Survey Under Income Tax Act, 1961 Jurisdiction Of - Indore

Report
Overview of Search and Seizure and
Survey Provisions Under Income Tax Act
1961 with Relevant Provisions of Indian
Evidence Tax Act
Presented By
Ram Krishna Gupta
CCIT (CCA),Nagpur Mumbai
NATURE OF POWER UNDER SECTION
132
 Punjab and Haryana High court in Janak Raj Sharma
v. Director of Inspection ( Investigation) ( 1995) 215
ITR 234 held ( page 237 of 215 ITR ) :

“Section 132 impinges upon the privacy of a citizen.
It even carries a social stigma. To a sensitive man, the
consequences can be serious. The Legislature has
consequently provided the in-built safeguards. These
have to be satisfied before any order for search, etc. can
be passed.”
SECTION 132: Legislative History
 Section 37(2) was introduced by Finance Act, 1956 to
grant powers of search and seizure in the Income Tax
ACT 1922.
 The same continued in the IT ACT 1961 under section
132. This provision as such continued till 1964.
Thereafter, it was replaced by a completely elaborate
provision as these provisions were stuck down by
Assam High Court being voilative of article 14 and
19 ( 1g) of the constitution. In this year section 133A
was also introduced giving power of survey.
SCOPE OF DISCUSSION
 Search provisions-legal Action-validity of action-release of
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explained assets
Presence of counsel -Quasi Judicial proceedings –meaning
thereof-Nature of Enquiries –
Confession –Advantages and Disadvantages
Confession -How to be made
Ingredients of Retraction
Post search Enquiry
Post search action necessarily to be taken
Assessment-how to determine income, etc
Controversies –Judicial Pronouncement
SEARCH AND SEIZURE-S.132
 SEARCH - WHEN POSSIBLE
 Object - to get direct and clinching evidence regarding
transactions, duplicate set of books, undisclosed,
concealed income, wealth and assets.
 WHO CAN AUTHORIZE [U/s 132(1)
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Authorisation of Search
DGIT / CCIT / DIT /CIT
May Authorize
ADIT/ ACIT
Dy. DIT / Dy. CIT
ITO
Addl. DIT / Addl. CIT
Jt. DIT / Jt. CIT
May Authorize
source of information
A: Information-outside the department: Professional
informers, business or professional rivals, disgruntled
employees, unhappy wife, estranged brothers or a
disgruntled son-in-law or a harassed daughter-in-law etc.,
within the department (CIB,AIR,ITS,AO etc.) and outside
the department (FIU, Police, NIA, Directorate of
Enforcement, custom and excise, Narcotics, sales tax etc)
B : Information of Hawala Transactions :
1. Bogus Purchases / Expenses
2. Bogus Cash Credits
3. Bogus Capital Gains
4. Foreign Bank Accounts
C Information gathered during search of third party or
associates
S.132-INFORMATION
 Information’ within the meaning of section 132(1)
should be as accurate as possible having reference to
the precise assets of a person and not of general nature
and that should in all probabilities, lead the
authorities to have the unmistaken belief that money,
bullion, jewellery or other valuable articles or things
pointed out by the informer, would be found in
possession of the person named by the informer.
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The reason to believe must be tangible in law and
it should have a rational nexus with the belief.
Conditions for valid search
 Prabhubhai Vastabhai Patel Vs R.P. Meena 226 ITR
781 (Guj) has summarised conditions laid down by
various judgements
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Authority must have information
Reason to believe & not suspect
It must be info & not rumour or gossip or hunch.
Information must exist prior to authorisation.
reason to believe must have reasonable bearing / connection
to information.
Existence of condition precedent is open to judicial scrutiny.
But sufficiency of information is not open to judicial scrutiny.
Search related Instruction
 Instruction No. 7 of 2003 of 30th July 2003 –
 (a) Searches should be carried out only in cases
where there is credible evidence to indicate
substantial unaccounted income/assets in relation
to the tax normally paid by the assessee OR
 (b) where the expected concealment is more than
Rs. 1 crore.
SEARCH AND SEIZURE-S.132
 VALIDITY OF SEARCH – WRIT JURISDICTION
 At assessment stage: Chitra Devi Soni 313 ITR 174(Raj.)
in favour of assessee SLP dismissed.
 Paras Rice Mills 313 ITR 182(P&H);Gaya Prasad Pathak
290 ITR 128 (MP) against the assessee
Illegal Search – Consequences
 When a search is held as illegal by High Court :
 All assets seized to be returned
 Original copies of books of account or other documents to
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be released.
No proceedings u/s. 153A or u/s. 153C .
No presumption u/s. 132(4A) / 292C
Costs may be awarded
However, department is not precluded from using the
document [Pooranmal Vs. Director of Inspection (1974 )
93 ITR 505 (SC)]
The material seized during an illegal search can be used
against the assesses. Dr. Pratap Singh v. Director of
Enforcement ( 1985) 155 ITR 166 (SC)
PRESENCE OF COUNSEL
QUASI JUDICIAL PROCEEDINGS-MEANING
A.Investigation and collection of incriminating
evidence and relevant facts and their verification,
examination (Police inspector role-administrative)
B.Issuing of show cause notice to the assessee after
charges are framed (ie prosecutor’s role - to file
charge sheet before the trial court- administrative )
C.Appreciation and evaluation of the evidences
collected by him and explanation and evidences
filed by the assessee (Judge’s Role)
Quasi Judicial Authority
The role of
the quasi
judicial
authority
Prosecutor’s
role
Police inspector’s
role
Judge’s role
PRESENCE OF COUNSEL
Nature of I-T proceeding
 The Madras High Court, in the G. Giribabu & Anr. (2010)
326 ITR 575 Madras) case, decided that a person
summoned cannot insist that he should be permitted to
appear with his counsel during preliminary enquiry
proceedings.. The case arose under the FEMA provisions.
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The petitioners' case before the high court was that
the right to be represented by an advocate flows as the
cross examination is justified as if before a court of law. The
FEMA/I-T authorities have no jurisdiction or power to deny
the presence of an advocate. The right of fair procedure is
part of the requirement of article 21 of the Constitution of
India.
PRESENCE OF COUNSEL
Nature of Enquiry
 There is great latitude allowed to an income-tax authority
and the procedure in an adversary system of proceedings
cannot be applied to him even at the stage of collection
of information.
 The court held that the functions that the AOs under the IT
Act and officers of the ED under FEMA perform are of an
inquisitive nature seeking and collecting informationnot that of deciding any issues.
 Basically, these are information gathering exercises.
When the information gets collected through the machinery
of these provisions and it is to be put to use in passing
orders, the parties involved are to be given opportunity to
have their say in accordance with the principle of natural
justice and they get full opportunity for cross-examination
and, at that stage, the assessee/party proceeded against, can
be represented by his/her counsel-not at the enquiry stage.
STATEMENTS/CONFESSION
 Statement on oath-Meaning thereof
 Sec.8 of INDIAN OATHS ACT, 1969: Persons giving
evidence bound to state the truth: Every person giving
evidence on any subject before any Court or any person
authorized to administer oaths and affirmation shall be
bound to state the truth on the subject.
 Name of Old act - The Indian Oaths Act, 1873
Binding nature of a statement
made on oath
 an admission in statement recorded on oath is an
extremely important piece of evidence but it cannot be
said that it is conclusive : Pullangode Rubber
Products Co. Ltd. (91 ITR 18)(SC),Krishnan vs.
Kurushetra University (AIR 1976 SC 377) )(SC)
 a statement recorded u/s.132(4) at midnight cannot be
considered a voluntary statement if it is subsequently
retracted by the assessee and necessary evidence is laid
contrary to such admission: Kailashben Manharlal
Chokshi (174 Taxmann 466)( Gujrat):
Importance of Disclosing/Substantiating the manner of
earning undisclosed income in
 Assessment Proceedings-115BBE-introduced w.e.f 1st
 Penalty Proceedings
 Application for Settlement before the Settlement
commission
 The meaning of “Substantiate” :
 Refer: Hon’ble ITAT, Ahmedabad in Gujarat
Credit Corporation Ltd. v. ACIT [113 ITD 133 (Ahd)(SB)]
 “…‘NOT ABLE TO SUBSTANTIATE’ DOES NOT MEAN
NOT ACCEPTED BY THE AUTHORITY
CONCERNED BUT NOT SHOWING A SUBSTANCE IN
THE CLAIM MADE BY THE ASSESSEE.
ASPECTS RELATING TO SURRENDER OF UNDISCLOSED
INCOME
 Why to make surrender?
 To avoid penalty
 To mitigate rigors of search, To wrap up the search
proceedings
Conditions of surrender under section 132(4)
r.w.s 271AAB
 State the manner how undisclosed income has been
derived
 Substantiate the manner
 Pay the taxes before the specified date.
Retraction of Surrender
 To be made at the earliest
 Department may view it adversely
 Ultimately nature of evidences will decide
 Challenging valuation, not retraction
 Challenging calculation, not retraction
 Conditional surrender- fulfilling conditions
 Consequences of retraction.
 In case of retraction burden of proof on assessee : Krishan
Lal Shiv Chand Rai v. CIT (1973) 88 ITR 293 (P&H).
Surrender- consideration
 Cover incriminating material found
 Creation of capital
 Generation of income v. Application in assets
 Set-off of losses
 Assets acquired prior to seven financial years
 Current year income not recorded, advance tax not paid
 Conditional surrender
 Principle of Peak Balance
 No surrender for third party
SURRENDER OF UNDISCLOSED INCOME: How to be
made during the course of search
 A paragraph mentioning that the surrender letter
submitted by the assessee is in the nature of statement
of the assessee u/s.132(4).
 To mention that the declaration is subject to no penal
consequences. However,it has to be decided on merit:
 To mention broad manner of earning undisclosed
income and to substantiate it to the extent possible.
 Surrender letter to be signed by of the person/entity
making the surrender. In case a person makes
declaration on behalf of other person, he should be
authorized to do so.
SURRENDER OF UNDISCLOSED INCOME:
 Surrender of undisclosed income to be made in the hands of the
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person/entities against whom search warrant has been issued.
To ensure that surrender letter is given prior to the date of
conclusion of search with respect to the concerned
person/entity.
In case declaration is made amending or improving upon any
earlier declaration, this fact should be clearly mentioned.
In case there is seizure of cash, assessee should state and
request to treat the amount of cash seized as payment of
advance tax in the hands of concerned person/entity.
A line mentioning that surrender of undisclosed income is being
made to buy peace and to settle the dispute.
Retraction-Valid
 Affidavits
of independent witness to the search
proceedings be submitted corroborating the claim of the
deponent.
The Gauhati
High court
in_Green_ViewRestaurant. vs. Asstt. CIT (2003) 185 CTR (Gau) 651
dismissed the contention advanced by the assessee as to
recording of statements by using force and coercion when
the statements were recorded in the presence of two
witnesses and the retraction was after lapse of time.
Retraction-Duty of the officer
After retraction, statements must be recorded on oath.
At the time of re-recording of such statements, the
deponent must corroborate and confirm what he has
stated in the letter of retraction
Application of seized assets (Sec 132B)
The assets seized shall be dealt with in the following manner
i) Seized assets may be applied towards existing and future liability (sec
132B(1)(i)
ii) Release of seized asset after meeting existing liabilities in certain cases
132B(1)(ii),
iv) Assets other than money may also be applied to discharge liabilities (sec
132B (1)(iii)
Return of excess assets seized (section 132B(3)
 the interest shall be payable from the expiry of the period of 120 days from
the execution of the last of the authorizations for search till the date of
completion of assessment under section 153A or block assessment.
Section 132B
 Seized Cash can be adjusted against any existing income
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tax and wealth tax liability
It is also be adjusted against tax liability determined on
completion of assessment u/s 153A
Where an application to the AO is made for release of asset
within 30 days from the end of the month in which asset
was seized and if nature and source of such asset is
explained to the satisfaction of the AO. The AO after
adjusting existing liability has to release asset after
taking prior approval of CIT or CCIT.
After the amendment made by the Finance Act, 2013 w.e.f.
01.06.2013, seized cash cannot be adjusted against liability
for payment of advance tax. Refer Expl.2
Instruction No. 11 of 2006, of 1st Dec., 2006 regarding
release of seized cash deposited in PD Account
POST SEARCH LETTERS
 request to appropriate cash seized toward advance tax. Now not
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possible from 1st June 2013
Application u/s.132B for release of disclosed assets if any seized
along with all the relevant evidences.(Refer 1st and 2nd proviso to
132B(1)(i)
Letter requesting to give photocopies of all the documents, papers
or books of account seized. Delay in supplying copies of seized
material – Levy of interest not justified.[Refer Board order issued
u/s119(2)(a)] reported in 219 ITR 169 (ST)
Letter for release by person/entity not covered in the search, in
case any books of account or assets belonging to them have been
seized.
Letter with complete evidences regarding disclosure of jewellery or
assets in case restraint order u/s.132(3) has been passed but assets
have not yet been seized.
Letter for release of jewellery against deposit of equivalent amount
of cash /furnishing of bank guarantee.
Presumption as to ownership. S. 292 C
 [Inserted by Finance Act, 2008, w.r.e.f. 1/06/2002].
Presumption regarding
 Belongingness of book of account, other documents,
money, bullion, jewellery, other valuable article or thing
 Truthfulness of the contents
 regarding signature and handwriting and stamping and
execution or attestation.
 NOTE:
This concept is in line with the principle given
under Indian Evidence Act. Section 110 of Indian Evidence
Act. 1872 reads as under :“ when the question is whether any
person is owner of anything of which he is shown to be in
possession, the burden of proving that he is not the owner is
on the person who affirms that he is not the owner”.
HANDLING OF ASSESSMENT IN SEARCH CASES
 Systematically and chronically arrange all the seized
documents entities wise and Assessment year wise . For that,
get the transactions entered in excel sheet preferably in the
following columns. Name of Entity, Date, amount ,narration
of expenditure, narration of income, narration of investment
and premise wise,
 Benefit of telescoping /peak credits
 Where any undisclosed income is offered in the return filed
u/s 153A then the expenditure incurred to earn that income
may also be claimed.
 Below the computation of income put the suitable and
appropriate notes-provide flexibility , no allegation of non
disclosure etc
RELEVANT ISSUES UNDER SECTION 153A / 153C (made after
31/5/03)
 Assessment for the preceding seventh year prior to the
year of search can be reopened under section
148.Ramballabh Gupta v. Asstt. CIT(2007) 288 ITR 347
(MP).
 Fresh assessments to be framed for all the preceding six
years whether assessment proceedings are abated or not.
 Notice under section 143(2) within time limit as
prescribed is mandatory in case of proceedings under
section 153A :Asstt. CIT v. Hotel Blue Moon (2010) 321 ITR
362 (SC).
RELEVANT ISSUES UNDER SECTION 153A / 153C
 Recording of satisfaction before invoking provision of section
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153C :Manish Maheshwari v. Asstt. CIT (2007) 280 ITR 341
(SC).
Jurisdiction under section 153C can be assumed when seized
material belong or belongs to other person :Vijaybhai N.
Chandrani v. Asstt. CIT (2010) 38 DTR (Guj.) 225.
Reference to departmental valuation officers in search cases.
Reference for special audit under section 142(2A).
Reliance on statement recorded by authorized officer during
search.
No addition for investment in jewellery upto specified limit
not required to be seized.
Assessment in the case of retraction surrender of
undisclosed income.
ASSESSMENT U/S.153A IN THE CASE OF CONCLUDED
ASSESSMENTS
 ASSESSMENT U/S.153A HAS TO BE MADE ON THE BASIS OF
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INCRIMINATING MATERIAL ONLY IN THE CASE OF
CONCLUDED ASSESSMENTS
All Cargo Global Logistics Ltd. vs. DIT, 2012-TIOL-391-ITAT-MumSB, i.e., on the basis of undisclosed income/property/books of
accounts/ documents found during 132/132A operation.
A.C.I.T. vs. Pratibha Industries Ltd., [2012] 28 taxmann.com 246
(Mum.)
Jai Steel (India) vs. Assisstant Commissioner Of Income Tax
(dt.24.05.2013)(Raj.) held
(a) the assessments or reassessments, which stand abated in terms
of II proviso to Section 153A of the Act, the AO acts under his
original jurisdiction, for which, assessments have to be made; (b)
regarding other cases, the addition to the income that has already
been assessed, the assessment will be made on the basis of
incriminating material and (c) in absence of any incriminating
material, the completed assessment can be reiterated and the
abated assessment or reassessment can be made.
