THE ITO, WD-4,, THIRUVALLA vs. M/S.TOMS ENTERPRISES, CHANGANACHERRY

Per CHANDRA POOJARI, AM:

This appeal filed by the Revenue is directed against the order of the CIT(A),

Kottayam and pertains to the assessment year 2014-15.

conducted in the business premises on 23/09/2014. During the course of

survey, summons u/s. 131(1) of the Act was issued by the Assessing Officer to

Shri Tomy C Vadayil, Managing partner of the firm and statement u/s. 131 of the

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Act was recorded by the Assessing Officer from the managing partner on

25/09/2019 and the relevant part is as under:

"Question:- 8 - Explain the procedure of sale of goods in your firm. For e.g. I am showing a sale bill TPA 536 dated 03/01/2014 of Toms Pipes Pvt. Ltd. Please explain the sale of goods to Toms enterprises?

Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts.

Question:- 9- In addition to the above what are your major expenses?

Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive.

Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit?

Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure."

2.1 On verification of the P&L account for the AY 2014-15, the Assessing Officer

found that the assessee had shown gross profit at 10.55% instead of 15%

indicated by the Managing Partner. The Assessing Office issued a show cause

notice to the assessee asking why 15% gross profit should not be adopted in

view of the statement given by the Managing Partner. In reply, the assessee

explained the shortfall in the gross profit as under:

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“The Managing Partner of the assessee was more into operational aspects. He was not aware of the exact figures and financial rates of the company. The prices of the products are not fixed. They are variable depending on market conditions like demand and competition. When a statement was taken on 25th September 2014, he merely confirmed the facts as enquired by the Income Tax Officer without comparing/considering the exact facts and figures of the business. Therefore, the Gross Profit Rate mentioned by the Managing Partner at the time of taking statement was an exaggerated figure. This had no nexus with the reality. During the financial year 2013-14, the market was hit by recession and the demand for construction and related materials were comparatively lesser. The assessee was not able to achieve profits as they expected. This Authority may note the gross profit pattern of the Assessee in last 6 years.

FY Gross Profit Margin 2010-11 12.45% 2011-12 13.49% 2012-13 12.00% 2013-14 10.55% 2014-15 10.65% 2015-16 13.76%

The pattern clearly states that the Assessee has been slowly recovering from the hit they had at the time of recession. This Authority may kindly note that the statement given by the Managing Partner does not have any nexus with the actual performance of the company."

2.2. The Assessing Officer rejected the explanation of the assessee and assessed

the gross profit at 15% and made an addition of Rs. 92,47,500/- to the income

returned. The relevant para of the assessment order is as under:

"The reason adduced by the assessee is not tenable as the Managing Partner of the firm categorically admits in the statement recorded u/s 131(1) of the I.T. Act 1961 that the firm is earning a Gross Profit of 15% of the sales turnover after giving various kinds of discounts to the dealers. The Hon'ble High Court decision of Kerala in ITA. No.551/2009/dt. 26/05/2010 in the 3

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case of CIT Vs M/s. Hotel Meriya concluded that statement recorded and documents collected by the Assessing Offjcer cannot be brushed aside stating that it is having only limited application. The statement recorded as per Summons u/s 131(1) of the I.T. Act 1961, the assessee categorically admits that the firm is earning a Gross Profit of 15% on Sales Turnover. As the statement was given as per the Evidence Act, the assessee cannot retract from the admission made in the statement recorded as per Summons u/s 131(1) of the I.T. Act. Moreover the contention made by the assessee that the Managing Partner was not aware of the financial aspects of the firm is not true as per the facts and circumstances of the case. The application made by the assessee is rejected on the above grounds and I am fixing the Gross Profit @ 15% of the Turnover achieved during the year."

