Can Evidences Found During Survey Be Utilised In A Proceeding Under Section 153A Or 153C Of The Income Tax Act?

 

The Income Tax Act Provides For Two Canines Of Dracula In The Hands Of The Department In The Name Of Search And Survey. Both Are Necessary Evils. A Surprise Check On The Affairs Of A Taxpayer Is A Legitimate Weapon Of The State To Detect And To Prevent Tax Evasion. Search Is Done In Order To Unearth Hidden Cash Or Transaction Which Was Camouflaged By The Assessee In Order To Escape The Liability And Burden Of Income Tax. Whereas, The Survey Proceeding Is Also Akin To Search Proceeding. Search, Unlike Survey Proceedings It Is Not Just To Get Information Of Undisclosed Income, But Also To Seize The Money, Bullion Etc. Representing The Undisclosed Income And To Retain Them For The Purpose Of Proper Realization Of Taxes, Penalties Etc. Compared To Search Proceedings Survey Proceedings Have A Limited Objective Of Getting Information Relevant To The Assessable Income Of A Person.

 

SEARCH UNDER INCOME TAX ACT

 

The Power Of Search Is A Draconian Power In The Hands Of The Department If Utilized Without Restrictions And Checks. The Department Was Not Vested With The Right And Power To Make Search And Seizure. However, They Had Powers To Discovery And Inspection, Enforcing Attendance Of Witnesses, Examination Of Witnesses On Oath, Compelling Production Of Books Of Account And Documents, Issuing Of Commissions Etc., Under Civil Law.

 On Recommendation Of The Taxation Enquiry Commission, 1956, Sec. 37 Was Formulated And Entered In The 1922 Act To Confer Powers Of Search On Income Tax Officers. The Permission For The Same Was To Be Granted And Authorized By Commissioners In That Behalf. However, These Powers Were Limited To Search And Seizure Of Books Of Account And Other Documents Which Were In The Opinion Of The Officer Useful For Framing Proper Assessments Under The Income-Tax Act, 1922.

 

The Extent Of Powers:

 The Income Tax Act Gives Very Wide Powers To An Authorized Officer To Carry Out The Search And Also To Seize Documents And Unaccounted Assets.

The Authorized Officer Has The Power To:

 

1. a) To enter and search any building, place, etc. where he has reason to suspect that books of accounts, other documents, money, bullion, jewellery or other valuable article or thing

Representing Undisclosed Income Is Kept;

1. b) To break open the locks, where the keys thereof are not available;
2. c) To carry out personal search of the person who is suspected

To Have Secreted Any Item As Mentioned In A) Above;

1. d) Seize the items as mentioned in a) above;
2. e) Placemarks of identification and take extracts or copies of the books of accounts and other documents; and
3. f) Make a note or inventory of the valuables found during the search.

 

SURVEY UNDER THE INCOME TAX ACT

 Survey Is Defined Under Sec 133A Of The Income Tax Act. It Consists Of Seven Sub-Sections And Powers Under Sec 133A Can Be Divided Into Two Broad Categories. The First Category Deals With The Provisions Relating To Carrying Out A Survey At Business Premises Of Any Person Including Premises Where Activity For Charitable Purpose Is Carried On And Second Category, Deals With Inquiry Regarding Expense Incurred On Any Function Or Event.

 

The Extent Of Enquiry That Can Be Carried Out

 In Exercise Of Powers Under Section 133A, The Income -Tax Authority Can Enter Into Specified Class Of Premises And May: –

 

1. a) Inspect books of account and other documents.
2. b) Place marks of identification on the books of account or other documents and make extracts or copies there from.
3. c) Impound books or documents inspected.
4. d) Check or verify cash, stock or other valuable articles or thing.
5. e) Take inventory of cash, stock or other valuable articles or thing.
6. f) Call upon the proprietor, trustee, employee or other person to furnish information as regards any matter, which may be useful for or relevant to any proceedings under the Income Tax Act, 1961. This provision empowers the Income Tax Authority to record the statement of any person, which may be useful for or relevant to any proceedings under this Act.

