TaxTMI 
TaxTMI 
2002 (5) TMI 208
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....6 18,40,978 Asst. year 1996-97 26,65,658 These additions were made on account of alleged commission on billing on job contract work in block period. In the third ground the assessee has objected the following additions made on account of billing commission on trading activities in the block period: Rs. 1993-94 1,39,087 1994-95 12,46,828 &n....
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....wed i.e., 16 days of the service of notice. However, the assessee filed a return on Form No. 2B on9-6-1997. From the assessment order it is revealed that assessee had filed its regular income-tax return only for assessment years 1993-94 and 1994-95. These returns were filed with Income-tax Officer, Ward 3(11), Jaipur declaring an income Rs. 31,590 and Rs. 33,655 respectively only. As per the assessment order wherein it is mentioned that assessee has admitted to have earned undisclosed income to the tune of Rs. 2.27 crores for tax purposes. However, no such income was disclosed in the return filed by the assessee on9-6-1997. As per the order of the Assessing Officer, the assessee's attitude was not cooperative with the department because no reply in response to various notices was filed. The assessee started cooperating from14th July, 1997only, a date very close to the last date for completion of assessment i.e.,31-7-1997. It was found that assessee is interested in M/s. Polychem Traders (Proprietorship concern of assessee); M/s. Petro chem Overseas (India), Proprietorship concern of assessee; M/s. Petro ImpexIndiaPvt. Ltd., a company where assessee is director and in M/s. Par Petro....
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....ad, Karol Bagh,New Delhiand for the same purpose the amount was handed over to Shri Gopal Singh, a trusted man of assessee. The amount could not be deposited because Shri Gopal Singh was intercepted by the income-tax persons in the premises of Canara Bank,Arya Samaj Road, Karol Bagh and the amount was seized. The explanation given by the assessee was not found satisfactory to the Assessing Officer because of the assessee himself surrendered this amount during the course of search proceedings, wherein a statement on oath was recorded. Therefore, it was treated that the statement recorded at the time of search proceedings was a valid evidence as per provisions of law. Accordingly, an addition of Rs. 86 lakhs was made as unexplained cash under section 68 of the Act. 5. The same submissions were made here before us as they were made before the Assessing Officer through various letters. It was further stated that 90% of the total purchases are out of import and the remaining 10% of the total purchases were made from the local market. It was further stated that list of the parties in local market were also given to the Assessing Officer. Therefore, all the purchases are verifiable and g....
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....s account was filed, which was tallied and no addition on account of discrepancy in trading account was made by the Assessing Officer. This amount of Rs. 86 lakhs is also shown in the trading receipts as out of sale of the material purchased by the assessee. Therefore, it amounts to double addition as the amount of Rs. 86 lakhs have already been shown in trading receipts. It was also emphasised that total quantity purchased tallies with the sale and the stock. The remaining stock was of Rs. 26 lakhs which was found during the course of search and this amount of closing stock tallied with the purchases and sales. Therefore, there is no question of any undisclosed income of Rs. 86 lakhs on account of cash seized during the course of search. The attention of the Bench was drawn on various pages of the paper book, where detail of trading account is attached. 6. On the point of retracting from the earlier stand, it was pointed out that at the time of search, the assessee got nervous and due to coercive actions of the department people, he could not tell the truth and when he recollected his memory then only he retracted from his earlier stand. The retraction is rebuttable which is supp....
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.... bank accounts were opened at the instance of Shri Gopal Singh, the trusted man of Shri Sunil Agarwal, the assessee, which clearly shows the connivance of the assessee who indulged in unfair means and illegal activities. The contention of the assessee is unsupported by any evidence, as the assessee was in full senses and was at liberty and his own command. Therefore, the statement recorded at the time of search proceedings was without any coercion and without any duress. Therefore, a different story which was told by the assessee at the time of assessment proceedings cannot be believed. It was also stated that there is no bar to show sale in cash. Entire sale proceeds were routed through three bank accounts which was a deliberate action of the assessee to give a colourable device to the black money for converting into white. Therefore, the rotation of cash through bank account is a story which is concocted by the assessee and an afterthought. The attention of the learned DR was drawn by the Bench to pages 115, 116 and 117 where a consolidated trading account along with cash tally was given. It was replied by the learned DR that only page No. 115 was filed during the course of asses....
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....one Shri Rakesh Mahajan,C.A.was also recorded. The bank accounts mentioned above, were opened at the instance of Shri Rakesh Mahajan, who introduced the parties by verifying the signatures of the bank account holder. It was suggested by these statements that Sri Gopal Singh, trusted man of Sh. Sunil Agarwal was working for Sh. Sunil Agarwal. He approached Shri Ramesh Minocha for issuing bogus bills on account of job work for M/s. PPL. Shri Rakesh Mahajan, Chartered Accountant, also gave similar statement that Gopal Singh approached him and in lieu of introducing these parties in the bank the work of income-tax was assigned to Mr. Rakesh Mahajan, Chartered Accountant. Therefore, for this purpose he helped the assessee. From these statements and from other records, which were seized during the course of search proceedings, the Assessing Officer formed an opinion that the only person who indulged in bogus billing on account of job work, was none other than Shri Sunil Agarwal because Shri Sunil Agarwal, the assessee, was master mind who did all the work for M/s. PPL who floated bogus firms and issued bills on account of job work for M/s. PPL and earned a commissions of 2% on the gross ....
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....M/s. PPL because assessee has approached the jobbers for the purpose of job work for M/s. PPL and the reason for approaching these jobbers was very clear because M/s. PPL was the only big customer of assessee, which was buying 70% of the total turnover. It was further stated that affidavit of Ramesh Minocha was also given to the Assessing Officer, wherein it is clearly stated that he was under pressure at the time of recording the statement. Therefore, he could not narrate the actual instances. It was further stated that the assessee was not allowed to cross examine these persons whose statements were recorded at the back of the assessee. Therefore, these are mere allegations. It was further stated that there is no evidence that assessee has received any money, neither there is any transaction in the name of assessee which shows that assessee has earned commission. 11. On the other hand, the learned DR strongly placed reliance on the order of the Assessing Officer. It was further added that assessee has clearly admitted during the course of search that he has earned money on account of commission for getting job work billing for M/s. PPL. Shri Ramesh Minocha, in whose name the ban....
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....missions were made by the learned counsel as were made on account of job billing work and the same reply was given by the learned DR. 14. Next issue is in regard to addition of Rs. 1,36,41,971, as unexplained cash credit. Brief facts regarding this addition are that during the assessment proceeding, it was noted that assessee has received a sum of Rs. 45,00,000 during assessment year 1996-97 from M/s. Nice International, a proprietorship concern of Shri Sant Kumar Sharma ofBombay. It was further noted that a sum of Rs. 20 lakhs was taken as loan by the wife of assessee, Smt. Sunita Agarwal; Rs. 45 lakhs were taken as loan by Shri Vinod Jain and Rs. 20 lakhs of loan was taken by Smt. Bina Jain. All these loans were taken from M/s. Nice International. The statement of Shri Sant Kumar Sharma was recorded under section 133A(1) on 21-11-1996 at Bombay, wherein it was stated by Shri Sant Kumar Sharma, who was 24 years of age at that time, that he was an accounts clerk/Assistant with M/s. Par Petrochem Ltd., who was fabricators of garments etc. It was further stated that before this period he was also working Part-time with Sewa International, Gaur International and Par Petrochem Ltd. an....
