Judgment:
1. This appeal is preferred by the Revenue against the order of the learned CIT(A)-II, Nagpur dt. 31st March, 1999.
2. In ground No. 1, the Revenue has challenged the action of the learned CIT(A) in directing the AO to delete the disallowance of Rs. 62,224 and Rs. 47,345 made under Section 40A(3).
3. During the course of assessment proceedings for the block period, it was noticed by the AO that the assessee had made cash payments of Rs. 3,11,120 to M/s Vidarbha Distilleries against purchases of liquor and these cash payments amounting to Rupees less than 10,000 were made on the same day in multiple receipts. Similarly, cash payments against other purchases amounting to Rs. 2,36,724 were also made by the assessee in multiple receipts on the same day. The AO was of the pinion that the provisions of Section 40A(3) are clearly applicable to these payments and accordingly he disallowed 20 per cent of the said amounts under Section 40A(3) at Rs. 62,224 and Rs. 47,345. The learned CIT(A), however, deleted the disallowance made by the AO on this count as according to him, all the payments being less than Rs. 10,000 at a time, the provisions of S: 40A(3) were not applicable to these payments. For this conclusion, he relied on the decision of Hon'ble Orissa High Court in the case of CIT v. Aloo Supply Co. (1980) 121 ITR 680 (Ori). The learned CIT(A) was also of the opinion that the disallowance under Section 40A(3) could not constitute undisclosed income of the assessee for the purposes of Chapter XIV-B and thus the said disallowance made by the AO in the block assessment was not maintainable on this count also.
4. The learned Departmental Representative submitted before us that the payments made in cash on a single day exceeded the limit specified in Section 40A(3) and, therefore, the disallowance made by the AO by invoking the said section was fully justified. As regards the decision of Hon'ble Orissa High Court (1980) 121 ITR 680 (Ori) (supra) relied upon by the learned CIT(A) while giving relief to the assessee, she submitted that a contrary view has been taken by the Hon'ble Supreme Court in the case of Suman Prakashan (P) Ltd. v. CIT (1992) 195 ITR (St) 150. As regards the observation of the learned CIT(A) that the amount disallowed under Section 40A(3) cannot constitute undisclosed income of the assessee for the purposes of Chapter XIV-B, the learned Departmental Representative relied on the order of the AO, 5. The learned counsel for the assessee, on the other hand, submitted that the provisions of Section 40A(3) were not applicable in the case of the assessee as none of the cash payments in question had exceeded Rs. 10,000. He submitted that the decision of Hon'ble Orissa High Court reported in (1980) 121 ITR 680 (supra) is directly on the point and the learned CIT(A) was fully justified in relying on the same while allowing relief to the assessee. He also pointed out that the SLP filed by the Revenue against the said judgment of Hon'ble Orissa High Court has been rejected by the Hon'ble Supreme Court vide its decision reported in (1983) 143 ITR (St) 67. He further submitted that the disallowance under Section 40A(3) was made by the AO in the block assessment which could have been the subject-matter of regular assessment. He contended that the corresponding transactions of purchases not being a part of undisclosed income determined as a result of search, the disallowance made by the AO in respect of cash payments against such purchases under Section 40A(3) cannot form part of block assessment. For this contention, he relied on the decisions of Pune Bench of Tribunal in the case of Khopade Kisanrao Manikrao v. Asstt.
CIT (2000) 69 TTJ (Pune)(TM) 135 : (2000) 74 ITD 25 (Pune)(TM) and in the case of Janta Tiles v. Asstt. CIT (2000) 66 TTJ (Pune) 695.
6. We have considered the rival submissions and also perused the relevant material on record. It is observed that a similar issue came up for consideration before the Pune Bench of Tribunal in the case Parakh Food Ltd. v. Dy. CIT (1998) 64 ITD 396 (Pune) wherein it was held by the Tribunal that the disallowance under Section 40A(3) does not fall within the ambit of Chapter XIV-B and if any addition is called for on this count, the same can be made in the regular assessment of the assessee. Again, a similar view was taken by the Pune Bench in the case of Khopade Kisan Manikrao v. Asstt. CIT (supra) holding that the disallowance under Section 40A(3) cannot be considered as undisclosed income within the ambit of Chapter XIV-B since all the particulars of the relevant transactions were disclosed by the assessee in the regular return of income. The Cochin Bench of Tribunal also had an occasion to consider a similar issue in the case of Eastern Retreads (P) Ltd. v. Asstt. CIT (2000) 66 TTJ (Coch) 839 and in its decision the Tribunal held that disallowance under Section 40A(3) should be made in a regular assessment under Section 143(3) and the same cannot be made in a block assessment. In the present case, the relevant transactions of purchases were duly recorded by the assessee in his regular books of account and the same were not the subject-matter of determination of undisclosed income of the assessee as a result of search under Chapter XIV-B and this being the undisputed position, we hold, respectfully following the aforesaid decisions of the Tribunal, that the disallowance made by the AO under Section 40A(3) in the block assessment was outside the ambit of Chapter XIV-B. The learned CIT(A), therefore, was fully justified in deleting the same and his impugned order on this issue does not call for any interference.
