2018 (7) TMI 736 - AT - Income Tax

Addition on the surrendered sum made at the time of survey - Held that - The statement of Shri Ajay Kumar Jain was recorded on the date of survey on 23.02.2010 only u/s 133A of the Act. Hence, we are inclined to accept the argument of the ld. AR that the ld. AO had factually erred by stating the statement has been recorded u/s 131 of the Act thereby contemplating to give evidentiary value for the same. It is not in dispute that barring the statement from Shri Ajay Kumar Jain, no other corroborative evidences were found by the survey team or by the assessing officer at the time of assessment proceedings by pointing out certain deficiencies from books of accounts of the assessee to support the disclosure made in the sum of ₹ 60 lacs at the time of survey. - Decided against revenue

Summary

Issues Involved:
- Justification of deletion of addition based on surrendered sum
- Validity of statement recorded during survey
- Reliability of evidence and legal value of statement

Issue 1: Justification of deletion of addition based on surrendered sum:
The appeal by the Revenue challenged the deletion of an addition of ?60 lacs made by the ld. AO based on the sum surrendered by the assessee during a survey. The Revenue contended that the Ld. CIT(A) unjustifiably deleted the addition without proper basis. The assessee, a partnership firm, disclosed a turnover of ?36.39 crores and net profit of ?34.43 lacs in response to notices under the Income Tax Act. During the survey, a statement by Shri Ajay Kumar Jain declared ?60 lacs as bogus expenditure, which the firm later retracted as unauthorized. The ld. AO, however, made the addition based on this statement, claiming it had evidentiary value under section 131 of the Act. The Ld. CIT(A) analyzed the circumstances, including the lack of corroborative evidence and the unauthorized nature of the statement, and concluded that the addition was not made as per law. The Ld. CIT(A) allowed all grounds of appeal by the assessee, leading to the Revenue's appeal before the tribunal.

Issue 2: Validity of statement recorded during survey:
The key contention revolved around the validity of the statement recorded from Shri Ajay Kumar Jain during the survey. The Revenue argued that the statement was recorded under section 131(1) of the Act, attributing evidentiary value to it. However, the authorized representative of the assessee demonstrated that the statement was recorded solely under section 133A of the Act, not section 131. This factual discrepancy raised doubts on the ld. AO's reliance on the statement as evidence for the addition. The tribunal accepted the argument that the ld. AO's error in stating the section under which the statement was recorded undermined its evidentiary value. The absence of corroborative evidence further weakened the credibility of the statement, leading to the tribunal upholding the Ld. CIT(A)'s decision to delete the addition.

Issue 3: Reliability of evidence and legal value of statement:
The tribunal delved into the reliability and legal value of the statement made by Shri Ajay Kumar Jain during the survey. The Ld. CIT(A) highlighted that the statement lacked evidentiary value due to various factors, including the absence of supporting documents or deficiencies in the assessee's books of accounts. The tribunal concurred with the Ld. CIT(A)'s reliance on judicial decisions emphasizing the limited probative value of such statements, especially when unsupported by other evidence. The tribunal dismissed the Revenue's appeal, emphasizing that the ld. AO's reliance on a third party's statement without concrete evidence of tax evasion or accounting discrepancies was not legally tenable. The tribunal upheld the deletion of the addition of ?60 lacs, concluding that the ld. CIT(A)'s decision was legally sound and warranted no interference.

This detailed analysis of the judgment highlights the core issues, arguments presented, and the tribunal's decision, providing a comprehensive understanding of the legal aspects involved in the case.