2010 (3) TMI 1288 - AT - Income Tax

Summary

Issues Involved:

1. Whether the addition of Rs. 15,10,000 as undisclosed income was justified.
2. The evidentiary value of statements recorded during a survey under Section 133A.
3. The applicability of Section 69B of the IT Act regarding unexplained investments.
4. The role of corroborative evidence in substantiating claims of undisclosed income.

Issue-wise Detailed Analysis:

1. Addition of Rs. 15,10,000 as Undisclosed Income:

The primary issue in this case was whether the addition of Rs. 15,10,000 as undisclosed income was justified. The assessee had filed a return of income on 31st March 2007, and a survey under Section 133A was conducted on 25th July 2007. During the survey, certain papers were found indicating a sum of Rs. 15 lakhs related to the purchase of a property at D-55, Bani Park, Jaipur. The Assessing Officer (AO) claimed that this amount was paid over and above the declared consideration, based on statements recorded during the survey. However, the assessee did not include this amount in the income return, arguing that there was no corroborative evidence to substantiate the allegation of unexplained investment. The CIT(A) deleted the addition, noting that the AO had not collected corroborative evidence or made inquiries from the seller of the property. The Tribunal upheld the CIT(A)'s decision, emphasizing the lack of evidence to support the AO's claim.

2. Evidentiary Value of Statements Recorded During Survey:

The judgment extensively discussed the evidentiary value of statements recorded during a survey under Section 133A. It was argued that statements recorded during such surveys do not have conclusive evidentiary value and cannot be equated with statements under Section 132(4A). The Tribunal referenced several cases, including the Hon'ble Kerala High Court's decision in Paul Mathews & Sons v. CIT, which held that statements made during surveys cannot be used as conclusive evidence unless supported by other material. The Tribunal agreed with this view, noting that the AO's reliance solely on the survey statements without corroborative evidence was insufficient for making the addition.

3. Applicability of Section 69B of the IT Act:

The Tribunal also examined the applicability of Section 69B, which allows the AO to treat unexplained investments as deemed income. The Tribunal noted that the AO must exercise discretion when applying this section and that the mere lack of satisfactory explanation does not automatically justify the addition of undisclosed income. The Tribunal cited the Hon'ble Supreme Court's decision in CIT v. Smt. P.K. Noorjahan, which emphasized that the AO must consider whether it is plausible for the assessee to have earned the undisclosed income. In this case, the Tribunal found that the assessee, being a housewife with no apparent source of undisclosed income, could not reasonably be assumed to have made the alleged investment.

4. Role of Corroborative Evidence:

The judgment highlighted the importance of corroborative evidence in substantiating claims of undisclosed income. The Tribunal noted that the AO failed to provide any corroborative evidence or conduct inquiries with the seller of the property to support the claim of undisclosed investment. The Tribunal referenced several decisions, including ITAT Jaipur Bench's decision in Ashwani Kumar Bhardwaj v. DCIT, which underscored the necessity of corroborative evidence when making additions based on documents or statements found during surveys. The Tribunal concluded that, in the absence of such evidence, the addition of Rs. 15,10,000 was not justified.

Conclusion:

The Tribunal dismissed the revenue's appeal, affirming the CIT(A)'s decision to delete the addition of Rs. 15,10,000 as undisclosed income. The judgment emphasized the lack of corroborative evidence, the non-conclusive nature of survey statements, and the necessity for the AO to exercise discretion under Section 69B. The Tribunal's decision reinforced the principle that additions based solely on uncorroborated statements or documents found during surveys are not sustainable.