Sanjeev Kumar, Machhiwara V. ITO, Khanna

ITA 1342/CHANDI/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73578 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 04-03-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 26-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Additional evidence; Block assessment
• Section: 143(3); 133A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A, CHANDIGARH BEFORE SHRI T.R. SOOD, A.M AND MS. SUSHMA CHOWLA, J M ITA NO. 1342/CHD/2012 ASSESSMENT YEAR : 2009-10 SANJEEV KUMAR V I.T.O. IV, KHANNA PROP. DR. SHERU RICE & GENERAL MILLS KOHARA ROAD, VILLAGE IRAK MACHHIWARA AIJPK 1595 P (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SUDHIR SEHGAL RESPONDENT BY SHRI AKHILESH GUPTA DATE OF HEARING 4.3.2014 DATE OF PRONOUNCEMENT 20.3.2014 O R D E R PER T.R.SOOD, A.M THIS APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A)-II, LUDHIANA DATED 26.11.2012. 2. IN THIS APPEAL THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. THAT THE LEARNED CIT(A) HAS ERRED IN DISMISSING THE APPEAL AND CONFIRMING THE ORDER OF ASSESSING OFFICER ASSESSING INCOME AT RS. 76,87,610/- AGAINST INCOME RETURNED AT RS. 2,87,610/-. 2. THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THA T ADDITION OF RS. 5,00,000/- AND RS. 69,00,000/- MADE BY ASSESSING OF FICER IN THE RETURNED INCOME IS CORRECT. 3. THAT THE LEARNED CIT(A) HAS ERRED IN HOLDING THA T SURRENDER MADE BY THE ASSESSEE IN THE STATEMENT DATED 11.2.2009 WAS NOT W RONG IS WITHOUT CONSIDERING THE FACT THAT CIRCUMSTANTIAL EVIDENCE A ND OTHER MATERIAL ON RECORDS CLEARLY ESTABLISH THAT SURRENDER MADE BY THE ASSESS EE WAS NOT VOLUNTARILY. 4. THAT THE LEARNED CIT(A) HAS FAILED TO CONSIDER T HAT THE REPRESENTATION AND COMMUNICATION TO THE CONCERNED ADDITIONAL COMMI SSIONER OF INCOME TAX, RANGE KHANNA AND THE WORTHY COMMISSIONER OF INCOME TAX, LUDHIANA, BY THE ASSESSEE IMMEDIATELY HAS NOT BEEN CONSIDERED PROPER LY. 5. THAT THE LEARNED CIT(A) HAS ERRED TO CONSIDER TH AT THE LEARNED ASSESSING OFFICER HAS FAILED TO ESTABLISH BY BRINGING ON RECO RD ANY EVIDENCE THAT ADDITION OF RS. 5,00,000/- AND 69,00,000/- WAS WARRANTED AND CALLED FOR. 2 6. THAT THE LEARNED CIT(A) HAS ERRED IN NOT ADMITTI NG ADDITIONAL EVIDENCES U/S 46 A WHICH WAS ESSENTIAL AND MUST FOR THE CORRE CT DISPOSAL OF THE ORDER. 3 BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FIL ED RETURN OF INCOME DECLARING INCOME OF RS. 287610/-. SURVEY WAS CONDU CTED ON 11.2.2009 IN THE PREMISES OF THE ASSESSEE WHERE CERTAIN DISCREPA NCIES WERE NOTICED. ON THE BASIS OF THESE ALLEGED DISCREPANCIES A SUM O F RS. 75 LAKH WAS SURRENDERED. THE ASSESSEE RETRACTED FROM SURRENDER BY WRING A ALETTER ON 18.2.2009 TO ADDL CIT, KHANNA RANGE, KHANNA. THIS SURRENDERED SUM WAS NOT INCLUDED IN THE RETURN OF INCOME. DURING TH E COURSE OF ASSESSMENT PROCEEDINGS A SHOW CAUSE NOTICE DATED 6. 9.2011 WAS ISSUED REQUIRING THE ASSESSEE TO SHOW CAUSE AS TO WHY THE AMOUNT OF RS. 75 LAKH SURRENDERED DURING THE COURSE OF SURVEY CONDUC TED ON 11.2.2009, SHOULD NOT BE INCLUDED IN THE INCOME. THE ASSESSEE AGAIN REITERATED THE SURRENDER WAS OBTAINED UNDER INTIMIDATION AND COERC ION AND WAS ALSO BASED ON FORGED DOCUMENTS. SINCE THE ASSESSEE HAS ALREADY RETRACTED FROM THE SURRENDER THEREFORE THIS AMOUNT CANNOT BE INCLUDED IN THE ASSESSMENT. THE ASSESSEE ALSO SOUGHT COPIES OF SUR RENDER DOCUMENTS WHICH WERE SUPPLIED. ANOTHER LETTER WAS WRITTEN ON 7.12.2011 BY WHICH THE ASSESSEE WAS