Ghanshyambhai Dayaram Bachani, Mehsana V. ACIT, Circle Patan, Patan

ITA 513/AHD/2019

AI Insights

The case involves an appeal by Shri Ghanshyam Dayaram Bachani against the additions made to his income for the assessment year 2015-16, which were based on a statement made during a survey under section 133A of the Income Tax Act. The additions included investments in jewellery and renovation/construction/furniture, which the assessee later retracted, claiming they were made under pressure. The Assessing Officer (AO) and the CIT(Appeals) upheld these additions, leading to the appeal before the Tribunal. The Tribunal found that the additions were not supported by any material evidence and were solely based on the retracted statement, which has no evidentiary value under the law. The Tribunal also restored the issue of disallowance of cash payments under section 40A(3) to the CIT(Appeals) for further examination.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 131361 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 12-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 27-03-2019
• Other Referred Cases: CIT v. S. Khader Khan Son, CIT v. Agew Steel Mfg. (P.) Ltd., ACIT v. Shree Krishna Developers, Abhi Developers v. ITO, D.S. Agencies & Associates v. Addl CIT, ACIT v. Manjit Singh, CIT v. Sunrise Tooling System (P.) Ltd, Mahesh Ohri v. ACIT, Charanjit Singh v. ITO, CIT v. P. Balasubramanian
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Unexplained expenditure; Corroborative evidences; Tax effect; Retraction; Bogus
• Section: 68; 69C; 40A(3); 133A; 250; 20

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “A” BENCH Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Shri Ghansh yam Dayaram Bachani, Vegetable Market, Nava Gu nj Bazar, Visnagar, Dist: Mehsana PAN: ADHPB288 5L (Appellant) Vs The ACIT, Circle Patan, Patan (Resp ondent) Asses see b y : Shri Su la bh Padsh ah, A. R. Revenue by : Shri Atul Pandey , S r. D. R. Date of hearing : 13-03 -2023 Date of pronouncement : 21-04 -2023 आदेश /ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:- This is an appeal filed by the assessee against the order of the ld. Commissioner of Income Tax (Appeals), Gandhinagar, Ahmedabad, in proceeding u/s. 250 vide order dated 08/03/2019 passed for the assessment year 2015-16. ITA No. 513/Ahd/20119 Assessment Year 2015-16 I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 2 2. The assessee has taken the following grounds of appeal:- Sr. No. Grounds of appeal Tax effect relating to each Ground of appeal 1 Learned CIT(A) has erred in confirming the addition of Rs. 20,82,105/- made by AO in respect of investment in jewellery of Rs.20,82,105/- as per declaration made instatement recorded u/s 133 A without considering the facts that there is no evidence of such investment on record . 6,43,370/- 2 Learned CIT(A) has erred in confirming the addition of Rs. 40,75,907/- made by AO in respect of investment in renovation/construction/furniture of Rs. 40,75,907/- as per declaration made in statement recorded u/s 133 A without considering the facts that there is no evidence of such investment on record . 12,59,455/- 3 Learned CIT(A) has erred in confirming the addition Rs. 1,31,092/- made by AO u/s 40A(3) in respect of Car expenses made in cash. 40,507/ 4 Learned CIT(A) has erred in confirming the addition of Rs. 12,68,072/- made by AO u/s 40A(3) in respect of Other payments for purchases from traders made in cash. 3,91,834/- Total tax effect 23,35,166/- Ground Numbers 1 and 2: addition of 20,82,105/ -in respect of investment in jewellery and addition of 40,75,907/-in respect of investment in renovation/construction/furniture 3. The brief facts of the case are that the assessee is engaged in the business of trading in vegetables and fruits and for the year under consideration, the assessee filed return of income at 25,76,420/ -. A survey action under section 133A of the Act was carried out at the premises of the assessee on 19-11-2014. During the course of survey proceedings, the assessee in his statement during the course of survey proceedings, declared unaccounted investment in construction/renovation/furniture of I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 3 40,75,907/- and investment in jewellery and bullion of 20,82,105/- for assessment year 2015-16. The assessee subsequently retracted the statement made during the course of survey on 21-11-2014 on the ground that the statement given on 19-11-2040 was made under pressure and therefore, it is not acceptable to the assessee. However, the AO held that the retraction made by the assessee is without any basis, and without any supporting evidences. Accordingly, the AO held that the income disclosed by the assessee in the statement recorded, and based on the impounded material is treated as true and correct disclosure. The amount not disclosed the return of income amounting to 61,82,012/ -was added to the total income of the assessee. While making the aforesaid addition, the AO made the following observations: “In view of the above, the income disclosed by the assessee in the statement recorded and based on the impounded material is treated as true and correct disclosure. Since, the assessee failed to explain the source of investment in construction/renovation of Rs. 40,75,907/- and in jewellery/bullion of Rs. 20,82,105/- during the course of survey proceedings as well as assessment proceedings, therefore the same is added to the total income of the assessee. Penalty proceedings u/s 271(l)(c) are initiated separately for concealment of Income.” 