TaxTMI 
TaxTMI 
2008 (7) TMI 544
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....ing rise to the present reference are that there was a search and seizure operation under section 132 of the Income-tax Act, 1961 (hereinafter referred to as "the Act") carried out at the residential premises of the assessee on March 26, 1986, in which no substantial thing was found. Again, a similar search operation was carried out by the Department at the residence of one Mr. Rameshbhai M. Patel on July 25, 1986, and a key of the bank locker along with two packets containing six promissory notes were found. The statement of the said Mr. Rameshbhai M. Patel was recorded at the time of search in which he has stated that the said key of the bank locker as well as both the envelopes containing the promissory notes were handed over to him by Laxmanbhai S. Patel, the assessee. Out of the six promissory notes, one promissory note is for Rs. 8,78,358 dated October 25, 1984, executed by Shri Kantilal Motilal on behalf of M/s. Durga Cotton Industries in the capacity of a partner. The statement of Shri Kantilal Motilal was also recorded on that very day of the search, i.e., July 25, 1986, and in his statement, the said Shri Kantilal Motilal admitted that he had written the promissory note a....
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....ce the amount including the amount of Rs. 8,78,358.75 had been taxed in the hands of Kantilal M. Patel, Baldevbhai M. Patel and Babubhai S. Shah, then the said amount cannot be taxed twice in the hands of the assessee. The Assessing Officer did not find any substance in all these assertions of the assessee and he treated the amount of Rs. 8,78,358.75 as income of the assessee from undisclosed sources and added the same in the total income. 4. Being aggrieved by the said order of the Assessing Officer, the assessee went in appeal and legal as well as factual pleas were raised before the Commissioner of Income-tax (Appeals). The first legal plea raised on behalf of the assessee was that the assessee was not having any concern with the promissory note nor has he advanced any amount to Kantilal M. Patel or M/s. Durga Cotton Industries. The plea of the assessee was that the partners of M/s. Durga Cotton Industries made a voluntary disclosure of Rs. 11 lakhs as belonging to all the partners which included the sum of Rs. 8,78,358.75 also and that amount stood assessed in their hands and after that, there was no logic to assess the same amount in the hands of the assessee. The other legal....
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....other plea was that once the amount of Rs. 11 lakhs including the disputed figure of Rs. 8,78,358 stood assessed in the hands of the three partners of M/s. Durga Cotton Industries, then the same amount cannot be assessed in the hands of the assessee on the principle of double taxation. The last plea was that promissory note was not recovered from the possession of the assessee but from the possession of Rameshbhai M. Patel and his statement was recorded at the back of the assessee and opportunity of cross e examination was not given to the assessee. On the basis of these facts, the contention of the assessee was that the appeal should be allowed. 6. On the other hand, the learned Departmental representative appearing for the Revenue relied upon the orders of the authorities below and pointed out that crosse-examination of Rameshbhai M. Patel was not relevant factor as whatever was stated by him was admitted by the assessee and thus no purpose would have served by his crosse-examination. About the retraction of Kantibhai M. Patel, the learned Departmental representative pointed out that his original statement was spontaneous which should have been given precedence over the subseque....
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....d that the entire addition made by the Assessing Officer and confirmed by the learned Commissioner of Income tax (Appeals) as well as the Tribunal is required to be deleted on the ground that it is in violation of the principles of natural justice. 10. In support of his submission, he relied on the decision of the hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 wherein it is held that before the Income-tax authorities could rely upon the letters dated February 18, 1955 and March 9, 1957, 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 statement made by him. 11. He further relied on the decision of the hon'ble Supreme Court in the case of C. B. Gautam v. Union of India [1993] 199 ITR 530 wherein it is held that the courts have generally read into the provisions of the relevant sections a requirement of giving a reasonable opportunity of being heard before an order is made which would have adverse civil consequences for the parties affected. This would be particularly so in a case wher....
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....ary to spell out the reasons therefor. While, however, applying the principles of natural justice the court must also bear in mind the theory of useless formality and the prejudicial doctrine. The court accordingly held that assuming that two sets of accounts were maintained by the assessee, it did not mean that the nature of the accounts was difficult to understand, and an order under section 142(2A) could not be made on that sole basis. 15. Mr. Shah has further submitted that the authorities have committed an error in rejecting the contention of the assessee regarding double taxation after having simply followed the decision of the hon'ble Supreme Court in the case of ITO v. Ch. Atchaiah [1996] 218 ITR 239. He has submitted that the said case has no application at all. In that case, there is an admitted position that income is to be assessed either in the hands of the individuals or in the hands of association of persons. In that context, the hon'ble Supreme Court has observed that under the present Act, i.e., Act of 1961, the Income-tax Officer has no option like the one he had under the 1922 Act. He can and he must tax the right person and the right person alone. By right pers....
