Sahil Study Circle Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 1434/DEL/2013

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2779 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 11-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B R R KUMAR SENIOR
• Keywords: Search and seizure; Rule of consistency; Retraction; Revenue expenditure; Capital expenditure
• Section: 143(3); 133A; 69; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI A.T. VARKEY, JUDICIAL MEMBER ITA NO.1434/DEL./2013 (ASSESSMENT YEAR : 2007-08) M/S. SAHIL STUDY CIRCLE PVT. LTD., VS. DCIT, CIRCL E 7 (1), B 1/637, JANAKPURI, NEW DELHI. NEW DELHI 110 058. (PAN : AAHCS4592H) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY WADHWA, ADVOCATE REVENUE BY : SHRI B.R.R. KUMAR, SENIOR DR DATE OF HEARING : 03.11.2015 DATE OF PRONOUNCEMENT : 22.01.2015 O R D E R PER A.T. VARKEY, JUDICIAL MEMBER : THIS APPEAL, AT THE INSTANCE OF THE ASSESSEE, IS FI LED AGAINST THE ORDER OF THE CIT (APPEALS)-X, NEW DELHI DATED 02.01.2013 FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE COMPANY CATERS TO THE NEED OF STUDE NTS PREPARING FOR ENGINEERING AND MEDICAL EXAMINATIONS. IT ALSO SERV ES TO THE STUDENTS APPEARING IN BOARD EXAMINATIONS OF VARIOUS EDUCATIO NAL BOARDS. THE ASSESSEE COMPANY RUNS ITS COACHING INSTITUTES AT VARIOUS CEN TERS IN AND OUTSIDE DELHI ITA NO.1434/DEL./2013 2 AND SOME OF THE CENTERS ARE BEING RUN ON FRANCHISEE BASIS. THE MAIN SOURCE OF THE INCOME OF THE ASSESSEE IS FROM FEES COLLECTED F ROM THE STUDENTS/ASPIRANTS TAKING UP COACHING CLASSES. 2.1 THE ASSESSEE FILED RETURN OF INCOME ON 31.10.20 07 DECLARING TOTAL LOSS OF RS.29,78,771.69. DURING THE YEAR, A SURVEY WAS CONDUCTED U/S 133A OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) ON 09. 08.2007 IN THE BUSINESS PREMISES AT B-1/637, JANAKPURI, NEW DELHI. SUBSEQ UENTLY, THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT MAKING THE TWO ADDITIONS I.E. (I) RS.65.50 LAKHS AS UNDISCLOSED INCOME U/S 69A OF THE ACT IN RESPECT OF CASH RECEIPTS FOUND AND IMPOUNDED DURING THE COURSE OF S URVEY ACTION AND RS.8,27,275/- ON ACCOUNT OF DEFERRED REVENUE EXPENS ES ON ACCOUNT OF ADVERTISEMENT EXPENSES FOR THE MONTH OF MARCH 2007. THE LD. CIT (A) CONFIRMED THE ADDITIONS MADE BY THE AO. 3. NOW, THE ASSESSEE BEING AGGRIEVED IS IN APPEAL A GAINST THE AFORESAID TWO ADDITIONS. 4. REVISED GROUNDS NO.1 TO 3 ARE AGAINST THE SUSTEN ANCE OF THE ADDITION OF RS.65.50 LAKHS AS UNDISCLOSED INCOME U/S 69A OF THE ACT IN RESPECT OF CASH RECEIPTS FOUND AND IMPOUNDED DURING THE COURSE OF S URVEY ACTION. 5. BRIEF FACTS TO THE AFORESAID GROUND ARE THAT DUR ING THE YEAR, A SURVEY WAS CONDUCTED U/S 133A OF THE ACT ON 09.08.2007 AND DURING THE COURSE OF SURVEY, VARIOUS CASH RECEIPTS WERE FOUND AND IMPOUN DED. THESE CASH RECEIPTS ITA NO.1434/DEL./2013 3 WERE CORRELATED WITH THE LEDGER ACCOUNT FOR THE REL EVANT PERIOD AND IT WAS NOTICED THAT THESE RECEIPTS WERE NOT REFLECTED IN T HE REGULAR BOOKS OF ACCOUNTS OF THE ASSESSEE COMPANY. THE AO CONFRONTED THESE FA CTS AND EVIDENCES WITH SHRI SATISH KUMAR SURI, MD OF THE ASSESSEE COMPANY AND OBSERVED THAT EVEN AFTER GIVING THE OPPORTUNITY, SHRI SURI WAS UNABLE TO SUBMIT ANY PLAUSIBLE EXPLANATION AND ACCEPTED THAT THE AMOUNT INVOLVED I N THESE RECEIPTS AMOUNTING TO RS.65.50 LAKHS WAS UNACCOUNTED RECEIPT S FOR FY 2006-07 OVER AND ABOVE THE INCOME AS PER BOOKS OF ACCOUNTS PREPA RED. THE AO FURTHER OBSERVED THAT HOWEVER, WHILE FILING THE RETURN OF I NCOME THE ASSESSEE DECLARED A LOSS OF RS.29,78,771/- WHEREBY THE EARLIER AMOUNT ACCEPTED BY THE MANAGING DIRECTOR DURING THE COURSE OF SURVEY HAD N OT BEEN REFLECTED. THE AO PROVIDED AN OPPORTUNITY TO THE ASSESSEE TO EXPLA IN THE REASONS FOR THIS CHANGE OF DECLARATION TO WHICH THE ASSESSEE FILED A REPLY DATED 03.11.2009. THE AO, AFTER CONSIDERING THE REPLY OF THE ASSESSEE MADE THE FOLLOWING OBSERVATIONS :- (I) THE ASSESSING OFFICER HAS OBSERVED THAT EVEN THOUGH THE ASSESSEE HAS ARGUED THAT THE RECEIPTS FOUND DURING THE COURS E OF SURVEY WERE ACTUALLY ONLY A RECORD FOR INTERNAL TRANSFER O F FUNDS / CASH AT THE CENTRE AND WAS NEVER A REGULAR RECEIPT. FURTHER , THE AO HAS HIGHLIGHTED THAT THE NATURE OF THESE RECEIPTS CLEAR LY MENTIONED HEADING AS 'MODE', 'PARTICULARS', 'AMOUNT' AND 'DRA WN ON'. IT WAS FURTHER HIGHLIGHTED BY THE ASSESSING OFFICER TH AT IN THESE ITA NO.1434/DEL./2013 4 RECEIPTS THERE WERE PARTICULAR COLUMNS FOR CENTER, BATCH NUMBER, ROLL NUMBER AS WELL AS AMOUNT RECEIVED. (II) THE A.O. HAS HIGHLIGHTED THAT THE RECEIPTS WER E CARRYING RUNNING NUMBERS LIKE JP/001 TO JP/208. THIS INDICATES CLEAR LY THAT SUCH UNACCOUNTED RECEIPTS PERTAINED TO A PARTICULAR CENT ER OF JANAK PURI AND HAD BEEN RECEIVED FROM A PARTICULAR STUDEN T. THE A.O. HAS ALSO SPECIFICALLY POINTED OUT THAT EVERY SLIP C ONTAINS THE PURPOSE FOR WHICH THE MONEY HAS BEEN TAKEN AND IT V ARIES FROM TUITION TO PARTICULAR CLASS WITH SUBJECT. THEREFORE , THE CONTENTIONS OF THE ASSESSEE THAT THESE RECEIPTS WERE ONLY FOR I NTERNAL TRANSFER OF AMOUNTS CANNOT BE ACCEPTED. (III) THE A.O. HAS FURTHER HIGHLIGHTED THAT FROM TH E NATURE OF RECEIPT IT WAS POSSIBLE TO IDENTIFY THE STUDENTS AND PURPOSE F OR RECEIVING THIS AMOUNT. DURING THE ENTIRE SURVEY PROCEEDINGS, NO. DOUBTS OR EXPLANATIONS HAD EVER BEEN PRESENTED BY THE ASSESSE E OR SHRI S.K. SURI, THE