No addition of income based on a statement recorded during a survey

The ITAT Kolkata on 06.05.2015 has held that no addition of income can be allowed based on a statement recorded under the provisions of section 133 of the Income Tax Act during a survey.
The said judgment has been passed in the case of ACIT vs. Ajoy Bakli, Midnapore (PAN: ADJPB-3331M), I.T.A No. 312/Kol./2013 relating to the A.Y 2009-10 by the bench consisting of Shri P.K Bansal, Accountant Member and Shri Rajpal Yadav, Judicial Member.

Pleaders engaged in the case:

The appeal was heard on29.04.2015. The Appellant was represented by Shri Anjan Prasad Roy, JCIT/ld. Sr. DR and the Respondent, Ajoy Bakli, was represented by Shri Somnath Ghosh, Advocate, ld. AR.

Backgrounds of the case:

The assessee had the business of running a petrol pump and rice trading. A survey under the provisions of section 133A was conducted at the business premises of the assessee on 24.03.2009. During the survey, the department recorded a statement of the assessee under section 133A and 131 of the Income Tax Act in which the assessee had disclosed his total income of Rs. 23 lakhs.
The Assesee filed his return for the Assessment Year 2009-10 on 30.09.2009 stating his total income of Rs.22, 24,550/- together with regular books of accounts which were audited under section 44AB and the entries were corroborated by evidence.

The Assessing Officer made an addition of Rs. 23 lakhs in the total income of the assessee for the Assessment Year 2009-10 on the ground that during the survey, the assessee had stated an income of Rs. 23 lakhs which was not included in his filed return.

However, the Assessing Officer while making the assessment was satisfied with the books of accounts of the assessee. Being aggrieved by the order of the Assessing Officer, the assessee filed an appeal before Ld. CIT(A) who allowed the same and reversed the impugned order thereby stating that in the absence of other evidence save and except the admission obtained during the survey, the addition made to the total income of assessee was bad in law. The ld. CIT (A) has deleted the addition to the income of the assessee.

The Ld. CIT (A) took into consideration the facts and the legal position on the issue and held that there was no justification in sustaining the impugned addition made due to the alleged “income from undisclosed sources” on the basis of a statement obtained during survey under section 133 of the Act. For the said reason the Ld. CIT (A) directed to delete the addition. The Appellant got a relief of Rs. 23, 00,000/- from his income.
The Revenue preferred the appeal being aggrieved by the said order of the Ld. CIT (A).

The arguments put forward by the parties:

The ld. Counsel for the assessee contended that the statement had been recorded without any oath. As such, in absence of any other corroborative material collected by the Revenue, no addition can be made based on an alleged disclosure.

Cases referred:

The ld. Counsel for the assessee relied upon the judgment of the Hon’ble Madras High Court passed in of CIT vs. S. Khader Khan Son, (2008) 300 ITR 157 (Mad.) which was upheld by the Hon’ble Apex Court and Special Leave Petition against the same had been dismissed.
The ld. Counsel for the assessee further relied upon the judgment of the ITAT, Delhi passed in Mahesh Ohri vs. ACIT , I.T. Appeal No.4109/Del/09 for the A.Y 2005-06 which had been passed on 8.3. 2013. Copies of the said judgments were placed before the bench.

The judgment with reasons:

The bench considered the contentions of both sides and went through the record. The Hon’ble Madras High Court in the case of CIT vs. S. Khader Khan Son has analyzed the value of the statement recorded during a survey and held that an addition cannot be made on the basis of such a statement.

Similarly, the ITAT Delhi in Mahesh Ohri (supra) also considered this aspect and relying upon the judgment of the Hon’ble Kerala High Court in Paul Mathews and Sons vs. CIT, (2003) 263 ITR 101 (Ker.) has held that section 133A gives the authority to record the statement of a person, which may be relevant to a proceeding under the Act. However it enables the authority to record any statement of any person which is relevant but does not authorize recording any statement on oath.
The power to examine a person on oath is specifically conferred on the authorized officer under section 132(4) of the Act. The statement recorded on oath may be used as evidence in any proceeding, but a statement recorded under section 133A does not have any evidentiary value as the same was recorded by the authority, which has not been empowered to record a statement on oath.
Following the judgments of the Hon’ble Madras High Court, Kerala High and that of the Hon’ble Apex Court, the Tribunal held that deletion of the addition was justified. The ld. DR also failed to furnish any other corroborative evidence. In view of the above, the appeal of the revenue was dismissed.