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2017 (11) TMI 683 - HC - Income TaxAddition of undisclosed income - addition on the basis of assessee s statement, retracted by specific affidavit - addition made by the respondent u/s 145(3) - rejection of books of accounts - Held that - Firstly, the statement which was recorded on 23rd February, 2005 if it is taken alongwith the letter dated 23rd February, 2005 at Annexure-A, the contention raised by the appellant with regard to retraction is supported by his own letter. Apart from that the refund was granted on 19th October, 2005 and taking subsequent proceedings u/s 147, the contention raised by the assessee with regard to retraction is required to be accepted. The Tribunal, CIT(A) and the AO has seriously committed an error in adding income ₹ 2,70,248/- in spite of affidavit of 20th November, 2007 and letter dated 23rd February, 2005 and rejection of books of accounts u/s 145. The statement which has been made by the appellant that the assessee was compelled to make statement in view of goods which was attached was of pericible nature and the cost was three times of tax which are required to be paid therefore, it was contended that the assessee will adopt easy way to be caught hold of the tax authority. Tribunal has seriously committed an error in adding ₹ 77,298/- ignoring provisions of the act therefore, both the issues are required to be answered in favour of the assessee.
Issues Involved:
1. Addition of ?2,70,248/- as undisclosed income based on the assessee’s retracted statement. 2. Addition of ?77,298/- under Section 145(3) of the Income Tax Act, 1961, ignoring the provisions of Section 44AF. Issue-wise Detailed Analysis: 1. Addition of ?2,70,248/- as Undisclosed Income: The appellant challenged the Tribunal's decision which upheld the addition of ?2,70,248/- as undisclosed income based on a statement made by the assessee, which was later retracted. The court examined whether the ITAT was correct in law to uphold the Assessing Officer’s (AO) addition based on the retracted statement, ignoring Section 28 of the IT Act, 1961. The appellant argued that the statement made on 23rd February 2005 was retracted on 20th November 2007 via an affidavit, explaining that the initial statement was made under coercion. The appellant also highlighted that the return filed on 17th August 2005 was accepted, and a refund was granted on 19th October 2005. The appellant relied on precedents such as Kailashben Manharlal Chokshi vs. Commissioner of Income Tax, where it was held that additions based solely on a retracted statement without corroborative evidence are not justified. The court noted that the retraction was supported by a letter dated 23rd February 2005 and an affidavit dated 20th November 2007. The court found that the authorities (Tribunal, CIT(A), and AO) erred in adding the income despite the retraction and the evidence provided by the assessee. The court emphasized that the statement was made under pressure due to the perishable nature of the goods and the significant cost involved. 2. Addition of ?77,298/- under Section 145(3): The appellant contested the addition of ?77,298/- made under Section 145(3) of the IT Act, arguing that the provisions of Section 44AF were ignored. The appellant contended that the rejection of books of accounts and the resultant addition were not justified. The court, after reviewing the submissions, found that the Tribunal had committed an error in confirming the addition. The court held that the rejection of books of accounts under Section 145(3) was not warranted, and the provisions of Section 44AF should have been considered. The court concluded that the addition of ?77,298/- was incorrect and needed to be overturned. Conclusion: The court allowed the appeal, ruling in favor of the assessee on both issues. It held that the addition of ?2,70,248/- as undisclosed income was erroneous due to the retracted statement and lack of corroborative evidence. Similarly, the addition of ?77,298/- under Section 145(3) was also found to be incorrect, as the provisions of Section 44AF were ignored. The court emphasized the need for credible evidence and proper consideration of the retraction and supporting documents.
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