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Unraveling the Complexities of Bogus Purchase Additions

Assessee Triumphs in Bogus Purchase Case: Retracted Statement Insufficient for Additions

In a significant ruling, the Income Tax Appellate Tribunal (ITAT) allowed the appeals filed by M/s Yashasvi Fish Meal and Oil Company, Udupi, against the additions made by the Assessing Officer (AO) towards bogus purchases for various assessment years. The ITAT held that the AO cannot make additions solely based on a retracted statement recorded during a survey, without corroborative evidence or rejecting the books of accounts.

Case Name:

M/s. Yashaswi Fish Meal and Oil Company vs. DCIT

ITA No. 62 to 66/Bang/2023

ITAT Bangalore

Assessment Years 2012-13, 2013-14, 2014-15, 2015-16, 2017-18

Key takeaways:

An admission or statement recorded during a survey or search operation cannot be the sole basis for making additions to income.

Corroborative and independent evidence is required to support additions based on such statements.

If an assessee retracts a statement, the AO must consider the retraction and provide reasons for rejecting it.

The AO cannot make additions towards bogus purchases without rejecting the books of accounts or providing evidence that the transactions were not genuine.

The AO must consider and comment on retraction letters filed by the assessee within a reasonable time.

The assessee had retracted the statement within a reasonable time, and the AO failed to consider the retraction letter filed by the assessee.

The ITAT relied on various judicial precedents, including CIT vs. S. Khader Khan Son (300 ITR 157), CIT vs. Naresh Kumar Agarwal (2015) 53 taxmann.com 306 (AP), and the CBDT Circular F.No. 286/98/2013-IT(Inv.II) dated 18.12.2014, which emphasize the need for corroborative evidence and discourage obtaining admissions under coercion.

Issue:

The central legal question in this case is whether the Assessing Officer (AO) can make additions to the assessee’s income based solely on the statement recorded from one of the partners during the survey proceedings under Section 133A of the Income Tax Act, 1961, without any corroborative evidence or material.

Facts:

The case involves M/s Yashasvi Fish Meal and Oil Company, an assessee firm engaged in the business of fish meal and oil.

A survey under Section 133A of the Income Tax Act was conducted on 8.2.2018 at the premises of the assessee firm.

During the survey proceedings, a statement was recorded from Mr. Uday Kumar Salian, one of the partners, under Section 131(1A) of the Act.

In his statement, Mr. Salian admitted to inflating purchases and offered additional income for the assessment years 2012-13 to 2016-17 and 2017-18.

Based on this statement, the AO reopened the assessments under Section 147 of the Act and made additions to the assessee’s income towards bogus purchases for these assessment years.

The assessee retracted the statement vide a letter dated 14.2.2018, claiming that the statement was recorded incorrectly and that the additional income was offered only for the assessment year 2016-17.

The AO did not accept the retraction and confirmed the additions, relying solely on the statement recorded during the survey proceedings.

Arguments:

Assessee’s Arguments:

The assessee argued that the statement recorded during the survey proceedings cannot be the sole basis for making additions to income, as it lacks evidentiary value.

The assessee contended that the statement was retracted within a reasonable time, and no corroborative evidence was found during the survey or search proceedings to support the additions.

The assessee relied on various judicial precedents, including CIT vs. S. Khader Khan Son (300 ITR 157), CIT vs. Naresh Kumar Agarwal (2015) 53 taxmann.com 306 (AP), and the CBDT Circular F.No. 286/98/2013-IT(Inv.II) dated 18.12.2014, which emphasize the need for corroborative evidence and discourage obtaining admissions under coercion.

Revenue’s Arguments:

The Revenue argued that the statement recorded under Section 133A(3)(iii) of the Act has evidentiary value and can be relied upon for making additions.

The Revenue contended that the retraction filed by the assessee was not valid, as it was not supported by a sworn affidavit or convincing evidence.

The Revenue relied on various judicial precedents, including CIT vs. O. Abdul Razak 76 ITR 350 (Ker), CIT vs. Ravi Mathur (2017) ITR-OL 245 (Raj), and Surjeet Singh Chhabra vs. Union of India AIR 1997 SC 2560, to support the evidentiary value of statements recorded during survey proceedings.

Key Legal Precedents:

CIT vs. S. Khader Khan Son (300 ITR 157) and CIT vs. S. Khader Khan Son (352 ITR 480) (SC):

The Madras High Court and the Supreme Court held that statements recorded under Section 133A of the Income Tax Act lack evidentiary value, and materials or information found during survey proceedings cannot be the sole basis for making additions to income.

CIT vs. Naresh Kumar Agarwal (2015) 53 taxmann.com 306 (AP):

The Andhra Pradesh High Court held that statements recorded during search and seizure operations cannot be used to script the financial obituary of an assessee without corroborative evidence.

Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC):

The Supreme Court held that an admission is an important piece of evidence but cannot be conclusive, and the maker can show that it was incorrect.

Satinder Kumar (HUF) v. CIT (1977) 106 ITR 64 (SC):

The Supreme Court held that if an assessee contends that an admission was made based on a mistaken understanding or misconception of facts, such an admission cannot be relied upon without considering the assessee’s contention.

CIT vs. Khader Khan And Son [2012] 25 taxmann.com 413 (SC):

The Supreme Court held that statements recorded during survey proceedings do not have evidentiary value.

Surjeet Singh Chhabra v. Union of India AIR 1997 SC 2560:

The Supreme Court held that once it is shown that a statement was voluntary, the assessee cannot retract it.

Judgment:

The Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeals and deleted the additions made by the AO towards bogus purchases for the assessment years 2012-13 to 2015-16, 2017-18, and the addition of Rs. 1.5 crores on account of personal expenses of partners for the assessment year 2017-18.

The ITAT’s reasoning was as follows:

The ITAT observed that the AO had not rejected the books of accounts of the assessee and had accepted the profit declared by the assessee in the books of accounts.

The ITAT held that the AO cannot make additions towards bogus purchases solely based on the statement recorded from one of the partners during the survey proceedings, without any corroborative evidence or material.

The ITAT noted that the assessee had retracted the statement vide a letter dated 14.2.2018, within a reasonable time, claiming that the additional income was offered only for the assessment year 2016-17.

The ITAT held that once a statement recorded under Section 131 or 133A of the Act is retracted by the assessee, the AO cannot make additions towards bogus purchases without rejecting the books of accounts.

The ITAT observed that the AO had not brought any evidence on record to hold that the entire transactions were not genuine and had relied solely on the retracted statement.

The ITAT also relied on various other judicial precedents, including Vinod Solanki (2009) (233) ELT 157 (SC), K.T.M.S. Mohd. & Anr. vs. Union of India (1992) (197 ITR 196) (SC), and CIT vs. Vijay M. Mistry Construction Ltd. 355 ITR 498 (Guj), which emphasize the need for corroborative evidence and discourage reliance solely on retracted statements.

Based on the above reasoning, the ITAT allowed the assessee’s appeals and deleted the additions made by the AO towards bogus purchases and personal expenses of partners.

FAQ:

Q1. Can the AO make additions to income solely based on a statement recorded during a survey or search operation?

A1. No, the AO cannot make additions solely based on such a statement without corroborative and independent evidence.

Q2. What should the AO do if the assessee retracts a statement made during a survey or search operation?

A2. The AO must consider the retraction, provide reasons for rejecting it, and cannot rely solely on the retracted statement for making additions.

Q3. Can the AO make additions towards bogus purchases without rejecting the books of accounts?

A3. No, the AO cannot make additions towards bogus purchases without rejecting the books of accounts or providing evidence that the transactions were not genuine.

Q4. Is it necessary for the AO to consider retraction letters filed by the assessee?

A4. Yes, the AO must consider and comment on retraction letters filed by the assessee within a reasonable time.

Q5. What is the significance of the CBDT Circular F.No. 286/98/2013-IT(Inv.II) dated 18.12.2014 in this case?

A5. The CBDT Circular emphasizes the need for gathering evidence during search/survey operations and strictly directs officers to avoid obtaining admissions of undisclosed income under coercion or undue influence.

These appeals by assessee are directed against different orders of CIT(A)-2, Panaji for the assessment years 2012-13 to 2015-16 & 2017-18 all are common dated 9.12.2022. Most of the grounds in these appeals are common in nature, hence, these are clubbed together, heard together and disposed of by this common order for the sake of convenience.

2. Facts of the case in these assessment years are that the assessee has filed return of income and they are either subject to processing of return u/s 143(1) of the Income-tax Act,1961 ['the Act' for short] or assessment of the income u/s 143 of the Act as below:

2.1 There was a survey u/s 133A of the Act on 8.2.2018 in the case of assessee firm. Consequent to this, assessment was reopened u/s 147 of the Act after recording the reasons for reopening and notice u/s 148 of the Act was issued for these assessment years as follows:-

2.2 Finally, the assessment order for all these assessment years was framed u/s 143(3) r.w.s. 147 of the Act.

2.3 The first common ground in all these appeals is that the reassessment order is bad in law and void-ab-initio for want of requisite jurisdiction especially, the mandatory requirement to assume jurisdiction u/s 148 of the Act did not exist and have not been complied with and consequently, the re-assessment order requires to be quashed.

2.4 The ld. A.R. submitted that there was no material found in the course of survey to make any addition for the years under appeal and that the addition made by placing reliance on the statement given at the time of survey that the said statement has been retracted by the assessee within a reasonable time and explained to the authorities concerned that statement recorded was erroneous and no reliance could be placed upon the same for making reopening the assessment or making any addition. He relied on the judgement of Hon’ble Karnataka High Court in the case of CIT Vs. Dr. Thippa Setty reported in 322 ITR 525, wherein held that “the statement made by the assessee u/s 132(4) of the Act were retracted not once but twice and the department had accepted the retraction. No pungent and valid reasons had been assigned by the AO for reopening the assessment. There was no good and sufficient reason for re-opening of the assessment u/s 148 of the Act against the assessee.

3. The ld. D.R. submitted that there was a survey u/s 133A of the Act in case of assessee on 8.2.2018 and a statement u/s 131(1A) of the Act and during the survey proceedings u/s 133A of the Act was recorded on 8.2.2018 by department from one Mr. Uday Kumar Salian, S/o Late Gopal T. Salian, partner of M/s. Yashasvi Fish Meal and Oil Company and in that statement he categorically confirmed answer to question No.12 that there was bogus purchase entered by the assessee in these assessment years. Hence, the said material has been used for re-opening the assessment. Further, he submitted that sworn statement of Mr. Uday Kumar Salian was also recorded u/s 131 of the Act on 1.8.2018. Then also he confirmed entering of bogus purchase in the books of accounts and agreed to declare the adhoc lumpsum additional income. He relied on the order of the lower authorities.

4. We have heard the rival submissions and perused the materials available on record. There was survey u/s 133A of the Act in the case of assessee on 8.2.2018. Statement was recorded from Mr. Uday Kumar Salian on 8.2.2018 u/s 131(1A) of the Act during the course of survey proceedings u/s 133A of the Act. He has confirmed the entering of bogus purchase in these assessment years as “Malpe Raised”, which represents the bogus purchase. The said partner Mr. Uday Kumar Salian has retracted this statement vide his letter dated 14.2.2018 written to the Additional Director of Income tax, Pandeshwara, Mangalore and retracted the earlier statement given by him on 8.2.2018. However, the department has not considered the retracted statement and issued a notice u/s 148 of the Act in all these cases as stated above. Now the contention of the ld. A.R. is that there is no sufficient material to issue a notice u/s 148 of the Act to reopen these assessments.

4.1 In this case, the notice u/s 148 of the Act has been issued in all these assessment years on the basis of material collected during the course of survey proceedings u/s 133A of the Act conducted on 8.2.2018. During the course of survey proceedings, a statement was recorded from Uday Kumar Salian, one of the partners of the firm. In his statement recorded u/s 131 of the Act, he confirmed the bogus purchases in these assessment years. There also he offered additional income in these assessment years. That provoked the assessing officer to re-open the assessment. At the time of issuing of notice, there is no necessity of conclusive proof to suggest the escapement of income. On the other hand, the ld. AO shall have prima facie material to hold that his income has escaped from the assessment. In the instant case, there is a prima facie material available in the hands of the assessee in the form of statement recorded u/s 131 of the Act coupled with certain other documents to suggest the income escaped from assessment. With a view to examine these materials, the reassessment proceedings were initiated and which are came to the knowledge of the ld. AO subsequent to the original assessment, the doctrine of “change of opinion” cannot act as an embargo for exercise of power vested u/s 147 of the Act. The section 147 of the Act authorizes and permits the AO to assess or re-assess income chargeable to tax, if he has reason to believe that income from any assessment year has escaped assessment.

4.2 The scope and effect of section 147 as substituted with effect from April 1, 1989, and also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied : firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either material facts necessary for his assessment of that year. Both these conditions were condition precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first conditions suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso.

4.3 So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued.

4.4 Same view is fortified by the judgement of Hon’ble Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. reported in 291 ITR 500 (SC).

