ASSISTANT COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE I, RAIPUR V. M/S RAGHUVIR FERRO ALLOYS PVT. LTD., RAIPUR

ITSSA 15/RPR/2024

AI Insights

The case revolves around the appeal by the revenue against the order of the Commissioner of Income Tax (Appeals) which had favored the assessee, M/s Raghuvir Ferro Alloys Pvt. Ltd., in relation to additions made by the Assessing Officer under the Income Tax Act, 1961. The additions pertained to foreign exchange fluctuation losses and unexplained income surrendered by the assessee during a search operation. The Tribunal examined the legal validity of the additions, considering the principles laid down by various judgments and the instructions issued by the CBDT regarding the treatment of confessions made under coercion during search operations. The Tribunal concluded that the additions were not justifiable as they were not backed by any corroborative evidence and were based on a retracted confession.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 106768 (ITAT-RAIPUR)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Other Referred Cases: CIT vs Woodward Governor India P. Ltd, Surjeet Singh Chhabra Vs UOI, Rakesh Mahajan Vs CIT, Asstt. CIT v. Hukum Chand Jain, Pullangode Rubber Produce Co. Ltd Vs. State of Kerala, S. Arjun Singh v. CWT, Nagubai Armul v. B Sharma Rao, Sarwan Singh Rattan Singh v. State of Punjab, Chetnaben J. Shah vs ITO, Kailashben Manharlal Chokshi vs CIT, Jayantilal Thakordas Jariwala Vs. ACIT, Avishkar Infrastructure Pvt. Ltd. vs. DCIT, DCIT Vs. Pramukh Builders, CIT vs Naresh Kumar Agarwal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S.L.ANURAGI
• Assessee Lawyers: R. B. DOSHI
• Keywords: Set aside; Speculation loss; Business income; Capital asset; Revenue expenditure; Reasonable cause; Corroborative evidences; Depreciation; Unexplained investment; Document seized; Documents seized; Onus to prove; Retraction; Search and seizure; Block assessment; Loose papers; Assessment record
• Section: 143(3); 195; 250; 153A; 69; 13; 73; 37; 133A; 191; 37(1); 207; 20

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / IT(SS)A No: 15/RPR/2024 (िनधा[रण वष[ Assessment Year: 2014-15) Assistant Commissioner of Income Tax, Central Circle-1, CBD complex, 8th Floor, Sector 21, Naya Raipur v s M/s Raghuvir Ferro Alloys Pvt. Ltd., 130-137, Sector-C, Urla Industrial Area, Raipur- 433221 PAN: AACCR8946B (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri R. B. Doshi, CA राजˢ की ओर से /Revenue by : Shri S. L. Anuragi, CIT-DR सुनवाई की तारीख / Date of Hearing : 07.01.2025 घोषणा की तारीख/Date of Pronouncement : 29.01.2025 आदेश / O R D E R Per Arun Khodpia, AM: The captioned appeal is filed by the revenue against the order of Commissioner of Income Tax (Appeals)-3, Hoshangabad Road, Bhopal, (in short “Ld. CIT(A)”), u/s 250 of the Income Tax Act, 1961 (in short “the Act”), for AY 2014-15, passed on 14.08.2024, which in turn arises from the common order u/s 153A r.w.s. 143(3) of the Act for AYs. 2008-09 to 2013-14 and u/s 143(3) for AY 2014-15, passed by the Assistant Commissioner of Income Tax, Central-1, Raipur (in short “Ld. AO”), dated 22.03.2016. 2 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 2. The grounds of appeal raised by the revenue are as under: 1. Whether on the facts and on the circumstances of the case and in law, Ld. CIT(A) was justified in deleting the addition of Rs.1,39,54,556/- made by AO on account of foreign exchange fluctuation loss, ignoring that: (a) The assessee has not been able to substantiate its claim of loss with relevant corroborative documents / evidence, such as the bills / vouchers of export or import (sale or purchase) of stock or raw materials, as well as explanations to substantiate the claimed loss as an allowable revenue expenditure? (b) The assessee could not even furnish the calculation and explanation of loss claimed which formed the basis of debit notes issued by Special Blasts Limited to the assessee in respect of the said loss? 2. Whether on the facts and on the circumstances of the case and in law, Ld. CIT(A) was justified in allowing claim of assessee with respect to foreign exchange fluctuation loss by relying on the findings with respect to other years (para 3.1.5. refers to copies of ledger accounts for FY 11-12 and 12-13) and ignoring the principle of res-judicata in face of stark facts that even basic corroborative and supporting documents, evidences and explanations for the year under consideration have not been provided by the assessee? 3. Whether on the facts and on the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.1,25,00,000/-, made by the AO on account of unexplained income surrendered by the assessee, by relying on assessee's retraction affidavit, ignoring the following aspects which raise serious doubts on the authenticity of the affidavit: (a) That such affidavit is without acknowledgement of any tax authority before whom the same was filed by the assessee raising serious doubts on the authenticity of the affidavit? (b) That the assessee did not submit any specific reply in the assessment proceedings in respect of query raised in questionnaire dated 07.10.2015 (Part B) related to any disclosure made during the course of search and reasons why the disclosure is not accounted for in ITR? 3 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur (c) That the assessment proceedings were initiated by issue of notice dated 22.04.2015 u/s 153A of the Act whereas the said retraction affidavit is dated 04.02.2014? 4. Whether on the facts and on the circumstances of the case and in law, Ld. CIT(A) erred in deleting the addition of Rs.1,25,00,000/- made by the AO on account of unexplained income surrendered by the assessee: (a) Ignoring the principle that the burden to prove the genuineness of retraction lies on the assessee and the assessee needs to furnish documentary evidences for a valid retraction? (b) Grievously erring in believing that the surrender made during the course of search of Rs.1.25 crores by the assessee for AY 2014-15 was under force and coercion without ascertaining the truth in such allegations and completely ignoring that such allegation were neither raised nor certified by the independent witnesses available at the searched premises during the entire search proceedings? 5. Whether on the facts and on the circumstances of the case and in law, Ld. CIT(A) was justified in holding that AO has to discharge the onus to prove the voluntary disclosure made by the assessee ignoring the ratios as laid down by: (a) Hon'ble Supreme Court in Surjeet Singh Chhabra Vs UOI (1997) 1 SCC 508, wherein it is clearly laid down that Revenue officers are not Police officers and thus confession, though retracted, is an admission and binding on petitioner? (b) Hon'ble Punjab & Haryana High court in Rakesh Mahajan Vs CIT 214 CTR 218, that the admissions constitute best piece of evidence because admission are self-harming statements made by the maker believing it to be based on truth? (c) Hon'ble High Court of Chhattisgarh in the case of Asstt. CIT v. Hukum Chand Jain [2010] 191 Taxman 319, that if an allegation of duress or coercion was made for the purpose of retraction then the assessee need to submit documentary reasons to prove the same? 4 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 3. The brief facts of the case are described in the order of Ld. CIT(A), for the sake of clarity the same are culled out as under: Brief Facts of the Case:- 2. The conspectus of the case is that the appellant is a private limited company engaged in the manufacturing of all kind of Ferro Alloys and trading of Manganese Ore. A search and seizure operation was carried out at the residential/business premises of the appellant on 10.01.2014. The case of the appellant was centralized with ACIT {Central)-1, Raipur vide order of the Commissioner of Income Tax, Raipur u/s 127 of the Act dated 30.06.2014. The appellant for the year under consideration has filed its return of income on 30.11.2014 declaring total income of Rs. 99,07,801/-. The AO after considering various facts and circumstances of the case has made additions for the year under consideration. The issues in respect of which additions were made by the AO for the year under consideration are being discussed in the following manner:- Issue of addition made on the basis of statement recorded u/s 132(4) of the Act, 1961 for AY 2014-15:- The AO observed that during the course of search & seizure operation, statement u/s 132(4) was recorded wherein various incriminating documents were confronted to the appellant and was asked to explain and verify through regular books of account. The appellant was unable to explain alt the issue and get it verified from his regular books of account and therefore surrender an amount of Rs.1,25,00,000/- as undisclosed income in his statement recorded u/s 132(4) of the Act. The same was later on retracted by the appellant by stating that it was not backed up with credible evidences. The appellant further stated that he did not have copies of the seized material with him. The declaration of Rs. 1.25 crore had been made despite the fact that seized material does not content any basis. The AO in the assessment order incorporated that the statement recorded under section 132(4) of the Act is not simply a confession of the assessee in context withissue enumerated during the course of proceedings. It Is piece of evidences interms of Indian EvidenceAct. It Is not retraction from the commitment but it is deviation and avoidance of evidence gathered by the department. The AO further mentioned that it was liability of the assessee to quantify and explain the discrepancy at latter state. The retraction made by the assessee from the undisclosed income of Rs. 1.25 crore from his confession and statement recordedunder section 132(4) of the Act is evidence, has been made without coercion and force. It is onus of the assessee to discharge it through proper evidence and reasons which he failed. 5 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Therefo_ret,he retraction was not accepted by the AO and surrender made at Rs. 1.25 crore was added to the total income of the appellant under the provisions of section 69 of the Act. Issue of addition made on account of foreign exchange fluctuation loss for AY 2014-15:- lt was observed by the AO that the appellant has debited foreign exchange fluctuation loss in audited profit and loss account for AY 2013-14 amounting to Rs. 1,39,54,556/-. The appellant was required to explain and justify its claim alongwith documentary evidences. The appellant submitted that foreign exchange fluctuation expenditure shown in profit & loss account is related to Exchange differenceresulting from translating foreign currency into Indian currency. Since out company procures its imported raw material on credit for 90-180 days supported by Bank issued letter of Credit. Since, the foreign currency rates prevailing on date of purchase & date of payment are different, hence related difference is accounted in Books of Account as foreign exchanged fluctuation expenditure. The AO found that the reply of the appellant is not sufficient and justifiable. Accordingly, the Foreign Exchange Fluctuation, Losses claim by the appellant amounting to Rs. 1,39,54,556/- was disallowed and added back to the total income of the appellant for the AY 2014-15. 4. In view of the aforesaid additions made by Ld. AO in the assessment order, being aggrieved, the assessee preferred to carry the matter before the Ld. CIT(A). In appellate proceedings, the contention raised by the assessee found to be satisfactory and acceptable by Ld. CIT(A), accordingly, the appeal filed by the assessee was allowed in favour of the assessee. 5. Being dissatisfied with the decision of First Appellate Authority, granting relief to the assessee, now the department has assailed the impugned appellate order with the grievances raised in the present appeal. 6 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 6. Ground No. 1 & 2: Challenging the order of Ld. CIT(A) qua the deletion of addition of Rs.1,39,54,556/- by the Ld. AO on account of foreign exchange fluctuation loss. 6.1 While making the aforesaid addition, Ld. AO had observed as under: 12. In the course of verification, it is found that the assessee has debited foreign exchange fluctuation loss in audited profit and loss account in the following A.Ys. A.Y. Foreign Exchange fluctuation loss 2011-12 1285439 2013-14 8567717 2014-15 13954556 The assessee was asked to explain and justify the claim along with supporting documents/ evidence to substantiate the claim. It is well settled law that burden is upon the assessee to prove the claim. The reply of the assessee received on this issue which is placed on record after perusal. The contention of the assessee is not acceptable for the reason that In common parlance, a forex derivative represents an agreement whose value depends on the value of the underlying foreign exchange rates. Commonly forex derivatives are utilised to hedge the currency risk and could be in the form of a forward contract or an option. In terms of the Foreign Exchange Management (Foreign Exchange Derivative Contracts) Regulations, an Indian resident may enter into a forex derivative contract to hedge the risk exposure in respect of a transaction permissible under the exchange control regulations. The recommendatory AS 30 requires that MTM (Mark To Market) losses on financial instruments, including forex derivatives, should be recognised irrespective of whether the contract has matured/ concluded. With reference to the allow ability of MTM (Mark To Market) losses on account of forex derivatives the Central Board of Direct Taxes ('CBDT') has issued instruction number 3/2010 dated 23rd March, 2010 which clarifies the treatment to be adopted by tax officers. The Instruction starts by highlighting that a large number of taxpayers report '--losses on account of trading in forex derivatives on a MTM basis either suo motu or in compliance of the AS or advisory circular issued by the ICAI. It further directs tax officers to follow the guidelines laid down there under with regard to the allowability of such losses against the taxable income of an assessee. Para 2 of the CBDT instruction provides that MTM losses on forex derivatives, being the difference between the purchase price and the value as on the valuation date, is a notional loss and 7 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur is contingent in nature and therefore not allowable in computing the taxable income. Thus, wherever such MTM losses have resulted in reduction of book profits, the same is to be added back for computing the taxable income. Para 3 of the Instruction clarifies that even actual realised losses on forex derivatives could be treated as speculative loss unless it is an eligible transaction which is carried out in a recognised stock exchange and in case it is considered to be a speculative loss, the same can be set off only against speculation profits. Thus, the CBDT Instruction clearly provides that MTM losses in respect of unsettled forex derivatives are not allowable in computing the taxable income. It further goes to add that even the losses realised/ crystallized on maturity/ settlement of such contracts may be treated as loss on 'speculative transaction' and hence cannot be set-off against the business income of the taxpayer. The above mentioned issue was discussed in great detail in the recent landmark ruling of Supreme Court in the case of CIT vs Woodward Governor India P. Ltd (312 ITR 254) where in the SC relied on the earlier judgment in the case of Sutlej Cotton Mills Ltd vs. CIT (116 ITR 1) which observed as follows :- \"The law may, therefore, now be taken to be well settled that where profit or loss arises to an assessee on account of appreciation or depreciation in the value of foreign currency held by it, on conversion into another currene1;, such profit or loss would ordinarily be a trading profit o loss if the foreign currene1; is held by the assessee on revenue account or as a trading asset or as part of circulating capital embarked in the business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature.\" Further in the aforesaid ruling the Apex Court also affirmed the principles laid down in the ruling of CIT vs. V.S. Dempo & Co Pvt. Ltd (206 ITR 291) which are as below: * A loss arising in the process of conversion of foreign currency which is part of trading asset of the assessee is a trading loss as any other loss. * In determining the true nature and character of the loss, the cause which occasions the loss is immaterial; what is material is whether the loss has occurred in the course of carrying on the business or is incidental to it. If there is loss in a trading asset, it would be a trading loss, whatever be its cause because it would be a loss in the course of carrying on the business. Loss in respect of circulating capital is revenue loss whereas loss in respect of fixed capital is not. Loss resulting from depreciation of the fore ign currency which is utilised or intended to be utilised in business and is part of the circulating capital, would be a trading loss, but depreciation of fixed capital on account of alteration in exchange rate would be capital loss. 8 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur For determining whether devaluation loss is revenue loss or capital loss what is relevant is the utilisation of the amount at the time of devaluation and not the object for which the loan had been obtained. Even if the foreign currency was intended or had originally been utilised for acquisition of fixed asset, if at the time of devaluation it had changed its character and had assumed the new character of stock-in-trade or circulating capital, the loss that occurred on account of devaluation shall be a revenue loss and not a capital loss. The way in which the entries are made by an assessee in the books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profit or loss to the assessee. The argument generally raised by the revenue authorities to deny deduction of exchange fluctuation loss was that if the loss is recognized on MTM basis w.r.t year end rates, it is notional or contingent in nature. Losses are allowable only on actual crystallization on payment/ receipt. The aforesaid issue has now been settled by the SC which has held that the MTM loss recognized on the basis of recognized accounting standards is a real loss. As a corollary, gain on revenue account recognized in books on MTM basis will also be taxable. The propositions laid down by the SC in CIT vs Woodward Governor India P. Ltd (supra) can be summarized as follows :- - MTM loss is allowable in the year of recognition by debit to P&L A/c in terms of the mercantile method of accounting followed as per the mandatory Accounting Standards. - Though provisions of Section 37 refer to 'expenditure', the 'expenditure' may, in some cases, cover an amount which is really a 'loss', even though the said amount has not gone out from the taxpayer's pocket. * Accounts regularly maintained by a taxpayer in the course of business are to be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. Emphasis placed on requirement of adopting ordinan; principles of commercial accounting, unless such principles stand superseded or modified by legislative enactments. ·Unless legislatively intervened or found by the Tax Authority to be not reflective of true and correct profits for valid reasons, the method of accounting consistently followed by a taxpayer is 'supreme'. Disallowance not permissible unless accounting system followed by taxpayer found t be incorrect. Judicial recognition accorded to AS-11. The SC keeping in view the above principles laid out by their predecessors made the following conclusion, which may now be regarded as tests for determining the tax allowance of such items :- \"In conclusion, we may state that in order to find out if an expenditure is deductible the following have to be taken into account 9 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur (i) whether the system of accounting followed by the assessee is mercantile system, which brings into debit the expenditure amount for which a legal liability has been incurred before it is actually disbursed and brings into credit what is due, immediately it becomes due and before it is actually received; . (ii) whether the same system is followed by the assessee from the very beginning and if there was a change in the system, whether the change was bona fide; (iii) whether the assessee has given the same treatment to losses claimed to have accrued and to the gains that may accrue to it; (iv) whether the assessee has been consistent and definite in making entries in the account books in respect of losses and gains; (v) whether the method adopted by the assessee for making entries in the books both in respect of losses and gains is as per nationally accepted accounting standards; (vi) whether the system adopted by the assessee is fair and reasonable or is adopted only with a view to reducing the incidence of taxation.\" The reply of the assessee is not sufficient and justifiable. Accordingly, the Foreign Exchange Fluctuation losses claimed by the assessee are disallowed in relevant A.Ys and added to the total income of the assessee as per below stated chart: A.Y. Foreign Exchange fluctuation loss 2011-12 12,85,439/- 2013-14 85,67,717/- 2014-15 1,39,54,556/- 6.2 The aforesaid issue, thereafter, has been carried before the Ld. CIT(A), who had vacated the addition with the following observations: 3.1.2. I have considered the grounds raised by the appellant company, the facts and circumstances of the case in the assessment order of the relevant years and the submissions made by the appellant in this case. 3.1.3. I find the following infirmities in the assessment order- 1. The assessment order starts with reason for not accepting the contention and discusses the issue in the light of forex derivatives and provides the rules and accounting standard requirements and the CBDT instruction on the treatment of such derivatives. Then the AO has discussed about the instruction. Thereafter I find that there is discussion on certain decisions of the Hon'ble Supreme 10 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur courts on the exchange fluctuation treatment. I find most of the paragraph copied verbatim from a web link https://incometaxparaskochar.com/imaqe/aghore.pdf. There is no connect of this discussion with the issue at hand. 2. Further, there is discussion of case citations which are totally different from the initial discussion on forex derivate and CBDT instructions related to it. It appears that the AO has totally failed to understand the nature of the transactions, its context and the associated instructions and citations involved. Even though the issue apparently appears to be verbose in the order but it is actually. very cryptic and it is not clear what the AO intends to do about this issue. 3. The AO has not discussed the submission of the appellant in the order and therefore it cannot be ascertained why itis not acceptable. He has abruptly mentioned in the end that the reply of the assessee is not sufficient and justifiable. 3.1.4. If we look at the nature of the issue, it is debit of foreign exchange fluctuation loss of Rs.1,39,54,556/- in AY 2014-15. This is on account of the exchange difference resulting from conversion of foreign currency into Indian currency. This exchange difference is related to procurement of its imported raw material on credit for 90 days supported by bank issued letter of credit. There is fluctuation of forex rates therefore in transactions there is always a difference on date of purchase, date of payment and date of entry in balance sheet. The related difference is accounted for in the books of account as Foreign exchange fluctuation expenditure. This expenditure claim is allowable expenditure as per the Income tax Act after following the applicable Accounting standards. In case there is a gain then also same is needed to be offered as income for taxation. The appellant has further stated that such gain or loss arising due to forex fluctuation is of revenue nature as they are not related to acquisition, installation, disposition of any capital asset Since, it satisfied both the tests - purpose of business and its nature of revenue, so it is allowable expenditure as per section 37(1) of the Income tax Act. The appellant also has relied on CIT v Woodward Governor India P ltd of the Hon'ble Apex court which has affirmed that the unrealized exchange fluctuation gain/ loss are also allowed as deduction in the year in which it is accounted for. Ln fact, I find the AO has also relied upon this case in his order which actually supports the AO's claim only. Similarly another citation of the Hon'ble Apex court in the case of CIT vs VS Dempo and Co ( 206 ITR 291) relied upon by the AO for the reason best known to him, is also in support of the appellant. The relevant extract is - 'It held that a loss arising in the process of conversion of foreign currency which is part of trading assets of the assessee is a trading loss as any other loss. If there is a trading loss, In trading assets it would be a trading loss whatever Its cause 11 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur because it would be a loss in carrying on the business.' In actual sense the narrating of the case laws which are in support of appellant was self-defeating on the part of the AO and indicates he has not been able to appreciate the issue properly. 3.1.5. The appellant has submitted that the AO has mistakenly applied the CBDT instruction as it is not applicable in the instant case since losses were not on account of derivatives but are losses and gains in foreign exchange relating to the purchase transactions. It appears the AO has confused these losses to speculative losses. The appellant in support of its contention has given breakup (ledger copy of the account) indicating that the amount is related to difference of foreign exchange currency rate between purchase date and payment date. It has given the nature of purchase on high sea basis with different parties and copy of ledger account of one of the parties M/s Ore and metal company for FY 11•12 and FY 12-13 along with copy of bills and other import related documents have been Submitted. It has been clanf1ed by the appellant that the loss is related to purchase at material and hence related to trading account and they have not entered into any hedging transaction as mentioned by the AO at para 12 of the assessment order. I find the AO has failed to appreciate the issue and not given any cogent basis for why such debits on account of foreign exchange fluctuation losses are not allowable. I find force in the contention of the appellant which is backed by documentary evidences. I have already passed similar decision in the case of the appellant in AY 2013-14. Accordingly, I find the addition made is arbitrary and devoid of any basis and logic. Therefore, the ground of appeal is allowed and the addition made by the AO amounting to Rs.1,39,54,556/- on account of disallowance of Foreign Exchange Fluctuation Losses in AY 2014-15 is hereby deleted. 6.3 Apropos, the issue of admissibility of foreign exchange loss claimed by the assessee, Shri S. L. Anuragi, Ld. CIT-DR vehemently supported the order of Ld. AO and have submitted that during the assessment proceedings, the assessee was unable to substantiate its claim of loss with corroborative documents / evidence, such as bills/ vouchers of export or import (sale or 12 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur purchase) of stock or raw materials, as well as explanation to substantiate the claimed loss as an allowable revenue expenditure. He further submitted that the requisite calculation and explanations of loss claimed which formed the basis of debit notes issued by Special Blast Limited to the assessee are not furnished by the assessee before Ld. AO. It was the submission that Ld. CIT(A) was not justifying in allowing the claim of assessee referring to the findings in assessee’s own case in other years, ignoring the principles of res- judicata. It was the prayer that, in view of such facts and circumstances, the order of Ld. CIT(A) qua the issue in allowing claim of assessee regarding foreign exchange fluctuation loss is liable to be reversed and the addition made by Ld. AO merits to be sustained. 6.4 In rebuttal, Shri R. B. Doshi, CA, Authorized Representative of the assessee (in short “Ld. AR”), have submitted a written synopsis which reads as under: Submission of assessee 1. Instruction no. 3/2010 dated 23.03.2010 i) It deals essentially with tax treatment of trading in forex derivatives and with unsettled/settled forex derivative transactions. 13 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur ii) In respect of settled forex derivative transactions, it states that tax treatment of loss shall be according to sec, 43(5)(d). AOs have been directed to find out whether such transactions are \"eligible transactions\" u/s 43(5)(d). iii) Settled/completed contracts are considered to be case of actual loss/gain. iv) Transaction of assessee is not in derivatives nor does it represent a speculative transaction and so reliance on above Instruction by AO is totally misplaced. 2. Regarding reliance of AO on CIT vs Woodward Governor India P. Ltd.(2009) 312 ITR 254 (SC), PN 125 to 141 of PB. i) This case, on the contrary, advances the case of assessee. ii) Vide page 265-266 (PN 134 of PB, para no. 18), Hon'ble Supreme Court approvingly observed that paragraph 9 of AS-11 recognises exchange differences as income or expense. It further observed that any difference, loss or gain, arising on conversion of liability at the closing date, should be recognised in the profit and loss account of the reporting period. iii) In that case, loss claimed was held to be allowable. iv) In that case, loss claimed was on account of adjustment of transaction at the closing rate of foreign currency i.e. on 31s, March and the transaction had not settled. v) Case of assessee is on much better footing. Here, transaction has settled/completed during the year itself and claim of loss is on actual basis. 4. Loss on fluctuation of foreign exchange claimed by assessee is actual loss. It was incurred on procurement of imported raw material. It was for the purpose of business hence allowable. 14 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 5. Loss substantiated Copy of account of purchase of Manganese-Ore through Special Blasts Ltd. on High Sea basis is placed at PN 36 to 39 of PB. Ledger account of foreign exchange fluctuation loss is placed at PN 35 of PB. Confirmation from Special Blast Ltd. is placed at PN 40 of PB. 6. Accounting treatment as per mandatory Accounting Standard -11 issued by ICAI i) AS-11 at PN 50 to 65 of PB. ii) Para 9 (PN 55 of PB), 13 (PN 56-57 of PB) & 14 (PN 57 of PB) of AS-11 prescribes method of treatment of loss/gain. It authorizes debiting/crediting of loss/gain to profit & loss a/c. iii) Such mandate of AS-11 also noted & approved by Hon'ble Supreme Court in Woodward Governor India P. Ltd. (2009) 312 ITR 254, 265-266 (SC), PN 125 to 141 of PB, relevant findings on PN 134, para no. 18. iv) Claim of assessee backed by AS- 11 and ratio laid down by Hon'ble Supreme Court. v) Accounting Standards issued by ICAI are to be followed, as held in: - • CIT vs Hyundai Heavy Industries Co. Ltd. (2007) 291 ITR 482 (SC) In this case, it was held by Hon'ble Supreme Court that percentage completion method prescribed in AS-7 is appropriate for construction contracts taking place over several years. • MKB (Asia) (P) Ltd. vs CIT (2008) 167 Taxman 256 (Gau.) In this case, it was held that the accounting system as contemplated in AS-7 is an approved system of accounting by the Institute of Chartered Accountants of India. • CIT vs U. P. State Industrial Development Corporation (1997) 92 Taxman 45 (SC) In this case, it was held that in order to determine the question of taxability, well settled legal principles as well as principles of accountancy have to be taken into account. It is 15 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur a well-accepted proposition that for the purpose of ascertaining profit and gains, the ordinary principles of commercial accounting should be applied, so long as they do not conflict with any express provision of the relevant statutes. 7. Reliance on: - CIT vs V. S. Dempo & Co. P. Ltd. (1994) 206 ITR 291 (Born.), wherein Hon'ble High Court held vide page 300-30 I that a loss arising in the process of conversion of foreign currency which is part of trading asset, is a trading loss and in determining the nature of loss, what is material is whether the loss has occurred in the course of carrying on the business. If the loss is in a trading asset, it would be a trading loss and loss in respect of circulating capital is a revenue loss whereas loss in respect of the fixed capital is not a revenue loss. 6.5 Based on the aforesaid submission, Ld. AR summarized his contentions that Ld. AO had not appreciated the issue in correct perspective. The basis for addition adopted by the Ld. AO was pertaining to forex derivatives, the rules and accounting standards along with CBDT Instructions regarding the treatment of such derivatives are discussed in the assessment order. On perusal of Ld. CIT(A), it is emanating that Ld. AO has totally failed to understand the nature of transaction, its context and the associated instructions and citations involved. Ld. AR further explained that the Ld. AO had placed his reliance on judgment in the case of CIT vs Woodward Governor India Pvt. Ltd. (2009) 312 ITR 254 (SC), while making the addition against the assessee, whereas the analogy flowing from the said judgment is on the contrary advances the case of assessee. On the issue the 16 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur observations of Hon’ble Apex Court in the case of CIT vs Woodward Governor (supra), are extracted for the sake of reference and interpretation: 18. AS-11 deals with giving of accounting treatment for the effects of changes in foreign exchange rates. AS-11 deals with effects of exchange differences. Under para 2, reporting currency is defined to mean the currency used in presenting the financial statements. Similarly, the words \"monetary items\" are defined to mean money held and assets and liabilities to be received or paid in fixed amounts, e.g., cash, receivables and payables. The word ''paid\" is defined under s.·43(2). This has been discussed earlier. Similarly, it is important to note that foreign currency notes, balance in bank accounts denominated in a foreign currency, and receivables/payables and loans denominated in a foreign currency as well as sundry creditors are all monetary items which have to be valued at the closing rate under AS-11. Under para 5, a transaction in a foreign currency has to be recorded in the reporting currency by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. This is known as recording of transaction on initial recognition. Para 7 of AS-11 deals with reporting of the effects of changes in exchange rates subsequent to initial recognition. Para 7(a) inter-alia states that on each balance sheet date moneta1y items, enumerated above, denominated in a foreign currency should be reported using the closing rate. In case of revenue items falling under s. 37(1), para 9 of AS-11 which deals with recognition of exchange differences, needs to be considered. Under that para, exchange differences arising on foreign currency transactions have to be recognized as income or as expense in the period in which they arise, except as stated in para 10 and para 11 which deals with exchange differences arising on repayment of liabilities incurred for the purpose of acquiring fixed assets, which topic falls under s. 43A of the 1961 Act. At this stage, we are concerned only with para 9 which deals with revenue items. Para 9 of AS-11 recognises exchange differences as income or expense. In cases where, e.g., the rate of dollar rises vis-a-vis the Indian rupee, there is an expense during that period. The important point to be noted is that AS-11 stipulates effect of changes in exchange rate vis-a-vis monetary 17 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur items denominated in a foreign currency to be taken into account for giving accounting treatment on the balance sheet date. Therefore, an enterprise has to report the outstanding liability relating to import of raw materials using closing rate of exchange. Any difference, loss or gain, arising on conversion of the said liability at the closing rate, should be recognized in the P&L account for the reporting period. 6.6 To support the claim of foreign exchange fluctuation loss, Ld. AR placed before us copy of account of purchase of Manganese-Ore through Special Blast Limited on High Sea Sale basis at page no. 36 to 39 of the PB. Also, the ledger account of foreign exchange fluctuations loss is placed at page no. 35 of the PB along with confirmation from Special Blast Limited at page no. 40. 6.7 Ld. AR further stated that the accounting treatment of foreign exchange fluctuation loss is mandatory in accordance with the guidelines issued by Institute of Chartered Accountants from India (ICAI) under Accounting Standard-11 (AS-11), as duly acknowledge by the Hon’ble Apex Court in the case of Woodward Governor India Pvt. Ltd. (referred to supra). The relevant extract from AS-11 prescribing the method of Accounting Treatment of such loss / gain, which permits debiting / crediting of such loss/ gain to P&L account, is extracted as under for the sake of information and clarity: 18 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 9. A foreign currency transaction should be recorded, on initial recognition in the reporting currency, by applying to the foreign currency amount the exchange rate between the reporting currency and the foreign currency at the date of the transaction. 13. Exchange difference arising on the settlement of monetary items or Oil reporting an enterprise's monetary items at rates different from those at which they were initially recorded during the period, or reported in previous financial statements, should be recognised as income or as expenses ill the period in which they arise, with the exception of exchange differences dealt with in accordance with paragraph 15. 14. An exchange difference results when there is a change in the exchange rate between the transaction date and the date of settlement of any monetary items arising from a foreign currency transaction. When the transaction is settled within the same accounting period as that in which it occurred, all the exchange difference is recognised in that period. However, when the transaction is settled in a subsequent accounting period, the exchange difference recognised in each intervening period up to the period of settlement is determined by the change in exchange rates during that period. 6.8 In support of the contention that Accounting Standard issued by the ICAI can be adopted and are to be followed, has been approved by Hon’ble Courts, Ld. AR placed his reliance on the following Judgments:  CIT vs Hyundai Heavy Industries Co. Ltd. (2007) 291 ITR 482 (SC)  MKB (Asia) (P) Ltd. vs CIT (2008) 167 Taxman 256 (Gau.)  CIT vs U. P. State Industrial Development Corporation (1997) 92 Taxman 45 (SC) 19 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 6.9 Ld. AR also placed his reliance on the order of Hon’ble Mumbai High Court in the case of CIT vs V.S. Dempo & Co. P. Ltd. (1994) 206 ITR 291 (Bom.) referred to supra, wherein Hon’ble Bombay High Court had held that loss arising in process of conversion of foreign currency in the course of business would be a trading loss, whereas loss in respect of fixed capital is not a revenue loss. In the present case, the loss pertains to procurement of raw material, therefore, the same falls within the scope of trading activity. 6.10 Backed by the aforesaid submissions, it was the prayer by Ld. AR that Ld. AO, has not appreciated the issue properly, whereas Ld. CIT(A) had deliberated upon the issue in right perspective, who had already decided the same issue in earlier years in assessee’s own case, therefore, the addition made by the Ld. AO has no legs to stand in the eyes of law, the same needs to be vacated, which Ld. CIT(A) had rightly and justifiably deleted. Therefore, the order of Ld. CIT(A) deserves to be upheld. 6.11 We have considered rival submissions, perused the material available on record and case laws relied upon by the parties. Under the factual matrix of present case, it is observed from order Ld. CIT(A), that the foreign exchange fluctuation loss claimed by the assessee is on account of exchange difference resulting from conversion of foreign currency into Indian currency, related to procurement of imported raw material by the assessee. Ld. CIT(A) 20 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur also referred to the judgment relied upon by Ld. AO in the case of Woodward Governor (supra), which in fact, is supporting the claim of assessee. Ld. AO relied on CBDT’s instruction pertaining to speculation losses on derivatives which have no applicability on the issue in the instant case. Necessary documentary evidence is examined by Ld. CIT(A) during the course of appellate proceedings, who has the powers coterminous with that of the Ld. AO. It seems that the Ld. AO got carried away with According Standard and CBDT instructions relating to speculation loss on derivatives, which is not the nature of loss that the assessee had claimed in its P&L Account. Respectfully following the analogy drawn by Hon’ble Apex Court in the case of Woodward Governor (supra) and by Hon’ble Bombay High Court in the case of V. S. Demp & Com. (supra), which are the basis of decision by the Ld. CIT(A), whereas the findings of Ld. AO are misplaced to construe even the facts of claim made by the assessee in the present case, therefore, we find substance to concur with the decision of Ld. CIT(A) and we do so. In result, Ground no. 1 & 2 of the revenue being bereft of merits, stands dismissed. 7. Ground No. 3, 4 & 5: These grounds are taken by the revenue to raise the common contention that the addition of Rs.1.25 Crore made by the Ld. AO on account of unexplained income surrendered by the assessee, which was erroneously deleted by the Ld. CIT(A). 21 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 7.1 While making the aforesaid addition, Ld. AO have elaborately discussed the issue and have made the addition u/s 69 of the Act with the following observations: 8. Surrender amounting to Rs.1.25 crores under section 132(4) During search operation, the assessee had made disclosure of Rs. 1,25,00,000/- on 15.01.2014 for F.Y. 2013-14, i.e. A.Y. 2014-15. Further, the assessee failed to incorporate disclosure made in relevant A.Ys.2014-15 under consideration, During the search proceedings, statement under section 132(4) was recorded in which assessee show inability to explain all the aspects of undisclosed income and investment during the entire earning period. Several incriminating documents were confronted to him and asked to explain and verify through regular books of account. The details of the discrepancies and documents are not possible for the authorized officer under 132 of the Act to put everything on statement recorded during the search proceedings. The assessee was unable to explain all the issue and get it verified from his regular accounts and statements submitted to the department. Considering the entire discrepancies on account of issues and unverifiable documents, the assessee was given opportunity to under section 132(4) of the Act, for quantification and verification of quantum of corn;:,ealp-1ent in his case. It is statutory liability of the assessee to explain and verify the above before the assessing officer. Being failed to explain he preferred to surrender Rs.1.25 crores to explain entire issues enumerated during the proceeding and accordingly statement was recorded. The assessee has admitted undisclosed income. 8.1 Scanned copy of relevant part of the statement under section 132(4) is reproduced as under:- 22 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 8.2. It was the liability of the assessee to quantify and explain the discrepancy at letter stage which has been discussed at various stage of the search proceedings. On his request, time WE\\S given him to prepare statement of affaires and explanation along with supporting documents for verification .He failed· to furnish it. For preparation of statement of affair the assessee was provided copy of all the documents and seized material and facilities time. In spite of that the assessee has failed to furnish it and he retracted from his commitment only when proceeding under section 153A of the Act are started. He would have retracted before, initiating assessment proceedings with explanation and evidences. It has not been done by him. 8.3. The assessee was given proper opportunity to explain and justify it as the statement under section 132(4) is a piece of evidences in view of the Indian evidence act. It is assessee liability to 23 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur explain that the statement is untrue. The decision held in by the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd Vs. State of Kerala and another 91 ITR 18 is squarly applicable in the case. It is held that \"Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts.\" 8.4. The statement recorded under section 132(4) of the act is not simply a confession of the assessee in context with issue enumerated during the course of proceedings. It is piece of evidences in terms of Indian evidence act. It is not retraction from the commitment but it is deviation and avoidance of evidence gathered by the department. Reliance is placed on the decision of the Punjab and Haryana High Court in the case of Rakesh Mahajan vs. CIT cited at 642 of 2007 (Taxpert) and 214 CTR 218 wherein it has been held that ''It is well settled that admissions constitute best price of evidence because admission are self- harming statements made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming one's own interest unless such a statement is true.\" The statement recorded under section 132(4) is an evidence to be used by the department and declaration made by the assessee is itself evidence in his possession. The statement recorded before the authority is assessee confession to discrepancies and irregulatory, hence if any retraction is made it is assessee liability to discharge onus. 8.5. Section 110 of the Evidence Act is material in this respect which stipulates that when the question is whether any person is owner of anything of which he is shown to be in possession, the onus of proving that he is not the owner, is on the person who affirms that he is not the owner. In other words, it follows from the well-settled principle of law that normally, unless contrary is established, title always follows possession. It is evident from above discussion that the assessee has to discharge onus for retraction of surrendered income. He failed to do so Retraction from the above without having reasonable cause and without any supporting evidences is not acceptable. The question of evidentiary value of a statement recorded u/s 132(4) of the Act is no more res integra. When an assessee had made a statement of facts, he can have no grievance if he is taxed in accordance with that statement. The reasonableness of the AO's approach, may be appreciated that he had not 24 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur made any enhancement or substitution in the amounts as offered/ disclosed in the said statement. It was a statement pertaining to certain facts which were in the exclusive knowledge of the assessee. Those facts were disclosed to the Revenue Deptt. Thereupon those were accepted by the Revenue Department. Those facts were of such nature that there was no scope of existence of any other evidence. Affirmation of facts at best can only be done by the assessee in his own volition. If the assessee wanted to correct the said statement, it was open for him to show the evidences to retract those facts. But no such evidence was furnished though an another chance was granted while explaining the entire issues at search proceeding stage which means that the assessee had no evidence at all in his possession. It is here to clarify that the statute prescribes the power to the Revenue Authorities for recording a statement on the day of search operation. In this context, case law cited few decisions wherein there was a discussion of retraction of a statement or the legal sanctity of statement in the eyes of Income-tax Laws. It is to clarify that there is a difference in a statement recorded under the proceedings carried out u/ s. 132 of the Act of the Act. The Income-tax Act, wherever thought fit and necessary has conferred such powers to examine a person on oath. Those powers are therefore has been expressly provided. In this context Section 132(4) of the Act enables an authorized officer to examine a person on oath. Such a sworn statement made u/s.132(4) of the Act, thus can be used as an evidence under the Act. A statement recorded u/ s. 132(4) of the Act has a far reaching consequence because if it is proved to be false which the assessee only knows or believes to be false or the assessee does not believe it to be true, it is assessee liability to explain and prove it. 8.6. If any coercion or force are not alleged and proved, and assessee has voluntary declared undisclosed income and has not made retraction within three month of the statement recorded, onus lies with the assessee to prove that the declaration is made out of misconception. The assessee has not made such efforts. The learned Ahmedabad Bench in the case of DCIT v. Bhogilal Moolchand 96 ITO 344 held that statement given Under Section 132(4) is not conclusive and person can retract under certain circumstances. However, time gap between statement and retraction of statement is one of the important points to be taken into account to decide as to whether the statement was given under mistaken belief of either fact or law. However when assessee retracted statement made Under Section 132(4) after three and a half months of disclosure and there was not an iota of evidence to support retraction then AO was justified in not accepting assessee1s retraction The decision held in the case of Carpenters Classics(Exim) (P) Ltd. Vs DCIT ( ITAT, Bang) 108 ITO 142 squarely applicable in the case .It is held that:- \"When statement was made voluntary and was not alleged to have been obtained under threat or coercion, onus was on assessee to prove that said declaration was made under any misconception 25 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur of facts - Since assessee had not taken any steps to rectify its declaration before authorities before whom such declaration was made, there was no valid reason for retraction of same after a gap of about two and a half mo 8.7 Charge of coercion or threat is not enough unless is supported by proper evidences and legal action against the officer concern. Merely filing of application before any authority is not sufficient to prove above blame. The onus lies with the assessee who was not discharged and thus allegation is not admissible. It is onus of the assessee to discharge it. Decisions held in cases of Manoharlal Kasturchand Chokshi Vs ACIT (ITAT, Ahd) 61 ITD 55, Param Anand Builders Vs ITO (ITAT, Mum) 59 ITD 29, Works of Art (P) Ltd, Vs ACIT (ITAT, Jp) 65 ITD 4, Amritlal Bhagwandas Soni Vs DCIT (IT.AT, Ahd) 59 TTJ 418Hiralal Maganlal & Co. Vs DCIT (ITAT, Mum) 96 ITD 113Airport Authority of India Vs CBEC (Del) 207 CTR 196 Ravindra D. Trivedi Vs CIT (Raj) 215 CTR 313 applicable in the case where it is held that \"The onus of proving coercion and threat is to be proved by the assessee.\" 8.8. The submissions made by the learned Counsel thoughtfully considered and are of the view that there is no merit in his explanation. It is well settled that admissions constitute best piece of evidence because admissions are self-harming statement made by the maker believing it to be based on truth. It is well known that no one will tell a lie especially harming one's own interest unless such a statement i·strue. Section 17 of the 1872 Act defines admission to be a statement, oral or documentary, which suggests an inference as to any fact in issue or relevant fact which has been made by a party to proceedings or his agent and others as per details given in Sections 19, 20, 21,22 and 23 of the 1872 Act. If an admission has been made by a party to proceedings under Sections 17 and 18 of the 1872 Act, suggesting an inference that the income was unexplained then such an admission is an admissible piece of evidence. Admissions have also been regarded as substantive evidence because it sustains their veracity from the fact that maker has said something against his own interest. 8.9. Considering the discussion held as above, it is inferred that the retraction made by the assessee from the undisclosed income amounting to Rs.1.25 crores from his confession and statement recorded under section 132(4) is an evidence, has been made without coercion and force. It is onus of the assessee to discharge it through proper evidences and reasons which he failed. Therefore, retraction is not accepted and subject to discussion is added to the income of the assessee under the provisions of section 69 of the Act. The assessee has retracted from the statement under section 132(4) therefore the case of 26 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur the assessee is cove·red by the conditions laid down in section 271AAB of the Act, initiate penalty proceedings u/s 271AAB of the IT Act for A.Y. 2014-15. Initiate penalty under section 271AAB of the income tax Act 1961 for A.Y. 2014-15 7.2 Aggrieved with the aforesaid addition, assessee carried the matter before the Ld. CIT(A), wherein the addition has been vacated by the First Appellate Authority with the following observations: 3.2.3. I have considered the grounds raised by the appellant company, the facts and circumstances of the case in the assessment order of the relevant year, reply/comment submitted by the AO and the submissions made by the appellant in this case. The statement u/s 132(40 of the Income tax Act was taken on 14.1.2014of Sh Ajay Chaudhary, the Director of M/s Raghuvir Ferro Alloys Pvt, Ltd. He was asked about certain business activities of entities, relation between entities and certain business processes. There is no confrontation of any incriminating material or seized material etc to the said person. In reply to q. no. 16 the director has suo moto surrendered Rs.13.50 Cr as undisclosed income related to him, his family and related concerns and it is based on seized material and assets. Thereafter in reply to q no. 17 the appellant has surrendered Rs.1.25 crores under income from other sources/ business stock and current assets. The appellant had submitted his retraction duly notarized to the Income tax authorities on 4.2.2014. The scanned copy is given below – 27 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 28 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 29 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 30 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 31 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 32 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur It is mentioned in the order by the AO that several incriminating documents were confronted to him and asked to explain and verify through regular books of account. The details of the discrepancies and documents are not possible for the authorized officer u/s 132 of the Act to put everything on statement recorded during the search proceedings. The assessee was unable to explain all the issue and get it verified from his regular accounts and statements submitted to the department Perusing the above details In the order, I have tried to find such instances of any particular incriminating ma1erial either in the statement or the assessment order which was confronted and which the appellant's director or authorized officer failed to explain. There is not a single mention of any particular transaction, loose paper or any Incriminating material anywhere. I find that the Assessing officer has made a very casual and general comment and in fact if there was any such material then it should have been mentioned in the assessment order. Itis the duty of the officer to bring all 33 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur the relevant incriminating material, facts and documents very clearly on the statement and the same needs to be confronted. Further, I also do not find any evidence related to income from other sources/ business stock and current assets of any particular year that has been mentioned in the statement u/s 132(4) of the Act against whom such surrender is accounted for. It is the duty of the AO to bring such facts in the assessment order after confronting the same to the assessee. I also find that the appellant has in its submissions given a counter to the case citation referred to by the AO by distinguishing facts and circumstances. I agree with the reasons given for the same by the appellant I also consider the other case citations mentioned by the appellant in support of his contentions. 3.2.5. I find it very unreasonable on the part of the AO that entire onus is put on the appellant to substantiate the surrender amount while the AO has not highlighted any single incriminating material r evidence of which can be linked to the kind of surrender made by the appellant. The AO has conveniently ignored the fact that he is supposed to highlight the incriminating material, facts and documents unearthed from the search and seizure operation and thereafter need to confront the same to the assessee before adjudicating the issues related to it. Once established then the AO could have reconciled such unearthing of undisclosed income with the undisclosed income surrendered in those particular heads. However, I do not find any such thing in the order. I also find it beyond comprehension where the AO mentions that the reasonableness of AO's approach in the said order that he has not substituted or appreciated the figure of amount offered / disclosed in the statement. This disclosure has been accepted by the department. However the AO forgets that it is his duty to corroborate such surrender with the incriminating material or facts/ issues related to undisclosed income. He has not mentioned any such evidence in the order. The AO kept on finding fault with the assessee forgetting about his own duties in the assessment order. Further I also do not find what is the basis of the AO mentioning at point no 8.6 that – “if any coercion or force are not alleged and proved, and assessee has voluntary declared undisclosed income and has not made retraction within 3 months of the statement recorded, onus lies with the assessee to prove that the declaration is made out of misconception. The assessee has not made such efforts. “I find this to be factually incorrect. I have obtained and verified the copy of retraction from the AO in the appellate proceedings and found that the retraction is dated 4.2.2014, which is around 20 days after the search and seizure action. I don't know how the AO is mentioning that the retraction is after more than 3 months later than search and seizure action. The AO has neither provided date of retraction nor mentioned anything about the content of retraction in the order. 34 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Further the case citation relied upon is meaningless as it is not applicable as the facts are portrayed here incorrectly. 3.2.6. It is in fitness of thing to also to refer to the reply of Addl. CIT (Central), Raipur in response to query raised by me on dated 24.07.2024. The scan copy of query raised is as given below:- The reply of Addl. CIT (Central)-1,Raipur dated 06.08.2024 to q. no. ii, iii & iv is as follows: (ii) Retraction submitted by the appellant or its AR is enclosed herewith. As per AOs submission, an affidavit / declaration dated 04.02.2014 wherein retraction of disclosure of income amounting to Rs. 125.00 Lakh has been found as per assessment records. (iii) As per para 8 of assessment order, the AO has rejected the retraction in the assessment order on the basis of following observation:- \"The retraction made by the assessee from the undisclosed income amounting to Rs.1.25 crores from his confession and statement recorded under section 132(4) is evidence, has been made without coercion and force. It is onus of the assessee to discharge it through proper evidences and reasons which he failed. Therefore, retraction is not accepted and subject to discussion is added to the income of the assessee under the provisions of section 69 of the Act.” iv) No, as per information available on records. Further, it is humbly requested that before taking any adverse view, the AO may be given opportunity to defend the assessment order. 3.2.7. Section 132(4) of the act empowers the Authorized Officer to examine and record a statement under oath of any person who is found to be in possession or control of any books of account. documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 {11 of 1922), or under the Income-tax Act, 1961. Direct Tax Law (Amendment) Act'1987 w.e.f. 1-4-1989, inserted an explanation to Section 132(4), which reads as under:- \"Explanation.-For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as 35 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act,1922 (11 of 1922), or under this Act. It is appreciated that huge importance to the statements recorded u/s 132(4) of the Income Tax Act during search and seizure operations is given, which is clear from the intent of Legislature as it thought tit to include a separate sub-section 132(4) for recording of statement during a search operation. However, It is very important to mention here is that the words 'may be used in evidence in any proceedings' appearing in section 132(4) are of great significance. The Legislature seems to be aware that some admissions may be made at the time of search which may be true, but for which sufficient corroborative evidence may not be found. The Division Bench of the Kerala High Court in CIT v. Hotel Meriya [2010] 195 Taxman 459/[2011] 332 ITR 537 considered the scope of a statement recorded under section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income-tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such an evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income-tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income-tax Act. Reliance is placed on the Departmental Circular No. 14(XL-35), dated 11-4-1955 which states that officers of the Department must not take advantage of ignorance of an assessee as to his rights. It is one of their duties to assist a taxpayer in every reasonable way. Therefore, the retraction of statement tendered on mistaken belief of law or facts should be accepted by the department. Further the CBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 regarding confession of additional income during the course of search & seizure and survey operation is as reproduced herein under- \"In pursuance of the Finance Minister's budget speech dated 28-2-2003 this instruction was issued by the CBDT and is as under: \"Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed incomeduring the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation 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 department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. 36 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Any action on the contrary shall be viewed adversely\". This instruction is in line with the recommendation of the Task Force on Direct Taxes Chaired by Dr. Vijay Kelker.\" Recommendation in final Report Para 3.27 of Task Force on Direct Taxes Chaired by Dr. Vijay Kelkar in this context is also mentioned here.  The CBDT must issue immediate instruction to the effect that no raiding party should obtain any surrender whatsoever.  Where, a taxpayer desire to voluntarily make a disclosure, he should be advised to make so after the search.  All cases where surrender is obtained during the course of the search in violation of the instruction of the CBDT, the leader of the raiding party be subjected to vigilance enquiry.  All statements recorded during the search should be Video recorded. Subsequently, CBDT also issued another letter [F.NO.286/98/2013-IT (INV-II], DATED 18-12-2014, emphasizing upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. The letter is being reproduced herein under:- \"SECTION 132, READ WITH SECTION 133A OF THE INCOME-TAX ACT, 1961- SFEARGH & SEIZURE • ADMISSIONS OF UNDISCLOSED INCOME UNDER COERCION/PRESSURE DURING SEARCH/SURVEY LETTER [F.NO.28619812013- IT (INV./1)), DATED 18-12-2014 Instances/complaints of undue influence/coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and- to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence / coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T. Act, 1961 and/or recording a disclosure of undisclosed income under undue pressure/coercion shall be viewed by the Board adversely. 37 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 6. This issues with approval of the Chairperson, CBDT. Hon'ble Supreme Court of India in case of Pullangode Rubber Produce Co. ltd. v. State of Kerala [1973J 91 ITR 18 wherein their Lordships while observing that admission is an extremely important piece of evidence held that it cannot be cold to be conclusive and the maker can show that it was incorrect. The landmark verdict was followed by the Hon'ble Delhi High Court of Delhi in case of S. Arjun Singh v. CWT [1989] 175 ITR 91. /[1988] 41 Taxman 272 (Delhi)]. Further reliance can also be placed on the judgement of the apex court in case of Nagubai Armul v. B Sharma Rao AIR 1956 SC 100 wherein it was held that an admission is an extremely important piece of evidence but it cannot be said that It is conclusive. It is open to the assessee who made the admission to show that it is incorrect. In yet another case of Sarwan Singh Rattan Singh v. State of Punjab AIR 1957 SC 637, the Hon'ble Supreme Court of India held that an admission is not conclusive as to the truth of the matters stated therein. Itis only a piece of evidence, the weight to be attached to which must depend on the circumstances in which it is made. It can be shown to be erroneous or untrue.' The Hon'ble Bombay High Court has dealt with this issue in case of Balmukund Acharya v. Dy. CIT (2019] 176 Taxman 316/310 ITR 310 (Born.} and has held as under:- 31. Having said so, we must observe that the Apex Court and the various High Courts have ruled that the authorities under the Act are under an obligation to act in accordance with law. Tax can be collected only as provided under the Act. If any assessee, under a mistake, misconceptions or on not being property instructed is over assessed, the authorities under the Act are required to assist him and ensure that only legitimate taxes due are collected (see SR. Kosti v. CIT [2005] 276 /TR 165(Guj.), CPA Yoosuf v. /TO [1970) 77 /TR 237(Ker.), CIT v. Bharat General Reinsurance Co. Ltd. [1971) 81 /TR 303(Delhi), CIT v. Archana R. Dhanwatey [1982)136 ITR 355(Bom.)\". Another case that is relied upon here is CIT v. Jorawar Singh M. Rathod (2005) 148 Taxman 35 (Ahd. - Trib.) (Mag.) where the assessee stated In retraction that during recording of statement he was under constant threat of penalty and prosecution and was confused about various questions asked by the search party about documents, papers, etc., of other persons found from his premises. He declared the sum under pressure which was evident from the fact that no such corroborative evidence, asset or valuables were found in form of 38 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur immovable or movable properties from his residence in support of the amount of disclosure which was later on retracted but not accepted by the department. The Tribunal observed:….It is true that simple denial cannot be considered as a denial in the eyes of law but at the same time it is also to be seen (that) the material and valuables and other assets are found at the time of search. The evidence ought to have been collected by the revenue during the search in support of the disclosure statement.” The retraction was held valid. Further in another case R. Koshti v. CIT (2005) 193 CTR (Guj.) 518 It has been held that if the assessee under a mistake, misconception or on not being properly instructed, is over assessed, the authorities are required to assist him and ensure that only legitimate taxes due are collected. The decision in CIT v. Durga Prasad More [1973] CIR (SC) 500, was tallowed 1.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 section132(4)...”. I also find the applicability of retraction of statements recorded at odd hours. The admissibility of retraction of statements which were given in an exhausted state and at odd hours was allowed by Gujarat High Court in Kailashben Manharlcil Choksi v. CIT {2010) 320 ITR 411 (Guj,). It was held that a statement which has been recorded u/s 132(4) at odd hours is not a voluntary statement if it is subsequently retracted. The Court observed that the main grievance of the A.O. was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advice. High Court held that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. The Court also held that the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. In this case the said statement was recorded in midnight only. In the end the AO has inferred that statement made is an evidence and had put the onus on the assessee only to give the basis of retraction. He has not accepted the retraction and made addition u/s 69 of the Income tax Act. I find this highly unreasonable and baseless. The AO has failed to find any incriminating material in the search to prove undisclosed income in the relevant years and also not been able to substantiate the surrender with any finding on incriminating material unearthed from the search action. The case citation relied upon the appellant are applicable and looking into the facts and circumstances of the case, I therefore hold that the addition deserves to be deleted. 39 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 7.3 Dissatisfied with the aforesaid relief granted by the Ld. CIT(A) to the assessee; by vacating the addition made by the Ld. AO u/s 69, revenue preferred the present appeal. 7.4 At the threshold, on the aforesaid issue Ld. CIT-DR reiterated the facts on the issue from the order of Ld. AO, as well as Ld. CIT(A). 7.5 Ld. CIT-DR further submitted that the impugned decision of Ld. CIT(A) has been suffering with serious infirmities, wherein the addition was deleted relying on assessee’s retractation affidavit, (i) ignoring the aspects that such affidavit is without acknowledgment of any tax authority before whom the same was filed by the assessee, (ii) regarding disclosure when the assessee was queried as to why the disclosed amount is not shown in the ITR, assessee remain silent and (iii) that the notice u/s 153A was issued on 22.04.2015, whereas the said retractation affidavit is dated 04.02.2014. Ld. Sr. DR further argued that Ld. CIT(A) had ignored the principle that the burden to prove that the genuineness of retraction lies on the assessee and the assessee needs to furnish documents in support of valid retraction. It was the submission that the contention of the assessee that the surrender was made under force and coercion without ascertaining the truth that such allegation was neither raised nor certified by the independent witnesses available at the searched premises during the entire search proceedings. 40 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 7.6 Ld. CIT-DR further submitted that in the case of Bhagirath Aggarwal vs CIT, (2013) 31 Taxmann.com 274, 351 ITR 143 (Delhi), Hon’ble Delhi HC has held that an addition in assessee’s income relying on statements recorded during the search operations cannot be deleted without proving statements to be incorrect. 7.7 Based on aforesaid submissions, it was the prayer that Ld. CIT(A), on the facts and circumstances of present case and in law, erred in deleting the addition of Rs.1.25 Crore made by the Ld. AO u/s 69 of the Act. The decision of Ld. CIT(A) qua the issue, therefore, liable to be set aside and the addition made by the Ld. AO merits to be restored. 7.8 Ld. AR on the other hand submitted that Ld. CIT(A) had rightly, judiciously and after taking cognizance of various jurisprudence inter alia, the instruction issued by CBDT have decided the issue in favour of the assessee, whereas Ld. AO had committed the mistake in making the addition even after assessee’s retraction towards the amount offered during the statements recorded u/s 132(4) which stand alone has no evidentiary value unless the same is supported with any corroborative evidence to justify such addition. Before us, Ld. AR placed a written submission qua the aforesaid addition u/s 69, the same is extracted as under: 41 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Submission of assessee 1. Copy of statement at PN 14 to 30 of PB. Surrender made vide answer to question no. 16 & 17 of statement, at PN 29 & 30 of PB. No reference of any seized material or any specific undisclosed transaction/income. 2. AO made addition stating that number of incriminating documents confronted to assessee during search which assessee could not explain and so surrendered amount is liable to be added. 3. Questions on some of the seized material: - i) Q. no. I & 2 of statement, PN 17 of PB. ii) Q. no. 3 & 4 of statement, PN 18 of PB. None of the found/seized document contain any reference of any undisclosed income. 4. No incriminating material or undisclosed income found during search. No other addition made by AO for the year under appeal, except on account of surrender & disallowance of foreign exchange fluctuation loss. 5. Surrender baseless: retracted i) Surrender made during search was thus without reference to any material/evidence found during search and was baseless. ii) Surrender was involuntary and therefore retracted vide affidavit dated 04.02.2014, copy at PN 31 to 34 of PB. iii) Retraction affidavit filed before ACIT, Central Circle-I, Raipur on 22.04.2015. Evidence at PN 31 of PB. 6. No other material, except surrender statement, relied upon by AO for making addition. 7. Since surrender was totally baseless, unsupported by any finding whatsoever, stood retracted, no addition could be made on the basis of such statement. 8. Reliance on: - i) Chetnaben J. Shah vs ITO (2016) 288 CTR 579 (Guj.), PN 68 to 73 of PB, relevant findings at PN 72, para 5 & 6. ii) Kailashben Manharlal Chokshi vs CIT (2010) 328 ITR 411 (Guj.) 42 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Assessee came forward with voluntary disclosure of the 7 lakh. There was nothing to show that the surrender was made under duress, pressure and coercion. Vide page 420, para 26, Hon'ble High Court concluded that merely on the basis of admission the assessee could not have been subjected to additions unless and until some corroborative evidence is found in support of such addition. iii) Jayantilal Thakordas Jariwala Vs. ACIT - (2015) 45 CCH 054 (Ahd. Trib.), PN 74 to 85 of PB, relevant findings on PN 82 & 83, para no. 12 & 14. Held, disclosure u/s 132(4) during search was an admissible evidence but not conclusive one. This presumption of admissibility of evidence was a rebuttable one and merely on the disclosure statement made u/s 132(4), addition could not to be made. Department was unable to lay its hand on the material exhibiting unexplained income to the extent of Rs. 10 crores. iv) Avishkar Infrastructure Pvt. Ltd. vs. DCIT - (2015) 44 CCH 0217 (Mum. Trib.), PN 86 to 96 of PB, relevant findings on PN 95, para 6.3. v) DCIT Vs. Pramukh Builders (2008) 112 TTD 179 (Ahd.) (TM), PN 97 to 117 of PB, relevant findings on PN 115, para 7. There being no spectre of evidence regarding undisclosed income, addition made only on the basis of statement of managing partner of assessee under s. 132(4), given in a state of confusion and later retracted, could not be sustained either in part or as a whole. vi) CIT vs Naresh Kumar Agarwal (2014) 369 ITR 171 (T & AP). PN 118 to 124 of PB, relevant findings on PN 121, para 10, 11 & 12. Although u/s 132(4) statements recorded shall be treated as piece of evidence, it would be so, as long as the statement is not retracted. If the assessee comes forward with plea that his statement was recorded under coercion. the evidentiary value of such statement suffers from a serious dent. Vide para 11 it was observed that the mandate u/s 132(4) gets honoured only when there is no other version from the assessee vis a vis the statement. However, if the statement is retracted by the person from whom it is said to 43 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur have been recorded, it has to be subjected to the same test, as is done in matters of similar nature. Sec. 132 cannot be taken as a provision laying down any new principle in the law evidence. Vide para 12, it was held that for all practical purposes, statement u/s 132(4) partakes the character of one recorded by an investigating officer u/s 162 of Cr. PC. Howsoever desirable, it may appear to be, it cannot· be ascribed status of a proven fact. 7.9 Based on the aforesaid submissions, Ld. AR argued that the finding of Ld. AO does not reflect the correct fact that the assessee was confronted with incriminating documents during the search which the assessee was not able to explain, whereas none of the seized documents contains reference of any undisclosed income. It was the submission that no incriminating material was unearthed during the search action, therefore, there was no addition proposed and made by the Ld. AO, except on account of surrender and disallowance of Foreign Exchange Fluctuation Loss. The addition made, qua the surrender by the assessee, which was later retracted vide affidavit dated 04.02.2014 filed before the ACIT, Central Circle-1, Raipur on 22.04.2015 was therefore without any reference to any material or evidence surfaced during the search. Since the addition was made solely based on the statement of the assessee, dehors any corroborative evidence, no addition could be made. Ld. AR, on this aspect have placed his reliance on the following judgments: i) Chetnaben J. Shah vs ITO (2016) 288 CTR 579 (Guj.), PN 68 to 73 of PB, relevant findings at PN 72, para 5 & 6. 44 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 5. Learned Counsel for the respondent has taken this Court to Section 132(4) of the Act and contended that the statement made during the search is required to be accepted and the retraction was made after every long time. The reasoning of the Assessing Officer was confirmed by the Tribunal and therefore, no interference is called for by this Court in the facts and circumstances of the case. 6. We have heard learned Counsel for the respective parties and perused the records of the case. We re of the view that the CIT (Appeals) has rightly appreciated the case based on the sound principles flaw and has also considered the statement made by the assessee at the relevant point of time. We are of the view that in light of the observations made by this Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income-tax (supra), mere speculation cannot be a ground for addition of income. There must be some material substance either in the form of documents or the like to arrive at a ground for addition of income. Considering the ratio laid down in the above decision and in the facts of the present case, we are of the view that the issue raised in this Appeal is required be answered in favour of the assessee and against the Department. ii) Kailashben Manharlal Chokshi vs CIT (2010) 328 ITR 411 (Guj.) “13. He has further relied on the instructions dated 10-3-2003 issued by the Central Board of Direct Taxes, which states that instances have come to the notice of the Board where assesseets have claimed that they have forced to confess the undisclosed income during the course of the search and seizure and survey operations. Such confessions, if not based on credible evidence, are later retracted by the concerned assessee while filing returns of income. In these circumstances, confessions during the course of search and seizure and survey operations do not serve any useful purpose. This instruction further states that it is, therefore, advised that there should be focus and concentration on collection of evidence of income 45 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax Department. Similarly, while recording statement during the course of search and 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. 26. In view of what has been stated hereinabove, we are of the view that this explanation seems to be more convincing, has not been considered by the authorities below and additions were made and/or confirmed merely on the basis of statement recorded under section 132(4) of the Act. Despite the fact that the said statement was later on retracted no evidence has been led by the Revenue authority. We are, therefore, of the view that merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission. We are also of the view that from the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Hence there is no reason not to disbelieve the retraction made by the Assessing Officer and explanation duly supported by the evidence. We are, therefore, of the view that the Tribunal was not justified in making addition of Rs.6 lakhs on the basis of statement recorded by the Assessing Officer under section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee.” Learned Counsel for the appellant has taken us to the relevant findings of the Assessing Officer which are reproduced herein below :- \"In this connection the assessee was requested to explain as to under what circumstances he has not made included the above concealed income in his return of income filed for the A.Y. 1994-95. To this, it is explained by the assessee that his statement u/s. 132(4) was recorded under pressure and he was forced to make disclosure on account of concealed income as well as the unaccounted investment 46 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur made out of the said concealed income. The assessee also stated that during the course of search books of account and loose papers were found and seized but not evidences regarding the unaccounted concealed income of Rs.10,50,000/- in the purchase and sales of shares of the speculative nature have been found and seized by the Department. According to assessee he had not earned any such speculative income from the purchase and sales of shares but only Badla income was earned in earlier A.Y.'s which has been taxed while passing the order for Assessment in earlier years. The arguments and explanations of the assessee are not accepted because his statement u/s 132(4) of the Act was recorded voluntarily without replying any coercive measures by the search authorities and therefore now he cannot say that statement was recorded under pressure. The statement recorded u/s. 132(4) of the Act during the course of search as evidential value and the admission made by the assessee in his voluntary statement is an evidence itself to prove that the assessee had earned speculative income from the purchase and sale of shares which was not recorded in the books of accounts. The statement recorded u/s. 132(4) are very crucial and statement recorded under this sub-section are first in point of time, spontaneity in a statement suggests absence of deliberation on the part of the truthfulness in the version given. The first statement, therefore, carries more weight. Facts stated in the first statement are normally treated as acceptably. Apparently, there is no reason for any authorized person to pressurise the assessee for disclosure and it is a settled position as per evidence acts done by the public officer in discharge of his duties are bonafide and if anybody alleges otherwise, heavy bonus lies on him to establish the same. Apart from making self serving statement, the assessee has brought no facts, evidence, or details on records to establish the correctness of the contentions now taken. The assessee has admitted in initial statement that the income was earned from speculative activities in shares to some extent. This is provide from records as substantial shares were found and seized from the premises of the assessee has 47 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur discussed elsewhere. It is a non fact that when assessee wants to keep his income concealed no record of the same be maintained and it has been held by Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (214 ITR 801) that where no direct evidence is available matters are to be decided on the basis of pre- pronderance of probabilities. The Hon'ble Supreme Coun in the case of Sumati Dayal has largely relied on test of human probabilities in testing that case. In two other decisions the Hon'ble ITAT, Bombay Bench third member has reported at 205 ITR 52 and 209 IT at page no. 1 has also relied on the time tested test of human probabilities in concluding those cases. In the present case, any person or ordinary prudence would find the contentions of the assessee to be merely and after through. This is because of surrounding circumstances as described above make it highly likely that the assessee actually had earned speculation income of Rs.10,50,000/- from share transactions. Learned Advocate for the appellant has also taken us to the declaration which was made by the assessee at the time of filing of the assessment as also the statement u/s. 132(4) of the Act which was recorded on 24.08.1993 at 11.45 pm during the course of search proceedings and specifically to the statement No.(9) which reads as under :- \"(9) Over and above this, approximately Rs.10,50,000/- is earned from the trading of shares in different shares which are not recorded in the books of accounts.\" It is submitted that the CIT (Appeals) while considering the appeal has taken into account all the relevant details and held at Paragraph 24 as under :- \"24. It is a normal presumption that —statement under section 132(4) is given voluntarily unless it is proved otherwise. There is no evidence on record to show that this statement was given in any coercion. Therefore, I am unable to agree with the assessee that it was a forced statement. But I am reasonably impressed by the contention that this statement was subject to variation on either side after verification i.e. assessee could reduce the disclosure made or the Assessing Officer could enhance the same if the facts and evidence so warranted. May be, even if 48 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur this fact is not mentioned in the statement itself, the point will still remain since it is no body's case to get say any extra tax then is due. The reality remains that there is no evidence what-so-ever with the department even in consequence of a serious action like search and seizure followed by detailed security which could support the earning of speculation income of Rs.10,50,000/- in this year. In other words, there is no evidence to support the very existence of this income except the so called statement u/s 132(4) of the Act. It defies logic that an assessee will or should admit any income which he had not earned and which the department had not found out. I do not find any thing against the arguments that disclosure u/s. 132(4) was subject to variation and once the assessee had access to seized documents and he realised subsequently that there was no occasion to make this disclosure, he was having an inherent right to clarify the situation so that he could be taxed only on real income and not on an income which was not there at all, since there was no evidence to prove otherwise too. In addition, the very important fact that remains that inspite of the search, no material/evidence was found to show that the assessee was having any other undisclosed assets which could be linked with this disclosure. In view of the totality of the circumstances, arguments given by the assessee and reasoning as above, the addition made is deleted.\" ii) Jayantilal Thakordas Jariwala Vs. ACIT - (2015) 45 CCH 054 (Ahd. Trib.), PN 74 to 85 of PB, relevant findings on PN 82 & 83, para no. 12 & 14. 12. No doubt, the disclosure or admission made under section 132(4) of the Act during the course of search proceedings is an admissible evidence but not conclusive one. This presumption of admissibility of evidence is a rebuttable one, and if an assessee is able to demonstrate with the help of some material that such admission was either mistaken, untrue or based on misconception of facts, then solely on the basis of such admission no addition is required to be made. It is true that admission being declaration against an interest are good evidence, but they are not conclusive, and a party is always at liberty to withdraw the admission by demonstrating that they are either mistaken or untrue. In law, the retracted 49 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur confession even may form the legal basis of admission, if the AO is satisfied that it was true and was voluntarily made. But the basing the addition on a retracted declaration solely would not be safe. It is 10t a strict rule of law, but only rule of prudence. As a general rule, it is unsafe to rely upon a retracted confession without corroborative evidence. Due to this grey situation, CBDT has issued Circular So.286/2/2003 prohibiting the departmental officials from taking confession in the search. The board is of the view that often the officials used to obtain confessions from the assessee and stop further recovery of the material. Such confessions have been retracted and then the addition could not withstand the scrutiny of the higher appellate authority, because no material was found supporting such addition. Keeping in view, the above broad principle, let us examine the disclosure made by the assessee and his retraction. 14. The ld. counsel for the assessee has made a reference to a number of decisions. We think it is not necessary to re-capitulate and recite all the decisions on this legal aspect. But suffice to say that the core of all the decisions of the Hon'ble High Court as well as of the Tribunal is to the effect that the addition ought not to be made in the hands of the assessee, merely on the disclosure statement made under section 132(4) OF THE Income Tax. The statement has to be seen in the context of facts found in the course of search, and later on it is to be interpreted reasonably by considering the material collected by the Revenue. iii) Avishkar Infrastructure Pvt. Ltd. vs. DCIT - (2015) 44 CCH 0217 (Mum. Trib.), PN 86 to 96 of PB, relevant findings on PN 95, para 6.3 6.3 So far as it relates to findings recorded by Ld. CIT(A), one of the finding is that by making admission under section 132(4) the assessee has altered the position of the Department because of which the Department did not pursue the matter further and did not visit the said Acme Centre at Ahmedabad. It may be mentioned that such opinion of Ld. CIT(A) would be contrary to the aforementioned circular issued by CBDT, where the clear mandate has been given to the Income Tax Authorities working 50 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur under the CBDT that while recording the statement during the course of search/survey no attempt should be made to obtain confession of the undisclosed income and any such action would be viewed adversely. Recognizing such position their Lordships of Telangana & Andhra Pradesh High court have already observed that if addition is made simply on the basis of statement recorded under section 132(4) and no material is brought on record by the Revenue authorities then it would reflect upon very perfunctory nature of the survey/search action of the Department. Therefore, in absence of supporting material, the addition simply on the basis of statement cannot be upheld. The other findings of Ld. CIT(A) do not support the addition as they are only based upon the admission of the assessee. According, to the facts of the case, the assessee had furnished all required particulars regarding sale and expenditure incurred on the impugned project and AO could not point out any defect in those particulars submitted by the assessee. Thus, the addition is made simply on the basis of statement recorded during the course of search and is not supported by any material. In view of case law relied upon by Ld. AR, the addition is not sustainable and is deleted. iv) DCIT Vs. Pramukh Builders (2008) 112 TTD 179 (Ahd.) (TM), PN 97 to 117 of PB, relevant findings on PN 115, para 7. 7. I have duly considered the rival contentions, the material on record and have perused the proposed orders by my learned Brothers. Let us examine the main reasons given by the learned AM for his conclusion. The first reason which he considers to be a crucial pointer is that Shri Kamal Shah is the managing partner of the case of the assesee firm and in fact, is one of the main persons who is in the know of the affairs of the business. This fact is undisputable. However, having retracted from the original statement, the letter does not lead us to anywhere. The search was on the group as a whole consisting of several entitles. The statements that he may have given during the search are for the group as a whole and though in the statement he has given the break-up of disclosure, it is not corroborated by anything that might have been unearthed during the search. There may have been hundreds of reasons andthoughts crossing in the mind of the 51 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur deponent during the search and it is not expected that whatever is reeled out during the search is only after proper application of mind. He may have explained the modus operandi of charging on-money, or the avenues and the destination of such' money. Again, this may be true for the group as a whole but the retracted statement does not lead to the conclusion that the particular assessee before us had an undisclosed income of Rs.10 lakhs. The second reason given by the learned AM is that enhancing the figure of disclosure two months later shows proper application of mind and also absence of any duress while giving the statement. Well, there may not be any evidence of coercion being exercised by the search party, there may not be any duress also, but existence of confusion cannot be ruled out. Duress has to be distinguished from confusion. Duress is a constraint illegally exercised to force on person to perform some act. This, as mentioned earlier, may be absent. But confusion means something thrown into disorder wherein a person may be perplexed or embarrassed or thrown into turmoil. The entire family is likely to be in a state of perdition during and in the aftermath of the search. In fact, the revision of the earlier statement does not reflect application of mind but a state of compounded confusion only. V/hen such are the state of affairs, no sanctity can be attached to the statement and that cannot form the sole basis to determine undisclosed income. It is not the question of throwing the burden on the Revenue as observed by the learned AM, but certainly when search is conducted, it needs to have some basis to come to the conclusion of concealment. It is highly philosophical to say that restricting the addition only in the entity where material is found, betrays the thinking and the machination employed by the assessee, using it as a ploy to make travesty of the entire judicial process of the search and seizure proceedings. All said and done where is the evidence to show that assessee had any undisclosed income barring the statement given by Shri Kamal Shah while under utter state of confusion. As a matter of fact, what has been stated about the so-called machination of the assessee is an ill-founded and unwarranted allegation against the assessee. Further, it is interesting to note that though the learned AM has observed that the alternate argument of treating t 5 per cent of the gross on-money as income defects (defeats) the assessee's case in this regard. Despite this observation ultimately, be sustains the addition to that extent only. Therefore, in view of the foregoing discussion, I 52 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur am convinced that there being no spectre of evidence regarding undisclosed income, no addition can be sustained. I am in agreement with the view taken by the learned JM. v) CIT vs Naresh Kumar Agarwal (2014) 369 ITR 171 (T & AP). PN 118 to 124 of PB, relevant findings on PN 121, para 10, 11 & 12. 10. Assuming that a statement, which fits into sub-section (4) of Section 132 of the Act was recorded from the respondent, it needs to be seen as to how far that can constitute the basis for the appellant to proceed against the respondent. Sub-section (4) of Section 132 of the Act itself, is to the effect that the statements recorded shall be treated as piece of evidence in the proceedings under the Act. That would be so, as long as the statement is not retracted. If the assessee comes forward with a plea that his statement was recorded under threat or coercion, the evidentiary value of the statement suffers a serious dent. 11. The mandate under sub-section (4) gets honoured only when there is no other version from the assessee, vis-a-vis the statement. In such a case, the statement would constitute the basis for making block assessment even if the Department does not have any other material to buttress its case. However, if the statement is retracted by the person from whom it is said to have been recorded, it has to be subjected to the same test. as is done in matters of similar nature. This is particularly so, when the person, from whom it is recorded, is going to be visited with penal consequences. Sub-section (4) of Section 132 of the Act cannot be taken as a provision laying down any new principle in the law of evidence; 12. For all practical purposes, the statement recorded under sub-section (4) of Section 132 of the Act. partakes the character of the one recorded by an investigating officer under Section 162 of Cr. P.C. Howsoever desirable, it may appear to be, it cannot be ascribed the status of a proven fact. At the most, it would constitute the basis for the prosecution to frame its case and correspondingly be a material for the defence to ensure that the prosecution sticks to its version. The question of a statement of that nature being treated as the clinching evidence, by itself, leading to any penal action does not arise. 53 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 7.10 Supported with the aforesaid judgments, it was the prayer by Ld. AR that the addition made by Ld. AO u/s 69 based on statement of the assessee u/s 132(4), dehors any documentary support, which are later retracted, was rightly deleted by the Ld. CIT(A) following the settled position of law that merely on the basis of admission, the assessee could not have been subjected to additions unless and until, some corroborative evidence is found in support of such admission. It was the submission that considering the facts and circumstances of present case, the order of Ld. CIT(A) deserves to be sustained. 7.11 We have considered the rival submissions, perused the material available on record and case laws relied upon by the parties. Admittedly, in present case during the process of Search and Seizure, the assessee through Shri Ajay Chaudhary S/o Late Shri S. S. Chaudhary, Director of the assessee company, while recording the statement u/s 132(4) on 15.01.2014, have offered an amount of Rs.1.25 Crore to surrender in the name of M/s Raghuvir Ferro Alloys (the assessee), under income from other sources / business stock / current asset. A retraction dated 14.02.2014 thereafter was filed by the assessee before Ld. AO on 22.04.2015 and this fact was duly acknowledged by the Ld. AO in the assessment order. In the retraction letter, it was the 54 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur allegation by assessee that the statements recorded are not voluntary, that coercion, threat or inducement was exercised by the search team and the recording of statement is unauthorizedly converted into interrogation. On this issue, Ld. CIT(A) had raised certain questions with Ld. AO, in particular asking about the retraction by the assessee, the basis for rejecting the retraction in the assessment order and observation by the Ld. AO regarding the heads under which surrender was made by the assessee u/s 132(4) and the addition was made in the Assessment order. In response to such queries, Ld. AO submitted before the Ld. CIT(A) vide reply dated 06.08.2024 that the retraction by the assessee is rejected because the assessee failed in discharging the onus through proper evidence and reasons for retraction. Regarding heads in which the surrender was made, Ld. AO replied “No”, as per information available on records. Ld. CIT(A) further mentioned the CBDT instruction F. No. 286/2/2003 dated 10.03.2023 wherein it is categorically directed by the CBDT that the confession of assessee, if not based on credible evidence are taken / retracted by the concerned assessee’s while filing the Return of Income (ROI), in such circumstances, confession during the Search & Seizure and survey operation 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 55 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur Department. On this issue, Ld. CIT(A) had also referred to the judgment in the case of Kailashben Manharlal Choksi vs CIT (supra), wherein Hon’ble Gujarat High Court has held that a statement which has been recorded u/s 132(4) at odd Hours is not voluntary evidence, if it is subsequently retracted. The grievance of Ld. AO that the statement was not retracted immediately, and it was done after 2 months, it was an afterthought and made under legal advice. Hon’ble Court further held that merely on the basis of admission, the assessee could not have been subjected to such additions unless and until some corroborative evidence is found in support of such admission. The Court also held that the statement recorded at such odd hours cannot be considered to be a voluntary statement, if it is subsequently retracted and necessary evidence is led contrary to such admission. Ld. CIT(A) further observed that in the instant case, the statements are recorded at midnight only. Ld. CIT(A) observed that the findings of Ld. AO are highly unreasonable and baseless, Ld. AO has failed to find any incriminating material in the search to prove undisclosed income in the relevant year and not been able to substantiate the surrender with any finding on incriminating material unearthed from the search action. 7.12 In backdrop of aforesaid facts and circumstances and observations of Ld. CIT(A), we find substance in the submission of Ld. AR, who relied on the 56 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur judgment in the case of Chetanben J. Shah vs ITO (supra), wherein Hon’ble Gujarat High Court following the judgment in the case of Kailashben Manharlal Chouksi vs CIT (supra), has held that mere speculation cannot be a ground for addition of income, there must be some material substance either in the form of documents or the like to arrive at a ground for addition of income. Regarding the contentions raised by the revenue that the affidavit was not acknowledged by the department, cannot be of any assistance as the retraction by the assessee is duly discussed in the assessment order, therefore, filing of the same before Ld. AO, cannot be doubted at this stage. Assessee’s retraction after some time is duly taken care of by the Hon’ble Gujarat High Court in the case of Chetanben J. Shah vs ITO (supra), wherein Hon’ble High Court of Gujarat has referred to the contention raised by the revenue that the retraction was made after a very long time, therefore, the statement made during the search is required to be accepted. Regarding the reliance of the revenue on the judgment of Hon’ble Delhi HC in the case of Bhagirath Aggrawal vs CIT (surpa), we observed that the said case law is distinguishable on the facts, thus, the same cannot assist the contentions raised by the department in the instant case. In the case of Bhagirath Aggrawal vs CIT (surpa), the assessee had after recording of his confession have confirmed the earlier statement u/s 132(4) by a letter dated 09.01.2006, further there was no allegation of any threat or intimation having been meted 57 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur out by the revenue authorities, whereas in the present case, assessee never confirmed the confession under the statements u/s 132(4) and had also alleged to have been undergone through the threat, physical violence, duress and coercion, which led to a surrender of Rs.1.25 Crores on account of buying peace and to avoid litigation. 7.13 Having considered the totality of facts involved in the present case, in terms of aforesaid observations and the settled position of law, as there was no incriminating material collected by the revenue to support the surrender made by the assessee u/s 132(4) of the Act, unearthed during the Search & Seizure action, and the statement offered by the assessee are retracted, respectfully following the judicial pronouncements relied upon by the assessee referred to supra and the binding instructions of the CBDT which are need to be mandatorily adhered to by the department, we find substance in the decision of Ld. CIT(A) in deleting the addition made on the basis of statements of assessee u/s 132(4) dehors any corroborative evidence to support such addition, thus, without any interference, we uphold the order of Ld. CIT(A). Consequently, Ground No. 3, 4 & 5 of the present appeal of revenue stands dismissed. 58 IT(SS)A No.15/RPR/2024 ACIT, Central Circle-1, Raipur vs M/s Raghuvir Ferro Alloys, Raipur 8. In result, appeal filed by the revenue, in IT(SS)No. 15/RPR/2024 stands dismissed, in terms of our aforesaid observations. Order pronounced in the open court on 29/01/2025. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 29/01/2025 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- ACIT, Central Circle-1, Raipur 2. ŮȑथŎ / The Respondent- M/s Raghuvir Ferro Alloys Pvt. Ltd. 3. The Pr. CIT, Raipur (C.G.) 4. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "