Direct Tax Online

Cited Here

COMMISSIONER OF INCOME TAX vs.DIGAMBAR KUMAR JAIN (HUF)

HIGH COURT OF MADHYA PRADESH

KRISHN KUMAR LAHOTI & SMT. VIMLA JAIN, JJ.

ITA No. 198 of 2012

Nov 19, 2012

(2012) 83 CCH 0236 MPHC

(2013) 84 DTR 0365

Legislation Referred to

Section 69, 133A

Case pertains to

Asst. Year 2007-08

Decision in favour of:

Assessee

Survey Evidentiary value of Survey statement u/s 133A Survey u/s 133A was conducted in premises of assesseeHUF,
and certain documents were impoundedStatement of Karta was recorded in which he admitted that there were certain
discrepancies in impounded documents and surrendered income for taxationAddition was made by AO on basis of a
statement recorded during survey u/s 133ACIT(A) had deleted additionITAT had confirmed order passed by
CIT(A)Held, statement recorded under s. 133A had no evidentiary valueAdditions could not be made merely on the
basis of statement u/s 133APresence of some corroborating evidence against undisclosed income of assessee was
essential before making additionAddition was wrongly made by AO Revenues appeal dismissed

Held

Merely on basis of statement u/s 133A of the Income Tax Act, which was recorded during survey , such addition could not have
been made. To make such addition, some corroborating evidence against undisclosed income was required, which could not be
found by the AO. The AO had made an addition merely on the basis of a statement recorded during survey u/s 133A of the
Income Tax Act. The CIT (A) and Tribunal had rightly deleted addition by holding that merely on basis of such statement
without corroboration, such addition could not be made. CIT Vs. Ms Dhingra Metal Works in ITA No.1111/2010 and (b) CIT
vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad), followed

(Para 8, 10)

Conclusion
Addition made by revenue merely on the basis of statement recorded during survey u/s133A of the Income Tax Act was not
justified.

In favour of

Assessee

Cases Referred to

Paul Mathews and Sans vs. CIT, 263 ITR page 101 (Kerala)
CIT Vs. Ms Dhingra Metal Works in ITA No.1111/2010 and
CIT vs. S. Khader Khan Son (2008) 300 ITR 157 (Mad)
Pullanquote Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC)
Paul Mathews & Sons vs. CIT (2003) 181 CTR (Ker) 207 : (2003) 263 ITR 101 (Ker)
CIT vs. G.K. Senniappan (2006) 203 CTR (Mad) 447 :(2006) 284 ITR 220 (Mad)

Counsel appeared:

Sanjay lal for the Appellant

{JUDGMENT}JUDGMENT

1. This appeal is directed against an order dated 13/06/2012 passed by Income Tax Appellate Tribunal, Jabalpur Bench,
Jabalpur, in ITA No. 114/Jab/2010 Assessment Year 2007-08, by which the Tribunal has confirmed the order passed by the
Commissioner of Income Tax (Appeal) dated 08/07/2012. Both the authorities have found that the Assessing Officer erred in
making the addition of Rs.40 lakhs as the additional income of the appellant without any material, merely on the basis of
statement recorded during survey under Section 133A of the Income Tax Act.

2. The learned counsel for the appellant submits that it was burden on the assessee to prove that the statement recorded by the
Income Tax Officer, during the survey , was not correct. Both the authorities have erred in treating the statement under Section
133A of the Income Tax Act, as incorrect, in absence of any corroboration by documentary evidence. It was submitted that this
appeal may be admitted on the substantial questions of law as framed in the memo of appeal.

3. We have gone through the record and orders passed by the CIT (A) and Income Tax Appellate Tribunal.

4. The facts of the case are that a survey under Section 133A of the Income Tax Act, was conducted in the premises of the
respondent-HUF on 20/09/2006. The respondent is a manufacturer and trader of umbrellas. During survey , certain documents
were found which were impounded. A statement of Shri Digambar Kumar Jain, the Karta of the assessee was recorded in
which he had admitted that there were certain discrepancies in the impounded documents and he had surrendered for taxation
an amount of Rs.40 lakhs to cover possible anomaly. During the assessment proceedings, he had refuted the surrendered on the
ground that there was no undisclosed income. The Assessing Officer on the basis of statement found that the assessee was
liable for further addition of Rs.40 lakhs and assessed the respondent accordingly.

5. An appeal was preferred by the assessee against such an order before the Commissioner of Income Tax. In the appeal, it was
stated that in absence of any material against assessee, addition could not have been made, merely on the basis of the statement
recorded under Section 133A of the Income Tax Act. The aforesaid addition required corroboration by some cogent evidence.

6. The CIT (A) in the order has recorded facts, which reads thus:-

"It was vehemently contended by the counsel of the appellant that the action of the Assessing Officer in making addition of
Rs.40,00,000/- is based purely on the statement recorded during the course of survey . It as contended that the outset it may be
mentioned that the statement recorded during the course of survey has no binding force nor it can be considered for the
purposes of assessment as held by the Kerala High Court in the case of Paul Mathews and Sans vs. CIT, 263 ITR page 101
(Kerala). The assessee had submitted a detailed reply in this regard which has been verbatim reproduced by the Assessing
Officer in the assessment order starting from page no.6 and completing on page no.11. The assessee had also filed a retraction
of statement before the Commissioner of Income Tax. The Assessing Officer rejected the same that the retraction was
submitted by the assessee after 2 1 /2 months of the survey . He however lost sight of the fact that all the books of accounts and
documents were impounded by the survey authorities. The assessee was not provided the inspection and copies of those
accounts and without looking into the accounts it was not possible for the assessee to ascertain the amount to surrender for the
purpose of tax. However, when he examined those accounts he himself made surrender in the return of income submitted by
him based on actuarial calculation by incorporating all the seized documents and calculated the income of Harish Umbrella at
Rs.16,24,962/-. The Assessing Officer had also not doubted the surrender of the assessee in the return but he added a sum of
Rs.40 lakhs based only on the statement recorded during the course of survey . While doing so he never even considered the
surrender actually made by the assessee in the return of income which clear goes to show that the Assessing Officer had not
properly appreciated the facts of the case and made the addition for addition sake. The detailed submission those were made
before the Assessing Officer was again submitted and it was argued that the Assessing Officer had quoted several decisions but
the sum and substance of the decisions were that addition cannot be made merely on alleged confession of the assessee unless
it is corroborated by the other circumstantial evidence i.e. the books of accounts and other documents those may be found in
possession f the assessee or collected by the Assessing Officer. In the instant case the assessee had fully taken into
consideration all the documents and papers those were found and on that basis has calculated its income and that had been
offered for tax. Thereafter nothing remained to be explained as none is doubted by the Assessing Officer. It is thus manifest
that income declared by the assessee fully covers all the accounts and documents found and seized by the survey party and
there was absolutely no case for making any addition. The action of the Assessing Officer in making addition was based purely
on statement recorded during the course of survey unless some other corroborative material was pointed out or brought on
record by the Assessing Officer the action of AO is illegal . The Assessing Officer has not been able to substantiate the
addition/surrender of Rs.40 lakhs by bringing on record such material or evidence. On the contrary the assessee has fully
explained each and every paper and has made the correct surrender on actual working in the return of income. The law does
not permit the addition as made by the Assessing Officer.

7. The CIT (A) on the basis of the aforesaid discussion held that the additional was not correct and it was not in accordance
with law. Relying on the judgment of various High Court s, the aforesaid addition was deleted. Against the orders passed by
the CIT(A), an appeal was filed before the Tribunal and Income Tax Appellate Tribunal, Jabalpur Bench, Jabalpur vide order
dated 13/06/2012 has reconsidered the matter and found that CIT(A) was right in directing such deletion and dismissed the
appeal. This order is under challenge.

8. We have perused the record and found that merely on the basis of statement under Section 133A of the Income Tax Act,
which was recorded during the survey , such addition could not have been made. To make such addition, some corroborating
evidence against undisclosed income was required, which could not be found by the Assessing Officer. The Assessing Officer
had made an addition merely on the basis of a statement recorded during survey under Section 133A of the Income Tax Act.
The CIT (A) and the Tribunal had deleted it by holding that merely on the basis of such statement without corroboration, such
addition could not be made.

9. Shri Lal learned counsel for the appellant also submitted that these authorities have not recorded any findings that the
statement recorded under Section 133A of the Income Tax Act, was unbelievable, but considering the legal position as has
been found by the CIT (A) and the Tribunal, the aforesaid contention has no merit. The view is supported by the judgments of
various High Court s in (a) CIT Vs. Ms Dhingra Metal Works in ITA No.1111/2010 and (b) CIT vs. S. Khader Khan Son
(2008) 300 ITR 157 (Mad), in which it has held thus :-

"In the instant case, there was a survey operation conducted under s. 133A in the assessee's premises and a statement was
recorded from one of the partners. Assuming there were discrepancies and irregularities in the books of accounts maintained by
the assessee, an offer of additional income for the respective assessment years was made by the partner of the firm. But, such
statement, in view of the scope and ambit of the materials collected during the course of survey action under s. 133A shall not
have any evidentiary value, as rightly held by the CIT(A) and the Tribunal, since such statement was not attached to the
provisions of s. 133A. It could not be said solely on the basis of the statement given by one of the partners of the assessee firm
that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the
existence of such disclosed income or earning of such income in the hands of the assessee, it could not be said that the
Revenue had lost lawful tax payable by the assessee. A power to examine a person on oath is specifically conferred on the
authorities only under s.132(4) in the course of any search or seizure. Thus, the IT Act, whenever it thought fit and necessary
to confer such power to examine a person on oath, has expressly provided for it, whereas s.133A does not empower any ITO to
examine any person on oath. Thus, in contradistinction to the power under s.133A, s.132(4) enables the authorized 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 IT Act. On the other hand, whatever statement recorded under s. 133A is not given an evidentiary value. What is more
relevant, in the instant case, is that the attention of the CIT(A) and the Tribunal was rightly invited to the circular of the CBDT
dt. 10th March, 2003 with regard to the confession of additional income during the course of search and seizure and survey
operations.- Pullanquote Rubber Produce Co. Ltd. vs. State of Kerala 1972 CTR (SC) 253 : (1973) 91 ITR 18 (SC), Paul
Mathews & Sons vs. CIT (2003) 181 CTR (Ker) 207 : (2003) 263 ITR 101 (Ker) and CIT vs. G.K. Senniappan (2006) 203
CTR (Mad) 447 : (2006) 284 ITR 220 (Mad) relied on."

10. In view of the settled law of various High Court s as are referred in the order, we find that there was no error in the order
passed by the CIT (A) and the Tribunal. This appeal does not involve any substantial question of law for our consideration.
This appeal is accordingly dismissed.

No order as to costs.

*****
Customized Notes

Copyright 2017 Wolters Kluwer (India) Pvt. Ltd. All Rights Reserved.