Addition made only on the basis of statement which stood retracted on the next day itself was unjustified. ITAT deleted the addition
ABCAUS Case Law Citation:
ABCAUS 3034 (2019) (06) ITAT
Important Case Laws Cited/relied upon by the parties:
Pullangode Rubber Produce Company Ltd. Vs State of Kerala and Another (1973) 91 ITR 0018
The instant appeals was filed by the assessee against the separate orders of CIT(A) in the matter of orders passed by the Assessing Officer (AO) u/s 143(3)/147 and 154 of the Income Tax Act, 1961 (the Act).
The main ground taken by the asseesee was that the CIT(A) erred in holding against him only on the basis of his statement ignoring that the same was rebutted on the very next date by filing the affidavit.
The AO on the basis of information regarding transfer of commercial plot, had issued notice u/s 148 of the Act. In compliance to which the assessee filed return of income.
In the course of reassessment proceedings, the AO observed that the assessee had transferred a commercial property which was obtained by way of power of attorney. The AO further recorded the statement of assessee wherein he had admitted to have paid money to the owner for getting himself appointed as a power of attorney holder for sale of the said property.
However, this statement was retracted by filing an affidavit on the very next date wherein it was stated that the assessee had received remuneration for his acting as POA. However, the AO did not accept the retraction and observed that the assessee had paid money to the owner and the said property.
Thus, the AO held that the assessee has earned profit in this transaction being the difference of amount of sale price minus amount paid to owner. Accordingly, the same was added to the assessee’s income from other sources by treating it as unexplained u/s 69 of the Act.
The CIT(A) observed that since the owner had accepted sale consideration in his return of income, only amount paid by the assessee remained unexplained in his hands. Accordingly, he confirmed the addition to that extent against which the assessee was in further appeal before the ITAT.
The Tribunal observed that the CIT(A) failed to consider the fact that the assessee retracted from the statement by filing affidavit on the very next date. In the said affidavit the assessee had stated that due to fear, he had accepted having paid money to the owner towards appointing power of attorney but the truth is that he had received only a small amount towards this work from the owner of the property.
The Tribunal noted that it was clear that the addition confirmed by the CIT(A) was on the basis of statement which had been retracted by filing affidavit on the very next date explaining the reasons for retracting from the earlier statement.
The Tribunal observed that the Hon’ble Supreme Court had held that
“Admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made admission to show that it is incorrect and the assessee should be given proper opportunity to show that correct state of affairs.”
It was noted that in the instant case, no evidence was brought on record that assessee paid amount to the owner. Therefore, the addition made only on the basis of statement which stood retracted on the next day itself was unjustified. After retraction of statement, no inquiry was made by the A.O. nor by the CIT(A) from the owner as to whether any amount was paid by the assessee to him for giving power of attorney.
Accordingly, the Tribunal directed to delete the addition confirmed in the hands of assessee. However, considering the role of assessee as broker and Power of Attorney holder, the Tribunal considered brokerage income of 5% as reasonable and upheld addition to that extent only.