2013 (11) TMI 55 - AT - Income Tax

Undisclosed investment - assessment u/s 153C - Income found during search and seizure - CIT deleted addition - Held that - Assessee had disclosed income in respective companies by way of change in method of accounting or say by recognizing changing the method of the income. Assessing Officer had not pinpointed any defect in this method. During the assessment proceedings as well as in the remand reports called by the CIT (A), the Assessing Officer has not quantified any concealed income. These assessees were part of the Sareen Group although Shri Shravan Gupta was Director in these companies but these companies were controlled by Sareen Group persons only. Overall discloser by all these persons had been made of Rs.335.66 crores. The income disclosed by these assessee companies had not been challenged on the basis of any evidence except the initial bifurcation of undisclosed income. Therefore, in our considered view, the disclosure made by Shri Shravan Gupta during the search operation and which has been further enhanced, shall not have adverse impact on income disclosed in the return of these assessees. Only on the basis of ad hoc bifurcation of the disclosure or surrendered income at initial stage of proceeding and in absence of any incriminating document shall not make such addition sustainable. Overall disclosure was of a high amount. Initial bifurcation was not based on any reliable calculation in view of changed method of recognizing income. The fact shows that these bifurcations were made on ad hoc basis only. It was not even based on any seized material. No statement u/s 132(4) of the Act recorded in these companies. Neither the authorized officer during the search operation nor Assessing Officer had worked out any concealed income supported by any document. Hence, no adverse inference can be drawn when assessee filed return of income by making income on the basis of changed method of accounting - Decided against Revenue.

Issues Involved:
1. Validity of addition based on statements recorded during search operations.
2. Validity of the assessment under section 153C read with section 143(3) of the Income-tax Act, 1961.
3. Admissibility and evidentiary value of statements recorded under section 132(4) and section 131 of the Income-tax Act, 1961.
4. Impact of the absence of incriminating documents on the addition of income.
5. Validity of retraction of statements and its impact on the assessment.
6. Legal precedents and their applicability to the case.

Detailed Analysis:

1. Validity of Addition Based on Statements Recorded During Search Operations
The primary issue in these appeals was the addition of income based on the statement of Shri Shravan Gupta, Managing Director of Emaar MGF Land Limited, who admitted additional income of Rs. 225 crores during a search operation. The Assessing Officer attributed Rs. 16 crores to each of the assessee companies based on this statement and subsequent bifurcation. However, the CIT (A) deleted the addition, stating that no incriminating documents were found during the search, and the overall disclosed income by the group was Rs. 335.66 crores, which was higher than the initially admitted Rs. 225 crores.

2. Validity of the Assessment Under Section 153C Read with Section 143(3)
The assessments for the assessee companies were framed under section 153C read with section 143(3) of the Income-tax Act, 1961, for six Assessment Years (2002-03 to 2007-08). No additions were made during these assessments. The CIT (A) found that the Assessing Officer had not provided any quantification of concealed income during the assessment proceedings or in the remand report, leading to the deletion of the addition.

3. Admissibility and Evidentiary Value of Statements Recorded Under Section 132(4) and Section 131
The CIT (A) and the Tribunal noted that the statements recorded under section 132(4) and section 131 were not available with the Assessing Officer. The CIT (A) requested these statements, but they were not furnished. The Tribunal upheld that without these statements and any corroborative evidence, the addition based on Shri Shravan Gupta's statement could not be sustained. The CIT (A) also referenced several legal precedents indicating that statements alone, without corroborative evidence, are insufficient for making additions.

4. Impact of the Absence of Incriminating Documents
The Tribunal emphasized that no incriminating documents were found during the search concerning the assessee companies. The CIT (A) and the Tribunal both highlighted that the addition could not be justified without any seized material or evidence supporting the concealed income. The Tribunal supported the CIT (A)'s decision to delete the addition due to the lack of incriminating evidence.

5. Validity of Retraction of Statements and Its Impact on the Assessment
The CIT (A) and the Tribunal considered the retraction of statements and the overall disclosure of Rs. 335.66 crores by the group. The Tribunal noted that the retraction was valid as the final disclosed amount was higher than the initially admitted amount, and no evidence suggested that the statement was made under coercion or threat. The Tribunal referenced several case laws supporting the view that retracted statements, without corroborative evidence, cannot form the basis for additions.

6. Legal Precedents and Their Applicability
The Tribunal and the CIT (A) referred to various legal precedents to support their decisions. These included cases like CIT, Ranchi Vs. Ravindra Kr. Jain, M. Narayanan & Bros. Vs. ACIT, and others, which held that additions based on retracted statements without corroborative evidence are not sustainable. The Tribunal also distinguished the cases cited by the Revenue, stating that they were not applicable to the facts of the present case.

Conclusion
The Tribunal upheld the CIT (A)'s decision to delete the additions made by the Assessing Officer, emphasizing the lack of incriminating documents, the higher overall disclosure by the group, and the absence of corroborative evidence for the statements recorded during the search. The appeals by the Revenue were dismissed.

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