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....also very clear that on the basis of regular books of account no addition can be made for the purpose of block period assessment. It was further stated that Shri Sant Kumar Sharma has exported the material directly and the deduction under section 80HHC has also been availed by Shri Sant Kumar Sharma and the same has been accepted by the department. The attention of the Bench was also drawn on the assessment order of Shri Sant Kumar Sharma enclosed in the paper book. The reliance was further placed on ITO v. Suresh Kalmadi [1988] 73 CTR (Trib.) (Pune) 80 (TM), Ram Niwas & Sons v. Asstt. CIT [1993] 44 ITD 394 (Delhi), Sarogi Credit Corpn. v. CIT[1976] 103 ITR 344 (Pat.) and Addl CIT v. Hanuman Agarwal [1985] 151 ITR 150 (Pat.). 14.2 On the other hand, the learned Departmental Representative has strongly placed reliance on the order of the Assessing Officer. He further stated that DDI,Bombaygave information and as per the provisions of section 158BB these types of credits can be considered while completing the assessment under section 158BC. The reliance was placed on 64 ITD 10. It was further stated that circumstantial evidence are against the assessee, as all the materials were dir....
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....f assessment under section 158BC or not, but there was an argument that the Assessing Officer was not right in computing some of the income under section 158BC as they were part of the regular books of account. We reject this argument of the learned counsel as there is no dispute in regard to filing the regular returns of income. The regular returns of income were filed only for two assessment years i.e. assessment years 1993-94 and 1994-95. The returns were filed in Jaipur and the assessments completed by the present Assessing Officer were on account of other incomes which were not disclosed in regular returns filed for two years., Therefore, there is no defect in the order of the Assessing Officer in regard to computation of income under section 158BC in Chapter XIVB. Therefrom, this argument of the learned counsel is rejected that certain incomes are out of purview of Chapter XIVB for the purpose of assessing income under section 158BC. 9. Now we will come on the grounds which are raised by the assessee in grounds of appeal. First ground is in regard to addition of Rs. 86 lakhs seized from the premises of the Canara Bank while a man of the assessee was going to deposit the same....
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....r it is further stated that reply of letter dated10-7-1997and11-7-1997is being prepared and will be filed shortly. On17-7-1997the reply of letters dated10-7-1997and11-7-1997was filed. This letter further says that letter No. 172 dated16-7-1997is being prepared and shall be filed shortly. This reply is placed at paper book page 62. Another letter filed by the assessee is placed at paper book page 66, which is of dated23-7-1997. By this letter the reply was given of letter dated22-7-1997, wherein it is mentioned that the reply has already been filed of letters dated11-7-1997,15-7-1997and17-7-1997. Last letter filed by assessee is placed at page 90 of the paper book, which is of dated 25-7-1997, which was written to the Commissioner of Income-tax, Delhi (Central)-II, whereby the Commissioner was informed that assessee has explained all the queries raised by the Assessing Officer and intervention of the CIT was sought in regard to apprehension of huge additions which were to be made by the Assessing Officer. After perusing these replies it cannot be stated that assessee has not cooperated with the department, of course the search was made on 20-6-1996 and the return was filed after 8 m....
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....nbsp; 02 lakhs (c) My personal car Maruti 800 No. HR-2 6-1156 01.50 lakhs (d) Loans to Mohan Aggarwal my brother 15 lakhs (e) Loans to M/s. Tarun sales 05 lakhs (f) Cash found seized from Sh. Gopal Singh as well as credited in CA A/c Nos. 5825, 5826 & 5827, as stated above 01.23 crores (g) Sundry household and other expense 05.50 lakhs" 21. In reply to question No. 36, which was the last question aske....
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....; Fixed deposits kept in locker as Rs. 2 lakhs; investment in personal car was Rs. 1.50 lakhs; loan to assessee's brother Shri Mohan Agrawal Rs. 15 lakhs; loan to M/s. Tarun Sales Rs. 5 lakhs; cash found, seized from Shri Gopal Singh as well as credited in C.A. Account Nos. 5825, 5826 and 5827 were to the tune of Rs. 1.23 crores and Sundry household and other expenses were to the tune of Rs. 5.50 lakhs. If we total all these amounts it comes to Rs. 1.59 crores; but if we see the addition on account of cash found and seized was made only of Rs. 86 lakhs. An amount of Rs. 37.56 lakhs seized from iccount No. 5825; Rs. 3,000 in account No. 5826 and Rs. 26,000 seized from account No. 5827 in Canara Bank, totalling Rs. 37.85 lakhs was not added as the same was found; is explained. It clearly establishes that assessee surrendered a sum of Rs 1.23 crores; whereas the Assessing Officer has made an addition of Rs. 86 lakhs only. It means the statement recorded on20-6-1996was partly admitted. In the statement the assessee has surrendered a sum of Rs. 1.23 crores on account of cash seized. The Assessing Officer ignored the latter explanation given by the assessee that Rs. 86 lakhs is part of s....
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....e to be furnished to the Sales-tax Department against the sales made by the assessee, otherwise the sales-tax liability could have been accrued. These intermediary parties issued S.T. forms and the same were deposited to the Sales-tax Department. Therefore, this method was adopted and the cash sales were routed through these three bank accounts and the bank accounts of the intermediary parties. A clarification was sought from the assessee in regard to these three bank accounts and other parties' accounts, the reply was given by the assessee on 14-7-1997 and again on 28-7-1997, wherein in following reply was filed:-- "The Current Account Nos. 5825, 5826 and 5827 with Canara Bank, Karol Bagh are the accounts of Shri Rajinder Singh, Prop. M/s. Central Plastic Syndicate, Shri Satyaveer Singh, Prop. M/s. New Fashion Plastic and Shri Kishore Kumar, Prop. India Plastics who are all independent persons having independent existence and identities and assessed to income-tax for a period prior to opening of the bank accounts by them, The record reveals that introduction of Accountant under whose control or directions or in association availability of cash in these accounts, these persons hav....
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....that I have been making sales in cash and the said cash sale proceeds were channellised back in my business by depositing approximately 70% and 30% as cash in the three Canara Bank accounts and in the bank accounts of intermediary concerns in the name of which bills were issued by for which actually sales were made in cash in the open market. I did not have enough space for storage of the goods and, therefore, the sales in the open market was necessary besides being market conditions. Also that no stock belonging to any of the following concerns was found during the course of search. It, also thus proves that whole of the material purchased were sold by us in the open market." 24. After considering the reply of the assessee and the explanation in regard to bank accounts, the Assessing Officer was satisfied and in paragraphs 5.12 and 5.13 the Assessing Officer has stated the accounts of various parties are genuine. Therefore, no addition is made on account of trading. The observations of the Assessing Officer given in paras 5.12 to 5.18, are reproduced here as under: "5.12 The assessee has further submitted vide his letter dated28-7-1997that:-- I also submit that my purchases are....
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....e directly on behalf of the supplier, to the Commissioner of Customs for payment of Custom Duties on import of raw materials, which established that he was controlling the three accounts and the debtors accounts and purchases were made from the suppliers. The cash deposited in these accounts are nothing but the sale realisation of the raw material. 5.14 Keeping in view the above facts and circumstances of the case and the modus operandi adopted by the assessee is reasonable and no addition on account of cash credit is called for out of these three accounts and the debtors accounts. 5.15 The amount of seizure of Rs. 37,85,000 from the bank balances lying in the above bank account have been taken into consideration in total of the cash deposited and the amounts credited in these accounts, for which necessary finding has been made in the above-mentioned paragraph Nos. 4.3 to 4.3.14 and, therefore, no separate addition on account of this seizure is called for. 5.16 During the search and seizure operation an amount of Rs. 11,140 was found and seized at the business premises No. WZ-95/2, Titarpur,Najafgarh Road,New Delhi. The assessee was asked to explain the source of this cash. Duri....
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....icate 8. 2254/PNB M/s. S.K. Industries 9. 1678/SBI M/s. Asif & Co. 10. 1677/SBI M/s. Fazil Enterprises 11. 2590/BOM M/s. Harkaushal Plastics 12. 2631/BOM M/s. Dee Kay Moulders 13. 2628/BOM &nbs....
