statement made during survey under section 133A of the Income-tax Act has no evidentiary value

By Legal Cell, Accommodation Times

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 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, vide Paul Mathews and Sons v. CIT
[2003] 263 ITR 101 (Ker.).

SUPREME COURT OF INDIA
Commissioner of Income-tax, Salem
v.

S. Khader Khan Son

Appeal (Civil) Nos. 13224 of 2008 & 6747 of 2012†

September 20, 2012

ORDER

Heard learned counsel on both sides.

Leave granted.
This civil appeal filed by the Department pertains to Assessment Year 2001-02.

In view of the concurrent findings of fact, this civil appeal is dismissed.

No order as to costs.

—————–
HIGH COURT JUDGMENT IN RESPECT OF ABOVE IS AS FOLLOWS :-
HIGH COURT OF MADRAS
Commissioner of Income-tax v. S. Khader Khan Son
T.C.
JUDGMENT
P.D. Dinakaran, J.—

The Revenue has preferred the above tax case appeal against the order of the Income-tax Appellate Tribunal in I.T.A. No. 479/Mds/2005 dated October 13,
2006, raising the following substantial questions of law:

“(i)
in  holding  that  the  statement  made  during  survey  under  section  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 agent
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
during the course of survey action under section 133A could form the basis of the assessment?”

 
The brief facts are : The assessment year involved in this appeal is 2001-02. The assessee filed its return of income on October 29, 2001, disclosing an
income of Rs. 12,640. The return was processed under section 143(1) of the Income-tax Act, 1961 (in short “the Act”), on August 27, 2002, and notice under
section 143(2) of the Act was issued on August 27, 2002, and served on the assessee on September 24, 2002. In the instant case, a survey action was 
conducted under section 133A of the Act on July 24, 2001, in the premises of the assessee at 90, Syed Mada Street, Shevapet, Salem, and one of 
the
02 and Rs. 30,00,000 for the assessment year 2002-03. However, the said statement was retracted by the assessee through its letter dated August 
3,  2001,  stating  that  the  partner  Asif  Khan,  from  whom  a  statement  was  recorded  during  the  survey  operation  under  section  133A,  was  new  to 
the management and he could not answer the enquiries made and as such, he agreed to an ad hoc addition, which could never be achieved by 
the business owing to the severe competition and to the legislation by the Government prohibiting smoking in public places.  The assessee, thus,

It was specifically contended that the 
power to examine a person on oath is specifically conferred on the authorities only during the course of 
any
would not serve any useful purpose and the sworn statement recorded during the survey should not be 
given

contended that the statement of Asif Khan recorded under section 133A has no evidentiary value.

But, the Assessing Officer found that certain books were not produced or, impounded at any time nor were they produced during the course of survey action
and that certain entries in the books were made subsequent to the survey action and only at the time of survey action, the assessee had come forward with
the “admissions. Therefore, the Assessing Officer came to the conclusion that he had reason to believe that the assessee had evaded production of those
books during the survey action and even after the survey action, as it could be seen from the survey folders. Accordingly, the Assessing Officer not accepting
the book, viz., “branch contractors” agent book produced after the survey to support the claim of manufacturing process, came to the conclusion that it is to
be impounded and accordingly, based op the admissions made by the assessee, which are directly relatable to the defects noticed during the action under
section 133A of the Act he recomputed the assessment and sought for the balance tax payable by his assessment order dated March 30, 2004.

Aggrieved by the said assessment order dated March 30, 2004, the assessee preferred art appeal before the Commissioner of Income-tax (Appeals), who,
by order dated November 30, 2006, held the issue in favour of the assessee. On appeal at the instance of the Revenue, the Appellate Tribunal holding
that there was no infirmity in the order of the Commissioner, dismissed the Revenue’s, appeal. Hence, the present appeal by the Revenue, raising the
substantial questions of law referred to above.

