1998 (9) TMI 125 - AT - Income Tax

Summary

Issues Involved:

1. Status and binding nature of the preliminary statement recorded before the start of the search action.
2. Whether the second statement recorded during the search could be considered as a retraction of the preliminary statement and the assessee's right to retract.
3. Status and binding nature of the second statement.

Summary:

Issue 1: Status and Binding Nature of Preliminary Statement

The preliminary statement recorded before the actual rummaging of the search was not considered a statement u/s 132(4) of the IT Act, 1961. The Tribunal noted that the preliminary statement was recorded before the start of the search action and involved general questions unrelated to specific assets or documents. Consequently, it was deemed unauthorized and not legally binding. The Tribunal relied on the decision of the Hon'ble Bombay High Court in R.R. Gavit vs. Smt. Sher Banu Hasan Daya & Anr. (1987) 161 ITR 793 (Bom), which was upheld by the Supreme Court.

Issue 2: Retraction of Preliminary Statement

The second statement, recorded during the search, could not be considered a retraction of the preliminary statement. The Tribunal held that the second statement was the only legal statement u/s 132(4). Even if it were considered a retraction, the assessee had the right to retract a statement given under duress or a disturbed state of mind, as supported by the Supreme Court decision at AIR 1976 SC 376.

Issue 3: Status and Binding Nature of Second Statement

The second statement was corroborated by the statements of other family members and documentary evidence. The Tribunal held that the second statement was valid and reliable. The Revenue's rejection of the second statement was based on presumptions and conjectures without supporting evidence. The Tribunal concluded that the Revenue was not justified in rejecting the assessee's assertions regarding the source of cash found during the search.

Conclusion:

The Tribunal deleted the addition of Rs. 45,000 sustained by the CIT(A), accepting the assessee's explanation for the source of cash found during the search. The assessee's appeal was allowed.