2020 (10) TMI 655 - AT - Income Tax

Unexplained investment - scope of section 132(4) - addition on the ground that during the course of search seized paper was found exhibiting advance payment was made by the family for purchase of a land - Revenue has relied on bhakti pocket diary and entries therein - whether only on the basis of the disclosure by an assessee, an addition can be made on account of undisclosed investment in the hands of the assessee ? - CIT(A) has confirmed orders of the AO - HELD THAT - Addition on the basis of disclosure made under section 132(4) of the Act is to be made on the basis of other corroborative evidence exhibiting unexplained investment or unexplained asset possessed by an assessee. Except a disclosure on the strength of certain notings, the department failed to bring any other corroborative evidence exhibiting actual investment by these assessee in the purchase of any land. If the department is able to lay its hand on the details of vendor, details of land, some connection with actual transaction, by part payment through banking channel probably it could be assumed that apart from account payee payment, some cash amount might have been made. But that live link is grossly missing in the instant case. Therefore, we do not find any hesitation in holding that these additions are not sustainable in the hands of these assessee. Accordingly, the appeals and three COs of the assessee are allowed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Condonation of delay in filing appeals.
2. Validity of additions made based on statements recorded under section 132(4) of the Income Tax Act and the evidence supporting such additions.

Issue-Wise Detailed Analysis:

1. Condonation of Delay in Filing Appeals:
The appeals of the assessees were time-barred by 163 days. The assessees submitted affidavits explaining the delay, attributing it to a bona fide belief that the department would file appeals against all related orders, and they would only need to file cross objections. Upon realizing that the department did not file appeals against two assessees, they promptly filed their appeals. The Tribunal, referencing the liberal interpretation of "sufficient cause" as per judicial precedents, including the Supreme Court's decisions in Collector Land Acquisition Vs. Mst. Katiji and N.Balakrishnan Vs. M. Krishnamurthy, condoned the delay. The Tribunal emphasized that the delay was not deliberate and was caused by a bona fide mistake, thus allowing the application for condonation of delay.

2. Validity of Additions Based on Statements Recorded Under Section 132(4) and Supporting Evidence:
The core issue was whether the additions made based on the disclosure of ?9.05 crores during the search, recorded under section 132(4), were justified. The assessees retracted their statements, alleging coercion and fabrication by the search team. They supported their claims with affidavits, including those from independent witnesses present during the search.

The Tribunal examined whether the retraction was credible and if the additions were supported by corroborative evidence. The Tribunal noted that the Revenue failed to provide details of the land, vendors, or any corroborative evidence of the alleged transactions. The Tribunal referenced judicial precedents, including the Gujarat High Court's decision in Kailashben Manharlal Chokshi Vs. CIT, which emphasized that additions cannot be made solely based on retracted statements without corroborative evidence.

The Tribunal highlighted the lack of evidence from the Revenue, such as details of the land, vendors, or any supporting documents, and the reliance solely on the disputed diary entries and the retracted statements. The Tribunal also considered the educational background of the assessees, suggesting that they might have been unduly influenced by the search officers.

Given the absence of corroborative evidence and the credible retraction by the assessees, the Tribunal concluded that the additions were not sustainable. The Tribunal allowed the appeals and cross objections, deleting the additions made in the hands of the assessees.

Conclusion:
The Tribunal condoned the delay in filing appeals due to bona fide reasons and found that the additions based on the retracted statements and unsupported diary entries were not justified. The appeals and cross objections were allowed, and the additions were deleted.