ASKED TO FILE REPLY TO THE SHOW CA USE NOTICE DATED 6.9.2011. THE ASSESSEE AGAIN FILED DETAILED REPLY STATING THAT SURRENDER WAS ILLEGAL WHICH THE ASSESSEE HAS RETRACTED THEREF ORE SAME CANNOT BE INCLUDED. THEREAFTER THE ASSESSING OFFICER DISCUSS ED VARIOUS QUESTIONS AND ANSWERS IN THE STATEMENT RECORDED DURING SURVEY AND HOW METICULOUSLY STATEMENT WAS RECORDED AND SAME BEING IN THE NATURE OF ADMISSION THEREFORE SAME WAS VALID. HE ALSO REFERR ED TO FEW DECISIONS AND ULTIMATELY ADDED THE AMOUNT OF RS. 74 LAKHS I.E . RS. 69 LAKHS ON ACCOUNT OF RECEIVABLES AND RS. 5 LAKHS ON ACCOUNT O F SURRENDER LETTER AGAINST CASH. HOWEVER, NO ADDITION WAS MADE FOR R S. 1 LAKH WHICH WAS ALSO SURRENDERED ON ACCOUNT OF DIFFERENCE IN STOCK. 4 ON APPEAL THE SUBMISSIONS MADE BEFORE THE ASSESSI NG OFFICER WERE REITERATED. THE LD. CIT(A) FORWARDED THESE SUBMISS IONS TO THE ASSESSING 3 OFFICER FOR HIS COMMENTS WHO IN A REPORT DATED 4.6. 2012 OBSERVED THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THAT SURRENDER MA DE IN THE STATEMENT WAS WRONG. THIS REPORT WAS GIVEN TO THE ASSESSEE W HO IN TURN SOUGHT TO GET CERTAIN ADDITIONAL EVIDENCE ADMITTED IN THE FOR M OF A CERTIFICATE FROM SARPANCH AND AFFIDAVITS OF SOME INDIVIDUALS THROUGH WHICH THE ASSESSEE WANTED TO PROVE THAT NAMES FROM WHICH THE ALLEGED R ECEIVABLES WERE THERE WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS, I N FACT DID NOT EXIST. THIS ADDITIONAL EVIDENCE WAS ALSO FORWARDED TO THE ASSESSING OFFICER BY THE LD. CIT(A) WHO REPORTED BACK THAT THE ASSESSEE WAS GIVEN 19 HEARINGS AND THEREFORE ASSESSEE CANNOT SAY THAT HE WAS PREVENTED FOR PRODUCING SUCH ADDITIONAL EVIDENCE ON THE BASIS OF SUCH EVIDENCE CAN BE ADMITTED. 5 THE LD. CIT(A) IN THIS BACKGROUND REFUSED TO ADMI T ADDITIONAL EVIDENCE. THEREAFTER HE ADJUDICATED THE ISSUE ON M ERITS AND MAINLY OBSERVED THAT ADMISSION WAS PROPER EVIDENCE AND PRO PER STATEMENT HAS BEEN RECORDED WHICH COULD NOT BE PROVED BY THE ASSE SSEE TO BE WRONG AND THEREFORE ASSESSMENT WAS JUSTIFIED. 6 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE NARRA TED THE FACTS AND SUBMITTED THAT NOTHING INCRIMINATING WAS FOUND DUR ING THE SURVEY BUT THE SURVEY TEAM WAS ADAMANT AND BENT UPON TO EXTRACT SU RRENDER. THE TEAM PLANTED CERTAIN SLIPS (COPY OF WHICH IS AVAILABLE A T PAGE 88 TO 91). ORIGINAL SLIPS WERE NEVER GIVEN TO THE ASSESSEE. H E POINTED OUT THAT WITHIN A WEEK THE ASSESSEE RETRACTED FROM THE SURRE NDER AND IN FACT WROTE A COMPLAINT HOW THE SURRENDER WAS OBTAINED ILLEGALL Y VIDE LETTER DATED 18.2.2009 ADDRESSED TO THE ADDL CIT, KHANNA (PAGE 2 4 & 25 OF PAPER BOOK). THOUGH THE ASSESSEE RECEIVED A REPLY FROM TH E OFFICE OF ADDL CIT (COPY OF WHICH IS AVAILABLE AT PAGE 26 OF PAPER BOO K) BUT NO ENQUIRIES WERE CONDUCTED BY THE ADDL CIT. THEREAFTER THE ASS ESSEE ALSO WROTE A LETTER TO THE CIT (COPY OF WHICH IS AVAILABLE AT PA GE 27 TO 28 OF PAPER BOOK). VERBALLY THE CIT ASSURED THE ASSESSEE THAT NO COGNIZANCE OF THE 4 SURRENDER WOULD BE TAKEN BUT THE ASSESSING OFFICER HAS NOT FOLLOWED THE ASSURANCES. 