TaxTMI 
TaxTMI 
2003 (5) TMI 210
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....transactions. The complainant in the complaint is said to have informed the Deptt. that the payment paid to three companies was in fact withdrawn from their bank account and, thereafter paid back to the assessee. In this background it was informed that the payment of commission was not genuine. Consequent to the receipt of information, proceedings under section 148 were initiated and the statement of one Mr. M.K. Meattle who as stated above are the common MD of the three companies referred to above, was recorded. 2. Apart from the statement of Mr. Meattle, the statement of another person, namely, Mr. A.K. Jhunjhunwala who is stated to be the Chartered Accountant and claimed to be relative of Mr. M.K. Jajodia the MD of the assessee company was also recorded. The gist of the statement of these two persons were that the payment of commission to these three companies, namely EIP, TIP and BCP was not genuine and the basis as to how commission was not genuine was explained by these persons. In their statement recorded these persons explained that the amount of cheques for commission were deposited in the bank account(s) of the three companies and, thereafter, the amounts were withdrawn ....
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.... CIT(A) where also the assessee lost. 5. Having lost at two places the assessee filed appeals before this Tribunal for the 3 assessment years separately which appeals of the assessee were disposed of by this Tribunal vide order dated24th December, 1993with the following observations:-- "We have carefully considered rival submissions of the parties. We have also gone through request of the assessee dated13-3-1990filed before the Assessing Officer seeking time to cross-examine Shri Meattle. In our considered opinion, the Assessing Officer on peculiar facts of the case should have granted some more lime to assessee to gather material needed for proper cross-examination of Shri Meattle. The request made appears to be bona fide and should have been accepted. We further find from the record that assessee raised a grievance in its written submissions to the CIT(A) that reasonable opportunity was not provided by the Assessing Officer and the same be now provided. The aforesaid request should have been accepted to meet the ends of justice; but as already noted, learned CIT(A) rejected the request and confirmed the disallowance. It is thus clear that disallowance of commission in the three....
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..... Jain attended. The record transpires that they were asked to cross-examine Mr. Jhunjhunwala. On being asked by the Assessing Officer to cross-examine Mr. Jhunjhunwala, they categorically refused to cross-examine on the ground that he was stranger to the transaction and without questioning Mr. Meattle there was, according to the assessee, no useful purpose is going to be served by cross-examining Mr. Jhunjhunwala and in this background they declined to cross-examine Mr. Jhunjhunwala. Mr. Meattle any how did not turn up till4 PM. Before the Assessing Officer, the counsel for the assessee stated that they cannot wait for long for Mr. Meattle to appear and in this background left the office of the Assessing Officer at4.05 PM. From the facts on the accord it transpires that as far as Mr. Meattle was concerned, the summons sent to him at his last known address was received back unserved. As the summons were received back unserved the Assessing Officer made a request to the DDI (Inv.), Bombay to trace these witnesses and ask them to attend before the Assessing Officer for the purpose of cross-examination. Anyhow before the dates were fixed for cross-examination which was27th February, 1....
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....ied with by the Assessing Officer the entire proceedings emanating from the order of the Assessing Officer by which he had made the reassessment to the order of the CIT(A) and so on and so forth is a nullity and void ab initio. Mr. Ganeshan further contended that in this background the original assessment made under section 143(3) needs to be confirmed. In support of his contentions Mr. Ganeshan relied upon various judgments:-- 1. Bhopal Sugar Industries Ltd. v. ITO [1960] 40 ITR 618 (SC) 2. Dwarka Nath v. ITO [1965] 57 ITR 349 (SC) 3. C. Vasantlal & Co. v. CIT [1962] 45 ITR 206 (SC) 4. Dhakeshwari Cotton Mills v. CIT 1955 SCR 941 (SC) 5. CIT v. East Coast Commercial Co. Ltd. [1967] 63 ITR 449 (SC) 6. Chuharmal v. CIT [1988] 172 ITR 250 (SC) 7. Vimal Chandra Golecha v. ITO [1982] 134 ITR 119 (Raj.) 8. Addl. CIT v. Jay Engg. Works Ltd. [1978] 113 ITR 389 (Delhi) 9. STO v. Uttareswari Rice Mills [1975] 89 ITR 6 (SC) 10.StateofMysorev. Shivabasappa Shivappa Makapur AIR 1963 SC 375 11. M.K. Thomas v. State ofKerala[1977] 40 STC 278 (Ker.) 12. State ofKeralav. K.T. Shaduli Yusuff [1977] 39 STC 478 (SC) 13. Mahindra Nath Chatterjee v. Collector of Central Excise 1977 Tax LR ....
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....or the adjudicating authority to determine and not for the parties to decide. The ld. DR submitted that whenever a witness is produced his testimony is either to be accepted or rejected. The submission of the ld. DR was that if the testimony is not dislodged by cross-examination it has to be taken as correct which is the case here. Having not done so, the ld. DR contended that it does not lie in the mouth of the assessee that a statement cannot be read in. The ld. DR pressed into services in support of his arguments the provisions of sections 137 and 138 of the Evidence Act. The ld. DR contended that though the provisions of Evidence Act are not applicable, but the principles so led in the Evidence Act can be applied. The submission of the ld. DR was that the recording of the statement which is called Examination-in-Chief and an opportunity to cross-examine fall within the ambit of the Evidence Act. The assessee having not availed of the opportunity to cross-examine the consequences so enunciated in the Act and the law laid down by various court that the statement will be read as a whole to be correct shall be attracted. Referring to the non-availability of Mr. Meattle, the ld. DR ....
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....d of situations and no others. After having drawn our attention to the section 33 of the Evidence Act and also to the fact that the assessee had been granted an opportunity in the earlier stages of the proceedings to cross-examine, having not availed of the same, it is the assessee who is to be blamed and suffer the consequences of the statement made. The ld. DR in support of his contention submitted that though the Evidence Act in turn does not apply but the principles enunciated therein apply. The ld. DR would contend that to cover up such like situations, the principles of the Evidence Act need to be adopted otherwise Jot many good cases shall fail because there are no provision in the Income-tax Act which covers such like situations. 14A. Mr. Ganeshan in rejoinder reiterated the submissions made earlier. 15. We have heard the parties and taken ourselves through the record. Though the issue in this case is very short, but it has taken 20 years already in the corridors of tax authorities, without attaining any finality. We, therefore, feel that the issue must attain its finality. In this background when we examine the issues involved in these appeals, we find that they revolves....
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....om. He said that M/s.Rogerswill give a business of Rs. 1 crore commission and my hawala charges of 1% shall be paid at the time of final check of Roger to any of my companies. He and myself used to come toDelhiby morning flight of6 AMand used to go by evening flight together and these can be verified from the Indian Airlines records. Regarding bank A/cs I opened a current A/c inPNB Barakhamba Road,New Delhiand SBI, Kasturba Gandhi Marg,New Delhiof M/s. Excavator & M/s. Triveni and the A/c of M/s. Bahri & Co. was opened in Union Bank ofIndia, Church Gate Branch,Bombay. M/s. Roger also had a/c in all these three banks named above. I do not remember the A/c No. because my records were destroyed in the collapse of Akashdeep buildings on 5th of August, 1983 when the entire building collapsed. In this premises all these three companies had branch office. The exact amount of commission received by my companies can be obtained from my bank account which were specifically opened for the purpose of adjustment as staled above. The modus operandi was Mr. A.K. Jhunjhunwala used to take a blank signed cheque from me and fill up the figure by his own handwriting as well as on the pay in slips for....
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....nk Amount 508887 23-7-1981 SBI, New Delhi 17,10,894.08 508891 12-8-1981 SBI, New Delhi 16,19,268.40 --------------- 33,30,162.48 --------------- 657160 16-3-1982 11,45,982.90 --------------- (3) M/s. Bahri & Co. (P.) Ltd. Ch. No. Date Bank Amount 412054 19-10-1981 UBI, Bombay 7,00,000.00 412055 19-10-1981 UBI, Bombay 3,47,810.60 --------------- 10,47,810.60 --------------- So, a total of Rs. 77,09,997.75 was paid as commission to your companies, as detailed above by M/s. Rogers Enterprises Pvt. Ltd. Please explain at what rate these commissions were computed and what sort of services were supposed to have been rendered by your companies. Also do affirm that three cheques were issued to your companies and as stated above there were hawala entries. Ans. As explained above Shri A.K. Jhunjhunwala, a CA and a relation of Shri M.K. Jajodia approached me inBombayand settled the deal as stated above. All the above cheques although numbers and amount I do not remember can be verified from the A/cs in the banks as stated above of my companies. Only thing that I can say that these were transfer cheques of hawala only and no real commission was paid to these companies ....
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....nk signed cheques issued by him from his companies which were available with Mr. Jhunjhunwala were utilized and the amounts were withdrawn by cash and the cash was paid to the assessee. From the perusal of the above statement it is also clear that Mr. Meattle had admitted that he was not concerned with the withdrawal or deposit of the cash because he was to get only one per cent commission on the completion of the business to the tune of Rs. 1 crore. Mr. Meattle also admits that he was not paid any commission because he could do business to the tune of Rs. 80 lakhs. A perusal of the statement of Mr. Meattle reveals that he filed a complaint as the assessee did not make the amount agreed to. That apart, Mr. Meattle also admits that he has not shown any income from these transactions that nothing has paid and the commission cheques issued byRogersin the name of his companies were only Hawala entries. On the correspondence he says that my signatures was obtained on the letter head and beyond that he has not himself written any letter and says that everything was managed by Mr. Jhunjhunwala. 17. In the light of the statement made by Mr. Meattle, it is very clear that both he and Jhunj....
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....Did you have any authority to withdraw the same? Ans. I was handed over a bearer cheque by one of the man of Shri M.K. Jajodia and I withdrew the cash amount and handed over to that man as per the telephonically instructions of Shri Jajodia. Since it was a bearer cheque duly signed by the drawer, so there is no question of any authority. Qn. 14. Who was the drawer? In other words whose signature was there on the bearer cheque? Ans. I cannot remember and I was not interested in reading the signature, etc. as I was simply following instructions. Qn. 15. If the cash was to be withdrawn and handed over to the man who had given you the cheque, logically speaking that man would have done the needful. There was no reason why you came in the picture. Could you please throw some light on this? Ans. I don't know what was the reason for asking me to withdraw the money but the fact remains that the cash was handed over to his man. Qn. 16. Who was "this man"? Ans. I think it was one Mr. Lok Nath. Qn. 17. Did you take any receipt from his man Shri Lok Nath? Ans. No. I was just following the instruction. Qn. 18. How much was the amount in cash handed over to Shri Lok Nath? Ans. I don't....
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....without any threat, coercion or force. Sd/-XX 30-11-1990 (A.K. Jhunjhunwala) Before me. Sd/-XX 30-11-1990 (Abhay K. Sinha) ADIT (Inv.) HQ-II, Aayakar Bhawan,Bombay" Statement under section 131 "Statement of oath/solemn affirmation recorded from Shri A.K. Jhunjhunwala son of Late Shri M.P. Jhunjhunwala on15-3-1995at11 AMduring the course of search proceedings at 408, Aaykar Bhawan. Oath Administered Sd/-XX 15-3-1991 (A.K. Jhunjhunwala) Qn. 1. Do you know the companies in the names M/s. Excavator India Pvt. Ltd. & M/s. Triveni International Production Pvt. Ltd.? Ans. No. Qn. 2. Do you know Mr. M.K. Meattle? Ans. Yes. Qn. 3. Did he give you any blank cheques duly signed by him as director of M/s. Excavator India Pvt. Ltd., M/s. Triveni International Production Pvt. Ltd. or M/s. Bahri & Co. (P.) Ltd.? Ans. No. I was handed over such cheques by Mr. Loknath Saraff of M/s. Roger Enterprises Pvt. Ltd. Qn. 4. What did you do with these cheques, which were blank and signed by Shri M.K. Meattle? Ans. As per the instruction of Shri Loknath Saraff, I filled in the amounts and withdrew cash amounts and handed over the cash amount to Shri Loknath. Qn. 5. For which banks, di....
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....structed by Shri Jajodia to withdraw the cash and handover to him, which I did. Qn. 11. I show you the photocopies of following: (i) Cheque No. B/A06/50 399452, SBI,Kasturba Gandhi Road, dated23-7-1981, Amt. Rs. 7 lakhs. (ii) Cheque No. B/A06/50 399451, SBI,Kasturba Gandhi Road,Delhidated23-7-1981, Amt. Rs. 8.50 lakhs. (iii) Cheque No. B/A06/50 399453, SBI,Kasturba Gandhi Road, dated24-7-1981, Rs. 1,50,000. (iv) Cheque No. B/A06/50 399453, SBI,Kasturba Gandhi Road,Bombay, dated12-8-1981, Amount. Rs. 5,50,000. (v) Cheque No. B/A06/50 399456, SBI Kasturba Gandhi Road, Bombay, dated 12-8-1981, Rs. 10,00,000. (vi) Cheque No. B/A06/50 399454, SBI,Kasturba Gandhi Road, dated12-8-1981, Rs. 69,061.40. Now you please state whether any of these is written in our handwriting? Secondly, if these are not filled in our handwriting, in whose handwriting the same has been filled in? Ans. Cheques appearing in item Nos. (i), (ii), (iv) and (v) are filled in by me and in my handwriting. About (iii) and (iv), I can't say. Qn. 12. The total withdrawal as per cheques at item Nos. (i), (ii), (iv) & (v) comes to Rs. 31 lakhs. What did you do with the cash withdrawn on self cheques. Ans. Handed ....
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....0. A perusal of the statement of two witnesses reproduced above and the gist of which has been taken reveals that these two witnesses are the witnesses of the transaction and are witnesses of fact. Both these two witnesses say that they have participated in the transaction in one way or the other. We can say that it is not that one witness tries to draw support from the other, but both have their independent roles to perform and have performed the same to achieve one goal i.e., to help the assessee company to justify its claim before the Revenue authorities with respect to the payment of commission which was never, according to these two witnesses, paid. When we examine the evidence, we feel that as far as Mr. Meattle is concerned, the assessee claims to have paid commission to its companies which Meattle denies. How he denies to have received payment is evident that according to him he has neither deposited the cheques nor withdrawn the amount. According to him, he used to sign letters brought to him by Jhunjhunwala on which reliance was placed that there was a correspondence exchanged. Jhunjhunwala says that he has withdrawn the money from the banks and given it to the assessee. ....
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....tial and material case in CE, it must follow that he believed that the testimony given could not be disputed at all. It is wrong to think that this is merely a technical rule of evidence. It is a rule of essential justice. It serves to prevent surprise at trial and miscarriage of justice, because it gives notice to the other side of the actual case that is going to be made when the turn of the party on whose behalf the CE is being made comes to give and lead evidence by producing witnesses. It has been stated on high authority of the House of Lords that this much a Counsel is bound to do when CE that he must put to each of his opponent's witnesses in turn so much of his own case as concern that particular witness or in which that witness had any share. If he asks no question with regard to this, then he must be taken to accept the plaintiff's account in its entry. 23. Keeping in view the legal precedents and the fact that the assessee has refused to cross-examine his witness, we feel that the assessee admitted the statement made by Mr. Jhunjhunwala to be correct and, therefore, chose not to cross-examine him. Whether a witness is stranger or a witness of fact is for the courts to ....
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....ates can be relied upon provided the following conditions are fulfilled:-- (i) Proceedings are between the same parties; (ii) That the adverse party in the first proceedings had the right and opportunity to cross-examine; (iii) The question in issue was substantially the same in the first as in the second proceedings." 26. A close reading of the provisions of section 33 leaves no room to doubt that the statement of a witness who is not available or cannot be round out can still be relied upon provided the conditions laid down in section 33 are fulfilled and the conditions are that the Statement is to be read in, in proceedings between the same parties, the adverse party in the first proceedings had the right and opportunity to cross-examine and the question in issue was substantially the same in the first as in the second proceedings 26A. Examining the statements of Mr. Meattle in the light of the provisions of section 33 of the Evidence Act, we may say that Mr. Meattle made a statement on17th March, 1990. The Assessing Officer granted opportunity to cross-examine and the assessee did not cross examine the witness. The evidence of Mr. Meattle which is now being referred to by t....
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....d. He has narrated the entire facts on which facts the assessee refused to cross-examine when opportunity was granted earlier. Therefore, we have no hesitation in saying that the evidence of Mr. Meattle was complete and applying the ratio of Lahore High Court in the case of Dewan Singh we feel that the evidence given by Mr. Meattle can be read in and we find no force in the arguments of the counsel for the assessee that the statement of Mr. Meattle needs to be rejected. 29. In view of the above discussion we may say that as far as the statement of Mr. Jhunjhunwala is concerned he having not been cross-examined despite being put in the witness box, the statement made in Examinatio-in-Chief has to be accepted and we fail to appreciate as to how does it lie in the mouth of the assessee to come out and say that he is a stranger to the transaction. Regarding Mr. Meattle, we have already said that in the light of the provisions of section 33 of the Evidence Act, his evidence is complete and can be read in. 30. After having held that the evidence of Mr. Meattle and Jhunjhunwala is acceptable, the question that arises is as to whether the rules of natural justice have been complied with ....
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.... judgment is that the ITO is not bound by the rules of evidence. It is open to him to collect the material to facilitate assessment by private inquiry. But if he desires to use the matter so collected, the assessee must be informed of the material and must be given adequate opportunity for explaining it. 34. We do not know in what context this judgment has been filed. In the case in hand, the statement of two witnesses were recorded. The statements were supplied. The opportunity was given to cross-examine the witnesses whom the assessee failed to cross-examine for whatever reasons. The matter travelled to the Tribunal and the Tribunal directed the Assessing Officer to give an opportunity of cross-examination to the assessee. As stated above, this is a case of two witnesses. One witness is not found, the other is not available. The witness who was available is refused to be cross-examined. The other witness is not available. In these circumstances, we fail to understand as to how the material collected by the Assessing Officer has not been brought to the notice of the assessee. We feel that this judgment instead of helping the assessee advances the case of the Revenue which has pla....
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.... in the case of Chuharmal. Before adverting to the judgment we may refer to the relevant paragraphs in the said judgment which is in the following words:-- "Held dismissing the petition and confirming the position of the High Court (i) that assessee meant by saying that the Evidence Act did not apply to the proceedings under the Income-tax Act, 1961 say that the record of the rules of Evidence contained in the Evidence Act was not applicable, but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act in the proceedings before them they were prevented from doing so." 38. When we examine this judgment in the light of the observations of theApex Courtin the para reproduced above, we feel that this judgment help the Revenue and not the assessee. We say so for the reasons that in this case the provisions of section 33 of the Evidence Act has been invoked to justify the reading of the evidence of Mr. Meattle and we say that following this judgment no fault can be found out when the provisions of section 33 of the Evidence Act has been invoked. 39. The other judgment on the issue which was relied upon by the counsel for the assessee ....
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....ssessee for re-assessment proceedings must be brought to the notice of the person concerned and the person concerned must be given an opportunity to answer the same, This judgment also we feel does not advance the case of the assessee as every material available with the Assessing Officer in the form of statement was made available to the assessee. 44. Another judgment on which the assessee placed reliance was the one Shivabasappa Shivappa Makapur's case. This was a case of an inquiry before a domestic Tribunal where in a domestic inquiry statement of certain witnesses were recorded in the absence of the defaulter. The statement of the witnesses was read out to the defaulter and they were given an opportunity to cross-examine the witnesses. It was held in this case that the rules of natural justice in this background cannot be said to be violated. We feel that this judgment also supports the Revenue. The Counsel then relied upon another judgment in the case of M.K. Thomas. Before the Kerala High Court the provisions of section 17(3) of the Kerala General Sales Tax Act came up for interpretation and the Kerala High Court while interpreting the said section observed that in the asse....
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.... and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any material against an assessee without giving the assessee an opportunity to meet it. He is not bound to divulge the source of his information. There is no denial of natural justice if the Income-tax Officer refuses to produce an informant for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case." 49. A perusal of the aforesaid ratio of the judgment reveals that this judgment in all force helps the case of the Revenue. Apart from the judgments referred to above, the assessee relied upon some other judgments copies of which were placed in paper book No. 3. We have also examined those judgments and say that they are on the issues already discussed above and do not advance the case of the assessee. 50. In view of the discussion above, we say that by no stretch of imagination can it be said that the auth....