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....as filed a summarised detail of sales made to intermediary concerns and funds diverted from their accounts from1-4-1995to20-6-1996. The total sales were made of Rs. 65,60,95,296. The total amount received through these three bank accounts was at Rs. 55,63,48,102 and there was a balance amount which was to be received from the debtors, that was of Rs. 9,97,46,194. This amount of Rs. 9,97,46,194 includes Rs. 8,73,33,956 which was balance from these intermediary parties; Rs. 37.56 lakhs which was seized from the Canara Bank accounts; Rs. 86 lakhs which was seized in cash in the premises of the Canara Bank and Rs. 56,238 was cash-in-hand on 20-6-1996. The details of these items are placed at pages 116 and 117. The details are tallied with the chart prepared and placed at page 115. The Assessing Officer has also stated that summarised details of sales made to intermediary concerns were filed; they were correct and tallied. Therefore, no addition was made. The addition was made by only considering the statement of the assessee made on20-6-1996which was retracted by the assessee on a later stage. In our considered view there is no doubt that primary statement recorded on 20-6-1996 is a go....
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....h and wherein I had no opportunity either to consult my advocates, my staff or my books of account etc. The pressure of search was built so much that I had to make this surrender without having actual possession of the assets or unexplained investments or expenses incurred and hence there being no such income as undisclosed. The money seized or other assets already stand declared and available out of known sources and hence the said surrender is meaningless and I don't admit this surrender as a voluntary surrender supported by actual possession of any assets giving rise to any undisclosed income." After this explanation the assessee further gave explanation is regard to items which were surrendered at the time of search. This explanation was given in regard to construction at G-73, Kirti Nagar; Fixed deposits of Rs. 2 lakhs; Investment in Maruti car; loan to Mohan Aggarwal of Rs. 15 lakhs; Loan to Tarun Sales -- Rs. 5 lakhs; cash found and seized Rs. 1,23,85,000, which includes cash seized in the premises of Canara Bank at Rs. 86 lakhs; and balance in three bank accounts at Rs. 37,56,000, Rs. 3,000 and Rs. 26,000. Again at page 4 of this reply (P.B. 31), the assessee has stated th....
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....issued by the assessee, were to the tune of Rs. 1.25 crore. These cheques were returned back as the amount had already been seized by the department. The details of these cheques are placed in the paper book at page 36. If assessee could have deposited Rs. 86 lakhs, then the amount in the bank would have been at Rs. one crore twenty five lakh or odd, as there was a bank balance of Rs. 37.56 lakhs or odd already. As the department seized the amount, hence Rs. 86 lakhs could not be deposited and cheques were returned back. The bank statement showing returning of cheques are placed at pages 37 and 38 of the paper book. The Assessing Officer has admitted somewhere in his order that assessee made payment to Customs authorities for clearing the material which was imported by the assessee and this payment was made through these three bank accounts, which clearly establishes the bona fide of the assessee in regard to cash sale routed through these three bank accounts. Therefore also we are of the view that the addition of Rs. 86 lakhs could not have been made if the explanation of the assessee was considered which was with cogent reasons. The reason for surrendering the income was also exp....
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....e assessee's claim on the ground that she had services of a Chartered Accountant right from the beginning and had stated everything about the deposits, etc. and, therefore, it could not be at the behest of her father-in-law that she admitted the deposits and further that it took exactly two years to revise the statement which was after the death of the assessee's father-in-law, moreover, the assessee was educated lady, a graduate and had claimed to have taken tuitions and had earned income therefrom, had signed the application form for fixed deposits and had also lodged claim before the liquidator for the return of money with interest. On appeal this order of the Assessing Officer was confirmed by the CIT(Appeals) and on second appeal the order of the Assessing Officer was also confirmed with the finding as stated above. In this case relied upon by the learned DR, the lady could not explain the deposits even after reducing of the deposited amount from the return of income. However, in the present case the assessee is discharging his onus by showing the sale proceeds which tallied with the purchases made by the assessee. Therefore, facts are distinguishable from the facts in the cas....
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....t state of affairs. 34. In the case of Pushpa Vihar v. Asstt. CIT[1994] 48 TTJ (Bom.) 389, the ITAT Bombay Bench 'D' held that if retraction is with cogent reasons and evidence, then retraction can be made. The brief facts and conclusion of, this case, is as under:-- "B, who is a partner of the firm, admitted in original statement the amount of concealed income. Later on, there was retraction and it was stated that what he stated originally was in relation to the sale and not in relation to the income. Also he is a non-matriculate and the junior; most partner in the firm, The possibility of committing a mistake by him in explaining the affairs of the firm cannot be ruled out altogether. There is no cogent material on record to support or to justify the veracity or falsehood of the statement. The Revenue agreed to accept what B stated at that time. No incriminating document was seized. Even on2-12-1987when another survey operation was conducted at the assessee's premises, nothing significant was found. The argument of Revenue that there were possibility of getting higher figures of sales, but same could not be obtained as during the survey the management stopped the A.C. room and ....
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....fficer is directed to delete the addition made on this count." While holding so the Bombay Bench of Tribunal, has placed reliance on a decision decided in the case of Kishore A. Meswani in IT Appeal No. 7161 (Bom.) of 1987 dated 7-8-1990 and on a decision of Supreme Court in the case of Krishan v. Kurukshetra University AIR 1976 SC 376, wherein the Hon'ble Apex Court had held that, "any admission made in ignorance of legal rights or under duress cannot bind the maker of the admission. It is an accepted position that what is admitted by the party to be true, must be presumed to be true, unless the contrary is demonstrated. However, mere admission cannot be bed rock or foundation of an assessment. It is always open to the assessee who made the admission to show that what he admitted was not correct. Thus, it cannot be said that the admission made by a person is relevant in deciding the matter. But it is not always conclusive. The person who admitted the fact is at liberty to explain or clarify the circumstances and the nature of statement and also the correct facts. It is well-settled that the effect of an alleged admission depends upon the circumstances in which it was made. There....
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....ition, as narrated above, we are of the view that this addition of Rs. 86 lakhs was not justified and accordingly we delete the same. This ground of the assessee is allowed. 35. The next ground is in regard to addition on account of commission on job work billing business and billing commission on trading activity. After hearing rival submissions and considering the material on record we noted that this addition was made on the basis of documents found from the possession of one Shri Om Prakash, a person belonging to assessee and statements recorded of Shri Ramesh Minocha, Proprietor of Bhupinder Singh & Co. and Shri Rakesh Mahaj an,C.A.The main facts of the case have already been discussed while disposing of ground in regard to addition of Rs. 86 lakhs. However, we will like to state some more facts briefly. 36. The assessee has admitted during initial statement recorded on20-6-1996that he has earned a profit of Rs. 2.26 crores which was not disclosed by him. It was further admitted by him that three bank accounts bearing numbers 5825, 5826 & 5827, were opened in Canara Bank and they were benami bank accounts and all the incomes, which were not recorded in the books of account, ....
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....onfirm that income from following transactions has not been disclosed before any Income-tax authority. I further confirm that these transactions have not been accounted for in my regular books of account. The details are as under:-- (a) That the bank accounts bearing Current A/c Nos. 5825, 5826 & 5827 in Canara Bank, Arya Samaj Road are in reality my benami accounts and all the money lying therein of late as well as past belongs to me. These deposits represented undisclosed income not recorded in regular books of account, earned from trading of plastic raw material by me. Quantum of such income is that an amount of Rs. 86,00,000 found and seized from Shri Gopal Singh on 20-6-1996 at Canara Bank, Branch Arya Samaj Road, Karol Bagh together with Rs. 37 lakhs being added in the three above noted accounts, represents my current recent in this business has been carried out by me about 2-3 years during which an income of Rs. 78,00,000 earned in similar way by resorting to trading in cash. (b) I have to further add that as stated earlier regarding my liaison activities I have actually earned profit of around Rs. 26,00,000 in the last 2-3 years from activities noted at Annexure AA showin....
