The judgment of the court was delivered by
M. R. Shah -. Leave to amend the proposed question no. 2(C) by correcting figure as Rs. 7,00,500/instead of Rs. 7,50,500/.
2.0. As common question of law and facts arise in both the appeals and as such arise out of the common impugned judgment and order passed by the learned Income Tax Appellate Tribunal (hereinafter referred to as the “Tribunal”), both these appeals are decided and disposed of by this common order.
3.0. Feeling aggrieved and dissatisfied with impugned judgment and order passed by the learned Tribunal dated 31.12.2013 passed in ITA No. 1247/RJT/2010 for AY 200708, by which, the learned Tribunal has allowed the said appeal preferred by the respondent assessee and deleted the addition of Rs. 25,50,320/made by the Assessing Officer as unexplained investment in stock in hands of the respondentassessee and deleted addition of Rs. 7,00,500/made by the Assessing Officer as cash in hand, Revenue has preferred Tax Appeal No. 525 of 2014 with the following proposed substantial question of law.
A. Whether the ITAT is justified in law as well on the facts in coming to the conclusion that retraction made by the assessee from the statement under Section 133(A) of the Act is legal and proper?
B. Whether the ITAT is justified in law as well on the facts in coming to the conclusion that admission under Section 133A of the Act i.e. statement made in survey cannot be basis for addition?
C. Whether the ITAT is justified in law as well on the facts in deleting addition made by the Assessing Officer of Rs. 7,00,500/by way of cash in hand and Rs. 25,50,320/as unexplained investment in stock?
3.1. Feeling aggrieved and dissatisfied with impugned judgment and order passed by the learned Tribunal dated 31.12.2013 passed in ITA No. 639/RJT/2010 for AY 2007-08, by which, the learned Tribunal has allowed the said appeal preferred by the respondent assessee and deleted the addition of Rs. 6,00,000/in hands of the respondent assesseeKishorbhai Mohanlal Karia, Revenue has preferred Tax Appeal No. 553 of 2014 with the following proposed substantial question of law.
A. Whether the ITAT is justified in law as well on the facts in coming to the conclusion that retraction made by the assessee from the statement under Section 133(A) of the Act is legal and proper?
B. Whether the ITAT is justified in law as well on the facts in coming to the conclusion that admission under Section 133A of the Act i.e. statement made in survey cannot be basis for addition?
C. Whether the ITAT is justified in law as well on the facts in deleting addition made by the Assessing Officer of Rs. 6,00,000/as per the declaration made in statement under Section 133A of the Act?
4.0. The facts leading to the present Tax Appeal in nutshell are as under:
4.1. That an action under Section 133 A of the Income Tax Act, 1961 (hereinafter referred to as the Act) was carried on 4.1.2007 at the business premises of the partnership firm namely M/s. M.P. Scrap Traders, Rajkot in which Shri Kishorebhai Mohanlal Karia, was also partner. During the course of survey proceedings, statement of said Shri Kishorebhai Mohanlal Karia was taken in which, fixed deposits and bank transactions in th name of various family members and partners found stood surrendered as undisclosed income in various years i.e. assessment years 2000-01 to 2004-05.
In the said statement, Shri Kishorebhai Mohanlal Karia also admitted of unexplained investment in construction of house property and furniture etc. purchased by him. He also admitted to make surrender of Rs. 6 lacs on this account over and above the amount of aforesaid investment of Rs. 96,38,410/.
Thus, the assesseeShri Kishorebhai Mohanlal Karia acted upon his statement and surrendered an income of Rs. 96,38,410/. The same stood disclosed as his income in the return of income filed for assessment years 2000-01 to 2004-05.
