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Facts
The Revenue appealed the deletion of an addition made by the AO on the basis of a survey statement, which the assessee later retracted. The assessee was engaged in the business of transportation of goods, and a survey was conducted where certain documents were impounded. The AO made an addition based on a statement made by the assessee during the survey regarding undisclosed income, which the assessee claimed was made under pressure.
Held
The Tribunal held that the addition made by the AO solely on the basis of a retracted statement recorded during a survey and a 'dumb document' without any corroborative evidence cannot be sustained. The Tribunal relied on Supreme Court and various ITAT judgments stating that such statements have no evidentiary value and cannot be the basis for addition. The Tribunal also addressed the issue of disallowance under Section 40A(3) and found no infirmity in the CIT(A)'s order.
Key Issues
Whether an addition based solely on a retracted statement recorded during a survey and an uncorroborated 'dumb document' is sustainable. Whether the disallowance under Section 40A(3) by the AO was justified.
Sections Cited
133A, 40A(3)
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Income Tax Appellate Tribunal, “D” BENCH, KOLKATA
O R D E R
Per Rajesh Kumar, AM:
This is an appeal preferred by the Revenue against the order of the Commissioner of Income Tax, Kolkata 20(hereinafter referred to as the “Ld. CIT(A)”] dated 22.05.2024 for the AY 2014-15.
At the outset, we observe from the appeal folder that there is a delay of 190 days in filing the appeal by the department in support of which a condonation petition was filed. It was stated in the condonation petition that the delay has occurred due to obtaining the administrative approvals from the competent authorities, which took quite a long time and accordingly, the delay may be condoned being for genuine and bonafide reasons. The ld. AR, on the other hand, did not oppose the condonation of delay. Considering the reasons cited before us, we are inclined to condone the delay and admit the appeal for hearing.
3.1. The facts in brief are that the assessee was carrying on the business of transportation of goods. A survey action u/s 133A of the Act was conducted on the assessee on 08.11.2013. During the course of survey some books/documents were impounded and the statements were also recorded u/s 133A of the Act. The impounded papers were accepted by the ld. AO but explanation of the assessee qua the seized documents was rejected as regards the admission of the assessee qua the undisclosed income in the statement recorded at the time of survey. Accordingly, the addition of ₹4,41,61,742/- was made towards undisclosed profit as admitted in the statement recorded during the survey. The ld. AO accepted the profit on transportation business at 2.9% meaning thereby that if the income after addition is considered the turnover of the assessee would be 152 crores which is approximately 5.5 times higher than the declared turnover.
3.2. The ld. CIT (A) allowed the appeal of the assessee on this issue after taking into account the contention and submission of the assessee and by relying upon the various decisions and also the fact that the statement relied by the ld. AO has been retracted by the assessee immediately within a few days. The observations of the ld. CIT (A) are as under:-
“I have duly considered (i) the grounds of appeal Nos. 2, 3, 4 & 5, (ii) the Assessment Order of the AO and (iii) submission made by appellant in support of these grounds. Since these four grounds have been raised against the addition of Rs.4,41,61,742/-. Therefore, these four grounds are being taken together for adjudication. While making There is also merit in the submission of the appellant when he says that if the additions of AO is accepted as correct, then in that case considering the ratio of profit generated from his business, he could have done the unaccounted business of additional turnover of Rs. 142 crores, which is beyond imagination of anybody who has a little sense of doing business in transportation line and logistics sector. For achieving the business turnover of Rs. 142 crores, one requires 5 to 6 times more working capital, fixed assets, office premises, manpower, support system, vendors, etc. But not a single piece of evidence which can be termed as unaccounted was found in the survey except that impugned dumb document, which does not speak for itself. The appellant states that in the course of survey not a scintilla of paper or document was found showing additional transportation or turnover not to speak of the huge additional turnover of Rs. 142 crores. There is also merit in the submission of appellant, when he states that to achieve a turnover of Rs. 142 crore, truck load of papers, huge freight and lorry challans, number of details and registers for dispatch and receipt of goods, number of cash vouchers for payment of advance to the truck drivers, and other huge papers including copies of the blue books of the trucks operating for transportation of such goods, the R/R numbers for transportation, the DO in the name of customers and insurance of goods during transit is required. If any goods is transported the transporter is bailed in respect of such goods and has to maintain sizeable records. Not a single paper or document was found which was not recorded in the regular books of accounts. Therefore, the very assumption of receipts of income from transportation of goods that too weekly and from all over India isfigment of mind. No such addition can be made on the basis of a paper which had no corroborative evidence. The CBDT Circular referred to above specifically says that the AO should rely on credible evidence. The piece of paper found cannot be treated as credible evidence particularly when the same was not corroborated by any other paper or entry or books of account or document.
4. The issue raised in ground no.3, is against the deletion of addition of ₹13,89,500/- as made by the ld. AO u/s 40A(3)of the Act.
4.1. The facts in brief are that during the course of survey some documents were impounded which were relating to the assessee’s partnership firms namely; heritage transport organization and M/s heritage infrastructure and some business-related documents of the assessee. The ld. AO found that the assessee has made some cash payments in violation of provisions e of section 40A(3) of the Act as the payments were above 20,000/- each in case of M/s Heritage Infrastructure and ₹35,000/- in case of M/s Heritage transport organization. Finally, the ld. AO disallowed the said amount and added the same to the income of the assessee.
4.2. In the appellate proceedings, the ld. CIT (A) deleted the addition to the tune of ₹21,48,856/- and partly sustained the addition to the extent of ₹13,89,500/- by observing and holding as under:-
“The appellant has raised ground no. 6 of his appeal against the disallowance of expenditure under the provision of section 40A (3) of this act of Rs. 35,38,356. The AO in its assessment order has stated that during the course of survey, it was found from the debit vouchers impounded in SA-5, HTO(CITRD)03, and HTO(CITRD)04, that appellant has made payment exceeding Rs. 35,00,000/- on several occasions to different parties. These payments were made for the two partnership concerns 'of the appellant namely Heritage Infrastructure (SA-5) of Rs. 2,81,156/- and heritage
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the open court on 31.12.2025.