"1. On the facts and in the circumstances of the case the learned Commissioner (Appeals) has erred in deleting the addition of Rs. 6,00,000 declared by under section 132(4), holding that only on the basis of statement of assessee 4 without there being any corroborating evidence cannot form basis for addition especially when the assessee has retracted from declaration; when in fact the assessing officer has rightly made the addition as the assessee could not produce the loan creditors nor could prove the genuineness of the loan taken by the firm.
2. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the addition of Rs. 2,33,212 on account of loans taken by cheques along with interest thereof without appreciating the fact that the assessing officer has rightly made the addition as the assessee could not explain the sources of the creditors.
3. On the facts and in the circumstances of the case, the learned Commissioner (Appeals) has erred in deleting the addition of Rs. 1,04,379 on account of cash loans along with interest holding that the onus cast upon the assessee has been discharged by filing confirmation letters when in fact the assessee could not produce the loan creditors to prove that they have advanced the loans." In this case, search operation was conducted in January 1992. The assessee-firm is engaged in the business of financing and investment in shares. During the course of search statement of Shri Laxmichand Jivraj Gosar was recorded. He is a partner in the firm with 30 per cent share.
The premises located at G-6 Balakrishna Apartment, Chipunkar Road, Ram Nagar, Dombivli(E) which is the head office of another group concern M/s. Shah Enterprises in which also Shri Laxmichand was partner, 1131 files containing the records of clients of M/s. Gosar & Co. were found.
Substantial amount was advanced by these clients to concern of Doda/ Gosar Emp. The assessee-firm is also a recipient of such loans. The statement was recorded on 17-1-1992 at G-6, Balkrishna Apartment, where search took place. Spot enquiries were carried out by the Authorised Officer at the addresses of some of the clients. It revealed that either such parties were not in existence or the addresses were fictitious. Some of the clients had also denied to have given any advances of money or loan to Gosar/Doda group to which this firm belonged. In general cases, the above referred files were found to contain bank pass books, cheque books and pay-in-slips of the respective clients, who claimed to have advanced money to the group including this assessee-firm.
When Shri Laxmichand was asked to explain, he stated that some of the loans may not be genuine and some parties may not appear for confirmation of loans given to Gosar and Doda group of concerns. Shri Laxmichand then declared a sum of Rs. 12 lakhs in respect of loans from various parties in the case of this firm. Out of this, Rs. 6 lakhs was declared as additional income in the assessment year 1991-92 and Rs. 6 lakhs was declared for the assessment year 1992-93.
Return of income was filed on 17th December, 1992 at income of Rs. 22,840. No such income of Rs. 6 lakhs so declared in the statement was shorn therein. The assessing officer sought for explanation as to why the sum declared in the statement under section 132(4) was not disclosed in the return. The assessee-firm, filed a letter dated 6-10-1993 wherein it was explained that during the course of search they were under pressure and in confused state of mind. Subsequently, it came to their notice that there are no loans, which are not genuine.
Hence, they withdrew the declaration. The assessing officer carried out enquiries in the loans/credits and had come to the conclusion that either the loans are not genuine or the loan creditors have no capacity to advance loan. Accordingly he made the addition of Rs. 6 lakhs being the sum disclosed under section 132(4) for this assessment year.
The assessing officer had asked during the assessment proceedings to produce the loan creditors. The assessee declined to produce them on the ground that he does not have legal authority to produce them. He requested to issue summons to them. The assessing officer accordingly issued summons to all the creditors. The assessee had also filed confirmatory letters in respect of all creditors except one. Summons were served in all cases except two cases. out of those upon whom summons were served, only three persons responded.
The assessing officer vide his office note in the assessment order has mentioned that summons have been issued to those from whom cash has been borrowed and to those from whom money above Rs. 20,000 has been taken by cheques.
There are two categories of loans. One is the loans taken in the name of nine persons amounting to Rs. 1,33,000 in cash; interest thereon amounts to Rs. 4,901 as under: The other caterogies worked out by assessing officer, where money was paid by cheques above Rs. 20,000, consists of 22 names with total amount of Rs. 9,33,000 and interest of Rs. 80,763 thereon. It is as under: As per assessing officer summons were sent to all these persons.
Creditor at Sr. No. 3 (Dr. Kaushik) attended and verified the loan.
Summons on creditor at Sr. No. 6 (Mangal Das) were returned back. Since rest of the persons did not turn up, the assessing officer asked the assessee to produce them. But he failed to produce them. The assessing officer noted that independent enquiries also could not be made in these cash loans as these persons failed to comply with the summons.
Their creditworthiness could not be examined. Thus by invoking the provisions of section 68, the assessing officer made the addition of Rs. 1, 15,000 (1,33,000 - 18,000) and of interest of Rs. 4,901.
Regarding second category of loans: These loans, were taken by cheques.
The assessing officer had considered only those items, where loan above Rs. 20,000 is involved. The assessing officer points out that cash was deposited in their bank account on the same day or a few days earlier and money was transferred to assessee by transfer entries. No evidence regarding bank accounts were filed. Summons were issued to these parties. They were served except in one case i.e. in the case of creditors at Sr. Nos. 7 (Anil Nanji Gada). In response to summons only two persons Sr. No. 10 and 14 (Mr. Jagdish & Rupen Zaverchand) attended. The assessing officer found from their statements that they do not have capacity to advance the loans. They could not explain the source from which the money was deposited in the Bank. Regarding the persons in whose case summons returned back, opportunity was given to the assessee to produce him. But he did not produce any creditor.
Regarding other persons upon whom summons were served and who did not respond, assessee was given opportunity to produce all these loan creditors, but they were not produced. The assessing officer mentions that bank pass books in respect of person at Sr. Nos. 7, 8, 10, 16, 17 and 20 were seized from the premises of the group firm in which assessee was also a partner. The assessing officer inferred from such seizure of bank pass books that the amounts brought into the books of account in the name of various loan creditors belonged to the assessee.
He then treated the sum of Rs. 9,32,000 and interest thereon of Rs. 50,763 totalling to Rs. 9,82,763 as deemed income under section 68. He gave credit of disclosure of Rs. 6 lakhs and added the sum of Rs. 3,82,763.
The Commissioner (Appeals) deleted the addition of Rs. 6 lakhs by observing as under : "I have gone through the submissions of the learned counsel and after going through the assessment order and the case-laws, relied upon by him. I find that apart from the statement of appellant recorded under section 132(4), at the time of search, the assessing officer has not brought on record any other material to show that the said addition is warranted. Further find that the assessing officer has held in the subsequent paragraphs that the loan of Rs. 9,32,000 raised by the appellant are not, genuine but while making the addition on that count, he has given credit to an amount of Rs. 6,00,000 added by him on the basis of statement made under section 132(4). I propose to consider the additions under section 68 in respect of all the loans while dealing with that ground, but, for the purposes of the present addition of Rs. 6,00,000 1 find that the same is based only on the statement of the assessee at the time of search that certain loans any not be verifiable and that the loan creditors may not appear before the assessing officer for confirming the said loan. To my mind, such statement would not amount to declaration under section 132(4) since under that section what can be declared is any money, bullion, jewellery or other valuable article or thing unfound in his possession or under his control which has been acquired out of his income which has not been disclosed so far in his return of income, and further he has to specify in his statement the manner in which such income has been earned. The immunity will be available only if the assessee declares such an asset or income in the return to be furnished and pays tax together with interest, if any, in respect of such income. I further find that the appellant has retracted from the statement given under section 132(4) and, therefore, the assessing officer is not justified in placing reliance upon it for the purposes of making the impugned addition. So far as the retraction of declaration under section 132(4) is concerned, I find that the decision of Honourable ITAT, Bombay Bench 'D' in the case of M/s. Pushpa Vihar, Bombay, (supra) quoted above, is in favour of the appellant. It has been held in the said case"that any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. It is an accepted position that what is admitted by the party to be true, must be presumed to be true, unless the contrary is demonstrated.
However, mere admission cannot be bed rock or foundation of an assessment." It is, thus, clear that as per Commissioner (Appeals), the addition was made only on the basis of statement of an assessee, without there being any corroborating evidence and it cannot form basis for addition especially when the assessee has retracted from the same. This addition of Rs. 6,00,000 was, accordingly, deleted.
The main thrust of Commissioner (Appeals) is that under section 132(4) an assessee can declare only unaccounted money, bullion, jewellery or article or things and not bogus credits/loans and where there is a retraction, then statement under section 132(4) cannot be used against the assessee.
Regarding addition of Rs. 1,15,000 and interest thereon of Rs. 4,901 the Commissioner (Appeals) deleted the addition by observing as under : "I have carefully considered the submissions made by the learned counsel and after going through the assessment order, I am inclined to agree that the appellant has discharged the primary onus cast upon it under section 68 of the Income Tax Act. I also agree with the learned counsel that even though the loans are in cash, they are admittedly within the permissible limit of law, namely, that they are below Rs. 20,000 each, hence, the same cannot be held as non-genuine. I am supported by the observations of the I.T.A.T., Pune Bench, Pune, in the case of Income Tax Officer v. Suresh Kalmade, cited supra, wherein it has been held that "Once the identity of the third party is established before the Income Tax Officer and other such evidences which are prima facie placed before him pointing to the fact that the entry is not fictitious, the initial burden lying on the assessee can be said to have been duly discharged." I further find that according to the assessing officer's own admissions, the service of summons upon the 7 creditors has proved their identity and their loan confirmation letters have proved the genuineness of the transaction. Copies of their balance-sheet and Income-tax particulars have proved their capacity to advance the said loans, hence the addition on account of loans aggregating to Rs. 1,00,000 pertaining to these 7 persons are hereby deleted.
So far as the loan of Rs. 15,000 from Shri Mangaldas N. Thakkar is concerned, in whose case the summons were returned by the Postal Authorities, I feel it would in the interest of justice, if this addition of Rs. 15,000 and the interest amounting to Rs. 522 pertaining to the same is restored to the file of the assessing officer with the direction that fresh summons may be issued on the new address of the creditor to verify the loan and to decide the issue afresh. The balance interest of Rs. 4,379 is deleted." The main thrust of learned Commissioner (Appeals) while deleting the addition was that : 1. Identity of the creditors is established as summons were served upon them.
2. They each are below Rs. 20,000 being within the permissible limit of law.
3. The learned counsel for the assessee has filed loan a confirmation letters.
4. Copies of the Balance Sheet and income-tax, particulars of these persons were filed. - 5. The addition relating to Mangaldas upon whom summon could not be served and it was returned back, the matter was restored to the file of assessing officer.
Regarding addition of Rs. 3,82,263 the learned Commissioner (Appeals) deleted the addition by observing as under : "I have considered the submissions of the learned counsel and gone through the facts and circumstances of the case. So far as the loan of Rs. 80,000 from Anil Nanji Gada, Bombay, is concerned, since summons could not be served upon him on account of his having shifted from his old address, I feel that it would be in the interest of justice, if this addition is restored to the file of the assessing officer with the direction that summons can be served at his new address. The interest claim of Rs. 6,681 will also be considered afresh after looking into the genuineness of the said loan. Similarly, so far as the advance of loan of Rs. 60,000 (Rs. 30,000 each) from Shri Rupen Zaverchand Gada, Dombivli and Shri Jagdish Govindji Joshi, Mulund, Bombay are concerned, I find that the assessing officer is of the opinion that these persons did not have a capacity to advance the loan, however, before coming to this conclusion, I feel the assessing officer should have given an opportunity of being heard to the appellant to rebut this conclusion and to cross examine the parties or to lead any other evidence in support of this claim. This addition of Rs. 60,000 representing the loans from two persons and the interest disallowance of Rs. 2,870 relating to the same is restored to the file of the assessing officer.
So far as the loans from 19 persons aggregating to Rs. 7,92,000 are concerned, for the detailed reasons given by me, in appeal No. PN/ Commissioner (Appeals)I.KLN/AC-1(1)/Tr-464/93-94 dated 26th October, 1993 in the case of M/s. Rushabh Finance & Investment Co., Dombivli, and as per the decisions of Honourable Supreme Court and High Court referred to above. I hold that the said additions are not correct in the facts and circumstances of the case. This addition of Rs. 7,92,000 alongwith the disallowance of interest amounting to Rs. 41,212 is hereby deleted." The brief findings of the learned Commissioner (Appeals) while deleting the addition are that : 2. Additions relating to Anil Nanji Gada (Rs. 80,000 at Sr. No. 7 in second list) upon whom summon were not served was restored in the file of assessing officer.
3. Additions relating to Rupen Zaverchand (item No. 14 in the second 4 list) and Jagdish Govindji (item No. 10 in the second list) totalling to Rs. 60,000 and interest thereon was restored to file of assessing officer for giving fresh opportunity to the assessee.
4. Following the decision in M/s. Rushabh Finance Investment Co. the addition is deleted.
(ii) Rs. 1,04,379 (Rs. One lakh and interest thereon of Rs. 4379) in respect of 7 persons in the first category; and (iii) Rs. 2,32,212 being difference between balance sum of Rs. 7,92,000 (remained after excluding Rs. 80,000 and Rs. 60,000 as per items 7,10 & 14 in the second list) less Rs. 6 lakhs plus interest thereon of Rs. 41,212.
Before us the learned Departmental Representative submitted that as per section 68 the onus is on the assessee to :CIT v. United Commercial and Industrial Co. (P.) Ltd. (1991) 187 ITR 596 (Cal).
The learned Departmental Representative also submitted that mere establishment of identity is not sufficient to prove the loan. He relied on M.A. Unneeri Kutty v. CIT (1992) 198 ITR 147 (Ker). The assessee has also to prove creditworthiness and genuineness of transactions. Mere filing of confirmatory letters does not discharge the onus that lie on the assessee. He relied on Bharati (P.) Ltd. v.CIT (1978) 111 ITR 951 (Cal). Regarding the disclosure made under section 132(4), learned DR submitted that the assessee had in his knowledge that loans are not genuine. He was confronted with bank pass books/cheque books belonging to the creditors, found in the search.
Further the retraction was delayed. Return was filed after 11 months of the search and retraction letter was submitted in October 1993 (22 months after the search). He finally submitted that in the alternative, the matter may be restored back to the file of assessing officer for such enquiries /opportunities.
(v) In the statement no particular specific name of the creditor was given.
(vi) The assessing officer could not establish that parties are not genuine.
(vii) The assessing officer had accepted the retraction, as he had made independent enquiries. No addition can be made merely on the basis of statement without any further evidence or material in that regard.
(viii) No unaccounted cash/ asset were found in the hands of the firm in the search.
(ix) The statement should be read as a whole. He relied on Glass Lime Equipments Co. Ltd v. CIT (2002) 253 ITR 454 (Guj.) and 71 ITD 295, (Kn-Trib).
(x) No addition can be made merely on the basis of statement. He relied on CIT v. Shri Ramdas Motor Transport (1999) 238 ITR 177 (AP), Pushpa Vihar v. Assistant Commissioner (1994) 48 TTJ 389 (Bom).
(xi) The assessee had discharged the initial burden. Copy of acknowledgement of return of income along with computation of total income of the creditors were filed.
(xii) All the parties are assessed to tax and TDS was made wherever applicable.CIT v. Orissa Corporation (P.) Ltd. (xiv) The assessee is not required to prove the source of the source.
The department has not done further investigation in the matter. He relied on the decision in the case of Orissa Corporation (P.) Ltd. (supra).
(xv) If the assessing officer was not satisfied with the reply of the lender he should have exercised his powers to call them.
(xvi) The word used in section 68 is 'may' not 'shall'. Therefore, addition need not be made in each and every case.
(xvii) In similar following cases, the additions are deleted by Tribunal.
1. Assistant Commissioner v. Rushab Finance Investment Co. (IT Appeal No. 251 (Bom.) of 1994 dated 7-10-2002) 2. Assistant Commissioner v. Dhirajlal D. Gosar (IT Appeal No. 2303 (M) of 1997 dated 17-1-2003) We have considered the rival submissions, the material on record and the decisions cited by the parties. The learned counsel for assessee has relied on the decisions of the Hon'ble Tribunal in the case of Rushab Finance & Investment Co. (supra), Dhirajlal D. Goshar (supra) & assessee's own case for the assessment year 1992-93. A perusal of these orders do not reveal that they had considered the facts as pointed out in this case i.e. during the course of search authorised officer had found bank pass books, cheque books and pay-in-slips and signed blank cheques in respect of some of the clients; spot enquiries were done and some of the clients were not found genuine. They were either not in existence or addresses were fictitious etc.; that some of the clients have denied to have paid any money to G. Doda. Therefore, we cannot say that ratio of the above decisions would be squarely applicable to the facts of the present case. The principles of res judicata are also not applicable in income-tax proceedings particularly in the cases relating to applicability of section 68. Each loan is independent in itself. In each case, the assessee has the onus to prove the identity of the creditor, his creditworthiness and the genuineness of the transaction.
In some cases, the assessee might be able to prove and the authorities concerned may be satisfied with the evidence furnished by the assessee but that does not lead to the inference in all cases either in the same year or in subsequent years or in the case of other assessees that onus is deemed to have been discharged as required under section 68. The Tribunal was satisfied on the facts of those cases viz. Rushab Finance & Investment Co. (supra), Dhirajlal D. Goshars (supra) and Expresso Investments for the assessment year 1992-93. But it cannot be said that facts are identical and, therefore, onus is deemed to have been discharged in the present case.
It is important for the decision on the issue, to highlight the facts, which are peculiar and specific to this case and to this assessment year. For this, we take a note of the statement of Shri Laxmichand Jivraj Gosar recorded on 17-1-1992. It is as under:- Statement of Shri Laxmichand Jivraj Gosar, Son of Shri Jivraj Leeladhar Gosar aged 30 years occupation business, resident of 10, Shree Madhanath Apartment, Dr. Rajendra Prasad Road, Dombivli (E) recorded under section 132(4) of the Income Tax Act, 1961 an oath/solemn affirmation on 17-1-1992 during the search proceedings under section 132 of the Income Tax Act, 1961 at G-6, Balkrishna Apartment, Chiplunkar Road, Dombivli (E).
Q. No. 4: During the course of search under section 132 of the Income Tax Act, 1961 at premises located at G-6, Balkrishna Apartment, Chiplunkar Road, Ramnagar, Dombivli(E) as many as 1131 files containing records of income-tax and pertaining to assessee's clients of M/s.
Gosar & Co. were found. On scrutiny of some of the files it was noticed that some of the assessee clients have advanced substantial amounts of loans to Gosar and Gada group of concerns spot inquiries conducted on the given addresses of some of the assessee's clients revealed that either such parties were not in existence or the addresses were fictitious. Also uncertain cases, it was noticed that some of the assessee clients have denied of having advanced any money/loans to Gosar and Gada group of concerns. Further, it was also noticed that there are numerous inter firm transactions invoking advances/loans.
Considering both these facts together what do you want to say about it now? Also in numerous cases, the above referred files were found to contain bank pass books, cheque books and pay slips of the respective assessee's clients. In some cases signed blank cheques have also been found. Most of these files are apparently cases prepared to capitalization cases. What is your explanation in this respect? Ans: It is a fact that there are loans from some assessee clients as mentioned by you, which were taken by Gosar and Gada group of concerns.
Some of these loans may not be genuine and some of the parties may not appear for confirmation of the loans given to Gosar and Gada group of concerns, also it is a fact that there are inter firm transactions.
Considering all these facts, we have made a scheme of declaration of additional income in respect of our various concerns before the ADIT (Inv.), Thane during the course of action under section 132 of the Income Tax Act, 1961 at this premises. As per the scheme of declaration given by us, we are hereby declaring given by us, we are hereby declaring a sum of Rs. 12,00,000 in respect of loans from various parties in the case of M/s. Expresso Investments. However, at this time, it is not possible to pin point such assessees, which are not genuine. But myself Shri Bhagwanji Gosar, Amarchand Gada, Chandrakant Gosar, Dhiraj Gosar and Ramesh Gada Vad discussed the extent of non-genuine loans in the group of firms and Pvt. Ltd. companies with which we all are associated and we, thus, arrived at a certain figure.
Accordingly, we had given a declaration before the ADIT, Thane as stated above on 16-1-1992. I hereby confirm the said declaration scheme.
Q. No. 5: Can you specify the non-genuine loan transactions in respect of which you have made a declaration of Rs. 12,00,000 as mentioned above? Ans: It is not possible to specify non-genuine loan transactions at this stage as the books of account from which such information can be taken are already seized on 10- 1- 1992 by your officials and so are not available here right now.
Q. No. 6: Please state in what form the amount of declaration is lying in the firm M/s. Expresso Investments? Ans: The amount of declaration is lying in the form of loans taken by the firm M/s. Expresso Investments from various parties which are not either genuine or may not be able to confirm the loans.
Q. No. 7 I am explaining to you the provisions of section 132(4) of the Income Tax Act, 1961 under which you have the option to offer the concealed income earned during the year for taxation to qualify for nonimposition of penalty under section 271(1)(c) of the Income Tax Act, 1961 provided due taxes are paid before the end of the current financial year. What is your say in the matter? Ans: I on behalf of all the partners of M/s. Expresso Investments state that as mentioned in reply to question No. 4 above, I hereby offer additional income of Rs. 12,00,000 for the assessment year mentioned below in the hands of M/s. Expresso investments: , The other partners of the firm have no objection for the said declaration or the same has been given after consulting with them. I hereby abide to pay taxes on the additional income declared as above in the case of M/s. Expresso Investments, Dombivli before 31-3-1992.
Q.No. 8 : You have given a declaration of additional income of Rs. 12,92,389 before the authorised officer Shri P.T. Kensale & V.D. Shinde during the course of action under section 132 at G-6, Balkrishna Apartment, Chiplunkar Road, Dombivli(E) on 10-1-1992 in your individual capacity. Please, confirm the same and also confirm that the above declaration of Rs. 12,00,000 made by you in the case of M/s. Expresso Investments is in addition to the declaration made by you of Rs. 12,92,389 in your individual capacity? Ans : I hereby confirm that I have already made a declaration of Rs. 12,92,389 in my individual capacity and that this is over and above the declaration made in the case of M/s. Expresso Investments of Rs. 12,00,000.
Ans: The above declaration has been made by me under section 132(4) of the Income Tax Act, 1961 in the case of M/s. Expresso Investments, Dombivli (E). It is my request that capitalisation of the amount declared may be allowed to me in the books of M/s. Expresso Investments, and to give immunity from penalty and prosecution.
Whatever stated above is true to the best of my knowledge and belief and nothing has been concealed there from. The statement has been given voluntarily and no coercion or threat was exercised on me by the authorised officer.
Signature of the officer recording the statement (with name & designation) 1. Shri Laxmichand Jivraj is a partner in the assessee-firm. as well as M/s. Shah Enterprises, at whose address the search was carried out and where the statement was recorded under section 132(4).
2. 1031 files containing record of income-tax proceedings pertaining to assessee's clients (including creditors) were bound.
3. spot enquiries into some of these clients revealed to the authorised officer that either these parties are not in existence or the addresses were fictitious.
4. Some of the clients also denied to have advanced any money to Gosar/Doda Group.
5. These files were found to contain bank pass books, cheque books and pay-in-slips of respective clients. In some case some signed blank cheques were also found.
6. Shri Laxmichand Jivraj had admitted that some of the loans may not be genuine. Hence, he disclosed a sum of Rs. 12.00 lakh as additional undisclosed income (Rs. 6.00 lakh for,each of the two assessment years 1991-92 and 1992-93).
7. There was a discussion among Shri Laxmichand Jivraj, Shri Bhagwanji Gosar, Amarchand Goda, Chandrakant Gosar, Dhiraj Gosar and Ramesh Goda about extent of non-genuine loans with which they all are associated and they arrived at the,figure of disclosure.
8. It was also stated that declared sum of Rs. 12.00 lakh was lying in the form of loans taken by firm "Expresso Investments" which are not genuine and which may not be confirmed.
9. The declaration of Rs. 12.00 lakh in response to question No. 4 was repeated in answers to question Nos. 6, 7, 8 & 9.
We also note that there was no retraction letter/affidavit and first indication of retraction was given after 11 months when return of income was filed on 17-12-1992 where disclosure of Rs. 6.00 lakh for the assessment year 1991-92 was not returned. Thereafter, explanation as to why that disclosure was not declared in the return was for the first time given on 6-10-1993 almost after 22 months of the search.
Now let us consider various submissions made by learned counsel for assessee.
So far as filing of documentary letter from the creditors are concerned, we are of the view that it does not discharge the onus cast on the assessee as held in Bharati (P.) Ltds. case (supra). Further, mere establishment of identity of creditors is also not sufficient to prove that lenders are genuine. For this, the learned Departmental Representative has rightly relied on the decision of Hon'ble Karnataka High Court in the case of M.A. Unneeri Kutty (supra). In this case, the special leave petition was dismissed by the Hon'ble Supreme Court as reported in 201 ITR (St) 23 (SC). Neither furnishing of particulars is sufficient nor payment of account payee cheque is sacrosant. This was held by Hon'ble Calcutta High Court in CIT v. Precision Finance (P.) Ltd. (1994) 208 ITR 465 (Cal) and by Hon'ble Allahabad High Court in the case of Nizam Wool Agency v. CIT (1992) 193 ITR 318 (All). The Tribunal in B. Tex Corporation Ltd. v. Income Tax Officer (1993) 202 ITR 17 (ST) (Bom.) also held that mere filing of confirmatory letters does not discharge the onus cast on the assessee. It is incorrect on the part of the learned counsel for assessee to cast the onus on the assessing officer to establish that parties are not genuine. So far as acceptance of retraction is concerned, we are of the view that this submission is not acceptable because once return is filed by the assessee not declaring the undisclosed income under section 132(4), the assessing officer is duty bound to carry enquiries on the basis of material found in the search. Merely because assessing officer has carried out independent enquiries after the search and after filing of return of income does not lead to the inference that retraction has been accepted by the assessing officer. In fact, the assessing officer had exercised his power to summon the parties and many of them have not turned back and not honoured the summons. It is the duty of the assessee to file correct particulars and also assist the assessing officer in service of the summons. It was also duty of the assessee to explain how and why bank pass books, cheque books and signed blank cheques were found with the assessee in respect of those cases whose loans are appearing in the books of assessee, particularly, those mentioned at S1. Nos. 7, 8, 10, 16, 17 & 20 in the second category of loans referred above. We are not inclined to believe the loans in respect of these cases would be genuine. For establishing genuineness of the loans, it is necessary in addition to explain why bank pass books, cheque books etc. are found with the assessee as to how the loans have been repaid and what arrangement was made to repay the loans or how the creditors/their legal heirs would recover the loans from the assessee in the event of death of the creditor or the partner/s of the assessee or on dissolution of the firm. The assessee/or the creditors have also not explained as to how cash was deposited in the bank account a couple of days before the actual transfer of money to the assessee. This casts serious doubts about the genuineness of the transactions. In fact, neither the creditworthiness nor the genuineness of the loan transactions is proved.
We are unable to subscribe to the view canvassed by the assessee that the statement given under section 132(4) is not valid and cannot be acted upon because of the retraction so made. Firstly, from the facts available on record, we do not subscribe to the view that there was any duress or pressure on Shri Laxmichand Jivraj to disclose the undisclosed income under section 132(4). Shri Laxmichand Jivraj was allowed to consult all his brothers /partners. Thus, there was every freedom to Shri Laxmichand Jivraj to consult among themselves and then to come to the conclusion that certain loans are not genuine. Nothing was put into the mouth of Shri Laxmichand Jivraj. When the search party enters the premises of the assessee, they carry with them two independent witnesses, who are generally well known to the party searched. There are often members or officers from other organisations or from different part of the department accompanying the search party.
Warrant is shown to the assessee concerned or to the inmates of the premises. After the search is over, a panchnama is drawn in the presence of the witnesses and panchnama contains as to whether any special event took place during the course of search. If it happened, the same is required to be recorded in panchnama. If there is any pressure or coercion on assessee, he is at liberty to report the matter to higher authorities. Entire event relating to alleged pressure or duress can be reported either to the higher authorities in the investigation wing or to the CIT/CCIT/CBDT. No such report was made by the group for 11 months till return was filed or till 22 months when clarificatory letter was submitted. It is enough to prove that there was no real/unreal pressure or coercion. It was clearly an afterthought so as to support the alleged retraction or non-disclosure of undisclosed income in the return. Wheneversuch an event takes place like duress/pressure etc., the witnesses can also be brought forward to support the allegation: Nothing of this sort has been attempted in this case. Thus, the conduct of the assessee clearly shows that pressure or duress is only an afterthought just to support retraction. In fact, there is no real retraction, it is only non-declaration of income in the return. Whether loans are genuine or not, it is in personal knowledge of the assessee and no third party can be privy to these accommodation entries. Once after consultation with his brothers and partners, Shri Laxmichand Jivraj came to the conclusion that certain loans are not genuine, he is to be believed. This belief is not coming out of thin air. It is based on documentary evidence found in the search. Pay-in-slips, blank signed cheques, cheque books cannot lie with assessee. At least no reason has been advanced so far. Spot enquiries had revealed that certain creditors were non-existent and they were not found at the given address or addresses are fictious.
When Shri Laxmichand Jivraj was confronted with all these evidences only then he had come out with a disclosure.
We are of the view that by its declaration and acts the assessee intentionally caused/made the departmental authorities to believe the declaration made by the assessee to be true and induced them to act upon such belief. In our view it is not open to the assessee to change the stand it has already taken and thus cause the situation in his favour by inducing the department not to investigate or enquire into the matter on the seize documents. It is not open to the assessee to turn around on the said declaration. This is based on maxim, allegans contria non est audiendus (a person alleging contradictory facts should not be heard). In Pickard v. Sears, (1837) 6 Ad. & El 469, 474, it has been held that where a person 'by his words or conduct wilfully causes another to believe the existence of a certain state of things and induces him to act on that belief, so as to alter his own previous position, the former is concluded from averring against the latter qa different state of things as existing at the same". In the celebrated book titled 'Administrative Law' by Sir William Wade (eighth edition by Wade and Forsyth - Oxford University Press), the legal position has been explained at p. 242 as under : "The basic principle of estoppel is that a person who by some statement or representation of fact causes another to act to his detriment in reliance on the truth of it is not allowed to deny it later, even though it is wrong. Justice here prevails over truth. Estoppel is often described as a rule of evidence, but more correctly it is a principle of law. As a principle of common law it applies only to representations about past or present facts".
In Evidence Act also, it is clearly laid down in section 115 thereof, that when one person has by his declaration or act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative to deny the truth of that thing. Section 115 of the Evidence Act also incorporates a statutory principle of common law that a person alleging contradictory facts should not be heard. If the assessee had not made the said declaration, or statement, the departmental authorities could have continued enquiries and could have investigated the entire matter on the basis of various documents seized during the course of search like blank cheques with bank pass books etc. By making the disclosure of Rs. 12.00 lakh being non-genuine loans, the assessee effectively prevented the department from carrying out its further investigation by making them to believe that Rs. 12.00 lakh is the unaccounted money. By seeking to retract, the assessee wants itself to be placed at an advantageous position at a point of time when he was before giving statement under section 132(4). However, with passage of time, the evidence which the department could have collected may no longer available; they might be manipulated, fabricated or destroyed. Further, the power of ADI to investigate is far wide and intense as compared to the power of assessing officer. By making the declaration before the ADI and admitting concealment and thereafter retracting it before the assessing officer, means practically closing the investigation by the investigation wing of the department. This cannot be acceptable. Thus, in our view retraction sought to be made by the assessee after several months of declaration and admission under section 132(4) is only a well thought out device to shut the department from collecting the evidence to unearth unaccounted income. Further no explanation is given by the assessee as to the delay in retraction. Nothing prevented the assessee from clarifying the facts immediately after search, if what was stated before the officers was factually incorrect. The return so filed by the assessee after 11 months does not contain anything spectacular, something which could have been discovered after lapse of time. There were no such contents in the return, which could have only been obtained at a later date or could not have been obtained just immediately after the search. In fact to our understanding, the return is only a bald denial and nothing else. Thus, we do not find anything in the subsequent conduct either to negate the declaration of disclosure given on oath by the assessee nor can it become the basis of retraction of the declaration made under section 132(4). When we compare the fact situations in two cases, one when the statement under section 132(4) was recorded and the other when the return was filed, we find that, in the former, there is very little time and scope of artificiality, or stating falsity, the assessee is not in a frame of mind where he could create some explanation which is not true. Whatever spontaneous answers come they are mostly true. When the statement is given that loans are not genuine, it should be accepted as true because it is in the very personal knowledge of the assessee. What he knows only he can state. Once he states on oath, something personal and only known to him, it must be true. About facts and events like this, only he is privy and he also knows the consequences of stating the truth that he has to pay taxes thereon on such disclosure, then the truth becomes an inseparable ingredient of the disclosure. On the other hand falsity has no legs to stand. When the assessee is compelled to state something, then the assessee knows, and also the officers present and recording the statement, that such statements are withdrawn the next day or immediately at the earliest available opportunity. Here the time is the essence. It is the deciding factor. The delay is the life support to the belief that whatever is stated is true. More delay affirms such belief. Inordinate delay in retraction establishes, that it was a truth and nothing else but truth.
