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2016 (4) TMI 868 - ITAT HYDERABAD

2016 (4) TMI 868 - ITAT HYDERABAD - TMI - Unexplained investment - addition made simply on the basis of the statement recorded u/s. 133A - Held that:- An admission by assessee during the search or survey proceedings cannot be considered as conclusive unless it is supported by corroborative evidence. With regard to investments on which, the statement was taken, there is no material identified during the survey operations so as to determine the unexplained investment at ₹ 70 Lakhs in the han .....

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u/s. 133A.

Discrepancies in respect of expenses and the percentage of net profit on estimation basis - disallowance of expenses - Held that:- The addition made is on adhoc basis. Considering the submissions of the Counsel and facts of the case, we are of the opinion that unverifiable vouchers cannot be avoided in this line of business. Keeping that in view, we are of the opinion that a disallowance of ₹ 5 Lakhs will meet the ends of justice. Consequently, we restrict the disallo .....

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he rival contentions, we do not see any reason to interfere with the order of the CIT(A). Assessee has not justified earning so much of agricultural income and the estimation by the AO is reasonable. Since no contradictory evidence is filed before us, we see no reason to interfere with the orders of the AO and CIT(A) on the issue. In the result, the grounds pertaining to agricultural income as ‘income from other sources’ are rejected - ITA No. 533/Hyd/2014, ITA No. 532/Hyd/2014, ITA No. 534/Hyd/ .....

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-2014 respectively in each case. We have heard the Ld. Counsel and Ld. DR and perused the evidence on record. 2. Briefly stated, assessee-firm M/s. Sai Priya Constructions is in the business of construction and sale of flats. The other two assessees are partners in the above firm. There were survey operations u/s. 133A of the Income Tax Act [Act] in the business premises of assessee on 09-09-2008. In the course of survey proceedings, assessee, Managing Partner has declared an amount of ₹ 7 .....

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siness, however, went on to disallow an amount of ₹ 10 Lakhs to cover the discrepancies in respect of expenses on the percentage of net profit on estimation basis. Further, AO also made an addition of ₹ 70 Lakhs on the basis of the declaration made in the course of survey of the amount of ₹ 70 Lakhs in the hands of the firm. Similarly, in the hands of the Managing Partner and his wife, AO made addition of ₹ 25 Lakhs even though assessee has objected to the same. It was th .....

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ering the detailed submissions and case law relied on by the assessee, as extracted in the appellate order, Ld. CIT(A), however, confirmed the amount by stating as under: 4.2. I have seen carefully the facts and evidence. First of all, there is no doubt about the fact that huge investment had been made in the aforementioned to projects by the appellant. It is incorrect to say that the appellant did not have access to its own books of account. All the documents were available with the appellant a .....

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nt waited for a full period of three years to go back on the surrender i.e., in the year 2011. It is not understood how it took such an unusually long time to verify the facts from the books of account and related documents. It is very clear from above that the appellant wanted to get out of its own liability to pay taxes and therefore as an afterthough decided to retract his statement . 4. It was the contention of the Ld. Counsel that all the investments made were part of the books of account a .....

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books of account and entries subsequent to the survey did not offer the income other than were arrived at as a profit in the Books of Accounts. It was the submission that there is no incriminating material at all, so the declaration so made has no basis. Further, it was submitted that the reasoning given by the CIT(A) that assessee waited for a full period of three years to go back and surrender is not correct as the survey took place on 09-09-2008 and assessee has completed the Books of Accoun .....

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#39;ble Supreme Court in the case of CIT Vs. S. Khader Khan Son [352 ITR 480] (SC) similar in facts. In the case of individual partners also, no incriminating material was found and could not be the basis for addition as determined by the AO and the Ld. CIT(A). 5. Ld. DR however, relied on the orders of the AO and CIT(A) to submit that assessee has bonafidely admitted the incomes which should have been honoured by him. Ld. Counsel in reply submitted that assessee has filed return for earlier yea .....

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idence available with the Revenue to establish that assessee has earned a tentative figure of ₹ 70 Lakhs as un-explained investment and its partners an amount of ₹ 25 Lakhs each. We are also surprised to notice that Ld. CIT(A) after recording the detailed submissions and case law relied upon by assessee did not even comment about those aspects and has simply confirmed the additions stating that huge investment was made in the aforementioned objects by assessee. It is not clear whethe .....

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all the information that he wanted. This statement of the Ld. CIT(A) contrasts with the statement recorded in the course of survey. Assessee fairly admitted that books of account are maintained and he does not know how to operate the computers (in response to Question Nos. 11 & 13 in the statement). Referring to certain advances made for agreements, AO asked for the source of investment for which assessee admitted the investments in the hands of the firm as well as in their individual hands. .....

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han Son [352 ITR 480] (SC) (supra) has upheld the decision of the Hon'ble Madras High Court, in which it was held: A survey was conducted in the premises of the assessee-firm. One of the partners in his statement offered an additional income of ₹ 20 lakhs for the assessment year 2001-02 and ₹ 30 lakhs for the assessment year 2002-03 but the statement was retracted by the assessee stating that the partner from whom the statement was recorded during the survey operation under secti .....

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and that 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 . 8. From various judicial pronouncements, it is clear that an admission by assessee during the search or survey proceedings cannot be considered as conclusive unless it is supported by corroborative evidence. With regard to investments on which, the statement was taken, there is no material identified durin .....

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e are of the opinion that the addition cannot be made simply on the basis of the statement recorded u/s. 133A. Accordingly, the grounds raised by the assessees with respect to the above additions are hereby allowed. 9. One more issue to be considered is an adhoc addition of ₹ 10 Lakhs made by the AO. As already stated above, AO gives a finding that assessees book profit at 8.9% is to some extent reasonable with other cases in the same line of business as recorded in para 5 of the assessmen .....

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e whether the amount is an agreed addition or an adhoc disallowance as seen from the AO s order. Be that as it may, assessee contested the same before the CIT(A) that the said disallowance is not based on any evidence. Ld. CIT(A) after duly recording the objections of assessee on this, confirms the same holding as under: 6.1. During appeal proceedings, the appellant stated that such an estimated addition did not have any basis and it should be deleted. It was further added that all the expenses .....

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ffer of an agreed surrender on an estimated basis. Looking into the nature of vouchers, the assessing officer also agreed that if an amount of ₹ 10 lakhs was surrendered, it would meet the ends of justice. Accordingly, he agreed to the surrender and did not make any further scrutiny. 6.3. During appeal proceedings, the appellant could not substantiate the expenses in question. If the case of the appellant was that all the expenses were properly couched and proven, then he could have provid .....

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rival contentions, we are of the opinion that the addition made is on adhoc basis. Considering the submissions of the Counsel and facts of the case, we are of the opinion that unverifiable vouchers cannot be avoided in this line of business. Keeping that in view, we are of the opinion that a disallowance of ₹ 5 Lakhs will meet the ends of justice. Consequently, we restrict the disallowance to an amount of ₹ 5 Lakhs. 11. In the result, appeal in ITA No. 533/Hyd/2014 is partly allowed. .....

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