TMI Blog2010 (1) TMI 917X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order, the AO had nowhere arrived at a satisfaction regarding concealment of income or furnishing of inaccurate particulars of income, since order of CIT(A)'s quashed qua in the assessee's quantum appeal and thereby the addition forming the basis of levy of penalty no longer exists, cancellation of the penalty by the ld. CIT(A) is confirmed for this reason on merits - ITA No. 2607(Del) 2004, ITA No. 454(Del) 2008, - - - Dated:- 29-1-2010 - A.D. Jain and A.K. Garodia, JJ Ajay Vohra, Achit Jain and R.P. Munjal, CA for the Appellant G.S. Sahota, Sr. DR for the Respondent ORDER A.D. Jain:- ITA No. 2607(Del) 2004:- 1. This is assessee's appeal for the assessment year 2000-01, taking the following grounds:- "1. The proceedings u/s 147 are invalid and without jurisdiction. 2. There are no materials before the Assessing Officer and the alleged materials are irrelevant to having reasons to believe that income has escaped assessment, the proceedings u/s 147 are without jurisdiction. 3. The confessional statement alleged is not a fact or evidence and after retraction of the same, it ceases to be relevant, thus the proceedings u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of C/276, Sarita Vihar, New Delhi, i.e., the assessee. The Customs Authorities had also recovered from the possession of Shri Tuli, two loose sheets containing some currency transaction, whereon, some currency transactions were mentioned, and photo copies of declaration of gifts and related affidavits in respect of the assessee and his family. The assessee was also questioned by the Customs Authorities. He had admitted before them that the said US $ 84,000 had been arranged by him. He had also explained the source of arranging these dollars before the Customs Authorities, deposing that over the years, he had accumulated unaccounted cash worth about Rs. 36 lakhs and when his friend Shri Tuli wanted US $, the assessee took the opportunity to make the money lying with him white and legal; that this was why he told Shri Tuli to issue cheque book from his account, in return of which, the assessee spent the cash lying with him to acquire the US $ from the black market; that cash of about Rs. 36 lakhs was lying with him from his business operations over his earnings; that he purchased foreign currency of US $ 84,000 in piecemeal over more than a week's period, on different dates; and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , duress and coercion and were not voluntary statements; that the AO wrongly made the addition, relying solely on the statements originally made by Shri S.C. Tuli and the assessee on 25.5.1999; that the AO erroneously ignored the retraction of these statements; that the statements having been successfully retracted, they could not have been made the sole basis for making any addition; that the AO further wrongly overlooked the affidavits filed by the assessee before him, the contents of which affidavits had not been rebutted by any Authority; that moreover, the proceedings against the assessee under the Customs Act have since been dropped by the ACMM, vide order dated 4.8.2009 (supra); that proceedings under FERA have also been dropped by the Adjudicating Officer, Directorate of Enforcement, vide order dated 06.10.2004; that the AO did not make any independent enquiry from the two persons from whom the assessee is alleged to have purchased the foreign currency; that the AO erred in placing reliance on "Surjeet Singh Chhabra v. Union of India" [1997] 89 ELT 646 (SC) (copy placed on record); that "Surjeet Singh Chhabra" (supra) has been distinguished by the Hon'ble Supreme Court in " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of Rs. 34,11,478/- was received by the assessee from his NRI friend, Shri S.C. Tuli. After the assessee's return of income was processed, the AO received information from the Customs Authorities that one Shri Subhash Chand Tuli had been searched at IGI Airport, New Delhi and recovery of US $ 84,000 equivalent to Indian rupees 35,25,000/- had been made from his possession. Shri Tuli stated before the Customs Authorities to have received the US $ 84,000 from the assessee. The assessee was also questioned by the Customs Authorities and vide his statement dated 25.5.1999, the assessee admitted that this amount of US $ 84,000 had been arranged by him. He also explained the source thereof. He, as such, admitted the case of the Customs Authorities as discussed in the opening portion of this order. The AO issued a notice u/s 148 of the Act to the assessee. The assessment was completed at Rs.50,40,730/-. The assessee's undisclosed income u/s 69 C of the Act was determined at Rs.40,32,507/-. 10. Before the ld. CIT(A), the assessee contended that the statement before the Customs Authorities had no evidentiary value, since it had been retracted before the Magistrate within just a few da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,507/- u/s 69 C of the Act. While doing so, the AO placed reliance on "Surjeet Singh Chhabra v. Union of India" (supra). 13. In "Surjeet Singh Chhabra v. Union of India" (supra), Shri Chhabra was in an SLP before the Hon'ble Supreme Court against an order of confiscation of gold kara. He had confessed before the Customs Authorities on having purchased gold and having converted it into a kara, in contravention of the Customs Duty Act and the FERA. Shri Chhabra challenged the order of confiscation for the reason of having not been allowed cross examination of the witnesses who had stated that recovery had been made from him. It was brought to the notice of the Hon'ble Supreme Court that Shri Chhabra had retracted his confession. It was held, inter alia, that the Customs Officials are not Police officials. It was further held that the confession, though retracted, was an admission and bound Shri Chhabra. 14. In "Vinod Solanki vs. Union of India" 2009 [233] ELT 157 (SC) relied on by the assessee (copy placed at pages 15 to 21 of the case laws paper book), post "Surjeet Singh Chhabra v. Union of India" (supra), the Hon'ble Supreme Court held that evidence brought by confession, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 23 to 41 of the case law paper book), it has been observed, having considered "Surjeet Singh Chhabra v. Union of India" (supra), and"Vinod Solanki v. Union of India" (supra), that the ratio of these decisions is that once a statement is retracted, the contents of the retracted statement must be substantially corroborated by independent and cogent evidence; that"Surjeet Singh Chhabra v. Union of India" (supra), does not lay down that even a retracted statement can be independently used for making any addition in the hands of the assessee; and that though a statement binds the assessee, once it is retracted, it cannot be the sole basis for making the assessment. 19. Affidavits dated 27.3.2002 and 10.3.2003 were filed by the assessee before the AO. Therein, it was stated that the assessee's residence was searched on 25.5.2009 at about 6.30 A.M.; that the assessee was forceably taken to the Airport; that the shirt of the assessee was stripped off; that the assessee was threatened with third degree measures; that the assessee was threatened that his wife and children would also be called if he did not fall in line and agree to write whatever he was asked to write; and that the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this acquisition as Naveen or two Afghanis. The AO did not deem it necessary to make any investigation with these people. 24. It is also pertinent to mention that before the ACMM, vide order dated 4.8.2009 (copy placed on record), proceedings under the Customs Act have been dropped. Proceedings under the FERA were also been dropped by the Adjudicating Officer, Directorate of Enforcement, vide order dated 6.10.2004, a copy whereof has also been furnished. 25. In the following decisions, it has been held that if the basis of the assessment order diminishes, the addition made is not sustainable:- 1. CIT vs. Somani Pilkington's Limited, 266 ITR 388 (P and H); 2. Farrukhabad Gramin Bank vs. ITO, 273 ITR 113 (All.); and 3. CIT vs. Ramachandra Hatcheries, 305 ITR 117/215 CTR 370 (Mad.). 26. In the present case, obviously, the basis of the assessment order has diminished. The statements initially made have been successfully retracted. The proceedings under the Customs Act as well as under the FERA have been dropped. The department has not been able to discharge its burden of proof that the statements were not recorded under force, threat and coercion. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X
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