2022 (10) TMI 1173 - HC - Income Tax

Survey proceedings u/s 133A - Authenticity of the data contained in the pendrive seized from the possession of Shri Riyaz, one of the assessee's employee - what is clearly borne out by the record on the controversy surrounding the pen drives and the generation of data from the pen drives? - Whether the appellate Tribunal should not have found that the survey conducted on 14.7.2014 at the residential house of Sri Riyaz violated the provisions of Section 133A of the Income Tax Act? - HELD THAT - We have to interpret Section 133A (1). According to the explanation, a place (a) where a business or profession or activity for charitable purpose is carried on, (b) shall also include any other place where any business or profession and activity for charitable purpose is carried on or not. Therefore, explanation includes a place where any one of the three activities is carried on therein or not. Excluding residence by the construction now commended to this Court would completely take away from the scope of the survey of the Department a residence simpliciter. Such a meaning would defeat the language of Section 133A of IT Act. A few of the statements recorded at any point in time during the pendency of the proceedings on the description of the place are not conclusive in interpreting the applicability of Section 133A - Annexure A filed describes the place of the survey as follows Chelembra, Malappuram, Office room of Shri Riyas M @ Veliyaparambil House, Pulliparamba . In our view, the ground raised u/s 133A is not sustainable. The question is answered in favour of the Revenue and against the assessee.

Summary

Issues Involved:
1. Legality of the survey conducted on 14.07.2014 at the residential house of Sri Riyaz under Section 133A of the Income Tax Act.
2. Error of law by the Appellate Tribunal in dismissing the application for permission to raise additional grounds based on Sections 65A and 65B of the Evidence Act.
3. Implications of the generation of Hash Value Report in the presence of the assessee on the contents of the pen drives.

Detailed Analysis:

Issue 1: Legality of the Survey Conducted on 14.07.2014
The primary contention was whether the survey conducted at the residential house of Sri Riyaz violated Section 133A of the Income Tax Act. The assessee argued that Section 133A authorizes surveys only at business premises during business hours, not at residences. The Revenue countered this by referring to the explanation in Section 133A, which includes any place where business-related documents may be kept, even if not a business premises. The court noted that the explanation to Section 133A, introduced by the Finance Act, 2017, clarifies that a place where business or profession is carried on includes any other place where business-related documents are kept. The court found that the survey at Riyaz's residence, described as "office room of Shri Riyas M @ Veliyaparambil House," was legitimate under this provision. Consequently, the court ruled in favor of the Revenue, stating that the survey did not violate Section 133A.

Issue 2: Error of Law in Dismissing Additional Grounds
The assessee argued that the Tribunal committed an error by not allowing additional grounds based on Sections 65A and 65B of the Evidence Act, which deal with the admissibility of electronic records. The Tribunal had dismissed the application citing a lack of sufficient reasons for not raising these grounds earlier. The court examined whether the Tribunal exercised its discretion correctly. The Tribunal noted that the assessee did not provide a satisfactory explanation for the delay in raising these grounds and that the additional evidence sought to be introduced (expert opinion on Hash Value Report) was an afterthought. The Tribunal also found that the assessment was not solely based on the pen drives but included other corroborative evidence. The court agreed with the Tribunal's findings, concluding that the Tribunal had exercised its jurisdiction correctly and there was no error in dismissing the additional grounds.

Issue 3: Implications of Hash Value Report Generation
The assessee contended that the generation of the Hash Value Report in the presence of the assessee did not necessarily mean that the contents of the pen drives were accessed in their presence. The court examined the procedural correctness of the Hash Value Report generation. The Tribunal had found that the pen drives were impounded during a survey, and the Hash Value Report was generated in the presence of the assessee and witnesses, ensuring procedural integrity. The court noted that the assessee had been given a copy of the data and had acknowledged the Hash Value Report, which was witnessed by local panchas and countersigned by the forensic expert. The court concluded that the procedural requirements for the admissibility of electronic evidence under Sections 65A and 65B were met, and the Tribunal's reliance on the Hash Value Report was justified.

Conclusion:
The court dismissed all the appeals, answering all three substantial questions of law in favor of the Revenue and against the assessee. The survey at Riyaz's residence was deemed lawful under Section 133A, the Tribunal did not err in dismissing the application for additional grounds, and the generation of the Hash Value Report was procedurally correct. The appeals failed, and no costs were awarded.