Shri Anil Kumar Agarwal v. The Income Tax Officer Ward -4(1) Jaipur, New Central Revenue Building , Statue Circle, B.d. Road, Jaipur

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR 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 thejudgment and order of the Tribunal whereby the Tribunal hasdismissed 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 thecase the learned ITAT was right in law in holdingthat the AO was right in adding Rs. 2,70,248/- asundisclosed income on the basis of assessee’sstatement, retracted by specific affidavit dated20.11.2007, dated 23.2.2005 and ignoring theprovision of the Section 28 of the IT Act, 1961?case the learned ITAT was right in law in holdingthat the AO was right in adding Rs. 2,70,248/- asundisclosed income on the basis of assessee’sstatement, retracted by specific affidavit dated20.11.2007, dated 23.2.2005 and ignoring theprovision of the Section 28 of the IT Act, 1961? ii) Whether the learned ITAT was right in law in confirming the addition made by the respondentu/s 145(3) of the Act ignoring the provision ofSection 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 thereleased 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 goodactually belongs to me. Investment in thesegoods have been out of my declared income forthe current financial year and this I paid anadvance tax (including cess and of Rs. ForA.Y. 2005-06 Copy of Challan/proof of paymentis also enclosed for ready reference. You honour would revel your con that are dulyor produce would be are concealed income asaccept 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 23[rd] February, 2005 moreparticularly question no. 3, 5 & 6 which reads as under:- “iz]3. vkius ,d i= fnukad 23-02-05 nkf[ky fd;k gS ftlesa vkiusdgk gS fd eSllZ ts],e]dwy gkml izk] fy] esa 2]70]248@& Li;s dkeky iMk gqvk gSA tks fd ujflag nkl osn izdk’k ds gSaA vkius ;sHkh 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 ekyeSllZ lcj buVjus’kuy us ujflag nkl osn izdk’k es bEiksVZ fd;kFkk 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 cqDlvkWQ vdkmUV ¼fdrkcsa½ ls ckgj gS tks fd vu,DlIys.M gSA eSaigys gh bl buosLV dks viuh bPNk ls vkidks crk pqdk gwa vkSjblds mij tks Hkh vfxze dj ¼,MokUl VSDl½ curk gS eSa Hkjus dksrS;kj gwaA rFkk ml pkyku dh dkWih vkidks fn[kk nwaxkA ;gfMLDykstj eS viuh bPNk ls ¼okysUVjyh½ dj jgk gwa vkSj bl;dhu ds lkFk dj jgk gwa fd vki esjs mij dksbZ isuy izksohtuugh yxk;sxsaA 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 ekyeSllZ lcj buVjus’kuy us ujflag nkl osn izdk’k es bEiksVZ fd;kFkk 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 cqDlvkWQ vdkmUV ¼fdrkcsa½ ls ckgj gS tks fd vu,DlIys.M gSA eSaigys gh bl buosLV dks viuh bPNk ls vkidks crk pqdk gwa vkSjblds mij tks Hkh vfxze dj ¼,MokUl VSDl½ curk gS eSa Hkjus dksrS;kj gwaA rFkk ml pkyku dh dkWih vkidks fn[kk nwaxkA ;gfMLDykstj eS viuh bPNk ls ¼okysUVjyh½ dj jgk gwa vkSj bl;dhu ds lkFk dj jgk gwa fd vki esjs mij dksbZ isuy izksohtuugh yxk;sxsaA 5.He further contended that on the basis of this, the appellanthas filed his return on 17[th] August, 2005 which was accepted andrefund was granted on 19[th] October, 2005 at Annexure-4.Subsequently, the proceedings were initiated on 20[th] November,2007 by filing his affidavit at annexure-5 which reads as under:- “I Anil Kumar Agarwal S/o, Late Shri Gopi RamAgarwal, resident of 1818, Govind Rao Ji KaRasta, Chandpole Bazar, Jaipur do hereby declareand 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 firmhas been closed w.e.f. 31.03.2006. 3. That after drawing funds in cash from myregular business, I made purchases of dry fruitsat Delhi on dated 04.12.2005 for a sum of Rs.2,70,248/-. the dry fruits were purchasedthrough broker. The dry fruits were stored atstorage of J.M. Cool House Private Limited, Delhi.The DDI Investigation Unit 1(3), New Delhi hasseized the said dry fruits at cold storage on dated14.12.2004. 