Retraction of statement under section 132(4) after search and seizure; confession held voluntary and assessment restored

Retraction of a statement recorded under section 132(4) following search and seizure raised the question whether the confession was vitiated by coercion; the court found the assessee failed to prove duress or intimidation, so the statement remained admissible and supported assessment, and the Assessing Officers decision to tax the surrendered undisclosed income was restored. The applicability of the Kerala precedent was considered distinguishable because the assessee had explained the seized materials in the return and appellate forums reversed the AO without meeting his cogent reasons; appellate acceptance of a new ground not pleaded below was held improper, leading to setting aside of appellate orders.

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Issues Involved:
1. Justification of the Income-tax Appellate Tribunal in upholding the Commissioner of Income-tax (Appeals) order.
2. Deletion of Rs. 2,75,854 addition by the Assessing Officer based on the respondent's father's admission.
3. Applicability of the principle of law laid down by the Kerala High Court in V. Kunhambu and Sons v. CIT [1996] 219 ITR 235 to the present case.

Issue-wise Detailed Analysis:

1. Justification of the Income-tax Appellate Tribunal in upholding the Commissioner of Income-tax (Appeals) order:

The High Court examined whether the Tribunal was justified in upholding the Commissioner of Income-tax (Appeals) order that deleted the additions made by the Assessing Officer. The Tribunal had observed that confessional statements made during search operations are often made under stress and strain, and without access to relevant documents and books of account. Therefore, such statements are rebuttable and can be modified or clarified later. The Tribunal held that the Assessing Officer's assessment of income at Rs. 7,50,000 for each assessee was based on the statement under section 132(4) and that the searched material did not indicate any undisclosed income beyond what was originally offered. The Tribunal concluded that the statement under section 132(4) was rebuttable and had been explained by the assessees at a later stage, thus finding no infirmity in the Commissioner of Income-tax (Appeals) order.

2. Deletion of Rs. 2,75,854 addition by the Assessing Officer based on the respondent's father's admission:

The High Court scrutinized the deletion of the Rs. 2,75,854 addition made by the Assessing Officer. The Assessing Officer had included this amount based on the statement of Hukum Chand Jain, who had surrendered Rs. 30 lakhs as undisclosed income during the search. The Commissioner of Income-tax (Appeals) deleted the addition, reasoning that the undisclosed income offered in the block return was more than the specific addition made in the cases of Hukum Chand Jain and Kamal Chand Jain. The Tribunal upheld this deletion, noting that the statement made during the search was rebuttable and that the assessees had provided explanations for the discrepancies at a later stage.

3. Applicability of the principle of law laid down by the Kerala High Court in V. Kunhambu and Sons v. CIT [1996] 219 ITR 235 to the present case:

The High Court evaluated whether the principle of law from the Kerala High Court's decision in V. Kunhambu and Sons v. CIT applied to the present case. In V. Kunhambu and Sons, the Kerala High Court had held that a voluntary statement made during search proceedings is binding unless it is proven to have been made under coercion or mistaken belief. The High Court in the present case found that the assessees failed to discharge the burden of proving that their statements were obtained under duress or coercion. The High Court noted that the assessees did not retract their statements immediately after the search and only claimed duress during the assessment proceedings, which was not supported by contemporaneous evidence. Consequently, the High Court held that the principles from V. Kunhambu and Sons were applicable, and the Tribunal erred in not applying them.

Conclusion:

The High Court concluded that the Tribunal was not justified in holding that the principles from V. Kunhambu and Sons did not apply. The assessee failed to prove that the confession under section 132(4) was due to intimidation, duress, or mistaken belief. The Assessing Officer's assessment based on the surrendered undisclosed income was justified. Therefore, the orders of the Commissioner of Income-tax (Appeals) and the Tribunal were set aside, and the Assessing Officer's order was restored.

Order:

The High Court set aside the orders passed by the Commissioner of Income-tax (Appeals) and the Tribunal, restoring the order passed by the Assessing Officer.

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