TaxTMI 
TaxTMI 
2019 (8) TMI 1890
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....: a) The pen drive is claimed to have been recovered from the residence of one Mr. Shareef in survey u/s 133A of the Act without cross examining Mr. Riyas. b) The Assessing Officer has gone wrong in accepting the pen drive as a piece of evidence and making substantial additions to the income returned. The pen drive is not having any evidential value as per evidence Act c) The Commissioner of Income Tax has gone wrong in omitting to consider the Appellants' submission regarding the lack of evidential value of data in the Pen drive. 3. Without prejudice to the submission regarding evidential value of pen drive as above; the Assessing Officer has gone wrong in including stock transfer between sister concerns and branches valued Rs. 2,99,77,239/- in the computation of sales turnover. b) The Assessing Officer has gone wrong in omitting to deduct the cost of additional quantity of timber valued Rs. 8,29,05,394/- required to meet the alleged sale as per pen drive c) The Assessing Officer has gone wrong in not deducting expenses Rs. 6,80,288/-Shown in the pen drive for computing the total income. 4. The assessing Officer ought to have noticed that the seized materials claimed....
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....lant Proceedings 47,67,320.00 78,67,320.00 7,31,36,150.00 1,70,55,478.00 CIT(A) observed that on 04.12.2013 a search and seizure operation was carried out at the premises of the appellant company, other group concerns and directors of the companies. During the course of search, voluminous documents were found and seized evidencing that the assessee company as well as other group concerns were engaged in systematic suppression of sales and thereby profits and details of these documents seized and contents of these documents have been elaborated by the AO in the assessment order. It was observed that during the post search investigation, the Investigation Wing received information that the books of accounts were also maintained at a different premise, which was under the control of Shri Riyaz, who is an employee of Mr. Shareef, the controller of Hillwood Group. A survey u/s. 133A was carried out on 14.07.2014 at the said premises of Shri Riyaz M. and books of accounts belonging to Hillwood Group was found and impounded. During the course of survey 3 pen drives containing data of Hillwood Group was also found and these were also impounded. The contents of the pen drives were subj....
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..... It has already been discussed earlier that there is no dispute about the fact that the data contained in the said pen drives belonged to the appellant group and copy of the data was provided to the appellant before finalization of the assessment. The appellant has objected that Mr. Riyaz was not made available for cross-examination by the Department. In this regard, it is an important fact that the statement of Riyaz has not been used to compute the income of the appellant, but it is the date contained in the pen drive has been used for assessment. Since the statement of Mr. Riyaz has not been used against the appellant, there is no question of giving an opportunity of cross-examination of Mr. Riyaz to the appellant arises. The data in the Pen Drive has been used against the appellant and, therefore, a copy of the same was given to the assessee. Mr. Riyaz is an employee of Mr. Shareef and it is an undisputed admitted fact that data contained in the Pen Drive found during the course of survey at the premises of Mr. Riyaz belonged to the assessee. I do not see any violation of Principle of Natural Justice in the facts of this case. Since the above data belonged to the appellant, th....
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....ts. Shri Beeran and Shri. Krishna Prasad daily prepare such reports and submit to me at the day end or on the next day. I generally give this slips to Shri.Hakim or Shri.Rajeev in accounts after verification. In addition to the above, these slips will have daily expenditure, outstanding amounts from customers and also the details of bank deposits/cheques etc. Q.No.4 In the search u/s 132 conducted at business premises of M/s Hillwood group of companies, loose sheets inventorised as HW-1 and HW-2 were seized, which included the actual accounts of your business, When these materials were examined it was noticed that the complete accounts are not shown in the returns filed before the department. A detailed statement were recorded from you in this regard then. Now based on the above evidence, it is apparent that even after the Search action, your companies are not completely accounting your sales in books. Please comment on this. A.4 I have given a detailed statement on 04.12.2014 about this. I admit that the actual sales are not fully accounted. Q.5 On 14/07/2014, Income tax department conducted a survey u/s 133A at the office room premises of Shri M. Riyas. From there, we impou....