MANAGING DIRECTOR. (IV) THE A.O. HAS ALSO HIGHLIGHTED THAT THE CONTENT ION OF THE ASSESSEE THAT NO CASH WAS FOUND DURING THE SURVEY AND, THERE FORE, THESE RECEIPTS IN CASH AMOUNTING TO RS.65.50 LAKHS IS NOT SUPPORTED BY THE EVIDENCE FOUND. IN THIS REGARD IT WAS ALSO OBSE RVED THAT AS PER THE BOOKS OF ACCOUNTS THERE WAS A CASH BALANCE OF R S.1,00,217/-, WHICH HAD ALSO NOT BEEN FOUND AT THE PREMISE. THE A .O. HAS, THEREFORE, STATED THAT SUCH HUGE AMOUNT OF CASH COU LD NOT BE KEPT IDLE AT THE BUSINESS PREMISES AND, THEREFORE, COULD NOT BE FOUND AT THIS PARTICULAR PREMISE. (V) THE A.O. HAS STATED WITH REGARD TO THE CONTENTI ON THAT SHRI SURI WAS IN BAD MENTAL STATE AND ACCORDINGLY HAD GIVEN T HE STATEMENT REGARDING RS.65.50 LAKHS WAS ALSO NOT ACCEPTED SINC E FROM THE ITA NO.1434/DEL./2013 5 NATURE OF THE STATEMENT GIVEN BY SHRI S.K. SURI SPE CIFICALLY REPRODUCED ON PAGE 8 & 9 OF THE ASSESSMENT ORDER, I T IS CLEAR THAT THE STATEMENT WAS GIVEN WITH ALERTNESS AND BALANCED FRAME OF MIND. ACCORDINGLY, AFTER CONSIDERING THE DETAILS OF STATEMENTS WHICH WAS ALSO REPRODUCED ON PAGE 10 TO 12 OF ASSES SMENT ORDER, IT WAS CLEAR THAT SH. S.K. SURI WAS FULLY IN CONTRO L OF THE RUNNING OF THE BUSINESS AND AFTER CONSIDERING THAT THESE RE CEIPTS COULD NOT BE EXPLAINED, THIS AMOUNT OF RS.6S.S0 LAKHS HAD BEE N SURRENDERED. THE ASSESSING OFFICER HAS, THEREFORE, HIGHLIGHTED T HAT THE RETRACTION WITH REGARD TO THIS RS.65.50 LAKHS WAS NOT JUSTIFIED AND DURING THE COURSE OF SURVEY, SH. S.K. SURI, MD OF THE COMPANY HAD MADE THE SURRENDER OF RS.65.50 LAKHS IN A BALANCED FRAME OF MIND AND AFTER FULLY CONSIDERING THAT THE RECEIPTS FOUND WERE NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCO UNTS MAINTAINED BY THE ASSESSEE AND MADE THE IMPUGNED ADDITION. 5.1 AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY AND THE LD. CIT (A) CONFIRMED THE ADDITIO N BY OBSERVING AS UNDER :- 2.3 I HAVE GONE THROUGH THE FACTS OF THE CASE, OBS ERVATIONS OF THE A.R. AND SUBMISSIONS OF THE A.R. OF THE APPELLANT. THIS GROUND IS BEING FINALIZED AFTER MAKING THE FOLLOWING OBSERVATIONS: A. ON GOING THROUGH THE FACTS OF THE CASE IT IS CL EAR THAT SURVEY ACTION U/S 133A HAD BEEN CARRIED OUT AT THE BUSINESS PREMI SE OF THE APPELLANT. DURING THE COURSE OF SURVEY, CERTAIN DOCUMENTS IN T HE FORM OF RECEIPTS HAD BEEN FOUND WHICH WERE CONFRONTED TO THE MANAGING DI RECTOR OF THE COMPANY. THE SURVEY TEAM HAD TAKEN AN ELABORATE STA TEMENT OF THE MANAGING DIRECTOR WHEREIN PROPER OPPORTUNITY HAD BE EN PROVIDED FOR THE APPELLANT TO RECONCILE THESE RECEIPTS AND DOCUMENTS WITH THE REGULAR BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. HOWEVER, DE SPITE THE OPPORTUNITIES PROVIDED AND AFTER CAREFULLY CONSIDER ING THE DOCUMENTS, SH. S.K. SURI, THE MANAGING DIRECTOR OF THE COMPANY MAD E A SURRENDER OF RS.65.50 LAKHS AS UNDISCLOSED SOURCES OVER AND ABOV E THE DETAILS AS PER THE ITA NO.1434/DEL./2013 6 BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. AT TH AT STAGE, THERE WAS NO DISPUTE REGARDING THE NATURE OF THESE RECEIPTS AND THE STATEMENT GIVEN BY THE MANAGING DIRECTOR SH. S.K. SURI WAS ELABORATE O NE WHICH CLEARLY INDICATED THAT HE WAS THE PRINCIPAL PERSON LOOKING AFTER THE ADMINISTRATION AND FINANCE OF THE APPELLANT COMPANY. B. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER QUESTIONED THE RETRACTION OF THE APPELLANT WITH REG ARD TO THE AMOUNT SURRENDERED DURING THE COURSE OF SURVEY. IT IS PERT INENT TO NOTE THAT EVEN AFTER SURVEY WAS COMPLETED, THE MANAGING DIRECTOR, SH. S.K. SURI OR ANY OTHER PERSON OF THE APPELLANT COMPANY DID NOT RETRA CT FROM THE SURRENDER OF RS.65.50 LAKHS MADE DURING THE COURSE OF SURVEY. HO WEVER, IT WAS ONLY DURING FILING OF THE INCOME TAX RETURN, AFTER COMPL ETION OF FEW MONTHS FROM THE SURVEY THAT THE APPELLANT DECIDED TO RETRA CT FROM HIS SURRENDER. IN THIS REGARD, NO PROPER EXPLANATION OR JUSTIFICATION FOR THE DELAYED RETRACTION WAS PUT FORWARD BY THE A.R. OF THE APPELLANT EITHER BEFORE THE ASSESSING OFFICER OR DURING THE APPELLATE PROCEEDINGS. IT IS PERTINENT TO NOTE THAT SH. S.K. SURI, THE MANAGING DIRECTOR OF THE COMPANY WAS A PERSON LOOKING AFTER THE DAY TO DAY AFFAIRS INCLUDING FINANCIAL TR ANSACTIONS OF THE COMPANY AND IT IS DIFFICULT TO ACCEPT THAT HE WOULD NOT BE IN A POSITION TO EXPLAIN THE PRIMARY DOCUMENTS FOUND DURING THE COURSE OF SURVEY . FROM THE DETAILS ELABORATED IN THE ASSESSMENT ORDER AS WELL AS SUBMI SSIONS OF THE A.R. OF THE APPELLANT, IT ONLY SHOWS THAT THE NATURE OF THE SE RECEIPTS WERE DIFFERENT FROM THE RECEIPTS ISSUED NORMALLY TO VARIOUS STUDEN TS AGAINST FEE RECEIVED FROM THEM. IN FACT, THIS WOULD ALSO CLEARLY ESTABLI SH THAT THE DIFFERENCE IN THE NATURE OF RECEIPTS WAS ONLY BECAUSE THESE AMOUN TS WERE RECEIVED IN CASH AND NOT ACCOUNTED FOR IN THE REGULAR BOOKS OF ACCOUNTS. THEREFORE, THE COUNTER ARGUMENT OF THE A.R. OF THE APPELLANT IS NO T ACCEPTABLE. C. THE A.R. OF THE APPELLANT HAS SUBMITTED THAT TH E MD OF THE COMPANY WAS NOT IN HIS PROPER STATE OF MIND AND WAS EXHAUSTED DURING THE COURSE OF SURVEY. HOWEVER, IT IS ALSO IMPORTANT TO NOTE THAT THE STATEMENT OF SH. S.K. SURI WAS A LONG STATEMENT WHEREIN DIFFE RENT DETAILS WERE ELABORATELY DISCUSSED SHOWING THE MENTAL ALERTNESS OF SH. S.K. SURI AND AT THE SAME TIME SINCE HE WAS FULLY AWARE OF THE FINANCIAL SYST EM OF THE