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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: MS. MADHUMITA ROY & SHRI B.M. BIYANI
Per B.M. Biyani, A.M.:
Feeling aggrieved by appeal-order dated 27.08.2019passed by learned Commissioner of Income-Tax (Appeals)-1, Bhopal[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 30.12.2016 passed by learned ITO, Ward-2(1), Bhopal[“Ld. AO”] u/s 143(3) of Income-tax Act, 1961 [“the Act”] for Assessment-Year[“AY”] 2014-15, the assessee has filed this appeal on following grounds:
“1. That under the circumstances, the learned CIT (Appeals) erred in not considering the fact that the assessment order passed on the basis of surrender made during the course of survey by making huge addition of Rs.3,85,09,545/- is unjust, unfair and bad in law as the same was made
M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 arbitrarily, without any concrete basis, imaginary and without quantifying the figures properly and hence, liable to be quashed.
That under the circumstances, the learned CIT (Appeals) erred in confirming the addition of Rs.1,10,00,000/- which includes excess stock of finished goods Rs.12,58,500/-, excess stock of scrap Rs.66,74,844/- and excess stock of coal Rs.30,00,000/- (rounded off to Rs.1,10,00,000) being difference in stock as per books of account and as found during the course of survey was made arbitrarily, without any concrete basis and without considering the fact that the list prepared at the time of survey was prepared hurrily and without actual measurement of stock.
That under the circumstances, the learned CIT (Appeals) erred in confirming the addition of Rs.1,50,OO,OOO/- which was made due to difference in investment in plant &machinery as per books and as per list prepared at the time of survey without considering the explanation offered by the assessee and without considering the fact that the assessee has disclosed all the investment in plant &machinery in its books of account and nothing is undisclosed as stated in the assessment order. The learned CIT (Appeals) also erred in not giving the finding on the objection that the basis of figure adopted in the list of plant &machinery prepared during the course of survey was not given by the AO.
That under the circumstances, the learned CIT (Appeals) erred in confirming the addition of Rs. 9,OO,OOO/- being made as unexplained expenditure on account of labour expenses without considering the explanation offered by the assessee and without considering the fact that the entire expenditure on this account is fully vouched and incurred only for manufacturing process and thus, no disallowance should be made under this head.
That under the circumstances, the learned CIT (A) erred in confirming the addition of Rs. 30,OO,OOO/- made on account of other miscellaneous discrepancies as the same was made without identifying any expenditure which is of undisclosed nature.
That under the circumstances, the learned CIT (A) erred in confirming the
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 addition of Rs.86,09,545/- made on account of unexplained sundry creditors after deducting the sundry creditors as disclosed in the return Rs.1,14,90,455/- (Income disclosed by the assessee on account of sundry creditors written off) as the same was made without considering the fact that no such undisclosed payment was made by the assessee to the sundry creditors.
That the appellant craves, leave to add, to urge, to alter or to amend any of the grounds of appeal on or before the date of hearing.”
Heard the learned Representatives of both sides at length and case- records perused.
Briefly stated the facts are such that the assessee-company is engaged in the business of steel manufacturing industry. During current-year, a survey u/s 133A was conducted by revenue-authorities on 21.01.2014 wherein the books of account, stocks, plant and machinery were verified; based thereon the authorities ascertained discrepancies indicating undisclosed income of assessee as detailed below:
Item Rs. Excess stock of finished goods 12,58,500 Excess stock of scrap 66,74,844 Excess stock of coal 30,00,000 Total excess stock 1,09,33,344 R/o excess stock (A) 1,10,00,000 Investment in Plant and machinery 1,50,00,000 Bogus wages payable 9,00,000 Misc. discrepancies 30,00,000 Bogus sundry creditors 1,98,00,000 Total (B) 3,87,00,000
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 Total (A + B) 4,97,00,000 R/o total (A + B) 5,00,00,000
During survey, the statements of Shri Neeraj Goel (It is wrongly mentioned in assessment-order that the statements of Shri Narendra Kumar Goyalwere recorded), director of assessee-company, were also recorded wherein he surrendered an undisclosed income of Rs. 5 crore and offered to disclose this income in the return of assessee-company. However, while filing return of income, the assessee-companydeclared an additional income of Rs. 1,14,90,455/- only on account of bogus sundry creditors (out of Rs. 1,98,00,000/-mentioned in the above table) and did not declare the full income of Rs. 5 Crore as surrendered.
During assessment-proceeding, Ld. AO found the short-disclosure of Rs. 3,85,09,545/- (Rs. 5,00,00,000 surrendered during survey – Rs. 1,14,90,455 declared in the return) and confronted the assessee on this aspect, in response to which the assessee made following submission which is noted by Ld. AO in Para No. 6 of the assessment-order and reproduced below for a quick reference:
"Madam, our mental status at the time of survey was not well and proper and hence statement was given under pressure without considering the fact and figure tally with the books of accounts and without thinking of consequence of such surrender. Thereafter, at the time of finalization of books of accounts out of the above surrender I have found that some sundry creditors which appeared in our books of accounts are not traceable and I was notsure whether payment made in cash and hence the same was written off of Rs. 1,14.90,455.89 in the audited profit and loss account and duly shown in the return filed in A.Y. 2014-15. The copy of accounts of sundry creditors whom balances written off during the year is enclosed herewith. In the other heads ofsurrender there is no discrepancy noted during the finalization account and hence not credited in profit and loss account during the course of finalization of accounts. Further. it is submitted that our company has maintained regular and proper books of accounts which 'are audited u/s 44AB of the income tax act and also under the companies act and auditor has also not pointed out any discrepancies in the regular books of accounts and hence, you are requested not to added balance surrender in the total income of the company. The amount surrendered at the time of survey however after surrender of Rs. 1,14,90,455.89 regarding sundry creditors balance amount remains of Rs.
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 38509544 and it is requested that the same may not be added to the total income as there is no discrepancies in our books.” 6. However, these submissions could not satisfy the Ld. AO, who made an addition of Rs. 3,85,09,545/- by observing and holding thus in the assessment-order:
“The above submissions of the assessee are not acceptable due to the following reasons:
1.The statement of Shri Narendera Kumar Goyal was recorded on oath during the course of survey. In answer to Q No.11 to Q no.17, the director admitted additional income to the tune of Rs.5 crore for A.Y.2014-15.
The relevant portion of statement recorded of Shri Narendra Kumar Goyal is as under:
��न 11- सव� क� कार�वाई के दौरान मंडीद�प �ट�ल यू�नट क� ��ैप, इंगॉ%स और कोल क� इंव()� बनाई गई । भौ�तक स.यापन म( यह पाया यगा 0क इंगॉ%स और ��ैप का बुस ए3सेस �टॉक लगभग 79.33 लाख का है जो आपके �टॉक रिज�टर से भी अ=धक है । इसी �कार इस ?�माइसेस म( कोल का �टॉक लगभग 300 टन पाया गया, जो आपके खातA मे दज� नह�ं है । इसक� वैBयू लगभग 30 लाख Cपये आती है । कृपया �पEट�करण द( ।
उHर - ��ैप, इंगॉ%स और कोल के भौ�तक स.यापन म( लगभग 1.10 करोड़ का जो ए3सेस �टॉक आया है, कृपा करके काकडा �ट�ल �ाइवेट JलJमटेड म( ए3सेस �टॉक माना जाये एवं इस पर जो भी करारोपण आयेगा वह मK अदा करने के Jलए तैयार हूँ । �ाथ�ना है 0क इस पर �ौJस3यूशन और पेनाBट� जैसी काय�वाह� न क� जाये ।
��न 12- चूं0क आपके बु3स ऑफ अकाउंट, 15 सी, गो?वंदपुरा मK है । इसJलए कृपया अगले ��न का जवाब गो?वंदपुरा के ?�माइसेस म( बु3स ऑफ अकाउंट के वेTर0फकेशन के साथ उपलUध कराये ।
उHर- कृपया मK गो?वंदपुरा म( इसका जवाब देने के Jलए तैयार हूँ ।
��न 13- मK आपको काकडा �ट�ल �ाईवेट JलJमटेड का वेजेस पेयेबल लेजर अकाउंट जो 0क 10.05.2013 से 10.01.2014 तक का है । इस लेजर के मुताWबक 9 लाख Cपये वेजेस
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 पेयेबल है । कृपया बताय( 0क वेजेस पेयेबल अभी तक 3यो पेयेबल Xदखाई जा रह� है । बताये 0क 3या इन वेजेस का अभी तक भुगतान हुआ है या नह� ॽ
उHर- इन वेजेस पेयबल का भुगतान नकद म( 0कया जा चुका है और व�तुतः वत�मान म( कोई वेजेस पेयेबल नह�ं है । अतः इसे मK 9 लाख को वत�मान ?वHीय वष� म( अघो?षत आय के Cप म( �वीकार करता हूँ एवं इस पर करारोपण के Jलए तैयार हूँ ।
��न 14- कांकडा �ट�ल �ाइवेट JलJमटेड के बु3स ऑफ अकाउंट म( हूज सं]ी �ेडीटस� Xदखाई Xदये गये है । इसम( ^यादातर �े_डटस� ?वगत वष` या पूव� के वष` के है । कृपया इस संबंध म( �पEट�करण द�िजये ।
उHर- कृपया इसका �पEट�करण देने के Jलए मुझे आधे घंटे का समय Xदया जाये ।
(�टेटम(ट आधा घंटा के प�चात पुनः �ारंभ)
(पुनः �ारंभ)
उHर- मKने अपने बु3स ऑफ अकाउंट का एdजाJमनेशन 0कया । मK आपको कुछ सं]ी �े_डटस� का Jल�ट दे रहा हूँ िजसका भुगता करंट ईयर मे हो चुका है ले0कन बु3स ऑफ अकाउंट म( दज� नह�ं 0कया गया है । टोटल सं]ी �े_डटस� लगभग 1.98 करोड़ के सं]ी �े_डटस� िजनका भुगतान कर(ट ईयस� म( 0कया जा चुका है, ले0कन बु3स म( दज� नह�ं है, �वेgछा पूव�क काकड़ा �ट�ल �ाइवेट JलJमटेड म( अघो?षत Cप से 0कए गए भुगतान के Cप म( घो?षत कर रहा हूँ ।
