The income tax authority may examine on oath any person, which may be useful for the purpose of any proceeding under the Act. A statement on oath may be used as evidence in any proceedings under the Act. However, it is only when the statement is recorded by the authorized officer on oath, which could be used as evidentiary value against the person making the statement.
Reasons
of Retraction
Generally,
the statements made earlier are retracted when the maker contends that earlier
admissions:
(i) were
untrue; or
(ii) were
on a mistaken understanding, misconception; or
(iii) were
not voluntary; or
(iv) were
under mental stress, undue influence, pressure or coercion.
Mode
and Manner of retraction or rebuttal of earlier statements/admitted facts
Retraction of a statement later on,
which was made during the search or survey operation is not an easy way to
escape the tax implications and requires
corroborative evidence and documents to support the retraction and show the
circumstances as to why the person is retracting his statement made earlier. The
following aspects should be kept in mind:
(i) In
the form of a letter
The retraction should be made properly and at
the earliest possible opportunity and establishing the situation as to how the facts stated in
statement mistaken on facts or in law.
(ii)
Sworn Affidavit
In the form of a Sworn Affidavit
filed and backed by corroborative evidences justifying the retraction. A retraction should be made on an
affidavit along with supporting evidences, if any,
Retraction
by a Sworn in Affidavit
Affidavitis
a solemn and voluntary declaration or statement of fact in writing, relating to
matters in question and sworn or affirmed and signed by the deponent before a
person or officer duly authorized to administer such an oath or affirmation -
should show the circumstances under which admission was made and the grounds
for which the admission is incorrect. Necessary supporting evidences to support
the correct facts need to be filed.
Ingredients
of Affidavit
Every
Affidavit should clearly express how much is the statement of the deponent’s
knowledge and how much is a statement of his belief and the ground of belief
must be stated with sufficient particularity to enable the Court/Administering
Authority to judge whether it would be safe to act on the deponent’s belief.
When the Affidavits filed by the party bear only the verification that they
were sworn on oath and the contents of the Affidavits were admitted by them to
be correct without giving source of knowledge or information, the verification
makes the Affidavits meaningless and valueless as noted in the case of Babu
Lal v. Motilal, AIT 1953 MB &2 (Gwalior benefit).
The
onus to prove malafide lies heavily on the person alleging it. Facts constituting
malafide have to be supported by Affidavits stating that they have ‘come
to the knowledge’ of the deponent. The nature and source of knowledge is to be
disclosed with sufficient particularity. Affidavit will not be one as required
by law if the above ingredients are missing, stated the Supreme Court
categorically in Suckwinder Pal Bipan Kumar v. State of Punjab, AIR 1982 SC
65.
(iii)) Affidavit of witnesses
Additional affidavit of the
witnesses present during search or seizure may also be filed. The statement of
the witnesses present holds good value and may aid the assessee in getting
relief.
(iv) Furnish relevant details and evidences
It must clearly lay down the facts of
the case and detail the evidences showing inter alia use of force, coercion,
intimidation or any mistake of fact/law, whatever may be the case.
In case of a mistake of fact or law, it must clearly lay down as to what
statement was recorded, what mistake took place in making such a statement, the
reason for the same and the actual correct position. Evidences in support of
the correct facts must also be attached.
(vi) Inform Senior Officers
In addition to the Assessing Officer,
Authorised Officer (who conducted the Search), a retraction which is made on
affidavit or otherwise should also be communicated to higher authorities.
Any retraction should be done at the
earliest without any delay. A retraction made immediately may strengthen the
case of the assessee whereas a belated retraction will in most cases will have
no value and would be seen as an afterthought.
There is no universal law on retraction admission etc. In the
case CIT v. Sun Engineering Works (P)
Ltd (1992) 198 ITR 297 (SC) the Court held that the judgements to
be read in the context in which it was delivered It is neither desirable
nor permissible to pick out a word or a sentence from the judgment of this
Court, divorced from the context of the question under consideration and treat
it to be the complete ‘law’ declared by this Court.
No Confession can be extorted [CBDT F.
No. 286/2/2003-IT (Inv.), dated 10.03.2003]
CBDT in F. No. 286/2/2003-IT (Inv.) dated
10.03.2003 has also advised that while recording statement during the course of
search and seizure, no attempt should be made to obtain confession as to the
undisclosed income. Further, in pending assessment proceedings, Assessing Officer
should rely upon the evidence/material gathered during the course of
search/survey operations or thereafter while framing the relevant assessment
orders. Thus, power to record a statement has not been diluted. What is
discouraged is forced confession of undisclosed income.
CBDT in F. No. 286/2/2003-IT (Inv.) dated
10.03.2003
Subject : Confession of
additional Income during the course of search & seizure and survey
operation -regarding
Instances have come to the notice of the Board where
assessees have claimed that they have been forced to confess the undisclosed
income during the course of the search & seizure and survey operations.
