2017 (10) TMI 780 - HC - Income Tax

Undisclosed income - addition on the basis of statement recorded at the time of survey - suo moto surrender - Held that - From perusal of the record, it is clearly transpires that while filing an application dated 27.12.2008, the appellant has stated before the Assistant Director of Income Tax (Investigation) that he was forced to surrender the said amount at the time of survey, whereas there is no evidence or material furnished by the assessee to support the said contention and in fact the assessee himself has surrendered the amount as his undisclosed commission income of ₹ 5,00,000/- in assessment year 2006-07 and ₹ 7,00,000/- in assessment year 2007-08. Admittedly, the assessing authority has allowed enough opportunity to the assessee starting immediately from the date of survey till the assessment order dated 29.12.2008 is passed but the appellant for the first time stated that he has been forced to surrender the said amount only a day before the assessment proceedings are completed and the assessment order has been passed i.e. 27.12.2008. It is clearly an admission on the part of the appellant to surrender the amount of ₹ 5,00,000/- as an admitted commission which itself is an important piece of evidence, therefore, statement made voluntarily by the assessee could well affirm the basis of assessment which in the instant case is done. It is well settled law that burden lays on the assessee to establish that the admission made at the time of survey by means of a statement was wrong and, in fact, there was no additional income. In the present case, this burden does not even seem to have been admitted to be discharged by the assessee.

Summary

Issues Involved:
1. Sustaining addition of ?5,00,000/- based solely on a statement recorded during a survey.
2. Assessing Officer’s duty to investigate the truth of facts stated in the return.
3. Differentiation between powers under Section 133A and Section 132(4) of the Income Tax Act.

Detailed Analysis:

Issue I: Sustaining Addition Based on Statement During Survey
The primary issue in this case was whether the Income Tax Appellate Tribunal (ITAT) was correct in sustaining an addition of ?5,00,000/- based solely on a statement recorded during a survey without any corroborative material evidence. The appellant argued that the addition was made ignoring the Central Board of Direct Taxes (CBDT) instructions, which emphasized collecting evidence rather than obtaining confessional statements during surveys. The Tribunal, however, found that the statement of the Director, made on oath during the survey, was a voluntary admission of undisclosed income. The Tribunal also examined the survey folder and found no evidence to support the appellant's claim that the surrender was coerced. The Tribunal noted that the appellant had confirmed the surrender in a letter dated 02.06.2008 and had even deposited advance tax based on this surrender.

Issue II: Assessing Officer’s Duty to Investigate
The appellant contended that the Assessing Officer (A.O.) failed in his duty as an investigator by not verifying the truth of the facts stated in the return and relying solely on the statement recorded during the survey. The Tribunal, however, observed that the A.O. had provided multiple opportunities to the appellant to present evidence or refute the statement, but the appellant failed to do so. The Tribunal noted that the appellant did not retract the statement or provide any material evidence to contradict the admission of undisclosed income until the very end of the assessment proceedings.

Issue III: Differentiation Between Powers Under Section 133A and Section 132(4)
The appellant argued that there is a legal distinction between the powers conferred under Section 133A (survey) and Section 132(4) (search and seizure) of the Income Tax Act. Section 133A does not empower authorities to record statements on oath, unlike Section 132(4). The Tribunal acknowledged this distinction but found that the appellant's statement during the survey was voluntarily made and was corroborated by subsequent actions, such as the payment of advance tax. The Tribunal concluded that the voluntary nature of the statement and the lack of any material evidence to the contrary justified the addition made by the A.O.

Conclusion:
The High Court upheld the Tribunal’s decision, concluding that the order was based on findings of fact and no substantial question of law arose. The Court emphasized that the burden was on the appellant to prove that the admission made during the survey was incorrect, which the appellant failed to do. The appeal was accordingly rejected.