TaxTMI 
TaxTMI 
2003 (5) TMI 210
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....e 3 years were bogus 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 that the payment paid to three companies was in fact withdrawn from their bank account and, thereafter paid back to the assessee.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 ....
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....lenged in appeal before the 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 disallow....
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....ny Mr. M.K. Jajodia and one Mr. M.K. 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-ex....
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....ctions of this Tribunal have not been complied 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.....
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.... so made. The ld. DR submitted that whether a witness is a stranger or not is for 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 sh....
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....ed that principles laid down in section 33 of the Evidence Act covers these kind 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 backgrou....
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....jodia ofRogershaving office at 3rd floor, Ready Money Chambers,FortBombaynext to Akbar Ali's showroom. 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 sig....
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....bsp; Amount 376247 20-06-1980 SBI, New Delhi 6,59,130.81 90341 15-11-1980 PNB, New Delhi 3,23,265.52 90340 15-11-1980 PNB, New Delhi 12,03,645.42 --------------- &....
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.... 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 &nbs....
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....y Jhunjhunwala. Adj. For cross-examination on13-3-1990and10.30 AM. I undertake come as above. Recorded by me: Sd/ 8-3-90 (S.K. Gupta) ACIT (Asstt.) SpI. Cir. 5(1)" 16. Certain important factors that emerge out of the statement of Mr. Meattle are that it reflects the nature of business of the companies owned by Mr. Meattle. Mr. Meattle stated that apart from hawala he had no other business. That apart he states in his statement that he was contacted by A.K. Jhunjhunwala who claimed to be relative of Mr. Jajodia of M/s. Rogers and who informed him that M/s. Rogers will give a business of one crore and shall be paid a commission of 196 which shall be the hawala charges and the said amount shall be paid at the time of final settlement. Mr. Meattle also admits that the bank accounts in the three banks, i.e., PNB, Barakhamba Road, SBI, KG Marg and UBI, Church Gate, Bombay of the three companies i.e., EIP, TIP and BIC were opened and in all these three bank branches M/s. Rogers had its accounts. Mr. Meattle also in his statement had explained that the working arrangement which, according to him, was that Mr. Jhunjhunwala used to take blank signed cheque from him an....
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....e? Ans. I am partner in M/s. A.K. Jhunjhunwala & Co., Chartered Accountants. I have got professional income apart from small interest and dividend income on some investment, in my individual capacity. Qn. 3. Do you know anything about a company called M/s. Roger Enterprises Pvt. Ltd.,Delhi? Ans. Yes, I know there is the company called M/s. Roger Enterprises Pvt. Ltd.,Delhi. Qn. 4. Are you in any way related to the directors of this company? Ans. There is one director Mr. M.K. Jajodia who is related to me. Qn. 5. Do you have any business relation with the above said company? Ans. No. Qn. 6. Did you ever had any business relation with theCo., i.e., M/s. Roger Enterprises Pvt. Ltd.,Delhi? Ans. No. Qn. 7. Have you ever helped M/s. Rogers Enterprises Pvt. Ltd.,Delhito do any business transaction here atBombay? Ans. No. Qn. 8. Have you even helped M/s. Roger Enterprises Pvt. Ltd.,Delhiin doing any banking transactions such as deposit or withdrawal of cash/cheque atBombayor in some bank branch inBombay? Ans. Yes, at the instruction of Shri M.K. Jajodia. Qn. 9. How did Mr. M.K. Jajodia give instruction to you? Did he write to you in a letter form? ....
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....em. Qn. 22. How did you recognize him? Was he ever introduced to you by Shri Jajodia? Am. Yes. He was introduced to me by Mr. Jajodia. Qn. 23. Do you know one concern called M/s. Bahri & Co. Pvt. Ltd.? Ans. No. Qn. 24. Do you remember the Bank branch from where you withdrew the cash as discussed earlier? Ans. Yes. Union Bank ofIndiaat Churchgate Bombay. Qn. 25. Did you fill in the bearer cheque through which you withdrew the cash? Am. I might have filled in. Qn. 26. Have you ever operated A/c of M/s. Rogers Enterprises Pvt. Ltd. maintained atBombay? Ans. Never. Qn. 27. I am showing you the photocopies of two bearer cheque Nos.419652, 419651 dated2-11-1981and2-10-1981. Are these two cheques filled in by you personally or through somebody? Ans. I have not filled in personally or got it filled in through any body the above two cheques. Qn. 28. Did you yours use these two cheques for the withdrawal of cash or not? Ans. I can't say with certainty but if I am shown the back side of the cheque, I can confirm. Qn. 29. Have you ever withdrawn any money from the Ale of M/s. Roger Enterprises Pvt. Ltd. at Union Bank ofIndia, Church Gate,Bombay? ....
