No Independent Evidentiary Value For Statement Recorded u/s 133A During Survey: ITAT Deletes ₹9.6 Crore Bogus Purchases Addition [Read Order]

The Chandigarh Bench of the Income Tax Appellate Tribunal ( ITAT ) held that a statement recorded under Section 133A during a survey lacked independent evidentiary value and upheld the deletion of additions totalling to Rs. 9.6 crore made on account of alleged bogus purchases.

Malbros International Pvt. Ltd. (assessee), engaged in manufacturing and trading liquor and allied products, filed income tax returns for AY 2017-18 and AY 2016-17, declaring incomes of ₹5,73,17,740/- and ₹4,60,52,060/-, respectively.

The Assessing Officer (AO) reopened the assessments based on information from a survey conducted at the premises of Shri Ashok Kumar Gupta, who allegedly controlled M/s S.A. Agro International and M/s Ridhi Sidhi Impex.

During the survey, Shri Gupta’s statement recorded and claimed that he provided accommodation entries to the assessee. The AO treated purchases from these entities as bogus and added Rs. 6,67,08,792/- and Rs. 2,93,25,267/- as unexplained expenditure under Section 69C of the Income Tax Act.

Aggrieved by the AO’s order, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the additions. The CIT(A) noted that the assessee provided invoices, ledger accounts, lorry receipts, weight slips, and quality check reports, and payments were made via RTGS/NEFT.

The CIT(A) further observed that the sales were undisputed, and no evidence suggested the purchase amounts were recycled back to the assessee. Aggrieved by the CIT(A)’s order, the Revenue appealed to the ITAT.

The assessee contended that the statement under Section 133A lacked evidentiary value, as no cross-examination opportunity was provided, violating principles of natural justice. The assessee also argued that the books of accounts were audited, and no defects were pointed out.

Additionally, the assessee cited judicial precedents, including CIT vs. S. Khadar Khan Son and Paul Mathews & Sons vs. CIT which held that statements under Section 133A are not conclusive evidence.

The two-member bench comprising Rajpal Yadav (Vice President) and Krinwant Sahay (Accountant Member) observed that the AO relied solely on Gupta’s statement, which was recorded without cross-examination.

The Tribunal referenced the Madras High Court’s ruling in CIT vs. S. Khadar Khan Son, stating that Section 133A does not authorize officers to administer oaths, rendering such statements devoid of independent evidentiary value.

The Tribunal further noted the Central Board of Direct Taxes (CBDT) Circular dated 10.03.2003, which advises against relying on confessions obtained during surveys without credible evidence.

The Tribunal found that the assessee maintained detailed records, including daily receipt sheets and quality check reports, and its books were not rejected under Section 145(3) of the Income Tax Act.

The Tribunal upheld the CIT(A)’s decision and held that the additions were unsustainable due to the lack of corroborative evidence beyond Gupta’s statement. The appeals of the Revenue were dismissed.

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