2017 (4) TMI 1549 - AT - Income Tax

Addition u/s 68 - Addition based on duplicate sets of accounts found during the Survey - deletion of addition by ld. CIT(A) - HELD THAT - The statement of one of the partner Mr. Gaurav R. Viradia was taken on 06.10.2007 who reached from Baroda on second day of survey. Genesis of the impugned addition was the duplicate set of books of accounts extracted from the residence of Mr. Kalpesh Vaghani but printed at the office of assessee on 09.10.2007. Mr. Kalpesh Vaghani came into picture during the course of survey when it was informed to the survey team that books of accounts are in the computer of Mr. Kalpesh Vaghani who has been appointed for preparing projected financial statements for the purposes of taking bank credit limits. The facts about the role of Mr. Kalpesh Vaghani also get affirmed by his affidavit which has not been challenged by the Revenue authorities, wherein it has been categorically stated that major modification were made in the actual books of accounts and various figures were inflated to show a bright financial future of the assessee firm and to make them fit as per the requirements of banking authority so that higher working capital limit is granted for the projects undertaken. Disclosure statement made by the partner Mr. Gaurav R. Viradia was retracted on 30th October, 2007 wherein he stated that contents appearing in the statements recorded on 06.10.2007 were never stated by him because it was practically not possible for him to work out such complex financial details in a small period of two to three hours that too after travelling by road from Baroda to Bhavnagar. Assessee firm s partner Mr. Gaurav R. Viradia further denied in his retraction letter about the acceptance and payment of cash in the alleged duplicate set of books of accounts. No attempt was made either in the course of survey or subsequent to survey i.e. up to the date of framing the assessment to call and record the statement of Mr. Kalpesh Vaghani to extract the truth. Also no enquiry was conducted against the partners for the alleged additions in the assessee firm in the given facts when it was an initial year of commencement of business and there was no previous source of capital or accumulated funds of the assessee firm which could be treated as an unaccounted or undisclosed income. In the case of assessee also the statements taken u/s.133A of the partner Mr. Gaurav R. Viradia were later on retracted and the only evidence Revenue is harping upon is the duplicate set of books of accounts on which most of the entries, as admitted by the Accountant and the Consultant have been manipulated / enhanced / modified / re-arranged in order to prepare projected financial data to be provided to banks for getting sanctioned higher working capital credit limits for running the projects undertaken by the assessee firm. In view of totality of facts and discussion made above, we find no reason to interfere with the order of ld. CIT(A) who has deleted the impugned addition u/s.68. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act based on duplicate sets of accounts found during the survey.
2. Admissibility and impact of the retraction statement by the assessee.
3. Evidentiary value of statements recorded during the survey under Section 133A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Deletion of Addition under Section 68:
The Revenue challenged the deletion of additions made under Section 68 of the Income Tax Act for the Assessment Years 2007-08 and 2008-09. The Assessing Officer (AO) had made additions based on duplicate sets of accounts found during a survey conducted under Section 133A at the business premises of the assessee. The AO argued that the duplicate books found were the actual books of the assessee, containing unaccounted cash receipts totaling ?2,50,11,000 for AY 2007-08 and ?1,21,60,596 for AY 2008-09. The AO supported the additions by citing various judicial decisions where statements made during surveys were held valid for making additions.

2. Admissibility and Impact of Retraction Statement:
The assessee retracted the disclosure made during the survey, arguing that the duplicate books were manipulated by Mr. Kalpesh Vaghani, a financial consultant, to show a sound financial condition for securing bank loans. The Commissioner of Income Tax (Appeals) [CIT(A)] accepted the retraction, noting that the AO did not conduct further investigations or inquiries to substantiate the additions. The CIT(A) observed that the duplicate books were modified by Mr. Vaghani, and there was no evidence to support the AO's claim that the duplicate books represented the actual accounts of the assessee.

3. Evidentiary Value of Statements Recorded During Survey:
The CIT(A) and the Tribunal relied on judicial precedents, including the decision of the Hon’ble Apex Court in CIT vs. S. Khader Khan Son, which held that statements recorded during surveys under Section 133A do not carry evidentiary value unless corroborated by other material evidence. The Tribunal noted that no incriminating material was found at the business premises of the assessee during the survey, and the statements recorded were later retracted. The Tribunal emphasized that the AO failed to bring any corroborative evidence to support the additions made based on the retracted statements and the duplicate books.

Conclusion:
The Tribunal upheld the CIT(A)’s decision to delete the additions made under Section 68 for both assessment years. The Tribunal concluded that the duplicate sets of accounts were not reliable evidence of unaccounted income, as they were manipulated by Mr. Vaghani for the purpose of securing bank loans. The Tribunal also held that the retracted statements made during the survey could not be the sole basis for additions without corroborative evidence. Thus, the appeals of the Revenue were dismissed.