2013 (6) TMI 521 - AT - Income Tax

Re opening of assessment - survey u/s.133A - Held that - As during the course of assessment proceeding for A.Y. 2003-04 and 2004- 05 one of the tenant Shri Rashikbhai Chotabhai Patel of the project developed by M/s.Vastu Construction, had confronted with the impounded material and admitted that he has made the payments over and above the documented price totalling to Rs.22 lacs through cheque and cash. This confession leads to confirmation of payment of on money by Shri Rashikbhai Chotabhai Patel. On verification of return of income for A.Y. 2003-04 & 2004-05 the assessee has shown Rs.78713/- and Rs.46719/- as his total income for both the years. Therefore, the source of on money payment made by the assessee is required to be verified and needs further investigation. The document which was found from the brief case of one Shri Bankim D.Patel, C/o.Vastu Construction has indicated that in respect of Building No.7, the total area was 3020.87 sq.ft. for which the cost of plot was Rs.8,71,200/- and the cost of construction was Rs.13,59,000/-, thus totalling to (approximately) Rs.24,16,000/-. Thus Revenue Department had enough information in its possession, therefore fully empowered to reopen the assessment or otherwise assess this assessee specially within four years as it has happened in the present case - Against assessee. Addition u/s.69 on the basis if said statement - Held that - This is not a case where merely on the basis of a statement the impugned addition was made. This is a case where the statement was recorded on the basis of an incriminating material recovered during the course of survey operation. On merits the AO has examined the sources of investment to the extent of Rs.11,28,000/- out of the total investment in the said property of Rs.22,16,196/-, hence only the difference amount of Rs.10,88,196/- was taxed in the hands of the assessee. The assessee has not made any attempt to explain the balance unexplained investment. Thus there was no fallacy in the findings on facts as also on law by the Revenue Authorities, hence the said addition is hereby confirmed. Against assessee.

Summary

Issues Involved:
1. Validity of the assessment order passed under section 143(3) read with section 147 of the Income Tax Act.
2. Whether there was sufficient material before the Assessing Officer (AO) to entertain the belief that income had escaped assessment.
3. Legitimacy of the addition of Rs.10,88,196/- under section 69 of the Income Tax Act based on the retracted statement of the appellant.

Detailed Analysis:

1. Validity of the Assessment Order under Section 143(3) read with Section 147:
The appellant challenged the validity of the assessment order passed under section 143(3) read with section 147, arguing that the Commissioner of Income-tax (Appeals) erred in dismissing the ground of appeal. The Tribunal noted that the AO had issued a notice under section 148 based on a survey conducted under section 133A, which revealed a document indicating undisclosed income. The Tribunal upheld the AO's decision, stating that the reopening of the assessment was justified based on the incriminating material and the statement of the appellant recorded during the survey.

2. Sufficiency of Material for Belief of Escaped Income:
The appellant argued that there was no material before the AO at the time of issuing the notice under section 148 to entertain the belief that income had escaped assessment. The Tribunal examined the reasons recorded by the AO, which included a statement from the appellant admitting to payments over and above the documented price for a property. The Tribunal found that the AO had sufficient material, including the appellant's statement and documents recovered during the survey, to form a belief that income had escaped assessment. The Tribunal dismissed the appellant's argument, emphasizing that the AO's belief was based on concrete evidence.

3. Addition of Rs.10,88,196/- under Section 69:
The appellant contested the addition of Rs.10,88,196/- under section 69, arguing that it was based merely on a retracted statement. The Tribunal noted that the AO had relied on the appellant's statement recorded during the survey, which was corroborated by documents indicating higher payments for the property than those documented. The appellant had retracted the statement, claiming it was made under duress and due to ill-health. However, the Tribunal found that the retraction was not immediate and lacked supporting evidence. The Tribunal upheld the AO's addition, stating that the statement was supported by incriminating material, and the appellant failed to provide a satisfactory explanation for the discrepancy in the investment amount.

Conclusion:
The Tribunal dismissed the appeal, affirming the validity of the assessment order under section 143(3) read with section 147, the sufficiency of material for the AO's belief of escaped income, and the addition of Rs.10,88,196/- under section 69 based on the appellant's statement and corroborating evidence. The Tribunal emphasized the importance of timely retraction and supported evidence in contesting statements made during surveys.