The Learned Senior Counsel, Government Ofindia (Taxes) Has Relied On (1954) 26 Itr 775[Dhakeswari Cotton Mills Ltd v. Ita 877/09

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON TUESDAY ,THE 16TH DAY OF OCTOBER 2018 / 24TH ASWINA, 1940 ITA.No. 877 of 2009 AGAINST THE ORDER/JUDGMENT IN IT(SS)A 1(COCH)/2004 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 12-03-2007 APPELLANT/S:/APPELLANT/REVENUE : THE COMMISSIONER OF INCOME TAXTHRISSUR. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S:/RESPONDENT/ASSESSEE : SRI C.M.RAVICHULLIYIL HOUSE, ASAN ROAD, ENGANDIYUR, TRICHUR DISTRICT. BY ADVS.SRI.ANIL D. NAIRKUM.SOUMYA PRAKASHSRI.R.SREEJITH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 16.10.2018, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J U D G M E N T Vinod Chandran, J. The appeal by the Revenue raises a question of lawas to whether the Income Tax Appellate Tribunal wasright in having interfered with the order of theAssessing Officer (AO) as confirmed in first appeal bydeleting the addition made of “pakadi” as disclosed byanother in his sworn statement taken under Section132(4) of the Income Tax Act, 1961 ('Act' for short).The facts disclose that the search proceedings underSection 158BC was carried out in the premises of oneK.K.Lakshmanan. A sworn statement was taken from thesaid person who in the course of the statement deposedthat an amount of Rs.38 lakhs was given to one Ravi as“pakadi” for vacating a premises in which the said Ravihad been carrying on business and later, the assessee'swife and brother have been carrying on a business. 2.There was a search conducted in the premisesof C.M.Ravi also, the assessee-respondent herein. Noincriminating material was discovered. The statement was confronted to Ravi, the respondent herein, whodenied having received any such amounts. The specificcontention taken up by Ravi was that the premises wasone owned by Pazhayanadakkavu Pandyasamooham Trust. Hehad surrendered the premises to the Trust and they hadentered into an agreement with the subsequent tenant.There was no other material found by the AO to supportthe sworn statement of K.K.Lakshmanan. It was hencethe Tribunal interfered with the re-assessment. 3.The learned Senior Counsel, Government ofIndia (Taxes) has relied on (1954) 26 ITR 775[Dhakeswari Cotton Mills Ltd. v. Commissioner ofIncome-Tax, West Bengal], (2006) 284 ITR 557[Commissioner of Income Tax v. C.F.Thomas]and (2013)350 ITR 71 [Commissioner of Income Tax v. O.AbdulRazak] to bring home the point that the sworn statementunder Section 132(4) has evidentiary value in theproceedings under the Act and hence, the additions madecannot be set aside. It is also the contention of theRevenue that the said Lakshmanan who had given thesworn statement had disclosed Rs.38 lakhs as incomebefore the Settlement Commission as is seen from Annexure-E. The deponent having so declared the incometo his detriment and paid tax, there is no reason todoubt the said sworn statement, is the contention takenby the Revenue. 4.Dhakeswari Cotton Mills Ltd.(supra) was reliedon to urge that the sworn statement taken under Section132(4) has evidentiary value, though it cannot beconsidered as evidence in a court of law. However, wenotice the specific paragraph which is extracted below,which goes against the Revenue: Annexure-E. The deponent having so declared the incometo his detriment and paid tax, there is no reason todoubt the said sworn statement, is the contention takenby the Revenue. 4.Dhakeswari Cotton Mills Ltd.(supra) was reliedon to urge that the sworn statement taken under Section132(4) has evidentiary value, though it cannot beconsidered as evidence in a court of law. However, wenotice the specific paragraph which is extracted below,which goes against the Revenue: 8. As regards the second contention, we are in entireagreement with the learned Solicitor-General when he saysthat the Income Tax Officer is not fettered by technicalrules of evidence and pleadings, and that he is entitled toact on material which may not be accepted as evidence ina court of law, but there the agreement ends; because it isequally clear that in making the assessment under sub-section (3) of Section 23 of the Act, the Income Tax Officeris not entitled to make a pure guess and make anassessment without reference to any evidence or anymaterial at all. There must be something more than baresuspicion to support the assessment under Section 23(3).The rule of law on this subject has, in our opinion, beenfairly and rightly stated by the Lahore High Court in thecase of Seth Gurmukh Singh v. CIT[1]. 5.Here, we notice Section 158BB of the Act,which speaks of 'computation of income of the blockperiod' in proceedings commenced under Section 158BC. The undisclosed income has to be the aggregate totalincome, computed on the basis of evidence found as aresult of search or requisition of books of accounts orother documents and such other materials or informationavailable with the AO, relatable to such evidence.Here, there is no evidence obtained in the searchconducted in the assessee's premises. The swornstatement of another, on a search of his premises is aninformation available with the AO, which has to berelated to such evidence as disclosed from the searchor books of accounts or other documents. 6.Even going by the judgment of the HonourableSupreme Court, there cannot be a pure guess work tomake an assessment without reference to any evidence ormaterial at all. In the present case, it is to benoticed that the search and seizure was in the premisesof another person, who had a undisclosed income, partof which was said to be paid to the assessee herein.It is the sworn statement taken from that other personwhich is relied on for the purpose of assessment of theassessee herein. 7.O.Abdul Razak (supra) was a case in which thisCourt looked at the retraction made by the deponent,which was held to be self serving and found to beincapable of dispelling the statutory presumptionavailable under Section 132(4). We again emphasisethat here the search proceedings were in the premisesof yet another person and a sworn statement taken ofthat person. In O.Abdul Razak (supra), the deponentwas the person on whose premises the search wasconducted and the evidentiary value of the swornstatement made under Section 132(4) in the furtherproceedings taken on the basis of the search andseizure could not have been dispelled by a mere selfserving retraction. The same rigor cannot apply to asworn statement with respect to a payment made toanother, who is alleged to have received amounts fromthe deponent. Without corroborating material asmandated in Section 158BB, there can be no assessmenttaken as against the other person who is implicated bythe person on whose premises the search and seizure wasconducted. 8.In the present case, admittedly, the owner ofthe premises, in respect of which the “pakadi” is saidto have been paid was not examined. Based on the swornstatement of one another person, who deposed underSection 132(4) that an amount of money was given to theearlier tenant, proceedings were taken against theassessee; which was not corroborated by any otherevidence. There was also no enquiry carried out tofind whether such amounts were in fact received by theassessee or the assessee had any undisclosedexpenditure or investment on the basis of such amountsreceived. In such circumstances, we are of the opinionthat the order of the Tribunal cannot be interferedwith and we refuse to answer the question raised, whichis merely on facts and not on law. The learned Senior Counsel has also referred tothe judgment of this Court in C.F.Thomas (Supra) topray for a remand, wherein the statement was notconfronted to the assessee and it was in suchcircumstances that there was a remand made by aDivision Bench of this Court. In the present case, thestatement was confronted to the assessee, but he denied the same. The AO failed to get any corroboratingevidence in the search conducted in the premises of theassesee and hence we have confirmed the order of theTribunal affirming that of the CIT (Appeals), which setaside the order of the AO. There is no warrant for aremand. The appeal would stand rejected. No costs. Sd/-K.VINOD CHANDRANJUDGESd/-ASHOK MENONJUDGE APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE-ATRUE COPY OF THE ORDER OF THE SWORN STATEMENTANNEXURE-BTRUE COPY OF THE ORDER OF THE BLOCK ASSESSMENT ITA 877/09 ANNEXURE-C ANNEXURE-D ANNEXURE-E jg -9- TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL IN I.T(S& S) A NO.1(COCH)/2004 DATED 12/3/2007 TRUE COPY OF THE ORDER OF THE SETTLEMENT COMMISSION //True Copy//