ANIL KUMAR AGRAWAL V. INCOME TAX OFFICER

ITA/449/2009

AI Insights

The case involves Shri Anil Kumar Agarwal, who appealed against the decisions of the Income Tax Officer, Ward-4(1), Jaipur, which were upheld by the CIT(A) and the Tribunal. The dispute centered on the addition of Rs. 2,70,248 as undisclosed income and Rs. 77,298 ignoring provisions of the Income Tax Act, 1961. The appellant contended that these amounts were declared from his regular business income, and the statements admitting them were made under coercion during a search and seizure operation. The court examined the circumstances under which the statements were made and the subsequent retraction by the appellant, leading to the conclusion that the additions were unjustified.

• Counselvise Citation: [2017] 140 COUNSELVISE.COM (IT) 768646 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 29-08-2017
• Assessment Year: misc
• Other Referred Cases: Kailashben Manharlal Chokshi vs. Commissioner of Income Tax, The Commissioner of Income Tax-IV vs. Ramanbhai B Patel, Chandrakumar Jethmal Kochar vs. Income Tax Officer, Chetnaben J Shah Legal Heir of Jagdishchandra K. Shah vs. The Income Tax Officer Ward 10(3) Or His Successor
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: K D MATHUR; PRATEEK KEDAWAT
• Assessee Lawyers: SIDDHARTH RANKA; RAJ KUMAR YADAV
• Keywords: Coercion; Income tax appeal; Retraction; Search and seizure; Undisclosed income
• Section: 28; 145(3); 132(4)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 449 / 2009 SHRI ANIL KUMAR AGARWAL S/O SHRI GOPI RAM AGARWAL, R/O-1818, GOVIND RAV JI KA RASTA, CHANDPOLE BAZAR, JAIPUR ----Appellant Versus THE INCOME TAX OFFICER WARD -4(1) JAIPUR, NEW CENTRAL REVENUE BUILDING , STATUE CIRCLE, B.D. ROAD, JAIPUR ----Respondent _____________________________________________________ For Appellant(s) : Mr. Siddharth Ranka with Mr. Raj Kumar Yadav For Respondent(s) : Mr. K.D. Mathur & Mr. Prateek Kedawat for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Order 29/08/2017 1. By way of this appeal, the appellant has assailed the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal of the assessee confirming the order of the Assessing Officer as well as CIT(A). 2. This court while admitting the matter framed the following questions of law:- “i) Whether in the facts and cirucmstances of the case the learned ITAT was right in law in holding that the AO was right in adding Rs. 2,70,248/- as undisclosed income on the basis of assessee’s statement, retracted by specific affidavit dated 20.11.2007, dated 23.2.2005 and ignoring the provision of the Section 28 of the IT Act, 1961? ii) Whether the learned ITAT was right in law in (2 of 11) [ITA-449/2009] confirming the addition made by the respondent u/s 145(3) of the Act ignoring the provision of Section 44AF of the IT Act, 1961 and at Rs. 77,298/-.” 3. Counsel for the appellant has taken us to Annexure-1 which reads as under:- “This is to request you to kindly left the released good lying at J.M. Cool House Pvt. Ltd. in the name of M/s Narsingh Dass Ved Prakash, Delhi details of which is enclosed. These good actually belongs to me. Investment in these goods have been out of my declared income for the current financial year and this I paid an advance tax (including cess and of Rs. For A.Y. 2005-06 Copy of Challan/proof of payment is also enclosed for ready reference. You honour would revel your con that are duly or produce would be are concealed income as accept if above mentioned.” 4. He has also taken us to the questions which are put to him on the same day by the Delhi Office on 23rd February, 2005 more particularly question no. 3, 5 & 6 which reads as under:- “iz]3. vkius ,d i= fnukad 23-02-05 nkf[ky fd;k gS ftlesa vkius dgk gS fd eSllZ ts],e]dwy gkml izk] fy] esa 2]70]248@& Li;s dk eky iMk gqvk gSA tks fd ujflaag nkl osn izdk’k ds gSaA vkius ;s Hkh dgk gS fd vki bl eky ds mij Li;s 86]480@& Li;s dk ,MokUl VSDl Hkh djus dks rS;kj gSA D;k vki ;g ckr ekurs gSa m- ;g ckr lp gSA vkSj eSa bls Lohdkj djrk gWwA iz]5] ;g fd xqM~l fdl uke ls bEiksVZ fd;k gS crk;s= m- ;g eky eSusa ,d nyky ds Fkzks ¼}kjk½ [kjhnk FkkA ;g eky eSllZ lcj buVjus’kuy us ujflag nkl osn izdk’k es bEiksVZ fd;k Fkk vkSj ;g eky eSusa muls [kjhnk FkkA iz-6 D;k vki dqN vksj dguk pkgrs gS m- bl eky ds vUnj esjh tks buosLVesUV gS oks esjh jsX;wyj cqDl vkWQ vdkmUV ¼fdrkcsa½ ls ckgj gS tks fd vu,DlIys.M gSA eSa igys gh bl buosLV dks viuh bPNk ls vkidks crk pqdk gwa vkSj blds mij tks Hkh vfxze dj ¼,MokUl VSDl½ curk gS eSa Hkjus dks rS;kj gwaA rFkk ml pkyku dh dkWih vkidks fn[kk nwaxkA ;g fMLDykstj eS viuh bPNk ls ¼okysUVjyh½ dj jgk gwa vkSj bl ;dhu ds lkFk dj jgk gwa fd vki esjs mij dksbZ isuy izksohtu ugh yxk;sxsaA (3 of 11) [ITA-449/2009] 5. He further contended that on the basis of this, the appellant has filed his return on 17th August, 2005 which was accepted and refund was granted on 19th October, 2005 at Annexure-4. Subsequently, the proceedings were initiated on 20th November, 2007 by filing his affidavit at annexure-5 which reads as under:- “I Anil Kumar Agarwal S/o, Late Shri Gopi Ram Agarwal, resident of 1818, Govind Rao Ji Ka Rasta, Chandpole Bazar, Jaipur do hereby declare and state on oath as under:- 1. That I was proprierot of M/s Santosh Store, 1818, Govind Rao Ji Ka Rasta, Chandpole Bazar, Jaipur. 