2006 (12) TMI 127 - HC - Income Tax

Block assessment search - Sale of immovable property - admission made voluntarily by assessee relating to undisclosed income retraction of statement by assessee even after the service of summons during the course of recording statement would itself negate the admission moreover Revenue not established that there is actually on-money passed on to the seller not proved that there is understatement of sale consideration in the document additions rightly deleted by CIT & ITAT

Summary

Issues:
1. Admissibility of statement made during search under section 132(4) of Income-tax Act, 1961.
2. Retraction of admission made voluntarily regarding undisclosed income.

Analysis:

Issue 1: Admissibility of statement under section 132(4):
The case involved appeals filed by the Revenue against the order of the Income-tax Appellate Tribunal regarding the admissibility of a statement made during a search under section 132(4) of the Income-tax Act, 1961. The Tribunal dismissed the Revenue's appeal, confirming the deletion of an addition of Rs. 23 lakhs as undisclosed income for the assessment year 1997-98. The Tribunal found that no material was discovered during the search to support the addition. The statement made by the assessee was subsequently retracted, and no evidence was presented to prove the alleged on-money payment. The Tribunal held that without any material found during the search or related evidence, the statement could not be a basis for making any addition in the block assessment. The Tribunal emphasized that undisclosed income should be based on evidence found during the search, which was lacking in this case. The Tribunal's decision was upheld, stating that the Revenue failed to provide any basis for the addition, leading to the dismissal of the tax case.

Issue 2: Retraction of admission regarding undisclosed income:
In another set of appeals, the Revenue challenged the assessments made on the basis of a statement by the buyer regarding on-money payment for a property. The Tribunal dismissed the Revenue's appeals, upholding the deletion of additions made by the Assessing Officer. The Tribunal noted that the buyer had retracted the statement, and no other material supported the alleged on-money payment. The Tribunal emphasized the importance of market price determination between a willing buyer and seller, stating that the burden of proof lies with the Revenue to show any discrepancy in the sale consideration disclosed in the deed. Since no evidence was presented to refute the sale consideration, the Tribunal ruled in favor of the assessees. The Tribunal's decision was upheld, stating that the Revenue failed to establish the passing of on-money to the sellers or any understatement in the sale consideration. Consequently, the tax cases were dismissed, and no substantial questions of law were found to warrant interference.

In conclusion, the judgments in both sets of appeals highlighted the importance of concrete evidence and material to support additions of undisclosed income, emphasizing the need for a direct nexus between the evidence found during search operations and the assessments made. The decisions underscored the burden of proof on the Revenue to establish any discrepancies or undisclosed income, failing which the additions could not be sustained.