1. This appeal has been filed by the Revenue against the order of learned CIT(A), dt. 14th Nov., 2000 for the block period 1st April, 1987 to 12th Jan., 1998 under Section 158BC(c)/143(3) of the IT Act, 1961.
2. Shri K.C. Jain, CIT-Departmental Representative, appeared on behalf of the Revenue, whereas Shri O.P. Dua and Ms. Jaya Verma, advocates, represented the assessee.
"On the facts and in circumstances of the case, the learned CIT(A) has erred in: (i) deleting the addition of Rs. 71,097 made by the AO on account of undisclosed income; (ii) deleting the addition of Rs. 42,33,686 made by the AO on account of suppressed receipts on the basis of admission made by the partners in their operations." 4. Before dealing with the grounds of appeal, we consider it proper to narrate the circumstances pertaining to this matter, which are as under : 4.1. The assessee is a registered firm and is running a nursing home in the name of Bali Nursing Home. It had four partners, namely, Dr. R.K.Bali, Dr. Rajinder Bali, Dr. Abha Bali, and Dr. Veena Bali. A search and seizure operation under Section 132 of the IT Act, 1961 was carried out at the business premises of the assessee at B-2/B-3, D.B. Gupta Road, New Delhi on 12th Jan., 1998. During the course of search, certain incriminating documents were found. Statements of three partners were also recorded on 12th and 13th Jan., 1998. On the basis of the incriminating documents, the AO made addition of Rs. 71,097 on account of undisclosed income. He also made addition of Rs. 42,33,686 on account of the undisclosed income for the block period. Thus, total undisclosed income was worked out at Rs. 43,04,783 for the block period. In appeal, the learned CIT(A) deleted the additions. The Revenue has challenged the deletion of additions in this appeal.
5. Ground No. 1 : During the course of search, Annex. A-89 was seized from the premises of the assessee. It contained some small chits on which certain amounts were mentioned. Details of such papers with serial numbers have been given at pp. 2 and 3 of the assessment order.
The explanation of the assessee vide reply dt. 17th Nov., 1999 in respect of these chits/documents was that the same did not pertain to the assessee, namely, Bali Medical and Dental Centre. The AO, on examination of each entry found that certain papers were related to the assessee. He, therefore, made an addition of Rs. 71,097 by observing as under : "5.3. The assessee has submitted that the advance was received for goods and was later on refunded on return of goods and hence was not recorded in the books of account. It is clear from the above noting that it pertains to Bali Medical & Dental Centre. Bali Medical & Dental Centre has not shown from its books of account whether advance received for goods, was recorded or not. Only written submissions have been filed without any documentary evidence. Hence, these will be added in the hands of Bali Medical & Dental Centre.
Serial Nos. 14 and 15 pertain to Dr. R.K. Bali. Serial Nos. 16 and 17 pertain to M/s Bali Medical & Dental Centre. Serial No. 18 pertains to expenses of mobile van for dental treatment. Hence, no addition is to be made. Dr. R.K. Bali is Chairman of Mobile Dental Centre. Serial Nos. 19 to 20 are particulars of bills of Hari Chand Bhagat Ram for Rs. 27,180 and bill of Punjab Timber Traders for Rs. 28,320 and pertains to Bali Medical & Dental Centre. Serial Nos. 21 and 22 belongs to Dr. R.K. Bali and these are particulars of certain expenditure made by Dr. R.K. Bali. It has been stated by the assessee that these are particulars of materials not accepted hence not entered. However, perusal of these two chits indicates that the total of Rs. 1,200 and Rs. 1,935 have been drawn and appear to be payments made by Dr. R.K. Bali and hence will be added in his hands.
Serial Nos. 23 to 27 are being considered separately in the hands of Bali Medical & Dental Centre because these slips are similar to those enclosed in Annex. A-26.
5.4. In view of the above discussion the addition to be made in the hands of the assessee-firm for the block period is Rs. 71,097." 5.1. The addition of Rs. 71,097 was challenged by the assessee before the learned CIT(A). Regarding serial No. 1 of Annex. A-89, which was about Rs. 21,000, it was submitted that it was a bill of Sunil Kumar, interior decorators, for renovation work done by them. It was pointed out that on completion of the work, advance paid by the partners was entered in the books on 10th April, 1998. In this regard, reference was made to the relevant entries in the ledger. Similarly, explanation was furnished about the amount of Rs. 2,250 and Rs. 1,440 and it was submitted that these loose papers pertained to Dr. R.K. Bali. Regarding the amount of Rs. 21,159, it was explained that a bill amounting to Rs. 28,320 pertained to Punjab Timber Traders and payment of this amount was made by cheque which is reflected in the bank account of the assessee.
5.2. About the figure of R 25,248 also it was explained that it pertained to Hari Chand Bhagat Ram and these bills were paid through cheques, which have been duly reflected in the bank account. The learned CIT(A) found the explanation of the assessee fully convincing and deleted the addition by observing as under : "I have examined the explanation with reference to evidence contained in paper book and I find that the explanation of the assessee is correct and there is no reason to make addition of Rs. 71,097 in the hands of the appellant i.e., M/s Bali Medical & Dental Centre. Accordingly, the addition of Rs. 71,097 is deleted." 5.3. The learned Departmental Representative has challenged the findings of the learned CIT(A) and has placed reliance on the order of AO.5.4. On the other hand, the learned counsel for the assessee placed reliance on the order of the learned CIT(A).
5.5. We have carefully considered the entire material on record and the rival submissions. The addition of Rs. 71,097 has been made on account of the following entries found recorded on the loose papers recovered during the course of search and seizure :-----------------------------------------------------SI. No. Page number Amount Financial Annex. A-89 year-----------------------------------------------------1 48 21,000 1997-98-----------------------------------------------------16 82 2,250 1997-98-----------------------------------------------------17 83 1,440 1997-98-----------------------------------------------------19 86 21,159 1997-98-----------------------------------------------------20 86 25,248 1997-98----------------------------------------------------- 5.6. The assessee had demonstrated before the learned CIT(A) that the figures written on the loose papers related to certain bills and the amounts were duly recorded in the books of account of the assessee. The learned CIT(A) found the explanation in relation to each entry to be fully justified and convincing. As the amount was duly disclosed in the books of account in relation to the loose papers, it cannot be said that the incriminating documents pertaining to the addition of Rs. 71,097 related to undisclosed income of the assessee. In our view, therefore, the learned CIT(A) was fully justified in deleting the addition. Hence, we do not find any scope to interfere and reject the ground taken by the Revenue on this issue.
6. Ground No. 2 : This ground challenges the deletion of addition of Rs. 42,33,686.
6.1. During the course of search, certain documents annexed with Annex.
A-26 and Annex. A7 were seized. On the basis of the documents and on the basis of the statements of the partners of the assessee-firm, recorded at the time of search, the AO made addition of Rs. 42,33,686 as suppressed income of the assessee. This was done by taking 25 per cent of the professional receipt as being earned outside the books of account. The addition in various years has been made in the following manner :----------------------------------------------------------------------Financial Amount as per Amount considering ReceiptsYear books the previous column suppressed (Rs.) to be 75% (Rs.) (Rs.)----------------------------------------------------------------------1995-96 44,51,651 58,02,200 13,50,549----------------------------------------------------------------------1996-97 53,72,180 71,62,904 17,90,724----------------------------------------------------------------------1997-98(till DOS) 32,80,235 43,73,648 10,92,413---------------------------------------------------------------------- 6.2. In appeal, the learned CIT(A) considered the statements of the partners, recorded at the time of search and the written submissions of the assessee, which have been reproduced in the appellate order and deleted the addition. It is to be pointed out that the main contention of the assessee before the learned CIT(A) was that the so-called admission of the partners was neither natural nor voluntary as the statements were recorded under duress and coercion and mental pressure.
For this purpose, various reasons were advanced which were accepted by the learned CIT(A) for holding that the addition cannot be justified on the basis of such statements.
6.3. Before us, the learned Departmental Representative has challenged the findings of the learned CIT(A) and has placed reliance on the order of AO. According to him, the learned CIT(A) was not justified in holding that the statements of the partners were not given voluntarily and in accepting the retraction of the contention.
6.4. We have carefully considered the entire material on record and the rival submissions. In order to appreciate the arguments of the parties advanced and for proper appraisal of the relevant ocular testimony in the ,shape of statements recorded under Section 132(4) and the other material as well as for examination of the main issue, which relates to the evidentiary value of the confessional statements, we consider it proper to reproduce the relevant material in the body of this order.
6.5. The main allegation of the assessee is that the statements of three partners were not really voluntary statements but their signatures were obtained under compulsion. It was emphasized that it is most improbable and unnatural that all the three persons shall give the answers to a particular question in identical words and language. For examining this issue, we consider it proper to reproduce the statements also for the purpose of analysis and comparison. Relevant portion of statements of Dr. Veena Bali, which is available at pp. 15 and 16 of the paper book, relevant portion of statement of Dr. Abha Bali which is available at pp. 19 and 20 of the paper book and relevant portion of statement of Dr. R.K. Bali, which is available at pp. 28 and 29 of the paper book, are being reproduced in the following manner : Q. Please state categorically what is the total amount earned from unaccounted professional receipts outside the books of account for last 10 years by you, your husband Sh. Dr. Ravinder Kumar Bali, Dr.
Rajinder Bali and Dr. Veena Bali and M/s Bali Nursing Home where you, your husband and Dr. Rajinder Bali and Dr. Veena Bali and kindly to relate the abovesaid undisclosed income with its investment.