7 THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTE D THAT THE ASSESSEE HAS REPLIED TO ALL THE NOTICES ISSUED U/S 143(2) AS WELL AS QUESTIONNAIRE ISSUED TO HIM (COPIES AVAILABLE IN TH E PAPER BOOK). NO DEFECT WAS FOUND IN THE SAME AND ADDITION HAS BEEN MADE MERELY ON THE BASIS OF SURRENDER STATEMENT WHICH HAS ALREADY BEEN RETRACTED AND THEREFORE SUCH ADDITION IS NOT MAINTAINABLE. HE AL SO POINTED OUT THAT THE PERSONS AGAINST WHOSE NAME SOME SLIPS WERE PLANTED SHOWING RECEIVABLES NEVER EXISTED AND THAT IS WHY THE ASSE SSEE WANTED TO FURNISH EVIDENCE THAT THESE PERSONS DID NOT EXIST BUT THE L D. CIT(A) WRONGLY REFUSED TO ADMIT SUCH ADDITIONAL EVIDENCE. IN FACT SUCH ORIGINAL SLIPS WHICH WERE PLANTED BY THE DEPARTMENT AND WERE TAKEN AWAY BY THE SURVEY TEAM AND HAVE NEVER BEEN SHOWN TO THE ASSESSEE. ON LY COPIES HAVE BEEN PROVIDED. ACCORDING TO HIM IN THESE CIRCUMSTA NCES ADDITION IS NOT MAINTAINABLE. HE ALSO TRIED TO DISTINGUISH THE DEC ISION RELIED ON BY THE ASSESSING OFFICER AND THE LD. CIT(A). THE LD. COUNS EL FOR THE ASSESSEE REFERRED TO THE COPIES OF THE SLIPS STATED TO HAVE BEEN FOUND DURING THE SURVEY WHICH ARE AVAILABLE AT PAGE 88 TO 91 AS WELL AS COPY OF INVENTORY OF CASH. HE ALSO SUBMITTED THAT IN THIS CASE THE AS SESSEE HAS BEEN FILING THE RETURN REGULARLY AND NO SUBSTANTIAL ADDITION HA S BEEN MADE EVEN WHEN THE ASSESSMENT WERE TAKEN UP IN THE SCRUTINY WHICH CLEARLY SHOW THAT THE ASSESSEE IS A LAW ABIDING CITIZEN. 8 ON THE OTHER HAND, THE LD. D.R. FOR THE REVENUE S UPPORTED THE ORDER OF ASSESSING OFFICER AND THE LD. CIT(A) 9 WE HAVE GONE THROUGH THE RIVAL SUBMISSIONS CAREFU LLY. ADMITTEDLY SURVEY WAS CONDUCTED ON 11.2.2009 AND THE STATEMENT RECORD DURING SURVEY ON 11.2.2009 READS AS UNDER: TO, 11/2/2009 THE ADDITIONAL COMMISSIONER OF INCOME-TAX RANGE- KHANNA, KHANNA 5 SUBJECT: SURVEY U/S 133A OF INCOME-TAX ACT. AFTER FOR SURRENDER OF ADDITIONAL INCOME-: REQUEST REGARDING SIR, SURVEY OPERATION U/S 133 A OF INCOME-TAX ACT, 1961 HAS BEEN CONDUCTED BY THE SURVEY PARTY OF INCOME-TAX DEPT. CONSISTING OF FOLLOWING OFFICERS AND OFFICIALS :- 1. SH. GURMEET SINGH SOHAL, I.T.O 2. SH. JASBIR S. SAINI, I.T.O 3. SH. R.S. DHAMI, INSPECTOR 4. SMT. HARJIT KAUR , INSPECTOR AT OUR BUSINESS PREMISES I.E. M/S. DR. SHERU RICE & GEN. MILLS, MACHHIWARA- KOHARA ROAD, VILL. IRAQ, DISTT. LUDHIANA TODAY I.E; 11/2/2009. DURING THE COURSE OF SURVEY DISCREPANCIES IN CASH AS PER CASH BOOK AN D PHYSICAL VERIFICATION WAS FOUND AND EXCESS CASH OF RS. 5,00,000/- WAS FOUND. FURTHER EXCESS STOCK OF RS. 1 LAKH WAS FOUND ON PHYSICAL VERIFICATION. SOME DOCUMENTS IN THE SHAPE OF RECEIVABLES WERE FOUND FROM OUR PREMISES, WHICH WER E NOT ACCOUNTED FOR IN OUR BOOKS OF ACCOUNTS. IN ORDER TO PEACE OF MIND AND FU RTHER LITIGATION. I HEREBY AFTER THE FOLLOWING ADDITIONAL INCOME FOR THE FINAN CIAL YEAR 2008-09 OVER AND ABOVE THE INCOME AS PER BOOKS OF ACCOUNTS: 1. CASH RS. 5,00,000/- 2. STOCK RS. 1,00,000/- 3. RECEIVABLES RS. 69,00,000/- TOTAL RS. 75,00,000/- THE ABOVE AMOUNT OF RS. SEVENTY FIVE LAKH IS SURREN DERED AS ADDITIONAL INCOME FOR THE FINANCIAL YEAR 2008-09 OVER AND ABOV E ANY REGULAR INCOME AS PER BOOKS OF ACCOUNTS SUBJECT TO NO PENAL ACTION U/ S 271(1)(C) OF INCOME TAX ACT. 1961. THE ABOVE SURRENDER OF INCOME HAS BEEN M ADE VOLUNTARILY WITHOUT ANY FEAR AND PRESSURE FROM THE DEPT. THREE CHEQUES OF RS. 23,17,500/-( DETAIL OF WHICH IS GIVEN BELOW HAVE BEEN GIVEN AS IN LIEU OF TAX PAYABLE ON ADDITIONAL SURRENDERED INCOME OF RS. 75,00,000/-. SL.NO. CHEQUE NO. AMOUNT DATE OF CHEQUE 1 0232968 5,00,000/- 20.02.2009 2 0232969 9,00,000/- 15.03.2009 3 0232970 9,17,500/- 25.03.2009 THE ABOVE CHEQUES HAVE BEEN GIVEN OUT OF C/A/C NO. 300079 OF B.O.I, MACHHIWARA. I REQUEST YOUR HONOUR TO KINDLY ACCEPT THE OFFER OF SURRENDER OF ADDITIONAL INCOME OF RS. 75,00,000/- (RS. SEVENTY FIVE LAKHS). YOURS FAITHFULLY SD/- FOR DR. SHERU