TaxTMI 
TaxTMI 
1985 (6) TMI 78
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....-------------------- GR Date Descrip- Consignor Consignee Amount Freight Weight No. tion of Rs. Rs. Qtl. goods ----------------------------------------------------------------------------------------- 1 2 3 4 &nbs....
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....sp; 18,408 212 15 Jodhpur Traders, Ahmedabad 420 29-9-1978 Titanium Sunder & Co., Anubhav 18,408 212 15 Jodhpur Traders, &nb....
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....p; 422 30 Jodhpur Traders, Ahmedabad ----- &n....
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....bsp; 15 Chemicals, Traders, Jodhpur 119, Spectrum Comm. Centre, &n....
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.... Jodhpur Spectrum Comm. Centre, Relief Road, Ahmedabad864 7-2-1979 Titanium Indl. Anubhav 73,632 842 60 &....
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.... Relief Road, Ahmedabad ----------------------------------------------------------------------------------------- The recipient was contacted through the department at Ahmedabad who vide his letter to ADI dated 8-5-1979 had accepted of having received the titanium dioxide of four consignments only relating to Bill Nos. 419, 420, 421 and 543. They further mentioned in the letter that the three parties had dealings with them only in 1978-79 and they did not deal with them either in 1977-78 or 1979-80. They also mentioned in the said letter of having sold caustic soda to Gulabdas Jagannath & Associates in the year. In the letter the party mentioned that Ram Lal Garg was personally known....
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....e added to your income. The reply given was that the goods were delivered to Anubhav Traders and payment was duly received from them and has been so entered in the books. The photocopy of receipts issued was also taken by the department. This statement was later followed by an affidavit dated 1-1-1981. 2.2 From 23-8-1979 to 29-8-1979 the department conducted the survey of the premises of Gulabdas Jagannath & Associates, Gulabdas Jagannath and also the premises of their partners. The assessee is a partner in his individual capacity in Gulabdas Jagannath and a partner as a karta of his HUF in Gulabdas Jagannath & Associates. Gulabdas Jagannath deals with soap, soda, urea, BHC powder and other chemicals and Gulabdas Jagannath & Associates deals in the titanium dioxide. In the raid, the department seized the following documents: (a) a visiting card bearing the name Industrial Chemicals, Nakoda Bhawan Chopasini Road, Jodhpur, telex and telephone of the assessee-firms; (b) correspondence between Industrial Chemicals, Guj. Chem. Distilleries India Ltd., Billimora, Gujarat and Chemical & Ancillaries Services for the period February and March 1977 (Pages 2 to 5 of paper book). T....
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.... Answer : He contacted both personally as well as over the phone. Question 27 : Kindly mention the names of other partners of your firm who had given statements in this case ? Answer : Mr. Madan Raj had given the statement. Question 28 : Did he also stated that Shyam Sunder Dhoot sent the goods ? Answer : I have no idea. Question 29 : Did you prepare the various bills as has been mentioned in your affidavit ? Answer : I did not prepare any of the bills. Questions 37 & 38 : Kindly tell as to when Shyam Sunder Dhoot contacted you in connection with the consignment transported ? Answer : He came to our Jodhpur office personally about 3-4 days prior to the first consignment and also spoke over the phone about two hours prior to the despatch of goods. Question 39 : Did Shyam Sunder Dhoot himself brought the goods ? Answer : No. The goods were sent through a messenger. Questions 40 & 41 : Kindly give the name of the office of Shyam Sunder Dhoot ? Answer : The only office name I had known was Gulabdas Jagannath & Associates. Examination by Manik Chand, ITO. Question 47 : Did you discuss about transportation request made by Shyam Sunder Dhoot wit....
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....er section 132(1)(ii) to the Commissioner which is still pending. 2.5 During the assessment proceedings the ITO keeping the various facts gathered as above in mind, examined Ratan Lal of Anubhav Traders on 6-3-1982. On this day he had asked Shyam Sunder Dhoot to be present while adjourning the case on 27-2-1982 without mentioning that he had called Mr. Ratan Lal for examination. On 6-3-1982 Shyam Sunder Dhoot did not attend as he was away to Gujarat Alkalies & Chemicals Ltd. Mr. Ratan Lal's statement was recorded in the presence of Mr. Mertia, the assessee's counsel. Mr. Mertia was asked to cross-examine him who refused to do so on the plea that his client away and that it is he who would like to cross-examine Ratan Lal. The statement of Mr. Ratan Lal is at page 65 of the paper book. Question 1 : Did you on behalf of Anubhav Traders purchased titanium dioxide and caustic soda from Sunder & Co., Amarchand Agarwal & Co. and Industrial Chemicals ? Answer: Yes, there were purchases from all the three firms. Question 3 : Who had contacted you on behalf of the three firms ? Answer : The person who contacted me mentioned his name as Ram Lal Garg. Question 4 : Where does ....
