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2015 (4) TMI 542
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....peal before the Hon'ble ITAT stood decided and set-aside for granting cross-examination of Shri Niranjan Shah. The ld. CIT(A) has thus rendered the whole purpose of setting aside the CIT(A)'s order as futile and has unnecessarily thrown the appellant once again into endless litigation after several rounds of appeals before the appellate authorities. 2. The ld. CIT(A) failed to take proper cognizance of the statement of Shri Niranjan Shah recorded during the cross-examination proceedings. That since Shri Niranjan Shah having categorically admitted in the said statement in no uncertain terms that he does not have any financial transactions with the appellant in cash and that such transactions appearing in A/c. No. 36 maintained by him and found from his possession are pertaining to him only and the appellant has nothing to do with the same, the impugned addition in the hands of the appellant based on such material is wholly unjustified and bad in law and accordingly requires to be deleted/quashed. 3. The ld. CIT(A) has further erred in relying upon the statements of the appellant recorded by the FEMA authorities for drawing adverse inference without considering the fact....
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....ed on 17.10.1990. After search, assessee filed a disclosure petition in which following unaccounted income was disclosed for various assessment years: AY 1985-86 Rs.38.10 lac AY 1986-87 Rs. 9.00 lac AY 1988-89 Rs. 5.55 lac AY 1989-90 Rs. 6.50 lac AY 1990-91 Rs. 5.30 lac AY 1991-92 Rs. 39.30 lac Rs.103.75 lac 3.2 The aforesaid disclosure was in respect of share holding in Patwa Investment & Finance Ltd., Lyka Leasing & Finance Ltd. and Dharnidhar Leasing & Finance Ltd. to the extent of Rs. 95.75 lacs and the balance disclosure of Rs. 8 lac was in respect of cash found during course of search. 3.3 Assessments for A.Y.1985-86 to A.Y.1990-91 and 1992-93 were reopened u/s.148 of the Act and were finalized vide assessment orders u/s. 143(3) r.w.s. 147 of the Act [A.Y.1986- 87 to 1990-91 and 1992-93] and u/s.143(3) of the Act [A.Y.1991-92], wherein various additions were made which included addition on account of alleged advances to Shri Niranjan Shah out of undisclosed sources on the basis of material seized from his possession i.e. Shri Niranjan Shah. The particulars of orders passed are as under: A.Y. Date of Order ....
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.... the Assessing Officer for denovo assessment with the following observations: "After careful consideration of the rival submissions and the facts and circumstances of the case, we are of the opinion that so far as IT appeals are concerned, it is an admitted fact that the Assessing Officer of Shri Niranjan Shah while completing his assessments had relied upon the seized material seized from premises of Shri Niranjan Shah at the time of searching his case on 30/04/1992 and during that process had procured cash flow statement as well as statement of Shri Niranjan Shah which have the effect on assessee's assessments. It is further observed from the records that at the initial stage, appellant's Assessing Officer had allowed Shri Niranjan Shah, but before Assessing Officer of Shri Niranjan Shah at Bombay and it is also an admitted fact that the Assessing Officer of Shri Niranjan Shah at Bombay did not allow the assessee an opportunity to cross examine Shri Niranjan Shah, rather directed him back to his Assessing Officer with the directions that cross examination will be allowed by appellant's Assessing Officer itself. It is further an admitted fact that when the assessee ....
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....d by concern Assessing Officer. He assessed total income should include the returned incomes, additions on the basis of disclosed admitted incomes as discussed above i.e. cash found and disclosed, commission income of Rs. 6.50 lacs disclosed for A.Y. 1989-90, income from M/s Patwa traders confirmed as per direction given in appeal orders, perquisites added and confirmed in First Appeals and later not contested and the additions on account of alleged advances to Shri Niranjan Shah out of undisclosed sources. The addition, on account of alleged advances to Shri Niranjan Shah, out of undisclosed sources is main issue at relevant point of time. Regarding the main issue i.e. addition on account of alleged advances to Shri Niranjan Shah out of undisclosed sources and stand of assessee has been that the impugned addition was erroneous since same was based on material and found assessed from third party and not from the assessee. In this regard, relevant facts are as under: "8.1.1 During the course of an income-tax search on 30-5- 1992 at the premises of one Shri Niranjan j. Shah, a stock broker of Bombay and a close relative of the appellant, a computer floppy was seized which co....
