TaxTMI 
TaxTMI 
2006 (4) TMI 525
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....During the said survey, the IT Department discovered that the transactions of purchase and sale of diamond by VDT and on that basis the AO reopened the case of assessee who had also sold diamonds to DD. The AO, accordingly treated the sale of diamonds by assessee to DD as bogus and in turn added the amount of sale proceeds of diamond jewellery as undisclosed income of assessee. 3. At the very outset, the learned Authorised Representative of assessee has contended that the issue is covered in favour of assessee by the decision of 'C' Bench of Mumbai Tribunal in the case of Mohanlal R. Daga vs. ITO, (ITA No. 7963/Mum/2003 for asst. yr. 1998-99) reported in (2005) 92 TTJ (Mumbai) 1236, and has furnished a copy of the same. He has contended that the facts of present assessee are identical with those of the cited case and Tribunal deleted the addition therein. As against this, the learned Departmental Representative has relied on the orders of the authorities below. 4. We have considered the rival contentions, relevant material on record as also the cited decisions. The facts of the case in hand being undoubtedly identical with those of the cited case, we have no reason to....
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....e us is, therefore, to see as to whether the explanation offered by the assessee before the AO was satisfactory or not ? It is well established that the explanation so offered by the assessee should be reasonable and inspire confidence. The explanation, which is fantastic, unsatisfactory or not supported by cogent, reliable and the best evidence available within the reach of the assessee or one which does not inspire confidence or is strenuous on credulity cannot be said to be a satisfactory explanation for the purposes of s. 68. 3. The assessee filed his return of income on 10th Dec., 1998 declaring total income at Rs. 1,07,350. The return was processed under s. 143(1)(a) of the IT Act or 23rd July, 1999. Subsequently, information was received by the AO that one Shri Vishnudutt Trivedi, proprietor of M/s Dhananjay Diamonds and his son Shri Rohit Trivedi, proprietor of M/s Ratnakar Diamonds had been surveyed by the IT Department at Thane and that the Department, during the course of survey and the proceedings following immediately thereafter, detected that the transactions of purchase and sale of diamonds made by the said Shri Vishnudutt Trivedi and his son Shri Rohit Trivedi th....
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....the case of the assessee was that Shri Trivedi had subsequently retracted the said statement on 4th April, 2000 though the assessee has filed no evidence before the Tribunal to show that the said statement dt. 31st March, 2000 was retracted by Shri Trivedi on 4th April, 2000 and how it was retracted and which part of the statement was retracted though the assessee has filed a comprehensive paper book containing 53 pages apart from copies of judgments/orders, etc. before us. (v) The assessee relied upon a copy of the affidavit dt. 24th Dec., 2001 of Shri Vishnudutt Trivedi, which was executed after about a year and nine months of survey. A copy of the said affidavit is placed at pp. 27-29 in his paper book filed before the Tribunal. In the said affidavit, Shri Trivedi confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It was further stated by Shri Trivedi in his affidavit that he was a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it was stated that the statement was given under the state of confusion and as per the directio....
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....d VDIS declarants and hand over the same to Shri Saxena, mediator. I used to get commission of 0.5 per cent for arranging the transaction. I used to prepare purchase bills in favour of the same and the same were also given to Shri Saxena. I have never come across any party. I have not seen any party or I have not met any party at any time even today. Subsequently on paper only the sales of the diamonds purchased are effected. For these purchases and sales, purchase bills and sale bills got printed in the names of different proprietorship concerns are used. I would like to mention here that the sale proceeds of the said diamonds are invariably received through cheques from the said parties. These cheques are deposited in the banks mentioned above." "Q. 6. Try to recollect full name and address of Shri Sanjay Saxena, his office and residential address, telephone number, etc Ans. His name is Sanjay Saxena. Address I do not remember. Telephone number also I do not remember." "Q. 16. Then how the balance sheet is tallied? All the assets are owned by you. Please explain. Ans. The closing stock shown at Rs. 5,88,45,980 as on 31st March, 1999 in the case of Ratnakar Diamonds....
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....atement given by Shri Vishnudutt Trivedi before Survey Authority that all the transactions of purchase and sale of diamonds appearing in the PandL a/c of their proprietary concerns are 'fictitious' transactions is correct and conclusive......." 8. The AO did not accept the plea of the assessee that Shri Trivedi had successfully retracted his statement made on 31st March, 2000 and hence he ignored the same and took the statement in question as the basis for rejecting the sale transaction as genuine. He treated the impugned sum found credited in the assessee's books of account as not satisfactorily explained and consequently added the same to the income returned by the assessee. Outcome of the first appeal before the CIT(A) 9. On appeal, the learned CIT(A) confirmed the assessment order on the following, amongst other, grounds : (i) The learned CTT(A) noted that, on the day of survey, neither any stock was found nor claimed to be available by Dhananjay Diamonds and Ratnakar Diamonds. In this connection, the learned CIT(A) referred to the statement recorded on 31st March, 2000 in which Shri Trivedi had categorically stated as follows : "In fact, physical tra....
