2012 (6) TMI 136 - AT - Income Tax

Validity of reassessment reopened on basis of statement obtained in the course of survey - statements obtained in the course of survey made u/s 133A have been retracted by both the assessees - Held that - Statements made by the assessees, later retracted, do not have any evidentiary value. A reason must be formed by the Assessing Officer to reopen an assessment on the basis of material or information recognized under law. Even if reassessments are held to be valid, still no additions could be made on the basis of those statements. Therefore, reopening of an assessment is not permissible in law on the basis of a statement obtained in the course of survey action u/s 133A, which has been later on retracted. Consequently, revision orders passed u/s 263 for AY 2000-01 and 2003-04 also do not survive - Decided in favor of assessee.

Summary

Issues:
Appeals challenging income escaping assessments, validity of reopening assessments based on sworn statements obtained during a survey under sec.133A.

Analysis:
1. The appeals were filed by husband and wife, both regularly assessed to income tax, challenging assessments for various years. The husband filed eight appeals related to six assessment years, including those arising from revision orders. The wife filed seven appeals for consecutive assessment years, all against orders by the Commissioner of Income-tax(Appeals)-XII at Chennai.

2. Assessments were reopened based on a survey at Lakshmi Hospital, with additions made mainly for interest disallowance, unexplained investments, and expenses. The wife's case involved disallowance of interest paid on loans and deficiency in personal expenses accounting.

3. The legal challenge raised common grounds against the merit of additions and the validity of reopening assessments. The assessees argued that sworn statements obtained during the survey under sec.133A should not form the basis for reopening assessments, citing legal precedents.

4. The assessees contended that statements obtained during a survey under sec.133A lack evidentiary value, as held in various court decisions. The Revenue defended the income escaping assessments, stating that even if the reasons for reopening were found unsustainable later, the assessments were conducted in accordance with the law.

5. The Tribunal examined the probative value of materials collected during the survey under sec.133A. Citing court decisions, it emphasized that statements under sec.133A do not have evidentiary value and cannot be the sole basis for reopening assessments. The Tribunal held that the reassessments were not sustainable in law and set them aside, along with corresponding revision orders.

6. The reassessments were deemed impermissible as they were based on retracted statements obtained during the survey, lacking evidentiary value. The Tribunal concluded that the reopening of assessments was not legally valid, leading to the allowance of the appeals filed by the assessees.