2010 (4) TMI 830 - AT - Income Tax

Business carried on by assessee and other family members in same premises-survey conducted for the assessee as well as his father on the same day- Assessee was assessed for the excess cash found in Survey-validity of Statement under survey. - Held that - materials collected during the course of survey action under section 133A shall not have any evidentiary value.CBDT Circular No. 286 which discourages Revenue officials from taking any statement during survey proceedings.When the assessee has explained by giving entire details including their PAN, etc. and the availability of cash at the time of survey or during the relevant period, in our opinion, by simply mentioning why the cash should be kept in assessee s house may not be a valid reason for assessment, when all the members are assessed to tax and have made a valid claim with proof. - Thus case was decided in favor of assessee .

Summary

Issues:
1. Sustained addition of Rs. 9,60,025 as excess cash during survey.
2. Sustained addition of Rs. 71,000 representing debtors' balances.

Issue 1: Sustained addition of Rs. 9,60,025 as excess cash during survey:
The appeal concerns the addition of Rs. 9,60,025 as excess cash found during a survey under section 133A of the IT Act. The assessee argued that the cash found was explained and statements made during the survey should not be conclusive evidence, citing the case of CIT v. S. Khader Khan Son. The CBDT Circular No. 286 discourages relying on survey statements. The Departmental Representative relied on survey statements and the appellate order. The assessee provided details of cash balances of family members, supported by cash book copies and other documents. The assessee retracted the admission made during the survey. The Tribunal held that survey statements cannot solely be the basis for additions, especially when all family members' cash balances were explained and supported by evidence. The Tribunal accepted the explanation and ordered the deletion of the addition.

Issue 2: Sustained addition of Rs. 71,000 representing debtors' balances:
The second issue involves the addition of Rs. 71,000 representing debtors' balances not accounted for in the books. The assessee claimed these were petty amounts that were indeed accounted for. It was found that the assessee had advanced petty loans during the relevant period, but the survey statement mentioned a higher loan amount. The Tribunal reiterated that survey statements without supporting evidence cannot be the sole basis for additions, as per the cited case law. Therefore, the Tribunal concluded that the addition of Rs. 71,000 was solely based on the statement and ordered its deletion.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting both the sustained additions of Rs. 9,60,025 as excess cash during survey and Rs. 71,000 representing debtors' balances. The judgment emphasized the importance of not solely relying on survey statements without supporting evidence and upheld the principle that admissions during surveys should not be the sole basis for additions.