 

Whether Books, Cash, Valuables Etc. Can Be Removed, Seized Or Impounded

 The Present-Day Act Provides For The Books, Cash, Valuable Etc. To Be Removed, Seized Or Impound With A Rider That It Cannot Be Done Beyond 15 Days Without Prior Approval Of The Chief Commissioner, Director General Or Director. But, Sec. 133A Was Not Always So Rosy. Prior To Amendment By Finance Act, 2002 W. E. F. 1-6-2002, Subsection (4) Of Section 133A Specifically Provided That The Authority Shall Not Remove Or Cause To Be Remove Books, Valuables, Etc. Found At The Premises During The Course Of Survey.

 Sec 133A Prior To Amendment Was Toothless Tiger. On Top, The Judgments Laid Down By Various High Courts Further Created Great Difficulties And Impediment For The Tax Official And Revenue. The Judgments Categorically Held That Impounding Of Books, Etc. During Survey, Prior To 1 -6-2002, Would Be Illegal.

 The Judgments Of The Hon’ble Courts Made Impounding Of Books And Documents During Course Of Survey A Highly Contentious And Debatable Issue. To Put A Quell On The Issue, The Legislature Inserted Clause (Ia) In Sub Section (3) Of Section 133A, By Finance Act, 2002, W. E. F. 1-6-2002, Granting Power To The Authorized Officer To Impound Books And Documents Inspected During Survey.

 However, Such Power Of Impoundment Comes With Fetters. Firstly, The Power Can Only Be Exercised After Recording Reasons. Secondly, It Cannot Be Retained For A Period Exceeding Ten Days Without Approval Of The Chief Commissioner, Commissioner, Director General Or Director.

 However, This Power Was Limited And Only Restricted To Impoundment Of Books And Documents And Even After Amendment Made By The Finance Act 2002, Cash, Stock And Valuables Cannot Be Seized Or Impounded During The Course Of Survey.

 

Further, The Finance Act, 2014 Substituted The Clause (B) Of The Proviso To Clause (Ia) In Sub- Section (3) Of The Aforesaid Sec. 133A. This Amendment Provides That An Income Tax Authority During The Survey Shall Not Retain In Custody Any Such Books Of Account Or Other Documents For A Period Exceeding Fifteen Days (Exclusive Of Holidays) Without Obtaining The Prior Approval Of The Principal Chief Commissioner Or Chief Commissioner Or Principal Director General Or Director General Or Principal Commissioner Or Commissioner Or Principal Director Or Director Therefore, As The Case May Be. However, While Acting Under Sub-Section (2A) Of Section 133A The Tax Authority Shall Not Impound And Retain In His Custody Any Books Of Account Or Documents Inspected By Him Or Make An Inventory Of Any Cash, Stock Or Other Valuables. These Amendments Are Effective From 1-10-2014.

 

CAN SEC. 153A OR 153C BE INVOKED WITHOUT VALID “SEARCH”?

The Income Tax Act Itself As Well As Catena Of The Judgments Passed By The Hon’ble High Courts And Supreme Court Makes It Clear Beyond Any Doubt That Sec 153A Or 153C Cannot Be Invoked Without A Prior Search Action.

 Sec 153A Of The Act, Pristinely Mentions That, “In The Case Of A Person Where A Search Is Initiated Under Section 132 Or Books Of Account, Other Documents Or Any Assets Are Requisitioned Under Section 132A After The 31st Day Of May, 2003” Which Makes Search An Imperative And Sine Quo Non For Initiation Of Proceeding Under Sec 153A. Further, 153C Is A Similar Proceeding Which Is Initiated On The One Who Is Not Searched But Incriminating Evidences Were Found During Search Linked To Him.

