RAJESH KUMAR POONIA,JHUNJHUNU vs. ASSISTANT COMMISSIONER OF INCOME TAX, JHUNJHUNU

“1. The Learned CIT (A) has legally and factually erred in Confirming invocation of section 145(3) of the Act and rejecting books of Accounts without pointing out any specific discrepancy in the books of accounts:- 2. Under the facts and Circumstances, The Learned CIT (A) has erred in law on facts in confirming the addition on the basis of statement recorded u/s 133A in the course of survey for making additions more particularly when statement recorded u/s 133A on 16.03.2018 has not got an evidentiary value. No cross examination of the retraction was made and in violation of principles of natural justice.

3. Under the facts and Circumstances the CIT (A) has erred in law by ignoring the CBDT instruction s issued by CBDTs letter issued vide F.NO. 286/2/2003 IT (Inv) dated 10/03/2003 and F.No. 286/98/2013-IT(inv.1) dated 18.12.2014. the consent of both the parties and therefore, we are deciding these two appeals by common order.

3.1 First, we take up the appeal of the assessee in ITA No. 623/JP/2024.

3.2 The brief fact as culled out from the records is that return of income declaring total income of Rs. 17,64,160/- was filed electronically on 31/03/2018. The case was selected for Limited Scrutiny through CASS and the notice u/s 143(2) of the IT Act, 1961 was issued on 08/08/2018 which was duly served upon the assessee. Subsequently notice u/s 142(1) of the IT Act, 1961 along with questionnaire was issued on 27/08/2018 and was duly served upon the assessee. Further, on change of incumbency a fresh notice u/s 142(1) of the IT Act, 1961 was issued on 26/10/2018 requiring certain details / information / clarification through electronically mode. In compliance to these notices, the assessee uploaded the replies on e-filing portal and furnished required details/ explanation/clarification/ evidences, which were perused and examined thoroughly in respect of the issues/reasons on the basis of which the case was selected for limited scrutiny. chicken. He had shown total income amounting to Rs. 17,64,160/- for the year under consideration. Further the assessee had shown income of Rs. 1,75,150 as agriculture income. In this case, survey proceedings were conducted u/s 133A of the income Tax Act, 1961 on 16/03/2018 to 17/03/2018 at the business premise of the assessee. During the course of survey proceedings the statements of the assessee were recorded u/s 131 of the income Tax Act, 1961 on oath on 16/03/2018 and 17/03/2018. In his statements, the assessee admitted while answering question No.18 that his business income for the financial year 2015-16 (AY 2016-17) was Rs 40-50 lacs, whereas as per ITR filed for the year under consideration he has shown his business income at Rs. 19,14,163/-only. Thus, the assessee has shown less business income by Rs.25,85,837/-(Average of 40-50 lac comes to Rs.45,00,000/- minus Rs.19,14,163/-). In view of the facts discussed above, the matter was required to be examined thoroughly beyond the reasons of the 'limited scrutiny. Accordingly, the case was converted from limited scrutiny criteria to complete scrutiny after obtaining necessary approval of the Pr. Commissioner of Income Tax-3, Jaipur vide her letter No. 2282 dated 10/12/2018. scrutiny a notice u/s 142(1) of the IT Act, 1961 was issued to the assessee along with a detailed questionnaire/ show cause dated 10/12/2018. In response to this the assessee furnished his reply electronically on 14/12/2018 and subsequent replies thereafter.

3.5 Ld. AO noted that during the course of survey proceedings incriminating papers, diaries, etc were found and impounded. Statement of Shri Rajesh Poonia Prop. of M/s Lakshay Poultry Farm, Pilani were recorded on oath u/s 131 of the IT Act, 1961 on 16/03/2018 and 17/03/2018. In his statement in reply to question No. 18, the assessee admitted on oath that his income during the year under consideration was Rs.40-50 lac which was estimated on the basis of impounded diaries, ledger, etc. He further admitted that he would submit relevant documents in support of his income admitted/ accepted. However, on perusal of ITR filed by the assessee, it was noticed that he has shown less income for the year under consideration compared to that accepted at the time of survey proceedings. Thus the assessee was issued a show cause notice dated 10/12/2018. The assessee filed the reply on 14.12.2018. Ld. AO because of the following reasons:

1 During the course of survey proceedings the assessee himself admitted in his statement on oath recorded u/s 131 of the IT Act, 1961 on 17/03/2018 & 18/03/2018 while answer the question No. 18 that his income for the year under consideration was Rs.40-50 lacs. The assessee admitted his business income on the basis of his calculation bases on his memory and incriminating documents including ledgers, diaries, etc, which were impounded during the course of survey. The relevant portion of the statement is annexed as annexure A. 2 While answering question No. 7 the assessee has admitted that he did poultry farming also. On perusal of trading and P&L account it is revealed that the assessee has not shown any income from such activity. Relevant portion of said statement is annexed as annexure B.

6. The books of accounts so produced for examination were prepared after survey proceedings, hence not reliable completely. As such, the same is treated as fabricated one. Thus vide order sheet entry dated 20/12/2018 the books of accounts of the assessee were rejected u/s 145(3) of the IT Act, 1961.

7. The assessee has filed his retraction/deviation regarding business income declared during the survey proceedings through notarized affidavit dated 18/05/2018 which is after lapse of two months from the date of survey. As such this is an afterthought only to evade tax liability.

9. In his statement recorded on oath u/s 131 of the IT Act, 1961 the assessee while answering question No. 10, stated that he has & 623/JP/2024 Rajesh Kumar Poonia vs. ACIT maintained the details of his income and expenditure in the diaries which were found and impounded during the course of survey proceedings. Thus it is clear that the assessee has not maintained regular books of accounts.

Ld. AO based on those reasons noted that the assessee has declared less business income by Rs.25,85,837/- in his ITR for the year under consideration as compared to that declared at the time of survey proceedings. Further it is clear that the books of accounts produced are fabricated and prepared after the time of survey. In view of the facts and circumstance and the discrepancies found as discussed above, the books of account of the assessee was rejected u/s 145(3) of the IT Act, 1961 vide order sheet entry dated 20/12/2018. Based on those discussion the difference amount of business income at Rs.25,85,837/-(Rs.45,00,000/- minus Rs. 19,14,163/-) declared at the time of survey but not shown in the return of income is added to the total income of the assessee for the year under consideration.

4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

I have decided the similar issue in the case of the appellant for the assessment year 2017-18 in the ground of appeal number 1 where the action of the Id. AO has been upheld and grounds of appeal have been dismissed. Material facts of the present appeal being pari-materia with the facts of the appeal in the assessment year 2017-18, the findings of the appeal order in the case of assessment year 2017-18 in the ground of appeal number 1 will apply mutatis- mutandis to the present appeal for the assessment year 2016-17 and it is held accordingly.

Accordingly this ground of appeal is hereby dismissed.

The relevant part from the order of the ld. CIT(A) for the A. Y. 2017-18 reads as follows: A.Y.2017-18 finding of ld. CIT(A) in ground no.1

4.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:- The appellant has challenged the action of the Id. AO of invoking of section 145(3) of the Act and rejecting books of accounts. Appellant has made contention that the ld. AO has not pointed out any specific discrepancy in books of accounts. Further, the AO has rejected books of accounts on the basis of statements during the survey and preparation of books of accounts after survey. The A.O. has not found single irregularity between seized material and Books of Accounts produced. During the assessment proceedings the Id. AO has observed that the appellant has not produced stock register despite of the specific request from the Id. AO and the books of accounts so produced are prepared after survey proceedings hence not reliable. Further the appellant declared gross profit 3.19% and net. profit 1.26% in the year under appeal whereas in the proceedings year gross profit @3.82% and net profit @2.44% have been declared. For the year under & 623/JP/2024 Rajesh Kumar Poonia vs. ACIT consideration it is significantly on lower side. Further during the statements recorded on oath on 16/03/2018 & 17/03/2018 appellant had stated while answering question No. 17 that his business income for the financial year 2016- 17 (AY 2017-18) was Rs. 60 to 70 lacs, whereas as per ITR filed for the year under consideration he has shown taxable income at Rs. 40,04,040 only The appellant admitted his business income on the basis of his calculation bases on his memory and incriminating documents including ledgers diaries etc, which were impounded during the course of survey. The appellant in his statement has also admitted that he used to destroy the temporary slips of some of his business activities (answer No. 12). No regular books of accounts and sale bills for the year under consideration were found during the course of survey. A show cause notice was issued on the issue however the said discrepancy was not explained and not reconciled with books of account in the assessment proceedings. In his statement recorded on dated 16/03/2018 & 17/03/2018 the appellant in answer of question No. 10 accepted that he has maintained the details of his income and expenditure in the diaries which were found and impounded during the course of survey proceedings. Further, in answer of question no 12, the appellant has accepted that he has destroyed uchanti hisab kitab after receiving payment. Further, in answer of question no 19, the appellant has accepted that he was not able to verify the cash and stock with books of accounts. Thus it is clear that the appellant has not maintained regular books of accounts. Also, during the course of assessment proceedings the appellant has filed ledger of vehicle expenses and of diesel expenses and all the such payments are shown as made in cash without the supportings. Thus it is clear that the appellant has inflated the expenses to reduce his taxable income. Further in the retraction affidavit the appellant has increased the purchases by adding names of the parties whereas these were not mentioned during the survey and at the same time w.r.t. these names in the retraction affidavit the appellant has not filed any evidence of having made purchases from these parties. Hence purchases from these parties have been included in the books of accounts without any basis as there were no bills. Thus the books of accounts so produced for examination during the assessment proceedings were prepared after survey proceedings and there was no occasion for the appellant make a complete and correct books of accounts as the underlying documents itself were not available. Considering the totality of facts and applicable law, the books of accounts are rightly treated as fabricated one by the learned AO in the assessment order. The appellant has not shown the correctness of the books of account as the onus in this regard is on the appellant in the peculiar facts and circumstances of the case. Accordingly the books of Ground Nos. 2 & 3

5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

I have decided the similar issue in the case of the appellant for the assessment year 2017-18 in the grounds of appeal number 2 & 3 where the addition made by the Id. AO has been upheld and grounds of appeal have been dismissed. Material facts of the present appeal being pari-materia with the facts of the appeal in the assessment year 2017-18, the findings of the appeal order in the case of assessment year 2017-18 in the grounds of appeal number 2 & 3 will apply mutatis-mutandis to the present appeal for the assessment year 2016-17 and it is held accordingly.

Accordingly these grounds of appeal are hereby dismissed.”

Ground No. 4

6.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

I have decided the similar issue in the case of the appellant for the assessment year 2017-18 in the ground of appeal number 4 where the grounds of appeal have been dismissed. Material facts of the present appeal being pari-materia with the facts of the appeal in the assessment year 2017-18, the findings of the appeal order in the case of assessment year 2017-18 in the ground of appeal number 4 will apply mutatis-mutandis to the present appeal for the assessment year 2016- 17 and it is held accordingly. Accordingly this ground of appeal is hereby dismissed.”

Ground No. 5 & 623/JP/2024 Rajesh Kumar Poonia vs. ACIT 7.1 The appellant has not added and altered any of the above mentioned ground of appeal. Accordingly such mention by the appellant in its ground is treated as general in nature, not needing any specific adjudication and is accordingly treated as disposed off.

8. In the result, the appeal of the appellant is dismissed.”

5. Since the ld. CIT(A) has dismissed, the appeal of the assessee, the assessee has preferred the present appeal on the ground as stated hereinabove. Apropos to the grounds so raised, ld. AR of the assessee has relied upon the submission made before the ld. CIT(A) and the same is reproduced herein below:-

“May it please your honor, Before embarking upon the grounds of the appeal and case history in the above mentioned case, it would be in the fitness of the things to briefly discuss about the survey operations as carried out on 16.3.2018 at the Business Premises of the Assessee at M/S Lakshay poultry Centre, Rajgarh Road Pilani. The Assessee is a trader of Poultry feed and Wholesaler of the Chicks . The Additions were made by the A.O. during the Assessment proceedings only on the basis of statements recorded under section 133A of the Act and he rejected books of Accounts only because they were prepared after survey operations ,without pointing out any specific discrepency. Obviously, the additions so made were not well reasoned and deserved to be deleted summarily being bad in law. In the circumstances, the additions so made are assailed ground-wise as under:

Ground No.1 The Learned A.O. has legally and factually erred in invoking section 145(3) of the Act and rejecting books of Accounts without pointing out any specific discrepancy in the books of accounts:-

The A.O. has during the Course of hearing has rejected the Books of Accounts by recording the following reasons :-

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT ‘the books so produced during the examination were prepared after survey proceedings, hence not reliable completely. And such, same is treated as fabricated one’

The other reference taken by the A.O. is admission by the Assessee for a income of Rs. 40-50 lakhs during the Assessment Proceedings.

The Assessee used to maintain complete ledgers of the Purchases and sales which were impounded by the Survey team during the survey Proceedings. The expenses made by the Loading vehicles per trip are also recorded in these Ledgers and Diaries. So, all the relevant material for computing income of the Assessee was available on the time of the survey Proceedings. The Books were not summarized and were not in the Reportable format .The Assessee as mentioned in the order itself at para 5.2 ‘Assessee has admitted income bases on his memory and incriminating documents including ledgers ,dairies etc. which were impounded during the course of survey.’ The Assessee on summarizing the records and on accounting some ‘Non cash Expenses’ such as Depreciation and Interest worked out his income and retracted his statement and thereby submitting his true income. The income as admitted in the statements is on the basis of memory only as mentioned in his order by A.O. himself. The Statements recorded u/s 133A are not on oath and are non-admissable evidence as mention by the Apex court in various cases. (The issue of statement u/s 133A is discussed in detail in Ground No. 2 and 3).The rejection of the Books of Accounts on basis of Statements during survey and preparation of books of accounts after survey is bad in law and is not admissible. Meaning of Books of Accounts :- The complete details of the Purchases, sales and expenses were available at the time of the survey and was in the form of the proper ledgers. The Assessee has not accounted non cash items like depreciation. The Documents available were enough to calculated the trading profit after summarization. The Assessee summarized them through the record available with IT department and Prepared complete Books of Accounts. According to Section 2(12A) of the Income Tax Act, 1961, books or books of account, include ledgers, day-books, cash books, account-books and other books, whether kept in the written form or as print-outs of data.

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT The Hon'ble Income Tax Appellate Tribunal, Delhi Bench, in Brij Lal Goyalv. Asstt. CIT [2004] 88 ITD 413 held that the Books of Account mean those books of account whose main object is to provide credible data and information to file the tax returns . So, the Available data in form of ledgers were enough to compute the profit and the Assessee has just summarized the data. The Allegation of the fabrication has is non-justifed on account of following grounds:-

(i) The A.O. has on various occasions pursued the books of Accounts and has reconciled them by the seized material. (ii) The A.O. has while verification of books of Accounts has placed on record the Bills of sales and ledgers of the Few sellers. The A.O. has on record placed bill No. 1,17,42,47,337,641,706,957 and 1311 and ledgers of Bhanwar ji Poonia and Mahesh. The A.O. has found no irregularity in them and reconciled them with seized record. (iii) The A.O. has not found single irregularity between seized material and Books of Accounts produced and mere because it was summarized after survey does not make it fabricated. So, in the Light of above discussions when all the ledgers of purchases ,sales and expenses were available at the time of the Survey and profit can be worked out from them , the so called books made after survey (with the object to summarize records) cannot be held as fabricated one and rejection of the book s u/s 145(3) is bad in law ,especially when not even a single defected is pointed out by the A.O. in his order. Ground No.2 and 3. Under the facts and Circumstances , The Learned A.O. has erred in law on facts in making the addition of Rs. 2585837.00 treating it as undisclosed income of the Assessee and that too without providing any adverse material on record and without considering the facts and circumstances of the case . The learned A.O. has erred on relying on the statement recorded u/s 133A in the course of survey for making additions more particularly when statement recorded u/s 133A on 16.03.2018 has not got an evidentiary value. No cross examination of the retraction was made and in violation of principles of natural justice :- 2.1 Legal position of the statement recorded u/s 133A :-

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT The section 133A provides the ‘Powers of the survey’ .The sub clause (3)(iii) describes the powers in relation to recording of the statements ,which reads as under :- “record the statement of any person which may be usefully or relevant to any ,proceedings under the Act No where in the section 133A ,has given Power to the IT department to take a statement on oath. The Learned A.O. has in his order on numerous occasion has quoted the statements as ‘statement on Oath’. When the law doesnot permits the A.O. to record the statements under oath, mere using of such terminology in the Assessment order make the statement of the Asssessee ‘a Statement under oath’ and hence has no evidentiary value . The various judicial Pronouncements has affirmed the view over the time :- (i) The Hon'ble Madras High Court in the case of CIT vs. S. Khader Khan (2008) 300 ITR 157 (Mad), has laid down the following principles on the matter. According to the court: (i) An admission is an extremely important piece of evidence, but it cannot be said that it is conclusive and it is open to the person, who made the admissions to show that it is incorrect and 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 Pulkngode Rubber Produce Co. Ltd. Vs Stat e of Kerala [1973] 91 ITR 18. (ii) In contradiction to the power under section 133A, Section 132(4) of the Income Tax Act enables the authorized 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 is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons vs. CIT [2003] 263 ITR 101 (Ker.) (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 CIT vs. G.K. Senniappan [2006] 284 ITR 220 (Mad). (iv) The material or information found in course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this & 623/JP/2024 Rajesh Kumar Poonia vs. ACIT court in TC(A) No.2620 of 2006 (between CIT vs. S. Ajit Kumar [2008] 300 ITR 152 (Mad). (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 proceedings under this Act", as already extracted & CO 02/Gau/2017 A.Y. 2013-14 ACIT, Cir-1DBR vs. M/s Brahmaputra Diagnostics & Hospital Ltd. Page 3 above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive by itself. The above cited judgment of the Hon'ble madras High Court was confirmed by Hon'ble Supreme Court in CIT vs. S. Khader Khan Son (2013) 352 ITR 480 (SC). (copy of order attached P.B. NO…..) (ii) Paul Mathews 263 ITR 101 (Ker) Whatever statement recorded u/s 133A is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn is statement which alone has the evidentiary value as contemplated under law. Therefore, there is much force in the argument that the statement elicited during the survey operation has no evidentiary value. (copy of order attached P.B. NO…..)

So, the A.O. has no power to record the statement on oath as per section 133A and such statements has not get evidentiary value as per the Judgement of Superme court and hence cannot be basis of making an addition .

2.2 Retraction of Statements and No Cross Examination of Retraction Affidavit :- The Assessee had no knowledge of the Income tax act and rules. As already stated in statements he is only 12th pass and not enough capable to understand complex terminology of taxation used in the statements. He was also unaware of the allowable expenses and deductible expenses as per income tax Act .He after summarizing his Books of Accounts as per the Income tax Act with the professional help ,retracted the statements made during the survey. In the Assessment order the A.O. has himself mentioned in the Para 5.2 that he made admission of income on basis of his memory .Obviously he was unaware of the allowable expenses and deduction for the interest costs, non cash items such as depreciation and deduction u/s 80 C. The Books of accounts found on the fateful day of survey were in the form of the ledgers and cash books and true income could not assessed through such records then and there. So, he retracted the statements in around 60 days of the survey operations.

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT The Apex Court in the case of Shri Krishan v. Kurukshetra University AIR 1976 SC 376 held that while recording a statement, the maker of the statement has to be made aware of his legal rights. Admission made in ignorance of legal rights or under duress is not held to be binding.

No cross-Examination was done by the A.O. after submission of such retraction statement and it has been held by the Apex court that ‘Non Cross examination will shut doors for revenue to challenge the Retraction’. (i) Supreme Court in the case of Mehta Parikh & Co. vs. CIT [1956] 30 ITR 181 (SC) where it was held that it will not be open to the revenue to challenge the statements made by the deponent in their affidavits later on, if no cross examination with reference to the statements made in the affidavits is done. "No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits". (ii) L. Sohanlal Gupta v. CIT [1958] 33 ITR 786 (All.) – The Tribunal was not entitled to reject the Affidavit filed by the assessee on the mere ground that he had produced no documentary evidence; if it was not accepted as sufficient proof, the assessee should have been called upon to produce documentary evidence or he should have been cross examined to find out how far his assertions in the affidavit were correct (iii)Honorable Gujrat High Court in case of PARSHWA ENTERPRISES TAX APPEAL NO. 372 of 2017 has held that that no addition can be made solely on the basis of a retracted statement made during the survey operation, particularly, when proper justification for retraction was also offered. (copy of order attached P.B. NO…..) (iv) The Jurisdiction Hon’ble Rajasthan High Court in the case of Ashok Kumar Jain 369 ITR 145 held that addition made merely on the basis of statement in the course of survey is not justified unless accompanied by corroborative evidence. (copy of order attached P.B. NO…..)

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT In the case the assessee surrendered ₹ 5 crores during course of survey, however in the return of income he offered only ₹ 3 crores. AO made the addition of ₹ 2 crores. Tribunal deleted the addition. On appeal by revenue the Court held that if the assessee did not adhere to the surrender made during the course of survey, it was for the Assessing Officer to bring on record cogent material and other evidence to support the addition rather than rely on the statements simpliciter. Therefore, there was no infirmity or perversity in the order of the Tribunal

The case Discussed above of the Jurisdictional Highcourt and case of ours are identical case and in our Assessment order also the A.O. has not gave any reasons either for rejection of the books of Accounts and addition was simply made on basis of statements and no findings were made for Addition . We request you to see the case in the Light of the order of Jursidictional High Court .

So, the Retraction Affidavit which has not been cross examined by the A.O. cannot be challenged later on by the Revenue and such non Cross examination will lead to acceptance of such Retraction Affidavit and hence the additions made becomes null and void in entirety.

2.3 The A.O. while making addition in his order has quoted the order of Punjab and Haryana High Court dated 24.09.2007 in the case of Rakesh mahajan vs CIT cited at 642 of 2007(taxert) and 214 CTR 2018 (copy of order attached P.B. NO…..)that “ It is well settled that admission constitute best piece of evidence because admission are self –harming statements made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming ones own interest unless such a statement is true.”

The aforesaid Judgement does not cover the facts and circumstances of our case on following points :-

(i) The mentioned Judgement is related to Search and Seizure operations and hence judgement deals with the statements u/s Section 132(4) which are taken on oath and not with statements u/s 133A which deals with Non-oath statements whose evidentiary value has already been discussed by the Apex court in case of CIT vs. S. Khader Khan. (ii) The Judgement quoted does not deal with the Retraction affidavit and subsequent Non Cross Examination by the Department .We have already discussed the Judgement of Apex Courtin case of Mehta Parikh & Co. vs. CIT & 623/JP/2024 Rajesh Kumar Poonia vs. ACIT [1956] 30 ITR 181 (SC) where it has been held that ‘Non Cross examination will shut doors for revenue to challenge the Retraction’. (iii) In a subsequent decision of the Punjab and Haryana Highcourt in the case of Sanjeev kumar jain the High court Affirmed that Cross examination of witness is necessary . So, the case relied on by the A.O. while making addition is irrevent and is not applicable in case. 2.3 Cases where Addition made on basis of statements is deleted :-

