2006 (11) TMI 136 - SC - Income Tax

Statutory presumption under Section 132(4A) limited to search, seizure, retention and Section 132B; not for regular assessments

SC held that the statutory presumption in section 132(4A) applies only to search and seizure proceedings and to retention under section 132(5) and ... Search and seizure - Whether the Tribunal was correct in holding that the presumption under sub-section (4A) of section 132, is only for the limited purpose of passing an order under sub-section (5) of the said section - HELD THAT:- The presumption under section 132(4A) is available only in regard to the proceedings for search and seizure and for the purpose of retaining the assets under section 132(5) and their application under section 132B. It is not available for any other proceeding except where it is provided that the presumption under section 132(4A) would be available. In our considered view, the High Court of Allahabad in Pushkar Narain Sarraf [1990 (1) TMI 51 - ALLAHABAD HIGH COURT] and the High Court of Delhi in Daya Chand [2001 (2) TMI 74 - DELHI HIGH COURT] have taken the correct view in holding that the presumption under section 132(4A) is available only in regard to the proceedings for search and seizure under section 132. Such presumption shall not be available for framing the regular assessment. The High Court Of Karnataka in the impugned judgment has clearly erred in holding to the contrary. Consequently, question No.1 of the Revenue is answered in the affirmative, i.e. against the Revenue and in favour of the assessee. It may be clarified that though the presumption under section 132(4A) is not available to the authorities while framing the regular assessment the material seized can be used as a piece of evidence in any other proceedings under the Act, all contentions are left open. Accordingly, the appeals are allowed. Issues Involved:1. Applicability of presumption under Section 132(4A) of the Income-tax Act, 1961.2. Validity of additions made to the assessee's income based on seized documents.3. Legality of the assessment orders passed by the assessing authorities and the Commissioner of Income-tax (Appeals).Issue-wise Detailed Analysis:1. Applicability of presumption under Section 132(4A) of the Income-tax Act, 1961:The core issue was whether the presumption under Section 132(4A) is confined only to the provisional adjudication under Section 132(5) or if it extends to regular assessment proceedings. The High Court of Karnataka had held that the presumption under Section 132(4A) is not limited to Section 132(5) and can be used for regular assessments. However, the Supreme Court disagreed, stating that the presumption under Section 132(4A) is a rebuttable presumption and is confined to the proceedings for search and seizure and the retention of assets under Section 132(5) and their application under Section 132B. The Supreme Court noted that the presumption should not intrude into the regular assessment process unless explicitly provided by the Legislature, as evidenced by Section 278D. The Court emphasized that Section 132 is a complete code in itself and should not interfere with other provisions of the Act.2. Validity of additions made to the assessee's income based on seized documents:The assessing authority had made significant additions to the assessee's income based on documents seized during the search, specifically PRM-1, PRM-7, and PRM-13. The Tribunal had initially set aside most of these additions, except for Rs. 2,62,100, citing that the presumption under Section 132(4A) should not extend to regular assessments. The High Court of Karnataka, however, upheld the additions, leading to the Revenue's favor. The Supreme Court, aligning with the Tribunal's view, stated that the presumption under Section 132(4A) is not applicable for regular assessments. Consequently, the Court set aside the assessment orders that relied on this presumption, remitting the case back to the assessing authority to frame the assessment afresh without the presumption under Section 132(4A).3. Legality of the assessment orders passed by the assessing authorities and the Commissioner of Income-tax (Appeals):The Supreme Court found that the assessment orders by the assessing authorities and the Commissioner of Income-tax (Appeals) were vitiated as they improperly relied on the presumption under Section 132(4A) for framing the regular assessment. The Court noted that while the material seized during the search could be used as evidence, the presumption under Section 132(4A) should not influence the regular assessment process. As a result, the Court set aside these orders and remitted the case back to the assessing authority for a fresh assessment in accordance with the law, without being influenced by the previous orders or the current judgment.Conclusion:The appeals were accepted, and the order passed by the High Court was set aside. The Supreme Court remitted the case back to the assessing authority for framing the assessment afresh in accordance with the law, emphasizing that the presumption under Section 132(4A) is not applicable for regular assessments. The Court did not record any opinion on the merits of the case and left all contentions open. No costs were ordered.