Such confessions, if not based upon credible evidence, are later retracted by
the concerned assessees while filing returns of income. In these eircumstances,
on confessions during the course of search & seizure and survey operations
do not serve any useful purpose. It is, therefore, advised that there should be
focus and concentration on collection of evidence of income which leads to
information on what has not been disclosed or is not likely to be disclosed
before the Income Tax Departments. Similarly, while recording statement during
the course of search it seizures and survey operations no attempt should be
made to obtain confession as to the undisclosed income. Any action on the
contrary shall be viewed adversely.
Further, in respect of pending assessment proceedings
also, assessing officers should rely upon the evidences/materials gathered
during the course of search/survey operations or thereafter while framing the
relevant assessment orders.
Dismissing
the appeal of the revenue the Court held that, merely on the basis of statement
recorded in the course of search, which was retracted, within a short time by
filing an affidavit. Subsequently his further statement was recorded he
reiterated the stand taken in affidavit. Court held that no disallowance of
consultancy charges can be made without bringing on record independent
material. - [CIT v. Reliance Industries Ltd. (2020) 421 ITR 686 : (2019) 261 Taxman
358 (Bom)]
During search certain incriminating documents were found in possession of one DD, managing and handling land acquisition on behalf of assessee-company and his statement was recorded. He stated that there were amounts disbursed for purchase of lands and a certain amount of cash had also been received by him to purchase lands. However, later he had retracted his statement. A.O. issued notice under section 153C and initiated proceedings against assessee and made additions under section 69C. High Court held that since seized documents did not belong to assessee but were seized from residential premises of one Mr. DD who had later retracted his statement, no action under section 153C could be undertaken in case of assessee. It further held that since entire decision was based on seized documents and there was no material to conclusively show that huge amounts revealed from seized documents were actually transferred from one side to another, additions under section 69C were not sustainable. SLP of Revenue was dismissed.- [Principal CIT, Central III v. Krutika Land (P) Ltd. (2019) 103 taxmann.com 9 (SC)]
In CIT v. Rakesh Ramani, in course of block assessment, assessee brought on record various documents to establish that jewellery seized from him actually belonged to his employer, impugned addition made in respect thereof merely on ground that assessee in course of statement made u/s 132, had admitted that said jewellery belonged to him, could not be sustained. It was also held that there is no requirement in law that evidence in support of its case must be produced by assessee only at time when seizure has been made and not during assessment proceedings. Besides, the entire basis of the revenue’s case is the statement made on the date of the seizure. The voluminous evidence filed by the respondent during the course of the assessment proceedings has been completely ignored on the ground that the same was not produced when the seizure was made. The High Court held that there is no requirement in law that evidence in support of its case must be produced by assessee only at the time when the seizure has been made and not during the assessment proceedings. The basis of the decision was the evidence led by the respondent during the assessment proceedings which established that the jewellery belonged to his employer ‘P’ Jewellers. Therefore, the Bombay High Court held that the view taken by the two Authorities namely the Commissioner (Appeals) as well as the Tribunal is a possible view on the facts as existing. Therefore, the Court held that the question of law does not arise to any substantial question of law and the appeal of the Revenue was dismissed. – [CIT v. Rakesh Ramani (2018) 256 Taxman 299 : 168 DTR 356 : 94 taxmann.com 461 (Bom.)]
Addition not
maintainable on the basis of mere statement recorded during survey
Hon’ble High Court of Madras in the
case of CIT v. S. Khader Khan and Son (2008)
300 ITR 157 (Mad) which held
the statements recorded under section 133A of the Act does not give any
evidentiary value as the officer is not authorized to administer oath and to
take any sworn statement which alone has evidentiary value as contemplated
under law. In the present case, as discussed above, the survey under section 133A
of the Act was conducted on 08.01.2013 and a preliminary statement was recorded
on 09.01.2013 stated to have been on oath of Shri Ajoy Kr. Das who is happened
to be son of assessee. Again a final statement of Shri Rohitaswa Das was
recorded to confirm the statement made by Shri Ajoy Kr. Das. We note that in
the light of the observations made by the Hon’ble High Court of Madras in the
case of S. Khader Khan & Sons (supra). It is to be held that no addition is
maintainable on the basis of statement recorded during the course of survey
unless there is evidence supporting the statement.
it is to be noted that there cannot
be addition made on account of statements recorded under survey proceedings
conducted under section 133A of the Act and therefore the addition made in the
present case in the hands of assessee is not maintainable only for the reason
that the addition was made by Assessing Officer and confirmed by the CIT(A) is
solely based on the statement of Shri Ajoy Kr. Das which was alleged to have
been confirmed by the assessee during the course of survey.
As discussed above, there was no
evidence to show that the excess stock alleged to have been found at the
warehouse premises bearing no. 54/14, this belongs to assessee and the addition
made in the hands of assessee is not maintainable. (Related Assessment Year :
2013-14) – [Rohitaswa Das v. ACIT - Date
of Judgement : 28.08.2019 (ITAT
Kolkata)]
No merit in sustaining the addition only based on the statement recorded during the course of survey
It is trite law that Section 133A does
not empower any Income tax authority to examine any person on oath and then use
it as evidence to make addition. In such a situation, no addition can be made
or sustained only on the basis of the statement recorded during the survey under
section 133A of the Act. Once the assessee has retracted from the statement
then it was on the Assessing Officer. to establish beyond any doubt the issues
on which the addition has been made. Once the assessee has submitted up to date
cash book and stock register then it was duty of the Assessing Officer to pin
point the defects in such books of account particularly with regard to the
issues, on which the statement was recorded during the survey. Further in the
case of Shri Pawan Kumar, even the Assessing Officer recorded his statement but
he has not asked any question with regard to amount of advance of Rs. 10.00
lacs for which the addition has been made only on the basis of a piece of
paper, which was not signed by Shri Pawan Kumar. Similarly in the case of
debtors, once the assessee has retracted then it was the duty of the Assessing
Officer to examine these debtors to establish the truthfulness of the debt. The
ld DR has relied on the decision of Hon’ble Bombay High Court in the case of Dr.
Dinesh Jain v. ITO (2014) 45 com442 (Bom.) and decisions of Hon’ble Rajasthan High Court in the
case of Rameshwar Lal Mali v. CIT (2003) 132 Taxman 629 (Raj), we have considered the facts and law
involved in these cases and we find that the facts are at variation from these
cases, therefore, the ratio laid down in these cases are not applicable to the
assessee’s case. Considering all these aspects, we find no merit in sustaining
the addition only based on the statement recorded during the course of survey. (Related Assessment Year : 2009-10) – [Satish
Chand Agarwal, Prop. Sumit Medical Hall v. ITO - Date of Judgement : 12.04.2018
(ITAT Jaipur)]
Evidentiary
value of statement recorded during survey proceeding
A
statement unless administered on oath has no evidentiary value. In the course
of search proceeding under section 132 of the Income Tax Act, section 132(4)
specifically empowers the Investigating Officer to obtain statement
administered on oath. However, no such authority is given by law to obtain
statement in survey proceedings under section 133 of the Income Tax Act. As a
primary fact, admission/confession given under section 133 has no evidentiary
value.
An
admission of estimated income made during survey has no evidentiary value and
is not binding on the assessee. The income has to be assessed as per the return
of income and books of account. Hiralal Maganlal 97 TTJ Mum 377 distinguished.
CBDT Circular No. 286/2/2003 (Inv.) II, dated 10.03.2003 referred. (Related
Assessment year : 2016-17) - [Amod Shivlal Shah v. ACIT (Date of
pronouncement : 23.02.2018) (ITAT Mumbai)]
In CIT, Central-III v. Lavanya Land (P) Ltd. and Others, the Hon’ble Bombay High Court dismissed an appeal filed by the revenue against the order of the ITAT, Mumbai and upheld the order of the ITAT in which it had set aside the additions made by the revenue based on the statement made by person who was searched but which was later retracted by him. In this case, a search was conducted at the premises of one of handlers of the assessee company and his statement was recorded which showed an admission that a large sum of money was received by him to purchase lands in the name of the assessee company. The said statement was retracted by him after a period of two and a half months. However, the department proceeded to issue a notice to the assessee under section 153C of the Act on the basis of the statement of the person searched and without taking into account the retraction, an addition was made under section 69. The CIT(A) upheld the addition made. On appeal, the ITAT Mumbai set aside the addition made. Adverting to the fact that the concerned person (Dilip Dherai) has retracted his statement, the Tribunal arrived at the conclusion that merely on the strength of the alleged admission in the statement, the additions could not be made as the essential ingredients of Section 69C of the Income Tax Act enabling the additions were not satisfied. This was 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. Against the order of the ITAT, the revenue filed an appeal to the Hon’ble Bombay High Court, which held while dismissing the appeal of the revenue, in para 22 of its Order, as under:
“It is not possible for us to reappraise and re-appreciate
the factual findings. The finding that Section 153C was not attracted and its
invocation was bad in law is not based just on an interpretation of Section
I53C but after holding that the ingredients of the same were not satisfied in
the present case. That is an exercise carried out by the Tribunal as a last
fact finding authority. Therefore, the finding is a mixed one. There is no
substantial question of law arising from such an order and which alternatively
considers the merits of the case as well.” - [CIT, Central-III v. Lavanya Land (P) Ltd. and
Others (2017) 397 ITR 246 (Bom.)]
