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Bannalal Jat Constructions (P.) Ltd. v. Assistant Commissioner of Income-tax
Judgment Summary — Bannalal Jat Constructions (P.) Ltd. v. Assistant Commissioner of Income-tax, Central Circle-2 Ajmer
Factual and Procedural Background
This appeal under Section 260A of the Income-tax Act, 1961 challenged the order dated 29.12.2017 of the Income Tax Appellate Tribunal (Jaipur Bench). The core factual matrix (as set out in the opinion) is as follows:
- On 10.10.2014 a search (and related proceedings) was conducted at the residential and business premises of Shri Bannalal Jat, Director of the appellant company (M/s Bannalal Jat Constructions Pvt. Ltd.). He also ran a proprietorship (M/s Bannalal Jat Contractor).
- Cash of Rs. 1,21,43,210/- was found at the residential premises and inventorised in the panchnama (Annexure CF dated 11.10.2014).
- In a statement recorded under Section 132(4) (and later under Section 131), Shri Bannalal Jat admitted that the cash represented undisclosed income of the appellant company.
- When the appellant-company did not offer this amount in its return for the relevant assessment year, the Assessing Officer issued a show-cause notice and ultimately added Rs. 1,21,43,210/- to the company's income as unaccounted/undisclosed income. The CIT(A) and thereafter the ITAT affirmed this addition.
- The appellant contended before the High Court that it had later updated the proprietorship's books, showing the cash to belong to the proprietorship (not the company), and thus that the company had legitimately retracted the earlier admission; it relied on documents and a CBDT instruction to support retraction.
- The High Court examined the evidence and authorities and ultimately answered the substantial question of law in favour of the revenue and dismissed the appeal.
Legal Issues Presented
- Whether, under the facts and in law, the Income Tax Appellate Tribunal was justified in upholding additions made by the Assessing Officer based on statements recorded under Section 132(4) of the Income-tax Act, 1961, while ignoring the presumption under Section 292C and the evidences produced by the appellant (as framed in the substantial question of law admitted for hearing).
Arguments of the Parties
Appellant's Arguments (as presented in the opinion)
- The appellant updated the proprietorship's books of M/s Bannalal Jat, reconciled accounts and showed that the cash (Rs.1,21,41,528/- in one place in the record) belonged to the proprietorship concern, not the appellant-company; therefore the company validly retracted the earlier statement that the cash was its undisclosed income.
- Reference was made to CBDT Instruction No. 286/2/2003-IT (INV-II) dated 10.03.2003 to show that non-disclosure in the return can be treated as a retraction.
- Cited M. Narayanan & Bros. (Madras High Court) where retraction during assessment proceedings was accepted on merits when supported by materials.
- Argued that the retraction was not a bare retraction but was backed by books and other supporting material; the delay in completing the proprietorship books was explained in the reply dated 02.12.2016.
- Contended that statutory presumption under Section 292C (and provisions such as Section 132(4A)(i)) was rebutted by panchnama and entries and explanations; relied on Pepsi Food and Sunil Aggarwal decisions (Delhi High Court) to show additions cannot be based solely on statements when retraction is supported by evidence.
- Contended ITAT erred by unduly favouring the admission under Section 132(4) and by not neutrally considering the documentary evidence and explanation offered.
- Also relied on the principle that where two views are possible, the view favourable to the assessee should be preferred (citing Escorts Heart Institute & Research Centre Ltd.).
Respondent's (Revenue) Arguments (as presented in the opinion)
- The director (Shri Bannalal Jat) had, in statements recorded during and after the search, admitted that the cash belonged to the appellant-company and represented undisclosed income; these admissions were reinforced by entries and materials seized.
- The cash-books produced later were incomplete and contained many pending entries; the Assessing Officer was entitled to disbelieve such books because completeness and correctness were not established.
- There was a time gap between the dates of bank withdrawals and the date of search which undermined the appellant's explanation.
- Relied on the principle that statements recorded under Section 132(4) carry great evidentiary value and cannot be discarded in a summary manner; retraction must be timely and accompanied by strong proof (relying on CIT v. Ravi Mathur and a series of other authorities).
