M/S.Roma Builders, Cochin vs Assessee

M/s. Roma Builders, Vs. The Income Tax Officer, Ward- No.32/1642, 2nd Floor, 2(3), Range-2, Kochi. Syed Mohd. Complex, N.H. Byepass, Palarivattom, Kochi-25. [PAN: AAKFR2151F] (Assessee-Appellant) (Revenue-Respondent)

Assessee by Shri C.B.M. Warrier, CA Revenue by Shri K.K. John, Sr. DR

Date of hearing 04/02/2015 Date of pronouncement 12/02/2015

ORDER

Per CHANDRA POOJARI, Accountant Member:

This appeal by the assessee is directed against the order dated

17/03/2014 passed by the CIT(A)-II, Kochi for the assessment year 2009-10.

2. The assessee has raised the ground with regard to addition of

Rs.1,41,00,000/- to the total income of the assessee.

3. The facts of the case are that the Assessing officer made the addition of

Rs.1,43,00,000/- on the basis of the Profit and Loss Account found during the 2 I.T.A. No.363/Coch/2014

course of survey. In this, the purchases account showed expenditure of

Rs.1,81,56,303, gross profit of Rs.2,85,49,335/- and net profit of

Rs.1,83,22,005/-. The assessee was not able to explain the sources of

investment and various works undertaken by it and since there was a deficiency

of Rs.1.10 crores in explaining the various works undertaken by, it was offered

as income of the assessee from undisclosed sources. Further, the assessee was

not able to explain the source of the payment of Rs.40 lakhs for the advance

given for land at Chottanikara and development of Panangad, and hence the

same was also offered as unaccounted income by the assessee. Hence the total

addition was made by the Assessing officer at Rs.1,43,00,000/- as under:

1. Profit calculated @12% on 5.41 crores : Rs. 65,00,000/-

2. Amount brought into business from : Rs. 78,00,000/-

undisclosed income Total income disclosed during the year : Rs.1,43,00,000/-

4. On appeal, the CIT(A) observed that the documents found during the

course of survey was proper profit and loss account giving details of sales and

expenditure under various heads in detail. According to the CIT(A), it specifically

mentioned figure of sales, purchase of material, gross profit and net profit.

Thus, the CIT(A) observed that the submissions and explanations made by the

assessee were only afterthought and not supported by documentary evidences.

In addition to profit and loss account found during the course of survey, the

CIT(A) relied on the statement of the Managing Partner, Shri Soni E. Thomas for 3 I.T.A. No.363/Coch/2014

sustaining the addition. According to the CIT(A), the explanation was not

supported by any documentary proof and it was only an afterthought.

Accordingly, the CIT(A) rejected the claim of the assessee and sustained the

addition of Rs.1,43,00,000/-. Against this, the assessee is in appeal before us.

5. The Ld. AR submitted that the addition made by the Assessing officer and

sustained by the CIT(A) was only on the basis of statement of the Managing

Partner Shri Soni E. Thomas and there was no supporting material to sustain the

addition. Further, the Ld. AR submitted that the statement was taken from Shri

Soni E. Thomas by threatening with prosecution and other penal proceedings

and therefore such statement which was obtained on coercion, threatening or

undue influence cannot be relied upon for the purpose of assessment so as to

sustain the addition. Even otherwise, he submitted that the copies of statement

recorded from Shri Soni E. Thomas was not furnished to the assessee at the time

of assessment. It was only received by the assessee from the Departmental

Representative during the proceedings before the Tribunal on 12-01-2015.

According to him, the statement of Shri Soni E. Thomas was prepared by the

officers after the survey and brought to the assessee's office and signature was

obtained and even though the signature was obtained, the assessee was

completely in the dark about the content and the tax implication in those

documents. The Ld. AR relied on the CBDT Circular F.No.286/2/2003-IT(Inv.II)

dated 10/03/2003, stating that confession obtained from the assessee without 4 I.T.A. No.363/Coch/2014

the support of seized materials is unlawful and it is not an evidence as per the

decision of the Supreme Court in the case of CIT vs. S. Khader Khan Son (2013)

(352 ITR 480).

5.1 Finally, the Ld. AR submitted that the income of the assessee for the

assessment year 2008-09 was estimated at 12% of the total expenditure by

following the contract completion method and the same method is also to be

followed for estimating the income for the assessment year 2009-10.

5.2. The Ld. AR submitted that the total investment for the assessment year

2009-10 worked out to Rs.3,46,58,118/- and the income for the assessment year

2009-10 worked out to Rs.41,58,974/-. Thus, the addition of Rs.65 lakhs

towards income from sales may be replaced with the addition of Rs.41,58,974/-

for the assessment year 2009-10.

