2019 (7) TMI 367 - AT - Income Tax

Addition on the basis of statements given in survey operations u/s 133A - in statement assessee offer a sum of ₹ 83.33 lakhs and subsequent retracted, latter on by way of another letter offer a sum of ₹ 50.00 lakhs - HELD THAT - We have noticed that the survey operations took place on 14th and 15th of February, 2018, meaning thereby, the assessee was having sufficient time between the dates of survey and the date of filing letter dated 26.04.2013, wherein the additional income of ₹ 50.00 lakhs was surrendered. This is further fortified by the fact that the assessee himself has agreed to offer a sum of ₹ 50.00 lakhs in his letter filed subsequently, which would mean, the assessee itself has arrived at the figure of ₹ 50.00 lakhs by duly examining the surrounding facts. When there is basis for ascertaining the undisclosed income, then, we are of the view that the CIT(A) was justified in holding that the various decisions relied upon by the assessee are not applicable to the facts of present case. Quantum of addition - enhancement by CIT(A) - HELD THAT - Assessee was ignorant of the basis under which the additional income of ₹ 83.33 lakhs was arrived. Hence the assessee has asked for the basis of arriving at the figure of ₹ 83.33 lakhs in his letter dated 18.02.2013 (within three days of survey operations). It appears that the assessee was not given the basis. Even at the time of hearing before us, D.R could not furnish the basis for the amount of ₹ 83.33 lakhs. Thus, it can be noticed that the revenue is unable to furnish the basis for determining the additional income of ₹ 83.33 lakhs and hence the assessee is also not aware of it. Assessee could arrive at the additional income at ₹ 50.00 lakhs and agreed to offer the same, even though the assessee also did not furnish the details thereof. In any case, the fact remains that the basis of determining additional income of ₹ 50.00 lakhs is within the personal knowledge of the assessee. We notice that the said offer has been accepted by the AO, even though the assessee did not offer the said amount also in the return of income. CIT(A) was not justified in enhancing the addition to ₹ 83.33 lakhs without furnishing the break-up details and basis thereof. Since the basis of determining the additional income of ₹ 50.00 lakhs offered by the assessee in his letter dated 26.04.2013 is within the knowledge of the assessee, we are of the view that the same should be added as additional income of the assessee. AO has added the sum of ₹ 50.00 lakhs as per the letter dated 26.04.2013 and in our view, the AO was justified for the same. Appeal of the assessee is partly allowed.

Summary

Issues:
1. Addition of ?83.33 lakhs based on statements during survey operations.
2. Validity of the addition in light of judicial precedents.
3. Enhancement of the addition to ?83.33 lakhs by the CIT(A).
4. Appeal against the CIT(A) order.

Issue 1: Addition of ?83.33 lakhs based on statements during survey operations:
The assessee, engaged in the business of Gold and Silver ornaments, surrendered ?83.33 lakhs during survey operations under coercion, citing excess stock and valuation differences. Subsequently, the assessee retracted part of the surrender in a letter dated 26-04-2013, agreeing to offer ?50.00 lakhs. The AO accepted this revised amount, leading to the addition of ?50.00 lakhs.

Issue 2: Validity of the addition in light of judicial precedents:
The assessee challenged the addition before the CIT(A) citing judicial precedents that statements during surveys lack evidentiary value. However, the CIT(A) upheld the addition to ?83.33 lakhs, emphasizing the detailed process followed during the survey, including inventory comparisons and the assessee's admission of undisclosed income. The CIT(A) rejected the applicability of cited precedents, asserting the validity of the addition.

Issue 3: Enhancement of the addition to ?83.33 lakhs by the CIT(A):
The CIT(A) enhanced the addition to ?83.33 lakhs, emphasizing the thorough survey process and the assessee's admission of undisclosed income based on gathered evidence. The CIT(A) rejected the assessee's contentions and relied on legal principles regarding voluntary statements and admissions to support the enhancement.

Issue 4: Appeal against the CIT(A) order:
The assessee appealed the CIT(A) decision, arguing that the addition was solely based on the survey statement lacking evidentiary value. The Tribunal noted the initial surrender of ?83.33 lakhs and subsequent agreement to offer ?50.00 lakhs by the assessee. Despite the lack of detailed basis for the initial surrender, the Tribunal upheld the addition of ?50.00 lakhs, as agreed upon by the assessee, setting aside the CIT(A)'s decision to enhance the addition to ?83.33 lakhs.

In conclusion, the Tribunal partially allowed the assessee's appeal, sustaining the addition of ?50.00 lakhs instead of the enhanced amount of ?83.33 lakhs. The decision highlighted the importance of the assessee's agreement in determining the undisclosed income, despite the lack of detailed basis for the original surrender amount.