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2010 (4) TMI 1064

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..... in the block assessment proceedings by relying only on the sworn statement made by the assessee. 3. The facts of the case are stated in brief. The Department carried out search and seizure operations in the hands of the assessee on 6th Nov., 2001. In the sworn statement taken during the course of search, the authorized officer enquired about the possible understatement of the value of following three properties and therefore possibility of concealment of income : (a) Vacant site purchased near Kesari Talkies in 1998. (b) Shop purchased at Pavan Plaza, Vizag. (c) House built at Kandakam Road. In reply, the assessee submitted that there would be difference in the books and returns shown to the IT Department and accordingly agre .....

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..... ned Authorised Representative contended that the tax authorities were not right in law in making the addition of ₹ 12 lakhs by solely relying upon the sworn statement taken at the time of search, that too, on the presumption that the said disclosure was made towards the difference in the cost of construction. 5. On the contrary, learned Departmental Representative submitted that since the consideration paid for the acquisition/construction of the impugned three properties was apparently lower than the market value, the assessee has agreed to disclose the impugned amount of ₹ 12 lakhs and hence the tax authorities are right in law in treating the said sum of ₹ 12 lakhs as the undisclosed income of the assessee on the bas .....

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..... r. 2002-03 by availing loan of ₹ 5 lakhs from a co-operative bank and hence the details of construction were also available in the bank account. The essential ingredient for framing a block assessment, as stated earlier, is the material seized during the course of search. The contention of the learned Authorised Representative is that the Revenue did not seize any material to indicate that there is understatement of the value of the three properties stated above. 7. The AO has placed much reliance on the sworn statement given by the assessee during the course of search. Since the whole issue revolves around the said sworn statement, we feel it appropriate to extract the relevant question No. 4 and the answer thereof from the sworn .....

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..... 2 lakhs. On a plain reading of the question and answer extracted above, it can be noticed that the authorized officer is questioning the probable understatement in the purchase/construction of the three properties. However, in reply, the assessee makes a general disclosure of ₹ 12 lakhs without making reference to any particular property. Hence, in our opinion, he is not correct in assuming that the disclosure of ₹ 12 lakhs represents unexplained investment in house construction. The moot question here is whether a block assessment can be framed only on the basis of sworn statement. 8. In this regard, it is relevant here to discuss the various case law relied upon by learned Authorised Representative. (a) Rajesh Jain v .....

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..... ect of a retracted confession for the purpose of levy of penalty under Foreign Exchange Regulation Act, 1973. At para 22 of the order, it has been observed as under : It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sen .....

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..... e fact that the tax authorities were also not sure of the purpose of the disclosure is evident from their respective orders. While the AO is of the view that the assessee has made the disclosure with regard to the difference in the cost of construction of one of the three properties, the learned CIT(A) interprets that it has been made with regard to all the three properties, whereas the assessee has made a general disclosure, without making reference to any of the properties. The above said facts indicate that both the assessee and the tax authorities were not sure of the purpose of disclosure. In that case, in view of the judicial precedents discussed in earlier paras, we are of the view that no credence could be given to the statement in .....

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