- Maintained that the assessee failed to discharge the burden of proving that the admission was wrong or produced cogent evidence to show it was made under duress or compulsion.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court (as stated in the opinion) |
|---|---|---|
| CIT, Bikaner v. Ravi Mathur | Statements recorded under Section 132(4) have great evidentiary value; retraction must be promptly and convincingly proved; retraction after long delay is of little value. | Ravi Mathur was followed and reproduced at length; the Court relied on it as a key authority to hold that 132(4) statements cannot be discarded lightly and that late, unsupported retraction loses significance. |
| THE PULLANGODE RUBBER & PRODUCE CO. LTD. v. STATE OF KERALA (1973) | An admission is an important piece of evidence but not conclusive; it can be rebutted by the person who made it. | The Court referenced Pullangode to state the settled proposition that admissions are important but rebuttable; however, rebuttal requires cogent evidence. |
| M. Narayanan & Bros. v. Income Tax Special Investigation Circle | Retraction made during assessment proceedings may be entertained where supported by materials produced on merits. | The appellant relied on this Madras High Court decision; the Court noted that where retraction is backed by materials it may succeed, but found such supporting evidence lacking or inadequate on the facts of the present case. |
| Pepsi Food (P) Ltd. v. ACIT | Application of statutory presumptions (Section 292C) where documents/money found in possession during search are presumed to belong to that person unless rebutted. | Appellant relied on this decision to contend the presumption under Section 292C could be invoked; the Court addressed presumption but found the record did not sufficiently rebut the evidentiary weight of 132(4) admissions. |
| The Commissioner Of Income Tax v. Sunil Aggarwal | Holdings on whether additions can be based solely on statements when retraction is followed by cogent rebuttal evidence. | The Court observed Sunil Aggarwal did not assist the appellant because in that case the assessee supported retraction with cogent material; in the present case the Court found such material was not produced. |
| Escorts Heart Institute & Research Centre Ltd. v. Dy. CIT | Where two reasonable views are possible on evidence, the view favourable to the assessee should be preferred. | The appellant cited this principle; the Court considered it but concluded that on the facts and evidence before it the view favouring the revenue was tenable. |
| Rameshchandra & Co. v. CIT | Supporting authority (as relied by revenue) on evidentiary weight of statements and/or handling of retractions. | Relied upon by the respondent; the Court treated it as one of the authorities supporting the proposition that 132(4) statements have evidentiary value. |
| Dr. S.C. Gupta v. CIT | Authority on evidentiary value of admissions and the burden on the assessee to rebut them. | Relied upon by respondent and noted by the Court as consistent with the principle that admission must be rebutted by cogent evidence. |
| Bachittar Singh v. CIT | On the acceptability of retraction and the need for contemporaneous evidence to support retraction. | Cited by the respondent; Court cited it as supportive of the position that delayed retractions without sufficient evidence may not be acceptable. |
| Commissioner Of Income Tax v. Ms. Hotel Meriya | Scope and admissibility of statements recorded under Section 132(4) as evidence under Section 158BB and related provisions. | Referred to by the Court (Division Bench) to underline that statements recorded under Section 132(4) and seized documents are admissible and carry evidentiary value. |
| Commissioner Of Income-Tax v. Lekh Raj Dhunna | On drawing presumption under sections 132(4) and 132(4A) and the assessee's burden to rebut with cogent material. | The Court cited this authority as supporting the need for the assessee to produce cogent material to displace the presumption arising from statements and seized material. |
| CIT v. O. Abdul Razak | Addressed evidentiary value of admissions and the role of statements recorded during search. | Cited by the respondent and noted by the Court among authorities affirming the evidentiary weight of search statements. |
| ACTO, Anti Evasion-I, Alwar v. Khandelwal Foods Products (Alwar) | Supporting authority relied upon by the revenue (Raj. High Court decision). | Relied upon by the respondent; Court treated it as part of the line of cases supporting the revenue's position. |
| Kailashben Manharlal Chokshi v. Commissioner Of Income-Tax | Example where the assessee successfully supported retraction with proper evidence. | The Court distinguished the present facts from such cases, noting that where retraction is supported by cogent evidence it may succeed; found such support lacking here. |
| CIT v. Omprakash K. Jain | On the assessing officer's duty to examine genuineness of documents produced in support of retraction. | Referenced to indicate that genuineness of documents must be objectively considered; Court found that on facts the Assessing Officer could reject the later-produced accounts. |
| P.K. Palwankar v. CGT | Authority cited in the opinion concerning admissions and evidentiary value. | Mentioned in the opinion as part of earlier authorities on the weight of admissions; Court treated it as part of the jurisprudence affirming the evidentiary significance of admissions. |
| Commissioner Of Income-Tax, Kerala v. Mrs. Doris S. Luiz | Authority cited on admissions and their evidentiary import. | Referred to by the Court as part of the body of case law indicating that admissions made in statements can form the basis of assessment unless convincingly rebutted. |
Court's Reasoning and Analysis
The Court's analysis proceeded by reference to the factual record, the statements made during search, the subsequent explanations and documents produced by the appellant, and the settled law on the evidentiary value of statements recorded during search and seizure. The Court's step-by-step reasoning (as expressed in the opinion) can be summarized as follows:
- Fact-finding basis: The ITAT had found on the material that Shri Bannalal Jat managed business affairs of both the proprietorship and the company from his residence and that this made it difficult to identify whether cash found belonged to the proprietorship or the company in the absence of separate, contemporaneous cash-books for each concern.
- Admissions recorded on oath: The Court noted that during search (10.10.2014) and on 11.10.2014, Shri Bannalal Jat admitted that the cash of Rs.1,21,43,210/- represented undisclosed income of the company; he also, during post-search proceedings (04.12.2014), again confirmed surrender of the same amount.
- Evidentiary principle: The Court extensively relied on the principle articulated in Ravi Mathur (and a host of other precedents) that statements recorded under Section 132(4) carry great evidentiary value, cannot be lightly discarded, and that retraction must be prompt and supported by convincing evidence (e.g., complaint to higher officials, sworn affidavit, or cogent documentary evidence demonstrating coercion or factual incorrectness).
- Burden on the assessee: The Court emphasized that the burden lay on the assessee to demonstrate that the admission made during search was wrong; a belated, self-serving retraction without strong supporting evidence was of little weight.
- Assessment of the appellant's evidence: The Court reviewed the books and materials produced by the appellant and observed that the proprietorship's cash-book contained pending/incomplete entries and that the Assessing Officer was entitled to disbelieve these records. The Court also observed unexplained gaps (e.g., inability to identify specific bank from which withdrawals were made) in the explanation given at the time of search.
- Weighing authorities and precedents: The Court considered decisions cited by both sides — distinguishing cases where retraction succeeded because it was backed by cogent evidence, and aligning with authorities (including Ravi Mathur and several High Court decisions) that uphold the evidentiary weight of 132(4) statements and require credible proof for retraction.
- Conclusion on the central question: Given the admissions on oath during the search and the lack of convincing, contemporaneous documentation or other strong evidence to rebut those admissions, the Court concluded that the ITAT was justified in upholding the Assessing Officer's additions based on the 132(4) statements.
Holding and Implications
Holding: The court answered the substantial question in favour of the revenue and dismissed the appeal. In the words of the opinion: "The question ... is answered in favour of the revenue and against the assessee." The appeal was accordingly dismissed.
Implications:
- Direct effect on the parties: The addition of Rs. 1,21,43,210/- as unaccounted income of the appellant-company, as made by the Assessing Officer and affirmed by the CIT(A) and the ITAT, is upheld by the High Court; the appellant's attempt to retract earlier admissions (recorded under Section 132(4)) was held insufficiently supported.
- On precedent and broader law: The Court applied and reiterated existing principles — notably the high evidentiary value of statements recorded under Section 132(4) and the requirement that any retraction be timely and supported by cogent evidence. The opinion applies existing authorities to the facts rather than announcing a new principle; it therefore affirms and applies established law rather than purports to lay down a novel precedent.
Note: This summary is based exclusively on the content of the provided opinion and does not add or infer facts beyond what is contained in that opinion.
ORDER
1. Delay condoned.
2. The Special Leave Petition is dismissed.
| ANNEX |
[2019] 106 taxmann.com 127 (Raj.)
HIGH COURT OF RAJASTHAN
Bannalal Jat Constructions (P.) Ltd. v. Assistant Commissioner of Income-tax, Central Circle-2 Ajmer
MOHAMMAD RAFIQ AND GOVERDHAN BARDHAR, JJ. D.B. IT APPEAL NO.140 OF 2018 AUGUST 31, 2018
Prakul Khurana and Sanjay Jhanwar for the Appellant. Siddharth Bapna and Anil Mehta for the Respondent.
JUDGMENT
Mohammad Rafiq, J. - This appeal under Section 260A of the Income tax Act, 1961, which seeks to challenge the order dated 29.12.2017 of the Income Tax Appellate Tribunal, Jaipur bench, Jaipur, was admitted to hearing on following substantial question of law:—
"Whether under the facts and circumstances of the case and in law the ld. ITAT was justified in upholding the additions made by the Assessing Officer merely on the basis of statements recorded u/S 132(4) of the Income tax Act, 1961 ignoring the presumption laid down u/S 292C of the Income tax Act, 1961 and the evidences brought on record by the Appellant?"
2. Briefly stated, the facts of the case are that a search was conducted at the business/residential premises of Shri Banna Lal Jat, the Director of appellant company - M/s. Bannalal Jat Constructions Private Limited, on 10.10.2014, in which he was also operating his proprietary concern in the name of M/s. Bannalal Jat Contractor. During the search proceedings at residential premises of Shri Bannalal Jat, a cash worth of Rs. 1,21,43,210/- was found and inventorised as per Annexure CF of Panchnama dated 11.10.2014. He, in his statement, recorded under Section 132(4) of the Income tax Act, 1961 (for short 'the IT Act') during the course of search and even subsequent statement recorded under Section 131 of the IT Act, admitted the same as undisclosed income of the appellant-company. However, subsequently while filing the return of income for the relevant assessment year, the appellant-company did not offer the said undisclosed income to tax. The assessing officer therefore served upon the appellant-company a show cause notice as to why it has failed to disclose the said income and also to get the cash verified from the regular books of accounts. The appellant-company in response to the show cause notice, submitted written reply on 02.12.2016 contending that withdrawals were made from the account with Bank of Baroda and State Bank of Bikaner and Jaipur between the period from 20.09.2014 to 30.09.2014, which was kept at the residence and out of that amount, he kept a sum of Rs.70 lakh in the morning in the car for making payment to labour, tractor, material etc. Thus, in the survey the appellant-company explained the amount of Rs.98.92 lakh (70+19.92+9) pertained to his business. The extract from the account maintained in the computer books for the financial year 2014-15 was submitted. It was also stated that the print out of incomplete books of account in computer was taken by the ADI (Investigation) team, according to which cash balance of Rs.4,21,691/- only was unaccounted in the balance-sheet of M/s. Bannalal Jat Construction Private Limited.
3. The survey was converted into search and the statement of the assessee under Section 132(4) was recorded on 10.10.2014 at 10:15 PM and thereafter search was concluded on 11.10.2014 in the morning and the assessee stated that such cash belonged to the appellant-company as undisclosed income. The assessee thereafter maintained that the subsequent statement of assessee under Section 132(4), whereby cash was surrendered was incorrect and obtained under pressure. In case, this cash balance seized from Shri Bannalal Jat belonged to his proprietary concern and cash balance of the company was only Rs.4,21,691/- on the date of survey/search. The assessing officer rejected the statement of the assessee observing that on examination of books of account it was found that at several places there were instances of unaccounted incomes/profit, some of which were even surrendered by the assessee during the post search proceedings. In the statement of Shri Bannalal Jat recorded on 10.10.2014, he in reply to question no.6 admitted that the books of account of the appellant-company has been written up to 09.10.2014 but expenses for last 3-4 months were yet to be entered. Shri Bannalal Jat, in reply to question no.8, admitted that in his business of civil construction, he inflated various expenditure and income so generated by inflating the expenditure is in form of cash which was found at his residence and the same was not recorded in his books of accounts and he surrendered the cash so found amounting to Rs.1,21,43,210/-. During the course of post search proceedings and after three months of search action, Shri Bannalal Jat, vide statement recorded under Section 131 on 04.12.2014 again confirmed the admission of undisclosed cash of Rs.1,21,43,210/- as has already been offered under Section 132(4) of the IT Act. In view thereof, the Assessing Officer made an addition of Rs.1,21,43,210/- as unaccounted income of the appellant-company. The CIT (Appeals) concurred with the findings recorded by the Assessing Officer and dismissed the appeal filed by the appellant-company. The second appeal filed by the appellant-company was again dismissed by the Income Tax appellate Tribunal (for short, 'the ITAT') vide impugned judgment dated 29.12.2017.
4. Mr. Prakul Khurana, learned counsel for the appellant-company, has submitted that the appellant-company on updating the books of accounts of M/s. Bannalal Jat (Proprietorship concern of Shri Bannalal Jat), which was stated to be incomplete during the course of statement recorded under Section 132(4) of the IT Act, it was reconciled and it became evident that the aforesaid cash balance of Rs.1,21,41,528/- was available in the books of accounts of M/s. Bannalal Jat and that the cash found belonged to the said proprietorship concern and not the appellant-company. Accordingly, this amount was not offered in the return of income filed by the appellant-company thereby retracting the statement of the company recorded under Section 132(4) of the IT Act. There is thus no dispute of whatsoever kind regarding the form and manner of retraction. Reference is made to Instruction No.286/2/2003-IT (INV-II) dated 10.03.2003 to show that non-disclosure in the return of income is considered as retraction by the department. Reliance is placed on a judgment of the High Court of Madras in M. Narayanan & Bros. v. Income Tax Special Investigation Circle [2011] 13 taxmann.com 49/201 Taxman 207 (Mag.)/339 ITR 192 wherein retraction made during the course of assessment proceedings was entertained and relief was granted on merits of the explanation.
5. It is argued that it was not a case of simple retraction but backed by books of accounts of M/s. Bannalal Jat, wherein no discrepancy was found by the Assessing Officer and cash balance as on 31.03.2015 has been accepted by the department coupled with the fact that in the initial statement recorded under Section 133A of the IT Act during the course of survey Shri Bannalal Jat himself stated the cash found was out of the withdrawals from his bank account. The appellant-company has clarified the reason for the delay in completion of books of M/s. Bannalal Jat by plausible reasoning duly explained in its reply dated 02.12.2016 for not including the cash found of Rs.1,21,41,528/- in the return. The authorities below have wrongly disbelieved the explanation of the appellant duly supported by other corroborating evidence. The ITAT has rejected all the arguments without objectively dealing with the same being unduly influenced by the notion that the appellant cannot be allowed to retract from the statement at this stage. The findings of the ITAT that the assessee carries business activities of the appellant-company from both residence and official premises, are not based on any material and are perverse. Further, the argument of the assessee relating to statutory presumption under Section 292C of the IT Act was also based on the 'panchnama' drawn of cash seized in the hands of Shri Bannalal Jat and statement recorded under Section 133A of the IT Act and not entirely on the factum of residence of Shri Bannalal Jat, where the amount was seized. The ITAT has not dealt with the contentions raised neutrally and without being influenced by the fact of admission recorded under Section 132(4) of the IT Act.
