2016 (10) TMI 1304 - AT - Income Tax

Unexplained investment in the hospital building u/s. 69 - Admission made by the assessee in statement recorded u/s. 133A - HELD THAT - In the present case, we find that although the assessee during survey proceedings had admitted as additional income during the period relevant to assessment year 2009-10, however, subsequently vide letter dated 04-03-2009 the assessee has retracted from said admission. Apart from the statement of assessee there is no other documentary evidence which suggest undisclosed income of the assessee. Rather the assessee has furnished credible evidence to substantiate source of funds. In such circumstances addition on the basis of statement recorded u/s. 133A cannot sustain. We find merit in the appeal of the assessee. Accordingly, impugned order is set aside and the appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition of ?34,02,400/- as unexplained investment under Section 69 of the Income Tax Act, 1961.
2. Validity of the statement recorded under Section 133A during the survey.
3. Retraction of the statement by the assessee.
4. Evaluation of documentary evidence provided by the assessee.
5. Applicability of CBDT Circular dated 18-12-2014.

Issue-wise Detailed Analysis:

1. Addition of ?34,02,400/- as unexplained investment under Section 69 of the Income Tax Act, 1961:
The assessee, a medical practitioner, was subjected to a survey action under Section 133A, during which he declared additional income of ?34,02,400/- as unexplained investment in the hospital building. The Assessing Officer (AO) added this amount under Section 69 of the Act. The Commissioner of Income Tax (Appeals) upheld this addition, leading to the second appeal by the assessee before the Tribunal.

2. Validity of the statement recorded under Section 133A during the survey:
The statement of the assessee was recorded at 4 a.m. on 13-02-2009, wherein he admitted to an expenditure of approximately ?68 lakhs on the hospital's construction and declared ?34,02,400/- as additional income. However, the assessee later retracted this statement, claiming it was made under stress and without access to his financial records, which were with his accountant.

3. Retraction of the statement by the assessee:
The assessee retracted his statement via a letter dated 04-03-2009, providing details of the source of funds for the hospital construction. He explained that the initial statement was made under pressure and without proper documentation. The Tribunal noted that the retraction was made within a fortnight and was supported by documentary evidence.

4. Evaluation of documentary evidence provided by the assessee:
The assessee furnished details of the source of funds, including bank loans, joint family funds, sale of gold ornaments, gifts from his father, insurance policy maturity amounts, and borrowings from individuals. The Tribunal found that the assessee provided credible evidence to substantiate these sources, including affidavits, bank statements, and receipts.

5. Applicability of CBDT Circular dated 18-12-2014:
The Tribunal referred to the CBDT Circular, which discourages making additions based solely on statements recorded during surveys without corroborative evidence. The Tribunal emphasized that such statements should not be used to make additions unless supported by credible evidence.

Conclusion:
The Tribunal concluded that the addition of ?34,02,400/- under Section 69 was not supported by any documentary evidence. The assessee provided credible evidence to explain the source of funds for the hospital construction. The Tribunal also referred to the CBDT Circular and relevant judicial precedents, which state that statements recorded under Section 133A have no evidentiary value unless supported by evidence. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the assessee, deleting the addition of ?34,02,400/-.

Order:
The appeal of the assessee is allowed, and the addition of ?34,02,400/- is deleted. The order was pronounced on Monday, the 31st day of October, 2016.