Introduction
Authority and power to conduct search and seizure operations is strident and caustic power authorized by law to be taken recourse to when the conditions mentioned under different clauses of Section 132 (1) of the Act are satisfied.
The jurisdictional facts that have to be established before a search under Section 132 (1) of the Act can be authorised are that (i) the authority issuing the authorization is in possession of some credible information, other than surmises and conjectures (ii) that the authority has reason to believe that the conditions stipulated in clauses (a), (b) and (c) of Section 132 (1) qua the person searched exist; and (iii) the said information has nexus to such belief.
The law is well settled that a warrant of search and seizure under Section 132(1) can only be issued on the basis of some material or information on which the Commissioner/Director has reason to believe that any person is in possession of money, jewellery or other valuable articles representing wholly or partly income or property which has not been or would not be disclosed, under the IT Act. The satisfaction of the authorities under Section 132 must be on the basis of relevant material or information. The word used in Section 132(1) are "reason to believe" and not "reason to suspect".
Having said so, the primary thrust of the Search and Seizure action is to collect evidences of tax evasion which otherwise could not have surfaced and brought to tax. Section 132(4) of the act has been put in place by the legislature consciously so as to enable the authorized officer to collect such evidences by recording statements during the course of search. Section 132(4) of the act empowers the Authorized Officer, to examine and record a statement under oath of 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 the Income Tax Act'1961.
Direct Tax Law (Amendment) Act'1987 w.e.f. 01-4-1989, inserted an explanation to Section 132(4), which reads as under:-
'Explanation.- For the removal of doubts, it is hereby declared that the exami-nation 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.”
Here, it would be relevant to point out that the statements u/s 132(4) are recorded by administering oath which is presumed to be carrying truth in view of the provisions of section 181 and section 193 of the Indian Penal Code which provide for imprisonment if a false statement is given.
Therefore there is a considerable importance of statements recorded u/s 132(4) during search and seizure operations, which is clear from the intent of Legislature as it thought fit to include a separate sub-section 132(4) for recording of statement during a search operation. However, it is further most pertinent to mention here is that the words 'may be used in evidence in any proceedings' appearing in section 132(4) are of great significance. The Legislature seems to be aware that some admissions may be made at the time of search which may be true, but for which sufficient corroborative evidence may not be found.
The word 'statement' is defined neither in the Income-tax Act nor in the Indian Evidence Act, and, hence, it assumes its dictionary meaning of 'something that is stated'.
The Division Bench of the Kerala High Court in CIT v. Hotel Meriya [2011] 332 ITR 537 /[2010] 195 Taxman 459 (Ker.) considered the scope of a statement recorded under Section 132(4) and found that such statement recorded by the officer as well as the documents seized would come within the purview of evidence under the Income-tax Act read with Section 3 of the Evidence Act. The necessary corollary is that such an evidence should be admissible for the purpose of search assessments too. The Explanation to Section 132(4) of the Income Tax Act was also noticed by the Division Bench to further emphasize that the evidence so collected would be relevant in all purposes connected with any proceedings of the Income Tax Act.
Having said so, it is further pertinent to mention that statement recorded on oath u/s 132(4) of the act is significant both from the point of view department as well as the assessee who is subjected to search. From the departmental point of view, such a statement enables the department to bring on surface the tax evasion, to examine the nature of incriminating documents, assets etc. found during the course of search and record the assessee's version with the regard to the contents of such incriminating documents and assets, its source, mode and manner of earning/application and its accountability in the books of accounts whether disclosed or not. Such a statement recorded on oath carries a significant evidentiary value which may be used by the Assessing Officer during the course of assessment proceedings as a corroborative evidence along with documentary evidences material unearthed during the course of search and seizure action.
On the other hand, the assessee subjected to such a search and seizure action, by making a valid disclosure of its undisclosed income in the statement recorded u/s 132(4) gets benefitted from less or no levy of penalty for the specified previous year u/s 271AAA or 271AAB, as the case may be, though on fulfillment of conditions mandated in Section 271AAA and/or 271AAB. Therefore, the assessee's must be cautious enough about his or her disclosures, manner of disclosures of unaccounted income and it's substantiation thereof as the manner and way in which assessee makes the declarations decides the fate of the assessee as regards the penal provisions are concerned.
It is further pertinent here that invariably in every search and seizure action, statements u/s 132(4) are recorded multiples times, till the search is concluded. The persons giving such statements during search proceeding remain under great mental pressure, nervousness and stress. Most of times they also do not have the availability of relevant details, documents and books of account at the time of giving such statements, in the absence of which precise information the statements made during the search proceeding are often vulnerable on the ground that same cannot be correctly furnished.
There may be cases, in the course of search and seizure operations wherein an attempt is often made to extract information about undisclosed income with the desire to announce the success of the operation of search by the concerned authorities, for achieving their success in search operations. In such cases, the Income-tax Department may adopt the pressure tactics for confessions of undisclosed income, which amounts to violation of human rights and on the contrary an assessee always complains of adopting pressure tactics by the department to extract confessions for declaration of undisclosed income. In such cases the authorities try to obtain and record Statement of the nature they would like to record. The persons making the Statements are made to sign on the statements and other documents.
To curb such erroneous practices of seeking involuntary forced confession of undisclosed income, the CBDT issued Circular F. No. 286/2/2003-IT(Inv.), dated 10-3-2003 after taking due recommendation of Kelker Committee, which clearly states that 'no attempt should be made to obtain confession/surrender as to the undisclosed income during search. Any action on the contrary shall be viewed adversely'.
CBDT Instruction F. No. 286/2/2003-IT (Inv.), dated 10-3-2003 regarding confession of additional income during the course of search & seizure and survey operation is as reproduced herein under
'In pursuance of the Finance Minister's budget speech dated 28-2-2003 this instruction was issued by the CBDT and is as under:
"Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess undisclosed income during the course of the search and seizure and survey operation. Such confession, if not based on credible evidence, are taken/retracted by the concerned assessees while filing return of income. In these circumstances, confession during the search and seizure and survey operation do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income-tax department. Similarly, while recording statement during the course of search and seizure operation, no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely". This instruction is in line with the recommendation of the Task Force on Direct Taxes Chaired by Dr. Vijay Kelker.”
Recommendation in final Report Para 3.27 of Task Force on Direct Taxes Chaired by Dr. Vijay Kelkar in this context
- The CBDT must issue immediate instruction to the effect that no raiding party should obtain any surrender whatsoever.
- Where, a taxpayer desire to voluntarily make a disclosure, he should be advised to make so after the search.
- All cases where surrender is obtained during the course of the search in violation of the instruction of the CBDT, the leader of the raiding party be subjected to vigilance enquiry.
- All statements recorded during the search should be Video recorded.
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