2005 (11) TMI 389 - AT - Income Tax

Block assessment in search cases - Search and seizure - Undisclosed income - On money paid for acquiring flats and shops - addition based on loose papers - interior decoration and household expenses -whether the declaration/admission so made in the statement can be effectively and successfully retracted - HELD THAT - We are of the view that by its declaration and acts the assessee intentionally caused/made the departmental authorities to believe the declaration made by the assessee to be true and induced them to act upon such belief. In our view it is not open to the assessee to change the stand it has already taken and thus cause the situation in his favour by inducing the department not to investigate or enquire into the matter on the seized documents. It is not open to the assessee to turn around of the said declaration. In fact to our understanding, the affidavit of Shri Manmohan Singh is only a bald denial and nothing else. It does not contain any new evidence, fact or material. There is nothing in this affidavit to rebut the contents of the seized documents as shown on page 7 bundle No. 14 of party R6. Thus, such affidavit or even the letter written to the CIT can neither negate the declaration of disclosure given on oath by the assessee nor can it become the basis of retraction of the declaration made u/s 132(4). When we compare the fact situations in two cases, one when the statement u/s 132(4) was recorded and the other when the retraction was tendered, we find that, in the former, there is very little time and scope of artificiality, or stating falsity, the assessee is not in a frame of mind where he could create some explanation which is not true. Only possibility is that he may, state something or some facts of which he may not be aware. Whatever spontaneous answers come they are mostly true unless, proved with acceptable facts otherwise. When the statement is given that on- money has been paid, it should be accepted as true because it is in the very personal knowledge of the assessee. What he knows only he can state. Once he states on oath, some thing personal and only known to him, it must be true. About facts and events like this, only he is privy and he also knows the consequences of stating the truth that he has to pay taxes thereon on such disclosure, then the truth becomes an inseparable ingredient of the disclosure. In the present case the delay in retraction was inordinate. The explanation for delay was far from convincing. What he stated 11 months after he could have stated next day of the search. There was no need for consultation, if whole thing was false. As a matter of fact it was not. Therefore, entire set of submissions relating to retraction deserves to be rejected. During the course of search, at the residential premises of Mrs. Dolly Ghosh, a memorandum of understanding dated 25-7-1991 signed by her and Shri Manmohan Singh was found. When Shri Manmohan Singh was confronted with this MOU, he admitted to have paid in cash to her for resigning from the partnership. The payment was admitted to be unaccounted. Shri Manmohan Singh thus disclosed a sum for block period. This sum was offered in block return also. From this it is clear that whatever he has stated u/s 132(4) and admitted as his concealed income was based on documentary evidence confronted to him. There was no disclosure or admission which was not found supported with evidence. The disclosure being on-money for shops and flats in Tulsi Shyam Building was based on document No. 7 bundle No. 14 party R6. Disclosure as based on stamped receipts. The disclosure of Rs. 2,70,000 was based on inspection of the house during the course of search showing freshly carried out renovations etc. On the other hand, the retraction was based on no evidence. In view of the above, we reject the contention of the learned counsel for the assessee that there was any coercion or pressure or duress while recording statement u/s 132(2)/131(1A) and also assessee s retraction subsequently and uphold the order of the Assessing Officer made on the basis of seized documents as well as disclosure and admission made u/s 132(4) and further enhanced u/s 131(1A). As a result, addition being on-money paid for acquiring flats and shops in Tulsi Shyam Building, sum based on loose paper Nos. 48 to 50 being stamped receipts and being unaccounted expenditure on renovation and interior decoration covered in ground Nos. 1, 2, 3 in assessee s appeal are confirmed. In the result, the appeal of the assessee is dismissed. Unexplained business expenditure - NRI gift - Payment of on-money towards purchase of flat - After considering the material and also the case laws cited in the case of Shri Manmohan Singh, we are of the view that issue simply boils down to the point that whether statement given u/s 132(4) has to be used against the assessee or retraction is given weightage and additions be deleted. The issue has been considered in detail in the case of Shri Manmohan Singh Vig (HUF) by this Tribunal. Following the decision of Tribunal in Manmohan Singh Vig (HUF) s case (supra), we hold that the retraction or rather denial is not established by any material/evidence and hence the same cannot be substituted for admission made by the assessee under sections 132(4) and 131(1A) and supported by documentary evidence found in the search. This is the position in respect of all the impugned additions made by the Assessing Officer. Hence, the additions made are confirmed. No evidence has been furnished to show as to how the case of the assessee does not fall under Chapter XIV-B. We reject this contention. We reject all the grounds raised by the assessee in this regard. In result, the appeal of assessee is dismissed.

Issues Involved:
1. Addition of Rs. 15,70,450 towards alleged on-money paid for acquiring flats and shops.
2. Addition of Rs. 2,30,000 based on loose papers found during the search.
3. Addition of Rs. 2,70,000 towards interior decoration and household expenses.
4. Validity of retraction of declaration by the appellant.
5. Repercussions of pending assessment under Chapter XIV-B of the Income-tax Act.
6. Allegation of the Assessing Officer traveling beyond the scope of Chapter XIV-B.

Detailed Analysis:

1. Addition of Rs. 15,70,450 towards alleged on-money paid for acquiring flats and shops:
The Assessing Officer (AO) made an addition of Rs. 15,70,450 based on a statement recorded under section 132(4) and subsequent statement under section 131(1A) where the assessee admitted to paying on-money for acquiring flats and shops in Tulsi Shyam Building. The AO relied on seized documents and the assessee's own admission during the search. The assessee later retracted this admission through an affidavit, claiming coercion and pressure. However, the AO rejected this retraction, reasoning that the statements were based on direct evidence and the delay in retraction was not convincing.

2. Addition of Rs. 2,30,000 based on loose papers found during the search:
The AO added Rs. 2,30,000 based on loose papers found during the search, which indicated cash payments to New Suraj Builders. The assessee admitted to these payments during the search but later retracted, explaining that the documents were related to a loan given to M/s. Amber Wood Packers Pvt. Ltd. The AO rejected this explanation, relying on the seized documents and the initial admission.

3. Addition of Rs. 2,70,000 towards interior decoration and household expenses:
The AO made an addition of Rs. 2,70,000 based on the assessee's statement during the search, where he admitted to unaccounted expenditure on interior decoration and household expenses. The assessee later retracted this admission, claiming it was made under pressure. The AO rejected the retraction, noting that the statement was voluntary and supported by evidence found during the search.

4. Validity of retraction of declaration by the appellant:
The Tribunal examined whether the retraction of the declaration made under section 132(4) was valid. It was held that the retraction was merely a denial without any supporting evidence. The Tribunal emphasized that statements made under section 132(4) are presumed to be true unless rebutted by cogent evidence. The delay in retraction and the lack of immediate complaint to higher authorities further weakened the assessee's case.

5. Repercussions of pending assessment under Chapter XIV-B of the Income-tax Act:
The appellant argued that the assessment under Chapter XIV-B of the Income-tax Act for M/s. MJS Associates was still pending and could impact his assessment. The Tribunal found no rational nexus or connection between the two assessments, as the additions in the appellant's case were based on seized documents and his own admissions.

6. Allegation of the Assessing Officer traveling beyond the scope of Chapter XIV-B:
The appellant alleged that the AO traveled beyond the scope of Chapter XIV-B in making the additions. The Tribunal rejected this contention, finding no evidence or argument to support the allegation. The Tribunal held that the AO acted within the scope of Chapter XIV-B, relying on seized documents and the appellant's statements.

Conclusion:
The Tribunal upheld the additions made by the AO, rejecting the appellant's retraction and arguments. The appeal was dismissed, affirming the AO's reliance on seized documents and the appellant's admissions during the search. The Tribunal emphasized the importance of timely and substantiated retraction and the presumption of truthfulness of statements made under section 132(4).

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