Understanding Statements Under the Income Tax Act

STATEMENT UNDER THE INCOME TAX STATEMENT UNDER THE INCOME TAX ACT, 1961 ACT, 1961 Speaker : Dr. Paras Kochar, Advocate Organised by: ICAI, EIRC Date : 12th July, 2025

TOPICS TOPICS RECORDING RETRACTION CROSS EXAMINATION

INTRODUCTION INTRODUCTION

WHAT IS STATEMENT ? WHAT IS STATEMENT ? A representation, certification, affirmation of document and record. Statement means direct examination. Statement means any written

SECTIONS UNDER SECTIONS UNDER WHICH STATEMENT IS WHICH STATEMENT IS RECORDED RECORDED Statement recorded under oath u/s 131 & 132(4) of the Income Tax Act Statement recorded without oath u/s 133A & 133A(5) of the Income Tax Act

WHOSE STATEMENT IS WHOSE STATEMENT IS RECORDED ? RECORDED ? Assessee Director Partner Proprietor Family Members Staff Witness Any Other Person

BASIC STRUCTURE OF STATEMENT BASIC STRUCTURE OF STATEMENT Administration of Oath. Confirming identity of Deponent. Affirmation to consequence to giving false statement. Details of Family Members. Question related to the issue for which statement is recorded. Confirmation that the statement is given willfully. Signature on all pages. Note: Statement now a days are typed on computer but the administration of oath and Confirmation that the statement is given willfully are hand written.

STANDARD ADMINISTRATION OF OATH STANDARD ADMINISTRATION OF OATH I _____________, son of ______________, residing at __________________, do hereby swear in the name of GOD that whatever I shall state, will be the truth, the whole truth and nothing but the truth.

STANDARD AFFIRMATION TO CONSEQUENCE STANDARD AFFIRMATION TO CONSEQUENCE TO GIVING FALSE STATEMENT TO GIVING FALSE STATEMENT Q. Your attention is drawn towards the following provisions of the IPC, section 179 (Refusing to Answer question), 180 (Refusing to sign statement) and 181 (giving/making false statement on oath). Besides your attention is also drawn to the following provision of IT Act, Section 277 (giving false statement in verification), 277A (falsification of books of accounts) 278 (enabling others to evade tax). Any contravention of the above mentioned provisions shall attract penal action against you. Please confirm that you have been made aware of the same. A. Sir, I confirm that the penal provisions for giving false statement on oath have been explained to me. I also confirm having seen and understood the above cited provisions.

STANDARD CONFIRMATION OF STANDARD CONFIRMATION OF WILLFUL STATEMENT WILLFUL STATEMENT The above statement has been given by me voluntarily and has been recorded as per my version. The same has been given by me in sound state of mind, without any threat, coercion or pressure. The statement given is true to the best of my knowledge and belief.

TYPES OF STATEMENT TYPES OF STATEMENT Statement during Search and Seizure. Statement during Survey. Statement on consequential survey or search. Statement during TDS Survey. Statement during Survey by Tax Recovery Officer. Statement during Various investigation wing. Statement during Assessment proceedings. Statement after cross examination. proceedings by

STATEMENT DURING SEARCH STATEMENT DURING SEARCH Preliminary Statement Final Statement

ISSUES IN PRELIMINARY ISSUES IN PRELIMINARY STATEMENT STATEMENT Details of Family Members, Sources of Income. Details of Cash Lying at The Premises. Details of Bank Lockers of The Family And Possession of Keys. Nature of Business conducted.

SAMPLE QUESTIONS SAMPLE QUESTIONS Please introduce yourself. Please submit any proof in respect of your identity and proof of address. What is your educational qualification ? What is your source of income ? Please explain the nature of business done by you. Please state the name of companies/concerns under your group. Please provide details of all your family members. During the course of search cash amounting to Rs._______/- has been found. Please explain its source.

