2022 (4) TMI 1418 - HC - Income Tax

Addition based on statement recorded u/s 132(4) - HELD THAT - A raid was conducted and in that process, statement is said to have been recorded under Section 132(4) which was, later on, retracted by the Assessee. In a situation like this, where the office premises are sealed for many days and during that period, a statement is said to have been recorded under Section 132 (4) Tribunal s view that only the basis of such retracted statement, addition could not be justified without any other material admissible in evidence, warrants no interference as it is not a substantial question of law. In the case of Commissioner of Income Tax Versus Harjeev Aggarwal 2016 (3) TMI 329 - DELHI HIGH COURT and Kailashben Manharlal Chokshi 2008 (9) TMI 525 - GUJARAT HIGH COURT various High Courts have held that addition based solely on statement later on retracted, without anything more, could not be justified in law. Thus, the view taken by the Tribunal cannot be faulted. No Substantial question of law.

Summary

Issues:
1. Consideration of material collected during investigation by the Income Tax Appellate Tribunal.
2. Validity of the Tribunal's decision regarding the addition based on retracted statement under Section 132(4) of the I.T. Act.
3. Interpretation of the principles laid down by the Supreme Court in relevant cases.

Analysis:
1. The appellant argued that the Income Tax Appellate Tribunal made a perverse finding by upholding the order of deletion without disclosing the material collected during the investigation and without giving the assessee an opportunity for cross-examination. The appellant contended that the Tribunal erred in not considering that no prudent investor would invest in the companies in which the assessee had invested. However, the Tribunal's decision was based on the fact that the material information was not disclosed to the assessee, and no opportunity was provided for cross-examination, which was deemed valid. The Tribunal's finding was considered reasonable, and no legal basis was presented to support the consideration of undisclosed material without proper disclosure and cross-examination.

2. The Tribunal's decision regarding the addition based on a retracted statement under Section 132(4) of the I.T. Act was challenged by the appellant. The appellant argued that the retracted statement alone should be considered, even if retracted after five months. However, the court did not find this argument compelling. The court referred to judgments from the High Court of Delhi, emphasizing that the addition based solely on a retracted statement without additional supporting evidence could not be justified. The court also cited precedents from various High Courts, supporting the view that an addition solely based on a retracted statement is not legally sound. Therefore, the Tribunal's decision in this regard was upheld, and the appellant's argument was dismissed.

3. The appellant relied on the principles laid down by the Supreme Court in relevant cases to support their arguments. However, the court found that the principles cited did not apply to the facts of the present case. The court emphasized that the Tribunal's findings were based on the material on record, and the aspect of human probability did not favor the Revenue in this case. The court referenced judgments from various High Courts, including the Supreme Court, to highlight that an addition based solely on a retracted statement, without additional evidence, could not be justified. Consequently, the court dismissed the appeal, stating that it did not involve any substantial question of law based on the considerations presented.

In conclusion, the High Court dismissed the appeal, upholding the Tribunal's decision regarding the consideration of material collected during investigation and the validity of the addition based on a retracted statement under Section 132(4) of the I.T. Act. The court found that the appellant's arguments did not present any substantial question of law and were not supported by legal precedents.