2015 (2) TMI 256 - HC - Income Tax

Addition to income - survey operation under Section 133A - Held that - In the present case, the admitted facts are that during the survey, a Director of the assessee - who was duly authorized to make a statement about the materials and the undisclosed income, did so on 20.11.2007. The Company did not retract it immediately or any time before the show cause was issued to it. For the first time, in reply to the show cause notice it faintly urged that the statement was not voluntary and sought to retract it. The reply, a copy of which has been placed on record, undoubtedly makes reference to some previous letter retracting the statement. Learned counsel urged that that letter was written on 21.12.2007. However, the actual reply to the show cause notice is silent as to the date. This itself casts doubt as to whether the retraction was in fact made or was claimed as an afterthought. Furthermore, this Court is of the opinion that in the circumstances of the case both the CIT (A) and ITAT were correct in adding back the amount of ₹ 63,33,260/- after adjusting the expenditure indicated. The explanation given by the assessee, in the course of the appellate proceedings, that the surrender was in respect of a certain portion of the receipt which had remained undisclosed or that some parts of it were supported by the books, is nowhere borne out as a matter of fact, in any of the contentions raised by it before the lower authorities. For these reasons, this Court is of the opinion that no substantial question of law arises - Decided against assessee.

Issues:
1. Addition of undisclosed income in the assessment.
2. Validity of the addition made by the Assessing Officer.
3. Interpretation of Section 133A and Section 132(4) of the Income Tax Act.
4. Evidentiary value of statements recorded during survey operations.
5. Consideration of retracted statements in tax assessments.
6. Application of legal precedents in similar cases.

Issue 1: Addition of Undisclosed Income
The case involved the assessee engaged in real estate and construction activities, subjected to a survey operation under Section 133A of the Income Tax Act. During the survey, a Director disclosed an additional income outside the regular books of accounts. The Assessing Officer added back the undisclosed amounts to the total income, despite the assessee's claim that the surrender was not voluntary and bona fide. The CIT (A) partially relieved the assessee by considering debit entries from gross receipts, reducing the taxable income.

Issue 2: Validity of Addition
The assessee contested the addition of undisclosed income, arguing that the Revenue lacked corroborative objective material to support the addition. The Revenue relied on rough notings and statements recorded during the survey. The Court examined previous judgments emphasizing the need for corroborative evidence and held that adverse inferences cannot be solely based on statements recorded during surveys without additional supporting material.

Issue 3: Interpretation of Sections 133A and 132(4)
The Court analyzed the discretionary powers granted to authorities under Section 133A and Section 132(4) of the Income Tax Act. It noted that while Section 132(4) allows the examination on oath, Section 133A permits the recording of statements relevant to proceedings. The Court highlighted the distinction between search and seizure operations under Section 132 and survey operations under Section 133A.

Issue 4: Evidentiary Value of Statements
The Court discussed the evidentiary value of statements recorded during surveys, emphasizing the need for supporting material to draw adverse inferences. It cited a case where the AO's addition based solely on a statement during a survey was deemed inappropriate due to the availability of relevant records explaining the discrepancy.

Issue 5: Consideration of Retracted Statements
The Court examined the timing of the assessee's retraction of the statement made during the survey. It noted discrepancies in the retraction process and concluded that the retraction was not adequately supported or timely, leading to the affirmation of the addition of undisclosed income.

Issue 6: Application of Legal Precedents
The Court referred to previous judgments dealing with additions in tax assessments based on undisclosed income. It highlighted the importance of factual evidence and the lack of substantial questions of law in the present case, ultimately dismissing the appeal.

This detailed analysis of the judgment covers all the relevant issues comprehensively, providing a thorough understanding of the legal reasoning and outcomes in the case.

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