TaxTMI 
TaxTMI 
2009 (6) TMI 656
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....me declared by the assessee was not commensurate. Keeping in view these huge deposits in the bank account No. 7674 in Punjab National Bank, Katra Jaimal Singh, Amritsar, the AO had reasons to believe that income has to be much higher than declared by the assessee, even after adopting a modest rate of 1 per cent. For the asst. yr. 1999-2000, the assessee had filed his return on 31st March, 2003 which was beyond the prescribed time under s. 139, it was declared to be non est. The AO recorded reasons for issuing notice under s. 148 and the said notice was served on 25th Sept., 2003 wherein the AO after going through the said bank account has reasons to believe that volume of transactions during the year did not correlate with the return of income. Therefore, the AO had reasons to believe that income had escaped assessment. During the asst. yr. 2000-01, the AO found that the assessee had filed his return on 31st March, 2003 declaring income of Rs. 23,311 which did not tally with the huge cash deposits in bank account No. 7674 with the Punjab National Bank. Katra Jaimal Singh, Amritsar. Therefore, the AO had reasons to believe that income had escaped assessment. For the asst. yr. 2001-0....
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.... same as these pieces of evidence were laying in the office of the Dy. Director of IT (Inv.), Amritsar. The learned Departmental Representative further stated that the documents at serial No. 69 of the Departmental paper book is a chart of market rate for gold and silver which are being filed for reference to buttress the case of the Department. Lastly, he requested that these evidences filed by the Department are very much necessary for the correct decision of the present ease and requested that the same may be admitted. 7. After hearing both the parties on the applications filed by the assessee for admission of the additional ground of appeal under r. 11 of the ITAT Rules, 1963, an application filed by the assessee for admission of the additional evidence under r. 29 of the ITAT Rules, 1963 and application filed by the Revenue for admission of additional evidence under r. 29 of the ITAT Rules, 1963, the Bench vide its order dt. 27th May, 2009 allowed the applications filed by the assessee for admission of the additional ground of appeal, an application filed by the Revenue for admission of the additional evidence but the Bench had dismissed the application of the assessee for ....
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....lacs, which represent undisclosed income of the assessee. Therefore, I have the reasons to believe that the income chargeable to tax to the tune of Rs. 5 lacs have escaped assessment for the asst. yr. 1996-97, hence proceedings under s. 147 are to be initiated. Your kind approval for the issue of notice under s. 148 for the asst. yr. 1996-97 is solicited. Sd/- (K.K. Mahajan) ....
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.... by filing certain evidence before the learned first appellate authority which has not been adjudicated by him. The learned first appellate authority has also not appreciated properly the income-tax and sales-tax returns filed by the assessee to prove the genuineness of the transaction/credits/deposits. The learned counsel for the assessee also drew our attention towards rent deed placed at pp. 12 to 14 of the paper book No. 1 filed by the assessee in Punjabi and 14A and 14B English translation and stated that the shop of the assessee was situated in Anand Market, Patel Chowk, Amritsar wherein shop No. 3 owned by Shri Jatinder Anand S/o Late Shri D.L. Anand, resident of 116, Shakti Nagar, Amritsar, for Rs. 500 per month for 11 months w.e.f. 1st Nov., 1997. He stated that this rent deed established that the assessee has taken this shop for doing the business of jewellery. He also drew our attention towards page No. 69 of the paper book No. 1 and drew our attention towards statement dt. 22nd Jan., 2004 under s. 131 recorded on 22nd Jan., 2004 of the owner of the assessee named Shri Jatinder Anand which he had made before the AO in which the owner of the shop stated that he had rented....
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....the Revenue authorities doubted the veracity of the registration and the sales bills issued by the SBI and the other evidence filed by the assessee without verifying the same and wrongly held that the assessee was not engaged in the genuine business of gold jewellery and disallowed the claim of the assessee. The learned counsel for the assessee further contended that the assessee has also purchased jewellery from various registered dealers registered with the sales-tax authorities during the financial year 1998-99 as per copies of bills placed at. pp. 27 to 38 of the paper book. Keeping in view the arguments raised by him, he stated that the assessee has conclusively established beyond any reasonable doubt that the assessee was engaged in the business of purchase and sale of jewellery and allegation of the AO that the assessee was not engaged in the jewellery business but was merely providing accommodation entries is totally false and incorrect. 10. He further stated that the Dy. Director of IT (Inv.) and the AO recorded the statement of the assessee from time to time, the assessee repeatedly confirmed that he was engaged in the business of jewellery. He invited our attention to....
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....n the assessee allegedly stated as not being engaged in the jewellery business and is merely providing accommodation entries. The learned counsel for the assessee stated that these statements were recorded by the Dy. Director of IT (Inv.) under threat and coercion and the same were not voluntary statements given by the assessee. The assessee was made to sign the said statements wherein it was stated that the assessee's business of sale and purchase of jewellery and job work was bogus and it was never in existence. He stated that the assessee was forced to give confessional statements before the Dy. Director of IT (Inv.). When the second statement of the assessee dt. 6th Jan., 2003 recorded by the Dy. Director of IT (Inv.), Amritsar, the assessee was paraded in the Patel Chowk Bazar, Amritsar, in the presence of various shopkeepers due to which the assessee felt very humiliated and insulted. Due to this intense pressure of the Investigation Wing, the assessee started feeling acute chest pain on 6th Jan., 2003 and had to be hospitalised on 7th Jan., 2003 and was discharged from hospital on 15th Jan., 2003. During this period of hospitalisation of the assessee i.e., from 7th Jan.,....
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....an., 2003 and 17th Jan., 2003 by the Dy. Director of IT (Inv.), which is primary basis for alleging that the assessee was engaged in providing accommodation entries and not the business of purchase and sale of jewellery was recorded under immense threat, pressure and coercion and affidavit in support of the retraction dt. 14th Feb., 2003 was also filed before the AO and the assessee was also cross-examined on this affidavit in the statement dt. 10th March, 2005. He requested that it is settled law that statement once retracted looses its evidentiary value and cannot be relied upon for drawing any adverse inference. In support of his contention, he relied upon the following judgments: (1) Vinod Solanki 2009 (233) ELT 157 (SC); (2) K.T.M.S. Mohd. & Anr. vs. Union of India (1992) 108 CTR (SC) 84 (1992) 197 ITR 196 (SC); (3) Dy. CIT vs. Ratan Corporation (2005) 197 CTR (Guj) 536; (4) G. Kanagaraj vs. Dy. CIT (2001) 73 TTJ (Chennai) 731; (5) Govind Ram Chhugani vs. Asstt. CIT (2002) 77 TTJ (Jd) 339; (6) Surinder Pal Verma vs. Asstt. CIT (2004) 83 TTJ (Chd)(TM) 24 : (2004) 89 ITD 129 (Chd)(TM); (7) ITO vs. Pukhraj N. Jain (2006) 99 TTJ (Mumbai) 364 : (2005) 95 ITD 28....
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....r. vs. Union of India; (6) Asstt. CIT vs. K.L. Jolly & Sons (2007) 18 SOT (Del) 501; (7) Pyramid Software & Technologies vs. Dy. CIT (2006) 104 TTJ (Asr) 353; (8) Late Shri Mukund V. Kapadia vs. ITO (2002) 77 TTJ (Mumbai) 595 : (2002) 82 ITO 489 (Mumbai). 14. After citing the aforesaid judgments, the learned counsel for the assessee stated that the statements recorded under s. 131 of the Act even though no proceedings were pending was not a valid statement and, therefore, no reliance could be placed on such invalid statement. Therefore, the statements recorded on 16th and 17th Jan., 2003 were invalid in the eye of law and could not be relied upon by the AO. As regards to the statements dt. 17th Jan., 2003 of the assessee's brother and mother which are also invalid because these were also recorded by the Dy. Director of IT (Inv.), who had no authority to record the same. The learned counsel for the assessee submitted that keeping in view aforesaid various decisions, statements recorded by the Dy. Director of IT (Inv.) are invalid statements in the eye of law and could not be relied upon by the AO. He also draw our attention towards the statements of Shri Harjinder Si....
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.... 338 (Punj); (12) Prakash Chand Nahta vs. CIT (1996) 135 CTR (MP) 203 : (1996) 220 ITR 277 (MP); (13) Manoj Aggarwal vs. Dy. CIT (2008) 117 TTJ (Del)(SB) 145 : (2008) 11 DTR (Del)(SB)(Trib) 1 : (2008) 113 ITD 377 (Del)(SB); (14) Sarita Devi Kajaria vs. ITO (2004) 86 TTJ (Kol)(TM) 1090 : (2004) 89 ITD 109 (Kol)(TM); (15) Mahes Gulabrai Joshi vs. CIT (2005) 96 TTJ (Mumbai) 876 : (2005) 95 ITD 300 (Mumbai); (16) ITO vs. Pukhraj N. Jain. 16. In the end, the learned counsel for the assessee stated that the issue in dispute is squarely covered in favour of the assessee by the recent decision of the Special Bench of the Tribunal in the case of Manoj Aggarwal vs. Dy. CIT. He stated that in these cases also the AO proceeding on conjectures and surmises alleged that the assessee was engaged in providing accommodation entries. The assessee in that case also had purchased huge quantity of old jewellery from various declarants of VDIS, 1997, which was subsequently sold in cash and the cash was deposited in the bank account. out of which cheques were issued to the sellers of jewellery. The modus operandi of the said seller was broadly similar to that of the appellant. The Speci....
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....Associates and has shown himself as a salaried employee. He further submitted that in the said form, the assessee had given telephone number of M/s Umat & Associates. It was further contended that the bank account of the appellant was opened on the verification of one Mr. Rakesh Kumar, who was holding bank account in the name of M/s Aar Aar Traders. The bank account of the said concern was introduced by Mr. V.K. Umat himself personally. On the reliance being placed on the rent agreement entered into by the appellant for taking the shop on rent, the Departmental Representative contended that the said agreement was witnessed by one Shri Vijay Gupta, who had given his residential address as the office address of Mr. V.K. Umat. It was further contended that even the signature of the landlord, Shri Jatinder Anand, in the rent deed does not match with his Signatures in his statement placed at pp. 69 to 72 of the assessee's paper book. It was further submitted that reliance placed by the assessee on the acceptance of the returns of income filed for the asst. yrs. 1996-97 and 1997-98 were improper. He submitted that the said returns were nothing but a sudden creation of records and wer....
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....he bills were very much available with the appellant. 23. It was further submitted that the details shown in the application form for sales-tax registration is at variance with the details as given in the IT returns. This, according to the Departmental Representative, shows that records were prepared/created in order to give the genuine shape to the jewellery business. The Departmental Representative further referred to the sales-tax return filed by the appellant for various years. It was submitted that in the sales-tax return for the financial year 1997-98, the appellant had shown sales of Rs. 68,56,320 only as against sales of Rs. 6,69,82,150 shown in the IT return. It was further submitted that in the return for the subsequent financial year 1998-99 the appellant declared nil turnover to the Sales-tax Department, whereas the appellant claimed to have carried on bullion trade during the said financial year. 24. As regards reliance being placed on purchase from the registered dealers relied upon by the Authorised Representative, the learned Departmental Representative invited our attention to various bills of purchases made from the three dealers, viz., M/s Vinod Jewellers, ....
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.... in this letter, which is a contemporaneous record. According to the Departmental Representative, after recording of the statement of the appellant on 6th Jan., 2003, when the appellant was asked to show his shop, the appellant stated that let us go and thereafter, run away. Thereafter, he got himself admitted in the hospital and in the meanwhile FIR was also lodged stating that the books of accounts were lost on 16th Dec., 2002. It was further contended that the allegation of the appellant and his mother and brother that their statements were recorded under threat and coercion on 16th Jan., 2003 and 17th Jan., 2003 is not correct as is evident from the fact that subsequent to the recording of the said statement health of the mother of the appellant recovers, which was not possible had there been threat and coercion by the Investigation Department. As regards the statement of Shri Sanjay Grover, brother of the appellant recorded by the AO on 16th Jan., 2004, it was submitted in that statement he gave evasive replies. 26. As regards the contention that the statement of appellant and various persons recorded by the Dy. Director of IT (Inv.) under threat and coercion, the Departmen....
