Section 153A additions cannot be sustained on retracted statements alone without supporting incriminating evidence

ITAT Mumbai held that additions for assessment years 2008-09 to 2013-14 under Section 153A cannot be sustained based solely on retracted statements made during search proceedings, as statements under Section 132(4) do not constitute incriminating material without supporting evidence. The tribunal deleted these additions, following precedents from Delhi and Bombay HCs. For AY 2014-15, the matter was remanded to AO for fresh examination of business genuineness. However, the tribunal upheld the validity of reopening assessment for AY 2007-08, finding tangible material justified the reassessment proceedings.

---

---

Issues Involved:
1. Validity of jurisdiction under Section 153A without incriminating material.
2. Additions based on retracted statements.
3. Rejection of books of accounts and estimation of income.
4. Enhancement of income by the CIT (A).

Summary:

1. Validity of Jurisdiction under Section 153A without Incriminating Material:
The Tribunal examined whether the Assessing Officer (AO) had valid jurisdiction under Section 153A of the Income-tax Act, 1961, in the absence of any incriminating material found during the search. It was noted that the search took place on 3 October 2013, and the assessments for the years up to 2013-14 were concluded. The Tribunal held that for these years, additions could only be made based on incriminating material found during the search. It was observed that no such material was found, and the additions were made solely on the basis of retracted statements. The Tribunal referenced several judicial precedents, including the Hon'ble Delhi High Court's decision in PCIT vs. Best Infrastructure (India) (P.) Ltd., which held that statements under Section 132(4) do not constitute incriminating material. Consequently, the Tribunal allowed the appeals for the assessment years 2008-09 to 2013-14, as the additions were not based on any incriminating material.

2. Additions Based on Retracted Statements:
The Tribunal considered whether additions could be made based on retracted statements in the absence of any other incriminating material. The Tribunal referred to multiple judicial precedents that held that retracted statements alone could not be considered incriminating material for making additions. It was noted that the statements made by the assessee and other parties were retracted, and there was no admission of income. Therefore, the Tribunal directed the deletion of additions made for the assessment years 2008-09 to 2013-14.

3. Rejection of Books of Accounts and Estimation of Income:
For the assessment year 2014-15, which was an open assessment year at the time of the search, the Tribunal examined the AO's rejection of the books of accounts and estimation of income. The AO had rejected the books of accounts based on the absence of evidence of actual business activity during the search and relied on statements indicating that the assessee was providing accommodation entries. The Tribunal set aside the issue to the AO to determine whether the assessee was engaged in actual business or merely providing accommodation entries. The AO was directed to examine the purchase and sales invoices and other evidence to substantiate the transactions.

4. Enhancement of Income by the CIT (A):
The Tribunal also addressed the enhancement of income by the CIT (A) for various assessment years. The CIT (A) had enhanced the income based on the estimation of accommodation entry commission. The Tribunal, following its findings on the validity of jurisdiction and the basis for additions, directed the deletion of such enhancements for the assessment years 2008-09 to 2013-14. For the assessment year 2014-15, the issue was set aside to the AO for fresh determination.

Conclusion:
The appeals for the assessment years 2008-09 to 2013-14 were allowed, and the additions based on retracted statements were deleted. For the assessment year 2014-15, the issue was set aside to the AO for fresh determination. The Tribunal's decision was based on the absence of incriminating material and the reliance on retracted statements.

---