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....5 in the name of Industrial Chemicals were issued and the goods sent to various places. The department has been able to locate 13 bills/bilty only but sequence in which bills have been issued suggests that each and every bill was issued. The 13 despatches located by the department were sent to Anubhav Traders, Ahmedabad and despatches against the rest of the bills were sent to the other places which are known only to the assessees. Therefore, for the purpose of computation of concealed income the inclusion of rest of the bills is justified. In this connection copies of some of the bills but covering all the three firms were given to the assessee asking him why not the rest of the bills should also be taken into consideration for the purpose of computation of income. The learned authorised representative through one of his messengers sent a letter the substance of which is that only the material on record could be relied upon, if at all the addition is made on account of business carried on by the fictitious concerns which the assessee disowns, the argument of the assessee is not convincing in the light of the above discussion and also for the reason that the authorised representati....
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....; Total 7,678 ------- But keeping in view the various contingencies of business, which might have occurred, I take total number of effective bills at 5,000. Thus, sales through 5,000 bills on the estimate average of Rs. 15,000 per bill comes out to Rs. 7,50,00,000 and to this figure I add again on estimate basis Rs. 5 lakhs on account of bills which have been issued for higher amount. Looking to the facts and circumstances of the case, I apply a gross profit rate of 4 per cent which gives a total gross profit of Rs. 30,20,000. Out of this, a deduction to the extent of 25 per cent is allowed to the assessee for the items of profit and loss acc....
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....eased the number of bill. I do not find any fault in his working. Estimation of the assessee's income from these concerns is approved. (vii) The authorised representative of the assessee vide his letter dated 4-8-1982 brought on record 12 letters of transporters of Jodhpur to show that no goods of these concerns were transported by them. For the reasons mentioned in (vi) above, the evidence is rejected as irrelevant. I wish the assessee and his authorised representative had taken equal trouble in giving the true particulars to the department, so that the facts in the matter could have been easily established without the botheration of their estimation. (viii) The ITO's estimation of initial investment in the business of three concerns Rs. 1,50,000 is very reasonable and, therefore, no interference in the matter is being made'." 3. Aggrieved by this order the assessee preferred appeals to Commissioner (Appeals). The observation of the Commissioner (Appeals) was: (a) Regarding seizure of visiting cards and correspondence of Industrial Chemicals, assessee stating that he does not know anything about them, later correcting it by a letter and the address in the bills which w....
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....bsp; found entered (iii) Industrial Chemicals 5 Consignments Only two &nbs....
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....-95) where he had stated of having sold goods to the firm Gulabdas Jagannath & Associates on 19-10-1978 which establishes the fact that Shyam Sunder Dhoot was known to Ratan Lal. In this letter to ADI, Ratan Lal had stated that Ram Lal Garg represented only Sunder & Co. whom he had known personally, if Ram Lal Garg was in fact Shyam Sunder Dhoot he would have stated so. Mr. G.D. Gargieya further submitted that some photograph purported to be of Ram Lal Garg was shown to Ratan Lal which he had recognised but he was made to sign on the back of photograph of Shyam Sunder Dhoot. It is assessee's misfortune that he had to go to Ahmedabad on 6-3-1982, as otherwise on that day itself Ratan Lal would have clarified that Ram Lal Garg and Shyam Sunder Dhoot are two different persons. He made a reference to page 102 where the affidavit of the Branch Manager at Jodhpur Office of Anubhav Traders is provided wherein he has stated that Ratan Lal had known Shyam Sunder Dhoot for quite sometime as Shyam Sunder Dhoot used to come to their office. ITO waited almost over 20 days before he had made the assessment. He could have easily afforded another opportunity to the assessee. Even the IAC refused t....
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...., Shyam Sunder Dhoot talked to him about the transportation charges and after some time the goods have come to his office, he had thought that the goods were sent by Shayam Sunder Dhoot. This by itself a feeling of a person but not a finding of fact and from this any adverse inference as is drawn is totally incorrect. According to Mr. G.D. Gargieya the department has no positive evidence and let alone any circumstantial evidence at all against the assessee. He then referred to pages 81-92 where the statement of various transporters are attached none of them had transported any goods of the three firms in the year under consideration. This point was made in connection with the observation of the ITO in estimating the sales at Rs. 7.5 crores. The department had carried out the search for over six days and could not point out any defect with the books of the firms of the assessee nor they had found any unaccounted stocks or any other evidence which could lead to the conclusion that assessee had done any dealings outside the books. Further, he submitted by reference to the copy of balance sheet of Travancore Titanium Products Ltd., a Government of India Enterprise (page 137), the only ....
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....placed reliance on CIT v. Durga Prasad More [1971] 82 ITR 540 (SC), Bhagatpura Motor Transport Co-operative Society Ltd. v. K.S. Jhala AIR 1965 Raj. 149 and Shyamsingh v. Dy. Inspector General of Police AIR 1965 Raj. 140. According to Mr. S.S. Ruhela Commissioner (Appeals) contradicting his views (sic). In paragraphs 18 to 21 he had found that the assessee has impersonated as Ram Lal Garg but wants ITO to examine the issue and again in paragraph 22 he mentions that the statement of Parveen Kumar clearly establishes that it was Shyam Sunder Dhoot who had sent the goods to Ahmedabad. But with all that he sets aside the orders of ITO. He, therefore, pleaded that order of ITO needed to be restored. 6. We have heard the parties and considered all the materials that have been placed on record. The fact remains that the survey was conducted on the assessee on the basis of information collected at the time of similar operations on transport operators. From Nakoda Transport Co. the department had collected information that the three firms Sunder & Co., Amarchand Agarwal & Co. and Industrial Chemicals had sent goods vide 13 bills through them to Anubhav Traders, Ahmedabad. Anubhav Traders....
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....e ITO in our opinion is invalid as assessee has shown from the letter of the manufacturer of titanium dioxide that apart from assessee, goods were sold by them to three parties that too only at Jodhpur. 6.2 Much reliance has been placed on the statement of Praveen Kumar. Praveen Kumar's statement clearly indicates that he only presumed that the same person had sent the goods who enquired of him about the transportation charges and this presumption he had based on the basis of time, i.e., within about two hours of the enquiry goods came to him for despatches. The presumption is also based in the similar nature of goods. Praveen Kumar admits that Shyam Sunder Dhoot never mentioned the names of the three firms but he concluded it to be belonging to him as the said firms dealt with similar goods whose goods were transported by his trucks. Another reason given by him for his conclusion that Shyam Sunder Dhoot was the owner of the three firms was that he was aware of a number of sister concerns of one firm. The department on the basis of this statement which is entirely a presumption and opinion or feeling of a person had held the assessee to be the owner of the three firms. Praveen K....
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.... As already mentioned earlier, the department seized only a visiting card and the correspondence of 1977 between Industrial Chemicals and Gujarat Chemicals Distillers. The bills of the three firms were not found in the premises of the assessee. Except for the letter pads, nothing else was found. No books of account of the three firms were found in the assessee's premises. No cash or other investment has been found. The only two aspects that are existing are : the similarity of name Industrial Chemicals and similar type of goods traded in. Are these sufficient to indict a person ? In our opinion, these are clearly not at all sufficient. 6.6 The department provided the assessee copies of only six bills out of the total 13. Even here, by referring to the serial numbers of these bills we find as pointed out by the assessee's counsel that in the ease of Sunder & Co. bill No. 1048 is dated 30-9-1978 while bill No. 1013 is dated 26-10-1978 and similar is the case with bills of Industrial Chemicals. Bill No. 1875 is dated 19-11-1978 while bill No. 1539 is dated 7-2-1979. Latter serial number of bills appears as issued earlier, while earlier serial numbers of bills are issued subsequentl....
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....esh High Court in the case of Ganga Prasad Sharma have held that while making a best judgment assessment though there must necessarily be guesswork in the matter it must not be arbitrary. The Gauhati High Court in the case of Raj Mohan Saha have observed that the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment. They have further observed if the ITO's findings were based on mere guess and could not be supported, the same cannot be said to be material to sustain the findings. 6.7 The Supreme Court in the case of Kishinchand Chellaram have observed making an addition based on hearsay is not permitted. In that case there were telegraphic transfer by the employee of the assessee from one office to another. The ITO wrote two letters to the manager of the bank. The said letters were not provided to the assessee. The manager confirmed that the telegraphic transfer sent from Madras was received by Bombay office and the amount was paid to the employee of the assessee on the same date at Bombay. On the basis of the letters the Tribunal conclud....