TaxTMI 
TaxTMI 
2002 (5) TMI 208
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....p; Asst. year 1995-96 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 1....
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....income for the block period. No return was submitted within the time allowed 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 ImpexI....
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....ned that Rs. 86 lakhs also was to be deposited in Canara Bank,Arya Samaj Road, 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 give....
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....s from regular source. It was further explained that trading and profit & loss 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 ....
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....tion of one Shri Rakesh Mahajan, Chartered Accountant, who also admitted that the 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 repl....
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....cha who was Proprietor of M/s. Bhupinder Singh & Co. was also recorded. Statement of 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 b....
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....re there which might have kept by the assessee for getting their accounts settled with 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 commiss....
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.... Rs. 25,11,748 and added it to the income of the assessee as undisclosed income. The same submissions 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 w....
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....was further stated that assessee is maintaining regular books of account and Board's circular is 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 ....
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.... in his grounds of appeal that, whether these grounds are out of purview of Chapter XIV-B for the purpose of 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. 8....
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....997is also explained. Further replies were filed in regard to letters dated7-7-1997and9-7-1997. In this letter 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 ....
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....in the name of my wife precise details of this locker shall be submitted shortly 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 &....
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....we will find that there was an admission of unexplained investment in construction at G-73, Kirti Nagar, Delhi which was to the tune of Rs. 7.5 lakhs; 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....
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....fficer that there was a reason to locate the intermediary parties because there was a requirement of Sales-tax Department, as the Sales-tax forms were 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 recor....
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....the shape of cheques to me and thus no addition on this account should be made. Further to the submissions made in this letter, I wish to submit again 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....
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.... 5. Perusal of the books of account/documents seized, three bank accounts No. 5825, 5826 and 5827 and the bank accounts of the debtors also indicate that payments were made 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 a....
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....bsp; 2252/PNB M/s. Rayco Engg. Syndicate 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 ....
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....aid anything about the sale out of cash sale proceeds, which includes Rs. 86 lakhs and the same was part of the compilation chart placed at paper book page 115. The Assessing Officer had admitted in his order that assessee has 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 additio....
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....-- "That the surrender was made with mistaken belief and without looking into books of account and without understanding law and also I was compelled by the occurrence of various circumstances and perturbed by events of search 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....
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....e the entire amount lying in banks, that was about Rs. 37.56 lakhs and Rs. 86 lakhs, which was to be deposited in the bank on 20-6-1996 for honouring the cheques issued by assessee on a previous date was seized. These cheques, which were 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 ba....
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....months, the assessee submitted revised returns showing reduced income by excluding investments in deposits on ground that they did not belong to her and were made at the behest of her father-in-law. The Assessing Officer, however, rejected the 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 amou....
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....ooks of account can be explained that it cannot be presumed that income or wealth assessed on the basis of book entries are correct. Therefore, the assessee has to be given an opportunity to show that the books of account do not disclose the correct 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 wa....
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....ror, originally committed by giving a different version of truth. In the absence of any other material apart from the original admission, there is nothing to support the addition. It is not possible to agree with the CIT(A). Accordingly the Assessing Officer 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 ....
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....es are tallied with the purchases as there is a clear finding of the Assessing Officer. Chart was produced before him which was accepted and no separate additions were made. Therefore, in view of all these facts and circumstances and in view of the legal position, 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 ....
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....10 in paragraph 6.1, the Assessing Officer has reproduced the part of the statement given on20-6-1996. For the sake of convenience we reproduce the reply given by the assessee in regard to question No. 34: "Ans. Yes, I have gone through Annexures and on oath, I confirm 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....
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....hri Ramesh Minocha and Shri Rakesh Mahajan and gathered impression on the papers found from the possession of Shri Om Prakash and the admission of Shri Om Prakash that he prepared the accounts on the instructions of Shri Sunil Agarwal, the assessee. Otherwise there is no 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....
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....e proceedings of the case of Shri Sunil Agarwal. The reply of summons under section 131 was filed vide letter dated29-8-1996by the proprietor of M/s. Arun Moulders. Copy of the same is placed at page 42 of the paper book. By this letter it was informed to the department that the assessee is engaged 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 material....
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....ne from other parties. I was getting complaints from M/s. PPL that my raw material quality is not good and their Jobber are complaining about the same to them. However, the quality of my raw material was of a good standard. I feared that if action is not taken by me, I might lose the business from M/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. S....
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..... Ans.: I will be in a position to reply only after taking copies of seized material and checking from bank statements. Q. No. 15: Page 25 of these documents (Annexure A1, party 6) is a computer print out giving details of cash deposited into Banks for3-6-1996to15-6-1996. The Banks are Canara Bank, PNB, SBBI, UBI & Bom. Please inform 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 p....
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....found. We have also seen that these accounts were found with various parties i.e., Rakesh Mahajan and Ramesh Minochaandhis associates, but no paper was found with the assessee. The assessee clearly stated that he can only reply after seeing these papers and after reconciling these papers, otherwise he is not in a position to say anything. We 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 Maha....
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....g of any commission, rather he has categorically denied that he has not earned any commission, only he coordinated with M/s. PPL. 42. Regarding cross examination the assessee has requested to cross-examine Shri Rakesh Mahajan and Shri Ramesh Minocha, but no opportunity was given. In the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713, 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 al....
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....ax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross examine the manager of the bank with reference to the statements made by him. Nor was there any explanation regarding what happened when the manager appeared 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 ....
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.... assessment was vitiated by violation of principles of natural justice, as the permission given for cross examination of the witnesses was illusory. 46. In case of Smt. Rajrani Gupta. At page 160, the Tribunal has observed that though deposition of patients were taken before assessee but he was not given opportunity to cross examining them before making addition, 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....
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....ceived by cheques and earlier statement should not be taken into account as the same was given under pressure. The assessee has not stated anything by filing any document. He explained the position where it was stated that neither any assets were found nor any other evidence which goes against the assessee was found. If any evidence was found, that was in favour of assessee, 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 s....
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....esh Mahajan, where certain cash were deposited out of cash sale proceeds. This issue we have already discussed while disposing of the addition of Rs. 86 lakhs, where we have found that cash proceeds were out of cash sales which were duly accounted for. No other evidence was found, which shows that assessee has done any billing business of trading activity for others. Neither there 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....
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....those facts we would like to repeat here. Facts were that the statement of Shri Sant Kumar Sharma was recorded by the Income-tax Officials at Bombay and copy of that statement was sent to the Assessing Officer here at Delhi and on the basis of that information, the Assessing Officer raised certain queries to the present assessee and the same was replied by stating that assessee and 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 ca....
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....g the return, in which the deduction under section 80HHC was claimed, then in that situation also that amount cannot be assessed in two hands. One more reason for not sustaining the addition here is that when one person has already disclosed the income in his regular return, then it cannot be treated as undisclosed income in the hands of other person because the same amount has already 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 ....
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....e by the Assessing Officer spread over assessment years 1994-95 to 1996-97 on account of commission on billing on job work and contract work. In the 3rd ground the assessee's grievance relates to the addition of Rs. 25,14,742 made by the Assessing Officer spread over financial years 1993-94 to 1996-97 on account of billing commission on trading activities. 3. The facts in brief are that the assessee 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-....
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....i Anil Oberoi. (4) M/s. JVS Enterprises, prop. Jagvinay Singh. (5) M/s. S.P. Singh & Co., proprietor Shri Surinder Pal Singh. The Assessing Officer during the course of search operations recorded the statement of Shri Ramesh Minocha on12-7-1996, in which he submitted that he was the proprietor of M/s Bhupinder Singh & Co. and in M/s. New Era Plastics, his wife was proprietor and in M/s. Ravi Plastic Moulders, 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 fr....
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....hey are not in my handwriting. Q. No. 10: Was any commission was paid for Document of Bills? Ans.: I don't remember. Q. No. 11: On Page 251, Annexure A-17, Party No. 7, Account of New Era Plastic, Bhupinder Singh, JVS Enterprise S.P. Singh & Co. for year 1994-95 is given. The total is Rs. 10,54,37,339.20. The amount of commission for the first stage @ 7 P = 73806 & 2/3A stage C@ 7+12 P. (Per Rs. 100) = 2,00,330 matches 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 ....
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.... spread over in three assessment years viz., 1994-95, 1995-96 and 1996-97. 10. The Assessing Officer noticed on the basis of seized documents at page Nos. 14 and 15 of Annexure "A1", as per Panchnama drawn on20-6-1996that the assessee was also involved in arranging the bills for transactions between M/s PPL and ten other concerns and also for some other concerns also. He worked out the total of these transactions at Rs. 12,34,32,045. 11. The assessee vide 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 th....
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....urt in the case of Kishinchand Chellaram he contended that the additions made on the basis of statements given by Shri Ramesh Minocha and Shri Rakesh Mahajan, Chartered Accountant should be deleted because these statements were not confronted to the assessee and no opportunity was given to the assessee to cross-examine these two persons. He also relied on some other judgments for the proposition that the addition made by the Assessing Officer under these circumstances, 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 orig....
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....er any person can retract from his statement and if so under what circumstances. And, secondly, what is the effect of the situation where the Assessing Officer frames the assessment without confronting the assessee with the material gathered by him. 22. The main cases relied on by the learned Counsel for the assessee in respect of validity on retraction is that of Pullangode Rubber Produce Co. Ltd. In this case it was held that admission by a person is an extremely important piece 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 a....
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....e assessee that he has not earned any commission at all, he would not have claimed deduction on account of expenses from the Assessing Officer, which was duly allowed. Then the assertion of the assessee that he had to coordinate between M/s PPL and the labour employed in the unorganised sectors in view of his fear that M/s PPL may not stop lifting the goods from him as they were the largest buyers procuring around 70% of the goods sold by him. Nothing has been brought on record by the 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 J....
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.... appellants to show cause why penalty should not be imposed on them, did not cease to be operative because the Appellate Assistant Commissioner pointed out an illegality which vitiated the proceedings after they were lawfully initiated. It was further held that the Income-tax Officer was well within the jurisdiction to continue the proceedings from the stage at which the illegality had occurred and to assess the appellants to a penalty, if any, which the circumstances of the case may require. 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 section....
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....o be cured from the point from where it had occurred. In the case of Bhagwat Prasad v. CIT[1998] 97 Taxman 294 (All.), it was held as under:-- "Assessment order which was made in violation of the requirements of section 144B and otherwise also in breach of the principles of natural justice suffered from a procedural irregularity which was curable." Taking into consideration the entire conspectus of the case, I am of the considered opinion that there is no point in deleting the additions made by 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 questi....
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.... 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?" THIRD MEMBER ORDER R.M. Mehta, Vice President.--The following questions have been referred to me under section 255(4) of the Income-tax Act, 1961:-- "1. Whether on the facts and in the circumstances of the present case the addition 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 req....
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.... of Canara Bank, Karol Bagh, being carried by one, Shri Gopal Singh and the assessee confessed the ownership of this cash and stated that it represented his undisclosed income from trading in plastic raw material. He also offered for tax purposes a total amount of Rs. 2.27 crores which included the said sum of Rs. 86 lakhs. 8. During the course of search the statement of the assessee was recorded i.e., on 20-6-1996 and in response to Q. No. 11 he detailed the modus operandi which led to the generation of the said amount, but there was a categorical 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....
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....bsp; Sh. Kishore Kumar, E-95, Amar Colony, Prop. M/s. India Lajpat Nagar-IV, 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....
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....n their bank accounts. 18. The ultimate conclusions drawn by the Assessing Officer vide paras 5.13 and 5.14 of the assessment order were as follows: "5.13: Keeping in view the submission of the assessee, examination of books of account enquirie conducted by the department during the course of search and thereafter, the following facts emerge: 1. It is a fact that the raw materials, purchased by the assessee, have been duly accounted for in the books of account and purchases were made on credit and the alleged payments were made by cheques, by using the above three accounts and bank 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.....
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....in the statement and answer thereto and the reproduction is at pages 10 and 11 of the assessment order. The assessee in fact accepted that current bank accounts bearing Nos. 5825, 5826 and 5827 in Canara Bank, Arya Samaj Road, were in reality his benami accounts and all money lying therein belonging to him. Jt was also stated by him that the amounts lying deposited represented his undisclosed income not recorded in the regular books of account. The following items were indicated i.e., a sum of Rs. 86 lakhs seized from Shri Gopal Singh on 20th June, 1996 at the bank premises plus the sum of Rs. 37 lakhs lying 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 fo....
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....ordinated with persons in the unorganized sector from whom he got the goods manufactured for M/s PPL. The further explanation was that in cases where proper bills were not available or some or the parties refused to accept cheques for the work done by them, then there was a possibility that bills had been obtained from parties, who had not done any work and which in fact was done by persons in the unorganized sector. 24. As regards specific queries raised in questions beginning No. 9 and ending with No. 16 the assessee either did not give any reply or explanation on the ground that he could only do so after taking 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....
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.... that he i.e., Shri Ramesh Minocha only prepared bills. That all books of account and bill books were kept and controlled by the assessee; (ix) That although income-tax returns had been filed for assessment years 1994-95 and 1995-96 in respect of the three concerns of Shri Ramesh Minocha he did not remember how the expenses had been shown since the accounts were prepared by and on behalf of the assessee and he i.e., Shri Ramesh Minocha only singed the relevant papers for income-tax assessment through Shri Rakesh Mahajan, C.A.; and (x) As regards the expenditure against the commission income, which was @ 40p. per hundred rupees, 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....
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....ress was filled up subsequent to the signatures being attested and the forms were handed over to Shri Gopal Singh; (vi) There was no correspondence/communication between Shri Rakesh Mahajan and the said three parties on the one hand and between Shri Rakesh Mahajan and the bank with reference to the opening of the bank accounts; (vii) That Shri Rakesh Mahajan merely filled up the "introduction" part of the bank account opening forms in Canara Bank, Karol Bagh, which included his name, account No. and address and the names of the parties, their occupations and addresses were left blank and filled up latter on; (viii) That addresses given by M/s India 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 busin....
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....t order highlighted the alleged system of bogus billing carried out by the assessee and there is a detailed discussion the documents seized from certain premises of Delhi as also from a scooter, which was in the possession of Shri Gopal Singh. On the basis of the seized material and further investigations the Assessing Officer came to the conclusion that various concerns had not done any activities of alleged job work/moulding work or trading activities and these were found/alleged to have done billing work only. It also came forth that bank accounts of all these numerous parties had been introduced by the assessee and his associates and that the transactions of billing were also 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 Asse....
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....r and which included Shri Ramesh Minocha; (iv) That M/s PPL had also confirmed that they had not paid any commission to the assessee and the General Manager of M/s PPL, whose statement had been reccorded had also admitted that the assessee coordinated with them for the purpose of job work; (v) There was no direct evidence with the Department, which would show that the assessee had earned commission at 2 per cent for the purpose of billing on account of the job work for M/s PPL; (vi) Assessee's name was found nowhere in the papers found during the course of the search although the names of other parties were mentioned and which might have been kept by the assessee for getting the accounts 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 allegatio....
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.... Co. Ltd's case (ii) S. Arjun Singh's case (iii) Smt Rajrani Gupta's case. 39. The same submission as highlighted aforesaid were made by the parties in respect of the addition of Rs. 25,11,742 the earlier ones relating to the addition of Rs. 95,18,600. 40. The learned Judicial Member, who wrote the initial order proceeded to delete both additions amounting to Rs. 95,18,600 and Rs. 25,11,742 on the following facts and line of reasoning: (i) That the addition was made on the basis of documents found from the possession of one Shri Om Prakash as also the statements recorded of Shri Ramesh Minocha and Shri Rakesh Mahajan,C.A.; (ii) The assessee had admitted during the recording of his initial statement on 20th June, 1996 that 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....
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....d and both of them confirmed that the assessee had coordinated/assisted in the job work for M/s PPL through the outside parties and there was no mention in the order of the Assessing Officer that these senior officers confirmed paying, commission on account of job work; (xiv) That a reading of letter dated 29th August, 1996 sent by the proprietor of M/s Arun Moulders in response to issue of summons under section 131 by the D.I. [Investigation] led to the conclusion that the job work was done on contract basis in the unorganized sector and the same was done on behalf of M/s PPL and the same was routed through certain parties, which were issuing bills and charging commission. That charging of commission was not disputed, but that it was only settled by the assessee; (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 ....
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....tracted from his earlier stand; (xxvii) That the assessee requested for opportunity to cross examine the persons, who had given statements against him, but which was not allowed by the Assessing Officer; and (xxviii) If there was any beneficiary on the aforesaid facts and circumstances, then it was either Shri Rakesh Mahajan or Shri Ramesh Minocha, but not the assessee. 41. In addition to the aforesaid facts and reasoning, the learned Judicial Member dealt at length with the "legal position" on the question of retraction and this spans paras 41 to 53 of his order. In para 42, the learned Judicial Member reiterated the request of the assessee for cross examining Shri Ramesh Minocha and Shri Rakesh Mahajan, which was not allowed and referred to the judgment of the Hon'ble Supreme Court 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 ....
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....ditions aforesaid. The relevant facts of the case have been discussed by him in his order beginning at page 82 and the relevant paras being 3 to 12. A close reading of these shows that his recording of facts is quite identical and does not differ from the order of the learned Judicial Member. The submissions of the parties are recorded thereafter and these, in my opinion, are relevant and required to be referred to as under: On Behalf of the assessee:-- (i) That the initial statement of the assessee should not be considered as the same was given under pressure and coercion; (ii) The assessee had stated that he had coordinated with M/s PPL only because the said M/s PPL was buying 70 per cent of the material sold by the assessee and there was an apprehension that the assessee may lose the customer in case the job work 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, 1996r....
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....As regards the statement of the General Manager of M/s PPL to the effect that no commission was paid to the assessee the submission was that commission could be paid either by the payer or the payee i.e., the latter being the persons in the unorganized sector, who did job work for M/s PPL; (vii) The assessee himself had admitted at the time of search that he had earned commission @ 2 per cent and there was, therefore, no case for the assessee to retract from his earlier statement; and (viii) As regards the retraction by Shri Ramesh Minocha, the submission was that it was not permissible in law to retract from one's own statement in such a light manner merely saying that the statement recorded earlier was under coercion. 46. The learned Departmental Representative on behalf of the Revenue relied on the judgment of the Chandigarh Bench of the Tribunal 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....
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....d in his earlier admission on 20-6-1996 he had nowhere stated that he had earned the commission from M/s PPL although there was no dispute about the fact that M/s PPL had given a certificate to the effect that they had not paid any commission; (v) There were many people in the unorganized sector, who at the instance of the assessee did job work for M/s PPL and if the assessee had not received any commission from M/s PPL he might have received the same from such other persons; (vi) The assessee himself had made a claim for deduction on account of expenditure before the Assessing Officer and this would not have been done in case he had not earned any commission at all; (vii) The assessee had stated that he had to coordinate between M/s PPL and the persons employed in the unorganized sector apprehending that M/s PPL may stop dealing with him, but nothing was brought on record 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 Accounta....
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....ficer and he could reply only after taking copies of the seized material and on examination of the accounts of the transactions related thereto. According to the learned Accountant Member the Assessing Officer made the additions without confronting the assessee with the seized material. This was also a ground on which the matter was restored back to the file of the Assessing Officer. 55. Before me the learned counsel for the assessee vehemently supported the order passed by the learned Judicial Member in respect of the first point of difference, which contains the two additions discussed at length in the earlier part of the present order. I would like to go to the extent of saying that the learned counsel reiterated the submission made at the time of hearing before the Division Bench and which have been duly taken note of by the learned Members in their separate orders. It was emphasized 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 Offic....
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....434 (Cal.); (v) Pathikonda Balasubba Setty v. CIT [1967] 65 ITR 252 (Mys.); (vi) Sona Builders v.UnionofIndia[2001] 251 ITR 197 (SC); and (vii) Kishinchand Chellaram's case. 58. The learned Departmental Representative, on the other hand, supported the order passed by the learned Accountant Member. It was submitted by him that the learned Judicial Member had deleted the additions on two grounds, the first being that proper and adequate opportunity had not been given by the Assessing Officer and the second being that the assessee had successfully rebutted all the adverse facts brought on rccord by the Assessing Officer. According to the learned Departmental Representative, there was a clear contradiction in the order of the learned Judicial Member in respect of the aforesaid two grounds inasmuch as on the one hand it was being held that proper opportunity was not given and on the other the assessee 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 pr....
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....parties before me as also the Division Bench have been duly taken into account along with the weighty paper book filed at the stage of the earlier proceedings before the Division Bench. 62. In the view of the learned Judicial Member, there is adequate material on record or the absence thereof to delete both the additions and the further view is to the effect that retraction from earlier statements recorded by the Assessing Officer was on good grounds and he in fact agreed with the assessee's counsel when it was contended by the latter that the earlier statements of the assessee as also Shri Ramesh Minocha were given under pressure and coercion. As against this the learned Accountant Member took the view that the retraction was not on any good or valid ground and statements, which had been recorded on oath in the first instance could not be lightly brushed away. The learned Accountant Member also took into account 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 le....
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....retraction" from their earlier statements by the assessee and Shri Ramesh Minocha was not on sufficient ground. No doubt, both the learned Members have referred to numerous decisions while writing their respective orders and coming to the point of retraction they have brought out the legal propositions, but in my opinion, the view taken by the learned Accountant Member is the correct one on the facts and circumstances of the case. It must be appreciated that this is a case in which there was a seizure of cash amounting to Rs. 86,00,000 and the assessee straightaway offered for taxation a sum of Rs. 2.27 crores. Three bank accounts in the name of three different persons were unearthed by the Department and the assessee in his initial statement accepted that these were his benami accounts. The huge amount of cash was seized from one Shri Gopal Singh, a trusted employee of the assessee; (iv) The aforesaid three bank accounts were 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....