HIMANSHU J TRIVEDI,MUMBAI vs. ITO 16(2)(3), MUMBAI

Brief facts are, the assessee an individual owns a hotel in the name and style of Royal Hotel at Matheran. For the assessment year under consideration, assessee filed his return of income on 30th July 2010, declaring total income of ` 4,51,488. A survey under section 133A was conducted in the business premises of the assessee on 29th / 30th October 2010. It is alleged during the survey it was found that assessee had incurred substantial out of books expenditure on extension of hotel building, etc. When these facts were confronted to the assessee, it is alleged, to cover up the discrepancies assessee offered additional income of ` 51.60 lakh for the assessment year 2010–11 and handed over three account payee cheques totaling to ` 40 lakh towards tax payment on additional income. During the assessment proceedings, the Assessing Officer found that at the time of survey, two note books have been impounded from the hotel premises. On the basis of entries made in the note books a statement was recorded from the assessee on 30th October 2010, wherein the assessee offered additional income. However, after seven days assessee retracted his statement given at the time of survey by filing an affidavit on 6th November 2010, accompanied by a medical certificate disowning the additional income offered. The Assessing Officer treating the retraction of statement given at the time of survey as well as the affidavit filed as an after thought observed that the 3 Himanshu Trivedi assessee being an educated person, the statement recorded from him at the time of survey cannot be disowned subsequently. He, therefore, called upon the assessee to show cause, why additional income offered at the time of survey should not be treated as income earned by the assessee during the relevant previous year. Though, the assessee objected to the proposed addition by stating that the statement recorded at the time of survey was under duress and mental pressure, hence, cannot be acted upon, however, the Assessing Officer rejecting the contention of the assessee proceeded to complete the assessment adding back the amount of ` 51.60 lakh offered as additional income in the statements recorded during the survey as undisclosed income of the assessee. Being aggrieved of the additions so made, the assessee preferred appeal before the learned Commissioner (Appeals).

Before the first appellate authority, the assessee challenging the addition made elaborate submissions contending that the entries were made in the impounded note book found during survey at the instance of Departmental Officers and the statement was recorded under duress. The assessee alleged that even the post dated cheques towards payment of tax were also forcibly taken from him. It was, therefore, submitted, as the assessee did not willingly offered the additional income at the time of survey, immediately after closure of the survey action he filed a letter supported by an affidavit retracting

Learned Authorised Representative submitted, at the time of hearing of appeal earlier, the assessee had filed certain additional evidences and on that basis a reference was made to the DVO to find out the veracity of Department’s claim that the assessee has constructed a second floor on the existing hotel. On the basis of additional evidences filed by the assessee, a reference was made to the Departmental Valuation Officer (DVO) to ascertain the correct facts. The DVO in his report dated 20th January 2016 has reported that on the date of his visit, he found that the structure is constructed up to 5 Himanshu Trivedi first floor and there is no deviation of the approved plan. She, therefore, submitted in view of the DVO’s report the allegation of the Department that the assessee has made extension to the hotel building by constructing the second floor is without any basis. She, therefore, submitted, the addition made should be deleted.

Learned Departmental Representative on the other hand justifying the addition submitted that during the survey incriminating material impounded by the Department disclosed out of books expenditure incurred by the assessee towards extension of the hotel building. He submitted, in the statement recorded at the time of survey assessee also accepted such facts and offered additional income which, however, was subsequently retracted. He submitted, on the basis of additional evidence filed by the assessee at the time of hearing of appeal before the Tribunal, the Assessing Officer has conducted enquiry through the Ward Inspector and also found that the assessee has made extension to the hotel building by constructing a tin shed in the second floor. He, therefore, submitted the addition made is justified.

In the rejoinder, learned Authorised Representative submitted, assessee’s hotel is situated at Matheran which has been declared as an Echo Friendly Zone and no construction above ground plus first floor is 6 Himanshu Trivedi allowed. She submitted, as per the approved plan, the hotel has ground and first floor comprised of 70 rooms in total. She submitted, there is no construction in second floor and the tin shed which has been treated as a second floor by the Department is only a temporary structure for preventing leakages in the roof of the building. She submitted, the said tin shed have been put up with the permission of the Collector which has been renewed from time to time.

We have considered the submissions of the parties and perused the material available on record. Undisputedly, in the course of survey action, a statement was recorded from assessee on the basis of entries made in note books, wherein, the assessee offered additional income of ` 51.60 crore to cover up alleged out of account expenditure incurred in the extension of the hotel building. However, after a week of the survey action, the assessee filed a letter before the Departmental Authorities supported by an affidavit retracting the statement given during the survey. The assessee had also alleged that the entries made in the impounded note books were at the instance of the Departmental Authorities at the time of survey. Be that as it may, it is fact on record that the assessee had disowned the statement recorded at the time of survey and consequently, the additional income offered. He has also disputed the entries in the impounded note books. Therefore, it is the duty of the Department to prove the 7 Himanshu Trivedi entries in the impounded note books through other corroborative evidences. It has been alleged by the Department that the assessee has constructed a second floor in the building by incurring unaccounted expenditure as recorded in the impounded note books. However, the assessee has emphatically stated that construction of the hotel building was completed in the year 1993, as per the approved plan which allowed construction of ground plus first floor and there is no further extension of the existing structure. To prove such facts, the assessee at the second appellate stage had produced certain additional evidence to demonstrate that no extension of the existing structure has been carried out. Therefore, before the ITAT, the dispute was narrowed down to the fact whether there is construction of second floor of the existing building. As it transpires from the record, on the basis of additional evidence submitted by the assessee, learned Departmental Representative had taken up the issue with the Assessing Officer and the Assessing Officer through his Ward Inspector undertook enquiry to ascertain whether construction of second floor was undertaken by the assessee. After obtaining the report of the Ward Inspector again a reference was made to the DVO to find out whether extension of the existing structure was made or not. The DVO made a spot visit of the building on 28th December 2015 and has 8 Himanshu Trivedi submitted his report vide letter dated 20th January 2016. The contents of such letter are as under:– “Sub: Finding and Determination of Deviations in the plan of “Royal Hotel at Mathern” Ref: (1) Your Ref. no.ITO 19(1)(5)/Valuation/2015–16 dated 20.11.2015. With reference to the above subject, the property was inspected on 29.12.2015 and structure is found up to first floor. Further the comments as under:– 1. Annexure–I it was submitted by your good self along with the above cited reference.

Annexure–II, it was submitted by the assessee, during the site inspection.

As could be seen from the aforesaid report of the DVO he has specifically mentioned that the structure is up to first floor and there is no deviation to the approved plan. The Department has tried to put emphasis on the report of the Ward Inspector dated 30th November 2015 wherein it has been stated that there are guest rooms in first and second floor. He also reported that there is a tin shed on R.H. Block. Thus, on the basis of the aforesaid report of the Ward Inspector, the Department is claiming that the assessee had made extension to the hotel building by constructing a second floor to the existing structure. However, it needs to be mentioned that the Ward

In the result, appeal is allowed. Order pronounced in the open Court on 21.12.2016