4.5 The ld. A.R. relied on the judgement of Hon’ble Karnataka High Court in the case of Dr. Thippa Setty (322 ITR 525) (Karn.) In that case the Hon’ble High Court held that statement recorded u/s 132(4) of the Act which was retracted cannot be relied upon to reopen the assessment u/s 148 of the Act when the department has accepted the retraction. However, in the present case, the department never accepted the retraction statement filed by the assessee on 14.2.2018. Being so, at the stage of reopening of assessment by the AO, it is not necessary to have conclusive opinion of escapement of income. On the other hand, he must have prima facie of the opinion that income has escaped from the assessment in these assessment years. To that extent, in our opinion, at the time of reopening of assessment, the AO has reason to believe that income has escaped from assessment on the basis of the sworn statement recorded from the partner namely Mr. Uday Kumar Salian in view of the bogus purchase said to be recorded by the assessee in its books of accounts. Being so, we do not find any merit in this ground No.2 of the assessee raised before us. This ground of assessee is rejected.

5. The next commonground in these appeals is with regard to addition towards bogus purchase on the basis of sworn statement recorded from Mr. Uday Kumar Salian in his sworn statement cited above in all these assessment years.

5.1 During the course of survey proceedings, a statement was recorded from Mr. Uday Kumar Salian, one of the partner of the assessee firm. In the statement recorded u/s 131 of the Act dated 1.8.2018 he has admitted additional income of Rs.45,02,01,134/- for the assessment year 2012-13 to 2018-19. Similarly, there was a statement u/s 133A of the Act dated 8.2.2018 which is as below:

5.2 However, for the assessment years 2012-13, 2013-14, 2014-15, 2015-16 & 2017-18 did not include additional income offered in these assessment years, which was admitted during the course of survey proceedings and also in the statement recorded u/s 133A &133 of the Act. The AO thus made additions in these assessment years as per the income offered in statement recorded u/s 131 & 133A of the Act as above. Against this, assessee is in appeal before ld. CIT(A) who has confirmed the order of the AO. Against this assessee is in appeal before us.

6. The ld. A.R. submitted that there was a minor reduction in profit percentage from financial year 2014-15 to 2015-16, this was raised by the officials during the survey proceedings. The same was due to various reasons affecting internally and externally. However, to purchase peace and to cover up the reduction in profit percentage and also to cover up discrepancies, commissions and omissions, if any from the assessment year 2012-13 to 2016-17, Mr. Uday Kumar Salian had agreed to declare a sum of Rs.5,50,00,000 for the year 2016-17. Accordingly additional income of Rs.5,50,00,000 was offered to tax and revised Return of Income for the assessment year 2016-17 incorporating the additional income was filed on 31.03.2018 vide acknowledgement no. 598177411310318. This was also brought to the notice of Assistant Director of Income Tax, Mangalore. On verification of the statement, it is understood that the additional income was quantified and recorded as Rs.5,50,00,000 per annum from financial year 2011-12 to 2016-17. No such admission was made, further no evidence has been found either during the survey proceedings or during the search proceeding at the premises of the partners. It appears that the quantification is based on the mis- interpretation of the surrender and not corroborated by any evidence. It may be noted that our turnover for financial year 2011-12 to 2016-17 is as under:

6.1 The ld. A.R. submitted that even assuming but not admitting that there is inflation in purchases as noted in the statement, the inflated purchases cannot be equal in all the years, much less when there is substantial variation in the turnover. The additional income declared for the assessment year 2016-17 was only to purchase peace and avoid litigation. No evidence from the same was detected either during the search or survey proceedings and the quantification appears to be mere estimation without any basis. The assessee has already paid the tax due on the surrendered additional income and further fastening with additional tax liability for the additional income as recorded in, the statement which was quantified based on wrong interpretation of the surrender made would cause genuine hardships and also be against the principles of justice. He submitted that assessee has received notices u/s 148 of the Act for the assessment years 2012-13 to 2016-17 and it is presumed that the same is for the additional income recorded in the statement as submitted earlier, as the same is due to wrong interpretation of the surrender made by Mr. Udaya kumar Salian and no income chargeable to tax has been escaped assessment. In view of the same the ld. A.R. requested to drop the proceedings initiated u/s 147 of the Act.

6.2 The ld. A.R. submitted that assessee has been declaring substantial income and net profit for various years, which are as under:

He submitted that the net profit is after claiming depreciation, remuneration, and interest on capital of partners. As could be noticed there from the income declared by the assessee is substantially high as compared to other comparable cases. If at all the income is assessed as estimated in the statement., the same will result in assessment of unreasonably higher income defeating the principle of assessing the real income. During the survey proceedings, a print out containing details of purchases was found. The ld. A.R. submitted that in line of business of the assessee, the purchases are made from boat owners, these boat owners do not issue any bills for their sales and hence vouchers are raised by the assessee for the purchases. A sheet containing date wise breakup of purchases made against bills and against vouchers raised by the assessee was found. The purchases made against vouchers raised by the assessee was inferred as inflation of purchases and an additional income of Rs.4,52,01,134 was estimated. Hence, he submitted that the purchases made are actual and are used for the purpose of the business. The dealing in fish is an unorganised sector and in this line of business it is obvious that the purchases are made against the self-made vouchers and same cannot be inferred as inflation.

6.3 He further submitted that during the survey proceedings when asked about the investment in SEZ unit it was stated that the approximate investment in the SEZ unit in the year 2017 was Rs.5,00,00,000. However, on inspection of the statement, it is observed that an additional amount of Rs.5,00,00',000 is treated as investment in Mangalore SEZ unit during the Financial year 2016-17 met out of alleged inflated purchase. In this regard, he submitted that Memorandum of Understanding was entered into between Mangalore SEZ ltd and our firm on 29.03.2017. As per the said agreement he submitted that assessee is entitled to setup its unit in the said land only after getting approval 'from the Development Commissioner of Mangalore SEZ as per the norms of SEZ Act 2005 and Rules 2006. As per the terms of said agreement, a sum of Rs.3,82,50,000 being 50% of the one-time non-refundable premium amount was paid and the said amount is also duly reflected in the books of accounts of the firm. As per the terms of MOU, a unit can be set up only after obtaining necessary approval and the approval from Development Commissioner Mangalore SEZ was obtained only on 15-06-2017. In view of the same, the ld. A.R. submitted that no investment/ development activity can be carried out in the SEZ unit without approval of development officer which is obtained only in Financial year 2017-18 (15.06.2017). Moreover, MOU was entered on 29.03.2017 i.e 2 days prior to the financial year end. It would be irrational to estimate the investment of Rs. 5,00,00,000 in only two days. Hence the estimation of Rs.5,00,00,000 for FY 2016-17 towards investment in SEZ unit is not correct and without any basis.

6.4 The ld. A.R. further submitted that during the survey proceedings, details about personal expenditure of the partner was asked and in response thereto it was stated that the approximate personal expenditure of all the partners put together would be around Rs.1-1.5 crores. It may be noted that personal expenditure of the partner is met by the firm. On verification of the statement, the additional income of Rs.1,00,00,000 for the FY 2016-17 and Rs.1,50,00,000 for FY 2017-18 was estimated. In this regard, he submitted that the estimation is not correct and is not based on any material. No materials/evidences were detected either during the survey or search proceedings to prove that the personal expenditure of the partners are charged to the firm. The partners capital balances is in proportion to their profit sharing ratio over the years and all the partners withdraw equal amounts from the firm. In this scenario it is very unlikely that the personal expenditure of the partners which are not common is booked in the books of accounts of the firm. In light of the above, he submitted that the estimation of additional income of Rs.1,00,00,000 for financial year 2016-17 and 1,50,00,000 for financial year 2017-18 is not correct and appears to be misinterpretation of the answer given.

6.5 The ld. A.R. submitted that the assessee’s partner Mr. Uday Kumar Salian was under the bonafide belief that the statements were recorded according to his answer and did not think that it was misinterpreted. The procedure of statement recording took long hours and various print outs were taken thereafter. Mr. Udayakumar Salian and other partners were asked to sign the print outs taken. They had no opportunity to verify the contents of the printouts taken. A request to furnish copy was made with the officials before vacating the premises and the assessee was informed that copies would be furnished at the Income Tax office.

Subsequently, at the time of assessee’s visit to Income Tax office, once again signatures were taken on the print outs taken by the officials. The assessee’s request to furnish copies of the print outs signed by assessee at the time of survey and thereafter at the Income Tax office was not fulfilled. As the copies of the statements were not furnished earlier, assessee was under the belief that Rs.5,50,00,000 was declared as additional income and the tax on the same was also paid and the issues were all settled. The ld. A.R. stated that the assessee was surprised on receipt of Notices dated 01.03.2019 issued u/s 148. Thus, once again a request was made to furnish copies of the statements recorded. Though the due date to furnish Return of Income in response to Notices u/s 148 was nearing, copies of the statements were not furnished. In the absence of the same Returns of Income were filed on 01.04.2019 declaring the income returned originally. In view of the above, the ld. A.R. submitted that the additional income as agreed during the survey proceedings has been duly offered to tax in the revised return of income and there is no additional income to be assessed in the hands of assessee’s firm.

6.6 Thus, the ld. A.R. submitted that the summary of income declared by assessee over the years is as follows:

As could be noticed there from the Net profit (before deducting interest on capital remuneration and depreciation) declared by the assessee is substantially high as compared to other comparable Cases. If at all the income is assessed as estimated in the statement, the same will result in assessment of unreasonably higher income defeating the principle of assessing the real income. Further, the sales are found to be genuine by the Revenue and thus the corresponding purchases are bound to be genuine when all the evidences related to purchases are produced and no defect is pointed out by the revenue.

6.7 Further, the ld. A.R. submitted that the allegation that partners as per their mutual understanding have agreed to take Rs.50,00,000/- in cash per annum in addition to the remuneration, interest on capital and profit share earned during the year and hence Rs.5.50 crores is estimated as additional income for each year for the F.Ys 2011-12 to 2016-17 does not corroborate with the factual position. Details of partners for the financial years 2011-12 to 2016-17 is as under:

6.8 The ld. A.R. submitted that as could be noticed there were 12 partners up to 28.04.2016. As per Deed of Retirement dated 28.04.2016 Mohammed Mujeeb Sikhander retired from firm and thus the firm was left with only 11 partners thereafter. In view of the above the estimation of Rs. 5,50,00,000 per annum as withdrawn by the 11 partners was factually incorrect. Such bald and vague statements without any corroboration is neither sustainable nor is reasonable. He submitted that in the line of business of the assessee firm, the purchases are made from boat owners, these boat owners do not issue any bills for their sales and hence purchase vouchers are raised by the assessee firm. A sheet containing date wise breakup of purchases made against bills and against vouchers raised by us was found. The purchases made against vouchers raised by us was inferred as inflation of purchases and an additional income of Rs.4,52,01,134 was estimated. He submitted that the purchases made are actual and are used for the purpose of the business.

6.9 The ld. A.R. submitted that the dealing in fish is an unorganized sector and in this line of business it is obvious that the purchases are made

against the self-made vouchers and same cannot be inferred as inflation. The assessee has already produced all the purchase bills/selfvouchers along with evidences related to their transportation. Neither any defect in the books of accounts nor the vouchers and evidences produced have been pointed out by learned assessing officer and hence the proposed addition is totally uncalled for and would be merely based on suspicion.

6.10 The ld. A.R. further submitted that during the survey proceedings when asked about the investment in building of SEZ unit, it was stated that the approximate investment for construction of building of SEZ unit was Rs.5,00,00,000. However, on inspection of the statement, it was observed that an additional amount of Rs.5,00,00,000 is treated as investment in Mangalore SEZ unit during the Financial year 2016-17 met out of alleged inflated purchase.

In this regard, he submitted that Memorandum of Understanding was entered into between Mangalore SEZ and assessee firm only on 29.03.2017. He submitted that as per the said agreement assessee firm is entitled to setup unit in the said land only after getting approval from the Development Commissioner of Mangalore SEZ as per the norms of SEZ act 2005 and rules 2006. As per the terms of said agreement, a sum of Rs.3,82,50,000 being 50%, the one-time non-refundable premium amount was paid and the said amount is also duly reflected in the books of accounts of the firm. As submitted earlier as per the terms of MOU, a unit can be set up only after obtaining necessary approval.

The approval from Development Commissioner Mangalore SEZ was obtained only on 15-06-2017. In view of the same, he submitted that no investment/ development activity can be carried out in the SEZ unit without approval development officer which is obtained only in financial year 2017-18 (15.06.2017). Moreover, MOU was entered on 29.03.2017 i.e 2 days prior to the financial year end. Even one has to assume that investment is made it would be irrational to estimate the investment of Rs. 5,00,00,000 in only two days. Hence the estimation of Rs.5,00,00,000 for FY 2016-17 towards investment in SEZ unit is not correct and without any basis.

6.11 Further, the ld. A.R submitted that during the survey proceedings, details about personal expenditure of the partner was asked and in response thereto it was stated that the approximate personal expenditure of all the partners put together would be around 1-1.5 crores. The personal expenditure of the partner is met out of their income and no part of it is charged in the books of account of the firm. On verification of statement the additional income of Rs.1,00,00,000 for the FY 2016-17 and 1,50,00,000 for FY2017-18 was estimated. In this regard, he submitted that the estimation is not correct and is not based on any material. No materials/evidences were detected either during the survey or search proceedings to prove that the personal expenditure of the partners are charged to the firm. The partners capital balances is in proportion to their profit sharing ratio over the years and all the partners withdraw equal amounts from the firm. In this scenario it is very unlikely that the personal expenditure of the partners which are not common is booked in the books of accounts of the firm. In light of the above, the estimation of additional income of Rs.1,00,00,000 for financial year 2016-17 and 1,50,00,000 for financial year 2017-18 is not correct and appears to be misinterpretation of the answer given.

6.12 Mr. Uday Kumar Salian was under the bonafide belief that the statements were recorded according to his answers and did not think that it was misinterpreted. The procedure of statement recording took long hours and various print outs were taken thereafter. Late nights Mr. Udaykumar Salian and other partners were coerced to sign the print outs taken. They had no opportunity to verify the contents of the printouts taken. Copies of the statements were also not furnished. Thus, in view of the above assessee had not offered any additional income as alleged in Show Cause Notice dated 27.09.2019.

6.13 The ld. A.R. further submitted that two of the partners were searched and also enquiries of partners were made during the course of survey. In none of the partners cases, including those who were searched or examined, any additional personal expense or any unaccounted assets were not found by the Revenue.

Further either during the survey proceedings or search proceedings at the premises of partners no assets much less corresponding to the additional income as found in the statement recorded is detected. Meanwhile, the assessee requested that if the revenue is relying on any other statements/ evidences copy of the same may be furnished to the assessee.

6.14 Without prejudice the ld. A.R. submitted that the re-opening is not as per law. Reason recorded is merely based on factually incorrect statement. The ld. A.R. stated that the sanctioning authority also did not apply his mind for the sanction. He requested to furnish copies of the sanction letter to the assessee and allowed to file objections against the re-opening and he drew our attention to the decision of the Supreme Court in GKN Driveshaft's case in view of passing speaking order against the objections on re-opening of assessment. The admission made during the survey proceedings is brought to the notice of the revenue before issue of the Notice u/s 148 where in it is clearly stated that additional income was admitted only for assessment year 2016-17 and which is duly offered to tax. Thus, there was no reason to believe that income had escaped assessed for assessment year 2012-13 to 2015-16.

6.15 Without prejudice to the above and also to the right of the assessee to file further objections to the re-opening of the assessment, the ld. A.R. submitted that as the reasons recorded for re-opening of assessment proceedings u/s 147 is only based on statement recorded u/s 131 of the Act, in this connection he submitted that the evidentiary value of the statement recorded has been discussed by various judicial authorities and it is held that the statement recorded cannot be a sole evidence for assessment much less to re-open the assessment unless it is corroborated by documentary evidences.

6.16 The ld. A.R. further submitted that the assessment proceedings for AY 2013-14 was completed. As could be noticed there from the AO has duly verified all the vouchers for relevant assessment year. However, few vouchers were not legible and proposed to add Rs. 8,50,000 for the relevant assessment year. Assessee did not wish to litigate on this and agreed for the same. He submitted that if there was any inflation in purchases same would have been detected by the AO during the assessment proceedings, that too when the bills/vouchers were verified by him. The assessment for AY 2015-16 was completed accepting the returned income after due verification of the vouchers and bills. Hence, the proposed addition would result to change of opinion.

6.17 The ld. A.R. drew our attention to the instructions issued by Central Board of Direct Taxes in F.No.286/2/2003-IT(Inv), dated 23.03.2003 wherein the following is stated:

"Instances have come to the notice of t he Board where assesses have claimed t hat t hey have been forced to confess undisclosed income du ring the course of the search an d seizure and survey operation. Such confession, if not based credible evidence, are taken/retracted by the concerned assesses while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the income tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income."

6.18 The ld. A.R. submitted that in the instant case no documentary evidence was found either during the survey proceedings at the premises of the assesse or during the search proceedings at the premises of the partners. In such a scenario the statement recorded would not serve any evidence as opined by the CBDT.

6.19 The ld. A.R. further submitted that in Attar Singh Gurmukh Singh V. ITO (1991) 191 ITR 667/59 Taxman 11 (SC) and CWT V. Rohtas Industries Ltd (1968) 67 ITR 283 (Pat), the Hon’ble Supreme Court held that the statement can be retracted if assessee proves that, the statement was not given in a proper frame of mind or was given under duress and threat or under a mistaken belief of law. It is also held that, the revenue authorities are required to corroborate the admission in the statement with independent evidence. As evident from the reason recorded for re-opening of assessment is only based on statement no other corroborative evidence to substantiate the additional income quantified was detected.

6.20 The ld. A.R. submitted that Hon’ble Apex Court in Pullangode Rubber Produce Co., Ltd V. State of Kerala (1973) 91 ITR 18 (SC) held that the admission is an extremely important piece of evidence, has held that, it cannot be said to be conclusive and the maker can show that it was incorrect. The statement is factually incorrect for the detailed reasons stated above and in the instant case sole reliance is placed on such factually incorrect statement.

6.21 The ld. A.R. further submitted that in Satinder Kumar (HUF) V. CIT (1977) 106 ITR 64 (SC), it was held that an admission made by an assesse constitutes a relevant piece of evidence, but if the assesse contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts, such an admission cannot be relied upon without first considering the aforesaid contention. The ratio is squarely applicable on the instant case as the statement itself is recorded on a mistaken understanding.

6.22 The ld. A.R. drew our attention to Hon’ble Supreme Court’s in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC), wherein Hon’ble Apex court held that a statement recorded during survey proceedings do not have any evidentiary value. Thus, the sole evidence relied upon issue of show cause notice do not have any evidentiary value in the eyes of law. For the sake of convenience, the above submissions are summarised below:

• Survey proceedings had taken place at the premises of the assessee on 08.02.2018. Copies of documents impounded and statements were not furnished even after repealed arid persistent requests.

• Copies of statements were furnished only on 19.07.2019, i.e after 17 months from the date of survey.

• The additional income admitted for one year was misinterpreted as for 6 years.

• Additional income admitted during survey is immediately offered to tax by revising the Return of Income for AY 2016-17 on 31.03.2018.

• Mis-interpretation of surrender made was brought to the notice of revenue immediately after receipt of the copies of statement recorded.

• Turnover has varied over the years and the alleged inflation of purchases has no correlation with the year wise purchases / turnover.

• Assessee has been declaring substantial income over the years and is much higher than the profits declared in the similar nature of trade

• It is normal practice in this line of business, payments have to be made to fishermen in cash and bearer cheques.

• No evidences about alleged inflation was found either during the course of survey or during the course of search at the residence of the partners.

• Details provided about investments made in SEZ unit and about personal expenditure of the partners treated as additional income, without any basis and evidences.

• Without prejudice reassessment proceedings is void an bad in law.

• Without prejudice to the above there was no reason to believe that assessee's income had escaped assessment.

• Without prejudice to the above, the reasons recorded for reopening of assessment proceedings u/s 147 is only based on factually incorrect statement recorded u/s 131 which is not corroborated by any evidences.

Thus, such factually incorrect statement cannot form a belief of income escaping assessment much less cannot be a sole evidence for assessment.

