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TMI Blog2014 (11) TMI 513X X X X Extracts X X X X X X X X Extracts X X X X ..... e advantage - But that was not a rule of evidence but a rule of prudence and fair play - the effect of explanation to Section 132(4) of the Act is that the AO can rely upon it in respect of pending proceedings also, as a piece of evidence, but not as the sole basis for imposing additional financial liability upon an assessee either in the form of denial of benefits which an assessee is otherwise entitled to, or subjecting him to prosecution - if there exists any other supportive material, the statement recorded u/s 132(4) can certainly be taken aid of - in the absence of other supporting material, a statement of that nature cannot constitute the basis to burden an assessee. Even in relation to the very block assessment, a statement referable to Section 132(4), but retracted by the person cannot constitute the sole basis - It can be relied upon if it is not retracted from and even if it is retracted from, it is supported by other material - The communication dated 11-03-2003 of the department to its officials throws light upon this - If the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5-86. The Revenue, on the one hand and the assessee, on the other hand filed two appeals each, before the Hyderabad Bench A of the Income Tax Appellate Tribunal (for short, the Tribunal) feeling aggrieved by the orders passed by the Commissioner (Appeals). The principal contention before the Tribunal was as to whether it was open for the assessing officer to take into account, the statement recorded under Section 132(4) of the Act, at a subsequent point of time. The department pleaded that in view of the amendment to the provision, it was open to them to place reliance upon the statement even in respect of the proceedings that are referable to earlier assessment years. The contention of the respondent-assessee was two fold. The first was that the amendment was prospective in nature and the second was that even on merits, the statement recorded under Section 132(4) has no evidentiary value since it has been retracted by the person from whom it was recorded. The Judicial Member accepted the contention of the Revenue, whereas the Accountant Member held the other way. Therefore, the matter was referred to a third member. He agreed with the Accountant Member. As a result, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the respondent, on the other hand, submits that the search took place in the year 1988 and the assessment orders in question are referable to 1984-85 and 1985-86 and that the returns for those two years cannot be processed with reference to the events that have taken place at a later stage. He contends that mere delay in passing of assessment orders cannot be a factor to superimpose the subsequent events, particularly when each year constitutes a unit by itself, under the Act. Learned counsel further submits that any provision that entails in disadvantage or penal consequences cannot be given retrospective effect. It is also urged that even on merits, the so-called statement of the Managing Director cannot constitute basis since it was already retracted and that the assessing officer did not press into service, any independent material other than the statement. The orders passed, in relation to the returns filed by the respondent for the assessment years 1984-85 and 1985-86 are in question. In respect of both the assessment years, the respondent claimed deduction of amounts said to have been paid towards commission and brokerage, to authorised dealer-firms. The amounts ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether on merits, the statement recorded under Section 132 of the Act could constitute proper evidence to support the conclusion arrived at by the assessing officer. Answering the first question is by no means a simple task. Several concepts need to be taken into account in this behalf. The discussion must start from the ordinary basic premise that unless the Legislature expresses the view otherwise, the provision enacted by it is always deemed to be prospective in operation. There are certain exceptions to this general principle. If the amendment is to a provision which is purely procedural in nature, the amendment is treated as retrospective, meaning thereby that the provision carried the meaning ascribed to it through the amendment, from the initial stage itself. Though it is not difficult to express this in theory, several problems arise in practice. The first is in the context of the classification itself. Many a time, a provision though occurs in an enactment which is procedural in nature, partakes the substantive characters. Further, in a given case, a particular provision can be purely procedural in nature or though may appear to be procedural, may contain substantive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive right back far enough it will be found secreted in the interstices of procedure. (Emphasis is of ours) The distinction between the charging provision on the one hand and machinery provisions on the other, in a tax enactment is also explained as under: It is important to distinguish between charging provisions, which impose the charge to tax, and machinery provisions, which provide the machinery for the quantification of the charge and the levying and collection of the tax in respect of the charge so imposed. Machinery provisions do not impose a charge or extend or restrict a charge elsewhere clearly imposed. The subject matter before the Honble Supreme Court was the right of appeal, and their Lordships held that no individual has a substantive right of appeal and much would depend upon the procedure that is in vogue, at the relevant point of time. In Pooran Mal v. Director of Inspection (2 supra), a Constitution Bench of the Supreme Court examined the constitutional validity of certain parts of Section 132 itself. Even while upholding the provision, their Lordships stressed the importance of fair play and reasonableness. After referring to the protection given ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the view that even in relation to the very block assessment, a statement referable to Section 132(4), but retracted by the person cannot constitute the sole basis. It can be relied upon if (a) it is not retracted from and (b) even if it is retracted from, it is supported by other material. The communication dated 11-03-2003 of the department to its officials throws light upon this. In ITTA No. 112 of 2003, decided on 09-09-2014, this Court took the said communication and the relevant provisions of the Act, and held: If the statement made during the course of search remains the same, it can constitute the basis for proceeding further under the Act, even if there is no other material. If, on the other hand, the statement is retracted, the Assessing Officer has to establish his own case. The statement that too, which is retracted from the assessee, cannot constitute the basis for an order under Section 158BC of the Act. The same factual situation obtains in the present case also. The statement has been retracted and the department did not press into service, any other material. If such a statement cannot constitute the basis in respect of the very block assessment, the question ..... X X X X Extracts X X X X X X X X Extracts X X X X
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