RICE & GEN. MILLS. NARESH AGGARWAL, ADVOCATE ABOVE SHOWS THAT NATURE OF DISCREPANCIES HAS NOT BE EN SPECIFIED WHICH CREATES DOUBT. THEREAFTER THE ASSESSEE WROTE FOLLO WING LETTER TO ADDL CIT ON 18.2.2009: 6 TO, 18/2/2009 THE ADDITIONAL COMMISSIONER OF INCOME TAX KHANNA RANGE KHANNA- 141401 ------------------------ SUB: REQUEST FOR RECONSIDERATION OF SURVEY CASE U/ S 133 A OF M/S DR. SHERU RICE & GEN MILLS VILL. IRAQ (LUDHIANA) SIR, WITH REFERENCE TO THE ABOVE NOTED SUBJECT I DRAW YO UR KIND ATTENTION TO THE SURRENDER APPLICATION SUBMITTED IN THE ABOVE SA ID CASE WHICH IS NEITHER AT WILL NOR SUBMITTED VOLUNTARILY. THE APPLICANT WAS I NTIMIDATED BY THE OFFICERS OF THE DEPT. TO PREPARE FORGED PAPERS WHEREIN IMAGINAR Y & NON EXISTENT NAMES WERE MENTIONED AS DEBITORS (RECEIVABLE) FOR A TOTAL VALUE OF RS. 69,00,000/- (RS. SIXTY NINE LAKH ONLY). EVEN THE CASH IN HAND F IGURES WERE INCREASED BY RS. FIVE LAKH JUST TO GET SURRENDER OF RS. 75,00,00 0/- FOR THE SAKE OF NAME & FAME OF THE DEPT. & TO PUT FEAR PYCHOSIS IN THE MIN DS OF THE GENERAL PUBLIC. THE SURVEY AT THE BUSINESS PREMISES OF THE FIRM STA RTED AT BOUT 11.30 A.M. ON 11.02.2009 WHEN THE SURVEY PARTY OF YOUR DE PT. TOOK FULL CONTROL OF ALL THE ACCOUNT BOOKS & THE CASH AVAILABLE. SOME STAFF MEMBERS OF YOUR DEPT. STARTED COUNTING THE STOCK. WHEN THE SURVEY OPERATI ON WAS GOIND ON THE OFFICERS HAVE BEEN THREATENING & INTIMIDATING ME TO PAY AT L EAST RS. 70,00,000/- RS. SEVENTY LAKH OF INCOME TAX OR FACE THE WRATH OF THE DEPT. WITH EACH PASSING MINUTE THE OFFICERS HAVE BEEN THREATENING ME DIRE C ONSEQUENCES IF THE SURRENDER IS NOT MADE. SURVEY WHICH STARTED AT 11.3 0 A.M. ON 11.02.2009 WAS SUPPOSED TO ST6OP AT THE SUNSET BUT NO NO IT CONTIN UED FOR THE WHOLE NIGHT. NOTHING INCRIMINATING WAS FOUND. NO DIFFERENCE IN C ASH WAS FOUND BUT THE OFFICERS WERE HELL BENT FOR THE SURRENDER. THE OFFI CER WERE TIME & AGAIN THREATING TO LOCK THE PREMISES & BLACK LIST THE FIR M SO THAT NO BUSINESS MAN MAY HAVE THE DARE TO DEAL WITH OUR FIRM. THEY FURTHER T HREATENED TO PUT ME BEHIND BARS IF THE SURRENDER IS NOT MADE & ULTIMATELY AT A BOUT 7 A.M. THE NEXT DAY I.E. ON 12.02.2009 THE FAMILY WAS SO MUCH FRIGHTENED THA T THE OFFICERS OF THE DEPT. GOT PREPARED FORGED PAPERS OF IMAGINARY & NON EXIST ENT DEBTORS (RECEIVABLES). NOT ONLY THIS THE OFFICERS INTIMIDATED ME TO SIGN P APERS WHEREIN CASH IN HAND WAS SHOWN TO BE FIVE LAKH MORE THAN THE ACTUAL FIGU RE TO GET SURRENDER OF RS. 75,00,000/- ONLY (RS. SEVENTY FIVE LAKH) ONLY. EVEN THOUGH THE PAPERS WERE GOT SIGNED ON 12.02.2009 AT ABOUT 7 A.M. BUT THE DA TE MENTIONED WAS 11.02.2009. IN VIEW OF THE FACTS STATED ABOVE I HER EBY REQUEST YOU TO LOOK INTO THE MATTER & NOT TO TAKE ANY COGNIZANCE OF MY SURRE NDER LETTER WHICH WAS TAKEN UNDER INTIMIDATION & COERCION & BASED ON FORGED DOC UMENTS GOT PREPARED UNDER THREAT BY THE SURVEY PARTY. I FURTHER REQUEST YOU T O PLEASE REDUCE THE SURRENDER VALUE BY RS. 74,00,000/- (SEVENTY FOUR LAKH) BEING THE VALUE OF RECEIVABLE (RS. 69,00,000/-) WHICH IS BASED ON FORGED PAPERS & RS. 500000/- (RS. FIVE LAKH) VALUE OF EXCESS CASH SHOWN THAN THE ACTUAL CASH FOU ND FROM THE FIRM. I ALSO REQUEST YOU TO NOT TO PRESENT THE POST DATED CHEQUES TO RECOVER THE INCOME TAX TILL THE DISPOSAL OF THIS APPLICATIO N. IN THE MEAN TIME I AM REQUESTING THE BANK TO STOP PAYMENT OF THE CHEQUES ISSUED TO YOU AT THE TIME OF SURVEY. HOPING EARLY CONSIDERATION. WITH THANKS, YOURS FAITHFULLY, DR. SHERU RICE & GEN MILLS SD/- 18/2/2009 (SANJIV KUMAR) PROPRIETOR 7 10 AGAINST THIS LETTER THE ASSESSEE GOT FOLLOWING R ESPONSE FROM ADDL CIT: NO. 1076 OFFICE OF THE ADDL. COMMISSIONER OF INCOME TAX, RANGE KHANNA, DATED:- 20.02.2009 TO, SH. SANJEEV KUMAR, P/O M/S DR. SHERU RICE & GENL MILLS, VILL: IRAQ, LUDHIANA SUB: REQUEST FOR RECONSIDERATION OF SURVEY CASE U/S 133 A OF M/S SHERU RICE & GENL MILLS, VILL: IRAQ, LUDHIANA-REG.-. *** PLEASE REFER TO YOUR LETTER DT. 18.02.2009 ON THE C APTIONED SUBJECT. I HAVE CAREFULLY GONE THROUGH THE CONTENTS OF YOUR AFOREME NTIONED LETTER AND CALLED FOR A FACTUAL REPORT FROM THE CONCERNED OFFI CER W.R.T THE VARIOUS ALLEGATIONS LISTED BY YOU THEREIN. YOU ARE REQUESTE D TO BE PRESENT IN THIS OFFICE ON 24.02.2009 AT 11.30 AM FOR A DISCUSSION I N THIS REGARD, SO AS TO APPRECIATE YOUR VERSION MORE CLEARLY. YOU MAY ALSO BEING YOUR COUNSEL WITH YOU FOR THIS PURPOSE. YOURS FAITHFULLY, SD/- (D.S.BRAR) ADDL. COMMISSIONER OF INCOME TAX, RANGE KHANNA. IT SEEMS NO ENQUIRY HAS BEEN CONDUCTED AND THE DEP ARTMENT HAS NOT BEEN ABLE TO PRODUCE ANY RECORDS OR EVIDENCES TO SH OW WHETHER ANY ENQUIRY WAS CONDUCTED. THE ASSESSEE IN THE ABSENCE OF ANY ENQUIRY APPROACHED THE OFFICE OF THE CIT-II, LUDHIANA AND W ROTE FOLLOWING LETTER ON 24.2.2009: TO, 24/02/2009 THE COMMISSIONER OF INCOME TAX LUDHIANA II LUDHIANA ------------ SUB: INQUIRY REGARDING SURVEY OPERATION AT THE PREM ISES OF DR. SHERU RICE & GEN MILLS VILL: IRAQ (MACHHIWARA) SIR, APROPOS THE SUBJECT CITED ABOVE IT IS HUMBLY SUBMIT TED THAT SURVEY U/S 133-A WAS CONDUCTED AT THE PREMISES OF THE FIRM ON 11-02-2009 IN WHICH NO INCRIMINATING DOCUMENT WAS FOUND. THE ADDITIONAL CO MMISSIONER OF INCOME TAX KHANNA RANGE WHO SUPERVISED THE OPERATION PERSONALL Y VISITED THE BUSINESS 8 PREMISES & SUPERVISED THE OPERATION. WHEN NOTHING I NCRIMINATING WAS FOUND HE THRESHED US & THE OFFICERS ON DUTY. IT WAS AT THE B EHEST OF SH. BRAR SAHIB THAT THE OFFICERS ON DUTY GOT PREPARED FORGED PAPERS IN WHICH NON EXISTENT & IMAGINARY DEBTORS (RECEIVABLES) AMOUNTING TO RS. 69 ,00,000/- (SIXTY NINE LAKH) WERE SHOWN & CASH IN HAND WAS INCREASED BY RS . 5,00,000/- (RS. FIVE LAKH) TO GET SURRENDER OF RS. 75,00,000/- (RS. SEVE NTY FIVE LAKH). A REQUEST LETTER WAS WRITTEN TO THE AD. C.I.T, KHAN NA (COPY ENCLOSED) TO RECONSIDER THE SURRENDER. I NEVER WANTED TO COMPLAI NT THE HIGHER AUTHORITIES & HAVE BEEN THINKING THAT WITH THE PASSAGE OF TIME GO OD SENSE WILL PREVAIL ON THE AD. C.I.T. SH. BRAR. BUT ON RECEIPT OF THE APPLICAT ION MR. BRAR ADDL. C.I.T. CALLED SH. NARESH AGGARWAL ADVOCATE WHO WAS PRESENT AT THE TIME OF SURVEY AND SH. J.S. LOTEY TO HIS OFFICE & TOLD THEM TO CALL THE AS SESSEE & WITHDRAW THE APPLICATION FAILING WHICH MR. BRAR THREATENED OF SE RIOUS CONSEQUENCES. IN VIEW OF THE ABOVE SAID FACTS & THE BEHAVIOUR OF MR. BRAR I HAVE NO HOPE THAT I WILL GET MY JUSTICE AT THE HANDS OF SH. BRAR. I THEREFORE HUMBLY REQUEST YOU TO LOOK IN TO THE MATTER & INQUIRE SHY SH. BRAR ADD. C.I.T. KHANNA GOT PREPARED FORGED DOCUMENTS OF NON EXISTENT & IMA GINARY RECEIVABLES WORTH RS. 69,00,000/- (RS. SIXTY NINE LAKHS) FROM OFFICER S ON DUTY & WHY THE CASH AMOUNT WAS SHOWN EXCESS BY RS. 5,00,000/- (RS. FIVE LAKH ONLY) AT THE TIME OF SURVEY. MR. BRAR UNDER THE GARB OF HONESTY HAS LITT LE A DACOIT. PLEASE LOOK INTO THE MATTER & GIVE JUSTICE TO ME AND SUITABLE ACTION AGAINST SH. D.S. BRAR ADDL. COMMISSIONER OF INCOME TAX KHANNA RANGE, KHANNA FOR INSTIGATING THE