2008 (10) TMI 395 - AT - Income Tax

Addition on Unexplained investments - statement on oath during survey u/s 133A - HELD THAT - Though during the course of survey the director of the assessee-company admitted on oath that the unexplained investment on renovation was not included in the total income. The assessee explained that no renovation was actually carried on. Proof in this regard was also filed. An addition is sustainable provided expenditure has been incurred. Income is not computed on the basis of submissions of parties but on the basis of actual earning of income. The assessee has all along been claiming that it has not carried out any renovation, which requires any expenditure to be incurred. This fact should have been verified by the AO. Even after filing photographs in this regard the AO turned a blind eye to the ground reality and has sought to made addition merely on the basis of statement recorded during the course of survey. Section 133A do not compel an assessee to give statement on oath. If the survey officials have recorded the statement on oath, it is an excessive exercise of power. Except the statement of a director of the assessee-company, there is no other material to make the addition. However, when the assessee denies the fact of having made any investment and there is no other material except the statement of assessee that any investment has been made, no addition can be made u/s 69 without actually finding that investments are made. Since the basis of addition is statement of the assessee rather than actual investment having been made, we hold that provision of section 69 is not attracted in such a situation. We, therefore, delete the addition made u/s 69. In the result, the appeal is allowed.

Summary

Issues:
1. Addition of unexplained investment under section 69 of the Income-tax Act, 1961 based on a statement made during a survey operation.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi challenged the order of the Commissioner of Income-tax (Appeals) concerning the addition of Rs. 5,00,000 to the assessee company's income as unexplained investment under section 69 of the Income-tax Act, 1961. The issue arose from a survey conducted at the assessee's premises where the director claimed to have made an investment for renovation, which was later retracted. The Assessing Officer added the amount as unexplained investment, disregarding the retraction and lack of evidence of actual renovation. The Commissioner upheld the addition, emphasizing the director's initial statement on oath and dismissing claims of coercion during the survey.

The assessee contended that the statement made during the survey, even if on oath, lacked validity under section 133A, which only allows for information gathering, not sworn statements. The counsel argued that the Assessing Officer failed to verify the renovation claim and solely relied on the statement. The Tribunal noted that income should be based on actual earnings, not unverified statements. Referring to a decision by the Madras High Court, the Tribunal highlighted that statements under section 133A lack evidentiary value equivalent to those under section 132(4) and should not be the sole basis for additions.

The Tribunal emphasized that the power under section 133A does not mandate statements on oath and that the director's statement was the only basis for the addition. Without concrete evidence of actual investment, the Tribunal concluded that section 69 was not applicable in this scenario. Therefore, the Tribunal allowed the appeal, deleting the addition made under section 69 of the Act.

In conclusion, the Tribunal ruled in favor of the assessee, emphasizing the importance of verifying facts beyond statements made during surveys and the limited evidentiary value of statements under section 133A. The judgment highlighted the necessity of concrete evidence to support additions under section 69 of the Income-tax Act, 1961.