Penalty Provisions
 For earlier years U/s 271(1)(c)
 For specified years U/s 271AAA Introduction of Section
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271AAB by Finance Act, 2012 w.e.f.1st july 2012
Penalty for undisclosed income even for specified
previous year in staggered manner:Declared during search in statement under section
132(4) – 10%
Declared in the return of income filed under section 153A
– 20%
Not Declared, addition made during assessment – 30%90%
Voluntary disclosure- consequences
 The Supreme Court in the case MAK Data (P.) Ltd. V. CIT (2013) 38
Taxman.com 448 (SC) held as under:
 The Assessing Officer shall not be carried away by the plea of the assessee like
‘voluntary disclosure’, ‘buy peace’, ‘avoid litigation’, ‘amicable settlement’, etc.,
to explain its conduct;
 Assessee had only stated that he had surrendered the additional sum with a
view to avoid litigation, buy peace and to channelize the energy and resources
towards productive work and to make amicable settlement with the income-tax
department. Statute does not recognize those types of defences under the
Explanation 1 to section 271(1)(c);
 It is trite law that the voluntary disclosure does not free the assessee from the
mischief of penal proceedings under section 271(1)(c). The law does not provide
that when an assessee makes a voluntary disclosure of his concealed income, he
has to be absolved from penalty;
 The surrender of income in this case was not voluntary in the sense that the
offer of surrender was made in view of detection made by the Assessing Officer
in the search conducted in the sister concern of the assessee.
Survey Under Income Tax Act,
1961
 Jurisdiction Of Income tax authority for conducting
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survey s. 133A (1)
Territorial Jurisdiction
Assessee specific Jurisdiction
Authorized Jurisdiction
The place of the business or profession shall include
any other place where the books of accounts or other
documents or any part of the cash or stock or other
valuable article is kept.(Business related material)
Expln.to Sec.133A defines an Income Tax Authority :
Director /Commissioner to Inspector level however If
authorized by Joint/Addl. Director/ commissioner then
Deputy / Assistant Director / Commissioner ITOs ,Tax
Recovery Officer,Inspector of Income Tax (For
certain Specific purpose)
Jurisdiction:
 Residential premises can also be covered if the
assessee states that business/professional
work/document/assets is there
 Survey is possible even to enquire about tax deducted at
source : Reckitt and Colman of India Ltd. vs. ACIT [2001] 251
ITR 306 (Cal)..
 Business or residential premises of third parties,
including a Chartered Accountant, a pleader, or Income Tax
Practitioner, of whom the assessee may be a client, are
not places which could be entered into for the
purpose of section 133A. (Circular no. 7- D dt
3/5/1967),however if it is found that assessee’s books of
accounts/documents are there than for that limited purpose
it can also be covered.
 Note : Survey team has no power to break open any locked
premises as power to break open any lock is not conferred u/s
133A as against specific provisions contained u/s 132.
Evidentiary Value of Statement Recorded
u/s 133A
 Statement u/s 133A is not recorded on oath and,
therefore, in the absence of any corroborative
evidence, has no evidentiary value.Refer: CIT v.S.
Khader Khan & Sons 352 ITR 480(SC),Paul Mathews
and Sons 263 ITR ITR 101 (Ker)
 However addition can be made on the basis of
assessee’s statement in survey, if it is supported by
relevant material.Refer: CIT v. P. Balasubramaniam 215
Taxman 288 {2013} Madras- High Court and Mumbai
ITAT Income Tax Officer v. Devji Premji
Brief Comparison between Search u/s 132 and Survey u/s 133A
Seizure of Books of account as well as money, Impounding of only Books of account and
jewellery, bullion and other valuable article
other documents
Retention-Not exceeding
Section139(9A)*
60Days
[As
per Retention-Not exceeding10Days [As per
section133A(3)(ia)]**
Statement recorded on oath and used as evidence Statement not recorded on oath and hence,
in subsequent proceedings
In the absence of incriminating material, no
evidentiary value
Retraction-Possible
Retraction–Easier-As no evidentiary value
Pending Assessments-Abate
Not applicable
Statement u/s131(1A)-Can be recorded
Statement u/s131(1A)-Can be recorded
*Books of accounts or documents shall not be **It can be extended with prior approval of
retained by the A.O. for a period exceeding thirty CCIT or DGIT as the case may be.
days from the date of the order of asst. u/s153A
Nature of ‘Escaped Income, Concealed Income and‘Undisclosed Income’
Escaped Income
Concealed Income
Undisclosed Income
Section147
Section271
271AAA/271AAB
(i) under assessment of income The word ‘conceal’ means to
(ii) income assessed at too Low a hide, to keep secret. The phrase
rate
‘conceal the Particulars of his
income’ would include false
(iii)Excessive relief granted
deduction or exemptions claimed
(iv) excessive loss or depreciation
by the Assessee in his return.
allowance or Any other allowance
CIT vs. Manjunatha Cotton
and Ginning Factory (Kart.
HC)2013
Any income of the specified
previous year represented, either
wholly or partly, by any money,
bullion, Jewellery or other valuable
article or thing or any entry in the
books of account or other documents
or transactions found in the course
of a search under section 132, which
has—
Section147
271AAA/271AAB
Section 271
(A) Not been recorded on or before
the Date of search in the books of
account or other
documents
maintained in the normal course
relating to such previous year; or
(B) otherwise not been disclosed to
the
Chief
Commissioner
or
Commissioner before the date of
search;
APPLICATION TO SETTLEMENT COMMISSION
 Pre-requisite for Filing Application –
 1. An application before the Settlement Commission can be made only
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if the additional income disclosed exceeds Rs 10 lakhs in normal case
and in search case if disclosure exceeds 50 lakhs.
2. Application can be made only at the stage of the pendency of the
original assessment proceedings before the assessing officer (AO).
3. No application can be made when proceedings are initiated for
assessment or reassessment under Section 148 of the Income-Tax Act,
1961
4. Proceedings for making fresh assessment when original assessment
was set aside either by the Commissioner or by the Tribunal will also be
outside the purview of the application for settlement.
5. An application can be made by an assessee for settlement before the
Commission only once in a lifetime.
Advantage: Order is conclusive and final. Waiver of penalty and
prosecution under Income Tax Act can be given
WRIT Related Matters:
 ILLEGAL SEARCH-release of Jewellery and ornaments
seized: In Director General of Income Tax and Anr. vs
Diamondstar Exports Ltd and Ors. [2006] 293 ITR 438
:Hon’ble SC has held that Jewellery and ornaments seized
during an illegal search were to be returned to the owners
as soon as possible, along with the interest at the rate of 8
per cent on the value of the seized items.
 VIOLATION OF HUMAN RIGHTS : Chief
Commissioner of Income-tax (CCA) v. State of Bihar
Through The Chief Secretary, [2012] 18 taxmann.com
70 (Pat.):Due regard to human dignity and value cannot be
ignored.:
WRIT Related Matters:
 SUPPLY OF REASONS WITHOUT SOURCE OF INFORMATION: M/s M D
Overseas Ltd. v DGIT & Others, [2011] 198 TAXMAN 136(All.):Whether when
assessee makes a prima facie case against validity of search, Revenue is obliged
to share information relating to 'reasons to believe' for authorizing search
except the source of information. Held Yes
 GENERAL REASONS LIKE HIGH GROWTH AND HIGH PROFIT
MARGINS CAN NOT BE TH E BASE FOR SEARCH :Space wood
Furnishers Pvt. Ltd. Director General of Income Tax (Investigations)
[2012] 340 ITR 0393 (Bom)
 NOTICE ISSUED U/S 131(1A) SUBSEQUENT TO SEARCH WOULD NOT
INVALIDATE SEARCH : Dr. Roop v. Commissioner of Income-tax, Meerut
[2012] 20 taxmann.com 205 (All.) see also Neesa Leisure Ltd. V Union of India
through Secretary. [2011] 338 ITR 0460 (Guj). Contrary view: Allahabad High
Court in the case of Dr. Mrs. Anita Sahai v. DIT [2004] 266 ITR 597
Other Important cases
 THE ISSUANCE OF PROHIBITORY ORDERS U/S
132(3) IN RESPECT OF ACCOUNTS DULY PASSED
THROUGH REGULAR BOOKS OF ACCOUNTS
ARE NOT VALID :MAA VAISHNAVI SPONGE LTD. V.
DGIT (INVESTIGATION) [2011] 339 ITR 0413 (ORI).
 DUMPING OF DOCUMENTS AND ARTICLES IN
PARTICULAR PLACE AND SEAL IT, NOT RIGHTS :
Dr. C. Balakrishnan Nair v CIT 237 ITR 70 (Kerala)
 AUTHORISATION OF SEARCH MERELY ON AN
INTIMATION FROM CBI WAS INVALID,:Ajit Jain
Vs Union of India 242 ITR 302(Delhi)
Other Important cases
 NO SEIZURE OF THIRD PARTY IF THERE IS
EXPLANATION AS TO THE OWNERSHIP OF SUCH
ASSETS: Alleppey Financial Services V ADIT 236 ITR
562(Kerala)
 PROHIBITORY ORDER ON BANK AND CASH
WITHDRAWN AND SEIZED: KCC Software Ltd, 298/1
(SC) – cash in bank account is not same as cash on hand.
 SEIZURE OF PAWNED ARTICLES: Alleppey Financial
Enterprises vs ADIT (Inv. ) & Anr. ,(1999) 236 ITR 562
(Ker.) :Gold ornaments pledged by the customer with the
assessee as security for loan amount sanctioned by him
cannot be seized u.s 132, respondent directed to return the
gold ornaments together with the pledged forms
Other Important cases
 NO SEIZURE OF LAPTOP OR OTHER RECORDS
OF CA EXCEPT TO THE EXTENT RELATED TO
CLIENT SEARCHED – S R Batliboi & co, 186 Taxman
350 (SC)
 Post Search enquiry: issuance of summon:
Can be issued. Arti Gases v. DIT (Inv.) [2001] 248 ITR
55 (Guj.)
Can not be issued: Arjun Singh & Another v.
Assistant Director of Incometax (Investigation) 246
ITR page 363(MP) ; Dr. Balkrishnan Nair v. CIT
reported in 154 CTR page 543(Kerela )
Other Important cases
 Presumption: Surendra M. Khandhar vs ACIT &
Ors. (2009) 224 CTR (Bom.) 409 :Assessee having
failed to rebut the presumption u/s 292C , addition u/s
69 on the basis of documents seized from the
possession of the assessee was rightly made by AO &
sustained by the tribunal.
 No presumption u/s 132(4A) available in the
assessment ,S. 132 a separate code by itself –– Metrani’s
case, 287 ITR 209 (SC)-
Technical rules of Evidence Act inapplicable
 The perception that the provisions of the Evidence Act is
inapplicable to taxation proceedings is incorrect. The
Bombay High Court in the case J.S.Parker vs. V.B.Palekar 94
ITR 616held that what was meant by saying that the
Evidence Act did not apply to the proceedings under the
Act was that the rigours of the rules of evidence contained
in the Evidence Act was not applicable but that did not
mean that when the taxing authorities were desirous of
invoking the principles of the Act in proceedings before
them, they were prevented from doing so. Evidence Act
embodies principle of common law jurisprudence which
could be attracted to a set of circumstances that satisfy its
conditions
Evidence
 Section 3 of the Indian Evidence Act reads as follows:
 Evidence-Evidence means and includes (1) All statements which the Court permits or requires to
be made before it by witnesses, in relation to
matters of fact under inquiry, such statements are
called oral evidence;
 (2) All documents including electronic records produced
for the inspection of the Court, such documents are
called documentary evidence. Thus, evidence can
be both oral and documentary and electronic
records can be produced as evidence."
Evidence – Oral & Documentary
All statements which are recorded by or before an
authority are called oral evidence.
All documents including books of account, bills,
vouchers, receipts, supporting record, bank
statements, registers, etc. are documentary evidence.
Documentary Evidence
•A document means;
•any matter expressed (written)
•on any substance
•in letters; figures or marks.
•Documentary evidences are;
• either primary (original) evidences or
• secondary (copies) evidences.
Forms of Evidence
Following are relevant but not sufficient evidence:
 Books of Accounts
 Public records
 Published maps or charts
 Official gazette
 Statement of law
 Certain judgments of Courts
 Expert Opinions
 Opinion on handwriting
 Customs and usage
 Character and past history
Burden of Proof and Onus of Proof
•Duty of proving a fact
•Used interchangeably
•Carries definite meaning
•Burden is fixed
•Onus is ambulatory
•Extent of onus can shift & re-shift
•Degree of proof required
Golden Rules of Evidence & Natural Justice
•First ; what is apparent is believed to be true.
•Second ; what is believed to be true can be proved with
evidence to be false.
•Third ; the person seeking to counter the apparent truth has to
lead evidences.
•Fourth ; law can shift the burden of proof on the assessee to
prove that apparent is real.
•Fifth ; evidence gathered behind the back of the assessee
cannot be used unless an opportunity of rebutting same is
given
•Sixth ; the rules of Natural Justice shall apply in admission of
the evidence ; an opportunity of hearing and cross
examination : a must.
•Seventh; evidences not produced can be produced before the
appellate authorities on a written application.
•Eighth ; statement made on oath is binding but not conclusive
Evidence Act-Principle
 Statements made in ordinary course of business:
 S. 32(2): When the statement is made by such a person(i.e. a person
who is dead or can not be found ,etc.) in the ordinary course of
business ,and in particular when it consists of any
(a) An entry or memorandum made by him in books kept in (i)the
ordinary course of business ,or (ii) the discharge of
professional duty: or
(b) An acknowledgement (written or signed by him)of the receipt of
money, goods, securities or properties of any kind .or
(c) Documents used in commerce, written or signed by him. or
(d) The date of a letter or other document usually dated ,written or
signed by him,
are relevant.
Evidence Act-Principle
Regular enteries in accounts book
S. 34:
Enteries in books of accounts ,including
those maintained in an electronic form ,regularly
kept in the course in business ,are relevant,
whenever they refer to a matter into which the
court has to inquire but such statements are not
alone sufficient evidence to charge any person with
liability.
Burden of Proof-General
Chapter VII of Part III of Indian Evidence Act deals
with Burden of Proof. Relevant section are 101 to114.
Section101:When a person is bound to prove the
existence of any fact, it is said that burden of proof lies
on that person.
Section 106: The burden of proving any fact, which is
especially within the knowledge of any person is upon
him.
Burden of Proof-General
Section 110: When the question is whether any
person is owner of any-thing of which he is shown
to be in possession, Sec. 110 of the Evidence Act is
material in this respect. The onus of proving that
he is not the owner is on the person who affirms
that he is not the owner. In other words, it follows
from the well-settled principle of law that
normally, unless the contrary is established, title
always follows possession. Chuharmal vs CIT 172
ITR 250 ( S C)
Section 114
 The Court may presume the existence of any fact
which it thinks likely to have happened, regard being
had to the common course of natural events, human
conduct and public and private business, in their
relation to the facts of the particular case.
 (e) that judicial and official acts have been regularly
performed;
61
Evidence Act-Principle
Estoppel
S115: When a person has by his declaration ,act, or
omission intentionally caused or permitted
another person to believe a thing to be true and to
act upon such belief neither he ,nor his
representative can be allowed to deny the truth of
that thing in a suit or proceeding between himself
and such person or his representative.
Burden of Proof- Case Laws

Source of Receipt - Burden on Assessee

Kalakhan Mohd. Hanif V. CIT 50 ITR 1(SC)
 Receipt is taxable - Burden on Revenue

Janki Ram Bhado Ram V. CIT 57 ITR 21 (SC)

CIT Vs Sumiti Dayal 214 ITR 801 (Hon’ble Supreme
Court)
 Deduction/Exemption – Burden on Assessee
 UnexplainedInvestment/expenditure
69, 69A, 69B and 69C.


Initial onus on assessee to prove source
(98 ITR 280 (All.)
Burden to prove that apparent is not real
Burden to prove that apparent is not real will depend on
the facts of the case.
1.
2.
3.
Burden is on the assessee where the Department
alleges that apparent is not real. Sumati Dayal vs.
CIT (1995) 214 ITR 801 (SC), The test of human
probabilities influenced.
Burden is on the party who claims it to be so that the
apparent is not the real. Daulat Ram Rawatmull's
case_(1973) 87 ITR 349 (SC),.
The Supreme Court, once again, laid burden on the
Department in the subsequent case of Kishinchand
Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980)
125 ITR 713 (SC)
Books of Account
 Books of account
 The books or books of account as defined in section 2(12A)
of the Act includes ledgers, day books, cash books, account
books and other books, whether kept in written form or as
printouts of data stored in a floppy, disc, tape or any other
form of electromagnetic data storage device known in
common parlance. It is wider and includes books of
account.
 '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.
Books of Account-Loose papers
Loose sheets or scraps of paper cannot be termed
as 'book' for they can be easily detached and
replaced.
The Supreme Court in Central Bureau of
Investigation vs. V.c. Shukla AIR 1998 SC 1406
approved of the decision in Mukund Ram vs. Daya
Ram AIR 1914 Nagpur 44 where 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
There are two kinds of people, those who
do the work and those who take the credit
, try to be in the first group, there is less
competition.
68
 If you are interested in balancing work and
pleasure, stop trying to balance them,
instead make your work more pleasurable.
Donald Trump
 My Email:[email protected]

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