2013 (11) TMI 938 - AT - Income Tax

Addition on account of suppression of income nature of the documents found during the survey - evidentiary value of statement recorded u/s 133A - Held that - The entries, neatly made, one for each date, for different dates, in a chronological order, by a partner managing the affairs of the firm (i.e., for most part), cannot be a scrawl, without any meaning. - Besides, the assessee s explanation , leaves one in no manner of any doubt in this respect. This is as each of the three versions by the assessee in explaining these entries are only in terms of money. - documents are not dumb documents. - high court in the case of Surendra M. Khandhar v. Asstt. CIT 2009 (1) TMI 83 - BOMBAY HIGH COURT , wherein the hon ble court has clarified that the document found during survey is, unless successfully rebutted by the assessee, presumed to be true. Addition is confirmed as reasonable, meriting confirmation; the assessee having itself disclosed an excess of around 6% on even the expenses recoverable from its clients - The statement u/s.133A is by itself of no evidentiary value, and it is validity, if so, would only be with reference thereto, i.e., to the extent it explains or corroborates and/or supports the material/evidence found consideration is given to the assessee s argument of netting the amount written on the right side, so that its nature could only be a different, i.e., representing out-lays, only to find the same as not acceptable. This is for the reason that it is not possible that such expenditure is incurred only on few (sixteen) days in a year, or even more importantly, not in the regular course - Further-more, the assessee surprisingly does not receive any amount on the said dates, so that it may represent an either or situation. Rather, the expenditure would not only be incurred on the basis of which the amount stands received, but also, where it is not so, there being as afore-noted a time gap between the entries in each row, so that there is no expenditure on all but 16 days during the relevant previous year Decided in favor of Revenue.

Summary

Issues Involved:
1. Admission of delayed cross-objection by the assessee.
2. Nature and validity of documents found during the survey.
3. Validity of the assessee's retraction of the admission.
4. Estimation of suppressed income.
5. Disallowance of expenses by the Assessing Officer (A.O.).

Detailed Analysis:

1. Admission of Delayed Cross-Objection by the Assessee:
The assessee's cross-objection was delayed by 140 days. The delay was explained through an affidavit citing the deaths of two partners and a medical certificate. The tribunal found the reasons sufficient, accepted the condonation application, and proceeded with the hearing.

2. Nature and Validity of Documents Found During the Survey:
The assessee, a partnership firm, was surveyed under Section 133A of the Income Tax Act, 1961. Loose papers and a scrap notebook containing various entries were found. The assessee initially admitted a sum of Rs. 2.3 crores as income but later retracted, claiming the disclosure was under duress. The A.O. inferred the entries as suppressed income, amounting to Rs. 214.28 lakhs. The tribunal examined the documents and found them to be meaningful entries, not dumb documents, as claimed by the assessee. The tribunal noted that the figures, suffixed by 'L' and 'T', represented sums of money related to the business.

3. Validity of the Assessee's Retraction of the Admission:
The tribunal observed that a mere denial without substantive evidence does not constitute a valid retraction. The assessee failed to provide any material to show coercion or influence at the time of the initial admission. The tribunal upheld the A.O.'s reliance on the initial admission, supported by the documents found during the survey.

4. Estimation of Suppressed Income:
The tribunal found merit in the assessee's argument that the entire amount of Rs. 214.28 lakhs could not represent suppressed income. The CIT(A) had restricted the addition to 10% of the aggregate amount, i.e., Rs. 21.42 lakhs, considering it as gross receipts. The tribunal deemed this estimation reasonable, noting that the assessee had disclosed an excess recovery of expenses from customers, which was offered as income. The tribunal confirmed the CIT(A)'s estimation of suppressed income at Rs. 21.42 lakhs.

5. Disallowance of Expenses by the Assessing Officer (A.O.):
The A.O. disallowed 10% of the claimed expenses, amounting to Rs. 11.34 lakhs, as they were not verifiable. The CIT(A) deleted this disallowance, finding that the assessee had recovered the expenses from customers. The tribunal, however, noted that the assessee's accounts showed an excess recovery, corroborating the A.O.'s disallowance. The tribunal restored the matter to the CIT(A) for a decision on the merits, including the extent of disallowance, after hearing both sides.

Conclusion:
The tribunal partly allowed the Revenue's appeal for statistical purposes and dismissed the assessee's cross-objection. The order was pronounced on 15/03/2013.