2003 (4) TMI 243 - AT - Income Tax

Third-member majority: additions based only on a seized loose document unsustainable; deletions upheld for individual and HUF assessments

Amarjit Singh Bakshi (HUF). Versus Assistant Commissioner Of Income-Tax.

ITAT (third-member majority) held that additions based solely on a seized loose document were not sustainable. The JM deleted the additions in the ... Block Assessment in search case - Undisclosed Income Of Any Other Person - incriminating documents found and seized - assessments were made on a substantive basis for the individual and on a protective basis for the HUF - Denial of opportunity to cross-examine witnesses - difference of opinion between the Members of the Bench - Third member Order. Whether on the facts and on the basis of material on record the learned Accountant member was correct in sustaining an addition or whether the Judicial Member was justified in deleting the entire addition made by the Assessing Officer while framing the block assessment on the basis of proceeding initiated under section 158BD of the Income-tax Act? Per Gupta, J.M.- HELD THAT:- Only a document was found at the place of Shri N.S. Atwal. There was no evidence whether any amount was paid by assessee or was received by Shri N.S. Atwal. Neither there was any material which establishes that the amount paid by assessee had been invested by Shri N.S. Atwal. The statement was recorded on 6-11-1996 of Shri N.S. Atwal, even a copy of the statement was not provided to the assessee till the date of hearing before the Tribunal, as the learned DR has filed a copy of statement recorded on 6-11-1996 now here before us on 31-5-2001. Therefore, respectfully following the decision of the Apex Court, we feel that there was no material for making any addition in hands of assessee. Similar view has been expressed by the Hon'ble Supreme Court in the case of R.B. Shreeram Durga Prasad and Fatechand Narsing Das [1989 (1) TMI 4 - SUPREME COURT] wherein it is held that without affording an opportunity to the assessee, the order passed by the Settlement Commission was a nullity because it was made in violation of the principle of natural justice. Therefore, in view of the decision of the Apex Court, the additions made by the Assessing Officer are not justified. Accordingly we delete the entire addition. In the case of assessee--Shri A.S. Bakshi (HUF), the additions were made on protective basis. We have already deleted the addition made in the case of assessee, individual. Therefore, no basis remains for making addition in hands of HUF on protective basis. Accordingly the additions made in the hands of Shri A.S. Bakshi (HUF) on protective basis are also deleted. Since we have decided the issue on merit in both of the cases, therefore, we feel no necessity to adjudicate upon the legal ground raised by the learned counsel in regard to initiation of proceedings under section 158BD of the Act at this stage. In the result, both the appeals of the assessee are allowed. Per Shri Sikander Khan, A.M. - HELD THAT:- I respectfully disagree with the Ld. JM that the impugned addition of Rs. 6,83,50,000 should be deleted. However, the entire addition of Rs. 6,83,50,000 can neither be confirmed. It is evident from the statement of Shri Atwal that he had not received the entire amount of Rs. 7.07 Crores as per the seized document. Shri Atwal in his statement stated that he had received over Rs. 3 crores upto 29-11-1994 vide his statement on 31-3-1997. In his earlier statement he had more specifically mentioned that he had received Rs. 3.68 crores upto 15-10-1994. In view of this, we can consider only Rs. 3.68 crores as the total payment by Shri Bakshi to Shri Atwal under the agreement as per the seized document. Since the Assessing Officer had accepted the declared sale consideration of Rs. 23.50 lakhs as explained, the unexplained investment would work out to. Addition under section 69B for un-unexplained investment in the hands of Shri A.S. Bakshi individual cannot be made more than Rs. 3,44,50,000. Accordingly, the addition is reduced. I am of the view that in view of the preponderance of evidence as mentioned above and as the assessee was given reasonable opportunity in the course of assessment proceedings under section 143(3) and again in the course of proceeding under section 158BD of the Act, it will not serve any purpose to set aside the assessment as the assessee will continue to deny the seized document as not genuine. I am also of the view that cross examination of Shri Atwal and Shri Ganeshan by the assessee long after the relevant event and also because of Shri Atwal's retraction letter of 28-3-2001 would not serve any purpose and would complicate the matter giving handle to the, assessee to manipulate and overturn the whole thing and undermine the genuine interest of justice in the case. In all the three statements on different dates Shri Atwal confirmed the seized document. This was also confirmed by Shri Ganeshan in his statement. The statements of both Shri Atwal and Shri Ganeshan are very detailed and clear and they do not leave any scope for disbelieving the same. In income-tax matter strict rules of evidence and procedure are not necessarily to be followed. The genuineness of the seized document having been convincingly proved and established and as now it is held by me that the amount paid by Shri Bakshi to Shri Atwal was Rs. 3.68 crores and not the entire sale consideration, the addition for unexplained investment is to be made. I have not discussed and given finding on the ground in which the assessee has challenged the proceeding initiated under section 158BD in this case because the Ld. JM has not given his finding on the same in the proposed order. Third member Order - As against some of the views expressed by the learned Accountant Member, the learned Judicial Member gave some apt reasons for coming to the conclusion that the facts and circumstances of the case did not warrant any addition and I would like to refer to some of these as follows:-- (i) The assessee had denied all along that he had not purchased any land for a consideration and further there was information available on record and which showed that there were discussions between Shri N.S. Atwal and the Punjab & Sind Bank for recovery of substantial amounts from the former; (ii) The total land in question had not been purchased by the assessee alone in his Individual capacity, but by his HUF as also his wife and the seller was not Shri N.S. Atwal alone, but two others, namely, Shri F.S. Atwal and Shri B.S. Atwal and separate amounts were paid to each although from different books of account pertaining to Individuals and other entities; (iii) The figure mentioned in the document could not be the one at which a prudent person would purchase land especially when he knew that there was a heavy charge on the said land with Punjab & Sind Bank from whom a loan of a few crores had been obtained by Shri N.S. Atwal; (iv) There were conflicting statements by Shri N.S. Atwal at various stages of the proceedings, before the courts at Dhanbad andDelhiand lastly, in his own assessment when he completely retracted from the stand taken in earlier proceedings; (v) That even if a valid 'agreement' had been entered into between the parties and by this the reference is to the seized document, the Department still had to prove that the amount stated in the said seized document changed hands between the parties when the registered documents and the books of account revealed a completely different position; (vi) That although Shri N.S. Atwal at one stage mentioned a sum as receipt from the assessee, but no material was found in his case and which would show as to where such a huge amount had been kept/invested by him. The matter has been discussed at length by the learned Third Member, but the ultimate conclusion, which has been reached is that a mere entry on a loose sheet of paper and where the assessee claims that it was only a planning done, but not supported by actual cash when there is no documentary evidence to support the passing of cash and further there is no evidence about the existence of the amount mentioned in the loose sheet of paper as embedded in either cash, jewellery or investment, then the assessee's explanation cannot be rejected and addition made by the Assessing Officer would, therefore, not be sustainable. Even in the present case, the entire addition rests on the seized document and no other material has been adverted to and which would conclusively show that a huge amount of the magnitude mentioned in the seized document proceeded from, one side to the other. In his own tax assessments Shri N.S. Atwal, at one stage took the stand that the seized document was only a 'projection' or an 'estimate' and nothing else. The file may now be sent to the Division Bench for passing an order in conformity with the majority opinion. Issues Involved:1. Validity of the assessment order u/s 158BD read with section 113 of the Income-tax Act, 1961.2. Whether the addition of Rs. 6,83,50,000 under section 69B was justified.3. Whether the assessee was denied the opportunity to cross-examine witnesses.4. Admissibility and impact of additional evidence.Summary:1. Validity of the assessment order u/s 158BD read with section 113:The assessment orders for the block period from assessment years 1987-88 to 1997-98 were challenged. The assessments were made on a substantive basis for the individual and on a protective basis for the HUF. The proceedings under section 158BD were initiated based on documents seized during a search at the premises of Shri N.S. Atwal.2. Addition of Rs. 6,83,50,000 under section 69B:The Assessing Officer made an addition of Rs. 6,83,50,000 based on a seized document (Annexure A-3) indicating an agreement to sell land for Rs. 7.07 crores, while the registered sale deeds showed a consideration of Rs. 23.5 lakhs. The assessee denied making any payment over the recorded amount. The Tribunal found that the seized document was partly written in pencil and partly in pen, and the signatures were made by ball pen. The Tribunal noted that the Department did not find any evidence of the alleged payment during the search and that the statements of Shri N.S. Atwal were inconsistent and not corroborated by any material evidence.3. Denial of opportunity to cross-examine witnesses:The assessee repeatedly requested to cross-examine Shri N.S. Atwal and Shri R. Ganeshan, whose statements were relied upon by the Assessing Officer. The Tribunal observed that the assessee was not given this opportunity, which was a violation of the principles of natural justice. The Tribunal cited the Supreme Court's decision in Kishinchand Chellaram v. CIT, emphasizing that without affording an opportunity to cross-examine, the addition could not be sustained.4. Admissibility and impact of additional evidence:Both parties submitted additional evidence. The Department submitted a forensic report verifying the assessee's signature on the seized document, while the assessee submitted a letter from Shri N.S. Atwal retracting his earlier statements. The Tribunal admitted these additional evidences, noting that they went to the root of the matter. The Tribunal found that Shri N.S. Atwal's retraction letter indicated that the figure of Rs. 7.07 crores was a mere estimate and not an agreed or paid amount.Conclusion:The Tribunal concluded that the addition of Rs. 6,83,50,000 under section 69B was not justified due to the lack of corroborative evidence and the denial of the opportunity to cross-examine witnesses. The Tribunal deleted the entire addition in the case of the individual and, consequently, the protective addition in the case of the HUF. The dissenting opinion by the Accountant Member, which partially upheld the addition, was not accepted. The majority opinion favored the assessee, resulting in the deletion of the additions.