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  • F.N. Irani
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  • T.A. BUKTEPradeep Parikh
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  • F.N. Irani
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Smart Summary

Structured Summary of the Tribunal Opinion

Factual and Procedural Background

The appellant (a firm running a tea stall business at a railway station) filed appeals against separate orders of the Commissioner (Appeals) XIV, Bombay dated 18 January 1993 for the assessment years 1988-89 to 1991-92. The Assessing Officer made additions of Rs. 6,00,000 for each assessment year 1988-89 to 1990-91 and Rs. 7,00,000 for assessment year 1991-92 on the ground that, during a search, two partners of the firm had agreed to make those additions. The Commissioner (Appeals) confirmed those additions, prompting these appeals to the Tribunal.

At the time of search (which the partners say continued from 9 a.m. on 7th September 1990 to 3 p.m. on 9th September 1990), two partners initially gave statements admitting undisclosed amounts but subsequently retracted those statements by affidavits dated 20th September, 1990 and 16th November, 1990, alleging coercion and pressure during the search. The Assessing Officer and Commissioner (Appeals) treated the retractions with suspicion and upheld the additions in assessment; the Tribunal heard submissions from both sides and reviewed relevant authorities before deciding the appeals on merits.

Legal Issues Presented

  1. Whether additions to the firm's income (Rs. 6,00,000 per year for 1988-89 to 1990-91 and Rs. 7,00,000 for 1991-92) could be sustained when they were based primarily on statements recorded during a search that were later retracted by affidavit claiming coercion?
  2. Whether a statement recorded during an extended search (two days and two nights) can be treated as voluntary and sufficient basis for additions in the absence of corroborative documentary or other supporting evidence?
  3. Whether a retraction of confessional statements is admissible and should be given weight where the retraction is supported by the absence of independent supporting material for the additions?

Arguments of the Parties

Appellant's Arguments

  • The additions were made solely because the partners allegedly agreed to make them at the time of search; those confessional statements were later retracted on grounds of coercion and pressure during a two-day search.
  • No incriminating documents, loose papers or other material were found during the search to support the additions; therefore, mere statements (now retracted) cannot sustain additions.
  • The business was a regulated tea stall at a railway station where prices and licence-fee calculations were fixed by railway authorities; this left little or no scope to earn the extra income alleged.
  • Cited authorities (Tribunal and higher court decisions) to support the proposition that retractions made on grounds of coercion should be accepted if there is no supporting evidence for the admission, and that evidence offered only by way of an uncorroborated offer or confession which the Department did not accept cannot be relied upon.
  • If affidavits retracting confessional statements are to be accepted in part, they ought to be accepted in full — the Department cannot selectively accept portions to justify additions while rejecting the remainder.

