THE COMMISSIONER OF INCOME TAX vs. SRI C.M.RAVI

There was a search conducted in the premises of C.M.Ravi also, the assessee-respondent herein. No incriminating material was discovered. The statement -3- was confronted to Ravi, the respondent herein, who denied having received any such amounts. The specific contention taken up by Ravi was that the premises was one owned by Pazhayanadakkavu Pandyasamooham Trust. He had surrendered the premises to the Trust and they had entered into an agreement with the subsequent tenant. There was no other material found by the AO to support the sworn statement of K.K.Lakshmanan. It was hence the Tribunal interfered with the re-assessment.

The learned Senior Counsel, Government of India (Taxes) has relied on (1954) 26 ITR 775 [Dhakeswari Cotton Mills Ltd. v. Commissioner of Income-Tax, West Bengal], (2006) 284 ITR 557 [Commissioner of Income Tax v. C.F.Thomas] and (2013) 350 ITR 71 [Commissioner of Income Tax v. O.Abdul Razak] to bring home the point that the sworn statement under Section 132(4) has evidentiary value in the proceedings under the Act and hence, the additions made cannot be set aside. It is also the contention of the Revenue that the said Lakshmanan who had given the sworn statement had disclosed Rs.38 lakhs as income before the Settlement Commission as is seen from -4- Annexure-E. The deponent having so declared the income to his detriment and paid tax, there is no reason to doubt the said sworn statement, is the contention taken by the Revenue.

Dhakeswari Cotton Mills Ltd.(supra) was relied on to urge that the sworn statement taken under Section 132(4) has evidentiary value, though it cannot be considered as evidence in a court of law. However, we notice the specific paragraph which is extracted below, which goes against the Revenue:

As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the Income Tax Officer is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a court of law, but there the agreement ends; because it is equally clear that in making the assessment under sub- section (3) of Section 23 of the Act, the Income Tax Officer is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under Section 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh v. CIT1. 5. Here, we notice Section 158BB of the Act, which speaks of 'computation of income of the block period' in proceedings commenced under Section 158BC.

Even going by the judgment of the Honourable Supreme Court, there cannot be a pure guess work to make an assessment without reference to any evidence or material at all. In the present case, it is to be noticed that the search and seizure was in the premises of another person, who had a undisclosed income, part of which was said to be paid to the assessee herein. It is the sworn statement taken from that other person which is relied on for the purpose of assessment of the assessee herein.

O.Abdul Razak (supra) was a case in which this Court looked at the retraction made by the deponent, which was held to be self serving and found to be incapable of dispelling the statutory presumption available under Section 132(4). We again emphasise that here the search proceedings were in the premises of yet another person and a sworn statement taken of that person. In O.Abdul Razak (supra), the deponent was the person on whose premises the search was conducted and the evidentiary value of the sworn statement made under Section 132(4) in the further proceedings taken on the basis of the search and seizure could not have been dispelled by a mere self serving retraction. The same rigor cannot apply to a sworn statement with respect to a payment made to another, who is alleged to have received amounts from the deponent. Without corroborating material as mandated in Section 158BB, there can be no assessment taken as against the other person who is implicated by the person on whose premises the search and seizure was conducted.

In the present case, admittedly, the owner of the premises, in respect of which the “pakadi” is said to have been paid was not examined. Based on the sworn statement of one another person, who deposed under Section 132(4) that an amount of money was given to the earlier tenant, proceedings were taken against the assessee; which was not corroborated by any other evidence. There was also no enquiry carried out to find whether such amounts were in fact received by the assessee or the assessee had any undisclosed expenditure or investment on the basis of such amounts received. In such circumstances, we are of the opinion that the order of the Tribunal cannot be interfered with and we refuse to answer the question raised, which is merely on facts and not on law. The learned Senior Counsel has also referred to the judgment of this Court in C.F.Thomas (Supra) to pray for a remand, wherein the statement was not confronted to the assessee and it was in such circumstances that there was a remand made by a Division Bench of this Court. In the present case, the statement was confronted to the assessee, but he denied -8- the same. The AO failed to get any corroborating evidence in the search conducted in the premises of the assesee and hence we have confirmed the order of the Tribunal affirming that of the CIT (Appeals), which set aside the order of the AO. There is no warrant for a remand. The appeal would stand rejected. No costs. K.VINOD CHANDRAN JUDGE ASHOK MENON JUDGE