Retraction from the surrender without having evidence or proof not permissible in the eyes of law. Supreme Court quashed SLP of the assessee
ABCAUS Case Law Citation:
ABCAUS 2871 (2019) (04) SC
Important Case Laws Cited/relied upon by the parties
CIT, Bikaner Vs. Ravi Mathur
CIT Vs. Sunil Aggarwal
Kailashben Manharlal Chokshi Vs. Commissioner of Income-tax
Commissioner of Income-Tax Vs. Lekh Raj Dhunna
Dr. S.C. Gupta Vs. Commissioner of Income-Tax
The Supreme Court recently dismissed the SLP of the assessee against the order of the High Court in dismissing his appeal holding that the statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction.
A search was conducted at the business/residential premises of the Director of appellant company in which he was also operating his proprietary concern.
During the search proceedings at residential premises of the said director, cash was found. In the statement, recorded under Section 132(4) of the Income Tax Act, 1961 (the Act) and even subsequent statement recorded under Section 131 of the Act, the director admitted the same as undisclosed income of the appellant-company.
However, subsequently while filing the return of income for the relevant assessment year, the appellant-company did not offer the said undisclosed income to tax.
The Assessing Officer (AO) therefore served upon the appellant-company a show cause notice as to why it has failed to disclose the said income and also to get the cash verified from the regular books of accounts.
The appellant-company in response to the show cause notice, submitted that withdrawals were made from the account with Bank which was kept by him.
It was also stated that the print out of incomplete books of account in computer was taken by the ADI (Investigation) team, according to which a lesser cash balance only was unaccounted in the balance-sheet. It was also contended that the surrender of cash was incorrect and obtained under made under pressure.
However, the Assessing Officer rejected the contentions of the assessee and made addition for unaccounted income of the appellant-company. The CIT (Appeals) concurred with the findings recorded by the Assessing Officer and dismissed the appeal filed by the appellant-company. The second appeal filed by the appellant-company was again dismissed by the Income Tax appellate Tribunal.
The High Court noted that in a previous case it had held that the statements recorded under Section 132(4) of the Act have great evidentiary value and it cannot be discarded in a summary and cryptic manner, by simply observing that the assessee retracted from his statement.
The Hon’ble opined that one has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion.
The Hon’ble High Court noted that in the present case, the ITAT, on the basis of such statement of the director concluded that in the absence of individual cash-book of respective concerns and other details maintained by him, it was not possible to identify whether the cash so found belonged to the proprietary concern or to the assessee company. Subsequently, in the statement u/s 132(4) of the Act the director categorically admitted that the cash belonged to his proprietorship company and the same was its undisclosed income. Thereafter another statement under Section 132(4) was recorded at his business premises.
It was noted that he was asked to explain the source of cash found at his office and residence, he submitted that regarding the amount found at his residence that he was unable to give any explanation and admitted that he was in the business of civil construction and in such business, various expenses have been inflated and shown in the books of accounts, and that the income so generated on account of such inflation in expenses was represented in the form of cash was found at his residence. When asked to provide any other explanation which he wished to provide, he submitted that pursuant to search operations where various documents, loose papers, entries, cash, investment, advances and individual expenditure details were found and taking all that into consideration, he surrendered the undisclosed income. He also categorically stated that which disclosure was in the hands of the proprietorship firm in his individual capacity.
It was observed that during the post-search proceedings, statement was again recorded under Section 131, wherein he was again confronted with the various documents seized and cash found during the course of search and the consequent surrender made by him in respect of his two concerns and in response thereto, he again confirmed the surrender of undisclosed income.
The Hon’ble High Court observed that the Hon’ble Supreme Court had held that admission is an extremely important piece of evidence but it can’t be said that it is conclusive. It is open to the person, who made admission to show that it is incorrect.
The Hon’ble High Court opined that the assessee should be given proper opportunity to show the correct state of affairs. The law with regard to this has developed much thereafter. There is no gainsay the fact that admission made during the search can be disputed by the assessee and at the same time however it is equally well settled that the statement made voluntarily by the assessee could form the basis of assessment. Mere fact that the assessee retracted the statement at later point of time could not make the statement unacceptable. The burden lay on the assessee to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for assessee to make such statement. However, a bald assertion to this effect at much belated stage cannot be accepted.
The Hon’ble High Court observed that the assessee indulged in maintaining transaction on diaries and loose papers which was not permissible in any of the method of accounting. The assessee, while filing the return of income, had not disclosed any undisclosed income and hence, retracted from the admission made by him during the course of search.
The Hon’ble High Court held that Subsequent retraction from the surrender without having evidence or proof of retraction was not permissible in the eyes of law. The statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction.