2015 (12) TMI 1322 - AT - Income Tax

Confession of additional income during the course of search and seizure and survey operations - Held that - No hesitation in holding that no addition can be made merely on the basis of surrender without existence of any corroborative evidence found against the assesee. We would also like to state that the assessee had retracted by filing a written submission before the DIT, Inv.-I, New Delhi on 28.11.2006 which is 6 days after the search. There was sufficient time with the Investigation Wing to carry on the investigation and to collect the evidence against the retraction. However, records show that nothing has been done in this regard. In such a situation, the retraction of the assessee cannot be said to be invalid in absence of any incriminating documents. In view of these facts, we uphold the order of the CIT(A) stating no addition can be made merely on the basis of surrender without existence of any corroborative evidence found against the assesee - Decided in favour of assessee.

Summary

Issues:
1. Addition of surrendered amount in assessment.
2. Reliance on confession and retraction.
3. Application of CBDT instructions on confession of additional income.
4. Corroborative evidence requirement for additions based on surrender.

Analysis:
1. The appeal was against the addition of Rs. 2 crores surrendered by the assessee during search proceedings to his income in the assessment. The CIT(A) found that the addition was solely based on the surrender, which was retracted by the assessee within six days. The CIT(A) concluded that no incriminating material justifying the addition was found during the search, and the assessee's retraction further weakened the basis for the addition. The CIT(A) held that the addition could not be sustained without proper evidence to support it.

2. The Department argued that the confession made by the assessee, even if retracted, should bind the assessee as it constitutes an admission. Citing legal precedents, the Department contended that admissions are self-harming statements made based on truth and should be considered valid evidence. However, the assessee argued that the confession was made under mental pressure and pointed to a similar case decided by the ITAT in favor of the assessee.

3. The ITAT referred to CBDT instructions regarding confessions of additional income during search operations. The instructions emphasized the need for credible evidence to support such confessions and cautioned against relying solely on confessions without corroborative evidence. The ITAT highlighted that the CBDT instructions discouraged obtaining confessions during search operations and stressed the importance of evidence collection to determine undisclosed income.

4. Relying on legal precedents, the ITAT held that no addition could be made solely based on surrender without corroborative evidence against the assessee. The ITAT noted that the addition in this case was not supported by any incriminating documents found during the search. The ITAT also highlighted that the assessee had retracted the statement, and the Investigation Wing failed to gather evidence against the retraction. Consequently, the ITAT upheld the CIT(A)'s decision to dismiss the Department's appeal, emphasizing the necessity of corroborative evidence for additions based on surrender.

In conclusion, the ITAT dismissed the Department's appeal, emphasizing the importance of corroborative evidence to support additions based on surrendered amounts and highlighting the significance of following CBDT instructions on confessions of additional income during search operations.