HIGH COURT OF JHARKHAND
Shree Ganesh Trading Co.
Commissioner of Income-tax
Tax Case No. 8 of 1999
January 3, 2013
1. The following questions of law have been referred to this Court under section 256(1) of the Income Tax Act, 1961 by the Income Tax Appellate Tribunal, Patna Bench, Patna:-
“1. Whether the statement on oath recorded on 24.9.87 u/s 132(4) of the Act will be governed by the said provision as it stood on 24.9.87 or as amended by insertion of the Explanation therein w.e.f 1.4.89?
2. Whether the statement on oath recorded on 24.9.87 is within the ambit and scope of section 132(4) as amended by insertion therein of the Explanation w.e.f 1.4.89 and consequently admissible in evidence in the assessment proceedings?
3. Whether the addition of Rs. 20 lakhs was proper and justified on the basis of the admission in the statement u/s 132(4) voluntarily made without there being any corroborative evidence of the existence of any such income in any tangible form?”
2. However, reference has been argued on the question no.1 only and it has been submitted that though the question has been formulated with respect to applicability of proviso to section 132(4), which came into force with effect from 1.4.1989, by Explanation it has been declared that examination of any person under sub-section (4) of section 132 may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income Tax Act, 1961, learned counsel for the assessee submitted irrespective of insertion of proviso, assuming for the sake of argument that there was statement under section 132(4) of the Act of 1961, even then such statement alone without corroborative evidence cannot fasten any liability upon the assessee and that admission made in the statement under section 132(4) solely cannot be the ground for holding the income of the assessee. Learned counsel for the assessee relied upon the Division Bench judgment delivered in the case of Kailashben Manharlal Chokshi v. CIT  328 ITR 411/ 174 Taxman 466 (Guj.), wherein it has been held that retracted statement recorded under section 132(4) cannot be the basis for assessing undisclosed income of the assessee. In the above judgment, the Division Bench held that there must be some corroborative evidence to the admission.
3. Learned counsel for the Revenue vehemently submitted that it is easy for anybody to retract from the statement given under section 132(4) and therefore, if the same view is taken by this Court, that will permit the tax evaders to give statement under section 132(4) admitting liability of income without any coercion, duress or force and then retract from that statement. It is also submitted that even retraction requires some corroborative evidence and the assessee could have submitted his evidence to show that he had no such income as has been admitted in his statement under section 132(4) of the Income Tax Act.
4. We considered the submissions of the learned counsel for the parties and perused the reasons given in the impugned orders as well as reasons given in the case of Kailashben Manharlal Chokshi (supra).
5. It appears from the statement of facts that there was a search in the business premises of the petitioner’s firm as well as in the residential premises of its partner, Shri Sheo Kumar Kejriwal, on 24th September, 1987. During the course of search, the statement of Shri Sheo Kumar Kejriwal had been recorded under section 132(4) of the Income Tax Act and in the statement, he stated that he was partner in the Ganesh Trading Company, i.e. the present assessee-firm in his individual status and that he surrendered Rs. 20 lacs for the assessment year 1988-89 as income, on which tax would be paid. He further stated that other partners would agree to the same; otherwise it would be his personal liability. However, in the returns filed after search, the income of Rs. 20 lacs surrendered by Shri Sheo Kumar Kejriwal was not declared by the assessee-firm. On being asked to explain the reason for not showing the surrendered amount in the returns, it was submitted by the assessee that declaration made by the partner was misconceived and divorced from real facts. It was contended that the declaration was made after persuasion, which, according to the learned counsel for the assessee, Shri Binod Poddar, in fact, was because of coercion exerted by the search officers. In explanation, it was submitted that the firm or the individual had no undisclosed income. The assessee’s said retraction was not accepted by any of the authorities below on the ground that the statement given by the assessee appears to be voluntarily given statement disclosing undisclosed income of Rs. 20 lacs. According to the learned counsel for the assessee, Shri Binod Poddar, the Assessing Officer had full jurisdiction to proceed for further enquiry and could have collected evidence in support of alleged admission of undisclosed income of the assessee.
6. We are of the considered opinion that statement recorded under section 132(4) of the Income Tax Act, 1961 is evidence but its reliability depends upon the facts of the case and particularly surrounding circumstances. Drawing inference from the facts is a question of law. Here in this case, all the authorities below have merely reached to the conclusion of one conclusion merely on the basis of assumption resulting into fastening of the liability upon the assessee. The statement on oath of the assessee is a piece of evidence as per section 132(4) of the Income Tax Act and when there is incriminating admission against himself, then it is required to be examined with due care and caution. In the judgment of Kailashben Manharlal Chokshi (supra), the Division Bench of Gujarat High Court has considered the issue in the facts of that case and found the explanation given by the assessee to be more convincing and that was not considered by the authorities below. Here in this case also, no specific reason has been given for rejection of the assessee’s contention by which the assessee has retracted from his admission. None of the authorities gave any reason as to why Assessing Officer did not proceed further to enquire into the undisclosed income as admitted by the assessee in his statement under section 134(2) in fact situation where during the course of search, there was no recovery of assets or cash by the Department. This fact also has not been taken care of and considered by any of the authorities that in a case where there was search operation, no assets or cash was recovered from the assessee, in that situation what had prompted the assessee to make declaration of undisclosed income of Rs. 20 lacs. Mere reading of statement of assessee is not the assessment of evidentiary value of the evidence when such statement is self-incriminating. Therefore, we are of the considered opinion that in the present case, a wrong inference had been drawn by the authorities below in holding that there was undisclosed income to the tune of Rs. 20 lacs.
7. In view of the above reasons, without answering the question about retrospective operation of the proviso to section 134(4), we are holding that the authorities below have committed error of law in drawing inference from the materials placed on record, i.e. admission of the assessee coupled with its retraction by the assessee. The Revenue may now proceed accordingly.