4. In appeal, the Ld. CIT(Appeals) dismissed the appeal of the assessee with respect to the aforesaid additions with the following observations: “6.2 Since the exact amount has been stated by the appellant, there must be some document in possession of the survey team or in possession of the appellant on the basis of which he stated the figure of purchased jewellery and ornaments. However, it is noticed that this amount is added by the A.O. referring to para 4 of the assessment I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 4 order but he did not mention as to whether the same is taxed u/s.69(unexplained investment) or 69C(Unexplained expenditure) of the Act but appears to be taxed as "income of the current year" as admitted by the appellant during the course of survey proceedings. Since this is a suo-moto declaration made by the appeilant during the course of appellate proceedings and thereafter, nothing has been brought on record by the appellant in denial of such purchase of the gold and bullion during the course of assessment proceedings as well as in the present appellate proceedings, the addition of Rs.20,82,105/- is required to be confirmed and the part ground of appeal raised against this addition is dismissed. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 7.2 Since the exact amount has been stated by the appellant, there must be some document in possession of the survey team or in possession of the appellant on the basis of which he stated the figure of construction, renovation and furniture. However, it is also noticed that this amount is added by the A.O. in para 4 of the assessment order but did not mention as to whether the same is taxed u/s.69 (unexplained investment) or 69C (Unexplained expenditure) of the Act but appears to be taxed as "income of the current year" as admitted by the appellant during the course of survey proceedings. Since this is a suo-moto declaration made by the appellant during the course of appellate proceedings and thereafter, nothing has been brought on record by the appellant in denial of such investment/expenditure in house property during the course of assessment proceedings as well as in the present appellate proceedings, the addition of Rs.40,75,907/- is required to be confirmed and the part ground of appeal raised against this addition is dismissed. 7.3 While dismissing the ground of appeal in respect of above- mentioned two additions, it is also observed that the book results of the appellant have been accepted and the capital account of the appellant did not reflect the matching withdrawals from the capital account of the appellant as appearing as on 31.03.2015. Thus both these investments are held to be out of undisclosed income.” I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 5 5. The assessee is in appeal before us against the aforesaid order passed by Ld. CIT(Appeals) confirming the aforesaid additions made by the AO. The main contention of the assessee before us is that from the records, it is clear that no such seized material or any document or record was found during survey proceedings justifying the addition of 20,82,105/ -towards investment in jewellery and 40,75,907/- towards investment in renovation/construction/furniture. The counsel for the assessee submitted that the additions made are purely on basis of declaration made in statement recorded during survey proceedings. In fact, after survey proceedings and during course of assessment proceedings as well, the assessee had filed complete accounts and other details, however, the AO has not been able to bring out any document on record or bring forth any adverse evidence which can justify the addition of Rs. 61,58,012/-. Though the AO has stated in the assessment order that income disclosed in statement recorded was based on impounded material, the AO has not provided nor brought forth any such material on record throughout the assessment proceedings, which can justify the above additions. Therefore, the addition of 20,82,105/-in respect of investment in jewellery and 40,75,907/-in respect of investment in renovation/construction/furniture has been made purely relying upon the declaration made in the statement recorded, which has already been retracted by the assessing, after survey and thus the above additions are not justified. Further, during the course of appellate proceedings, the Ld. CIT(Appeals) has himself accepted that on the issue of addition of 20,82,105/- in respect of investment in jewellery that the AO has not referred to any document found during course of survey proceedings, suggesting that the appellant has made such investment in jewellery and bullion during the year under I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 6 consideration (para 6.1 and page 15) and similarly on the issue of addition of 40,75,907/-towards investment in renovation/construction/furniture, the Ld. CIT(Appeals) observed that the assessing officer has not referred to any document found during the course of search proceedings, suggesting that the appellant had spent the