2014 (10) TMI 536 - HC - Income Tax

Addition the basis of statement recording during survey u/s 133A - Statement recorded on the basis of impounded loose papers, diaries, documents etc. Surrender of amount by assessee Held that - Tribunal after appreciating the evidence on record and the evidence placed by the assessee, has accepted the surrender to the tune of ₹ 3 crore which was made in the return of income and is based on appreciation of evidence and it is a finding of fact - The assessee gave an explanation supported by material on record, that on the basis of the documents and whatever was un-recorded in the diary/loose papers/other unverifiable creditors, the total amount of surrender came to the tune of ₹ 2.20 crore only - even the AO has not pointed out any evidence or material entered in the loose papers or diaries or incriminating documents which could justify addition over and above of ₹ 3.00 crore or even ₹ 5.00 crore or more. The AO has not found or bothered to found or traced anything additional as a result of survey from the assessee except relying on the recorded statements at the time of survey and therefore this view found favour with the two appellate authorities that the funds are arising from the same business and have a direct nexus and the income was invested/utilized during the year - the conclusion reached by the ITAT is based on the appreciation of evidence and is reached on the basis of finding of fact - It is also a finding of fact admittedly that in AY 2007-08 despite surrender in statements of ₹ 2 crore the income was offered at ₹ 1.5 crore only thus, the Tribunal rightly came to the conclusion that the amount of ₹ 1.5 crore, which was surrendered/offered in the AY 2007-08, was also available as a fund which came to be used partly in the investment of share capital, creditors or other investments as well as other defects, unverifiable creditors etc. thus, no question of law arises for consideration Decided against revenue.

Summary

Issues:
Appeal against ITAT order for assessment year 2008-09 regarding surrender amount discrepancy.

Analysis:
The appeal under section 260-A of the Income Tax Act challenged the ITAT order related to the assessment year 2008-09. The case involved a survey under section 133 A of the IT Act at the business premises, leading to the discovery of incriminating documents and a total surrender of Rs. 8 crore by the assessee across different assessment years. The dispute arose when the assessee, in the revised return for 2008-09, reduced the surrender amount from Rs. 5 crore to Rs. 3 crore, prompting the AO to make an addition of Rs. 2 crore. The CIT(A) partially upheld the addition, leading to appeals by both the revenue and the assessee before the ITAT. The ITAT, in its impugned order, deleted the entire addition of Rs. 2 crore, leading to the revenue's appeal before the High Court.

The revenue contended that the assessee's voluntary surrender during the survey should have been adhered to, and reducing the amount in the revised return was unjustified. The High Court, after considering the arguments and reviewing the evidence, found that the ITAT's decision to accept the surrender of Rs. 3 crore made in the return was based on a factual appreciation of evidence. The assessee's explanation, supported by material, justified the total surrender amount, including additional amounts offered to cover other defects. The AO failed to provide evidence to dispute the assessee's explanation or prove income beyond the surrendered amount. The High Court noted that the funds surrendered in 2007-08 were available for investment, supporting the nexus between the surrendered amount and its utilization in the business.

The High Court emphasized that the ITAT's conclusion was based on factual findings and evidence appreciation, highlighting the lack of substantial questions of law arising from the ITAT's order. The Court dismissed the appeal, stating that no interference was warranted as there was no infirmity or perversity in the ITAT's decision. The High Court upheld the ITAT's order, emphasizing the importance of the Assessing Officer substantiating additions with cogent material rather than relying solely on statements.