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Statement recorded during survey alone cannot be basis of addition – concurrent findings of three appellate authorities confirmed by the Supreme Court in case of S. Khader Khan Sons |
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Statement recorded during survey alone cannot be basis of addition – concurrent findings of three appellate authorities confirmed by the Supreme Court in case of S. Khader Khan Sons |
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Relevant provisions: Section 132(4) and 133A of Income-tax Act, 1961. Provisions of Indian Evidence Act. Commissioner of Income-tax Versus S. Khader Khan Sons 2013 (6) TMI 305 - SUPREME COURT - in view of the concurrent findings of fact, this civil appeal has been dismissed by the Supreme Court. (The CIT(A), tribunal and High Court have decided matter in favour of assesse). Circular of the Central Board of Direct Taxes dated 10.3.2003 holding that admission in survey has no evidentiary value. Related judgment of High Court: COMMISSIONER OF INCOME-TAX Versus S. KHADAR KHAN SONS 2007 (7) TMI 182 - MADRAS HIGH COURT Cases referred by High Court: Commissioner of Income-Tax Versus GK. Senniappan. - 2006 (1) TMI 87 - MADRAS High Court , a Division Bench of this Court, in which one of us was a party (P.P.S.JANARTHANA RAJA, J.), in Dr.S.C.Gupta v. Commissioner of Income-tax [ 1999 (11) TMI 9 - ALLAHABAD High Court of course, placing reliance on the decision of the Apex Court in Pullangode Rubber And Produce Company Limited Versus State Of Kerala And Another - 1971 (9) TMI 64 - SUPREME Court Paul Mathews And Sons Versus Commissioner of Income-Tax. - 2003 (2) TMI 25 - KERALA High Court . Recent case law of relevance: Case law referred in above:
About provisions – present status vis a vis position in relevant year before High Court : The provisions of S. 132(4) as considered by the High Court is same as on present day. The provisions of S. 133A, as considered by the High Court is also same some amendment made subsequently has no impact on the issue of evidently value in case of survey ( except in case of expenses in functions, ceremonies etc now covered under sub-section (5) . Therefore, law laid down in case of S. Khader Khan Son (supra.) is applicable at present as well. Sub-section The provisions of 132 (4) and S.133A as applicable and relevant were as follows:
The High Court has found difference in both provisions. The provision of S. 132(4) provides that concerned authority may examine on oath …. And any statement made by such person may be used in evidence in any proceeding under the Act. Whereas there is no evidentiary value of statement recorded in a survey u/s 133A. The Court also referred to the circular in this regard and held that a statement made by a partner of firm, during course of survey and later on retracted has no evidentiary value and merely based on such statement or admission an addition cannot be made. The honourable Supreme court has dismissed appeal of revenue in view of concurrent findings of CIT(A), ITAT and High Court. The High Court held as follows: For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated 10.3.2003, extracted above, for arriving at the conclusion that 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. Recent case law of relevance: In this case the honourable High Court in para 22 held as follows: 22. Since the order of Commissioner of Income-tax (Appeals) making enhancement to the income determined by the Assessing Officer is based on the unsworn statement obtained under Section 133A , in the absence of other materials, the Tribunal rightly set aside the order of Commissioner of Income-tax (Appeals) and we do not find any reason to interfere with the order of the Tribunal. No substantial question of law arise for consideration and the Tax Case Appeal stands dismissed. As per reading of the author, provisions in this regard have remaining same and similar on this issue. The Circular is still in force. Therefore, the ruling, as confirmed by the Supreme Court are applicable presently also. Therefore, merely on the basis of statement recorded during survey, an addition cannot be made, particularly if the statement has been retracted or disputed by other concerned parties. For making an addition the authorities must have some valid evidences. In the case before High Court even statement of partner of firm was held not to have evidentiary value so as to enable an addition in hands of firm. Therefore, statements recorded by tax authorities during proceedings in cases of other parties cannot be used against other parties. However, unfortunately, some statements recorded by tax authorities (may be due to pressure tactics, arm twisting tactics and also by offering monetary or other incentives) are being used as tool against many parties without examining creditworthy ness of statements made even by strangers.
By: CA DEV KUMAR KOTHARI - August 17, 2016
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