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....the AO, even denied opportunity of cross-examining both the said persons. The Departmental Representative further relied upon the statement of Shri Vajinder Singh of M/s Jaspal Printing Press recorded by Dy. Director of IT (Inv) on 17th Jan., 2003 wherein he denied knowing the appellant. It was submitted that the appellant had claimed to have got his bill books printed from M/s Jaspal Printing Press. It was further submitted that the appellant refused Lo cross-examine Shri Vajinder Singh, when such opportunity was allowed by the AO. 29. The Departmental Representative further referred to the findings given by the AO in the assessment order regarding credit of unexplained money belonging to Shri Subhash Chand Goel, Mrs. Veena Goel, Shri Vinod Kumar Chadha and Shri Rajeev Arora of M/s Saba Naga Rice Mills, some of the beneficiaries of the accommodation entries provided by the appellant. It was submitted that the AO has traced actual deposit of money in the bank account of the appellant in receiving accommodation entries. As regards the statements of Shri Parminder Singh, Shri Hakumat Rai and Shri Vijay Gupta being relied upon by the appellant, it was submitted that the said thr....
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....e of bullion from SBI and the same was subsequently included in the books of accounts. It was further submitted that the fact that the SBI bullion trade was subsequently incorporated in the books of accounts by the appellant in order to give it a genuine shape of jewellery business is evident from the fact that the appellant had subsequently adjusted the accounting of one sale bill of jewellery in order to include the transactions with SBI in the books of accounts. The Departmental Representative further submitted that the appellant, in order to hide, the same, adjusted the balance of the SBI bank account in the capital account of the assessee, which is contrary to the general accounting practice being followed. All these facts, according to the Departmental Representative, leads to the conclusion that the transactions of bullion trade from SBI were subsequently included in the books of accounts merely to give a genuine shape of jewellery business to the accommodation entries business carried on by the appellant. Elaborating further, it was further submitted that the bullion trade was not at all recorded in the books of accounts impounded by the Department on 6th Jan., 2003. The sa....
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....tmental Representative stated that with due respect to the Special Bench's decision, the Department has not accepted the finding of the Special Bench, Tribunal, Delhi wherein one part of Shri Sunil Kapoor's confession has been upheld and another part has not been upheld. The confession can be either true or false. It has been decided many number of times that the document has to be seen in its totality. The same logic should apply to the confessional statement also. More so, when Shri Manoj Aggarwal has also confirmed that Shri Sunil Kapoor was a mediator/sub-mediator in his accommodation entry business. 32.2 As we have stated above, the learned Departmental Representative distinguished both the eases in his written submissions of 50 pages and lastly he requested that appeals filed by the assessee may be dismissed. 33. In reply to the aforesaid contentions of the Departmental Representative, the learned counsel of the assessee primarily reiterated his submissions made earlier. As regards the address of M/s Umat & Associates being mentioned in some of the application forms like sales-tax registration form and PAN application form, it was primarily eon tended that the s....
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....her submitted that in the statement of Shri Vinod Kumar of M/s Vinod Jewellers and Shri Satish Kapoor as reproduced in the assessment order of M/s Vinod Jewellers, both the said persons nowhere sated that jewellery sold by them was in the nature of accommodation entry. It was contended that the Departmental Representative is reading words into the statements and also the application filed under s. 144A to the Addl. CIT since none of the parties ever accepted having routed accommodation entries through the appellant, as is alleged by the Departmental Representative. 35. As regards the receipt of money from M/s Baba Naga Rice Mills for allegedly giving accommodation entry, it was submitted that the appellant had purchased jewellery from four persons mentioned on p. 91 of the assessment order belonging to the same group for total consideration of Rs. 12,24,579 on 11th Aug., 1998. These transactions were duly recorded in the books of account. However, on the very next date, i.e., on 12th Aug., 1998, the aforesaid parties again approached the appellant to take back the jewellery due to some family dispute. Accordingly, the appellant returned the jewellery and received back the consid....
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....urther submitted that it is totally impermissible for the Department to allege creation of records in the form of IT returns, etc. which were duly acknowledged by the Department itself. 38. As regards the contention of the Departmental Representative that the appellant had subsequently incorporated transactions of bullion trade in the books of accounts, the Authorised Representative submitted that it is an undisputed fact that the appellant has duly included the turnover from purchase and sale of bullion from SBI in the return of income filed for the asst. yr. 1999-2000. The appellant's trade has been impliedly accepted by the AO in the assessment order for the asst. yr. 1999-2000 since the AO has not disputed the same. Therefore, it is not now open to the Departmental Representative to challenge the genuineness of the bullion trade carried on by the appellant. Reference in this regard was also made to the decisions of the Hon'ble Supreme Court in the cases of Hukumchand Mills Ltd. vs. CIT (1967) 63 ITR 232 (SC) and MCorp Global (P) Ltd. vs. CIT (2009) 222 CTR (SC) 110 : (2009) 19 DTR (SC) 153 : (2009) 309 ITR 434 (SC). As regards the allegation of the Department that th....
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....bill books found from the office of Shri V.K. Umat. 40. As regards reliance being placed on the documents relating to M/s Nayyar Jewellers, it was submitted that the said documents/evidences are not at all relevant for adjudicating the appeal of the appellant. It was submitted that findings given in the case of Shri Raj Kumar are not at all relevant in the case of the appellant. As regards the contention of the Departmental Representative that Shri Raj Kumar also contended having carried on business from the same shop as claimed by the appellant, it was submitted that the appellant had registered rent deed of the premises and secondly the appellant is unaware as regards what was said by Mr. Raj Kumar and further that in the absence of cross-examination of Shri Raj Kumar, his statement could not be relied upon in the case of the appellant. 41. As regards threat and coercion being applied by Dy. Director of IT (Inv.) for recording various statements including that of appellant, the learned Authorised Representative relied upon the circumstances highlighted earlier to contend that such statements were not at all voluntary statements and, therefore, cannot be relied upon. Alterna....