This is when substantive evidence was found in the search that some loans are not genuine. And revenue is on a solid wicket to tax those loans. When there is evidence found and there is also an admission under section 132(4) given on oath, then no amount of bald retraction, quickly or delayed, can make a turn around. In the present case the delay in retraction was inordinate. There was no explanation for delay.
What he stated II months after filing the return, he could have stated next day of the search. There was no need for consultation if whole thing was false. As a matter of fact it was not. Therefore, entire set of submissions relating to retraction deserves to be rejected.
We derive support from various judicial pronouncements. In Surjit Singh Chhabra v. UOI (1997) 1 SCC 508/509, it was held that custom officers are not police officer and the confession made before them, though retracted, binds the petitioner. Similarly in T.S. Kumaraswamy v. Assq.
CIT(1998) 65 ITD 188 (Mad.), it was held that Income Tax Officers are not police officers, they do not use unfair means or third degree methods in recording statement on oath. Therefore, such statements and oaths cannot be retracted unless it is proved by legally acceptable evidence that such admission /confession or oath was not voluntarily tendered or was under coercion or duress. In the present case no such evidence has been produced or even shown to have existed. In V.Kunhambu & Sons v. CIT (1996) 219 ITR 235 (Ker.), the Hon'ble Kerala High Court held that where assessment has been on the statement of the assessee and no case has been made out that such statement was made under a mistaken belief of facts or law, statement being a voluntary one, then there is no scope for the assessee to challenge the correctness of the assessment made on the basis of such statements. In the case of Hotel Kiran v. Assistant Commissioner (2002) 82 ITD 453 (SC), the Pune Bench of the Tribunal held that where during the course of search, assessee made some admission, he debars the authorized officers from making further investigation. Therefore, in their wisdom the Legislature has provided that such statement can be used in evidence and the assessment can be made on that basis. We derive support from the decision in Hiralal Maganlal & Co. v. Dy. CIT(IT (SS) Appeal No. 117 (Mum.) of 1996), the Tribunal, reported in (2005) 96 ITD 113 (Mum.), wherein it was held as under : "35. Respectfully following the judicial authorities on the subject, we hold as under : (i) Statements in the nature of declarations covered by the provisions of section 115 of the Evidence Act, are binding on the declarant. They can neither be retracted nor do they require any corroboration. Such declarations can form the sole basis for assessment. The declaration made by Shri Prataprai Sanghvi, partner in the assessee-firm through his statement recorded under section 132(4) of the Income Tax Act, 1961 falls squarely within the ambit of section 115 of the Evidence Act and hence the same was neither open to retraction nor required any further corroboration. The assessing officer could, therefore, base the impugned addition on the said declaration.
(ii) Statements which are not in the nature of declarations under section 115 of the Evidence Act are also binding and can form the sole basis for assessment if they are not effectively retracted. Effective retraction is possible in two situations. First situation is where it is not voluntarily made. A statement, however, cannot be said to be involuntarily made merely because it is subsequently sought to be retracted. It is also to be remembered that the law of evidence presumes regularity and correctness of the official actions unless proved otherwise and hence the said principle will also govern the statement recorded by a public official and this is more particularly so when it is recorded in pursuance of the statutory provisions of law.
The provisions of sub-section (4) of section 132 also create rebuttable presumption in favour of the statements recorded there under and authorize their use in evidence in any proceeding under the Income Tax Act. The burden is, therefore, squarely on the person who alleges that the statement was not made voluntarily to prove that it was involuntarily made or made under coercion or undue influence or that it was made under mistaken belief or was obtained by fraud or misrepresentation. Mere allegation will not suffice. Second situation is where the person seeking to retract proves, by leading cogent and reliable evidence, the erroneous or incorrect nature of the facts stated or confessed at the earliest possible opportunity. In the case before us, it has been held above that the assessee has squarely failed to satisfactorily discharge the burden that the confessional statement made by Shri Prataprai Sanghvi under section 132(4) was involuntarily made or made under coercion or undue influence or was made under mistaken belief or obtained by fraud or misrepresentation. Rather, the evidence available on record shows that it was voluntarily made by Shri Sanghvi with due care and caution and after necessary consultations with all concerned. Besides, there has been inordinate delay, which has not been substantiated, on the part of the assessee to retract from the confessional statement. Retraction is also not supported by any independent or reliable evidence to,prove the incorrect nature of the facts confessed in the statement. The confessional statement of Shri Prataprai Sanghvi is also corroborated by other evidence. For these reasons also, the assessing officer, was therefore, in our view, justified in basing the impugned addition on the basis of confessional statement made at the time of search.
