Income Tax Appellate Tribunal - Ahmedabad
Acit.,Circle-1,, Bhavnagar vs Shree Krishna Developers, Bhavnagar on 4 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD '' B " BENCH - AHMEDABAD
Before Shri Rajpal Yadav, JM & Shri Manish Borad, AM.
ITA Nos.1177 & 1231/Ahd/2011
Asst. Year: 2007-08 & 2008-09
ACIT, Circle-1, Bhavnagar. Vs. Shree Krishna
Developers, Plot No.49-
50, Suhas, Satyanarayan
Road, Kalubha Road,
Bhavnagar.
Appellant Respondent
PAN ABHFS 5334H
Appellant by Shri James Kurian, Sr.DR
Respondent by Shri Sakar Sharma, AR
Date of hearing: 07/02/2017
Date of pronouncement: 04/04/2017
ORDER
PER Manish Borad, Accountant Member.
These two appeals of Revenue for Asst. Year 2007-08 and 2008-09 are directed against two separate orders of ld. Commissioner of Income Tax(A)-XX, Ahmedabad, dated 28.01.2011 and 15.02.2011 vide appeal nos.CIT(A)-XX/265/09-10 and CIT(A)-XX/489/10-11 respectively both directed against the orders u/s 143(3) of the Income-tax Act, 1961 (in short the Act) framed on 31.12.2008 and 27.12.2010 by ACIT/DCIT, Cir-1, Bhavnagar, respectively. Since the appeals of Revenue belong to the same assessee and the issues are similar, these were heard together and are being disposed of by this common order for the sake of convenience.
ITA No. 1177 & 1231/Ahd/2011 2Asst. Year 2007-08 & 2008-09
2. The Revenue has raised following grounds:-
Grounds of appeal in ITA No.1177/Ahd/2011
1. The ld.CIT(A)~XX, Ahmedabad has erred in (aw and on facts in deleting the addition of Rs,2,50,11,000/- made u/s.68 of the I.T. Act '61 based on duplicate sets of accounts found during the Survey,
2. The ld, CIT(A) further erred on law and in fact in admitting the retraction statement of the assessee wherein the disclosure made during the survey was retracted even though statement was based on misinterpretation and understanding of the facts.
2.1 The Id.CIT(A) failed to appreciate that the statement of partner Shri Gaurav R. Viradia on behalf of the firm, was recorded during the course of 5urvey u/s.133A of the I.T' Act which has an evidentiary value. The statement has been made voluntarily without coercion or intimidation. As well, the statement was not a forced one, there is no scope for the assesses to challenge the correctness of the assessment. Moreover, while answering to Q.Nos.12 to 17 in the statement recorded u/s,133 of the I.T. Act which are based on the duplicate set of accounts and forms the main base of disclosure. Shri Viradia never stated that the duplicate books do not belong to his firm.
2.2 There are number of judicial decisions where additions teed on the statement made during the survey have been held valid. Some of the ore;
i) In the case of br.S.C.0upta Vs. CIT 248 ITR 782 the Hon'ble Allahabad High Court has held that the additions made on the basis of statement given by The assessee during the survey was an extremely important piece of evidence, Therefore, a statement made voluntarily by the assessee could form the basis of addition. The burden lay on the assesses to establish that the addition made at the time of survey was wrong and, in fact, there was no additional income, , ;
ii) In the case of S.S.Ratanchund Bholanath Vs. CIT 210 ITR 682, the Hon'ble M.P.High Court has held that when assesses admitted That a particular income is liable to be included in its total income, assessment made in such admission was valid.
iii) The Hort'ble Himachal Pradesh High Court in the case of Hirasingh Co. Vs, CIT 330 ITR 791 has held that where addition was made on the basis of admission made by the assessee, it was held that the addition was justified,
iv) In K.I. Pavunny Vs. Asstt. CCWE 1997 (90 ELT 241)(SC), three judges Bench of Supreme Court observed that if the confessional statement is retracted, the Court is required to examine whether it was obtained by threat, ITA No. 1177 & 1231/Ahd/2011 3 Asst. Year 2007-08 & 2008-09 duress or promise, and also whether the confession is truthful. If it is found to be voluntary and truthful inculpatory portion of the retracted confession can be acted and even conviction can be based upon the same. This view was reiterated in a recent decision of the Apex Court in Vinod Solanki Vs. U.O.I. 2009 (233 ELT 157)(SC).
3. On the acts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of the AO.
4. It is, Therefore, prayed 1hat the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.
Grounds of appeal in ITA No.1231/Ahd/2011
1. The ld.CIT(A)~XX, Ahmedabad has erred in (aw and on facts in deleting the addition of Rs,1,21,60,596/- made u/s.68 of the I.T. Act '61 based on duplicate sets of accounts found during the Survey,
2. The ld, CIT(A) further erred on law and in fact in admitting the retraction statement of the assessee wherein the disclosure made during the survey was retracted even though statement was based on misinterpretation and wrong understanding of the facts.
2.1 The Id.CIT(A) failed to appreciate that the statement of partner Shri Gaurav R. Viradia on behalf of the firm, was recorded during the course of 5urvey u/s.133A of the I.T Act which has an evidentiary value. The statement has been made voluntarily without coercion or intimidation. As well, the statement was not a forced one, there is no scope for the assessee to challenge the correctness of the assessment. Moreover, while answering to Q.Nos.12 to 17 in the statement recorded u/s,133 of the I.T. Act which are based on the duplicate set of accounts and forms the main base of disclosure. Shri Viradia never stated that the duplicate books do not belong to his firm.
2.2 The ld. Commissioner of Income Tax(A) failed to appreciate the bank book entry in duplicate books of account in total agreement (including that of bank account No.) with that of regular books of accounts. No other person can obtain the bank statement and make entry in duplicate set of accounts, which clearly establishes that the duplicate books of accounts found from the computer of Shri Kalpesh Vaghani belongs to the firm of M/s Shree Krishna Corporation and is actually the real books of the said firm.
a) In SBS Account No.660I1405450 (Suparshva Project), debit balance in. bank account as on 8,5,2007 is also available in duplicate ledger copy of bank book,
b) Rs..9000/- deposited in bank for opening new account are entered in duplicate ledger copy also.
ITA No. 1177 & 1231/Ahd/2011 4Asst. Year 2007-08 & 2008-09
c) Rs..300/- charged by the bank on 6.3.2007 to issue new cheque book are also entered in duplicate set of account
d) A sum of fts.94,600/- has been debited in bank account through cheque No.849004, As per ledger copy of bank in duplicate set of account this payment has been made to M/s.Khodiyar Cement Depot.
e) In 58S A/c No.66011406566 bank has charged fts.300/- on 6,3,2007. This entry is made in duplicate set of account also.
f) Through cheque No.839665; 910948:505785:561020; 509661 certain sums ranging from Rs.l tac to 2 lac have been credited in above said bonk account. Surprisingly in duplicate set of account their ledger accounts in the name of Shri Arvindkumar Kontiial Shah, Smt Ashaben R, Shah, Smt.Ashmitaben S. Roman, Shri Hiren P. Shah and Smt.Jalpa R. Shah etc wherein entries have been made stating that cash paid in lieu cheque received,
g) In SBS Account no,660i3076758 there is debit balance of Rs,41,58,981/- on 30.4.2007. This amount also appears in trio! balance of duplicate set of accounts.
h) Sank has charged interest of Rs.7,419/- which is debited in bank account on 30.4.2007.
i) This amount also appears in trial balance of duplicate set of account.
j) Transfer entries of Rs.11,00,000/- and Rs.13,30,000/- debited on 36.4.3007 in bonk account also appear in trial balance of duplicate set of account.
2.3 There are number of judicial decisions where additions based on the statement made during the survey have been held valid. Some of the are:
i) In the case of Dr,S.C,6upta Vs. CIT 248 ITR 782 the Hon'ble Allahabad High Court has held that the additions made on the basis of statement given by the assessee during the survey was ait extremely important piece of evidence.