Assessing Officer. It was submitted that the assessee had merely mentioned

that they plan and prepare price list in order to get approximately 15% gross

profit and 4% net profit and this cannot be considered as admission. It was

erroneous to interpret the statement as admission by the managing partner and

the managing partner had nowhere categorically admitted of making 15% Gross

Profit. According to the Ld. AR, no documentary evidences were found from the

assessee by the revenue to support the addition made merely on the basis of

statement recorded/s 131(1). It was submitted that the Assessing Officer had

no incriminating evidence to support the statement made by the managing

partner and the Assessing Officer merely relied on a statement given by the

managing partner and made addition without even making an enquiry. The Ld.

AR submitted that the Assessing Officer had no proof, other than a statement, to

come to a conclusion that the assessee had not disclosed its complete income.

According to the Ld. AR, the audited books of accounts of the assessee, the audit

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report by the Auditor and the bank statements were in line with the income

already disclosed by the assessee, while the Assessing Officer merely relied on a

statement which stated about approximations and the plan and budgets of the

assessee. According to the Ld. AR, it is a fact that no business runs as per the

plans and predictions and the ground reality is that the profit earned by the

business man would be much lower than the projections and estimations. It was

submitted that even in the statements, the managing partner had mentioned

that the assessee will have to give different types of discounts on the sale price.

Thus, it was submitted that the net profit already disclosed by the assessee

showed a true and correct valuation of net profit of the assessee.

3.1 Further, it was submitted that an unapproximated gross profit rate given

without looking into the books of account or financial statements cannot be used

as a basis for making additions. According to the Ld. AR, the Assessing Officer

had no material evidences to come to the conclusion that the assessee had

earned 15% Gross Profit. The Assessing Officer made the assessment merely on

approximation. It was very evident that, despite of the low sales, the assessee

had to increase the discounts offered to customers to sustain in the market

which resulted in a lower Gross Profit than the earlier years. From the normal

trend of 3% discount, it was submitted that the assessee had to offer a discount

at the rate of 4% on total turnover to sustain in the market. It was explained

that the market for PVC pipes was considerably down and the firm had lowered

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its Gross Profit rate to attain the sales targets which was evident from the above

table that the sales had dropped considerably in the financial year 2013-14. The

drop in sales and increase in discounts offered resulted in low GP compared to

earlier years. It was submitted that the assessee had not attained a GP of 15%

in any of the previous years. Thus, it was reaffirmed that the GP ratio as

mentioned by the managing partner in his statement had no basis and had no

nexus with the actual financial condition of the assessee. Thus, it was submitted

that the Assessing Officer had erroneously placed his reliance on a statement

given by the managing partner without having any evidences to substantiate the

addition.

report on sustainability of the additions. The Assessing Officer submitted the

remand report vide letter dated 23.05.2018 and the relevant part of the report is

as under:

"4. Statement recorded u/s.131(1) of the I.T. Act should have the same bearing as evidence defined in section 3 of the Evidence Act. Assessing Officer is vested with the same powers in a Court as under Civil Procedure Code, 1908. According to the Hon'ble High Court decision of Kerala in ITA No.551/2009 dated 26/05/2010 in the case of CIT Vs. Hotel Meriya, the statement recorded on oath cannot be brushed aside stated that it is having limited application. In this case the managing partner cannot make statement about the financial position of the Firm without knowing the exact position of the Firm.

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21/02/2014 i.e. after the admission that the firm has been earning 5% gross profit in the statement of oath. So he was fully aware of the situation of the profitability of the Firm as he has paid self assessment tax of Rs.10 Lakhs on 29/09/2014. Now he deliberately reduces the gross profit in order to claim the refund of the above.

Particulars 2013-14 2012-13 2011-12 2010-11

Sales 20,76,03,970.10 21,40,88,730.19 18,98,01,060.94 16,12,26,038.53

Gross Profit 2,16,26,855.65 2,56,90,750.75 2,56,13,147.36 2,00,80,233.07

GP Ratio 10% 12% 13% 12%

Total discount 88,46,724.80 65,94,694.50 57,62,946.00 72,91,701.00

% discount on 4.26% 3.08% 3.03% 4.52% Sales

supported the additions made on the following grounds:

a) The Managing Director has admitted under oath that the gross profit of the Appellant is 15% and statement given on oath cannot be brushed aside in view of the decision of jurisdictional High Court in the case of Hotel Meriya, supra.

b) The gross profit shown for the AY 2014-15 is the least in last six years and the assessee has inflated the expenditure on account of discounts to decrease the profit. 7

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Court under CPC, 1908 under section 131 of the Act to record statements on

oath and the same can be taken as admission of the assessee. However, the

question is whether it is conclusive and the assessee is barred from retracting

such statement. This question was answered by Hon'ble Supreme Court in the

case of Produce Co. Ltd. vs State of Kerala ( 91 ITR 18) and held as under:

"It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect."

6.1 In the light of the decision of Hon'ble Supreme Court, the CIT(A) observed

that though the admission made is an important piece of evidence, the same is

not conclusive and the Appellant can show that such admission was incorrect.

Therefore, there is no bar on the Appellant to explain whether the admission

reflects the truth or not, based on cogent evidence.

6.2 The CIT(A) referred to the question whether the contents of the statement

of Managing Director be read as admission of gross profit earned during the AY

2014-15. The statement of the managing director is reproduced as follows:

"Question:- 8 - Explain the procedure of sale of goods in your firm. For e.g. I am showing a sale bill TPA 536 dated 03/01/2014 of Toms Pipes Pvt. Ltd. Please explain the sale of goods to Toms enterprises?

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Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts.

Question:- 9- In addition to the above what are your major expenses?

Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive.

Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit?

Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure."

According to the CIT(A), on perusal of answer to question no. 10, it was evident

that it was not an admission of gross profit at 15% but it was only about general

approach towards pricing of the products. Further, it was observed that the

statement was not based on any books maintained by the assessee and

therefore, no addition can be made based on such general statements.

6.3 The CIT(A) referred to the question whether an estimated addition can be

made on the basis of low gross profit or increase in expenditure under a

particular head? In this regard, the CIT(A) relied on the judgment of the Delhi

High Court in the case of Paradise Holidays (325 ITR 013) wherein the Court

considered issue of rejection of low net profit rate and held as under:

"6. The assessing officer has not pointed out any specific defect or discrepancy in the account books maintained by the assessee. Admittedly,

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the assessee had been maintaining regular books of account, which were duly audited by an independent chartered accountant. As noted by the Commissioner (Appeals), the financial results were fully supported by the assessee with vouchers and the books of account were complete and correct in all respects. The accounts which are regularly maintained in the course of business and are duly audited, free from any qualification by the auditors, should normally be taken as correct unless there are adequate reasons to indicate that they are incorrect or unreliable. The onus is upon the revenue to show that either the books of account maintained by the assessee were incorrect or incomplete or method of accounting adopted by him was such that true profits of the assessee cannot be deduced therefrom,"

6.4 Further, the CIT(A) relied on the judgment of the Delhi High Court in the

case of Poonam Rani (326 ITR 0223) wherein the Court had considered issue of

rejection of low net profit rate and held as under:

"10. .......Similarly, if the rate of GP declared by the assessee in a particular period is lower as compared to the GP declared by him in the preceding year, that may alert the assessing officer and serve as a warning to him, to look into the accounts more carefully and to look for some material which could lead to the conclusion that the accounts maintained by the assessee were not correct. But, a low rate of GP, in the absence of any material pointing towards falsehood of the accounts books, cannot by itself be a ground to reject the account books under section 145(3) of the Act."

