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Income Tax Appellate Tribunal, Hyderabad ‘A‘ Bench, Hyderabad
Before: Shri R.K. Panda & Shri Laliet Kumar
आयकर अपील�य अ�धकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘A‘ Bench, Hyderabad Before Shri R.K. Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member Assessment Year: 2019-20 Dy. C. I. T Vs. Nanitha Constructions Central Circle 1(1) Hyderabad Hyderabad PAN:AAGFN1630D (Appellant) (Respondent) Assessee by: Shri K.C. Devdas, CA Revenue by: Shri KPRR Murthy, CIT(DR) Date of hearing: 18/04/2023 Date of pronouncement: 28/04/2023 ORDER Per R.K. Panda, A.M This appeal filed by the assessee is directed against the order dated 21.07.2022 of the learned CIT (A)-11, Hyderabad, relating to A.Y.2019-20.
Facts of the case, in brief, are that the assessee is a firm engaged in the business of contract works. It filed its return of income for the A.Y 2019-20 on 20.09.2019 declaring total income at Rs.4,41,98,240/-. In this case, a survey operation u/s 133A of the I.T. Act was conducted on 22.3.2019 during the course of which the assessee had admitted additional income of Rs.6.00 crores voluntarily to cover up the discrepancies in the books of account. However, in the return of income the assessee
ITA 504 of 2022 Nanitha Constructions has not admitted the additional income so offered to tax during the survey operation u/s 133A of the Act .
The case was selected for scrutiny and statutory notices u/s 143(2) & 142(1) were issued and served on the assessee to which the AR of the assessee appeared before the Assessing Officer from time to time and filed the requisite details. The Assessing Officer noted that a statement of the Partner of the firm Shri L Narasinga Rao was recorded on 26.03.2019 wherein the Partner in response to query No.20 had declared income of Rs.6.00 crores for the impugned A.Y by stating as under: "Q.20 Do u want to say anything else? Ans. My major source of income is from the profits of the firm. In order to cover up the above discrepancies observed during the survey proceedings, we come forward to offer Rs:4 Crores as additional income for A.Y.2018- 19 and Rs.6 Crores as additional income for A. Y.2019-20 over and above the regular income. For the current F.Y. 2018-19, including the disclosed income the total profits declared will be @8% on total turnover. Regarding the A.Y. 2018-19 I will file the revised return of income after paying the requisite taxes at the earliest. We request that penalty may not be levied." (Signature of deponent] The above statement has been recorded as per my volition and the same has been recorded without any pressure or threat and the same is true and correct.”
The Assessing Officer observed that the assessee in response to notice issued u/s 142(1) dated 15.12.2020 submitted on 5.7.2021 has replied as under: “The assessee in response to notice issued u/s 142(1) dated 15.12.2020 submitted on 05.07.2021as under: It is humbly submitted that assessee has come forward for offering of additional income of Rs.4Crores and 6Crores for A. Y.2018-19 & 2019-20 respectively under the mental pressure and confusion during the course of survey proceedings. As on the date of survey i.e., 26.03.2019, the books of accounts for A. Y.2019- 20 are not yet closed, hence only under stress and confusion& to avoid confrontation and prolonging the proceedings, assessee has come forward to offer the additional income as such assessee has never earned any such undisclosed income and all the receipts/income are accounted for in the books of account and all the expenses are Page 2 of 14
ITA 504 of 2022 Nanitha Constructions vouchsafed. In view of the above, as there is no suppression of income/undisclosed income, it is requested to accept the book results and treat the admission during the course of survey proceedings as nullity."
The Assessing Officer noted that the assessee has filed a retraction letter after 2 years 4 months. According to him if the assessee had really mental pressure or confusion, he would have retracted such statement immediately after the survey. Since the assessee in the instant case has voluntarily admitted Rs.6.00 crores during the course of survey as additional income as per his statement recorded in the course of survey, therefore, the Assessing Officer, relying on various decisions made addition of Rs.6.00 crores to the total income of the assessee apart from other additions. The Assessing Officer accordingly determined the total income of the assessee at Rs.10,53,57,716/-.
Before the learned CIT (A), it was argued that no incriminating material were found during the course of survey which is evident from the assessment order. It was argued that while filing the return of income, the assessee realized that there are no discrepancies in the books of account for which no additional income over and above the actual net profit for the year under consideration was declared. The Assessing Officer also did not point out any defects or deficiencies in the books of account and other details which were produced before him. The CBDT instructions dated 10.03.2013 was brought to the notice of the learned CIT (A) which is in context of confessional additional income during the search and seizure operation according to which no addition can be made on the basis of such confession, if not based on credible evidence and which is subsequently retracted by the assessee while filing the return of income.
ITA 504 of 2022 Nanitha Constructions Various decisions were also brought to the notice of the learned CIT (A) according to which no addition can be made on the basis of mere statement recorded during the course of survey admitting additional income in absence of any defects in the books of account or any corroborative material found of impounded.
Based on the arguments advanced by the assessee, the learned CIT (A) deleted the addition by observing as under: “6. Decision: In this case a survey u/s. 133A was conducted on 22.03.2019 and the appellant made a disclosure of Rs.4,00,00,000/- in A.Y. 2018-19 and Rs.6,00,00, 000/- in A.Y, 2019-20 to cover up the discrepancies in the books of accounts. The appellant filed only a return of Rs.4,4 1,98,240/- for A.Y. 2019-20. It is seen from the assessment order that the books of accounts have been examined and the appellant has responded to the notice u/s. 1420) from time to time, which implies that the appellant has filed all the detailed as required and the Assessing Officer has not made any negative comment regarding the quality of compliance of the appellant. It is seen from the para 2.1 to 2.3 that certain disallowances have been made after examining the expenditure debited in the books of accounts and additions have been made. From the above, it can be seen that the Assessing Officer has verified and examined the books of accounts and vouchers. After disallowing certain claims on account of vehicle maintenance, 40A(3) and tours and travels, the Assessing Officer noted that a survey was conducted, wherein the partner gave a sworn statement of admitting income for the current year, the same is reproduced in para 3 of the assessment order. The appellant vide reply dated 15.12.2020 stated that the declaration was made under pressure and confusion and the date of survey 26.03.2019, the books were not closed for this assessment year. Id being appellant further stated that all the receipts income are accounted and also the expenditure and therefore for the present year there is no suppression or undisclosed income. It was observed by the Assessing Officer retraction was made that he after two years and four months and that is not proper, therefore the addition has to be made. It is seen that the appellant has filed letter much before the passing of the order on 21.09.2021 and all the books have been produced and further examined by the Assessing Officer and no defect or error has been found in the said case or accommodation entry or bogus bills, suppression of sales or inflation of expenses. Therefore to merely make addition on the basis of a statement that the profit of Rs.6,00,00,000/| - will be additionally offered without the benefit of the closure of books of Page 4 of 14
ITA 504 of 2022 Nanitha Constructions accounts or any incriminating material is baseless. Needless to state that the assessment order does not rely on any incriminating material impounded during the course of survey. It is important to note that every year is an independent year and therefore no such import can be made unless the AO is able to prove that the books of accounts were incorrect, defective or improper. There is no Such finding by the AO in that regard. The letter filed by the appellant is very clear in this regard. Even the statement is not based on any scientific basis or quantification which was recorded during the course of survey. It is a general statement and there is no whiff of any discrepancy confronted while recording the statement as reproduced in the assessment order. It is seen in the assessment order that no defects has been brought out nor does any incriminating material exist. Therefore, the addition has just been made on the basis of a statement and cannot be quantified or ascertaining the true and correct income of the appellant. The appellant has stated that the books of accounts were audited and on the basis of the same the returns was filed. The appellant has produced books of accounts. The following is important to be itemized as a matter of fact: i) The books of accounts were audited based on bills and vouchers ii) During the course of survey no incriminating material establishing tax evasion was found. iii) No material or evidence was found during survey indicating that the additional profit is Rs.6,00,00,000/-. iv) The AO did not dispute the receipts or expenditure of the appellant. v) The books of accounts, bills, vouchers as required by the AO were produced during the course of assessment proceedings and no deficiency was pointed out. The above submissions and contentions of the appellant are a matter of fact and can be seen that these facts flow from the assessment orders. The appellant has cited various case laws which are in relation to the issue and in view of the same and the peculiar facts of the case it is held that the above statement is not a conclusive evidence to come to a conclusion of the profit of the appellant, as it is devoid of merit, evidence and material. It will not be out of place to mention that in the whole statement recorded during the course of the survey especially question number 1 to 19, no detect nus been found out which has been used in the assessment proceedings for this year. In the concluding part of the statement, the question is Question No. 20 - Do you want to say anything else?"
