S. 143(3)153A Addition made solely on the basis of a disclosure and without any incriminating material is not sustainable if facts show that disclosure was under duress

Pursuant to a search and seizure operation u/s 132, the assessee made a disclosure of unaccounted income of Rs. 20 crore. He later claimed that the disclosure was not voluntary but was because the assessee was under tremendous pressure and harassment in the form of repeated search action, survey and freezing of assets. It was also claimed that no incriminating material was found during the search. It was also claimed that the disclosure was "pro tem", meaning tentative and subject to correction. The AO & CIT(A) rejected the claim. On appeal by the assessee to the Tribunal HELD allowing the appeal:

(i)           Whether the disclosure was voluntary or given under coercive circumstances.

Conclusion: The contentions raised by ld. Counsel for the assessee lead to a clear inference that the disclosure of the assessee cannot be regarded as voluntary. The pressure of restrained DDs. of 31.48 crs. against a disclosure tax liability of about 7 crs is palpable. It has the propensity to derail the business and creating enough pressure for businessmen to somehow avoid the pressure. Besides the chronology of events and attendant circumstances do not convince us that this summary disclosure was voluntary and on the scale of merit it can override the other facts. Consequently we have no hesitation in holding that the solely relied disclosure was involuntary. In these circumstances the desirability of additions is to be judged on other facts and circumstances. Reliance is placed on Hon'ble Rajasthan High Court in the case of CIT v. Ashok Kumar Soni 291 ITR 172 for the proposition that admission in statement during search proceedings is not conclusive proof. Besides Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co.vs. State of Kerala 91 ITR 18 has also held so that such statement can be explained in the light of correct facts.

(ii)          Whether in the light of CBDT instruction dtd 10-03-2003, search proceedings and assessment can be based incriminating material and not on such disclosures.

Conclusion: A perusal of the CBDT instruction reveals that even Board is aware of such laconic disclosures and expects its officers to rely on incriminating evidence. Thus CBDT also is not in favor of search assessments being based only on such disclosures; it wants them to be based on incriminating material. In view the facts, circumstances, CBDT instruction and various case laws relied on by the assessee we are unable to uphold the additions solely on the basis of disclosure which doesn't meet the eye and have been held by us to involuntary.

(iii)        Whether the additions are based on any incriminating material discovered as a result of search in terms of sc. 153A.

Conclusion: There is no reference to impugned additions being based on any worthwhile incriminating material or evidence except raising some suspicions. The sole basis of additions in both cases is proposed to be the disclosure. Consequently the additions made are not as a result of any material found during the course of search, in view thereof impugned additions cannot be sustained as they do not conform to mandate of sec. 153A.

(iv)        Whether the assessees furnished proper explanation about the bank a/c and and transactions.

Conclusion: As the facts emerge the Corporation bank a/c belonged to Raghubir, the proceeds deposited therein came to him through banking channel on account of agreement to sell his share in ancestral land to G P Realtors not connected to assessees….. As the final disclosure remained at 20 crs., assesses to avoid the harassment agreed for its inclusion as it did not take the tax liability any further. Apropos departments contention that why assesses did not tell this in first blush assessee has demonstrated that they requested for some time to verify from parties who cooperated. The affidavits, bank certificates, documents relating to G P Realtors including compromise deed all corroborate the assesses contentions. Therefore no adverse inference or addition can be drawn against assesses in this behalf.

(v)         Whether on merits the impugned additions can be made in a search assessment u/s 153A which is meant for assessment of undisclosed income consequent to search proceedings.

Conclusion: By detailed observations we have held that neither any worthwhile incriminating material, information, and evidence was discovered as a result of impugned multiple search operations nor the additions sustained are based on any such material. The sole basis of additions is the disclosure which we have held to be involuntary. Consequently the additions do not conform to the mandate of sec. 153A.