ACIT, C.C.-2, RANCHI V. M/S HEIGHTEN CONSTRUCTION, RANCHI

ITSSA 9/RAN/2020

AI Insights

The case involves multiple appeals by both the revenue and the assessee, M/s Heighten Construction, concerning additions made under Section 40A(3) of the Income Tax Act, 1961 for various assessment years. The primary issue was the legality of cash payments exceeding ₹ 20,000 made for procurement of construction materials and payment of wages. The tribunal examined whether these payments were justified under Rule 6DD of the Income Tax Rules, 1962, which provides exceptions to the cash payment limit under certain circumstances. The tribunal found that the payments were made out of business necessity and were genuine, thus not violating the provisions of the Act. Additionally, the tribunal addressed issues related to unaccounted cash and undisclosed investments, concluding that the additions made by the Assessing Officer were not supported by sufficient evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 37243 (ITAT-RANCHI)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2016-2017
• Other Referred Cases: Attar Singh Gurmukh Singh Vs ITO, Harshila Chordia Vs ITO, Anupam Tele Services Vs ITO, CIT Vs Achal Alloys (P) Ltd., ITO Vs Ishan Township Pvt. Ltd., Sk Jaynal Abddin Vs CIT, Pullangode Rubber Produce Company Ltd. Vs State of Kerela, CIT Vs Ravindra Kumar Jain, CIT Vs. Khader Khan Son, CIT Vs Jorawar Singh M Rathod, CIT Vs Lavanya Land Pvt. Ltd. and Others
• Laws Referred To: Income Tax Act, 1961, Income Tax Rules, 1962
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Income from undisclosed sources; Onus to prove; Retraction; Search and seizure; Source of fund
• Section: 64; 153A; 40A(3)

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, RANCHI BENCH, RANCHI BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER AND SHRI RATNESH NANDAN SAHAY, ACCOUNTANT MEMBER IT(SS)A No. 09/Ran/2020 (Assessment Year 2016-17) Assistant Commissioner of Income Tax, Central Circle-2, Ranchi. Vs. M/s Heighten Construction, 1st Floor, The Heritage Complex, Bariatu Road, Ranchi-834009. PAN No. AAFFH 5375 N Appellant/ Assessee Respondent/ Revenue IT(SS)A No. 10 to 15/Ran/2020 (Assessment Years 2011-12 to 2016-17) M/s Heighten Construction, 1st Floor, The Heritage Complex, Bariatu Road, Ranchi-834009. PAN No. AAFFH 5375 N Vs. Deputy Commissioner of Income Tax, Central Circle-2, Ranchi. Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Ranjeet Garodia, C.A. with Shri Deepak Patel, C.A. Department represented by Shri Shadab Ahmed, CIT-DR Date of hearing 18/02/2025 Date of pronouncement 20/02/2025 O R D E R PER: BENCH 1. These appeals preferred by the revenue as well as by the assessee emanates from the separate orders of learned Commissioner of Income Tax (Appeals)-3, Patna [in short, the ld. CIT(A)] dated 17/02/2020 and 18/02/2020 for the Assessment Year (AY) 2011-12 to 2016-17 respectively as per the grounds of appeal on record. 2. At the outset, the parties herein conceded that the facts and circumstances and the issues involved in all these appeals are absolutely similar and identical and IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 2 after hearing the submissions of both the parties, all the matters are heard together and are disposed off vide this consolidated order. 3. These appeals are time barred as per number of dates appearing against each one of them as per record. We have considered the condonation petition and the reasons for the delay and we find that such delay cannot be attributed to the deliberate or malafide conduct of the parties herein and that the said delay was due to circumstances beyond the control of the parties. We must also mention that the order passed by the ld. CIT(A) was during time when immediately after which Covid-19 pandemic outbreak started and because of the lockdown, primafacie also, these appeals could not have been filed as per the prescribed time limit. We, therefore, condone the delay and proceed to hear the appeals on merit. 