 The Mumbai Bench Of The Tribunal In The Case Of J.M. Trading Corporation Vs. ACIT, 20 SOT 489 (Mum) Held That Where A Search Is Carried Out At The Premises Owned By The Assessee, But Rented To Other Concern, The Same Does Not Result Into A Valid Search U/S 132 On The Assessee. Revenue Appeal Has Been Dismissed In This Case By Hon’ble High Court Of Bombay. Furthermore, The Hon’ble Supreme Court, In CIT, Mumbai Vs. M/S J.M. Trading Corporation Ltd. In CC No.13456/2010, Has Dismissed The Departmental SLP Against The Hon’ble Bombay High Court Order.

 

The Hon’ble Supreme Court Has Also Dismissed The SLP Filed By The Department In Dr. Mansukh Kanjibhai Shah Vs. ACIT, Central Circle-2, 129 ITD 376 (Ahm) Also, Since, Inter Alia, No Search Operation Was Conducted In The Premises Of The Assessee, It Was Held That The Proceedings U/S 153A Of The Act Were Invalid And Bad In Law.

 Similar View Has Been Taken By ITAT Delhi Bench In ACIT Vs Sarmangalam Builders & Developers Pvt Ltd ITA No 196 To 198/Del/2011 Order Dated 14th March 2014 And Also In Siksha Vs CIT (2011) 336 ITR 112 (Orissa HC).

 It Is Therefore Well Established That A Search Proceeding Is A Sine Quo Non For Invocation Of Sec 153A Or 153C Of The Act.

 NOW, THE QUESTION ARISES IS WHETHER SEC 153C CAN BE INVOKED IN CASE OF A SURVEY?

 

It Is Well Established That A Procedure Which Follows Survey Is Reassessment And Not A Procedure As Prescribed Under Sec 153A Or 153C Of The Act. A Conjoint Reading Of Sec 132 And Sec 153A Makes It Abundantly Clear That A Search Action Under Sec. 132 Is A Precondition For Sec. 153A To Come Into Play. If There Is No Search Action Taken Place Then The Invocation Of Sec. 153A Is Ruled Out As Sec. 153A Clearly States That “In The Case Of A Person Where A Search Is Initiated Under Section 132 Or Books Of Account, Other Documents Or Any Assets Are Requisitioned Under Section 132A”. From This It Follows That If Documents Are Impounded U/S. 133A Then Provisions Of Section 153A Or 153C Cannot Be Invoked.

 

ANOTHER QUESTION WHICH ARISES IS, CAN EVIDENCES GATHERED UNDER SURVEY  BE USED IN A PROCEEDING UNDER SECTION 153A OR 153C?

 

An Action Of Search Under Sec. 132 Is Followed By Sec 132A. Sec 132A Provides For The Seizure. After Search, If Any, Incriminating Evidence Is Found Then It Is Seized According To Sec 132A. Whereas, The Process Under Survey Is Not Seizure But Impoundment. As Discussed Above, Impoundment Can Be Done For 15 Days. If The Time Period Is Exceeded As Specified Under Sec 133A(3)(Ia) Then Shall Be With Prior Permission Of Appropriate Officer.

The Elementary Difference Between The Two Evidences Is The Procedure Through Which Such Evidences Are Gathered. Both Sections I.E. 132A And 133A, Provides For Making Of Panchnamas. The Power Under Sec 132A Does Not Have Any Time Restrictions As Mentioned Under Sec 133A.

 Now, Scouting On The Bigger Question As To Whether Evidences Gathered Or Impounded Under Sec 133A Can Be Introduced Or Used Under Sec 153A Or 153C. Where It Is Made Clear That A Proceeding Without Proper Search Can-Not Be Proceeded Under Sec 153A Or 153C, Meaning Thereby, An Action Of Search Is Must, And Further, That A Survey Cannot Culminate Into An Action Under Section 153A Or 153C. In My Humble Opinion, The Conjoint Reading Of Sec 153A, 153C, 132 And 133A Makes It Pristinely Clear That Sec. 153A And 153C Will Only Steer In Action Whenever There Is A Search Action And In No Circumstances An Action Under Sec. 153A And 153C Can Be Kicked Start By Survey Procedure.

 If Survey Procedure Cannot Kick Start A Proceeding Under Section 153A Or 153C, Then In A Circumstance Where A Search Took Place On ‘A’ And Parallelly A Survey Took Place On ‘B’ But, No Evidences Were Found During Search But Some Evidences Were Found In Survey. In This Case Can Evidences Found During Survey Be Used In Invoking A Proceeding Under Sec. 153A Or 153C. Let Us Analyze This Issue In Detail.

 The Material Found During The Course Of Survey Does Not Give Any Authorization To The AO To Make The Assessment U/S 153C R.W.S.153A Of IT Act. There Should Be Material Available Evidencing The Under Statement Of Income In The Premises Of Searched Person Relating To Third Party To Assume The Jurisdiction To Make Assessment Under Section 153C R.W.S. 153A Of IT Act. This View Is Supported Vide Paragraph 50 Of The Judgment In The Case Of CIT V. IBC Knowledge Park (P.) Ltd. [2016] 69 Taxmann.Com 108 (Kar.):-

“Materials Such As Books Of Account, Documents Or Valuable Assets Found During A Search Should Belong To A Third Party Which Would Lead To An Inference Of Undisclosed Income Of Such Third Party. Such An Inference Should Be Recorded By The Assessing Officer Having Jurisdiction Over The Searched Persons And Communicated To The Assessing Officer Having Jurisdiction Over Such Third Party Along With The Seized Documents And Other Incriminating Materials On The Basis Of Which The Assessing Officer Having Jurisdiction Over Such Third Party Would Issue Notice Under Section 153C. On Receipt Of The Aforesaid Material, The Assessing Officer Having Jurisdiction Over Such Third Party Would Proceed Against The Said Third Party. Thus, Where No Material Belonging To A Third Party Is Found During A Search, But Only An Inference Of An Undisclosed Income Is Drawn During The Course Of Enquiry, During Search Or During Post-Search Enquiry, Section 153C Would Have No Application. Thus, The Detection Of Incriminating Material Leading To An Inference Of Undisclosed Income Is A Sine Qua Non For Invocation Of Section 153C Of The Act”

The Ratio Laid Down By The Hon’ble High Court Makes It Clear That The Incriminating Evidence Shall Be Found In Case Of Search Only. This Pristinely Clear The Subject That The Evidences Which Are Found During Search Shall Be Used For Proceeding Under Sec 153A Or 153C.

 

The Hon’ble ITAT, Panji In Case Of Tahir Isani, V. ACIT, Circle – 2(1), Panaji, Cross Objection No. 6/Pan/2013, Dated 28-06-2013, Held That:

 “In This Case, The Agreements Were Not Found During The Course Of Search But Were Impounded During The Course Of Survey Carried Out In The Case Of Mr. Sadiq Shaikh. We Have Also Inquired From The Ld. DR Whether The Documents Were Impounded During The Course Of Search In The Case Of Mr. Sadiq Shaikh Or Were Impounded During The Course Of Survey. The Ld. DR Submitted That The Documents Were Found During The Course Of Survey. Therefore, In This Case, A Condition Precedent For Issuing Notice U/S 153C And Assessing Or Re-Assessing The Income Of Other Person Is That Money, Bullion, Jewellery Or Other Valuable Articles Or Things Or Books Of Accounts Or Documents Seized Or Requisitioned Belongs To Such Person. This Requirement Is Not Satisfied. Therefore, A.O’s Resort To Provisions Of Sec. 153C Of The Act Is Not Valid. We Have Examined The Facts In The Present Case In The Light Of Law. It Is Admitted Position Emerging From The Records That The Documents I.E. Agreements Were Recovered During The Survey Proceedings And Not Found During The Course Of Search. Moreover, These Documents Were Unregistered Agreements. Under These Circumstances, The Condition Precedent For Issuing Notice U/S 153C Is Not Fulfilled And Any Action Taken U/S 153 Of The Act Stands Vitiated. We Hold That The Notice U/S 153C Is Not Valid Notice As The A.O Was Not Having Valid Jurisdiction To Issue Notice U/S 153C Of The Act And The Assessment Order Is Ab Initio Opposed To Law. In The Result, The C.O Is Allowed.”

The Hon’ble ITAT Chandigarh In The Case Of Padam Chand Jain & Co. V. Assistant Commissioner Of Income-Tax, Central Circle-I, Chandigarh, [2015] 64 Taxmann.Com 211 (Chandigarh – Trib.), Observed And Held That:

 “The Combined Reading Of These Provisions Would Clearly Show That There Should Be Search Conducted Under Section 132 Of The Act Or Requisition Made Under Section 132A Of The Act And Where The Assessing Officer Is Satisfied That The Money, Bullion, Jewellery Or Other Valuable Article, Etc. Belong To Such Person Other Than The Person Referred To In Section 153A, Shall Hand Over Such Incriminating Material To The Assessing Officer To Proceed Against Such Person Under Section 153C Of The Act. Therefore, The Requirement Of Law For Proceedings Under Section 153C Of The Act Has Been That There Should Be Search Under Section 132 Of The Act Or Requisition Under Section 132A Of The Act And During The Course Of Search Some Incriminating Material Should Be Found Against Some Other Person Other Than The Person Searched Or Requisition Made Under Section 132A Of The Act. In The Case Of The Present Assessee Firm, It Appears That No Incriminating Material Was Found In The Case Of The Person Searched Against The Assessee Firm. The Excess Cash Was Found In The Case Of The Assessee Firm In The Survey Under Section 133A Of The Act Only. Therefore, The Assessee Was Justified In Contending Before The Learned CIT (Appeals) That The Survey Under Section 133A Of The Act Could Be Made The Basis For Assessment Framed Under Section 153C Of The Act.

 

This Point Was Not Addressed To By The Learned CIT (Appeals) While Dismissing The Appeal Of The Assessee. Since It Is A Legal Issue And Goes To The Root Of The Matter And Requires Consideration Of The Entire Seized Material, Therefore, In Our View, The Matter Requires Reconsideration At The Level Of The Learned CIT (Appeals). We Accordingly Set Aside The Impugned Order And Restore The Matter In Issue To The File Of The Learned CIT (Appeals) With Direction To Redecide The Issue Strictly In Accordance With Law By Giving Reasonable Sufficient Opportunities Of Being Heard To The Assessee.”

 

 The Aforementioned Two Judgments Of The Respective Hon’ble ITAT Categorically Opined That The Material Shall Be Found During The Search Proceeding Only, In Order For Initiation Of A Proceeding Under Sec 153A Or 153C Of The Income Tax Act.

Further, The Hon’ble High Court Of Karnataka In The Case Of CIT Vs. Smt. Yashoda Shetty, Dated Oct 10, 2014, Held That:

 “It Is Not In Dispute That During The Search No Undisclosed Income Was Detected. No Seizure Of Incriminating Materials Was Made. It Is Only In The Course Of Survey, The Incriminating Material Was Found. That Material Is Not Relatable To Any Incriminating Material Found During The Survey. Therefore, On The Basis Of The Incriminating Material Found In The Course Of Survey Merely Because The Same Was Put To The Assessee And His Statement Was Recorded Subsequent To The Search, The Same Cannot Be Held To Be Relatable To The Assessee. Therefore, The Authorities Were Justified In Holding That The Said Material Found In The Course Of Survey Can Become The Subject Matter Of Regular Assessment And It Cannot Become The Subject Matter Of Block Assessment.”

 The Judgement Of The Hon’ble Karnataka High Court Acts A Last Nail In The Coffin And Solidify The Stand That The Evidences Gathered During The Survey Cannot Be Used In A Proceeding Under 153A Or 153C. The Hon’ble Court Further Held That Where The Evidences Are Found Under A Survey Proceeding Then The Correct Procedure To Be Applied Will Be A Regular Assessment And Not Block Assessement.

In The Case Of Commissioner Of Income-Tax Vs G.K. Senniappan,  284 ITR 220 Mad, The Hon’ble Madras High Court Held In The Case Where The Issue Was Whether The Language Contained In Section 158BB That “Such Other Materials Or Information As Are Available With The Assessing Officer” Would Encompass With It The Materials Gathered During The Survey Proceedings Made Under Section 133A Of The Act.

 “A Mere Reading Of The Above Provision Clearly Indicates That The Sentence “Such Other Materials Or Information As Are Available With The Assessing Officer” Cannot Be Bisected Or Taken In Isolation For The Purpose Of Computation. Such Other Materials Or Information As Are Available With The Assessing Officer, Should As Per The Section Relatable To Such Evidence. The Word “Such” Used As A Prefix To The Word “Evidence” Assumes Much Significance, In This Provision, As It Indicates Only The Evidence Found, As A Result Of Search Or Requisition Of Books Of Account Or Other Documents, At The Time Of Search. Any Other Material Cannot Form Basis For Computation Of Undisclosed Income Of The Block Period. Hence, We Are Of The View That The Commissioner As Well As The Tribunal Have The Issue In Accordance With The Statutory Provisions, And Requires No Interference. The Appeal Is Accordingly Dismissed.”

The Madras High Court Held That The Material That Can Be Used Under Sec 158BB I.E. Computation Of Undisclosed Income Of The Block Period Will Not Include Any Evidence Or Material Gathered During The Survey.

 

An Observation Made By The Hon’ble Patna Court Deserves A Mentioning, In The Case Of Commissioner Of Income Tax, Kolkata-Iii V. Veerprabhu Marketing Limited, Decided On 4^th Of August 2016. The Court Observed That:

 “Mr.Nizamuddin, Learned Advocate, Appearing For The Revenue-Appellant Submitted That It Is True That Section 153C Read With Section 153A Proceeds On The Basis Of Search Under Section 132 Or Requisition Under Section 132A. There Is No Reference To Any Survey Under Section 133A. He, Therefore, Did Not Dispute The Submission Made By Mr.Jain That Power Under Section 153C Read With Section 153A Could Only Have Been Exercised In The Case Of A Search And Requisition. He, However, Added That There Was, In Fact, A Search As Also A Requisition. He Submitted That There Has Been Survey In Addition Thereto. Therefore, It Cannot Be Said That Exercise Of Power Was Bad. Admittedly, There Was Search As Also Requisition.”

 The Pith Of This Judgment And Argument Establishes That If There Was No Search Then The Evidences Found During The Survey Cannot Be Used Against The Assessee In Inititating A Proceeding Under Sec 153A Or 153C.

 

 

SHIELD OF SEC 292C OF THE INCOME TAX ACT

 Another Question Which Arises While Reading The Income Tax Is The Presumption Which Is Provided Under Sec 292C Of The Act. The Verbatim Section 292C Is Reproduced Here: –

 Presumption As To Assets, Books Of Account, Etc.

292C. (1) Where Any Books Of Account, Other Documents, Money, Bullion, Jewellery Or Other Valuable Article Or Thing Are Or Is Found In The Possession Or Control Of Any Person In The Course Of A Search Under Section 132 Or Survey Under Section 133A, It May, In Any Proceeding Under This Act, Be Presumed—

(I)  That Such Books Of Account, Other Documents, Money, Bullion, Jewellery Or Other Valuable Article Or Thing Belong Or Belongs To Such Person;

(Ii)  That The Contents Of Such Books Of Account And Other Documents Are True; And

(Iii) That The Signature And Every Other Part Of Such Books Of Account And Other Documents Which Purport To Be In The Handwriting Of Any Particular Person Or Which May Reasonably Be Assumed To Have Been Signed By, Or To Be In The Handwriting Of, Any Particular Person, Are In That Person’s Handwriting, And In The Case Of A Document Stamped, Executed Or Attested, That It Was Duly Stamped And Executed Or Attested By The Person By Whom It Purports To Have Been So Executed Or Attested.

(2) Where Any Books Of Account, Other Documents Or Assets Have Been Delivered To The Requisitioning Officer In Accordance With The Provisions Of Section 132A, Then, The Provisions Of Sub-Section (1) Shall Apply As If Such Books Of Account, Other Documents Or Assets Which Had Been Taken Into Custody From The Person Referred To In Clause (A) Or Clause (B) Or Clause (C), As The Case May Be, Of Sub-Section (1) Of Section 132A, Had Been Found In The Possession Or Control Of That Person In The Course Of A Search Under Section 132.

 

A Bare Perusal Of Section 292C Shows That There Are Two Limbs To The Section. Firstly, That A Statutory Presumption Can Be Drawn Where Any Documents Is Found In Possession And Control  Of A Person In The Course Of A Search Or Survey That It Belongs To “Such A Person”.  Secondly, A Presumption Is Also Drawn That The Contents Of Such A Document Are True.

 

The Hon’ble Apex Court In The Case Of P.R. Metrani Vs. CIT (287 ITR 209) Discussed About Three Types Of Presumptions Under The Law And Stated That It Is Of Three Types, (I) “May Presume”, (Ii) “Shall Presume” And (Iii) “Conclusive Proof’. “May Presume” Leaves It To The Discretion Of The Court To Make The Presumption According To The Circumstances Of The Case. “Shall Presume” Leaves No Option With The Court Not To Make The Presumption. The Court Is Bound To Take The Fact As Proved Until Evidence Is Given To Disprove It. In This Sense Such Presumption Is Also Rebuttable. “Conclusive Proof’ Gives An Artificial Probative

Effect By The Law To Certain Facts. No Evidence Is Allowed To Be Produced With A View To Combating That Effect. In This Sense, This Is An Irrebuttable Presumption.

 

The Hon’ble Bombay High Court In The Case Of Harish Textile Engrs. Ltd Vs. DCIT, Dated 30.10.2015,  Held That Section 292 Of The Act Provides That Where Any Documents Are Found In Possession Or Control Of Any Person In The Course Of Search Under Section 132 Of The Act, Then It May Be Presumed In Any Proceedings Under This Act That The Contents Of Such Documents Are True And Correct. It Will Be Noted That The Section Uses The Word ‘May Presume’ And Not ‘Shall Presume’ Or ‘Conclusively Presume’. The Words ‘May Presume’ Are In The Nature Of Discretionary Presumption Different From A Compulsory Presumption. Therefore This Presumption Has To Be Invoked By The Authorities Passing An Order Under The Act Particularly When The Invocation Of Such Presumption Is Discretionary On The Authorities

In The Case Of M/S Delco India Pvt. Ltd. Dated 10.2.2016 – Delhi High Court Has Held As Under:-

Section 292C Of The Act, Inter Alia, Provides That Where Any Books Of Accounts Or Other Documents Are Found In Possession Or Control Of Any Person In The Course Of Search Under Section 132 Or Survey Under Section 133A Of The Act, It May Be Presumed That Such Books Or Documents Belong To Such Person. Undisputedly, Such Presumption Is Rebuttable

 

Now, The Assumption Is Only Arising Out The Two Words Used Under The Sec 292C I.E. “Control And Possession”. These Two Terms Are Very Vague And Can Encompasses Infinity Under Its Definition. It Is Well Settled That The Presumption Under Sec 292C Is A Of “May Presume” And Not Of Conclusive Proof. A Presumption Of Rebuttal Is Available Against An Action Under Sec 292C. A Peculiar Fact That Is Pertinent To Be Discussed Is That A Survey Action Can Only Take Place At The Place Where Assessee’s Business Or Profession Is Carried Out.

 In Case Of Rajesh Kr Kankaria Kolkata Vs Department Of Income Tax ITA No 70 Of 2009 Presumption Under Section 292C Is Rebuttable One.

 

The Term Used Under Sec 292C Is “Control And Possession” And The Meaning And Nature Of These Two Words Are Very Wide And Open . In Case Of Survey Which Can Be At An Office Premise And Office Premise Is  Almost Like A Public Place With Ingress And Egress Of Thousand Bodies. Under Such Circumstances Using And Employing Words Like “Control And Possession” In Case Of Survey Where Material And Documents Are Found May Not Necessarily Be In Control And Possession Of The Assessee. Therefore, The Sec 292C Presumption Which Is Rebuttable Presumption Can Be Countered And Moreover, Section 292 C Speaks About Presumption To Document Or Books , It Does Not States The  Procedure Of Using Those Documents In Various Proceedings .

Hence , If Documents Found In Survey May Have Presumption That The Same Belongs To Assesee But It Certainly Have To Be Culminated  In Proper Assessment Proceedings That Is 147/148 And Any Improper Proceedings Initiated Based  On Any Presumption Under Section 292 C Or  Employed By The Department Will Patently Be  Incorrect , Hence It Can Be Inferred , If Any Material Found During Survey Can Be Presumed To Be Belonging To Assesee But The Same Should Be Used On Proper Platform Of Assessment Us 147 Or 148 And Cannot Be Abruptly Be Used In Proceedings U S 153A Or 153C ,There Sec 292C Cannot Be Invoked To Correct The Procedural Lapses.

 

WAY FORWARD

 

The Hon’ble Supreme Court In The Case Of CIT V. S. Ajit Kumar Held That Any Material Or Evidence Found/Collected In A Survey Which Has Been Simultaneously Made At The Premises Of A Connected Person Can Be Utilized While Making The Block Assessment In Respect Of An Assessee Under Section 158BB Read With Section 158 BH Of The IT Act. The Present-Day Income Tax Does Not Have A Chapter XIV-B. The Same Was Done Away From The 31^st Of May, 2003 As Evident By Sec 158BI. This Again Brings Back To The Position Whether The Evidences Unearthed During Survey Can Be Used And Utilized For Proceeding Under Sec 153A Or 153C. In My Humble Opinion, And Ratios Laid Down By The Courts, It Can Be Said That The Nature As Well As Evidentiary Value Of The Evidences Or Material Unearthed During Search And Survey Are Different. Both The Provisions Are Distinct And Separate. If The Evidences Or Material Unearthed During Survey Is Utilized As An Evidence Unearthed During The Search Then

It Will Lead To Dilution Of Fabric Of Tax Laws. Taw Laws Need To Interpreted Strictly And If Such Procedural Lapses Are Encouraged Then It Will Not Be A Travesty Of Justice, Law And Order But Also A Mockery Of Law.

 

In My Humble Opinion, The Minimum Requirement To Justify The Invoking Of Sec. 153C Is That At Least It Should Be Possible To Gather A Satisfaction-There Should Be Some Seized Record Pertaining To The Assessee Which Had Been Found In A Search Action. There Are Views Which Propound And Takes A Shield Under Sec 292C Of The Income Tax Act. In This Regard It Is Stated That Sec. 292C Cannot Be Invoked Because A Jurisdictional Error Cannot Be Cured By Indirect Means.

 

Disclaimer: The Contents Of This Document Are Solely For Informational Purpose. It Does Not Constitute Professional Advice Or A Formal Recommendation. While Due Care Has Been Taken In Preparing This Document, The Existence Of Mistakes And Omissions Herein Is Not Ruled Out. Neither The Author Nor SNGC And Its Affiliates Accepts Any Liabilities For Any Loss Or Damage Of Any Kind Arising Out Of Any Inaccurate Or Incomplete Information In This Document Nor For Any Actions Taken In Reliance Thereon. No Part Of This Document Should Be Distributed Or Copied (Except For Personal, Non-Commercial Use) Without Express Written Permission Of The Author And SNGC.

 

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Co-Authors

Veena Agrawal (CA)

Abhishek Kumar (Adv)