COMPANY, IT IS DIFFICULT TO ACCEPT THAT HE WOULD FUMBLE IN THE CRU CIAL QUESTION REGARDING THE RECEIPTS FOUND AT THE SURVEY PREMISES. IF ALL O THER ANSWERS IN THE STATEMENTS WERE FOUND TO BE ELIGIBLE AND SOUND, TO ACCEPT THAT ONLY FOR THIS QUESTION HE WILL NOT BE IN A POSITION TO P ROVIDE A PROPER ANSWER, ALSO DOES NOT APPEAR TO BE LOGICAL AND ACCEPTABLE. D. THE CONTENTION OF THE A.R. THAT THE PROVISIONS OF SECTION 69 ARE NOT APPLICABLE, IS ALSO NOT ACCEPTABLE SINCE 'VALUABLE' ARTICLE WOULD CONSIST OF SUCH UNACCOUNTED CASH RECEIPTS FOUND DURING THE COU RSE OF SURVEY. ANOTHER ARGUMENT SUBMITTED BY THE A.R. OF THE APPEL LANT WAS THAT NO CASH TO SUPPORT THESE RECEIPTS WAS FOUND DURING THE COUR SE OF SURVEY. HOWEVER, IN THIS REGARD IT IS PERTINENT TO NOTE THAT EVEN WI TH REGARD TO THE CASH ITA NO.1434/DEL./2013 7 BALANCE SHOWN IN THE BOOKS OF ACCOUNTS, THE SAME WA S NOT FOUND AT THE PREMISES ON THAT DAY. THE SURVEY ACTION WAS ONLY AT A PARTICULAR BUSINESS PREMISE AND IT IS QUITE POSSIBLE THAT THE CASH AMOUNT WOULD BE KEPT BY THE APPELLANT AT SOME OTHER MORE SECURE PRE MISE. IN ANY CASE, THE ONUS WOULD BE ON THE ASSESSEE TO EXPLAIN WHETHER AL L THE CASH WAS BEING MAINTAINED BY THE COMPANY, SINCE THE CASH EVEN AS P ER THE BOOKS WAS NOT FOUND AT THE PREMISE. E. AFTER CAREFUL CONSIDERATION OF THE CIRCUMSTANCES OF THE CASE, IT IS CLEAR THAT THE SPECIFIC EVIDENCES AND DOCUMENTS FOU ND DURING THE COURSE OF SURVEY WERE ACCEPTED AS UNEXPLAINED INCOME BY THE M ANAGING DIRECTOR OF THE COMPANY AFTER A DETAILED STATEMENT GIVEN DURING THE COURSE OF SURVEY. EVEN THOUGH THE APPELLANT RETRACTED AFTER SEVERAL M ONTHS, THERE WAS NO JUSTIFICATION FOR THIS RETRACTION WHEN THE MANAGING DIRECTOR HAD HIMSELF ACCEPTED THE AMOUNTS AS EXPLAINED EARLIER ON. THE V ARIOUS DOCUMENTS SUBMITTED BY THE A.R. OF THE APPELLANT DURING THE C OURSE OF APPELLATE PROCEEDINGS, ONLY APPEAR TO BE AN AFTERTHOUGHT AND CANNOT BE ACCEPTED. ACCORDINGLY, IN VIEW OF THE ABOVE OBSERVATIONS, I A M CONVINCED THAT THE ADDITION MADE BY THE ASSESSING OFFICER AMO UNTING TO RS.65.50 LAKHS IS FULLY JUSTIFIED AND THIS GROUND OF THE APP ELLANT IS TREATED AS DISMISSED. 6. THE ASSESSEE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US ON THIS ISSUE. 7. LD. AR FOR THE ASSESSEE REITERATED THE SUBMISSIO NS MADE BEFORE THE LD. CIT (A) AND ALSO FILED THE WRITTEN SUBMISSIONS. FO R THE SAKE OF CLARITY, THE WRITTEN SUBMISSIONS FILED BY THE LD. AR ARE REPRODU CED AS UNDER :- 1) INAPPLICABILITY OF SECTION 69A: (I) SECTION 69A STATES THAT ADDITION U/S 69A OF THE I.T ACT CAN BE MADE ONLY WHEN THE FOLLOWING CONDITIONS ARE SATISFIED: I. WHERE IN ANY FINANCIAL YEAR THE ASSESSEE IS FOUN D TO BE THE OWNER OF ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE ART ICLE AND, II. SUCH MONEY, BULLION, JEWELLERY OR VALUABLE ARTI CLE IS NOT RECORDED IN THE BOOKS OF ACCOUNT, IF ANY, MAINTAINED BY HIM FOR ANY SOURCE OF INCOME, III. AND THE ASSESSEE OFFERS NO EXPLANATION ABOUT T HE NATURE AND SOURCE OF ACQUISITION OF THE MONEY, BULLION, JEWELLERY OR OTH ER VALUABLE ARTICLE, OR THE EXPLANATION OFFERED BY HIM IS NOT, IN THE OPINION O F THE AO, SATISFACTORY, ITA NO.1434/DEL./2013 8 IV. THEN, THE MONEY AND THE VALUE OF THE BULLION, J EWELLERY OR OTHER VALUABLE ARTICLE MAY BE DEEMED TO BE THE INCOME OF THE ASSES SEE FOR SUCH FINANCIAL YEAR. (II) THE ADDITION SO MADE U/S 69A IS NOT TENABLE PE R SE AS THE ASSESSEE HAS NOT BEEN FOUND TO BE THE OWNER OF ANY MONEY, BULLIO N, JEWELLERY OR OTHER VALUABLE ARTICLE. THE SLIPS IMPOUNDED DURING THE SU RVEY ACTION ARE NEITHER MONEY NOR BULLION. KINDLY REFER TO THE JUDGMENTS IN THE CASE OF (A) CIT V. RAVI KUMAR [2008] 294 ITR 78 (PUNJAB & HARYA NA), '8. IN THE PRESENT CASE, THE ASSESSEE WAS FOUND TO BE IN POSSESSION OF LOOSE SLIPS AND NOT OF ANY VALUABLE ARTICLES OR THI NGS. NEITHER THE POSSESSION NOR THE OWNERSHIP OF ANY JEWELLERY MENTIONED IN THE SLIPS COULD PROVE. IN VIEW THEREOF, THE PROVISIONS OF SECTION 69A OF THE ACT HAD RIGHTLY NOT BEEN APPLIED BY THE TRIBUNAL TO THE FACTS OF THE CASE IN HAND. ACCORDINGLY, QUESTION NO. 1 IS ANSWERED AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE.' (B) D.N SINGH V. CIT [2010] 324 ITR 304 (PAT.): 'PARA 13. IN MY OPINION, ANY ARTICLE WHICH HAS VALU E WILL COME UNDER THE EXPRESSION, 'VALUABLE ARTICLE' MENTIONED IN SECTION 69A OF THE ACT AND THE VALUE OF SUCH ARTICLE CAN BE DEEMED TO BE THE INCOM E OF THE ASSESSEE IN CASE THE ASSESSEE FAILS TO OFFER EXPLANATION OR THE EXPL ANATION OFFERED IS NOT SATISFACTORY. ' (C) RELEVANT PARA OF KANGA & PALKHIWALA'S 'THE LAW AND PRACTICE OF INCOME TAX' (PAGE 1370 -PARA 2) STATES AS FOLLOWS: '2. 'VALUABLE ARTICLE'; MEANING.- THE PATNA HIGH CO URT HAS HELD THAT THE EXPRESSION 'VALUABLE ARTICLE' AND MONEY IN ANY 'ART ICLE WHICH HAS VALUE', BUT THE CHATTISGARH HIGH COURT (INTERPRETING THE SAME E XPRESSION IN S. 69B) HAS HELD THAT IT REFERS TO ARTICLES THAT NORMALLY HAVE A HIGH PRICE, THEREBY EXCLUDING ORDINARY ARTICLES. IT IS SUBMITTED THAT T HE LATTER MP HIGH COURT'S VIEW IS CORRECT, BECAUSE THE PATNA HIGH COURT APPEA RS TO HAVE OVERLOOKED THE WELL-KNOWN RULE OF CONSTRUCTION THAT GENERAL WO RDS THAT FOLLOW SPECIFIC WORDS WITHIN A GENUS MUST BE CONSTRUED EJUSDEM GENE RIS. THE TERM 'MONEY', HOWEVER, HAS A NARROWER MEANING, AND INCLUDE ONLY S OMETHING THAT CAN BE USED AS A CIRCULATING MEDIUM IN GENERAL USE, HAVING REPRESENTATIVE VALUE.' 2) REGARDING RETRACTION OF STATEMENT BY SH. S.K SUR I: I. DURING THE COURSE OF SURVEY, SH SK SURI WAS CONF RONTED WITH THE CASH RECEIPTS FOUND. SH SURI WAS UNABLE TO PROVIDE ANY E XPLANATION AND ACCEPTED THAT THE AMOUNT INVOLVED IN THESE RECEIPTS WAS UNAC COUNTED RECEIPTS FOR FY 2006-07. ITA NO.1434/DEL./2013 9 II. HOWEVER, WHILE FILING THE RETURN OF INCOME, THE ASSESSEE DECLARED A LOSS OF RS.29,78,771/- WHEREBY THE AMOUNT OF CASH RECEIP TS WAS NOT REFLECTED. III. A DETAILED EXPLANATION WAS GIVEN BY THE ASSESS EE AS TO WHY THE AMOUNT SURRENDERED WAS NEVER THE INCOME OF ASSESSEE AND WA S JUST A RECORD OF INTERNAL TRANSFER OF CASH FROM ONE CENTRE TO ANOTHE R. IV. IN QUESTION NO 21, THE AUTHORISED OFFICER CONFR ONTED SH. SK SURI WITH SLIPS SEIZED AND POINTED OUT THAT CASH HAS BEEN WRI TTEN THEREON AND REQUIRED HIM TO GIVE DETAILS THEREOF. IN RESPONSE TO THIS QU ESTION, THE ASSESSEE SUBMITTED 'I CANNOT PROVIDE DETAILS OF THE RECEIPTS AT PRESENT'. (RELEVANT EXTRACT OF STATEMENT ATTACHED AT PB 45-56) V. HOWEVER, THE AUTHORISED OFFICER AGAIN VIDE QUEST ION NO 22 REQUIRED HIM TO CO-RELATE THOSE RECEIPTS WITH THE BOOKS OF A CCOUNTS OF THE ASSESSEE COMPANY FOR THAT YEAR. SH SURI HAD ALREADY EXPLAINE D THAT HE CANNOT GIVE THE DETAILS OF SUCH 'RECEIPTS' AT THAT TIME AND THE REFORE WHEN HE WAS AGAIN REQUIRED BY THE AUTHORISED OFFICER TO CO-RELATE THE SAME WITH BOOKS OF ACCOUNTS FOR FY 2006-07, HE HAD SUBMITTED THAT THOS E RECEIPTS HAVE NOT BEEN ENTERED IN BOOKS OF ACCOUNTS. VI. FURTHER, SH SURI HAD GIVEN THIS STATEMENT AT AB OUT 3:00 AM TO 4:00 AM ON 09.08.2007 WHEN THE SURVEY WAS BEING CONTINUED IN H IS PREMISES SINCE 8.30 AM ON 08.08.2007. VII. IT IS EVIDENT FROM THE ABOVE THAT SH SK SURI W AS ASKED THE SAME QUESTION REGARDING THE RECEIPTS SO FOUND DESPITE TH E FACT THAT HE HAD CLEARLY STATED THAT HE COULD NOT PROVIDE THE DETAILS OF THE RECEIPTS AT THAT TIME. FURTHER INQUIRY WAS DONE BY LONG DURATION OF SURVEY WHICH CONTINUED FOR MORE THAN 20 HOURS AT A STRETCH. SH SURI IS AN OLD PERSON AND PROBABLY COULD NOT UNDERGO THE ANXIETY AND STRAIN TO WHICH HE WAS EXPOSED TO. VIII. THEREFORE, IT WAS IN THESE CIRCUMSTANCES WHEN HE WAS NOT ABLE TO GIVE ANY EXPLANATION TO THE REPETITIVELY ASKED QUESTION, HE AGREED TO SURRENDER THE AMOUNT OF RS.65,05,115/- IN HIS STATEMENT AT TH E TIME OF SURVEY. IX. KINDLY READ STATEMENT AT PG.9 OF THE AD'S ORDER WHICH SAYS 'PROBABLY BEEN LEFT OUT. .. SINCE I AM NOT ABLE TO GIVE ANY E XPLANATION IN THIS REGARD ... '. EXPLANATION WAS LATER GIVEN WHICH WAS CREDIBLE. 3) REGARDING THE TRUE NATURE OF RECEIPTS FOUND (GRO UND 3): I. IT WAS ONLY AFTER THE CONCLUSION OF SURVEY THAT THE ASSESSEE COMPANY FOUND THAT SUCH 'RECEIPTS' INFACT WERE NOT RECEIPTS OF FEES FROM STUDENTS, BUT WERE ONLY EVIDENCE OF INTER CENTER CASH TRANSFER WH EN CASH WAS COLLECTED IN DIFFERENT COACHING CENTRES RUN BY THE ASSESSEE COMP ANY AND THESE RECEIPTS WERE MADE JUST FOR A RECORD THAT CASH WAS BEING BRO UGHT TO THE JANAKPURI CENTRE. ITA NO.1434/DEL./2013 10 II. THE RECEIPTS IN FACT WERE NEVER THE INCOME OF T HE ASSESSEE COMPANY AND THEREFORE ADDITION IN THIS RESPECT IS NOT TENABLE. 4) RECEIPTS FOUND WERE ONLY A RECORD OF INTERNAL TR ANSFER OF CASH: THE FACT THAT THE RECEIPTS FOUND IN THE SURVEY WERE NOT FEES RECEIPTS FROM STUDENTS BUT WERE A RECORD OF DOCUMENTS PREPARED ON LY FOR INTERNAL TRANSFER OF FUNDS BY VARIOUS CENTRES OF THE ASSESSEE COMPANY CAN BE ESTABLISHED BY THE FOLLOWING: I. THAT THE 208 'RECEIPTS' FOUND AT JANAKPURI CENTR E WERE ON THE FORMATS OF UNUSED RECEIPTS EARLIER PRINTED FOR USE IN THE CENTRE BUT WERE NOT USED DUE TO PRINTING IRREGULARITIES IN THE SAID 'RE CEIPTS'. II. THE ASSESSEE POINTED OUT THAT THE FORMAT OF THE SE 'RECEIPTS' WERE DIFFERENT FROM THE FORMAT OF FEE RECEIPTS ISSUED BY THE ASSES SEE IN THE REGULAR COURSE OF BUSINESS AS THE SAME NEITHER INCLUDED THE HEAD O F SERVICE TAX NOR INCLUDED THE CHEQUE NUMBER AND BANK NAME AND ALSO DID NOT IN CLUDE THE COURSE AND CLASS FOR WHICH THE FEES IS BEING ALLEGED TO BE REC EIVED. ACCORDINGLY THE SAME COULD NOT BE USED FOR ISSUING RECEIPTS TO STUD ENTS FROM WHOM FEES WAS RECEIVED IN REGULAR COURSE AND THEREFORE WERE USED ONLY AS A MEMORANDA ACCOUNT FOR INTERNAL TRANSFER OF FUNDS BY THE ASSES SEE COMPANY. III. IT WAS ALSO EXPLAINED THAT NO INCOME OR REVENU E WAS EARNED BY THE ASSESSEE AGAINST SUCH RECEIPTS SINCE THE ORIGINAL R ECEIPTS PREPARED WERE FOUND DURING THE COURSE OF SURVEY (PB 63-162) AND T HEREFORE IT CANNOT BE SAID THAT THE ASSESSEE HAD RECEIVED ANY FEES FROM A NY STUDENT SINCE IN CASE OF ACTUAL RECEIPT FROM STUDENTS THE ORIGINAL COPY W OULD HAVE TO BE GIVEN TO THE PAYER AND THE ASSESSEE WOULD HAVE RETAINED ONLY A CARBON COPY. IT WAS POINTED OUT TO THE LEARNED ASSESSING OFFICER THAT I N FACT ALL THE 208 'RECEIPTS' WERE THE ORIGINAL COPY WHICH COULD NOT B E AVAILABLE WITH THE ASSESSEE IN CASE ANY ACTUAL RECEIPT HAD BEEN ISSUED . IV. IT WAS FURTHER EXPLAINED THAT NO NAME OF PAYER WAS FOUND WRITTEN IN ANY OF THESE SLIPS WHICH ALSO PROVED THAT THEY COULD NO T HAVE BEEN ISSUED TO ANY STUDENT SINCE EVERY STUDENT WOULD INSIST ON A RECEI PT WHICH BEARS HIS NAME. V. THE ASSESSEE FURTHER EXPLAINED THAT THE RECEIPTS ISSUED IN THE REGULAR COURSE OF ITS BUSINESS WERE OF TOTALLY DIFFERENT CO LOUR AS WELL