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TMI Blog2024 (2) TMI 862X X X X Extracts X X X X X X X X Extracts X X X X ..... Ld. CIT(A) is liable to be quashed and the order of the Assessing Officer be restored. (iii)That the Ld. CIT(A) erred in facts and in law in holding that the additions of Rs. 4,50,00,000/- was made solely on the basis of confessional statement of Shri Kailash Chandra Lohia U/s 132(4) of the Act, ignoring the fact that the confessional statement was made on the basis of seized documents marked as SPL-02 & SPL-03 wherein suppression of the sales consideration of flats booked/sold was found written. (iv) The Appellant craves leave to add/modify/alter any or all of the grounds during the course of hearing/pendency of appeal." 3. Brief facts of the case are that the assessee is a part of "Lohia Group". A search and seizure operation was conducted U/s 132 of the Income Tax Act, 1961 in the case of the Lohia Group on 24.10.2017 and on subsequent dates. During the course of the search, certain books/documents etc. were found and/or seized vide panchnama dated 24/25.10.2017 prepared in the case of the assessee. During the course of search, the statements of Shri Kailash Chandra Lohia was recorded on 24.11.2017 u/s 131 of the Act and on 07.12.2017 u/s 132(4) of the Act. The statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Rs.35068253/- which was written back by the assessee in its profit & loss account was received as advance from various flats buyers which was forfeited on account of nonpayment of the balance dues. It was further submitted that the assessee had submitted explanation of all the seized documents marked as "SPL-01" to "SPL-20" together with supporting evidences which was accepted by the assessing officer. Hence, the addition of Rs.4,50,00,000/- was not justified and is totally misconceived. The ld. CIT(A) while extensively dealing with the merits of the case, deleted the addition of Rs.4,50,00,000/- made by the AO on account of difference between the disclosure made by the Shri Kailash Chandra Lohia under Section 132(4) of the Act and the additional income declared by the assessee in its return of income filed for the above assessment year. 5. Aggrieved, the revenue is now in appeal before this Tribunal. 6. Before us the ld. D/R has relied upon the order of the assessing officer stating that the assessee ought to have honored the surrender made during the course of search and on the other hand the ld. A/R of the assessee heavily has relied upon the order of the ld. CIT(A) and refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid amount of Rs.350,68,253/- as its income for the above assessment year. During the course of assessment proceedings, the AO had treated the aforesaid amount of Rs.350,68,253/- as part of the additional income of the assessee for the above assessment year. The AO had, accordingly, vide notice dated 16.12.2019, show caused the assessee as to why the balance amount of Rs.4,50,00,000/- (i.e. Rs.8,00,00,000/- admitted as additional income as per statement of Shri Kailash Chandra Lohia less Rs.350,68,253/-) be not brought to tax. The show cause notice dated 16.12.2019 has been referred to by the Assessing Officer at pages 6 to 9 of the assessment order. However, from a perusal of the aforesaid notice, it is noted that the impugned addition of Rs.4,50,00,000/- is only on the basis of admission of additional income by Shri Kailash Chandra Lohia. Further, it is specifically noted that but for the aforesaid admission of additional Income by Shri Kailash Chandra Lohia, neither the officers of the investigation wing (i.e. who had conducted the search in the case of the Appellant), nor even the Ld. DDIT (Inv.) (i.e. the officer who had conducted the post search investigation proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nv-1) dated 18.12.2014 issued by the C.B.D.T., the ld. CIT(A) held that the addition made by the AO merely on the basis of confessional statement was contrary to CBDT circulars/instructions. 9.1. Further, since the statements were specifically retracted by Shri Kailash Chandra Lohia vide his affidavit dated 08.03.2018 and further impliedly retracted at the time of filing the return of income by the assessee for the above assessment year, the AO should have made further independent investigations and should have referred to seized records to prove that the purported additional income of Rs.4,50,00,000/- pertain to the assessee. Further, apart from placing reliance on the aforesaid admission of additional income by Shri Kailash Chandra Lohia through his statements, the Ld. AO had not made even a slightest of attempt or investigation to bring on record the form and manner in which the said additional income of Rs.4,50,00,000/- was available with the assessee on the date of search. Thus, without making any enquiry or efforts, Ld. AO merely proceeded to make the impugned addition of Rs.4,50,00,000/- solely on the basis of the admission of additional income in the statements of shri Kai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Naresh Kumar Agarwal [2014] 369 ITR 171/[2015] 53 taxmann.com 306 (AP) this court dealt with the very aspect and held that a retracted statement cannot constitute the sole basis for fastening liability upon the assessee." (iv) Apart from the ratios of the Judgments referred above and as relied upon by the assessee in his submissions, the ld. CIT(A) noted that in the following cases, it has been held that no addition can be made on the basis of a retracted Statement: * DCIT vs. Ratan Corpn. [197 CTR 536 (Guj)] * CIT vs. Uttamchand Jain [ITA No. 634 of 2009] * G. Kanagaraj vs. DCIT [73 TTJ 731(Chennai)] * Govind Ram Chhugani vs. Asstt. CIT [77 TTJ 339(Jodh)] * Surinder Pal Verma vs. ACIT [89 ITD 129(Chd.)(TM)] * Dineshchandra J. Dina vs. ITO [112 Taxman 107(Ahd.)] (v) The ld. CIT(A) further held that it is pertinent to state that time and again, it has been held by various Hon'ble Courts that a statement recorded under Section 132(4) of the Act on a stand-alone basis without reference to any other incriminating material found during search operation will not have an evidentiary value . It has been further held that such statements/enticement of confession, sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lohia made on 24.11.2017 u/s 131 of the Act which is placed at paper book page 33 - 36, wherein he had made a disclosure of Rs.101 crores in reply to Q. No. 7 of his statement for his entire group including Rs.8.00 crore for the assessee M/s. Subham Planners Ltd. for the assessment year 20182019. The break-up of his disclosure which is given at page 36 of the paper book is re-produced below:- BREAK UP OF DISCLOSURE Amount in crores Sl. No. Name of the Form/Co. Asstt. Year 2015-16 Asstt. Year 2016-17 Asstt. Year 2018-19 Total 1. Brahmaputra Metallics Ltd 5.00 0.50 85.00 90.50 2. Tripura Ispat 0.00 2.00 0.00 2.00 3. Kanak Traders Ltd. 0.00 0.15 0.00 0.15 4. N.E. thermion 0.00 0 0.00 0 5. Gasgen 0.00 0.35 0.00 0.35 6. Subham Planners Ltd 0.00 0 8.00 8.00 TOTAL 5.00 3.00 93.00 101.00 11. A perusal of the aforesaid statement of Shri Kailash Lohia shows that neither any incriminating material relating to the assessee M/s. Subham Planners Ltd. was found and/or seized during the search nor Shri Lohia was confronted with any such document. Hence, the disclosure of Rs.8.00 crore made by Shri Kailash Lohia was without any specific reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ges 119 - 121 of the paper book) and its annexures (at pages 121 to 258 of the paper book) explained these documents with supporting evidences. From the assessment order we find the assessing officer has not made any specific addition based on these seized documents. 15. The assessing officer, thereafter vide his show cause notice dated 16.12.2019 (at page 260 to 262 of the paper book) asked the assessee to explain as to why the residual sum of Rs.4,50,00,000/- (Rs. 8.00 crores disclosed by Shri Kailash Lohia - Rs.3,50,68,253/- offered by the assessee as additional income under the nomenclature "Sundry Balance Written off" under the head "Income from other sources") be added back to the total income of the assessee. The assessee vide its letter dated 18.12.2019 (at page no. 259 of the paper book) responded by saying that Rs.35068253/- represented the amounts of advances received against booking of flats which were forfeited for nonpayment of the balance amount and that there was no basis for including Rs.45000000/- in the total income of the assessee. However, the assessing officer thereafter relying soley upon the disclosure made by shri Kailash Lohia added Rs.4,50,00,000/- (Rs.8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the search. The CBDT is of the view that very often officials used to obtain confession from the assessee and stop further recovery of material. Such confessions have been retracted and then the addition could not withstand the scrutiny of higher authorities because no material was found supporting such addition. Keeping in view the above principle, the Board has restrained the authorities from taking confession under section 132(4) of the Income Tax Act. There are a large number of decisions which suggest that without corroborating evidence, addition ought not to be made on the basis of a declaration made under section 132(4) of the Income Tax Act. 18. The Indore Bench of the ITAT in the case of M/s. Ultimate Builders vs. ACIT in ITA No.134/Ind/2019; Assessment Year 2014-15, order dt. 09.08.2019, under identical circumstances has held as under:- "9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred to and relied by both the parties. The sole grievance of the assessee raised in Ground No.1 of the instant appeal is against the order of Ld. CIT(A) confirming the addition of Rs.2,25,00,000/- made by the Ul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Chouhan. No reference was made to any incriminating material having its bearing on the Ultimate Builders surrendered income. During the course of hearing before us Ld. Counsel for the assessee contended that during the course of search i.e. between 29.1.14 to 31.1.2014 no cash or unrecorded assets was found, no incriminating material was found and no income was offered to tax in the statement recorded u/s 132(4) of the Act of the person found to be in the possession and control of the books of premises. Relevant questions asked about the loose paper found were duly replied in the statement. 12. Ld. Counsel for the assessee further contended that since the search in the case of assessee was concluded on 31.1.2014 the alleged statement of the partner Mr. Vipin Chouhan taken on 02.02.2014 cannot be construed as a statement given during the course of search u/s 132(4) of the Act so far as relating to the assessee since the search in its case already concluded on 31.1.2014. He further submitted that no incriminating material was found during the course of search and as held by Hon'ble Tribunal in the latest decision in the case of ACIT(1) vs. Sudeep Maheshwari (supra) that "no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he authorised officer it reads "during the course of search or seizure, examination of both the person". During the course of search is a period during which the search is initiated and concluded. In the instant case the search was initiated on 29.1.2014 and concluded on 31.1.2014 by a authorised Ultimate Builders officer for the assessee which is verifiable from the Panchanama framed by the search team. The statement of Mr. Vipin Chouhan was taken on 02.02.2014 by another authorised officer and this date is after the conclusion of the search in the case of the assessee on 30.01.2014. 18. There may have been some force in the contention of the revenue authorities if the statement u/s 132(4) of the Act was taken during the course of search at the assessee's premises or during the continuation of search, the statement may have been recorded on other places but the fact is that so far as the assessee M/s. Ultimate Builders is concerned the search concluded on 31.01.2014 and before the conclusion of the search no surrender of undisclosed income was made in the statement recorded u/s 132(4) of the Act by the persons available at the assessee's business premises. 19. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earch & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs.3 crores in personal name. It is also stated that the case laws as relied by the A.O. are not applicable on the facts of the present case. The assessee has relied on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. Retraction from admission was permissible in law and it was open to the person who made the admission to show that it was incorrect. However, Ultimate Builders reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other partners would agree to the same; otherwise it would be his personal liability. However, in the returns filed after search, the income of Rs. 20 lacs surrendered by Shri Sheo Kumar Kejriwal was not declared by the assessee-firm. On being asked to explain the reason for not showing the surrendered amount in the returns, it was submitted by the assessee that declaration made by the partner was misconceived and divorced from real facts. It was contended that the declaration was made after persuasion, which, according to the learned counsel for the assessee, Shri Binod Poddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no undisclosed income. The assessee's said retraction was not accepted by any of the authorities Ultimate Builders below on the ground that the statement given by the assessee appears to be volunt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by the assessee. The Revenue may now proceed accordingly". 25. In the light of ratio laid down in various judgments referred above including one in the case of ACIT(1) Vs. Sudeep Maheshwari (supra) decided by us wherein also we, after referred various judgments of Hon'ble High Courts have held that additions cannot be sustained merely on the basis of statement given during the course of search without correlating the addition with the incriminating seized material. Therefore the decision relied by Ld. Departmental Representative laying down the ratio that addition can be made even on the basis of statement given during the course of search u/s 132(4) of the Act irrespective of the fact whether any incriminating material is found or not, will not support Revenue in the instant case. 26. In the given facts and circumstances of the case and respectfully following the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X
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