2008 (4) TMI 452 - HC - Income Tax

Reassessment- The Assessing Officer reopened the assessment by notice issued under section 148 of the Act on the ground that the interest income and investments made in fixed deposits had escaped assessment within the meaning of section 147 of the Act. The Assessing officer completed the assessment making the various additions. The Commissioner (Appeals) confirmed the order of the Assessing Officer. The Tribunal held that the reopening of the assessment being based on mere suspicion and without any material the assessment was liable to be cancelled. Held that- it was clear that the statement by the asseseee under section 132(40 of the Act were retracted not once but twice and that the Department had accepted the retraction. No cogent and valid reason had been assigned by the Assessing Officer for reopening assessment. There was no good or sufficient reasons for reopening of the assessment under section 148 of the Act against the assessee.

Issues Involved:
1. Evidentiary value of statements given by the assessee on oath during a search and their subsequent retraction.
2. Validity of reopening assessments based on retracted statements.
3. Assessment of undisclosed income from money lending and unexplained investments.
4. Deletion of additions made by the Assessing Officer regarding unexplained credits and loan repayments.

Detailed Analysis:

1. Evidentiary Value of Statements Given by the Assessee on Oath During Search:
The primary issue was whether the statements given by the assessee under section 132(4) of the Income-tax Act, 1961, during a search could be used as evidence in the assessment, especially after the assessee retracted these statements. The court noted that the assessee had retracted his statements twice, claiming they were obtained under duress and coercion. The Tribunal held that once the statements were retracted, they could not be used as a basis for reopening assessments. The court supported this view, emphasizing that the retraction was made before the issuance of notice under section 148 of the Act and was acknowledged by the Department.

2. Validity of Reopening Assessments Based on Retracted Statements:
The court examined whether the reopening of assessments under sections 147 and 148 of the Act was justified based on the retracted statements. The Revenue argued that the statements, once given, could not be retracted and that there was sufficient material to reopen the case. However, the court found that the reasons recorded for reopening the assessments were not sufficient or valid, especially since the statements had been retracted. The court cited several precedents, including the Supreme Court's judgments, emphasizing that the reasons for reopening must be based on relevant and material evidence, which was lacking in this case.

3. Assessment of Undisclosed Income from Money Lending and Unexplained Investments:
The Tribunal had held that the undisclosed income from money lending and unexplained investments in fixed deposits could not be assessed in the hands of the assessee. The court supported this finding, noting that the retracted statements could not be used as the basis for such assessments. Additionally, the affidavits submitted by the assessee's brothers, claiming ownership of several fixed deposits and funds, further weakened the Revenue's case. The court highlighted that the Revenue did not issue notices to the brothers, who claimed the funds in their individual names.

4. Deletion of Additions Made by the Assessing Officer Regarding Unexplained Credits and Loan Repayments:
The Tribunal had deleted the additions made by the Assessing Officer concerning unexplained credits and loan repayments not accounted for. The court upheld this decision, reiterating that the retracted statements could not form the basis for such additions. The court emphasized that the Assessing Officer did not provide sufficient reasons or material evidence to justify the reopening of assessments and the subsequent additions.

Conclusion:
The court concluded that there were no good or sufficient grounds for reopening the case under section 148 of the Act against the assessee. The retraction of statements, acknowledged by the Department, invalidated the basis for reopening the assessments. Consequently, the court dismissed the appeals filed by the Revenue and upheld the Tribunal's findings in favor of the assessee.

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