2025 (5) TMI 1307 - AT - Income Tax

Survey statements alone insufficient for income additions without proper verification under tax assessment

ITAT Ahmedabad partially allowed the appeal regarding undisclosed business income additions based on survey statements. The tribunal held that merely ... Addition made solely on the basis of the statement recorded during the survey held at the premises of the appellant - Undisclosed business income - HELD THAT:- Neither any evidence of the expenses incurred by the assessee is found available either in the impounded documents or in the statement as made by the assessee in the course of survey. Merely because the assessee had stated the figure of Rs. 1,17,05,820/- as ‘income’ in his statement in the survey, the same cannot be considered as a gospel truth. The gross turnover corresponding to this income should have been enquired in the course of survey. When the assessee had raised the issue in the course of assessment that this figure was not income but turnover, the Revenue was duty bound to examine the contention of the assessee and verify as to what was actual turnover of the assessee corresponding to income of Rs. 1,17,05,820/- This exercise was not carried out by the AO and the contention of the assessee was summarily rejected. We, therefore, deem it proper to set aside the matter to the file of the JAO to examine as to whether the figure as recorded in the impounded documents BF-1 as well as BF-2 represented turnover or the income of the assessee.Thus, the matter is set aside to the file of the JAO. On-money receipt on sale of property - The total on-money received in cash was rightly treated as income of the assessee for the current year. In fact the evidence for application of this income was also found in the course of survey. As per these documents, the assessee has advanced Rs. 35,00,000/- to Shri Jairam S Sewani for purchase of property. Another sum Rs. 31,00,000/- was paid to Shri Rajendrakumar N Patel as advance towards purchase of another property. The source of these cash payments was explained as on-money receipt by the assessee on sale of two shops as well as undisclosed income derived from business during the year. Considering these evidences found in the course of survey as well as the statement of the assessee, the addition on account of on-money receipt by the assessee was correctly made. Accordingly, the addition made by the Assessing Officer is confirmed to this extent. The core legal questions considered by the Tribunal in this appeal relate to the validity and correctness of additions made to the assessee's income based on statements recorded during a survey under section 133A of the Income Tax Act, 1961, and the documentary evidence seized during that survey. Specifically, the Tribunal examined: (i) whether the addition of Rs. 1,40,05,820/- as undisclosed income, made solely on the basis of the retracted statement recorded during the survey, was justified; (ii) the nature and correctness of the undisclosed business income of Rs. 1,17,05,820/- alleged to be suppressed; and (iii) the validity of the addition of Rs. 23,00,000/- as on-money received on the sale of two shops.The first issue concerned the legal weight and evidentiary value of the statement recorded during the survey under section 133A, particularly when such statement was later retracted by the assessee. The assessee contended that the statement was recorded under duress and subsequently retracted, and that the addition was made without verifying the correctness of the figures or considering other relevant facts. The Revenue, on the other hand, argued that the addition was supported not only by the statement but also by incriminating documents seized during the survey, and that the assessee failed to provide any alternative explanation for the entries in those documents.Regarding the undisclosed business income of Rs. 1,17,05,820/-, the Tribunal analyzed the documentary evidence seized during the survey, notably two impounded documents referred to as BF-1 and BF-2. BF-1 consisted of computer-generated sheets showing date-wise/month-wise income figures, while BF-2 was a hand-written diary summarizing these figures. The assessee admitted these figures as unaccounted income in the survey statement but later contended that these represented turnover rather than income, and that the turnover figures were not verified by the authorities. The Tribunal noted that while the documents clearly recorded these amounts, they did not specify whether the figures represented income or turnover, and there was no evidence of corresponding expenses or turnover to substantiate the claim that these were net profits. The Tribunal found that the Assessing Officer had summarily rejected the assessee's explanation without conducting a proper inquiry into the nature of these figures. Consequently, the Tribunal set aside this part of the matter to the Assessing Officer for fresh examination, directing the Assessing Officer to verify whether the figures represented turnover or income and to consider relevant evidence accordingly.On the issue of the on-money receipt of Rs. 23,00,000/- on the sale of two shops, the Tribunal reviewed the statement of the assessee and the impounded documents. The assessee admitted receiving cash amounts of Rs. 16,00,000/- and Rs. 7,00,000/- as on-money on the sale of two shops, which were not recorded in the sale deeds. The Tribunal found that this admission was corroborated by entries in the impounded documents and that the Revenue also found evidence of application of these funds in property purchases. The Tribunal held that the addition on account of on-money receipt was justified and confirmed the addition made by the lower authorities in this regard.The Tribunal's reasoning on the first issue emphasized that while statements recorded during survey are relevant evidence, they are not conclusive and must be corroborated by other material. The Tribunal observed that the Assessing Officer should have conducted a detailed inquiry into the nature of the figures recorded in the impounded documents and not reject the assessee's explanation summarily. The Tribunal's order to remit the matter for fresh verification underscores the principle that additions to income must be based on clear and substantiated evidence, and that the assessee must be given a fair opportunity to prove the true nature of the amounts in question.On the second issue, the Tribunal's detailed examination of the impounded documents and the statement revealed that the figures were consistent across the seized documents but ambiguous in their characterization as income or turnover. The Tribunal's directive to the Assessing Officer to verify the nature of these figures and examine supporting evidence reflects the requirement for a thorough fact-finding exercise before making additions.Regarding the third issue, the Tribunal accepted the assessee's admission of receipt of on-money and found corroborative documentary evidence of the application of such funds. The Tribunal thus affirmed the addition of Rs. 23,00,000/- as undisclosed income from on-money receipts, reinforcing the principle that unaccounted cash receipts on property transactions are taxable income.In dealing with competing arguments, the Tribunal balanced the assessee's claim of retraction and mental pressure during survey against the Revenue's reliance on documentary evidence. It recognized the importance of corroboration and verification and did not accept the addition solely on the basis of a retracted statement. The Tribunal's approach aligns with established legal precedents that statements recorded during survey are admissible but require corroboration, and that the burden lies on the Revenue to establish undisclosed income beyond doubt.The significant holdings of the Tribunal are as follows:'Merely because the assessee had stated the figure of Rs. 1,17,05,820/- as 'income' in his statement in the survey, the same cannot be considered as a gospel truth.''The Revenue was duty bound to examine the contention of the assessee and verify as to what was actual turnover of the assessee corresponding to income of Rs. 1,17,05,820/- This exercise was not carried out by the Assessing Officer and the contention of the assessee was summarily rejected.''We, therefore, deem it proper to set aside the matter to the file of the Jurisdictional Assessing Officer to examine as to whether the figure of Rs. 1,17,05,820/- as recorded in the impounded documents BF-1 as well as BF-2 represented turnover or the income of the assessee.''In view of the evidences as found in the course of survey as well as the explanation of the assessee in this regard, we do not find any reason to interfere with the order of the lower authorities. The total on-money of Rs. 23 lakhs received in cash was rightly treated as income of the assessee for the current year.'These holdings establish the core principles that additions to income based on survey statements must be corroborated by documentary evidence, that the nature of figures in seized documents must be clearly determined before making additions, and that admissions of on-money receipts in property transactions constitute taxable income. The Tribunal's final determination was to partly allow the appeal by setting aside the addition relating to the undisclosed business income for fresh verification, while confirming the addition relating to the on-money receipt.