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TMI Blog2025 (5) TMI 1587X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee are from Professional fee, interest income and dividend income. As a result of search jurisdiction over the cases was assigned to Central Circle -22, New Delhi vide order u/s. 127 of the Act. The notice u/s. 143(2) and further notices u/s 142(1) were issued from time to time and the assessee responded to the notices issued and filed details required during the assessment proceeding. During the search at the residence of the assessee at 12A Green Avenue, Pocket -3, Vasant Kunj, New Delhi loose papers were found/seized marked as Annexure-A-1 to A-18. Statement of assessee were recorded u/s 132(4) of the Act where in response to question No.22, the assessee made a disclosure of additional income of Rs. 100 crores on account of the discrepancies found at the time of search. Thereafter during post search proceedings before the ADIT, Unit-IlI(1), the authorized representative of the assessee (his CA) vide letter dated 28/05/2012 re-confirmed the surrender and increased the amount of additional income from 100 crores to 130 crores and stated the bifurcation of the disclosure of additional income offered by the assessee during the search. According to the said letter Rs. 90 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 132(4) is only piece of evidence found as a result of search which although retracted however, will not make the fact corrected that there was no incriminating material, therefore, the addition was justified and she vehemently supported the order of the ld. AO on this issue The ld. DR further challenged the various finding of the ld. CIT(A). She has heavily relied on the statement recorded u/s. 132(4) of the Act wherein the assessee has accepted the additional income of Rs. 10.crores as his additional income in addition Rs. 120 crores offered as additional income in the hands of other entities. Ld. CIT DR further stated that the addition was based on the confession before the investigation and now the assessee cannot say that the statement is not correct. No evidence was filed in support the allegation that the statements were recorded and admission was obtained from the assessee under pressure. In addition, the ld. DR also filed a written submission in respect of the grounds raised by the revenue, which is reproduced as under: "1. Kind attention is invited to para 16 of the assessment order. It is submitted that during the course of search at the residence of the assessee, cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the fact that he had reconfirmed content of his statement recorded under section 132(4) by way of a letter dated 28/05/2012, which was filed around 6 month after such statement. Such letter, by no stretch of imagination can be considered as having been written under some kind of pressure or coercion. Moreover, in case as alleged, statement u/s. 132(4) of the Act was recorded under some pressure, why did assessee not make complaint about the same to higher authorities in the department? Further, if the statement was recorded under pressure, why did assessee not retract it within few days of recording of such statement? It is pertinent to highlight that assessee is making allegation of pressure and harassment more than 3 years after the date of making the statement. There is no reason or justification given by the assessee for taking such a long time gap for challenging the statement. In fact, as stated earlier, case records also indicates that the assessee did not file any retraction by way of affidavit before the concerned authorities. Thus, conduct of the assessee subsequent to recording of the sworn statement clearly indicates that there was no pressure upon the assessee at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) has neither given any finding supporting the claim of assessee regarding pressure/duress on him, nor held that the assessee successfully rebutted the presumption arising from statement under section132(4). In absence of such findings in his order, the Ld. CIT(A) committed an error of law in ignoring the admission made by the assessee under section 132(4) of the I.T. Act and deleting the addition made by the Α.Ο. 8. Without prejudice to the contention of the Revenue that admission of additional income by the assessee was based on seized documents and discrepancies therein as noted and judged by the assessee in his wisdom at the time of recording of the statement on oath, relief could not have been allowed to the assessee by the Ld. CIT(A) merely on the ground that "addition made by the A.O. is not based on any document found in the search action" in light of fact that such addition was based on an admission made in a sworn statement under section 132(4) of the I.T. Act, which was neither rebutted nor proved to be invalid/improper one. Thus, the decision of the Ld. CIT(A) is contrary to provisions of the law. Case Laws being relied upon: A. There are catena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that by not declaring additional income in the return of income filed, the assessee has retracted from the confession of additional made in the statements recorded u/s 132(4) which cannot be binding since the same was made under pressure. The search was commenced in the early morning and recording of statements were continued for around 12 hrs. and assessee was allowed a break of only few minutes in the evening. 