COMMISSIONER OF INCOME-TAX Vs. K BHUVANENDRAN

JUDGEMENT

(1.) THESE appeals are filed under Section 260A of the Income Tax Act, 1961 by the Revenue against the order of the Income Tax Appellate Tribunal, Chennai, 'D' Bench dated 17.03.2006 in I.T.(SS) A No. 116/Mds/2002 for the block period 01.04.1988 to 18.03.1999, I.T.A.No.2270/Mds/2003 for the assessment year 1997-98 and I.T.A.No.796/Mds/2004 for the assessment year 1997-98, raising the following common substantial questions of law:- 1. Whether the statement made during the course of search under section 132(4) of the Income Tax Act 1961 voluntarily by a person is admissible in evidence or not?

(2.) WHETHER in the facts and circumstances of the case an admission made voluntarily relating to undisclosed income, not immediately retracted within a reasonable time, and was retracted only after the service of summons during the course of recording statement would itself negate the admission?" 2. T.C.(A) No.2663 of 2006: The facts arising out of this appeal are as under: i) There was a search in the assessee's residential premises on 19.03.1999. Notice dated 26.10.1999 was issued under Section 158BC of the Income-tax Act ("Act" in short) to the assessee on 28.10.1999 giving 40 days time for filing the return. Subsequently, the assessee filed Return in Form 2B on 19.11.1999 declaring an undisclosed income of Rs.1,48,500/-. The assessee did not specifically included the sum of Rs.23 lakhs as undisclosed income in the Return even though he admitted the payment of the said amount relating to the purchase of a property at Door Nos.8 & 9, Arunachala Asari Street, Salem, by his wife, Rajalakshmi, and his sons K.B.Srinivasan and B.Sakthivel, over and above the amount of Rs.34 lakhs disclosed in the sale deed. Based on the admission, the Assessing Officer added the amount of Rs.23 lakhs as undisclosed income for the assessment year 1997-98 of the block period 01.04.1988 to 18.03.1999. Aggrieved by the order, the assessee filed an appeal to the Commissioner of Income-tax (Appeals). The C.I.T.(A) allowed the appeal and directed the Assessing Officer to delete the addition of Rs.23 lakhs. Aggrieved, the Revenue filed an appeal to the Income-tax Appellate Tribunal ("Tribunal" in short). The Tribunal dismissed the Revenue's appeal and confirmed the order of the C.I.T.(A). ii) Learned Standing Counsel appearing for the Revenue submitted that a mere denial of payment of on-money over and above Rs.34 lakhs mentioned in the document, by filing an affidavit could not absolve the assessee from the consequences of the sworn testimony recorded under Section 132(4) of the Act. Further it is submitted that the assessee had no case to retract that the on-money has not been paid later and also the assessee himself has accepted that the admission given by him before the Deputy Director of Income-tax (Investigation) on the date of search is purely voluntary and not out of compulsion, or there is no undue influence on the assessee. Further it is contended, no more is necessary to prove and hence, the Revenue is right in assessing the sum of Rs.23 lakhs as undisclosed income for the block period. iii) Heard the counsel. In July 1996, the wife and the two sons of the assessee purchased a commercial complex at Door No.8 & 9, Arunachala Asari Street, Salem for a sum of Rs.34 lakhs. In a statement recorded during the course of search, the assessee stated that a sum of Rs.23 lakhs was paid over and above the registered value shown in the document and also admitted that the same would be offered as undisclosed income for the block period. Later on, the assessee did not offer this amount in the Return for the block period, by a subsequent retraction by filing an affidavit. On facts, we found in the statement recorded on 08.02.2001 from the assessee, that the assessee had reached Salem from Chennai at 6.15 a.m. on 19.03.1999 and soon after the arrival, the search officials arrived at his premises at 7.30 a.m. placing two police officials with guns at the entrance of his house. The assessee did not have peaceful sleep during the train journey because of stomach pain due to gastric ulcer and was restless. The assessee was told by the search officials that the proceedings will be completed smoothly if he agrees that there is on-money payment of Rs.23 lakhs. Hence, the assessee also admitted the same, without being aware of the consequences. Further, the assessee made a statement that he was physically and mentally nervous and did not know what he answered and also denied on 08.02.2001 that neither he nor any of his family members made any on-money payment. Further it is seen from the record that the assessee is not the owner of the property and only his wife and children are the co-owners. Later, on 04.01.2001, all the three co-owners have also categorically denied payment of any on-money to the seller over and above Rs.34 lakhs mentioned in the registered document. Two statements were recorded from Shri.K.Jagannathan, the seller, on 23.04.1999 as well as on 08.02.2001 and he has also categorically stated that neither he nor any of his family members received any on-money from the buyer. Further there is no documentary evidence found or discovered during the course of search to prove that on-money has passed in the sale transaction. There is no basis for making addition by way of undisclosed income. The Assessing Officer had only relied on the statement of a person who is not a party to the immovable transaction and hence, there is no basis for determining the undisclosed income for the block period. The following factors emerges from the facts of the case: a) No material found during the course of search b) Statement recorded from the assessee was subsequently retracted and rebutted c) Registered Sale Deed does not show any payment more than what was disclosed. Taking into consideration of the above factors including the fact that the Revenue could not bring on record any material or evidence to show that the assessee had paid on-money of Rs.23 lakhs, we are of the view that the statement which is not relatable to seized material could not be a basis for making any addition in the block assessment. Both the first appellate authority as well as the Tribunal had given a concurrent finding. Paragraphs 4 and 5 of the order of the Tribunal, reads as under: "4. Admittedly no material was found during the course of search operation. The statement said to be recorded from the assessee was subsequently retracted and rebutted. The registered Sale Deed does not show any payment more than above what was disclosed. In the absence of any material, in our opinion there cannot be any addition as undisclosed income. 5. Sec.158BB of the Income-tax Act provides for computation of undisclosed income. According to Sec.158BB undisclosed income shall be aggregate of the total income of the previous year falling within the block period computed in accordance with the provisions of Income-tax Act on the basis of the evidence found as a result of search or any other material or information available with the Assessing Officer and relatable to the evidence found during the course of search. In this case admittedly there is no evidence or material found during the course of search operations. The statement recorded from the assessee was subsequently retracted and rebutted. Further more, statement is not relatable to any seized material. Therefore, even the statement cannot be the basis for making any addition. When the Sale Deed discloses a sale consideration, it is for the Revenue to show that what was disclosed in the Sale Deed is not correct sale consideration. In this case the Revenue could not bring on record any material to show that the asssessee has paid on money of Rs.23,00,000/-. Therefore in our opinion the Id CIT (A) has rightly deleted the addition. We do not find any infirmity in the order of the Id CIT (A). Accordingly, we confirm the same." From a reading of the above, it is evident that the reasons given by the Tribunal are based on valid materials and evidence and hence we do not find any error or legal infirmity in the order of the Tribunal and there is no special factor or compelling reason which warrants interference of the impugned order of the Tribunal. Hence no substantial questions of law arise for consideration of this Court and accordingly, the tax case is dismissed.