OFFICERS WHO CONDUCTED SURVEY TO GET PREPARED FORGED DOCUMEN TS TO HAVE SURRENDER OF RS. 75,00,000/- (RS. SEVENTY FIVE LAKH ONLY) FROM M E BY ILLEGAL MEANS. HOPING EARLY INQUIRY YOURS FAITHFULLY FOR DR. SHERU RICE & GEN MILLS SD/- (PROPRIETOR) THE CONTENTS OF ABOVE CORRESPONDENCE CLEARLY SHOW T HAT THE ASSESSEE HAS BRAVELY POINTED OUT HOW THE SURVEY TEAM HAS EXT RACTED SURRENDER FROM HIM, WHICH IS ILLEGAL. INSTEAD OF CONDUCTING ANY E NQUIRY THE REVENUE HAS SIMPLY HUSHED UP THE MATTER. IN SUCH CIRCUMSTANCES THE ASSESSEE COULD DO NOTHING BUT WE MUST APPRECIATE THE ASSESSEE WHO WAS BRAVE ENOUGH TO WRITE THESE LETTERS. 11 NOW THE QUESTION IS WHAT IS THE EVIDENTIARY VALU E OF STATEMENT RECORDED IN THE SURVEY. IDENTICAL ISSUE CAME UP F OR CONSIDERATION OF HON'BLE MADRAS HIGH COURT IN CASE OF CIT V. S. KHA DER KHAN SON, 300 ITR 157. IN THAT CASE THE ASSESSEE HAD FILED RETUR N DECLARING INCOME OF RS. 12640/- FOR ASSESSMENT YEAR 2001-02. ON JULY 4 ,2001 A SURVEY WAS CONDUCTED IN THE PREMISES OF THE ASSESSEE AND THROU GH HIS SWORN STATEMENT ONE OF THE PARTNER OF THE FIRM NAMELY SHR ASIF KHAN OFFERED ADDITIONAL INCOME OF RS. 20 LAKHS FOR ASSESSMENT YE AR 2001-02 AND RS. 30 LAKHS FOR ASSESSMENT YEAR 2002-03. ON AUGUST 3, 2001 THE STATEMENT WAS RETRACTED STATING THAT ASIF KHAN WAS NEW TO THE 9 MANAGEMENT AND HE COULD NOT ANSWER THE ENQUIRIES MA DE AND AS SUCH AGREED TO ADDITION WHICH COULD NOT BE POSSIBLE BECA USE OF LOW PROFIT IN THE BUSINESS BECAUSE OF SEVERE COMPETITION. IN THAT CA SE THE BOOKS OF ACCOUNTS WERE NOT PRODUCED AND THEREFORE ADDITION O F RS. 20 LAKHS WAS MADE ON THE BASIS OF A STATEMENT RECORDED DURING TH E SURVEY. HON'BLE HIGH COURT REFERRED TO THE PROVISIONS OF SECTION 132 & 133A AND OBSERVED THAT THE STATEMENT RECORDED DURING THE SU RVEY U/S 133A DOES NOT HAVE EVIDENTIARY VALUE. THERE WAS DIFFERENCE B ETWEEN THE STATEMENT RECORDED U/S 132(4) AND 133A. IN THIS CASE ALSO TH E REFERENCE WAS MADE TO THE DECISION OF HON'BLE SUPREME COURT IN CASE OF PULLANGODE RUBBER PRODUCE CO. LTD VS. STATE OF KERALA AND ANOTHER, 91 ITR 18. INCIDENTALLY THIS DECISION HAS ALSO BEEN RELIED ON BY THE LD. CI T(A). THE COURT POINTED OUT THAT IN THIS CASE HON'BLE APEX COURT CL EARLY HELD THAT ADMISSION IS EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IS STILL OPEN TO THE PERS ON WHO MADE ADMISSION TO SHOW THAT IT IS INCORRECT. FOR READY REFERENCE HEA D NOTE OF THIS DISCUSSION READS AS UNDER: ENTRIES MADE BY THE ASSESSEE IN THE ACCOUNT BOOKS TREATING A PORTION OF THE GENERAL EXPENDITURE AS EXPENSES TOWARDS IMMATURE PL ANTS AND CAPITALIZING SUCH PORTION AMOUNT TO AN ADMISSION THAT THE AMOUNT IN Q UESTION 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 FOR THE PURPOSE OF EXPLANATION (2) TO SECTION 5 OF THE KERA LA AGRICULTURAL INCOME-TAX ACT, 1950. SUCH ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE ASSESSEE WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THE ASSE SSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUN T DO NOT DISCLOSE THE CORRECT STATE OF FACTS. THEREAFTER HON'BLE MADRAS HIGH COURT MADE DETAILED DISCUSSION AND ULTIMATE CONCLUDED THAT STATEMENT RECORDED DURING S URVEY WILL NOT CARRY ANY EVIDENTIARY VALUE. IN FACT HON'BLE HIGH COURT REFERRED TO CIRCULAR OF CBDT DATED 10.3.2013 WHICH READS AS UNDER: INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHE RE ASSESSES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE UNDISCLOS ED INCOME DURING THE COURSE OF