Case Law Details
CASE LAWS DETAILS
DECIDED BY: ITAT, BENCH `B’, Hyderabad.
IN THE CASE OF: IT (SS) A. NO. 65/HYD/2005, APPEAL NO: IT (SS) A. NO. 65/HYD/2005, DECIDED ON FEBRUARY 28, 2008
RELEVANT PARAGRAPH
10. We heard the rival contentions. Before proceeding in this matter, we feel it is better to analyse the decision of Honorable Madras ITAT decision in the case of Sivabala Devi, supra, as both the assessee and Ld. CIT(A) have placed their reliance on it. In that case, the appellant had furnished certain information regarding — her investments, sources thereof and the nature of her income to the Income tax Department as early as on 15-05-1995 through her reply to the ADI, Investigation- II, Madurai, in compliance with his notice u/s 131 of the Income tax Act. The search was conducted in the residence of the appellant’s co-brother on 20-01-1996, i.e. nearly after a gap of eight months. So there was actually no connection between the disclosure made by the assessee and the search operations. Both were independent of each other and the disclosure was much earlier to the search and was without detection by the department. Hence in the facts and circumstances of the case, the Honorable ITAT has held that the information having been disclosed in compliance with the requirement of section 131 of the Income tax Act, it would not fall under the purview of the block assessment proceedings. However; in the present case the survey and search were carried out on the same day and the search was initiated during the continuance of survey and the assessee has admitted the j same only after the detection by the department and such disclosure is not in compliance with the requirement of the .provisions of the Act. Hence’* the facts of the present case differ from the above cited decision and the present case has to be decided on the legal point and merits independently.
11. The main contention of the assessee is that in the present case, the Survey operation u/s 1 33A of the Act preceded the Search Operation and the value of excess stock having been accepted in the statement recorded during the course of survey, it should be presumed that the same has -been disclosed to the department before the initiation of Search proceedings. In this connection, it is very much relevant to analyze of the provisions of the Act which prescribe the powers of the Income tax authority. Section 131 to Section 134 are the provisions which empower the income tax authorities. However only one section viz., Section 132 authorize an Income tax authority to enter the residential premises. Three sections, viz., Section 132, 133A and 133B authorize an Income tax authority to enter the business premises. Under section 133B, an Income tax authority is empowered to collect only the information prescribed under the Income tax Rules.
12. The Power of entry into the residential and business premises prescribed under section 132 can be exercised by_the Income tax authority only, in consequence of information in his possession and also with an additional condition that such authority should have reason to believe, on the basis of such information, that there is wilful omission, non-compliance or concealment on the part of the assessee. Under section 132, an income tax authority can enter and search any building, break open the lock of any door, search any person, seize any books, money, bullion, jewellery Or other.valuable article, make a note of inventory of any such money, bullion etc. He MAY also examine on oath any person and any statement obtained during such examination may thereafter be used in evidence in any proceeding under the Act.
13. Whereas for exercising power of survey u/s 133A of the Act, no such prior information or reason is necessary and it also overrides other provisions of the Act with non- obstente clause. In the survey operation, the income tax authority can enter only the business premises and also only during the hours at which such place is open for the conduct of business or profession. Under the power of survey u/s 133A, an income tax authority can inspect the books of account, make an inventory of cash, stock or other valuable article or thing checked or verified by him, record a Statement of any person (with out administering oath) which may be useful for, or relevant to, any proceeding under the Act. The information so collected may be used in any proceeding, which may be past, present or future proceeding.
14. The Act has prescribed a special procedure for Assessment of search cases (i.e. cases where search is initiated u/s 132) for the search initiated after 30th June, 1995 and on or before 31st May, 2003, in which “Undisclosed income” has been found out. No such kind of special procedure is prescribed for making assessment on the basis of information collected during the course of survey u/s 133A.
15. There is also difference with regard to the treatment of the Statement recorded both under section 132 and section 133A. Under the provisions of section 132(4), the statement recorded during the search proceedings may be used as “evidence in any proceedings” under the Act. However, the same status of-, “evidence” is not accorded to the statement recorded^u/s 133A. This difference has been pointed out by Hon’We Keralcmigh Court in the case of Pau[ Mathews & Sons Vsf CJT{263 ITRlQrj; (Hence the. statement taken u/s 133A during the survey CAN NOT have same value as evidence as envisaged in the statement recorded during search u/s 132(4).
l6. The term “Undisclosed income” assumes significance here. The learned CIT(A) in para 04(a) of his order has extracted the observations of the Hon’ble Delhi High court in the case of L.R.Gupta Vs. Union of India (1992) 194 1TK. 321 which is reproduced below:-
“The expression “income which has not been or would not be disclosed for the purposes of the Income tax Act” would mean that income which is liable to tax but which the assessee has not returned in his income tax return or made known to the Income tax Department, The sub clause itself refers to this as “Undisclosed income or properly”. In our opinion, the words “undisclosed” , in that context, must mean income which is hidden from the Department.”
It was further observed by the Honorable Court that:-
“Where the department is aware of the existence of such an p^ asset or the receipt of such an amount by the assessee, then f the department may be fully justified in issuing a notice , under section 148 of the Act, but no action can be taken % under section 132(1 )(c). Authorization u/s 132(1) can be issued if there is a reasonable belief that the assessee does not want the Income tax Department to know about the existence of such income or asset in an effort to escape assessment. Section 132(l)(c) has been incorporated in order to enable the department to take physical possession of those movable properties or articles which are, or represent, undisclosed income or property. The words “undisclosed income j mean income which is liable to be taxed under the provisions of the Income Unr Act but which has not been disclosed by an assessee in wi effort to escape assessment. “Not disclosed” implies the intention of the assessee to hide the existence of the income or the asset from the Income tax department while being aware that the same is rightly taxable.”
The Madras bench of Honorable ITAT in the case of Smt. Sivabala Devi (supra) has described the word “disclosed” as under:-
“Disclosed” for the purposes of this Act definitely means, disclosed for the purposes required by the various Provisions contained in the Income-tax Act/ 1961. Disclosed for the purposes of the Income tax Act, 1961 does riot mean, disclosed for the purposes of making an assessment alone. There is no such a restriction given in the definition of “undisclosed income”, so as to presume that particulars furnished by art assessee through filing a return of income / alone constitute disclosing the particulars for the purposes of this Act. The assessee might be furnishing details and particulars regarding his property and income in compliance of the requirements made by appropriate authorities invoking different provisions of the Income tax Act, 1961.”
17. A combined reading of above cited decisions makes it clear that the disclosure should be in compliance with the requirements made by the appropriate authorities invoking different provisions of the Income tax Act. In the present case, the admission of excess stock is not in compliance with the requirement of any of the provisions of the Act.
18. As per the provisions of Section 132(13) of the Act, the provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches and seizure shall apply, so far as may be, to searches and seizure made u/s 132(1) or 132(1 A). Hence in the search proceedings, panchanamas are prepared quoting therein date and time of commencement of search and the said search is formally completed quoting again the date and time of completion. No such procedure is prescribed for the survey carried out u/s 133A. The Act prescribes only the time during which an income tax authority can enter the business premises. So there is no formal commencement and completion of survey proceedings, which means that the Survey is only an investigation proceeding only. If the department proceeds to assess or reassess the income on the basis of information obtained during the course of survey under the provisions of the Act, then the disclosure made by the assessee will fall in the category of “disclosure in compliance with the requirement of the provisions of the Act”. Otherwise, it is only an information which may be used in any proceeding, whether past, present or future.
19. Both in the case of search u/s 132 and survey u/s 133A an option is available with the income tax authority, i.e., not to proceed with the information obtained during the course of respective proceedings as the word “May” is used in the respective provisions. However if the department chooses to proceed further, it can proceed to assess the undisclosed income found out u/s 132 only in accordance with the provisions of Chapter XIV-B in respect of search initiated during the period referred supra. However, in the absence of any such special procedure for the surveys, in our opinion, the department may use the information obtained during the course of survey-
(a) in regular assessment proceedings; and/ or
(b) in reassessment proceedings; or
(c) even for initiation of search proceedings during the continuance of survey.
20. By assimilating the legal provisions and taking the conspectus of the matter, we are guided to decide the issue before us in the following way:-
(a) as there is no formal commencement and completion of survey proceeding u/s 133A and during the continuance of survey proceedings, the search proceedings u/s 132 having been initiated on the basis of information obtained, circumstances of the case, it can be said that the survey proceeding loses its identity and in fact, gets merged with the search proceedings. Hence as claimed by the assessee, there cannot be two independent proceedings in the present case and the conclusion of operation results in search proceeding only. Had the survey and search proceedings been carried out on two different dates independently, then the claim of the assessee may hold good.
b. As the survey operation is only an investigation proceeding and the information obtained during the course can be used for any future proceeding, the search can only be said to be rightly initiated in the present case on the basis of information about the excess unaccounted stock obtained during the course of survey and the end result of operation is search only.
c. The value of excess stock cannot be said to have been disclosed to the department for the following reasons:-
(i) The “evidential” value is not accorded to the statement obtained during the course of survey.
(ii) The disclosure is not in compliance with the requirement of the provisions of the Act.
(iii) the department did not proceed to assess or reassess the excess stock by issue of notice either u/s 142(1) or u/s 148.
