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TMI Blog2024 (2) TMI 746X X X X Extracts X X X X X X X X Extracts X X X X ..... dition made in the hands of the assessee. Treatment to income u/s 115BBE - We find that he assessee is private limited company. Though a disclosure has been made in the statement made to offer Rs. 75 Lakhs for tax but there is no reference to any incriminating material found during the course of search. The assessee has disclosed Rs. 75 Lakhs as extraordinary item in the profit and loss account and offered it as income. The said income cannot be treated as unexplained unless any seized material has been referred by the revenue authorities. In absence thereof and also considering the fact that the assessee is into the regular business, the alleged sum of Rs. 75 Lakhs can be considered only as a business income and, therefore, the ld. Assessing Officer erred in treating it as an income u/s 115BBE of the Act liable to be taxed. This action of the ld. Assessing Officer is not justified. We accordingly, allow the cross-objection raised by the assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid income, nor the ld. Commissioner of Income Tax (Appeals) was justified in not adjudicating the Ground No.5 raised by the respondent before him in respect of the above issue in the Memorandum of Appeal 2.2. The revenue has raised the following grounds of appeal in I.T.A. No. 21/GTY/2023 in the case of Leade Liquor Manufacturing Pvt. Ltd.: - (i) For that the Ld. CIT(Appeal) has erred in law in not using the statement under section 132(4) of the Act as an evidence in the proceedings of the Income Tax Act, 1961 in view of judicial pronouncements in the following cases: - a. C.I.T. Vs. MAC Public Charitable Trust (2022) 144 taxmann.com 54 (Madras) b. Thiru. A.J. Ramesh Kumar Vs. D.C.I.T. (2022) 139 taxmann.com 190 (Madras) (ii) For that the Ld. CIT(Appeal) had erred to in law in accepting the retraction ignoring the fact that the assessee did not do so for the period from 26.02.2019 to 06.12.2019, which is clearly an afterthought. (iii) For that the Ld. CIT(Appeal) has erred to allow the assessee in estimating an income of Rs. 4,08,856/- only (disclosed amount of Rs. 75,00,000/- shown in return U/s. 153A - Rs. 70,91,144/- amount recorded in incriminating document s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otal income in view of the disclosure given during the course of search in the statement recorded u/s. 132(4) of the Act. In reply, the assessee gave a detailed submission along with reference to the retractions statement stating that the statement recorded during the course of search u/s 132(4) of the Act on 26/27-02-2019 was made under pressure at late hours and that too was on an adhoc/estimate basis, having no access to the seized/impounded material and the directors, Shri Amit Kumar Jain, was not able to give any detailed breakup of the aforesaid so disclosure. It was submitted that on receipt of the photocopy of the seized documents at a later date, the same were analyzed and its was noticed that the disclosure of higher amount has been made and since the statement given u/s 132(4) of the Act were neither voluntary nor correct, therefore, the same has been retracted and the additional income of Rs. 1,00,00,000/- has been offered as additional income. The Chart depicting the amount of disclosure made during the course of search and after retracting the statement are reproduced below:- Given along with statement given on 26/27-02-2019 Sl. No. Name of the person for whom dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g any Undisclosed Assets, Money, Bullion, Jewelry or other Valuable Article or Thing or any Undisclosed Investment or Unexplained Expenditure or any Outgoing. b. That, from a perusal of the impugned Assessment Order and the Submissions filed by the Appellant, it is seen that no enquiry appears to have been conducted by the Assessing Officer (during the assessment proceedings) regarding the source of the purported Undisclosed Income offered by the Director of the Appellant i.e. Shri Amit Jain in his Letter Dated 25/03/2019. c. That, from a perusal of the impugned Assessment Order and the Submissions filed by the Appellant, it is specifically noted that, but for the aforesaid admission of the said Additional Income, by the Appellant and his other family members, neither the Officers of the Investigation Wing (i.e. who had conducted the Search in the case of the S.K. Jain Group), nor even the DDIT(Inv.) (i.e. the Officer who had conducted the post-search investigation proceedings) and nor even the Assessing Officer have brought on record any material or evidence as would give factual legs of the aforesaid addition of Rs. 10,00,00,000/-. Thus, it appears that the Additional/Undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant, it is seen that the impugned addition of Rs. 10,00,00,000/- is not ascribed to any Cash Credit or any other Entry in the Books of Accounts of the Appellant found during the course of Search in the case of the Appellant or even from the premises of "any Other Person", during the course of Search or Survey conducted in the case of such Other Person pertaining to the "S.K. Jain Group". Further, no such alleged Cash Credit or other Entry has been referred to by the Assessing Officer in the impugned Assessment Order whose source and nature was not substantiated or explained by the Appellant. k. That, from a perusal of the impugned Assessment Order and the Submissions filed by the Appellant, it is seen that the impugned addition of Rs. 10,00,00,000/- is