2018 (11) TMI 1493 - HC - Income Tax

Computation of income of the block period - undisclosed expenditure or investment - Held that - In the present case, admittedly, the owner of the premises, in respect of which the pakadi is said to have been paid was not examined. Based on the sworn statement of one another person, who deposed u/s 132(4) that an amount of money was given to the earlier tenant, proceedings were taken against the assessee; which was not corroborated by any other evidence. There was also no enquiry carried out to find whether such amounts were in fact received by the assessee or the assessee had any undisclosed expenditure or investment on the basis of such amounts received. In such circumstances, we are of the opinion that the order of the Tribunal cannot be interfered with and we refuse to answer the question raised, which is merely on facts and not on law. The statement was confronted to the assessee, but he denied the same. The AO failed to get any corroborating evidence in the search conducted in the premises of the assessee and hence we have confirmed the order of the Tribunal affirming that of the CIT (Appeals), which set aside the order of the AO. There is no warrant for a remand. The appeal would stand rejected.

Summary

Issues:
Interference with AO's order based on sworn statement under Section 132(4) - Evidentiary value of sworn statement - Corroboration required for assessment based on sworn statement - Relevance of search proceedings in another person's premises - Application of Section 158BB in assessment process.

Analysis:
The case involved an appeal by the Revenue challenging the Income Tax Appellate Tribunal's interference with the Assessing Officer's order based on a sworn statement under Section 132(4) of the Income Tax Act, 1961. The sworn statement disclosed a payment made as "pakadi" to vacate premises, but the search conducted did not yield incriminating evidence. The Tribunal intervened as there was no supporting material for the sworn statement. The Revenue contended that the sworn statement had evidentiary value and pointed to the deponent's disclosure of income before the Settlement Commission.

The Revenue relied on precedents to argue for the evidentiary value of sworn statements under Section 132(4). However, the Court noted that while such statements have value, assessments cannot be based on pure guesswork without supporting evidence. The Court emphasized the need for evidence or material to support assessments under the Act. Section 158BB was highlighted concerning the computation of income during block period proceedings, stressing the importance of evidence found during searches or related information.

The judgment also referenced a previous case where a retraction of a sworn statement was deemed insufficient to dispel statutory presumptions. In the present case, the lack of corroboration for the sworn statement made the assessment against the respondent untenable. The Court highlighted the absence of examination of the premises owner and the failure to verify the alleged payment, leading to the refusal to interfere with the Tribunal's decision. The need for corroborating evidence and proper enquiry before assessments were reiterated.

Additionally, the Court rejected the plea for a remand, noting the denial of the statement by the assessee and the absence of corroborating evidence from the search. The order of the Tribunal, supported by the CIT (Appeals), was upheld due to the lack of substantiating evidence. Ultimately, the appeal was rejected without costs, emphasizing the importance of evidence and corroboration in assessment proceedings.