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2020 (2) TMI 587 - HC - Income TaxAddition on account of the peak unaccounted investment - addition on the account of GP on unaccounted purchases and finalized the assessment u/s 143(3) of the Act - only evidence with the DRI as well as the A.O. was in the form of a confessional statement made by Shri Gandhi on oath recorded under Section 108 of the Customs Act - HELD THAT - A Co-ordinate Bench of this Court, in the case of Kailashben Manharlal Chokshi vs. Commissioner of Income-tax 2008 (9) TMI 525 - GUJARAT HIGH COURT took the view that merely on the basis of admission, the assessee cannot be subjected to additions. The Co-ordinate Bench proceeded to observe that unless and until some corroborative evidence is found in support of such admission, the department would be justified in making additions. In other words the proposition of law as laid down is that the department cannot start with the confessional statement. The confessional statement has to be brought in aid of other materials on record. In the case on hand two authorities have concurrently recorded a finding of fact that, except the statement recorded under Section 108 of the Customs Act there is no other evidence. There was no material to corroborate the statement made by the assessee in the form of confession. In the case on hand, as noted above, there is no material except the confessional statement of the assessee recorded under Section 108 of the Customs Act. In view of the concurrent findings recorded by both, the CIT(A) as well as the Appellate Tribunal, we are of the view that we should not disturb the finding of facts. None of the questions as proposed by the Revenue could be termed as substantial question of law.
Issues:
1. Addition made on account of undisclosed profit and unaccounted investment in undervalued goods. 2. Justification of the Income Tax Appellate Tribunal in deleting the addition. 3. Consideration of the statement of admission by the assessee given before the Deputy Director of Income Tax (Investigation) Unit (II) Surat. 4. Correctness of the statement by the Hon'ble ITAT that no addition can be made on the action of a third party. Analysis: Issue 1: Addition made on account of undisclosed profit and unaccounted investment in undervalued goods The case involved a Tax Appeal under Section 260A of the Income Tax Act, 1961, where the Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition made on account of undisclosed profit and unaccounted investment in undervalued goods. The assessment was finalized under Section 143(3) of the Act, with significant additions on peak unaccounted investment and GP on unaccounted purchases. Issue 2: Justification of the ITAT in deleting the addition The ITAT justified the deletion of the addition, emphasizing that the confessional statement made by a partner of the firm, recorded under oath, was the main evidence relied upon by the Customs Authorities and the Assessing Officer (AO). The CIT(A) observed that there were no independent findings to support the addition, and the AO solely relied on information from the customs department without conducting further inquiries to establish the truth. The ITAT concurred with the CIT(A) and dismissed the appeal, highlighting the lack of corroborative evidence to substantiate the alleged unaccounted payments. Issue 3: Consideration of the statement of admission by the assessee The statement of admission by the assessee before the Deputy Director of Income Tax (Investigation) Unit (II) Surat played a crucial role in initiating the scrutiny of the case. However, the CIT(A) and the ITAT found that apart from this statement, there was a lack of concrete evidence to support the additions made by the AO. The ITAT emphasized that without documentary evidence, no addition could be justified based solely on the action of a third party, in this case, the DRI. Issue 4: Correctness of the statement by the Hon'ble ITAT The Hon'ble ITAT's statement that no addition could be made on the action of a third party was upheld by the Appellate Tribunal, which also referred to a decision by the CESTAT, West Zone Bench Mumbai, dropping proceedings against the assessee-firm. The Tribunal noted that there was no documentary evidence to suggest under-invoicing by the assessee, and without such evidence, the addition could not be sustained. The Court, in line with previous judicial pronouncements, affirmed that a mere confessional statement without corroborative evidence was insufficient to support additions. In conclusion, the Tax Appeal was dismissed by the High Court, upholding the decisions of the CIT(A) and the ITAT, as there was a lack of substantial questions of law and no concrete evidence to support the additions made by the AO based on the confessional statement alone.
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