not ascribed to any Unexplained Expenditure not recorded in the Books of Accounts, if any, of the Appellant. Further, no detail of any such purported Unexplained Expenditure was found during the course of Search in the case of the Appellant or even from the premises of "any Other Person", during the course of Search or Survey conducted in the case of such Other Person pertaining to the "S.K. Jain Group". l. That, upon being sp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T (Inv-II) dated 18.12.2014, additions made solely on the basis of admission of additional income made in the Statement recorded during the Search are untenable. In the said Instructions, it has been made amply clear that an Assessing Officer should rely solely upon the evidences and materials gathered during the Search and Survey operations for making additions and framing the Assessment Orders and the uncorroborated Statements or Confessions taken during the Search or Survey do not serve any useful purpose. 9. The ld. CIT(A), thereafter, extensively discussed the law relating to retraction of confessional statement at page 59 to 78 of his order. Few of such decisions are referred below: - (i) In the case of Pullangode Rubber Produce Co. Ltd. vs. State of Kerala [1973] 91 ITR 18 (SC)], it was held/averred, as follows, by the Hon'ble Supreme Court: "Held that it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts." (ii) In the case of Satinder Kumar (HUF) vs. CIT [(1977) 106 ITR 64 (SC)], it was held/averred, as follows, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and put to a mental agony that he looses its normal mental state of mind and at that stage it can not be expected from a person pre- empt the statement required to be given in law as a part of his defence." (v) Apart from the rationes of the Judgments referred above and as relied upon by the assessee in his submissions, the learned CIT(A) noted that in the following cases, it has been held that no addition can be made on the basis of a retracted Statement: • DCIT vs. Ratan Corpn. [197 CTR 536 (Guj)] • CIT vs. Uttamchand Jain [ITA No. 634 of 2009] • G. Kanagaraj vs. DCIT [73 TTJ 731(Chennai)] • Govind Ram Chhugani vs. Asstt. CIT [77 TTJ 339(Jodh)] • Surinder Pal Verma vs. ACIT [89 ITD 129(Chd.)(TM)] • Dineshchandra J. Dina vs. ITO [112 Taxman 107(Ahd.)] (vi) On the above proposition, the learned CIT(A) relied upon the following judicial pronouncements: - (a) In the case of Commissioner of Income Tax vs. Harjeev Aggarwal [(2016) 290 CTR 263] (b) In the case of Kailashben Manharlal Chokshi vs. CIT [328 ITR 411 (Guj)] (c) In the case of PCIT vs. Best Infrastructure Private Limited [397 ITR 82] (d) In the case of Binit Agarwal vs. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gold Bottling Pvt. Ltd. q) M/s Manobal Vinimay Pvt. Ltd. r) M/s Corobus Alchobrew Products Pvt Ltd s) M/s Wallendorfer (Assam) Pvt Ltd t) M/s Supertech Conbrit Industries I also agree that many documents and records have been shown to me for my information. Based on material shown to me, and also presuming that many of other documents and records may have substantial tax effect, on behalf of the entire group, I would like to voluntarily surrender and additional business income of Rs. 25 Crores in addition in our normal business income. Specific details and breakup of this disclosure shall be provided to you by me after having discussed with my advisers, consultants and family members and after checking with the records. This disclosure which we will which we will provide positively on 28.02.2019 shall have the concern-wise and quantum-wise amounts financial year wise. But, I would like to state again that all such amounts when added up shall not be less than the voluntarily disclosed amount of Rs. 25 (twenty-five) Crores. Since the surrender has been made by me voluntarily, I request that no penal/ prosecution proceedings be initiated against us." 10.1. The ld. CIT(A) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidentiary value. The retraction made on 06/12/2019, is merely an afterthought as it has been done almost after 10 months of the disclosure given during the course of search. The ld. D/R further submitted that the assessee ought to have honoured the surrender at Rs. 11 Crores. He also submitted that various incriminating material were found relating to various group concerns and based on such seized material, statement was given u/s 132(4) of the Act and the same should not have been retracted. 13. On the other hand, the ld. Counsel for the assessee heavily relied on the detailed finding of facts by the ld. CIT(A) and plethora of judgments referred and relied on by the ld. CIT(A). Reference was also made to the Circulars issued by the CBDT bearing (a)Circular No. F. No. 286/2/2003 - IT (Inv-II) dated 10.03.2003; & (b)Circular No. F. No. 286/98/2013-IT (Inv-II) dated 18.12.2014, wherein directions have been given to the Assessing Officer that they should rely upon the evidence and material gathered during the course of search and survey for making additions and framing assessments and the statement or confession taken during the course of search or survey do not serve any useful p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guwahati-781005 was recorded on late night on 26.02.2019 and continued till early morning on 27.02.2019. Therefore, he was under tremendous pressure and mentally exhausted and was compelled to give the aforesaid disclosure. This fact may kindly be verified with his statement recorded on 26/27.02.2019, wherein the date of statement has been mentioned as 26.02.2019 but his signature bears the date of 27.02.2019. It is very significant to mention here that the signature of one of the witness to the statement was taken even before his statement was completed as his signature bears 26.02.2019 as the signing date, whereas the other witness has signed the same statement on 27.02.2019. 3. That our director, Shri. Amit Kumar Jain was compelled to make the aforesaid disclosure of Rs. 25.00 crores by the Authorized Officer without any incriminating document having been found in course of the search to that effect. Also, there is no link or nexus to the aforesaid disclosure of Rs. 25.00 crores to any document/material found during the search. The said disclosure of Rs. 25.00 crores was made on adhoc/ estimate basis at the instance of the Authorized Officer who took his aforesaid statement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s. Aroma India Pvt. Ltd 2018-2019 Rs. 110000000/- 2. M/s. Leade Liquor Manufacturing Pvt. Ltd 2018-2019 Rs. 85000000/- 3. M/s. M.S. Concrete Pvt. Ltd 2018-2019 Rs. 30000000/- 4. Smt. Mayuri Jain 2018-2019 Rs. 5000000/- 5. Shri Amit Kumar Jain 2018-2019 Rs. 10000000/- 6. M/s. M.S. Aromatic 2018-2019 Rs. 10000000/- Total Rs. 250000000/- A perusal of his aforesaid letter dated 25.03.2019, would show that the disclosure was totally on adhoc and estimate basis and no material/document has been referred in the said letter having any link or nexus with the disclosed amount. 7. That despite being no document/material to support and/or corroborate the disclosure of Rs. 25,00,00,000/-, he was made to confirm and re-confirm the said disclosure in his subsequent statements recorded on 02.04.2019 and 22.04.2019 just to ensure that he stuck to the disclosure of Rs. 25,00,00,000/-. Similarly, his father Shri Shanti Kumar Jain, his brother Shri Sumit Kumar Jain and Shri Haridas Saha were also made to confirm the statement made by him. This was ostensibly done as there was no document/material to support or corroborate such a huge disclosure. Even he h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. Jain group were found during the course of search on the basis of which the addition of Rs. 10.00 crore was made. As far as the reference to a particular seized document marked AKJ-01 (Page no. 5) at page 33 of the assessment order is concerned, the learned CIT(A) at page 85 and 86 of his order has observed as follows: - "In the case of the Appellant, evidence regarding the amount of only Rs. 91.67 Lacs has been referred to and reproduced in the impugned Assessment Order. The Assessing Officer has himself noted in Para 20 of the impugned Assessment Order that since the Appellant had already offered a sum of Rs 1,00,00,000/- for taxation, an additional sum of Rs. 10,00,00,000/- was being added to the total income of the Appellant meaning thereby that out of the so-called "total surrendered amount" of Rs. 11,00,00,000/-, since the Appellant had already offered the sum of Rs 1,00,00,000/- for taxation, the remaining/additional amount of Rs. 10,00,00,000/- was being added to the total income of the Appellant. That being the scenario, if the Assessing Officer had material evidence (as reproduced in the impugned Assessment Order) of only Rs. 91.67 Lacs, then that amount was already ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not conclusive and parties are always at liberty to retract the admission by proving that they are either mistaken or untrue. As a general rule of practice, it is unsafe to rely upon retracted confessions without corroborative evidence. Due to this situation, the Board has issued a Circular No. 286/2/2003 dated 10.03.2003 and Circular No. 286/98/2013 dated 18.12.2014, which prohibits the department i.e. search party to take any confession in the search. The CBDT is of the view that very often officials used to obtain confession from the assessee and stop further recovery of material. Such confessions have been retracted and then the addition could not withstand the scrutiny of higher authorities because no material was found supporting such addition. Keeping in view the above principle, the Board has restrained the authorities from taking confession under section 132(4) of the Income Tax Act. There are a large number of decisions which suggest that without corroborating evidence, addition ought not to be made on the basis of a declaration made under section 132(4) of the Income Tax Act. 18. During the course of hearing, the learned D.R. has submitted that there was a delay in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsiderations altogether, ensue. The situation resembles the one, which arises on retraction from the statement recorded under Section 164 Cr. P.C. The evidentiary value of a retracted statement becomes diluted and it looses the strength, to stand on its own. Once the statement is retracted, the Assessing Authority has to garner some support, to the statement for passing an order of assessment. 11. In I.T.A.No.112 of 2003, this Court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee. 12. In the instant case, the appellants specifically pleaded that the statements were recorded from them by applying pressure, till midnight, and that they have been denied access outside the society. The Assessing Officer made an effort to depict that the withdrawal or retraction on the part of the appellants is not genuine. We do not hesitate to observe that an Assessing Officer does not have any power, right or jurisdiction to tell, much less to decide, upon the nature of withdrawal or retraction. His duty ends where the statement is recorded. If the statements are retracted, the fate thereof must be decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was initiated in the Signature Group and its associates on 29.1.2014. The assessee's association with the Signature group is on account of the common partners in various concerns. Assessee is separately assessed to tax. Search u/s 132(4) of the Act was initiated in the case of the assessee on 29.1.2014 and was concluded on 31.1.2014. This fact is proved on the basis of "panchanama" prepared by the officer of the search team which is placed at page 62-64. No surrender was made in the statements taken by the search team during the course of search from 29.1.2014 to 31.1.2014. There is no mention of any incriminating material referred by the Ld. A.O on the basis of which additions have been made. 11. The search action in the case of Signature Group continued ever after 31.1.2014. On 02.02.2014, Mr. Vipin Chouhan who is Ultimate Builders the partner of the assessee firm gave a statement before the search team wherein he made surrender of Rs. 2,25,00,000/- on behalf of the appellant firm and agreed to offer it to tax. In the very same statement he also made surrender on behalf of another firm M/s. Virasha Infrastructure in the capacity of a partner. In the very same st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be made merely on the basis of statement which too was taken after conclusion of the search and no correlation has been made with the incriminating material found during the course of search. 14. On the other hand Departmental Representative gave reference to various judgements referred above. She mainly placed emphasis on the judgment of Hon'ble High Court of Madras in the case of Kishore Kumar V/s DCIT (supra) holding that "when there was a clear admission of undisclosed income in the statement sworn in u/s 132(4) of the Act there is no necessity to scrutinise the documents". 15. Now so far as the first contention of the assessee that the statement relied on by the revenue authorities cannot be construed as a statement given u/s 132(4) of the Act, we will like to first reproduce the provisions of Section 132(4) of the Act; "(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is fond to be in possession or control of any books of account, documents, money, bullion, jewellery to other valuable article or thing and any statement made by such person during such examination may thereafter be used in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tructure, Signature Ultimate Builders Infrastructure, Signature Builders and Signature Builders and Colonisers. Certainly the search in the case of concerns other than the Ultimate Builders did not conclude on 02.02.2014 but at that point of time on 02.02.2014 the search in the case of Ultimate Builders stood concluded two days before on 31.1.2014. 20. We therefore are of the considered view that the alleged statement given by Mr. Vipin Chouhan on 02.02.2014 may be construed as the Section 132(4) of the Act for all the other concerns named above except for the assessee i.e. M/s. Ultimate Builders. Therefore the statement referred to by the Ld. A.O on the basis of which the addition have been made in the hands of the assessee in our view cannot be construed as the statement u/s 132(4) of the Act. 21. Coming to the issue of addition made by the Ld. A.O on the basis of the statement but no reference been given to the incriminating material, we find that in the assessment order Ld. A.O has referred to various seized documents but none of them is directly related to the assessee. These seized documents are of the Signature Group and Ld. A.O has only mentioned the details of the se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the rival contentions of the parties. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs. 69,59,000/- and Rs. 75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed. Ground raised by the revenue is dismissed." 23. Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi vs. CIT - (2008) 14 DTR 257 (Guj.), 9. The Ld. Departmental Representative though not leaving his grounds, could not dispute the proposition that the add ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of undisclosed income of the assessee. 6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessee was concluded on 31.1.2014 by the Authorised Officer. Secondly as regards to other business concerns referred by Mr. Vipin Chouhan in his statement given on 02.02.2014 and in case of such business concern wherein search action u/s 132 of the Act was continuing the said statement dated 02.02.2014 will be considered as the statement u/s 132(4) of the Act. Thirdly, no reference has been given by the Revenue Authorities to any incriminating material found during the course of search at the business premises of the assessee, which could be correlated to the alleged surrendered income earned by the assessee from undisclosed sources. 27. We therefore are of the considered view that the finding of Ld. CIT(A) needs to be set aside and the addition of Rs. 2,25,00,000/- deserves to be deleted since it has been made on the basis of a Ultimate Builders statement not given u/s 132(4) of the Act and without referring to any incriminating material found during the course of search." 21. It is, therefore, a settled law that no addition can be made solely on the basis of statement recorded u/s 132(4) of the Act in the absence of any corroborative material or evidence to support the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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