Principal Commissioner of Income-tax, Surat v. Nageshwar Enterprises
[Citation -2020-LL-0203-32]

Citation 2020-LL-0203-32
Appellant Name Principal Commissioner of Income-tax, Surat
Respondent Name Nageshwar Enterprises
Court HIGH COURT OF GUJARAT AT AHMEDABAD
Relevant Act Income-tax
Date of Order 03/02/2020
Assessment Year 2007-08
Judgment View Judgment
Keyword Tags unaccounted investment • unaccounted purchases • documentary evidence • undisclosed profit • search proceedings • notice issued • primary onus
Bot Summary: In the course of the search, one of the partners of the firm, namely Shri Rajesh Gandhi, in his statement recorded on oath, admitted before the DRI as regards the undervaluation Page 2 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER of the metallic yarn and jari/kasab to the extent of 60279. In his statement the partner of the appellant firm stated that they used to make payment to these Japanese and Chinese sellers after lifting of goods from the port. The only evidence with the DRI as well as AO is the admission by the partner of the appellant firm in his Statement recorded on oath u/s 108 of the Customs Act. The confessional statement has to be brought in aid of other materials on record. In the case on hand two authorities have concurrently recorded a finding of fact that, except the statement recorded under Section 108 of the Customs Act there is no other evidence. The ratio of this decision is that there is a statement recorded in the course of the search proceedings and such statement is retracted and the burden is on the maker of the statement to establish that the admission in his statement was wrong and that such statement was recorded under duress and coercion. In the case on hand, as noted above, there is no material except the confessional statement of the assessee recorded under Section 108 of the Customs Act.


C/TAXAP/806/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 806 of 2019 PRINCIPAL COMMISSIONER INCOME TAX SURAT Versus NAGESHWAR ENTERPRISES Appearance: MRS KALPANAK RAVAL(1046) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 03/02/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. This Tax Appeal under Section 260A of Income Tax Act, 1961 (for short, 'the Act, 1961') is at instance of Revenue and is directed against order passed by Income Tax Appellate Tribunal, Surat, dated 03.05.2019, in ITA No. 147/AHD/2011/SRT for A.Y. 2007-2008. 2. Revenue has proposed following three questions of law for consideration of this Court : (a) Whether on facts and in circumstances of case and in law, Hon'ble ITAT was justified in deleting addition made by A.O. on account of undisclosed profit and unaccounted investment in undervalued goods despite Page 1 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER assessee himself having admitted before DRI in his statement about his under invoicing of imports, though later retracted, when Hon'ble Supreme Court in Surjeet Singh Chhabra Vs Union of India [1997 (89) ELT 646(SC)] held that confession, though retracted, is admission and binding ? (b) Whether on facts and in circumstances of case and in law, Hon'ble ITAT was justified in not considering that statement of admission by assessee was given by assessee before DRI based on specific documentary evidences found during search on M/s Nageshwar Enterprises on 22.09.2007 and therefore primary onus was on assessee to establish its case? (c) Whether on facts and in circumstances of case and in law, Hon'ble ITAT was correct in stating that no addition can be made on action of third party when AO has already stated details etc of investigation by DDIT(Inv.), Unit-II among other details? 3. It appears from materials on record that on basis of information received from Deputy Director of Income Tax (Investigation) Unit (II) Surat, search of residential premises of assessee was undertaken by Directorate of Revenue Intelligence (DRI), Surat. In course of search, one of partners of firm, namely Shri Rajesh Gandhi, in his statement recorded on oath, admitted before DRI as regards undervaluation Page 2 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER of metallic yarn and jari/kasab to extent of 60279.75 kgs., out of which 30405.00 kgs. pertains to year under consideration. He admitted that difference of undervalued amount was paid in cash to seller firm at China and Japan. In such circumstances, case was selected for scrutiny. 4. It appears that A.O. rejected all submissions canvassed on behalf of assessee and ultimately made addition of Rs.32,57,962/- on account of peak unaccounted investment and addition of RS.35,13,067/- on account of GP on unaccounted purchases and finalized assessment under Section 143(3) of Act. 5. assessee, being dissatisfied with assessment order, preferred appeal before CIT(A). CIT(A) allowed appeal of assessee vide order dated 28th October 2010. CIT(A), while allowing appeal of assessee, observed as under: 7.1 I have carefully gone through reasons mentioned by A.O. in assessment order as well as lengthy submissions and arguments submitted on behalf of appellant. I have Page 3 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER also considered various judicial pronouncements cited on behalf of appellant. I find that in assessment order A.O. has not mentioned about any independent finding for making this addition. He has simply relied upon information and evidences received from customs department regarding raid conducted by officers of DRI. In my view after receiving information from customs department A.O. must have further carried out inquiries to find out truth. But it appears that no such exercise was done by A.O. and there are no independent findings of A0. for reaching to conclusion that appellant firm in fact made any such unaccounted payments for goods imported from JAPAN and CHINA. So far as findings of DRI are concerned, which are mentioned by A.O. in assessment order, I find that DRI has made up case mainly on basis of admission statement of partner of appellant firm. This is main evidence relied upon by Customs Authorities as well as by A.O. Except for this admission statement, there is no finding either of DRI or of A.O. to suggest that so called differential