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....e's case. Shri Riyaz, being an employee of the assessee is under his control and non attending the cross examination of Shri Riyaz is only a last effort to save the assessee and it cannot be taken at the face value. Further, the assessee has stated that Shri Riyaz is no more an employee of the assessee- company. However, the assessee has not furnished any details of his resignation when he left the employment with the assessee-Company and also has not furnished his new address. Without furnishing the details of the new address of Shri Riyaz if he left the employment with the assessee-company, the assessee is only blaming the Department for not providing an opportunity of cross examination of Shri Riyaz which is only a self serving argument. We do not find any fault of the Department for not giving opportunity of cross examination of Shri Riyaz. Now the assessee wants to derive benefit out of it which cannot be given by us at this stage. Hence, in our opinion, the CIT(A) is justified in holding that there is no necessity of providing opportunity of cross examination of Mr. Riyaz by these assessees. Thus, Ground No. 2(a) in all the appeals is dismissed. 5.2 Ground No. 2(b) b) The ....
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....on u/s 65A and 65B of the Evidence Act 1872 read with sec 93 and the 2nd schedule of the Information Technology Act 2000 before adopting this as an evidence against the assessee for the purpose of assessment." 6.2. The Ld. AR filed affidavit of Shri V. Shareef dated 29/03/2019 wherein it was submitted that: : "1) In the Assessment order dated 29-03-2016 passed by Deputy Commissioner of Income Tax, Central Circle-2, Kozhikode, Para 23C, it is stated as under:- "The claim of the assessee is against facts. The Pendrives recovered from the premise of Shri. Riyaz was subject to forensic examination in the presence of Shri. V. Shareef on 22-07-2014 & 23-07-2014. During the forensic examination the data integrity of the pendrives were secured by generating hash value report. The report were handed over to Shri. V. Shareef also. Working copy of the data in the pendrives were taken during the forensic examination. This working copy was provided to Shri. A.P Vinod Kumar the A.R of the assessee for the purpose of reference during the course of assessment proceedings." In the above paragraph of the assessment order, it is stated that the forensic examination of the pen drives was cond....
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....scribed as "financial tool" did not contain any entry regarding purchases and payment made through banking channels. The ld. AR submitted that the assessment was made by taking some items from the pen drive and some items from regular books of accounts by adopting "pick and choose" method. It was submitted that the seized material claimed to have been recovered during search were not provided to the assesse for verification in spite of assessee's specific request for the same and the assessment based on such material is illegal and void. The assesses have not pressed any other arguments. 7. The Ld. DR submitted that in the affidavit assessee had questioned the statement made by the Assessing Officer in order dated 29/03/2016, para 23c. The Assessing Officer states that during the course of survey 3 pen drives were impounded. It was submitted that the pen drives were subjected to forensic examination in the presence of V. Shareef on 22/07/2014 & 23/07/2014. During the forensic examination the data integrity of the pen drives were secured by generating Hash Value Report. The report was handed to V. Shareef also. The working copy of the data in the pen drives were provided to A.P. Vi....
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....et formula of universal application to decide the question of admission of additional ground or criteria for admission thereof, which operates de hors the peculiarities of a fact situation. As long as the issue is related to the correct determination of tax liability of the assessee in a particular assessment year and availability of relevant facts found from the material already on record, it is open to the assessee and department to raise that issue provided that the issue so raised is bona fide and the same could not have been raised on an earlier occasion for good and sufficient reasons. The limitations are that there are no new facts which required to be investigated by the said admission of additional ground and there should be good and sufficient reasons for not raising the issue on an earlier occasion by the assessee/department. The assessee has to demonstrate the existence of good and sufficient reasons for not raising the additional ground in the earlier proceedings of the lower authorities. The additional grounds have to be taken up before the Tribunal on account of bona fide reasons which are stated to be true and correct reasons by the assessee. On this fact, in our hu....
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....e of Ramlal and others v. Rewa Coalfields Ltd., [AIR 1962 SC 361] wherein it was held that it is not the case of the assessee whether the assessee exercised due diligence so as to file legal remedy. As discussed earlier, the assesses have not given sufficient cause for raising the additional ground before us in these cases. Hence, it cannot be admitted. 8.3 Even otherwise, the additional ground is not having any merit. As can be seen from the record that the Department generated the hash value report of each pen drive found during the course of survey in the case of Shri Riyaz. The Department retrieved the hash value report in accordance with the applicability of provisions of section 65A and 65B of the Evidence Act, 1872 r.w.s. 93 and 2nd schedule of the Information Technology Act, 2000 : A Hash Value Report Of Riyaz-M 4GB Pendrive 1 Name Riyaz-M 4GB Pen drive PD-1 Description &nb....