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....d by the facts found at the time of survey and hence the statement was duly corroborated in material respects; two, the statement made j spontaneously on oath before the AO would carry greater evidentiary value I than the letter of retraction; three, though the letter of retraction was dt. 4th April, 2000, it was actually filed before the AO on 18th July, 2000; four, neither the retraction nor explanation about large cash deposits and absence of stock j was supported by any evidence; and, five, the statement was made on 31st March, 2000 without any coercion as no coercion was alleged by Shri Trivedi at any time except two years later. (v) The learned CIT(A) has also considered the subsequent statement of Shri Trivedi given before the AO on 25th Oct., 2002 confirming the transaction. She has also considered the earlier statement of Shri Trivedi given on 31st March, 2000 in which he stated that he had neither come across any party nor had he seen or met any party at any time. She observes that while Shri Trivedi confirmed in his subsequent statement that the impugned transaction was entered into by him through a "common family friend" but he did not remember the name of the said f....
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....re issued to the VDIS declarants. She also noted that the statement of Shri Trivedi on this point was quite categorical and self-explanatory. She felt that it was well-nigh impossible for the Department to establish the nexus between the cash deposits made in the various accounts of Trivedis with the cheques ultimately issued to the VDIS declarants. She therefore proceeded to consider the totality of circumstances and, having so considered them, held that it was out of the funds so transferred from one bank account to another that payment to the assessee was made. 10. Aggrieved by the order of the learned CIT(A), the assessee is now in appeal before the Tribunal. The appeal has come up for priority hearing at the instance of the assessee. Submissions before the Tribunal 11. In support of the appeal, the assessee has filed a paper book containing 53 pages apart from filing copies of the following two orders of the Tribunal: (i) Order dt. 22nd Sept., 2004 passed by Mumbai "C" Bench of the Tribunal in Mohanlal R. Daga vs. ITO which has now been reported in (2005) 92 TTJ (Mumbai) 1236. The submission of the assessee is that the issue in hand is covered by the said order of ....
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....he reason why I have chosen to extensively refer to the grounds on which the learned CIT(A) has confirmed the assessment order is to highlight the balanced approach which the CIT(A) has painstakingly adopted in carefully analyzing the factual and legal aspects of the case before rendering her decision. The short question is whether the impugned order passed by the learned CIT(A) suffers from any illegality, irrationality or irregularity (any or all of what is called triple "Is") so as to require our interference as proposed by the learned Brother in his order. 15. The facts stated by Shri Trivedi in his statement on oath were sufficient enough to cause a doubt in the mind of the AO about the genuineness of the explanation offered by the assessee to explain the nature and source of cash credit. The assessee sought to trace the source of the impugned cash credit to the sale proceeds allegedly received by him on sale of diamonds. If the AO was not satisfied that the explanation given by the assessee was genuine and bona fide, it was indeed his duty to call upon the assessee to produce further evidence to establish the identity of the creditor, his creditworthiness as also the genui....
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....ee were not sufficient enough, on the facts of the case, for discharging the requisite burden of proof that lay upon the assessee under s. 68. In fact, the materials brought on record were sufficient enough to reject the glib explanation tendered by the assessee to explain the nature and source of the impugned cash credit. 16. The assessee wants that mere purchase bill issued by M/s Dhananjay Diamonds and mere receipt of money through account payee cheques should be accepted and construed as sufficient for discharging the burden that lay upon the assessee under s. 68. On the facts of the case placed before us, I am unable to hold so. It has been held in a number of cases, viz., CIT vs. United Commercial and Industrial Co. (P) Ltd. (1991) 187 ITR 596 (Cal) and CIT vs. Precision Finance (P) Ltd. (1994) 121 CTR (Cal) 20 : (1994) 208 ITR 465 (Cal) that mere receipt of money by account payee cheque is not sufficient to discharge the requisite burden of proof envisaged by s. 68. I am unable to ignore the decisions of the superior Courts and hold that receipt of money through account payee cheque is sufficient and conclusively establishes the genuineness of the transaction in question.....
