2015 (10) TMI 2012 - AT - Income Tax

Tribunal limits addition to Rs. 2 crores, stresses corroborative evidence. Assessee's retraction validated.

The Tribunal upheld the CIT(A)'s decision to restrict the addition to Rs. 2 crores, dismissing appeals from both the Revenue and the assessee. The ... Disclosure made by assessee during the course of search - whether though the assessee has disclosed the income in the note appended with the return of income, but his income can be assessed lower than the returned income? - CIT(A) deleted the addition in part - Held that:- The assessee has made a disclosure of ₹ 10 crores during the course of search. While filing of the return, on verification of all the materials, he re-affirmed his disclosure at ₹ 2 crores. His admission during the course of search, coupled with the re-affirmation at the time of filing of return, would denude him to say that disclosure was under misconception of facts, because, he was not supplied the seized material. This disclosure was made after the perusal of evidence. Therefore, he cannot say there is no evidence against the assessee for assessing the income of ₹ 2 crores. As discussed, earlier statement made under section 132(4) is admissible evidence. We have upheld the findings of the CIT(A) for deletion of ₹ 8 crores on the ground that there was no corroborative evidence with the Revenue in support of that addition, but, the moment the assessee has re-affirmed the disclosure of ₹ 2 crores, it becomes an absolute evidence. This disclosure was made after due deliberation and consultation with the tax consultant. Therefore, there is no mistake of facts or misconception about the law on this amount. The ld.First Appellate Authority has rightly confirmed the addition to this extent. - Decided against assessee and revenue. Issues Involved:1. Validity of voluntary disclosure made under Section 132(4) of the Income Tax Act during the search.2. Justification for the addition of Rs. 10 crores based on the disclosure.3. Correctness of the CIT(A)'s decision to restrict the addition to Rs. 2 crores.4. Assessment of the adequacy of corroborative evidence to support the disclosure.5. Examination of the retraction of the disclosure and its impact on the assessment.Issue-wise Detailed Analysis:1. Validity of Voluntary Disclosure under Section 132(4):The primary issue revolves around the voluntary disclosure made by the assessee under Section 132(4) during the search operation. The assessee initially disclosed an income of Rs. 10 crores, which was later contested. The legal framework under Section 132(4) permits the authorized officer to examine any person on oath during the search, and such statements are admissible as evidence. However, the admissibility of such statements is not conclusive and can be rebutted if the assessee demonstrates that the admission was mistaken, untrue, or based on a misconception of facts.2. Justification for the Addition of Rs. 10 Crores:The Assessing Officer (AO) asserted that the assessee's income should include the entire Rs. 10 crores disclosed during the search. The AO's stance was that the disclosure was a voluntary admission of unaccounted income, and thus, the entire amount should be added to the assessee's income. However, the CIT(A) found that the actual corroborative material only supported an addition of Rs. 90,30,782, not Rs. 10 crores.3. Correctness of CIT(A)'s Decision to Restrict the Addition to Rs. 2 Crores:The CIT(A) restricted the addition to Rs. 2 crores, considering the assessee's reaffirmation of this amount in the return of income. The CIT(A) reasoned that the assessee consciously accepted the disclosure of Rs. 2 crores, and thus, the income could not be brought down from this amount. The Tribunal upheld this decision, noting that the assessee's reaffirmation at the time of filing the return indicated a deliberate and informed acceptance of the Rs. 2 crores disclosure.4. Assessment of Corroborative Evidence:The Tribunal emphasized that mere disclosure under Section 132(4) is insufficient for tax liability unless corroborated by other material evidence. The CIT(A) noted that the Revenue could not find any incriminating material during the search to justify the Rs. 10 crores disclosure. The Tribunal supported this view, highlighting that the corroborative material only justified an addition of Rs. 90,30,782 after reappraisal of the appellate proceedings.5. Examination of Retraction and Its Impact:The assessee retracted the initial Rs. 10 crores disclosure, arguing it was a preliminary figure subject to verification of seized materials. The Tribunal acknowledged that retracted confessions could still form a legal basis if the AO is satisfied with their truthfulness and voluntariness. However, the Tribunal found that the retraction was justified as the Revenue failed to provide corroborative evidence for the Rs. 10 crores. The Tribunal also noted the CBDT Circular No.286/2/2003, which discourages obtaining confessions without supporting material.Conclusion:The Tribunal concluded that the CIT(A) correctly restricted the addition to Rs. 2 crores based on the assessee's reaffirmation in the return of income. The Tribunal dismissed both the Revenue's appeal for a higher addition and the assessee's appeal for a lower addition, thereby upholding the CIT(A)'s decision. The Tribunal emphasized the need for corroborative evidence to support disclosures made under Section 132(4) and validated the assessee's retraction due to the absence of such evidence.Order:The appeals of both the Revenue and the assessee were dismissed, and the Cross-Objection filed by the assessee was allowed for statistical purposes. The decision was pronounced on 16th September 2015 at Ahmedabad.