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....p; 07/23/14 1017:11AM Target Date 07/23/14 1017:11AM File Path C:\Users\D N A\Desktop\PD 2\Riyaz-M 4GB Pen drive PD-1 .E01 Case Number Riyaz-M Sandisk Pendrive (black & white) 4Gb Evidence Number Riyaz-M 4GB Pen drive PD-1 Examiner Name IT Calicut Notes &....
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....p; 0 Size Error 64 Granularity 0 Process ID 0 Index File C:\Program Files\EnCase6\lndex\Riyaz-M 4GB Pen drive PD 1-35d955165c503843811fcd90745558f9. Read Errors 0 Missing Sectors 0 CRC Errors &n....
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....; 1 References 0 Physical Location 0 Physical Sector 0 Evidence File Riyaz-M Pendrive 2 File Identifier 0 Code Page 0 Full Path &nb....
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....; Fixed File Integrity Completely Verified, 0 Errors Acquisition MD5 f07ba9f50106d751ad33S44ec23Q4f39 Verification MD5 f07ba9f50106d751ad33S44ec23Q4f39 QUID 3556b083d16f1149892e232ace655b94 EnCase Version 6.19.2 System Version Windows 7 &....
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....; Physical Disk, 15,826.944 Sectors 7.5GB Logical Size 0 Initialized Size 0 Physical Size 512 Starting Extent OSO File Extents 1 References 0 Physical Location 0 Physical Sector 0 Evidence File Riyaz-M-Pendrive 3 File Identifier &....
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....bsp; f15f6c64d0336439d65d39f5f440a53f GUID 8255cd57cd96dc45b24ce7acb59e1fde EnCase Version 6.19.2 System Version Windows 7 Witnesses Forensic Expert Assessee A.O Hash Value Report of Riyaz-M Pendrive 3 Is Physical . Raid Stripe 0 Size Error 64 Granularity 0 Process ID 0 Index File  ....
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.... of the Companies of which I am the Managing Director and Managing Partner, assessments were carried out under the provisions of the IT Act. While doing so, the Assessing Authority placed reliance on the data said to have been recovered from three pen drives which are alleged to have been impounded at the time of a survey conducted at the residence Sri Riyas, an employee of the Group. 2. The appellants had taken the stand that [1]: authenticity of the pen drives subjected to forensic examination is NOT PROVED, [2]: the "data integrity" of the pen drives WERE NOT SECURED before they were subjected to forensic examination, [3]: the pen drives WERE NOT ACCESSED IN THE PRESENCE OF THE PERSON FROM WHOM THEY ARE ALLEGED TO HAVE BEEN IMPOUNDED AND/OR THE ASSESSEE AND OVER AND ABOVE EVERYTHING, THE ALLEGED RECOVERY WAS DURING AN ILLEGAL AND UNAUTHORISED SURVEY - at the residential house of an employee though in the assessment order and other records, it is made out that the recovery was from the room" - at least in the English translation of the statements and records. In fact during the course of the hearing on the appeals before this Hon'ble Tribunal, an affidavit was sworn to by ....
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....er Sc.], Ph.D [Cyber Forensics], Calicut dt. 15.06.2019 produced herewith may accepted as ADDITIONAL EVIDENCE IN THE ABOVE APPEAL/S." 10. The Ld. AR has also filed additional evidence in the form of forensic report dated 15/06/2019 which reads as follows: About Dr. P. Vinod Bhattathiripad Introduction; Dr. P. Vinod Bhattathiripad has been a cyber forensic expert to Police, Judiciary, Directorate of Revenue intelligence (DR1), Special Intelligence and Investigation Bureau (SHIB) of Customs, Department of lncome Tax in India and several multi-national companies. He is consulted on crimes involving digital evidence. In addition, he has been an expert commissioner for several courts in the Indian Judiciary in a few civil/criminal cases involving cyber evidence. Currently, he holds the consultative-post of the Chief Technology Officer (Honorary) to the Director General of Police, Kerala. Expertise; He is the developer of POSAR, a recent protocol for forensics of software copyright infringement. he has worked on AFC (Abstraction- Filtration-Comparison), the method of investigation of software piracy and copyright infringement cases in the US and the international judiciary. Educ....
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....afe guard the interests of both the Department and the Assessee? Answer: In order to safe-guard the interests of both the department and the person (from whom the storage devise is recovered), it is highly necessary that the seized storage devise reaches the Forensic Expert without the data available therein being accessed by anybody. In order to ensure this, it is highly necessary that the following steps should be followed by the Authority who carries out the seizure procedure on the electronic storage devise: i. Officer seizing the devise shall first - in the presence of the person from whom devise is seized [or the owner of the pen drive] - generate hash value from the electronic storage devise [pen drive/s in this case] by performing hashing process on the devise by using a world standard hashing software tool and then note down the resulting hash value in the report prepared in regard to the seizure of the devise: ii. The Officer seizing the devise shall forward the seized storage devise [pen- drive/s in the instant case] along with the seizure report - which disclose the hash value generated while seizing the devise - for forensic examination; Further, in order t....
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.... important question: What action did the authority take to ensure that pen drive has not been modified or tampered with by anybody during 14.07.2014 and 22/23.07.2014 with an illegal intent? The hashing processes done on 22.07.2014 and 23.07.2014 DO NOT in any way protect the integrity of the content of the 3 pen drives as they DO NOT to ensure that the data in the pen drive remained safe and secure during 14.07.2014 and 22/23.07.2014. To add to this, the hash value reports made available to me does not contain any declaration from the Forensic Expert (who is to subject the pen drives to forensic analysis to the effect) that he has compared the hash value as generated by him on 22/23-07.2014 with hash values, if any, generated on 14.07.2014 (See the steps iii and iv in the answer to the query A). The details above encourage me to raise another important question; What action did the forensic expert take to ensure that pen drive has not been modified or tampered with by anybody during 14.07.2014 and 22/23.07.2014 with an illegal intent? I, therefore assume that the first hashing process was carried out only on 22/23.07.2014 and no hashing process was done on 14.07.2014. This t....
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....ch to both Mathematics and Computer Science. Hash value is a numeric value of a fixed length that uniquely identifies a large volume . A hash value is often calculated using a standard "hash function". A hash function is mathematical algorithmic function. The process of calculating a hash value (obviously, by using a hash function) is called Hashing process. In short, Hashing is a Mathematical calculation process by using a Mathematical Hash Function. And, Hash Value is the result of the process. In order to calculate a hash value, several standard hash functions do exist. The world standard MDS hash function is an example of such a hash function. There exist several hashing software tools, each of which is based on one of the world hash functions. For example, there exist several software tools based on the world standard MD5 hash function. Now, here is a brief description of the algorithmic function of a hashing software tool: When data is fed into an MD5 hashing-software tool, the tool would generate a 128-bit hash value string which, for laymen, is a 32 digit hexadecimal number. This 32 digit hexadecimal number will uniquely represent the large volume of data tha....
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....andisk Pendrive [BLACK & WHITE] 4 GB B: PEN DRIVE 2: Riyaz-M Pendrive 2: 4 GB C: PEN DRIVE 3: Riyaz-M Pendrive 3: 8GB: Strontium 11.1 However, the Ld. AR submitted that the Pendrives impounded, as per the List produced do not include a BLACK & WHITE pen drive while the pen drives analysed include BLACK & WHITE PIN DRIVE and it was therefore apparent that what was subjected to forensic analysis were not those pen drives which were impounded from Mr. Riyaz. In any event, there exists one pen drive at least which was not one amongst the three impounded. It was submitted that this, read along with the fact that there is no evidence to show from which pen drive the offending data was recovered should result in the evidence; regarding the pen drives as of no evidentiary value. 11.2 It was submitted that the examination of the pen drives should have been carried out in the presence of Sri Riyaz from whom the same was alleged to have been impounded. While no attempts were made to secure his presence, since the same constitutes recovery of materials from the possession of third parties, the assesses had requested for an opportunity to cross examine Sri Rivaz. The Assessing Authority h....
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....uch defect or 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 exper....