2010 (7) TMI 211 - HC - Income Tax

Income from undisclosed sources - the Assessing Officer contended that assessee had purchased a shop for Rs. 24 lakhs jointly with brother and the sourse of investment was not reflected in the books of accounts. The Assessing officer rejected the contention of the assessee that he had done potato business which was evidenced by entries in a dairy found during the survey holding that there was a long gap between the statement made originally on March 21, 2003 and retraction of the statement on May 28, 2003 and the stand taken was an afterthought. The Commissioner (Appeals) upheld the plea of assessee, while the Tribunal rejected. Held that - the assessee failed to produce books of account which may have been maintained during regular course of business or any other authentic contemporaneous evidence of agricultural income. Appeal dismissed.

Summary

Issues:
1. Addition of Rs. 19 lakhs based on a statement during survey and subsequent retraction.
2. Explanation of source of investment through entries in a diary seized during survey.
3. Ignoring decision of co-ordinate Bench in similar circumstances.

Analysis:
1. The appeal involved the assessment year 2003-04 under the Income-tax Act, 1961. The assessee, an individual, surrendered Rs. 19 lakhs during a survey under section 133A, claiming it was from the purchase of a property jointly with his brother. However, he later retracted this statement, citing agricultural income as the source. The Assessing Officer rejected this, relying on the long gap between the statements and case law. The Commissioner of Income-tax (Appeals) accepted the retraction, but the Tribunal disagreed, emphasizing the importance of the initial voluntary statement and lack of contemporaneous evidence for the claimed agricultural income. The Tribunal held the burden was on the assessee to prove the original statement wrong, citing case law like Surinder Kumar Charanjit Kumar v. CIT [2006] 282 ITR 78.

2. The appellant argued that the retracted statement could be proven wrong, citing relevant judgments. However, the Tribunal upheld its decision, emphasizing the need for early retraction and the significance of the initial voluntary statement. The Tribunal reasoned that the mere existence of diary entries was insufficient to disprove the original statement, especially in the absence of proper accounting records or evidence of agricultural income. The Tribunal's decision was supported by case law and deemed reasonable and legally sound.

3. The appellant's reliance on judgments like Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 and Ester Industries Ltd. v. CIT [2009] 316 ITR 260 was deemed unconvincing by the Tribunal. The Tribunal found the earlier statement was not proven incorrect and held that the statement under section 133A, though not equivalent to section 132(4), was still relevant in the absence of proper records. The Tribunal's decision aligned with legal precedents and was considered valid. Ultimately, the court dismissed the appeal, stating no substantial question of law arose from the case.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the court's reasoning behind its decision.