Statement obtained under survey would not automatically bind upon the assessee – SC
Survey in a wider sense means to scrutinize or to inspect. The power of survey under the Income tax Act has been provided under Section 133A and Section 133B. According to Section 133A, an income-tax authority may enter:
- any place within the limits of the area assigned to him, or
- any place occupied by any person in respect of whom he exercises jurisdiction, or
- 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:
- 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,
- 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
- 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.
An income-tax authority acting under this section may:
- 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,
- make an inventory of any cash, stock or other valuable article or thing checked or verified by him
- record the statement of any person which may be useful for, or relevant to, any proceeding under this Act.
Let us refer to the case of CIT v. S. Khader Khan Son (2012), where the issue under consideration pertained to the evidentiary value of statements recorded during survey under Section 133A.
Facts of the Case:
- The assessee filed its return of income disclosing an income of Rs. 12,640.
- The return was processed under section 143(1) and a notice was issued and served on the assessee.
- In the instant case, a survey action was conducted under section 133A in the premises of the assessee and one of the partners of the firm, in his sworn statement offered an additional income of Rs. 20,00,000 for the assessment year 2001-02 and Rs. 30,00,000 for the assessment year 2002-03.
- However, the said statement was retracted by the assessee stating that the partner, from whom a statement was recorded during the survey operation under section 133A, was new to the management and he could not answer to 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, contended that the statement of the partner recorded under section 133A had no evidentiary value.
- It was specifically contended that the power to examine a person on oath was specifically conferred on the authorities only during the course of any search under section 132(4) and therefore, it was requested that the survey operations would not serve any useful purpose and the sworn statement recorded during the survey should not be given any weightage.
- The AO came to the conclusion that he had reason to believe that the assessee had evaded production of stated books during the survey action and even after the survey action, as it could be seen from the survey folders.
- Accordingly, the AO came to the conclusion based on the admissions made by the assessee, which are directly relatable to the defects noticed during the action under section 133A, he recomputed the assessment and sought for the balance tax payable by his assessment order.
Order of Appellate Authorities and High Court (HC)
- Aggrieved by the said assessment order the assessee preferred an appeal before the CIT(A), who held the issue in favour of the assessee.
- On appeal, at the instance of the Revenue, the Tribunal holding that there was no infirmity in the order of the Commissioner, dismissed the Revenue’s appeal.
- On revenue’s appeal, High court dismissed the same.
Observations of the Supreme Court (SC)
- 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
- 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
- The expression “such other materials or information as are available with the Assessing Officer” contained in Section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under Section 133A
- The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment
- Finally, the word “may” used in Section 133A (3)(iii), 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
- Therefore, SC dismissed the appeal.
In conclusion, statement obtained under survey would not automatically bind upon the assessee and it is not a conclusive piece of evidence by itself. Section 133A does not empower any Income tax Officer to examine any person on oath and that solely on the basis of the statement given by one of the partners of the assessee. Addition cannot be made merely on the basis of such statement