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TMI Blog1998 (8) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... ss capital for 1988-89." The facts germane to the above issue are that the assessee is an individual. On 2-10-1987 at the Sahara International Airport in Mumbai he was found to be in possession of Rs. 7 lakhs. The Air Intelligence Unit of Customs (ATUC, for short, hereinafter) intercepted the assessee on his arrival from Bangalore and was questioned about the source of the cash of Rs. 7 lakhs. Not being satisfied with the explanation, the ATUC referred the matter to the Income-tax authorities in Mumbai and an Assistant Director of Income-tax (Inv.) (hereinafter referred to as ADI, for short) was empowered by a necessary warrant under section 132A of the IT Act to initiate necessary proceedings against the assessee. Being not fully satisfied with the explanation offered, the ADI seized the cash of Rs. 7 lakhs after completing formalities. Besides, a statement on oath was also recorded on the same day at the Airport. In answer to question No. 3, the assessee had stated to have earned an income of Rs. 1,08,000 each from business during the periods relevant for the assessment years 1986-87 and 1987-88 and that the same was not disclosed to the department. The assessee also did not fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s envisage such situations. As per the provisions of the section 292B of the I.T. Act no proceedings are invalid, if such proceedings are in substance and effect in conformity with or according to the intent and purpose of the Act. Therefore, merely by reason of a procedural error, the proceedings under the Act cannot be said to be invalid." Another objection of the assessee was that there was no evidence to show that he had in fact earned an income of Rs. 1,08,000 from business. To this the Assessing Officer pointed out that it was the assessee who had stated that he had earned such an income and the onus of proof did not lie on the department to prove it otherwise. According to him, the onus of proof lay on the assessee to prove that the admitted income was never earned. The explanation of the assessee regarding the source for Rs. 7 lakhs was not satisfactory. In the return of income filed by the assessee subsequent to the seizure, for the assessment year 1988-89, it was stated that the sum of Rs. 7 lakhs represented the business capital and the business income earned during the financial year 1987-88. It was also stated that the business was of an undisclosed nature and the so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search under section 132 and such a statement could not be recorded during the course of a seizure made under section 132A and, in fact, there was a specific exclusion in terms of section 132A(3). Further, for a statement to be recorded under section 131, the person questioned would have to appear either as an assessee or as a witness and the assessee was clearly not asked to appear either as an assessee or as a witness. According to the CIT(A), therefore, the ADI who recorded the statement had no jurisdiction to record a statement under section 131, as he was neither the Assessing Officer nor had he been issued with a commission by the Assessing Officer to record such a statement. In fact, the statement, in the opinion of the CIT(A), did not purport to be a statement either under section 131 or under section 132(4) but a statement in terms of section 132A. The CIT(A) also considered whether section 292B would have any application. According to him, section 292B was a section that prevented the invalidation of a proceeding on account of technical errors of notice, etc. and there was no technical error at all whatsoever in the present case. The error here was jurisdictional and we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. As per section 292B, no proceedings are invalid, if such proceedings are in substance and in effect in conformity with or according to the intent and purpose of the Act. For this purpose, the learned departmental representative placed reliance on the following case laws : (i) L. Hazari Mal Kuthiala v. ITO [1961] 41 ITR 12 (SC); (ii) R. P. Kandaswami v. CIT [1963] 49 ITR 344 (Mad.); and (iii) CIT vs Hargopal Bhalla Sons [1971] 82 ITR 243 (Punj. Har.). The learned departmental representative also contended that even though no oath was administered at the time of recording the statement still the material furnished is good material. In support, he placed reliance on the decision of the Assam High Court in the case of Chowkchand Balabux v. CIT [1961] 41 ITR 465. The learned departmental representative contended that the argument of the assessee that the ADI cannot record statement outside his office chambers cannot survive as it is a settled matter that the Assessing Officer or ADI, in exercise of his powers under section 131 can also record a statement outside his office chambers. He contended that the ADI has got power to record statement as evident from section 131(1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition by the CIT(A). 7. We have heard the rival submissions. The first question to be decided is whether the ADI is competent to record the statement of the during the proceedings under section 132A. It is true that the ADI has not quoted any section under which the statement was recorded. The statement is given by the assessee voluntarily on his own. The assessee has not alleged any coercion during the proceedings under section 132A when the statement was recorded from him. It is the contention of the revenue that the ADI is competent to record a statement under section 131(1A). It is also the case of the revenue that even if the section under which the statement is recorded is not quoted, it can be regularised by invoking section 292B. The case laws cited by the learned departmental representative support the case of the revenue. (i) In the case of L. Hazari Mal Kuthiala (supra), the Hon'ble Supreme Court held as under : ". . . the exercise of a power would be referable to a jurisdiction which conferred validity upon it and not to a jurisdiction under which it would be nugatory; and the order of the Commissioner was not invalid merely because it was not made under the Patia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23(3) of the 1922 Act. Penalty proceedings based on such an assessment order would also be valid." It is the contention of the learned departmental representative that the assessee has given a statement voluntarily and stated that he got business income from a business of undisclosed nature. Hence, the statement recorded by the ADI has to be held to be valid. (iv) The Assam High Court in the case of Chowkchand Balabux (supra) has held that the provisions of section 37 of the IT Act only empowered, and did not lay down an obligation, on the ITO to administer oath when examining persons appearing before him and that the statements recorded by the ITO without administering an oath to the persons attending was good material and admissible in income-tax proceedings. (v) The Kerala High Court has held as under, in the case of V. Kunhambu Sons (supra) : "The Explanation to section 132 of the Income-tax Act, 1961, inserted with effect from April 1, 1989, seeks to clarify the necessary import of the main provision contained in sub-section (4) of section 132 of the Act. It does not change the substantive provision of the Act; nor does it lay down a different method of using the st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be decided is whether the assessee has carried on any business during the course of the assessment year under consideration giving rise to an income of Rs. 1,08,000 each. The Assessing Officer has computed the income from business only on the basis of the answer given by the assessee to a question put to him during the recording of the statement on 2-10-1987 at the Airport. The assessee has stated, in answer to that particular question, that he has earned an income of Rs. 1,08,000 each from the business during the period relevant to the assessment years 1986-87 and 1987-88. On the strength of the above admission of the assessee, the Assessing Officer held that the assessee had earned an income of Rs. 1,08,000 each for the two years under consideration and that the same was not disclosed. The assessee also did not file revised returns for the two years subsequent to admission of earning the income from business. It is the contention of the assessee that he has not carried on any business during the years in question. It is pertinent to note that though the assessee disclosed an income of Rs. 6,40,000 for the assessment year 1988-89 from business, the Assessing Officer held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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