The share capital addition rests on a statement I was never allowed to cross-examine. Does it stand?
No. Statements under s.132(4) do not by themselves constitute incriminating material; a copy of the statement and an opportunity to cross-examine the deponent must be given, and where the statement is retracted or cross-examination is refused it has to be discarded. The s.68 additions fell.
Decided by the High Court (Delhi High Court — S. Muralidhar J and Prathiba M. Singh J) on 2017-08-01, reported as [2017] 84 taxmann.com 287 (Delhi) / [2017] 397 ITR 82 (Delhi); IT Appeal Nos. 11 to 22 of 2017. It bears on section 68, section 132, section 132(4), section 153A, section 260A of the Income Tax Act 1961, in Search, Survey & Block Assessment, Evidence & Burden of Proof and Cash Credits & Unexplained Money matters.
This is the case for a search assessment where the whole s.68 case comes from an entry operator's statement about accommodation entries. It gives you a jurisdictional limb, that a completed year needs incriminating material referable to that particular year, and a fairness limb, that the onus of producing the deponent is on the Revenue and cannot be shifted to you. It also confirms that once identity, genuineness and creditworthiness are documented, suspicion alone will not sustain the addition.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A search under s.132 was carried out on 15 September 2008 on both Tarun Goyal and the Best Group of Companies, in the course of which loose papers were found which the Revenue said related to unaccounted receipts from property sales and unrecorded construction expenditure. To support jurisdiction under s.153A the Revenue relied on statements under s.132(4) of Tarun Goyal and of Anu Aggarwal recorded on the day of the search, and of Anu Aggarwal and Harjeet Singh, directors of the Best Group, recorded on 24 October 2008, together with three seized documents A-1, A-4 and A-11. Anu Aggarwal surrendered Rs 8 crores as undisclosed income, but for the assessment year in question only. Goyal's statement was never given to the assessees, he was never produced for cross-examination, and he subsequently retracted. On that footing the Assessing Officer treated share premium and share application money as unexplained cash credits under s.68 for assessment years 2005-06 to 2009-10. The Commissioner (Appeals) sustained the additions; the Tribunal, by a common order dated 31 May 2016, deleted them and held there was no incriminating material for the years other than the year of search. The Revenue appealed under s.260A in twelve appeals, on questions of law framed on 21 March 2017.
The Revenue's appeals were dismissed. On jurisdiction: the surrender of Rs 8 crores by Anu Aggarwal was for the assessment year in question only and not for each of the six years preceding the search, and the documents A-1, A-4 and A-11 were explained as accounted for, so neither could be incriminating material qua each of the preceding years (para 36). A copy of Goyal's s.132(4) statement was never given to the assessees and he was never offered for cross-examination; the Assessing Officer's own remand report showed his attempts to produce Goyal had failed; the onus of producing him lay on the Revenue and could not be shifted to assessees who said they did not know him; and apart from his retraction, the failure to produce him for cross-examination is by itself sufficient to discard his statement (para 37). Statements recorded under s.132(4) do not by themselves constitute incriminating material, as explained in Harjeev Aggarwal (para 38). Dayawanti Gupta was distinguished, there being no admission of a failure to maintain accounts and no finding of habitual clandestine operations here (para 38). The Tribunal was therefore fully justified in holding the assumption of jurisdiction under s.153A unjustified (para 39). On the s.68 additions for three of the years, the Court held that it was not persuaded that the Tribunal's finding suffered from any perversity (para 41), and that with the assessees having discharged the burden of explaining the credits the Tribunal's order suffered from no legal infirmity warranting interference (para 43).
On jurisdiction the Court applied the Kabul Chawla summary, which it set out in full, and Meeta Gutgutia, restating that unless there is incriminating material qua each of the assessment years in which additions are sought the assumption of jurisdiction under s.153A is vitiated, and noting that the Gujarat, Karnataka, Calcutta and Bombay High Courts had come to the same conclusion (paras 34 and 35). It then applied that to the facts: a surrender confined to one year is not incriminating material for the other years; documents explained as accounted for are not incriminating material; a statement whose maker is never produced, whose remand-report-recorded absence is the Revenue's failure and who has retracted, must be discarded; and a s.132(4) statement is not by itself incriminating material, that being what Harjeev Aggarwal had explained (paras 36 to 38). On the merits of the s.68 additions the Court did not reason afresh. It set out the Tribunal's paragraphs 38, 45, 46 and 48 — the absence of any cash deposit in the share applicants' bank accounts before the cheques issued, the Assessing Officer's own remand verification with the applicants' banks producing no adverse finding, the self-declaration of the applicant company's director, the share application form, the confirmation on the company's letterhead with cheque numbers and PAN, the certificate of incorporation and the applicant's return, and the officer's failure to summon the director or verify against the income tax record — and held only that it was not persuaded that these findings were perverse and that the order suffered from no legal infirmity (paras 40 to 43).
