DCIT Vs Ratandeep Gold & Diamond Pvt. Ltd (ITAT Varansi)
ITAT Varanasi held that principles of natural justice demand that both the parties, i.e. assessee as well as AO, shall be given opportunity of being heard, before being condemned and any prejudice is caused. Impugned order not satisfying the same is liable to be set aside.
Facts- Post conduct of survey, AO issued notice to the assessee asking on the basis of data retrieved from the computer and recorded statements, undisclosed profit should not be treated as unaccounted income under section 69 of the Income Tax Act.
Further, AO also contested that difference of Rs. 43 Lacs figured out under the head furniture and fixture should not be treated as unexplained investment under section 69 of the Income Tax Act.
CIT(A) accepted the appeal filed by the assessee. Accordingly, being aggrieved, revenue has preferred the present appeal.
Conclusion- Fair hearing and adherence of principles of natural justice are the most important pillars of the judicial proceedings, and proceedings before ld. CIT(A) are quasi judicial in nature. If ld. CIT(A) was not clear as to that the AO has failed to give finding on the nature of such incriminating documents with respect to which the income was surrendered under the head Furniture and Fixtures, the ld. CIT(A) ought to have issued notice of hearing to the AO and must have sought his explanation/comments/remand report, before condemning AO or prejudicing AO by deciding the issue against AO. No such notice of hearing was issued by ld. CIT(A) to the AO in the instant proceedings, nor any comments/remand report was called by ld. CIT(A) from AO to explain his position on the issue or to defend his assessment order. Principles of natural justice are clearly breached as ld. CIT(A) misdirected himself by adventuring into a fault finding mission, rather than acting as an adjudicator and/or investigator to unravel the truth in order to compute income chargeable to tax in the hands of the assessee as per mandate of the provisions of the 1961 Act.
FULL TEXT OF THE ORDER OF ITAT VARANSI
This appeal, filed by Revenue, being ITA No.136/VNS/2020, is directed against the appellate order dated 10.08.2020 passed by learned Commissioner of Income Tax(Appeals), Varanasi(hereinafter called “the CIT(A)”) in Appeal No. CIT(A)/Vns/10643/2019-20/32, for assessment year (ay): 2017-18, the appellate proceedings had arisen before Learned CIT(A)from assessment order dated 30.12.2019 passed by learned Assessing Officer (hereinafter called “the AO”) under Section 143(3)of the Income-tax Act, 1961 (hereinafter called “the Act”)(DIN & Order No. ITBA/AST/S/143(3)/2019-20/1023418835(1)).The assessee has filed Cross Objections(C.O.) which is listed as C.O. No.02/VNS/2021 , arising out of ITA No. 136/VNS/2020, for assessment year 2017-18. We have heard both the parties through physical hearing mode in Open Court proceedings.
2. The grounds of appeal raised by Revenue in memo of appeal filed with Income Tax Appellate Tribunal, Varanasi (hereinafter called “the tribunal”) in ITA No. 136/VNS/2020 for ay:2017-18, reads as under:
“1. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition on account of undisclosed profit of Rs.45,608/- factoring the value of stock, the net profit came out Rs. 74,30,135/- against disclosed Rs.73,84,527/-
2. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition as unexplained expenses of Rs.11,43,944/- debited in P&L. A/c after the date of survey.
3. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained purchases of Rs.45,36,423/- out of unregistered purchases of Rs.4,53,64,232/- @10%.
4. On the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the addition unexplained investment of Rs.43,00,000/- under the head furniture and fixture which admitted during survey action and retracted while filing of return of income.
5. Right is reserve to alter, modify and to file any fresh ground of appeal.”
2a. The grounds of Cross Objection(C.O.) raised by assessee in memo of Cross Objections(C.O.) filed with the tribunal, reads as under:
“1.The assessment order failed to workout basis of quantum of addition of Rs.45608 made on the basis of factoring of net profit which makes addition unjustified.
2.The learned CIT Appeal had deleted the addition of Rs.45608 by evaluating detail facts brought on record which is not distinguished by A.O.. Hence deletion of addition of 45608 is unjustified on fact.
3. Addition of Rs.1143944 against unexplained expenditure on ground that expenditure booked after the date of survey without perusing books of account and fact brought during assessment proceeding which makes addition unjustified.
4. Hon’ble CIT Appeal had perused records and deleted the addition on the basis of facts which again not distinguished in grounds of appeal . Hence deletion Rs. 1143944 is unjustified.
