2018 (4) TMI 1841 - AT - Income Tax

Addition on account of advances given for purchase of land and disclosed in the statement recorded under section 132(4) but was not offered to tax - assessee in his statement recorded under section 132(4) has admitted undisclosed income on account of advances given to various persons for purchase of land - HELD THAT - In the case in hand the assessee never disputed the amounts or entries recorded in the seized material but the assessee has subsequently explained and brought on record the fact that out of the total amount of Rs. 11, 25, 00, 000/- a sum of Rs. 1, 60, 00, 000/- given as an advance during the financial year 2012-13 relevant to the assessment year 2013-14 was received back by the assessee on 20th April 2013 and therefore the said amount was available with the assessee for giving advances during the year under consideration. This stand of the assessee is not disputing the entries in the seized material and further the assessee has filed the evidences in support of the fact that the said amount was received back by the assessee. Since these transactions are unaccounted transactions and only found during the course of search and seizure operation therefore there cannot be any other evidence in the shape of entries in the books of accounts except the persons concerned who have duly made the statements on oath as the affidavits were filed by the assessee in this regard. Statement u/s 132(4) alone cannot be considered as a conclusive piece of evidence by ignoring the other facts and evidence which may establish the correct facts regarding the transactions in dispute - when the assessee has filed the evidences in support of the claim that a sum of Rs. 1, 60, 00, 000/- was received by the assessee which was available for advance given during the year under consideration then in the absence of any enquiry conducted by the AO to controvert the facts and to dispute the evidence filed by the assessee the addition made by the AO and sustained by the ld. CIT (A) is not justified. Hence we delete the addition made on this account. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of the assessment order under section 143(3) read with section 153B(1)(b) of the Income Tax Act, 1961.
2. Addition of Rs. 1,60,00,000 on account of advances given for the purchase of land and disclosed in the statement recorded under section 132(4) of the Act but not offered to tax.

Issue-wise Detailed Analysis:

1. Validity of the Assessment Order:
- Ground No. 1: The assessee initially raised the issue of the validity of the assessment order passed under section 143(3) read with section 153B(1)(b) of the Income Tax Act, 1961.
- Resolution: During the hearing, the assessee's representative stated that this ground was not pressed. Consequently, the tribunal dismissed Ground No. 1 as not pressed.

2. Addition of Rs. 1,60,00,000 on Account of Advances:
- Ground Nos. 2 & 3: These grounds pertain to the addition of Rs. 1,60,00,000 on account of advances given for the purchase of land, which were disclosed in the statement recorded under section 132(4) but not offered to tax.
- Background: A search and seizure operation under section 132 was conducted on the assessee group on 23rd May 2013. Incriminating material, including a diary with entries of certain amounts, was found. The assessee surrendered a total undisclosed income of Rs. 11,25,00,000, which included Rs. 1,60,00,000 for the assessment year 2013-14 and the balance for the assessment year 2014-15. However, in the return for the assessment year 2014-15, the assessee offered only Rs. 8,05,00,000, leading to a shortfall of Rs. 1,60,00,000.
- Assessee's Contention: The assessee argued that the sum of Rs. 1,60,00,000 was received back from advances given in the previous year and was thus available for re-advancing during the year under consideration. The assessee submitted affidavits from the recipients of the advances, Shri Hanuman and Shri Radheyshyam, confirming the refund.
- Assessing Officer's (AO) View: The AO rejected the assessee's contention, stating that the source and availability of Rs. 1,60,00,000 were not explained during the search and seizure action. The AO considered this claim an afterthought to avoid tax on undisclosed income.
- CIT (A)'s Decision: The CIT (A) upheld the AO's decision, noting that the assessee did not provide immediate retraction or supporting evidence for the refund of Rs. 1,60,00,000.
- Tribunal's Analysis: The tribunal noted that the search and seizure action continued for two days, and the assessee was under pressure. The assessee subsequently provided affidavits and other evidence to support the claim that Rs. 1,60,00,000 was refunded. The tribunal emphasized that the AO did not conduct further inquiries to verify the assessee's claim and relied solely on the statement recorded under section 132(4).
- Legal Precedents: The tribunal referred to the CBDT Circulars and the Supreme Court's decision in Pullangode Rubber Produce Co. vs. State of Kerala, which held that an admission is an important piece of evidence but not conclusive. The tribunal also cited the Mumbai Tribunal's decision in M/s. Tribhovandas Bhimji Zaveri (Delhi) Pvt. Ltd. vs. ACIT, where a similar situation of pressure-induced surrender was considered.
- Conclusion: The tribunal concluded that the statement under section 132(4) alone could not be considered conclusive evidence, especially when the assessee provided subsequent evidence. The tribunal found that the addition made by the AO and sustained by the CIT (A) was not justified and deleted the addition of Rs. 1,60,00,000.

Final Judgment:
- The appeal of the assessee was partly allowed, with the tribunal deleting the addition of Rs. 1,60,00,000 made by the AO. The order was pronounced in the open court on 27/04/2018.