ITA 504 of 2022 Nanitha Constructions
In reply to this question for the relevant year the appellant admitted additional income of Rs.6,00,00,000/ -, There is no mention of incriminating material in the question which itself shows that it is a general any voluntary statement and was subsequently retracted. There is no law which prevents a general voluntary statement to be withdrawn, especially when sufficient time was given to the Assessing Officer with regard to this retraction before passing the assessment order and all the documents required for the year were produced to the satisfaction of the Assessing Officer. Thus, there is no corroborative evidence to indicate such conclusion by the assessing officer. Further the profit even mentioned was a general figure of Rs.6,00,00,000/- and this kind of general figure has no basis whatsoever, especially once the books of accounts are proper. The declaration made in the earlier year cannot become a fact which can be sed in the subsequent year for determination of profits, as even in that year, there is no scientific basis apparently brought out by the AO and the addition was more on an agreed basis. Once the addition has been made on agreed basis, it could be there to up any deficiency for that year under consideration and circumstances of the case by an agreement between the AO and the appellant to agree to a particular amount of profit, the appellant had prevented to deal with the issue and elaboration or to highlight any defect in the cs the appellant did not want to litigate and close the matter accordingly. However, in the present assessment year that is not the case, as the appellant has furnished the books and evidences and no defect for the same was brought and no significant omission incriminating evidence was found. The A0 accepted the books of accounts of the appellant therefore, there was no basis, per se, to estimate the income of the appellant just On a mere statement. It is also seen that the AO has not made any remarks regarding the non- cooperation of the appellant at any point of time during the course of appellate proceedings and also the statement made by the appellant during the course of 133A did not prevent the AO to examine the books of accounts or to prevent the AO from proceeding further in the present assessment year. In view of the same, the above addition is not sustainable being devoid of merit and evidence in relation.to the present. year under consideration. The relief for the year under consideration, does not give any immunity or the change of stand by the appellate authority for A.Y. 2018-19 as in that year the appellant agreed for the addition and thus preventing the assessing officer to make enquiries or investigate as the income declared by the appellant was to the satisfaction of the assessing officer in that relevant year and proceedings. The same is not the situation in the present case under consideration, therefore, the observations made are limited to the year under consideration and the facts and the circumstances of the relevant year.
ITA 504 of 2022 Nanitha Constructions
The grounds of appeal are elaborate in nature and mention case laws and the various narration of evidence and deserve no adjudication as such considering the elaborate discussion above. The ground no. 3 which is regarding the addition of Rs. 6,00,00,000/-is adjudicated in the favour of the appellant as the addition has been deleted as per the discussion above. The ground No.2 and 4 are regarding retraction which needs no separate adjudication.”
Aggrieved with such order of the learned CIT (A) the Revenue is in appeal before the Tribunal.
The learned DR strongly objected to the order of the learned CIT (A) deleting the addition of Rs.6.00 crores made by the Assessing Officer. He submitted that the assessee in the statement recorded during the course of survey had admitted an amount of Rs.4.00 crores as additional income for the A.Y 2018- 19 and Rs.6.00 crores for the A.Y 2019-20. The assessee offered the additional income of Rs.4.00 crores in the return of income for the ay 2018-19 whereas he did not offer Rs.6.00 crores for the A.Y 2019-20. Since the assessee has accepted a part of the statement and has not accepted the other part of the statement, therefore, the learned CIT (A) without considering the statement as a whole was not justified in deleting the addition.
Referring to the decision of the Hon'ble Delhi High Court in the case of PCIT vs. Avinash Kumar Setia reported in (2017) 395 ITR 235, he submitted that the Hon'ble High Court in the said decision has stated where the assessee has surrendered certain income by way of declaration and withdraw the same after two years without any satisfactory explanation, it could not be treated as bonafide and, hence, addition would sustain.
ITA 504 of 2022 Nanitha Constructions
Referring to the decision of the Hon'ble Delhi High Court in the case of Raj Hans Towers (P) Ltd vs. CIT reported in (2015) 373 ITR 9, he submitted that the Hon'ble High Court in the said decision has held that where the assessee had not offered any satisfactory explanation regarding surrendered amount being not bonafide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified.
Referring to the decision of the Hon'ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate reported in (1964) 53 ITR 225 (S.C), he submitted that the powers of the CIT (A) are coterminous with that of Income Tax Officer and he can do what Income Tax Officer can do and also direct him to do what he has failed to do.
Referring to the decision of the Hon'ble Supreme Court in the case of Kapurchand Shrimal vs. CIT reported in (1981) 131 ITR 451, he submitted that the Hon'ble Supreme Court in the said decision has held that an appellate authority has jurisdiction as well as duty to correct all the errors in the proceedings under appeal and to issue, if necessary, appropriate directions to the authority against whose decision the appeal is preferred to dispose of the whole or any part of the matter afresh unless forbidden from doing so by the statute. He accordingly submitted that since the order of the learned CIT (A) is contrary to the statement given by the assessee during the course of survey admitting additional income of Rs.6.00 crores for the impugned A.Y therefore the order of the learned CIT (A) deleting the addition of Rs.6.00 crores should be reversed and that of the order of the Assessing Officer be restored. Page 8 of 14
ITA 504 of 2022 Nanitha Constructions
The learned Counsel for the assessee, on the other hand, heavily relied on the order of the learned CIT (A). He submitted that the learned CIT (A) in the instant case has passed an elaborate order justifying the deletion. He submitted that in the instant case when the survey took place, the Accounting Year of the assessee was not over and therefore, the books of account were not closed. During the course of survey no incriminating material whatsoever was found indicating the earning of additional income of Rs.6.00 crores, the audited books of accounts were submitted before the Assessing Officer and no discrepancy whatsoever were found except violation of 40A(3) to the extent of Rs.1,88,529/- and disallowance of expenses to the tune of Rs.3,94,342/- being personal in nature.
Referring to the instructions issued by the CBDT vide Instruction F.No.286/2/2003-IT (Inv) dated 10/03/2003 regarding confession of additional income during search and survey operations, he submitted that as per the said CBDT instructions, it is binding on the Revenue and no addition can be made merely on the basis of confessional statement recorded during the course of survey/search in absence of corroborative evidence. Relying on various decisions, he submitted that since in the instant case also no corroborative evidence whatsoever was found during the course of survey and the addition was made mainly on the basis of confessional statement of the partner during the course of survey, therefore, in absence of any defects in the books of account produced during the course of assessment proceedings, the addition of Rs.6.00 crores made by the Assessing Officer was not justified and the learned CIT (A) fully justified in deleting the addition. So far as the various decisions relied on by the learned CIT (A) are concerned, he Page 9 of 14
ITA 504 of 2022 Nanitha Constructions submitted that these are distinguishable and not applicable to the facts of the present case.
We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned CIT (A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.6.00 crores to the income of the assessee apart from other nominal additions on the ground that the assessee during the course of survey operation u/s 153A on 22.3.2019 had admitted additional income of Rs.6.00 crores for the impugned A.Y 2019-20 and the assessee has not declared such income in the return of income filed. We find the learned CIT (A) deleted the addition the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the learned DR that when the assessee had offered additional income of Rs.4.00 crores for the A.Y 2018-19 and Rs.6.00 crores for the A.Y 2019-20 and since the assessee had offered the additional income in the return of income for the A.Y 2018-19, therefore, the learned CIT (A) was not justified in deleting the addition of Rs.6.00 crores on the basis of retraction of the assessee after a period of 2 years and 4 months.
It is the submission of the learned Counsel for the assessee that although the assessee had offered additional income of Rs.6.00 crores for the impugned A.Y in his statement recorded during the course of survey on 22.3.2019 however, such admission was not based on any corroborative material found since the assessee has not earned any such income. It is also his submission that when the books of account produced before the Assessing Officer were thoroughly examined by him and no Page 10 of 14
ITA 504 of 2022 Nanitha Constructions discrepancy whatsoever was found and since no incriminating material whatsoever was found during the course of survey establishing suppression of income, therefore, in view of CBDT instructions dated 10/03/2003 no addition can be made merely on the basis of confessional statement made during the course of survey/search which has subsequently been retracted in absence of any corroborative material.
We find some force in the above arguments of the learned Counsel for the assessee. It is an admitted fact that when the survey took place on 22.3.2019, the books of account of the assessee were not closed and apart from the statement recorded of the Partner Mr. L Narsinga Rao, there is no other evidence available with the Revenue to show that the assessee for the impugned A.Y has suppressed income to the extent of Rs.6.00 crores. Even during the course of assessment proceedings when the audited books of account were produced before the Assessing Officer, he has thoroughly examined the same but could not find any discrepancy other than violation on account of 40A(3) to the extent of Rs.1,88,529/- and disallowance of expenses treating the same as personal in nature to the extent of Rs.3,94,342/-. Therefore, we find force in the argument of the learned Counsel for the assessee that when the assessee has not earned any income other than the income declared in the return, therefore, addition of Rs.6.00 crores merely on the basis of the statement of the Partner in absence of any corroborative material found during the course of survey or thereafter is against the spirit of CBDT Instructions dated 10.3.2003.
We find the CBDT in F. No. 286/2/2003-IT (Inv) dated 10/ 03/ 2003 has given binding directions on its officers Page 11 of 14
ITA 504 of 2022 Nanitha Constructions regarding the confession of additional income during search and survey operations as under:
“Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based upon Credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search and seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders"
We find the Hon'ble Supreme Court in the case of CIT vs. Kader Khan Son (2013) 352 ITR 480 (S.C) has upheld the decision of the Hon'ble Madras High Court reported in 214 CTR 589 holding section 133A does not empower any IT Authority to examine any person on oath and thus, any such statement has no evidentiary value. Therefore, any admission made during such statement cannot, by itself, be made the basis for addition.
We find the Hon'ble Delhi High Court in the case of CIT vs. Dhingra Metal Works (2010) 328 ITR 384 (Del.) has held that any statement recorded u/s 133A has no evidentiary value. Similar view has been taken by the Hon'ble Madras High Court in the case of CIT vs. P Balasubramaniam (2013) 354 ITR 116 (Mad).
Further, it is the settled proposition of law that every year is independent and therefore, merely because the assessee Page 12 of 14
ITA 504 of 2022 Nanitha Constructions has admitted the additional income declared during the course of survey for the A.Y 2018-19, the same cannot bind the assessee for admitting such additional income for the A.Y 2019-20 declared during the course of survey especially when the accounting year of the assessee was not over and no discrepancy whatsoever were found in the books of account maintained and produced by the assessee before the Assessing Officer even during the course of assessment proceedings and no corroborative material found either during the course of survey or thereafter. Since in the instant case, the accounting year was not over on the date of survey, no incriminating material establishing any tax evasion was found, there is no material or evidence unearthed by the Department either during the course of survey or thereafter to establish the suppression of income of Rs.6.00 crores, therefore, in view of the detailed reasonings given by the learned CIT (A) on this issue, we find no infirmity in the same.
So far as the various decisions relied on by the Revenue are concerned, these according to us are distinguishable and not applicable to the facts of the present case. In the case of PCIT vs. Avinash Kumar Setia (2017) 395 ITR 235 decided by the Hon'ble Delhi High Court, the survey took place on 20.10.2008 and the assessee filed the declaration on 18.12.2008 surrendering additional income. It was accordingly held that there was absolutely no compulsion on the assessee to make such a declaration after a period of 2 months which was retracted after 2 years to resile. However, in the instant case, the declaration was made on the very date of survey and therefore, the decision of Hon'ble Delhi High Court in the case of Avinash Kumar Setia cannot be applied to the facts of the present case.
ITA 504 of 2022 Nanitha Constructions