ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1, GUWAHATI vs. ROHIT JAIN, SHILLONG

order : July 5th, 2022 ORDER Per Manish Borad, Accountant Member: Both these appeals filed by the Revenue pertaining to the Assessment Years (in short “AY”) 2016-17 & 2017-18 are directed against the common order passed u/s 250 of the Income Tax Act, I.T.A. Nos.: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-1, Guwahati [in short ld. “CIT(A)”] dated 08.04.2019 arising out of the assessment orders framed u/s 153A/153D/143(3) of the Act dated 28.12.2018.

2. Whether or not the Ld CIT(A) erred in holding the contents of seized material were duly explained in assessment proceedings while giving relief of Rs.2.20 Cr in the assessment year 2016-17 ignoring tenet that mere statement on typed paper does not constitute tangible and cogent evidences which can be relied upon.

3. Whether on the facts and circumstances of the case and law, the Ld CIT(A) erred in deleting the addition of Rs.2,20,00,000/- for AY 2016-17 where the assessee was unable to substantiate the noting in the seized material with cogent evidences in assessment proceedings.”

4. As far as Revenue’s appeal for AY 2017-18 is concerned, except the change of the amount regarding addition of Rs. 60 lakh made on the basis of statement on oath recorded during the course of search, there is no change in the grounds of appeal. For the purpose of adjudication of the issues, we will take the facts for AY 2016-17. .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain.

5. Brief facts of the case as culled out from the records are that the assessee was subject to search u/s 132 of the Act on 02.06.2016. Assessment proceedings carried u/s 153A r.w.s. 153D r.w.s. 143(3) of the Act. Ld. AO observed that during the course of search, the assessee has given a statement on oath u/s 132(4) of the Act accepting unaccounted income amounting to Rs. 5.60 Cr from AY 2011-12 to AY 2017-18 and as far as AY 2016-17 is concerned the amount stated was 2.20 Cr. The said statement was retracted by the assessee i.e. Rohit Jain, Chairman of CMJ Group by filing an affidavit on retraction petition dated 25.08.2016 stating that the said disclosure was made under coercion and threat and such amounts were wrongly disclosed since the entire sum is already accounted for in the regular books of accounts of various family members. Ld. AO was not convinced and came to a conclusion that since the assessee has admitted the said amount as undisclosed income in the statement recorded on oath u/s 132(4) of the Act, the same ought to have been disclosed in the return filed in compliance with the notice u/s 153A of the Act and since the same has not done, ld. AO made an addition of Rs. 2.20 Cr. Similar type of addition was made for AY 2017-18 at Rs. 60 lakh. Though there was some other additions made by ld. AO but since they are not in dispute before us, we are limiting our adjudication only to the addition made at Rs. 2.20 Cr for AY 2016- 17 and Rs. 60 lakh for AY 2017-18.

6. Aggrieved, assessee challenged the action of ld. AO before ld. CIT(A) who has deleted the additions after considering various judicial pronouncements consistently holding that mere statements taken during the course of search u/s 132(4) of the Act Page 3 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. cannot be considered to be incriminating material and has also considered the fact that once the appellant has retracted his statement by way of an affidavit dated 25.08.2016, the onus shifted over to ld. AO to refer to the incriminating material found during the course of search in order to substantiate the alleged addition made in the hands of the assessee. Ld. CIT(A) while deleting the impugned addition also referred to the CBDT circular no. 286/2/2003-IT(Inv.) dated 10.03.2003 wherein directions have been given by the CBDT that in respect of the pending assessment proceedings, assessing officer should rely upon the evidence/material gathered during the course of search/survey operation while framing the relevant assessment orders and since no such evidence was referred to by ld. AO for making the impugned addition and sole reliance was placed on the statement given u/s 132(4) of the Act, ld. CIT(A) deleted the addition of Rs. 2.20 Cr. made for AY 2016-17 and Rs. 60 lakh for AY 2017-18.

7. Aggrieved, the Revenue is now in appeal before this Tribunal. Ld. D/R vehemently argued referring to the observation of ld. AO and stated that certain evidences were filed in the form of bank statement which were not confronted to ld. AO and thus, there is a gross valuation of Rule 46A of Income Tax Rules, 1962 and further submitted that the statement given u/s 132(4) of the Act are on oath and therefore has evidential value and any post- retraction of such statement cannot be entertained. Thus, prayer was made to confirm the addition made by ld. AO.

8. On the other hand, ld. Counsel for the assessee apart from placing heavy reliance on the finding of ld. CIT(A) as well as various .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. judgments and decisions referred in the impugned order further made arguments referring to the written submission filed in the form of the facts of the case placed at page 1 to 7 of the paperbook and since similar type of submissions have been made for AY 2016-17 and AY 2017-18, we are extracting below the submission for AY 2016-17: “The respondent, an individual, is engaged in dealing in Broom Stocks as well as in shares and securities. The respondent filed his return for the assessment year under dispute u/s. 139(1) of the Income Tax Act. 1961 on 01-08-2017 declaring income at Rs. 7,25.040/-. Meanwhile, a search & seizure operation u/s. 132 of the Income Tax Act. 1961 was conducted on 02-06-2016 at his premises which was concluded on 01-08-2016. In such operation, the respondent was confronted with the loose papers found in the business premises of C.M.J. Group of Companies wherein he was the Chairman. After a span of two months, the respondent filed a petition of disclosure of Rs. 35,00,00,000/- of undisclosed / unaccounted income in various hands of his group for different assessment years. Since the warrant of authorization u/s. 132(1) of the Income Tax Act, 1961 was executed against the respondent, a notice dated 11-08-2017 was issued u/s. 153A of the Income Tax Act, 1961 by the Ld. Deputy Commissioner of Income Tax, Circle 4, Guwahati (hereinafter referred to as the Ld. Assessing Officer for the sake of brevity) upon the respondent. In compliance thereof, the respondent had duly filed a return u/s. 153A of the Act on 27-10-2018 disclosing the income of Rs. 12,80,120/-. However, such return of income for the assessment year under dispute did not include the amount of Rs. 2.20,00,0001- disclosed by the respondent in the disclosure petition filed in compliance with statement u/s. 132(4) of the Act on 29-07-2016. In fact, subsequent to the disclosure statement on 29-07-2016, the respondent had appeared before a Notary Public in Shillong on 25-08-2016, and affirmed on oath that the disclosure statement was obtained on coercion without any aid of the accounts of the respondent and his group members. It was affirmed that such amount was wrongly disclosed since the entire sum is already accounted for in the regular books of accounts of various family members and on such premise, the disclosure made during the course of search & seizure operation on 29-07-2016 was categorically retracted. It was also explained during the course of the assessment proceedings before the Ld. Page 5 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. Deputy Commissioner of Income Tax. Circle

1. Guwahati (hereinafter referred to as the Ld. Assessing Officer for the sake of brevity) who desired the respondent to produce evidence in support of such explanation which were duly complied with by the respondent. In fact, the Ld. Assessing Officer did not find any discrepancy in such an explanation filed by the respondent. However, the Ld. Assessing Officer required the assessee to show cause why the amount disclosed by the respondent in the course of search & seizure operation should not be treated as his undisclosed income. In rejoinder, it was apprised in detail that the disclosure made during search & seizure was not voluntary and it was taken under coercion and intimidation. In fact, the alleged disclosure made was in the realm of fiction and not supported by any evidence. In course of the assessment proceedings, the respondent had produced all the evidence in support of the explanation filed in respect of the documents seized marked CML/SHC/02, CML/SHC/04 and CML/SHC/06 and also reconciled the alleged discrepancies which came up during the search & seizure operation. The rejoinder dated 07-12-2016 along with the affidavit did not impress the Ld. Assessing Officer since the retraction made by the respondent was, in his opinion, to be rejected. Accordingly, the Ld. Assessing Officer rejected such an explanation on the justification that the respondent has himself offered income of Rs. 2,20,00,000/- voluntarily. On such reasoning, the Ld. Assessing Officer made an addition of Rs. 2,20,00,000/-, along with another addition of Rs. 12,00,00,000/-, to the total income disclosed by the respondent as “undisclosed income" within the province of s. 68 of the Income Tax Act, 1961. Thus, the assessment order dated 28-12-2018 was framed u/s. 153A/143(3) of the Income Tax Act, 1961 on a total income of Rs. 14.32,80,120/- for the assessment year under dispute. The instant appeal arises out of the impugned appellate order dated 08-04-2019 passed by the Ld. Commissioner of Income Tax (Appeals)- 1, Guwahati [hereinafter referred to as the Ld. Commissioner (Appeals) for the sake of brevity who reversed the action of the Ld. Assessing Officer in respect of the addition made u/s. 68 of the Act of Rs. 2,20,00,000/- made by the Ld. Assessing Officer. Admittedly, a search and seizure operation u/. 132(1) of the Act was carried out on 02-06-2016 in the business premises of CMJ Group of companies, in which the respondent is a chairman. During the course of such search and seizure operations, the Officials found certain loose papers which were inventoried as CML/SHC/02, CML/SHC/04 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. and CML/SHC/06. Although they were able to extract an alleged admission of disclosure of Rs. 35,00.00,000/- on account of various heads in his statement on 29-07-2016 from the respondent in which a sum of Rs. 2,20,00,000/- was included in respect of a business of coal trading. Subsequently, on 25-08-2016, the respondent solemnly affirmed on oath that such disclosure made was obtained on coercion and on wrong premises since the entire amount so disclosed is already accounted for in the hands of various persons in their returns filed. In the course of assessment proceedings, however, the main grievance of the Ld. Assessing Officer was that the amount of disclosure of Rs. 2,20,00,000/- was not included in the return filed in response to notice u/s. 153A of the Act and as such, he conceived that such an amount should be added to the total income of the respondent even though the same had been retracted. He, however, rejected the affidavit without assigning any reasons thereto. The fact that the respondent was unable to explain the amounts found in the seized loose papers was due to his inability to explain them from the books of accounts maintained in the regular course of business. In the course of assessment proceedings, it was explained with evidence by the respondent that all the receipts and payments were incorporated in the books maintained by the respondent and his family members which were produced to the satisfaction of the Ld. Assessing Officer. The entire reconciliation of Rs. 2.20,00,000/- were furnished before the Ld. Assessing Officer who however, was unable to find any flaw in the same. In fact, the Ld. Assessing Officer did undertake verification in respect of such transactions. The details of payments and receipts unearthed from the seized material CML/SHC/02, CML/SHC/04 and CML/SHC/06 were duly produced to the satisfaction of the Ld. Assessing Officer who had not expressed any doubts regarding the veracity thereof. It is an undisputed fact that the entries in the books of accounts in relation to such entries in the loose papers were explained to the Ld. Assessing Officer. The Ld. Assessing Officer, however, was unable to identify any defect in such an explanation which was duly supported by evidence. Thereafter, the only grouse which remained with the Ld. Assessing Officer was that although during search & seizure operation, the respondent had admitted unaccounted income of Rs. 2,20,00,000/-, but he did not include this undisclosed component in the return filed by him and thereby retracted such baseless and specious confession. It is the requirement in law that a taxpayer is liable to explain his affairs for the entire period of the previous year. The entire activities and affairs of the previous year are incorporated and shown as per accounting .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. principle in the trading, profit & loss account. All the necessary and relevant evidence as required was furnished before the Ld. Assessing Officer during the assessment proceedings for the assessment year under dispute. The respondent has furnished before the Ld. Assessing Officer explanation in support of impounded papers marked CML/SHC/02, CML/SHC/04 and CML/SHC/06 and in such circumstances it was his duty to definitely to come to one conclusion or the other in regard to the reliability of every one of the relevant accounts filed by the respondent. The prejudicial conclusion arrived at by the Ld. Assessing Officer is solely and exclusively based on alleged disclosure made during search & seizure operation u/s. 132( 1) of the Income Tax Act, 1961 by the respondent on 29-07-2016 which was later on retracted on 25-08-2016. It was explained that such disclosure was taken under coercion and under undue influence. In fact, there was nothing found in the premises of the respondent which may lead to the conclusion of undisclosed income. Hie disclosure made on 29-07-2016 was explained by the respondent on 25-08-2016 which was conveniently ignored by the Ld. Assessing Officer. Therefore, there was no evidence whatsoever for the Ld. Assessing Officer to conclude the disclosure of Rs. 2,20,00,000/- as undisclosed income. The main plight of the Ld. Assessing Officer was solely that although the respondent admitted undisclosed income during search & seizure operation, but in his return filed the said unaccounted income was not included by him. It is an accepted position that mere admission by a taxpayer cannot be a categorical basis of an assessment proceeding. The alleged disclosure made during search & seizure proceeding is not conclusive and it is always open to the taxpayer to establish that what he admitted was not correct by filing cogent evidence. During the search & seizure operation, the respondent admitted an amount of Rs. 2,20,00,000/- as undisclosed income from coal trading business without any supporting evidence and the said specious admission was successfully retracted by the respondent by filing complete explanation in support of the return of income filed. The Ld. Assessing Officer did not dispute the explanation tendered by the respondent in respect of coal trading business made during the relevant previous year. Therefore, there was no evidence adduced on record to justify the specious disclosure of Rs. 2,20,00,000/- obtained in defiance of the C.B.D.T. Circular in this respect during the search & seizure operation. In any case, the provisions of s. 132( 1) of the Income Tax Act, 1961 does not empower any Income Tax Authority to examine any person on oath and hence any such statement obtained from that .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. person has no evidentiary value and any admission made during such statement cannot, by itself, be made the basis for addition. It is clarified that instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, such confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on the 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 statements during the course of search & seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidence/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders [C.B.D.T. INSTRUCTION NO. 286/2/2003-IT (INV. II), DATED 10-03-2003], As to the status of this circular, the provision of s. 119(1) of the Act provides that, "the Board may, from time to time, issue such orders, instructions and directions to other income-tax authorities as it may deem fit for the proper administration of this Act and such authorities and all other persons employed in the execution of this Act shall observe and follow such orders, instructions and directions of the Board provided that no such orders, instructions or directions shall be issued (a) so as to require any income-tax authority to make a particular assessment or to dispose of a particular case in a particular manner, or (b) so as to interfere with the discretion of the Appellate Assistant Commissioner in the exercise of his appellate functions." As per s. 119(2) of the Act, without prejudice to the generality of the power of the C.B.D.T. set out in s. 119(1) of the Act, a specific power is given for the purpose of proper and efficient management of the assessment proceedings and collection of revenue to issue from time to time general or special orders in respect of any class of incomes or class of cases setting forth directions or instructions, not being prejudicial to the assessees, as the guidelines, principles or procedures to be followed in the work relating to assessment proceedings. Such instructions may be by way of relaxation of any of the provisions of the sections specified therein or otherwise. The .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. C.B.D.T., thus, has power, inter alia, to tone down the rigour of the law and ensure a fair enforcement of its provisions, by issuing circulars in exercise of its statutory powers u/s. 119 of the Act which are binding on the authorities in the administration of the Act. Thus, the authority which wields the power for its own advantage under the statute is given the right to forego the advantage when required to wield it in a manner it considers just by relaxing the rigour of the law or in other permissible manners as laid down in s. 119 of the Act. The power is given for the purpose of just, proper, and efficient management of the assessment proceedings. It is a beneficial power given to the C.B.D.T. for proper administration of fiscal law so that undue hardship may not be caused to the assessee and the fiscal laws may be correctly applied. It is settled that regardless of the interpretation that was placed on the said phrase, if there are circulars which have been issued by the Central Board of Excise and Customs which place a different interpretation upon the said phrase, that interpretation will be binding upon the Revenue [C.C.E. -VS- DHIREN CHEMICAL INDUSTRIES (2002) 254 ITR 554 (SC)]. Therefore, not having acted in conformity with the instruction issued by the C.B.D.T. is in contravention to the provisions of s. 119 of the Income Tax Act, 1961 and the addition made thereunder has no validity in the eyes of law. Since, the position adopted by the Ld. Assessing Officer ignoring the contents thereof, runs counter to the Circular issued by the C.B.D.T. in this respect and the addition made in the sum of Rs. 2,20,00,000/- in conflict thereof is an extreme example of an arbitrary mindset which was not only misconceived but also fell outside the scope and ambit of the provisions thereof and the action of the Ld. Commissioner (Appeals) in deleting the said addition made is absolutely correct and he came to the apposite finding within the statutory prescription in this regard. It is not in dispute that the respondent is neither an expert in accountancy nor seized of the exact procedures and niceties of the Income Tax Act, 1961. It only natural that during Search & Seizure operation confusion reigned supreme and it was impossible for the respondent who was asked to record statement forthwith to understand the implications of signing it when, spoon fed imaginary questions were held up before him without giving him proper opportunity for rebuttal. Such a highhanded approach and decision is tantamount to thrusting upon a taxpayer irrational conclusion which is accordingly repudiated as the same will lead to absurdity not contemplated in law. The statement being composed of impossible conclusions is retracted as illogical and as such, no sustainable Page 10 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. conclusions can be drawn therefrom nor utilized in the assessment proceedings. It is also the requirement of law that the Assessing Authorities are also duty bound to consider such explanation judicially. It is an accepted fact that the respondent had explained in affirmation the reason for retraction of disclosure during the course of the assessment proceedings. It is well settled that retraction from admission is permissible in law and it is open to the person who made this admission to show it was incorrect [PULLAGODE RUBBER PRODUCE CO. LTD. -VS-STATE OF KERELA (1973) 91 ITR 18 (SC)]. In the present context it was explained that the entire sum of Rs. 2,20,00,000/- disclosed is already disclosed in his hands as well as his family members din the regular manner and as such, no allegation of undisclosed nature is attached to it. It was categorically mentioned page by page of the impounded material marked CML/SHC/02, CML/SHC/04 and CML/SHC/06 in the annexure to his affidavit. In the instant case, it had been proved with ample evidence that the facts and figures disclosed in the accounts are correct and actual and no conclusion of aberration can be drawn from the same. Admittedly, the respondent was made to disclose an amount of Rs. 2,20,00,000/- as undisclosed income on account of failure to explain the loose papers found during search and seizure operation marked as CML/SHC/02, CML/SHC/04 and CML/SHC/06 which was therefore totally retracted and the Ld. Assessing Officer was apprised to cease and desist from acting on such statement of disclosure obtained under misapprehension and accordingly, his action in this respect constitutes an evidence of extreme aberration. There is also no doubt or dispute that there was indeed no supporting evidence to give credence to such a statement. As a matter of fact, no defect of any kind was pointed out in the explanation filed in this context. There is absolutely nothing on record to conceive that the explanation filed by the respondent in consonance with his accounts maintained by him were manipulated. It is also an inalienable principle that an admission of a taxpayer may be evidence against him, however, the same is not clinching conclusive. It could not be said solely on the basis of the statement given by assessee that an income was assessable as his lawful income. Since there was no evidence adduced on record to prove the existence of such undisclosed income of or earning of such income by the respondent, such income cannot be included by the Ld. Assessing Officer in his hands. Where Assessing Officer solely based on statement of assessee’s director recorded during search operation treated share application money received by assessee-company as undisclosed income and made .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. additions under section 68, since said statement was retracted during search operation and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were to be deleted [P.C.I.T. -VS- GOLDEN GOENKA FINCORP LTD (2023) 148 TAXMANN.COM 313 (CAL)]. In the present context, admittedly, the impugned addition of Rs. 2,20,00.000/- was made by the Ld. Assessing Officer is solely based on the statement of the respondent alone. There is no ostensible reason and/or evidence whatsoever adduced in support of this addition and accordingly, such addition being based on the statement alone is wholly unwarranted. On the facts of the present case, there is nothing more to support the impugned addition than the disclosure petition of respondent as recorded during search & seizure proceedings. Such a statement cannot be a legally justifiable basis for addition to the income of the respondent. It is thus axiomatic that there was no independent evidence with the Ld. Assessing Officer, apart from the alleged disclosure petition of the respondent, to invoke of the provision of s. 68 of the Income Tax Act. 1961 in the instant case and therefore, action inviting the mischief thereof does not arise and the Ld. Commissioner (Appeals) in reversing such flawed approach considering the facts and circumstances of the case in their totality was absolutely correct in his findings which were in consonance with the inalienable position in law.”

