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2007 DIGILAW 1860 (RAJ)

Commissioner of Income v. Kamal And Company

2007-09-27

BHAGWATI PRASAD, MUNISHWAR NATH BHANDARI

body2007
JUDGMENT 1. - The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, referred the following question for its answer/opinion of this court vide its order dated February 16, 1999. "Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that additions made on the basis of material collected during the course of such survey was illegal ?" 2. The Revenue had moved an application for seeking reference on three questions pertaining to the order of the Tribunal in I. T. A. Nos. 765, 663 and 664/JP/92. Out of the three questions, the Tribunal referred only question No. 3 with some modification. 3. The brief facts giving rise to the question referred is that a survey under section 133A of the Income-tax Act was conducted on February 25, 1987, during the course of survey, excess stock was found, thereby addition was made by a sum of Rs. 3,24,544 by the Assessing Officer. Aggrieved by the said addition, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) where the appeal of the assessee was partly allowed. The assessee and the Department preferred second appeals before the Income-tax Appellate Tribunal. In this second appeal, the assessee was permitted to take additional ground, questioning the competence of Inspector to hold survey in violation of section 133A of the Income-tax Act. The learned Tribunal thereafter decided the appeal in favour of assessee, the additions made by the Assessing Officer based on inventory of stock taken during the course of survey held to be illegal as the Inspector was not competent to conduct survey. 4. The Revenue thereafter preferred an application for reference of question for seeking opinion of the High Court after referring to two judgments of the hon'ble apex court. The learned Tribunal thereafter referred one issue where the question raised is as to whether additions made on the basis of material collected during the course of survey is legal or not. 5. Learned counsel appearing for the Revenue urged that irrespective of the fact that the Inspector was not competent to conduct survey as per the provisions of section 133A of the Income-tax Act, yet material collected during the course of survey can be made use of by the Assessing Officer. In this regard reference of the judgments of the hon'ble apex court was given.In the case reported in Dr. In this regard reference of the judgments of the hon'ble apex court was given.In the case reported in Dr. Pratap Singh v. Director of Enforcement (1985) 155 ITR 166 , it was held that illegality of search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence brought is to be cautious and circumspect in dealing with such material or evidence. 6. In other cases reported in Pooranmal v. Director Inspection (Investigation) (1974) 93 ITR 505 (SC) the hon'ble apex court held that material obtained in search made in contravention of the provisions can be used. 7. According to the learned counsel for the Revenue, the ratio of the two judgments applies even in the matter of survey because after collection of material in search and seizure and collection of material in survey, it stands on the same footing for the purposes of use of material by the Assessing Officer. Thus, according to the learned counsel for the Revenue, material collected can be used for making additions however, the additions so made by the Assessing Officer based on the inventory of stock taken during the course of survey was deducted by the Tribunal. Thus, it was prayed that reference should be answered in favour of the Revenue. 8. On the other hand, counsel appearing for the assessee urged that the case of seizure under section 132 does not stand at par with the case of survey under section 133A of the Income-tax Act. It was though admitted that while conducting search under section 132, material collected can be used by the Assessing Officer but the same principle cannot be applied in the case of survey. According to him, section 133A(4) prohibits Income-tax authority for removing any books of account or other documents or any cash, stock or other valuable articles or things. Once a prohibition is imposed then contrary action of the Inspector cannot permit the Assessing Officer to use the material. A reference of the case reported in Maruti Mills Ltd. v. Union of India (2001) 250 ITR 348 (Raj) was given where the learned single judge held that while exercising the power under section 133A a document cannot be impounded thus order to summon books and further order of impounding books found to be illegal. A reference of the case reported in Maruti Mills Ltd. v. Union of India (2001) 250 ITR 348 (Raj) was given where the learned single judge held that while exercising the power under section 133A a document cannot be impounded thus order to summon books and further order of impounding books found to be illegal. The learned counsel for the assessee also submitted written submissions. 9. We have carefully heard and perused the written submissions made by the parties and looked into the legal provisions pertaining to the issue in reference. 10. From the facts available on record, it has come out that the action of the Inspector to conduct survey under section 133A was not legal under section 133A though no prohibition has been imposed on the Inspector to conduct such a survey however unless an authority is given under the provisions of section 133A, survey conducted by the Inspector is not held to be legal and the Tribunal has recorded its finding accordingly. Now, the moot question comes as to whether material collected during the course of illegal survey can be taken into consideration by the Assessing Officer or in other words whether additions can be made on the basis of material collected during the course of illegal survey. In the present matter, inventory of stock was prepared by the Inspector during the course of survey and based on the said material the Assessing Officer made additions. Now, considering the provisions of sections 132 and 133A we find that though there is a difference between the provisions rather the scope of two provisions are different but the question in the reference is only in regard to use of the material during the course of illegal survey. 11. Considering the judgment of the hon'ble apex court in the two cases referred to above we find that the material collected during the course of illegal search can be made use of thus if the ratio decidendi of the judgments of the hon'ble apex court is applied then it becomes clear that even in the case of illegal survey, material collected can be used for additions. While delivering the judgment, the hon'ble apex court was cautious about the fact that material collected is coming out from illegal search and yet material collected was allowed to be used by the Assessing Officer. While delivering the judgment, the hon'ble apex court was cautious about the fact that material collected is coming out from illegal search and yet material collected was allowed to be used by the Assessing Officer. The same analogy applies here for the reason that so far as the procedure undertaken by the Assessing Officer is concerned, it remains same in regard to use of material either collected in search or in survey. The inventory of stock was prepared by the Inspector during the course of illegal survey and material was then used by the Assessing Officer for making additions. Hence, in those circumstances, we are of the opinion that in view of the two judgments of the hon'ble apex court the Revenue was entitled to use the material collected during the course of illegal survey. 12. In view of the discussions made above, we answer the question in favour of the Revenue and against the assessee. *******