He, however, did not act on the surrender so made during the course of survey with respect to unexplained investment in house property and furniture for Rs. 6 lacs. The A.O. while completing the assessment, treated the said investment of Rs. 6 lacs as unexplained investment in the year under consideration being the year of survey. That apart, the assessee's explanation that after maturity of fixed deposit receipts, the said amount of investment in fixed deposits was claimed to have been invested by the assessee in the following assets i.e. (i) investment in residential building/furniture Rs. 6,00,000/, (ii) gift to Hiren Dattani Rs. 1,00,000/, (iii) investment in Gold Bullion Rs. 27,34,500/, (iv) investment in stock held by partnership firm M/s M.P. Scrap Traders Rs. 25,50,320/,( v) excess cash found in business premises Rs. 7,00,500/and (vi) balance amount stood utilized towards payment of taxes for the aforesaid years, in which, it was surrendered. The A.O. merely accepted the application of money 4 ITA towards gift to Hiren Dattani for Rs. One lac, gold bullion Rs. 27,34,500/and payment of taxes. He, however, did not accept the investment in excess stock for Rs. 25,50,320/and excess cash found Rs. 7,00,500/and made the additions thereon as undisclosed investment in the case of partnership firm M/s M.P. Scrap Traders over and above the addition of Rs. 6 lacs as stated hereinbefore. The reason taken in not accepting the said application by the assessing authority as well as by the Ld. CIT(A) is that the appellant Shri Kishorebhai Mohanlal Karia had filed two affidavits dated 23rd January, 2007. In one of the affidavit, the assessee has retracted the statement made during the course of survey proceedings, stating that statement obtained during the course of survey proceedings was neither voluntary nor binding upon the assessee. In the second affidavit, the assessee had given application of the maturity proceeds of the aforesaid unexplained investment in fixed deposits for Rs. 96,38,410/.
The Revenue authorities look it a retraction of statement in one of the affidavits and disbelieved the assessee and accordingly made the additions as aforesaid. That on appeal, learned CIT(A) confirmed the aforesaid additions.
4.2. Being aggrieved and dissatisfied with the addition of Rs. 6 lacs in the hands of Shri Kishorebhai Mohanlal Karia and addition of Rs. 7,00,500/as cash in hand and Rs. 25,50,320/as unexplained investment in stock in hands of M/s. M.P. Scrap Traders, both the assesseeShri Kishorbhai Mohanlal Karia as well as M/s. M.P. Scrap Traders preferred two appeals before the learned Tribunal and by impugned judgment and order the learned Tribunal has allowed the aforesaid appeals and has deleted the aforesaid additions.
4.3. Feeling aggrieved and dissatisfied with the impugned common judgment and order passed by the learned Tribunal, the Revenue has preferred present Tax Appeals with the aforesaid proposed questions of law.
5.0. We have heard Shri Desai, learned advocate for the Revenue. We have considered the orders passed by the learned Assessing Officer, learned CIT(A) and common judgment and order passed by the learned Tribunal. At the outset, it is required to be noted that while making the aforesaid additions in the hands of Shri Kishorbhai Mohanlal Karia as well as in the hands of firm, the AO solely relied upon the statement of Shri Kishorbhai Mohanlal Karia recorded at the time of search on 4.1.2007 which subsequently came to be retracted and / or explained within the period of 19 days i.e. 23.01.2007. It is required to be noted that as such except aforesaid statement recorded at the time of search which was subsequently retracted, there was no other material and / or corroborative material with the AO, on which, the addition of Rs. 6 lacs in the hands of Shri Kishorbhai Karia and Rs. 7,00,500/cash in hand and Rs. 25,50,320/as unexplained investment in stock in the hands of the assesse M/ s. M.P. Scrap Traders can be justified. In backdrop of the above, reasoning given by the learned Tribunal in para 5 made while deleting the aforesaid additions are required to be considered. In para 5, the learned Tribunal has observed and held as under:
“5.We have heard parties with reference to material on record. Shri Kishorebhai Mohanlal Karia, partner of M/s M.P. Scrap Traders has admitted of unexplained investment in fixed deposits and deposits in bank accounts and surrendered the same as his income for returns of income filed for assessment years 2000-01 to 2004-05.
