A.O that the assessee had failed to explain the entries in the impounded documents on the basis of cogent evidence was absolutely misconceived, because there was not a single instance of any such document mentioned in the assessment order which had remained unexplained. Rather, it was noticed by the CIT(A) that the entries in the documents impounded in the course of the survey proceedings, to the extent pertaining to the assessee, were duly explained by him with supporting evidence. The CIT(A) observed that only three entries mentioned in the impounded documents belonging to the assessee pertained to the year under consideration. It was observed by the CIT(A) that the aforesaid three entries pertained to the rental income which had been offered by the assessee as his income under the head “income from House Property” in the return of income for the year under consideration. It was further observed by the CIT(A) that neither it was the case of the A.O that there were any other documents belonging to the assessee for the year under consideration, nor that the evidence placed on record by the assessee was either rebutted by him or did not inspire any confidence. The CIT(A) observed that it was clearly a case where the addition of Rs. 50 lac made by the A.O was only P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia backed by a bald statement of the assessee and was bereft of any evidence which could lead to any undisclosed income of the assessee for the year under consideration. The CIT(A) in order to fortify his aforesaid view that an addition made on the basis of a bald statement recorded by the survey officials, without bringing on record any discrepancy evidencing undisclosed income of the assessee cannot be sustained, therein took support of the CBDT Circular No. 286 of 2003, dated 10.03.2003. It was observed by the CIT(A) that the CBDT in its aforesaid Circular No. 286 of 2003, dated 10.08.2003 had advised its field officers not to resort to the practice of obtaining disclosures during the course of survey proceedings and rather focus on collecting evidence. On the same lines, the CBDT had also directed the assessing officers to make additions on the basis of evidence collected during the course of the survey proceedings and to refrain from making additions on the basis of stand alone statements. Further, as regards the non-maintenance of books of accounts by the assessee, it was observed by the CIT(A) that as the assessee was not required to maintain any books of account in terms of Sec. 44AA of the Act, hence no adverse inferences on the said count could have been drawn either by the survey party or by the A.O. On the basis of his aforesaid deliberations the CIT(A) deleted the addition of Rs.50 lac.
The revenue being aggrieved with the deletion of the addition of Rs.50 lac by the CIT(A) has carried the matter in appeal before us. The ld. Departmental Representative (for short „D.R‟) submitted that as the statement of the assessee recorded during the course of the survey proceeding was retracted by him without any basis, hence such retraction was rightly not given any weightage by the A.O. It was the contention of the ld. D.R that as the assessee on being confronted with the impounded material had came forth with a disclosure during the course of the survey proceedings, thus it was not permissible on his part to thereafter whimsically on the basis of an afterthought retract the statement wherein such disclosure was made. In support of his contention that a statement cannot be retracted by an assessee as per his whims and fancies, reliance P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia was placed by the ld D.R on certain judicial pronouncements viz. (i) Sanjeev Agarwal Vs. Income Tax Settlement Commissioner (2015) 56 Taxman.com 214 (All); and (ii) Heeralal Maganlala & Co. Vs. DCIT (2005) 97 TTJ 377 (Mum). The ld. D.R taking support of the judgment of the Hon‟ble High Court of Delhi in the case of CIT-II Vs. Jansampark Advertising & Marketing (P) Ltd. (ITA No. 525 of 2014; dated 11.03.2015) (Del), therein averred that even if the A.O had failed to conduct a proper scrutiny of the impounded material to support the disclosure of Rs. 50 lac which was made by the assessee in the course of the survey proceedings, in that event it was obligatory on the part of the CIT(A) to have conducted proper inquiries and the additions could not have simply been deleted on the ground of lack of inquiry by the A.O. In the backdrop of his aforesaid contentions, it was submitted by the ld. A.R that the CIT(A) without verifying the impounded material or directing the A.O to make such verifications had thus erred in deleting the addition of Rs. 50 lac made by the A.O on the basis of the admission of the assessee
Per contra, the ld. Authorized Representative (for short „A.R‟) for the assessee taking us through the facts of the case submitted that survey proceedings conducted on 07.01.2009 in the case of M/s Jalaram Enterprises, a proprietary concern of the brother of the assessee viz. Shri Haresh Majethia were carried out the entire day and at late hours in the night the statement of the assessee was recorded under Sec. 133A of the Act. It was submitted by the ld. A.R that the disclosure of a lumpsum amount of Rs. 50 lac was obtained from the assessee during the late hours in the night. It was submitted by the ld. A.R that the aforesaid surrender was made at the behest of the survey officials who had made the assessee to understand that as he was owning properties and there was evidence of cash payments for purchase of property, which on account of his failure to comply with the statutory obligation of maintaining the books of account for the year under consideration viz. A.Y 2009-10, had thus remained unrecorded in the books of account, making him liable to declare a lump sum undisclosed income of Rs. 50 lac. It was the contention of the ld. A.R P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia that the assessee after perusing the impounded material realised that the survey party had misled him about the correct position of law, as in the absence of any business income, he was under no statutory obligation of maintaining any books of accounts. Further, the assessee realized that neither any property was purchased by him during the year under consideration nor any evidence of any cash payment made by him for purchase of any property was shown to him by the survey party. Still further, the assessee in order to prove the source and application of funds and the fact that all his transactions were routed through the bank account, thus got his books of accounts prepared with the help of a Chartered Accountant. It was submitted by the ld. A.R that the assessee realising that the disclosure was wrongly obtained from him, thus within a short period of 2 days of making the disclosure statement, had vide his letter dated 10.01.2009 filed with the Investigation wing of the department retracted from the said statement. The ld. A.R averred that the A.O had made the addition of Rs. 50 lac in the hands of the assessee without supporting the same with any specific entries or material evidencing any undisclosed income of the assessee for the year under consideration. It was the contention of the ld. A.R that a confession made by the assessee during the survey proceedings cannot be taken as a conclusive evidence, and it is open to the assessee to establish that the disclosure made was not true and correct. The ld. A.R submitted that the CIT(A) duly appreciating the fact that the addition of Rs.50 lac was made by the A.O in thin air without supporting the same on the basis of any material or evidence had thus rightly concluded that the same could not be sustained and was liable to be vacated. The ld. A.R taking us through the observations of the CIT(A) submitted, that he had rightly observed that in the impounded document viz. Annexure A7 there were only three entries relating to the assessee, which pertained to the rental income which had been offered by the assessee in his return of income for the year under consideration under the head “Income From House Property”. The ld. A.R in the backdrop of her aforesaid contentions averred that as the CIT(A) appreciating the facts of the case in the right perspective had rightly deleted the addition of Rs. 50 lac, P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia thus the appeal of the revenue did not merit acceptance and was liable to be dismissed.
We have heard the authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record. We find that it remains as a matter of an admitted fact that the assessee had during the course of the survey proceedings conducted at the premises of M/s Jalaram Enterprises, a proprietary concern of his brother Shri. Harish Majethia, therein made a disclosure of Rs.50 lac for the year under consideration viz. A.Y 2009-10. However, it is a matter of record that the assessee had thereafter within a short period of two days retracted his aforesaid statement, vide a letter dated 10.01.2009 filed with the investigation wing of the department. It is the claim of the assessee that during the course of the survey proceedings he was misled about the correct position of law, and despite remaining under no statutory obligation for maintaining any books of account in the absence of any business income, was wrongly made to understand by the survey officials that by not maintaining the books of account his investments/cash payments made in respect of properties were to be characterised as unrecorded, therein leading to an undisclosed income of Rs. 50 lac in his hands. It is the case of the assessee that the survey officials had as a matter of fact by misleading him, therein made him cough up a lump sum disclosure of Rs. 50 lac. However, as claimed by the assessee, on realising that he was misled about the correct position of law and on such wrong premises was influenced to make a disclosure of additional income, thus immediately within a period of two days had retracted from his statement which was recorded during the course of survey proceeding. We find that as emerges from the orders of the lower authorities, the assessee in order to fortify his claim that all his transactions were routed through bank account and the source and application of funds was clearly proved, had with the assistance of a chartered accountant got his books of accounts prepared.
P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia 10. Be that as it may, we are of the considered view that a standalone statement of the assessee recorded during the course of the survey proceedings, therein surrendering certain amount of income, cannot be taken as a conclusive piece of evidence for making of additions in the hands of the assessee. We find that the disclosure of a lump sum amount of Rs. 50 lac was made by the assessee, for the reason that he was made to understand by the survey officials that by not maintaining the books of account his investments/cash payments made in respect of properties were to be characterised as unrecorded, therein leading to an undisclosed income of Rs. 50 lac in his hands. We are of the considered view that the income of an assessee has to be determined not as per the unsubstantiated statements recorded/obtained during the course of the survey proceedings, but rather are to be determined as per the provisions of the Income Tax Act. Now, in the case before us, though admittedly it is a fact that the assessee had surrendered an amount of Rs. 50 lac during the course of the survey proceeding, but then, as the assessee had resiled from his said statement, which having been made within a short period of two days can by no means be characterised as an afterthought on his part, thus a very heavy onus was cast upon the A.O to relate the disclosure of additional income made by the assessee with „material‟ evidencing undisclosed income of the assessee for the year under consideration. However, we are afraid that no efforts were either made by the survey party or by the A.O to determine as to what this amount of undisclosed income of Rs. 50 lac initially offered by the assessee was made up of. Interestingly, the A.O had attempted to justify the addition of Rs. 50 lac for the reason that the assessee had failed to explain the entries in the impounded documents on the basis of cogent evidence. However, we are unable to persuade ourselves to subscribe to the said claim of the A.O, as there is not a single instance or document which has been mentioned in the assessment order that had remained unexplained by the assessee. Rather, the fact as it so remains is that the contents of the documents impounded in the course of the survey action, to the extent the same pertained to the assessee were duly explained by him with supporting evidence. We find that as observed by the CIT(A) only three entries P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia appearing in the impounded document pertained to the assessee in context of the year under consideration. We find that as observed by the CIT(A), the aforesaid entries pertained to the rental income of the assessee, which had duly been offered by him in his return of income for the year under consideration under the head “Income From House Property”. We are unable to comprehend that now when there is no material justifying the addition of Rs. 50 lac in the hands of the assessee, then how the same was made by the A.O merely on the basis of the standalone unsubstantiated statement of the assessee recorded during the course of the survey action on 07.01.2009, which in itself had been retracted within a short span of two days i.e. on 10.01.2009. We may herein observe that it is neither the case of the A.O that there are some other documents belonging to the assessee for the year under consideration, nor that the explanation of the assessee in respect of the entries pertaining to him in the impounded documents were either rebutted by him or did not inspire any confidence. We may herein observe that not being oblivious of such practices on the part of the survey officials in obtaining disclosures in the thin air and framing of assessments by the assessing officers on the basis of such bald surrender statements, the CBDT had with the intent to curb the same came up with a Circular No.286 of 2003, dated 10.03.2003, wherein the field officials were advised to refrain from obtaining disclosures and rather focus on collecting evidence during the course of survey proceedings. Further, in the said circular the assessing officers were advised to frame the assessments by relying upon the evidence collected in the survey proceeding, rather than relying upon unsubstantiated standalone statements recorded during the course of such proceedings. We are of the considered view that the addition of Rs. 50 lac made by the A.O on the basis of a dumb disclosure made by the assessee in his statement recorded during the course of the survey proceedings, which too was retracted within a period of two days, in the absence of any evidence leading to any undisclosed income of the assessee for the year under consideration, thus, cannot be sustained and had rightly been deleted by the CIT(A). We thus, not finding any infirmity in the very well reasoned order P a g e | ACIT, CC-2 Vs. Shri Liladhar Majethia passed by the CIT(A) in context of the issue under consideration, uphold the same. The Ground of appeal
No. 4 raised by the revenue is dismissed.
11. The appeal of the revenue in respect of the „Ground of appeal No. 4‟, which was the limited issue for adjudication before us is dismissed. Order pronounced in the open court on 07.09.2018.