Madras High Court: Assessing Officers Not Bound by Evidence Act in Assessment Proceedings

Madras High Court: Assessing Officers Not Bound by Evidence Act in Assessment Proceedings

The Madras High Court has ruled that assessing officers are not bound by the regulations of the Indian Evidence Act, 1872.

Justice C. Saravanan of the Madras High Court noted that assessment proceedings under the Income Tax Act, 1961, carried out before an assessing officer are not judicial proceedings; instead, they are quasi-judicial proceedings before a quasi-judicial officer. The provisions of the Evidence Act, 1872, particularly Sections 65A, 65B, and 66, are deemed irrelevant in this context.

The petitioners contested the assessment orders issued under Section 153C in conjunction with Section 143(3) of the Income Tax Act, 1961, as well as the scrutiny assessment orders made under Section 143(3) of the Act.

The context for the proceedings under Section 153C of the Income Tax Act, 1961, against each petitioner stems from a search carried out at the premises of the ‘searched person’ on November 10, 2020.

The search took place at the covert office of the searched person. During the search, the team discovered customized software called J Pack, which was utilized for documenting unrecorded gold and cash transactions. Additionally, the team confiscated an IBM desktop PC and a pen drive associated with J Pack, both maintained by the accountant of the searched person.

The main challenge to the respective assessment orders issued by the assessing officers primarily revolves around the contention that they failed to take into account the decision of the Supreme Court in Super Malls (P) Ltd. v. CIT. In this case, the court held that if the assessing officer handling both the searched person and the third person is the same, it suffices for the assessing officer to document in a satisfaction note that the documents seized from the searched person pertain to another individual, eliminating the necessity of transmitting such seized documents. Furthermore, the initiation of proceedings under Section 153C of the Income Tax Act, 1961, was argued to be time-barred.

The petitioner asserted a serious infringement of natural justice principles, highlighting the denial of the opportunity for any of the respective petitioners to cross-examine Mr. Suresh Khatri, the director of the searched person, and Mr. Rajendra Kothari, the accountant of the same. Furthermore, the individual whose sworn statements were pivotal in initiating proceedings under Section 153C of the Income Tax Act, 1961, was not made available for cross-examination.

The petitioner argued that the procedure outlined in Section 65B of the Evidence Act, 1872, was not adhered to. This procedure is deemed mandatory for the admissibility of evidence obtained from a computer printout, and consequently, such evidence cannot be relied upon.

The court affirmed that the Indian Evidence Act, 1872, is applicable to all judicial proceedings within any court, encompassing court-martials. However, it does not extend to proceedings conducted before an arbitrator. Moreover, the provisions of the Indian Evidence Act, 1872, are not applicable to quasi-judicial proceedings overseen by quasi-judicial officers, such as assessing officers under various tax laws or appellate authorities and tribunals operating under them.

The court rejected all the petitions filed by the respective petitioners contesting the orders issued under Section 153C of the Income Tax Act, 1961, in conjunction with Section 143(3) of the Act, as well as under Section 143(3) of the Income Tax Act, 1961.