2020 (5) TMI 715 - AT - Income Tax

Addition on account of surrender made at the time of search u/s 132 - AR submitted that the surrender was made at the pressure of the search party and it does not have any evidence. The statement was retracted and therefore, could not have been relied upon by the ld AO to make the addition - HELD THAT - Apparently, in assessment order as well as in the appellate order no evidence was disclosed based on which the father of the assessee disclosed the sum - in the statement u/s 132(4) of the Act of the assessee in reply to question No. 35, where assessee has disclosed ₹ 20 lacks on his own, also does not have any discussion about the material based on which the disclosure is made. No doubt the disclosure made for the firm of Golden Manor may have other evidence, however in the case of the impugned addition of ₹ 20 lakhs; we do not find any mention about evidence of unaccounted income - also admitted by revenue that the assessee has retracted the statement immediately after the search that is almost within 10 days of the search - circular of CBDT dated 10.03.2003 also discourage revenue from making an addition merely on the basis of statement or confession without any evidence. Further had there been any evidence ld AO should have made addition of that amount and not ₹ 20 Lakhs. In view of this, we do not find any reason to sustain the order of the lower authorities. Accordingly, the ld AO is directed to delete the addition - Appeal of the assessee is allowed.

Summary

Issues:
1. Addition of Rs. 20 lakhs on account of surrender made during search under section 132 of the Income Tax Act.
2. Addition of Rs. 30 lakhs based on a statement made under section 132(4) of the Income Tax Act, subsequently retracted.

Issue 1: Addition of Rs. 20 lakhs
The appeal was filed by an individual assessee against the order confirming the addition of Rs. 20 lakhs made at the time of search under section 132 of the Income Tax Act. The assessee's father had surrendered the amount during the search, which the assessee also agreed to but later retracted. The Assessing Officer (AO) added the amount to the total income, which was contested by the assessee before the CIT (A) and subsequently before the ITAT. The ITAT held that the surrender was made under pressure and lacked evidence. The circular by CBDT and decisions of various courts supported the assessee's contention that the surrender should not have been relied upon without evidence. The ITAT found no material to connect the surrendered amount to undisclosed income, and as the assessee retracted the statement soon after the search, the addition was deemed unjustified. The ITAT directed the AO to delete the addition of Rs. 20 lakhs, reversing the lower authorities' orders.

Issue 2: Addition of Rs. 30 lakhs
In another appeal with identical circumstances, the AO had added Rs. 30 lakhs based on the father's statement under section 132(4) of the Income Tax Act, which was later retracted. The ITAT, considering the similar facts, directed the AO to delete the addition of Rs. 30 lakhs, following the reasoning provided in the previous order. The ITAT reversed the lower authorities' orders and allowed the appeal of the assessee in this case as well.

In conclusion, both appeals of the assessee were allowed, and the additions of Rs. 20 lakhs and Rs. 30 lakhs were directed to be deleted by the ITAT based on the lack of evidence and the retractions made by the individuals involved. The orders of the lower authorities were reversed, and the appeals were decided in favor of the assessee.