ISSUES IN FINAL STATEMENT ISSUES IN FINAL STATEMENT Details of immovable properties owned by the assessee and his family members. Details of bank accounts of the assessee and his family members and also the account details of business concerns. Details of partnership firms, LLP, and companies in which the assessee and his family members are interested. Details of income tax and wealth tax returns filed by the assessee and his family members and the concerns with which they are associated. Explanation of documents, cash, stock, jewelry, transactions found recorded in Hard Disk, Pen Drive, Mobile Phones, etc. found during the search.

SAMPLE QUESTIONS SAMPLE QUESTIONS Please give details of Dummy Directors and companies controlled and managed by you. Please provide details of companies which are used for providing accommodation entries. Please provide the List of Beneficiaries. During the course of search action documents bearing IM No. ___ has been seized containing details of sales made on various dates which are not found to be recorded in the books please explain the same. During the course of search action documents bearing IM No. ___ has been seized containing details of various working of interest which are not found to be recorded in the books please explain the same. During the course of search action documents bearing IM No. ___ has been seized containing details of loan/share capital taken from shell companies please explain the same. I am showing you the statement of Mr. X, your employee who has stated that transaction found in documents bearing IM No.____ are not recorded in books. Please offer your comment on the same.

SAMPLE QUESTIONS SAMPLE QUESTIONS Please state where are the books of accounts in relation to your concerns are kept. During the course of search action jewelery weighing ___ gms as per report of the government approved valuer is found. Please explain the source of the same with evidences. Please go through the documents bearing IM No. ___, which appears to be a Rukka from which it is found that you have given/received loan of Rs._________/-. Please explain the mode of payment/receipt of the same. From the documents bearing IM No. ___ it appears that you have suppressed 2 zeros. Please explain the same. Do you want to say anything more ?

STATEMENT DURING SURVEY STATEMENT DURING SURVEY Statements are now recorded under Oath. Line of questioning similar to that discussed under Search.

STATEMENT ON CONSEQUENTIAL SURVEY OR SEARCH STATEMENT ON CONSEQUENTIAL SURVEY OR SEARCH Notice issued by Investigation Officer. Notice issued on person who has transaction with assessee searched or surveyed. Line of questioning relates to transaction with assessee searched or surveyed. Example: Notice issued u/s 131 issued to Accommodation Entry Provider. Then questioning pertains to transactions between his companies and assessee.

STATEMENT DURING TDS SURVEY STATEMENT DURING TDS SURVEY Statements are now recorded under Oath. Line of questioning relates to compliance/non-compliance to TDS provisions.

STATEMENT DURING SURVEY BY TAX STATEMENT DURING SURVEY BY TAX RECOVERY OFFICER RECOVERY OFFICER Statements are now recorded under Oath. Line of questioning relates to recovery of Tax Due.

STATEMENT IN RESPONSE TO NOTICE U/S 131(1A) STATEMENT IN RESPONSE TO NOTICE U/S 131(1A) Notice issued by Investigation Officer. Statement recorded under Oath. Line of questioning relates to issue for which notice is issued. Example: Notice issued u/s 131(1A) for Sale on Investment transaction. Then questioning pertains to those transactions only.

STATEMENT DURING ASSESSMENT PROCEEDING STATEMENT DURING ASSESSMENT PROCEEDING Notice u/s 131 is issued by Assessing Officer. Notice can be issued to the assessee or person with whom the assessee has transaction. Line of questioning relates to issue for which notice is issued. Example: Notice issued u/s 131 issued to Share Applicant. Then questioning pertains to that transaction only.

IS STATEMENT AN IS STATEMENT AN EVIDENCE ? EVIDENCE ? Section 132(4) provides for recording statement and the same can be used as evidence in any proceedings under the Act. The explanation gives a wide scope that the examination is connected with any matter of investigation connected with any proceedings. However, a statement in itself is not a conclusive evidence unless it is backed by some supporting corroborative evidences.

IS STATEMENT AN IS STATEMENT AN EVIDENCE ? EVIDENCE ? Pullangode Rubber Produce Co. Ltd. V. State of Kerala (1973) 91 ITR 18 (SC) it has been held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect. The Apex Court in Nagubai Armal v. B. Sharma Rao AIR 1956 SC 100 has also laid down that an admission is not conclusive as to the truth of the matters stated therein. It is only a piece of evidence, the weight to be attached to which must depend on the circumstances under which it is made.

HOW TO GIVE HOW TO GIVE STATEMENT ? STATEMENT ?

To answer all the queries to the best of knowledge. Not to refuse answer a question. To make reply after understanding the question. To reply in brief and with full confidence. To be humble and cool. Not to give false Statement. Not to provide false and wrong evidences. To sign the statement recorded.

RECORDING OF RECORDING OF CONFESSIONAL STATEMENT CONFESSIONAL STATEMENT CBDT has time and again stated that no confessional statement should be recorded. Various instruction has been issued in this regard. Some are: CBDT NO. 286/2/03- IT (INV) DT.10/3/03- No confessional statement to be elicited F.No. 286/98/2013-IT (INV.II) DATED 18th Dec 2014

WHAT IS WHAT IS RETRACTION OF RETRACTION OF STATEMENT? STATEMENT? Retraction of a statement refers to the act of taking back or withdrawing a previously made statement. In a legal context, it is essentially the formal or informal withdrawal of a statement that was previously communicated, whether in writing or verbally. Retraction can occur for various reasons, such as the realization that the statement was inaccurate, incomplete, or made under duress.

CONDITION FOR RETRACTION OF CONDITION FOR RETRACTION OF STATEMENT STATEMENT Threat & coercion. No corroborative evidence. Statements in odd hours. By mistake. Time limit for retraction.

CASE LAWS (CONDITION FOR RETRACTION) CASE LAWS (CONDITION FOR RETRACTION) THREAT & COERCION GREEN VIEW RESTAURANT VS CIT 185 CTR GAU 651 The contention advanced by the assessee was dismissed as to the recording of statements by using force and coercion when the statements were recorded in the presence of two witnesses and the retraction was after the lapse of time. Vinod Solanki v. Union of India [2009] 92 SCL 157 It is a trite law that evidences brought on record by way of confession which stood retracted must be substantially corroborated by other independent and cogent evidences, which would lend adequate assurance to the Court that it may seek to rely thereupon. We are not oblivious of some decisions of this Court wherein reliance has been placed for supporting such contention but we must also notice that in some of the cases retracted confession has been used as a piece of corroborative evidence and not as the evidence on the basis whereof alone a judgment of conviction and sentence has been recorded. Saraswati Petrochen Pvt. Ltd. v. ITO(2023)156 Taxman.com 471 Delhi H.C.

CASE LAWS (CONDITION FOR RETRACTION) CASE LAWS (CONDITION FOR RETRACTION) CORROBORATIVE EVIDENCE CIT VS. UTTAM CHAND JAIN (2010) 320 ITR 554 (BOM-HC) - the Hon ble High Court has held that a retracted confession can rely only on if there is independent and cogent evidence to corroborate the statement. ASST. COMMISSIONER OF INCOME TAX VS. JORAWAR SINGH M RATHOD (2005) 148 TAXMAN 35 (AHD.) - it was held that addition made merely on the basis of a statement by AO which has been retracted could not be sustained as there was no evidence, material or recovery of any movable or immovable assets at the time of search to corroborate the disclosure made by the assessee.

CASE LAWS (CONDITION FOR RETRACTION) CASE LAWS (CONDITION FOR RETRACTION) STATEMENTS IN ODD HOUR KAILASHBEN MANHARLAL CHOKSHI VS CIT 174 TAXMAN 466 GUJ. HC - has held that statement recorded at odd hours cannot be considered to be a voluntary statement. RAJENDRA PRASAD ETC. VS. STATE OF UTTAR PRADESH 1979 AIR 916, DT. 09.02.1979. - While disposing of the writ petition filed by the department the Hon ble Patna High Court held that the department has no plausible excuse for making interrogations till odd hours of second night till 3 A.M. Thereby, partially affirming the order of learned Commission holding the department guilty of violating human rights.

CASE LAWS (CONDITION FOR RETRACTION) CASE LAWS (CONDITION FOR RETRACTION) TIME TIME LIMIT LIMIT R R P P MONGA MONGA VS RADHESHYAM RADHESHYAM AGARWAL, OF OF 2011 2011) ) (A (A. .Y Y. . 2006 HOTEL HOTEL KIRAN KIRAN VS retracted statement because the retraction was done after 105 days and there was not an iota of evidence to support retraction. DCIT v. Sahakar Global Ltd. order dated 26-03-2021, ITA Nos. 5125-5128/ Mum /2017 (AY 2009-10 to 2012-13). Shri Jaisingh Yadav v. ACIT- ITA Nos. 1290 & 1291/JP/2019, order 21-10-2020 . VS DCIT( DCIT(2004 AGARWAL, KOLKATA 2006- -07 07) ) - VS. . ACIT ACIT ( (1971 2004) ) 269 269 ITR KOLKATA VS ITR (AT) (AT)1 1 DELHI DELHI (DELAY (DELAY IN VS. . DEPARTMENT DEPARTMENT OF IN RETRACTION) RETRACTION) - OF INCOMETAX INCOMETAX (ITA (ITA NO NO. . 254 254 (KOL) (KOL) 1971) ) 82 82 ITR ITR 453 453 (PUNE) (PUNE) - it was held that AO was justified in not accepting the BY BY MISTAKE MISTAKE BHAGIRATH BHAGIRATH AGGARWAL made can certainly be retracted if the circumstances permit, and it can also be shown to have been made under some mistake or otherwise to be incorrect, but the onus would be on the person making such admission. AGGARWAL VS VS. . CIT CIT ( (2013 2013) ) 351 351 ITR ITR 143 143 (DEL) (DEL)- it has been held that an admission once

PROCEDURE FOR RETRACTION PROCEDURE FOR RETRACTION OF STATEMENT OF STATEMENT Affidavit Petition Filing of return

CONTENTS OF AFFIDAVIT CONTENTS OF AFFIDAVIT FOR RETRACTION FOR RETRACTION Name, father s name, address, age, status, PAN etc. Date, time of commencement and time of concluding statement. Date of search. Why and under which section statement was recorded. Who recorded the statement. Why and in what connection statement was recorded. Full facts of the case. Matter related to facts for retraction. Signature Affidavit should be made before Class

STEPS TO BE TAKEN AFTER STEPS TO BE TAKEN AFTER RETRACTION AFFIDAVIT RETRACTION AFFIDAVIT Covering letter addressed to concerned authority enclosing affidavit. Any documentary evidence in support of contents of affidavit, if any. Note: Affidavit Should be filed immediately.

CONSEQUENCES FOR CONSEQUENCES FOR RETRACTION OF STATEMENT RETRACTION OF STATEMENT Summon u/s 131 is issued to the person who has retracted the statement for re- recording of his statement and such statement is recorded very strictly and with utmost care. Thorough investigation is made relating to the affairs of the person who retracts the statement and more information is collected in respect of the facts asserted in the earlier statement and denied in the retracted statement. Notices u/s 131 can be served on the parties to verify the transactions or inspectors can be sent for further verification of the transactions, to collect more evidence on the issues raised in the retracted statement.

CONSEQUENCES FOR CONSEQUENCES FOR RETRACTION OF STATEMENT RETRACTION OF STATEMENT The information can be passed to other Government departments such as Custom, GST, ED, CBI etc. The issues of retraction are highlighted in the appraisal report if the retraction is made prior to the finalization of the appraisal report. The issue is also highlighted in the assessment order by the assessing officer. The Income Tax Authority can make video recordings of fresh statements. The Income Tax Authority can arrange for the recording of fresh statements in the presence of a First Class Magistrate on request of assessee.

IMPACT OF RETRACTION IMPACT OF RETRACTION Adverse impact in investigation wing. No favorable impact at assessment wing. CIT appeal does not give much weightage to the retraction. At ITAT/High Court level retraction become significant.

WHAT IS CROSS WHAT IS CROSS EXAMINATION? EXAMINATION? Cross-examination is a legal process during a trial where one party questions the witness called by the opposing party. The primary purpose of cross- examination is to test the credibility of the witness, challenge their testimony, and elicit information that may be favorable to the cross-examiner's case.

HOW TO HOW TO CROSS CROSS- -EXAMINE EXAMINE

KEY POINTS ABOUT CROSS KEY POINTS ABOUT CROSS- - EXAMINATION EXAMINATION Purpose: Cross-examination is used to impeach the credibility of the witness, clarify ambiguities in their testimony, highlight inconsistencies, and bring out facts that support the cross-examiner's case. Questioning Techniques: The party conducting the cross-examination (cross-examiner) should uses a series of questions to challenge the witness's version of events. Questions can be leading, suggesting the desired answer, or they can be open-ended to allow the witness to explain their position. Scope: The cross-examiner is generally limited to topics that were covered during the direct examination by the opposing party. However, there may be circumstances where the cross-examiner can explore related matters that are relevant to the case.

KEY POINTS ABOUT CROSS KEY POINTS ABOUT CROSS- - EXAMINATION EXAMINATION Confrontation: Cross-examination is often confrontational in nature, with the cross-examiner seeking to highlight any inconsistencies or weaknesses in the witness's testimony. Right to Confrontation: The right to cross-examine witnesses is considered a fundamental element of due process in many legal systems. It allows the opposing party to challenge the evidence presented against them.

PREPARATION OF PREPARATION OF CROSS EXAMINATION: CROSS EXAMINATION: To read the facts of the case minutely. To read the statement of the witness whom you want to cross examine minutely. To find out defects in the replies given by the witness in bis statement. To collect some other information about the witness which are not on record. To study the financial statement, assessment order of the witness if available. To make out some questions in advance which you want to raise during cross examination. To hit the witness on main issues. To read his face impression and body language.

HOW CROSS HOW CROSS EXAMINATION IS DONE EXAMINATION IS DONE File application before the Taxman for cross examination. Taxman will provide opportunity by giving notice to Witness and Assessee fixing date and time of cross- examination. Upon cross-examination the Taxman may record another statement of the witness.

COPY OF THE STATEMENT COPY OF THE STATEMENT Obtaining copy of statement from investigation officer. Obtaining copy of statement from Assessing officer.

LEGAL POSITION ON CROSS LEGAL POSITION ON CROSS EXAMINATION EXAMINATION It has been held in various cases that if opportunity of cross examination is not provided then the said statement cannot be relied upon as it violates principles of natural justice. The various cases in this regard are: Laxmanbhai S.Patel V.CIT 327 ITR 291 (2010) Kalra Glass Factory V. Sales Tax Tribunal 167 ITR 488 (SC) Dhakeswari Cotton Mills Ltd. vs. C.I.T., 26 ITR 775 (SC) Lakshman Exports Ltd. v. Collector of Central Excise (2005) 10 SCC 634 Andaman Timber Industries (2015) 281 CTR 214 (SC) Kishinchand Chellaram V. CIT, (1980) 125 ITR 0713 CIT, Central v. Sunita Dhadda [2018] 100 taxmann.com 526 (SC)

CONCLUSION CONCLUSION

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