6. On the other hand, the Ld. DR submitted that the Assessing officer has

clearly considered the material gathered during the course of survey, alongwith

the books of account and the argument of the assessee' Counsel placed before

the Bench is entirely an afterthought and without any credible evidence. He

relied on the order of the lower authorities.

5 I.T.A. No.363/Coch/2014

7. We have heard both the parties and perused the record. The grievance of

the assessee before us is that no reliance can be placed on the statement made

by Shri Soni E. Thomas during the course of survey u/s. 133A of the I.T. Act

conducted on 15/09/2009 for the reason that it was not prepared by him. It was

prepared by the Income Tax Officer and brought to the assessee's Office by one

of the officers of the Survey Department who persuaded Shri Soni E. Thomas to

sign the statement since he was threatened that without which steps of

prosecution and other action will be taken. He was not given any opportunity to

consult any person before signing the statement. He signed the statement

without knowing fully what is contained in the statement. It was alleged that no

copy of the statement was given to him and he was not allowed to consult any

person after the survey also. He received the copy of the statement as

Annexure-I only along with the assessment order wherein an amount of

Rs.78,00,000/- was considered as investment brought into business from

unexplained sources The assessee submitted that there was no such investment

from undisclosed sources. According to the assessee, the profit and loss account

and balance sheet were prepared from the account found at the time of survey

and in these books of accounts, there was no undisclosed income and

unexplained investment.

7.1 It is undisputed fact that u/s. 133A of the I.T. Act, the Revenue

authorities are entitled to record the statement of any person who may be useful 6 I.T.A. No.363/Coch/2014

or relevant to the proceedings under the I.T. Act. The power to record a

statement during survey proceedings is found in section 133A(3) of the I.T. Act .

The relevant portion of the Act reads as follows:

"Power of survey.__.....(3) an income tax authority acting under this section may, __

(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act."

The requirement of recording a statement on oath is found in section 132 of the

Act, i.e., during search and seizure proceeding and such a requirement is not

found in section 133A of the Act. However, a statement made u/s. 133A of the

Act is having its evidentiary value and it could be relied upon, though it is not a

sole conclusive evidence. In this case, the lower authorities while making the

addition of Rs.1,43,00,000/- did not solely relied upon the statement made by

Shri Soni E. Thomas but also on the profit and loss account and balance sheet

found during the course of survey wherein it was clearly mentioned by the

Assessing Officer in the assessment order that there was profit and loss account

and balance sheet found during the course of survey. The profit and loss

account showed the income at Rs.1,83,22,005/-. The source of investment was

shown in the balance sheet as loan by pledging gold of assessee's wife, sister-in-

law and others, mortgaging land belonging to his family and advance received

from prospective buyers. When the question was put to the assessee to explain

the sources, the assessee offered Rs.1.43 crores as additional income which

consisted of two portions:

7 I.T.A. No.363/Coch/2014

i) Profit calculated @12% on Rs.5.41 crores : Rs.65,00,000/-

ii)Amount brought into business from undisclosed income : Rs.78,00,000/-

Total : Rs.1,43,00,000

7.2. It is evident from the statement of Shri Soni E. Thomas vide answer to

Question No. 11 wherein he stated that there is a deficiency of Rs.1.10 crores for

explaining the source for the various works undertaken by the assessee and he is

ready to offer that amount as income of the firm. Further, to Question No. 12,

he offered another sum of Rs. 40 lakhs to explain the source for the advance

given for purchasing land at Chottanikara and development of Panangad. Thus

he offered Rs.1.50 crores for the two assessment years, namely, 2008-09 and

2009-10. This was again confirmed by a declaration given by him in which he

stated that the amount disclosed for the assessment year 2008-09 was Rs.6.42

lakhs, enhancing the already returned income to Rs.15.72 lakhs making it 12%

of the total receipts of the year and he disclosed the total income at Rs.1.43

crores for the assessment year 2009-10 as per Annexure I to assessment order.

Thus, the addition was made not only on the basis of the statement of the

assessee but also on the basis of the material gathered in the course of survey in

the form of profit and loss account and balance sheet.

7.3 Though the survey took place on 15/09/2009 and the assessment was

completed on 30/12/2011, there was no retraction on the part of the assessee.

Before the Assessing officer, the assessee is very evasive and not co-operated 8 I.T.A. No.363/Coch/2014

with the Assessing officer at the time of assessment. The assessee filed

retraction letter before the CIT(A) only on 10th July, 2013 for the reason best

known to the assessee. If there is any coercion, threatening or undue influence

from the side of the Department, the assessee should have remedied at his end

but the assessee has not taken any remedial action on this count. On the other

hand, the assessee was not able to give explanation in respect of the entries in

the Profit and Loss account and balance sheet so as to explain the source of

investment and gave a statement that the assessee is ready to offer Rs.150

lakhs as income more than the income computed in the books of account and

requested the Department not to take penalty proceedings against him or the

firm. The assessee stated before us that as per CBDT Circular cited supra, a

confession statement cannot be collected by the Department from the assessee

during the course of search or survey so as to make addition. In this case, it is

not a confession statement collected by the Department, rather it is an evidence

in the form of profit and loss account and balance sheet on the basis of which

the assessee offered additional income when it failed to explain the source of

investment found in these documents.