A. About 25 per cent of the professional receipt are being earmarked outside the books of account by the abovementioned four persons and firms every year for the last 10 years. After calculating the total unaccounted receipts/income for the last 10 years to an amount of Rs. 80,00,000 (eighty lakhs), myself, my husband, Dr. Veena Bali and Dr. Rajinder Bali admit that there is a concealment of income on account of undisclosed professional receipt outside the regular books of account and offer the same amount of Rs. 80 lakhs for taxation in our hand in individual capacity and in the hand of the firms. I also undertake to pay the taxes due on the amount. I also hereby state that the undisclosed income of Rs. 80 lakhs has been invested in the purchase and renovation of property No. 20B/2, D.B. Gupta Road, New Delhi, purchase of flat Nos. 1A and IB White House, Bhagwan Das Road, New Delhi, renovation of nursing home premises 20B/2, D.B. Gupta Road, New Delhi, unaccounted loans including an amount of Rs. 16 lakh app. to Mrs. Usha Bhaumik, E-13, East of Kailash, New Delhi, foreign gift of an amount of US $ 18000.
Undisclosed investment in stock of medicine found at M/s Balis Medicos Chemist and any other property or loan or advance or expenditure incurred by me for last 10 years upto the date of search, including the cash found at my/our residence 20B/2 and residence of my mother-in-law Mrs. Vidyawati Bali, 20B/3, D.B. Gupta Road, New Delhi.
Q. Please state categorically what is the total amount earned from unaccounted professional receipts outside the books of account for last 10 years by you, your wife Dr. Abha Bali, your brother Dr.
Ravinder Kumar, his wife Dr. Veena Bali and M/s Bali Nursing Home where you, your wife, your brother Dr. Rajinder Bali and his wife Dr. Veena Bali and kindly to relate the abovesaid undisclosed income with its investment.
A. As stated by me earlier, about 25 per cent of the professional receipt are being earmarked outside the books of account by the abovementioned four persons and firms every year for the last 10 years. After calculating the total unaccounted receipts/income for the last 10 years at an amount of Rs. 80,00,000 (eighty lakhs), myself, my wife Dr. Abha Bali, my brother Dr. Rajinder Kr. Bali and his wife Dr. Veena Bali admit that there is a concealment of income on account of undisclosed professional receipt outside the regular books of account and offer the same amount of Rs. 80 lakhs for taxation in our hand in individual capacity and in the hand of the firms. 'I also undertake to pay the taxes due on the amount. I also hereby state that the undisclosed income of Rs. 80 lakhs has been invested in the purchase and renovation of property no. 20B/2, D.B. Gupta Road, New Delhi, purchase of flat Nos. 1A and IB White House, Bhagwan Das Road, New Delhi, renovation of Nursing Home Premises 20B/2, D.B. Gupta Road, New Delhi, unaccounted loans including an amount of Rs. 16 lakh app. To Mrs. Usha Bhaumik, E-13, East of Kailash, New Delhi, and foreign gift of an amount of US $ 18,000.
Undisclosed investment in stock of medicine found at M/s Balis Medicos Chemist and any other property or loan or advance or expenditure incurred by me for last 10 years upto the date of search, including the cash found at my/our residence 20B/2 and residence of my mother-in-law Mrs. Vidyawati Bali, 20B/3, D.B. Gupta Road, New Delhi.
Q. Please state categorically what is the total amount earned from unaccounted professional receipts outside the books of account for last 10 years by you, your husband Sh. Dr. Rajinder Kumar Bali, your brother-in-law Shri R.K. Bali, your sister-in-law Dr. Abha Bali and M/s Bali Nursing Home where you, your husband Dr. Sh. Rajinder Bali, your brother-in-law Shri R.K. Bali, your sister-in-law Smt. Abha Bali and kindly correlate the abovesaid undisclosed income with its investment.
A. About 25 per cent of the professional receipt are being earmarked outside the books of account by the above mentioned four persons and firms every year for the last 10 years. After calculating the total unaccounted receipts/income for the last 10 years at an amount of Rs. 80,00,000 (eighty lakhs), myself, my husband Sh. Rajinder Bali, my brother-in-law Shri R.K. Bali, my sister-in-law Smt. Abha Bali admit that there is a concealment of income on account of undisclosed professional receipt outside the regular books of account and offer the same amount of Rs. 80,00,000 (eighty lacs) for taxation in our hand in individual capacity and in the hand of the firms. I also undertake to pay the taxes due on the amount. I also hereby state that the undisclosed income of Rs. 80 lakhs has been invested in the purchase and renovation of property No. 20B/2, D.B. Gupta Road, New Delhi, purchase of flat Nos. 1A and IB White House, Bhagwan Das Road, New Delhi, renovation of Nursing Home Premises 20B/2, D.B. Gupta Road, New Delhi, unaccounted loans including an amount of Rs. 16 lakh app. to Mrs. Usha Bhaumik, E-13, East of Kailash, New Delhi and foreign gift of an amount of 18,000 US dollars. Undisclosed investment in stock of medicine found at M/s Balis Medicos Chemist and any other property or loan or advance or expenditure incurred by me for last W years upto the date of search, including the cash found at my/our residence 20B/2 and residence of my mother-in-law Mrs. Vidyawati Bali, 20B/3. D.B: Gupta Road, New Delhi.