6. Shri Prakul Khurana, learned counsel for the appellant, argued that reliance placed by the ITAT on the judgment of this Court in CIT, Bikaner v. Ravi Mathur - 2017 (1) WLC (Raj.) 387, is wholly misconceived as the aforesaid judgment is distinguishable on facts. Learned counsel submitted that the same Bench of the ITAT constituting of same members in the case titled Assistant Commissioner Income Tax, Central Circle, Ajmer v. Shri Devendra Kumar Choudhary (ITA 828/JP/16), has taken a dramatically opposite view. Therein initially jewellery worth Rs.30 lakh was surrendered as undisclosed income in the statement recorded under Section 132(4) of the IT Act but subsequently the same was not offered for taxation while filing the return of income after a gap of 357 days. The ITAT de spite taking note of the judgment of this Court in Ravi Mathur,supra, upheld the deletion of the addition accepting the Explanation by relying on CBDT Instruction No.286/2003-IT/INV dated 10.03.2003, which prohibits the department from obtaining confessions as to undisclosed income during the course of search and seizure and survey operations. It is argued that this Court in Ravi Mathur,supra, had no occasion to consider the CBDT Instruction. Learned counsel submitted that no material has been placed by the Department in rebuttal of the appellant that the cash found belonged to Shri Bannalal Jat. The authorities being the fact finding authorities are obligated to objectively consider the explanation of the assessee on merits and evaluate supporting material. Reliance is also placed on the judgment of the Supreme Court in THE PULLANGODE RUBBER & PRODUCE CO.LTD. v. STATE OF KERALA [1973] 91 ITR 0018 .
7. It is argued that Section 132(4A)(i) and Section 292C of the IT Act also provide statutory presumption that when a document/money is found in the possession or control of any person in the course of search, the same is considered to belong to the same person. The onus is on the department to rebut the presumption by leading cogent evidence. Reliance is placed on the judgment of the Delhi High Court in Pepsi Food (P) Ltd. v. ACIT - (2014) 52 taxmann.com 220 (Delhi) . The additions cannot be solely based on the statements, which are subsequently retracted even if belatedly, as held by the Delhi High Court in The Commissioner Of Income Tax v. Sunil Aggarwal [2016] 237 Taxman 512/[2015] 64 taxmann.com 107/379 ITR 367 .
8. It is argued that it is a settled position of law that if in the facts and circumstances of the case and evidence, if two views are possible, the view in favour of the assessee should be preferred. Reliance in support of this argument is placed on the judgment of this Court in Escorts Heart Institute & Research Centre Ltd. v. Dy. CIT [2017] 87 taxmann.com 184/251 Taxman 401/[2018] 404 ITR 344 .
9. Per contra, Mr. Siddharth Bapna, learned counsel for the respondent-revenue, submitted that Shri Bannalal Jat, the Director of the appellant-assessee produced the books of accounts and disclosed several instance of unaccounted income/profit. Although, in the initial statement, Shri Bannalal Jat, the Director of the appellant-company, admitted that the cash belonged to him and the source of such cash was withdrawal from the bank account between 20.09.2014 to 30.09.2014, however, the same was not offered to tax. The subsequently produced copy of cash-book of M/s. Bannalal Jat Contractor, a proprietorship concern of Shri Bannalal Jat, incorporated number of pending entries, which itself proves that the cash-book and books of accounts of Shri Bannalal Jat were incomplete on the date of search. The correctness and completeness of such cash-book was not accepted by the assessing officer. There was a time gap of more than 10-15 days from the respective dates of withdrawal and the date of search, which defies the argument of the assessee. Even if the 'panchnama' of the cash was found and seized in the name of Shri Bannalal , the same was voluntarily admitted in his statement under Section 132(4) as belonging to the appellant-company. Subsequently, again on 04.12.2014 in his statement recorded under Section 131 of the IT Act, Shri Bannalal Jat admitted surrender of undisclosed income of the M/s. Bannalal Jat Construction Pvt. Ltd.
10. Learned counsel for the respondent-revenue, relying on the judgment of this court in Ravi Mathur,supra, argued that the statements recorded under Section 132(4) of the IT Act have great evidentiary value and cannot be discarded in a summary manner by simply observing that the assessee has retracted the same. The retraction has to be genuinely made within reasonable time and immediately after such a statement has been recorded either by filing a complaint to the superior authority of otherwise brought to the notice of the higher officials, duly sworn affidavit or statements supported by convincing evidence. Nothing has been done by the assessing officer in the present case. Learned counsel, in support of his argument, has also relied on the judgments in Rameshchandra & Co. v. CIT [1987] 35 Taxman 153/168 ITR 375 of High Court of Bombay at Nagpur, Dr. S.C. Gupta v. CIT [2001] 118 Taxman 252/248 ITR 782 of the Allahabad High Court, Bachittar Singh v. CIT [2010] 328 ITR 400 of the Punjab and Haryana High Court, Commissioner Of Income Tax v. Ms.Hotel Meriya [2010] 195 Taxman 459/[2011] 332 ITR 537 of the Kerala High Court, Commissioner Of Income-Tax v. Lekh Raj Dhunna [2012] 20 taxmann.com 554/344 ITR 352 of the Punjab and Haryana High Court, CIT v. O. Abdul Razak [2012] 20 taxmann.com 48/207 Taxman 193(Mag.)/[2013] 350 ITR 71 of the High Court of Kerala, and ACTO, Anti Evasion-I, Alwar v. Khandelwal Foods Products, Station Road, Alwar - 2017 (1) RLW 612 (Raj.) of this Court.
11. We have given our thoughtful consideration to rival submissions and perused the material on record.
12. The ITAT in its impugned judgment dated 29.12.2017 has taken note of the fact that the appellant-company carries out his business activities from both his residence as well as the official premises and these business activities pertains to both of his concerns, namely, M/s. Bannalal Jat Construction Private Limited and M/s. Bannalal Jat Contractor, the proprietary concern of Shri Bannalal Jat. The ITAT, therefore, rejected the argument regarding presumption under Section 292C of the IT Act that cash so found at the residence belongs to him and not to the appellant-company. The ITAT noted that Shri Bannalal Jat in the statement recorded under Section 133A of the IT Act during the course of survey, in reply to question no.11, submitted the cash amounting to Rs.28,92,500/- belonged to his business and the same can be verified from the books of accounts maintained at his Head Office at Jahajpur. In reply to question no. 14 with regard to source of Rs.70,00,000/- found in the car registered in his name, he submitted that he used the car for his business purposes and he had withdrawn this amount from the Branch of Bank of Baroda situated at Jahajpur and Branch of State Bank of Bikaner and Jaipur situated at Jahajpur between the period 20.09.2014 and 30.09.2014 and the same could be verified from the records maintained at his Head Office at Jahajpur. Further, in answer to question no.16 with regard to the amounts of cash of Rs.70,00,000/-, Rs.19,92,500/- and Rs.9,00,000/- found at his residence, he submitted that Rs.70,00,000/- was withdrawn by his clerk ('munshi') and his sons from the Bank Account and given to him. However, it could not be explained as to from which particular bank the withdrawal was made. Regarding Rs.19,92,500/- which was stated to be given by Shri Satya Narain, he submitted that there is no supporting evidence available with him; and, in respect of the amount of Rs.9,00,000/-, he stated the same to be his business receipts. In reply to question no.22 whether he maintains individual cash books being the proprietor of M/s. Bannalal Jat Contractor and also the Director in M/s Bannalal Jat Construction Pvt. Ltd., he submitted that he does not maintain individual cash books.
13. This court in Ravi Mathur, (supra) which was relied by the ITAT in the present case, after considering catena of previous decisions, held that the statements recorded under Section 132(4) of the IT Act have great evidentiary value and it cannot be discarded in a summary and cryptic manner, by simply observing that the assessee retracted from his statement. One has to come to a definite finding as to the manner in which the retraction takes place. Such retraction should be made as soon as possible and immediately after such statement has been recorded by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials by way of duly sworn affidavit or statement supported by convincing evidence, stating that the earlier statement was recorded under pressure, coercion or compulsion. We deem it appropriate to reproduce para 15 of the said judgment, which reads thus,—
'15. In our view, the statements recorded under Section 132(4) have great evidentiary value and it cannot be discarded as in the instant case ITA No.720/JP/2017 M/s Bannalal Jat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer by the Tribunal in a summary or in a cryptic manner. Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. We may observe that retraction should be made as soon as possible and immediately after such a statement has been recorded, either by filing a complaint to the higher officials or otherwise brought to the notice of the higher officials, either by way of a duly sworn affidavit or statements supported by convincing evidence through which an assessee could demonstrate that the statements initially recorded were under pressure/coercion and factually incorrect. In our view, retraction after a sufficient long gap or point of time, as in the instant case, loses its significance and is an afterthought. Once statements have been recorded on oath, duly signed, it has a great evidentiary value and it is normally presumed that whatever stated at the time of recording of statements under Section 132(4), are true and correct and brings out the correct picture, as by that time the assessee is uninfluenced by external agencies. Thus, whenever an assessee pleads that the statements have been obtained forcefully/by coercion/undue influence without material/contrary to the material, then it should be supported by strong evidence which we have observed hereinbefore. Once a statement is recorded under Section 132(4), such a statement can be used as a strong evidence against the assessee in assessing the income, the burden lies on the assessee to establish that the admission made in the statements are incorrect/wrong and that burden has to be discharged by an assessee at the earliest point of time and in the instant case we notice that the AO in the Assessment Order observes:—
"Regarding the amount of Rs. 44.285 lakhs, it is now contended that the statement u/s 132(4) was not correct and these amounts are in ITA No.720/JP/2017 M/s Bannalal Jat Construction Pvt. Ltd., Bhilwara v. ACIT, Central Circle-Ajmer thousands, not lakhs i.e. it is now attempted to retract from the statements made at the time of S & S operations."
Therefore, what we gather from the Assessment Order and on perusal of the above finding that the retraction was at the stage when the assessment proceedings were being finalized i.e. almost after a gap of more than an year. Such a so-called retraction in our view is no retraction in law and is simply a self-serving statement without any material.'
