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2025 (4) TMI 331 - HC - Income TaxAdditions made under the block assessment only on the basis of evidence gathered during the course of search - Whether additions under the block assessment can be made solely on the basis of the statement recorded u/s 132(4) without any other material evidence to corroborate with? - Addition for investment in the property and Articles found in search - One of the arguments put forth by the appellant is that the additions to income should be attributed to the appellant s father who had passed away in 1993 - HELD THAT - There is no merit in this submission as it is unsupported by any material such as books maintained by his father or returns filed by him offering income/claiming expenditure in his hands. A perusal of the assessment order reveals that there has been substantial seized material relied upon in the framing of the assessment. The Statement in question has been recorded from the assessee on oath and Section 132(4) states that any such Statement may be used in evidence in any proceeding under the Indian Income Tax Act 1922 or this Act. The scope of the Statement is set out in the Explanation to Section 132(4) where Legislature clarifies that the examination of the person is not a restrictive examination touching only upon documents or assets found in the search but may encompass all materials relevant for the purposes of investigation connected with the proceedings under the Act. This is not a case where the appellant has retracted the statement despite having had the opportunity to do so. Hence the statement remains part of the record as a reliable document. Moreover the appellant has also not responded to Notice u/s 158BC dated 06.12.1996 by filing a block return. Hence in the absence of a return and the fact that the Appellant has stood by the recorded statement we are not inclined to intervene. The Departmental Instruction states that the computation of undisclosed must be based on evidence. In the present case there are seized material duly supported by the assessee s own statement. In the case of Smt.Dayawanti Foot Note Supra 2016 (11) TMI 211 - DELHI HIGH COURT has affirmed the position that where inference is strong in respect of undisclosed income of assessee such inferences being premised on materials found as well as statements recorded in the course of search operations such additions are permissible and warranted. Intervention in such a case would arise only where the estimation has been shown to be arbitrary or unreasonable. In all the issues raised for consideration before us incriminating material has been found in the course of search proceedings. Over and above the statement of the assessee confirms the position that the additions made are justified. We are thus of the considered view that the order of the Tribunal does not suffer from any infirmity. Decided in favour of revenue.
ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment include: 1. Whether additions made under the block assessment should be based solely on evidence gathered during the course of a search. 2. Whether additions under block assessment can be made solely on the basis of a statement recorded under Section 132(4) of the Income Tax Act, 1961, without corroborating material evidence. 3. Whether the Income Tax Appellate Tribunal was correct in upholding the addition related to expenses incurred on house construction without crediting expenses borne by the appellant's father. 4. Whether the Tribunal's dismissal of detailed written submissions regarding contributions by the appellant's father was appropriate. ISSUE-WISE DETAILED ANALYSIS 1. Evidence-Based Additions in Block Assessment Legal Framework and Precedents: The block assessment under Chapter XIV-B of the Income Tax Act mandates that undisclosed income should be determined based on evidence found during a search. Section 132(4) allows statements recorded during the search to be used as evidence. Court's Interpretation and Reasoning: The Court emphasized that both seized materials and statements recorded under Section 132(4) are crucial in determining undisclosed income. The Tribunal's reliance on these was deemed appropriate as the statements were not retracted, and no block return was filed by the appellant to counter the findings. Key Evidence and Findings: The assessment was based on seized materials such as cash, jewellery, and assets, alongside the appellant's statement admitting to undisclosed income. Application of Law to Facts: The Court found that the Tribunal correctly relied on the statement and seized materials to uphold the assessment. The statement was considered reliable as it was not retracted and complemented the evidence found. Treatment of Competing Arguments: The appellant's argument that additions should be solely based on seized materials was rejected, as the statement provided corroborative evidence. Conclusions: The Court upheld the Tribunal's decision, affirming that both seized materials and statements are valid bases for block assessments. 2. Reliance on Statements Under Section 132(4) Legal Framework and Precedents: Section 132(4) permits the use of statements recorded during searches as evidence. The Court referenced precedents where statements, if not retracted, were deemed credible. Court's Interpretation and Reasoning: The Court noted that the statement was not retracted and aligned with the seized materials, thereby justifying its use in the assessment. Key Evidence and Findings: The statement included admissions of undisclosed income and discrepancies between declared and actual expenditures. Application of Law to Facts: The Court found the Tribunal's reliance on the statement appropriate, as it was consistent with the evidence and not contested by the appellant. Treatment of Competing Arguments: The appellant's reliance on precedents where statements were retracted was distinguished, as no retraction occurred in this case. Conclusions: The Court upheld the use of the statement as evidence, affirming the Tribunal's decision. 3. Expenses on House Construction Legal Framework and Precedents: Section 69 of the Income Tax Act addresses unexplained investments. The Court examined whether the Tribunal correctly considered evidence of expenses borne by the appellant's father. Court's Interpretation and Reasoning: The Court found that the Tribunal correctly dismissed the appellant's claim regarding his father's contributions, as no supporting evidence was provided. Key Evidence and Findings: The appellant's statement and seized materials indicated discrepancies in declared construction costs, with no evidence of the father's contributions. Application of Law to Facts: The Tribunal's decision to uphold the assessment was based on the lack of evidence supporting the appellant's claim about his father's contributions. Treatment of Competing Arguments: The appellant's argument was rejected due to the absence of evidence, and the Tribunal's findings were upheld. Conclusions: The Court affirmed the Tribunal's decision, finding no error in the assessment of construction expenses. SIGNIFICANT HOLDINGS The Court upheld the Tribunal's decision on all issues, affirming the following principles: - Statements recorded under Section 132(4), if not retracted, are credible evidence in block assessments. - Both seized materials and statements are valid bases for determining undisclosed income. - Claims of contributions from third parties must be supported by evidence to be considered in assessments. The Court dismissed the appeal, affirming the Tribunal's order and ruling in favor of the revenue on all substantial questions of law.
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