ITAT Deletes Survey-Based Additions: Retraction Accepted Where Supported by Contemporaneous Evidence

ITAT Deletes Survey-Based Additions: Retraction Accepted Where Supported by Contemporaneous Evidence

The assessee, Shri Subhash Kumar Aahi, proprietor of M/s Mahan Jewellers, filed his return for AY 2013-14 declaring income of Rs.42.48 lakh. During a survey under Section 133A conducted on 30.05.2012, the assessee surrendered Rs.89.29 lakh towards alleged excess gold and silver jewellery, excess cash, and unexplained shop renovation. However, in the return of income, the assessee retracted the surrender, explaining that the excess gold jewellery belonged to customers who had given it for repair, excess silver was supported by purchase bills not yet posted in books, excess cash was explained by recent bank withdrawals, and renovation expenses were fully recorded.

The Assessing Officer rejected the retraction and made additions aggregating to Rs.1.07 crore, including estimated gross profit on alleged sale of surrendered stock. The CIT(A) upheld the additions, treating the surrender as voluntary. Aggrieved, the assessee appealed before the ITAT.

Issue Raised: Whether additions could be sustained solely on the basis of a surrender made during survey under Section 133A, despite retraction supported by documentary evidence.

Tribunal’s Decision: The ITAT Jabalpur substantially allowed the assessee’s appeal. The Tribunal reiterated that a statement recorded during survey under Section 133A has no independent evidentiary value and cannot by itself justify additions without corroborative material.

The addition on excess gold jewellery of Rs.54.58 lakh was deleted, as repair registers, receipt vouchers acknowledged during survey, and employee statements clearly showed that part of the jewellery belonged to customers. The excess cash addition of Rs.9.52 lakh was deleted since bank statements established recent withdrawals and the Revenue failed to prove alternative utilisation. The addition of Rs.5.19 lakh towards excess silver jewellery was also deleted as purchase bills were found during survey and were never disputed.

On alleged unexplained renovation expenditure of Rs.14.22 lakh, the Tribunal held that the valuation report was flawed, having included the cost of an already existing building. Documentary evidence showed that only recorded renovation expenses were incurred. Consequently, the estimated gross profit addition of Rs.23.67 lakh was also deleted, as the very basis of unexplained stock did not survive. The Tribunal held that the additions were made in disregard of contemporaneous evidence and were unsustainable in law.

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