YASHASVI DEVELOPERS,HUBLI vs. THE INCOME TAX OFFICER WARD 3(5) HUBLI, HUBLI

PER WASEEM AHMED, ACCOUNTANT MEMBER: The present appeal filed by the assessee is directed against the order under section 250 of the Income Tax Act, 1961 (hereafter the Act) passed by the learned Commissioner of Income Tax (Appeals) under the National Faceless Appeal Centre, Delhi (hereafter the Ld. CIT(A)) for A.Y. 2015-16 bearing DIN & Order No.: ITBA/NFAC/S/250/2025-26/1080834185(1).

2.1 The Ld. AR of the assessee submitted that the learned CIT(A) passed the order on 17- 09-2025, which was received through email. The CA who filed the first appeal informed the assessee in the second week of October 2025 that the appeal had been partly allowed and that the further appeal before the Tribunal had to be filed within 60 days from the date of receipt of the order, i.e., on or before 16.11.2025.

2.2 It was submitted that the partner of the assessee could not approach the counsel within time due to ill-health, family problems and financial crisis. These circumstances affected his ability to attend to the administrative work, including filing of the appeal. He approached the counsel only in the last week of December 2025.

2.3 It was further submitted that the delay thereafter occurred because time was required to understand the implications of the appellate order, consult tax professionals, collect and collate relevant records, and prepare the appeal papers. It was therefore submitted that the delay was due to bona fide reasons and not due to any negligence, inaction or deliberate lapse on the part of the assessee.

4.1 On consideration of the explanation, we find that the delay is not inordinate. The assessee's reasons are specific and supported by a sworn affidavit. There is nothing on record to suggest that the delay was deliberate or that the assessee intended to abandon its right of appeal. The assessee's conduct also shows that, after approaching counsel, steps were taken to prepare and file the appeal.

4.2 The Hon’ble Supreme Court in Collector, Land Acquisition v. Mst. Katiji & Others (1987) 167 ITR 471 (SC) has held that the expression “sufficient cause” should be construed liberally so as to advance substantial justice. It was also observed that ordinarily a litigant does not stand to benefit by filing an appeal late and that substantial justice should be preferred over technical considerations.

4.3 Further, the Hon’ble Supreme Court in N. Balakrishnan v. M. Krishnamurthy (1998) 7 SCC 123 has held that the length of delay is not material by itself. The acceptability of the explanation is the relevant consideration. Where the delay is not mala fide or deliberate, a liberal approach should be adopted in the interest of substantial justice.

4.4 In the present case, the delay is only of 57 days. The assessee's explanation appears to be bona fide. No material has been brought before us to show that the explanation is false or that the assessee deliberately delayed filing the appeal. In our view, the assessee should not be denied an opportunity of having its appeal decided on merits merely on account of such delay.

4.5 Furthermore, we are of the view that refusing to condone the delay in the facts of the present case would result in the matter being rejected on a technical ground without examining the dispute on merits. On the other hand, no prejudice would be caused to the Revenue if the short delay is condoned, since the Revenue would have full opportunity to contest the appeal on merits.

4.6 Considering the facts of the case and respectfully following the principles laid down by the Hon’ble Supreme Court in the decisions referred to above, we are of the considered opinion that there was sufficient cause for the delay in filing the appeal. Accordingly, the delay of 57 days is condoned, and the appeal is admitted for adjudication on merits.

6.1 During the assessment proceedings, the assessee filed an affidavit dated 23.12.2017 retracting the earlier declaration of Rs. 47,47,300/-. The assessee stated that the declaration made during the survey was based on false evidence and was made under a wrong understanding.

6.2 The AO did not accept the retraction. The AO observed that the additional income was not offered merely on the basis of a statement. It was offered on the basis of materials found during the survey. The loose sheets were also admitted by the partner to have been written by him. He had accepted that the amounts represented unaccounted expenditure on construction. The AO further held that the subsequent affidavit was only a self-serving retraction and was not supported by any material. According to the AO, the assessee also failed to produce any evidence to show that the expenditure appearing in the impounded material had been recorded in the books of account. The AO therefore rejected the retraction and added Rs. 47,47,300/- to the assessee's total income as unexplained investment in the construction of residential apartments.

7.1 The assessee further submitted that the statement was recorded during the survey and the additional income was offered under peculiar circumstances. It was argued that an admission made during survey is not conclusive and the Department was required to establish that the loose papers actually belonged to the assessee and represented real payments made outside the books. The assessee relied upon the decision in CIT v. S. Khader Khan Son reported in 360 ITR 157 and contended that a statement recorded in survey proceedings could not, by itself, be treated as sufficient evidence for making the addition.

7.2 It was also submitted that the declaration of Rs. 47,47,300/- had subsequently been withdrawn by letter dated 23.12.2017 supported by a notarised affidavit. According to the assessee, no unaccounted document or defect in the books had actually been found during the survey. The assessee therefore contended that once the declaration was retracted, the burden was on the Department to prove that the vouchers were genuine and represented undisclosed expenditure of the assessee.

7.3 The assessee also pointed out that four residential projects were under construction during the relevant period. It was contended that the finding of the AO regarding the alleged payments was inconsistent with the factual position regarding the stage of the projects. The assessee therefore prayed that the addition of Rs. 7,47,300/- made u/s 69 of the Act be deleted.

5.1.4. Perusal ot pata 2 of the affidavit, makes it evident that the additional income was declared on the understanding that the survey proceedings will be restricted to the firm's income declared as a compromise and would be concluded accordingly. The para 3 of the affidavit provides the actual reason for retraction i.e. the assessee did not expect that the case would be taken for scrufiny and accordingly decided to retract the statement disclosing the additional income. lt is noted that the additional income was declared vide deposition given u/s.131 at the time of survey on 03.11-2014. Subsequently, the assessee has filed the return duly disclosing the afore mentioned amount of Rs.47,47,3001. The original return was filed on 01.10.2015, after approximately one year from the date of disclosure. Subsequently, the revised return was filed on 22.12.2o1s wherein the additional income of Rs.47,59,265/-, as per disclosure was offered for taxation. The said return was processed u/s. 143(1) of the lr Act on 01.01.2016. Subsequently case was selected for scrutiny and notice uls.143(2) was issued on 16.09.2016 and served on the assessee on 22.09.2016. Subsequently, notices u/s.142(1) were issued from time to time to the assessee. 5.1.5. The chronology of events clearly shows that the assessee never thought of the withdrawal of disclosure of additional income at any time till the proceeding u/s.143(3) was commenced. The first return was filed after one year from the date of disposal wherein the assessee has confirmed the disclosure and offered the same for taxation. The revised return dtd. 22j2.201s also confirmed the disclosure of additional income. Even after the issue of 143(2) notice, the assessee didn't consider retraction of the statement and consequent disclosure. During the period of more than three years till 23.12.2017 (date of retraction of statement) it had never occurred to the assessee that the voucher nos.133 & 134, on the basis of which disclosure was made were ingenuine. Further, assessee failed to adduce any evidence how such realisation after three years was occurred to it that the documents are ingenuine and fabricated. lt is also to be noted, though the assessee claimed that the documents are fabricated, no complaint had been filed before the authority or any authority higher than the assessing officer. All the facts clearly indicates that the documents i.e. voucher nos.133 & 134 are genuine, found in the course of survey and pertains to undisclosed payments to certain parties which were acknowledged by the assessee company through its managing partner, Shri M.S. Marol and accordingly offered the same for taxation by filing of return dated 01 .10.2015 and again by revised return dated 22.12.2015. The only reason for retraction of the additional income which was otherwise attracted and offered for taxation by the assessee in its original and revised return was continuation of proceedings u/s.143(3) by the assessing officer. The assessee was under misguided impression that once the disclosure has been made there would be no proceedings u/s.143(3) in it's case. Hence, since the proceedings u/s.143(3) had been commenced and continued, the assessee tried to retract the disclosure by filing an affidavit, contents of which could not be substantiated. 5.1.6. ln continuation to the above, it is to be mentioned that there are several judicial pronouncements where such belated retraction of statement have been found and decided by various judicial authorities i) ln the course of search proceedings, statement of director of the assessee company recorded uls.132(4) admitting certain undisclosed income. ln the course of assessment, A.O. made addition to assessee's income on the basis of statement given by its directors but subsequently, director retracted the said statement. High Court opined the mere fact that the director the assessee company retracted statement at a later point of time, could not made the said statement unacceptable. Thus, since the assessee failed to discharge its burden that admission made by the director in his statement was wrong and the said statement was recorded under duress and coercion, SLP filed against decision of High Court was to be dismissed. [Banwarilal Jat Construction (P) Ltd. vs. Asstt.ClT (2019) 106 taxmann.com 127(Raj)1. SLP dismissed filed against High Court dismissed by Hon'ble Apex Court in 106 taxman.com 1281264 taxman S(SC). ii) Statement given to the A.O. u/s.132(4) have legal force and unless retractions are made within a short span of time, supported by affidavit swearing that contents are incorrect and it was obtained under force, coercion by lodging complaint with higher officials, same cannot be treated as retracted. []ClT vs. MAC Public Charitable Trust (2022) 144 taxmann.com 54 (Mad)] iii. Retraction of statement recorded uls.132(4) has to be made within reasonable time or immediately after statement of assessee is recorded, and hence where retraction of statement recorded u/s.132(4) had been made after 8 months, same is to be discarded. [PCIT vs. Roshanlal Sancheti (2023) 150 taxmann.com.227 (Raj)] SLP dismissed in 150 taxmann.com2281452lTR 229 (SC). 5.1.7. ln this instant case, the retraction was made after passage of three years from the date of statement. The appellant did not prove any coercion on the part of the survey unit, neither he could substantiate the claims made in the affidavit. 5.1.8. On perusal of the return field on 22.12.20'15, it is seen that the appellant had disclosed total income under the head other income ( sub-head any other income) of Rs. 65,93,0431 inclusive of Rs. 47,47,300/- as income declared u/s. 133A (survey). The appellant also claimed total expenditure of Rs. 52,69,118/- resulting in net income of Rs. 13,23,925/-. Subsequently in the return field on 23.12.2017, the income disclosed was Rs. 17,84,723! (after removing Rs. 47,47,3004) and expenditure claimed was Rs. 460,000/- resulting in net income of Rs. 13,24,7231-. The assessing officer has computed assessed income taking into consideration return filed on 23.12.2017. 5.1.9. On perusal of the above facts and circumstances, the undersigned is of the opinion that the appellant is not entitled for any relief on this issue of retraction of disclosure and the assessing officer has rightly added the amount of Rs.47,47,300/-. Accordingly, the grounds of appeal associated with this issue is dismissed and the addition made by the assessing officer is confirmed.

9.1 The Ld. AR further submitted that a statement recorded during survey proceedings does not have conclusive evidentiary value and cannot, by itself, justify an addition unless it is supported by independent material. It was contended that no contrary material was brought on record to substantiate the alleged investment. It was also submitted that the Ld. CIT(A) incorrectly proceeded on the basis that the assessee had offered Rs. 47,47,300/- as income in the ROI. According to the assessee, the said amount was never included in the computation of total income, and no tax was paid on it. The returned income continued to remain at Rs. 13,23,925/-. Mere reflection of the amount in the Profit and Loss Account under the head “other income - survey declaration” could not amount to an offer of income for taxation under the Act.

9.2 The Ld. AR further contended that the finding of the Ld. CIT(A) that the assessee retracted the disclosure only after commencement of scrutiny proceedings was also incorrect. It was submitted that the assessee had never included the alleged survey amount in the returned income and had never paid tax thereon. Therefore, the conduct of the assessee itself showed that the alleged admission was never acted upon for tax purposes. Lastly, the Ld. AR submitted that the judicial precedents relied upon by the Ld. CIT(A) were distinguishable on facts. In those cases, there was corroborative evidence and clear acceptance of the income in the computation of total income. Such facts were absent in the present case. It was therefore submitted that the Revenue had failed to discharge the burden of establishing unexplained investment, and the addition of Rs. 47,47,300/- deserved to be deleted.

11.1 It is an admitted fact that the survey was conducted u/s 133A of the Act and during the course of the survey the assessee accepted an amount of Rs. 47,47,300/- in relation to the alleged unexplained expenditure. Subsequently, the assessee withdrew the said statement. The lower authorities have placed substantial reliance on the original statement and the fact that the amount was reflected in the accounts of the assessee.

11.2 It is settled law that an admission is an important piece of evidence. However, an admission cannot be regarded as conclusive in every circumstance. The person making the admission is entitled to show that the admission was incorrect. More importantly, a statement recorded during a survey u/s 133A of the Act stands on a different footing from a statement recorded on oath during search proceedings. Section 133A of the Act does not confer the power to examine a person on oath. The Hon'ble Madras High Court explained this distinction in Commissioner of Income-tax vs. S. Khader Khan Son reported in [2008] 300 ITR 157 (Madras)/[2008] 214 CTR 589 (Madras) order dated 04-07-2007, and the Revenue's appeal against that decision was subsequently dismissed by the Hon'ble Supreme Court in Commissioner of Income tax, Salem v. S. Khader Khan Son reported in [2012] 25 taxmann.com 413 (SC) order dated 20-09-2012. The relevant para of the Hon’ble Madras High Court is reproduced below:

“From the foregoing discussion, the following principles can be culled out: (i) 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 Kerala [1973] 91 ITR 18 ; (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 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. Senniappan [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)(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. 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 notautomatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal. Accordingly, rinding no substantial question of law arises for consideration, the tax case appeal stands dismissed.” 11.3 Therefore, in our considered view, the statement made by the assessee during survey cannot be looked at in isolation. The Revenue must show some material which supports the admission and establishes the existence of the alleged unexplained expenditure. The fact that the assessee subsequently retracted the statement after some time may be relevant while examining the credibility of the retraction, but delay in retraction by itself cannot convert an unsupported statement into conclusive evidence of unexplained expenditure.

11.4 In the present case, the addition is of Rs. 47,47,300/-. However, apart from referring to the statement and the vouchers stated to have been found during survey, the lower authorities have not brought out any specific corroborative evidence establishing the actual incurring of the alleged unexplained expenditure. There is no clear finding regarding the identity of the persons to whom the alleged payments were made, the dates on which such payments were made, the mode of payment, or the precise nature of the expenditure. The existence and actual payment of the alleged unaccounted expenditure have thus not been independently established.

11.5 In this regard, the decision of the Hon'ble Madras High Court in Commissioner of Income-tax, Trichy vs. P. Balasubramanian reported in [2013] 33 taxmann.com 130 (Madras)/[2013] 215 Taxman 288 (Madras)/[2013] 354 ITR 116 (Madras) order dated 06-03- 2013 is also relevant. In that case, the Hon’ble Court considered a statement recorded u/s 133A of the Act and found that the portion of the statement which was not supported by further/corroborative material could not sustain the addition. The principle emerging therefrom is that while a statement recorded during survey may be relevant material, the Revenue cannot sustain an addition merely on an unsubstantiated statement where the factual assertion forming the basis of the addition has not been independently verified. The relevant para is reproduced below:

“18. The Hon'ble Supreme Court in Pullangode Rubber Produce Co. Ltd.(supra) held that 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. Any statement recorded under Section 133A would have evidentiary value only if supported with materials and form the basis for assessment. In his explanation, the assessee stated that he has been doing job work and the remaining 2100 gms had been given to 3 Asaris. The Officers had not verified whether the gold was available with the said Asaris nor chosen to examine the said Asaris. The statement recorded during survey operation under Section 133A may be a relevant material. But in the absence of further materials to substantiate the same, such statement recorded under Section 133A can hardly be the basis for assessment. During the survey, 900 gms of gold was found in the premises of the assessee and the statement of the assessee was supported only to the extent of actual seizure of 900 gms. Since the statement of assessee in respect of the remaining gold was not substantiated, the Tribunal rightly set aside the addition in respect of the gold.” 11.6 We also find merit in the contention of the assessee regarding the accounting treatment of Rs. 47,47,300. The assessee has specifically contended that although the amount appeared in the Profit & Loss Account under the head “other income - survey declaration”, the amount was not included in the computation of total income and the returned income continued to remain the same. Mere description of an amount in the Profit & Loss Account cannot, by itself, establish the existence of unexplained expenditure when the very factual basis of such expenditure has not been established by supporting evidence.

11.7 The Ld. CIT(A) has observed that the disclosure was based upon vouchers found during the survey. However, what is material is not merely whether some vouchers were found, but whether those vouchers or any other material establish that the assessee actually incurred unexplained expenditure of Rs. 47,47,300/-. On the facts placed before us, there is no finding identifying such expenditure transaction-wise or connecting the entire addition of Rs. 47,47,300/- with any actual unaccounted payment made by the assessee.

11.8 In view of the above discussion, and respectfully following the principles laid down by the Hon’ble Madras High Court in S. Khader Khan Son (supra), as affirmed by the Hon’ble Supreme Court, and in P. Balasubramanian (supra), we are of the considered view that the addition of Rs. 47,47,300/- cannot be sustained merely on the basis of the statement recorded during the survey proceedings. The Revenue has not brought any independent or corroborative material on record to establish that the assessee had actually incurred the alleged unexplained expenditure. In the absence of such material, the statement by itself cannot form the sole basis of the addition. Accordingly, the addition of Rs. 47,47,300/- is deleted. The grounds raised by the assessee on this issue are allowed.

Order pronounced in the open court on 7th October, 2026.

Sd/- Sd/- SOUNDARARAJAN K. WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 7th October, 2026. Vms Copy to: YASHASVI DEVELOPERS, S-11 AND 12, INDUSTRIAL ESTATE, IST 1 GATE, GOKUL ROAD, HUBLI 580 030, HUBLI-DHARWAD-580030, KARNATAKA THE INCOME TAX OFFICER WARD 3(5) HUBLI, 2 C R BUILDING, NAVANAGAR HUBLI 580025, HUBLI-DHARWAD-580025, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE

By Order ASSISTANT REGISTRAR / I.T.A.T., BANGALORE

P G Digitally signed by P G RAJANI RAJA Date: 2026.10.22 NI 15:23:22 +05'30'