Additions based on statement recorded u/s 132(4) without considering Retraction Affidavit with evidences deleted
In a recent judgment, ITAT has deleted additions which were based on only statement recorded u/s 132(4) and without taking note of the Retraction Affidavit filed by the assessee with relevant evidences.
ABCAUS Case Law Citation:
ABCAUS 3924 (2024) (03) ITAT
Important Case Laws relied upon:
DCIT vs Narendra Garg & Ashok Garg (AOP) [2016] 72 taxmann.com 355
CIT Vs JKD Pearl India Developers (P) Ltd
Pr. CIT vs. Saumya Construction (P.) Ltd. [2017] 81 taxmann.com 292/[2016] 387 ITR 529
CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234 Taxman 100/[2016] 380 ITR 573
PCIT(Central) -Vs- Kaushik Devjibhai Patel [2023] 152 taxmann.com 462 (Guj)
Abhisar Buildwell (P.) Ltd
Commissioner of Income-tax v. Mehndipur Balaji, 2022 SCC Online All 444 : (2022) 447 ITR 517
In the instant case, the assessee had filed five appeals challenging the order passed by the CIT(A) confirming addition of wife’s and son’s income in the hands of appellant, whereas, no incriminating documents found and seized in search.
The appellant assessee was an individual and working as an Accountant in a Construction company. There was a search action under section 132 of the Income Tax Act, 1961 (the Act) carried out in the premises of the Group of Companies and following the same, search action was initiated in the residential premises of the assessee.
During the search, the assessee admitted of taking accounting charges in his wife’s name and part of salary in his son’s name. Immediate after the search action, due to heart attack, the assessee was admitted in Hospital and under gone coronary artery disease and Stents were implanted.
Based on the statements recorded u/s.132(4), the income of the assessee’s wife and his son’s income were clubbed in the hands of the assessee.
Aggrieved against the assessment orders, the assessee filed appeals before CIT(A) who confirmed the additions made by the Assessing Officer and dismissed the appeals filed by the assessee.
The Tribunal following the above judicial precedents quashed the assessment orders for unabated assessment years in the absence of any incriminating material seized from the assessee’s premises. The Tribunal held that those assessment orders were without jurisdiction and bad-in-law.
For the remaining unabated assessment, the Tribunal observed that the assessee’s wife was a B.Com. Graduate with Advanced Accounting, Auditing and having good knowledge in writing of books of accounts on tally system as part time job work basis and have been regularly filing her Return of Income u/s 139(1) of the Act. Similarly, assessee’s son had also filed his Return of income.
The Tribunal further observed that impugned additions were made solely on the basis of Statement recorded under Section 132(4) of the Act. The AO had not considered the Returns of Income filed by the assessee’s wife and son under section 139(1) within the prescribed the due dates. Also, the AO had not considered the Retraction Affidavits filed by the assessee, his wife and his son with relevant material evidences.
The Tribunal observed that CBDT’s Circular No.286/2/2013 prohibits the department i.e. search party to take any confession in the search. The CBDT is of the view that 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 Search 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 Act.
The Tribunal stated that it is settled Principle of Law that the disclosure or admission made under section 132(4) of the Act during the search proceeding is admissible evidence but not a conclusive one. The Hon’ble Jurisdictional High Court held that where assessee retracted from disclosure made in statement under section 132(4) which was not accepted by revenue, and if no undisclosed income was found during search, Revenue could not make addition on bare suspicion and presumption.
The Tribunal also observed that the Co-ordinate Bench has held that addition made merely and solely on the basis of confession without any corroborative evidence was not sustainable in law and moreover the said confession made by the assessee was subsequently retracted and since the addition was not supported by any cogent, convincing independent documentary evidence, therefore, the same was correctly found to be not sustainable.
Accordingly, the Tribunal held that assessment orders were without jurisdiction and bad-in-law and quashed them.
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