Departmental Representative's Arguments

  • The statements recorded by the two partners during the search were voluntary and final; the bottom of the statements contained language asserting voluntariness.
  • Given that the search lasted two days and two nights, the confessional statements were nevertheless genuine and the retractions were afterthoughts.
  • The retraction affidavits did not come with documentary evidence to support the allegation of coercion; therefore the retractions should not be accepted.
  • Relied on case law distinguishing the authorities cited by the assessee and argued that in the absence of direct documentary evidence it is permissible to sustain additions if the trier of fact is satisfied on the available material.
  • Referenced commentary from Income-tax law (Chaturvedi & Pithisaria) to argue that retraction without documentary corroboration should not be allowed.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
J.B. Boda & Co. P. Ltd. — Tribunal, Bombay Bench 'A', 1 June 1994 (ITA Nos. 1850 & 1851/Bom/1991) Retraction of a statement made under coercion cannot form the basis for an addition or disallowance. Relied upon by the appellant to support accepting the retraction; the Tribunal considered it persuasive for the proposition that retracted confessions obtained under pressure should not sustain additions.
Shri Kishore A. Meshwani & Shri Amilal S. Meswani — Tribunal, Bombay Bench 'A', 7 Aug 1990 (ITA Nos. 7161 & 7162/Bom/1987) An offer or admission (for example, taxation of jewellery at a stated amount) is not necessarily sustainable as an assessment basis simply because it was offered; the profit/income should be assessed on proper basis. Appellant relied on it to show that an offered or confessional amount (without corroboration) is not automatically acceptable for assessment; the Tribunal treated it as supportive of the need for supporting material besides the confession.
Shri Suresh Chandra Agarwal — Tribunal, Bombay Bench 'E', 21 Apr 1993 (ITA No. 7900/Bom/1992) Retraction may be rejected where disclosure was voluntary and clearly made so. Relied upon by the Department, but the opinion notes that reliance is weakened because a subsequent miscellaneous application recalled that Tribunal order on grounds that certain submissions had not been properly appreciated.
Shri Nagesh S. Navalgund — Tribunal, Bombay Bench 'C', 30 Sep 1993 (ITA No. 6743/Bom/1992) Upheld addition based on a statement recorded at the time of search and seizure. Department relied on it; the opinion notes that the order was subsequently re-examined (M.A. No. 8/Bom/1994) and recalled in part, so reliance was considered not fully correct.
Electra (Jaipur) P. Ltd. v. IAC (1987) 26 ITD 236 (Del.) Judiciary and Revenue aim to discover the truth; genuine payments/deductions should not be disallowed merely because evidence arouses suspicion — require re-examination. Appellant relied on it to support the proposition that the Tribunal should seek the truth and accept retraction where appropriate and re-examine the matter rather than sustain additions based on suspicious evidence.
G.V. Rattaiah & Co. Ltd. v. ITO (1986) 19 ITD 89 (Hyd.) New material adduced before the Tribunal may be accepted where it is credible and essential to justify the decision; fresh facts can be admitted. Appellant relied on it to argue that the retraction (as fresh material) should be admitted and given weight.
Addl. Commissioner v. Kanhaiyalal Jessaram (1977) 106 ITR 168 (MP) An offer made for settlement (e.g., under s.271(4A)) which the Department does not accept cannot be used against the assessee for making additions; facts disclosed in an unaccepted offer should be excluded. Appellant cited it to argue that where an offer/statement is not accepted by the Department, evidence from such offer should not be relied upon for additions; Tribunal considered the analogy.
State of Kerala v. C. Velukutty (1965) 60 ITR 239 (SC) Maintenance of secret accounts in one place does not necessarily mean corresponding secret accounts exist elsewhere; arbitrary extrapolation of concealed turnover without corroborative material is unjustified. Appellant relied on this Supreme Court observation to show that arbitrary surmise about undisclosed income in one entity based on another is unsustainable without supporting material.
Attar Singh Gurmuk Singh v. ITO (1991) 191 ITR 667 (SC) Statutory interpretation in taxing matters may legitimately aim to curb black money; finding of black money must, however, be supported by material. Department relied on it to support the proposition that direct documentary evidence is not always necessary to detect concealed income; the Tribunal noted, however, that in the instant case black money was not found or supported by evidence.
CWT v. Rohtas Industries Ltd. (1967) 67 ITR 283 (Pat.) In absence of direct evidence, a judicial or quasi-judicial body can base conclusions on notorious facts consistent with principles of section 144 of the Evidence Act. Department cited it; the Tribunal noted that while the principle supports reliance on notorious facts in absence of direct evidence, the Assessing Officer had not produced such notorious facts in the present case.
Raza Sugar Co. Ltd. v. Commissioner (1981) 130 ITR 421 (Del.) and Buland Sugar Co. Ltd. v. Commissioner (1981) 130 ITR 434 (Del.) Where facts show that "on money" (unaccounted consideration) was realized, additions based on that finding may be proper and not excessive. Department relied on these authorities to demonstrate occasions where additions based on factual findings were upheld; Tribunal found these cases factually distinguishable from the instant appeal.
C.B. Lalvaney v. Commissioner (1992) 197 ITR 302 (Bom.) Tribunal's fact-based finding that investments were benami was upheld where relevant principles were applied correctly. Department cited it by analogy; Tribunal regarded the facts in that decision as distinguishable from the present facts and therefore not decisive here.

