2017 (10) TMI 378 - AT - Income Tax

Addition u/s 69 - survey u/s 133A - Held that - It is the assessee, who has to prove the contents are false or incorrect. In this case the assessee has not discharged it s burden. The ld. A.R further argued that the AO has not given the survey statement which was sought by them on 14/02/2011 and 21/02/2011. It is settled issue that during the pendency investigation the statements would not be supplied to the assessee and the copies will be given when the evidences are used against the assessee. This view is supported by the Hon ble Madras High court judgement in the case of Advantage Strategic Consulting (P.) Ltd 2016 (7) TMI 939 - MADRAS HIGH COURT . In this case neither the assessee nor the DR could inform us when the copies of statements were supplied to the assessee. Therefore, we are of the considered opinion that the case should be remitted back to the file of the A.O. to give sufficient opportunity to the assessee to prove his case of excess payment and the contents recorded in the seized material was incorrect. The assessee should produce Mr. B. Babujee and B. Srinivas with relevant evidences to prove the hand writing and explain the contents of noting in full. The A.O. is directed to supply the copies of statements recorded and the impounded material and allow the assessee to explain the case, and also examine both Mr. B. Babujee and B. Srinivas in detail and decide the issue afresh on merits. Accordingly the assessment is set aside with direction to re do the same de novo.

Issues Involved:
1. Deletion of addition towards unexplained investment amounting to ?2,05,59,255.
2. Validity and reliability of evidence found during the survey.
3. Onus of proof under Section 292C of the Income Tax Act.
4. Admissibility and verification of additional evidence (affidavit) submitted by the assessee.

Detailed Analysis:

1. Deletion of Addition Towards Unexplained Investment:
The primary issue in the appeal was the deletion of an addition amounting to ?2,05,59,255 towards unexplained investment. The assessee, engaged in real estate, had declared a total income of ?6,01,420. A survey under Section 133A of the Income Tax Act led to the discovery of incriminating material indicating unaccounted payments for property purchase. The assessment was reopened under Section 147, and the total income was reassessed at ?2,17,97,350, including the addition of ?2,05,59,255 based on the survey findings. The CIT(A) deleted this addition, prompting the revenue to appeal.

2. Validity and Reliability of Evidence Found During the Survey:
During the survey, the assessing officer (A.O.) found books of accounts and loose sheets indicating a property purchase for ?2,36,30,135, with ?1,95,00,000 paid in cash. The managing partner initially confirmed this but later retracted the statement. The A.O. relied on the presumption under Section 292C, treating the survey material as true and making the addition. The CIT(A) found the A.O.'s reliance on the survey material insufficient, noting that the A.O. should have verified the actual amount paid to the vendor, gathered market information, and referred the property for departmental valuation.

3. Onus of Proof Under Section 292C of the Income Tax Act:
The CIT(A) held that the onus was on the revenue to prove the payment of on-money. The CIT(A) argued that the impounded document was merely a clue and not conclusive evidence. The A.O. was required to gather additional material to substantiate the addition. The revenue contended that under Section 292C, the burden was on the assessee to disprove the contents of the seized material. The tribunal noted that the assessee had not discharged this burden and that the A.O. had not provided sufficient opportunity for the assessee to explain the discrepancies.

4. Admissibility and Verification of Additional Evidence (Affidavit) Submitted by the Assessee:
The assessee submitted an affidavit from an ex-employee, Mr. B. Babujee, claiming that the incriminating notes were in the handwriting of another ex-employee, Mr. B. Srinivas. The CIT(A) admitted this affidavit without verifying the credentials of Babujee or Srinivas. The revenue argued that the affidavit was not credible and that the assessee had not provided evidence of their employment. The tribunal found that the CIT(A) had erred in admitting the affidavit without proper verification and that the issue required further enquiry.

Tribunal's Decision:
The tribunal remitted the case back to the A.O. to give the assessee an opportunity to prove the incorrectness of the impounded material. The A.O. was directed to supply the copies of statements recorded and the impounded material to the assessee, allowing them to explain the case. The A.O. was also instructed to examine Mr. B. Babujee and Mr. B. Srinivas in detail and decide the issue afresh on merits. The appeal filed by the revenue and the cross-objection filed by the assessee were both allowed for statistical purposes.

← Previous Next →