Login
  • Bookmark
  • PDF
  • Share
  • CaseIQ

K. Sakthivel v. Assistant Commissioner Of Income Tax

Madras High Court
Jun 14, 2012
Judgment
Subsequent
References
CaseIQ
Case Information
CITATION CODES
citation codes
CASE NO.

Tax Case (Appeal) No. 1083 of 2005

Attorney(S)

For the Appellant: Vikram Sriram for G.R. Associates.

For the Respondent: T. Ravikumar, Standing Counsel.

JUDGES

Chitra Venkataraman

K. Ravichandra Baabu, JJ.

ACTS

provisions of order 18, rules 5 and 8 of CPC and provisions of s. 164 of the CrPC.

provisions of order 18, rules 5 and 8 of CPC and s. 164 of the CrPC

provisions of order 18, rules 5 and 8 of CPC or s. 164 of CrPC.12.

provision of order 18, rules 5 and 9 CPC and s. 164, CrPC

18, rules 5 and 8 of CPC and s. 164 of the CrPC.

rule 5 of order XVIII of the CPC,

s. 131 of the IT Act, 1961

See more information ... Less ...
Important Paras
Please sign up to view Important Paras.
Smart Summary (Beta)

Summary of the Opinion — Judgment delivered by Chitra Venkataraman, J.

Factual and Procedural Background

This appeal arises from a block assessment for the block period 1 April 1989 to 19 August 1999 (assessment year(s) around 1989–90 to 1990–91 being mentioned) in which the assessee was assessed following a search of the premises of one V.S. Kathirvel conducted between 22 June 1999 and 19 October 1999. Incriminating documents seized during that search showed unaccounted real estate transactions involving the assessee, who had purchased three acres of land from V.S. Kathirvel for a purported aggregate consideration of Rs. 9,75,000.

During the departmental inquiry the assessee gave a sworn statement on 5 August 1999 under s. 131 of the Income-tax Act, in which he admitted that although the land was purchased for Rs. 9,75,000, the registered sale deed recorded only Rs. 1,95,000 and that Rs. 7,80,000 of the consideration was not shown in his books. Proceedings under ss. 158BD r/w 158BC (notice dated 27 August 2001 served on 3 August 2001), notices under s. 142(1) and summons under s. 131 followed. The assessee later filed a Form No. 2B block return on 6 August 2002 declaring nil undisclosed income, and the return was taken up to scrutiny by notice under s. 143(2) dated 8 August 2002.

The Assessing Officer, relying on seized material and the s. 131 statement, held that Rs. 7,80,000 represented undisclosed income and assessed it at 60% with interest under s. 158BFA. The assessee marshalled several legal challenges (including that notice under s. 158BD did not mention the block period; that the s. 131 statement was recorded in violation of procedural provisions imported from the CPC/CrPC and was involuntary; and that an assessment could not be based solely on a s. 131 statement), and appealed to the CIT(A) and then to the Tribunal. The CIT(A) and the Tribunal both dismissed the assessee's appeals on the grounds summarized below. The assessee then appealed to this Court, which confirmed the Tribunal's order and dismissed the tax appeal.

Legal Issues Presented

  1. Whether a notice under s. 158BD of the Income-tax Act, 1961 is sustainable in law if it does not mention the block period.
  2. Whether non-mentioning of the block period in the notice is a curable defect in view of various precedents.
  3. Whether provisions of Order XVIII, Rules 5 and 8/9 CPC and s. 164 CrPC need to be followed when recording a confessional statement under s. 131 of the IT Act, and whether the Tribunal's finding that they need not be followed is sustainable in law.
  4. Whether an assessment can be based merely on a statement under s. 131 without corroborative material.
  5. Whether a notice under s. 158BD is valid if the Assessing Officer did not record satisfaction in the notice that the alleged undisclosed income belonged to the appellant.
  6. Whether a notice under s. 158BD could be issued without following the procedure prescribed under s. 158BC and without conducting a search under s. 132 in relation to the assessee.

Arguments of the Parties

Assessee's Arguments

  • The notice issued under s. 158BD did not mention the block period and therefore was invalid and vitiated the proceedings from the root.
  • The sworn statement recorded on 5 August 1999 under s. 131 was not voluntary and was recorded in violation of procedural safeguards specified in Order XVIII (rules 5 and 8), CPC and s. 164, CrPC; the recording officer did not allow the assessee to read the record, and the signature was obtained by threat and coercion.
  • The assessee retracted the earlier statement by affidavit/letters filed in June 2003 and asserted that the true purchase consideration shown in his books was around Rs. 2,21,000 and not the undisclosed sum claimed by the Revenue, thereby denying the assessment of Rs. 7,80,000 as undisclosed income.
  • The assessment was said to be based purely on the s. 131 statement and therefore unsustainable without independent corroborative material.

