Finding of ITAT that retracted statement cannot be termed as incriminating material not appealable before High Court
In a recent judgment, Hon’ble Guwahati High Court has held that finding of the ITAT and CIT(A) that retracted statement cannot be termed as incriminating material not liable to be interfered with in Income Tax Appeal since High Court can only exercise jurisdiction when any substantial question of law arises.
ABCAUS Case Law Citation:
4534 (2025) (04) abcaus.in HC
In the instant case, the Revenue had filed an Income Tax Appeal challenging the order passed by the Tribunal on the susbstantial question of law as to whether Tribunal was justified in confirming findings of the CIT (appeal) that for the assessment for relevant Assessment Year was not abated?
The respondent had filed Income Tax Returns under Section 139(1) of the Income Tax Act, 1961 (the Act). However, a search and seizure operation under Section 132 of the Income Tax Act was conducted on the residential premises of the respondent later and thereafter, in continuation of that a search was again conducted.
During the search, statement of respondent was recorded on oath wherein he admitted the fact of routing the unaccounted cash of the family by way of bogus LTCG/STCG in the regular books of account.
On the basis of the search results, the case was selected for scrutiny under Section 153A of the Income Tax Act and a notice was issued to file Return of Income. In compliance of the notice under Section 153A of the Income Tax Act, the respondent e-filed his return of income.
However, it was found that the income disclosed and admitted during the search was neither incorporated in the Return nor offered for tax during period under consideration. As such, show cause notice was issued. Replying to the SCN, the assessee submitted a retraction petition along with an affidavit stating that the disclosure was made under coercion and threat.
However, the AO rejected the retraction on the ground that However, the assessee had not been able to produce any evidence, documentary or circumstantial, in support of the averment of coercion, threat etc. As such, a rebuttal letter along with para wise reason for the non acceptance of the retraction petition was issued to the respondent assessee.
Finally, the AO passed the assessment order adding the amount as disclosed on account of so called Long term capital gain to total income of the assessee within the meaning of section 68 of the Income tax Act, 1961. Also, penalty under section 271(1)(c) was also initiated on the reasoning that the assessee had deliberately and wilfully concealed unaccounted income.
On appeal, the Commissioner of Income Tax (Appeals), allowed the said appeal while recording a finding of fact that the Assessing Officer had invoked the jurisdiction under Section 153A of the Income Tax Act without there being any incriminating material whereas the law is well settled that in the absence of incriminating material, a completed assessment cannot be opened invoking the powers under Section 153A.
The ITAT rejected the grounds taken by the Revenue vide impugned judgment and affirmed the findings of the Commissioner of Income Tax (Appeals).
Before the Hon’ble High Court the respondent assessee submitted that now it is well settled that in the absence of incriminating material, no addition can be made in respect of a completed assessment. It is contended that in the present case, the assessment was completed but the Assessing Officer without there being any incriminating material had passed the Assessment Order by invoking the provisions of Section 153A of the Income Tax Act, however, the same is not in accordance with law.
It was further argued that the Commissioner of Income Tax (Appeals) as well as ITAT had recorded a finding of fact that no incriminating material was available on record and in the absence of the same, the Assessing Officer has erred in passing the Assessment Order while invoking the provisions of Section 153A of the Income Tax Act and the said finding of fact recorded by the Commissioner of Income Tax (Appeals) and ITAT is not liable to be interfered with and in such circumstances, no substantial question of law arises in this appeal and therefore, the present appeal was liable to be dismissed.
The assessee placed reliance on the catena of judgments of the Hon’ble Supreme Court to support his contentions.
The Hon’ble High Court observed that Hon’ble Supreme Court, in Abhisar Buildwell (P) Ltd. while affirming the view taken by the Delhi High Court in the case of Kabul Chawla as well as by Gujarat High Court in the case of Saumya Construction had held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act. However, the completed/unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under sections 147/148 of the Act and those powers are saved.
The Hon’ble High Court observed that the Commissioner of Income Tax (Appeals) as well as ITAT, after carefully scrutinizing the material collected by the Assessing Officer, has recorded a finding of the fact that other than the retracted statement no other evidence/material was relied upon by the Assessing Officer to invoke the addition. The Commissioner of Income Tax (Appeals) and the ITAT were of the view that the said piece of evidence, i.e. retracted statement cannot be termed as incriminating material.
The Hon’ble High Court opined that the said finding of fact recorded by the Commissioner of Income Tax (Appeals) as well as ITAT is not liable to be interfered with in this appeal since High Court can only exercise jurisdiction when any substantial question of law arises.
Accordingly, it was held that the present appeal did not involve any substantial question of law and therefore, the same was dismissed, being devoid of merit.
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