DCIT, CIRCLE -1, GUWAHATI, GUWAHATI vs. AL CARE DIAGNOSTIC AND RESEARCH CENTRE PRIVATE LIMITED, GUWAHATI

IN THE INCOME TAX APPELLATE TRIBUNAL “DB” BENCH, GUWAHATI (Through Virtual hearing at Kolkata) Before Shri Laxmi Prasad Sahu, Accountant Member and Shri Pradip Kumar Choubey, Judicial Member ITA No.307/GTY/2025 Assessment Year: 2017-18 DCIT, Circle – 1,………………….……………………………….………………………….Appellant 617, Aayakar Bhavan, GS Road, Guwahati, Assam- 781005 [PAN No. AAGCA6088F] Vs. AL Care Diagnostic And Research Centre Private Limited…………... Respondent AL Care Diagnostic And Research, Centre Private Limited, Assam- 781005 Appearances by: Uttam Kumar Borthakur, Advocate,.appeared on behalf of the Appellant. Santosh Kumar Karnani, Addl. CIT, appeared on behalf of the Respondent. Date of concluding the hearing : 20 July, 2026 Date of pronouncing the order : September 03 ,2026 ORDER Per Pradip Kumar Choubey, Judicial Member: The present appeal has been preferred by the revenue against the order of the CIT(E) dated 25.07.2025 of the Office of the Commissioner Of Income Tax, passed u/s 143(3) of the assessment year 2017-18 [hereinafter referred to as ‘CIT(A’].

ITA No.307/GTY/2025 At the very outset it appears from the report of the Registry that Revenue has filed the present appeal after a delay of 11 days. Revenue has filed a petition to condone the delay. Going over the contents of the petition delay is hereby condoned.

I} During the Assessment Year under consideration, the assessee was engaged in the business of Pathological and Radiological Test.

Ii}. During the course of survey proceeding, a statement of Shri Dibyajyoti Talukdar one of the director of assessee company was recorded under section 2

ITA No.307/GTY/2025 131 of the Income Tax Act, 1961 on 20/09/2016 wherein he admitted that the assessee was not maintain the records regarding referral commission payment. In this regard the assessee disclosed an amount of Rs. 1,00,00,000/- (Rupees One Crore) only. The relevant portion of the statement is extracted here. Vide Vide Notice under section 142(1) of the Income Tax Act, 1961 dated 27/09/2019, the assessee was asked to explain how the said disclosures were affected while calculating total income at the time of filing of ITR. In response, the assessee stated that the excess figure of Rs 1,00,00,000/- so declared during the course of survey had been duly disclosed in "Part A OI-Other Information" in the return for the relevant Assessment Year. Assessing officer found that the assessee has shown an amount of Rs. 1,00,00,000/-(Rupees One Crore) towards disallowance made under section 37 of the Income Tax Act, 1961 , though the assessee had debited an amount of Rs. 1,00,00,000/- with the head "Miscellaneous Commission" as seen from the ledger account of the "Commission" expenses furnished by the assessee. It is also seen that the "Agency Commission" Expense for the year under scrutiny has increased disproportionately as compared to the preceding year, as evidenced from the table,as such, it is clear from the statement above that an amount of Rs. 1,00,00,000/- was an unrecorded expenditure in cash, which was claimed in the P&L, i.e., included in books of account only after the survey and then

ITA No.307/GTY/2025 subsequently disallowed also. As such, no income was offered as disclosed on account of unrecorded expenditure made in cash. In view of this, a sum of Rs. 1,00,00,000/- is added to the total income of the assessee as "unexplained expenditure" u/s 69C of the Income Tax Act, 1961

6.5 These grounds relate to the appellant’s objection to the addition of Rs. 100,00,000/- by the Assessing Officer as unexplained expenditure under Section 69C of the Act, in view of the facts that the admitted cash payments of Rs./Rs.100,00,000/- on account of referral commission without deduction of tax, was duly incorporated in the audited books of account and no infirmity was found in such books of account. Such an addition made by the Assessing Officer would imply that the total expenditure on account of referral commission was Rs. 2,57,86,230/- during the year, an implication which has no factual basis.

