Facts of the Case

The respondent/assessee, ARN Infrastructure Ltd., is engaged in real estate development and construction across NCR. It entered into an agreement with Real Gain Estates Pvt. Ltd., appointing it as an exclusive agent for booking and selling properties with a brokerage of 6.5%.

A survey under Section 133A was conducted on 20.11.2008, during which certain documents were impounded and statements of directors were recorded. One director allegedly admitted undisclosed income of ₹10 crores.

The Assessing Officer (AO), relying solely on this statement, added ₹10 crores to the taxable income. However, the assessee did not include this amount in its return.

The addition was deleted by CIT(A), and the Income Tax Appellate Tribunal (ITAT) upheld the deletion. The Revenue filed an appeal before the Delhi High Court.

 Issues Involved

  1. Whether an addition to income can be sustained solely based on a statement recorded during a survey under Section 133A.
  2. Whether such statements have evidentiary value without corroborative evidence.
  3. Whether failure to provide the survey report to the assessee vitiates the assessment proceedings.

 Petitioner’s Arguments (Revenue)

  • The addition of ₹10 crores was justified as it was based on voluntary statements of directors.
  • Statements were recorded on oath and clearly indicated receipt of unaccounted cash.
  • The survey findings formed a valid basis for assessment.

 Respondent’s Arguments (Assessee)

  • Statements recorded during survey proceedings under Section 133A do not carry evidentiary value as they are not recorded on oath.
  • The survey report was not provided, violating principles of natural justice.
  • No corroborative material was found to support the alleged undisclosed income.
  • Reliance placed on CIT v. S. Khader Khan Son, affirmed by the Supreme Court.

 Court’s Findings / Order

  • The addition of ₹10 crores was based solely on statements of directors without corroborative evidence.
  • Statements made during survey proceedings were often made to “buy peace” and cannot be treated as conclusive evidence.
  • The survey report was not furnished to the assessee, nor were directors confronted with it.
  • The Court affirmed that no corroborative material existed to justify the addition.
  • The Tribunal and CIT(A) were correct in deleting the addition.
  • No substantial question of law arose, and the appeal was dismissed.

 Important Clarification by the Court

  • There is a clear distinction between statements recorded under Section 133A and Section 132(4):
    • Section 133A: No power to administer oath → statement has no evidentiary value
    • Section 132(4): Statement recorded on oath → carries evidentiary value
  • Additions cannot be sustained merely on the basis of survey statements without independent evidence.

 Sections Involved

  • Section 133A – Survey proceedings
  • Section 132(4) – Statement on oath during search

 Link to download the order -https://delhihighcourt.nic.in/app/showFileJudgment/RAS27072023ITA372019_200504.pdf

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