RAMESHWAR LAL VYAS,BEAWAR, AJMER vs. DCIT, CENTRAL CIRCLE, AJMER

This appeal by the assessee is directed against the order of CIT(A), Jaipur - 05 dated 18.08.2023 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’).The assessee has raised the following grounds of appeal: -

1. under the facts and circumstances of the case and in law, the Ld. CIT (A) erred in not quashing the impugned assessment order, passed u/s. 143(3) of the Act, on the ground of being beyond jurisdiction and various other statutory reasons. Hence, the same may kindly be quashed.

2. under the facts and circumstances of the case and in law, the Ld. CIT (A) erred in upholding the action of the Ld. AO in making addition of Rs. 27, 49,000/- u/s. 69 of the Act on account of alleged cash payment. The addition is contrary to the facts, excessive and unjustified.

3. Under the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in making addition of Rs. 27,49,000/- u/s. 69 of the Act on the basis of loose paper and statement. Hence, the addition is bad in law and deserves to be deleted.

4. Under the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming the action of the Ld. AO in making addition of Rs. 35,24,891/-, u/s. 69 of the Act, on account of alleged investment made in construction of immovable property i.e. showroom. Hence, the addition is unjustified, illegal or excessive and deserves to be deleted.

5. Under the facts and circumstances of the case and in law, without prejudice, the Ld. CIT(A) erred in confirming the addition of Rs. 35,24,891, made by the AO under section 69 merely on the basis of valuation report of the District Valuation Officer (DVO). Further, the Ld. CIT(A) was not justified in not rejecting the method of valuation followed by DVO (like adoption of CPWD rates instead of PWD rates etc.) and other inaccuracies in estimation of the value of property. Hence, the addition is unjustified, illegal or excessive and deserved to be deleted.

6. Under the facts and circumstances of the case and in law, without prejudice, the Ld. CIT(A) erred in confirming the action of the Ld. AO in making addition of Rs. 35,24,891/- u/s. 69 of the Act on the basis of statement. Hence, the addition is bad in law and deserves to be deleted

7. Alternatively, and without admitting, the Ld. CIT (A) erred in law as well as on the facts of the case in not giving benefit of telescoping of the funds available in the hands of the appellant.

8. under the facts and circumstances of the case and in law, the Ld. CIT (A) has erred by upholding the initiation of penalty proceeding u/s. 271AAC under the current case. The said initiation and confirmation thereof is contrary to the law as well as facts and deserves to be quashed.

9. the appellant craves your honours indulgence to add, amend or alter all or any grounds of appeal before or at the time of hearing.

2. The brief facts of the case are that the assessee filed his return of income u/s. 139 of the Act on 07.11.2017, declaring total income at Rs. 21,13,260/-. A survey u/s. 133A (1) of the Act was conducted on 30.08.2016 at the business premises of the assessee. Various documents were found and seized as per annexure prepared during the course of survey proceedings. One such document was marked as Page 68 of Exhibit-8 of Annexure-A which was claimed to contain the details pertaining to creditors of the assessee. It was stated by the AO, in his assessment order, that the assessee made cash payment of Rs. 27, 49,000/- to such creditors out of his undisclosed income. The AO also made addition of excess stock of Rs. 6, 76,967/- on account of excess, physical as against the book stock, and concluded it as stock earned out of undisclosed income of the assessee. Further, as per the AO, the assessee, in the statement, recorded during survey, admitted to have invested Rs. 77,50,000/- in construction of showroom which was not recorded in his books of accounts and accordingly surrendered the amount but the same was not reported in ITR. The case of the assessee was selected for complete scrutiny and accordingly statutory notices were issued. During the course of assessment, the assessee denied to have paid cash of Rs. 27, 49,000/- to creditors and in support of this, submitted confirmation and affidavit of such creditors. For addition of excess stock, the assessee submitted a chart of reconciliation of stock and stated that the difference of Rs. 6, 76,967/- is due to rate -difference. Similarly, for investment of Rs. 77,50,000/-, the assessee stated that the said investment is duly recorded in his books of accounts. In view of this, the case of the assessee was assessed by making an addition u/s. 69 of the Act r.w.s 115BBE of the Act amounting to Rs. 62,73,891/-. The assessee being aggrieved with this order preferred an appeal before the Ld. CIT(A), who in turn deleted the addition of excess stock of Rs. 6,76,967/-, however upheld the other two additions made by the AO. The assessee, being further aggrieved with this order of the Ld. CIT (A), preferred the present appeal before us.

