Tribunal grants appeal, cancels $14.85M unaccounted income. Survey statements lacked evidence, diary entries not credible.

The tribunal allowed the assessee's appeal and deleted the addition of Rs. 14.85 crores as unaccounted income. The statements recorded during the survey lacked evidentiary value, the diary entries were not convincingly genuine, and ongoing litigations made the receipt of on-money unlikely.

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Issues Involved:

1. Confirmation of addition of Rs. 14.85 crores as unaccounted income.
2. Validity and evidentiary value of statements recorded under section 133A during survey.
3. Genuineness and correctness of entries in the diary found during the survey.
4. Impact of ongoing litigation on the alleged receipt of on-money.

Issue-wise Detailed Analysis:

1. Confirmation of Addition of Rs. 14.85 Crores as Unaccounted Income:

The assessee-company, engaged in real estate, was scrutinized for the assessment year 2011-12. During a survey under section 133A, a diary was found indicating cash receipts of Rs. 14.85 crores, which the director admitted as unaccounted income. The AO added this amount to the assessee's income, which was confirmed by the CIT(A). The assessee contended that no such cash was received, and the land in question was under litigation, making the receipt of on-money improbable.

2. Validity and Evidentiary Value of Statements Recorded Under Section 133A During Survey:

The directors retracted their statements made during the survey, claiming they were made under pressure. The assessee argued that statements recorded under section 133A have no evidentiary value as they are not made under oath. This contention is supported by judicial precedents, including the Kerala High Court's decision in Paul Mathews and Sons Vs. CIT, and the Supreme Court's approval in CIT Vs. S. Khadar Khan & Sons, which state that such statements are merely informational and not conclusive evidence.

3. Genuineness and Correctness of Entries in the Diary Found During the Survey:

The AO verified cheque entries in the diary with the bank statements, concluding the diary's entries were genuine. However, the assessee argued that the diary was prepared during the survey under pressure, and the entries were not genuine. The assessee highlighted inconsistencies, such as the absence of dates and names for cash receipts, and the identical handwriting and ink for entries over six months, suggesting the entries were made simultaneously, not over time.

4. Impact of Ongoing Litigation on the Alleged Receipt of On-Money:

The land in question was subject to multiple litigations, including proceedings before the Bombay High Court and a status quo order from the Ahmedabad Civil Court. The assessee argued that it was improbable for anyone to pay such a large amount in cash for land embroiled in legal disputes. The CIT(A) dismissed this argument, stating that the assessee itself had purchased the land despite ongoing litigations, implying others could take similar risks. However, the tribunal found this reasoning flawed, as no corroborative evidence of such cash transactions was provided, and the legal disputes made the receipt of on-money unlikely.

Conclusion:

The tribunal concluded that the Revenue failed to provide sufficient evidence to support the addition of Rs. 14.85 crores as unaccounted income. The statements recorded during the survey lacked evidentiary value, and the diary's entries were not convincingly genuine. The ongoing litigations further undermined the likelihood of receiving on-money. Consequently, the tribunal allowed the assessee's appeal and deleted the addition of Rs. 14.85 crores.

Order:

The appeal of the assessee is allowed, and the addition of Rs. 14.85 crores is deleted.

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