Ajay Kumar Mittal, J.:— This order shall dispose of I. T. A. Nos. 126 and 127 of 2003 as common question of law and facts are involved therein. For brevity, the facts are being taken from I.T A. No. 126 of 2003.
2. This appeal was admitted on January 22, 2004, for determination of the following substantial question of law:
“Whether the Tribunal was right in law in ignoring the facts on records as also the provisions of sections 132(4) and 132(4A) of the Income-tax Act, 1961, and holding that the addition of Rs; 9 lakhs made by the Assessing Officer on account of commission income and confirmed by the Commissioner of Income-tax (Appeals) was without any basis?”
3. The facts necessary for adjudication of the present appeal, as narrated therein, are that the search was conducted at the residence of the assessee on April 15, 1993. The assessee being individual filed his, return on March 28, 1994, declaring an income of Rs. 2 lakhs. The assessment was completed on March 31, 1999 (annexure A), by the Deputy Commissioner of Income-tax and the income was assessed at Rs. 13,02,440 by making addition of Rs. 9 lakhs on account of income from commission, on sales. Feeling aggrieved, the assessee went in appeal and the Commissioner of. Income-tax (Appeals) (in short “the CIT (A)”), vide order, dated. December 20, 1999, upheld the addition of Rs. 9 lakhs made by the Assessing Officer. Still feeling aggrieved, the assessee approached, the Tribunal who vide order dated February 28, 2003, deleted the addition of Rs. 9 lakhs holding, that there was no evidence to conclude that the assessed had actually earned the commission on sales. Hence, the present appeal by the Revenue. We have heard learned counsel for the parties.
4. Learned counsel for the Revenue submitted that the assessee during the course of search operation on April 15, 1993, had made a statement under section 132(4) of the Act admitting that he was selling agent of M/s. P.M.S Enterprises, Phagwara and had been getting commission at 2 per cent, on sales effected through him. According to the learned counsel, in the light of statement of the assessee under section 132(4), the Assessing Officer was justified in making addition of Rs. 9 lakhs on account of commission received from M/s. P.M.S Enterprises calculating by taking 2 per cent, of Rs. 4,92,03,005, i.e, Rs. 9,84,060.10, and giving deduction of Rs. 84,060.10 on account of expenses incurred. He further submitted that the total sales of Rs. 4,92,03,005 is discernible from the documents, details of which are as under:
“Annexure
Amount of sale (in Rs.)
A1
45,47,388
A2
1, 19, 26, 694
A3
1,07,301
A4
2, 55, 15, 434
A5
22,67,750
A6
48,38,438
Total
4,92,03,005”
5. It was further urged that the said documents belonged to the assessee in view of the provisions of section 132(4A) of the Act as the same were seized during the course of the search from the premises of the assessee. Learned counsel contended that the assessment order was rightly upheld by the Commissioner of Income-tax (Appeals) but the Tribunal erred in deleting the addition of Rs. 9 lakhs on account Of Income from commission on’ sales received from M/s. P.M.S Enterprises, Phagwara.
6. Controverting the above submission, learned counsel for the assessee argued that the Revenue had failed to bring any material on record which could have substantiated their plea that the assessee had earned commission on sales from M/s. P.M.S Enterprises, Phagwara. In the absence of any tangible evidence produced by the Department, the addition of Rs. 9 lakhs was not justified. The order of the Tribunal was supported by the learned counsel for the assessee.
7. The point for consideration in this appeal is whether the addition of Rs. 9 lakhs made by the Assessing Officer on account of commission income on the basis of the admission of the assessee in his statement, under section 132(4) of the Act which was confirmed by the Commissioner of Income-tax (Appeals) on appeal, was sustainable.
8. It would be advantageous to view the provisions which are relevant and section 132(4) reads thus:
“132. (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.”
9. Sub-section (4) of section 132 enables the authorized officer to record on oath the statement of the persons who are found to be in possession or control of article or thing at the time of search. Under this provision, the Assessing Officer is empowered to use such statement against the assessee and base the assessment thereon. However, where the assessee is able to establish that the statement so made was not voluntary but was a result of coercion or inducement, the same may not be acted upon. The onus lies very heavy upon the assessee in such circumstances, to prove such coercion or inducement. Further, the assessee can produce evidence to rebut the statement recorded under section 132(4) of the Act. The Explanation inserted by the Direct Tax Laws (Amendment) Act, 1, 987, with effect, from April 1, 1989, permits the examination of, the persons under sub-section (4) not only in relation to the books of account, other documents or assets found as a result of search but also on any other matter relevant for any proceedings under this Act or the Indian Income-tax Act, 1922.
10. Sub-section (4A) of section, 132. raises. certain, presumptions. It reads as under:
“(4A) Where any books of account, other documents, money but lion, jewellery, or other valuable article or thing are or is found in the possession or control of any person in the course of a search, it may be presumed—
(i) that such books of account, other documents, money, bullion, jewellery or other valuable article or thing belong or belongs to such person;
(ii) that the contents of such books of account and other documents are true; and
(iii) that the signature and every other part of such books of account and other documents which purport to be in the handwriting of any particular person or which may reasonably be assumed to have been signed by, or to be in the handwriting of, any particular person, are in that person's handwriting, and in the case of a document stamped, executed or attested, that it was duly stamped and executed or attested by the person by whom it purports to have been so executed or attested.”
11. Sub-section (4A) was introduced by the Taxation Laws (Amendment) Act, 1975, with effect from October 1, 1975, and it enacts certain presumptions. According to it, the books of account, other documents, money, bullion, jewellery or other valuable articles seized from the possession of a person, shall be presumed to belong to such person in whose possession or control they are found during the search. A similar presumption is raised regarding the truthfulness of the contents of the books of account which are found. Presumption also arises in respect of signatures and every other part of the books of account to be in the handwriting of the person by whom it is purported to have been written. Similarly, if they are stamped, executed or attested, a presumption may be made to be duly stamped and executed or attested by the persons by whom it purports to have been executed or attested. The aforesaid presumptions are rebuttable in nature “and their strength is dependent upon the circumstances of each case. Further, the words used in this sub-section are “may be presumed” which are in contradistinction to the words “shall presume” or “conclusive proof”.
12. Now, the question that would require an answer would be whether the presumption under section 132(4A) can be used for framing regular assessment.
13. The Karnataka High Court in CIT v. P.R Metrani (HUF), [2001] 251 ITR 244 had laid down in clear terms that the presumption under sub-section (4A) of section 132 cannot be restricted for passing an order under section 132(5) only. It further recorded that the presumptive value is total in so far as section 132(5) is concerned; but in respect of other proceedings, the presumption is rebuttable. However, the Delhi High Court in Daya Chand v. CIT, [2001] 250 ITR 327 and the Allahabad High Court in Pushkar Narain Sarraf v. CIT, [1990] 183 ITR 388 have subscribed a different view. We are in respectful agreement with the view expressed by the Karnataka High Court as to accord any other meaning to the aforesaid provision would be against the legislative intent as sub-section (5) of section 132 had been omitted by the Finance Act, 2002, with effect from June 1, 2002, whereas sub-section (4A) of section 132 still continues on the statute book.
14. Having crystallized the legal position, it is now apt to delve on the factual situation of the present case. It is not in dispute that the assessee had made a statement under section 132(4) of the Act whereby a surrender of Rs. 2 lakhs was made. Besides this, the assessee had admitted that he had earned commission from M/s. P.M.S Enterprises, Phagwara which was not disclosed in the return filed by him. The relevant portion of the statement reads as follows:
“I am selling agent of M/s. P.M.S Enterprises, Railway Road, Phagwara, and get commission at the rate of 2 per cent, on the sales effected through me. I have no other source of income except interest from the firm on deposit with the firm. My wife is a housewife and does tailoring work on a very small scale.”
15. Further, during the search, certain sale documents were seized which bore the signatures of the assessee as well. The said documents depicted total sales of Rs. 4,92,03,005 as noticed earlier.
16. Thus, in view of sub-sections (4) and (4A) of section 132 of the Act, the Assessing Officer was justified in drawing presumption against the assessee and had made addition of Rs. 9 lakhs in his income under section 68 of the Act. The onus was upon the assessee to have produced cogent material to rebut the aforesaid presumption which he had failed to displace. The assessee retracted from the said statement, vide letters dated November 24, 1998, and March 11, 1999, during the course of assessment proceedings. However, no value could be attached thereto in the present case. In case the statement which was made by the assessee at the time of search and seizure was under pressure or due to coercion, the assessee could have retracted from the same at the earliest. No plausible explanation has been furnished as to why the said statement could not be withdrawn earlier. In such a situation, the authenticity of the statement by virtue of which surrender had been made at the time of search cannot be held to be bad. The Tribunal, thus, erred in concluding otherwise. The. Tribunal, therefore, was not justified in reversing the order of the Assessing Officer which was affirmed by the Commissioner of Income-tax (Appeals) also. In view of the above, the substantial question of law is answered in favour of the Revenue and against the assessee.
17. The appeal stands allowed.