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2019 (3) TMI 1402 - HC - Income TaxReopening of assessment - Reasons recorded based on sworn statement recorded u/s 133A - no incriminating material found - reason to believe - HELD THAT - In the present case, there is no dispute on the position that the survey initiated by the Department on 12.01.2018 has yielded no tangible incriminating material. In fact, the Mahazarnama of even date reveals as much. Notwithstanding this, the Department has gone ahead with the impugned proceedings based solely upon the sworn statement recorded under Section 133A from one of the partners. In the light of Circular F.No.286/2/2003 dated 10.03.2003 as well as the admitted position that there is not a shread of material apart from the statement recorded under Section 133A that forms the basis of the proceedings for reassessment, the reasons dated 28.05.2018 have no legs to stand. The impugned notices dated 31.03.2018, which trace their existence to the reasons dated 28.05.2018 must thus fail and quash the same as well as the impugned orders dated 30.07.2018 rejecting the preliminary objections. - Decided in favour of assessee.
Issues Involved:
1. Validity of proceedings under Section 148 of the Income Tax Act, 1961. 2. Legitimacy of re-assessment based solely on a statement recorded under Section 133A. 3. Jurisdictional challenge concerning approval from the Joint Commissioner of Income Tax. 4. Admissibility and evidentiary value of statements recorded during survey operations. Issue-wise Detailed Analysis: 1. Validity of proceedings under Section 148 of the Income Tax Act, 1961: The petitioner challenged the proceedings under Section 148 dated 31.03.2018 and the order disposing of objections dated 30.07.2018 for assessment years 2013-14 to 2015-16. The petitioner argued that the reasons for reopening the assessments were solely based on a statement recorded under Section 133A, which lacked any tangible incriminating material. The court noted that the survey conducted on 12.01.2018 did not yield any incriminating material, as evidenced by the Mahazarnama. The court emphasized that reasons for reopening assessments must be based on tangible materials, as established in the Supreme Court's judgment in CIT, Delhi Vs. Kelvinator Ltd. 2. Legitimacy of re-assessment based solely on a statement recorded under Section 133A: The court examined whether reassessment proceedings could be sustained solely on a sworn statement recorded during a survey under Section 133A. The petitioner cited the Karnataka High Court's decision in Commissioner of Income Tax and Another Vs. Dr.N.Thippa Setty, which set aside reassessment based entirely on retracted statements. The court also referred to the Central Board of Direct Taxes (CBDT) circular dated 10.03.2003, which advised against relying solely on confessions during surveys without credible evidence. The court concluded that a statement recorded under Section 133A does not have the same evidentiary value as one recorded under Section 132(4) during a search and seizure operation. 3. Jurisdictional challenge concerning approval from the Joint Commissioner of Income Tax: The petitioner argued that the notice under Section 148 was issued without the necessary approval from the Joint Commissioner of Income Tax, as required by Section 151(2). However, the court found that due sanction had been obtained from the concerned authority, rejecting the petitioner's contention that the proceedings were without jurisdiction on this ground. 4. Admissibility and evidentiary value of statements recorded during survey operations: The court discussed the distinction between statements recorded under Section 133A and Section 132(4). While Section 132(4) statements can be used as evidence in proceedings, Section 133A statements do not have the same evidentiary value. The court cited the Supreme Court's decision in CIT, Salem v. M/s.S.Khader Khan Son, which held that materials collected and statements obtained under Section 133A are not conclusive evidence. The court also highlighted that the statement recorded from the partner, Mr. Janakiraman, had been retracted, and no other tangible evidence supported the reassessment. Conclusion: The court concluded that the reassessment proceedings were based solely on the statement recorded under Section 133A without any tangible material evidence. Consequently, the reasons for reopening the assessments dated 28.05.2018 were deemed insufficient, and the impugned notices dated 31.03.2018 and orders dated 30.07.2018 were quashed. The writ petitions were allowed, and the connected miscellaneous petitions were closed without costs.
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