Statements recorded u/s 131(1A) instead of section 133A(iii) by survey team were invalid hence no addition can be made merely on the basis of invalid statements – ITAT
In a recent judgment, ITAT Chennai has held that statements recorded u/s 131(1A) instead of section 133A(iii) by the survey team were invalid and will not give jurisdiction to the assessing officer to make any additions based on the invalid statement.
ABCAUS Case Law Citation:
4477 (2025) (03) abcaus.in ITAT
In the instant case, the appellant assessee had challenged the order passed by the CIT(A) in confirming the addition merely based on sworn statements u/s 131(1A) of the Income Tax Act, 1961 (the Act) on account of purported unaccounted cash collected from customers towards sale of flats.
The assessee was a company engaged in the business of real estate and property development. There was a survey u/s 133A of the Act in the premises of the assessee company. During the course of survey, project-wise details undertaken by the assessee company in excel sheets were found in office desktop.
The survey team also recorded statement on oath u/s 131(1A) of the Act from the AGM and Managing Director of the company. Subsequently, another statement was recorded u/s 131(1A) of the Act under oath from Managing Director of the assessee company.
Based on the above statements recorded u/s 131(1A) of the Act, excel sheets that were impounded during the course of survey and based on letter of admission of receipt of on-money by the Managing Director, the AO completed the assessments by making addition of on-money receipts as unaccounted income and taxed the same at the rates specified under section 115BBE of the Act.
The CIT(A) vide impugned orders dismissed appeals of the assessee. The CIT(A) however treated on-money receipts as business income of the assessee company u/s 28 of the Act and directed the AO to tax the same accordingly.
Before the Tribunal, the assessee filed an application for admission of additional ground, stating that “the sworn statements recorded u/s 131(1A) of the Act were impermissible and not valid in the eyes of law”.
It was contended that in a case of survey u/s 133A of the Act, statement can be recorded only u/s 133A(3) of the Act. Only in the event of satisfaction of conditions mentioned u/s 133A(6) of the Act, a statement can be recorded u/s 131(1A) of the Act. It was stated that survey team had not brought anything on record that conditions mentioned u/s 133A(6) for recording sworn statement u/s 131(1A) of the Act were satisfied.
The Tribunal noted that the survey team recorded three statements from the employees and Managing Director of the assessee company under section 131(1A) of the Act which were not valid and which will not give jurisdiction to the assessing officer to make any additions based on the invalid statement recorded under section 131(1A) of the Act.
The Tribunal observed that as held by the Calcutta High Court unless the provisions of section 133A(6) of the Act were satisfied, no statement could have been recorded invoking the powers of section 131 of the Act. Much less, in the instant case, the statement recorded by the survey team were invalid since there was no reason to suspect that any income has been concealed or is likely to be concealed that was brought out by the revenue but for which a statement could be recorded u/s 131(1A) of the Act.
The Tribunal noted that the above view was taken by the Hon’ble Delhi High Court and also by the Hon’ble Bombay High Court which held that an invalid summon issued u/s 131(1A) of Act would make the same non est and was liable to be quashed.
Further, the Tribunal noted that as per the Survey Manual, 2019, survey team should have recorded the statement under section 133A(3)(iii) of the Act which does not grant power to survey team to administer oath as in the case of search. Even if the subject statements were recorded under section 133(A)(3)(iii) of the Act, the same does not have any evidentiary value as held by the jurisdictional High Court and the Special Leave Petition (SLP) filed by the Revenue was dismissed by the Hon’ble Apex Court and the issue has reached finality.
The Tribunal opined that statement under section 131(1A) of the Act in the instant case were incorrect and invalid as per law. Since the subject statements were invalid in law therefore the same could not have been used to make any addition.
The Tribunal further stated that even considering the judgement of the Hon’ble Supreme Court where it was observed that material obtained from an illegal search can still be used against the person in whose custody it was found, it is to be noted that the Hon’ble Apex Court in the said decision concerned itself with material obtained from an illegal search and not a mere illegal statement recorded under the wrong provisions of the Income Tax Act.
Further, the Tribunal observed that impounded material, i.e., excel sheets were not accompanied by a certificate in terms of section 65B(4) of the Indian Evidence Act, 1872. Therefore, the said impounded material was inadmissible in the eyes of law.
Further, the Tribunal noted that the assessing officer had relied upon the impounded material obtained during the course of survey and had taken into consideration only some portions of the impounded material and has disregarded the rest of it, which is not permissible in law as held by the Delhi High Court.
The Tribunal held that the assessing officer had proceeded to make the additions only on the basis of statements which were invalid and obtained without authority of law and on inaccurate loose sheets / dumb documents that were incapable of being relied upon for making any addition unless corroborated by other independent and cogent evidences.
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