Addition done on the basis Statement recorded during survey without

Addition done on the basis Statement recorded during survey without corroborative evidence is not sustainable

08/27/2021

Addition done on the basis Statement recorded during survey without corroborative evidence is not sustainable

Short Overview Statement of director of assessee-company recorded under section 133A during the course of survey operations alone without any corroborating material did not have any evidentiary value and, therefore, addition made merely on the basis of such statement could not be sustained in the eyes of law.

During the course of survey, director of assessee-company admitted unaccounted income, however, the same was not offered for tax in the return of income filed for the year under consideration. AO made addition. Assessee challenged this on the ground of no corroborative evidence.

It is held hat Statement of director of assessee-company recorded under section 133A during the course of survey operations alone without any corroborating material did not have any evidentiary value and, therefore, addition made merely on the basis of such statement, could not be sustained in the eyes of law.

Decision: In assessee s favour.

Income Tax Act, 1961, Section 145(3)

Accounting method—Rejection of books of account—No specific defect pointed out by AO

Short Overview Once books of account had been prepared/recasted, AO could not go back to the stage of survey proceedings and contend that since no books of account were available at that point in time, he would not consider books of account so recasted/prepared and furnished subsequently. AO was well within his rights to question the results or the effect of the transactions so reflected in the books of account as to whether the same represents a true and fair picture and identifies the defects, if any, however, once books of account had been prepared and submitted for his verification, he could not deny the very existence of such books of account. Therefore, rejection of books of account was not justified in the instant case in absence of any specific defect so pointed out by AO.

Survey was conducted at premises of assessee and books of account maintained on the tally software were deleted and could not be retrieved by the experts of the department during survey proceedings. However, basic vouchers and other details were available with the assessee, as such books of account were subsequently re-casted and were audited and on the basis of same, return of income was filed by the assessee. However, AO rejected books of account on the ground that books of account were not found/available at the time of survey and same had been prepared subsequently and were thus not reliable.

it is held that Once books of account had been prepared/recasted, AO could not go back to the stage of survey proceedings and contend that since no books of account were available at that point in time, he would not consider books of account so recasted/prepared and furnished subsequently, AO was well within his rights to question the results or the effect of the transactions so reflected in the books of account as to whether the same represents a true and fair picture and identifies the defects, if any, however, once books of account had been prepared and submitted for his verification, he could not deny the very existence of such books of account. Therefore, rejection of books of account was not justified in the instant case in absence of any specific defect so pointed out by AO.

Decision: In assessee s favour.

IN THE ITAT, JAIPUR BENCH

VIJAY PAL RAO, J.M. & VIKRAM SINGH YADAV, A.M.

DCIT v. Mojika Real Estate & Developers (P) Ltd.

ITA Nos. 1236, 1429/JP/2018

11 September, 2020

Assessee by: Manish Agarwal, CA

Revenue by: Ranjan Kumar, CIT

ORDER

Vikram Singh Yadav, A.M.

These are two cross appeals filed by the Revenue and the assessee against the order passed by the learned Commissioner (Appeals)-1, Jaipur dated 29-8-2018 wherein respective grounds of appeal are as under :–

ITA No. 1236/JP/2018 (Revenue’s appeal):

“1. Whether in the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) was justified in deleting the addition of Rs. 3,66,72,718 which was made on the basis of pin pointed confession or modus operandi of the business of the assessee by the Director of assessee company that the money received was against sale/advance of sale of flats/plots?

Whether in the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) was justified in deleting the addition of Rs. 3,66,72,718 despite the fact that the assessee never retracted from the confession of surrendering income of Rs. 5,00,00,000 made during the course of survey under section 133A of Income Tax Act?.
Whether in the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) was justified in denying the evidentiary value of statement recorded under section 133A(3) of the Income Tax Act, 1961 despite the fact that admission of additional income surrendered was based upon the discrepancies brought out during the course of survey under section 133A of the Income Tax Act, 1961 and were clearly admitted by the director of assessee company?
Whether in the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) was justified in deleting addition of Rs. 50 lacs which was made pointing out the deficiencies in books of accounts and applying provisions of section 145(3) of Income Tax Act, 1961 and the application of provisions under section 145(3) of the Act has also not been uphold by Commissioner (Appeals)?”

ITA No. 1429/JP/2018 (Assessee’s appeal):

“1. On the facts and in the circumstances of the case and in law, learned Commissioner (Appeals) has grossly erred in confirming the addition of Rs. 1,33,27,282 made by learned assessing officer arbitrarily.

On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has grossly erred in confirming the addition of Rs. 1,33,27,282 made by learned assessing officer on account of alleged undisclosed income of preceding year which was claimed as invested in the work in progress without considering the submissions made during the course of assessment proceedings. Thus, the addition so made deserves to be deleted.

2.1. That the learned Commissioner (Appeals) has further erred in not allowing the benefit of telescoping/set off of the income declared in preceding year and claimed as applied and forming part of closing stock.”

ITA No. 1429/JP/2018

Firstly, we take up the Revenue’s appeal. In Grounds of Appeal Nos. 1 to 3, the Revenue has effectively challenged the action of the learned Commissioner (Appeals) in deleting the addition of Rs. 3,66,72,718 which was based upon the discrepancies brought out during the course of survey under section 133A and were clearly admitted by the director of assessee company in his statement recorded under section 133A(3) of the Act.
Briefly, the facts of the case are that during the course of assessment proceedings, the assessing officer observed that an amount of Rs. 3,66,72,718 was disclosed during the course of survey proceedings, however the same was not offered for tax in the return of income filed for the year under consideration. As per the assessing officer, it is a fact that the said disclosure was made on the basis of various incriminating evidences in the form of loose papers which undisputedly showed that the assessee had indulged in earning of unaccounted money. It was only on the basis of these evidences that Shri Nagar Mal Agarwal, Director of the assessee company had admitted the unaccounted income during the course of survey. It was held by the assessing officer that during the course of survey, loose papers found were impounded which include number of papers which are not recorded in the books of accounts. During the course of assessment proceedings, the assessee was asked to furnish the page-wise details of the loose papers found during the course of survey. He was also asked to verify the same from the books of account so prepared and produced for examination. After verification of books of accounts, the assessing officer found that there are number of papers containing entries which are not recorded in the books of accounts. It was held by the assessing officer that it is established that Mr. Nagar Mal Agarwal had rightly disclosed the undisclosed income of Rs. 5.00 crores in assessment year 2013-14 and 2014-15, which is also established from the fact that assessee itself after the survey had revised its return of income and had declared additional income of Rs. 1,33,27,282 for assessment year 2013-14. Further assessee never filed any letter for making retraction from the surrender made during the survey. Such admissions, made during the course of survey, legally bind the person who deposed such facts, until and unless rebutted or disproved by evidences otherwise. In the present case the evidences of unrecorded expenditures/receipts are available in the documents impounded during the course of survey and also in the form of admission in the statements recorded of the directors of the assessee company. Accordingly, the addition amounting to Rs. 3,66,72,718 was made to the total income declared by the assessee which on appeal, has been deleted by the learned Commissioner (Appeals). Against the said findings, the Revenue is in appeal before us.
During the course of hearing, the learned CIT/DR submitted that a survey operation under section 133A of the Act was conducted at the business premises of the assessee on 4-9-2013. During the course of survey, sworn statements of director Shri Nagarmal Agarwal was recorded wherein he voluntarily made admission of total undisclosed income of Rs. 5,00,00,000 in the hands of assessee company collectively for both assessment year 2013-14 and 2014-15 and the same admission had got approved during the survey operation by another director Shri Durga Prasad Agarwal whose statement was also recorded. Pursuant to this, assessee revised its ITR for assessment year 2013-14 wherein it admitted and offered an additional income of Rs. 1,33,27,282 being part of undisclosed income as owned up by directors during the course of survey operation conducted. However, for balance surrendered amount Rs. 3,66,72,718 (Rs. 5,00,00,000 less Rs. 1,33,27,282), assessee did not offer this in its ITR filed for assessment year 2014-15 which was e-filed on 29-11-2014 at a returned income at Rs. 80,98,100. It is also a fact that till filing of ITR for assessment year 2014-15 on 29-11-2014, assessee did not file any retraction letter before the assessing officer or Addl. CIT or Pr. CIT. Therefore, while filing its ITR for assessment year 2014-15, after a lapse of more than a year, assessee retracted from its earlier stated stand taken on 4-9-2013 without assigning any reason or providing any additional fact to support its contention. The assessee’s only stand was that surrender during survey operation was not backed by corroborative evidences. It was submitted that during the survey operation, no books of accounts were found at the business premises of the assessee nor they were made available to the Authorized party or even to the assessing officer on subsequent dates. Even on analysis of assessee’s P.C. where books were maintained, no such complete books of account were found to been kept. In this regard, reference can be drawn to the sworn statement of Shri Nagarmal Agarwal and on perusal of the same, it is absolutely clear that there were no books of accounts prepared by the assessee and also same were not made available to Authorised Officers during the course of survey operation. Therefore, Balance Sheet for the year prepared thereafter and even e-return filed online later on for the year cannot be relied. If that was the case, assessee could have produced its books of accounts in support of its contention after conclusion of survey operation. But assessee waited for almost a year to retract from its stated position. Further, it is pertinent to note that assessee did not even bother to controvert these facts later on also before the assessing officer. Even these facts have also not been looked into by learned Commissioner (Appeals) while deciding the present appeal.
It was further submitted that the decision of the learned Commissioner (Appeals) is not acceptable on merits as well as he has not properly appreciated the facts of the case. During the course of survey proceedings, Shri Nagarmal Agarwal, director of the assessee in his statement admitted an undisclosed income of Rs. 5,00,00,000 in the hands of the assessee company in F.Y. 2012-13 & 2013-14 relevant to assessment year 2013-14 & 2014-15. In reply to question No. 26 of statement, Shri Nagarmal Agarwal specifically admitted that the transactions found recorded in impounded documents pertains to the company and other related entities and was not recorded in regular books of account and estimated such amount at Rs. 5 crores, received mainly from sale/advance of sale of plots. The said statement was also confirmed by Shri Durga Prasad Agarwal, another director of the assessee company and also the brother of Shri Nagarmal Agarwal. The assessee had revised its return of income for assessment year 2013-14 wherein an additional income of Rs. 1,33,27,282 was included under the head ‘business or profession’. However, the assessee has not disclosed balance amount of Rs. 3,66,72,718 pertaining to the year under consideration.
It was submitted that the assessee never flied any letter for making retraction from the surrender made during the survey. The admissions, made during the course of survey operation, legally bind the person who deposed such facts, until and unless rebutted or disproved by evidence otherwise. Further, the assessee is unable to get verify the expenses claimed on account of the consumption of material, labour and others. In case, even after verification of impounded documents, the assessee would have worked the surrender amount to be on higher side, it was its onus to prove it otherwise with the help of corroborative evidence, which it failed to do. Contrary to this, the retraction before assessing officer as discussed in the assessment order is a general, rather a vague retraction and there is no supporting evidence to demonstrate that the impugned statement was factually wrong.

