Preface
It may be apt to start with recent decision of Apex court in case of Vasant Rao Guhe wherein context of Prevention of Corruption Act, 1988 it is observed by three Judges bench that “ …As has been held by this Court amongst others in State of Maharashtra Vs. Dnyaneshwar Laxman Rao Wankhede (2009) 15 SCC 2000, even in a case when the burden is on the accused, the prosecution must first prove the foundational facts” The apercu reference to these observations put the subject in correct perspective.
Further, apposite would be reference to classical observations of Apex court in case of K.P.Varghese 131 ITR 597 holding that
“It is a well settled rule of law that the onus of establishing that the conditions of taxability are fulfilled is always on the Revenue. to throw the burden of showing that there is no understatement of the consideration, on the assessee would be to cast an almost impossible burden upon him to establish the negative, namely that he did not receive any consideration beyond that declared by him”.
Further, Apex court in case of. In L.I.C of India & Anr v. Ram Pal Singh Bisen, (2010) 4 SCC 491, held that
“failure to prove the defence does not amount to an admission, nor does it reverse or discharge the burden of proof of the plaintiff.” Also held in case of Union Of India vs Ibrahim Uddin & Anr on 17 July, 2012 that “The court cannot loose sight of the fact that burden of proof is on the party which makes a factual averment” Further, in A. Raghavamma and Another v. A. Chenchamma and Another AIR 1964 SC 136, while making a distinction between burden of proof and onus of proof, a three-Judge Bench of Apex court opined thus: “There is an essential distinction between burden of proof and onus of proof :burden of proof lies upon the person who has to prove a fact and it never shifts, but the onus of proof shifts. The burden of proof in the present case undoubtedly lies upon the plaintiff to establish the factum of adoption and that of partition. The said circumstances do not alter the incidence of the burden of proof. Such considerations, having regard to the circumstances of a particular case, may shift the onus of proof. Such a shifting of onus is a continuous process in the evaluation of evidence.”
Further, interesting reference can be made to Apex court verdict on legal fictions and presumptions where in case of M/s. Bhuwalka Steel Industries Ltd. & Another vs UOI (March 24, 2017) has perspicaciously held that
“There is a clear distinction in law between a legal fiction and presumption. A distinction commonly taken between the fiction and the legal presumption runs something as follows: A fiction assumes something which is known to be false; a presumption (whether conclusive or rebuttable) assumes something which may possibly be true. This distinction is regarded as being reinforced, as it were, in the case of the rebuttable presumption because such a presumption assumes a fact which probably is true.”
10 “Presumptions are closely related to legal fictions … but they operate differently”
11. “Fictions always conflict with reality, whereas presumptions may prove to be true”
12. Legal fictions create an artificial state of affairs by a mandate of the legislature. They compel everybody concerned including the courts to believe the existence of an artificial state of facts contrary to the real state of facts. When a fiction is created by law, it is not open to anybody to plead or argue that the artificial state of facts created by law is not true, barring the only possible course if at all available is to question the constitutionality of the fiction. It is settled law that only sovereign legislative bodies can create legal fictions but not a subordinate law making body. Whereas presumptions are rules of evidence for determining the existence or otherwise of certain facts in issue in a litigation. Presumptions were inferences which the judges were directed to draw from certain states of facts in certain cases, and these presumptions were allowed a certain amount of weight in the scale of proof; such a presumption and such evidence amounted to full proof, such another to half full, and so on.”
Further it is said in same decision that Presumptions are of four kinds according to English law.
1. Conclusive presumptions. These are rare, but when they occur they provide that certain modes of proof shall not be liable to contradiction.
2. Presumptions which affect the ordinary rule as to the burden of proof that he who affirms must prove.
He who affirms that a man is dead must usually prove it, but if he shows that the man has not been heard of for seven years, he shifts the burden of proof on his adversary.
3. There are certain presumptions which, though liable to be rebutted, are regarded by English law as being something more than mere maxims, though it is by no means easy to say how much more. An instance of such a presumption is to be found in the rule that recent possession of stolen goods unexplained raises a presumption that the possessor is either the thief or a receiver.
4. Bare presumptions of fact, which are nothing but arguments to which the Court attaches whatever value it pleases.
Further Apex court in case of Sati Oil Udyog in decision reported at (2015) 276 CTR 14 has held that
“The burden of proving that the assessee has so attempted to evade tax is on the revenue which may be discharged by the revenue by establishing facts and circumstances from which a reasonable inference can be drawn that the assessee has, in fact, attempted to evade tax lawfully payable by it…”.
Apex court in case of Hindustan Ferodo Ltd. vs. Collector of Central Excise, Bombay, 1997(89) ELT 16(SC), in paragraph 3 it was laid down:
“3. It is not in dispute before us,as it cannot be, that the onus of establishing that the said rings fell within Item 22F lay upon the Revenue. The Revenue led no evidence. The onus was not discharged. Assuming therefore, that the Tribunal was right in rejecting the evidence that was produced on behalf of the appellants, the appeal should, nonetheless, have been allowed.”
In ‘Arun Kumar V. Union of India’ – 2006 (9) TMI 115 – (SUPREME COURT) it was held that
“a ‘jurisdictional fact’ is a fact which must exist before a Court, Tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non existence of which depends upon the jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency’s power to act depends. If the jurisdictional fact does not exist, the court, authority or order cannot act. If a court or authority wrongly assumes the existence of such fact the order can be questioned by a writ of certiorari. The underlying principle is that the erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.
Further it is held by Apex court in this regard in celebrated order in case of Raza Textiles 87 ITR 539 held that
“..No authority, much less a quasi-judicial authority, can confer jurisdiction on itself by deciding a jurisdictional fact wrongly and …. It is incomprehensible to think that a quasi-judicial authority like the Income-tax Officer can erroneously decide a jurisdictional fact and thereafter proceed to impose a levy on a citizen…”
Further on scope of subordinate legislation, it may be better to refer to authority of Apex court in Hukam Chand Etc. v. Union of India & Others, AIR 1972 SC 2427 : (1972) 2 SCC 601, at Para 8
“The underlying principle is that unlike Sovereign Legislature which has power to enact laws with retrospective operation, authority vested with the power of making subordinate legislation has to act within the limits of its power and cannot transgress the same. The initial difference between subordinate legislation and the statute laws lies in the fact that a subordinate law making body is bound by the terms of its delegated or derived authority and that court of law, as a general rule, will not give effect to the rules, thus made, unless satisfied that all the conditions precedent to the validity of the rules have been fulfilled (see Craies on Statute Law, p. 297, Sixth Edition).”
On Evidentiary value, it may be better to refer to illuminating discussion in recent Apex court decision in case of Common cause vs UOI [2017] 77 Taxman 245 (SC),
“. With respect to the kind of materials which have been placed on record, this Court in V.C. Shukla’s case (supra) has dealt with the matter though at the stage of discharge when investigation had been completed but same is relevant for the purpose of decision of this case also. This Court has considered the entries in Jain Hawala diaries, note books and file containing loose sheets of papers not in the form of “Books of Accounts” and has held that such entries in loose papers/sheets are irrelevant and not admissible under Section 34 of the Evidence Act, and that only where the entries are in the books of accounts regularly kept, depending on the nature of occupation, that those are admissible
It has further been laid down in V.C. Shukla (Supra) as to the value of entries in the books of account, that such statement shall not alone be sufficient evidence to charge any person with liability, even if they are relevant and admissible, and that they are only corroborative evidence. It has been held even then independent evidence is necessary as to trustworthiness of those entries which is a requirement to fasten the liability.
This Court has further laid down in V.C. Shukla (Supra) that meaning of account book would be spiral note book/pad but not loose sheets. The following extract being relevant is quoted hereinbelow :-
“14. In setting aside the order of the trial court, the High Court accepted the contention of the respondents that the documents were not admissible in evidence under Section 34 with the following words: “An account presupposes the existence of two persons such as a seller and a purchaser, creditor and debtor. Admittedly, the alleged diaries in the present case are not records of the entries arising out of a contract. They do not contain the debits and credits.
They can at the most be described as a memorandum kept by a person for his own benefit which will enable him to look into the same whenever the need arises to do so for his future purpose. Admittedly the said diaries were not being maintained on day-to-day basis in the course of business. There is no mention of the dates on which the alleged payments were made. In fact the entries there in are on monthly basis. Even the names of the persons whom the alleged payments were made do not find a mention in full. They have been shown in abbreviated form. Only certain ‘letters’ have been written against their names which are within the knowledge of only the scribe of the said diaries as to what they stand for and whom they refer to.”
x x x x x x x x x x x x x x x
From a plain reading of the Section it is manifest that to make an entry relevant thereunder it must be shown that it has been made in a book, that book is a book of account and that book of account has been regularly kept in the course of business. From the above Section it is also manifest that even if the above requirements are fulfilled and the entry becomes admissible as relevant evidence, still, the statement made therein shall not alone be sufficient evidence to charge any person with liability.
It is thus seen that while the first part of the section speaks of the relevancy of the entry as evidence, the second part speaks, in a negative way, of its evidentiary value for charging a person with a liability. It will, therefore, be necessary for us to first ascertain whether the entries in the documents, with which we are concerned, fulfill the requirements of the above section so as to be admissible in evidence and if this question is answered in the affirmative then only its probative value need be assessed.
“Book” ordinarily means a collection of sheets of paper or other material, blank, written, or printed, fastened or bound together so as to form a material whole. Loose sheets or scraps of paper cannot be termed as “book” for they can be easily detached and replaced. In dealing with the word “book” appearing in Section 34 in Mukundram v. Dayaram1 a decision on which both sides have placed reliance, the Court observed:-
“In its ordinary sense it signifies a collection of sheets of paper bound together in a manner which cannot be disturbed or altered except by tearing apart. The binding is of a kind which is not intended to the moveable in the sense of being undone and put together again. A collection of papers in a portfolio, or clip, or strung together on a piece of twine which is intended to be untied at will, would not, in ordinary English, be called a book. … I think the term ‘book’ in Section 34 aforesaid may properly be taken to signify, ordinarily, a collection of sheets of paper bound together with the intention that such binding shall be permanent and the papers used collectively in one volume. It is easier however to say what is not a book for the purposes of Section 34, and I have no hesitation in holding that unbound sheets of paper, in whatever quantity, though filled up with one continuous account, are not a book of account within the purview of Section 34.”
We must observe that the aforesaid approach is in accord with good reasoning and we are in full agreement with it. Applying the above tests it must be held that the two spiral note books (MR 68/91 and MR 71/91) and the two spiral pads (MR 69/91 and MR 70/91) are “books” within the meaning of Section 34, but not the loose sheets of papers contained in the two files (MRs 72/91 and 73/91).
x x x x x x x x x x x x x x x x x x
Mr. Sibal, the learned counsel for the Jains, did not dispute that the spiral note books and the small pads are “books” within the meaning of Section 34. He, however, strongly disputed the admissibility of those books in evidence under the aforesaid section on the ground that they were neither books of account nor they were regularly kept in the course of business. he submitted that at best it could be said that those books were memoranda kept by a person for his own benefit.
According to Mr. Sibal, in business parlance “account” means a formal statement of money transactions between parties arising out of contractual or fiduciary relationship. Since the books in question did not reflect any such relationship and, on the contrary, only contained entries of monies received from one set of persons and payment thereof to another set of persons it could not be said, by any stretch of imagination that they were books of account, argued Mr Sibal.
He next contended that even if it was assumed for argument’s sake that the above books were books of account relating to a business still they would not be admissible under Section 34 as they were not regularly kept. It was urged by him that the words “regularly kept” mean that the entries in the books were contemporaneously made at the time the transactions took place but a cursory glance of the books would show that the entries were made therein long after the purported transactions took place. In support of his contentions he also relied upon the dictionary meanings of the words ‘account’ and ‘regularly kept’.”
(Emphasis added by us)
With respect to evidentiary value of regular account book, this Court has laid down in V.C. Shukla, thus;
“37. In Beni v. Bisan Dayal it was observed that entries in books of account are not by themselves sufficient to charge any person with liability, the reason being that a man cannot be allowed to make evidence for himself by what he chooses to write in his own books behind the back of the parties. There must be independent evidence of the transaction to which the entries relate and in absence of such evidence no relief can be given to the party who relies upon such entries to support his claim against another.
In Hira Lal v. Ram Rakha the High Court, while negativing a contention that it having been proved that the books of account were regularly kept in the ordinary course of business and that, therefore, all entries therein should be considered to be relevant and to have been proved, said that the rule as laid down in Section 34 of the Act that entries in the books of account regularly kept in the course of business are relevant whenever they refer to a matter in which the Court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability.
It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that they were in accordance with facts.”
It is apparent from the aforesaid discussion that loose sheets of papers are wholly irrelevant as evidence being not admissible under Section 34 so as to constitute evidence with respect to the transactions mentioned therein being of no evidentiary value. The entire prosecution based upon such entries which led to the investigation was quashed by this Court”
Income Tax Law and Burden of proof
After having a look on the concept of burden of proof, application of said concept in various provisions of income tax law is dilated in this portion of the paper. At various occasions, it is noticed that tax administration particularly do not appreciate and respect the “burden of proof” and it is generally put on tax payer. To some extent the credit goes to the provisions like section 96(2) of Income Tax Act (in GAAR) where it is presumed that
“(2) An arrangement shall be presumed, unless it is proved to the contrary by the assessee, to have been entered into, or carried out, for the main purpose of obtaining a tax benefit, if the main purpose of a step in, or a part of, the arrangement is to obtain a tax benefit, notwithstanding the fact that the main purpose of the whole arrangement is not to obtain a tax benefit.”
Further, to the same effect are the provisions like section 50C, section 43CA and section 56 where in context of immovable property, it is presumed at the beginning that circle rate should be the minimum value of transaction. In applying such law, it is generally forgotten that basic and foundational facts necessary to apply such presumptions etc must be first established dehors assumptions. Like before applying section 96(2) there must be an arrangement and tax benefit proved, then only other presumption can arise.
Further, that the burden is on the Revenue to prove that the income sought to be taxed is within the taxing provisions and there was in fact income, are propositions which are well settled by the Supreme Court in the case of Parimisetti Seetharamamma v. CIT [1965] 57 ITR 532 which reiterates these propositions. This is very important burden and must be discharged by revenue strictly. There should not be reverse burden on tax payer to prove negative. The manner in which this burden can be discharged largely depends on the context of provision in consideration and facts of that case. It has been long since Apex court verdict in Sumati Dayal case 214 ITR 801 that human probabilities and surrounding circumstances can discharge revenue burden is applied in carte-blanche manner by revenue. But the moot point is if human probabilities are to decide whether tax payer is taxable or not then entire purpose to keep and maintain inundated and gargantuan documentation will loose its significance. (refer section 44AA, section 145 of Income Tax Act ). So test of human probability in author’s opinion cannot be used in routine and light hearted manner and must be applied in rare cases. Often it is seen that tax deduction at source by payer which many time is done out of abundant caution to avoid wrath of law is seen as adequate proof that payee has earned an income which is taxable in payee hands, which according to author is again misplaced. Further, role of assumptions and suspicions in discharge of burden by revenue authorities is a recurring phenomena where in majority of tax assessments it is seen that apart from assumption and suspicion there is nothing in revenue’s pocket. It is cardinal principle of taxation that suspicion howsoever strong cannot take the place of evidence (Commissioner of Income-tax v. Daulatram Rawatmull, (1964) 53 ITR 574 (SC)) which principle is now a fundamental principle in taxation law. Proceedings on basis of assumptions and suspicion is rejected in various authorities at various stages like it is held that reasons to suspect are not reasons to believe (refer Supreme court in Lakmani Mewal Dass case 103 ITR 437)).
Apropos, section 68 (unexplained cash credit), although there are long line of judicial pronouncements where issue of burden of proof is analysed but for purpose of present paper, whole subject can be put lucidly if reference is made to recent Delhi high court decision in case of D.K.Garg, order dated 4th August 2017, in ITA 115/2005 wherein it is held as under:
“There have been numerous cases before the AO, CIT (A), the ITAT and for that matter even before this Court, where the question involved concerns the treatment of ‘accommodation entries’. Basically, what an accommodation entry provider does is to accept cash from an Assessee and arranges to have a cheque issued from his own account or some other account, usually of ‘paper’ or fake entities, to make it appear to be a loan or an investment in share capital. The accommodation entry provider usually charges a commission which is deducted upfront. Where the Assessee is unable to explain the source of such credit in his account – i.e. by demonstrating the identity of the provider of the credit, the creditworthiness of such entity, and the genuineness of the transaction – the credit entry is treated as unexplained and the income is treated under Section 68 of the Act as the income of the Assessee.
In cases where the Assessee discharges the initial onus of establishing the identity and creditworthiness of the credit provider and the genuineness of the transaction, be it one of loan or subscribing to share capital, the onus shifts to the revenue to show the contrary. Where, for instance, an Assessee furnishes the complete details of the entity like its certificate of incorporation, PAN number, income tax returns, bank accounts, names and addresses of the directors and so on, the Courts have insisted on the AO to make a proper enquiry to examine the identity and creditworthiness of such companies and the genuineness of the transactions in question. Where the AO fails to make such an enquiry, a Court might delete the additions made by the AO…”
To the similar effect is recent Delhi high court decision in case of BEST INFRASTRUCTURE (INDIA) PVT. LTD order dated 01/08/2017 in ITA 13/2017 wherein it is held as under:
“37. Fourthly, a copy of the statement of Mr. Tarun Goyal, recorded under Section 132 (4) of the Act, was not provided to the Assessees. Mr. Tarun Goyal was also not offered for the cross-examination. The remand report of the AO before the CIT(A) unmistakably showed that the attempts by the AO, in ensuring the presence of Mr. Tarun Goyal for cross-examination by the Assessees, did not succeed. The onus of ensuring the presence of Mr. Tarun Goyal, whom the Assessees clearly stated that they did not know, could not have been shifted to the Assessees. The onus was on the Revenue to ensure his presence. Apart from the fact that Mr. Tarun Goyal has retracted his statement, the fact that he was not produced for cross examination is sufficient to discard his statement.
38. Fifthly, statements recorded under Section 132 (4) of the Act of the Act do not by themselves constitute incriminating material as has been explained by this Court in Commissioner of Income Tax v. Harjeev Aggarwal (supra). Lastly, as already pointed out hereinbefore, the facts in the present case are different from the facts in Smt. Dayawanti Gupta v. CIT (supra) where the admission by the Assessees themselves on critical aspects, of failure to maintain accounts and admission that the seized documents reflected transactions of unaccounted sales and purchases, is non-existent in the present case. In the said case, there was a factual finding to the effect that the Assessees were habitual offenders, indulging in clandestine operations whereas there is nothing in the present case, whatsoever, to suggest that any statement made by Mr. Anu Aggarwal or Mr. Harjeet Singh contained any such admission.”
ITAT reasoning approved by high court:
“Therefore, we hold that the statement of Shri Tarun Goyal cannot be used against the assessee because:
(i) His statement was recorded behind the back of the assessee and the assessee was not allowed any opportunity to cross-examine him.
(ii) There is no corroborative evidence in support of the statement of Shri Tarun Goyal. On the other hand, the material found during the course of search and other evidences placed on record by the assessee are contrary to the allegation made by Shri Tarun Goyal in his statement.”
To the same effect is Delhi high court decision in case of N.C.Cables 391 ITR Page 11.
Further, regarding approach to be adopted by revenue authorities u/s 68, it maybe useful to make reference to full bench decision of P&H high court reported at 382 ITR 453:
The Hon’ble Punjab & Haryana High Court in a recent judgement in the case of CIT vs Jawaharlal Oswal and Others (I.T.A. No. 49 of 1999, Judgment delivered on 29.01.2016) dismissed the Department’s appeal by holding that suspicion and doubt may be the starting point of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly when deeming provision is sought to be invoked. The Hon’ble Court has observed ,
“…The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer….Further a deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69-A. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that inferences and presumptions are integral to an adjudicatory process but cannot by themselves be raised to the status of substantial evidence or evidence sufficient to raise an inference. A deeming provision, thus, enables the revenue to raise an inference against an assessee on the basis of tangible material and not on mere suspicion, conjectures or perceptions.”
Further, since lots of dispute have arisen in past as to the burden of proof in cases of penalties of concealment of income u/s 271(1)(c), it is highlighted by reference to decisions mentioned next as to the moving fulcrum on the subject:
Madras high court in case of S.S.M.Ahmed Hussain .. Respondent (T ax Case (Appeal) No.319 o f 2017) DATED : 04.07.2017
(In context of explanation to section 271(1)(C):
Held
“28. After the insertion of the Explanation, it cannot be said that the onus lies on the Revenue to establish mens rea for concealment of income before imposition of penalty. If there was failure to return the correct income, there would be a presumption of concealment, unless the Assessee was able to prove that his failure to return his correct income was not due to fraud or neglect.”
Delhi high court has echoed different sentiments in next mentioned decisions:
a) Neeraj jindal reported at 393 ITR Page 1 where in following observations are made on sec. 271(1)(c):
“14. The Supreme Court held, in Shri T. Ashok Pai v. Commissioner of Income Tax, Bangalore (2007) 7 SCC 162, that penalty under Section 271(1)(c) is not to be mandatorily imposed. In other words, the levy of penalty under this provision is not automatic. This view has been reiterated in Union of India v. Rajasthan Spinning and Weaving Mills, (2009) 13 SCC 448 to say that for there to be a levy of penalty under Section 271(1)(c), the conditions laid out therein have to be specifically fulfilled.
Section 271(1)(c) of the Act, being in the nature of a penal provision, requires a strict construction. While considering the interpretation of this provision, this Court in Commissioner of Income Tax v. SAS Pharmaceuticals (2011) 335 ITR 259 (Del), stated that:
“It is to be kept in mind that Section 271(1)(c) of the Act is a penal provision and such a provision has to be strictly construed. Unless the case falls within the four-corners of the said provision, penalty cannot be imposed. Subsection (1) of Section 271 stipulates certain contingencies on the happening whereof the AO or the Commissioner (Appeals) may direct payment of penalty by the Assessee.”
Thus, what is required to be judged is whether there has been a “concealment” of income in the return filed by the assessee.
Earlier decisions indicated a conflict of opinion as to whether Section 271(1)(c) required the revenue to specifically prove mens rea on the part of the assessee to conceal his income. In order to remove the element of mens rea, the Finance Act, 1964 deleted the word “deliberately” that preceded the words “concealed the particulars of his income” in Section 271(1)(c). Nonetheless, even post the amendment, the Apex Court in K.C. Builders v. Assistant Commissioner of Income Tax, 265 ITR 562 (SC) held that:
“The word „concealment‟ inherently carried with it the element of mens rea. Therefore, the mere fact that some figure or some particulars have been disclosed by itself, even if takes out the case from the purview of non-disclosure, cannot by itself take out the case from the purview of furnishing inaccurate particulars. Mere omission from the return of an item of receipt does neither amount to concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstances found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon.
In order that a penalty under Section 271(1)(c) may be imposed, it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income.”
Thus, despite the fact that there is no requirement of proving mens rea specifically, it is clear that the word “conceal” inherently carries with it the requirement of establishing that there was a conscious act or omission on the part of the assessee to hide his true income. This was also the conclusion of the Supreme Court in the case of Dilip N. Shroff Karta of N.D. Shroff v. Joint Commissioner of Income Tax, Special Range Mumbai and Anr., (2007) 291 ITR 519 (SC). In a later decision in Union of India v. Dharmendra Textile Processors, (2008) 13 SCC 369, the Supreme Court overruled its decision in Dilip N. Shroff (supra). Thereafter, in Commissioner of Income Tax v. Reliance Petroproducts Pvt. Ltd., (2010) 11 SCC 762 the Court clarified that Dilip N. Shroff (supra) stood overruled only to the extent that it imposed the requirement of mens rea in Section 271(1)(c); however, no fault was found with the meaning of “conceal” laid down in Dilip N. Shroff’s case. Thus, as the law stands, the word “conceal” in Section 271(1)(c), would require the A.O. to prove that specifically there was some conduct on part of the assessee which would show that the assessee consciously intended to hide his income”
Delhi high court decision u/s 271(1)(c) in case of New Holland Tractors reported at 275 CTR 291 is apposite, relevant observations reproduced below:
“We have had the advantage of penning the judgment in the appeal preferred in relation to the quantum proceedings and have held that the assessee was wrong in not offering the whole or entire amount of the technical fee for tax in the year of receipt. But, it does not follow that penalty for concealment must be imposed as the quantum appeal is decided against the assessee. The findings in the assessment proceedings cannot be considered as conclusive and final for the purpose of imposition of penalty under section 271(1)(c) of the Act.
As per opinion expressed by the Supreme Court in Commissioner of Income Tax, West Bengal I, and Anr.Vs. Anwar Ali [1970] 76 ITR 696 (SC) such findings may constitute good evidence in the penalty proceedings but it does not follow that penalty for concealment under Section 271(1)(c) is mandatory whenever an addition or disallowance is made. The language of Section 271(1)(c) has undergone substantial changes since the pronouncement of the aforementioned judgment, but the said legal position, still hold good.
In assessment proceedings, we are primarily concerned with the assessment of income i.e. quantification and computation of total income as per the provisions of the Act, whereas in penalty proceedings we are primarily concerned with the conduct of the assessee. Penalty is imposed not because addition is made but because there is concealment or furnishing of inaccurate particulars by the assessee. This is apparent from language of Section 271(1)(c) and Explanation 1 which are reproduced below:-
“271. Failure to furnish returns, comply with notices, concealment of income, etc.–(1) If the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner (Appeals) in the course of any proceedings under this Act, is satisfied that any person—
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income
Explanation 1.–Where in respect of any facts material to the computation of the total income of any person under this Act,–
(A) such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Deputy Commissioner (Appeals) or the Commissioner(Appeals) to be false, or
(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.”
The word ‘conceal’ inherently and per-se refers to an element of mens rea, albeit the expression ―furnishing of inaccurate particulars is much wider in scope. The word ‘conceal’ implies intention to hide an item of income or a portion thereof. It amounts to suppression of truth or a factum so as to cause injury to the other. (See CIT vs. A. Subramania Pillai [1997] 226 ITR 403 (Mad). The word ‘conceal’ means to hide or to keep secret. As held in Law Lexicon, the said word is derived from the latin word ‘concelare’ which implies ‘con’ & ‘celare’ to hide. It means to hide or withdraw from observation; to cover or keep from sight; to prevent discovery of; to withhold knowledge of. The word ‘inaccurate’ in Webster’s Dictionary has been defined as ‘not accurate; not exact or correct; not according to truth; erroneous; as inaccurate statement, copy or transcript’.
The word ‘particular’ means detail or details of a claim or separate items of an account [see Commissioner of Income Tax vs. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158(SC)]. Thus the words ―furnished inaccurate particulars is broader and would refer to inaccuracy which would cause under-declaration or escapement of income. It may refer to particulars which should have been furnished or were required to be furnished or recorded in the books of accounts etc. [See CIT vs. Raj Trading Co. (1996) 217 ITR 208 (Raj.)] Inaccuracy or wrong furnishing of income would be covered by the said expression, though there are decisions that adhoc addition per se without other or corroborating circumstances may not reflect “furnished inaccurate particulars”. Lastly, at times and it is fairly common, the charge of concealment and “furnishing of inaccurate particulars” may overlap.”
It seems that law is still under evolution and we are blessed with new provisions of section 270A etc substituting the concept of concealment and inaccurate particulars with under-reporting and mis-reporting of income which may add fuel to litigation already going on from at-least five and half decades when deliberately word was omitted in 1964 & 1970 when Anwar Ali decision came and later on explanation to section 271(1)(c) was added which explanation is still hotly debated due to being peculiarly worded.
Further, very recently Delhi high court in batch matters in cases of Sahara in decision pronounced on 23/08/2017 on constitutional validity of expanded scope of special audit u/s 142(2A) post amendment by Finance Act,2013 and has succinctly held (approving validity of said amendment) in unambiguous terms that:
“6. Thus, what emerges from the Sahara 2008] 300 ITR 403 (SC) (supra) decision of the Supreme Court in relation to Section 142(2A), can be summarized as under:
(i) The Assessing Officer must make a genuine and honest attempt to understand the accounts maintained by the assessee.
(ii) The opinion required to be formed by the Assessing Officer under Section 142(2A) must be based on objective criteria and not merely subjective satisfaction. The powers under the provision cannot be used by the Assessing Officer merely to shift his responsibility of scrutinizing the accounts to the special auditor.
(iii) The requirement of previous approval of the Chief Commissioner or Commissioner, casts a heavy duty on these authorities to ensure that this requirement is not reduced to an empty formality. Before granting the approval, the Commissioner or the Chief Commissioner, must have before him the materials on the basis of which the opinion has been formed by the Assessing Officer. The approval granted by the Commissioner or the Chief Commissioner must reflect application of mind to the facts of the case. This requirement was elaborated by the Calcutta High Court in West Bengal State Co-operative Bank Ltd. v. Joint Commissioner of Income Tax, [2004] 267 ITR 345 (Cal), where it noted that- “The Commissioner of Income Tax should not give any approval mechanically and if he finds that there is no examination of the books of account by the Assessing Officer before sending the proposal, he will not certainly give any approval. Under this section, the Commissioner of Income Tax does not exercise the jurisdiction of the appellate authority rather the approving authority. Approval means and connotes supporting and accepting of an act and conduct done by another person. Therefore, it would be his duty to examine on receipt of his proposal, whether the Assessing Officer has correctly done it or not, if he finds that this requirement has not been fulfilled then he must not approve of the same.”
(iv) In accordance with the principles of natural justice, the assessee must be given the opportunity of a pre-decisional hearing before action is taken under Section 142(2A).
While this decision of the Supreme Court was prior to the amendments inserted by the Finance Act, 2013, this Court sees no reason as to why these holdings of the Supreme Court in Sahara (supra) would not be applicable to the amended Section 142(2A). The fact that the AO’s determination under this provision must be based on objective material and not subjective satisfaction, that he must make an honest attempt at understanding the accounts of the assessee, that the grant of approval by the higher authority must not be mechanical, that principles of natural justice must be followed by giving the assessee a pre-decisional hearing, would all be equally applicable even under the amended Section 142(2A). It would still be impermissible for the AO to shift the responsibility of auditing the accounts mechanically to the special auditor. In these circumstances, we fail to understand the petitioner’s contention as to how the amendments would in effect nullify these procedural safeguards that the Supreme Court has read into Section 142(2A).”.
Further, while disturbing consistency, burden will be on revenue to demonstrate compelling and strong reasons to over-come the consistency principle (refer SC in Godrej & Boyce reported at [2017] 394 ITR 449 (SC).
Further, Hon’ble Allahabad high court in case of M/S Sahu Investment Mutual Benefit Co.Ltd has held on 03.03.2017 in INCOME TAX APPEAL No. 141of 2005 as below:
“Initial burden for application of the doctrine of “Piercing of Veil”:
“101. Whether in respect to tax dues or other public revenue or in other cases, if one has to discard the corporate personality, then the initial burden would lie upon it to place on record relevant material and facts to justify invocation of doctrine of lifting of veil and to plead that the corporate shell be not made a ground of defence. A personality conferred by the statute cannot be overlooked or ignored lightly and in a routine manner or on a mere asking. In fact whenever the veil is to be pierced, it would mean that somebody, individual or group of individuals, have obtained the shell of corporate personality as a pretext or mask to cover up a transaction or intention of those individual/individuals is neither legal nor otherwise in public interest. In effect the attempt of those individuals have to be shown akin to fraud or misrepresentation. The legal personality of the corporate body thus can be ignored in such cases since it is well settled that fraud vitiates everything and, therefore, the benefit of legal personality obtained by someone for purposes other than those which are lawful or even if lawful but not otherwise permissible, the corporate personality being the result of such fraudulent activity would have to be discarded but not otherwise. These are the things based on positive factual material and cannot be presumed in the absence of proper pleadings and material to be placed by the person who is pleading to invoke the doctrine of piercing the veil and to ignore the juristic personality of the corporate body. Once relevant material is made available by the authority or person concerned, thereafter it would be the responsibility of the other side to place material to meet the aforesaid attack”
Further regarding AIR information, it is succinctly pointed in a order of Mumbai ITAT in case of Kroner Investments Limited, order dated 10.04.2015 (ITA No.5125/M/2013) that:
“We find that addition in this case has been made solely on the basis of AIR information and without any corroborative evidence regarding the receipt of any interest by the assessee from the said M/s. Essar Oil Ltd. The assessee has specifically denied the receipt of such an interest income. The Revenue has not made any enquires to find out whether the AIR information was correct or not. It has been held time and again by this Tribunal that the additions made solely on the basis of AIR information are not sustainable in the eyes of law. If the assessee denies that it is in receipt of income from a particular source, it is for the AO to prove that the assessee has received income as the assessee cannot prove the negative. Reliance can be placed in this respect on the decision of the Tribunal in the case of “DCIT vs. Shree G. Selva Kumar” in ITA No.868/Bang/2009 decided on 22.10.10 and another case in the case of “Aarti Raman vs. DCIT” in ITA No.245/Bang/2012 decided on 05.10.12”
Now, at last, a round up is made under income tax law with select provisions to highlight the relevant burden of proof there under in tabulated format:
| Provision/Aspect | Burden on Assessee | Burden on Revenue | |
| Section 9 (deals mainly with non resident business connection – under DTAA referred as Permanent Establishment) | Not applicable | Yes Burden lies on revenue to establish business connection and permanent establishment | |
| Section 12AA
Withdrawal of registration |
Not applicable | Burden on revenue to prove trust activities are not genuine or are ultra vires to its objects | |
| Section 14A | Not Applicable | Burden on revenue to record proper dissatisfaction u/s 14A and rule 8D that assessee has incurred expenses for earning tax free income (refer CIT v. Taikisha Engineering India Ltd. (2015) 370 ITR 338 (Del) & SC in 394 ITR 449 ) | |
| Section 36(1)(iii) (interest expense) | Not Applicable | Referring Apex court decision in case of Hero Cycles 379 ITR 345 and P&H high court in Max India 388 ITR 81 that presumption on interest free funds is in assessee favor. | |
| Section 37 Expenses Allowable | Burden on assessee to prove expenses are allowable under law and relevant conditions are fulfilled | Not Applicable | |
| Section 41(1)
Remission/cessation of liability |
Not applicable | Burden on revenue to prove remission and cessation in relevant assessment year where benefit obtained earlier | |
| Section 43CA,50C and Section 56 (Circle rate provisions) | Burden on assessee to challenge circle rate and then AO duty bound to refer to DVO for valuation | In case revenue does not refer to DVO despite assessee objection whole addition shall be bad | |
| Section 145 Books rejection | Not Applicable | Burden on revenue to prove books not reliable by proving them to incorrect or incomplete so that income cannot be computed therefrom | |
| Section 148
Burden to prove income escaping assessment |
No applicable | Burden lies on revenue to prove income escapement with reasons to believe (by bringing on records tangible material) which cannot be discharged by post mortem exercise which must be with independent application of mind (refer 394 ITR 147, & Delhi high court in Meenakshi Overseas case 26/05/2017)
Reference can be made to Delhi high court in Pradeep gupta 303 ITR 95 |
|
| Section 153A and Section 153C | Not Applicable | Burden on revenue to establish incriminating material on records for making asst u/s 153A/153C (refer Delhi high court 295) CTR 466 (Del)/ 395 ITR 526) Meeta Gutgutia case)
Recently Delhi high court in Mera Baba case decided on 21/08/2017 has interalia observed that for material found from other person, only remedy possible is sec.153C (same conclusion in SUBHASH KHATTAR decided on 25/07/2017) |
|
| Section 201 TDS assessee in default | As per Jagran Prakashan ruling 345 ITR 288 revenue is required to prove tax is not recoverable from payee then only payer can be approached qua TDS portion | Albeit post amendment by Finance Act,2012 payer may be called to file CA certificate in form 26A to claim immunity u/s 201 from TDS demands here Payer can request AO to issue notices u/s 133(6)/131 for discharging his burden | |
| Section 260A substantial question of law (burden to prove perversity)
(same ratio may extend to ITAT also) |
Lies on appellant to establish perversity by evidence /material | ||
| Section 263 Revision by CIT | Not applicable | Burden on revenue to prove AO order erroneous and prejudicial both (refer SC in 395 ITR page 1 Kwality Steel case)
Recently Delhi high court in Mera Baba case decided on 21/08/2017 has interalia observed that validity of assessment can be challenged u/s 263. |
|
| Section 269SS
Section 269T Section 269ST |
In authors opinion to apply these provisions if assessee establishes that transaction is genuine and bonafide, then revenue should have onus to establish that purpose of transaction is tax evasion and transaction is not genuine to invoke penalty provisions (
(Allahabad High Court in case of CIT Vs. Dimple Yadav 379 ITR 177 (All)) . Further it may noted that to invoke these provisions : a) Penalty must be initiated in assessment order (379 ITR 521); b) Time limitation u/s 275 would trigger from AO initiating penalty in assessment order and not when relevant authority gives the notice (PCIT-5 v. JKD Capital & Finlease Ltd. (2015) 378 ITR 640 (Del). |
||
| Section 273B Reasonable cause | Burden lies on assessee to prove reasonable cause (refer SC in 312 ITR 225) | Not Applicable | |
| Section 278AA Prosecution : Reasonable cause | Burden on tax payer-assessee | Not Applicable | |
| Issue & Service of Notice (once objected by assessee u/s 292BB before AO during assessment etc) (section 282) | Not applicable | Burden lies on revenue to prove notice issued & service once same is called in question by tendering valid evidence for dispatch etc
(refer Delhi high court detailed order in case of Chetan Gupta reported at 382 ITR 613) |
|
After making above analysis, it’s time to now discuss on next aspect of evidentiary value keeping in mind income tax law and digital advancement.
Evidentiary Value : Income Tax Law
Although it is generally stated that principles of Indian evidence law are not strictly applicable to income tax act but said principles are also not proscribed to be referred when required in a fact situation. After making cogitation of income tax law provisions, it is seen that there are few provisions where word evidence and material are used. Notably, section 143(3) which deals with scrutiny assessment inter-alia states that “such evidence as the assessee may produce…” and “…and after taking into account all relevant material…”. Also similar reference is used in scrutiny notice provision u/s 143(2) stating inter-alia that “…. any evidence which the assessee may reply…”. Similarly, explanation 1 to section 147 uses the phrase “evidence” and “material” which popularly is viewed as sword and shield in matter of reopening. Further, word material as referred here is used in various shades under income tax law:
- Reopening of assessment: Tangible Material (refer SC in 103 ITR 437);
- Search based assessments: Incriminating Material (refer DHC in Meeta Gutgutia supra);
Further, CBDT in its instruction no. 20/2015 (dated 29/12/2015) has expounded thus:
“The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice.”
In order to summarize the key areas where question of evidentiary value of a document etc is raised in tax proceedings, same is tabulated below:
| Nature of document | Evidentiary Value |
| Books of account and entries therein | Constitute relevant and prima-facie proof ( 59 ITR 632 ,636)
(section 34 of evidence act) (section 145 of Income Tax Act) Not conclusive : 91 ITR 18(SC), 372 ITR 605(SC) ;82 ITR 363 SC Also Note 129 ITR 573: “…The basic principle is the same in the law relating to income-tax as well as in civil law, namely, that if there is no challenge to the transaction represented by the entries or to the genuineness of the entries, then it is not open to the other side-in this case, the revenue-to contend that that which is shown by the entries is not the real state of affairs..” Also Note 113 ITR 389 “Thus, not only in respect of the relevancy but also in respect of proof the material which can be taken into consideration by the ITO and other authorities under the Act is far wider than the evidence which is strictly relevant and admissible under the Evidence Act” |
| Affidavits | SC Mehta Parikh 30 ITR 181: rejection of affidavit requires examination of deponent
Mad HC in 158 ITR 826: “According to the learned counsel appearing for the Revenue, the Tribunal ought not to have accepted the interested testimony of the assessee, when even according to her, there are other documents, particularly crossed cheques, which are said to have been issued by the assessee in favour of some of the multani bankers in partial payment of interest. We find that the Revenue’s contention sounds reasonable. It might be that any judicial authority can accept any statement of an assessee, when that is the only piece of evidence available in that particular case, and order assessment on such sole evidence. But when, even according to the assessee, there is other documentary evidence of corroborative value and the same is within the reach of the assessee, in such a case, we are of the opinion that a judicial body cannot act on such interested testimony of the assessee alone” Affidavit must be properly verified. |
| Wills | Delhi ITAT in Budh Kishore 87 TTJ 140:
Amount recd through Will cannot be taxed by rejecting the will on conjectures and surmises (that is will is not on stamp paper, there are no witnesses; it merely bears thumb impression etc) Also similar conclusion by Jodhpur ITAT in 102 TTJ 161 |
| Cash Flow Statement in matter of cash deposits | Cash flow statement keeps importance in tax proceedings specially in matter of cash withdrawals and cash deposits
Shri Ravinder Singh Negi, Chandigarh ITAT (Order dated 8/11/2016) ITA Nos. 811 & 812/CHD/2014; M/S OMNI INFO WORLD PVT. LTD. Delhi high court ITA 364/2016 (29/07/2016) Punjab & Haryana High Cour t in the case of Shiv Charan Dass Vs CIT 126 ITR 26: |
| Loose documents | Section 132(4A)/Section 292C
– Dumb document /jottings/scribbling – no evidentiary value (refer 383 ITR 32 Vatika Ltd Delhi high court) – Limited evidentiary value qua person in possession (Delhi high court in case of Vinita Chaurasia 394 ITR 758) – Discretionary in nature (Calcutta high court in case of M/S. AJANTA FOOTCARE (INDIA) PVT. LTD. Order dated 15 June, 2017.) Held “…In our view, even without proper explanation from the assessee, when the mandate of law is that authorities may presume certain facts under Section 292C of the Act to come to a conclusion in favour of Revenue, the nature of information contained in or revealed by such document would have to be examined to link such document to undisclosed income of the assessee.” – Principle of corroboration and independent enquiry and examination |
| Statements
u/s 132(4) u/s 133A etc |
CBDT No.286/2/2003-IT(INV) dated 10/3/2003,- statement are not material for assessment purposes;
Also refer: Gajjam Chinna Yellappa & Others vs ITO, 370 ITR 671 (T & AP) & CIT vs. Naresh Kumar Agarwal, 369 ITR 171; Ganesh Trading Company vs. CIT, 84DTR (Jharkand) 94 Commissioner of Income Tax v. Harjeev Aggarwal (2016) 290 CTR 263 Held that mere statements made during the course of the search, under Section 132 (4) of the Act, cannot be considered to be incriminating material (re-applied in Best City case supra) ( CIT vs. Sunil Aggarwal (2015) 379 ITR367 (Del).) CIT v. Dhingra Metal Works (2010) 328 ITR 384 (Del) CIT v. S. Khader Khan Son (2008) 300 ITR 157 (Mad); |
| Bank Pay In Slip | “However, we are in agreement with the view taken by the Tribunal to the effect that the entry made in the pay-in-slips cannot prevail over the entry in the books of account since the books of account would reflect the appropriate recordwherein treatment of receipts would be found.”Bombay high court in case of Likproof India P. Ltd. 23RD DECEMBER, 2016 |
Now left is the scope of evidentiary value of digital and electronic evidence (like whats-app etc). It may be profitable to refer to section 65A and section 65B of Evidence Act.
65A. Special provisions as to evidence relating to electronic record. – The contents of electronic records may be proved in accordance with the provisions of section 65B.
65B. Admissibility of electronic records:
(1) Notwithstanding anything contained in this Act, any information contained in an electronic record which is printed on a paper, stored, recorded or copied in optical or magnetic media produced by a computer (hereinafter referred to as the computer output) shall be deemed to be also a document, if the conditions mentioned in this section are satisfied in relation to the information and computer in question and shall be admissible in any proceedings, without further proof or production of the original, as evidence of any contents of the original or of any fact stated therein of which direct evidence would be admissible.
(2) The conditions referred to in sub-section (1) in respect of a computer output shall be the following, namely: –
(a) the computer output containing the information was produced by the computer during the period over which the computer was used regularly to store or process information for the purposes of any activities regularly carried on over that period by the person having lawful control over the use of the computer;
(b) during the said period, information of the kind contained in the electronic record or of the kind from which the information so contained is derived was regularly fed into the computer in the ordinary course of the said activities;
(c) throughout the material part of the said period, the computer was operating properly or, if not, then in respect of any period in which it was not operating properly or was out of operation during that part of the period, was not such as to affect the electronic record or the accuracy of its contents; and
(d) the information contained in the electronic record reproduces or is derived from such information fed into the computer in the ordinary course of the said activities.
(3) Where over any period, the function of storing or processing information for the purposes of any activities regularly carried on over that period as mentioned in clause (a) of sub-section (2) was regularly performed by computers, whether –
(a) by a combination of computers operating over that period; or
(b) by different computers operating in succession over that period; or
(c) by different combinations of computers operating in succession over that period; or
(d) in any other manner involving the successive operation over that period, in whatever order, of one or more computers and one or more combinations of computers, all the computers used for that purpose during that period shall be treated for the purposes of this section as constituting single computer; and references in this section to a computer shall be construed accordingly.
(4) In any proceedings where it is desired to give a statement in evidence by virtue of this section, a certificate doing any of the following things, that is to say, –
(a) identifying the electronic record containing the statement and describing the manner in which it was produced;
(b) giving such particulars of any device involved in the production of that electronic record as may be appropriate for the purpose of showing that the electronic record was produced by a computer;
(c) dealing with any of the matters to which the conditions mentioned in sub-section (2) relate, and purporting to be signed by a person occupying a responsible official position in relation to the operation of the relevant device or the management of the relevant activities (whichever is appropriate) shall be evidence of any matter stated in the certificate; and for the purposes of this sub-section it shall be sufficient for a matter to be stated to the best of the knowledge and belief of the person stating it.
(5) For the purposes of this section, –
(a) information shall be taken to be supplied to a computer if it is supplied thereto in any appropriate form and whether it is so supplied directly or (with or without human intervention) by means of any appropriate equipment;
(b) whether in the course of activities carried on by any official, information is supplied with a view to its being stored or processed for the purposes of those activities by a computer operated otherwise than in the course of those activities, that information, if duly supplied to that computer, shall be taken to be supplied to it in the course of those activities;
(c) a computer output shall be taken to have been produced by a computer whether it was produced by it directly or (with or without human intervention) by means of any appropriate equipment.
Explanation: For the purposes of this section any reference to information being derived from other information shall be a reference to its being derived therefrom by calculation, comparison or any other process.”
Section 65B of the Evidence Act details this special procedure for adducing electronic records in evidence. Sub-section (2) lists the technological conditions upon which a duplicate copy (including a print-out) of an original electronic record may be used:
(i) at the time of the creation of the electronic record, the computer that produced it must have been in regular use;
(ii) the kind of information contained in the electronic record must have been regularly and ordinarily fed in to the computer;
(iii) the computer was operating properly; and,
(iv) the duplicate copy must be a reproduction of the original electronic record.
Sub-section (4) of section 65B of the Evidence Act lists additional non-technical qualifying conditions to establish the authenticity of electronic evidence. This provision requires the production of a certificate by a senior person who was responsible for the computer on which the electronic record was created, or is stored. The certificate must uniquely identify the original electronic record, describe the manner of its creation, describe the device that created it, and certify compliance with the technological conditions of sub-section (2) of section 65B.
Supreme court (Three Judge bench) case of Anvar V. Basheer, reported in (2014) 10 SCC 473 Held
“An electronic record by way of secondary evidence shall not be admitted in evidence unless the requirements under Section 65B are satisfied. Thus, in the case of CD, VCD, chip, etc., the same shall be accompanied by the certificate in terms of Section 65B obtained at the time of taking the document, without which, the secondary evidence pertaining to that electronic record, is inadmissible.”Also held in same decision
“15. It is further clarified that the person need only to state in the certificate that the same is to the best of his knowledge and belief. Most importantly, such a certificate must accompany the electronic record like computer printout, Compact Disc (CD), Video Compact Disc (VCD), pen drive, etc., pertaining to which a statement is sought to be given in evidence, when the same is produced in evidence. All these safeguards are taken to ensure the source and authenticity, which are the two hallmarks pertaining to electronic record sought to be used as evidence. Electronic records being more susceptible to tampering, alteration, transposition, excision, etc. without such safeguards, the whole trial based on proof of electronic records can lead to travesty of justice”…The Supreme Court in Harpal Singh @ Chhota Vs. State Of Punjab, has reiterated that any electronic record in the form of secondary evidence cannot be admitted in evidence unless a certificate under Section 65B (4) of the Evidence Act is produced…
Conclusion
Above exposition on burden of proof and evidentiary value can be finished with felicitous observations of Madras high court in N.Swamy case 241 ITR 363:
“4. We find it a little difficult to agree with those observations. The asses-see’s income is to be assessed by the Income-tax Officer on the basis of the material which is required to be considered for the purpose of assessment and ordinarily not on the basis of the statement which the assessee may have given to a third party unless there is material to corroborate that statement of the assessee given to a third party, even if it be a bank. The mere fact that the assessee had made such a statement by itself cannot be treated as having resulted in an irrebuttable presumption against the assessee. The burden of showing that the assessee had undisclosed income is on the Revenue. That burden cannot be said to be discharged by merely referring to the statement given by the assessee to a third party in connection with a transaction which was not directly related to the assessment and making that the sole foundation for a finding that the assessee had deliberately suppressed his income.”
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Despair I will not, while I yet descry
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Author Bio
Very elaborate article throws to light many aspects of law