DCIT, CIRCLE - 2, MIDNAPORE, PASCHIM MEDINIPUR vs. M/S. GRAMI AGRO PVT. LTD., PASCHIM MEDINIPUR

आदेश /O R D E R

PER Waseem Ahmed, Accountant Member:-

This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-XXXVI, Kolkata dated 28.01.2010. Assessment was framed by ACIT, Range 1 & 2, Midnapore u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 24.12.2009 for assessment year 2007-08. The grounds raised by the Revenue per its appeal are as under:- “i. The Ld. CIT(A)-XXXVI, Kolkata is erred in deleting the additions of Rs.50,00,000/- made by the AO at the time of assessment u/s. 143(3) towards income from undisclosed sources based on voluntary disclosure of the assessee during the course of survey u/s. 133A on 2.6.03.2007.

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 2 ii. the Ld. CIT(A) is erred in deleting the additions of Rs.9,87,919/- made u/s 40(a)(ia) for non-deduction of tax (TDS) in violation of the provisions of section 194C of the IT Act, 1961. iii. The appellant craves leave to add, alter/or amend any of the grounds of appeal during the course of hearing.

Shri T.K.Chakraborty, Ld. Authorized Representative appeared on behalf of assessee and Md. Ghyas Uddin, Ld. Departmental Representative appeared on behalf of Revenue. 2. First issue raised by Revenue is as regards that L’d CIT(A) erred in deleting the addition made by Assessing Officer on account of undisclosed income found during survey for ₹ 50 lakhs.

There was a survey conducted in assessee’s premises on 26.03.2007 under section 133A of the Act. During the course survey, a statement of assessee was recorded u/s. 133A(3)(i) of the Act whereby a voluntarily disclosure was made for an income of ₹ 50 lakhs. The relevant portion of the statement is reproduced below:- “Q.No. 12. Do you want to disclose any income voluntarily? A. Yes Sir, I would like to disclose an amount of Rs.50,00,0000/- (rupees fifty lakhs) and Sir, this disclosed income also includes not income for this particular year till now, sundry creditors (outstanding liabilities) and other disallowances being the part of trading and P & L a/c Q.No. 13. Please explain the nature and figure of disclosed amount? Ans. Sir, as above. Q.No.14. Do you want to change / alter / add anything to the statement made by you earlier? Ans. No, I am standing on the deposition made above.

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 3 Q. No. 15. You have any problem with the visiting officials during the course of survey operation at your business premises? Ans. No, we have not faced any problem. I offer the statement in sound and good mental, healthy condition without any fear or force from internal or external entities.”

From the above statement the AO observed that the undisclosed income pertains to the incorrect amount of sundry creditors shown in the books of accounts and various inflated expenses claimed in trading and profit & loss account. The assessee has also given a cheque of Rs. 5 lacs towards the payment of advance tax along with the voluntarily disclosure statement. But the assessee did not file its return of income disclosing the aforesaid amount of Rs. 50 lacs as offered to tax in the disclosure statement at the time of survey. However the assessee in support of non-inclusion of the aforesaid amount in its income did not produce its books of account and also not proved the genuineness of sundry creditors and other expenses in spite of various opportunities provided to it. The AO also observed that assessee has withdrawn the voluntary disclosure statement made u/s 133A of the Act after the expiry of 2 years and 9 months and which is just 7 days before the time barring date for passing the assessment order. In the absence of non submission of relevant documents by assessee, AO has confirmed the addition of ₹ 50 lacs and added to the total income of assessee.

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 4 accounts. All the stock registers supported by purchase and sales registers are lying in the custody of AO and no flaw has been reported by the AO on the impounded documents. The alleged ground raised by AO that assessee has failed to produce its books of account is factually incorrect as its books of account are already under the custody of AO. It was also submitted that the Director, Shri Bhabatosh Mandal, Senior citizen of aged 69 years, during the survey operation, was not in proper and sound state of mind as there was prolonged survey operation and long interrogation. He was forced to sign undisclosed income and assessee has brought this fact to the notice of Ld. JCIT, Midnapore by writing letter dated 04.10.2007. The addition of Rs. 50 lacs is not supported by the books of accounts and other relevant records. From the above submission and other records the Ld CIT(A) observed as under:- (a) Various books of account were impounded during the course of survey besides the inventory of cash and stock. , including purchase book vide also register rice and paddy handling register, daily milling account and other miscellaneous papers / bills / dealing orders etc., but the AO did not raise in a single question with regard to the books of account impounded during the survey; (b) From the facts, it was found that Director of the assessee-company appeared before AO on 23.12.2009 in response to show cause notice issued by AO and explained that details of sundry creditors has already been filed; (c) The order-sheet entry also reflected that assessee appeared on 09.04.2009 and field some details. The director of assessee-company appeared on 22.09.2009 and has filed written statement in response to notice issued u/s 142(1) of the Act. Accordingly, L’d CIT(A) finally observed that AO failed to find any incriminating materials to justify the addition of ₹ 50 lakh. There was no basis for the AO to make the addition of ₹ 50 lakh as there was a survey conducted in the business premises of assessee just five days before end of financial year and all the books of account were in the custody of AO. The AO has failed to mention any discrepancy from the documents impounded at the time of survey. The allegation of AO is simply that assessee has retracted from the disclosure statement after expiry of 2 years and 9

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 5 months is factually incorrect. It is because the assessee actually retracted from the disclosure statement made u/s. 133A of the Act at the time of filing of its return on 30.10.2007. L’d CIT(A) accordingly deleted the addition made by AO by observing as under:- “4.7 The ratio of the above cases is squarely applicable in the case of the appellant. A survey action u/s 133A of the Act was conducted at the business premises of the appellant and no discrepancy of cash etc., was found. However, a statement of the MD was recorded where he voluntarily disclosed Rs.50.00 lakhs, towards net income for the current year as well as sundry creditors and other expenses included in trading at P & L a/c. Head-wise bifurcation of disclosure was not specified in relation to statement. Subsequently, the appellant filed the return not admitting the disclosure. During the assessment proceedings, the appellant explained that his all accounts including sundry creditors and expenses debited in the trading and P & L a/c were correct. He further contended that the disclosure was made under stress and cheque for advance tax was given to buy peace of mind. The details requisitioned by the AO were filed by the appellant. The AO was also having the books of accounts in his possession which were impounded on 26/03/2007. However, he failed to point out about any bogus sundry creditors and inflation of expenses debited in trading and P & L a/c. when no incriminating documents, excess stock etc., found, the statement of the appellant cannot be made the sole basis for addition. In order to make an addition on the basis of surrender during search or survey, it is sine qua non that there should be some other material to co- relate the undisclosed income with such statement. In view of the foregoing and keeping reliance on the judicial pronouncements as above, the addition of Rs.50,00,000/- is deleted.”

Being aggrieved by this order of Ld. CIT(A) Revenue is appeal before us. 5. Before us L’d DR submitted that assessee has made disclosure for undisclosed income of ₹ 50 lakhs. The said disclosure was made before Survey Team when the director was fit in his mental condition. The ld. DR drew our attention to the statement made by assessee u/s. 133A in support of his claim. The ld. DR also submitted that assessee has not produced its books of account before the AO to verify the sundry creditors and expenses claimed in its profit and loss a/c. Ld DR further submitted that the claim of assessee was not acceptable in the light of the decision in the case of Navdeep Dhingra v. CIT (2015) 56 taxmann.com 75 (P&H), 232 taxman 425 where it was held as under : “Onus to prove concealment of income lies upon the revenue. Admissions are an integral part of assessments and as they are the best evidence of a fact,

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 6 within the personal knowledge of an assessee may if the admission is voluntary and not extracted by coercion or force, be read against an assessee. The relevance of an admission admits to another exception namely if the admission is retracted within reasonable time and by assigning valid reasons. A perusal of the impugned orders reveals that the assessee made an admission, on 18.01.2006 and followed it up by a written admission on 19.01.2006 but while filing his return did not retract the admission. At no stage of the survey or assessment proceedings except at its fag end on 4.12.2008 i.e. almost two years after the admissions and a few weeks before finalisation of the assessment, did the assessee raise a plea that he was coerced and forced into making admissions. The belated retracting of the admissions on 04.12.2008, nearly two years after the admissions and then also without any facts to support the allegation of coercion or pressure, cannot enure to the benefit of the assessee. An admission is substantial evidence of a fact, within the special knowledge of an assessee and if not retracted immediately or within reasonable time is substantive evidence of a fact and may be read against an assessee. We, therefore, answer the above questions against the assessee and as we find no reason to hold that the revenue has erred in relying upon admissions made by the assessee, dismiss the appeal. Admission was substantial evidence of fact, within special knowledge of Assessee and if not retracted immediately or within reasonable time was substantive evidence of fact and might be read against Assessee”

Similarly Hon’ble High Court of Allahabad in the case of Sanjeev Agrawal Vs. Income tax settlement commissioner 56 taxmann.com 214(Allahabad)/ 2015, 231 taxman 71 has held as under : “Statement make voluntary u/s.133A cannot be retracted unless Assessee files evidence to show that admission made in statement at time of survey is wrong and against material on record.”

Finally, L’d DR vehemently relied on the order of Assessing Officer. On the other hand, Ld. AR filed a paper book which is running pages from 1 to 19 and cited various case laws in support of his claim which are kept on record. He reiterated that no incriminating material was found during the course of survey with regard to the disclosure of its undisclosed income for ₹ 50 lakh. The statement was recorded under coercion and pressure by the Survey Team. Similarly the payment of advance tax of ₹ 5 lakh was made by AO under the pressure only. The assessee retracted from the statement dated 25.04.2007 and the finding of AO that statement was retracted after 2 years and 9 months is factually incorrect. Ld AR relied on the order of Ld. CIT(A).

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 7

“It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect.”

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 8 From the above we find that the admission of evidence cannot be conclusive and the same can be proved otherwise. In this connection, we are relying in the case of PAUL MATHEWS & SONS vs. COMMISSIONER OF INCOME TAX HIGH COURT OF KERALA (2003) 181 CTR 0207 : (2003) 263 ITR 0101 : (2003) 129 TAXMAN 0416

“Sec. 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Sec. 133A however, enables the IT authority only to record any statement of any person which may be useful, but does not authorize for taking any sworn in statement. The IT Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas s. 133A does not empower any ITO to examine any person on oath. Thus, in contra distinction, to the power under s. 133A, s. 132(4) 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 IT Act. On the other hand, whatever statement recorded under s. 133A 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 the evidentiary value as contemplated under law. Therefore, there is much force in the argument of the counsel for the appellant that the statement, elicited during the survey operation has no evidentiary value and the ITO was well aware of this. The ITO has referred to the fact that consequent upon the survey, the assessee has filed a revised return offering 8 per cent of the contract receipt as net profit before allowing deduction of salary payment made to partners at Rs. 1,60,050. It was also found that the 8 per cent profit disclosed is deemed to have been arrived after allowing depreciation and interest on capital paid to the partners. The ITO has not accepted the income declared by the assessee in a mechanical way, but applied his mind to the various aspects of the matter before completing the assessment. The ITO also found that during the course of hearing, certain details filed showed that the assessee had received an advance of Rs. 19 lakhs and the advances received from P of Rs. 10 lakhs has been explained. Regarding the advance of Rs. 9 lakhs received from E only three lakhs is found to be genuine. Hence, the balance of Rs. 6 lakhs is to be explained which is telescoped in the income already disclosed at Rs. 8,26,550. It was in such circumstances that no separate addition was made to the account. It was also found by the ITO that accordingly on discussion, the total income of the assessee for the asst. yr. 1998-99 is determined at Rs. 8,26,550. Thus, the ITO considered the factual aspects of the matter regarding the advance claimed to have been received and the balance of Rs. 6 lakhs out of the 19 lakhs was also telescoped in the income already disclosed. In the statement in the course of survey, the managing partner only stated that an amount of Rs. 19 lakhs was introduced towards advance for sale of land and E confirmed only six lakhs. It was on this basis that the balance of Rs. 13 lakhs were offered for the asst. yr. 1998-99. That was confirmed by P and E as Rs. 6 lakhs was found to be a mistake and the assessment orders in their case were also produced. The ITO also verified the above aspects. Therefore, the assumption that what was

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 9 offered in the statement of 43 lakhs is in addition to what has been assessed and on the basis that the statement has got evidentiary value is erroneous. The materials collected during the course of survey has been borne in mind by the AO who was well aware of the evidentiary value of the statement. At the same time, such survey conducted unearthed certain income and the ITO rightly, on the basis of the accounts and offer made and the admissions made before him, came to the conclusion that what was offered in the written offer made by the assessee is reasonable. The alleged admission contained in the answer to question No. 13 in the statement of the managing partner of the assessee obtained under s. 133A is only a qualified one and the assessee had clearly explained the same before the AO by cogent materials and the same was accepted by the said officer. The view taken by the ITO cannot be said to be unsustainable in law so as to call it an order passed erroneously. The entire sum of Rs. 19 lakhs was considered for the block assessment completed as early as on 28th Oct., 1999, in the case of P much before the survey. In these circumstances, the statement of the assessee that the amount of Rs. 13 lakhs offered by him in the statement during the course of survey is only a mistake of fact cannot be brushed aside. Further, in the light of the voluntary disclosure in the letter given in writing by the assessee the facts given by him have been verified with the books of accounts and it was only after consideration of the various aspects of the matter and related facts that the AO accepted the offer made by the assessee. In such circumstances, the view taken by the ITO cannot be said to be prejudicial to the Revenue nor can it be said to be erroneous. There is nothing in the order of the ITO to warrant a finding that it is unsustainable in law. For the above reasons, the CIT was not justified in law in invoking the powers under s. 263 as the twin conditions precedent to exercise the power has not been satisfied in this case.—Malabar Industrial Co. Ltd. vs. CIT (2000) 159 CTR (SC) 1 : (2001) 243 ITR 83 (SC) and Smt. Tara Devi Aggarwal vs. CIT 1973 CTR (SC) 107 : (1973) 88 ITR 323 (SC) relied on. ITO having not accepted the income declared by the assessee after the survey in a mechanical way, but after applying his mind to various aspects of the matter including the disclosure made before completing the assessment, order passed by the AO cannot be said to be erroneous or prejudicial to the Revenue and the CIT was not justified in invoking powers under s. 263.”

In view of the above precedents, we find that for making such addition on the basis of voluntarily disclosure statement, it was equally important for the AO to bring the substance for making such addition to the total income of assessee. The case law cited by Ld DR is distinguishable from the facts in hand. From the case of Navdeep Dhingra v. CIT (2015) 56 taxmann.com 75 (P&H), 232 taxman 425 supra, we find in this case the assessee did not retract from the statement at the time of filing of returns but retracted at the fag-end of the assessment proceedings. In the instant case the

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 10 assessee retracted at the time of filing of returns. Similarly from the facts of the case Sanjeev Agrawal Vs. Income tax settlement commissioner 56 taxmann.com 214(Allahabad)/ 2015, 231 taxman 71 (supra) we find that the retraction from statement has been allowed if based on cogent reasons. In the instant case, accordingly we find that the onus was there on the Department to substantiate the disclosure statement given by the assessee on the basis of books of accounts and documents impounded during the survey. However, in the instant case, assessee has given all the details as required by AO but he failed to bring any defects in the documents and books of account as submitted by assessee. We also find that CBDT has issued a clarification No. F No.286/2/2003- IT(Inv) dated 10.03.2003, where it is held:- “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 it 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.”

In view of the above, we find no reason to interfere in the order of Ld. CIT(A) and we uphold the same.

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 11 The assessee failed to provide documentary evidence in support of above expenses, therefore, AO disallowed the same by holding that TDS has not been deducted by assessee and he added back to the total income of assessee.

Being aggrieved by this order of Ld. CIT(A) Revenue is in appeal before us. 10. Before us Ld DR submitted that expense claimed by assessee are exceeding limit as specified u/s. 194C of the Act and he vehemently relied on the order of AO. On the other hand, Ld. submitted all details of expenses were available before AO though without considering the same he invoked the provision of Sec. 40(a)(ia) and he relied on the order of Ld. CIT(A).

ITA No.755/Kol/2011 A.Y.2007-08 DCIT, Cir-2, Mid. V. M/s Grami Agro Pvt. Ltd. Page 12 anything contrary to the findings of Ld. CIT(A). We are inclined to interference in the order of Ld. CIT(A). This ground of Revenue’s appeal is dismissed.

In the result, Revenue’s appeal stands dismissed. 13. Order pronounced in open court on 22/07/2016 Sd/- Sd/- (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp �दनांकः- 22/07/2016 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-DCIT, Circle-2, Midnapore, Sahoo Bhawan, Kshudiram Nagar P.O. Midnapore, Dist. Paschim Medinipur 2. ��यथ�/Respondent-M/s Grami Agro Pvt. Ltd. Jamda, Jhargram, Dist.Paschim Medinipur, Pin.721 507 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड� फाइल / Guard file. By order/आदेश से, /True Copy/ उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, कोलकाता