A search and seizure operation was carried out at the premises of the assessee on 22.11.2006. Assessee is an individual filed the return of income at Rs.5,88,06,735/- on 02.09.2008. This amount included undisclosed investment in jewellery of Rs. 12,85,777/- and undisclosed cash found during search of Rs.24,86,000/-. The Assessing Officer made an addition of Rs. 15 crores on the basis of statement recorded u/s 132(4) of the Income-tax Act, 1961 during the search operation.
In the assessee’ s case , this admission of additional income is not based upon any credible evidence and the same has been retracted within 6 days from the search. Non-asking any question regarding seized papers/documents from the premises of the assessee clearly shows that there was no focus and consideration of the search party on the collection of evidence of income which lead to information on what has been disclosed or is not likely to be disclosed before the revenue authorities. There is no evidence found and seized that assessee has carried out speculation trading during the relevant period. No document in this regard was seized from the premises of the assessee. The documents seized from the residence of Shri Prem Arora was related to the financial year 2003-04 and the income earned in those transactions has been received by the assessee through banking channels and not by cash and the same has been duly accounted for. In such a situation, the presumption that assessee might have carried out speculation business during the year on the basis of such document seized is completely untenable and unsustainable and additions based on such presumption cannot be sustained. The inference that Shri Prem Arora was in possession of the cash and being the close person of the assessee, assessee might have been indulging in the speculation business of the commodity trading is also unsustainable presumption. No adverse inference can be drawn about the assessee on such presumption. The Assessing Officer’s reliance that assessee has also narrated about the investment of the undisclosed speculative income in the purchase of gold and jarau jewellery, investment in shares and investment in vaida bazaar and advances given to the parties trading in agricultural field is also not supported by any document. Nothing has been found during the search and no such assets had been recovered. Therefore, such additions made only on the basis of a statement which has been retracted immediately thereafter are not sustainable. The pattern of the questions put to the assessee during the search of the premises shows that whatever recorded in these statements is not true. Only on the basis of presumption that large scale construction was going on at the school building of the trust and hospital of the trust cannot be made a basis for addition. The Assessing Officer should have ascertained the investment by way of referring the case to the DVO if he has any doubt in this regard. No evidence regarding any anonymous donation by the trust was found and seized and nothing has been made out by the Assessing Officer in the assessment. The other assessments u/s 153A of the Act in assessee’s case for Assessment Year 2001-02 to 2006-07 have been made without any addition. Thus, in our considered view, no incriminating evidence was found against the assessee which could suggest or show that unexplained investment has been made to the tune of Rs. 15 crores and such income has been utilized or invested as stated by the assessee in the retracted statement. Nothing of such sort borne out of the facts. In our considered view, no addition can be made merely on the basis of surrender without existence of any corroborative evidence found against the assessee. For this propositions, reliance is placed on the following case laws :-
“a. Kailashben Mangarlal Chokshi Vs CIT (2008) 174 Taxmann 466 (Guj.) / (2008) 14 DTR 257 (Guj.)
Merely on the basis admission, the assessee could not have been subjected to additions, unless and until some corroborative evidence was found in support of such admission. Further statement recorded at such odd hours (at midnight) could not be considered to be voluntary statement, it was subsequently retracted and necessary evidence was led contrary to such admission. Addition was deleted.
b. Arun Kumar Bhansali Vs DCIT (2006) 10 SOT 46 (Bang) (URO)Block period 1990-9 1 to 1999-2000 – Whether while computing undisclosed income of assessee, Assessing Officer should take cognizance of such correct income as depicted in books of account as well as in seized material, and should not adopt a figure merely as per admission of assessee – Held, yes.
c. Shree Chand Soni Vs DCIT (2006) 101 TTJ (JD) 1028Search and seizure – Block assessment – consumption of undisclosed income – Addition based on the assessee’s statement under s. 132 (4) – Admittedly, no incriminating document was found to support the impugned addition regarding bogus capital – Statement recorded under s. 132(4) does not tantamount to unearthing any incriminating evidence during the course of search – Therefore, no addition could be made only on the basis of such statement.
d. Rajesh Jain Vs DCIT (2006) 100 TTJ (Del) 929
Search and seizure – Block assessment – Retraction of statement – Addition of Rs.25 Lakhs made solely on the basis of confessional statement of assessee that he earned the said amount in the last Ten years was not justified – Confessional statement should be corroborated with some material to show that assessment made is just and fair – Conduct of affairs by the revenue authorities shows that good amount of psychological pressure was built on the assessee to make the said statement, which was retracted – Further, the addition was illegal as while the assessee spoke of earning the said income over a period of 10 years, total addition was made in two asst. yrs. 1999-2000 and 2000-200 1 – All material found during search was duly explained by assessee on which no adverse comment was made by AO – Assessee to be assessed on the income returned by him for the block period.
Further reliance is also placed whether no addition can be made simply on the basis of surrender without any cogent and valid reasons and which the assessee has subsequently retracted. For this proposition, the reliance is placed on the following case laws :-
“a. India Seed House V s Asstt. CIT (2000) 69 TT J (Delhi) (TM) 241
In case of block assessment no addition can be made merely on the basis of statement recorded at the time of search which stands fully proved to be incorrect in view of the material itself which was seized at the time of search.
b. Pranav Construction Co. Vs Asstt. CIT (1998) 3 DTC 719 (Mum-Trib) (1998) 61 TTJ (Mum.-Trib) 145
It was held that the admission cannot be read as an Act of Parliament and that it has to be read in the context fairly and reasonably. The burden of incurring the expenditure can be discharged either by direct evidence or if such evidence is not available the assessee can always point out to circumstantial evidence supporting the claim. Thus, statement recorded under section 132(4) cannot be made use for purpose of precluding assessee from claiming expenditure for earning income which assessee forgot to claim while making statement disclosing income.
c. Ganga Saran & Sons (P) Ltd. Vs ITO (1981) 130 ITR 1 (SC) : ITO Vs Nawab Mir Barkat AU Khan Bahadur (1974) 97 ITR 239 (SC)Belief should not be arbitrary or irrational but based on relevant and material reasons.
d. S. Narayanappa Vs CIT (1967) 63 ITR 219 (SC) Belief must be in good faith, and cannot merely be a pretence.
e. Madhya Pradesh Industries Ltd. Vs ITO (1970) 77 ITR 268 (SC)
Absence of evidence to prove existence of ITO’s belief that income has escaped assessment, will invalidate reassessment.
f. Mayank Poddar (HUE) Vs WTO (2003) 181 CTR (Cat) 362If in law an item is not taxable, no amount of admission or misapprehension can make it taxable. The taxability or the authority to impose tax is independent of admission. Neither there can be any waiver of the right by the assessee. The Department cannot rely upon any such admission or misapprehension if it is not otherwise taxable.”
We would also like to state that assessee retracted by filing a written submission before the DIT, Inv.-I, New Delhi on 28.11.2006 which is 6 days after the search. There was sufficient time with the Investigation Wing to carry on the investigation and to collect the evidence against the retraction.
However, records show that nothing has been done in this regard. In such a situation, the retraction of the assessee can not be said to be invalid in absence of any incriminating documents. In view of these facts, we uphold the order of the CIT (A).
In the result, the appeal of the revenue stands dismissed.