T K PRASAD,THRISSUR V. THE ACIT, CENTRAL CIRCLE, THRISSUR, THRISSUR

ITA 673/COCH/2022

AI Insights

The case involves Shri T.K. Prasad, a businessman engaged in the manufacturing and retail sale of gold jewellery, who appealed against the order of the CIT(A) confirming the additions made by the AO for the Assessment Year 2018-19. The AO had made these additions following a search and seizure operation under section 132 of the Income Tax Act, 1961, conducted at the assessee's premises, which revealed certain unexplained investments and excess stock of gold. The assessee contested these additions, arguing that they were based on coerced admissions and lacked substantive evidence. However, both the CIT(A) and the Tribunal found the assessee's explanations unconvincing and upheld the AO's additions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 633131 (ITAT-COCHIN)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2018-2019
• Other Referred Cases: LIBS Infonet (P) Ltd vs. ACIT, New Delhi [ITA No.6509/Del/2014], CIT vs. S. Khakder Khan son reported in {2008) 300 ITR 157 (Madras), CIT. Ranchi vs. Ravindra Kumar Jain reported in (2009) ITA NO.6509/Del/2014 33 SOT 251 (Delhi), Paul Mathews & Sons vs. CIT (2003) 263 ITR 101
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LEENA LAL; SNR
• Assessee Lawyers: MAKING ENQUIRY
• Keywords: Additional evidence; Corroborative evidences; Unexplained investment; Retraction; Search and seizure; Source of fund
• Section: 148; 144; 142(1); 132; 69; 133A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH : COCHIN BEFORE SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K., JUDICIAL MEMBER ITA No. 673/Coch/2022 Assessment Year : 2018-19 Shri T.K. Prasad, Thamarassery House, Marathakkara, Ollur, Thrissur – 680 320. PAN: ACTPP3442J Vs. The Assistant Commissioner of Income Tax, Central Circle, Thrissur. APPELLANT RESPONDENT Assessee by : None Revenue by : Smt. Leena Lal, Snr. AR Date of Hearing : 10-03-2025 Date of Pronouncement : 09-06-2025 ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER This is an appeal filed by the assessee challenging the order of the Ld.CIT(A) – 3, Kochi dated 07/02/2022 in respect of the A.Y. 2018-19 and raised the following grounds: “1. Mr. T. K. Prasad, the appellant is engaged in the business of manufacturing of gold and retail sale in jewellery business. He is a regular assessee before the Income Tax department and has also filed income tax returns and paying taxes accordingly. He has filed the return up to AY 2017-2018 regularly and in due time. He has declared true and correct return and that he has neither concealed the income nor given inaccurate particulars of income for any of previous years.But he has Page 2 of 10 ITA No. 673/Coch/2022 paid advance tax Rs.5,00,000 for the AY 2018-19 .There was a search and seizure operation u/s 132 of the Income Tax Act, 1961 in the business premises of the appellant on 18.08.2017.From the documents impounded, the AO has observed that certain investments had been made by the assessee. The department has carried off, all the details available at the office with them.The assessee has not concealed any income deliberately.Two years later, the AO initiated assessment proceedings u/s 153C for the period AY 2011-12 to AY 2017-18 153C on 18.09.2019. The assessee was demanded to produce the documents for the relevant period. Meanwhile. due to the work pressure, the accountant of assessee has resigned from his office. Initiation of assessment proceedings coupled with the sudden departure of accountant has led to severe mental distress and depression to assessee. Due to the limitation of time and the sudden resignation of the accountant, the assessee was unable to compile the requisite documents and hence requested the AO to adjourn the due date mentioned in the notice. However, disregarding the hardship of assessee, the AO did not grant any adjournment for the same. Due to all these reasons. the assessee was unable to file the returns for the AY 2018-19 despite receiving the notice u/s 148 on 30.09.2019. The AO has passed order u/s 144 r.w.s.147 of the income tax act 1961 on 27.12.2019 resulting in a tax liability of Rs.1,63,00,424/-. The assessee finds the order of Assessing Officer as illegal and unjustifiable. Against the additions made by the Assessing Officer, the assessee makes the following submissions: FACTUAL GROUNDS 1. Unexplained investment -The assessing officer stated in the assessment order that, as per statement recorded at the time of survey, the assessee has stated that his business is manufacturing of gold jewellery. The assessing officer considered the amount of balance outstanding with Shri Vijay Sait amounting to Rs.40,49,630/ - as unexplained investment and is added back to Total Income as unexplained income u/s 69 of the Income Tax Act, 1961 and taxed under section 115BBE of Income Tax Act,1961. Mr.Vijay Sait is gold dealer and creditor to