Statement recorded u/s 132(4) is not sacrosanct merely for want of coercion and duress – ITAT

Statement recorded u/s 132(4) is not sacrosanct merely because assessee failed to demonstrate any coercion and duress – ITAT

ABCAUS Case Law Citation:
ABCAUS 3708 (2023) (04) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in upholding   the addition of undisclosed income made by the Assessing Officer (AO) only on the basis of confessional statement recorded u/s 132(4) of the Income Tax Act, 1961 (the Act).

The assessee was a director of various companies during the relevant financial year.  A search and seizure operation under Section 132 of the Act was conducted at the premises of a Business Group engaged in the business of real estate. The assessee was associated with the business   activities of the group and derived salary income in the capacity of director in various companies. The premises of assessee were also covered by search operations and also on lockers on subsequent dates. Large amount of cash was found during the course of search operation at the residential premises and lockers of the assessee.   

In the course of search, certain incriminating documents in the form handwritten loose papers were found and seized from the premises of the assessee.  A statement was recorded under Section 132(4) of the Act in which the assessee conceded unaccounted income.

Subsequently, the assessment was completed by the AO by inter alia   making additions on account of conceded income as undisclosed income. The impugned addition was primarily made in the light of admissions and confessions made in the statement recorded under Section 132(4) of the Act in the course of the search.

Before the CIT(A), the assessee submitted that the confessional statement made under Section 132(4) cannot be relied upon in the absence of tenable corroboration thereof and the additions made solely   on the basis of statement obtained in the course of search is not justified and such action is also in contravention of CBDT Instruction Number – F. No. 286/2/2003-IT (Inv.II) dated 10.03.2003.  It was contended that the additions made on the basis of a statement were not backed by any concrete underlying evidence and such additions are also in the nature of double additions.  

It was broadly contended that the income computed on the basis of various entries apparently do not pertain either to the assessee or not relatable to year in question otherwise.  It was further contended that such income has been already assessed in the hands of appropriate assessee in appropriate   assessment years and thus no income has ultimately escaped assessment.  The assessee also furnished explanation on other additions/disallowances   made.

The CIT(A) however endorsed the action of the Assessing Officer and declined to interfere with the impugned additions.

Before the Tribunal the assessee contended that the loose paper found was wholly vague, ambiguous and non-descript and thus unreliable. Therefore, no adverse inference can be drawn based on such non-descript loose paper.

The ITAT observed that the loose paper which is the foundation for assessment of as unaccounted income clearly speaks that purported transaction occurred in past.  Thus, without engaging into the debate of truthfulness of loose paper or credibility of additions, the undisclosed   income could be possibly assessed only in the past assessment year at best and thus the addition in the wrong AY in question is wholly   untenable being opposed to the scheme of the Act.  

The Tribunal stated that the averments made in the statement cannot be read as gospel truth and at any rate, do not operate as estoppel against statute. The AO is required to assess the income in the correct assessment year.  As per   loose paper found, the impugned income in the instant case is identifiable to past AY and could not be assessed in current AY in question. Notwithstanding, the impugned income is demonstrated to have already been assessed in other assessment year and is a case of   double assessment of same disclosure. Hence, the action of AO was not tenable on this score also.

Further, the Tribunal noted that the cash found represented cash in hand on the date search and belonged to different companies in which the assessee was a director and kept the cash belonging to those companies in his custody in fiduciary capacity.

The contention of the assessee was that there was no justification for making separate addition towards the cash found as undisclosed income where the total cash found itself emanates from record or in the alternative taxes have been paid in appropriate hands.  

The Tribunal opined that the explanation offered by the assessee towards undisclosed income was self explanatory and plausible. The course adopted by the Revenue was not permissible in law.

The Tribunal observed that CIT(A) mainly relied upon the statement recorded under Section 132(4) wherein the assessee had made surrender. The Tribunal opined that the CIT(A) proceeded on the footing that statement recorded under Section 132(4) is sacrosanct where the assessee failed to demonstrate any coercion and duress and hence confirmed the action of the Assessing Officer.

The Tribunal opined that the assessee clearly demonstrated on facts that the various components of alleged undisclosed income were fully explainable on the grounds of either payment of taxes in other assessment year to which such alleged undisclosed income related to or the addition was in the nature of double taxation or the undisclosed income did not relate to the assessee as demonstrable from the loose paper found and seized forming the basis for addition.

Accordingly, the appeal of the assessee was allowed and the order of CIT(A) was set aside and the impugned additions were cancelled. 

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