6.6 During the course of survey proceedings, a statement of Shri Dibyajyoti Talukdar, one of the directors of the appellant company was recorded on 20.09.2016 wherein the director of the appellant company admitted that the appellant was not maintaining the record of referral commission payment made in cash to the doctors. However, the director of the appellant company

ITA No.307/GTY/2025 disclosed an amount of Rs. 1,00,00,000/- as additional income of the appellant as the same was paid in cash. The relevant extract of the statement is as under.

(a) The relevant part of the said deposition has been reproduced below for your honour's ready reference:

Q.17 Kindly furnish the details of references received from various doctors for diagnostics in your centre.

Ans. We don't get references from all the doctors mentioned in the list of "Referral Doctors", However, a list of references received more than 300 per doctors is being submitted to you.

Q.18 During the course of survey, one loose paper marked as page no.26 of annexure "ACDR-5" was found and impounded. Kindly go through it and explain the content of the page?

Ans. It is a list of doctors whom we have paid commissions against their referrals.

Q.19 What was the mode of payments for such commissions?

Ans. It was in cash.

Q.20 Kindly refer the period of such payments?

Ans. It is pertaining to month of August 2016 5

ITA No.307/GTY/2025 Q.21 What is the total amount of such commission paid?

Ans. We don't pay referral commission often. However, sometimes we do. We don't have any record of such commission paid except the above.

Q.22 Kindly fumish the whole list of doctors whom you have paid referral commission?

Ans. As I have already mentioned above that we don't pay such commission often and we don't have any such record. So, it is difficult to fumish such details.

Q.23 During the course of survey one diary marked as "ACDR-1" found and impounded. Kindly go through the page no.20 of the annexure "ACDR-1"and explain the content of the page?

Ans. It is pertaining to the share of our in house doctor per case who do not get salary from Alcare Diagnostic & Research Centre Pvt. Ltd. We pay them in percentage. Here "USG" means ultra-sonography, "CT" Stands for CT Scan.

Q.24 Do you have anything to say?

Ans Since, we don't have record of referral commission paid. I hereby disclose a sum of Rs. 1(one) crore as addition income of AlcareDiagonstic& Research Centre Pvt. Ltd for the F.Y 2016-17 as same was paid in cash.

ITA No.307/GTY/2025 I have gone through the above statement given by me and understood it The same has been recorded correctly and without any fabrication. The statement has been given by me out of my free will and is true to the best of my knowledge and belief. No coercion, threat, inducement or any other undue influence was brought upon me.

6.7 As disclosed by the director of the appellant company in his statement taken during the survey proceedings, the amount of Rs. 1,00,00,000/- was disclosed by the appellant in "Part A OI-Other Information in the return for the impugned A.Y.2017-18. On perusal of the return of income, it is observed that the appellant has disclosed an amount of Rs. 1,00,00,000/- and disallowed the same as "Amounts debited to the profit and loss account to the extent disallowable under section 37 in the return. This fact was also recorded by the auditors under Note no.32 to the Notes forming a part of the financial statement for the year ended on 31.03.2017 of the audited financial statements as "The referral commission of Rs. 1,00,00,000/- paid to numerous parties has not deducted the TDS and it has also declared before Income tax Authority during survey. Hence the expenses are inadmissible as per the Income Tax Act 1961. "In this regard, reference is made to the decision of the Hon'ble Punjab & Haryana High Court in the case of Commissioner Of Income-Tax vs M/S Kap Scan & Diagnostic Centre Pvt. Ltd in ITA No 445 of 2006, as reproduced under

ITA No.307/GTY/2025 Section 37 is a residuary provision. An assessee is entitled to deduction of all expenditure which is wholly and exclusively laid out or expended for the purposes of the business which has not been expressly covered by any other specific provision of the Act

"(1) The expenditure must not be governed by the provisions of Sections 30 to 36.

ITA No. 445 of 2006-5-

(ii) The expenditure must have been laid out wholly and exclusively for the purposes of the business of the assessen.SE TAX DEPART

(iii) The expenditure must not be personal in nature

(iv) The expenditure must not be capital in nature."

