2012 (11) TMI 1167 - HC - Income Tax

Additions based on statement during Survey Proceedings - Assessee is a manufacturer and trader of umbrellas. During survey, certain documents were found which were impounded. A statement of the Karta of assessee was recorded in which he had admitted that there were certain discrepancies in the impounded documents and he had surrendered for taxation some amount to cover possible anomaly. During the assessment proceedings, he had refuted the surrendered on the ground that there was no undisclosed income. The AO on the basis of statement found that the assessee was liable for further addition of the said amount and assessed the respondent accordingly. - HELD THAT - Merely on the basis of statement recorded during the survey u/s 133A, such addition could not have been made. To make such addition, some corroborating evidence against undisclosed income was required, which could not be found by the AO. Decision in the case of COMMISSIONER OF INCOME-TAX VERSUS DHINGRA METAL WORKS 2010 (10) TMI 29 - DELHI HIGH COURT , relied upon.

Summary

Issues:
- Addition of Rs. 40 lakhs as additional income based on statement recorded during survey under Section 133A of the Income Tax Act.
- Burden of proof on the assessee to show the statement was incorrect.
- Requirement of corroborative evidence for making additions.
- Legal validity of the statement recorded during the survey.
- Applicability of various High Court judgments on the evidentiary value of statements recorded under Section 133A.

Analysis:
1. The appeal challenged an order confirming the addition of Rs. 40 lakhs as additional income based solely on a statement recorded during a survey under Section 133A of the Income Tax Act. The authorities found the Assessing Officer erred in making the addition without any corroborative material.

2. The appellant argued that the burden to prove the statement incorrect was on the assessee. Both authorities were criticized for treating the statement as incorrect without supporting documentary evidence. The appeal raised substantial questions of law regarding the validity of the addition.

3. The High Court reviewed the records and orders of the CIT (A) and the Income Tax Appellate Tribunal. The facts revealed discrepancies in the impounded documents during the survey, leading to the surrender of Rs. 40 lakhs by the assessee.

4. The CIT (A) emphasized that the Assessing Officer's addition was solely based on the statement recorded during the survey, which lacked evidentiary value as per previous High Court judgments. The Assessing Officer failed to consider the surrendered amount in the return, indicating an improper assessment.

5. The High Court noted that the addition lacked corroborative evidence against undisclosed income, which was necessary for such assessments. The CIT (A) and the Tribunal rightly deleted the addition, following established legal principles.

6. The appellant's counsel highlighted the absence of findings questioning the credibility of the statement recorded under Section 133A. Citing relevant case laws, the High Court affirmed the decisions of the lower authorities, emphasizing the legal inadequacy of additions based solely on such statements.

7. Considering the settled law and precedents from various High Courts, the High Court concluded that no substantial question of law existed in the appeal. The order passed by the CIT (A) and the Tribunal was upheld, and the appeal was dismissed with no costs awarded.