TaxTMI 
TaxTMI 
2010 (1) TMI 917
X X X X Extracts X X X X
X X X X Extracts X X X X
....vidences and based on irrelevant consideration. 6. There are no evidences on record to show that the appellant had acquired US $ 84,000 and thus the inclusion of Rs. 40,32,507.00 in income is wrong. 7. The possession of US $ 84,000 was held and the foreign currency confiscated u/s 110 of the Customs Act, 1962 by Customs Authorities and in such circumstances the AO relying on certain Statements alone cannot infer income of the appellant. Therefore, the inclusion of Rs. 40,32,507.00 is wrong. 8. The whole determination of alleged income of Rs. 40,32,507.00 based on the allegation inferences, conclusions by an extraneous authority, namely Customs Authorities cannot clothe the AO with the judicial power to include Rs. 40,32,507.00 as income of appellant. 9. Shri S.C. Tuli has not been offered to be cross examined by the appellant, so any reliance on the same is inadmissible in law and, therefore, the inclusion of Rs. 40,32,507.00 in total income is wrong. 10. The above grounds of appeal are without prejudice to one another and no part of the same should be treated as admission of the appellant. 11. The interest provision of se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Income Tax Act was issued to the assessee by the AO on receipt of the aforesaid information from the Customs Authorities and in view of the categorical statement made by the assessee before the Customs Authorities, as above. By virtue of the assessment order, the assessment was completed at Rs. 50,40,730/-. Vide the impugned order, the learned CIT(A) confirmed the addition. This is how the assessee is in appeal before us. 5. The learned counsel for the assessee has contended that the learned CIT(A) has erred in confirming the addition made; that there is no evidence on record to show that the assessee had acquired US $ 84,000; that the foreign currency was confiscated under the Customs Act by the Customs Authorities; that as such, the AO, relying on certain statements alone, could not infer this foreign currency to be the income of the assessee; that the addition is based merely on the allegations, inference, and conclusions of the Customs Authorities; that Shri S.C. Tuli, from whom the foreign currency was recovered by the Customs Authorities, was not got cross examined by the assessee; that under the proceedings before the Customs Authorities, the assessee was acquit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ought by confession, if retracted, must be corroborated by independent and cogent evidence; that this has also been held, following the Hon'ble Supreme Court, by the Amritsar Tribunal in "Rishi Grover v. ACIT" (copy placed on record); that in the following cases, it has been held that no addition can be made on the basis of a retracted statement:- 1. DCIT vs. Ratan Corpn., 197 CTR 536(Guj); 2. CIT vs. Uttamchand Jain, ITA No. 634 of 2009; 3. G. Kanagaraj vs. DCIT, 73 TTJ 731 (Chennai); 4. Govind Ram Chhugani vs. Asstt. CIT, 77 TTJ 339 (Jodh); 5. Surinder Pal Verma vs. ACIT, 89 ITD 129(Chd.)(TM); 6. Dineshchandra J. Dina v. ITO, 112 Taxman 107(Ahd.). 6. The learned counsel has further submitted that in the following decisions, it has been held that if the basis of the assessment order diminishes, the addition made by the AO is not sustainable:- 1. CIT vs. Somani Pilkington's Limited, 266 ITR 388 (P and H); 2. Farrukhabad Gramin Bank vs. ITO, 273 ITR 113 (All.); and 3. CIT vs. Ramachandra Hatcheries, 305 ITR 117/215 CTR 370 (Mad.). 7. It has also been submitted on behalf of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatement. It was also contended that such statement could not be relied on and hence the Income Tax proceedings against the assessee were without affording due opportunity to cross examine the party; and that the statement had been made before an Authority entirely different from the Income Tax Department. 11. The learned CIT(A) sustained the addition of Rs. 40,32,507/-. It was observed, inter alia, that the assessee had made a categorical statement before the Customs Authorities, in which purchase of the dollars had been confessed; that such purchase had been confessed by the assessee from his undisclosed funds; that the statement was made in the presence of Shri Tuli and so, no cross examination of Shri Tuli was relevant; that the AO had correctly relied on "Surjeet Singh Chhabra vs. Union of India" [1996] 135 Taxation 711(SC) to hold that the confession made before the Customs Authorities were binding. The ld. CIT(A) observed that the assessee had not produced any evidence or any material or reason to show that the first statement before the Customs Authorities was wrong and the retraction thereof was correct; that unless a proposed retraction is supported by cogent ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n, if retracted, must be substantially corroborated by other independent and cogent evidence which would lend adequate assurance to the court that it may seek to rely thereupon. 15. "Vinod Solanki v. Union of India" (supra) also holds that regarding confession statement, the initial burden to prove that such confession was voluntary, is on the department. Where reliance has been placed on such confession, the burden is on the prosecution to prove that it was not obtained by threat. In the present case, the original statements have been withdrawn by the assessee and Shri S.C. Tuli before the ACMM, a judicial Authority and Court of law and the Customs proceedings as well as the FERA proceedings have been dropped. 16. "Vinod Solanki v. Union of India" (supra) also holds that while ascertaining the voluntary nature of a statement subsequently retracted, the court must bear in mind the attending circumstances, the time of retraction, the nature and manner of retraction and the other relevant factors. In the present case, the attending circumstances, as we shall presently see, clearly point out to the statements being not voluntary in nature. As for the retraction, it....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... asked to write; and that the assessee was dictated the contents to be written in his statement by the Customs Authorities. It is pertinent that neither of these affidavits has ever been rebutted. 20. In the cross examination of Shri Vinod Barel, Customs Superintendent, recorded before the AO in the assessment proceedings, he stated that though he remembered that summons were issued to the assessee, he could not recall as to through whom they were sent and as to where they were served on the assessee; that the search was conducted on the assessee on 25.5.99 in the morning; that he had not seen any pass issued to the assessee by the Delhi Police for entering the Airport Arrival Hall; that it was not correct that the assessee had been forceably whisked away from his residence on 25.5.99; that no witness was present at the time of recording of the statement of the assessee; and that since the assessee had himself voluntarily tendered details which were sufficient for the investigation, it was not necessary to record the statements of the assessee in a question and answer form. This statement of Shri Vinod Barel was also relied on by the AO, despite the said inaccuracies ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....proof that the statements were not recorded under force, threat and coercion. In this regard, affidavits filed by the assessee before the AO have not been rebutted. Moreover, the statement of Shri Vinod Barel, Customs Superintendent, does not inspire any confidence. It has been given undue weightage by the AO. Also, undeniably, neither was the statement of Shri Tuli, forming the basis of initiation of the proceedings against the assessee u/s 148 of the I.T. Act, furnished to the assessee, nor was he allowed any opportunity to cross examine Shri Tuli, inspite of repeated requests in this regard. The action of the AO in making the statement of Shri Tuli the basis for the addition in the assessee's hands also, as such, falls. Not confronting the assessee with such a statement and not allowing an opportunity to cross examine the witness is in stark violation of the natural justice principle of audi alterem partem. The following authorities are relevant in this regard:- 1. Kishanchand Chellaram vs. CIT, 125 ITR 713 (SC); 2. Saraswati Industrial Syndicate Ltd. vs. CIT, 237 ITR 1 (SC); 3. State of Punjab vs. Bhagat Ram, AIR 1974 SC 2335; 4. Kalra Gl....