M/s. H.M. Associates,, Anand v. The Income tax Officer, Ward-1,, Anand

ITA 3843/AHD/2004 | 2000-2001
Pronouncement Date: 29-01-2010 | Result: Dismissed

Appeal Details

RSA Number 384320514 RSA 2004
Assessee PAN AACFH5652D
Bench Ahmedabad
Appeal Number ITA 3843/AHD/2004
Duration Of Justice 5 year(s) 1 month(s) 2 day(s)
Appellant M/s. H.M. Associates,, Anand
Respondent The Income tax Officer, Ward-1,, Anand
Appeal Type Income Tax Appeal
Pronouncement Date 29-01-2010
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 29-01-2010
Date Of Final Hearing 11-01-2010
Next Hearing Date 11-01-2010
Assessment Year 2000-2001
Appeal Filed On 27-12-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI MAHAVIR SINGH JM & SHRI A.N. PAHUJA A M I.T.A. NO.3843/AHD/2004 (ASSESSMENT YEAR 2000-01) M/S HM ASSOCIATES VS ITO WARD-.1 C/O KK3 STATION ROAD ANAND OPPOSITE BANK OF INDIA ANAND [PAN : AACFH5652D] (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI MG PATEL AR REVENUE BY : SHRI MC PANDIT DR O R D E R AN PAHUJA : THIS APPEAL BY THE ASSESSEE AGAINST AN ORDER DATED 05-11-2004 OF THE LD.CIT(A)-II BARODA RAISES THE FOLLOWING GROUN DS : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-II BARODA HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.6 69 247/- MADE BY TH E LEARNED ASSESSING OFFICER ON THE GROUND OF BEING UN - EXPLAINED INVESTMENTS U/S 69 OF THE INCOME TAX ACT 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -II BARODA HAS ALSO ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY CONFIRMING THE ADDITION OF RS.1 22 678/- MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF BEING UN - EXPLAINED INVESTMENTS U/S 69 OF THE INCOME TAX ACT 1961. 3. THE APPELLANT THEREFORE PRAYS FOR THE FOLLOWING : (I) ADDITION OF RS.6 69 247/- MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF BEING UNEXPLAINE D INVESTMENT MAY KINDLY BE DELETED. (II) ADDITION OF RS.1 22 678/- MADE BY THE LEARNED ASSESSING OFFICER ON THE GROUND OF BEING UN- EXPLAINED INVESTMENT MAY KINDLY BE DELETED. 4. YOUR APPELLANT PRAYS TO RESERVE THE R IGHT TO ADD ALTER AMEND OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEA L. . I.T.A. NO.3843/AHD/2004 2 2. FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT DURING THE COURSE OF SURVEY U/S 133A OF THE INCOME-TAX ACT 1961[HEREINAFTER REF ERRED TO AS THE ACT]IN THE BUSINESS PREMISES OF THE ASSESSEE ON 17.10.2001 LO OSE PAPERS NO.1 & 2 IN ANNEXURE B-9 WERE FOUND REFLECTING DETAILS OF IN VESTMENT OF RS.38 20 044/- UNTIL 31-03-2000. THE LOOSE PAPER IN PAGE NO. 13 & 14 WHICH WERE PROFIT AND LOSS ACCOUNT AND BALANCESHEET AS ON 31.3.2000 REVE ALED INVESTMENT IN CONSTRUCTION IN THE FORM OF CLOSING STOCK OF RS.27 89 497/-.IN REPLY TO SPECIFIC QUESTIONS NO.6 TO 11 PARTNER SHRI MANHERBHAI MOH ANBHAI DALWADI WHO WAS AVAILABLE AT THE TIME OF SURVEY ADMITTED IN HIS ST ATEMENT THAT INVESTMENT AMOUNTING TO RS.27 89 497/- WAS RECORDED IN HE BOOK S OF ACCOUNT OF THE FIRM AND ALSO ADMITTED IN HIS REPLY TO QUESTION NO.8 THAT TO TAL INVESTMENT IN THE SCHEME UNTIL 31-03-2000 WAS RS.38 20 044/- IN TERMS OF THE AFORESAID LOOSE PAPERS. ACCORDINGLY HE ADMITTED THAT THE DIFFERENCE OF RS. 10 30 547/- IN THE INVESTMENT WAS OUT OF UNDISCLOSED INCOME OF THE FIRM AS WELL A S OF ITS PARTNERS (REPLY TO QUESTION NO.11 OF THE STATEMENT). THEREFORE THE S AID PARTNER MADE A DISCLOSURE OF INCOME OF THE SAID AMOUNT IN THE FOLLOWING HANDS : M/S HM ASSOCIATES (ASSESSEE) RS. 7 30 547 SHRI HASMUKHBHAI CHHANBHAI MAKWANA RS. 1 00 000 SHRI MANHARBHAI MOMANBHAI DALWADI RS. 1 00 000 SHRI PINAKBHAI DINESHBHAI GOHEL RS. 1 00 000 ------------------ RS.10 30 547 ------------------ 2.1 HOWEVER IN THE RETURN OF INCOME THE ASSESSEE DISCLOSED INCOME OF RS.62 300/- ONLY IN TERMS OF PROVISIONS OF SEC. 44A D OF THE