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....bited by a sum of Rs. 15,100/- against the foreign exchange of equivalent amount provided by Shri Niranjan J. Shah in Hong Kong to various persons from whom the appellant had received reimbursement. He stated that his aforesaid account was also debited by a sum, of Rs. 1,07,500/- against Singapore Dollars 10000 provided by Shri Niranjan J.Shah to one Shri N.Babulal Shah in Singapore in June, 1990. The appellant had further explained that he had paid a sum of Rs. 20,000/- to one Shri Nirubhai on 29-12-1990, Rs. 1,15,000/- to one Nanda, Rs. 45,000/- to one Shri Parikh, Rs. 10,000/- to a person (name not given) on 31-5-1991, Rs. 40,000/- to one Shri Churchill on 1-7-1991 and Rs. 5,00,000/- to one Shri Pradip Shah on 5-10-1991, under instructions from Shri Niranjan J. Shah on behalf of one Anil of USA. This was submitted with regard to the clarification given in respect of the aforesaid entries for foreign exchange transactions, para l(e) of the memorandum dated 5-10-1994 issued by Enforcement Directorate, New Delhi to the appellant, Shri Niranjan J. Shah and others refers. 8.1.2. With regard to the entries appearing in account no.36, relating to transactions affected through cheque....
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....s concerns, was out of the unaccounted cash lying with him. The Assessing Officer who made the earlier order of assessment for A. Y. 1986-87 dated 25-3-1994, has given instance of some of the credit entries in cash, appearing in account no. 36, reflected in the books of account of the appellant seized during a search in the case of the appellant in August, 1990. Pages 14 and 15 of the relevant assessment order refer. 8.1.4 On the basis of the aforesaid, the Assessing Officer who passed the earlier order under section 143(3) read with section 147 of the Income-tax Act dated 25-3-1994 for A. Y. 1986-87, made an addition of Rs. 1,89,61,000/- (similar additions of varying amounts were made with respect to other Ass. Years in appeal, now) to the total income of the appellant, representing the amounts advanced to Shri Niranjan j. Shah, his concerns and other persons on his (Shri Niranjan J. Shah's) behalf, other than by means of cheques, and credited in account no.36. While making the addition, the Assessing Officer has referred to the submission made by the appellant that the statement given by him before the FERA authorities was a relevant, significant and substantive piece of e....
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....tions in the account were either on 31- 5-1985 or thereafter. The appellant's counsel had also stated that Shri Niranjan J. Shall had actually owned up all the transactions reflected in the said account by way of debit or credit, in his income-tax proceedings, it was also contended that there were various transactions by means of cheques, in this account, which did not pertain to the appellant and, therefore, such transactions had not been accounted for in the books of any concern of the appellant's group, it was contended that such transactions by means of cheques pertained to third parties and the appellant had nothing to do with these transactions. It was emphasised that on the basis of evidence and material which was available in the income-tax records of Shri Niranjan J.Shah with the Income-tax authorities at Bombay,-it could be easily established that several transactions did not pertain to the appellant My predecessor had examined the contentions raised by the appellant and had given his findings in para 3.11 of his aforesaid order. He stated that on the basis of the statements given by the appellant, the inescapable conclusion was that the account no.36 in the compu....
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....ficer to be decided de novo. The appellant was asked to produce the relevant material and evidence, in support of the various claims made by him before the CIT(A), before the Assessing Officer and the Assessing Officer was advised to make enquiries from the Income-tax authorises of Bombay on the relevant points. 8.1.6 In the order passed by the Assessing Officer under section 143(3) read with section 250 of the Income-tax Act, subsequently in 1998, the Assessing Officer observed that the statement furnished by the appellant to work out the peak credit in account no.36 did not give the correct working of the peak credit He stated that the appellant had not worked out the peak credit by considering each transaction as a separate transaction. He observed that in the account maintained in the computer, when any amount of cash was brought in at a particular time, the same was entered first. The cash brought in or taken out subsequently was entered only thereafter. He, therefore, held that the cash withdrawn by a latter entry could not be considered as having been used for making deposits which appeared prior to the withdrawal. He observed that in the statement prepared by the appella....
