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TMI Blog2018 (9) TMI 1025X X X X Extracts X X X X X X X X Extracts X X X X ..... Agarwalla was not a director of the assessee company and was therefore not lawfully competent to make statement on its behalf. He has argued that the AO erred in law in relying solely on the disclosure made by third party for drawing adverse inference in the case of the assessee and that too when such third party had already retracted his disclosure and also there was no corroborative or direct evidence on record to support the disclosure. The Ld AR has referred to the sworn affidavit of Sri Kailash Prasad Agarwalla wherein he had explained that the disclosure was made under coercion and that he did so without even having any idea about the working of the assessee company. The Ld AR has argued that the statement u/s 132(4) or subsequent disclosure petition given by Sri Kailash Prasad Agarwalla had no consent or authority of the assessee company and therefore it could not be lawfully relied upon for drawing adverse inference in the case of the assessee company. The Ld AR has further argued that no incriminating material representing undisclosed income of the assessee was found in the search and the disclosure made by Sri Kailash Prasad Agarwalla was unwarranted and irrelevant as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t corroborated by independent evidence. Similarly, in the case of Kailashben Manharlal Choksi vs CIT [2008] 174 Taxman 466, the Hon'ble High Court of Gujarat held that merely on the basis of the statement made uj s 132(4), the assessee could not be subjected to addition unless and until some corroborative evidence was found by the revenue in support of such addition. The Hon'ble High Court of Madras has held in the case of M Narayanan & Bros vs ACIT [2011] 13 taxman.com 49 that while the statement recorded u/s 132(4) may be used as evidence, yet, that by itself, does not become the sole material to rest the assessment more so when the assessee seeks to withdraw the same. The jurisdictional !TAT in the case of DCIT vs Vivekanand Venna ITA No. 1784/Kol/2012 held that no addition could lawfully be made on the basis of disclosure when there was no corroborative or direct evidence to support the disclosure. 7. The Ld AR has argued that the impugned assessment order of the AO violated the spirits as laid down by the CBDT in its circular dated 10-03-2003. For it has been the consistent policy of the CBDT that search operations should focus and concentrate on collection of credi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the course of search/survey operations or thereafter while framing the relevant assessment orders." 9. I have perused the impugned assessment order of the AO and considered the submissions of the Ld AR and the material placed by him on record. I have also perused the various judicial decisions relied upon by the Ld AR. I find that the facts in the present case are not in dispute. It is admitted that Sri Kailash Prasad.Agarwalla in his statement u/s 132(4) made disclosure of Rs. 10 crores on behalf of the assessee. But then, he later clarified before the AO that the disclosure was made by him without having any idea about the working of the assessee company, that the disclosure was made not voluntarily but under' coercion of the officers authorised to conduct the search and that the disclosure was not supported or corroborated by any incriminating material found in the search. The AO on his part has brought no material on record to show that Sri Kailash Prasad Agarwalla had got any legal sanction or authority to make disclosure on behalf of the assessee. There is nothing on record to even suggest that Sri Kailash Prasad Agarwalla had the consent of the assessee company wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort of such addition. The Hon'ble High Court of Madras has held in the case of M Narayanan & Bros vs ACIT [2011] 13 taxman.com 49 that while the statement recorded u/s 132(4) may be used as evidence, yet, that by itself, does not become the sole material to rest the assessment more so when the assessee seeks to withdraw the same. I find that the present case is directly covered by the decision of the jurisdictional ITAT in the case of DCIT vs Vivekanand Verma in ITA No. 1784/Kol/2012 wherein it was held that no addition could lawfully be made on the basis of disclosure when there was no corroborative or direct evidence to support the disclosure. I also find that the action of the AO is not in conformity with the direction issued by the CBDT as contained in its circular dated the 10th March, 2003 which was relied upon by the Hon'ble High Court of Madras in the cases of M Narayanan & Bros vs. ACIT and CIT vs. Khader Khan Son. The CBDT had clearly instructed that the AO should rely on credible evidence and that the material gathered in search should form the basis for framing the assessment order. I am of the considered view that the AO erred in law as well as on facts in resting ..... X X X X Extracts X X X X X X X X Extracts X X X X
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