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.... wanted me to fill in the blank signed cheques given by him. Qn. 8. So you should have understood as to why he wanted you to fill in the cheque. Today Shri Loknath may say that he did not given any instruction and it is you who took away the cash. Then how will you defend yourself? Ans. Earlier also, I had stated that Shri Mahendra Kumar Jajodia, Director of M/s. Rogers Enterprises Pvt. Ltd. is my relative who had asked me to carry out the above instructions i.e., filling in the duly signed cheques and withdrawing the cash from the various accounts. But I make it very clear that I never had any vested interest or financial gain in the transaction. I used to hand over the cash immediately to Shri Loknath Saraff or to Shri Mahendra Kumar Jajodia as per their instructions. Qn. 9. Now I show you photocopy of C/A pay-in-slip dated12-8-1981through which a cheque of Rs. 16,17,268.40 has been deposited into the Ale of M/s. Triveni International Productions Pvt. Ltd. on the backside, the cheque No. 305899 of SBI Kasturba Gandhi is written. Can you identify the handwriting used here? Ans. This is in my handwriting. I have filled in this pay-in-slip. Qn. 10. This pay-ill-slip i....
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....he cash and you have taken away all the cash amounts. So how will you defend yourself? Ans. You can see that I was handed over cheques of different dates and of different banks to withdraw the cash and hand over the same back to them immediately. Accordingly, I withdrew cash amounts on different dates from different banks and handed over the cash to Mr. Jajodia or Mr. Loknath. If I had retained the cash amounts even once, they would not have given the work to withdraw the cash again. This proves that I never had any financial gains and all the amounts so withdrawn have been handed over to them. Qn. 14. Do you want to add or delete to anything stated so far? Ans. No. Whatever stated above is true and only true I have stated without any pressure, coercion or force. I have given the statement to best of my mental and physical health. Sd/-XX 15-3-1991 (AX Jhunjhunwala)" 19. A perusal of the aforesaid statement reveals that Mr. Jhunjhunwala knows the existence of M/s. Roger Enterprises Pvt. Ltd., its Director Mr. M.K. Jajodia with whom he claimed to be having a relationship. Mr. Jhunjhunwala admits as is evident from the aforesaid statement that he has helped Mr.....
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....rtant chains directly involved in helping the assessee to achieve a target which target is to show payment of commission which was in fact never paid. He is not one limb of the chain of the assessee but he is half of the chain who has made his best to help the assessee reduce his tax liability. He by no means can be said to be a stranger to transaction but is safely a witness of fact who despite opportunity has not been cross-examined. 22. If Jhunjhunwala is not a stranger to the transaction and is a witness of fact having not cross-examined and he having been not cross-examined then what is the effect of the statement of Mr. Jhunjhunwala. For this, we may refer to the observations of the Jurisdictional High Court in case of Balkishan v. State 1977, CLJ 401 wherein it has been held as under:-- "Balkishan v. State 1977 Cr. LJ. 401 (Delhi). Section 138 in the Evidence Act permits cross-examination. It has been held by the Courts that where a particular material assertion is made in examination-in-chief and the witness is cross-examined in this respect of that assertion then it will be taken that the party affected admits the truth of that assertion. The provisions of section....
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....wala stated were facts and since the assessee had nothing with him which could contradict the statement of Jhunjhunwala, he in these circumstances choose not to cross-examine him and, therefore, the entire statement shall be read against the assessee. 24. This brings us to the other issue of Meattle having not been produced for cross-examination. The assessee wanted his witness to be produced. The record depicts that the Revenue made efforts to trace him, but could not as is evident from the order of the CIT(A) on page 7. If the witness is not available, then whether his evidence is to be retained or rejected. That apart, another question that arises for consideration is when the Evidence Act is not applicable to the tax proceedings what should be done with the statement of Mr. Meattle? The law on this issue is well-settled and the law is that though the provisions of Evidence Act are not applicable, but in a given situation the help of the principles of Evidence Act in the proceedings before the assessing authorities can be taken. For this, we may refer to the judgment of theApex Courtin case of Chuhannal wherein theApex Courthas held that in case the Income-tax Authorities are....
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....e produced at a later stage of the same proceedings for cross-examination cannot only be relied upon by the Revenue but also referred to as well. For what we have said here we may for this draw support from the judgment of the Lahore High Court in the case of Dewan Singh which dealt with the proposition similar to the one which we aloe not concerned. The issue before High Court was as to what should be done with the unfinished testimony of a witness whether it is admissible or not and the Hon'ble Lahore High Court while dealing with this issue made the following observations:-- "No general rule can be laid down in respect of unfinished testimony. If it is substantially complete and the witness is prevented by sickness or death or other cases (mentioned in section 33) from finishing his testimony where viva voce or deposition are not to be rejected entirely. But, if any order advanced has to be substantially complete it must be rejected." 27. In the light of what has been laid down by Hon'ble Lahore High Court, we may say that evidence of Mr. Meattle was recorded. Mr. Meattle was a witness to the fact. Mr. Meattle says that the amount of commission was deposited in his compani....
