2014 (5) TMI 7 - AT - Income Tax

Survey u/s 133A of the Act - Confirmation of addition Disclosure made during the survey Amounts constitutes additional income or total income Held that - During the course of survey, Assessee admitted to the income of Rs. 35 lacs but in the return of income filed by the Assessee the income of Rs. 32,49,328/- was offered to tax - the addition of Rs. 35 lacs has been made only on the basis of admission made by the Assessee during the course of survey - Revenue has not brought any material on record to demonstrate that the addition of Rs. 35 lacs made by the AO is backed by tangible material apart from the statement recorded during the course of survey when the assessee has admitted to confirmation of the addition of the differential amount, the addition to be restricted to Rs. 2,50,672/- being the shortfall in the amount admitted during the course of survey and as declared by the Assessee in the return of income Decided partly in favour of Assessee.

Summary

Issues:
1. Addition of undisclosed income based on survey statement.
2. Discrepancy in income declared during survey and in the return of income.

Issue 1: Addition of undisclosed income based on survey statement:
The appeal was filed against the order of CIT(A)-XVI, Ahmedabad for A.Y. 07-08. The Assessee, an individual running a proprietary concern, voluntarily offered Rs. 35 lacs as income during a survey under section 133A of the Act. The Assessing Officer (A.O.) added this amount to the income as the Assessee did not offer it in the return for A.Y. 07-08. CIT(A) upheld the addition, stating that the statement under section 133A has evidentiary value and if not retracted immediately after the survey, it is considered valid. The Assessee argued that the disclosure was an estimate for the entire financial year and had paid advance tax based on it. However, CIT(A) rejected this, emphasizing that only undisclosed income is disclosed during a survey, not estimated income. The Tribunal noted that the addition was solely based on the survey statement without additional evidence. The Tribunal partially allowed the appeal, restricting the addition to the shortfall between the admitted amount during the survey and the declared income in the return.

Issue 2: Discrepancy in income declared during survey and in the return of income:
The Assessee admitted Rs. 35 lacs during the survey but declared Rs. 32,49,328/- in the return of income. The Tribunal acknowledged this discrepancy and limited the addition to Rs. 2,50,672/-, the difference between the admitted amount during the survey and the declared income. The Revenue failed to provide tangible material supporting the full addition of Rs. 35 lacs, leading to the Tribunal's decision to restrict the addition based solely on the survey statement. The Tribunal emphasized that statements during surveys do not hold evidentiary value and must be supported by concrete evidence for additions to be justified.

This judgment highlights the importance of concrete evidence to support additions based on statements made during surveys, emphasizing the need for immediate retraction if the statement is under duress. The Tribunal's decision to restrict the addition based on the shortfall between admitted and declared income showcases the significance of substantiated evidence in tax assessments.