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....material with the Assessing Officer to infer that assessee has earned any commission on account of job work made on behalf of M/s. PPL from the unorganised sector through the companies of Shri Ramesh Minocha. We have also seen that nowhere the assessee has admitted that he had earned any commission on account of coordination made by him to M/s. PPL. On the contrary the assessee has categorically denied from the day one that he has earned any commission on account of job work made for M/s. PPL, though he has admitted that M/s. PPL is his primary customer who buys about 70 per cent of the total turnover of assessee. It has been further stated by him that he received some complaint from M/s. PPL and just to maintain his business relations because M/s. PPL was the main customer, he coordinated with him by getting the job work done from the unorganised sector and the bills were routed through the bank accounts opened in the names of Shri Ramesh Minocha through Shri Rakesh Mahajan, C.A. In paragraph 6.3 of the order of the Assessing Officer, it is very clearly mentioned by the Assessing Officer that a survey operation was con ducted on 12-8-1996 in the premises of M/s. PPL at Okhla for f....
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....ged in the business of fabrication of Plastic moulding goods on contract basis in the name of M/s. Arun Moulders. It was further clarified that during financial years 1993-94 and 1995-96 the moulding business was done on contract basis for M/s. Padmani Polymers Ltd., for which the raw material and moulds were supplied by the said company and during financial year 1994-95 the said job was done for various other persons also. It was further replied that the job work was got done through M/s. S.P. Singh & Co., New Era Plastic Trading, Bhupinder Singh & Co. and also from JVS Enterprises etc., most of which was processed from various cottage industries and jobbers in the unorganised sector in Khyala, Vishnu Garden, Nangloi, Peeragarhi, Nawada Village etc. in Delhi under his overall supervision. The inspection of finished goods was also got done routinely and after approval of the moulded materials, the finished products were dispatched to the principal i.e., M/s. PPL. It was further confirmed that the payments were received by cheques in regular course of business and the Income-tax ward was informed where this assessee was assessed. From the contents of this letter, it is also very cle....
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..../s. PPL (Padmini Polymers Ltd). I therefore coordinated with Jobbers in unorganised sector, from which I got the goods manufactured for M/s. PPL. In same cases we were not getting proper bills of the parties (Jobbers) refused to accept cheques for the work done by them. I might have procured the bills from some parties, though work was not done by them but the work was done by the Jobbers in the unorganised sector.' Q. No. 8: So you agree that bogus billing for job work was lone by a number of concerns, though no actual job work was done here, the following concerns uninvolved in bogus billing of job work:-- (i) M/s. Bhupinder Singh & Co. Prop. Shri Ramesh Minocha (ii) M/s. New Era Plastics TradingCo., Prop. Smt. Kamal Minocha (iii) M/s. Ravi Plastic Moulders, Prop. Shri Anil Oberoi. (iv) M/s. JVS Enterprises, Prop. Shri Jagvinay Singh (v) M/s. S.P. Singh & Co., Prop. Sh. Surinder Pal Singh. Ans.: I have already stated that job work for M/s. Padmini Polymers Ltd. was actually done but in some case, where the work was done by the jobbers in the unorganised sector, the bills or job work might have been taken from some of the above parties in cases where jobbers in unorganised ....
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....m source of these deposits? Ans.: As I have already stated, I can explain only after verification of seized material and reconciliation of my accounts." 40. From the perusal of these questions and answers asked on6-8-1996, one thing emerges, that nowhere the assessee had admitted that he has earned any commission. One more thing which emerges, is that the assessee has asked that after reconciling these papers then he will be able to reply accordingly. It shows that no copy of the material seized by the department was got available to the assessee for his proper reply. Only some papers were shown and then the reply was given. After perusing, further, the order of the Assessing Officer we noted that portion of statements of Shri Ramesh Minocha, Prop. of Bhupinder Singh & Co. and Shri Rakesh Mahajan, C.A. were reproduced and after perusing the portion of statements of these two persons we find that they have also confirmed that the work was done for M/s. PPL and not for Mr. Sunil Agarwal. Only one thing which was admitted by Shri Ramesh Minocha and Shri Rakesh Mahajan, that was that Shri Gopal Singh introduced Shri Sunil Agarwal with Ramesh Minocha and Ramesh Minocha introduced thes....
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....further noted that Shri Ramesh Minocha has filed an affidavit that the statement which was given in the premises of Shri Rakesh Mahajan, was under pressure. He admitted that he has done business independently and earned income independently which has already been shown by him. From the affidavit, which was in shape of retraction, if any inference can be drawn, then only inference can be drawn that Shri Ramesh Minocha retracted from his earlier stand. Firstly he stated that he earned income on account of job work billing and he will declare all the income in due course. On a later stage he retracted from his earlier stand and denied. Copy of Letter of his denial which is dated29-8-1996is placed at page 52 and affidavit in support of his contention is placed at pages 53 and 54 of the paper book. We have also seen the statement of Shri Rakesh Mahajan, who also confirmed that he knows Mr. Ramesh Minocha, who introduced Shri Gopal Singh and Shri Sunil Agarwal and for getting the income-tax work he helped them by opening of bank accounts in the names of various persons known to him. As we have already stated that on the basis of these facts and circumstances the addition made by the Asse....
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....the Hon'ble Supreme Court has held that without allowing any opportunity to cross-examine no addition can be made. The brief facts in the case of Kishinchand Chellaram were that the assessee had an office inBombayand one inMadras. On receiving information that a sum of Rs. 1,07,350 was remitted by the assessee by two telegraphic transfers fromMadrastoBombaythrough a bank, the ITO wrote two letters to the Manager of the bank dated14-1-1955and10-2-1955, making enquiries about the remittance. These two letters were neither disclosed to the assessee nor brought on record. The manager replied, by a letter dated18-2-1955, to the effect that a telegraphic transfer of Rs. 1,07,350 sent by the assessee fromMadraswas received by the bank atBombayon16-10-1946, and the amount was paid to N, an employee of the respondent, on the same day. This letter also was not disclosed to the assessee. The application for the telegraphic transfer was signed by one T describing himself as: "T C/ o M/s. K. Chellaram". There were at the relevant time two employees of that name both of whom had left service long back. There was another letter dated9-3-1957, addressed by the bank to the assessee wherein it was s....
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....in obedience to the summons referred to in the letter dated9-3-1957, and what statement he had made. (ii) That, even assuming that the two letters were to be taken into account, those letters would at the highest establish that T, an employee, remitted the amount from Madras and N, another employee, received it at Bombay, From this it did not follow that the remittance was made at Madras and received at Bombay on behalf of the assessee. The burden was on the department to show that the money belonged to the assessee by bringing proper evidence on record and the assessee could not be expected to call T and N in evidence to help the department to discharge the burden that lay upon it. (iii) That there was no evidence on the basis of which the Tribunal could come to the finding that the sum of Rs. 1,07,350 was remitted by the assessee and that it represented the disclosed income of the assessee." 43. Here in the present case the situation is similar; rather we can say that the situation is more favourable to the assessee. In the case of Kishinchand Chellaram some amount was transferred and was verified by the manager. The addition was confirmed upto the stage of High Court. However....
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....ition, prejudice was done against her. Held, yes. In this case also the reliance was placed on the decision of the Apex Court in the case of State of Kerala v. K.T. Shaduli Grocery Dealer AIR 1977 SC 1627, wherein it was held that cross examination has to be afforded, where the statement of a deponent forms an integral part of the material on the basis of which the order is passed by the taxing authority. Further the reliance was placed in the case of Suraj Mall Mohta & Co. v. A.V. Visvanatha Sastri [1954] 26 ITR 1 (SC) as also the decision of Apex Court in case of Kishinchand Chellaram. 47. After considering the ratio of these valuable decisions we find that the facts of the case are squarely covered by these decisions and they are applicable on the facts of the present case. No opportunity to cross examine were allowed to the assessee. Therefore, we are of the view that addition made on the basis of statements given by Shri Rakesh Mahajan and Shri Ramesh Minocha cannot be sustained. However, we will like to discuss here the case laws relied upon by the learned DR also. 48. In the case of Amritlal Agarwal v. Asstt. CIT [1998] 64 ITD 7 (Cal.), the additions were confirmed by the ....
