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 143, 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. The Court held that the Tribunal was not right in confirming the addition to the extent of Rs 6 lakhs: the addition of Rs 1 lakh on account of unaccounted cash was confirmed and the addition of Rs 6 lakhs was deleted (paras 27 and 28). Merely on the basis of an admission the assessee could not have been subjected to the additions unless 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 (para 26).
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 (para 22). The glaring fact 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 (para 22). 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 (para 23). 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 (para 23). 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 (para 24). On the furniture, no payment for the additional furniture lying in bundles had been made by the date of search (para 25). 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 (para 26).
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 143, 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. The Court held that the Tribunal was not right in confirming the addition to the extent of Rs 6 lakhs: the addition of Rs 1 lakh on account of unaccounted cash was confirmed and the addition of Rs 6 lakhs was deleted (paras 27 and 28). Merely on the basis of an admission the assessee could not have been subjected to the additions unless 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 (para 26).
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 (para 22). The glaring fact 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 (para 22). 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 (para 23). 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 (para 23). 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 (para 24). On the furniture, no payment for the additional furniture lying in bundles had been made by the date of search (para 25). 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 (para 26). 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 143, 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. The Court held that the Tribunal was not right in confirming the addition to the extent of Rs 6 lakhs: the addition of Rs 1 lakh on account of unaccounted cash was confirmed and the addition of Rs 6 lakhs was deleted (paras 27 and 28). Merely on the basis of an admission the assessee could not have been subjected to the additions unless 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 (para 26). It arises in Evidence & Burden of Proof and Search, Survey & Block Assessment matters, on section 132(4), section 132, section 143, 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. Followed by the Gujarat High Court in CIT v. Chandrakumar Jethmal Kochar [2015] 55 taxmann.com 292 / [2015] 230 Taxman 78 (Guj), decided 12 November 2014, where the CASE REVIEW records Kailashben Manharlal Chokshi as followed at para 6 and the Court set out para 23 of it in full before holding that an admission of benami concerns, retracted and uncorroborated, could not sustain the addition. No later decision doubting or overruling it was found. 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.
This came to the High Court as a reference under s.256(1) (IT Reference No. 111 of 1997), not as an appeal, and the question was partly answered in the assessee's favour — 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), which resolves the garbled CTR reference previously noted. The 'torture and harassment during search' passage often quoted with this case is from the Allahabad decision in CIT v. Radha Kishan Goel, which counsel cited; the Gujarat Court's own point is narrower — a statement taken at midnight deserves little credit if it is retracted and contrary evidence is led. 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. The Court held that the Tribunal was not right in confirming the addition to the extent of Rs 6 lakhs: the addition of Rs 1 lakh on account of unaccounted cash was confirmed and the addition of Rs 6 lakhs was deleted (paras 27 and 28). Merely on the basis of an admission the assessee could not have been subjected to the additions unless 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 (para 26).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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