|CORAM:||Sandeep Gosain (JM), Shamim Yahya (AM)|
|CATCH WORDS:||admission of undisclosed income, retraction|
|DATE:||January 16, 2018 (Date of pronouncement)|
|DATE:||January 25, 2018 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 68: If an admission of undisclosed income is made by the assessee after reference to the material found during search and seizure, it cannot be said that the admission is not based on incriminating material. The retraction of such admission of undisclosed income is not permissible especially when the retraction is by the mother and not by the assessee|
(i) A search and seizure action u/s. 132 of the Act was conducted on 24.01.2011. The assessee is a well known actress of Indian Film Industries. Various incriminating documents were found during search. On this issue during the course of search an amount of Rs.50 lacs was declared as undisclosed income for cash payment for purchase of Studio Aesthetique. Various incriminating material were found during search. When the same was confronted to Smt. Madhu Chopra, the mother of the assessee who was managing the affairs of the assessee, she admitted undisclosed income.
(ii) Subsequently, Smt. Madhu Chopra, the mother of the assessee vide letter dated 13.4.2011 filed in the office of Income Tax Office on 06.06.2011, retracted the above said statement. In this background, the Assessing Officer was of the opinion that as per the seized material Rs.50 lacs in this regard was to be added as undisclosed income of the assessee. Regarding the retraction statement of Smt. Madhu Chopra, the said retraction stated that no cash payment was made for purchase of Studio Aesthetique, except the payment made by a cheque of Rs.3.50 crores. However, the Assessing Officer was not convinced. He observed that the assessee has not contradicted the seized material on the basis of which she had disclosed an amount of Rs.50 lakhs being made for purchase of Studio Aesthetique. Instead, the assessee has simply stated that there is no cash component as agreed in the statement recorded during the course of search. Therefore, the contention of the assessee is not accepted and the disclosure made during the course of search to the tune of Rs.50 lakh is treated as undisclosed income for the year under consideration and is accordingly taxed.
(iii) The Commissioner of Income Tax (Appeals) accepted that the Assessing Officer has not accepted the submission made by the assessee during the assessment stage and has made the addition arbitrarily. He held that no documentary evidence in this regard has found. He held that no addition can be made solely on the basis of the loose papers. Hence, he held that the assessee’s explanation is acceptable in light of the Hon’ble Apex Court decision in the case of CIT vs. Kalyanasundaram  294 ITR 49 (SC). Accordingly, he deleted the addition.
(iv) The Tribunal had to consider the following ground in the appeal by the Revenue:
“Whether on the facts and in the circumstances of the case and in law, the learned CIT(A) is justified in deleting the addition of Rs.50 lacs being cash payment made for acquisition of Studio Aesthetique without appreciating the fact that the addition has been made on the basis of documents seized and voluntarily admitted by the assessee and her mother Smt. Madhu Copra during the search to be cash component of the payment made to the said party over and above payment of Rs.3.50 crores made by cheque and subsequently retracted without giving any supporting evidence to the contrary?”
HELD by the Tribunal allowing the appeal:
As evident in the material obtained by the Revenue during search and seizure, it was only with reference to the search and seizure material that Smt. Madhu Chopra gave a specific amount to various heads wherein the undisclosed income had been utilized. The assessee had also separately accepted the same. Hence, it cannot be said that this addition is not based upon any incriminating material found or searched. Furthermore, the so called retraction is by the mother of the assessee and the Assessing Officer is correct in finding that there is no retraction whatsoever by the assessee. Hence, the ld. Commissioner of Income Tax (Appeals) has totally erred when he has held that the Assessing Officer has made this addition without any evidence or arbitrary. Furthermore, the Commissioner of Income Tax (Appeals) has himself erred and contradicted himself when he observes that no addition can be made on the basis of the loose papers. Thus, on one hand she is stating that there is no material and on the other hand she is stating that there are materials in the form of loose papers. Hence, the reasoning by the Commissioner of Income Tax (Appeals) is contradictory and is unsustainable. The decision of the Hon’ble Apex Court in the case of CIT vs. Kalyanasundaram  294 ITR 49 (SC) relied upon by the ld. Commissioner of Income Tax (Appeals) is on totally different facts and circumstances. In the said case, where the tribunal’s decision was authored by one of us, the issue related to on money payment in respect of immovable property based on conflicting statement of the seller and certain figures noted in loose sheets. Hence, this decision was rendered in a different context and does not help the case of the assessee. Hence, we set aside the order of the ld. Commissioner of Income Tax (Appeals) and restore that of the Assessing Officer.