2. That due to losses the activities of said firm has been closed w.e.f. 31.03.2006. 3. That after drawing funds in cash from my regular business, I made purchases of dry fruits at Delhi on dated 04.12.2005 for a sum of Rs. 2,70,248/-. the dry fruits were purchased through broker. The dry fruits were stored at storage of J.M. Cool House Private Limited, Delhi. The DDI Investigation Unit 1(3), New Delhi has seized the said dry fruits at cold storage on dated 14.12.2004. 4. During the course of seizure I personally clarified the source of investment i.e. drawings from regular business in purchase of said dry fruits. I was ready to produce regular books of accounts to DDI for verification. The Learned DDI was continuously pursuing me to declare the investment in dry fruits as my income from undisclosed sources. Further he also inform him that in case no declaration is made as per his advise the dry fruits will not be release for a longer time. Since the value of old dry fruits decrease sharply after passing of time in market, or say after a period of six months value remains less than half of the dry fruits. For the reason, I was forcely admitted that investment in dry fruits were made by me from my undisclosed sources, while actually investment was made out of cash drawings from regular books of accounts. As such statement was made under pressure and is not binding on the me.” (4 of 11) [ITA-449/2009] 6. In spite of his retraction, the CIT (A) has added the income and the Tribunal has confirmed the same. 7. He has relied upon the decision in case of Kailashben Manharlal Chokshi vs. Commissioner of Income Tax reported in [2010] 328 ITR 411 (Gujarat) wherein it has been held as under:- “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 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 (sic) to disbelieve the retraction made by the AO (sic-assessee) 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 lacs on the basis of statement recorded by the AO under Section 132(4) of the Act. The Tribunal has committed an error in ignoring the retraction made by the assessee. 8. He has also relied upon the decision of Gujarat High Court in case of The Commissioner of Income Tax-IV vs. Ramanbhai B Patel in Tax Appeal No. 207/2008 decided on 20th July, 2016 wherein it has been held as under:- “5.1. Learned Counsel for the assessee has relied upon letter [F. No. 286/98/2013-IT (INV.II] dated 18/12/2014 whereby the instructions was issued in relation to Section 132, read with Section 133A of the Income Tax Act, 1961 with regard to search & seizure, admission of undisclosed income under coercion/pressure during the search/survey. The said (5 of 11) [ITA-449/2009] circular reads thus: \"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. 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.\" 9. This Court had also an occasions to deal with the similar issue in case of Chandrakumar Jethmal Kochar (supra), where this Hon'ble Court after considering various pronouncements has held as under: \"3. Learned advocate for the appellant has submitted that the Tribunal has committed an error in allowing the appeal. He further submitted that the Tribunal (6 of 11) [ITA-449/2009] has not given any cogent reasons in its order. \"4. As against this, Mr. Soparkar, learned Senior counsel heavily relied upon the decision of this Court in the case of Kailashben Manharlal Chokshi v. Commissioner of Income Tax, reported in MANU/GJ/0744/2008 : [2010] 328 ITR 411 (Guj.), more particularly paragraph No. 23. In the aforesaid case, the judgment rendered in CIT v. D.L.F., reported in MANU/SC/1059/1999 : [2000] ITR 855 has been referred. Paragraph No. 23 of the decision of Kailashben Manharlal Choksh (supra) reads as under:-- 23. The main grievance of the Assessing Officer was that the statement was not retracted immediately and it was done after two months. It was an afterthought and made under legal advise. However, if such retraction is to be viewed in light of the evidence furnished alongwith the affidavit, it would immediately be clear that the assessee has given proper explanation for all the items under which disclosure was sought to be obtained from the assessee. So far as amount invested in house property is concerned, the assessee has specifically stated in his explanation dated 28.2.1989 that there was absolutely no basis for making the disclosure on account of bunglow at 68, Sarjan Society, Athwa Lines, Surat. It was in the year 1964 that the assessee took one Plot No. 68 in Sarjan Co.Operative Housing Society which was also constructing the bunglow for which the assessee claimed to have been made contribution from time to time. The assessee took possession of the bunglow in 1974 when only ground floor was constructed. Since then he has been living there. The assessee has constructed first floor during 1986 to 1988 and he has incurred the expenses for first floor structure to the tune of Rs. 2,03,185.65 ps. but this amount has been withdrawn from the account of the firm in which the assessee is a partner. As