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2015 (10) TMI 2012 - ITAT AHMEDABAD

2015 (10) TMI 2012 - ITAT AHMEDABAD - TMI - Disclosure made by assessee during the course of search - whether though the assessee has disclosed the income in the note appended with the return of income, but his income can be assessed lower than the returned income? - CIT(A) deleted the addition in part - Held that:- The assessee has made a disclosure of ₹ 10 crores during the course of search. While filing of the return, on verification of all the materials, he re-affirmed his disclosure a .....

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e. We have upheld the findings of the CIT(A) for deletion of ₹ 8 crores on the ground that there was no corroborative evidence with the Revenue in support of that addition, but, the moment the assessee has re-affirmed the disclosure of ₹ 2 crores, it becomes an absolute evidence. This disclosure was made after due deliberation and consultation with the tax consultant. Therefore, there is no mistake of facts or misconception about the law on this amount. The ld.First Appellate Authori .....

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6.2009 passed for the Asstt.Year 2007-08. On receipt of notice in the Revenue s appeal, the assessee has filed cross-objection also bearing No.239/Ahd/2009. 2. The grounds of the appeal taken by the Revenue are not in consonance with the Rule 8 of Income-Tax (Appellate) Tribunal Rules. In brief, the grievance of the Revenue is that the assessee has made a voluntary disclosure of ₹ 10 crores in the statement recorded under section 132(4) of the Income Tax Act, during the course of search. T .....

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, therefore, the CIT(A) has erred in confirming the addition of ₹ 2 crores. The CIT(A) ought to have restricted the addition to ₹ 99.30 lakhs. 3. In the CO, the assessee has not taken any independent ground of appeal. The CO has been filed in support of the CIT(A) s finding. Thus, the issues agitated in both the appeals as well as in the CO are common. 4. Brief facts of the case are that the search and seizure operation under section 132 of the Income Tax Act was carried out at the r .....

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x Act on 9.6.2008. On scrutiny of the accounts, the ld.AO has observed that during the course of search at the residential premises, cash of ₹ 12,36,880/- was found. The search party has seized a cash of ₹ 12 lakhs from the cash found at the time of search. The ld.AO has confronted the assessee to explain the source of cash found at the premises. The AO was of the opinion that section 69 of the Income Tax Act, provides that where in any financial year, the assessee is found to be the .....

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. (a) the assessee is found to be owner of the money, (b) money is not recorded in the books of accounts, if any maintained, and (c) the explanation about the nature and source of acquisition of money offered by the assessee, is not in the opinion of the AO satisfactory. Then such money or value of bullion jewellery etc. would be treated as an income of assessee. He, accordingly, rejected the explanation of the assessee and made addition of ₹ 12,36,880/-. 5. On appeal, the CIT(A) has delet .....

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he source of the cash at the residence of head of the group found during the course of search can be attributed to such deficit in other concerns. The Revenue has not challenged this deletion specifically in the grounds taken before us. Therefore, we do not deem it necessary to elaborately deal with this issue at this stage. 6. The main controversy in this appeal relates to the disclosure made by the assessee during the course of search. According to the AO, the assessee has made a disclosure of .....

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AO has produced the details in tabular form on page no.9 of the assessment order. He pointed out that total addition of ₹ 8,89,57,186/- has been made in the hands of different individual as well as companies. Telescoping of this addition is being granted to the assessee, against the disclosed income of ₹ 10 crores. 7. On appeal, the ld.First Appellate Tribunal has recorded a finding that out of the alleged addition of ₹ 8,89,57,186/- made by the AO in the case of different indi .....

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d.CIT(A) that though he has made a voluntary disclosure of ₹ 2 crores in the note appended with the return, but, ultimately, the material which can goad the AO to make the addition is to the extent of ₹ 90,30,782/-. The assessee submitted that disclosure made by him along with return be ignored and his assessable income be restricted to ₹ 99,30,782/-. This plea of the assessee has been rejected by the ld.First Appellate Authority for two reasons, viz. (a) that the assessee has .....

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evidence, and the assessee cannot take a U turn from the disclosure voluntarily made by him. She further contended that along with return, the assessee has appended a note wherein, he has contended that in case his income by way of additions made by the AO exceeds ₹ 2 crores, then, his disclosure may also be accepted upto that amount. This type of conditional retraction would suggest that the assessee has not actually retracted his statement made during the course of search. The ld.First .....

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occasions. All the authorities i.e. Hon ble High Courts, ITAT etc. are unanimous in their approach while propounding meaning of section 132(4) of the Act, that mere disclosure would not be sufficient to put any assessee with tax liability. The adjudicator would seek corroboration with other material for putting any assessee under the tax liability on the basis of such disclosure. He took us through the finding of the CIT(A), and also made reference to the Circular of the CBDT No.286/2/2003 where .....

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i Narendra B. Sanchawala, ITA No.222/Ahd/2002; vii) Dhanvarsha Builders & Developers P. Ltd. Vs. DCIT, 105 TTJ (Pune) 376; viii) Bansal Strips P. Ltd. & Ors., Vs. CIT 100 TTJ (Del) 665; ix) CIT Vs. M.S. Agrawal (HUF, 11 DTR (MP) 169; x) Mange Ram Mittal Vs. ACIT, 105 TTJ (Del)(SB) 594; He placed on record copies of these decisions. The ld.counsel for the assessee has also placed on record copies of all the decisions referred by the AO and pointed out that how these decision are not appli .....

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aluable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act. Explanation.- For the removal of doubts, it is hereby declared that the examination of any person under this sub- section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the .....

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t case so as to find out whether the addition of ₹ 10 cores is to be made in the hands of the assessee on the basis of his disclosure statement made during the course of search recorded under section 132(4) of the Act or not, we deem it appropriate to make reference to the question and the reply of the assessee as well as two letters written by the assessee and note annexed with the return of income. All these three items have been reproduced by the CIT(A) in his impugned order. They read .....

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mmitted mistakes which is quite possible and considering that voluntary disclosure is made by me and I shall pay the tax on this time. Besides on this voluntary disclosure further information such as item wise, assessee-wise assessment year-wise, detailed information, I shall present in 10 days time, which may please be accepted. Extract of letter dated 18.9.2006: The reference to the subject mailer, on September 15, 2006 evening, last remaining prohibitory on far at our individual premises wax .....

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identified, as the case may be, from which the detailed break-up, i.e. the head of account., year, assessees, companies, firms, family members, etc. shall be furnished in due course. The aforesaid disclosure is made to cover any error, omissions, discrepancies that may be found in any manner based-on any entries, notes, scribbling, notings etc. in the books of accounts, other documents, loose papers, transactions etc., forming pert of the impounded material or even found, impounded, seized or i .....

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r the normally accepted, interpreted, implemented and understood principles of income commercial parlance as also based on the judicial pronouncements of various authorities on the subject matter......." . The extract of letter dtd. 30-10-20.06 was as under: "In continuation of our earlier submission dated September 16, 2006 referring to the preliminary voluntary disclosure and surrendering of income of ₹ 10,00,00,000 (Rupees ten crores only) We have to state as follows. 1. The a .....

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r concerns / associate concerns of our group. : 2. Accordingly, the aforesaid amount, of disclosure would be added into the computation of income of the current financial year of Shri Jayantilal Thakordas Jariwala who is the head of the family, subject to examination, verification and evaluation of the seized materials, impounded records and such other documents as may be available, found and identified, as the case may be. while filing the return of income. 3. In all humility, it is the case of .....

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lanation in this regard, we shall be pleased to provide on hearing from your end. ……… The appellant has submitted that in the return of income a specific note was made in reference to the disclosure of income, therein it was written that "scrutiny and preliminary review of all the group assessees, family numbers, employee, directors, shareholders, etc. was earned out for identifying any discrepancies, errors, omissions, mistakes etc. and based on that, the amount to be .....

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closure made is at present reduced while computing the total income only for the purpose of registering the claim. However, during the course of assessment / appellate / revision proceedings of any of the assessees of the Colourtex Group covered during the search / survey proceedings, if any disallowances of expenses, deductions, errors, omissions -in the books of accounts, other documents, loose papers, transactions etc. forming part of the impounded material or from any other sources, records .....

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akordas Jariwala after, determining the income of all the assessees on a logical basis as per normally accepted, interpreted, implemented and understood principles of income in commercial parlance. 12. No doubt, the disclosure or admission made under section 132(4) of the Act during the course of search proceedings is an admissible evidence but not conclusive one. This presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some ma .....

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hat it was true and was voluntarily made. But the basing the addition on a retracted declaration solely would not be safe. It is not a strict rule of law, but only rule of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT has issued Circular No.286/2/2003 prohibiting the departmental officials from taking confession in the search. The board is of the view that often the officials used to obtain confessio .....

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n Manharlal Chokshi Vs. CIT, 220 CTR (Guj) 138. In this case, search was conducted upon the assessee under section 132 of the Income Tax Act on 4.11.1988. The statement of the assessee was recorded under section 132(4) of the Act. He made disclosure of ₹ 7 lakhs. Later on, in January, 1989, the assessee retracted from the disclosure and stated the disclosure of ₹ 50,000/- was acceptable to him. The ld.AO made an addition of ₹ 7 lakhs on the basis of his statement and observed t .....

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ure by the assessee was considered as after-thought. The issue travelled before the Hon ble High Court. The Hon ble High Court has deleted the addition by observing that merely on the basis of disclosure, addition cannot be made. There should be some corroborative material. The following observations in para-26 of the judgement of Hon ble Court are worth to note. It reads as under: 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincin .....

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are also of the view that 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. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of ₹ 6 lakhs on the basis of statement recorded by the Asse .....

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Tribunal, and thereafter, concurred with the conclusions of the Tribunal by observing as under: 6. In view of the above discussion and considering the principal laid down in the case of Kailashben Manharlal Chokshi (supra),we are of the considered opinion that the view taken by the Tribunal is just and proper. We are not convinced with the submissions made by Mr. Mehta, learned advocate for the appellant that the Tribunal has not given cogent reasons. Therefore, the answer to the first question .....

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hink it is not necessary to re-capitulate and recite all the decisions on this legal aspect. But suffice to say that the core of all the decisions of the Hon ble High Court as well as of the Tribunal is to the effect that the addition ought not to be made in the hands of the assessee, merely on the disclosure statement made under section 132(4) OF THE Income Tax. The statement has to be seen in the context of facts found in the course of search, and later on it is to be interpreted reasonably by .....

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a business-man who might be happened to be a semi-literate fellow and atmosphere during the course of search. The assessee has disclosed that companies/firms are maintained by him through his employees, and because of that, his employees or other persons might have committed mistake. It is quite possible, and therefore, he made disclosure. In the letter, the assessee has appraised the Revenue that it is a preliminary disclosure depending upon the outcome of the documents and their verification. .....

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etails of addition in a tabular form at page no.4 of the assessment order. But the ld.CIT(A) has observed that after reappreciation of the appellate proceedings, most of these additions have been deleted. The additions are confirmed to the extent of ₹ 99,30,782/-. Most of these orders narrated in the table at page no.4 of the CIT(A) s order are being confirmed by the Tribunal also. Along with these appeals, we have heard some 32 more appeals of the group concerns. We have upheld the orders .....

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cumstances, we are of the opinion that the ld.CIT(A) has appreciated the controversy in right perspective and no interference is called for in the findings of the CIT(A). 16. So far as the grievance of the assessee is concerned, the ld.counsel for the assessee relied upon two orders of the Tribunal rendered in the case of DCIT Vs. Sanmukhdas Wadhwani, 85 ITD 734 (Nag.) and M/s.United Phosphorous Ltd., IT(SS)No.246/Mum/2005 & IT(SS).No.265/Mum/2006. He contended that though the assessee has d .....

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