2025 (5) TMI 218 - HC - Income Tax

Sections 65B and 63 not required for receipt of electronic records in income-tax assessment proceedings; genuineness can be challenged

HC held that Sections 65B of the Indian Evidence Act and 63 of the Bharatiya Sakshya Adhiniyam, 2023 do not apply to income-tax assessment proceedings ... Applicability of Section 65B of the Indian Evidence Act, 1872 (and corresponding provisions in the Bharatiya Sakshya Adhiniyam, 2023) to assessment proceedings before the Income Tax authorities - HELD THAT:- Under the new law of evidence, expert's certificate is also made mandatory. This is an extra requirement. We may now examine if the statutory requirement set out in the Evidence Act (now BSA) must be fulfilled before the assessing authority would receive the electronic record as evidence in the assessment proceedings. Our answer is in the negative. We hold that Section 65B of the Evidence Act, 1872 as well as Section 63 of Bharatiya Sakshya Adhiniyam, 2023 are inapplicable to the assessment proceedings before the assessing officer/appellate authority/tribunal. It is open to the assessee to challenge the genuineness of the material relied on by the department. But the non-furnishing of the certificate under Section 65B cannot be used as a shield to resist the reception of the electronic record. This is for the simple reason that the assessment proceedings are not judicial proceedings and the technical rules of the Evidence Act are inapplicable to them. There is yet another reason. The adverse materials have been seized from the electronic systems and instruments maintained by the assessee’s/their employees. It would be too much to expect them to issue certificates in favour of the department which would use the material against them. We came across the Digital Evidence Investigation Manual 2014 issued by the Central Board of Direct Taxes in which it has been mentioned that since Section 65A and 65B of the Indian Evidence Act govern the integrity of the electronic record, while handling any digital evidence, the procedure has to be in consonance with the said provisions. We are however of the view that the contents of a manual cannot have any statutory value or force and in any event, they cannot alter the legal position laid down by the Hon'ble Supreme Court. When there is no statutory provision which makes the rules of Evidence Act applicable to the assessment proceedings under the Income Tax Act, they cannot become applicable by virtue of the contents found in the manual issued by the department. We do not want to delve further into the matter as we are of the view that it may prejudice the case of the assessee’s before the appellate forum. When we relegate a litigant to go before the appellate forum, we should not render any finding on facts. That is why, apart from clarifying on the legal issue of applicability of Section 65B of the Evidence Act, we have not touched on any other aspect. Issues: (i) Whether writ petitions challenging assessment orders should be entertained despite availability of alternate remedy by appeal to the Commissioner (Appeals); (ii) Whether Sections 65A/65B of the Indian Evidence Act (and Section 63 of Bharatiya Sakshya Adhiniyam, 2023) are applicable to assessment proceedings before the assessing officer.Issue (i): Whether the writ petitions bypassing the appeal remedy under Section 246A are maintainable.Analysis: The statutory scheme provides a comprehensive appellate remedy under the Income-tax Act. Established precedent recognises limited exceptions permitting writ relief where statutory authorities act in total violation of natural justice or outside statutory power. Even if exceptions are shown, exercise of writ jurisdiction remains discretionary and requires the writ forum to consider whether the point goes to the root of the matter. The Single Judge's quashing of assessments and directions for de novo assessment involved extensive factual examination and micromanagement of assessment procedure; furnishing of seized materials and panchnamas is necessary to enable effective exercise of the statutory appeal remedy.Conclusion: The objection based on availability of alternate remedy is upheld and the writ petitions are non-suited; this conclusion is in favour of the Appellant.Issue (ii): Whether Sections 65A/65B of the Indian Evidence Act and corresponding provisions in Bharatiya Sakshya Adhiniyam are applicable to assessment proceedings before the assessing officer.Analysis: The Evidence Act applies to judicial proceedings before courts; quasi-judicial/adjudicatory authorities, including assessing officers and tribunals, are not strictly bound by the technical rules of evidence. Supreme Court precedents establish that assessing authorities are not confined by strict evidentiary provisions and must assess probative value, with the assessee being given notice and opportunity to rebut. Departmental manuals cannot import statutory effect. Requiring a Section 65B certificate would unduly handicap assessment proceedings where electronic material was seized from the assessee's systems.Conclusion: Sections 65A/65B of the Indian Evidence Act and Section 63 of Bharatiya Sakshya Adhiniyam, 2023 are inapplicable to assessment proceedings before the assessing officer; this conclusion is against the assessee and in favour of the Appellant on evidentiary admissibility.Final Conclusion: The writ appeals are allowed; the Single Judge's order allowing the writ petitions is set aside, subject to directions to furnish seized panchnamas and permitting the assessees to pursue the statutory appeal remedy.Ratio Decidendi: In assessment proceedings before income-tax authorities, technical admissibility requirements of the Indian Evidence Act (Sections 65A/65B) do not apply; where a comprehensive statutory appellate remedy exists, writ jurisdiction should be exercised sparingly and only in clear cases going to the root of the matter, with the availability of appeal ordinarily requiring non-suit of writ petitions.