M/S. KATHYAYINI ENTERPRISES,BENGALURU vs. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE- 1(2)(1), BANGALORE

O R D E R This appeal filed by the assessee is directed against the order of the CIT(A), dated 25.09.2019. The relevant assessment year is 2008-2009.

2. The learned CIT(A) is not justified in upholding the addition of Rs.3,59,006/-, being the alleged in the difference between the returned income of Rs.14,40,994/- and the sum of Rs.18,00,000/-, purportedly offered by partner of the assessee firm at the time of survey under the facts and in the circumstances of the appellant’s case. 2.1 The learned CIT(A) ought to have appreciated that the partner of the appellant firm Smt.Prema Shanbhag, had never made any such declaration in the hands of the firm at the time of survey and hence, the aforesaid addition made was arbitrary and opposed to law and materials on record and therefore, the same ought to have been deleted.

3. Without prejudice to the right to seek waiver with the Hon’ble CCIT/DG, the appellant denies itself liable to be charged to interest u/s 234B and 234C of the Act, which under the facts and in the circumstances of the appellant’s case deserves to be cancelled.

4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”

3. The crux of the above grounds is that the addition made by the Assessing Officer and confirmed by the CIT(A), cannot be sustained as there was no sworn statement recorded u/s 131(1) of the I.T.Act.

4. Briefly stated the facts of the case are that the assessee is a partnership firm carrying on the business of running a restaurant under the trade name and style of M/s.Samrat Restaurant at Hotel Chalukya Premises. A survey was conducted in the business premises of the assessee on 11.10.2007, as well as in the residential premises of the partners of the assessee firm. Thereafter the assessee filed its return of income on 03.10.2008 declaring total income at Rs.14,40,994. The assessee has reported this income based on regular books of accounts maintained in the normal course of business, which are duly audited u/s 44AB of the Act. During the course of assessment proceedings, the A.O. issued show cause notice dated 30.11.2009 proposing to add a sum of Rs.18,00,000 to the income returned by the assessee on the ground that the same was offered as additional income by one Smt.Prema Shanbhag, partner of the assessee-firm in the course of post-search proceedings. The assessee objected to the proposed addition by stating that Smt.Prema Shanbhag had never offered any additional income to tax in the hands of the assessee-firm for the year under appeal in the course of post search appraisal proceedings. Thereafter, the Assessing Officer completed the assessment u/s 143(3) assessing the total income at Rs.18,00,000 thereby raising the demand of Rs.2,09,860. In first appeal, the CIT(A) confirmed the view taken by the Assessing Officer. Hence, the assessee is in appeal before the Tribunal.

5. I have heard the rival submissions and perused the material on record. The main contention of the learned AR is that there is no sworn statement recorded u/s 131 of the Act and submitted that even if there sworn statement recorded u/s 131 of the Act, the addition cannot be sustained, as there is no supporting evidence suggesting any addition. The learned AR relied on the judgment of the Hon’ble Madras High Court in the case of CIT v. S.Khader Khan Son (300 ITR 157) wherein held that addition cannot be made only on the basis of admission during the course of survey and it shall be supported by supporting material and observed that section 133A of the Act does not empower the authority to examine any person on oath, hence such statement has no evidentiary value and any admission made during such statement cannot, it self, be made the basis for addition. The contention of the learned Departmental Representative is that there was survey u/s 133A of the Act on 11.10.2017 and the assessee agreed to declare Rs.18 lakh as additional income. However, the assessee filed its return of income only for Rs.14,40,994, and thus, the differential amount was added as income of the assessee. In my opinion, the only sworn statement, not supported by corroborative evidences, cannot become a basis for any addition. There should be additional material in support of sworn statement recorded u/s 131 of the Act, to prove that the assessee is having undisclosed income. The learned DR though pleaded before me that there is supporting material, however, no evidences were placed before me to suggest that the addition made by the Assessing Officer is justified. In view of this, I am inclined to remit the issue to the file of the Assessing Officer to consider the corroborative evidence if any with the Department to make the additions. Needless to say, if there is no corroborative material to support the impugned addition, the A.O. shall not make any addition. With these observations, I remit the entire issue in dispute to the file of th A.O. for fresh consideration.