2003 (10) TMI 295 - AT - Income Tax

Unexplained investments - search operation u/s 132 - HELD THAT - It is an undisputed fact that during the search the raiding party did not find any evidence indicating that the assessees have earned unexplained income of Rs. 50,000, Rs. 3,78,200, Rs. 15,000 and Rs. 20,000 in asst. yrs. 1992-93 and 1993-94. No evidence regarding investment in the shares or advancement of money to relatives was found. The Revenue is only harping upon disclosure statements of the assessees for making these additions. However, during the proceedings of s. 132(5) the assessees have retracted from their statements. The retraction has not been accepted by the Revenue on the ground that no evidence has been shown by the assessee in support of the retraction. It is true that the simple denial cannot be considered as a denial in the eyes of law. But when no activity has been undertaken by the assessee, how it can be proved by way of evidence that such activity has ever been undertaken by the assessee except simple denial what other evidence can be produced by the assessee. The evidence ought to have been collected by the Revenue during the search in support of the disclosure statements. Had the Revenue found any material and then obtained a disclosure from the assessees, then the assessees might not have been able to retract from their disclosure statements. But additions made only on the basis of disclosure statements normally should not be confirmed in the absence of corroboration. In the eyes of law the general rule of practice is that it is unsafe to rely upon a confession only without any corroboration. Hence, we are of the opinion that the Revenue ought not to have made the additions. We allow these appeals of the assessees and delete the additions of Rs. 50,000, Rs. 3,78,000 in the case of Amishkumar N. Shah in asst. yr. 1992-93, and Rs. 15,000 and Rs. 20,000 in the case of Smt. Ranjnaben Shah in asst. yr. 1992-93. In the result, the appeal of the Revenue is dismissed.

Summary

Issues Involved:
The judgment involves appeals related to additions based on disclosures obtained under section 132(4) of the Income Tax Act during search operations, as well as the deletion of an addition for unexplained investment in household items.

Additions Based on Section 132(4) Disclosures:
The appeals concern the confirmation of additions in the assessments of two assessees, Amishkumar Shah and Ranjanben Shah, for the assessment years 1992-93 and 1993-94. The additions were made solely on the basis of disclosures obtained in their statements recorded under section 132(4) during search operations at their premises. The assessees contested these additions, arguing that the disclosures were extracted under coercion and lacked evidentiary support.

Contentions and Decisions:
The CIT(A) upheld the additions, emphasizing the evidentiary value of statements recorded under section 132(4) and rejecting the assessees' retraction as it came after a significant time gap. However, the assessees challenged this decision, arguing that the Revenue failed to provide corroborative evidence for the additions and that the retraction should be considered. The Tribunal agreed with the assessees, highlighting the importance of corroboration and the general rule against relying solely on confessions without supporting evidence.

Decision on Additions:
The Tribunal found that the Revenue had not presented any evidence during the search to support the additions based on the disclosure statements. As the assessees had retracted their statements and no corroborative evidence was provided, the Tribunal concluded that the additions should not have been made solely on the basis of the disclosures. Consequently, the Tribunal allowed the appeals and deleted the additions in the cases of both Amishkumar Shah and Ranjanben Shah for the relevant assessment years.

Deletion of Unexplained Investment Addition:
In a separate appeal by the Revenue, the Tribunal addressed the deletion of an addition for unexplained investment in household items. The AO had added the estimated value of these items to the assessee's income, but the CIT(A) accepted the explanation that these items were received from the assessee's father and were not acquired from undisclosed sources of income.

Final Outcome:
The Tribunal allowed the appeals of the assessees regarding the additions based on section 132(4) disclosures and dismissed the Revenue's appeal concerning the deletion of the addition for unexplained investment in household items. The Tribunal upheld the CIT(A)'s decision in this regard, emphasizing that the household items were old articles for personal use and not acquired from undisclosed sources of income.