5. The addition of Rs.4536423 on the ground of alleged suppression of profit 10% in unregistered purchase of Rs.45364232 is against the fact which shows the unregistered purchase are much economical than registered purchase, which shows order passed is without verifying the record and make the order unjustified,
6. Hon’ble CIT Appeal has rightly deleted the addition of Rs 4536423 after verifying the fact from the record that addition is against the fact as unregistered purchase are economical in comparison to registered purchase.
7. The addition of Rs.43 lacs u/s 69A in respect of alleged excess investment in furniture fixture is void ab-initio.
8. Hon’ble CIT Appeal rightly deleted addition of Rs. 43 lacs on facts as well duly supported by judicial pronouncement.”
3. The brief facts of the case are that consequent to the authorization of survey issued by ld. JCIT , Range-3, Varanasi , survey operations were carried out by Revenue under Section 133A of the 1961 Act, on 5th October, 2017 in the business premises of the assessee and its sister concerns of the group. During the course of survey operations carried out by Revenue under Section 133A of the Act, several documents and retrieved of computer data backup etc. which were incriminating in nature as per annexures to the Survey Report drawn, were found and impounded by Revenue . The assessee filed its return of income for ay: 2017-18 ,on 7th November, 2017,returning income of Rs.76,90,500/- . The AO issued notice under Section 143(2) , dated 27.09.2018 to the assessee, which was claimed by AO to have been duly served on the assessee. Thereafter, notices under Section 142(1) were also issued by AO on 29th January, 2019 and 4th November, 2019 to the assessee, which were also claimed by AO to have been duly served on the assessee. The assessee participated in assessment proceedings conducted by the AO. The assessee is a Private Limited Company and derives income under the head business and profession at Book Profit of Rs. 73,84,528/- and paid taxes as per provisions of Section 115JB at Rs. 22,97,152/- , during the impugned assessment year. During the course of survey proceedings conducted by Revenue against the assessee under Section 133A of the Act, on 05th October, 2017, a statement was recorded on oath of Shri Manjit Singh, the Director of the company on 5th October, 2018(sic. 05th October 2017-correct date of survey ) on the issues of undisclosed income and investment, and the details of undisclosed income and signed copies of Profit & Loss account and Balance-sheet retrieved from the computer of the group M/s Ratandeep Gold & Diamond Pvt. Limited. The relevant copy of the statement, as well signed copy of P&L and Balance Sheet as retrieved from computer are reproduced by AO ,in the assessment order at page no. 3-7, which is reproduced hereunder:
The AO issued show cause notice (SCN) dated 17.12.2019 to the assessee , asking assessee to explain as under:
“1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 201617 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income?
2. Apart from this during the Course of survey proceedings in your statement u/s 133 recorded on 05.10.2018(sic. 05.10.2017) for Q 23 you were asked to explain the difference in investment under the sub head furniture and fixture in B/S a difference of Rs 43.00 Lacs was noted and in answer to Q.23 you have offered total amount as undisclosed investment. However, subsequently you have retracted from the same as per your ITR, Hence, why the aforementioned amount of investments may not be treated as your income u/s 69 of the Income-tax Act, 1961?”
In reply, the assessee submitted before AO that the assessee has contested the finding during the survey (stock status at Page no. 8 of seized material) where total stock value was taken as Rs. 10,32,24,013/-, whereas actual stock as per audited statement is Rs.4,58,34,907/- for same stock without any variation(audit report filed on 07.11.2017). The assessee submitted details of valuation of closing stock , which is reproduced by the AO at page 9 of the assessment order, and the same was accepted by the AO and no adverse inference was drawn by the AO. The details of valuation of stock as aforesaid submitted by the assessee before the AO , is reproduced hereunder:
Thus, so far as surrender of Rs. 5,00,00,000/-(Rs. five crores) made by assessee during survey due to differential in the stock value , wherein the assessee, infact, retracted the said surrender of income of Rs. Five Crores by not declaring the same in the return of income filed with the department , the said retraction stood accepted by the AO and no adverse view/inference was drawn by the AO on this issue . However, the AO observed that factoring in this value of stock the net profit comes to Rs. 74,30,135/-(more than Rs. 45,608/-). The AO observed that the assessee has stated in his statement recorded under Section 131, that there were some problem in the accounting software due to which it has taken an exaggerated rate for some stock which was deemed as an unexplained income of the assessee by invoking provision of Section 69A of the Act , and , thus, aforesaid income of Rs. 45,608/- was added to the total income of the assessee by the AO and brought to tax @ 60% as provided under Section 115BBE of the Act, vide assessment order dated 30.12.2019 passed by AO u/s 143(3).