ACT IGNORING THE INCOME OF RS.7 30 547/-ADMITTED DURING THE COURSE O F SURVEY IN THE HANDS OF FIRM. IN A LETTER DATED 18-03-2002 FILED ALONG WITH THE RETURN ON 30.3.2002 THE ASSESSEE SUBMITTED AS UNDER: I.T.A. NO.3843/AHD/2004 3 A SURVEY WAS CONDUCTED AT OUR BUSINESS PREMISES A T HILLPARK ANAND ON 17.10.2001. OUR BUSINESS IS IN PARTNERSHIP FIRM CONSISTING THREE PARTNERS. AMONGST THEM ONE OF TH E PARTNER NAMELY MANHERBHAI M. DALWADI REMAINED PRESENT AND S TATED ON OATH ON BEHALF OF THE FIRM. IN PURSUANCE OF ANSWER NO.8 9 & 10 TOGETHER OF TH E STATEMENT RECORDED THAT ACCORDING TO LOOSE PAPER FI LE AND ANNEXURE B.9. IT WAS WRITTEN THAT TOTAL INVESTMENT MADE UP T O 31.03.2000 IS OF RS.38 20 044/- OUT OF WHICH CERTAIN INVESTMENTS ARE MADE IN CASH. THE INVESTMENT AS RECORDED IN BOOKS ARE RS.27 89 49 7/- VIDE ANSWER NO.9 OF THE STATEMENT. HENCE TOTAL CASH INVESTMENT ON BASE OF WORKING ST ATEMENT NO.2 & 1 OF RS.38 20 044/-. IT WAS STATED VIDE ANSWER 11 OF THE STATEMENT THAT ABOVE INVESTMENT WAS MADE OUT OF INCOME OF THE FIRM AND P ARTNERS DETAILED AS UNDER: H.M. ASSOCIATES INCOME RS. 7 30 547/- PARTNERS 1. HC MAKWANA RS. 62 070/- 2. M.M. DALWADI RS. 62 070/- 3. P.D. GOHEL RS. 62 070/- ------------------- RS. 9 16 758/- TAKING INTO CONSIDERATION THE PAPERS AND RECORDS VE RIFIED AS STATED ANS. 10 OF THE STATEMENT TO FIND OUT THE INVESTMENT AND DIFFERENCE IN INVESTMENT FOR ADMISSION AS UNDISCLOSED INCOME THE CORRECT AMOUNT SHOWN AND EXPLAINED IN FOLLOWING PARAS. I. STATEMENT NO.2 1. 5 FIGURES PERTAINING TO YEAR 31.03.2000 RS.26 38 553/- 2. 3 FIGURES PERTAINING TO YEAR 31.03.2001 RS. 1 4 2 157/- ------------------- TOTAL RS.27 80 710/ II) STATEMENT NO.1 1. EXPNS. UP TO 31.03.2000 26 38 553/- 2. EXPNS. UPTO 31.03.2001 1 42 157/- ------------------ RS.27 80 710/- 3. EXPNS. OF 31.03.2000 I.T.A. NO.3843/AHD/2004 4 AS PER VERIFICATION RS. 8 47 023/- 4. EXPNS. FROM 01.04.2001 TO 31.03.2001RS. 1 13 789 /- 5. A/M NOT KNOWN RS. 12 522/- 6. PARTNERS WITHDRAWAL RS. 66 000/- ------------------- TOTAL RS.38 20 044/- ABOVE STATEMENT INITIATED BY ASSESSING OFFICER DATE D 17.10.2001 III. CORRECT A/M OF DISCLOSURE UPON SURVEY 1. EXPNS. UP TO 31.03.2000 RS. 26 38 552/- 2. EXPNS. RS. 8 47 023/- 3. NET WITHDRAWAL (RS. 3 00 000 RS.66 000) -- -------------------- TOTAL RS. 34 85 576/- IV. CHANGE IN AMT. OF DISCLOSURE 1. A/M AS STATED IN ITEM 10 OF THE STATEMENT (ITEM-II ABOVE) RS. 38 20 044/- 2. CORRECT /AM OF DISCLOSURE (ITEM III ABOVE) RS. 34 85 576/- -------------------- TOTAL RS. 3 34 468/- V) REVISION IN DISCLOSURE WORKING 1. DISCLOSURE AS STATED IN PARA-10 OF STATEMENT RS. 10 30 547/- 2. A/M. TO BE REDUCED ITEM IV RS. 3 34 468/- -------------------- TOTAL ACTUAL A/M OF DISCLOSURE RS. 6 96 079/- A) DISCLOSURE IN HANDS OF FIRM OF UNDISCLOSED INCOME RS. 4 62 079/- B) DISCLOSURE IN HANDS OF PARTNER (RS.3 00 000 RS.66 000/-) RS. 2 34 000/- -------------------- TOTAL RS. 6 96 079/- VI) ACTUAL DISCLOSURE 1. UNDISCLOSED IN HAND OF FIRM RS.6 13 023/- 2. DISCLOSURE IN HAND OF PARTNER RS.2 34 000/- I.T.A. NO.3843/AHD/2004 5 ------------------- TOTAL RS.8 47 023/- BASED ON ABOVE WE DISCLOSED AMOUNT OF RS.8 47 023/ - BEING CASH DEFICIT AS AGAINST RS.6 96 079/- AS SHOWN IN (V) AB OVE. THUS THE CASH INVESTMENT BASED ON RECORDED AND WO RKED OUT AS ABOVE IS CORRECTLY TREATED AS UNDISCLOSED. ENTIRE WORKING AND DISCLOSURE IS BASED ON AMOUNTS W RITTEN IN THE RECORDS AND BOOKS VERIFIED AT THE TIME OF SURVEY. THEREFORE THIS EXPLANATION AND MODIFICATION IS MADE SUBJECT TO REC ORDS AND AMOUNTS ARRIVED AT RECORDED IN IT. 2.2 THE AFORESAID FACTS WERE REITERATED BY THE A SSESSEE IN THEIR LETTER DATED 24.1.2003. IN THE LIGHT OF THESE FACTS THE AO NOT ICED THAT THE ASSESSEE IS STATED TO HAVE INCURRED UNDISCLOSED EXPENSES IN CONSTRUCTI ON