M/s. Kalpana Sweets, Mangalore V. ITO, Mangalore

ITA 465/BANG/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9495 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2009
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-09-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 14-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Assessee Lawyers: V SRINIVASAN
• Keywords: Gift; Income from undisclosed sources; Retraction; Revised return
• Section: 271(1)(c); 69C; 133A; 250

Judgement Text

PAGE 1 OF 18 ITA NO.465/BANG/2009 1 THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH B BEFORE SHRI K P T THANGAL, VICE PRESIDENT AND SHRI N L KALRA, A.M. ITA NO.465/BANG/2009 [ASSESSMENT YEAR 2003-04] M/S KALPANA SWEETS, MARKET ROAD, MANGALORE. - APPELLANT VS THE INCOME TAX OFFICER, WARD-2(1), MANGALORE. - RESPONDENT APPELLANT BY : SHRI V SRINIVASAN RESPONDENT BY : SMT. V S SREELEKHA O R D E R PER N L KALRA : THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDE R OF LEARNED CIT(A), MANGALORE DATED 23RD MARCH, 2009 . 2. THE FIRST GROUND OF APPEAL IS GENERAL AND WILL STAND DISPOSED OF IN VIEW OF OUR FINDINGS TO BE RECORDED ON OTHER GROUNDS OF APPEAL. 3. THE SECOND GROUND OF APPEAL IS AGAINST THE CONFIRMATION BY THE LEARNED CIT(A) OF ADDITION OF RS .20 LAKHS MADE BY THE ASSESSING OFFICER. PAGE 2 OF 18 ITA NO.465/BANG/2009 2 3.1 THE ASSESSEE FILED THE RETURN OF INCOME ON 16T H JANUARY, 2004 VIDE WHICH IT DECLARED AN INCOME OF RS .2,67,889/-. SURVEY U/S 133A OF THE ACT WAS CONDUCTED ON 22ND JAN UARY, 2003 IN THE BUSINESS PREMISES AND MANUFACTURING UNI T OF THE ASSESSEE. THE ASSESSEE DEALS IN MANUFACTURE AND SA LE OF SWEETS AND SAVORIES INCLUDING PURCHASE AND SALE OF BAKERY P RODUCTS AND OTHER MISCELLANEOUS EATABLES. DURING THE COURSE OF SURVEY, SEVERAL DISCREPANCIES WERE NOTICED WITH REGARD TO T HE CASH BALANCE, SALARY AND WAGES, GIFT VOUCHERS, FUEL USAGE IN THE MANUFACTURE OF SWEETS. DURING THE COURSE OF SURVEY, IT WAS NOTICED THAT THE ASSESSEE IS IN THE HABIT OF NOT FU LLY ACCOUNTING ITS EXPENDITURE TOWARDS FUEL, EXPENSES TOWARDS SALA RY AND WAGES OF ITS EMPLOYEES ETC. APART FROM SUPPRESSION OF MANU FACTURE AS WELL AS SALES TO THE EXTENT OF 50%. DURING THE COU RSE OF SURVEY, STATEMENTS OF MR. DEVDAS NAGVEKAR AND MR. VARADARAJ NAGVEKAR, PARTNERS OF THE ASSESSEE FIRM WERE RECORD ED. MR. DEVDAS NAGEKAR WAS LOOKING AFTER THE AFFAIRS OF THE BUSINESS PREMISES WHILE HIS ELDER BROTHER MR. VARADARAJ NAGV EKAR WAS LOOKING AFTER THE MANUFACTURING UNIT. IN THE STATE MENT RECORDED ON 23RD JANUARY, 2003, MR. B DEVDAS S NAGVEKAR DECLA RED VOLUNTARILY A TOTAL SUM OF RS.40 LAKHS FOR THREE ASS T. YEARS IN ORDER TO OVERCOME THE DISCREPANCIES, SHORTCOMING, C ONCEALMENT OF EXPENDITURE AND SUPPRESSION OF SALES ETC. FOR TH E 3 ASST. YEARS AS UNDER:- PAGE 3 OF 18 ITA NO.465/BANG/2009 3 ASST. YEAR ADDITIONAL INCOME OFFERED 2001-02 RS.10 LAKHS 2002-03 RS.10 LAKHS 2003-04 RS.20 LAKHS 3.2 THE ASSESSEE FILED REVISED RETURNS FOR THE ASS T. YEARS 2001-02 AND 2002-03 AND SHOWED THE ADDITIONAL INCOME AS OFFERED IN THE STATEMENT RECORDED ON 23RD JANUARY, 2 003. PENALTY PROCEEDINGS U/S 271(1)(C) WERE INITIATED FOR BOTH THE ASST. YEARS. PENALTIES U/S 271(1)(C) WERE ALSO LEVI ED FOR TWO ASST. YEARS I.E. 2001-02 