DCIT CC-3, MUMBAI vs. NIBR BULLION P. LTD, MUMBAI

lquokbZ dh frfFk@Date of hearing : 09/09/2022 ?kks”k.kk dh frfFk@Date of pronouncement : 05/12/2022 vkns’k/ ORDER

PER VIKAS AWASTHY, JM:

P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD

On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the undisclosed income of Rs.8,18,19,881/- (being the difference between the sum of Rs.12,00,00,000/- disclosed as income in statement of the assessee recorded u/s 132(4) and the income disclosed) on the ground that the assessment was completed on the basis of statement without appreciating the evidentiary value of the statement of the assessee recorded u/s 132(4) and that there was no evidence of mistake of estimation or wrong interpretation of law justifying retraction according to the various court decision, by the assessee after a substantial period of time.

i) Loose paper files A-1 to A-5 seized from the residence of Shri Ajay C. Arora. ii) Documents inventorised in A-1 and back up of pen-drive taken on CD seized from the residence of Shri Shrawan Kumar Bajaj, a close associate of this group.

P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD dated 06/05/2009. The learned DR submits that the CIT(A) has erred in accepting the retraction statement and directing the AO to delete the addition made on the basis of disclosure u/s 132(4) of the Act. Once, the disclosure has been made after duly consulting the other Directors of the company and the disclosure was reiterated in the subsequent statement, there is no valid reason for the assessee to retract from the said statement. The learned DR prayed for reversing the findings of the CIT(A) on this issue and confirming the addition based on the disclosure.

Sr. No Particulars Rs. 1 Unaccounted opening stock on 22.08.08 1,21,10,000 2 Unaccounted peak investment in cash 2,21,15,062 purchases for the period 22.08.08 to 24.09.08 3 Unaccounted investment in silver 3,37,370 4 Unexplained commission u/s 69C 4,45,687 5 G.P. addition on unaccounted cash from 23,85,000 22.08.08 to 24.09.08 6 G.P. addition on purchases regularized 4,19,836 through entry operators 7 Out of expenses 2,02,204 8 Out of entertainment exp. 1,64,960 Total 3,81,80,119/-

9. The assessee by way of an affidavit dated 06/05/2009 restricting the disclosure to Rs.3.75 crores. The primary reason for retraction of the disclosure amount mentioned in statement recorded u/s 132(4) of the Act was, the assessee was not having copies of the seized documents. It was only after the assessee received copies of seized documents, the assessee revised the amount of declaration. Apart from the additions mentioned above, the AO made further addition of Rs.8,18,19,881/- (12,00,00,000 – 3,81,80,119) on account of disclosure u/s 132(4) of the Act. The addition made u/s 132(4) of the Act is P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD merely on the basis of statement and is not corroborated by any documentary evidence. It is not denying the fact that statement recorded u/s 132(4) of the Act, is on oath and can be used as evidence. However, mere statement cannot be the basis of addition. The Board vide instruction F.N. 286/2/2003 dated 10/03/2003 has clearly instructed that the confessions if not based upon credible evidence are letter retracted by the concerned assesseeses in the return of income. Therefore, focus and concentration should be on collection of evidence of income which leads to information about the income which has not been disclosed. The aforesaid instructions were reiterated by the Board vide communication dated 18/12/2014.

10. The assessee has placed reliance on various decisions to contend that no addition can be made on the basis of statement recorded in the absence of cogent evidence:

(i) In the case of CIT(A) Vs. Ashok Kumar Jain (supra). The Hon’ble High Court held as under:

“8. .............. As we have noticed earlier the AO has not found or bothered to found or traced anything additional as a result of survey from the assessee except relying on the recorded statements at the time of survey and therefore this view found favour with the two appellate authorities that the funds are arising from the same business and have a direct nexus and the income was invested/utilized during the year under consideration. In our view, the conclusion reached by the Income Tax Appellate Tribunal is based on the appreciation of evidence and is reached on the basis of finding of fact. It is also a finding of fact admittedly that in assessment year 2007-08 despite surrender in statements of Rs.2 crore the income was offered at Rs.1.5 crore only and accepted by the Revenue/Assessing Officer.

“3. Whether the addition of Rs.20 lakhs was proper and justified on the basis of the admission in the statement u/s 132(4) voluntarily made without there being any corroborative evidence of the existence of any such income in any tangible form?" The Hon’ble High Court answered the said question by observing as under: “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,

P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD 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.” (Emphasized by us) (iii) The Pune Bench of Tribunal in the case of Assistant CIT Vs. Ghatge Patil Industries Limited (supra), where the assessee had retracted from the statement given u/s 132(4) of the Act concluded as under: 10.1 We have also perused the order of Mumbai Bench of the Tribunal in the case of M/s. Avishkar Infrastructure Pvt. Ltd. and the finding given by the Tribunal in Para Nos. 6.1 to 6.3 of the order reads as under:

“6.1 Under these facts and circumstances of the case we have to exam me that whether sustenance of impugned addition is in accordance with law or not. The law in this regard has already been described in the above part of this order and reference can be made to the decision of Hon'ble Telangana & Andhra Pradesh High Court in the case of Gajjam Chinna Yellapa vs. ITO (supra), where their Lordships have observed that in case statement is retracted then totally different consideration altogether will ensue and the situation would resemble to section 164 of the Code of Criminal Procedure. The evidentiary value of retracted statement become diluted and it loses its strength to stand on its own. In that case Assessing authority has to garner some support to the statement [or passing an order of assessment. It. is also held that retracted statement would not put an end to the procedure, then the AO is under an obligation to support his findings on the basis of other materials and if he does not have such material then it would reflect upon the very perfunctory nature of the survey. For holding so their Lordships have referred to the aforementioned circular dated 10/3/2003, wherein CBDT has clearly given the mandate to the officers that during the course of search, seizures and survey no attempt should be made to obtain confession as to the undisclosed income and such instructions to CBDT were applicable when the search and seizure was made and assessment was framed. CBDT has further mandated that in respect of pending assessment also AO should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing relevant assessment order. The addition made in the present case is contrary to the aforementioned decision of Hon'ble Telangana & Andhra Pradesh High Court as well as aforementioned circular of CBDT as the assessment is entirely based upon the statement recorded during the course of search and no P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD independent material has been brought on record by the AO to show that the income returned was incorrect. 6.2 The other decisions which have been relied upon by Ld. AR also supports similar proposition and these have been discussed in the above part of this order and for the sake of brevity they are not repeated. 6.3 So far as it relates to findings recorded by Ld. CIT(A), one of the finding is that by making admission under section 132(4) the assessee has altered the position of the Department because of which the Department did not pursue the matter further and did not visit the said Acme Centre at Ahmedabad. It may be mentioned that such opinion of Ld. CIT(A) would be contrary to the aforementioned circular issued by CBDT, where the clear mandate has been given to the Income Tax Authorities working under the CBDT that while recording the statement during the course of search/survey no attempt should be made to obtain confession of the undisclosed income and any such action would be viewed adversely. Recognizing such position their Lordships of Telangana & Andhra Pradesh High court have already observed that if addition is made simply on the basis of statement recorded under section 132(4) and no material is brought on record by the Revenue authorities then it would reflect upon very perfunctory nature of the survey/search action of the Department. Therefore, in absence of supporting material, the addition simply on the basis of statement cannot be upheld. The other findings of Ld. CIT(A) do not support the addition as they are only based upon the admission of the assessee. According, to the facts of the case, the assessee had furnished all required particulars regarding sale and expenditure incurred on the impugned project and AO could not point out any defect in those particulars submitted by the assessee. Thus, the addition is made simply on the basis of statement recorded during the course of search and is not supported by any material. In view of case law relied upon by Ld. AR, the addition is not sustainable and is deleted.” The above extract from the Tribunal supports the view that the statement recorded during the search and seizure action in the absence of any independent and corroborating/incriminating material is not to be relied upon. Assessee offered the undisclosed income to the extent the corroborating evidences were seized. It is not the case of the AO that total sum of Rs.8 crores is backed up by such incriminating material. Considering the above, we are of the opinion that factually the assessee offered the income to the extent the seized material was available and not otherwise. AO’s attempt to make the differential amounts of undisclosed strictly relying on the sworn statement of Mr. Kiran Patil, MD of the company is unsustainable considering the written submission of the assessee and the order of the Tribunal in the case of M/s. Avishkar Infrastructure Pvt. Ld. (supra). Therefore, we hold that the relief granted by the CIT(A) in his order is fair and reasonable and it does not call for P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD any interference. Accordingly, the common ground raised by the Revenue in the grounds of appeal has to be decided against the Revenue and in favour of the assessee.

11. The Revenue on contrary has placed reliance on the decision in the case of Bhagirath Agarwal Vs. CIT (supra). In the said case, the Hon’ble High Court held that the appellant/assessee has not produced any material to show that the admissions made by him were incorrect. The statements recorded u/s 132(4) of the said Act are clearly relevant and admissible and they can be used as evidence. In fact, once there is a clear admissions, voluntarily made, on part of the assessee, that would constitute good piece of evidence at the hands of the Revenue.

We find that the Hon’ble High Court made aforesaid observations in the peculiar facts of that case, the aforesaid ratio would not apply in the instant case as the assessee has given a plausible reason for retraction. Undoubtedly, in the instant case there is no allegation by the assessee that the statement was recorded under threat, coercion or any pressure. However, the basis for making such huge disclosure is also unsubstantiated. It was only when the assessee received copies of the seized documents, the assessee could recalibrated the equation and made disclosure of Rs.3.75 crores. The said disclosure made by the assessee is quite close to the addition made by the AO on each of the items examined and addition made during assessment proceedings.

P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD by the Ajay C. Arora u/s 132(4) of the Act and subsequently confirmed. However, the AO was not able to point any seized document that could be correlated to the disclosure statement. Thus, in the light of the facts of the case, various decisions and CBDT instructions referred above, we see no infirmity in the impugned order granting partial relief to the assessee. Hence, the impugned order is upheld and appeal of the Revenue is dismissed.

Order pronounced in the open court on Monday the 05th day of December 2022.

Sd/- Sd/- (AMARJIT SINGH) (VIKAS AWASTHY) Yks[kk lnL;/ACCOUNTANT MEMBER U;kf;d lnL;/JUDICIALMEMBER eaqcbZ/Mumbai, fnukad/Dated: 05/12/2022 Mahesh R. Sonavane izfrfyih vxzsf”kr of the Order forwarded to: vihykFkh/The Appellant , 1. izfroknh/The Respondent. 2. 3. vk;dj vk;qDr ¼v½/ The CIT(A)- vk;dj vk;qDr/ CIT 4. foHkkxh; izfrfu/kh] vk;- vih- vf/k-] eqacbZ/DR, ITAT,Mumbai 5. 6. xkMZ QkbZy/Guard file. BY ORDER, //True Copy//

P a g e | (A.Y.2009-10) NIBR BULLION PVT. LTD