DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1, COIMBATORE vs. RAM BATTERY INDIA PRIVATE LIMITED, ERODE

The assessee has raised the following Cross Objection:

The grounds by the Appellant Revenue are without any reasons and are baseless.

The CIT(A) is justified in deleting the addition with respect to Rs. 87,83,236/-, for the Assessing Officer has not brought on record any details and in possession of any evidence with respect to the alleged unaccounted rental income and other income. And for all other reasons that may be adduced at the time of hearing, the Respondent prays that this cross-objections be considered in the right perspective and that the appeal by the Appellant Revenue be dismissed in the interest of justice. 5. Brief facts of the case are that the assessee is a company engaged in manufacturing and trading batteries and also running a hotel cum restaurant. A survey u/s.133A of the IT Act was conducted on 05/03/2020 in the business premises of the assessee company. A sworn statement u/s.131 were recorded from the Managing Director of the assessee company by the Assessing Officer wherein he has stated as under: a) Difference in stock - Rs. 9,86,174/-; b) Income on account of interior decoration, land purchase, and purchase of kitchen equipments, furnitures, etc. of Rs.1,52,47,650/-; c) Other sources Rs.87,83,236/-.

Before the ld. CIT(A), the ld. AR of the assessee contended that there is no whisper/mention as to how the sum of Rs.1,53,47,650/- was arrived at by the survey authorities. The assessee has also stated that the sum of Rs.89,10,000/- mentioned under "Building Hotel Ram Inn" represents expenditure on interior, furniture, etc. incidental to its business. Further, the assessee has stated that the expenditure towards interior, furniture, etc, was made in earlier years. However, the AO has made the addition in the current year, more particularly in the absence of any corroborative evidence during survey. The assessee has placed reliance on decision of the Hon'ble Supreme Court in the case of CIT v. S. Khader Khan Son [2013] 352 ITR 480 (SC) and the CBDT instruction dated 10.03.2003 in F.NO. 286/2/2003-IT (INV. II).

The ld. CIT(A), on the issue of Unaccounted rental income and other income of Rs.87,83,236/- has passed following order as under:

Before us, the ld.DR for the revenue contended that statement recorded during survey cannot be ignored. She further submitted that after recording statement assessee is not justified taking volte-face against the said statement. She also referred para 20 of the judgment of the Hon’ble Rajsthan High court in the case of Bannalal Jat Constructions (P.) Ltd Vs ACIT [2019] 106 taxmann.com 127 (Raj) which is as under:

Subsequently, on 04.12.2014 during the post-search proceedings, statement of Shri Bannalal Jat was again recorded under Section 131 of the IT Act, wherein he was again confronted with the various documents seized and cash found during the course of search and the consequent surrender made by him in respect of his two concerns and in response thereto, he again confirmed the surrender of undisclosed income amounting to Rs.1,21,43,210/- and Rs.1,35,00,000/-. It is in this background that we have to view his reply to the show-cause notice submitted on 02.12.2016. This show-cause notice was issued to him by the assessing officer when the appellant-company offered the said undisclosed income to tax. The reliability, importance and sanctity of admission made during search could be refuted only by cogent and convincing evidence. We may in this connection refer to earliest judgment of the Supreme Court in Pullangode Rubber Produce Co. Ltd., (supra) wherein it was held that admission is an extremely important piece of evidence but it can't be said that it is conclusive. It is open to the person, who made admission to show that it is incorrect. The assessee should be given proper opportunity to show the correct state of affairs. The law with regard to this has developed much thereafter. There is no gainsay the fact that admission made during the search can be disputed by the assessee and at the same time however it is equally well settled that the statement made voluntarily by the assessee could form the basis of assessment. Mere fact that the assessee retracted the statement at later point of time could not make the statement & CO-37/Chny/2025 (AY 2020-21) Ram Battery India Pvt Ltd unacceptable. The burden lay on the assessee to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for assessee to make such statement. However, a bald assertion to this effect at much belated stage cannot be accepted. The assessee indulged in maintaining transaction on diaries and loose papers which was not permissible in any of the method of accounting. The assessee, while filing the return of income, has not disclosed any undisclosed income and hence, retracted from the admission made by him during the course of search. Subsequent retraction from the surrender without having evidence or proof of retraction is not permissible in the eyes of law. The statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction.

Per contra, the ld.counsel for the assessee has contended that except the statement during survey nothing was seized or found. The statement was recorded despite no corroborative material was noticed or gathered or found during survey. He further, submitted that the revenue authorities were wrongly recorded the statement in violation of the CBDT instruction dated 10.03.2003 in F.N.286/2/2003-IT(INV.II).

We have heard the rival submissions and perused the record and case law citation referred. We find from the record that there is no reference to the any corroborative evidence, found during the course of survey which leads to the conclusion that the appellant has made any investment in the hotel during the year under consideration. It is also not known that how Shri L.R. Mahesh and & CO-37/Chny/2025 (AY 2020-21) Ram Battery India Pvt Ltd AO arrived at the amount of Rs.1,52,47,650/-. No documents have been referred by the Shri L.R. Mahesh and AO. We also find that during assessment proceedings, the assessee had submitted before the AO that the actual expenditure on interior, furniture etc. to the tune of Rs.89,10,000/- incidental to the business was already accounted in their books under ‘Building Hotel Ram Inn’. Therefore, in this case by filing the expenditure, the assessee has duly shown that the statement made was not correct. The Supreme Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 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.

The jurisdictional High Court in the case of Commissioner of Income-tax, Trichy v. P. Balasubramanian [2013] 33 taxmann.com 130 (Madras)/[2013] 215 Taxman 288 (Madras) held as under:

After elaborately referring to the decisions of Paul Mathews & Sons (supra); CIT v. G.K Senniappan [2006] 284 ITR 220/155 Taxman 118 (Mad.) and CIT v. Ajit Kumar [2008] 300 ITR 152 (Mad.) and the Circular of the Central Board of Direct Taxes dated March 10, 2003 with regard to confession statement of additional income during the course of search and seizure and survey operations, the Division Bench of this Court in CIT v. S. Khader Khan Son [2008] 300 ITR 157 (Mad.) has summarised the principles as under:

The Punjab and Haryana High Court held that even if the statement under section 133A was not at par with the statement under section 132(4) and did not have that evidentiary value, such statement cannot be held to be irrelevant material so as to be ruled out of consideration in totality of facts, particularly in the absence of regular books of account. In the facts and circumstances of the case that the assessee failed to produce books of accounts, which may have been maintained during the regular course of business or any other authentic contemporaneous evidence of agricultural income, the Punjab & Haryana High Court held that the statement under Section 133A cannot be held to be irrelevant material. In our considered view, in the factual matrix of present case, the above decision of Punjab & Haryana High Court is not applicable.

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.

AS cited by ld. DR for the revenue, the case of Bannalal Jat Constructions (P.) Ltd Vs ACIT [2019] 106 taxmann.com 127 (Raj), Bannalal was confronted with the various documents seized and cash found during the course of & CO-37/Chny/2025 (AY 2020-21) Ram Battery India Pvt Ltd search and the consequent surrender made by him. In this present case, nothing was found or seized during survey, hence the judgment in Bannalal Jat Constructions (P.) Ltd is not at all applicable here.

Our above observation is equally applicable to the unaccounted rental income of Rs.87,83,236/-. There is no corroborative evidence to support the addition made by the AO on this account except the statement made.

Hence, in the light of the above factual matrix and case law referred we are not inclined to interfere with the order of the ld.CIT(A), therefore, affirm the same on both additions.