3. Before we proceed on the appeal filed by the assessee, it is brought to our knowledge that the appeal of the assessee is time barred by 361 days. On this issue, the assessee filed an application for condonation of delay alongwith his affidavit. It is observed that there was a deficiency in the affidavit filed before us which has been removed by the assessee. It is brought to our notice that the assessee’s appeal before the Ld. CIT (A) was disposed of by an order dated: 18.08.2023 and the same was due for filing on 16.10.2023. But the same was filed before us on 11.10.2024, i.e. with a delay of 361 days. For the delay, the assessee submitted that he has mentioned in FORM No. 35 for receipt of communication through manual mode only and has also given his e-mail to which communication may be sent. However, he has neither received the order of the Ld. CIT (A) in physical form nor through e-mail address furnished on the Form no. 35. Considering the affidavit filed by the assessee and principle of justice, taking a lenient view, we deem it fit to condone the delay of 361 days in filing of appeal.

5. On the other hand, AR of the assessee submitted that the page, as reproduced by the AO in the assessment order, neither indicate any payment/ reference of cash nor any date. AR of the assessee further highlighted the abnormality of the seized page under consideration and stated that Exhbit-8 is a hand written debtor’s ledger book and the seized page-68 is a single page, in such Exhibit-8, having details of creditors whereas other handmade ledgers were having ledgers of debtors only. The AR also attracted our attention to the confirmation and affidavit of such creditors and also to the factually incorrect figure of Rs. 6, 55,525/- in case of M/s. Shiva Industries and wrong classification of debtor: Kamal Trading Co. as creditor. In support of the importance of affidavit, the AR of the assessee also referred to judgment of Hon’ble Supreme Court in the case of Daulat Ram Rawatmull vs. CIT [(1973) 87 ITR 349 (SC)] and Mehta Parikh & Co. Vs. CIT [(1965) 30 ITR 181 (SC)]. The AR further submitted that when neither any unaccounted purchase or sale was found and the addition on account of excess stock has already been deleted by Ld. CIT(A), then there remains no room for any cash payment and for invoking section 69, existence of investment, during the year, is a pre-requisite. With regard to the statement, the AR stated that the statement was obtained by coercive measures and assessee has retracted the statement, which is also acknowledged by the Ld. CIT (A), by not disclosing the same in his ITR and also invited our attention to CBDT Instruction: F. No. 286/2/2003-IT (Inv), dated 10th March, 2003 and judgments of various Hon’ble High Courts in reference to the forced confession.

6. Before the Ld. CIT (A), it was reiterated that the addition has been made merely on the basis of statement and one seized page without bringing any corroborative tangible material. The assessee further stated that no cash payment has been made to any party and submitted confirmation and affidavit of such parties. With respect to statement, he stated that statement u/s. 133A of the Act has no evidentiary value. The CIT (A) did not accept the submissions of the assessee and confirmed the addition made by the AO.

