Retracted Statement not Incriminating Material u/s 153A: Gauhati HC quashes ₹4.23 Cr Addition [Read Order] 

In a recent ruling, the Gauhati High Court held that a retracted statement alone cannot be treated as incriminating evidence under Section 153A of the Income Tax Act and quashed the Rs. 4.23 crore addition made to the assessee's income. 

The case arose when the Principal Commissioner of Income Tax (PCIT) challenged an order by the Income Tax Appellate Tribunal (ITAT), which had upheld the findings of the Commissioner of Income Tax (Appeals) [CIT(A)] in favor of the respondent, Rohit Karan Jain. 

The dispute centered around a search and seizure operation conducted on June 2, 2016, at the respondent’s residence, during which statements were recorded regarding alleged bogus Long-Term Capital Gains (LTCG) transactions.

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The Assessing Officer (AO) relied on the confession of the assessee’s father, who admitted to routing unaccounted income through pre-arranged LTCG transactions. However, this statement was later retracted. 

Based on this statement alone, the AO issued an assessment order under Section 153A, adding Rs. 4.23 crore to the respondent’s total income. The assessee challenged this, arguing that no incriminating material had been found during the search to justify reopening a completed assessment.

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The CIT(A) ruled that in the absence of independent incriminating material, the assessment could not be reopened merely based on a retracted statement. ITAT upheld this decision citing Supreme Court rulings in Abhisar Buildwell (P) Ltd. and Kabul Chawla, which established that additions under Section 153A require fresh incriminating material.

The Revenue argued that the retracted statement was still admissible and that search assessments should allow reassessment of the entire income. The court held that a retracted statement, without corroborative evidence, does not qualify as incriminating material. The High Court also observed that mere suspicion or allegations without material evidence cannot justify reassessment under Section 153A of the Income Tax Act.

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A division bench comprising Chief Justice Vijay Bishnoi and Justice Kaushik Goswami dismissed the Revenue’s appeal, stating that no substantial question of law arose in the case. The court reaffirmed that completed assessments cannot be reopened under Section 153A of the Income Tax Act unless fresh incriminating material is found during a search operation. The court upheld the ITAT’s ruling, confirming that the addition of Rs. 4.23 crore was unsustainable in law.

To Read the full text of the Order CLICK HERE

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