2010 (9) TMI 847 - HC - Income Tax

Income from commission on sales - addition of income - Tribunal deleted the addition - Held that - In view of sub-ss. (4) and (4A) of s. 132 the AO was justified in drawing presumption against the assessee and had made addition of Rs. 9,00,000 in his income under s. 68. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displace. The assessee retracted from the said statement vide letters dt. 24th Nov., 1998 and 11th March, 1999 during the course of assessment proceedings. However, no value could be attached thereto in the present case. In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In such a situation, the authenticity of the statement by virtue of which surrender had been made at the time of search cannot be held to be bad. The Tribunal, thus, erred in concluding otherwise. The Tribunal, therefore, was not justified in reversing the order of the AO which was affirmed by the CIT(A) also. In favour of revenue.

Summary

Issues:
Determining the correctness of the addition of Rs. 9,00,000 made by the Assessing Officer on account of commission income and confirmed by the Commissioner of Income Tax (Appeals) in light of the statement made by the assessee under section 132(4) of the Income Tax Act, 1961.

Analysis:
The judgment pertains to IT Appeal Nos. 126 and 127 of 2003, addressing a common question of law and facts. The primary issue revolves around whether the Tribunal was justified in deleting the addition of Rs. 9,00,000 on account of commission income made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals). The case originated from a search conducted at the assessee's residence, leading to an assessment where income from commission on sales was added. The Tribunal later deleted this addition based on lack of evidence proving the commission earned by the assessee.

The Revenue contended that the addition was justified as the assessee admitted receiving commission during the search operation. The Revenue relied on section 132(4) of the Income Tax Act, which allows statements made during search to be used as evidence. The documents seized during the search indicated total sales of Rs. 4,92,03,005, supporting the addition of commission income. The Revenue argued that the Tribunal erred in deleting the addition without substantial evidence.

Conversely, the assessee argued that the Revenue failed to provide concrete evidence substantiating the commission income. The assessee emphasized the lack of material supporting the Revenue's claim and supported the Tribunal's decision to delete the addition. The main contention was whether the addition based on the statement made under section 132(4) was sustainable.

The judgment delved into the legal provisions of sections 132(4) and 132(4A) of the Income Tax Act. Section 132(4) empowers the Assessing Officer to use statements made during search operations as evidence, subject to the assessee's ability to prove coercion or inducement. Section 132(4A) raises presumptions regarding seized items, which are rebuttable. The judgment referenced precedents from Karnataka, Delhi, and Allahabad High Courts regarding the scope of presumptions under section 132(4A.

Ultimately, the Court found that the Assessing Officer was justified in adding the commission income based on the statement made by the assessee during the search. The assessee failed to rebut the presumptions raised under sections 132(4) and 132(4A, leading to the reversal of the Tribunal's decision. The judgment favored the Revenue, allowing the appeal and upholding the addition of Rs. 9,00,000 to the assessee's income.