amounts or invested the same in construction, renovation and furniture during the year under consideration. Therefore, after accepting the above facts, Ld. CIT(Appeals) has erred in confirming the additions of 20,82,105/-in respect of investment in jewellery and 40,75,907/-in respect of investment in renovation/construction/furniture, merely on basis of statement recorded during the course of survey proceedings, ignoring the fact that the aforesaid statement had already been retracted by the assessee during the course of assessment itself. Therefore, the counsel for the assessee submitted that the only basis that can be found for making and confirming the above additions is the declaration made in the statement recorded during the course of survey proceedings. However, the aforesaid statement recorded during survey proceedings has been retracted immediately by the assessee and such statement recorded during the course of survey has no evidentiary value, particularly in light of the fact that there is nothing to support the addition except the declaration obtained during the survey. 6. In response, the DR placed reliance on the observations made by the Ld. CIT(Appeals) in the appellate order. 7. We have heard the rival contentions and perused the material on record. It is well-settled law that statement of the assessee taken during the I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 7 course of survey, which has been subsequently retracted has no evidentiary value. In the case of CIT v. S. Khader Khan Son 25 taxmann.com 413 (SC), the Hon'ble Supreme Court held that Section 133A does not empower any ITO to examine any person on oath; so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made the basis of addition. In the case of CIT v. Agew Steel Mfg. (P.) Ltd. 46 taxmann.com 120 (Gujarat), the addition was made by Assessing Officer in respect of excess stock found in search only on basis of statement of MD of assessee-company which was later on retracted. The Tribunal reconciled entire material and concluded that Assessing Officer was not right in making such addition. The High Court dismissed the appeal of the Revenue by holding that where after examining summary of stock valuation and other relevant material, Tribunal computed valuation of stock and deleted a part thereof, same was not to be interfered. In the case of ACIT v. Shree Krishna Developers 88 taxmann.com 659 (Ahmedabad - Trib.), the ITAT held that where statement of partner of assessee-firm taken under section 133A was later on retracted and only evidence Department had was duplicate set of books of account which were made for purpose of taking bank loan, addition made under section 68 had to be deleted. In the case of Abhi Developers v. ITO 12 SOT 444 (AHD.), the Ahmedabad ITAT held that no evidentiary value can be attached to a statement recorded under section 133A unless it is supported by some material. In the case of D.S. Agencies & Associates v. Addl CIT 82 taxmann.com 252 (Mumbai - Trib.), the ITAT held that addition made purely on basis of statement made during course of survey under section 133A which was later on retracted by assessee was to be deleted. In the case I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 8 of ACIT v. Manjit Singh 85 taxmann.com 210 (Amritsar - Trib.), the ITAT held that where there was no material with revenue to make addition in excess of physical stock found during survey, no addition could be sustained on basis of retracted surrender of unaccounted stock by assessee in survey proceedings. In the case of CIT v. Sunrise Tooling System (P.) Ltd 47 taxmann.com 20 (Delhi), the Delhi High Court held that where Assessing Officer made addition to assessee's income on basis of statement recorded by director of company in course of survey to effect that said amount represented non-existent transaction, since statement so made did not have any evidentiary value and, moreover, Assessing Officer had not even rejected assessee's books of account while treating transaction in question to be bogus, impugned addition deserved to be deleted. In the case of Mahesh Ohri v. ACIT 35 taxmann.com 301 (Delhi - Trib.), the ITAT held that where apart from statement under section 133A(3)(iii), revenue had not brought anything on record in support of its conclusion that assessee had undisclosed income, addition made by Assessing Officer could not be sustained. In the case of Charanjit Singh v. ITO 88 taxmann.com 685 (Chandigarh - Trib.), the ITAT held that Statement recorded on oath at time of survey under section 133 has no evidentiary value and no addition under section 68 should be made on that basis. In the case of CIT v. P. Balasubramanian 33 taxmann.com 130 (Madras), the High Court held that any statement recorded under section 133A would have an evidentiary value only if it is supported by relevant material to substantiate same. 8. In the instant facts, notably, the additions have been made by the AO and subsequently confirmed by Ld. CIT(Appeals) are only on the basis of I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 9 statement/declaration which has been made by the assessee during the course of survey proceedings. The Ld. CIT(Appeals) has specifically observed during the course of appellate proceedings that the assessing officer has not referred