3b. The AO , further observed that the assessee has provided details of expenses in Profit & Loss account as per seized documents and as per audited Balance Sheet, and while perusing this comparative chart, the AO observed that expenses debited in books of accounts ( on finalization of accounts) are mentioned as amounting to Rs.22,18,157/- (including depreciation of Rs. 5,70,537/-). Hence, the remaining expenses debited after date of survey viz. 05.10.2017 were disallowed by the AO amounting to Rs. 11,43,949/- as unexplained expenses u/s 69C.
3c. The AO further observed that the assessee has made unregistered purchases amounting to Rs. 4,53,64,232/- out of total purchases. The AO observed that the assessee has not provided any details to enable its verification. Thus, the AO observed that the assessee company has suppressed its profit by making unregistered purchases. The AO rejected books of accounts of the assessee company. Considering the facts and circumstances of the case, the AO disallowed 10% of the total unregistered purchases which were treated as deemed income of the assessee and brought to tax by AO under Section 69C of the 1961 Act, which stood added by the AO to the total income of the assessee u/s 69C for taxation at the rate of 60% as provided u/s 115BBE of the 1961 Act.
3d. Further, the AO observed that the assessee has not provided detail regarding the undisclosed investment of Rs. 43,00,000/- under the head furniture and fixture. The AO observed that the assessee could not produce any verifiable explanation or evidence. The AO added the same to the total income of the assessee as unexplained investment u/s 69A of the 1961 Act and brought to tax the same at the rate of 60% as provided under Section 115BBE of the Act.
4. Aggrieved by assessment order passed by the AO, the assessee filed first appeal withLearnedCIT (A).
4b During the appellate proceedings before learned CIT(A), the assessee submitted with respect to addition of Rs. 45,608/-made by the AO u/s. 69C read with Section 115BBE regarding differential in valuation of stock, as under:
“The addition of Rs. 45,608 in accordance with the Para-8 of the assessment order is not fully explained the assessee want to mention that as the A.O has accepted the valuation of closing stock shown by assesseeRs. 4,58,34,907/- against value shown in the statement of account seized during survey operations which shows closing stock of Rs.10,32,24,013. There does not remain any difference of Rs. 45,608 as referred in para 8 of assessment order. The difference in figures pertaining to trading account in statement seized during survey and final audited balance sheet is only a minor difference in purchase as the same is shown in audited balance sheet Rs. 17,49,71,132/- against the value shown in seized document Rs.17,49,39,516/-. Thus, there is difference of just Rs. 31,616 which pertains to few purchases not recorded in purchase after reconciliation with Vat return, which for entered in books at the time of finalization of accounts. The copy of bills and ledger is enclosed at page no 119- 126.
There is also minor difference in sales as sales shown in audited balance sheet Rs 15,57,07,088/- against sales reflected in seized document is Rs. 15,56,91,097/- there is difference of 15,991 which is also in respect of sales not recorded properly and at finalization of account and after reconciliation with vat return the same was entered. The copy of sales bill and ledger is enclosed at page no 127-130. Therefore, the addition of Rs. 45,608 is totally unjustified as not supported by any reasoning.”
4ba. The learned CIT(A) accepted the aforesaid contentions of the assessee, and deleted the addition of Rs.45,608/- as were made by the AO , vide appellate order dated 10.08.2020, by holding as under:
“Decision:
I have gone through the facts and circumstances of the case. Appellant submitted the reconciliation of the value of the stock found during the survey with the value of actual stock as per audited statement and no adverse inference is drawn on this issue by AO. AO mentioned in the order that ‘Factoring in this value of stock the net profit comes out to be Rs. 74,30,135/- (more than Rs. 45,608/-) and added this amount as unexplained income u/s 69A of the Income Tax Act, 1961 without giving any reason whatsoever of any kind in support of this observation. Once AO has accepted the valuation of closing stock shown by assesseeRs. 4,58,34,907/- against value shown in the statement of account seized during survey operations which shows closing stock of Rs.10,32,24,013/-, AO cannot make such a small amount of addition that too u/s 69A without bringing nay(sic. any) material on record. Appellant has tried explaining the difference due to late posting of the purchase and sale vouchers. In view of the same the addition is deleted.”