WORK AND RECOMPUTED DISCLOSURE OF AN AMOUNT OF RS. 6 96 079/- INSTEAD O F RS. 10 30 547/-.HOWEVER TOTAL DISCLOSURE OFFERED WAS RS. 8 47 023/- -RS. 6 13 023 IN THE HANDS OF ASSESSEE FIRM AND RS.2 34 000/- IN THE HANDS OF PAR TNERS. REJECTING THE ABOVE RECONCILIATION OF THE ASSESSEE THE AO OBSERVED THA T THOUGH THE ASSESSEE CLAIMED THAT AMOUNT OF RS. 1 42 157/-[1 12 754+28 1 93+1 210] RELATES TO THE PERIOD RELEVANT FOR THE AY 2001-02 THE SIXTY BILLS FOUND DURING THE SURVEY REVEALED THAT THESE PERTAINED TO THE YEAR UNDER CON SIDERATION. EVEN WHEN THE AMOUNT OF RS. 1 12 754/- DID NOT TALLY THE ASSESSE E ATTRIBUTED AN AMOUNT OF RS. 768/- MENTIONING SUNDRY IN ORDER TO TALLY THE FIGUR E. EVEN NO DETAILS AND EVIDENCE WERE PROVIDED AS TO HOW THE AMOUNT OF RS.28 193/- RS.1 210/- 1 13 789/- AND 12 522/- RELATED TO THE AY 2001-02. MOREOVER THE A SSESSEE DID NOT PROVIDE ANY EVIDENCE OF SOURCE OF ALLEGED WITHDRAWAL OF RS. 66 000/- EVEN WHEN DURING THE COURSE OF SURVEY THE SAID AMOUNT WAS ADMITTED TO BE INVESTMENT. AS REGARDS REVISED DISCLOSURE OF RS. 8 47 023/- THE AO OBSERV ED THAT THERE WAS NO BASIS FOR PICKING UP ONLY THE SAID AMOUNT FOR THE YEAR UNDER CONSIDERATION EVEN WHEN THE LOOSE PAPER FOUND DURING THE SURVEY REVEALED THAT THE ACCOUNTS WERE UP TO 31.3.2000. THE AO ALSO FOUND THAT THE ASSESSEE TRE ATED DISCLOSURE OF RS.6 13 023[8 47 023-(3 00 000-66 000)] AS SALES AN D RETURNED THE INCOME ACCORDINGLY IN TERMS OF PROVISIONS OF SEC. 44AD OF THE ACT WHILE ENCLOSING A PROFIT I.T.A. NO.3843/AHD/2004 6 AND LOSS ACCOUNT SHOWING SUCH SALES OF RS.6 13 023 /- AND CLOSING STOCK OF RS. 30 84 797/-. THE AO OBSERVED THAT THERE WAS NO BASI S FOR SUCH CHANGED FIGURES VIS--VIS FIGURES SHOWN IN THE PROFIT AND LOSS ACC OUNT FOUND DURING THE COURSE OF SURVEY. THE AO FURTHER POINTED OUT THAT THOUGH THE ASSESSEE REFLECTED SALES OF RS. 6 13 023/- ADVANCES RECEIVED ON ACCOUNT OF TWO BUNGLOWS AS REVEALED BY THE PARTNER IN REPLY TO QUESTION NO. 7 OF HIS STATE MENT WERE NEVER DISCLOSED NOR RELEVANT DETAILS WERE SUBMITTED DESPITE SPECIFIC REQUEST MADE. SINCE THE DISCLOSURE MADE IN HIS STATEMENT BY THE PARTNER OF THE FIRM WAS BASED ON LOOSE PAPERS AND DOCUMENTS FOUND DURING THE COURSE OF SUR VEY WHILE THE AMOUNT WAS NOT REFLECTED IN THE RETURN AND THE STATEMENT OF TH E PARTNER WAS NOT RECORDED UNDER ANY INFLUENCE OR THREAT NOR THE ASSESSEE ADDU CED ANY BASIS FOR REVISING THE DISCLOSURE THE AO ADDED AN AMOUNT OF RS. 6 69 247/-[7 30 547-61 300] FOR THE DETAILED REASONS GIVEN IN HIS ORDER ON PAGES 10 TO 17 ON ACCOUNT OF UNEXPLAINED INVESTMENT OF RS.6 69 247/- IN THE PROJ ECT HILL PARK BUNGALOWS U/S 69 OF THE ACT. 2.3 BESIDES THE AO ADDED A FURTHER SUM OF RS.1 22 678 BASED ON HIS FINDINGS ON PAGES 17 TO 24 OF HIS ORDER ON THE BASIS OF REP ORT OF DVO. THE AO NOTICED DURING THE COURSE OF ASSESSMENT PROCEEDINGS THAT O NE BILL NO.40/2000 DATED 29.3.2000 FOR RS. 6 932/- ISSUED BY BHAGWATI ENTERP RISES WAS NOT RECORDED IN THE BOOKS OF ACCOUNTS. SINCE A NUMBER OF IRREGULARITIES WERE NOTICED DURING THE COURSE OF SURVEY AND THE PARTNER OF THE ASSESSEE FI RM ADMITTED UNDISCLOSED INVESTMENT THE AO REFERRED THE VALUATION OF BUILDI NG BEING CONSTRUCTED BY THE ASSESSEE TO DVO. THE DVO IN HIS REPORT WORKED OUT THE COST AS UNDER : SL. NO. PERIOD OF CONSTRUCTION EXPENDITURE SHOWN BY THE ASSESSEE[IN RS. COST OF CONSTRUCTION DETERMINED BY DVO[IN RS.] 1 4/99 TO 3/2000 2550369 3703594 2 4/2000 TO 3/2001 153917 223515 3 4/2001 TO 3/2002 34939 50738 I.T.A. NO.3843/AHD/2004 7 4 4/2002 TO 2/2003 102434 148752 TOTAL 2841659 4126599 SINCE THE DVO IN HIS REPORT DID NOT CONSIDER ADMIN ISTRATIVE EXPENSES ACCOUNTANT FEES MISCELLANEOUS EXPENDITURE INTERES T EXPENSES FEES AID TO LOCAL BODY AND CONNECTION CHARGES THE AO AFTER ALLOWING AN OPPORTUNITY TO THE ASSESSEE ADDED AN AMOUNT OF RS.1 22 678[37 03 594(D VO)-25 50 369(AS PER BOOKS)-10 30 547(ADMITTED UNDISCLOSED INVESTMENT)] REJECTING THE PLEA OF THE ASSESSEE THAT UNDISCLOSED EXPENSES AMOUNTED TO RS. 8 47 023/- ONLY WHILE THE BREAK UP OF EXPENSES PROVIDED BY THE ASSESSEE DID N OT INCLUDE ANY AMOUNT ON ACCOUNT PLAN APPROVAL AND CONNECTION CHARGES. 3. ON APPEAL THE ASSESSEE SUBMITTED WITH REGARD TO ADDITION OF RS.6 69 247/- THAT THE ASSESSEE HAD CLEARLY EXPLAI NED IN THEIR LETTER RECTIFICATION OF GROSS ERROR IN THE QUANTUM OF DISC LOSURE AND THE AO HAS ERRED IN INFERRING THE EXPLANATION OF ASSESSEE T REATING THE SAME AS CHANGE OF VIEW. THERE IS NO JUSTIFICATION FOR MAKIN G GROSS ADDITION AND ONLY PROFIT BE TREATED AS INCOME. INTER ALIA THE ASSESS EE RELIED ON THE JUDGMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS PRESIDE NT INDUSTRIES (GUJ) 258 ITR 654 (GUJ) AND STATED THAT ONLY PROFIT BE TAXED AND NOT THE ENTIRE AMOUNT. WITH REGARD TO THE OTHER ADDITION OF RS.1 2 2 678/- THE ASSESSEE SUBMITTED THAT THE AO HAS IGNORED ALL PROOFS AND EV IDENCES OF EXPENSES PERTAINING TO THE FINANCIAL YEAR 2000-2001 AND BLIN DLY TAKEN THE FIGURES AT RS.1 22 678/- AS INCOME. IT WAS PLEADED THAT ADDIT ION MADE WAS NOT JUSTIFIED AND THE SAME BE DELETED IN TOTO. IN THE L IGHT OF THESE SUBMISSIONS THE LD. CIT(A) CONCLUDED AS UNDER: 3.8 I HAVE CONSIDERED THE SUBMISSIONS MADE AS WELL AS ARGUMENTS PUTFORTH BY THE LEARNED COUNSEL FOR THE A PPELLANT. THE FINDING OF THE AO IN THE ASSESSMENT ORDER IS CAREFU LLY GONE THROUGH. IT IS OBSERVED THAT DURING THE COURSE OF SURVEY WHI CH WAS CONDUCTED ON 17.10.2001 AT THE BUSINESS PREMISES OF APPELLANT FIRM CERTAIN EXPENSES INCURRED ON PROJECT HILL PA RK BUNGALOW BY THE FIRM WERE FOUND TO BE UNRECORDED AND STATEMENT OF PARTNER SHRI I.T.A. NO.3843/AHD/2004 8 MANHARBHAI M DALWADI WAS RECORDED. IN REPLY TO QUE STION NO.11 A DISCLOSURE WAS MADE AS UNDER - M/S HM ASSOCIATES (APPELLANT FIRM) RS. 7 30 547 - SHRI HASMUKHBHAI CHHANBHAI MAKWANA RS. 1 00 000 - SHRI MANHARBHAI MOMANBHAI DALWADI RS. 1 00 000 - SHRI PINAKBHAI DINESHBHAI GOHEL RS. 1 00 000 ------------------ RS.10 30 547 ------------------ 3.9 IT IS VERY CLEAR THAT THE DISCLOSURE HAS NOT BE EN HONOURED BY APPELLANT FIRM WHILE FILING THE RETURN OF INCOME. THE REASONS FOR THE SAME ARE STATED THAT CERTAIN FIGURES WERE NOT PERTA INING TO THE PERIOD UNDER CONSIDERATION AS WELL AS SOME AMOUNT H AS BEEN INCURRED OUT OF WITHDRAWALS OF PARTNER. FINALLY T HE APPELLANT HAS FILED RETURN OPTING FOR PRESUMPTIVE TAX SCHEME BY P AYING TAX ON DEEMED INCOME @8% OF RECEIPTS AND BY THIS METHOD EN TIRE DISCLOSURE HAS BEEN DILUTED SO AS TO REDUCE THE INC IDENCE OF TAX. 3.10 THE APPELLANT DURING THE APPELLATE PROCEEDINGS HAS REITERATED THE SUBMISSION MADE BEFORE THE AO AND PL EADED THAT ADDITION MADE IS NOT JUSTIFIED SINCE EXPENSES INCUR RED ARE PROPERLY SHOWN IN THE ACCOUNTS WHICH BE CONSIDERED. 3.11 IT IS NOTICED THAT MATTER WAS REFERRED TO DVO BY THE AO AND DVO HAS ESTIMATED THE COST OF CONSTRUCTION AGGREGAT ING TO RS.41.26 LACS AS NARRATED IN PARA 14 ON PAGE 17 OF ASSESSMENT ORDER. THE COST OF CONSTRUCTION AS DERIVED BY DVO FOR THE PERIOD UNDER CONSIDERATION IS RS.37 03 594. THE SAME WAS DULY CONFRONTED TO THE APPELLANT BY THE AO AND OBJECTION S RAISED BY THE APPELLANT BEFORE THE AO AGAINST THE VALUATION OF DV O HAS BEEN TAKEN CARE BY THE AO. THE AO AFTER DETAILED REASON ING HAS MADE THE ADDITION AS STATED IN PARA 18 ON PAGE 24 OF ASS ESSMENT ORDER. THE APPELLANT DURING THE APPELLATE PROCEEDINGS ALSO FAILED TO JUSTIFY AND SUBSTANTIATE ITS PLEA THAT EXPENSES INCURRED WE RE PROPERLY RECORDED IN BOOKS OF ACCOUNTS. ALL MATERIAL EVIDEN CES INCLUDING THE VALUATION REPORT OF DVO INDICATE THAT THE APPELLANT HAS NOT CORRECTLY SHOWN ITS