Admission at the time of survey is retractable

In CIT v. Dhingra Metal works (decided by Delhi High Court on04.10.2010) it was held that an admission given at the time of survey under section 133A is not binding on the tax payer. In this case the assessee firm admitted Rs.45 lakhs as income due to non-tally of stock at the time of survey. Later, the assessee tallied the stock and claimed that there was no stock discrepancy as much as to tax the admission of Rs.45 lakhs. The AO ignored the assessee's submission and simply relied on the statement recorded at the time of survey and taxed the disputed sum. Both CIT(Appeals) and tribunal decided the issue in favour the taxpayer. The court held that the statement recorded at the time of survey did not have evidentiary value and the statement recorded at the time of survey was not taken on oath.

Accordingly, the court held that the AO was not justified in solely relying on the statement recorded at the time of survey without controverting the records and details furnished by the assessee for claiming that there was no inflated/ unaccounted stock holding at the time of survey. Precedent for the decision could be found in Paul Mathews & Sons v. CIT (2003) 263 ITR 101 (Ker) and CIT v. Khader Khan (2008) 300 ITR 157 (Mad)