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2015 (8) TMI 1494
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....w receipt of illegal gratification by the assessee while working as Principal Secretary, Urban Development and Administration, Government of Madhya Pradesh from various companies to whom contracts were awarded by Urban Development and Administration Department, Government of Madhya Pradesh. The seized documents also show receipt of illegal gratification by the assessee along with Shri Narottam Mishra, then Minister, Urban Development & Administration, Government of Madhya Pradesh and others. In the case of Shri Narottam Mishra, the Assessing officer issued notice u/s. 133(6) to Municipal Commissioner, Indore Principal Secretary, Department of Urban development, Bhopal and the Commissioner, Urban Development, Bhopal. Through these notices, the Assessing Officer has called for original files of award of contract of sewerage line to M/s.Nagarjun Construction Co. Ltd and M/s. Simplex Infrastructure Ltd, alongwith a set of Xerox copies of original files. These notices were not complied by these persons. The Assessing officer passed the assessment orders without completing these enquiries. In the assessment order the Assessing Officer has elaborately discussed the five primary evidences ....
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....ur family members ever had any financial transactions with him. Please give details. Though you have denied the above questions in submission, but it was proved to the contrary. It is found from the documents seized through search Action on Sri Mukesh Sharma u/s 132 of Income-tax Act, 1961, that he was an intermediary for facilitating the work from the Ministers and Officers of Department of Urban Development. Sri Mukesh Sharma has been found to be a liasioning intermediary for the practices of transfer and posting and fund allocation. The documents in his possession are proving him to be a liaisoning intermediary a liasioning intermediary. Primary Evidence No. 2 Loose sheets 1/1, page from Matrix Pad, collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal i.The word "mayor" is clearly written on this piece of evidence. ii."M" & 'Netaji' mentioned in these documents refers to the Minister Urban Development, M.P.' because Shri Mukesh Sharma addressed the then Minister of Urban Development, as 'Netaji' iii.PP mentioned in these documents refers to Principal Secretary, Urban Development Department, M.P. iv. The 'C' mentioned in these do....
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.... as Mayor of Nagar Nigam Indore who is the inspecting and approving authority for the work of sewerage. The mayor has agreed to receive Rs. 2.67 Crore. 6. The 5th person whose name has not been referred is commissioner of Nagar Nigam Indore who has agreed to receive Rs. 1.33 crore. This name of commissioner of nagar nigam has not been written in this place. But the vertical chain of arrangement of government hierarchy is clearly indicating this missing person to be the commissioner of nagar nigam, Indore. Primary Evidence No. 3 Loose Paper Paper sheets 1/1, page from Matrix Pad, collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal This contains the acronym of nagar and simplex. The number written against them are expressed in the monetary value in Rupees in crore. This amount is exactly matching with amount of awarded contract This Rs. 266.87 crore has been rounded off and shown as Rs. 267 crore in the 1st evidence. Primary Evidence No. 4 Loose paper sheets 1/1, page from Matrix Pad collected from Residence of Mukesh Sharma (B-99, Rajved Colony, Kolar Road, Bhopal. This evidence shows the letter M, letter P and word commis....
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....nfrastructure during the tenure of Principal Secretary, Urban & Development, M.P. The AO held that unaccounted gratification found during the course of search was not adequate and not sufficient to make addition in view of Section 34 of Evidence Act. During the course of search and seizure u/s 132 of the Income-tax Act, 1961, at the residence of Shri Mukesh Sharma, certain documents were found and seized. The seized documents included documents regarding award of contract or re-organization of water supply of Ujjain city. The seized documents read alongwith other seized documents give a reason to belief that unaccounted gratifications have been received in respect of this contract. The AO did not carry out any enquiry on this issue and completed the assessment order without carrying out proper enquiries. Thus, the order is erroneous so far as it is prejudicial to the interests of revenue. Therefore, show cause notice was given and in reply to show cause notice, the assessee filed the written submissions, which reads as under:- In the initial Para of the order, the A.O. has recorded about his methodology and the procedure he followed, as also the basis for his eventual find....