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....Madhya Pradesh High Court has held in Lachhiram Puranmal and Anr. vs. ITO (1990) 184 ITR 186, (MP), that the ITO is not debarred from examining the genuineness of cash credits in the books of the firm said to be deposited by partners who had declared income under the VDS. In CIT vs. Saligram Prem Nath (1984) 40 CTR (PandH) 325 : (1985) 153 ITR 234 (PandH), it has been held, in the context of VDIS 1965, that the ITO is empowered to enquire about genuineness of the source of the amount found credited in assessee's books and tax that amount in spite of the same having already been made the subject of declaration under s. 24 of the Finance (No. 2) Act, 1965 by the creditors and taxed thereunder. The aforesaid decision has been followed by the Hon'ble Punjab and Haryana High Court in CIT vs. Meera and Co. (1986) 52 CTR (PandH) 53 : (1986) 161 ITR 31 (PandH). It is thus evident that genuineness of sale transaction by which diamonds declared under the VDIS were sold cannot be taken as proved only because the assessee had declared the said diamonds under the VDIS. In other words, the assessee was under obligation to prove the genuineness of sale transaction notwithstanding the fact....
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.... representative has preferred to submit that the issue in hand was covered by the decision of the Tribunal in Mohanlal R. Daga (supra) instead of making any submission on the merits of the case. I shall, therefore, now turn to the Tribunal's order in Mohanlal R. Daga (supra). Operative part of Tribunal's order in Mohanlal Daga to which the learned Brother is a party reads as under: "15. We have considered the rival contentions, relevant material on record and also the cited decisions. As regards the first and second statements of VDT, the same having been recorded not during the proceedings pertaining to assessee, but during survey in the case of VDT, the copies of the same having not been supplied to the assessee prior to assessment, and supplied only as attached with the assessment order and opportunity for cross-examining VDT in respect of those statements having not been accorded to the assessee, the same cannot be read/used against assessee. The question of assessee's self asking for cross-examination of VDT in respect of those two statements dt. 30th and 31st March, 2000 does not arise when the copies of the same had not been supplied to the assessee before mak....
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....se turned on the following facts : one, copies of the statement of Shri Trivedi were not supplied to the assessee and thus there was a violation of the principle of natural justice and hence the statement of Shri Trivedi which was recorded on the back of the assessee was not capable of being used against the assessee; two, statement given by Shri Trivedi was retracted by him; three, there was no evidence on record that any cash amount was paid back by assessee to VDT and four, the purchase of diamonds by Shri Trivedi was supported by purchase voucher and payment in consideration thereof was supported by account payee cheque. It may be useful to ascertain whether the facts in the present case also suffer from similar deficiencies as pointed out by the Tribunal in Mohanlal R: Daga. 22. In the present case, there is no whisper that the copy of the statement in question was not supplied to the assessee. In his paper book, the assessee himself has placed the copies of all the relevant statements, namely, statement dt. 31st March, 2000 recorded under s. 131 and subsequent statement recorded by the AO on 25th Oct., 2002 when Shri Trivedi appeared before the AO. The assessee has neither....
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....ement on 31st March, 2000. The Departmental authorities had recorded his statement without using any force or coercion or deception of any kind. It is also not the case of the assessee that Shri Trivedi was not aware of the modus operandi of his own business while making the statement on 31st March, 2000. Then there is a decision of the highest Court of the land in Surjit Singh Chhabia AIR 1997 SC 2560 which supports the decision of the CIT(A). It appears that the said decision rendered by the Hon'ble Supreme Court was not cited before the coordinate Bench deciding the matter in Daga's case. I am sure that if the said decision had been cited before the Bench, its decision would have been different. Thus, neither the facts nor the law are on the side of the assessee. How can the statement of Shri Trivedi made on 31st March, 2000 then be ignored notwithstanding its alleged retraction by Shri Trivedi? In our view, it is the first statement made on oath, which would carry greater evidentiary value till the facts stated therein are proved to be incorrect. Thus the statement even after its alleged retraction, would continue to have evidentiary value till the assessee establish....
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....on dt. 4th April, 2000 was sent by Regd. Post AD but the affidavit is silent as to when the said letter was sent by Regd. Post AD. It is stated in the order of the Departmental authorities that letter of retraction was received in the income-tax office on 18th July, 2000, In the Tribunal's order in Mohanlal R. Daga, it is stated that the receipt of letter of retraction shown by the Department on 18th July, 2000 was due to some typographical error. But another CIT(A) in the present case also records a categorical finding that the letter of retraction was received in the Income-tax Office on 18th July, 2000. No evidence was placed before us to rebut the said finding recorded by the CIT(A) in the present case. In the absence of postal receipt and the AD Certificate, it is difficult to believe that the letter in question was sent at the earliest possible opportunity or on 4th April, 2000. Secondly, it is stated in the affidavit that Shri Trivedi was in a confused state of mind and that he had made the statement as per the directions of the income-tax authorities but it is not stated as to which part of the statement was directed to be made by the income-tax authorities. It is also ....