��न 15- आपके बु3स ऑफ अकाउंट मे कुछ ?वसंग�तयां पाई गई है जैसे सं]ी �े_डटस� का भुगतान दज� नह�ं होने, लेबर वाऊचर का भुगतान दज� नह�ं होना, कृपया �पEट�करण द�िजए 0क आपक� इसके अलावा क� बु3स ऑफ अकाउंट म( ?वसंग�तयां हK, िजस पर आप अपना �पEट�कर देना चाहते है ।
उHर- जी हाँ, इन ?वसंग�तयA के अलावा क� ?वसंग�तयां खातA म( दज� हो सकती है िजनका ?ववरण ��तुत कर दूंगा । यह ?वसंग�तयां लगभग 28-30 लाख क� होनी चाXहए । इस पर मK �वेgछा से करारोपण के Jलए तैयार हूँ । आपसे �नवेदन है 0क लगभग 28 से 30 लाख iपये अjय मदA के Jलए काकड़ा �ट�ल क� अघो?षत/भुगतान/�नवेश के संबंध म( करारोपण माना जाये।
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 ��न 16- काकड़ा �ट�ल �ाइवेट JलJमटेड क� गो?वंदपुरा एवं मंडीद�प म( सव�mण काय�वाह� के दौरान यह पाया गया 0क nलांट एoड मशीनर� क� इंव()� बनाई गई एवं बु3स ऑफ अकाउंट मे इसका Jमलान 0कया गया और यह पाया गया 0क लगभग iपये i. 1.50 करोड का �नवेश आपके बह� खातA म( दज� नह�ं है । कृपया �पEट�करण द�िजए ।
उHर- आपके एवं आपक� ट�म pवारा 0कये गये भौ�तक स.यापन और काकड़ा �ट�ल �ाइवेट JलJमटेड का बु3स ऑफ अकाउंट का मेरे pवारा अवलोकन 0कया गया । इससे म( सहमत हूँ 0क लगभग iपये 1.50 करोड Cपये का nलांट एoड मशीनर� एवं 0फ3�ड असे%स म( 0कया गया �नवेश बु3स ऑफ अकाउंट म( दज� नह�ं है । इसे मK �वेgछापूव�क कर(ट फाइन(Jसयल ईयर म( काकड़ा �ट�ल �ाइवेट JलJमटेड म( अघो?षत Cप से 0कये गये �नवेश के Cप म( �वीकार करता हूँ एवं करारोपण के Jलए तैयार हूँ ।
��न 17- इसके अलावा भी 3या आप कुछ कहना चाहते हैॽ
उHर – मK यह� कहना चाहता हूँ 0क सव�mण क� काय�वाह� शां�तपूव�क एवं सहयोगा.मक रवैये के साथ क� गई है । काकड़ा �ट�ल �ाइवेट म( जो भी ?वसंग�तयां पायी गई हK उसे मKने काकड़ा �ट�ल �ाइवेट JलJमटेड क� अघो?षत आय �नवेश के Cप म( �वीकार 0कया है । यह राJश लगभग 5 करोड क� होती है । इस पर चालू ?वHीय वष� म( जो भी करारोपण होता है उसे मK �वेgछापूव�क देने को तैयार हूँ ।
Thus, from the above statement recorded during the Course of survey it is seen that the assessee has made the disclosure to the tune of Rs. 5 crores as under. Excess Stock 1,10,00,000/-. Investment in Plant &Machinery 1,50,00,000/. Bogus Wages Payable 9,00,000/- Other miscellaneous discrepancies 30,00,000/- Bogus sundry creditors 1,98,00,000/_ 7. The assessee in his letter dated 26.12.2016 submitted that the books of account of the company are audited and the auditor has not pointed out any discrepancies in the regular books of account and hence request is made that only an amount of Rs. 1,14,90,455/- on account of sundry creditors may be added to the total income. The confessional statement made by the director is binding on the assessee as the retraction has not been made within reasonable time with sufficient evidences by the assessee. Further it is not the case that the assessee had surrendered the additional income of Rs. 5 crores under coercion, threat or undue influence. The reliance is placed on the decision of ACIT Vs Hukum Chand Jail (2010) 191 Taxman 319 (Chhattisgarh).
