2016 (9) TMI 114 - HC - Income Tax

Addition with respect to on money payment by the assessee for the purchase of property - addition was made based on the statements recorded during the search from the assessee and his son and seller of the property - Held that - As for deciding any issue, against the assessee, the Authorities under the Income Tax Act, 1961 have to consider, as to whether there is any corroborative material evidence. If there is no corroborating documentary evidence, then statement recorded under Section 132(4) of the Income Tax Act, 1961, alone should not be the basis, for arriving at any adverse decision against the assessee. If the authorities under the Income Tax Act, 1961, have to be conferred with the power, to be exercised, solely on the basis of a statement, then it may lead to an arbitrary exercise of such power. An order of assessment entails civil consequences. Therefore, under Judicial review, courts have to exercise due care and caution that no man is condemned, due to erroneous or arbitrary exercise of authority conferred. In the case on hand, statement recorded on 29.12.1999 from the son of the assessee under Section 132(4) of the Act is not corroborated by any material document. Admittedly, Revenue has also not confronted the assessee, with the said statement of his son. If that be the case, it can be safely concluded that, there was no material documentary evidence, to substantiate and corroborate the statement of Mr.Natarajan, son of the assessee. If the assessee makes a statement under Section 132(4) of the Act, and if there are any incriminating documents found in his possession, then the case is different. On the contra, if mere statement made under Section 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterised as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence, should not be treated as conclusive evidence against the maker of the statement. Thus we are of the considered view that the Revenue has not made out a case for reversal of the orders impugned, on the grounds raised, and thus we hold that all the substantial questions of law, are answered in the negative against the Revenue, and in favour of the respondent/assessee.

Summary

Issues Involved:
1. Assessment of the value of immovable properties.
2. Addition towards excess stock of gold jewellery.
3. Addition towards excess stock of silver articles.
4. Addition towards difference in the cost of construction.
5. Addition towards inadequate drawings.
6. Levy of surcharge.

Issue-wise Detailed Analysis:

1. Assessment of the Value of Immovable Properties:
The Commissioner of Income Tax (Appeals) reduced the assessment value from ?31,00,000/- to ?5,00,000/-. The Tribunal held that there was no material found during the search to justify the addition of ?5,00,000/-. The Tribunal noted inconsistencies in the dates of the statement recorded under Section 132(4) of the Income Tax Act, 1961, and doubted the reliability of the statement. The Tribunal concluded that without corroborative evidence, the addition could not be sustained.

2. Addition Towards Excess Stock of Gold Jewellery:
The Commissioner of Income Tax (Appeals) deleted the addition of ?86,000/- towards the excess stock of 215 grams of gold jewellery, considering the excess as negligible. The Tribunal upheld this decision, noting that the reconciliation statement provided by the assessee was reasonable and that the Assessing Officer's addition was unwarranted.

3. Addition Towards Excess Stock of Silver Articles:
The Commissioner of Income Tax (Appeals) treated the excess stock of 39 Kgs of silver articles, valued at ?2,90,000/-, as undisclosed income. The Tribunal did not specifically address this issue in the detailed analysis provided.

4. Addition Towards Difference in the Cost of Construction:
The Commissioner of Income Tax (Appeals) revised the cost of construction, allowing for self-supervision and high rates, reducing the addition. The Tribunal found that no books of account or material evidence were found during the search to justify the addition of ?83,700/-. Therefore, the Tribunal set aside the addition, agreeing with the appellate authority that the valuation report obtained after the search was not sufficient evidence.

5. Addition Towards Inadequate Drawings:
The Commissioner of Income Tax (Appeals) reduced the addition from ?3,00,000/- to ?2,00,000/-, accepting the appellant's plea. The Tribunal did not specifically address this issue in the detailed analysis provided.

6. Levy of Surcharge:
The Commissioner of Income Tax (Appeals) upheld the levy of surcharge of ?2,10,360/-, stating that the first schedule clearly imposes a surcharge on taxes levied under Section 113. The Tribunal did not specifically address this issue in the detailed analysis provided.

Conclusion:
The Tribunal concluded that the Revenue did not provide sufficient corroborative evidence to support the additions made by the Assessing Officer. Statements recorded under Section 132(4) of the Income Tax Act, 1961, without corroborative material, should not be treated as conclusive evidence. The Tribunal upheld the deletions and reductions made by the Commissioner of Income Tax (Appeals) and dismissed the appeals filed by the Revenue. The High Court affirmed the Tribunal's decision, answering all substantial questions of law in favor of the respondent/assessee and dismissing the tax case appeals.