2022 (3) TMI 521 - ITAT JAIPUR

Assessment u/s 153A - incriminating material found during the course of search and seizure action or not? - Addition of capital gain u/s 68 - whether AO has grossly erred in law in completing assessment u/s 153A r.w.s. 143 (3) even when no incriminating material whatsoever found in course of search which could suggest any undisclosed income so as to initiate proceedings u/s 153A? - HELD THAT:- Neither in the assessment order nor in the order of the ld. CIT (A) there is any mention or finding that the additions have been made by the AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. AO has solely relied upon the report of the Investigation Wing and statement of one Shri Anuj Agarwal recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure u/s 132 in case of the assessee.

The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, the additions made by the AO while passing the assessment order under section 153A for the assessment year 2010-11 are not sustainable and accordingly the same are liable to be deleted.

Addition u/s 68 - The assessee brought on record the evidence in the shape of bills, allotment of shares, payment through banking channel, dematerializing of the shares in the Demat account of the assessee and sale of the shares through Stock Exchange from the Demat account of the assessee. The documentary evidence which can be independently verified and the correctness of the same cannot be questioned being the payment made by the assessee through banking channel reflected in the bank account statement as well as dematerializing of the shares in the Demat account proving the fact of holding of the shares by the assessee in the Demat account. The evidence produced by the assessee has established at least two facts that the assessee was holding the shares in his Demat account and the payment for purchase consideration was made through banking channel which is also not disputed by the AO. AO has not brought on record any material to controvert or disprove these evidences of payment through banking channel, holding of the shares in the Demat account of the assessee, sale of shares from the Demat account through Stock Exchange at the prevailing price in the Stock Exchange on the date of sale. Thus the conclusion of the AO is based on suspicion and surmises without any tangible material to show that the assessee’s own unaccounted income has routed back to the assessee in the shape of Long Term Capital Gain.

While recording the statement during the course of search and seizure and survey operations, no attempt should be made to obtain confession as to the undisclosed income. The Board has again issued a Circular dated 18th December, 2014 and advised the Taxing Authorities to avoid obtaining admission of undisclosed income under coercion/undue influences. Thus in the absence of any incriminating material found during the course of search and seizure action, the confession as recorded during the course of search and seizure action has no evidentiary value. It is also pertinent to note that if a confession revealing certain information or disclosing certain transactions which are not disclosed by the assessee in the books of account, the same has a good evidentiary value and a simplicitor retraction of such statement cannot be accepted until and unless the assessee at the time of retraction explains the mistakes and circumstances under which such mistakes were committed while making the confession. In the case in hand, the confession of the assessee is not revealing any transaction which is not already disclosed or recorded in the books of account. Therefore, any confession of undisclosed income which is already part of books of account as well as already disclosed in the return of income filed under section 139(1), in the absence of any supporting documentary evidence cannot be regarded as a good evidence for addition. Hence, we do not find any error or illegality in the impugned order of the ld. CIT (A) qua this issue. This covers the Ground Nos. 1 to 7 of the Revenue’s appeal.