4. First we shall be adjudicating the appeals of the assessee from IT(SS)A No. 10 to 15/Ran/2020. The learned Authorised Representative (ld. AR) of the assessee submitted that one common issue is involved for all the years in appeal and that IT(SS)A No. 10/Ran/2020 for A.Y. 2011-12 may be taken as the lead case. 5. The solitary issue for adjudication in all these appeals of the assessee is with regard to addition made by the Assessing Officer under Section 40A(3) of the Income Tax Act, 1961 (in short, the Act) on account of payment exceeding ₹ 20,000/- made by cash/self cheque/bearer cheque etc. The adjudication also shall look into whether the additions can solely be made by the department as per Section 40A(3) of the Act in an isolated manner or whether the conditions specified under Rule 6DD of the Income Tax Rules, 1962 (in short, the Rules IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 3 also should be considered. Our decision in IT(SS)A No. 10/Ran/2020 for A.Y. 2011-12 (lead case) shall apply \"mutatis mutandis\" to the other years of appeal as well, except for the amounts involved. In the case of assessee, the additions were made by the Assessing Officer under Section 40A(3) of the Act, since the assessee had made payment exceeding ₹ 20,000/- for purchase of petty construction materials like sand, nails etc. The assessee is in the business of Government Civil construction contract/sub-contract and other construction activities. There was a search and seizure operation under Section 132(1) of the Act which was carried out in the business premises of the assessee. During the course of such search, certain documents were impounded from the office premises of assessee which were marked as HC-1 to HC-16. These documents mainly related with the attendance records of various persons and various expenses related with construction work. During the assessment proceedings, it was observed by the Assessing Officer that the assessee had made payments in contravention with Section 40A(3) of the Act which included payment towards wages and payment for purchase of construction materials. Additions were made on these grounds. When the matter went before the learned. CIT(A), he deleted the additions made on account of payment towards wages but upheld the additions for payments regarding purchase of construction materials. It is the contention of assessee that they are working in civil construction sites which also includes government contract jobs. In every such site of the assessee, there is a site manager/agent who is supervising the work on behalf of assessee. In order to facilitate smooth work in progress and completion of work within given time frame, the assessee always keeps certain IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 4 amount of cash with the said site supervisor or agent so that in case, certain construction material is required that could be immediately procured from the various suppliers without any hindrance in relation to the construction work. It is always the business exigency to pay certain amount in cash for the procurement of various petty materials required for construction. The assessee had paid amount for purchase of sand etc. The same is procured from open market and the seller of the sand procures the same from the riverbed. It is the common practice that all these vendors of sand they do not take payment through banking channels or issuing of tax invoices etc. and in order to procure the sand, cash has to be paid to them. The payment has always been made from the business source of the assessee. This fact has never been disputed by the department. It is further contended by the assessee that the Assessing Officer has not brought out any case regarding the non-genuinenity of the payment made towards procuring the construction material. The addition has been only made for contravention of Section 40A(3) of the Act. In this regard, the contention of assessee is that such construction materials are critical components for the construction projects and their timely availability is crucial to meet project deadlines. If the assessee delays or foregoes such purchases of sand etc. due to cash payment limit that would severely hamper business operations leading to potential losses, damage to reputation and legal implications. The assessee further contends that this case is covered within the exception of Rule 6DD(k) of the Rules where it states as follows: \"(k) where the payment is made by any person to his agent who is required to make payment in cash for goods or services on behalf of such person\" IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 5 Therefore, the assessee further submits that in case of assessee, the site manager/agents have been given cash amounts for procuring various construction materials as and when required for the smooth functioning of the project which is very essential for the business activity of the assessee. The assessee placed reliance on the following case laws: Attar Singh Gurmukh Singh Vs ITO(1991) 59 Taxman 11 (SC) Harshila Chordia Vs ITO (2008) 298 ITR 349 (Raj HC) Anupam Tele Services Vs ITO (2014) 366 ITR 122 (Guj HC) CIT Vs Achal Alloys (P) Ltd. 218 ITR 46 (MP HC) ITO Vs Ishan Township Pvt. Ltd. ITA No. 449/Ind/2018 order dated 05/09/2024. 6. Per contra, the learned Commissioner of Income Tax-Departmental Representative (ld. CIT-DR) for the revenue supported the findings of subordinate authorities and contended that it was correct action by the Assessing Officer since there was a contravention of Section 40A(3) of the Act and the assessee has failed to explain the reasons for such contravention. 7. We have carefully considered the submissions made by the parties herein, facts and circumstances of this case and the documents placed on record. The assessee is engaged in construction business which also includes the government contract jobs/sub contract etc. The grievance of assessee in all the appeals filed before the Tribunal is with regard to addition made by the Assessing Officer under Section 40A(3) of the Act wherein it has been alleged that the assessee has made payment exceeding ₹ 20,000/- and such payments have not been explained by the assessee. When the matter reached to the ld. CIT(A), as evident at para 5.3.2 of his order, he had examined the allowability of payment on account of wages and have allowed the claim of assessee to IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 6 that extent. However, with regard to payment made on account of purchases of construction material and other expenses, the same was confirmed by the ld. CIT(A). The contention of assessee that the addition made under Section 40A(3) of the Act has to be always considered alongwith Rule 6DD of the Rules wherein the assessee is covered as per Rule 6DD(k) of the Rules. That all through out, it has been the submission of the assessee that while engaging in the construction work at various sites, they have appointed site manager/agents who in turn have been entrusted with some cash amount for necessary procurement of construction materials from various suppliers so that there is no hindrance in the construction activities carried out by the assessee and also for the reason that the said construction work is completed within the given time frame whether it is for the government or for a private party. The assessee purchased various construction items including sand from vendors who procures the sand from riverbed and they are indigenous people who do not support the traditional banking channel routes and will only supply the sand after payments are made in cash. Therefore, in order to procure such sands which are essential for the construction work, cash payments have been made to such vendors. If the assessee would look into whether they are exceeding the limit of payment in cash as per Section 40A(3) of the Act, in such cases, they will not able to procure such construction materials and the same in turn would hamper the business activity of the assessee resulting in loss of reputation and facing legal implications. We find that the revenue has not doubted the genuinity of the activities of construction carried out by the assessee nor has doubted the genuineness of the payments made to various IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 7 vendors/suppliers from the business sources of the assessee. In fact, it is the only ground of revenue that in order to procure the construction materials from various suppliers, the assessee had made payments in contravention of Section 40A(3) of the Act. However, the revenue has failed to look into whether the genuineness of the business of the assessee requires such kind of action or not. The revenue has not brought in any material on record to show that the supplies of sand or for that matter, small suppliers of various items for construction, they are accepting cheque payments or that they are accepting payment through banks etc. Neither the Assessing Officer nor the ld. CIT(A) has taken into consideration the common practice in the business of construction in which the assessee is engaged and as to how the business activities are achieved. The department has also not refuted the engagement of a site agent who is in turn procuring these materials for the assessee from various suppliers. The assessee, on the other hand have explained the merit of the transaction embedded within Rule 6DD(k) of the Rules and therefore there has been no violation of Section 40A(3) of the Act. The assessee has also demonstrated the business exigency for paying amounts in cash for procurement of the various construction materials. We find that the Hon'ble Supreme Court in the case of Attar Singh Gurmukh Singh Vs ITO (supra) on this issue has observed and held as under: \"In our opinion, there is little merit in this contention. Section 40A(3) must not be read in isolation or to the exclusion of Rule 6DD. The Section must be read along with the Rule. If read together, it will be clear that the provisions are not intended to restrict the business activities. There is no restriction on the assessee in his trading activities. Section 40A(3) only empowers the assessing officer to disallow the deduction claimed as expenditure in respect of which IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 8 payment is not made by crossed cheque or crossed bank draft. The payment by crossed cheque or crossed bank draft is insisted on to enable the assessing authority to ascertain whether the payment was genuine or whether it was out of the income from disclosed sources. The terms of Section 40A(3) are not absolute. Consideration of business expediency and other relevant factors are not excluded. The genuine and bona fide transactions are not taken out of the sweep of the Section. It is open to the assessee to furnish to the satisfaction of the assessing officer the circumstances under which the payment in the manner prescribed in Section 40A(3) was not practicable or would have caused genuine difficulty to the payee. It is also open to the assessee to identify the person who has received the cash payment. Rule 6DD provides that an asses- see can be exempted from the requirement of payment by a crossed cheque or crossed bank draft in the circumstances specified under the rule. It will be clear from the provisions of Section 40A(3) and rule 6DD that they are intended to regulate the business transactions and to prevent the use of unaccounted money or reduce the chances to use black- money for business transactions. See: Mudiam Oil Company v. ITO, [1973] 92 ITR 519 A.P. If the payment is made by a crossed cheque drawn on a bank or a crossed bank draft then it will be easier to ascertain, when deduction is claimed, whether the payment was genuine and whether it was out of the income from disclosed sources. In interpreting a taxing statute the Court cannot be oblivious of the proliferation of black-money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black-money should not be regarded as curtailing the freedom of trade or business. As to the second question it may be stated that the word 'expenditure' has not been defined in the Act.\" Therefore, the Hon'ble Apex Court have clearly ruled that there has to be a harmonious construction while interpreting Section 40A(3) and Rule 6DD. The basic objective of the Legislature in reference to this provision is certainly curving of circulation of black money in the society, however, while doing so, the tax authorities has to consider the genuineness of the payments, the IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 9 practical conditions involved therein and any arbitrary addition should not in any way cause hindrance of trade or business of any assessee tax payer. Reverting to the facts of the present case, the revenue has not brought out any evidence showing that such suppliers of sand etc. are open to accept cheques or open to accept payments through banking channel and therefore, as per correct practice in such construction business, the sands have to be procured through cash payment without which the construction work cannot proceed and thus similar also with regard to other petty items of construction. The revenue has also not doubted the applicability of Rule 6DD(k) of the rules in the activities of the assessee wherein the money is paid to the agent to procure goods etc. for the assessee and in such scenario, there cannot be any addition under Section 40A(3) of the Act. In the case of CIT Vs. Sri Shanmuga Ginning Factory (2013) 37 taxmann.com 422 (Mad) it has been held by the Hon'ble Madras High Court that payments made for excess of ₹ 20,000/- to its agent for procuring cotton could not be disallowed under Section 40A(3) of the Act considering the genuineness of the payments. Reverting to the facts of the present case, the department has never doubted the genuineness of payment made by the assessee, they have only made the addition by looking into Section 40A(3) of the Act isolatedly and in technical manner without considering the Rule 6DD of the Rules and also without considering the practicalities and the genuineness involved in the transaction which was there in the case of assessee and as established by the common business practices inline of the construction business. Similarly the Hon'ble Madhya Pradesh High Court in CIT Vs Achal Alloys (P) Ltd. 218 ITR 46 (MP) have held that if the IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 10 genuineness of the payment was not exposed to any doubt and cash payments were made on the fulcrum that the payees insisted for cash payments then no disallowance can be made. This also applies to the facts of the present case wherein the sellers of sand and other petty items for construction insists for cash paymentws and the genuineness of such payment has never been doubted by the department. That when on one hand, the Hon'ble Supreme Court in the case of Attar Singh Gurumukh Singh (supra) has held that trade and business practices has to be given first priority and that there has to be a harmonious construction in interpreting Section 40A(3) and Rule 6DD of the Rules, certain later decisions by Hon'ble Rajasthan High Court in the case of Harshila Chordia Vs ITO (2008) 298 ITR 349 and the decision of Hon'ble Gujarat High Court in Anupam Tele Services Vs ITO (2014) 366 ITR 122 (Guj) have held and observed that exceptions contained in Rule 6DD are not exhaustive and the said Rule must be interpreted liberally. Considering this legal para materia, the assessee is in better position. Since as per facts, it is covered as per Rule 6DD(k) of the Rules so far as its business activities are concerned and further the Hon'ble Supreme Court have clearly laid down that the business exigencies i.e. trade and business of assessee cannot hamper through technical interpretation of provisions of the Act and rather genuineness and the practical circumstances also should be considered by the tax authorities. Considering the entire facts and circumstances and the legal principles as enshrined in the aforestated judgments, we are of the view that such addition made by the Assessing Officer and confirmed by the ld. CIT(A) under Section 40A(3) of the Act is unjustified, arbitrary and bad in law for the IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 11 reason that the genuineness of the payment has been accepted by the department, the assessee is covered as per Rule 6DD(k) of the Rules which again has not been disputed by the department and when the circumstances are such that payee insisted on cash payment then in order to save the business activities and to perform it within the said time frame, even if cash payments are made that does not call for any disallowance. As per above terms, the grounds of appeal in this appeal of assessee in IT(SS)A No. 10/Ran/2020 for A.Y. 2011-12 are allowed. 8. In the result, appeal of assessee in IT(SS)A No. 10/Ran/2020 for A.Y. 2011-12 is allowed. 9. That our decision in IT(SS)A No. 10/Ran/2020 for A.Y. 2011-12 shall apply mutatis mutandis to other years of appeals of the assessee except for the amounts involved. Therefore, the other appeals of the assessee in IT(SS)A No. 11 to 15/Ran/2020 for A.Y. 2012-13 to 2016-17 are also allowed. 10. Now we shall adjudicate the revenue appeal in IT(SS)A No. 09/Ran/2020 for A.Y. 2016-17 as per following grounds of appeal: \"1. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 35,10,014/- u/s 40a(3) of the I.T. Act made in the assessment order for payment in cash exceeding Rs. 20,000/- (Rs. twenty thousand) each without appreciating the law that provisions applied to immediate payment and no document were found/seized showing payments to labour by these payees during search. Further, multiple payments in cash exceed Rs. 20,000/- each are made to payees during the year in contravention of the provisions. 2. That on the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in deleting the addition of Rs. 2,56,24,600/- on account of advance given to different parties and Rs. 14,87,430/- on account of undisclosed investment for office renovation without appreciating the facts that the incriminating documents based on which Sri Maheshwar Prasad, Partner of the assessee firm admitted these amounts as unexplained advances and expenses in cash were in the handwriting of Sri Maheshwar IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 12 Prasad. The burden of proof was on him to explain the contents of the documents vis a vis books of accounts and due to failure of the same he had admitted the amounts as additional income in his statement u/s 132(4) on 20/08/2015. 3. That Sri Maheshwar Prasad never retracted the statement given u/s 132(4) of the Income Tax Act, 1961 and it was Sri T.S. Grover, A/R of the assessee firm who for the first time vide letter dated 11/12/2017 informed the AO that Sri Maheshwar Prasad was coerce to give statement. 4. That notice u/s 153A was issued to the assessee on 12/04/2016 and Return of Income was not filed on the due date of 11/05/2016 but it was filed on 08/12/2017, just 23 days before the case was getting time barred by limitation. 5. That the assessee never produced any documents before the AO to explain that the advances of Rs. 2,71,12,030/- pertain to accounted purchases/expenditure. 