Additions made of amount surrendered after adjusting expenditure was justified

Brief about the case

In the case of Raj Hans Towers Pvt. Ltd. Vs.  CIT, Delhi High Court held that discretion vested in the Revenue authorities in content and character is not radically different in the case of a survey or in the case of search and seizure operations as is evident from a plain reading of Section 133A (3) and 132(4) and so the AO may use his discretion to use the recorded statement as a relevant material. HC held that where assessee had not offered any satisfactory explanation regarding surrendered amount not being bona fide and it was also not borne out in any contentions raised before lower authorities, additions so made after adjusting expenditure were justified.

Facts of the case:

• The assessee company was engaged in real estate and contruction activities which was subjected to survey u/s 133A.
• During the course of survey, one of the directors of the assessee company surrendered an amount which was not disclosed in the company’s returned income.
• The AO recorded the director’s statement and added back the surrendered amount which the assessee later contended to be non-voluntary disclosure. The AO, however, rejected the explanation.

• The CIT (A) ,however, allowed the deduction of expenditure and added back Rs.63,33,260/-
• On cross appeals, the appeal of the assessee was rejected.
• On appeal to the HC, it opined that in the circumstances of the case, the approach of the CIT – as affirmed by the ITAT – cannot be faulted.
• HC relied upon 3 decisions of this Court; CIT v. Anil Bhalla (2010) 322 ITR 191 (Delhi), CIT v. Dhingra Metal Works (2010) 328 ITR 384 (Delhi) and CIT v. Akme Projects ITA 596/2012.
• HC stated that the Assessee had not offered any satisfactory explanation regarding the surrendered amount not being bona fide.
• Further, the director of the assessee company was duly authorized to make a statement about the undisclosed income and Mr. Goyal acted accordingly on 20.11.2007. The Company did not retract immediately or any time before the show cause was issued to it on 27.11.2010. In reply to the show cause notice, the company for the first time urged that the statement was not voluntary and sought to retract it. This clearly indicated that the retraction was claimed as an afterthought.

Contention of the Revenue

• The director of the company is an authorized person to act on behalf of the company.
• The director having been surrendered the undisclosed and unreturned income of Rs. 15 Crores, such income is subject to tax and must be added to the income.

Contention of the Assessee

The director had not acted willfully and thereby no such addition to the income should be made.

Held by High Court

• Section 132(4) enables the Assessing Officer to use his discretion as is evident from the term ‘may’. In the instant case, the extent of amounts which the Assessing Officer took into consideration in adding back on the basis of the receipts and rough jottings was Rs.1.11 crores. The assessee’s Director stated this in the course of survey in the statement recorded by the revenue.
• The Delhi Court opined that in the circumstances of the case both the Commissioner (Appeals) and Tribunal were correct in adding back the amount of Rs.63.33 lakhs after adjusting the expenditure indicated. The explanation given by the assessee, in the course of the appellate proceedings, that the surrender was in respect of a certain portion of the receipt which had remained undisclosed or that some parts of it were supported by the books, is nowhere borne out as a matter of fact, in any of the contentions raised by it before the lower authorities. For these reasons, this Court is of the opinion that no substantial question of law arises. The appeal is accordingly dismissed.