M/s. Sandeep Kumar Mittal, New Delhi V. CIT, New Delhi

ITA 345/DEL/2014

AI Insights

The case revolves around a survey conducted under section 133A of the Income Tax Act, 1961, at the business premises of Sandeep Kumar Mittal, where he allegedly surrendered unaccounted income. The assessee later retracted his statements, claiming coercion and lack of evidence for the surrenders. The Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) upheld the additions made based on the initial surrenders. The Tribunal, however, found that the statements recorded under section 133A were not taken on oath and thus lacked evidentiary value, leading to the deletion of the additions related to excess stock, cash, and unexplained investments. The Tribunal also addressed the issue of rent disallowance and jurisdictional challenges.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 302779 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 28-11-2022
• Assessment Year: misc
• Appeal Filed On: 19-12-2022
• Other Referred Cases: National Thermal Power Co. Ltd. vs CIT, CIT vs. Khader Khan & Son, CIT vs. Dhingra Metal Works
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Income from undisclosed sources; Retraction; Documents seized
• Section: 143(3); 133A

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”: NEW DELHI BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 345/Del/2014 Asstt. Year: 2008-09 O R D E R PER ASTHA CHANDRA, JM The appeal by the assessee is directed against the order dated 08.11.2013 of the Ld. Commissioner of Income Tax (Appeals) – XXVIII, New Delhi (“CIT(A)”) pertaining to assessment year (“AY”) 2008-09. 2. The assessee has taken the following grounds of appeal:- “1. That, on the facts and circumstances of the case the order of the Ld.CIT(A)-XXVIII, New Delhi is bad in Law & on facts for want of jurisdiction and is liable to be quashed., 2. That, on the facts & in the circumstances of the case Ld.CIT (A)-XXVIII ,New Delhi was not justified in confirming additions of surrendered amount of Rs.56,71,600/- as excess stock during the survey proceedings which have been retracted by the appellant. Sandeep Kumar Mittal Prop. Sri Bankey Bihari Papers A-2/106, Milan Vihar Apartment-72, I.P. Extension, New Delhi – 110 092 PAN AADPM6092R Vs. CIT Appeals-XXVIII, New Delhi. (Appellant) (Respondent) Assessee by: Shri Assem Chowla, Advocate Shri Manu K. Giri, Advocate Ms. Barayar Khan, Advocate Department by : Shri Abhishek Kumar, Sr. DR Date of Hearing 29.11.2022 Date of pronouncement 19.12.2022 ITA No. 345/Del/2014 2 3. That, on the facts & in the circumstances of the case Ld.CIT (A)-XXVIII, New Delhi was not justified in confirming additions of surrendered amount of Rs. 9,78,800/- as excess cash during the survey proceedings which have been retracted by the appellant. 4. That, on the facts & in the circumstances of the case Ld.CIT (A)-XXVIII ,New Delhi was not justified in confirming additions of surrendered amount of Rs.8,50,000/- as unexplained investments during the survey proceedings which have been retracted by the appellant. 5. That, on the facts & in the circumstances of the case Ld. CIT(A)-XXVIII was not justified in confirming the addition of Rs.96,000/- made by ACIT ,Circle 39(1),New Delhi on account of rent paid in respect of Property No. A-2/106,Milan Vihar Apartment, 72, I.P. Extn. Patparganj, Delhi by invoking provisions of section 40A(2)(b) of the I.T. Act, 1961. 6. The appellant craves his right to add new ground or amend any ground during the Appellate Proceedings.” 3. The assessee moved an application dated 26.10.2021 under Rule 11 of Income Tax (Appellate Tribunal) Rules 1963 for admission of the following additional grounds:- “a. On the facts and circumstances of the case and in law, the Learned Deputy Commissioner of Income Tax, Circle 39(1), New Delhi has erred in recording the statement of the Assessee and his wife on oath under section 133A of the Act. b. On the facts and circumstances of the case and in law, the Learned Assessing Officer has erred in relying upon the statements recorded of the assessee and his wife on oath under section 133A of the Act.” 4. It is stated in the above application that the aforesaid additional grounds are purely legal in nature and do not require any consideration of additional facts. Moreover, these additional grounds are necessary for proper appreciation of the issue in appeal and would sub-serve the cause of substantial justice. Reliance has also been placed on the judgment of Hon’ble Supreme Court in National Thermal Power Co. Ltd. vs CIT (1998) 229 ITR 383 (SC)). ITA No. 345/Del/2014 3 5. Let us take notice of the facts in brief. The assessee is an individual and engaged in the trading of all kinds of papers used in packaging under the name M/s. Bankey Bihari papers. A survey under section 133 A of the Income Tax Act, 1961 (the “Act”) was carried out on 19.09.2007 and 20.09.2007 in the premises of the assessee. During the course of survey operation the assessee is stated to have voluntarily surrendered Rs. 75,00,400/- which comprised of Rs. 56,71,600/- for excess stock, Rs. 9,78,800/- for excess cash and Rs. 8,50,000/- for investment in construction WIP. The assessee deposited the whole tax of Rs. 24,91,000/- on 20.09.2007. According to the Learned Assessing Officer (“AO”) when statement was recorded, each page was signed by the assessee himself. Inventory of cash and stock was prepared and copies thereof given to the assessee. Cash was also inventorised and returned to the assessee. Within a month after survey, on 17.10.2007 the assessee retracted from his statement and requested to provide the certified copies of books of account/ documents seized and impounded during the course of survey. Yet another letter dated 17.3.2008 was filed by the assessee stating therein that the surrender value was arrived at without making any inventory of cash, stock or details of construction expenses and thus without any evidence regarding excess availability of cash, stock in hand or unexplained investments. No physical inventory was ever prepared by the survey team who without making any physical inventory of cash alleged that cash of Rs. 10,01,000/- was available. The Ld. AO wrote back to the assessee on 15.12.2010 denying all the allegations made by the assessee. The assessee had filed his return for AY 2008-09 on 27.09.2008 declaring loss of Rs. 1,00,930/- and without considering the voluntary surrender made during the course of survey operation. The case was picked up for thorough compulsory scrutiny. During the course of assessment proceedings, the Ld. AO issued a show cause notice dated 22.12.2010 to the assessee which was duly replied by the assessee vide letter submitted on24.12.2010. The submissions of the assessee were not acceptable to the Ld. AO. According to the Ld. AO the assessee voluntarily surrendered the amount of Rs. 75,00,400/- and deposited tax also. This statement was recorded on oath. The assessee ITA No. 345/Del/2014 4 retracted the disclosure made in the statement recorded on oath on 19.09.2007 and 20.9.2007 after 27 days of the survey and that the retraction had no merit. The Ld. AO completed the assessment on total income of Rs. 74,95,470/- on 31.12.2010 under section 143(3) of the Act including therein the impugned additions. 6. Aggrieved, the assessee appealed before the Ld. CIT(A) who confirmed the impugned additions. This has brought the assessee before the Tribunal. 7. Let us deal with the additional grounds taken by the assessee before the Tribunal. After perusal of the assessee’s application for admittance of the additional grounds and hearing the Ld. Representatives of the parties, we are convinced that the additional grounds raise the questions which are purely legal in nature and following the judgment of the Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra) we admit them for adjudication. 8. The gist of the twin questions is that section 133A of the Act does not envisage recording of statement of the assessee and his wife on oath and therefore, the Ld. Assessing Officer could not, in law rely on such statements. The Ld. AR drew our attention to the statements recorded on oath during survey operation (copy at pages 1-17 of Paper Book) and submitted that section 133A does not empower any ITO to examine any person on oath. In contra distinction to the power under section 133A of the Act, section 132(4) enables the authorised 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 Act. On the other hand whatever statement is recorded under section 133A is not given an evidentiary value. The statement obtained under section 133A would not be automatically binding upon the assesses. The Ld. AR relied upon the decision of Hon’ble Madras High Court in CIT vs. Khader Khan & Son (2008) 300 ITR 157 (Mad.) and the decision of Hon’ble Delhi High Court in CIT vs. Dhingra Metal Works (2010) 328 ITR 384 (Delhi). He also referred to the letter dated 18.12.2014 of the CBDT [ F. No. 286/98/2013-IT (Inv.II) ] and CBDT ITA No. 345/Del/2014 5 instructions F. No. 286/2/2003-IT (Inv.II) dated March 10, 2003. The Ld. DR opposed the admission of additional grounds of appeal and the contents therein. 9. Undoubtedly, the additional grounds taken by the assessee before the Tribunal involves legal question and do not require consideration of any additional facts. We, therefore, in the light of the judgment of the Hon’ble Supreme Court in National Thermal Power Co. Ltd. (supra) admit these grounds for adjudication by us. 10. Section 133A, originally enacted by the Finance Act 1964, w.e.f. 01.04.1964 was substituted by the taxation laws (Amendment) Act, 1975 w.e.f. 01.10.1975. We have perused the section 133A as amended from time to time. We find that sub-section (3)(iii) of section 133A does not authorise the survey officer to record the statement of any person which may be useful for, or relevant to any proceeding under the Act. However, such statement recorded cannot have any evidentiary value. In CIT vs. S. Khader Khan & Son (supra) the Hon’ble Madras High Court held that a power to examine a person on oath is specifically conferred on the authorities only under section 132(4) in the course of any search or seizure. The Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has specifically provided for it, whereas section 133A does not empower any ITO to examine any person on oath. Statement recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. The Hon’ble Madras High Court further held that the word “may” used in section 133A(3)(iii) 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. The decision (supra) of the Hon’ble Madras High Court has been affirmed by the Hon’ble Supreme Court in CIT vs. S.Khader Khan & Son (2013) 352 ITRO 480(SC). Similar view has been expressed by the Hon’ble Delhi High Court in CIT vs. Dhingra Metal Works (2010) 328 ITR 384 (Delhi). The Hon’ble Delhi High Court observed that in any event, it is settled ITA No. 345/Del/2014 6 law that though an admission is extremely important piece of evidence, it cannot be said to be conclusive and it is open to the person who has made the admission to show that it is incorrect. 11. For the reasons aforesaid, we are of the view that the survey officer is vested with the power under section 133A(3)(iii) to record the statement of the assessee which may be useful for or relevant to any proceedings under the Act. But he is not authorised to administer oath. Since the survey officer had recorded the statement of the assessee and his wife on oath in the case under our consideration, we hold that the action of the survey officer was not in accordance with law. Consequently, such statement cannot be conclusive piece of evidence by itself and it is open to the assessee to show that the same was incorrect. Accordingly, both the additional grounds are decided in favour of the assessee. 12. We now proceed to consider the case of the assessee on merits. Survey under section 133A was conducted on 19.9.2007 and 20.9.2007 in the course of which the assessee in his statement recorded on oath surrendered excess stock of Rs. 56,71,600/-; excess cash of Rs. 9,78,800/-; and Rs. 8,50,000/- being investment in construction WIP. On 17.10.2007 i.e. within a month the assessee wrote to the CCIT (page 18-20 of Paper Book) stating therein that he was constantly threatened, pressurised and coerced to surrender and make declaration regarding the alleged unaccounted income without any iota of evidence and expressed his intention to retract from his statement. The letter dated 17.03.2008 vide which the assessee retracted from his statement copy at page 21-23 of Paper Book reads as under:- “17.03.2008 The Deputy Commissioner of Income Tax, Circle 39(1), Room No.222, C.R. Building, I.P. Estate, New Delhi. Sub: Survey u/s. 133-A of the Income Tax Act, 1961 on 19.9.2007 at the business premises of M/s. Sri Bankey Bihari Papers - Sole Proprietor Sh. Sandeep Kumar Mittal, at A-2/106, Milan Vihar ITA No. 345/Del/2014 7 Apartments, 72, I.P. Extension, Delhi-110 092 and at A-28, Sector-8, Noida U.P.-201301. PAN NO. - AADPM 6092R Dear Sir, Most respectfully it is submitted that through my letter dated 17.10.2007 addressed to Hon’able Chief Commissioner and copy to your goodself I have retracted from my statement recorded on 19-09-2007/20-09-2007. On my request dated 24.9.2007 and subsequent reminder dated 11-02- 2008 a copy of the said statement was provided tame on 20-02-2008.On going through the said statement my comments are as under: On the very first page of the statement your good self has taken my signature on oath on 19-09-2007 whereas your signatures have been put at the fag end of the survey on 20.9.2007. Secondly, on the last page i.e. page no. 12 of the statement under reference, while concluding the alleged survey you have written “recorded in my presence” which shows that yourself stood in both the positions of witness as well as administrator which cannot be the case. 3. Further in the said statement upto Question no. 30 (i.e. page 8) were dictated by your goodself to your subordinate and I was directed to write their answers in my own handwriting. Up to that point I accept my statement in Toto. 4. But from question no. 31 onwards all the questions as well as their answers were written by the official of the Survey party and I was made to sign without even being allowed to read the same. Only on the last page i.e. no. 12 at 12.00 noon on 20-09-2007 I was made to write “I have given the above statement of my own free will, without any kind of pressure or coercion/pressure exerted upon me’ 5.After getting bankers cheque for Rs. 24,91,000/= being income-tax on the alleged surrender value of Rs. 75,00,400/= the remaining pages fro 9 to 12 containing Question No. 31 onwards were written very has between 11.30 A.M to 12.00 noon on 20-09-2007. The said surren value was arrived at without making any inventory of cash, stock or details of construction expenses and thus without any evidence regarding excess availability of cash, stock in hand or unexplained investments. The survey party decided to get the surrender of Rs. 75,00,400/= as detailed below: 1. Excess Stock Rs.56,71,600/- 2. Excess Cash Rs. 9,78,800/- 3. Investment in Rs. 8,50,000/- Construction work in Progress. ITA No. 345/Del/2014 8 ----------------------- Rs.75,00,400/- ------------------------ As the health condition of my father Sh. G.K. Agarwal, who is a Diabetic and Heart Patient, was not good, hence in order to get rid of this pressure I requested my nears and dears to help me at this juncture by providing financial help in a very short span of time to enable me to get a pay order from my bankers I procured cash from the persons as per list attached and deposited into bank for getting the pay order, thus there was no excess cash found at the premises. Though admittedly as per the books of account the value of stock at the business premises on 19.9.2007 was Rs.54,06,623/-, however, without any basis or material,; the survey team assumed the value of stock at the premises to be Rs. 1,10,78,223/- without any physical verification. (Kindly refer to Q.36) which reads as under: “Q.36. During the course of survey u/s.133 A conducted in your business premises at A-28, Sector-8, Noida today i.e.,. 19.9.2007, copy of the trading & P&L a/c has been furnished by you which is duly signed by (you in the capacity as prop, of Sri Bankey Bihari Papers. As per this trading a/c , a stock of RS.54,06,623/- is available with you as per the books whereas as per physical inventory of stock prepared during the course of survey at your premises, the Stock of the value of Rs. 1,10,78,223/- has been found. Thus the stock is found in excess to the tune of Rs.56,71,600/-Please reconcile and explain this discrepancy.* It may be pointed out that the item in question is heavy paper reels weighing in average about 300 Kgs. - 400 Kgs. per reel. Neither the survey team had taken reels of paper for weighment nor did they have any equipment to check or to verify the weight or value of the stock at Rs. 1,10,78,223/- without any basis or physical inventory and I was forcibly made to accept the same under pressure. Likewise there was no cash available in the business premises beyond Rs.22,143/- However, the survey team without making any physical inventory of the cash, alleged that a cash of Rs. 10,01,000/- was available in the business premises and claimed excess cash of Rs. 9,78,857/-, though no such amount of cash was available in the business premises. The survey team also assumed an imaginary figure of Rs. 8,50,000/- being the approx. Amount spent on renovation and interior decoration. It is submitted that certain renovations were carried outby me in the premises in the year 2005-06 immediately after taking the premises and the amounts spent on renovation was duly reflected in the books of account for the year 2005-06 and the revenue has not discovered any defect in the books of accounts. No renovation work was going on or was being executed at the time of the said survey. ITA No. 345/Del/2014 9 I hereby withdraw from the forcible surrender and request for refund of the entire amount forcibly and unlawfully procured by the survey team towards the amount of income tax on such alleged surrender. Under the facts and circumstances explained above I am not able to pay my full attention neither to my business activities nor to my health/father’s health and family chores. In fact there is no fault on my part and I am a genuine and regular tax payer. Kindly drop the proceedings and refund the tax. Thanking you Yours faithful! Sd/- (Sandeep Kumax Mittal) Proprietor M/s. Sri Bankey Bihari Papers Cony with compliments to The Hon’bles I Chief Commissioner of Income Tax-XII, New Delhi 2. Commissioner of Income Tax-XIILNew Delhi. 3. Additional Commissioner of Income Tax Range 39(1), New Delhi.” 13. As regards the excess stock the assessee had replied to the question No. 36 that in order to purchase peace he surrendered the excess stock and in the letter of retraction, the assessee asserted that heavy paper reels weighed in average about 300 kgs – 400 kgs per reel. The survey team had not taken reels of paper for weighment they did not have any equipment to verify the weight or value of stock. No physical inventory was ever prepared by the survey team and the value of stock was assumed without any basis or physical inventory and that the assessee was forced to accept the excess stock under pressure. The contention of the assessee before the Ld. AO/CIT(A) was that the average weight per reel is 346 kgs whereas the survey team had taken average weight of one reel as 680 kgs which is completely misplaced. 13.1 The paper is an excisable item and the assessee had filed stock returns with the Custom & Central Excise Department and the returns for the period from April, 2007 to September, 2007 was placed before the Ld. AO/CIT(A) and no discrepancy was found either by the Central Excise Department or by the Revenue Authorities therein. During assessment proceedings production of stock register was insisted upon, though the assessee in reply to question No. 34 has stated that he is not maintaining ITA No. 345/Del/2014 10 any stock register because it involves various sizes, weight and quality of the paper. This statement of the assessee has completely been ignored by the Revenue Authorities. We, therefore, hold that the excess stock as worked out by the survey team does not rest on solid foundation as it has been arrived at by incorrect assumptions. 14. As to the excess cash, in the letter of retraction, the assessee submitted that there was no cash available in the business premises beyond Rs. 23,143/-. It was explained to the Ld. AO/CIT(A) that for payment of tax the assessee was made to collect money from his relatives and friends. Complete details i.e. name of the party, address, PAN, amount were furnished (pages 49-52 of Paper Book). The total of such cash collection by the assessee amounted to Rs. 10,02,000/-. Apart from this, the assessee arranged Rs. 8,50,000/- vide cheque No. 137414 from Ajay Kumar Aggarwal & Sons (HUF); Rs. 1,50,000/- vide cheque No. 000004 from Girraj Kishore Aggarwal & Sons (HUF) and Rs. 5,45,799/- through overdraft Account No. 06304010000150 maintained at Oriental Bank of Commerce. It was out of the above collection/arrangement made by the assessee that he could provide a banker’s cheque amounting to Rs. 24,91,600/- being the amount of tax on Rs. 75,00,400/- which the assessee was made to surrender. 14.1 It is interesting to note that the Ld. AO imposed penalty under section 271D for violation of provisions of section 269SS of the Act for obtaining cash loans by the assessee (pages 76-79 of Paper Book). However, the penalty has been deleted by the Ld. CIT(A) (pages 80-91 of Paper Book) by accepting the explanation of the assessee that cash was collected in the morning of 20th September, 2007 by the assessee from his friends and relatives in order to get banker cheque for Rs. 24,91,600/- favouring DCIT Circle 39(1). It may, not be out of place to mention that the Revenue’s appeal against the order (supra) of the Ld. CIT(A) stands dismissed by the Tribunal in ITA No. 5356/Del/2012 dated 30.09.2016. 14.2 The Ld. AO rejected the assessee’s explanation merely relying on the statement of the assessee recorded during survey. In fact, except cash of Rs. ITA No. 345/Del/2014 11 22,143/- no more cash was available with the assessee and the survey team erred in treating the funds arranged by the assessee for depositing tax as excess cash available with the assessee. The addition is not sustainable and is deleted. 15. Regarding the addition on account of investment in construction WIP, it was explained in the letter of retraction and during assessment proceedings that certain renovations were carried out in the year 2005-06 and the amount spent was duly reflected in the books of account. At the time of survey no renovation work was going on. The only basis of the impugned addition is the statement of the assessee during survey which has been retracted. The explanation of the assessee could have been verified with reference to the books of account which has not been done. The impugned addition does not rest on any solid legal basis and is therefore, deleted. 16. Accordingly, we decide ground No. 2, 3 & 4 in favour of the assessee. The additions challenged in these grounds were made on the basis of statement recorded on oath during the course of survey under section 133A which was retracted by the assessee. It is now well established that any admission made during statement recorded under section 133A cannot by itself, be made the basis for addition in the absence of any corroborative material brought on record by the Revenue. We have earlier observed that these additions are not sustainable even on merits. 17. Ground No. 5 relates to 50% disallowance out of rent paid by the assesee to his wife which has been confirmed by the Ld. CIT(A). The Ld. AO accepts that business letters of the assessee are being received at the premises for which rent is being paid by the assesee. The case of the assessee is that the premises was being used for placement of orders for purchase, meeting with suppliers, arranging dispatches, delivery etc. In none of the earlier years disallowance out of such rent has been made in assessments completed under section 143(3) of the Act. We agree with the submissions of the assessee and hold that no such adhoc disallowances ITA No. 345/Del/2014 12 based on surmises alone can be sustained. The impugned disallowance is deleted. 18. Ground No. 1 relating to jurisdiction has not been seriously contested by the assessee. We, therefore, dismiss this ground as not pressed. 19. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 19th December, 2022. sd/- sd/- (ANIL CHATURVEDI) (ASTHA CHANDRA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 19/12/2022 Veena Copy forwarded to - 1. Applicant 2. Respondent 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, New Delhi Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr. PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr. PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order