MIDAS GOLDEN DISTILLERIES P. LTD ,SRIPERUMBUDUR V. OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX, NUNGAMBAKKAM

ITA 2955/CHNY/2024

AI Insights

The case involves Midas Golden Distilleries Private Limited, a manufacturer of alcoholic beverages, which was subjected to a search under section 132 of the Income Tax Act on November 9, 2017. The search revealed over-invoicing of purchases from suppliers, leading to unaccounted income. The AO initiated assessment proceedings and made additions to the company's income for the assessment year 2014-15 based on the over-invoicing. The company appealed against these additions, arguing that they were based solely on statements and not on concrete evidence. However, both the CIT(A) and the Tribunal found the additions justified, citing corroborative evidence from excise records and the company's own admissions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 314502 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Other Referred Cases: Harjeev Agarwal, Abhisar Buildwell, Khader Khan sons, Paul Mathews and Sons v. Commissioner of Income-tax, G.K.Senniappan, T.C.(A) No.2620 of 2006
• Laws Referred To: Income Tax Act
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHIVANAND K KALAKERI
• Assessee Lawyers: SANJAY
• Keywords: Corroborative evidences; Income from undisclosed sources; Document seized; Documents seized; Bogus purchase; Search and seizure; Block assessment; Bogus
• Section: 142(1); 132; 153A; 133A

Judgement Text

" आयकर अपीलीय अधिकरण, ‘ए’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH: CHENNAI माननीय श्री मनु क ुमार धिरर ,न्याधयक सदस्य एवं माननीय श्री अमिताभ शुक्ला, लेखा सदस्य क े सिक्ष BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.2955/Chny/2024, Assessment Years: 2014-15 Midas Golden Distilleries Private Limited, No.2/207, Sirumathur Village, Padappai- Pushpagiri Road, Sriperumbudur, Tamil Nadu-601 301. [PAN: AADCM9073D] Deputy Commissioner of Income Tax, Central Circle-2(2). Chennai. (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Assessee by : Shri Sanjay, CA प्रत्यर्थी की ओर से /Revenue by : Shri Shivanand K Kalakeri, CIT सुनवाई की तारीख/Date of Hearing : 24.03.2025 घोषणा की तारीख /Date of Pronouncement : 07.05.2025 आदेश / O R D E R PER AMITABH SHUKLA, A.M : This appeal is filed by the assessee against the order bearing DIN & Order No.ITBA / APL / S / 250 / 2024-25 / 1069075013(1) dated 25.09.2024 of the Learned Commissioner of Income Tax [herein after “CIT(A), Chennai for the assessment years 2014-15. 2.0 Before proceeding further, it is deemed necessary to briefly analysis the factual matrix of the case. The Appellant M/s. Midas ITA No. 2955/Chny/2024 Page - 2 - of 13 Golden Distilleries Pvt. Ltd. is a major manufacturer of alcoholic beverages and supplier to Tamil Nadu State Marketing Corporation (TASMAC) a company owned by the Government of Tamil Nadu, which has a monopoly over the wholesale and retail sale of alcoholic beverages in the state. A search u/s 132 of the Act was carried out at the business premises of the appellant Company on 09.11.2017. As a sequel to this search, the premises of the vendors of the appellant Company were also subjected to search u/s 132 of the Act. During the course of search u/s132 of the Act at the business premises of the suppliers of Bottles & Cartons to the assessee Company M/s. Sri Sai Enterprises (herein after referred as SSE) and M/s Sri Sai Cartons (herein after referred as SSC) at Adayar, a bunch of loose sheets were found and seized vide Ann/SP/SSE/LS/32 dated 27.12.2017. These loose sheets revealed the fact that the Bottles & Cartoons supplied to the assessee company were invoiced at overpriced rates by both the entities SSE & SSC. The Authorised Officer confronted the findings of the search with Shri. K. Karthikeyan, Director of the assessee company and recorded a statement u/s 132(4) of the Act on 29.12.2017. In the statement recorded Shri. K. Karthikeyan has admitted that the details mentioned in the seized loose sheets related to rates of over invoicing of purchase of bottles /cartons from SSE (a firm ln which Shri S.Chandrasekaran is the managing partner) ITA No. 2955/Chny/2024 Page - 3 - of 13 and SSC which is owned by Shri Jaganathan S/o S. Chandrasekaran. It was also clarified that as agreed between him and Shri S. Chandrasekaran over invoicing of sale of bottles/ cartons was resorted to by SSE and SSC on their sales to the assessee Company at certain prescribed rates. Accordingly, it was contended that exact quantity of over invoicing depended on the type of bottles / cartons which varied from 10 paise to 30 paise and 75 paise to 175 paise respectively as mentioned in the loose sheets. 2.1 Further, Shri K.Karthikeyan had also deposed during the search proceedings that SSE had been generating cash through bogus purchases from some of its suppliers and at a prescribed rate. The cash generated through such bogus purchases were siphoned off from the system and in turn handed over to the assessee Company in lieu of over invoicing of sales done to the assessee apparently collected by him / his employees/ business concerns so as to meet certain incidental expenses which are peculiar to this line of business. Shri K.Karthikeyan also furnished the quantitative details of bottles and cartoons purchased from SSE and SSC during the FY(s) from 2007-08 to 2017-18 (till the date of search) based on the daily production report, cross checked with excise records. He had ITA No. 2955/Chny/2024 Page - 4 - of 13 admitted, on sworn statement, unaccounted income generated by over invoicing of the purchases of bottles and cartons from SSE and SSC to the tune of Rs. 54,15,57,715/- and Rs.12,26,65,335/- respectively from the FY 2007-08. During the course of search, the quantitative details of bottles (both old & new) and cartons purchased from SSE and SSC for the FY 2013-14 were retrieved with the assistance of employees of assessee company and approved by Director (Shri. K.Karthikeyan) of the Company from the books of accounts of the company during the course of continuation of search on 29.12.2017 and they were quantified as 50,42,52,212 bottles (Old 33.78.65.294: new 16,63,86,918) and 1,13.70,748 cartons. After taking into account an average rate of 15 paise for each bottle/Rs.1.50 for each carton (as provided by Director Shri.K.Karthikeyan) purchased from SSE / SSC respectively on account of over invoicing of purchases by MGDPL, the corresponding sums of Rs.7,56,37,832/- and Rs.1,70,56,122/- were claimed to have been received back by cash on account of purchases for the period FY 2013-14/AY 2014-15. 2.2 The Ld.AO, on the basis of the findings of the search initiated assessment proceedings by issuing notice u/s 153A of the Act dated 13.08.2018. In response to the notice the·assessee company filed return of income by admitting loss income of Rs.12,63,51,621/- on ITA No. 2955/Chny/2024 Page - 5 - of 13 11.09.2018. Notice u/s 143(2) of the Act was issued on 18.03.2019.The AO called for further details by issuing notice u/s 142(1) of the Act. In response the assessee responded vide its submission dated 07.11.2019 by submitting that there was overpricing only from Old Bottles and Cartoons and not the new ones and accordingly worked out the disallowance for the FY 2013-14. The AO had issued a show-cause notice to the assessee on 25.11.2019, asking for evidence regarding objections and requiring the names and ledger copies of suppliers other than SSE / SSC. In response, the assessee company referred to the sworn statement of its Director, Shri. K. Karthikeyan, who acknowledged discrepancies in bottle and carton calculations. However, the AO rejected this explanation, holding that the quantitative details were based on daily production reports and cross-checked with excise records, leaving no room for error. Further, the assessee claimed miscalculations in the number of bottles purchased for the period from 2007-08 to FY 2017-18, comparing different figures. The AO rejected this argument, stating that the average monthly purchase figures for the previous years were consistent with the purchases in question. The Ld.AO, based upon sworn statements/ depositions made as well as incriminating documents found during the search, concluded that an amount of Rs. 7,56,37,832/- from SSE and Rs. 1,70.56,12.2/- from SSC, received by ITA No. 2955/Chny/2024 Page - 6 - of 13 over-invoicing bottle and carton purchases, as the unaccounted income. The AO after considering the sum of Rs. 6.62,78,825/- already offered by the assessee in the return of income flied in response to the notice u/s 153A of the Act added a sum of Rs. 2,64,15,129/- to the total income for AY 2014-15 as unaccounted income. 3.0 The first issue raised by the assessee through ground of appeal no.1 is on the issue of additions made by the Ld.AO on the basis of mere statements recorded during search. The Ld. Counsel of the assessee argued that the Ld.AO has rested the addition of Rs.2,64,15,129/- on account of over pricing of bottles and cartons by relying upon statement recorded during the course of search proceedings. It was contended that no addition can be made on mere statements. 4.0 The Ld DR would like to place reliance upon the order of lower authorities. It was contended that the statement recorded during the course of search / post search proceedings were evenly supported by incriminating evidences found during the search action. 5.0 We have heard rival submissions in the light of material available on records. It is trite law that the assessing officer as a quasi-judicial ITA No. 2955/Chny/2024 Page - 7 - of 13 authority must make his own independent enquiries before making any addition of income. Third party enquiries and/or statements can be a starting point but not the sole basis for drawing any conclusions. In the case of Harjeev Agarwal, Hon’ble Delhi High Court has held that undisclosed income cannot be computed merely on the basis of statements of an accused unless, the same is supported by credible evidence on record. Again the Hon’ble Apex Court in the case of Abhisar Buildwell has also ruled that no addition can be made merely on the basis of bald statement of a person unless supported by cogent supporting evidences. 6.0 Hon’ble Madras High Court in the case of Khader Khan sons 352 ITR 0480 has laid the following ratio on the issue of validity of statement under statements recorded during search / survey proceedings. “…..5.3. A power to examine a person on oath is specifically conferred on the authorities only under Section 132(4) of the Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101]. 5.4. The scope of Sections 132(4) and 133A also came up for consideration before the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income- tax [(2003) 263 I.T.R. 101]. In the said case, the assessee therein made an ITA No. 2955/Chny/2024 Page - 8 - of 13 attempt to draw a distinction between the two provisions, viz., Sections 132(4) and 133A. According to the assessee, there is no provision to administer oath or to take any sworn statement and that a mere admission or an acquiescence cannot be a foundation for an assessment and that any statement given during a survey has no effect as an \"admission\" nor can it be a statement on oath. According to the assessee, his statement during the survey with reference to any books of account can hardly be the basis for any assessment. It was also contended on behalf of the assessee that any material collected or any statement recorded during the survey under Section 133A cannot be put against the assessee, as the same has no evidentiary value. The Division Bench of the Kerala High Court, appreciating the stand taken by the assessee and after referring to Section 133A of the Act, held as hereunder: \".. we find that the power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it 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. Therefore, the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this.\" (emphasis supplied) 5.5. Similarly, when the issue, whether the expression \"such other materials or information as are available with the Assessing Officer\" in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, came up for consideration before this Court in Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220], a Division Bench of this Court, in which one of us was a party (P.P.S.JANARTHANA RAJA, J.), answered the question in the affirmative, against the Revenue and in favour of the assessee, holding that the materials collected during the survey under Section 133A cannot be taken into consideration while determining the undisclosed income in respect of block assessment as per section 158BB, as the same has no evidentiary value. 5.6. Again, when an identical question whether the material found in the course of survey in the premises of the builder could be used in the block assessment of the assessee, came up for consideration before this Division Bench in an unreported case in T.C.(A) No.2620 of 2006, this Court, by order dated 22.11.2006, of course, following the earlier decision of this Court in G.K.Senniappan's case reported in (2006) 284 I.T.R. 220, while confirming the order of the Tribunal, answered the question in favour of the assessee, in limine. ITA No. 2955/Chny/2024 Page - 9 - of 13 6. What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dated 10.3.2003 with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated 10.3.2003 reads as follows: \" Instances have come to the notice of the Board wher assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & 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 which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search & 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 proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders.\" 7. From the foregoing discussion, the following principles can be culled out:- (i) An admission is extremely an 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 accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18]; (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it 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. Commissioner of Income-tax [(2003) 263 I.T.R. 101]; (iii) The expression \"such other materials or information as are available with the Assessing Officer\" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A, vide Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220]; (iv) The material or infomration found in the course 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 Commissioner of Income-tax v. S.Ajit Kumar); (v) Finally, the word \"may\" used in Section 133A (3)(iii) of the Act, viz., \"record the statement of any person which may be useful for, or relevant to, any proceeding ITA No. 2955/Chny/2024 Page - 10 - of 13 under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. 8. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal….” 7.0 We have noted that the statements recorded during the search proceedings have been duly compared with the incriminating documents found from the assessee’s premises. Thus, it is not a case of mere reliance upon the statements but rather case where the statements recorded have been comprehensively compared with the incriminating documents so as to lend credence to their admisibility. We have also noted that the Ld.CIT(A) has adequately examined this matter in his appellate order. We are therefore of the considered view that there is no case for any intervention in the order of the Ld.CIT(A) at this stage. Accordingly, the order of the Ld.CIT(A) is confirmed and the ground of appeal no.1 raised by the assessee is dismissed. 8.0 The next issue raised by the assessee is regarding the addition of Rs. 2,64,15,129/- on the basis of over pricing of bottles and cartons. The Ld.Counsel for the assessee submitted that the Ld.AO had omitted to consider that SSE and SSC are not the only suppliers and that there ITA No. 2955/Chny/2024 Page - 11 - of 13 were other suppliers as well. The Ld. Counsel argued that admittedly, over pricing was only in respect of old bottles purchased from the market and not the new bottles and that therefore the impugned addition was flawed as it contained both old and new bottles and cartons. 9.0 The Ld. DR placed full reliance upon the order of lower authorities. 10.0 We have heard rival submissions in the light of material available on records. We have noted from para 6.10 to 6.12 of the order of the Ld.CIT(A) that he has comprehensively analyzed the issued before arriving at his conclusions. For the purposes of clarity the relevant part of the order is extracted hereunder:- “…6.10 On examination of the grounds raised, it can be seen that the grounds raised revolve around the core issue of additiona dn disallowance made. On examination of the submissions made, it can be seen that the contention of the appellant is that the overpricing applied only to old bottles and cartons, and provided revised figures for the disallowance during the course of assessment proceedings. The appellant also contended that the AO failed to account for discrepancies in the number of bottles and cartons and argued that the seized loose sheets were not corroborated with the actual transactions. The appellant’s argument regarding discrepancies in the number of bottles and cartons was not substantiated by documentary proof. 6.11 As evident in the assessment order, there exists no dispute about the overpricing of bottles and the consequent generationof unaccounted cash. This fact was admitted by the Director of the assessee company himself during the course of search itself. However, during the course of assessment proceedings, it has been claimed before the AO that overpricing of rates pertained only to old bottles and cartons ITA No. 2955/Chny/2024 Page - 12 - of 13 alone. The undersigned is of the considered view that the appellant’s submission about the application of overpriced rates pertained only to old bottles and cartons is noted. However, the Director of the appellant company, in his statement under section 132(4) of the act has clearly admitted to over-invoicing, and the same was corroborated by the seized loose sheets. The AO cross-verified the quantitative details with excise records, which substantiated the over-invoicing claim. Thus the appellant’s contention regarding discrepancies in the number of bottles and cartons lacks credibility. 6.12 As evident in the assessment order, the AO, after analyzing the seized materials and relying on the statement of the appellant’s Director, arrived at a conclusion that the loose sheets provided sufficient evidence of over-invoicing. Additionally, the AO cross-referenced the seized documents with the excise records to substantiate the quantity of goods, which, according to the AO, confirmed the over-invoicing practices by the appellant. Seized mateials like loose sheets can be considered valid evidence if they are corroborated by independent findings, such as the excise records in this case. The undersigned is of the view that the AO rightly relied on the seized materials and the admission made by the appellant’s Director. Therefore the undersigned is of the view that there exists no circumstance warranting any interference in the order of the AO. Accordingly, the addition of Rs.2,64,15,129/- is sustained and all the grounds raised upon this issue are hereby treated as dismissed….” 11.0 Thus it is seen that the Ld.CIT(A) has concurred with the findings of the Ld.AO that the addition as based upon statement of the Director recorded during the search admitting over invoicing, incriminating documents found and seized, exercise records etc and that consequently there is no scope for holding any other conclusions. It has been concluded that the appellant assessee could not support his arguments with any cogent documentary evidences. Accordingly, we are of the considered opinion that no case for any interference in the order of Ld.CIT(A) is made out at this stage. We therefore confirm the findings ITA No. 2955/Chny/2024 Page - 13 - of 13 of the Ld.CIT(A) and dismiss the ground of appeal no.2 raised by the assessee. 12.0 In the result, the appeal of the assessee is dismissed. Order pronounced on 7th , May-2025 at Chennai. Sd/- (मनु क ुमार धिरर) (MANU KUMAR GIRI) न्याधयक सदस्य / Judicial Member Sd/- (अधमताभ शुक्ला) (AMITABH SHUKLA) लेखा सदस्य /Accountant Member चेन्नई/Chennai, धदनांक/Dated: 7th , May-2025. KB/- आदेश की प्रतितिति अग्रेतिि/Copy to: 1. अिीिार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकर आयुक्त/CIT - Chennai 4. तिभागीय प्रतितिति/DR 5. गार्ड फाईि/GF "