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2021 (3) TMI 221 - AT - Income TaxAssessment us 153A - statement of assessee to be the basis for making any estimated additions against the assessee - Reliance on third party statement - HELD THAT - If the Revenue recorded statement of any witness at the back of the assessee, such statement shall have to be confronted to the assessee and right of cross-examination to such statement shall have to be given to the assessee. In this case no material is produced before us to show if any right of cross-examination have been allowed by the A.O. or the other Income Tax Authority to the statement of Shri Ramendra Kumar Singh to the assessee. Therefore, such statement otherwise also cannot be read in evidence against the assessee. No statement of assessee was recorded under section 132(4). Later on A.O. recorded the statement of assessee under section 131which is the sole basis of making the above estimated additions against the assessee, but, the statement of the assessee is also not corroborated by any evidence or material on record. We may also note even if assessee has made some admission in his statement recorded under section 131, however, the question is what is the basis of assessee in making any admission in statement recorded under section 131 of the I.T. Act, 1961. Statement of assessee alone cannot be the basis for making any estimated additions against the assessee. May be the assessee has retracted from the statement given under section 131 later on and there is a delay in retracting by filing a letter and affidavit to the Income Tax Authorities as well as President of Noida Authority, but, the delay in retracting the statement is of no significance because there were no corroborative material found during the course of search at the residence of Smt. Kusum Lata or Shri Ramendra Kumar Singh or at the residence of the assessee. Thus, in the absence of any corroborative evidence, statement of Shri Ramendra Kumar Singh or assessee cannot be the basis for estimating the additions of commission against the assessee in all the assessment years under appeal. It is well settled Law that if no incriminating material was found during the course of search, such type of additions cannot be made against the assessee. See KABUL CHAWLA 2015 (9) TMI 80 - DELHI HIGH COURT Statement of Shri Ramendra Kumar Singh and Annexures A1 and A2 found in their case being a third party cannot be referred to or relied upon in the case of the assessee unless the procedure provided under section 153C of the I.T. Act, 1961 have been adopted by the authorities below. - Decided in favour of assessee.
Issues Involved:
1. Legality of additions based on unaccounted commission income. 2. Validity of statements recorded under sections 132(4) and 131(1A) of the Income Tax Act, 1961. 3. Requirement of corroborative evidence for additions. 4. Applicability of section 153A vs. section 153C of the Income Tax Act, 1961. 5. Admissibility and impact of retracted statements. Issue-wise Detailed Analysis: 1. Legality of Additions Based on Unaccounted Commission Income: The case revolved around the additions made by the Assessing Officer (AO) on account of unaccounted commission income supposedly earned by the assessee. The AO made these additions based on the statements and documents found during a search operation under section 132 of the Income Tax Act, 1961. The AO concluded that the assessee, along with others, received illegal commissions for awarding contracts. The additions were made for various assessment years based on an estimated commission of ?1,500 per bond. 2. Validity of Statements Recorded Under Sections 132(4) and 131(1A) of the Income Tax Act, 1961: The statements of the assessee and Shri Ramendra Kumar Singh were pivotal to the AO's conclusions. The assessee contended that his statement under section 131(1A) was recorded under coercion and duress, and subsequently retracted. The Tribunal noted that the statement of Shri Ramendra Kumar Singh, recorded under section 132(4), was not corroborated by any material evidence. The Tribunal emphasized that statements recorded under coercion or without corroborative evidence could not form the sole basis for additions. 3. Requirement of Corroborative Evidence for Additions: The Tribunal highlighted the necessity of corroborative evidence to substantiate the statements made during the search. It was noted that no incriminating material was found from the assessee's premises, and the documents found from Smt. Kusum Lata and Shri Ramendra Kumar Singh did not mention the assessee's name. The Tribunal relied on the principle that without corroborative evidence, statements alone could not justify the additions. 4. Applicability of Section 153A vs. Section 153C of the Income Tax Act, 1961: The Tribunal referred to the legal position that for making additions under section 153A, incriminating material must be found during the search. It was noted that the AO should have proceeded under section 153C if the material belonged to a third party. The Tribunal cited the case of CIT v. Kabul Chawla, which established that no additions could be made under section 153A if no incriminating material was found during the search. The Tribunal found that the AO failed to follow the mandatory procedure under section 153C, thereby invalidating the additions. 5. Admissibility and Impact of Retracted Statements: The Tribunal observed that the assessee's retraction of his statement, though delayed, was significant. The Tribunal emphasized that retracted statements, especially those made under alleged coercion, could not be the sole basis for additions without corroborative evidence. The Tribunal cited judgments from higher courts, including the Hon'ble Supreme Court, which supported the view that statements recorded under duress or without corroborative evidence should not be used to make additions. Conclusion: The Tribunal concluded that the additions made by the AO were not sustainable in law due to the lack of corroborative evidence and the improper application of sections 153A and 153C. The Tribunal set aside the orders of the lower authorities and deleted all the additions in all the assessment years under appeal, thereby allowing the assessee's appeals.
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