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....for AY 1986-87. After considering the observations of the Assessing Officer as also the contentions of the appellant the CIT (Appeals) passing this order had after detailed discussion on facts and circumstances ; reached the following conclusions: (a) Transactions in the computer floppy containing account no.36, in the name of 'J.K.', was found during the course of an income-tax search at the premises of Shri Niranjan J.Shah on 30/5/1992, were with appellant only. (b) The contention of the appellant that Shri Niranjan J.Shah had admitted the credit entries in cash, appearing in account no.36, is not correct. He had admitted only the debit entries in cash and had explained the source thereof. (c) The then CIT, in his order dated 30-3-1995, in the case of the appellant for AY 1985-86, has stated that the claim of the appellant that several transactions in account no.36 which were by cheques and could be established as pertaining not to him (the appellant) but to various other parties, had to be considered on the basis of whatever evidence or material which could be produced by him or which was available in the incometax records of Shri Niranjan J.Shah with his Ass....
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....as under: "8.3 I have gone through the facts of the case, the submissions, the various statements recorded by FERA Authorities as well as under the IT Act, the orders of my predecessors in the case, the order of the Hon'ble ITAT setting aside the issue and have given the brief facts on each of these in the earlier paragraphs. The following important observations and facts are culled out after consideration of all material and evidences on record, on the issue concerned: a) With regard to the contents of the account marked as 'J.K', the statement of the appellant was recorded on 10th July, 1992 under the provisions of the Foreign Exchange Regulation Act. In his aforesaid statement the appellant admitted that the credit entries appearing in the aforesaid account represented the amounts paid in Indian rupees by him or by his concerns or by certain persons on his behalf to Shri Niranjan J.Shah or his concerns or certain persons acting on his (Shri N.J.Shah's) behalf. Similarly, the appellant admitted that the debit entries appearing in the aforesaid account represented the amount in Indian rupees paid by Shri Niranjan J. Shah or his concerns to him (the appellant) or his ....
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....ssessment for A. Y. 1986-87dated 25-3-1994, has given instance of some of the credit entries in cash, appearing in account no. 36, reflected in the books of account of the appellant seized during a search in the case of the appellant in August, 1990 (refer pages 14 and 15 of the relevant assessment order). This has never been disputed by the appellant. g) Shri Niranjan J.Shah, in his statement under section 131 of the Income-tax Act recorded by his Assessing Officer on 27-10-1993, with regard to account no.36 had stated that this account was of Shri J.K.Doshi, as per the index. He further stated that this account represented transactions between him and Shri J.K.Doshi of Ahmedabad in Indian rupees. He also stated that most of the figures mentioned in this account were in code and to read those; the decimal point was to be ignored. However, at certain places, figures were written in full also. He had given details of such figures in the aforesaid statement. He had further stated that such discrepancies occurred in this account due to the fact that this account was never settled and checked between him and Shri J.K.Doshi. He stated that this account also reflected the transactions....
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....re with anybody else. Definitely, the transactions cannot be with oneself. It has also to be seen that the transactions in cash related to FERA violations recorded in the same account are not denied. On one hand he says that he does not remember the nature of transactions and on the other he says that the transactions with the appellant in Cheque/DD are recorded. The attempt by Shri Niranjan Shah to help the appellant, wherein there were no further tax implications to him cannot be taken to dilute the overwhelming evidences which show the genuineness of the transaction beyond doubt. k) The bringing into taxation of the transactions from the end of Shri Niranjan Shah in his case does not entitle the appellant for any relief. There are always two ends to a transaction between two parties, and each has to explain and cater to its end of transaction. For instance, a seller of property has to pay the correct capital gains or profits and the purchaser to explain the source. Taxation in one hands cannot in any case entitle the other for relief. In fact, it is an evidence of the genuineness of the transaction. To sum up, it has to be seen that the accounts were confronted to the appe....
