Case Law Details
Anil Kantilal Shah Vs CIT (ITAT Mumbai)
ITAT Mumbai held that addition under section 69B of the Income Tax Act towards unexplained investment sustained excel sheet and whatsapp chat are incriminating material found and seized during the course of search action.
Facts- A search and seizure action u/s 132 of the Act was carried out on 26.11.2019 at the branch offices, site offices, residences of the partners and employee of M/s Narendrakumar & Company (Everest Masala Group) along with related parties. The assessee Shri Anil Kantilal Shah was the proprietor of M/s Om Kesar and was covered u/s 132 of the Income Tax Act 1961.
During the course of search action some excel files were found in the laptop and whatsapp messages were found on the mobile phone of the assesse which related to the transactions pertaining to purchases of a flat. As per the information contained in the excel sheet the assesse has made cash payment of Rs.42.69 lac to the builder suparshwa state over and above the agreement value of the flat of Rs.1.1 crores. During the course of search action the assessee has also accepted these fact in his statement recorded u/s 132(4) of the Act that an amount of Rs.42.69 lacs was paid in cash for purchasing of the aforesaid premises.
As the assessee had not declared the amount of Rs. 42.69 lac in the return, a show cause notice was issued proposing addition of the amount to total income as unexplained investment u/s 69B. Not agreeing with the submission, AO made addition of the same amount. CIT(A) dismissed the appeal of the assessee.
Conclusion- During the course of search action at the premises of the assesse the excel sheet on the laptop of the assessee was found and seized. It is evident from the copy of excel sheet as reproduced above in this order in which it is clearly mentioned the agreement value of Rs.1,10,00,000/- and the cash component of over and above the agreement value of Rs. 42.69 lac. It is establish that there was incriminating material found and seized during the course of search action in the case of the assesse. Therefore, ground of the assessee that nothing was found during the course of search is not correct.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
These 2 appeals filed by the assessee for A.Ys. 2018-19 & 202021 are directed against the different orders of the ld. CIT(A) and for the sake of convenience both these appeals are adjudicated together.
ITA No. 227/Mum/2023
“1. The LD CIT (A) is Erred in confirming a sum of Rs. 42,69,000/- without appreciating the fact that the notice issued under section 153A of the ACT but nothing concrete was found during the search & rather all the entries in the book of the Appellant as well in the books of the search party were matching rupee to rupee.
2. The LD CIT (A) is Erred in confirming a sum of RS:- 42,69,000/- without proving cash had changed hands and only based on whatsapp (chats & rough working based on laptop chats,
3. The LD CIT (A) is Erred in confirming the said sum inspite of the fact that Appellant had retracted his statement immediately has he could do so counting the general circumstances & covid-19 pandemic situations & also waited to receive the copy of original statement recorded.
4. The LD CIT (A) is also erred in arriving at conclusion that cash portion given by the Appellant to the developer without appreciating the fact that agreement value was at Rs.1,10,00,000/- as against stamp duty valuation/market value of the said property was only Rs.83,82,000/-
5. The Ld CIT(A) is failed to appreciate the fact that the statement given by the appellant was under pressure as appellant’s Wife shocked and she was taken immediately to the doctor by the investigating team officers.
5A. The Ld CIT(A) is also erred in not considering the retracted statement which was filed immediately after getting the statement from the Ld A.O. & Immediately after completion of Lockdown due to Covid-19 Pandemic.
6. The Appellant prays to delete the addition made on this account. 7. The Appellant craves leave to add, alter, amend or delete the above ground/s of appeal.
2. Fact in brief is that a search and seizure action u/s 132 of the Act was carried out on 26.11.2019 at the branch offices, site offices, residences of the partners and employee of M/s Narendrakumar & Company (Everest Masala Group) along with related parties. The assessee Shri Anil Kantilal Shah was the proprietor of M/s Om Kesar and was covered u/s 132 of the Income Tax Act 1961.
During the course of search action some excel files were found in the laptop and whatsapp messages were found on the mobile phone of the assesse which related to the transactions pertaining to purchases of flat at C-805, Suparshwa Urvana Old Nagardas Road, Andheri East, Mumbai. As per the information contained in the aforesaid excel sheet the assesse has made cash payment of Rs.42.69 lac to the builder suparshwa state over and above the agreement value of the flat of Rs.1.1 crores. During the course of search action the assessee has also accepted these fact in his statement recorded u/s 132(4) of the Act that an amount of Rs.42.69 lacs was paid in cash for purchasing of the aforesaid premises. The said excel sheet is reproduced as under:
However, during the course of assessment the assessing officer found that assesse has not declared the aforesaid amount of Rs.42.69 lac in the return of income. Therefore, assessing officer has issued show cause notice dated 15.09.2021 asking the assesse why an amount of Rs.42.69 lacs should not be added to the total income as unexplained investment u/s 69B of the Act. In response the assesse submitted that he had retracted the statement recorded during the search by way of filing affidavit and submitted that there was no cash transaction happened with the builder. However, the AO has not agreed with the submission of the assessee and added the amount of Rs.42.69 lacs as unexplained investment on the basis of such transaction noted on the excel sheet found in the laptop seized from the premises of the assessee which was also corroborated with the whatsapp communication.
3. Aggrieved, the assesse filed the appeal before the ld. CIT(A). The ld. CIT(A) has dismissed the appeal of the assessee. The relevant part of the decision of CIT(A) is as under:
“8. The submissions made by the appellant have been duly considered. As regards the Grounds No. 1 to 4 of the Original Grounds of Appeal, the same pertain to the addition of Rs. 42,69,000/- made by the AO on account of Unexplained Investment by way of cash made in Property Being Flat No. C-805, Suparshwa Urbana, Old Nagardas Road, Andheri (East), Mumbai. During the course of search proceedings, digital evidence in the form of excel files in laptop and whatsapp messages in the mobile phone of the assessee were found pertaining to the purchase of flat at C-805, Suparshwa Urbana, Old Nagardas Road, Andheri (E), Mumbai 400069. The digital evidence pointed out that during the year, the assessee had made cash payment of Rs 42.69 lakhs to the builder Suparshwa Estate over and above the agreement value of Rs 1,1 crore. The assessee accepted the said cash transaction in his statement recorded u/s 132(4) and offered the amount of Rs. 42 69 lakh as his undisclosed income. However, almost 8 months after the search, the assessee retracted from the disclosure made by filing an affidavit on 02.07.2020 by simply stating that the earlier disclosure statement was given under pressure and that no cash payment had been made in respect of the relevant property transaction. The appellant also took the plea that the change of hands of cash was not proved in his case, and also that the stamp duty value of the property was much lower than the agreement value.
8.1 After going through the submissions of the appellant and also the assessment order, it is observed that the property purchase transaction has been very precisely recorded in the excel sheets of the appellant’s laptop. The AO in his order has given the details of the details mentioned in the excel sheet on Pages 5, 6, 14, 15 and 16 of the assessment order. The calculations very clearly mention the Agreement value as Rs.1,10,00,000/- and the cash component totaling to Rs.42.69 lakh. The Whatsapp Chats between the assessee and the builder also further corroborate the relevant transactions. It is also clear that the excel sheet is not an estimation as it mentions the paid amount as Rs.36,00,000/- and the balance amount as Rs. 6,00,000/- Most importantly, the appellant in his statement recorded Us 132 (4) admitted the cash payment of Rs. 42 69 lakh but later retracted after 8 months giving no cogent reasons for the retraction In his submissions the appellant has given the reason for lapse of 8 months in retraction as Covid Lockdown Attributing the delay of 8 months in retraction to Covid Lockdown has no basis as the search took place on 26.11.2019 and the Covid Lockdown happened only towards the end of March 2020. Had there been any genuine reason for the retraction, the appellant had 4 months before the lockdown happened However, the appellant chose to sit quietly for all these months and then made a retraction with no apparent reason.
8.1.1 In this regard the Hon’ble Madras High Court in the case of CIT v MAC Charitable Trust [2022] 144 taxmann.com 54 (Madras) has held that statements given under section 132(4) have legal force and unless retractions are made within a short span of time, supported by affidavit swearing that contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials. same cannot be treated as retracted. The relevant extracts of the said judgment are as under:
61. In view of the law discussed above, it must be held that statement recorded undersection132(4) of the Act and later, confirmed in statement recorded undersection 131 of the Act, cannot be discarded simply by observing that the assessees have retracted the same, because such retraction ought to have been generally made within a reasonable time or by filing complaint to supenor authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit of statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summanly in cryptic manner by observing that the assessees in the belatedly filed affidavit have retracted from their statements Such retraction is required to be made as soon as possible or immediately after the statement of the assessees was recorded. Duration of time when such retraction was made, assumes significance and in the present case, retraction has been made by the assessees after eight months to be precise, 237 days.
62. It is settled position of law that the admission though important is not conclusive. It is open to the assessee who made the admission to show that it is incorrect as held by the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18. The onus falls on the person who had earlier admitted to prove it wrong. Therefore, the statements could form the basis of assessment.
63. The statements given to the Assessing officer undersection132 (4) have legal force. Unless the retractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted. This position laid down in catena of decisions by the various High Courts in Lekh Raj Dhunna (supra), Bachittar Singh (supra), Rameshchandra & Co. v. CIT [1987] 35 Taxman 153/168 TR 375 (Bom) Dr SC Gupta (supra), CIT v. Hotel Menya (2010) 195 Taxman 459/2011) 332 ITR 537 (Ker), O. Abdul Razak (supra).
8.1.2 Similarly, in the case of Sinhagad Technical Education Society V DCIT [2022] 139 taxmann.com 270 (Pune Trib.) the Hon’ble Pune ITAT also had the occasion to examine a similar case of disclosure u/s 132(4) and later retraction. The Hon’ble ITAT held that on careful examination of the so called retraction statements filed in the form of affidavits, all affidavits are stereo typed, identically worded stating that the statement made undersection132(4) to the effect that the receipt of capitation fees are not correct as the statements are given under tremendous pressure as well as torture at the time of the statement were recorded. These retraction statements were made after a gap of 7 months. No evidence of coercion. compulsion and pressure was led on record. Thus, it is nothing, but a bald statement. Further, the said three persons are employees of the assessee society working under direct supervision, control, direction of the founder and president of the assessee society. In view of these facts, the retraction statements can be said to be self-serving and no credence can be given and the retraction statements looses significance and an afterthought. Therefore, the statement recorded under section 132(4) cannot be discarded merely because the retractment statements were filed. The statements undersection 132(4) are true and correct and brings out the correct picture as at that time the maker of the statement is uninfluenced by external agencies and it is the statements are recorded in the presence of the independent witnesses. Therefore, the so-called retraction statements are simple a self-serving statements without any material and cannot override the statements recorded undersection132(4).
The so called retraction statements cannot be given any credence, on the other hand, the statements given by three persons under section132(4) carries more evidentiary value and cannot be discarded.
Further, the Assessing Officer also brought corroborative evidence in the form of the evidence showing refund of capitation fees, recommendation letters given by VIPS of the locality seeking waiver/reduction in the capitation fees/donations, exchange the messages between A, S and D and admission agent. This corroborative evidence remains uncontroverted by the assessee society. Thus, there is a conclusive evidence brought on record by the Assessing Officer to hold that the assessee had been indulging in collection of capitation fees from the students at the time of admission in various courses under the management quota. The relevant extracts of the said order are as under:
27. Now, we shall deal with the contention made on behalf of the appellant society that no evidentiary value can be attached to the statements made by said three persons u/s 132(4) of the Act in view of the affidavits filed on 21-4-2014 before the Assessing Officer by the said three persons. The said affidavits are claimed to be retraction statements from the said three persons. Now the question that arises for consideration is under what circumstances, the retraction statement can be given the credence. The Hon’ble Rajasthan High Court in the case of Bannalal Jat Construction (P) Ltd. (supra) after referring to the series of decisions laid down that (i) the retraction should be made as soon as possible and immediately after statement has been recorded (ii) the retraction should be supported by duly sworn affidavit and statement through convincing evidence the asssesee could demonstrate that the earlier statement was incorrect and (ii) whenever pleadings were made that to effect that the earlier statements was recorded under pressure, coercion or compulsion by filing a complaint to higher officials. This position was reiterated in catena of decisions by the various High Courts in the case of CIT v Lekh Raj Dhunna [2012] 20 com 554/344 ITR 352 (Pun). & Har), Bachittar Singh v. CIT [2010] 328 ITR 400 (Punj & Har), Rameshchandra & Co. v. CIT [1987] 35 Taxman 153/168 ITR 375 (Bom), Dr. S.C. Gupta v. CIT [2001] 118 Taxman 252/248 ITR 782 (All), CIT v. Hotel Meriya [2010] 195 Taxman 459/12011] 332 ITR 537 (Ker.), CIT v. O. Abdul Razak [2012] 20 taxmann.com 48/207 Taxman 193 (Mag)/2013) 350 ITR 71 (Ker.),
28. In the present case, on careful examination of the so called retractment statements filed in the form of affidavits dated 16-4-2014 notarized on 19-4-2014, we find that all those affidavits are stereo typed, identically worded stating that the statement made u/s 132(4) to the effect that the receipt of capitation fees are not correct as the statements are given under tremendous pressure as well as torture at the time of the statement were recorded. These retraction statements were made after a gap of 7 months. No evidence of coercion, compulsion and pressure was led on record. Thus, it is nothing, but a bald statement. Further, the said three persons are employees of the appellant society working under direct supervision, control, direction of the Founder and President of the appellant society, namely, Shri Maruti N. Navale. In view of these facts, the retraction statements can be said to be self-serving and no credence can be given and the retraction statements looses significance and an afterthought. Therefore, the statement recorded u/s 132(4) cannot be discarded merely because the retractment statements were filed The statements u/s 132(4) are true and correct and brings out the correct picture as at that time the maker of the statement is uninfluenced by external agencies and it is the statements are recorded in the presence of the independent witnesses Therefore, in our considered opinion, the so-called retraction statements are simple a self-serving statements without any material and cannot override the statements recorded u/s 132(4) of the Income-tax Act. The reliance placed by the Id. Counsel on the decision of the Hon’ble Delhi High Court in the case of CIT v. Sunil Aggarwal (2015) 64 taxmann.com 107/2016] 237 Taxman 512/[2015] 379 ITR 367 cannot come to the rescue of the appellant herein for the reason that in the said case the assesse apart retracting the statement also discharged the onus of proving the statement is incorrect through cogent material.