(iii) A confessional statement, which is not in the nature of declaration under section 115 of the Evidence Act, continues to have evidentiary value even after its retraction. However, such retracted confession / statement needs corroboration if it has been successfully retracted. As held above, the case of the assessee before us does not fall under this category." There is one issue, which has been raised by the Commissioner (Appeals). It is that statement under section 132(4) would not tantamount to a declaration since under that section what can be declared is any money, bullion, jewellery or other valuable article or thing found in his possession or under his control, which has been acquired out of his income not disclosed so far in his return of income. Further, the learned Commissioner (Appeals) observed that the assessee has to specify in his statement the manner in which such income has been earned. The immunity will be available only if the assessee declares such an asset or income in the return to be furnished. In our view, the view held by the Commissioner (Appeals) is misconceived. Section 132(4) reads as under : "(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income Tax Act, 1922 (11 of 1922), or under this Act, : For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income Tax Act, 1922 (11 of 1922), or under this Act." The Explanation to sub-section (4) was introduced by Finance Act, 1987 with effect from 1-4-1989 and is clarificatory in nature because it starts with "for removal of doubts". It provides that examination of any persons may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also on any related matters. Sub-section (4) is not confined to examination of any person in respect of money, bullion, jewellery or assets. Sub-section itself quotes that if a person is found to be in possession of any document, books of account, money, bullion or other valuable article or thing. Therefore, it is incorrect to suggest that examination of a person and recording of his statement under section 132(4) will be confined to merely to assets found in the search and not in respect of books of account or documents found therein. Thus, the assessee can always declare undisclosed income found as a result of documents found/seized by the officers during the course of search. Even otherwise, a declaration of income can be based on investigations carried out by the authorised officers during the course of search as clear from the explanation. Further, the view of the learned Commissioner (Appeals) is incorrect that declaration was based only on the statement under section 132(4). She has over-looked, the finding given by the assessing officer in his assessment order that blank cheque books, blank signed cheques were found in the search and the assessee had consulted his brothers before giving declaration.
Therefore, we do not approve the basis on which the Commissioner (Appeals) has given her finding.
Having held that (i) his statement under section 132(4) was not under duress and (ii) the retraction of statement on facts, is not justified, the next question for our consideration is whether the impugned order of Commissioner (Appeals) be sustained.
We find that Commissioner (Appeals) had deleted the addition to the tune of Rs. 6 lakhs for two reasons (i) statement of assessee under section 132(4) would not amount to declaration as such statement was not in accordance with the provision of section 132(4) inasmuch as much as such statement could be recorded and when any money, bullion, jewellery or valuable article or thing was found from the premises of assessee and (ii) such statement was retracted by assessee. We are unable to uphold the reasons given by Commissioner (Appeals) for deleting the addition of Rs. 6 lakhs. We have already held that statement was not given under any duress consequently retracted on facts, was not justified. Further, we find that number of incriminating material including bank pass books of creditors, cheque books and pay-in-slips, were found from the premises of the assessee during the course of search. Such materials in our opinion fall within the ambit of the words "other valuable articles or things". Therefore, the statement under section 132(4) could validly be recorded. Accordingly it is not possible for us to sustain the reasons given by the Commissioner (Appeals) for deleting the sum of Rs. 6 lakhs.
We further find that Commissioner (Appeals) deleted the addition of Rs, I lakh for the reasons (i) that onus on assessee was discharged as identity of creditors were established and (ii) genuineness was proved by the confirmation as well as balance sheets and income-tax particulars of creditors. We are unable to uphold her order for the reasons given hereafter. It is settled legal position that onus is on assessee to prove (i) identity of cash creditors (ii) capacity of the creditor and (iii) genuineness of the transaction (49 ITR 112 SC).
Therefore, merely the fact that identity is proved, the cash credit cannot be held to be genuine. The assessee must also prove the other conditions. Mere filing of confirmation letter is not sufficient even after confirmation letter, he is within his right to ask the assessee to produce the creditor with evidence to prove their capacity or genuineness of the transaction. No doubt, the balance sheets and income-tax particulars were filed before assessing officer, but the Commissioner (Appeals) failed to consider the adverse materials-(i) that pass books of cash creditors were found in the possessions of assessee in the course of search for which there is no explanations from assessee and (ii) the perusal of pass book revealed that cash were deposited in the bank account of creditors before issue of cheques to assessee. In these premises, unless there is material to show the availability of cash with creditors on the dates of deposits in their' bank account, the genuineness of cash credit cannot be accepted. Such availability can be explained by the cash creditor. Therefore assessing officer, was justified in asking the assessee to produce these cash creditors so that they could explain the availability of cash.
Accordingly, we are unable to uphold the reasons given by Commissioner (Appeals) for deleting the additions of Rs. 1 lakh.
Regarding the balance addition of Rs. 2,82,000, we find that Commissioner (Appeals) has restored the matter regarding addition on account unexplained cash credit of Rs. 80,000 in the name of Anil Nangi & cash credits of Rs. 60,000 in the names of Rapare 2 Gada & Jagdish Joshi. Rest of the addition was deleted on the basis of confirmations filed and statement of affairs of creditors. We have already given observations in the earlier para for not approving the reasons given by Commissioner (Appeals). Therefore, for the same reasons, the deletion cannot be upheld.We also feel that order of assessing officer also cannot be restored.
The provisions of section 132(4) provides that statement under section 132(4) may be used in evidence. That means the discretion is vested with assessing officer, to use it as evidence. It is not incumbent on him to make addition solely on the basis of such statement. Even otherwise, in our opinion, mere admission, without any corroboration, is not enough for making addition. In the statement under section 132(4), the assessee merely stated that some of the cash creditors may not be genuine. It is on the basis of such doubt that addition was made. In these circumstances of cash creditors, the assessing officer should not come in the way of assessee. In the present case, assessing officer merely got restricted himself to the statement under section 132(4). He had chosen to make enquiries regarding genuineness of the cash creditors by asking the assessee to prove the genuineness of such cash credits. Having done so, he could not make addition on the basis of statement under section 132(4) alone. Rather, he should have dealt with each credit with reference to the materials on the record.
Accordingly, we set aside the order of Commissioner (Appeals) and restore the matter to the file of assessing officer for fresh adjudication after giving reasonable opportunity of being heard.
In the result, the appeal of the revenue is allowed for statistical purpose as indicated above.