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 8. Further, the assessee has not been able to demonstrate the compelling circumstances which had put the Director under mental tension during the Course of survey. It is crystal clear that the Director had surrendered only at the instance of discrepancies earthed during survey operation. The Director by making surrender during survey, has induced the survey team/Assessing officer to abstain from collecting incriminating evidences against the assessee. Hence the assessee cannot be allowed to enjoy the benefit of his act surrender and subsequent retraction made during the course of hearing on 26.12.2016. 9. Reliance is placed on recent decision of Deep Colonisers Vs Dy, CIT, Circle-1(2), Bhopal, ITA No. 4 70/Ind/2013. In this case, the survey operation u/s 133A was conducted on 22/06/2007 wherein some loose papers documents and hooks of account were found and seized. A register containing entries regarding extra work done on the plot was found and seized at the time survey. During the course of survey the partner surrendered an amount of Rs. 20 lakhs on account of extra work done. Further, for various irregularities the amount of Rs. 20 lakhs Were surrendered as undisclosed income. The assessee filed the return on 13/09/2008 declaring income of Rs. 36,176/-. However, the assessee did not disclosed additional income admitted during the Course of survey. In light of abo YO facts the A. O. made the addition to the tune of Rs. 140 lakhs to the total income of the assessee relying on the judgement of ACIT Vs Hukum Chand Jail (2010) 191 Taxman 319 (Chhattisgarh). TheLd. CIT( A) confirmed the addition made by the Assessing Officer by relying on the above judgement. The assessee preferred an appeal before Hon' ble I.T.A.T. Indore bench, Indore. The Han 'ble ITA T has dismissed the appeal of the assessee. The relevant Portion of judgement is as under:-
"In the light of above, discussion we are of the considered opinion statement made voluntarily during survey could form basis of addition unless proved otherwise. In view of these fact and circumstances, we are of the considered opinion that by making surrender during survey, the assessee did induce the survey team to abstain from further collecting incriminating evidences against the assessee therefore, the assessee cannot be allowed to enjoy the benefit of his act of surrender by not offering the same for taxation. in view of these facts and circumstances, respectfully following the above judicial pronouncements and statement of partner of the assessee, recorded during the course of survey and specific admission of undisclosed income by the Assessee’s,we upheld the finding of the lower authorities in making addition on account of surrender made during survey which was not retracted. accordingly, this ground of appeal is dismissed."
In view of these facts the additional income of Rs. 3,85,09,545/- {5,00,00,000(Income disclosed by the assessee) - Rs.1,14,90,455/- (Income disclosed by the assessee on account of sundry creditors written off)} is taxed in the hands of the assessee.”
Being aggrieved by action of Ld. AO, the assessee carried matter in first-appeal before Ld. CIT(A).
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 8. During first-appeal, the assessee made a lengthy submission running over 23 pages to Ld. CIT(A) which is noted in Para No. 4 of the appeal-order, we do not reproduce the same for the sake of brevity. Though the assessee made detailed submissions but on the basis of certain judicial rulings and on the strength of statement given by Shri Neeraj Goyal during the course of survey, the Ld. CIT(A) was of the view that the assessee should have disclosed full income of Rs. 5 Crore.Accordingly, none of the submissions made by assessee impressed the Ld. CIT(A), who upheld the addition made by Ld. AO by observing and holding thus:
“6. Ground No. 1:- Through this ground of appeal, the appellant has challenged the addition ofRs. 3,85,09,545/-. The A.O. made the addition on the ground that during the course of survey u/s 133A on 21.01.2014, the following discrepancies were found:-
Excess stock 1,10,00,000 Investment in plant and machinery 1,50,00,000 Bogus wages payable 9,00,000 Other miscellaneous discrepancies 30,00,000 Bogus sundry creditors 1,98,00,000 Total (Rs.) 4,97,00,000
The statement was recorded during the course of survey and the appellant has made the disclosure to the tune of Rs.5,00,00,000/ -. In view of above facts the additional income of Rs.3,85,09,545/- - {Rs.50000000 (income disclosed by the assessee) - Rs. 1,14,90,455/- (Income disclosed by the assessee on account of sundry creditors written off)} has been added in the hands of the appellant. The appellant while filing the return of income has disclosed the income of Rs.1,14,90,455/- and retracted from the disclosure by an amount of Rs.3,85,09,545/-. As regards to the evidentiary value of the disclosure statement, Sections 17 to 31 of the Indian Evidence Act, 1872 deal with admission. As defined in section 17, it is a "statement, (oral or documentary or contained in electronic form) which suggests any inference as to any fact in issue or relevant fact, and which is made by any of the person, and under the circumstances, hereinafter mentioned". The general rule with regard to admission is that the party or their
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 representative says about the matter in dispute or facts relevant thereto which throw light on the issue in dispute or consideration. It is well settled that a party's admission as defined in sections 17 to 20, fulfilling the requirements of s.21, is substantive evidence proprio vigare. An admission, if clearly and unequivocally made, is the best evidence and though not conclusive, shifts the onus on to the maker. Reliance is placed on Thiru Jon v. Returning Officer, A 1977 (SC) 1724. Although, in this case there has been no allegation of coercion, the Courts have gone further and held that the confession need not be ruled out merely because of an allegation of use of coercion. Many statutes make use of such confessional evidence as long as it is proved that it was so obtained by operation or under circumstances which indicate an inference of such operation. The confessions are to be considered as a whole and not in any edited