DCIT Vs NIBR Bullion Pvt. Ltd. (ITAT Mumbai)
ITAT Mumbai held that addition merely on the basis of confession during the course of search operation without supporting evidence is unsustainable in law.
Facts- During search proceedings, statement of Ajay C. Arora, Director of the assessee company was recorded u/s 132(4) of the Act. In his disclosure statement, he offered Rs.12 crores towards undisclosed income in F.Y. 2008-09 to cover up discrepancies in the seized documents, digital data, stock, excess jewellery, etc. Thereafter, Ajay C. Arora retracted from his statement and restricted his disclosure to Rs.3.75 crores in respect of discrepancies aforesaid.
AO vide assessment order dated 31/12/2010 passed u/s 143(3) of the Act assessed total income of assessee at Rs.12,10,70,727/-. The AO rejected assessee’s retraction of statement and after making addition on various accounts as unaccounted stock, unaccounted investment, unaccounted commission, GP addition on unaccounted cash, GP addition of unaccounted purchases etc. made addition of the balance disclosure Rs.8,18,19,881/- (Rs.12,00,00,000/- – Rs.3,81,80,119/-) made u/s 132(4) of the Act.
Aggrieved by the assessment order, the assessee carried the issue in appeal before the CIT(A). The CIT(A) deleted the addition of Rs.8,18,19,881/- made on account of disclosure statement u/s 132(4) of the Act. Against the aforesaid findings of the CIT(A), the Revenue is in appeal.
Conclusion- CBDT Circular No.286/2003 dated 18/02/2014 to contend that addition cannot be made based on mere confession of additional income during the course of search operation.
Held that 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.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal by the Revenue is against the order of Commissioner of Income Tax Appeals-36 Mumbai [hereinafter referred to as “the CIT(A)”], dated 30/05/2011 for the assessment year 2009-10.
2. The Revenue in appeal has raised solitary issue in ground No. 1 of the appeal, the same reads as under:
“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.”
3. The brief facts of the case as emanating from records are: The assessee is engaged in business of dealing in Bullion. A search action u/s 132 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) was carried out on NIBR Bullion group including its Directors and Associates on 25/09/2008. During the course of search, following incriminating materials were found and seized:
“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.”
4. During search proceedings, statement of Ajay C. Arora, Director of the assessee company was recorded u/s 132(4) of the Act. In his disclosure statement, he offered Rs.12 crores towards undisclosed income in financial year 2008-09 to cover up discrepancies in the seized documents, digital data, stock, excess jewellery, etc. Thereafter, Ajay C. Arora retracted from his statement and restricted his disclosure to Rs.3.75 crores in respect of discrepancies aforesaid. The assessee filed his return of income on 22/12/2009 declaring total income of Rs.3,85,86,257/- including additional income of Rs.3.75 crores as a result of search. The Assessing Officer (AO) vide assessment order dated 31/12/2010 passed u/s 143(3) of the Act assessed total income of assessee at Rs.12,10,70,727/-. The AO rejected assessee’s retraction of statement and after making addition on various accounts as unaccounted stock, unaccounted investment, unaccounted commission, GP addition on unaccounted cash, GP addition of unaccounted purchases etc. made addition of the balance disclosure Rs.8,18,19,881/- (Rs.12,00,00,000/- – Rs.3,81,80,119/-) made u/s 132(4) of the Act. Aggrieved by the assessment order, the assessee carried the issue in appeal before the CIT(A). The CIT(A) deleted the addition of Rs.8,18,19,881/- made on account of disclosure statement u/s 132(4) of the Act. Against the aforesaid findings of the CIT(A), the Revenue is in appeal.
5. Ms. Samruddhi Hande appearing on behalf of the Revenue submits that in the instant case assessment is made consequent to search. During the course of search, statement of Ajay C. Arora was recorded u/s 132(4) of the Act on 26/09/2008. In his statement, he offered an additional income of Rs.12 crores for the Financial Year 2008-09 corresponding to the assessment year 2009-10. In his statement, he confirmed that declaration has been made after consulting the other two Directors of the assessee company that is Harmesh C. Arora and Anil C. Arora. Again on the 19/11/2008 Ajay C. Arora confirmed that additional income of Rs.12 crores is offered on the basis of seized documents and other discrepancies which may be found in the books of account. The learned Departmental Representative (DR) referred to the extract of statement of Ajay C. Arora in para 14 of the assessment order. The learned DR submits that Ajay C. Arora retracted from the statement after more than 6 months vide letter 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.
6. Per Contra, Shri Dharmesh Shah appearing on behalf of the assessee vehemently defended the findings of CIT(A) in deleting the addition solely made on the basis of disclosure statement without any corroborative evidence. The learned Authorised Representative (AR) submits that a perusal of the assessment order would show that the AO made addition of Rs.3,81,80,119/- on the basis of seized material. The learned AR asserted that once the addition has been made by the AO separately under different heads after examining the seized material, no further addition on disclosure was required to be made. The disclosure was made to cover all the discrepancies. The learned AR submitted that the retraction was made by the assessee only after the assessee was provided copy of the documents seized during search. In retraction statement, the assessee restricted disclosure to Rs.3.75 crores which is approximately the same, for which the AO made addition in respect of different items. The learned AR referred to the observations of the CIT(A) in para 46 and 52 of the impugned order, wherein, the CIT(A) categorically mentioned that addition of Rs.8,18,19,881/- is based only on the statement of the assessee, there is no corroborating documentary evidence to match the said disclosure. The learned AR placed reliance on the CBDT Circular No.286/2003 dated 18/02/2014 to contend that addition cannot be made based on mere confession of additional income during the course of search operation. The learned AR in support of his submissions placed reliance on the following decisions:
i. CIT v. Ashok Kumar Jain [369 ITR 145 (Raj.)]
ii. Shree Ganesh Trading Co. v. CIT [257 CTR (Jharkhand) 159]
iii ACIT v. Ghatge Patil Industries Limited and vice-versa [ITA No. 1281 to 1284/Pun/2016] dated 19.09.2018
iv. Avishkar Infrastructure Pvt. Ltd. v. DCIT [ITA No.7165/MUM/2011] dated 17.06.2015.
7. The learned DR rebutting the arguments made on behalf of the assessee pointed that the copies of the seized documents were provided to the assessee on 19/11/2018 and the retraction statement was filed by the assessee on 06/05/2009 i.e. that almost after 6 months from the date of providing the documents. Such a long delay in making the retraction statement clearly shows that it is an after thought. Hence, the AO rightly rejected retraction statement.
8. We have heard the submissions made by rival sides and have examined the orders of authorities below. Undisputedly, during the course of search in a statement recorded u/s 132(4) of the Act, Ajay C. Aroraj, Director of the assessee company offered Rs.12 crores to cover up discrepancies in the seized documents. During the course of assessment proceedings, the AO thoroughly examined books of the assessee and thereafter, made addition in respect of each of the shortcomings found in the book. The AO rejected the books of the assessee and made addition on following counts:
