DCIT CEN CIR 9, MUMBAI vs. AVISHKAR INFRASTRUCTURE P.LTD, MUMBAI

We have heard both the parties and their contentions have carefully been considered. The question in the present appeal relates to the determination of profit in respect of "Acme Center", a project developed by the assessee at Ahmadabad. The sole basis of the Department to assess profit of Rs.70.00 lacs is based upon the statement recorded under section 132(4) of the Act. It is a matter of fact that by the time statement was recorded, the entire project was not sold by the assessee. Only two shops were sold. The details of sale of the entire project by the assessee has already been produced in the table reproduced in para-3. According to the facts, assessee has developed total area of 14950 sq.fts. which comprises of ground floor to 4th floor. By the time statement was recorded the assessee had sold 6000 sq.fts. for an aggregate amount of Rs.1,86,26,000/-, which give rise to average rate of Rs.3103/- per sq.ft. The subsequent sales by the assessee were 8950 sq.fts. which was sold for an aggregate amount of Rs.3,28,68,750/-, which is average sale rate of Rs.3672/- per sq.ft. All these sales are made to third party, the names of which were given not only to AO but also to Ld. CIT(A). Therefore, total receipts of the assessee from the said project are a sum of Rs.5,14,88,750/-. The details of expenditure was also submitted to the AO. The relevant portion of the assessment order has already been reproduced. The AO did not doubt the receipts of the assessee as well as expenditure incurred on project but he has made the addition simply on the basis of statement which was recorded under section 132(4) of the Act. The assessee retracted the statement by filing the return of income and this fact has also been admitted by Ld. CIT(A) with the following words" "Secondly, in this case although the search & seizure was carried out in the premises of the appellant on 24-07-2008, the appellant never retracted the statement recorded u/s. 132(4) of the Act till the date of furnishing of return of income on 23-09-2009." 6.1 Under these facts and circumstances of the case we have to examine 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 Telungana & 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 for 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 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