DCIT Vs Mojika Real Estate and Developers Pvt. Ltd. (ITAT Jaipur)
Conclusion: Rejection of books of accounts under section 145(3) was not justified as once the books of accounts had been prepared/recasted, AO could not go back to the stage of survey proceedings to contend that since no books of accounts were available at that point in time, he would not consider the books of accounts so recasted/prepared and furnished subsequently.
rejection books account specific defect pointed out AO
Held: In the instant case, AO had rejected the books of accounts invoking the provisions of section 145(3) and had made an addition of Rs 50 lacs in the hands of assessee company. The reason why AO had rejected the books of accounts was that the books of accounts were not found/available at the time of survey and the same had been prepared subsequently and were thus not reliable. The survey was conducted at the premises of assessee on 4.09.2013 and it was an undisputed position that the books of accounts maintained on the tally software were deleted and could not be retrieved by the experts of the department during the survey proceedings. However, basis vouchers and other details available with assessee, the books of accounts were subsequently re-casted and were audited and basis the same, the return of income was filed by assessee. Therefore, once the books of accounts had been prepared/recasted, AO could not go back to the stage of survey proceedings and contend that since no books of accounts were available at that point in time, he would not consider the books of accounts so recasted/prepared and furnished subsequently. AO was well within his rights to question the results or the effect of the transactions so reflected in the books of accounts as to whether the same represented a true and fair picture and identified the defects, if any, however, once the books of accounts had been prepared and submitted for his verification, he could not deny the very existence of such books of accounts. Therefore, the rejection of books of accounts was not justified in the instant case in absence of any specific defect so pointed out by AO.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
These are two cross appeals filed by the Revenue and the assessee against the order passed by the ld. CIT(A)-1, Jaipur dated 29.08.2018 wherein respective grounds of appeal are as under:-
ITA No. 1236/JP/2018 (Revenue’s appeal):
“1. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,66,72,718/- which was made on the basis of pin pointed confession or modus operandi of the business of the assessee by the Director of assessee company that the money received was against sale/advance of sale of flats/plots?”
2. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of 3,66,72,718/- despite the fact that the assessee never retracted from the confession of surrendering income of Rs. 5,00,00,000/- made during the course of survey u/s 133A of I.T. Act ?.
3. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in denying the evidentiary value of statement recorded u/s 133A(3) of the I.T. Act, 1961 despite the fact that admission of additional income surrendered was based upon the discrepancies brought out during the course of survey u/s 133A of the T. Act, 1961 and were clearly admitted by the director of assessee company?
4. Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting addition of Rs. 50 lacs which was made pointing out the deficiencies in books of accounts and applying provisions of sec. 145(3) of I.T. Act, 1961 and the application of provisions u/s 145(3) of the Act has also not been uphold by CIT(A)?”
ITA No. 1429/JP/2018 (Assessee’s appeal):
“1. On the facts and in the circumstances of the case and in law, ld. CIT(A) has grossly erred in confirming the addition of Rs. 1,33,27,282/- made by ld. AO arbitrarily.
2. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the addition of Rs.1,33,27,282/- made by ld. AO on account of alleged undisclosed income of preceding year which was claimed as invested in the work in progress without considering the submissions made during the course of assessment proceedings. Thus, the addition so made deserves to be deleted.
2.1. That the Ld. CIT(A) has further erred in not allowing the benefit of telescoping/set off of the income declared in preceding year and claimed as applied and forming part of closing stock.”
ITA No. 1429/JP/2018
2. Firstly, we take up the Revenue’s appeal. In Grounds of Appeal 1 to 3, the Revenue has effectively challenged the action of the ld CIT(A) in deleting the addition of Rs. 3,66,72,718/- which was based upon the discrepancies brought out during the course of survey u/s 133A and were clearly admitted by the director of assessee company in his statement recorded u/s 133A(3) of the Act.
3. Briefly, the facts of the case are that during the course of assessment proceedings, the AO observed that an amount of Rs. 3,66,72,718/- was disclosed during the course of survey proceedings, however the same was not offered for tax in the return of income filed for the year under consideration. As per the Assessing officer, it is a fact that the said disclosure was made on the basis of various incriminating evidences in the form of loose papers which undisputedly showed that the assessee had indulged in earning of unaccounted money. It was only on the basis of these evidences that Shri Nagar Mal Agarwal, Director of the assessee company had admitted the unaccounted income during the course of survey. It was held by the Assessing officer that during the course of survey, loose papers found were impounded which include number of papers which are not recorded in the books of accounts. During the course of assessment proceedings, the assessee was asked to furnish the page-wise details of the loose papers found during the course of survey. He was also asked to verify the same from the books of account so prepared and produced for examination. After verification of books of accounts, the Assessing officer found that there are number of papers containing entries which are not recorded in the books of accounts. It was held by the AO that it is established that Mr. Nagar Mal Agarwal had rightly disclosed the undisclosed income of Rs. 5.00 crores in A.Y. 2013-14 and 2014-15, which is also established from the fact that assessee itself after the survey had revised its return of income and had declared additional income of Rs. 1,33,27,282/- for A.Y 2013-14. Further assessee never filed any letter for making retraction from the surrender made during the survey. Such admissions, made during the course of survey, legally bind the person who deposed such facts, until and unless rebutted or disproved by evidences otherwise. In the present case the evidences of unrecorded expenditures / receipts are available in the documents impounded during the course of survey and also in the form of admission in the statements recorded of the directors of the assessee company. Accordingly, the addition amounting to Rs. 3,66,72,718/- was made to the total income declared by the assessee which on appeal, has been deleted by the ld CIT(A). Against the said findings, the Revenue is in appeal before us.