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....ssee, like statements of two General Managers of M/s PPL; confirmation of General Managers of M/s PPL saying that no commission has been paid; reply under section 131 of one party saying that he has done job work for M/s PPL. All these evidences are in favour of assessee. Therefore, we are of the view that this decision is also not helpful to the department. 52. Last case on which the reliance was placed by the learned DR was the decision in the case of Sumnati Dayal. In this case the Hon'ble Supreme Court has held that surrounding circumstances and the test of human probability has to be considered. In this case some jackpot in horse riding were won. The jackpots were won in three different stations. Assessee could not furnish any detail in regard to withdrawals for expenses for these three stations, which were situated at three different directions, namely,Madras,BangaloreandHyderabad. Then the Settlement Commission found that the assessee has converted his black money into white by showing prize money through jackpots. The Hon'ble Supreme Court confirmed the finding of the Settlement Commission by holding that human probabilities and surrounding circumstances were examined by t....
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....ere is any confirmation or evidence from any other source that assessee issued bills for their trading activities, nor the assessee has issued in his name. Therefore, in absence of any cogent evidence, no addition is sustainable. One more important fact which we noted that Assessing Officer while making these huge additions has not considered the reply filed by him from time to time. However, he placed reliance on the last para of the letter where he has mentioned that, without prejudice to the submissions on merit made there in earlier letter if any addition which is being made on account of commission for job work or on account of any other activities, then the deduction should be allowed on account of expenditure, which were made in making payments to various Jobbers and other billing agents. The Assessing Officer only relied on this alternative submission and without discussing the submissions and considering on merit, he made these two impugned additions which, in our considered view, are not sustainable either on facts of the case or on the basis of real income theory. There should be a real income which can be assessed. This theory has been settled by the Apex Court that the....
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.... his family members have taken a loan of Rs. 1.30 crore from Sh. Sant Kumar Sharma. All the confirmation and relevant material/evidences were filed. The statement of Shri Sant Kumar Sharma was not got available to the assessee for preparing reply, neither Sant Kumar Sharma was produced before assessee for the purpose of cross examination. 58. In the case of Kishinchand Chellaram, the Hon'ble Supreme Court has held that no addition can be made if the person, on the basis of whose statement the additions were made, was not produced before assessee for the purpose of cross examination and in the result the additions sustained upto the level of High Court, were deleted by the Hon'ble Supreme Court. We have also discussed so many other cases while disposing the other ground of the assessee in the present case and we have held that of course the information from a person is a material evidence, but it is not conclusive. It was further held that if the person, on the basis of whose statement, the addition was made if he is not produced before the assessee for cross examination then no addition can be sustained. Here in the present case the addition was made only on the basis of informati....
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....dy been disclosed before the department well in time. For this reason also this addition cannot be sustained by treating undisclosed income in the hands of assessee. 59. We have also seen the statement of Shri Sant Kumar Sharma recorded atBombay, which is part of the assessment order and after going through the statement of Sant Kumar, nowhere we found that Shri Sant Kumar Sharma had stated that he has not made the export business. On the other hand, he has categorically accepted that the export business was done by him only, of course Shri Sunil Kumar Agarwal helped him. Rendering some help to another person does not prove that the person who rendered the help is liable for any penalty or he is owner of the income earned by the other person. Shri Sant Kumar Sharma has clearly stated that Shri Sunil Kumar has promised him to return his money upto March 1997 alongwith interest @ 1.5% p.a. This also shows that Sant Kumar Sharma was the real owner of export business transaction. We have also seen the case laws relied upon by the learned DR and are of the view that they were distinguishable on facts. The facts in the case of Sumati Dayal, we have already discussed somewhere in above p....
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....see was subjected to search and seizure proceedings on 20-6-1996 and on this same day the statement of the assessee was recorded wherein he conceded that he had earned profit of around Rs. 26 lakhs in last two years from the activities noted in Annexure "AA" showing total liaison turnover of Rs. 5 crores. He further conceded that he had earned a profit of Rs. 10 lakhs at the rate of 2% being his commission and the balance amount of Rs. 10 lakhs had been earned in the earlier years. He voluntarily offered a sum of Rs. 2 crores 26 lakhs for taxation in respect of his undisclosed income earned by him during the block period. During the course of search proceedings, which continued up to30th July, 1996, the search party laid its hands over certain incriminating documents, accounts and loose-papers. These were inventoried as Annexures "A1", "A-3D" and 'AA-1". On the basis of these seized papers it was noticed that the assessee was engaged in bogus billing on account of job work for M/s. Padmini Polymers Ltd. (in short "PPL"). Dummy bank accounts were also found during the search. During the course of investigation Annexure "AA, Party No. 8, page 11" was found from one Shri On Prakash, t....
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....ders, Shri Anil Oberoi was the proprietor. Shri Ramesh Minocha admitted that these three concerns had shown to have done job work for five other concerns. He submitted that actually no job work was done but these three concerns were making invoices and challans by showing job work done for making plastic moulder items like filters, mugs, buckets, etc. In response to a question as to what, commission he earned and who gave the commission to him, Shri Ramesh Minocha stated that Shri Sunil Agarwal used to make payments in cash on account of his making the said bills in the bill books his three concerns. The rate of commission was stated to be 40 Paise per Rs. 100. He further stated that the total amount of commission received by him for and on behalf of these three concerns from time to time during the financial year 1993-94 was Rs. 3,20,000 on total job work done worth Rs. 8 crores. 5. Shri Ramesh Minocha vide his letter dated 15-7-1996 further confirmed that M/s. JVS Enterprises and M/s. S.P. Singh & Co. had also made bills for plastic moulders job work done by them for M/s. PPL through Sh. Sunil Agarwal though nothing was done in reality. He further submitted that Shri Jagvinay Si....
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....with the figures written on the page. Is the commission paid at various stages? Ans.: I don't remember anything. However, I can tell only after taking copies of seized material and reconciliation of my accounts if any of the transactions relates to me. Q. No. 12: I am showing you Page 14 and 15 of Annexure A1, Party 8 which gives names of a number of concerns alongwith Dr./Cr. Figures. Why these papers were maintained by you and what do these papers contain? Ans.: These papers were not maintained by me or they were found from me. However, I can further say only after examining all the seized material and reconciliation of my account. Q. No. 13: I am showing you Page 11 and 12 on which details of TDS deducted, details of place of assessment, date of filing of Return, TDS refund due, TDS refund received and Income-tax assessment portion is given for a number of parties. Why these details were maintained by you? Ans.: I am unable to recollect anything at the moment. However, I can tell after verification. Q. No.14: I am showing you papers Annexure A1, Party No. 6, Pages 22, 23, 24, 25 which gives certain details of transactions done in Accounts in Canara Bank, UBI, SBBI and PNB/....
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....ide his letter dated 28-7-1997 addressed to the Assessing Officer requested that any addition on the basis of trading done by M/s PPL and others allegedly done through him, the profit rate of the same could not be applied more than the net profit earned by him in his own business. The extract of this letter in this regard is reproduced as under: "That any addition which may be made on account of trading done by Padmini Polymers Ltd. and others allegedly done through me, the profit rate of the same cannot be applied more than the net profit earned by me in my own trading I have to employ actual funds and working capital besides there being other administrative, selling and management expenses, etc. It is thus submitted that the profit rate in no circumstances should be taken more than my net profit rate as the same then also is otherwise excessive in case of nature of addition being made." 12. Agreeing with the submissions made by the assessee, the Assessubg Officer worked out the addition of Rs. 25,11,742 in respect of assessment years 1993-94 to 1996-97 by applying the net profit rate earned by the assessee in his own business. 13. During the course of hearing before the Bench,....
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....should be deleted. 17. On the other hand, the learned Departmental Representative contended that the assessee himself during the course of search had admitted that he had earned income on account of commission for getting job work of billing for M/s PPL. He relied on the statements of Shri Ramesh Minocha and Shri Rakesh Mahajan,C.A.and contended that Shri Ramesh Minocha had clearly stated on12-7-1996that he had done bogus billing to the extent of Rs. 8 crores for the financial year 1993-94. He further contended that as against the statement of Shri Ramesh Minocha who admitted to have done bogus billing to the tune of Rs. 8 crores and earned commission thereon amounting to Rs. 3,20,000, the assessee had in his original statement on 20-6-1996 had admitted to have done total liaison turnover only worth Rs. 5 crores. He further submitted that the falsity of the claim of the assessee is obvious in view of the fact that the bogus turnover worth Rs. 8 crores was only in respect of three concerns of Shri Ramesh Minocha and that too only for one year. As against this, the learned Departmental Representative contended that the raid party had enough evidence that the assessee was engaged in ....
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....ce of evidence but it cannot be said that it is conclusive. It was further laid down that it is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not show the correct state of facts. Thus, it is obvious that in order to successfully retract from one's own statement, it is incumbent upon that person to prove beyond the shadow of any doubt that his statement earlier recorded was incorrect and it is also incumbent upon that person to establish his retraction with cogent reasons and evidence. 23. In the case of Thiru John v. Returning Officer AIR 1977 SC 1724 it was laid down that the party's admission is a substantive evidence and is the best evidence against the party making it and though not conclusive. It was further laid down that what a party himself admits to be true may reasonably be presumed to be so and until the presumption is rebutted the fact admitted must be taken to be established. 24. Thus, on the basis of these two citations it is obvious that the burden very heavily lies on the person retracting from his earlier statement to prove without any iota of dou....
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....assessee to establish the genuineness of his fear. No evidence whatsoever was furnished from the side of M/s. PPL safe-vouching the authenticity of the assessee's fear. Under the circumstances, I am of the opinion that the assessee has not successfully retracted from his earlier statement made at the time of search. 25. The second retraction by Shri Ramesh Minocha is also very interesting. His statement was recorded on12-7-1996, wherein he conceded that he was engaged in issuing bogus bills in respect of which he was earning commission from the assessee in respect of his three concerns. Later on Shri Ramesh Minocha vide his letter dated 15-7-1996 again confirmed the same and also stated that Shri Jagvinay Singh and Shri Surinder Pal Singh, the proprietors of the two other concerns were also involved in issuing bogus bills and the bills were prepared at his own residence. Then came the retraction on29-8-1996stating that his statement recorded on12-7-1996was under a coercion. If these facts are tested on the judgment in the case of Pullangode Rubber & Produce Co. Ltd., the retraction can only be said to be unsuccessful. If the statement recorded by the Assessing Officer on12-7-1996w....
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....It is pertinent to note that this judgment was given by a Bench comprising three Judges, whereas the judgment of Kishinchand Chellaram was rendered by a Bench comprising of two Judges and further the case of Guduthur Bros. was not brought to the notice of theHon'ble Apex Court. View similar to Guduthur Bros. was taken by the summit court in the case of Kapurchand Shrimal v. CIT [1981] 131 ITR 451 (SC). 29. In a recent case of CIT v. Jai Prakash Singh [1996] 219 ITR 737 (SC) a return was filed voluntarily by one out of ten legal representatives disclosing entire income of deceased. The assessment was completed in this case when the legal representative compiled with the notices under sections 142(1) and 143(2). Later on an objection was raised for the first time in the appeal that the notice hadnot been issued to the other legal representatives, and it was claimed that the assessment so made should be held to be null and void. In this case the Hon'ble Supreme Court held that an omission to serve notice or any defect in the service of notices provided by procedural provisions does not efface or erase the liability to pay tax where such liability is created by distinct substantive pr....
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....y the Assessing Officer, as agitated by the assessee in these two grounds of appeal. 30. However, it is clearly borne out from the statement of the assessee recorded on6-8-1996, the relevant portion of which has been extracted above that the assessee has time and again stated that he did not remember anything in respect of the documents shown by the Assessing Officer. The assessee submitted that he could tell only after taking copies of the seized material and on reconsideration of accounts of the transactions related thereto. In response to question No. 13 he stated that he was unable to recollect anything at the moment. However, he could ten after verification. In response to question Nos. 14 and 15 also the replies were similar. Inspite of that, the Assessing Officer worked out the additions in respect of commission on billing business andjob work without confronting the assessee with the seized material, which the assessee wanted to verify. I also find force in the submissions of the learned counsel that the Assessing Officer made the additions on the basis of statements of Shri Rakesh Aggarwal and Shri Ramesh Minocha recorded by the Assessing Officer without confronting the s....
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.... of Rs. 95,18,600 and Rs. 25,14,742 disputed by the assessee in ground Nos. 2 and 3 should be deleted or the matter should be restored to the file of the Assessing Officer for deciding afresh? 2. Whether on the facts and in the circumstances of the present case the observations that 'in my view the Assessing Officer should be given the liberty to consider the taxability of this very sum in accordance with law' are correct, when both the Members are of the considered view that the addition of Rs. 1,36,41,971 cannot be said to be the undisclosed income of the assessee?" 2. Before I proceed to answer these questions the background and relevant facts of the case are required to be adverted to and these are that there were search and seizure operations at the residential and business premises of the assessee as also associated persons and concerns on 20-6-1996 and the last of the warrants of authorization for search was executed on 30-7-1996. 3. Notice under section 158BC was issued on 30-9-1996 asking the assessee to file return of income including the undisclosed income for the block period within 16 days of the service of the notice, but such a return admittedly was filed only on ....
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....tegorical assertion that it represented income from undisclosed sources not recorded in the books of account. It may be mentioned that subsequently during the course of assessment proceedings the assessee changed his version contending that the cash represented realization of cash sales. 9. For the reasons both factual and legal stated in the order the Assessing Officer added the sum of Rs. 86 lakhs as the undisclosed income in assessment year 1997-98. 10. During the course of search three bank accounts were found being used for depositing huge amounts of cash and making withdrawals and these were in the Canara Bank,Arya Samaj Road, Karol Bagh,New Delhi. Incidentally these were in the names of three different persons. On the date of search a total of Rs. 37.85 lakhs was found deposited in these accounts and same was seized. 11. Shri Gopal Singh stated to be an employee of the assessee admitted in his statement recorded on20-6-1996at the bank premises that he was regularly depositing cash to tune of several lakhs in the three accounts, the same being handed over to him by the assessee or his brother, Shri Mohan Aggarwal. 12. The Department on verifying from the bank came across ....
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....nbsp; Plastics. New Delhi. ----------------------------------------------------------------------------------------- 13. It transpired that one Shri Rakesh Mahajan,C.A.had "introduced" the aforesaid 3 accounts verifying the address shown in the a/c opening form. The following facts, however, came to light when said Shri Rakesh Mahajan was examined under section 131: (i) He did not know any of the three persons in whose names the accounts were opened; (ii) One Shri Gopal Singh who was known to him through one of his clients, Shri Ramesh Minocha, had brought these persons to him and got their bank account opening forms signed by him as "introducer, on the temptation of giving large quantity of work of his own employer" i.e., Shri Sunil Agarwal; (iii) That although he had audited some books of account allegedly belonging to these persons, the details thereof were not available with him; (iv) That he had not met th....
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.... debtors account. 2. The account holders of 5825, 5826, 5827 and other accounts in the name of debtors have been used by Shri Sunil Agarwal is front concerns. Enquiries indicate that these were non-existent. Therefore, he generated fictitious debtors in his books of account and deposited the cash realized on sale of the raw material outside the books of account in those fictitious debtors, bank accounts. Through these bank accounts and the debtors, account the assessee has attempted to bring back the cash sales in his books through those fictitious debtors for onwards payment to his creditors. 3. Suppliers confirmations submitted by the assessee indicate that they have given the raw material on credit to the assessee. To make the payment to his creditors the assessee has adopted the above modus operandi by introducing his cash sale into his books of account through the abovementioned three bank account and the fictitious debtors. 4. Moreover, the premises searched clearly showed that he was not having much space to keep such big inventory of stock, which proves that he was making the sale in cash and issuing the bills in the name of the debtors to complete the formalities of the....
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....ying in the aforesaid three bank accounts on the date of search plus an income of Rs. 78 lakhs stated to have been earned in the aforesaid business carried out for a period of two to three years plus profit of around Rs. 26 lakhs earned in the last 2 to 3 years. It was stated by the assessee that commission was earned for arranging business transactions "for indicated parties" and the total undisclosed income earned was Rupees two crores and twenty-six lakhs and the same was voluntarily being offered for taxation for the block period. I may mention that the total of the aforesaid four figures comes to Rs. 2.27 crores. 21. During the course of investigation the assessee was shown certain documents, which included a paper containing details of 23 cheques in the name of certain parties and which was found on the person of one Shri Om Prakash, his accountant. The said accountant stated that the paper was prepared on the directions of the assessee and that the entries were not recorded in the regular books of account. The assessee in turn stated that he had acted as a liaison officer between the concerns listed in the paper and M/s Padmini Polymers Ltd. and had earned an undeclared pro....
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....aking copies of seized materials or after reconciling his own accounts. 25. I would next refer to the statement of Shri Ramesh Minocha recorded on 12th July, 1996 wherein he was queried at length on the purpose of his visit to the office of Shri Rakesh Mahajan, C.A. located at E-95, Amar Colony, New Delhi, and what was the nature of business/work carried on by him. As regards the purpose of the visit, it was stated that there was a matter being dealt with by theC.A.in the Company Law Board in respect of a company belonging to the assessee and insofar as the nature of work was concerned, this was also explained, but the relevant answers bring out the following: (i) That the three concerns, namely, M/s Bhupinder Singh & Co., of which Shri Ramesh Minocha was the proprietor, M/s. New Era Plastic Trading Company, whose proprietor was the wife of Shri Ramesh Minocha, and lastly, M/s Ravi Plastic Moulders, whose proprietor was a friend and nominee of Shri Ramesh Minocha had been shown to have undertaken job work for 5 other concerns and which were stated to have worked for M/s PPL; (ii) That no job work as such had been done by the three concerns of Shri Ramesh Minocha/his wife etc., b....
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.... expenditure at 5p. per hundred rupees was deducted by the assessee on account of book writing as also fees to Chartered Accountant for income-tax assessments etc. That expenditure on printing of bills and conveyance was his own expenditure i.e., Shri Ramesh Minocha. That at present he was not doing any such work of preparing bills without undertaking job work for the assessee or anybody else. That what had already been done was not correct and that he was willing to pay the tax on the correct income for the various years. 26. It transpires from page 15 of the assessment order that Shri Ramesh Minocha categorically appended on the statement recorded on oath that it was without any coercion or pressure and that replies had been given voluntarily. 27. The said Shri Ramesh Minocha by a written communication dated15th July, 1996to the Assessing Officer confirmed various facts with reference to his statement recorded on12th July, 1996at the office of Shri Rakesh Mahajan,C.A.In the said communication he reconfirmed the preparation of bills by one M/s JVS Enterprises, Proprietor Shri Jag Vinay Singh and M/s S.P. Singh & Co., Proprietor Shri Surinder Pal Singh and a perusal thereof shows....
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....ia Plastics and M/s New Fashion Plastics were those of the firm of Chartered Accountants i.e., M/s R.K. Mahajan & Co., whereas the third address was not of Shri Rakesh Mahajan, but of a relative of his; (ix) That the three parties in question were small and petty assessees and the addresses given by them for income-tax purposes were normally those of the C.As; (x) Fees for auditing of the three concerns etc. were stated to have been paid by Shri Gopal Singh; and (xi) That the fact of some concerns doing bogus billing business vis-a-vis the statement of Shri Ramesh Minocha recorded on 12-7-1996 in the office of Shri Rakesh Mahajan came to the latter's knowledge only after the search operation in June 1996. 29. Another statement of Shri Rakesh Mahajan was recorded on2-6-1997from which the following facts emerge: (i) Shri Rakesh Mahajan vide written communication dated 5-5-1997 to the Assessing Officer had asked for time to file the audited balance sheets, profit and loss account and the acknowledgements of filing the returns of income in the cases of Central Plastic Syndicate, New Fashion Plastics, but stated during the course of the recording of the statement that he had contac....
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....lso managed by him. The conclusion, in other words, was that the assessee was the real beneficiary of these accounts and which had been utilised for billing purposes of M/s Padmini Polymers Ltd. 31. At pages 23 and 24 of the assessment order the Assessing Officer vide para 6.15 set out the details of the parties, nature of work as also the quantum of billing for the period 1993-94, 1994-95 and 1995-96, the total thereof coming to a figure of Rs. 62,63,83,781, At the rate of 2 per cent of commission the Assessing Office arrived at a figure of Rs. 1,25,27,676. Considering the assessee's claim for deduction on account of expenditure set out in para 6.16 of the assessment order the Assessing Officer arrived at a net figure of Rs. 95,18,600 for the assessment years 1994-95 to 1996-97 and which was added. 32. It was further observed by the Assessing Officer that documents seized from premises No. F-37, Mansarovar Garden, New Delhi, indicated that the assessee was also involved in arranging bills for transactions between M/s PPL and certain other concerns numbering 10 in all and the period being the assessment years 1991-95 to 1996-97.The total of these was worked out at Rs. 1,23,81,75,....
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.... settled with M/s PPL since the assessee had approached certain parties for the purpose of job work for M/s PPL.; (vii) That Shri Ramesh Minochia had also filed an affidavit before the Income-tax Officer wherein it had been clearly stated that he was under pressure at the time of recording of his statement; (viii) The assessee was not allowed to cross examine various persons whose statements were recorded behind his back and, therefore, what such persons had stated were mere allegations. 35. The main thrust of the arguments of the learned counsel was that presumptions and assumptions drawn by the Department were rebuttable and in this case there was ample material or the lack of it, which could cogently and validly rebut such allegations. 36. The learned Departmental Representative arguing on behalf of the Department before the Division Bench vehemently supported the order of the Assessing Officer. His main arguments were as follows: (i) The assessee had clearly and categorically admitted during the course of the search that he had earned money on account of commission for obtaining job work billing for M/s PPL; (ii) Shri Ramesh Minocha had categorically admitted that he had ....
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....at he had earned a profit of Rs. 2.26 crores, which was not disclosed by him and he further admitted that the three bank accounts bearing Nos. 5825, 5826 and 5827 were opened in the Canara Bank and they were his benami accounts and all incomes, which were not recorded in the books of account were deposited in these three accounts; (iii) The Assessing Officer had gathered the impression that the assessee was indulging in arranging job work for M/s PPL and charging commission at 2 per cent on the entire job work payments and in doing so the Assessing Officer heavily relied upon the statements of Shri Rakesh Mahajan, C.A. and Shri Ramesh Minocha; (iv) That the fictitious bank accounts were opened "in the names of Shri Ramesh Minocha," who was issuing job work bills to M/s PPL, as nobody was ready to issue bills in the unorganized sector; [Portion underlined by me does not appear to be a correct fact]. (v) As per the statement of Shri Ramesh Minocha, the terms of commission were settled through the assessee, who also arranged the payment on account of commission on such bills; (vi) Shri Rakesh Mahajan,C.A., at the time of recording of his statement admitted that the three bank acc....
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....see; (xv) It was quite clear that payments were made on behalf of M/s PPL and not on behalf of the assessee, who only coordinated for getting the job work done for the unorganized sector and billing was done through certain parties, who had issued the bills got their commission after the supply was done by the assessee; and that settling did not mean that the assessee also received some commission; (xvi) That replies to certain questions asked from the assessee at the time of recording of his statement on 6th August, 1996 showed that nowhere had the assessee admitted that he had earned commission; (xvii) It also merited consideration that the assessee had sought time to reply on the ground that he could do so only after reconciling the papers. That this showed that copies of the material seized by the Department were not made available to the assessee for his proper reply and only some papers were shown; (xviii) That certain observations in the order of the Assessing Officer as also certain portions of the statements of Shri Ramesh Minocha and Shri Rakesh Mahajan, C.A. showed that these persons also confirmed that the work was done for M/s PPL and not for the assessee; (xix) T....
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.... in the case of Kishinchand Chellaram for the proposition that where such an opportunity is not allowed, then addition cannot be made. According to the learned Judicial Member, the situation in the assessee's case was more favourable, than the case before the Hon'ble Supreme Court since statements of Shri Ramesh Minocha and Shri Rakesh Mahajan were recorded behind the back of the assessee, and request for cross examination was not acceded to. The other decisions relied upon by the learned Judicial Member were as follows: (i) Hanuman Agarwal's case; (ii) Gargi Din Jwala Prasad's case; (iii) CIT v. Ashok Leyland Ltd. [1969] 72 ITR 137 (Mad.). 42. The decisions relied upon by the learned Departmental Representative were also adverted to by the learned Judicial Member and which included:--Durga Prasad More's case 43. A perusal of the order of the learned Judicial Member shows that the decisions relied upon on behalf of the assessee were found to be squarely applicable whereas those relied upon on behalf of the Revenue were found to be not applicable/distinguishable. 44. As regards the addition of Rs. 25,11,742, the learned Judicial Member made the following further observations: ....
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....ork was not done through people who did not make any complaints about the material supplied by the assessee to M/s PPL; (iii) That the General Manager of M/s PPL had admitted that the assessee only coordinated the job work done on behalf of M/s PPL and no commission was paid to him; (iv) That Shri Ramesh Minocha had furnished an affidavit on29th August, 1996retracting from his earlier statement recorded by the Assessing Officer and which was also given under coercion and pressure; (v) That since the assessee as also Shri Ramesh Minocha had retracted from their earlier statements, there was no question of relying on such statements and making an addition thereof; (vi) That a person who had given his statement could successfully retract in view of the judgment of the Hon'ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd.'s; (vii) That the assessee during the recording of his statement on 6th August, 1996 had nowhere admitted that he had earned commission on billing work; (viii) That the Assessing Officer had violated the principles of natural justice inasmuch as he had not confronted the assessee with the statements of Shri Ramesh Minocha and Shri Rakesh Mahaja....
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....bunal in the case of Sadhu Ram Gupta as also certain other decisions to the same effect. 47. In considering the aforesaid submission of the parties with reference to the facts of the case, the learned Accountant Member in para 21 at page 92 of the order set out two broad propositions, which were required to be examined and decided and these being: (i) Whether a person could retract from a statement given earlier, and if so, under what circumstances; and (ii) What was the effect of a situation where the Assessing Officer framed an assessment without confronting the assessee with the material gathered by him. 48. The learned Accountant Member then referred to certain reported decisions beginning with Pullangode Rubber Produce Co. Ltd's case for the proposition that if a person wanted to successfully retract from one's own statement given earlier, it was incumbent upon that person to prove beyond the shadow of any doubt that the statement recorded earlier was incorrect and further it was also incumbent to establish the retraction with cogent reasons and evidence. 49. The next decision was that of the Hon'ble Supreme Court in the case of Thiru John and the learned Accountant Membe....
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....ord by the assessee to establish the genuineness of such a fear. 51. In view of the aforesaid facts, the learned Accountant Member opined that the retraction by the assessee from his earlier statement made at the time of search was not successful. 52. Coming to Shri Ramesh Minocha, the learned Accountant Member noticed that in his statement recorded on12-7-1996he had conceded that he was engaged in issuing the bogus bills in respect of which he was earning commission from the assessee in respect of his three concerns. 53. Further vide letter dated 15-7-1996 Shri Ramesh Minocha confirmed the aforesaid facts and further stated that Shri Jagvinay Singh and Shri Surinder Pal Singh, proprietors of two other concerns were also involved in issuing the bogus bills and such bills were prepared at his own residence. After this the learned Accountant Member referred to the retraction, which took place on29-8-1996wherein the plea was that statement recorded on12-7-1996was under coercion. In applying the law laid down in the case of Pullangode Rubber Produce Co. Ltd's case, the learned Accountant Member opined that the retraction was not successful. According to him if the statement recorded....
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....ed that there was neither any unexplained cash or a bank account which remained to be explained. According to him, the additions in question had been made primarily on the basis of the statement recorded at the time of search and quite a few "additions" had not even been made by the Assessing Officer himself. According to the learned counsel, there was no material on record, which would show or prove that any income had been earned, more so, of the nature indicated by the Assessing Officer. Further according to him there was nothing to show that the assessee had received any money. The further submission was to the effect that the statement of Shri Ramesh Minocha recorded after the search did not relate to M/s PPL and this was also the position in respect of the statement of the C.A. i.e., Shri Rakesh Mahajan. 56. The learned counsel laid much emphasis on the retraction of their earlier statements by the assessee and Shri Ramesh Minocha contending that such retraction was on good ground since the earlier statements had been recorded under coercion and pressure. The learned Judicial Member, according to the learned counsel, had decided the matter considering the direct evidence and....
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.... had rebutted all the adverse facts brought on record. It was the submission of the learned Departmental Representative that the latter was not possible without the former. It was also emphasized by the Departmental Representative that both the learned Members had agreed on a proper opportunity not having been given by the Assessing Officer and the learned counsel for the assessee was wrong in stating that such an opportunity was not asked for. A reference was made to page 63 of the order of the learned Judicial Member. The learned Departmental Representative in fact went on to state that the learned Judicial Member had devoted a good part of his order to the question of opportunity and his observations in para 40 of his order led to only one conclusion i.e., denial of natural justice. 59. It was the further plea of the learned Departmental Representative that once it was held that proper opportunity had not been given, then the only course open was to set aside the matter so that opportunity, which had been denied earlier should be given. According to the learned Departmental Representative, the learned Accountant Member considering the facts of the case, taking into account the ....
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.... the submissions of the assessee's counsel made before the Division Bench that the statements of Shri Ramesh Minocha and Shri Rakesh Mahajan were recorded behind the back of the assessee and no opportunity for cross-examination had been allowed. I may mention that the learned counsel in the present hearing before me categorically stated that no such opportunity had been asked for, but this is belied by the recording of the facts by both the learned Members of the Division Bench in their separate orders. 63. The learned Accountant Member, in my opinion, has tightly opined by taking into account the reported decisions that retraction by Shri Rakesh Mahajan and the assessee from their earlier statements was improper and without any valid ground, more so when relevant facts in both the statements were stated and reiterated and in one of the cases i.e., of Shri Ramesh Minocha, reconfirmed in writing a few days after the recording of the initial statements. According to the Accountant Member, if the statement recorded was under threat or coercion, then could it be said that even voluntary letter written a few days later was under threat or fear or coercion. It is noted from para 25 of t....
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.... introduced by Shri Rakesh Mahajan,C.A.and it clearly emerges that he did not know the three persons at all and he had probably put his signatures on blank introduction forms with the expectation that some professional work for the assessee Shri Gopal Singh would come his way. The said Shri Rakesh Mahajan in his statement did mention about some audit work being done and income-tax returns being prepared and books in respect of which were left at his office by Shri Gopal Singh; and (v) Coming to Shri Ramesh Minocha he also in his initial statement confirmed receiving commission on billing work and which according to him was received in cash from the assessee. He also referred to Shri Gopal Singh, the trusted employee of the assessee being instrumental in preparation of bill books etc. and there is also a mention of the signatures of Shri Ramesh Minocha, appearing on blank cheques. In other words, there is a "relationship" between Shri Rakesh Mahajan and the assessee through Shri Gopal Singh and similarly between Shri Ramesh Minocha and the assessee, once again through Shri Gopal Singh. 66. I would like to emphasize on the facts of the present case that the statements of the assess....