6. That if the assessee had any explanation of the incriminating documents in the form of pages 70 and 71 of HC-3, what prevented it in providing the explanation to the AO and why did it not file return of income in time. 7. That the ld. CIT(A) failed to observe the provisions of Rule 46A of IT Rules, 1962 in spite of the fact that the incriminating documents was in the handwriting of Sri Maheshwar Prasad and only he could deviate from the statement if any, based on the credible documents. This could have been done by the AO or by the CIT(A) by recording his fresh statement. 8. That accepting one sided explanation of the assessee who has been totally non cooperative in filing of return of income in time and also during the proceedings amounts to a reward to the assessee for his non cooperation. 9. That under the facts and circumstances of the case and in law the ld. CIT(A) has erred in deleting the additions of Rs. 4,00,000/- made by the Assessing Officer on the basis of unaccounted cash found during the course of search as well as statement recorded u/s 132(4) of the Income Tax Act, 1961. 10. That the applicant craves leave to add, alter, delete, modify the grounds of appeal before the Hon'ble Court.\" 11. The first ground of appeal of revenue pertains to deletion of addition of ₹ 35,10,014/- with regard to payment of wages to the labourers under Section 40A(3) of the Act exceeding ₹ 20,000/- each. The addition was made by the Assessing Officer as per Section 40A(3) of the Act for payment exceeding ₹ 20,000/- to each labourer, total amounting to ₹ 35,10,014/- for A.Y. 2016-17 which was deleted by the ld. CIT(A). The ld. CIT(A) at page No. 28 para No. 5.3.2 of his order has observed and held as under: IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 13 \"5.3.2 On a careful consideration of rival submission, the fact that emerges is that the appellant is able to conclusively prove the payment on account of wages for each labour below Rs. 20,000/- as is evident from the seized material itself as well as the attendance register which is part of paper book. Therefore, payment made on account of wages to the tune of Rs. 15,92,150/- is allowed. ……………………………] Finally at para 15 page No. 44 of the order pertaining to A.Y. 2016-17, the ld. CIT(A) has observed and held as under: \"As can be seen from the ground of appeal, finding of the AO and the submission of the appellant, they are same/similar to ground No. 1 of A.Y. 2011-12. Therefore, my finding and decision given in for ground No. 1 of A.Y. 2011-12 is applicable mutatis mutandis to ground No. 1 of A.Y. 2016-17. Accordingly, I hold that payment made on account of wages to the tune of Rs. 35,10,014/- is allowed…………………] That as evident from the observation of ld. CIT(A), the fact emerges that the assessee was able to conclusively prove the payments on account of wages for each labourer below ₹ 20,000/- from the seized material itself as well as the attendance register which is part of the paper book. That with regard to expenditure incurred on wages, the assessee had submitted the lumpsum payments were made to the site supervisors/agents of the assessee to distribute the wages to the labourers working under him after ascertaining their attendance and in no case the payment of each laborer was made in excess of ₹ 20,000/- per day. We find that the Hon'ble Kolkata High Court in the case of Sk Jaynal Abddin Vs CIT order dated 02/04/2024 for A.Y. 2006-07 has held that where the supervisors has withdrawn lumpsum amounts to pay the individual labourers, with each payment being below the threshold limit of ₹ 20,000/- and given the business requirements and the nature of the payments, IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 14 there cannot be any disallowance under Section 40A(3) of the Act. Reverting to the facts of the present case, it has been verified by the ld. CIT(A) that the payments have been made to the labourer in compliance with Section 40A(3) of the Act and there has not been any violation of said provision which was ascertained from the seized material itself as well as the attendance register. We, therefore, do not find any infirmity with the findings of the ld. CIT(A) which is hereby upheld. In the result, ground No. 1 of the appeal of revenue is dismissed. 