ITAT Delhi Upholds Deletion Of ₹10.5 Crore Addition Based On Retracted Statement In Oppo Search Case

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 17 April upheld the deletion of a Rs. 10.5 crore addition made solely on the basis of a retracted statement recorded during search proceedings, holding that such statements, in the absence of corroborative evidence, cannot by themselves sustain an addition under the Income-tax Act.

A Bench comprising Judicial Member Anubhav Sharma and Accountant Member Manish Agarwal dismissed the Revenue's appeal and affirmed the order of the Commissioner of Income Tax (Appeals), which had deleted the addition in a case arising from a search conducted in the Oppo Mobile India Group. It held:

“....a declaration or disclosure made by the person is binding unless it is rebutted by the person by furnishing valid evidences...."

The case arose from a search conducted on 21 December 2021 under Section 132 in the Oppo Mobile India Group, during which authorities also searched the taxpayer, an employee working as Director (Finance).

During the search, officials recorded his statement under Section 132(4), wherein he allegedly admitted to receiving Rs. 10.5 crore in cash as commission linked to GST refunds and further stated that he used the amount for purchasing jewellery and depositing funds in bank accounts of family members.

The taxpayer retracted the statement within a short period, contending that he made the admission under mental and physical stress during prolonged search proceedings. He also relied on medical records to support his claim of ill health and coercion at the time of recording the statement.

Despite this, the Assessing Officer proceeded to make an addition of Rs. 10.5 crore under Section 69A solely on the basis of the statement, without bringing any independent material on record to establish the alleged receipt or its utilisation.

Before the CIT(A), the taxpayer argued that the search did not yield any incriminating material such as cash, jewellery, or unexplained bank deposits to corroborate the alleged admission. The CIT(A) accepted this contention and deleted the addition, holding that a statement under Section 132(4), in the absence of supporting evidence, does not carry independent evidentiary value.

On appeal, the Revenue contended that the admission made during the search was categorical and binding, and that the subsequent retraction was an afterthought without evidentiary support.

The Tribunal rejected the Revenue's submissions and held that no material evidence, apart from the retracted statement, existed to indicate receipt or utilisation of Rs. 10.5 crore. It noted that the search did not result in recovery of any jewellery corresponding to the alleged investment, nor did it reveal any unexplained bank deposits. The Bench observed that:

“......no incriminating material was found/ seized evidencing any such income or application / utilization of such income as was admitted into the statements which further proves that these statements were recorded on dotted lines. Thus, the appellant retracted the statement recorded u/s 132(4) of the Act showing the admission made therein by him was incorrect......."

The Tribunal further relied on CBDT Instruction No. 286/2/2003-IT(Inv), dated 10 March 2003, which directs field officers to base additions on evidence gathered during search proceedings and discourages reliance on mere surrender statements.

It also noted that the search team did not collect any incriminating material either during the search or thereafter, including at the assessment stage under Section 143(3), and that the addition rested entirely on the alleged admission recorded under Section 132(4).

Accordingly, the ITAT upheld the CIT(A)'s order deleting the addition and dismissed the Revenue's appeal.

For Appellant: Pooja Swaroop, CIT DR

For Respondent: Gaurav Jain, Advocate & Tarun Chanana, Advocate