Therefore, a statement made voluntarily by the assessee could form the basis of addition. The burden lay on the assessee to establish that the addition made at the time of survey was wrong and, in fact, there was no additional income.
ii) In the case of S.S.Ratanchand Bholanath Vs. CIT 210 ITR 682, the Hon'bie M.P. High Court has held that when assessee admitted that a particular income is liable to be included in its total income, assessment made in such admission was valid.
iii) The Hon'ble Himachal Pradesh High Court in th3e case of Hirasingh & Co, Vs. CIT 230 ITR 791 has held that where addition was made on the basis of admission made by the assesses, it was held that the addition was justified, ITA No. 1177 & 1231/Ahd/2011 5 Asst. Year 2007-08 & 2008-09
iv) In K.I. Pavunny Vs. Asstt.CCWE 1997 (90 ELT 241)(SC). three judges Bench of Supreme Court observed that if the confessional statement is retracted, the Court is required to examine whether it was obtained by threat, duress or promise and also whether the confession is Truthful, If it is found to be voluntary and Truthful inculpatory portion of the retracted confession can be acted and even conviction can be based upon the same. This view was reiterated in a recent decision of the Apex Court in Vinod Solanki vs. UOI 2009 (233 ELT 157)(SC)
3. On the acts and in the circumstances of the case, the ld. CIT(A) ought to have upheld the order of the AO.
4. It is, Therefore, prayed 1hat the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.
3. For proper adjudication of facts, we well take up A.Y.2007-08 as the lead year.
4. Briefly stated facts as culled out from the records are that assessee is a partnership firm incorporated on 15.01.2007 (assessment year 2007-08 is the first year of business of the assessee firm). Assessee company is engaged in land development and construction of residential and commercial complexes. It was initially formed on 15.11.2007 and was reconstituted on 15.03.2007 by executing supplementary partnership deed. Survey action u/s.133A of the Act was carried out at the business premises of the assessee on 05.10.2007, statements of the Accountant Mr. Nitin Patel and partner Gaurav R. Viradia were recorded u/s.131 of the Act. Print outs of books of accounts were also recovered from the computer lying at the residence of Mr. Kalpesh Waghani, to whom assignment of preparation of project report was given by the appellant for availing bank loan for one of its project. Partner Mr. Gaurav R. Viradia disclosed unaccounted income of Rs.2,18,00,000/- for A.Y. 2007-08 and Rs. 25,65,178/- for A.Y. 2008-09. However, the additional income offered in the course of survey by Mr. ITA No. 1177 & 1231/Ahd/2011 6 Asst. Year 2007-08 & 2008-09 Gaurav R. Viradia was subsequently retracted on 30th October, 2007 through detailed written submission along with affidavits of various parties whose names were appearing in the duplicate set of books of accounts. Returned income declaring nil income was filed on 31.10.2007. The case was selected for scrutiny assessment. Notice u/s.143(2) followed by 142(1) of the Act along with detailed questionnaire was duly served. During course of assessment proceedings, ld. Assessing Officer mainly harped upon the duplicate set of books of accounts which were fund at the business premises and figured out various entries which were credited in the alleged books of accounts and their source was enquired by the assessee. During course of assessment proceedings, ld. counsel for the assessee was firm on its submission that duplicate set of books of accounts found in the computer owned by Mr. Kalpesh Waghani was not original books as they were modified and figures were escalated by Mr. Kalpesh Waghani in order to show sound financial condition of the assessee firm so that higher bank credits can be availed for the housing projects undertaken by the assessee. It was also contended that most of the entries in the duplicate set of books of accounts were either having no basis or there was no name attached thereto. Wherever, some names were appearing in the duplicate books, assessee has duly provided the affidavits of those persons denying to have made any such transactions with the firm. It was also contended that statements made during the course of survey u/s.133A do not carry any evidentiary value and addition can be made only if they are corroborated with documents found at the business premises of the assessee, which was not the case of assessee as no incriminating material was found at the business premises of the assessee. However, these submissions of the assessee could not convinced ld. Assessing Officer and he went ahead completing the assessment making ITA No. 1177 & 1231/Ahd/2011 7 Asst. Year 2007-08 & 2008-09 addition of Rs.2,50,11,000/- u/s.68 of the Act assessing income at Rs.2,50,11,000/- and for A.Y. 2008-09 against returned income of Rs.8,97,012/-, income was assessed at Rs.1,30,51,310/- after making addition of Rs.1,21,60,596/- u/s. 68 of the Act by observing as follows:
"The statement of the assessee that the duplicate set of books of account doesn't belong to it/ is baseless on the following grounds :-
(a) As already discussed at page No. 10/21 of the order that Shri Nitin N Patel, accountant in reply to Question No. 13,14, & 15 admitted that the Pen drive given by M/s Krishna developers is with Shri Kalpesh Waghani and further in reply to Question No 17 he says that mobile of Shri Kalpesh Waghani is switched off therefore I am going to his residence to bring back the Pen drive or back up of the data.