Court's Reasoning and Analysis

The Tribunal proceeded through a step-by-step analysis of facts, evidence and authorities:

  1. Scope of dispute: All grounds of appeal related to the same issue — additions made in four assessment years on the basis of statements recorded during search and subsequent confirmation by Commissioner (Appeals).
  2. Examination of retractions: Two partners filed affidavits retracting their statements and alleging coercion and pressure during a prolonged search (two days and two nights). The Tribunal noted the partners' explanation that pressure made them agree at the time of search and that they later retracted upon reflection.
  3. Evidence on record: The Tribunal observed there were no incriminating documents, loose papers or documentary material produced from the search to substantiate the additions; the Assessing Officer had not adduced independent supporting evidence for the additions beyond the confessional statements.
  4. Comparative and business facts: The Tribunal considered the nature of the appellant's business (regulated tea stall with prices and licence-fees fixed by railway authorities) and that comparable cases showed similar turnovers; this reduced the plausibility of very large concealed income from the business.
  5. Assessment of voluntariness: Given the duration and circumstances of the search, the Tribunal found there was considerable substance to the contention that the statements may not have been free, fearless and voluntary. The Tribunal reasoned that extreme admissions of large undisclosed amounts are inconsistent with normal voluntary disclosures and can indicate forcible admissions.
  6. Weight to retraction: The Tribunal emphasized precedent that retraction should be allowed where it is supported by proper principle and evidence. Here, because no independent supporting material existed to corroborate the confessional statements, the retraction carried weight.
  7. Evaluation of precedents: The Tribunal reviewed rival authorities cited by both sides — some authorities supported accepting retractions when corroboration is absent, while others allowed additions where facts showed voluntariness or other supporting material. The Tribunal treated those decisions as fact-sensitive and distinguished several of the Department's cited authorities on facts or subsequent developments (e.g., recall of an order).
  8. Conclusion on evidence: Because the Assessing Officer did not produce supporting evidence beyond the recorded statements, and because those statements were plausibly recorded under pressure and later retracted, the Tribunal concluded that the additions could not be sustained on merits.

Holding and Implications

Holding:

All the appeals are allowed.

Direct consequences and implications:

  • The additions of Rs. 6,00,000 (for each of assessment years 1988-89 to 1990-91) and Rs. 7,00,000 (for assessment year 1991-92), which were made solely on the basis of statements recorded during the search and subsequently confirmed by the Commissioner (Appeals), are not sustained by the Tribunal because no corroborative material was produced and the recorded statements were plausibly made under coercion.
  • The Tribunal accepted the partners' retractions and held that, in the absence of independent supporting evidence, those earlier statements could not serve as a basis for addition. As a result, the appellant succeeds on merits and the disputed additions are set aside.
  • The opinion does not purport to lay down a new general precedent; it resolves the appeals on the facts and evidence before the Tribunal and applies existing authorities to those facts. (The opinion distinguishes and applies earlier decisions on a fact-sensitive basis rather than announcing novel legal doctrine.)

Note: This summary strictly reflects only the information contained in the provided Tribunal opinion and does not add or infer facts beyond that text.

Show full summary ...

    Deepchand & Co. v. Assistant Commissioner of Income-tax

    T.A. Bukte, Judicial Member - The appellant- firm has filed all these appeals against the separate orders of the Commissioner (Appeals) XIV, Bombay, dated 18th January, 1993, for the assessment years 1988-89 to 1991-92 mostly on the common ground of making addition of Rs. 6,00,000 in each of the assessment years 1988-89 to 1990-91 and the addition of Rs. 7,00,000 in the assessment year 1991-92 on the ground that at the time of search, the appellant's partner agreed for making the said additions. Accordingly, the Assessing Officer made the said additions in the respective assessment years and the Commissioner (Appeals) has confirmed them. Therefore, these appeals.

    2.We have heard the learned representative for the assessee Shri F.N. Irani and the learned Departmental Representative Shri D.K. Singh. Their arguments are taken into consideration.

    3. All the grounds of appeal pertain to the said issue of making the additions of Rs. 6,00,000 each in the assessment years 1988-89 to 1990-91 and Rs. 7 lakhs in the assessment year 1991-92. At the outset, it would not be out of context to mention here that the partners retracted the earlier statements for agreeing to make the additions as aforesaid. His explanation was that the search continued from 9.00 a.m. on 7th September, 1990 upto 3 p.m. on 9th September, 1990 i.e., two days and two nights. During the said search, great pressure was brought on him. Therefore, there was no alternative for him except to agree for making the said additions as aforesaid.