"On the facts and in the circumstances of the case the learned CIT(A) erred in directing to delete addition of Rs. 1,71,398 made by AO on account of excess undisclosed income to that extent." 8. After considering the rival submissions and perusing the relevant material on record, it is observed that a similar issue involving identical facts and circumstances has been decided by this Bench vide its order dt. 22nd Oct., 2002, in the case of Dy. CIT v. Sanmukhdas Wadhwani in IT(SS)A No. 9/Nag/99 in favour of the assessee and respectfully following the said decision of the Tribunal, we hold that when the undisclosed income of the assessee for the block period had been finally determined at Rs. 8,28,607 as a result of the learned CIT(A)'s impugned order, he was right in directing the AO to adopt the undisclosed income of the assessee at Rs. 8,28,607 as against the income originally returned by the assessee at Rs. 10,00,000. His impugned order on this issue is, therefore, upheld and ground No. 2 raised by the Revenue in this appeal is dismissed.
9. In ground Nos. 3 and 4, the Revenue has challenged the action of the learned CIT(A) in directing the AO to delete the addition of Rs. 51,90,000 made on account of peak credit of the cash transactions found recorded in the diary seized during the search and seizure operations under Section 132.
10. On this case, a search under Section 132(1) was conducted at the business and residential premises of the assessee on 16th Jan., 1997, wherein various incriminating documents were found and seized by the Department. In the course of examination of the seized documents, it was found by the AO that the assessee had maintained a diary (identified as B-1) in which certain transactions of loan were recorded. These transactions were not reflected in the regular books of account maintained by the assessee for the relevant period. The peak of the said transactions was worked out by the AO at Rs. 51,90,000. In the statement of the assessee recorded under Section 132(4), it was stated by him that this amount represents his own money and he is ready to offer an income of Rs. 50 lakhs on this count in the block return.
However, the assessee did not disclose this income in the block return filed subsequently under Section 158BC stating that the disclosure was made by him in his statement recorded under Section 132(4) under great mental pressure, He also submitted that the admission made by him in the said statement was not voluntary and should not be acted upon. As regards the transactions found recorded in the seized diary, the assessee explained before the AO that the same represent borrowings from the creditors as clearly indicated in the diary and the presumption arising under Section 132(4A) was that the contents of the seized diary are true. It was, therefore, contended by the assessee before the AO that the entries recorded in the seized diary showing the borrowings from the third party should be taken as the true state of affairs. It was also contended by the assessee that the concerned creditors/lenders having admitted the said transactions, it stands conclusively established that the admission made by the assessee in his statement recorded under Section 132(4) was not correct. It was further contended that the onus of proving the advances/credits has been duly discharged by him and, therefore, the amount of such credit cannot be treated as his undisclosed income merely on the basis of admission made in the statement recorded under Section 132(4). The AO, however, did not accept the contentions of the assessee raised before him. He was of the opinion that the clear cut admission made by the assessee in his statement recorded under Section 132(4) was sufficient to prove that the amount involved in the transactions found recorded in the seized diary represented the income of the assessee. He was also of the opinion that the lenders who made the declarations under VDIS after the search in order to show that they had advanced money to the assessee in reality were not entitled to make such a declaration under VDIS, He, therefore, proceeded to treat the peak amount of Rs. 51,90,000 of the said transactions as undisclosed income of the assessee for the block period relying mainly on the admission of the assessee in statement recorded under Section 132(4). The matter was carried before the learned CIT(A) and it was argued on behalf of the assessee before him that the entries were appearing in the diary maintained regularly by the assessee and the said diary having been found during the course of search from the possession of the assessee, the entries appearing therein have to be presumed to be true in terms of provisions of Section 132(4A). As regards the emphasis laid by the AO on the statement recorded under Section 132(4) on 1st Feb., 1997, it was submitted on behalf of the assessee that the assessee had been put to day-to-day harassment by being called at the office of ADI and having undergone the mental stress in this process, he had no option but to sign the said statement under pressure which in fact was dictated by the concerned ADI. It was also submitted that the said statement was retracted by the assessee while filing the return of income for the block period in which the impugned amount of Rs, 51,90,000 was not declared. It was also contended by the assessee before the learned CIT(A) that even before the AO, he sought to demonstrate the aspect of undue influence, pressure and coercion at the time of recording the said statement, but the AO did not allow such opportunity to him. An application, therefore, was filed by the assessee before the learned CIT(A) seeking permission to admit the additional evidence in the form of his affidavit dt. 4th Feb., 1997, as well as the