per say of Mr. Shah even departmental valuation officer has also accepted that the cost of construction of first floor worked out to Rs. 2,06,060/-. There was, therefore, no reason for making addition of Rs. 4 lacs on the basis of alleged disclosure made by the assessee in his statement recorded under Section 132(4) of the Act. In support of this statement the Revenue has not brought any evidence whatsoever which would establish that the assessee had in fact incurred an amount of Rs. 4 lacs on the construction of the first floor and that amount was invested out of the undisclosed income. Hence there is no justification for making account of Rs. 4 lacs merely on the basis of statement recorded under (7 of 11) [ITA-449/2009] Section 132 (4). None of the authorities have considered this explanation and the CIT(A) as well as Tribunal both have proceeded on the footing that the Assessing Officer has considered the explanation. So far as the addition on account of gold ornament to the tune of Rs. 1 lac is concerned, the assessee has given the explanation that was reproduced by the Assessing Officer in his assessment order which says that during the course of search and seizure proceeding, statement of assessee's wife, Smt. Kailashben Chokshi was recorded and according to which she had received about 25 tolas of gold each from her parents and from her parents in law side at the time of her marriage in the year 1960. She had given 15 tolas of gold ornaments to her daughter Ritaben at the time of her marriage in the month of March, 1988. If the total jewellery found during the course of search is taken into consideration, in light of the instructions issued by the Board, any middle class Indian family may be having jewellery and gold ornaments to that extent. Hence, no addition can be made on that count. Even if the board Circular may not have retrospective operation, looking to the quantum of holding and assessee's explanation, we are of the view that this is a normal holding which can be found in any middle class Indian family and hence no addition could have been justified on that count. So far as addition of Rs. 1 lac on account of unaccounted investment in furniture is concerned, it is stated by the assessee that on the ground floor furniture was made before 15 years and assessee had spent Rs. 25,000/- for renovation after making withdrawal from the firm's account. It is further submitted that the furniture on the first floor was partly received and paid out of withdrawals from the firm. At the time of the search additional furniture meant for the first floor was just received by way of parcel from Ahmedabad and was lying in bundles. A detailed source of investment of furniture purchased from Ahmedabad with a due confirmation from the party concerned have been filed by the assessee before the Assessing Officer. Since no payment of this additional furniture was made by the assessee till the date of search, no addition could have been made on this count. 5. We have heard learned advocates appearing for both the parties and perused the material available on record. The Tribunal while deciding the appeal in paragraph No. 8 has observed as under:-- (8 of 11) [ITA-449/2009] 8. We have heard the assessees counsel and the D.R. We are of the opinion that the CIT(A) when he relied upon the statement of the assessee made on 8.8.90 ignored the fact that there were two statements recorded on that day. The first statement was recorded at the 8 am. and second statement was recorded at 8:45 pm. in the night. In the first statement recorded in the morning which are contained on pages 1 to 12 of the assessees paper book. There is no acceptance of the fact that the business belonged to him and not to the other persons who are said to have given the statements against him. It is notable that 33 questions were asked in the morning session and this morning session statement was the first statement. Therefore, if the line of reasoning recorded by the CIT (A) is accepted then the reliance has to be placed on the first statement in the morning. In this first statement in the morning there is no acceptance of any benamidari or any disclosure. It is notable that the second statement of the assessee started at 8:45 pm. which according to the assessee continued upto 6 am. next day. This is contained from pages 13 to 26 of the paper book and contains 35 questions and answers. Till question No. 21 of the second statement there is no allegation of any benamidari. From question No. 22 the statement starts talking about proprietorship of different concerns in the name of his various employees. Even in answer to question No. 22 he could not give the names of the proprietors of Kamal Traders, Naman Traders, Sampat Traders, Adarsh textiles. In the last sentence of the said answer he stated as translated in English besides above there are no other firms in the name of our employees. In answer to question No. 23 he accepted that Sugam Textiles was being run by his employees as his benami. In answer to question No. 24 he accepted that all the concerns mentioned in question No. 22 are his benami concerns. In answer to question No. 26 he accepted that certain bank accounts were his benami bank accounts. In answer to question No. 27 he further agreed that all the deposits made in the name of his employees are his deposits. In answer to question No. 33 he disclosed an income of Rs. 15 lakhs. He could not give any further details on that date. On 31.8.90 another statement of this assessee was recorded. In that he accepted that he was a partner in Padam Enterprises as individual and in Mahavir Trading Co. as HUF. In answer to question No. 14 he stated that through the two concerns of Sugam Textiles and Shanti Traders the profits of 14 concerns belonging to his group were reduced. The name of 14 concerns are given on assessees paper book page No. 28. In answer to (9 of 11) [ITA-449/2009] question No. 12 he made a disclosure of Rs. 24 lakhs in all including Rs. 15 lakhs disclosed on 8.8.90. From the above statements one thing is clear that in the first statement made in the morning of 8.8.90 this assessee did not disclosure any benamidari and it was only in the second statement taken from 8:45 pm. onwards that he disclosed certain benamidaris and proceeded make certain disclosure. It is notable that the disclosure. Made in answer to question No. 12 appearing on assessees paper book page No. 32 in the statement given on 31.8.90 talks about disclosure of 24 lakhs in 14 concerns as group disclosure. The issue regarding group disclosure has neither been discussed by the A.O. nor by the CIT(A). Under I.T. Act an assessment has to be made on an assessee on an income determined in his case for a particular year. The quantum of disclosure made in each and every 14 concerns have not been identified by either of the lower authorities. The department has also not contested the fact that this assessees son suffered from diabetes. In view of the above circumstances we see reason to believe that the second statement given by the assessee after 8:45 pm. was not given under the circumstances which could be said as normal for the assessee. 6. In view of the above discussion and considering the principal laid down in the case of Kailashben Manharlal Choksh (supra), we are of the considered opinion that the view taken by the Tribunal is just and proper. We are not convinced with the submissions made by Mr. Mehta, learned advocate for the appellant that the Tribunal has not given cogent reasons. Therefore, the answer to the first question would be against the Revenue and in favour of the assessee. The second question will also ensure for the benefit of the assessee as from the record it is clear that other concerns were not Benami concerns of the assessee.\" 9. He has also relied upon another decision of Gujarat High Court in case of Chetnaben J Shah Legal Heir of Jagdishchandra K. Shah vs. The Income Tax Officer Ward 10(3) Or His Successor in Tax Appeal No. 1437/2007 decided on 14th June, 2016 wherein it has been held as under:- “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 (10 of 11) [ITA-449/2009] search is required to be accepted and the retraction was made after a very 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 are of the view that the CIT (Appeals) has rightly appreciated the case based on the sound principles of law 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 a 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 to be answered in favour of the assessee and against the Department.” 10. He contended that the authority has accepted the return and refunded the amount and the Delhi Authority has compelled him to make the statement to release goods worth more than Rs. 2,00,000/- on which he was required to pay tax Rs. 86, 000/-. 11. Counsel for the respondent has supported the order of the Tribunal and contended that the retraction is made subsequently and reasoning adopted by the Tribunal is required to be affirmed. 12. We have heard counsel for both the sides. 13. Firstly, the statement which was recorded on 23rd February, 2005 if it is taken alongwith the letter dated 23rd February, 2005 at Annexure-A, the contention raised by the appellant with regard to retraction is supported by his own letter. Apart from that the refund was granted on 19th October, 2005 and taking subsequent (11 of 11) [ITA-449/2009] proceedings u/s 147, the contention raised by the assessee with regard to retraction is required to be accepted. The Tribunal, CIT(A) and the AO has seriously committed an error in adding income Rs. 2,70,248/- in spite of affidavit of 20th November, 2007 and letter dated 23rd February, 2005 and rejection of books of accounts u/s 145. 14. The statement which has been made by the appellant that the assessee was compelled to make statement in view of goods which was attached was of pericible nature and the cost was three times of tax which are required to be paid therefore, it was contended that the assessee will adopt easy way to be caught hold of the tax authority. 15. In our considered opinion, the Tribunal has seriously committed an error in adding Rs. 77,298/- ignoring provisions of the act therefore, both the issues are required to be answered in favour of the assessee. 16. The appeal stands allowed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/3 "