PCIT Vs M.Kiran Kumar (Madras High Court)
Summary: The Madras High Court upheld the ITAT’s order deleting multiple additions made solely on the basis of a statement recorded during search without corroborative evidence. The Court held that an admission under Section 132(4), especially when made to “buy peace,” cannot independently justify additions unless supported by material evidence. It found that the alleged undisclosed income was not attributable to the assessee in his individual capacity and lacked supporting proof. The Court also affirmed that business transactions routed through related concerns did not qualify as deemed dividend under Section 2(22)(e), as they were genuine commercial dealings without personal benefit. Further, it upheld deletion of additions relating to long-term capital gains, noting absence of evidence linking the assessee to any bogus scheme despite high returns. Emphasizing that suspicion, conjecture, and probability cannot replace evidence, the Court dismissed the Revenue’s appeal in entirety.
Core Issue: The primary issue before the Court was whether additions could be sustained merely on the basis of a statement recorded under Section 132(4) of the Income-tax Act without any corroborative evidence. Ancillary issues included the applicability of Section 2(22)(e) relating to deemed dividend in respect of alleged circuitous transactions and the validity of denial of exemption under Section 10(38) on long-term capital gains on the allegation of penny stock transactions without establishing a direct nexus with any bogus scheme.
