Assessee entitled to submit correct calculations after surrendering ad hoc amount during search u/s 132

ITAT Indore allowed the appeal, deleting the addition made by AO based solely on assessee's statement during search u/s 132. The tribunal held that the surrendered amount of Rs. 5 crores was an ad hoc figure, not final, and assessee was entitled to submit correct calculations in return. Following CBDT instruction dated 10.03.2003 and judicial precedents, additions cannot be made based on mere surrender without corroborating evidence. Only correct income should be taxed under Income-tax scheme.

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Issues Involved:
1. Addition of Rs. 1,76,68,829/- based on the difference between the amount declared u/s 132(4) and the amount shown in the returns of income.

Summary:

Issue 1: Addition of Rs. 1,76,68,829/- based on the difference between the amount declared u/s 132(4) and the amount shown in the returns of income

The assessee, an individual with income from the business of grains, filed a return for AY 2016-17 declaring a total income of Rs. 93,26,060/-. During a search action u/s 132 on 07.01.2016, the assessee admitted to an undisclosed income of Rs. 5,00,00,000/- for himself and his family members. The AO made an addition of Rs. 1,76,68,829/- based on this declaration, which was upheld by the CIT(A). The AO noted that the statements recorded u/s 132(4) are pieces of evidence and not mere confessions, and the retraction by the assessee after a long time-gap was not acceptable. The AO concluded that the addition was justified to prevent revenue leakage.

During the first appeal, the CIT(A) upheld the AO's order, noting that the retraction was made after twenty-three months and was not communicated to the Departmental authorities. The CIT(A) emphasized that the evidence from the testimony could be utilized to frame the assessment.

The assessee argued that the addition was made merely on the basis of the surrender/confession obtained during the search proceeding without any corroborative evidence. The assessee contended that the surrender of Rs. 5,00,00,000/- was a lump sum figure made under the context of not being able to instantly explain the seized documents. The assessee subsequently declared an income of Rs. 2,36,68,100/- after analyzing the documents, and the AO made a separate addition of Rs. 86,63,071/- based on the seized documents, leaving a balance of Rs. 1,76,68,829/- unsupported by any evidence.

The ITAT found no merit in the revenue's arguments, noting that the addition was based solely on the assessee's statement during the search. The ITAT emphasized that under the scheme of Income-tax, only the correct income should be taxed, and the CBDT instruction dated 10.03.2003 restricts making additions based on mere confessions during search/survey without corroborative evidence. The ITAT concluded that the addition made by the revenue authorities was not justified and ordered its deletion.

Conclusion:
The appeal of the assessee was allowed, and the addition of Rs. 1,76,68,829/- was deleted.

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