8. It is further submitted by the ld. AR that the admission of undisclosed income of Rs. 10,00,00,000/-, was made on ad hoc basis, without referring to any incriminating document found in the search & seizure action u/s 132 of the Act. He further stated that in the case of Shri B.C. Jindal, admission of undisclosed income of Rs. 30 crores was included in the return of income filed on 31.8.2012 and due taxes along with interest were paid as such surrender was based on the incriminating material found as a result of search. Ld. AR further submitted that undisclosed income of Rs. 90 crores as admitted in the hands of M/s Lucky Holdings Pvt. Ltd., for A. Y. 2012-13 since, was not supported by any document found and seized during search, therefore, the same was not offer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd ultimately concluded only during the early hours of the next day i.e., 15.11.2011. 13. At the fag-end of the recording of statement, when the assessee was completely exhausted, he was asked to comment on certain voluminous seized annexures (documents and hard disk) marked as Annexure A-1 to A-18, found from his residential premises, in response to which the assessee categorically stated that the aforesaid annexures relate to his business and family and that he shall offer his comments on the same later on. The extracts of the said question and response, which was one of the last queries posed to the assessee is extracted hereunder: "Q.21 During the course of search at your residence i.e., 124, Green Avenue, Sector D-III, Vasant Kunj documents/hard disk found and seized as Annexure A-1 to A-18. Please comment on the contents of these Annexures. Ans. Documents/Hard Disks found and seized from my residence as Annexure A-1 to A-18 contains documents relating to my business and my family. I shall offer my comments on the contents later on." (emphasis supplied) 14. Thereafter, despite there being absolutely no incriminating material found from the premises of the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid surrendered amount of Rs. 100 crores as under: (Refer page 23 of the PB): (i) a sum of Rs. 90 crores was stated to be offered on behalf of Lucky Holdings Pvt. Ltd.: and (ii) balance Rs. 10 crores was stated to be offered on behalf the assessee himself. 18. Later, on examination of the contents of the entire seized documents (including Annexures A-1 to A-18) and the state of affairs as per the regular records, it was evident that the surrender made at the time of search under duress/ coercion ought not to have been made since there was, in reality, no discrepancy that warranted any such surrender. Accordingly, return of income was on 27.09.2012 without including any such surrendered amount, thereby formally withdrawing/retracting from the surrender erroneously made under threat/ coercion. 19. On the basis of the above, the assessee on 27.09.2012, filed the return of income, for the assessment year under consideration under section 139(1) of the Act declaring income of Rs. 3,71,04,136 (Refer pages 24-25 of the PB). In the said return of income, the assessee, as stated above, admittedly, did not include the above surrendered amount of Rs. 10 crores. Withdrawal retrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t not to have been surrendered in the first place, and accordingly, no part of the amount surrendered was offered to tax in the return of income filed on 27.09.2012. 26. Pertinently, even in the post search proceedings i.e., investigation/assessment, no incriminating documents was ever confronted to the assessee by the Department to demonstrate any nexus of the above amount of Rs. 10 crores. Repeated request to AO to undertake verification to assess correct taxable income 27. It is imperative to note here that during the course of assessment, the assessing officer, vide notice dated 17.01.2014 (enclosed at page 27 of the PB), confronted the assessee to explain why the income surrendered during the course of search was not offered to tax in the return of income. 28. In response to the aforesaid notice, the assessee, vide letter dated 27.01.2014, explained the aforesaid reasons for not declaring any part of the surrendered amount as income (enclosed at page 28 of the PB). The relevant extracts of the letter dated 27.01.2014 are reproduced hereunder: "....Subsequent to the search operations, the state of affairs and the copies of documents seized during the search, after obt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the surrender made during the course of search was ad-hoc, without any basis and was made under huge pressure, only to buy peace. In the said letter, the assessee even pin-pointed that the Department was unable to place on record any incriminating material to insist the assessee to offer to tax such amount. The relevant extracts of the aforesaid letter is reproduced as under: ".....The aforesaid alleged surrender of Rs. 10 crores made during the search proceedings was adhoc and not based on any discrepancy/incriminating documents found during the search. The aforesaid surrender had absolutely no basis in law as the same has no nexus or correlation with any material found during search, and no such material have been confronted to me by the Department till date. The search operation which started on 14.11.2011, continued uninterrupted for the next day and my statement was recorded more than 24 hours after the search started. I was then thoroughly exhausted and was mentally extremely tired. The statement was recorded by me under huge pressure and was to buy peace of mind. It was made on absolutely adhoc basis and neither there was any confrontation of incrementing document or dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s whatsoever with any incriminating documents/evidences which have been confronted to me which would demonstrate that the said amount represents my income for the assessment year under consideration either during the search proceedings or thereafter." (emphasis supplied) 31. On perusal of the above letter dated 4.12.2014, it will kindly be appreciated that the assessee had categorically mentioned before the assessing officer that: a) the amount surrendered during the course of search was ad-hoc, without any basis and under huge pressure; b) the contents of seized documents, copy