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Tips to win the Appeal by searching defects in a statement(s) recorded by the Income Tax Authority.

The meaning of a statement, anything stated in writing or orally to communicate in any matter and manner. The word statement is not defined in the Income Tax Act or in the Evidence Act.

 Recording a statement in the Income Tax assessment involves everyday tasks for Income Tax Authorities. The Income Tax Authorities are having two types of powers administrative and Quasi-Judicial powers at a time. He must act within the framework of law, natural justice, and judicial pronouncement at a time The Income Tax Authorities used to use the statement of an assessee as a weapon against the assessee for taxing the assessee during the assessment proceeding. The recording of a statement is an art in itself because during the recording many types of precaution have to be taken as well as to follow the legal position. The Officer recording the statement should have correctly identified the person whose evidence he is recording.  Summons should be always served correctly for the purpose of recording statement The Assessing Officer takes utmost care in recording the statement of an assessee, but even then the statements recorded by the department can be utilized by the assessee in his favor because the same can hardly be perfect and the statement so recorded is interpretable as well as one can point out a legal defect in the statement, so recorded. The representative of the taxpayer at the appellate stage try to quash the demand, created by the Income Tax Officer, by trying to search for a legal deficiency in the statements recorded by the Income Tax Officer. The Indian Oath Act plays an important role in recording the statement.

The Income Tax Authorities should take care to administer the oath while recording the statement that the oath was sworn under the Indian Oath Act without any error and get his statement recorded. The statement should be without undue pressure or coercion, stress, squeeze, straining.

But the error, deficiency or mistake can be useful for the assessee for defending himself in the appeal on the technical ground. In most of the cases, the statement is being used as an admission or confession. If the foundation itself is defective in that case the entire addition can be deleted. Therefore the statement should be gone through carefully and one should have tried to find out the legal glitches/mistakes in recording the statement as per law as well as following the legal pronouncement. The mistake if found can prove very useful.

If one refuses to take the oath in the proceeding, then the oath-administer shall mention this fact and, he can also initiate the penalty proceeding. Therefore one should avoid refusing to take an Oath in course of recording the statement. It will not be out of place to mention here that it should keep in mind that the authority is competent to sware Oath under the provision in which he is recording the statement on Oath.

Similarly, anyone should not refuse to sign the statement, such refusal should be taken on record by the Assessing Officer, and that can further multiply the litigation. Therefore this should also be avoided.

While concluding the statement for the officer recording the statement, it is necessary to mention that he has examined the witnesses and the statement is voluntary and given without any pressure, without any intoxication. Detail of persons who were present at that time of recording the statement, their names. The statement must be recorded in the language from which the deponent is acquainted.

If there is any irregularity in administering oaths or taking oaths, then what will be the fate/ character of the statement, is a matter of dispute? Whether the irregularity in recording the statement will be fatal or shall be harmless?

The judgment of V. Datchinamurty v. Asst. Director of Inspection, 149 ITR 341 (Mad) and Poolpandi v. Superintendent, Central Excise 62 Taxman 447 (SC) is helpful regarding the presence of a counsel during the examination.

Mostly the authorities are not permitting but this issue is definitely debatable. In these circumstances, one should be prepared to ready without assistance. It will be worthwhile to submit that various High Courts also held that refusal to allow the presence of a lawyer will not be violative of protection under Article 20(3) of the Constitution of India.

Following are the main headings in which we can search the deficiency or loopholes in the statement for defending or for wining in the appeal:-

Powers to record statement

Section 131(1) empowers the Assessing Officer with the powers as vested in a court under the Code of Civil Procedure in respect of discovery and inspection. As per section 131(1) (b) Income Tax authority is empowered to examine any person on oath.

The Income-tax Act, 1961 empowers the assessing officer to record the statement as provided under Section 132 Sub Section (4) of Income TaxAct, 1961.

As far as the recording of statement under section 133 of the Income Tax Act, 1961, as per the judgment of Paul Mathew and sons versus Commissioner reported in ITR 263 ITR page 101, the statement recorded has no statement because the section does not authorize to take any solvent statement.

The Hon’ble High Court of Madras 214 CTR 589 in the case of Commissioner of Income tax vs. S. Khader Khan Son has held that Section 133A does not empower the authority of the Income Tax to examine any person on oath, hence.

While defending one should see whether the recording is as per authorization of the Income Tax Act, 1961.

Who can record the statement?

The very first question is who can record the statement. This article is confined to the Income Tax only. Section 116 of the IT Act having names of the authorities of the Income-Tax including Income Tax Inspector. There are so many judgments in which it has been held that the Income Tax Inspector is not authorized so as to record this statement. As such this should be seen from the statement. If recorded by the Statement we can take this plea in the appeal and this can be very useful ground.

In 29 IT Rep. Page 513 the Hon’ble Income-tax Appellate Tribunal, Delhi Bench, Delhi in case of Smt. Madhubala Vs. Income-tax Officer, Ward-4 Hissar held that in Income-tax Act, Inspector is not authorized so as to record the statement. In the case of M/s Kamal & Co. vs. Assistant Commissioner of Income-tax, Jaipur, the Hon’ble Appellate Tribunal, Jaipur Bench, Jaipur is also of the same view reported in  21 T.W. 427. In the case of Income Tax Officer V/s Vardhman Industries reported in 99 TTJ page 509 the Honorable ITAT, Jodhpur Bench is also having the same views.

Who can administer The Oath?

One of the issues can be the statement without administering the oath is no statement in the eye of law as laid down by many courts as per Section 3 of the Indian Oath Act which provides power to administer the oath. As such, this should be seen from the statement whether the same is as per section 3 of the Indian oath act or not. This should be also verified from the statement. If it is no so without administrating the oath the statement shall lose its character, as per various judicial pronouncements.

 Recording of statements

The Income-tax Act provides for the recording of statements. The question arises whether the oath can be administered by every authority, in every proceeding is very controversial. As per the Indian Oath Act, the oath can be administered only by a competent person. If the statement recorded without administering an oath can be no statement as per the law. This should be verified whether the person recording the statement is competent or not.

Fate of statement –

Any statement or admission of the fact in a statement is binding on the statement makers, therefore, it is suggested that statement should be given consciously though the statement maker can retract from the statement but it can be a limitation of law.

Language of the statement

India is a country where there are so many provincial languages and it is not possible that everyone knows every language, therefore there is a specific provision in the Indian Oath Act 1969 that the authority must record the statement in the language of which the deponent is aware. If it is not practically possible in that case the language should be as mutually agreed but at least the contents of the statement should be explained to the deponent in the language is known to him. If this principle has not been followed, we can challenge it in appeal.

Presence of Independent Witness

The presence of a witness is not necessary at the time of recording the statement. But the question arises in this situation if the witness is present and having a signature on the said statement what would be the legal position. The presence of any witness during the course of recording the statement and signature thereof on the recorded statement create more evidently value of that statement. The witness is not necessary but the presence thereof strengthens the value of certification. Sometimes circumstances demand retraction in that case if the witness also confirms, in that case, the statement loses its value it became weaker in comparison to normal course.

Verification by mentioning read over and accepted

The recording officer, after the recording of the statement, must write at the bottom or end of the statement as read over and accepted. The non-mentioning of read over and accepted converted the statement as no statement in the eye of law as per the judgment of Rajasthan High Court, Jaipur Bench, in case of the Assistant Commissioner Taxes Officer Vs. Kishori Shyam Brijesh Kumar reported in 93 STC Page 213 (Raj.). The Hon’ble Court held that missing of read over and accepted over the signature the Hon’ble Court not accepted the statement as correct.

The Hon’ble Rajasthan High Court in the judgment reported in 92 STC Page 629( Raj.) in case of C.T.O v/s M/s Kewalram Sumnomal Cavanduspur held that where the oath was not administered in that case the statement is no statement in the eye of law. The relevant portion is as under:

 “If the statements were obtained and the officer has verified them as read over and accepted by the assessee then the question of admission of said statement could have been examined by the Sales Tax Tribunal. The mistake of officer, not verifying the statement show that the said statements were not accepted as a correct one and is not admissible in law”.

Though the judgment is in respect of the sales-tax matters, principles laid down by the Hon’ble Court can be applied in other laws also.

The Jodhpur ITAT followed the order of the High Court in the case of Income Tax officer vs. Vardhman Industries reported in 99 TTJ page 509. . Relevant portion is reproduced as under:

“In the cross-objection, the only ground taken by the learned Authorised Representative, Shri Suresh Ojha for asst. yrs. 1996-97 and 1997-98 are that the learned Assessing Officer has relied on the statements taken by the Inspector and also the statements recorded by himself. Without going into much detail, both these issues stand covered by the order of this Bench. This Bench has been consistently holding that the statements recorded by the Inspector of the Department are not valid statements as he is not authorized to record such statements and the statements recorded by the ITO without reading over, and explaining to the maker of the statements before his signature are invalid as has been held by the Hon’ble jurisdictional High Court in the case of CTO vs. Kewai Ram Sumnomal Cavanduspur 92 STC 29, copy of which is filed on record. So, to that extent, the cross-objections are allowed.”

Cross-examination of statement or evidence.

It is not mandatory for the Assessing Officer to allow cross-examination, where a statement on the oath of another person is being used against any assessee. Failure to allow cross-examination substantially reduces the evidentiary value of the statement on oath. This is not a violation of the basic rights of the assessee but on the request, the Assessing Officer should allow cross-examination. As per the judgment of Rajasthan High Court delivered in the case of Rameshwar Lal Mali v.s CIT 256 ITR 536 (Raj), there is no provision for permitting cross-examination of the person whose statement is being recorded during the survey.

Caution for  deponent

Before signing the recorded statement, the deponent should go through. If found any correction should point out the mistake if any, occurred in course of recording the statement. The facts escaped should be incorporated related to the subject prior to signing. Copy thereof must be demanded after signing the statement. The assessee should take care while giving the statement under the Income Tax Act even in other places. The statement so recorded can be used as evidence against him by the person recorded statement. The burden shall be lies on the assessee always to establish that the contention in the statement is incorrect/wrong/ due to pressure/ignorance.        

DISCLAIMER: This information is not professional advice. Although care has been taken to ensure accuracy but before making this decision on the basis of the article consults your Lawyer, Advocate, Tax Advisor, or Legal Advisor. The interpretation presented in this article is of the author himself, on the basis of which the author will not be responsible for any decision taken / for the consequences of the use of such information. All rights reserved with the writer. Any portion of this article should not be published in any form without the author’s permission. The author will not be responsible for human error.


Suresh Ojha
Suresh Ojha
Born on 26 March 1949 in Nimbi Jodha village of Nagaur Rajasthan and advocating since 1977 at Bikaner, my qualification is M.A., LL.B. Appearing before the Income Tax Appellate Tribunal, Rajasthan Tax Board, and Rajasthan High Court, in Taxation matters. Also, remain Vice President of All India Federation of Tax Practitioners (Central Zone), and Rajasthan Tax Consultant Association, Jaipur, presently Vice-President of Income Tax Appellate Tribunal Bar Association, Jodhpur Rajasthan Tax Bar Association, and. Bikaner Tax Consultant Association. Also remain in the Editorial Board of "Tax World" published from Jaipur and "Income Tax Service Tax Interpretations" published from Ghaziabad, was also honorary editor of “Aayakar Vaanee”, published from Bikaner. All India Federation of Tax Practitioners, Mumbai awarded at the National level for book writing. Akhil Bharatiya Brahman Mahasangh also awarded “ Brahman Vidhigya Bhusan Purushkar 2016” Wrote books titled “Qanunee Upchar”, “Mahila Qanun”,” Qanunee Kitab” and “Kaise Likhen Vsiyat”, The Government of India awarded the “Pandit Govind Ballabh Pant Award” for the writing of books “Qanunee Upchar " and " Mahila Qanun ". Appreciations were also received at the District Administration and State level for law books writing in Hindi. Was a member of the Indian delegation to "The World Congress Devoted to the International Year of Peace" held in Copenhagen (Denmark) in 1986.

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