4. During the course of hearing, the ld. CIT/DR submitted that a survey operation u/s 133A of the Act was conducted at the business premises of the assessee on 4/9/2013. During the course of survey, sworn statements of director Sh. Nagarmal Agarwal was recorded wherein he voluntarily made admission of total undisclosed income of Rs. 5,00,00,000/- in the hands of assessee company collectively for both AY 2013-14 and 2014-15 and the same admission had got approved during the survey operation by another director Shri Durga Prasad Agarwal whose statement was also recorded. Pursuant to this, assessee revised its ITR for AY 2013-14 wherein it admitted and offered an additional income of Rs. 1,33,27,282/- being part of undisclosed income as owned up by directors during the course of survey operation conducted. However, for balance surrendered amount Rs.3,66,72,718/- (Rs.5,00,00,000/- less Rs. 1,33,27,282/-), assessee did not offer this in its ITR filed for AY 2014-15 which was e-filed on 29/11/2014 at a returned income at Rs.80,98,100/-. It is also a fact that till filing of ITR for AY 2014-15 on 29/11/2014, assessee did not file any retraction letter before the AO or Addl.CIT or Pr.CIT. Therefore, while filing its ITR for AY 2014-15, after a lapse of more than a year, assessee retracted from its earlier stated stand taken on 4/9/2013 without assigning any reason or providing any additional fact to support its contention. The assessee’s only stand was that surrender during survey operation was not backed by corroborative evidences. It was submitted that during the survey operation, no books of accounts were found at the business premises of the assessee nor they were made available to the Authorized party or even to the AO on subsequent dates. Even on analysis of assessee’s P.C. where books were maintained, no such complete books of account were found to been kept. In this regard, reference can be drawn to the sworn statement of Shri Nagarmal Agarwal and on perusal of the same, it is absolutely clear that there were no books of accounts prepared by the assessee and also same were not made available to Authorised Officers during the course of survey operation. Therefore, Balance Sheet for the year prepared thereafter and even e-return filed online later on for the year cannot be relied. If that was the case, assessee could have produced its books of accounts in support of its contention after conclusion of survey operation. But assessee waited for almost a year to retract from its stated position. Further, it is pertinent to note that assessee did not even bother to controvert these facts later on also before the AO. Even these facts have also not been looked into by ld CIT(A) while deciding the present appeal.
5. It was further submitted that the decision of the ld.CIT(A) is not acceptable on merits as well as he has not properly appreciated the facts of the case. During the course of survey proceedings, Shri Nagarmal Agarwal, director of the assessee in his statement admitted an undisclosed income of Rs. 5,00,00,000/- in the hands of the assessee company in FY 2012-13 & 2013-14 relevant to AY 2013-14 & 2014-15. In reply to question No.26 of statement, Shri Nagarmal Agarwal specifically admitted that the transactions found recorded in impounded documents pertains to the company and other related entities and was not recorded in regular books of account and estimated such amount at Rs. 5 crores, received mainly from sale/advance of sale of plots. The said statement was also confirmed by Shri Durga Prasad Agarwal, another director of the assessee company and also the brother of Shri Nagarmal Agarwal. The assessee had revised its return of income for AY 2013-14 wherein an additional income of Rs 1,33,27,282/- was included under the head `business or profession’. However, the assessee has not disclosed balance amount of Rs. 3,66,72,718/- pertaining to the year under consideration.
6. It was submitted that the assessee never flied any letter for making retraction from the surrender made during the survey. The admissions, made during the course of survey operation, legally bind the person who deposed such facts, until and unless rebutted or disproved by evidence otherwise. Further, the assessee is unable to get verify the expenses claimed on account of the consumption of material, labour and others. In case, even after verification of impounded documents, the assessee would have worked the surrender amount to be on higher side, it was its onus to prove it otherwise with the help of corroborative evidence, which it failed to do. Contrary to this, the retraction before AO as discussed in the assessment order is a general, rather a vague retraction and there is no supporting evidence to demonstrate that the impugned statement was factually wrong. Further, it is also pertinent to mention here that assessee has also not raised doubts that statement of directors during survey operations conducted were taken under duress. This fact is also evident from assessee’s written submission made during assessment proceedings. Therefore, as discussed above, on merit as well, ld CIT(A)’s decision suffers from infirmities which deserves to be reversed.
7. It was further submitted that where the assessee makes sworn statement on oath or otherwise during Search & Seizure Operation or during survey operation and makes a voluntary disclosure, then it becomes a vital piece of evidence which can be rebutted only on the basis of other corroborative evidences, and further, if an assessee wishes to retract from his/her stated position, then he/she is supposed to do so within a reasonable period of time and that should have been backed by further corroborative evidences. Further, assessee has also to prove that statement was taken under duress during survey or search & seizure operation which is not the case of assessee here. Even assessee’s submission is also silent on this point. It was further submitted that though assessee’s case pertains to evidences gathered during survey operation, following decisions by various Hon’ble Courts have held the importance of evidentiary value of sworn statement and voluntary disclosure made thereof during survey operation / S&S Operation and treatment of subsequent retraction made after a gap of long duration and support the case of the department:
