I disclosed a large sum in the search statement and retracted two months later. Will the retraction hold?
Partly, and only for what the department cannot corroborate. An admission is evidence but not conclusive, so additions for house property, gold and furniture that rested only on the retracted statement were deleted, while the amount matched by unaccounted cash actually found was upheld.
Decided by the High Court (Gujarat High Court — K.A. Puj J and Bankim N. Mehta J) on 2008-09-01, reported as [2008] 174 Taxman 466 (Guj) / [2010] 328 ITR 411 (Guj) / [2008] 220 CTR 138 (Guj); IT Reference No. 111 of 1997. It bears on section 132(4), section 132, section 256(1) of the Income Tax Act 1961, in Evidence & Burden of Proof and Search, Survey & Block Assessment matters.
This is the standard authority for attacking a search disclosure, and it gives you two separate arguments: that the circumstances in which a statement is taken at odd hours during a search go to whether it was voluntary, and that the authorities must deal with the explanations offered on retraction instead of dismissing them as an afterthought. It also shows the ceiling: the head backed by material survived, so the outcome is usually a split rather than a clean deletion.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A search under s.132 was carried out on 4 November 1988 at the premises of the firm M/s Chokshi Kasturchand Dalaji & Sons and of its partners, including the assessee. In a statement recorded under s.132(4) the assessee disclosed Rs 7,00,000 — Rs 4,00,000 as unaccounted investment in house property, Rs 1,00,000 as unaccounted cash, Rs 1,00,000 as unaccounted investment in furniture and Rs 1,00,000 as unaccounted investment in gold ornaments. In January 1989 he retracted, saying only Rs 50,000 was acceptable and that the disclosure had been made under pressure and coercion, and he filed an affidavit with an explanation dated 28 February 1989 for each head. The Assessing Officer treated the two-month delay as showing the retraction had no reason behind it and added the whole Rs 7,00,000 for assessment year 1989-90. The Commissioner (Appeals) and the Tribunal confirmed. The Tribunal held that on retracting the assessee had rendered himself untrustworthy and that the affidavit was self-serving. The assessee died while the matter was pending and his legal heirs were brought on record on 9 July 2008. The Tribunal referred to the High Court under s.256(1) the question whether it was right in confirming the Rs 7 lakh addition disclosed under s.132(4) but retracted thereafter.
The referred question was partly answered in favour of the assessee and against the Revenue. The Court held that the Tribunal was not justified in confirming the addition to the extent of Rs 6 lakhs: in its concluding passage it confirmed the addition of Rs 1 lakh on account of unaccounted cash, deleted the addition of Rs 6 lakhs, and disposed of the reference without any order as to costs. Merely on the basis of an admission the assessee could not have been subjected to the additions unless and until some corroborative evidence was found in support of that admission, and a statement recorded at such odd hours cannot be considered voluntary if it is subsequently retracted and evidence is led contrary to the admission. The judgment is an oral judgment in continuous prose and carries no paragraph numbers, so the passages described here are identified by where they sit in the Court's own discussion; any paragraph numbers seen against this case come from the law reports.
The Court began from the position that it would not ordinarily interfere with concurrent findings of fact, but said two things still had to be seen: whether the explanation tendered by the assessee had been considered by the authorities below, and whether the addition rested merely on the s.132(4) statement. The glaring fact, taken up at the start of that discussion, was that the statement had been recorded at midnight; in normal circumstances it is too much to give any credit to a statement recorded at such odd hours, because a person may not be in a position to make a correct or conscious disclosure then. The Assessing Officer's grievance was that the retraction came two months later and was an afterthought made on legal advice; but viewed against the affidavit and the evidence filed with it, the assessee had given a proper explanation for every head. On the house property, the first floor was built between 1986 and 1988 at a cost of Rs 2,03,185.65 withdrawn from the firm's account, and the departmental valuation officer had himself put the cost at Rs 2,06,060; the revenue produced no evidence that Rs 4 lakhs had been spent or that it came from undisclosed income. On the gold, the quantity was a normal holding for a middle class Indian family in the light of the Board's instructions, and even if the circular was not retrospective the explanation held. On the furniture, no payment for the additional furniture lying in bundles had been made by the date of search. Taking those heads together at the close of the judgment, the explanation was more convincing, had not been considered by the authorities below, and the revenue had led no evidence after the retraction; an admission alone could not sustain the additions without corroboration. The judgment carries no paragraph numbers, so these steps are described in the order in which they appear.
merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission
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Handle my notice → Ask a CA on WhatsAppPartly, and only for what the department cannot corroborate. An admission is evidence but not conclusive, so additions for house property, gold and furniture that rested only on the retracted statement were deleted, while the amount matched by unaccounted cash actually found was upheld. This was decided by the High Court (Gujarat High Court — K.A. Puj J and Bankim N. Mehta J) and bears on section 132(4), section 132, section 256(1) of the Income Tax Act 1961. It is reported as [2008] 174 Taxman 466 (Guj) / [2010] 328 ITR 411 (Guj) / [2008] 220 CTR 138 (Guj); IT Reference No. 111 of 1997. This is the standard authority for attacking a search disclosure, and it gives you two separate arguments: that the circumstances in which a statement is taken at odd hours during a search go to whether it was voluntary, and that the authorities must deal with the explanations offered on retraction instead of dismissing them as an afterthought. It also shows the ceiling: the head backed by material survived, so the outcome is usually a split rather than a clean deletion. If it applies to you, the first step is this: Retract promptly and in writing, head by head, with the explanation and supporting material for each figure rather than a bare denial.
A search under s.132 was carried out on 4 November 1988 at the premises of the firm M/s Chokshi Kasturchand Dalaji & Sons and of its partners, including the assessee. In a statement recorded under s.132(4) the assessee disclosed Rs 7,00,000 — Rs 4,00,000 as unaccounted investment in house property, Rs 1,00,000 as unaccounted cash, Rs 1,00,000 as unaccounted investment in furniture and Rs 1,00,000 as unaccounted investment in gold ornaments. In January 1989 he retracted, saying only Rs 50,000 was acceptable and that the disclosure had been made under pressure and coercion, and he filed an affidavit with an explanation dated 28 February 1989 for each head. The Assessing Officer treated the two-month delay as showing the retraction had no reason behind it and added the whole Rs 7,00,000 for assessment year 1989-90. The Commissioner (Appeals) and the Tribunal confirmed. The Tribunal held that on retracting the assessee had rendered himself untrustworthy and that the affidavit was self-serving. The assessee died while the matter was pending and his legal heirs were brought on record on 9 July 2008. The Tribunal referred to the High Court under s.256(1) the question whether it was right in confirming the Rs 7 lakh addition disclosed under s.132(4) but retracted thereafter. The matter was decided on 2008-09-01 by the High Court (Gujarat High Court — K.A. Puj J and Bankim N. Mehta J). On those facts the High Court held as follows. The referred question was partly answered in favour of the assessee and against the Revenue. The Court held that the Tribunal was not justified in confirming the addition to the extent of Rs 6 lakhs: in its concluding passage it confirmed the addition of Rs 1 lakh on account of unaccounted cash, deleted the addition of Rs 6 lakhs, and disposed of the reference without any order as to costs. Merely on the basis of an admission the assessee could not have been subjected to the additions unless and until some corroborative evidence was found in support of that admission, and a statement recorded at such odd hours cannot be considered voluntary if it is subsequently retracted and evidence is led contrary to the admission. The judgment is an oral judgment in continuous prose and carries no paragraph numbers, so the passages described here are identified by where they sit in the Court's own discussion; any paragraph numbers seen against this case come from the law reports.
The Court began from the position that it would not ordinarily interfere with concurrent findings of fact, but said two things still had to be seen: whether the explanation tendered by the assessee had been considered by the authorities below, and whether the addition rested merely on the s.132(4) statement. The glaring fact, taken up at the start of that discussion, was that the statement had been recorded at midnight; in normal circumstances it is too much to give any credit to a statement recorded at such odd hours, because a person may not be in a position to make a correct or conscious disclosure then. The Assessing Officer's grievance was that the retraction came two months later and was an afterthought made on legal advice; but viewed against the affidavit and the evidence filed with it, the assessee had given a proper explanation for every head. On the house property, the first floor was built between 1986 and 1988 at a cost of Rs 2,03,185.65 withdrawn from the firm's account, and the departmental valuation officer had himself put the cost at Rs 2,06,060; the revenue produced no evidence that Rs 4 lakhs had been spent or that it came from undisclosed income. On the gold, the quantity was a normal holding for a middle class Indian family in the light of the Board's instructions, and even if the circular was not retrospective the explanation held. On the furniture, no payment for the additional furniture lying in bundles had been made by the date of search. Taking those heads together at the close of the judgment, the explanation was more convincing, had not been considered by the authorities below, and the revenue had led no evidence after the retraction; an admission alone could not sustain the additions without corroboration. The judgment carries no paragraph numbers, so these steps are described in the order in which they appear. In the words reproduced by the source cited on this page: "merely on the basis of admission the assessee could not have been subjected to such additions unless and until, some corroborative evidence is found in support of such admission" The decision followed or applied Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) — relied on by the assessee; Nirman Textile Mills (P.) Ltd. v. Asstt. CIT [2006] 284 ITR 325 (Guj) — relied on by the assessee.
It was decided by the High Court on 2008-09-01 and is reported as [2008] 174 Taxman 466 (Guj) / [2010] 328 ITR 411 (Guj) / [2008] 220 CTR 138 (Guj); IT Reference No. 111 of 1997. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 132(4), section 132, section 256(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The referred question was partly answered in favour of the assessee and against the Revenue. The Court held that the Tribunal was not justified in confirming the addition to the extent of Rs 6 lakhs: in its concluding passage it confirmed the addition of Rs 1 lakh on account of unaccounted cash, deleted the addition of Rs 6 lakhs, and disposed of the reference without any order as to costs. Merely on the basis of an admission the assessee could not have been subjected to the additions unless and until some corroborative evidence was found in support of that admission, and a statement recorded at such odd hours cannot be considered voluntary if it is subsequently retracted and evidence is led contrary to the admission. The judgment is an oral judgment in continuous prose and carries no paragraph numbers, so the passages described here are identified by where they sit in the Court's own discussion; any paragraph numbers seen against this case come from the law reports. It arises in Evidence & Burden of Proof and Search, Survey & Block Assessment matters, on section 132(4), section 132, section 256(1) of the Income Tax Act 1961, and was decided by Gujarat High Court — K.A. Puj J and Bankim N. Mehta J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Get the time and circumstances of the recording on record, because a statement taken at odd hours during the search goes to voluntariness. Ask the officer to identify the corroboration for each item separately, and expect the items matched by cash or assets found to stand.
Still good law. The judgment stands and has been followed. In CIT v. Chandrakumar Jethmal Kochar [2015] 55 taxmann.com 292 / [2015] 230 Taxman 78 (Guj), decided 12 November 2014, the Gujarat High Court followed it, setting out the relevant passage of this judgment before holding that an admission about benami concerns, retracted and uncorroborated, could not sustain the addition. That later judgment has not been examined directly for this entry, so what it contains is recorded at second hand and should be read before it is relied on. No later decision doubting or overruling this judgment has been found. One point about locators, because it affects every citation of the case. This is an oral judgment printed in continuous prose and it carries no paragraph numbers at all, so any paragraph number seen against it comes from a law report and not from the Court; a submission that cites 'paragraph 23' of this judgment is citing a reporter's numbering and can be challenged. Describe the passage instead. Two limits on how far the case can be pushed. It is a reference under section 256(1) answered partly in the assessee's favour, and the Rs 1 lakh addition matched by unaccounted cash actually found was confirmed; the ratio is that an admission needs corroboration, not that a retracted statement counts for nothing. And the circumstances mattered: the statement was recorded at midnight, the retraction came two months later supported by an affidavit and documentary explanations for each head, and the Revenue led no evidence after the retraction. A retraction unsupported by any explanation, or one contradicted by seized material, does not attract the same answer, and later Benches have drawn that distinction. Read the current position on statements recorded during a search alongside this judgment rather than out of it. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
HOW THE CASE CAME UP, AND WHAT IT DECIDES. This came to the High Court as a reference under s.256(1) (IT Reference No. 111 of 1997), not as an appeal, so the Court was answering a question framed by the Tribunal and not rehearing the assessment. The question was partly answered in the assessee's favour: the addition of Rs 6 lakhs was deleted and the Rs 1 lakh cash addition stands. The full citation line is [2008] 174 Taxman 466 / [2010] 328 ITR 411 / [2008] 220 CTR 138 (Guj). A CAUTION ON LOCATORS. The judgment is an oral judgment in continuous prose and carries no paragraph numbers, so anything taken from it must be described by its place in the Court's own discussion rather than pinned to a paragraph; do not supply a paragraph number for it. A CAUTION ON WHAT IS QUOTED WITH IT. The 'torture and harassment during search' passage often quoted with this case is not the Gujarat Court's own — it comes from the Allahabad decision in CIT v. Radha Kishan Goel, which counsel cited. The Gujarat Court's point is narrower and is better for being narrower: a statement recorded at such odd hours cannot be considered voluntary where it is subsequently retracted and evidence is led contrary to the admission, and an admission, while evidence, is not conclusive and cannot by itself support an addition without corroboration. Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 (SC) is the source of the second proposition and belongs in the citation with it. HOW TO USE IT. The value of the case is that it splits the additions head by head instead of treating the retraction as all or nothing. The heads resting only on the statement — house property, gold and furniture — went; the head matched by unaccounted cash actually found stayed. That is the realistic expectation to set with a client, and it is also the shape of the argument: ask the officer to identify the corroboration for each item separately rather than contesting the statement in the abstract. The delay of about two months did not defeat the assessee here, but the reasoning rests on the explanations having been offered and supported, so a bare denial filed late is a different case and this judgment does not carry it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The referred question was partly answered in favour of the assessee and against the Revenue. The Court held that the Tribunal was not justified in confirming the addition to the extent of Rs 6 lakhs: in its concluding passage it confirmed the addition of Rs 1 lakh on account of unaccounted cash, deleted the addition of Rs 6 lakhs, and disposed of the reference without any order as to costs. Merely on the basis of an admission the assessee could not have been subjected to the additions unless and until some corroborative evidence was found in support of that admission, and a statement recorded at such odd hours cannot be considered voluntary if it is subsequently retracted and evidence is led contrary to the admission. The judgment is an oral judgment in continuous prose and carries no paragraph numbers, so the passages described here are identified by where they sit in the Court's own discussion; any paragraph numbers seen against this case come from the law reports.
TaxSphere, “Kailashben Manharlal Chokshi v CIT”, https://taxnotice.vittsphere.com/caselaw/case/kailashben-chokshi-v-cit-retraction/ (validity last checked 2026-08-19)
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