Undisclosed income cannot be computed solely on the basis of the statement made during the search: Delhi HC
The Delhi High Court in a recent judgment dated 29.05.2024 in the case of Pavitra Realcon Private Limited in ITA 579/2018 has held that the undisclosed income cannot be computed solely on the basis of the statement made during the search. It has been held that the statement constitutes information only if it relates to evidence or material found during the search and only then it can be used for making an addition. A statement alone, without any other material discovered during the search which would corroborate the statement, doesn’t grant any authority to the assessing officer to make an addition.
In this case, the assessee company had received Rs. 325.23 Crores as advance against property from Jain Group of Companies ( owned by Mr. S. K. Jain and Mr. V. K. Jain ) who were stated to have provided accommodation entries to the assessee company. The Directors of the assessee company, when confronted with this information during the course of the search, were not in a position to explain the amount received by the company as an advance against property and in fact made a voluntary disclosure of Rs. 325.23 Crores as unaccounted income for the assessment year under consideration. Despite these facts, the Court held that during the search, no incriminating material was found from the assessee’s premises and the assessing officer has made the addition only on the basis of the statement of Directors of assessee recorded under section 132(4). The Court has upheld the deletion of the addition and held that though the statement recorded under section 132(4) has better evidentiary value, however , it is also a settled law that an addition cannot be sustained merely on the basis of the statement.
The Copy of the judgment is as under:
