The Income Tax Appellate Tribunal (ITAT), Surat Bench has held that the survey cannot be converted into search by Income Tax Authority without recording satisfaction.
The assessee firm, Raj Enterprise is engaged in the business of construction of the development of plots and bungalows. The assessee-firm filed its return of income for the A.Y. 2008-09 on 07.10.2008 declaring Nil income. The case of the assessee was reopened under section 147 of the Act. Notice under section 148 of the Act was served upon the assessee. In response to the notice under section 148 of the Act, the assessee furnished the original return of income filed under section 139(1). The assessee again vide its application/ letter dated 23.04.2013 requested for reasons recorded. In response to the assessee’s application, the assessee was provided reasons recorded.
The Assessing Officer (AO) after supplying reasons recorded proceeded for assessment. The AO recorded that survey under section 133A of the Act was carried out on 06.01.2010 at the business premises of the assessee. At the time of the survey, the assessee firm was developing a real estate project in the name and style of Water World Project in the outskirts of Surat City. The survey statement of Gobarbhai Gondalia partner of assessee firm was recorded. In the statement, the partner of the assessee stated that he has sold land admeasuring 76,788 square yards and received a consideration of Rs.4.22 crore. Further, in questions no. 15 & 16 he disclosed that the land was purchased in the year 2007 for Rs.6,30,000/- from two different parties. He disclosed an unaccounted investment in the hands of the firm in the year 2007.
The Coram of Accountant Member, Dr. Arjun Lal Sahini, and Judicial Member, Pawan Singh has held that provision of section 133A(4) prohibits the income tax authority to remove cash, stock or other valuable article and it is only upon non-cooperation or refusal by the person under search that power under section 131(1) can be resorted.
“We also held that the recording of the statement by the survey team under section 131(1) is not valid. Thus, no cognizance of such a statement could be taken. Hence, the addition which is solely based on the stamen is not legally sustainable. Thus, the assessee also succeeded in this submission as well. Considering the fact that we have allowed the appeal of the assessee on two primary submissions of ld AR for the assessee, therefore, the consideration and adjudication of other submissions has become academic. In the result, the ground of appeal raised by the assessee is allowed,” the ITAT said.
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