Relevant Provisions of Income Tax Act, 1961

Section 132 - Search and Seizure

Section 133A - Power of Survey

Assessment Year - 2001-02

The following issues were raised before the Madras High Court:

(i) Whether on the facts and in the circumstances of the case, the income Tax Tribunal is right in law in holding that the statement made during a survey under Sec.133A of the Income Tax Act has no evidentiary value ?

(ii) Whether on the facts and in the circumstances of the case, the Income Tax Tribunal is right in not considering the fact that the Branch Contractors Agents Account Book in which entries were made subsequent to the survey and not found during the survey nor produced the survey, could be relied upon ?

(iii) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in not considering the fact that the voluntary statement made without any coercion or duress given during the course of survey action under Sec.133A could form the basis of the assessment ?"

After considering the facts and arguments, honorable HC has said that:

(i)  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.

(ii)  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 is recorded under section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law,

(iii) 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 above, 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.

(For full text of judgment - visit 2008 -TMI - 4140 - MADRAS HIGH COURT)

Evidentiary value of survey statements: unsworn survey statements are not conclusive and lack statutory sworn status. Admissions made during a survey are important but not conclusive; the person must be given an opportunity to show the books correctly disclose facts. Survey powers do not permit administration of oath, so statements recorded under survey lack the sworn evidentiary character that statute accords to examined statements. The term 'may' in the provision for recording statements indicates materials and statements collected during survey are useful but not conclusive evidence, and reliance on books or entries created or produced only after the survey requires scrutiny given this limited evidentiary status.