2020 (12) TMI 523 - AT - Income Tax

Addition on the account of errors and omissions - assessee declared additional income on the basis of notings made on loose papers during the survey action - AO was of the opinion that the assessee is not justified in offering an amount towards errors and omissions - HELD THAT - In the certain proceedings the survey team impounded evidence against the assessee and on such confrontation the assessee himself on oath conceded that the above said amounts are not recorded in the regular books of account and not declared by the Income Tax Department which in our opinion constitutes on additional income. The only contention raised before the lower authorities below by the assessee that the said amount was declared on ad-hoc basis, in our opinion it is away from truth because there was no retraction by the assessee from the date of survey to the filing of return of income to that effect - AO has not merely relied upon declaration made by the assessee in his statement recorded in the course of survey action whereas the assessee himself clarified the reasons due to which the additional income earned in the answer to Q. No. 11 which is reflecting in page 2 of the AO. Assessee placed reliance in the instructions dated 10-03-2003 issued by the CBDT wherein we note that in the said instructions the CBDT has advised CCIT and DGIT that no addition should be made solely on the basis of declaration made by the assessee in the statements recorded during the course of survey - assessee himself explained how he earned the additional income of ₹ 1,07,67,799/- and to cover up such errors and omissions the assessee himself offered ₹ 72,32,201/-. It is noted there was evidence against the assessee in earning the said additional income and the arguments of that without there being any adverse material the addition made by the AO is invalid, in our view is not acceptable. Thus, the instructions of CBDT as placed reliance by the assessee is not applicable to the facts and circumstances of the present case. - Decided against assessee.

Summary

Issues:
Challenging addition of ?65,00,000 on account of errors and omissions in the facts and circumstances of the case for assessment year 2013-14.

Analysis:
1. The appellant, engaged in the business of builders and developers, challenged the addition of ?65,00,000 made by the Assessing Officer (AO) based on loose papers' notings during a survey action. The AO determined the total income at ?1,91,30,536, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) emphasized the importance of factual and legal matrix, highlighting the need to unravel any tax avoidance schemes and ignore pretenses. The CIT(A) upheld the addition, emphasizing the need for evidence to support income declarations.

2. The appellant argued that the addition was unjustified and solely based on the statement recorded during the survey action without corroborative evidence. The appellant contended that the additional income declared was ad-hoc to cover errors and omissions, not based on specific evidence. Referring to previous tribunal decisions and CBDT instructions, the appellant sought deletion of the addition.

3. The Tribunal noted discrepancies in the income declaration and the statement recorded during the survey, where the appellant acknowledged unrecorded cash receipts. The Tribunal observed that the appellant's explanations lacked retraction and clarified the reasons for additional income declared. The Tribunal found the AO's reliance on the appellant's statement valid, considering evidence against the appellant in earning the additional income.

4. The appellant's reliance on CBDT instructions and a Kolkata Bench Tribunal decision was countered by the Departmental Representative. The Tribunal distinguished the Kolkata Bench case, where stock and cash discrepancies were involved, and the appellant had retracted statements. The Tribunal concluded that the benefit of doubt in the Kolkata case did not apply here due to differing circumstances, upholding the CIT(A)'s decision to confirm the addition.

5. Grounds raised by the appellant were dismissed, including consequential grounds, leading to the dismissal of the appeal. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of evidence in income declarations and the distinctions in applicable precedents. The appeal was ultimately dismissed by the Tribunal on September 16, 2020.