9. We have heard rival contentions and perused the records placed before us. The Revenue’s grievance are two-fold; firstly, that there were certain documents filed by the assessee before ld. CIT(A) which were not confronted to ld. AO and secondly, ld. CIT(A) erred in deleting the addition of Rs. 2.20 Cr & Rs. 60 lakh made by ld. AO for AY 2016-17 & AY 2017-18, respectively. The said sum was added in the hands of the assessee on the basis of the undisclosed income offered to tax in the statement given under oath u/s 132(4) of the Act, during the course of search proceedings which were carried out in the case of the assessee on 02.06.2016 u/s 132 of the Act. .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain.

10. So far as the first contention of the Revenue is concerned that ld. AO was not granted any opportunity under Rule 46A of the Rules to examine the additional evidences filed by the assessee, we notice that the evidences so referred to by the Revenue authorities are concerned they are not related to the impugned addition before us. On perusal of the assessment order, we notice that the sole basis of making the impugned addition was only on the basis of the statement given during the course of search. So far as the seized material marked as CML/SHC/02, CML/SHC/04 and CML/SHC/06 are concerned which ld. AO referred for making the addition in question before us, the explanation to the transaction mentioned therein have claimed to have been produced to the satisfaction of ld. AO who have not expressed any doubt regarding the veracity thereof. It is also an admitted fact that the entries in the books of accounts in relation to such entries in the loose papers were duly explained to ld. AO and ld. AO was unable to identify any defect in such explanation which were duly supported by evidences and therefore, the only basis for the said addition was the statement given u/s 132 of the Act. Under these given facts and circumstances of the case this ground of the Revenue that there is a violation of Rule 46A of the Rules has no legs to stand, hence, the same is dismissed.

11. As far as the second issue is concerned that whether ld. CIT(A) erred in deleting the addition made by ld. AO based on the statement given u/s 132(4) of the Act, we notice that the search proceedings which were conducted on 02.06.2016 finally. concluded on 01.08.2016. The disclosure statement which has been heavily relied by ld. AO was recorded u/s 132(4) of the Act on Page 13 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. 29.07.2016. Within a span of less than a month when the assessee joined the business operations and came to a normalcy, filed an affidavit before the Revenue authorities dated 25.08.2016 stating that the disclosure of Rs. 5.60 Cr given by him and which spread from AY 2011-12 to AY 2017-18 was given under coercion and threat. In the said disclosure Rs. 2.20 Cr and Rs. 60 lakh were stated against AY 2016-17 & AY 2017-18. The said retraction was duly placed before ld. AO also. However, ld. AO did not accept the said retraction and gave weightage to the statement given during the course of search u/s 132(4) of the Act recorded on 29.07.2016 and held that the assessee ought to have disclosed it in the return of income filed in compliance to the notice u/s 153A of the Act.

12. Once it remains an admitted fact that the impugned addition has been made only on the basis of the statement given during the course of search and there is no reference to any incriminating material, if any, found during the course of search on the basis of which any nexus can be drawn for the alleged addition, we first find it pertinent to go through the CBDT circulars dated 10.03.2003 & 18.12.2014 which has been referred by ld. CIT(A) in the impugned order and the same reads as follows: “F. No. 286/2/2003-IT (Inv) GOVERNMENT OF INDIA MINISTRY OF FINANCE & COMPANY AFFAIRS DEPARTMENT OF REVENUE CENTRAL BOARD OF DIRECT TAXES Room No. 254/North Block, New Delhi, the 10th March, 2003 To All Chief Commissioners of Income Tax, (Cadre Contra) Page 14 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. & All Directors General of Income Tax Inv. Sir Subject: Confession of additional Income during the course of search & seizure and survey operation -regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration 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 Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders…………………………………..” “F.No. 286/98/2013-IT (Inv.II) Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes Room No. 265A, North Block New Delhi, the 18th December, 2014 To 1. All Principal Chief Commissioners of Income Tax

2. All Chief Commissioners of Income Tax

3. All Directors General of Income Tax (Inv.)

4. Director General of Income Tax (I & CI), New Delhi Subject: Admissions of Undisclosed Income under coercion/pressure during Search/Survey- reg. Page 15 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. Ref: 1) CBDT letter F.No. 286/57/2002-IT(Inv.II) dt. 03-07-2002 2) CBDT letter F.No. 286/2/2003-IT(Inv.ll) dt. 10-03-2003 3) CBDT letter F.No. 286/98/2013-IT(Inv. 11) dt. 09-01-2014 Sir/Madam, Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light.

2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence.

3. In view of the above, while 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…………………”

13. On going through the above CBDT circulars, we find that the emphasis of the Board is towards gathering of evidences during the course of search and survey and to strictly avoid obtaining I.T.A. Nos.: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. admission of undisclosed income under coercion and influence. There are plethora of judgments and decisions wherein it has been consistently held that merely making an addition only on the basis of the statement given during the course of search and without referring to any incriminating material is not justified and such additions cannot stand in the eyes of law.

14. At this juncture, we would like to refer to the decision of Coordinate Bench of Indore in the case of M/s. Ultimate Builders vs. ACIT in order dated 09.08.2019 where similar issue has been adjudicated and decided against the Revenue observing as follows: “9. We have heard rival contentions and perused the records placed before us and carefully gone through the judgments referred to and relied by both the parties. The sole grievance of the assessee raised in Ground No. 1 of the instant appeal is against the order of Ld. CIT(A) confirming the addition of Rs.2,25,00,000/- made by the Ld. A.O on account of undisclosed income surrendered during the course of search by the partner of the assessee firm.

10. At the cost of repetition we would like to recite and recapitulate the facts once more. The assessee is a partnership firm engaged in real estate business. It is the part of Signature Group. Search action was initiated in the Signature Group and its associates on 29.1.2014. The assessee's association with the Signature group is on account of the common partners in various concerns. Assessee is separately assessed to tax. Search u/s 132(4) of the Act was initiated in the case of the assessee on 29.1.2014 and was concluded on 31.1.2014. This fact is proved on the basis of "panchanama" prepared by the officer of the search team which is placed at page 62-64. No surrender was made in the statements taken by the search team during the course of search from 29.1.2014 to 31.1.2014. There is no mention of any incriminating material referred by the Ld. A.O on the basis of which additions have been made.

11. The search action in the case of Signature Group continued ever after 31.1.2014. On 02.02.2014, Mr. Vipin Chouhan who is the .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. partner of the assessee firm gave a statement before the search team wherein he made surrender of Rs.2,25,00,000/- on behalf of the appellant firm and agreed to offer it to tax. In the very same statement he also made surrender on behalf of another firm M/s. Virasha Infrastructure in the capacity of a partner. In the very same statement he also made surrender on behalf of other companies of Signature Group. Ld. A.O during the course of assessment proceedings observed that the assessee has not offered surrendered income of Rs.2,25,00,000/- for tax and confronted 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 replied in the statement.

12. Ld. Counsel for the assessee further contended that since the search in the case of assessee was concluded on 31.1.2014 the alleged statement of the partner Mr. Vipin Chouhan taken on 02.02.2014 cannot be construed as a statement given during the course of search u/s 132(4) of the Act so far as relating to the assessee since the search in its case already concluded on 31.1.2014. He further submitted that no incriminating material was found during the course of search and as held by Hon'ble Tribunal in the latest decision in the case of ACIT(l) vs. Sudeep Maheshwari (supra) that "no addition was called for which has been made merely on the basis of the statement without correlating the disclosure made in the statement with the incriminating material gathered during the course of search". .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain.

13. So the contention of the Ld. Counsel for the assessee can be summarised that the addition cannot be made merely on the basis of statement which too was taken after conclusion of the search and no correlation has been made with the incriminating material found during the course of search.

14. On the other hand Departmental Representative gave reference to various judgements referred above. She mainly placed emphasis on the judgment of Hon'ble High Court of Madras in the case of Kishore Kumar V/s DCIT (supra) holding that "when there was a clear admission of undisclosed income in the statement sworn in u/s 132(4) of the Act there is no necessity to scrutinise the documents".