4. During the course of seizure I personallyclarified the source of investment i.e. drawingsfrom regular business in purchase of said dryfruits. I was ready to produce regular books ofaccounts to DDI for verification. The Learned DDIwas continuously pursuing me to declare theinvestment in dry fruits as my income fromundisclosed sources. Further he also inform himthat in case no declaration is made as per hisadvise the dry fruits will not be release for alonger time. Since the value of old dry fruitsdecrease sharply after passing of time in market,or say after a period of six months value remainsless than half of the dry fruits. For the reason, I was forcely admitted thatinvestment in dry fruits were made by me frommy undisclosed sources, while actuallyinvestment was made out of cash drawings fromregular books of accounts. As such statementwas made under pressure and is not binding onthe me.” 6.In spite of his retraction, the CIT (A) has added the incomeand the Tribunal has confirmed the same. 7.He has relied upon the decision in case of KailashbenManharlal Chokshi vs. Commissioner of Income Tax reported in[2010] 328 ITR 411 (Gujarat) wherein it has been held as under:- For the reason, I was forcely admitted thatinvestment in dry fruits were made by me frommy undisclosed sources, while actuallyinvestment was made out of cash drawings fromregular books of accounts. As such statementwas made under pressure and is not binding onthe me.” 6.In spite of his retraction, the CIT (A) has added the incomeand the Tribunal has confirmed the same. 7.He has relied upon the decision in case of KailashbenManharlal 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 hereinabovewe are of the view that this explanation seems tobe more convincing, has not been considered bythe authorities below and additions were madeand/or confirmed merely on the basis ofstatement recorded under Section 132(4) of theAct. Despite the fact that the said statement waslater on retracted no evidence has been led bythe Revenue authority. We are, therefore, of theview that merely on the basis of admission theassessee could not have been subjected to suchadditions unless and until, some corroborativeevidence is found in support of such admission.We are also of the view that the statementrecorded at such odd hours cannot be consideredto be a voluntary statement, if it is subsequentlyretracted and necessary evidence is led contraryto such admission. Hence there is no reason not(sic) to disbelieve the retraction made by the AO(sic-assessee) and explanation duly supported bythe evidence. We are, therefore, of the view thatthe Tribunal was not justified in making additionof Rs. 6 lacs on the basis of statement recordedby the AO under Section 132(4) of the Act. TheTribunal has committed an error in ignoring theretraction made by the assessee. 8.He has also relied upon the decision of Gujarat High Court incase of The Commissioner of Income Tax-IV vs. Ramanbhai BPatel in Tax Appeal No. 207/2008 decided on 20[th] July, 2016wherein it has been held as under:- “5.1. Learned Counsel for the assessee has reliedupon letter [F. No. 286/98/2013-IT (INV.II] dated18/12/2014 whereby the instructions was issued inrelation to Section 132, read with Section 133A of theIncome Tax Act, 1961 with regard to search &seizure, admission of undisclosed income undercoercion/pressure during the search/survey. The said circular reads thus: "Instances/complaints of undue influence/coercionhave come to notice of the CBDT that someassessees were coerced to admit undisclosed incomeduring Searches/Surveys conducted by theDepartment. It is also seen that many suchadmissions are retracted in the subsequentproceedings since the same are not backed bycredible evidence. Such actions defeat the verypurpose of Search/Survey operations as they fail tobring the undisclosed income to tax in a sustainablemanner leave alone levy of penalty or launching ofprosecution. Further, such actions show theDepartment as a whole and officers concerned inpoorlight. 2. I am further directed to invite your attention to theInstructions/Guidelines issued by CBDT from time totime, as referred above, through which the Board hasemphasized upon the need to focus on gatheringevidences during Search/Survey and to strictly avoidobtaining admission of undisclosed income undercoercion/undueinfluence. 3. In view of the above, while reiterating theaforesaid guidelines of the Board, I am directed toconvey that any instance of undue influence/coercionin the recording of the statement duringSearch/Survey/Other proceeding under the I.T. Act,1961 and/or recording a disclosure of undisclosedincome under undue pressure/coercion shall beviewedbytheBoardadversely. 4. These guidelines may be brought to the notice ofall concerned in your Region for strict compliance. 5. I have been further directed to request you toclosely observe/oversee the actions of the officersfunctioningunderyouinthisregard. 3. In view of the above, while reiterating theaforesaid guidelines of the Board, I am directed toconvey that any instance of undue influence/coercionin the recording of the statement duringSearch/Survey/Other proceeding under the I.T. Act,1961 and/or recording a disclosure of undisclosedincome under undue pressure/coercion shall beviewedbytheBoardadversely. 