Without Corroborating Evidence, Addition Can’t Be Made On The Basis Of A Declaration Made U/s 132(4) Of The Income Tax Act: ITAT

The Guwahati Bench of the Income Tax Appellate Tribunal (ITAT) has held that without corroborating evidence, an addition ought not to be made on the basis of a declaration made under Section 132(4) of the Income Tax Act.

The bench of Rajpal Yadav (Vice President) and Manish Borad (Accountant Member) has observed that apart from the disclosure statement, no other document is being referred to by the Assessing Officer. No doubt, the disclosure or admission made under Section 132(4) of the Act during the search proceeding is admissible evidence but not conclusive.

A search under Section 132 of the Income Tax Act was carried out in the residential as well as office premises of the assessee/appellant and its directors. A notice under Section 153A was issued and served upon the assessee. The assessee has filed its return of income, declaring total income at Rs. 1,76,45,600.

The Assessing Officer has passed a very brief assessment order and has made an addition of an equal amount.

The assessee contended that the assessing officer has not discussed any detail except a reference to the statement of the assessee, whereby, under Section 132(4), he has made the disclosure.

The tribunal noted that the presumption of admissibility of evidence is a rebuttal one, and if the assessee is able to demonstrate with the help of some material that such an admission was either mistaken, untrue or under some misconception of fact, then solely on the basis of such an admission, no addition is required to be made. It is true that admissions being declared against interest are good evidence, but they are not conclusive, and parties are always at liberty to withdraw the admission by proving that they are either mistaken or untrue.

The ITAT stated that in law, a retracted confession may even form the legal basis of an addition if the Assessing Officer is satisfied that it was true and was voluntarily made, but basing the addition or retracted declaration solely on it would not be safe. It is not a strict rule of law but only a rule of prudence. As a general rule of practice, it is unsafe to rely on a retracted confession without corroborative evidence.

The ITAT noted that the CBDT has issued Circular No. 286/2/2013, which prohibits the department, i.e., the search party, from taking any confessions in the search. The CBDT is of the view that officials used to obtain confessions from the assessee and stop further recovery of material.

Case Title: Agrim Infraproject Private Limited Versus Deputy Commissioner of Income Tax

Case No.: I.T.A. Nos. 219, 222 & 224/GAU/2019

Date: 05.04.2023

Counsel For Appellant: Chirag

Counsel For Respondent: N.T. Sherpa

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