14. The judgment of the Delhi High Court in Sunil Aggarwal, (supra) relied by the assessee does not in any manner extend any assistance to him because that was a case in which the court found that the assessee, apart from retracting the statement, also discharged the onus on him through cogent material to rebut the presumption that stood attracted in view of the statement made under Section 132(4) of the IT Act with reference to the entries in the books of accounts of the sales made during the year and the stock position. Similar was the position in Kailashben Manharlal Chokshi v. Commissioner Of Income-Tax [2008] 174 Taxman 466/[2010] 328 ITR 411 , wherein the High Court of Gujarat found that the assessee gave proper evidence in support of his retraction. The High Court of Madras in M. Narayanan & Bros. (supra) held that when assessee had explained his statement as not correct in context of materials produced, no amount could be added to his income on the basis of his statement. Similarly, what has been held by the High Court of Bombay in CIT v. Omprakash K. Jain [2009] 178 Taxman 179[2010] 322 ITR 362 was that the assessing officer, while considering whether retraction was under duress or coercion, had also to consider genuineness of documents produced before him.
15. The Punjab and Haryana High Court in Lekh Raj Dhunna, (supra) taking note of the fact that the assessee had made a statement under Section 132(4) of the IT Act whereby a surrender of Rs.2 lakh was made and further that the assessee had admitted that he had earned commission from a party, which was not disclosed in the return filed by him and certain documents were seized which bore the signature of the assessee, held in para 16 of the report as under:—
"16. Thus, in view of sub-sections (4) and (4A) of Section 132 of the Act, the Assessing Officer was justified in drawing presumption against the assessee and had made addition of Rs.9 lakhs in his income under Section 68 of the Act. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displace. The assessee retracted from the said statement, vide letters dated November 24, 1998, and March 11, 1999, during the course of assessment proceedings. However, no value could be attached thereto in the present case. In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In such a situation, the authenticity of the statement by virtue of which surrender had been made at the time of search cannot be held to be bad. The Tribunal, thus, erred in concluding otherwise. The Tribunal, therefore, was not justified in reversing the order of the Assessing Officer which was affirmed by the Commissioner of Income-tax (Appeals) also."
16. The Punjab and Haryana High Court in Bachittar Singh (supra) in para 7 of the report, held as under:—
"7. It is not disputed that the statement was made by the assessee at the time of survey, which was retracted on May 28, 2003, and he did not take any further action for a period of more than two months. In such circumstances, the view taken by the Tribunal that retraction from the earlier statement was not permissible, is definitely a possible view. The mere fact that some entries were made in a diary could not be held to be sufficient and conclusive to hold that the statement earlier made was false. The assessee failed to produce books of account which may have been maintained during regular course of business or any other authentic contemporaneous evidence of agricultural income. In the circumstances, the statement of the assessee could certainly be acted upon."
17. The High Court of Kerala in O. Abdul Razak, (supra) in para nos.8, 9 and 10 of the report, held as under:—
"8. It cannot be doubted for a moment that the burden of proving the undisclosed income is squarely on the shoulders of the department. Acquisition of properties by the assessee are proved with the documents seized in search. Since under statement of consideration in documents is the usual practise the officer questioned the assessee on payments made over and above the amounts stated in the documents. Assessee gave sworn statement honestly disclosing the actual amounts paid. The question now to be considered is whether the sworn statement constitutes evidence of undisclosed income and if so whether it is evidence collected by the department. In our view the burden of proof is discharged by the department when they persuaded the assessee to state details of undisclosed income, which the assessee disclosed in his sworn statement, on being confronted with the title deeds seized in search.
9. Section 132 of the Income tax Act deals with search and seizure and sub-Section (4) of Section 132 empowers the authorised officer during the course of the search and seizure to examine on oath any person who is found to be in possession or control of any books of account, documents, money or valuable articles or things etc. and record a statement made by such person which can be used in evidence in any proceedings under the Income Tax Act. The explanation appended to Clause (4) also makes it clear that such examination can be in respect of any matters relevant for the purpose of any investigation and need not be confined to matters pertaining to the material found as a result of the search. A plain reading of Section 132(4) would clearly show that what was intended by empowering an officer conducting the search to take a statement on oath was to record evidence as contemplated in any adjudication especially since Section 131 confers on all officers empowered therein with the same powers as vested in a court under the Code of Criminal Procedure, for the purpose of the Income Tax Act.
10. A Division Bench of this Court in C.I.T. v. Hotel Meriya, (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 Section 158(BB) of the Income-tax Act read with Section 3 of the Evidence Act and Section 131 of the Income Tax Act. Based on the above finding, it was also held that such evidence would be admissible for the purpose of block assessments too. The explanation to Section 132(4) of the Income Tax Act was also noticed by the Division Bench to further emphasise that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income Tax Act."
18. The Allahabad High Court in Dr. S.C. Gupta (supra) in para 7 of the report, held as under:—
"7. As regards the assessee's contention that the statement having been retracted the Assessing Officer should have independently come to a conclusion that there was additional income as sought to be assessed and that there was no material to support that there was such income, this contention in our view is not correct. As held by the Supreme Court in Pullan-gode Rubber Produce Co. Ltd. v. State of Kerala, (1973) 91 ITR 18 an admission is an extremely important piece of evidence though it is not conclusive. Therefore, a statement made voluntarily by the assessee could form the basis of assessment. The mere fact that the assessee retracted the statement could not make the statement unacceptable. The burden lay on the assessee to establish that the admission made in the statement at the time of survey was wrong and in fact there was no additional income. This burden does not even seem to have been attempted to be discharged. Similarly, P.K. Palwankar v. CGT, [1979] 117 ITR 768 (MP) and Commissioner Of Income-Tax, Kerala v. Mrs. Doris S. Luiz, [1974] 96 ITR 646 (Ker) on which also learned counsel for the assessee placed reliance are of no help to the assessee. The Tribunal's order is concluded by findings of fact and in our view no question of law arises. The applications are, accordingly, rejected."
19. Reverting back to the present case, the ITAT, on the basis of such statement of Shri Bannalal Jat, concluded that he was managing his business affairs of both his proprietary concern as well as appellant-company from his residence and that in the absence of individual cash-book of respective concerns and other details maintained by him, it is not possible to identify whether the cash so found belongs to the proprietary concern or to the assessee company. Subsequently, when the statement under Section 132(4) of the IT Act was recorded on 10.10.2014, which was concluded at his residence, Shri Bannalal Jat categorically admitted that the cash amount of Rs.1,21,43,210/- belonged to his company M/s. Bannalal Jat Construction Private Limited and the same was its undisclosed income. Thereafter another statement under Section 132(4) of the IT Act was recorded at his business premises on 11.10.2014. In reply to question No. 8, he was asked to explain the source of cash amounting to Rs.3,380/-found at his office and Rs.1,21,43,210/- found at his residence, he submitted regarding the amount of Rs.1,21,43,210/- found at his residence that he was unable to give any explanation and admitted that he was in the business of civil construction and in such business, various expenses have been inflated and shown in the books of accounts, and that the income so generated on account of such inflation in expenses is represented in the form of cash was found at his residence. This undisclosed income belonged to his company M/s Bannalal Jat Construction Pvt. Ltd. In response to question no. 11 wherein he was asked to provide any other explanation which he wishes to provide, he submitted that pursuant to search operations where various documents, loose papers, entries, cash, investment, advances and individual expenditure details have been found and taking all that into consideration, he surrendered Rs.4,01,43,210/- as his undisclosed income. He also categorically stated that the said disclosure is in the hands of M/s Bannalal Jat Construction Private Limited in respect of unexplained cash amounting to Rs.1,21,43,210/- and Rs.2,50,00,000 and Rs.30,00,000/- totalling to Rs.2,80,00,000 in his individual capacity.
20. Subsequently, on 04.12.2014 during the post-search proceedings, statement of Shri Bannalal Jat was again recorded under Section 131 of the IT Act, wherein he was again confronted with the various documents seized and cash found during the course of search and the consequent surrender made by him in respect of his two concerns and in response thereto, he again confirmed the surrender of undisclosed income amounting to Rs.1,21,43,210/- and Rs.1,35,00,000/-. It is in this background that we have to view his reply to the show-cause notice submitted on 02.12.2016. This show-cause notice was issued to him by the assessing officer when the appellant-company offered the said undisclosed income to tax. The reliability, importance and sanctity of admission made during search could be refuted only by cogent and convincing evidence. We may in this connection refer to earliest judgment of the Supreme Court in Pullangode Rubber Produce Co. Ltd., (supra) wherein it was held that admission is an extremely important piece of evidence but it can't be said that it is conclusive. It is open to the person, who made admission to show that it is incorrect. The assessee should be given proper opportunity to show the correct state of affairs. The law with regard to this has developed much thereafter. There is no gainsay the fact that admission made during the search can be disputed by the assessee and at the same time however it is equally well settled that the statement made voluntarily by the assessee could form the basis of assessment. Mere fact that the assessee retracted the statement at later point of time could not make the statement unacceptable. The burden lay on the assessee to show that the admission made by him in the statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence stating that the earlier statement was recorded under duress and coercion, and this has to have certain definite evidence to come to the conclusion that indicating that there was an element of compulsion for assessee to make such statement. However, a bald assertion to this effect at much belated stage cannot be accepted. The assessee indulged in maintaining transaction on diaries and loose papers which was not permissible in any of the method of accounting. The assessee, while filing the return of income, has not disclosed any undisclosed income and hence, retracted from the admission made by him during the course of search. Subsequent retraction from the surrender without having evidence or proof of retraction is not permissible in the eyes of law. The statement recorded during the course of search action which was in presence of independent witnesses has overriding effect over the subsequent retraction.
21. In view of the above discussion, the question formulated vide order dated 09.05.2018 is answered in favour of the revenue and against the assessee.
22. The appeal is accordingly dismissed.
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