Mere Statement recorded during survey cannot be the sole basis for making addition

A survey proceedings was carried out in the middle of the accounting year (on 1.12.2006) in the case of AHS Joint Venture, the sister concerns of the assessee firm. During the course of survey there was no incriminating material nor undisclosed income found in the hands of the assessee or its sister concern. A statement was recorded from the assessee partner, wherein he estimated the income of the group concern at 12.25 crores of rupees as under:

However, after finalization and audit of accounts, the income declared by the respective concerns whereas as follows:

In the case of AHS Joint Ventures, the actual income worked out was more than the estimated declared income, whereas in the case of the assessee, the income worked out was lower than what was declared during the course of survey proceedings. The Assessing Officer accepted the income declared in the case of AHS Joint Venture. However, in the case of assessee, he made an addition Rs. 71,91,658/- being the difference between the estimate given at the time of survey (Rs. 12.25 crores of the group) and the income declared as per the return of income (Rs. 11.53 crores of the group).

The estimated declaration of income during the course of survey was given in December 2006 for the period 1.4.2006 to 3 1.3.2007 i.e. much prior to close of the accounting year. No person can tell in advance in the month of December 2006 as to what exactly would be the income for the entire period of 1.4.2006 to 3 1.3.2007. The return of income filed by the assessee is on the basis of audited statement of accounts and not on the basis of any surrender. The books of accounts has not been rejected nor any incriminating material or evidence of undisclosed income was unearthed either during the course survey or assessment proceedings. The Assessing Officer has himself recognized that the declaration made by the assessee was not based on any surrender. The Assessing Officer has not assessed the income at Rs. 6 crores which was the estimated declaration of income during the course survey, but he has completed the assessment at Rs. 5,14,46,510/-.

It is trite position of law that statement recorded during the course of survey cannot be the sole basis for making an addition especially when there is nothing incriminating material or any undisclosed income unearthed during the course of survey proceedings u/s 133A of the Act.