TMI Blog1998 (8) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... irector does not suffice for invoking section 132(4) of the Act ? 3. Whether the interpretation of the Appellate Tribunal as regards the scope and ambit under section 132(4) is correct ? 4. Whether the Appellate Tribunal is justified in holding that Explanation to section 132(4) is prospective in nature though the said Explanation laid down only rule of evidence and in that sense it is only procedural in nature ? 5. Whether the finding of the Appellate Tribunal that the authorised dealers are real and are not conduits created for the purpose of syphoning off the profits of the assessee-company is based on material on record ? 6. Whether the above finding of the Appellate Tribunal is vitiated by non-consideration of relevant material on record ? 7. Whether the Appellate Tribunal's finding that K. V. R. Chowdary's statement does not bind the assessee-company notwithstanding he being the managing director, is valid in law ? 8. Whether the Appellate Tribunal is justified in readily accepting the plea of the assessee as regards the existence of purported trade practice of payment of heavy commission merely on furnishing of alleged sale invoices issued by other men in trade, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals before the Income-tax Appellate Tribunal in respect of both the assessment years. Although the contention of the Revenue is that the commissions paid to the four partnership firms were benami and that the said amounts were ultimately ploughed back to the assessee-firm, in a well considered order, the Accountant Member dismissed the appeals of the Revenue and allowed the appeals of the assessee-firm. The Accountant Member held that, (1) the evidence of Sri K. V. R. Chowdary is inadmissible in evidence because the question put to him was in excess of the power granted under section 132(4) of the Act; (2) his statement cannot also be used in evidence as he was not the person in control of the affairs of the assessee-firm and that his statement was also not corroborated with any other evidence. He accordingly held that there was no evidence to establish the inference of the Revenue that the commissions paid to the three firms in Kakinada had been received back by the company. It is relevant to mention here that there was no dispute with regard to the commission paid to Mehta Trading Company, Bombay. While so, the Judicial Member differed with the view taken by the Accountant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel that the managing director of the assessee-company, which was established under the Companies Act, is said to be the person in actual physical control of the affairs of the company and that the Tribunal erred in law in holding that he is not a person in control of the affairs of the assessee and thereby in not construing his statement as recorded under section 132(4) of the Act. An answer to this contention requires narration of some factual background. In this case, the Department, during the course of their search of the assessee-company, examined the managing director of the assessee-company and recorded his statement. Question No. 48 put by the searching officer is pertinent to be mentioned here. It is extracted hereunder : "Question No. 48.-At this point of time, may I invite your attention to section 132(4) of the Income-tax Act, 1961, which states that any disclosure made during the course of search operation voluntarily would not amount to concealment of income. Would you make any disclosure voluntarily ? Answers : I, in my capacity of the managing director of SRMT Ltd., would like to make some admissions. There are three firms of authorised dealers of the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney, etc., and such statement can be used in evidence thereafter in any proceeding under the Act. For the purpose of convenience, sub-section (4) along with its Explanation is extracted here-under : "(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 for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act." A plain reading of sub-section (4) shows that the authorised officer during the course of raid is empowered to examine any person if he is found to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lanation, the authorised officer is now empowered to examine any person not only in respect of any books of account, etc., but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. Thus, the authorised officer is now empowered to examine any person, irrespective of the fact whether such person is found to be in possession of any incriminating material or valuable things or not, and record a statement from such person if he is of the opinion that the examination of such person is useful for the purposes of his investigation and the statement of such person can as well be used in evidence in the subsequent proceedings initiated against him, or against the assessee under whom he is working, under the Act. But this Explanation was not in existence as on the date of conducting search by the Income-tax Department (i.e., February 10, 1988, and February 11, 1988) in this case. It was introduced with effect from April 1, 1989, through the Direct Tax Laws (Amendment) Act, 1987. The contention, therefore, is that the Explanation has got retrospective effect and so the statement of the managing director recorded prior to the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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