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Facts
A survey under Section 133A on the assessee's business premises revealed incriminating material. The assessee, running a travel agency, admitted unaccounted business receipts of Rs.1,17,05,820/- and on-money of Rs.23,00,000/- from property sales, totaling Rs.1,40,05,820/-, which was not offered for tax. The assessee later retracted the statement, claiming duress and that the figures represented turnover, not income. The Assessing Officer added the entire amount, a decision upheld by the CIT(A).
Held
The Tribunal confirmed the addition of Rs.23,00,000/- related to on-money receipts from property sales, finding it to be supported by evidence and the assessee's statement. However, for the Rs.1,17,05,820/- regarding business receipts, the Tribunal observed that the AO failed to properly investigate whether the amount was turnover or net income, despite the assessee's contention. This part of the addition was thus set aside and remanded to the AO for fresh examination.
Key Issues
1. Whether an addition based on a retracted statement, claiming disclosed figures represented turnover instead of income, is valid without further verification. 2. Whether on-money receipts from property sales, admitted during a survey, constitute taxable income.
Sections Cited
133A, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH, AHMEDABAD
Before: SHRI SANJAY GARG & SHRI NARENDRA PRASAD SINHA
PER NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of CIT(A)-11, Ahmedabad dated 06.07.2023 for the Assessment Year (A.Y.) 2014-15.
The brief facts of the case are that the assessee had filed his return of income for the A.Y. 2014-15 on 29.11.2014 declaring total income of Rs.70,48,670/-. The case was selected for scrutiny under CASS. The assessee is running Travel Agency under the name of M/s. Parth Travels. A survey action under section 133A of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] was conducted at the business premises of the assessee on 13.08.2013. In the course of survey, certain incriminating material related to the business activities and other transactions carried out by the assessee were found which were impounded. On the basis of the incriminating material, the assessee in his statement recorded in the course of survey admitted unaccounted business receipts of Rs.1,17,05,820/- and receipt of on-money Assessment Year: 2014-15 Laxmandas Mohanlal Lakhvani vs. DCIT Page 2 of 8 of Rs.23,00,000/- on sale of his two old shops. Thus, the assessee admitted a total amount of Rs.1,40,05,820/- as his undisclosed taxable income for the A.Y. 2014-15. However, this undisclosed income admitted by the assessee in the course of survey were not offered for tax in the income tax return filed by him. When enquired in the course of assessment, the assessee had submitted that the statement in the course of survey was recorded under duress and that the said statement was subsequently retracted. The Assessing Officer, however, was not convinced with the explanation of the assessee. He found that the statement was given vis-a-vis the impounded documents wherein the unrecorded incomes of the assessee were categorically recorded. Therefore, he made addition of Rs.1,40,05,820/- on account of admitted unaccounted income. The assessment was completed under Section 143(3) of the Act on 08.12.2016 at a total income of Rs.2,10,54,490/-.
Aggrieved with the order of the Assessing Officer, the assessee had filed an appeal before the First Appellate Authority which was decided by the CIT(A) vide the impugned order and the appeal of the assessee was dismissed.
Now the assessee is in second appeal before us. The following grounds have been taken in this appeal:
“1.0 The learned Commissioner of Income Tax (Appeals) has erred in law and on facts in confirming the addition of Rs.1,40,05,820/- made solely on the basis of the statement recorded during the survey held at the premises of the appellant. While confirming the additions the learned Commissioner (Appeals) has based the judgement merely on the retraction statement filed by the appellant without considering the other facts put forward by the appellant. 2.0 The appellant craves leave to add to, modify, alter, delete the above ground either before or at the time of hearing of the appeal.”
Shri Palak Pavagadhi, Ld. AR appearing for the assessee submitted that the Ld. CIT(A) was not correct in confirming the addition of Rs.1,40,05,820/- made solely on the basis of the statement of the assessee recorded in the course of survey which was subsequently retracted. The Ld. AR explained that, at the time of survey, the books of account of the assessee were written and completed up to the month of May Assessment Year: 2014-15 Laxmandas Mohanlal Lakhvani vs. DCIT Page 3 of 8 and the reconciliation was also pending. He further submitted that the assessee was an illiterate person and the gross turnover was admitted by him as undisclosed income and that this fact was not verified by the lower authorities. He also placed reliance on various decisions in support of his contention that the addition made on the basis of retracted statement was not justified.
Per contra, Shri Kavan Limbasiya, Ld. Sr. DR submitted that the disclosure made by the assessee in the course of survey was based on specific documents found and impounded from the premises of the assessee. He submitted that the assessee did not give any alternative explanation in respect of the entries appearing in the impugned documents while retracting the statement made in the course of survey. The Ld. Sr. DR further submitted that the addition was based not only on the statement but also on the basis of specific entries as appearing in the impounded documents and, therefore, the Ld. CIT(A) had rightly upheld the addition as made by the Assessing Officer.
