Patnaik, J.:— These are references under section 256(1) of the Income Tax Act, 1961 made at the instance of an assessee. The assessment years in question are 1980–81 and 1981–82. The question referred are as follows:
“1. Whether there was any material for the conclusion of the Hon'ble Appellate Tribunal to the effect that there was excess stock of Rs. 1,50,000/- as on 31.3.1980 and 31.3.1981?
2. Whether there is any material for the Hon'ble Appellate Tribunal for its conclusion that there was excess physical stock to the tune of Rs. 3 lakhs as on the date of search viz., 25.7.81, in the absence of physical verification?
3. Whether there was any material for the Hon'ble Tribunal to sustain the addition of Rs. 1,50,000/- towards “difference in Closing Stock” in the assessment order when the stock declared in the four different trading accounts was supported by proper inventories and no difference was established in those inventories?
4. Whether, on the facts and in the circumstances of the case, the Hon'ble Tribunal is justified in its conclusion that the statement obtained from the Managing Partner Shri. Raman at the time of search was not under coercion but was voluntary?
“5. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was correct in law and facts in finding that in the absence of statements or affidavits obtained from the two witnesses to the search “the assessee has totally failed to prove that the statement was obtained by intimidation and coercion”, when these persons were witnesses of the Department and not of the assessee and whether the above finding is sustainable when no reference was made to the enquiry conducted by the Inspecting Asst. Commissioner of Income-tax, on the complaint made by the assessee?”
2. The assessee is a registered firm dealing in textiles at Cannanore. For the assessment year 1980–81, the assessee returned an income of Rs. 3,99,830/-. On 25.7.1981, there was a search in the premises of the assessee by the officers of the Income-tax Department. In the course of the search, a statement was recorded from Shri. V. Raman, the managing partner of the assessee. He admitted that there were certain discrepancies in the accounts maintained by the assessee. He further conceded that there was some unaccounted investment in a cinema theatre which has been constructed by the assessee and such unaccounted investment would come to Rs. 3 lakhs in all and that could be equally spread over for the assessment years 1980–81 and 1981–82. It was also further confessed that the stock as found in the premises was much more than the stock admitted for income-tax purposes and such difference would also be of the order of Rs. 3 lakhs which could again be spread over equally for the assessment years 1980–81 and 1981–82. In view of the statement and as a measure of compromise, the Income Tax Officer while making the assessment for the years 1980–81 and 1981–82 included the total income of Rs. 3 lakhs each in the total turnover. On appeal, the Commissioner of Income-tax (Appeals) held that the addition on account of unexplained investment in cinema theatre is to be struck down as illconceived and unsubstantiated in as much as only three out of the four partners of the firm were engaged in the construction of cinema theatre and the exact amount invested could not be ascertained until the construction was complete. However, in the matter of addition, on account of excess, he confirmed the order of the Income Tax Officer including Rs. 1. 5 lakhs as being the value of unexplained excess stock in each year's turnover of income. The assessee filed appeals before the Income tax Appellate Tribunal, for both the years, objecting to the addition of Rs. 1. 5 lakhs sustained by the Commissioner of Income-tax (Appeals). The Income Tax Officer field cross-objections objecting to the deletion of Rs. 1. 5 lakhs by the Commissioner of Income tax (Appeals) on account of unexplained investment in the cinema theatre. The appeals and cross-objections were dismissed by the Appellate Tribunal. It held that if the offer of settlement in the form of a confessional statement is made and the same is accepted by the department, the assessee cannot subsequently turn round and disown settlement. Therefore, the issue cannot be decided merely because the assessee made a protest immediately after the conduct of the search. There is nothing to show that the search was conducted out of any malice on the part of the officers of the department. On the other hand, it was found that the search was restart to only because of the failure of the assessee to produce the opening stock inventory. Shri. Raman and a writer of the firm were examined in this connection on 16.7.1981, about 9 days before the search. The search was conducted only when it was found that there was no chance of getting the opening stock inventory. There is nothing in the evidence to show that the Income Tax Officer intimidated Sri. Raman in giving a statement in the course of the search. The Tribunal found that it is a case in which the assessee did not discharge the burden of providing coercion and intimidation.