the assesse. The assessee has advanced the money to purchase the gold and it is not the current year transaction. There is no balance deposit or outstanding balance with Mr.Vijay Sait. Page 3 of 10 ITA No. 673/Coch/2022 The assessee has admitted the same under the pressure from the investigation department. The addition made solely on the basis of statements recorded during the survey proceedings without adequate evidence is not sustainable in the eyes of law  Reference : It was held in LIBS Infonet (P) Ltd vs. ACIT, New Delhi [ITA No.6509/Del/2014] that the addition made solely on the basis of statements recorded during the survey proceedings without adequate evidence is not sustainable in the eyes of law. Speaking on behalf for ITAT Delhi. the Judicial Member Mr. H.S. Sidhu has observed that: “We have heard both the parties and perused the records, especially the orders of the revenue authorities. statement recorded u/s. 133A of the Act and the case laws cited by the Ld. Counsel of the assessee, as aforesaid as well as the CBDT's Circular dated 10.3.2003. We find that in the present case an addition of Rs. 70 lacs was made by the AO on the basis of statement of Mr. Ajay Singhal at the time of survey recorded u/s. 133A of the I.T. Act. We find considerable cogency in the Ld. Counsel of the assessee's submissions that addition cannot be made on the basis of the statement recorded during the survey under section 133A of the Act, in view of the various judicial decisions wherein, it has been held that such statement does not have any evidentiary value, especially the decision of the Hon'ble Madras High Court in the case CIT vs. S. Khakder Khan son reported in {2008) 300 ITR 157 (Madras) wherein, it has been held that \"Addition on the basis of statement recorded during survey under section 133A-Sect. 133A does not empower any IT Authority to examine any person on oath, hence, any such statement has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition\" and the decision of the Hon'ble High Court of Jharkhand delivered in the case of CIT. Ranchi vs. Ravindra Kumar Jain reported in (2009) ITA NO.6509/Del/2014 33 SOT 251 (Delhi) wherein. it has been held that \"addition made by the lower authorities merely on the basis of statement recorded during survey and thereafter, without bringing any corroborative material on record is devoid any merits.\" We also find force in the assessee's counsel contention that in view of the CBDT's Letter issued vide F.No. 286/2/2003-IT (Inv.) dated 10th March, 2003 the addition made by the AO and confirmed by the Ld. CIT (A) is not sustainable in the eyes of law. For the sake of Page 4 of 10 ITA No. 673/Coch/2022 clarity we are reproducing the contents of the CBDT's letter dated 10.3.2003 as under:- “F.No. 286/2/2003-IT (Inv) Government of India, Ministry of Finance & Company Affairs, Department of Revenue Central Board of Direct Taxes, Room No. 254, North Block, New Delhi, the 10th march, 2003 To All Chief Commissioners of Income tax (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Sub:- Confession of additional Income during the course of search & seizure and survey operation - similar Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey ITA NO.6509/De1/2014 operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on' collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- (S. R. Mahapatra] Under Secretary (Inv. II) In the background of the aforesaid discussions and respectfully following the precedents of the Hon'ble High Courts, as aforeSaid and in view of the CBDT's Letter dated 10.3.2003, as aforesaid, we are of the considered opinion that the addition made on the basis of the statement in the present case recorded ITA NO.6509/De1/2014 u/s. 133A is not sustainable in the eyes of law, hence, we delete the addition of Rs. 70 lacs Page 5 of 10 ITA No. 673/Coch/2022 made by the AO and confirmed by the Ld. CIT(A) and allow the Appeal of the Assessee accordingly.\" The assessee is of the opinion that no such incriminating documents were seized/ found during the search proceedings that suggest the undisclosed income of Rs. 1,00,00,000/- As per the instruction of CBDT Letter vide F.No. 286/2/2003-IT (Inv.) dated 10.03.2003. it is a well-established fact that in the absence of any evidence. no addition is required to be made for any adhoc declaration made by the assessee. The same has been upheld by the Kerala High Court in Paul Mathews & Sons vs. CIT (2003) 263 ITR 101.1t was observed that: “Section 133A permits recording of statement, but does not authorize the person, taking the statement, to administer oath before recording the statement, which power is conferred u/s 132(4) of the Act only. Thus, in contra-distinction to Section 133A, Section 132(4) enables the authorized officer to examine a person on oath and any statement made by such person during such examination can be used in evidence under the Act. Therefore. the evidence