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.... Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or Courts have a right to expect that those exercising judicial functions will follow the reason or ground of the judicial decision in the earlier cases on identical matters." However, it is equally relevant to notice the decision of the Hon'ble Supreme Court in Padmasundara Rao (Decd.) and Ors. vs. State of Tamil Nadu (2002) 176 CTR (SC) 104 : (2002) 255 ITR 147 (SC) in which the Hon'ble Court has held thus : "Courts should not place reliance on decisions without discussing as to how the factual situation fits in with the fact situation of the decision on which reliance is placed. There is always peril in treating the words of a speech or judgment as though they are words in a legislative enactment, and it is to be remembered that judicial utterances are made in the setting of the facts of a particular case, said Lord Morrin in Herrington vs. British Railways Board (1972) 2 WLR....
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....in our opinion, there is nothing to suspect the same." The Tribunal says, "there is a transparency about the entire transaction which nullifies any attempt to make out the transaction as something unusual arid out of the ordinary." That diamonds are not transparent, that they dazzle with a brilliance that blinds the eye, seems to have escaped the notice of the Tribunal. It undiscerningly accepted the glib explanation of the assessee, though teeming with improbabilities and strenuous on credulity." 28. I have given serious consideration to all the facts and circumstances of the case in the light of the materials and arguments placed before us. As observed by Lord Templeman in ft vs. IRC (1994) 1 WLR 334 (HL), every tax avoidance scheme involves a trick and a pretence. It is the task of the Revenue to unravel the trick and the duty of the Court to ignore the pretence. In the case before us, the Revenue has unravelled the trick that was played to accommodate the VDIS declarants through fictitious entries of purchase/sale of diamonds and hence it is our bounden duty to ignore the pretence, namely, the medium of cash credits generated by the impugned sale transaction for introducing ....
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..... 5. As per the declaration under VDIS, the diamonds were acquired in financial years 1981-82 (39.50 ct.), 1982-83 (13,75 ct.), and 1983-84 (12.50 ct.). The proof of declaration along with the affidavit, the valuation report and the copy of certificate under s. 68(2) of the VDIS were filed along with the return. 6. To verify the veracity of the transactions, the summons under s. 131 of the Act was issued to the Manager, Vasai Janta Sahakari Bank Ltd., Bhayander (E) Branch requesting him to furnish bank statement of account No. 102-3475 in the name of Dhananjay Diamonds and also of another concern Ratnakar Diamonds (Ratnakar in short) along with the pay-in-slips in respect of cash deposits made in the above account. On examination of the details furnished by the bank, it was found that the cash was deposited in the account of Ratnakar Diamonds, which is also a proprietary concern of VDT and on the following day of the sale, a cheque was issued in the name of Dhananjay and on the same day, a cheque was issued by Dhananjay to the assessee. The AO therefore concluded that the statement given by VDT before the survey authority that all the transactions of purchase and sale of diam....
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....purchase/sales bills in the names of different proprietary concerns were printed; and that during the course of survey, from the books of account of Dhananjay Diamonds and Ratnakar Diamonds stock at Rs. 2,72,89,520 arid Rs. 5,88,45,980 as on 31st March, 1999 was disclosed but those were not at all in existence on the relevant date and were mere book entries in the closing stock. It was further noted that the evidence of pay-in-slips was also found to be of large amounts of cash deposited in various bank accounts of Dhananjay Diamonds on various dates, which were deposited from the money received from various parties to whom subsequently cheques were issued, that VDT also admitted to the fact that while his son Rohit VDT was the proprietor of Ratnakar Diamonds, he had no experience of the diamonds trade and the business was handled by him and his son was nowhere connected with Ratnakar Diamonds personally. The CIT(A) did not agree to the assessee's submission that VDIS declaration was not open to subsequent questioning, as according to him, nowhere in the Scheme is there any prohibition for inquiries to be conducted by the AO, on the sale of the assets that were so declared. It ....
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....s as genuine and only some part of the business was on paper for facilitating the VDIS declarants. According to him, in the statements which are backed by documentary evidence, that is the one of 30th March, 2000 and 31st March, 2000, he had categorically denied having any genuine business of manufacturing and trading of diamonds at all and, therefore, if he thereafter states that the transaction entered into with the assessee were genuine transaction there is no documentary evidence with either party that it was so. He also rejected the claim of the assessee that VDT was in fact the witness of the Department and the onus of proof shifted from him to the Department. According to him the bank deposits of the dealer would have a bearing if the dealer was conducting any genuine business at all, which is contrary to the fact proved at the time of survey that in fact no business at all has been done by VDT. He finally concluded that the AO has pointed out in his order that the cheque payments to the assessee were made out of transfer entries and cash deposits in the bank account on immediately preceding dates or on the same dates; that evidence with the Department is available to show t....
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....ent of VDT were not supplied to the assessee and thus there was a violation of the principle of natural justice and, therefore, the statement of Shri VDT which was recorded on the back of the assessee was not capable of being used against the assessee; (ii) the statement given by VDT was retracted by him; (iii) absence of evidence on record that any cash amount was paid back by the assessee to VDT; (iv) unsupported purchase of diamonds by VDT by purchase voucher; and (v) payment in consideration thereof was supported by account payee cheque. He then examined the case of the assessee in the light of the aforesaid four differences and held that the said decision in the case of Mohanlal R. Daga (supra) was not applicable on the facts of the case as also the settled law governing them. He accordingly held that a look at the whole sequence of events, it was quite clear as to how the things were managed in the present case. The entire story which was so well-written, directed and acted was unearthed by the Department through survey when VDT was caught unaware. It is this element of chance and surprise, which led to the disclosure of startling facts by VDT. Such facts cannot b....
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....ther submitted that the income declared by VDT for the year under consideration at Rs. 1,27,009 has been accepted. 10.3 The assessee has relied upon the copy of the affidavit dt. 24th Dec., 2001 of VDT, which was executed after about a year and nine months of survey. In the said affidavit VDT confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It was further stated by VDT in his affidavit that he was a registered dealer under the BST and CST Act. As regards the statement given by him on 31st March, 2000, it was stated that the statement was given under the state of confusion and as per the direction of the IT Department. It was also contended that VDT had appeared before the AO on 25th Oct., 2002 and confirmed the impugned transaction as also payment of the money through account payee cheque. It was submitted that the nature and source of the amount found credited in the books stood fully and satisfactorily explained and therefore the AO was not justified in making the impugned addition. In support of his various arguments, the learned counsel relied upon the decisions of Chiranji ....
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....) Mahesh B. Shah vs. Asstt. CIT (1999) 154 CTR (Ker) 391 : (1999) 238 ITR 130 (Ker), (ii) Asstt. CIT vs. Rameshchandra R. Patel (2005) 94 TTJ (Ahd)(TM) 361 : (2004) 8S TTD 203 (Ahd)(TM), (iii) ITO vs. Ashok Kumar (2005) 92 TTJ (Chd) 467, (iv) Ramesh T. Salve vs. Asstt. CIT (2001) 71 TTJ (Mumbai) 111 : (2000) 75 TTD 75 (Mumbai), (v) Ramjas Nawal vs. CIT (2003) 183 CTR (Raj) 144, (vi) Amritial Bhagwandas Soni vs. Asstt. CIT (1997) 59 TTJ (Ahd) 418, (vii) Dr. S.C. Gupta vs. CIT (2001) 170 CTR (All) 421 : (2001) 248 ITR 782 (All), (viii) Smt. Vasanti Sethi vs. Asstt. CIT (1993) 45 TTJ (Del) 503, (ix) K.P. Davis vs. ITO (1995) 52 TTJ (Coch) 362 : (1995) 53 TTD 79 (Coch). (x) Amal Kumar Chakraborty vs. CIT (1994) 207 ITR 376 (Cal), (xi) Hiralal Maganlal and Co. vs. Dy. CIT [(IT(SS)A 117/Mum/1996, reported at (2005) 97 TTJ (Mumbai) 377-Ed.], (xii) Smt. Gunwantibai Ratilal vs. CIT(1983) 35 CTR (MP) 49 : (1984) 146 ITR 140 (MP). 11.1 On natural justice the learned Departmental Representative relied upon various paragraphs of GTC Industries Ltd. vs. Asstt. CIT (1998) 60 TTJ (Bom) 308. 12. The parties are heard and their rival contentions considered. The....
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.... the payments have been made by VDT to assessee by account payee cheques and the same is corroborated by bank statement. This transaction of sale of 71 carets of loose diamonds by assessee to VDT has already been accepted in assessee's original assessment under s. 143(3). There is no evidence on record that any cash amount was paid back by assessee to VDT. The possession of loose diamonds by assessee is proved by assessee's declaration under VDIS. As such, considering all the facts and circumstances of the case together with the legal position, we find no justification for holding the sale of loose diamonds by assessee to M/s Dhananjay Diamonds as bogus order as a mere paper transaction and not genuine, and in turn for making/sustaining addition. We, therefore, delete the addition." 13. In my opinion the facts are substantially identical to those appearing in the case of Mohanlal R. Daga vs. ITO (supra) and there is no reason to take a different view. Here also the diamonds were sold to Dhananjay vide their purchase bill dt. 20th Jan., 1998. The sale consideration for the diamonds was received through account payee cheque and that was credited in the capital account of t....
