A statement recorded during the course of search cannot be considered an incriminating material in order to make addition in an unabated assessment year

 

Addition on the basis of statement during search is a matter of litigation and debate. There is one interesting case before Mumbai ITAT wherein it has been held that statement recorded during the course of search cannot be considered an incriminating material in order to make addition in an unabated assessment year

The case is as under:

DCIT vs. Man Global Ltd – Mumbai Tribunal – ITA No. 7440/Mum/2019 –Order dated 25-11-2021

 

Short Overview of the case:

The assessee filed the return of income on 30.09.2011 declaring total income of Rs.1,34,37,790/-.

The Assessee is engaged in the Real Estate Business. The assessee has developed two projects called MAN Opus and Shanti Sadan. A search under section  132 of the Act was conducted in case of the Man Group of Companies including the assessee on 10.12.2014.

During the course of recording of statement u/s 132(4) of the Act Shri Ramesh Mansukhani Director of Man Group has in principle agreed that the purchases from Karma Ispat were unsubstantiated.

 Notice u/s 153A was issued to the assessee on 25.01.2016 which was complied with filing of return of income on 16.06.2016 declaring same income as was declared in the return of income filed originally.

Thereafter statutory notices were issued and duly served upon the assessee. Finally, the assessment under section 143(3) r.w.s. 153A of the Act was framed vide order dated 26.12.2016 at a total income of Rs.3,68,63,798/- by making additions under section 14A of the Act of Rs.23,03,070/- and on account of bogus purchases from M/s. Karma Ispat Ltd. 2,11,22,938/-.

Aggrieved assessee challenged the assessment order before the Ld. CIT(A) on jurisdictional issue as well as on merit which was dismissed. Thus, assessee approached Tribunal.

Tribunal noted that during the course of search no incriminating material in the form of books of accounts/documents or any unexplained money, bullion, jewellery or any other valuable asset was found pertaining to the assessment year under consideration.

It also observed that the assessment year under consideration has attained finality on the date of search as there was no pending assessment on the date of search i.e. the assessment has not abated for the purpose of section 153A of the Act. Tribunal held that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year.

 Finally, it held that except the statement recorded u/s 132(4) of the Act of director of Karma Ispat Ltd as well as Director of Man Group of Industries there was no incriminating materials which was seized during search and hence, deleted entire additions.