affidavit of one of the witnesses Shri Tahir All in order to substantiate his allegation of undue influence, pressure and coercion at the time of recording the statement. The learned CIT(A) admitted the said additional evidence as according to him the same was going to the root of the matter and was also necessary for adjudicating the issue relating to the addition of Rs. 51,90,000 on merits. Before doing so, he put forth the said evidence to the AO who was present before him during the course of appellate proceedings, but the AO refused to examine the same stating that it constitutes self-serving statements, As a result of the AO's refusal to examine the said additional evidence in the form of affidavits, the learned CIT(A) treated the contents of the said affidavits to be true and proceeded to delete the addition of Rs. 51,90,000 made by the AO for the following reasons given in para No.5.5 of his impugned order : "In view of the above facts and on perusal of the diary which was found in the process of search, I am unable to agree with the AO that the appellant would deposit his own money in different names in his diary which was not meant to be produced anywhere. The provision contained under Section 132(4A) are in favour of the appellant and, therefore, it is to be held that the diary belongs to the appellant as also its contents are true, more so because the creditors have confirmed the transactions before the AO. In view of these facts, and legal position it is clear that the appellant has brought sufficient evidence on record to show that the amount in question does not belong to him, for which, support is also drawn from the decision reported in 65 ITD p. 118. In the circumstances, addition of Rs. 51,90,000 is hereby deleted." Aggrieved by the relief given by the learned CIT(A) to the assessee on this issue, the Revenue is in appeal before us.
11. The learned Departmental Representative at the outset invited our attention to the English translated copy of the assessee's statement recorded under Section 132(4) placed at page Nos. 11 to 14 of the assessee's paper book and pointed out that when the transactions recorded in the diary found and seized during the course of search were confronted to the assessee, he had categorically stated that the peak amount of Rs. 50 lakhs involved in the said transactions was his own undisclosed money. Referring to the answer given by the assessee to question No. 2 of the said statement, she submitted that the assessee had clearly stated that he never borrowed any money from anybody and had also admitted of having about Rs. 50 lakhs of his own which were undisclosed. Referring to the assessee's answer to question No. 6 of the said statement, she submitted that the assessee had gone through the relevant seized documents and had also consulted his counsel before making the declaration of his undisclosed income to the extent of Rs. 50 lakhs in the said statement. She submitted that the assessee was fully aware of the provisions of Section 132(4) as well as the evidentiary value of his statement recorded under the said section.
Referring to the various questions posed to the assessee in the said statement, she explained that even though the said questions were put to the assessee by the concerned ADI in different manners, the reply of the assessee was consistent to the effect that the transactions recorded in the seized diary represented his undisclosed income.
Further, referring to the statement of Shri Borle placed at page No. 20 of the Revenue's paper book, she pointed out that the said person in whose name an amount of Rs. 20 lakhs was credited in the seized diary had denied of having given any amount to the assessee or his family members and thus the admission of the assessee in the statement under Section 132(4) was corroborated by the denial of Shri Borale made in his statement. She further submitted that the statement of the assessee under Section 132(4) was recorded in the month of January whereas the return for the block period was filed by the assessee only in the month of August which makes it clear that the retraction of the statement was made by the assessee only after a period of 7 months. Her contention in this regard was that if there was any coercion or pressure at the time of recording the statement of the assessee under Section 132(4) as alleged by him, he should have retracted it immediately in one form or the other and the retraction made after a prolonged period of 7 months cannot be accepted. Referring to the additional evidence filed by the assessee before the learned CIT(A) in the form of his affidavit, she submitted that the said affidavit claimed to be made on 4th February, 1997, was never filed by the assessee before the AO during the course of assessment proceedings despite the same being very much available with him at the relevant time. As regards the other additional evidence filed by the assessee before the learned CIT(A) in the form of affidavit of Shri Tahir Ali, one of the witnesses to the assessee's statement recorded under Section 132(4), the learned Departmental Representative pointed out that the sard affidavit was made by the said deponent only on 23rd March, 1999, i.e., after a period of more than two years from the date of recording the statement of the assessee under Section 132(4) and, therefore, such a denial made after a lapse of more than two years cannot be assigned any evidentiary value. She contended that this evidence in the form of self-serving statements which was contradictory to the categorical admission made by the assessee in the statement should not have been admitted by the learned CIT(A) at the appellate stage or at least he should have given an opportunity to the AO to examine the same before relying on the same.