6.5.1. It is to be pointed out here that the portion of the statements highlighted in dark (italicised in print), is identical in all the three statements.
6.6. The abovementioned statements were retracted by Dr. R.K. Bali vide letter dt. 29th Jan., 1999 which is available at.p. 166 of the paper book and which is as under : This has a reference to the search conducted at our business and residential premises on 12th Jan., 1998. I, am pained to bring to your notice that the statements of our family members which were recorded during the course of the search were neither voluntary nor out of free will. I am writing this to place on record that the statement of mine and other family members which were recorded under duress are without sanctity of law and, therefore, not binding on us.
You are requested to take appropriate action in the matter and save us from any further adverse consequence.
6.7. In order to further explain the entire factual position relating to the confession and retraction, a letter dt. 19th Jan., 2000, was written by the assessee which is available at pp. 163 to 165 of the paper book and relevant portion of which is as under : "1. That the persons searched were in a state of shock and circumstances were so created concerning their prestige and reputation that they were left with no alternative but to succumb to pressure. It was therefore desirable that the statement be retracted and accordingly immediately after the total search was complete and the persons were in a position to regain the lost confidence retracted the statements on 29th Jan., 1998, which is annexed herewith.
(i) Dr. Rajinder Bali was out of India and was not searched and cannot be made to accept alleged statements by other family members.
The alleged admission is stated to be not only on behalf of firms but also in his individual capacity. It is therefore, out of question to rely on such alleged statements. Even proceedings against him under Section 158BC are invalid.
(ii) That the alleged statements are vague, general and ambiguous and are contrary to the facts on record. It is clear from the alleged statements that no incriminating material was found at the recording of the alleged statements. All alleged figures are imaginary. Even one of the assessees was asked to state a uniform suppression of 25 per cent which on the facts of it is contrary.
Further, as the facts will bear us out that what is stated about the alleged investments in various properties is without any material.
Statement of Ms. Usha Bhaumik, landlady of E-13, East of Kailash, had been recorded. Similarly, in respect of foreign gifts, complete evidence is available and has been furnished. Cash found at various premises, has been fully explained to be out of the books. There is no fact which is not verifiable. Again the alleged figure of Rs. 80 lakhs as the alleged undisclosed income is totally imaginary and without any substantiating material.
(iii) The invalidity of the statement is clear. As the oath was administered to Dr. R.K. Bali on 13th Jan., 1998 by an officer who was fully conversant with the process of search, Dr. Bali was forced to sign prepared statement dt. 12th Jan., 1998. The statement therefore cannot be considered to have been made on oath and is, therefore, involuntary. The other members were also forced to sign the alleged statement dt. 12th Jan., 1998.
(iv) The affidavits of the two witnesses so chosen are annexed herewith. These affidavits clearly indicate that the alleged statements are not voluntary and undue pressure was exercised.
(v) Immediately after the retraction was given, the learned Asstt.
Director of IT (Inv.) started the investigation de hois the alleged admissions which are now subject-matter of scrutiny before your honour. Despite our request, we have not been provided with the appraisal report otherwise we would have pointed out that the whole investigation proceeds on surmises and conjectures.
(vi) It is settled law that the time to decide what is or is not evidence is when trial takes place. The special procedure for assessment of search cases lays down that computation of the total income is to be made irrespective of other provisions as is seen from the words of Section 158BA, which states that the AO must proceed to assess the undisclosed income as per. Section 158BB notwithstanding any other provision contained in the Act. The proceedings start by furnishing of a return in the prescribed form ( Form No. 2B) wherein the assessee would set forth his total income including the undisclosed income, if any, for the block period. The return has been submitted in the prescribed form and verified in the manner prescribed. No undisclosed income has been declared as there was none. The alleged binding nature therefore is of no avail as the alleged statement without any substantiating material cannot be considered as evidence. It is settled law that the AO cannot deny the assessee its right to prove that the fact of alleged surrender was no admission and that the so-called admission was in fact wrong and the alleged surrender was made solely under pressure and was signed to avoid botheration, harassment and for protection of self-respect." 6.8. The assessee has also filed affidavit of Shri Bishamber Singh Rana and Shri Trilok Singh Rana, which are available at pp. 167 and 168 of the paper book. These affidavits are as under : "I, Bishamber Singh Rana, S/o Shri Surinder Singh Rana r/o Terrace, Nursing Home, D.B. Gupta Road, New Delhi, do hereby state on oath and solemnly affirm as under : That search was conducted by IT Department on 12th Jan., 1998 at the premises No. 20B/2, D.B. Gupta Road, Karol Bagh, New Delhi.
That my services for being a witness, were asked by the search officer. That I was directed to remain present during the search.
