2010 (11) TMI 135 - AT - Income Tax

Survey - Addition of Income - During the course of survey action carried out on 11-2-05 a declaration was obtained from the assessee wherein an amount of Rs. 76,33,179 was offered to tax but the same was retracted subsequently - It is an established position of Law that if a disclosure is made by the assessee either under mistaken belief of facts and law due to mental pressure from the survey party or under coercion he can retract the statement and the admission so made Non Recording of reasons in its order by ITAT - Apex Court in the case of CIT v. K.Y. Pillaiah (1966 -TMI - 39909 - SUPREME Court) though normally the Appellate Tribunal should Record its conclusions on every disputed question raised before it by setting out its reasons in support of its conclusion, merely because it fails to record its reasons, the said Order cannot be said to be wrong particularly when an Appellate Authority fully agrees with the view expressed by the first appellate authority and has no other ground to record in support of its conclusion. In otherwords, merely because it does not repeat the reasons given by the first appellate authority, on which a decision was given against the assessee or the department, Order of the Appellate Tribunal cannot be said to be illegal or irregular. - Accordingly held that the miscellaneous application filled by the revenue are rejected

Issues Involved:
1. Deletion of addition of Rs. 76,33,179 referable to additional income offered during the course of survey action.
2. Deletion of disallowance of amount claimed towards bad debts (Rs. 20,87,450).
3. Alleged mistake apparent from record due to ITAT passing a short order without elaborating on the issues.

Issue-wise Detailed Analysis:

1. Deletion of Addition of Rs. 76,33,179:
The assessee-firm, engaged in civil contracts, had a survey conducted on 11-2-05, during which it declared an additional income of Rs. 76,33,179. This declaration was later retracted. The Assessing Officer (AO) added this amount to the income despite the retraction and explanation provided by the assessee. Upon appeal, the CIT (A) found that the additional income disclosed was not based on any incriminating evidence and was made under mental pressure and coercion. The CIT (A) noted that the survey did not uncover any material to corroborate the confession of concealed income. It was emphasized that a statement made during a survey can only form the basis of assessment if linked to evidence. The CIT (A) concluded that the declaration lacked credible evidence and was made under a mistaken belief of facts. The CIT (A) cited several legal precedents, including the Supreme Court's ruling in Pullan Gode Rubber Produce Co. Ltd. v. State of Kerala, which held that an admission is not conclusive and can be shown to be incorrect. Consequently, the addition of Rs. 76,33,179 was deleted.

2. Deletion of Disallowance of Bad Debts (Rs. 20,87,450):
The CIT (A) also addressed the issue of bad debts, concluding that the mere write-off of debt as bad is sufficient to claim deduction under the Income Tax Act. The AO's doubts about the veracity of the claim were deemed unjustified. The CIT (A) referenced the jurisdictional High Court's decision in CIT v. Star Chemicals (Bom.) Pvt. Ltd., which supported the assessee's position. Thus, the disallowance of Rs. 20,87,450 was deleted.

3. Alleged Mistake Apparent from Record:
The Revenue filed a miscellaneous application, arguing that the ITAT's short order lacked detailed reasoning and thus indicated a 'mistake apparent from record.' The Revenue cited internal guidelines suggesting that detailed reasons should be provided even when agreeing with the first appellate authority. The Revenue contended that the absence of independent reasons in the ITAT's order could be perceived as non-application of mind. In response, the assessee's counsel argued that the application was misconceived, as the Tribunal had no power to review its order under the guise of rectifying a mistake apparent from the record. The counsel cited the Supreme Court's decision in CIT v. K.Y. Pillaiah, which held that an order is not necessarily wrong if it fails to record reasons, especially when the Tribunal fully agrees with the first appellate authority. The Tribunal, after hearing both sides, concluded that there was no mistake apparent from the record. The Tribunal emphasized that the internal guidelines were meant to encourage detailed reasoning but did not mandate it in cases where the Tribunal fully agreed with the CIT (A). The Tribunal noted that the DR had not provided any material to contradict the CIT (A)'s findings. The Tribunal also referenced the Supreme Court's decision in T.R.F Limited v. CIT, which settled the legal issue regarding bad debts in favor of the assessee. Consequently, the Tribunal rejected the miscellaneous application filed by the Revenue.

Conclusion:
The Tribunal upheld the CIT (A)'s order, deleting the addition of Rs. 76,33,179 and the disallowance of Rs. 20,87,450. The Tribunal found no mistake apparent from the record in its original order and rejected the Revenue's miscellaneous application. The Tribunal emphasized that detailed reasoning was not necessary when fully agreeing with the first appellate authority's well-reasoned order.

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