TaxTMI 
TaxTMI 
2022 (10) TMI 1173
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....12.2013, the Revenue carried out a search in the business premises of the assessees and the residence of Managing Director Sri V Shareef. On 14.07.2014, the Revenue conducted a survey at the premises of one Riyaz, who was an employee working with the assessee. The Deputy Commissioner, Central Circle-II, Kozhikode, by notice dated 29.02.2016, has taken up block assessment against the assesses. On 18.03.2016 the assesses filed reply to the pre-assessment notice dated 29.02.2016. On 29.03.2016 the Deputy Commissioner of Income Tax, Central Circle - II, completed the assessment for the block period stated in each one of the assessment orders. The assessee carried the matter in appeal, at the first instance, before the Commissioner of Income Tax (Appeals), and the appellate authority modified the assessment orders on the estimation of turnover etc and granted substantial relief to the assesses. The assesses filed second appeals before the Tribunal challenging the assessment order of the Deputy Commissioner dated 29.03.2016, and the order of the Commissioner dated 19.07.2018, particularly on the alleged manner and mode of the survey dated 14.07.2014 under Section 133A of the Act as illeg....
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....e and its sister concerns are dealers doing business in timber. On 04.12.2013 search of the business premises of the assessee and the residence of its Managing Director along with the business premises of the sister concerns, was carried out. A few documents were recovered, and the statement of Managing Director V Shareef was recorded. On 14.07.2014, the Revenue conducted a survey of the premises of one Riyaz, an employee of the assessee's company. The relationship or standing of Riyaz vis-à-vis is disputed by the assessee, however having regard to the findings of fact recorded by all the authorities, this Court proceeds on the basis of findings recorded in this behalf. The Department impounded a few account statements, and three pen drives from the custody of the said Riyaz. On 29.02.2016 pre-assessment notice for the Assessment Year 2008-09 to 2013-14 was served on the assessee. On 18.03.2016, the assessee filed the reply, and on 29.03.2016, the assessment was completed by determining the total income for assessment at Rs.7,31,36,150/. The assessee filed appeal, and by order dated 19.07.2018, the appeal was allowed in-part, and the estimation of turnover was modified. By e....
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....assessee was advised to place on record an expert opinion on the Hash Value Report dated 23.07.2014 and permit the assessee to raise additional grounds. The Tribunal ought to have allowed the assessee to raise additional grounds and bring on record expert opinion. The rejection of both requests has prejudiced the case of the assessee, and the notional value, without there being a semblance of evidence, has been assessed by the Revenue. He invites our attention to Anvar P V v. P K Basheer (supra) and M/s. P A Kuriakose Jewellers v. The Assistant Commissioner of Income Tax (Order dated 24.05.2018 in ITA 459/Coch/2010 and connected cases) in support of the above arguments. 5.3 According to the assessee, the Department, for the first time, during the pendency of the appeals before the Tribunal, has come up with a case that the Hash Value Report was generated on 22/23.07.2014 when the pen drives were opened by expert. The assessee, to find out whether the data now relied on by the Department is secured in accordance with the procedure prescribed in this behalf, has obtained the report of Sri Vinod Bhattathiripad, who opined that generation of Hash Value at the time of opening the pen d....
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....sed. He invites our attention to the chronology of dates and events and argues that the additional grounds and additional materials are nothing but ex post facto attempts by the assessee to challenge the revised order of assessment passed by the Assessing Officer. 7. The substantial questions considered by this Court will have to be examined in the light of what is clearly borne out by the record on the controversy surrounding the pen drives and the generation of data from the pen drives. Therefore, it is very much required to appreciate the case of respective parties as follows: Pre-assessment notice dated 29.02.2016 refers to the recovery of actual details of the business transactions with various third parties recovered from the premises under the control one Riyaz, as noted above, an employee of the assessee, and the controversy is whether the employee was in service or resigned when the survey was carried out on 14.07.2014. The pre-assessment notice refers to documents recovered and impounded on both the occasions. The entry-to-entry matching of the details from all the sources was undertaken in the presence of Sri A P Vinodkumar and one Hakim during the course of the assessm....
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....ntered into by the assessee with various parties. During the survey operations at the premises of Shri Riyas M certain documents (HW/R/13, HW/R/04, HW/R/07, HW/R/18, HW/R/17, HW/R/19) pertaining to the business transactions entered into by the assessee were recovered. These documents were prepared by Shri E K Beeran and Shri K T Krishnaprasad who had acknowledged the same in the statements recorded from them. It was seen that the day books entries in the software recovered from the pendrive is exactly matching with the impounded materials as mentioned above. It was also seen that in a survey u/s 133A conducted in the corporate office on 24-07-2014 certain loose sheets were impounded (HSSA -1) which were exactly similar to the loose sheets impounded and marked as HW/R/13, HW/R/04, HW/R/07, HW/R/18, HW/R/17, HW/R/19. All of the above clearly point towards authenticity of the data contained in the pendrive seized from the possession of Shri Riyaz,, one of the assessee's employee. 14.3 Certain documents were recovered and impounded on 14/07/2014, during the course of survey u/s133A,from the premises under the control of Shri M Riyaz, who is an employee of the assessee company. Th....