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....ion available with this office, forwarded by the Investigation Wing of the Department, the bank account No. 7674 in Punjab National Bank, Katra Jaimal Singh, Amritsar, which stands in the name of Shri Rishi Grover, Prop. M/s Vishnu Jewellers, was used to provide "accommodation entries" to various parties. Thus, the unaccounted cash available with the parties (or, beneficiaries) would be deposited in the said bank account and on payment of some commission, cheques/demand drafts/pay orders etc. would be issued in favour of the beneficiaries from that bank account. Thus, this method was used for converting the unaccounted money of the beneficiaries into white money on payment of commission by such beneficiaries. The volume of transactions during one financial year, as perused from this bank account does not collate with the income as returned by the assessee in his IT return filed for that corresponding assessment year. The assessee has filed return of income for asst. yr. 1998-99 on 31st Oct., 1998 declaring the income of Rs. 73,180. During the financial year corresponding to asst. yr. 1998-99, it is found that the total deposits in the bank account No. 7674 are to the tune of Rs.....
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....ntal Representative, however, submitted that at the time of initiation of reassessment proceedings under s. 147 of the IT Act, the AO is only required to come to a prima facie belief of escapement of income. The available information with the AO in the form of huge transactions in the bank account and other information received were sufficient for the AO to come to a prima facie belief of escapement of income. 46. We have carefully considered the rival submissions. We find substantial merit in the contention of the learned Departmental Representative that at the stage of reopening the proceedings under s. 147 of the Act what is required is only the prima facie belief that any income of the assessee has escaped assessment. In the present case, from the reasons as reproduced hereinabove, we are of the considered view that the AO did entertain a prima facie belief of escapement of income and, therefore, the proceedings initiated by the AO were valid. In the aforesaid reasons, the AO has observed that certain information was received from the Investigation Wing of the Department that bank account No. 7674 in PNB, Katra Jaimal Singh, Amritsar, standing in the name of the appellant wa....
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....nd Raymond Woollen Mills Ltd. vs. ITO (1999) 152 CTR (SC) 418 : (1999) 236 ITR 34 (SC)]." 48. Based on the aforesaid decision of the Hon'ble Supreme Court, we are of the considered view that the AO was justified in initiating reassessment proceedings under s. 147 of the Act. It may also be noted that for the asst. yr. 1998-99, the return filed by the assessee was not scrutinized under s. 143(3) of the IT Act and original return was accepted as such. In these circumstances, the reasons recorded by the AO were sufficient enough for him to come to a prima facie belief of escapement of income. 49. As regards the reopening of assessment proceedings for the asst. yrs. 1999-2000 to 2002-03, no contention was raised before us by the learned Authorised Representative, even though specific ground has been raised challenging the validity of the initiation of proceedings under s. 147 of the IT Act. From the records, it is noticed that returns for the three years were filed belatedly on 31st March, 2003, i.e., even after the expiry of the time-limit for filing the belated return. Accordingly, the return for the asst. yrs. 1999-2000 to 2002-03 were invalid returns in the eyes of law. T....
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....d by Dy. Director of IT (Inv.) on 16th Jan., 2003 and 17th Jan., 2003, particularly when the said statements were allegedly recorded under threat and coercion and were also subsequently retraced by the assessee?" 52. The primary issue that arises for our reconsideration is whether on the facts and the circumstances of the case it can be held that the appellant was during the relevant year engaged in jewellery business or not. On perusal of the records, we notice that the assessee has claimed to be engaged in the jewellery business since the financial year 1993-94, even though returns for the initial assessment years were not filed as the income for the said year were below the taxable income. For the asst. yrs. 1996-97 and 1997-98, the appellant filed return of income on 15th Jan., 1998, declaring income from his proprietary concern, M/s Vishnu Jewellers, much prior to the start of the investigations proceedings in the case of the appellant sometime in December, 2002. Thereafter, return for the asst. yr. 1998-99 was filed by the appellant on 31st Oct., 1998 duly accompanied by the audited accounts and the audit report under s. 44AB of the IT Act. The returns for the subsequent y....
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....m the fact. Ans. There are nine shops in Anand Market, Jamadar Haveli, Amritsar. However, no numbers have been given to these shops. I have rented out the middle shop of the 1st floor of the Anand Market. I had executed a rent deed in this regard Jar shop No. 3 with Shri Rishi Grover, Prop. M/s Vishnu Jewellers. Q. 4 But in statement recorded on 6th Jan., 2003 in response to question No. 8 you had stated that no rent deed had been executed with M/s Vishnu Jewellers. Please explain. Ans. I was made to sign on the statement which had been recorded on 6th Jan., 2003 that is why I had signed the statement under pressure." 55. Apart from Shri Anand, the fact that the appellant carried on jewellery business from the said shop has even been confirmed by various other persons, which we shall be referring to in due course. We also note that not only the assessee had filed his return of income for various asst. yrs. 1996-97 to 1998-99 by mentioning the address of his shop as 26, Anand Market, Patel Chowk, Amritsar, but the Department has also been issuing various notices, intimations, etc., at the said premises of the assessee. It is also noted that there is no allegation of any ....
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....k, Amritsar. Stated that I started business of manufacturing and resale of jewellery w.e.f. 1st Nov., 1997. I invested Rs. 76,000 out of my personal saving. The business premises are on rent basis and rent @ Rs. 500 per month is being paid. Total purchases and sales upto 25th Dec., 1997 was to the tune of Rs. 18,570 and Rs. 11,727 respectively. Prior to joining this business, I was doing job work. The firm has no additional place of business. On the R.H.S.C. shop No. 27 and on the LH.S. is shop No. 25. R.O.A.C. Sd/- For Vishnu Jewellers Prop." 57. In the aforesaid statement, the appellant clearly stated to be engaged in the business of manufacture and resale of jew....
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....orities. But at the same time the fact remains that during the financial year 1997-98, the appellant declared turnover of more than Rs. 66 lacs before sales-tax authorities, which was duly accepted by the Sales-tax Department. In these circumstances, the mere fact that correct turnover was not declared by the appellant before the sales-tax authorities could not be the ground to hold that the appellant was not at all engaged in the jewellery business. On the contrary, the fact that the appellant was registered as a jewellery dealer with the Sales-tax Department clearly supports the case of the appellant of being engaged in jewellery business. 58. Apart from the aforesaid, it is further noticed that the appellant had also made substantial purchase of jewellery from some of the registered sales-tax dealers, bills in respect of the same are placed at pp. 27 to 38 of the assessee's paper book. On perusal of the same, it is noticed that the appellant had made purchases of jewellery from three registered dealers, viz. M/s Vinod Jewellers, M/s Hukum Chand Sushil Chand and M/s Kapoor Jewellers. Before us, the learned counsel of the Revenue has placed copies of the assessment order dt....
