2024 (12) TMI 824 - HC - Income Tax

Unexplained investment in the house property - husbands of the assessees, during the course of search operations, made statements u/s 132 (4) that total investment in the construction was Rs. 15 lakhs whereas only a sum of Rs.7 lakhs was accounted for - HELD THAT -A statement recorded u/s 132 (4) is evidence within the purview of evidence u/s 158BD r/w Section 3 of the Indian Evidence Act, 1872 and Section 131 and is admissible in evidence. An admission is an extremely important piece of evidence, but the same is not conclusive as it is open for the person making admission to show that it is incorrect. In the instant cases, the husbands of the assessees made statements under Section 132 (4) of the 1961 Act during the course of search. The fact that total cost of construction was Rs. 15 lakhs was reiterated by the assessees on 03.05.1999. Once the statements were recorded on oath, the statements had an evidentiary value and the presumption is that the statements made u/s 132 (4) are true and correct unless the assessees plead that the statements have been obtained forcibly or by coercion or undue influence. Once the statements are recorded u/s 132 (4) the same can be used as evidence against the assessees. In such a case, the burden lies on the assessees to establish that the admission made in the statements is either incorrect or wrong. In the instant cases, the assessees have failed to discharge the said burden. It is not the case of the assessees that their husbands made statements either under coercion or undue influence. No attempt has been made by the assessees to explain such an admission. Therefore, in the facts and circumstances of the case, the Tribunal rightly set aside the order passed by the CIT (Appeals). Decided against assessee.

Summary

Issues:
Appeal under Section 260-A of the Income Tax Act, 1961; Reversal of order by Income Tax Appellate Tribunal; Addition of unexplained investment in house property; Validity of statements made under Section 132 (4) of the Income Tax Act; Burden of proof on assessees to disprove statements; Admissibility of statements as evidence; Comparison with previous court decisions.

Analysis:
The appeals were filed under Section 260-A of the Income Tax Act, 1961, challenging a common order by the Income Tax Appellate Tribunal. The appeals related to the block period 1989-1990 to 1999-2000 and focused on the addition of a sum of Rs. 4,00,000 on account of unexplained investment in a house property. The key question raised was whether the Tribunal erred in reversing the order passed by the Commissioner of Income Tax Appeals regarding this addition.

During a search conducted under Section 132 of the Income Tax Act, certain material was found related to the construction of a residential-cum-shopping complex. The husbands of the assessees admitted to a total investment of Rs. 15 lakhs, but only Rs. 7 lakhs were accounted for. Consequently, the Assessing Officer treated the remaining Rs. 8 lakhs as unexplained investment, attributing Rs. 4 lakhs each to the assessees.

The Commissioner of Income Tax Appeals set aside this addition, stating that the Assessing Officer should have verified the cost of construction through proper valuation methods. However, the Tribunal reversed this decision, emphasizing the husbands' statements under Section 132 (4) of the Income Tax Act, which indicated a total investment of Rs. 15 lakhs. The Tribunal noted that the assessees failed to provide evidence to refute these statements, leading to the restoration of the addition.

The High Court analyzed the legal implications of statements made under Section 132 (4) of the Income Tax Act, highlighting their evidentiary value and admissibility in proceedings. Referring to a Supreme Court decision, the Court emphasized that such statements are not conclusive but hold significant evidentiary weight. In this case, the assessees did not challenge the statements or demonstrate any coercion, shifting the burden to them to disprove the admissions made.

The Court differentiated the present case from previous decisions of other High Courts, emphasizing the specific circumstances and legal principles involved. Ultimately, the Court ruled in favor of the Revenue, upholding the Tribunal's decision to restore the addition of unexplained investment. The appeals were dismissed, and costs were not awarded to either party.

This detailed analysis demonstrates the legal intricacies surrounding the validity of statements made under Section 132 (4) of the Income Tax Act and the burden of proof on assessees to challenge such statements in tax proceedings. The judgment provides clarity on the evidentiary value of such statements and their impact on assessment outcomes.