2024 (9) TMI 505 - AT - Income Tax

Evidentiary value of statements recorded during the survey - whether the statement recorded by the authorities during the course of survey carried out u/s 133A of the Act has evidential value so that the admission made, if any in such statement (whether on oath or otherwise), can be used against the assessee? - HELD THAT - The plea of the Revenue that the CIT(A) should have solely relied upon the survey statement of Shri Naresh Jain recorded u/s 133A(3)(iii) (or even u/s 131 on oath) admitting income but ignoring the impounded documents found and the explanation furnished thereon with the supporting evidences should be ignored, can not be accepted. We are thus not in agreement with the dissenting findings recorded by the CIT(A) on this aspect. For the above reasons, the modified ground of appeal no. 2 taken by the assessee is allowed. Eligibility of statement of the assessee alleging admission - AO used the statement to corroborate said material found during the survey but, at the same time, the assessee had successfully explained the contents of the said impounded document/s in responding to the additions made by the AO and thus, were rightly deleted as by the CIT(A). Hence, no blind reliance could be placed on the statement of the assessee alleging admission. The law is well settled that no addition can be made solely based on the statement. Even the CBDT directed the subordinate authorities not to press the assessee to make surrenders. We also find that the CIT(A) rightly placed reliance on the decision of C.K. Abdul Aziz 2019 (9) TMI 357 - KERALA HIGH COURT Thus, we find no infirmity in the order of the CIT(A) on this aspect. It is necessary to clarify that we have confirmed the deletions of additions by the CIT(A) on merits independent of these legal aspects. Therefore, the ground of the Revenue, on the aspect of the admission by the assessee in statement is hereby dismissed. Alleged admission is claimed to have been retracted by filing affidavit before the ADIT (INV) within a period around 2 months after the survey when admission was made - CIT(A) although rejected the claim of the assessee of filing retraction in absence of any evidence brought on record of approaching to the higher authorities. However, he appreciated the contents of the impounded documents and the explanation furnished by the assessee thereon and recorded independent finding, while granting relief. Therefore, he recorded a categorical finding that the retraction from the earlier statement was with sufficient, credible and corroborate evidence to support the claim of the assessee. We have also carefully considered the claim of filling retraction; however, in view of the contrary claims raised, we have not gone into this controversy. Addition based on impounded document which is a registered sale deed - Though the assessee admitted that it was a cash payment not recorded anywhere in the accounts however, no evidence in support of this statement was found and needless to say that, it usually happens for want of availability of the record and because of tensed moments, an assessee is used to admit. But the fact remain that the payment of said advance is recorded in the Balance Sheet which was submitted before the authorities below through a letter. Neither the accounts were rejected nor this contention was disproved by the Revenue and therefore, the same shall prevail over the verbal statement of the assessee. We thus find no force in the addition, so made by the AO. Even there was no occasion for the AO to have made an addition of the entire Rs. 20,22,500/- and since the CIT(A) has already deleted Rs. 9,75,000/-, the balance addition is also deleted. Payment did not pertain to the year under consideration - Addition made on account of the alleged cash payments to one Ajay Modi in connection with taking over the management of Bhagat Public School - We are in full agreement with the contention of the ld. AR that, (alternatively), such addition (if at all required) could have been made only in A.Y. 2014-15, but not in any case in A.Y. 2016-17. Such interpretation is supported by the language of S. 69 of the Act, based on the jurisdictional facts, which could not be disputed by the Revenue - we find no justification for making the impounded addition and the same is deleted. Application of Sec 115BBE - Only identifiable source of investment or asset or expenditure, which were alleged to be unexplained and additions were made by the AO, emanates from the only source of income being advertising business in his proprietary namely M/s Quick Advertising Company, as per the computation of total income. There is no other known source of income, which could give rise to undisclosed income, under consideration. We find support from the decisions of Ram Narayan Birla 2016 (9) TMI 1354 - ITAT JAIPUR Rekha Shekawat 2022 (8) TMI 791 - ITAT JAIPUR and Bajranggan Traders 2017 (11) TMI 388 - RAJASTHAN HIGH COURT - Thus, otherwise also in the facts circumstances of the present case Sec 115BBE could not have been invoked. For the above reasons the invoking of Sec 115BBE is therefore, quashed, and this ground taken by the assessee is therefore, allowed. Addition u/s 69C on account of unexplained agriculture expenses - We find no force in the ground so taken as the ld. CIT(A) has recorded cogent and detailed findings while rejecting this ground taken by the assessee before him. Therefore, this ground No. 7 taken by the assessee is dismissed.

Note:- Evidentiary Value of Statements Recorded During Income Tax Surveys: A Judicial Analysis

Issues Involved:
1. Legality and evidentiary value of statements recorded during the survey.
2. Addition of Rs. 20,22,500 based on the impounded documents.
3. Addition of Rs. 1,58,00,000 on account of unaccounted investment in Bhagat Public School.
4. Addition of Rs. 9,50,000 on account of unaccounted investment in ST land.
5. Benefit of telescoping and its computation.
6. Application of Section 115BBE.
7. Charging of interest under Sections 234A & 234B.

Issue-wise Detailed Analysis:

1. Legality and Evidentiary Value of Statements Recorded During Survey:
The assessee contended that the statements recorded during the survey under Section 133A have no evidentiary value. The Tribunal agreed, stating that the statute provides different provisions for recording statements under Sections 132(4), 133A(3)(iii), and 131, each operating independently. Statements recorded under Section 133A cannot be used as evidence against the assessee. The Tribunal cited various decisions, including CIT vs. S. Khader Khan Son, to support this view. The Tribunal concluded that the CIT(A) wrongly relied on the survey statements and that such statements, even if recorded on oath, do not hold evidentiary value in the absence of corroborative evidence.

2. Addition of Rs. 20,22,500 Based on Impounded Documents:
The Tribunal found that the impounded registered sale deed showed Devilal Bairava as the buyer of the agricultural land, and the assessee was neither a party to the transaction nor had signed the document. The Tribunal noted that the payment of Rs. 9,75,000 was recorded in the assessee's balance sheet and was not disputed by the Revenue. Therefore, the addition of Rs. 10,47,500 was deleted, and the Revenue's ground for challenging the deletion of Rs. 9,75,000 was dismissed.

3. Addition of Rs. 1,58,00,000 on Account of Unaccounted Investment in Bhagat Public School:
The Tribunal noted that the addition of Rs. 1,58,00,000 consisted of three figures: Rs. 40,00,000, Rs. 60,00,000, and Rs. 58,00,000. The addition of Rs. 40,00,000 was deleted by the CIT(A), and the Revenue did not appeal against it. The Tribunal found that the payment of Rs. 60,00,000 did not pertain to the year under consideration but to an earlier year, as indicated by the language of the agreement. Therefore, the addition of Rs. 60,00,000 was deleted. The addition of Rs. 58,00,000 was not pressed by the assessee and was confirmed.

4. Addition of Rs. 9,50,000 on Account of Unaccounted Investment in ST Land:
The Tribunal found that the impounded document showed the date of payment as 04.11.2016, which falls in the financial year 2016-17, relating to A.Y. 2017-18. Therefore, the CIT(A) rightly deleted the addition in the current year. The Tribunal dismissed the Revenue's ground on this issue.

5. Benefit of Telescoping and Its Computation:
The Tribunal noted that the CIT(A) allowed the benefit of telescoping, reducing the total additions sustained to Rs. 28,72,212. However, the Tribunal found that the CIT(A) wrongly reduced Rs. 11,60,000 as income utilized in A.Y. 2015-16, which had already been settled under the VSV scheme. Therefore, the net addition sustained was reduced to Rs. 16,72,212. The Tribunal further noted that the additions sustained up to the stage of the ITAT were Rs. 58,55,490, and after giving effect to the available cash, the net addition remained NIL. The Tribunal allowed the additional ground taken by the assessee for recomputing the benefit of telescoping.

6. Application of Section 115BBE:
The Tribunal found that the additions sustained were related to the business income of the assessee and could not be classified under the head "Income from Other Sources" for applying Section 115BBE. The Tribunal quashed the invocation of Section 115BBE and allowed the assessee's ground on this issue.

7. Charging of Interest Under Sections 234A & 234B:
The Tribunal noted that the charging of interest under Sections 234A & 234B is consequential and directed the AO to recompute the same after giving effect to the Tribunal's order.

Conclusion:
The Tribunal partly allowed the appeal of the assessee and dismissed the appeal of the Revenue. The Tribunal directed the AO to recompute the tax and interest liabilities after giving effect to the Tribunal's findings.

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