statements recorded under Section 132 (4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal
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Handle my notice → Ask a CA on WhatsAppNo. Statements under s.132(4) do not by themselves constitute incriminating material; a copy of the statement and an opportunity to cross-examine the deponent must be given, and where the statement is retracted or cross-examination is refused it has to be discarded. The s.68 additions fell. This was decided by the High Court (Delhi High Court — S. Muralidhar J and Prathiba M. Singh J) and bears on section 68, section 132, section 132(4), section 153A, section 260A of the Income Tax Act 1961. It is reported as [2017] 84 taxmann.com 287 (Delhi) / [2017] 397 ITR 82 (Delhi); IT Appeal Nos. 11 to 22 of 2017. This is the case for a search assessment where the whole s.68 case comes from an entry operator's statement about accommodation entries. It gives you a jurisdictional limb, that a completed year needs incriminating material referable to that particular year, and a fairness limb, that the onus of producing the deponent is on the Revenue and cannot be shifted to you. It also confirms that once identity, genuineness and creditworthiness are documented, suspicion alone will not sustain the addition. If it applies to you, the first step is this: Fix the date on which the search was initiated before you cite this, because it decides whether the s.153A reasoning applies (a search initiated on or before 31 March 2021), or ss.147 to 151 in their pre-Finance (No. 2) Act 2024 form govern under s.152(3) (1 April 2021 to 31 August 2024), or the reintroduced block assessment scheme governs (on or after 1 September 2024), and therefore whether the authority is usable at all.
A search under s.132 was carried out on 15 September 2008 on both Tarun Goyal and the Best Group of Companies, in the course of which loose papers were found which the Revenue said related to unaccounted receipts from property sales and unrecorded construction expenditure. To support jurisdiction under s.153A the Revenue relied on statements under s.132(4) of Tarun Goyal and of Anu Aggarwal recorded on the day of the search, and of Anu Aggarwal and Harjeet Singh, directors of the Best Group, recorded on 24 October 2008, together with three seized documents A-1, A-4 and A-11. Anu Aggarwal surrendered Rs 8 crores as undisclosed income, but for the assessment year in question only. Goyal's statement was never given to the assessees, he was never produced for cross-examination, and he subsequently retracted. On that footing the Assessing Officer treated share premium and share application money as unexplained cash credits under s.68 for assessment years 2005-06 to 2009-10. The Commissioner (Appeals) sustained the additions; the Tribunal, by a common order dated 31 May 2016, deleted them and held there was no incriminating material for the years other than the year of search. The Revenue appealed under s.260A in twelve appeals, on questions of law framed on 21 March 2017. The matter was decided on 2017-08-01 by the High Court (Delhi High Court — S. Muralidhar J and Prathiba M. Singh J). On those facts the High Court held as follows. The Revenue's appeals were dismissed. On jurisdiction: the surrender of Rs 8 crores by Anu Aggarwal was for the assessment year in question only and not for each of the six years preceding the search, and the documents A-1, A-4 and A-11 were explained as accounted for, so neither could be incriminating material qua each of the preceding years (para 36). A copy of Goyal's s.132(4) statement was never given to the assessees and he was never offered for cross-examination; the Assessing Officer's own remand report showed his attempts to produce Goyal had failed; the onus of producing him lay on the Revenue and could not be shifted to assessees who said they did not know him; and apart from his retraction, the failure to produce him for cross-examination is by itself sufficient to discard his statement (para 37). Statements recorded under s.132(4) do not by themselves constitute incriminating material, as explained in Harjeev Aggarwal (para 38). Dayawanti Gupta was distinguished, there being no admission of a failure to maintain accounts and no finding of habitual clandestine operations here (para 38). The Tribunal was therefore fully justified in holding the assumption of jurisdiction under s.153A unjustified (para 39). On the s.68 additions for three of the years, the Court held that it was not persuaded that the Tribunal's finding suffered from any perversity (para 41), and that with the assessees having discharged the burden of explaining the credits the Tribunal's order suffered from no legal infirmity warranting interference (para 43).
On jurisdiction the Court applied the Kabul Chawla summary, which it set out in full, and Meeta Gutgutia, restating that unless there is incriminating material qua each of the assessment years in which additions are sought the assumption of jurisdiction under s.153A is vitiated, and noting that the Gujarat, Karnataka, Calcutta and Bombay High Courts had come to the same conclusion (paras 34 and 35). It then applied that to the facts: a surrender confined to one year is not incriminating material for the other years; documents explained as accounted for are not incriminating material; a statement whose maker is never produced, whose remand-report-recorded absence is the Revenue's failure and who has retracted, must be discarded; and a s.132(4) statement is not by itself incriminating material, that being what Harjeev Aggarwal had explained (paras 36 to 38). On the merits of the s.68 additions the Court did not reason afresh. It set out the Tribunal's paragraphs 38, 45, 46 and 48 — the absence of any cash deposit in the share applicants' bank accounts before the cheques issued, the Assessing Officer's own remand verification with the applicants' banks producing no adverse finding, the self-declaration of the applicant company's director, the share application form, the confirmation on the company's letterhead with cheque numbers and PAN, the certificate of incorporation and the applicant's return, and the officer's failure to summon the director or verify against the income tax record — and held only that it was not persuaded that these findings were perverse and that the order suffered from no legal infirmity (paras 40 to 43). In the words reproduced by the source cited on this page: "statements recorded under Section 132 (4) of the Act do not by themselves constitute incriminating material as has been explained by this Court in Harjeev Aggarwal" The decision followed or applied CIT v. Harjeev Aggarwal [2016] 70 taxmann.com 95 / 241 Taxman 199 (Delhi); CIT v. Kabul Chawla [2015] 61 taxmann.com 412 / 234 Taxman 300 / [2016] 380 ITR 573 (Delhi); Pr. CIT v. Meeta Gutgutia [2017] 395 ITR 526 / 82 taxmann.com 287 (Delhi); Smt. Dayawanti Gupta v. CIT [2017] 390 ITR 496 / 245 Taxman 293 (Delhi) — distinguished on the facts.
It was decided by the High Court on 2017-08-01 and is reported as [2017] 84 taxmann.com 287 (Delhi) / [2017] 397 ITR 82 (Delhi); IT Appeal Nos. 11 to 22 of 2017. 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 68, section 132, section 132(4), section 153A, section 260A, 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 Revenue's appeals were dismissed. On jurisdiction: the surrender of Rs 8 crores by Anu Aggarwal was for the assessment year in question only and not for each of the six years preceding the search, and the documents A-1, A-4 and A-11 were explained as accounted for, so neither could be incriminating material qua each of the preceding years (para 36). A copy of Goyal's s.132(4) statement was never given to the assessees and he was never offered for cross-examination; the Assessing Officer's own remand report showed his attempts to produce Goyal had failed; the onus of producing him lay on the Revenue and could not be shifted to assessees who said they did not know him; and apart from his retraction, the failure to produce him for cross-examination is by itself sufficient to discard his statement (para 37). Statements recorded under s.132(4) do not by themselves constitute incriminating material, as explained in Harjeev Aggarwal (para 38). Dayawanti Gupta was distinguished, there being no admission of a failure to maintain accounts and no finding of habitual clandestine operations here (para 38). The Tribunal was therefore fully justified in holding the assumption of jurisdiction under s.153A unjustified (para 39). On the s.68 additions for three of the years, the Court held that it was not persuaded that the Tribunal's finding suffered from any perversity (para 41), and that with the assessees having discharged the burden of explaining the credits the Tribunal's order suffered from no legal infirmity warranting interference (para 43). It arises in Search, Survey & Block Assessment, Evidence & Burden of Proof and Cash Credits & Unexplained Money matters, on section 68, section 132, section 132(4), section 153A, section 260A of the Income Tax Act 1961, and was decided by Delhi High Court — S. Muralidhar J and Prathiba M. Singh 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. Demand a copy of the statement relied on and apply for the deponent to be produced, then record that the Revenue did not produce him rather than attempting to produce him yourself. Ask the officer to identify the incriminating material year by year, since each assessment year has to be examined separately. Put PAN details, confirmations and banking records on file so the s.68 addition also fails on identity, genuineness and creditworthiness.
Under appeal, and the appeal has not been decided. The Supreme Court granted leave against this judgment on 14 May 2018 in Pr. CIT v. Best Infrastructure (India) (P.) Ltd. [2018] 94 taxmann.com 115 / [2018] 256 Taxman 63 (SC), SLP (Civil) Diary No. 14821 of 2018, and directed the appeal to be tagged with SLP(C) No. 12126 of 2018. Leave granted means the appeal is pending, not that the judgment has been disturbed, and no stay is recorded, so the decision stands. The rule it applies — no addition in a completed assessment without incriminating material referable to that year — was affirmed by the Supreme Court in Pr. CIT v. Abhisar Buildwell (P.) Ltd. [2023] 149 taxmann.com 399 / 293 Taxman 141 / 454 ITR 212 (SC). Whether the tagged appeal against this judgment was disposed of with that batch was not established. Correction to the regime statement elsewhere in this entry: the s.153A and s.153C regime does not run to 31 August 2024. Date scope: by the closing limb of s.153A(1) that section reaches only a search initiated, or a requisition made, after 31 May 2003 and on or before 31 March 2021, and s.153C is excluded by its own sub-section (3) from any search initiated on or after 1 April 2021, so this entry is authority on the s.153A and s.153C regime and on nothing else — a search initiated between 1 April 2021 and 31 August 2024 is a reassessment under ss.147 to 151 as they stood immediately before the Finance (No. 2) Act 2024, by force of s.152(3), and a search initiated on or after 1 September 2024 falls under the substituted Chapter XIV-B. The incriminating-material requirement worked out in this line rests on the words of s.153A and s.153C, which spoke only of assessing or reassessing total income and carried no material limb of their own; s.158BB(2) of the substituted Chapter has its own and considerably wider undisclosed-income limb, and whether the same requirement holds under it has not been decided, so the point should not be assumed either way for a block assessment. 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.
Both questions the entry recorded as unresolved are now settled. The citation is [2017] 84 taxmann.com 287 / [2017] 397 ITR 82 (Delhi), ITA Nos. 11 to 22 of 2017. And the search on 15 September 2008 was of both Tarun Goyal and the Best Group of Companies (para 4), so the question of whose premises were searched does not arise. What does need care is that the Supreme Court granted leave against this judgment on 14 May 2018 and tagged the appeal with SLP(C) No. 12126 of 2018 — check its present status. Cite the case for the jurisdictional holdings at paras 36 to 39: a surrender confined to one assessment year is not incriminating material for the others, and a s.132(4) statement whose maker is not produced for cross-examination and who has retracted must be discarded, the onus of producing him being the Revenue's. The detailed findings about share application forms, confirmations and bank statements are the Tribunal's, reproduced at paras 40 to 42 and upheld only on the ground that they were not perverse. Whether the civil appeal for which the Supreme Court granted leave on 14 May 2018, tagged with SLP(C) No. 12126 of 2018, has since been disposed of — and if so on what terms — was not established. 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 Revenue's appeals were dismissed. On jurisdiction: the surrender of Rs 8 crores by Anu Aggarwal was for the assessment year in question only and not for each of the six years preceding the search, and the documents A-1, A-4 and A-11 were explained as accounted for, so neither could be incriminating material qua each of the preceding years (para 36). A copy of Goyal's s.132(4) statement was never given to the assessees and he was never offered for cross-examination; the Assessing Officer's own remand report showed his attempts to produce Goyal had failed; the onus of producing him lay on the Revenue and could not be shifted to assessees who said they did not know him; and apart from his retraction, the failure to produce him for cross-examination is by itself sufficient to discard his statement (para 37). Statements recorded under s.132(4) do not by themselves constitute incriminating material, as explained in Harjeev Aggarwal (para 38). Dayawanti Gupta was distinguished, there being no admission of a failure to maintain accounts and no finding of habitual clandestine operations here (para 38). The Tribunal was therefore fully justified in holding the assumption of jurisdiction under s.153A unjustified (para 39). On the s.68 additions for three of the years, the Court held that it was not persuaded that the Tribunal's finding suffered from any perversity (para 41), and that with the assessees having discharged the burden of explaining the credits the Tribunal's order suffered from no legal infirmity warranting interference (para 43).
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