1999 (6) TMI 53 - AT - Income Tax

Summary

Issues Involved:
1. Addition of Rs. 18,24,550 to the returned income.
2. Validity of the statement made u/s 132(4) and its retraction.
3. Legal impact of a statement made u/s 132(4) read with Explanation 5 to section 271(1)(c).

Summary:

1. Addition of Rs. 18,24,550 to the returned income:
The assessee filed a return declaring an income of Rs. 37,96,395. During a search u/s 132, it was found that the assessee was involved in money lending outside the books of account. The assessee initially disclosed Rs. 56 lakhs but declared Rs. 37,75,450 in the return. The Assessing Officer (AO) added Rs. 18,24,550 to the returned income, reasoning that the income disclosed u/s 132(4) was correct and the assessee had understated the income in the return. The CIT(A) confirmed this addition.

2. Validity of the statement made u/s 132(4) and its retraction:
The assessee argued that the statement made u/s 132(4) was made without proper examination of the seized material and could be retracted. The CIT(A) held that the statement u/s 132(4) was binding and could not be retracted. However, the Tribunal disagreed, stating that an admission could be retracted if shown to be incorrect. The Tribunal noted that the assessee had disclosed a higher amount in the return and before the Settlement Commission, which was more than the Rs. 56 lakhs initially disclosed.

3. Legal impact of a statement made u/s 132(4) read with Explanation 5 to section 271(1)(c):
The CIT(A) accorded an extraordinary status to the statement made u/s 132(4), stating it entailed substantial benefits like immunity from penalty and prosecution. The Tribunal disagreed, stating that an admission under one provision of law could not have a different status under another provision unless specifically provided. The Tribunal held that the assessee could retract the statement made u/s 132(4) if sufficient grounds were shown. The Tribunal found the reasons given by the assessee for showing a lower figure in the return to be valid and plausible.

Conclusion:
The Tribunal deleted the addition of Rs. 18,24,550 sustained by the CIT(A) and allowed the appeal, holding that the assessee's retraction from the statement made u/s 132(4) was justified and supported by case law.