4c. With respect to addition of Rs. 11,43,944/- made by the AO w.r.t. expenses which represented the difference between the expenses reflected in the impounded material vis-à-vis audited accounts, the assessee submitted before ld. CIT(A) as under:
“The A.O has made addition of Rs.11,43,949 u/s 69C in respect of difference in expenditure debited in audited statement and statement seized during survey u/s 133A. The assessee has submitted the expenses pertains to heads where entries are made at the time of finalization of account. The copy of comparison sheet of expenses as per seized document and audited profit and loss account is enclosed at page no 424. The same shows the addition in expenses as accepted by the A.O and expenses not accepted and added u/s 69C. The addition of Rs.11,43,949/ also includes expenses of tax audit fees accounting charges which as per A.O. should be allowed. The assessee has enclosed the copy of all said expenses which shows that the difference amount has been first debited in books of account in separate head which at the of audit had been properly entered in correct head of expenditure The detail of same alongwith the supporting are enclosed at page no.28-78. The vouchers of all the expenditure mentioned in the ledger accounts are available for verification and if required same may be uploaded.
The aforesaid details show that all the expenditure had already been recorded in the books of account therefore the addition cannot be made u/s 69C Hence addition of 11,43,944 should be deleted.”
4ca. The learned CIT(A) after considering the reply of the assessee, deleted the aforesaid addition of Rs. 11,43,944/- , vide appellate order dated 10.08.2020,by holding as under:
“Decision:
I have gone through the facts and the written submissions filed along with the details filed enclose therein. There is no dispute that the expenditure has been incurred for the purposes of business. It is also an admitted fact that the accounts have been tax audited and the auditors have not given any adverse comments on these expenses recorded in the books. It is also clear that theassessee had filed all the details of the expenses under various heads. AO has not pointed out any specific defects in these details filed. The AO has failed to bring any material on record to demonstrate that these expenses have not been incurred and are not verifiable. Mere statement that the parts of the expenseshave been incurred after survey would not be sufficient enough to call for any addition. The appellant is a private limited company and complete records havebeen maintained as certified by the auditor. No disallowance can be made on mere suspicion. Keeping in view, the ratio laid down by the Judgment of the Hon’ble High Court of Allahabad in the case of CIT-I vs. M/s S.T. Advari Sc. Company [ITA No. 425 of 2012] & by Hon’ble Apex Court in the case of J.J. Enterprises vs. CIT 254 ITR 216 (SC), the disallowances made by the AO cannot be sustained.
Considering the facts and circumstances of the case and keeping in view the judicial pronouncements, the additions made by the AO u/s 69C is hereby deleted.
This ground is allowed.”
4d. With respect to the addition of Rs. 45,36,423/- made by the AO on account of unexplained purchases being 10% of the unregistered purchases, the assessee submitted before ld. CIT(A) as under:
“The A.O had made addition of Rs. 45,36,423 u/s 69C being 10% of purchase made shown as unregistered purchase of Rs.4,53,64,232. The contention that assessee has under the garbage of unregistered purchase suppressed its profit. The assessee first of all want to mention that the query has never being confronted to the assessee during course of assessment proceeding as theassessee would have explained it the same at the time of assessment itself. The assessee has enclosed herewith at page no 25-27, the copy of stock sheet showing purchase of registered purchase as well as unregistered purchase which shows average purchase of unregistered purchase is 2413.35 per gram which is in the case of registered purchase within Uttar Pradesh and outside Uttar Pradesh is Rs.2790.5 and 2968.23 per gram respectively. This shows that when purchase price of unregistered purchase is already less than other purchases there remains no scope for suppression of profit in this respect.”
4da. The Ld. CIT(A) after considering the aforesaid reply of the assessee deleted the aforesaid additions of Rs. 45,36,423/- made by the AO, vide appellate order dated 10.08.2020, by holding as under:
“Decision:
AO mentioned in the order that the appellant has made unregistered purchases amounting to Rs. 4,53,64,232/- out of the total purchase. Since these unregistered purchases cannot be verified, 10% of total unregistered purchases was treated as deemed income u/s 69C of the I.T. Act, 1961. Appellant has submitted that AO never asked for any such details during assessment proceedings from the appellant to explain. Appellant is showing purchase of registered purchase as well as unregistered purchase which shows average purchase of unregistered purchase is 2413.35 per gram which is in the case of registered purchase within Uttar Pradesh and outside Uttar Pradesh is Rs.2790.5 and 2968.23 per gram respectively. This shows that when purchase price of unregistered purchase is already less than other purchases there remains no scope for suppression of profit in this respect.
I have gone through the facts and circumstances of the case. Appellant submitted the reconciliation of the value of the stock found during the survey with the value of actual stock as per audited statement and no adverse inference is drawn on this issue by AO. All purchases, sales and closing stock were accepted by AO. There is no dispute that the unregistered purchases have been made for the purposes of business. Mere statement that the purchases are unregistered would not be sufficient enough to call for any addition. AO has failed to explain what inference he is trying to achieve at. No adhocaddition @ 10% can be made without giving any reason, that too u/s 69C of ITA Act. Keeping in view, the ratio laid down by the Judgment of the Hon’ble High Court of Allahabad in the case of CIT-I vs. M/s S.T. Advari Sc. Company [ITA No. 425 of 2012] & by Hon’ble Apex Court in the case of J.J. Enterprises vs. CIT 254 ITR 216 (SC), the disallowances made by the AO cannot be sustained. Considering the facts and circumstances of the case and keeping in view the judicial pronouncements, the additions made by the AO u/s 69C is hereby deleted.”
