2007 (7) TMI 182 - HC - Income Tax

Survey at firm & one of the partners of the firm u/s 133A difference between search u/s 133A & search u/s 132(4) - Materials collected & the statement recorded during the survey u/s 133A are not conclusive piece of evidence on basis of circular dated 10.3.2003, Tribunal is right in holding that the statement made during a survey u/s.133A has no evidentiary value hence solely on basis of statement of any partner, addition made in assessment of assessee(firm) are liable to be set aside

Summary

Issues Involved:
1. Evidentiary value of statements made during a survey under Section 133A of the Income Tax Act.
2. Reliance on entries in the Branch Contractors Agents Account Book made subsequent to the survey.
3. Basis of assessment on voluntary statements made during the survey without coercion or duress.

Detailed Analysis:

Issue 1: Evidentiary Value of Statements Made During a Survey Under Section 133A
The primary issue revolves around whether statements made during a survey under Section 133A have any evidentiary value. The court noted that Section 133A does not empower income-tax authorities to examine a person on oath, unlike Section 132(4), which specifically confers such power during search and seizure operations. Consequently, statements recorded under Section 133A lack evidentiary value. The judgment referenced the decision in Paul Mathews and Sons v. Commissioner of Income-tax [(2003) 263 I.T.R. 101], which held that statements made during a survey cannot be used as evidence since they are not made under oath.

The court also cited the CBDT circular dated 10.3.2003, advising that confessions during surveys should not be relied upon unless supported by credible evidence. The court emphasized that an admission, while important, is not conclusive and can be contested by the person who made it, as established in Pullangode Rubber Produce Co. Ltd. v. State of Kerala [(1973) 91 I.T.R. 18].

Issue 2: Reliance on Entries in the Branch Contractors Agents Account Book Made Subsequent to the Survey
The assessing officer found that certain books, including the Branch Contractors' Agent Book, were not produced during the survey and contained entries made subsequent to the survey. The court held that the assessing officer's reliance on these entries was misplaced. The Tribunal and the Commissioner had rightly concluded that these entries, made after the survey, could not be used as a basis for assessment, especially when the initial statements made during the survey were retracted and lacked evidentiary value.

Issue 3: Basis of Assessment on Voluntary Statements Made During the Survey Without Coercion or Duress
The court examined whether voluntary statements made during the survey could form the basis of assessment. The assessee had retracted the statement made by one of its partners, arguing that it was made under duress and without proper understanding. The court found that the statements made during the survey under Section 133A, even if voluntary, could not be used as a basis for assessment without corroborative evidence. The court referenced the decision in Dr. S.C. Gupta v. Commissioner of Income-tax [(2001) 248 I.T.R. 782], where the burden was on the assessee to prove that the admission made was incorrect. However, in this case, the court found no material evidence to support the additional income disclosed during the survey.

Conclusion:
The court concluded that the materials collected and statements recorded during a survey under Section 133A do not have evidentiary value and cannot be solely relied upon for assessment. The Tribunal and the Commissioner had correctly followed the CBDT circular and relevant judicial precedents in arriving at their decision. Therefore, the court dismissed the Revenue's appeal, finding no substantial question of law for consideration.