She contended that the evidentiary value of this additional evidence should have been considered by the learned CIT(A) in the proper perspective especially when the AO present before the learned CIT(A) had objected to the admission of this additional evidence stating specifically that the same was merely in the form of self-serving statement. She also contended that no evidence was brought on record by the assessee to show that his statement under Section 132(4) was recorded under pressure or coercion and in the absence of the same, the retraction of the same made subsequently after a lapse of 7 months cannot be believed. Referring to the VDIS declarations made by the creditors in whose names the entries in the seized diary were appearing, she made an attempt to point out certain discrepancies in the said declarations. She contended that in any case, this evidence brought on record by the assessee in the form of affidavits and the VDIS declarations of the so-called creditors was not sufficient to retract the statement recorded under Section 132(4) or to establish that the admission made by the assessee in the said statement was incorrect and, therefore, the AO's action in making the addition on this count relying on such admission which was clear-cut and voluntary, was fully justified. She, therefore, contended that the relief allowed by the learned CIT(A) to the assessee on this issue ignoring the admission of the assessee made in the statements under Section 132(4) was not well-founded and his impugned order on this issue is liable to be set aside. For this contention, she relied on the decision of Mumbai Bench of Tribunal in the case of Ramesh T. Salve v. Asstt. CIT (2001) 71 TTJ (Mum) 111 : (2000) 75 ITD 75 (Mum) and that of Chandigarh Bench of Tribunal in the case of Rameshwai Lal Ahuja v. Asstt. CIT (2000) 67, TTJ (CM) 411.
12. The learned counsel for the assessee submitted that the impugned addition of Rs. 51,90,000 on account of peak credit of transactions recorded in the seized diary was made by the AO mainly relying on the statement of the assessee recorded under Section 132(4). He submitted that right from the beginning, the assessee has alleged the use of pressure and coercion by the search party during the search which ultimately resulted in the admission, made by the assessee in the statement recorded under Section 132(4). He submitted that the search operations at the business premises of the assessee commenced on 16th Jan., 1997, and continued up to 1st Feb., 1997, i.e., for more than 15 days. He submitted that the business premises of the assessee is a small shop admeasuring about 240 sq. ft. and considering that mainly the books of account and other record were found and seized from the said premises, there was no reason to continue the search operations which had commenced on 16th Jan., 1997 up to 1st Feb., 1997. He submitted that even the diary identified as. B-1 was found and seized from the residential premises of the assessee on 16th Jan., 1997, i.e., on the first day of search itself and in these circumstances, the search was continued till 1st of Feb., 97 just to put pressure on the assessee in order to obtain a surrender of income. He contended that the fact that the search was continued for more than 15 days and finally concluded immediately after the surrender made by the assessee under Section 132(4) clearly indicates that the purpose of continuing the search operations was only to obtain a surrender of substantial income from the assessee.
13. Referring to the relevant pages of the seized diary marked as B-1 placed at page Nos. 22 to 30 of his paper book, he pointed out that the entries therein were made in the name of different persons on account of amounts borrowed by the assessee from them and on para No. 11 of the said diary, the entries regarding payment of interest to the said creditors were also clearly recorded by the assessee. He contended that the said diary having been found from the possession of the assessee, the entries made therein have to be presumed to be true in terms of the provisions of Section 132(4A) and especially when the assessee himself had retracted the admission made in the statement recorded under Section 132(4) to the effect that the amount reflected in the said transactions was his own undisclosed income, by not declaring any undisclosed income in the return for a block period filed subsequently and had also produced the gvidence in the form of affidavits, confirmation letters and VDIS declarations of the concerned creditors in whose names the transactions were recorded in the seized diary to show that the said amount belonged to them, the AO ought to have examined the said evidence keeping in view the presumption available under Section 132(4A). He contended that the AO, however, overlooked the presumption arising form the entries recorded in the seized diary under Section 132(4A) and also ignored the cogent evidence brought on record by the assessee to prove that the admission made in the statement recorded under Section 132(4) was incorrect. He contended that the said creditors while disclosing the amounts advanced to the assessee under VDIS had paid income-tax at the rate of 30 per cent on the amount so declared and if at all the said persons hid no relevance with the said transactions as stated by the assessee in his statement recorded under Section 132(4), there was no reason for them to part with the substantial amount of tax paid under VDIS. He contended that all these vital and relevant aspects were not given due consideration by the AO and he proceeded to add the entire amount of Rs. 51,90,000 in the hands of the assessee as his undisclosed income merely on the basis of admission made in the statement recorded under Section 132(4). He contended that the learned CIT(A), however, properly appreciated the relevance of this evidence and also allowed the assessee to adduce the additional evidence as per Rule 46A considering that the same was going to the root of the matter and was also necessary for adjudicating the issue on merits, Referring to para No. 5.4 of the learned CIT(A)'s impugned order, he pointed out that an opportunity was given by the learned CIT(A) to the AO present before him during the course of appellate proceedings to examine the said additional evidence, but the AO did not opt to examine the same stating that it was merely a self-serving evidence. Reference to the assessee's affidavit filed before the learned CIT(A) as additional evidence (copy placed at page No. 6 of his paper book), he submitted that the said affidavit was made by the assessee before the notary public on 4th Feb., 1997, itself stating clearly on oath that his action of surrendering the income on this count was on account of pressure and coercion by the search party and that the entries found recorded in the seized diary by no stretch of imagination could be treated as his income. The learned counsel for the assessee contended that the retraction of the statement recorded under Section 132(4) came to be made by the assessee immediately on 4th Feb., 1997, itself and the process of retraction thus had started immediately after the search. He also clarified the discrepancies pointed out by the learned Departmental Representative in the VDIS declaration of the concerned creditors and further explained that the said creditors had not only declared the amounts advanced to the assessee specifically under the VDIS scheme but in some cases, they had also declared their other income which further substantiates the assessee's case that the VDIS declarations were filed by the concerned creditors on their own and the amounts appearing in the said diary were their own money. To sum up, the learned counsel for the assessee submitted that the assessee having successfully retracted the admission made in the statement recorded under Section 132(4) and also proved that the statement made under Section 132(4) was not correct by adducing sufficient evidence to show that amount reflected in the transactions recorded in the seized diary belonged to the other persons, there was no case to add this, amount in the income of the assessee. He also explained the legal position as regards the evidentiary value of the statement recorded under Section 132(4) in the light of various judicial pronouncements as also the position relating to the retraction of the same to make out a case that there was successful retraction of his statement by assessee in the present case and the evidence brought on record was sufficient to prove that the statement made by the assessee under Section 132(4) was not correct. He contended that the addition of Rs. 51,90,000 made by the AO to the undisclosed income of the assessee merely on the basis of the said statement was thus not correct and the learned CIT(A) was fully justified in deleting the same after considering the submission made by the assessee before him and the evidence brought on record.
14. We have considered the rival submissions and also perused the relevant material on record to which our attention was drawn during the course of hearing. It is observed that the addition on account of peak credit of the transactions found recorded in the seized diary identified as B-1 amounting to Rs. 51,90,000 was made by the AO mainly on the basis of admission made by the assessee in the statement recorded under Section 132(4) of the effect that the said amount represented his undisclosed income. Before we proceed to consider the evidentiary value of the said statement in the light of subsequent retraction of the assessee as well as the evidence brought on record to show that the said admission was factually not correct, it would be appropriate to consider the nature of entries found recorded in the relevant seized diary as well as the presumption available under Section 132(4A).
15. A copy of the said diary found and seized during the course of search containing page Nos. 1 tp 8 as well as page No. 11 is placed at page Nos. 22 to 30 of the assessee's paper book and a perusal of the same reveals that on page Nos. 1 to 8 of the said diary, ledger accounts of some parties were maintained by the assessee in a regular manner showing opening balances as well as debit and credit entries with corresponding dates. The names of the concerned parties i.e., the account-holders were also clearly written in the header in all the accounts. On page No. 11 of the said diary, a copy of which is placed at page No. 30 of the assessee's paper book, interest account was maintained by the assessee in which the amounts of interest paid to the creditors whose accounts were maintained on page Nos. 1 to 8 of the diary were recorded giving corresponding details about the period of interest, date of interest and names of the recipients. The manner and method in which all these accounts were maintained showing the relevant transactions on page Nos. 1 to 8 as well as the interest account maintained on page No. 11 showing the payment of interest to the said creditors were clearly indicative of the nature of transactions being amount borrowed by the assessee from the concerned persons on interest as well as the subsequent repayment of such borrowings in part. In our opinion, this diary or for that matter the entries recorded in the said diary in a regular and proper manner were self-explanatory as regards the nature of transactions as well as the assessee's involvement, in the said transactions and the assessee's version of the same in his statement recorded under Section 132(4) was clearly contradictory to this apparent position.
16. Undisputedly this diary was found during the course of search from the possession and control of the assessee and in accordance with Section 132(4A), a presumption was available by a legal fiction that the said diary belonged to the assessee and the contents of the same were true. It is true that presumption under Section 132(4A) is available to be drawn for the benefit of the Revenue and that it is a rebuttable presumption. However, it is also true that if such presumption is available to be drawn in the facts and circumstances of the given case and having regard to the nature of the documents found during search as well as the contents thereof, it has to be carried to its logical conclusion. In the present case, as already observed, the contents of the seized diary were such that the only inference which could have been reasonably drawn having regard to the manner and method of entries made therein was that the transactions found recorded in the seized diary represented the amounts borrowed by the assessee from the persons named therein on interest. In our opinion, the contents of the seized diary gave rise to a very strong presumption under Section 132(4A) about the nature of transactions found recorded in the seized diary being the amounts borrowed by the assessee from the concerned persons on interest and a mere statement of the assessee recorded under Section 132(4) giving an altogether different version of the said transactions stating that the apparent is not real was not sufficient to rebut such presumption available under Section 132(4A) especially when the said statement was retracted by the assessee subsequently.
