2025 (1) TMI 440 - AT - Income Tax

Addition based on a statement made during a survey u/s 133A - retraction of the statement by the assessee - lack of documentary evidence to support the alleged undisclosed income - HELD THAT - Additions have been made in the hands of the assessee primarily on the basis of statement of the assessee recorded during the course of survey proceedings. It is observed that while making the additions in the hands of the assessee on account of undisclosed income earned from land broking, there is no specific reference to land transactions deals done by the assessee during the impugned assessment year, there is no specific reference with regards to the name of purchaser and seller of such properties, there is no reference as to how this figure of Rs. 14 crores was arrived by the Department and in respect to which specific properties, there is no specific details of land which was purchased and sold for which the assessee earned brokerage income and further, there is no mention of the value of transactions for which the assessee earned brokerage income. It is seen that the entire basis of making addition of Rs. 14 crores to the income of the assessee is on the basis of statement recorded u/s 131A of the Act, during the course of survey proceedings. It is a well settled law that no additions can be made only on the basis of statement of the assessee unless supported by incriminating evidence against the assessee. The present additions are not liable to be sustained in the hands of the assessee. Appeal of the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment are:

Whether the addition of Rs. 14 crores to the assessee's income, based on a statement made during a survey under Section 133A, is valid in the absence of corroborative evidence.
Whether the retraction of the statement by the assessee, claiming coercion, affects the validity of the addition.
Whether the lack of documentary evidence to support the alleged undisclosed income impacts the assessment.
Whether the procedural aspects of recording and relying on statements during surveys were adhered to, as per legal standards and precedents.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Validity of Addition Based on Survey Statement

Relevant Legal Framework and Precedents: The court considered the legal framework under Section 133A of the Income Tax Act, which allows for surveys but does not permit the recording of sworn statements. Precedents such as the decisions in Dr. Dinesh Jain v. Income Tax Officer and Ramanbhai B. Patel were reviewed, which emphasize the need for corroborative evidence to support statements made during surveys.
Court's Interpretation and Reasoning: The court noted that the addition was primarily based on the assessee's statement during the survey, without any corroborative documentary evidence. It highlighted that statements made during surveys, without further evidence, do not hold substantial evidentiary value.
Key Evidence and Findings: The court found that the Assessing Officer (AO) did not present any specific evidence of land transactions or brokerage income to substantiate the Rs. 14 crore addition. The statement was deemed insufficient as the sole basis for the addition.
Application of Law to Facts: The court applied the principle that additions cannot be sustained solely on statements made during surveys unless supported by evidence. The lack of details regarding transactions, parties involved, and specific properties undermined the addition.
Treatment of Competing Arguments: The court considered the assessee's argument that the statement was made under coercion and without corroborative evidence. It contrasted this with the AO's reliance on the statement and previous admissions by the assessee.
Conclusions: The court concluded that the addition of Rs. 14 crores was not sustainable due to the absence of corroborative evidence and the procedural shortcomings in relying solely on the survey statement.

Issue 2: Impact of Retraction and Coercion Claims

Relevant Legal Framework and Precedents: The court examined the validity of retractions and the circumstances under which they are considered credible, referencing cases like Kailashben Manharlal Chokshi vs. CIT which emphasize the need for voluntary and corroborated statements.
Court's Interpretation and Reasoning: The court acknowledged the assessee's claim of coercion and noted the significant delay in retraction. However, it focused on the lack of evidence supporting the original statement.
Key Evidence and Findings: The court found no substantive evidence to support the original statement or the alleged income, reinforcing the assessee's retraction.
Application of Law to Facts: The court applied the principle that coerced or unsupported statements cannot form the basis for additions, especially when retracted with reasonable justification.
Treatment of Competing Arguments: The court weighed the assessee's retraction against the AO's assertion of voluntary admission, ultimately siding with the need for evidence.
Conclusions: The retraction was deemed credible due to the absence of corroborative evidence, and the addition was not justified.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The court emphasized, "It is a well settled law that no additions can be made only on the basis of statement of the assessee unless supported by incriminating evidence against the assessee."
Core Principles Established: The judgment reinforced the principle that survey statements must be corroborated by evidence to justify income additions. It also highlighted the importance of procedural fairness and the credibility of retractions.
Final Determinations on Each Issue: The court determined that the addition of Rs. 14 crores was invalid due to the lack of supporting evidence and procedural deficiencies in relying solely on the survey statement. The appeal was allowed, and the addition was set aside.

In summary, the court's decision underscores the necessity for corroborative evidence when making additions based on survey statements and the importance of considering retractions when claims of coercion are made. The judgment aligns with established legal standards and emphasizes procedural integrity in tax assessments.

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