Addition of ₹6 Crores Based on Director’s Statement During Search: ITAT Upholds CIT(A) Deletion [Read Order]

The Ranchi Bench of Income Tax Appellate Tribunal ( ITAT ) upheld the Commissioner of Income Tax (Appeals)[ CIT(A)]’s deletion of a ₹6 crore addition based on the director’s statement during a search for AY 2014-15.

The Revenue-appellant appealed against the CIT(A) order passed for the AY 2014-15 dated 2014-15.The revenue counsel submitted that in this case, Hallmark Suppliers Pvt. Ltd., respondent-assessee, a search was conducted in the Bhalotia group of cases on 22.08.2013. During the assessment, the assessee offered ₹6 crores as additional income for the assessment year 2014-15, and the Assessing Officer (AO ) added this amount to the income.

It was stated that the CIT(A) deleted the addition by relying on the Gujarat High Court’s decision in PCIT vs. Nageshwar Enterprises and the ITAT Kolkata decision in Rohitaswa Das vs. DCIT. The CIT(A) held that the addition could not be made solely on the director’s statement without supporting evidence.

The revenue counsel argued that since the assessee had offered the income during the search, the addition should have been upheld and requested the reversal of the CIT(A)’s order.

The assessee counsel submitted that a total declaration of about ₹10 crores was made in the group, out of which ₹6 crores was shown in the assessee company’s name and the rest in other family members’ names.

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It was stated that the director’s statement and declaration were made under compulsion. The counsel argued that there was no evidence of undisclosed income and requested that the CIT(A)’s order be upheld.

The two member bench comprising George Mathan (Judicial Member) and Ratnesh Nandan Sahay (Accountant Member) considered the rival submissions and reviewed the assessment order. It observed that the AO had relied only on the director’s statement, in which the assessee offered ₹6 crores as additional income for the assessment year 2014-15.

The disclosure was stated to be voluntary, made to avoid litigation, and based on the understanding that no penalty would be imposed.

The appellate tribunal noted that no supporting evidence or incriminating material was found to justify the addition. It further observed that the CIT(A) deleted the addition as it was based solely on the statement without any corroborative proof.

Since no revised return was filed and no documents were produced to establish undisclosed income, the tribunal held that there was no basis for the addition and upheld the CIT(A)’s order.

Accordingly the appeal of the revenue was dismissed.

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