(b) In Question No. 20 when Shri Nitin N Patel, accountant was categorically asked to explain as to why the entries found in the office at 49/50, suhas and the entries of copy of accounts -:. (duplicate set) which he has brought are not tailing, he doesn't deny the fact that back up of computer data (duplicate set of account) have been brought by him.
(c) In reply to Question No. 11, 12, 13 & 14 reproduced on page No. 10/21 of this order Shri Nitin N Patel has admitted that the computerized account, material, voucher etc were not available at the office premises and informed that it could be available with Shri Kalpesh Waghani another accountant of the assessee in his computer or pen drive at his residence. (d) Sec. 133A of the I T Act while defines the power of survey as under :
(1) Notwithstanding anything contained in any other provision of this Act, and income-tax authority may enter -
(a) any place within the limits of the area assigned to him or
(b) any place occupied by any person in respect of whom he exercises jurisdiction, [or] [ (c) any place in respect of which he is authorized for the purpose of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place] at which a business or profession is carried on, whether such place be the principle place or not of such business or profession, and required nay ITA No. 1177 & 1231/Ahd/2011 8 Asst. Year 2007-08 & 2008-09 proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession -
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,
(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein and (ill) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.
Explanation - For the purposes or" this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.
By virtue of explanation to Sec 133A an income-tax authority can enter into even the third party premises where the assessee / his representative states that books of account are kept at the premises of third party in a situation where the books of account are not found at the business premises of the assessee. The case of the assessee is fully covered by the provisions of this explanation as at the commencement of survey, none of the partners was available and the books of account / documents which are supposed to be kept at the business premises were also not there. In these circumstances the books of account were recovered from the computer of Shri Kalpesh Waghani, accountant of the assessee at the instance of Shri Nitin N Patel another accountant of the assessee, no matter that Shri Nitin N Patel was perhaps unaware of the fact that back-up of the data brought by him was in fact duplicate set of accounts. Therefore it doesn't make any difference as to whether the duplicate set of accounts are recovered from the business premises of the assessee or from any other place suggested by the accountant of the assessee attending the business in absence of any of the partner of the firm.
(e) In its reply dated 30.10.2007 the assessee has categorically denied that the duplicate set of accounts belong to it. Further during the course of assessment proceedings the assessee in reply dated 24.12.2009 to show cause notice dated 21.12.2009 has stated that Shri Kalpesh Waghani from whose premises duplicate set of accounts were recovered might have inflated entries so as to make the figures workable as per requirements of bank authorities as assignment of making project report and to get funds from the bank for working capital was given to him. There is a contradiction in statement of the assessee dated 30.10.2007 and dated 24.12.2009. In the former statement the assessee has categorically denied owning of duplicate set of accounts, while in the latter statement the ITA No. 1177 & 1231/Ahd/2011 9 Asst. Year 2007-08 & 2008-09 assessee appears to have half heartedly accepted that the entries made in the duplicate set of accounts have been made by its accountant but it has tried to establish that the entries made therein may not be considered reliable as inflated by the accountant. The assessee's stand cannot be accepted as it cannot be allowed to twist some facts as per its convenience and to reject other facts not favourable to it.
(f) The assessee's(partner Shri Gaurav R. Viradia) claim that he was fully exhausted and under mental stress as he had to rush from Baroda(where his aunt was critically ill to Bhavnagar and it was not possible for him to give any reply even if he has signed the statement of surrender is just and after thought as at the time of recording his statement he never complained of any mental stress or any physical or mental illness. The statements of Shri Gaurav R. Viradia consist of six pages. In the statement he was confronted to seventeen questions. In concluding para he has stated that I will fully sign the statement in healthy state of mind without any coercion. If he was really ill or indisposed he should have asked for medical help but no such request was made by him. Therefore ground taken by the assessee of exhaustion or mental stress is nothing more than an after thought.
11. In view of the above it is amply clear that the submissions made by the assessee are baseless and ill-conceived after thought as they do not make specific reply to the specific queries. Therefore the theory of retraction of disclosure made by the assessee is not acceptable. The assessee had made disclosure of Rs. 2,18,00,0007- on account of unaccounted cash receipts found in duplicate set of accounts for F.Y 2006-07 relevant to A.Y 2007-08 which has not been offered by the assessee as additional income in the return for A.Y 2007-08. Therefore an addition of Rs. 2,18,00,000/- is made to the income of the assessee u/s 68 of the I T Act, 1961. (Addition Rs. 2,18,00,000/-)
12. Further, following cash receipts were found directly in different project:
In center point project: Rs.
1 From Jayprakash 41,000
2 From Dilipsinh Chudasama 1,25,000
In Siddhi Vinayak Project:
3 From D. K. Shah on 20.02.2007 9,999
From D. K. Shah on 03.03.2007 9,35,000
From D. K. Shah on 05.03.2007 5,00,000
From D. K. Shah on 09.03.2007 7,00,000
From D. K. Shah on 10.03.2007 9,00,000
Total 32,10,999
ITA No. 1177 & 1231/Ahd/2011 10
Asst. Year 2007-08 & 2008-09
The assessee has not filed any explanation regarding these receipts. As these receipts relate to A.Y 2007-08, an addition of Rs. 32,10,999/- is made u/s 68 of the I T Act, 1961 on account of unexplained cash receipts (Addition Rs. 32,10,999/-)
13. After above discussion income of the assessee is computed as under:
Rs.
Total income as per return. NIL
Add:
I Addition as per para 11 discussed above 2,18,00,000/-
II Addition as per para 12 discussed above 32,10,999/-
Total income 2,50,10,999/-
i.e. 2,50,11,000/-
5. Aggrieved assessee went in appeal before the CIT(A) and succeeded in full as ld. CIT(A) deleted total addition of Rs.2,50,11,000/- for A.Y. 2007-08 and Rs.1,21,60,596/- for A.Y. 2008-09 by observing that the print outs represented duplicate set of books of accounts which were made by Mr. Kalpesh Waghani for the purpose of taking bank loan and in absence of any other material or evidence against the assessee, no addition can be made.
6. Aggrieved Revenue is now in appeal against the order of CIT(A) before the tribunal. Ld. Departmental Representative vehemently argued supporting the order of Assessing Officer and also submitted that income was disclosed by the partner of the assessee firm during the course of survey under no stress and the duplicate books of accounts found with Mr. Kalpesh Waghani were actually the books of accounts of assessee only as most of entries including bank entries were matching. He further submitted that retraction of statement by partner Gaurav R. Viradia was merely after thought and therefore, addition made by ld. Assessing Officer should be sustained.ITA No. 1177 & 1231/Ahd/2011 11
Asst. Year 2007-08 & 2008-09
7. On the other hand, learned Authorized Representative supported the order of CIT(A) and also referred to the submissions made before the CIT(A). He further submitted that A.Y. 2007-08 was the first year of the incorporation of assessee firm as the return of income filed for A.Y. 2007-08 was for the period of 15.01.2007 to 31.03.2007. There was no accumulated income with the assessee firm which could have been alleged as the undisclosed income. Learned counsel further submitted that the assessee in order to carry on activities as land/property developers initiated process of ranging finance and also started negotiations for acquiring piece of lands on which property could be developed. Further in order to achieve its object of property/land development planned three projects in the name of Center Point, Suparshva and Siddhivinayak at different locations. Bank accounts in the name of these three projects were opened on 06.03.2007 by depositing cash of Rs.9000/- in each account. Further to meet the working capital requirements, assessee applied for sanction and disbursement of credit facility to State Bank of Saurashtra, Vaghavadi Road Branch, Bhavnagar on 30th March, 2007 and the credit facility was sanctioned on 25.04.2007 and disbursement was made towards purchase of land and construction thereon.
In this sequence, assessee in order to get higher bank credit facility engaged a financial consultant to prepare the projected accounts according to the needs of bank. The projected entries in the alleged duplicate set of books of accounts were made in such a manner so far as to indicate borrowing capacity of firm as well as sound financial capacity of partners by making the dummy entries in the projected accounts. He further added that survey u/s.133A of the Act was conducted at business premises on 05.10.2007 which came to be concluded on 06.10.2007. No incriminating material was found at the business premises but on enquiry it was revealed that duplicate ITA No. 1177 & 1231/Ahd/2011 12 Asst. Year 2007-08 & 2008-09 books of accounts are lying with Mr. Kalpesh Vaghani. Accordingly, back up was taken from the computer system lying at the residence of Mr. Kalpesh Vaghani and print out of same was taken. All the alleged additions were based on this duplicate set of books of accounts. The statements made by partner Mr. Gaurav R. Viradia stands already retracted and the reason for the retraction was that assessee was not provided the copies of documents taken by Revenue authorities. Later on when they were provided to assessee necessary verification with regular books of accounts was made and it was revealed that all the alleged cash credits do not exist at all and there was no case of any addition. Learned counsel also submitted that no reliance could be placed on the computer print outs taken from the computer of Mr. Kalpesh Vaghani in absence of any material contrary against the appellant and more so Mr. Vaghani has admitted in his statement that he modified the data on his own and as per his own wisdom. The survey officials took the said data during his absence and without taking signatures of any of his family members or calling for any witness. Further, ld. Assessing Officer has not disputed the affidavits so furnished at any stage of proceedings. Nothing adverse has been brought on record to support the additions made in the assessment order in spite of spending long period of almost three years from the date of survey. Learned counsel further referring and relying on the judgment of hon'ble Apex Court in the case of CIT vs. S. Khader Khan 214 CTR 589 and co-ordinate bench, Ahmedabad's decision in case of Abhi Developers vs. ITO 12 SOT 444 (Ahmedabad- Tribunal) submitted that no addition can be made merely on the basis of statements having been recorded unless the same can be corroborated by any material either found during course of survey or subsequently brought on record by the department while framing the assessment.
ITA No. 1177 & 1231/Ahd/2011 13Asst. Year 2007-08 & 2008-09
8. We have heard rival contentions and perused the record placed before us and gone through the decisions relied on by learned counsel. In these two appeals of Revenue, 2007-08 and 2008-08, the only issue raised is against deletion of addition by ld. CIT(A) which was made by ld. Assessing Officer u/s.68 of the Act at Rs.2,50,11,000/- and Rs.1,21,60,596/-.
9. We observe that the assessee firm is engaged in the business of property and land development and real estate related activities. It came into existence in the fourth quarter of financial year 2006-07 relevant to assessment year 2007-08. It was the very first year of commencement of business. Survey u/s.133A of the Act was carried out on business premises of assessee on 05.10.2007 which was concluded on 06.10.2007. Undisputedly, no incriminating material of whatsoever nature was found at the business premises of the appellant by the survey party in the form of excess cash, evidence of unaccounted borrowings, investments and expenditure. The statement of one of the partner Mr. Gaurav R. Viradia was taken on 06.10.2007 who reached from Baroda on second day of survey. Genesis of the impugned addition was the duplicate set of books of accounts extracted from the residence of Mr. Kalpesh Vaghani but printed at the office of assessee on 09.10.2007. Mr. Kalpesh Vaghani came into picture during the course of survey when it was informed to the survey team that books of accounts are in the computer of Mr. Kalpesh Vaghani who has been appointed for preparing projected financial statements for the purposes of taking bank credit limits. The facts about the role of Mr. Kalpesh Vaghani also get affirmed by his affidavit which has not been challenged by the Revenue authorities, wherein it has been categorically stated that major modification were made in the actual books of accounts and various figures ITA No. 1177 & 1231/Ahd/2011 14 Asst. Year 2007-08 & 2008-09 were inflated to show a bright financial future of the assessee firm and to make them fit as per the requirements of banking authority so that higher working capital limit is granted for the projects undertaken.
10. We further observe that disclosure statement made by the partner Mr. Gaurav R. Viradia was retracted on 30th October, 2007 wherein he stated that contents appearing in the statements recorded on 06.10.2007 were never stated by him because it was practically not possible for him to work out such complex financial details in a small period of two to three hours that too after travelling by road from Baroda to Bhavnagar. Assessee firm's partner Mr. Gaurav R. Viradia further denied in his retraction letter about the acceptance and payment of cash in the alleged duplicate set of books of accounts.
11. We further observe that no attempt was made either in the course of survey or subsequent to survey i.e. up to the date of framing the assessment to call and record the statement of Mr. Kalpesh Vaghani to extract the truth. Also no enquiry was conducted against the partners for the alleged additions in the assessee firm in the given facts when it was an initial year of commencement of business and there was no previous source of capital or accumulated funds of the assessee firm which could be treated as an unaccounted or undisclosed income. We further find that it is well established judicial precedent that whatever statement is recorded u/s.133A of the Act it has no evidentiary value obviously for the reason that the Officer is not authorized to administer oath and not to take any sworn evidence which alone has evidentiary value as contemplated under law (as held by hon'ble Madras High Court in the case of CIT vs. S. Khader Khan ITA No. 1177 & 1231/Ahd/2011 15 Asst. Year 2007-08 & 2008-09 Son (2008) 300 ITR 157 and this order of hon'ble Madras High Court was confirmed by the hon'ble Apex Court also). In the case of assessee also the statements taken u/s.133A of the partner Mr. Gaurav R. Viradia were later on retracted and the only evidence Revenue is harping upon is the duplicate set of books of accounts on which most of the entries, as admitted by the Accountant and the Consultant have been manipulated / enhanced / modified / re-arranged in order to prepare projected financial data to be provided to banks for getting sanctioned higher working capital credit limits for running the projects undertaken by the assessee firm. In view of totality of facts and discussion made above, we find no reason to interfere with the order of ld. CIT(A) who has deleted the impugned addition u/s.68 of the Act by giving a detailed finding which reads as follows:
"4. I have carefully gone through the findings given in the assessment order, submissions of the AR of the appellant, remand reports of the AO. On perusal of the grounds of appeal it is seen that the appellant has objected to the addition of Rs. 2,50,10,999/- made merely on the basis of statement of partner Shri Gaurav R Viradia in the course of survey u/s 133A wherein he admitted certain incomes on the basis of trial balance printed from the computer data found at the residential premises of Shri Kalpesh Vaghani. Shii Viradia admitted income to the extent of Rs. 2,18,00,000/- for the year under consideration stating the same as having been received as booking advance partly through him (to the extent of Rs. 1,60,50,000/- ) and partly through another partner Isha Sanjaybhai Sonani (to the extent of Rs. 57,50,000/-). The amount so admitted has been retracted by him in a letter dated 31/10/2007 communicated to the AO, Copies of affidavits of some of the parties named in the printout taken from the computer of Shri Kalpesh Vaghani were also filed later with the AO. It is seen that the AO despite receiving communication for retraction of admitted incomes immediately after survey did not carry out any further inquiries or investigations. No action was taken by the AO even in respect of the parties whose names figured in the alleged duplicate set of books of account of the appellant and in whose cases the appellant provided addresses and who had executed notarized affidavits. The AO opted not to carry out further investigation/ inquiries in the matter except seeking examination of partners of the appellant, Shri Nitin Patel-accountant and Shri Kalpesh Vaghani.
4.1 The claim of the AR of the appellant indicating the circumstances ITA No. 1177 & 1231/Ahd/2011 16 Asst. Year 2007-08 & 2008-09 under which the modified data containing their transactions was found from the computer of Shri Kalpesh Vaghani appears quite reasonable in view of the fact that Shri Kalpesh Vaghani through affidavit, written ommunications and in statement recorded u/s 131 has confirmed that he had indeed modified the data given to him by the partners of the appellant to prepare project accounts.
4.1(i) It is seen that in the alleged duplicate set of books of accounts there are substantial deposits in the names of Shri Gaurav R Viradia and Shri Kalpesh Vaghani. It is surprising that the AO has not questioned either Shri Gaurav R Viradia or Shri Kalpesh Vaghani while recording statement u/s 131 of the Act about transactions appearing in their names in the alleged duplicate set of books of accounts.
4.1(ii) It is seen that the appellant firm was absolutely new and this was the first year of their business. The firm had neither acquired any land in the year under consideration nor had even entered into any agreement for purchase of land etc. The respective land owners have denied having received any cash consideration from the appellant. The AO has not been able to substantiate the payment to any person outside the regular books of accounts as compared to the alleged duplicate set of books. No evidence has been found about the cash being paid for purchase of land. The inflated purchases as appearing in the alleged duplicate set of books of accounts have also not been established with any enquiries or evidence.
The persons from whom money has been shown as received in cash i.e. Bharatbhai, Fathabhai and Kalpeshbhai have not been allotted any units in any of the projects of the appellant. Kalpesh Vaghani who is engaged in writing accounts and arranging bank finance etc apparently has no capacity to lend money to the extent, appearing in alleged duplicate set of accounts. He has not even been questioned about the money allegedly advanced by him.
The appellant has acquired land from Shri D.K. Shah for the Suparshva Project in the next assessment year. The appellant was therefore, liable to make payment to Shri D.K. Shah against land. There could be no occasion for the appellant to receive any amount to the extent of Rs. 30,44,999/- from him that too for the unrelated Siddhivinayak Project.
It is also seen that no units have been allotted in any of the projects to Shri D.K Shah, Shri Dilip Singh and Shri Jay Prakash in whose name amount have been shown as received in the computer printout.
It also strange that if appellant had made such unaccounted payments or had received any such amounts in cash then at least a part of such transactions should have been found reflected in the data found from the business premises of the appellant back up of which was provided to Shri Kalpesh Vaghani to make projected accounts etc. because in real estate transactions at least part of the ITA No. 1177 & 1231/Ahd/2011 17 Asst. Year 2007-08 & 2008-09 transactions have to be accounted for in the regular books of accounts. However, there was no reflection of such transactions in the regular books of accounts of the appellant. This gives credence to the appellant's claim that data was modified by Shri Kalpesh Vaghani on his own in order to make the balance sheet appear better. Moreover Shri Kalpesh Vaghani has also confirmed the same in his statement that he had modified the data obtained from the appellant. The AO has observed that it would not have been possible for Mr Kalpesh Vaghani to have manipulated the data in a short span of time. This contention of the AO does not seem valid. If bogus data had to be incorporated the speed of such entries would be much faster. The AO has not noticed that in the statement Shri Vaghani has stated about the no. of entries he can make based on vouchers. It is obvious that considerably higher no. of entries could be made if they were just to be entered without any vouchers etc. The allegation of the AR that survey team did no impound computer of Shri Kalpesh Vaghani in the course of survey in spite of finding alleged incriminating material containing huge unaccounted transactions and even at the time of taking backup/ printout from his computer no outside witnesses etc had been called to avoid any dispute thereon and even no signatures or initials were put by the survey officials on the same while impounding it does not mean that the printout were not taken from the computer of Shri Vghani. It is seen that the computer printouts taken from the premises of Shri Kalpesh Vaghani and this fact has been confirmed in the statement of Shri Vaghani himself. However, the fact that the data had been modified by Shri Vaghani is established. In the absence any other material or evidence to substantiate the fact that the printout taken from the computer of Shri Kalpesh Vaghani represented the duplicate set of books of accounts of the appellant, the same cannot be accepted.
The statement recorded during the course of survey does carry significant weight but when the same has been retracted and there is no other material or evidence to support the disclosure made no addition could be made on the basis of such retracted statement.
The AO despite of all inquiries made by him has not come out with any evidence or circumstance which can support his claim. It is a settled proposition of law that no addition can be made merely on the basis of statement recorded in the course of survey which has no evidentiary value unless such statement is supported by other incriminating material or evidences. In the case of the appellant nothing adverse to the appellant was found from the business premises and persons named in the alleged duplicate set of books of accounts have denied such transactions on oath. :
4.1(iii) Under these circumstances it cannot be established that the printouts represented duplicate set of books of accounts of the appellant. That being so, in the absence of any other material or evidence against the appellant, no addition could be made on the basis of the print outs obtained from the ITA No. 1177 & 1231/Ahd/2011 18 Asst. Year 2007-08 & 2008-09 residence of Shri Kalpesh Vaghani. The addition made by the AO of Rs.
2,50,10,999/- is hence not justified. The same, is hence deleted."
12. In the result, appeal of Revenue for assessment year 2007-08 and 2008-09 are dismissed.
Order pronounced in the open Court on 04th , April, 2017 Sd/- Sd/-
(Rajpal Yadav) (Manish Borad)
Judicial Member Accountant Member
Dated 04/04/2017
True Copy
S. K. Sinha
Copy of the order forwarded to:
1. The Appellant
2. The Respondent
3. The CIT concerned
4. The CIT(A) concerned
5. The DR, ITAT, Ahmedabad
6. Guard File
BY ORDER
Asst. Registrar, ITAT, Ahmedabad