Statements recorded during the course of the survey alone have no evidentiary value- ITAT Jaipur

Brief Facts:

During the survey proceedings, the director of the assessee company admitted an unaccounted income of Rs. 5 crores. However, while filing the return of income for the year under consideration, the same was not offered for tax. It is also noteworthy that the directors did not file any letter of retraction from the surrender made during the course of the survey. The assessee retracted from their earlier taken stand without assigning any reason or providing any additional fact to support their contention. Such retraction was made after elapse of a period of more than a year. The A.O. proceeded for addition on the basis of statements of the directors and other incriminating documents found during the course of the survey. However, the addition was deleted by the ld. CIT(A) in an appeal made by the assessee. The Revenue preferred a further appeal before the Tribunal.

Observations of the Tribunal:

• It may be mentioned here that the statement recorded u/s 133A of the Act has no evidentiary value as held by the Hon'ble Apex Court and other judicial authorities. In the case of CIT vs. Shri Roshan Lal in ITA No. 185/2014 order dated 03/11/2015, it has been held by the Hon'ble High Court of Rajasthan that the statement recorded under Section 133A has no evidentiary value and any admission made during such statement cannot be made the basis of addition. Further, the Hon'ble Supreme Court in the case of CIT vs. S. Khader Khan Son [2012] 25 taxmann.com 413 (SC) dismissed the civil appeal by the income tax department and confirmed the order of the Hon'ble Madras High Court in the case of CIT vs. S. Khader Khan Son [2008] 300 ITR 157 (MAD.) evolving the following important principles:
  "(a) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. vs. State of Kerala [1973] 91 ITR 18;
  (b) In contradistinction to the power under section 133A, section 132(4) of the Act enables the authorized officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income Tax Act. On the other hand, whatever statement is recorded under section 133A of the Income Tax Act is not given any evidentiary value obviously for the reason that the officer is not authorized to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker.);
  (c) The material or information found in the course of survey proceedings could not be a basis for making any addition in the block assessment, vide decision of this court in T.C. (A) No. 2620 of 2006 (between CIT vs. S.Ajit Kumar [2008] 300 ITR 152 (Mad.));"

Ruling of the Tribunal:

It is not in dispute that the statement of the director of the assessee company was recorded u/s 133A during the course of survey operations and it is a settled legal proposition that the said statement alone without any corroborating material doesn't have any evidential value. What is therefore relevant to examine is whether the statement of the director of the assessee company is corroborated with any material in the form of papers/ documents etc. found during the course of survey operations.

We, therefore, find that it is a case where the statement of the director of the assessee company is not corroborated by any evidence which demonstrates that there are any other transactions pertaining to the year under consideration which remain undisclosed and not recorded in the books of accounts and therefore, the statement recorded u/s 133A on a standalone basis cannot form the basis for making the addition in the hands of the assessee company.

Read complete order: DCIT vs. Mojika Real Estate & Developers Pvt. Ltd.

Disclaimer: The above article is based upon the judgement of the Hon'ble ITAT Jaipur and is meant for informative purposes only. Readers are requested to act diligently and under consultation with a professional before applying the information contained in this article.