ACIT, CENTRAL CIRCLE, GHAZIABAD, GHAZIABAD vs. BRATPAL SINGH TYAGI, HAPUR

Considered the rival submissions and perused the material on record. Upon careful consideration, we are of the considered view that in the interest of justice, the matter requires denovo assessment. Therefore, we remit back the issues to the file of the Assessing Officer with the directions to decide the same afresh after admitting the additional evidences and submissions of the assessee, after giving adequate opportunity of being heard to the assessee. Assessee is directed to fully cooperate with the AO during the proceedings. We hold and direct accordingly.

In the result, the appeal being for AY 2017-18 filed by the assessee is allowed for statistical purposes.

Now we take up for AY 2018-19 filed by the assessee wherein the assessee has taken the following grounds of appeal:-

The Revenue in the cross appeal for AY 2018-19 has challenged the reduction of tax upto 50% by the ld. CIT (A).

At the time of hearing, ld. AR of the assessee brought to our notice that the addition of Rs.90,00,000/- was made on the plea that assessee surrendered undisclosed income by using a cheque of Rs.60,00,000/- at the time of survey of companies. He further brought to our notice that Assessing Officer observed that assessee was generating huge income from farm house and assessee himself in his statement has surrendered and agreed to pay tax at Rs.60,00,000/-, hence Assessing Officer made the addition of Rs.1.80 crores being tax on the assessee is 30% and added the same u/s 69A of the Act. He submitted that assessee preferred an appeal before the ld. CIT (A) and before ld. CIT (A), assessee submitted that assessee had not surrendered any amount but at the time of survey in company issued the cheque of Rs.60,00,000/- on pressure of the Department, as in none of the places of survey nothing was found by way of cash, bullion, jewellery, investment or any tangible or intangible assets as assessed u/s 69A. He submitted that copy of statement of Shri B.S. Tyagi dated 13.09.2017 at survey on Uniplus Biotech Pvt. Ltd. and Bestopick Life Sciences Pvt. Ltd. in which there is no mention of any surrender u/s 69A of the Act.

Ld. AR further brought to our notice that after going through the submissions of the assessee, ld. CIT (A) on the basis of cheque issued, worked out that tax to the tune of Rs.30,00,000/- was paid in group cases on estimated income of Rs.90,00,000/- inspite of the fact that no excess cash, stock, undisclosed investment, jewellery and bullion was found u/s 69A by the Assessing Officer on the basis of which surrender was taken as reported by the Assessing Officer. Further, he brought to our notice that ld. CIT (A) has not given any finding of availability of undisclosed income/investment but relied upon the issue of cheque of Rs.60,00,000/- to cover up taxes to be paid on enhanced income and reduced taxes amounting to Rs.30,00,000/- and made the addition of Rs.90,00,000/- u/s 690A of the Act. Against this order, assessee as well as Revenue are in appeal before us.

On the other hand, ld. DR submitted that assessee during survey voluntarily surrendered Rs.60 lakhs and the same was confirmed by the Assessing Officer. After considering the submissions of the assessee, ld. CIT (A) gave relief to the assessee upto 50% of the addition. He submitted that ld. CIT (A) has not appreciated the facts that assessee himself in his statement surrendered and agreed to pay tax of Rs.60 lakhs and he objected to the findings of the ld. CIT (A).

Considered the rival submissions and material placed on record. No doubt assessee declared Rs.60 lakhs during survey proceedings. The same was not disclosed by the assessee in the return of income but Assessing Officer has proceeded to confirm the addition. However, ld. CIT (A) has reduced the same upto 50% to the extent assessee has paid tax of Rs.30 lakhs. Against which both assessee and Revenue are in appeal before us.

After considering the detailed submissions, we are of the considered view that mere acceptance during search/survey does not suffice. The Assessing Officer has to corroborate the material found during survey and made the addition. As per the CBDT Instruction F.No.286/98/2013-IT (Inv. II) dated 18.12.2014 wherein it was emphasised upon the need to focus on covering evidence during survey/search to strictly avoid obtaining admission of undisclosed income. Similar issue was considered by the coordinate Bench in the case of ACIT vs. Shri Shyam Sunder Jindal in vide order dated 21.05.2025 and held as under :- “14. It is a settled proposition of law that mere statement u/s 132(4) or u/s 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the search or the statement must be made relatable to some material by subsequent inquiry/investigations.

Hon'ble Supreme Court in the case of Pullangode Rubbers Produces CO Ltd (supra) has observed as under: "It is no doubt true that entries in the account books of the assessee amount to an admission that the amount in question was laid out or expended for the cultivation, upkeep or maintenance of immature plants from which no agricultural income was derived during the previous year. An admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the person who made the admission to show that it is incorrect."

The crux of the aforesaid decision is that a declaration or disclosure made by the person is binding unless it is rebutted by the person by furnishing valid evidences. In the present case, assessee admitted certain income in the statements recorded u/s 132(4) of the Act which was later retracted and reasons for such retraction was explained by making detailed submission with the help of explanation of seized material which does not indicate any incriminating material. Thus, the appellant retracted the statement recorded u/s 132(4) of the Act showing the admission made therein by him was incorrect by filing all the possible documentary evidences.

The Hon'ble High Court of Rajasthan in the case of Mantri Share Brokers Pvt. Ltd. reported in 96 taxmann.com 279 held as under: “Section 69B of the Income-tax Act, 1961- undisclosed investments (Burden of proof)- whether where except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document or in any other form to conclude that statement made was supported by some documentary evidence, said sum could not be added in hands of assessee as undisclosed investments - Held, yes [Paras 10-11] 1In favour of assessee]. Para 10 & 11 of the order is as under: 10. Before proceeding with the matter, it will not be out of place to mention that except the statement in the letter, the AO has no other material on record to assess the income of Rs. 1,82,00,000/-.

It is settled proposition of law that merely on the statement that too also was taken in view of threat given in question No.36 as narrated by Mr. Gupta and the same sought to have been relied upon, there is no other material either in the form of cash, bullion, jewellery or document in any other form which can come to the conclusion that the statement made was supported by some documentary evidence. We have gone through the record and find that the CIT (A) has rightly observed as stated hereinabove, which was confirmed by the Tribunal.”

It would not be out of place to mention that this order of Hon'ble Rajasthan High Court has been confirmed by Hon'ble Supreme Court also.

Further, Hon'ble Delhi High Court in case of Harjeev Agarwal (supra) held as under: "...A plain reading of Section 132 (4) of the Act indicates that the authorized officer is empowered to examine on oath any person who is found in possession or control of any books of accounts, documents, money, bullion, jewellery or any other valuable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB (1) read with Section 1588 (b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded...."

Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the Act, the same was also applied in respect of assessment u/s 153A, as has been held by hon’ble Delhi High Court in case of Best Infrastructure (84 Taxmann.com 287) when it was held as under: “38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal (supra).”

It is submitted that Hon’ble Rajasthan High Court in the case of PCIT vs Shri Sanjay Chhabra in Income Tax Appeal No. 22/2021 vide order dt. 06/04/2022 has held that addition based solely on statement later on retracted, without anything more, could not be justified in law and thus had not admitted the appeal filed by the department. The relevant observations of the hon’ble court are as under: The argument advanced on the basis of the principle propounded by the Supreme Court in the case of Sumati Dayal (supra), does not apply to the facts of the present case at all. The Tribunal's findings are based on material placed on record. The aspect of human probability, in the present case, only goes against the Revenue because in the present case, a raid was conducted and in that process, statement is said to have been recorded under Section 132(4) of the I.T. Act, which was, later on, retracted by the Assessee. In a situation like this, where the office premises are sealed for many days and during that period, a statement is said to have been recorded under Section 132 (4) of the I.T. Act, the Tribunal's view that only the basis of such retracted statement, addition could not be justified without any other material admissible in evidence, warrants no interference as it is not a substantial question of law. In the case of Commissioner of Income Tax Versus Harjeev Aggarwal reported in (2016) 290 CTR (Del) 263 and Kailashben Manharlal Chokshi Versus Commissioner of Income Tax reported in (2010) 328 ITR 411 (Guj) various High Courts have held that addition based solely on statement later on retracted, without anything more, could not be justified in law. Thus, the view taken by the Tribunal cannot be faulted. In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed.

At this juncture, it is also relevant to mention that in the case of M/s Lucky Holding Pvt. Ltd. in whose hands a sum of Rs. 90 Crores were admitted by the assessee in the same statement / letter field before the Investigation wing, the assessment u/s 147/143(3) was completed where no addition was made on account of alleged admission of undisclosed income by the assessee. The copy of the order is available in paper book pages 60-61. It is incidentally noted that the same assessing officer has completed the assessment in the case of the company where he accepted the contention that when no incriminating paper was found, no addition could be made solely based on the alleged admission in the statements recorded u/s 132(4) of the Act. However, in the case of assessee, the same assessing officer has taken a divergent stand and without referring to any incriminating material found/ seized during the search made the addition sole for the reason that assessee has admitted additional income in the statements recorded u/s 132(4) of the Act during the search proceedings.

It is further seen that assessee gave pagewise explanation of all the loose papers found and seized from his possession which were inventoried as Annexure A-1 to 18 and none of the paper contained any entry related to the assessee which indicates any transaction of undisclosed in nature and the explanations tendered by the assessee were accepted by AO without any adverse remark. The copies of explanation so filed before the lower authorities are placed in paper book pages 90-139.

In the case of Shri B.C. Jindal, since there was incriminating material found/seized indicating undisclosed income, therefore, the additional income admitted by the assessee was offered for tax and due taxes were paid, this also support the stand of the assessee that wherever the admission of additional income was based on the incriminating material, the same was honored by the respective assessee.

Regarding the judicial pronouncements relied upon by the revenue, we find in these cases the assessee was not able to demonstrate that the admission made in the statements recorded during search were incorrect with the plausible evidence. The Hon’ble Supreme court in the case of Pullangode Rubber (supra) has held that though admission is an extremely important piece of evidence but it cannot be said to be conclusive and the person who made the admission can show that it is incorrect. As observed above, in the instant case the assessee has tendered his explanation of each, and every paper found and seized during the search wherein he had categorically explained the nature of entries contained the name of the entity in whose books of accounts they are recorded. Thus, though all these judgements refer to the situation where additions were made on the basis of confessional statements yet, in these cases such confession was not proved incorrect thus the Hon’ble courts opined that addition made on the basis of admission should be upheld. As explained above, the facts of the present case are distinguishable thus these judgments as relied upon by the revenue are not applicable in the instant case.

At this stage we refer to the statements of the assessee recorded u/s 132(4) wherein after reply to Question No. 16, statements were discontinued for providing rest to the assessee at 8:45PM of 14.11.2011 and they were resumed on 9:00 PM of 14.11.2011 i.e. after allowing the assessee for rest of only 45 minutes. Thereafter, these statements were concluded on 15.11.2011 and it is not mentioned in the statements at what time they were concluded on next day. This clearly shows the mental pressure applied for obtaining the surrender from the assessee which is gross violation of the CBDT Instruction No. 286/2/2003-IT-Inv, dated 10.3.2003 wherein directions were given to the field officers to collect the evidences during search and seizure and to avoid the practice of obtaining the surrender. As observed above, in the present case, no such incriminating evidence was collected by the search team during the course of search nor thereafter, before completing the assessment u/s 143(3) of the Act and the addition was made solely on the basis of the alleged admission obtained from the assessee in the statements recorded u/s 132(4) of the Act.” 15. Respectfully following the above decision, we are also of the view that Assessing Officer merely cannot rely on the admission during survey rather it should be backed by cogent material or the statement must be relatable to some material with the support of subsequent verification/investigation. Therefore, we are inclined to allow the grounds raised