17. Reverting back to the evidentiary value of the statement of the assessee recorded under Section 132(4), it is a settled position of law that although such statement is an important piece of evidence, it is not always conclusive. In the case of Pullangode Rubber Products Co.
Ltd. v. State of Kerala and Anr. (1973) 91 ITR 18 (SC), the Hon'ble Supreme Court has held that an admission in a statement recorded on oath is an extremely important piece of evidence but it cannot be said that it is conclusive and it is always open to the person who made the admission to show that it is incorrect. In the case of Krishan Lal Shiv Chand Rai v. CIT (1973) 88 ITR 293 (P&H), the Hon'ble Punjab & Haryana High Court has held that the party is entitled to show by proof that the admission made by him previously is in fact not correct and true.
In the case of Krishnan v. Kurukshetra University AIR 1976 SC 377, the Hon'ble apex Court has held that any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission.
Explaining further, the Hon'ble apex Court observed that mere admission cannot be bedrock or foundation of an assessment and it is always open to the assessee who made the admission to show that what he admitted was not correct. The Hon'ble apex Court also observed that the effect of an alleged admission depends upon the circumstances in which it was made. A similar issue relating to the evidentiary value of the statement recorded on oath arose for consideration before the Bombay Bench of Tribunal in the case of Pushpa Vihar v. Asstt. CIT (1994) 48 TTJ (Bom) 389 and after discussing the legal position propounded in the various judicial pronouncements including the one of Hon'ble Supreme Court in the case of Shri Krishnan v. Kurukshetra University (supra), the Tribunal held that the person who admitted the fact is at liberty to explain or clarify the circumstances and the nature of statement and also the correct facts. Keeping conscious awareness of this legal position relating to the evidentiary value of a statement recorded under Section 132, we now proceed to consider the circumstances in which the statement of the assessee was recorded under Section 132(4) as well as the evidence brought on record by the assessee to show that the admission made by him was not correct.
18. In this case, search and seizure operations were commenced, inter alia, at the business premises of the assessee known as M/s Lucky Liquor Agency situated at Netaji Chowk, Yavatmal. The said operation continued up to 1st of Feb., 1997, on different dates, the details of which are given below : 19. From the perusal of above details, it is, apparent that a search was commenced on 16th Jan., 1997 at 9.45 A.M. and temporarily concluded on the same day at 9 P.M. during the course of which nothing apparently was found by the search team comprising of 9 officiate headed by the officer of the rank of Asstt. CIT. On the next day, the search team again visited the business premises of the assessee at 10.30 A.M. and continued the search operation upto 10 P.M. in which pash of Rs. 2,25,000 was seized and the books of account and other record found was inventorised as per Annex. B pp. 1 to 5. Again on 18th Jan., 1997, the search operations were commenced at 10.30 A.M. and temporarily concluded at 10 P.M. in which some record in the form of office files etc. were found and inventorised as per Annex. B-6 and SB-1, On 19th Jan., 1997, the search team revisited the business premises of the assessee at 12.20 P.M. and continued the search operation up to 4.30 P.M. in which books of account and other documents as inventorised in Annex. B, B-1 and SB were seized. On this day i.e. 19th Jan., 1997, a computer PC 388 was found and inventorised as per Annex. A. However, the same was not seized but a prohibitory order under Section 132(3) was passed. In the panchanama prepared on 19th Jan., 1997, nothing was specifically mentioned about the finality or otherwise of the search operations. Thereafter on 30th Jan., 1997, i.e., after a gap of about 11 days, the search party now headed by Asstt. CIT (Investigation), Nagpur, visited the business premises, of the assessee at 10.40 A.M.and the search operations on that were again temporarily concluded at 9.30 P.M. in which books pf account and other documents inventorised as Annex. A2 page No. 1 to 6 were found and seized Again on 31st Jan., 1997, a search party headed by Dy. Director of Investigation Nagpur with 9 other officials visited the business premises of the assessee and conducted the search operations from 10 A.M. to 10.30 P.M. in which books of amount and other documents inventorised as Annex, CP pp. 1, 2 & 3 were found. Thereafter, on 1st Feb., 1997, the search team comprising of 10 officials including one Dy. Director of Investigation, one Asstt. pirector of Investigatipn and one Asstt. CIT besides ITO's and Inspectors, visited the business, premises of the assessee at 10 A.M. and the search was finally concluded at 1 PM on 1st Feb., 1997.
20. It is pertinent to note here that the business premises of the assessee situated at Netaji Ghowak, Yavatmal which was subjected to search on different dates is a shop admeasuring about 250 sq. ft. and what ultimately found during the said operations was mainly the books of account and other record which ought to have been available even on the first day of search itself. In these circumstances, we find it very difficult to understand the real purpose of continuing the search operations for such a long period and that too with noticeable interruptions and gaps, In the case of T.C. Chandrashekhar v. Asstt.
