2013 (10) TMI 478 - AT - Income Tax

Additions on the basis of statement made u/s 133A - Addition made on the basis of surrender made at the time of Survey u/s 133A of the Income Tax Act, which was later retracted by the Assessee Held that - Retraction has been made by the assessee within his own right and on the basis of facts on record and in the absence of any incriminating document found and therefore, even if the admission has been made on the date of survey that cannot be conclusive and the assessee has the right to prove that such admission made was incorrect Reliance has been placed upon the judgment of Hon ble Supreme Court of India in the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala And Another reported in 1971 (9) TMI 64 - SUPREME Court , wherein it was held that admission is an extremely important price of evidence but it cannot be said that it is conclusive and it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts. Also in view of the decision of Hon ble Kerala High Court in the case of Paul Mathews And Sons vs. C.I.T. reported in 2003 (2) TMI 25 - KERALA High Court , where it has been held that whatever statement is recorded under section 133A of the Act, it is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law - Also no books of account has been rejected by the A.O. and on one hand, the AO is accepting investment made in the building and on the other hand in the absence of any incriminating document is alleging that the assessee has made undisclosed investment. The AO cannot blow hot and cold in the same breath in this regard Decided in favor of Assessee.

Summary

Issues Involved:
1. Addition of Rs.20,00,000 on account of alleged unexplained expenditure in construction of the building.
2. Basis and justification for the addition.
3. Reliance on statement recorded under section 133A.
4. Violation of CBDT Instructions.
5. Retraction of the alleged surrender.
6. Evidence supporting the cost of construction.
7. Consideration of evidence and explanations provided by the assessee.
8. Justification of the addition.
9. Penalty proceedings under section 271(1)(c) and penal interest under sections 234B & 234C.

Issue-wise Detailed Analysis:

1. Addition of Rs.20,00,000 on account of alleged unexplained expenditure in construction of the building:
The assessee contested the addition of Rs.20,00,000, arguing that it was made without any basis and was upheld without pointing out any defect or omission in the books of account, vouchers, or other records.

2. Basis and justification for the addition:
The addition was based solely on a statement recorded under section 133A during a survey conducted on 06.10.2006. The assessee argued that this statement lacked corroborative evidence and was unjust and unlawful. The Assessing Officer (AO) confirmed the addition under section 69B, citing the voluntary nature of the surrender and the absence of any evidence of the revised surrender of Rs.8,00,000 being accepted by the department.

3. Reliance on statement recorded under section 133A:
The assessee argued that the statement recorded under section 133A has no evidentiary value, as per judicial precedents, including the Hon'ble Supreme Court's decision in CIT vs. S. Khader Khan Son and the CBDT Circular dated 10.03.2003. The AO, however, relied on the original statement and the voluntary nature of the surrender.

4. Violation of CBDT Instructions:
The assessee contended that the addition violated CBDT Instructions F.No.286/2/2003 dated 10.03.2003, which discourage obtaining uncorroborated confessions during search and survey operations. The AO did not consider this instruction, leading to the assessee's grievance.

5. Retraction of the alleged surrender:
The assessee retracted the surrender, claiming it was made under mental tension and without adequate knowledge of the books of account. The revised surrender of Rs.8,00,000 was discussed with the JCIT and accepted, but the AO did not acknowledge this retraction.

6. Evidence supporting the cost of construction:
The assessee provided evidence of the cost of construction, including a valuation certificate and details of expenditures recorded in the books of account. The AO did not find any discrepancies in the books of account or refer the matter to the Valuation Cell.

7. Consideration of evidence and explanations provided by the assessee:
The assessee argued that the evidence and explanations provided were not properly considered by the AO or the CIT(A). The CIT(A) confirmed the AO's action despite the assessee's detailed submissions and explanations.

8. Justification of the addition:
The assessee contended that the addition was not justified by any evidence or material on record. The AO's reliance on the original statement without any corroborative evidence was deemed unjust and unlawful.

9. Penalty proceedings under section 271(1)(c) and penal interest under sections 234B & 234C:
The assessee argued that the penalty proceedings and penal interest were unjust and unlawful, given the lack of evidence supporting the addition.

Conclusion:
The Tribunal found that the assessee successfully retracted the surrender statement and that the addition was not supported by any concrete material evidence. The Tribunal emphasized that statements recorded under section 133A have no evidentiary value and that the AO should rely on evidence/materials gathered during the survey. The Tribunal directed the AO to delete the addition of Rs.20,00,000 and allowed the assessee's appeal.