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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 .

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slide1

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
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 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
SCOPE OF DISCUSSION
  • Search provisions-legal Action-validity of action-release of 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 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)
slide6

AuthorisationofSearch

DGIT/CCIT/DIT/CIT

Addl.DIT/Addl.CIT

Jt.DIT/Jt.CIT

MayAuthorize

ADIT/ACIT

Dy.DIT/Dy.CIT

ITO

MayAuthorize

source of information
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
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.
  • The reason to believe must be tangible in law and it should have a rational nexus with the belief.
conditions for valid search
Conditions for valid search
  • PrabhubhaiVastabhai Patel Vs R.P. Meena226 ITR 781 (Guj) has summarised conditions laid down by various judgements
      • 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
Search related Instruction
  • Instruction No. 7 of 2003 of 30th July 2003 –
  • (a) Searches should be carried out only in cases where there is credibleevidence to indicate substantial unaccountedincome/assets in relation to the tax normally paid by the assessee OR
  • (b) where the expectedconcealment is more than Rs.1crore.
search and seizure s 1321
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
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 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
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)

presence of counsel1
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.
  • 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 counsel2
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 information-not 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
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
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: KailashbenManharlalChokshi (174 Taxmann 466)( Gujrat):
importance of disclosing substantiating the manner of earning undisclosed income in
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’bleITAT,AhmedabadinGujaratCredit CorporationLtd.v.ACIT[113ITD133(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
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
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 : KrishanLalShivChandRai v. CIT (1973) 88 ITR 293 (P&H).
surrender consideration
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
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:
  • Surrender of undisclosed income to be made in the hands of the 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
Retraction-Valid
  • Affidavits of independent witness to the search proceedings be submitted corroborating the claim of the deponent.

The Gauhati High court in_Green_View-Restaurant. 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
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
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
Section 132B
  • Seized Cash can be adjusted against any existing income 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
POST SEARCH LETTERS
  • request to appropriate cash seized toward advance tax. Now not 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
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
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
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
RELEVANT ISSUES UNDER SECTION 153A / 153C
  • Recording of satisfaction before invoking provision of section 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 IN THE CASE OF CONCLUDED ASSESSMENTS
  • ASSESSMENT U/S.153A HAS TO BE MADE ON THE BASIS OF INCRIMINATING MATERIAL ONLY IN THE CASE OF CONCLUDED ASSESSMENTS
  • All Cargo Global Logistics Ltd. vs. DIT, 2012-TIOL-391-ITAT-Mum-SB, 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
Penalty Provisions
  • For earlier years U/s 271(1)(c)
  • For specified years U/s 271AAA Introduction of Section 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
Voluntary disclosure- consequences
  • The Supreme Court in the case MAK Data (P.) Ltd. V. CIT (2013) 38 Taxman.com448 (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
Survey Under Income Tax Act, 1961
  • JurisdictionOf Income tax authority for conducting 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
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
Evidentiary Value ofStatementRecordedu/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. DevjiPremji
application to settlement commission
APPLICATION TO SETTLEMENT COMMISSION
  • Pre-requisite for Filing Application –
  • 1. An application before the Settlement Commission can be made only 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: Orderis conclusive and final. Waiver of penalty and prosecution under Income Tax Act can be given
writ related matters
WRIT Related Matters:
  • ILLEGAL SEARCH-release of Jewellery and ornaments seized: In Director General of Income Tax and Anr. vsDiamondstar 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 matters1
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. Roopv. 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
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 cases1
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 cases2
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 cases3
Other Important cases
  • Presumption: Surendra M. Khandharvs 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)-
slide49

Relevant Provisions

of

Indian Evidence ACT

technical rules of evidence act inapplicable
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
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
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
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
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
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
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
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 principle1
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
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 general1
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
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;

evidence act principle2
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
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

Burden to prove that apparent is not real will depend on the facts of the case.

1. 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.

2. 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),.

3. 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)

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BOOKS OF ACCOUNT

Vs

LOOSE PAPERS

books of account
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
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
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