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....t is surprising that you have chosen to issue a notice u/s. 263 on the ground that the assessment order passed by the A.O. is erroneous in so far as it is "prejudicial to the interest of revenue." In the said notice, your contentions are that (i) That the seized documents found in the course of search with Mukesh Sharma show the receipt of illegal gratification for the award of contract of sewerage line from Nagarjuna Construction Co. Ltd., and Simplex Infrastructure Limited (ii) That contracts in question were awarded by the Urban Development Department of the Government of Madhya Pradesh (iii) That the A.O. passed the assessment order without completing the requisite enquiries of contracts awarded by the Municipal Corporations of Indore and Ujjain (iv) That rigors of Evidence Act do not apply to proceedings under I.T. Act (v) That A.O. has not conducted any enquiry and has completed the assessment by holding that no corroborative evidences have been found, and, therefore, the order is erroneous. It is pointed out and reiterated yet again that the so-called evidences as referred to in the aforesaid notice u/s. 263 are purely dumb papers, because such noting is se....
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....ose of enquiry. However, after making such detailed enquiry, the AO staunchly averred that in absence of any corroborating evidences, the assessee cannot be charged to tax, and therefore he rightly acknowledged and concluded the assessment that the allegations were not proven and accordingly did not make any addition on the basis of such dumb documents. 4. While once again reechoing the suspicions that were raised at the Enquiry stage (and that were the cause for the Assessing Officer to take the hasty step of issuing a notice under Section 142 of the IT Act but were finally settled as uncorroborated and unsubstantiated by him), you have overlooked the facts that came to be placed before the Assessing Officer in the course of his detailed Enquiry. These significant facts are: i. The Assessee had nothing to do with the preparation of either the Detailed Project Report for the projects mentioned or for their Request for Qualification/RFQ or Request for Proposal/RFP process, nor did he evaluate or approve or issue letters of intent or Award the projects mentioned by you (this has already been duly affirmed by the Assessee before the AO vide our lett....
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.... had he alluded remotely to him in any way anywhere (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011). iii. The main rationale for your notice of 31/12/2012 relates to the case of another tax-payer. This is another case and not assessee's case. You have stated that certain files of award of contracts were called from the Municipal Corporation Indore, but the Assessing Officer passed the order without completing these enquiries. As you yourself have stated, these files were required for the case of Shri Narottam Misra, and not in assessee's case. This is a different case and of a different tax-payer. As stated above, these documents had no direct relevance to assessee's case. In this case the Assessing Officer looked at all the facts of the matter and after conducting detailed enquiry he was convinced and accordingly passed a legal order. Hence, to now say that these files were sought by him in assessee's case is incorrect. This, therefore, cannot be ground for saying that enough inquiry had not been conducted by the Assessing Officer in assessee's case. Moreover, the assessee fervently believes that there is nothing advers....
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.... enquiry ended with the Assessment Order dated 30/12/2011, i.e. for over the course of more than a year. Revision proceedings do not permit roving or fishing enquiries. The Assessee's case is supported by binding decisions of the Hon'ble Apex Court and Hon'ble High Courts including, inter alia, as referred above. For the aforesaid reasons the AOs order of assessment cannot be dubbed as erroneous. 7. The Hon'ble Supreme Court has established basic guidelines in the case of Central Bureau of Investigation vs. VC Shukla and others on 2,,d March 1998 wherein the Jain Hawala Case was adjudicated. The operative paragraph from the judgement is: "After having held that the documents were neither books of account nor kept in the regular course of business the High Court observed that even if they were admissible under Section 34, they were not, in view of the plain language of the Section, sufficient enough to fasten the liability on the head of a person, against whom they were sought to be used. As, according to the High, the prosecution conceded that besides the alleged entries in the diaries and the loose sheets there was no other eviden....
