Introduction
The Appellate Tribunal SAFEMA in the case of K.R. Radhakrishnan v. Initiating Officer, Kochi[i], discussed whether statements recorded under the provisions of the Income-tax Act,1961 (‘IT Act’) could be relied upon by authorities to initiate proceedings under the Prohibition of Benami Property Transactions Act, 1988 (‘PBPT Act’).
Facts
The orders passed by the Adjudicating Authority attaching chit funds amounting to Rs. 3,50,000 and Rs. 25,00,000 under the PBPT Act were challenged. The grounds for the challenge were that the sworn statements of the Appellant, recorded under s. 132(4) of the IT Act should not be relied upon by authorities to pass orders under any other statute.
In his statement, the Appellant accepted purchasing various assets, including chit funds, made by his employer in his name. However, he later submitted that the statement was wrongly recorded, and the Appellant produced evidence to substantiate his claims, such as a sale deed and a certificate from village authorities stating that he had been undertaking a poultry business on the land.
The Appellant further argued that the authorities produced no evidence other than the sworn statement to establish a case under the PBPT Act and that no independent inquiry was conducted.
The Respondent contested the appeal and relied on the judgment of the Andhra Pradesh High Court in the case of Gajam Chino Yallapa v. Income Tax Officer[ii], wherein it was observed that the statements recorded under s. 132(4) of the IT Act can form the basis for proceedings under other statutes.
Held
The appeals were dismissed and decided in favour of the Respondent. It was held that the statements recorded under s. 132(4) of the IT Act are sworn statements and can be relied upon by authorities under different statutes to initiate proceedings. Therefore, the Respondent was not obligated to record statements under the PBPT Act.
Relying on the judgment of the Bombay High Court in the case of Vinod M. Chitalia v. Union of India[iii], the court observed that the statements recorded under s. 108 of the Customs Act, 1962, are judicial in nature and can be relied upon by authorities to initiate proceedings under the Foreign Exchange Management Act, 1999.
It was held that the Appellant failed to produce evidence supporting his claims that the income was earned from the poultry business or agricultural activities. It was further noted that the Appellant had not filed any income tax return despite the income exceeding the exempt threshold.
Our Analysis
In this case, the Appellate Tribunal reaffirmed the principles laid down by the Andhra Pradesh High Court in Gajam Chino Yallapa (supra), which addressed the validity of sworn statements. The Tribunal examined the nature of such statements, noting that those recorded under the IT Act or Customs Act are judicial in nature. As a result, these statements can be relied upon by authorities under different statutes to initiate proceedings.
Should the authorities disregard the statements made under the IT Act and instead record fresh statements for separate proceedings, it could lead to inconsistent findings and divergent outcomes across statutes despite relating to the same property and issues.
End Notes
[i] [2024] 166 taxmann.com 662 (SAFEMA - New Delhi) dated 03.09.2024.
[ii] ITTA No. 268 of 2003 dated 06.11.2014.
[iii] 2012 SCC OnLine Bom 476.
Authored by Rosy Gupta, Advocate at Metalegal Advocates. The views expressed are personal and do not constitute legal opinions.