The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled that the Income Tax Department cannot make additions to an assessee’s income based solely on statements made during a search operation under Section 132 of the Income Tax Act, 1961, if those statements are subsequently retracted and no incriminating material is found during the search.
The case involved three assessees, Saketkumar R Tanna, Indumati Rugnath Tanna, and Ritaben Saketkumar Tanna. Search operations were conducted under Section 132 of the Act at their residential premises. Following the search, notices under Section 153A of the Act were issued for reassessment of income for multiple assessment years.
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The central issues in the case were whether the department could add income to the assessees’ income based on statements made during the search operation under Section 132, which were later retracted, and whether the department could make additions in the absence of any incriminating material found during the search.
The assessees, represented by Mehul. K. Patel, argued that their statements made during the search under Section 132 were retracted and could not be used against them. They contended that the additions made by the Income Tax Department were based on these retracted statements and not on any incriminating material found during the search.
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The ITAT bench, comprising Accountant Member Annapurna Gupta and Judicial Member T.R. Senthil Kumar, relied on several judicial precedents, including the judgements in DCIT vs. Narendra Garg & Ashok Garg (AOP) and Abhisar Buildwell Pvt. Ltd. vs. PCIT.
The Tribunal held that disclosures or admissions made under Section 132(4) of the Act during search proceedings are admissible evidence but not conclusive. The bench ruled that in cases of completed or unabated assessments, the Income Tax Department cannot make additions based solely on retracted statements made during the search without any incriminating material being unearthed.
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The Tribunal partially allowed the appeals of the assessees. Additions made based on loose sheets found during the search regarding investments in shares were upheld, while additions based on other grounds without any seized material to support them were deleted.
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