2017 (11) TMI 1594 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - Held that - The contentions of the Ld. DR that the statement of the directors of the assessee should have been taken into consideration by the CIT(A) and the addition of the undisclosed income was justified by the assessee. This contention can not have a support unless and until the supportive documents were taken into congnizance by the Assessing Officer. The Assessing Officer has not taken any efforts to verify the statements of the Directors from the record. The CIT(A) has rightly deleted the additions by taking into consideration all the aspects of statements as well as the documents produced by the Assessee before the Assessing Officer. - Decided in favour of assessee.

Summary

Issues Involved:
1. Deletion of addition made by the A.O on account of unexplained money amounting to ?10,00,00,000/-.
2. Evidentiary value of statements recorded during survey operations.
3. Adherence to principles of natural justice and procedural fairness.

Issue-wise Detailed Analysis:

1. Deletion of Addition Made by the A.O on Account of Unexplained Money Amounting to ?10,00,00,000/-:
The appeals concern the deletion of an addition made by the Assessing Officer (A.O) based on a survey conducted on 20/11/2008, which impounded documents suggesting that the assessee received a significant portion of booking amounts in cash, not declared in the tax return. The A.O relied on a statement by a director of the assessee company, who voluntarily disclosed an additional income of ?10 crores. However, this amount was not included in the return filed for the relevant assessment year, leading the A.O to add ?10 crores as unexplained money.

2. Evidentiary Value of Statements Recorded During Survey Operations:
The CIT(A) deleted the addition, noting that the books of accounts were produced before the A.O, who failed to point out any deficiencies. The CIT(A) observed that the assessee followed the project completion method, and the statement made during the survey did not have evidentiary value unless supported by corroborated evidence. The CIT(A) emphasized that statements recorded under Section 133A do not hold evidentiary value unless corroborated by other evidence. The CIT(A) referred to legal precedents, including the judgment of the Hon’ble High Court of Madras in CIT v/s S Kader Khan & Sons, which stated that statements recorded during surveys do not have evidentiary value unless supported by corroborative evidence.

3. Adherence to Principles of Natural Justice and Procedural Fairness:
The CIT(A) criticized the A.O for not confronting the assessee with the survey report and for not bringing any circumstantial evidence on record to show that cash was received in addition to the declared amount. The CIT(A) highlighted that the A.O did not apply his mind and blindly followed the survey report without corroborating evidence. The CIT(A) also pointed out that the A.O did not follow the CBDT instruction dated 10.3.2003, which mandates that no document can be used against any person unless the person is given a reasonable opportunity to submit their version. The CIT(A) cited the Hon’ble Supreme Court in Kishanchand Chellaram v/s Commissioner Of Income-Tax and the Hon’ble Delhi High Court in J.T.(India)Exports & Another v/s Union of India and Another, emphasizing the importance of adhering to principles of natural justice.

Conclusion:
The tribunal upheld the CIT(A)'s decision, agreeing that the A.O failed to provide corroborative evidence and did not adhere to procedural fairness. The appeals of the Revenue were dismissed, and the deletion of the addition of ?10 crores was confirmed. The tribunal emphasized that statements made during surveys need corroborative evidence to hold evidentiary value and that procedural fairness must be maintained by confronting the assessee with all relevant documents.