of which was provided to the assessee much later, do not reveal any discrepancy that warranted inclusion of any income other than the regular income of the assessee c) the income declared in the return of income was the actual income of the assessee taxable under the provisions of the Act, which has been determined on the basis of extensive analysis of the books of accounts and other allied documents/records, and d) the Department was unable to bring anything on record to justify the alleged addition of Rs. 10 crores to the income of the assessee's e) instructions issued by the CBDT categoricall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dates assessment of real "income" 37. In this regard, it is respectfully submitted that assessment under the provisions of the Act is required to be made with reference to the correct taxable real "income" of the assessee and consequently, such assessment ought to be as per documents, records and evidence and not merely on the basis of any ad-hoc, that too, involuntary statement/ surrender made during the course of search, which too stands subsequently retracted/ clarified, as discussed hereunder. 38. It is well settled law that admission of income cannot be the sole basis to tax any income/amount. It is always open to the assessee to explain the contents of the earlier admission. the circumstances in which the same was made and even retract from the same if the admission was made under mistaken impression of facts and/or law. 39. In this context, reference may be made to the following settled legal position: a) Purpose of assessment is to tax correct taxable income; b) Admission is relevant, but not conclusive; c) Addition cannot be made solely on the basis of a statement that, too, a statement that stands retracted, and/ or is explained subsequently, d) Statement on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar (HUF) V. CIT: 106 ITR 64 (HP) DCIT V. Sreeni Printers: 67 STC 279 (Ker.) KrishanLal Shiv Chand Rai V. CIT: 88 ITR 293 (P&H) Indo Java & Co. V. IAC: 30 ITD 161(SB) Addition cannot be made simply on the basis of statement recorded during search, that too, in violation of CBDT Instruction 47. Reference in this regard may be made to provisions of section 132(4) of the Act, which reads as under: "(4): The authorized officer may, during the course of the search or seizure. examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable 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 purposes of any investigation connected with any proceeding under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile recording statement during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely Further, in respect of pending assessment proceedings also. Assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders." (emphasis supplied) 52. The aforesaid instruction was again reiterated by the CBDT in Instruction no. F. No. 286/98/2013-IT (Inv. II) dated 18.12.2014 (Refer pages 164 to 165 of caselaw PB), wherein it has emphasized upon the need to focus on gathering evidences during search/survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. "Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessee were coerced to admit undisclosed income during search/surveys conducted by the Department, It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence Such action defeat the very purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grover vs. ACIT: 126 TTJ 527 (Ars.) (Refer pages 230 to 266 of caselaw PB) (d) Statement once retracted, looses its evidentiary value 63. It is further trite law that statement, once retracted, looses its evidentiary value. Further, in the following cases it has been held that a lawful assessment has to be based on material and such assessment cannot be done merely on the basis of admission: * K.T. M. S. Mohd. vs. UOI: 197 ITR 196 (SC) (Refer pages 128 to 143 of case law PB) the Court observed that statement obtained by inducement/ threat/coercion or by any improper means must be rejected and it is the maker of the statement to establish the same. However, even if maker of the statement fails to establish his allegation of inducement, etc, while acting on the statement the authority is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction. Vinod Solanki vs. UOI: (2008) 16 SCC 537 Legal position applied to present facts 64. On perusal of the aforesaid, it will kindly be appreciated that it is trite law that admission, though relevant, is not conclusive. The entire purpose of the assessment is to tax correct taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mar vs. CIT: 52 taxmann.com 449 [SLP Dismissed in 234 Taxman 771 (SC)] In the facts of the said case, a search was conducted at the premises of the assessee's father, wherein loose sheets and notings on telephone diaries pertaining to the assessee were found by the department. Pursuant to the same, assessment under section 143(3) r.w.s. 153A/153C of the Act was completed by the assessing officer based on admission made by the assessee during the time of search and the records seized. In the sworn statement, the assessee on being confronted with the search documents/loose sheets and notings, without disputing the same, categorically stated that he had separate business income which was not included in his income tax returns and on this account admission of undisclosed income was made. The assessee in the sworn statement also explained the notings in the loose sheets and stated that outstanding loans given from his undisclosed finance business was recovered with interest @ 18%, which tantamounted to clear admission of undisclosed income. It is in light of these facts that the Court held that when there is a clear and categoric admission of undisclosed income by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 308 (Del) Appeal dismissed in [2023] 149 taxmann.com 399 (SC) In this regard, it is submitted that the aforesaid decision is distinguishable on facts and not at all applicable to the case of the assessee. In this case, search and seizure operation was carried out on assessee firm and various material, documents, agreements, invoices and statements in the form of accounts and calculations were seized. The assessee along with her family members surrendered a sum of Rs. 3.5 crores as additional income in respect of business carried on outside books of account. The assessing officer however rejected books of account and made addition by estimating sales and gross profit rates, inter alia on the ground that in course of search statements were recorded by assessee's son on behalf of assessee and other family members. The assessee submitted that statements were not recorded during search but later and that they could not be considered of any value for the purpose of making addition. On these facts, the issue for consideration before the Court was whether statement recorded in post search proceedings could be considered for the purpose making addition in 153A procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l estate and constructions activities. It was subjected to survey operation under section 133A of the Act. During the course of survey, the statement of one of its Directors was recorded, wherein he disclosed a sum of Rs. 15,00,55,000 as additional income outside the regular books of account and furnished details in this regard. The assessee did not disclose this income in its returns, which was declared at the time of survey. On issuance of show cause notice during assessment proceedings as why the said unaccounted amount, disclosed by the Director should not be added back to the total income, the assessee alleged that the surrendered amounts were not voluntary and bona fide and the same was obtained in illegal and arbitrary manner, and in the absence of any evidence or material in relation to the surrender, the surrender made during the course of survey was also retracted. The assessing officer, however, rejected the explanation and added back the amounts. The CIT (A) gave partial relief by taking into account debit entries from the gross receipts, thus reducing the total taxable income, which order was confirmed by the Tribunal. It is in light of these facts, especially co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rwal vs. CIT: 215 Taxman 229 (Del) In the facts of the said case, search operations were conducted in which assessee made certain statements. The assessee surrendered Rs. 1 crore during the first statement and thereafter in the second statement (recorded after a gap of 10 days during further search proceedings), voluntarily increased the amount of surrender to Rs. 1.75 crores. Later on, he wrote a letter to bifurcate the sum into two branches. The assessing officer finally, made addition of entire sum as the assessee's undisclosed income. On appeal, the main question raised by the assessee before the High Court was whether the statements, whereby the surrender was made, were sufficient for making the addition or not. The Court, in this regard held that as a general rule of practice it is unsafe to rely on a retracted confession and judicial as well as quasi-judicial authorities ought to look for corroborative evidence. But, the Court held that this was not a case of a retracted confession since the assessee had never effectively retracted his statement and there was also no allegation of any threat or intimidation having been meted out by the revenue authorities. In the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the amount of undisclosed income offered on the ground that the assessee was unable to explain the various loose papers, documents, availability of jewellery and silver items and cash, which he volunteered to surrender as his undisclosed income. On appeal, the CIT(A) deleted the addition. The Tribunal dismissed the revenue's appeal holding that confessional statements made during search are often vulnerable, as the person making such statements remains under great stress and strain and he does not have relevant details, documents and books of account and in the absence of the same, precise computation relating to mode of utilization of such income and year of investment cannot be clearly furnished. On further Revenue appeal, the High Court reversed the order of the Tribunal by holding that the assessee had, on being confronted with incriminating material, voluntarily surrendered the amount to cover the various loose papers, documents, jewellery and silver items and cash found during the search. Since he made unconditional and voluntary statement and surrendered the amount as undisclosed income, as he could not explain the recovery of cash, gold and silver ornaments and loo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opportunity to the appellant-firm to adduce evidence in support of the return and explain the disclosures made in the statement of its partner had not been complied with." The aforesaid decision, it is submitted, supports the case of the assessee in so far as the Court has specifically observed that the assessing officer is bound to provide adequate opportunity to the assessee and undertake verification before proceeding to make addition on the basis of a statement." 