The total surrender made during these years amounted to Rs. 96,38,410/. The said Shri Kishorebhai Mohanlal Karia in his reply to question No. 9 in his statement recorded during the course of survey proceedings, informed the survey party to submit application of the amount of realization of the aforesaid investments on a later date. This was also duly acted upon by filing an affidavit on 23/1/2007 giving details of application of investments as under:
i. Residential building of the partner Rs. 6,00,000/Page
ii. ii. Gift to Hiren Dattani Rs. 1,00,000/
iii. Gold Bullion Rs. 27,34,500/
iv. Purchase of stock as disclosed by 'A' firm Rs. 25,50,320/
v. Excess cash found in 'A' premises Rs. 7,00,500/
vi. Difference amount is paid as Income Tax.
The second affidavit dated 23/1/2007 filed alongwith the aforesaid affidavit was with respect to retraction of statement to the effect that the statement elucidated during the survey proceedings do not have any evidentiary value and the same should not be used against the assessee, even though, he had made a correct disclosure of investments of Rs. 96,38,410/in the returns of income filed for the aforesaid five years. The Hon'ble Apex Court in the case of CIT Vs. S. Khader Khan Sons, (2013) 352 ITR 480 (SC) clearly admitted the principle that Section 133A of the I.T. Act does not empower any I.T. authority to examine any person on oath and therefore any admission made in survey cannot by itself be made a basis for addition. As the appellant Shri Kishorebhai Mohanlal Karia in appeal before us has acted on the surrender of Rs. 96,38,410/, the retraction made through such an affidavit dated 23/1/2007 was of no consequence. His retraction otherwise with respect to any other offer of surrender contained in the statement was not acted upon by him as the same were stated to have been explained out of application of the realization of the aforesaid fixed deposits. For this purpose, his affidavit was filed before the authorities below. There was no material found as a result of survey indicating unexplained investment in the construction of house property or purchase of furniture thereof for Rs. 6 lacs except that there was admission by the assessee in his statement. Likewise the itemwise stock inventory is not shown to have been taken physically by the survey party. Merely in his statement, the excess stock found in the hands of the partnership firm stated in the said statement was taken as surrender thereof separately over and above the excess cash found. The assessee in his reply to the show cause notices placed heavy reliance on the affidavit dated 23/1/2007 in which the aforesaid investments were claimed to have been made out of realization of the fixed deposits and other bank deposits for which surrender of income was made in the earlier years. The Revenue authorities did not find any other application of such amount of surrendered income. They have rested their decision only on the retraction of statement made subsequently which was for a limited purpose only. After the assessee had filed the affidavit, he was neither cross examined on that point nor was he called upon to produce any documentary evidence. Consequently the assessee was entitled to assume that the income tax authorities were satisfied with the affidavit as sufficient proof on this point. In fact, the A.O. has not even rejected such an affidavit of the assessee in the entire proceedings before him. Under the circumstances and having regard to the judgment by the Hon'ble Allahabad High in the case of Sohan Lal Gupta Vs. CIT (1958) 33 ITR 786 at page 791, as also was considered at the time of hearing in presence of the parties in appeal, we are satisfied that the assessee has made a bonafide claim of application of the income that stood surrendered in the aforesaid five years i.e. 2000-01 to 2004-05 and there being no contrary material on record, the addition of Rs. 6 lacs in the hands of Shri Kishorebhai Mohanlal Karia and Rs. 7,00,500/cash in hand and Rs. 25,50,320/as unexplained investment in stock in the hands of M/s M.P. Scrap Traders are unwarranted on the peculiar facts of the case and same are hereby directed to be deleted.”
6.0. In view of the aforesaid factual aspect, more particularly, when the AO had no other material and / or corroborative material to justify the aforesaid additions except the confessional statement of Shri Kishorbhai Karia recorded on 4.1.2007 which was subsequently retracted within a period 19 days and the same came to be explained with respect to aforesaid additions, we are in complete agreement with the view taken by the learned Tribunal. We see no reasons to interfere with the impugned judgment and order passed by the learned Tribunal deleting the aforesaid additions. Under the circumstances, proposed question of law are answered against the revenue. Consequently, both the appeals deserve to be dismissed and are accordingly dismissed.