2022 (10) TMI 542 - AT - Income Tax

On-money received - survey action conducted on them u/s 133A - assessee had failed to honour surrender made by it during survey in this regard for the impugned year - addition made was that the surrender made by the assessees during survey was on estimate basis while disclosure made subsequently in the return filed was on actual basis of the number plots sold by the assessee on which the assessee admitted to have received on-money - HELD THAT - For the impugned assessment year, accordingly, no disclosure has been made by the assessee in the return of income. It is therefore clearly not a case of retraction of surrender at all. Whatever the assessee had surrendered, it was duly declared in its return of income of the preceding year. What the Revenue is now attempting to do is to apply a hypothesis that since the assessee had admitted to having received on-money in the preceding year, the same logic would apply to all properties sold in the impugned year also. But we find that other than surrender made by the assessee, there is no incriminating material with the Revenue lending credence to this hypothesis. The assessee has repeatedly stated that it made surrender to buy peace and whatever was surrendered it had honoured in the preceding year. In the absence of any other evidence, the surrender made by the assessee alone cannot be sufficient to establish that the assessee has actually received onmoney on all transactions, and therefore no addition could have been made in the impugned year for any on-money receipt. Accordingly, the order of the CIT(A) upholding the addition.

Issues Involved:
1. Addition on account of alleged on-money received.
2. Validity of retraction from the surrender made during the survey.
3. Evidentiary value of statements recorded under section 133A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Addition on Account of Alleged On-Money Received:
The primary issue in both appeals was the addition made to the income of the assessees on account of alleged on-money received. The assessees were involved in real-estate development and had been subjected to a survey under section 133A of the Income Tax Act. During this survey, the partners of the assessee-firms made a surrender of on-money received on plots sold/booked. However, the amount disclosed in the return of income was less than the amount surrendered. The Assessing Officer (AO) added the difference to the income of the assessees, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].

2. Validity of Retraction from the Surrender Made During the Survey:
The assessees contended that the surrender made during the survey was on an estimated basis, while the disclosure in the return was on an actual basis. They argued that there was no retraction of the surrender as the disclosure made was true and correct based on the actual number of plots sold. The AO, however, held that the assessees had retracted from their surrender and made additions accordingly. The Tribunal observed that the surrender was made before the financial year began and was based on an estimate. The actual disclosure in the return was based on the properties actually sold/booked during the year. The Tribunal found that the assessees had supported their retraction with evidence, showing that the properties sold were less than what was disclosed in the surrender.

3. Evidentiary Value of Statements Recorded Under Section 133A:
The assessees argued that statements recorded under section 133A were not recorded on oath and did not have the same evidentiary value as statements recorded under section 132(4). The Tribunal noted that the Revenue had not pointed out any incriminating material found during the survey to support the surrender on account of on-money received. The Tribunal held that the addition made solely based on the surrender, without any incriminating material, was not sustainable.

Separate Judgments Delivered:
- M/s Jay Buildcon: The Tribunal noted that the surrender of Rs.49.75 lakhs was made on an estimated basis before the financial year began. The actual disclosure of Rs.23.75 lakhs in the return was based on the properties actually sold/booked during the year. The Tribunal found that the retraction was justified and supported by evidence. The addition of Rs.26 lakhs was directed to be deleted.

- M/s Sun Developers: The Tribunal found that the assessee had surrendered Rs.50 lakhs, which was disclosed in the return of income for the preceding year. For the impugned year, no further disclosure was made. The Tribunal held that there was no retraction of the surrender and that the addition made by the AO was based on a hypothesis without any incriminating material. The addition of Rs.20,23,809/- was directed to be deleted.

Conclusion:
The Tribunal allowed the appeals of both assessees, directing the deletion of the additions made on account of alleged on-money received. The Tribunal emphasized the need for incriminating material to support such additions and upheld the validity of retraction when supported by evidence.

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