Retraction of statement – No other evidence of suppression of income – Addition of income not justified
Dismissing the appeal of revenue,
the Court held that; while making the additions in the hands of the partner as
well as in the hands of the firm, the Assessing Officer solely relied upon the
statement of the partner recorded at the time of search, which subsequently came
to be retracted or explained within the period of 19 days. Except the statement
recorded at the time of search which was subsequently retracted, there was no
other material or corroborative material with the Assessing Officer, on which,
the addition of Rs. 6 lakhs in the hands of the partner and Rs. 7,00,500 cash
in hand and Rs. 25,50,320 as unexplained investment in stock in the hands of
the firm could be justified. Under the circumstances, the deletion of the
additions was justified. (Related Assessment year : 2007-08) – [CIT
v. M.P. Scrap Traders (2015) 372 ITR 507 (Guj.)]
Survey statement were retracted-
court ruled that no addition can be made based on the statement - Where assessment order was passed on sole
basis of statements recorded during course of survey and after retraction of
statements, Assessing Officer did not produce any other material to support
understatement of sale consideration of land, assessment order was to be set
aside
In the instant case, the
appellants specifically pleaded that the statements were recorded from them by
applying pressure, till midnight, and that they have been denied access outside
the society. The Assessing Officer made an effort to depict that the withdrawal
or retraction on the part of the appellants is not genuine. We do not hesitate
to observe that an Assessing Officer does not have any power, right or
jurisdiction to tell, much less to decide, upon the nature of withdrawal or
retraction. His duty ends where the statement is recorded. If the statements
are retracted, the fate thereof must be decided by law meaning thereby, a
superior forum and not by the very authority, who is alleged to have exerted
force.
It is not as if the retraction
from a statement by an assessee would put an end to the procedure that ensued
on account of survey or search. The Assessing Officer can very well support his
findings on the basis of other material. If he did not have any other material,
in a way, it reflects upon the very perfunctory nature of the survey. We find
that the appellate authority and the Tribunal did not apply the correct
parameters, while adjudicating the appeals filed before them. On the undisputed
facts of the case, there was absolutely no basis for the Assessing Officer to
fasten the liability upon the appellants. Our conclusion find support from the
Circular dated March 10, 2003, issued by the Central Board of Direct Taxes,
which took exception to the initiation of the proceedings on the basis of
retracted statements. Therefore, the orders of assessment dated December
1, 1998, are set aside. – [Gajjam Chinna Yellappa v. ITO (2015) 370 ITR 671 (AP)]
Retraction
in the return – Statement on oath is a piece of evidence and when there is
incriminating admission against himself, then it is required to be examined
with due care and caution – Addition made only the basis of statement was
deleted
During
course of search conducted under section 132 upon assesseefirm, a partner made
a statement under section 132(4) and surrendered a sum of Rs. 20 lakhs for
Assessment Year 1988-89 as income. In return filed after search assessee-firm
did not declare income of Rs. 20 lakhs on plea that declaration made by partner
was misconceived and divorced from real facts and that firm or individual had
no undisclosed income. Lower authorities did not accept assessee’s said
retraction on ground that statement given by partner appeared to be voluntarily
given statement disclosing undisclosed income of Rs. 20 lakhs and added said
amount to its income as undisclosed income. No specific reason had been given
for rejection of assessee’s contention by which it had retracted for admission
of partner. During course of search there was no recovery of assets or cash by
department, having regard to facts and circumstances of case a wrong inference
had been drawn by authorities below in holding that there was undisclosed
income to the tune of Rs. 20 lakhs of assessee. Addition was deleted. (Related
Assessment Year: 1998-99) - [Shree Ganesh Trading Co. v. CIT (2013) 257
CTR 159 : 214 Taxman 262 : 84 DTR 94 (Jharkhand)]
Section
69 – Unexplained investments – Survey – Statement – Survey does not empower any
ITO to examine any person on oath, statement recorded under section 133A has no
evidentiary value addition cannot be made merely on the basis of such statement
It
was held that section 133A does not empower any ITO to examine any person on
oath. So statement recorded under section 133A has no evidentiary value and
addition cannot be made on basis of such statement. FACT:
The
Tribunal deleted the addition made by the Assessing Officer on the basis of
statement recorded during the survey proceedings. In an appeal before the High
Court, the High Court by passing a detailed order and referring the Circular of
Board dated 10.03.2003 has held that merely on the basis of statement recorded
in the course of survey, which was retracted subsequently addition cannot be
made. High Court explained the difference between section 132(4) and section
133A. High Court held that statement obtained under section 133A would not
automatically bind upon the assessee and
confirmed the order of Tribunal. On appeal by the Department to the Apex court
the Court held that in view of the concurrent findings of fact, the civil
appeal of department was dismissed. (Related Assessment year : 2001-02) - [CIT
v. S. Khader Khan Son (2013) 352 ITR 480 : (2012) 254 CTR 228 : 210 Taxman 248
: 79 DTR 184 (SC)]
A
survey was conducted in the premises of the assessee firm. One of the partners
in his statement offered an additional income of Rs. 20 lakhs for the Income
Tax Assessment year 2001-02 and Rs. 30 lakhs for the Assessment year 2002-03,
but the statement was retracted by the assessee stating that the partner from
whom the statement was recorded during the survey operation under section 133A
of the Income Tax Act, 1961, was new to the management and had agreed to an adhoc
addition. The Assessing Officer based on the admissions made by the
assessee computed the income. The order was set aside by the CIT(A) and his
order was upheld by the ITAT.
