2005 (4) TMI 245 - AT - Income Tax

Tribunal Dismisses Revenue Appeal, Stresses Need for Strong Evidence in Tax Assessments and Additions.

The ITAT upheld the CIT(A)'s decision to delete an addition of Rs. 16,00,000 under section 132(4), citing insufficient corroborative evidence and lack of ... Search and seizure operation - Addition on account of disclosure made u/s 132(4) - Income from transport business - HELD THAT:- We find that at the time of search no evidence or material or assets, immovable or movable properties were found which supports the disclosure. The assessee had retracted from the said disclosure which has not been accepted by the Department. It is true that simple denial cannot be considered as a denial in the eyes of law but at the same time, it is also to be seen (that) the material and valuable and other assets are found at the time of search. The evidence ought to have been collected by the Revenue during the search in support of the disclosure statement. It is true that an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real. Science has not yet invented any instrument to test the reliability of the evidence placed before a Court or Tribunal. Therefore, the Courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Thus, we apply the ratio of apex Court in the case of Durga Prasad [1971 (8) TMI 17 - SUPREME COURT] i.e., test of human probabilities, we do not find any material on record on which basis it can be said that the disclosure of the assessee for Rs.16 lakhs is in accordance with law and in spirit of s. 132(4). Hence, we find that the CIT(A) has correctly deleted the addition. The second ground is pertaining to Rs. 4 lakhs on account of transport business. The AO made the estimation of Rs. 4 lakhs. The CIT(A) has sent back this matter to the file of AO with certain direction. Thus, we do not find any infirmity in the order of the CIT(A). In view of the fact, the order of CIT(A) is confirmed. In the result, the appeal of Revenue is dismissed. Issues:1. Deletion of addition under section 132(4)2. Setting aside addition in respect of income from transport businessAnalysis:1. Deletion of addition under section 132(4):The appeal by the Revenue challenged the deletion of an addition of Rs. 16,00,000 made on account of disclosure under section 132(4). The assessee had disclosed this amount during a search and seizure operation but later retracted the statement, claiming ignorance and pressure. The CIT(A) considered the circumstances, lack of supporting assets or evidence, and the nature of the disclosure. The CIT(A) observed that the disclosure lacked specificity regarding the income period and assets acquired. The CIT(A) noted the absence of valuables seized during the search and the history of the appellant's properties not aligning with the year under consideration. The CIT(A) concluded that the addition was not sustainable without corroborative evidence and directed the AO to delete the amount.2. Setting aside addition in respect of income from transport business:The second issue involved an addition of Rs. 4,00,000 in respect of income from the assessee's transport business. The AO had estimated this amount, but the CIT(A) remanded the matter back to the AO with directions. The Tribunal found no infirmity in the CIT(A)'s order and confirmed the decision. The appeal by the Revenue was dismissed accordingly.In the detailed analysis, the Tribunal emphasized the importance of evidence and material to support additions in assessments. It distinguished the present case from precedent where disclosures were substantiated by assets. The Tribunal highlighted the obligation of tax authorities to act in accordance with the law and collect legitimate taxes. Quoting legal principles, the Tribunal stressed the need for more than mere suspicion to support assessments or additions. Applying the test of human probabilities, the Tribunal found no basis in the record to support the Rs. 16,00,000 addition. Consequently, the CIT(A)'s decision to delete the amount was upheld.