4. These guidelines may be brought to the notice ofall concerned in your Region for strict compliance. 5. I have been further directed to request you toclosely observe/oversee the actions of the officersfunctioningunderyouinthisregard. 6. This issues with approval of the Chairperson,CBDT." 9. This Court had also an occasions to deal with thesimilar issue in case of Chandrakumar JethmalKochar (supra), where this Hon'ble Court afterconsidering various pronouncements has held asunder: "3. Learned advocate for the appellant has submittedthat the Tribunal has committed an error in allowingthe appeal. He further submitted that the Tribunal has not given any cogent reasons in its order. "4. As against this, Mr. Soparkar, learned Seniorcounsel heavily relied upon the decision of this Courtin the case of Kailashben Manharlal Chokshi v.Commissioner of Income Tax, reported inMANU/GJ/0744/2008 : [2010] 328 ITR 411 (Guj.),more particularly paragraph No. 23. In the aforesaidcase, the judgment rendered in CIT v. D.L.F.,reported in MANU/SC/1059/1999 : [2000] ITR 855has been referred. Paragraph No. 23 of the decisionof Kailashben Manharlal Choksh (supra) reads asunder:-- 23. The main grievance of the Assessing Officer wasthat the statement was not retracted immediatelyand it was done after two months. It was anafterthought and made under legal advise. However,if such retraction is to be viewed in light of theevidence furnished alongwith the affidavit, it wouldimmediately be clear that the assessee has givenproper explanation for all the items under whichdisclosure was sought to be obtained from theassessee. So far as amount invested in houseproperty is concerned, the assessee has specificallystated in his explanation dated 28.2.1989 that therewas absolutely no basis for making the disclosure onaccount of bunglow at 68, Sarjan Society, AthwaLines, Surat. It was in the year 1964 that theassessee took one Plot No. 68 in Sarjan Co.OperativeHousing Society which was also constructing thebunglow for which the assessee claimed to have beenmade contribution from time to time. The assesseetook possession of the bunglow in 1974 when onlyground floor was constructed. Since then he has beenliving there. The assessee has constructed first floorduring 1986 to 1988 and he has incurred theexpenses for first floor structure to the tune of Rs.2,03,185.65 ps. but this amount has been withdrawnfrom the account of the firm in which the assessee isa partner. As per say of Mr. Shah even departmentalvaluation officer has also accepted that the cost ofconstruction of first floor worked out to Rs.2,06,060/-. There was, therefore, no reason formaking addition of Rs. 4 lacs on the basis of allegeddisclosure made by the assessee in his statementrecorded under Section 132(4) of the Act. In supportof this statement the Revenue has not brought anyevidence whatsoever which would establish that theassessee had in fact incurred an amount of Rs. 4 lacson the construction of the first floor and that amountwas invested out of the undisclosed income. Hencethere is no justification for making account of Rs. 4lacs merely on the basis of statement recorded under Section 132 (4). None of the authorities haveconsidered this explanation and the CIT(A) as well asTribunal both have proceeded on the footing that theAssessing Officer has considered the explanation. Section 132 (4). None of the authorities haveconsidered this explanation and the CIT(A) as well asTribunal both have proceeded on the footing that theAssessing Officer has considered the explanation. So far as the addition on account of gold ornament tothe tune of Rs. 1 lac is concerned, the assessee hasgiven the explanation that was reproduced by theAssessing Officer in his assessment order which saysthat during the course of search and seizureproceeding, statement of assessee's wife, Smt.Kailashben Chokshi was recorded and according towhich she had received about 25 tolas of gold eachfrom her parents and from her parents in law side atthe time of her marriage in the year 1960. She hadgiven 15 tolas of gold ornaments to her daughterRitaben at the time of her marriage in the month ofMarch, 1988. If the total jewellery found during thecourse of search is taken into consideration, in lightof the instructions issued by the Board, any middleclass Indian family may be having jewellery and goldornaments to that extent. Hence, no addition can bemade on that count. Even if the board Circular maynot have retrospective operation, looking to thequantum of holding and assessee's explanation, weare