2013 (3) TMI 290 - HC - Income Tax

Penalty under Section 271(1)(c) - assessee himself had admitted the unexplained investment made in gold and cash which was not disclosed in the book of accounts - ITAT deleted the penalty levy - assessee is doing business of manufacture of gold jewels for others on job work basis - whether material collected and the statement recorded during the survey operation under Section 133A has any evidentiary value? - Held that - As decided in Pullangode Rubber Produce Co.Ltd. vs. State of Kerala, (1971 (9) TMI 64 - SUPREME COURT) that an admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect. Any statement recorded under Section 133A would have evidentiary value only if supported with materials and form the basis for assessment. In his explanation, the assessee stated that he has been doing job work and the remaining 2100 gms had been given to 3 Asaris. The Officers had not verified whether the gold was available with the said Asaris nor chosen to examine the said Asaris. The statement recorded during survey operation u/s 133A may be a relevant material but in the absence of further materials to substantiate the same, such statement recorded under Section 133A can hardly be the basis for assessment. During the survey, 900 gms of gold was found in the premises of the assessee and the statement of the assessee was supported only to the extent of actual seizure of 900 gms. Since the statement of assessee in respect of the remaining gold was not substantiated, the Tribunal rightly set aside the addition in respect of the gold. Unaccounted cash of Rs.2,49,770/-, the assessee tried to explain the cash by stating that he has sold the land at Kodaikanal for Rs.2,80,000/- and the same was deposited in Bank on 5.10.2002 and the amount was withdrawn from the Bank on 17.10.2002 and during the course of survey, the Department came across the said cash. The survey was on 29.10.2002 and the drawal of money from the Bank was a few days before search. Even though the said amount of Rs.2,49,770/- was not disclosed in his books, the assessee tried to explain the same. The Tribunal rightly set aside the addition and remitted to the AO to verify whether the cash balance as per the books of accounts has emanated from the cash withdrawn from the Bank on 17.10.2002. No error or infirmity in the order of the Tribunal to verify the correctness of assessee s statement. Addition of interest earned on the unaccounted investment in money lending business - the enhancement is based only on the statement recorded from the assessee. No other material or information was available that the assessee invested Rs.5.00 lakhs in money lending business and earned interest. the addition of Rs.5.00 lakhs as unaccounted investment in money lending business and addition of interest earned is based on only rough estimate and the Tribunal rightly deleted the addition on the interest of money lending business, household expenses and creditors. Since the Tribunal deleted the addition and ordered expunging the initiation of penalty proceedings under Section 271(1C) no reason to interfere with the finding of the Tribunal. Tribunal rightly set aside the order of Commissioner of Income-tax (Appeals) as its order making enhancement to the income determined by the Assessing Officer is based on the unsworn statement obtained under Section 133A. No substantial question of law arise for consideration and the Tax Case Appeal stands dismissed.

Issues Involved:
1. Evidentiary value of statements recorded under Section 133A.
2. Unexplained investment in gold.
3. Unaccounted cash.
4. Addition towards interest on money lending business.
5. Levy of penalty under Section 271(1)(c).

Issue-wise Detailed Analysis:

1. Evidentiary Value of Statements Recorded under Section 133A:
The primary issue was whether the material collected and the statement recorded during the survey operation under Section 133A of the Income Tax Act have any evidentiary value. The court emphasized the distinction between statements recorded under Sections 132(4) and 133A, noting that the latter does not empower the Income Tax Officer to examine any person on oath. Therefore, statements recorded under Section 133A do not have the same evidentiary value as those recorded under Section 132(4). The court cited several precedents, including the Kerala High Court's decision in Paul Mathews and Sons v. CIT and the Madras High Court's decision in CIT v. S. Khader Khan Son, to support this view. It concluded that statements recorded under Section 133A can only be considered relevant material but not conclusive evidence.

2. Unexplained Investment in Gold:
The assessee admitted to possessing 3000 grams of gold during the survey, but only 900 grams were found on the premises. The remaining 2100 grams were allegedly with three goldsmiths. The court observed that the statement regarding the remaining gold was not substantiated with further evidence. Consequently, the Tribunal's decision to confine the addition to 900 grams of gold found during the survey was upheld. The court reiterated that the statement recorded under Section 133A, without further corroborative material, could not form the sole basis for assessment.

3. Unaccounted Cash:
The assessee explained the unaccounted cash of Rs.2,49,770/- by stating it was from the sale of land and subsequent withdrawal from the bank. The Tribunal directed the Assessing Officer to verify this claim. The court upheld this direction, noting that the Tribunal's order to verify the correctness of the assessee's statement was appropriate and did not find any error or infirmity in it.

4. Addition Towards Interest on Money Lending Business:
The addition of Rs.1,10,000/- towards interest on an alleged unaccounted investment of Rs.5.00 lakhs in money lending business was based solely on the statement recorded from the assessee. The court found no other material or information to support this addition. It agreed with the Tribunal's decision to delete the addition, stating that it was based on a rough estimate and lacked substantive evidence.

5. Levy of Penalty under Section 271(1)(c):
Since the Tribunal had deleted the additions and ordered the expunging of penalty proceedings under Section 271(1)(c), the court saw no reason to interfere with this finding. The court emphasized that the order of the Commissioner of Income-tax (Appeals) was based on an unsworn statement obtained under Section 133A, and in the absence of other materials, the Tribunal's decision to set aside the order was justified.

Conclusion:
The court dismissed the Tax Case Appeal, holding that no substantial question of law arose for consideration. The Tribunal's decision to confine the addition to materials found during the survey, delete other additions, and expunge the penalty was upheld. The court reiterated the limited evidentiary value of statements recorded under Section 133A and emphasized the need for corroborative material to support any additions based on such statements.

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