2025 (4) TMI 395 - AT - Income Tax

Unexplained investment made u/s 69 - in statement the director of the Assessee admitted the payments made in cash for the property - AO made addition on the basis of loose papers found in the premises of a third party and based on the statement of the third party as latter retracted. HELD THAT - On bare reading of the seized document it is found that there is no heading to describe the nature of transaction that depicts in the spiral pad. There were no correct date with year to suggest that these transactions are pertaining to the assessment year. It does not indicate as to who prepared the documents and whether the figures mentioned therein was in Rupees or in any other currency. There is no signature of the person who prepared it or there was no authentication of these documents. In the loose slip has been interpreted by the AO that these are unaccounted cash payments made by the Assessee without their being any corroborative evidence. At this point it is appropriate to consider few judgments on this issue. In the present case the AO made impugned addition based on sworn statement of its Managing Director recorded u/s 131 during the course of survey without their being other corroborative evidence. In the present case the assessing officer found nothing incriminating to justify the addition of Rs. 22.25 Crore except the confession made by the then director of the Assessee-Company (which has been retracted letter) apart from a loose sheet. The statement cannot be held as conclusive proof to make an addition. In the present case the addition has been made by the A.O. relying upon the sole statement which was retracted having no evidentiary value in the absence of any corroborative material as per the law laid down by the Apex Court and followed by High Courts and Tribunals. In absence of any other piece of evidence to make addition of Rs. 22.25 Crore on pro rata basis u/s 69 in the hands of the Assessee CIT(A) rightly deleted the addition. Further it is also found that there is no corresponding addition made in the hands of the alleged cash beneficiaries or even corrective action proposed by the AO in the assessment of the beneficiaries of the alleged cash. We find no error or infirmity in the order of the Ld. CIT (A) in deleting the addition made by the AO. Appeal of the Revenue is dismissed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue in this case is whether the CIT(A) was justified in deleting the addition of Rs. 22,25,00,000/- made on account of unexplained investment under Section 69 of the Income Tax Act, 1961. This issue arises from the Revenue's appeal against the CIT(A)'s order, which had overturned the assessment order that treated the amount as unexplained investment based on a statement made by the Director of the assessee company during a survey operation.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents:

The case revolves around Section 69 of the Income Tax Act, which deals with unexplained investments. The legal framework requires that unexplained investments be added to the income of the assessee if they are not satisfactorily explained. The tribunal considered precedents such as the Supreme Court's ruling in Common Cause (A Registered Society) vs. Union of India, which held that entries in loose papers are inadmissible as evidence unless corroborated by other reliable material.

Court's interpretation and reasoning:

The Tribunal examined the evidentiary value of the statement made by the Director of the assessee company during the survey operation. It noted that the statement was later retracted and lacked corroborative evidence. The Tribunal emphasized that statements made under Section 133A during survey operations do not have evidentiary value unless supported by additional evidence. The Tribunal also referred to the Supreme Court's decision in Vinod Solanki v. Union of India, which highlighted the necessity of corroboration for retracted confessions.

Key evidence and findings:

The primary evidence was a spiral pad found during the survey operation, which allegedly contained details of cash payments. However, the Tribunal found that the document lacked crucial details such as the name of the payer or payee, dates, and signatures. The Tribunal also noted that the Director's statement was retracted and that the Revenue did not take any action to validate the confession or counter the retraction.

Application of law to facts:

The Tribunal applied the principles established in previous cases, emphasizing that loose papers and retracted statements without corroborative evidence cannot form the basis for additions under Section 69. The Tribunal found that the Assessing Officer's reliance on the spiral pad and the Director's retracted statement was insufficient to justify the addition.

Treatment of competing arguments:

The Revenue argued that the CIT(A) erred in dismissing the addition, citing the Director's initial admission of cash payments. However, the Tribunal found that the retraction and lack of corroborative evidence undermined the Revenue's position. The Assessee's representative argued that the statement was made under duress and was not supported by any discrepancies in the books of accounts, which the Tribunal found persuasive.

Conclusions:

The Tribunal concluded that the CIT(A) was correct in deleting the addition, as the evidence presented by the Revenue was insufficient to substantiate the claim of unexplained investment. The Tribunal emphasized the need for corroborative evidence to support additions based on retracted statements and loose papers.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning:

The Tribunal cited the Supreme Court's decision in Common Cause (A Registered Society) vs. Union of India, stating that "entries in loose papers/sheets are irrelevant and not admissible under Sec. 34 of Evidence Act and only where entries are in books of accounts/regularly kept, those are admissible."

Core principles established:

The Tribunal reinforced the principle that statements made during survey operations under Section 133A do not have evidentiary value unless corroborated by other reliable evidence. It also highlighted that retracted confessions require substantial corroboration to be considered valid evidence.

Final determinations on each issue:

The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 22,25,00,000/-, concluding that the Revenue failed to provide sufficient evidence to support the claim of unexplained investment. The Tribunal dismissed the Revenue's appeal, affirming that the addition was not justified based on the evidence presented.