of the view that this is a normal holding whichcan be found in any middle class Indian family andhence no addition could have been justified on thatcount. So far as addition of Rs. 1 lac on account ofunaccounted investment in furniture is concerned, itis stated by the assessee that on the ground floorfurniture was made before 15 years and assesseehad spent Rs. 25,000/- for renovation after makingwithdrawal from the firm's account. It is furthersubmitted that the furniture on the first floor waspartly received and paid out of withdrawals from thefirm. At the time of the search additional furnituremeant for the first floor was just received by way ofparcel from Ahmedabad and was lying in bundles. Adetailed source of investment of furniture purchasedfrom Ahmedabad with a due confirmation from theparty concerned have been filed by the assesseebefore the Assessing Officer. Since no payment of thisadditional furniture was made by the assessee till thedate of search, no addition could have been made onthiscount. count. 5. We have heard learned advocates appearing forboth the parties and perused the material availableon record. The Tribunal while deciding the appeal inparagraph No. 8 has observed as under:-- count. 5. We have heard learned advocates appearing forboth the parties and perused the material availableon record. The Tribunal while deciding the appeal inparagraph No. 8 has observed as under:-- 8. We have heard the assessees counsel and the D.R.We are of the opinion that the CIT(A) when he reliedupon the statement of the assessee made on 8.8.90ignored the fact that there were two statementsrecorded on that day. The first statement wasrecorded at the 8 am. and second statement wasrecorded at 8:45 pm. in the night. In the firststatement recorded in the morning which arecontained on pages 1 to 12 of the assessees paperbook. There is no acceptance of the fact that thebusiness belonged to him and not to the otherpersons who are said to have given the statementsagainst him. It is notable that 33 questions wereasked in the morning session and this morningsession statement was the first statement. Therefore,if the line of reasoning recorded by the CIT (A) isaccepted then the reliance has to be placed on thefirst statement in the morning. In this first statementin the morning there is no acceptance of anybenamidari or any disclosure. It is notable that thesecond statement of the assessee started at 8:45pm. which according to the assessee continued upto6 am. next day. This is contained from pages 13 to26 of the paper book and contains 35 questions andanswers. Till question No. 21 of the second statementthere is no allegation of any benamidari. Fromquestion No. 22 the statement starts talking aboutproprietorship of different concerns in the name ofhis various employees. Even in answer to questionNo. 22 he could not give the names of the proprietorsof Kamal Traders, Naman Traders, Sampat Traders,Adarsh textiles. In the last sentence of the saidanswer he stated as translated in English besidesabove there are no other firms in the name of ouremployees. In answer to question No. 23 he acceptedthat Sugam Textiles was being run by his employeesas his benami. In answer to question No. 24 heaccepted that all the concerns mentioned in questionNo. 22 are his benami concerns. In answer toquestion No. 26 he accepted that certain bankaccounts were his benami bank accounts. In answerto question No. 27 he further agreed that all thedeposits made in the name of his employees are hisdeposits. In answer to question No. 33 he disclosedan income of Rs. 15 lakhs. He could not give anyfurther details on that date. On 31.8.90 anotherstatement of this assessee was recorded. In that heaccepted that he was a partner in Padam Enterprisesas individual and in Mahavir Trading Co. as HUF. Inanswer to question No. 14 he stated that through thetwo concerns of Sugam Textiles and Shanti Tradersthe profits of 14 concerns belonging to his groupwere reduced. The name of 14 concerns are given onassessees paper book page No. 28. In answer to question No. 12 he made a disclosure of Rs. 24 lakhsin all including Rs. 15 lakhs disclosed on 8.8.90. Fromthe above statements one thing is clear that in thefirst statement made in the morning of 8.8.90 thisassessee did not disclosure any benamidari and itwas only in the second statement taken from 8:45pm. onwards that he disclosed certain benamidarisand proceeded make certain disclosure. It is notablethat the disclosure. Made in answer to question No.12 appearing on assessees paper book page No. 32in the statement