During survey u/s 133A conducted by the income tax authorities, it is ritual to record survey statement of the assessee at the time of survey. When the survey statement is recorded , the assessee is ,without any doubt , is under tremendous psychological pressure and often without any assistance of competent persons or professionals. Therefore, most of the statements are one sided and often recorded as it suits to officer and signed by the assessee. In fact this site had earlier posted Survey u/s 133A :7 Actions Tax Official Can’t Take and
Later when assessee reexamination every issue raised during survey u/s 133A with his chartered accountant, often the statement given u/s 133A comes as a bottleneck to actually declare correct position of business. Thus , a question comes up whether the the statement recorded u/s 133A is the last word or assessee can actually change the statement u/s 133A without any legal repercussion.
S.C Dismisses SLP on issue of Survey Statement
Readers will be happy to note that the issue regarding the importance of statement u/s 133A was considered by Madras High Court in CIT vs S. Kader Khan 300 ITR 157 (MAD.)/ 214 CTR 589 (MAD.) in which the exact issue before High Court of Madras was
“whether the materials collected and the statement elicited during the survey operation under section 133A of the Act had any evidentiary value”
Madras High Court had held in that case that the statement, obtained under section 133A would not automatically bind upon the assesses .The department filed SLP in Supreme Court which was dismissed vide its order dated 20/09/2012
Madras High Court on Survey Statement U/s 133A
The brief facts are that a survey was conducted on assessee on 24th July 2001 and during that survey assessee under statement u/s 133A offered to show additional income Rs 20,00,000 for Asst Yr 2001-02 and Rs 30,00,000 for Asst Yr 2002-03.
However, the said statement was retracted by the assessee through its letter dated August 3, 2001, stating that the partner Asif Khan, from whom a statement was recorded during the survey operation under section 133A, was new to the management and he could not answer the enquiries made and as such, he agreed to an ad hoc addition, which could never be achieved by the business owing to the severe competition and to the legislation by the Government prohibiting smoking in public places. The assessee, thus, contended that the statement of Asif Khan recorded under section 133A has no evidentiary value.
The A.O did not agree with the assessee and did not accept the books produced during the scrutiny assessment stating that certain entries are made subsequent to survey.
Both CIT(A) and Tribunal , however held in favour of the assessee.
The department appealed before Madras High court and one of the ground out of three was “whether the materials collected and the statement elicited during the survey operation under section 133A of the Act had any evidentiary value”
The High Court held on the issue of evidentiary value of statement recorded during survey proceeding as under :
the following principles can be culled out:
(i) An admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. v. State of Kerala  91 ITR 18 ;
(ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT  263 ITR 101 (Ker.);
(iii) The expression “such other materials or Information as are available with the Assessing Officer” contained in section 158BB of the Income-tax Act, 1961, would include the materials gathered during the survey operation under section 133A, vide CIT v. G. K. Senniappan  284 ITR 220 (Mad.) ;
(iv) The material or information found in the course of survey proceeding could not be a basis for making any addition in the block assessment, vide decision of this court in T. C (A) No. 2620 of 2006 (between CIT v. S. Ajit Kumar  300 ITR 152 (Mad.);
(v) Finally, the word “may” used in section 133A(3)(iii) of the Act, viz., “record the statement of any person which may be useful for, or relevant to, any proceeding under this Act”, as already extracted above, makes it clear that the materials collected and the statement recorded during the survey under section 133A are not conclusive piece of evidence by itself.
For all these reasons, particularly, when the Commissioner and the Tribunal followed the circular of the Central Board of Direct Taxes dated March 10, 2003, extracted above, for arriving at the conclusion that the materials collected and the statement, obtained under section 133A would not automatically bind upon the assesses we do not see any reason to interfere with the order of the Tribunal.
Summing up on Survey Statements
When a survey u/s 133A is conducted , and any statement is recorded by the A.O , that statement itself can not be used for making any addition without any other material evidence in support of the said statement. Therefore, if at all under duress and pressure , a tax payer has signed a statement u/s 133A , he can very well retract from such statements without any legal consequences.