2013 (8) TMI 936 - AT - Income Tax

Addition by the A.O. merely on the basis of statement recorded u/s 132(4) - Held that - The ingredient for retraction of statement made during the search, therefore, stand duly satisfied as the assessee is found to have made retraction within a reasonable time immediately after the copies of statement were provided to him. Furthermore, there being no material or evidence on record to show that appellant has carried any business outside the books for sale and purchase of items of pharmaceutical companies that could give rise to income to the extent of ₹ 30,00,000/-, addition merely on the basis of such statement which stood validly retracted could not have been made. On similar basis and reasoning in the case of Suresh Medical Agency another assessee of the group who were also searched on the same day along with this appellant, vide our order dated 21.8.2013 in ITA No. 443/JP/2012 have found the retraction made as valid and also deleted the addition. We, therefore, find no factual or legal justification in sustenance of addition by Ld. CIT (A) in this regard. Unexplained jewellery found at the time of search - Held that - The search party did not ask any further question in this regard and no further detail was required from him. The Assessing Officer also did not make any enquiry after he received the explanation of the assessee claiming that 240 gms jewellery belongs to his brother in law Shri Mukti Lal Agarwal. The explanation filed by the assessee, however, has been rejected by the Assessing Officer without making any further enquiry or requiring the appellant to adduce further evidence. The explanation so given has not been found false. Therefore, the claim of 240 gms jewellery explained by the assessee as belonging to Shri Mukti Lal Agarwal cannot be rejected on surmises and conjectures. We, therefore, direct deletion of addition on this account. As regards the claim of jewellery belonging to his son Shri Praful Mittal Assessing Officer rejected this claim by saying that the said paper is a dumb document and without any date and in the absence of any bill for purchase of jewellery claim was not allowed. On the peculiar facts of surrender of income by Shri Praful Mittal and entries showing purchase of jewellery in the seized documents the valid explanation ought to have been accepted. We, therefore, do not find any justification in sustenance of addition on this basis and direct deletion thereof. As regards jewellery weighing 300 gms belonging to Shri Lal Chand Mittal and Shri Madan Lal Mittal embark any enquiry from the appellant on this issue after the appellant had explained that jewellery weighing 150 gms each belong to such two persons, namely, Shri Lal Chand Mittal and Shri Madan Lal Mittal nor he was required to produce both these persons for cross examination or verification of facts stated by the appellant. If the claim made by these two persons for their jewellery having been left in the house of Shri Radheyshyam Mittal who was residing next door was to be taken as wrong claim, the Assessing Officer could have made addition as of unexplained investment in jewellery in their respective hands. This, however, has not been done. The appellant having furnished a reasonable explanation and considering the peculiar facts of the case, we do not find any justification in sustenance of addition on account of the jewellery weighing 300 gms in the hands of the appellant as unexplained investment. We, therefore, direct deletion thereof and allow relief to the appellant. As a result assessee s appeal stands allowed.

Summary

Issues Involved:
1. Addition of Rs. 19,15,303 based on a statement recorded u/s 132(4) without corroborative evidence.
2. Addition of Rs. 8,24,618 on account of unexplained gold jewellery.
3. Denial of benefit of telescoping, recycling, and rotation of funds.

Issue-wise Detailed Analysis:

1. Addition of Rs. 19,15,303 based on a statement recorded u/s 132(4) without corroborative evidence:

The appellant contested the addition of Rs. 19,15,303 made by the Assessing Officer (A.O.) based on a statement recorded under section 132(4) of the I.T. Act, 1961, without any corroborative evidence. The A.O. argued that the statement taken during the search had great evidentiary value and could only be retracted if coercion was proven. The appellant had initially offered Rs. 30,00,000 as income from medical business in his statement but did not reflect this in his return of income. The retraction of the statement was deemed an afterthought as it occurred seven months post-search, and the appellant failed to prove coercion. The Ld. CIT (A) upheld the A.O.'s decision, emphasizing the appellant's failure to provide immediate retraction through an affidavit. The Tribunal, however, found merit in the appellant's argument that the statement was not corroborated by any evidence found during the search. The Tribunal referenced judgments, including Pullangode Rubber Produce Co. Ltd. vs. State of Kerala and CIT vs. Ashok Kumar Soni, which stated that an admission during a search is not conclusive proof and can be explained. The Tribunal concluded that the retraction was valid and timely, as it was made immediately after receiving the statement copies. The addition of Rs. 19,15,303 was deleted.

2. Addition of Rs. 8,24,618 on account of unexplained gold jewellery:

The appellant challenged the addition of Rs. 8,24,618 for unexplained jewellery. During the search, jewellery weighing 4491 grams was found, and the appellant claimed that 798.430 grams belonged to specific family members. The A.O. rejected this claim due to a lack of evidence and treated 968.43 grams as unexplained, making an addition of Rs. 10,21,135. The Ld. CIT (A) provided partial relief by accepting 170 grams as explained but upheld the addition for the remaining 798.430 grams. The appellant argued that the jewellery belonged to family members and was accounted for in their returns. The Tribunal found that the A.O. did not make further inquiries or require additional evidence from the appellant. The Tribunal accepted the appellant's explanation for 240 grams belonging to his brother-in-law and 258.430 grams purchased by his son from unaccounted income. The Tribunal also accepted the explanation for 300 grams belonging to his brothers, whose assessments did not contest this claim. The addition of Rs. 8,24,618 was deleted.

3. Denial of benefit of telescoping, recycling, and rotation of funds:

The appellant sought the benefit of telescoping, recycling, and rotation of funds, which was denied by the Ld. CIT (A). Given the Tribunal's decision to delete the additions under the first two grounds, the issue of telescoping became irrelevant. Consequently, this ground was dismissed.

Conclusion:

The Tribunal allowed the appeal partly, deleting the additions of Rs. 19,15,303 and Rs. 8,24,618, while dismissing the ground related to telescoping. The order was pronounced in the open court on 26.08.2013.