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....have any other income generating activity. My eldest son Rohit is proprietor of Ratnakar Diamonds, which is also run from the same address. This business has started in 1997. There are no branches of the above two concerns. There is no other business activity in my family. Q. 3. Do you maintain books of account and if yes, till what date they have been written. Also please produce the books of account for both the concerns. A.3. Books upto 31st March, 1999 have been written and audited and the same are herewith produced. Books of account for the current year are not available. The same are with my accountant Mr. Hitesh Patel, c/o Vora Traders, Trikam House, Opp. R.N. High School, Opera House, Mumbai-4." "Q. 6. What is the nature of the business carried out by you ? A. 6 It is trading and manufacturing of diamonds. Q. 7 Exactly from where this activity is carried out ? A. 7. For manufacturing the diamonds are given to various cutters in Bhayander, Malad and Surat. Trading is done directly. Diamonds are purchased and sold to various parties. Q. 8 Please give the addresses and names of various cutters to whom you give diamonds for manufacturing. A. 8 The ....
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....atnakar Diamonds, personally. Q. 4 Whenever these transaction of purchase of diamond from the customers took place, whether the sellers had come to you or you had been to their place? and where the delivery of diamonds taken ? Ans. In fact, physical transactions of these purchase of sale of diamond never took place. However, fictitious transactions were done on paper only so as to facilitate the VDIS-97 declarants. I win get you full details of these transaction made on paper only on Monday i.e. 3rd April, 2000. Q. 5 You give all the details on Monday, but today at least you get us, the modus operandi of your transaction and details of few transactions. Ans. I may state here that Shri Sanjay Saxena of Kalyan, full address, I don't know, used to approach me with cash and name of the party, address of the party, description and weight of the diamond, etc. pretended to be sold. Then sometimes, I used to deposit the cash in the bank accounts of M/s Dhananjay Diamonds or M/s Ratnakar Diamonds. Sometimes the cash used to be in circulation. The names of the banks in which the cash is deposited are Vasai Janta Sahakari Bank, Bhayander (E), Branch (account No. 3475), Global ....
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....my books myself. A. 11 Are you assessed to tax ? Ans. Yes. I am assessed to tax and I am filing my returns regularly with ITO, Ward 2(3), Thane. Q. 12 Have you got your accounts audited by the chartered accountant in view of the s. 44AB of the IT Act ? Ans. Yes. For the asst. yrs. 1997-98 and 1998-99 Shri Soni Agarwal and Co., chartered accountant of Bhayander and for asst. yr. 1999-2000 Shri Lalwani, chartered accountant, Bhayander have audited my books of accounts. Q. 13 Why the chartered accountant was changed for asst. yr. 1999-2000 ? Ans. Chartered accountant was changed as Mr. Soni Agarwal and Co. were busy by the workload. Q. 14 Whether Mr. Soni Agarwal and Co. and Mr. Lalwani were of the fact that the business transactions are merely on paper and whether the books of account were produced for audit purposes. Ans. The books were given physically for audit purpose. They were orally informed that these are all genuine transactions. Q. 15 Whether the creditors shown at Rs. 3,27,61,567 as on 31st March, 1999 in the case of Dhananjay Diamonds and at Rs. 7,03,44,010 as on 31st March, 1999 in the case of Ratnakar Diamonds were genuine creditors or they ar....
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....so filed an affidavit dt. 24th Dec., 2001 which was executed after about a year and nine months of survey, the relevant portion thereof, reads as under : "I hereby confirm that during the financial year 1997-98 (asst. yr. 1998-99) I have purchased cut and polished loose diamonds weighing 65.75 carats for Rs. 10,35,562 from Shri Uttamchand Pukhraj Jain of 21/588, Nehru Nagar, Kurla (East), Mumbai-400 024 vide my purchase bill dt 20th Jan., 1998. "I further confirm that I had taken the delivery of above said cut and polished loose diamonds from the above said purchaser's address at the time of making the payment to seller," 20. It is evident from this affidavit that VDT had confirmed the purchase of the diamonds in question from the assessee as also payment in consideration thereof to the assessee by account payee cheque. It js further evident that he, was a registered dealer under the BST and CST Act. 21. Again on 25th Oct., 2002 VDT confirmed in a more specific way that the transactions with the assessee and three others were genuine and true. Certain questions and answers as are referred to in this letter are : "Q. 3 What is the nature of your business and since....
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....s of account and statements and also applied for return of books but till date same is lying with ITO, Ward-2(3), Thane. Q. 21 How do you say, the statement given during the course of survey under s. 133A was under influence. Ans. Yes, at the time of survey I was totally state of confusion in a however under mental pressure the statement was recorded which was retracted by me. Q. 22 In the light of the fact that Mr. Sanjay Saxena is known to you in your business dealing as indicated by you in earlier statement at the time of survey as well as above answer to Q. 5. Ans. Yes, however these four parties are not introduced by Mr. Sanjay Saxena. Q. 23 Do you say that there is influence for taking your statement today ? Ans. No, I am giving the statement voluntarily with sound mind. Q. 25 Where delivery of diamond has taken place ? Ans. As stated above I had collected the delivery of diamond from these parties addresses. Q. 26 Whether you are assessed under Sales-tax Act and filed the return ? Whether the above transactions are disclosed in your sales-tax return or not ? Ans. I am duly registered under BST and CST Act and filed my all returns and above trans....
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....t given on 30th March, 2000 which is confirmed by him vide letter dt. 4th April, 2000 and his affidavit thereafter and also on oath when he appeared before the AO under s. 131 on 25th Oct., 2002. 28. The fact that the letter dt. 4th April, 2000 retracting his statement was not given on oath is of no consequence as it is supporting to earlier statements dt. 30th March, 2000 and as affirmed in the statement recorded under s. 131 subsequently on 25th Oct., 2002 though we agree that between these contradictory statements, those made under oath will have greater value. It is a fact that VDT has retracted his statement given on 31st March, 2000. The fact that it is without offering any explanation as to the large cash deposits and the absence of stock has nothing to do with that, because it is the Department who claims that the money had been given by the assessee. 29. The fact that in the subsequent statement on oath recorded by the AO, VDT claiming that while he knew Saxena, the transactions entered into by him with the assessee were not through him but through family friends whose names he did not remember, cannot raise doubt as to the genuineness of the transaction with the ass....
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....s of s. 68 of the Act as applied by the Revenue authorities. In my opinion the source is satisfactorily explained by the assessee. 34. The assessee had filed a copy of the certificate issued by the CIT, Mumbai under s. 68(2) along with valuation report. The contention that nature and source of acquisition of diamonds in question cannot be enquired into in view of the provisions of the VDIS, is supported by the Special Bench decision in the case of Asstt. CIT vs. Surya Kante Dalmia (2006) 99 TTJ (Cal)(SB) 1. In that (case) also under the Voluntary Disclosure Scheme, 1997, the assessee made disclosure of undisclosed income which was represented by diamonds, silver utensils, gold bars, etc. The said voluntary disclosure was duly accepted and a certificate relating to the same was issued. The assets declared under VDIS, 1997, had been sold in relevant assessment year and such sale proceeds had been credited in the books. As regards the sale of silver utensils, the AO made enquiries with the valuer, who issued valuation report for the said utensils; the transporters, who issued consignment notes for transportation of the same from Calcutta to Delhi; the jewellers of Delhi who purchas....
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.... itself VDT appeared and explained everything to be genuine. Therefore nothing much turns on this fact by itself. 36. In that also the valuer and transporters after giving the statements had retracted their statements through affidavits and had furnished necessary supporting evidence in support of their fresh statements/affidavits which was not found to be false by the Revenue at any stage, the AO was held grossly erred in not accepting the retraction and statements of other persons made during the course of assessment proceedings. Here also retraction is based on the books of account, copies of sale bill, disclosure of transaction in income-tax and sales-tax proceedings and therefore cannot be brushed aside. 37. Since the addition had been made as unexplained cash credit, the case was examined in the light of the provisions of s. 68. Under s. 68, if the explanation with regard to nature and source of deposit is found unsatisfactory, only then the amount so credited may be added as income. The Revenue had failed to substantiate its claim and there was no direct evidence to show that the jewellers of Delhi had given accommodation entries to the assessee. Here also there is no ....
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.... from the fact that under the provisions of s. 80P of the Act the entire income from banking activities is exempt in the hands of the assessee, a co-operative bank. Thus there could exist no reason for the assessee-bank to indulge in any activity which would yield undisclosed income. The Tribunal was right in deleting the addition of Rs. 1,80,95,811 in respect of fixed deposits and Rs. 2,17,71,500 in respect of the interest." (iii) In the case of Addl. CIT vs. Miss Late Mangeshkar (supra) the Tribunal examined the statements made by the two persons and found that the evidence tendered by them suffered from serious infirmities. It held that mere entry in the accounts regarding payments to the assessee was not sufficient as there was no guarantee that the entries were genuine. The Tribunal, therefore, held that there was no proof that the amounts in question represented income from undisclosed sources belonging to the assessee. The High Court upheld the finding of the Tribunal and held- "that the conclusion of the Tribunal had been reached by it on a proper appreciation of the evidence. This was a finding of fact by the Tribunal and no question of law arose and no referen....
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....f which it could come to the finding that the sum credited in capital account of the assessee represented the undisclosed income of the assessee. 41. Certain decisions were cited by the learned Departmental Representative which according to (him) support the case of the Revenue. These are discussed hereunder: (a) In Mahesh B. Shah (supra) the Kerala High Court observed that the assessee has agreed to treat the expenditure as a capital expenditure both before the Asstt. CIT as well as before revisional authority. No evidence or material is furnished to show that the assessee was coerced to make a statement. On the contrary the Court stated that nothing prevented the assessee to retract the same. The allegation of compulsion or coercion was not accepted on mere statement. It is held too late on this day to claim of any compulsion. The stand taken by the assessee was held nothing but an afterthought, self-serving and had been made to suit the convenience. The assessee himself has signed, the statement on 13th March, 1995 and therefore, it was held not permissible to allow the assessee to go back on his own stand before the Departmental authorities below. (b) In the case of Ra....
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.... his solemn affirmations had no evidentiary value. The admission by the assessee is definitely a substantive evidence. There is no need for corroborative evidence, in view of the evidentiary value the statement of that person is bestowed with under s. 132(4)." (e) In Ramjas Nawal (supra) the Rajasthan High Court held that "if statements are given under threat or duress, the assessee can retract from his statements given under threat or duress during search. But the material on fact shows otherwise. When the statements were taken, the assessee has admitted that he is disclosing undisclosed income at his free will and without any threat. Not only that when the assessee retracted from his statements given during search the ITO has given the specific finding that during the course of search, the search party has given opportunity to submit any documentary evidence whether he has genuine income from SP." (f) In Amritlal B. Soni (supra) the Ahmedabad Bench of the Tribunal observed that "It is well settled in law that admission by a party is the best evidence of a point in issue and though not conclusive, is decisive of the matter unless successfully withdrawn or proved erroneous. W....
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....e but that does not mean that when the taxing authorities are desirous of invoking the principles of the Evidence Act in proceedings before them, they are prevented from doing so. Besides, s. 115 of the Evidence Act incorporates a salutary principle of common law based on the maxim allegans contraria non est audiendns (a person alleging contradictory facts should not be heard) and hence the said principle is fully applicable to proceedings under the IT Act. The provisions of s. 115 of the Evidence Act provide statutory recognition to the said principle which is otherwise also applicable to all the judicial and quasi-judicial proceedings. The underlying philosophy behind the said principle being to ensure, in the words of Sir Wade in his Administrative Law (supra), that justice prevails over truth....... 25. In our view, the retraction sought to be made by the assessee several months after making the declaration under s. 132(4) was nothing but a well planned device to frustrate the efforts of the Department to unearth unaccounted income. The attempt of the assessee to retract from the said declaration is not only against the well-settled principles of common law and against the l....
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.... his assessment. If the assessee denies the information collected by the ITO. it is the duty of the ITO to satisfy himself by making independent enquiry from sources considered reliable by him and decide whether the information passed on to him is true or not. If as a result of his own independent enquiry he comes to the conclusion that the information received by him is true, he is at liberty to act thereon after disclosing it to the assessee and affording him a reasonable opportunity of rebutting it. The copy of entries from the accounts of another firm supplied to the ITO by the Sales-tax Department was held not legal and admissible evidence on which the ITO could act for imposing extra burden of income-tax on the assessee when the original accounts were missing and could not be verified and when the assessee denied the entries therein." 44. GTC Industries Ltd. vs. Asstt. CIT (supra) deals with certain aspects of making available the material collected and used against the assessee. In that case the assessee's request was that nothing really much turns in this case on the observations in that case- (a) Statement of witnesses, copies of which were not even given to the ....
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....essary to refer to various English decisions which have held so. What particular rule of natural justice should apply to a given case must depend to a great extent on the facts and circumstances of that case, the framework of the law under which the enquiry is held and the constitution of the Tribunal or body of persons appointed for. that purpose. Whenever a complaint is made before a Court that some principle of natural justice had been contravened the Court has to decide whether the observance of that rule was necessary for a just decision on the facts of that case. 47. The case of Union of India and Am. vs. Tulsiram Patel AIR 1985 SC 1416 and Satellite Engineering Ltd. vs. Union of India and Ors. before the Bombay High Court is also a case of opportunity and nothing much turns on this case as well. 48. On these facts and circumstances of this case in my opinion therefore the appeal of the assessee is to be allowed. ORDER Per Dr. O.K. Narayanan, Accountant Member. - This appeal is filed by the assessee. The relevant assessment year is 1998-99. The appeal is directed against the order of the CIT(A)-XXI at Mumbai dated 21-10-2003 and arises out of the assessment comple....