11. We have considered the rival contentions, perused the material available on record and gone through the findings of the lower authorities recorded in their respective orders. We have also gone through the various judicial rulings placed before us by both the parties to drive home to their contentions. As the assessee objected to the proposed addition on the ground that during the search no incriminating material indicating any undisclosed income for the year under consideration was found, which is also apparently clear from the assessment order itself and from the order of the ld. CIT(A). Further before the AO assessee has filed explanation of each and every paper found and seized during the search operation, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that the surrender of Rs. 10 crore. was on adhoc basis and it was also claimed that the surrender was made under pressure. However, the above submissions of the assessee, did not find favour and addition of Rs. 10 crs., was made. (v) During appellate proceedings, the appellant has reiterated the submission made in the assessment proceedings and it has also been submitted by the appellant that the admission of undisclosed income of Rs. 10,00,00,000/-, was made on adhoc basis, without referring any incriminating document found in the search & seizure action u/s 132 of the Act. It is further submitted that the admission of undisclosed income of Rs. 30 crores, in the hands of Shri B.C. Jindal, was supported by the documents found and seized during search and seizure action, which was inventorised as Annexure-JJ/1 & JJ/7, in which cash payments to various parties, for acquisition of land were noted. Therefore, this additional income of Rs. 30 crores, was included in the return of income filed on 31.8.2012, the due taxes along with interest was also paid and same has not been disputed. It is further submitted that the admission of undisclosed income of Rs. 90 crores, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are hereby allowed. 12. From the observation of ld. CIT(A) it could be seen that ld. CIT(A) accepted the contentions of the assessee and held that no addition could be made as no incriminating material was found/seized with respect to the admission made in the statements recorded during search from the possession of assessee. It is evidently clear that in the assessment order there is no mention, reference or finding that the additions have been made by the AO based on any incriminating material found/seized during the course of search and seizure in the case of the assessee. 13. Another very important aspect is being adverted to for consideration is that even in the new provisions relating to assessments consequent to search, warrant existence of incriminating material to re-open assessments relating to certain assessment years. Vide the Finance Act, 2021, the Parliament has done away with the existing legal framework for assessment in case of search or requisition forming part of Chapter XIV of the Income Tax Act, 1961- Procedure for Assessment i.e. sections 153A to 153D of the Income Tax Act, 1961 in respect of search or requisition conducted on or after 1st April 2021. For th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... documentary evidences. 17. The Hon'ble High Court of Rajasthan in the case of Mantri Share Brokers Pvt. Ltd. reported in 96 taxmann.com 279 held as under: "Section 69B of the Income-tax Act, 1961- undisclosed investments (Burden of proof)- whether where except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document or in any other form to conclude that statement made was supported by some documentary evidence, said sum could not be added in hands of assessee as undisclosed investments - Held, yes [Paras 10-11] 1In favour of assessee]. Para 10 & 11 of the order is as under: 10. Before proceeding with the matter, it will not be out of place to mention that except the statement in the letter, the AO has no other material on record to assess the income of Rs. 1,82,00,000/-. 11. It is settled proposition of law that merely on the statement that too also was taken in view of threat given in question No.36 as narrated by Mr. Gupta and the same sought to have been relied upon, there is no other material either in the form of cash, bullion, jewellery or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded...." 20. Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the Act, the same was also applied in respect of assessment u/s 153A, as has been held by hon'ble Delhi High Court in case of Best Infrastructure (84 Taxmann.com 287) when it was held as under: "38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra)." 21. It is submitted that Hon'ble Rajasthan High Court in the case of PCIT vs Shri Sanjay Chhabra in Income Tax Appeal No. 22/2021 vide order dt. 06/04/2022 has held that addition based solely on statement later on retracted, without anything more, could not be justified in law and thus had not admitted the appeal filed by the department. The relevant observations of the hon'bl court are as under: The argument advanced on the basis of the principle propounded by the Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditional income in the statements recorded u/s 132(4) of the Act during the search proceedings. 23. It is further seen that assessee gave pagewise explanation of all the loose papers found and seized from his possession which were inventoried as Annexure A-1 to 18 and none of the paper contained any entry related to the assessee which indicates any transaction of undisclosed in nature and the explanations tendered by the assessee were accepted by AO without any adverse remark. The copies of explanation so filed before the lower authorities are placed in paper book pages 90-139. 24. In the case of Shri B.C. Jindal, since there was incriminating material found/seized indicating undisclosed income, therefore, the additional income admitted by the assessee was offered for tax and due taxes were paid, this also support the stand of the assessee that wherever the admission of additional income was based on the incriminating material, the same was honored by the respective assessee. 25. Regarding the judicial pronouncements relied upon by the revenue, we find in these cases the assessee was not able to demonstrate that the admission made in the statements recorded during search were in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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