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.... said Shri Rameshbhai for safe custody. The assessee has falsely denied the fact that he handed over two envelopes. The authorities have considered the statement of the assessee in which initially, he stated that he was having one locker in the joint name of his wife and his own and did not state about the existence of locker, the key of which was handed over by him to the said Shri Rameshbhai. It was only after the ADI read over the statement of the said Shri Rameshbhai to him that the assessee had to admit the existence of another locker. The assessee was habitual lier and tried to conceal the bear facts. On these premises, the authorities have come to the conclusion that the assessee must have handed over two envelopes to the said Shri Rameshbhai and not one, including the promissory note in question and hence, there was no necessity of crossexamining the said Shri Rameshbhai. 17. Mr. Bhatt has further submitted that the retraction of Shri Kantilal M. Patel is nothing but an afterthought. The first statement of the said Shri Kantilal M. Patel was spontaneous and that should be given precedence over the subsequent events. The retraction was made apparently at the instance of the....
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....of somebody else, then there was nothing to prevent an investigation into the true source of the amount. There was nothing in section 24 of the Finance (No. 2) Act, 1965, which prevented the Income-tax Officer, if he was not satisfied with the explanation of an assessee about the genuineness or source of an amount found credited in his books, in spite of its having already been made the subject of a declaration by the creditor and taxed under the scheme, from investigating the true nature and source of the creditors ; (iv) the legal fiction created by section 24(3) of the Finance (No. 2) Act, 1965, was limited in its scope and could not be invoked in assessment proceedings relating to any person other than the person making the declaration under that Act so as to rule out the applicability of section 68 of the Income-tax Act, 1961 ; (v) in a case of this description, there was no question of double taxation. Once it was found that the income declared by the creditors did not belong to them there was nothing to prevent the same being taxed in the hands of the assessee to whom it actually belonged. 19. Mr. Bhatt has further submitted that the above decision of the hon'ble Supreme Co....
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....uction of a statute or document of title, the decision of the Tribunal is open to reference to the court under section 66(1). (ii) When the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. (iii) A finding on a question of fact is open to attack under section 66(1) as erroneous in law when there is no evidence to support it or if it is perverse. (iv) When the finding is one of fact, the fact that it is itself an inference from other basic facts will not alter its character as one of fact. Mr. Bhatt has, therefore, submitted that the order passed by the Tribunal confirming the order of the learned Commissioner of Income-tax (Appeal) who in turn confirmed the order of the Assessing Officer, is not required to be distributed on any count and hence, the present reference is required to be answered in favour of the Revenue and against the assessee. 21. We have considered the rival submissions of the parties. We have also gone through the orders passed by the authorities below. We have applied our mind to....
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....there was no business relation between him and the said Shri Kantilal M. Patel for which he could advance such a huge amount to him. It is none of the business of the assessee to know as to what was the motive or purpose behind the execution of such promissory note. 23. It has also come on record that the said Shri Kantilal M. Patel has not only retracted his earlier statement which was said to have been obtained under great pressure, tension and coercion. In fact, the said Shri Kantilal M. Patel along with Shri Baldev M. Patel and Babubhai Manilal Shah, other two partners of M/s. Durga Cotton Industries made a voluntary disclosure on September 29, 1986, disclosing an aggregate sum of Rs. 11 lakhs as belonging to the said three partners which included a sum of Rs.8,78,358.35 covered by the said promissory note. The plain reading of the said disclosure petition makes it abundantly clear that the said amount belonged to them and at one stage, they had entrusted a sum of Rs. 9 lakhs to the assessee and had subsequently withdrawn smaller amounts from them and finally, the entire amount was taken away by them on or about October 25, 1994. Even this version of the disclosure petition wa....
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....ence of such cross examination, it is not justified to arrive at the conclusion that the assessee had given two envelopes to the said Shri Rameshbhai M. Patel and out of these two envelopes, one envelope contained the promissory note which was said to have been executed by Shri Kantilal M. Patel in favour of the assessee. If one looks at the amount of other promissory notes, they are hardly of Rs. 5,000 to Rs. 25,000. This is the only promissory note which is of Rs. 8,78,358. This would certainly raise a doubt or suspicion and this very fact goes in favour of the assessee. The court is mindful of the fact that reappreciation of facts or evidence is not permissible while exercising the advisory jurisdiction of this court. However, as held by the hon'ble Supreme Court in the case of Sree Meenakshi Mills Ltd. v. CIT [1957] 31 ITR 28 that when the point for determination is a mixed question of law and fact, while the finding of the Tribunal on the facts found is final, its decision as to the legal effect of those findings is a question of law which can be reviewed by the court. The finding is arrived at by the authorities below while denying an opportunity of crossexamining the importa....