TMI Blog2020 (5) TMI 201X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) did not appreciate the submission made by assessee during assessment as well as appellate proceedings, which establishes that there is no case of any unexplained investment, money or income, as nature and source of the income is reflected and explained in the ITR filed, Balance sheet and profit loss account, itself, therefore, question of any income from any undisclosed source does not arise. We direct the A.O. to treat the income of ₹ 4.75 lacs as income from business. Addition u/s 69 - addition relying upon the statements recorded under section 132(4) - HELD THAT:- assessee in its question to answer no. 13 stated that amount of cash short noticed were withdrawn from banks and savings out of income offered for tax and has been used for construction. This explanation even if considered to be true also explains the availability of source of funds. Thus, the source of construction was out of the declared income/sources and there was no additional or unexplained investment as no evidences relating to additional construction investment were found during search. There is no addition in the impugned assessment order on account of short cash found rather during ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 - Shri R.C. Sharma, Accountant Member And Shri Sandeep Gosain, Judicial Member For the Assessee : Shri M.S. Jhanwar (CA) For the Revenue : Shri Abhimanyu Singh Yadav (JCIT-DR) ORDER PER: R.C. SHARMA, AM These are the appeals f iled by the assessee against the separate orders of the ld.CIT(A)-2, Udaipur dated 06/06/2019 and 30/09/2019 for the A.Y. 2012-13 2017-18 in the matter of order passed u/s 143(3) r.w.s. 153A of the Income-tax Act, 1961 [hereinafter referred to as the Act , for short]. 2. Firstly we take ITA No. 392/Jodh/2019 for the A.Y. 2017- 18. Rival contentions have been heard and record perused. Facts in brief are that the assessee is engaged in the business of real estate, earning income from business, rental income and income from other sources. There was a search operat ion against the assessee on 16/09/2016, wherein his statement was recorded by the search party. The post search assessment was conducted by the AO and whereby income was assessed at impugned total income of ₹ 134,47,871/ vide assessment order dated 28.12.2018. The assessee challenged the impugned assessment order dated 28.12.2018 before the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or regular business income as offered by assessee. The provisions of Section 69 or 69A of the Act are not applicable in the facts of the case as far as the question of income of ₹ 4,75,000/- from property transaction is concerned, which is in the nature of nature of business income as assessee is duly engaged in the business of real estate only. Even otherwise, the provisions of section 69 or 69A are applicable in case of unrecorded transaction or investment, whose nature and source is not explained. However, in the present case, the assessee has duly explained the nature and source of the transaction as well duly declared the same in its return of income. 6. The ld. CIT(A) did not appreciate the submission made by assessee during assessment as well as appellate proceedings, which establishes that there is no case of any unexplained investment, money or income, as nature and source of the income is reflected and explained in the ITR filed, Balance sheet and profit loss account, itself, therefore, question of any income from any undisclosed source does not arise. Accordingly, we direct the A.O. to treat the income of ₹ 4.75 lacs as income from business. 7. Wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the undisclosed income. Any action on the contrary shall be viewed adversely. Further in respect of pending assessment proceedings also, assessing officer should be relied upon the evidences/ material gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders. 9. As per the ld AR, it is thus evident that it has been directed by the Board that no addition should be made on the basis of confessions but on the basis of evidences/ material gathered during the course of search or thereafter. It is settled law that every officer and person employed in the execution of the Act shall observe and follow the orders, instructions and directions of the Board and as such benevolent circulars are binding on the Income Tax Authorities even if it is deviating from the provisions contained in the Act. 10. Reliance was also placed by ld. AR on the decision of the Hon'ble Madras High Court in the case of M. Narayanan Bros, vs. ACIT, Salem (2011) 13 taxmann.com 49 (Mad.) Held in this case, in the course of assessment proceedings, assessee retracted the statement made on day of search AO rejected the said plea and made assessment o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [Palinode Rubber Produce Co. Pvt. Ltd. vs. State of Kerala (1971) 91 ITR 18 (SC)]. An admission of fact made by an assessee constitutes an important piece of evidence but it is not conclusive proof of the matter admitted. It is rebuttable and it is open to the assessee who made admission to show that it is incorrect. [G. Morgues Bros. Vs. C.I.T. (1973) 88 ITR 432 (SC)]. An admission made by the assessee before the Income-tax authorities is an important piece of evidence but he is entitled to show that such an admission was made out of ignorance of law or it was otherwise vitiated [C.I.T. v. Bhanwarlal 225 ITR 870 (Raj)]. the statement made by an assessee u/s 132 (4) is not always a universal truth. The statement of the assessee should be corroborated with the facts on record and documents seized at the time of search to ascertain its reliability. The law of natural justice and fair play demands that the surrounding circumstances and other relevant factors have to be considered before making an addition solely on basis of admission. If the assessee has stated something in his statement either out of ignorance of certain vital facts or neglige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same is not corroborated. In support of this argument the assessee places reliance on the judgment of Hon ble Andra Pradesh High Court in the case of Commissioner of Income-tax-II, Hyderabad vs. Naresh Kumar Agarwal reported at [2015] 53 taxmann.com 306 (Andhra Pradesh), wherein it was held that: In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section132(4) does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under section 132(4) of the Act, does not have any evidentiary value. This provision embedded in sub-section (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement. The finding of the Tribunal was based on the above well settled principle. The ld. AR further argued that it is evident from the facts/documents available on the record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch may be useful, but does not authorize taking any sworn statement. Thus, it is trite law that Section 133A does not empower any Income tax authority to examine any person on oath and then use it as evidence to make addition. In such a situation, no addition can be made or sustained only on the basis of the statement recorded during the survey U/s 133A of the Act. Once the assessee has retracted from the statement then itwas on the A.O. to establish beyond any doubt the issues on which the addition has been made. Once the assessee has submitted up to date cash book and stock register then it was duty of the Assessing Officer to pin point the defects in such books of account particularly with regard to the issues, on which the statement was recorded during the survey. Further in the case of Shri Pawan Kumar, even the Assessing Officer recorded his statement but he has not asked any question with regard to amount of advance of ₹ 10.00 lacs for which the addition has been made only on the basis of a piece of paper, which was not signed by Shri Pawan Kumar. Similarly in the case of debtors, once the assessee has retracted then it was the duty of the Assessing Officer to exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2018 as stated in para 6.5 at page 19 of the assessment order. Copy of the submission dated 20.09.2018 duly acknowledged by the department is placed herewith in the Paper book (PB Page no.98 -150). Relevant extracts from Para 6.5 at page 19 of the assessment order at PB Page 128 148 in this regard is reproduced below for ready reference: We also enclose herewith reconciliation statement alongwith copy of cash book after entering relevant unrecorded vouchers and cash book as on date of search 16.09.2016 separately. 18. The assessee also produced all relevant books of accounts/ documents before the AO as stated on last page of the letter dated 05.09.2018 submitted on 20.09.2018 and the AO has not pointed out any discrepancies therein. Thus, allegation of the AO is totally baseless. Additionally, our attention was invited to the following documentary evidences submitted during the course of assessment proceedings, which negates the allegation of the AO: a. Letter dated 06.08.2018 from assessee to ld. AO duly receipted /submitted on 23.08.2018, copy enclosed PB at 75. b. Further Annexure 8 PB page 80 forming part of Letter dated 06.08.2018 includes copy of statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Total withdrawals from Banks (I + ii + iii) 50,90,000 3. Total of opening Balance and withdrawals from Banks 54,88,390 In view of above, cash balance in the hand of the assessee accumulated out of above stated withdrawals as on date of search reported at ₹ 30,71,397/ due to incomplete records cannot be called as unexplained investment used in construction activities. 20. With regard to A.O. s allegation that there was no bills or incomplete vouchers with regard to cost of construction, it was submitted by the ld AR that there is no requirement to maintain bills etc, in relation to construction expenses as same is not claimed as business expenses nor depreciation claimed thereon. However, details of the construction expenses was provided to the AO vide letter dated 20.12.2018 (PB Pages 194-202) in compliance of the Order sheet dated 17.12.2018. It is relevant to submit that the AO has not pointed out any discrepancies in the details of the construction expenses submitted before him nor asked any further clarification which required to be provided by the assessee. 21. Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 1,18,11,563/-. Further, the entire income of ₹ 1,18,11,563/- was declared in the return of income under the head Business and Profession and against this undisclosed income, the assessee claimed set off of business loss of ₹ 1,05,11,789/-. He further contended that having made a statement on oath, the burden was on the assessee to show with evidence that his statement U/s 132(4) was erroneous. Further, no bills/vouchers for construction activity was available with the assessee. No valuation report was filed by the assessee despite the A.O. specifically giving the assessee an opportunity to do so vide query letter dated 16.07.2018 (para 6.2 of the assessment order refers) accounts of construction activity were maintained. Thus the building account of school, showing investment of ₹ 3,48,32,781/- till the date of search in construction of school, and building account showing investment of ₹ 29,64,831/-in son's house till 31.03.2016, filed in assessment and in appeal, have no credibility. 25. We have heard the r ival contentions and carefully gone through the orders of the authorit ies below. We had also deliberated on the judicial pronouncements ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the course of the search proceedings that transactions in computer are incomplete and maintained only to keep control and discipline on family members as family consists of four married sons. During the course of the search proceedings, Question no 14 asked by the departmental officials establishes that it is found that cash book is not complete and not updated . It is also relevant to observe that the question no. 14 asked by department during the course of search/survey establishes the finding of the department that cash books or other accounts books were incomplete. Thus, it is undisputed fact that the cash balances ₹ 1,25,93,421/- was derived from incomplete cash books of various assessee s of the Group. The assessee on account of mistaken facts and incomplete records, stated in answer to question number 14 during the course of the search proceedings that aforesaid cash short was noticed on account of incomplete records and explained that it has been used for construction activities. However, the AO merely on the basis of his statement made the impugned addition without establishing any investment in construction activities with any corroborating evidences. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement recorded during search is free from all ambiguity and doubts and it is quite likely that certain vital facts may be omitted or ignored or incorrectly stated. If the assessee has stated something in his statement either out of ignorance of certain vital facts or negligence or non-availability of relevant material, which is contrary to the established facts of the case, he cannot be assessed to tax merely on the basis of such erroneous statement. It is also relevant to observe that alleged physical cash shortage is consequential to incomplete cash books. Cash books are not maintained on regular basis being individual status of the various assessee s of the Group and turnover of the assessee was below tax audit requirement. Accordingly, assessee in its question to answer no. 13 stated that amount of cash short noticed were withdrawn from banks and savings out of income offered for tax and has been used for construction. This explanation even if considered to be true also explains the availability of source of funds. Thus, the source of construction was out of the declared income/sources and there was no additional or unexplained investment as no evidences relating to addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n not found during course of search, therefore, addition confirmed by the ld. CIT(A) is not legally sustainable as per settled position of law. 33. From the record, we found that during the course of the assessment proceedings, assessee vide letter dated 20.12.2018, submitted details of the total investment in Mount View School Bedwasat ₹ 4,00,18,782/ as on 31.03.2017. There is no adverse finding pointed out by the AO which establishes that there was no source of such investment, further no defects/mistakes were pointed out regarding the supporting evidences submitted by the assessee. We also found that Mr. Om Prakash Choudhary, son of assessee had also incurred ₹ 29,64,831/ towards construction of his house which was also explained with relevant details and documentary evidences filed before the AO. The assessment in the case of Mr. Om Prakash Choudhary, son of assessee was concluded without any adverse findings in this regard. The source of investment in his house has been accepted as such by the AO vide assessment in his case dated 26.12.2018. Thus, the question of any additional or unexplained investment does not arises even from the department own stand taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd compensatory which had been rectified voluntarily without any seized document and net effect of such income/interest comes to ₹ 1249/- offered for tax while filing ITR U/s 153A, thus, interest expenses ₹ 114746/- and ₹ 57/- deserves to be allowed/netted off towards additional income/interest offered for tax. 5. The appellant craves leave to add, amend and modify all or any ground of appeal on or before the date of hearing. 37. We have considered the rival content ions and carefully gone through the orders of the authorit ies below and found from the record that the lower authorities have not allowed the assessee to claim deduction of interest expenditure but has included the interest income so of fered by the assessee in the proceedings U/s 153A. We found that the assessee has just rectified the apparent mistake on the record by offering the interest income and interest expenditure. Accordingly, we direct the A.O. to make addition only to the extent of mistake so pointed out in the reconcil iation. 38. In this regard, we found that during the assessment proceedings, the assessee produced detailed reconciliation of the return filed u/s 139 u/s 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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