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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI H. S. SIDHU & SHRI O. P. MEENA
Page 1 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER आ.अ.सं./I.T.A No.3140/AHD/2014 िनधा�रण वष�/Assessment Year: 2005-06 M/s. Computer Force, V. Assistant Commissioner of Plot No. 376/2(14) Zari Causeway Income Tax, Vapi Circle, Vapi. Road, Opp. Grounds of appeal State Co-op, Bank Kachigam, Daman - 396 193. [PAN: AACFC 6893 K] अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से Assessee by Shri A. Gopalakrishnan, CA राज�व क� ओर से Revenue by Shri R. P. Rastogi, Sr. D.R. सुनवाई क� तारीख Date of hearing 19.07.2019 उ�ोषणा क� तारीख Date of 27.08.2019 pronouncement आदेश /ORDER PER O. P. MEENA, AM 1. This appeal by the Assessee is directed against the order of learned Commissioner of Income tax (Appeals)-Valsad (in short “the CIT (A)”) dated 10.10.2014 pertaining to Assessment Year 2005-06 against the confirmation of penalty of Rs.9,16,971/- levied under section 271(1)(c) Income Tax Act,1961 (in shot of the Act)by the Assistant Commissioner of Income Tax, Vapi Circle –Vapi (the AO).
Succinct facts are that during the course of survey proceedings carried out 09.03.2005, Shri Rajul Vora Partner of the firm has admitted in his statement that he had incurred expenditure of Rs.25,05,900/- on renovation being done by the firm, which has not been recorded in books. However, in return of income no such income was disclosed. The
Page 2 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 assessee has retracted the disclosure of Rs.25,05,900/- vide letter dated 26.10.2005 filed with the AO on 31.10.2005 on the ground that he was not allowed to sleep and answer were given by him in not full conscious and answers are not in accordance with facts. However, the AO did not accept this contention and made addition on this account and also initiated penalty proceedings under section 271(1)(c) of the Act. The assessee carried the matter in appeal before CIT (A). However, the CIT (A) has also confirmed the addition so made. The decision of penalty proceedings was kept in abeyance till disposal of appeal. The ITAT vide order dated 03.05.2013 in I.T.A.No. 3742/Ahd/2008 had dismissed the plea of the assessee as the assessee has retracted only to its answers to question 23 and 26. Further retraction has been made after gap of 5 months. Hence, the AO levied penalty of Rs.9,16,971/- on the amount of tax sought to be evaded.
Being aggrieved, the assessee filed an appeal before the ld. CIT (A). The assessee has claimed that the assessee has retracted with disclosure vide letter dated 31.10.2005 as the was sleepy and not conscious when the statement was recorded. The CIT (A) has upheld the addition in general manner. The penalty order was passed by the AO without giving opportunity of being heard. Further, on law point , section 133A does not empower the AO to examine any person on oath hence, statement recorded during survey under section 133A has no evidentiary value in the light of decision of Hon`ble Madras High Court in the case of CIT vs. S. Khader Khan Sons (2008) 300 ITR 157(Mad) affirmed by Hon`ble
Page 3 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 Supreme Court in 214 CTR 589 (Mad) and Pullangode Rubber Produce Company Ltd. v. State of Kerala 91 ITR 18 (SC) and CBDT Instruction 286/2/2003-IT(Inv). However, CIT (A) has confirmed the penalty by observing that the assessee could not establish the expenditure incurred for renovation. Merely relying on statement, which according to the assessee has no evidentiary value is not suffice. The real facts involved cannot be ignored. Accordingly, the CIT (A) has confirmed the levy of penalty.
