2018 (11) TMI 953 - HC - Income Tax

Addition of surrendered income - relevancy of statement recorded u/s 132(4) - retraction of statement given within reasonable time - Held that - Statement recorded u/s 132(4) of the Act and later confirmed in statement recorded under Section 131 of the Act, cannot be discarded simply by observing that the assessee has retracted the same because such retraction ought to have been generally made within reasonable time or by filing complaint to superior authorities or otherwise brought to notice of the higher officials by filing duly sworn affidavit or statement supported by convincing evidence. Such a statement when recorded at two stages cannot be discarded summarily in cryptic manner by observing that the assessee in a belatedly filed affidavit has retracted from his statement. Such retraction is required to be made as soon as possible or immediately after the statement of the assessee was recorded. Duration of time when such retraction is made assumes significance and in the present case retraction has been made by the assessee after almost eight months to be precise, 237 days. We are persuaded to allow the appeal of the revenue which is accordingly allowed. - Decided against assessee.

Issues Involved:
1. Validity of the retraction of the assessee’s statement.
2. Evidentiary value of statements recorded under Section 132(4) and Section 131 of the Income Tax Act.
3. Justification of the additions made by the Assessing Officer based on the seized documents and statements.
4. Legitimacy of the deletion of additions by the CIT(A) and upheld by the ITAT.

Issue-wise Detailed Analysis:

1. Validity of the Retraction of the Assessee’s Statement:
The appellant-revenue challenged the retraction of the assessee’s statement, arguing that the retraction affidavit was filed after a significant delay of 237 days, indicating no immediate pressure or coercion. The court observed that retraction should be made promptly, ideally immediately after the statement is recorded, by filing a complaint to higher officials or through a duly sworn affidavit supported by convincing evidence. In this case, the retraction was deemed an afterthought due to the prolonged delay, and thus, lacked credibility.

2. Evidentiary Value of Statements Recorded under Section 132(4) and Section 131 of the Income Tax Act:
The court emphasized that statements recorded under Section 132(4) during search and seizure operations hold significant evidentiary value and cannot be summarily discarded. The assessee's statements were recorded in the presence of witnesses and reconfirmed under Section 131. The court referenced multiple judgments, including CIT, Bikaner Vs. Ravi Mathur, which highlighted that such statements are presumed to be true and correct unless convincingly rebutted by the assessee. The court concluded that the assessee failed to provide sufficient evidence to invalidate these statements.

3. Justification of the Additions Made by the Assessing Officer Based on the Seized Documents and Statements:
The Assessing Officer made additions based on seized documents and the assessee’s statements, which included admissions of undisclosed income. The court noted that the assessee’s retraction lacked timely and credible evidence to support claims of coercion or incorrect statements. The court cited various cases where retractions were not entertained due to delayed filing or lack of supporting evidence. The court held that the additions made by the Assessing Officer were justified as they were based on the assessee’s own admissions and the seized material.

4. Legitimacy of the Deletion of Additions by the CIT(A) and Upheld by the ITAT:
The CIT(A) deleted several additions made by the Assessing Officer, considering the retraction affidavit and explanations provided by the assessee. The ITAT upheld this decision. However, the court found that the CIT(A) and ITAT did not adequately consider the evidentiary value of the original statements and the significant delay in retraction. The court ruled that the deletions were not justified as the retraction was not supported by convincing evidence and was filed after an unreasonable delay.

Conclusion:
The court allowed the appeal of the revenue, holding that the substantial question of law was answered in favor of the revenue and against the assessee. The court emphasized the importance of timely and credible retraction of statements and upheld the evidentiary value of statements recorded under Section 132(4) and Section 131 of the Income Tax Act. The deletions made by the CIT(A) and upheld by the ITAT were deemed unjustified due to the lack of supporting evidence for the retraction.

← Previous Next →