C.I.T.CENTRAL, JAIPUR vs. PRAKASH AZAD

Facts

The Revenue (CIT Central, Jaipur) filed an appeal against the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench's order dated March 22, 2013, pertaining to assessment year 2008-09. The ITAT's decision was challenged by the Revenue. The core of the dispute revolves around additions made to the assessee's income based on a statement recorded during search and survey proceedings. The Revenue contended that the ITAT's findings were perverse as the addition on account of 'on-money' of Rs. 3 crore was based on seized documents, not solely on the statement. The assessee, Prakash Azad, argued that the confession was extracted illegally and under coercion, and was retracted promptly. The Revenue's claim of undisclosed income was based solely on this confession without corroborative evidence.

Held

The High Court held that the entire case of the Revenue was based on the confession of the assessee extracted during search/seizure and survey proceedings, which the assessee had retracted. It was admitted that no corroborative material or substantive proof was collected by the Revenue to substantiate the allegation of undisclosed income. The Court found that CBDT circular No.286/2/2003-IT (Inv.II) dated 10.3.2003, and general principles of evidence appreciation, require corroboration of confessional statements by credible and tangible evidence. Relying solely on a confession without such corroboration is unsafe. Since the Revenue admittedly failed to collect any tangible, corroborative evidence, the ITAT's view that the department failed to provide cogent, tangible, and satisfactory evidence regarding the additional undisclosed income was justified. The impugned judgment of the ITAT was not illegal or perverse. Therefore, no substantial question of law was involved, and the appeal was dismissed.

Key Issues

1. Whether the findings of the ITAT were perverse on facts while holding that the additions were based only on the statement recorded during search, when the addition on account of 'on-money' of Rs. 3 crore was made on the basis of seized documents (Annexure A-1, Pages 57 to 63), which was upheld by CIT(A) to the extent of Rs. 2.66 crore? (Question of law and fact, concerning the basis of additions). Assessee's contentions: The confession of the assessee was extracted illegally and by coercion and was thus rightly discarded. No corroborative, credible substantive proof was collected by the department to substantiate the allegation of additional undisclosed income. Reliance was placed on CBDT Instruction F.No.286/2/2003-IT(Inv.II) dated 10.3.2003, which states that confessions not based on credible evidence and later retracted should not be relied upon, and focus should be on collecting evidence of undisclosed income. Revenue's contentions: Confessional statements made during search and survey proceedings are admissible in law without corroboration. The assessee retracted the confession after a significant delay, and the burden was on the assessee to prove the statement was factually incorrect or untenable. The ITAT was unjustified in holding that the confessional statement could not be relied upon for want of corroboration.