AS DIFFERENT FORMAT AND THE RECEIPTS ISSUED IN REGULAR COURSE OF BUSINESS WERE PRODUCED BEFORE THE AO TO SHOW THAT THE 208 RECEIPTS WERE NO T FOR RECEIVING FEES. VI. THE ASSESSEE FURTHER EXPLAINED THAT EVEN DURING THE COURSE OF SURVEY NO EXCESS CASH WAS FOUND AND THEREFORE ALSO NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE ASSESSEE. VII. THE ASSESSEE ALSO EXPLAINED THAT FOR EACH AND EVERY STUDENT WHO IS STUDYING IN ANY COACHING CENTRE OF THE ASSESSEE COM PANY A REGISTRATION FORM ITA NO.1434/DEL./2013 11 IS CREATED AT THE TIME OF ADMISSION AND EVEN DURING THE COURSE OF SURVEY NO DISCREPANCY OR IRREGULARITY WAS FOUND WHEN SUCH REG ISTRATION FORMS WERE COMPARED WITH THE FEES ACCOUNTED FOR BY THE ASSESSE E COMPANY IN ITS BOOKS OF ACCOUNTS. VIII. THE ASSESSEE ALSO FILED COPIES OF REGISTRATIO N FORM AS SPECIMEN BEFORE THE AO IN SUPPORT OF ITS CLAIM THAT NO RECEIPT COUL D BE ISSUED TO ANY STUDENT WITHOUT GIVING HIS OR HER NAME ON THE RECEIPT. IX. THE ASSESSEE FURTHER DREW THE ATTENTION OF THE LEARNED ASSESSING OFFICER TO THE RECEIPTS ISSUED IN THE REGULAR COURSE OF BUS INESS WHICH WERE FOUND DULY ACCOUNTED IN THE BOOKS OF THE ASSESSEE TO SHOW THAT ON EACH AND EVERY RECEIPT THE NAME OF THE STUDENT IS CLEARLY INDICATE D AND THAT CAN BE THE ONLY PROOF OF A STUDENT HAVING PAID HIS FEES TO THE INST ITUTE, WHEREAS ON THE CASE OF THESE 208 RECEIPTS NO NAME WAS MENTIONED AND THI S ITSELF PROVES THAT THESE 208 RECEIPTS WERE PREPARED ONLY FOR INTERNAL TRANSFER OF FUNDS. X. IT CAN ALSO BE SEEN FROM THE SEIZED 'RECEIPTS' T HAT AMOUNTS IN FEW BILLS ARE NOT A ROUND-OFF FIGURE. FOR EG; JP/007 - RS. 34243/-, JP/062 - RS. 16836/-, JP/117 - RS. 22422/-. IT IS SUBMITTED THAT IT NEVER HAPPENS OR HAPPENED THAT THE TUITION FEES RECEIVED FROM STUDEN TS IS IN NON-ROUNDED OFF AMOUNTS LIKE THE ONES STATED ABOVE. XI. ALSO, IN THE USUAL BUSINESS PROCEEDINGS, THE TU ITION FEES RECEIVED FROM STUDENTS IS IN INSTALMENTS. IT RARELY HAPPENS THAT THE STUDENT GIVES A LUMP SUM AMOUNT OF TUITION FEES. AS CAN BE SEEN FROM THE SAMPLE RECEIPTS AND STUDENT-WISE STATEMENT OF TUITION FEES RECEIVED DUR ING THE YEAR (PB 57-62), IT HAS HARDLY HAPPENED THAT THE AMOUNT RECEIVED IS A LUMPSUM FEES AMOUNT OF ABOUT RS. 30,000 OR MORE. HOWEVER, IN THE SEIZED RECEIPTS, THERE ARE HARDLY ANY BILLS OF AMOUNTS LESS THAN RS.30,000/- A ND ALMOST ALL BILLS ARE OF LUMPSUM AMOUNTS RANGING BETWEEN RS.30,000 TO RS. 65 ,000/-, WHICH IS A RARE TRANSACTION IN THE ROUTINE OF THE ASSESSEE'S B USINESS. XII. BESIDES AND MOST IMPORTANTLY, THE ASSESSEE COM PANY PROVIDES COACHING FOR EXAMS THAT ARE HELD IN MARCH EVERY YEAR. BECAUS E OF THIS REASON, IT IS AN ESTABLISHED ROUTINE EVERY YEAR THAT THE FACULTY AT THE CENTRES COMPLETE THE COURSE BY JANUARY EACH YEAR. IT IS THEREFORE VERY U NCOMMON THAT A STUDENT TAKES ADMISSION IN A BATCH WHOSE COURSE HAS BEEN CO MPLETED. ALSO, ONE WOULD NOT PAY FEES IN LUMPSUM MUCH BEFORE THE START OF BATCHES I.E, IN APRIL-MAY. THE FACT THAT THERE IS A VERY MEAGRE NUMBER OF NEW ADMISSIONS IN JAN-FEB- MARCH EVERY YEAR CAN BE ESTABLISHED FROM THE LEDGER OF TUITION FEES RECEIVED BY THE ASSESSEE COMPANY OF FY 2006-07, 2005-06. BUT, AS APPARENT FROM THE SEIZED RECEIPTS, THERE AR E 59 RECEIPTS THAT PERTAIN TO THE PERIOD FEB - MARCH. IT WOULD BE COMPLETELY A GAINST THE ESTABLISHED ROUTINELY BUSINESS PROCEEDINGS IF THESE RECEIPTS AR E TO BE TREATED AS FEES ITA NO.1434/DEL./2013 12 RECEIPTS SINCE SUCH A HUGE NUMBER OF STUDENTS TAKIN G ADMISSION IN A 'NON- SEASONAL' PERIOD IS NOT ONLY DUBIOUS BUT ALSO NEXT TO IMPOSSIBLE. 5) ADDITION MADE IS CONTRADICTORY TO BOARD CIRCULAR : IT IS ALSO SUBMITTED THAT THE ADDITION MADE AND UPH ELD BY THE LD. CIT (A) ON THE BASIS OF STATEMENT OBTAINED DURING THE COURSE O F SURVEY IS CONTRARY TO THE BOARD'S INSTRUCTION F.NO.286/2003 IT(INV)-1I DATED 10.03.2003 AND HENCE, THE ADDITION NEEDS TO BE SET ASIDE (GROUND 4). THE SAID CIRCULAR IS REPRODUCED BELOW FOR YOUR READ Y REFERENCE: 'CONFESSION OF ADDITIONAL INCOME DURING THE COURSE OF SEARCH AND SEIZURE AND SURVEY OPERATION. INSTRUCTION: F. NO. 286/2/2003-IT (INV. II), DATED 10-3-2003. INSTANCES HAVE COME TO THE NOTICE OF THE BOARD WHER E ASSESSEES HAVE CLAIMED THAT THEY HAVE BEEN FORCED TO CONFESS THE U NDISCLOSED INCOME DURING THE COURSE OF THE SEARCH & SEIZURE AND SURVE Y OPERATIONS. SUCH CONFESSIONS, IF NOT BASED UPON CREDIBLE EVIDENCE, A RE LATER RETRACTED BY THE CONCERNED ASSESSEES WHILE FILING RETURNS OF INCOME. IN THESE CIRCUMSTANCES, SUCH CONFESSIONS DURING THE COURSE OF SEARCH & SEIZ URE AND SURVEY OPERATIONS DO NOT SERVE ANY USEFUL PURPOSE. IT IS, THEREFORE, ADVISED THAT THERE SHOULD BE FOCUS AND CONCENTRATION ON COLLECTI ON OF EVIDENCE OF INCOME WHICH LEADS TO INFORMATION ON WHAT HAS NOT BEEN DIS CLOSED OR IS NOT LIKELY TO BE DISCLOSED BEFORE THE INCOME-TAX DEPARTMENT. SIMI LARLY WHILE RECORDING STATEMENT DURING THE COURSE OF SEARCH & SEIZURE AND SURVEY OPERATIONS NO ATTEMPT SHOULD BE MADE TO OBTAIN CONFESSION AS TO T HE UNDISCLOSED INCOME. ANY ACTION ON THE CONTRARY SHALL BE VIEWED ADVERSEL Y. FURTHER, IN RESPECT OF PENDING ASSESSMENT PROCEEDIN GS ALSO, ASSESSING OFFICERS SHOULD RELY UPON THE EVIDENCES/MATERIALS G ATHERED DURING THE COURSE OF SEARCH/SURVEY OPERATIONS OR THEREAFTER WH ILE FRAMING THE RELEVANT ASSESSMENT ORDERS.' 6) STATEMENT U/S 133A HAS NO EVIDENTIARY VALUE: I) IN THE CASE OF THE ASSESSEE, MERE RELIANCE HAS B EEN PLACED ON THE STATEMENT OF SH. SATISH KR SURI, MD, WITHOUT ANY EVIDENCE TO SUBSTANTIATE THE STATEMENT WITH. II) RELIANCE IS PLACED ON THE DECISION BY THE HON'B LE SUPREME COURT IN THE CASE OF CIT V. S. KHADER KHAN SON [2012] 254 CTR 22 8 WHEREBY IT WAS HELD; 'SECTION 133A OF THE INCOME ACT, 1961 - SURVEY - WH ETHER SECTION 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON O ATH; SO STATEMENT ITA NO.1434/DEL./2013 13 RECORDED UNDER SECTION 133A HAS NO EVIDENTIARY VALU E AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE BASIS OF ADDITION - HELD, YES' III) AS PER CIT V. DHINGRA METAL WORKS [2010] 328 I TR 384 (DELHI HC); 'PARA 2; DURING THE COURSE OF SURVEY, THE TAX OFFIC IALS NOTICED SOME DISCREPANCIES IN STOCK AND CASH IN HAND. DURING THE SAID SURVEY, RESPONDENT- ASSESSEE SURRENDERED AN AMOUNT OF RS.99,50,000/- AN D OFFERED THE SEINE FOR THE PURPOSES OF TAXATION. THE ADDITIONAL INCOME OFF ERED INCLUDED A SUM OF RS.45,00,000/- ON ACCOUNT OF EXCESS STOCK FOUND DUR ING THE COURSE OF SURVEY AND OFFERED BY ONE OF THE PARTNERS OF THE RE SPONDENT-ASSESSEE AS ADDITIONAL INCOME. 5. HOWEVER, SUBSEQUENTLY, THE RESPONDENT-ASSESSEE V IDE ITS LETTER DATED 29TH NOVEMBER, 2004 CONTENDED THAT THE STATEMENT ABOUT S TOCK WAS INCORRECT AND THAT THE IMPUGNED DISCREPANCY HAD BEEN RECONCILED A S IT WAS ONLY A MISTAKE. CONSEQUENTLY, THE RESPONDENT-ASSESSEE WITHDREW THE OFFER OF ADDITIONAL INCOME FOR TAXATION ON ACCOUNT OF EXCESS STOCK. PARA 6; THE AO RELIED UPON THE STATEMENT OF ONE OF THE PARTNERS OF RESPONDENT-ASSESSEE GIVEN DURING THE COURSE OF SURV EY UNDER SECTION 133A OF THE ACT AND CONCLUDED THAT THE EXPLANATION/ RETR ACTION BY THE RESPONDENT- ASSESSEE WAS AN AFTERTHOUGHT AND HAD NO ELEMENT OF TRUTH. 14. MOREOVER, THE WORD MAY USED IN SECTION 133A(3)( III) OF THE ACT CLARIFIES BEYOND DOUBT THAT THE MATERIAL COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY IS NOT A CONCLUSIVE PIECE OF EVID ENCE BY ITSELF. 15. IN ANY EVENT, IT IS SETTLED LAW THAT THOUGH AN ADMISSION I S EXTREMELY IMPORTANT PIECE OF EVIDENCE, IT CANNOT BE SAID TO BE CONCLUSI VE AND IT IS OPEN TO THE PERSON WHO HAS MADE THE ADMISSION TO SHOW THAT IT I S INCORRECT. 16. SINCE IN THE PRESENT CASE, THE RESPONDENT-ASSES SEE HAS BEEN ABLE TO EXPLAIN THE DISCREPANCY IN THE STOCK FOUND DURING T HE COURSE OF SURVEY BY PRODUCTION OF RELEVANT RECORD INCLUDING THE EXCISE REGISTER OF ITS ASSOCIATE COMPANY, NAMELY, M/S. D.M.W.P. LTD., WE ARE OF THE OPINION THAT THE AO COULD NOT HAVE MADE THE AFORESAID ADDITION SOLELY O N THE BASIS OF THE STATEMENT MADE ON BEHALF OF THE RESPONDENT-ASSESSEE DURING THE COURSE OF SURVEY. 7) ADMISSION CANNOT BE SAID TO BE CONCLUSIVE AND IS OPEN TO REBUTTAL: HON'BLE SUPREME COURT IN THE CASE OF PULLANGODE RUB BER PRODUCE CO. LTD. V. STATE OF KERALA [1973] 91 ITR 18 HAS HELD- 'AN A DMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID T HAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW T HAT IT IS INCORRECT. ' 8) ADDITION OF WHOLE OF RS. 65.50 LACS WITHOUT ADJU STING WITH BUSINESS LOSS: ITA NO.1434/DEL./2013 14 WITHOUT PREJUDICE TO THE ABOVE, THE ID. CIT(A) HAS ADDED AN AMOUNT OF RS.65.50 LAKHS ON THE BASIS OF CASH RECEIPTS FOUND DURING THE COURSE OF SURVEY WITHOUT ADJUSTING THE SAME WITH THE BUSINESS LOSS C OMPUTED AT RS.21,51,496/- . 8. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE RS OF THE AUTHORITIES BELOW. 9. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MAT ERIAL. RELYING ONLY ON THE STATEMENT MADE BY SHRI SURI AT THE TIME OF S URVEY, THE LOWER AUTHORITIES CANNOT SADDLE THE IMPUGNED ADDITION IN THE LIGHT OF THE RETRACTION MADE BY SHRI SURI WHEREIN HE HAVE RECONCILED THE RECEIPTS F OUND DURING SURVEY AND HAS EXPLAINED THE RECEIPT AS THAT OF INTER BRANCH TRANS FER AND WITHOUT EXAMINING THE VERACITY OF THE CLAIM OF THE ASSESSEE, THE AO J UMPED INTO A CONCLUSION BASED ONLY ON THE ADMISSION MADE BY SHRI SURI DURIN G SURVEY CANNOT BE COUNTENANCED. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. S. KHADER KHAN SON [2012] 254 CTR 228 HAS HELD AS UNDER :- 'SECTION 133A OF THE INCOME ACT, 1961 - SURVEY - WH ETHER SECTION 133A DOES NOT EMPOWER ANY ITO TO EXAMINE AN Y PERSON ON OATH; SO STATEMENT RECORDED UNDER SECTION 133A HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE BASIS OF ADDITION - HELD, YES' AND WE TAKE NOTE OF THE DECISION THE HONBLE JURISD ICTIONAL HIGH COURT IN A SIMILAR CASE I.E. CIT V. DHINGRA METAL WORKS [2010] 328 ITR 384 (DELHI HC) WHEREIN THE HONBLE HIGH COURT HELD AS UNDER :- '2 DURING THE COURSE OF SURVEY, THE TAX OFFICIALS N OTICED SOME DISCREPANCIES IN STOCK AND CASH IN HAND. DURIN G THE SAID SURVEY, RESPONDENT-ASSESSEE SURRENDERED AN AMOUNT O F RS.99,50,000/- AND OFFERED THE SEINE FOR THE PURPOS ES OF ITA NO.1434/DEL./2013 15 TAXATION. THE ADDITIONAL INCOME OFFERED INCLUDED A SUM OF RS.45,00,000/- ON ACCOUNT OF EXCESS STOCK FOUND DUR ING THE COURSE OF SURVEY AND OFFERED BY ONE OF THE PARTNERS OF THE RESPONDENT-ASSESSEE AS ADDITIONAL INCOME. 5. HOWEVER, SUBSEQUENTLY, THE RESPONDENT-ASSESSEE V IDE ITS LETTER DATED 29TH NOVEMBER, 2004 CONTENDED THAT THE STATEMENT ABOUT STOCK WAS INCORRECT AND THAT THE IMPUGNED DIS CREPANCY HAD BEEN RECONCILED AS IT WAS ONLY A MISTAKE. CONSE QUENTLY, THE RESPONDENT-ASSESSEE WITHDREW THE OFFER OF ADDITIONA L INCOME FOR TAXATION ON ACCOUNT OF EXCESS STOCK. 6. THE AO RELIED UPON THE STATEMENT OF ONE OF THE P ARTNERS OF RESPONDENT-ASSESSEE GIVEN DURING THE COURSE OF S URVEY UNDER SECTION 133A OF THE ACT AND CONCLUDED THAT THE EXPL ANATION/ RETRACTION BY THE RESPONDENT-ASSESSEE WAS AN AFTERT HOUGHT AND HAD NO ELEMENT OF TRUTH. .. 14. MOREOVER, THE WORD MAY USED IN SECTION 133A(3) (III) OF THE ACT CLARIFIES BEYOND DOUBT THAT THE MATERIAL CO LLECTED AND THE STATEMENT RECORDED DURING THE SURVEY IS NOT A C ONCLUSIVE PIECE OF EVIDENCE BY ITSELF. 15. IN ANY EVENT, IT I S SETTLED LAW THAT THOUGH AN ADMISSION IS EXTREMELY IMPORTANT PIECE OF EVIDENCE, IT CANNOT BE SAID TO BE CONCLUSIVE AND IT IS OPEN T O THE PERSON WHO HAS MADE THE ADMISSION TO SHOW THAT IT IS INCOR RECT. ... 16. SINCE IN THE PRESENT CASE, THE RESPONDENT-ASSE SSEE HAS BEEN ABLE TO EXPLAIN THE DISCREPANCY IN THE STOCK F OUND DURING THE COURSE OF SURVEY BY PRODUCTION OF RELEVANT RECO RD INCLUDING THE EXCISE REGISTER OF ITS ASSOCIATE COMPANY, NAMEL Y, M/S. D.M.W.P. LTD., WE ARE OF THE OPINION THAT THE AO CO ULD NOT HAVE MADE THE AFORESAID ADDITION SOLELY ON THE BASI S OF THE STATEMENT MADE ON BEHALF OF THE RESPONDENT-ASSESSEE DURING THE COURSE OF SURVEY. WE TAKE NOTE THAT SURVEY STARTED ON 08.08.2007 AT 8 .30 AM AND SHRI SURIS STATEMENT WAS RECORDED AT ABOUT 3.00 AM TO 4.00 AM ON 09.08.2007 AND THE ADMISSION WAS MADE BY HIM WHEN HE WAS STRESSED AND TOTALLY EXHAUSTED. THE DISCREPANCY NOTICED DURING THE SURVEY OF RECEIPTS W ERE RECONCILED BY SHRI SURI ITA NO.1434/DEL./2013 16 WHO EXPLAINED THAT THE RECEIPTS WERE ONLY IN RESPEC T TO INTER-BRANCH CASH TRANSFER AND NOT RECEIPTS OF FEES FROM STUDENTS. N O STUDENTS WILL REMIT FEES AND NOT INSIST ON BILLS TO BE ISSUED IN THEIR NAMES . SO THE EXPLANATION THAT RECEIPTS WITHOUT NAMES AS EXPLAINED BY THE ASSESSEE THAT IT IS ONLY IN RESPECT TO CASH TRANSFER FROM DIFFERENT BRANCHES IS PLAUSIB LE IN THE LIGHT OF THE FOLLOWING EXPLANATION GIVEN BY THE ASSESSEE :- THAT RECEIPTS ISSUED TO STUDENTS WHICH ARE PLACED FROM PAGE 93 IS DIFFERENT AND AS EXPLAINED BY THE LD. AR THAT THE 2 08 'RECEIPTS' FOUND AT JANAKPURI CENTRE WERE ON THE FORMATS OF UNUSED RECE IPTS EARLIER PRINTED FOR USE IN THE CENTRE BUT WERE NOT USED DUE TO PRIN TING IRREGULARITIES IN THE SAID 'RECEIPTS'. THE LD. AR POINTED OUT THAT TH E FORMAT OF THESE 'RECEIPTS' WERE DIFFERENT FROM THE FORMAT OF FEE RE CEIPTS ISSUED BY THE ASSESSEE IN THE REGULAR COURSE OF BUSINESS AS THE S AME NEITHER INCLUDED THE HEAD OF SERVICE TAX NOR INCLUDED THE CHEQUE NUM BER AND BANK NAME AND ALSO DID NOT INCLUDE THE COURSE AND CLASS FOR W HICH THE FEES IS BEING ALLEGED TO BE RECEIVED. ACCORDINGLY THE SAME COULD NOT BE USED FOR ISSUING RECEIPTS TO STUDENTS FROM WHOM FEES WAS REC EIVED IN REGULAR COURSE AND THEREFORE WERE USED ONLY AS A MEMORANDA ACCOUNT FOR INTERNAL TRANSFER OF FUNDS BY THE ASSESSEE COMPANY. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE LD. CIT (A) ERRED IN UPHOLDING THE CONCLUSION OF THE AO ITA NO.1434/DEL./2013 17 BASED ONLY ON THE ADMISSION DURING SURVEY MADE BY S HRI SURI AT THE WEE HOURS (I.E. BETWEEN 3.00 AM 4.00 AM) TO FASTEN TH E LIABILITY WHEN SHRI SURI WAS ABLE TO EXPLAIN AND RECONCILE THE RECEIPTS. TH E AO DID NOT BOTHER TO ENQUIRE INTO THE VERACITY OF THE EXPLANATION GIVEN BY THE ASSESSEE. THE AO COULD HAVE EASILY CALLED FOR DETAILS FROM THE BRANC HES OF THE ASSESSEE AT JANAKPURI AND TESTED THE EXPLANATION GIVEN BY THE A SSESSEE IN RESPECT TO INTER- BRANCH TRANSFER OF CASH TO THE HEAD OFFICE, WITHOUT DOING SO, THE ADDITION MADE SOLELY ON THE BASIS OF ADMISSION DURING SURVEY CANNOT BE UPHELD AS HELD BY THE HONBLE SUPREME COURT IN CIT VS. S. KHADER K HAN SONG (SUPRA) AND IN A SIMILAR CASE OF HONBLE JURISDICTIONAL HIGH CO URT IN CIT VS. DHINGRA METAL WORKS (SUPRA). THEREFORE, THE ORDERS OF THE LOWER AUTHORITIES ARE BAD IN LAW AND ARE SET ASIDE ON THIS ISSUE. THESE GROUNDS ARE ALLOWED. 10. GROUND NO.4 IS AGAINST THE SUSTENANCE OF DISALL OWANCE OF ADVERTISEMENT EXPENSES AMOUNTING TO RS.8,27,275/- O N THE GROUND THAT SIMILAR EXPENSES WERE DISALLOWED AND OFFERED FOR TAXATION I N EARLIER YEARS. 11. THE ASSESSING OFFICER HAD DISALLOWED AN AMOUNT OF RS.8,27,275/- BY OBSERVING THAT IN THE EARLIER YEARS I.E. F.Y. 2005- 06 AN AMOUNT OF RS.10,97,150/- WAS OFFERED TO TAX ON GROUND THAT TH E REVENUE OUT OF THESE ADVERTISEMENT EXPENSES WOULD BE GENERATED IN THE NE XT YEAR. SIMILARLY, FOR A.Y. 2007-08, THE AO OBSERVED THAT THE ASSESSEE HAD INCURRED AN EXPENDITURE OF RS.8,27,275/- WHICH HAD BEEN INCURRED IN THE MON TH OF MARCH, 2007. ITA NO.1434/DEL./2013 18 ACCORDINGLY, THE AO HELD THAT SINCE THIS WAS A CLEA R DEVIATION FROM THE REGULAR PRACTICE FOLLOWED BY THE ASSESSEE WITH AN I NTENTION TO REDUCE ITS TAXABLE INCOME, THIS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. 12. AGGRIEVED, THE ASSESSEE WENT IN APPEAL BEFORE T HE FIRST APPELLATE AUTHORITY AND THE LD. CIT (A) CONFIRMED THE ADDITIO N BY OBSERVING AS UNDER:- 3.3 AFTER GOING THROUGH THE OBSERVATIONS OF THE A.O ., FACTS OF THE CASE AND SUBMISSIONS OF THE A.R. OF THE APPELLA NT, IT IS CLEAR THAT THE ASSESSING OFFICER HAS MADE THIS DISALLOWAN CE ON THE GROUNDS THAT SIMILAR EXPENSE IN THE EARLIER YEAR HA D BEEN OFFERED TO TAX BY THE ASSESSEE BUT IN THIS YEAR THE SAME HAD N OT BEEN OFFERED TO TAX WITH THE INTENTION TO REDUCE THE TAXABLE INC OME AS AN INCOME OF RS.65.50 LAKHS HAD BEEN SURRENDERED DURING THE C OURSE OF SURVEY. ON GOING THROUGH THE REPLY OF THE A.R. OF T HE APPELLANT ALSO, IT HAS NOWHERE MENTIONED AS TO WHY SIMILAR EX PENSE HAD BEEN DISALLOWED IN THE EARLIER YEAR AND THE ASSESSEE HAD OFFERED FOR TAXATION WHY IN THIS YEAR THIS PRACTICE HAS BEEN DI SCONTINUED. ACCORDINGLY, IT APPEARS THAT THE ASSESSING OFFICER HAS FOLLOWED THE RULE OF CONSISTENCY IN ACCOUNTING AS WELL, AS IN AL LOWING ADVERTISEMENT EXPENSES AND HAS ACCORDINGLY DISALLOW ED THIS AMOUNT. I DO NOT FIND ANY REASON FOR INTERFERING W ITH THE FINDINGS OF THE ASSESSING OFFICER AND ACCORDINGLY, THIS ADDI TION IS UPHELD AND THIS GROUND OF THE APPELLANT IS DISMISSED. 13. LD. AR SUBMITTED THE WRITTEN SUBMISSION WHICH A RE REPRODUCED AS UNDER :- THE COMPLETE DETAILS OF ADVERTISEMENT EXPENSES INC LUDING THE LEDGER AND BILLS OF 'ADVERTISEMENT EXPENSES' (PB --) INCURRED BY THE ASSESSEE WERE FURNISHED BEFORE THE LD. AO AND IT WAS EXPLAINED TH AT THE ENTIRE EXPENDITURE HAD BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN NO POSSIBLE WAY HAD THE AO POINTED OUT ANY DISCR EPANCY OR ANY EXPENDITURE OF INADMISSIBLE NATURE AS PER SECTION 3 7 OF THE I.T ACT, 1961. THE DISALLOWANCE WAS MADE ONLY ON THE GROUND THAT D URING AY 2006-07, THE EXPENSES INCURRED IN MARCH 2006 HAD BEEN OFFERE D FOR TAX BY THE ITA NO.1434/DEL./2013 19 ASSESSEE, WHICH IS EVIDENTLY NOT A SUBSTANTIAL GROU ND TAKEN BY THE LD AO AND THE ID. CIT (A) DESPITE THE FACT THAT ALL THE SUPPO RTING DOCUMENTS GIVING PROOF OF EXPENDITURE INCURRED HAD BEEN FURNISHED BE FORE THE AUTHORITIES. FURTHER, THE AO HAS FAILED TO APPRECIATE THE FACT T HAT THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE IN THE INCOME TAX ACT, 1961. IF THE EXPENDITURE INCURRED IS ON ACCOUNT OF BUSINESS, THE N THE SAME IS OUGHT TO BE ALLOWED U/S 37 OF THE ACT. LEGAL ISSUE: (I) IT IS AN ESTABLISHED FACT UNDER FOLLOWING JUDGE MENTS BY APEX COURTS THAT 'TO BE AN ALLOWABLE EXPENDITURE UNDER SECTION 37(1), THE MONEY PAID OUT OR AWAY MUST BE: (A) PAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OR PROFESSION; AND FURTHER (B) MUST NOT BE; (I) CAPITAL EXPENDITURE; (II) PERSONAL EXPENSE; OR (III) AN ALLOWANCE OF THE CHARACTER DESCRIBED IN SE CTIONS 30 TO 36 AND SECTION 80W' A) CIT V. INDIAN MOLASSES CO. (P.) LTD. [1970] 78 I TR 474 (SC) B) J.K. COTTON MFRS. LTD. V. CIT [1975] 101 ITR 221 (SC) C) SASSOON J. DAVID & CO. (P.) LTD. V. CIT [1979] 1 18 ITR 261 (SC) (II) AS IS EVIDENT FROM THE LEDGER OF ADVERTISEMENT EXPENDITURE (PB 163- 168), THE ASSESSEE COMPANY HAS INCURRED ADVERTISEME NT EXPENDITURE ON ADVERTISING THE IN NEWSPAPERS AND MAGAZINES AND THE SAME HAVE BEEN INCURRED: - WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, AND - THE EXPENDITURE IS NOT: - CAPITAL IN NATURE, - FOR PERSONAL EXPENSES, - DESCRIBED IN SECTIONS 30 TO 36 OF THE ACT. 14. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORD ERS OF THE AUTHORITIES BELOW. ITA NO.1434/DEL./2013 20 15. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE AND P ERUSED THE MATERIAL. THE ASSESSEE HAS CLAIMED ADVERTISEMENT EXPENSES AMO UNTING TO RS.8,27,275/-. HOWEVER, THE SAME WAS DISALLOWED BY THE AO ON THE G ROUND THAT IN EARLIER YEARS, IT WAS NOT ALLOWED AND REVENUE, OUT OF THESE ADVERTISEMENT EXPENSES, WOULD BE GENERATED IN THE NEXT YEAR. SO, ACCORDING TO THE AO, THERE HAS BEEN DEVIATION FROM THE REGULAR PRACTICE FOLLOWED BY THE ASSESSEE AND THAT TOO TO REDUCE ITS TAXABLE INCOME, SO HE DISALLOWED THE SAM E AND ADDED TO THE INCOME OF THE ASSESSEE. LD. CIT (A) ALSO CONCURRED WITH TH E VIEW OF THE AO. WE FIND THAT THE ASSESSEE HAD PRODUCED THE LEDGER AND BILLS OF THE ADVERTISEMENT EXPENSES BEFORE THE LOWER AUTHORITIES BELOW AND EXP LAINED THAT ENTIRE EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVEL Y FOR THE PURPOSE OF BUSINESS. THE AO HAS NOT POINTED OUT ANY DISCREPAN CY OR ANY REASON EXPLAINED EVEN INADMISSIBLE IN THE NATURE AS PER SE CTION 37 OF THE ACT. JUST BECAUSE THE ASSESSEE HAS NOT OFFERED FOR TAX IN THE PREVIOUS YEARS, IT CANNOT BE THE GROUND FOR DISALLOWING THE EXPENSES. IT SHOULD BE REMEMBERED THAT THERE IS NO ESTOPPEL AGAINST THE LAW. IT IS A TRITE LAW THAT IF THE EXPENSES ARE WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS OR PROF ESSION AND IF IT IS NOT A CAPITAL EXPENDITURE OR PERSONAL EXPENDITURE THEN TH E EXPENDITURE NEED TO BE ALLOWED. FROM THE LEDGER OF THE ADVERTISEMENT EXPE NDITURE (PAGES 163 TO 168 OF PB), WE FIND THAT THE ASSESSEE COMPANY HAD INCUR RED ADVERTISEMENT EXPENDITURE ON ADVERTISING THE SAME IN NEWSPAPERS A ND MAGAZINES. IN THE ITA NO.1434/DEL./2013 21 LIGHT OF THE FACT THAT THERE WERE NO OTHER JUSTIFIA BLE REASONS GIVEN BY BOTH THE AUTHORITIES BELOW TO DISALLOW THE ADVERTISEMENT EXP ENDITURE, CANNOT BE COUNTENANCED. THEREFORE, WE DELETE THE ADDITION MA DE BY THE AUTHORITIES BELOW AND THE GROUND IS ALLOWED. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE STAND S ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 22 ND DAY OF JANUARY, 2016. SD/- SD/- (G.D. AGRAWAL) (A.T. VARKEY) VICE PRESIDENT JUDICIAL MEMBER DATED THE 22 ND DAY OF JANUARY, 2016 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-X, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.