6.5 According to the CIT(A), the observations of the Delhi high Court in the

above cases clearly indicate that if the Assessing officer takes note of low GP

rate shown by the assessee the he has to probe further and examine the

correctness of the accounts maintained by the Appellant. Further, the Assessing

Officer has to lake note of the explanation offered by the assessee with regard to

low GP rate and in the end, only if the Assessing Officer can point out either

defects in the books of account or establishes the falsity of the explanation

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offered by the assessee, the Assessing Officer is empowered to estimate the GP

rate based on the comparative cases.

6.6 In view of the detailed discussion in the paragraphs above, the CIT(A) held

that the conclusion drawn by the Assessing Officer that the Managing Partner

has admitted gross profit of 15% on oath was incorrect and not based on facts.

Further, it was held that the explanation of the assessee regarding statement

given by the Managing Director cannot be brushed aside on the ground that the

statement was given under oath as the assessee had a right to prove that such

admission was incorrect. Further, it was held that the Assessing Officer cannot

make additions based on gross profit difference without establishing that the

books of account maintained by the assessee do not reflect correct profit earned

by the assessee. Hence, considering the above facts, the CIT(A) deleted the

addition of Rs.92,47,500/- made by the Assessing Officer based on low gross

profit.

order of the Assessing Officer.

the books of account of the assessee were required to get audited u/s. 44AB of

the Act. It is an admitted fact that books of account of the assessee had not

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been rejected by the Assessing Officer. However, the Assessing Officer relied on

the statement of Shri Tomy C. Vadayil, managing partner of the assessee

recorded u/s. 131(1) of the Act on 25/09/2014 for the purpose of framing the

assessment wherein he has stated as follows:

"Question:- 8 - Explain the procedure of sale of goods in your firm. For e.g. I am showing a sale bill TPA 536 dated 03/01/2014 of Toms Pipes Pvt. Ltd. Please explain the sale of goods to Toms enterprises?

Ans: - We buy goods from the company by fixing our price (up to 160% of the cost price). From the price we give different types of discounts (Trade discount, monthly quantity discount, annual quantity discount, quarterly quantity discount). In addition to that we also give cash discounts.

Question:- 9- In addition to the above what are your major expenses?

Ans: - Other major expenses are distribution expenses, advertisement, Sales promotion, Salary incentive.

Question:- 10 After deducting the above expenses will you give the approximation of gross profit and net profit?

Ans: - We plan and prepare price list in order to get approximately 15% gross profit and 4% net profit. However, if we are not able to achieve the required turn over, then we will lose our control on net profit because of fixed cost that will increase the over head expenditure."

8.1 As seen from the above, the managing partner stated that the assessee is

getting GP at 15% and net profit at 4%. Contrary to this, the assessee has

shown gross profit at 10.55%. It was also explained by the Ld. AR the reason

for declaring GP at lower rate in the assessment year instead of 15% as stated in

the sworn statement and this was due to offering higher discount to the

customers to sustain in the market. This was the case of offering lower rate of

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profit on sale. The Assessing Officer rejected the contention of the assessee and

he estimated the income of the assessee on the basis of GP at 15% by placing

reliance on the sworn statement recorded u/s. 131 of the Act. After careful

consideration of the circumstances and facts of the this case, we are of the

opinion that the statement recorded u/s. 131 of the Act was valid statement and

it could be used for the purpose of assessment provided they are supported by

corroborative documents.

8.2 Under section 131 of the Act, the income tax authority is empowered to

examine on oath. Section 131 of the Act confers power to the income tax

authority to record the statement in the course of proceedings before them. The

power invested u/s. 131(1) is only to make enquiries and investigation and not

basically meant to voluntary disclosure or surrender of concealed income. As per

section 31 of the Indian Evidence Act, 1878, admissions are not conclusively

proved as against admitted proof. In the absence of rebuttable conclusion,

admission bind the maker when these are not rebuttable or retracted. It was

held by the Supreme Court in the case of Pullengode Rubber Produce vs. State of

Kerala (91 ITR 18) that an admission is an extremely important piece of evidence

but it cannot be said that it is conclusive and the maker can show that it was

incorrect. In the case of Satinder Kumar (HUF) vs. CIT (106 ITR 64), the High

Court of Himachal Pradesh held that the admission made by an assessee

constitute a relevant piece of evidence but if the assessee contends that in

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making the admission, he had proceeded on a mistaken understanding or on

