SHEETAL COLLECTION,JALGAON vs. DCIT, CIRCLE-2, JALGAON, JALGAON

Tersely stated the facts of the case are that; 2.1 The assessee is a partnership firm and engaged in retail trading business of readymade garments. During the year under consideration a survey action u/s 133A of the Act on the assessee firm was carried out and a statement of its partner was recorded. In answering to question number 16 the partner declared/admitted certain ITAT-Pune Page 1 of 4

M/s Sheetal Collection Vs DCIT (a) excess cash ₹7,51,313/- (b) unpaid sundry creditors ₹2,32,087/- (c) excess stock ₹16,08,121/- & (d) towards Gross Profit ₹6,57,442/-. In addition to former specific declaration/admission, further an amount of ₹8,00,000/- was also declared as undisclosed business income to cover-up errors & omissions under the pretext that the Revenue may surface them on examination of records, documents & books etc. 2.2 The return of income [‘ITR’ hereinafter] filed by the assessee u/s 139(1) of the Act declaring total income of ₹23,36,020/- was selected for scrutiny u/s 143(2) of the Act. Upon finding that, out of total business income declared during the course of survey i.e. ₹32,48,952/- the assessee did fail to offer an amount of ₹8,00,000/- which was disclosed to cover-up probable errors & omissions committed, the Ld. AO added the same and accordingly framed the assessment u/s 143(3) of the Act. 2.3 Aggrieved assessee contested the former solitary addition in first appeal unsuccessfully, hence brought-up the one in present appeal on a sole ground as; Under the facts and circumstances of the case and in law the learned CIT(A), NFAC has erred in confirming the addition of Rs. 8,00,000/- made by AO [DCIT, Circle-2, Jalgaon] solely on the basis of statement recorded during the course of survey action and without bringing on record any corroborative evidence in support of the same.

There is no definition in the Act as to what constitutes a 'statement'. The dictionary meaning of 'statement' is 'something that is said formally and officially either orally on in written form which either confirms or denies any fact’ The clause (iii) of s/s (3) of section 133A of the Act empowers an income tax authority to record statement of any person which may be useful for or relevant in connection with on- going survey proceedings. This provision however does not specify as to whether such statement is to be recorded on oath or otherwise, because a Statement recorded on oath carries evidential value and automatically binds the assessee unlike the statement recorded otherwise than on oath.

In this context we note that, Hon’ble High Court ‘Paul Mathews & Sons Vs CIT’ [2003, 263 ITR 101 (Ker)] has settled a position of law by categorically holding that power to examine a person on oath is explicitly conferred u/s 132(4) of the Act only in search or seizure cases, and no such authorisation has been expressly provided in section 133A of the Act. The question of entitlement to record the statement on oath in the course of survey operation is put to rest by the Hon’ble Supreme Court in ‘CIT Vs S. Khader Khan Son’ [2012, 352 ITR 480] whereby it is settled that, section 133A of the Act does not empower tax authorities to examine any person on oath, therefore, statement obtained thereunder would not automatically bind the assessee.

In the instant case, admittedly the partner of the assessee firm in a statement recorded u/s 133A of the Act has admitted the impugned sum as an additional income of ₹8,00,000/- of his firm towards probable errors & omissions which was unknown to both the rival parties at the time of survey. The said disclosure/admission was simply made under the pretext that the Revenue may at any time thereafter would discover the same and probably tax it as non-business income of the assessee. ITAT-Pune Page 3 of 4

In upshot, the impugned addition made by the Ld. AO and sustained in appeal by the Ld. CIT(A) is founded merely on the basis of admission made u/s 133A of the Act but it badly lacked by corroborative evidence of presence of any errors or omissions in the records, hence deserves to be reversed, ordered accordingly.

The appeal of the assessee in result stands ALLOWED. In terms of rule 34 of ITAT Rules, the order pronounced in the open court on this Thursday, 01st August, 2024.