12. Learned CIT-Departmental Representative submitted that grounds No. 2 to 8 of the revenue's appeal pertains to two issues i.e. (i) deletion of addition of ₹ 2,56,24,600/- on account of cash advances to different parties and (ii) ₹ 14,87,430/- on account of undisclosed investment for office renovation. The facts which emerges from the record is that Shri Maheshwar Prasad, partner of assessee firm have recorded his statement under Section 132(4) of the Act during the course of search and have admitted that these amounts were unexplained advances and expenses in cash. The Assessing Officer has made addition solely on the basis of this statement recorded under Section 132(4) of the Act. However, it is also a fact as per record that the said Maheshwar Prasad had retracted his statement which was recorded on 28/08/2015 on 15/11/2017. That even after such retraction dated 15/11/2017, the Assessing Officer relied on decision of Hon'ble Apex Court in the case of B.Kishore Kumar Vs DCIT Chennai (2015) 62 Taxman 215 (SC). The Assessing Officer further has not brought any corroborative evidence against the assessee and has also disregarded the retraction made by him. IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 15 13. In this background, it is observed that the ld. CIT(A) from page No. 64 and 65 of his order distinguished the case laws relied upon by the Assessing Officer in the case B.Kishore Kumar (supra) and how it is not applicable to the facts and circumstances of the case of assessee. The ld. CIT-DR for the revenue could not refute the findings of ld. CIT(A) in this regard nor could produce any evidence to show that the case laws relied by the Assessing Officer is applicable to the case of the assessee. The ld. CIT(A) referred to the case of Pullangode Rubber Produce Company Ltd. Vs State of Kerela 91 ITR 18 (SC) wherein the Hon'ble Apex Court have held that \"though an admission is 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.\" Therefore, there are two principle emerging from this finding (i) a person making statement under Section 132(4) can also retract the same and (ii) solely on basis of the statement, the addition cannot be fastened on the assessee without any corroborative evidences. Further the Hon'ble Jurisdictional High Court of Jharkhand in the case of CIT Vs Ravindra Kumar Jain 12 taxmann.com 257 (Jharkhand) have held that \"no addition can be made on the basis of the statement recorded under Section 132(4) if the assessee retracted later and surrender was not corroborated by independent evidence.\" Reverting to the facts of the present case, the partner of assessee had retracted the statement and there was no corroborative evidence brought against the assessee to prove that such cash advances was from undisclosed sources of the assessee. Further the Hon'ble Madras High Court in the case of CIT Vs. Khader Khan Son 300 ITR 157 which was later on affirmed by the IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 16 Hon'ble Supreme Court reported in 3521 ITR 480 (SC) has given the guideline that in the circumstances on confession recorded during the search and seizure which later on is retracted, therefore it is 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 department. Therefore, on this issue, considering these facts and circumstances and the judicial principles, the ld. CIT(A) had observed and held as under: \"16.3.4 In view of the above discussion and the fact that the AO failed to gather an iota of corroborative evidence to counter the retracted statement of Shri Maheshwar Prasad and also respectfully following judicial decisions (supra), I hold that the AO is not justified in making the addition solely based on statement recorded u/s 132(4) of the Act. Accordingly, the AO is directed to delete the addition made of Rs. 2,56,24,600/- on account of alleged advances made to the parties…………….].\" 14. We further observe from the order of ld. CIT(A) that the contention which was raised by the assessee and was accepted by the ld. CIT(A) that the statement made by Shri Maheshwar Prasad, partner of the assessee firm was in the late night of search i.e. on 20/08/2015 and after repeated application before the DDIT(Inv), Ranchi for a copy of such statement, finally the assessee received copy of the statement on 15/11/2017 and after going through the said statement, immediately, the assessee had filed retraction of the same before the Assessing Officer mentioning that such statement was not voluntary but it was made under pressure to accept the undisclosed income. In this regard, we take guidance from the decision of Hon'ble Supreme Court in the case of IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 17 Pullangode Rubber Produce Co. Ltd. Vs State of Kerala (supra) wherein it has been held by their Lordships that though, admission is an extremely important piece of evidence but it is not conclusive and the person who is making statement can demonstrate that it is incorrect. In this case, the assessee has retracted the statement made on 15/11/2017 and the addition has been solely made on the basis of statement recorded under Section 132(4) of