2007 (1) TMI 219 - AT - Income Tax

Income From Undisclosed Sources - survey u/s 133A - retracted statements - HELD THAT - I find substance in the finding of the learned CIT(A) that when the statement by which surrender was made was retracted and the father of the assessee, Shri Hari Ram, Jain was an existing income-tax assessee, in whose name the sum stated to have been invested by the assessee, in such circumstances, keeping in view the retraction of statements it was the duty of the AO to examine Shri Hari Ram Jain to make the addition, if any, in the proper hands. In my view, the learned CIT(A) has, thus, rightly deleted the additions in question. The Ground No. 1 is, thus, rejected. Reopening proceedings u/s 147 - money for purchase of the plot - escaped assessment - addition u/s 69 - HELD THAT - It is not the case of the Department in the present matter under consideration that during the proceedings u/s 147, the additions in question were connected with the issue for which reopening was initiated or the AO had brought on record any reason to show that the impugned additions were otherwise linked with the enquiry in regard to disclosure of alleged payment of on money. The learned CIT(A) has, thus, rightly deleted the additions in question made on account of trading addition, unestablished cash credit and low household withdrawals. The first appellate orders are, thus, upheld. It is worthwhile to mention over here that while deciding the case in Vipan Khanna vs. CIT 2000 (7) TMI 2 - PUNJAB AND HARYANA HIGH COURT , has referred the decision of Hon'ble Supreme Court in the case of CIT vs. Sun Engineering Works (P) Ltd. 1992 (9) TMI 1 - SUPREME COURT and V. Jaganmohan Rao vs. CIT 1969 (7) TMI 4 - SUPREME COURT . The Ground No. 2 is, thus, rejected. In the result, appeals are dismissed.

Summary

Issues:
1. Deletion of addition of Rs. 1,00,000 surrendered during survey under s. 133A of the IT Act, 1961.
2. Deletion of additions made under different heads without deciding on merits and relying on specific judgments.

Issue 1: Deletion of addition of Rs. 1,00,000 surrendered during survey under s. 133A of the IT Act, 1961:
The assessee disclosed during a survey that he paid Rs. 1,00,000 as on money for a plot in his father's name, which was not included in his returns. The AO initiated proceedings under s. 147, but the CIT(A) deleted the addition based on the retraction of the statement by the assessee. The CIT(A) found that the statement was made under duress during the survey and lacked credibility. The CIT(A) relied on various precedents and a CBDT letter emphasizing that confessions during surveys should be based on credible evidence. The CIT(A) concluded that the AO should have examined the father of the assessee before making the addition, considering the retraction of the statement. The Tribunal upheld the CIT(A)'s decision, stating that the additions were rightly deleted.

Issue 2: Deletion of additions made under different heads without deciding on merits and relying on specific judgments:
The AO made additions under various heads, including s. 69, s. 68, trading addition, and low household withdrawals, during the reopening proceedings. The CIT(A) deleted these additions, citing that the AO exceeded the reasons recorded for reopening. The Tribunal agreed with the CIT(A), noting that the AO did not establish a link between the additions and the issue for which the reopening was initiated. The Tribunal referenced the amendment in s. 147 and the decision in Vipan Khanna vs. CIT, emphasizing that additions unconnected to the reopening issue cannot be justified. The Tribunal upheld the CIT(A)'s decision to delete the additions under different heads, based on the specific judgments cited.

In conclusion, the Tribunal dismissed the appeals, affirming the CIT(A)'s decisions to delete the additions based on the retraction of statements made during the survey and the lack of connection between the additions and the reasons for reopening. The judgments cited played a crucial role in guiding the Tribunal's decision-making process.