7.4 The case law relied upon by the assessee in the case of CIT vs. S. Khader

Khan Son (2013) (352 ITR 480) (SC) in which the SLP was dismissed is arising

from the decision of the Madras High Court in the case of CIT vs. S. Khader Khan

Son (2008) (300 ITR 157) which proceeded on the fact that the authorities did 9 I.T.A. No.363/Coch/2014

not accept the retraction of the statement made on oath by the deponent during

the survey proceedings u/s. 133A of the Act on the ground that the startement

was made on oath. Besides the sole evidence against the assessee in that case

was that the statement was made on oath during the survey proceedings which

is not the case in the present case. In this case, profit and loss account and

balance sheet were found during the course of survey and the assessee was not

able to explain the source of investment shown in the balance sheet and the

same was considered as unexplained investment and undisclosed income from

project. Therefore, the case relied upon by the assessee is completely

distinguishable and not applicable to the facts of the present case. Further, the

allegation of the assessee that the statement was brought to the assessee by

one of the officers of the survey Department who forced him to sign the

statement is without basis. As discussed earlier, this allegation was made by the

assessee after a long gap, i.e., between 15/09/2009 and 10th July, 2013, i.e., 3

years 10 months. It is nothing but an afterthought and his sole intention was to

evade tax. Being so, the letter written by the assessee to the CIT(A) on

10thJuly, 2013 cannot be relied upon as the assessee was not able to

demonstrate that the Department has exerted any coercion, threatening or

undue influence on the assessee to give the statement so as to declare

additional income. When the survey Department has found the profit and loss

account and balance sheet at the premises of the assessee, onus is on the

assessee to show that the income shown in the profit and loss account is not the 10 I.T.A. No.363/Coch/2014

actual income of the assessee and the investment shown in the balance sheet

reflected the true and correct source and there is no undisclosed income or

unexplained investment. It is to be noted that the profit and loss account and

the balance sheet found during the survey proceedings, and even after 3 years,

10 months, did not retract the contents therein. On the other hand, the assessee

stated that the income of the assessee was determined on the basis of Audited

profit and loss account and balance sheet. There is no evidence to suggest that

the entries found in the balance sheet found during the course of survey was

explained. Being so, the retraction made by the assessee on 10th July, 2013

before the CIT(A) is an after thought and the statement made during the course

of survey accompanied with profit and loss account and balance sheet is to be

considered for the purpose of assessment wherein the assessee has voluntarily

offered additional income. In view of this, since there is failure on the part of

the assessee to lead evidence before the authorities to explain the documents

found during the course of survey and reconcile the same with Audited profit and

loss account and balance sheet, and also before the Tribunal to show that the

profit and loss account and balance sheet found during the course of survey is

reflecting the true position of the assessee, it should be considered as evidence

in support of the statement made by the assessee in the course of survey and

the addition is to be sustained. Accordingly, we are inclined to confirm the order

of the CIT(A) on this issue.

11 I.T.A. No.363/Coch/2014

7.4 At this point, we make it clear that with regard to question whether the

assessee can retract his statement given during the course of survey, the

obvious answer is "yes", but that should be at the earliest opportunity when the

statement was recorded or atleast within the reasonable time. It is an important

piece of evidence which simply cannot be brushed aside unless and until

otherwise it is proved. It is open to the assessee to show that the earlier

statement was incorrect. In the present case, the assessee was not able to

show that the earlier statement made by the assessee was incorrect. Hence, the

statement made by the assessee is to be considered as relevant material and

considering the totality of facts particularly in the light of long delay of 3 years 10

months taken by the assessee in retracting them, the retraction is to be rejected.

Thus, having regard to the facts and circumstances of the case, the order of the

CIT(A) is upheld.

8. In the result, the appeal filed by the assessee is dismissed.

Pronounced in the open court on 12-02-2015

sd/- sd/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Kochi Dated: 12th February, 2015 GJ Copy to:

1. M/s. Roma Builders, No.32/1642, 2nd Floor, Syed Mohd. Complex, N.H. Byepass, Palarivattom, Kochi-25.

2. The Income Tax Officer, Ward-2(3), Range-2, Kochi.

12 I.T.A. No.363/Coch/2014

3. The Commissioner of Income-tax(Appeals)-II, Kochi,

4. The Commissioner of Income-tax, Kochi.

5. D.R., I.T.A.T., Cochin Bench, Cochin.

6. Guard File.

By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin