No justification of making addition in absence of any evidence of unaccounted investment

Raj Enterprise Vs DCIT (ITAT Surat)

The Hon’ble Gujarat high Court in CIT Vs Golden Finance (supra) held that where Assessing Officer made addition on account of unexplained investment on basis of document impounded during survey and statement recorded by partner of assessee-firm, in view of fact that said documents did not suggest that noting were of loans and advances and, moreover, statement recorded during survey could not be relied upon, impugned addition was to be set aside. Thus, considering the above factual discussions and legal view taken by Jurisdictional High Court, we are of the view that there is no justification of making addition in absence of any evidence of unaccounted investment. Hence, we direct the AO to delete the addition.

FULL TEXT OF THE ORDER OF ITAT SURAT

1. This appeal by assessee is directed against the order of ld.Commissioner of Income Tax(Appeals-4), Surat dated 15.02.2016 for the Assessment Year (A.Y.) 2008-09.The Assessee raised the following grounds of appeal:

“(1) The ld. CIT(A) has erred in law and on facts in confirming an addition to the tune of Rs.4,22,33,400/- made by the ld.AO on the ground of alleged undisclosed investment u/s.69 of the Act.

(2) It is, therefore, prayed that the above addition be deleted.

(3) The Appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary all or any of the Ground or Grounds of Appeal.”

2. Brief facts of the case are that the assessee firm is engaged in the business of construction of 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 dated 25.03.2013 was served upon the assessee. In response to the notice under section 148 of the Act, the assessee furnished original return of income filed under section 139(1) on 7.10.2008. The assessee again vide its application/ letter dated 23.04.2013 requested for reasons recorded. In response to assessee’s application dated 23.04.2013, the assessee was provided reasons recorded. The Assessing Officer (AO) after supplying of 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 assessee. At the time of survey, the assessee firm was developing real estate project in the name and style of Water World Project in outskirts of Surat City. During the survey statement of Gobarbhai Gondalia partner of assessee firm was recorded. In the statement,the partner of assessee stated that he has sold land admeasuring 76,788 square yard and received a consideration of Rs.4.22 crore. Further, in question 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 unaccounted investment in the hand of firm in the year 2007.

3. On the basis of such statement, the AO issued show cause notice as to why Rs.4.22 crore should not be taken as unaccounted investment for the A.Y. 2008-09. In response to the show cause notice, the assessee filed its reply. The reply of assessee is recorded in para 7 of the assessment order. In the reply, the assessee in sum and substances stated that there is a factual error in recording reasons of reopening that statement of Gobarbhai Gondalia was recorded twice and that he confirmed the sale of land for a consideration of Rs.4.22 crore. Gobarbhai Gondalia belongs to traditional agricultural family. He hardly studied up to 6th standard and for the first time he faced higher level Income Tax Officers. During the survey, Mr. Gobarbhai Gondalia terribly afraid, upset and nervous and trying to get rid of this stressful and uncomfortable situation by signing whatever statement written by survey team in his name without really understanding either the question or the answer. He has immediately retracted the statement vide letter dated 18.02.2010 addressed to Deputy Director of Income Tax (Investigation)-3. It was further stated that while going through the statement recorded on 07.01.2010, that statement does not contain correct and complete facts of assessee firm’s case. The assessee stated that share of Gobarbhai Gondalia is 15% whereas, as a matter of fact, his working partner and his share is 20% as per the partnership deed dated 07.10.2008. In fact explaining to reply of question no. 5, it was stated that he sold land admeasuring 27 wingas bearing survey no.563A located at Umbhrat in 2007 @ Rs.550 per square yard. As a matter of fact, as agreed between the partners of Raj Enterprises, vide original deed of partnership dated 01.04.2007, the agricultural land to be purchased by assessee-firm, were to be purchased in the name of Gobarbhai Gondalia as he is farmer and purchase documents can be executed in the name of farmer only. It was further explained that as per the clause 1 to 5 of preamble of partnership deed, it was agreed that any agricultural land/can be converted into non­agricultural land which are to be purchased on behalf of the firm shall be purchased in the name of Gobarbhai Gondalia. Till such agricultural land get converted into non-agricultural land, each partner shall carry on incidental procedure in their respective names subject to technical limitation of law. Further, till the land is converted into non-agricultural land, the transaction on behalf of the firm shall be in the name of individual names i.e. Gobarbhai Gondalia shall make the transaction in his name. All responsibility will be of the firm. Financial Loss arouse out of any issue shall be borne by firm. Conversion and management of agricultural land into non-agricultural land and the management of such land shall be made in the name of firm. The assessee also explained that the seller of land executed sale deed in the year 2007, no part payment of consideration was pending. It was explained that sale consideration was completed in 2007 itself.

4. The reply of the assessee was not accepted by the AO. The AO held that during the survey, the statement of partner was recorded under section 131 of the Act. In the statement, the partner stated that he sold the land admeasuring 76,788 square yard in the year 2007 @ Rs.550 per square yard to the firm and received consideration of Rs.4.22 crore. Further, in reply to question no.16 & 17 he disclosed that land was purchased for a net consideration of Rs.4.16 crore which was disclosed as his unaccounted receipt. The AO further recorded that the payment by the assessee firm was not accounted in the regular books of accounts, therefore, the same was treated as unaccounted investment in the hand of firm. On the retraction statement, the AO concluded that retraction was made after 40 days of survey proceedings and no clenching evidence was furnished by Gobarbhai Gondalia. After referring certain case laws, the AO made addition in the hand of assessee firm of Rs.4.22 crore on account unexplained investment.

5. On appeal before the ld.CIT(A), the assessee challenged the validity of reopening under section 147 as well as addition on merit. On the reopening, the ld. CIT(A) held that the assessee has not made a single submission or assertion in support of relevant ground, therefore, the grounds of appeal was dismissed. On the validity of addition of Rs.4.22 crore, assessee again filed detailed written submissions as recorded in para 8.1 of the order of ld. CIT(A). In the written submission, the assessee stated that assessee firm never entered into transaction for purchase of land from Gobarbhai Gondalia(partner). The AO in the assessment has not referred any document about the transaction of land between the assessee firm and its partner. No transaction of purchase of land that partner took place. The AO has not dealt with the basic submission of the assessee. The AO made addition of Rs. 4.22 Crore that assessee-firm on the ground that assessee-form made payment of unaccounted on money. The AO has not proved that transaction of purchase and sale has taken place between the assessee-firm and the partners. The statement recorded by survey team suffer from basic irregularity, invalidity and illegality and referred sub­section 6 of section 133A of the Act which say that if a person under this section required to afford facility to Income Tax Authority to inspect books of accounts or other document to check or verify any cash stock or valuable article of things or to furnish any information or to record his statement to have recorded either refused or evades to do so, the Income Tax Authority have power under section 133(1) of the Act for enforcing compliance with requirement made. It was never the claim of survey officer that Mr.Gobarbhai Gondalia refused or evaded to make the statement admitted to be recorded under section 133A of the Act. The statement was recorded at odd hours at 3.30 AM during the course of survey proceedings. During the course of survey proceedings, no evidence was found suggesting that Gobarbhai Gondalia sold the impugned land to assessee-firm for a sum of Rs.4.22 crore. The statement has already been retracted and no addition can be made in absence of corroborating evidence. It was further stated that the land was purchased by Mr.Gobarbhai Gondalia for a consideration of Rs.6,30,000/- on 26.04.2007 and on 04.05.2007. The AO made addition without any justification. The assessee also relied on various case laws. The assessee also furnished the copy of purchase deeds dated 26.04.2007 and 04.05.2007 and submitted that the sale consideration as per sale deeds are Rs. 630,000/-. No additional stamp duty was required on such sale deeds by the Stamp valuation authorities as the land were purchased as per Jantri rates.

6. In alternative submissions the assessee stated that no addition is made in case of Partner Gobarbhai Gondalia on the ground that he made unexplained investment in the lands, which indicate that the lands were purchased at considerations shown in the sale deeds. The same AO has jurisdiction over the partner of the assessee –firm. The impugned land were acquired in FY 2007-08 and as per the allegation of AO the said land was transferred to assessee-firm in the same financial year. The same AO having jurisdiction over partner namely Gobarbhai Gondalia, has not made any addition on account of unaccounted investment in purchase of land.

7. The ld. CIT(A), after considering the submission of the assessee held that the assessee is claiming that land was purchased for less than Rs. 10/- Per square yard and was sold at a price of Rs.400 square yard. The actual sale price was around Rs. 1500/- per square yard as discussed in later part of his order. It was further held that there was drastic multiplication of sale consideration, which is not possible in a year or two years of purchase. It was further held that the assessee accepted undisclosed income of Rs. 1.50 Crore form the project till the date of survey as on 06.10.2010 and has shown it in the return of income. On the statement of Gobarbhai Gondalia, the ld CIT(A)held that it has to be considered in the light of the facts that sale value was accepted in the books, undisclosed income over and the purchase value recorded could not have been corrected. On the retraction of the statement of Gobarbhai Gondaliarecorded that is was under duress, coercion and obtained after midnight without reading, the ld.CIT(A) held that there is no proof that statement was recorded after midnight. No such time or remark is on his statement. The statement is very brief. The statement was voluntary. The partner comes out to be thorough in business and accounts. He has mentioned the purchase price and rate at which plots are being sold. After perusal of section 10, 11 & 12, the ld.CIT(A) held that though there are certain small discrepancies in the statement, however, the statement are voluntary and not under duress. The partner is a knowledgeable person. He has a reason to believe that the plot could not have been purchased as shown below Rs.7 lakhs. The value of land is held to be Rs.4.22 crore. The ld.CIT(A) while upholding the action of AO held as under:

“8.2 This addition of undisclosed investment has been made primarily on the statement of the partner Shri Gobarbhai Gondalia. The appellant has made detailed submissions and has contested the addition on various grounds which included (i) the statement was given under tension, the partner is semi-literate and signed the statement without knowing the contents (ii) the statement has been retracted (iii) there are obvious discrepancies in the statement like wrong share in partnership firm, wrong details of payments etc. (iv) no profits have been shown by the partner as per the statement (v) the statement is not actually u/s. 131 (vi) the registered value of the land recorded in the books of account of the assessee is within the valuation as per the revenue authorities for the purpose of stamp duty.

I have carefully considered the statement of Shri Gobarbhai Gondalia, the entire gamut of facts and circumstances of the case, the assessment order and the submissions of the appellant. It is a peculiar case where the statements and submissions are inconsistent and therefore facts in the entirety rather than any assertion/statement in isolation would have to be considered. The following pertinent observations/facts are culled out of the above:

1) The appellant is claiming that the land was purchased for less than Rs. 10 per sq. yard. By its own books after little development it has itself shown the sale price at over Rs. 400/- per sq. yard. The actual sale price was around Rs. 1,500/- per sq. yard as discussed and decided hereafter and in para X of this order. Such a drastic multiplication of sale consideration (around 40 times by appellant’s books, much more if unaccounted disclosed income of Rs. 1.5 crore is considered and over 150 times as per my decision) is not possible within a year or two of purchase.

2) The appellant had itself accepted net undisclosed income of Rs. 1.5 crore from the project till the date of survey i.e. as on 06.01.2010 and has shown it in the return for A.Y. 2010-11. The disclosure was made by Shri Rajeshbhai J Pengawala in reply to Q. No. 22; after considering the documents found, mobile (clearly referring to SMSs of financial transactions confronted in immediately preceding question no. 21) etc. Clearly by implication the appellant is accepting that the actual sale price was substantially above the recorded price.

3) The statement of Shri Gobarbhai Gondalia has to be considered in the light of the above facts and seeing the sale value accepted in books, undisclosed income over it etc. it is clear that the purchase value recorded could not have been correct.

4) To say that the statement was under duress and coercion, taken after midnight and without reading has to be understood and examined from the entire statement. There is no proof for the assertion that the statement was taken after midnight. No such time or remark is there on the statement. The statement is also very brief and there are no signs of it being stretched for long times. After going through these replies, I have got no reason to believe that the statement was not voluntary. The partner comes out to be thorough in business and accounts. After stating the purchase price of the land which the firm paid and also the rate at which the plots were being sold the partner had given very elaborate and clear headed replies to subsequent questions. For instance;

a) In reply to Q. No. 10 gave details of bank accounts of himself and his sons.

b) In reply to Q. No. 11 gave details of embroidery machinery and power looms owned by his two sons, the name of the concern etc.

c) In reply to Q. No. 12 gives details of ownership of property, construction, ancestral property, year of purchase of machinery etc. and in reply to Q. No. 13 gives the details of purchase of machinery and cost.

d) Clearly states that he is a working partner and receives Rs. 8,000/- (may not be accounted) in cash per month.

Although, there are certain small discrepancies in the statement, however it is clear that the statement was voluntary and not under duress, the partner is a knowledgeable person and considering the human probabilities where a land purchased has been converted into plots and has been accepted to have been sold at over 40 times in books and much above considering the undisclosed money received; I have every reason to believe that the plot could not have been purchased for as low as the sum shown of below Rs. 7 lac; and the partner who is severally and jointly responsible had given the actual value in the statement. Therefore, the value of land is held to be Rs. 4,22,33,400/-. However, the purchase price of the impugned land as shown in the books of account of the firm would have to be reduced, and the AO is directed to do so while giving the effect to this order for working out the addition for undisclosed investment. The ground of appeal is decided accordingly.”

8. Further aggrieved, the assessee has filed present appeal before this Tribunal by raising the grounds of appeal, which we have recorded in para-1 (supra).

9. We have heard the submission of ld.Authorised Representative(ld.AR) of the assessee and ld.Commissioner of Income Tax–Departmental Representative(ld.CIT-DR) for the Revenue and perused the orders of Lower Authorities carefully.Ground No.1 relates to additions of Rs.4.22 crore on account of unexplained investment in purchase of land from Gobarbhai Gondalia (partner). The ld.AR of the assessee submits that the assessee-firm right from the beginning contended that assessee never purchased any land out of survey no. 563A/2 and 562-2 at Umbhra from Mr. Gobarbhai Gondalia. No evidence is brought on record either by the AO or by the ld.CIT(A) about the purchase of investment by firm in the land from Mr. Gobarbhai Gondalia. In fact, the impugned land was purchased by Gobarbhai Gondalia from Nanubhai Patel and Chandbibi Suleman Wali vide sale deed dated 09.03.2007 and 26.04.2007. The copy of those sale deeds are placed on record. After purchase of said land Gobarbhai Gondalia, partner of the assessee introduced the said two piece of land into partnership firm [assessee-firm] as his capital contribution. These facts are clearly discernible from the contents of deed of partnership deed dated 07.10.2008, copy of which is placed in paper book. The fact that land was originally purchased by Mr. Gobarbhai Gondalia and later on introduced as a capital contribution is established beyond doubt by evidence on record. The ld. CIT(A), confirmed the addition by taking view that Gobarbhai Gondalia paid money to the extent of amount added without any evidence on record and without substantiating such fact and dispensing submission and evidence furnished by assessee. The ld.CIT(A) made addition on gross mis-appreciation of facts. In fact, assessee firm has not purchased land from Gobarbhai Gondalia, the question of making unaccounted payment on purchase of impugned land does not arise at all and the entire addition is liable to be deleted. The observation of ld. CIT(A) in para 17 and 18 of the impugned order that probably recording the increase in the sale rate of land over different period is clearly unfounded and unjustified. The land was purchased by individual for a total consideration of Rs.6.30 lakhs and was introduced as capital contribution on 26.04.2007 and 04.05.2007 i.e. within period of 1.5 months from the date of purchase. No addition in case of Gobarbhai Gondalia was made by AO as the land was purchased as per Jantri Rate applicable as determined by the Stamp Valuation Authority. The conclusion of ld.CIT(A) that just within the period of 1.5 months the price of land increased from Rs.6.3 lakhs to Rs.4.22 crore and no property would appreciate for more than 68 times within a period of 1.5 months. A huge addition of Rupees more than Rs.4.5 crore is made on the ground of making payment of unaccounted sale consideration. In case of recipient of such alleged unaccounted sale i.e. partner/ Gobarbhai Gondalia, no addition is made by Revenue on the relevant ground. The addition is made solely on the basis of statement of Gobarbhai Gondalia recorded during the survey on 07.01.2010. The statement was recorded at 3.30 AM during night hours.

10. The ld AR for the assessee submits that Hon’ble Gujarat High Court in case of Kailashben Manharlal Chokshi Vs CIT 328 ITR 411 (Guj) held that no reliance can be placed and no credence can be adopted to the statement recorded during such odd night hours. On the finding of ld. CIT(A) that no proof of statement at midnight, the ld.AR for the assessee submits that Hon’ble Supreme Court have consistently held that statement recorded during survey has no evidentiary value when same is retracted by deponent of the statement. To support his submission, the ld.AR for the assessee relied upon the following decisions:

(i) CIT V/s S. Khader Khan Son (2012) 254 CTR 228 (SC).

(ii) CIT-III V/s Golden Finance (2013) 40 Taxmann.com 329 (Guj).

(iii) M/s. Shashi Wines V/s ITO Vapi, Ward-4, Daman ITA No. 882/Ahd/2017.

(iv) CIT V/sDigambar Kumar Jain (HUF) (2013) 84 DTR 365 (MP).

(v) CIT V/s Dhingra Metal Works (2010) 236 CTR 621 (Del).

(vi) CIT V/s P. Balasubramanian (2013) 354 ITR 116 (Mad).

(vii) ITO V/s Vijay Kumar Kesar (2010) 231 CTR 165 (Chattisgarh).

(viii) CIT V/s S. Khader Khan Son (2008) 214 CTR 589 (Mad).”

11. Another alternative submission of ld.AR of the assessee submits that the addition is made only on the basis of retracted statement and the superior Courts have consistently held that no addition can be made in case of assessee when no corroborative evidence have been laid and the statement has already been retracted. To support his submission, the ld.AR of the assessee relied upon the following decisions:

(i) CIT v/s Chandrakumar Jethmal Kochar (2015) 55 taxmann.com 292 (Guj).

(ii) KailashbenManharlal Chokshi v/s CIT (2010) 328 ITR 411 (Guj).

(iii) DCIT v/s. Ratan Corporation (2005) 197 CTR 536 (Guj).

(iv) M/s. Shashi Wines V/s ITO Vapi, Ward-4, Daman ITA No. 882/Ahd/2017.

(v) PCIT V/s Sunshine Import & Export P. Ltd. (2020) 118 taxmann.com 123 (Bombay).

(vi) CIT, Tiruchirapalli v/s. Smt. S. JayalakshmiAmmal (2016) 74 Taxmann.com 35 (Madras).

(vii) DCIT v/s. Pramukh Builders (2008) 115 TTJ 330 (Ahd)(TM).

(viii) ACIT v/s. Ramanbhai B. Patel (2008) 12 DTR 471 (Ahd) (Trib).

(ix) ACIT v/s. Jorawar Singh M. Rathod (2005) 94 TTJ 867 (Ahd).

(x) Skylark Build V/s ACIT, Central Circle – 4(2), Mumbai (2018) 97 taxmann.com 682 (Mumbai-Trib.).

(xi) Smt. Ranjnaben Mansukhlal Shah v/s. ACIT (2004) 83 TTJ (Rajkot) 369.

(xii) DCIT v/s. Premsons (2010) 130 TTJ 159 (Mumbai).

(xiii) G. Kanagaraj v/s. ACIT (2001) 73 TTJ 731 (Chennai).

(xiv) Govind Ram Chhugani v/s. ACIT (2002) 77 TTJ 339 (Jd).

(xv) ITO v/s. Bua Dass (2005) 97 TTJ 650 (Asr).”

12. In further alternative submission, the ld.AR for the assessee submits that the AO recorded that statement of Gobarbhai Gondalia was recorded under section 133(1) of the Act. The recording of statement of Gobarbhai Gondalia under section 133(1) of the Act is illegal and invalid. Since as per the provision of relevant section 133A(6) of the Act, the recourse of provision of section 133(1) of the Act can be invoked by Survey Officer only when person concerned refused to gave his statement or does not co­operate in recording of his statement during survey proceedings. There is no such claim or observation of non-cooperation of Mr. Gobarbhai Gondalia recorded by Survey Officer, therefore, recourse of section 131(1) of the Act for recording the impugned statement on oath by Survey Officer is illegal and invalid. To support his submission, the ld.AR for the assessee relied upon the following decisions:

(i) Pawan Kumar Goel v. Union of India (2019) 107 taxmann.com 21 (P&H).

(ii) CIT v. Mool Chand Salecha (2002) 124 Taxman 898 (Raj.).

(iii) Shri Venkateshwara Tourist Home P. Ltd. v. ADIT (1998) 101 Taxman 710 (Kar.).

(iv) Maruti Mills Private Limited V/s Union of India and Others (2000) 159 CTR (Raj) 142.

(v) Dr. Vijay Pahwa V/s Samir Mukhopadhyay (1995) 129 CTR (Cal) 64.

(vi) Gheru Lai Bal Chand V/s ITO (1982) 137 ITR 190 (P&H).

(vii) Ram Saroop Pawan Kumar V/s ITO (1980) 18 CTR 101 (P&H).”

13. The ld.AR for the assessee finally submits that as per CBDT Circular dated 10.03.2003, the copy of which is already placed, the CBDT directed its officer to focus on collection of incriminating evidence during the search/survey proceedings rather than obtaining admission of huge unaccounted income by the concerned assessee without collecting supporting / corroborative material. The CBDT has also clarified that without such bare admissions are retracted later on and the additions are made merely on the basis of statement of assessee, such addition do not survive in appellate proceedings. On the aforesaid submission, the ld.AR of the assessee submits that impugned addition which is made in absence of any evidence, solely based on the statement, which stands retracted, and the addition is liable to be deleted.

14. The assessee has filed following documents of record;

15. On the other hand the ld CIT-DR for the revenue submits that survey under section 133A was carried out at the premises of the assessee. During the survey statement of partners were recorded under section 131. In the stamen one of the partner namely Gobarbhai Gondalia disclosed that a land admeasuring 76,788 Sq yard was sold by him in the year 2007 @ 550 per Sq yard to the firm and he had received Rs. 4.22 Crore. In response to the question he specifically answered that the said land was purchased by him on a consideration of Rs. 4.16 Crore. The payments made by the firm was not accounted in the books of the firm. The statement of the partner was a valid statement. The retraction made by the partner on the ground that there was duress or any pressure is not supported by any evidence. The retraction was made after more than one month time. The ld Dr for the revenue fully supported the order of the lower authorities.

16. We have considered the rival submissions of the parties and have gone through the orders of the lower authorities. We have also deliberated on the various case laws relied by the ld. AR for the assessee. The AO made additions on account of unexplained investment of Rs. 4.22 Crore by taking view that a survey action was carried out at the premises of the assessee-firm, during the survey, the statement of partner was recorded under section 131 of the Act. The partner in his statement disclosed that he sold the land admeasuring 76,788 square yard in the year 2007 @ Rs.550 per square yard to the assessee-firm and received consideration of Rs.4.22 crore. The AO further noted that in reply to question no.16 & 17, the partner disclosed that land was purchased for a net consideration of Rs.4.16 crore. The AO further recorded that the payment by the assessee firm was not accounted in the regular books of accounts. On the retraction of statement by the partner, the AO concluded that retraction was made after 40 days of survey proceedings and no clenching evidence was furnished by partner/ Gobarbhai Gondalia. Accordingly, the AO made addition in the hand of assessee firm of Rs.4.22 crore on account unexplained investment. The ld CIT(A) upheld the action of AO by holding that it is a peculiar case where the statements and submissions are inconsistent and therefore facts in the entirety rather than any assertion/statement in isolation would have to be considered. The ld CIT(A) further held that there are certain small discrepancies in the statement of the partners, however it is clear that the statement was voluntary and not under duress, the partner is a knowledgeable person and considering the human probabilities where a land purchased has been converted into plots and has been accepted to have been sold at over 40 times in books and much above considering the undisclosed money received. It was held that ld CIT(A) have every reason to believe that the plot could not have been purchased for as low as the sum shown of below Rs. 7.00 lacks; and the partner who is severally and jointly responsible had given the actual value in the statement. Therefore, the value of land is held to be Rs. 4,22,33,400/-. The ld CIT(A), directed that the purchase price of the impugned land as shown in the books of account of the firm would have to be reduced, and directed the AO accordingly to do so while giving the effect to this order for working out the addition for undisclosed investment.

