TaxTMI 
TaxTMI 
2019 (2) TMI 1798
X X X X Extracts X X X X
X X X X Extracts X X X X
....ermining total income of the assessee at INR 5711954/-. The assessee agitated the issue before the learned CIT - A, who passed an order dated 31/3/2016 partly allowing the appeal of the assessee. Therefore, now the assessee is aggrieved by the confirmation of an addition of INR 125240/- made on account of alleged unexplained jewelry under section 69B of the act and further addition of INR 1640,000/- on account of undisclosed investment in purchase of a property. Therefore assessee is in appeal. 3. The assessee has raised the following grounds of appeal in ITA NO. 4881/Del/2016 for the Assessment Year 2010-11:- "1. That on the facts and in the circumstances of the case and in law, learned Commissioner of Income-tax (Appeals) erred in not deleting the addition of Rs. 1,25,240/- made on account of alleged unexplained jwelery u/s 69B overlooking the fact that said jwelery is very well covered by CBDT instruction & is in accordance with social and marital status of assessee herein. 2. That on the facts and in the circumstances of the case and in law, learned Commissioner of Income-tax (Appeals) erred in sustaining the addition on account of undisclosed investment of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e jewelry is falling within the allowed limit per person of the family according to the status, then no addition should be made. He therefore submitted that the assessee deserves the grant of benefit of that circular at least. For this proposition he relied upon the decision of the honourable Gujarat High Court in 339 ITR 351. 6. The learned departmental representative vehemently stated that the orders of the lower authorities may be affirmed for the simple reason that assessee is found in possession of certain invoices of purchase of jewelry as well as the jewelry. She submitted that benefit of circular cannot be given where the invoices of purchase of jewelry were found and not the actual jewelry. 7. We have carefully considered the rival contentions and perused the orders of the lower authorities. Fact shows that during the course of search conducted at the residence of the assessee on 26/4/2012 certain documents were found which were the invoices of the purchase of gold and diamond jewellery worth INR 1083958 for period from financial year 2006 - 07 to financial year 2010 - 11. The assessee was asked the question about the source of funds for purchase of the jewelry. The ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sis for the same recognizes customs prevailing in the Hindu society. In the circumstances, unless the Revenue shows anything to the contrary, it can safely be presumed that the source to the extent of the jewellery stated in the circular stands explained. Thus, the approach adopted by the Tribunal in considering the extent of jewellery specified under the said circular to be a reasonable quantity, cannot be faulted with. In the circumstances, it is not possible to state that the Tribunal has committed any legal error so as to give rise to a question of law." [ underline supplied by us] In the present case the bills of purchase of jewelry were found instead of jwellery itself and assessee has explained that the jwelery is purchased for the friends and relatives of the assessee. In the above decision of Hon Gujarat High court the purpose of the issue of the circular was accepted. When the jewelry itself is found but the bills are not found the addition is made u/s 69 of the act. Further when the bills are found but the jewellery is not available with the assessee during the course of search the addition is also required to be made u/s 69 of the act. Therefore we do not find any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,000,000 was received in cash and balance INR 300,000 was stated to be receivable. It was further stated that the deal was facilitated by one Sri Basant. Shri Prakash Chand, one of the sellers, confirmed the above transaction that he received INR 800,000 and INR 1,000,000 by cheque and cash respectively. The other person (3rd one) could not attend the office, but he filed a written letter wherein it was stated that he also received cheque of INR 800,000 and cash of INR 1,000,000. There are also certain cash deposits in these three bank accounts of the different persons. Therefore the learned assessing officer drew the conclusion that Shri Akshat Bansal and the assessee sold land for a consideration of INR 5,700,000 whereas the sale deed has been executed of Rs. 24.20 Lacs only. The circle rate of the property is INR 7,865,000. The assessee was confronted by issue of show cause notice. Assessee submitted that he and Akshat Bansal were not party to the agreement dated 16/12/2009 and as there was no approachable road to the land, it was purchased at a lesser rate. The learned AO rejected the explanation of the assessee holding that the sale deed was registered along with the 2 witness....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the learned assessing officer has made further enquiries. Therefore it cannot be said that no addition can be made on this count. On the issue of the cross-examination raised by the assessee she referred the decision of the coordinate bench in 59 taxmann.com 212. She submitted that when assessee was confronted by the questionnaire dated 18/6/2014 and show cause notice dated 24/7/2014 the assessee got reasonable opportunity of rebutting the statement made by those parties. Therefore according to her there is no requirement of granting crossexamination to the assessee. She further submitted that merely because cross-examination has not given to the assessee of witnesses; addition cannot be deleted as there is no violation of principles of natural justice because assessee was put to the notice. 11. We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that sale deed was found during the course of search where the transaction value of the property was shown at INR 2,420,000 and market value of the property was INR 7,865,000. On the basis of this evidence revenue carried out post search enquiries with the sellers. The sell....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ranted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guesswork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of crossexamination. That apart, the Adjudicating Authority simply relied upon the price-list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price-list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ara no 6.18] 6.18 As regards the proceedings before the Assessing Officer (AO), ld. Special Counsel pointed out that in Para 3.2 of the order under section 201 of the Act, concluding the discussion on the nature of the Transaction, the AO has held that from the Transfer Pricing documentation, Software Supply Agreement dated 01.01.2006 and R&O sub-contract agreement between M/s. Nokia Corporation, Finland and M/s. Nokia India Ltd, emails and Statements that the payments for various intellectual property rights supplied by M/s. Nokia Corporation, Finland were being made regularly. Thus, Assessing Officer did not solely relied on the statements of employees only but used them to corroborate his findings. Ld. Special Counsel further submitted that at page 22 of his order, the AO has clearly stated that the statements without exception are relied upon not to establish the default, but to corroborate certain aspects such as the manufacturing process, the software downloads, the manual preparation of invoices, basis of preparation and that there was no material change in the whole process of doing so since inception. The AO at page (22) of his order has held that the contention o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....oving fact is by production of evidence and evidence includes oral evidence of witnesses. The opportunity to prove the correctness of completeness of the return would, therefore, necessarily carry with it the right to examine witnesses and that would include equally the right to cross-examine witnesses examined by the Sales-tax Officer. Here in the present case the return filed by the assessee appeared to the STO to be incorrect and incomplete because certain sales appearing in the books of Hazi Usmankutty and other wholesale dealers were not shown in the books of account of the assessee. The STO relied on the evidence furnished by the entries in the books of account of Hazi Usmankutty and other wholesale dealers for the purpose of coming to the conclusion that the return filed by the assessee was incorrect or incomplete. Placed in these circumstances, the assessee could prove the correctness and completeness of his return only by showing that the entries in the books of account of Hazi Usmankutty and other wholesale dealers were false, bogus or manipulated and that the return submitted by the assessee should not be disbelieved on the basis of such entries, and this obviously, the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Kishanchand Chellaram (supra), the Apex Court was concerned with the evidence which was to be used against the assessee. This was in the form of letter from the Manger of a Bank through which money was remitted. This letter was not shown to the assessee. Therefore, evidence was held not to be admissible. It was held that opportunity to controvert should be given to the assessee. 101. In the case of Dr. Rash Lal Yadav (supra), it was held : "The concept of natural justice is not a static one but is an ever expanding concept. In the initial stages it was thought that it had only two elements, namely, (i) no one shall be a judge in his own cause, and (ii) no one shall be condemned unheard. With the passage of time a third element was introduced, namely of procedural reasonableness because the main objective of the requirement of rule of natural justice is to promote justice and prevent its miscarriage." 102. In the case of Mahendra Electricals Ltd. (supra), it was held that: "The opportunity to cross-examine the witness who has made adverse report should not be denied, to the opposite party." 103. The concept and contents of natural just....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of procedural justice. It is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination. However, if a witness has given directly incriminating statement and the addition in the assessment is based solely or mainly on the basis of such statement, in that eventuality it is incumbent on the Assessing Officer to allow cross-examination. Adverse evidence and material, relied upon in the order, to reach the finality, should be disclosed to the assessee. But this rule is not applicable where the material or evidence used is of Collateral Nature." 