AND 2002-03. HOWEVER, IN THE RET URN FOR THE ASST. YEAR 2003-04, THE ASSESSEE HAS NOT INCLUDED TH E ADDITIONAL INCOME AS OFFERED IN THE STATEMENT RECORDED ON 23RD JANUARY, 2003. THE AO HAS FURTHER MENTIONED THAT THE ASSESS EE PAID ADVANCE TAX ON THE ADDITIONAL INCOME OFFERED, BUT I N THE RETURN OF INCOME, SUCH ADDITIONAL INCOME WAS NOT INCLUDED. THE ASSESSEE FILED APPEALS AGAINST THE ASSESSMENT ORDERS AND PEN ALTY ORDERS FOR THE ASST. YEARS 2001-02 AND 2002-03. THE LEARN ED CIT(A) DISMISSED THE APPEALS AGAINST THE QUANTUM BUT ALLOW ED THE APPEALS AGAINST PENALTY ORDERS FOR BOTH THE ASST. YEA RS. THE LEARNED AO HAS MENTIONED IN THE ORDER THAT THE ASSE SSEE HAS NOT OFFERED THE ADDITIONAL INCOME FOR THE ASST. YEAR UND ER CONSIDERATION BECAUSE PENALTIES WERE LEVIED FOR THE EARLIER YEARS. SUCH CONTENTION WAS RAISED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS ALSO. THE AO THEREFORE WAS OF THE VIEW THAT THE ASSESSEE HAS NOT DECLARED THE ADDITIONAL I NCOME AS A RESULT OF AN AFTER THOUGHT. PAGE 4 OF 18 ITA NO.465/BANG/2009 4 3.3 DURING THE COURSE OF SURVEY, THE FOLLOWING DISCREPANCIES WERE OBSERVED:- ACTUAL (RS.) ACCOUNTED (RS.) DIFFERENCE (RS.) A) FUEL 2,00,000 49,060 1,50,960 B) CASH BALANCE 4,10,820 37,995 3,72,820 C) SALARY IN SHOP 1,59,400 56,600 1,54,800 D) GIFT ARTICLES 94,520 - 94,520 E) SWEETS MANUFACTURES/SALES ON AVERAGE 200 KGS 100 KGS 100 KGS 3.4 SHRI B VARADARAJA NAGVEKAR, WHO WAS LOOKING AF TER THE MANUFACTURING UNIT, IN HIS STATEMENT IN ANSWER TO QUESTION NO.20 STATED THAT ABOUT 40 CYLINDERS OF 17.5 KGS AND 200 LITRES OF DIESEL IS CONSUMED PER MONTH. HE FURTHER ADMITT ED THAT THEY ARE NOT MAINTAINING ANY STOCK BOOK OR MANUFACTURING ACCOUNT IN THE UNIT, WHERE HE IS LOOKING AFTER MANUFACTURING O F SWEETS. AT THE TIME OF SURVEY, 179 KGS OF SWEETS WERE FOUND. 60 KGS OF SWEETS WERE SENT TO THE SHOP BY THE MANUFACTURING UN IT BY 12 NOON AND OVERALL ABOUT 240 KGS OF SWEETS WERE MANUF ACTURED ON THE DAY ON WHICH THE SURVEY WAS CONDUCTED. IT WAS AD MITTED BY THE PARTNER LOOKING AFTER THE MANUFACTURING UNIT TH AT MAXIMUM QUANTITY OF GOODS IN A DAY IS 250 KGS AND ON AN AVERA GE 200 KGS ARE MANUFACTURED AND SENT TO THE SHOP. SWEETS ARE SENT TO THE SHOP BY THE MANUFACTURING UNIT TWICE I.E. IN THE AFT ERNOON AND IN THE EVENING. HOWEVER, MR. DEVDAS NAGVEKAR STATED T HAT ABOUT 100 KGS OF SWEETS ARE MANUFACTURED DAILY. IT WAS AD MITTED BY PAGE 5 OF 18 ITA NO.465/BANG/2009 5 DEVDAS NAGVEKAR THAT HIS ELDER BROTHER VARADARAJ NA GVEKAR IS LOOKING AFTER THE MANUFACTURING UNIT. THE AO THERE FORE INFERRED THAT THE ASSESSEE IS SUPPRESSING ITS SALES TO THE EXTENT OF 100 KGS OF SWEETS I.E. 50% OF MANUFACTURED ITEMS IS ONLY TAKEN FOR SALES IN THE BOOKS. 3.5 THE AO HAS ALSO MENTIONED IN HIS ORDER THAT TH E SALES TAX DEPARTMENT ALSO NOTICED THE SUPPRESSION O F SALES AND SALES TURNOVER AS DECLARED BY THE ASSESSEE WAS NOT A CCEPTED. SUCH SUPPRESSION OF TURNOVER WAS FOUND BY THE SALES TAX DEPARTMENT DURING INSPECTION. 