C.I.T.CENTRAL,JAIPUR vs. BHARAT KUMAR AZAD

Facts

The Revenue (CIT Central, Jaipur) is appealing the Income Tax Appellate Tribunal's (ITAT) order dated March 22, 2013, concerning assessment year 2009-2010. The appeal challenges the ITAT's decision to delete additions made by the Assessing Officer (AO) and upheld by the CIT(A). The core of the dispute revolves around a confession of undisclosed income made by the assessee, Bharat Kumar Azad, during search and survey proceedings. The Revenue contends that this confession, along with seized documents, formed the basis for the additions. The assessee, however, claims the confession was extracted under coercion and was subsequently retracted. The AO made additions based on this confession, which the CIT(A) partially upheld. The ITAT ultimately deleted these additions.

Held

The High Court held that the entire case of the Revenue was based on the confession of the assessee made during search/seizure and survey proceedings, and it was undisputed that the assessee retracted this confession on 27.07.2009. It was also admitted that the allegation of undisclosed income was based solely on this confession, with no corroborative material or substantive proof collected by the Revenue. The Court found that CBDT Circular No.286/2/2003-IT (Inv.II) dated 10.03.2003, and general principles of evidence appreciation, require corroboration of a confessional statement by credible and tangible evidence. Without such corroboration, it is unsafe to rely solely on the confession to uphold the liability fastened upon the assessee. Since the Income Tax Authorities admittedly did not collect any tangible, corroborative evidence to substantiate the allegation of undisclosed income, the ITAT's view that the department failed to provide cogent, tangible, and satisfactory evidence was justified. The Court concluded that the impugned judgment of the ITAT was not illegal or perverse and no substantial question of law was involved. Therefore, the appeal was dismissed.

Key Issues

1. Whether the ITAT's findings were perverse on facts by holding that additions were based solely on a statement recorded during search, when seized documents (Annexure A-1, Pages 57 to 63) were also relied upon for an addition of Rs. 3 crore on account of 'on-money', which was upheld to the extent of Rs. 2.66 crore by the CIT(A)? (Question of law and fact, turning on appreciation of evidence). Assessee's arguments: The assessee argued that the confession was extracted illegally and by coercion, and therefore, rightly discarded. They contended that no corroborative, credible substantive proof was collected by the department to substantiate the allegation of additional undisclosed income. The assessee relied on CBDT Instruction F.No.286/2/2003-IT(Inv.II) dated 10.03.2003, which advises against relying on confessions not based on credible evidence and warns against obtaining confessions during search/survey operations. The assessee asserted that they retracted the confession at the earliest opportunity, making the orders of the ACIT and CIT(A) capricious and in contravention of settled legal principles. Revenue's arguments: The Revenue argued that a confession of additional undisclosed income made during search/seizure and survey proceedings is admissible in law without corroboration. They contended that the ITAT was unjustified in holding that the confessional statement could not be relied upon for want of corroboration. The Revenue asserted that the assessee's confession was made during search proceedings and was retracted after a significant delay, placing the burden on the assessee to prove the statement was factually incorrect or untenable. The Revenue argued that the appeal should be admitted on the substantial question of law framed.