We have heard the rival submissions. The addition of Rs.1,40,05,820/- was made in this case on the basis of the documents found in the course of survey and the statement of the assessee recorded in the course of survey. It is, therefore, relevant to go through the statement of the assessee recorded during the survey and also examine the documentary evidences found in the course of survey. A copy of the statement of Shri Laxmandas Mohanlal Lakhvani recorded in the course of survey on 13.08.2013 has been brought on record. The addition of Rs.1,40,05,820/- made on the basis of statement of the assessee given in the course of survey comprises of two parts:
(i) Rs.1,17,05,820/- on account of suppressed business income, and (ii) Rs.23,00,000/- on account of on-money receipt on sale of two old shops.
We will examine the correctness of these two additions considering the evidences found in the course of survey as well as the statement of the assessee.
7.1 In the course of survey, one loose paper file BF-1 was impounded. The assessee was required to explain certain pages of this document and the reply of the assessee in this regard was as under: -
“Q.9 I am showing you the loose paper file BF-1 impounded from your premise. I am showing you its Pages 1-9 and 13-21. Please explain it. An.9. These sheets show the date wise/month wise income of myself and my other concerns. This income is of the books of accounts of my concerns. The details of Parth Travels in it are as below: Page 1 August, 2013 Unaccounted Income Rs.18,10,410/- Page 13-14 July, 2013 Rs.18,2,540/- Page 15-16 June, 2013 Rs.30,20,290/- Page 17-18 May, 2013 Rs.28,29,430/- Page 20-21 April, 2013 Rs.22,18,150/- Rs.1,17,04,820/-
In the same way, the details of Kavita Travels are as below: Unaccounted Income Page 2-3 July, 2013 Rs.12,42,120/- Page 4-5 June, 2013 Rs.15,96,350/- Page 6-7 May, 2013 Rs.17,58,700/- Page 8-9 April, 2013 Rs.13,43,620/- Page 19 (Is the summary of above) -------------------- Rs.59,40,790/-
The above income is the unaccounted income of my concern M/s. Parth Travels and the Prop. com. M/s. Kavita Travels of my wife Kavita. This amount is not recorded in my other books (Subsidiary and regular). I declare this amount that is Rs.1,17,05,820/- (Rupees One Crore Seventeen Lakhs Five Thousand Eight Hundred Twenty only) as unaccounted and undisclosed income of Parth Travels. In the same way, I declare the amount of Rs.59,40,790/- (in words Rupees Fifty Nine Lakhs Forty Thousand Seven Hundred Ninety only) as the unaccounted and undisclosed income of M/s. Kavita Travels. This income is the income of the current year of both the concerns that is F.Y. 2013-15 (Α. Υ. 2014-15). Both the concerns will pay the tax on it in the fixed time period.” “Q.10 I am showing you the Page 18, 19, 20, 21, 22 of the (Green Diary) found from you which is inventorised in the name of BF-2. Please clarify about it. An.10. This question is of the details of the unaccounted income shown in Ans.9 of Parth Travels. This is the summary of computer sheets which is written month Assessment Year: 2014-15 Laxmandas Mohanlal Lakhvani vs. DCIT Page 5 of 8 wise. I have given you its table in Answer 9. I have declared this income as undeclared income.” 7.2 The assessee had thus explained in the course of survey that these documents contained details of his unaccounted and undisclosed income. Before the Assessing Officer the assessee had taken a plea that he had wrongly explained the receipts of business as his income. It was explained that his highest turnover of business in the preceding three years was Rs.3.17 crores only in A.Y. 2013-14 in which the net profit disclosed was @ 7.17%. If the income for part period of A.Y. 2014-15 was taken at Rs.1,17,05,820/- as per statement given in the course of survey, then the turnover of the assessee would be an unimaginable figure. It was submitted that in the course of survey, the assessee was under huge mental pressure and had wrongly stated the figure of receipts as income. He further submitted that no evidence of corresponding turnover was found in the course of survey which would justify his unaccounted income of Rs.1,17,05,820/- for the period of 5 months only.
7.3 The Assessing Officer, however, had rejected the explanation of the assessee considering the evidences found in the course of survey and the statement of the assessee. We have called for the evidences impounded during the course of survey and carefully examined the entries appearing therein. It is found that the impugned documents BF-1 has month-wise computer-generated sheets in which date-wise income is mentioned. The figure appearing in BF-1 is corroborated by entries recorded in hand-written impounded diary BF-2. At page no.18 of BF-2 there is an entry as “April 2013 22.18 computer sheet pramane”. Thus, as per this page, the total entry in the month of April 2003 made in the computer sheet was for the figure 22.18, which tallies with page no.20 of BF-1. Thus, there is no doubt of correctness of the total amount of Rs.1,17,05,820/- for the period from April 2013 to August, 2013 which are corroborated by the entries in the impounded document BF-1 as well as BF-2. However, the entry appearing in BF-2 does not indicate that this figure of 22.18 represents income or turnover. In the impounded document BF-1, the entries are appearing as ‘income’ but the contention of the assessee is that this was wrong nomenclature. BF-1 contains date wise figure of income but the details of the turnover and the expenses are nowhere appearing in any of the seized documents. If the total figure of Rs.1,17,05,820/- as per BF-1 is taken as net income, then the question arises as to what was the total turnover and expenses incurred by the assessee during this Assessment Year: 2014-15 Laxmandas Mohanlal Lakhvani vs. DCIT Page 6 of 8 five-month period. No evidence of turnover corresponding to the income of Rs.1,17,05,520/- was found in the course of survey. Neither any evidence of the expenses incurred by the assessee is found available either in the impounded documents or in the statement as made by the assessee in the course of survey. Merely because the assessee had stated the figure of Rs.1,17,05,820/- as ‘income’ in his statement in the survey, the same cannot be considered as a gospel truth. The gross turnover corresponding to this income should have been enquired in the course of survey. Further, when the assessee had raised the issue in the course of assessment that this figure was not income but turnover, the Revenue was duty bound to examine the contention of the assessee and verify as to what was actual turnover of the assessee corresponding to income of Rs.1,17,05,820/- This exercise was not carried out by the Assessing Officer and the contention of the assessee was summarily rejected. We, therefore, deem it proper to set aside the matter to the file of the Jurisdictional Assessing Officer to examine as to whether the figure of Rs.1,17,05,820/- as recorded in the impounded documents BF-1 as well as BF-2 represented turnover or the income of the assessee. As the assessee has contended that this amount was the turnover, relevant documents & evidences in support thereof may be called for and examined and thereafter the matter may be decided afresh. The assessee is directed to produce necessary evidences before the AO in support of his contention that the figure of Rs.1,17,05,820/- was his turnover and not income. To this extent, the matter is set aside to the file of the JAO.
On-money receipt on sale of property 7.4 In the course of statement recorded during survey, the assessee was required to explain the entries appearing at page nos.16 & 17 of the impounded documents BF- 2. The explanation of the assessee was as under: -
“Q.11 Please explain Page 16 and 17 of BF-2. An. 11 There is details of the basement sale at page 16 of BF-2. I had sold the shop of this basement to Sh. Mukund for total Rs.29.75 lakhs. In this page the price of the deed is Rs.13.25 lakhs and Rs. 0.50 lakh that is regarding the deed of total Rs.13.75 lakhs. In this, I have received cash of Rs.16 lakhs. I declare it as the unaccounted income of my year F.Y. 2013-14 (Α.Υ. 2014-15). In the same way, in the year 2013-14, in one shop of Page 17, I had an unaccounted income of Rs.7 lakhs. I had sold this shop to one Mr. Gohil in Rs.13.50 lakhs. In which, deed of Rs. 6.50 Assessment Year: 2014-15 Laxmandas Mohanlal Lakhvani vs. DCIT Page 7 of 8 lakhs was done. And had received cash of Rs.7 lakhs. In this way, I declare Rs.23 lakhs for the year 2013-14 (A.Y. 2014-15) as my undeclared income. I will pay the tax on it in the fixed time period.” 7.5 The assessee had explained that it had sold two shops in the basement for a consideration of Rs.29.75 lakhs and Rs.13.50 lakhs in which on-money of Rs.16,00,00 and Rs.7,00,000/- respectively was received in cash. The amount received in cash is also found separately recorded in the impugned document BF-2. In view of the evidences as found in the course of survey as well as the explanation of the assessee in this regard, we do not find any reason to interfere with the order of the lower authorities. The total on-money of Rs.23 lakhs received in cash was rightly treated as income of the assessee for the current year. In fact the evidence for application of this income was also found in the course of survey at page nos.11 & 12 of BF-1. As per these documents, the assessee has advanced Rs.35,00,000/- to Shri Jairam S Sewani for purchase of property. Another sum Rs.31,00,000/- was paid to Shri Rajendrakumar N Patel as advance towards purchase of another property. The source of these cash payments was explained as on-money receipt by the assessee on sale of two shops as well as undisclosed income derived from business during the year. Considering these evidences found in the course of survey as well as the statement of the assessee, the addition of Rs.23,00,000/- on account of on-money receipt by the assessee was correctly made. Accordingly, the addition made by the Assessing Officer is confirmed to this extent.
In the result, appeal of the assessee is partly allowed for statistical purpose.
Order pronounced in the open Court on this 30th April, 2025.