(i) Avinash Kumar Sethia Dehli)

“In the background of the aforesaid discussions and respectfully following the precedents of the Hon'ble Supreme court, High Courts, ITAT, Delhi Bench decision dated 8.3.2016, as aforesaid and in view of the CBDT's Letter dated 10.3.2003, we are of the considered opinion that the addition made on the basis of the statement in the present case recorded u/s. 133A is not sustainable in the eyes of law, hence, we delete the addition of Rs. 1.25 crores made by the AO and confirmed by the Ld. CIT(A) and allow the Appeal of the Assessee accordingly.” (copy of order attached P.B. NO…..)

(ii) Hon'ble High Court of Jharkhand delivered in the case of CIT, Ranchi vs. Ravindra Kumar Jain reported in (2009)

33 SOT 251 (Delhi) wherein, it has been held that "addition made by the lower authorities merely on the basis of statement recorded during survey and thereafter, without bringing any corroborative material on record is devoid any merits." We also find force in the assessee's counsel contention that in view of the CBDT's Letter issued vide F.No. 286/2/2003-IT (Inv.) dated 10th March, 2003 the addition made by the AO and confirmed by the Ld. CIT(A) is not sustainable in the eyes of law.

(iii) Iibs Infonet (P) Ltd., (ITAT Dehli)

In the background of the aforesaid discussions and respectfully following the precedents of the Hon'ble High Courts, as aforesaid and in view of the CBDT's Letter dated 10.3.2003, as aforesaid, we are of the considered opinion that the addition made on the basis of the statement in the present case recorded u/s. 133A is not sustainable in the eyes of law, hence, we delete the addition of Rs. 70 lacs made by the AO and confirmed by the Ld. CIT(A) and allow the appeal of the Assessee accordingly. (copy of order attached P.B. NO…..)

& 623/JP/2024 Rajesh Kumar Poonia vs. ACIT Ground No. 4 under the facts and Circumstances the A.O. has erred in law by ignoring the CBDT instruction s issued by CBDTs letter issued vide F.NO. 286/2/2003 IT (Inv) dated 10/03/2013

It is submitted that time and again board has issued instruction to the officer of the department not to indulge in surrender of income by way of obtaining confessional statements. However in the case of the assessee in clear cut violation of the circulars/instructions the income tax authorities exerted pressure and obtained surrender of income in statement recorded during the course of survey. The same is therefore unlawful and illegal and addition made on such confessional statement automatically becomes unlawful and deserves to be deleted.

In the case of CWT vs. Sanwarmal Shivkumar 171 ITR 337 the Jurisdictional High Court of Rajasthan held that the officers of the Department are bound by the circulars of the board. Further in the following cases the Courts have held that circulars issued by the Board are binding: - (i) Navnit Lal C Javeri Vs. Sen (1965) 56 ITR 198 (SC) (ii) K.P. Varghese vs. ITO (1981) 131 ITR 597 (SC) (iii) UCO Bank vs. CIT (1999) 237 ITR 889 (SC) (iv) Union of India vs. Azadi Bachoo Andolan (2003) 263 ITR 706(SC)

In the above decisions the Apex Court of the Country has reiterated that wherever CBDT has issued instructions/circulars to relieve hardships the same are of binding nature. In view of this it is submitted that the surrender of income obtained in confessional statement goes against the spirit of the circulars issued by the Board quoted below. The addition made on the basis of such confessional statement deserves to be deleted .We relevant portion following Board circulars dated 10.03.2003 and 18.12.2014 are quoted below-

For the sake of clarity we are reproducing the contents of the CBDT’s letter dated 10.3.2003 as under:-

“F.No. 286/2/2003-IT (Inv) Government of India, Ministry of Finance & Company Affairs, Department of Revenue Central Board of Direct Taxes, Room No. 254, North Block, New Delhi,the 10th march, 2003

Sir, Sub:- Confession of additional Income during the course of search & seizure and survey operation – regarding

Instances have come to the notice of the Board where 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 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 notlikely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures 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

Yours faithfully, Sd/- (S. R. Mahapatra] Under Secretary (Inv. II)

Circular vide letter (F.No.286/98/2013- IT (INV.II)], dated 18-12-2014. Relevant part reads as under :-

“2. I am further directed to invite your attention to the Instructions / Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.

3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.

The Gujrat Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income-tax reported in [2008] 174 Taxman 466 (Guj.). Relevant paragraphs read as under :-

“13. He has further relied on the instructions dated 10-3-2003 issued by the Central Board of Direct Taxes, which states that instances have come to the notice of the Board where assessee’s have claimed that they have forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based on credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, confessions during the course of search and seizure and survey operations do not serve any useful purpose. This instruction further states that 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 and seizures 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.

