ITAT overturns additions under Income Tax Act due to lack of evidence

The ITAT allowed the appeals of the assessee in two cases involving additions of Rs. 20 lakhs and Rs. 30 lakhs made under sections 132 and 132(4) of the Income Tax Act. The additions were based on statements made during searches that were later retracted. The ITAT found the surrenders were made under pressure and lacked evidence, directing the AO to delete the additions due to insufficient connection to undisclosed income. The lower authorities' orders were reversed, ruling in favor of the assessee in both cases.

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Issues:
1. Addition of Rs. 20 lakhs on account of surrender made during search under section 132 of the Income Tax Act.
2. Addition of Rs. 30 lakhs based on a statement made under section 132(4) of the Income Tax Act, subsequently retracted.

Issue 1: Addition of Rs. 20 lakhs
The appeal was filed by an individual assessee against the order confirming the addition of Rs. 20 lakhs made at the time of search under section 132 of the Income Tax Act. The assessee's father had surrendered the amount during the search, which the assessee also agreed to but later retracted. The Assessing Officer (AO) added the amount to the total income, which was contested by the assessee before the CIT (A) and subsequently before the ITAT. The ITAT held that the surrender was made under pressure and lacked evidence. The circular by CBDT and decisions of various courts supported the assessee's contention that the surrender should not have been relied upon without evidence. The ITAT found no material to connect the surrendered amount to undisclosed income, and as the assessee retracted the statement soon after the search, the addition was deemed unjustified. The ITAT directed the AO to delete the addition of Rs. 20 lakhs, reversing the lower authorities' orders.

Issue 2: Addition of Rs. 30 lakhs
In another appeal with identical circumstances, the AO had added Rs. 30 lakhs based on the father's statement under section 132(4) of the Income Tax Act, which was later retracted. The ITAT, considering the similar facts, directed the AO to delete the addition of Rs. 30 lakhs, following the reasoning provided in the previous order. The ITAT reversed the lower authorities' orders and allowed the appeal of the assessee in this case as well.

In conclusion, both appeals of the assessee were allowed, and the additions of Rs. 20 lakhs and Rs. 30 lakhs were directed to be deleted by the ITAT based on the lack of evidence and the retractions made by the individuals involved. The orders of the lower authorities were reversed, and the appeals were decided in favor of the assessee.

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