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.... Niranjan Shah out of undisclosed sources. In this regard, learned Authorized Representative pointed out that in case of Shri Niranjan Shah, this amount has been added in respective assessment years. So, addition is not desirable in assesee's case, which will amount to double addition. Learned Authorized Representative further submitted that CIT(A) erred in relying upon statement of assessee recorded by FEMA for drawing adverse inference without considering the fact that said statement in such transactions other than FEMA already stood reflected in his statement recorded by Income Tax Authorities. Regarding FEMA proceeding, learned Authorized Representative pointed out that in FEMA proceedings, findings are as under: "I have carefully considered all the materials and the facts of the case emanating from the records, the evidence adduced by the Department in support of the charges alleged in the SCN, the submissions both written as well as oral, made by/or on behalf of the noticees. The computer printout of Floppy I seized by the Income Tax Department from Sh. Niranjan Shah contain the accounts of various persons. Page Nos. 53 to 59 of the said floppy contained an account titl....
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....ed from the premises of Sh. Niranjan Shah, Sh. J.K.Doshi interalia stated that at page 1, at Sr. No. 36 of the said document his name in short J.K' was mentioned; that pages 53 to 59 of the said document related to the transactions undertaken with Sh. Niranjan Shah by him of his concern; that debit entries under the heading 36 in pages 53, 54; 55, 56, 57, 58, 59 represented the amounts in Indian rupees paid by Sh. Niranjan Shah/his concern or by his men to him or to anybody on his behalf; that credit entries in the said document represented the amounts paid in Indian currency by him or through his concern to Sh. Niranjan Shah/his concern or to anybody on his behalf; that the figures written under the head 36 were expressed in Indian rupees and while reading the amounts decimals were to be omitted. Following entries incriminatory in nature from foreign exchange of view figured in the printout of the floppy 1 seized from the premises of Sh. Niranjan Shah: Explaining the various entries pertaining to him, appearing in A/c. No. 36 of the Computer print out F-l, Sh. J.K. Doshi, in his various statements explained that his account with Sh. Niranjan Shah was debited by Rs. 1,20,000....
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....3.6.90, 15.6.90, 2.7.90, 4.7.90, 5.5.90 were respectively available on pages 353, 310, 351, 350, 71, 70, 69 and 217 of A 10. Similarly, the transactions dated 28.1.91 for Rs. 1,15,000/- and Rs. 45,000/-pertaining to US D 2,000 as noted on page 258 of A-11. Also page 258 of All contains the original entry regarding transaction of US D 25,000 on 9.3.91. The corresponding entry regarding this transaction is figuring on 88/F1 against the date 10.3.91 in Nilesh J. Vadhani US D A/c. The original notings of transactions dated 1.6.9l, 14.6.91, 23.7.91, 9.8.91, 7.9.91, 13.9.91, 16.9.91,29:10.91, 29.1.92 and 30.1.92 were figuring on pages 500, 507, 512, 372, 140, 137, 136, 179 and 11 of A 11. The debit transactions dated 1.9.91, 25.10.91were reflected on pages 144 and 181 of A 11. Page 191 of A 11 contain an entry "5 JK to Pradip Shah A/c. Anil USA for 15150/- US D", regarding the transaction dtd. 5.10.91 on59/Fl. As already stated US D stands for US dollar. The accounts on pages 58 and 59 of Fl shall be read without the decimal. In his statement dtd. 6.10.93 he had stated that the debit entries dtd. 3.10,89 and 4.10.89 for R&. 5 Lacs each regarding DD for Boston were correlated with the deb....
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....arranged a total remittance of US $ 13,000 to him (Satish Mody) and wife under the Immunity scheme and debited Rs. 4,44,000/- from his (Satish Mody) account as evident from page 83 of Fl. Sh. Vipul R. Shah in his statements dtd. 23.6,92, 24.6.92 and 25.6.92 etc. had explained that Dr. Sharik, a friend of Kamlesh (co-brother of Vipul), had received Sh. Pnd. 3870 against Rs. 1,50,000 received by Sh. Niranjan Shah through him (Vipul Shah); that the account of the said transaction is figuring in account No.-2 on page 11 of Fl regarding Chandrakaut D. Charvada in London; that Sh. Niranjan Shah had provided Fr. 11,752/-through Sh. Nilesh Vadhani (Dubai) to Paresh Gheewala against payment of Rs. 52,000 through him (Vipul) to Sh. Niranjan Shah; that the account of the said transactions is in account No. 8 on page 87 Fl regarding Nilesh Vadhani; that he received US $ 2000 in Hong Kong from K. Lalwani of M/s. Elkey International (Hong Kong) on 25.8.90 and the transaction is figuring in account No, 4 of Lalwani on page 66 of Fl. Kamlesh N. Soni vide his statement dtd. 16.7.92 had confirmed that he contacted Vipul R. Shah for foreign exchange worth Rs. 1.5 Lac for Dr. Khwaja Sharik who w....
