Whether retraction of statement, without discrediting corroborative evidence, is insufficient to nullify additions under Sections 69A and 69C?
Chhattisgarh High Court dated April 3, 2025, in the case of Assistant Commissioner of Income Tax Circle 2(1), Raipur versus Shri B.L. Agrawal
(TAXC Nos. 105, 109, 110, 111 of 2017) holds significant implications regarding additions under Sections 69A and 69C of the Income Tax Act, 1961,
Let us have a Short Overview of the case:
Facts of the Case:
• The respondent/assessee, Shri B.L. Agrawal, filed a return of income declaring Rs. 3,88,460/-.
• The Assessing Officer (AO), based on search operations under section 132 of the Income Tax Act, made a substantial addition of Rs. 5,41,12,406/- under Sections 69A and 69C, alleging unaccounted income and unexplained expenditure.
• The additions were primarily based on:
• Statements of key individuals involved in the scheme,
• A handwriting expert report identifying the assessee’s handwriting on incriminating documents,
• Discovery of a massive money laundering network using shell companies and cash deposits by villagers.
• CIT(A), vide order dated 31.05.2012, partially allowed the appeal by deleting major additions.
• The ITAT, Raipur Bench, dismissed the Department’s appeal on 09.01.2017, upholding the deletion on the basis that the principal witness, CA Shri Sunil Kumar Agrawal, had retracted his statement via affidavit, alleging coercion.
Key Legal Issues:
1. Whether the CIT(A) and ITAT erred in ignoring material and corroborative evidence that linked the assessee with large-scale money laundering and unaccounted income?
2. Whether retraction of a statement alone, without adequately addressing corroborative evidence, can form the basis for deleting additions made under Sections 69A and 69C?
Arguments by Revenue:
• The assessee, along with associates, orchestrated a scheme to convert black money into white through shell companies and routing funds via villagers from Kharora.
• Over 230 bank accounts were opened, and funds were eventually transferred to M/s Prime Ispat Limited, a company promoted by the assessee.
• The CIT(A) and ITAT ignored statements of Shri Vimal Agrawal and Shri Vinod Agrawal (Directors of the shell entities), who admitted acting under instructions from the assessee and his family.
• Retraction by CA Sunil Kumar Agrawal was not credible, especially in light of overwhelming supporting evidence.
• CBI, ED and EOW had registered separate cases relating to these very transactions.
High Court Findings:
• The Tribunal and CIT(A) erred in ignoring crucial statements and materials discovered during the search.
• The retraction by one individual (CA) does not nullify other direct and corroborative evidence, including:
• Expert report proving the assessee’s handwriting,
• Admissions by accomplices,
• Documentary trails of fund movements and structured transactions.
The copy of the order is as under:
