2013 (3) TMI 69 - HC - Income Tax

Court upholds Tribunal decision on income tax appeal, deems retraction of undisclosed income surrender not bona fide.

The High Court upheld the Tribunal's decision in an income tax appeal case where an appellant retracted a statement surrendering Rs. 10 lakhs as ... Addition - retraction of statement - undisclosed income - The Tribunal vide the impugned order has held that after almost four years, retraction has been made which cannot be said to be bonafide and therefore, the Assessing Officer was justified in assessing the income of Rs. 10 lakhs as undisclosed income, which was surrendered at the time of search. - held that:- It is not the case of the appellant that the surrender of Rs. 10 lakhs as undisclosed income was obtained by the departmental authorities under coercion or any threat. It was voluntary and therefore, the retraction made after almost four years appears to be an afterthought, which had rightly been disbelieved by the Tribunal. - Decided against the assessee. Issues:1. Appeal under Section 260(A) of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal.2. Validity of sustaining addition of Rs. 10,00,000/- based on a statement recorded during a search operation.3. Assessing Officer's duty to investigate and ascertain the truth of facts stated in a statement.4. Justification of setting aside the order of CIT(A) accepting retraction on the grounds of preventing investigation.Analysis:1. The appellant filed an appeal under Section 260(A) of the Income Tax Act against the order of the Income Tax Appellate Tribunal. The appellant pressed for re-framed questions (E), (F), and (G) arising from the Tribunal's order.2. The issue of sustaining the addition of Rs. 10,00,000/- was raised based on a statement recorded during a search operation. The appellant questioned the justification of this addition solely on the basis of the statement without any other material to correlate the undisclosed income.3. The appellant argued that the Assessing Officer's function is not only adjudicatory but also investigative. It was contended that the AO should have ascertained the truth of the facts stated in the statement made during the inquiry. The appellant highlighted that the assessment was made solely on the basis of the statement without conducting a proper inquiry.4. The Tribunal set aside the order of CIT(A) accepting the retraction on the grounds that the assessee prevented the Department from carrying out an investigation. The appellant contended that the AO must frame the assessment based on evidence or particulars produced by the assessee, as per sub-section (3) of section 143.Detailed Summary:The appeal pertained to the Block Period 1.4.1988 to 14.5.1998, where a search and seizure operation was conducted at the premises of the appellant. During the search, cash of Rs. 10 lakhs was seized, which the appellant surrendered as undisclosed income. However, later the appellant retracted the confessional statement, claiming that the amount was the cash-in-hand reflected in the books of account. The Assessing Officer did not accept this retraction and brought the sum of Rs. 10 lakhs to tax. The CIT(A) deleted the addition, stating that the cash-in-hand was more than Rs. 10 lakhs and could not be treated as undisclosed income.The Revenue appealed to the Tribunal, which held that the retraction made after almost four years was not bona fide, and the Assessing Officer was justified in treating the surrendered amount as undisclosed income. The High Court, after hearing both parties, noted that the surrender was voluntary and not obtained under coercion. The Court upheld the Tribunal's decision, stating that the retraction after a significant period appeared to be an afterthought and was rightly disbelieved. Therefore, the Court found no legal infirmity in the Tribunal's order and dismissed the appeal.