"Explanation. For the removal of doubts, it is hereby declared that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the

ITA No.307/GTY/2025 purposes of business or profession and no deduction or allowance shall be made in respect of such expenditure."

"20. Disallowance of illegal expenses. 20.1 Section 37 of the Income-tax Act is amended to provide that any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited by law shall not be deemed to have been incurred for the purposes of business or profession and no deduction or allowance shall be made in respect of ITA No. 445 of 2006-6-such expenditure. This amendment will result in disallowance of the claims made by certain assessees in respect of payments on account of protection money, extortion, hafta, bribes, etc., as business expenditure It is well decided that unlawful expenditure is not an allowable deduction in computation of income.

20.2 This amendment will take effect retrospectively from Ist April, 1962, and will, accordingly apply in relation to the assessment year 1962-63 and subsequent years."

ITA No.307/GTY/2025 recognized. It cannot be held that businessmen are entitled to conduct their business even contrary to law and claim deductions of payments as business expenditure notwithstanding that such payments are illegal or opposed to public policy or have pernicious consequences to the society as a whole.

6.4.1 A physician shall not give, solicit, or receive nor shall he offer to give solicit or receive, any gift, gratuity, commission or bonus in consideration of or return for the referring, recommending or procuring of any patient for medical, surgical or other treatment. A physician shall not directly or indirectly participate in or be a party to act of division, transference, assignment, 10

ITA No.307/GTY/2025 subordination, rebating, splitting or refunding of any fee for medical, surgical or other treatment.

6.4.2 Provisions of para 6.4.1 shall apply with equal force to the referring, recommending or procuring by a physician or any person, specimen or material for diagnostic purposes or other study/work. Nothing in this section, however, shall prohibit payment of salaries by a qualified physician to other duly qualified person rendering medical care under his supervision."

"23. What consideration and objects are lawful, and what not. The consideration or object of an agreement is lawful, unless-

ITA No.307/GTY/2025 it is forbidden by law, or is of such a nature that, if permitted, it would defeat the provisions of any law: or is fraudulent or involves or implies, injury to the person or property of another or the Court regards it as immoral, or opposed to public policy.

In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.

21 The judgments relied upon by the assessee cannot be of any assistance to the assessee as they are prior to insertion of Explanation to sub section (1) of Section 37 of the Act. Reference may also be made to the Apex Court Judgment in Dr. T.A. Quereshi's case ITA No. 445 of 2006-9- (supra) on which reliance has been placed by the leamed counsel for the assessee. The Hon'ble Supreme Court in that case was seized of the matter where heroin forming part of the stock of the assessee's trade was confiscated by the State authorities and the assessee claimed the same to be an allowable deduction. The Hon'ble Supreme Court held that seizure and confiscation of such stock in trade has to be allowed as a business loss and Explanation to Section 37 has nothing to do as that was not a case of business expenditure. Since the present case is not a case of business loss but of business expenditure, that judgment is distinguishable and does not help the assessee. 12

ITA No.307/GTY/2025 22. The issue with regard to the amount illegally paid to the police authorities for running their business came up for consideration before the Madhya Pradesh High Court in Gwalior Road Lines v Commissioner of Income-tax, [1998] 234 ITR 230 (MP) wherein it was held that after insertion of Explanation to Section 37(1) by the Finance Act, 1998 we.f 1.4.1962. the assessee could not claim such payment as expended for commercial exigency and, therefore, the same was not an allowable deduction.

ITA No.307/GTY/2025 26. In view of the above, the appeals are allowed and the substantial question of law is answered in favour of the revenue and against the assessee."[Emphasis added]

6.8 Considering the rationale of the aforementioned judicial precedent, the disclosed amount of Rs. 1,00,00,000/- being on account of cash payment of referral commission made to the doctors by the appellant and thus, disallowed under section 37 of the Act by the appellant in its return of income for the impugned A.Y.2017-18, is found to be in order.

