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Income Tax Appellate Tribunal, BENGALURU BENCH A, BENGALURU
Before: SHRI. INTURI RAMA RAO & SHRI. LALIT KUMAR, JUDICIAL
IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'A', BENGALURU BEFORE SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI. LALIT KUMAR, JUDICIAL, JUDICIAL MEMBER (Assessment Year : 2008-09) Shri. Sai Babu, Prop : Sri Enterprises, Near Adi Anjaneya Temple, Jogihalli Road, C. N. Hally .. Appellant PAN : AYFPS5738N v. Deputy Commissioner of Income-tax, Circle -1, Tumkur .. Respondent Assessee by : Shri. H. Guruswamy, ITP Revenue by : Smt. Swapna Das, JCIT Heard on : 01.05.2017 Pronounced on : 09.06.2017 O R D E R PER LALIT KUMAR, JUDICIAL MEMBER:
This is an appeal filed by the assessee against the order of CIT (A)- II, Bengaluru, dt.13.11.2014, for the assessment year 2008-09.
ITA.1050/Bang/2015 Page - 2
The assessee has raised the following grounds of appeal :
ITA.1050/Bang/2015 Page - 3
Brief facts of the case are that the assessee, an individual filed the return of income on 27.09.2008, by declaring income of Rs.45,89,180/-. A survey was done in the premises of the assessee on 12.01.2010 and thereafter a statement of the assessee was recorded on 04.02.2010. In his statement, the assessee has allegedly admitted to declare an additional income of Rs.57,04,205/-. However, in the revised return of income filed on 11.03.2010, the assessee has not honoured the commitment made in his statement recorded on 04.02.2010. Pursuant thereto, the AO has issued a notice proposing to add back an amount of Rs.38,85,200/- to the income of the assessee. To the said notice, assessee has submitted a reply on 03.12.2010 to the following effect :
“I have already submitted a letter and also clarified in person no advance was paid to Chandre Gowda and Smt. Giriyamma both totalling to around 33,00,000. The other difference in income offered is due to amount actually incurred and amount as arrived by the assessment officer during survey for construction of house at Ammasandra and CN Halli.”
However, the Ld. AO was not convinced and therefore an addition of Rs.39,97,305/- was made instead of Rs.38,85,200/- made to the income of ITA.1050/Bang/2015 Page - 4 the assessee. Feeling aggrieved, assessee has filed an appeal before the CIT (A).
The CIT (A) has confirmed the order passed by the AO. Therefore, the assessee is in appeal before us on the grounds reproduced hereinabove.
At the outset, it is stated that the additions made by the AO and confirmed by the CIT (A) were without any corroborative and cogent evidence, except the sworn statement recorded on 04.02.2010. The Ld. AR has taken us to the order passed by the authorities below. He also drew our attention to the judgment of the Hon’ble Supreme Court in the matter of CIT v. S. Khader Khan Son [(2013) 352 ITR 480 (SC)], in support of his argument that no addition can be made in the absence of any cogent evidence. Paragraph 66, of the above judgement, on which reliance was placed by the Ld. AR for the assessee, reads as under :
A survey was conducted in the premises of the assessee-firm. One of the partners in his statement offered an additional income of Rs. 20 lakhs for the assessment year 2001-02 and Rs. 30 lakhs for the assessment year 2002-03 but the statement was retracted by the assessee stating that the partner from whom the statement was recorded during the survey operation under section 133A of the Income-tax Act, 1961 , was new to the management and had agreed to an ad hoc addition. The Assessing Officer based on the admissions made by the assessee recomputed the assessment. The order was set aside by the Commissioner (Appeals) and this order was upheld by the Tribunal. On appeal to the High Court, the High Court held that in view of the scope and ambit of the materials collected during the course of survey, the action under section 133A would not have any evidentiary value and that it could not be said solely on the ITA.1050/Bang/2015 Page - 5 basis of the statement given by one of the partners of the assessee-firm that the disclosed income was assessable as lawful income of the assessee.
On merits, it was submitted that the assessee had filed the confirmation letter in the appellate proceedings before the CIT (A) and the CIT (A) had sought a remand report from the AO. However, the AO has submitted that the remand report stating that despite the notices sent to the three persons, they have chosen not to appear before him. Hence, the CIT (A) confirmed the addition.
The Ld. AR submitted before us that Smt. Giriyamma, had expired.
However, in respect of Shri. Chandre Gowda and Shri. Chunche Gowda, it was mentioned that they were out of station. On the basis of this, it was submitted that the addition made by the authorities below with respect of Shri.Chandre Gowda, Shri. Chunche Gowda and Smt. Giriyamma, was without any basis. In respect of the addition made for investment in construction of house, it was submitted by the Ld. AR that the order passed by the authorities below was without any basis and it was purely based on conjectures and surmise. The Ld. AR has drawn our attention to the Valuation Report filed before the authorities below and before us, to show that the construction was in the remote village was incorrectly taken, while ITA.1050/Bang/2015 Page - 6 it was actually Rs.60,000/- per square. Cost of construction was required to be taken on the basis of Valuation Report.
On the other hand, the Ld. DR has submitted that the assessee has admitted in the statement recorded on 04.02.2010 to declare an amount of Rs.57,04,205/- and therefore, the additions made by the authorities below was correct.
We have gone through the record and the orders passed by the authorities below. Without going into the merits of the case from a bare reading of the assessment order and the order of the first appellate authority, it is clear that no corroborative evidence was brought on record by the AO to show that the sum of Rs.20 lakhs was paid as advance towards sale consideration to Shri. Chandre Gowda. Neither the sale deed, nor the statement confirming the receipt of Rs.20 lakhs as advance, nor any statement from the attesting witnesses to the sale deed were brought on record. Further, there is also no evidence in respect of advance paid to Shri. Chunche Gowda. There is no evidence brought on record in the form of agreement to sale, wherein it was agreed that the total sale consideration of Rs.29,38,000/- was agreed by the assessee to be paid to Shri. Chunche Gowda, out of which Rs.5 lakhs was paid to him as advance. Neither Shri.
ITA.1050/Bang/2015 Page - 7 Chunche Gowda was examined nor any other document was produced on record. Therefore, in the absence of any evidence, the additions were made merely on the basis of statement recorded during the survey.
In our view, it is the duty of the AO to bring on record the corroborative evidence for the purpose of making the addition. Merely on the basis of the statement recorded during the survey or after survey, the addition cannot be made as held by the Hon’ble Supreme Court in the matter of S. Khader Khan Son (supra), as also so notified by the Board vide Circular, F. No.286/98/2013 –IT (Inv.II), dt.18.12.2014. Thus the additions for Rs 25,00,000/-made on account of advances given to Shri.Chandre Gowda and Shri. Chunche Gowda are deleted .
In respect of Smt. Giriyamma, it is also the case of the AO that the assessee has paid a sum of Rs.13 lakhs to Smt. Giriyamma, being the agreed sale proceeds of the land, against which Rs.5 lakhs was paid as advance, as shown in the Balance Sheet for the year ending 31.03.2009. Though the assessee has filed the confirmation letter from Smt. Giriyamma, dt.nil, however, if we look into the letter at page 27 of the paper book, then it is clear that the said letter is undated without the PAN, bank account details, husband’s name or father’s name, or even the address ITA.1050/Bang/2015 Page - 8 of Smt. Giriyamma. Moreover, if we look into the report filed by the AO dt.27.11.2013, it is clear that Smt. Giriyamma had already expired. Assessee, during the course of proceedings, has not been able to give the date of the confirmation letter, as well as the date of death and merely relied upon the judgment of Hon’ble Supreme Court in S. Khader Khan Son (supra). We would like to point out that the judgment passed by the Courts is not in the nature of statute and can not be blindly applied without ensuring the facts of the present case. In the present case, a sum of Rs. 5 lakhs was shown in the Balance Sheet of the assessee, for the year ending 31.03.2009. Moreover once the assessee filed a confirmation letter confirming the transaction that no sum of Rs.8 lakhs was paid in cash to Smt. Giriyamma, then it is the solemn duty of the assessee to give all the details of her like date of her death, date of confirmation, Pan no, address etc. In the light of the above, we do not think the explanation given by the assessee is plausible and can be accepted . In view thereof, we uphold the order passed by the CIT (A) with respect to addition of Rs.8 lakhs.
With respect to the difference in cost of construction of residence, as well as upstairs, in this regard, the authorities below had made an addition of Rs.7 lakhs to the total income of the assessee, under the above two heads ITA.1050/Bang/2015 Page - 9 on the basis of statement recorded from the assessee, during the course of survey.
The Ld. AR for the assessee has submitted that the Valuation Report submitted by the assessee giving the cost of construction at Hammasandra as well as in respect of the first floor of the residence on a property bearing No.898, Joggihalli Road, 1st Stage, Chikkanayakanahalli, from the Approved Valuer. However AO has estimated the cost of construction without any basis and without reference either to the CPWD or State PWD Manuals.
On the other hand, the Ld. DR supports the orders of the lower authorities.
We have gone through the record and considered the submissions made by the parties. In our view, the cost of construction of the property at Hammasandra as well as the first floor of residence at Joggihalli, Chikkanayakanahalli, were required to be based on some material. The ld AO has not made the addition based on some material or basis rather had made solely on the basis of the statement and an estimation. In our view, the whole basis of making the addition by the authorities below is the ITA.1050/Bang/2015 Page - 10 statement recorded during the course of survey on 04.02.2010 and there is no corroborative material available before the authorities below. On the other hand assessee had filed valuation report before the authorities below and the said report of approved valuer was not disputed or rejected by the authority below. Hence relying upon the judgment of the Hon’ble Supreme Court in the case of S. Khader Khan Son (supra), we are of the opinion that this addition made by the authorities below also was without any basis.
Therefore the same is not sustainable in the eyes of law. Hence, we delete this addition to the extent of Rs.7 lakhs . Thus the assessee gets a relief of Rs.32 lakhs.
In the result, assessee’s appeal is partly allowed.