2011 (4) TMI 731 - HC - Income Tax

Search and seizure - Undisclosed income - addition of surrendered income during search on the basis of retracted statement - It is not in dispute that during the course of search, the Assessee first submitted that he has nothing to disclose and therefore first stand of the Assessee was that he had no undisclosed income and then the Assessee alleged to had stated that he had also undisclosed income of Rs. 7 Lakhs - Therefore relying on only one such statement given by the Assessee in these circumstances where out of three two facts were found to be not correct, then in these facts and circumstances, it was the duty of the Assessing Officer to collect more evidence in support of the fact that there was undisclosed income of Rs. 7 Lakhs in the hands of the Assessee - The appeal is dismissed

Summary

Issues:
1. Whether the Income Tax Appellate Tribunal was justified in not making an addition based on a surrender made under Section 132(4) of the Income Tax Act when the Assessee retracted the statement and it was not corroborated by independent evidence.

Analysis:
The appellant challenged the orders passed by the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal, contending that the Tribunal erred in not making an addition based on the Assessee's surrender under Section 132(4) of the Income Tax Act. The Assessee had voluntarily disclosed undisclosed income during a search, stating an amount of Rs. 7 lakhs, part of which was invested in stocks and given as loans. However, discrepancies were found by the Assessing Officer regarding the correctness of these statements. The appellant argued that the retraction made by the Assessee after a delay of two years should be rejected, citing a judgment where the Supreme Court cast doubt on retractions made after significant delays. The Tribunal and the Commissioner of Income Tax (Appeal) considered these discrepancies and found that the Assessee's statements were not fully supported by evidence.

The Court noted that during the search, the Assessee initially denied having undisclosed income but later admitted to Rs. 7 lakhs of undisclosed income, including investments and loans. However, the Assessing Officer found discrepancies in the Assessee's statements, with some amounts not found in banks and other details not matching up. The Court emphasized that out of the three key facts stated by the Assessee, two were found to be incorrect by the Assessing Officer. The Court highlighted that the Assessing Officer should have collected more evidence to support the claim of undisclosed income. The Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal considered these discrepancies and made their decisions based on the facts of the case.

In conclusion, the Court found no merit in the appeal and dismissed it, upholding the decisions of the Commissioner of Income Tax (Appeal) and the Income Tax Appellate Tribunal. The Court's decision was based on the lack of sufficient evidence to support the Assessee's claims of undisclosed income, considering the discrepancies found by the Assessing Officer and the lack of corroboration for the statements made during the search.