2011 (12) TMI 363 - HC - Income Tax

Addition - Block assessment - On the basis of seized documents, recovered during search, relating to purchase of land as also the sworn statement recorded under Section 132(4), the assessing officer computed the undisclosed income - The addition made on account of personal expenses was deleted on the ground that since the assessing officer had made additions with respect to the costly items purchased, there cannot be any further addition on account of personal expenditure - it is evident that the assessee had voluntarily submitted before the Income Tax Officer that the amount shown in the document with respect to purchase of four properties were not the actual amounts and that he had paid more than that shown in the document - The statement given under oath has to be considered in the context of the long prevalent practise of not stating the actual consideration with respect to transactions of immovable properties, for the purpose of evading stamp duty - The admission made by the assessee before the assessing officer corroborated by the title deeds seized in search absolves the department from discharging any burden regarding the additions made on the strength of such admission - In the instant case on the clear admission of the assessee corroborated by the documents the burden on the department ceases to exist. Regarding personal expenditure - The only explanation offered by the assessee for the years 1989-90 to 1992-93 was that his personal expenses in the said years were met by his parents - the approach of the Tribunal is perverse in so far as the additions made for purchase of items is distinct and different from the additions for personal expenses - Decided against the assessee. Regarding addition made of Rs.3 lakhs in the year 1993-94 - The assessee offered absolutely no evidence to prove the transaction and the contradictions regarding the disclosure in the cash flow statement as a NRI loan and the later explanation as a loan received in cash, hits at the root of the genuineness of the transaction - When the assessee had voluntarily disclosed the same in the cash flow statement and had failed to explain the genuineness of the transaction, we are at a loss to understand why the Tribunal insisted on search materials to substantiate the addition - Decided against the assessee

Summary

Issues Involved:
1. Evidentiary value of the statement recorded under Section 132(4) of the Income Tax Act.
2. Deletion of additions related to property transactions and estimated personal expenses.
3. Addition of Rs. 3,00,000/- claimed by the assessee as a loan.

Issue-wise Detailed Analysis:

1. Evidentiary Value of the Statement Recorded Under Section 132(4):
The Tribunal held that no addition can be made based on the assessee's statement under Section 132(4) without further corroborative material. The Tribunal found that the retraction of the statement by the assessee diminished its evidentiary value. However, the High Court disagreed, stating that the statement on oath given by the assessee, which was corroborated by seized documents, constituted sufficient evidence of undisclosed income. The Court emphasized that a statement under Section 132(4) is statutorily deemed to have evidentiary value and cannot be retracted at the mere will of the party without contra evidence. The Court concluded that the burden of proof was discharged by the department when the assessee voluntarily disclosed details of undisclosed income during the search.

2. Deletion of Additions Related to Property Transactions and Estimated Personal Expenses:
The Tribunal deleted the additions related to property transactions on the grounds that the statement recorded under Section 132(4) could not be the sole basis for such additions, especially after the assessee retracted the statement. The Tribunal also deleted the addition for personal expenses, reasoning that the assessing officer's estimation was based on assumptions and was already accounted for by the addition of costly items purchased. The High Court, however, found that the admissions made by the assessee in the statement under Section 132(4), corroborated by the documents seized, were sufficient to justify the additions. The Court held that the burden of disproving the admissions was on the assessee, who failed to provide evidence that the amounts shown in the documents were the only payments made. Regarding personal expenses, the Court found that the estimate was reasonable and based on the assessee's lifestyle and admissions under Section 132(4).

3. Addition of Rs. 3,00,000/- Claimed by the Assessee as a Loan:
The Tribunal deleted the addition of Rs. 3,00,000/- on the grounds that there was no material seized during the search to substantiate it. The High Court disagreed, noting that the assessee's cash flow statement initially described the amount as an NRI loan, but later claimed it was a loan from his elder brother without providing any supporting evidence. The Court held that the onus was on the assessee to prove the nature and source of the receipt, which he failed to do. The Court concluded that the assessing officer rightly treated the amount as undisclosed income due to the lack of credible evidence.

Conclusion:
The High Court allowed the Revenue's appeal, answering all questions in favor of the Revenue and against the assessee. The Court upheld the evidentiary value of the statement recorded under Section 132(4), validated the additions related to property transactions and personal expenses, and confirmed the addition of Rs. 3,00,000/- as undisclosed income.