8.1.3 In the case of Nayyar Patel v. ACIT [2022] 137 taxmann.com 149 (Kerala), the Hon’ble Kerala High Court has held that where pursuant to search conducted at assessee’s premises, his statement was recorded under section 132(4) and later assessee retracted his statement, but had not adduced any evidence to substantiate his allegations to retract from his statements undersection 132(4), retraction was to be ignored and additions based on statement originally recorded were justified. The relevant extracts from the relevant order are as under:
When the law is thus evident from the statutory provision and the judgments of this Court referred to above, it can be seen that in so far as this case is concerned, almost 13 months after the recording of the statements, the assessee had sought to retract from his statements, though partially, by his letter dated 28-7-1999 Even in this letter, the reasons stated by him are that the statement dated 22-6-1998 was recorded at the unearthly hour of 2.30 am and that he was under fear and trepidation. He has not adduced any evidence to substantiate his allegations to retract from his statementsundersection132(4). The assessee had also not stated why he had confirmed the correctness of the disclosures made in his statement of 22-6-1998, in the subsequent statements made by him on 24-6-1998 and 6-7-1998. That apart, if as stated by him, he was under fear and trepidation when the statement of 24-6-1998 was recorded, there is absolutely no reason for him to have awaited till 28-7-1999 to retract from his statement. The fact that he was served a copy of the statements only on 27-7-1999, cannot in any manner justify the delay on the part of the assessee in retracting from his statement, especially in a case where the assessee even in his letter of retraction does not state that he was unaware of the contents of the statements recorded till he received a copy thereof on 27-7-1999. For this reason, according to us, the retraction of the statements made is only to be ignored and the matter has to be taken to its logical conclusion.
8.2 The various judicial rulings have made it abundantly clear that the that statements given under section 132(4) have legal force and unless retractions are made within a short span of time duly supported by affidavit swearing that contents are incorrect and it was obtained under force or coercion and a complaint is lodged with the higher officials, the same cannot be treated as retracted. The fact that the retraction statement in the present case has been made after a gap of 8 months, and that too without any evidence of coercion or compulsion or pressure, makes it nothing but a bald statement. No credence can be given to the retraction statement and it looses significance. The statement recorded under section 132(4) cannot be discarded merely because the retraction statement was filed The statement under section 132(4) brings out the correct picture as at that time the maker of the statement is uninfluenced by external agencies and the statements are recorded in the presence of the independent witnesses. Therefore, the so-called retraction statements is a simple self-serving statement without any material and cannot override the statement recorded under section132(4). Moreover, in the instant case the statement made by the assessee u/s 132(4) accepting the cash transactions of Rs.42.69 lakh was based on strong corroborating evidence by way of excel sheets of seized digital evidence and WhatsApp chats of seized mobile phone data which further confirmed the cash transactions. This digital evidence cannot in any case be negated
8.3 In view of the above, the addition of Rs.42,69,000/- made by the AO as unexplained investment is upheld. Grounds 1 to 4 are accordingly dismissed.”
4. During the course of appellate proceedings before us the ld. Counsel submitted that the amount of Rs.42.69 lac was not the actual amount paid in cash and it was just the projection made by the assessee noted on the excel sheet. The ld. Counsel also submitted that WhatsApp messages only referred about the GST refund and not the cash transactions. The ld. Counsel further submitted that the assessee has actually purchased flat for Rs.1.10 crores and the value of the flat as per stamp duty valuation was Rs. 83 lac. The addition was based on mere WhatsApp chats and no incriminating material have been recovered. The AO was incorrect in arriving at the conclusion that assessee had filed Retraction after 8 months of the search in fact because of corona pandemic the assesse could not file his Retraction statement.
On the other hand, the ld. D.R contended that assesse was also doing side business of supplying saffron and he stated during the course of search that there was no fixed commission in that business. Assessee was covered u/s 153A of the Act and from the laptop of the assessee incriminating material pertaining to the purchase of the house property as referred above was found and seized. The ld. D.R further submitted that in the excel sheet the assesse has created schedule of payment and contents of the Excel Sheet were corroborated with the whatsapp messages. The ld. Counsel also referred page no. 5 of the assessment order wherein the AO has reproduced the Excel sheet to demonstrate that assessee has made agreement for purchasing of the referred flat for Rs.1,10,00,000/- however the assesse has made balance payment of Rs. 42 lac in cash. The ld. D.R further submitted that contents of the excel sheet also corroborated with the whatsapp messages showing cash payment to the amount of Rs.42.69 lac. (Rs.34.69 lac plus Rs.8 lac) to the builder Suparshwa Group over and above the agreement value of Rs.1.10 crores. In the rejoinder the ld. Counsel submitted that no evidence of cash generated from the business was found and these were the mere projection and actually no cash payment was made.
