TaxTMI 
TaxTMI 
2025 (6) TMI 1138
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....llant, a partnership firm, filed its Return of Income on November 7, 2017, declaring a total income of Rs 3,03,06,350/-. The case was selected for scrutiny assessment, and consequently, a notice under section 143(2) was issued on September 17, 2018, followed by a notice under section 142(1). On December 15, 2016, a search and seizure operation was conducted under Section 132 of the Act, at the premises of the assessee firm. During the course of the search, incriminating materials were discovered, based on which the assessee firm voluntarily surrendered alleged unaccounted income amounting to Rs. 9,85,00,000/-. The case of revenue is that total amount surrendered Rs. 9,85,00,000/-, was duly confirmed in writing through a letter signed by Shri Tarique Ali, a partner of the assessee firm. This surrendered income allegedly comprised the following: 1. Rs. 7,00,00,000/- (Rupees Seven Crore only) attributed to purchases made outside the regular books of accounts, as evidenced by the incriminating materials uncovered during the search. 2. Rs. 2,50,00,000/- (Rupees Two Crore Fifty Lakh only) representing unrecorded construction expenses related to the building located at Veerpur Industr....
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....firm which continued post-midnight of 15.12.2016 and concluded on 16.12.2016. At the time of search managing partner of the firm, Mr. Danish Ali was not present in India. However, statements of the other partner of the appellant firm, Mr. Tariq Ali, who was not in control of accounts, were recorded u/s 132(4) of the Act and he was asked and required to explain about various papers pertaining to finance and accounts found and impounded from the business premises of the appellant firm. The finance and accounts of the appellant firm were looked after by Mr. Danish Ali. The accountant of the firm was also on leave. In their absence, Mr. Tariq Ali having no knowledge of the accounts of the appellant firm had expressed his inability to give any detailed explanations in respect thereof. That Mr. Tariq Ali having expressed his lack of accounting knowledge and inability to give detailed explanations of the impounded material, his averments are null in the eyes of law and void ab initio. That left with no other option, helpless Mr. Tariq Ali in apprehension of any possible act of error and omission and under mistaken belief of law and fact, had offered income of Rs. 11.00 crores pertaining t....
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....tner of the appellant firm Mr. Tariq Ali, who was looking after the construction work of building had a rough estimate in his mind that approximately a sum of Rs. 250.00 lacs must have been incurred for building under construction till 15.12.2016, in absence of accounting knowledge he could not present the accounts at the time of search. It was submitted that no incriminating documents in respect of building construction were found or impounded during the course of search. Then amount of Rs. 35.00 lakhs stated above has no basis or rationale but an act of surmise and conjuncture under mistaken belief of law and fact it has no reference to any books of account, documents, money, bullion, jewellery or other valuable article or thing. That after return of the managing partner of the appellant firm Mr. Danish Ali from vacation, the accounts of the appellant firm were looked into and it was found that all the bills and vouchers, which Mr. Tariq Ali due to his lack of knowledge of accounts, could not corroborate with the accounts on 15/16.12.2016, were found duly entered and recorded in the books of account of the appellant firm. It was contended all the bills, vouchers and loose papers ....
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.... question No.28, that upto September, 2016, one Rinku Sharma was looking after the accounts and when he left, thereafter, the accounts were not properly maintained and in December, 2016 one Yasir was appointed as Accountant. It was admitted by him in question No.13 that the accounts were not properly maintained and properly documented. Further, when he was confronted with the document Annexures A1 to 83 he submitted that the accounts of the firm are looked after by brother Shri Danish Ali and he has no knowledge. Further, in response to question No.41 where list of sundry creditors and difference in cash was sought to be explained, it was replied by him specifically that Danish Ali only looked after all the accounts and in his absence, considering the complexity of the accounts, Tariq Ali is unable to give detailed replies and, accordingly, agreed to surrender a sum of Rs. 11 crores as income on account of partnership firm, present assessee Vision Exports and the partnership firm of Danish Ali and his father, Kohinoor Crafts. It was mentioned by Tariq Ali in his reply to question No.41 that he will give details of this Rs. 11 crores in the next 2-3 days. Thereafter in response to n....
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....enditure or investment of the firm and its partners not found recorded in the books of accounts for the period 17.08.2011 to 14.12.2016 4. Sh. Danish Ali 35,00,000/- On account of expenses incurred on marriage of Sh. Danish Ali including payment made to famous fashion designer of bollywood Mr. Manish Malhotra in cash (LP.3 of Party A-1 pages 6 to 18). 5. Sh. Danish Ali 55,00,000/- Out of marriage gifts particulars of which are not traceable. 6. M/s Kohinoor Crafts 25,00,000/- On account of any other income/expenditure or investment of the firm and its partners not found recorded in the books of accounts for the period 01.04.2010 to 14.12.2016. Grand Total 11,00,00,000/- 14. In this notice at page 465, there is also mention of certain loose papers which were sought to be explained. At pages 468 to 470, there is a reply of the assessee in which there is an explanation with regard to the currency notes of Rs. 13,64,000/- found during the search operations and also with regard to the loose papers. Accordingly, as we examine the assessment order, we find that none of the alleged disclosures on account of alleged outside book purchases, construction of buil....
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....e retraction from the disclosure of income of Rs. 25 lakhs made by the assessee is clearly an afterthought and, therefore, is not acceptable. It is the submission of the ld. Counsel that no material pertaining to the assessee was found during the search on 15th December, 2016 showing the existence of any unexplained investment which is evident from 'Panchnama.' Further, no admission was made in the statement recorded u/s 132(4) and the admission made in the statement recorded u/s 131(1A) has no evidentiary value and the onus is upon the Revenue to bring corroborative material/evidence on record either during the search or post search proceeding to prove the existence of any undisclosed income. It is also his submission that the statement mentions that the income pertains to the period 01.04.2010 to 14th December, 2016 and, therefore, the entire addition should not have been made in this year without bringing any material on record to prove that this income pertains to the impugned assessment year. Further, nothing has been brought on record to prove the contents of the affidavit retracting the erstwhile statement. 11.1 I find some force in the above argument of the ld. Counsel. I....
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....position of law that addition cannot be sustained merely on the basis of the statement. There has to be some material corroborating the content of the statements. 21. In the case of Kailashben Manharlal Chokshi v. CIT1, the Gujarat High Court held that the additions could not be made only on the basis of admissions made by the assessee, in the absence of any corroborative material. The relevant paragraph no. 26 of the said decision has been reproduced hereinbelow: - 26. In view of what has been stated hereinabove we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntar....