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2006 Supreme(SC) 1121
SUPREME COURT OF INDIA
ASHOK BHAN & DALVEER BHANDARI
P.R. Metrani - PETITIONER
VERSUS
Commissioner of Income Tax, Bangalore-RESPONDENT
Appeal (civil) 5673-5675 of 2002
DATE OF JUDGMENT: 15/11/2006
The presumption under Section 132(4A) of the Income-tax Act, 1961, is available only for provisional adjudications intended for the retention of assets under Section 132(5) and cannot be applied to the framing of regular assessments.
Headnote:(A) Income-tax Act, 1961 - Sections 132(4), 132(4A), and 132(5) - Search and Seizure - Presumption under Section 132(4A) - Scope and applicability - Whether the presumption that seized documents belong to the person and their contents are true is available for regular assessments - Section 132 is a complete code in itself - Presumption is a rebuttable one designed to facilitate summary adjudication under sub-section (5) for asset retention - Not available for framing regular assessment. (Paras 33, 35, 42)
(B) Evidence in proceedings - Section 132(4) - Distinction between using seized material as evidence and applying the presumption under Section 132(4A) - While the former is available for any proceeding under the Act, the latter is restricted to search and seizure proceedings. (Paras 41, 43)
Facts of the case:
Search operations were conducted at residential and business premises, leading to the seizure of documents and assets. The assessing authority made additions to the income of the assessee for certain assessment years by invoking the presumptions under Section 132(4A), treating the seized documents as belonging to the assessee and their contents as true. The validity of using these presumptions for regular assessments was challenged.
Findings of Court:
The court held that the presumption under Section 132(4A) is only available for proceedings relating to search and seizure, specifically for the purpose of retaining assets under Section 132(5) and their subsequent application under Section 132B. It cannot be extended to regular assessments. The court rejected the notion that this presumption is non-rebuttable for Section 132(5) and rebuttable for other proceedings.
Issues: Whether the presumption provided under sub-section (4A) of Section 132 of the Income-tax Act, 1961, is limited to the passing of a summary order under sub-section (5) or if it can be raised during the process of framing a regular assessment.
Ratio Decidendi: Section 132 constitutes a self-contained code. The statutory presumption in sub-section (4A) was introduced to enable the assessing authority to make provisional adjudications within a strict time frame to prevent tax evasion and retain assets. Since the legislature explicitly provided for the continuation of this presumption in specific instances elsewhere but did not do so for regular assessments, it cannot be inferred that the presumption applies to regular assessments. Using a seized document as evidence under sub-section (4) is distinct from invoking the legal presumption of ownership and truthfulness under sub-section (4A).
Result: Appeals are allowed; the order passed by the High Court is set aside and the case is remitted back to the assessing authority for framing the assessment afresh.
Legal Category Hierarchy
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tax law
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income tax
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search and seizure
- presumption under section 132(4a)
- use of seized material as evidence
- regular assessment
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search and seizure
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income tax
JUDGMENT
BHAN, J.
These appeals are directed against the judgment and order dated 9.7.2001 passed by the High Court of Karnataka at Bangalore in ITRC Nos. 38, 39 & 40 of 1996 vide which the High Court has allowed the reference cases 39 and 40 of 1996 thereby answering the questions in favour of the Revenue and against the assessee. ITRC No. 38 of 1996 filed by the assessee has been dismissed by the High Court. Since these appeals arise from the common order passed by the High Court, we also propose to dispose them of by a common order.
FACTS
The facts relevant for disposing of these references in short are. P.R. Metrani and Y.R. Metrani were two brothers and are the members of the Joint Hindu Family. P.R. Metrani (HUF) assessee was a partner in a firm called M/s. R.N. Metrani and Sons. Y.R. Metrani was also a partner in this firm. P.R. Metrani as well as Y.R. Metrani have died during the pendency of these cases.
A search of the residential premises Ranganatha Nilaya was conducted by the Income Tax, Central Excise and Customs Departments on 30.06.1982 and 01.07.1982 and as well as the business premises where the business of the firm was being conducted. The residential premises of J.J. Bakale, nephew of P.R. Metrani were also searched. The search brought to surface unaccounted money, gold biscuits, gold jewellery, silver etc. besides some important documents. For the purpose of assessment for the assessment years 1981-82 and 1982-83 three documents were found to be relevant by the Assessing Officer and they were marked as PRM-1, PRM-7 and PRM-13 at the time of search and seizure, which were seized from the residential premises namely, Ranganatha Nilaya. Statement of J.J. Bakale was recorded at the time of search. P.R. Metrani was away to Rajasthan on a business tour. He was examined after his return to Hubli on 13.7.1982. He denied the possession of PRM-1, PRM-13 and PRM-14. He also denied that these papers contain any writing made by him. The Assessing Authority made a summary adjudication order under Section 132(5) of the Income Tax Act, 1961 (for short "The Act"). He made certain additions and retained the assets seized.
Notice under Section 139(2) dated 17.9.1982 for the assessment year 1982-83 was served on the assessee on 21.9.1982. The appellant declared a total income of Rs.46,200/- and a net agricultural income of Rs.6,000/-. Notices under Section 143(2) and 142(1) were issued on several dates. Appellant appeared before the authorities on several dates and assessment came to be completed. The following additions were made in respect of the assessment year 1982-83:-
i.
Income from undisclosed sources as discussed in para 3.2 as per PRM-1 and PRM-7 Rs. 28,67,920
ii.
Income from undisclosed sources as discussed in para 3.3 i.e., PRM-13 Rs. 6,66,690
iii
Investent in Durgadabail building at Hubli as per para 5 being 50% of Rs. 5,24,200/- Rs. 2,62,100
iv
Unexplained expenditure U/s. 69C Rs. 8,33,525
The assessment for the years 1981-82 was completed after making an addition of Rs.19,93,117/-. Assessing Authority made an assessment for the construction of a commercial complex in Durgadabailu, the investment for which was declared at Rs. 5,55,000/- for the entire building. Half of the building belonged to P.R. Metrani and other half to Y.R. Metrani. The department had sent the Valuation Officer for enquiry regarding the cost of building and it was fixed by the Department Valuation Officer at Rs. 5,83,000/-. The assessing authority however did not accept the valuation made by the Valuation Officer and held that the total investment on the building was Rs. 6,45,809/-. A source to the extent of Rs. 1,21,627/- was accepted. The balance was rounded off to Rs. 5,24,200/-. Half of this was added to the assessment of P.R. Metrani (HUF) and other half were added in the assessment of Y.R. Metrani.
The appellant being aggrieved filed appeals before the Commissioner (Appeals). The Commissioner (Appeals) by separate order disposed of t
