2015 (10) TMI 920 - AT - Income Tax

Addition being the difference between the declared income as per the statement given during the course of survey and income as per the income tax return - CIT(A) deleted the addition - Held that - The estimated declaration of income during the course of survey was given in December 2006 for the period 1.4.2006 to 31.3.2007 i.e. much prior to close of the accounting year. No person can tell in advance in the month of December 2006 as to what exactly would be the income for the entire period of 1.4.2006 to 31.3.2007. The return of income filed by the assessee is on the basis of audited statement of accounts and not on the basis of any surrender. The books of accounts has not been rejected nor any incriminating material or evidence of undisclosed income was unearthed either during the course survey or assessment proceedings. The Assessing Officer has himself recognized that the declaration made by the assessee was not based on any surrender. The Assessing Officer has not assessed the income at ₹ 6 crores which was the estimated declaration of income during the course survey, but he has completed the assessment at ₹ 5,14,46,510/-. It is trite position of law that statement recorded during the course of survey cannot be the sole basis for making an addition especially when there is nothing incriminating material or any undisclosed income unearthed during the course of survey proceedings u/s 133A of the Act.In view of the aforesaid reasoning we are of view that the order of the CIT(A) is correct and in accordance with law and no interference is called for - Decided against revenue.

Summary

Issues:
Whether the CIT(A) was justified in deleting the addition made by the Assessing Officer based on the difference between declared income during a survey and income as per the income tax return for the relevant assessment year 2007-08.

Analysis:
The main issue in this case was whether the CIT(A) was correct in deleting the addition of Rs. 71,91,658 made by the Assessing Officer based on the difference between the income declared during a survey and the income as per the income tax return for the assessment year 2007-08. The Assessing Officer had added the difference between the estimated income declared during the survey and the returned income as the income of the assessee firm. The reasoning behind this addition was that the assessee had declared income only in the hands of specific entities and not in the hands of an individual partner. However, the CIT(A) found that the addition was not justified as it was made without rejecting the books of accounts and without considering the complexities involved in estimating income in the middle of the year, especially in the real estate sector where exact income estimation is challenging due to project durations. The CIT(A) also referred to a Supreme Court decision emphasizing that statements recorded during surveys have no evidentiary value for making additions. Therefore, the CIT(A) deleted the addition.

Another crucial aspect of the case was the discrepancy between the estimated income declared during the survey and the actual income declared in the income tax return. The partner of the assessee firm had estimated a total income of Rs. 12.25 crores from group concerns during the survey. However, upon finalization and audit of accounts, the actual income declared was lower. The Assessing Officer accepted the income declared by one entity but made an addition in the case of the assessee firm based on the difference between the estimated and actual income. The CIT(A) found that the estimation made during the survey, which was much prior to the end of the accounting year, cannot be considered definitive. The return of income was based on audited statements, and no undisclosed income was found during the survey or assessment. The CIT(A) held that the statement recorded during the survey cannot be the sole basis for making additions, especially without any incriminating material or evidence of undisclosed income.

In conclusion, the Appellate Tribunal upheld the decision of the CIT(A) and dismissed the appeal filed by the Revenue. The Tribunal agreed that the addition made by the Assessing Officer was not justified, considering the circumstances of the case, the complexities involved in estimating income in the real estate sector, and the lack of incriminating material or undisclosed income. The Tribunal found the CIT(A)'s order to be correct and in accordance with the law, leading to the dismissal of the Revenue's appeal.