4e. With respect to the addition of Rs. 43,00,000/- made by the AO to the income of the assessee, on account of unexplained investment under the head ‘Furniture and Fixture’ , the assessee submitted before learned CIT(A) , as under:
“The learned AO has made addition of Rs. 43 lacs on the basis of statement recorded during course of survey u/s 133A in reference with the question no. 23 appearing at page no. 4 of assessment order. The such addition pertains to alleged under investment shown in furniture fixture reflected books of account against so called speculated figure of Rs. 60 lacs considered by survey team. The addition of Rs. 43 lacs considered as unexplained investment u/s 69A. The assessee want to mention that any addition u/s 69A can be made only in respect of unexplained money bullion, jewellery or other valuable article which is not recorded in books of account maintained by assessee for any source of income. Therefore, addition made u/s 69A for alleged excess investment in furniture and fixture is void ab initio.
The assessee further want to mention that in the reply given during course of assessment proceeding the assessee had mentioned that amount shown in books of account is Rs. 18,54,126 and not Rs. 16,98,326 as referred in question no.23 in the statement recorded at the time of assessment proceeding.
The assessee has enclosed herewith copy of fixed assets alongwith the bills and vouchers in respect of same at page no. 79-118 which are self-speaking and not denied by the AO. The all bills and vouchers were impounded during course of survey moreover, the AO have failed to bring any material on record which can show that investment made by the assessee exceeds the amount recorded in books of account.
The assessee relies upon judicial pronouncement which categorically hold that any addition on the basis of statement recorded during course of survey /search cannot be taken ground for making addition unless until any incriminating document is not found by the AO. The judicial pronouncement of Apex CIT VS Mantri Share Broking Pvt Ltd 257 Taxman 337 is being relied. Moreover, the recent decision in case of Rohitaswa Das v. Asstt. CIT I.T.A No. 1949/Kol/2017 further confirms the assessee’s contention that addition of Rs. 43 lacs made on the basis of statement of the director of the assessee cannot be treated tenable in the eyes of law. The copy of judicial pronouncement are enclosed at page no. 131-149. Therefore, it should be deleted.”
4ea. The learned CIT(A) after considering the aforesaid reply of the assessee, deleted the aforesaid addition of Rs.43,00,000/-, vide appellate order dated 10.08.2020, by holding as under:
“Decision:
A survey u/s 133A was conducted on 05.10.2017 at the business premises of appellant and its sister concerns. During the course of survey several documents and retrieved of computer data backup were found and impounded by the authorized parties. Appellant surrendered certain amounts under various heads of stock, furniture &fixtures, etc. However, appellant filed original return of income on 07.11.2017 showing total income of Rs. 76,90,500/- and paid taxes as per provisions of section 115JB at Rs. 22,97,152/- without disclosing the surrendered amount in the return filed. The relevant portion of the statement are scanned in the order. AO asked appellant that in your statement recorded on 05/10/2017, you had surrendered an undisclosed income of Rs. 5,00,00,000/- on account of difference in stock Rs. 43,00,000/- on account of difference in furniture and fixture and had offered the same as undisclosed investment, which subsequently have been retracted too while filing the ITR. You did not disclose this surrender made during survey and did not pay any of the due taxes. In reply the appellant has explained the discrepancies found during the survey pertaining to the stock value that was accepted by the AO as correct. However, AO did not accept the reply of the appellant pertaining to the difference in the amount of investments shown in the Furniture & Fixtures amounting to Rs. 43,00,000/-. With regards to investment in the Furniture & Fixtures appellant enclosed copy of all the bills and vouchers in respect of fixed assets. These bills and vouchers were impounded during course of survey as submitted by appellant. AO had no other material other than the statement taken during the Survey of the Director, on record which can show that investment made by the assessee exceeds the amount recorded in books of account. Appellant relies upon judicial pronouncement which categorically hold that any addition only on the basis of statement recorded during course of survey cannot be taken ground for making addition unless until any incriminating document is not found by the AO. It is not clear from the order of AO, who has not given any finding on the nature of such incriminating documents with regard to which the income was surrendered under the head Furniture & Fixtures.