The Order of various courts regarding addition on account of the Boards instructions have been already mentioned in Ground no. 2.3 above.

From the above discussion it can been be clearly concluded that the A.O. has not taken care of the Procedures during the survey Proceedings nor during the Assessment proceedings any attempt had been made to make any finding while rejecting books of accounts and making addition. So, the additions made merely on basis of Statements u/s 133A is bad in law and hence we pray to delete it summarily.

Pg No. Submitted with S. No. Particulars

Case laws relied upon:

S. No. Particulars Page No. 1 CIT vs S. Khader Khan Son (Hon’ble Madras High Court) 1-6 [2008] 300 ITR 157 (Madras) dated 04.07.2007 2 CIT vs. S. Khader Khan Son (Hon’ble SC) 7-7 [2012] 25 taxmann.com 413 (SC) dated 20.09.2012 3 CIT vs. M. P. Scrap Traders (Hon’ble Gujarat High Court) 8-11 [2015] 60 taxmann.com 205 (Gujarat) dated 01.07.2014 4 PCIT vs. M/s Esspal International Pvt. Ltd. (Hon’ble Rajasthan High Court) 12-18 D.B. Income Tax Appeal No. 25/2024 dated 03/09/2024 (Rajasthan High Court)

The ld. AR of the assessee submitted that when the assessee in a reasonable time retracted statement and that is not controverted. No addition can be made on that retracted statement.

8. Per contra, the ld. DR relied upon the orders of lower authorities and vehemently argued that ld. CIT(A) while dealing with the arguments of the assessee has controverted as to why the books were rejected. Ld. CIT(A) observed that the assessee has not given details of stock, ledger expenses incurred in cash and details of purchases made from certain parties were not submitted. Even the ld. CIT(A) observed that the assessee has practice of maintaining Kacha Hisab and therefore, based on that incriminating material. Ld. AO made the addition of the income which has been accepted proceedings. Ld. CIT(A) has also discussed as to why the statement coupled with the incriminating material found at the time of survey cannot be considered as retracted and without any material. Therefore, ld. DR heavily relied upon the decisions cited by the ld. CIT(A) on the evidentiary value of statement recorded at the time of survey. Ld. DR also submitted that the revenue has collected certain incriminating document and based on that disclosure surrendered by the assessee voluntarily and therefore, the assessee accepts challenging the order of lower authorities on technical ground and there is no argument by the Ld. AR of the assessee on merits of additions made in the rejoinder submission.

For the year under consideration the assessee has filed ITR declaring income of Rs. 17,64,160/- on 31/03/2018. The case was selected for 1961 was issued on 08/08/2018 which was duly served upon the assessee.

The assessee derives income from trading of poultry feed and chicken. As there was proceeding of the survey on 16/03/2018 to 17/03/2018 at the business premise of the assessee, wherein the statement of the assessee recorded u/s 131 of the Act. In his statements, the assessee admitted while answering question No.18 that his business income for the financial year 2015-16 (AY 2016-17) was Rs 40-50 lacs, whereas as per ITR filed for the year under consideration he has offered income at Rs. 19,14,163/-only. Ld. AO based on that statement consthe assessee has shown less business income by Rs.25,85,837/-(Average of 40-50 lac comes to Rs.45,00,000/- minus Rs.19,14,163/-). In view of the facts discussed above, the matter was required to be examined thoroughly beyond the reasons of the 'limited scrutiny’. Accordingly, the case was converted from limited scrutiny criteria to complete scrutiny after obtaining necessary approval of the Pr.

Commissioner of Income Tax-3, Jaipur vide her letter No. 2282 dated 10/12/2018. Ld. AO noted that while survey proceedings incriminating papers, diaries, etc were found and impounded. Statement of Shri Rajesh Poonia Prop. of M/s Lakshay Poultry Farm, Pilani were recorded on oath u/s 131 of the Act on 16/03/2018 and 17/03/2018. In his statement in reply the year under consideration was Rs.40-50 lac which was estimated because of impounded diaries, ledger, etc. He further admitted that he would submit relevant documents in support of his income admitted/ accepted. However, on perusal of ITR filed by the assessee, it was noticed by the ld. AO that he has shown less income for the year under consideration compared to that accepted at the time of survey proceedings.

Thus, the assessee was issued a show cause notice dated 10/12/2018.

The assessee filed a reply on 14.12.2018. Ld. AO considered the submission of the assessee but found it not acceptable because the assessee admitted in his statement on oath recorded u/s 131 of the Act while answering question No. 18 that his income for the year under consideration was Rs.40-50 lacs. The assessee admitted his business income based on his calculation bases on his memory and incriminating documents including ledgers, diaries, etc, which were impounded while survey. The bench noted that the assessee has retracted to that statement vide affidavit dated. 18.05.2018 i.e. with in a reasonable time after the survey [ paper book page 1 & 2]. During the hearing ld. DR on being asked did not specifically what was the material based on upon which the disclosure was obtained but the same were not presented. Ld. AO did not is relied upon. The income which is offered by the assessee is supported by the books of accounts which ld. AO stated that are prepared after the survey but did not find any specific defects. Ld. AO noted that the assessee has filed ledger of vehicle expenses and of Diesel expenses which were in cash and he stated that same are not verifiable, but he did not find the claim of the assessee as incorrect based on the activity conducted. Ld. AO did not compare that of the assessee’s claim that how it was not comparable.

Thus, the rejection of the books were not correct. Ld. AO simply mentioned the invocation of section 145(3), but the mandatory notice was not given mentioning the defects in the books of accounts based on the provision of section 145 of the Act. The provision of section 145(3) provides that;

(3) Where the Assessing Officer is not satisfied about the correctness or completeness of the accounts of the assessee, or where the method of accounting provided in sub-section (1) has not been regularly followed by the assessee, or income has not been computed in accordance with the standards notified under sub-section (2), the Assessing Officer may make an assessment in the manner provided in section 144.

Thus, it is clear from the above provision of the act that the ld. AO or that of the ld. CIT(A) may proceed under Section 145(3) under any of the following circumstances: • Where he is not satisfied about the correctness or completeness of the accounts; or • Where method of accounting cash or mercantile has not been regularly followed by the assessee; or Based on the facts as discussed above it was not case of the revenue for the second and third reason but is of on the first reason that the ld. AO is not satisfied about the correctness of completeness of the accounts. But the same is not the situation when the assessee has produced all the records that were required by the AO. The bench noted that before the ld. CIT(A) the assessee made a submission to support as to why the provision of section 145(3) cannot be invoked in the case of the assessee. The assessee submitted that AO cannot reject the books of accounts and apply the provisions of section 145(3) of the Act unless no material record has been brought on record to hold that book results are not reliable, when that are maintained in regular course of business. Even the ld.AO has not given required notice for rejection of book results as required under law. Even the ld. CIT(A) has simply supported the finding of the ld. AO without dealing with the contention of the assessee. Therefore, in such circumstances and facts of the case, the Assessing Officer was not justified in rejecting the books of account by invoking the provisions of section 145(3) of the Act and the additions made by the Assessing Officer are liable to deleted. Having held so that the books’ results cannot be rejected based on the surmises to have been rejected by both the lower authorities but no addition related to that rejected books of accounts was made by issuing a separate notice therefore, the book result cannot be disbelieved and the addition cannot be made based on the surmises and conjectures.

Ld. AR of the assessee submitted that the case laws cited by Ld. CIT(A) are related to the search and the statement recorded u/s 132(4) cannot be compared with statement recorded under the survey which is not statement on oath. Even that statement was retracted by the assessee. As the ld. AR of the assessee serviced the decision of our own High Court in the case of our own Rajasthan High Court in the case of PCIT Vs. Esspal International P. Ltd [ 166 taxmann.com 722 (Rajasthan) ] wherein the High Court held that ;

11. Now it is a matter of record that Shirish Chandrakant Shah had retracted his statements given before the Assessing Officer. Even otherwise, an admission by the assessee cannot be said to be a conclusive piece of evidence. The admission of the assessee in absence of any corroborative evidence to strengthen the case of the Revenue cannot be made the basis for any addition. Therefore, the substantial questions of law framed by the appellant pertained to an open issue which stands concluded by the decision of the Hon'ble Supreme Court; one such decision was rendered in "M/s Pullangode Rubber Produce Co. Ltd. v. State of Kerala And Another" [1973] 19 ITR 18.

Respectfully following the binding judgment and the discussion so recorded herein above ground no. 1 & 2 raised by the assessee are allowed. Since raised by the assessee becomes academic.

In terms of these observations, the appeal of the assessee in ITA no.

623/JP/2024 stands is allowed

Therefore, it is not imperative to repeat the facts and various grounds raised. Hence, the bench feels that the decision taken by us in for Assessment Year 2016-17 shall apply mutatis mutandis in the case of Rajesh Kumar Poonia in for the Assessment Year 2017-18.

Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 06/05/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Rajesh Kumar Poonia, Churu 2. izR;FkhZ@ The Respondent- ACIT, Circle- Jhunjhunu, Jhunjhunu 3. vk;dj vk;qDr@ The ld CIT vk;dj vk;qDr¼vihy½@The ld CIT(A) 4. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA Nos. 611 & 623/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत