2022 (4) TMI 1646 - AT - Income Tax

Additions deleted under section 143(3) read with 153B(1)(b) as rough papers and retracted confessions lack corroborative evidence

The ITAT Jaipur allowed the assessee's appeal, directing deletion of additions made under section 143(3) read with 153B(1)(b). The tribunal held that ... Addition made in the assessment completed U/s 143(3) r.w.s. 153B(1)(b) - Addition based on rough paper and on the statement of the assessee u/s 132(4) - surrender was obtained from the assessee during the course of search which was retracted late on and got re-affirmed by the department HELD THAT:- It is a settled law that the presumption whosoever strong may be but it cannot take place of proof and thus the A.O. has acted more on suspicion and doubt than on evidence. It is settled principle of law that suspicion however strong cannot take the place of evidence. In following cases it has been time and again held that suspicion howsoever cannot take place of evidence. AO has interpreted a dumb document having no legal validity as per his suitability and addition based on this paper deserves to be deleted more particularly when the paper itself contained errors and addition is made merely and solely on the basis of confession without any corroborative evidence. Moreover the said confession made by the assessee was subsequently retracted and since the addition was not supported by any cogent, convincing independent documentary evidence, therefore, considering the totality of facts and circumstances, judicial precedents referred above as well as following the decision of JKD Pearl India Developers Pvt. Ltd.[2020 (10) TMI 976 - ITAT JAIPUR] wherein the present Author of this order was also the Author of that order, therefore, we direct the A.O. to delete the addition so made and confirmed qua this issue. Addition for various expenses - HELD THAT:- As observed from the above that JDA Expenses were incurred by assessee, which are evident in the copy of registered deed furnished before AO as well as CIT(A) and after including incidental Misc. expenses comes to Rs.6776/- and Rs.5421/-. So far as brokerage expenses are concerned, the same are approximately 3% of the gross sale consideration, which is in accordance with market rates. Further, expenses of Rs.30,000/- were paid to mediator / broker Sh. Sunil Gajaria and assessee had submitted complete address as well as PAN details of the mediator / broker. Accordingly, identity of the payee and genuineness of payment is fully established and expenses were not held to be excessive. Therefore, we direct to delete the same. Appeal of the assessee is allowed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal issues considered in this judgment are:- Whether the addition of Rs. 1,50,00,000/- to the assessee's income based on retracted statements and a loose slip found during a search operation was justified.- Whether the addition of Rs. 1,39,581/- related to brokerage and other expenses was correctly upheld by the lower authorities.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Addition of Rs. 1,50,00,000/- based on retracted statements and loose slipRelevant legal framework and precedents:The legal framework involves Section 132 of the Income Tax Act, 1961, which governs search and seizure operations, and Section 143(3) read with Section 153B(1)(b) for assessment of income. The precedents include various judicial pronouncements that emphasize the need for corroborative evidence in addition to statements made during search operations.Court's interpretation and reasoning:The Tribunal noted that the statements made by the assessee during the search were retracted soon after, and the retraction was supported by an affidavit. The Tribunal emphasized that statements recorded under duress or coercion cannot be the sole basis for additions unless corroborated by independent evidence.Key evidence and findings:The key evidence included the statements recorded during the search, the loose slip allegedly showing cash advances, and the subsequent retraction by the assessee. The Tribunal found inconsistencies in the notings on the loose slip and noted that no corroborative evidence was provided by the AO to support the addition.Application of law to facts:The Tribunal applied the principle that additions cannot be based solely on retracted statements without corroborative evidence. The Tribunal found that the AO failed to conduct post-search inquiries to verify the contents of the loose slip or the statements made during the search.Treatment of competing arguments:The Tribunal considered the Revenue's argument that the statements made during the search had evidentiary value. However, it found the assessee's retraction credible and supported by adequate evidence, including the lack of corroborative material to substantiate the addition.Conclusions:The Tribunal concluded that the addition of Rs. 1,50,00,000/- was not justified as it was based solely on retracted statements and an uncorroborated loose slip.Issue 2: Addition of Rs. 1,39,581/- related to brokerage and other expensesRelevant legal framework and precedents:The relevant legal framework involves the assessment of income under Section 143(3) of the Income Tax Act, 1961. The precedents emphasize the need for substantiation of expenses claimed by the assessee.Court's interpretation and reasoning:The Tribunal examined the evidence provided by the assessee, including the complete address and PAN details of the broker, to substantiate the brokerage expenses. It found that the expenses were in line with market rates and adequately substantiated.Key evidence and findings:The evidence included the details of brokerage expenses, JDA expenses, and other incidental expenses. The Tribunal found that the assessee had provided sufficient documentation to support the claim.Application of law to facts:The Tribunal applied the principle that expenses must be substantiated with adequate evidence. It found that the assessee had met this requirement and that the AO had not provided any contrary evidence.Treatment of competing arguments:The Tribunal considered the Revenue's position but found that the evidence provided by the assessee was credible and adequately substantiated the expenses claimed.Conclusions:The Tribunal concluded that the addition of Rs. 1,39,581/- was not justified and directed the AO to delete the same.3. SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning:'It is settled position of law that no addition can be made simply and simply only and only on the basis of a naked statement having no clothing.''The Tribunal concluded that the addition of Rs. 1,50,00,000/- was not justified as it was based solely on retracted statements and an uncorroborated loose slip.'Core principles established:- Statements recorded during search operations must be corroborated by independent evidence to justify additions.- Retraction of statements, if supported by adequate evidence, can negate the evidentiary value of statements made during search operations.- Expenses claimed by the assessee must be substantiated with adequate documentation to be allowed.Final determinations on each issue:- The addition of Rs. 1,50,00,000/- was deleted as it was based on retracted statements and lacked corroborative evidence.- The addition of Rs. 1,39,581/- was deleted as the expenses were adequately substantiated by the assessee.