It is well settled legally that once the appellant has retracted from the statement recorded by the survey team, then the AO is duty bound to investigate the issue further, mention specific adverse material found during the survey to make the addition. Here, the additions made by the AO in this case is purely based on the statement recorded during the survey and such statement has no evidentiary value in view of the decision of Hon’ble Supreme Court in the case of CIT VS S. Khader Khan Son 300 ITR 157 (SC) where Hon’ble Supreme Court has held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission toshow that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts.
Appellant retracted from the main surrender of Rs. 5,00,00,000/- and AO accepted the retraction on the basis of the submissions given by AO. Similarly, appellant submitted details about difference on the value of Furniture & Fixtures, which the AO rejected without any basis and made addition on the basis of statement given without referring to any document found during the survey. It is well settled legal proposition that an admission cannot be the sole foundation for an assessment. It is always open to an appellant to demonstrate that a particular income is not taxable in his hands and that it was returned under an erroneous impression of law or facts. The principle can be applied in a case where the disclosure made u/s 133A did not match with the material collected in survey. No income can be taxed when no corroborative evidence or asset or valuables were either found during the survey from the business premises or are brought on record by AO during assessment proceedings after examination and verification of books of accounts produced by appellant. The well-settled position that while the admission is a piece of evidence that can be used against the person who has given the statement. For an admission to be effective corroboration with, third party evidence is required. But what a party himself admits to be true, may reasonably be presumed to be so, unless it is satisfactorily explained or successfully withdrawn. So long as they do not operate as estoppel, persons making admissions are at liberty to contradict them or to show that they are untrue or mistaken or made under a misapprehension. Thus, the effect of an admission is to shift the burden of proof to the party making the admission. Admissions play a very important role in the income-tax proceedings, as they generally bind the maker i.e. assessee. In the absence of any denial or explanation therefore, an admission is almost conclusive regarding the facts contained therein. They generally dispense with the requirement of adducing further evidence or proof to support a fact. Though section 31 of the Indian Evidence Act, 1872 states that admissions are not conclusive proof of the matters admitted, yet admissions in the absence of rebuttal may conclude an issue. Under the Income-tax Act also admissions bind the maker when these are not rebutted or retracted. Burden to prove the ‘Admission’ as incorrect is on the maker and in case there is a failure of the maker to prove that earlier stated facts were wrong, his earlier statements are sufficient to conclude a matter. However, if retraction is proved sufficiently then the earlier stated facts or admissions, loose their effect and relevance as a binding evidence and the AO cannot conclude a matter on the basis of such earlier statement alone. At the same time, bald retractions of earlier admissions will not be enough and even after retraction such earlier statements/admissions cannot automatically become nullities. Merely because a statement is retracted, it cannot become as involuntary or unlawfully obtained. For any retraction to be successful in the eyes of law the maker has to show as to how earlier recorded statements do notstate the true facts or that there was coercion, inducement or threat while recording his earlier statements.
AO has not found any fault with the sales, purchase or any expenses in the books of accounts finalized after the survey. AO has not pointed out any specific document or evidence impounded during the survey that shows the unexplained investments made by appellant. In view of the above facts the addition of Rs. 43,00,000/- cannot be sustained and is deleted as it is made without any basis.”
5. Aggrieved by appellate order passed by ld. CIT(A) allowing the appeal filed by the assessee, the Revenue is now aggrieved and has come in appeal before the tribunal. The Ld. CIT DR opened arguments before the Bench and submitted that survey under Section 133A was conducted by Revenue in the case of the assessee, on 5th October, 2017 and statement was recorded on oath of Sri Manjit Singh, Director of the assessee, wherein, inter-alia, he surrendered Rs. 43,00,000/- under the head furniture and fixture during the course of survey. Our attention was drawn by ld. CIT-DR to the appellate order passed by ld. CIT(A)and assessment order passed by the AO w.r.t. additions of Rs. 45,608/- on account of suppressed profits owing to differential in the value of stock made by the AO which stood deleted by ld. CIT(A). The Ld. Counsel for the assessee submitted in rebuttal that there is no basis of making additions specified by the AO in the assessment order , with respect to suppressed profit of Rs. 45,608/-on account of differential in the value of stock. With respect to the additions of Rs. 11,43,944/- made by the AO w.r.t. unexplained