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Facts
The assessee, Little Scholars Academy, filed a return of income declaring Rs. 75,00,000. A survey action was conducted, and a loose sheet detailing expenditures was impounded, which was not reflected in the books of account. The assessee also showed an unsecured loan which was treated as unexplained income.
Held
The Tribunal held that the statement recorded during the survey, which was later retracted, lacked evidentiary value without corroboration. The expenditure from the loose sheet was not substantiated by other evidence. The Tribunal also noted that the assessee had disclosed donations and held valid registrations, making the invocation of certain sections inappropriate.
Key Issues
Whether the expenditure mentioned in a retracted statement recorded during a survey, without corroborative evidence, can be added to the income? Whether the additions made under sections 69, 68, and 115BBE were justified given the assessee's disclosures and registrations?
Sections Cited
143(3), 133A, 143(2), 142(1), 12AA, 11, 11(6), 69, 68, 115BBE, 12A, 80G, 115BBC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCHES: E : NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI ANUBHAV SHARMA
Assessment Year: 2019-20 Little Scholars Academy, Vs ACIT (Central), 0, Joya Road, Moradabad. Amroha, Uttar Pradesh – 244 221. PAN: AAATL3331R (Appellant) (Respondent) Assessee by : Shri Mayank Patawari & Shri Akash Ojha, Advocates Revenue by : Shri Amit Katoch, Sr. DR Date of Hearing : 24.04.2025 Date of Pronouncement : 29.05.2025 ORDER
PER ANUBHAV SHARMA, JM:
This appeal is preferred by the assessee against the order dated 17.05.2023 of the Commissioner of Income-tax (Appeals), , Lucknow-3 (hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.CIT(A), Lucknow-3/10590/2018-19 arising out of the appeal before it against the order dated 06.04.2021 passed u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Central Circle, Moradabad (hereinafter referred to as the Ld. AO).
The assessee has taken the following grounds of appeal:- “1. On the facts and circumstances of the case, the order passed by Ld. CIT(A) is bad both in eyes of law and on facts.
2. That the Ld. CIT(A) has erred in law and on facts by lending credence to statement under section 133A of the Act as such statement has no evidentiary value.
3. That the Ld. CIT(A) erred in law and on facts in ignoring the valuation report which was made for the purpose of finding out the actual investment in the building during the period of construction.
4. That the Ld. AO erred in law and on facts by not discharging the shifted onus to disprove the evidence filed by the assessee and keeping quiet on the valuation report. 4.1 That the Ld. CIT(A) has erred in relying upon the loose sheet as the same has been disproved by the facts presented.
5. That the Ld. CIT(A) erred in law and on facts in ignoring the proof of construction of the building and the ledger accounts filed which disclose the para-wise detail of vendors from whom construction was effected where the majority of transaction were before the date of survey.
6. That the Ld. CIT(A) erred in law and on facts in not appreciating the duly explained construction/ improvement of building from the audited books of accounts which were duly accepted by the Ld. AO.
7. That the Ld. CIT(A) erred in law and on facts by confirming the addition of Rs. 1,49,91,294/- remained in terms of section 69 of the Act relying on an retracted statement and a make believe document.
8. That the Ld. CIT(A) erred in law and on facts by invoking section 115BBE of the Act to charge income tax on Rs. 75,00,000/- when such amount was duly disclosed as income of the assessee in the Income Tax Return.
9. That the Ld. CIT(A) has erred in law and on facts by confirming the Addition of Rs. 5,00,000/- on account of unexplained income under section 68 of the Act.
10. That the Ld. CIT(A) has erred in law and on facts in not providing the Appellant with the reasonable opportunity of being heard.
11. That the appellant reserves the right to add, modify, alter, amend or delete any of the grounds.”
3. Heard and perused the records. Ld. AR has submitted that ground no. 9 and 10 are not pressed and ground no. 1 is general in nature. Based on the same the relevant facts are that the Appellant had filed its Return of Income in ITR-7 on 30.10.2019 declaring total income at Rs. 75,00,000/- and subsequently revised return of income was filed on 03.03.2020 declaring total income Rs. 75,00,000/-. In this case, a survey action u/s 133A of the Act was carried out at the office premises of the trust on 11.02.2019 and documents were impounded. The case was selected for compulsory scrutiny and statutory notice u/s 143(2) of the I.T. Act was issued on 28.09.2020 by the then Assessing Officer, ACIT (Exemption) Circle, Lucknow, which was duly served upon the assessee. Thereafter the case was centralized with the ACIT (Central Circle), Moradabad vide order u/s 127 of the Act by the Ld. Commissioner of Income Tax (Exemption), Lucknow on 08.12.2020. Thereafter notices u/s 142(1) of the Act were issued.
3.1 During the assessment proceedings, it has been noted by the Assessing Officer that the assessee society has been constituted on 05.06.1990. The society is registered u/s 12AA of the Income Tax Act, 1961 vide order dated 11.12.2001 of the Ld. Commissioner of Income Tax, Moradabad and it has been renewed with effect from 05.06.2015 for further five years. The assessee has claimed exemption u/s 11 of the Income Tax Act, 1961. The Assessing officer noted that the society/trust has claimed depreciation on fixed asset amounting to Rs.91,01,832/- which was claimed at the time of purchase. So it is not allowable u/s 11(6) of IT Act, 1961. Therefore show cause notice dated 17.02.2021 was issued and the assessee society was required to explain the claim of depreciation amounting to Rs.91,01,832/-.
3.2 After considering the submission of the assessee, it has been held by the Assessing Officer that the assessee has already claimed deduction at the time of purchase of assets so as per section 11(6) of Act, depreciation is not allowable on such assets. Thus the depreciation amounting to Rs.91,01,832/- was disallowed and added to the income of the assessee society.
3.3 Further, during the assessment proceedings, it has been noted by the Assessing Officer that during survey operation conducted at the school premises as well as hospital building of the society on 11.02.2019 a loose sheet was impounded wherein monthly cash expenditure on school building as well as hospital building totaling to the amount of Rs.2,24,91,294/- was mentioned but was not reflected in the books of account maintained on the system by the society. It has also been noted by the Assessing Officer that during the survey action statement of Sri Girish Chandra Bansal (Manager) was recorded and in reply to the Q.No.20 he explained that “Yes, the paper which you are showing to me, pertains to F.Y. 2018-19 in which monthly details of expenditure on LSA 4 and hospital building has been mentioned. No bills and voucher pertaining to this expenditure is available in this time”. Further while giving answer to the Q.No. 21 he explained that “Said amount was anonymous donation received in cash during F.Y. 2018-19”.
3.4 Therefore after considering the assessee’s written submission, the assessing officer has treated Rs. 2,24,91,294/- as unexplained investment u/s 69 of the Act. Thus, the assessing officer has held that since the assessee trust has already disclosed the surrendered income of Rs. 75,00,000/- out of said unexplained investment in the return of income and hence remaining amount of Rs.1,49,91,294/- is added u/s 69 Act to its income.
3.5 During the assessment proceedings, it has been further noted by the Assessing Officer that assessee trust has shown unsecured loan of Rs.5,00,000/- from Shri Harvendra Singh, out of which unsecured loan of Rs.1,80,000/- has been claimed to be old and Rs.3,20,000/ has been raised during F.Y. 2018-19. On verification of the same it has been found by the Assessing Officer that cash of Rs.1,80,000/- was transferred in his account and 3,20,000/ was deposited also in his account and the same was transferred to the assessee trust. Since creditworthiness of the same was not proved and Shri Harvendra Singh has not filed his ITR, the same was surrendered by the assessee for tax. Therefore, the unsecured loan of Rs.5,00,000/- was treated unexplained income of the trust u/s 68 and added to its income of the trust. Therefore, assessment has been 5 completed at the total income of 2,29,91,294/- vide impugned order dated 06- 04-2021. The Appellant has filed the appeal before ld. CIT(A) against and had succeeded partly for which is in appeal raising aforesaid grounds.
As with regard to grounds no. 2-7, challenging the addition of INR 1,49,91,294/- under section 69 of the Act the thrust of contention of ld. AR was on the fact that apart from the handwritten sheet (available at page no 139 of the paper book), nothing incriminating was seized during the survey proceedings. Furthermore, the manager was pressured to write the contents on the paper, which was made part of the seized material, and the same was retracted on 27.02.2019, i.e., within the 17 days, and the letter along with a sworn affidavit informing such retraction, was filed on 27.02.2019. (Letter along with sworn affidavit is available at pages 212 to 215 of the paper book). Further, during the assessment proceedings on 05.03.2019, the manager testified under oath that the contents of the impugned sheet were written under pressure and without any access to the bills, vouchers, books of account, and papers containing details of payments (Retracted Statement is available at pages 216 to 221).
4.1 Though ld. DR has relied and defended the impugned orders, it is undisputed that the contents of the impugned sheet were written at the time of the survey. Thus it was not a document in existence before the survey so cannot be considered to be some incriminating material discovered or impounded during the course of the survey proceedings to be made basis of some 6 conclusion of undisclosed transactions. This only forms part of the statement recorded during search and would have limitations of same nature as exist for a bare statement. No other material corroborated this statement and the calculation forming part of the statement. Thus the alleged cash amount of INR 2,24,91,294 mentioned in the seized material has no basis whatsoever, as nothing incriminating matter relating to alleged cash payments was found during the survey, and the manager who was pressured to write the same has retracted the contents within short span of just 17 days. The Appellant society has also filed a letter stating that the contents were written under pressure by the Manager and a voluntary surrender of anonymous donations of INR 75 Lacs was made in the ITR to buy peace of mind and avoid any hindrance to the activities of the Society.
4.2 Then ld. AR has established that the value of construction recorded in the books of account (available at pages 222 to 228 of the paper book) is in consonance with the valuation report (available at page no 204-211 of the paper book). Thus the said incriminating expenditure statement is not corroborated by finding any discrepancy or evidence from the books of assessee. In regard to relevance and admissibility of retracted statements, recorded during search or survey proceedings under the Act, the findings of Hon’ble High Court of Delhi in the matter of CIT vs Sunil Aggarwal, [2015] 64 taxmann.com 107 (Delhi) helps the case of assessee where Hon’ble high Court has held as follows:-
“14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. Of course, where the retraction is not for any convincing reason, or where it is not shown by the Assessee that he was under some coercion to make the statement in the first place, or where the retraction is not followed by the Assessee producing material to substantiate his defence, the AO might be justified in make additions on the basis of the retracted statement.”
4.3 In the light of aforesaid, where the statement was of an employee and the retraction was immediately made, the statement recorded during survey, not having same evidentiary value as one recorded during search, which too needs corroboration, we are inclined to hold that the very basis of making addition not being one that could be considered a legally admissible evidence, the addition deserves to be deleted. Ground no. 1 to 7 are sustained.
Now coming to invoking of section 115 BBE of the Act against the amount surrendered as income in the revised ITR filed. Admittedly the Appellant was holding a valid registration under section 12A and 80G of the Act, and the same was duly verified by the Ld. AO. The Appellant has made the voluntary surrender of anonymous donations of INR 75 Lacs under section 115BBC of the Act in the ITR on 03.03.2020. Further, it is an undisputed fact that the construction in question has been done from anonymous donations and its application deserves to be allowed, as the application of funds is for charitable purposes. Thus, the applicability of section 69 of the Act does not