Income surrendered during Survey cannot form Sole basis for Assessment: ITAT Delhi [Read Order]


In a recent ruling, the Delhi bench, Income Tax Appellate Tribunal has held that addition cannot be made solely on the basis of surrender made during the time of survey. The Tribunal upheld the legal position that the addition should be supported by any material evidence procured at the time of survey since the statement under Section 133A of the Income Tax Act, 1961 lacks evidentiary value.

The assessee in the instant case, is a company engaged in the business of financing of automobiles and allied through loan cum hypothecation mode. During the time of survey, the assessee failed to prove the genuineness of certain transactions. Based on the statements made during this time, the Assessing Officer competed assessment. However, the assessee successfully challenged the assessment order before the Commissioner of Income Tax (Appeals) by proving the legality of the transactions. Therefore, the Revenue approached the Tribunal challenging the order of the CIT(A).

The Tribunal noted the fact that certain amount of the surrendered income was not in respect of cash credit and the certain other amount were not pertaining to the relevant assessment year, therefore, addition under s. 68 cannot be made.

The Tribunal noted that, in the case of Dhingra Metal Works, the Delhi High Court categorically held that the Assessing Officer could not have made the addition solely on the basis of the statement made on behalf of the assessee during the course of survey. A similar view had been taken by the Madras High Court in the case S. Khader Khan Son, which was subsequently upheld by the Apex Court.

The Tribunal further relied upon the CBDT circular dt 10.03.2003 which clarifies that the addition should be based upon the evidences/material gathered during the course of search/survey rather on the basis of statement recorded during the course of survey.

In view of the above circular and judicial pronouncements, the Tribunal confirmed the order of the CIT(A) by dismissing the appeal filed by the Tribunal.

Read the full text of the order below.