Evidentiary value of statement made on oath in survey proceedings u/s 133A -High Court explains

Evidentiary value of a statement made on oath by the assessee to the income tax authority in survey proceedings u/s 133A of the Income Tax Act-High Court explains

ABCAUS Case Law Citation:
ABCAUS 3144 (2019) (09) HC

Important case law relied upon by the parties:
Paul Mathews and Sons v. Commissioner of Income Tax : (2003) 263 ITR 101
Commissioner of Income Tax v. Khader Khan Son : (2008) 300 ITR 157
Commissioner of Income Tax v. Hotel Samrat : (2010) 323 ITR 353
Travancore Diagnostics (P) Limited v. Assistant Commissioner of Income Tax: 2016 (5) KHC 580 : 2016 (4) KLT 350
Govindarajulu Mudaliar v. Commissioner of Income Tax : AIR 1959 SC 248)
Roshan Di-Hatti v. Commissioner of Income Tax : AIR 1977 SC 1605)
Commissioner of Income Tax v. P.K.Noorjahan : AIR 1999 SC 1600
Pullangode Rubber Produce Co. Ltd. v State of Kerala, 1973 (91) ITR 18 (SC)

Evidentiary value of statement made on oath in survey proceedings u/s 133A

In the instant case, the question for consideration was as to what is the evidentiary value of a statement made on oath by the assessee to the income tax authority in survey proceedings held under Section 133A of the Income Tax Act, 1961 (the Act)?

In the instant case, a search u/s 132 of the Act was conducted at the residential premises of of one of the Directors of a company (the company). During the search, an agreement executed by the appellant/assessee, who was the Managing Director of the company, for purchase of land was found and seized.

The said document revealed that the appellant had given lakhs of rupees as advance for purchase of the property. Thereafter, survey proceedings under Section 133A of the Act were conducted at the premises of the company. During the survey proceedings, the assessee gave a statement on oath to the income tax authority that he had given an amount as advance for purchase of the property.

Subsequently, the appellant sent a letter taking the plea that he had executed the agreement in the capacity as the Managing Director of the company and that the amount was invested out of the funds of the company and that he had not made any personal investment in the deal and also that the deal was subsequently cancelled by the company.

The Assessing Officer (AO) did not accept the explanation given by the appellant regarding the nature and source of the amount. The AO found that the books of accounts of the company did not reveal that the said amount was invested by the company in such a deal. Therefore, the aforesaid amount was brought to tax by the assessing authority as unexplained investment.

Both the CIT(A) and the Tribunal confirmed the view taken by the AO and dismissed the appeal.

Though the assessee at any stage before had not raised the question regarding the evidentiary value of the statement made on oath by the assessee to the income tax authority during the survey proceedings under Section 133A of the Act. Also, before the Hon’ble High Court, no such question of law had been raised by the appellant/assessee in the memorandum of appeal filed. However, in view of the submissions made, the Hon’ble High Court raised the following substantial questions of law:

(1) Has the income tax authority got power to examine on oath any person during survey proceedings under Section 133A of the Act?

(2) Is it correct proposition of law that a statement made on oath by the assessee before the income tax authority during the survey proceedings under Section 133A of the Act has no evidentiary value at all?

(3) Is it permissible under law to make assessment of tax solely on the basis of the statement made on oath by an assessee before the income tax authority during the survey proceedings under Section 133A of the Act?

The Hon’ble High Court observed that Section 133A of the Act deals with survey proceedings. Section 133A(3)(iii) of the Act provides that an income-tax authority acting under Section 133A may record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. It is evident from this provision that, during survey proceedings, the incometax authority has got power to record the statement of “any person” which includes an assessee.

The assessee had relied on the favourable judgment of the Division Bench of the Hon’ble High Court which had categorically held that, whatever statement is recorded under Section 133A of the 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.

However the Hon’ble High Court noted that another Division Bench of the High Court had taken a view that the said decision did not lay down the correct law. However, the issue was not referred to a Full Bench as it was not necessary to do so in that case.

Again, another Division Bench of the Hon’ble High Court clarified the dictum laid down in the said favourable judgment that what the Court had said was that the statement made by the assessee under Section 133A of the Act is not conclusive and that it is open to the person who made the admission to resile from it and to state the same to be incorrect, in which event, the assessee should be given an opportunity to show that the books of account discloses the correct statement of facts.

The Hon’ble High Court observed that Section 133A of the Act, unlike Section 132(4) of the Act, does not specifically empower the income tax authority to examine a person on oath and to that extent there can be no quarrel with this proposition laid down in the said favourable judgment of the Division Bench. However, Section 133A of the Act does not also prohibit the income tax authority to administer oath to a person. As in the case of an accused in a criminal proceedings, there is no specific prohibition as contained in Section 4(2) of the Oaths Act, 1969 against administering oath to an assessee in the proceedings under Section 133A of the Act. The status of an assessee in the proceedings under Section 133A of the Act cannot be equated to the status of an accused in a criminal case.

The Hon’ble High Court opined that therefore, merely by reason of the fact that the income tax authority has administered oath to an assessee and recorded his sworn statement during the survey proceedings under Section 133A of the Act, it cannot be found that such statement has no evidentiary value at all and that it cannot be used in any manner against the assessee in any proceedings under the Act.

The Hon’ble High Court pointed out that as explained by the Division Bench, the statement on oath made by an assessee to the income tax authority during the survey proceedings under Section 133A of the Act is not conclusive. The assessee can explain or withdraw the admission, if any, made by him in such statement. Assessment of tax cannot be made solely on the basis of such sworn statement made by the assessee under Section 133A(3)(iii) of the Act. At the same time, such statement can be used to corroborate other materials before the assessing authority, including the contents of any document.

Accordingly, the Hon’ble High Court answered the the substantial questions of law raised as under:

1. Has the income tax authority got power to examine on oath any person during survey proceedings under Section 133A of the Act?

answered in favour of the assessee and against the revenue

2. Is it correct proposition of law that a statement made on oath by the assessee before the income tax authority during the survey proceedings under Section 133A of the Act has no evidentiary value at all?

answered in favour of the revenue and against the assessee

3. Is it permissible under law to make assessment of tax solely on the basis of the statement made on oath by an assessee before the income tax authority during the survey proceedings under Section 133A of the Act?

answered in favour of the assessee and against the revenue

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