ITAT deletes additions from search proceedings citing lack of corroborating evidence beyond section 132(4) statements

ITAT Chennai upheld CIT(A)'s deletion of additions made during search proceedings. Regarding seized cash of Rs. 1,32,340, the tribunal accepted assessee's explanation of past salary savings given his high income. For Rs. 5 lakhs, third party confirmation via email was accepted as AO failed to verify despite not disputing the claim. Addition for unexplained jewellery was deleted as assessee reconciled seized items with wealth tax returns and family members' holdings were within CBDT limits. Undisclosed income addition based solely on statement under section 132(4) was rejected, following Supreme Court precedent that admissions cannot be sole foundation for assessment without corroborating evidence. Assessment order validity was upheld despite typographical error referencing section 153A instead of 142(1), as substantive proceedings remained valid.

---

---

Issues Involved:
1. Deletion of addition towards cash found and seized during the course of search.
2. Deletion of addition towards unexplained jewellery.
3. Deletion of addition towards undisclosed income based on the statement recorded u/s. 132(4) of the IT Act.
4. Validity of assessment order passed u/s. 143(3) r.w.s. 153(1)(b) of the IT Act.

Summary:

1. Deletion of Addition Towards Cash Found and Seized:
The first issue is the deletion of the addition towards cash found and seized during the course of search amounting to Rs. 6,32,340/-. The appellant explained that Rs. 1,32,340/- was from past savings and Rs. 5 lakhs belonged to his aunt, Smt. Padmavathamma. The CIT(A) deleted the additions made by the Assessing Officer, and the Tribunal upheld this decision, noting that the explanation provided by the appellant was supported by bank statements and confirmation from the aunt.

2. Deletion of Addition Towards Unexplained Jewellery:
The second issue concerns the deletion of additions towards unexplained jewellery amounting to Rs. 16,93,524/-. The appellant explained that the jewellery belonged to family members and reconciled the excess jewellery with wealth tax returns. The CIT(A), considering the CBDT Circular and the explanation provided, deleted the additions. The Tribunal upheld this decision, noting that the jewellery was within the limits specified by the CBDT and belonged to family members.

3. Deletion of Addition Towards Undisclosed Income:
The third issue is the deletion of the addition of Rs. 2.70 crores made towards undisclosed income based on the statement recorded u/s. 132(4) of the IT Act. The appellant argued that the loose sheets found during the search did not contain any undisclosed income and explained the investments through bank statements. The CIT(A) deleted the additions, stating that without corroborative evidence, the admission in the statement u/s. 132(4) cannot be taken as conclusive. The Tribunal upheld this decision, emphasizing that admission alone cannot be the foundation of assessment without independent evidence.

4. Validity of Assessment Order:
The fourth issue is the validity of the assessment order passed u/s. 143(3) r.w.s. 153(1)(b) of the IT Act. The appellant challenged the assessment order, arguing that the notice issued u/s. 153A was not valid. The CIT(A) observed that the reference to notice u/s. 153A was a typographical error and that the correct notice u/s. 143(2) was issued. The Tribunal upheld the CIT(A)'s findings, stating that the reference to section 153A in the assessment order does not nullify the entire proceedings.

Conclusion:
The Tribunal dismissed the appeal filed by the revenue and the cross objection filed by the assessee, upholding the CIT(A)'s decisions on all issues. The order was pronounced in the court on 30th August 2023 at Chennai.

---