22. Recently the Co-ordinate Bench in the case of ACIT(l) 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 in law and it was open to the person who made the admission to show that it was incorrect. However, reliance is placed on the judgement of the Hon'ble Gujarat High Court rendered in the case of CIT Vs. Chandrakumar Jethmal Kochar (2015) 55 Taxmann.com 292 (Gujarat), wherein it has been held that 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 urged 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 parties. 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 merely 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. .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. 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. Ground raised

by the revenue is dismissed."

23. Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi vs. CIT - (2008) 14 DTR 257 (Guj.), held 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.

24. Hon'ble Jharkhand High Court Shree Ganesh Trading Co. V/s Commissioner of Income-tax, Tax Case No.8 of 1999 order dated 03.01.2013 held as under; "4. We considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned orders as well as reasons given 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, according to the learned counsel for the assessee, Shri Binod Poddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no undisclosed income. The assessee's said retraction was not accepted by any of the authorities below on the ground that the statement given by the assessee appears to be voluntarily given statement disclosing undisclosed income of Rs. 20 lacs. According to the learned counsel .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. for the assessee, Shri Binod Poddar, the Assessing Officer had full jurisdiction to proceed for further enquiry and could have collected evidence in support of alleged admission of undisclosed income of the assessee.

6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee's contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to make declaration 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 self- incriminating. 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". .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain.

25. In the light of ratio laid down in various judgments referred above including one in the case of ACIT(l) 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 material. Therefore the decision relied by Ld. Departmental Representative laying down the ratio that addition can be made even on the basis of statement given during the course of search u/s 132(4) of the Act irrespective of the fact whether any incriminating material is found or not, will not support Revenue in the instant case.

26. In the given facts and circumstances of the case and respectfully following the judgements and decisions referred above we find that firstly the statement given by Mr. Vipin Chouhan u/s 132(4) of the Act on 02.02.2014 cannot be considered as the statement given u/s 132(4) of the Act in the instant case of the assessee firm since the search action in case of assessee was concluded on 31.1.2014 by the Authorised Officer. Secondly as regards to other business concerns referred by Mr. Vipin Chouhan in his statement given on 02.02.2014 and in case of such business concern wherein search action u/s 132 of the Act was continuing the said statement dated 02.02.2014 will be considered as the statement u/s 132(4) of the Act. Thirdly, no reference has been given by the Revenue Authorities to any incriminating material found during the course of search at the business premises of the assessee, which could be correlated to the alleged surrendered income earned by the assessee from undisclosed sources.

27. We therefore are of the considered view that the finding of Ld. CIT(A) needs to be set aside and the addition of Rs.2,25,00,000/- deserves to be deleted since it has been made on the basis of a statement not given u/s 132(4) of the Act and without referring to any incriminating material found during the course of search. Addition for undisclosed income of Rs.2,25,00,000/- is deleted. Accordingly Ground No. 1 raised in the appeal by the assessee is allowed.”

15. Similar view was taken by Coordinate Bench of Indore in the case of M/s. Ramani Infrastructure vs. DCIT in I.T.(SS)A. No. 211/IND/2019 order dated 20.07.2021 which reads as under:

I.T.A. Nos.: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. “20. Now question before us is that in case no incriminating material was found during the course of search whether the Assessing Officer can make addition merely on the basis of statement u/s 132(4) of the Act. Although Ld. CIT(A) has referred to various judicial precedence, this tribunal in the case of M/s. Signature Builders in IT(SS)A No. 184 to 186/Ind/2018 & others dated 08.01.2021 adjudicated similar issue and the relevant finding is reproduced below: 70. We have heard rival contentions and perused the records placed before us and carefully gone through the records and submissions made before us. The assessee namely M/s Signature Infrastructure has raised the common issue for Assessment Year 2013-14 and 2014-15 with regard to the addition of Rs. 50,00,000/-and Rs.3,00,00,000/- confirmed by the Ld. CIT(A) which was made by the Ld. A.O on the basis of income declared by the assessee in the statement given u/s 132(4) of the Act. We observe that in the case of assessee’s appeal M/s Signature Builders similar issue was raised for Assessment Year 2013-14 and 2014-15 for the addition made on the basis of income declared by the assessee u/s 132(4) of the Act during the course of search carried out on 29.01.2014. Income was declared by the authorised representative of the Signature group under the name of various concerns in the statement made u/s 132(4) of the Act. Subsequently when the assessee was required to file return of income in response to notice u/s 153A of the Act the impugned income was not shown in the Income Tax Return on the basis of the assessee’s observation that there was no incriminating material seized during the course of search which could support the impugned amount. During the course of assessment proceedings also the addition made by the Ld. A.O was purely on the basis of statement given during the course of search. Nowhere in the assessment order the Ld. A.O has brought on record any incriminating material or loose paper seized during the course of search having its nexus with the addition made on the basis of statement. We further observe that in one of the group concern M/s Ultimate Builders order dated 9.8.2019 similar issue came for adjudication and this Tribunal on the basis of the facts of the case as well as relying on the judicial pronouncements deleted the addition since the same were made without referring to the incriminating material found during the course of search. The finding of this Tribunal in the case of M/s Ultimate Builders has been reproduced in the preceding paras while dealing with the similar issue raised in the case of M/s Signature Builders. Since the issue and facts remains the same Ld. Departmental Representative did not controvert this fact Page 25 of 29 .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. that the impugned addition was not based on incriminating material found during the course of search and is just on the basis of the statement given u/s 132(4) of the Act. We in the case of M/s Signature Builders have held in para 21 of this order as follows:- 21. From perusal of the above finding of this Tribunal in the case of M/s Ultimate Builders (supra), we find that the common issue raised in Ground No.3 of M/s Signature Builders is identical to the issue raised and adjudicated in the case of M/s Ultimate Builders (supra). We therefore respectfully following the same and also in view of the identical fact that impugned addition of Rs.25,00,000/- and Rs.3,00,00,000/- made by the Ld. A.O was purely based on the statement given u/s 132(4) of the Act and there was no reference to any incriminating material found during the course of search which could support the impugned addition. We therefore delete the addition of Rs.25,00,000/- for Assessment Year 2013-14 and Rs.3,00,00,000/- for Assessment Year 2014-15 and set aside the action by both the lower authorities and accordingly allow Ground No. 3 of assessee’s appeal for Assessment Years 2013-14 and 2014-15 raised in ITA No. 185-186/Ind/2018.