given on 31.8.90 talks aboutdisclosure of 24 lakhs in 14 concerns as groupdisclosure. The issue regarding group disclosure hasneither been discussed by the A.O. nor by the CIT(A).Under I.T. Act an assessment has to be made on anassessee on an income determined in his case for aparticular year. The quantum of disclosure made ineach and every 14 concerns have not been identifiedby either of the lower authorities. The departmenthas also not contested the fact that this assesseesson suffered from diabetes. In view of the abovecircumstances we see reason to believe that thesecond statement given by the assessee after 8:45pm. was not given under the circumstances whichcould be said as normal for the assessee.6. In view of the above discussion and consideringthe principal laid down in the case of KailashbenManharlal Choksh (supra), we are of the consideredopinion that the view taken by the Tribunal is justand proper. We are not convinced with thesubmissions made by Mr. Mehta, learned advocate forthe appellant that the Tribunal has not given cogentreasons. Therefore, the answer to the first questionwould be against the Revenue and in favour of theassessee. The second question will also ensure forthe benefit of the assessee as from the record it isclear that other concerns were not Benami concernsof 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 inTax Appeal No. 1437/2007 decided on 14[th] June, 2016 wherein ithas been held as under:- “5. Learned Counsel for the respondent has takenthis Court to Section 132(4) of the Act andcontended that the statement made during the search is required to be accepted and theretraction was made after a very long time. Thereasoning of the Assessing Officer was confirmedby the Tribunal and therefore, no interference iscalled for by this Court in the facts andcircumstances of the case. 6. We have heard learned Counsel for therespective parties and perused the records of thecase. We are of the view that the CIT (Appeals)has rightly appreciated the case based on thesound principles of law and has also consideredthe statement made by the assessee at therelevant point of time. We are of the view that inlight of the observations made by this Court in thecase of Kailashben Manharlal Chokshi v.Commissioner of Income-tax (supra), merespeculation cannot be a ground for addition ofincome. There must be a some materialsubstance either in the form of documents or thelike to arrive at a ground for addition of income.Considering the ratio laid down in the abovedecision and in the facts of the present case, weare of the view that the issue raised in this Appealis required to be answered in favour of theassessee and against the Department.” 10.He contended that the authority has accepted the return andrefunded the amount and the Delhi Authority has compelled himto 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 theTribunal and contended that the retraction is made subsequentlyand reasoning adopted by the Tribunal is required to be affirmed. 12.We have heard counsel for both the sides. 10.He contended that the authority has accepted the return andrefunded the amount and the Delhi Authority has compelled himto 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 theTribunal and contended that the retraction is made subsequentlyand 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 23[rd] February,2005 if it is taken alongwith the letter dated 23[rd] February, 2005at Annexure-A, the contention raised by the appellant with regardto retraction is supported by his own letter. Apart from that therefund was granted on 19[th] October, 2005 and taking subsequent proceedings u/s 147, the contention raised by the assessee withregard to retraction is required to be accepted. The Tribunal,CIT(A) and the AO has seriously committed an error in addingincome Rs. 2,70,248/- in spite of affidavit of 20[th] November, 2007and letter dated 23[rd] February, 2005 and rejection of books ofaccounts u/s 145. 14.The statement which has been made by the appellant thatthe assessee was compelled to make statement in view of goodswhich was attached was of pericible nature and the cost was threetimes of tax which are required to be paid therefore, it wascontended that the assessee will adopt easy way to be caught holdof the tax authority. 15.In our considered opinion, the Tribunal has seriouslycommitted an error in adding Rs. 77,298/- ignoring provisions ofthe act therefore, both the issues are required to be answered infavour of the assessee. 16.The appeal stands allowed. (INDERJEET SINGH),J. (K.S. JHAVERI),J. A.Sharma/3