On
appeal to the High Court, the High Court held that in view of the scope and
ambit of the materials collected during the course of survey, the action under
section 133A would not have any evidentiary value and that it could not be said
solely on the basis of the statement given by one of the partners of the
assessee firm that the disclosed income was assessable as lawful income of the
assessee. On appeal to the Supreme Court :
The
Supreme Court dismissed the appeal in view of the concurrent finding of fact,
and affirmed the decision of the High Court. - [CIT v. S. Khader Khan Son
(2013) 352 ITR 480 (SC)]
Addition
made on the strength of a statement recorded during the survey cannot be sustained
During
the course of survey, the assessee made declaration and surrendered a sum of
Rs. 2 crore. The Assessing Officer found that the assessee had not filed a
revised return of income and had failed to incorporate the surrendered amount
to tax in the return. The assessee contended that he had not made any voluntary
disclosure. The statement recorded during the course of survey was not given on
oath and had no evidentiary value. Not being satisfied with the Explanation of
the assessee the Assessing Officer made an addition of Rs. 2 crores which
addition was confirmed by the CIT(A). On appeal by the assessee, the Tribunal
deleting the addition held that:
“The
department failed to collect any material during the course of survey and the
Assessing Officer was harping upon the statement of the assessee.The statement
recorded during survey had no evidentiary value and no addition could be
sustained on the strength of this statement. (Related Assessment year 2005-06)”—[Mahesh
Ohri v. ACIT (2013) 23 ITR 522 (ITAT Delhi)]
Interrogation
till late night amounts to “torture” and violation of “human rights” – Officers
are held liable for to pay compensation from their salary
The
assessee’s premises were searched under section 132 and alleged undisclosed
income of Rs. 4.18 crores was detected. The assessee filed a complaint before
the Bihar Human Rights Commission stating that interrogation and recording of
statement was conducted for more than 30 hours and till the odd hours of the
night without any break or interval and this violated his human rights. The
Commission upheld the plea and directed the concerned officials to show-cause
why the assessee should not be compensated from their salary. The Department
filed a Writ Petition to challenge the order, held by the Court: (i) The
interrogation continued till 3.30 a.m. on the second night of search and
seizure as per the department’s record. The search and seizure manual does not
prescribe any time limit for search and survey operation and the same may
continue for days if required, but it has to be in keeping with the basic human
rights and dignity of an individual. The purpose of the Act is to give effect
to the process of execution of actions of executive and bureaucratic machinery
in line of accepted standard of basic human rights which are internationally
recognized. The laws and approach to law for its execution must confirm to the
charter of human values and dignity. Even a person accused of a serious offence
has to be produced before the nearest Magistrate within 24 hours minus the time
taken in reaching the Court. There is no possible justification to continue interrogation
and keep the assessee awake till 3 a.m. on the second night of search and
interrogations. No reason has been assigned as to why the interrogations could
not have been deferred till the morning of the next day. The officials could have continued with the
interrogation on the next day in the morning after allowing the assessee to
retire at an appropriate time in the night. Sleep deprivation method of
interrogation amounts to inhuman treatment and violation of Article 3 of the
European Convention on Human Rights. The Convention prohibits in absolute terms
torture or inhuman or degrading treatment or punishment. No exception to
Article 3 can be made even in the event of Public Emergency threatening the
life of the Nation. Accordingly, the department is guilty of violating human
rights even though the operations were conducted in best interest of revenue
and good faith [Ireland v. UK (1978) ECHR 1, Kalashnikov v. Russia (2002)
ECHR 596 & Salmouni v. France (2000) 29 EHRR 403 followed; Rajendran
Chingaravelu 2010 (1) SCC 45 distinguished] (ii) However, as the
Commission, without issuing any notice to the officials engaged in the search
(as to the violation of Human Rights), issued notice on why monetary
compensation be not awarded and be recoverable from their salary, it had
pre-judged the officials as being guilty of violation of human rights, without
affording them an opportunity of hearing. This was contrary to section 16 of
the Protection of Human Rights Act, 1993 and had to be reversed. - [CCIT v.
