1994 (7) TMI 111 - AT - Income Tax

Summary

Issues Involved:
1. Legitimacy of additions based on confessional statements.
2. Validity of retraction of confessional statements.
3. Requirement of supporting evidence for additions.
4. Comparison with similar cases and precedents.

Summary:

1. Legitimacy of Additions Based on Confessional Statements:
The appellant-firm contested the additions of Rs. 6,00,000 for the assessment years 1988-89 to 1990-91 and Rs. 7,00,000 for the assessment year 1991-92, which were made based on a partner's confessional statement during a search. The partner later retracted the statement, claiming it was made under duress during a prolonged search from 9.00 a.m. on 7th Sept., 1990 to 3 p.m. on 9th Sept., 1990.

2. Validity of Retraction of Confessional Statements:
The appellant argued that the addition cannot be justified solely on the basis of a confessional statement, especially when retracted. The Tribunal referenced similar cases, such as M/s J.B. Boda & Co. P. Ltd., where retracted statements recorded under coercion were not considered valid for making additions.

3. Requirement of Supporting Evidence for Additions:
The appellant-firm emphasized that no incriminating documents or loose papers were found during the search to support the additions. The Tribunal agreed, stating that additions must be based on concrete evidence rather than mere statements. The Tribunal cited cases like Shri Kishore A. Meshwani, where additions based on retracted statements were not sustained.

4. Comparison with Similar Cases and Precedents:
The Tribunal considered various precedents, including decisions from the Bombay Bench and the Delhi Bench, which highlighted the necessity of supporting evidence for additions. The Tribunal noted that the appellant's business, a tea stall at a railway station, had regulated pricing and limited scope for unaccounted income. The Tribunal also referenced the decision in Electra (Jaipur) P. Ltd. vs. IAC, emphasizing the need to ascertain the truth behind statements and affidavits.

Conclusion:
The Tribunal concluded that the statements recorded during the search were not free and voluntary, and the retraction was supported by proper evidence. The Assessing Officer failed to provide supporting evidence for the additions. Therefore, the Tribunal allowed the appeals, and the additions were not sustained.