TaxTMI 
TaxTMI 
2019 (9) TMI 1172
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....irm carrying on the business of Real Estate as Builder and Developer. A search u/s 132 of the Act was initiated on Signature Group as well as the business associates on 29.1.2014. Assessee firm being part of Signature Group was also covered under the search action. In the case of the assessee search action commenced on 29.1.2014 and was concluded on 31.1.2014. However search u/s 132 of the Act in the case of Signature Group and other concerns concluded on a later date. Subsequent to search, notice u/s 153A of the Act was served upon the assessee. Return of income declaring Rs. 1,10,38,030/- was filed on 29.9.2014. In order to scrutinize the records notices u/s 143(2) and 142(1) of the Act was served upon the assessee. After considering the statement and search material of Signature Group, Ld. Assessing Officer (In short 'Ld.A.O') came to know that one of the partner of the assessee firm Mr. Vipin Chauhan gave a statement on 2.2.2014 u/s 132(4) of the Act. In this statement he surrendered undisclosed income of Rs. 2,25,00,000/- on behalf of the firm. On perusal of the return income Ld. A.O found that the assessee has not offered the surrendered undisclosed income of Rs. 2,25,0....
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.... various concerns of the group, however, no satisfactory explanation was offered. In absence of any satisfactory explanation, the main persons of the group admitted additional income of the group in the hands of various concerns during statement recorded on oath. The additional income was declared after consulting the other partners and related persons of various concerns of the group. The brief detail of additional income admitted by the assessee is as under:- (Rupees in Lakhs) Sr.No Concern/F. Y. 2011-12 2012-13 2013-14 Total l. Signature Infrastructure 50 300 350 2. Signature Builders 25 300 325 3. Signature Builders and Colonizers 25 300 325 4. Signature Developers 100 100 TOTAL liDO 5. Om Builders 275 275 6. Om Construction 50 750 800 7. Sainath Infrastructure P Ltd 25 25 TOTAL 1100 8. Ultimate Builders 225 225 9. Virasha Infrastructure 225 225 TOTAL 450 10. Mls Sainath C....
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....f this, the appellant failed to furnish the explanation. The appellant was given proper and meaningful opportunity to explain and justify the statement given u/s 132(4) of the IT Act, which is a piece of evidence in view of the Indian Evidence Act. Section 110 of the Evidence Act is material in this respect which stipulates that when the question is. whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner is on the person who affirms that he is not the, owner. In other words, it follows from the well-settled principle of law that normally, unless contrary is established, title always follows possession. It is evident from above discussion that the assessee has to discharge onus for retraction of surrendered income. The assessee failed to do so. Retraction without having reasonable cause and without any supporting evidences is not acceptable. The question of evidentiary value of a statement recorded u/s.132 (4) of the Act is no more res integra. When an assessee had made a statement of facts, he can have no grievance if he is taxed in accordance with that statement. The reasonableness of the AO&....
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.... is not conclusive and person can retract under certain circumstances. However, time gap between statement and retraction of statement is one of the important points to be taken into account to decide as to whether the statement was given under mistaken belief of either fact or law. However when assessee retracted statement made under section 13 2( 4) after three and a half months of disclosure and there was not an iota of evidence to support retraction then AO was justified in not accepting assessee's retraction The decision held in the case of Carpenters Classics (Exim) (P) Ltd. Vs DCIT ( ITAT, Bang) 108 ITD 142 squarely applicable in the case .It is held that :- "When statement was made voluntary and was not alleged to have been obtained urider threat or coercion, onus was on assessee to prove that said declaration was made under any misconception of facts - Since assessee had not taken any steps to rectify its declaration before authorities before whom such declaration was made, there was no valid reason for retraction of same after a gap of about two and a half months." As regards to the evidentiary value of the disclosure statement, Sections 17 to 31 of ....
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....ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could from the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. d)Thus, it is a clear and settled law that admission by a person is good piece of evidence though not conclusive and the same can be used against the person who makes it. The reason behind this is a person making a statement stops the opposite party from making further investigation. However, the statement is not conclusive and the person giving the statement can retract the same under certain circumstances: (i) The first circumstance is where the statement is not given voluntarily but it was obtained under coercion, threat or undue influence. But the burden is upon the person making the statement to prove that the statement given by him was not vo....
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....e the appellant has retracted from his statement given during the course of search on 02.02.2014, after a gap of nearly eight months. h)These claims are baseless as no efforts were made by the assessee to inform of any such stance during post survey inquiries. This shows that the assessee is taking a plea to get away from his voluntary statement as an after-thonght. Claims have to be discarded as the assessee has not produced any evidence in that behalf. Once the statement of the assessee is voluntary and there has been no pressure,the same is binding on the assessee. i)In the case of council of Institute of Chartered Accountants of India vs. Mukesh R. Shah (2004) 186 CTR (Guj) 579, the High Court of Gujarat has held that "a retraction, so as to dislodge the admission made, should come about at the earliest point of time. It goes without saying that a retraction made after a considerable length of time, would not have the same efficacy in law as a retraction made at the earliest point of time from the day of admission. A belated retraction would fall in the category of afterthought instead of being retraction. That apart, for a retraction to be effective ....
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....did not surrender this amount on the basis of any particular paper or document but merely surrendered in general for the discrepancies in the books in respect of booking, investments and sales. However, while filing the return the assessee retracted from the statement of the partner and did not offer this amount in the return. 1. During the course of the assessment proceedings the Ld. A.O. examined the books of accounts which were checked with the seized documents (Para2 of the Asst. order). Necessary details which were asked were furnished with the supporting documents which were perused by the Ld. A.O. (para 2 of the Asst. order). The Ld. A.O. discussed at length about the incriminating documents in para 5 from Pg.3 to Pg.9. At Pg.10 he mentioned the various documents which according to him were incriminating. This list of document has been reproduced in more than 10 cases (Pg.87-117). The details of these documents have also been mentioned in the list which were found at different premises and were not pertaining to the assessee. The Ld. A.O. raised a specific query about the cash receipts which were answered with all necessary details on 18.02.2016 (Pg.78-86 of PB). ....
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....rm has received cash amount outside its books, and cash payments have been made for land obtained under JV, unrecorded sales consideration has been received and expenses have been inflated and have made an surrender of income of Rs. 225 Lakh. The same was not offered as income in the return filed. b. The addition in the case of the assessee was made solely on the basis of the so called declaration made by the assessee u/s 132(4) of the Act. Provision of section 132(4) provides that: "The authorized officer may during the course of the search or seizure examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion jewellery or other valuable article or thing and any statement made by such person during such examination, may thereafter be used in evidence in any proceeding under the Income Tax act. It may be appreciated that as per provisions of section 132(4), a statement u/s 132(4) is valid and can be used as evidence only if all the conditions mentioned herein below are cumulatively satisfied. a. the statement is recorded by the authorized officer AND b. the s....
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....ment recorded by the authorized officer and accordingly is not covered by the provisions of section 132(4) and consequently does not constitute any evidence in itself. Thus as the statement was not recorded by the authorized officer in the case of the assessee the same does not constitute an admissible evidence and no cognizance can be given to such statement and addition cannot be made on the basis of such non admissible statement. ii. whether the statement is recorded during the course of search The statement under reference is recorded on 02.02.2014 and that too in the premises which are different from the premises which were searched in the case of the assessee. The witnesses in the case of the statement were also different from the persons who have attended the search in the case of the assessee. Thus the statement recorded is after the completion of the search and seizure at the premises of the assessee. The said statement was recorded on 02.02.2014 during search and seizure operation at 18- 19 Kolar Castle, Chuna Bhatti Square, Kolar Road, Bhopal in the case of Signature group, as such it can be concluded that the said statement was not in....
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....h. It may be mentioned that the declaration made was not with reference to any specific incriminating paper/papers or documents and was neither with reference to any undisclosed asset or income found during the course of search. It was a vague declaration made under duress. In this regards it may be mentioned that It is held by the Hon'ble Andhra Pradesh High Court in the case of CIT V Shri. Ramdas Motor Transport (2000) 163 CTR 0403 wherein it was observed and held in Para 7 by the court that "A plain reading of sub-s. (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to be in possession or control of any undisclosed books of account, documents, money or other valuable articles or things, elicit information from such person with regard to such account books or money which are in his possession and can record a statement to that effect. Under this provision, such statements can be used in evidence in any subsequent proceeding initiated against such person under the Act. Thus, question of examining any person by the authorised officer arises only when he found such person to be in possession o....
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....ought on record any specific transaction recorded in the seized records which the assessee may not have been able to get reconciled with the books of accounts or from where any unaccounted income can be deduced. The AO also have not brought on record any specific document based on which the declaration was made by the partner and on which addition has been sustained by him. The AO has provided an illustrative list of 14 cases in page 10-11 of the order contending that those papers are incriminating documents seized based on which the additional income was disclosed by the assessee. In this regards it may be mentioned that none of the papers referred to by the AO were seized from the assessee and none of them related to the assessee and none of them had any mention from which any inference could be drawn that the assessee might have earned some undisclosed income. The details of the illustrative cases mentioned by the AO are given hereunder for ready reference: Sr. No (i) Paper reference (ii) Seized from (iii) Relates to (iv) A LPS 3 Office premises of signature group at 18-19 kolar castle Chuna Bhatti Square Signature Colonisers ....
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....ement recorded u/s 132(4). i. As detailed above the statement recorded cannot be used against the assessee as it is not recorded in accordance with the provisions of section 132(4). The AO has failed to bring on record any specific instance of the assessee having earned any undisclosed income or having made any unexplained investment. The sole basis for making the addition is the statement made by one of the partners. ii. The AO had observed that the addition can be made solely on the basis of the statement and in this regards have drawn support from section 17 & section 110 of the Evidence Act 1872. He also placed reliance on the judgments rendered in the case of Rakesh Mahajan v CIT 214 CTR 218 as well as other decisions reported in DCIT v Bhogilal Moolchand 96 ITD 344 and Carpenters Classic p ltd v DCIT 108 ITD 142. In this regards it may be mentioned that the reliance of the AO on section 110 & 17 of the Evidence Act 1872 are totally misplaced and out of context. Section 17 relates to any admission in a statement which suggests any inference to any fact in issue or relevant fact. Thus the said section is with reference to an....
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....) (viii) CIT vs. Deepak Agrawal 251 Taxmann Pg.22 (Bom.) (ix) PCIT vs. Lata Jain 384 ITR 543 (Del.) (x) The Hon'ble Indore Tribunal in the case of Shri Omprakash Dhanwani vs. ACIT in IT(SS) No.237 (xi) Similar view was taken in the case of Anant Steel reported in 28 ITJ 47 and in the case of Shri Omprakash Gupta in ITA (SS) 277 to 282/IND/2017 order dated 28.02.2019 8. Per contra Ld. Departmental Representative vehemently argued and supporting the orders of both the lower authorities. She also submitted that the assessee firm is part of the Signature Group and the search u/s 132 of the Act was in process. Mr. Vipin Chouhan is the partner of Ultimate Builders and gave the statement for surrendering the undisclosed income of Rs. 2,25,00,000/-. She placed reliance on following judgments contending that the statement given u/s 132(4) of the Act is conclusive evidence and the additions can be made on the basis of such statement given during the course of search. (i) Hon'ble High Court of Madras in the case of Kishore Kumar V/s DCIT(2014)52 taxmann.com 449 (Madras). (ii) Hon'ble Supreme Court of India in the case of B. Kishore K....
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....ronted the assessee. During the assessment proceedings u/s 143(3) of the Act, assessee made the retraction by submitting that no such undisclosed income was earned and therefore no such income was required to be offered to tax. However, Ld. A.O giving reference to the statement of Mr. Vipin Chouhan, partner of Ultimate Builders and also giving reference to the seized documents found during the search at Signature Group made addition for undisclosed income. When the matter came up before Ld. CIT(A) addition was confirmed. However the basis of addition was accepted to have been made only on the basis of the statement of Mr. Vipin Chouhan. No reference was made to any incriminating material having its bearing on the surrendered income. During the course of hearing before us Ld. Counsel for the assessee contended that during the course of search i.e. between 29.1.14 to 31.1.2014 no cash or unrecorded assets was found, no incriminating material was found and no income was offered to tax in the statement recorded u/s 132(4) of the Act of the person found to be in the possession and control of the books of premises. Relevant questions asked about the loose paper found were duly repl....
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....t, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income- tax Act, 1922 (11 of 1922 ), or under this Act." 16. The above sub Section 4 of Section 132 of the Act starts with reference to "authorised officer", which means that the Officer who is authorised to conduct search on the assessee. In the instant case it is stated before us that the authorised officer of the assessee and that of the other concerns of Signature Group are different. 17. After the word the authorised officer it reads "during the course of search or seizure, examination of both the person". During the course of search is a period during which the search is initiated and concluded. In the instant case the search was initiated on 29.1.2014 and concluded on 31.1.2014 by a authorised officer for the assessee which is verifiable from the Panchanama framed by the search team. The statement of Mr. Vipin Chouhan was taken on 02.02.2014 by another authorised officer and this date is after the conclusion of the search in the case of the assessee on 30.01.2014. 18. There m....
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....he course of search but only on the basis of statement of Mr. Vipin Chouhan given on 02.02.2014. 22. Recently the Co-ordinate Bench in the case of ACIT(1) VS. Sudeep Maheshwari (supra) in which the undersigned was also a co-author while adjudicating the issue that "whether addition can be made merely on the basis of statement given during the course of search without correlating the statement with incriminating material", we have decided the issue observing as follows:- "6. It is the case of the assessee that during the course of search & seizure, no incriminating material or undisclosed income or investments were found. It is stated that the assessee was under mental pressure and tired. Therefore, to buy peace of mind, he accepted and declared Rs. 3 crores in personal name. It is also stated that the case laws as relied by the A.O. are not applicable on the facts of the present case. The assessee has relied on the decision of the Hon'ble Supreme Court rendered in the case of Pullangode Rubber Produce Co. Ltd. 91 ITR 18 (SC), wherein the Hon'ble Court has held that admission cannot be said that it is conclusive. Retraction from admission was permissible....
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....in the case of Kailashben Manharlal Chokshi (supra). 5. It appears from the statement of facts that there was a search in the business premises of the petitioner's firm as well as in the residential premises of its partner, Shri Sheo Kumar Kejriwal, on 24th September, 1987. During the course of search, the statement of Shri Sheo Kumar Kejriwal had been recorded under section 132(4) of the Income Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other partners would agree to the same; otherwise it would be his personal liability. However, in the returns filed after search, the income of Rs. 20 lacs surrendered by Shri Sheo Kumar Kejriwal was not declared by the assessee-firm. On being asked to explain the reason for not showing the surrendered amount in the returns, it was submitted by the assessee that declaration made by the partner was misconceived and divorced from real facts. It was contended that the declaration was made after persuasion, which,....
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....ration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is selfincriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs. 7. In view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by the assessee. The Revenue may now proceed accordingly". 25. In the light of ratio laid down in various judgments referred above including one in the case of ACIT(1) Vs. Sudeep Maheshwari (supra) decided by us wherein also we, after referred various judgments of Hon'ble High Courts have held that additions cannot be sustained merely on the basis of statement given during the course of search without correlating the addition with the incriminating seized materi....