2018 (9) TMI 280 - AT - Income Tax

Addition to income - Admission to offer income in the statement u/s. 132(4) - non conclusion of transaction for purchase of land - Held that - No admission to offer any income in the said statement. The gist of the statement u/s. 132(4) of the Act has already been narrated in the earlier part of this order. In the letter dated 3. 6. 2014 filed by the Assessee he has agreed to declare ₹ 25 lacs as income and that such declaration is given only to purchase peace and that there was no basis for declaration of ₹ 25 lacs as income of the Assessee. There was no evidence found in the course of search by which it can be said that the Assessee earned income of ₹ 25 lacs. There is no other basis to come to such a conclusion. In such circumstances, the addition of ₹ 25 lacs is sought to be made only on the basis of the Assessee s letter dated 3. 6. 2014. It is also a well-accepted principle that an admission is not conclusive evidence as to the truth of the matter stated therein. It is only a piece of evidence the relevancy of which is required to be judged based on the material evidence and circumstances in which it is made. The statement of the Assessee u/s. 132(4) of the Act shows that he is employee of Ess & Ess Infrastructure Pvt. Ltd. , who were the main persons who were searched u/s. 132. Assessee earns a monthly salary of ₹ 10, 000/-. He received ₹ 50 lacs from his employer for purchase of lands from farmers but could not conclude the transactions and returned the same to his employer. He is a person of no or very little means and not capable of earning ₹ 25 lacs. In such circumstances, no credence can be given to the admission of the Assessee that too in a letter. Such admission is not even in a statement u/s. 132(4) of the Act which has some evidentiary value. No addition to income to be sustained - Decided in favour of assessee

Summary

Issues Involved:
Appeal against addition of ?25 lakhs to total income based on voluntary declaration during search operation.

Analysis:
1. The Assessee, an individual, was searched under section 132 of the Income Tax Act, 1961, along with the company he worked for. During the search, the Assessee made a statement under section 132(4) stating his salary, lack of immovable property, and involvement in land transactions for his employer.

2. Subsequently, the Assessee informed the authorities that a sum of ?50 lakhs received from his employer for land purchase was returned unused, and he offered ?25 lakhs as income for tax purposes to avoid further investigation. However, he did not declare this amount in his income tax return for the relevant assessment year.

3. The Assessing Officer (AO) treated the voluntary declaration as final and added ?25 lakhs to the Assessee's total income. The Commissioner of Income Tax (Appeals) upheld this addition, emphasizing that the Assessee's failure to honor the declaration was unjustified, as it prevented further investigation into his affairs.

4. On appeal to the Tribunal, the Assessee argued that the declaration was made under a mistaken belief and lack of tax knowledge, and there was no concrete evidence to support the addition. The Assessee contended that the declaration was made solely to avoid further scrutiny and not based on actual income earned.

5. The Tribunal analyzed the statements made by the Assessee under section 132(4) and the subsequent letter offering ?25 lakhs as income. It noted the absence of substantial evidence linking the Assessee to the declared income and highlighted that an admission is not conclusive evidence, especially when made under duress or ignorance.

6. Relying on legal precedent, the Tribunal concluded that the Assessee, being a low-income individual, lacked the means to earn ?25 lakhs as declared. The Tribunal found no basis to support the addition solely based on the Assessee's letter, especially when there was no corroborative evidence or admission in the official statement under section 132(4).

7. Consequently, the Tribunal allowed the Assessee's appeal, directing the deletion of the ?25 lakhs addition to the total income. The Tribunal emphasized the importance of concrete evidence and circumstances in determining the validity of admissions and upheld the principle that an admission alone is not sufficient to establish income without supporting evidence.

This detailed analysis of the judgment highlights the key legal and factual aspects considered by the Tribunal in overturning the addition to the Assessee's total income based on a voluntary declaration made during a search operation.