That circumstances which would have affected the prestige and reputation of Dr. R.K. Bali were so created that on 13th Jan., 1998 he had to sign a prepared statement. Dr. R.K. Bali was also pressurized to get the .prepared statements signed from Dr. Abha Bali and Dr. Veena Bali." 6.8.1. The affidavit of Trilok Singh Rana contains a similar deposition.
6.9. In the written submissions before the learned CIT(A) it was further submitted that so far as the second portion of the statement relating to investment of money in property is concerned, a report of Valuation Cell was obtained by the AO and no undisclosed investment outside the books was found to have been made. It was pointed out that the AO even did not refer to the investigation made in the assessment order which itself shows that nothing could be found out about alleged additions and investment of the undisclosed income in the property. It was next submitted that in the individual cases of Dr. Abha Bali and Dr. R.K. Bali, the AO has not made any addition on the basis of statements. In this regard reference has been made to para 7.4 of the assessment order, in the case of Dr. Abha Bali, which is as under : "7.4. The facts as discussed elaborately in para Nos. 3 to 6 above clearly establish that there are suppression of professional receipts by the assessee. When the first statement of Dr. Abha Bali recorded during search is viewed in conjunction with these facts, there is no doubt about the factum of suppression. However, instead of the admitted 25 per cent suppression in receipts, the suppression in this case has been worked out on the basis of the seized material which have been examined in detail and only the concealment as reflected in these seized papers have been considered as undisclosed income of the . assessee for the block period." 6.10. Likewise, reference to para 9.4 of the assessment order in the case of Dr. R.K. Bali has been made, which is as under : "9.4. The facts as discussed elaborately in para Nos. 4 to 8 above clearly establish that there are suppression of professional receipts by the assessee. When the first statement of Dr. R.K. Bali recorded during search is viewed in conjunction with these facts, there is no doubt about the factum of suppression. However, instead of the admitted 25 per cent suppression in receipts the suppression in this case has been worked out on the basis of the seized material which have been examined in detail and only the concealment as reflected in these seized papers have been considered as undisclosed income of the assessee for the block period." 6.11. Both the above mentioned affidavits were not controverted before the learned CIT(A). Likewise, the Department neither called the witnesses Shri Bishamber Singh Rana and Shri Trilok Singh Rana, who filed affidavits, for cross-examination nor filed any counter-affidavit in rebuttal.
6.12. It is also to be observed that neither before the learned CIT(A) nor before us the Department has denied the fact that reference was not made to the Valuation Cell for determining the investment made by the assessee in the properties, reference to which was made by them in their statements.
6.13. In the context of the above material facts and circumstances, we have examined the entire aspect relating to the evidentiary value of the statements recorded by the AO and find ourselves in full agreement with the findings of the learned CIT(A) on this issue. For supporting his findings our reasons are as under: (1) On a close comparison of the three statements reproduced above, it is found that identical question, cast in identical language was put to them and the answers of all the three persons ware also in identical language, rather it appears to be verbatim repetition.
These persons have disclosed the same percentage of suppression of professional receipts i.e., 25 per cent. They have also uniformly disclosed the figure of Rs. 80 lacs on account of unaccounted receipts/income for last ten years and they have also disclosed that this amount of undisclosed income of Rs. 80 lacs was invested in the renovation of property No. 20B/3B D.B. Gupta Road, purchase of flat Nos. 1A, IB, White House, Bhagwan Das Road, Mandi House, renovation of nursing home 20B/3B D.B. Gupta Road, etc. These persons were professional, having high qualifications and, therefore, it does not appear to be natural that they will speak the same language, in the same tone and shall make the disclosures in the same figure and on the same items. Such version cannot be said to be natural and voluntary version nor a spontaneous version in response to queries made from them. If enquiries would have been made individually from them then they would have given different versions or might have given different percentage of suppressed income or different figures of undisclosed receipts. This factor itself, therefore, casts a shadow of doubt on the genuineness of the entire event of recording statements. The argument of the learned counsel for the assessee, therefore, that the statements as recorded, were already drafted and these persons were asked to sign the same, deserves full credence.
(2) It is found that the oath was administered on 12th Jan., 1998 to Dr. Veena Bali. Copy of her statement is on p. 14 of the paper book.
She has signed the statement and thereafter again the statement has been recorded. In the last she has signed the statement and the date put by her is 13th Jan., 1998. The certificate below her statement is also dt. 13th Jan., 1998. However, the signatures of the Asstt.
Director of IT who recorded the statement were dt. 12th Jan., 1998.
It has not been clarified as to how the signatures have been made by her on 13th Jan., 1998 on the remaining part of the statement. There is no indication, in the statement that part of it was recorded on 12th Jan., 1998 and remaining on 13th Jan., 1998. If the statement was discontinued on 12th Jan., 1998, then a note should have been given for continuing the same on the next date. That has not been done. Similar is the position in relation to statement of Dr. Abha Bali. She was administered oath on 12th Jan., 1998. However, in the last she has signed the statement on 13th Jan., 1998. Statement of Dr. R.K. Bali was also recorded on 12th Jan., 1998 and he too had signed the statement in the last on 13th Jan., 1998. In his case also the Asstt. Director of IT has made signatures on 12th Jan., 1998. Thus, this discrepancy indicates that whereas the Asstt.