15. Therefore decision relied by the ld DR is also on the same line of reasoning as the decision cited by the ld AR. Therefore we do not have any hesitation is holding that when the addition is made solely on the basis of statement the third party and revenue does not have any other evidences, then without granting opportunity of cross examination , such addition cannot be made. In th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cash under section 69A of the income tax act. This addition was challenged by the assessee before the learned CIT - A, who confirmed the same. 19. The learned authorised representative referred to the fact that during the course of search an amount of INR 1809000/- has been found as cash in hand from the residence and bank locker of the assessee that the said amount represented the reported cash balance and his family members as per the statement of affairs filed with the Department. He referred to page number 83 of the paper book wherein he stated that as per statement of affairs of Shri Ram Niwas Gupta HUF the cash balances INR 1220243/-, Ram Niwas Gupta where the cash balance is INR 8 33530/- , Miss Swetha Gupta where the cash balances INR 1380180/- and Mrs Anurag Gupta where the cash in hand is INR 71033/-. He submitted that the total cash available on hand as on 31/3/2012 with the family members of the assessee is in all amounting to INR 3 504987/- whereas the amount of cash seized during the search operation was INR 1809000/-. He submitted that as the above cash balance as shown in the statement of affairs of the related family members of the assessee as per the return of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the income tax act on 26/4/2012 which was later on retracted by the assessee by filing a letter dated 9/7/2012. Further the disclosure has been made by the assessee in the answer to question number 11 of the statement recorded by the income tax department at the time of search. In the answer to question number 11 the assessee has disclosed stating that it is made for buying peace of mind and to cover up the discrepancies stated in the statement and to save himself from legal proceedings. Assessee declared income of Rs. 1 Crore for financial year 2011 - 12 and INR 7,500,000 declared or financial year 2012 - 13. On reading of the statement of the assessee dated 26/4/2012, prior to question number 11, there is no reference of any cash found and admitting that it is undisclosed income of the assessee. Therefore the lower authorities could not have linked the cash found with the disclosure made by the assessee. Further the assessee has stated concurrently before the lower authorities that the statement of affairs of the various related parties shows the cash on hand, which is much higher than the amount of cash found during the course of search. If the above facts is proved to be corr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of Rs. 1809000/- as unaccounted cash found, the balance addition of Rs. 81,91,000/- is made separately. The assessee did not submit the breakup of surrendered income and disclosing his return of income filed for the relevant assessment year. Therefore, as the cash found was also part of the disclosure. The amount of INR 7,500,000 was disclosed by the assessee in light of various discrepancies found in his accounts. Therefore, the balance amount of INR 8 191000/- that was added to the total income of the assessee. The assessee also challenges the above addition. Learned CIT - A confirmed the above addition. Therefore assessee is aggrieved with above additions preferred appeal before us. 23. The ld AR submitted that a. Statement made by the assessee is retracted by the assessee by filing a letter dated 9/7/2012. The statement was recorded on 26/4/2012. b. He stated that there is no evidence collected by the revenue during the search related to disclosure. c. There is no evidence stated in the assessment order which is linked to the disclosure. d. In the statement also there is no linkage of any material to the impugned disclosure. e. He....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nces during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influence. 3. In view of the above, while reiterating the aforesaid guidelines of the Board, I am directed to convey that any instance of undue influence/coercion in the recording of the statement during Search/Survey/Other proceeding under the I.T.Act,1961 and/or recording a disclosure of undisclosed income under undue pressure/ coercion shall be viewed by the Board adversely. 4. These guidelines may be brought to the notice of all concerned in your Region for strict compliance. 5. I have been further directed to request you to closely observe/oversee the actions of the officers functioning under you in this regard. 26. Further Hon Gujarat High court in case of . Kailashben Mangarlal Chokshi Vs CIT (2008) 174 Taxmann 466 (Guj.) / (2008) 14 DTR 257 (Guj.) has held that Merely on the basis admission, the assessee could not have been subjected to additions, unless and until some corroborative evidence was found in support of such admission In that decision also the statement was retracted by the assessee. Therfore based on the circular of CBDT a....