Section 132 of the Income-Tax Act, 1961 empowers the income-tax authorities to effect search and seizure in cases where, consequent to information in their possession (concerning taxpayers), they have reasons to believe that the income and assets are not disclosed or would not be disclosed.

Section 132(4) provides that an authorised officer may, during the course of search or seizure, examine on oath any person who is found to be in possession or control of any books of account, documents, money, bullion, jewellery or other valuable article or thing, and any statement made by such person during such examination, may thereafter be used in evidence in any proceeding under the Act.

Scope of Section 132(4)

In R. R. Gavit vs Smt.Sherbanoo Hasan Day (1986 161 ITR 793), the Bombay High Court observed that the power to interrogate on oath conferred by Section 132(4) is not for the purpose of general investigation of the assets but for the limited purpose of seeking an explanation or information in respect of the documents, articles or things found during the search. Thus, the power conferred was limited -- not all-pervasive.

The Direct Taxes (Amendment) Act, 1987 inserted an Explanation to Section 132(4) w.e.f. April 1, 1989, to circumvent the judgment of the Bombay High Court in the R. R. Gavit case.

The Explanation has enlarged the scope of Section 132(4) and has also included what was not there in the original section regarding examination of persons: who may or may not be found in possession of books, documents or assets; or who may be questioned at any stage of proceedings under Section 132.

Evidentiary value

In Pullangode Rubber Produce Co. Ltd vs State of Kerala (1973 91 ITR 18 SC), the court observed thus: "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 not correct".

In Nagubai Armal vs B. Sharma Rao (AIR 1956 SC 100), the observations are: "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. It can be shown to be erroneous or untrue".

In Krishan Lal Shiv Chand Rai vs CIT (1973 88 ITR 293 P&H), the court has said: "It is an established principle of law that a party is entitled to show and prove that the admission made by him probably is in fact not correct and true".

Thus, the judicial view had been that a statement under Section 132(4) could be retracted if it was not voluntary, given on mistaken facts or law, factually incorrect and legally untenable.

The Ahmedabad High Court, in the Kailashben Manharlal Chokshi vs CIT (2008 174 Taxman 466 Gujarat) case, also gave a ruling regarding the statement under Section 132(4). It was held that a statement recorded under Section 132(4) cannot be considered to be voluntary, if subsequently retracted, merely on the ground that it was recorded at midnight, without there being anything else.

The High Court observed: "So far as the case on hand is concerned, the glaring fact required to be noted is that the statement of the assessee was recorded under Section 132(4) of the Act at midnight. In normal circumstances, it is too much to give any credit to the statement recorded at such odd hours. The person may not be in a position to make any correct or conscious disclosure in a statement if such statement is recorded at such odd hours".

Analysis of observations

The foregoing discussion regarding courts' observations concerning the statement under Section 132(4) shows that the statement under this provision cannot be recorded simultaneously when the search operations are in progress or after it is concluded, if it happens to be midnight.

It is to be appreciated that recording of statements during search operations has to be an integrated operation and cannot be carried out on a piecemeal basis at different intervals except when some lockers, etc., are to be seized for unavoidable reasons.

Hence, there is no escape from recording the statements at midnight. Search operations could be delayed because of hostile or tacit non-cooperation from the side of the assessees.

A statement, consequent to information surfacing from search, can be recorded only after the search has concluded or almost concluded. Hence, if it continues till late in the night, recording of statement at midnight or even thereafter may be inescapable. Hence, to say that the statement is inadmissible because of this reason alone, it needs to be said, with respect, tantamounts to ignoring the real-life situations.

The view expressed by the honourable High Court may be conceptually correct, but it needs review keeping in view the practical aspects concerning the problems faced during search operations.