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....rding to the assessee were not given effect to by the Assessing Officer and where the matter reached the Apex Court, the Apex Court held that the refusa1 to carry out the directions of the Tribunal now amount to denial of natural justice. TheApex Courtheld in this case that the writ can be issued to compel the officer to carry out the directions of the Tribunal. 31. When we apply the ratio of this case to the facts of the present case, we feel that the assessee cannot draw any strength from the judgment of the Apex Court for the reason that Jhunjhunwala has been put into a witness box for the cross-examination which the assessee for the reasons referred to above and which reasons have been held to be not proper have refused to cross-examine him and while Mr. Meattle could not be produced because he was not available at the address. In this background we feel that the Assessing Officer has complied with the directions of the Tribunal, but it is the assessee who in legal wrangles want to exploit a situation and want to take advantage of his own wrong. We, therefore, feel that this judgment so relied upon by the assessee does not advance the case of the assessee. 32. The next ju....
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....ment cannot be made on suspicion. An assessment made without disclosing to the assessee the information supplied and without giving an opportunity to the assessee rebut the information so supplied and declining to take him to consideration all materials which the assessee wanted to produce in support of his case constitute violation of fundamental justice. When we examine the judgment of the Apex Court in the light of the facts available on record, we find that in this case the only material collected by the Revenue was the statement of the two witnesses who were put to cross-examination but which opportunity was not availed of. Later on one witness could not be produced as explained above and the other refused to be cross-examined for the reasons best known to the assessee which we hold were not genuine. We fail to understand as to how this judgment advance the case of the assessee and how can it be said that the assessment has been made on suspicion. To the contrary we shall be wrong in saying, if we say that the rules of natural justice have not been followed or that the assessment is based on suspicion. 36. Another judgment of theApex Courtin the case of East Coast Commercia....
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....ows that the ITO is not fettered by the technical rules of evidence and the like and that he may act on a material which may not strictly speaking be accepted as evidence in a court of law." 40. When we examine the aforesaid paragraph in the light of the facts available on the record, we feel that even this judgment does not advance the case of the assessee because whatever material the Assessing Officer has gathered has not only been made available to the assessee, but the assessee has been given opportunity to rebut the same, 41. The next judgment in line relied upon by the ld. AR in Jaya Engineering Works Ltd.'s case. "While the word "evidence" may recall the oral and documentary evidence as may be admissible under the Indian Evidence Act, 1872, the use of the word "material" in section 143(3) of the Income-tax Act, 1961, shows that the Income-tax Officer, not being a court, can rely upon material which may not be strictly evidence admissible under the Evidence Act for the purpose of making an order of assessment. Courts often take judicial notice of certain facts, which need not be proved while administrative and quasi-judicial authorities can take "official notice" of....
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.... Tax Act. 45. In this case Kerala High Court held that the assessee was not entitled to demand a right of cross-examination of a particular person as part of reasonable opportunity under section 17(3) of the Act on the rules of natural justice. We do not know as for what proposition this judgment been relied upon or as to how this judgment advances the case of the assessee when applied to the facts and circumstances of the present case. 46. The next judgment relied upon by the assessee is the one in K.T. Shaduli Yusuff's case which also defines rules of natural justice which we say have not been violated. 47. Another judgment on which the ld. AR placed reliance was the one Mahindra Nath Chatterjee's case wherein it has been held "the right to cross-examine is not necessarily a part of reasonable opportunity". It was further observed in the said report that whether in a particular case a particular party should have the right to cross-examine or not depends upon the facts and circumstances of the case and it very largely depend upon the adjudicating authority who is not guided by the rules of evidence as such. He must however afford such opportunity as would ensure to party....
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....e feel that the onus of proof that the commission paid was genuine was on the assessee. The question that further arises is as to whether the assessee has discharged the onus and if yes then how. According to the assessee he has discharged the onus by proving that the payment has been made by cheque. Not only this, the name of the person to whom the payment by cheque is made is disclosed and therefore, the payment is genuine. 52. This argument so raised by the assessee sounded well at the threshold but when we examined it further we found that it cannot hold water. Merely because payment is made by cheque may in some cases may persuade the authorities to hold the payment to be genuine but in this case the situation is totally reverse as the person/party to whom the payment by cheque is alleged to have been made has his own story to tell and which story is believed by us. There is a complete blackout on the nature of services rendered. There is no material placed on record nor has our attention been drawn to any material which would demonstrate without doubt the nature of services rendered by these three companies. Keeping in mind these facts, we feel that the assessee has misera....