PR. COMMISSIONER OF INCOME TAX (CENTRAL)-3, NEW DELHI vs. OLIVE OVERSEAS PRIVATE LIMITED

Facts

The appeals were filed by the Pr. Commissioner of Income Tax (Central)-3, New Delhi against the order of the Income Tax Appellate Tribunal (ITAT). The ITAT had allowed the appeals filed by Olive Overseas Private Limited, thereby deleting additions made in assessment orders passed under Section 153A of the Income Tax Act, 1961. The assessment years involved were 2012-2013 and 2014-2015. The Revenue's case was hinged on a statement recorded under Section 132(4) of the Act, which they contended was incriminating material found during a search. The assessee had denied knowing the person whose statement was relied upon.

Held

The High Court held that a statement recorded under Section 132(4) of the Income Tax Act, 1961, does not, by itself, constitute incriminating material sufficient to justify additions made under Section 153A of the Act. The Court relied on its previous judgments, including PCIT (Central)-3 v. Anand Kumar Jain (HUF), CIT v. Kabul Chawla, and Principal Commissioner of Income Tax, Delhi v. Best Infrastructure (India) P. Ltd. The reasoning was that for a block assessment under Section 153A, there must be a nexus between the statement recorded and the incriminating evidence or material found during the search and seizure operations. A standalone statement, without corroborative material unearthed during the search, cannot empower the Assessing Officer to frame a block assessment. The Court noted that such statements, if not relatable to other evidence, could be retracted and might be recorded under undue influence or coercion, thus not forming a sole basis for computing undisclosed income. The additions made by the Assessing Officer were deleted by the ITAT, and this finding of fact, based on the lack of evidence, was not interfered with.

Key Issues

1. Whether a statement recorded under Section 132(4) of the Income Tax Act, 1961, constitutes incriminating material sufficient to justify additions made under Section 153A of the Act, without corroborative evidence found during the search. The Revenue argued that the statement recorded under Section 132(4) was incriminating material and formed the basis for the assessment. They relied on the evidentiary value of such statements. The Assessee contended that a statement recorded under Section 132(4) alone, without any other corroborative material found during the search, cannot be the sole basis for making additions under Section 153A. They highlighted that the statement was not relatable to any other evidence or material discovered during the search and seizure operations, and in fact, the assessee had denied knowing the person whose statement was used.