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2007 (7) TMI 638 - AT - Income TaxUndisclosed income - Search and seizure u/s 132 - seizure of incriminating documents - Addition on the basis of statement made by assessee’s partner - Difference of opinion between the two learned Members - Third Member Order - Whether, the Tribunal delete whole of the undisclosed income of ₹ 10 lakhs or should restrict the addition on account of ‘on-money’ to ₹ 1,50,000? - statement retracted from the original statement. Order ld JM - HELD THAT:- learned Judicial Member took note of the specific findings/observations of the CIT(A) to the effect that (a) the statement of Shri Kamal Shah was taken on record based on mere suspicion, (b) the same cannot be treated as an admission and cannot be treated as material for framing the assessment and (c) the Assessing Officer has not brought on record any cogent material or evidence in respect of on-money receipts The learned JM observed that the revenue has not disputed the correctness of this finding and hence the conclusion reached by the CIT(A) has to be accepted. The alternative contention of the revenue, on the basis of the order of the Tribunal in the case of Adinath Construction that at least 15 per cent of the receipts should be treated as undisclosed income was also rejected on the ground that in the case of Adinath Construction, a diary was found in which the details relating to the receipt of on-money were found to be recorded. Moreover, in that case, the assessee itself has accepted a receipt of ₹ 14,22,000, but in the present case, there was no such diary nor was there such admission. Order Ld AM - The learned AM took note of the conduct of the assessee in so far as that the disclosure was made by the managing partner of the assessee-firm, he had explained the modus operandi of charging on-money, explained the investment of such money and absence of duress while recording the statement. The learned AM held that these facts confirmed the factum and practice of charging on-money. Finally, though he did not much agree with the alternate contention to treat only 15 per cent of the gross on-money as the assessee’s income, yet, he sustained the addition to that extent only, i.e., at ₹ 1,50,000. Third Member Order - The main reasons given by the learned AM for his conclusion. The first reason which he considers to be a crucial pointer is that Shri Kamal Shah is the managing partner of the assessee-firm and in fact, is one of the main persons who is in the know of the affairs of the business. This fact is undisputable. However, having retracted from the original statement, the latter does not lead us to anywhere. The search was on the group as a whole consisting of several entities. The statements that he may have given during the search are for the group as a whole and though in the statement he has given the break-up of disclosure, it is not corroborated by anything that might have been unearthed during the search. There may have been hundreds of reasons and thoughts crossing in the mind of the deponent during the search and it is not expected that whatever is reeled out during the search is only after proper application of mind. He may have explained the modus operandi of charging on-money, or the avenues and the destination of such money. Again, this may be true for the group as a whole but the retracted statement does not lead to the conclusion that the particular assessee before us had an undisclosed income of ₹ 10 lakhs. The second reason given by the learned AM is that enhancing the figure of disclosure two months later shows proper application of mind and also absence of any duress while giving the statement. Well, there may not be any evidence of coercion being exercised by the search party, there may not be any duress also, but existence of confusion cannot be ruled out. Duress has to be distinguished from confusion. Duress is a constraint illegally exercised to force a person to perform some act. It is highly philosophical to say that restricting the addition only in the entity where material is found, betrays the thinking and the machination employed by the assessee, using it as a ploy to make travesty of the entire judicial process of the search and seizure proceedings. All said and done where is the evidence to show that assessee had any undisclosed income barring the statement given by Shri Kamal Shah while under utter state of confusion. As a matter of fact, what has been stated about the so called machination of the assessee is an ill-founded and unwarranted allegation against the assessee. Further, it is interesting to note that though the learned AM has observed that the alternate argument of treating 15 per cent of the gross on-money as income defects the assessee’s case in this regard. Despite this observation, ultimately, he sustains the addition to that extent only. Therefore, I am convinced that there being no spectre of evidence regarding undisclosed income, no addition can be sustained. I am in agreement with the view taken by the learned JM. In view of majority decision, the addition of ₹ 10 lakhs on account of undisclosed income having been sustained by the CIT(A) stands deleted and assessee’s appeal allowed on this point.
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