Officer Concerned Not Authorized To Administer Oath, No Evidentiary Value: Delhi High Court

The Delhi High Court while upholding the ITAT’s ruling held that the addition of Rs. 10 crore was made purely on the basis of the statement made by directors without corroborative evidence.

The bench of Justice Rajiv Shakdher and Justice Girish Kathpalia has observed that there is a qualitative difference between the statement recorded under Section 133A and Section 132(4) of the Income Tax Act. The statement recorded under Section 133A of the Act has no evidentiary value since the officer concerned is not authorised to administer an oath and record a sworn statement. It is in contradiction with the statement recorded under Section 132(4), which is recorded on oath by an officer who is vested with the necessary powers.

The respondent/assessee is a developer and builder. In the course of its business, it undertook various projects in different cities and locations in the National Capital Region of Delhi.

The assessee entered into various agreements, including one dated June 30, 2006, with a company going by the name Real Gain Estates. Real Gain acted as the assessee's sole and exclusive agent for booking and selling commercial shops and flats, which were the subject matter of construction projects undertaken by the respondent/assessee. For its efforts, Real Gain was to receive brokerage at a rate of 6.5%.

A survey was carried out. During the survey, the officers of the appellant/revenue impounded several documents. Consequently, in the course of the survey, the officers recorded the statements of the directors of the assessee. One of the directors made a statement that led to the addition of Rs. 10 crores to the taxable income of the respondent or assessee.

The Tribunal concluded that since there was no corroborative material available for making an addition, the assessment order could not be sustained.

The department stated that the statement disclosed that consideration was received by the assessee in cash and, therefore, was rightly added to the assessee's taxable income.

The assessee stated that since the statements were recorded during the course of the survey, the concerned officers did not have the power to record them on oath.

The court found that the addition of Rs. 10 crores to the taxable income of the respondent/assessee was made purely on the basis of the statement made by its directors. Although the statements appear to have been categorised as voluntary, what emerges is that the statements were made to "buy peace of mind". Thus, Rs. 10 crore was surrendered by the directors during the survey, which was added to the taxable income of the respondent or assessee. No corroborative evidence was found to support the addition.

Case Title: PCIT Versus ARN Infrastructure Ltd.

Citation: 2023 LiveLaw (Del) 692

Date: 27.07.2023

Counsel For Petitioner: Abhishek Maratha

Counsel For Respondent: Ruchesh Sinha

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