2015 (5) TMI 429 - HC - Income Tax

Search u/s 132 - undisclosed income of three items - assessee submits that the AO rested his conclusions exclusively on the statement recorded under section 132(4) of the Act and that the same is opposed to law- Held that - The search that was conducted on March 4, 1997, led to the block assessment against the appellant covering the period from 1987-88 to 1997-98. Though the appellant submitted the returns showing nil income, the Assessing Officer conducted a detailed enquiry with reference to various items that are said to have been noticed by him before the search. The three items referred to above were dealt with in detail in the order of assessment. The defence offered by the appellant was that he clearly mentioned at the time of recording of the statement that the same would be subject to verification of the books of account. The statement recorded under section 132(4) of the Act would certainly constitute an important basis for an Assessing Officer to take necessary steps under the provisions of the Act. However, if the statement is retracted and there does not exist any other reliable material, making of assessment on the basis of such retracted statement cannot be treated as legal. Therefore, it is difficult to hold that the statement was bereft of any material. As a matter of fact, the relevant documents were shown to the appellant and he not only admitted the genuinity of those documents but also made it clear that the amount mentioned therein is an unaccounted income. Once the questions were put to the appellant, on the basis of the seized documents, which in turn were assigned separate numbers, there is no way the appellant can disown the same. Further, this is not a case, where the block assessment is based exclusively upon the statement. It was supported by the other documents seized during the course of search. - Decided against assessee.

Summary

Issues:
1. Validity of block assessment based on statement recorded under section 132(4) of the Income-tax Act.
2. Interpretation of the appellant's statement during the search.
3. Reliance on previous court judgments and circulars.
4. Assessment supported by seized documents.
5. Application of circular regarding assessment based on statements.

Analysis:

1. The main issue in this case was the validity of the block assessment conducted by the Assessing Officer based on the statement recorded under section 132(4) of the Income-tax Act. The appellant contended that the assessment solely relying on the statement was against the law. The court emphasized that while the statement is crucial for assessment, if retracted without other reliable material, the assessment cannot be considered legal.

2. The appellant argued that his statement during the search was subject to verification of the books of account, indicating that the undisclosed income items were accounted for. However, the court noted that the appellant did not provide alternative explanations for the amounts mentioned in the statement, which were considered unaccounted income.

3. Both parties cited previous court judgments and circulars to support their arguments. The appellant referred to a judgment and a circular, highlighting the importance of retracted statements in assessments. The respondent, on the other hand, pointed out distinctions in the facts of those cases compared to the present case.

4. The assessment was not solely based on the appellant's statement but also supported by seized documents during the search. The court examined specific questions and answers from the statement, showing the appellant's acknowledgment of unaccounted income, further reinforcing the assessment's validity.

5. The circular relied upon by the appellant pertained to assessments solely based on statements, whereas considerable material was seized during the search in this case. The court concluded that the circular was not applicable as the assessment was supported by seized documents, and there was no reason to interfere with the Tribunal's order.

In conclusion, the court dismissed the appeal, upholding the validity of the block assessment based on the statement recorded during the search and supported by seized documents. The miscellaneous petition was also disposed of, with no costs awarded.