amount was paid by appellant firm. There is no mention of any other evidence or finding in this respect either by DRI or by A.O. learned A.R. Of appellant also pointed out various unique circumstances of this case as under: Page 4 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER Japanese/Chinese sellers were professionally managed companies and there is no possibility of their agreeing for any under invoicing and taking differential value in cash. In his statement partner of appellant firm stated that they used to make payment to these Japanese and Chinese sellers after lifting of goods from port. This is completely unbelievable. No exporter will agree for such risky proposition. No exporter will take such risk of delivering goods in advance without taking full payment. Not even single person or representative of Japanese/Chinese Sellers has been identified either by partner or by DRI or by A.O. It is unbelievable that seller who is sitting in JAPAN/CHINA will deliver goods to purchaser of Surat without receiving full payment and will depute person who has never been identified by anybody to collect differential cash from buyer at Surat and to remit same to seller. I have carefully considered these arguments and I am Inclined to agree with Page 5 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER learned A.R. of appellant that had there been any such unaccounted payments to Japanese/Chinese Sellers then some evidences must have been found out by DRI or AO. They could not Identify even one representative who used to collect cash for Japanese/Chinese Suppliers. Had there been any such payment then at least some evidence must have been found out. Even no comparable cases or instances are mentioned to show that prices declared by appellant were less than fair market prices. only evidence with DRI as well as AO is admission by partner of appellant firm in his Statement recorded on oath u/s 108 of Customs Act. It is argued on behalf of appellant that it is now almost settled law that no addition can be made merely on basis of admission statement until and unless there are corroborative evidences or findings. In support of this argument appellant has placed reliance on number of case laws as mentioned hereinabove 6. Thus, CIT(A) took view that only evidence with DRI as well as A.O. was in form of confessional statement made by Shri Gandhi on oath recorded under Section 108 of Customs Act. Page 6 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER 7. Revenue, being dissatisfied with order passed by CIT(A), preferred appeal before Appellate Tribunal. Appellate Tribunal, while dismissing appeal preferred by assessee and affirming order passed by CIT(A), observed as under : 7. We have heard rival submissions and perused relevant material on record. We find that addition made on show- cause notice issued by DRI. However, said statement was retracted by partner of assessee-firm. That AO has based his findings influenced solely on DRI. There is no evidence whatsoever brought on record which could suggests that assessee has actually done under invoicing by making import in purchases. Therefore, in our considered opinion, in absence of any documentary evidence, no addition can be made on action of third party i.e. DRI. Further, CESTAT, West Zone Bench Mumbai, vide its final order N0. A/85365-85368/2019 dated 25.02.2019 has also dropped proceeding initiated against assessee-firm. Therefore, we do not find any merits in revenue appeal. Accordingly, same is dismissed. Page 7 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER 8. Being dissatisfied with order passed by Tribunal, Revenue is here before this Court with present appeal. 9. Co-ordinate Bench of this Court, in case of Kailashben Manharlal Chokshi vs. Commissioner of Income- tax, 328 ITR 411, took view that merely on basis of admission, assessee cannot be subjected to additions. Co-ordinate Bench proceeded to observe that unless and until some corroborative evidence is found in support of such admission, department would be justified in making additions. In other words proposition of law as laid down is that department cannot start with confessional statement. confessional statement has to be brought in aid of other materials on record. In case on hand two authorities have concurrently recorded finding of fact that, except statement recorded under Section 108 of Customs Act there is no other evidence. 10. Mrs.Raval, learned standing counsel appearing for Revenue seeks to rely upon decision of Rajasthan High Court in case of Page 8 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER Bannalal Jat Constructions (P.) Ltd. vs. Assistant Commissioner of Income Tax reported in [2019] 106 taxmann.com 128 (SC). 11. ratio of this decision is that there is statement recorded in course of search proceedings and such statement is retracted and burden is on maker of statement to establish that admission in his statement was wrong and that such statement was recorded under duress and coercion. It is further brought to our notice that decision of Rajasthan High Court was carried in appeal by assessee before Supreme Court and Supreme Court has dismissed SLP. There need not be any debate with proposition of law as laid down in decision of Rajasthan High Court, but close look at decision of Rajasthan High Court would indicate that confessional statement was not only piece of evidence. There was no material to corroborate statement made by assessee in form of confession. In case on hand, as noted above, there is no material except confessional statement of assessee recorded under Section 108 of Customs Act. Page 9 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 C/TAXAP/806/2019 ORDER 12. In view of concurrent findings recorded by both, CIT(A) as well as Appellate Tribunal, we are of view that we should not disturb finding of facts. None of questions as proposed by Revenue could be termed as substantial question of law. 13. In result, this Tax Appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) KUMAR ALOK Page 10 of 10 Downloaded on : Fri Feb 07 10:12:26 IST 2020 Principal Commissioner of Income-tax, Surat v. Nageshwar Enterprise
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