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2009 (7) TMI 911 - AT - Income TaxAddition based on income surrendered during survey - Statement recorded during survey u/s 133A relied upon but later on retracted without any corroborating evidence at all - construction cost of building unexplained - real owner - difference in stock found during the survey - CIT(A) confirmed the addition. HELD THAT - Nothing was found during the course of survey to indicate that assessee has either incurred himself any expenditure on the construction of building nor that he has advanced the money to his brother for construction of the building, which was not found to be recorded in the books of account. Even the CIT(A) while upholding the addition on account of surrender made on account of investment in building did not refer the matter to the DVO to find out if any excess investment was made in the building as compared to the investment shown by brother of the assessee who was separately assessed. Merely on the basis of statement having been recorded, no addition can be made unless the same can be corroborated by any material either found during the course of survey or subsequently brought on record by the department while framing the assessment. Even appellate proceedings are extension of the assessment proceedings and the CIT(A) has got co-terminus powers to do what the AO has failed to do. The fact that surrender on account of investment in building was not recorded on the day of survey, but the assessee was subsequently called to the office on the next date and he was forced to surrender the amount itself indicate that undue influence was exercised on the assessee to surrender the amount. As in the case of Paul Mathews Sons v. CIT 2003 (2) TMI 25 - KERALA HIGH COURT held that statement of assessee recorded during the course of survey under provisions of section 133A(3)( iii ) can be said to be useful or relevant to the assessment proceedings only in the circumstances when there is a material on record to prove through the existence of any of the activities on the basis of which disclosure is stated to be made. It was categorically mentioned by the Hon ble High Court that statement recorded u/s 133A cannot be given evidentiary value as such evidentiary value is not attached with the provisions of section 133A. The only basis for addition as per AO was the statement of the assessee without any corroborative material or documentary evidence on record. Hon ble Madras High Court in the case of CIT v. S. Khandar Khan Chand 2007 (7) TMI 182 - MADRAS HIGH COURT , observed that where assessee has admitted suppressed income but there was no documentary evidence in possession of the department, no addition can be made on the basis of such statement. The Hon ble High Court reviewed all the available judgments on the point along with CBDT Instructions dated 10-3-2003, and went to the extent of holding that section 133A does not empower any IT authorities to examine any person on oath and hence, such statement has no evidentiary value and any admission made during such statement cannot by itself be made the basis for addition. The AO has also recorded a wrong fact to the effect that advance tax payment was made by the assessee on the surrendered amount. However, neither any tax was paid by the assessee nor the amount of surrender in the investment in the building was offered for tax in the return of income filed after the survey. Thus, it is crystal clear that the AO has made addition contrary to the Instruction of CBDT dated 10-3-2003 and also against clear ratio of the decision of Hon ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd. 1971 (9) TMI 64 - SUPREME COURT . Therefore, the addition made by the lower authorities merely on the basis of statement recorded during survey and thereafter, without bringing any corroborative material on record, was devoid of any merits. We are, therefore inclined to hold that no addition was warranted on account of mere surrender taken during survey by exercising undue influence and which was retracted while filing the return after survey. In the result, the appeal of the assessee is allowed.
Issues Involved:
1. Addition of Rs. 22,90,000 based on a retracted statement during a survey under section 133A. 2. Basis of the CIT(A)'s order on conjectures and disregard of facts. 3. Ownership and investment in the property by the assessee's brother. 4. Initiation of penalty and charging of interest. Issue-wise Detailed Analysis: 1. Addition of Rs. 22,90,000 Based on Retracted Statement: The primary issue revolves around the addition of Rs. 22,90,000 made by the Assessing Officer based on a statement recorded during a survey under section 133A, which was later retracted by the assessee. The assessee argued that this addition was made without any corroborating evidence. The tribunal noted that the assessee had surrendered Rs. 15,34,000 during the survey for discrepancies in stock and cash and paid tax on it. However, the additional amount of Rs. 22,90,000 related to the construction cost of a building owned by the assessee's brother was also added by the Assessing Officer without any supporting evidence. The tribunal emphasized that no material was found during the survey or subsequently to substantiate this additional investment. 2. Basis of the CIT(A)'s Order on Conjectures: The assessee contended that the CIT(A)'s order was based on conjectures and disregarded the facts, judicial precedents, and instructions from the Board regarding the evidentiary value of statements made during surveys. The tribunal found that the CIT(A) failed to refer the matter to the Departmental Valuation Officer (DVO) to ascertain the actual investment in the property. The tribunal highlighted that the CIT(A) did not take any steps to verify the correctness of the investment claimed by the assessee's brother, which was a critical oversight. 3. Ownership and Investment in the Property by the Assessee's Brother: The tribunal thoroughly examined the ownership and investment in the property No. 2195/5, Rama Colony, Rohtak. It was established that the property was owned by the assessee's brother, who had provided a detailed explanation of the sources of investment, including a bank loan and withdrawals from his accounts. The tribunal noted that the Assessing Officer did not bring any evidence to suggest that the investment in the property exceeded what was disclosed by the assessee's brother. The tribunal also pointed out that the statement recorded during the survey did not indicate that the assessee had incurred any expenditure on the property or advanced money to his brother for its construction. 4. Initiation of Penalty and Charging of Interest: The assessee argued that the CIT(A) failed to adjudicate on the grounds concerning the initiation of penalty and charging of interest. The tribunal observed that the surrender of Rs. 22,90,000 was made under undue influence and coercion, and no corroborative material was found to support this surrender. The tribunal referred to various judicial precedents, including the Hon'ble Kerala High Court's decision in Paul Mathews & Sons v. CIT, which held that statements recorded during surveys under section 133A do not have evidentiary value unless corroborated by material evidence. The tribunal concluded that the addition made by the lower authorities was devoid of merits and no addition was warranted based on the mere surrender taken during the survey. Conclusion: The tribunal allowed the appeal of the assessee, holding that the addition of Rs. 22,90,000 was made without any corroborative evidence and was based solely on a retracted statement recorded during the survey. The tribunal emphasized the importance of corroborative material to substantiate any addition made during assessment proceedings and highlighted the need for proper verification of facts by the assessing authorities.
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