CIT (2000) 66 TTJ (Bang) 360, similar facts were involved inasmuch as search was conducted on 12th and 13th Jan., 1995, in which some of the documents found and inventorised were not seized and a prohibitory order under Section 132(3) was passed. Search resumed on subsequent occasions and was finally concluded on 12th Feb., 1996, and in these facts and circumstances of that case, the Bangalore Bench of the Tribunal came to the conclusion that the search was shown to be continuing for some collateral purposes like getting disclosure from the assessee under Section 132(4) observing that the search was continued under the whims of the searching party without any real purpose or for collateral purpose. A similar issue also arose for consideration before the Hon'ble Kerala High Court in the case of Dr.
C. Balkrishnan Nair and Anr. v. CIT (1999) 237 ITR 70 (Ker) wherein no satisfactory explanation was offered as to why the books of account and other documents were not practicable to be seized and the search discontinued once was resumed after 14 days and the Hon'ble Kerala High Court held that the same is vitiated being prolonged unreasonably without justification and there being serious lapses and violation of statutory provisions. Their Lordships of Kerala High Court also observed that there is no provision in Cr. PC or in the IT Act or the rules for postponing the search for such a long period.
21. In the present case, as already discussed, the search was continued for a long time without any justifiable reason and the fact that the search team went on visiting the business premises of the assessee off and on without any real purpose sufficiently demonstrates that the search was continued for such a long time for some collateral purpose like obtaining disclosure of income from the assessee. The fact that the prolonged search was finally concluded on 1st Feb., 1997, immediately after the disclosure of income to the tune of Rs. 50 lakhs by the assessee in his statement recorded under Section 132(4) further fortifies this conclusion. A circumspect view of all the facts and circumstance of the present case thus is sufficient to indicate/suggest that the assessee was put under pressure by the prolonged search operation which finally culminated in the disclosure of income to the tune of Rs. 50 lakhs by the assessee which, in our opinion, cannot be considered as a voluntary disclosure. In the case of Asstt. CIT v.Sushila D. Agrawal (1994) 49 TTJ (Ahd) 663, the Ahmedabad Bench of Tribunal has held that the value of statement recorded during the search should be reviewed with great caution particularly when the same is denied, varied or retracted or established by the defendant to have obtained or given under mental stress, coercion or undue influence.
22. In the present case, even the questions posed to the assessee and the answers given by him in the statement recorded under Section 132(4) indicate that the said statement was not made by the assessee voluntarily and the information given by him in the said answers against his own interest without there being any specific question is also suggestive of the tenor of the said statement and the compelling circumstances under which the assessee was made to give the same. The reference to the assessee's knowledge about the relevant provisions of IT Act also indicates the anxiety on the part of the Revenue to put the things beyond doubt and recording of the statement in such an unnatural manner further supports the case of the assessee. Thus, sufficient circumstantial evidence arising from the material on record was available to indicate/suggest that the statement of the assessee was recorded under pressure and duress and to that extent the assessee was successful in retracting the said statement. As a matter of fact, the process of retraction was started immediately after the date of recording the said statement when an affidavit to that effect was made by the assessee on 4th Feb., 1997, itself on oath before the public notary. Further, by not declaring the income surrendered in the said statement in his return filed for block period, the assessee had clearly communicated his retraction to the AO and during the assessment proceedings he had also furnished the relevant evidence in the form of confirmation letters and VDIS declarations of the concerned creditors to show that the money involved in the transactions recorded in the seized diary belonged to them. The AO, however, refused to examine this vital and relevant evidence filed by the assessee to show that the admission made in the statement was incorrect and he proceeded to make the additions mainly relying on the said admission. Consequently, the assessee had no opportunity to show that the admission made in his statement was incorrect before the AO and it was for the first time before the learned CIT(A) that he had an occasion to avail such opportunity. The case of the assessee thus was covered by the exceptional circumstances provided in Sub-rule (1) of Rule 46A and accordingly he was entitled to produce the additional evidence in the form of his own affidavit as well as the affidavit of the witness to prove the incriminating circumstances in which his statement was recorded under Section 132(4).