Being, aggrieved the assessee filed this appeal before the Tribunal. The learned counsel for the assessee submitted that the Ld. CIT (A) while finalizing quantum appeal observed that the AO or survey party has not found any independent evidence as regards investment, but the assessee has categorically mentioned it in his statement. Hence, the addition has been made owing to technical and inferential reason rather than based on any finding of fact of any independent evidence. The ITAT has merely confirmed the addition by stating that statement was retracted to its answer to question 23 & 26 and not retracted to all other questions of statement. It was submitted that entire statement was not concerned with disclosure, as it was made in reply to Question no. 26 only. The learned counsel further submitted that statement recorded during the course of survey proceedings has no evidentiary value as held by the Hon`ble Supreme Court in the case of CIT vs. S. Khader Khan Sons (2008) 300 ITR 157(Mad) affirmed by Hon`ble Supreme Court in [2013] 352 ITR 480(SC)/ [2012] 201 Taxman 248 (SC) / 25 taxmann.com 413
Page 4 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 (SC) and Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC), Beside, statement there was no material found during survey which establish that the assessee has incurred any expenditure on renovation. The learned counsel for the assessee referred question 25 of statement of Shri Rajul Vora and submitted that it has been clearly stated by the survey party in question 25 that as per balance sheet the assessee has made investment two years back. This read with balance sheet of the assessee would clearly established that investment was made prior to two years before date of survey. Hence, there is no evidence or material found during survey, which could establish that the assessee incurred expenditure as, admitted in disclosure during survey. The learned counsel for the assessee further relied on the Instruction F. No. 286/98/2003-IT (Inv-II) dated 18.12.2014 in which it was laid down that no disclosure would be obtained during search or survey under undue pressure, influence/ coercion without gathering evidence. Therefore, it was contended that disclosure made during survey has not based on any evidence hence; there is no positive concealment of income. Hence, penalty is not leviable.
Per contra, the ld. Sr. D.R. supported the order of lower authorities.
We have heard the rival submissions and perused the relevant material on record. The perusal of the assessment order reveals that the AO has made addition solely based on statement of Shri Rajul Vora recorded during survey under section 133A of the Act. However, we find that that said statement was later retracted by filed letter dated
Page 5 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 26.10.2005 filed on 31.10.2005. Ongoing through the statement, it is discernible that the so-called statement was not based on any incriminating material found or impounded during the course of survey. Therefore, the addition made during assessment proceedings is also without any material and merely on-retracted statement of the partner. However, the Appellate Authorities upheld same by not accepting late retraction of statement. It is trite law that penalty proceedings are distinct and separate proceedings from assessment proceedings. The finding recorded in the assessment order is not conclusive for deciding the imposition of penalty. It only has a persuasive value. Any finding recorded in the assessment order does not mean that the penalty has to be imposed automatically. It is discernible from statement itself that construction of factory building was completed before two years for date of survey which is also supported by the balance sheet of the assessee as referred in question 25 of the statement of Shri Rajul Vora itself. We observe statement recorded during the course of survey proceedings has no evidentiary value as held by the Hon`ble Supreme Court in the case of CIT vs. S. Khader Khan Sons (2008) 300 ITR 157(Mad) and affirmed by Hon`ble Supreme Court in [2013] 352 ITR 480(SC)/[2012] 201 Taxman 248 (SC) / 25 taxmann.com 413 (SC). Similarly the decision of Apex Court in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC)also supports the issue under consideration. Except, statement there was no material found during survey which establish that the assessee has incurred any expenditure on renovation. The CBDT has also issued Instruction F.No.286/98/2003-IT(Inv-II) dated 18.12.2014, by which it was directed the Revenue authorities that
Page 6 of 6 Computer Force, Daman v. ACIT-Vapi/I.T.A. No. 3140/AHD/2014/A.Y.05-06 disclosure during search or survey should be not be based under under- duress, pressure, influence/coercion where no evidence is gathered. Therefore, such disclosure obtained during survey without any evidence whatsoever cannot be said to be unearthing of positive concealment of income. Therefore, in such circumstances, penalty is not exigible. In view of these facts and circumstances, we are of the view that no positive concealment of income has been established. Nor the AO brought on record any material, which suggests that the assessee concealed his income or furnishing of inaccurate particulars of income. In such situation, addition made does not ipso-facto lead for penalty of concealment of income. On careful consideration of facts and circumstances of the case, we hold that it is not a case of positive concealment of income. Hence, penalty of Rs.9,16,971/- levied under section 271(1) (c) is therefore, deleted. Thus, the grounds of appeal are allowed.
In the result, the appeal of the assessee is allowed.
The order is pronounced by listing the case on the Notice Board under Rule 34(4) of Income Tax Appellate Tribunal Rules 1963.
Sd/- Sd/- (H. S. SIDHU) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat: Dated: 27th August , 2019/opm Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat