Tribunal deletes income tax addition lacking evidence, cites CBDT Circular

The Tribunal allowed the appeal of the assessee, deleting the addition of Rs. 34,02,400/- under Section 69 of the Income Tax Act. The Tribunal found that the addition lacked documentary evidence, and the assessee provided credible sources for the funds used in hospital construction. The retracted statement made without proper documentation was not considered valid, in line with the CBDT Circular discouraging additions based solely on survey statements. The Tribunal emphasized the need for corroborative evidence and set aside the addition based on the lack of supporting documentation.

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Issues Involved:
1. Addition of Rs. 34,02,400/- as unexplained investment under Section 69 of the Income Tax Act, 1961.
2. Validity of the statement recorded under Section 133A during the survey.
3. Retraction of the statement by the assessee.
4. Evaluation of documentary evidence provided by the assessee.
5. Applicability of CBDT Circular dated 18-12-2014.

Issue-wise Detailed Analysis:

1. Addition of Rs. 34,02,400/- as unexplained investment under Section 69 of the Income Tax Act, 1961:
The assessee, a medical practitioner, was subjected to a survey action under Section 133A, during which he declared additional income of Rs. 34,02,400/- as unexplained investment in the hospital building. The Assessing Officer (AO) added this amount under Section 69 of the Act. The Commissioner of Income Tax (Appeals) upheld this addition, leading to the second appeal by the assessee before the Tribunal.

2. Validity of the statement recorded under Section 133A during the survey:
The statement of the assessee was recorded at 4 a.m. on 13-02-2009, wherein he admitted to an expenditure of approximately Rs. 68 lakhs on the hospital's construction and declared Rs. 34,02,400/- as additional income. However, the assessee later retracted this statement, claiming it was made under stress and without access to his financial records, which were with his accountant.

3. Retraction of the statement by the assessee:
The assessee retracted his statement via a letter dated 04-03-2009, providing details of the source of funds for the hospital construction. He explained that the initial statement was made under pressure and without proper documentation. The Tribunal noted that the retraction was made within a fortnight and was supported by documentary evidence.

4. Evaluation of documentary evidence provided by the assessee:
The assessee furnished details of the source of funds, including bank loans, joint family funds, sale of gold ornaments, gifts from his father, insurance policy maturity amounts, and borrowings from individuals. The Tribunal found that the assessee provided credible evidence to substantiate these sources, including affidavits, bank statements, and receipts.

5. Applicability of CBDT Circular dated 18-12-2014:
The Tribunal referred to the CBDT Circular, which discourages making additions based solely on statements recorded during surveys without corroborative evidence. The Tribunal emphasized that such statements should not be used to make additions unless supported by credible evidence.

Conclusion:
The Tribunal concluded that the addition of Rs. 34,02,400/- under Section 69 was not supported by any documentary evidence. The assessee provided credible evidence to explain the source of funds for the hospital construction. The Tribunal also referred to the CBDT Circular and relevant judicial precedents, which state that statements recorded under Section 133A have no evidentiary value unless supported by evidence. Consequently, the Tribunal set aside the impugned order and allowed the appeal of the assessee, deleting the addition of Rs. 34,02,400/-.

Order:
The appeal of the assessee is allowed, and the addition of Rs. 34,02,400/- is deleted. The order was pronounced on Monday, the 31st day of October, 2016.

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