7. We have gone through the order of AO, submissions of the assessee before AO and Ld. CIT (A) and findings derived by the Ld. CIT (A) and the arguments made by the AR of the assessee before us. On perusal of the orders, we note that AO has made addition on the basis of the statement recorded during survey u/s. 133A of the Act which has been retracted by the assessee. So far as the reliance made by the AO and Ld. CIT (A) on the statement is concerned, we note that the statement recorded u/s. 133A of the Act has no evidentiary value and any admission made during the survey cannot be allowed to be the basis of addition. It is a settled legal position that statement recorded u/s. 133A of the Act does not have any evidentiary value since the officer concerned is not authorized to administer oath and record a sworn statement. In light of the observations made by the Hon’ble High Court of Madras in the case of S. Khader Khan & Sons, we hold that no addition is maintainable on the basis of statement recorded during the course of survey u/s. 133A of the Act. The relevant portion of decision of Hon’ble High Court of Madras is reproduced herein below:

“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 133Acannot be put against the assessee, as the same has no evidentiary value. The Division Bench of the Kerala High Court, appreciating the stand taken by the assessee and after referring to Section 133A of the Act, held as hereunder:

…

(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];

The Hon’ble Supreme Court in Civil Appeals No.6747 of 2012 vide its order dated 20.09.2012 also confirmed the view of Hon’ble High Court of Madras which is reproduced hereunder:

“1.Heard Learned Counsel on both sides. Leave grated.

payment made to creditors. On the other hand, the assessee has submitted confirmation of all parties, under consideration, along with affidavits, regarding transactions executed with appellant during the year under consideration. More so, we find that no enquiry was conducted by the AO from even a single person named in the so called seized page, if at all, to strengthen the finding of Revenue culminating with addition. The contention of the Ld. CIT (A) that it is a case of parallel accounting is also hollow and presumptive since no corroborative material was brought on record. We also find force in the argument of the AR of the assessee that there cannot be any unaccounted income without there being any unaccounted purchase or sale or unaccounted stock. Neither the AO nor the Ld. CIT (A) has brought any material of any unaccounted purchase or sale in the current case and the addition on account of accounted stock was already deleted by the Ld. CIT (A). We agree with the submission of the AR of the assessee that for invoking section 69 of the Act, there has to be an unrecorded/ unaccounted investment and that there cannot be any unaccounted investment without there being any accounted income.

contain therein are also cannot be termed as unexplained investment. Accordingly, in absence of investment, section 69 of the Act cannot be invoked. In the circumstances, we hold that the AO and Ld. CIT (A) have erred in treating Rs. 27,49,000/- as unaccounted investment in the hands of the assessee. The grounds raised by the assessee are allowed and addition is hereby deleted.

12. The AR of the assessee submitted before us that the alleged investment is not related to the current year, the value, estimated by the DVO, is wrong since the same has been based on CPWD rates instead of state/ local PWD rates and no corroborative evidence with respect to investment, other than the DVO report and statement, was brought by the AO. In support of his submission that State/ local rates should be adopted for valuation of investment, the AR of the assessee relied upon the judgement of the Jurisdiction High Court in the case of CIT vs. Hotel Joshi (242 ITR 478) and CIT vs. Smt. Prem Kumar Murdia [{2006) 204 CTR (Raj) 343]. Further, the AR also submitted that no addition can be made on the basis of statement without corroborative evidence.

13. We have gone through the orders and submission/ argument of the AR of the assessee, at the outset; we already stated earlier that addition made on the basis of statement u/s. 133A of the Act is not maintainable. Further, without going into the other submission of the AR of the assessee, on perusal of the report of the DVO, as submitted before us by the AR of the assessee, we find that the DVO has not determined any investment for the year under consideration i.e. F.Y. 2016-17 which clearly suggest that, even as per the DVO, no investment was made by the assessee, in construction of any property, during the year under consideration. Hence, since the investment is not at all related to the year under consideration, there is no question to make addition therein u/s. 69 of the Act as unexplained investment since the very foundation of invoking section 69 of the Act in the current case is absent. Hence, in the absence of any investment during the current year, the addition of Rs. 35,

24,891/- made in this regard is found to be not sustainable. Thus, the same is deleted. In view of the decision above, the other legal grounds raised by the assessee have become academic, hence do not call for adjudication. Consequently, this appeal is allowed. In the result, appeal of the assessee is allowed. The Order is pronounced in the open court on the 24TH day of July 2025.