Assessee's retracted surrender statement insufficient to establish undisclosed income without supporting documentary evidence

ITAT Jaipur dismissed revenue's appeal regarding undisclosed cash deposits and surrendered income. The assessee maintained regular audited books with Rs. 43 crore turnover, mostly through banking channels. Despite husband's statement during survey admitting deposits as undisclosed income, CIT(A) deleted additions finding no incriminating material. The statement was retracted within two months, and AO failed to establish manipulation in cash books. ITAT upheld CIT(A)'s findings that surrender lacked documentary support and accounts were properly maintained and audited.

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Issues Involved:
1. Justification of CIT(A) in not appreciating incriminating documents and deleting the addition of Rs. 72,00,000/-.
2. Justification of CIT(A) in deleting the addition of Rs. 35,550/-.

Detailed Analysis:

1. Justification of CIT(A) in not appreciating incriminating documents and deleting the addition of Rs. 72,00,000/-:
The Revenue argued that the CIT(A) did not appreciate the incriminating documents found during the survey, which indicated unaccounted transactions. The AO relied on the statement of Shri Naresh Jain recorded under oath u/s 131, admitting that Rs. 72,00,000/- deposited during demonetization was from undisclosed sources.

The assessee countered that the cash deposited was from cash withdrawals from bank accounts during the FY 2016-17. The CIT(A) noted that the AO failed to reject the books of accounts maintained by the assessee, which were audited and showed a cash balance of Rs. 77,66,469/- on 08.11.2016. The difference between the cash balance as per the impounded document (Rs. 1,57,62,376/-) and the regular cash book was due to pending expenses.

The CIT(A) verified the claim and found that the books of accounts were tallied with bills/vouchers, and the cash deposits were matched with cash withdrawals. The AO's remand report confirmed that there was sufficient cash available to deposit Rs. 72,00,000/- during the demonetization period. The CIT(A) concluded that the addition made by the AO was not sustainable as the source of cash deposited was explained with credible evidence.

The Tribunal agreed with the CIT(A)'s findings, noting that the AO did not establish any substantial mistake in the regular cash book. The Tribunal also emphasized that the statement recorded during the survey u/s 133A does not have binding evidentiary value and cannot be the sole basis for addition. The Tribunal dismissed the Revenue's ground, affirming the CIT(A)'s deletion of the addition of Rs. 72,00,000/-.

2. Justification of CIT(A) in deleting the addition of Rs. 35,550/-:
The AO added Rs. 35,550/- as undisclosed income based on the statement of Shri Naresh Jain during the survey, which included a total surrender of Rs. 2,00,00,000/-. The CIT(A) noted that the total additions for A.Y. 2015-16 and A.Y. 2016-17 exceeded Rs. 2,00,00,000/-, leaving no balance for A.Y. 2017-18.

The CIT(A) observed that the addition of Rs. 35,550/- was only a balancing figure to make the total of Rs. 2 crore of disclosure made in the statement. The AO accepted that if the addition for A.Y. 2015-16 was corrected to Rs. 1,81,18,746/-, the total additions would exceed Rs. 2,00,00,000/-, making the addition for A.Y. 2017-18 unsustainable.

The Tribunal agreed with the CIT(A)'s findings, noting that no incriminating material was found to support the addition of Rs. 35,550/-. The Tribunal dismissed the Revenue's ground, affirming the CIT(A)'s deletion of the addition of Rs. 35,550/-.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s deletion of the additions of Rs. 72,00,000/- and Rs. 35,550/-. The Tribunal found that the CIT(A) had appropriately considered the evidence and explanations provided by the assessee, and the AO's reliance on the survey statement alone was not justified.

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