The ITAT, Surat in Raj Enterprise v. The Deputy Commissioner of Income Tax [ITA No.1165/AHD/2016 (AY 2008-09) dated November 24, 2021] held that an order passed by the Revenue Department to re-open the assessment assuming that some income might have escaped assessment and confirming the addition by solely relying on the retracted statement rather than documentary evidence is invalid.
Facts:
Raj Enterprise (“the Assessee”) filed return for Assessment Year (“A.Y.”) 2008-09 and declared Nil income and the case was opened for re-assessment by the Deputy Commissioner of Income Tax/ Assessing Officer (“the A.O.”) and served a notice dated March 25, 2013 under Section 148 of the Income Tax Act, 1961 (“the IT Act”) on grounds that such income has escaped assessment. The Assessee responding to that notice furnished original return of income and vide letter dated April 23, 2013 requested for reasons recorded.
Accordingly, the Assessee was provided with the reasons recorded stating that as per the survey carried out by the A.O. at the business premises of the Assessee, the partner of the Assessee firm, Gobarbhai Gondalia stated that the Assessee firm was engaged in developing real estate projects in outskirts of Surat for which a land of 76,788 square yards was sold at a consideration of INR 4.22 crore which was primarily purchased at INR 6,30,000 the transactions were not disclosed.
The A.O. after such disclosure issued show cause notice as to why Rs.4.22 crore should not be taken as unaccounted investment for the A.Y. 2008-09. The Assessee replied contending that there was a factual error in recording reasons and that Gobarbhai Gandolia has hardly studied till 6th grade. Further, he was terribly afraid, nervous and answered without really understanding the questions.
Furthermore, the statement taken from Gobarbhai Gondalia cannot be considered as he retracted from the statement signed by him by the survey team stating that the signature given by him was under fear, duress, and coercion.
The reply of the Assessee was not accepted by the A.O. and made an addition of INR of Rs. 4.22 crore as unaccounted investment.
Being aggrieved the Assessee filed an appeal before Ld. Commissioner of Income Tax (Appeals) (“Ld. CIT(A)”) challenging the validity of reopening the assessment under Section 147 of the IT Act as well as on merits However, it was held that there was no evidence to support the submissions of the Assessee and dismissed the Appeal.
Being aggrieved, the Assessee has filed this appeal.
Issue:
Whether the Ld. CIT(A) has erred on the facts and law by confirming an Rs. 4.22 crore made by the A.O. on the ground of alleged undisclosed investment under Section 69 of the IT Act?
Held:
The ITAT, Surat in ITA No.1165/AHD/2016 (AY 2008-09) dated November 24, 2021 held as under:
- Noted that the documentary evidence produced by the Assessee fully corroborates the submissions made by the Assessee and there was no such sale of land by Gobarbhai Gondalia to the assessee firm, rather the said land was introduced as capital contribution.
- Observed that the Ld. CIT(A) made addition on gross appreciation of facts as there was no such purchase of land so the unaccounted payment raised out of land had to be deleted.
- Noted that the value of the land cannot appreciate from 6.3 lakhs to Rs. 4.22 crore within a period of 1.5 months.
- Stated that the Department has relied more upon the statement of the Gobarbhai Gandola than on the documentary evidence.
- Relied on the judgements of various High Courts it was held that of the statement by survey team under Section 131(1) of the IT Act is not valid. The addition which was solely based on the statement is not legally sustainable and the consideration and adjudication of other submissions has become academic.
Relevant Provisions:
Section 13(1) of the IT Act
“13. Incomes Which Do Not Form Part Of Total Income
(1) Nothing contained in section 11 operate so as to exclude from the total income of the previous year of the person in receipt thereof-
(a) any part of the income from the property held under a trust for private religious purposes which does not ensure for the benefit of the public;
(b) in the case of a trust for charitable purposes or a charitable institution created or established after the commencement of this Act, any income thereof if the trust or institution is created or established for the benefit of any particular religious community or caste;”
Online GST Course by Bimal Jain
Recorded: Certified Advanced GST Course
Course Details: Certificate of Participation will be Provided, Free GST Updates on E-mail, WhatsApp, Telegram for 1 Year, Background Material and PPT will be Provided on the downloadable basis, Total 21 Recorded Sessions (60 Hours), will be available for 120 hours or 60 Days whichever expires earlier.
For Registration:- https://cutt.ly/hxjl5Cu
Recorded: GST Course on Exports, Deemed Exports, SEZ, Imports, Merchandise Exports, Inverted Duty Structure (including Refunds)
Course Details: 6 Online Recorded Sessions of 2.30Hrs each with Background Material (BGM)
For Registration:- https://cutt.ly/pvw7mzl
For more details, Call: +91-11-42427056, E-mail: intern@a2ztaxcorp.com, Web: www.a2ztaxcorp.in
DISCLAIMER: The views expressed are strictly of the author and A2Z Taxcorp LLP. The contents of this article are solely for informational purpose and for the reader’s personal non-commercial use. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon. Further, no portion of our article or newsletter should be used for any purpose(s) unless authorized in writing and we reserve a legal right for any infringement on usage of our article or newsletter without prior permission.