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Income Tax Appellate Tribunal, “B” BENCH : KOLKATA
Before: Hon’ble Shri S.S.Godara, JM & Hon’ble Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-11, Kolkata [in short the ld CIT(A)] in Appeal No.194/CIT(A)- 11/R-39/14-15/Kol dated 16.03.2015 against the order passed by JCIT, range-39, Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 29.12.2012 for the Assessment Year 2010-11.
The only issue involved in this appeal is as to whether the Ld. CIT(A) was justified in deleting the addition made in the sum of Rs. 60 lacs by the ld. AO based on the
The brief facts of this issue is that the assessee is a partnership firm deriving income from transportation and commission agency. It had filed its return of income for assessment year 2010-11 on 25.09.2010 declaring total income of Rs. 3,15,760/-. There was a survey conducted u/s 133A of the Act on 23.02.2010. During the course of survey, certain documents were impounded as annexures ETS-I, ETS-II and ETS-III. The annexure ETS-I contained 139 pages comprising of general ledgers for the period 01.04.2007 to 31.03.2008 relevant to assessment year 2008-09. The annexure ETS-II contained 122 pages comprising of various invoices of the assessee firm pertaining to financial years 2006-07, 2007-08 and 2008-09. There were some documents pursuant to trade related sundry creditors for the financial year 2009-10 in the other impounded documents which are examined by the ld. AO during the assessment proceedings.
In response to notices u/s 142(1) and 143(2) of the Act, the assessee submitted the copy of the return, tax audit report together with its annexures by disclosing a turnover of Rs. 36.39 crores and net profit of Rs. 34.43 lacs.
During the survey proceedings, the statement of one Shri Ajay Kumar Jain was recorded by the survey team. Shri Ajay Kumar Jain happened to be the brother-in-law of one of the partners Shri Alok Kumar Jain and he stated that whenever the working partner i.e. Shri Alok Kumar Jain is out of station, he looks after day to day business of the firm. In reply to query no. 6 recorded in the statement, Shri Ajay Kumar Jain stated that the transportation expenses debited in the profit and loss account were not entirely genuine and he declared Rs. 60 lacs as bogus expenditure under that head and agreed to offer the same as additional income and also gave three cheques to the survey team as under: 2
3 M/s Eastern Transport Services A.Yr. 2010-11 Cheque No. Date Amount 717703 26.02.2010 Rs. 10 lacs 717704 04.03.2010 Rs. 5 lacs 717705 10.03.2010 Rs. 5 lacs The assessee honoured these cheques, but however claimed refund of Rs. 23,82,006/- while filing the return of income after declaring total income of Rs. 3,15,760/- . The assessee before the ld. AO stated that the firm is represented only by Mr. Alok Kumar Jain and Mr. Nirmal Kumar Samal and both were not present at the time of survey. It was specifically stated that Mr. Ajay Kumar Jain who was present at the time of survey was not authorized to give any statement on behalf of the firm. Accordingly, the assessee firm duly retracted the disclosure given by Mr. Ajay Kumar Jain as unauthorized by the firm. It was pleaded before the ld. AO at the time of assessment proceedings that there was no bogus expenditure and all the entries are duly recorded in the books of accounts which were also supported by proper evidences thereon. The ld. AO however did not agree to the contentions of the assessee and proceeded to make an addition of Rs. 60 lacs based on the statement recorded at the time of survey. The ld. AO also mentioned in his order that the statement was recorded from Mr. Ajay Kumar Jain u/s 131 of the Act and accordingly, in his opinion has got evidentiary value.
Before the Ld. CIT(A) apart from reiterating the aforesaid facts, brought to the notice of the Ld. CIT(A) that no statement was recorded u/s 131 of the Act from Shri Ajay Kumar Jain. On the contrary, the statement was recorded from Shri Ajay Kumar Jain only u/s 133A of the Act which is quite evident from the statement thereon. It was pleaded that the said statement does not have any evidentiary value and in support of which he placed reliance on various judicial decisions. It was also brought to the notice of Ld. CIT(A) that the survey was conducted in the premises of 115, College Street, Ground Floor, Kolkata-700012 and the relevant papers were found there. While this is so, there is no reason for the survey team to approach Shri Ajay Kumar Jain in the 3
4 M/s Eastern Transport Services A.Yr. 2010-11 address of 48A, Park Street, 5th Floor, Kolkata-700016 and record statement from him. It was pleaded that this itself proves that the statement that was recorded from Shri Ajay Kumar Jain was not out of his own free will. The Ld. CIT(A) placed reliance on the CBDT instruction in F. No. 256/2/2003-IT(Inv.) dated 10.03.2003 wherein the board has specifically instructed the survey officers and search officers not to record any confession statement from the assessee. The Ld. CIT(A) observed that: “In the case of the assessee, the action u/s. 133A of the Act was correctly taken up at the address of the Firm at 115, College Street, Kolkata - 700 012 and some papers/books were collected by the A.O. from there. However based on a statement by one Sri Subhankar Dey, the A.O. conducted another survey' at the premises No.47A, Park Street, Kolkata-700 016 believing that the books of account of the assessee are kept there. This action of the A.O. is disputed. As per the Explanation to Section 133A.(1) of the Act, a place/where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which-the-person-carrying on the business or profession states that any of his books of account or other document or any part of his / her stock or other valuable article or thing relating to his business are or is kept. Logically the above declaration should come from the person carrying on his business or profession otherwise the survey action can be held as bad in law. This has been held so in the case of U.K. Mohapatra & Co. v. ITO (2009) 308 ITR 133 (Ori.) and it/has been affirmed by the Supreme Court in the case of ITO v. U.K. Mohapatra & Co. (2010) 225 CTR 131 (S.C.). Further the result of the Survey at 47A, Park Street, Kolkata-16 revealed that there were no books of account or other document of the assessee Firm available at that premises. In such a situation even the reliability of the statement becomes presumptive. It is also seen that Sri Ajay Kumar Jain is not an employee or even a Partner of the Firm. His status is that of a friend who chips in when the Partners are away from business. In the case of CIT v. S. Khadar Khan Son (2008) 300 ITR 157 (Mad) it was held that the statement obtained U/s.133A of the Act would not automatically bind the assessee/or it does not have any evidentiary value. This decision of the High Court has since been confirmed by the Supreme Court in this case of CIT v. S. Khader Khan son (2012) 254 CTR 228(SC.). Thus even if the statement recorded during the course of the survey is not of any evidentiary value, it can be used to 'support' the findings of the survey. But in the instant case there are no documents or details with the A.O. suggesting any evasion of tax. The sole argument of the A.O. is that Sri Ajay Kumar Jain had been entrusted with signed blank cheques by the Partners in case of any need and that Sri Ajay Kumar Jain 4
5 M/s Eastern Transport Services A.Yr. 2010-11 had given three cheques to the survey-team totaling Rs.20,00,000/- as tax on the surrendered sum of Rs.60 lakhs. Further the cheques were deposited only on 01.03.2010, 09.032010 & 15.03.2010 and the assessee did not stop the payments and only retracted the surrender by filing of return of income on 25.09.2010. These are good arguments but they cannot go beyond the law laid down by the Supreme Court in the two cases noted above. The A.O. cannot rely on the statement of a third party to fix tax liability on the assessee without pointing out any mistake in the accounts. Further from the date of survey on 23.02.2010 to the date of passing of the assessment order on 29.12.2012, the A.O. could not point out any deficiency in the assessee's books of account and no enquiries were got made indicating any concealment. The A.O. had verified the impounded documents obtained from 115 College Street, Kolkata and had not found any discrepancy in them. In view of the above, it is not possible to hold that the addition of Rs.60,00,000/- was made as per law. The addition is, therefore deleted. All the grounds of appeal of the assessee are allowed.”
Aggrieved the revenue is in appeal before us.
The ld. DR relied on the order of the ld. AO. He stated that the statement was recorded u/s 131(1) of the act, whereas the case law relied upon by the Ld. CIT(A) on CIT vs. S. Khader Khan Sons reported in 300 ITR 157 (Mad) were rendered in the context of recording statement under 133A of the Act which was held by the Hon’ble Madras High Court as not having any evidentiary value. With this argument the ld. DR tried to distinguish the case law relied upon by the Ld. CIT(A) in his order and accordingly, vehemently supported the order of the ld. AO.
We have heard rival submissions. We find from pages 6 to 8 of the paper book filed by the authorized representative of the assessee that the statement of Shri Ajay Kumar Jain was recorded on the date of survey on 23.02.2010 only u/s 133A of the Act. Hence, we are inclined to accept the argument of the ld. AR that the ld. AO had factually erred by stating the statement has been recorded u/s 131 of the Act thereby contemplating to give evidentiary value for the same. It is not in dispute that barring the statement from 5
6 M/s Eastern Transport Services A.Yr. 2010-11 Shri Ajay Kumar Jain, no other corroborative evidences were found by the survey team or by the assessing officer at the time of assessment proceedings by pointing out certain deficiencies from books of accounts of the assessee to support the disclosure made in the sum of Rs. 60 lacs at the time of survey. In view of this, we find that the Ld. CIT(A) had rightly placed reliance on various decisions which has been elaborated in his order and reproduced hereinabove. In our considered opinion, the order of the Ld. CIT(A) does not call for any interference. Accordingly, grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 04.07.2018