2016 (8) TMI 1407 - AT - Income Tax

Addition of undisclosed income in his statement recorded u/s 132(4) - Held that - It is clear that there is no material or corroborative evidence to support the statement made under section 132(4) of the Act in respect of the addition of ₹ 30 lakh against unexplained investment in stock and ₹ 23.20 Lacs against the unexplained expenditure. The assessee did not admit the addition, which means, he retracted the said surrender in the return of income filed. We find that the Tribunal in the case of best infrastructure (India) Private Limited (2016 (5) TMI 1298 - ITAT DELHI) and case of Harjeev Aggarwal (2016 (3) TMI 329 - DELHI HIGH COURT) have in the similar facts and circumstances, held that no addition can be made merely on the statement recorded under search and seizure proceedings on a standalone basis without any supporting or corroborative material - thus order passed by the CIT(Appeals) on the issue in dispute is well reasoned and no interference on our part is required, accordingly, we uphold the finding of the CIT (Appeals) on the issue in dispute. Thus, ground No. 1 and 2 of the appeal are dismissed. Adjudication of appeal without filing of the statement of fact as mandated by the statutory form No. 35. - Held that - CIT(A) has not treated the forms filed before him as defective. He admitted the appeal and adjudicated the matter on merits. The order of the CIT(A) is the impugned order appealed against before us. The ld. DR wants us to hold that the order of the ld. CIT(A) is illegal and against the law as there is a defect in Form No. 35 In our view the arguments raised by the ld. DR are devoid on merit. Defects in the return of income filed, defects on Form No. 35 which is the form of appeal etc. are to be considered by the respective authorities before whom these are filed and the maintainability of the appeal before us cannot be challenged. The right of appeal is a substantive right. Procedural issues can not take away substantial rights of a person. This cannot be a ground for the revenue to challenge the order of the ld. CIT(A) which is in this case in favour of the Revenue. The arguments to say the least are farfetched. Hence we dismiss the same.- decided against revenue

Summary

Issues Involved:
1. Deletion of addition of ?30,00,000/- based on the assessee's statement under Section 132(4) of the Income Tax Act, 1961.
2. Deletion of addition of ?23,30,000/- based on the assessee's statement under Section 132(4) of the Income Tax Act, 1961.
3. Adjudication of appeal without removal of defect related to filing of the statement of facts as mandated by statutory form no. 35.

Issue-wise Detailed Analysis:

1. Deletion of Addition of ?30,00,000/-:
The Revenue contested the deletion of ?30,00,000/- added by the Assessing Officer (AO) based on the assessee's statement recorded under Section 132(4) during a search. The CIT(A) deleted this addition, and the Revenue argued that such statements are admissible evidence and should not be rejected.

The assessee argued that the statement was made due to an inability to reconcile consolidated stock found during the search with the stock in the books of various firms. However, during assessment, no stock discrepancy was found, and thus, no addition should be made solely based on the statement.

The Tribunal referenced the case of M/s. Best Infrastructure (India) Private Limited Vs. ACIT, where it was held that statements recorded during a search cannot alone justify additions without corroborative evidence. The Tribunal and Hon'ble Jurisdictional High Court in CIT Vs. Harjeet Aggarwal emphasized that statements under Section 132(4) should not be the sole basis for additions without supporting material.

The Tribunal upheld the CIT(A)'s decision, noting the absence of stock discrepancies and lack of corroborative evidence to support the ?30,00,000/- addition.

2. Deletion of Addition of ?23,30,000/-:
The Revenue also contested the deletion of ?23,30,000/- added by the AO based on the assessee's statement under Section 132(4). The AO claimed that certain loose documents indicated undisclosed expenses and investments, which the assessee explained as being from disclosed sources.

The CIT(A) found no specific findings or unexplained documents to justify the addition. The Tribunal agreed, noting that the addition was based solely on the statement under Section 132(4), without corroborative evidence.

The Tribunal reiterated that statements recorded during a search cannot alone justify additions without supporting material, referencing the same legal precedents as in the first issue.

3. Adjudication of Appeal Without Filing Statement of Facts:
The Revenue argued that the CIT(A) should not have adjudicated the appeal due to the assessee's failure to file a statement of facts as required by statutory form no. 35.

The Tribunal noted that filing an appeal is a substantive right and cannot be invalidated by procedural irregularities. It referenced the case of Computer Engineering Services India Private Limited Vs. ACIT, where it was held that non-filing of a statement of facts does not disable the CIT(A) from deciding the issue.

The Tribunal dismissed the Revenue's ground, emphasizing that procedural defects should not override substantive rights.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s deletion of the additions and the adjudication of the appeal despite procedural defects. The decision was pronounced on 16th August 2016.