form. In the case of the assessee there has been no allegation of any coercion. Even retracted confession was held to be binding, reference is made to the case of Surjit Singh Chhabra (1997) ISCC 508, 509(SC) wherein petitioner retracted his confession given to the customs officials, yet it was held to be binding. The Indian Law on confession can be understood from the following passage in a decision under criminal law in State of U'P. v. Boota Singh, AIR 1978 SC 1770. "As, however, the confession was a retracted one, it could be acted upon only if substantially corroborated by independent circumstances. It is not necessary that a retracted confession should be corroborated in each material particular; it is sufficient that there is a general corroboration of the important incidents mentioned in the confession". In the instant case the confession was correlated to the material found during the course of Survey. As held by the Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. Thus, it is a clear and settled law that admission by a person is good piece of evidence though not conclusive and the same can be used against the person who makes it. The reason behind this is a person making a statement stops the opposite party from making further investigation. However, the statement is not conclusive and the person giving the statement can retract the same under certain circumstances: (i) The first circumstance is where the statement is not given voluntarily but it was obtained under coercion, threat or undue influence. But the burden is upon the person making the statement to prove that the statement given by him was not voluntary. The assessee can discharge this burden by giving a direct evidence of coercion or threat by the Authorised Officer or by circumstantial evidence in this regard. The time gap between the statement and the retraction of statement would also one of the important points to be
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 taken into account while deciding whether the statement was voluntary or not. (ii) The other circumstance is where the statement was given under the mistaken belief of either fact or law. Here again the burden is upon the person giving the statement to prove that the statement given by him was factually incorrect or was untenable in law. This view is supported by the decision of the Tribunal Bench of Ahmedabad in the case of Manharlal Kasturchand Chokshi v. ACIT [1997] 61 ITD 55 (Ahd.), and also in the case of Hotel Kiran v. A CIT [1971] 82 ITR 453 (Pune). Apart from the above legal lacunae, the appellant's retraction also suffers from other procedural defects. The appellant, being responsible for the functioning of the manufacturing unit, voluntarily gave statement u/s 133A of the Income Tax Act, 1961 on 21.01.2014, which does not indicate any sort of pressure or coercion but alert presence of mind and clarity of thought of the deposing assessee. By this statement, it was categorically and unequivocally stated that the concern was not maintaining proper stock of goods. These facts were within the exclusive knowledge of the appellant, who voluntarily stated the same. Therefore, with these facts in exclusive knowledge domain, once disclosed voluntarily in full consciousness, were binding on the assessee, as the contrary could not be proved. Further, the Hon'ble ITAT, Pune Bench, in the case of Chander Mohan Mehta v. ACIT(Inv.) [1999] 65 TTJ (Pune) 327, has come to the conclusion that seized documents along with the statement recorded under section 133A constituted valid piece of evidence, which could be used in assessing undisclosed income. However, the two taken together have to be read as a whole. In the instant case, theassessee hasclearly linked the unaccounted stock of concern to undisclosed income in statement u/section 133A of the Income Tax Act, 1961 and hence, such statement is binding on the assessee. Subsequently, the return filed, without showing the full disclosure made during the course of survey. This is the first time the appellant has retracted from his statement given during the course of survey on 21.01.2014, after a gap of nearly two years and two months. These claims are baseless as no efforts were made by the assessee to inform of any such stance during post survey inquiries. This shows that the assessee is taking a plea to get away from his voluntary statement, as an after-thought. Claims have to be discarded as the assessee has not produced any evidence in that behalf. Once the statement of the assessee is voluntary and there has been no pressure, the same is binding on the assessee. In the case of Council of Institute of Chartered Accountants of India vs. Mukesh R. Shah (2004) 186 CTR (Guj) 579, the High Court of Gujarat has held that "a retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made at the earliest point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction. That apart, for a retraction to be effective so as to dislodge the admission made earlier in point of time, the retraction has to be supported by contemporaneous evidence and the onus is on the person making such admission and retraction." Thus the legal position about the assessee's
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 belated retraction is clear that it is an after-thought. Thus, from the above analysis it emerges that: i. The retraction was made after a period of two years and two months; ii. It was never communicated to the Departmental authorities, merely not disclosed with the return of income; iii. From record it is impossible to hold that any threat or coercion has been exerted during the confession statement of the assessee. iv. Irrespective of the form or validity of the voluntary disclosure statement or of the deposition taken from the assessee on 21.01.2014, the evidence of testimony cannot be wiped out and does not become non-existent and this evidence can well be utilised to frame the assessment on that basis. In view of the above position, the appellant's unsuccessful attempt to retract from the disclosure is untenable being an afterthought and is rejected. Therefore, the addition made by the AO amounting to Rs.3,85,09 ,545 / - is Confirmed. Therefore, this ground of appeal is Dismissed.” 9. Now, the assessee has come in this appeal before us assailing the orders of lower authorities.
Ld. AR appearing on behalf of assessee argued at length referring to the orders of lower authorities, the documents placed in a Paper-Book and a Written-Synopsis filed by him. He critically analysed line by line the orders of lower authorities as re-produced above and strongly contested that a bare perusal of the orders of both of lower authorities make it very clear that the addition has been made / confirmed merely on the basis of confessional- statement of Shri Neeraj Goyal, one of the directors of assessee and that too, without any evidence, direct or corroborative, found by authorities. Ld. AR submitted that the CBDT has repeatedly said in its Circulars that no confessional-statement shall be obtained, therefore any addition made on the basis of confessional-statement is illegal and unsustainable:
Circular F.No. 286/2/2003-IT(Inv.) dated 10.03.2003: Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances,on confessions during
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search & seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. Circular F.No. 286/98/2013-IT(Inv. II) dated 18.12.2014:
Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT. 11. Ld. AR also submitted that there are innumerable decisions of Hon’ble Courts where it has been categorically held that the statements recorded
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 during survey do not have any evidentiary value and cannot be a basis of addition. Ld. AR has submitted an analysis of several decisions in his Written-Synposis holding this proposition which we re-produce below:
Pullangode Rubber Held that Produce Co. Ltd. 91 ITR (a) An admission is an extremely important piece 18 (SC) of evidence but it cannot be said that it is conclusive. b). Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. 2. CIT vs. Chandrakumar Merely on basis of admission that few benami Jethmal Kochar [2015] concerns were being run by assessee, assessee taxmann.com 292 could not be subjected to addition when assessee (Gujarat) retracted from such admission and revenue could not furnish any corroborative evidence in support of such admission 3. CIT vs. Ramanbhai B Held that admission of undisclosed income by Patel (Gujarat high assessee is not conclusive if no evidence is found Court) to support the admission. A retraction, though belated, is valid. 4. CIT vs. Sunil Aggarwal Held that a retracted statement u/s 132(4) would (2015) 64 require some corroborative material for the ld AO taxmann.com to make addition on basis of such statement. 107(Delhi)/ (2016) 237 Taxmann 512 (Delh)/ (2015) 379 ITR 367(Delhi) 5. CIT vs. O. Abdul Razak Initial Burden to show that confession was 350 ITR 71 (Ker) voluntary and not obtained by resorting to coercive means is on the department. 6. TDI Marketing P Ltd. 28 Held that since basis of addition was statement of SOT 215 (Del.) assessee rather than actual investment having been made, provisions of sec 69 were not attracted to such a situation. 7. M. Narayanan & Bros. v. It was held that when assessee had explained his ACIT, SIC, Salem[2011] statement as not correct in context of materials 13 taxmann.com 49 produced, same could not be added to assessee’s (Madras) income. 8. CIT vs Dhingra Metal Held that when assessee had been able to explain Works 196 Taxman 488 discrepancy in stock found during course of
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 (Del.) survey, then addition solely on basis of statement made by partner on behalf of assessee could not be sustained. 9. DCIT v.Narendra Garg & It was held that where assessee retracted from Ashok Garg [2016] 72 disclosure made in statement under section taxmann.com 355 132(4) which was not accepted by revenue, and if (Gujarat) no undisclosed income was found during search, revenue could not make addition on bare suspicion and presumption 10. Basant Bansal v ACIT Held that neither any worthwhile incriminating (2015) 63 taxmann.com material, information, and evidence was 199 (Jaipur Trib.) discovered as a result of impugned multiple search operations nor the additions sustained are based on any such material. The sole basis of additions is the disclosure which we have held to be involuntary. Consequently the additions do not conform to the mandate of sec. 153A. 11. CIT v. Balaji Wire (P) Ltd. Statement made by any third party after the date [2008] 304 ITR of search is of no consequence; assessee has a 393/[2007] 164 Taxman right of its cross-examination. This having not 559 (Delhi), been done the additions cannot be made 12. CIT v.Harjeev Aggarwal A statement recorded u/s. 132(4) can form basis [2016] 70 taxmann.com for a block assessment only if such statement 95 (Delhi) relates to any incriminating evidence of undisclosed income unearthed during search. 13. Vinod Solanki v. UOI It is the burden of the Department that material [2009] ELT 157(SC). brought on record including retracted statement must be substantially corroborated by other independent and cogent evidences. 14. Krishan v. Kurukshetra Admission made in ignorance of supporting University AIR 1976 SC record and legal rights or under duress cannot 376. bind such statement or disclosure. 15. CIT v. Vikas Electronics Whatever be the merits or demerits of (International) (P.) Ltd. statements of ‘assessee, unless they could be [2007] 166 Taxman 137 directly connected with the recovery of any (Delhi) incriminating material during the search, they could not be used against the assessee. 16. CIT Vs. Bhanwar Lal Department should bring on record sufficient Murwatiya evidence before making addition u/s 69 of the 39 TW 214 Income Tax Act, 1961 and the retreated statement cannot be made the sole basis for
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 making addition as it cannot be said to be conclusion. 17. Kalishaben Manharlal Addition on the basis of retracted statement u/s Chokshi Vs. CIT (2008) 132(4) - statement retracted by assessee after 220 CTR (Guj) 138 : two months on the ground that it was recorded (2010) 328 ITR 411 : under coercion and duress cannot be basis of (2008) 174 TAXMAN 466 addition. : (2008) 14 DTR 257
Shree Ganesh Trading Held that the statement recorded u/s. 132(4) Co. v. CIT [2013] without corroborative evidence could not fasten taxmann.com 170 liability (Jharkhand) 19. Smt. Ranjnaben Held that AO could not make addition only on Mansukhlal Shah v. basis of disclosure statement without ACIT [2004] 2 881 corroboration and evidence in support of (RAJKOT) disclosure statement. 20. ACIT V. Jorawar Singh Held that the surrender was under pressure as no M. Rathod such evidence or asset/evidence were found in [2005] 148 Taxman movable or immovable property from the search 35(Ahd.) (MAG.) premises, thus addition is unsustainable. 21. Naresh Kumar Verma vs. Held that addition in respect of job work charges ACIT, Central Circle, merely on basis of statement was not sustainable Patiala as no evidence was found in possession of [2013] 32 taxmann.com assessee to support the admission. 280 (Chandigarh – Trib.) 22. DCIT, Circle 6(1), Held that when the assessee retracted the Ahmedabad vs. statement and no other evidence was on record Pramukh Builders [2008] to show the undisclosed income baring 112 ITD 179 (Ahm.) ™ statement, addition is unsustainable. 23. Arun Kumar Bhansali V. Held that the ld AO should take cognizance of DCIT [2006] 10 SOT 46 such correct income as depicted in books of (Bang.) (URO) accounts as well as seized material and should not adopt figures merely as per admission of assessee. 24 Shree Chand Soni V. Held that where the addition was based on DCIT [2006] 101 TTJ statement alone and no such income was 1028 (Jodh.) disclosed in return filed for the block period but admitted and no incriminating document was found to support the impugned addition, the addition was to be deleted.
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 25. Rajesh Jain V. DCIT Confessional statement should be corroborated [2006] 100 TTJ 929 with some material evidence to show that (Delhi) assessment was just and fair. 26. Jyotichand Bhaichand It was held that no addition can be made merely Saraf & Sons P. Ltd. V. on the basis of statement recorded u/s 132(4) in DCIT [2013] 86 DTR absence of corroborative evidence. (Pune) 289 27. CIT vs S. Ajit Kumar 300 Where no material was found during search in ITR 152 (Mad.) respect of amount allegedly paid by assessee to a builder, material found in course of survey in premises of builder could not be used in block assessment of assessee to make addition 28. Abdul Quyme v CIT An admission or an acquiescence cannot be a (1990) 184 ITR 404 (All) foundation for an assessment. A finding in this regard is a condition precedent and where no such finding is recorded, the action of the authority concerned cannot be upheld. 29. CIT vs Radhe Associates Held that the addition by assessee construction (2013) 37 taxmann.com firm, only on basis of partner’s statement which 336 (Guj.) was later retracted, was not sustainable
CIT vs M.P. Scrap Held that except statement, there was no other Traders (2015) 60 material or corroborative material with Assessing taxmann.com 205 (Guj.) Officer to justify said addition – hence addition is unjustified 12. Then, Ld. AR carried also placed a heavy reliance on Page No. 1 to 8 of his Written-Submission to demonstrate that no evidence/material was available to the survey-team with regard to various items of addition, they have done only a table-exercise in an arbitrary, imaginary and hurried manner and just obtained confessional-statement of the director. It is noteworthy that the assessee has also taken such pleadings strongly before the Ld. CIT(A) as well as in the grounds of appeal raised before us.
With aforesaid submissions, Ld. AR argued that the addition made by lower-authorities are totally illegal as well as baseless, and deserves to be deleted.
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 14. Per contra, the Ld. DR apart from relying on the findings of both of the lower authorities also submitted that the statements given by director of assessee-company have an important value and cannot be brushed aside. Ld. DR further submitted that the sheet of statements does not demonstrate that they were given under any duress or coercion. He further submitted that the assessee has not made any separate retraction, it is only so that the assessee has not disclosed income in the return of income. Hence, according to Ld. DR, the retraction is not acceptable. With these submissions, Ld. DR strongly argued that the orders of lower authorities cannot be said to faulty and no interference is required. Ld. DR prayed to uphold the addition.
We have considered rival contentions of both sides and perused the records placed before us. Before proceeding further, we would like to deal with a primary issue, which is of course a legal aspect, as to whether the revenue-authorities can obtain confessional-statements during survey and whether such statement, if not corroborated by any evidence,can be a basis for addition or not?
We have given a mindful thought and find as under:
(i) In Circular dated 10.03.2003 (supra), the CBDT has categorically stated “Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances,on confessions during the course of search & seizure and survey operations do not serve any useful purpose.It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search & seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income.” Same view was re-iterated again in subsequent Circular dated 18.12.2014 (supra).
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 (ii) In the case of CIT V/s S. Khadar Khan Son (2012) 25 taxmaan.com 413 (SC), Hon’ble Apex Court has dismissed the SLP filed by the Department observing the same to be without any merit which was filed against the judgment of Hon’ble High Court of Madras in the case of CIT V/s S. Khadar Khan Son (2008) 300 ITR 157 (Mad.). The findings of Hon'ble High Court of Madras affirmed by Hon'ble Apex Court which are very much relevant in the instant case of the appellant are reproduced hereunder:
“7. From the foregoing discussion, the following principles can be culled out:-
(i) An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18];
(ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101];
(iii) XXX
(iv) XXX
(v) Finally, the word "may" used in Section 133A(3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself.
For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal.”
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 (iii) Hon'ble jurisdictional High Court of Madhya Pradesh in the case of Commissioner of Income Tax Vs. Digambar Kumar Jain (HUF) (2013) 84 DTR 0365 held thus:
“We have perused the record and found that merely on the basis of statement under Section 133A of the Income Tax Act, which was recorded during the survey, such addition could not have been made. To make such addition, some corroborating evidence against undisclosed income was required, which could not be found by the Assessing Officer. The Assessing Officer had made an addition merely on the basis of a statement recorded during survey under Section 133A of the Income Tax Act. The CIT (A) and the Tribunal had deleted it by holding that merely on the basis of such statement without corroboration, such addition could not be made. Shri Lal learned counsel for the appellant also submitted that these authorities have not recorded any findings that the statement recorded under Section 133A of the Income Tax Act, was unbelievable, but considering the legal position as has been found by the CIT (A) and the Tribunal, the aforesaid contention has no merit. The view is supported by the judgments of various High Courts in (a) CIT Vs. Ms Dhingra Metal Works in ITA No.1111/2010 and (b) CIT vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad), in which it has held thus :- "In the instant case, there was a survey operation conducted under s. 133A in the assessee's premises and a statement was recorded from one of the partners. Assuming there were discrepancies and irregularities in the books of accounts maintained by the assessee, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under s. 133A shall not have any evidentiary value, as rightly held by the CIT(A) and the Tribunal, since such statement was not attached to the provisions of s. 133A. It could not be said solely on the basis of the statement given by one of the partners of the assessee firm that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee. A power to examine a person on oath is specifically conferred on the authorities only under s.132(4) in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas s.133A does not empower any ITO to examine any person on oath. Thus, in contradistinction to the power under s.133A, s.132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the IT Act. On the other hand, whatever statement recorded under s. 133A is not given an evidentiary value. What is more relevant, in the instant case, is that the attention of the CIT(A) and the Tribunal was rightly invited to the circular of the CBDT dt. 10th March, 2003 with regard to the confession of additional income during the course of search and seizure and survey operations.- Pullanquote
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC), Paul Mathews & Sons vs. CIT (2003) 181 CTR (Ker) 207 : (2003) 263 ITR 101 (Ker) and CIT vs. G.K. Senniappan (2006) 203 CTR (Mad) 447 : (2006) 284 ITR 220 (Mad) relied on." In view of the settled law of various High Courts as are referred in the order, we find that there was no error in the order passed by the CIT (A) and the Tribunal. This appeal does not involve any substantial question of law for our consideration. This appeal is accordingly dismissed.” 17. Clearly, therefore, in view of theCBDT Circulars and the judgments of Hon’ble Supreme Court as well as jurisdictional High Court,there can hardly be any dispute that the statement given during the course of survey does not have evidentiary value, unless corroborated by sufficient evidences/materials. That also brings us to conclude that any addition made by revenue-authorities without credible evidence/materials is unlawful and unsustainable.
In the present case, a careful scrutiny of the assessment-order as well as first-appellate order reveals that the lower authorities have not based the addition made/confirmed by them on any evidence/material; they have made/confirmed addition solely by relying upon the statement of director. Needless to mention that in Para No. 8 of the assessment-order, the Ld. AO has gone to mention “The Director by making surrender during survey, has induced the survey team/Assessing Officer to abstain from collecting incriminating evidences against the assessee.” This narration by Ld. AO, initself, speaks everything without saying anything and is clearly against the mandate given by the CBDT in aforesaid Circulars. Therefore, the addition made by Ld. AO is contrary to the CBDT Circulars as well as CIT V/s S. Khadar Khan Son (supra) andCommissioner of Income Tax Vs. Digambar Kumar Jain (HUF) (Supra). Since the lower authorities have not based the addition made/confirmed by them on any kind of evidence/material, nor the learned DR appearing on behalf of revenue could force the same before us during hearing, we are not persuaded to go into the details of same, if any. We are also aware that time and again, it is well-settled that the Revenue has to prove undisclosed income beyond doubt but this is totally absent in
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 the present case. Thus, being enlightened and inspired by the CBDT Circulars and the decisions of judicial forums including those cited hereinabove, we find no merit in the addition of Rs. Rs. 3,85,09,545/- made by revenue-authorities. We, therefore, delete the same. With this, all grounds of this appeal are allowed.
In the result, this appeal of assessee is allowed.
Order pronounced as per Rule 34 of I.T.A.T. Rules, 1963 on 22/12/2022.
Sd/- Sd/-
(MADHUMITA ROY) (B.M. BIYANI) JUDICIAL MEMBER ACCOUNTANT MEMBER Indore िदनांक/Dated : 22.12.2022 Patel/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore
Date of taking dictation 10.12.22 2. Date of typing & draft order placed before the 10.12.22
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M/s Kakda Steel Private Limited ITA No.916/Ind/2019 Assessment year 2014-15 Dictating Member 3. Date on which the approved draft comes to the 10.12.22 Sr. P.S./P.S. 4. Date on which the approved draft is placed before 19.12.22 other Member 5. Date on which the fair order is placed before the Dictating Member for pronouncement 6. Date on which the file goes to the Bench Clerk 7. Date on which the file goes to the Head Clerk 8. Date on which the file goes to the Assistant Registrar for signature on the order 9. Date of dispatch of the Order
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