17. The ld AR for the assessee vehemently argued before us that the assessee-firm right from the beginning contended that the assessee- firm never purchased any land out of survey no. 563A/2 and 562-2 at Umbhra from Mr. Gobarbhai Gondalia and that no evidence is brought on record either by the AO or by the ld.CIT(A) about the purchase of investment by firm in the land from Mr. Gobarbhai Gondalia. In fact, the impugned land was purchased by Gobarbhai Gondalia in his individual capacity and after purchase of said land Gobarbhai Gondalia; partner of the assessee introduced the said two piece of land into assessee-firm as his capital contribution. During his submissions the ld AR for the assessee also invited our attention on the contents of deed of partnership deed dated 07.10.2008, copy of which is placed in paper book. We find merit in the submissions of the ld AR for the assessee the impugned land was originally purchased by Mr. Gobarbhai Gondalia as per sale deed dated 09.03.2007 and 26.04.2007, copy of which are available at page No.133 to 171 of paper book (PB). On further perusal of the various clauses of partnership deed 07.10.2008, we find that those pieces of land were introduced as a capital contribution by Gobarbhai Gondalia, which is clearly discernable from the contract of the partnership. The partnership is registered in office of Sub-Registrar Navsari vide document No. 8013 dated 08.10.2008. The registration of the partnership is much prior to survey action on 06.01.2010 and recording the statements of partners. We have noted that the ld. CIT(A), while confirming the action of the AO held that he have every reason to believe that the plot could not have been purchased for as low as the sum shown of below Rs. 7.00 lakhs and the partner who is severally and jointly responsible had given the actual value in the statement and therefore, the value of land is held to be Rs. 4,22,33,400/-. We find that the lower authorities while making addition made more reliance on the statement of the partners instead of considering the documentary evidence and the effect of legal fiction under section 45(3) of the Act.

18. We find that the documentary evidence placed on record by assessee, fully corroborate the submissions of the ld AR for the assessee that there is no sale of land by Gobarbhai Gondalia to the assess-firm, rather the said land was introduced as capital contribution, and that no money is paid by the assessee firm to the partner. There is no evidence on record about the unexplained investment by the assessee-firm in the impugned land rather it is a part of capital contribution by partner. If there was any remote chance of unexplained investment in the land, it might have been made by partner who had purchased the land in his individual capacity in FY 2007-08. No such investigation is carried out either by the AO or by ld CIT(A). No addition is made in the hand of purchaser of land, though; it was informed to the AO at the initial stage that the said land was purchased by individual partner. It is settled law that statement recorded during the survey action has no evidentiary value unless it is corroborated with material evidence, when the statement made during the survey stand retracted.

19. The Hon’ble jurisdictional High Court in CIT Vs Chandrakumar Jethamal Kochar (supra) held that merely on basis of admission that few benami concerns were being run by assessee, assessee could not be subjected to addition when assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such admission.

20. The Hon’ble Gujarat high Court in CIT Vs Golden Finance (supra) held that where Assessing Officer made addition on account of unexplained investment on basis of document impounded during survey and statement recorded by partner of assessee-firm, in view of fact that said documents did not suggest that noting were of loans and advances and, moreover, statement recorded during survey could not be relied upon, impugned addition was to be set aside. Thus, considering the above factual discussions and legal view taken by Jurisdictional High Court, we are of the view that there is no justification of making addition in absence of any evidence of unaccounted investment. Hence, we direct the AO to delete the addition.

21. The ld AR for the assessee also vehemently submitted that recording of statement under section 131(1) during the course of survey is illegal and invalid unless there is satisfaction of survey party that the person refuses to make his statement or does not co-operate in recording statement during survey. We have seen that contents of the statement of partners of the assessee recorded under section 131(1), however, there is no endorsement of the survey party that the partners of the assessee-firm refused to have their statement or not co-operated during survey.

22. We find that Hon’ble Gujarat high Court in Pawan Kumar Goel Vs Union of India (supra) 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.

23. In view of the aforesaid legal position, we also held that the recording of the statement by survey team under section 131(1) is not valid. Thus, no cognizance of such statement could be taken. Hence, the addition which is solely based on the stamen is not legally sustainable. Thus, the assessee also succeeded on this submission as well. Considering the fact that we have allow the appeal of 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.

24. In the result, the ground of appeal raised by the assessee is allowed.

25. In the result, the appeal of the assessee is allowed.

Order announced on 31 January, 2022 in open court and the result was also placed on notice board.