6.23 Further, he drew our attention to the retracted statement filed before the authorities on 14.2.2018, which reads as follows:

6.24 The ld. A.R. alleged that the partners as per their mutual understanding have agreed to take Rs.50,00,000/- in cash per annum in addition to the remuneration, interest on capital and profit share earned during the year and hence Rs.5.50 crores is estimated as additional income for each year for the F.Ys 2011-12 to 2016-17 does not corroborate with the factual position. Details of partners for the financial years 2011-12 to 2016-17 is asunder:

6.25 As could be noticed there from there were 12 partners upto 28.04.2016. As per Deed of Retirement dated 28.04.2016 Mohammed Mujeeb Sikhander retired from firm and thus the firm was left with only 11 partners thereafter. In view of the above the ld. A.R. submitted that estimation of Rs. 5,50,00,000 per annum as withdrawn by the 11 partners was factually incorrect. Such bald and vague statements without any corroboration is neither sustainable nor is reasonable.

6.26 The extract of answer to Q. No. 14 of statement of Mr. Udayakumar Salian is reproduced hereunder:

"Ans . Sir, I want to state that the mutual understanding of withdrawing/ taking Rs.50,00,000/ - in cash from the firm in addition to the remuneration, interest on capital share of profit was made in the year 2011- 12. From that year onwards, i.e. from F.Y. 2011-12, we the 11 partners are withdrawing an amount totaling to Rs. 5,50,00,000/ - per annum from M/ s Yashaswi Fish Meal & Oil by introducing bogus purchase bills.

Now in order to rectify the mistakes in the books of accounts of our partnership concern, I am availing this opportunity and voluntarily offering a sum of Rs. 33,00,00,000/ - spread over the Financial Years 2011-12 to 2016-17. The break up of the same is produced below for ready reference.

I have already stated in my answer to the earlier question that in this year also i.e. the F. Y. 2017-18, as on date, we have made the bogus purchases bills to the tune of Rs.4,28,47,574/ - and offering the same as additional income in the F.Y. 2017-18."

6.27 The ld. A.R. submitted that as could be noticed there from it is recorded as if Mr. Udayakumar has deposed as "we the 11 partners are withdrawing”. Mr. Udayakumar Salian who is well aware of the fact that there were 12 partners up to 28.04.2016 would not. have stated that 11 partners are withdrawing. This proves that, the statement recorded was prepared as per the convenience of Department at the time of survey based on the facts prevalent (11 partners) on the date of survey.

6.28 He further alleged that the expenses are inflated and a sum of Rs. 50,00,000 each is shared by the partners per annum. As could be noticed from the financial statements the profit sharing ratio of the partner varied from financial year 2014-15 onwards and their capital balances is in proportion to their profit sharing ratio. In such case it is very unlikely and beyond human probabilities that the partners will share the amount of profits earned from inflating the expenditure equally as alleged. Thus, the above facts shows that the statement is factually incorrect and not recorded as deposed by the person deposing the statement but recorded as per the convenience of the officials recording the statement. The partner deposing the statement is well aware of the facts and such factual error would not have been arisen if the statement is recorded as deposed. Mr. Udayakumar Salian has filed a letter dated 14.02.2018 immediately after the search/ survey stating the facts deposed by him during the survey proceedings. As could be noticed there from, he had agreed to offer additional income of Rs. 5,50,00,000 as additional income for assessment year 2016-17 and not for each financial year from financial year 2011-12 onwards. The firm is formed on 08.02.2007 the statement is recorded stating that the inflation of expenses is being made only from financial year 2011-12. After the completion of the survey proceedings the assessment could have been reopened from assessment year 2012-13 onwards. Thus, the officer recording the statement being aware of the limitation for reopening of assessment recorded the statement determining additional income for the years that could be reopened as per the provisions of the Act.

6.29 Further the ld. A.R. submitted that the Q.No. 21 reads as under:

"21. I am once again reminding you that this statement is being recorded on oath and the consequences of giving a false statement under oath has already been explained to you. Please confirm."

6.30 But the answer to the question reads as under:

Ans. I understand that this statement is being recorded under Oath and I have also understood the consequences of giving a false statement under Oath. I have offered additional incomes under different heads and different AYs in my replies to the earlier questions. In addition, I would also like to offer additional income amounting to Rs.2.50 Crore (Rs.1.50 Crore for FY 2016-17 and Rs.1.00 Crore for FY 2017 18) on account of booking of various personal expenditures of the partners in the books of the firm. I would also like to offer additional income of Rs.5 Crore on account of bogus purchases debited in the books for the FY 2016-17 which has been utilized for the investment made in our new plant coming up in the SEZ, and this additional income is over and above what is already shown in the books of the firm. To sum up the total additional income offered for taxation in the hands of the firm for the different AYs is as below -

6.31 The ld. A.R. submitted that, the question is to confirm that the person deposing it is aware of the consequences of giving false statement on oath. But the Page 31 of 85 ITA Nos.62 to 66/Bang/2023 M/s. Yashaswi Fish Meal and Oil Company, Udupi answer is recorded as if the person deposing it is agreeing to declare additional income. Further, he submitted that regarding the issue of investment in SEZ unit and personal expenditure is concerned you may appreciate that there was no whisper on these issues in the entire statement and it suddenly crops up in question No. 21 without reference to any material found during the survey. Thus, it is clear that the statement was prepared by the Department officials and not the one that is deposed by the partner of the assessee Mr. Udayakumar Salian. He drew our attention to the decision of Honourable Andhra Pradesh High Court in the case of CIT Vs Naresh Kumar Agarwal (2015) 53 taxman.com 306 (AP), wherein it was held as under: "16. The circumstances under which a statement is recorded from an assessee, in the course of search and seizure, are not difficult to imagine. He is virtually put under pressure and is denied of access to external advice or opportunity to think independently. A battalion of officers, who hardly feel any limits on their power, pounce upon the assessee, as though he is a hardcore criminal. The nature of steps, taken during the course of search are sometimes frightening. Locks are broken, seats of sofas are mercilessly cut and opened. Every possible item is forcibly dissected. Even the pillows are not spared and their acts are backed by the powers of an investigating officer under Section 94 of Cr.P.0 by operation of sub-section (13) of Section 132 of the Act. The objective may be genuine, and the exercise may be legal. However, the freedom of a citizen that transcends, even the Constitution cannot be treated as non-existent. 17. It is not without reason that the Parliament insisted that the recording of statement must be in relation to the seized and recovered material, which is in the form of documents, cash, gold etc. It is, obviously to know the source thereof, on the spot. Beyond that, it is not a limited licence, to an authoritq, to script the financial obituary of an assessee."

