2016 (4) TMI 346 - AT - Income Tax

Addition on undisclosed income - addition made by the AO on the basis of statement of Mr. Ajay Singhal at the time of survey recorded u/s. 133A - Held that - We find considerable cogency in assessee s submissions that addition cannot be made on the basis of the statement recorded during the survey under section 133A of the Act, in view of the various judicial decisions wherein, it has been held that such statement does not have any evidentiary value, especially the decision of the Hon ble Madras High Court in the case CIT vs. S. Khakder Khan son reported in (2007 (7) TMI 182 - MADRAS HIGH COURT ) wherein, it has been held that Addition on the basis of statement recorded during survey under section 133A-Sect. 133A does not empower any 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 . Thus we are of the considered opinion that the addition made on the basis of the statement in the present case recorded u/s. 133A is not sustainable in the eyes of law, hence, we delete the addition - Decided in favour of assessee.

Summary

Issues Involved:
Addition of undisclosed income based on statement recorded during survey u/s. 133A of the Income Tax Act.

Analysis:
The case involved an appeal against the order of the Ld. Commissioner of Income Tax (Appeals) regarding the addition of Rs. 70,00,000 as undisclosed income by treating it as such without providing adverse material or allowing cross-examination. The assessee's return of income was Rs. 45,465, and during a survey under section 133A, a statement by a director of the assessee company admitted to earning undisclosed income of Rs. 70,00,000. The Assessing Officer made the addition based on this statement, and the CIT(A) upheld it. The Tribunal considered the arguments presented by both parties, including case laws and a CBDT circular, emphasizing that statements recorded during surveys under section 133A lack evidentiary value. The Tribunal cited judicial decisions to support its conclusion that additions based solely on such statements are not sustainable. Additionally, the CBDT's circular advised against obtaining confessions during searches and seizures. Consequently, the Tribunal held that the addition of Rs. 70,00,000 was not justified and deleted it, allowing the assessee's appeal.

This judgment highlights the importance of relying on credible evidence and following legal procedures during income tax assessments. It underscores that additions based solely on statements recorded during surveys under section 133A, without corroborative evidence, lack evidentiary value and are not sustainable in law. The Tribunal's decision to delete the addition of undisclosed income emphasizes the need for tax authorities to gather concrete evidence rather than relying on confessions obtained during search operations. The case serves as a reminder of the legal principles governing the assessment of undisclosed income and the significance of adhering to established legal precedents and guidelines, such as the CBDT circular cited in this case.