6.9 During the assessment proceedings the Assessing Officer on perusal of the ledger account of the expenses on "Commission observed that the appellant had debited an amount of Rs.1,00,00,000/- under the head "Miscellaneous Commission" and opined that the "Agency Commission' Expense for the year under scrutiny had disproportionately increased in comparison to the preceding year. The Assessing Officer thus, arrived at the conclusion that extra expenditure amounting to Rs.1,00,00,000/- has been disallowed by the appellant under Section 37 of the Act and that the appellant had made no disclosure but retracted completely. Referring to the statement made by the director of the appellant company, the Assessing Officer made an addition of Rs.1,00,00,000/- as "an unrecorded expenditure in cash, which was claimed in the P&L, i.e, included in books of account only after the survey and then 14

ITA No.307/GTY/2025 subsequently disallowed also. As such, no income was offered as disclosed on account of unrecorded expenditure made in cash. In view of this, a sum of Rs. 1,00,00,000/- is added to the total income of the assessee as "unexplained expenditure" u/s 69C of the Income Tax Act, 1961".

6.10 From the foregoing paragraph, it is evident that despite the appellant's disclosure of Rs.1,00,00,000/- in the return of income and disallowance of the same under section 37 of the Act by the appellant in its return of income for the impugned A.Y.2017-18, the Assessing Officer was of the opinion that the appellant had made no disclosure and completely retracted the statement recorded during the survey proceedings. Thereafter, the Assessing Officer made the addition of Rs. 1,00,00,000/-as "unexplained expenditure" under Section 69C of the Act.

6.11 It is pertinent to note that the Assessing Officer in his assessment order under Section 143(3) of the Act dated 26.12.2019 has not relied upon any evidences/materials gathered during the course of survey operations or thereafter while framing the assessment order for the impugned A.Y.20017-18. By solely relying on the statement of Shri Dibyajyoti Talukdar, one of the directors of the appellant company which was recorded under section 131 of the Act on 20.09.2016 wherein Shri Dibyajyoti Talukdar had disclosed the amount of Rs.1,00,00,000/-, the Assessing Officer has proceeded to make the 15

ITA No.307/GTY/2025 addition of Rs.1,00,00,000/- as "unexplained expenditure under Section 69C of the Act in the assessment order under Section 143(3) of the Act dated 26.12.2019.

6.12 The Hon'ble Madras High Court in the case of Commissioner of Income-tax v. S. Khader Khan Son in [2008] 300 ITR 157 (Madras) has averred that

"All the three substantial questions of law raised by the Revenue revolve on the vexed question whether the materials collected and the statement elicited during the survey operation under section 133A of the Act had any evidentiary value. For the purpose of clarity, it is apt to refer sections 132(4) and 133A of the Act, which are extracted as hereunder:

"131 Search and seizure. Q)- (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.

Explanation. - For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect

ITA No.307/GTY/2025 of any books of account other documents or assets found as a result of the search, but also in respect of all matters relevant far the, purpose of any investigation connected with any proceeding under the Indian Income-tax Act 1922 (11 of 1922), or under this Act

"1334. Power of survey-(1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter-

(a) any place within the limits of the area assigned to him, or

(b) any place occupied by any person in respect of whom he exercises jurisdiction, or

(c) any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such place is situated or who exercises jurisdiction in respect of any person occupying such place, at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor, employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession

(to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place.

ITA No.307/GTY/2025 (ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and

(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.

Explanation For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.

(2)An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.

(3) An income-tax authority acting under this section may-

(i) if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made extracts or copies therefrom,

ITA No.307/GTY/2025 (ii) make art inventory of any cash, stock or other valuable article or thing checked or verified by him.

(ii) record the statement of any person which may be useful for, or relevant to/ any proceeding under this Act.

(4) An income-lax authority acting under this section shall on no account, remove or cause to be removed from the place wherein he has entered, any books of account or other documents or any cash, stock or other valuable article or thing.

(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any proceeding under this Act.

ITA No.307/GTY/2025 (6) If a person under this section is squired to afford facility to the income-tax authority to inspect books of account or other documents or to check or verily any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made.

Explanation-In this section-

(a) income-tax authority' means a Commissioner, a Joint Com missioner, a Director a Joint Director an Assistant Director or Deputy Director or an Assessing Officer, and for the purposes of clause (i) of sub-section (1), clause

(i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax, if so authorised by any such authority:

(b) 'proceeding' means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are exercised, or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such date in respect of any year."

In the instant case, there was a survey operation conducted under section 133A of the Act in the assessee's premises and a statement was recorded from one of

ITA No.307/GTY/2025 the partners Assuming there were discrepancies and irregularities in the books of account maintained by the assessee, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such statement 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 as rightly held by the Commissioner and the Tribunal since such statement was not attached to the provisions of section 133A of the Act. It could not be said solely on the basis of the statement given by one of the partners of the assessee-firm mat the disclosed income was assessable as lawful income of the assessee Since there was no material on record to prove the existence of such disclosed income or eaming of such income in the hands of the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee.

In the decision in Putiangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18, the apex court held mat 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.

Where a survey was conducted in the premises of the assessee, a medical practitioner and a statement was recorded from him, in which the assessee surrendered additional income and pursuant to the same, the Assessing Officer reopened the assessment, but during the course of which the assessee retracted 21

ITA No.307/GTY/2025 the additional income offered and contended that the statement was the result of duress, which was not accepted by the Assessing Officer and also by the Tribunal holding that the statement is valid and that it was made without duress, a Division Bench of the Allahabad High Court in Dr. SC Gupta v CIT (2001) 248 ITR 782 (All), of course, placing reliance on the decision of the apex court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 held that the burden that was laid on the assessee to establish that the admission made in the statement at the time of survey was wrong and that there was no additional income was not even attempted to be discharged and thus, the order of the Tribunal was based on facts and no question of law arose from it.

A power to examine a person on oath is specifically conferred on the authorities only under section 132(4) of the Act in the course of any search or seizure. Thus, the Income-tax Act whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, 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

ITA No.307/GTY/2025 statement recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. CIT (2003) 263 ITR 101.

The scope of sections 132(4) and 133A also came up for consideration before the Kerala High Court in Paul Mathews and Sons v. CIT [2003] 263 ITR 101. In the said case, the assessee therein made an attempt to draw a distinction between the two provisions, viz sections 132(4) and 133A. According to the assessee, there is no provision to administer oath or to take any sworn statement and that a mere admission or an acquiescence cannot be a foundation for an assessment and that any statement given during a survey has no effect as an "admission" nor can it be a statement on oath. According to the assessee, his statement during the survey with reference to any books of account cart hardly be the basis for any assessment. It was also contended on behalf of the assessee that any material collected or any statement recorded during the survey under section 133A cannot be put against the assessee, as the same has no evidentiary value. The Division Bench of the Kerala High Court, appreciating the stand taken by the assessee and after referring to section 133A of the Act. held as here- under (page 108):

we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax Act in the 23

ITA No.307/GTY/2025 course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on cath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, 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 Therefore, the statement elicited during the survey operation has no evidentiary value and the Income-tax Officer was well aware of this. (emphasis supplied).

Similarly, when the issue, whether the expression "such other materials or information as are available with the Assessing Officer in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, came up for consideration before this court in CIT v. G. JCSenniappan [2006] 284 ITR 220. a Division Bench of this court, in which one of us was a party (P.PS. Janarthana Raja J.), answered the question in the

ITA No.307/GTY/2025 affirmative. against the Revenue and in favour of the assessee, holding that the materials collected dunng the survey under section 133A cannot be taken into consideration while determining the undisclosed income in respect of block assessment as per section 158BB, as the same has no evidentiary value.

Again, when an identical question whether the material found in the course of survey in the premises of the builder could be used in the block assessment of the assessee, came up for consideration before this Division Bench in an unreported case in T. C (A) No. 2620 of 2006, this court, by order dated November 22, 2006-since reported in CIT v S. Ajit Kumar [2008] 300 ITR 152, of course, following the earlier decision of this court in G.K. Senniappan's case reported in [2006] 284 ITR 220, while confirming the order of the Tribunal, answered the question in favour of the assessee, in limine

What is more relevant, in the instant case, is that the attention of the Commissioner and the Tribunal was rightly invited to the circular of the Central Board of Direct Taxes dated March 10, 2003, with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated March 10, 2003, reads as follows

"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 25

ITA No.307/GTY/2025 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, the Assessing Officers should rely upon the evidences/materials gathered during the course-of search/survey operations or thereafter while framing the relevant assessment orders."

From the foregoing discussion, the following principles can be culled out:

(1) An admission is an extremely 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 account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. v. State of Kerale (1973) 91 ITR 18. 26

ITA No.307/GTY/2025

(ii) In contradistinction to the power under section 1334, 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 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 CIT (2003) 263 ITR 101 (Ker.):

(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, vide CIT v. G. K. Sennisppan (2006) 284 ITR 220 (Mad)

(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, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar [2008] 300 ITR 152 (Mad.), (v) Finally, the word "may" used in section 133A(3)(Ni) 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 27

ITA No.307/GTY/2025 it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself.

For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A would not automatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal.

Accordingly, finding no substantial question of law arises for consideration, the tax case appeal stands dismissed."

6.13 Reference is made to the CBDT'S INSTRUCTION F. NO. 286/2/2003-IT (INV.

II), DATED 10.3.2003, reproduced 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 & 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, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration

ITA No.307/GTY/2025 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 & 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." [Emphasis added]

6.14 It is important to note that there was no finding on record by the survey party to imply that there was suppression of income/receipts of Rs.1,00,00,000/- in the books of account of the appellant and that the said amount was paid out of such excess income/receipts beyond the books of account. Hence, there is strength in the appellant's argument that "adding back Rs. 10000000, as unexplained expenditure, on irrelevant considerations while disregarding the relevant ones, in spite of the fact that such an addition would imply that the total expenditure on account of referral commission was Rs. 25786230 during the year, an implication which has no factual basis whatsoever." 29

ITA No.307/GTY/2025 6.15 In light of the above discussion and in absence of evidences/materials gathered by the Assessing Officer during the course of survey operations or thereafter while framing the assessment order under Section 143(3) of the Act dated 26.12.2019, the addition of Rs.1,00,00,000/- as "unexplained expenditure" under Section 69C of the Act lacks cogent explanation and is found to be based on mere assumptions and suspicion. Hence, the addition of Rs.1,00,00,000/- under Section 69C of the Act is considered to be not maintainable and the appeal of the appellant is thus, allowed.

6.16 In the result, the appeal is allowed and decided as above.

ITA No.307/GTY/2025 4. The Ld. CIT (A) committed a fundamental error in law by misapplying the provisions of the Income Tax Act. The CIT (A)'s reliance on the case law related to Section 37, which governs the deductibility of business expenses, is misplaced and irrelevant to the core issue. The AO's addition was made under Section 69C, which pertains to unexplained expenditures, a distinct and separate provision. The CIT (A)'s failure to distinguish between these two sections and the purposes they serve demonstrates a legal misapprehension, thereby vitiating the impugned order. 5. The Ld. CIT (A) erred in entertaining contentions and arguments which went beyond the scope of the material on record before the Assessing Officer without due compliance with the principles of Rule 46A. The CIT (A)'s decision to delete the addition, while implicitly relying on arguments not substantiated by evidence available during the assessment proceedings, undermines the integrity of the assessment order and the procedural safeguards provided under the Act. 6. On the facts and in the circumstances of the case, the Ld. CIT (A) passed an order that is brad in law and against the facts. The appellant craves leave to add, alter, or amend any of the grounds of appeal at the time of the hearing. 5. Contrary to that Ld. AR supports the impugned order thereby submitting that in the books of accounts for the year under reference, in addition to commission of Rs. 1,57,86,230/-, on which TDS was made the assessee duly incorporated the aforesaid admitted cash payment of Rs. 10,00,00,00/. The Ld. AR further submits that in course of assessment proceeding has also uploaded the copy of TAR, copy of the balancesheet and copy of the profit and loss account. The Ld. AR further submits that in response to the questionnaire issued by the Assessing Officer, assessee has submitted the details which is evident from the screenshot of the portal as the assessee submitted balance- sheet for the Assessment Year 2017-18, 2016-17, fixed asset invoice, bank statement, ledger in which details of all persons to whom the payments were made to the extent Rs. 57,86,230/- tax was deducted at source on these payments. The Ld. AR further submits that assessee has annexed all those documents with the assessing officers required, submitted the statements

ITA No.307/GTY/2025 showing month wise details of cash deposits into bank on 01.04.2015 to 08.11.2015 and 09.11.2015 to 31.12.2015 and corresponding period of 01.04.2016, 08.11.2016, and 09.11.2016 to 31.12.201. The Ld. AR submits that in respect of commission paid in cash of Rs. 1,00,00,000/- for which no receipt evidence was issued to usand we were not in a position to claim such amount in business expense,we had not incorporated such expenses into the books of accounts, subsequent to our admission during survey we incorporated such cash expenses into the books of accounts confirming to our own statement. The Ld. AR further submits that the Ld. AO did not find any discrepancy in the books of accounts to show that Rs. 1,00,00,000/- was not paid out of disclosed accounts recorded in the books of accounts nor he rejected the books of accounts. The Ld. AR further submits that by adding back further sum of Rs. 1,00,00,000/- as unexplained expenditure in cash,the Ld. AO had in fact implied that our commission expenses were Rs. 2,57,862,30/- instead of Rs. 1,57,862,30/- as disclosed in the audit books of accounts and this was not supported by any evidence or admission and clearly a perversity of the fact. The Ld. AR submits that there is no infirmity in the impugned order as the CIT(A) has discussed the material facts and thereafter allow the appeal of the assessee.

ITA No.307/GTY/2025 6. Upon hearing the submission of the counsel of the respective parties and on perusal of the impugned order we find that the assessee is engaged in the business of pathological and radiological test on survey u/s 133(1) of the act was conducted and assessee case was selected for compulsory scrutiny assessing officers has completed the assessment by assessing the income at Rs. 284,66,210 we further find that assessee objection to the addition of Rs. 1 crore by the assessing officers as unexplained expenditure. It is a fact that assessee had admitted the cash payment of Rs. 1,00,.00,000/- on account of referral commission regarding to him duly incorporated in the audited books of accounts. During the course of survey statement of Shri Dibyajyoti Talukdar being one of the directors was recorded and as per his statement the amount of Rs. 1,00,00,000/- was disclosed by the assessee in “Part A O1-Other Information”.We further find that assessee has disclosed an amount of Rs. 1,00,00,000/- and disallowed the same as amounts deducted to the profit and loss amount to the extent disallowable u/s 37 in the return. The Ld. CIT(A) before allowing the appeal of the assessee discuss the judicial pronouncement in its judgment as discussed above. We further find that there was no finding in record by survey party to imply that there was suppression of income/receipt of Rs. 1,00,00,000/- in the books of accounts and the said amount of the page out of such excess income beyond the books of accounts. It is pertinent to

ITA No.307/GTY/2025 mention here that director of the assessee company in answer to question No. 224 had unequivocally stated that we had no records of revival commission paid in cash and his submission is that assessee has no alternative left to disallow the said amount of Rs. 1,00,00,000/- u/s 37 of the Act. The CIT(A) has considered this fact and thereafter his held that addition of Rs. 1,00,00,000/- as unexplained expenditure u/s 68C lacks cogent explanation and it is found to be based on near assumptions.

Accordingly, the appeal filed by the Revenue is hereby dismissed.

Kolkata, the 3rd September, 2026.

Sd /- Sd/- [Laxmi Prasad Sahu] [Pradip Kumar Choubey] Accountant Member Judicial Member

Dated:. 03 .09. 2026. DC, PS

ITA No.307/GTY/2025 Copy of the order forwarded to: 1. Appellant - 2. Respondent - 3. CIT(A)- 4. CIT- 5. CIT(DR)

//True copy// By order Manish Bhoi Deputy Registrar, Kolkata Bench, Kolkata

ITA No.307/GTY/2025