M/S. SBS AGENCIES,CHENNAI vs. DCIT, CENTRAL CIRCLE-3(4), CHENNAI

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आयकर अपीलीय अधिकरण, ’सी’ न्यायपीठ, चेन्नई।
IN THE INCOME TAX APPELLATE TRIBUNAL
‘C’ BENCH: CHENNAI
श्री यस यस विश्वनेत्र रवि, न्यावयक सदस्य एवं श्री अविताभ शुक्ला, लेखा सदस्य के समक्ष
BEFORE SHRI SS VISWANETHRA RAVI, JUDICIAL MEMBER AND SHRI AMITABH SHUKLA, ACCOUNTANT MEMBER
आयकर अपील सं./ITA No.1894/Chny/2024
निर्ाारण वर्ा /Assessment Years: 2018-19

M/s.SBS Agencies,
No.18, Audiappa Naicken Street,
Sowcarpet,
Chennai-600 079. [PAN: AALFS9107M]

Deputy Commissioner of Income
Tax
Central Circle-3(4),
Chennai

(अपीलार्थी/Appellant)

(प्रत्यर्थी/Respondent)
अपीलार्थी की ओर से/ Assessee by :
Shri D.Anand, Advocate
प्रत्यर्थी की ओर से /Revenue by :
Ms.R.Anita, Add.CIT
सुिवाई की तारीख/Date of Hearing
:
21.11.2024
घोर्णा की तारीख /Date of Pronouncement
:
15.01.2025

आदेश / O R D E R

PER AMITABH SHUKLA, A.M :

This appeal is filed against the order bearing DIN & Order No.ITBA
/APL/S/250/2024-25/1065130411(1) dated
25.05.2024
for the assessment years 2018-19 Through the aforesaid appeal the assesse has challenged order u/s 250 dated 25.05.2024 passed by CIT(A),
Chennai.
2.0
The assessee has raised seven grounds of appeal all of which are centering around the addition of Rs.17,51,669/- and Rs.5,95,712/- made by the Ld. AO u/s 69A and 69B respectively. All the grounds are centering around the stand of the assessee that the additions made by :- 2 -:

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the Ld. AO tantamount to double taxation and therefore adjudicated together.
3.0
The factual matrix surrounding the case is that a survey u/s 133A was done on the assessee’s premise, who is trading in dry fruits and general merchandise, on 28.12.2017. During the course of survey proceedings excess stock and cash was found. The Ld. AO noted that Assessee had filed his return of income on 12.10.2018 declaring in come of Rs.50,74,650/- The Ld. AO noted that the assessee had not included in his return of income the income admitted during the course of survey.
The Ld. AO proceeded to add the same by invoking provisions of section 69A and 69B of the act. The Ld. First Appellate Authority confirmed the addition made by the Ld. AO. As evident from para 7.4 to 7.8 of the order of Ld.CIT(A), reliance was principally placed upon the sworn statement of managing partner namely Shri Kirti P Jain of the appellant recorded during the course of survey proceedings.
4.0
We have heard rival submissions in the light of material available on records. At the outset, we have noted that the order of the Ld. AO is a totally non-speaking order without any application of mind. He has summarily rejected assessee’s explanations holding them as unsatisfactory without placing on records as to how and why the same were unsatisfactory. To the extent the order of the Ld. AO deserves to :- 3 -:

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be set aside. Further, the Ld. CIT(A) has also merely relied upon the Ld.AO’s order and reproduced the same. The Ld. CIT(A) has principally sustained the addition by harping on the point that the assessee’s managing partner had offered additional income during the survey through a sworn statement and hence was liable for including the same is the return of income. The arguments of the assessee of having included the impugned figures of disclosure of excess cash and stock in the books of accounts while filing the return of income, have been brushed aside without any demonstrative evidence.
4.1 The Ld. Counsel for the assessee has submitted that admittedly it had made disclosures of income arising on account of survey proceedings. It has however contended that the amounts surrendered have been included in the books of accounts for the purposes of filing the return of income. It is the case of the assessee that his books of accounts were updated post survey and were also audited as per provisions of the income tax act. The Ld. Counsel for the assessee argued that the excess stock of Rs.17,51,669/- was included in the trading account under the head purchases and cash of Rs. 5,95,712/- was included in the P & L account under the head miscellaneous income. It has been contended that no mistakes have been pointed by the Ld. AO in the books of accounts of the assessee u/s 145(3) of the :- 4 -:

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act. In support of its contentions of inclusion of the amounts disclosed during survey, the assessee has contended that column 40 of the tax audit report for AY-2018-19 shows that GP in 2018-19 was 5.4% and NP was 3.43% as against 2.17% and 0.08% and 2.5% and 0.09% in immediately preceding assessment years viz 2017-18 and 2016-17. The rise during the present year was attributable to the additional income disclosed. The Ld. Counsel placing reliance upon the decision of Hon’ble Delhi High Court in Paradised Holidays 325 ITR 13 and of Hon’ble Madras High Court in the case of KSM Gurusamy Nadar & Sons
149 ITR 127 argued that when no defects are pointed in the books by the Ld. AO and the same are accepted, no additions can be made to the returned income. The Ld. Counsel contested invocation of section 69A and 69B on the premise that the same was non-maintainable. The Ld.
Counsel also contested that the reliance by Ld. First Appellate Authority on the sworn statement of the managing partner was misplaced in view of the decision of Hon’ble Apex Court in the case of Khadar Khan & Sons
25 taxmann.com 413. He argued that Hon’ble Apex Court has held that the statements recorded during survey proceedings have any evidentiary value when corroborated with conclusive evidences and that in the present case the disclosures have been corroborated by necessary entries in the return of income. The Ld. DR would like to place reliance
:- 5 -:

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upon the orders of authorities below. It is the case of the Ld. DR that the assessee has manipulated its books so as to artificially reduce the net profit. It was contended that between 29.12.2017 to 31.03.2018
only expenses was booked by the assessee so as to suppress the actual profits.
4.2 As regards the controversy of validity of statements recorded during survey proceedings, we have noted that Hon’ble Madras High
Court in the Khader Khan Sons has laid the following ratio on the issue of validity of statement under statement 133A.
“…..5.3. 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 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. Commissioner of Income-tax [(2003) 263 I.T.R. 101].
5.4. The scope of Sections 132(4) and 133A also came up for consideration before the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income- tax [(2003) 263 I.T.R. 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 can 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
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High Court, appreciating the stand taken by the assessee and after referring to Section 133A of the Act, held as hereunder:
".. we find that the 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 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, 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) 5.5. 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 Commissioner of Income-tax v.
G.K.Senniappan [(2006) 284 I.T.R. 220], a Division Bench of this Court, in which one of us was a party (P.P.S.JANARTHANA RAJA, J.), answered the question in the affirmative, against the Revenue and in favour of the assessee, holding that the materials collected during 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.
5.6. 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 22.11.2006, of course, following the earlier decision of this Court in G.K.Senniappan's case reported in (2006) 284 I.T.R. 220, while confirming the order of the Tribunal, answered the question in favour of the assessee, in limine.
6. 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 10.3.2003 with regard to the confession of additional income during the course of search and seizure and survey operations. The said circular dated 10.3.2003 reads as follows:
" Instances have come to the notice of the Board wher 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 :- 7 -:

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credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on 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 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."
7. From the foregoing discussion, the following principles can be culled out:-
(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 do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 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 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 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 Commissioner of Income-tax v. G.K.Senniappan [(2006) 284 I.T.R. 220];
(iv) The material or infomration 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 Commissioner of Income-tax v. S.Ajit
Kumar);
(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.
8. For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that the materials collected and the :- 8 -:

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statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal….”
4.3
A perusal of the above indicates that Hon’ble Juri ictional High
Court has held that the statement recorded u/s 133A does not has requisite evidentiary value. The views have also been echoed by Hon’ble Kerala High Court as well in the case of Paul Mathews & Sons.
Thus we find sufficient force in the arguments of the assessee that the determination of undisclosed income of the assessee cannot be only based upon admissions made by the managing partner of the assessee firm. Thus the reliance by the Ld. First Appellate Authority only upon the sworn statements is misplaced particularly in view of the fact that the disclosures made have been included in the books of account by the assessee.
4.4
Perusal of the assessment order shows that the Ld. AO has made the impugned additions making sweeping statements without placing on records any corroborative evidences to prove its case. No effort has been made to point out any specific defects in the books of account of the assessee or to elucidate that the entries qua amounts offered during the survey proceedings have not been included in the audited books of accounts. The Ld. First Appellate Authority also proceeded to confirm the addition by relying upon the principal aspect that :- 9 -:

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the assessee had made disclosure during the survey. We find sufficient force in the argument of the assessee that the rise in GP / NP ratios is linked to additional income offered during the year. Accordingly, we are of the view that the impugned addition made by the Ld. AO on account of excess stock and cash deserves to be deleted. The orders of lower authorities are therefore set aside and all the grounds of appeal raised by the assessee are allowed.
5.0
In the result, the appeals of the assessee is allowed.
Order pronounced on 15th , January-2025 at Chennai. (यस यस नवश्विेत्र रनव)
(SS VISWANETHRA RAVI)
न्यानयक सदस्य / Judicial Member (श्री अनमताभ शुक्ला)
(AMITABH SHUKLA)
लेखा सदस्य /Accountant Member
चेन्नई/Chennai, नदिांक/Dated: 15th , January-2025. KB/-
आदेश की प्रतितिति अग्रेतिि/Copy to:
1. अिीिार्थी/Appellant
2. प्रत्यर्थी/Respondent
3. आयकर आयुक्त/CIT - Chennai
4. तिभागीय प्रतितिति/DR
5. गार्ड फाईि/GF