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.... that he used to sell diamond jewellery to the appellant. Shri Rishi Grover of M/s Vishnu Jewellers. In his next statement dt. 10th Jan., 2003, Shri Satish Kapoor confirmed that he had seen the shop of M/s Vishnu Jewellers sometime around in the year 1998-99 and further that he had visited the shop of the appellant also. In response to question No. 6, he stated that he used to sell some jewellery items to M/s Vishnu Jewellers from time to time. Again in his statement dt. 30th Sept., 2003 recorded by the AO, Shri Kapoor again confirmed the fact that he had business transactions with M/s Vishnu Jewellers. In his reply to question No. 8, he stated as under: "Question No. 8 I am showing you statements recorded under s. 131 by Dy. Director of IT (Inv.), Amritsar, on 26th July, 2002, 12th Aug., 2002, 13th Aug., 2002, 10th Jan., 2003, 6th Jan., 2003, 13th Jan., 2003, 29th Jan., 2003 and 30th Jan., 2003. Please specify all the relevant portions of statements which were written without your consent. Ans. I will tell you the specific instances which are untrue and written without my consent. The real state of office as situated as follows: (i) The shops of M/s Vishnu Jewellers at An....
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....ant: "1. The assessee firm has been doing jewellery business for the last more than 90 years and has been regularly assessed to income-tax and sales-tax throughout. It is a registered dealer under sale-tax laws. When sale is made from registered dealer to registered dealer then the seller issues his sale bill showing the registered dealer number of the purchaser and that is acknowledged by the purchaser as a registered dealer. The assessee firm was selling mainly gold jewellery and not old diamond jewellery. Therefore, the old diamond jewellery purchased was to be sold to another registered dealer who was purchasing and selling that jewellery. All the jewellery in question, on the basis of which the assessment is reopened was purchased and sold as it was without any process. 2. It was the diamond jewellery of some other parties which was purchased and sold to M/s Vishnu Jewellers and the profit earned by our firm was duly declared in the P&L a/c of the firm. This is fully illustrated in the charts and bank statements, which were filed before the learned AO and copies thereof are enclosed for your kind consideration and for ready reference. 3. From the chart of asst. yr. 19....
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....statement of Shri Vinod Kumar of M/s Vinod Jewellers to the effect that he had stated in his statement that he sold diamond jewellery to M/s Vishnu Jewellers through M/s Hukum Chand Sushil Chand and that he did not know anything about M/s Vishnu Jewellers. Shri Kumar, in his statement had further stated that Shri Satish Kapoor of M/s Hukum Chand Sushil Chand had stated that M/s Vishnu Jewellers is their concern and therefore, the diamond jewellery was sold to the said concern. Based on the said statements, the Departmental Representative contended that M/s Vishnu Jewellers was actually not engaged in any jewellery business and the jewellery was sold by M/s Vinod Jewellers to M/s Hukum Chand Sushil Chand and merely entry in respect of the same was routed through M/s Vishnu Jewellers, which goes to prove that M/s Vishnu Jewellers was not engaged in genuine business. However, contrary to the said assertion of the Departmental Representative, on careful perusal of the complete statement of Shri Vinod Kumar, we notice that what emerges from his statement is that he actually sold diamond jewellery to M/s Vishnu Jewellers through M/s Hukum Chand Sushil Chand. The said transaction was done....
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....e leg of the transaction, i.e. purchase of jewellery by the appellant cannot thus be disputed and if that be so, it clearly proves that the appellant was genuinely engaged in the business of purchasing old jewellery. We find substantial merit in such contention of the appellant. We notice that not even a single case has been pointed out before us where the seller has denied having sold jewellery to the assessee. On the contrary, we find that in case of one of the seller, Shri Rajiv S. Arora the Mumbai Bench of the Tribunal has accepted sale of jewellery to M/s Vishnu Jewellers. Copy of the said decision is placed at pp. 532 to 538 of the assessee's paper book. 67. All the aforesaid facts and circumstances, in our considered view clearly lead to the conclusion that the assessee was engaged in the jewellery business in the name of his proprietary concern M/s Vishnu Jewellers. Before we deal with various findings given by the AO and also the evidences and contentions raised by the learned Departmental Representative, we may also note that various statements of the assessee were recorded at various stages, both by the Dy. Director of IT (Inv.) as well as AO in order to determine....
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....s, subsequent statements dt. 16th Jan., 2003 and 17th Jan., 2003, the assessee, Shri Rishi Grover, confessed being engaged in providing accommodation entry and not genuine jewellery business, the said statements were recorded under threat and coercion and were not voluntary statements of the assessee. Before dealing with the said statements recorded by Dy. Director of IT (Inv.), Amritsar, we may, however, refer to various other statements (about nine) recorded by the AO during the assessment proceedings. In his first statement dt. 16th Sept., 2003, recorded by the AO, placed on pp. 177-178 of the assessee's paper book, it is noticed that the assessee again confirmed having carried on jewellery business. This fact was repeatedly confirmed by the assessee, Shri Rishi Grover, in all his subsequent statements dt. 11th Nov., 2003, 17th Nov., 2003, 20th Nov., 2003, 15th Jan., 2004, 13th Aug., 2004, 16th Sept., 2004, 30th Sept., 2004 and 31st Dec., 2004. Some of the extracts from the statements of the assessee are reproduced hereunder: Statement dt. 11th Nov., 2003- "Q. 7 When and how did you start this business in jewellary? Ans. I started this business in 1993-94. I met Shr....
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....rent and had carried on jewellery business under the name of his proprietary concern, M/s Vishnu Jewellers. 70. All the above said facts and various statements of the assessee as well as the close relatives of the assessee, in our considered view, clearly proves that the assessee did carry on jewellary business and the findings of the AO that no jewellary business was ever carried on by the assessee cannot be accepted. 71. On perusal of the assessment order, it is noticed that the major circumstances which lead the AO to believe that the assessee was not engaged in genuine jewellery business and was merely providing accommodation entries to the various persons are the two statements of the assessee dt. 16th Jan., 2003 and 17th Jan., 2003 recorded by Dy. Director of IT (Inv.) and also the fact that substantial cash amounts were deposited in the bank account of the assessee against which cheques were subsequently issued to various sellers of the jewellary. Apart from this fact, the AO in his detailed assessment order has primarily referred to the statements of various other persons recorded by the Dy. Director of IT (Inv.) and also by the AO subsequently during the course of as....
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....cts and circumstances do indicate that prior to the recording of statements of the assessee on 16th Jan., 2003 pressure appears to have been exerted on the assessee. We further, note that subsequent to the recording of the said statements on 16th Jan., 2003 and 17th Jan., 2003, the appellant filed an affidavit dt. 14th Feb., 2003 before the AO on 6th Aug., 2003 placing on record the aforesaid facts regarding threat and coercion being employed by the Dy. Director of IT (Inv.) prior to the recording of the statements. Further a detailed note was filed along with the returns of the income for the asst. yrs. 1999-2000 to 2002-03 on 31st March, 2003, which reads as under: "Note attached along with the return filed: 1. I am filing my IT returns for asst. yrs. 1999-2000 to 2002-03 voluntarily and in good faith. 2. I was the sole proprietor of M/s Vishnu Jewellers in which I was doing the business of purchase and sale of jewellery and labour work of jewellery. The said business was started by me during the financial year 1995-96 and I have already filed my IT returns for asst. yrs. 1996-97, 1997-98 and 1998-99 as my income for all these three years was taxable. 3. Thereafter, a....
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....s thereof were written by the officers of Investigation Wing on their own and I was forced to sign the said statements and hence I deny the contents of the said two statements recorded on 16th Oct., 2003 and 17th Jan., 2003. 10. I hereby confirm and reiterate that the business of M/s Vishnu Jewellers was being carried on by me as a sole proprietor and I had maintained regular books of account for all the transactions made for that business. All the transactions of M/s Vishnu Jewellers were genuine and represent the true state of affairs and are hereby confirmed by me. 11. I am filing the returns for asst. yrs. 1999-2000 to 2002-03 voluntarily so as to reconfirm my above noted contentions." 74. We also note that the AO, during the course of assessment proceedings, cross-examined the assessee, Shri Rishi Grover, on the affidavit filed by him in his statement dt. 10th March, 2005 placed at pp. 223-226 of the assessee's paper book. In the said cross-examination, the assessee maintained that the statements dt. 16th Jan., 2003 and 17th Jan., 2003 were not his voluntary statements but were statements under threat and coercion. 75. The aforesaid facts, in our considered vie....
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....the core of all the decisions of this Court is to the effect that the voluntary nature of any statement made cither before the customs authorities or the officers of Enforcement Directorate under the relevant provisions of the respective Acts is a sine qua non to act on it for any purpose and, if the statement appears to have been obtained by any inducement, threat, coercion or by any improper means, that statement must be rejected brevi manu. At the same time, it is to be noted that, merely because a statement is retracted, it cannot be recorded as involuntary or unlawfully obtained. It is only for the maker of the statement who alleges inducement, threat, promise, etc. to establish that such improper means have been adopted. However, even if the maker of the statement fails to establish his allegations of inducement, threat, etc., against. the officer who recorded the statement, the authority, while acting on the inculpatory statement of the maker, is not completely relieved of his obligation at least subjectively to apply its mind to the subsequent retraction to hold that the inculpatory statement was not extorted. It thus boils down to this that the authority or any Court inten....
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.... the Hon'ble Supreme Court referred before us, we are of the considered view that the legal position that emerges is that a retracted statement, though binds the assessee, once retracted cannot be the sole basis for making the assessment. It is open to the assessee to show the circumstances in which confessional statements were recorded and once the assessee proves that confessional statements were recorded under threat and coercion and retracts from the same, the confessional statements cannot be the sole basis for making assessments or for making any additions in the hands of the assessee. 80. In the present case, as has been noted by us hereinabove, the statements of the assessee, Shri Rishi Grover, recorded on 16th Jan., 2003 and 17th Jan., 2003 by Dy. Director of IT (Inv.) were not his voluntary statements but were recorded by the Dy. Director of IT (Inv.) under threat and coercion. The learned Departmental Representative, however, contended that the statements of the assessee recorded on 16th Jan., 2003 and 17th Jan., 2003 were the voluntary statements of the assessee and there is nothing on record to establish that the assessee was threatened to give the statements. I....
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....ourt in the case of Arjun Singh. Therefore, according to the learned Authorised Representative the statements recorded by the Dy. Director of IT were invalid statements and must be excluded from consideration. The learned Departmental Representative, on the other hand, relied upon the decision of the Hon'ble Madhya Pradesh High Court in the case of Classic Builders & Developers to contend that there was no irregularity in the statements recorded by the Dy. Director of IT (Inv.). 82. On a careful consideration of the aforesaid submissions, we are of the considered view that at a time when the statements were recorded by Dy. Director of IT (Inv.), no proceedings were pending against the assessee. Further under the provisions of s. 131 of the IT Act, the Dy. Director of IT (Inv.) could have recorded statements under sub-s. (1A) thereto, that too, in connection with any pre-search enquiry only. The said sub-section is reproduced as under: "131. Power regarding discovery, production of evidence, etc.-(1) The AO, Dy. CIT(A), Jt. CIT, CIT(A) and Chief CIT or CIT shall, for the purposes of this Act, have the same powers as are vested in a Court under the CPC, 1908 (5 of 1908), wh....
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....or empowered by the Board or Asstt. Director or the authorised officer referred to in sub-s. (1) of s. 132 of the Act, before he takes action under cls. (i) to (v) of that sub-section, if he has reason to suspect that any income has been concealed or is likely to be concealed by any person or class of persons within his jurisdiction, then, for the purposes of making any enquiry or investigation relating thereto, it shall be competent for him to exercise the powers conferred under sub-s. (1) on the IT authorities referred to in that sub-s. notwithstanding that no proceedings with respect to such person or class of persons are pending before him or any other IT authority. The officers, i.e., the officers mentioned in sub-s. (1) of s. 131 are also possessed of the power of the Civil Court regarding discovery, production of evidence, etc., in relation to the judicial proceedings before them in regard to the assessment and there was no question of repetition of those officers performing judicial function in sub-s. (1A) of s. 131 of the Act, but the power under s. 131(1A), is exercised notwithstanding that no proceedings with respect to such person or class of persons are pending before ....
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.... of the IT Act. The said decision is clearly applicable to the facts of the present case since in the present case, nothing has been brought on record by the learned Departmental Representative to establish that the Dy. Director of IT (Inv.) recorded statements of various persons including the assessee Shri Rishi Grover in December, 2002/January, 2003, in connection with any action contemplated under s. 132 of the IT Act. The decision of the Single Judge of the Hon'ble Madhya Pradesh High Court in the case of Classic Builders & Developers relied upon by the learned Departmental Representative cannot be applied in view of the aforesaid decision of the Division Bench of the same Hon'ble High Court in the case of Arjun Singh discussed hereinabove. 86. In view of the aforesaid legal position, it clearly emerges that statements of the assessee and various other persons recorded by the Dy. Director of IT (Inv.) were not valid statements in the eyes of the law and, therefore, the same could not be relied upon. The Hon'ble Supreme Court of India in the case of K.T.M.S. Mohd. & Anr. observed that if the officer exercising powers under s. 40 of the FERA, was not a Gazetted Off....
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....invalid statement since the same was recorded by Dy. Director of IT (Inv.) and further in the absence of any cross-examination, such statements must be excluded from consideration. We find substantial merit in the aforesaid contentions of the learned Authorised Representative for the assessee that firstly the statement of Shri Harjinder Singh recorded by Dy. Director of IT was, an invalid statement for the reasons discussed hereinabove. That apart, since the testimony of Shri Harjinder Singh was not subjected to cross-examination, the same could not be relied upon as has been held by the Supreme Court in the case of Kishinchand Chellaram. (b) Statement of Shri Jatinder Anand recorded on 6th Jan., 2003 by the Dy. Director of IT (Inv.) has been relied upon by the AO. On perusal of the statement dt. 6th Jan., 2003, it is, however, noticed that Shri Jatinder Anand in the said statement confirmed having given one shop on rent to M/s Vishnu Jewellers. Subsequently, in his statement dt. 22nd Jan., 2004, which has been discussed by us in the earlier part of the order, Shri Jatinder Anand again confirmed having given shop No.3 on rent to M/s Vishnu Jewellers, the proprietary concern o....
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.... the assessee was not at all engaged in jewellery business. That apart, as noted by us hereinabove, such statements are invalid statements and cannot be relied upon. Even further, such statements recorded by Dy. Director of IT must be read along with the subsequent statements recorded by the AO. Once that is done, statements of the said persons, in our view, does not lend any credence to the claim of the AO that the assessee was engaged in the business of merely accommodation entries and was not in the genuine business of jewellery. (d) Statements of Shri Chamel Singh (alias Nikku) and Shri Raj Kumar (alias Bittoo), both employees of the assessee, were also recorded by the AO on 30th Dec., 2003. The AO in his assessment order has referred to certain inconsistencies in the statements of the two employees to allege that the assessee was not doing genuine jewellary business. On perusal of the statements reproduced on pp. 84-86 of the assessment order, we, however, notice that both the employees have confirmed in their respective statements that they worked for Shri Rishi Grover, the assessee herein and that the assessee carried on jewellery business from its shop in Anand Building,....
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....dt. 22nd Jan., 2004 stating that his earlier statement dt. 22nd Jan., 2003 was recorded under pressure by the Dy. Director of IT (Inv.) and he was merely made to sign the said statement. The statement of Shri Rakesh Kumar read with his subsequent statement recorded by the AO, in our considered view, does not support the case of the Revenue. Shri Rakesh Kumar in his subsequent statement and affidavit filed before the AO confirmed the fact that he introduced the bank account of the assessee and further stated that the first statement was recorded under pressure, which, even otherwise was an invalid statement and could not be the basis for holding that the assessee was merely providing accommodation entries and that the appellant was not engaged in the jewellery business. (g) Statement of one Shri Vijay Gupta recorded on 6th Feb., 2004 by the AO has been relied upon by the AO to state that he was also an employee of Umat & Associates and he used to fill cheques, deposit vouchers, bills for M/s Vishnu Jewellers, the proprietary concern of the assessee. The learned Authorised Representative for the assessee, however, submitted that, Shri Vijay Gupta was part-time accountant of ....
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....tative that though opportunity was granted to the assessee to cross-examine the said persons, the assessee refused to cross-examine them. The learned Authorised Representative for the assessee, however, submitted that the subsequent statements of Shri Yudhvir and Shri Sushil Kumar Sareen could not be relied upon. Inviting our attention to the statement of the assessee dt. 7th March, 2005, it was submitted that the assessee had in the said statement clearly stated before the AO that the two brokers are lying probably because they fear scrutiny assessment by the Department. On careful consideration of various statements of the two brokers, we notice that though initially said two persons confirmed having worked as brokers for the assessee, but in their statement recorded in March, 2005, both the persons denied having conducted jewellary business for the assessee. Thus, while the first statements support the stand taken by the appellant, the subsequent statements to some extent support, the case of the Revenue since even according to the assessee entire sales were not effected through the said brokers. It is, however, noticed that both the persons have taken contrary stands in t....
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....ething more than towards commission for giving such entries. The fact that the amount received is exactly the same amount as was paid for purchase of jewellery clearly supports the case of the appellant that the jewellery was returned back and accordingly, consideration paid earlier was received back from the sellers of the jewellery. The said transaction, thus, in our view, does not lend any support to the case of the Revenue that the appellant was merely providing accommodation entries. 91. One of the contention raised before us was that particulars of the office of Umat & Associates is found mentioned in various documents like application for allotment of PAN. sales-tax registration, surety bonds, etc. On the basis of the same, it was repeatedly contended by the learned Departmental Representative that the assessee did not carry on jewellery business and the entire transactions were done at the behest of Shri V.K. Umat of M/s Umat & Associates. On a careful perusal of the various records brought to our attention, we find no merit in such contention of the Department. It was the contention of the learned Authorised Representative for the assessee that the particulars of Umat &....
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....earned Departmental Representative. The main contention of the Departmental Representative was that since the original bill books were claimed to have been lost in December, 2002, the finding of the bill books at the time of survey clearly indicates that no bill books were actually lost. 94. On careful consideration of the same, we are of the considered view that the appellant had placed on record a copy of the FIR lodged on 7th Jan., 2003 wherein it is stated that original bill books and vouchers were lost on 16th Dec., 2002. Therefore, the contention of the Departmental Representative that original bills and vouchers were never actually lost cannot be accepted. Furthermore, the Departmental Representative has not been able to rebut the contention of the appellant's Authorised Representative that each and every bill stands duly recorded and included in the return of income and the duplicate bill books were printed merely to issue duplicate bills to the persons who lost their original bills and in whose cases proceedings were initiated by the IT Department. In these circumstances, we are unable to accept the contention of the Departmental Representative that the fact that th....
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....e CIT(A) in not considering such documents, the appellant filed before us application for admission of additional ground. Alternatively, application for admission of the said document as additional evidences was also filed before us. The learned Departmental Representative for the Department, however, vehemently objected to the aforesaid documents being filed by the appellant. It was the vehement contention of the DRA that no such documents were ever filed before CIT(A). It was further submitted by the Departmental Representative that the transaction of bullion trade were included by the appellant subsequently after the books of accounts were impounded by the Dy. CIT(A) on 6th Jan., 2003 merely to give the colour of genuineness to the appellant's business. 98. On hearing the rival submissions, vide our separate order dt. 27th May, 2009, the application of the appellant for admission of additional grounds was allowed by us. In the said order, after perusing the records of the CIT(A) it was held that since the appellant had submitted the bills of purchase of bullion from SBI vide its letters dt. 13th Feb., 2006 and 22nd Feb., 2006, the first appellate authority erred in not co....
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....along with return of income for the asst. yr. 1999-2000. On perusal of the assessment order for the asst. yr. 1999-2000, we further notice that there is no discussion in the assessment order about the bullion trade carried on by the assessee. The learned Departmental Representative in this context argued that since the details relating to bullion trade were never furnished by the assessee before the AO, it was not possible for the AO to discuss the same in the same assessment order. To that extent, we agree with the contention of the Departmental Representative. However, we also note at the same time that despite the quantum of turnover and the bank statements of PNB account being available with the AO, the AO did not bother to investigate to find out the reason for variation in the entries as per the PNB account and the turnover disclosed in the return of income. Had he investigated, he would have found that the turnover declared in the return of income included the turnover relating to the bullion trade. 101. That apart, we further note that the details of bullion trade were very much filed by the assessee before learned CIT(A). The contention of the learned Departmental Repre....
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....quantity of jewellery from a number of consumers who declared jewellery under VDIS, were actually not engaged in purchase of jewellery but were merely providing accommodation entries. In that case also, it was the contention of the Revenue that the assessee has not been able to give details of the consumers to whom substantial jewellery was sold after purchasing the same from various VDIS declarants. The modus operandi of the said assessees were similar to the operations of the appellant. The Special Bench of the Tribunal did not agree with the contention of the Revenue and after elaborately dealing with the rival submission came to the conclusion that the jewellery business carried on by M/s Bemco Jewellers (P) Ltd. and M/s Bishan Chand Mukesh Kumar was genuine and not accommodation entry as alleged by the Revenue authorities. We may reproduce hereunder the observations given by the Tribunal while holding the business of the assessee therein to be genuine. 105. In the case of M/s Bemco Jewellers (P) Ltd., the Tribunal concluded as under: "82. In view of the foregoing discussion, it appears to us that the evidence collected by the Revenue authorities is not sufficient to esta....
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....as right, as also the sales-tax assessment order under the Gujarat Sales-tax Act where the assessee declared Rs. 24,07,30,000 as total sales and exempted sales. There was no evidence of any consequence which was unearthed during the search to directly show that Bemco was carrying on only accommodation entry business for jewellery. Sunil Kapoor who was projected as one of the witnesses of the Department to support their stand that Bemco's jewellery business was bogus, has been found by us to have acted as sub-mediator in the share accommodation entry business carried on by Manoj Aggarwal through Friends Portfolio and he has also been paid commission in that business. Bemco has been found to have had a shop or showroom in 1182, Kucha Mahajani and this has been confirmed by the report of the Sales-tax Inspector as also by the rental receipt starting from January, 1998. Thus, the surrounding circumstances, apart from the direct evidence in the case, do not contain anything which belies the claim of Manoj Aggarwal that though his share transaction business was only an accommodation entry business for commission, the jewellery business carried on by Bemco has not been proved to be so....
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.... and. admitted as additional evidence in the case of Tejinder Singh. HUF, can still be utilized, Shri S.D. Kapila has urged that the case of Shri Tejinder Singh should be restored to the file of the AO to consider and decide the same afresh in the light of the said additional evidence. He has submitted that this will also facilitate in giving an opportunity to the assessee to cross-examine the deponents whose statements have been sought to be relied upon by the Department and also to rely upon the letters/affidavits of the said deponents which have been filed by him and admitted by the Tribunal as additional evidence. He has contended that this will enable the AO to reach a proper conclusion after taking into consideration this entire evidence which has been gathered after the completion of assessment in the case of Tejinder Singh, HUF and which is relevant to decide the issues involved in the said case. Although this plea of Shri S.D. Kapila sounds to be logical and legally tenable, we find it difficult to accept the same in view of our decision rendered in the cases of Shri Manoj Aggarwal and Bemco Jewellers (P) Ltd. in the foregoing portion of this order. It is no doubt true tha....
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....ght on record by the assessee especially the evidence in the form of sales-tax assessment order wherein the transactions of purchase and sale of jewellery were accepted by the sales-tax authorities was found to be reliable by us to support the case of the assessee that the relevant transactions of purchase and sale of jewellery were genuine. As the issue involved in the case of Bemco/Manoj Aggarwal as well as all the material facts relevant thereto including the evidence brought on record are similar to the case of Bishan Chand Mukesh Kumar, we are of the view that the decision rendered in the case of Bemco/Manoj Kumar on the said issue is applicable even in the case of M/s Bishan Chand Mukesh Kumar with equal force and this being so, no meaningful purpose will be served by sending the matter back to the AO for reconsideration and redecision merely because the issue has not been decided on merits in the case of M/s Bishan Chand Mukesh Kumar. In our opinion, this exercise would prove to be merely academic and it would result only in multiplicity of litigation. In that view of the matter and keeping in view the reasons given above, we do not find any justifiable reason to send this m....