6.32 Thus he submitted that the findings of Hon’ble Andhra Pradesh High Court is squarely applicable on this issue as the Department officials have proceeded with the recording statement on the issue for which not even a single piece of evidence was found during survey or search proceedings. ITA Nos.62 to 66/Bang/2023 M/s. Yashaswi Fish Meal and Oil Company, Udupi Page 32 of 85 6.33 All these proves beyond doubt that the statement relied upon by the AO is not a statement as deposed by the person making such statement hut recorded by the officer recording the statement as per the convenience of the revenue to put unnecessary tax burden on the assessee. No corroborative evidence: 6.34 There is no corroborative evidence that proves that there was an arrangement to withdraw the money by the partner by inflating the expenditure or that proves that the expenses have been inflated. 6.35 The ld. A.R. submitted that our turnover for financial year 2011-12 to 2016-17 is as under:

6.36 Even assuming but not admitting that there is inflation in purchases as noted in the statement, the inflated purchases cannot be equal in all the year, much less when there is substantial variation in the turnover. The additional income declared for the assessment year 2016-17 was only to co-operate with the department and avoid litigation. No evidence from the same was detected either during the search or survey proceedings and the quantification appears to be mere estimation without any basis.

6.37 Summary of income declared by the assessee over the years is under:

Note: Net profit before deducting interest on capital remuneration and depreciation

6.38 He submitted that as could be noticed there from the Net profit (before deducting interest on capital remuneration and depreciation) declared by the assessee is substantially high as compared to other comparable cases. If at all the income is assessed as estimated in the statement, the same will result in assessment of unreasonably higher income defeating the principle of assessing the real income. Further, the sales are found to be genuine by the Revenue and thus the corresponding purchases are bound to be genuine when all the evidences related to purchases are produced and no defect is pointed out by the revenue.

6.39 He submitted that though repeated requests for copies of statements were made before the Assistant Director of Income Tax, Unit-2, Mangalore to furnish copies of statements recorded the same were not furnished. Consequent to the receipt of Notices u/s 148 one more round of repeated requests to furnish copies of statements recorded were made before the assessing officer as under: 1. Letter dated 22.03.2019 2. Letter dated 16.05.2019 by Authorised representative 3. Email dated 26.06.2019 by Authorised representative.

6.40 After repeated and persistent requests, the copies of statements of Mr. Udayakumar Salian purportedly recorded u/s 131 on 08.02.2018, 12.02.2018 and 01.08.2018 were furnished only on 19.07.2019. On verification of the same, it was seen that the statements dated 08.02.2018 and 12.02.2018 were recorded admitting the whopping additional income of Rs. 45,02,01,134. The discrepancies in the statement recorded were immediately brought to the notice of the Assessing Officer vide letter dated 22.07.2019. The learned AO held as under:

"7.20 In the instant case the statement is deemed to be retracted as the assessee has not filed any formal affidavit or letter retracting the declaration as being recorded under threat or coercion or mistaken facts. It is only vide letter dated 22.07.2019 the assessee is making a claim that the declaration made was not recorded as it was meant by him"

6.41 However, the learned AO failed to appreciate that the letter dated 14.02.2018 was filed with the Assistant Director of Income Tax, Unit-2, Mangalore i.e within a week of search/survey proceedings. As could be seen from the letter the admission made is clearly explained. However, the learned AO held that the retraction was made only on 22.07.2019. Though the letter was filed confirming the declaration since the statement typed by the department officials to their convenience was in accordance with what was disposed in the letter dated 14.02.2018 is required to be treated as retracted. Thus, the assessing officer's contention that the statement was not retracted immediately is not correct.

6.42 The learned AO relied on decision of Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC) and CIT Vs. Durga Prasad More 82 ITR 540 (SC), wherein it was held that matter should be considered in the human probabilities and surrounding circumstances. But learned AO failed to appreciate the following factors before arriving at the conclusion of inflation:

a. There were 12 partners upto 28.04.2016 but the allegation of AO is that 11 partners have withdrawn 50 Lakhs each from financial year 2011-12 which prima facie proves that the allegation is bald and without any substance.

b. The profit sharing ratio of partners is not equal and it is beyond human probabilities that the amount earned out of alleged inflation of expenses is shared equally among the partners.

c. The learned AO failed to appreciate the surrounding circumstances that no corresponding asset is found either during search or survey to substantiate the alleged inflation of expenses.

d. The learned AO failed to appreciate that the alleged inflation is equal to 12% of the total sales of Financial year 2011-12 and the resultant GP is nearly 30% which is absurd in the industry of the appellant. Thus, it is submitted that the circumstantial evidences too prove that the alleged inflation is without any basis and beyond human probabilities.

6.43 The learned AO has relied on the decision of Kerala High Court in the case of CIT Vs. O. Abdul Razak 76 ITR 350 (Ker) and held that the statement recorded during search will serve as an evidence against the assessee. It may be noted that the Honourable Andhra Pradesh High Court in the case of CIT Vs Naresh Kumar Agarwal (2015) 53 taxman.com 306 (AP) held as under:

"13. In Abdul Rajaks case (supra) , the Kerala High Court took the view that a statement recorded under sub-section (4) of Section 132 of the Act can constitute the basis for passing a block assessment order, notwithstanding the retraction from it, by the assessee. The discussion in this behalf reads as under: "8. It cannot be doubted for a moment that the burden of proving the undisclosed income is squarely on the shoulders of the Department. Acquisition of properties by the assessee are proved with the documents seized in search. Since understatement of consideration in documents is the usual practice the officer questioned the assessee on payments made over and above the amounts stated in the documents. The assessee gave sworn statement honestly disclosing the actual amounts paid. The question. now to be considered is whether the sworn statement constitutes evidence of undisclosed income arid if so whether it is evidence collected by the Department. In our view, the burden of proof is discharged by the Department when they persuaded the assessee to state details of undisclosed income, which the assessee disclosed in his sworn statement, on being confronted with the title deeds seized in search."

14. With great respect to the learned Judges of Kerala High Court, who rendered the judgment, we express our inability to subscribe to that view. To the extent, Their Lordships have taken note of the fact that the burden of proving undisclosed income squarely rested on the Department, there is hardly any doubt. However, the manner in which the burden can be said to have been discharged, as mentioned in the underlined portion, runs contrary to the very basic tenets of law of evidence. Though the fact that the assessee therein retracted from the sworn statement, no discussion was undertaken about it.

15. The question of discharge of burden, arises in respect of a fact, to be proved. If the contents of the statement recorded from an assessee are to be proved, that very statement cannot be a proof, by itself. Such a course would bring about hypellage logic, which is illustrated by a well known example.

Q: who is a doctor?

Ans: The one who administers Medicine.

Q: What is Medicine?

Ans: The one that is administered by a doctor. Such discussion does not lead one, any further. The discharge of burden must be in respect of the plea taken by the Department and the burden can be discharged only through material, which is over and above what was stated in their case. The statement assumes the character of proven fact, only when it is not denied by the assessee.

