2019 (3) TMI 1006 - HC - Income Tax

Addition based on search and seizure operation - surrender made voluntarily - incriminating material or the surrounding circumstances reveal that there is any material to justify the addition - ITAT deleted the addition - confession during the course of search and seizure operation - HELD THAT - The Tribunal as well as CIT(Appeals) after recording finding of fact in favour of the assessee has rightly deleted the addition of 7 crores as there is no incriminating document or material on record which could be a good ground for addition of seven crores be added in the hand of the assessee. Circular dated 10.3.2003 F. No. 286/2/2003- IT (Inv) held that more confession during the course of search and seizure operation cannot be a ground for addition in the income of the Assessee. Therefore the case law relied upon by the Appellant is of no help. The case in hand the assessee has given documents material and explained threadbare with regard to amount of 24 crores but the assessing authority has mechanically made the addition of 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted. There is no legal infirmity in the order passed by the Tribunal. The assessee-respondent in the statement given on 6.10.2005 has surrendered 18 crores on account of investment made in purchase of jewellery/precious stones and 6 crores were surrendered as cash in hand duly shown in the books of account balance 7 crores were surrendered with stipulation that details of the same would be given in due course of time. The assets to the magnitude of 7 crores were neither found by the authorities below nor such assets were identified or declared by the appellant. In such a situation it could be inferred that no such assets actually exists. In other words there is no clinching evidence or material to justify such addition of 7 crores. The case in hand the assessee-respondent has given documents material and explained threadbare with regard to amount of 24 crores but the assessing authority has mechanically made the addition of 7 crores and added back the same amount only on the basis of statement having been made by the assessee which is not permitted. No legal infirmity in the order passed by the Tribunal. - decided against revenue.

Summary

Issues:
1. Whether the ITAT's order was erroneous in deleting the addition of ?7 crore despite a voluntary surrender by the assessee.
2. Whether the addition of ?7 crore to the assessee's income was justified based on the statement recorded under Section 132(4) of the Income Tax Act.
3. Whether the ITAT erred in holding that the addition lacked evidence and disregarded the statement recorded under Section 132(4).

Issue 1:
The appeal was filed under Section 260A of the Income Tax Act, 1961 challenging the order of the ITAT regarding the addition of ?7 crore to the assessee's income for the assessment year 2006-2007. The assessee had voluntarily surrendered ?31 crore for taxation, out of which ?18 crore was attributed to investments and ?6 crore as cash, with the remaining ?7 crore to be detailed later. The CIT (Appeals) allowed the appeal and deleted the ?7 crore addition. The Revenue appealed to the ITAT, which upheld the deletion of the ?7 crore addition. The counsel for the Revenue argued that the Tribunal erred in confirming the deletion, citing relevant case law. However, the Tribunal and CIT (Appeals) found in favor of the assessee, emphasizing the lack of incriminating evidence to support the addition.

Issue 2:
The assessing authority added back ?7 crore to the assessee's income based on the statement made under Section 132(4) of the Act during a search operation in 2005. The CIT (Appeals) and the ITAT both deleted this addition, noting the absence of incriminating material to justify it. The statement by the assessee indicated that only ?24 crore should be taxed for the year in question, with details on the remaining ?7 crore to be provided later. The Tribunal and CIT (Appeals) found that the addition lacked a basis in evidence or material, leading to the deletion of the ?7 crore from the assessment.

Issue 3:
The Tribunal and CIT (Appeals) concluded that the addition of ?7 crore to the assessee's income was unwarranted due to the lack of supporting evidence. The assessing authority had solely relied on the statement made by the assessee during the search operation without corroborating evidence. The case law cited by the Revenue was deemed inapplicable as it involved different circumstances where additions were based on thorough examination of documents and explanations. In this case, the addition was solely based on the statement made by the assessee, which was deemed insufficient to justify the addition. The Tribunal upheld the deletion of the ?7 crore addition, emphasizing the importance of substantial evidence to support such adjustments.

In conclusion, the High Court dismissed the appeal, upholding the decision of the ITAT to delete the addition of ?7 crore to the assessee's income. The Court found no legal infirmity in the Tribunal's order, emphasizing the necessity of substantial evidence to support income additions and highlighting the importance of thorough examination of documents and explanations before making such adjustments.