State of Bihar, Through Chief Secretary (Rajendra Singh) (2012) 250 CTR 304 :
205 Taxman 232 : 71 DTR 268 (Pat)]
The Assessee, a dealer in diamonds, had declared certain
diamond jewellery under Voluntary Disclosure of Income Scheme, 1997 – Said
declaration was accepted by department and a certificate was issued to assessee
– In his return of income for relevant assessment year, assessee claimed to
have sold said jewellery to one T on 20.01.1999. Return was processed under
section 143(1)(a), but later, on basis of statement of T recorded during course
of survey conducted upon him wherein he had stated that he was not actually
doing business of diamonds and transactions reflected in his books of account
were merely accommodation entries. The Assessing Officer reopened assessment
and made addition of entire sale amount as undisclosed income of assessee. The
Tribunal, relying upon retracted statement made by T, deleted impugned
addition. Since existence of diamond jewellery with assessee prior to sale was
evidenced by VDIS, 1997 certificate and on sale of said jewellery assessee had
received consideration which was duly accounted for, mere fact that jewellery
sold by assessee was not found with purchaser ‘T’ could not be a ground to hold
that transaction was bogus and consideration received by assessee was his
undisclosed income. The Court held that retraction
statement of Mr. Trivedi is corroborated by the pay-in-slips/cash deposits in
the bank account of Mr. Trivedi and the non-availability of the jewellery
claimed to have been sold by the assessee to Mr. Trivedi, is a reasonable and
possible view. Therefore, the High Court upheld the decision of
the Tribunal in deleting impugned addition. – [CIT v. Uttamchand
Jain (2010) 320 ITR 554 : (2009) 182 Taxman 343 (Bom)]
Evidence
brought by confession, if successfully retracted, must be corroborated by
independent and cogent evidences
The
Hon’ble apex Court in Vinod Solanki v. Union of India cautioned in using
the retracted statement. The relevant para is as follows:—
It
is a trite law that evidences brought on record by way of confession which
stood retracted must be substantially corroborated by other independent and
cogent evidences, which would lend adequate assurance to the court that it may
seek to rely thereupon. We are not oblivious of some decisions of this Court
wherein reliance has been placed for supporting such contention but we must
also notice that in some of the cases retracted confession has been used as a
piece of corroborative evidence and not as the evidence on the basis whereof alone
a judgment of conviction and sentence has been recorded. (See Pon Adithan v.
Deputy Director, Narcotics Control Bureau, Madras (1999) 6 SCC 1) - [Vinod
Solanki v. Union of India (2009) 233 ELT 157 (SC)]
Statement
recorded under section 132(4) at odd hours cannot be considered as voluntary
statement if it is subsequently retracted and necessary evidence is laid
contrary to such admission
It
was held that statement recorded at odd hours cannot be considered to be a
voluntary statement and if it is subsequently retracted and necessary evidence
contrary to such admission is led, the admission will not be binding. - [Kailashben
Manharlal Choksi v. CIT (2008) 328 ITR 411 : 14 DTR 257 (Guj)]
It
was held that the evidence given by Chief Financial Officer of assessee in a
statement given under section 132(4) may be a good factor for probing issue
further and can be a corroborative piece of evidence but surely on basis of
this statement, addition in hands of assessee cannot be made, more so, where
such statement is not a voluntary statement and has been retracted. – [First Global Stockbroking (P) Ltd. v. ACIT (2008)
115 TTJ 173 (ITAT Mumbai)]
It
was held that there was no evidence to show that the assessee had any
undisclosed income barring the statement given by the managing partner while in
an utter state of confusion. Further the managing partner had retracted the
admission. There may be hundreds of reasons and thoughts crossing the mind of
the deponent during the search and it is not expected that whatever is reeled
out during the search is only after proper application of mind. Therefore the
additions were not justified merely based upon the statement without any
evidence to corroborate the addition made as undisclosed income. – [DCIT v. Pramukh Builders (2008) 112 ITD 179
(ITAT Ahmedabad)(TM)]
If an assessee under a mistake, misconception or on
not being properly instructed, is over assessed, the authorities under the Act
are required to assist him and ensure that only legitimate taxes due are
collected. The decision in CIT v. Durga Prasad More (1973) CTR (SC) 500, was
followed i.e., test of human probabilities. The High Court said “We do not find
any material on record on which basis it can be said that the disclosure of the
assessee of Rs. 16 lakhs is in accordance with law or in spirit of section
132(4)…”. (p. 872) – [S.R. Koshti v. CIT
(2005) 193 CTR 518 (Guj.)]
No
addition can be made merely on confession
No
addition can be made merely on confession. CBDT’s Instruction is relevant in
this regard. There should be corroborative material to make addition. Further,
confession can be retracted subsequently.
On
the basis of confessional statement obtained due to pressure which the assessee
retracted from, the addition made for on-money was deleted. The Tribunal
observed that in view of retraction, the Assessing Officer should have made
enquiries from the shop owners who were supposed to have paid on-money to the
assessee which he did not. As such undue significance cannot be given to the
statement made before the authorities during search operation. - [DCIT
v. Ratan Corporation (2005) 145 Taxman 503 (Guj)]
The
Assessing Officer worked out the income on the basis of seized material which
was less than the income declared in statement under section 132(4). The
assessment was, however, made on the income confessed in the statement. The
Tribunal observed:
“..........It
is also a fact that total income so computed by the Assessing Officer falls
below the income disclosed under section 132(4). It is not the case of the
department that the difference in the income assessed and income disclosed under
section 132(4) represents some other concealed income. Therefore, it is clear
that there is no material available with the department to justify the addition
so far as the difference between the income computed by the Assessing Officer
and income disclosed under section 132(4).
In
other words, the so-called disclosure under section 132(4) is bald and has no
legs to stand and in such a case retraction is justified............. Thus, the
view that emerges is that the ultimate addition to be made in a case would depend
on the facts and circumstances of the case and not purely on the disclosure
made under section 132(4), which also stood retracted subsequently.............”. (p. 292) - [ACIT v. Anoop
Kumar (2005) 94 TTJ 288 (ITAT Amritsar)]
Not
sustainable – No evidence, material, assets, immovable or movable, were found
at the time of search which supports the disclosure – Retraction of statement
under section 132(4) – CIT(A) rightly deleted the addition
Assessee
disclosed Rs. 16 lakhs in his statement recorded under section 132(4) but later
retracted from the same – Assessing Officer made the addition merely on the
basis of statement recorded under section 132(4) at the time of search – Not
sustainable – No evidence, material, assets, immovable or movable, were found
at the time of search which supports the disclosure – ITO is not entitled to
make a pure guess and make an assessment without reference to any evidence or
any material at all – There must be something more than bare suspicion to
support the assessment or addition – There being no material on record on the
basis of which it can be said that the disclosure made by the assessee was in
accordance with law and spirit of section 132(4) - CIT(A) rightly deleted the
addition. - [ACIT v. Jorawar Singh M. Rathod (2005) 148 Taxman 35
: 94 TTJ 867 (ITAT Ahmedabad)]
Statement
given under section 132(4) is on oath and under section 133A is not on oath and
therefore it is difficult to retract the disclosure made in the statement under
section 132(4) as compared to the disclosure made in the statement made under
section 133A
In
the case of DCIT v. Bhogilal Mool Chand, the Tribunal stated: “It is settled
law that admission by a person is a good piece of evidence though not conclusive
and the same can be used against the person who makes it. The reason behind
this is, a person making a statement stops the opposite party from making further
investigation.” - [DCIT v. Bhogilal Mool Chand (2005) 3 SOT 211
(ITAT Ahmedabad)]
Retraction should be supported by convincing and effective evidence through which assessee could demonstrate that the statement initially recorded was factually incorrect
It
was accepted that the assessee had a right to retract but that has to be based
on evidence brought on record to the contrary and there must be justifiable
reason and material accepting retraction i.e., cogent and sufficient material
have to be placed on record for acceptance or retraction. All that has to be
done by the assessee if he is to retract the statement which was recorded in
the presence of witnesses unless there is evidence of pressure or coercion. The
facts of each case have to be considered to reach the conclusion whether retraction
was possible or not as there can be no universal rule. - [ACIT v. Ramesh Chandra R.
Patel (2004) 89 ITD 203 (ITAT Ahmedabad) (TM)]
The Chandigarh Bench of the Tribunal took a realistic view of
the facts and circumstances in which disclosure is generally made in search and
seizure proceedings. It was observed:
“It is well known fact that the
confessional statements made during the search are often vulnerable on the
ground that the person giving such statements remain under great mental strain
and stress. They also do not have the availability of relevant details,
documents and books of account at the time of giving such statements in the
absence of which precise information relating to the mode of utilization of
such income and the year of such investment cannot be correctly furnished. The
assessees are, therefore, entitled to modify/clarify the statements after
verifying the necessary details from the relevant records at later point of
time.” (p. 24) –
[Surinder Pal Verma v. Asstt. CIT (2004) 89 ITD 129 (ITAT Chandigarh) (TM)]
Retraction
of statement under section 132(4) – Additions made only on the basis of
disclosure statement normally should not be confirmed in the absence of
corroboration
During
the proceedings under section 132(5), the assessees retracted from their
statements – No material/evidence collected by the Revenue during the search in
support of the disclosure statements – No addition can, therefore, be made on
the basis of such confession. Addition under section 69 - Unexplained
investment in household items – Assessing Officer did not hold that these
articles were acquired by the assessee during the accounting but were received
by the assessee from his father – Same could not be considered as acquired from
undisclosed sources of income – Hence, no addition could be made. - [Amishkumar
Mansukhlal Shah v. ACIT & Ranjnaben Mansukhlal Shah v. ACIT (2004) 83 TTJ
369: 136 Taxman 168 (ITAT Rajkot)]
It
was held that section 133A enables the income-tax authority only to record any
statement of any person which may be useful, but does not authorize for taking
any sworn-in statement. On the other hand, such a power to examine a person on
oath is specifically conferred on the authorized officer only under section
132(4) in the course of any search or seizure. Thus, the Income-tax Act,
whatever it thought fit and necessary to confer such power to examine a person
on oath, the same has been expressly provided, whereas section 133A does not
empower any ITO to examine any person on oath. Statement recorded under section
133A is not given any evidentiary value obviously for the reason that the
officer is not authorized to administer oath and to take any sworn-in statement
which alone has the evidentiary value as contemplated under law. Therefore the
statement elicited during the survey operation has no evidentiary value. – [Paul Mathews & Sons v. CIT (2003) 263
ITR 101 (Ker.)]
