2024 (1) TMI 1234 - HC - Income Tax

Reopening of assessment u/s 147 - notice issued on the basis of statement recorded u/s 133A - HELD THAT - As decided in in Khader Khan 2007 (7) TMI 182 - MADRAS HIGH COURT wherein as compared and contrasted Sections 132(4) and 133A and concluded that Section 133A does not empower the officer conducting the survey to record statements under oath. On that basis, it was further concluded that such statement does not have evidentiary value. On examining the impugned notice, it is clear that a survey was conducted and that several factual findings were made on such basis. These findings inter alia relate to sales in cash which were not reflected in the books of account, availability of undisclosed or excess stock; and payment for a property being made partly from undisclosed profits. In the impugned notice, it is recorded that the statement of Sri.S.Ravichandran was not the only basis for initiating proceedings under Section 148A, and that such proceedings were initiated on the basis of the entire set of findings arising from the survey. In the impugned notice, it is further recorded that a statement was recorded not only under Section 133A, but also under Section 131. Section 131, on a plain reading, confers the powers of a civil court on the relevant officers. Such powers include the power to examine even a third party under oath. The above discussion leads to the conclusion that no case is made out to interfere with proceedings initiated by the respondent for alleged escaped assessment. It is needless to say, however, that it is open to the petitioner to participate in such proceedings and resist any liability in respect of such escaped assessment.

Summary

Issues involved:
The petitioner challenges a notice issued under Section 148 of the Income Tax Act, 1961 for alleged escaped assessment for the assessment year 2019-2020. The main contention is whether the notice based on a statement recorded under Section 133A of the Income Tax Act is valid.

Issue 1: Validity of notice under Section 148 based on statement under Section 133A

The petitioner challenges the notice under Section 148 on the ground that it was issued based on a statement recorded under Section 133A, which is contended to lack evidentiary value. Citing the judgment in Commissioner of Income Tax v. S.Khader Khan Son, it is argued that such statements cannot be relied upon as evidence, thereby vitiating the notice.

Issue 2: Basis of the notice under Section 148

The respondent justifies the notice under Section 148 by stating that it was issued following a survey initiated under Section 133A, which revealed various discrepancies. The survey findings included unaccounted cash sales, excess stock, purchase of an immovable property using undisclosed profits, and other irregularities. The assessing officer concluded that there was escaped assessment based on these findings.

Judgment:

The Division Bench judgment in Khader Khan was relied upon to argue that a statement under Section 133A lacks evidentiary value. However, upon examination of the impugned notice, it is evident that the survey conducted yielded factual findings related to unaccounted cash sales, excess stock, and undisclosed profits used for property purchase. The notice clarifies that the initiation of proceedings under Section 148A was not solely based on the statement of Mr. S.Ravichandran under Section 133A, but on the entire set of survey findings.

The impugned notice also reveals that statements were recorded under both Section 133A and Section 131 of the Income Tax Act. Section 131 confers powers akin to a civil court on the officers, including the authority to examine third parties under oath. Considering these factors, the court concludes that there is no basis to interfere with the respondent's initiation of proceedings for alleged escaped assessment.

The petitioner is advised to participate in the proceedings and contest any liability arising from the escaped assessment. The writ petition is disposed of with the mentioned observations, and no costs are awarded. The connected miscellaneous petitions are accordingly closed.