The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) recently held that the department cannot make addition merely on the basis of the statement made by the Director of the Company during the search proceedings.
During the course of search proceedings under section 132 of the Income Tax Act, the department recorded the statement of one of the directors of the assessee-Company based on which, the impugned addition was made. The Assessing Officer recorded that as per the statement of the Director, it is evident that the share capital was bogus. However, this statement has been retracted within a span of 7 days.
The Tribunal noted that it is settled law that statements recorded during the course of survey proceedings would not have much evidentiary value unless the same are backed by credible evidence.
“This position has been settled by Hon’ble Supreme Court in the case of CIT V/s S.Khader Khan & Sons (25 Taxmann.com 413). The CBDT instructions No. F.No.286/98/2013-IT (Inv. II) dated 18/12/2014 also discourages confessional statements without any credible evidences. No incriminating material is shown to have been found during the course of survey proceedings,” the Tribunal said.
While deleting the addition, the Tribunal said that “We also find that learned CIT(A) has gone by irrelevant considerations to confirm the impugned additions. The object clause of the investor entities would have no relevance vis-à-vis proposed additions in the hands of the assessee u/s 68. It is trite law that no additions could be made merely on the basis of suspicion, conjectures or surmises.”Subscribe Taxscan AdFree to view the Judgment