18. At the cost of repetition, we observe that if the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act."

6.44 The findings of Hon’ble Andhra Pradesh High Court is squarely applicable to the instant case for the following reasons:

a. The contents of the statements are proved to be incorrect.

b. The statement is retracted and the learned AO has relied on the statement for additions. No material is brought on record to substantiate the case of the Department.

6.45 The learned AO relied on decision in the case of CIT Vs. Ravi Mathur (2017) ITR-OL 245 (Raj) and held that the statement was not retracted immediately and same was made only on 22.07.2019. But the learned AO failed to appreciate that the appellant had duly filed a letter dated 14.02.2018 i.e. within a week reconfirming the admission made. The fact that the statement was not recorded as deposed and same was recorded as per whims and fancy of the officers came to the notice only when the purported statement was furnished to the assessee after 18 months though repeated requests were made before the investigation wing as well as assessing officer. The statement was furnished by the assessee on 19.07.2019 (Friday) and the second retraction was filed on 22.07.2019 (Monday) i.e. on the next working day. In view of the above it cannot be said that the appellant had not filed retraction immediately while appellant had filed retraction twice i.e. within a week of the search/survey and second retraction was filed on the next working day. Further the retraction filed provides for documentary evidence which proves that the contents of statement are factually incorrect and was not recorded as deposed but a prejudiced statement prepared statement by Department officials. Thus, following the judgement of Hon’ble Rajasthan High Court the assessment order is liable to be quashed which is entirely based on the factually incorrect statement.

6.46 The Hon’ble Apex Court in Pullangode Rubber Produce Co., Ltd V. State of Kerala (1973) 91 ITR 18 (SC) held that the admission is an extremely important piece of evidence, has held that, it cannot be said to be conclusive and the maker can show that it was incorrect. The statement is factually incorrect for the detailed reasons stated above and in the instant case sole reliance is placed on such factually incorrect statement.

6.47 The ld. A.R. further relied on the judgement in the case of Satinder Kumar (HUF) V. CIT (1977) 106 ITR 64 (SC), wherein it was held that an admission made by an assessee constitutes a relevant piece of evidence, but if the assessee contends that in making the admission he had proceeded on a mistaken understanding or on misconception of facts or on untrue facts, such an admission cannot be relied upon without first considering the aforesaid contention. The ratio is squarely applicable on the instant case as the statement itself contains incorrect facts.

6.48 He further drew our attention to Hon’ble Supreme Court's decision in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC), wherein Hon’ble Apex court held that a statement recorded during survey proceedings do not have any evidentiary value. Thus, the sole evidence relied upon issue of show cause notice do not have any evidentiary value in the eyes of law.

6.49 The learned AO has relied upon the decision of Hon’ble Apex Court in the case of Surjeet Singh Chhabra Vs. Union of India AIR 1997 SC 2560 wherein it is held that once it is shown that the statement was voluntary then, the assessee cannot retract. In the instant case, it is proved beyond doubt that the statement is not voluntary as the same contains factual inaccuracy stated above and is prepared at the convenience of Department.

6.50 The ld. A.R. further submitted that the learned AO has relied upon the decision of Hon’ble Supreme Court in the case of Awadh Kishore Dass Vs. Ram Gopal AIR 1979 SC 861 wherein it was held that unless the statement is proved wrong they are efficacious proof of facts admitted. But in the instant case as stated above it is proved that the statement relied upon by the AO is wrong and thus same cannot be considered as efficacious proof of facts admitted. Thus, he submitted that the reliance of AO on the said judgement do not substantiate the case of the department.

6.51 He further submitted that the learned AO has relied on the decision in the case of B. Kishore Kumar Vs. DCIT (2014) 52 taxmann.com 449 (Madras), but he failed to appreciate that the basic distinguishable fact is that in the said case assessee had agreed about the additional income but in the instant case no such admission is made by the appellant in the instant case.

6.52 In view of the above, the ld. A.R. submitted that none of the cases relied upon by the learned AO substantiate the case of revenue but in fact the same are in favour of the assessee under the facts of the instant case.

6.53 Hence, the ld. A.R. brought to our notice the gist of the submissions made is as under:

• Reopening is merely based on a statement which is not recorded as deposed by the person making such statement. Thus, the reopening is bad in law.

• Reassessment proceedings is bad in law since the speaking order is not passed against the objection filed in view of the Apex Court decision in GKN Driveshaft

• The purported statement relied upon for reopening is factually incorrect

• There is no corroborative evidence to substantiate the allegations

• The purported statement is duly retracted twice and same cannot be relied upon

• Judicial pronouncements relied upon by the AO is clearly distinguished on the facts of the appellant

• Various judicial pronouncements including that of the Apex Court are in favour of the appellant

• Statement during survey proceedings is not binding as per the decision of Apex Court in the case of CIT Vs Khader Khan And Son [2012] 25 taxmann.com 413 (SC) 6.54 The ld. A.R. further relied on the following judgements:

a) Hon’ble Supreme Court in the case of CIT Vs. S. Khadar Khan & Sons 352 ITR 480 (SC)

b) Judgement of AP High Court in the case of CIT Vs. Naresh Kumar Aggrawal (369 ITR 171)

c) Order of the Tribunal Cochin bench in the case of ITO Vs. V. Thomas Enterprises (ITA No.442/Coch/2018 dated 7.2.2019 for the AY 2014-15).

6.55 In view of the above, the ld. A.R. prayed before us that the additions may be deleted appreciating the facts of the case. In the unlikely event of our proceedings taking any adverse view, then the ld. A.R. requested that an opportunity of personal hearing may be granted.

7. On the other hand, the ld. D.R. submitted that the assessee filed the reply on 4.11.2019 to the show cause notice issued by the AO vide letter dated 27.9.2019 wherein the ld. A.R. objected to the addition on various grounds whose gist is mentioned in the assessment order, which is reproduced as under:

• Survey proceedings had taken place at the premises of the appellant on 08.02.2018. Copies of documents impounded and statements were not furnished even after repeated and persistent requests

• Copies of statements were furnished only on 19.07.2019, i.e. after 17 months from the date of survey.

• The additional income admitted for one year was mis-interpreted as for 6 years.

• Additional income admitted during survey is immediately offered to tax by revising the Return of Income for A.Y. 2016-17 on 31.03.2018.

• Mis-interpretation of surrender made was brought to your notice immediately after receipt of the copies of statement recorded.

• Turnover has varied over the years and the alleged inflation of purchases has no correlation with the year wise purchases / turnover.

• Appellant has been declaring substantial income over the years and is much higher than the profits declared in the similar nature of trade

• It is normal practice in this line of business, payments have to be made to fishermen in cash and bearer cheques.

• No evidences about alleged inflation was found either during the course of survey or during the course of search at the residence of the partners.

• Details provided about investments made in SEZ unit and about personal expenditure of the partners treated as additional income, without any basis and evidences.'