SANJAYKUMAR TIKAMCHAND BUCHA,SURAT vs. ACIT, CIRCLE-1(2), SURAT

Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

The facts of the case in brief are that the appellant was engaged in the business of wholesale trading of art silk fabrics and house property during the year under consideration. In this case, a survey u/s.133A of the Act was carried out at the business premises of the appellant on 10.04.2013 and many incriminating documents were found and impounded during the operation. During the survey, statements of the appellant were recorded on oath on 10.04.2013 and 11.04.2013 and undisclosed income of Rs.4,01,04,399/- was offered to tax by the appellant during the course of survey. The undisclosed income was admitted by the appellant on the basis of impounded documents. The appellant subsequently filed return of income declaring an income of Rs.84,97,910/- on 01.10.2013. Case of the appellant was selected for scrutiny through CASS. Subsequently, notices u/s.143(2) and 142(1) of the Act were issued to the appellant. In compliance of the same, appellant filed written submissions along with books of account and relevant bills/vouchers, etc. The Assessing Officer (in short, ‘AO’) noticed that the appellant has filed return without 2013-14 Sanjaykumar Tikamchand Bucha incorporating the disclosure made during the survey under various heads, which are as under: Sr. No. Head of Income Undisclosed income (Rs.) 1. Excess Stock 2,03,02,389/- 2. Unaccounted investment in cheque 25,50,000/- discounting business 3. Excess cash 24,40,000/- 4. Unaccounted receivables 1,48,12,010/- Total 4,01,04,399/- 3.1 Thus, the appellant had offered undisclosed income less by Rs.3,22,48,899/- (4,01,04,399 – 78,55,500). The appellant filed an affidavit on 11.01.2016 for retraction of the admitted undisclosed income. In the said affidavit, it was stated by the appellant that no documents or evidences were found during survey operation on 10.04.2013 at the business premises except cash of Rs.27,54,660/-. It was further stated that wife of the appellant was suffering from the fever on the date of survey. In spite of several calls from his wife, the survey team did not allow him to go to his residence to take care of his wife. The survey team also threatened him to make disclosure of Rs.5 Crore. The appellant was ready to disclose income only to the extent of excess cash found for taxation; however, survey team pressurized the appellant to write entries of unaccounted receivables in the diary and prepare inventory of excess stock so that disclosure of Rs.5 Crore could be justified. It was, therefore, submitted that the said impounded diary and inventory of closing stock etc. were not true as same was prepared under threat and same could not be considered as true evidence.

Aggrieved by the order of AO, the appellant filed appeal before CIT(A). Before the CIT(A), the appellant submitted that it had filed retractions before the AO on 11.01.2016. The CIT(A) noted that the retraction was filed before the AO after the lapse of 2 years and 9 months from the date of admission. Further, no evidence was either filed before AO or during the appellate proceedings that the appellant had filed any complaint with high authorities regarding statement having been recorded under force or coercion. Therefore, it was held by the CIT(A) that the retraction filed cannot be treated as bonafide and the same was to be treated as an afterthought to escape the rigors of income tax. The retraction had to be filed by the appellant within reasonable time to have any force; thus, the plea of the appellant was rejected. The CIT(A) relied on the decisions in the following cases, viz. (i) Roshan Lal Sanchiti vs. PCIT, (2023) 150 taxmann.com 228 (SC), (ii) CIT vs. MAC Public Charitable Trust, (2022) 144 taxmann.com 54 (Mad.), (iii) Kantilal C. Shah vs. ACIT, (2011) 14 taxmann.com 108 (Ahd – Trib.), (iv) PCIT vs. Avinash Kumar Setia, (2017) 81 taxmann.com 476 (Delhi), (v) Thiru S. Shyam Kumar vs. ACIT, (2018) 99 taxmann.com 39 (Mad.) and (vi) Ravindra Kumar Verma vs. CIT, (2013) 30 taxmann.com 367 (All.). 4.1 With regard to the claim of the appellant that the statement recorded in the survey proceedings do not have any evidentiary value, the CIT(A) observed 2013-14 Sanjaykumar Tikamchand Bucha that the claim of the appellant is not correct because the statement of the appellant was recorded on oath u/s.133A of the Act on the basis of incriminating materials found/impounded during the survey. It is settled law that an admission during the course of statement recorded u/s.131 of the Act has legal sanctity and admission was binding on the appellant. Further, it was noted that the disclosure/admission of undisclosed income in the statement was not merely adhoc disclosure but it was backed by incriminating documents related to excess stock, unaccounted investment in cheque discounting business, excess cash and unaccounted receivables found during the course of survey proceedings. It was also observed that the A.O. had made detailed discussion regarding all the issues in the assessment order. It was further observed that the addition was not made merely on the basis of statement recorded during the survey but on the basis of details/notings of unaccounted receipt found during the survey proceedings which were incriminating in nature and which were impounded. In view of the same, the argument of the appellant was rejected by Ld. CIT(A).

The appellant submitted before the CIT(A) that the addition of excess stock of Rs.2,04,15,259/- found during the course of survey was wrong without appreciating the facts and circumstances of the case. During survey proceedings, no incriminating documents suggesting the existence of stock to the tune of Rs.2,04,15,259/- was found and there was no excess physical stock at the business premises of the assessee. It was further stated that, nothing was found from the business premises except the cash of Rs.27,54,660/-. The appellant had 2013-14 Sanjaykumar Tikamchand Bucha expressed his willingness to disclose the said amount but the survey team pressurized the assessee to make disclosure of Rs.5,00,00,000/- without any incriminating material. It is further stated that the assessee had signed all the papers and statement under tension, pressure and incoherent state of mind and he had given the statement in the manner in which he was asked to reply. The statement recorded during the course of survey proceedings has no evidentiary value in the eyes of law and the assessment finalized purely on basis of such statements and so-called incriminating documents is not justified.

The assessee submitted that he was not at all in possession of such a huge volume of stock as the appellant had no space to store such a huge volume of stock as the area of his business premises was hardly around 200 sq. feet. It was submitted that it is practically in possible to store goods worth Rs.2,04,15,259/- having quantity of 6058 takas (bundles) of grey cloth of both proprietary concerns in such a small area. It is further stated that not a single evidence of any unaccounted purchases or unaccounted sales was found during the course of survey proceedings. The AO had also not pointed out a single evidence to suggest that the appellant was engaged in carrying on unaccounted trading activities. It was, therefore, stated that the statement recorded during the survey has no evidentiary value. The AO did not lead any cogent evidences to establish the fact of existence of stock. 6.1 Regarding the addition of Rs.25,00,000/- on account of unaccounted investment in cheque discounting business, it was submitted that the same is 2013-14 Sanjaykumar Tikamchand Bucha covered in the total disclosure of Rs.78,55,500/- offered by the appellant in the return of income and therefore, no separate addition is required. 6.2 Regarding the addition of Rs.1,48,12,010/- towards unaccounted receivables, it was submitted that during the course of survey proceedings, a diary containing a list of alleged receivables was found and inventorised as Annexure 'B-1'. It was submitted that the said diary was a dumb document having irrelevant data, not connected with any business transactions of the appellant. The appellant had not carried out any unaccounted transactions of purchases and sales during the year under consideration and the appellant had not sold any goods to any of the so-called parties mentioned in the impounded diary. It is evident from the said diary that only the names were written and no place or any addresses have been mentioned in the said diary. There are no details regarding transactions with the said parties and no other incriminating document related to the transactions mentioned in the said diary were found. Besides, none of the parties from whom the amount was shown as receivables, were in existence and the AO had also not proved with evidence about the identification or existence of such parties. The AO had not made any inquiry to establish that the said amount was actually receivable by the appellant from such parties. The reply of the assessee was rejected by the CIT(A) because addition was made not merely on the basis of statement during the survey but on the basis of the details and notings of receivables in the impounded pocket diary. The CIT(A) relied on the decisions in cases of C. K. Abdul Azeez vs. CIT, (2019) 111 2013-14 Sanjaykumar Tikamchand Bucha taxmann.com 74 (Ker.) and Dr. Dinesh Jain vs. ITO, (2014) 45 taxmann.com 442 (Bom.). In view of the above factual and legal positions, the CIT(A) confirmed the additions made by the AO and dismissed the appeal.

Aggrieved by the order of CIT(A), the appellant filed appeal before this Tribunal. The learned Authorized Representative (ld. AR) of the appellant filed paper books including the written submission before CIT(A), audit report along with audited financial statements, statements recorded u/s 131 and 133A of the Act, chart showing details of gross profit and net profit ratios for previous year, copy of affidavit by the assessee, copy of impounded diary, inventory of cash found during survey proceedings. The ld. AR submitted that the area of the appellant was only 200 square feet where it is not possible to have the stock as inventorised during the survey. He submitted that the disclosure and surrender of income was under force from the survey team. The ld. AR has relied on the submissions made during the appellate proceedings.

On the other hand, Ld. CIT(D.R.) for the revenue relied on the orders passed by the lower authorities. He submitted that the additions were made on the basis of the incriminating material found during the survey and categorical disclosure by the assessee. He also submitted that the retraction made by the assessee after 2 years and 9 months was not proper. The cheque discounting business was admitted by the assessee because 17 cheques were found during the survey. The CIT-DR further submitted that the impounded diary was accepted by the appellant during the survey. The receivable mentioned in the diary was for 2013-14 Sanjaykumar Tikamchand Bucha the whole year and not for a single day. The retraction was after 2 years and 9 months and hence it should be ignored.

We have heard both the parties and perused the materials available on record. We have also deliberated upon the case laws relied upon by both sides. The primary issue in the appeal is regarding the reliability of evidence gathered during the survey and whether the appellant’s retraction of undisclosed income, after a significant delay, should be accepted. It is a settled principle of law that a statement recorded under oath during a survey, supported by incriminating material, has substantive evidentiary value, and retraction from such admission must be prompt, credible, and substantiated to have any contrary effect. Reliance in this regard is placed on the judgement of the Hon'ble Supreme Court in the case of Roshanlal Sanchiti (supra). In this decision, it was held that retractions of confessional statements made during search/survey proceedings must be made promptly and with cogent evidence, failing which they lose evidentiary value. The Hon’ble Supreme Court in case of M/s Pebble Investment and Finance Ltd., in SLP No.11784/2017, dated 05.07.2017 dismissed SLP challenging the decision of Hon’ble Bombay High Court (2017-TIOL-188-HC-MUM-IT), where it was held that statement made u/s 133A of the Act could be relied upon for purpose of assessment, in absence of any contrary evidences or explanations as to why such statement made was not credible. Reliance may also be placed on the decision of ITAT, Ahmedabad in the case of Kantilal C. Shah (supra), wherein it is held that Section 132(4) of the Act enables an authorized officer to examine a person on 2013-14 Sanjaykumar Tikamchand Bucha oath and such a sworn statement made under section 132(4), can be used as an evidence under the Act. In the present case, the assessee waited for nearly 2 years and 9 months to retract, without any intervening cause or genuine justification. Such delay clearly undermines the credibility of the retraction.The timing of the retraction is crucial. A retraction filed after 2 years and 9 months, when the assessment proceedings were near completion, strongly indicates that it was not genuine but a tactical manoeuvre to nullify the earlier admission. It has been held by Courts that a delayed retraction which is not accompanied by cogent evidence must be treated as an afterthought and rejected outright. In this case, the retraction is not accompanied by any evidence disproving the content of the inventory, diary, or cheque found. On the contrary, the stock inventory was prepared in the presence of the assessee and signed by him and his employee. The pocket diary was recovered from the business premises, and its entries were never proved to be fabricated. Thus, the retraction fails both factually and legally, and the addition based on the admission and corroborating material was rightly made by the AO. Let us now discuss about various additions made by the AO and confirmed by the CIT(A).

Ground Nos. 1 to 4 are related to additions of Rs.3,23,11719/-, which was the difference between the admitted disclosure of Rs.4,01,67,269/- during the survey and income offered in the return of income of Rs.78,55,550/-. The first ground pertains to addition of Rs.2,04,15,259/- on account of excess stock. The ld. AR submitted that no incriminating documents were found during the survey 2013-14 Sanjaykumar Tikamchand Bucha suggesting the existence of excess stock worth Rs. 2,04,15,259/- and that the addition made by the AO is unsubstantiated. The office premises of about 200 square feet, which cannot store such huge stock as pointed out in the inventory prepared during survey. We find that the appellant voluntarily disclosed Rs.2,04,15,259/- as excess stock during the survey. This disclosure was made in the face of inventory of stock and statements taken under oath on 10.04.2013 and 11.04.2013. The appellant signed and acknowledged the details of the excess stock, thereby confirming its existence. The ld. AR has submitted photographs in support of the claim that the business premises were too small (around 200 sq. feet) to accommodate the alleged excess stock of Rs.2,04,15,259/-. We are not persuaded to agree with the contention of the ld. AR. While the photographs submitted by the appellant may indeed depict the limited space available at the business premises, they do not conclusively establish that the excess stock was not stored elsewhere. It is entirely plausible that the appellant maintained the excess stock in an alternate storage facility, such as a godown or another premises, which may not have been captured in the photographs detected during the survey operation. The inventory was signed by both the appellant and his employee, confirming the details of the excess stock. In view of these facts, the appellant's argument regarding space constraints cannot be accepted as a valid reason for deleting addition towards excess stock. The admission made by the appellant during the survey, along with the signed inventory and impounded documents, provides sufficient corroborative evidence to support the conclusion 2013-14 Sanjaykumar Tikamchand Bucha that the excess stock existed and was part of the appellant's business operations. We have already relied upon the decision of Hon’ble Supreme Court in case of Pebble Investment & Finance Ltd. (supra), Roshanlal Sanchiti (supra) and Kantilal C. Shah (supra) where it was held that statement recorded during the survey operation can be used as an evidence in absence of any contrary evidence as to why such statement was not credible. In view of the above facts and legal position, we do not find any infirmity in the order of CIT(A) and accordingly, the ground No.1 is dismissed. 10.2 Ground No.2 is addition of Rs.25,00,000/- on account of unaccounted investment in cheque discounting business. The ld. AR submitted that this disclosure during the survey has been included in the overall disclosure of Rs.78,55,500/- in the return of income filed. Hence, no separate addition should have been made. However, the AO has made the addition, which was confirmed by the CIT(A). Since the appellant has included this amount in the disclosure while filing the return, separate addition would amount to double addition, which is not permissible. Hence, the AO is directed to delete addition of Rs.25,00,000/- towards unaccounted investment in cheque discounting business. The ground No.2 is accordingly allowed. 10.3 Ground No.3 is regarding addition of Rs.1,48,12,010/- on account of unaccounted receivables, which was admitted as additional income during the survey in the statement recorded u/s 133A of the Act. A pocket diary was found during the survey, which formed the basis for such disclosure. The facts have 2013-14 Sanjaykumar Tikamchand Bucha already been discussed earlier in this order and, hence not repeated. The appellant, however, retracted from the said disclosure after 2 years and 9 months by filing an affidavit. The ld. AR strongly contested this addition, stating that the pocket diary impounded during the survey contains irrelevant and meaningless entries. He also submitted that no independent evidence was found to support the receivables mentioned in the diary. While it is true that the diary did not contain full details, the presence of the diary itself, coupled with the fact that it was found at the appellant’s business premises, establishes a strong presumption that the entries were related to the appellant’s business activities. Provisions of section 292C of the Act are directly on the impugned issue. As per the said provisions, where any books of account or other documents are found in possession or control of any person in curse of search u/s 132 or survey u/s 133A of the Act, it may be presumed that such books or documents belong or belongs to such person and that the contents of such books of documents are true. The appellant has failed to provide any credible evidence to the contrary. In the absence of such evidence, the addition made by the AO and upheld by the CIT(A) does not require any interference. Accordingly, ground No.3 is dismissed. 10.4 Ground No.4 is a prayer to accept the additional income of Rs.78,55,500/- offered in the return of income instead of addition made by the AO. We have discussed all the issues independently and decided them on merits. Hence, no further adjudication is required. Accordingly, the ground No.4 is dismissed.

Ground No. 5 is general in nature and do not require any adjudication.