All the three substantial questions of law raised by the Revenue revolve on the vexed question whether the materials collected and the statement elicited
during the survey operation under section 133A of the Act had any evidentiary value. For the purpose of clarity, it is apt to refer sections 132(4) and 133A of
the Act, which are extracted as hereunder :
“131 Search and seizure. Q)—.. (4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be
in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such
person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
Explanation.—For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any
books of account other documents or assets found as a result of the search, but also in respect of all matters relevant far the, purpose of any investigation
connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act-”
“133A. Power of survey.—(1) Notwithstanding anything contained in any other provision of this Act, an income-tax authority may enter—

(a)any place within the limits of the area assigned to him, or

(b)any place occupied by any person in respect of whom he exercises jurisdiction, or

(c)any place in respect of which he is authorised for the purposes of this section by such income-tax authority, who is assigned the area within which such
place is situated or who exercises jurisdiction in respect of any person occupying such place,

at which a business or profession is carried on, whether such place be the principal place or not of such business or profession, and require any proprietor,
employee or any other person who may at that time and place be attending in any manner to, or helping in, the carrying on of such business or profession—
(i) to afford him the necessary facility to inspect such books of account or other documents as he may require and which may be available at such place,
(ii) to afford him the necessary facility to check or verify the cash, stock or other valuable article or thing which may be found therein, and

(iii) to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this Act.

Explanation.—For the purposes of this sub-section, a place where a business or profession is carried on shall also include any other place, whether any
business or profession is carried on therein or not, in which the person carrying on the business or profession states that any of his books of account or other
documents or any part of his cash or stock or other valuable article or thing relating to his business or profession are or is kept.

(2)An income-tax authority may enter any place of business or profession referred to in sub-section (1) only during the hours at which such place is open for
the conduct of business or profession and, in the case of any other place, only after sunrise and before sunset.

(3) An income-tax authority acting under this section may,—

(i)if he so deems necessary, place marks of identification on the books of account or other documents inspected by him and make or cause to be made
extracts or copies therefrom,

(ii)make art inventory of any cash, stock or other valuable article or thing checked or verified by him.

(iii) record the statement of any person: which may be useful for, or relevant to/ any proceeding under this Act.

(4) An income-tax authority acting under this section shall on no account, remove or cause to be removed from the place wherein he has entered, any books
of account or other documents or any cash, stock or other valuable article or thing.

(5) Where, having regard to the nature and scale of expenditure incurred by an assessee, in connection with any function, ceremony or event, the income-
tax authority is of the opinion that it is necessary or expedient so to do, he may, at any time after such function, ceremony or event, require the assessee
by whom such expenditure has been incurred or any person who, in the opinion of the income-tax authority, is likely to possess information as respects
the expenditure incurred, to furnish such information as he may require as to any matter which may be useful for, or relevant to, any proceeding under this
Act and may have the statements of the assessee or any other person recorded and any statement so recorded may thereafter be used in evidence in any
proceeding under this Act.

(6) If a person under this section is squired to afford facility to the income-tax authority to inspect books of account or other documents or to check or verify
any cash, stock or other valuable article or thing or to furnish any information or to have his statement recorded either refuses or evades to do so, the
income-tax authority shall have all the powers under sub-section (1) of section 131 for enforcing compliance with the requirement made.

Explanation.—In this section,—

(a) ‘income-tax authority’ means a Commissioner, a Joint Com missioner, a Director, a Joint Director, an Assistant Director or Deputy Director or an
Assessing Officer, and for the purposes of clause (i) of sub-section (1), clause (i) of sub-section (3) and sub-section (5), includes an Inspector of Income-tax,
if so authorised by any such authority;

(b) ‘proceeding’ means any proceeding under this Act in respect of any year which may be pending on the date on which the powers under this section are
exercised, or which may have been completed on or before such date and includes also all proceedings under this Act which may be commenced after such
date in respect of any year.”

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 partners. Assuming there-were discrepancies and irregularities in the books of account maintained by the assessee, an offer of additional income
for the respective assessment years was made by the partner 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
partners of the assessee-firm mat 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.

In the decision in Putlangode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 , the apex court held mat 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.

Where a survey was conducted in the premises of the assessee, a medical practitioner, and a statement was recorded from him, in which the assessee
surrendered additional income and pursuant to the same, the Assessing Officer reopened the assessment, but during the course of which the assessee
retracted the additional income offered and contended that the statement was the result of duress, which was not accepted by the Assessing Officer and also
by the Tribunal holding that the statement is valid and that it was made without duress, a Division Bench of the Allahabad High Court in Dr. S.C. Gupta v.
CIT [2001] 248 ITR 782 (All), of course, placing reliance on the decision of the apex court in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [1973]
91 ITR 18 held that the burden that was laid on the assessee to establish that the admission made in the statement at the time of survey was wrong and
that there was no additional income was not even attempted to be discharged and thus, the order of the Tribunal was based on facts and no question of law
arose from it.