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....sh Babulal Shah have admitted the charges alleged against them in the SCN. The evidence on record, as discussed above also prove the charges alleged against them as well as Sh, Niranjan Shah and I find them guilty of the said contravention. Shri Niranjan Shah, has interalia, contended that the copies of the printouts of the floppies given to him are illegible and that it was the floppies and not the printouts seized from him and the printout cannot therefore be relied upon as evidence. I find no merit in this contention of Shri Shah. The seized floppies were restored on the computer in the office of the I.T. authorities in front of the panchas and the authorised representative of Shri Niranjan Shah, when printouts were taken in their presence, and copies of the same were given to them on 27.1.2000. After said inspection/action on 27.1.2000, Shri Shah has not contended that the printouts givers to him were not clear or that the printouts did not represent the contents of the floppies seized from him. The floppies and other documents seized from the residence of Shri Shah by the Income tax authorities were under panchanama duly drawn under proper authorisation under the IT. Act. T....
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....y his advocate. First of all, I fail to see any merit-in the argument that once a SCN for quasi judicial proceedings is issued, the .same evidence cannot be used for other infringements of law, not covered by such earlier SCN; for other relevant quasi judicial proceedings. Even otherwise, it is seen from the records of the case, that the aforesaid SCN referred to by Shri Niranjan Shah pertains to the seizure of foreign exchange to wit US $ 17204, Stg. Pnd. 557, Sing. $ 185, DM 220, Spanish P. 1,67,000, UAE Dhs. 1495, Thai Bhats 1322 and KH $ 20 from his residence by the Income Tax authorities. By this SCN, Shri Niranjan Shah had been charged of otherwise acquiring the aforesaid foreign exchange without the permission of the RBI in violation of the provisions of Sec. 8(1) of FERA 1973. Thus, in this case, Shri Niranjan Shah has been accused of otherwise acquiring the foreign exchange seized from his residence without the requisite permission of RBI. On the other hand, as far as the transaction figuring in the document and floppies seized from the residence of Shri Niranjan Shah are concerned, he has not been charged with any offence, at the time of recording his statement with refer....
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....on the noticees, for the offences, detailed in the SCN: i) Sh. Niranjan Shah - Penalty of Rs. 4,50,000/- (Rs. Four Lacs and Fifty thousand only) ii) Sh. J.K. Doshi - Penalty of Rs. 90,000/-(Rs. Ninety thousand only) iii) Parag Kumar Pal Bhavnagari - Penalty of Rs. 8,500/- (Rs. Eight thousand five hundred only) iv) Sh. Nikhil R. Parikh - Penalty of Rs. 1,500/- (Rs. One (thousand five hundred only) v) Sh. Nirish Babulal Shah - Penalty of Rs. 10,000/-(Rs. Ten thousand only) The penalty of Rs. 4,50,000/- (Rs. Four Lacs and fifty thousand only) Imposed on Sh. Niranjan Shah, Rs. 90,000/- (Rs, Ninety thousand only) imposed on Sh. J.K. Doshi, Rs. 8,500/- (Rs. Eight thousand five hundred only) imposed on Sh. Parag Kumar Pal B, Rs. 1,500/- (Rs. One thousand five hundred only) imposed on Sh. Nikhil R. Parikh and Rs. 10.000/-(Rs.Ten Thousand only) imposed on Sh. Nirish Babulal Shah should be deposited in the office of the Enforcement Directorate at Mittal Chambers, 2nd Floor, Nariman Point, Mumbai 21 either by Demand Draft or Pay Order drawn in favour of the Drawing & Disbursing Officer within forty five days from the date of ....