DCIT, CENTRAL CIRCLE-2, NEW DELHI V. UTTAM CHAND RAKESH KUMAR, NEW DELHI

ITA 1782/DEL/2023

AI Insights

The case involves an appeal by the Revenue against the order of the learned CIT(Appeals) which had deleted an addition of Rs. 3,75,00,000 made by the Assessing Officer on account of discrepancies found in stock and cash receivable during a survey under section 133A of the Income Tax Act, 1961. The assessee, a partnership firm engaged in the business of dry fruits, had initially surrendered the amount during the survey but later retracted the surrender. The CIT(Appeals) found that the addition was made solely on the basis of the retracted statement without any corroborative evidence, which was not permissible under the law. The Tribunal upheld this decision, emphasizing that a statement made during a survey is not conclusive proof of undisclosed income and must be corroborated by other evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 30468 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2018-2019
• Other Referred Cases: CIT v. Kohder Khan Son (2008) 300 ITR 157, M.S Agarwal v. Dy. CIT [2004] 90 ITD 80 (Del.-Trib.), Dy. CIT vs. Pramukh Builders [2008] 112 ITD 179 (Ahd.- Trib)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Gift; Loose papers; Competent authority
• Section: 143(3); 142(1); 143(2); 143(1); 133A

Judgement Text

"1 ITA no. 1782/Del/2023 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F ”: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 1782 /DEL/2023 Assessment Year: 2018-19 DCIT, Central Circle-2, Delhi. Vs M/s Uttam Chand Rakesh Kumar, 573, Kara Ishwar Bhawan, Khari Baoli, Delhi-110006. PAN- AACFU 3176 D APPELLANT RESPONDENT Assessee represented by Shri Sachin Kumar, CA ; & Shri Achin Garg, CA Department represented by Ms. Harpreet Kaur Hansra, Sr. DR Date of hearing 12.02.2025 Date of pronouncement 27.02.2025 O R D E R PER Ms. MADHUMITA ROY, JM: The instant appeal, preferred by the Revenue, is directed against the order dated 30.03.2023 passed by the learned Commissioner of Income-tax (Appeals)- 23, New Delhi, arising out of the order dated 28.03.2021 passed by the DCIT, Central Circle-2, Delhi u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for assessment year 2018-19 whereby the addition made by the learned Assessing Officer on account of discrepancy found in stock and cash receivable has been deleted. 2. We have heard rival submissions made by the respective parties. We have also perused the relevant material available on record. The brief facts leading to the 2 ITA no. 1782/Del/2023 case are, the assessee, a partnership firm, filed its return of income for the assessment year under consideration declaring total taxable income at Rs. 1,76,63,300/- which was processed u/s 143(1) of the Act on 13.05.2019. Prior to that a survey operation u/s 133A of the Act was carried out in the case of the assessee on 18.01.2018, a notice whereof u/s 143(2) of the Act was issued on 27.09.2019 by the DCIT, Circle 47(1), New Delhi and upon centralization of the matter of the case u/s 127 of the Act vide order dated 19.02.2020 issued by the PCIT the proceedings continued. Notice u/s 142(1) dated 26.02.2021 along with questionnaire was issued. In response thereto submission was filed by the assessee on-line. It is relevant to mention that the assessee before us is engaged in the business of purchase and sale of dry fruits and running its business at Katra Ishwar Bhawan. During survey proceedings various discrepancies were claimed to have been noted on account of excess stock of Rs. 88,04,481/- and shortage of stock Rs. 67,80,481/-. Further, unaccounted cash sales was also found to have been made by the assessee and during the course of survey proceedings the assessee surrendered an amount of Rs. 4,13,85,200/- on account of cash receivable. Thereby the assessee surrendered total amount of Rs. 5 crores. Apart from that the assessee stated on oath, rather admitted total surrender of Rs. 5 crores and agreed to pay tax in the form of advance tax up to 31.03.2018 which the assessee subsequently retracted. The assessee in its detailed reply, submitted before the Assessing Officer, particularly had drawn attention to the proviso to sub-section (6) of section 133A of the Act where it has been specifically stipulated that no action in survey u/s 133A(1) shall be taken by the Assessing Officer without obtaining the approval of the JCIT. Such approval was not served upon the assessee, as also mentioned therein, and therefore, at the very outset of the matter, the survey has been claimed to be null & void ab initio and the statement recorded there-under also claimed to 3 ITA no. 1782/Del/2023 be non est in the eyes of law and claimed to exclude the same from consideration or to use as an evidence. 3. Before the Assessing Officer the assessee relied upon the judgment of Hon’ble Madras High Court in the case of CIT v. Kohder Khan Son (2008) 300 ITR 157, whereby the Hon’ble Madras High Court held that the ITO was not empowered u/s 133A to examine any person on oath and therefore the statement recorded in a survey u/s 133A has no evidentiary value and the addition on the basis of such admission is not sustainable in the eye of law. It is relevant to mention that the statements of the partners recorded during the course of survey proceedings u/s 133A of the Act were not made voluntarily and the partners being extremely tired, not in proper senses under tremendous pressure, brought down … to the direction of the authorities and signed the statements as put to them without reading the same as also brought to the notice of the learned AO during the assessment proceedings conducted against the assessee before us. The deficit in recording statement of Shri Rakesh Kumar Bhatia and Shri Akshay Kumar Bhatia was also pointed out by the assessee before the learned Assessing Officer. In fact the addition of Rs. 5 crores as proposed by the Assessing Officer on the basis of the admission of the statements of the partners of the firm recorded during survey u/s 133 of the Act out of which the major portion of Rs. 4.13 crores approx is on account of loose papers being Annexure B-6 in the impounded survey documents found during the course of survey was claimed to be the dumb document by the assessee and no addition, therefore, can be made on the basis of such figure mentioned in the said impounded document as admitted in the statement recorded during survey as the assessee has already retracted the said statement which was the sole basis of the proposed addition. 4 ITA no. 1782/Del/2023 4. In support of the case made out by the assessee several judgments were relied upon as is evident from the order passed by the learned Assessing Officer. However, the learned Assessing Officer has observed that the surrender of Rs. 5 crores made by the assessee before the survey team was not out of threat, fear and/or coercion. With the following finding the addition to the tune of Rs. 3,75,00,000/- was made by the learned Assessing Officer on account of discrepancy found in stock and cash receivable: “5.1.3.3 These discrepancies clearly depict that books of accounts of the assessee are not reliable. During the course of survey proceedings, the assessee was specifically asked about the discrepancies pointed out in the closing stock and loose papers. On confrontation, the assessee did not give the name and complete address of the persons from cash was to be receivable and ultimately he has surrendered his undisclosed income on account of excess closing stock by Rs.88,04,481/- and Rs.4,13,85,200/-. On account of loose papers found relating to cash receivable as mentioned in the annexure B-6. 5.1.4 Further, during the course of post survey proceedings, the assessee was called for to explain the certain issues on 12.02.2018, 26.03.2018 & 03.04.2018, but he does not say anything about the surrender so made. The assessee, during the course of survey proceeding had handed over the cheques amounting to Rs. 1,65,00,000/-. On the tax calculated on the surrendered income for the advance tax payment. The assessee himself admitted that he will deposit the advance tax. Hence, cheque was not produced in the bank. The assessee while filing the return of income for the assessment year under consideration had disclosed only Rs.1,25,00,000/- out of Rs.5,00,00,000/- surrendered as discussed above, which clearly shows the afterthought of the assessee it is appropriate to mention here that the assessee did not retract the surrendered so made before the then DCIT, Circle 47(1), and now he has retracted from the surrendered after 39 month which is clearly shows afterthought and motive of tax evasion of the assessee. The assessee has also levied certain allegations of the survey proceedings after a long time elapsed that before conducted the survey no proper permission of the competent authority was obtained nor prepared the impounding order for impounding the books of account as well as no retention was taken from the appropriate authority in order to retain the 5 ITA no. 1782/Del/2023 books of account. In this regard, it is stated that the survey was conducted after getting proper / necessary approval from the competent authority as prescribed in I.T. Act, 1961 and the books of account also impounded through the impounding order on which signature was taken of the party which is placed on file further retention of the books of account have been taken from time to time from the appropriate authority which was placed on file. The facts of the case laws cited by the assessee are difference in the instant case. 5.1.5 In view of facts discussed above, the allegation levied by the assessee is baseless and have no force and are hereby rejected out rightly further, the surrendered so made by the assessee on account of excess stock and cash receivable was actually undisclosed income of the assessee and liable to be taxed. As mentioned earlier para that the books of account of the are not reliable and deserved to be rejected and same is hereby rejected, considering the discrepancies pointed out above. In view of discussed facts the surrendered income of Rs.5,00,00,000/- representing the undisclosed income of the assessee from which assessee has already declared an amount of Rs. 1,25,00,000/- under the head other source of income and the remaining of Rs.3,75,00,000/- is hereby added back to the total income of the assessee as business income. (Addition: Rs.3,75,00,000/-)” 5. In appeal before the learned CIT(Appeals) the assessee reiterated the stand taken earlier and filed written submissions against such addition of Rs. 3,75,00,000/- made by the Assessing Officer on the basis of statements of partners of the appellant firm recorded during the course of survey. Learned CIT(Appeal) taking into consideration this particular aspect of the matter that the learned AO reached to a conclusion that excess stock and cash receivable as undisclosed income to the tune of Rs. 5 crores based on the statements recorded during the course of survey, the learned CIT(Appeals) deleted the addition, inter alia, with the following observations: “20. During the course of assessment, the appellant raised various issues regarding the papers found but the Assessing Officer did not examine those 6 ITA no. 1782/Del/2023 issues and proceeded with the assessment and make addition of Rs.3,75,00,000/- solely on the basis of statement during the course of survey. 21. It is established position of law that the addition cannot be made on the basis of only statement if there is no corroborative evidence. It appears that the Assessing Officer has laid over emphasis on the statement during the course of survey given by the appellant and accepted it as the ultimate truth. The statement during the course of survey u/s 133A is not as statement under oath as in the case of search u/s 132(4). Therefore, the statement during survey has lesser evidencary value than that of statement u/s 132(4). The statement u/s 132(4) also has to be corroborated by other evidences. In this regard, the provisions of section 132(4) is reproduced as under:- The authorized officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act. 22. As per the above referred section, by using the word 'used in evidence', it is clarified that the statement cannot be used as evidence. Use of the word 'used in evidence' means that if there are other evidences, then the statement will be a corroborative evidence and alongwith other evidences, the statement will also form a part of the evidence. Therefore, the Assessing Officer was unjustified in making addition only on the ground of statement rendered during the course of survey but not corroborated by any other evidence of any type. 23. Statement at the time of survey made by the assessee can be the starting point of investigation but it cannot be the final proof or evidence in respect of undisclosed income. It is to be noted that in the return of income the appellant had only partially offered the undisclosed income and the major portion amounting to Rs. 3.75 crore was not offered by him. Therefore, necessary evidences was supposed to be gathered which has not been done. 24. A statement once made cannot be said to be conclusive proof regarding undisclosed income of the assessee. Courts have consistently opined that ultimately it is the nature of the evidences available with the department 7 ITA no. 1782/Del/2023 which will decide the matter whether on the basis of same, any undisclosed income can be assessed in the hands of the assessee or not. 25. It is a trite law and settled legal position that no adverse cognizance should be taken against the assessee on the basis of statement only which is not corroborated by any document/evidence. 26. This fact has been noted by CBDT and also Hon'ble Courts (Harjeev Agarwal 290 CTR 263) Delhi. 27. In the case of M.S Agarwal v. Dy. CIT [2004] 90 ITD 80 (Del.-Trib.), assessee admitted gift to be non-genuine in his statement recorded during search but during the course of assessment proceedings, it was found that there was ample evidence to show that these transactions was disclosed in the books of accounts of donor as well as done. The addition was deleted. 28. In the case of Dy. CIT vs. Pramukh Builders [2008] 112 ITD 179 (Ahd.- Trib), it has been held that there being no specter of evidence regarding undisclosed Income addition made only on the basis of statement of managing partner of assessee u/s 132(4) given in the state of confusion on later retracted could not be sustained either in part or as a whole. 29. In view of the above, it is held that the Assessing Officer was not justified in making addition of Rs.3,75,00,000/- on the basis of statement wherein the appellant had surrendered Rs.5 Crores. 30. The next issue for consideration is income out of alleged sales made in cash by the appellant. One of the ground for making addition of Rs.3.75 Crores was that the appellant had made unaccounted sales in cash amounting to Rs. 4,13,85,200/-. Without going much into the legality of the document Impounded, the Issue is decided on the ground as to what would have been the actual income out of unaccounted cash sales. 31. The evidences found during the course of survey indicated that the appellant had made sales in cash amounting to Rs. 4,13,85,200/-. However, the entire receipt was treated as income by the appellant. In respect of other cash sales of Rs. 67,80,481/- found during the course of survey, the Assessing Officer adopted G.P @ 1%. If the same logic and the G.P rate is applied on alleged cash sales amounting to Rs.4,13,85,200/-, the income in the hands of the appellant comes to Rs.4,13,852/-. 32. The appellant has furnished the following chart G.P in earlier years. 8 ITA no. 1782/Del/2023 S.No. A.Y Sale (in Rs.) G.P (In Rs.) G.P (in %) Assessment u/s i) 2011-12 1,69,72,50,284.00 1,87,18,721.00 1.10 143(1) ii) 2012-13 1,92,58,96,000.00 2,04,58,708.00 1.06 143(3) iii) 2013-14 2,43,48,88,766.00 2,52,11,356.00 1.04 143(3) iv) 2014-15 3,07,03,35,100.00 2,75,53,450.00 0.90 143(3) v) 2015-16 2,58,05,32,060.00 2,68,32,418.00 1.04 143(3) vi) 2016-17 2,99,45,16,468.00 3,66,85,485.00 1.23 143(3) vii) 2017-18 3,83,79,63,955.00 3,98,80,954.00 1.04 143(3) 33. The Assessing Officer has taken G.P @ 1% on the undisclosed sales found during the course of survey. Even if the profit on the alleged cash sale of Rs.4,13,85,200/- is taken at 2% (higher than the one recorded in the books and adopted by the Assessing Officer), then also no further addition can be made because the additional income offered by the appellant is enough to take care of additional profits. This is evident from the following calculation. Addition income disclosed Rs.1,25,00,000/- Less: Excess stock Rs. 8805481/- Less: G.P on negative stock Rs. 67804/- Rs.36,26,715/- Less: G.P @2% on cash sale Rs.8,27,704/- 34. Thus, no further addition was required to be made by the Assessing Officer on the basis of statement alone. Even if, the contents of the loose slips is treated as fully true, then also not more than Rs.8,27,704/- was the income of the appellant on account of loose slips. In that case also, no further addition could have been made. 35. In view of the above discussion, it is held that the Assessing Officer was unjustified in making the addition amounting to Rs.3,75,00,000/- to the returned income of the appellant firm. Accordingly, the addition is hereby deleted. 36. In view of the decision in respect of Ground No. 1 to 9, there is no need to adjudicate Ground No. 10, 11 and 12 as these are consequential to addition of Rs.3,75,00,000/-. 6. It appears from the above that the learned CIT(Appeals) came to the finding that the appellant had made sales in cash amounting to Rs. 4,13,85,200/- but the 9 ITA no. 1782/Del/2023 entire receipt was treated as income of the appellant. In respect of other cash sales of Rs. 67,80,481/- as found during the course of survey, G.P. @ 1% was adopted by the Assessing Officer. Thereby the income of the appellant, taking into consideration the entire alleged cash sales of Rs. 4,13,85,200/-, becomes only of Rs. 4,13,852/-. Thus, even if the profit on the alleged cash sales of Rs. 4,13,85,200/- is taken at 2% i.e. higher than the finding of the Assessing Officer, then also no further addition is sustainable because the addition income offered by the appellant is enough to take care of additional profit which is apparent from the deliberation made by the learned CIT(Appeals) at page 45 of the order passed by him, as reproduced herein above and the addition has rightly been, therefore, found to be unjustified so as not to warrant interference. The order passed by the learned CIT(A) is, therefore, found to be fit and proper. The Revenue’s appeal is found to have no basis and is dismissed. 7. In the result, Revenue’s appeal is dismissed. Order pronounced in open court on 27.02.2025. Sd/- Sd/- (S. RIFAUR RAHMAN ) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "