2007 (7) TMI 182 - HC - Income Tax

Statements under section 133A during survey are not conclusive evidence of income; partner's offer insufficient without independent proof

COMMISSIONER OF INCOME-TAX Versus S. KHADAR KHAN SONS

HC dismissed the appeal, holding that statements recorded during a survey under section 133A do not constitute conclusive evidence of income. A partner's ... Evidentiary value of statements made during a survey under Section 133A - conclusive piece of evidence - Survey at firm & one of the partners of the firm u/s 133A - difference between search u/s 133A & search u/s 132(4) - HELD THAT:- In the instant case, there was a survey operation conducted under Section 133A of the Act in the assessee's premises and a statement was recorded from one of the partner. Assuming there were discrepancies and irregularities in the books of accounts maintained by the assessee, an offer of additional income for the respective assessment years was made by the parnter of the firm. But, such statement, in view of the scope and ambit of the materials collected during the course of survey action under Section 133A shall not have any evidentiary value, as rightly held by the Commissioner and the Tribunal, since such statement was not attached to the provisions of Section 133A of the Act. It could not be said solely on the basis of the statement given by one of the partner of the assessee-firm that the disclosed income was assessable as lawful income of the assessee. Since there was no material on record to prove the existence of such disclosed income or earning of such income in the hands of the assessee, it could not be said that the Revenue had lost lawful tax payable by the assessee. A power to examine a person on oath is specifically conferred on the authorities only under Section 132(4) of the Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, has expressly provided for it, whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement recorded under section 133A of the Act is not given an evidentiary value, vide a decision of the Kerala High Court in Paul Mathews and Sons v. Commissioner of Income-tax [2003 (2) TMI 25 - KERALA HIGH COURT]. An admission is extremely an important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of accounts do not correctly disclose the correct state of facts, vide decision of the Apex Court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1971 (9) TMI 64 - SUPREME COURT]; The word 'may' used in Section 133A (3)(iii) of the Act, viz., 'record the statement of any person which may be useful for, or relevant to, any proceeding under this Act, as already extracted, makes it clear that the materials collected and the statement recorded during the survey under Section 133A are not conclusive piece of evidence by itself. Thus, the materials collected and the statement obtained under Section 133A would not automatically bind upon the assessee, we do not see any reason to interfere with the order of the Tribunal. Appeal stands dismissed. Issues Involved:1. Evidentiary value of statements made during a survey under Section 133A of the Income Tax Act.2. Reliance on entries in the Branch Contractors Agents Account Book made subsequent to the survey.3. Basis of assessment on voluntary statements made during the survey without coercion or duress.Detailed Analysis:Issue 1: Evidentiary Value of Statements Made During a Survey Under Section 133AThe primary issue revolves around whether statements made during a survey under Section 133A have any evidentiary value. The court noted that Section 133A does not empower income-tax authorities to examine a person on oath, unlike Section 132(4), which specifically confers such power during search and seizure operations. Consequently, statements recorded under Section 133A lack evidentiary value. The judgment referenced the decision in Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101], which held that statements made during a survey cannot be used as evidence since they are not made under oath.The court also cited the CBDT circular dated 10.3.2003, advising that confessions during surveys should not be relied upon unless supported by credible evidence. The court emphasized that an admission, while important, is not conclusive and can be contested by the person who made it, as established in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18].Issue 2: Reliance on Entries in the Branch Contractors Agents Account Book Made Subsequent to the SurveyThe assessing officer found that certain books, including the Branch Contractors' Agent Book, were not produced during the survey and contained entries made subsequent to the survey. The court held that the assessing officer's reliance on these entries was misplaced. The Tribunal and the Commissioner had rightly concluded that these entries, made after the survey, could not be used as a basis for assessment, especially when the initial statements made during the survey were retracted and lacked evidentiary value.Issue 3: Basis of Assessment on Voluntary Statements Made During the Survey Without Coercion or DuressThe court examined whether voluntary statements made during the survey could form the basis of assessment. The assessee had retracted the statement made by one of its partners, arguing that it was made under duress and without proper understanding. The court found that the statements made during the survey under Section 133A, even if voluntary, could not be used as a basis for assessment without corroborative evidence. The court referenced the decision in Dr. S.C. Gupta v. Commissioner of Income-tax [(2001) 248 I.T.R. 782], where the burden was on the assessee to prove that the admission made was incorrect. However, in this case, the court found no material evidence to support the additional income disclosed during the survey.Conclusion:The court concluded that the materials collected and statements recorded during a survey under Section 133A do not have evidentiary value and cannot be solely relied upon for assessment. The Tribunal and the Commissioner had correctly followed the CBDT circular and relevant judicial precedents in arriving at their decision. Therefore, the court dismissed the Revenue's appeal, finding no substantial question of law for consideration.