2016 (7) TMI 1524 - HC - Income Tax

Addition made pursuant to the statement recorded u/s 132(4) - assessee has retracted from the said disclosure which has not been accepted by the revenue - HELD THAT - Revenue ought to have collected enough evidence during the search in support of the disclosure statement. It is a settled position of law that if an assessee under a mistake misconception or on not being properly instructed is overassessed the authorities are required to assist him and ensure that only legitimate taxes are collected. The Assessing Officer cannot proceed on presumption u/s 134(2) of the Act and there must be something more than bare suspicion to support the assessment or addition. In the present case though the revenue s case is based on disclosure of the assessee stated to have been made during the search u/s 132(4) of the Act there is no reference to any undisclosed cash jewellery bullion valuable article or documents containing any undisclosed income having been found during the search. As decided in KAILASHBEN MANHARLAL CHOKSHI VERSUS COMMISSIONER OF INCOME-TAX 2008 (9) TMI 525 - GUJARAT HIGH COURT merely on the basis of admission the assessee could not have been subjected to such additions unless and until some corroborative evidence is found in support of such admission. From the statement recorded at such odd hours cannot be considered to be a voluntary statement if it is subsequently retracted and necessary evidence is led contrary to such admission. As gone through the order passed by the Tribunal no infirmity in the said order. Revenue is not in a position to produce any material on record so as to warrant interference by this Court. The deletion of addition on account of household expenses and cloth transaction has been rightly confirmed by the Tribunal. Tribunal has rightly applied the principles of telescoping for reducing additions made by the Assessing Officer. Decided in favour of the assessee and against revenue.

Summary

Issues:
1. Addition of benami investment
2. Application of principles of telescoping
3. Reliability of statement recorded under Section 132(4) of the Income Tax Act
4. Deletion of various additions made by the Assessing Officer

Analysis:

Issue 1 - Addition of Benami Investment:
The Revenue challenged the deletion of Rs. 35 lakhs towards benami investment by the Income Tax Appellate Tribunal (ITAT). The Tribunal concluded that the initial investment amount had been rotated in construction projects, arguing that the projects were undertaken simultaneously. The ITAT also applied telescoping principles to reduce the additions made by the Assessing Officer and confirmed by the Appellate Commissioner. The Court upheld the Tribunal's decision, emphasizing the lack of evidence supporting the original addition and the need for more than mere suspicion to justify assessments.

Issue 2 - Application of Principles of Telescoping:
The ITAT utilized telescoping to delete various additions under different heads made by the Assessing Officer. The Revenue contended that the statement recorded under Section 132(4) of the Income Tax Act during a search operation could not be relied upon due to subsequent retraction. However, the Court upheld the ITAT's decision, citing the absence of concrete proof to support the retraction and the necessity for corroborative evidence for additions based solely on such statements.

Issue 3 - Reliability of Statement Recorded under Section 132(4):
The Revenue questioned the reliability of the statement recorded under Section 132(4) of the Income Tax Act. The Court referenced a previous case where statements recorded under similar circumstances were deemed unreliable, especially when retracted later. The Court emphasized the need for voluntary and supported statements, highlighting the inadequacy of evidence in this case to justify the additions based on the initial statement.

Issue 4 - Deletion of Various Additions:
The Assessing Officer had made several additions to the undisclosed income of the assessee, which were partly deleted by the CIT (Appeals) and further altered by the ITAT. The Court found no error in the ITAT's decision to delete additions on account of household expenses and cloth transactions, applying telescoping principles to reduce the Assessing Officer's additions. The Court ruled in favor of the assessee, confirming the ITAT's judgment and dismissing the Tax Appeals filed by the Revenue.

In conclusion, the Court upheld the ITAT's decision, emphasizing the importance of substantial evidence and voluntary, supported statements in tax assessments. The judgment favored the assessee, confirming the deletion of additions and the application of telescoping principles by the ITAT.