CONSTRUCTION EXPENSES WHICH RESULTED INTO ADDITIONS OF RS.6 69 247 AND RS.1 22 678 AGGREGATING TO RS.7 91 925 WHICH NEED NO INTERFERENCE AND MORE PARTICULARLY WHEN A D ISCLOSURE OF RS.7 30 547 WAS MADE IN THE HANDS OF APPELLANT FIRM DURING SURVEY PROCEEDINGS. IN THE FACTS AND CIRCUMSTANCES OF APP ELLANTS CASE I DECLINE TO ACCEPT THE PLEA TAKEN BY THE APPELLANT T HAT ONLY PROFIT @8% BE TAXED SINCE NO SUCH PLEA CAN BE ACCEPTED WHE RE EXPENDITURE ARE UNACCOUNTED AND DULY ACCEPTED DURIN G THE SURVEY BY THE MAIN PARTNER. I.T.A. NO.3843/AHD/2004 9 3.12 IT IS WORTH MENTIONING THAT AFTER AMENDMENT OF SECTION 69C WITH EFFECT FROM 1.4.99 SUCH UNEXPLAINED EXPENDITU RE WHICH IS DEEMED TO BE THE INCOME OF THE ASSESSEE SHALL NOT B E ALLOWED AS DEDUCTION UNDER ANY HEAD OF INCOME AND HENCE THE AD DITION HAS BEEN RIGHTLY MADE BY THE AO OF AGGREGATE AMOUNT OF EXPENDITURE FOUND TO BE UNACCOUNTED AND THE SAME STANDS CONFIRM ED. 4. THE ASSESSEE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LD. AR ON BEHALF OF THE ASSE SSEE WHILE CARRYING US THROUGH PAGES 12 & 13 THE PAPER BOOK AND THE IMPUGNED ORDER S CONTENDED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN IGNORING THEIR CONTENT IONS THAT THE DOCUMENTS FOUND DURING THE COURSE OF SURVEY INCLUDED CERTAIN AMOUN TS PERTAINING TO THE SUCCEEDING YEARS. TO A QUERY BY THE BENCH THE LD. AR COULD NOT POINT OUT ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) NOR COU LD REFER US TO ANY MATERIAL SUGGESTING THAT AMOUNTS MENTIONED ON PAGE 12 & 13 OF THE PAPER BOOK INCLUDED CERTAIN AMOUNT WHICH DID NOT RELATE TO THE YEAR U NDER CONSIDERATION. AS REGARDS ADDITION OF RS. 1 22 678/- THE LD. AR MERELY PLEAD ED THAT DIFFERENCE IN VALUATION BEING LESS THAN 5% SHOULD BE IGNORED. ON THE OTHER HAND THE LD. DR SUPPORTED THE FINDINGS OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES AND GONE TH ROUGH THE FACTS OF THE CASE. UNDISPUTEDLY THE PARTNER OF THE FIRM SHRI MANHERBH AI MOHANBHAI DALWADI DURING THE COURSE OF SURVEY U/S 133A OF THE ACT IN THE BUS INESS PREMISES OF THE ASSESSEE ON 17.10.2001 ON THE BASIS OF LOOSE PAPER S NO.1 & 2 IN ANNEXURE B- 9 WHEREIN DETAILS OF INVESTMENT OF RS.38 20 044/-W ERE REFLECTED UNTIL 31-03- 2000 IN REPLY TO SPECIFIC QUESTIONS NO.6 TO 11 OF HIS STATEMENT ADMITTED THAT INVESTMENT AMOUNTING TO RS.27 89 497/- WERE RECORDE D IN YHE BOOKS OF ACCOUNTS OF THE FIRM AND ALSO ADMITTED IN HIS REPLY TO QUEST ION NO.8 THAT TOTAL INVESTMENT IN THE SCHEME UNTIL 31-03-2000 WAS RS.38 20 044/-. AC CORDINGLY HE ADMITTED THAT THE DIFFERENCE OF RS.10 30 547/- IN THE INVESTMENT WAS OUT OF UNDISCLOSED INCOME OF THE FIRM AS WELL AS OF ITS PARTNERS (REPLY TO QU ESTION NO.11 OF THE STATEMENT) AND ACCORDINGLY AGREED TO MAKE DISCLOSURE OF RS. 7 30 547/- IN THE HANDS OF THE ASSESSEE AND PAY TAX ACCORDINGLY. HOWEVER THE SAID AMOUNT WAS NOT DECLARED I.T.A. NO.3843/AHD/2004 10 AS INCOME IN THE RETURN AND INSTEAD AS OBSERVED BY THE LD. CIT(A) THE ASSESSEE DID NOT HONOUR THE DISCLOSURE ON THE GROUND THAT CE RTAIN FIGURES DID NOT PERTAIN TO THE PERIOD UNDER CONSIDERATION AS WELL AS SOME AMOU NT HAD BEEN INCURRED OUT OF WITHDRAWALS OF PARTNER AND FINALLY THE ASSESSEE F ILED RETURN OPTING FOR PRESUMPTIVE TAX SCHEME BY PAYING TAX ON DEEMED INCO ME @8% OF RECEIPTS. MOREOVER THE DVO ESTIMATED THE COST OF CONSTRUCTION OF THE A FORESAID PROJECT HILL PARK BUNGALOW AT RS.41.26 LACS WHILE THE CO ST OF CONSTRUCTION AS DERIVED BY DVO FOR THE PERIOD UNDER CONSIDERATION WAS RS.37 03 594/-. THE SAME WAS DULY CONFRONTED TO THE ASSESSEE BY THE AO AND AFTER CONSIDERING THE OBJECTIONS RAISED BY THE ASSESSEE THE AO MADE THE ADDITION AS STATED IN PARA 18 ON PAGE 24 OF ASSESSMENT ORDER. SINCE THE ASSESSEE FAILED T O SUBSTANTIATE ITS PLEA THAT EXPENSES INCURRED WERE PROPERLY RECORDED IN BOOKS O F ACCOUNTS THE ADDITIONS OF RS.6 69 247/- AND RS.1 22 678/- AGGREGATING TO RS.7 91 925/- WERE UPHELD BY THE LD. CIT(A). THOUGH THE LD. AR ARGUED BEFORE US THAT CERTAIN AMOUNTS PERTAINED TO THE SUCCEEDING YEARS THERE IS NOTHING ON RECORD T O SUGGEST THAT THE SAID AMOUNT PERTAINED TO THE SUCCEEDING YEARS WHILE THE PARTNER IN HIS STATEMENT ON THE BASIS OF DOCUMENTS FOUND DURING THE COURSE OF S URVEY ADMITTED UNDISCLOSED INVESTMENT OF RS.7 30 547/- IN THE YEAR UNDER CONSI DERATION AND AGREED TO PAY TAX THEREON. EVEN PLEA OF THAT LD. AR THAT DIFFEREN CE IN VALUATION DOES NOT EXCEED 5% IS NOT CORRECT. THE ASSESSEE DISCLOSED AN AMOUNT OF RS. 25 50 369/- IN THE BOOKS AND THE DVO VALUED RS.37 03 594/- FOR THE YEA R UNDER CONSIDERATION AND THE PARTNER DURING THE COURSE OF SURVEY ADMITTED UN DISCLOSED INVESTMENT. IN THESE CIRCUMSTANCES THERE IS NO MATERIAL BEFORE US SO AS TO ENABLE US TO TAKE A DIFFERENT VIEW IN THE MATTER. 5.1 EVEN OTHERWISE WE FIND THAT THE ADDITIONS WERE MADE BY THE AO NOT MERELY ON THE BASIS OF STATEMENT OF THE PARTNER DU RING THE COURSE OF SURVEY. IN FACT STATEMENT OF THE PARTNER WAS RECORDED IN THE LIGHT OF DOCUMENTS FOUND DURING THE COURSE OF THE SURVEY AND THE PARTNER HIM SELF VOLUNTEERED TO OFFER THE UNDISCLOSED INCOME FOR TAX. THERE IS NOTHING TO SUG GEST THAT THE STATEMENT WAS RECORDED UNDER DURESS AND THE FINDING OF THE AO IN THIS REGARD WAS NEVER I.T.A. NO.3843/AHD/2004 11 DISPUTED BEFORE THE LD. CIT(A) AND EVEN BEFORE US. IN THIS CONNECTION WE MAY REFER TO FACTS OF THE CASE WHEREIN A SURVEY WAS CON DUCTED IN THE PREMISES OF THE ASSESSEE A MEDICAL PRACTITIONER AND A STATEMENT W AS RECORDED FROM HIM IN WHICH THE ASSESSEE SURRENDERED ADDITIONAL INCOME AN D PURSUANT TO THE SAME THE AO REOPENED THE ASSESSMENT BUT DURING THE COUR SE OF WHICH THE ASSESSEE RETRACTED THE ADDITIONAL INCOME OFFERED AND CONTEND ED THAT THE STATEMENT WAS THE RESULT OF DURESS WHICH WAS NOT ACCEPTED BY THE AO AND ALSO BY THE TRIBUNAL HOLDING THAT THE STATEMENT IS VALID AND THAT IT WAS MADE WITHOUT DURESS A DIVISION BENCH OF THE ALLAHABAD HIGH COURT IN DR. S.C. GUPTA VS. CIT (2001) 170 CTR (ALL) 421 : (2001) 248 ITR 782 (ALL) OF COURSE PLACING RELIANCE ON THE DECISION OF THE APEX COURT IN PULLANGODE RUBBER PRODUCE CO. LTD . VS. STATE OF KERALA HELD THAT THE BURDEN THAT WAS LAID ON THE ASSESSEE TO ES TABLISH THAT THE ADMISSION MADE IN THE STATEMENT AT THE TIME OF SURVEY WAS WRO NG AND THAT THERE WAS NO ADDITIONAL INCOME WAS NOT EVEN ATTEMPTED TO BE DISC HARGED AND THUS THE ORDER OF THE TRIBUNAL WAS BASED ON FACTS AND NO QUESTION OF LAW AROSE FROM IT. HONBLE HIGH COURT CLEARLY HELD THAT 'AS REGARDS THE ASSESSEE'S CONTENTION THAT THE STAT EMENT HAVING BEEN RETRACTED THE ASSESSING OFFICER SHOULD HAVE INDEPENDENTLY COM E TO A CONCLUSION THAT THERE WAS ADDITIONAL INCOME AS SOUGHT TO BE ASSESSED AND THAT THERE WAS NO MATERIAL TO SUPPORT THAT THERE WAS SUCH INCOME THIS CONTENT ION IN OUR VIEW IS NOT CORRECT. AS HELD BY THE SUPREME COURT IN PULLANGODE RUBBER P RODUCE CO. LTD V. STATE OF KERALA [1973] 91 ITR 18 AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE THOUGH IT IS NOT CONCLUSIVE. THEREFORE A STATEMENT MADE VOLUNTARILY BY THE ASSESSEE COULD FORM THE BASIS OF ASSESSMENT. TH E MERE FACT THAT THE ASSESSEE RETRACTED THE STATEMENT COULD NOT MAKE THE STATEMENT UNACCEPTABLE. THE BURDEN LAY ON THE ASSESSEE TO ESTABLISH THAT TH E ADMISSION MADE IN THE STATEMENT AT THE TIME OF SURVEY WAS WRONG AND IN FA CT THERE WAS NO ADDITIONAL INCOME. THIS BURDEN DOES NOT EVEN SEEM TO HAVE BEEN ATTEMPTED TO BE DISCHARGED. SIMILARLY P.K. PALWANKAR V. CGT [1979] 117 ITR 768 (MP) AND CIT V. MRS. DORIS S. LUIZ [1974] 96 ITR 646 (KER.) ON WHICH ALSO LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ARE OF NO HELP TO THE ASSESSEE. THE TRIBUNAL'S ORDER IS CONCLUDED BY FINDINGS OF FACT AND IN OUR V IEW NO QUESTION OF LAW ARISES.' 5.2 IN THE CASE UNDER CONSIDERATION THE ASSESS EE HIMSELF VOLUNTARY OFFERED THE AMOUNT OF UNDISCLOSED INCOME TO TAX DURING THE COURSE OF SURVEY ON I.T.A. NO.3843/AHD/2004 12 17.10.2001. IT WAS NOT UNTIL FILING OF RETURN ON 30 .3.2002 THAT THE ASSESSEE DID NOT HONOUR DISCLOSURE. THERE WAS NO ALLEGATION OF DURESS EVEN. THUS FOR THE INTERVENING PERIOD THE ASSESSEE PREVENTED THE AUTH ORITIES FROM UNDERTAKING PROPER INVESTIGATION OF FACTS FOUND DURING THE SURV EY. HAD THE ASSESSEE RETRACTED THE STATEMENT IMMEDIATELY AFTER SURVEY THE AUTHORITIES COULD HAVE UNDERTAKEN FURTHER ENQUIRIES TO UNEARTH THE CORRECT FACTS. IT WAS THE ASSESSEE WHO BY HIS DECLARATION AND ACTS INTENTIONALLY CAU SED OR PERMITTED THE DEPARTMENTAL AUTHORITIES TO BELIEVE THE DECLARATION MADE BY THE ASSESSEE ON 17.10.2001 IN HIS STATEMENT TO BE TRUE AND INDUCED THEM TO ACT UPON SUCH BELIEF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOT OPEN TO THE ASSESSEE TO DENY THE TRUTH OF THE FACTS STATED IN THE SAID D ECLARATION. THIS IS BASED ON THE MAXIM ALLEGANS CONTRARIA NON EST AUDIENDUS (A PERS ON ALLEGING CONTRADICTORY FACTS SHOULD NOT BE HEARD). IN PICKARD V. SEARS [18 37] 6 AD & EI 469 474 IT HAS BEEN HELD THAT WHERE A PERSON 'BY HIS WORDS OR COND UCT WILFULLY CAUSES ANOTHER TO BELIEVE THE EXISTENCE OF A CERTAIN STATE OF THIN G AND INDUCES HIM TO ACT ON THAT BELIEF SO AS TO ALTER HIS OWN PREVIOUS POSITION T HE FORMER IS PRECLUDED FROM AVERRING AGAINST THE LATTER A DIFFERENT STATE OF TH INGS AS EXISTING AT THE SAME TIME.' IN THE CELEBRATED BOOK TITLED 'ADMINISTRATIVE LAW' BY SIR WILLIAM WADE (EIGHTH EDITION BY WADE AND FORSYTH-OXFORD UNIVERSITY PRESS ) THE LEGAL POSITION HAS BEEN EXPLAINED AT P. 242 AS UNDER: 'THE BASIC PRINCIPLE OF ESTOPPEL IS THAT A PERSON W HO BY SOME STATEMENT OR REPRESENTATION OF FACT CAUSES ANOTHER TO ACT TO HIS DETRIMENT IN RELIANCE ON THE TRUTH OF IT IS NOT ALLOWED TO DENY IT LATER EVEN T HOUGH IT IS WRONG. JUSTICE HERE PREVAILS OVER TRUTH ESTOPPEL IS OFTEN DESCRIBED AS A RULE OF EVIDENCE BUT MORE CORRECTLY IT IS A PRINCIPLE OF LAW. AS A PRINCIPLE OF COMMON LAW IT APPLIES ONLY TO REPRESENTATIONS ABOUT PAST OR PRESENT FACTS.' 5.3 THE RELEVANT PROVISIONS OF SECTION 115 OF THE EVIDENCE ACT ARE ALSO QUITE APPOSITE AND THE CASE OF THE ASSESSEE SQUARELY FALL S THEREUNDER. SECTION 115 OF THE EVIDENCE ACT READS AS UNDER: '115. WHEN ONE PERSON HAS BY HIS DECLARATION ACT OR OMISSION INTENTIONALLY CAUSED OR PERMITTED ANOTHER PERSON TO BELIEVE A THI NG TO BE TRUE AND TO ACT UPON SUCH BELIEF NEITHER HE NOR HIS REPRESENTATIVE SHAL L BE ALLOWED IN ANY SUIT OR I.T.A. NO.3843/AHD/2004 13 PROCEEDING BETWEEN HIMSELF AND SUCH PERSON OR HIS R EPRESENTATIVE TO DENY THE TRUTH OF THAT THING.' 5.4. IN CHUHARMAL V. CIT [1988] 172 ITR 250 255 THE HON'BLE SUPREME COURT HAS HELD THAT WHAT IS MEANT BY SAYING THAT THE EVID ENCE ACT DOES NOT APPLY TO INCOME-TAX PROCEEDINGS UNDER THE ACT IS THAT THE R IGOUR OF THE RULES OF EVIDENCE CONTAINED IN THE EVIDENCE ACT IS NOT APPLICABLE BUT THAT DOES NOT MEAN THAT WHEN THE TAXING AUTHORITIES ARE DESIROUS OF INVOKING THE PRINCIPLES OF THE EVIDENCE ACT IN PROCEEDINGS BEFORE THEM THEY ARE PREVENTED FROM DOING SO. BESIDES SECTION 115 OF THE EVIDENCE ACT INCORPORATES A SALUTARY PRI NCIPLE OF COMMON LAW BASED ON THE MAXIM ALLEGANS CONTRARIA NON EST AUDIENDUS ( A PERSON ALLEGING CONTRADICTORY FACTS SHOULD NOT BE HEARD) AND HENCE THE SAID PRINCIPLE IS FULLY APPLICABLE TO THE PROCEEDINGS UNDER THE INCOME-TAX ACT. THE PROVISIONS OF SECTION 115 OF THE EVIDENCE ACT STIPULATE STATUTORY RECOGNITION TO THE SAID PRINCIPLE WHICH IS OTHERWISE ALSO APPLICABLE TO ALL THE JUDICIAL AND QUASI-JUDICIAL PROCEEDINGS. THE UNDERLYING PHILOSOPHY BEHIND THE S AID PRINCIPLE BEING TO ENSURE IN THE WORDS OF SIR WADE IN HIS ADMINISTRAT IVE LAW THAT JUSTICE PREVAILS OVER TRUTH. 5.5 IN THE CASE BEFORE US THERE IS NO DISPU TE THAT THE ASSESSEE MADE THE DECLARATION IN HIS STATEMENT RECORDED DURING THE CO URSE OF SURVEY AS HIS UNDISCLOSED INCOME TO THE EXTENT OF RS. 7 30 547/- FOR THE YEAR UNDER CONSIDERATION WHICH THE DEPARTMENTAL AUTHORITIES A CCEPTED AND UPON WHICH THEY DID NOT PROCEED WITH FURTHER INVESTIGATIONS . IF T HE ASSESSEE HAD NOT MADE THE SAID STATEMENT THE DEPARTMENTAL AUTHORITIES COULD HAVE CONTINUED THEIR INVESTIGATIONS AND INVESTIGATED THE ENTIRE MATTER. BY MAKING THE DISCLOSURE OF ADDITIONAL INCOME OF RS. 7 30 547/- WHICH HE OFFER ED FOR TAXATION THE ASSESSEE STOPPED THE ENTIRE PROCESS OF FURTHER INVESTIGATION AS THE DEPARTMENT ACCEPTED THE DISCLOSURE AND CLOSED FURTHER INVESTIGATION ON THE SAID ISSUE. IN OUR VIEW IT WAS NOT OPEN TO THE ASSESSEE TO DENY LATER THE TRUT H OR THE CORRECTNESS OF THE SAID DECLARATION MADE ON 17.10.2001. THIS APPROACH OF THE ASSESSEE IN ESSENCE WOULD TANTAMOUNT TO HIS TELLING THE DEPART MENT THAT YOU ACCEPTED MY LIE I.T.A. NO.3843/AHD/2004 14 AND NOW YOUR HANDS ARE TIED AND YOU CAN DO NOTHING. HAVING MADE A VOLUNTARY DECLARATION AND INDUCED THE DEPARTMENTAL AUTHORITIE S TO ACT UPON THE SAME AT THE TIME OF SURVEY THE ASSESSEE CANNOT BE PERMITTED TO TURN AROUND LATER AND DENY THE TRUTH OF THE AFORESAID DECLARATIONS OR THE REPR ESENTATIONS MADE THEREIN. SECTION 115 OF THE EVIDENCE ACT PREVENTS HIM FROM D OING SO. FURTHER DECLARATIONS FALLING UNDER SECTION 115 OF THE EVIDE NCE ACT DO NOT REQUIRE ANY CORROBORATION. RETRACTION FROM DECLARATION OR ACTS FALLING UNDER SECTION 115 OF THE EVIDENCE ACT IS ALSO NOT POSSIBLE AT ALL. THE RETRA CTION BY THE ASSESSEE IN THE CASE BEFORE US IS HIT BY SECTION 115 OF THE EVIDENC E ACT. MOREOVER THERE IS NO SUCH INFLEXIBLE RULE THAT ADDITION CAN NEVER BE M ADE ON THE BASIS OF THE FACTS ADMITTED IN THE STATEMENT. A RETRACTED CONFESSION/S TATEMENT MAY STILL FORM THE SOLE BASIS FOR ADDITION IF THE ASSESSEE FAILS TO PR OVE THE INCORRECT OR ERRONEOUS NATURE OF THE FACTS ADMITTED OR STATED IN THE STATE MENT AT THE EARLIEST POSSIBLE OPPORTUNITY FROM THE STATEMENT/CONFESSION. IN THE C ASE UNDER CONSIDERATION THE ASSESSEE SOUGHT TO RETRACT FROM THE DECLARATION MAD E BY HIM ON 17.1.2001 SEVERAL MONTHS AFTER IT WAS MADE AND ACTED UPON BY THE DEPARTMENTAL AUTHORITIES. THE EXPLANATION LATER GIVEN BY THE ASS ESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS IS WITHOUT ANY BASIS AND NO MATERIAL HAS BEEN PLACED BEFORE US THAT CERTAIN AMOUNTS OFFERED TO TAX IN T HE YEAR UNDER CONSIDERATION IN FACT RELATED TO THE SUCCEEDING YEARS . RATHER THE LOOSE PAPERS AND DOCUMENTS FOUND DURING THE COURSE OF SURVEY FORMED THE BASIS OF ADDITION AND THE PARTNER OF THE FIRM CORROBORATED THE FACTS REVEALED FROM LOOS E PAPERS/DOCUMENTS IN HIS STATEMENT. 5.7 IN VIEW OF THE FOREGOING WE DO NOT FIND ANY MISTAKE IN THE APPROACH OF THE LD. CIT(A) IN UPHOLDING THE ADDITIONS OF RS.6 6 9 247/- AND RS. 1 22 678/- ESPECIALLY WHEN THE MAIN PARTNER ACCEPTED UNDISCLO SED INCOME DURING THE COURSE OF SURVEY. THEREFORE GROUND NOS.1 TO 3 IN T HE APPEAL ARE REJECTED. 6. NO ADDITIONAL GROUND HAVING BEEN RAISE D IN TERMS OF THE RESIDUARY GROUND NO. 4 ACCORDINGLY THIS GROUND IS DISMISSE D. I.T.A. NO.3843/AHD/2004 15 7. IN THE RESULT APPEAL IS DISMISSED. . ORDER PRONOUNCED ON 29TH JANUARY 2010. SD/- SD/- (MAHAVIR SINGH) (A.N. PAHUJA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD DATED : 29TH JANUARY 2010 PK/- COPY TO: 1. THE ASSESSEE 2. ITO WARD-.1 3. CIT(A)-II BARODA 4. CIT CONCERNED 5. DR C BENCH BY ORDER DEPUTY REGISTRAR ITAT AHMEDABAD