2014 (5) TMI 1111 - AT - Income Tax

Addition made on the basis of statement made during the course of survey u/s.133A - receipt of money in cash - Held that - As evident from the observation of the ld.CIT(A) that the AO had not confronted the assessee regarding receipt of money in cash and merely assumed that the assessee has received cash from each and every purchaser. Undisputedly, the AO has not made enquiry from the other purchasers and no material has been placed on record that money was received in cash except that statement was made by one of the Directors of the company during the course of survey. The ld.CIT(A) has held that the retraction letter of the assessee is not valid without giving any reason. We also find that the ld.CIT(A) has not taken into account the decision of CIT vs. Khader Khan Son reported at (2007 (7) TMI 182 - MADRAS HIGH COURT) and the appeal filed by the Revenue before the Hon ble Apex Court 2013 (6) TMI 305 - SUPREME COURT . Therefore, ld.CIT(A) was not justified in confirming the action of the AO and moreover the Revenue has not placed any independent material on record to substantiate the addition. Under these facts, the addition to the extent of ₹ 2,95,000/- only (Rs.4,75,000 ₹ 1,80,000) is hereby sustained and the AO is directed to delete the balance amount of ₹ 29,75,000/-. - Decided partly in favour of assessee.

Summary

Issues:
1. Assessment order contrary to facts and prejudicial to assessee.
2. Additions made contrary to law and based on erroneous understanding.
3. Confirmation of addition of Rs. 32,70,000 as undisclosed income.

Analysis:

Issue 1: Assessment order contrary to facts and prejudicial to assessee
The appeal challenged the order of the Ld. Commissioner of Income Tax(Appeals) dated 30/04/2008 for Assessment Year 2005-06. The survey under section 133A revealed discrepancies in the sale of shops by the assessee. The authorized officer recorded statements indicating discrepancies in the receipts and declarations made by the company. The Assessing Officer (AO) made additions totaling Rs. 36,99,64,000, which were partially sustained by the CIT(A). The main contention was the discrepancy in the receipt of Rs. 32,70,000 from the sale of shops, which the assessee disputed as undisclosed income.

Issue 2: Additions made contrary to law and based on erroneous understanding
The appeal raised concerns about the additions made by the AO without substantial evidence. The assessee argued that the statement recorded during the survey under section 133A had no evidentiary value. The assessee relied on legal precedents to support the contention that mere statements during surveys cannot be the sole basis for additions. The absence of independent material to substantiate the addition was highlighted, questioning the validity of the AO's conclusions based on limited statements.

Issue 3: Confirmation of addition of Rs. 32,70,000 as undisclosed income
The key issue revolved around the confirmation of the addition of Rs. 32,70,000 as undisclosed income by the CIT(A). The assessee contended that the AO's reliance on statements without corroborative evidence was unjustified. The CIT(A) upheld the addition based on limited statements without thorough investigation into all purchasers and without substantial independent material. The appellate tribunal partially allowed the appeal, sustaining only Rs. 2,95,000 of the addition and directing the deletion of the remaining balance. The decision emphasized the importance of independent evidence and proper substantiation for additions in income tax assessments.

In conclusion, the judgment highlighted the necessity of substantial evidence and independent material to support additions in income tax assessments. It underscored the limitations of relying solely on statements recorded during surveys and emphasized the need for thorough investigations and corroborative evidence before confirming additions as undisclosed income.