Further, it is also pertinent to mention here that assessee has also not raised doubts that statement of directors during survey operations conducted were taken under duress. This fact is also evident from assessee’s written submission made during assessment proceedings.

Therefore, as discussed above, on merit as well, learned Commissioner (Appeals)’s decision suffers from infirmities which deserves to be reversed.

It was further submitted that where the assessee makes sworn statement on oath or otherwise during Search & Seizure Operation or during survey operation and makes a voluntary disclosure, then it becomes a vital piece of evidence which can be rebutted only on the basis of other corroborative evidences, and further, if an assessee wishes to retract from his/her stated position, then he/she is supposed to do so within a reasonable period of time and that should have been backed by further corroborative evidences. Further, assessee has also to prove that statement was taken under duress during survey or search & seizure operation which is not the case of assessee here. Even assessee’s submission is also silent on this point. It was further submitted that though assessee’s case pertains to evidences gathered during survey operation, following decisions by various Hon’ble Courts have held the importance of evidentiary value of sworn statement and voluntary disclosure made thereof during survey operation/S&S Operation and treatment of subsequent retraction made after a gap of long duration and support the case of the department :–

Pullangode Rubber Products Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC) : 1973 TaxPub(DT) 0089 (SC)

Hon’ble Jurisdictional High Court in the case of Shri Ravi Mathur (DB Income Tax Appeal No. 67/2002) & Ors.

Dr. S.C. Gupta v. CIT 248 ITR 782 (All) : 2001 TaxPub(DT) 0235 (All-HC)

S.S. Ratanchund Bholanath v. CIT 210 ITR 682 (MP) : 1994 TaxPub(DT) 1159 (MP-HC)

Hirasingh Co. v. CIT 330 ITR 791 (HP)

K.I. Pavunny v. Asstt. CCWE (1997) 90 ELT 241 (SC) : 1997 TaxPub(EX) 0199 (SC)

Vinod Solanki v. Union of India (SC) (Civil Appeal No. 7407 of 2008, dated 18-12-2018)

Pr. CIT v. Roshan Lal Sancheti (D.B. Appeal No. 47/2018, dt. 30-10-2018) (Rajasthan High Court) : 2018 TaxPub(DT) 7549 (Raj-HC)

Bachittar Singh v. CIT (2010) 328 ITR 400 (P& H) : 2010 TaxPub(DT) 2118 (P&H-HC)

It was accordingly submitted that in light of aforesaid decisions, sworn statement recorded of one of the director Shri Nagarmal Agarwal and duly confirmed by another director Shri Durga Das Agarwal, cannot be discarded simply by observing that the assessee has retracted the same by simply stating that disclosure taken by the Department was not backed by corroborative evidences. But it is also a proven legal position that such retraction ought to have been generally made within reasonable time or by filing complaint to superior authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages or even confirmed by two directors during survey operation conducted and in absence or non-production of books of accounts during survey operation or even on subsequent dates cannot be discarded summarily in cryptic manner by learned Commissioner (Appeals) by simply allowing the assessee’s retraction on assessee’s claim that disclosure was not backed by corroborative evidences. Even if such retraction be allowed by learned Commissioner (Appeals) then he should have enquired whether it was made as soon as possible or immediately after the statement of the assessee was recorded. Duration of time when such retraction is made assumes significance and in the present case retraction has been made by the assessee after almost a year. The burden in this case lies on the assessee to establish that the admission made during the survey operation was wrong and there was no additional income arising out of transactions reflected in the impounded documents. Even so the assessee could have produced its complete books of accounts to demonstrate that transactions appearing in the impounded documents were duly recorded in its regular books of account maintained. Clearly this burden does not have even seemed to have been attempted to be discharged. Even this aspect was also not looked into by learned Commissioner (Appeals). It was accordingly submitted that the order learned Commissioner (Appeals) with regard to deletion of addition of Rs. 3,66,72,718 being balance amount of undisclosed income for the year may be reversed.
Per contra, the learned A.R. submitted that in these grounds of appeal, the department has challenged the addition of Rs. 3,66,72,715 made by assessing officer, solely on the basis of alleged admission in the statements of the director of assessee company recorded during the course of survey conducted under section 133A without making reference to any corroborative evidences found as a result of survey.
It was submitted by the learned A.R. that it is settled proposition of law that statements during the course of survey cannot be recorded on oath as is clear from the provisions contained under section 133A(3)(iii) of the Income Tax Act, 1961, which empowers the Income Tax Authorities to record the statements of any person which may be useful or relevant to any proceedings under the Act. For that purpose we have to consider the provision contained in section 133A(6) which mandates that if a person refuses or evades to give replies or does not facilitate the Income Tax Authority to inspect books of accounts or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statements recorded, either refuses or evades to do so, then they shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement. However, in the instant case, during the survey proceedings the assessee offered all facilities to the survey party and at no occasion any concealment of fact, disrespect or misbehavior was noticed by the survey party. The Income Tax Authorities can examine any person on oath as per provisions contained under section 131(1)(b) of the Income Tax Act, 1961. Thus in normal course of survey proceedings, statement recorded on oath are unwarranted and unjustified and are academic in nature. No cognizance therefore can be attached on such statements. The same therefore deserves to be ignored. In this regard reliance is placed onCIT v. S. Khader Khan Son (2008) 300 ITR 157 (Mad) : 2008 TaxPub(DT) 0790 (Mad-HC) and Paul Mathews and Sons v. CIT 263 ITR 101 (Ker.) : 2003 TaxPub(DT) 1040 (Ker-HC) . The said position was further clarified by CBDT vide Circular No. 10 dated 2003, which clearly stated that focus and concentration should be on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments rather than on obtaining confession.
It was further submitted that in following cases, Jaipur Bench of ITAT has consistently held that no addition could be made solely based on the alleged admission made in the statements recorded during the course of survey conducted under section 133A on oath without making reference to any incriminating paper/document found or without bringing on record any contrary material by making independent and fresh enquiries during the course of assessment proceedings and such orders have since been upheld by Hon’ble jurisdictional High Court as well :–

Shri Anu Milk Products (P) Ltd. (ITA No. 122/JP/12) upheld by Hon’ble High Court in Appeal No. 74/2014, dated 18-9-2017.

Maverick Share Brokers (P) Ltd. (ITA No. 701/JP/12) upheld by Hon’ble High Court in Appeal No. 14/2016.

Roshan Lal Lodha (Appeal No. 185/2014 Order, dated 3-11-2015)

Ratan Textiles (P) Ltd. (ITA No. 525-528/JP/2016)

It was submitted that in view of above settled position, the entire addition being made solely relying upon unsupported so-called confessional statements recorded during survey proceedings is bad in law and therefore the same deserves to be deleted.

On merits, it was submitted by the learned A.R. that such addition was made without corroborating the same with reference to the documents impounded during the course of survey and without appreciating the explanation of seized documents submitted by the assessee. It is pertinent to note here that as stated above, on the basis of all the documents/loose papers found and impounded, additional income was worked out at Rs. 1,33,27,282 which was offered for tax in assessment year 2013-14 by filing revised return of income. Further, in the absence of any corroborative evidences found as a result of survey, the balance amount of Rs. 3,66,72,718 was not included in the total income declared for the year under consideration as the same was offered in the statements signed on dotted lines. The survey proceedings were commenced in the noon at around 1.15 PM on 4-9-2013 and continued till late evening of 5-9-2013 when the statements of the director were concluded after prolonging the proceedings throughout the night and the director during such long interrogation got exhausted and thus under those circumstances they had signed on the statements dictated by the survey authorities without having applied their mind.
The assessee thereafter during the course of assessment proceedings furnished all such information with regard to the additional income offered for tax. Further, the assessee company furnished the audited financial statements for the year under consideration as well as of the preceding year which were prepared from the books of accounts maintained in the regular course of business which could not be produced for verification during the survey proceedings due to the technical problem persisting with the computer and the data got corrupt. Also, the assessee has cooperated with the Income Tax officials during the course of survey proceedings which is apparent from the statement of Shri Nagarmal Agarwal. Thus, in the absence of non-cooperation on the part of assessee, learned assessing officer was not authorized to record statements on oath and thus addition made by placing sole reliance on such statements deserve to be deleted, particularly when these remain uncontroverted.
It was submitted that the learned assessing officer at page 8 in para 6.6 of the assessment order has referred to some pages/documents impounded during the course of survey and held the same as incriminating by alleging that the same were not recorded in the books of account maintained by assessee and was of opinion that Shri Nagar Mal Agrawal had rightly admitted the additional income during the survey. In this regard, it was submitted that during the course of assessment as well as in appellate proceedings, the explanation with regard to these papers was duly tendered and from perusal of the same, it is evident that the papers referred by learned assessing officer either do not pertain to the year under appeal or do not have financial implication in the case of assessee or are recorded in the books of accounts. It reflects that on the basis of very casual observations, learned assessing officer has made huge addition of Rs. 3,66,72,718 by incorrectly referring such documents as incriminating (whereas most of them pertained to assessment year 2013-14 or are recorded or do not pertain to the assessee) and thereby the learned assessing officer had incorrectly observed that admission obtained during survey was based on the incriminating documents and as per sweet will of directors of assessee company.
It was submitted that the learned Commissioner (Appeals) after considering these facts and explanation so submitted by the assessee vis-a-vis the papers found during the course of survey has rightly deleted the addition of Rs. 3,66,72,718 which is solely made on the basis of statements recorded on oath during survey and the same has not been controverted by the department. Further, it is a cardinal principle of law that only real income should be taxed and no hypothetical income could be added. In the case of assessee, books of accounts were duly audited by chartered accountant without any adverse remarks and thus did not call for any addition. Further, so far as loose paper/impounded documents during the survey are concerned, pagewise explanation of each and every paper was furnished during the course of assessment proceedings and in fact wherever such loose papers represented entries not recorded in books of accounts, the same were quantified and total of such unrecorded entries worked out at Rs. 1,33,27,282 and the same were duly offered for taxation in assessment year 2013-14 through revised return and has been accepted by department. However, just because such sum was lower than Rs. 5.00 crores, i.e., the alleged admission by director, addition was made by learned assessing officer for balance amount of Rs. 3,66,72,718 without in any manner substantiating such sum with documents. In other words, learned assessing officer has taxed the income, which was never earned by assessee, solely on the basis of statements of directors, which remained uncorroborated. In this regard, reliance is placed on the decision of Hon’ble Supreme Court in case ofCIT v. Godhra Electricity Ltd. (1997) 225 ITR 746 (SC) : 1997 TaxPub(DT) 1198 (SC).
It was further submitted that in the statements recorded of the director Shri Nagarmal Agarwal during the course of survey, the section under which they are recorded have been stated as 131A(1) which appears to be a slip of pen as no such section is available on the statute therefore there arises no occasion to invoke the same. Possibly the official who recorded the statements intended to write the section as 133A(1) and by mistake instead of 133A he stated the same as 131A. The statement of other director Shri Durga Prasad Agarwal was also recoded simultaneously, i.e., at the same place as well as almost similar hours wherein the correct section, i.e., under section 133A(1) is stated thus it is clear that due to human error instead of 133A it was written as 131A in the statement of Shri Nagarmal Agarwal and therefore, the same should be regarded to have been recorded under section 133A(1) of the Income Tax Act, 1961 and the case laws submitted earlier wherein it has been held that no statements under section 133A can be recorded on oath during the course of survey, are applicable and accordingly it is submitted that the addition of Rs. 3,6672,718 solely made only on the basis of such statements deserves to be deleted.
It was further submitted that it is not the case where any wrong facts were stated or any misbehavior of the assessee was reported during the survey proceedings and all the facilities were provided to the survey party and necessary co-operation was extended, therefore, in no case there was any occasion to record statements under section 131 of the Income Tax Act, 1961. As has been provided under section 133A(6) if a person refuses or evades to give replies or does not facilitate the Income Tax Authority to inspect books of accounts or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statements recorded, either refuses or evades to do so, then the assessing officer has all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement. As submitted above no such occasion ever arose in the instant case during the course of thus statements could not have been recorded under section 131 nor any such notice was issued prior to recording of the statements which fact can be verifiable from the survey records.
It is also a matter of fact that statements can be recorded under section 131(1)(d) by issuing commissions and such statements are normally recorded at the office of the assessing officer or other official, as the case may be and in no circumstances the same could be recorded at the business place of the assessee. Further under section 131(1A), statement can be recorded by Pr. DG or DG or Pr. Director or Director or ADIT or DDIT or authorized officer of income tax for making any investigation or enquiry where no proceedings under the Act are pending. In the case of the assessee, since survey action under section 133A has taken place, such provisions are also not applicable.
It was further submitted that the admission of Rs. 5.00 crores made therein was anad hoc figure on absolutely estimate basis as looking to volume of documents and in absence of books of account which were got deleted due to computer error, it was not possible for the directors of the assessee company to verify each and every paper.

However, after obtaining the copies of the papers impounded, the precise working was done and an income of Rs. 1,33,27,282 was further included in the total income for assessment year 2013-14 by making revision of return and total profits of Rs. 2,12,96,713 was computed for the year under appeal as is evident from the Profit & Loss account. Thus it is not the case of retraction from the statements recorded during the survey. It is further submitted that besides the documents indicating the income of Rs. 1,33,27,282 for which the necessary revised return was filed for assessment year 2013-14, no incriminating paper whatsoever was found as a result of survey which could suggest any income more than what has been declared in assessment year 2013-14 and the net profit computed for the year under appeal.

In the case ofPullangode Rubber Products Co. Ltd. v. State of Kerala & Anr. (1973) 91 ITR 18 (SC) : 1973 TaxPub(DT) 0089 (SC), the Hon’ble Supreme Court has held that an admission in a statement recorded on oath is an extremely important piece of evidence but it cannot be said that it is conclusive and it is always open to the person who made the admission to show that it is incorrect. In the present case, the assessee has explained with the help of the books of accounts prepared and audited after the receiving the copies of the papers that all the entries contained therein are duly recorded and income has rightly been computed. This is also fortified from the fact that some loose papers which are referred by the learned assessing officer in the impugned order in para 6.6 at page 8-9 of the assessment order are either not pertained to the year under appeal or duly recorded in the books of account.
It was further submitted that the power of survey under Income Tax is governed by section 133A of the Income Tax Act, whichinter alia includes power to record statements of any person present at premises surveyed and which may be useful for or relevant for, or relevant to, any proceeding under the Income Tax Act. Power to record statements is divided in two parts, i.e., in accordance with clause (iii) of section 133A(3) and secondly, 133A(6) of the Income Tax Act. From perusal of above, it is evident that sub-section (3) of section 133A contains general powers of Income Tax authority to record statements during survey, whereas sub-section (6) of section 133A specifies that in the event of non cooperation on the part of person who is required to facilitate the survey official in any manner, survey authority shall have all the powers as contained under section 131(1) to enforce compliance. As per section 131(1), Income Tax Authorities shall have same powers as are vested in a Court under the Code of Civil Procedure 1908, which inter alia includes :–

(a)

(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath,

(c)

(d)

It was submitted that a survey authority shall be empowered to record statements on oath during survey only in the event a person refuses or evades to furnish details sought by survey teams or denies to facilitate survey team in conducting enquiry in any manner or refuses or evades to have his statement recorded and not otherwise.

In the instant case, assessee afforded the income tax authorities all the facilities required for verification/inspection of records or any other information and also did not refuse for recording his statement.

Further, it is an admitted fact that books of accounts could not be made available to the survey officials as the same were deleted due to some technical error which was beyond the control of assessee. This fact was affirmed by the technical experts of the department also and has not been doubted. Even otherwise nowhere in the proceedings, it was alleged by the department that assessee had tried to evade information from the survey team leading to issue of notice under section 131. In the scenario, survey officials were not authorized to record statements under section 131.

From the perusal of the summon issued under section 131, it is noted that the same has been issued at the other address of the company which is a project site of “Nursery Residency” and the same was received by one of the civil engineer Shri Narendra Rathore who was under employment with the company during that period. Therefore the notice was never intended to be issued in the name of Shri Durga Prasad Agarwal under the circumstances as prescribed under section 133A(6) for recording the statements under section 131 of the Income Tax Act, 1961. It is further submitted that as per the summon under section 131, Shri Durga Prasad Agarwal was required to appear before assessing officer on 4-9-2013 however the statement of Shri Durga Prasad Agarwal were recorded on 4-9-2013 which are available at Paper Book Page 37 to 40 and the same were stated to have been recorded under section 133A(1). Without prejudice to above, it is further submitted that in the event these statements presumed to have been recorded under section 131, as submitted above there were no circumstances leading to record the statement under section 131 and as is clear from the statements itself, they stood completed on the very same day, i.e., on 4-9-2013 where the same were concluded and were not kept pending for further recording thus the proceedings as initiated vide summons under section 131 stood complied with and concluded on 4-9-2013 itself.
It was further submitted that on perusal of statements of Shri Durga Prasad Agarwal dated 4-9-2013/5-9-2013, it is quite evident that these statements are recorded under section 133A(1) as is quite clear from the preface of the statements and the allegation of assessing officer is totally incorrect that these statements have been recorded under section 131.

Since, the statements have been recorded under section 133A(1), there should not be any occasion of oath to be administered and if at all some oath seems to be administered, as seen from perusal of the statements, same has no validity in the eyes of law. Without prejudice to above, there was no occasion with the survey team to issue the summon under section 131 and as such summon if any issued, was wrongly issued, Moreover consequent statements were incorrectly recorded. Secondly Shri Durga Prasad Agarwal in these so called statement under section 131 has nowhere admitted any unaccounted income. Thirdly, it is submitted that Shri Durga Prasad Agarwal has signed below the statements of Shri Nagar Mal Agarwal recorded under section 133A(1) [erroneously mentioned as 131A(1)], by stating that he agreed with the statements of Shri Nagarmal Agarwal which cannot be held as the statements recorded in response to notice under section 131. The statement of Shri Durga Prasad Agarwal were not recorded in response to notice under section 131 on 5-9-2013 and therefore, the allegation of the assessing officer that such statement were recorded under section 131 is incorrect. This fact is further fortified from the perusal of statements of Shri Nagarmal Agarwal where at the end of the statement of Shri Nagarmal Agarwal only one line is written by Shri Durga Prasad Ji and that too without any reference of section 131 [though rightly so as in survey proceedings statements are normally recorded under section 133A(1) and not under section 131] or by administering oath which is the legal necessity for recording the statement under section 131. It is a single sentence statement and not statements under any specific section and that too without mentioning that such confirmation is on oath. He accordingly supported the order and the findings of the learned Commissioner (Appeals).

We have heard the rival contentions and purused the material available on record. We find that in this case, a survey operation was carried out at the business premises of the assessee company during the midst of the financial year 2013-14 on 4-9-2013 wherein certain loose papers and documents were found and the statement of the director of the assessee company, Shri Nagarmal Agarwal was also recorded under section 133A of the Act. In his statement, Shri Nagarmal Agarwal based on review of the papers and documents submitted that these papers/documents pertain to the business transactions of the assessee company and since the books of accounts are not complete as on the date of survey, the same cannot be verified from the books of accounts and he estimated a sum of Rs. 5 crores in respect of financial year 2012-13 and financial 2013-14 primarily pertaining to flat booking in respect of various projects being executed by the assessee company and submitted that these are transactions which are outside the regular books of accounts which he disclosed and surrendered for taxation and also submitted that once the books of accounts are completed, he will get the same verified from the books of accounts.

The fact that the amount of Rs. 5 crores was an estimation made by the director of the assessee company for the two financial years and that too mainly from sale/advance of sale of plots has also been reiterated by the learned CIT/DR in his submissions and is therefore not in dispute. Subsequently, the assessee company revised its return of income for the financial year 2012-13 relevant to assessment year 2013-14 disclosing additional income of Rs. 1,33,27,282, being part of the undisclosed income as stated by the director of the assessee company during the course of survey. The said revised return of income was filed on 20-11-2013 within two and half months of date of survey which was conducted on 4-9-2013. For the impugned financial year 2013-14, as the survey operations were conducted at the assessee’s premises during the middle of the financial year 2013-14 on 4-9-2013, admittedly, it is an undisputed position that the books of accounts of the assessee company maintained on the tally software were deleted due to some system error and could not be retrieved by the experts of the department during the survey proceedings.

However, basis papers/documents, vouchers and other details impounded during the course of survey and otherwise available with the assessee, the books of accounts were subsequently re-casted and were audited and basis the same, the return of income was filed by the assessee wherein the remaining additional income disclosed during the course of survey to the tune of Rs. 3,66,72,718 was not offered to tax which the Revenue has brought to tax and is thus the subject matter of present dispute.

As per the assessing officer, loose papers found during the course of survey include number of papers which are not recorded in the books of accounts and during the course of assessment proceedings, the assessee was asked to furnish the page-wise details of the loose papers found during the course of survey. He was also asked to verify the same from the books of account so prepared and produce before undersigned for examination and after verification, it has been found that there are number of papers containing entries in lacs which are not recorded in the books of accounts. It was accordingly held by the assessing officer that it is clearly established that Mr. Nagar Mal Agarwal in his statement recorded during the course of survey had rightly disclosed the undisclosed income of Rs. 5.00 crores in assessment year 2013-14 and 2014-15, which is also established from the fact that assessee itself after the survey had revised its return of income and had declared additional income of Rs. 1,33,27,282. Further, the assessee company never filed any retraction letter in respect of surrender made during the survey. During the course of hearing, the learned CIT D/R has also emphasized on this fact and submitted that where the assessee makes sworn statement during the survey operations making a voluntary disclosure, it becomes a vital piece of evidence which can be rebutted only on the basis of corroborative evidence and further, where the assessee wishes to retract from its statement, such retraction is supposed to be done within reasonable period of time and should be backed by further corroborative evidence. It was submitted that such admissions, made during the course of survey, legally bind the person who deposed such facts, until and unless rebutted or disproved by evidences otherwise. In the present case the evidences of unrecorded expenditures/receipts are available in the documents impounded during the course of survey and also in the form of admission in the statements recorded of the directors of the assessee company and given that the undisclosed income was not offered in the return of income, the same was rightly brought to tax by the assessing officer and which has been wrongly deleted by the learned Commissioner (Appeals).
Per contra, the contention of the assessee is that statement of the director of the assessee company recorded under section 133A has no evidentiary value as the said statement cannot be recorded on oath as clear from the provisions of section 133A(3)(iii) of the Act. It has been further contended that even where the said statement is considered, no addition can be made solely basis the said statement without corroborating the same with reference to the documents impounded during the course of survey pertaining to the financial year 2013-14 relevant to impugned assessment year. It has been submitted that the assessee company furnished the audited financial statements for the year under consideration as well as of the preceding year which were prepared from the books of accounts maintained in the regular course of business which could not be produced for verification during the survey proceedings due to the technical problem persisting with the computer as the data got corrupt/deleted. It was submitted that on the basis of all the documents/loose papers found and impounded, additional income was worked out at Rs. 1,33,27,282 which was offered for tax in assessment year 2013-14 by filing revised return of income, however, for the year under consideration, in the absence of any corroborative evidences found as a result of survey pertaining to the year under consideration, the balance amount of Rs. 3,66,72,718 was not included in the total income declared in the return of income.
It is not in dispute that the statement of the director of the assessee company was recorded under section 133A during the course of survey operations and it is a settled legal proposition that said statement alone without any corroborating material doesn’t have any evidential value. What is therefore relevant to examine is whether the statement of the director of the assessee company is corroborated with any material in form of papers/documents etc found during the course of survey operation and whether such papers/documents pertain to transactions which pertain to the financial year 2013-14 relevant to the impugned assessment year 2014-15. In this regard, we refer to the findings of the assessing officer wherein it was held that certain loose papers were found during the course of survey and the same were not recorded in the books of accounts and the findings of the assessing officer contained at para 6.6 of the assessment order read as under :–

“6.6 During the course of survey, loose papers found were impounded which include number of papers which are not recorded in the books of accounts. During the course of assessment proceedings, the assessee was asked to furnish the page-wise details of the loose papers found during the course of survey. He was also asked to verify the same from the books of account so prepared and produce before undersigned for examination. After verification it has been found that there are number of papers containing entries in lacs which are not recorded in the books of accounts for example page 12 of annexure A-4 is a ledger account of DIS (DIFF) for the period from 1-4-2013 to 14-8-2013 having opening balance as on 1-4-2013 at Rs. 27,11,408 (credit) which is not tallied with the books of accounts produced nor any plausible explanation is tendered. Likewise, there are numerous loose papers which are also not recorded in the books of accounts which were prepared after the survey. Prominent amongst such loose papers is also page no. 31 of the Annexure A-3 which a summary of the flats/plots sold by the assessee in one of its project named ‘Midas Residency’.

The summary has been prepared in the form of detailed chart consisting details of Flat No., Type, Area in sq. ft., Name of the buyer, rate per sq. ft. at which sold, total amount, Payment Received and also details of registries of sale deed having been done. It is seen from such details that there is a huge difference between the amounts of sale consideration as per agreed rates which range from Rs. 3,400 to Rs. 4,200 per sq. ft. and the amounts recorded in the books of accounts. This was clear evidence in respect of unaccounted income having been earned. Similarly page no. 12 & 22 of Annexure A-4, page no. 201 to 217, page no. 230 to 236 and page no. 251 & 252 of Annexure A-8, page 44, 48, 50, 57 to 59, 61 and 62 of Annexure A-22, page no. 166 of Annexure A-33 were only some of the loose papers amongst many which were found and impounded during the course of survey on the basis of which the specific disclosure spread between two years had been made by the assessee. These facts have not been disputed or controverted by the assessee.”

With reference to aforesaid papers, the assessee has submitted detailed explanation before the learned Commissioner (Appeals) as well as before us and the same are contained at para 3.1.1 page 12 of the appellate order and the same reads as under :–

Ann.	Page No.	Nature of Document	Particulars	Amount
A-3	31	Summary of Flats/plots sold by assessee in “Midas Residency” project	Difference in booking amounts and registered deed amounts offered for taxation in assessment year 2013-14	Recorded in books of accounts
A-4	12	Ledger account of DIS (DIFF) for the period from 1-4-2013 to 14-8-2013. Opening balance of ledger as on 1-4-2013 Rs. 27,11,408	Related to M/s. Mojika Proprietorship Firm of Shri Durga Prasad Agarwal and not to assessee company.	No financial implication in the case of assessee
A-4	22	Ledger of Raika Construction for the period 1-4-2012 to 6-6-2013	Cash payment of Rs. 2 lacs recorded in books of accounts.	1,00,000 (pertains to assessment year 2014-15)
A-8	201- 217	Cash payment vouchers	Recorded in Books of Accounts of F.Y. 2012-13	—
A-8	230-232	Cash payment vouchers	Recorded in books of Accounts of F.Y. 2012-13	—
A-8	233-236	Cash payment vouchers	Recorded in books of Accounts of F.Y. 2012-13	—
A-8	251-252	Ledger Copy of Rajesh trading company for F.Y. 2012-13 & 13-14	Cash Paid on 3-4-2013 Recorded in books of accounts	1,00,000
A-22	44	Petty Cash Expenses Rs. 93500	Pertains to F.Y. 2012-13	—
A-22	48	Petty Cash Expenses details	Pertains to F.Y. 2012-13	—
A-22	50	Cash payment vouchers	Pertains to F.Y. 2012-13	—
A-22	57-59	Cash payment vouchers	Pertains to F.Y. 2012-13
A-22	61-62	Cash payment vouchers	Pertains to F.Y. 2012-13
A-33	166	Cash payment vouchers	Pertains to F.Y. 2012-13

On perusal of the above explanation so submitted by the assessee, we find that most of these papers found during the course of survey pertain to financial year 2012-13 relevant to assessment year 2013-14 except cash payment of Rs. 1 lacs each to Raika Construction and Rajesh Trading company which have been recorded in the books of accounts.

Regarding Annexure A-3, page 31 relating to summary of flats/plots sold by the assessee company in Midas Residency and which happens to be prime basis for estimating the figure of Rs. 5 crores as stated during the course of survey by the director of the assessee company, it has been explained by the assessee company that the difference in booking amounts and registered deed amounts has been recorded in the books of accounts and offered for taxation in assessment year 2013-14. The explanation so offered by the assessee has not been refuted by the Revenue and no contrary evidence has been brought on record disputing the said explanation. Further, the revised return of income so filed by the assessee for assessment year 2013-14 has been accepted by the Revenue. We therefore find that it is case where the statement of the director of the assessee company is not corroborated by any evidence which demonstrate that there are any other transactions pertaining to the year under consideration which remain undisclosed and not recorded in the books of accounts and therefore, the statement recorded under section 133A on a standalone basis cannot form the basis for making the addition in the hands of the assessee company. The learned Commissioner (Appeals) has examined the matter at length and has returned a similar finding contained at para 3.1.2 which reads as under :–

“(vi) It has already been mentioned earlier that Shri Nagarmal Agarwal has surrendered a total amount of Rs. 5 Crore as undisclosed income of the appellant company for the assessment year 2013-14 and 2014-15. The appellant has included the amount of Rs. 1,33,27,282 in its revised return of income for the assessment year 2013-14 but it has not included the remaining amount of Rs. 3,66,72,718 (5,00,00000 – 1,33,27,282) in its return of income for the year under consideration. In the assessment order, besides the above addition of Rs. 1,33,27,282, the assessing officer has made an addition of Rs. 3,66,72,715 to the income of the appellant on the basis of the admission of Shri Nagarmal Agarwal, the director of the appellant company, recorded during the course of survey.

(vii) During the appellate proceedings, it was the contention of the appellant that the statement of its directors Shri Nagarmal Agarwal recorded during the course of survey conducted under section 133A has no evidentiary value as the statement during the course of survey cannot be recorded on oath as is clear from the provisions contained under section 133A(3)(iii) of the Act, which empowers the Income Tax Authorities to record the statements of any person which may be useful or relevant to any proceedings under the Act. It was the further contention of the appellant that the provision contained in section 133A(6) mandates that if a person refuses or evades to give replies or does not facilitate the Income Tax Authority to inspect books of accounts or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statements recorded, either refuses or evades to do so, then they shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement. However, in the instant case, during the survey proceedings, the appellant has offered all facilities to the survey party and at no occasion any concealment of fact, disrespect or misbehavior was noticed by the survey party. The Income Tax Authorities can examine any person on oath as per provisions contained under section 131(1)(d) of the Act. Thus in normal course of survey proceedings, statement recorded on oath are unwarranted and unjustified and are academic in nature. No cognizance, therefore, can be attached on such statements. The same, therefore, deserves to be ignored. In support of its submissions, the appellant has relied upon a number of judicial pronouncements.

(viii) However, it is noted from the copy of statement of Shri Nagarmal Agarwal, the Director of the appellant company placed on record that the said statement appears to be recorded on oath under section 131A and not under section 133A of the Act as claimed by the appellant and the attention of the A.R. was drawn to this fact. In response, it was submitted by the appellant that in the statement of the director Shri Nagarmal Agarwal, the section under which it has been recorded, has been stated as 131A(1) appears to be a slip of pen as there is no such section available on the statute, therefore, there arises no occasion to invoke the same. It was further stated that possibly, the official, who has recorded the statement intended to write the section as 133A(1) and by mistake instead of 133A, he stated the same as 131A. It was also stated that the statements of other director Shri Durga Prasad Agarwal was also recoded simultaneously, i.e., at the same place as well as almost similar hours, wherein the correct section, i.e., under section 133A(1) was stated (APB-37). Thus, it was the contention of the appellant that due to human error instead of 133A, it was written as 131A in the statement of Shri Nagarmal Agarwal and therefore, the same should be regarded to have been recorded under section 133A(1) of the Act. It was also submitted that a statement can be recorded under section 131(1)(d) of the Act by issuing commission and the statement under section 131(1A) of the Act can be recorded by Pr. DG or DG or Pr. Director or Director or ADIT or DDIT or authorized officer of income tax for making any investigation or enquiry where no proceedings under the Act are pending and since survey action under section 133A has taken place, such provisions are also not applicable. It was further submitted that the case laws submitted earlier, wherein, it has been held that no statements under section 133A can be recorded on oath during the curse of survey, are applicable and accordingly, it was submitted that the addition of Rs. 3,66,72,718 solely made on the basis of such statements ceserves to be deleted.

