2016 (5) TMI 586 - AT - Income Tax

Addition to income - scrutiny assessment u/s 143(2) - statement recorded under section 133A - value of the statement taken during the course of survey - Held that - The issue regarding evidentiary value of the statement taken during the course of survey has fallen for consideration before the Hon ble Kerala High Court in the case of Paul Mathews and Sons (2003 (2) TMI 25 - KERALA High Court) held as during the course of survey the officer could record the statement of a person under sub-section 3(iii) of section 133A of the Income Tax Act. This clause authorizes the authority to record a statement of any person which may be useful for or relevant to any proceedings under the Act. However the officer is not authorized to record the statement on oath and hence the statement taken during the course of survey has no evidentiary value. It is simply an information which can be used for corroboration purpose for deciding any issue in favour or against the assessee. Post survey inquiry statement of PSP recorded under section 131which was on oath - if statement recorded under section 133A was ignored then there is a further disclosure by the payer. We find that his statement was recorded from the back of the assessee and no opportunity to cross-examine the deposer was given to the assessee. Hence this statement cannot be used against the assessee. We find support from the decision of Hon ble Supreme Court in the case of Kishanchand Chellaram (supra) wherein it was held that any material not confronted to the assessee would not constitute as admissible evidence and consequently addition made on the basis of such evidence is liable to be deleted. In the present case PSP was not subjected cross-examination. His statement was not recorded in the assessment proceeding of the assessee. It was in post-survey inquiry of his own case. Therefore this piece of evidence is to be excluded. Loose papers and small diaries impounded during the course of survey carried at the premises of PSP - even at the premises of PSP no search was conducted. There was no common documents executed between PSP and the assessee was found which bears the signatures of both the parties. To the extent common document was found i.e. last entry where assessee has confirmed receipt and put his signature in the diary of PSP assessee has offered the amounts for taxation. If we evaluate the evidence collected by the AO in shape of loose paper impounded during the course of survey in the light of the decision of Abhalbhai Arjanbhai Jadeja (2013 (4) TMI 731 - GUJARAT HIGH COURT ) then it would reveal that conclusive evidence was not collected even during the course of survey demonstrating the payment made to the assessee. Therefore we allow ground of the appeal of the assessee and delete the addition. - Decided against revenue

Summary

Issues Involved:
1. Confirmation of the addition of Rs. 85 lakhs by the CIT(A).
2. Confirmation of the levy of interest under sections 234B, 234C, and 234D of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Confirmation of the Addition of Rs. 85 Lakhs by the CIT(A):

Facts and Background:
- The assessee, a land developer and broker, filed a return of income electronically declaring a total income of Rs. 1,32,51,938/-, later revised to Rs. 2,07,51,940/-.
- The case was selected for scrutiny assessment, and a search and seizure operation was conducted on 10.9.2010.
- During a survey at M/s. Devraj Developers, various loose papers and small diaries were found, and statements were recorded from PSP, a partner at M/s. Devraj Developers, indicating payments to the assessee.

Assessee's Contentions:
- The assessee argued that statements recorded during the survey have no evidentiary value and cannot be used to make additions.
- The land in question was owned by M/s. Krishna Developers and sold to M/s. Devraj Developers, with the assessee acting merely as a broker.
- The assessee relied on several judgments, including CBI Vs. V.C. Shukla, to argue that entries in a third party's diary cannot establish receipt of payments without corroborative evidence.

CIT(A)'s Decision:
- The CIT(A) confirmed the addition, reasoning that if the assessee admitted one entry, it should be presumed that all entries are genuine.
- The CIT(A) also referenced an ITAT decision in the case of Dhunjibhoystud and Agricultural Farm to support the addition.

Tribunal's Analysis:
- The Tribunal noted that statements recorded during surveys under section 133A have no evidentiary value as they are not taken under oath.
- The Tribunal referenced the Kerala High Court decision in Paul Mathews and Sons and the Supreme Court's dismissal of an SLP against a similar decision by the Madras High Court.
- The Tribunal found that the post-survey statement under section 131, recorded without cross-examination, cannot be used against the assessee.
- The Tribunal emphasized that loose papers and diaries found at PSP's premises cannot be used to charge the assessee without corroborative evidence.
- The Tribunal criticized the CIT(A) for not distinguishing between the entries and for failing to apply the principles from the Supreme Court's decision in CBI Vs. V.C. Shukla.
- The Tribunal concluded that the Revenue failed to prove the payments to the assessee and that the addition was based on assumptions rather than concrete evidence.

Conclusion:
- The Tribunal deleted the addition of Rs. 85 lakhs, finding the evidence insufficient to support the Revenue's claims.

2. Confirmation of the Levy of Interest under Sections 234B, 234C, and 234D:

Facts and Background:
- The CIT(A) confirmed the levy of interest under sections 234B, 234C, and 234D of the Income Tax Act.

Tribunal's Analysis:
- The Tribunal noted that the charging of interest is consequential in nature and depends on the outcome of the primary issue regarding the addition of Rs. 85 lakhs.

Conclusion:
- Since the addition of Rs. 85 lakhs was deleted, the Tribunal found that the levy of interest under sections 234B, 234C, and 234D was not applicable and rejected this ground.

Final Order:
- The appeal of the assessee was partly allowed, with the addition of Rs. 85 lakhs deleted and the levy of interest under sections 234B, 234C, and 234D rejected as consequential.