vmisconception of facts or untrue facts, such admission cannot be relied upon

without considering the aforesaid contention. In the case of Avadh Kishore Das

vs. Ram Gopal AIR 1979 (SC) 861, it was held that evidentiary admissions are

not conclusive proof of the facts admitted and may be explained or shown to be

wrong but they do raise an estoppel and shift the burden of proof to the person

making the admission. The Supreme Court further held that unless shown or

explained to be wrong, they are an efficacious proof of the facts admitted. Thus,

the burden to prove “admission” as incorrect is on the maker and in case of

failure of the maker to prove that the earlier stated facts were wrong, these

earlier statements are suffice to conclude the matter. If retraction is proved

sufficiently, the earlier stated facts loose their effect and relevance as a binding

evidence and the authorities cannot conclude the matter on the basis of the

earlier statements alone. However, bald retraction of earlier admissions will not

be enough even after retraction. Such statements cannot automatically become

nullified. If the assessee proves that the statement recorded u/s. 131 was

involuntary and it was made under coercion or during their admission, the

statement recorded u/s. 131 has no legal validity.

8.3 There was a circular issued by CBDT issued circular in F. No. 286/98/2013- IT(Inv.II) dated 18th December 2014 stating as follows:

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“Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light.

From the above Circular, it is amply clear that the CBDT has emphasized on its

officers to focus on gathering evidences during search/survey operations and

strictly directed to avoid obtaining admission of undisclosed income under

coercion/under influence. Keeping in view the guidelines issued by the CBDT

from time to time regarding statements obtained during search and survey

operations, it is undisputedly clear that the lower authorities have not collected

any other evidence to prove that the impugned income was earned by the

assessee.

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8.4 Without commenting on the authenticity of the statement by the managing

partner of the assessee Shri Tomy C. Vadayil, we are of the opinion that there is

no corroborative evidence to support the claim made by the Assessing Officer.

Even otherwise, uncorroborative statements collected by the Assessing Officer

cannot be an evidence for sustenance of addition made by the Assessing Officer.

8.5 At this stage, it is pertinent to refer to the judgment of the Supreme Court

in the case of Vinod Solanki (2009) (233) ELT 157 observed as under :

"22. It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. [see Pon Adithan vs. Dy. Director, Narcotics Control Bureau (1999) 6 SCC 1] ...............

8.6 Yet again in Romesh Chandra Mehta vs. State of West Bengal (1969) 2

SCR 461 although this Court held that any statement made under ss. 107 and

108 of the Customs Act by a person against whom an enquiry is made by a

customs officer is not a statement made by a person accused of an offence, but

as indicated hereinbefore, he being an officer concerned or the person in

authority, s. 24 of the Indian Evidence Act would be attracted.

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8.7 It has been similarly held by the Hon’ble Supreme Court in the case of

K.T.M.S. Mohd. & Anr. vs. Union of India (1992) (197 ITR 196) as under:

"We think it is not necessary to recapitulate and recite all the decisions on this legal aspect. But suffice it to say that the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made either before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court intending to act upon the inculpatory statement as a voluntary one should apply its mind to the retraction and reject the same in writing. It is only on this principle of law that this Court, in several decisions, has ruled that, even in passing a detention order on the basis of an inculpatory statement of a detenu who has violated the provisions of the Foreign Exchange Regulation Act or the Customs Act, etc., the detaining authority should consider the subsequent retraction and record its opinion before accepting the inculpatory statement lest the order be vitiated. Reference may be made to a decision of the Full Bench of the Madras High Court in Roshan Beevi vs. Jt. Secretary to the Government of Tamil Nadu, Public Deptt. etc. (1983) Mad LW (Crl.) 289 : (1984) 15 ELT 289 : AIR 1984 NOC 103, to which one of us (S. Ratnavel Pandian, J.) was a party."

8.8 The ratio that emerges from the aforesaid decisions is that once a

statement is retracted, the contents stated in the retracted statement must be

substantially corroborated by other independent and cogent evidence. It has

been consistently held by various courts that a sworn statement cannot be relied

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upon for making any addition and must be corroborated by independent

evidence for the purposes of making assessments.

8.9 We are of the view that the statement recorded u/s. 131 cannot be

independently used for making any addition in the hands of the assesse and the

said statement cannot, in our view, be the sole basis for making any addition and

must be independently corroborated by evidences. Thus, on a careful reading of

the decisions of the Hon’ble Supreme Court referred before us, we are of the

view that the legal position that emerges is that a sworn statement, though

binds the assessee, it cannot be the sole basis for making the assessment. It is

open to the assessee to show the circumstances in which confessional

statements were recorded and once the assessee proves that confessional

statements were recorded under threat and coercion and retracts from the same,

the confessional statements cannot be the sole basis for making assessments or

for making any addition in the hands of the assessee.

Madras High Court held as follows:

“The principles relating to section 133A of the Income Tax Act, 1961, are as follows: (i) an admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts

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do not correctly disclose the correct state of facts; (ii) in contradistinction to the power under section 133A, section 132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law; (iii) The expression "such other materials or information as are available with the Assessing Officer" contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A; (iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment; (v) Finally, the word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself.

A survey was conducted in the premises of the assessee-firm. One of the partners in his sworn statement offered an additional income of Rs.20 lakhs for the assessment year 2001-02 and Rs.30 lakhs for the assessment year 2002-03. However, the said statement was retracted by the assessee-firm in its letter dated August 3, 2001, stating that the partner from whom a statement was recorded during the survey operation under section 133A, was new to the management and he could not answer the enquiries made and as such he agreed to an ad hoc addition. The Assessing Officer based on the admissions made by the assessee, which were directly relatable to the defects noticed during the action under section 133A of the Act, recomputed the assessment. The order was set aside by the Commissioner of Income-tax (Appeals) and this order was upheld by the Tribunal. On appeal to the High Court:

“Held, dismissing the appeal, that in view of the scope and ambit of the materials collected during the course of survey action under section 133A shall not have any evidentiary value. It could not be said solely on the basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee.”

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6747 of 2012 dated 20/09/2012, the Supreme Court held as follows:

“Heard Counsels on both sides. Leave granted. Civil Appeal filed by the Department pertains to 2001-02. In view of the concurrent findings of the fact, this Civil Appeal is dismissed.”

Hence, the ratio laid down by the Madras High Court was confirmed by the

Supreme Court.

(ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income- tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101];

(iii) The word "may" used in Section 133A (3)(iii) of the Act, viz., "record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself.

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(iv) Finally, the statement recorded by the Assessing Officer on 25/09/2014 u/s. 131 cannot be the basis to sustain the addition since it is not supported by corroborative material.

basis of sworn statement of the managing partner. Accordingly, we dismiss the

ground taken by the Revenue. The appeal of the Revenue is dismissed.

sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER

Place: Kochi Dated: 7th February, 2019 GJ

Copy to: 1. M/s. Toms Enterprises, 505/XII, Industrial Estate, Industrial Nagar, Veroor, P.O., Changanacherry, Kottayam-689 106. 2. The Income Tax Officer, Ward-4, Thiruvalla. 3. The Commissioner of Income-tax(Appeals), Kottayam. 4. The Pr. Commissioner of Income-tax, Kottayam. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order

(ASSISTANT REGISTRAR) I.T.A.T., Cochin

I.T.A. No.442/Coch/2018