Ita/19/2019 Of C.k.abdul Azeez v. The Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE C.K.ABDUL REHIM & THE HONOURABLE MR. JUSTICE R. NARAYANA PISHARADI THURSDAY, THE 05TH DAY OF SEPTEMBER 2019 / 14TH BHADRA,1941 ITA.No.19 OF 2019 AGAINST THE ORDER IN ITA 248/Coch/2016 DATED 31-05-2018OF I.T.A.TRIBUNAL,COCHIN BENCH FOR THE A.Y.2010-11 APPELLANT/ASSESSEE: C.K.ABDUL AZEEZCHEENATHAM KUZHIYIL HOUSE, MALAYAMMA P.O., KOZHIKODE 673 639. BY ADV. SRI.S.ARUN RAJ RESPONDENT/REVENUE: THE COMMISSIONER OF INCOME TAXCENTRAL CIRCLE, CIRCLE, CALICUT 673 001. SRI JOS JPSEPJ SC FOR INCOME TAX THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON05.08.2019, THE COURT ON 05.09.2019 DELIVERED THEFOLLOWING: C.K.ABDUL REHIM & R.NARAYANA PISHARADI, JJ **************************I.T.A.No.19 of 2019---------------------------------------------- Dated this the 5[th] day of September, 2019 J U D G M E N T R.Narayana Pisharadi, J What is the evidentiary value of a statementmade on oath by the assessee to the income taxauthority in survey proceedings held under Section133A of the Income Tax Act, 1961 (hereinafterreferred to as 'the Act')? This is the core issue forconsideration in this appeal. 2.A search under Section 132 of the Actwas conducted at the residential premises ofMr.Sainul Abdheen, one of the Directors of thecompany by name 'Parathode Granites PrivateLimited' (hereinafter referred to as 'the company').During the search, an agreement executed by theappellant/assessee, who was the Managing Directorof the company, for purchase of land having an extent of 28.75 acres, was found and seized. This documentrevealed that the appellant had given 90 lakhs rupees asadvance for purchase of the property. Thereafter, surveyproceedings under Section 133A of the Act were conducted atthe premises of the company. During the survey proceedings,the assessee gave a statement on oath on 11.03.2011 to theincome tax authority that he had given an amount of 95 lakhsrupees as advance for purchase of the property.Subsequently, the appellant sent a letter dated 04.03.2013 tothe department. In that letter he took the plea that hehad executed the agreement in the capacity as theManaging Director of the company and that the amountof 95 lakhs rupees was invested out of the funds of thecompany and that he had not made any personal investmentin the deal and also that the deal was subsequently cancelledby the company. 3.The assessing officer did not accept theexplanation given by the appellant regarding the nature andsource of the amount. The assessing officer found that thebooks of accounts of the company did not reveal that theamount of 95 lakhs rupees was invested by the company insuch a deal. Therefore, the aforesaid amount was brought to tax by the assessing authority as unexplained investment. 4.The appellant took up the matter in appeal beforethe Commissioner of Income Tax (Appeals). The appellateauthority agreed with the view taken by the assessing officerand dismissed the appeal. The appellant filed further appealbefore the Income Tax Appellate Tribunal. The Tribunalconfirmed the findings made by the assessing officer and theappellate authority and dismissed the appeal. The aforesaidorder of the Tribunal is under challenge in this appeal filed bythe assessee. 5.We have heard Sri.Arun Raj.S, learned counsel forthe appellant and also Sri.Jose Joseph, learned StandingCounsel for the department. tax by the assessing authority as unexplained investment. 4.The appellant took up the matter in appeal beforethe Commissioner of Income Tax (Appeals). The appellateauthority agreed with the view taken by the assessing officerand dismissed the appeal. The appellant filed further appealbefore the Income Tax Appellate Tribunal. The Tribunalconfirmed the findings made by the assessing officer and theappellate authority and dismissed the appeal. The aforesaidorder of the Tribunal is under challenge in this appeal filed bythe assessee. 5.We have heard Sri.Arun Raj.S, learned counsel forthe appellant and also Sri.Jose Joseph, learned StandingCounsel for the department. 6.Learned counsel for the appellant contended thatthe agreement for purchase of property was executed by theappellant in his capacity as the Managing Director of thecompany and that the investment was made out of the fundsof the company and that he had not made any personalinvestment. Learned counsel has also contended that noassessment could have been made based solely on the swornstatement given by the assessee before the income taxauthority during the survey proceedings. Learned counsel has further contended that, during the survey proceedings,the income tax authority has no power to examine on oathany person and that such a statement made on oath by theassessee has got no evidentiary value. 7.Per contra, learned Standing Counsel for thedepartment would contend that the appellant had admitted inthe sworn statement given before the income tax authoritythat he had invested 95 lakhs rupees in the deal. LearnedStanding Counsel for the department would also contend thatthe appellant/assessee failed to establish his plea that theamount was invested not by him but by the company and insuch circumstances, the assessing authority was right inbringing the amount to tax as unexplained investment underSection 69 of the Act. 8.No question regarding the evidentiary value of thestatement made on oath by the assessee to the income taxauthority during the survey proceedings under Section 133Aof the Act was raised by the assessee before the assessingofficer or the appellate authority or even before the Tribunal.No such question of law has been raised by theappelant/assessee in the memorandum of appeal filed in thisCourt also. However, in view of the submissions made by the learned counsel for the appellant/assessee, we are inclined toraise and consider the following substantial questions of law: (1)Has the income tax authority got powerto examine on oath any person during surveyproceedings under Section 133A of the Act?to examine on oath any person during surveyproceedings under Section 133A of the Act? (2)Is it correct proposition of law that astatement made on oath by the assesseebefore the income tax authority during thesurvey proceedings under Section 133A of theAct has no evidentiary value at all?statement made on oath by the assesseebefore the income tax authority during thesurvey proceedings under Section 133A of theAct has no evidentiary value at all? (3)Is it permissible under law to makeassessment of tax solely on the basis of thestatement made on oath by an assesseebefore the income tax authority during thesurvey proceedings under Section 133A of theAct?assessment of tax solely on the basis of thestatement made on oath by an assesseebefore the income tax authority during thesurvey proceedings under Section 133A of theAct? 9.Section 133A of the Act deals with surveyproceedings. Section 133A(3)(iii) of the Act provides that anincome-tax authority acting under Section 133A may recordthe statement of any person which may be useful for, orrelevant to, any proceeding under the Act. It is evident fromthis provision that, during survey proceedings, the income-tax authority has got power to record the statement of any person. The expression “any person” in this provision includesan assessee. 9.Section 133A of the Act deals with surveyproceedings. Section 133A(3)(iii) of the Act provides that anincome-tax authority acting under Section 133A may recordthe statement of any person which may be useful for, orrelevant to, any proceeding under the Act. It is evident fromthis provision that, during survey proceedings, the income-tax authority has got power to record the statement of any person. The expression “any person” in this provision includesan assessee. 10.Learned counsel for the appellant relied upon thedecision of a Division Bench of this Court in Paul Mathewsand Sons v. Commissioner of Income Tax : (2003) 263ITR 101 in support of his contention that the income taxauthority has got no power to examine on oath any person orto record any sworn statement of a person. Learned counselhas also pointed out that the decision in Paul Mathews(supra) has been relied upon by the Madras High Court inCommissioner of Income Tax v. Khader Khan Son :(2008) 300 ITR 157. 11. In Paul Mathews (supra), the Division Bench hasheld as follows: "Section 133A(3)(iii) enables the authorityto record the statement of any personwhich may be useful for, or relevant to, anyproceeding under the Act. Section 133A,however, enables the income-tax authorityonly to record any statement of any personwhich may be useful, but does notauthorize taking any sworn statement. Onthe other hand, we find that such a powerto examine a person on oath is specificallyconferred on the authorised officer only under Section 132(4) of the Income Tax Actin the course of any search or seizure.Thus, the Income Tax Act, whenever itthought fit and necessary to confer suchpower to examine a person on oath, thesame has been expressly provided whereasSection 133A does not empower anyIncome Tax Officer to examine any personon oath. Thus, in contradistinction to thepower under Section 133A, Section 132(4)of the Income Tax Act enables theauthorised officer to examine a person onoath and any statement made by suchperson during such examination can also beused in evidence under the Income Tax Act.On the other hand, whatever statement isrecorded under Section 133A of the IncomeTax Act it is not given any evidentiary valueobviously for the reason that the officer isnot authorised to administer oath and totake any sworn statement which alone hasevidentiary value as contemplated underlaw. Therefore, there is much force in theargument of learned counsel for theappellant that the statement elicited duringthe survey operation has no evidentiaryvalue”. 12. It can be seen that in Paul Mathews (supra), the Division Bench had categorically held that, whateverstatement is recorded under Section 133A of the Act, it is not given any evidentiary value obviously for the reason that theofficer is not authorised to administer oath and to take anysworn statement. 13. At this juncture, we may notice that another DivisionBench of this Court in Commissioner of Income Tax v.Hotel Samrat : (2010) 323 ITR 353, stated that the viewtaken in Paul Mathews (supra) does not lay down thecorrect law. However, the issue was not referred to a FullBench as it was not necessary to do so in that case. In HotelSamrat (supra), it was observed as follows: “During hearing, we felt that the decision ofthis Court in Paul Mathews and Sons reportedin [2003] 263 ITR 101 above referred to doesnot lay down the correct position of lawbecause, in our view, statement recordedunder Section 133A(3)(iii) though cannot betreated as independent evidence likeevidence recorded under Section 132(4), hascorroboratory value in assessment andstatement recorded under the said provisioncan be even relied on by the assessee. Inother words, the decision of this Court thatthe statement recorded under the aboveprovision does not have evidentiary value, inour view, does not lay down the correct law.However, since counsel for the respondent- “During hearing, we felt that the decision ofthis Court in Paul Mathews and Sons reportedin [2003] 263 ITR 101 above referred to doesnot lay down the correct position of lawbecause, in our view, statement recordedunder Section 133A(3)(iii) though cannot betreated as independent evidence likeevidence recorded under Section 132(4), hascorroboratory value in assessment andstatement recorded under the said provisioncan be even relied on by the assessee. Inother words, the decision of this Court thatthe statement recorded under the aboveprovision does not have evidentiary value, inour view, does not lay down the correct law.However, since counsel for the respondent- assessee does not rely on the above decision,we proceed to consider these cases on themerits without referring the matter forconsideration to a Full Bench because by theoperation of the latter part of the section,such statement has relevance for assessmentand other proceeding under the Act”. 14. Another Division Bench of this Court considered the issue in Travancore Diagnostics (P) Limited v. AssistantCommissioner of Income Tax: 2016 (5) KHC 580 : 2016(4) KLT 350. In that case, the Division Bench clarified thedictum laid down in Paul Mathews (supra) as follows: “For the purpose of this case, we do notthink that it is necessary to venture into aquestion as to whether Paul Mathew andSons lays down the right law. Even taking thedicta in Paul Mathew and Sons as the correctlaw, it is clear from the judgment that whatthis Court had said is that the statementmade by the assessee under Section 133A ofthe Act is not conclusive and that it is open tothe person who made the admission to resilefrom it and to state the same to be incorrect,in which event, the assessee should be givenan opportunity to show that the books ofaccount discloses the correct statement offacts.We draw support for our opinion fromthe judgment of the Hon'ble Supreme Courtin Pullangode Rubber Produce Co. Ltd. v. State of Kerala, 1973 (91) ITR 18 (SC). Theposition appears to be clear that the personmaking the admission or the statement willbe at liberty to withdraw from the statementor admission, since such statement had notbeen made under Section 132(4), whichprovides for a sworn statement, but oneunder Section 133A of the Act”. (emphasis supplied). 15.Section 133A(3)(iii) of the Act empowers theincome tax authority to record the statement of a personincluding an assessee. Section 133A of the Act, unlikeSection 132(4) of the Act, does not specifically empower theincome tax authority to examine a person on oath. Therecan be no quarrel with this proposition laid down in PaulMathews (supra). However, Section 133A of the Act doesnot also prohibit the income tax authority to administer oathto a person. As in the case of an accused in a criminalproceedings, there is no specific prohibition as contained inSection 4(2) of the OathsAct, 1969 against administeringoath to an assessee in the proceedings under Section 133A ofthe Act. The status of an assessee in the proceedings underSection 133A of the Act cannot be equated to the status of anaccused in a criminal case. Therefore, merely by reason of the fact that the income tax authority has administered oathto an assessee and recorded his sworn statement during thesurvey proceedings under Section 133A of the Act, it cannotbe found that such statement has no evidentiary value at alland that it cannot be used in any manner against theassessee in any proceedings under the Act. As explained inTravancore Diagnostics (supra), the statement on oathmade by an assessee to the income tax authority during thesurvey proceedings under Section 133A of the Act is notconclusive. The assessee can explain or withdraw theadmission, if any, made by him in such statement.Assessment of tax cannot be made solely on the basis of suchsworn statement made by the assessee under Section133A(3)(iii) of the Act. At the same time, such statementcan be used to corroborate other materials before theassessing authority, including the contents of any document.In our view, the dictum laid down in Paul Mathews (supra)and Hotel Samrat (supra) and Travancore Diagnostics(supra) can be harmonised in this manner without anyconflict. Thus, the substantial questions of law raised asitems (1) and (3) are answered in favour of the assessee andagainst the revenue. The substantial question of law raised as item No.(2) is answered in favour of the revenue andagainst the assessee. 16.Section 69 of the Act provides that, where in the financial year immediately preceding the assessment year,the assessee has made investments which are not recordedin the books of account, if any, maintained by him for anysource of income, and the assessee offers no explanationabout the nature and source of the investments or theexplanation offered by him is not, in the opinion of theAssessing Officer, satisfactory, the value of the investmentsmay be deemed to be the income of the assessee of suchfinancial year. 17. The burden is on the assessee to prove or explainthe source of the money or investment. Where an assesseefails to prove satisfactorily the source and nature of theinvestment, the Income Tax Officer is entitled to draw theinference that the amount is of an assessable nature (See Govindarajulu Mudaliar v. Commissioner of Income Tax: AIR 1959 SC 248). The law is well settled that the onus ofproving the source of a sum of money received by anassessee is on him. Where the nature and source of a receipt,whether it be of money or of other property, cannot be satisfactorily explained by the assessee, it is open to therevenue to hold that it is the income of the assessee and nofurther burden lies on the revenue to show that income isfrom any particular source (See Roshan Di-Hatti v.Commissioner of Income Tax : AIR 1977 SC 1605). Thequestion whether the source of the investment should betreated as income or not under Section 69 has to beconsidered in the light of the facts of each case. In otherwords, a discretion has been conferred on the Income taxOfficer under Section 69 of the Act to treat the source ofinvestment as the income of the assessee if the explanationoffered by the assessee is not found satisfactory and the saiddiscretion has to be exercised keeping in view the facts andcircumstances of the particular case (See Commissioner ofIncome Tax v. P.K.Noorjahan : AIR 1999 SC 1600). 18.In the instant case, there is no dispute with regardto the fact that the appellant had paid 95 lakhs rupees asadvance for purchasing a property. His plea is that theinvestment was made by him in his capacity as the ManagingDirector of the company and not in his personal capacity andthat the amount came out of the funds of the company. Thebooks of account of the company did not reveal any such 18.In the instant case, there is no dispute with regardto the fact that the appellant had paid 95 lakhs rupees asadvance for purchasing a property. His plea is that theinvestment was made by him in his capacity as the ManagingDirector of the company and not in his personal capacity andthat the amount came out of the funds of the company. Thebooks of account of the company did not reveal any such transaction or investment made by the company. Therefore,the assessing officer was not satisfied about the explanationgiven by the appellant/assessee. The assessee is none otherthan the Managing Director of the company. He could haveeasily produced records or materials to show that the amountwas actually invested by the company and not by him in hispersonal capacity. In the absence of any such materialsproduced, the assessing officer was justified in rejecting theexplanation given by the appellant and in bringing theamount to tax as unexplained investment. 19.The assessment of tax made by the authorityconcerned is not solely based on the sworn statement of theappellant given to the income tax authority. The basis of theassessment is the agreement executed by the appellant forpurchase of property and also the circumstance that theappellant failed to establish his plea regarding the investmentmade. The sworn statement of the appellant onlycorroborates those materials. The fact that the assessingauthority gave emphasis to the sworn statement of theappellant while passing the order of assessment does notchange this fact situation. and confirmed the findings made by the assessing authorityand the appellate authority. The conclusion reached by theTribunal on a finding of fact cannot be interfered with by thisCourt unless it is shown that it is perverse or that theTribunal had acted without any materials. In the instantcase, the factual findings made by the Tribunal do not sufferfrom any such error or illegality or perversity. Insuchcircumstances, we find no sufficient ground to interfere withthe findings of the Tribunal. The appeal is liable to bedismissed. Consequently, the appeal is dismissed. No costs. (sd/-) C.K.ABDUL REHIM, JUDGE (sd/-) lsn/jsr R.NARAYANA PISHARADI, JUDGE APPENDIX PETITIONER'S EXHIBITS: ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 30.3.2013 FOR THE ASSESSMENT YEAR 2010-11. ANNEXURE B TRUE COPY OF THE COMMISSIONER APPEALSORDER DATED 24.2.2016 FOR THE AY 2010-11. ANNEXURE C TRUE COPY OF THE IMPUGNED ORDER DATED31.5.2018 OF THE INCOME TAX APPELLATETRIBUNAL, COCHIN BENCH FOR THE AY 2010-11. RESPONDENT'S EXHIBITS: NIL TRUE COPY PS TO JUDGE