to any documents found in the course of survey proceedings, suggesting that the appellant had made such investment in jewellery and bullion during the year under consideration. Similarly, the Ld. CIT(Appeals) also observed that assessing officer has not referred to any documents found during the course of survey proceedings, suggesting that the appellant had spent the amounts or invested the same in construction, renovation and furniture during the year under consideration. Accordingly, it is observed that the additions have been confirmed by Ld. CIT(Appeals), only on the basis of statements recorded during the course of survey proceedings, which have been subsequently retracted by the assessee. In our considered view, Ld. CIT(Appeals) has not been able to give any comprehensive reason/logic for confirming the aforesaid additions. It is well-settled law that no additions can be made on the basis of statements/declaration made by the assessee during the course of survey proceedings, which have been subsequently retracted, unless the Department is able to bring on record any supporting evidence/material to show that the declaration/statement made by the assessee was correct and could not have been retracted. However, apparently in the present facts, no such material has been placed on record by the Department to suggest that the assessee had made investment in jewellery or investment in construction/renovation/furniture. Accordingly, in our considered view, the Ld. CIT(Appeals) has erred in law and on facts in confirming the addition in respect of investment made by the assessee in jewellery and investment in I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 10 construction/renovation/furniture. In view of the above observations, ground Numbers 1 and 2 of the assessee’s appeal are allowed. 9. In the result, the ground number 1 and 2 of the assessee’s appeal are allowed. Ground number 3: Addition of 1,31,092/ - u/s 40A(3) in respect of car expenses in cash 10. Before us, the counsel for the assessee submitted that he shall not be pressing ground number 3 of the assessee’s appeal. Accordingly, ground number 3 of the assessee’s appeal is dismissed as not pressed. Ground number 4: Addition of 12,68,072/ - u/s 40A(3) of the Act in respect of other payments for purchases from traders made in cash 11. The brief facts in relation to this ground of appeal are that during the course of assessment, the AO made addition under section 40A(3) of the Act on account of cash payments made by the assessee in contravention of the provisions of the aforesaid section. Besides the above, the AO had also made certain additions under section 40A(3) of the Act, which were confirmed by Ld. CIT(Appeals) . The specific grievance of the assessee is with respect to addition of 12,68, 072/- u/s 40A(3) of the Act on the ground that despite the fact that complete details were filed before the assessing officer towards the aforesaid payments during the course of assessment proceedings, the AO has not carried out any verification while I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 11 making the aforesaid disallowance of 12,68,072/-. The assessment order is completely silent with respect to the aforesaid addition. 12. In appeal before Ld. CIT(Appeals), he confirmed addition on the ground that the payments made to various parties are neither farmers nor commission agents and, thus, these cash payments made by the appellant of 12,68,072/-is not covered by the exclusions provided under Rule 6DD of the IT Rules. 13. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals). The counsel for the assessee submitted before us that the assessee had submitted details of payments of 12,68,072/- (attached at pages 52-69 of the paper book) and from the details furnished, it can easily be verified that most of the payments have been made to vegetable and fruit vendors, who are either farmers or commission agents and, thus, all these payments are covered under the exceptions to Rule 6DD of the IT Rules. In response, the DR placed reliance on the observations made by the Ld. CIT(Appeals) in the appellate order. 14. We have heard the rival contentions and perused the material on record. On going through the assessment records, we observe that Ld. CIT(Appeals) has not made any specific observation while confirming the aforesaid addition in the hands of the assessee and simply stated that the payments have been made to persons who do not fall within the purview of exclusion provided under Rule 6DD of the IT Rules. Accordingly, in interest of justice, we are hereby restoring this issue to the file of Ld. I.T.A No. 513/Ahd/2019 A.Y. 2015-16 Page No. Ghanshyambhai Dayaram Bachani vs. ACIT 12 CIT(Appeals) for de novo consideration after giving due opportunity of hearing to the assessee to present its case on merits. In the result, ground number 4 of the assessee’s appeal is restored to the file of Ld. CIT(Appeals) with the above directions. 15. In the result, ground number 4 of the assessee’s appeal is allowed for statistical purposes. 16. In the combined result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 21-04-2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 21/04/2023 आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/ आदेश से, उप/सहायक पंजीकार आयकर अपील य अ धकरण, अहमदाबाद