2019 (10) TMI 903 - AT - Income Tax

Addition merely on the basis of a statement recorded during survey u/s. 133A - HELD THAT - Addition made by the AO in the course of assessment proceedings merely on the basis of statement in course of search and post search proceedings is not sustainable. In DIGAMBAR KUMAR JAIN (HUF) 2012 (11) TMI 1167 - MADHYA PRADESH HIGH COURT held in this case that the AO made an addition merely on the basis of a statement recorded during survey u/s. 133A of the IT Act and ld. CIT(A) and the Tribunal had deleted it by holding that merely on the basis of such statement without corroboration, such addition could not be made and when the appeal was filed by the revenue against this Tribunal order before the Hon ble Madhya Pradesh High Court, the same was dismissed by Hon ble Madhya Pradesh High Court. In this case, the Tribunal held that the income is not taxable in the hands of the assessee in view of principle of mutuality and since in the present case, mutuality aspect is not there, this Tribunal order on this aspect is not relevant in the present case but this Tribunal order is relevant regarding this aspect that merely on the basis of the statement recorded during the course of search, an addition cannot be made blindly and the same has to be examined as per the relevant facts and law. In the present case also, although some papers were found and seized and surrender was also made by assessee up to ₹ 93 Lakhs out of amount noted in seized paper of ₹ 1,39,08,062/-, neither the AO nor ld. CIT(A) has corroborated the amount of addition with the entries in the seized material even on sample basis to show that the entry in the seized material is in fact regarding some undisclosed income of the assessee. The surrender of the assessee of ₹ 93 Lakhs is also not correlated with the seized material - we hold that the addition made by the AO and confirmed by CIT(A) merely on the basis of statement without establishing that the entry on the seized paper is indicating any undisclosed income of the assessee is not sustainable and hence, we delete the same. Unexplained investment in gold bullion - HELD THAT - As per the balance sheet as on 31.03.2009 of Shri Somashekar available on page no. 14 of the paper book, there is capital balance of ₹ 16,06,085/- and there is investment in gold bullion of ₹ 11,43,320/- and similarly, as per the balance sheet of Shri K. Chandrashekar (HUF) as on 31.03.2009 available on page no. 18 of the paper book, there is capital of ₹ 31,28,398/- and investment in gold bullion of ₹ 11,43,320/-. Under these facts, we are of the considered opinion that the addition made by the AO on this account is also not sustainable and hence, we delete the same because in our opinion, restoring the matter back to AO in the facts of the present case is not required. Ground nos. 6 and 7 are also allowed.

Issues Involved:
1. Legality of the search and assessment under section 153A.
2. Addition of ?1,39,08,062 as unexplained expenditure.
3. Addition of ?24,00,000 as unexplained investment in gold bullion.
4. Levy of interest under sections 234B and 234C.

Detailed Analysis:

1. Legality of the Search and Assessment under Section 153A:
The assessee contested the legality of the search and subsequent assessment under section 153A, arguing that the search was illegal and ultra vires the provisions of section 132(1)(a), (b), and (c). The assessee claimed the search was based on suspicion rather than prior information, making the assessment null and void. However, during the hearing, the assessee's representative did not press this ground, and thus, it was rejected as not pressed.

2. Addition of ?1,39,08,062 as Unexplained Expenditure:
The assessee challenged the addition of ?1,39,08,062 based on seized material found at the residence of Mr. Vivekananda. Initially, the assessee admitted to certain entries in the seized documents, agreeing to offer ?93 Lakhs as undisclosed income. However, later, the assessee clarified that these entries pertained to M/s. ILC Industries and its group concerns and included personal expenses, agricultural income, and hand loan transactions, which were recorded in the books of respective companies.

The Tribunal noted that the addition was made merely on the basis of the assessee's statement without corroborating evidence. Citing the judgment of the Hon'ble Apex Court in Pullangode Rubber Produce Co. Ltd. vs. State of Kerala, it was emphasized that an admission is important but not conclusive and can be contested. Similarly, the Tribunal referred to the Madhya Pradesh High Court's decision in CIT vs. Digambar Kumar Jain (HUF), which held that additions based solely on statements without corroborative evidence are unsustainable. The Tribunal concluded that the addition of ?1,39,08,062 was not justified and deleted the same.

3. Addition of ?24,00,000 as Unexplained Investment in Gold Bullion:
The assessee disputed the addition of ?24,00,000 for two gold bars found in a bank locker jointly held by an employee and the assessee's wife. Initially, the assessee admitted this as undisclosed income but later explained that the gold was declared in the hands of K. Somasekhar (HUF) and K. Chandrasekhar (HUF) with proper invoices and returns filed before the search.

The Tribunal found that the invoices and returns were filed before the search and noted in the assessment order. The AO did not provide evidence to counter the invoices or the sources of the HUFs. The Tribunal, therefore, found the addition unsustainable and deleted it.

4. Levy of Interest under Sections 234B and 234C:
The assessee denied liability for interest under sections 234B and 234C, arguing that the computation of interest was not provided regarding the rate, period, and method. No specific arguments were advanced during the hearing, and thus, this ground was presumed not pressed and dismissed.

Conclusion:
The appeal was partly allowed. The Tribunal deleted the additions of ?1,39,08,062 and ?24,00,000, finding them unsustainable. The grounds related to the legality of the search and the levy of interest were dismissed as not pressed. The order was pronounced in the open court.

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