Addition based on mere statement of assessee which is retracted is not sustainable

After reproducing Section 69C and adverting to the fact that Dilip Dherai has retracted his statement,  the Tribunal arrived at the conclusion that merely on  the strength of the alleged admission in the statement of  Dilip Dherai, the additions could not have been made. The concurrent findings of fact would demonstrate that the  essential ingredients of Section 69C of the IT Act enabling the additions were not satisfied. This is not a case of ‘no  explanation’. Rather, the Tribunal concluded that the allegations made by the authorities are not supported by actual cash passing hands. The entire decision is based on the seized documents and no  material has been referred which would conclusively show that huge amounts revealed from the seized documents are transferred from one  side to another. In that regard, the Tribunal found that the Revenue did not bring on record a single statement of  the vendors of the land in different villages. None of the sellers has been examined to substantiate the claim of the Revenue that extra cash has actually changed hands. It is in these circumstances that the Tribunal found that on  both counts, namely, the legal issue, as also merits, the additions cannot be sustained. Eventually, the Tribunal  held in paragraph 25 (page 188) as under:

“25. A perusal of the balance sheet of the assessee show that the authorized, issued and subscribed paid up capital  is at Rs. One lakh and the assessee had not done any business during the year under consideration. With such a  small corpus and no business activity, nor any has been brought on record by the Revenue, it is not acceptable that  the company may have incurred such huge expenditure outside its books of account. Further in his entire  assessment order, the AO himself has pointed out time and again different persons, who are alleged, to have made cash payments. Even on that count, the additions cannot be sustained in the hands of the assessee. In our  considerate view, there being no evidence to support the Revenue’s case that a huge figure, whatever be its  quantum, over and above the figure booked in the records and accounts changed hands between the parties, no  addition could therefore be made u/s. 69C of the Act to the income of the assessee. Considering the entire facts  brought on record, we have no hesitation to hold that even on merits, no addition could be sustained.”