THE SEARCH AND SEIZURE AND SURVEY OPERATI ONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, ARE LATER RETRACT ED BY THE CONCERNED ASSESSES WHILE FILING RETURNS OF INCOME. IN THESE C IRCUMSTANCES, ON CONFESSIONS DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTION OF EVIDENCE OF INCOME W HICH LEADS TO INFORMATION ON 10 WHAT HAS NOT BEEN DISCLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME- TAX DEPARTMENT. SIMILARLY, WHILE RECORDING STATEMEN T DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSELY. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, THE ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES / MATERIALS GATHERED DURING THE COURSE OF SEARCH / SURVEY OPERA TIONS OR THEREAFTER WHILE FRAMING THE RELEVANT ASSESSMENT OR DERS. THE COURT ALSO CONCLUDED THAT TOTAL ANALYSIS UNDER PARA 14 WHICH IS AS UNDER: FROM THE FOREGOING DISCUSSION, THE FOLLOWING PRINCI PLES CAN BE CULLED OUT: (I) 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 TO SHOW THAT IT IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUN T DO NOT CORRECTLY DISCLOSE THE CORRECT STATE OF FACTS, VIDE DECISION OF THE AP EX COURT IN PULLANGODE RUBBER PRODUCE CO. LTD. V. STATE OF KERALA [1973] 91 ITR 1 8; II) IN CONTRADISTINCTION TO THE POWER UNDER SECTION 133 A, SECTION 132(4) OF THE INCOME-TAX ACT ENABLES THE AUTHORIZED OFFICER T O EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH E XAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE INCOME-TAX ACT. ON THE O THER HAND, WHATEVER STATEMENT IS RECORDED UNDER SECTION 133A OF THE INC OME-TAX ACT IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE ANY SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW, VIDE PAUL MATHEWS AND SONS V. CIT[2003] 263 ITR 101(KER); III) THE EXPRESSION SUCH OTHER MATERIALS OR INFORM ATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER CONTAINED IN SECTION 158BB O F THE INCOME TAX ACT, 1961, WOULD INCLUDE THE MATERIALS GATHERED DURING THE SUR VEY OPERATION UNDER SECTION 133A , VIDE CIT V. G.K. SENNIAPPAN [2006] 284 ITR 2 20 (MAD); (IV) THE MATERIAL OR INFORMATION FOUND IN THE COURS E OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDITION IN THE BLOCK ASSESSMENT, VIDE DECISION OF THIS COURT IN T.C. (A) NO. 2620 OF 2006 (BETWEEN CIT V. S. AJIT KUMAR [2008] 300 ITR 152 (MAD); (V) FINALLY, THE WORD MAY USED IN SECTION 133 A ( 3) (III) OF THE ACT, VIZ., RECORD THE STATEMENT OF ANY PERSON WHICH MAY BE US EFUL FOR, OR RELEVANT TO, ANY PROCEEDING UNDER THIS ACT, AS ALREADY EXTRACTED AB OVE, MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURI NG THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF . FROM ABOVE IT BECOMES ABSOLUTELY CLEAR THAT THE ADD ITION CANNOT BE MADE MERELY ON THE BASIS OF STATEMENT WHICH HAS NO EVIDE NTIARY VALUE. THIS IS FURTHER CLARIFIED BY THE BOARD ITSELF THAT NO EFFOR TS SHOULD BE MADE TO EXTRACT THE SURRENDER WITHOUT CORROBORATING EVIDENC E. 12 THE ABOVE DECISION CAME UP FOR CONSIDERATION OF THE HON'BLE SUPREME COURT IN CASE REPORTED AT 210 TAXMAN 248 WH EREIN IT WAS RECORDED AS UNDER: 11 THIS CIVIL APPEAL FILED BY THE DEPARTMENT PERTAINS TO ASSESSMENT YEAR 2001- 02. IN VIEW OF THE CONCURRENCE FINDING OF FACT THI S CIVIL APPEAL IS DISMISSED. THEREFORE ORDER OF HON'BLE HIGH COURT GETS EMERGED WITH THE ORDER OF HON'BLE SUPREME COURT AND IN TURN BECOMES LAW OF THE LAND U NDER ARTICLE 141 OF THE CONSTITUTION OF INDIA. 