Growmore Enterprises Pvt. Ltd., Vadodara V. The DCIT, Circle-1(2) Now Circle-1(1)(1), Vadodara

ITSSA 30/AHD/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6405 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-06-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: B
• Next Hearing Date: 12-06-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 14-03-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure; Loose papers; Corroborative evidences; Retraction
• Section: 132; 143(3); 153C

Judgement Text

आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरणआयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण, अहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठअहमदाबाद 瀈यायपीठ अहमदाबाद 瀈यायपीठ “B”, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद । ।। । IN THE INCOME TAX APPELLATE TRIBUNAL “ B ” BENCH, AHMEDABAD ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTNAT MEMBER IT(SS)A No.30/Ahd/2023 Assessment Year : 2010-11 Growmore Enterprises Pvt.Ltd. 224, Golden Trade Centre Nr. S.T. Depot Vadodara – 390 002 Vs The DCIT Circle-1(2) [Now Cir-1(1)(1)] Vadodara PAN: AAACG 8897 L / (Appellant) / (Respondent) Assessee by : Ms. Urvashi Sodhan, AR Revenue by : Shri Sudhendu Das, CIT-DR /Date of Hearing : 13/06/2024 /Date of Pronouncement : 21/06/2024 आदेश/O R D E R PER SHRI MAKARAND V. MAHADEOKAR, AM: This appeal by the Assessee is directed against the order dated 16-01-2023 of the Commissioner of Income Tax (Appeals)–12, Ahmedabad [hereinafter referred to as “the Ld.CIT(A)”], dismissing the grounds of assessee and confirming the addition of Rs.15,00,000/- made by the Assessing Officer (hereinafter referred to as “AO”) in his assessment order passed u/s.153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") on account of a statement made by the Assessee during the course of search and seizure proceedings under section 132(4) of the Act for the Assessment Year (AY) 2010-11. IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 2 Facts of the Case: 2. A search and seizure operation was conducted on 11-02-2011 under section 132(1) of the Act, on the Transworld Furtichem Group (Dhanani Group) of cases. The residential premises of Shri Salim Sherani, the Director and Principal Officer of the assessee-company, M/s. Growmore Enterprises Pvt. Ltd., were also covered under section 132 of the Act. During the search, various incriminating documents relating to the Assessee were found. During the search, Shri Salim Sherani, in the presence of his Chartered Accountant, voluntarily disclosed an additional income of Rs.15,00,000/- for the Financial Year (FY) 2009-10 in the hands of M/s. Growmore Enterprises Pvt. Ltd. This disclosure was made to cover certain unexplained expenses and to co-operate with the Department. 2.1. During the assessment proceedings, the Assessee was asked to justify the reasons for not reflecting the disclosed amount of Rs.15,00,000/- in the return of income filed for the AY 2010-11. The Assessee, in a written submission, explained that the disclosure was made to buy peace and avoid litigation with the Department. The Assessee also mentioned that the disclosure was incorrectly made as some of the documents did not pertain to the Financial Year in question and also not relating to the assessee. The assessee also provided, during the course of assessment, some details of expenses and receipts which the director of the assessee could not explain while making a disclosure. IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 3 2.2. The AO, however, did not accept the explanation provided by the Assessee and added Rs.15,00,000/- to the total income of the Assessee as per the voluntary disclosure. 2.3. The Assessee filed an appeal before the Ld.CIT(A), who confirmed the addition made by the AO, relying on some judicial pronouncements. The Ld.CIT(A) concluded that statements given to the AO under section 132(4) of the Act have legal force and cannot be retracted without substantial evidence. 2.4. Therefore, the assessee is in appeal before us with following grounds: “1. The Learned Commissioner of Income Tax (Appeals) erred in holding that the statement recorded u/s.132(4) were applicable u/s 153C proceedings. 2. The Learned Commissioner of Income Tax (Appeals) erred in holding that since the statement u/s 132(4) was recorded in the presence of the Chartered Accountant of the Company and the same was applicable. 3. The Learned Commissioner of Income Tax (Appeals) erred in disregarding the submission and various case laws cited during the course of appellate proceedings and further erred in confirming the addition of Rs.15,00,000/- merely on the basis of the statement u/s 132(4) without any corroborative evidences. 4. The Learned Commissioner of Income Tax (Appeals) presumed incorrectly that the company had not filed appeal against the order passed u/s 153C rws 143(3) of the Act for A.Y. 2011-12. 5. The Learned Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs.15,00,000/- merely on the basis of the disclosure u/s 132(4) without any corroborative evidence. 6. The appellant company craves the right to add to or alter, amend, substitute, delete or modify all or any of the above grounds of appeal.” IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 4 On the grounds of appeal: 3. The Ld.Authorised Representative (AR) of the Assessee submitted that the addition of Rs.15,00,000/- was made solely based on the statement given under section 132(4) of the Act without any supporting evidence. The Ld.AR, during the course of appellate proceedings, relied on the judgment of the Hon’ble Gujarat High Court in the case of Kailashben Manoharlal Choksi Vs. CIT as reported in 220 CTR 138 (Guj), where it was held that mere admission during search proceedings does not justify the addition unless corroborated by concrete evidence. 3.1. The Ld.AR further contended that the disclosure was made to come clean and co-operate with the department. Some of the documents referred to in the disclosure did not pertain to the financial year under consideration, and some were explained during the course of assessment and also during appellate proceedings. The Ld.AR put before us the details as submitted to the AO, which the director could not explain at the time recording statement u/s.132(4) of the Act. 3.2. Alternatively, the Ld.AR argued that if the addition is to be sustained, only the net difference between the receipts and expenses, amounting to Rs.1,63,600/-, should be added to the income, rather than the entire disclosed amount of Rs.15,00,000/-. 4. The Ld.Departmental Representative (DR) submitted that the statement given by the director of the assessee-company under section 132(4) of the Act has substantial evidentiary value and cannot be retracted IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 5 without credible evidence. The Ld.DR argued that the Assessee's voluntary disclosure was made in the presence of its Chartered Accountant, indicating its authenticity. 4.1. The Ld.DR relied on the order of lower authorities. He pointed out that the Ld.CIT(A) has dealt with the issue in detail in para 6.3.5 of his order. 5. We have heard the rival contentions, perused the material available on record and gone through the orders of the lower authorities. The primary issue for consideration is whether the addition of Rs.15,00,000/- can be sustained solely based on the statement given under section 132(4) of the Act, without any corroborative evidence, and if not, whether the alternate plea of adding only the net difference between receipts and expenses should be accepted. 5.1. At this juncture, we take into consideration details submitted by the assessee to the AO and explanations offered by it in respect of the incriminating material found during the search. Out of total 49 pages of print-out taken from the laptop of the Director, explanation relating to Page Nos. 32 to 36, Page No. 39 and Page Nos. 42 to 44 could not be offered by the Director of the company Shri Salim A. Sherani. During the course of assessment, the assessee offered explanation in respect of these pages. The AO in his order has dealt with these details. For the sake of clarity, we reproduce relevant part here – IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 6 “During the course of assessment proceedings, the loose papers page No. 32 to 36, 39 and 42 to 44 of Annexure A-1 were examined and it was seen that pages 32 to 36 pertain to certain receipts and expenses related with the period 1.8.2008 to 26.03.2009 and a few entries were also related with April 2009, June 2009, Sept. 2009, and April 2010. Thus, it was seen that these papers pertain to the period 2008-09 relevant A.Y. 2009-10. Few entries related with F.Y. 2009-10 were around Rs. 2.10 lakhs related with only expenses and one payment mentioned as payment from Madam Rs. 1,07,564/- dated 07.06.2009 pertained to the period F.Y. 2009-10 (2010-11). Similarly page No. 39 pertained to entry of 1 lakh depicted as 1.0 dated 09.09.2008 But this entry is a duplicate entry already mentioned at page 36 of A-1 as '9/9/2008-Arawal sb 1.00'.. Similarly pages 42 to 44 also pertains to dispatch of certain materials in the month October and November of 2010 relevant to A.Y. 2011-12 and supply of certain material alongwith truck numbers, weight in MT, and value of the material with weight of PMT supplied by the assessee in the month August, September and October 2008 relevant to A.Y. 2009-10. The assessee was asked to justify the reasons of not reflecting the disclosure of Rs. 15,00,000/- in the return of Income filed for the A.Y. 2010-11 relevant to the F.Y. 2009-10 as per the statement on oath dt. 5th April 2011. The assessee vide a written submission mentioned that "During the course of hearing your honour had called for explanation as to why an amount of Rs. 35 lakhs ( Rs. 15 lakhs for A.Y. 2010-11 and Rs. 20 lakhs for A.Y. 2011-12) be not added as unexplained addition income in the hands of the Company. In view of answer to Question No. 8 of the statement of the Director Shri Salim A. Sherani recorded on 5.4.2011. In this regard it is submitted that in reply to question No. 7 relating to the loose papers inventoried at Annexure A-1 the director of the company Shri Salim A. Sherani could not be explained on page No. 32-36 and page No. 39. Hence the director had made a disclosure of Rs. 35 lakhs to come out clean and with a view to buy peace and to avoid litigation with the department. However, on perusal of the loose paper it is seen that page No. 39 does not pertain to the company. Regarding page No. 32 -36 it is submitted that the same pertains to the "material movement of Manganese Ore" during F.Y. IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 7 2008-09, for which a separate explanation has been filed during the course of assessment proceedings for A. Y. 2009-10. Considering the above facts and submission and also considering the fact that no other loose papers have found to indicate that the company had earned additional income not recorded in the books of accounts to the tune of Rs. 35 lakhs as stated by Shri Salim A. Sherani, we have to submit that no addition be made since the disclosure has been incorrectly made on papers not pertaining to the financial year concerned.” The reply of the assessee was carefully considered and not found tenable. There are certain entries at page 32 of annexure A-1 as follows: Expenses receipts 18/04/09 manohar vakil by yusuf 1000 21/04/09 from delhi rtgs aravali - 292568 27/04/09 angadia from delhi 400 24/09/09 dadam seth 68000 207432 07/06/09 payment from medam - 107564 10/06/09 dohad rent 50000 01/07/09 banswara exp 1000 15/09/09 mn freight from dahod 41700 010/7/09 banswara exp 2 days 1500 1,63,600 607564 The assessee had submitted a cash flow statement related with the mineral movement as per seized material of loose papers pages 32 to 36 (annexure A- 1). However during the course of assessment proceedings, the assessee did not offer any satisfactory explanation regarding these amount of money as mentioned above amounting to Rs. 1,63,600/- related with expenses and receipts of Rs. 60756/-. The assessee also had made payment of 68000 on 24/9/2009 to dadam seth, payment of dahod rent 50000 on 10/06/2009, and payment of 41700 as freight from dahod on 15/09/2009 is clearly in contravention of section 40(3) of I.T. Act. Since the above amount is though unallowable and the receipt to is un-reflected by the assessee in its books of accounts but since he had already made a discloser of Rs. 15,00,00 for the IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 8 current A.Y. 2010-11 is being considered as included in the amount disclosed in the statement on oath by the MD of the assessee company. Since the explanation to the seized loose papers was made in presence of the Chartered Accountant Shri Vipin D. Shah of the assessee company, the disclosure was made not only on the basis of the impugned loose papers but due to the admittance by the main person of the assessee company that there are certain expenses towards purchases made in respect of certain parties during the financial years 2009-10 and 2010-11, which are not in order. Therefore, towards the unexplained papers, I voluntarily offer Rs. 35,00,000/- (Rs. 15,00,000/- in F.Y. 2009-10 and Rs. 20,00,000/-in F.Y. 2010-11) as additional income in the hands of M/s. Growmore Enterprises Pvt. Ltd. over and above its normal income for the respective financial years. Therefore as per Assessee Company's main person, Shri Salim A. Sherani himself, the disclosure was based upon undisclosed purchases made from certain parties during the F.Y. 2009-10 and 2010-11. And the disclosure was made in presence/consultation with the Chartered Accountant of the company quantifying a figure of Rs. 15 lakhs for the current A.Y. and this offer was made voluntarily being in no position to submit any reasonable explanation. Therefore, the submission of the assessee are not acceptable and addition of Rs. 15,00,000/- for the A.Y. is being made as per disclosure of the principal officer/director Shri Salim A. Sherani, of the assessee company made under statement on oath in the presence and consultation of the Assessee company's Chartered accountant Shri Vipin D. Shah.“ 5.2. We have noted that even after recording this part of the order of AO, the Ld.CIT(A) has not dealt with this part in his order. The Ld.CIT(A) in his order relying on the judicial pronouncements, stated the legal position in relation to the statements u/s 132(4) of the Act. We reproduce the relevant paras from his order for the sake of clarity – “6.3.4 On the basis of the above propositions, courts have laid down the following legal position in relation to the statement u/s 132(4) of the Act as under : a. An admission is an extremely important piece of evidence though it is not conclusive. IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 9 b. A statement made voluntarily by the appellant could form the basis of assessment. c. The mere fact that the appellant retracted the statement could not make the statement unacceptable. d. The burden lay on the appellant to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion 11/15 that indicating that there was an element of compulsion for appellant to make such statement. e. However, a bald assertion to this effect at much belated stage cannot be accepted 6.3.5 Now, in the current case, statement u/s 132(4) of the Act was recorded on 05/04/2011. No retraction of this statement was ever made before initiation of assessment proceedings u/s 153C. No affidavit as necessary was ever filed to retract the statement recorded under oath. There is no allegation of undue force, coercion. The appellant himself has admitted that the statement was recorded properly. Most importantly the statement was recorded in presence of the CA of the company by the director and only after consulting him, voluntary disclosure of Rs 15,00,000/-for AY 2010-11 and Rs 20,00,000/- for AY 2011-12 was made. Clearly the appellant's director faced with the incriminating documents found and seized during the search pertaining to its undisclosed business for both the financial years in question, on his own volition came out clean and disclosed voluntarily the aforesaid amounts for the two AYs. He was allowed due consultation with the CA as well. Now after lapse of much time, without filing any affidavit, the appellant is retracting this disclosure. This as per legal position, as enumerated above, is unacceptable. The evidence collected in the form of statement u/s 132(4) of the Act is a very important piece of evidence as laid down by various courts and the appellant needs a strong argument in its favour to upset this finding. A bald assertion that the disclosure made in the statement is wrong is not enable. The burden lies on the assessee to establish that the admission made in the statements are incorrect wrong and that burden has to be discharged by an assessee at the earliest point of time and in IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 10 the instant case. The statements given to the Assessing officer under Section 132(4) have legal force. Unless the reiractions are made within a short span of time, supported by affidavit swearing that the contents are incorrect and it was obtained under force, coercion and by lodging a complaint with higher officials, the same cannot be treated as retracted. The statements recorded under section 132(4) have great evidentiary value and it cannot be discarded as in the instant case in a summary or in a cryptic manner. Therefore, in my considered opinion, the so-called retraction statements are a self-serving statement without any material and cannot override the statements recorded u/s 132(4) of the Income-tax Act.” 5.3. The Hon’ble Gujarat High Court in the case of Kailashben Manoharlal Choksi Vs. CIT (Supra) has held that no addition can be made merely based on a statement under section 132(4) of the Act unless it is supported by some corroborative evidence. In the present case, the AO and the Ld.CIT(A) have not pointed out any independent evidence to substantiate the addition apart from the statement recorded during the search. 5.4. It is also pertinent to note that the Assessee has consistently provided explanation to some of the details relating to the issue under dispute and showed that the admission made by him in the statement earlier at the time of search was not correct. Even during the course of hearing before us the Ld.AR explained the details of amounts as enlisted in the printed document. Regarding the alternate plea take by the Ld.AR at the time of hearing, we have examined the receipts and expenses mentioned in the documents. The net difference between the receipts and expenses amounts to Rs.1,63,600/-. This calculation is based on specific entries detailed in the records, which have been explained by the Assessee. IT(SS)A No.30/Ahd/2023 Growmore Enterprises Pvt.Ltd. vs. The DCIT Asst. Year : 2010-11 11 5.5. In light of the above discussion and the judgment of the Hon’ble Gujarat High Court in the case of Kailashben Manoharlal Choksi Vs. CIT(supra), we are of the considered view that the addition of Rs.15,00,000/- cannot be sustained merely based on the statement under section 132(4) of the Act without any corroborative evidence. Considering the alternate plea of the Assessee and based on the explanation provided for the receipts and expenses, we direct the AO to add only the net difference of Rs.1,63,600/- to the income of the Assessee for the AY 2010-11. 6. In the result, the appeal filed by the Assessee is partly allowed. Order pronounced in the Open Court on 21 st June, 2024 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V.MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, Dated 21/06/2024 . ी. य , . . ./T.C. NAIR, Sr. PS ! "# /Copy of the Order forwarded to : 1. "!ी $% / The Appellant 2. &य$% / The Respondent. 3. '(')* य य + / Concerned CIT 4. य य + )"!ी (/ The CIT(A)- 5. . /ीय )* , य "!ी य ")* , ज /DR,ITAT, Ahmedabad, 6. / 12 3 /Guard file. / BY ORDER, &य ! //True Copy// ह य !'जी (Asstt. Registrar) य "!ी य ")* , ITAT, Ahmedabad