2016 (3) TMI 321 - AT - Income Tax

Addition on the basis of admission during the course of survey - Held that - In the present case, it is an admitted fact that the assessee retracted the statement recorded u/s.133A of the Act vide its letter dated 1.4.2009 stating that the Income-tax team visited the assessee s residence, when he was conducting pooja on 13th day of death ceremony of his grand father and he was also starting abroad on the same day. He required to proceed to abroad at 3.30 P.M. and he was in tension by the disturbance of the Income-tax team at the time of pooja. Therefore, he wanted to get rid of the Income-tax team and agreed to offer ₹ 30 lakhs as income. Later, he came to know that in a confused state of mind, he was wrongly offered ₹ 30 lakhs as income and he filed a letter to the Income-tax Officer to withdraw the offer. In our opinion, the addition cannot be sustained only on the basis of admission during the course of survey. This plea of the ld. AR is supported by the judgment of the Supreme Court in the case of CIT v. S. Khader Khan Son (2013 (6) TMI 305 - SUPREME COURT ), wherein the judgment of the Jurisdictional High Court in the case of CIT v. S. Khader Khan Son (2007 (7) TMI 182 - MADRAS HIGH COURT) has been confirmed, by observing that sec.133A does not empower IT authority to examine any person on oath, hence any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. - Decided in favour of assessee Addition u/s 40A - AO identified the parties i.e. Shri Dhakshinamoorthy and Ramanathan, to whom the payments were made by the assessee in violation of sec.40A(3) - Held that - Regarding the identity of the recipients, there is no dispute. The amount of ₹ 1,00,000/- to be considered as agricultural produce in their hands and sec.40A(3) does not apply. The contention of the ld. AR is that these two parties are cultivators. They are not only agriculturists but also traders. Being so, he relied on the decision of the Tribunal in the case of Keerthi Agro Mills (P) Ltd. (2015 (5) TMI 1014 - ITAT COCHIN) is not appropriate. In that case, there was a payment of ₹ 23,17,32,420/-, which is purchases of paddy by cash payment in respect of 14,744 parties. The assessee has never given the name and address of the parties and not produced the parties before the assessing authority. Identity was also not proved and the enquiry could never progress into the next level, where whether the occupation of these persons was farming or not. The AO considered 75% of ₹ 23,17,32,420/- and disallowance was worked out at ₹ 17,37,99,315/- by invoking the provisions of sec.40A(3) of the Act. However, in the present case, the parties are identified and the amounts are also quantified. Being so, the ratio of the above decision of the Tribunal cannot be applied. More so, occupation of Shri Dhakshinamoorthy and Shri Ramanathan is not solely agricultural produce and they are trading also. There is no dispute in this fact and the provisions of Rule 6DD cannot be applied - Decided against assessee

Summary

Issues Involved:
1. Addition of Rs. 30,00,000 as additional income based on a sworn statement.
2. Additions of Rs. 19,46,899 and Rs. 14,34,188 made under Section 40A(3) of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Addition of Rs. 30,00,000 as Additional Income:
The first issue pertains to the confirmation of an addition of Rs. 30,00,000 as additional income. The facts reveal that a survey was conducted under Section 133A on the business premises of the assessee, who had filed a return of income admitting a total income of Rs. 2,04,810 for the assessment year 2008-09. During the survey, the assessee made a voluntary admission of Rs. 30,00,000 as additional income, which he later retracted, stating that the admission was made in haste and under pressure due to an impending foreign trip. The Assessing Officer (AO) ignored the retraction and added Rs. 30,00,000 based on the sworn statement.

On appeal, the Commissioner of Income-tax (Appeals) upheld the AO's decision, citing the assessee's admission during the survey. The assessee then appealed to the ITAT. The Tribunal observed that the addition was solely based on the sworn statement without any corroborative material evidence. The Tribunal cited the Supreme Court's judgment in Pullangode Rubber Produce Co. vs. State of Kerala and Anr., which states that an admission is an important piece of evidence but not conclusive. The Tribunal also referred to the case of Saveetha Institute of Medical and Technical Sciences v. ACIT, where it was held that admissions made under Section 133A are not valid evidence without corroborative material. The Tribunal concluded that the addition could not be sustained solely on the basis of the sworn statement and allowed the assessee's appeal on this ground.

2. Additions of Rs. 19,46,899 and Rs. 14,34,188 under Section 40A(3):
The second issue concerns the confirmation of additions of Rs. 19,46,899 and Rs. 14,34,188 under Section 40A(3) of the Income Tax Act. The assessee made cash payments to two individuals, Shri Dhakshinamoorthy and Shri Ramanathan, who appeared before the AO and confirmed the transactions. The AO disallowed the payments exceeding Rs. 20,000 made in cash, invoking Section 40A(3). The CIT(A) confirmed the AO's findings.

The assessee contended that the payments were for agricultural produce (copra) and should be exempt under Rule 6DD. The Tribunal reviewed the provisions of Section 40A(3) and Rule 6DD, which provide exceptions for certain payments. The Tribunal noted that the burden of proving the exceptions lies with the assessee. In this case, the AO had identified the recipients and quantified the payments. The Tribunal found that the recipients were not solely agriculturists but also traders, and thus, the provisions of Rule 6DD could not be applied. Consequently, the Tribunal dismissed the assessee's appeal on this ground.

Conclusion:
The appeal of the assessee was partly allowed. The addition of Rs. 30,00,000 based on the sworn statement was deleted, while the additions under Section 40A(3) were upheld. The order was pronounced on February 10, 2016, at Chennai.