Undisclosed income from one year can be used in subsequent years to justify investments or expense

ACIT Vs Naresh Jain (ITAT Jaipur)

In this ground, the Revenue contested the telescoping benefit of Rs. 1,00,30,778 that was granted by the CIT(A). Telescoping refers to the adjustment of income or unexplained investments of one year against the undisclosed income of another year. The CIT(A) had allowed the benefit of telescoping by utilizing the additional income disclosed by the assessee from earlier years to set off against the additions made in the current year.

The ITAT upheld the decision of the CIT(A), agreeing with the principle that the undisclosed income from one year could be legitimately used to explain investments, expenses, or other additions in subsequent years. The tribunal dismissed the Revenue’s argument, confirming that the CIT(A) had correctly applied the established principles of telescoping in this case, and there was no error in the approach adopted by the CIT(A).

FULL TEXT OF THE ORDER OF ITAT JAIPUR

This appeal filed by the Revenue is directed against order of the ld. CIT(A), Udaipur-2 dated 29-01-2024 for the assessment year 2017-18 raising therein following grounds of appeal.

‘’1 Whether on facts and in circumstances of the case, the Lad. CIT(A) is justified in ignoring the evidential basis of additions of Rs. 1,83,20,000/- available to the AO in the form of incriminating documents found and impounded during the survey containing all information of incriminating transactions recorded therein and further supported by the explanation and admission of Sh. Naresh Jain, in his statement recorded on oath us 131 during survey, who accepted these transactions to be unaccounted.

2. Whether on facts and in circumstances of case, the Ld. CTT(A) is justified in deleting addition of Rs 33,60,000/- made by AQ on the basis of incriminating documents containing registered document for purchase of property and supported by assessee’s statement-by simply relying on dicta from the decision of Hon’ble High Court of Kerala in the case of C.K. Abdul Azeez vs. CIT. Central Circle, Calicut [2019] 111 taxmann.com 74(Kerala) that “Statement on oath made by an assessée to income tax authority during survey proceedings under section 133A is not conclusive, assesse can explain or withdraw admission, if any, made by him in such statement and assessment of tax cannot be made solely on basis of such sworn statement made by assesssee under section 133A(3)(iii) and such statement can be used to corroborate other materials before assessing authority, including contents of any document which does not apply directly to present case as the addition was made on concrete evidence.

3. Whether on facts and in circumstances of the case, the Ld. CIT(A) is justified in deleting the addition of Rs. 7,10,000/- not considering the fact that it was made on the basis of incriminating documents impounded and the true explanation of Naresh Jan in statement was recorded on oath u/s 131 and not u/s 133A (3)(iii) and the assesse failed to prove with registered conveyance deed of transfer of above property, and also failed to make it verified with the explanation of the sellers

4. Whether on facts and in circumstances of the case, the Ld. CTT(A) is justified in deleting the addition of Rs. 27,97,131/- out of total addition of Rs 35,00,000/-by not considering the fact that the assessee admitted in his statement recorded on oath u/s 131 and not u/s 133A(3)(iii) and the assesssee failed to explain the available documents and evidences in this regard

5. Whether on facts and m circumstances of the case. the Lil CIT(A) is justified in deleting the addition of Rs. 75,00,000/- made on account of marriage of son Shri Ativeer Jain by appreciating the retraction from his statement claiming that these expenses do not belong to him and belonged to Nisha Jain despite that it was recorded on oath u/s 131 during the survey

6. Whether on facts and in circumstances of the case. the Ld. CIT(A) is justified in deleting the addition of Rs. 1,43,67,131/- out of total additions of Rs 1,83,20,000- which were duly made on the basis of incriminating documents found and impounded during the survey and truly explained by Naresh Jain in the statement recorded during the survey

7. Whether on facts and in circumstances of the case, the Ld. CIT(A) is justified in giving telescoping effect to the assesse to set off Rs 46,43,251-against the sustained addition Rs. 49,02,869- resulting in sustenance of remaining additions of Rs. 2,59,618/-only.’’

2.1 It may be noted that the present appeal is preferred by the Revenue against the order of CIT(A) dt. 29.01.2024. Since the ld. CIT(A) has already stated the relevant facts hence, the same are not being repeated here. During the course of hearing, the parties were directed to file detailed written submissions in support of their oral arguments, if so desired. However, the ld.DR supported the order of the AO. To this effect, the ld. AR of the assessee has filed the following written submissions countering the grounds of appeal raised by the Revenue.

‘’Submission:

1.1 Revenue’s grounds lack on merit and legality both: It appears that the revenue has proceeded on serious misconception of fact and law while repeatedly alleging that the ld. CIT(A) has ignored the basic fact that the assessee had already admitted income on oath u/s 131, which contention appears totally contrary to the factual and legal finding recorded by the CIT(A:

“With regard to evidentiary value of the statement recorded under oath u/s 131 it is held in various decisions that the statement recorded under oath is having evidentiary value. (At pg.25)

The next objection of the assessee is that statement on oath could not be recorded in course of survey. This issue is covered by the decision of the Bombay High Court in the case of Dr.

Dinesh Jain v. ITO [2014] 363 ITR 210/226 Taxman 27/45 taxmann.com 442 and, therefore, this objection raised by assessee does not survive. [Para 9]” (at pg.26)

Thus, the CIT(A) clearly held that the statement recorded on oath u/s 131 do have evidentiary value. However, thereafter the ld. CIT(A) also held that statement recorded during survey is not conclusive and also recorded categorical finding of fact that the corroborative material used by the AO wherein the assessee admitted, was fully explained and thereafter, in absence of any other corroborative evidence such admission alone could not be made a basis of the addition. Hence Revenues ground has no merits (subject to prayer mentioned below).

1.2 Prayer u/r 27 of the ITAT Rule, 1963:

Though, assessee is not in appeal or co. against such findings of the CIT(A) on this legal aspect, however assessee is entitled to support his order on the issue decided against him u/r 27 of the Income-tax (Appellate Tribunal) Rules, 1963 which provides that “The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him”. Since the CIT(A) did not appreciate that these were survey statement recorded u/s 133A(3)(iii) but not u/s 131 having no evidentiary value at all, hence this prayer. The said rule clearly support the assessee, because such aspect is inherently related to the ground taken by the assessee before him wherein, on merits he deleted the addition but on this particular legal aspect held against the assessee. Reliance is placed on the cases of ITO Vs IME International ITA No. 1873/JP/2012 dated 08.01.2016 (Del Trib), BPL Systems & Projects Ltd., and Sun Pharmaceuticals Industries Ltd and Sanjay Sawhney v. Principal Commissioner of Income-tax [2020] 116 taxmann.com 701 (Delhi) wherein it was held that:

“Section 253, read with section 153C, of the Income-tax Act, 1961 and rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 – Appellate Tribunal – Appealable orders (Aggrievedperson) – Assessment year 2008-09 – Whether rule 27 embodies a fundamental principal thata respondent who may not have been aggrieved by final order of lower authority or court,and therefore, has not filed an appeal against same, is entitled to defend such an orderbefore Appellate forum on all grounds, including ground which has been held against him bylower authority, though final order is in its favour – Held, yes – Whether where assesseesucceeded before Commissioner (Appeal) in ultimate analysis and was, thus, not anaggrieved party, in Revenue’s appeal, Tribunal committed a mistake by not permittingassessee (respondent before it) to support final order of Commissioner (Appeal) by assailingfindings of Commissioner (Appeal) on issues that had been decided against him – Held, yes[Para 26] [In favour of assessee]

Words and phrases : Term ‘thereon’ as occurring in section 254(1) of the Income-tax Act,1961/ Term “though he may not have appealed” as occurring in rule 27 of the Income-tax(Appellate Tribunal) Rules, 1963”

2. AO cannot blindly rely upon a statement alone:

2.1 During survey dt. 02.02.2017 statements of assessee were recorded u/s 131 and various impugned addition were based on statement of Shri Naresh Jain. However, it’s crucial to note that Shri Naresh Jain retracted his statement on 14.02.2017 (APB 8-11). In the light of this fact, our submission are follows.

2.2.1 Sole Statement, not a good basis for Addition: At the outset, we submit that no addition can be made merely and solely on the basis of a statement of a third party. The ld. AO heavily relied upon the statement of the Shri Naresh Jain recorded u/s 131 on dated 02.02.2017 by the Survey Team. However, the credibility of such statements is highly doubtful and not binding for various reasons, as enumerated below:

2.2.2 No addition permissible solely based on statements : Pertinently, the impugned additions have been made solely based on the statement of the assessee without any corroborative evidence, and that too ignoring the retraction. It is settled that an admission cannot be made the sole basis of assessment since it is a matter of common knowledge that during the course of Search/Survey, the Revenue Authorities normally do exert unwanted pressure and influence over the assessee’s to get something surrendered to make their survey a success. To expect the assessee to furnish an infallible evidence of concrete nature in such a situation is totally beyond comprehension.

2.3 The authorities below even violated the binding CBDT Circular No. 286/2/2003 dt. 10.03.2003 and the Budget Speech, 2003 by the Finance Minister please be referred, which is reproduced herein below :

“Instances have come to the notice of the Board where assessee have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstance, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments, Similarly, while recording statement during the course of search & seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment.”

The said instruction was relied upon in the cases of R. K. synthetics 30 TW 228 (Jd) , ITO vs. Suresh Chandra Koolwal (2004) 32 TW 23 (Jp) and also CIT v/s Shri Ramdas Motor Transport 238 ITR 177(AP).

2.4 Judicial Guideline: The authorities below did not appreciate that the Survey & Search creates tension in the mind of the person being searched and a layman normally used to lose confidence. It can’t be denied that such action creates an anxiety and medical problem to the person being searched. Pertinently, the Kelkar Committee has also taken note of this prevailing attitude of the search parties and consequently remarked very Reliance is placed on:

2.4.1 The existence of tension and surcharged atmosphere has been recognised even by the courts. Kindly refer Jagdish Narayan Ratan Kumar 22 TW 209 (JP). Such statements, therefore are bound to give a distorted picture and are not fully reliable as such.

2.4.2 On this aspect it will be quite relevant to refer to decision of Hon’ble Gujarat High Court Kailashben Manharlal Chokshi vs. CIT (2008) 14 DTR 257/ (2010) 328 ITR 411 (Guj.) wherein, it was held as under:

“22. It is also to be seen as to whether an addition made is merely based on the statement recorded by the AO under s. 132(4) of the Act and whether any cognizance may be taken of the retracted statement. So far as case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under s. 132(4) of the Act at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in a statement if such statement is recorded at such odd hours. Moreover, this statement was retracted after two months.

26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under s. 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not (sic) to disbelieve the retraction made by the AO (sic- assessee) and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs. 6 lacs on the basis of statement recorded by the AO under s. 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee.”

3. Admission retracted / Not acted upon – Hence addition invalid:

3.1 Unfortunately, in present case the AO ignored the settled legal position that a person making a statement is legally entitled to retract from what it had stated earlier. It has been held that an admission, though best evidence against such a person, if shown to be out of ambiguity, under tension or was against the facts or misconception of law, can be validly retracted. The assessee repeatedly submitted that it had prepared a retraction letter supported by affidavit dated 14.02.2017 (APB 140-143) which was filed before the ADIT(Inv.), Kota on 06.04.2017 for this purpose the assessee purchased a Non-Judicial Stamp Paper on 07.02.2017 (i.e. just within 4 days) executed on 14.02.2017, when it was signed in the presence of the Notary The contents of the same are reproduced here under :

“3. THAT the normal business hours of our business units are from 10:00 AM to 8:00 PM and business, activities are conducted at respective office 149, Ballabhbari, Kota during these hours only.

4. THAT the Income Tax Investigation Team has visited on 2nd February, 2017 at around 6:30 AM at my residence without prior notice and forced me to open the business premises at the same time.

5. THAT the Officials of Income Tax Department after forcing me to open the business premises started the survey on 2nd February, 2017 at around 7AM which continued till 5th February, 2017 around 3:30AM. The survey was conducted based on some suspicious information about our connection with Allen Career Institute. The Officials of the survey team, recorded my statement from time to time to establish, that we have unrecorded transactions with M/s Allen Career Institute. Having not found anything incriminating with reference to our transaction with Allen Career Institute, they started looking into our personal affairs and pressurised me to give statement about my transactions/properties.

6. THAT I gave the statement as per my information and knowledge without any verification from the books of This statement continued from 2nd February, 2017 to 5th February, 2017 and my statement was recorded in more than 25 pages. The survey party impounded various documents, books and papers and asked me to sign each and every paper without providing me any opportunity to read what they have written in my statement and thus concluded the survey at around 3:30 AM on 5th February, 2017. I was so exhausted in this continuous survey that I signed the papers as required by the survey party.

7. THAT-on-7th February, 2017 from the media news on ETV News and Zee Marudhara, I came to know that the Income Tax Survey Party has sought a declaration of undisclosed income of around 9 ers from me, On hearing this news, I was shocked as I had not made any such declaration nor the survey party have stated about any such undisclosed income in course of survey. 1, therefore, immediately went to the Income Tax Office, CAD Road, Kota – Room No.217 at around 7 PM but no official who came for survey was present there. Therefore, I rang up Shri Dinesh Gehlot, Commissioner but as soon as I started talking to him about the media news of my declaration of undisclosed income, he disconnected the call. Thereafter, I tried to contact Shri Mukesh Ji Sharma (ITO) but he also did not meet me. Thereafter, I called Mr. Jakhad, Jodhpur who informed me that as per my statement on various points, I have mentioned some amount which amounts to approximately Rs. 9 crs and this is the amount which I have surrendered in my statement.

8. THAT I am not aware that what has been recorded by the survey team in my statement recorded in survey as I was not given any opportunity to understand and read that These statements were recorded under coercion and undue influence; therefore, I disown the statement recorded in course of survey.

9. That I assure that after obtaining the various documents impounded from me and. after analyzing the same, if any unrecorded income is found, I will disclose the same in the return of income.

10. Whatever declaration 1 have made and wherever documents they have made me signed, 1 was not in a state of mind to analyze the situation at that time. So, I request you to please not to consider the statement given at the time of survey, they were all taken by coercion and misrepresentation by the income Tax Officials which is against the law.

11. That the facts stated in Paras 1 to 10 above are true and correct to the best of my knowledge and belief, SO HELP ME ”

3.2 The Authorities below doubted the fact of filing the affidavit yet however, no positive evidence has been brought on record by them from the office of the ADIT (Inv) denying the fact of receiving in the retraction letter/affidavit. The very fact of filing the affidavit together with the other facts and in absence of any contrary evidence, has to accept that the assessee did retract within a period of just four days from the date of admission during the course of survey statement on dated 02.02.2017. Even the revenue has not taken any specific ground on this aspect nor the ld. DR could controvert these facts.

3.3 There is a sharp contradiction in the findings recorded by CIT(A) because while dealing with the same retraction claimed (i.r.t. statement of Shri Naresh Jain), the CIT(A) in case of Smt. Nisha Jain AY2017-18 has recorded the following finding in para 5.6.2 at pg 38 of order “In this case, the retraction is with sufficient, credible and corroborative evidence to support his claim”.

3.4 Legal Principles:

3.4.1 It is trite law that an admission, though best evidence against such person, if shown to be out of ambiguity, under tension or was against the facts or misconception of law, can be validly It has been held by the Hon’ble Supreme Court in Pullangode Rubber Produce Co. Ltd. vs. State of Kerala & Others 91 ITR 18 (SC):

“Such admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect, and the assessee should be given a proper opportunity to show that the books of accounts do not disclose the correct state of facts”.

3.4.2 The Hon’ble Apex Court in Nagubai Ammal v/s B. Sharma Rao AIR 1956 (SC)593: held as under

“An admission is not conclusive as to be truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which must depend on the circumstances under which it is made. It can be shown to be erroneous or untrue”.

3.4.3 In Rajesh Jain v/s DCIT (2006) 100 TTJ 929 (Del), held that computation of undisclosed income solely on the basis of confessional statement of the assessee was not justified, inter alia, where the conduct of affairs by the Revenue Authorities showed that good amount of psychological pressure was built on the assessee to make the said statement and all material found during search was duly explained by assessee on which no adverse comments was made by the This decision contains various references and relevant extract quoted from various case laws.

3.4.4 Further kindly refer Polat Marmo Agglomerates Ltd Union of India (1994) 73 ELT 536 (Raj.) wherein it was held that the admission made in ignorance of correct position of law and facts are not binding upon a party.

3.4.5 Similarly, in the case of Ambalal vs. Union of India (1983)13 ELT 1321 (SC) it was held that confessional statements recorded under threat, coercion, inducement or promise are not valid but persons concerned should take care to retract such confessions without delay. Retraction would then be weighed in the light of other evidence available

3.4.6 The Hon’ble Supreme Court in Vinod Solanki v/s Union of India (2009) 233 ELT 157 (SC) makes it abundantly clear that the issue of summons and obtaining statements from the persons summoned, cannot and should not be the only basis to make out a case by the Revenue against the assessee. The Hon’ble Supreme Court took into account the fact that the burden of the revenue cannot be dispensed with and the onus cannot be shifted by it to the assessee by obtaining confessional statement. After elaborate judicial analysis of the legal position, the Hon’ble Supreme Court allowed the appeal of the assessee and vacated the orders of all the lower authorities.

3.4.7 Also refer Heirs and LRs of Late Laxman Bhai S. Patel v/s CIT (2009) 222 CTR 138 (Guj).

4 Statement of assessee can’t be incriminating material:

4.1 ACIT, Central Circle-1(4), Ahmedabad v. Himalaya Darshan Developers (Gujarat) (P.) Ltd [2021] 128 taxmann.com 435 (Ahmedabad – Trib.) held as under:

“Besides the above, the Assessing Officer has also made reference to the statement of the director of ‘SJSL’ recorded under section 132(4) and statement of another director under section 131(1A), wherein it was admitted that the company namely ‘SJSL’ is engaged in providing accommodation entries. Thus the same is a paper company. On perusal of the statement recorded under section 133(4) reproduced by the Assessing Officer in his order there was remarks made by such director to the effect that material/document seized during the search does not belong to the PS i.e. ‘SJSL’, or belong to the assessee company. In this regard, there were no incriminating material against OP was found in the search. Further, section 153C emphasize that there should be material or document seized which belong to the OP. As such statement recorded during search is not a material or document found and seized. Therefore, the statement recorded under section 132(4) cannot be construed as material/document for invoking proceeding under section 153C specially, in the circumstances where no material of incriminating in nature found belonging to OP. [Para 8.4]

The documents/any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute the documents sufficient to make assessment for the purposes of the Act. The courts have referred such documents as an ‘incriminating material’. While going through a large number of the decision rendered in the context of search assessment, it was observed that the word ‘incriminating material’ has been used very often, but the point here is that what is the meaning of ‘incriminating material’ or in other words what meaning can be attributed to ‘incriminating material’, as the same is the main bone of contention while framing the search assessment order under section 153A/153C and the same has not been defined under the Act. Therefore, it is imperative to understand the meaning of the word ‘incriminating material’. Practically stating it can be stated that the ‘incriminating material’ can be in any form such as a document, content of any document, entry in the books of account, an asset etc. [Para 8.5]

Any fact/evidence which could suggest that the documents/transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/make belief based on non-existent facts or suppressed/misrepresented facts, fulfilling the ingredients of undisclosed income, would constitute an ‘incriminating material’ sufficient to make assessment for the purposes of the Act. [Para 8.6]”

4.2 PCIT, Delhi-2 Best Infrastructure (India) (P.) Ltd.* [2017] 84 taxmann.com 287 (Delhi) Hon’ble High Court of Delhi held as under:

“38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra)….”

5. No evidentiary value of Survey Statement:

5.1 Further as per section 133A, there is nothing which suggests that a statement can be recorded on oath before the commencement of Survey or during Survey. However, if recourse is taken to section 131(1), during the survey, a statement can be recorded on oath, as the powers to record a statement on oath are vested in the authority u/s. 131(1) read with section 133(6) and in the circumstances specified u/s. 133(6) only. Section 133A does not empower any ITO to examine any person on oath, so statement recorded under section 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition.

5.2 Further, the statute has provided different provisions looking to the different factual situations as regard recording of the statement, somewhere on oath and somewhere without oath, u/s 132(4) (in such matters), u/s 133A(3)(iii) (in survey case) and u/s131 (for general inquiry). These provisions operate independently in their respective fields and cannot be used interchangeably. S.133A(3)(iii) is separate and independent from S. 131, as evident from the further fact that 133A (6), refers to use of the powers u/s 131 only in a given fact situation (as stated above), which manifests the legislative intention that statement of the assessee can be recorded under any of these three provisions as the situation may demand. Further, S.132(4) provides that such statement recorded during search may be used as evidence against the assessee in any proceedings, which is not the situation with S. 133A(3)(iii) nor with S. 131. In other words, though statement may be recorded on oath u/s 131, yet the statute not having provided such statement to be used as evidence against the assessee in any proceedings, the statement recorded under these two provisions loses their evidentiary value on the strict interpretation of the fiscal statute. Ignoring this significant difference will render the use of these words intendedly u/s 132(4), purposeless or nugatory. Therefore, to say that statement recorded u/s 133A(3)(iii) is equivalent to statement recorded u/s 131 is a gross misinterpretation of the provisions.

5.3 Reliance placed on:

5.3.1 CIT v. Khader Khan Son (2008) 300 ITR 157 (Mad.) (HC). Affirmed by Apex Court in, CIT v. S. Khader Khan Son (2012) 210 Taxman 248(2013) 352 ITR 480 (SC) / (2012) 25 taxmann.com 413 (SC).

5.3.2 Moreover in a comparatively recent case of CIT, Central -2, New Delhi v. Meeta Gutgutia [2017] 82 taxmann.com 287 (Delhi) Hon’ble Delhi High Court referred to the decision of the Kerala High Court in Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 and of the Madras High Court in S. Khader Khan while considering distinction between statements under Sections 132(4) and 133A held as under:

“40. The main plank of Mr. Manchanda’s submission was that the disclosure made by Mr. Pawan Gadia in his statement under Section 133A was sufficient to be construed as incriminating material qua all the aforementioned AYs, the assessment for which could be re-opened by invoking Section 153A of the Act. It is significant that while in the written submission dated 26th April, 2017, Mr. Manchanda termed the statement of Mr. Pawan Gadia as “the statement dated 23rd December, 2005 recorded under Section 132(4) of the Act”, he was careful to describe it as such in the subsequent written submission dated 2nd May, 2017. This was for a good reason. The statement was in fact not under Section 132(4) of the Act but under Section 133A of the Act. There is a difference between a statement made during a survey under Section 133A of the Act and that made during the course of search under Section 132 (4) of the Act. Section 132(4) of the Act states that the authorized officer may, during the course of search and seizure, “examine on oath any person who is found to be in possession or control of any books of account, documents, monies, bullion, jewellery…”and that any statement made during such examination may be used thereafter in evidence in any proceeding under the Act. On the other hand, Section 133A does not talk of the recording of any statement on oath. Under Section 133A (3) (iii), the Income Tax Authority acting under the said provision could “record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.” Therefore, there is a considerable difference in the nature of the statement recorded under Section 132(4) and that recorded under Section 133A(3)(iii) of the Act.

41. This distinction was noticed by this Court in Dhingra Metal Works (supra). The Court there referred to the decision of the Kerala High Court in Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 and of the Madras High Court in Khader Khan Son (supra) and observed that the word ‘may’ occurring in Section 133A(3)(iii) of the Act “clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself.” Incidentally, the decision of the Madras High Court in S. Khader Khan Son (supra) has been affirmed by the Supreme Court by the dismissal on 20th September, 2012 of SLP (Civil) No. 13224/2008 filed by the Revenue against the said decision after granting leave. To the same effect is the decision of this Court in Sunrise Tooling System (P.) Ltd. (supra) and of the Jharkhand High Court in Shree Ganesh Trading Co. (supra). The CBDT’s instructions dated 10th March, 2003 and 18th December, 2014 have also emphasized that there should be no recording of statement during “search/seizure/other proceeding” under the Act under “undue pressure or coercion”.

42. Therefore, in the present case, it would be wrong on the part of the Revenue to characterize the statement of Pawan Gadia as by itself an incriminating material that could be used for making additions in all the AYs in question apart from the year of search.”

5.3.3 Covered issue: This Hon’ble ITAT in the case of Unique Art Age v. AO [2014] 50 taxmann.com 194 (Jaipur – Trib.), has also taken similar view holding that:

“3.8 Effect of admission made in statements recorded during survey under section 133A of the Act

18. The position of law regarding the evidentiary value of admissions made in such statements is now settled. After considering the rival stands on this issue, we have already discussed the same in the earlier part of this order. No admission made in a statement recorded under section 133A on oath during survey can be relied as evidence against the maker or the assessee. Undeniably, the Assessing Officer has made impugned addition on the basis of the statement of Shri Manohar Lal Agarwal and specifically by relying on his reply to question No. 23 of his statement. As per the assessment order, the excess stock of Rs. 5,08,98,166 has been worked out after giving the benefit of discount and the gross profit rate but mainly relying on the statement of one of the partners of the assessee-firm. If the statement of Shri Manohar Lal Agarwal and others are excluded in view of the above legal position, the value of the alleged excess stock can be ascertained in the light of the facts of this case. The legal issue is decided in favour of the assessee”

6. Statement recorded u/s131 and not u/s 133A(3)(iii)-misinterpretation of law:

6.1 In this regard it is submitted that, such a contention, on a bare perusal of the related provision, is completely devoid of merit and rather a misreading and misinterpretation of the provision. During survey statements are recorded u/s 133A(3)(iii) of the Act only. However, recourse u/s131 (1) can be taken only if S.133A(6) is invoked. For ready reference S. 133A (6) is being reproduced hereunder:

“(6) If a person under this section is required to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the income-tax authority shall have all the powers under [sub-section

(1) of section 131] for enforcing compliance with the requirement made :

[Provided that no action under sub-section (1) shall be taken by an Assistant Director or a Deputy Director or an Assessing Officer or a Tax Recovery Officer or an Inspector of Income-tax without obtaining the approval of the Joint Director or the Joint Commissioner, as the case may be.]”

A bare perusal of the said provision shows that it is only because of the non- co-operative or evasive attitude, if adopted by the concerned person, who is summoned or is being enquired, then and then only the IT Authority shall be having powers u/s 131(1) under which, he may be summoned and on every failure to comply with, penalties can be imposed under other provisions of the law. But otherwise also, no action under this section could be taken by the survey authorities or the AO without having the prior approval of the Superior Authorities. The said provision nowhere empowers the IT Authorities to record the statement on oath.

6.2 The Revenue has also alleged in its grounds that the CIT (A) did not appreciate that the statements were recorded only u/s 131 but not u/s 133A (3)(iii). The revenue however, has not appreciated that statement u/s 131 can be recorded only during the course of some proceedings if it is pending which is indicated by the use of words “for the purposes of this Act” and therefore, the Hon’ble Courts have been consistently holding that unless there is a pendency of any proceedings, no summon can be issued nor statement could be recorded u/s 131(1). It is only when there is a purpose before the Revenue in relation to which, statements may be recorded but not otherwise. Only with a view to obviate with the necessity of any pending proceedings under the Act, the sub-section (1A) to section 131 was inserted by the Taxation Laws (Amendment) Act, 1975, w.e.f. 01.10.1975, however, this being not a case of search, this sub-section is not applicable in the instant case.

Therefore, to say that statement recorded u/s 133A(3)(iii) is equivalent to statement recorded u/s 131 is a gross misinterpretation of the provisions.

6.3 Decision cited by CIT(A) not applicable: The reliance placed by the ld. CIT(A) on certain decisions are based on the peculiar facts available in those cases only not available in the present eg. in Hukum Chand retraction was made after 2 years and in Kantilal C Shah retraction was made after 9 months hence both the cases are not applicable looking to the abnormally long period as against merely 2 months in the present case (04.02.2017) and affidavit towards retraction filed on 06.04.2017 (Pg.54 CIT(A) order).

6.4 It is pertinent to note that the CIT(A) has rejected the claim of filing retraction by the Assessee before him, at the same time, he considered the documentary evidences, furnished by the assessee, with a view to explain the impounded document and clarify the admission made, hence, it can’t be said that the CIT(A) granted relief only and only on the legal aspect (that statement recorded during survey u/s 133A(3)(iii) and/or u/s 131, has no evidentary value and not being conclusive, no addition can be made merely on that basis). On the contrary, it is discernible from his findings in all the 4 cases, where he has granted relief, he has extensively dealt with the merits of each case for examining the impounded documents, explanation of assessee, remand report and rejoinder etc., independently.

Thus, under totality of the facts and circumstances detailed above, the CIT(A) order rightly deleted the addition. Therefore, this ground taken by the revenue deserves to be dismissed.

7. Regarding DGOA-6 raised by Revenue w.r.t. deleting of addition Rs.1,43,67,131/- out of Rs. 1,83,20,000/- which alleged to be based on incriminating documents. it is submitted that since this ground is already considered in detail in various grounds (w.r.t. different amount included therein) above, no separate submission is required.

Thus, under totality of the facts and circumstances detailed above, the CIT(A) order rightly deleted the addition. Therefore, this ground taken by the revenue also deserves to be dismissed.

DGOA-2: Rs. 33,60,000/-: on account of undisclosed income u/s 69 for purchase of House situated at 7, wonder Road, Kacchi Basti, Kota;

Facts: The AO has dealt with this issue at Pg 5 Pr 5 regarding Rs. 33.60 lakhs and at Pg 6 Pr 6 w.r.t. Rs.5 Lakhs and copied at page no.29 para 6.1 of CIT(A) order. The detailed written submissions dt.02.12.2022 filed before the CIT(A) are at page no.30 para 6.2, the remand report thereupon by the AO dt. 07.06.2023 is at page no.33 para 6.4, the rejoinder dt. 29.06.2023 at page no. 35 para 6.5 and finally the ld. CIT(A), after considering the detailed submissions, the remand report, rejoinder made before him, at Page 38, Para.

6.6 concluded in following words:

“6.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted that during the survey action u/s 133A of the Income Tax Act at office premises of Shri Naresh Jain some incriminating documents were seized and inventorised by Annexure-A-1, Exhibit-1 (APB 62-77). This annexure was shown to Shri Naresh Jain and was specifically asked about the nature thereof. In reply, he explained that these documents were related to purchase of one House at 7, Wonder Road, Kachchi Basti, Kota, these documents also contained a registered agreement wherein the total sale consideration is recorded at 62,50,000/-, Shri Naresh Jain again admitted that only a sum of Rs. 28,90,000/- was paid through cheque and balance Rs. 33,60,000/- was paid in cash. The cash payment is nowhere recorded in books of accounts. This agreement was entered on 13.04.2016 itself.

When asked about this investment, the assessee filed his reply on 18.12.2019 (APB 32-37) in which the assessee has stated that the house is not related to him but related to Nisha Jain.

The reply of the assessee is considered but not found acceptable. He himself accepted in his statement u/s 131 during survey that some part of the consideration at Rs. 33,60,000/- was paid in cash by him and this payment was not recorded in his books of accounts. This cash payment has not been accounted either by Naresh Jain or Nisha Jain. The entire submission of the assessee is considered an afterthought Therefore, his submission is not found maintainable, the amount of Rs. 33,60,000/- as paid in cash for purchase of house is added to the total income of the assessee as undisclosed income u/s 69.

The appellant argued that the said amount was spent for construction of house situated at 7 Wonder Road, Kachibasti, Kota duly recorded in the books of accounts of his wife -Nisha Jain whose case was concurrently assessed by the L’d. AO himself. Hence, arbitrary addition made of Rs. 33,60,000/- and Rs. 5,00,000/- is bad in law and liable to be deleted.

It is argued that the sale-purchase agreement of Rs. 57,50,000/- was executed by Pradeep Sharma and not signed by the appellant. Later on the Registry was made by Pradeep Sharma and Smt Nisha Jain and all payments amounting to Rs. 64,18,000/- were made by Smt Nisha Jain- Prop. of M/s Quick Advertising Company, Kota

It is argued that the impounded document is an incomplete sale-purchase agreement between Pradeep Sharma as vendor and the appellant as has not signed the same in the capacity of purchaser.

It is argued that that all the payments for the subject house property has been made from the books of Quick Advrtising Company, Proprietor- Smt Nisha Jain, wife of appellant ( PAN- ABLPJ8118L who is regularly filing her Income Tax Return to the A/O Ward-Circle 1(1) Kota),. Against total cost of house plus construction/repairs, registration and other relevant charges etc and aggregating to Rs. 64,18,000/-, payment Rs. 29,58,000/- has been made through cheques, drawn on Syndicate Bank Ch No 392110 Rs. 5.00,000/- No 392117 Rs. 10,00,000/- No 392119 Rs. 10,00,000/-, No 557160 Rs. 3,90,000/- No. 557161 Rs. 68,000/- all between 13/04/2016 to 16/05/2016 and the balance amount Rs. 33,60,000/- has been paid in Cash and mainly does cover construction/repairs & registration related expenses etc. paid to Pradeep Sharma. The relevant transactions/entries are appearing in the ledger accounts of Quick Advertising, Proprietor, Smt Nisha Jain, wife of appellant. Accordingly, by any stretch of imagination and logic, the amount cannot be loaded as undisclosed income to the taxable income of appellant. This is against provisions under Income Tax Act and Natural Justice as well.

The appellant argued that the issue relates to construction expenses of Rs. 5,00,000/- on the house property situated at 7 Wonder Road, Kachibasti, Kota and Assessment Order refers to the Annexure A-1, Exhibit 11, page No 68 contaning rough jottings (i) 2,85,000 (ii) 4,16,000 (iii) 1,00,000 (iv) 30,000 and thus the total of all the four figures as above works out to 8,31,000/- indicating plain figures, not confirming/indicating that these figures relate to any value in Rupee Term. It is also very humbly submitted that page No 68 of the impounded documents is just a rough jotting and does carry any material information.

It was stated that detailed submission and relevant clarifications have already been made by the appellant vide reply letter dated 18/12/2019 (APB 32-37) about the facts and circumstances of purchase of house property and the amount of Rs. 5,00,000/- includes the amount Rs. 33,60,000/- spent in cash on 26/04/2016 towards construction/repair of the above said house property, has been duly shown and recorded in the books of Quick Advertising Company, Proprietor Nisha Jain, wife of appellant.

It is stated that the impugned house property de-facto and de-jure belongs to Smt Nisha Jain W/o appellant and all the cost of house and construction expenses have been borne by Smt Nisha Jain and the same are well appearing in the books of Quick Advertising Company, Proprietor- Smt Nisha Jain.

It is argued that Smt Nisha Jain is also Assessed to Tax, and information to the effect that this house has been purchased by Nisha Jain for Rs. 64,18,000/- and all the payments have been made through the books of accounts of Nisha Jain. The appellant also furnished following details in support of his arguments- 

-Ledger Account of Quick Advertising Company, showing expenses on purchase and repairs/construction in house at Kachhi Basti- (APB 85)

-Copy of Cash Book Pages of relevant dates having cash in hand to meet the payments in cash (APB 86-88) relevant page of Bank Account with Syndicate Bank showing payment for purchase of above said property (APB 89-91)

-Fixed Assets Depreciation Chart showing Rs. 64,18,000/- against New House at Sarovar Road, Kota, of Nisha Jain (APB 92)

It is argued that as appearing in the supporting papers/documents as above, all the relevant amounts are duly reflected in the books of accounts of Smt Nisha Jain and hence addition made by AO in the hands of Naresh Kumar Jain is liable to be deleted.

The facts of the case are considered. On perusal of the details furnished by the appellant, it is evident total cost of house plus construction/repairs, registration and other relevant charges etc aggregating to Rs. 64,18,000/- is recorded in the books of accounts of Ms. Nisha Jain. Out of this payment Rs. 29,58,000/- has been made through cheques and the balance amount Rs. 33,60,000/- has been paid in Cash. The AO has not rejected these books of accounts of Mrs. Nisha Jain while making assessment in her case. Therefore, the explanation furnished by the assessee cannot be rejected only on the basis of statement recorded during the survey. It is true that the statement recorded during survey is an important piece of evidence but it is not conclusive. Hon’ble High Court Of Kerala in the case of C.K. Abdul

Azeez v. Commissioner of Income Tax, Central Circle, Calicut [2019] 111 taxmann.com 74 (Kerala) held as under –

———–xxx———–xxx———–xxx———–xxx———–xxx———–

In this case, the AO has used statement to corroborate other materials impounded during the survey. However, the appellant is in a position to explain that the entries in the impounded documents are explainable from the books of accounts of Mrs. Nisha Jain. In these circumstances, the corroborative material relied upon by the AO is treated as explained. In the absence of any other corroborative material assessment of tax cannot be made solely on basis of such sworn statement made by assessee as held by the Hon’ble High Court. The assessee has explained the contents of impounded document as far as addition of Rs. 33,60,000/- is concerned. Therefore, the addition made by the AO to this extent is not found to be sustainable.

The appellant has not explained the Rs. 5,00,000/- cash expenditure as admitted during the survey. The admission is also supported by impounded document. The appellant has given only vague explanation that it is also recorded in the books of Mrs. Nisha Jain. However, no credible evidence is furnished. In fact, the appellant argued that the amount of Rs. 5,00,000/- includes the amount Rs. 33,60,000/- spent in cash on 26/04/2016 towards construction/repair of the above said house property. The reply of the appellant is not supported by documentary evidences. How, this expenditure of Rs. 5 lakhs is included in the amount of Rs. 33,60,0000/- is not explained with supporting evidences. Therefore, the explanation of the appellant is not found to be convincing and the same is rejected. The addition made by the AO of Rs. 5,00,000/- is based on admission in statement recorded during the survey and also supported by corroborative evidence in the form of impounded documents. The appellant could not explain the contents of the impounded document in the assessment as well as during the appellate proceedings. The appellant was provided sufficient opportunity in the remand proceedings also. However, the appellant has not furnished any plausible explanation. Therefore, the action of the AO in making addition of Rs. 5,00,000/- is found to be justified and upheld. 

In result of these grounds, ground number 4 is deleted and ground number 5 is dismissed.”

Submission:

1. At the outset we strongly place reliance upon our detailed submissions made before AO as also before the CIT(A).

2. We also place strong reliance upon the order of the CIT(A) to the extent (Pg. 38, Para 6.6) his findings and observations are given in the favour of assessee.

3. We respectfully submit that the Revenue’s grounds lack merit for the following reasons:

4. Agreement with the Assessee – never acted upon: At the outset, it is submitted that Annex A-1, Exhibit-1, Page No. 1-12 (APB 62-77), included an agreement between the Assessee and the seller Shri Pradeep Sharma on dt 13.04.2016 based on which the AO alleged that the assessee purchased the property for Rs. 62.50 lakhs and paid the amount partly through cheque and partly through However, such an allegation is based on a complete misreading and on misconception of law in as much as the said agreement was never acted upon by the assessee Shri Naresh Jain in as much as the same was not signed by the assessee, which fact is completely ignored by the AO. Moreover, this agreement did not ultimately result into transfer of the property for the reason that, undisputedly, the property was purchased by Smt. Nisha Jain for total sale consideration of Rs. 62,50,000/-. Thus, the property was registered in the name of Nisha Jain itself, rebuts the presumption, if any, as wrongly raised by the AO, stands strongly rebutted. By virtue of the registered sale deed, the legal implication flowing are that Smt. Nisha Jain was the legal owner and the real purchaser. She made the payment and she became the absolute owner of the property. Then how the assessee could have been involved. The further substantive fact that, (even the payments whether in cash or through cheque), were made by Nisha Jain (as further detailed in following the paras) prove that it was only Nisha Jain who made the entire payment.

5. Source fully explained: Undisputedly, the assessee submitted all the evidences of the source of payment made to the seller Shri Pradeep Sharma from the books of Quick Advertising Company, Proprietor- Smt Nisha Jain, wife of assessee ( PAN-ABLPJ8118L who is regularly filing her Income Tax Return to the A/O WardCircle 1(1) Kota),. Against total cost of house plus construction/repairs, registration and other relevant charges etc and aggregating to Rs. 64,18,000/-, payment Rs. 29,58,000/- has been made through cheques, drawn on Syndicate Bank Ch No 392110 Rs. 5.00,000/- No 392117   10,00,000/-  No  392119  Rs.  10,00,000/-,  No  557160 Rs.3,90,000/- No. 557161 Rs. 68,000/- all between 13/04/2016 to 16/05/2016 and the balance amount Rs. 33,60,000/- has been paid in Cash and mainly does cover construction/repairs & registration related expenses etc. paid to Pradeep Sharma. The relevant transactions/entries are appearing in the ledger accounts of Quick Advertising.

6. Voluminous evidences submitted before lower authorities but could not be rebutted by the AO: The assessee in support of his claim submitted following documents before lower authorities listed hereunder:

• • Sale Purchase Deed agreement of house property at Kachhi Basti, 7 Wonders Road, Kota, (APB 79 to 84)
  • Ledger Account Quick Advertising Company, showing expenses on purchase and repairs/construction in house at Kachhi Basti- (APB 85)
  • Copy of Cash Book Pages of relevant dates having cash in hand to meet the payments in cash, (APB 86 to 88)
  • Relevant page of Bank Account with Syndicate Bank showing payment for purchase of above said property (APB 89 to 91)
  • Fixed Assets Depreciation Chart showing 64,18,000/- against New House at Sarovar Road, Kota, of Nisha Jain , (APB 92)

Pertinently, the Accounts of Smt. Nisha Jain Prop. M/s Quick Attaching Agency were duly produced before the AO. However, the AO could not find any fault therein, nor therefore he rejected the same and the entries passed therein were binding upon the AO.

7. No categorical admission made by assessee: Heavy reliance has been placed by the AO on Q/A 21(APB1)of the statement recorded during survey on dt. 02.02.2017. However, a careful perusal thereof shows that the assessee never admitted the cash payment to be his undisclosed income nor undisclosed income of Smt. Nisha Jain. In fact, the question raised by the survey team itself was defective in as much as, despite finding a registered sale deed in the name of Nisha Jain, no clarification was sought, as to who made the payment through cheque and where from? Had such questions been raised, the assessee would have clarified. Thus, it is a purported attempt made by the survey team and the AO to portray an incorrect state of affairs to suit their purpose and justify the addition.

8. As regard the validity of the statement recorded during survey and retraction thereof by the Assessee, detailed submission has been dealt with DGOA-1 taken by the Revenue, reliance is placed on the same for this DGOA-2

9. Alleged addition of Rs.5 Lakhs-unjustified (Ref. Rule 27): At the outset, it is clarified that though the Respondent Assessee has not filed any appeal nor any Cross Objection however since the ld. CIT(A) has confirmed this addition of Rs. 5 lakhs, Respondent is entitled to challenge the same under rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 which aspect has been dealt with towards DGOA 1.

During the survey action u/s 133A of the I T Act at office premises of Shri Naresh Jain some incriminating documents were seized and inventoried as Party no-22 Annexure A, Exhibit 11, Pg no.68, (APB 78) which contained information regarding cash payment to contractor for construction expenses in cash for above said property amounting to Rs.5 lacs. It was submitted as before ld. CIT(A) as under (also reproduce at Pg31 of CIT(A) order):

“B (i) As regards addition of Rs. 5,00,000/- it is very humbly submitted that the issue relates to construction expenses of Rs. 5,00,000/- on the house property situated at 7 Wonder Road, Kachibasti, Kota and Assessment Order refers to the Annexure A-1, Exhibit 11, page No 68 contaning rough jottings (i) 2,85,000 (ii) 4,16,000 (iii) 1,00,000 (iv) 30,000 and thus the total of all the four figures as above works out to 8,31,000/-indicating plain figures, not confirming/indicating that these figures relate to any value in Rupee Term. It is also very humbly submitted that page No 68 of the impounded documents is just a rough jotting and does carry any material information.

(ii) It appears that the Survey Team/Assessing Authority placing reliance on the reply of appellant for Q-23 of Recorded Statement ‘On page No 68, there is account figures of construction expenses for house at 7 Wonders, Kachhibasti, Kota, and this amount is 5.00 lac, paid to in cash to the Contractor Ramesh Kharwal and has not been entered in the books of accounts”has taken these figures to (i)indicate value in rupee terms and (ii) The value pertains to some masonary items, construction, repair works etc. and resultnatly made addition of Rs. 5,00,000/- in the taxable income of appellant as undisclosed investment.

(iii) Detailed submission and relevant clarifications have already been made by the appellant vide reply letter dated 18/12/2019 about the facts and circumstances of purchase of house property and the amount of 5,00,000/- includes the amount Rs. 33,60,000/- spent in cash on 26/04/2016 towards construction/repair of the above said house property, has been duly shown and recorded in the books of Quick Advertising Company, Proprietor Nisha Jain, wife of appellant.

(iv) It is very humbly submitted that he impugned house property, situated at 7 Wonders, Kachhi Basti, Kota de-facto and de-jure belongs to Smt Nisha Jain W/o appellant and all the cost of house and construction expenses have been borne by Smt Nisha Jain and the same are well appearing in the books of Quick Advertising Company, Proprietor- Smt Nisha Jain.

(v) It is very humbly submitted that as already stated above Smt Nisha Jain is also Assessed to Tax, and information to the effect that this house has been purchased by Nisha Jain for Rs. 64,18,000/- and all the payments have been made through the books of accounts of Nisha Jain, and still to re-load the amount of Rs. 33,60,000/- + 5,00, 000/- total Rs. 38,60,000/- is quite injustice to the appellant and needs to be deleted on the side of justice.”

10. A careful perusal of the impounded document shows that it states about some building repair work (putti, colour, etc.), which is a clear case of the discussion held between the buyer (assessee) and the seller and on account of this repair work some addition has been made in the sale consideration of 5 lakhs (approx.). However, since it was paid in cash it was considered as a part of total cash payment of Rs. 33.60 lakhs there appears nothing wrong more particularly, when otherwise these impounded documents nowhere use the word paid or payable rather it is the assessee who own the document and explained the correct facts which, the authorities below must have accepted.

Thus, under the totality of the facts and circumstances detailed above, the CIT(A) order rightly deleted the addition. Therefore, this ground taken by the revenue also deserves to be dismissed.

DGOA-3: Rs. 7,10,000/-: on account of undisclosed income u/s 69 for purchase of agricultural land situated VII-Mandana, NH-76, Kota;

Facts: The AO has dealt with this issue at Pg 8 Pr 7 and copied at page no.41 para 7.1 of CIT(A) order. The detailed written submissions dt.02.12.2022 filed before the CIT(A) are at page no.42 para 7.2, the remand report thereupon by the AO dt. 07.06.2023 is at page no.43 para 7.4, the rejoinder dt. 29.06.2023 at page no. 45 para 7.5 and finally the ld. CIT(A), after considering the detailed submissions, the remand report, rejoinder made before him, at Page 46, Para.

7.6 concluded in following words:

“7.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted that during the Survey action at office premises of Shri Naresh Jain some incriminating documents were seized and inventories by Annexure-A, Exhibit-2. This annexure was shown to Shri Naresh Jain he explained that these documents related to agreement, power of attorney etc of agriculture land at Hanutia Road, Vill.- Mandana, Kota. Shri Naresh Jain again admitted that only a sum of Rs. 6,90,000/- was paid through cheque and balance Rs. 7,10,000/- was paid in cash. The cash payment was nowhere recorded in books of accounts.

Regarding this assessee filed his reply in which the assessee has accepted the cash payment however only contention is the AY in which the amount to be taxed is not 2017-18.

The reply of the assessee is considered but not found acceptable. As per the submission made by the assessee, he himself accepted in his statement u/s131 that cash payment of Rs. 7,10,000/- was made for purchase of agriculture land and the same was not entered in regular books of accounts. Now the assessee is saying that the above transaction was carried out in AY 2009-10 which is not acceptable.

Per contra the appellant argued that the issue relates to documents -Annexure-A, Exhibit-2, page No 1 to 13 (APB 93-110), impounded and inventorized by the Survey team, and the statement of appellant Recorded by the Survey Team on 04/02/2017, interalia wherein to the Q 23, the appellant replies “ .. the papers relate to Power of Attorney, copy of Ration Card, Affidavit about some land containing details of payments made by the appellant Rs. 6,90,000/- through cheque and Rs. 7,10,000/- in cash and registry of the land has not taken place.

It is argued that the reply of appellant to the question No 23 does not give any information about exact/likely date or the period of impugned transaction/deal that has taken place and as such can hardly be reckoned as a fit case to fall for A.Y 2017-18.

It is argued that the impugned Agricultural land is situated at Hanutia Road, village Mandana, Tehsil Ladpura District Kota, admeasuring 0.75 hect and recorded with the Revenue Department under Khasra No 73. However, the actual entry date in the documents/papers is 03/10/2008 and the sale-purchase agreement executed on 06/10/2008 suo-motu makes it to pertains to A/Y 2009-10 and not to A/Y 2017-18.

It is argued that erroneously some rough /irrelevant /erroneous jottings were also made about the deal/cost about the said piece of land and confusion has crept in.

It is further argued that actually the land was purchased in F/Y 2008-09, relevant to A/Y 2009-10 and as such does not relate to A/Y 2017-18. All the payments made towards full cost of land through cheque Rs. 6,90,000/- and in cash Rs. 7,10,000/- total Rs. 14,00,000/- is appearing in the books of accounts of appellant in A/Y 2009-10.

It is argued that the valid documents regarding sale/purchase of the said agricultural land and the transactions made in cash/cheque towards payment for the said land by the appellant are well appearing in the books of accounts of the appellant. The appellant has been satisfactorily assessed for A/Y 2009-10 and no demand for the said period is outstanding against the appellant.

The facts of the issue are considered. Here the transaction of cash is not denied by the appellant but according to the appellant, the relevant AY should be AY 2009-10 and not AY 2017-18. The appellant has furnished the copy of agreement of transaction of Agricultural land situated at Hanutia Road, village Mandana, Tehsil Ladpura District Kota, admeasuring 0.75 hectare and recorded with the Revenue Department under Khasra No 73. The actual entry date in the documents/papers is 03/10/2008 and the sale-purchase agreement executed on 06/10/2008 which makes it to pertaining to A/Y 2009- 10 and not to A/Y 2017-18. No evidence is brought on record which could prove that the cash transaction is pertaining to AY 2017-18. The appellant is in a position to prove that the land was purchased during AY 2009-10. Therefore, the related cash transaction cannot be assumed to be belonging to AY 2017-18. Therefore, the addition made by the AO during this AY 2017-18 is notfound to be sustainable and deleted.

The ground numbers 6 and 7 of appeal are treated as allowed.”

Submission:

1. At the outset we strongly place reliance upon our detailed submissions made before AO as also before the CIT(A).

2. We also place strong reliance upon the order of the CIT(A) to the extent (Page 46, Para. 7.6) his findings and observations are given in the favour of assessee.

3. We respectfully submit that the Revenue’s grounds lack merit for the following reasons:

4.1 It is submitted that the impugned Agricultural land is situated at Hanutia Road, village Mandana, Tehsil Ladpura District Kota, admeasuring 0.75 hect and recorded with the Revenue Department under Khasra No 73. However, the actual entry date in the documents/papers is 03/10/2008 and the sale-purchase agreement executed on 06/10/2008 makes it to pertains to A/Y 2009-10 and not to A/Y 2017-18. However, erroneously some rough /irrelevant /erroneous jottings were also made about the deal/cost about the said piece of land and confusion has crept in.

4.2 It is further submitted that actually the land was purchased in F/Y 2008-09, relevant to A/Y 2009-10 and as such does not relate to A/Y 2017-18. All the payments made towards full cost of land through cheque Rs. 6,90,000/- and in cash 7,10,000/- total Rs. 14,00,000/- is appearing in the books of accounts of assessee in A/Y 2009-10(APB 111).

4.3 Statement of assessee duly retracted: The issue has been raised by the Assessing Authority, mainly based on the statement of assessee, recorded by the survey team and as has already been retracted by the assessee vide affidavit dt. 17.02.2017(APB8-11). Kindly refer detailed submission of DGOA-1

4.4 Documents supporting assessee’s claim includes:

i. copy of ledger account of Nisha Jain showing transactions about payment of Rs. 6,90,000/- for agriculture land purchased (APB 111)

ii. Acknowledgement of cash payment/receipts 7,00,000/- (APB 112).

Thus, under totality of the facts and circumstances detailed above, the CIT(A) order rightly deleted the addition. Therefore, this ground taken by the revenue also deserves to be dismissed and relief may be granted .

DGOA-4: Rs. 35,00,000/-: on account of undisclosed income u/s 69 for construction expense w.r.t. house at E-15, Ballabhbari, Kota;

Facts: The AO has dealt with this issue at Pg 9 Pr 8 and copied at page no.48 para 8.1 of CIT(A) order. The detailed written submissions dt.02.12.2022 filed before the CIT(A) are at page no.49 para 8.2, the remand report thereupon by the AO dt. 07.06.2023 is at page no.50 para 8.4, the rejoinder dt. 29.06.2023 at page no. 52 para 8.5 and finally the ld. CIT(A), after considering the detailed submissions, the remand report, rejoinder made before him, at Page 53, Para.

8.6 concluded in following words:

“8.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted in this case that during the survey action u/s 133A of the Income Tax Act at office premises of Shri Naresh Jain some incriminating documents were seized and inventoried by Annexure-A, Exhibit-13 (APB 113). This annexure was shown to Shri Naresh Jain and was specifically asked the nature thereof. He explained that this document was related to expenses incurred for construction of house at E-15, Ballabhbari, Kota, wherein a sum of Rs. 35,00,000/- was spent in cash and this cash payment was also nowhere recorded in books of accounts. He again submitted that at this moment he couldn’t explain as to how much expenditure was already recorded in regular books of accounts, and shall explain the same later on. Regarding this assessee filed his reply in which the assessee has stated that this expense is not related to him but related to Nisha Jain. The reply of the assessee is considered as an afterthought by the AO and the amount of Rs. 35,00,000/- a paid in cash for house construction is added to the total income of the assessee as undisclosed income u/s 69.

The appellant argued that the said amount was spent for construction of house situated at E-15, Ballabh-bari Kota duly recorded in the books of accounts of his wife – Nisha Jain.

It is stated that the issue relates to some items and figures jotted on a page of table diary, impounded and inventorized by survey team as Annexure-A, Exhibit-13, pageNo 358, (APB 113) does not at all indicate any proper description/ particulars/figures etc to arrive at some correct/logical point. However, the description indicates to some building material/masonary work like goods/services relating to house construction/repair. In reply to Q-23 of the Statement Recorded by the Survey team the appellants ineralia says “ The diary contains details about house construction aggregating to about Rs. 35.00 lac on page No 358 of the relelvant Exhibit inventorized by the Survey Team. How much amount out of the expenses has been recorded in books, I have no knowledge at the hour. I shall provide the details later on.”

It is argued that the reply of appellant to the question is incomplete/ambiguous and cannot be relied upon. The appellant has replied that the amount relates to construction/repair/renovation of their house at E-15, Ballabhbari Kota. It is stated actually the said amount has been booked and accounted for by Smt Nisha Jain, wife of appellant who happens to be proprietor of Quick Advertising Company Kota.

It is very argued that as per books of accounts, actual figures work out to Rs. 27,97,131/ and not Rs. 35,00,000/- The sum of Rs. 27,97,131/- has been well accounted for in the books of accounts by Smt. Nisha Jain.

The appellant stated that the remaining Rs. 7,02,869/- be appropriated out of the amount Rs. 46,43,251/-, already declared by the appellant under the head “Other Receipts”.

The facts of the issue are considered. The AO made addition of Rs. 35,00,000/- on the basis of statement recorded during survey. However, in the statement itself, the appellant stated that the diary contains details about house construction aggregating to about Rs. 35.00 lac on page No 358 of the relevant Exhibit inventorized by the Survey Team. How much amount out of the expenses has been recorded in books, I have no knowledge at the hour. I shall provide the details later on. Therefore, during the survey also the appellant claimed that some of the amount is entered in the books of accounts. The appellant has now furnished evidences to show that out of Rs. 35,00,000/-the sum of Rs. 27,97,131/- has been accounted for in the books of accounts by Smt. Nisha Jain. The AO was asked to verify the claim of the appellant in the remand proceedings. No adverse comments received from the AO with regard to claim of the appellant that the amount of Rs. 27,97,131/- has been accounted for in the books of accounts by Smt. Nisha Jain. In view of these facts, since this amount is already entered in regular books of accounts of Mrs. Nisha Jain, the addition in the hands of the appellant is not found to be justified and deleted to that extent.

The appellant has not explained the remaining amount of Rs. 7,02,869/-. However, it is stated that this should be appropriated out of the amount Rs. 46,43,251/-, already declared by the appellant under the head “Other Receipts”. The claim of the appellant will be examined while considering the request for grating telescoping benefit. This addition to the extent of Rs. 7,02,869/- is found to be justified and upheld as the appellant has not furnished any plausible explanation with regard to this amount. The addition made by the AO is accordingly upheld to this extent.

The Ground Nos. 8 & 9 of appeal are treated as partially allowed.”

Submission:

1. At the outset we strongly place reliance upon our detailed submissions made before AO as also before the CIT(A).

2. We also place strong reliance upon the order of the CIT(A) to the extent (Page 53, Para. 8.6) his findings and observations are given in the favour of assessee.

3. We respectfully submit that the Revenue’s grounds lack merit for the following reasons:

4. It is submitted that the submission made by the assessee with regard to retraction of recorded statement & appearing under Ground No 1, may very kindly be taken and treated applicable for DGOA 4 as well.

5. Detailed submission filed before lower authorities-not rebutted:

5.1 The assesse on 02.12.2022 submitted detailed reply (also reproduced at pg.49 pr.8.2 of CIT(A) order) reproduced below:

“In support of Ground No 8 & 9, the appellant humbly submits as underIt is very humbly submitted that the submission made by the appellant with regard to retraction of recorded statement & appearing under Ground No 2, may very kindly be taken and treated applicable for Ground No 8 as well.

It is very humbly submitted that the issue relates to some items and figures jotted on a page of table diary, impounded and inventorized by survey team as Annexure-A, Exhibit-13, page No 358, does not at all indicate any proper description/particulars/figures etc to arrive at some correct/logical point. However, the description indicates to some building material/masonary work like goods/services relating to house construction/repair. In reply to Q-23 of the Statement Recorded by the Survey team the appellants ineralia says

“The diary contains details about house construction aggregating to about Rs. 35.00 lac on page No 358 of the relelvant Exhibit inventorized by the Survey Team. How much amount out of the expenses has been recorded in books, I have no knowledge at the hour. I shall provide the details later on.”

It is evident that the reply of appellant to the question is incomplete/ambiguous and cannot be relied upon and nothing meaningful, appellant query raised by the survey team, the appellant has replied that the amount relates to construction/repair/renovation of their house at E-15, Ballabhbari Kota. Placing undue emphasis on the recorded statement the Assessing Authority has added the amount in the income of appellant whereas actually the said amount has been booked and accounted for by Smt Nisha Jain, wife of appellant who happens to be proprietor of Quick Advertising Company Kota. This is against provisions under law and natural justice.

It is very humbly submitted that as per books of accounts, actual figures work out to Rs. 27,97,131/ and not Rs. 35,00,000/- The sum of Rs. 27,97,131/- has been well accounted for in the books of accounts by Smt. Nisha Jain. However, the Assessing Authority did not agree with the submission made by the appellant in the reply letter dated 18/12/2019 against addition of Rs. 35,00,000/- (i) the actual expenses appearing in the books of accounts of Smt. Nisha Jain Rs. 27,97,131/ and balance amount (ii) of Rs. 7,02,869/- be appropriated out of the amount Rs. 46,43,251/-, already declared by the appellant under the head “Other Receipts” It is not allowed. Actual construction Rs. 27,97,131/- which is evident from bills, vouchers and Bank Statement.

It is also very humbly submitted that an amount of Rs. 27,97,131/- already appearing in the books of Accounts of Smt Nisha Jain and vide reply letter dated 18/12/2019, information to this effect has been filed before Department. In view of above, by any stretch of imagination, reason and logic cannot be inferred that it is an ‘after thought’ on the part of Appellant. Further, the major part of expenses on house renovation/repairs have already been booked in the books of accounts of Smt Nisha Jain , wife of appellant, it would be contrary to the provisions under Income Tax Act 1961 and principles of natural justice. On the side of justice, addition of Rs. 35,00,000/- to the income of appellants needs to be deleted.

Encls. As per Paper Book Annexure- 5 (i) Copy of impounded paper at Exhibit-2, AnnexureA, page No 358 showing rough jottings about some masonary work estimates amounting to the figures of 35,00,000/- + 83.000 + 60,000 total 36,43,000/-, page No 113 (ii) copy of ledger account page No 114 to 123 (iii) of construction activity relevant bills and vouchers relaing to construction expenses page No 124 to 218 (iv) Ledger Account showing payments routed through Bank Account & 219 to 237 (v) Assets Depreciation Chart showing Rs. 27,97,131, page No 238.”

5.2 Further, assessee vide rejoinder dt. 29.06.2023 in response to Remand Report 07.06.2023 submitted by Add. CIT, Central Range, Udaipur filed following reply (also reproduced at pg.52 pr.8.5 of CIT(A) order) reproduced as under: –

“Addition of Rs. 35,00,000/- on account of un-accounted Expenditure on construction of house- E- 15, Ballabhbari, Kota

(i) Referring to the documents impounded & inventorized as Exhibit-2, Annexure-A, page No 358, some rough jottings about masonary work estimates amounting to figures 35,00,000 + 83,000 + 60,000 Total 36,43,000, papers and documents submitted by the assessee/appellant, and placing reliance and much importance and emphasis to the recorded statement of Shri Naresh Jain, especially his answer to Q-No 23, saying that ‘this document was related to expenses incurred for construction of at house No E-15, Ballabhbari, Kota wherein a sum of Rs. 35,00,000/- was spent in cash and this payment was also no where recorded in books of accounts,’ the Assessing Authority has ineralia observed –

“The reply of assessee is perused but not found acceptable. As per submission made by assessee, he himself accepted in his statement u/s 131 that Cash payment  Of Rs. 35,00,000/- was made for construction of house and the same was not entered in regular books of accounts. The Assessee has not produced any bills, vouchers, valuation report etc in support of claim”

“The documents were found from the premises of the assessee and assessee has accepted the contents of documents and offered the amount as reflecting in the seized papers during survey for taxation and now during assessment proceedings the assessee is denying his own statement which is not acceptable.

The entire submission of assessee is only an after thought to save himself from Tax liability. Therefore his submission is not found maintainable and sustainable in the eyes of law and hence the amount of Rs. 35,00,000/- as paid in cash for house construction is added to the total income of assessee as un-disclosed income u/s 69. Hence the AO had rightly made addition of Rs. 35,00,000/- and the contention of assessee/appellant is not acceptable being not correct.

In support of Ground No 5 and Point No 8 of Remand Report –

(A) It is humbly submitted that the appellant, in their earlier submissions to the Assessing Authority, has clarified that actual construction expenditure towards construction at house No E- 15, Ballabh bari Kota had been of 27,97,131/- and bills, voluchers and Bank Statement to this effect had also been submitted to the Assessing Authority.

(B) The appellant, to purchase peace of mind, has already offered for appropriation of the difference amount being 7,02,869/- under the head of construction expenses at House No E- 15, Ballabh Bari, Kota out of the amount Rs. 46,43,215/-already declared by the appellant under the head ‘Other Receipts’

(C) It is submitted that the Assessing Authority has completely ignored the facts and supporting documents submitted by the appellant during the assessment proceedings and reply filed from time to time and last one on 16/01/2023 before the Assessing Authority. The appellant has filed copy of ledger accounts, bills, vouchers and Bank Account statement, related to cost of construction before the Assessing Authority- Page 114 to 238 as enclosed with Index Sheet, with the reply letter dated 16/01/2023 and the same also had been filed before your honor for your ready reference. However, not considering all these papers and documents, the L’d Assessing Authority, has observed “The entire submission of assessee is only an after thought to save himself from Tax liability. Therefore his submission is not found maintainable and sustainable in the eyes of law and hence the amount of 35,00,000/- as paid in cash for house construction is added to the total income of assessee as un-disclosed income u/s 69of the Income Tax Act In a routine and mechanical manner , the Assessing Authority has concluded “Hence the AO had rightly made addition of Rs. 35,00,000/- and the contention of assessee/appellant is not acceptable being not correct.” Therefore the Assessing Authority observing as above, is not correct.”

6. Voluminous evidences submitted before lower authorities but could not be rebutted by the AO: Assessee in support of its claim submitted documentary evidence as listed hereunder:

(i) copy of ledger account (APB 114 to 123)

(ii) of construction activity relevant bills and vouchers relating to construction expenses (APB 124 to 218)

(iii) Ledger Account showing payments routed through Bank Account & (APB 219 to 237)

(iv) Assets Depreciation Chart showing 27,97,131, (APB 92).

Thus, under totality of the facts and circumstances detailed above, the CIT(A) order rightly deleted the addition. Therefore, this ground taken by the revenue also deserves to be dismissed.

DGOA-5: Rs. 75,00,000/-: on account of undisclosed income u/s 69C alleged expenditure on marriage of Shri Ativeer Jain (Son of Shri Naresh Jain)

Facts: The AO has dealt with this issue at Pg. 10 para 9 and copied at page no.55 para 9.1 of CIT(A) order. The detailed written submissions dt.02.12.2022 filed before the CIT(A) are at page no.56 para 9.2, the remand report thereupon by the AO dt. 07.06.2023 is at page no.59 para 9.4, the rejoinder dt. 29.06.2023 at page no. 62 para 9.5 and finally the ld. CIT(A), after considering the detailed submissions, the remand report, rejoinder made before him, at Page 64, Para. 9.6 concluded in following words:

“9.6 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The AO noted that during the survey action u/s 133A of the Income Tax Act at office premises of Shri Naresh Jain some incriminating documents were seized and inventoried by Annexure A-1, Exhibit 1 (APB 238). This annexure was shown to Shri Naresh Jain and was specifically asked about the nature thereof. He explained that this was on envelope which contained estimate of marriage expenses of his son Shri Ativeer Jain to the tune of Rs. 90 Lacs.

Apart from above, incriminating documents were seized and inventoried as Annexure A, Exhibit

13. This annexure was shown to Shri Naresh Jain and was specifically asked about the nature thereof. In reply of his statement recorded during survey action u/s 133A, he explained that it contained information regarding various expenses on son’s marriage to the tune of Rs. 75 Lacs. He once again submitted that at that moment he couldn’t explain as to how much expenditure was already recorded in regular books of accounts, and should explain the same later on.

The appellant argued that the said expenditure of Rs. 75,00,000/- was borne by his wife – Smt Nisha Jain, duly recorded in her books of accounts.

It is stated that the para relates to Exhibit-1, Annexure-1, page No.56 (APB 238) of the impounded papers/documents that were inventorized by the Survey Team during course of Survey proceedings, and the paper indicates that some details and figures pertaining some rough estimates for some marriage function on various major/minor heads.

It was argued that in reply to Q No 23 of his statement recorded during survey action u/s 133A on 03/02/2017, he explained that it contained information regarding various expenses on son’s marriage to the tune of Rs. 75,00,000/-” and the details given by the appellant (i) Fooding Expenses Rs. 30 lac, (ii) Jewellery Rs. 21 lac, (iii) Event Rs. 11 lac, (iv) Venue rent/expenses – UmmedBhawan- Rs. 5 lac, (v) Other/MiscExp Rs. 8 lac- Total Rs. 75 lac.

The appellant once again submitted that at that moment he could not explain as to how much expenditure was already recorded in regular books of accounts and should explain the same later on. The appellant filed reply on 18/12/2019 (APB 32-37) and therein stated that the expenses is not related to him.

It is very further stated that the marriage of appellant’s son Ativeer Jain, was held on 17/01/2017 and for the occasion, a sum of Rs. 76,60,417/- as on 31/03/2017 and with the payment of unpaid items, the expenses as on 31/03/2018 stand at Rs. 77,92,747/-, was spent by SmtNisha Jain- w/o appellant and the details are well entered in the ledger account of M/s Quick Advrtising Company, Kota a propriety concern of SmtNisha Jain. That the entries in the ledger accounts of the above firm reveal that around Rs. 2,76,890/- have been paid through cash. The self-speaking fact that the marriage of the son of appellant has taken place of 17/01/2017, and good amount of marriage expenses have been paid through Banking channel and the Survey Action did take place during first week of February 2017, by any stretch of imagination, logic, reasoning and inference it cannot be said that the expenses already debited and paid through Banking channel have been an “afterthought”. Even a layman would agree that the amounts routed through Banking channel cannot be changed for time/period etc and cannot be reversed to any other mode/form/channel.

It is evident that the marriage expenses Rs. 75,00,000/-, roughly jotted in the impounded and inventorized sheet of papers and vide impugned Assessment Order added in the income of appellant by the Assessing Authority, actually had been on higher side and the appellant and his wife has shown the actual figures in their books of accounts.

It is stated that the above said expenses have been borne by SmtNisha Jain, wife of Appellant and information to this effect has already filed with the department vide reply letter dated 18/12/2019 alongwith copy of books of accounts.

The facts of the issue are considered. The AO made addition of Rs. 75,00,000/- on the basis of statement recorded during survey. However, in the statement itself, the appellant stated that at that moment he could not explain as to how much expenditure was already recorded in regular books of accounts and should explain the same later on. Therefore, during the survey also the appellant claimed that some of the amount is entered in the books of accounts. The appellant has now furnished evidences to show that out of the expenses as on 31/03/2018 stand at Rs. 77,92,747/- which were spent by SmtNisha Jain- w/o appellant and the details are well entered in the ledger account of M/s Quick Advrtising Company, Kota a propriety concern of SmtNisha Jain. The AO was asked to verify the claim of the appellant in the remand proceedings. No adverse comments received from the AO with regard to claim of the appellant that the amount of Rs. 75,00,000/- has been accounted for in the books of accounts by Smt. Nisha Jain. In view of these facts, since this amount is already entered in regular books of accounts of Mrs. Nishajain, the addition in the hands of the appellant is not found to be justified and deleted.

The Ground Nos. 10 & 11 of appeal are treated as allowed.”

Submission:

1. At the outset we strongly place reliance upon our detailed submissions made before AO as also before the CIT(A).

2. We also place strong reliance upon the order of the CIT(A) to the extent (Pg. 38, Para 6.6) his findings and observations are given in the favour of assessee.

3. We respectfully submit that the Revenue’s grounds lack merit for the following reasons:

4. At the outset it is submitted that on a bare consideration of the entire matter together with the appreciation of the evidences in particularly those impounded, it is evident that the AO proceeded on a purported misconception of fact and rather on mere suspicion. It is evident from the impounded document that theses were rough jottings and mere estimates only. On the contrary, the wife of the assessee Smt. Nisha Jain had already accounted for a higher sum being Rs. 76,60,417/- upto 31.03.2017 together with the unpaid items of the marriage expenses upto Rs. 1,32,330/-, total to Rs. 77,92,747/- in the books of accounts of her proprietary M/s Quick Adevertising Agency, Kota. Pertinently, most substantial amount out of that was even paid through banking channels only and a small amount was paid in cash. Copy of ledger account and the books accounts, showing the marriage expenses were duly produced before the AO during the assessment and also during the remand proceedings, however these substantive facts could not be denied or controverted by the AO. Even in the statement, the assessee never categorically admitted it to be undisclosed income but as it was stated that he was not in the position to explain how much was the expenditure recorded in the books of accounts. Therefore, the reliance placed on the impounded documents and the statement of the assessee was not at all a good basis when documentary evidence of disclosing the marriage expenses in the regularly maintained books of accounts could not be disputed.

5. Assessee in support of its claim submitted documentary evidence as listed hereunder:

• • Ledger Account of Marriage Expenses in the books of Smt Nisha Jain (APB 239 to 243)
  • Head wise details of marriage expenses- (APB 244 to 262)
  • Copy of relevant bills & vouchers & Bank Account (APB 263 to 340).

Thus, the ld. CIT(A) after verifying all these facts and figures and even after obtaining a remand report from the AO wherein, he found no adverse comment on merits of the claim made by the assessee, rightly entire edition and therefore, this ground of the revenue, also deserves to be dismissed.

DGOA-7: Benefits of telescoping of Rs.46,43,251/- against sustained addition of Rs. 49,02,869/-.

Facts: The ld. CIT(A) at pg.84 Pr.12.4 considered the benefits of telescoping in following words:

“12.4 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the assessment order for the year under consideration. The contentions/submissions of the appellant are being discussed and decided as under:-

The appellant stated that benefit of telescoping and set off should be provided against the addition made by the AO and sustained in the appeal. It is further argued that there are various judgments of Hon’ble Supreme Court and Hon’ble High Courts who have applied the theory of telescoping in dealing with the Income Tax issues before them. The appellant relied upon the decision of Apex Court in case of Mahaveer Kumar Jain v. CIT (2018) 404 ITR 738 : 302 CTR 1 : 255 Taxman 161 : 165 DTR 113 (SC)], ITAT Jaipur in the case of Kushal Dasot v/s ACIT, Circle-7, Jaipur, in Appeal No ITA-675/JP/2012, Bombay High Court, in the case of Commissioner Of Income-Tax, … vs Jawanmal Gemaji Gandhi on 5 October, 1983 discussing on the earlier decision of Kerala High Court in [1980] 121 ITR 433.

The facts related to claim of telescoping benefit is presented as under

The appellant also stated that during the year also the cash was withdrawn by the assessee as under – AY 2017-18 (Rs. 46,23,251/-)

Return filed on 28.03.2018. The same assessed on 30-12-2019. The assesse claimed this amount as income from other sources. This amount was in the form of cash withdrawn from excess salary claimed to be paid to employees in Bhagat Public School. The appellant has offered this amount in the return of income furnished for AY 2017-18.

Accordingly, the appellant claimed that Rs. 46,43,251/- was available with the assessee. Therefore, against the additions confirmed during the year the set off should be given for the cash which is already offered for tax by the assessee. The appellant has also relied upon decisions as discussed above.

The argument of the appellant are considered. The appellant has offered additional income in the reopened assessments which has been accepted by the AO. Therefore, the availability of cash with the assessee during the year is established from the records. Accordingly, the credit of cash available to the assessee which has already been offered for taxation is claimed.

This issue is related to theory of telescoping benefit. If income is available to an Assessee, then that income can be explained as a source for an item of investment or expenditure that the Assessee is unable to explain, provided the income was available to the Assessee when the investment or expenditure is made/incurred. The idea is ultimately tax is levied either only on the income or only on its application. The telescopic theory operates on the basic presumption that when there are undisclosed income and also certain undisclosed investments, then it could be reasonably presumed that the undisclosed investments have been sourced out of the undisclosed income, so that only the income may be taxed or only the investment may be taxed and not both, in the hands of the assessee under the provisions of the Act. When an income is taxed/addition is made to taxable income in an earlier year, the assessee may claim that the income arising in subsequent year/subsequent period is sourced out of the income taxed earlier.

Hon’ble Bombay High Court held in the case of CIT v. Jawanmal Gemaji Gandhi [1983] 15 Taxman 487 (Bombay)/[1985] 151 ITR 353 (Bombay)/[1984] 39 CTR 127 (Bombay)[05-10-1983] held as under –

“The Supreme Court has held in the case of Anantharam Veerasinghaiah & Co. v. CIT [1980] 123 ITR 457 that the secret profits or undisclosed income of an assessee earned in an earlier assessment year can constitute a fund, though concealed, from which the assessee may draw subsequently. The assessee, in the instant case, acquired the gold in the latter half of the assessment year: it could then very well be that the undisclosed income earned in that very year, which had been added on account of the increased estimated turnover, constituted the fund from which this asset was acquired. The conclusion reached in this behalf by the Tribunal was reasonable and justifiable.”

The assessee, in the present case, acquired the cash from the employees of school which is offered for tax as per detail provided. It could then very well be that the undisclosed income earned in the form of cash which had been offered for taxation constituted the fund from which this application of cash is made.

In the case of Addl. CIT v. Dharamdas Agarwal, it was held that when cash credits were treated as income from undisclosed sources, the assessee can take an alternative contention before the Appellate Assistant Commissioner that the cash credits were out of undisclosed income taxed in earlier years and the assessee is entitled to raise such alternative plea before the Appellate Assistant Commissioner for the first time. – [Addl. CIT v. Dharamdas Agarwal– (1983) 144 ITR 143 (MP)]

In the case of CIT v. K.S.M. Guruswamy Nadar and Sons, it was held by the Madras High Court that when there are two separate additions, one on account of suppression of profit and another on account of cash credit, it is open to the assessee to explain that the suppressed profits had been brought in as cash credits and one has to be telescoped into the other resulting only in one addition. It was, therefore, held that the Tribunal was right in its view in telescoping the additions made towards the cash credits. – [CIT v. K.S.M. Guruswamy Nadar and Sons (1984) 149 ITR 127 (Mad)]

In the case of CIT v. Tyaryamal Balchand, additions were made to the trading results as also amounts representing cash credits were added as income from undisclosed sources. It was held that the AAC and the Tribunal had committed no error of law in holding that the unproved cash credit of Rs. 16,950 should be taken to have come out of intangible additions as substantial additions had been made even in the earlier years. It had also been rightly held by the Tribunal that even during the present assessment, an addition of Rs. 18,117 had been made, which would sufficiently cover any unexplained income to the extent of Rs. 16,950. The amount of Rs. 16,950 could not, therefore, be added as income from undisclosed sources. Additions were made to the trading results as also amounts representing cash credits were added as income from undisclosed sources. The Tribunal found that the additions in trading results would cover the amount of cash credits as also substantial additions had been made in earlier years, it was held that the Tribunal was justified in deleting the addition on account of cash credits. – [CIT v. Tyaryamal Balchand (1987) 165 ITR 453 (Raj)]

In view of the decisions relied upon by the appellant and the decisions discussed above, the additional income declared by the appellant in the return filed would cover the amount of unexplained investments of the current year. The claim of the appellant is found to be acceptable in this regard.

Accordingly, following additions confirmed in appeal are given benefit of telescoping. Rs. 20,50,000/-

Rs. 5,00,000/-

Rs. 7,02,869/-

Rs. 7,00,000/-

Rs. 9,50,000/-

Total Rs. 49,02,869/-

As discussed earlier, Rs. 46,43,251/- was already available with the assessee during the year as per additional income declared in the form of cash. Therefore, the net addition sustained is computed at Rs. 2,59,618 (49,02,869 – 46,43,251) as the appellant is in a position to establish cash availability out of additional income declared in the return of income filed.

In the result the addition to the extent of Rs. 2,59,618 /- is upheld and the remaining additions of Rs. 46,43,251/- out of total additions confirmed of Rs. 49,02,869/- are not found to be sustainable as the assessee is able to explain the source out of undisclosed cash offered for taxation as indicated above.

This ground of appeal is treated as partly allowed.”

Submission:

1. In this ground, the Revenue has challenged the benefit of telescoping given by the CIT(A) of the availability of income of Rs. 46,43,251/- against the additions sustained by him to the extent of Rs. 49,02,869/-. The facts are not denied that the assessee has surrendered additional income of Rs. 46,43,251/- (APB39) based on the excess cash withdrawal in the name of the payments made to the employees. In fact, it was the cash acquired from the employees of the school and was offered for Tax. The amount was in the form of cash withdrawals from excess salary claimed to have been paid to the employees of Bhagat Public School, which was offered for taxation in the ITR furnished for A.Y. 2017-18 (APB 38-42). On the other hand, we find that the ld. CIT(A) had confirmed various additions totaling to Rs. 49,20,869/- as detailed in his order.

2. The Revenue has not brought anything on record to show that the additional income so offered in A.Y. 17-18 stood utilised elsewhere and was not available for the undisclosed income/undisclosed investment made by the assessee in this year to the extent, they were confirmed by the CIT(A).

3. Similar benefit of telescoping was claimed and allowed by ld. CIT(A) but the ld. CIT(A) wrongly reduced Rs. 11.60 lakhs of AY 2015-16 as utilization which is under challenge along with addition confirmed/ deleted are also under challenge by both parties hence, the working for benefit of telescoping may kindly be recomputed after giving effect to ITAT order of AY 2016-17 and the surplus cash availability, if any found in that year may kindly be carried forward against which the addition sustained, if any at the stage of ITAT has to be setoff.

4. Supporting Case Laws:

4.1 The issue of telescoping is no more res integra and rather a well settled principle because long back in the case of Anantharam Veerasingaiah & Co vs CIT [1980] 3 Taxman 56, the Hon’ble Apex Court has in principle agreed that the undisclosed income in one year will constitute a fund which can be drawn by the assessee later on and can be utilised for acquiring goods or in making investments, etc. and therefore, separate additions on both the counts cannot be made.