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

the

The scope of sections 132(4) and 133A also came up for consideration before the Kerala High Court in Paul Mathews and Sons v. CIT [2003] 263 ITR 101.
In the said case, the assessee therein made an attempt to draw a distinction between the two provisions, viz., sections 132(4) and 133A. According to the
assessee, there is no provision to administer oath or to take any sworn statement and that a mere admission or an acquiescence cannot be a foundation for
an assessment and that any statement given during a survey has no effect as an “admission” nor can it be a statement on oath. According to the assessee,
his statement during the survey with reference to any books of account cart hardly be the basis for any assessment. It was also contended on behalf of the
assessee that any material collected or any statement recorded during the survey under section 133A cannot be put against the assessee, as the same has
no evidentiary value. The Division Bench of the Kerala High Court, appreciating the stand taken by the assessee and after referring to section 133A of the
Act, held as here- under (page 108) :

“… we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under section 132(4) of the Income-tax
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, the same has been expressly provided 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  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
and the Income-tax Officer was well aware of this. (emphasis supplied)

Similarly, when the issue, whether the expression “such other materials or information as are available with the Assessing Officer in section 158BB of the
Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, came up for consideration before this court
in CIT v. G. JC Senniappan [2006] 284 ITR 220, a Division Bench of this court, in which one of us was a party (P.P.S. Janarthana Raja J.), answered the
question in the affirmative, against the Revenue and in favour of the assessee, holding that the materials collected during the survey under section 133A
cannot be taken into consideration while determining the undisclosed income in respect of block assessment as per section 158BB, as the same has no
evidentiary value.

Again, when an identical question whether the material found in the course of survey in the premises of the builder could be used in the block assessment of
the assessee, came up for consideration before this Division Bench in an unreported case in T. C (A) No. 2620 of 2006, this court, by order dated November
22, 2006—since reported in CIT v. S. Ajit Kumar [2008] 300 ITR 152 , of course, following the, earlier decision of this court in G.K. Senniappan’s case
reported in [2006] 284 ITR 220, while confirming the order of the Tribunal, answered the question in favour of the assessee, in limine.

What  is  more  relevant,  in  the  instant  case,  is  that  the  attention  of  the  Commissioner  and  the  Tribunal  was  rightly  invited  to  the  circular  of  the 
Central Board of Direct Taxes dated March 10, 2003, with regard to the confession of additional income during the course of search and seizure 
and survey operations. The said circular dated March 10, 2003, reads as follows :

“Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income 
during  the  course  of  the  search  and  seizure  and  survey  operations.  Such  confessions,  if  not  based  upon  credible  evidence,  are  later  retracted 
by  the  concerned  assessees  while  filing  returns  of  income.  In  these  circumstances,  on  confessions  during  the  course  of  search  and  seizure 
and  survey  operations  do  not  serve  any  useful  purpose.  It  is,  therefore,  advised  that  there  should  be  focus  and  concentration  on  collection  of 
evidence
Similarly,  while  recording  statement  during  the  course  of  search  and  seizure  and  survey  operations  no  attempt  should  be  made  to  obtain 
confession as to the undisclosed income. Any action on the contrary shall be viewed adversely.

Further, in respect of pending, assessment proceedings also, the Assessing Officers should rely upon the evidences/materials gathered during the course-of
search/survey operations or thereafter while framing the relevant assessment orders.”

From

(i)
the
correctly
18 ;

(ii)  In  contradistinction  to  the  power  under  section  133A,  section  132(4)  of  the  Income-tax  Act  enables  the  authorised  officer  to 
examine
the
evidentiary  value  obviously  for  the  reason  that  the  officer  is  not  authorised  to  administer  oath  and  to  take  any  sworn  statement 
which

(iii)
tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan [2006] 284 ITR 
220 (Mad.) ;

(iv)
vide

(v)
to,
survey under section 133A are not conclusive piece of evidence by itself.

For  all  these  reasons,  particularly,  when  the  Commissioner  and  the  Tribunal  followed  the  circular  of  the  Central  Board  of  Direct  Taxes  dated 
March
not

Accordingly,





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