The assessee, a partnership firm engaged in the business of construction and development of residential flats and shops, filed its return of income declaring its total income for the assessment year. A survey action under section 133A of the Income Tax Act, 1961 (the Act) was conducted in the business premises of the assessee, during which statements of two partners were recorded, wherein they admitted a profit element in respect of different construction projects carried out by the assessee firm. Later, the partners retracted their statements by way of an affidavit, describing the loose papers found during the survey as dumb documents. The Assessing Officer (AO) rejected the retraction and made an addition, as the undisclosed income of the assessee.

The assessee appealed before the Commissioner of Income Tax (Appeals) (CIT(A)), who estimated the gross profit of the assessee at 12.5% and directed the AO to reopen the assessments for the assessment years 2009-10 to 2016-17 and give telescopic effect to the income of the assessee. The Revenue challenged the order of the CIT(A) before the Tribunal.

The Tribunal dismissed the appeal of the Revenue and upheld the order of the CIT(A). The Tribunal held that the AO was not correct in making the addition to the extent desired as the undisclosed income of the assessee, based on the statements recorded under section 133A of the Act, had no evidentiary value and were retracted by the assessee. The Tribunal also held that the CIT(A) had made a thorough analysis of the income of the assessee project-wise and estimated the gross profit at 12.5%, which was reasonable and did not require any interference. The Tribunal further held that the CIT(A) had rightly given direction to the AO to reopen the other assessment years and recompute the income of the assessee by giving telescopic effect, as per the provisions of section 147(1) of the Act. (AY. 2014-15)