Material collected during an illegal survey can be used by the Assessing Officer for making additions, applying principles similar to those in the case of illegal search and seizure.

1. - The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, referred the following question for its answer/opinion of this court vide its order dated February 16, 1999.

"Whether, on the facts and in the circumstances of the case the Income-tax Appellate Tribunal was justified in holding that additions made on the basis of material collected during the course of such survey was illegal ?"

2. The Revenue had moved an application for seeking reference on three questions pertaining to the order of the Tribunal in I. T. A. Nos. 765, 663 and 664/JP/92. Out of the three questions, the Tribunal referred only question No. 3 with some modification.

3. The brief facts giving rise to the question referred is that a survey under section 133A of the Income-tax Act was conducted on February 25, 1987, during the course of survey, excess stock was found, thereby addition was made by a sum of Rs. 3,24,544 by the Assessing Officer. Aggrieved by the said addition, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals) where the appeal of the assessee was partly allowed. The assessee and the Department preferred second appeals before the Income-tax Appellate Tribunal. In this second appeal, the assessee was permitted to take additional ground, questioning the competence of Inspector to hold survey in violation of section 133A of the Income-tax Act. The learned Tribunal thereafter decided the appeal in favour of assessee, the additions made by the Assessing Officer based on inventory of stock taken during the course of survey held to be illegal as the Inspector was not competent to conduct survey.

4. The Revenue thereafter preferred an application for reference of question for seeking opinion of the High Court after referring to two judgments of the hon'ble apex court. The learned Tribunal thereafter referred one issue where the question raised is as to whether additions made on the basis of material collected during the course of survey is legal or not.

5. Learned counsel appearing for the Revenue urged that irrespective of the fact that the Inspector was not competent to conduct survey as per the provisions of section 133A of the Income-tax Act, yet material collected during the course of survey can be made use of by the Assessing Officer. In this regard reference of the judgments of the hon'ble apex court was given.In the case reported in Dr. Pratap Singh v. Director of Enforcement (1985) 155 ITR 166 , it was held that illegality of search does not vitiate the evidence collected during such illegal search. The only requirement is that the court or the authority before which such material or evidence brought is to be cautious and circumspect in dealing with such material or evidence.

6. In other cases reported in Pooranmal v. Director Inspection (Investigation) (1974) 93 ITR 505 (SC) the hon'ble apex court held that material obtained in search made in contravention of the provisions can be used.

7. According to the learned counsel for the Revenue, the ratio of the two judgments applies even in the matter of survey because after collection of material in search and seizure and collection of material in survey, it stands on the same footing for the purposes of use of material by the Assessing Officer. Thus, according to the learned counsel for the Revenue, material collected can be used for making additions however, the additions so made by the Assessing Officer based on the inventory of stock taken during the course of survey was deducted by the Tribunal. Thus, it was prayed that reference should be answered in favour of the Revenue.

8. On the other hand, counsel appearing for the assessee urged that the case of seizure under section 132 does not stand at par with the case of survey under section 133A of the Income-tax Act. It was though admitted that while conducting search under section 132, material collected can be used by the Assessing Officer but the same principle cannot be applied in the case of survey. Accord