2017 (11) TMI 683 - HC - Income Tax

Court rules in favor of assessee, stating additions as undisclosed income and under Section 145(3) were erroneous.

Shri Anil Kumar Agarwal S/o Shri Gopi Ram Agarwal Versus The Income Tax Officer Ward -4 (1) Jaipur

Shri Anil Kumar Agarwal S/o Shri Gopi Ram Agarwal Versus The Income Tax Officer Ward -4 (1) Jaipur - TMI Issues Involved:1. Addition of Rs. 2,70,248/- as undisclosed income based on the assessee’s retracted statement.2. Addition of Rs. 77,298/- under Section 145(3) of the Income Tax Act, 1961, ignoring the provisions of Section 44AF.Issue-wise Detailed Analysis:1. Addition of Rs. 2,70,248/- as Undisclosed Income:The appellant challenged the Tribunal's decision which upheld the addition of Rs. 2,70,248/- as undisclosed income based on a statement made by the assessee, which was later retracted. The court examined whether the ITAT was correct in law to uphold the Assessing Officer’s (AO) addition based on the retracted statement, ignoring Section 28 of the IT Act, 1961.The appellant argued that the statement made on 23rd February 2005 was retracted on 20th November 2007 via an affidavit, explaining that the initial statement was made under coercion. The appellant also highlighted that the return filed on 17th August 2005 was accepted, and a refund was granted on 19th October 2005. The appellant relied on precedents such as Kailashben Manharlal Chokshi vs. Commissioner of Income Tax, where it was held that additions based solely on a retracted statement without corroborative evidence are not justified.The court noted that the retraction was supported by a letter dated 23rd February 2005 and an affidavit dated 20th November 2007. The court found that the authorities (Tribunal, CIT(A), and AO) erred in adding the income despite the retraction and the evidence provided by the assessee. The court emphasized that the statement was made under pressure due to the perishable nature of the goods and the significant cost involved.2. Addition of Rs. 77,298/- under Section 145(3):The appellant contested the addition of Rs. 77,298/- made under Section 145(3) of the IT Act, arguing that the provisions of Section 44AF were ignored. The appellant contended that the rejection of books of accounts and the resultant addition were not justified.The court, after reviewing the submissions, found that the Tribunal had committed an error in confirming the addition. The court held that the rejection of books of accounts under Section 145(3) was not warranted, and the provisions of Section 44AF should have been considered. The court concluded that the addition of Rs. 77,298/- was incorrect and needed to be overturned.Conclusion:The court allowed the appeal, ruling in favor of the assessee on both issues. It held that the addition of Rs. 2,70,248/- as undisclosed income was erroneous due to the retracted statement and lack of corroborative evidence. Similarly, the addition of Rs. 77,298/- under Section 145(3) was also found to be incorrect, as the provisions of Section 44AF were ignored. The court emphasized the need for credible evidence and proper consideration of the retraction and supporting documents.