Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Searching Case Laws & Precedent on Legal Query.....!
Analysing the retrieved Case Laws
Scanned Judgements…!
Statement under Section 132(4) of the Income Tax Act cannot be solely relied upon for making additions against the assessee, especially when it is a third-party statement ["DEEPAK KAKUBHAI MEHTA MUMBAI vs DCIT CENTRAL CIRCLE - 4(1) MUMBAI - Income Tax Appellate Tribunal"].
Such statements are deemed to have evidentiary value but are not conclusive on their own; they require corroboration from independent evidence to justify any adverse inference or addition ["DEEPAK KAKUBHAI MEHTA MUMBAI vs DCIT CENTRAL CIRCLE - 4(1) MUMBAI - Income Tax Appellate Tribunal"], ["ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 TRICHY INCOME TAX OFFICE TRICHY vs MARAGATHAMANI SHANMUGAM KARUR - Income Tax Appellate Tribunal"], ["ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 TRICHY INCOME TAX OFFICE TRICHY vs LIFE LINE AUTO FINANCE KARUR - Income Tax Appellate Tribunal"].
Courts have consistently held that statements recorded under Section 132(4) from third parties cannot be used as standalone evidence for making assessments or additions; they must be supported by other corroborative material ["ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 TRICHY INCOME TAX OFFICE TRICHY vs MARAGATHAMANI SHANMUGAM KARUR - Income Tax Appellate Tribunal"], ["ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 TRICHY INCOME TAX OFFICE TRICHY vs LIFE LINE AUTO FINANCE KARUR - Income Tax Appellate Tribunal"], ["DCIT CENTRAL CIRCLE-1 AURANGABAD AURANGABAD vs SMT. ASHA BHAGWANRAO KADAM PUNE - Income Tax Appellate Tribunal"].
The retraction of such statements by third parties does not automatically nullify their evidentiary value but emphasizes the need for corroboration ["ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2 TRICHY INCOME TAX OFFICE TRICHY vs LIFE LINE AUTO FINANCE KARUR - Income Tax Appellate Tribunal"].
Documents or loose sheets found at third-party premises, or third-party statements, cannot form the basis for additions unless linked with concrete evidence establishing the connection with the assessee ["DEEPAK KAKUBHAI MEHTA MUMBAI vs DCIT CENTRAL CIRCLE - 4(1) MUMBAI - Income Tax Appellate Tribunal"], ["DCIT CENTRAL CIRCLE-1 AURANGABAD AURANGABAD vs SMT. ASHA BHAGWANRAO KADAM PUNE - Income Tax Appellate Tribunal"], ["Revenue vs Jayant Hiralal Shah - Income Tax Appellate Tribunal"].
The law clearly states that the contents of third-party seized material or statements do not automatically presume the truth or establish the assessee's liability without independent evidence ["DCIT CENTRAL CIRCLE-4(3) KOLKATA KOLKATA vs SURESH KUMAR BANTHIA KOLKATA - Income Tax Appellate Tribunal"], ["DEEPAK KAKUBHAI MEHTA MUMBAI vs DCIT CENTRAL CIRCLE - 4(1) MUMBAI - Income Tax Appellate Tribunal"].
Analysis and Conclusion:The overarching legal principle from the cited judgments is that statements under Section 132(4) of the Income Tax Act, particularly from third parties, cannot be used as the sole basis for making additions or holding against the assessee. Such statements are considered to have evidentiary value but require corroboration. Without supporting evidence linking the material or statement to the assessee, any addition based solely on third-party statements or seized documents is unsustainable. This aligns with established case law, emphasizing that third-party statements and documents found at third-party premises cannot be automatically held against the assessee.
In the high-stakes world of Income Tax searches and seizures, statements recorded under Section 132(4) of the Income Tax Act, 1961, often play a pivotal role. But what happens when such a statement comes from a third party? Can it be automatically used to incriminate the assessee? This question—statement under 132(4) of third party cannot be held against the assessee—arises frequently in tax litigation and deserves a nuanced exploration.
Taxpayers facing raids worry about the weight given to these statements, especially if coercion or retraction is involved. This post breaks down the legal principles, judicial precedents, and practical insights to help you navigate this complex area. Note: This is general information based on judicial trends and not specific legal advice. Consult a tax professional for your case.
Section 132 empowers tax authorities to conduct searches and seizures during investigations into suspected tax evasion. Under Section 132(4), officers can examine any person on oath and record their statement, which is statutorily deemed to have evidentiary value in assessment proceedings PCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631.
These statements are admissible as evidence but are not conclusive. Their reliability hinges on factors like voluntariness, context of recording, and the assessee's subsequent actions Manmohansingh Vig VS Deputy Commissioner of Income-tax, Circle 1(1) - Income Tax Appellate Tribunal (2005).
Statements under Section 132(4) carry significant weight because they are recorded under oath during search operations. Courts have consistently held that they form a strong basis for assessments if made voluntarilyPCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631.
However, this value is not absolute:- Voluntary statements are generally binding and can support additions to income.- Involuntary ones, obtained through coercion, threat, or duress, lose credibility.
As noted in judicial analysis, statements recorded voluntarily, without coercion or threat, are binding and can form the basis of assessments PCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631.
The core issue is whether a third-party statement under Section 132(4) can be held against the assessee. Generally, such statements cannot be automatically used without corroborative evidence linking them directly to the assessee.
Key principles include:- Material from a third party's premises may trigger proceedings under Section 153C against that party, but it requires satisfaction that it belongs to the assessee M/S JAYANNA COMBINES vs DEPUTY COMMISSIONER OF INCOME TAX - 2025 Supreme(Online)(Kar) 36139SRI. SACHIN NARAYAN vs THE ASSISTANT COMMISSIONER OF INCOME TAX - 2025 Supreme(Online)(Kar) 442511.- Mere denial by the third party or lack of direct implication weakens its use: Merely because the assessee was a distant relative of Shri NRV could not be reason enough to allege that, he was receiving payments on his behalf, particularly when, he had denied having any such transactions in his statement recorded u/s 132(4) DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(4) CHENNAI CHENNAI vs RAJAMANI GOBINATH DINDIGUL - 2026 Supreme(Online)(ITAT) 1199.- Third-party statements alone, without incriminating the assessee, cannot sustain additions: AR further argued that even in the statement recorded, the parties have not stated anything pertaining to the assessee and therefore the addition made merely based on third party statement cannot be sustained EVERYEADY SPINNING MILLS PRIVATE LIMITED TRIUPUR vs ACIT CENTRAL CRICLE 3 COIMBATORE COIMBATORE - 2026 Supreme(Online)(ITAT) 194.
In one case, Further, third party statements also cannot be pressed into service as against the assessee Karti P. Chidambaram VS Deputy Director of Income Tax (Investigation), Nungambakkam - 2020 Supreme(Mad) 1280. This underscores that third-party evidence needs strong corroboration.
Even if a statement implicates the assessee, it may not hold if proven involuntary. Courts emphasize:- Burden on assessee to prove coercion; mere allegation isn't enough Manmohansingh Vig VS Deputy Commissioner of Income-tax, Circle 1(1) - Income Tax Appellate Tribunal (2005).- Retraction doesn't automatically nullify the statement unless backed by evidence of duress. The retraction of statement made u/s 132(4) cannot alter the fact as the statement was recorded out of free will and no coercion was involved DEPUTY COMMISSIONER OF INCOME TAX DELHI vs GAURAV DALMIA DELHI - 2026 Supreme(Online)(ITAT) 1664.
Judicial views reinforce this:- Statements have great evidentiary value and it cannot be retracted at the mere will of the party Commissioner of Income Tax v. C. Abdul Razak - 2012 Supreme(Online)(Ker) 38196Power Control Corporation VS C. C. E. & S. T. Jaipur-I - 2018 Supreme(Raj) 1565Pr. Commissioner of Income Tax (Central), Jaipur VS Roshan Lal Sancheti - 2018 Supreme(Raj) 1503Bannalal Jat Constructions Pvt. Ltd. VS Acit, Central Circle-2, Ajmer - 2018 Supreme(Raj) 2299.- Retraction after a delay, especially during assessments, is scrutinized: retraction, is almost after an year and that too when the assessment proceedings were being taken up Power Control Corporation VS C. C. E. & S. T. Jaipur-I - 2018 Supreme(Raj) 1565.- Bald retractions without proof fail: Burden lay on the assessee to show that the admission made by him in statement earlier at the time of survey was wrong. Such retraction, however, should be supported by a strong evidence Bannalal Jat Constructions Pvt. Ltd. VS Acit, Central Circle-2, Ajmer - 2018 Supreme(Raj) 2299.
In cases of alleged duress, like in Sashi Jena v. Khadal Swain, statements under duress are not conclusive Manmohansingh Vig VS Deputy Commissioner of Income-tax, Circle 1(1) - Income Tax Appellate Tribunal (2005).
Courts have clarified these nuances:- Hiralal Maganlal & Co. v. Dy. CIT: Voluntary statements bind, but coercion negates them PCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631.- Surjit Singh Chhabra v. Union of India: Retraction requires proof of involuntariness Manmohansingh Vig VS Deputy Commissioner of Income-tax, Circle 1(1) - Income Tax Appellate Tribunal (2005).
Additional insights from sources:- Reliance on retracted statements is untenable if statutory value exists: The reliance placed by the Tribunal on the retraction statement is totally untenable in so far as any statement recorded under S.132(4), statutorily deemed to have evidentiary value; cannot be retracted at the mere will of the party Commissioner of Income Tax v. C. Abdul Razak - 2012 Supreme(Online)(Ker) 38196.- In capital gains cases, third-party statements plus documents were insufficient without proof: the incriminating documents, statements, and valuation report were not sufficient to prove the receipt of on-money Commissioner Of Income Tax VS Prabhati Lal Saini - 2017 Supreme(Raj) 2794.
These rulings show courts examine circumstances of recording and subsequent conduct.
While third-party statements aren't automatically binding, exceptions apply:- If the department proves voluntariness and corroboration, they can support assessments DEPUTY COMMISSIONER OF INCOME TAX DELHI vs GAURAV DALMIA DELHI - 2026 Supreme(Online)(ITAT) 1664.- Incriminating material belonging to the assessee found at third-party premises may invoke Section 153C M/S JAYANNA COMBINES vs DEPUTY COMMISSIONER OF INCOME TAX - 2025 Supreme(Online)(Kar) 36139.- Delayed retractions without evidence strengthen the original statement Pr. Commissioner of Income Tax (Central), Jaipur VS Roshan Lal Sancheti - 2018 Supreme(Raj) 1503.
To protect your interests:- Document coercion immediately—affidavits, witness statements.- File timely retraction with supporting evidence, not belatedly.- Challenge admissibility in appeals, highlighting lack of direct link for third-party statements.- Seek legal aid during searches to ensure voluntariness.
Authorities must prove voluntary nature before reliance PCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631.
Stay informed on tax raids to safeguard your rights. For personalized guidance, consult a chartered accountant or tax lawyer.
References:- PCIT (central) VS Anand Kumar Jain (HUF) - 2021 0 Supreme(Del) 1631, Manmohansingh Vig VS Deputy Commissioner of Income-tax, Circle 1(1) - Income Tax Appellate Tribunal (2005), Commissioner of Income Tax v. C. Abdul Razak - 2012 Supreme(Online)(Ker) 38196, DEPUTY COMMISSIONER OF INCOME TAX DELHI vs GAURAV DALMIA DELHI - 2026 Supreme(Online)(ITAT) 1664, M/S JAYANNA COMBINES vs DEPUTY COMMISSIONER OF INCOME TAX - 2025 Supreme(Online)(Kar) 36139, SRI. SACHIN NARAYAN vs THE ASSISTANT COMMISSIONER OF INCOME TAX - 2025 Supreme(Online)(Kar) 442511, DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(4) CHENNAI CHENNAI vs RAJAMANI GOBINATH DINDIGUL - 2026 Supreme(Online)(ITAT) 1199, EVERYEADY SPINNING MILLS PRIVATE LIMITED TRIUPUR vs ACIT CENTRAL CRICLE 3 COIMBATORE COIMBATORE - 2026 Supreme(Online)(ITAT) 194, Karti P. Chidambaram VS Deputy Director of Income Tax (Investigation), Nungambakkam - 2020 Supreme(Mad) 1280, Power Control Corporation VS C. C. E. & S. T. Jaipur-I - 2018 Supreme(Raj) 1565, Pr. Commissioner of Income Tax (Central), Jaipur VS Roshan Lal Sancheti - 2018 Supreme(Raj) 1503, Bannalal Jat Constructions Pvt. Ltd. VS Acit, Central Circle-2, Ajmer - 2018 Supreme(Raj) 2299, Commissioner Of Income Tax VS Prabhati Lal Saini - 2017 Supreme(Raj) 2794.
#IncomeTax #Section132 #TaxLaw
Anand Kumar Jain (HUF) in ITA No.23/2021 and other appeals vide judgment and order dated 12/02/2021 had held that statement u/s.132(4) does not construe incriminating material for carrying out the assessment u/s.153A of the Act and statement cannot justify the additions made by the ld. AO. ... However, except the seized material and the statements recorded u/s. 132(4) of the Act from some third-party individuals, ....
The reliance placed by the Tribunal on the retraction statement is totally untenable in so far as any statement recorded under S.132(4), statutorily deemed to have evidentiary value; cannot be retracted at the mere will of the party. ... The Tribunal's finding that the statement recorded under S.132(4) has no evidentiary value, hence cannot be sustained. ... of the statement under S.132#....
Saveeta Institute of Medical and Technical Sciences [2012] 25 taxmann.com 138 (Chennai -Trib) has held that addition made on the basis of the sworn statement recorded u/s 132(4) of the Act cannot be sustainable and further held that the admission made u/s 132(4) by the Special Officer of the College ... Even otherwise, it is well settled that statement of a third party cannot, by....
Saveeta Institute of Medical and Technical Sciences [2012] 25 taxmann.com 138 (Chennai -Trib) has held that addition made on the basis of the sworn statement recorded u/s 132(4) of the Act cannot be sustainable and further held that the admission made u/s 132(4) by the Special Officer of the College ... on-money was paid except the loose sheet found in the premise of a third party and admission made by the #HL_STAR....
Further, the material found from the premise of third party cannot be used in the proceeding u/s 153A of the Income Tax Act. ... The retraction of statement made u/s 132(4) cannot alter the fact as the statement was recorded out of free will and no coercion was involved. 17. We have heard the rival submissions and have perused the relevant material on record. ... In the case of CIT V Harjeev Agarwal in ITA/8/2004 dated 10.03.2016 the hon’ble Delhi Hi....
in the Act separately for seized documents found of any person in a third-party search action. ... Apart from that the AO has also relied on the statement made by Praveen Kasera and Jai Bhagwan Sanwaria recorded u/s 132(4) of the Act in search operation conducted in the case of the brokers i.e., Sanweria and Kasera. ... Apart from that the AO has also relied on the statement made by Praveen Kasera and Jai Bhagwan Sanwaria recorded u/s 132(4) of the A....
On receipt of the aforesaid material, the Assessing Officer having jurisdiction over such third party would proceed against the said third party. ... having jurisdiction over such third party would issue notice under Section 153C. ... Materials such as books of account, documents or valuable assets found during a search should belong to a third party which would lead to an inference of undisclosed income of such third part....
On receipt of the aforesaid material, the Assessing Officer having jurisdiction over such third party would proceed against the said third party. ... having jurisdiction over such third party would issue notice under Section 153C. ... Materials such as books of account, documents or valuable assets found during a search should belong to a third party which would lead to an inference of undisclosed income of such third part....
It was brought to our notice that, Shri CPA, in his statement u/s 132(4) of the Act had admitted that, these account books related to his real estate and finance commission business. ... Merely because the assessee was a distant relative of Shri NRV could not be reason enough to allege that, he was receiving payments on his behalf, particularly when, he had denied having any such transactions in his statement recorded u/s 132(4) of the Act, which has remained unrebutt....
AR further argued that even in the statement recorded, the parties have not stated anything pertaining to the assessee and therefore the addition made merely based on third party statement cannot be sustained. The ld. ... Ltd. has deposed in statement recorded u/s. 132(4) of the Act that these purchase transactions are bogus. Since, the assessee has entered into sales transactions with the said company to the tune ....
Further, third party statements also cannot be pressed into service as against the assessee. Assessees never incriminated themselves in the statement recorded by the Department. The so called print outs allegedly taken from the cloned copies are not admissible. Further, electronic records are not admissible without the originals being produced by the owners.
Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. One has to come to a definite finding as to the manner in which retraction takes place. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. In our view, the statements recorded under Section 132(4) have great evidentiary value and it c....
On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. One has to come to a definite finding as to the manner in which retraction takes place. Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. In our view, the statements recorded under Section 132(4) have great evidentiary value and it c....
One has to come to a definite finding as to the manner in which retraction takes place. Statements recorded under Section 132(4) cannot be discarded by simply observing that the assessee retracted the statements. On perusal of the facts noticed hereinbefore, we have noticed that while the statements were recorded at the time of search on 9.11.1995 and onwards but retraction, is almost after an year and that too when the assessment proceedings were being taken up in November 1996. In our view, the statements recorded under Section 132(4) have great evidentiary value and it c....
So, two yardsticks cannot be applied to the same transactions. Now let us examine the nature of incriminating evidence found during the search. During the search, certain incriminating documents were found from the residential premises of the assessee suggesting that on-money in cash was received by the assessee. Secondly, the statement recorded under section 132 (4) is not of the assessee and is of the third person.
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