It is settled law that admission by a person is a good piece of evidence though not conclusive
and the same can be used against the person who makes it. The reason behind this is, a person making a
statement stops the opposite party from making further investigation. This principle is also embedded in the provisions of
the Evidence Act. But the statement
recorded under section 132(4) is on a different footing. The Legislature in its wisdom has provided that such a statement may
be used as evidence in any proceedings under the Act. However, there are
exceptions to such admission where the assessee can retract from such
statement/admission. The first exception exists where such statement is made
involuntarily, i.e., obtained under coercion, threat, duress, undue influence,
etc. But the burden lies on the person making such
allegation to prove that the statement was obtained by the aforesaid means. The second
exception is where the statement has been given under some mistaken
belief either of fact or of law. If he can show that the statement has been made on mistaken belief of facts, than the
facts on the basis of which admission was made were incorrect. – [Hotel Kiran v. Asstt. CIT (2002) 82 ITD 453 (ITAT Pune)]
It was held that, it is not the position of law that no
addition can be made on the basis of an admission at all, but the position of
law is that the person making an admission is not always bound by it and
sometimes can get out of its binding purview if that person can explain
concisely with supportive evidence/material or otherwise that the admission
made by him earlier is not correct or contains a wrong statement or that the
true state of affairs is different from that represented therein and so, the
same should not be acted upon for fastening tax liability which should rather be fixed on the basis of
correct/true facts, as ascertained from material on record. Unless it is
explained as stated above, the admission does retain its binding nature for the
person who makes the admission and the same may, if considered reasonable in view of
other facts on record and following the principles of preponderance
of probability, form the basis of fastening liability. The ITAT
allowed part relief to assessee. – [Gyan Chand Jain v. ITO (2001) 73
TTJ 859 (ITAT Jodhpur)]
It
was held that, mere retraction of statement by filing an affidavit would not
absolve the assessee from the consequences of sworn testimony recorded under
section 132(4) which was fully corroborated by documents and records found at
the business premises. - [ITO v. Bipin Faraskhana (2000) 73 ITD 334
(ITAT Ahmedabad)]
The Supreme Court held that evidentiary
admissions are not conclusive proof of the facts admitted and may be explained
or shown to be wrong, but they do raise an estoppel and shift the burden of
proof on to the person making them. The Supreme Court further held that unless
shown or explained to be wrong, they are an efficacious proof of the facts
admitted. – [Avadh
Kishore Das v. Ram Gopal AIR 1979 SC 861 (SC)]
It was held that it is true that an admission made by an
assessee constitutes a relevant piece of evidence but if the assessee
contends that in making the admission he had proceeded on a mistaken
understanding or on misconception of facts or on untrue facts such an admission cannot be relied upon without
first considering the aforesaid contention. – [Satinder
Kumar (HUF) v. CIT (1977) 106 ITR 64 (HP)]
Their Lordships while observing that admission is an
extremely important piece of evidence, held that, it cannot be said to be
conclusive and the maker can show that it was incorrect. [Also refer S. Arjun Singh v. CWT (1989) 175 ITR 91 : (1988) 41 Taxman
272 (Delhi)]. – [Pullangode Rubber Produce Co. Ltd. v. State
of Kerala (1973) 91 ITR 18 (SC)]:
It
was held that an admission is extremely an important piece of evidence but it
cannot be said that it is conclusive and it is open to the person who made the
admission to show that it is incorrect.—[Pullangode Rubber Produce Co. Ltd. State of
Kerala (1973) 91 ITR 18 (SC)]
It
was held that an admission is the best evidence that an opposite party can rely
upon and, though not conclusive, yet could be decisive of the matter unless
successfully withdrawn or proved erroneous.—[Narayan Bhagwantrao Gosavi
Balajiwale v. Gopal Vinayak Gosavi AIR 1960 SC 100]
It
was held that it will not be open to the revenue to challenge the statements
made by the deponent in their affidavits later on, if no crossexamination with
reference to the statements made in the affidavits is done.— [Mehta Parikh
& Co. v. CIT (1956) 30 ITR 181 (SC)]
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