2025 (4) TMI 475 - AT - Income Tax

Validity of statements recorded u/s.131 during the survey proceedings u/s. 133A - HELD THAT - Relying on the decision in the case of CIT vs. S. Khader Khan Son 2007 (7) TMI 182 - MADRAS HIGH COURT duly affirmed by the Hon ble Apex Court Ground No. 2 taken by the assessee is allowed and it is confirmed that section 133A does not empower the authorities to record the statements and statements obtained during the survey proceedings would not automatically bind the assessee. However burden still lying on the assessee to prove the statement otherwise in the light of substantive evidences. Relying on the documents being seized in the light of section 292C of the Act and no importance is being given to the statements recorded u/s. 131 - It is true that section 133A r.w.s. 292C of the Act raises a presumption that that the contents of books of account and other documents seized during the course of search is true. But it should be kept in mind that this presumption is only qua the person who is searched and/or from whose possession the books of account and documents are found and none else. Moreover this presumption is rebuttable. In the given facts of the case since the documents in question was not found or impounded from the appellant s premises but in the course of survey (not search) conducted against a third party the presumption set out in Section 292C of the Act does not apply to the appellant. In the case of CIT v. Shrishakti Trading Co 1993 (9) TMI 78 - BOMBAY HIGH COURT it has been held that it is well-settled that legal fictions are for a definite purpose and they are limited for the purpose for which they are created and should not be extended beyond that legitimate field. Other than this calculation sheets found at the premises of M/s. Quick Advertisement Co. no further working carried out by the AO to substantiate the same that it pertains to the assessee and calculations embedded there are true to be considered for the purposes of taxation. Notwithstanding the above as held (supra) that the statement recorded during the survey operations 133A of the Act has no evidentiary value and presumptions drawn u/s. 292C of the Act are also not in the favour of the Revenue. Resultantly Ground No. 3 raised by the assessee is allowed and the AO is directed to delete the addition.

Summary

ISSUES PRESENTED and CONSIDERED

The Tribunal considered several core legal issues in the appeals:

1. The legality and jurisdiction of the survey conducted under Section 133A of the Income Tax Act, 1961.

2. The evidentiary value of statements recorded under Section 131 during the survey.

3. The correctness of additions made by the Assessing Officer (AO) for alleged suppressed school fees and the denial of exemptions under Sections 11 and 12 of the Act.

4. The applicability of interest charges under Sections 234B and 234D of the Act.

5. The validity of notices issued under Sections 148 and 143(2), and the assessment orders passed without a Document Identification Number (DIN).

ISSUE-WISE DETAILED ANALYSIS

1. Legality of Survey under Section 133A

Relevant Legal Framework and Precedents: Section 133A of the Income Tax Act permits authorities to conduct surveys for collecting information related to tax liabilities. However, the jurisdiction and manner of conducting such surveys must comply with legal requirements.

Court's Interpretation and Reasoning: The Tribunal noted that the survey's legality was not pressed by the appellant, leading to its dismissal. The Tribunal did not delve into the jurisdictional challenges as the appellant did not pursue them.

2. Evidentiary Value of Statements Recorded under Section 131

Relevant Legal Framework and Precedents: Section 131 empowers authorities to record statements on oath, but statements recorded during surveys under Section 133A do not automatically bind the assessee, as established in CIT v. S. Khader Khan Son.

Court's Interpretation and Reasoning: The Tribunal relied on precedents, including the Supreme Court's affirmation in S. Khader Khan Son's case, to conclude that statements recorded during surveys lack evidentiary value unless corroborated by substantive evidence.

Key Evidence and Findings: The Tribunal emphasized that the burden of disproving the statement lies with the assessee, but the statements alone, without further evidence, cannot substantiate additions.

3. Additions for Suppressed School Fees and Denial of Exemptions

Relevant Legal Framework and Precedents: Sections 11 and 12 of the Act provide exemptions for income from property held for charitable or religious purposes. The AO made additions for alleged suppressed fees, impacting the exemptions.

Court's Interpretation and Reasoning: The Tribunal found that the documents seized during the survey did not originate from the assessee's premises, thus failing to meet the presumption requirements under Section 292C. Consequently, the additions were not justified.

Key Evidence and Findings: The Tribunal noted the lack of corroborative evidence linking the seized documents to the assessee's financial records, undermining the AO's basis for the additions.

Application of Law to Facts: The Tribunal applied Section 292C, emphasizing that the presumption of truth applies only to documents found in the possession of the person searched, not third parties.

Treatment of Competing Arguments: The Tribunal dismissed the Revenue's reliance on statements and documents from a third party's premises, highlighting the need for direct evidence.

4. Interest Charges under Sections 234B and 234D

Relevant Legal Framework and Precedents: Sections 234B and 234D impose interest on underpayment of advance tax and excess refunds, respectively.

Court's Interpretation and Reasoning: The Tribunal deemed these grounds consequential, not requiring specific adjudication due to the resolution of the primary issues.

5. Validity of Notices and Assessment Orders

Relevant Legal Framework and Precedents: Sections 148 and 143(2) govern the issuance of notices for reassessment and scrutiny. The absence of a DIN raises procedural questions.

Court's Interpretation and Reasoning: The Tribunal acknowledged the procedural irregularities but left these grounds open, noting ongoing divergent views in higher courts.

SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "Section 133A does not empower the authorities to record the statements. This is a settled position of law that the statement obtained under section 133A would not automatically bind upon the assessee."

Core Principles Established: The Tribunal reinforced that statements recorded during surveys lack evidentiary value unless supported by substantive evidence. The presumption under Section 292C applies only to documents found in the possession of the person searched.

Final Determinations on Each Issue: The Tribunal allowed the appeals in part, directing the deletion of additions for suppressed school fees and confirming that statements recorded during the survey do not bind the assessee. The Tribunal left procedural issues related to notices and assessment orders open for further adjudication.