2018 (12) TMI 205 - AT - Income Tax

Addition solely on the basis of statement of the assessee recorded under section 133A - loose papers assembled as Diary BK-4 - Amount surrendered by statement on oath at the time of survey by one of the Directors of the assessee-company - said amount of ₹ 1 crore was not included in the return of income filed when there were some amounts mentioned in the diary BK-4 - Held that - No detail of any immoveable property comes out in the assessment order. There is no mention to whom the amounts were paid. CIT(A), whose powers are co-terminus with that of the AO, also did not conduct any enquiry as regards the aforesaid issues - D.R. also by examining the original records brought in during the course of hearing on 20/11/2018 deposed before the Bench that nothing in the file suggests that the addition was supported by corroborating evidences. Such addition cannot be sustained. Therefore, we set aside the order of the CIT(A) and allow the grounds of appeal of the assessee.

Issues Involved:
1. Whether the addition of ?1 crore on account of undisclosed income, based on a statement recorded during a survey, is justified.
2. The evidentiary value of statements recorded under section 133A of the Income Tax Act.
3. The requirement of corroborative evidence to support additions based on survey findings.

Issue-wise Detailed Analysis:

Issue 1: Addition of ?1 crore on account of undisclosed income
The primary grievance of the assessee is the addition of ?1 crore upheld by the CIT(A), which was allegedly surrendered during a survey. The assessee contends that this addition is arbitrary and lacks factual basis. The assessee's company, engaged in manufacturing hides, had its books audited under section 44AB of the Act. During a survey conducted on 19.02.2015, a director was compelled to surrender ?1 crore, which was later retracted. The Assessing Officer (AO) made the addition based solely on the director's statement and loose papers found during the survey. The CIT(A) confirmed this addition without considering the retraction or the absence of corroborative evidence.

Issue 2: Evidentiary value of statements under section 133A
The assessee argued that statements recorded under section 133A do not have evidentiary value, as they are not recorded under oath. This position is supported by various judicial pronouncements, including the Supreme Court's ruling in CIT vs. S Khader Khan Son, which held that such statements cannot be the sole basis for assessing income. The Tribunal noted that the AO relied solely on the statement recorded during the survey and the amounts mentioned in loose papers, without any corroborative material.

Issue 3: Requirement of corroborative evidence
The Tribunal emphasized the need for corroborative evidence to support additions based on survey findings. The AO failed to establish a nexus between the amounts mentioned in the loose papers and the surrendered amount. There was no evidence of any land purchase or details of the recipient of the alleged advance. The CIT(A) also did not conduct any further inquiry to verify the contents of the loose papers. The Tribunal referred to several cases, including Texraj Realty Pvt. Ltd. vs. DCIT and Manjit Singh vs. ACIT, which highlight the necessity of corroborative evidence for sustaining additions.

Conclusion:
The Tribunal concluded that the addition of ?1 crore could not be sustained in the absence of corroborative evidence. The AO and CIT(A) did not provide any material to justify the addition apart from the retracted statement. The Tribunal set aside the order of the CIT(A) and allowed the appeal of the assessee, emphasizing that assessments should be based on evidence gathered during or after the survey, not merely on confessions obtained under duress. The stay petition filed by the assessee was dismissed as not pressed. The judgment underscores the importance of corroborative evidence in tax assessments and the limited evidentiary value of statements recorded under section 133A.

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