2012 (7) TMI 735 - AT - Income Tax

Receipt of on money - Addition in income - survey u/s. 133A - Held that - From the balance sheet of the assessee it is evident that there are no sales during the year under appeal and the advance received from the buyers is reflected as its liability - An agreement to sell does not create any interest in favour of the purchaser as it is on completion of the transaction of purchase and sale culminating in the extinguishment of the title in the vendor and simultaneous creation of the title in the vendee that the seller earns a profit or suffers a loss - as the amount is advance received has neither been controverted nor has the Revenue brought on record any facts to the contrary the amount of Rs.25,07,000/- is not an income in the present assessment year but is an advance and therefore it cannot be taxed in the year under appeal - in favour of assessee.

Summary

Issues:
Assessment based on retracted disclosure of income, validity of confessional statement recorded under duress, evidentiary value of statement recorded during survey, treatment of advance received in construction business.

Analysis:
1. The appeal was filed against the order of Ld. CIT (A) for the assessment year 2007-08, where the assessee contested the correctness of the assessment made despite retracting the disclosure of income. The A.O. added Rs.25,07,000 to the total income based on a statement recorded during a survey under duress, which the assessee later retracted.

2. The CIT (A) upheld the A.O.'s decision, noting the absence of evidence supporting the retraction claim and the voluntary nature of the initial disclosure corroborated by diary entries. The assessee failed to disprove the findings on the nature of entries in the diary, leading to the confirmation of the addition.

3. During the appeal before ITAT, the assessee argued that the statement was recorded at an inappropriate time, and the retraction was supported by an affidavit. The absence of discrepancies in the books of accounts was highlighted, and reliance was placed on legal precedents to challenge the addition made solely on the basis of the survey statement.

4. The Department contended that the retraction lacked merit, as no evidence was presented to substantiate coercion claims. Legal references were cited to support the position that the affidavit filed after a significant time lapse should be disregarded, emphasizing the importance of corroborative evidence.

5. ITAT analyzed the case considering the nature of the business and legal principles. Referring to relevant case laws, including the decision in CIT vs. Ashaland Corporation, it concluded that the Rs.25,07,000 was an advance received, not income, and therefore not taxable in the assessment year. The appeal was allowed, overturning the addition to the total income.

6. In summary, the judgment addressed issues related to the validity of a confessional statement, evidentiary value of statements recorded during surveys, and the treatment of advances in the construction business. The decision emphasized the importance of corroborative evidence and legal principles in determining the taxability of disclosed amounts, ultimately ruling in favor of the assessee based on the specific circumstances and legal precedents cited.