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....n drives were subjected to forensic imaging and a copy of the contents were provided to Shri Shareef and his Authorized Representative also. The vendor of the software used was Identified as Shri Jacob A. J. and his statement was also taken, Mr. Jacob stated that the software was a complete accounting package and was sold to Hillwood Group. There is no dispute about the fact that data contained therein in the pen drives found and impounded belonged to the Hillwood Group and the same were also compared to the documents found and seized during the course of search. Since the data found in the pen drives have been supplied to the appellant i.e. Mr. Shareef, it cannot be said that the principle of natural justice have not been adhered to. The AO has compared the data from the pen drive to the seized documents and also the books of account maintained by the appellant in regular course of business. Nothing adverse can be Inferred from the fact that the pen drive was impounded in a survey seven to 8 months after the search was initiated in the Group. Once an information has been received, the officers of the Department are duty bound to conduct inquiries through and according to various p....
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.... assessment. Grounds of Appeal Nos. 5, 6 and 7 are thus dismissed." 9. The assessee, therefore, cannot be allowed to state that the Department, for the first time, has come up with an expert examination of data in the pen drives, the generation of Hash Value, and reliance on materials unconnected to the assessee. It is in this background; the Tribunal recorded the following findings; "8. We have heard the rival submissions and perused the record. Now the question for us to consider is whether the additional grounds of appeals can be raised before the Tribunal which does not arise out of the order of the CIT(A). The law is very well settled, the power of Tribunal is not confined to deal only with issues arising out of the order of the CIT(A) or, for that purpose out of the order passed by the Assessing Officer. In the case of National Thermal Power Corporation Ltd. vs. CIT 229 ITR 383), the Supreme Court observed that the power of the Tribunal is not confined to dealing with the issue which is arising out of the order of the authorities below. As long as the issue is relating to framing of correct assessment for the relevant assessment year, and particularly, when the relevant fa....
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....g the additional ground by the assesses before the Tribunal. The discretion given to the Tribunal to consider the additional ground is not an arbitrary one circumscribed by the Limitation Act. The discretion vested with the Tribunal to do so is to be exercised in the interest of justice in the facts and circumstances of each case. Normally, a question of fact is not to be allowed to be raised for the first time as it may prejudice to other side. If such a question is raised at the earliest opportunity, the other side can lead evidence, which it may not be able to do if such a question is raised for the first time before the Tribunal. In view of this, the plea to admit the additional ground could not be allowed to be raised for the first time before this Tribunal. 8.2 In the present case, the assessees have failed to explain the reason for not raising the additional ground on earlier occasion and also the reason given by the assessees is that only omission to raise the additional ground and they have not given any reason for such omission. Therefore, it is evident that the assessees adopted callous approach which demonstrated utter indifference in the matter. In such a situation, ....
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.... lacunae may be pointed out by the party or the party may move the Tribunal to supply the defect and the Tribunal may itself act suo motu in the matter. So, discretion vested with the Tribunal has to be exercised in the interest of justice in the facts and circumstances of the case and not mechanically. However, it cannot be allowed if such evidence is raised for the first time before the Tribunal which may prejudice other party. The right to produce additional evidence fetters with restriction. Therefore, one has to establish why the assessee could not produce such evidence before the lower authorities. Therefore, admission of additional evidence depends upon the explanation given by the assessee for admission of such evidence. The assessee has to prove the bona fide reason of not producing such evidence on earlier occasion and it has to establish that such evidence was not available on earlier occasion and he has to produce such evidence, necessary to be admitted by the Tribunal for the first time so as to render justice. 12.1 In the present case, the assessee had produced expert opinion of cyber expert with regard to generation of hash value report. The cyber expert is an outs....
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....sic expert which means that the assesses were well aware of the generation of hash value report and the same was done in their presence. Hence, the additional evidence at this stage cannot be admitted as there was no sufficient cause in procuring such additional evidence. More so, if the assessees have doubted the integrity of the income tax officer concerned stating that they have tampered or manipulated the pen drives, in such circumstances, the assessees ought to have reported the matter to the higher authorities concerned so as to take appropriate action against the erred officer. Accordingly, the additional evidence is not admitted and these issues in all the appeals of the assesses are dismissed." Alternatively, the Tribunal also recorded that the Department followed clear procedure and retrieved the Hash Value Report which was duly acknowledged by the assessee. 10. In the above analysis, we have to examine whether the assessee was compelled to raise additional ground or bring on record additional material because of a disclosure made by the Department during the pendency of the appeal. It is axiomatic that the Tribunal, as a final authority on a finding of fact, is clothed....
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....open for the conduct of business and inspect such books of accounts or documents as the officer may require, may be available at such place. The emphasis is that the survey was conducted at the residence of Riyaz. The case of the assessee is that the said person resigned from the employment of the assessee. We take note of the finding of fact recorded by the Tribunal in this behalf that the assessee did not place any material to establish the explanation offered by the assessee. This takes us to the legal argument that the Department described a portion of Riyaz's residence as an office, and the assessment order, on account of translation, described the residence as an office room in residence. The bottom line of the argument is that the survey cannot be conducted at the residence of Riyaz. Since a few attempts are made to camouflage the residence as an office, the material in whichever form cannot be relied on for determining the suppressed turnover or income by the assessee. 12.2 Senior Advocate Sri P K R Menon replying to the argument made on the non-applicability of Section 133A of the Act, reads Section 133A of the Act, and invites our attention to the explanation, which read....