Revenue's Arguments

  • The omission to mention the block period in the s. 158BD notice is a procedural defect and does not affect jurisdiction; the assessee and his representative were fully aware of the block period and acted on the notice by obtaining details and filing the return (Form 2B).
  • The s. 131 statement was an admission binding on the assessee; there was no contemporaneous evidence of coercion and the retraction came years later (June 2003), which made it an afterthought.
  • The statement was recorded in the presence of the Dy. Director of IT (Inv.), and the assessee signed the statement after reading and making corrections; hence procedural objections grounded in CPC/CrPC provisions do not nullify the statement's admissibility in departmental proceedings.
  • The addition was founded on seized material and documents from the premises of Kathirvel and Arumugam as well as the assessee's statement; therefore the assessment was not based solely on the s. 131 statement.
  • The Revenue placed reliance on case law (Bombay High Court and other High Courts and Supreme Court decisions) that treat the defect as curable and uphold assessments where notice defects were not prejudicial and where the assessee acted on the notice.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Verma Roadways v. Asstt. CIT ((2000) 75 ITD 183 (All); (2001) 70 TTJ (All) 728) This precedent was listed among precedents in the substantial questions of law in the appeal. The opinion does not summarize the specific rule from this case elsewhere in the text. No specific application or discussion of this decision appears in the body of the Court's analysis in the provided opinion.
Narayana Chetty v. ITO ((1959) 35 ITR 388 (SC)) This precedent was listed among precedents in the substantial questions of law in the appeal. The opinion does not itself summarize its principle. No specific application or discussion of this decision appears in the body of the Court's analysis in the provided opinion.
CIT v. Kurban Hussain Ibrahimji Mithiborwala ((1971) 82 ITR 821 (SC); 1973 CTR (SC) SC) This precedent was listed among precedents in the substantial questions of law; the opinion does not set out the rule cited from it. No express application of this case is discussed by the Court in the provided opinion.
Nyalchand Malukchand Dagli v. CIT ((1965) 59 ITR 24 (Guj)) Listed in the substantial questions of law; the opinion does not extract or describe its principle. No specific application of the decision is recorded in the opinion.
P.N. Sasikumar v. CIT ((1988) 170 ITR 80 (Ker); 1988) 69 CTR (Ker) 78) Listed in the substantial questions of law; the opinion does not summarize the rule cited from it. No specific application by the Court is recorded in the provided opinion.
CIT v. Hindustan Motors Ltd. ((1977) 107 ITR 164 (Cal)) Listed among cases in the framing of issues; the opinion does not state the principle relied upon from this case in the text. No specific application of this case appears in the reasoning set out in the opinion.
Indian Banks' Association v. Devkala Consultancy Service ((2004) 267 ITR 179 (SC); 2004) 189 CTR (SC) 157) Listed among the initial precedents raised with the substantial questions; the opinion does not elaborate the principle from this decision in the body of the judgment. No direct application of this precedent is discussed in the opinion as provided.
Sakthivel Bankers v. Rana Investments ((2002) 255 ITR 143; 2002) 176 CTR (Mad) 603) The Court and lower authorities relied on this decision for the proposition that non-mentioning of certain particulars (such as block period or the source of authority in the notice) is a defect that may not, by itself, vitiate the assessment where the persons concerned were fully aware of the purpose of the notice. The Court expressly placed reliance on this decision (as did the CIT(A) and Tribunal) to hold that the absence of the block period in the s. 158BD notice did not vitiate the block assessment because the assessee and his representative were aware of the block period and acted upon it.
Shirish Madhukar Dalvi v. Assistant Commissioner of Income-Tax & Others ((2006) 287 ITR 242 (Bom); 2006) 203 CTR (Bom) 621) The Bombay High Court considered the nature of proceedings under s. 158BD and related provisions and treated the procedural requirements as not necessarily defeating the assessment where there is compliance in substance. The Court cited this decision to support the conclusion that non-mentioning of the block period in the notice is not fatal where the assessee knew the period and participated in proceedings; the Bombay High Court's approach buttressed the Court's conclusion here.
Smt. Mahesh Kumori Batra v. Jt. CIT ((2005) 280 ITR 34; 2005) 95 TTJ (Asr)(SB) 461) This decision was cited by the Revenue in support of the proposition that procedural defects in notices under block assessment provisions do not necessarily vitiate the assessment; the opinion does not elaborate the precise rule from this decision. The Court noted the Revenue's reliance upon it, but the opinion does not separately analyze or distinguish the decision; it formed part of the body of authority relied upon to reject the assessee's technical objections.
Manish Maheswari v. Asstt. CIT ((2007) 289 ITR 341; (2007) 208 CTR (SC) 97) The Supreme Court considered the scheme of block assessment procedure. The opinion extracts from it that s. 158BD provides methodology to make block assessment in terms of s. 158BC for persons other than those in respect of whom a search was made, and that conditions include: satisfaction recorded by the AO that the undisclosed income belongs to a person other than the searched person; seizure/handing over of books/documents to the AO having jurisdiction over the other person; and that the AO has proceeded under s. 158BC against that other person. The Court relied on Manish Maheswari to conclude that, on the record, there was compliance with the statutory conditions for issuing a notice under s. 158BD and proceeding with block assessment.
Surjeet Singh Chhobda v. Union of India ((1997) 1 SCC 508; AIR 1997 SC 2560) The decision, as relied upon by the CIT(A), is cited for the proposition that admissions made before the assessing authority bind the person; i.e., an admission given in departmental proceedings is relevant and binding unless successfully rebutted. The Court and the CIT(A) treated the assessee's initial s. 131 statement as an admission binding on the assessee and noted that the retraction did not carry sufficient evidentiary weight to displace the admission in the absence of material proof of coercion or inducement.
Vinod Solanki v. Union of India ((2008) 16 SCC 537) The Supreme Court held, and the opinion extracts, that mere retraction of a statement does not automatically render the earlier statement involuntary; the maker alleging inducement, threat or promise must establish such improper means. The Court applied this principle to reject the assessee's belated retraction, noting absence of materials to substantiate coercion and the consistency of the recorded statement with seized materials.

Court's Reasoning and Analysis

The Court's reasoning proceeds from the factual record (search, seized material, s. 131 statement, subsequent procedural steps) and examines the assessee's legal contentions in that factual context, with reference to precedent.

  1. Notice under s. 158BD and omission of block period:
    • The Court examined the procedural history and documents and noted that after receipt of notice the assessee (through counsel/representative) met the Assessing Officer, ascertained the block period and filed the Form 2B return indicating the block period. The Tribunal and CIT(A) had recorded that the assessee was aware of the block period and participated in proceedings.
    • Relying on the Court's own earlier decision in Sakthivel Bankers and on Bombay High Court authority (Shirish Dalvi), the Court treated the omission to state the block period in the s. 158BD notice as a procedural defect that did not vitiate proceedings where the assessee knew the purpose and block period and acted upon the notice.
    • Applying the rationale of Manish Maheswari, the Court checked that statutory conditions for invoking s. 158BD/158BC were satisfied on the record (satisfaction that undisclosed income belonged to a person other than the searched person; handing over of seized books/documents to AO having jurisdiction; AO proceeded under s. 158BC), and found no failure in compliance of the statutory scheme.
  2. Validity and evidentiary value of the s. 131 statement and retraction:
    • The Court reviewed the contemporaneous s. 131 statement (5 August 1999) in which the assessee admitted payment of Rs. 9,75,000 and stated that Rs. 7,80,000 was not recorded in books. The Court noted that the statement was recorded in the presence of the Dy. Director of IT (Investigation) and that the assessee had signed and had opportunity to read and correct the statement.
    • The assessee's retraction, made years later (June 2003), alleged coercion and that he was not allowed to read the statement; the Court found the retraction to be an unexplained afterthought because it was not raised contemporaneously and because the assessee had participated in inquiries thereafter until 2003 without immediate objection.
    • On the legal standard, the Court applied the principle from Surjeet Singh Chhobda that admissions made before the assessing authority bind the person unless validly retracted with supporting evidence. It further invoked Vinod Solanki to emphasize that mere retraction is not enough — the person alleging inducement, threat or promise must substantiate such allegations with material evidence.
    • Because there was no material evidence of coercion, the statement stood as a binding admission. The Court also observed that the statement was consistent with the seized materials from Kathirvel (and Arumugam) and hence the assessment was not founded solely on the recorded statement but also on independent corroborative material.
  3. Applicability of CPC/CrPC procedural safeguards to departmental statements:
    • The assessee contended that Order XVIII (rules 5 and 8) CPC and s. 164 CrPC required strict compliance when recording confessional statements. The Tribunal and the Court accepted that while such provisions may be relevant as safeguards, departmental income-tax proceedings are not identical to regular civil/criminal judicial proceedings and the strict modes prescribed thereunder need not be mechanically imported so as to render departmental admissions inadmissible where the circumstances show the statement was recorded in due course.
    • On the facts, the Tribunal found and the Court accepted that the statement was recorded in the presence of the Dy. Director (a fact that the assessee's later affidavit did not adequately challenge with independent proof), and therefore the plea of procedural non-compliance failed.
  4. Whether the assessment was based purely on s. 131 statement:
    • The Court reviewed the record of seizures and the consistency between seized documents and the assessee's s. 131 statement. It concluded that the assessment was founded on both the seized material and the statement and was not purely based on the statement alone; thus the objection that the assessment lacked corroboration failed.
  5. Overall assessment of the appellant's contentions:
    • The Court emphasized the timing of retraction, the absence of contemporaneous complaint or proof of coercion, the assessee's active participation in subsequent proceedings (including filing a return after ascertaining the block period), and the independent seized material corroborating the admission. These factors led the Court to conclude that the Tribunal and CIT(A) were right to dismiss technical objections and confirm the assessment.

Holding and Implications

Holding: The Court confirmed the order of the Tribunal and dismissed the tax appeal. The appeal was dismissed and the order of the Tribunal was thereby confirmed; no costs were awarded.

Implications:

  • The assessment that treated Rs. 7,80,000 as undisclosed income (assessed at 60% as noted in the assessment order) with interest under s. 158BFA stands as between the parties on the facts of this case.
  • The Court treated the omission to mention the block period in a s. 158BD notice as a curable procedural defect where the assessee knew the block period and acted on the notice (by ascertaining the period and filing Form 2B). The decision aligns with prior authorities cited and does not treat such an omission as necessarily jurisdictional in the circumstances of this case.
  • The Court reaffirmed the principle that admissions made before assessing authorities under s. 131 are binding unless effectively rebutted by contemporaneous evidence of coercion or inducement; a mere belated retraction without supporting material is insufficient to nullify the admission (applying Surjeet Singh Chhobda and Vinod Solanki).
  • No new legal doctrine was announced; the decision applies existing case law to the present facts and confirms the assessments on those facts. The direct effect is the upholding of the assessment and additions as recorded by the lower authorities; the opinion does not purport to set a novel precedent beyond its application of established authorities to the facts before the Court.
Show all summary ...

The Judgment of the Court was delivered by

Chitra Venkataraman, J.:— The assessee is on appeal as against the order of the Tribunal relating to assessment year for the period 1st April, 1989 to 1990–91. The above tax case (appeal) was admitted on the following substantial questions of law:

“(a) Whether the notice issued under s. 158BD of the IT Act, 1961 is sustainable in law if it does not mention the block period?

(b) Whether non-mentioning of the block period in the notice could be characterized as a curable defect, particularly in the teeth of judgments reported in:

(1) Verma Roadways v. Asstt. CIT, (2001) 70 TTJ (All) 728 : (2000) 75 ITD 183 (All)

(2) Narayana Chetty v. ITO, (1959) 35 ITR 388 (SC)

(3) CIT v. Kurban Hussain Ibrahimji Mithiborwala, 1973 CTR (SC) SC : (1971) 82 ITR 821 (SC)

(4) Nyalchand Malukchand Dagli v. CIT, (1965) 59 ITR 24 (Guj) (short note)

(5) P.N Sasikumar v. CIT, (1988) 69 CTR (Ker) 78 : (1988) 170 ITR 80 (Ker)

(6) CIT v. Hindustan Motors Ltd., (1977) 107 ITR 164 (Cal)

(7) Indian Banks' Association v. Devkala Consultancy Service, (2004) 189 CTR (SC) 157 : (2004) 267 ITR 179 (SC)

(c) Whether the finding of the Tribunal that provision of order 18, rules 5 and 9 CPC and s. 164, CrPC need not be followed while recording a confessional statement under s. 131 of the IT Act, 1961 is sustainable in law, in view of the specific language of s. 131(1) and s. 132(4) of the IT Act, 1961?

(d) Whether an order of assessment could be passed merely upon a statement under s. 131 without any corroborative material?

2. The assessee also raised additional questions of law which are as follows:

(a) Whether a notice issued under s. 158BD of the IT Act, 1961 is valid if the AO never recorded his satisfaction in the said notice that the alleged undisclosed income belonged to the appellant?

(b) Whether the respondent could have issued a notice under s. 158BD of the IT Act, 1961 without following the procedure prescribed under s. 158BC of the IT Act, 1961 and without conducting a search on the appellant under s. 132 of the IT Act, 1961?”

3. It is seen from the facts narrated that the search was conducted in residential and business premises of one V.S Kathirvel on 22nd June, 1999 and concluded on 19th Oct., 1999. During the course of the search, various incriminating documents were seized from the residential and business premises of V.S Kathirvel. It was seen that he had indulged in unaccounted real estate transaction. Some of the documents pertained to the transaction with the assessee who had purchased 3 acres of land from V.S Kathirvel for a consideration of Rs. 9,75,000. Enquiry proceedings were initiated against the assessee. The assessee participated in the enquiry proceedings and had given sworn statement on 5th Aug., 1999 under s. 131 of the IT Act. In answering the enquiry, the assessee is stated to have made the following statement, which, as recorded in the order of assessment and appeal, is the translation of the statement recorded in Tamil, which reads as under:

“Q 9. I am showing the original sale deed of Rs. 1,99,000 purchased on 6th Dec., 1995. This land of 3 acres was purchased on 6th Dec., 1995. P1. state how much you gave and to whom? Whether this amount was accounted?

Ans. I bought the above land of 3 acres through Sri V.S Kathirvel, Komarapalayam. Before buying this property, myself and V.S Kathirvel made an agreement and I paid in cash towards the consideration. Since I have paid all the amount as per agreement, now (I) do not have that agreement. According to that agreement, 1 acre = Rs. 3,25,000, totalling to Rs. 9,75,000 for three acres. This amount was given by me to V.S Kathirvel i.e Rs. 9,75,000. Later on 6th Dec., 1996, a sale deed was registered in my name for 3 acres. I paid the entire amount in cash before the date of registration. But I do not know the exact dates. The registration was made for Rs. 1,95,000 only. The remaining amount was given as on-money. In this, Rs. 1,95,000 was accounted for and the remaining amount of Rs. 7,80,000 was not shown in my books of accounts.

Q 10. On 22nd June, 1999, a search was conducted in the office premises of Sri V.S Kathirvel, Komarapalayam. During the course of search, a loose bunch in NR/B & D/S-30 was seized. In this loose bunch, (in) sheet Nos. 159, 1,55 and 143, some amounts are credited in the name of PMS and in sheet No. 155, an account was written under the PMS account.

PMS account 30.6.95: 3,00,000 6.12.1995: 6,75,000 3.25 × 3= 9,75,000: 9,75,000

PI see this and give details about it.

Ans. I have seen the above account, and it is the account of land purchased by me through V.S Kathirvel. The sheet Nos. 159, 155 and 143 (NR/B & D—S-30) shows the account details as stated by me in the answer to the previous question. Accordingly, this is the amount paid as per the agreement for the purchase of 3 acres. On 30th June, 1995 and 6th Dec., 1995, I paid Rs. 3,00,000 and Rs. 6,75,000 to Sri V.S Kathirvel.

Q. 11 : For purchasing 3 acres of land, you have registered for Rs. 1,95,000 only. PI. show me where it was accounted.

Ans. This amount (Rs. 1,95,000) was accounted in M/s. Sri Ragavendra Tex, Prop. K. Sakthivel (Indl.). It was in L.F No. 4, dt. 6.12.1995 in the day book. The total amount is Rs. 2,21,000 (including other charges). This amount was credited in my HUF personal books i.e from 1st April, 1989 to 5th Aug., 1999. Now I am showing those books.

Q. 12 : You Have shown the said amount of Rs. 1,99,000 + stamp duty only in your books. Please state about the remaining amount of Rs. 7,80,000. How you got this amount?

Ans : I have stated Sri Ragavendra Tex only on 1st April, 1994. Before that I was doing commission in textiles for about 5 years. Upto 6th Dec., 1995, I got Rs. 7,80,000 from my commission business and my individual business. This income was not written in the books of accounts. So from 1st April, 1990 to 6th Dec., 1995 I have earned Rs. 7.80.0 which is not accounted and I agree to pay the respective tax for that amount.”

4. Thus as evident from the statements and seized documents, the assessee confirmed that the purchase of the land was at the cost of Rs. 9.75.0 and only a sum of Rs. 1,95,000 was recorded in the sale deed and the balance of Rs. 7,80,000 paid from out of undisclosed income. This led to the issuance of notice under s, 158BD r/w s. 158BC dt. 27th Aug., 2001 served on the assessee on 3rd Aug., 2001. Thereafter, notice under s. 142(1), summons under s. 131 were also served. Admittedly the assessee participated in the enquiry proceedings. On 15th May, 2002, the assessee filed a letter which reads as under:

“In response to the above, I beg to submit that I received your abovereferred notice directing me to file my block return on or before 15th May, 2002. In this regard, I am to state that I am presently facing heavy financial crench and chronic liquidity problem and therefore, I could not make the payment of tax due for the block return and to file the same within 15th May, 2002. In view of the same, I request your goodself to kindly grant me two months time for arrangement of funds for paying the necessary tax due under the block return in my individual status. I also undertake to pay the total tax due and interest thereon under the block return within the time requested for and file the return along with challans for payment of tax.”

5. Ultimately, the assessee filed the block return in Form No. 2B on 6th Aug., 2002 declaring undisclosed income at Rs. Nil and return was taken up for scrutiny by issuance of notice under s. 143(2) dt. 8th Aug., 2002. Admittedly, the assessee participated in the assessment proceedings along with his advocate. He filed a letter during the course of hearing on 12th June, 2003 and 26th June, 2003. Along with letter dt. 26th June, 2003, the assessee is stated to have filed an affidavit wherein he had stated that on 5th Aug., 1999, he received a summons dt. 2nd Aug., 1999 issued by Dy. Director of IT (Inv.) Erode and when he appeared for the summons at IT Department, Erode, he was not allowed to meet the concerned Dy. Director of IT (Inv.) Erode. Later one Inspector of Investigation enquired him about the land purchased from V.S Kathirvel, Komarapalayam, but the Inspector recorded a different statement, that he was not told of the content of the said recorded statement but got his signature by threatening. He further stated in the affidavit that he was not allowed to read the statement written by that Inspector and hence, he had not given the statement Voluntarily. Further he did not write the usual writings like “the statement is given by me Voluntarily without threat or coersion. I read the statement and it was written correctly as I have said”. Thus, in the sworn statement, filed on 26th June, 2003, the assessee retracted the earlier statement by stating that the land was purchased by him at the cost of Rs. 2,21,000 inclusive of all expenses and not Rs. 7,80,000. Apart from this, the assessee objected to the summons issued under s. 131 of the Act. In dealing with the said submission, the assessing authority held that this retracted statement was an afterthought. Considering the fact that on 15th May, 2002, the assessee himself had not stated anything about the statement recorded and that he had stated that in view of the financial difficulty, he could not make the payment of tax due for the block period, he filed a return only on 15th May, 2002. Thus on verification of the books impounded as well as on the statement given by the assessee on 5th Aug., 1999, the assessing authority came to the conclusion that the assessee had accounted for Rs. 2,21,000 only, which was inclusive of the stamp duty charges in his books of accounts. As regards the balance amount of Rs. 7,80,0, the assessee had not filed any explanation except to state that the sworn statement recorded on 5th Aug., 1999 was not valid in law. On going through the records, the assessing authority, ultimately held that the assessee had undisclosed the income of Rs. 7,80,000 and the same was assessed at 60 per cent of the undisclosed income. Interest under s. 158BFA was also levied. Aggrieved by this, the assessee went on appeal before the CIT(A), wherein the assessee took a plea that notice dt. 27th Aug., 2001 issued to the assessee did not indicate the block period, for which return was submitted. In considering the contentions of the assessee, the CIT(A) pointed out to the answers given by the assessee at the time of enquiry and the filing of the return of income for the block period 1st April, 1989 to 19th Aug., 1999. The first appellate authority pointed out that the assessee had complied with notice issued under s. 158BD and filed a return of income in Form 2B after ascertaining the block period. The conditions mentioned in s. 158BD were fulfilled before proceeding with the block assessment and the appellant had no doubt as to the purpose for which the notice was issued. Hence, the absence of non-mentioning of the block period would not vitiate the block assessment. By placing reliance on the decision of this Court in Sakthivel Bankers v. Rana Investments, (2002) 176 CTR (Mad) 603 : (2002) 255 ITR 143 (Mad), the CIT(A), rejected the assessee's contention that nonmentioning of the block period in the notice would not vitiate the proceedings. As far as the statement retracted by the assessee is concerned, the first appellate authority pointed out that there was no evidence of any coercion brought on record before the AO as well as before the first appellate authority. The said statement made long after the recording of the statement. Thus, when the burden was on the assessee to prove that the statement was obtained by such means, in the absence of any material to substantiate such allegations, the CIT(A) rejected the same as baseless.

6. As regards the admissibility of the retraction statement, referring to the decision of the Supreme Court in Surjeet Singh Chhobda v. Union of India, (1997) 1 SCC 508 : AIR 1997 SC 2560 the CIT(A) held that any admission made before the assessing authority would bind the person. Except for the bland denial of the statement dt. 5th Aug., 1999, there was no retraction by the assessee for the AO to take cognizance of.

7. As regards the failure to follow rule 5 of order XVIII of the CPC, the first appellate authority held that there was no merit in such contention since the said statement was recorded before the Dy. Director of IT (Inv.) Erode, who had also signed the statement on 5th Aug., 1999. Thus the CIT(A) rejected the appellant's contention and dismissed the appeal. Aggrieved by this, the assessee went on further appeal before the Tribunal.

8. The Tribunal pointed out that the assessee had challenged the order of the CIT(A) only on technical issues and not on merits of the assessment. Thus, the Tribunal confined its attention only on technical aspects raised by the assessee. The first contention raised by the assessee related to notice issued under s. 158BD. On the AO not mentioning the block period in the notice issued under s. 158BD, the Tribunal pointed out to the letter written by the assessee's counsel on 12th June, 2003 that the said representative met the AO after receipt of notice under s. 158BC and after ascertaining the details of block period, the return was also filed in Form 2B. The assessee was also summoned under s. 131 and he was examined about the purchase consideration. Thus, it was very clear that the assessee participated in the assessment proceedings knowing fully well about the block period and the details of undisclosed income which was subject-matter of the enquiry. Therefore, non mentioning of the block period in the notice would not vitiate the assessment proceedings.

9. Even though learned counsel for the assessee raised a serious dispute on this aspect, we summoned the assessment files before this Court. On perusal of the same, we find that the return was filed by the assessee only after ascertaining the block period and such statement is also found even in the return itself filed by the assessee by way of remark as against the column of block period covered.

10. As regards the issue relating to the recording of the statement is concerned, the assessee placed reliance on the provisions of the CPC. The assessee contended that the statement recorded were not in confirmity with order 18, rules 5 and 8 of CPC and s. 164 of the CrPC. The assessee further questioned the validity of the retracted statement by referring to the apex Court decision relied on by the first appellate authority in Surjeet Singh Chhabda v. Union of India (supra). The Tribunal pointed out that the ITOs are not Police Officers. The confession though retracted was an admission binding on the assessee. The Tribunal pointed out that though the assessee stated that the statement given was not Voluntarily, yet, the said retracted statement was made after three years from the date of recording the statement, the delay thus, remained unexplained as to why the assessee did not make the allegations immediately after the statement was recorded. The assessee had also signed in all places wherever there were corrections in the statement recorded. The assessee had also read the statement before signing. In the circumstances, the Tribunal rejected the contention of the assessee that he was not allowed to read the statement and that he was not made the statement Voluntarily. In the absence of any material to support the allegation, as had been raised in the affidavit filed in the year 2003, the Tribunal rejected the said plea of the assessee.

11. As regards the compliance of provisions of order 18, rules 5 and 8 of CPC and provisions of s. 164 of the CrPC. the Tribunal held that even though the said provisions are to be observed, yet, the said provisions do not convert the income-tax proceedings into regular civil or criminal proceedings. Therefore, the strict principles laid down in the CPC and in the CrPC were not warranted. Apart from that, the Tribunal, as a matter of fact, held that the statement made by the assessee was recorded in the presence of Dy. Director of IT. As such, there is no violation of provisions of order 18, rules 5 and 8 of CPC or s. 164 of CrPC.

12. As regards evidentiary value of the statement recorded, the Tribunal pointed out that the material seized from the premises of Kathirvel and Arumugam and the statement recorded from the assessee clearly showed the consideration paid on the purchase of the landed property by the assesee. When the assessment was based on materials and information available on record, together with the statement made under s. 131, there was no substance in the contention of the assessee that the assessment which was made purely on the statement recorded could not be sustained. Thus, the Tribunal pointed out that since the contentions of the assessee are confined only to the technical aspects, they were not going in to the merit of the addition made by the lower authorities. Aggrieved by this, the assessee is before us.

13. Even though learned counsel appearing for the assessee reiterated the contentions in the grounds as had been taken before the Tribunal and contended that when the issuance of notice under s. 158BD is the very foundation to initiate proceedings against the assessee, the nonmentioning of the block period in the notice would cut at the very root of the assessment proceedings. Learned standing counsel for the Revenue placed before us the decisions in Shirish Madhukar Dalvi… v. Assistant Commissioner Of Income-Tax & Others…, (2006) 203 CTR (Bom) 621 : (2006) 287 ITR 242 (Bom), Smt. Mahesh Kumori Batra v. Jt. CIT, (2005) 95 TTJ (Asr)(SB) 461 : (2005) 280 ITR 34 (Asr)(SB)(AT) as well as Sakthivel Bankers v. Rana Investments, (2002) 176 CTR (Mad) 603 : (2002) 255 ITR 144 (Mad) and submitted that when the assessee had acted on the notice and filed the return knowing fully well the period of block assessment, yet considering the fact the notice issued under s. 158BD is only procedural and not related to assumption of jurisdiction, it is not open to the assessee to contend that the assessment was not valid.

14. In the decision relied on by the assessee in Manish Maheswari v. Asstt. CIT, (2007) 208 CTR (SC) 97 : (2007) 289 ITR 341 (SC), the apex Court considered the scheme of block assessment procedure and pointed out that s. 158BD provides the methodology to make block assessment in terms of s. 158BC in respect of any other person other than the person whose premises had been searched. The conditions required thereon are that there must be satisfaction recorded by the AO that the undisclosed income belongs to any person, other than the person with respect to whom the search was made under s. 132 of the Act; the books of account or other documents or assets seized or requisitioned had been handed over to the AO having jurisdiction over such other person and the AO has proceeded under s. 158BC against such other person. As far as this aspect is concerned, on going through the file, we find that there is no difficulty in holding that there is compliance of the provisions of the Act.

15. As far as the non-mentioning of the block period in the notice issued under s. 158BD is concerned, in the decision relied on by learned standing counsel for the Shirish Madhukar Dalvi… v. Assistant Commissioner Of Income-Tax & Others… (supra), the Bombay High Court considered the nature of the proceedings contained in s. 158BD. On going through the provisions contained under ss. 147, 148 and 158BC, the Bombay High Court held that s. 158BA refers to jurisdiction of the AO to assess undisclosed income in accordance with Chapter XIV-B, whereas s. 158BA(2) is the charging section, s. 158BB provides for computation of undisclosed income for the block period, whereas s. 158BC provides the procedure for block assessment. In the decision in Sakthivel Bankers v. Rana Investments (supra), this Court held that failure to mention the provision in the notice was not a circumstance which could be said to vitiate the ultimate order. The said decision relates to the assessment made consequent on the search conducted in assessee's place and notice was issued thereon to eight firms and to the wife of the assessee. Referring to s. 158BD, this Court held that non-mentioning of the purpose for which the notice was issued or the source of the authority of the officer issuing the notice per se would not defeat the aspect of the persons since the persons against whom the notice issued were fully aware of the purpose of issuing the notice.

16. In the light of the above-said decision of this Court as well as in view of the Bombay High Court cited supra, we reject the contention of the assessee that the non-mentioning of the block period would defeat the very assessment. Quite apart from this, the assessee participated in the enquiry conducted under s. 131 of the IT Act and had also made a statement confirming the purchase of the land. Subsequent thereto, the assessee had participated in the enquiry and on 15th May, 2002, in response to the notice under s. 142(1) the assessee expressed his inability to file the return on or before 15th May, 2002 on account of liquidity problem, hence he sought for time to file return. Ultimately, when the assessee filed the return under Form No. 2B, as already noted in the preceding para, the assessee mentioned the block period as ascertained from the ITO and said fact is stated by the assessee in the return filed by him. Thus, when the assessee received the notice issued on 5th Aug., 1999, the assessee had no doubt as to the nature of proceedings initiated, the purpose of the said proceedings and the block period for which proceedings were initiated. In the circumstances, it is too late for the assessee to contend that non-mentioning of the block period would defeat the assessment proceedings. In the circumstances, we reject the assessee's contention.

17. As regards the contention of the assessee that the statement recorded was in violation of provisions of CPC and CrPC, we do not think that the said contention would be well received by this Court. The conduct of the assessee has to be seen herein. The assessee made a statement in the enquiry conducted by the Department as regards the parting of a sum over and above what was recorded in the sale deed. A reading of the questions and answers which are extracted in the preceding para shows that the assessee was well aware of the contents of the statement made by him. The statement was recorded in the year 1999 and the assessee thereafter too participated in the enquiry until 2003 and he had no doubt about the truthfulness of the statement made. However, for some reason best known to him, the assessee in the letter on 26th June, 2003, took a plea that the statements were not recorded in the presence of Dy. Director of IT (Inv.) and statements were not given Voluntarily. It may be seen that the assessee is stated to have written letters on 12th June, 2003 and 26th June, 2003 and it is relevant to point out that the so-called retraction came to be made only in the letter dt. 26th June, 2003, which clearly shows that it is merely an afterthought to say that he made the statement under threat or coercion. Consequently, this ground fails.

18. As far as the recording of the statement not being in the presence of Dy. Director of IT (Inv.) is concerned, on a factual finding made by the Tribunal that the statement was recorded in the presence of Dy. Director of IT (Inv.), the contention of the assessee that the statement was recorded in violation of provisions of order 18, rules 5 and 8 of CPC and s. 164 of the CrPC fails traction statement is concerned, in the decision in Vinod Solanki v. Union of India, (2008) 16 SCC 537, the apex Court considered the similar contention, wherein the apex Court pointed out that merely because a statement is retracted, it cannot be treated that the first statement was involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise etc., to establish that such improper means have been adopted. Going by the above said decision, taking note of the time of retraction, in the absence of any materials to substantiate the said contention, coupled with other material documents available in the form of seizure made on the premises of Kathirvel and Arumugam and the consistency in the answers made by the assessee, we reject the contention of the assessee that the Department committed serious error in ignoring the retraction. The decision referred to by the assessee in Vinod Solanki v. Union of India (supra), does not in any manner advance the case of the assessee and the same has to fail. The said decision in fact fully supports the contention of the Revenue. As far as the third contention that the assessment had not been made taking note of the independent materials is concerned, here too, we do not accept the contention of the assessee that the assessment was based on the materials seized from the premises of Kathirvel and Arumugam, who were parties to the sale transaction as well as on the basis of the statement recorded under s. 131 from the assessee, as such, it cannot be held that the assessment was based just on the statement recorded from the assessee.

19. Considering the above facts, we have no hesitation in confirming the order of the Tribunal. Consequently, we reject the plea of the assessee and thereby, the order of the Tribunal is confirmed. The tax case (appeal) is dismissed. No costs.

© 2026 Gauge Data Solutions Pvt. Ltd.

x

Alert

Please log in or sign up for a free trial to access this feature.
Sign Up Login
x