Case Law Details
Jagdish Kumar Vs D.C.I.T (ITAT Amritsar)
ITAT Amritsar held that addition merely on the basis of statement taken at the time of locker operation without confronting the incriminating material or any other corroborative evidence has no evidentiary value u/s 292C.
Facts- AO stated that the surrender was made by the assessee at the time of operation of locker on persuasion by the search team. AO has mentioned that the assessee had surrendered Rs. 20,00,000/- and admitted u/s 132(4) as undisclosed & unaccounted income for the A.Y. 2010- 11 and now the plea for Rs. 10 lacs out of declared amount of Rs. 20 lacs, correlating to fee paid to court and getting refund, is nothing but an afterthought. As per the AO, by correlating Rs. 10 lacs out of surrender of Rs. 20 lacs with the issue of court fee, clearly shows the intention of the assessee to avoid the tax liability on Rs. 10 lacs by way of retracting the surrender.
As per the AO, the assessee has not filed any evidence in support of submission and therefore, these deserve to be rejected. Accordingly, the AO held that the assessee failed to declare full amount of surrender of Rs. 20 lacs, therefore the balance amount was added to the income of the assessee to justify full surrender of Rs. 20 lacs made during the search u/s 132(4) of the Income Tax Act, 1961.
The assesse being aggrieved with the Assessment Order, went in appeal before the Ld. CIT(A) who has confirmed the addition.
Conclusion- We have found that merely reliance is only placed upon statement of the assesse taken at the time of locker operation without confronting the incriminating material or any other corroborative evidence either at the time of recording statement u/s 132(4) or in the assessment proceedings. Such statement has no evidentiary value u/s 292C of the act as being not supported with any incriminating material/evidence. Further, The CBDT circular is binding on the revenue authorities as also followed by the CIT(A) in one of the Assessment year as above.
FULL TEXT OF THE ORDER OF ITAT AMRITSAR
Both the appeals have been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana even dated 21.01.2022 in respect of Assessment Years 2010-11 & 2012-13.
2. The assessee has raised the following grounds of appeal in ITA No. 56/Asr/2022:
“1. That the Id.CIT(A) grossly erred in confirming the addition of Rs.10 lacs, merely going by assessee’s offer made during search, when neither anything corroborating the surrender was found in search, nor thereafter during assessment proceedings.
2. That having regard to the facts of the case, the Id.CIT(A) was not justified in confirming the addition of Rs.41 lacs, by wrongly holding that the bearer cheque No.473220 issued by one Mr. Neeraj Puri, in assessee’s favour, had been encashed by the latter.
3. That the Id.CIT(A), while confirming the above addition, erred to infer that the assessee’s signatures were appearing on the backside of this cheque, though denied by assessee, which fact was also endorsed by the Id.AO in her remand report.
4. That the Id. CIT(A), ought to have sought a report of the forensic expert, rather than himself holding that the signatures on the cheque were not fake but of this assessee.
5. That the order under appeal is wholly against law and facts of the case.”3
3. Grounds of appeal in ITA No. 57/Asr/2022:
“1. That the Id.CIT(A) grossly erred in confirming the addition of Rs.30 lacs, merely going by assessee’s tentative offer made during search, when neither anything corroborating the surrender was found in search, nor thereafter during assessment proceedings.
2. That the ld. CIT(A), while upholding the above addition, was not justified in arbitrarily rejecting the assessee’s most plausible explanation filed in appeal.”
3. That the order under appeal is wholly against law and facts of the case.”
4. The appellant has raised common issue except variation of figures on identical facts in the 1st ground of both the appeals pertaining to mere offer of income by the appellant without corroborative incriminating material in search and therefore, the issue heads and adjudicated together for convenience and brevity.
5. The Assessing Officer (In short “the AO”) stated that the surrender was made by the assessee at the time of operation of locker on persuasion by the search team and this offer was also correlated to expense of court fee of Rs. 19.64 lacs incurred by the assessee when a suit of recovery was filed against Mr. Neeraj Puri. The AO was not satisfied with the reply filed by the assessee vide letter dated 16.12.2014 & 20.02.2015 and hold as not found tenable. The AO has mentioned that the assessee had surrendered Rs. 20,00,000/- and admitted u/s 132(4) as undisclosed & unaccounted income for the A.Y. 2010- 11 and now the plea for Rs. 10 lacs out of declared amount of Rs. 20 lacs, correlating to fee paid to court and getting refund, is nothing but an afterthought. As per the AO, by correlating Rs. 10 lacs out of surrender of Rs. 20 lacs with the issue of court fee, clearly shows the intention of the assessee to avoid the tax liability on Rs. 10 lacs by way of retracting the surrender. As per the AO, the assessee has not filed any evidence in support of submission and therefore, these deserve to be rejected. Accordingly, the AO held that the assessee failed to declare full amount of surrender of Rs. 20 lacs, therefore the balance amount was added to the income of the assessee to justify full surrender of Rs. 20 lacs made during the search u/s 132(4) of the Income Tax Act, 1961.
6. The assesse being aggrieved with the Assessment Order, went in appeal before the Ld. CIT(A) who has confirmed the addition by observing as under:
The facts of the case, basis of addition made by the AO and the arguments of the AR during the course of appellate proceedings have been considered. The AR has submitted that search was conducted on 30.04.2012 and assessee made surrender of Rs. 20 lacs for this year, more than a month later on 07.05.2012, when assessee’s locker was operated. As per the AR, the assessee was made to surrender a sum of Rs. 20 lacs u/s 132(4) at the time of search when the assessee was surrounded by Income Tax sleuths, with none of his aid not even his counsel in highly surcharge atmosphere under immense pressure when he hardly had any other option to look for. The AR argued that the surrender was made without confronting any incriminating documents/assets to cover any kind of discrepancy of inadvertent nature which may have crept in the accounts with a view to earn immunity from penalty. The AR further submitted that while making the offer, the assessee was neither offered to recall the facts nor able to access the documents. Accordingly, as per the AR, at the time of filing the return, it was reduced to Rs. 10 lacs and the assessee filed letter with the return explaining the reason for reduction, as after revisiting the seized document record and other material, the assessee reached satisfaction that there was nothing incriminating to justify the surrender of Rs. 20 lacs and therefore in the return filed, the surrender was reduced to Rs. 10 lacs. The AR referred to CBDT Instruction on the issue and the order dated 27.04.2017 passed by the CIT(A)-1, Jalandhar in the case of Sh. Varinder Arora in Appeal No. ROT/106/16-17/CIT(A)- 1/Jalandhar for A. Y. 2011-12. In the paper book for the assessment year 2012- 13, the AR has filed the photocopy of the statement dated 07.05.2012 when the surrender was made and the relevant questions and the replies of the assessee are reproduced below:
“4 Q: You are apprised of the legal provisions contained in sec. 132(4) of IT Act 1961. In the light of these provisions what you want to state in respect of your state of affairs so far as income, investment in movable & immovable assets or any other issue relevant therein, is concerned.
Ans: I have gone through all my state of affairs, assets found at the time of search, any kind of discrepancy of inadvertent in nature which may have crept in the accounts of my concerns, the transactions contained in the loose documents, I hereby offer a voluntary disclosure of Rs. 30 Lakhs for the F. Y. 2011-12 relevant to A. Y 2012 13. This offer is subject to no penalty & prosecution. This income has been earned from my business which could not be accounted for in the regular books of account.
I further offer a sum of rupees 20 lakh as cash investment made for depositing court fee in cash during the period F. Y 2009-10. This was also made out of some undisclosed in advertent error. This offer is made to buy peace of mind and as a law abiding tax payer I expect a lenient view, since this was unintentional.
5 Q:- Do you wish to say anything in addition or in modification to what you have stated earlier?
Ans:- I have given the above statement to the best of my knowledge & belief and without any kind of pressure or promise from any quarters This statement was recorded before the Authorized Officer in the presence of witnesses. After going through the statement, it is seen that the assessee voluntarily made the surrender and mentioned that this was being done after going through state of affairs and assets found at the time of search subject to no penalty or prosecution. It was also mentioned at the end of the statement that the statement was given to the best of knowledge & belief and without any kind of pressure or promise from any quarters. The very fact that the surrender was not made during the main search at the premises of the assessee but made after a gap of more than a month at the time of search of locker, rules out any coercion as argued by the AR. This period of one month was sufficient for the assessee to go through the seized material and appraise his state of affairs to arrive at a conclusion that the income has not been fully recorded, disclosed/accounted for and needs to be surrendered. There was sufficient time with the assessee after the search and before the operation of locker to consult any tax expert/counsel etc. Hence, in view of the time gap, the argument about pressure, coercion or allurement is not found acceptable. The assessee at the time of filing the return has not given any calculation etc. for retraction and simply stated that the surrender was not warranted. As per the legal provisions, the statement recorded u/s 132(4) has an evidentiary value under Income Tax Act, 1961. The argument about immunity from penalty etc. also has no merits because no guaranty can be given by any authority in violation of the specific provisions of the Income Tax Act, 1961. The reference to CBDT Circular on the issue has no applicability in this case because, the surrender was made voluntarily after more than a month of the main search, at the time of operation of the locker, when the atmosphere cannot be said to be highly surcharged or the assessee being virtually in the custody of the income tax department as argued by the AR in his submissions. The decision in the case of Sh. Varinder Arora may have been taken by the CIT(A)-1, Jalandhar on the basis of facts in his case and this cannot be the sole basis for deciding the issue in the case of the assessee which needs to be decided on the basis of the facts in the case of the assessee. Under the facts & circumstances of the case and in view of the above discussion, the arguments of the’ AR on this issue are not found acceptable specially in the light of the statement of the assessee reproduced above making a voluntary surrender of Rs. 20,00,000/- for the year under consideration. Therefore, the addition of Rs. 10,00,000/- made by the AO is found sustainable and hence upheld.
7. The Ld. Counsel for the assesse objected to the order of the Ld. in confirming the addition of Rs.10 lacs and 30 lacs in respect of the Assessment Year 2011-12 and 2012-13 respectively, merely going by assessee’s offer made during search, without corroborating the surrender Jagdish Kumar v. Dy. CIT amount with any incriminating document found in search, nor thereafter during assessment proceedings. The counsel contended that in the course of Search, the assessee was coerced by the search party to make an on the spot surrender of Rs.20 lacs, simply because a voucher of Govt. treasury was found depicting refund of court fee of Rs.19.64 lacs, which was earlier paid in this year. However, against notice u/s 153A, issued on 11.09.2013, the assessee e-filed his return on 04.12.2014 showing total income of Rs.24,29,810/-, inclusive of additional income (surrender)of Rs.10,00,000/-, together with audited accounts (copy placed below at page 143-159). Although, the Id.AO in the course of proceedings, invited complete details and documents, to verify the correctness of the return filed, as also the amount surrendered, however, he has ignored the facts on record and passed the impugned order with addition of Rs.10,00,000/-being the amount surrendered in search, without corroborating with any incriminating material to the aforesaid surrender amount in search, nor thereafter during assessment proceedings as alleged being not fully disclosed in return. In support, he placed reliance on the decision of ITAT Chandigarh in ITA No. 1616/CHD/2019. The relevant paras 66 & 67 are reproduced as under:
“66. Accordingly, we are not so convinced with the claims advanced on behalf of the Revenue that there was no pressure whatsoever on the assessee while making the surrender, however, for the purposes of the present proceedings, we have held that the surrender admittedly on facts was made on mistaken belief of facts and law and in the face of the voluminous plethora of evidences countering each of the factors considered relevant by the Revenue for addition, we have found that reliance is only placed upon statement of the Director and employees.
67. Accordingly, considering the position of law, facts and submissions on record, the additions are directed to be deleted.”
8. Per contra, the Ld. DR although supported the impugned order, however, he has not filed any rebuttal to the contention raised by the counsel.
9. Heard rival contentions, perused the material on record, impugned order, written submission and case law cited before us. It is admitted fact on record that the assessee has only honored Rs. 10,00,000/- instead of Rs. 20,00,000/- surrendered u/s 132(4) during search. It is also admitted facts that there no incriminating document or material referred by the AO to corroborate against the retraction by the assesse in both the assessment years. The AO has made the said addition merely based on statement recorded u/s 132(4), at the time of Locker operation by issuing a detailed show-cause notice dated 13.02.2015 asking the assessee as to why the surrender of Rs. 20,00,000/- was not fully honored. The assessee has filed Jagdish Kumar v. Dy. CIT justification before the AO for having restricted the surrender in his letter dated 16.12.2014, filed along with the return in compliance to the notice u/s 153A. As per the assessee, the actual quantum which warrants to be surrendered was Rs. 10 lacs. The AO has reproduced the copy of the letter dated 16.12.2014 also in the assessment order where it was mentioned by the assessee that while finalization the return, after apprising the seized documents vis a vis regular books of accounts and saving bank account and other facts, a sum of Rs. 10 lacs were found short to be explained with support of various expenses/outgoing incurred in respect of Assessment Year under consideration. As per the assessee, this amount which was found not to have been accounted in the books, has now being offered to tax in the return of income filed in compliance to 153A of the Act.
10. The Ld. CIT(A) has endorsed the finding of the AO by observing that the period of one month was sufficient for the assessee to go through the seized material and appraise his state of affairs to arrive at a conclusion that the income has not been fully recorded, disclosed/accounted for and needs to be surrendered and hence, the CBDT circular is not applicable. The Counsel argued that The Ld. CIT(A) has not appreciated the fact that the surrender was made without confronting any incriminating Jagdish Kumar v. Dy. CIT documents/assets to cover any kind of discrepancy of inadvertent nature which may have crept in the accounts with a view to earn immunity from penalty. The AR further submitted that while making the offer, the assessee was neither offered to recall the facts nor able to access the documents. Accordingly, as per the AR, at the time of filing the return, it was reduced to Rs. 10 lacs and the assessee filed letter with the return explaining the reason for reduction, as after revisiting the seized document record and other material, the assessee reached to conclusion that there was nothing incriminating to justify the surrender of Rs. 20 lacs and therefore in the return filed, the surrender was reduced to Rs. 10 lacs. The AR referred to CBDT Instruction on the issue and the order dated 27.04.2017 passed by the CIT(A)-1, Jalandhar in the case of Sh. Varinder Arora in Appeal No. ROT/106/16-17/CIT(A)- 1/Jalandhar for A. Y. 2011-12.
11. Recently, Chandigarh Tribunal held that Accordingly, the claims advanced on behalf of the Revenue that there was no pressure whatsoever on the assessee while making the surrender, however, for the purposes of the present proceedings, we have held that the surrender admittedly on facts was made on mistaken belief of facts and law and in the face of the voluminous plethora of evidences countering each of the factors Jagdish Kumar v. Dy. CIT considered relevant by the Revenue for addition and that reliance was only placed upon statement of the Director and employees. In the instant case, no evidences countering/rebutting the argument of assesseeon each of the factors considered relevant by the Revenue, particularly no incriminating material for addition. We have found that merely reliance is only placed upon statement of the assesse taken at the time of locker operation without confronting the incriminating material or any other corroborative evidence either at the time of recording statement u/s 132(4) or in the assessment proceedings. Such statement has no evidentiary value u/s 292C of the act as being not supported with any incriminating material/evidence. Further, The CBDT circular is binding on the revenue authorities as also followed by the CIT(A) in one of the Assessment year as above.
12. In view of the above, and following the Chandigarh Tribunal and CBDT circular, we hold that the order of the CIT(A) is perverse to the facts on record. Accordingly, the addition of 10,00,000/- and 30,00,000/- made in respect of Assessment Year 2011-12 and 2012-13 is deleted.
13. In the next issue, the appellant challenged pertains confirmation of the addition of Rs.41 lacs, by the Id. CIT(A) on the facts of the case, as not justified and legally wrong. The Ld. Counsel argued that the Id. CIT(A), Jagdish Kumar v. Dy. CIT while confirming the aforesaid addition of Rs.41 lacs, erred to infer that the assessee’s signatures were appearing on the backside of this alleged cheque, in spite being denied by assessee, and the said denial by the assesse is an admitted fact on record as evident from the endorsement by the AO in her remand report. The Counsel contended that the Id. CIT(A), ought to have sought a report of the forensic expert, to corroborate the fact of fake/authenticity of the signatures rather than himself holding that the signatures on the cheque were not fake but of this assessee.
14. It is seen from the impugned order that the submissions along with application for admission of additional evidence were sent to the AO and report submitted by the AO is reproduced at para 3.2 of the impugned order. The AO has reported that from the facts, it can be concluded that the assessee Sh. Jagdish Kumar has not withdrawn the payment of Rs. 2.7 crore with regard to five cheques which were bearer cheques in the name of Sh. Yog Raj Puri. Further it is mentioned that the sixth cheques of Rs. 41 lacs which was in the name of Sh. Jagdish Kumar seems to have forged signature. Therefore, in the light of the report submitted by the AO during the appellate proceedings, the arguments of the AR on this issue are found acceptable to the extent of payment of Rs. 2.7 crore as the cheques were Jagdish Kumar v. Dy. CIT passed by the bank authorities in the name of Sh. Yog Raj Puri and the payment was also made to Sh. Yog Raj Puri. Further, the cheque of Rs. 41 lacs, it was in the name of Sh. Jagdish Kumar and at the back, only the name of Sh. Jagdish Kumar is appearing (and there is no name/signature of Sh. Yog Raj Puri on the back of the cheque amounting to Rs. 41,00,000/-). Merely the ld. CIT(A) stated that the AO is not an expert in the matter of identification of signature, so his comments about forging or otherwise of the signature on this cheque cannot be ignored. In our view, the Ld. CIT(A)’s observation on this issue are self contradictory by accepting the remand report of the AO partially. Firstly, He accepted the arguments of the AR on this issue to the extent of payment of Rs. 2.7 crore as the cheques were passed by the bank authorities in the name of Sh. Yog Raj Puri and the payment was also made to Sh. Yog Raj Puri and secondly, the cheque of Rs. 41 lacs, at the back, only the name of Sh. Jagdish Kumar was appearing (and there is no name/signature of Sh. Yog Raj Puri on the back of this cheque amounting to Rs. 41,00,000/-) where the signature of Jagdish Kumar explained by the AO as fake was rejected by holding that the AO is not an expert in the matter of identification of signature. Therefore, the AO’s comments about forging or fake of the signature on this cheque ought to have not been ignored, and it was required to be corroborated with forensic expert report and that realization of cheque amount thereof.
15. Thus, the Ld. CIT(A) failed to establish or prove in the light of the remand report of the AO and any other material evidence such as, report of the forensic expert, to corroborate the fact of fake/authenticity of the signatures on the back side of the disputed bearer cheque and its encashment by the assessee at a later date. In view of the matter, we hold that the order of the Ld. CIT(A) has infirmity and perversity to the facts on record on the issue of addition on account of amount against bearer cheque having fake/forged signatures of the appellant assesse.
16. In view of the above, we accept the grievance of assessee as genuine and hold that the Id. CIT(A) was not justified confirming the aforesaid addition of Rs.41 lacs. Accordingly, addition of Rs.41 lacs is deleted.
17. In the result, appeal of the assessee is allowed.
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