Director of IT who recorded the statement,' tins put the date as 12th Jan., 1998, the persons whose statements were recorded* have put the date as 13th Jan., 1998. This discrepancy has not been explained at all. The dates are not only at one place but at several places. Therefore, it cannot be said that mistake was by chance or otherwise. This aspect also creates doubt about the genuineness of the whole thing and supports the contention of the learned counsel for the assessee that the statements were not voluntary.
(3) As per the statement, suppressed income on account of professional receipts of all the partners has been disclosed. The statement of Dr. Rajinder Kumar Bali has not been recorded. Hence, no disclosure on (his) behalf could be made. From the statements reproduced above, it is found that each person has disclosed income on behalf of other partners. It is settled legal position that the statement of one person cannot bind the other. As per the application dt. 29th Jan., 1998, reproduced above, Dr. R.K. Bali retracted the confession by saying that the statements of his family members recorded during the course of search were not voluntary nor under free will and were recorded under duress. The circumstances under which the pressure was built up upon him have been explained in the letter dt. 19th Jan., 2000, which has"-also been reproduced above. Besides, the witnesses namely, Bishamber Singh Rana and Trilok Singh Rana have also deposed that there was coercion for obtaining the statements. It has been specifically stated in para 4 of the affidavit of these witnesses that the circumstances which could have affected the prestige and reputation of Dr. Bali was so created that on 13th Jan., 1998 he had to sign the prepared statement. It was also mentioned that Dr. R.K. Bali was also pressurized to get the prepared statements signed from Dr. Abha Bali and Dr. Veena Bali. This version of the witnesses, who were the local witnesses of Panchnama prepared at the time of search, have not been controverted. They were not called for cross-examination nor were confronted. No counter-affidavit of any officer of the Department or any other witness was filed to rebut this evidence.
Thus, the contents of the affidavit, which have remained uncontroverted and unrebutted, have to be believed.
(4) The documents referred to above, namely, the retraction of the confession, the written explanation in support thereof and the affidavits have not been properly met by the AO for discarding the retracted version and for placing reliance on the statements.
(5) As mentioned by the learned CIT(A) on the point, of investment of undisclosed income in properties, the matter was referred to Valuation Cell. The AO has not brought any" material which was collected as a result of such investment (sic-enquiry). The report of the Valuation Officer has also not been filed on record. Thus, firstly, the result of enquiry was not communicated to the assessee and secondly the same was also not placed on record. On the basis of this it is also found that the statement regarding investment of undisclosed income in the properties has not been corroborated and substantiated.
(6) The approach of the Department also does not appear to be consistent. On the basis of the material seized during the course of search and on the basis of statement recorded during the course of search, block assessments in the case of the individuals were also made but in such assessments no reliance was placed on the statements of such persons recorded during the course of search.
This fact, is demonstrated from the extracts of the assessment orders in the cases of Dr. R.K. Bali, Dr. Veena Bali and Dr. Abha Bali, reproduced above. No undisclosed income has been estimated on the basis of their statements. Thus, the alleged suppressed income worked out on the basis of the statements of the above three partners is not corroborated or substantiated. In view of the above, it cannot be said that the statements were genuine or voluntary.
(7) The AO has also considered the three documents, namely, Annex.
A-26. These are loose slips, on which figures of cash on different dates are noted, details of which are as under :--------------------------------------------------------------SI. No. Seized Document Date Amount (as per Annexure page No. document)--------------------------------------------------------------1 A-26 55 09.12.97 5,000--------------------------------------------------------------2 -do- 54 08-1-98 5,000--------------------------------------------------------------3 -do- 52 08-1-98 10,000--------------------------------------------------------------4 -do- 22 08-1-98 10,000--------------------------------------------------------------5 -do- 21 05-1-98 10,000--------------------------------------------------------------6 A-6 11 15-12-97 10,000-------------------------------------------------------------- 6.14. The explanation of the assessee vide letter dt. 17th Jan., 2000, available at p. 50 of the paper book was as under : "11(c) The alleged loose papers at A-6 p. 11, A-26 page Nos. 22, 52, 54, 55 are slips prepared indicating the amount of cash in bundle for deposit of cash in bank when the bundle is given to staff by the partners for deposit in bank, such a slip prepared by the partners or staff is put on top of the bundle of cash to indicate the amount in the bundle. This slip is discarded when the pay-in-slip is prepared and may have been discovered by your staff at the time of search." 6.15. The AO has not accepted this explanation of the assessee.
However, he has not made any suppressed addition on this basis.
6.16. On going through the slips which are available at pp. 52 to 55 of the paper book, it is found that the amount has been noted on a smaller slip. It is noteworthy that on the slips 'morning' or 'evening' are indicated which shows that the calculation related to morning or evening. In any case, the explanation of the assessee in this regard appears to be acceptable because the Department has not been able to demonstrate, that the slips related to undisclosed money. These documents are to be treated only as dumb documents because no other details are written on these documents.
6.17. The AO has also not made any separate additions on the basis of these slips which shows that he could not find any corroborative material.
6.18. The other incriminating material as noted by the AO in the assessment order is on account of certain advances, details of which are-given in para 6.3 of the assessment order and which are as under : 6.19. The explanation of the assessee in relation to these advances was that they are only booking advances and later on the amount has been adjusted in the final bills prepared. In this regard our attention was invited by the learned counsel for the assessee to the explanation which is available at p. 68 of the paper book and which is as under : In your question No. 11 you have asked about advances received from various patients as shown at A-7 p. 29.
We had replied that the same advances are deposited by patients on their own, sometimes for safe keeping and at other times to reduce the cash payable on settlement of the final bill.
We had also stated that as the advances received are voluntary we record them only at the time of final payment of the bill. We would also draw your attention to seized documents Annex. A-8 page Nos.
61, .62, 66, 71, 72, 76, 86 and 91 in which the estimates of the bill shows that the said advances have been received as also the final amount of the estimate. This final estimate agrees with the bill raised by us on the concerned person.------------------------------------------------------------------------------------------Name of patient Amount of (Rs.) Annexure Amount of Amount ofAmount of adv. on A-7 No. and page advance in chgs. in finalfinal bill P. 29 No. of final final estimate estimate (Rs.) estimate (Rs.) (Rs.)(Rs.)------------------------------------------------------------------------------------------Mrs. Bimlesh 5,000 A-8,71 10,000 9,750 9,750------------------------------------------------------------------------------------------Mrs. Sushila Jain 1- A-8,91 Booking 29,100 29,100------------------------------------------------------------------------------------------Mrs. Kamlesh 2,000 1-8,52 2,000 2,0152,015------------------------------------------------------------------------------------------Mr. Pyare Lal 2,000 A-8,62 6,000 11,670 11,670------------------------------------------------------------------------------------------Mrs. Anju 10,000 A-8,66 10,500 18,370 18,370------------------------------------------------------------------------------------------Mrs.Harjeet Kaur 1,000 A-8,76 4,000 17,180 17,180------------------------------------------------------------------------------------------Mrs. Chanchal Rai 1,500 A-8,72 5,500 8,270 8,270------------------------------------------------------------------------------------------Mr. Prakash 1,500 A-8,81 4,500 4,920 4,940------------------------------------------------------------------------------------------ 6.20. We have also gone through the entire material relating to this seized document. On perusal of bills, copies of which have been filed on record, it is clear that the patients, against whom advances were received, were treated in the hospital of the assessee and final bills were prepared against parties. In this way the amount appears to have been adjusted. In any case, the AO has not made any separate addition on the basis of these documents, which also shows that he could not find any corroborative material.
6.21. On going through the above, it is clear that certain incriminating documents, namely, A-26 and A-7 were found which related to the professional activities of the assessee. The assessee gave explanation in respect of these documents. Although the same has not been accepted, but since the AO has not made any separate addition on the basis of this seized material, it is clear that the impugned addition of Rs. 42,33,682 is not based upon these documents.
6.22. On perusal of para 6.7 of the assessment order, which has been reproduced above, it is found that suppression of professional receipts at 25 per cent has been calculated by the AO on the basis of statements of three doctors recorded during the course of search. Thus, it is clear that the addition has been made solely on the basis of the so-called admission of the three partners of the firm.
6.23. We have, therefore, to see as to whether the additions made on account of suppressed professional receipts can be sustained particularly when there is no corroborative material to substantiate such statements. To reiterate, neither there is any seized material nor documentary evidence to base or to support the addition as has been made by the AO in this case, nor any evidence of investment of undisclosed income has been found. Thus, except the admissions of the partners of the firm, which has been retracted subsequently there is no other material to corroborate these statements.
6.24. On the basis of the above, we have to decide as to whether the additions can be sustained in the present matter solely on the basis of the so-called admissions or not. As has been observed by us, there is no material to corroborate the so-called admission and on the other hand the retraction of the admissions has been supported by the circumstantial evidence which shows doubt about the voluntariness of the admission and genuineness of the whole transaction. Besides, the "retraction and the explanation of the assessee is fully supported by the affidavits of the two witnesses of Panchnama who have specifically stated that these statements were given at the behest and under the pressure of IT authorities by the three doctors. In the context of these circumstances, the preponderance of probability definitely tilts towards the version and explanation of the assessee and on that basis it is to be held that the additions made on the basis of admission, on the facts and in the circumstances of the present matter cannot be sustained.
