Statement recorded u/s 133A can not be retracted saying survey team exerted force on assessee when he issued a cheque by properly preparing, signing it

In a recent judgment, ITAT Chennai has held that a statement recorded u/s 133A can not be retracted saying survey team had exerted force on the assessee when he issued a cheque by properly preparing, signing it for the amount surrendered.

Case Law Details:
I.T.A.No.1429/Mds./2015 Assessment Year :2007-08
Deputy Commissioner of Income Tax vs. B.K.Muralikrishna
Date of Order/Judgment: 22/04/2016

Important Judgments referred:
CIT Vs. Anandha Metal Corporation  [2005] 273 ITR 262 (Mad)  

CIT Vs. S. Khader Khan Son reported in [2008] 300 ITR 157 (Mad)
CIT Vs. Smt. Sakuntala Devi Khetan [2013] 352 ITR 484 (Mad)

Brief Facts of the Case:
The assesse was in the business of sale, purchase of human hairs. A survey u/s.133A was conducted at the business premises of assessee and during its course Revenue Authorities had taken inventory of human hair stock in the presence of assessee and the value of physical stock was worked out. The assessee’s statement was also recorded the same day wherein he accepted that stock records were not correct and express satisfaction with the correctness of the stock taking done. The assessee also  accepted that in view of the fact that he was not able to explain the stock position of 1.71 crore and to set right any shortcoming in this regard he offered to admit 50% of the stock found (i.e.; 85 lakh) as unaccounted stock for the year 2006-07. Therefore the AO considering the deficiencies in stock as per books of accounts and excess stock found at Rs. 1,71,53,950/-, totaling of Rs. 1,86,05,187/- as excess stock and made addition to the income of assessee.

Against this, the assessee carried on appeal to the CIT(A) who provided relief on the reason that assessee’s books of accounts had been accepted by Commercial Tax Department of State Government and in view of Madras High Court judgment in Anandha Metal Corporation (supra) and Smt. Sakuntala Devi Khetan (supra) wherein it was held that when one wing of the Government authority accepted the books of accounts of the assessee as true, other wing of the Government authority cannot doubt the same.  Also, CIT(A) in view of judgment of jurisdictional High Court in Khader Khan Son case (supra) held that statement recorded during the survey u/s.133A cannot be relied upon.

Revenue approached  ITAT against the order of CIT(Appeals)

Submission of the Assessee:
Before ITAT, the assessee alleged that during the course of survey, the statement was taken from the him by exerting force, and on that reason he offered the additional income and given a cheque to the Investigation Team.

Points/facts considered by ITAT:
ITAT was primarily concerned whether the explanation of assessee was credit worthy or not and observed the following facts:

1. After considering the offer made by the assessee, the survey team stopped further inquiry.
2. The assessee by his conduct managed to stop further investigation of the facts and drove the survey team out of the business premises of assessee. 
3.  The assessee has not stated what kind of force was exerted on him by the survey team
4. The assessee also did not given any reason as to why the survey teams forced him to make surrender
5. When assessee issued a cheque by properly preparing it and signing it, it cannot be said that the survey team exerted force on him.
6. The assessee was indirectly benefited from its disclosure, as the survey team thereafter was deprived from detecting further un-recording transactions by assessee.

Thus in the light of the above facts and circumstance, ITAT held the retraction by the assessee from the sworn in statement recorded on 27.02.2007 was only after thought and it could not be given any importance.

Regarding CIT(A) reliance on Anandha Metal Corporation case (supra) and Smt. Sakuntala Devi Khetan (supra), the ITAT distinguished them from the present case in as the Revenue carried on the survey u/s 133A and found discrepancy in physical stock at the premises of the assessee when compared to the books of accounts and quantified it which was accepted by the assessee whereas in the cases of Anandha Metal Corporation (supra) and Smt. Sakuntala Devi Khetan (supra) wherein there was no survey report available before the authorities to differentiate the sales/stock.  

The ITAT also observed that assessees have a right to retract from their statement, but it has to be based on evidence brought on record to the contrary and there must be justifiable reason and material accepting retraction. The cogent and sufficient material has to be placed on record for acceptance of retraction. 

The ITAT also held that in view of the new section 292C inserted by Finance Act, 2007 with retrospective from 01.10.1975, the judgment in the case of S. Khader Khan Son (supra) as relied by the assessee can not be applied.

Important excerpts from ITAT Judgment:
It was a statement made by the assessee during the course of survey not by an exertion from the assessee by the Revenue authorities. In our opinion, self-interest talks in all shorts of tongues and plays all shorts of roles. The indifference attitude of the assessee at the time of survey, and after the survey clearly indicates that assessee is not truthful at any time. The AO not only doubted the assessee’s books of accounts, but also attitude of the assessee in placing the necessary evidence before the assessment proceedings. Hence, he rejected the books of accounts and made assessment on the basis of evidence collected at the time of survey u/s.133A of the Act. In this case, facts speak loudly and clear than the books of accounts of the assessee. Being so, the rejection of books of accounts is justified, though the conclusions of the CIT(A) have a colour of factual findings, still not considering the facts relevant to the material facts and has acted in irrelevant materials so as to place reliance on the decision of jurisdicitional High Court cited above. The facts that those decisions relied by the CIT(A) wherein there was no survey action. Looking into the circumstances of the case, there is a huge difference between physical stock found during the course of survey and stock figures reflected in the books of accounts, the addition is warranted. The assessee is not willing to come clean and hence one will have to take recourse for arriving at a conclusion on the basis of material on record. In the present case, the AO used the material available on record and made assessment on which one cannot find any fault in it. Accordingly, we are confirming the addition towards excess stock found during the course of survey action. 

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