TaxTMI 
TaxTMI 
2024 (8) TMI 1756
X X X X Extracts X X X X
X X X X Extracts X X X X
....n holding that the value of excess jewellery is attributable to unaccounted income during the year of search 2015-16, without appreciating that the assessee himself admitted in his sworn statement dated 14/11/2014 that investment in additional jewellery found was made out of his unaccounted Income for the AY 2013-14. 2.2 The CIT(A) erred in not adjudicating the issue of addition made toward excess jewellery found on merits, though the assessee has not properly explained the source for acquisition of jewellery found but deleted on the ground of legality (i.e.) assessable in the AY 2015-16 (year of search), though the assessee himself admitted that the source for acquisition of excess jewellery was out of unaccounted income for the AY 2013-14." 3.1 In this ground, the Revenue has objected to the Ld. CIT(A)'s action of deleting the addition of Rs.1.25 crs. made by way of excess jewellery found during the course of search. Briefly stated, the facts as noted are that, the assessee is a Director of M/s. Jumbo Fireworks (India) (Pvt.) Ltd., (hereinafter in short "M/s. JFIPL") and partner in the group concerns. Search and seizure operations u/s.132 of the Income Tax Act, 19....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e as he had retracted the same and supported the retraction with contemporaneous evidence. The AO however didn't agree with this contention put forth by the assessee. According to the AO, the retraction was an after-thought and hence, had to be discarded. The AO further discussed the submissions on merits and observed that the assessee's family members weren't able to sufficiently justify that the jewellery belonged to them and that they were acquired out of their own regular income. The AO also denied to extend the benefit of the jewellery limits set out in CBDT Instruction No. 1916 dated 11.05.1994. The AO accordingly held that the impugned jewellery in question remained unexplained and added the same in the hands of the assessee u/s 69A of the Act in the relevant AY 2013-14. 3.3 Being aggrieved by the aforesaid addition, the assessee went in appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee is noted to have inter alia contended that, the addition on account of unexplained jewellery could have only been made in the year in which the assessee was found to be its owner i.e. the year of search (16.10.2014), viz., AY 2015-16 and not in AY 2013-14. The a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e explanation offered is found to be not satisfactory in the opinion of the Assessing Officer; (e) If the aforesaid conditions are satisfied, then, the value of the bullion, jewellery or other valuable articles may be deemed to be the income of the financial year in which the assessee is found to be the owner; (f) In the case of money, the money can be deemed to be the income of the financial year. 3.7 From the above, it is seen that, the value of unexplained jewellery shall be deemed to be the income of that financial year in which the assessee is found to be the owner. Now, under the express terms of the charging provisions contained in Sections 3 & 4 of the Act, the subject of charge is the income of the 'previous year'. Each `previous year' is a distinct unit of time for the purposes of assessment and the profits made or the liabilities or losses incurred before or after the previous year is immaterial in assessing the income in a particular previous year. Useful reference in this regard may be made to the following observations of the Hon'ble Delhi High Court in the case of Vipin Kumar Khanna Vs CIT (251 ITR 782), which are as follows :- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the owner in AY 2013-14. For this, the Revenue has relied upon the statement of the assessee wherein he has purportedly admitted to have acquired the impugned excess jewellery in the relevant AY 2013-14. Having perused the material placed before us, it is noted that there is no such explicit statement given by the assessee. The AO is noted to have taken cognizance of the answer given by the assessee in response to Q No. 27 of his sworn statement dated 16.10.2014, which reads as follows :- "I submit that these jewellery items and others belong to my wife, my daughter, daughter-in-law, son and myself and to the best of my knowledge/memory, these are accounted for. However, I offer Rs.1,25,00,000/- as additional unaccounted income. In this connection, I would like to make a request that the above additional unaccounted income offered by me in my hand may kindly be valued correctly after due verification of the income/wealth declared in my hand in my family members' returns and based on the Valuer's report to be prepared." 3.11 From the above, we note that, there was no such admission by the assessee that the impugned jewellery was acquired in FY 2012-13 relevant t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion. 3.1 The Ld CTT(A) failed to appreciate that the assessee himself admitted in his sworn statement that he has borrowed Rs.4,00,00,000/- for purchase of vacant land measuring 100 acres and returned the same along with interest amount of Rs.1,20,00,000/-. He also admitted that the amount was paid out of sale of scrap, waste materials and agreed to offer the same for the AY 2013-14. It is clear that the assessee made unaccounted investment (on money) on lands purchases by obtaining loan, which was repaid along with Interest from his unaccounted Income. 3.2 The Ld. CIT(A) erred in failing to appreciate that the retraction of statement by the assessee in only an afterthought and not substantiated by any evidence. The assessee has given facts categorically in his statements recorded during search based on which the additions were made." 4.1 The facts relating to this ground are that, in the course of search, a loose sheet ID marked ANN/HRV/RS/F/G/L was found which contained jottings "unAC-4Cr-15%-Rs.5,00,000 per month". The Investigating Officer is noted to have required the assessee to explain the meaning of these jottings in the course of search and recorded t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... clearly denied the said transaction. Mr. Nandgopal had also stated that he did not have the means to lend such a huge loan to the assessee. The assessee further showed that, the details of lands mentioned in his statement were actually acquired by M/s. Jumbo Fireworks (India) Pvt. Ltd. and not him and that too in earlier years. According to assessee therefore the original statement which had been retracted ought to be ignored. The AO however didn't agree with these submissions of the assessee and held that the admission made at the time of the search can't be ignored, especially in view of its coherence. The AO noted that, the assessee had admitted to earning undisclosed income in other years by way of sale of scrap and therefore according to him, he would have earned undisclosed income from sale of scrap in the relevant year as well, out of which he made repayment of loan of Rs.5.2 crores in question. The AO accordingly brought the impugned sum to tax by way of undisclosed income of the assessee. Being aggrieved by the order of the AO, the assessee carried the matter in appeal and the impugned addition was deleted by the Ld. CIT(A) by holding as under: - "6.9 Iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot be said that it is conclusive and further observed that it is open to the person who makes the admission to show that it is incorrect. 6.9.4 At the outset it can be stated that where the admission is tied up with incriminating evidence found in the course of search, the principle laid down by the Apex Court will no longer hold good. Obviously, in the absence of evidence an admission can no longer be an evidence to support any addition. 6.9.5 Further, the Apex Court in the case of Kasmira Singh v. State of Madhya Pradesh AIR 1952 SC 159, has observed that the correct way to approach a case of confession is to marshal evidence against the accused excluding the confession altogether from consideration Where the case can be decided independent of confession, then, it is not necessary to take help of confession. 6.9.6 Applying this test in the case of the Appellant, it can be stated that an admission should not be the foundation of the assessment but independent evidence should form the basis of assessment, while admission supplements it. 6.9.7 While going through the assessment order it can be seen that the AO relied upon the noting in the loose s....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 6.9.10 In view of the above discussion and the various judicial precedence relied, the undersigned is of the considered view that the AO has not brought any cogent, corroborative and conclusive evidence to substantiate the addition contemplated. In this background the grounds raised by the Appellant upon this issues are treated as allowed consequently the AO is here by directed to delete the addition of Rs.5,20,00,000/- made as unexplained loan repayment with interest u/s 69C of the Act." 4.3 Aggrieved, the Revenue is in appeal before us. 4.4 We have heard both the parties and perused the relevant statements and retraction affidavits and also the other material placed on our record. The main thrust of the Revenue's argument was that the impugned addition made by the AO was justified as it was made on the basis of statement given by the assessee in the course of search u/s 132(4) of the Act, which is an important piece of evidence in itself and that his subsequent retraction, being an afterthought, was of no relevance. In order to adjudicate this contention, it is first relevant to examine the extant provisions of Section 132(4) of the Act, which reads as follows: ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e attached to it must depend on the factual circumstances in which it was made. It is open for the assessee to show the contents/facts stated therein to be erroneous or untrue, based on mistake of fact. Hence, the position which emerges is that a statement u/s 132(4) of the Act by itself cannot be reason enough to justify an addition, if the assessee is able to show that the facts admitted by him was purely based on wrong assumption of facts and able to adduce evidence/material to show that he was wrong on the facts he admitted. So, when an admission u/s 132(4) of the Act has been retracted on the aforesaid reasons, then the AO should cross-examine the person again to ascertain the correct facts. The AO ought to conduct proper investigation into the affairs of the assessee and gather corroborative material which would negate such retraction and prove that the facts admitted originally is correct and thus retraction can be discarded. Otherwise, an addition made solely on the basis of a statement which has been subsequently retracted, and is not backed by corroborative evidence, may not be sustainable. For this, we may gainfully refer to the Instruction F.No.286/2/2003-IT (Inv. II), ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hile reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe /oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT . 4.7 In view of the above position of law, we now proceed to examine the facts on the present case. It is noted that the impugned addition emanated from the statement given by assessee u/s 132(4) of the Act. The Investigating Officer is noted to have impounded a loose sheet ID marked ANN/HRV/RS/F/G/L which contained a stray noting which read as, "unAC-4Cr-15%-Rs.5,00,000 per month". In relation to this stray noting, the assessee is noted to have admitted to undisclosed income of Rs.5.2 crores in the statement recorded u/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mises, which indicated re-payment of any cash loan or would corroborate the original statement of the assessee, as the purported noting found in Annexure - ANN/HRV/RS/F/G/L is ex-facie dumb in nature. We also find force in the Ld. AR's contention that the AO has advocated an impossible proposition that large scale generation & payment of unaccounted monies took place without there being any corroborative evidence to support the same. In the light of the infirmities discussed in the foregoing, we are of the view that some kind of material corroboration was required. Otherwise, such statement alone cannot be sufficient to fasten the assessee with any liability. Even though, on first blush, the original statement appeared relevant, but as noted in the foregoing on account of the infirmities and failure of the Revenue to corroborate the same with some independent evidence; coupled with the denial of the impugned transaction by Mr. Nandagopal and retraction made by the assessee, it is not prudent to rely on the same to draw adverse inference against the assessee. Hence, the Revenue's plea that the impugned addition be upheld on the basis of the original statement of the assessee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....could be termed as substantial question of law." 4.10 We find that similar issue was also involved in the decision rendered by Hon'ble Gujarat High Court in the case of Chetnaben J Shah Vs ITO (288 CTR 579). In this case, it is noted that in the course of search, the assessee had admitted in the statement u/s 132(4) of the Act that it was regularly purchasing and selling shares which were not forming part of the regular books and disclosed a sum of Rs.10,50,000/- to have been earned over the years. In the course of assessment, the assessee retracted his statement and contended that it was taken under pressure. The assessee also stated that although during the course of search, books of accounts and loose papers were found and seized, but there was no evidence unearthed which showed that the assessee was involved in the purchase and sale of shares which yielded income of Rs. 10,50,000/-. The AO however did not agree with the objections put forth by the assessee and added the impugned sum as undisclosed income of the assessee. On appeal the appellate authorities noted that there was no evidence to support the very existence of this income except the so called statement u/s 132....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Nos. 13 to 15 of his order :-- I have carefully considered the contention of the ld . counsel for the appellant and perused the relevant record. The Assessing Officer has made this addition mainly on the basis of statements of Mr. Surinder Miglani S/o Mr. Om Prakash Miglani, who was a lecturer of MBA with SSRD since August, 2005. This statement was recorded during the course of search. Though Mr. Miglani has retracted from his statement by filing affidavit before the Assessing Officer, this affidavit has not been accepted by the Assessing Officer on the ground that Mr . Surinder Miglani was not an assessee, who facing search action when his statement on oath was recorded . However, the Assessing Officer cannot be said to be justified in rejecting the sworn affidavit of Mr. Miglani on the above ground. Though I agree with the Assessing Officer that none can be allowed to retract from the statement made during the course of search, unless there was evidence to establish that such statement was recorded under duress etc ., in the case of appellant, though there is apparently no evidence of such duress etc ., this aspect is to be seen keeping in view the totality of the facts....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of search in this regard. The increase in salary from assessment years 2005-06 to 2006-07, in itself would further not constitute conclusive evidence that the appellant claimed certain in genuine expenses under the head Keeping in view the above discussion, I am not inclined to agree with the Assessing Officer that the appellant inflated expenses under the head "Salary". Though on the basis of statement of Mr. Surinder Miglani recorded during the course of search, adverse inference could be drawn against the appellant, as far as payment of salary to him alone is concerned, keeping in view the entirely of the facts and circumstances i.e., statement of 11 other employees recorded during the course of search and the subsequent affidavit of Mr. Miglani which has been rejected by the Assessing Officer not for some good and valid reasons, it would not be appropriate even to sustain addition even in respect of salary paid to Mr. Miglani. In view of the above, addition of Rs.14,33,132 made by the Assessing Officer is, therefore, deleted. 14. From the above, we find that ld. CIT(A) has decided this issue in proper perspective because the Assessing Officer has based his conclusio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to be repaid along with interest at the rate of 21% in a year. The assessee in his original statement dated 16.10.2014 is noted to have admitted to have repaid the said loan along with interest and accordingly offered the loan of Rs 1 crores along with interest of Rs.21 lacs to tax in AYs 2013-14 & 2014-15. The AO in the course of assessment noted that, the assessee didn't offer the impugned sum to tax in the return of income filed for AY 2013-14 and therefore added the same by way of unexplained payment u/s 69 of the Act in the hands of the assessee. Aggrieved by the order of AO, the assessee carried the matter in appeal before the Ld. CIT(A). It is noted that the Ld. CIT(A) upon examining the facts noted that the assessee had already offered the impugned repayment of loan along with interest in the return of income filed u/s 153C of the Act for AY 2014-15 which had been assessed to tax as well and accordingly deleted the impugned addition holding it to be double addition of the same amount. Being aggrieved by the order of Ld. CIT(A), the Revenue is now in appeal before us. 5.2 Heard both the parties. The sole contention raised by the Revenue before us is that viz., when ....