Assessment cannot be made merely on the basis of a statement recorded u/s 133A

Aassessment order itself reveals that the Revenue has placed reliance on the proceedings initiated against the appellant for imposition of penalty under Section 67 of the KVAT Act based on an inspection held on 17.08.2006. It is seen that the Revenue relied on letter dated 18.09.2007 issued by V. Ahammed to the Assistant Director of Income Tax (Investigation) clarifying his statement under Section 133A of the Act. This shows that the maker of the statement himself has re-affirmed the statement and nothing has been produced by the assessee to show that the contents of the statement are incorrect. In such a situation, we cannot accept the contention now raised by the learned counsel for the assessee and hold the assessments to be illegal.

Relevant Extract of the Judgment

5. The contention raised by the learned counsel for the appellant is mainly that the entire assessments are based on the statement of Sri. V.A. Ahammed, a Salesman of the appellant, recorded under Section 133A of the Act, and that in the absence of any corroborative evidence, the assessments are illegal. In support of this contention, the learned counsel has placed reliance on the judgments of this Court and the Madras High Court in Paul Mathews and Sons v. Commissioner of Income Tax¹ and Commissioner of Income Tax v. S. Khader Khan Son² respectively and the judgment of the Apex Court in Commissioner of Income Tax v. S. Khader Khan Son³ where the judgment of the Madras High Court was confirmed. On the other hand, the learned senior Counsel appearing for the Revenue contended that the statement under Section 1 33A has its evidentiary value, and according to him, so long as the assessee has not proved that the contents of the statement are incorrect, the assessment made relying on the statement cannot be interfered with. The learned counsel also invited our attention to the assessment order, where in addition to the statement under Section 1 33A, reliance has been placed on the proceedings for imposition of penalty under Section 67 of the KVAT Act on the allegation of suppression of stock. He also invited our attention to the assessment order where reliance has been placed on letter dated 1 8.09.2007 issued by Sri. V. Ahamed, a salesman of the appellant. Therefore, according to him, the principle laid down in the judgments of this Court and Madras High Court cannot be applied to the facts of this case. In fact, the learned counsel invited our attention to the judgment of the Bombay High Court in Dr. Dinesh Jain v. ITO (Bom)⁴ where the Bombay High Court has distinguished the judgment in S. Khader Khan Son (supra).

6. We have considered the submissions made. It is a fact that the statement under Section 133A of Sri. V. Ahammed, the salesman  of the appellant, was recorded during the survey conducted. It is also true that an assessment made entirely relying on such a statement cannot be sustained. Law in this behalf has been clarified by this Court in Paul Mathews and Sons v. Commissioner of Income Tax⁵, wherein this Court has held thus:

“Section 133A(3)(iii) enables the authority to record the statement of any person which may be useful for, or relevant to, any proceeding under the Act. Section 133A, however, enables the income-tax authority only to record any statement of any person which may be useful, but does not authorize taking any sworn statement. On the other hand, we find that such a power to examine a person on oath is specifically conferred on the authorised officer only under Section 132(4) of the Income-tax Act in the course of any search or seizure. Thus, the Income-tax Act, whenever it thought fit and necessary to confer such power to examine a person on oath, the same has been expressly provided whereas section 133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under Section 133A, Section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under Section 133A of the Income-tax Act it is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law. Therefore, there is much force in the argument of learned counsel for the appellant that the statement elicited during the survey operation has not evidentiary value and the Income-tax Officer was well aware of this.”

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