Case Law Details
When the statements made by the assessees here, later retracted, do not have any evidentiary value, there is no basis in holding that there are materials available before the Assessing Officer to make out cases of escapement of income. A reason must be formed by the Assessing Officer to reopen an assessment on the basis of material or information recognized under law.
Even if reassessments are held to be valid, still no additions could be made on the basis of those statements. In such circumstances, it is obvious that the reassessments would only be an empty formality. A provision of a statute is not contemplated for performing an empty formality. Therefore, by all means, it is necessary to hold that reopening of an assessment is not permissible in law on the basis of a statement obtained in the course of survey action under sec.133A, which has been later on retracted. The decision of the Tribunal, Ahmedabad Bench is squarely on this point. In that case, a statement was obtained in the course of survey and thereafter that was retracted and on that basis the Tribunal held that no addition can be made in the hands of the assessee. Therefore, in the facts and circumstances of the case, we hold that the substratum to give a reason to believe that income chargeable to tax has escaped assessment, is vitiated in these cases. Therefore, the impugned reassessments are not sustainable in law.
INCOME TAX APPELLATE TRIBUNAL, CHENNAI
ITA Nos. 575 to 582/(Mds)/2011 –
Assessment Years : 1999-2000 to 2004-05
Dr. J. Mohan Vs. The Asst. Commissioner of Income Tax
ITA Nos. 583 to 589/(Mds)/2011 – Assessment Years : 1999-2000 to 2005-06
Smt. M. Maheswari Vs. The Asst. Commissioner of Income Tax
Date of Pronouncement : 23rd April, 2012
O R D E R
PER BENCH
This is a bunch of 15 appeals. These appeals are filed by assessees who are husband and wife. The assessee-husband, Dr. J. Mohan is a surgeon who is running Lakshmi Hospital at Villupuram. Smt. M. Maheswari, the wife is running a proprietary pharmacy business in the hospital. Both husband and wife are regularly assessed to income-tax.
2. Dr. J. Mohan has filed eight appeals which relate to six assessment years, 1999-2000, 2000-01, 2001-02, 2002-03, 2003- 04 and 2004-05. For all the above six assessment years, the assessee doctor has filed appeals arising out of the income escaping assessment complete under sec.143(3) read with sec.147. The assssee has also filed appeals for two assessment yeas 2000-01 and 2003-04 which arise out of the assessments completed in pursuance of the revision order passed by the Commissioner of Income-tax. It is how, there are eight appeals for six assessment years.
3. In the case of Smt. M. Maheswari, there are seven appeals relating to seven consecutive assessment years from 1999-2000 to 2005-06. These seven appeals arise out of the income escaping assessments completed under sec.143(3) read with sec.147.
4. All these appeals are directed against different orders passed by the Commissioner of Income-tax(Appeals)-XII at Chennai, dated 20.1.2011.
5. A survey was conducted at Lakshmi Hospital on 17.8.2005. The survey was carried out under sec.133A of the Act. In the course of survey operations, statements were obtained from the assessees. From such statements obtained in the course of survey, the Assessing Officer brought out the cases of income escaping assessments and thus issued notices under sec.148 proposing reopening of the assessments. The objections raised by the assessees were overruled and assessments were completed under sec.147. In the case of Dr. J. Mohan, the additions made by the assessing authority in the reopened assessments, mainly related to disallowance of interest on loans and the estimated disallowance of running expenses and depreciation of motor cars. For the assessment year 2000-01, the Assessing Officer has also made an addition under sec.69 as unexplained investment made in jewellery. For the assessment year 2003-04, the assessing authority has made another addition towards unexplained cost of construction. The Assessing Officer has also made another addition for the assessment year 2004-05 against the expenses incurred by the assessee towards trip to USA.
6. In the case of Smt. M. Maheswari, the additions relate to disallowance of interest paid on loans and deficiency alleged in the amount of drawings accounted by her for personal and family expenses. In fact, the only addition made for the assessment year 2005-06 is the deficiency in the drawings.
7. In the facts and circumstances of the case, stated above, the assessees have raised common grounds in all these appeals. Apart from the grounds raised against the merit of the additions made by the assessing authority and sustained by the Commissioner of Income-tax(Appeals), the assessees have raised a legal ground challenging the validity of reopening of the assessments itself.
8. The learned counsel appearing for the assessees contended that the grounds for reopening the concluded assessments were made out by the assessing authority on the basis of sworn statements furnished by the assessees in the course of survey made under sec.133A. The learned counsel explained that it is not permissible to take sworn statements in action under sec133A and any statement obtained in the course of such survey does not have any evidentiary value and as such, the entire basis of reopening of the assessments vitiated and as such, all these impugned assessments are ab initio void in law. In support of his contentions, the learned counsel has relied on the following decisions :
(i) Paul Mathews And Sons v. CIT (263 ITR 101)(Ker.)
(ii) CIT v. S. Khader Khan Son (300 ITR 157)(Mad)
(iii) Ashok Manilal Thakkar v. ACIT (279 ITR(AT)143) (Ahmedabad)
9. Shri Yogesh Kamat, the learned Jt. Commissioner appearing for the Revenue defended the income escaping assessment orders. He explained that the survey conducted by the Department has brought out materials towards certain items of income escaped in the hands of the assessees. Even if, the reasons relied on by the Assessing Officer to reopen the assessments were later found to be unsustainable, still, the reopening of the assessments as such, does not have become vitiated. As far as these cases are concerned, the Assessing Officer has proceeded strictly in accordance with law and, therefore, the legal objection raised by the assessees is not sustainable in law.
10. We considered the legal objection carefully. There is no doubt that in these cases, the assessees had filed returns and the assessments were concluded. It is in the light of the details collected in the course of survey carried out under sec.133A that the Asssessing Officer has got the ground clearance to form and to make out a reason that the incomes have escaped assessments in the hands of these two assessees. As a matter of fact, other than the survey under sec.133A and the statements obtained in the course of that survey, nothing else is available on record to proceed against the assessees under sec.147 of the Act. Therefore, it is very necessary on our part to examine the probative value of the materials collected in the course of survey.
11. The Hon’ble Kerala High Court had an occasion to examine this crucial issue in the case of Paul Mathews & Sons v. CIT [263 ITR 101]. After examining the facts of the case, the court held that a power to examine a person on oath is specifically conferred on the authorised officer only under sec.132(4) in the course of any search or seizure. Thus, the Income-tax Act, when it thought fit and necessary to confer such power to examine a person on oath, as expressly provided for it, whereas sec.133A does not empower any Income-tax Officer to examine any person on oath. Thus, in contradistinction to the power under sec.133A, sec.132(4) of the Income-tax Act enables the authorized 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. The court held that whatever statement recorded under sec.133A of the Income-tax Act is not given an evidentiary value.
12. The Hon’ble Jurisdictional High Court in the case of CIT v. S. Khader Khan Son (300 ITR 157) had considered the very same issue. The Hon’ble High Court has laid down the principles relating to sec.133A as follows :
(i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts ;
(ii) In contradistinction to the power under section133A, section 132(4) 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 Act. On the other hand, whatever statement is recorded under sec.133A 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 as evidentiary value as contemplated under law ; (iii) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment ;
(iv) The materials collected during the course of survey under sec.133A shall not have any evidentiary value.”
13. The Income-tax Appellate Tribunal, Ahmedabad Bench in the case of Ashok Manilal Thakkar v. ACIT (279 ITR (AT) 143) has considered the same issue. In that case, there was a survey and certain disclosure was made in the statement made at the time of survey and thereafter, the statement was retracted. The Tribunal held that there is no evidentiary value for the materials stated to be collected in the course of survey and especially when the statement is retracted and, therefore, any addition on the basis of such survey material cannot be justified.
14. As far as the facts of impugned cases are concerned, the statements are obtained in the course of survey made under sec.133A. Both the assessees have thereafter retracted the statements. When this is the case, no reliance can be placed on the statement obtained in the course of that survey as held by the courts in the decisions mentioned above. When the statements made by the assessees here, later retracted, do not have any evidentiary value, there is no basis in holding that there are materials available before the Assessing Officer to make out cases of escapement of income. A reason must be formed by the Assessing Officer to reopen an assessment on the basis of material or information recognized under law. Even if reassessments are held to be valid, still no additions could be made on the basis of those statements. In such circumstances, it is obvious that the reassessments would only be an empty formality. A provision of a statute is not contemplated for performing an empty formality. Therefore, by all means, it is necessary to hold that reopening of an assessment is not permissible in law on the basis of a statement obtained in the course of survey action under sec.133A, which has been later on retracted. The decision of the Tribunal, Ahmedabad Bench is squarely on this point. In that case, a statement was obtained in the course of survey and thereafter that was retracted and on that basis the Tribunal held that no addition can be made in the hands of the assessee.
15. Therefore, in the facts and circumstances of the case, we hold that the substratum to give a reason to believe that income chargeable to tax has escaped assessment, is vitiated in these cases. Therefore, the impugned reassessments are not sustainable in law. They are accordingly set aside.
16. As the income escapement assessments themselves have been vitiated, the revision orders passed under sec.263 for assessment years 2000-01 and 2003-04 in the case of Dr. J. Mohan do not survive. Those orders are also set aside.
17. In result, these appeals filed by the assessees are allowed.
Order pronounced on Monday, the 23rd of April , 2012 at Chennai.