expenditure, the ld. CIT-DR drew our attention to the relevant para’s of the assessment order and the appellate order passed by the AO. The Ld. CIT DR submitted that there was a difference between the impounded material during survey and the audited Balance Sheet with respect to expenses , and owing to this difference of Rs. 11,43,944/-, an addition was made towards unexplained expenditure by the AO to the tune of Rs. 11,43,944/- , which stood deleted by ld. CIT(A). The Ld. Counsel for the assessee in rebuttal drew our attention to page No. 28 of the paper-book , wherein comparative chart(chart is reproduced by us in this order at later part) of expenses disallowed by the AO is placed. It was submitted by ld. Counsel for the assessee that tax audit of the accounts was duly conducted and these expenses are duly reflected in the books of accounts of the assessee. It was submitted that return of income was filed on 07.11.2017, while survey u/s 133A took place on 5th October 2017. It was submitted that the return of income for ay:2017-18 was filed after the date of survey viz. 05.10.2017. It was submitted that reply was filed before the AO which is placed in paper-book at Page No. 25-27. It was submitted that the impounded material is placed at page No. 148-149 of the paper book . The ld. CIT DR submitted that the matter can be set aside and restored back for fresh adjudication. The Ld. Counsel for the assessee objected and submitted that the matter cannot be set aside as details were given/furnished before the AO, and it is the AO who failed to take cognizance of the same . With respect to the next issue of addition of Rs. 45,36,423/- made by AO @10% of unregistered purchases towards suppressed profits, the Ld. CIT-DR submitted that there were unregistered purchases to the tune of Rs. 4,53,64,232/- out of total purchases made by the assessee, and no details were furnished by the assessee before the AO. It was submitted by ld. CIT DR that the AO invoked provisions of Section 69C. It was submitted that the AO did not asked any question on these unregistered purchases, while Ld. CIT(A) simply accepted the contentions of the assessee without any verification. The ld. Counsel for the assessee submitted that the unregistered purchases were more economical. With respect to next issue of addition of Rs. 43,00,000/- made by the AO towards undisclosed investments in Furniture and Fixture , the ld. CIT DR submitted and drew our attention to para no. 11 of the assessment order passed by the AO , and it was submitted that during survey investment to the tune of Rs. 43,00,000/- were made in furniture and fixture including decoration and furnishing of showroom , which were found to be not recorded in books of accounts. It was submitted by ld. CIT DR that statement was recorded of the Director of the assessee namely Mr. Manjit Singh during survey, and he surrendered the aforesaid amount of Rs. 43 lacs being invested in unrecorded furniture and fixture including decoration and furnishing of showroom premises , out of undisclosed sources of income. The Ld. CIT DR submitted that return of income was filed on 07th November, 2017, and the physical verification of stock was conducted during survey on 05.10.2017. The Director of the assessee Mr. Manjit Singh vide statement recorded on 6th October, 2017, surrendered an amount of investment in furniture and fixture including decoration and furnishing of showroom , to the tune of Rs. 43 lacs being made out of undisclosed sources. It was submitted by ld. CIT DR before the Bench that during assessment proceedings, the assessee retracted from the surrender of undisclosed income of Rs. 43 lacs as was made during survey. Our attention was drawn by ld. CIT-DR to the reply filed by the assessee before the AO during assessment proceedings, which is placed at page No. 27 of the paper-book, and submitted that the assessee retracted from surrender during assessment proceedings. It was submitted that even in return of income filed by assessee, the said undisclosed income of Rs. 43 lacs surrendered was not declared and disclosed. The ld. CIT DR submitted that ld. CIT(A) simply accepted the contentions of the assessee, without any further enquiry and verification . Our attention was drawn to page 4-5 of the assessment order passed by the AO , wherein vide question No. 23 while recording statement on 06.10.2017, question was put to Mr. Manjit Singh, Director of the assessee regarding undisclosed investments in furniture and fixture including decoration and furnishing of showroom, during the survey proceedings. It was submitted by ld. CIT DR that the assessee himself surrendered an amount of Rs. 60 lacs as income from undisclosed sources, and now the assessee cannot retract from the surrender of the undisclosed income during survey .The Ld. Counsel for the assessee on the other submitted that an expenditure of Rs. 18,54,126/- were incurred towards furniture and fixture. It was submitted by ld. Counsel for the assessee that Section 69A has no applicability. It was submitted by ld. Counsel for the assessee that addition of Rs. 43 lacs was made merely based on surrender made during survey , and the department does not have any incriminating material with it. It was submitted by ld. Counsel for the assessee that no verification of furniture and fixture including decoration and furnishing of showroom ,were made by authorities to identify actual investments made by the assessee in the furniture and fixtures including decoration and furnishing of showroom. It was submitted that there is no evidence that the assessee spent Rs. 60 lacs on furniture and fixture including decoration and furnishing of showroom. It was submitted that Rs. 45 lacs were taken as housing loan by the landlord of the premises , who invested in furniture and fixture including decoration and furnishing of showroom, and investments were not made by the assessee who is merely a tenant in the said premises. It was submitted that vide question no. 11 of the statement recorded on 06.10.2017 of Mr. Manjit Singh, it was submitted that Rs. 80 lacs was invested in Building which included investments made by the owners of the building and the assessee only invested Rs. 18.50 lacs in the furniture and fixture. The ld. CIT-DR objected at this stage and submitted that this theory of owner spending the amount in furniture and fixtures including decoration and furnishing of showroom , is introduced for the first time now before tribunal , and the same need to be rejected. The ld. Counsel for the assessee relied upon the following case laws:
a) Dismissal of SLP by Hon’ble Supreme Court in the case of CIT v. Mantri Share Broking Private Limited, (2018)96 com 280(SC)
b) Judgment and Order passed by Hon’ble Rajasthan High Court in the case of CIT v. Mantri Share Broking Private Limited (2018) 96 com 279(Raj.HC)
c)Appellate Order passed by ITAT, Kolkatta Bench in the case of Rohitaswa Das v. ACIT in ITA no. 1949/Kol/2017
d) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT , Central-III v. Krutika Land Private (2019)261 Taxman 454(SC)
e) Dismissal of SLP by Hon’ble Supreme Court in the case of PCIT v. B G Shrike Construction Technology Private Limited (2019) 265 taxman 543(SC)
The Ld. Counsel for the assessee submitted that the Department has no evidence of the assessee investing Rs. 60 lacs in the furniture and fixture including decoration and furnishing of showroom. The ld. Counsel for the assessee also relied upon CBDT instruction number F.No. 286/2/2003-IT(Inv II), dated 10.03.2003. The ld. Counsel for the assessee has filed copy of the said instructions, which are placed in file on record. The ld. Counsel for the assessee submitted that the C.O. is filed by the assessee which is only in support of the appellate order passed by ld.CIT(A).
6. We have considered the rival contentions and perused the material on record including cited case laws. The assessee is engaged in the business of jewellery. We have observed that there was a survey operations conducted by Revenue u/s 133A in the business premises(show room) of the assessee and its sister concerns of the group , on 05th October, 2017. During the course of survey operations carried out by Revenue under Section 133A of the Act, it is claimed by Revenue that several documents and retrieved of computer data backup etc. which were incriminating in nature as per annexures to the Survey Report drawn, were found and impounded by Revenue . The assessee filed its return of income for ay: 2017-18 ,on 7th November, 2017,returning income of Rs.76,90,500/- . The AO issued notice under Section 143(2) , dated 27.09.2018 to the assessee, which was claimed by AO to have been duly served on the assessee. Thereafter, notices under Section 142(1) were also issued by AO on 29th January, 2019 and 4th November, 2019 to the assessee, which were also claimed by AO to have been duly served on the assessee. The assessee participated in assessment proceedings conducted by the AO. During the course of survey proceedings conducted by Revenue against the assessee, a statement was recorded on oath of Shri Manjit Singh, the Director of the company , on the issues of undisclosed income and investment, and the details of undisclosed income and signed copies of Profit & Loss account and Balance-sheet retrieved from the computer of the group M/s Ratandeep Gold & Diamond Pvt. Limited. The relevant copy of the statement, as well signed copy of P&L and Balance Sheet as retrieved from computer are reproduced by AO ,in the assessment order at page no. 3-7 of the assessment order, which is reproduced hereunder:
The AO issued show cause notice(SCN) dated 17.12.2019 to the assessee , asking assessee to explain w.r.t. surrender of undisclosed income of Rs. 5.0 crores and Rs.
0.43 Crores, made during the course of survey proceedings , but which were not declared and disclosed by the assessee in the return of income filed with the Revenue. The said SCN dated 17.12.2019 , is reproduced hereunder:
“1. During the Course of Survey proceedings u/s 133A conducted on 05.10.2018, in your statement u/s 133A which was recorded on 05/10/2018(sic. 05.10.2017) in Q. 21, you were asked to explain undisclosed profit in your accounts during the FY 201617 on the basis of data retrieved from your computer amounting to Rs 6,81,81,364/- in reference to which you have surrendered an undisclosed income of Rs 5.00 Crores and made an statement that the due taxes with interest will be deposited within a week but you failed to do so. Furthermore while going through return of income filed by you on 07.11.2017 (vide E.filing No 295990071071117) we found that you have not fulfill your commitment made during survey with regard to payment of taxes. You are hereby provided a final opportunity to show cause as to why the aforementioned amount of investments shall not be treated as your unaccounted income u/s 69 of the Income-tax Act, 1961 and added back to your income?