4.2 The Hon’ble jurisdictional High Court in the case of CIT v. Tyaryamal Balchand (1987) 165 ITR 453 (Raj) has also held so, following the aforesaid apex court judgement.

Therefore, the ld. CIT(A) was fully justified (subject to our submission in para 3 above) in giving benefit of telescoping of the additional income against the undisclosed outgoings, to the extent sustained by him. There is no contrary evidence brought on record to dispute the factual assertions stated above. Therefore, this ground of the revenue may kindly be dismissed.

Common submission: The AO and Revenue in its GOA have repeatedly relied upon the Survey statement of Shri Naresh Jain alleging admission made by him w.r.t. different addition which, are wrongly relied upon being survey statement and further once stood retracted, which has been elaborately submitted in this WS and may be considered towards all such grounds.

Thus, the appeal of the Revenue be dismissed as submitted hereinabove and relief may be granted u/r 27 may be prayed for.

The above submissions have been made based on the instructions and the information provided of/by the client.’’

3.1 In ground 1 & 6 taken by the Revenue, the deletion of addition of Rs. 1,43,67,131,/- out of the total additions made by the AO of Rs. 1,83,20,000.-, is under challenge. It is noticed that the grievance raised in both the grounds is substantially the same hence being dealt with at one place. However, we find that this total Rs. 1.83 Crore consisted of various additions discussed in the other grounds of appeal already taken by the Revenue and appears to be general in nature. Since we have already considered and decided the other grounds which are part of Rs. 1.83 crore, hence no separate adjudication is required on the merit part. However, in response to the ground of appeal no. 1 & 6 (DGOA 1 & 6) taken by the Revenue, wherein it is alleged that the ld. CIT(A) has ignored the fact that the assessee had already admitted income on oath u/s 131 and in particular has held that: “With regard to evidentiary value of the statement recorded under oath u/s 131 it is held in various decisions that the statement recorded under oath is having evidentiary value. (At pg.25 )“the next objection of the assessee is that statement on oath could not be recorded in course of survey. This issue is covered by the decision of the Bombay High Court in the case of Dr. Dinesh Jain v. ITO [2014] 363 ITR 210/226 Taxman 27/45 taxmann.com 442 and, therefore, this objection raised by assessee does not survive. [Para 9] (at pg.26)”,

3.2 The assessee, feeling aggrieved from such finding recorded by the CIT(A) against the assessee, made a prayer orally as also through the written submission under Rule 27 of ITAT Rules, 1963. However, we do not find any categorical denial/objection from the side of the Revenue on this aspect.

3.3 We have given our thoughtful consideration to the prayer so made. We have perused Rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963, which reads that: “The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him”. The said Rule provide that where an assessee is not in Appeal or CO against any adverse findling recorded or any ground decided by the CIT(A) against the assessee yet however, such assessee respondent is fully entitled to support his order on the issue so decided against him. In this case since the CIT(A) did not appreciate that these were survey statement recorded u/s 133A(3)(iii) but not u/s 131, thus, having no evidentiary value at all, hence, this prayer was made. We find that the said Rule clearly support the Assessee-Respondent because such issue is inherently related to/arising from the ground taken by the assessee before the CIT(A), who deleted the additions on merits but decided the legal aspect against the assessee. We therefore find such prayer justified and therefore acced the request made under Rule 27 and proceed to decide the contention raised by the assessee against the finding of the CIT(A) recorded at para 9 page 25-26. We derive support from the decisions in the cases of ITO Vs IME International ITA No. 1873/JP/2012 dated 08.01.2016 (Del Trib), BPL Systems & Projects Ltd., and Sun Pharmaceuticals Industries Ltd. Further in case of Sanjay Sawhney v. Principal Commissioner of Income-tax [2020] 116 taxmann.com 701 (Delhi), it is held that: “Section 253, read with section 153C, of the Income-tax Act, 1961 and rule 27 of the Income-tax (Appellate Tribunal) Rules, 1963 – Appellate Tribunal – Appealable orders (Aggrievedperson) – Assessment year 2008-09 – Whether rule 27 embodies a fundamental principal that a respondent who may not have been aggrieved by final order of lower authority or court, and therefore, has not filed an appeal against same, is entitled to defend such an order before Appellate forum on all grounds, including ground which has been held against him by lower authority, though final order is in its favour – Held, yes – Whether where assessee succeeded before Commissioner (Appeal) in ultimate analysis and was, thus, not an aggrieved party, in Revenue’s appeal, Tribunal committed a mistake by not permitting assessee (respondent before it) to support final order of Commissioner (Appeal) by assailing findings of Commissioner (Appeal) on issues that had been decided against him – Held, yes[Para 26] [In favour of assessee]…….Words and phrases : Term ‘thereon’ as occurring in section 254(1) of the Income-tax Act,1961/ Term “though he may not have appealed” as occurring in rule 27 of the Income- tax(Appellate Tribunal) Rules, 1963”

3.4 Having admitted prayer of the assessee under Rule 27 as above, we now proceed to adjudicate the grounds of appeal no. 1 & 6 taken by the Revenue and such prayer. However, since a similar issue has already been considered and decided in detail in para no. 3.2 of our order dated 05-08-2024 in Naresh Jain A.Y. 2016-17 ITA No 349/JPR/2024(A) & 318/JPR/2024(A) and the same is reproduced hereunder:

“3.2 The short question raised in the modified ground appeal no. 2 by the assessee, to be decided is whether the statement recorded by the authorities during the course of survey carried out u/s 133A of the Act has evidential value so that the admission made, if any in such statement (whether on oath or otherwise), can be used against the assessee. We find that the statute has provided different provisions looking to the different factual situations w.r.t recording of the statement, which may be recorded with or without administering oath viz u/s 132(4) (in search cases), u/s 133A(3)(iii) (in survey case) and u/s131 (for general inquiry). No doubt, these provisions operate independently in their respective fields and cannot be used interchangeably (except unless specifically provided in the statute). S.133A is separate and independent from S. 131, as evident from the statute viz. S. 133A(6) of the Act, refers to use of the powers u/s 131 only in a given fact situation (as stated above), which manifests the legislative intention that statement of the assessee can be recorded under any of these three provisions as the situation may demand. Further, S.132(4) provides that such statement recorded during search may be used as evidence against the assessee in any proceedings, which is not the situation with S. 133A(3)(iii) nor with S. 131. In other words, though statement may be recorded on oath u/s 131, yet the statute not having provided such statement to be used as evidence against the assessee in any proceedings, the statement recorded under these two provisions loses their evidential value on the strict interpretation of the fiscal statute. Ignoring this significant difference will render the use of these words intendedly u/s 132(4), purposeless or nugatory. Therefore, to say that a statement recorded u/s 133A(3)(iii)/ or even u/s 133A(6) r/w s. 131, is equivalent to a statement recorded u/s 132(4) to be used as evidence against the assessee, is a gross misinterpretation of the provisions. We thus, agree with the contentions raised by the ld. A/R Shri Gargieya. We are supported by the decision, in case of Pr. CIT, Central -2, New Delhi v. Meeta Gutgutia [2017] 82 taxmann.com 287 (Delhi) Hon’ble Delhi High Court referred to the decision of the Kerala High Court in Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 and of the Madras High Court in S. Khader Khan while considering distinction between statements under Sections 132(4) and 133A held as under:

“40. The main plank of Mr. Manchanda’s submission was that the disclosure made by Mr. Pawan Gadia in his statement under Section 133A was sufficient to be construed as incriminating material qua all the aforementioned AYs, the assessment for which could be re-opened by invoking Section 153A of the Act. It is significant that while in the written submission dated 26th April, 2017, Mr. Manchanda termed the statement of Mr. Pawan Gadia as “the statement dated 23rd December, 2005 recorded under Section 132(4) of the Act”, he was careful to describe it as such in the subsequent written submission dated 2nd May, 2017. This was for a good reason. The statement was in fact not under Section 132(4) of the Act but under Section 133A of the Act. There is a difference between a statement made during a survey under Section 133A of the Act and that made during the course of search under Section 132 (4) of the Act. Section 132(4) of the Act states that the authorized officer may, during the course of search and seizure, “examine on oath any person who is found to be in possession or control of any books of account, documents, monies, bullion, jewellery…”and that any statement made during such examination may be used thereafter in evidence in any proceeding under the Act. On the other hand, Section 133A does not talk of the recording of any statement on oath. Under Section 133A (3) (iii), the Income Tax Authority acting under the said provision could “record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.” Therefore, there is a considerable difference in the nature of the statement recorded under Section 132(4) and that recorded under Section 133A(3)(iii) of the Act.

41. This distinction was noticed by this Court in Dhingra Metal Works (supra). The Court there referred to the decision of the Kerala High Court in Paul Mathews & Sons v. CIT [2003] 263 ITR 101/129 Taxman 416 and of the Madras High Court in Khader Khan Son (supra) and observed that the word ‘may’ occurring in Section 133A(3)(iii) of the Act “clarifies beyond doubt that the material collected and the statement recorded during the survey is not a conclusive piece of evidence by itself.” Incidentally, the decision of the Madras High Court in S. Khader Khan Son (supra) has been affirmed by the Supreme Court by the dismissal on 20^th September, 2012 of SLP (Civil) No. 13224/2008 filed by the Revenue against the said decision after granting leave. To the same effect is the decision of this Court in Sunrise Tooling System (P.) Ltd. (supra) and of the Jharkhand High Court in Shree Ganesh Trading Co. (supra). The CBDT’s instructions dated 10th March, 2003 and 18th December, 2014 have also emphasized that there should be no recording of statement during “search/seizure/other proceeding” under the Act under “undue pressure or coercion”.

42. Therefore, in the present case, it would be wrong on the part of the Revenue to characterize the statement of Mr. Pawan Gadia as by itself an incriminating material that could be used for making additions in all the AYs in question apart from the year of search.”

Further the Hon’ble ITAT, Jaipur in the case of Unique Art Age v. AO [2014] 50 taxmann.com 194 (Jaipur – Trib.), has also taken similar view holding that:

“3.8 Effect of admission made in statements recorded during survey under section 133A of the Act

18. The position of law regarding the evidentiary value of admissions made in such statements is now settled. After considering the rival stands on this issue, we have already discussed the same in the earlier part of this order. No admission made in a statement recorded under section 133A on oath during survey can be relied as evidence against the maker or the assessee. Undeniably, the Assessing Officer has made impugned addition on the basis of the statement of Shri Manohar Lal Agarwal and specifically by relying on his reply to question No. 23 of his statement. As per the assessment order, the excess stock of Rs. 5,08,98,166 has been worked out after giving the benefit of discount and the gross profit rate but mainly relying on the statement of one of the partners of the assessee-firm. If the statement of Shri Manohar Lal Agarwal and others are excluded in view of the above legal position, the value of the alleged excess stock can be ascertained in the light of the facts of this case. The legal issue is decided in favour of the assessee”

We also find support from Paul Matthew’s & sons Vs CIT [2003] 263 ITR 101, S. Kadar Khan Sons [2008] 300 ITR 157 (Madaras) affirmed by Hon’ble Apex court in CIT Vs S. Kadar Khan [2013] 352 ITR 480 (SC).

3.4 The reliance placed by the ld. CIT(A) on certain decisions are based on the peculiar facts available in those cases only not available in the present case. The ld. CIT(A) in his order in A.Y. 17-18 (in ITA No. 374/JPR/2024(D)) has wrongly placed reliance on the case of Ravi Mathur (RHC) incorrectly stating that the evidentiary value of the statement recorded during survey was upheld whereas, the said decision was rendered in the context of search u/s 132(4) of the Act and the bone contention raised by the assessee was that there is a significant difference between the language of S. 132(4) viz-a-viz S. 131(1) and S. 133A for that reason, which aspect, has been fully appreciated by the various decisions cited by the ld. A/R. The ld. CIT(A) has completely misinterpreted and misapplied the ratio of the aforesaid case.

3.5 Further the decision in case of Nokia (Supra) is completely distinguishable in as much as in that case, validity of survey itself was under challenge and the statements were recorded u/s 131 r/w 133A(6) because of non-cooperation from the side of the assessee and powers were also assumed u/s 131(1A) of the Act, which is not the case here hence, the same is completely distinguishable. The decision in the case of Dinesh Jain (Supra) is also not applicable in as much as there also, the lower authorities were not satisfied with the explanation furnished w.r.t the impounded document though the assessee had earlier admitted income based thereon, which are not the facts in the present case. Moreover, Meeta Gutgutia (Supra) is a much later decision, making a comparative study of the relevant provisions in detail.

The ld. CIT(A) in his order in A.Y. 17-18 (in ITA No. 374/JPR/2024(D)) has wrongly placed reliance on the case of Ravi Mathur (RHC) incorrectly stating that the evidentiary value of the statement recorded during survey was upheld whereas, the said decision was rendered in the context of u/s 132(4) of the Act and the bone contention raised by the assessee was that there is a significant difference between the language of S. 132(4) viz-a-viz 131(1) and S. 133A for that reason, which aspect, has been fully appreciated by the various decisions cited by the ld. A/R. The ld. CIT(A) has completely misinterpreted and misapplied the ratio in the aforesaid case.

The reliance placed by the ld. CIT(A) on certain decisions are based on the peculiar facts available in those cases only not available in the present case. Further the decision in case of Nokia (Supra) is completely distinguishable in as much as in that case, validity of survey itself was under challenge and the statements were recorded u/s 131 r/w 133A (6) because of non- cooperation from the side of the assessee and powers were also assumed u/s 131(1A) of the Act, which is not the case here hence, the same is completely distinguishable. The decision in the case of Dinesh Jain is also not applicable in as much as there also, the lower authorities were not satisfied with the explanation furnished w.r.t the impounded document though the assessee had earlier admitted income based thereon, which are not the facts in the present case. Moreover, Meeta Gutgutia (Supra) is a much later decision making a comparative study of the relevant provisions in detail.

Thus, respectfully following the ratio laid down in the above cited decisions, we are of the considered opinion that, the plea of the Revenue that the CIT(A) should have solely relied upon the survey statement of Shri Naresh Jain recorded u/s 133A(3)(iii) (or even u/s 131 on oath) admitting income but ignoring the impounded documents found and the explanation furnished thereon with the supporting evidences should be ignored, can not be accepted. We are thus not in agreement with the dissenting findings recorded by the CIT(A) on this aspect.

For the above reasons, the modified ground of appeal no. 2 taken by the assessee is hereby allowed. “

However, except the above legal aspect decided by the ld. CIT(A) against the assessee, we agree with the ld. CIT(A) in the respective grounds that the AO used the statement to corroborate said material found during the survey but, at the same time, the assessee had successfully explained the contents of the said impounded document/s in responding to the additions made by the AO and thus, were rightly deleted as by the ld.CIT(A). Hence, no blind reliance could be placed on the statement of the assessee alleging admission. The law is well settled that no addition can be made solely based on the statement. Even the CBDT directed the subordinate authorities not to press the assessee to make surrenders. We also find that the ld.CIT(A) rightly placed reliance on the decision of C.K. Abdul Aziz (Supra). Thus, we find no infirmity in the order of the ld.CIT(A) on this aspect. It is necessary to clarify that we have confirmed the deletions of additions by the ld.CIT(A) on merits independent of these legal aspects. Thus, following the findings recorded in the order A.Y. 16-17 as aforesaid, prayer of the assessee (U/R 27), is decided in its favour whereas part of the ground no. 1 & 6 taken by the Revenue are decided against the Revenue. Hence we hold accordingly.

4.1 In Ground No. 2, the Revenue is aggrieved by the deletion of the addition of Rs. 33,60,000/- made by the AO stated to be based on the impounded annexure and the statement of the Assessee record during the survey.

4.2 On a careful consideration of the rival contentions, the material available on record and in the light of the judicial pronouncements, we find no force in the ground of the Revenue. The AO has relied upon the impounded annexure A-1, Exhibit -1, Page No. 1-4, which is an agreement of purchase of house at 7, Wonder Road, Kota wherein the sale consideration is declared at Rs. 62.50 lakhs. Copy of the said agreement dt. 13.04.2016 is available at APB Pg. 62-65 and a perusal shows that it was an agreement between one Pradeep Sharma and the assessee. However, it was not signed by the assessee as a buyer. It is noticed that later on, the said property was purchased by Smt. Nisha Jain wife of the assessee vide registered sales deed dt. 20.05.2016 (copies placed at APB Pg. 79-84 and which is also stated to have been impounded for total sale consideration of Rs. 62.50 lakhs. Thus, it is evident that the agreement relied by the AO was never acted upon by the assessee but by different parties. Undisputedly, Nisha Jain purchased the property and she became the real and beneficial owner of the property. There is no dispute with regards to the source of payment of total purchase consideration including all expenses at 64.18 lacs out of which Rs. 29.58 lacs paid through cheque and Rs. 33.60 was paid in cash. Further, Rs. 1 lac was paid towards stamp charges details are available at APB 85, which is a copy of the ledger account in the books of M/s Quick Advertising Company. The AO never held the assessee to be the benamidar of Smt Nisha Jain. These facts and findings could not be rebutted by the ld D/R. Further heavy reliance is placed on the statement of the assessee recorded during the survey u/s 133A is completely misplaced. In the case of Naresh Jain ITA 349/JPR/2024(A) & 358/JPR/2024(D) for A.Y. 2016-17, we have already dealt with this issue in detail in para 3.2 of our order dated 05-08-2024 (Reproduced hereinabove) holding that survey statement alone, cannot be relied upon as such statement has no binding evidentiary value. We also agree with the ld. CIT(A) that the AO used the statement to corroborate said material found during the survey however, at the same time, the assessee had explained the contents of the said impounded agreement. The AO ignored that the impounded agreement was of April, 2016, whereas the registered sell deed was entered in May 2016, whereas survey took place long thereafter on 02.02.2017. In view of all this direct and cogent evidences, surrounding circumstances, no blind reliance could be placed on the statement of the assessee. We also find that the CIT(A) rightly placed reliance on the decision of C.K. Abdul Aziz (Supra). Thus, we find no infirmity in the order of the CIT(A). Therefore, the ground No. 2 of the Revenue is dismissed.

5.1 In Ground No. 3, the Revenue has challenged the deletion of the addition of Rs. 7,10,000/-. The AO relied upon an impounded document being annexure A, Exhibit-2, pages 1-13, copies of which are placed at APB Pg. 93-110, which related to purchase of the agricultural land at Manadana, Kota. Payment of consideration of Rs. 6.90 lakhs was paid through cheque however Rs. 7.10 lakhs paid in cash, which was the subject matter of the addition. We have found that the assessee did not dispute the transaction however the only contention was that the same related to A.Y 2009-10 but did not relate to the subject A.Y. 2017-18. Ld. CIT(A) recorded finding of fact that the document was bearing the dates of October, 2008 and therefore, the transaction pertained to A.Y 2009-10.

5.2 On a careful consideration of the rival contentions, the material available on record and in the light of the judicial pronouncements, we find no force in the ground of the Revenue. It is noticed that the impounded papers are bearing the dates of 2008 and other years, but do not show any date falling in the F.Y 16- 17(A.Y. 2017-18). Even the payment of Rs. 6,90,000/- was made by the assessee on different dates through cheques between the period from October, 2008 to March, 2009 as per the ledger account in the books of M/s Quick Advertising Company, copies placed at ABP Pg. 111. In the views of these facts which remained unrebutted, we find no infirmity in the order of ld. CIT(A) who rightly deleted the addition in this year. Hence, ground No. 3 of appeal is dismissed.

6.1 In ground No. 4, the Revenue has challenged the deletion of the addition of Rs. 35,00,000/- based on impounded documents Annexure A Exhibit 13 Pg. 358 (APB 113) and the statement of the assessee (Q/A 23) recorded during survey u/s 133A. On a careful consideration of the rival contentions, the material available on record and in the light of the judicial pronouncements, we find no force in the ground of the Revenue in as much as undisputedly, the amount of construction expenditure was already booked by the wife of the assessee, Smt. Nisha Jain in the regularly maintained books of accounts of her proprietary M/s Quick Advertising Company, Kota to the extent of Rs. 27,97,131/- and the balance of Rs. 7,02,869/- has already been offered by the assessee with the clam of telescoping. The said books of accounts containing the relevant ledger account, etc. were produced before the authorities below. However, the ld. AO could not find any fault therein, nor he rejected the books of accounts. We have also seen the impounded documents relied upon by the AO however, we find that no blind reliance could be placed on the statement of the assessee, alleging admission because in the same very statement, he clearly stated that he was not in a position to tell the exact amount of expenditures recorded in the accounts. Further, we find that the ld. CIT(A), recorded categorical findings of fact after verification of the record, and obtained a remand report from the AO, wherein nothing substantial adverse was found and he rightly deleted the addition to the extent of 27,97,131/- and the balance addition of Rs. 7,02,869/- has been upheld. Therefore, the ground No. 4 of the Revenue is dismissed.

7.1 In Ground No. 5, the Revenue has challenged the deletion of the addition of Rs. 75,00,000/- based on some impounded documents (Annexure A-1 Exhibit 1 Pg. 56 (APB 238)) and the statement of the assessee (Q/A 23) recorded during survey u/s 133A. On a careful consideration of the rival contentions, the material referred to and in the light of the judicial pronouncements, we find no force in the ground of the Revenue in as much as undisputedly, the amount of marriage expenditure was already booked by the wife of the assessee, Smt. Nisha Jain in the regularly maintained books of accounts of her proprietary M/s Quick Advertising Company, The said books of accounts containing the relevant ledger account, etc. were produced before the authorities below. However, the ld. AO could not find any fault therein, nor he rejected the books of accounts. We have also seen the impounded documents relied upon by the AO however, we find that they are mere rough-jottings, and in the shape of mere estimations, and does not inspire any confidence and has lost relevance in the light of the fact that the related marriage expenses had already been recorded in the accounts. No blind reliance could be placed on the statement of the assessee, alleging admission by the assessee because in the same very statement, he clearly stated that he was not in a position to tell the exact amount of expenditures recorded in the accounts. Further, we find that the ld. CIT(A), recorded categorical findings of fact after verification of the record, and obtained a remand report from the AO, wherein nothing substantial adverse was found and thus, he rightly deleted the addition. Therefore, this ground No. 5 of the Revenue is dismissed.

8.1 In ground No. 7, the Revenue has challenged the benefit of telescoping given by the ld. CIT(A) of the availability of income of Rs. 1,00,30,778/- (1,11,90,778 – 11,60,000 being income utilised in A.Y 15-16 as per ld. CIT(A)) against the additions sustained by him to the extent of Rs. 1,29,02,990/-.

8.2 We have carefully considered the rival contentions, pursued the material available on record and the findings recorded by the AO & ld. CIT(A)and the decisions cited at bar. The facts are not denied that the assessee had disclosed additional income in A.Y 13-14 to A.Y 16-17 totalling to Rs. 1,11,90,778/-. This amount was in the form of cash withdrawals from excess salary claimed to have been paid to the employees of Bhagat Public School which, was offered for taxation in the ITR furnished for these years. The income so offered was duly assessed by the AO also and the ld. CIT(A) has recorded factual findings on this aspect in relation to the A.Y. 13-14 to A.Y 16-17. On the other hand, the ld. CIT(A) has confirmed various additions totaling to Rs. 1,11,90,778/- as detailed in his order . There is nothing on record to show that the additional income so offered in these years stood utilised elsewhere and was not available for the undisclosed investment/outgoings made by the assessee in this year (to the extent they were confirmed by the ld.CIT(A)). The ld. DR was also not in a position to controvert these fact findings . On the other hand, the issue of telescoping is no more res integra and rather a well settled principle because in the case of Anantharam Veerasingaiah & Co vs CIT (Supra), the Hon’ble Apex Court has in principle agreed that the undisclosed income in one year will constitute a fund which can be drawn by the assessee later on and can be utilised for acquiring goods or in making investments, etc. and therefore, separate additions on both the counts cannot be made. The Hon’ble jurisdictional High Court in the case of CIT v. Thyaramal Balachand (Supra) has also held so, following the aforesaid apex court judgement. Therefore, in principle, we are in full agreement with the findings recorded by the ld. CIT(A) in giving benefit of telescoping of the additional income against the undisclosed outgoings, to the extent sustained by him. Hence, we don’t find any merit in ground No. 7 (taken by the Revenue and the same is dismissed.

8.3 However, this left an uncovered balance of Rs. 2,59,618/- and therefore, the addition to that extent which could not be telescoped, was upheld by the ld. CIT(A). But we find that similar ground was taken by the Revenue being DGOA-5 (against the telescoping benefit) and an additional ground was raised by the assessee being AGOA-10 against allowing short claim of benefits of the telescoping,which was decided by us vide para 15 of order dated 05-08-24 in A.Y. 16-17 in ITA no. 349/JPR/2024(D) and  ITA no. 358/JPR/2024(A). In A.Y. 16-17 against the availability of Rs. 1,00,90,778/-, the additions on account of outgoing/investments of Rs. 58,55,490/- were set off/telescoped leaving excess cash available of Rs. 46,64,712/- which was prayed to be carried forward to be next year A.Y 17-18 (under consideration) and to be telescoped similarly in this year. This year also the assessee has made the similar prayer but by way of invoking Rule 27 of ITAT Rules, 1962, in absence of any appeal or cross objection filled by it. It is also prayed that if any addition, sustained by the CIT(A), is deleted by the ITAT, that has also to be given effect while computing the benefits of telescoping. Since, such a prayer is consistent with the additional ground taken by the assessee last year A.Y. 16-17 and the department having already taken a ground against telescoping, such request is a part and parcel of the issue decided by the CIT(A), hence we are satisfied that such a claim can be entertained under Rule

8.4 On this aspect we derive support from Sanjay Sawhney vs. PCIT 116 taxmann.com 701 (Delhi) [2020]. Otherwise also the plea of telescoping being an alternate claim can be raised any time. In the case of R. K. Mehta v. ITO (2013) 144 ITD 51 (TM) (Raj.) (Trib.), the Tribunal held that there is no statutory condition for availing telescopic benefit that the assessee should raise the issue of telescopic before AO or CIT(A). Issue can be raised or allowed for the first time at stage of the Tribunal provided Tribunal is satisfied that assessee is entitled to the benefit of telescopic. It is noticed that there was an uncovered balance of Rs. 2,59,618/-, as aforesaid, which is telescoped against the carried forward cash available of Rs. 46,64,712/- from A.Y. 2016-17 hence, there remains nothing uncovered and therefore, the addition sustained by the CIT(A) of Rs. 2,59,618/- is hereby deleted. The assessee thus get relief of Rs. 2,59,618/-. Hence this ground of the Revenue is dismissed whereas the prayer of the assessee (U/R 27), as aforesaid, is hereby allowed. We hold accordingly.

9.0  In the result, the  appeal of the Revenue is dismissed with no orders as to cost.

Order pronounced in the open court on 05 /08/2024.