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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: Shri Shamim Yahya & Shri Ram Lal Negi
Per Shamim Yahya, Accountant Member:
This appeal by the assessee is directed against order of learned CIT(A)- 32, Mumbai, dated 20.01.2016 and pertains to assessment year 2010-11.
The assessee has raised the following grounds of appeal:
“1. The learned C.I.T. (A) has erred in confirming addition of Rs. 27,40,000 made by the learned A.O as unaccounted cash income.
Your appellant respectfully submits that, on facts and in law, the learned C.I.T. (A) should have deleted in toto the said addition of Rs. 27,40,000.
2. The learned C.I.T. (A) has erred in not holding that there is no factual and legal basis to conclude that the appellant had in fact made any unexplained expenditure / investment in furniture to the extent of Rs. 7,50,000.
Your appellant respectfully submits that, on facts and in law, by merely holding that the unexplained expenditure / investment in furniture gets covered as an application of unexplained cash income separately taxed, the learned C.I.T. (A) has erred in not recording categorical finding that no such expenditure / investment was in fact ever made.
Your appellant respectfully submits that, on facts and in law, the learned C.I.T. (A) should have recorded categorical finding that no such expenditure / investment was in fact ever made and based on such categorical finding the learned C.I.T. (A) should have deleted in toto the addition of Rs. 7,50,000 made by the learned A.O.”
Brief facts of the case are as under:
“2.1 'In this case, a survey action u/s 133A was carried out on 16/02/2010 at the business premises of the appellant. During the course of survey action, the appellant has declared a sum of Rs.37.40,000 as additional income over and above the regular income for the FY 2009-10. On perusal of the ROI it was noticed by the AO, that the sum has not been reflected in the income declared by the appellant and hence, the A.O. asked the appellant to furnish an explanation in this regard. In response, the appellant furnished an affidavit dated 29/01/2013 claiming that he had not received any further fees in cash other than those declared in the ROI and that the evidences (receipts) regarding Rs.10,000 unaccounted cash receipts were prepared at the time of survey and he was made to sign these receipts by the survey team. The appellant has further claimed that he had neither paid anything in cash to any teachers nor incurred any unaccounted expenditure on furniture and the declaration of Rs.10,00,000 as unaccounted income in form of unaccounted payment of salary in cash to teachers and Rs.7 to 8 lakhs on account of unaccounted investment in furniture was only at the instance of the survey team.
2.2 As regards the appellant's claim that the statements given by him were out of force was not acceptable to the A.O, as the appellant has signed the declaration that the statements are recorded without any compulsion, coercion or any force. Moreover, the appellant has not produced any evidence in support of the allegation against the survey team. The A.O. noted that the survey team had verified all the documents and accordingly the questions were put to Mr. Rajesh Agashe about receiving cash payments which were not accounted in the books and about non-genuine and unexplained expenditure. From the statements recorded by the survey team and on the basis of the material collected/impounded from the survey premises of the appellant during the course of Survey Action u/s 133A of the Act, the A.O. came to the conclusion that the appellant collected cash from students over and above the cheque payments and that such payments have not been recorded in the books of the appellant. The AO also concluded that the appellant has made substantial payments to teachers which are not recorded in the books of accounts, and that the appellant has also admitted that no salary/bonus register was maintained by him. In the circumstances, the claim of the appellant to retract the statement was rejected by the A.O. relying on the decision in the case of M/s Dhakeshwari Cotton Mills Ltd. Vs. C1T (26 ITR 775, 782 (SC)) and Shri Vasant Lal & Co. Vs. CIT (45 ITR 206, 209 (SC)). Accordingly, the amount of Rs.27,40,000 being additional income in respect of unaccounted cash received from students, a sum of Rs 10,00,000 being unexplained payments to teachers and a sum of Rs 7,50,000 being unexplained investment in furniture & fixtures was added to the income of the appellant.”
Against above order, assessee preferred appeal before the learned CIT(A). Learned CIT(A) also obtained remand report from the Assessing Officer. Considering the asseessee’s submission and Assessing Officers response the learned CIT(A) confirmed the action of the Assessing Officer by observing as under:
5.1.1 The main grievance of the appellant is mentioned by him at sl no 6 in his submissions reproduced above. The appellant states that nothing incriminating was found during the survey, but he was made to sign on 3 receipts of ` 10,000 each which was held as evidence of having received cash from his students over and above the regular fees. The appellant sought the AO to make what he calls ‘independent’ enquiries in the matter. The other substantial grievance is in sl no 12 of his submissions as to on what basis the 3 documents of cash receipts were extrapolated to all 274 students when evidence in respect of only 3 students is claimed to have been unearthed during the survey. The AO in his remand report, has addressed all the 17 points raised by the appellant. The remand report of the AO is equally lenghthy and is therefore not reproduced in toto in this order. I find that during remand proceedings, the AO has categorically stated that the appellant has filed confirmations from 240 students only as against 274 admittedly enrolled by him. The AO has also stated that fees have been received in cash from 149 students and in cheque from 91 students. It is amply clear therefore that a majority of the fees are received in cash and the contention of the appellant of receiving fees is cheque is contradicted as per his own books. The fees received from the balance 34 students remains a mystery till date. I have also perused the statement recorded from the appellant during survey. Therein he has categorically admitted that pages 4 to 6 impounded pertain to cash of Rs 10,000 received from students which are not accounted in his books. During appeal, the appellant has made a serious allegation against the survey party that these documents were prepared during course of survey and he was made to sign on them. This allegation is however unsubstantiated with any evidence whatsoever. The facts on record indicate that the appellant has received cash from 149 students and cheque from only 91 students. There is impounded material to indicate that cash over and above the regular fees has also been received from at least 3 students. As stated earlier, the confirmation of fees received from 34 students is still a mystery. In absence of any malafide on part of the survey team, the contention of the appellant cannot be accepted. I further find that a similar type of addition was made in AY 2009-10 in the case of the appellant. In that year as a result of the same survey, an addition of Rs 1,18,500 was made being the difference of fees declared during survey and those reflected in the books of account. This was confirmed by the CIT(A) and in further appeal in the ITAT, the addition was partly upheld. In its order for AY 2009-10 in the Hon’ble ITAT has held in para 7 that the appellant has no explanation to offer regarding his claim that lesser fees were collected from students. Similar is the case in this year. The appellant would have me believe that the impounded material be given a go by and his allegation against the survey party be believed inspite of no evidence in that regard. The affidavit filed by the appellant before the Assessing Officer is not substantiated with any evidence and is therefore rightly rejected by the Assessing Officer as self serving. I am therefore not inclined to accept the plea of the appellant that no cash over and above the regular accounted fees was received. I therefore, uphold the action of the AO in assessing a sum of Rs 27,40,000 as unaccounted fees received by the appellant.”
As regards the issue of addition of Rs.7,50,000 on account of undisclosed investment in furniture account, the learned CIT(A) deleted the addition by observing as under :
“This is against the AO assessing Rs 7,50,000 as unexplained investment in furniture. Once again I find that there is no material evidence before the AO for making this addition. The AO seems to have relied on the answer in Q 20 of the statement of the appellant. Therein the appellant states that most of the furniture is purchased in FY 2009-10 and the same is sourced from unaccounted cash collected from students. In the circumstances, the source of making investment in furniture is out of the unaccounted cash fees collected which have already been taxed. The same cannot be taxed once again as investment. The AO has taxed the source of income (unaccounted fees) as well as the application being unaccounted investment. This cannot stand as it results in double taxation. I therefore deleted the addition of Rs 7,50,000 made towards unexplained investment in furniture.”
Aggrieved, against above order assessee is in appeal before the ITAT.
We have heard the learned representatives of both the parties and perused the records. Learned counsel of the assessee submitted that this addition has been made on account of a statement on survey extracted from the assessee by coercion. He submitted that there is no incriminating material found during the course of survey. In this regard he placed reliance upon the decision of Hon’ble Apex court in the case of S. Kader Khan.
Per contra, learned Departmental Representative relied upon the orders of authorities below. He submitted that cogent materials were found at the time of survey which lead the assessee to make the admission. Hence he submitted that the subsequent retraction by the assessee cannot be given credence. Hence, he pleaded that the addition be sustained.
Upon careful consideration we note that the Assessing Officer has made the addition by extrapolating Rs. 10,000 as underhand receipt from each student by referring to three hand notes by the assessee where such receipts from three students were mentioned. The assessee's plea is that these notes were extracted by the search party at the time of survey. Furthermore, it is the plea that it cannot be extended to the entire number of students. We note that there is an admission by the assessee at the time of survey. There has been a considerable delay in the retraction if the nondisclosure of admitted income in the return of income is considered a retraction at all. I also note that earlier in assessee's own case ITAT has sustained some addition found on the basis of survey. The Apex court decision in the case of S Kader Khan also mandates that dehors cogent material found on survey addition merely on the basis of a statement on survey cannot be sustained.
Upon careful consideration and overall consideration of the facts of the case in our considered opinion 25% addition out of the total addition made by the Assessing Officer would meet the ends of justice. Learned counsel of the assessee fairly agreed to this proposition.
Accordingly, we modify the order of learned CIT(A) and direct that the addition be restricted to 25% in this case, on this issue.
As regards the addition of ` 7,50,000/- on account of undisclosed investment in furniture, we find that this addition has been made on adhoc basis dehors any cogent materials, hence we set aside the orders of the authorities below and direct that this addition be deleted.
In the result this appeal by the assessee stands partly allowed.
Order pronounced in the open court on this day of 20th March, 2018.