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....l satisfied with the conclusion. 9. In view' of the above facts that due enquiry was done by the Assessing Officer and since the entire proceedings, including those u/s. 263, being based on ab-initio erroneous surmises are untenable, and there being adequate Case Law to support this, and this being a case of substitution/superimposition of the opinion of a superior functionary upon that of the Assessing Officer, the proceedings u/s 263 should be dropped forthwith. 4. After considering the reply, the ld. Commissioner has examined the record and written statement of the assessee and AO has failed to examine the details and has not conducted any enquiry in respect of seized documents regarding award of contract of sewerage line from Nagarjun Construction and Simplex Infrastructure. The seized documents read together with seized documents give a reason to belief that unaccounted gratification has been received in respect of these contracts. Therefore, the ld. CIT has held that the order passed by the Assessing Officer is erroneous and prejudicial to the interests of the revenue. Therefore, the order of the AO was cancelled and the AO was directed to reframe the assessme....
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....e assessee cannot be charged to the tax with available information. The assessee has placed reliance on several cases. However I consider section 34 to interpret the five rows of the table of primary evidences in light of NIL corroborative evidences. Therefore, returned income of the assessee is accepted" Despite the aforesaid background of this case an order has been passed u/s. 263 on the ground that the assessment order passed by the A.O. is erroneous in so far as it is "prejudicial to the interest of revenue. In the said order u/s 263 the conclusions are based on the assumptions that (i) That the seized documents found in the course of search with Mukesh Sharma show the receipt of illegal gratification for the award of contract of sewerage line from Nagarjuna Construction Co. Ltd., and Simplex Infrastructure Limited (ii) That contracts in question were awarded by the Urban Development Department of the Government of Madhya Pradesh (iii) That the A.O. passed the assessment order without completing the requisite enquiries of contracts awarded by the Municipal Corporations of Indore and Ujjain (iv) That rigors of Evidence Act d....
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....hat is the reason why even after the detailed examination, because there was a sheer absence of corroborative material he did not make any addition. At page 3 of the order, the A.O. had only made his own preliminary observations on assumptions and presumptions with regard the evidence no.2, and interpreted the said dumb paper in a particular way only for the purpose of enquiry. However, after making such detailed enquiry, the AO staunchly averred that in absence of any corroborating evidences, the assessee cannot be charged to tax, and therefore he rightly acknowledged and concluded the assessment that the allegations were not proven and accordingly did not make any addition on the basis of such dumb documents. The Assessee further submits that it is also not lawful on the part of the Ld. CIT to hold that the Rigors of the Evidence Act do not apply in the tax proceedings. The Assessee submits that it is the settled law that the basic tenets and principles of Evidence Act do apply. The Hon'ble Supreme Court in the case of Chuharmal v/s. CIT reported in 172-ITR-250/251 (SC) held that "what was meant by saying that the Evidence Act did not apply to proceedings under Income Ta....
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....Parishad Samiti) comprising of the Mayor, the Municipal Commissioner, and the Parshads or Parishad members chosen/selected by the Mayor for various different verticals within the Municipal Corporation. The Parishad comprising of Parshads or Corporators of the Municipal Corporation, the President of the Municipal Corporation and the Mayor are all elected public representatives who have executive and statutory powers under the Municipal Corporation Act, read along with the 74th Constitutional Amendment. That the Assessee did not grant any favors or award projects to either Nagarjuna Construction or Simplex companies and that the allegations of illegal gratification are preposterous to say the least (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011). That the person searched had informed that he had submitted an affidavit to the effect that he has had nothing to do with the Assessee in any way, nor had he alluded remotely to him in any way anywhere (this has already been duly affirmed by the Assessee before the AO vide our letter dated 29/12/2011). Thus the notice and the consequent order issued u/s. 263 are ....
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....me. Since there is no corroborative or direct evidence to presume that the notings/jottings had materialised into transactions giving rise to income not disclosed in the books by the assessee, the department's presumption cannot be tenable in law. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of CIT v. D.K. Gupta 308 ITR 230 (Del). In the case of CIT vs. Ram Narain Goel - 224 ITR 180, the Hon'ble P&H High Court has held that suspicion, however strong, cannot take the place of evidence or proof. The Hon'ble P&H High Court in the case of CIT vs. Faqir Chaman Lal - 262 ITR 295 has held that it is a well settled proposition that the presumption howsoever strong cannot substitute evidence. In the case of CIT vs. Emerald Commercial Ltd. & Anr. -250 ITR 539, the Hon'ble Calcutta High Court following its own judgment reported in 244 ITR 422 has held that Tribunal was justified in holding that the findings of the Income-tax Officer and the Commissioner of Income-tax (Appeals) were based on presumption and not warranted by the facts of the case. Further reliance is placed on the following d....
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....Design and Automation Engineers (Bombay) P. Ltd. (Bombay H.C.), v. 323 ITR 206, CIT vs. Development Credit Bank Ltd. w. 243 ITR 83, Malabar Industrial Co. Ltd. Vs. CIT, (Supreme Court) x. 203 ITR 108 CIT Vs. Gabriel India Ltd., (Bombay H.C.) y. Mukesh Sharma v. CIT 25 ITJ 341 (Indore ITAT) 3. On the issue of CIT not making any inquiry himself or causing any inquiry to be made and merely making a bald allegation that the AO did not make any further inquiry :- 3.1 In the present case the show cause notice u/s 263 was issued on 31.12.2012 by the Ld. CIT and the final order was passed on 27/3/2014. In the meanwhile no enquiry was conducted by the CIT himself nor was any enquiry got conducted through someone else. 3.2 There are two limbs in section 263 . The first is regarding the order being erroneous and prejudicial to the interest of the revenue and the second is to pass such order after making or causing to be made such inquiry as deemed necessary 3.3 In the matter of DIRECTOR OF INCOME TAX vs. JYOTI FOUNDATION (2013) 357 ITR 388 (Delhi) it was observed : "Thus, in cases of wrong opinion or findin....
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....prescribed for an investigation, therefore if the investigation is reasonable through which a proper result can be achieved, then such an investigation can be termed as a reasonable or through investigation. From the contents of the order passed u/s 263, it appears that the Ld. CIT wants reinvestigation of the entire matter. But such a fishing or roving inquiries have never been encouraged by the Hon'ble Courts. In the likewise manner, the Ld. CIT was not correct in asking the AO to conduct inquiries afresh on the basis of those seized documents which were already appreciated during the assessment proceedings. Even this is not the case of the Ld. CIT that certain evidences were overlooked which were very much on record or in the knowledge of the AO. Even this is not the case of Ld. CIT that certain new facts or evidences were brought to the notice of the Revenue Department which were having a direct impact on the income assessed by the AO. Neither there was an escapement of evidence nor there was any evidence now brought to the notice of the revenue department, therefore if that was not the position, then we are not inclined to give our approval to such directions. ....
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....terests of revenue. Therefore, it is the duty of AO to make enquiry and ascertain the facts regarding contract of sewerage line. Therefore, there was error in order of AO and ld. Commissioner is justified in setting aside the order. 8. We have heard the rival contentions of both the parties. WE have also gone through the statement recorded of one Shri Mukesh Sharma and have also gone through the search statement and we had verified whether any adverse statement is given against the assessee or not. The question Nos. 10 & 11 in which some questions were asked to Shri Mukesh Sharma relating to the diary LPS-1/1 and in the diary, it was written - 267 M 6%, 16.02, 267 P 1.25% 3.3375 2.67 C 0.5 % 1.3350 etc. and question was asked relating to this codification, Shri Mukesh Sharma replied that he does not remember anything regarding this and no other questions were put by search party to Shri Mukesh Sharma. Shri Mukesh Sharma is Managing Director of one Prem Prakash Tubes Private Limited and Mukesh Sharma was the middleman. He was the middleman to award of sewerage line contract to Nagarjun Construction and Simplex Infrastructure. In his diary, these three sentences were found. From t....
