Search admissions and retraction: addition fails without corroborative seized material, though the dissent found voluntary disclosure.

An admission made during search may be retracted, but the retraction must be backed by plausible material showing the statement cannot stand on facts or in law. Here, the majority found no cogent seized material, incriminating record, asset, or other corroboration linking the alleged undisclosed income to the assessee, so the addition could not rest on statements alone and was deleted. The majority also declined to adopt a percentage-based estimate without comparable material. The dissent considered the partner's statements voluntary and supported by search circumstances, and would have sustained a limited addition. The subject turns on the evidentiary value of search statements and the need for corroboration after retraction.

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Issues: Whether the addition of Rs. 10 lakhs could be sustained solely on the basis of the partner's statements recorded during search and post-search proceedings under section 132(4) and section 131(1) of the Income-tax Act, 1961, after retraction and in the absence of corroborative seized material.

Analysis: The majority held that an admission recorded during search may be retracted, but the retraction must be supported by plausible material showing that the admission cannot be sustained on facts or in law. On the facts found by the first appellate authority, no cogent material, incriminating record, or asset was brought on record to link the alleged undisclosed income of Rs. 10 lakhs with the assessee. The addition rested only on the statements, and the revenue did not dislodge the finding that no corroborative evidence was found in the seized material. The majority distinguished the group concern's case, where seized diary entries and other evidence existed, and declined to apply a percentage-based estimate in the absence of comparable material in the present case.

Conclusion: The addition could not be upheld and the deletion was sustained in favour of the assessee.

Dissenting Opinion: The dissenting member held that the statements were voluntary, reflected a considered disclosure by the managing partner, and were corroborated by the search material and surrounding circumstances. On that view, the retraction was not acceptable without contemporaneous evidence disproving the admission, and the addition should have been restricted to Rs. 1,50,000.

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