2023 (3) TMI 669 - AT - Income Tax

Addition based on statement recorded during the course of survey - Additional income admitted by the Director of the company during the course of survey which was not declared in the return of income - CIT-A deleted the addition - HELD THAT - Since in the instant case, AO has made the addition merely on the basis of a statement recorded during the course of survey of Shri P. Satya Prasad, Director of the assessee company who had admitted additional income for the year under consideration and since such statement has been retracted by the Director before the Dy.Director of Income Tax (Inv.) Unit-I Hyderabad through an affidavit which has not been controverted and since the Revenue has no other material before them except the statement which has subsequently been retracted therefore, in the light of the CBDT Circular/Instruction and the various other decisions relied on by assessee to the proposition that the statement recorded during the course of survey has no evidentiary value unless the same is backed by credible evidence, the addition made by the AO was rightly deleted by the CIT (A). Director of PL Raju Constructions (P) Ltd Shri P. Venkatapati Raju in his statement u/s 132(4) during the course of search on 22.4.2019 in his reply to question No.6 has specifically stated to cover up any deficiencies in the matter of DCS Ltd and any other deficiencies that may arise to give quietus to the litigation that may emerge in the matter of DCS Ltd, the company has admitted the additional income of Rs.32.00 crores out of which Rs.5,57,65,000/-relates to the impugned A.Y. In view of the above and in view of the detailed reasoning given by the CIT (A) we do not find any infirmity in the order of the CIT (A) deleting the addition.Grounds raised by the Revenue are dismissed.

Summary

Issues Involved:
1. Admission of additional income during survey.
2. Validity of addition based on statements without supporting evidence.
3. Double taxation concerns.

Summary:

1. Admission of Additional Income During Survey:
The assessee, a company engaged in civil and mining contracts, filed its return of income for A.Y. 2017-18. During the assessment proceedings, the Assessing Officer noted that a survey operation under section 133A was conducted on the assessee, where the Director admitted additional income of Rs. 2 crores for the year. However, this additional income was not reflected in a revised return, leading to the addition of Rs. 2 crores to the total income by the Assessing Officer.

2. Validity of Addition Based on Statements Without Supporting Evidence:
The assessee contested the addition, arguing that no evidence of income suppression was found during the survey and that the admission was made under pressure. The CIT (A) called for a remand report and, after considering the submissions and supporting documents, deleted the addition. The CIT (A) noted that the additional income was admitted by the Director of M/s. PL Raju Constructions (P) Ltd. and not by the assessee. The CIT (A) relied on the principle that additions cannot be made solely based on statements made during surveys unless backed by credible evidence, as supported by the CBDT Instruction F.No.286/2/2003-IT (Inv.) and various judicial precedents.

3. Double Taxation Concerns:
The CIT (A) observed that the transactions between the assessee and M/s. PL Raju Constructions (P) Ltd. were already offered to tax by the latter. Therefore, adding the same income in the hands of the assessee would result in double taxation. The CIT (A) concluded that the addition of Rs. 2 crores in the hands of the assessee was unwarranted and directed its deletion.

Conclusion:
The Tribunal upheld the CIT (A)'s order, emphasizing that the addition based solely on the statement recorded during the survey, which was later retracted, was not justified. The Tribunal dismissed the Revenue's appeal, confirming that the CIT (A) was correct in deleting the addition to avoid double taxation and due to the lack of credible evidence supporting the initial statement.