23. During the course of assessment proceedings, the assessee made a written submission before the AO (copy at pp, 58 and 59 of his paper book) alleging that the disclosure or surrender of Rs. 50 lakhs was obtained from him under pressure and coercion and his statement recorded under Section 132(4) was not voluntary. The assessee also communicated to the AO that he is in a position to submit evidence in order to substantiate this allegation. This specific submission made by the assessee before the AO with a request that the disclosure made in the said statement should not be acted upon, however, was not duly taken into consideration by the AO and the assessee thus had no occasion during the proceedings before the AO to substantiate his allegation of pressure and coercion during the course of search. The elementary rule of justice embodied in the legal maxim audi alteram partem is that nobody should be condemned unheard. In any judicial proceeding, no one is to be condemned, punished or deprived of his rights without being given an opportunity of being heard, Therefore, it was incumbent on the learned CIT(A) to exercise his powers under Section 250(4) which, in the facts and circumstances of the case, was fully justified. Moreover, the CIT(A) had given an opportunity to the AO who was present before him during the appellate proceedings, to examine the fresh evidence before taking the same into account for adjudicating the case of the assessee and thus there was no fault on the part of the learned CIT(A) in taking into consideration the said additional evidence, having complied with the requirements of Sub-rule (3) of Rule 46A.24. As already observed, the confirmation letters from the concerned creditors as well as their VDIS declarations were filed by the assessee before the AO during the course of assessment proceedings to establish that the transactions reflected in the seized diary represented the amounts borrowed from the said creditors. The AO, however, relied heavily on the statement of the assessee recorded under Section 132(4) wherein he had admitted that the said transactions represented his money and had also offered the same for taxation. Further, the AO was also of the opinion that the said creditors were not entitled to make any declarations under VDIS after the search in order to show that they had advanced money to the assessee which was really belonging to them.
In our opinion, the action of the AO on this count was contrary to the scheme of VDIS itself in as much as the CBDT itself had clarified in the press release that the restriction in Section 64(2)(ii) is applicable in the case of a person in whose case search proceedings are initiated under Section 132 by issue of warrant and in a case which is interconnected with some search proceedings but no direct search is initiated, disclosure can be made under VDIS, 1997. In the present case, no search was initiated in the case of any of the creditors except Shri K.K. Borale and thus they all except Shri. K.K. Borale, were duly entitled for disclosing the money advanced to the assessee in their respective VDIS declarations. It is pertinent to note that in the said declarations filed by the concerned persons, they had explicitly declared the amounts advanced to the assessee as found recorded in the seized diary as their own income and had also paid tax on the said amounts as per the scheme. Moreover, some of the said creditors had also declared additional amount under VDIS over and above the amounts advanced to the assessee which further goes to show their resourcefulness as well as the genuineness of the declarations made by them under VDIS, Even Shri K.K. Borale, who had denied of having advanced any money to the assessee in his statement recorded under Section 132(4) during the course of search conducted in his case, subsequently filed an affidavit before the AO admitting on oath of having paid an amount of Rs. 20 lakhs to the assessee as advance and also gave the details of refund of the said amount to him by the assessee. It appears that all these facts as well as the material available on record were duly considered by the learned CIT(A) to come to a conclusion that the peak amount of transactions found recorded in the seized diary did not belong to the assessee but the same represented the amounts borrowed by him from the concerned creditors.
In our opinion, the conclusion drawn by the learned CIT(A) was based on the relevant and material evidence available on record before him and he was fully justified in deleting the addition made by the AO on this count.
25. Before us, the learned Departmental Representative has relied on the decisions of Mumbai Bench of Tribunal in the case of Ramesh T.Salve v. Asstt. CIT (supra) and that of Chandigarh Bench of Tribunal in the case of Rameshwar Lal Ahuja v. Asstt. CIT (supra) to support the action of that AO in making the impugned addition on the basis of specific and categorical admission made by the assessee in his statement recorded under Section 132(4) during the course of search. A perusal of the said decisions of the Tribunal, however, reveals that surrender of income in the facts and circumstances of those cases was found to be made by the assessee voluntarily without any duress or pressure and there was nothing to support the plea of the assessee that he had given the statement under coercion or threat. In the present case, as discussed hereinabove, the element of coercion and duress was apparently present during the search and there were sufficient circumstances to indicate/suggest that the surrender of income made by the assessee in his statement recorded under Section 132(4) was not voluntary, Thus, the aforesaid cases cited by the learned Departmental Representative are clearly distinguishable on facts and cannot be of any help to the Revenue's case. As such, considering all the facts and circumstances of the case, we are of the considered opinion that the addition of Rs. 51,90,000 made by the AO was merely based on the statement of the assessee recorded under Section 132(4) and the assessee having retracted the same successfully by adducing sufficient corroborating evidence to show that the said statement was not voluntary and that the admission made therein was incorrect, the addition made by the AO oil this count was not sustainable. In that view of the matter, we hold that the learned CIT(A) was fully justified in deleting the said addition made by the AO and his impugned order on this issue calls for no interference.
26. Ground Nos. 1 and 2 of assessee's cross-objection are only supportive in nature whereas ground No. 3 has not been pressed by the learned counsel for the assessee before us.
27. In the result, the appeal of the Revenue as well as the cross-objection of the assessee are dismissed.