21. Similar view was taken in the case of M/s Ultimate Builders in ITA 134/2019 dated 09.08.2019 and ACIT vs. Shri Sudip Maheshwari in ITA 524/IND/2013 dated 13/02/2019.

in Income Tax Act, 1961 (in short the 'Act') No. 21 l/Ind/2019. Ground no. 1 of revenue’s appeal stands dismissed.”

16. Similar view was also taken by Coordinate Bench of Indore in the case of DCIT vs. Shri Sudhir Kumar Agarwal in I.T.(SS)A. No. 85/IND/2021 order dated 18.05.2023 placing reliance on the judgment of Hon'ble Gujarat High Court in the case of Kailashben Mangarlal Chokshi Vs. CIT (2008) 14 DTR 257 (Guj.) and that of Hon'ble Jharkhand High Court in the case of Shree Ganesh Trading Co. V/s. Commissioner of Income-tax, Tax Case No. 8 of 1999 order dated 03.01.2013 observing as follows: “16. On careful consideration of stand of the AO and basis taken by the Ld. CIT(A) for deleting the addition, we may point out that the Hon’ble High Court of Gujarat in the case of Kailasben Mangarial Choksh vs. CIT (supra) held that merely on the basis of admission of assessee, the assessee could not have been subjected to addition, unless and until some collaborative evidence is found in support of such admission. Meaning thereby addition on the standalone basis of statement of assessee u/s 132(4) of the Act cannot be held as .: 338 & 339/GTY/2019 Assessment Years: 2016-17 & 2017-18 Rohit Jain. sustainable in absence of collaborative evidence found in support of such addition. Further, the Hon’ble Jharkhand High Court in the case of Shri Ganesh Trading Company vs. CIT (supra) held that mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. In this case the Hon’ble High Court noted that the authorities below have not considered a fact that in a case where there was a search operation, no asset or cash was recovered from the assessee, in such a situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lakhs.

17. In the present case also the assessee during the course of search operation in the statement and subsequently by way of letter dated 08.11.2011, as has been reproduced above, was sure about the surrender of Rs. 10.25 crores under various heads, however regarding remaining Rs. 2.50 crore, the assessee in the said letter clarified that the said amount pertaining to miscellaneous surrender shall be confirmed after study of all papers. Subsequently at the time of filing return u/s 153A of the Act, the assessee-group included Rs. 10.25 crore leaving the amount of Rs. 2.50 crore for the precise reason, which has been clearly accepted by Ld. CIT(A), that the assessee right from search and seizure operation till filing of return could not find any substantive material or investment which could be considered for supporting the surrender of remaining amount Rs. 2.50 crore. Therefore the Ld. CIT(A) was right in deleting the unsustainable addition made by the AO by relying various judicial rulings as narrated by him. We are unable to see any ambiguity, perversity or any other valid reason to interfere with the findings arrived by the Ld. CIT(A) in this regard. Therefore, we uphold the same. Accordingly, this ground of Revenue is dismissed.”

17. Respectfully following the above decisions and the ratio laid down by the Hon'ble Courts, we are inclined to hold that ld. CIT(A) was justified in deleting the addition of Rs. 2.20 Cr for AY 2016-17 and of Rs. 60 lakh for AY 2017-18 in light of the judicial pronouncements as well as under the given facts and circumstances of the case wherein without referring to any incriminating material found during the course of search ld. AO has made addition solely on the basis of disclosure statement given