DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE, JABALPUR vs. SHRI SAURBAH BADERIA, JABALPUR

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1. Deleting the addition of Rs. 1,66,00,000/- made by the Assessing Officer on account of non honoring of surrender made during the course of search and in the statement u/s 132(4) of the Income Tax Act, 1961 without appreciating the facts of the case and the evidentiary value of the statement recorded on oath u/s 132(4) of the Act. 3. The brief facts of the case are that the appellant is an individual and earning income from salary income from Satya Sai Hospital and Institutes of Medical Sciences Pvt Ltd, income from partnership firm and income from other sources. In this case, search & seizure operations u/s 132(1) of the Income Tax Act, 1961 was carried out on 17.11.2015. Consequently, notice

2 Saurabh Baderia u/s 153A of the IT Act, 1961 was issued on 28.07.2017 . Regular return of income for AY 2016-17 was filed on 16.10.2016 declaring total income of Rs. 18,54,42,110/ - The AO made addition of Rs. 1,66,00,000/- on account of difference of the surrender made of Rs. 20,16,00,000/- during the search and the return filed of Rs. 18,54,42,110/-voluntary disclosure made during the course of search.

 Addition is against the circular issued by the CBD T Circular 286/2/2003 March 23, 2003 which prohibits addition solely on the basis of confession. The circular is re-produced hereunder:- "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessee while filing return of mcome. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentra tion on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income."  Hon ble SC in Pullangode Rubber Produce Co Lid Vs State of Karela[1973] 91 ITR 18 an admission is an extremely important piece of evidence though it is no conclusive.  COMMISSIONER OF INCOME TAX VS. DILBAGH RAI ARORA HIGH COURI OF ALLAHABAD 308 CTR (All) 502 Addition on the basis of statement under s. 132(4) -Addition can only be made, if there is incriminating material or the surrounding circumstances reveal that there is any mater ial to justify the addition—If the person can explain with supportive evidence, material or otherwise that the admission by him earlier is not correct or contain a wrong statement or that a true state of affairs

4 Saurabh Baderia is different from that represented therein, addition cannot be made solely relying on statement under s. 132(4).  GAJJAM CHINA YELLAPPA & ORS. Vs. ITO HIGH COURT OF ANDHRA PRADESH 370 ITR 671 (AP) Income-Addition On the basis only it retracted statement under s. 132(4)-Is invalid—A retracted statement cannot constitute the sole basis for fastening liability upon the assessee -Once the statement is retracted the effect of retraction has to be decided by a superior forum and not by the very officer who is alleged to have exerted force-In case the statement recorded during survey is withdrawn, the AO can support his findings on the basis of other material —CBDT Circular dt. 10th March, 2003 also takes an exception from relying upon retracted statements-Appeals allowed and assessments set aside.  The Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat) …….merely on the basis of admission that few benami concerns were being run by assessee, assessee could not be basis for making the assessee liable for tax and the assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such evidence. It was further urg ed by the assessee that admission should be based upon certain corroborative evidences. In the absence of corroborative evidences, the admission is merely a hollow statement. We have given our thoughtful consideration to the rival contentions of the partie s. It is undisputed fact that the statement recorded u/s 132(4) of the Act has a better evidentiary value but it is also a settled position of law that the addition cannot be sustained merel y on the basis of the statement. There has to be some material corroborating the contents of the statement. In the case in hand, revenue could not point out as what was the material before the A.O., which supported the contents of the statement. In the absence of such material, coupled with the fact that it is recorded by the Ld. CIT(A) that the assessee himself had surrendered a sum of Rs.69,59,000/- and Rs. 75,00,000/- in A.Y. 2008-09 and 2009-10 respectively. The A.O. failed to co-relate the disclosures made in the statement with the incriminating material gathered during the search. Therefore, no inference is called for in the finding of the Ld. CIT(A) and is hereby affirmed.  The Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi VS. CIT - (2008) 14 DTR 257 (Guj.) …… that merely on the basis of admission, the assessee could not have been subject to additions, unless and until some corroborative evidence is found in support of such admission.

5 Saurabh Baderia 8. In the instant case the ld. CIT(A) held that he has come to an unescapable conclusion that the AO was not justified in making addition of Rs. 1,66,00,000/- as voluntary surrender made during the course of search because no specific reference has been made by the AO to any incriminating material found during the course of search suggesting earning of such unaccounted income.

Order Pronounced in the Open Court on 23/11/2023.