TaxTMI 
TaxTMI 
2009 (3) TMI 86
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....eized from a third party on which the Department was seeking to rely? (iii) Whether and in any event, the Tribunal was justified in law in reversing the finding of the Commissioner of Income Tax (Appeal) that the said sum of Rs.50 lacs could, if at all, form subject matter of assessment only in the hands of the then Chief Executive of the appellant D.R. Khatau, since neither the appellant nor the Special Officer appointed by this Hon'ble Court had received the said amount and its purported findings in that behalf are arbitrary, unreasonable and perverse ? 2. The facts of the case briefly are as follows : 3. The company, the assessee was incorporated in the year 1931 and carried on business of running a textile mill. The manufacturing operations at the said mill was stopped on January 21, 1984 due to the financial difficulties. It appears from the facts that the assessee had borrowed money from Industrial Reconstruction Bank of India (hereinafter referred to as "the Central Bank"). 4. The said Bank initiated the proceedings before the Hon'ble Court for recovery of their dues on May 29, 1985. A Special Officer was appointed by the Court for sale of the moveable and immove....
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....als) set aside the said assessment for reconsideration. The Assessing Officers were directed to allow the assessee an opportunity to examine the three letters. 10. It further appears that the assessee was provided with the copy of the said three letters dated December 15, 1990; December 17, 1990 and December 18, 1990 respectively. It was revealed from the said letters that the sale consideration for the moveable assets were increased by the parties to Rs.1.50 crore for paying off the workers and on that basis the Department contended that the return filed by the assessee was not correct. 11. The assesse contended that the letters dated December 15, 1990 and December 18, 1990 were not signed by its Chief Executive and were forged document. It was further contended by the assessee before the authority that there was no question to alter the sale price since the sale price was fixed by the Hon'ble Court and the matter was entirely dealt with by the Special Officer. It was further submitted that no reliance could be placed on these letters and it was the duty of the Assessing Officer to issue summons and to make further enquiries from M/s. Prasad Steel Traders and the Special Off....
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.... Income Tax (Appeals) and upheld the addition of Rs.50 lacs made by the Assessing Officer. 16. The Learned Counsel appearing on behalf of the appellant contended that from the facts it would be revealed that the approach of the Tribunal was entirely erroneous. The said three letters in question were not seized from the custody of the assessee. The said letters were seized from the father of Sunil Kumar Jaiswal. It is further submitted that that the signatures on the two letters alleged to have originated from the assessee were not of its Chief Executive D.R.Khatau, he has submitted other letters to show his usual signature. 17. The Assessing Officer on comparison found the signatures in the seized letters to be different but brushed the discrepancy away by observing that somebody entering into an illegal and surreptitious deal was unlikely to put his usual signature. Presuming the seized letters to be genuine and the contents thereof as true and correct, the Assessing Officer cast the burden to prove otherwise on the assessee by producing the persons concerned and did not summon the persons concerned or make them available for crossexamination. In course of the proceedings be....
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.... bank in evidence to prove this letter, it could be taken into account as evidence. But before the I.T. authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him..........." 20. He further submitted that the aforesaid judgment of the Hon'ble Supreme Court is a clear authority for the proposition that materials collected by the revenue from a third party have to be disclosed to the assessee and the assessee has the right to controvert the same by asking for cross-examination. 21. He further relied on the decision reported in (1977) 39 STC 478 (SC) [State of Kerala Vs. K.T.Shaduli Yusuff] and submitted that the Sales Tax Officer sought to rely upon evidence by way of entries in the books of account of the person with whom the assesssee had dealings for arriving at the finding that certain sales made by the assessee were not accounted for in the books of account of the assessee. The assessee requested for an opportunity to cross-examine the person in whose books the en....
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.... establishing truth and exposing falsehood. 24. It is further submitted that both the Assessing Officer and the Tribunal went wrong in holding that it was for the assessee to produce the persons concerned for examination. As has been held by the Hon'ble Supreme Court in the aforesaid decisions, the assessee had to be granted the opportunity to cross-examine the persons concerned and the Assessing Officer should have made them available for the said purpose by summoning them. In the instant case, though the assessee had requested the Assessing Officer to summon the concerned persons, he declined to do so and required the assessee to produce the persons for examination. It is submitted that it was the duty of the Assessing Officer to summon the summon the persons concerned and make them available for cross-examination by the assessee. 25. It is further submitted that the assessee had no control over the other persons and could not be expected to produce them before the Assessing Officer. Only D.R. Khatau had been the assessee's Chief Executive and as such, the assessee submitted his affidavit but the revenue did not cross-examine him. 26. In the decision reported in (1956) 3....
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....were entitled only to Rs.50 lacs out of the sale proceeds of the moveable assets, in terms of the order dated March 14, 1989 of the Division Bench, workers' dues if found to be in excess of Rs.50 lacs were to be met from the sale proceeds of the immoveable properties. The workers were thus fully protected. The improbability of the contents of the said letters is self-evident. He has further submitted that no material corroborating the contents of the letters was found at the assessee's premises which were simultaneously searched. 29. In course of the search at the assessee's premises, no copies of the two letters alleged to have been written by it nor the letter of the purchaser alleged to have been written to the assessee were found. No record was found of the purchaser having paid the money or of the assessee having received it by way of any entry in any books of account or in the form of a money receipt or otherwise. There is no statement of any person that a sum of Rs. 50 lacs was paid over and above the consideration of the said letters without even making the persons concerned available for cross-examination by the assessee. 30. He further submitted that even if taken a....
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....arify on the issue as it would be evident from the order passed by the Assessing Officer (see page 63 second paragraph, page 65 second paragraph, page 66 of the Paper Book). 34. The third question relates to the taxability of the said amount. According to the Learned Counsel, the assessee company took the defense in response to the aforesaid opportunity provided by the Assessing Officer to clarify on the aforesaid issue as would appear from page 68, fifth line from the top of the Paper Book; inter alia which is reproduced as follows : "..............Whatever evidences particularly letter dated 5.12.90, 17.12.90 & 18.12.90 seized of search & seizure operation (marked as TP - 6) received by the ADi is nothing but forged documents. Signatures in the letter dated 15.12.90 and 18.12.90 of Sri D.R.Khatau, Chief Executive of M/s. Bangodya Cotton Mills Ltd. Is forged by a person who may have vested interest to put the company or its directors in the false position and in trouble." 35. He further submitted that the Assessing Officer duly dealt with the matter elaborately and after scrutinizing the signatures appearing on the said letters came to the conclusion that the signatures c....
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....on'ble Court is not agreeable to the view taken by the Learned Tribunal being the last fact finding authority; should not reappreciate the evidence afresh and draw a conclusion different from those drawn by the Assessing Officer and upheld by the Learned Tribunal; at best this Hon'ble Court could remand the case to the Assessing Officer to consider afresh by giving opportunity to the assessee to cross-examine the person concerned as the view taken by the Hon'ble High Court and the Hon'ble Supreme Court in cases referred above upon which the assessee itself has relied on. 39. After considering the facts and circumstances of this case and after considering the decisions of the Hon'ble Apex Court in State of Kerala vs. K.T. Shaduli Yusuff (supra) and also after considering the decision of the Allahabad High Court in Additional C.I.T. vs. Radha Shyam Jagdaish Prasad (supra) and after analyzing the decision cited at the Bar as well as the decision in Kishinchand Chellaram's case (supra) as submitted by the learned counsel on behalf of the assessee that the Commissioner of Income Tax (Appeals) rightly accepted the assessee's alternative contention that even assuming the money had chan....