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....prejudicial to the interests of the Revenue" in section 263 of the Income-tax Act, 1961, has to be read in conjunction with the expression "erroneous" order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when the Assessing Officer adopts one of two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Assessing Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the Revenue, unless the view taken by the Assessing Officer is unsustainable in law. In CIT vs. Arvind Jewellers, 259 ITR 502, (Gujarat H.C.),in which it was held that the finding of fact by the Tribunal was that the assessee had produced relevant material and offered explanation in pursuance of the notices issued under section 142(1) as well as section 143(2) of the Act and after considering the material and explanations, the Income-tax Officer had come to a definite conclusion. Since the material was there on record and the said material was considered ....
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.... in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer, cannot be treated as prejudicial to the interests of the Revenue, for example, when an Incometax Officer adopted one of the courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue unless the view taken by the Income-tax Officer is unsustainable in law. " In CIT vs. Development Credit Bank Ltd. 323 ITR 206, that the Assessing Officer after making an enquiry and eliciting a response from the assessee came to the conclusion that the assessee was entitled to depreciation on the value of securities held on the trading account. The Commissioner could not have treated this findings to be erroneous or to be prejudicial to the interests of the Revenue. The observation of the Commissioner that the Assessing Officer had arrived at a finding without conducting an enquiry was erroneous, since an enquiry was specifically held wit....
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....rder passed was struck down by the Tribunal and that decision had been upheld by the High Court. That the claim for deduction under Section 35DDA was made by the assessee for the first time in assessment year 2002-03. One-fifth of the amount payable under the voluntary retirement was allowed as a deduction. In this year, the Assessing Officer had followed the earlier assessment orders. The Commissioner observed that note 2 in the audit report did create doubt as to whether expenditure to ESS was actually incurred or not. The assessee had clarified that the note was written by the auditor as a precautionary measure for reporting that the amount had been claimed under section 35DDA. The Commissioner in the order did not appreciate and deal with this aspect. He had wrongly interpreted and observed that the claim itself was made as a precautionary measure. The Tribunal, was, therefore, right in setting aside this part of the order. In CIT vs. Green World Corporation, 341 ITR 81,( S. C.) wherein it has been held that the assessment order cannot be interfered only because another view is possible. In CIT v. Sunbeam Auto, 341 ITR 81 (Delhi) wherein it has been held that if there ....
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....nquiry and verification is conducted by Commissioner of Income-tax and he is able to establish and show the error or mistake made by the Assessing Officer making the order unsustainable in law. We find that in this case the facts of the case are that one loose paper was found during search action u/s 132 of Mukesh Sharma and his evidence was apprised. The AO in assessment proceedings made a detailed inquiry of this loose paper found with Mukesh Sharma. The AO has classified the primary evidence and corroborative evidence and the income was assessed as per provisions of Income-tax Act, 1961. The AO has found that during the course of search, Mukesh Sharma has given illegal gratification for award of contract of sewerage line to Nagarjuna Construction and Simplex Infrastructure Limited. The AO in the case of Mukesh Sharma had been finalized and no addition was made in the case of Mukesh Sharma for this amount. We find that the Commissioner has remanded this assessment order on the ground that the AO should have made inquiry from Municipal Corporations of Indore and Ujjain. These two Corporations are local self-government with full autonomy to prepare and execute the project. Such Pro....
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.... for exercise of jurisdiction under section 263 of the Act. In such matters, to remand the matter/issue to the Assessing Officer would imply and mean the CIT has not examined and decided whether or not the order is erroneous but has directed the Assessing Officer to decide the aspect/question." 12. We, respectfully following the decision of the Tribunal, are of the view that the Tribunal has already examined the same papers in case of Shri Narottam Mishra. Therefore, this Tribunal cannot take a different view. Therefore, this matter is covered in favour of the assessee. It is well settled that if the same inquiry by the Assessing Officer in all original proceedings even if it inadequate that cannot flout the Commissioner with jurisdiction u/s 263 merely because he can form another opinion. 13. Now looking to the above case laws and facts of the case, we are of the view that the assessee was served with details in specific questionnaire u/s 141 of the Income-tax Act, 1961. The assessee has also given the detailed submission regarding the admissibility of diary and AO has made the enquiry from the Executive Engineer. Various bank accounts were examined in detail. No investigati....