the Act without corroborating the statement with other evidences so to bring on record that such cash advances made were from undisclosed income of the assessee. Coordinate Bench of Ahmedabad Tribunal in the case of CIT Vs Jorawar Singh M Rathod (2005) 148 Taxman 35 (Ahd-Trib) have held and observed that where the assessee had made statement and later on have retracted from the same and since the revenue has not collected any evidence in support of the disclosure statement, in such scenario, the retraction was valid. In the present case, before us, the department has not brought any evidence to show that such cash advances have been made from undisclosed sources of income of assessee in support of disclosure made and therefore once the statement is retracted, there cannot be any liability fixed on the assessee without any corroborative materials collected by the department. Hence, the retraction also has to be held valid. Further the Hon'ble Bombay High Court in the case of CIT, Central-III Vs Lavanya Land Pvt. Ltd. and Others (2017) 397 ITR 246 (Bom) had dismissed the appeal filed by the revenue against the order of the Tribunal, Mumbai wherein the Tribunal had deleted the additions made by the revenue based solely on the statement made by the person during the search which was later on retracted by him. IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 18 15. Considering the entire facts and circumstances of the case and the legal principles enshrined from the aforestated judicial pronouncements, we observe that the revenue has not brought out any corroborative evidence in support of disclosure statement made by Maheshwar Prasad and since there is no corroborative evidence and further that it has been stated such disclosure statement was made due to coercion, pressure and duress and was not voluntary which was later on retracted, therefore, in such scenario, there cannot be any liability imposed on the assessee tax payer. We, therefore, do not find any infirmity with the findings of the ld. CIT(A) which is hereby upheld. The relief provided to the assessee by the ld. CIT(A) is sustained. The ground of appeal by revenue is dismissed. 16. With regard to other part of grounds of appeal i.e. deletion of ₹ 14,87,430/- on account of undisclosed investment for office renovation, it has been observed by the ld. CIT(A) that the said amount spend for renovation of the office which has been capitalized as is evident from the ledger account of furniture and fixture. Therefore, the Assessing Officer was directed to delete the same. The ld. CIT-DR for the revenue could not refute these facts on record nor could bring or produce any material in support of revenue. We, therefore, do not find any infirmity with the findings of the ld. CIT(A) and the relief already granted to the assessee is upheld. As per above terms, grounds No. 2 to 8 of the revenue's appeal are dismissed. 17. Ground No. 9 of the revenue's appeal is with regard to deletion of addition of ₹ 4.00 lacs made by the Assessing Officer on the basis of unaccounted cash IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 19 found during the course of search as well as statement recorded under Section 132(4) of the Act. 18. That as evident at para 16.3.4 of the order of ld. CIT(A) that such cash of ₹ 4.00 lacs was found at the residence of Shri Maheshwar Prasad. The ld. CIT(A) has observed that on perusal of cash book and the bank book, it was noted that the assessee had withdrawn ₹ 5.00 lacs from ICICI bank on 19/08/2015 and had kept at the residence of the said partner for safe custody. Since the source of cash was explained, the said addition was deleted. Here also, the ld. CIT-DR could not refute these facts on record nor could produce any evidence in denial with the findings of the ld. CIT(A). We therefore, do not find any infirmity with the findings of the ld. CIT(A) which is hereby upheld. In view thereof, ground No. 9 of the revenue's appeal stands dismissed. 19. Ground No. 10 of the revenue's appeal is general in nature which do not call for any adjudication. As per above terms, the grounds of appeal of revenue's appeal are dismissed. 20. In the result, this appeal of revenue is dismissed. 21. Finally, all the appeals of the assessee are allowed and the appeal of the revenue is dismissed. Order announced in open court on 20th February, 2025. Sd/- Sd/- (RATNESH NANDAN SAHAY) (PARTHA SARATHI CHAUDHURY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ranchi, Dated: 20/02/2025 *Ranjan Copy to: 1. Assessee 2. Revenue IT(SS)A No. 9 to 15/Ran/2020 ACIT Vs M/s Heighten Construction & Ors Appeals. 20 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Ranchi "