recorded u/s 133A has no evidentiary value. The Revenue's contention before the High Court (supra) that the statement recorded by the authorized officer has evidentiary value and the statement cannot be retracted after a lapse of time has been negated by the court in its judgment in Dhingra Metal Works and the court has held that a statement recorded at the time of survey could be retracted by the assessee, if it is shown at a later point of time that the admission was incorrect. The court further observed that the AO cannot make addition solely on the basis of the statement made during survey and if at all, such addition is to be made, the AO ought to controvert the retraction made by the assessee by making enquiry and looking to the facts of the case. No addition can be made to the total income or an adverse inference drawn merely on the basis of admission at the time of survey.\" 2. Investment in stock— The Assessing Officer has estimated the value of stock at the premises of the assessee at Rs.1,14,61,018/- and treated the same as unexplained investments u/s 69 of Income Tax Act 1961 and added back to Total Income under section 115BBE of Income Tax Act.1961. Page 6 of 10 ITA No. 673/Coch/2022  As stated before, the assessee is a businessman and has been a regular assessee before the Income Tax Department. In consequent to search u/s 132 in the premises of assessee on 18.08.2017, the AO initiated assessment proceedings u/s 153C for the period AY 2011- 12 to AY 2017-18 153C on 18.09.2019. The assessee was demanded to produce the documents for the relevant period. Meanwhile, due to the work pressure, the accountant of assessee has resigned from his office. Initiation of assessment proceedings coupled with the sudden departure of accountant has led to severe mental distress and depression to assessee. Due to the limitation of time and the sudden resignation of the accountant, the assessee was unable to compile the requisite documents and hence requested the AO to adjourn the due date mentioned in the notice. However, disregarding the hardship of assessee, the AO did not grant any adjournment for the same. Due to all these reasons, the assessee was unable to file the returns for the AY 2018-19 despite receiving the notice u/s 148 on 30.09.2019.  The stock treated by the AO as excess stock actually forms part of the stock of the assessee from his gold manufacturing business. As per the financial statement filed before the IT Department, the closing stock as on 31.03.2017amounts to Rs. 52,86,070/-.Though assessee has not filed return for the AY 2018-19 due to the aforementioned reasons, the assessee has paid advance tax amounting to Rs. 5,00,000/-. In the background of the above facts and circumstances, the assessee is of the opinion that the additions made by the Assessing Officer are unreasonable and unjustifiable and the same must be deleted.” 2. The brief facts of the case are that the assessee is in the business of manufacturing gold jewellery. A search was conducted on 18/08/2017 and incriminating books were seized from the business premises of the assessee and based on that, notice u/s. 148 was issued on 30/09/2019. Thereafter, notice u/s. 142(1) was issued but the assessee had not filed any return of income in response to the notice issued u/s. 148. Finally, a show cause notice was issued on 17/12/2019. Even for the said show cause notice, the assessee had not responded and therefore a pre-assessment notice was Page 7 of 10 ITA No. 673/Coch/2022 issued on 21/12/2019. Even for the said notice, the assessee had not responded. The AO made the assessment based on the entries in the diary seized at the time of search. In the said diary, it was recorded as outstanding balance Rs. 40,49,630/-. This was accepted by the assessee by way of his sworn statement u/s. 132(4) of the Act. Similarly, at the time of search, the stock was verified and it was found that there was excess stock of 4229.158 grams of gold. The assessee was not able to explain the source of fund for acquisition of the said excess stock and he agreed to admit the same for assessment and therefore the value of the gold was estimated at Rs. 1,14,61,018/-. The AO made the two additions based on the entries in the diary as well as the excess stock found as unexplained investment u/s. 69 of the Act. 3. As against the said order of the AO, the assessee filed an appeal before the Ld.CIT(A). During the appellate proceedings, the assessee made a request to admit the additional evidences in support of the grounds of appeal. The Ld.CIT(A) had not accepted the said plea and also confirmed the additions made by the AO by not accepting the explanations offered by the assessee. The Ld.CIT(A) also got a remand report from the AO and considered the issue in detail and dismissed the grounds raised by the assessee. 4. As against the said order of the Ld.CIT(A), the assessee is in appeal before this Tribunal. 5. At the time of hearing none appeared for the assessee. The case was listed on various occasions but there was no representation on several occasions. Therefore we have decided to hear the Ld.DR and dispose the appeal on merits. 6. The Ld.DR submitted that the assessee right from the beginning is not cooperative and no materials were also filed before the AO, Ld.CIT and also Page 8 of 10 ITA No. 673/Coch/2022 before this Tribunal and therefore submitted that the addition made by the AO is correct and prayed to dismiss the appeal. 7. We have heard the arguments of the Ld DR and perused the materials available on record. 8. From the perusal of the assessment order, it came to light that the assessment was made u/s. 144 of the Act since the assessee had not responded to any of the notices issued by the AO. Further, the additions were made based on the materials seized at the time of search which was accepted by the assessee while giving statement u/s. 132(4) of the Act. Thereafter, the AO took up the assessment proceedings and issued various notices, show cause notice and pre-assessment notice but the assessee had not responded to any of the notices and not offered any explanations to the proposals made by the AO. Therefore the AO made the additions u/s. 69 of the Act. 9. Even before the Ld.CIT(A), the assessee had given some different explanations which are not in conformity with the statements given at the time of search. The Ld.CIT(A) also, after getting the remand report, had observed that the assessee had not produced any new evidences. Further, the Ld.CIT(A) had considered the entries made in the seized diary in which it was clearly mentioned that the details of the advances made by the assessee and the bullion supplied by Mr. Vijay Sait. The assessee being in the business of making gold jewellery, the normal presumption would be that he purchased the bullion from Mr. Vijay Sait for which he had made advances and therefore the advances reflected in the diary is for the purpose of purchasing the bullion. The Ld.CIT(A) had considered the entire facts and arrived a conclusion that the assessee had failed to substantiate the retraction from sworn statement and therefore confirmed the addition made based on the entries in the seized diary. Before us, the assessee filed a paper book and additional submissions and contended that the advance amount mentioned in the seized diary is not the current year transactions. Page 9 of 10 ITA No. 673/Coch/2022 In support of the said contentions, the assessee had not furnished any corroborative evidences and in such circumstances, we do not find any merit in the arguments advanced by the assessee and therefore we dismiss ground no. 1. 10. Insofar as the ground no. 2 that the excess stock available at the time of search, the assessee’s contention that the excess stock forms part of the stock of the assessee from his gold manufacturing business, could not be accepted since no documentary evidences were also filed before us. We have also noticed that before the Ld.CIT(A), the assessee’s submission was that the excess stock found during the search represents the gold received for job work from small goldsmiths for which the assessee had received only the making charges. In support of this contention the assessee furnished a self made statement in page 5 of the paper book which contains several names and the gold in grams. This statement could not be relied upon for the reason that the assessee had not recorded the said details in his books of accounts. The assessee had given a different explanation for the first time when the matter was pending before the Ld.CIT(A). The assessee had not stated anything about the job work when the statement was recorded and in fact, in the statement, he has admitted that he was in the business of making jewellery and selling it to the customers. 11. Now before us, the assessee had submitted a different story that the excess stock actually forms part of the stock of the assessee from his gold manufacturing business. The assessee had given different stories, one at the time of search and another story at the time of the first appeal and another story before us. It shows that the explanations given by the assessee is not a genuine one and therefore the same could not be relied upon. 12. We, therefore, do not find any merits in the second ground raised by the assessee since no documentary evidences were furnished before us in Page 10 of 10 ITA No. 673/Coch/2022 support of the claim made by the assessee. We, therefore, dismiss the ground no. 2 raised by the assessee also. 13. In the result, the appeal filed by the assessee is dismissed. Order pronounced in the open court on 9th June, 2025. Sd/- Sd/- (INTURI RAMA RAO) (SOUNDARARAJAN K.) Accountant Member Judicial Member Cochin, Dated, the 9th June, 2025. /MS / Copy to: 1. Appellant 2. Respondent 3. CIT 4. DR, ITAT, Cochin 5. Guard file 6. CIT(A) By order Assistant Registrar, ITAT, Cochin "