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

Facts

The Revenue (C.I.T. Central, Jaipur) filed an appeal against the judgment dated 22.3.2013 passed by the Income Tax Appellate Tribunal (I.T.A.T.), Jodhpur Bench, for the assessment year 2009-10. The appeal challenges the I.T.A.T.'s decision to delete additions made by the Assessing Officer. The core of the dispute revolves around the admissibility and reliance on a confessional statement made by the assessee during search and survey proceedings. The Revenue contended that the additions were based on seized documents and the assessee's confession, while the assessee argued the confession was illegally extracted and lacked corroboration. The Assessing Officer (ACIT) and the Commissioner of Income Tax (Appeals) [CIT(A)] had previously ruled against the assessee.

Held

The High Court held that the entire case of the Revenue was based on the confession of the assessee, which was retracted by the assessee on 27.7.2009. It was admitted that no corroborative material or substantive proof was collected by the Revenue during the search/seizure and survey proceedings to substantiate the allegation of undisclosed income. The Court referred to CBDT Circular No.286/2/2003-IT (Inv.II) dated 10.3.2003, and general principles of evidence appreciation, stating that corroboration of a confessional statement by credible and tangible evidence is required. Failing such corroboration, it is unsafe to rely solely on the confession. Since the Revenue admittedly failed to collect any tangible, corroborative evidence, the view taken by the I.T.A.T. that the department failed to provide cogent, tangible, and satisfactory evidence regarding the additional undisclosed income was justified. The impugned judgment was not found to be illegal or perverse. The Court was satisfied that no substantial question of law was involved. Therefore, the appeal was dismissed.

Key Issues

1. Whether the findings of the I.T.A.T. 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? Assessee's Contentions: The assessee argued that the confession was extracted illegally and by coercion, and was therefore rightly discarded. 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 10.3.2003, which states that confessions obtained during search/survey operations should not be relied upon if not based on credible evidence and if retracted. The assessee retracted the confession at the earliest opportunity. Revenue's Contentions: The Revenue contended that confessional statements made during search/survey proceedings are admissible in law without corroboration. The assessee's retraction of these statements after a significant delay placed the burden on the assessee to prove their factual incorrectness. The Revenue argued that the I.T.A.T. was unjustified in holding that the confessional statement could not be relied upon for want of corroboration.