    4. The second explanation was that the addition cannot be made merely for agreeing to make such addition. The Assessing Officer must have a basis and supporting documentary evidence to make even the agreed addition. If there is no supporting evidence or material on record, for making the addition, on the mere statement recorded at the time of search bringing pressure upon him cannot be justified. Nothing incriminating was found at the time of search. No documents or loose papers to support the additions was found. For this reason also, the additions as made aforesaid cannot stand to the test. Such addition, according to the appellant, should be deleted.

    5. Thirdly, the learned representative for the appellant-firm has relied on the Tribunal's order of Bombay Bench `A' of the Tribunal dated 1st June, 1994 in Income-tax Appeal Nos. 1850 & 1851/Bom/1991 for the assessment years 1987-88 and 1988-89 in the case of J.B. Boda & Co. P. Ltd. In that case also, the search and seizure operations were carried out. The confessional statement was given by Shri Bharat Boda on 6th July, 1989 and it was retracted on 7th July, 1989 by way of letter dated 7th July, 1989, addressed to Asstt. Director, Inspection and delivered on 11th July, 1989. The verification of the records was made thoroughly. The assessment was reopened under section 148 of the Income-tax Act, 1961, as done in the instant appeals. Mr. Bharat Boda was the managing director. He filed the affidavit on 27th July, 1989, contending that on the basis of the statement alone, no addition made could be justified especially when the genuineness of the donations and the allegation of the kickbacks had been gone into by counterpart of the Assessing Officer and found to be in order. The verification of the records of the Jaslok Hospital was also made. The Tribunal held that the retraction of the earlier statement which was recorded under coercion and pressure cannot become the basis for making an addition or a disallowance.

    6. It was submitted on behalf of the appellant-firm that the business carried on by the appellant-firm was of tea stall at railway station. The licence fee of the assessee was calculated by the railway authority at a certain percentage of the assessed sales turn. The rates of different eatable items at the different stalls at the railway stations were fixed by the railway authority. The appellant-firm did not have any choice to sell the eatable items at the different rates than the rates fixed by the railway authority. For this reason, it was submitted that there was no scope to earn more income out of the business of the tea stall at the railway station.

    7. It was further submitted that the sales turnover as the basis of charging licence fee has come nearer to the income shown by the appellant. The conditions laid down by the railway authority for carrying out the business of tea stalls at railway stations are on pages 1 to 6 of the paper book.

    8. The learned representative of the appellant also relied on another decision of the Bombay Bench `A' of the Tribunal dated 7th August, 1990, in the case of Shri Kishore A. Meshwani, Bombay, in Income-tax Appeal No. 7161/Bom/1987 for the assessment year 1983-84 and in the case of Shri Amilal S. Meswani in Income-tax Appeal No. 7162/Bom/87 for the assessment year 1983-84. In that case, the dispute was for making the addition of Rs. 4,90,000. The search and seizure operations were carried out under section 132 on 27th November, 1986. The statement of the assessee was recorded under section 132(4) at the time of search. The assessee offered the amount of Rs. 3 lakhs as unaccounted jewellery. Discrepancies were also found. Details of income were furnished. Regular books of account were not maintained nor they were found in the course of search proceedings. Certain money was also found at the time of search and the Department questioned the availability of that money. The net profit returned was assessed. The Tribunal held that only the profit was to be charged and not the amount offered. However, in that case, 82 items were found. In para 11 of the said order, the Tribunal clearly held that merely on the basis of assessee's offer for being taxed at Rs. 3 lakhs for unexplained jewellery as contained in his answer extracted, the assessment could not be sustained. Thus, it became clear that the value of the jewellery was offered for taxation but the same was held as not sustainable.

    9. The Departmental Representative relied on the decision of Bombay Bench `E' of the Tribunal dated 21st April, 1993, in the case of Shri Suresh Chandra Agarwal in Income-tax Appeal No. 7900/Bom/1992 for the assessment year 1991-92 and the copy of the said decision was filed on record. The Tribunal, in that case, did not accept the retraction because in that case, the assessee made it clear that the disclosure was voluntary. The learned Departmental Representative further relied on the decision of the Bombay Bench `C' of the Tribunal dated 30th September, 1993, in the case of Shri Nagesh S. Navalgund in Income-tax Appeal No. 6743/Bom/1992 for the assessment year 1991-92. The Tribunal, in that case, upheld the addition on the basis of a statement recorded at the time of search and seizure. However, the Tribunal in M.A. No. 8/Bom/1994 vide its order dated 22nd April, 1994, relying on the letter dated 16th January, 1991, which was a part of the paper book, wherein the assessee made submissions in respect of peak of the amount as undisclosed income, the Tribunal admitted that those submissions were not properly appreciated and, therefore, the Tribunal recalled its order by allowing misc. application. Hence, reliance placed on this order is not correct.

    10. The partners of the appellant-firm filed their affidavits dated 20th September, 1990, and 16th November, 1990, and withdrew their statements recorded by the search party at the time of search. The Commissioner (Appeals) made an observation that no evidence was furnished regarding the actual threats given by the search party. No such evidence could be furnished. It would be veracity of the evidence and retracted statements to be believed or not to be believed for making an addition without any basis. It was also observed that why the partners took about two months' time to retract the statements. According to the Assessing Officer and the Commissioner (Appeals), the retraction of the statements was an afterthought and under the advice. If a person making a statement agreeing to make an addition without having earned any income or without finding any incriminating documents would certainly require time to think over the repercussion of his confessional statement. If the time is taken to understand the veracity of the confessional statement, that does not become a material point to make and confirm the addition.

    11. It may be correct that even a person conducting a tea stall business at the very important and posh locality may earn much more but that does not mean that the business conducted at the tea stall at the railway station would also earn such handsome and sizeable income. The other tea stall owners of railway stations have shown comparatively similar income from their business. The turnover of the comparative cases was also nearer to the assessee's turnover. Therefore, it would be incorrect to say, even accepting lesser income in the comparative cases, the assessee does not have a case to accept either the turnover of the business or the profits as shown by it. Right from the date of filing the affidavit dated 16th November, 1990, the partner of the appellant-firm submitted that his statement was recorded under section 132(4) under the threats and coercion. The threats given and the coercion brought upon cannot be proved by furnishing documentary evidence as held by the Commissioner (Appeals). The partners, S/Shri Ashok D. Shah and Pravin D. Shah had given statements. Mr. Dipchand M. Shah had not given any statement agreeing to make the addition. Not giving the confessional statement by one partner does not bind him to the confessional statements given by the other partners.

    12. The stereotyped mention at the end of the statement that whatever was stated was true and to the best of the knowledge and belief and the statement given was voluntary without any threat, force or undue influence, would not mean that the partners agreed for making additions. Putting certain expression at the end of the statement cannot be taken as true in view of the retraction. Retraction can be made only after understanding the correct meaning and consequences of the statement. The copies of the statements were not furnished to the partners to know the contents. If the statements recorded at the time of search and seizure operations were true and voluntary, there was nothing wrong in furnishing the copies of the statement. In paragraph 3 of his order, the Commissioner (Appeals) has accepted that the assessee's quantum of income was higher than the incomes of the comparable cases but he held that every case is based on distinguishable facts. It is true that the direct evidence about earning higher income may not be always available but that does not mean that there should not be any indirect evidence to form the basis of estimation of the income. At random, any income higher or lower cannot be assessed in the hands of the assessee without supporting evidence. Undisclosed income can be determined and for doing so, certain material other than relying on mere confessional statement is required. Therefore, the statements of two partners dated 7th September, 1990 which are retracted later on is a questionable truth.

    13. Nothing was produced before us regarding reopening of the assessment under section 147 r/w section 148 and, therefore, we need not give any finding in respect of reopening of the assessments. The merits were argued and they have been considered.

    14. After discussing the facts, arguments and some of the orders relied upon by both the parties it would be necessary to discuss and consider the case law relied upon by both the parties. While submitting that the additions had been made on the basis of confessional statement and later on the said confessional statement was retracted by affidavits by those two partners who gave the statement, it does not make much more difference that Mr. Ashok D. Shah and Mr. Pravin D. Shah were having 40 per cent shares in the profit and loss of the assessee-firm and Mr. Dipchand M. Shah was only having 20 per cent shares and therefore the statement should not be given much more importance. It was again pointed out that nothing was found from the premises of the firm. The learned representative forced the question where was the evidence to make the addition, if there was no evidence according to him, the addition cannot be made on the basis of the statement of two partners only, who gave their statement under pressure and force. The relevant points on this issue were from page 152 of the paper book. Mr. Irani cited and relied upon the decision of Delhi Bench `A' in the case of Electra (Jaipur) P. Ltd. v. IAC (1987) 26 ITD 236 (Del.). The Delhi Bench `A' held in that case the sole purpose of judiciary as well as of the Revenue is to get at the truth. If the truth is that the payment of commission was genuine and was dictated by the business needs, such a payment should not be disallowed merely on the ground that the evidence led was of such a nature as to create a very high degree of suspicion. The Tribunal admitted the assessee's evidence and directed to examine the payment of commission afresh. This decision was relied for the purpose of finding out a truth from the statement recorded by the search party and affidavits filed to retract the same.

    15. The learned representative also relied on the decision of Hyderabad Bench `A' of the Tribunal in the case of G.V. Rattaiah & Co. Ltd. v. ITO (1986) 19 ITD 89 (Hyd.). The Hyderabad Bench of the Tribunal in that case held that the nature of new material adduced before the Tribunal for first time was such that there was no scope to doubt the truth or veracity and such material was very essential to justify the decision of the case. In that event the fresh facts can be admitted. In this view of the matter the assessee's learned representative contended that the statements of two partners required to be ignored in view of the retraction. According to him in any event the confessional statement have been nullified. His further proposition was that the approach followed by the Commissioner (Appeals) that the earlier statement cannot be retracted was not correct. Tribunal's order concerned with from pages 153 to 160 particularly pages from 158 to 160 were relied upon. Mr. Irani submitted that the assessee's case was much more stronger than the cases considered by the Tribunal on those pages of the paper book.

    16. While arguing regarding the defects in the books of accounts the decision of the Supreme Court from 8th STC 770 and relevant observations from 776 were relied. Mr. Irani submitted that you cannot accept the part of the affidavit and reject the another part of the same. According to him, if you are inclined to accept the contents of the affidavit, the same may be accepted fully and if not inclined to accept, the contents of the affidavit, it must be rejected. This contention was in connection with the affidavit filed by the two partners retracting their earlier statements and the Assessing Officer accepting the part of the said affidavit by rejecting the another part. He has cited the decision of the Madhya Pradesh High Court in the case of Addl. Commissioner v. Kanhaiyalal Jessaram (1977) 106 ITR 168 (MP). In that case the offer made was not accepted and the Department decided the assessee's case on merits on the basis of facts disclosed in such offer have to be excluded. Any offer made for settlement under section 271(4A) could not be accepted by the Department, in that event the offer cannot be considered for making additions. In the instant appeal also the offer made for settlement was not accepted by the Department and therefore Mr. Irani submitted that the evidence disclosed in the offer cannot be relied upon, when the offer itself was not accepted. Such an approach cannot be taken as correct and in support of this contention Mr. Irani relied on the decision of the Supreme Court in the case of State Of Kerala v. C. Velukutty (1965) 60 ITR 239 (SC). The Supreme Court held in that case on the facts that the maintenance of secret accounts in the head office does not necessarily follow that a corresponding set of secret accounts have been maintained in the branch office. Maintenance of secret accounts in the branch office might lead to an inference that the accounts disclosed did not comprehend all the transactions of the branch office. But that does not establish or even probabilize the finding that 135 per cent or 200 per cent or 500 per cent of the disclosed turnover was suppressed. That could have been ascertained from other materials. The assessments were arbitrarily made by applying a ratio between disclosed and concealed turnover in one shop to another shop of the assessee. It was only a capricious surmise unsupported by any relevant material and the assessment would not be sustained. This submission and the decision of the Supreme Court was relied upon because in the instant appeal the assessee is having undisclosed income in another firm, the addition had been made in this one.

    17. As against these arguments and the case law relied upon on behalf of the assessee, the learned Departmental Representative Mr. D.K. Singh, contended that new evidence in the form of affidavits should not be accepted by ignoring the statements made by the two partners. He has agreed that search went on for two days and two nights according to him the confessional statement was final and genuine. He relied on Commissioner (Appeals)'s order. He has also submitted that the statement made by the two partners S/Shri Ashok and Pravin were voluntary as in the bottom of the statements such sentence is written. According to him there was no supporting evidence to the contents of the affidavit. He submitted that the decision of the Tribunal relied upon were distinguishable on facts. Further, he has pointed out that the assessee in this case were literate and there was no mistake in the statement given before the search party. He has also pointed out the commentary from the Income-tax Law by Chaturvedi and Pithisaria 4th Edition, Volume-III, pages 33, 34, & 35. While pointing out the said commentary the retraction should not be allowed because there was no documentary evidence to support the retraction. He submitted that retraction was an afterthought.

    18. Mr. Singh while submitting that no direct evidence could be always available to substantiate the unaccounted income or concealed income, in support of this contention, he has relied on the decision of the Supreme Court in the case of Attar Singh Gurmuk Singh v. ITO (1991) 191 ITR 667 (SC). The Supreme Court considered in that case in interpreting the taxing statute it cannot be obvious of the proliferation of black money which is under circulation in our country. Any restraint intended to curb the chances and opportunities to use or create black money should not be regarded as curtailing the freedom of trade or business. That would be a case in the event of finding out black money. In the instant appeal, the Department did not find out black money nor supporting evidence for making additions on account of black money has been brought on record. Mr. Singh relied upon the decision of the Patna High Court in the case of CWT v. Rohtas Industries Ltd. (1967) 67 ITR 283 (Pat). This is again in support of not having any direct evidence.

    The Patna High Court held in that case in the absence of any direct evidence, a judicial or quasi-judicial Tribunal can base its conclusions on the basis of what are known as notorious facts bearing in mind the principles of section 144 of the Evidence Act. The Assessing Officer did not find out any direct evidence, he has also not brought any notorious facts for making additions. This decision supports both the parties.

    19. Then he has relied upon the decision of the Delhi High Court in the case of Raza Sugar Co. Ltd. v. Commissioner (1981) 130 ITR 421 (Del.) and Buland Sugar Co. Ltd. v. Commissioner (1981) 130 ITR 434 (Del.). Delhi High Court held in that case taking all the facts and circumstances into consideration the Tribunal found that some `on money' on free sale of sugar was realised by the assessee- companies and that the amount added by the ITO on this account could not be said to be excessive. This decision supports the submission if there are any facts to come to a conclusion that the additions made are proper. In that case admittedly the `on money' was realised on free sale of sugar. In the instant appeal there is no evidence to make conclusion that the additions made are proper except the mere statements of two partners only. He has relied upon the decision of the Bombay High Court in the case of C.B. Lalvaney v. Commissioner (1992) 197 ITR 302 (Bom.). The Bombay High Court held in that case that the facts had been duly considered by the Tribunal and it could not be said that in arriving at the conclusion the basic relevant principles of law have either been missed or misapplied. The Tribunal was justified in holding that the wife and son were the benamidars of the assessee and in including the investments made by them and the income earned thereon in the total income of the assessee. No question of law arose from that order. In that case the Tribunal came to the conclusion based on the evidence that the wife and son were benamidars of the assessee. In the instant appeal there is no evidence to come to a conclusion that the additions made have been proper and they are based on proper and supporting evidence. Thus, the facts of that case are distinguishable from the facts in the instant appeal.

    20. We have examined the facts of the case. We have considered all the arguments advanced on behalf of both the parties. We have further looked into the case law relied upon by both the parties. In our opinion there is no supporting evidence to confirm the additions except the statements of two partners recorded at the time of search. It would not be out of context to mention here that the statements recorded by the search party during the search of more than two days and two nights cannot be considered to be free, fearless and voluntary. There is a considerable substance in the assessee's contention that the statements were recorded under pressure and force. The Tribunal has held that retraction should be allowed if it is based on proper principles and evidence. In the ordinary course no assessee would say that he had much concealed unaccounted money as mentioned in the statements herein. At the most what was expected to say was that certain income from the business was not disclosed, but putting in the mouth of the assessee that so much amount was unaccounted and concealed would itself indicate that the admission was forcible and not voluntary.

    Secondly we must not create any disparity on the identical point in identical cases. The Tribunal has held in several cases that if the retraction is supported by the proper evidence, no weight should be given to the earlier statements. In the instant appeal the retraction was supported by proper evidence because no evidence is brought on record for making additions except mere statements. Therefore following the decisions of the Tribunal, we are inclined to accept the retraction. So far the evidence to make the additions is concerned, the Assessing Officer has not adduced any evidence to support his additions. Therefore, the additions on merits cannot be sustained.

    In the result, the appellant succeeds and all the appeals are allowed.

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    Comments

    Deepchand & Co. v. Assistant Commissioner of Income-tax
    (Jul 27, 1994)