2021 (9) TMI 1073 - AT - Income Tax

Addition u/s 69C - voluntarily disclosures during post search investigation proceedings which was not disclosed in the return of income filed u/s 139(1) - partner of the assessee firm in his statement made u/s 131(1A) had surrendered an amount on account of any other income/expenditure or investment of the firm and its partners not found recorded in the books of account for the period 01.04.2010 to 14th December, 2016 - AO while making the addition has also observed that the assessee had not disclosed the above amount in his return of income, the retraction letter filed vide affidavit dated 15th October, 2018 was at the fag end of the assessment proceedings and the assessee did not file any evidence to prove the bona fide on its part - HELD THAT - It is an admitted fact that apart from the statement recorded u/s 131(1A) of the IT Act surrendering an amount of ₹ 25 lakhs for the period from 01.04.2010 to 14th December, 2016 on account of any other income/expenditure or investment in the firm and its partners not found recorded in the books of account no other investments, cash or any other material was found which is unexplained. A perusal of the assessment order as well as the order of the CIT(A) shows that no material pertaining to the assessee was found during the search on 15th December, 2016 showing the existence of any unexplained investment or income or expenditure pertaining to the period from 01.04.2010 to 14th December, 2016. Hon ble Supreme Court in the case of CIT vs. Mantri Share Brokers (P) Ltd. 2018 (7) TMI 200 - SC ORDER has held that no addition u/s 69B can be made in the hands of an assessee where except statement of the Director of the assessee company offering additional income, there was no other material either in the form of cash, bullion, jewellery or document or in any other form to justify such additional income. Accordingly, the SLP filed by the Revenue against the decision of Hon ble Rajasthan High Court was dismissed. Similarly, the Hon ble Allahabad High Court in the case of CIT vs. Dilbagh Rai Arora 2019 (3) TMI 1006 - ALLAHABAD HIGH COURT , has held that merely because during search the assessee surrendered an amount in stipulation that details of the same would be given in due course of time, but, no such assets were ever found/identified by the authorities, no addition could be made to assessee s income. Since, in the instant case, admittedly, other than the statement of the partner recorded u/s 131(1A) of the Act offering additional income there was no other material found in the form of cash, bullion, jewellery or document in any other form or asset or unexplained expenditure to justify the said additional income, no addition u/s 69C could have been made by the AO - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of ?25 lakhs under Section 69C of the Income Tax Act.
2. Validity of the retraction of the statement made under Section 131(1A).
3. Evidentiary value of statements made during search proceedings.

Issue-wise Detailed Analysis:

1. Addition of ?25 Lakhs under Section 69C of the Income Tax Act:
The primary issue revolves around the addition of ?25 lakhs to the total income of the assessee under Section 69C of the Income Tax Act as unexplained expenditure. The Assessing Officer (AO) made this addition based on a statement recorded under Section 131(1A) where the partner of the assessee firm, Shri Iftikhar Ali, surrendered ?25 lakhs. The AO noted that this amount was not shown in the return filed under Section 139(1). The AO relied on various judicial precedents to justify the addition, emphasizing that the admission was not retracted and thus held evidentiary value. The CIT(A) upheld the AO's decision, citing similar judicial precedents and asserting that the retraction was an afterthought.

2. Validity of the Retraction of the Statement Made under Section 131(1A):
The assessee contended that the disclosure of ?25 lakhs was made under a mistaken belief and without any incriminating evidence found during the search. The assessee argued that the statement recorded under Section 131(1A) had no evidentiary value and that the burden of proof was on the Revenue to provide corroborative material. The retraction was made through an affidavit dated 15th October 2018, which the AO rejected as it was filed at the end of the assessment proceedings. The CIT(A) also dismissed the retraction, considering it an afterthought.

3. Evidentiary Value of Statements Made During Search Proceedings:
The Tribunal evaluated the evidentiary value of the statements made during the search. It was noted that no material, such as unexplained investments or income, was found during the search on 15th December 2016, which was evident from the 'Panchnama'. The Tribunal referenced the Supreme Court's decision in CIT vs. Mantri Share Brokers Pvt. Ltd., which held that no addition under Section 69B could be made solely based on a statement without corroborative evidence. Similarly, the Allahabad High Court in CIT vs. Dilbagh Rai Arora ruled that no addition could be made if no assets were found or identified to justify the surrendered amount.

Conclusion:
The Tribunal found merit in the assessee's arguments, noting the lack of corroborative evidence to support the addition of ?25 lakhs under Section 69C. The Tribunal emphasized that admissions made in statements must be supported by material evidence. Since no such evidence was found, the Tribunal directed the AO to delete the addition, allowing the appeal filed by the assessee.

Final Order:
The appeal filed by the assessee was allowed, and the addition of ?25 lakhs was directed to be deleted. The decision was pronounced in the open court on 22.09.2021.