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Facts
During a survey operation, the assessee's employees stated that cash of around 30% of the sale value of flats was accepted and not accounted for. The Director of the assessee-company also surrendered Rs. 4.50 crores. The AO made additions for unaccounted cash receipts of Rs. 44.50 lakhs and the surrendered income of Rs. 4.50 crores.
Held
The Tribunal held that statements recorded under Section 133A of the Act, without corroborative material, do not have evidentiary value. Impounded documents were also considered 'dumb documents' without supporting evidence. The AO failed to provide complete documents and conduct independent inquiries.
Key Issues
Whether the additions made by the AO based on statements recorded during survey operations and impounded documents are sustainable without corroborative evidence.
Sections Cited
133A, 131, 132(4)
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: JUSTICE (RETD.) SHRI C.V. BHADANG & SHRI B.R. BASKARAN
O R D E R PER B.R. BASKARAN, A.M :
The Revenue has filed this appeal challenging the order dated 29-05-2023 passed by the Ld.CIT(A)-51, Mumbai and it relates to the Assessment Year (AY.) 2014-15. The Revenue is assailing the decision of the Ld.CIT(A) in deleting the addition of Rs.4.50 crores relating to income surrendered during the course of survey operation and also the addition of Rs.44.50 lakhs relating to unaccounted cash receipts.
The assessee is engaged in the business of infrastructure development and trading in various goods. A survey operation u/s 133A of the Income Tax Act, 1961 („the Act‟) was conducted at the business premises of the assessee on 13-03-2014. During the course of survey operations, a statement was taken from two employees named Shri Ram Gopal Sharma and Shri Ranjeet Singh Jain, wherein they stated that the assessee is accepting cash of around 30% of sale value of flats. It appears that the cash receipts were not accounted for in the books. Further, certain undated and unsigned documents were impounded, wherein the details relating to receipt of consideration on sale of flats were recorded. It contained receipts by way of cheque as well as way of cash. Based on this information, the AO took the view that the assessee has collected cash on sale of flats and did not account for the same. The AO made additions on accounted of unaccounted cash in AY.2011-12 on the basis of sale of flats effected in that year. The AO also assessed a sum of Rs.44.50 lakhs during the year under consideration towards unaccounted cash receipts in respect of flats sold in this year. The Survey Team also recorded a statement from the Director of the assessee-company named Shri Ashok Kumar Kothari, wherein he agreed to surrender a sum of Rs.4.50 crores in AY.2014-15 and also agreed to pay tax in instalments.
However, the assessee did not offer Rs.4.50 crores in the return of income filed by it for AY.2014-15. When questioned about the same, the assessee contended that the said surrender is not based upon any material. Further, the surrender was made in the statement taken u/s. 133A of the Act and the said statement does not have any evidentiary value. In support of this contention, the assessee placed reliance on the decision rendered by the Hon‟ble Supreme Court in the case of S Khader Khan (352 ITR 480)(SC). However, the AO rejected the above said contention of the assessee, relying on the decision rendered by the Hon‟ble Allahabad High Court in the case of Sanjeev Agarwal vs. Income tax Settlement Commission (2015)(56 taxmann.com 214)(All) and other decisions, where in the Hon‟ble High Courts have held that the retraction of the statement without bringing any cogent evidence will not be valid. The AO also noticed that the assessee has retracted the statement of the Director after expiry of about 33 months. Accordingly, the AO rejected the delayed retraction. Accordingly, the AO assessed the income of Rs.4.50 crores surrendered by the Director of the assessee during the course of survey operation.
As stated earlier, the AO also assessed the unaccounted cash receipts of Rs.44.50 lakhs relying upon the statements given by the employees and the documents impounded at the time of survey operations.
The Ld.CIT(A) deleted both the additions and hence, the Revenue has filed this appeal.
We heard rival contentions and perused the record. The main contention of the Ld.AR was that the Director of the assessee had surrendered the income of Rs.4.50 crores in the statement taken from him u/s.133A of the Act. The said statement does not have evidentiary value and accordingly, contended that the AO could not have assessed this amount without bringing any cogent material in support of the same. The Ld.DR, on the contrary, submitted that the AO had issued a summon u/s. 131 of the Act before recording statement and accordingly, the statement has been recorded u/s.131 of the Act. Accordingly, the Ld.DR contended that the statement recorded u/s.131 of the Act shall have evidentiary value. He submitted that the AO has stated so in page 6 of the assessment order.
The Ld.AR, however, disputed the above said contentions of Ld.DR and also the observation made by the AO in the assessment order. He submitted that the Ld.CIT(A) and ITAT in AY.2011-12 have observed that the statements have been taken u/s.133A of the Act only. He submitted that the Ld.CIT(A) has also observed so in the current year, i.e., in AY. 2014-15. Hence, the Ld.DR was requested to verify the assessment and survey records and submit his arguments. Accordingly, time was given to Ld.DR in the earlier occasion and case was adjourned. However, the Ld. DR submitted that the copy of summon, if any, issued u/s.131 of the Act was not available in the record. We noticed earlier that the AO had made addition in AY.2011-12 on the basis of very same material. In the appeal adjudicated by ITAT for the above said year, the Tribunal has also noted down that the statement has been taken from the Director of the assessee u/s.133A of the Act only. Further, a perusal of the copies of statements placed in the paper book, it is stated that the statements were taken during the course of survey operations u/s.133A of the Act. Though the heading contains reference to sec.131/133A of the Act, the inapplicable portion has not been struck-off. However, below the heading, sec. 133A is noted down. The Ld.DR also reported that summon, if any issued u/s.131 of the Act is not available in the record. Accordingly, in the absence of any evidence to show that the summons u/s.131 was issued to the assessee, we have to follow the observations made by the Co-ordinate Bench in AY. 2011-12, wherein the Co-ordinate Bench has also observed that the statement was taken from the Director of the assessee u/s.133A of the Act.
We notice that the AO had made addition of Rs.20.86 crores relating to unaccounted cash receipts in AY.2011-12. The said issue has been examined by the Co-ordinate Bench of Tribunal in the assessee‟s own case in the order dated 27-06-2019 passed in & CO No.282/Mum/2018 and the Co-ordinate Bench has upheld the view taken by the Ld.CIT(A) in that year that the statement taken u/s.133A of the Act will not have any evidentiary value, as per the decision rendered by the Hon‟ble Supreme Court in the case of S Khader Khan (referred supra). With regard to the documents impounded from the assessee, the Tribunal upheld the decision of the Ld.CIT(A) that they are „dumb documents‟ and hence, reliance could not be placed upon them without bringing any corroborative material. In this regard, we notice that the Ld.CIT(A) as well as ITAT have placed reliance on the decision rendered by the Hon‟ble Supreme Court in the case of Common Cause vs. Union of India (2017)(394 ITR 220) and also the decision rendered by Hon‟ble Bombay High Court in the case of Sheraton Apparels vs. ACIT (2002)(256 ITR 20)(Bom).
Accordingly, the Tribunal held in AY.2011-12 that the statements of two employees cannot be relied upon. Since the AO could not co-relate the contents of the documents impounded with any other corroborative material, the Tribunal held that the said documents could also not be relied upon. The Co-ordinate Bench also noted another important point in paragraph 6.2 of its order, i.e., the AO has not furnished all the documents that were relied upon by him to make the addition, i.e., according to the assessee, the AO has given only few documents, but not all the documents, despite a reminder given by the assessee. Accordingly, the Tribunal, by placing reliance on the decision of the Hon‟ble Supreme Court rendered in the case of Kishanchand Chelaram (125 ITR 713)(SC), held that the AO could not have placed reliance on the documents, which were not furnished to the assessee. It also took support of the decision rendered by Mumbai bench of Tribunal in the case of Layer Exports P. Ltd (2017)(53 ITR 416)(Mum), wherein it has been held that the unsigned papers could not be relied upon. The Tribunal also noticed that the AO did not conduct any independent enquiry and simply placed reliance on the survey statements. Accordingly, the Tribunal held that the Ld.CIT(A) has rightly deleted the addition of alleged unaccounted cash receipts.
Now turning to the issues before us in the instant year, we notice that both the additions contested before us are based on the statements recorded during the course of survey operations u/s.133A of the Act and also certain documents impounded during the course of survey. The Co-ordinate Bench has already examined the legal validity of those documents in AY.2011-12 and it has held that they are dumb documents. Further, the Tribunal has also noticed that the AO did not furnish to the assessee complete set of documents on which he had placed reliance and hence the addition could not be sustained. The Co-ordinate Bench has also held that the survey statements cannot be only basis for making addition and the AO has to make independent enquiry and bring some corroborative material on record to support those additions. Hence, the addition of Rs.44.50 lakhs made by the AO on the basis of the documents, which were held to be dumb documents, is liable to be deleted, as held by the Co-ordinate Bench in AY.2011-12.
The Ld.AR also brought to our notice that the circular dated 03-07- 2002 (F No. 286/57/2002-IT (Inv.II) and letter dated 18-12-2014 in F No. 28698/2013-IT(Inv.II), wherein instructions have been given to the officials conducting search operations that the disclosure of undisclosed income in the statement taken u/s.132(4) of the Act without proper evidence in support thereof shall be adversely viewed. Hence, the above said circulars support the contention of the assessee that the surrender of Rs.4.50 crores made by the Director is not based on any credible evidence and hence, the said surrender made in the statement taken u/s.133A of the Act will not have any evidentiary value. In this view of the matter, the Ld.CIT(A) was justified in deleting the addition of Rs.4.50 crores made by the AO on the basis of surrender made in the survey statement.
In view of the foregoing discussions, we confirm the order passed by the Ld.CIT(A) in respect of both the additions contested before us. 13. In the result, the appeal filed by the Revenue is dismissed.