Income Tax Act, 1961 – Section 133A – Disclosure of investment in property – Addition on account of unexplained investment – During survey proceedings, Appellant/assessee made voluntary disclosure of investment in property for relevant assessment year – Assessing Officer treated amount as unexplained investment and brought same to tax – CIT(A) affirmed addition made by AO – Whether CIT(A) has erred in confirming addition made by AO on account of unexplained investment – HELD – Addition was made by AO solely on basis of admission made by assessee in his statement recorded during survey – Assessee subsequently pointed out to AO that he had mentioned wrongly figure of investment and had produced relevant documents evidencing quantum of investment made in property to be far less than that admitted by assessee in statement – Nothing has been brought on record by Revenue to effect that documents produced by assessee evidencing actual investment made by him in impugned property was false or fake – Statement recorded during survey can safely be stated to be retracted with documentary evidence, and in such circumstances, statement of assessee recorded under Section 133A of the Act carries no evidentiary value and cannot be made basis of addition – Addition made on account of unexplained investment solely on basis of admission of assessee is unwarranted – AO is directed to delete addition – Appeal is allowed
2022-VIL-1623-ITAT-RKT
IN THE INCOME TAX APPELLATE TRIBUNAL
RAJKOT BENCH, RAJKOT
ITA No.26/RJT/2019
Assessment Year: 2014-15
Date of Hearing: 13.12.2022
Date of Pronouncement: 16.12.2022
RAJESH RASIKLAL SONI
Vs
ITO
Assessee by: None
Revenue by: Shri V.J. Boricha, ld.DR
BENCH
SMT.ANNAPURNA GUPTA, ACCOUNTANT MEMBER
SMT. MADHUMITA ROY, JUDICIAL MEMBER, JUDICIAL MEMBER
ORDER
PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER
Present appeal has been filed by the assessee against order passed by the ld. Commissioner of Income Tax (Appeals)-2, Rajkot [hereinafter referred to as “the ld. CIT (A)”] dated 29.11.2018 passed under section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as "the Act" for short] for the Asst.Year2014-15.
2. None appeared on behalf of the assessee. The assessee has filed an adjournment application stating that they require some more time. We note that similar application was also filed on 11.10.2022. We further note that assessee has been given as many as five occasions for prosecution of his appeal. But in all the occasions, assessee remained absent and sought for adjournment. Therefore, it seems that the assessee is not interested in arguing the matter, and therefore, we decide to adjudicate the matter after hearing the ld. DR and considering the material available on record.
3. The grounds raised by the assessee are as under:
“1. The CIT (A) has erred in law and on facts in adding Rs.3,76,670/- to the income of the assessee as unexplained investment.
2. The CIT (A) has failed to appreciate that the addition to the income of the assessee cannot be made in the absence of any positive evidence solely on the basis of confessional statement recorded during the survey proceedings.”
4. A perusal of the order of the Revenue authorities below reveals that survey proceedings were carried out on the assessee on 3.2.2014 in which the assessee made voluntary disclosure of Rs.4,52,225/- for the impugned assessment year i.e. Asst. Year 2014- 15, but failed to file return of income. Accordingly, the case was reopened and notice issued under section 148 of the Act. In response to which, the assessee filed return of income declaring income of Rs.3,01,960/- as against disclosure made of Rs.4,52,224/-. The AO noted that survey proceeding was carried out at the premises of Vagheswari Jewellers, prop: Shri Vipul Rasiklal Soni on 3.2.2014. During the proceedings, the assessee disclosed unaccounted income of Rs.4,52,224/- as investment in property. He noted that during the recording of the statement under section 133(A) of the Act the assessee has admitted to unaccounted income pertaining to investment of Rs.4,52,224/- in property bearing Municipal No.30/41/2. The total investment made in the property was Rs.13,56,670/- by three brothers. But the assessee in the return of income filed in response to the notice under section 148 offered only Rs.75,557/- as against disclosure made during the survey of Rs.4,52,224/-. The assessee was asked to explain the same in response to which he contended that the quantum admitted to have been invested in the property was stated by mistake and the documents pertaining to purchase of the property revealed that it was purchased for Rs.2,26,670/- as against Rs.13,56,670/- admitted by the assessee in his statement recorded. He accordingly contended that only 1/3rd share relating to the same had been returned to tax in the return of income filed by the assessee amounting to Rs.75,557/-.The AO however did not accept the contentions of the assessee stating that the assessee himself had admitted to the said quantum of investment in the statement recorded during survey and accordingly treated the remaining amount of Rs.3,76,667/- as unexplained investment, and brought the same to tax.
5. Before the ld. CIT (A) the assessee reiterated the contentions made before the AO. The assessee also pointed out this fact was brought to the notice of the AO also and had remained uncontroverted, but that at the same time the AO did not take note of the same and made addition on account of unexplained investment solely on the basis of admission made by the assessee in his statement recorded during the survey. The contention of the assessee in this regard are reproduced at para-5 of the CIT (A)’s order as under:
“In the written submission assessee has contended that:-
"12. At the outset, your appellant does not dispute the fact that he had made investment in immovable property bearing Municipal No. 30/41/2 at Rapar, Kutch jointly with his two brothers Mr. Vipul Rashiklal Soni and Mr. Kamlesh Rashiklal Soni.
13. Your appellant contends and submits that there was a mistake as to the quantum of investment made in the impugned property in the statement recorded during the survey on account of great stress and duress at the fag end of the day of survey. It may please be noted that the survey party started the survey proceedings at 4 p.m., the recording of the statement started at 11.30 p.m. and was concluded at around 2.30 a.m. the next day. The fact was brought to the notice of the A.O. and the same has not been controverted by the A.O. in his order. Certain glaring errors in the statements recorded of my brothers which come to our notice were also pointed out to theA.O. TheA.O. has chosen to remain silent on this aspect also.
14. A copy of the document file based on which the admission was made by your appeallant is enclosed at PB Pg. 3 to 32. On perusal of the impugned documents file, it is clear that the total value of investment made in the impugned property is Rs.2,26,670/- as against Rs.13,56,670/-admitted by the assessee in his statement recorded at the time of survey.
15. Your appellant primarily relies on the submission made before the A.O. vide his letter dt 15.12.2017 & 22.12.2017filed before the A.O. during the proceedings u/s 148 (PB Pg. 67 & 76).
16. Your appellant further submits that he has not brought any new material on record but simply discovered a mistake in his statement recorded at the time of survey based on the material which was found during the survey itself and retracted his statement to the extent of the mistake only.
17. Further, there is no evidence found either at the time of survey or during the assessment proceedings that the assessee [along with his brothers) has made any investment over and above the amount specified in the impugned document file.
18. Reliance is placed on Decision of Hon. Supreme Court of India in the matter of Commissioner of Income-tax, Salem v. 5. Khader Khan Son [2012] 25 taxmann.com 413 (SC) wherein it has been held that Section 133A does not empower any ITO to examine any person on oath; so statement recorded Hinder section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition.
19. Reliance is placed on the Decision of Hon. Gujarat HC in the matter of Commissioner of Income-tax, Rajkot -III v. M.P. Scrap Traders [2015] 60 taxmann.com 205 (Gujarat} wherein it has been held that when the A.O. had no other material and/or corroborative material to justijy additions except the confessional statement of assessee which was subsequently retracted, additions made by the A.O were to be deleted.
It is my humble submission that the aforesaid decision is rendered by the Hon. Gujarat High Court in similar circumstances wherein a confessional statement was obtained from the assessee during a survey without any evidence which was retracted later on. The ratio of the said decision is squarely applicable to the present facts and therefore, the addition made by the A.O. deserves to be deleted.
20. Your appellant further relies on the decision of Hon. Gujarat HC in [2016] 72 taxmann.com 355 (Gujarat) Deputy Commissioner of Income Tax v. Narendra Card & Ashok Garg (AOP) wherein also it was held that where assessee retracted from disclosure made in statement under section 132(4) which was not accepted by revenue, and if no undisclosed income was found during search, revenue could not make addition on bare suspicion and presumption.
It may please be appreciated that the aforesaid decision is with reference to statement of assessee recorded on oath u/s 132(4). In the present case, it is a statement u/s 133A which is not even on oath and which is proven to be factually incorrect on the basis of material found during the survey itself. It is my humble submission that the ratio of the above decision is applicable in my case and therefore, the addition made by the A.O. should be ordered to be deleted.
Similar decision is rendered by the Hon. Gujarat HC in the matter of The Commissioner of Income Tax-IV Vs Ramanbhai B. Patel in tax appeal no. 207, 208 to 210 of 2008 wherein it has been held that Admission u/s 132(4) of undisclosed income by assessee is not conclusive if no evidence is found to support the admission. A retraction, though belated, is valid.
Similar decision is rendered by the Hon. Gujarat HC in [2015] 55 taxmann.com 292 (Gujarat) -Commissioner of Income-tax v. Chandra kumar jethamal Kochar and Hon. Andhra Pradesh HC in [2015] 55 taxmann.com 176 (Andhra Pradesh) - Commissioner of Income-tax, Karnataka v. Shri Ramdas Motor Transport Ltd.
21. Still further reliance is placed on the decision rendered by the Hon. Gujarat HC in [2008] 174 Taxman 466 (Gujarat) wherein it has been held that a statement recorded under section 132(4) at mid night cannot be considered to be a voluntary statement, if it is subsequently retracted by assessee and necessary evidence is led contrary to such admission and further that the assessee could not be subjected to addition merely on the basis of such admission, when despite retraction revenue could not furnish any corroborative evidence in support of such addition.
SUBMISSIONS WITH RESPECT TO OBSERVATIONS OFAO:
22. Your kind attention is invited to the operative para of the Assessment order - Page. 7 Para 6. The observations of the A.O. given therein are factually incorrect as explained below:
a. "Assessee has prepared forged documentary evidence to avoid tax liabilities" - The Assessee has not brought any fresh evidence on record other than that found during the course of survey.
- The assessee has only found a mistake in the material based on which confessional, statement was obtained during the survey proceedings.
- The assessee has retracted his statement to the extent of mistake found therein.
- The assessee along with his three brothers has paid almost 18 Lacs as tax liability and interest after the survey. Obviously, the assessee along with his family has not shied away from making payment of due taxes.
- In view of the above, it is patently clear that the assessee has not prepared any forged documentary evidence to avoid tax liabilities. b. "All the three brothers accepted this disclosure during recording statement under oath"
- Statement recorded during the course of survey proceedings is not on oath
- CIT v. S. Khader Khan Son [2012] 25 taxmann.com 413 (SQ
- Your kind attention is drawn to Q. 7 of my statement PB Pg. 81 and Q. 3 of Statement of my brother Mr. Kamlesh Soni PB Pg. 84. On-going through the same, it is clear that someone has written same answers to the question regarding the joint investment and got the statement signed from both of us. The tonality, language and even the words and punctuation marks are more or less same in both the cases.
- All the three statements were recorded well beyond the midnight and hence cannot be considered to be voluntary
- [2008] 174 Taxman 466 (Gujarat) - A false statement remains a false statement even if it is written a thousand times over. The fact that there is mistake in recording the statement during the survey is patent The A.O. has conveniently omitted to comment on this aspect despite my specific submission in this regard.
- In view of the above, the allegations made by the A.O. in his order lack credence and need to be brushed aside.
Considering the foregoing discussion, it is beyond pale of doubt that there was a mistake in the recording of statement of the assessee during the survey, the said statement has been retracted by the assessee only to the extent of mistake and there is no evidence to support the addition made by A.O. except the admission by the assessee in his statement recorded during the survey which is proven to be factually incorrect. In view of the above facts, settled law and judicial pronouncements of the Hon. Gujarat High Court as well as the Hon. Supreme Court of India, the addition of Rs.3,76,667/- made by the AO deserves to be deleted and the assessment order being erroneous on factual aspects be struck down.”
6. The ld. CIT (A) however upheld the addition made stating that the surrender made by the assessee was voluntary and there was nothing to prove that it was recorded under stress or duress. He also noted that the documents now produced by the assessee was not impounded during the survey, and therefore not subject to verification. Accordingly, he rejected the contentions of the assessee and upheld the addition made on the basis of surrender/admission made by the assessee in his statement recorded during the course of survey. The relevant finding of the ld. CIT (A) at para-6 of his order is as under:
“Having considered facts and circumstances of the case I find that impugned addition has been made on the basis of evidence collected during survey u/s 133A. In the statement recorded in the course of survey on 03/02/2014, the assessee was asked to give details of his immovable property in survey no. 30/41/2 documents pertaining to which had been found during the survey. In reply to question no. 7 the assessee stated that these documents pertained to immovable property in survey no. 30/41/2 and that 3 brothers jointly purchased this property for Rs.13,56,670/- including stamp duty and registration fees on 08/07/2013 and that unaccounted investment of assessee to extent of his share was Rs.4,52,224/- pertaining to F.Y. 13-14. It is based on these evidences that the impugned addition has been made.
During appellate proceeding the assessee has contended that after, peaceful perusal of the said document found during survey it was patently clearly that joint investment in the said property by 3 brother. was only Rs.2,26,670/- and assessee's share was only Rs.75,557/-. It is contended that the statement was recorded under duress and stress and such statement has no evidentiary value.
Having considered facts and circumstances of the case I find that in the statement of assessee in the question 7 and answer to it, there is no reference to any specific document or any specific figure in the said document. It was voluntary submission of assessee that 3 brothers had jointly purchased the said property for Rs.13,56,670/-.
Therefore the contentions that the statement was recorded under stress and duress has no merit. It is also noteworthy that the said document was not impounded during survey and therefore it is not subject to verification that the document which assessee is now referring are entirely the same which were found during survey. It is also noteworthy that when the assessee admitted his investment in his statement he has no where stated that the figure of investment is reflected in those documents. It is possible that while making the statement assessee had declared both his recorded and unrecorded investment in the said property and understandably unrecorded amount could not be reflected in the said document.
In view of the above discussion I find no merit in contentions of assessee. The addition made by the Assessing Officer on the basis ofassessee's voluntary statement on being confronted with the document found during survey is fully justified. I find no reason to interfere with the action of Assessing Officer. The addition is sustained. The ground of appeal is rejected.”
7. Before us the ld. DR relied on the finding of the authorities below.
8. We have gone through orders of the authorities below. We are not agreement with the ld. CIT (A). It is an undisputed fact that the addition of share of assessee’s investment in the impugned property which was added to his income as unexplained was solelyon the basis of his statement recorded during the survey that the investment in the property was to the tune of Rs.13,56,670/-. It is also an undisputed fact that the assessee subsequently pointed out to the AO that he had mentioned wrongly the figure of investment in the impugned property and had produced relevant documents evidencing the quantum of investment made in the property to be far less than that admitted by the assessee in the statement made to the tune of Rs.2,26,670/-. Nothing has been brought on record by the Revenue to the effect that the documents produced by the assessee evidencing actual investment made by him in the impugned property was false or fake. No infirmity has been pointed out in the documents produced by the assessee nor has Revenue carried out any further investigation so as to arrive at a conclusion that actual as demonstrated through documents is not the truth and that what the assessee had stated in his statement was in fact the truth. Though the statement of the assessee may surely not have been made under stress or duress, but there was always a probability of mistake being committed by the assessee. Even not considering probability of mistake being committed by the assessee, where the documents/evidences controverted the statement made by the assessee and nothing is brought on record by the Revenue to pin point any infirmity or falsity in the documentary evidence, then relying upon the statement of the assessee rejecting documentary evidence, is against all cannons of law and justice. In the present case, the assessee has, with evidence demonstrated actual investment made in the impugned property. No infirmity has been pointed out by the Revenue in the said documents. Therefore, statement recorded during survey can safely be stated to be retracted duly evidenced with documentary evidence, and in such circumstances, the statement of the assessee recorded u/s 133A of the Act carries no evidentiary value. The decisions cited by the Ld. Counsel for the assessee to the Ld. CIT (A), reproduced above, support our view. The Hon’ble apex court in the case of CIT, Salem vs S. Kader Khan (2012) 25 taxmann.com 413(SC) has held that statement recorded u/s 133A of the Act has no evidentiary value and cannot be made basis of addition. Hon’ble jurisdictional High Court in series of decisions has held that solely on the basis of statement recorded which was subsequently retracted with evidence, no addition could be made in the absence of any other corroborative material with the Revenue. That such addition was simply on the basis of surmises and conjectures and thus unsustainable in law. The decisions of the jurisdictional High Court holding so are as under:
CIT, Rajkot-III vs M P Scrap Traders (2015) 60 taxmann.com 205 (Guj)
DCIT vs Narender Grag & Ashok Grag (AOP) (2016) 72 taxmann.com 355 (Guj)
In view of the same, we hold that addition made of unexplained investment of Rs.3,76,667/- solely on the basis of admission of the assessee is unwarranted and direct the same to be deleted.
9. In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 16th December, 2022 at Ahmedabad.
DISCLAIMER: Though all efforts have been made to reproduce the order accurately and correctly however the access, usage and circulation is subject to the condition that publisher is not responsible/liable for any loss or damage caused to anyone due to any mistake/error/omissions.