5. Heard both the sides and perused the material on record. During the course of search action at the premises of the assesse the excel sheet on the laptop of the assessee was found and seized. It is evident from the copy of excel sheet as reproduced above in this order in which it is clearly mentioned the agreement value of Rs.1,10,00,000/- and the cash component of over and above the agreement value of Rs. 42.69 lac. It is establish that there was incriminating material found and seized during the course of search action in the case of the assesse. Therefore, ground no. 1 of the assessee that nothing was found during the course of search is not correct. Accordingly, ground no. 1 of the assessee stand dismissed.
6. Regarding other ground of appeal No. 3 to 5A, we find that as per copy of agreement placed in the paper book at page no. 18 to 48 it is evident that assessee has executed the agreement on 15.11.2017 for purchasing the above referred flat from the builder M/s Suparshwa Estate. The total price of the property as per the agreement was Rs. 1.10 crores. It is noticed that as per clause W at page 5 of the agreement the carpet area of the flat no. 805 was mentioned of 546 sq. ft. which matched with the area of the Flat recorded in the excel sheet as 546 sq. ft. In the excel sheet the different components of the transactions are clearly mentioned. The agreement value and the area of the flat was matched with the transactions recorded in the excel sheet. It is clarely mentioned that assesse had paid Rs.36 lac and balance amount of Rs.6 lac was remained to be paid over and above the agreement value of Rs.1.10 crore. Further we noticed that information found in the excel sheet are corroborated with the WhatsApp communication between the assesse and the builder as also elaborated in the assessment order. After considering the facts and evidence in the form of excel sheet, agreement and WhatsApp communication we don’t find any infirmity in the decision of ld. CIT(A) therefore, ground no. 2 to 5A of the appeal of the assesse are dismissed.
7. In the result, the appeal of the assesse is dismissed.
ITA No.228/Mum/2023
8. During the course of search WhatsApp message was found on the mobile phone of the assesse which revealed that assesse has made cash payment of more than Rs.9 lac Interior Mahendra Mewada. The assesse accepted the making of cash payment and submitted that cash payment was made on the insistence of the interior decorator. Regarding source of cash payment the assessee submitted that same was withdrawn from the saving bank account of the assessee and from the bank account of his wife’s. However, the AO has not accepted the submission of the assesse stating that assesse has not furnished the supporting documentary evidences to prove that amount paid were actually incurred through cash withdrawals. Therefore, the aforesaid amount of Rs.9,25,000/- was treated as unexplained expenditure and added to the total income of the assessee.
9. Aggrieved, the assessee filed the appeal before the ld. CIT(A). The CIT(A) has dismissed the appeal of the assessee.
10. During the course of appellate proceedings before us the ld. Counsel submitted that assessing officer has only given 2 days time to furnish the relevant detail and submission. The ld. Counsel further submitted that assessee along with his wife has withdrawn cash from saving bank on various dates which can be verified from the detail submitted in response to the show cause notice issued by the AO.
On the other hand, the ld. D.R supported the order of lower authorities.
11. Heard both the sides and perused the material on record. During the course of search the assesse has explained that the amount of Rs.9,25,000/- pertaining to interior expenditure was made by way of cash withdrawn from saving bank accounts of both the assessee and his wife and some part of the expenses were also made by cheques to the Interior Decorator as highlighted in the copy of bank statement placed in the paper book. The AO has also not provided sufficient time to the assessee therefore the required details could not be verified at the time of assessment. Considering the above facts and circumstances we restore this issue to the file of the AO for deciding afresh after examination of the relevant supporting details filed by the assesse. Accordingly, this ground of appeal of the assesse is allowed for statistical purposes.
12. In the result, the appeal of the assesse vide ITA No.227/Mum/2023 is dismissed and ITA No. 228/Mum/2023 is allowed for statistical purpose.
Order pronounced in the open court on 20.07.2023
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