6.25. The learned senior Departmental Representative has placed lot of emphasis on the evidentiary value of the admissions of the three partners. However, we are unable to agree with him.Krishan Lal Shiv Chand Rai v. CIT , the Hon'ble Punjab & Haryana High Court has held as under : "It is an established principle of law that a party is entitled to show and prove that an admission made by him previously was in fact not correct and true. It was incumbent upon the IAC to have afforded the assessee full opportunity to prove his assertions. It was clear from the records that no such opportunity was afforded to the assessee. The IAC proceeded to impose penalty solely on the basis of the fact that the amounts were surrendered by the assessee at the time of the assessment. Even treating the surrender as an admission of the concealment of undisclosed income, the IAC could not deny the assessee its right to prove that the fact of surrender was no such admission and that the so-called admission was in fact wrong and the surrender was made solely to avoid botheration as stated by the assessee."Asstt. CIT v. Mrs. Sushiladevi S. Agarwal, (1994) 49 TTJ (AM) 663 : (1994) 50 ITD 524 (Ahd), the Ahmedabad Bench of the Tribunal has also considered this issue and after considering the circumstances under which search takes place and the psychological pressure on the parties searched at that time, the following observations have been made : "A search operation, particularly under the IT Act is a lawful invasion on the privacy, life and property of a citizen which may affect him/her mentally also, causing several other inconveniences, hardships, embarrassment and harassment. There is every likelihood of a statement tendered to or recorded by the search officers on the search day being incoherent or at variance with subsequent statements tendered to or recorded in any further or collateral proceedings, but to make addition to the returned income or to put such person to sufferance or to adverse consequence on such statement is not justified in law. All that is stated by any deponent on the search day should not be taken as the truth, the whole truth and nothing but the truth. Such statements indubitably have evidentiary value and credibility in law, but the same should be viewed with great caution, particularly when the same is denied, varied or retracted or established by the defendant to have been obtained or given under mental stress, coercion, undue influence or due to any other abnormal condition and circumstances when such statement was given. If a person at later stage retracts from the statement given on the search day, then the Court or Tribunal should try to ascertain the reasons or circumstances from such person for doing so and, if satisfied, not to place heavy reliance on such earlier statement which has subsequently been denied and retracted."Pullangode Rubber Produce Co. Ltd. v. State of Kerala and Anr. , the Hon'ble Supreme Court of India has considered the evidentiary value of the admission and has observed as under : "Such admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts." 6.29. In the case of Abdul Qayume v. CIT , the Hon'ble Allahabad High Court has observed as under : "An admission or an acquiescence cannot be the foundation for an assessment, where the income is returned under an erroneous impression or misconception of law. It is always open to an assessee to demonstrate and satisfy the authority concerned that a particular income was not taxable in his hands and that it was returned under an erroneous impression of law. Each assessment year is an independent year and it is always open to the taxpayer to contend that he had wrongly been assessed in the past." 6.30. In the case of Smt. Ranjnaben Mansukhlal Shah. v. Asstt. CIT (2004) 83 TTJ (Rajkot) 369, the Rajkot Bench of the Tribunal has considered the evidentiary value of admission and retraction of the same and has observed that additions made only on the basis of disclosure statement normally should not be confirmed in the absence of corroboration. In that case also the Revenue had made addition only on the basis of an admission which was retracted subsequently. The Revenue had not collected any material or evidence during the search in support of the disclosure statements. It was held that no addition can be made on the basis of such confession.
6.31. In the case of Chitra Devi v. Asstt. CIT (2002) 77 TTJ (Jd) 640, the Jodhpur Bench of the Tribunal has also considered the same issue.
In that case the addition was made on the basis of the statement of the assessee and her two sons recorded during the course of search. It was held that these statements though may constitute information available with the AO, the same can by no stretch of imagination be treated to be relatable to such evidence i.e., to the evidence 'found' as a result of search, inasmuch as, the statement recorded during search could not be said to be an evidence 'found' as a result of search though the same may be an evidence 'obtained' during search." After considering the amendment introduced in the provisions of Section 158BB(1) w.e.f. 1st July, 1995, it was held that no addition on the basis of statement recorded during search could be made.
6.32. In the instant case it is to be observed that the statements recorded by the IT authorities are compelled testimony as held in the case of Nandini Satpathy v. P.L. Dani . The Hon'ble Supreme Court in the aforesaid case has observed as under: "Compelled testimony must be read as evidence procured not merely by physical threats or violence but by psychic torture, atmospheric pressure, environmental coercion, tiring interrogative prolixity, overbearing and intimidatory methods and the like." 6.33. In the case of Jagdish Chand Gupta v. Asstt. CIT (1996) 56 TTJ (Chd) 337 : (1996) 58 ITD 142 (Chd), the Chandigarh Bench of the Tribunal has observed that confessional statement made by the assessee before the Asstt. Director of IT were under such circumstances that they could not be treated to be voluntary and in absence of any other evidence available on record to justify, the addition made on the basis of confessional statements cannot be justified.
6.34. On the basis of the discussion made above, we fully affirm the findings of the learned CIT(A) and reject the ground taken in this appeal by the Revenue.