2018 (12) TMI 1508 - AT - Income Tax

Assessment u/s 153A - Addition merely relying upon the statement of the appellant recorded u/sec. 132(4) - as per assessee statement recorded allegedly during the course of search was not free and fair and therefore addition cannot be made on that basis - Held that - Referring to submission filed before the Ld. CIT(A) reiterating that surrender made by assessee and her husband was not voluntary and was under undue pressure from the search officials with assurance to conclude search. However, the assessee explained the source of each and every asset/loose paper found during the course of search and submitted before AO and Ld. CIT(A) that as to why additions cannot be made in respect of such assets/loose documents. The AO made an abrupt addition of ₹ 1,50,00,000/- which was affirmed by Ld. CIT(A) as against amount of ₹ 15, 58,632/- offered by the assessee suo-moto before the Ld. CIT(A). We also note that the case laws cited by the Ld. CIT(DR) are not exactly on the same facts and circumstances of the present case, hence, does not support the case of the Revenue. Keeping in view all as well as the CBDT Instructions vide its Instructions No. F. No. 286/2/2003-IT (Inv.II), dated 10.3.2003 has made it clear that reliance shall not be solely placed on the statements recorded in the search survey - we delete the addition in dispute and allow the grounds raised by the assessee.

Issues Involved:
1. Sustaining of addition based on a retracted statement recorded under section 132(4) of the Income Tax Act, 1961.
2. Validity of retraction of the statement and the evidentiary value of the initial statement.
3. Justification of the addition made by the Assessing Officer (AO) based on the statement.
4. Confirmation of the addition by the Commissioner of Income Tax (Appeals) [CIT(A)].
5. Protective addition in the case of the assessee’s husband.

Issue-wise Detailed Analysis:

1. Sustaining of Addition Based on a Retracted Statement:
The primary issue revolves around the addition of ?1,36,30,501/- sustained by the CIT(A) based on the statement recorded under section 132(4) of the Income Tax Act, 1961, which the assessee later retracted. The assessee argued that the statement recorded at midnight under abnormal circumstances should not be the sole basis for the addition. The Tribunal noted that the statement was recorded under duress and retracted immediately after the conclusion of the search, thus, it cannot be used as the sole basis for the addition.

2. Validity of Retraction and Evidentiary Value:
The assessee contended that the statement was made under coercion and retracted it within a reasonable time (two days after the last Panchnama). The Tribunal found merit in the assessee's argument, noting that no witnesses were present during the recording of the statement, and the retraction was supported by an affidavit. The Tribunal emphasized that retracted statements, especially those made under pressure, should not be the sole basis for additions unless corroborated by other evidence.

3. Justification of Addition by AO:
The AO made an addition of ?1,50,00,000/- based on the statement recorded during the search, which the assessee later retracted. The Tribunal observed that the AO failed to provide any tangible material evidence to support the addition, relying solely on the retracted statement. The Tribunal cited various judicial precedents, emphasizing that additions should not be based solely on statements recorded during searches, especially when retracted and unsupported by corroborative evidence.

4. Confirmation by CIT(A):
The CIT(A) confirmed the addition, rejecting the retraction as an afterthought and maintaining that the surrender was voluntary. However, the Tribunal found that the CIT(A) erred in ignoring the circumstances under which the statement was made and the lack of corroborative evidence. The Tribunal highlighted that the CIT(A)'s reliance on the statement recorded under duress was unjustified and unsustainable in law.

5. Protective Addition in Husband’s Case:
In the case of the assessee’s husband, the CIT(A) deleted the protective addition of ?1.50 crores, as the substantive addition was confirmed in the assessee’s case. Since the Tribunal deleted the substantive addition in the assessee’s case, it upheld the CIT(A)’s action of deleting the protective addition in the husband’s case. Consequently, the Revenue’s appeal was dismissed.

Conclusion:
The Tribunal allowed the appeal filed by the assessee, deleting the addition of ?1,36,30,501/- made based on the retracted statement recorded under section 132(4). The Tribunal emphasized that statements recorded under duress and retracted subsequently should not be the sole basis for additions without corroborative evidence. The Tribunal also dismissed the Revenue’s appeal, upholding the deletion of the protective addition in the case of the assessee’s husband. The judgment underscores the importance of corroborative evidence and the limited evidentiary value of statements recorded under duress during search operations.

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