3.6 THE ASSESSEE DEBITED A SUM OF RS.56,600/- TOWA RDS SALARY AND WAGES FOR THE YEAR ENDING 31ST MARCH, 2002 . AT THE TIME OF SURVEY, THE SURVEY TEAM NOTICED THAT 13 WORKE RS ARE WORKING AND THE SALARY PAID PER MONTH COMES TO RS.22 ,600/-. THE TOTAL SALARY FOR THE WHOLE YEAR COMES TO RS.2,71, 200/-. THUS, IT WAS FOUND THAT SALARY FOR THE FINANCIAL YEAR 2001-02 WAS NOT FULLY DEBITED. AT THE TIME OF SURVEY, THE DEPAR TMENT PREPARED LIST OF THE EMPLOYEES WORKING AND FOUND THA T TOTAL SALARY AND WAGES PAYABLE COME TO RS.3,51,400/-. THE ASSESSEE HAS DEBITED ONLY RS.75,000 AGAINST SALARY AND WAGES T ILL THE DATE OF SURVEY. THE CASH BALANCE AS PER BOOKS OF ACCOUNT WAS RS.4,10,820/- BUT CASH BALANCE FOUND WAS RS.37,995/ -. IT WAS FURTHER NOTICED AT THE TIME OF SURVEY THAT AN AMOUNT OF RS,94,520/- RELATING TO ADVERTISEMENT COST AND PURC HASE OF GIFTS PAGE 6 OF 18 ITA NO.465/BANG/2009 6 FOR DEEPAVALI WAS NOT ACCOUNTED BY THE ASSESSEE IN H IS REGULAR BOOKS OF ACCOUNT. MR. DEVDAS NAGVEKAR IN THE STATE MENT ADMITTED THAT THE TOTAL TURNOVER IS AROUND RS.45 LA KHS PER ANNUM. THE SALES TAX AUTHORITIES ALSO FIXED THE TU RNOVER AT RS.12000/- PER DAY AND AS PER THIS WORKING, TURNOVER FOR THE WHOLE YEAR COMES TO RS.43.8 LAKHS. 3.7 IT WAS CONTENDED BEFORE THE AO THAT ADDITIONAL INCOME WAS DECLARED TO BUY PEACE OF MIND AND TO GET OVER FURTHER GRUELING INVESTIGATION. THE AO MENTIONED T HAT BUSINESS PREMISES OF THE ASSESSEE IS LOCATED IN A BUSY AREA A ND IS VERY CLOSE TO CENTRAL MARKET OF MANGALORE. THE SURVEY I N THE BUSINESS PREMISES AND MANUFACTURING UNIT WAS STARTED AT 3.15 PM. UP TO THE START OF SURVEY, THE ASSESSEE RECORDED THE SALES ONLY TO THE EXTENT OF RS.11,409/-. THERE WAS NO FESTIVAL ON TH E DATE OF SURVEY AND ON AN AVERAGE THE ASSESSEE MANUFACTURES 2 00 KGS OF SWEETS PER DAY. THE AO ESTIMATED THE SUPPRESSION OF SALES TO THE EXTENT OF 100 KGS PER DAY AND AFTER APPLYING AVER AGE RATE OF RS.70 PER KG, THE AO DETERMINED THE SUPPRESSION OF SALES TURNOVER AT RS.24,50,000/-. 3.8 AFTER NARRATING ALL THE ABOVE FACTS, THE AO REJECTED THE BOOKS OF ACCOUNT OF THE ASSESSEE ON TH E GROUND THAT THE ASSESSEE IS NOT FULLY ACCOUNTING THE EXPEND ITURE AND SALES IN THE BOOKS OF ACCOUNTS. THE AO THEREFORE A DDED A SUM PAGE 7 OF 18 ITA NO.465/BANG/2009 7 OF RS.20 LAKHS TO THE INCOME AS OFFERED BY THE ASSES SEE IN THE STATEMENT RECORDED AT THE TIME OF SURVEY. 3.9 BEFORE THE LEARNED CIT(A) IT WAS SUBMITTED THA T THE OFFER OF ADDITIONAL INCOME AT THE TIME OF SURVE Y WAS WITH A VIEW TO PURCHASE PEACE WITH THE DEPARTMENT AND TO A VOID PROTRACTED LITIGATION. SUCH ADDITIONAL INCOME WAS NOT OFFERED IN THE RETURN OF INCOME BECAUSE THE DECLARATION GIVEN AT THE TIME OF SURVEY WAS ERRONEOUS AND SECONDLY, THE DEPARTMENT LEVIED PENALTY U/S 271(1)(C) FOR THE EARLIER YEARS FOR WHICH SIMILAR DECLARATION WAS GIVEN. THERE WAS AN UNWRITTEN UNDE RSTANDING THAT THERE WOULD BE NO PENALTY PROCEEDINGS. THE ADM ISSION OF THE ASSESSEE CANNOT CONFER JURISDICTION. THE ASSES SMENT IS TO BE BASED ON THE MATERIALS FOUND IN THE COURSE OF SURVE Y AND CANNOT BE BASED MERELY ON THE MERE ADMISSION. THE ASSESSEE HAS EXPLAINED THE DISCREPANCIES FOUND DURING THE COURSE OF SURVEY. ATTENTION OF THE LEARNED CIT(A) WAS DRAWN TO THE FA CT THAT THE AO HIMSELF HAS ESTIMATED THE SUPPRESSION IN TURNOVE R OF RS.24,50,000. THE AO COULD HAVE ADDED THE NET PROF IT ON SUCH SUPPRESSION OF SALES TURNOVER. ATTENTION OF LEARNE D CIT(A) WAS DRAWN TO CBDT INSTRUCTION DATED 10TH MARCH, 2003 VI DE WHICH, THE BOARD IMPRESSED UPON THE AO THAT THEY SHOULD NOT MAKE ANY ATTEMPT TO OBTAIN CONFESSION AS TO THE UNDISCLOSED INCOME. THE FOCUS OF THE REVENUE AT THE TIME OF SURVEY SHOULD B E ON COLLECTION OF EVIDENCE OF INCOME TO INFER THAT INCO ME IS NOT BEING PROPERLY DISCLOSED. THE ASSESSEE EXPLAINED THE DISC REPANCIES IN PAGE 8 OF 18 ITA NO.465/BANG/2009 8 THE CASH FOUND AND THE CASH BALANCE AS PER BOOKS OF ACCOUNT. THE DISCREPANCIES WERE ON ACCOUNT OF NOT MENTIONING THE CASH DEPOSITED IN THE REGULAR BANK ACCOUNT. IN THE CAS HBOOK, CERTAIN EXPENDITURES WERE PAID AND THESE WERE NOT WRITTEN I N THE BOOKS BY THE ACCOUNTANT. CERTAIN PURCHASES ACTUALLY PAID F ROM CASH GENERATED FROM SALES WERE OMITTED TO BE RECORDED BY THE ACCOUNTANT. THE EXCESS CASH IN REGULAR BOOKS DOES NOT GIVE RISE TO PRESUMPTION OF UNDISCLOSED INCOME. EXPENDITURE RELATING TO GIFT ARTICLES WAS OMITTED TO BE RECORDED BY THE ACCO UNTANT AND THIS IS ALSO ONE OF THE REASONS AS TO WHY CASH FOUN D WAS LESS AS COMPARED TO THE CASH IN HAND AS PER THE CASHBOOK. THE AO HAS ARRIVED AT THE QUANTITY OF SWEETS MANUFACTURED ON TH E BASIS OF AN ORAL STATEMENT OF THE PARTNER. SHRI VARADARAJ N AGVEKAR STATED THAT 200 KGS OF SWEETS ARE MANUFACTURED WHIL E HIS UNIT PARTNER STATED THAT 100 KGS OF SWEETS ARE MANUFACTU RED. NO EVIDENCE WAS FOUND THAT THE ASSESSEE FIRM WAS MANUF ACTURING 200 KGS OF SWEETS. BEFORE THE LEARNED CIT(A) THE A SSESSEE FILED THE MANUFACTURING AND TRADING ACCOUNT UP TO T HE DATE OF SURVEY. THIS IS AVAILABLE AT PAGES 12 AND 13 OF THE ORDER OF THE LEARNED CIT(A). FROM SUCH MANUFACTURING AND TRADIN G ACCOUNT, IT WAS SUBMITTED THAT THE GROSS PROFITS ON MANUFACTURE D ITEM IS 43% AS AGAINST 42% AND 46% FOR THE ASST. YEAR 2001-0 2 AND 2002-03 RESPECTIVELY. GROSS PROFIT ON TRADING ITEM COMES TO 15.5% AS AGAINST 25% AND 11% FOR THE ASST. YEARS 200 1-02 AND 2002-03 RESPECTIVELY. IT WAS THEREFORE SUBMITTED TH AT THE MANUFACTURING AND TRADING ACCOUNT PREPARED UP TO TH E DATE OF PAGE 9 OF 18 ITA NO.465/BANG/2009 9 SURVEY IS COMPARABLE WITH THE RESULTS OF THE IMMEDIA TELY PRECEDING YEAR. 3.10 THE SURVEY TEAM HAS NOT FOUND ANY BILLS OR OTH ER MATERIALS TO SUGGEST THAT THERE IS A CONSUMPTION OF 40 GAS CYLINDERS AND 200 LITRES OF DIESEL PER MONTH. THE P ARTNER IN THE STATEMENT HAS NEVER STATED THAT THE EXPENDITURE ON FUEL IS AN EXCESS OF RS.2 LAKHS. IT WAS MENTIONED IN THE QUES TION THAT EXPENDITURE IS IN EXCESS OF RS.2 LAKHS AND IT WAS N OT THE ASSERTION BY THE PARTNER. IN RESPECT OF EXPENDITURE ON WAGES AND SALARIES, IT WAS STATED THAT THE STATEMENTS WER E RECORDED LATE NIGHT AFTER 12 AM I.E. ON 23RD DECEMBER, 2003. THE STATEMENTS WERE NOT RECORDED IN THE WAY THE PARTNERS GAVE THE ANSWERS. THE PARTNERS WERE NOT CONVERSANT IN ENGLI SH LANGUAGE. DURING THE COURSE OF SURVEY, NOTHING WAS FOUND THAT THE FIRM WAS NOT ACCOUNTING MANUFACTURE OF GOODS AND SALES AND N O SUPPRESSION OF SALES OUTSIDE THE BOOKS WERE DETECTE D.THE SURVEY OPERATIONS LASTED LATE IN THE NIGHT TILL 3 AM ON TH E FOLLOWING DAY. STATEMENT OF THE PARTNER WAS RECORDED ON THE NEXT D AY AND A DECLARATION WAS GIVEN AFTER DISCUSSION WITH THE AO. THE ASSESSEE HAD DISCUSSION WITH THEN AO FOLLOWED BY THE DISCUSSION WITH THE ADDL. CIT AND HON'BLE CIT. ALL OF THEM P ROMISED, THOUGH NOT IN WRITING, THAT IN CASE RETRACTION OF S TATEMENT WAS NOT MADE THEN PENALTIES WILL BE DROPPED. THE ACC OUNTS WILL NOT BE PROBED. IN VIEW OF SUCH UNWRITTEN UNDERSTANDING, THE ASSESSEE FIRM THOUGHT IT WISE TO COOPERATE AND PAGE 10 OF 18 ITA NO.465/BANG/2009 10 DECLARE AND FILE SUCH RETURNS FOR THE ASST. YEARS 20 01-02 AND 2002-03. THERE WAS CHANGE IN THE INCUMBENTS AND TH E SUCCEEDING AO NOT ONLY INITIATED THE PENALTY BUT ALSO IMPOSED THE PENALTY. NO ASSETS OR EVIDENCES WERE FOUND DURING T HE COURSE OF SURVEY TO INFER THAT THE ASSESSEE WAS HAVING UNDISCL OSED INCOME. 3.11 THE LEARNED CIT(A) AFTER GOING THROUGH THE STATEMENTS OF THE ASSESSEE HELD AS UNDER:- 1) DURING THE COURSE OF SURVEY THE BOOKS OF ACCOUNT WERE FOUND TO BE NOT COMPLETE AND UPDATED. 2) THE ASSESSEE HAS NOT MAINTAINED ANY BOOKS OF ACCOUNT RELATING TO MANUFACTURE OF SWEETS. 3) CASH BALANCE AS PER BOOKS WAS RS.4,10,820/- WHILE THE CASH BALANCE FOUND AT THE TIME OF SURVEY WAS RS,.37,995/-. 4) DEFICIT IN CASH BALANCE WAS EXPLAINED THAT SOME OF THE EXPENSES HAVE NOT BEEN ENTERED IN THE BOOKS. 5) DURING SURVEY IT WAS FOUND THAT THE ASSESSEE HAS NOT DEBITED THE EXPENDITURE OF RS.94,520/- RELATING TO ADVERTISEMENT COST AND PURCHASE OF GIFTS FOR DEEPAVALI. 6) IN RESPECT OF MANUFACTURE OF SWEETS PER DAY, THERE IS CONTRADICTION BETWEEN THE STATEMENT OF SHRI VARADARAJA NAGVEKAR AND SHRI DEVDAS NAGVEKAR. 7) PARTNER HAS ADMITTED THAT THE FUEL CONSUMPTION IN TERMS OF GAS CYLINDER AND DIESEL WAS MUCH MORE THAN WHAT HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT. CONSIDERING THE ABOVE DISCREPANCIES, THE LEARNED CI T(A) HELD THAT THE AO WAS JUSTIFIED IN REJECTING THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) HAS REFERRED TO THE FACT THAT THE SA LES TAX PAGE 11 OF 18 ITA NO.465/BANG/2009 11 DEPARTMENT ALSO FOUND THAT THERE IS SUPPRESSION OF SALES TURNOVER. THE LEARNED CIT(A) NOTICED THAT THE FOLL OWING DISCREPANCIES ON THE DATE OF SURVEY WAS NOTICES:- 1) FUEL EXPENSES RS.1,59,960/- 2) DEFICIT IN CASH BALANCE RS.3,72,820/- 3) SALARY EXPENSES ON SHOP RS.1,54,900/- 4) WAGES IN MANUFACTURING UNIT RS.2,07,000/- 5) EXPENSES ON GIFT ARTICLES RS. 94,520/- TOTAL RS.9,88,930/- CONSIDERING THE GP ON SUPPRESSED SALES OF RS.24,50, 000/- AND THE DISCREPANCIES FOUND AT THE TIME OF SURVEY TO THE EXTENT OF RS.9,88,930/-, IT WAS OBSERVED BY THE LEARNED CIT(A) THAT THE UNACCOUNTED INCOME/TRANSACTIONS TOTALS TO RS.20,66, 930/-. THE LEARNED CIT(A) FURTHER OBSERVED THAT THE ASSESSEE H AS SHOWN SALES TURNOVER OF RS.35,65,113/- IN THE RETURN OF I NCOME. IF SUCH A TURNOVER CAN BE ACHIEVED BY FUEL EXPENSES OF RS.49 ,060/- THEN THE ACTUAL TURNOVER ON PROPORTIONATE BASIS OF THE A CTUAL FUEL EXPENSES WILL EXCEED RS.1 CRORE DURING THE YEAR. TH E ASSESSEE HAS SHOWN WAGES AND PAYMENTS OF RS.64,200/- FOR THE TURNOVER OF RS.35,65,113/- THEN THE WAGE PAYMENT OF RS.2,71,2 00/-, THE RESULTANT TURNOVER WOULD BE MORE THAN RS.1 CRORE. THE LEARNED CIT(A) THEREFORE OBSERVED THAT THE TURNOVER OF THE ASSESSEE MIGHT BE EVEN HIGHER THAN WHAT THE AO HAD ESTIMATED . WHEN THE BOOKS OF ACCOUNT DOES NOT REFLECT THE STATEMENT OF AFFAIRS THEN THE AO IS EMPOWERED TO DETERMINE THE CORRECT P ROFIT ON JUDICIAL ESTIMATION AFTER CONSIDERING ALL THE MATER IAL EVIDENCES PAGE 12 OF 18 ITA NO.465/BANG/2009 12 GATHERED BY HIM. THE LEARNED CIT(A) REFERRED TO THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE EARLIER YEARS VIDE WHICH THE TRIBUNAL HAS CONFIRMED THE ADDITIONA L INCOME OFFERED IN THE REVISED RETURN AS CORRECTLY ADDED. A N ADMISSION IS THE BEST EVIDENCE THAT AN OPPOSITE PARTY CAN RELY. HENCE, ASSESSEE'S RETRACTION OF ADMITTED DECLARATION IS ON FLIMSY AND UNACCEPTABLE GROUNDS AND HENCE CANNOT BE ACCEPTED. THE ALLEGATION OF COERCION HAS NOT BEEN PROVED BY THE AS SESSEE. THE LEARNED CIT(A) RELIED ON THE DECISION OF KERALA HIG H COURT IN THE CASE OF MAHESH B SHAH V ACIT 238 ITR 130. ACCORDIN GLY, THE LEARNED CIT(A) CONFIRMED THE ADDITION OF RS.20 LAKH S. 3.12 BEFORE US, THE LEARNED AR REITERATED THE ARGU MENT WHICH WERE PLACED BEFORE THE LEARNED CIT(A). IT WA S SUBMITTED THAT NO EVIDENCE SHOWING THE SUPPRESSION OF TURNOVE R OR DEFLATION OF EXPENSES WAS FOUND. THE ADDITIONS ARE BASED MERELY ON THE BASIS OF THE STATEMENTS OF THE PARTNERS RECO RDED. THE LEARNED AR SUBMITTED THAT THE LEARNED CIT(A) HAS TR EATED THE DISCREPANCIES FOUND AT THE TIME OF SURVEY TO THE EXT ENT OF RS.9,88,930/-. THIS INCLUDES THE DEFICIT IN CASH B ALANCE. THE DEFICIT IN CASH BALANCE EXPLAINS THE EXPENSES MADE, WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNT. HENCE THIS C ANNOT BE CONSIDERED AS PART OF THE DISCREPANCY TO BE ADDED TO THE INCOME. NO CASH WAS FOUND IN EXCESS. IF DEFICIT CASH IS FO UND THEN THE SAME CANNOT BE ADDED TO THE INCOME. THE LEARNED AR FURTHER SUBMITTED THAT THE ASSESSMENT IS TO BE MADE ON THE BASIS OF PAGE 13 OF 18 ITA NO.465/BANG/2009 13 EVIDENCE AND MATERIALS FOUND DURING THE COURSE OF S URVEY. THE AO CAN INVESTIGATE THE CASE BUT CANNOT MAKE ADDITIO N SIMPLY ON THE BASIS OF ADMISSION BY THE ASSESSEE. THE LEARNED AR FURTHER DREW OUR ATTENTION TO THE FACT THAT THE LEARNED AO HAS ESTIMATED THE SUPPRESSION OF SALES TO THE EXTENT OF RS.24,50,000/-. IF THE SUPPRESSION OF SALES IS TO THE EXTENT OF RS.24,50,000/- THEN THE ADDITION CANNOT BE MADE TO THE EXTENT OF RS.20 LAKHS. 3.13 ON THE OTHER HAND, THE LEARNED DR SUPPORTED T HE ORDERS OF THE AUTHORITIES BELOW. 3.14 WE HAVE HEARD BOTH THE PARTIES. PAGE 3 OF TH E PAPER BOOK FILED BY THE LEARNED AR CONTAINS THE DETA ILS OF EMPLOYEES AND SALARIES DRAWN. THIS IS SIGNED BY MR. DEVDAS NAGVEKAR. SALARIES OF 8 EMPLOYEES HAVE BEEN NOTED. 6 OF THE EMPLOYEES HAVE WORKED THROUGHOUT THE YEAR WHILE TWO OF THE EMPLOYEES JOINED DURING THE FINANCIAL YEAR RELEVANT T O THE ASST. YEAR UNDER CONSIDERATION. IT IS ALSO MENTIONED THAT THE PARTNER STATED THAT INDIVIDUAL CONFIRMATION FROM THE EMPLOYE ES IN RESPECT OF SALARY IS DISPENSED WITH, AS THE PARTNER IS ABIDING BY THE ABOVE DATA. PAGE NO.4 TO 10 CONTAIN THE COPY OF THE STATEMENT OF SHRI DEVDAS NAGVEKAR. HE WAS REQUIRED TO CONFIRM THE INVENTORY OF THE SWEETS MANUFACTURED ON THE DATE OF SURVEY, SWEETS MANUFACTURED TO THE EXTENT OF 179 KGS WAS FO UND. SHRI NAGVEKAR ADMITTED THAT 60 KGS OF SWEETS HAS ALREADY BEEN SENT PAGE 14 OF 18 ITA NO.465/BANG/2009 14 TO THE SHOP. ACCORDINGLY HE ADMITTED THAT THE TOTAL QUANTITY MANUFACTURED IS ABOUT 240 KGS. AT THE TIME OF SURV EY, IT WAS FOUND THAT 13 WORKERS WERE WORKING AND IT WAS NOTIC ED THAT SALARY PAYABLE TO THEM IS RS.22,600/-. SHRI VARADARA JA NAGVEKAR ADMITTED THE NUMBER OF WORKERS EMPLOYED AND THE QUAN TUM OF SALARY BEING PAID TO THEM. SHRI NAGVEKAR ADMITTED T HAT HE HAS CONSTRUCTED A HOUSE AND THE INVESTMENT IN THE HOUSE IS RS.18 LAKHS. HE IS ALSO HAVING A MARUTHI VAN WHICH WAS P URCHASED FOR RS.2,60,000/-. RS.2 LAKHS WAS FINANCED BY THE BANK AND RS.60,000/- WAS SPENT OUT OF HIS SAVINGS. HE WAS A LSO HAVING FIXED DEPOSIT IN STATE BANK OF INDIA. HE ALSO GAVE THE DETAILS OF THE PARTIES FROM WHICH THEY ARE PURCHASING THE RAW M ATERIALS. IN RESPECT OF SOURCE OF THE CONSTRUCTION OF THE HOU SE, IT WAS STATED THAT HE HAS RECEIVED GIFT FROM HIS BROTHER, WHO IS WORKING IN USA. HE ALSO ADMITTED THAT DURING FESTIVAL SEAS ON, THE MANUFACTURING OF SWEETS IS AROUND 350 KGS. FOR THI S PURPOSE, HE HAS TO PAY THE OVERTIME ALLOWANCE TO THE EXISTING EM PLOYEES. HE WAS ASKED TO GIVE THE FUEL CONSUMPTION PER MONTH FO R MANUFACTURING. IN RESPONSE TO THAT, HE ADMITTED TH AT ABOUT 40 CYLINDERS OF 17.5 KGS AND ABOUT 200 LITRES OF DIESEL IS CONSUMED PER MONTH. 3.15 SHRI DEVDAS NAGVEKAR STATED THAT HE IS HAVING SOME FIXED DEPOSITS IN VARIOUS BANKS AND ALSO ADMITTED T HAT HIS WIFE IS ALSO HAVING CERTAIN DEPOSITS. SHRI DEVDAS NAGVEKAR HAD BEEN TO MALAYSIA AND SRILANKA. HE HAS ALSO PAID ABOUT 15,00 0/- TOWARDS PAGE 15 OF 18 ITA NO.465/BANG/2009 15 MEMBERSHIP OF CLUB MAHINDRA HOLIDAYS. HE WAS ASKED TO WORK OUT THE CASH BALANCE AS ON THE DATE OF SURVEY AND TH AT CASH BALANCE WAS WORKED OUT AND MENTIONED AT RS.4,10,821 /-. HE AGREED THAT THERE IS CASH DEFICIT. HE STATED THAT AROUND RS.75,000/- WAS DEPOSITED IN THE CANARA BANK ACCOUN T. HE ALSO STATED THAT AROUND RS.85,000/- WAS NOT ENTERED IN T HE CASH BOOK IN RESPECT OF ADVERTISEMENT EXPENSES AND THE GIFT S CHEME. HE HAS ALSO PAID RS.45,000/- TO CLUB MAHINDRA HOLIDAYS THROUGH THE CREDIT CARD BUT THIS IS NOT REFLECTED IN THE CASH B OOK. HE ALSO STATED THAT HE HAS PURCHASED A PROPERTY NEAR MAHAMAYA TEMPLE FOR A SUM OF RS.10 LAKHS. IT IS TRUE THAT HE HAS S TATED THAT ABOUT 100 KGS OF SWEETS WERE MANUFACTURED. OUR OBJ ECT OF DRAWING ATTENTION TO THE FACTS CONTAINED IN THE STA TEMENT IS THAT THE DISCREPANCIES WERE FOUND AND IT WAS NOTED BY THE REVENUE THAT THE ASSESSEE IS NOT DISCLOSING THE CORRECT INC OME. HENCE, THE ASSESSEE MADE A SURRENDER OF RS.40LAKHS FOR THR EE YEARS. WHEN THE ASSESSEE HAS MADE THE REVENUE TO BELIEVE T HAT HE IS OFFERING ADDITIONAL INCOME SO THAT FURTHER INVESTIG ATION IS NOT CARRIED OUT THEN THE ASSESSEE CANNOT RETRACT SUCH A STATEMENT. SURVEY WAS CONDUCTED ON 22ND JANUARY, 2003. OFFER F OR ADDITIONAL INCOME WAS MADE ON 23RD JANUARY, 2003. T HE ASSESSEE PAID THE ADVANCE TAX AND ALSO FILED REVISE D RETURN FOR THE EARLIER YEARS. THE RETURN OF INCOME FOR THE AS ST. YEAR 2003- 04 WAS DUE BY OCTOBER, 2003 WHILE THE ASSESSEE HAS F ILED THE RETURN ON 16TH JANUARY, 2004. THE ADDITIONAL INCOME OFFERED PAGE 16 OF 18 ITA NO.465/BANG/2009 16 WAS NOT RETURNED BECAUSE THE AO LEVIED PENALTY VIE O RDER DATED 24TH SEPTEMBER, 2003 FOR THE ASST. YEAR 2001-02. 3.16 THE HON'BLE DELHI HIGH COURT IN THE CASE OF S URYA PHARMACEUTICALS LTD. 214 CTR 538 HAD AN OCCASION TO CONSIDER THE AVERMENT OF THE ASSESSEE THAT HE WAS FORCED TO MAKE STATEMENT UNDER DURESS. THE HON'BLE DELHI HIGH COU RT HELD THAT SUCH CONTENTION IS NOT ACCEPTABLE AS THERE IS NO IO TA OF EVIDENCE, NOT EVEN A WHISPER THAT SOME STEPS WERE IMMEDIATELY TAKEN TO STRAIGHTEN THE CASE. IN THE INSTANT CASE, THE ASSE SSEE FILED THE RETURNS FOR THE EARLIER YEARS AS PER THE DECLARATION S. THE ASSESSEE ALSO PAID ADVANCE TAX ON THE ADDITIONAL IN COME OFFERED. SUCH ACTIONS ON THE PART OF THE ASSESSEE CANNOT BE TERMED AS INVOLUNTARY. 3.17 THE TRIBUNAL WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE ASST. YEARS 2001-02 AND 2002-03, UP HELD THE ADDITION OF ADDITIONAL INCOME OFFERED BY THE ASSESSE E THROUGH REVISED RETURN. FOR READY REFERENCE, WE ARE REPRODU CING PARA 7 AND 8 OF THAT ORDER:- '7. THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THAT DURING THE SURVEY OPERATION, NO MATERIAL WAS FOUND IN SUPPORT OF UNACCOUNTED MANUFACTURE AND SALE OUTSIDE THE BOOKS OF ACCOUNTS. THE THEN ADDL. CIT AND CIT ASSURED THE ASSESSEE THAT IF DECLARATION IS GIVEN, NO PENALTY WOULD BE LEVIED; HENCE, THE ASSESSEE FILED REVISED PAGE 17 OF 18 ITA NO.465/BANG/2009 17 RETURN DECLARING ADDITIONAL INCOME. NOW THE ASSESSEE WANTS TO WITHDRAW THE DECLARATION. HENCE, THE APPEAL WAS FILED BEFORE THE CIT(A). LEARNED CIT(A) BY THE IMPUGNED ORDER REJECTED THE APPEAL, AGAINST WHICH, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 8. AFTER HEARING BOTH THE SIDES, WE ARE OF THE VIEW THAT THE LEARNED CIT(A) WAS JUSTIFIED IN DISMISSING THE ASSESSEES APPEAL. IT IS NOT CORRECT THAT NO DISCREPANCY WAS FOUND AT THE TIME OF SURVEY. PURSUANT TO THAT ONLY, THE ASSESSEE OFFERED ADDITIONAL INCOME BY FILING REVISED RETURN AND ALSO PAID TAX IN RESPECT OF ADDITIONAL INCOME. ASSESSMENT ORDERS WERE PASSED ACCEPTING THE ADDITIONAL INCOME SUBMITTED BY THE ASSESSEE. HENCE, THERE IS NO REASON TO WITHDRAW THE DECLARATION MADE BY THE ASSESSEE. THE FINDING OF CIT(A) IS UPHELD AND THE APPEAL IS DISMISSED'. CONSIDERING THE FINDING OF THE TRIBUNAL FOR THE EAR LIER YEARS, WE FEEL THAT THE ADDITIONAL INCOME AS OFFERED VIDE DEC LARATION IS REQUIRED TO BE ADDED. 3.18 THE BANGALORE BENCH IN THE CASE OF CARPENTERS CLASSICS (EXIM) P. LTD. V DCIT 299 ITR 124 (AT) HEL D THAT RETRACTION AFTER THREE MONTHS OF GIVING VOLUNTARY DE CLARATION AND WITHOUT SUPPORT BY ANY MATERIAL CANNOT BE ACCEPTED. UNDER SUCH CIRCUMSTANCES, ASSESSMENT ON THE BASIS OF ESTIMATIO N IS JUSTIFIED. THE LEARNED CIT(A) HAS ALSO POINTED OUT THAT DISCREPANCIES IN SALARY AND WAGES DO INDICATE A SUBS TANTIAL PAGE 18 OF 18 ITA NO.465/BANG/2009 18 SUPPRESSION OF TURNOVER. MOREOVER, IF THE EXPENSES ARE NOT ENTERED IN THE BOOKS OF ACCOUNT THEN THIS CANNOT BE ALLOWED UNDER THE PROVISO TO SECTION 69C OF THE I T ACT. W E THEREFORE FULLY AGREE WITH THE CONCLUSION ARRIVED AT BY THE LEA RNED CIT(A) THAT THE AO WAS JUSTIFIED IN MAKING THE ADDITION OF RS.20 LAKHS. HENCE, THE ADDITION OF RS.20 LAKHS IS CONFIRMED. 4. THE GROUNDS OF APPEAL NOS. 3 TO 5 WERE NOT PRES SED AND ARE THEREFORE DISMISSED AS NOT PRESSED. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 11TH SEPTEMBER, 200 9. SD/- SD/- (K P T THANGAL) (N L KALRA) VICE PRESIDENT ACCOUNTANT MEMBER BANGALORE, DATED:11/9/2009 COPY TO :- 1. THE ASSESSEE 2. THE REVENUE 3. THE CIT(A) CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR 6. GF 7. GF, ITAT, DELHI BENCH BY ORDER MSP/10/9/ ASSISTANT REGISTRAR, ITAT, BANGALORE.