13 WE FAIL TO UNDERSTAND THAT ONCE THE ASSESSEE HAS RETRACTED FROM SURRENDER WITHIN SEVEN DAYS AND HAS IN FACT COMPLAI NED AGAINST HIGH HEADEDNESS OF THE SURVEY TEAM LED BY ADDL CIT, WHAT PREVENTED THE DEPARTMENT FROM MAKING ANY ENQUIRIES IN RESPECT OF THE PERSONS FROM WHOM SO CALLED RECEIVABLES WERE THERE WHICH HAD NOT BEEN RECORDED IN THE BOOKS OF ACCOUNTS. AS HELD BY HON'BLE SUPREME C OURT IN CASE OF PULLANGODE RUBBER PRODUCE CO. LTD VS. STATE OF KERA LA AND ANOTHER (SUPRA) THAT ADMISSION IS IMPORTANT PIECE OF EVIDEN CE BUT THE PERSON MAKING ADMISSION CAN SHOW THAT SUCH ADMISSION IS NO T CORRECT. ONCE THIS WAS DONE BY THE ASSESSEE, THE ONUS WAS ON THE REVEN UE TO MAKE ENQUIRIES AND ONLY THEN SOME ADDITION COULD HAVE BE EN MADE ON THE BASIS OF SUCH ENQUIRIES. 14 WE HAVE ALSO PERUSED THE SLIPS OF RECEIVABLES WH ICH ARE STATED TO HAVE BEEN FOUND DURING SURVEY (COPY OF WHICH IS AVA ILABLE AT PAGE 88 TO 91). THESE SLIPS READ AS UNDER: 12 13 15 ABOVE CLEARLY SHOW THAT NO ADDRESS IS MENTIONED. IT DOES NOT INDICATE THAT THE AMOUNT IS RECEIVABLE. IF THE ASSE SSEE ADMITTED DURING THE SURVEY THAT THESE AMOUNTS REPRESENT RECEIVABLES, TH E REVENUE SHOULD HAVE AT LEAST EXTRACTED ADDRESS OF SUCH PERSONS AND WHEN THE ASSESSEE RETRACTED FROM THE SURRENDER THEN THE STATEMENTS OF THESE PERSONS SHOULD HAVE BEEN RECORDED WHICH HAS NOT BEEN DONE. FURTHE R PAGE 92 GIVES THE INVENTORY OF CASH IN HAND WHICH IS AS UNDER. 14 16 THERE IS CLEAR CUT OVER WRITING IN THE INVENTORY OF NOTES OF RS. 500. FURTHER THERE IS NO MENTION ABOUT ANY NOTE FOUND IN THE DENOMINATION OF RS. 50. THESE FEATURES ALSO CREATE DOUBT REGARDING THE GENUINENESS OF THE SURVEY. WE HAVE ALSO PERUSED THE DETAILS OF RE TURN FILED IN THE EARLIER YEARS AND CHART IS AS UNDER: CHART SHOWING THE INCOME AS ASSESSED BY THE DEPART MENT IN LAST FEW YEARS 15 ASSESSMENT YEAR RETURNED INCOME BY THE ASSESSEE ASSESSED INCOME U/S 143(3) OF INCOME -TAX ACT, 1961 ASSESSED INCOME U/S 143(1) OF INCOME -TAX ACT, 1961 2005-06 2,00,430/- 3,20,430/- -- 2006-07 1,86,253/- -- 1,86,253/- 2007-08 2,38,610/- 3,39,224/- -- 2008-09 1,80,310/- -- 1,80,310/- ABOVE CLEARLY SHOW THAT IN THE LAST FOUR YEARS TWO ASSESSMENTS HAVE BEEN TAKEN UP IN SCRUTINY BUT HARDLY ANY SUBSTANTIAL ADD ITION HAVE BEEN MADE. IN FACT PERUSAL OF THE ASSESSMENT ORDERS WOULD SHOW THAT ADDITIONS HAVE BEEN MADE MAINLY ON ACCOUNT OF DISALLOWANCE OF CERT AIN EXPENSES WHICH IS A ROUTINE FEATURE. 17 IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE O PINION THAT ADDITION HAS BEEN MADE WITHOUT ANY EVIDENCE AND IS MERELY ON THE BASIS OF STATEMENT RECORDED DURING THE SURVEY WHICH CANNOT B E SUSTAINED. ACCORDINGLY WE SET ASIDE THE ORDER OF THE LD. CIT(A ) AND DELETE THE ADDITION. 18 BEFORE PARTING WE WOULD LIKE TO REITERATE THAT THIS SEEMS TO BE A CASE OF HIGH HEADEDNESS BY THE REVENUE AUTHORITIES AND THEY SHOULD TAKE CAUTION NOT TO REPEAT SUCH ACTS. AT LEAST SENIOR OF FICERS ARE EXPECTED TO CONDUCT PROPER ENQUIRIES IN SUCH TYPE OF CASES. WE WERE INFORMED THAT IN THIS CASE SOME MONEY HAS BEEN WITHDRAWN FROM THE BA NK ACCOUNT OF THE ASSESSEE JUST FEW DAYS BEFORE HEARING OF THE APPEAL . THEREFORE WE WOULD DIRECT THAT ASSESSING OFFICER SHOULD GIVE APPEAL EF FECT TOUR ORDER AND REFUND THE TAXES ALREADY COLLECTED IMMEDIATELY. 19 IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20.3.2014 SD/- SD/- (SUSHMA CHOWLA) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 20 .3.2014 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/THE D.R 16 17