3. The statement made by Sri. Raman, the managing partner of the firm, at 11 pm. on 25.7.1981 is to the following effect:
“He was not keeping day-ta-day inventories and due to this stock entered in the accounts are much less than the actual stock. The value of the difference in the stock will come to Rs. 3 lakhs and that he is willing to have this amount being brought to tax one-half during the assessment year 1980–81 and the other half during the assessment year 1981–82.”
4. It is contended by learned counsel for the assessee that this statement was given by Sri. Raman under coercion and intimidation. On 26.7.1981 (the next day) the assessee sent a telegram to the Commissioner of Income tax complaining that the officers, who conducted the search, forcibly obtained a statement from Sri. Raman. It is also pointed out by learned counsel for the assessee that considering the quatum of the business of the assessee it would have been impossible for the managing partner to give any estimate of any unaccounted stock without any physical verification of all the four items of textiles in which the assessee was dealing. The assessee was keeping separate trading accounts for each item and no partner could have made any estimate of the unaccounted stock. When the assessee retracted the statement on the next day, the department could have continued the search. But, they abandoned the search soon after the statement was made. It was contended by the department that it is quite usual for persons whose premises were subjected to search to send complaints of unfounded allegations with a view to escape from the consequences and from the discoveries made during the search. The search in this, case was done in the presence of two independent witnesses, who are two business people in the neighbourhood. The assessee had failed to obtain any statement from the witnesses to the effect that there was any irregularity in the search or that there was coercion or intimidation which resulted in Sri. Raman giving the statement. The statement was given by Sri. Raman voluntarily. It is possible to verify on the part of businessmen of the calibre of the partners of the assessee firm to estimate the unaccounted stock with a reasonable amount of accuracy. The burden of proving that the statement was obtained by coercion and intimidation, has not been discharged by the firm. The aforesaid contentions of the assessee were rejected by the Tribunal.
5. Learned counsel for the assessee contended here that the Income-tax Officer was not empowered to obtain such a statement and that section 132 of the Income-tax Act does not empower the Income-tax Officer to obtain a statement without verification of the actual excess stock. The actual excess stock having not been ascertained and as there was no quantification of the same, the admission made by Sri. Raman was not voluntary.
6. Learned counsel for the Revenue has contended that the finding of the Tribunal that the statement was not obtained by coercion or threat is a finding of fact and as such that finding cannot be interfered with. Valid reasons were given for not including the investment made in the cinema theatre. This reason was given not because of the statement obtained by intimidation or coercion. The statement is actually one of settlement and does not come within the purview of section 132(4) of the Income-tax Act.
7. section 132 of the Income-tax Act deals with search and seizure of any books of account or other documents and to make a note or any inventory of any money, bullion, jewellery or other valuable article or thing in the course of search of any premises. Sub-section (4) and Explanation thereunder read as follows:
“(4) The authorised officer may, during the course of the search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing and any statement made by such person during such examination may thereafter be used in evidence in any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.
Explanation:— For the removal of doubts, it is hereby declared that the examination of any person under this sub-section may be not merely in respect of any books of account, other documents or assets found as a result of the search, but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Indian Income-tax Act, 1922 (11 of 1922), or under this Act.”
8. The explanation however was inserted by the Direct Tax Laws (Amendment) Act, 1987 with effect from 1.4.1989 Learned counsel for the assessee contends that prior to 1.4.1989 the Income Tax Officer (Authorised Officer) had no power to record the statement as it has been done in this case. It is argued that the power to interrogate under this sub-section is not for the purpose of general investigation of the assets, but for the limited purpose of seeking explanation or information in respect of the documents, articles or things found during the search and as such the authorised officer has no power to assess the income merely on the basis of a statement without actual verification of the stock. This contention, in our opinion, is not well founded.
9. It is true that the explanation was inserted and came into effect from 1.4.1989, that is, after the search was made in this case. But the explanation thereunder seeks to clarify the necessary import of the main provision contained in sub-section (4) of Section 132 of the Act. It does not change the substantive provision of the Act; nor does it lay down a different method of using the statement recorded under sub-section (4) of Section 132 of the Act. It permits interrogation of persons not only in relation to the books of account, etc., found as a result of the search but also on any other matter relevant for any proceeding under this Act. In this view of the matter we hold that the authorised officer had the power to record statements on oath on all matters pertaining to the suppressed income. The statement cannot be confined only to the books of accounts. If a partner of the firm came forward to disclose about non-entry of the excess stock in the registers during the course of search, there is no reason why the Income Tax Officer shall not make use of it even though there is no actual verification of the stock.
10. The Tribunal has clearly found that the statement was made voluntarily. It observed that the best and independent evidence in the matter would have been that of the two witnesses to the search, who are traders in the same locality. The assessee had not obtained any statement or affidavit from them in support of the plea that the statement was obtained by coercion or intimidation. So the assessee has totally failed to discharge the burden of proving that fact. Similar observation was made by the “Commissioner of Income-tax (Appeals). These are concurrent findings of facts. We are, therefore, not inclined to interfere with the said findings of facts.
11. The decision relied upon by the assessee in R.R Gavit v. Sherbanoo Hasan Daya [(1986) 161 ITR 793] has no application to the facts of this case. In that case the authorised officer recorded the statement on oath before conducting the actual search. In that context, it was held that the officer was empowered to examine the accused on oath during the course of search only in, the event the accused was found in possession or control of the things mentioned in section 132(4) of the Act. The statement was recorded before the search was commenced. It was held that the complainant had exceeded his authority under the provisions of section 132(4) by putting certain questions to the accused before commencing the search. In this case, the statement was recorded while the search was being conducted.
12. In Rameshchandra & Co. v. C.I.T [(1987) 168 ITR 375] the Bombay High Court observed that where an assessee has made a statement of facts, he can have no grievance if the taxing authority taxes him in accordance with that statement. If he can have no grievance, he can file no appeal. Therefore, it is imperative, if the assessee's case is that his statement has been wrongly recorded or that he made it under a mistaken belief of fact or law, that he should make an application for rectification to the authority which passed the order based upon that statement. Until rectification is made, an appear is not competent. We are in agreement with this observation. In this case, the assessment has been made based on the statement of the assessee. Since no case has been made out that the statement was made under a mistaken belief of fact or law, and as has been held above, the statement being a voluntary one, there is no scope for the assessee to challenge the correctness of the assessment as has been done in this case.
13. We do not find any merit in the contention of the assessee that even if there was an excess of stock to the extent of Rs. 3 lakhs at the time of search on 25.7.1981, there was no justification for the conclusion that there was excess stock of Rs. 1,50,000-as on 31.3.1980 and 31.3.1981 The excess stock of Rs. 3 lakhs admitted by the assessee on 25.7.1981 was allowed to be spread over for the previous two years as requested by the assessee for his own benefit. The assessee cannot therefore make any complaint on this count.
14. A further contention raised by the assessee was that, having rejected a portion of his statement regarding unaccounted investment in a Cinema Theatre, there is no justification to rely on another portion of the very same statement for the purpose of sustaining addition of unaccounted stock. We find no merit in this contention also. The addition on account of unexplained investment in Cinema Theatre was rejected not on the ground that the statement was taken from the assessee on threat or coercion but on the ground that the Cinema Theatre was owned only by 3 of the 4 partners of the firm and that a presumption that unexplained investment, if any, was made by the assessee firm could not be made. We are, therefore, of the view that there was sufficient material for the Tribunal to find that addition to the extent of Rs. 1,50,000.each for the assessment years 1980–81 and 1981-‘82 towards excess stock and that the assessee had failed to discharge his burden to prove that the statement was obtained by intimidation and coercion. For the reasons stated above, we answer the questions referred in the affirmative, in favour of the Revenue and against the assessee.
15. A copy of this judgment under the seal of this Court and the signature of the Registrar shall be forwarded to the Incometax Appellate Tribunal, as required by law.