(ix) In view of the above dispute whether the statement of Shri Nagarmal Agarwal was recorded on oath under section 131 or under section 133A of the Act, the assessing officer was required to attend with the relevant survey folder and on examination of the same, it has been observed that no summon under section 131 of the Act was available thereon in respect of Shri Nagarmal Agarwal and it appears that the approval of the Joint/Additional CIT have not been taken prior to recording of such statements. The assessing officer was required to examine the survey folder carefully and to submit its report thereof and vide its remand report, it was submitted by the assessing officer that :–

“As directed, the survey folder of the proceedings carried out at the business premises of M/s. Mozika Real Estate, Jaipur on 4-9-2013 and 5-9-2013 has been perused. Having perused the records of the case, it appears that the copy of the summon under section 131 of the Income Tax Act to Shri Nagar Mal Agarwal, director of the company is not available on survey record file of the case. However, it is submitted that statement of Shri Durga Prasad Agarwal, the other director of the company were taken on oath after issue of summon under section 131, who confirmed the statement of Shri Nagar Mal Agarwal at page 14 of the statement of Shri Nagar Mal Agarwal.”

A copy of the above remand report of the assessing officer was provided to the A.R. and the A.R. has submitted its rejoinder, the relevant extracts of which are reproduced as under :–

Rejoinder to the remand report:

“In this regard, it is submitted that Power of survey under Income Tax is governed by section 133A of the Income Tax Act, which inter alia includes power to record statements of any person present at premises surveyed and which may be useful for or relevant for, or relevant to, any proceeding under the Income Tax Act. Power to record statements is divided in two parts, i.e., in accordance with :–

(1) clause (iii) of section 133A(3), and

(2) 133A(6) of the Income Tax Act.

These provisions are reproduced hereunder for the sake of convenience :–

133A.

(iii) record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.

If a person under this section is required to afford facility to the income tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income tax authority shall have all the powers under [sub-section (1) of section 131] for enforcing compliance with the requirement made:

From perusal of above, it is evident that sub-section 3 of section 133A contains general powers of Income Tax authority to record statements during survey, whereas sub-section 6 of section 133A specifies that in the event of non cooperation on the part of person who is required to facilitate the survey official in any manner, survey authority shall have all the powers as contained under section 131(1) to enforce compliance. As per section 131(1), Income Tax Authorities shall have same powers as are vested in a Court under the Code of Civil Procedure, 1908, which inter alia includes :–

(a)

(b) enforcing the attendance of any person, including any officer of a banking company and examining him on oath,

(c)

(d)

It is thus submitted that a survey authority shall be empowered to record statements on oath during survey only in the event a person refuses or evades to furnish details sought by survey teams or denies to facilitate survey team in conducting enquiry in any manner or refuses or evades to have his statement recorded and not otherwise. In the instant case, assessee afforded the income tax authorities all the facilities required for verification/inspection of records or any other information and also did not refuse for recording his statement.

In view of above, it is submitted that in the instant case, so far as nothing transpires from records that assessee denied to provide facilities to the survey officials or refused to have his statement recorded under section 133A(1) and thus there was no occasion to record statements under section 131 on oath and it seems that same was done incorrectly under some misconception.

Learned assessing officer, in remand report has stated that statements of Shri Durga Prasad Agarwal were recorded on oath after issue of summons under section 131 of the Income Tax Act and a copy of which was also supplied by your goodself, wherein Shri Durga Prasad Agarwal has confirmed the statement of Shri Nagar Mal Agarwal at page 14 of the statement of Shri Nagar Mal Agarwal.

From the perusal of the summon issued under section 131, it is noted that the same has been issued at the other address of the company which is a project site of “Nursery Residency” and the same was received by one of the civil engineer Shri Narendra Rathore who was under employment with the company during that period. Therefore the notice was never intended to be issued in the name of Shri Durga Prasad Agarwal under the circumstances as prescribed under section 133A(6) for recording the statements under section 131 of the Income Tax Act, 1961. It is further submitted that as per the summon under section 131 Shri Durga Prasad Agarwal was required to appear before assessing officer on 4-9-2013 however the statement of Shri Durga Prasad Agarwal were recorded on 4-9-2013 which are available at Paper Book Page 37 to 40 and the same were stated to have been recorded under section 133A(1). Without prejudice to above, it is further submitted that in the event these statements presumed to have been recorded under section 131, as submitted above there were no circumstances leading to record the statement under section 131 and as is clear from the statements itself, they stood completed on the very same day, i.e., on 4-9-2013 where the same were concluded (APB 40) and were not kept pending for further recording thus the proceedings as initiated vide summons under section 131 stood complied with and concluded on 4-9-2013 itself.

It is further submitted that on perusal of statements of Shri Durga Prasad Agarwal dated 4-9-2013/5-9-2013, it is quite evident that these statements are recorded under section 133A(1) as is quite clear from the preface of the statements and the allegation of assessing officer is totally incorrect that these statements have been recorded under section 131. Since, the statements have been recorded under section 133A(1), there should not be any occasion of oath to be administered and if at all some oath seems to be administered, as seen from perusal of the statements, same has no validity in the eyes of law. Without prejudice to above, there was no occasion with the survey team to issue the summon under section 131 and as such summon if any issued, was wrongly issued, Moreover consequent statements were incorrectly recorded. Secondly Shri Durga Prasad Agarwal in these so called statement under section 131 has nowhere admitted any unaccounted income. Thirdly, it is submitted that Shri Durga Prasad Agarwal has signed below the statements of Shri Nagar Mal Agarwal recorded under section 133A(1) [erroneously mentioned as 131A(1)], by stating that he agreed with the statements of Shri Nagarmal Agarwal which cannot be held as the statements recorded in response to notice under section 131. The statement of Shri Durga Prasad Agarwal were not recorded in response to notice under section 131 on 5-9-2013 and therefore, the allegation of the assessing officer that such statement were recorded under section 131 is incorrect. This fact is further fortified from the perusal of statements of Shri Nagarmal Agarwal where at the end of the statement of Shri Nagarmal Agarwal only one line is written by Shri Durga Prasad Ji and that too without any reference of section 131 [though rightly so as in survey proceedings statements are normally recorded under section 133A(1) and not under section 131] or by administering oath which is the legal necessity for recording the statement under section 131. It is a single sentence statement and not statements under any specific section and that too without mentioning that such confirmation is on oath. Another aspect that needs your kind attention is that nowhere in remand report it is stated that summon under section 131 is issued by the assessing officer with prior approval of the higher authorities after explaining the circumstances leading them to record the statements under section 131 during the course of survey. Had those circumstances been occurred, a reference of the same must have been appeared in the assessment order or in the remand report.

In view of above submission, it is stated that no valid summons were issued under section 131 in the name of directors of assessee company and no valid statements were recorded on oath being the normal survey proceedings and only statements relied upon for making addition were those recorded under section 133A(1) and which cannot be the sole basis for making addition of Rs. 3,66,72,718 in the absence of any corroborative material on record. It is thus prayed that addition of Rs. 3,66,72,718 deserves to be deleted.”

(x) I have duly considered the submissions of the appellant, assessment order, remand report of the assessing officer and its rejoinder by the A.R. and the material placed on record. Before proceeding, it would be appropriate to reproduce hereunder the provisions of section 133A(6) of the Act as under :–

“(6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made:

Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an assessing officer or a Tax Recovery Officer or an Inspector of Income Tax without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be.”

(xi) It is to be noted that as per the provisions of section 133A(6) of the Act, the statement under section 131(1)(d) of the Act could be recorded in the circumstances, as specified therein and as per the proviso to section 133A(6) for exercising of such powers under section 131 of the Act, the prior approval of the concerned Range Head is required to be taken.

Further, for recording a statement under section 131(1)(d) of the Act, a summon is to be issued to the person concerned. On the other hand, a statement under section 131(1A) of the Act could be recorded by the Pr. DG or DG or Pr. Director or Director or ADIT or DDIT or authorized officer of income tax for making any investigation or enquiry where even no proceedings under the Act are pending and normally exercised by the officers of the investigation wing and not by the officers of the assessment units. It has already been mentioned earlier that in its remand report, it has been stated by the assessing officer that no summon under section 131 of the Act was issued to Shri Nagarmal Agarwal for recording his statement and thus, the necessary approval from the concerned JCIT/Addl. CIT as required by the proviso to section 133A(6) of the Act has not been taken prior to recording of such statement.

(xii) The contention of the assessing officer that Shri Durga Prashad Agarwal, another director of the appellant company has confirmed the statement of Shri Nagarmal Agarwal, in which Shri Nagarmal surrendered the sum of Rs. 5 Crore has been examined very carefully.

It is noted that the summon under section 131 of the Act, issued in the name of Shri Durga Prasad Agarwal, has been issued at the project site of “Nursery Residency” and the same was received by one of the civil engineer Shri Narendra Rathore, who was under employment with the company curing that period. It was further noted that as per the said summon, Shri Durga Prasad Agarwal was required to appear before assessing officer on 4-9-2013. However, the statement of Shri Durga Prasad Agarwal was recorded on 4-9-2013 and the same was stated to have been recorded under section 133A(1). Even otherwise, it is clear from the statement of Shri Durga Prashad Agarwal that it stood completed on the very same day, i.e., on 4-9-2013 and was not kept pending for further recording and thus, the proceedings as initiated vide summon under section 131 stood complied with and concluded on 4-9-2013 itself. Whereas Shri Durga Prasad confirmed the statement of Shri Nagarmal Agarwal on 5-9-2013, which cannot be held as the statement recorded under section 131 of the Act. It was further noted that it was a single sentence statement and not statement under any specific section and that too without mentioning that such confirmation is on oath. It has already been mentioned earlier that the statutory requirement of obtaining the prior approval of Joint/Additional CIT prior to recording statement under section 131 of the Act was not complied with.

Thus, in view of the factual matrix of the case and the legal position as discussed above, I find merit in the contention of the appellant that the statements of Shri Nagarmal Agarwal and Shri Durga Prashad Agarwal were not recorded under section 131 of the Act and these were recorded under section 133A of the Act.

(xiv) It may be mentioned here that the statement recorded under section 133A of the Act has no evidentiary value as held by the Hon’ble Apex Court and other judicial authorities. In the case of CIT v. Shri Roshan Lal in ITA No. 185/2014 Order, dated 3-11-2015, it has been held by the Hon’ble High Court of Rajasthan that the statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition. Further, the Hon’ble Supreme Court in the case of CIT v. S. Khader Khan Son (2012) 25 taxmann.com 413 (SC) : 2012 TaxPub(DT) 3088 (SC) dismissed the civil appeal by the income tax department and confirmed the order of Hon’ble Madras High Court in the case of CIT v. S. Khader Khan Son (2008) 300 ITR 157 (Mad) : 2008 TaxPub(DT) 0790 (Mad-HC) wherein it was held by the Hon’ ale High Court of Madras that :–

“From the foregoing discussion, the following principles can be culled out :–

(i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pulkngode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18;

(ii) In contradistinction to the power under section 133A, section 132(4) of the Income Tax Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act. On the other hand, whatever statement is recorded under section 133A of the Income Tax Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT (2003) 263 ITR 101 (Ker.) : 2003 TaxPub(DT) 1040 (Ker-HC);

(iii) The expression “such other materials or Information as are available with the assessing officer contained in section 158BB of the Income Tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan (2006) 284 ITR 220 (Mad.) : 2006 TaxPub(DT) 1217 (Mad-HC) ;

(iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this Court in T.C. (A) No. 2620 of 2006 between CIT v. S. Ajit Kumar (2008) 300 ITR 152 (Mad.) : 2008 TaxPub(DT) 0405 (Mad-HC) ;

(v) Finally, the word “may” used in section 133A(3)(iii) of the Act, viz., “record the statement of any person which may be useful for, or relevant to, any proceeding under this Act”, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself.

For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes, dated 10-3-2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A would not automatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal.”

(xv) It may be mentioned that recently, the Hon’ble Rajasthan High Court, Jaipur Bench in the case of CIT v. M/s. Maverick Share Brokers (P) Ltd. vide its Order, dated 23-3-2017 in D.B. Income Tax Appeal No. 14/2016, has held that :–

“4. In our considered opinion, the appellant and the other sister concerns are independent and merely on 133A statement, the addition could not have been made. Therefore, the Commissioner (Appeals) as well as the Tribunal have not committed any error in deleting the addition of Rs. 80,00,000.”

(xvi) It may be mentioned that in the case of CIT v. Mantri Share Brokers Pvt. Ltd. in D.B. ITA No. 502/2011, vide its Order, dated 5-9-2017 : 2018 TaxPub(DT) 3857 (Raj-HC), relating to survey under section 133A of the Act, it has been held by the Hon’ble High Court of Rajasthan that :–

“10. Before proceeding with the matter, it will not be out of place to mention that except the statement in the letter, the assessing officer has no other material on record to assess the income of Rs. 1,82,00,000.

It is settled proposition of law that merely on the statement that too also was taken in view of threat given in question No. 36 as narrated by Mr. Gupta and the same sought to have been relied upon, there is no other material either in the form of cash, bullion, jewellery or document in any other form which can come to the conclusion that the statement made was supported by some documentary evidence. We have gone through the record and find that the Commissioner (Appeals) has rightly observed as stated hereinabove, which was confirmed by the Tribunal.
In that view of the matter, the issue is required to be answered in favour of assessee against the Department.”

(xvii) During the appellate proceedings, it was submitted by the appellant that such addition was made without corroborating the same with reference to the documents impounded during the course of survey and without appreciating the explanation of impounded documents submitted by it. It was submitted that on the basis of all the documents/loose papers found and impounded during the survey, an additional income was worked out at Rs. 1,33,27,282 which was offered for tax in assessment year 2013-14 by filing revised return of income. It was also stated that in the absence of any corroborative evidence, the balance amount of Rs. 3,66,72,718was not included in the total income declared for the year under consideration as the same was offered in the statements signed on dotted lines. It was further submitted that the survey proceedings were commenced in the noon at around 1.15 PM on 4-9-2013 and continued till late evening of 5-9-2013, when the statements of the director were concluded after prolonged proceedings for all over the night and the director during such long interrogation got exhausted and thus under those circumstances, they had signed on the statements dictated by the survey authorities without having applied their mind.

(xviii) It was also stated that during the assessment proceedings, it has furnished all such information with regard to the additional income offered for tax. It has also furnished the audited financial statements for the year under consideration as well as of the preceding year which were prepared from the books of accounts maintained in the regular course of business, which could not be produced for verification during the survey proceedings due to the technical problem persisting with the computer and the data got corrupt. In its written submission, the appellant has stated, in brief the entries, the period to which the impounded material belonged as relied upon by the assessing officer for making the impugned addition. It was submitted that the papers referred by the assessing officer either do not pertain to the year under appeal or do not have financial implication in its case or are recorded in the books of accounts. It was the contention of the appellant that the assessing officer had incorrectly observed that admission obtained during survey was based on the incriminating documents and as per sweet will of directors of appellant company. It was also submitted that no corroborative evidences, whatsoever, have been brought on record by the assessing officer for making addition of Rs. 3,66,72,718 and the addition has solely been made on the basis of statements recorded on oath during survey, which do not have evidentiary value. It was also stated that it is a cardinal principle of law that only real income should be taxed and no hypothetical income could be added. In its case, books of accounts were duly audited by chartered accountant without any adverse remarks and thus did not call for any addition. Further, so far as loose paper/impounded documents during the survey are concerned, page wise explanation of each and every papers was furnished during the course of assessment proceedings and in fact, wherever such loose papers represented entries not recorded in books of accounts, the same were quantified and total of such unrecorded entries worked out at Rs. 1,33,27,282 and the same was duly offered for taxation in assessment year 2013-14 through revised return and has been accepted by department and the assessing officer has taxed the income, which was never earned by the appellant solely on the basis of statements of directors, which remained uncorroborated. In support of its contentions, the appellant has relied upon a number of judicial pronouncements.

(xix) It was the contention of the appellant that, even otherwise, if it is presumed that the statements of Shri Nagar Mal Agarwal and Shri Durga Prashad Agarwal, Directors of the appellant company, were recorded under section 131, the admission of Rs. 5 Crore made therein was an ad hoc figure on absolutely estimate basis as looking to volume of documents having total 49 volumes with so many papers in each volume and in absence of books of account which were got deleted due to computer error, it was not possible for the directors of the appellant company to verify each and every paper. However, after obtaining the copies of the papers impounded, the precise working was done and an income of Rs. 1,33,27,282 was further included in the total income for assessment year 2013-14 by making revision of return and total profits of Rs. 2,12,96,713 was computed for the year under appeal. It was further stated that besides the documents indicating the income of Rs. 1,33,27,282 for which the necessary revised return was filed for assessment year 2013-14, no incriminating document, whatsoever, was found as a result of survey which could suggest any income more than what has been declared in assessment year 2013-14 and the net profit computed for the year under appeal.

(xx) I have duly considered the submissions of the appellant, assessment order and the material placed on record and I find merit in this contention of the appellant. It may be mentioned that in the case of Pullangode Rubber Produce Co. Ltd. v. State of Kerala (1973) 91 ITR 18 (SC) : 1973 TaxPub(DT) 0089 (SC) , it has been held by the Hon’ble Apex Court that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who mace the admission to show that it is incorrect.

Thus, if the statement of Shri Nagramal Agarwal is treated as an evidence but the same was retracted by the appellant in its return of income for the year under consideration in the absence of any corroborating evidence. It is noted from the details of the impounded material as relied upon by the assessing officer and as stated in the assessment order that most of them pertained to assessment year 2013-14. In fact, only one impounded document marked as Annexure-‘A-A/251,252’ (cash payment of Rs. 1 Lac on 3-4-2013) pertained to the period under consideration and that too were stated to be recorded by the appellant in its books of accounts. Further, the books of accounts were audited and there is no evidence on record of any defects in such books of accounts and these books of accounts substantiate the retraction made by the appellant company in its return of income.

(xxi) It may be mentioned that in the case of Basant Bansal v. ACIT (2015) 63 taxmann.com 199 (Jaipur-Trib.) : 2015 TaxPub(DT) 3023 (Jp-Trib) , it has been held by the Hon’ble ITAT, Jaipur that:

“2.26 Going by these judgments and plethora of other judicial precedents, it is well-settled legal position that merely on the basis of a statement which is not supported by the Department with cogent corroborative material cannot be a valid addition basis for sustaining such ad hoc additions. It is the burden of the Department to prove that there existed relevant and cogent material to enable the assessing officer to make such additions. The Department has grossly failed to prove or demonstrate existence of any such relevant or cogent material. Assessee has demonstrated the background under which assessee was compelled to make a surrender due to seizure of Rs. 30 crores of DDs; these facts make the surrender a piece of evidence obtained by the Department without any cogent material and only using subtle arm-twisting. The disclosure thus is not binding on assessee a proposition which is supported by catena of judicial pronouncements and CBDT circulars referred to above. Thus there is no valid basis for sustaining the hypothetical addition of Rs. 20 crores which deserves to be deleted.”

(xxii) It may be mentioned that in a very recent Judgment, dated 27-4-2018, in the case of Shri Rajendra Kuamr Jain v. ACIT in ITA No. 378/JP/2017 for the assessment year 2014-15, it has been held by the Hon’ble ITAT, Jaipur that :–

“As regards the seized material, the assessee has never disputed the entries recorded in the seized material that the amounts found against each entry represents the advance given by the assessee for purchase of land. However, the only dispute is regarding the amount received back by the assessee from these two persons total amounting to Rs. 1,60,00,000 out of the advance of Rs. 11,25,00,000. The seized material entries are representing only the advances given by the assessee and, therefore, the amount received back by the assessee would not be considered as contrary to the entries in the seized material which represents only the transaction of advances given by the assessee. Hence, once the assessee has brought on record this fact that a sum of Rs. 1,60,00,000 was received by the assessee on 20-4-2013 though the said fact could not be explained in the statement recorded under section 132(4) due to peculiar circumstances and mental stress and pressure of the search party to surrender the undisclosed income, the subsequent facts brought on record by the assessee cannot be over-looked. The assessing officer has every right to controvert the claim of the assessee but by giving a contrary finding based on the material. Therefore, if the assessing officer was not in agreement with the claim of the assessee, then necessary enquiry ought to have been conducted to verify the correctness of the claim of the assessee instead of relying on the statement recorded under section 132(4) of the Act and ignoring the evidence filed by the assessee to show that the amount of Rs. 1,60,00,000 was received back by the assessee and was available for giving advance during the year under consideration. As regards the decision of Hon’ble Jurisdictional High Court in case of CIT v. Shri Ravi Mathur (supra), we note that in the said decision the controversy was regarding the figures found recorded in the seized material was admitted by the assessee in the statement under section 132(4) as in lacs.

However, subsequently the assessee took a stand that these amounts found recorded in the seized material are not in lacs but in thousands. Therefore, the subsequent stand of the assessee disputing the entries in the seized material which were duly admitted in the statement recorded under section 132(4) and that too without any supporting evidence was not accepted by Hon’ble High Court. Therefore, in the absence of any evidence in support of the claim that the amount found recorded in the seized material was in thousands and not in lacs, the Hon’ble High Court has rejected the retraction made by the assessee. In the case in hand, the assessee never disputed the amounts or entries recorded in the seized material but the assessee has subsequently explained and brought on record the fact that out of the total amount of Rs. 11,25,00,000, a sum of Rs. 1,60,00,000 given as an advance during the financial year 2012-13 relevant to the assessment year 2013-14 was received back by the assessee on 20-4-2013 and, therefore, the said amount was available with the assessee for giving advances during the year under consideration.

Therefore, this stand of the assessee is not disputing the entries in the seized material and further the assessee has filed the evidences in support of the fact that the said amount was received back by the assessee. Since these transactions are unaccounted transactions and only found during the course of search and seizure operation, therefore, there cannot be any other evidence in the shape of entries in the books of accounts except the persons concerned who have duly made the statements on oath as the affidavits were filed by the assessee in this regard.

Therefore, the statement under section 132(4) alone cannot be considered as a conclusive piece of evidence by ignoring the other facts and evidence which may establish the correct facts regarding the transactions in dispute. Hence in view of the above facts and circumstances of the case, we are of the considered opinion that when the assessee has filed the evidences in support of the claim that a sum of Rs. 1,60,00,000 was received by the assessee which was available for advance given during the year under consideration then in the absence of any enquiry conducted by the assessing officer to controvert the facts and to dispute the evidence filed by the assessee, the addition made by the assessing officer and sustained by the learned Commissioner (Appeals) is not justified. Hence we delete the addition made on this account.”

(xxiii) Further in the case of PCIT v. Best Infrastructure (India) Pvt. Ltd. (2017) 84 taxmann.com 287 (Del.) : 2017 TaxPub(DT) 3839 (Del-HC), it has been held by the Hon’ble High Court of Delhi that :–

“……A plain reading of section 158BB(1) does not contemplate computing of undisclosed income solely on the basis of a statement recorded during the search. The works ‘evidence found as a result of search’ would not take within its sweep statements recorded during search and seizure operations. However, the statements recorded would certainly constitute information and if such information is relatable to the evidence or material found during search, the same could certainly be used in evidence in any proceedings under the Act as expressly mandated by virtue of the Explanation to section 132(4). However, such statements on a standalone basis without reference to any other material discovered during search and seizure operations would not empower the assessing officer to make a block assessment merely because any admission was made by the assessee during search operation.

Fifthly, statements recorded under section 132(4) of the Act do not by themselves constitute incriminating material as has been explained by this Court inHarjeev Aggarwal(supra).” (Emphasis supplied)

(xxiv) Thus, in view of the above discussion and looking to the factual matrix of the case, it is held that the assessing officer was not justified in making addition solely on the oasis of statement of Shri Nagarmal Agarwal without having any corroborative material to support such huge addition of Rs. 3,66,72,718 and thus, the same is hereby deleted.”

Further, as we have noted above, the disclosure so made by the director of the assessee company during the course of survey in his statement recorded under section 133A was on an estimated basis on aprima facie review of the documents found during the course of survey and subsequently, within a period of two and half months, the assessee on detail examination determined the figure of Rs. 1,33,27,282 as the figure which remain undisclosed and the same was offered to tax by way of filing the revised return of income for assessment year 2013-14 which has been accepted by the Revenue and since, there was no other material found during the course of survey pertaining to assessment year 2014-15, no amount was offered to tax in the return of income for the impugned assessment year and therefore, the strictest principles of retraction wherein the surrender in the statement so recorded is supported by corroborative evidence and subsequent retraction in absence of any fresh evidence/explanation so advanced by the learned CIT/DR are not applicable in the peculiar facts and circumstances of the present case where the statement of the director of the assessee company was recorded under section 133A during the course of survey operations and said statement alone without any corroborating material doesn’t have any independent evidential value.
In light of aforesaid discussions and in the entirety of facts and circumstances of the case, the addition made merely basis the statement recorded under section 133A without any corroborating evidence cannot be sustained in the eyes of law and the learned Commissioner (Appeals) has rightly appreciated the facts of the case and has followed the legal proposition so laid down by the Courts including the jurisdictional High Court in the decisions referred supra. We accordingly doesn’t see any illegality or perversity in the findings of the learned Commissioner (Appeals) and the same are hereby affirmed. In the result, the grounds of appeals so taken by the Revenue are dismissed.
In Ground No. 4, the Revenue has challenged the action of learned Commissioner (Appeals) in deleting the addition of Rs. 50,00,000 made by assessing officer by rejection of books of accounts invoking the provisions of section 145(3) of the Act.
In this regard, the learned CIT D.R. submitted that during the course of survey, no books of accounts were found/available which shows that there were no books of accounts prepared by the assessee and they have been created as per the sweet will of the assessee as and when required. It was submitted that during the course of survey, evidence in respect of out of books sales as well as out of books expenses were found and impounded from the office of the assessee company. In the statements recorded during the course of survey, director of the assessee company has also surrendered a sum of Rs. 5 crores in the hands of the assessee company on the basis of the above mentioned evidences of out of books sales and expenses.

Accordingly, a show cause was issued to the assessee as to why the books of accounts should not be rejected invoking provisions of section 145(3) of the Act. In response, it was submitted by the assessee that books of accounts were duly audited by a Chartered Accountant and supported by necessary bills and vouchers and no error whatsoever was pointed out by the auditors. The submission so filed by the assessee were considered but not found acceptable by the assessing officer. The assessee company was found to be engaged in out of books sales and unrecorded expenses, on the basis of documentary evidence impounded during the course of survey and therefore, the books of accounts did not present ‘true and fair picture’ of its accounts and financial transactions and same were rejected invoking provisions of section 145(3) of the Act. Regarding estimation of income, it was submitted that the assessee was unable to get verify the expenses claimed on account of the consumption of material, labour and other expenses and also looking to the fact that there are unaccounted advances given to the contractors, the assessing officer has rightly disallowed a sum of Rs. 50,00,000. He accordingly supported the order and the findings of the assessing officer.

Per contra, the learned A.R. submitted that the assessee has maintained regular books of accounts on day to day basis which are duly audited by a reputed firm of Chartered Accountant which had not pointed out any defect therein. In the preceding assessment years also, the return of income filed based on the income computed as per the regular books of accounts maintained was accepted as such. On the date of survey, no books were available for the year under consideration as the same were maintained in tally software on computer system and were got corrupted due to software problem which fact was duly submitted before the survey team as well as before learned assessing officer during the course of assessment proceedings. However, learned assessing officer did not consider the submission of assessee and invoked the provisions of section 145(3) of the Income Tax Act, 1961 for the sole reason that they were not available during the survey. It was submitted that in the statements of Shri Nagarmal Agarwal recorded during the course of survey, wherein in reply to Question 11, he had categorically stated that after consulting his accountant, he came to know that books of accounts were corrupted in the system. This fact is further evident from statements of Shri Shubhrat Shah, accountant of the assessee company. Such statements cannot at all be the afterthought as they were given during the course of survey itself. It is also a matter of fact that during the course of survey proceedings, department with the help of computer experts had retrieved the files available however, the file containing the books of accounts for the year under consideration could not be retrieved and being a technical issue, the same is beyond the control of the assessee and is an undisputed fact. However, the assessing officer solely for the reason that director of the assessee company in the statements recorded could not specifically assert about the books of accounts, has drawn adverse inference that assessee does not maintain books of accounts on regular basis.
It was submitted that after the completion of the survey and upon receiving the copies of the loose documents impounded, the books of accounts were recasted and got audited, wherein no discrepancy whatsoever was pointed by the auditors and in fact no defect was pointed by assessing officer also. It is an established law that the books of accounts, if found incomplete as on the date of survey, the assessee should be given an opportunity to complete the same as to declare the real income. However, the assessing officer has not appraised such facts and has drawn adverse inference more particularly when such accounts have been duly audited without any adverse remarks.
It was further submitted that no defect whatsoever was pointed by learned assessing officer in books of accounts completed and produced before the assessing officer subsequently and provisions of section 145(3) were invoked solely for the reason that books were not available as on the date of survey without appreciating the fact that loss of books in computer system is hyper technical and was beyond the control of assessee. It is also submitted that book of accounts maintained by assessee have been accepted in assessment year 2015-16 where the assessment was completed under section 143(3), thus opening as well as closing balances of assessment year 2014-15 are not at all disputed and in fact, addition of Rs. 50 lacs has been made by the assessing officer with generalized comments and without pointing out any specific discrepancy and without any supporting facts or evidences.
It was further submitted that as per section 145(3), books of accounts can be rejected only if assessing officer records satisfaction that books of accounts maintained by assessee are either incomplete or incorrect, however in the instant case, the assessing officer has failed to point out even a single discrepancy in books of accounts recasted and audited by qualified chartered accountants. In support, reliance was placed on the following decisions :–

CIT v. Forech India Ltd. (2010) 329 ITR 336 (Delhi) : 2010 TaxPub(DT) 1574 (Del-HC)

Principal CIT v. Marg Ltd. (2017) 396 ITR 580 (Bom) : 2017 TaxPub(DT) 2117 (Mad-HC)

Asstt. CIT v. Intermedia Cable Communication (P) Ltd. 146 TTJ 476 (Pune) : 2012 TaxPub(DT) 2149 (Pune-Trib)

Ajanta Construction (P) Ltd. v. ACIT XXI TW 606 (ITAT Jaipur)

St. Teresa’s Oil Mills v. State of Kerala, (1970) 76 ITR 365 (Ker) : 1970 TaxPub(DT) 0239 (Ker-HC)

It was further submitted that the lump sum/ad hocaddition of Rs. 50.00 lakhs was made solely for possible leakage of revenue. It is pertinent to note here that assessee is private limited company, i.e., having separate legal entity and thus no question of personal expenses arises. Further, learned assessing officer has stated that such lump-sum addition has been made looking to the fact that there are unaccounted advances given to contractors. It is undisputed fact that assessee itself has already offered a sum of Rs. 1,33,27,282 on account of such advances made to contractors in assessment year 2013-14 and no evidences whatsoever has been brought on record by assessing officer to establish that assessee has paid more advances to contractors over and above the one recorded in books in the year under appeal. In the circumstances it was submitted that the results declared by the assessee are based on the books of accounts maintained and supported by the necessary bills and vouchers, thus the same deserve to be accepted. The learned A.R. accordingly supported the findings of the learned Commissioner (Appeals) stating that the latter has correctly appreciated these facts and has deleted the additions and the order so passed be upheld.
We have heard the rival submissions and perused the material available on record. The assessing officer has rejected the books of accounts invoking the provisions of section 145(3) of the Act and has made an addition of Rs. 50 lacs in the hands of the assessee company.

The reason why the assessing officer has rejected the books of accounts is that the books of accounts were not found/available at the time of survey and the same have been prepared subsequently and are thus not reliable.

We find that survey was conducted at the premises of the assessee on 4-9-2013 and it is an undisputed position that the books of accounts maintained on the tally software were deleted and could not be retrieved by the experts of the department during the survey proceedings. However, basis vouchers and other details available with the assessee, the books of accounts were subsequently re-casted and were audited and basis the same, the return of income was filed by the assessee. Therefore, once the books of accounts have been prepared/recasted, the assessing officer cannot go back to the stage of survey proceedings and contend that since no books of accounts were available at that point in time, he will not consider the books of accounts so recasted/prepared and furnished subsequently. The assessing officer is well within his rights to question the results or the effect of the transactions so reflected in the books of accounts as to whether the same represents a true and fair picture and identifies the defects, if any, however, once the books of accounts have been prepared and submitted for his verification, he cannot deny the very existence of such books of accounts. Therefore, we are of the considered view that rejection of books of accounts is not justified in the instant case in absence of any specific defect so pointed out by the assessing officer. Further, we find that no basis has been specified for determining and making the addition of Rs. 50 lacs which, going by plain wordings of the assessment order that such addition is made on account of possible leakage of revenues, is clearly ad hoc and cannot be sustained in the eyes of law.

We accordingly uphold the following findings of the learned Commissioner (Appeals) which are contained at para 3.2.2 (iv) to (vi) of his order which read as under :–

“(iv) I have duly considered the submissions of the appellant, assessment order and the material placed on record. It is an admitted fact that during the course of survey, the books of accounts for the year under consideration were not found either in physical form or on the computer of the appellant. It was stated by the accountant of the appellant that he was maintaining the same on tally software and the same were deleted. Even the Director of the appellant company stated so in his statement recorded during the course of survey. The so called deleted books of accounts could not be retrieved by the experts of the department during the survey proceedings.

However, it is noted from copies of some of the vouchers impounded during the course of survey and find place in the assessment order that books of accounts were maintained on computer at least for the F.Y. 2012-13. Further, the books of accounts were subsequently re-casted and were even audited by a chartered accountant and no defect was pointed out in the tax audit report by the auditor. It is also noted that there is no evidence on record that the assessing officer has found some specific defects in the books of accounts of the appellant and it appears that same were rejected without any cogent reason. If the books of accounts were not available during the course of survey, that itself cannot be the sole ground for rejection of books of accounts of the appellant. It may be mentioned that the books of accounts regularly maintained in the course of business have to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. The assessing officer has to prove satisfactorily that account books are unreliable, incorrect or incomplete, before it can reject accounts, which may be done by showing that important purchases are omitted therefrom or proper particulars or vouchers are not forthcoming or the accounts do not include entries relating to a particular class of business. The rejection of accounts should not be done on the basis of conjectures and surmises. In view of the above discussion and looking to the totality of facts and circumstances of the case, it is held that the assessing officer was not justified in rejecting the books of accounts under section 145(3) of the Act.

(v) It is further noted that the assessing officer has made trading addition of Rs. 50 Lac on account of possible leakage of revenue. The assessing officer has made lumpsum trading addition by observing that the appellant was unable to verify the expenses claimed on account of consumption of material, labour and also looking to the fact that there were unaccounted advances given to contractors. However, as mentioned earlier, no such defects were pointed out by the assessing officer in the audited books of accounts.

Further, it is to be noted that the appellant itself has offered a sum of Rs. 1,33,27,282 on account of unrecorded advances made to contractors in cash in its return of income for assessment year 2013-14 (in earlier ground of appeal, the same were treated as unaccounted receipts of the appellant).

(vi) Therefore, in view of the above discussion and looking to the fact that the rejection of books of accounts of the appellant by the assessing officer for the year under consideration has not been upheld, therefore, there is no question of making any trading addition. Further, there is no evidence on record, which may justify such huge trading addition. Hence, the ad hoc trading addition of Rs. 50 Lac made by the assessing officer is hereby deleted.”

In the result, the ground of appeal so taken by the Revenue is dismissed.

ITA No. 1429/JP/2018

Now, coming to assessee’s appeal wherein the assessee has taken sole ground of appeal and has challenged the action of learned Commissioner (Appeals) in confirming the addition of Rs. 1,33,27,282 made by the assessing officer.
At the outset, it is noted that there is delay in filing the present appeal by 43 days. After hearing both the parties and considering the affidavit and explanation so furnished by the assessee, we hereby condone the delay in filing the present appeal and the same is hereby admitted for adjudication.
During the course of hearing, the learned A.R. submitted that a survey action under section 133A was carried out on 4-9-2013 and during the survey, loose paper and documents were impounded and considering these papers, additional income of Rs. 1,33,27,282 was included in the total income for assessment year 2013-14 in terms of revised return of income filed on 20-11-2013. It was submitted that in the revised computation of income, such sum was shown as “advances given to various contractors not accounted for in the books of accounts” and included under the head “Income from business or profession”. Such return stood accepted by department as no further communication was received by the assessee. It was submitted that since the said expenses were claimed as advances made to the various contractors which remained unrecorded, therefore after the survey in the year under consideration, the total cost of the projects for which these advances were made stood inflated to the extent of Rs. 1,33,27,282. It was submitted that in order to avoid the double taxation of income, in the computation of income prepared for the year under consideration, the amount of Rs. 1,33,27,282 was claimed as deduction being already offered in preceding assessment year, however such explanation of assessee was not accepted by learned assessing officer and he made the addition of Rs. 1,33,27,282 on the allegation that assessee has claimed such reduction in computation which was an attempt to take back the sum offered in preceding year. It was submitted that sum of Rs. 1,33,27,282 was offered for taxation in assessment year 2013-14 pertaining to advances made to contractors which were not recorded in books of accounts. It was submitted that the assessee being a real estate developer, advances made to contractors were on account of construction work carried out in respect of its ongoing projects. Since, such advances were made to contractors for construction work, which eventually would have formed part of cost of project, however for the reason of non incorporating of such payment in books, cost of project also remained understated to that extent.
It was further submitted that once the department has accepted the additional income offered by assessee in assessment year 2013-14 and also not doubted its application in the shape of advances given to various contractors, where the necessary credit of the same is not allowed out of the net profit computed based on regular books of accounts, it would result into double taxation of the said income and therefore, the addition made by not allowing deduction of Rs. 1,33,27,282 deserves to be deleted.
Per contra, the learned CIT D.R. referring to the findings of the learned Commissioner (Appeals) submitted that there was no evidence on record which may establish that the said amount was given to contractors as advances, as claimed by the assessee in its computation of income for the assessment year 2013-14. In fact, the appellant has neither provided the breakup of such advances nor the projects to which these were related. Therefore, in the absence of any evidence on record, the sum of Rs. 1,33,27,282 cannot be treated as ‘advance to various contractors’. It was further submitted that the survey was conducted on 4-9-2013, i.e., during the relevant financial year under consideration and the return of income was filed by the assessee on 29-11-2014 and the assessee has not brought on record any reason why the said amount was not incorporated by the assessee in its audited books of accounts. It was accordingly submitted that the deduction of Rs. 1,33,27,282 claimed by the assessee in its computation of income for the year under consideration was nothing but an effort to reduce its tax liability and to set off the income offered for taxation in assessment year 2013-14. It was accordingly submitted that there is no infirmity in the order so passed by the assessing officer and which has been rightly confirmed by the learned Commissioner (Appeals).
We have heard the rival submissions and perused the material available on record. We find that during the course of assessment proceedings, the assessee was issued a show cause as to why the amount of Rs. 1,33,27,282 should not be added back in its income as wrongly claimed in its return of income. In response, the assessee furnished the following explanation which reads as under :–

“As a result of survey conducted at the business premises of the assessee certain loose papers and documents were impounded based on which a working was made and accordingly an additional income of Rs. 1,33,37,282 was included in the total income of assessment year 2013-14 and the return of income was revised after payment of tax which stood filed in terms of the e-filing acknowledgement No. 836396711201113 dated 20-11-2013 wherein in the computation of income it has been stated that the ‘advances given to various contractors not accounted for in the books of accounts and included under the head ‘income from Business or Profession. Since the said expenses were claimed to the advances made to the various contractors which remained unrecorded therefore after the survey in the year under consideration the total cost of the projects for which these advances were made stood inflated to the extent of Rs. 1,33,27,282 which form part of the closing stock declared for the year under consideration at Rs. 16,24,46,996 as on 31-3-2014, therefore, in order to avoid the double taxation of an income, in the computation of income prepared for the year under consideration the amount of Rs. 1,33,27,282 is claimed as deduction being already offered in preceding assessment year, in support of the claim two trading accounts are enclosed herewith wherein one is inclusive of the amount so offered for tax according to which the net profit is worked out at Rs. 2,12,96,713 and after reducing the same the real profit of Rs. 79,69,431 is worked out.”

The assessing officer, thereafter, considering the submissions of the assessee has recorded the following findings which are contained at para 6.4 of the assessment order which reads as under :–

“6.4. The reply of the assessee on this issue is duly considered.

As observed from the details submitted during the course of assessment proceedings and also on the examination of the books of accounts, it is found that the claim of the assessee is baseless as no such amount is included in the value of the closing stock of work in progress or finished goods. Moreover, it needs to be appreciated that out of the total disclosure of Rs. 5 crores made for assessment year 2013-14 and for assessment year 2014-15, the disclosure for assessment year 2013-14 amounting to Rs. 1,33,27,282 was exclusively in view of the unaccounted advances made to various contractors during F.Y. 2012-13. It is stressed and reiterated that the money given was in the nature of advances and not expenses. Neither was any evidence of any expense to the extent of Rs. 1,33,27,282 having been incurred either during F.Y. 2012-13 or during F.Y. 2013-14 were either found during the course of survey or were presented during the course of the present assessment proceedings. The utilization of advances, therefore, has not taken place in the form of expenses. It is therefore, a baseless argument that the total cost of project for which these advances were made stood inflated to the extent of Rs. 1,33,27,282. The assessee has altogether failed to explain how unaccounted advances to any person would inflate the cost of the raw material or the finished goods. On the contrary, it is evident that this is nothing but an attempt by the assessee to take back in this year what was offered in the earlier year. Therefore, the deduction of Rs. 1,33,27,282 claimed by the assessee is hereby disallowed and added back to its total income.”

We therefore find that the assessing officer has recorded a finding that out of the total disclosure of Rs. 5 crores made for assessment year 2013-14 and for assessment year 2014-15, the disclosure for assessment year 2013-14 amounting to Rs. 1,33,27,282 was in respect of the unaccounted advances made to various contractors during F.Y. 2012-13. The same is also the position of the assessee wherein it has revised its return of income for assessment year 2013-14 offering the said amount as additional income as advances given to various contractors which are not accounted for in the books of accounts. Therefore, as far as nature of additional income offered by the assessee in assessment year 2013-14 is concerned, it is admittedly in the nature of advances given to the various contractors engaged by the assessee which were not recorded in the books of accounts. The question that arises for consideration is once this additional income is offered and brought to tax as an intangible addition in the hands of the assessee for the previous assessment year, can the assessee be allowed telescoping/set off of the same in the impugned assessment year. In this regard, the claim of the assessee is that such advances were made to contractors for construction work, which eventually would have formed part of cost of project, however for the reason of non incorporating of such payment in books, cost of project also remained understated to that extent. In other words, the claim of the assessee is that there are unrecorded expenditure/payments made out of such advances which also remain unaccounted for the year under consideration and therefore, the assessee should be allowed the benefit of such unaccounted expenditure out of such unaccounted advances.

In this regard, the assessing officer has recorded a finding that no evidence has been furnished that these advances have actually been utilized for incurring any expenditure and the claim of the assessee for set off was denied and the said finding remain uncontroverted before us. We therefore find that there is no evidence on record which can demonstrate that advances to the contractors so offered by the assessee in the previous assessment year have actually been utilized towards project expenditure in the year under consideration. Even where it is assumed that project expenditure must have been incurred out of such advances, there is no evidence on record that such project expenditure also remained unrecorded and unaccounted in the books of accounts for the year under consideration which were finalized and audited much after the date of survey. We are therefore of the considered view that the benefit of set off of such income so offered by the assessee in the previous assessment year cannot be given to the assessee for the impugned assessment year and the contentions so advanced by the learned A.R. cannot be accepted. In the result, the sole ground of appeal taken by the assessee is hereby dismissed.

In the result, both the appeals filed by the Revenue and assessee are dismissed.

Addition done on the basis Statement recorded during survey without corroborative evidence is not sustainable

Addition done on the basis Statement recorded during survey without corroborative evidence is not sustainable

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