TaxTMI 
TaxTMI 
2019 (8) TMI 1890
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....the total income of the Appellant for the following reasons: 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....
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.... other grounds of Appeal. Income As per original Return Income As per filed u/s. 153 A Assessed Income Income Computed During Appellant 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 t....
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....This ground of appeal of the appellant is dismissed. d) Grounds of Appeal Nos. 5, 6 and 7 relate to Principle of Natural justice and use of data contained in the Pen Drives. 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 pre....
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....d. Further there are some more sheets which pertains to the sales on 24/07/2014. The accounts of all the three above concerns are included in these slips.lt is a daily practice we follow in maintaining accounts. 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 statem....
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.... Settlement commission to resolve this issue. Kindly exclude me from Penalty/Prosecution. 5.1.1 The above reply shows that objection raised by the assessee is totally misplaced and the assessee was in the knowledge of the activities of Shri Riyaz in connection with the assessee'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....
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....n the appeal proceedings." 6.1 The additional ground reads as under:- "The assessment is completed on the basis of the data from the three pen drives impounded from the house of Mr. Riyaz at the time of survey u/s 133A of the Act. The pen drives are not subject to verification as per the mandatory prescription 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 ....
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....Riyaz, summons was issued for his appearance and the opportunity was thereafter denied when he did not turn-up for cross examination pursuant to the summons issued. It was submitted that the Assessing Officer had included stock transfer to branches and sister concerns valued Rs. 2,99,77,239/- in the sales turnover wrongly. It was submitted that the pen drives which were described 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 w....
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.... of appeal which may not arise out the order of the lower authorities. There is no dispute or controversy about the power of the Tribunal to admit the additional ground of appeal. However, whether, in a particular situation the Tribunal should exercise such powers or not, would essentially depend upon the facts of such a case and as there cannot be any, and there is o straitjacket 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 occasio....
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.... case of the assessees falls under the category which is beyond the control of the assessee. As discussed earlier, the assessee has failed to show "sufficient cause" for not raising the additional ground within the period of limitation without explaining the delay till the date of hearing of these appeals. In other words, the whole period of delay is not at all explained as held in the case 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 : ....
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....bsp; Riyaz-M Sandisk Pendrive (black & white) 4Gb\Riyaz-M 4GB Pen drive PD-1 EO1 Device Name Riyaz-M Sandisk Pen drive PD-1 Actual Date 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 ....
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....; Windows Unknown Witnesses Forensic Expert Assessee A.O B Hash Value Report of Riyaz-M4GB Pendrive 1 Is Physical . Raid Stripe 0 Size Error 64 Granularity 0 Process ID ....
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....nbsp; Physical Disk: 7,821,312 Sectors 3.7GB Logical Size 0 Initialized Size 0 Physical Size 512 Starting Extent OSO File Extents 1 References &n....
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....; IT -Calicut Notes 4GB Pendrive belongs To Riyaz-M Label SanDisk Model Cruzer Blade Serial Number 2004 3411431DDC929CC3 Drive Type Fixed File Integrity &nbs....
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.... Total Size 4,004,511,744 Bytes (3.7GB) Total Sectors 7,821,312 Disk Signature 6F647134 Partitions Valid Hash Properties Name Value Head Set Hash category Partitions Name Id Type Start Sector Total Sectors Size Ob FAT32 0 7,821,312 3.7GB Witnesses Forensic Expert Assessee AO D Hash Value Report of Riyaz-M Pendrive 3 Name Riyaz-M_P....
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....bsp; C:\PD3\riyaz M-Pendrive-3 E01 Case No. Riyaz-M_Pendrive_3 Evidence Number Riyaz-M_Pendrive_3 Examiner Name IT -Calicut Notes 8GB Strontium Pendrive belongs To Riyaz-M Label SRT Model USB Drive Type Fixed File Integrity  ....
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....ature 182E07C3 Partitions Valid Hash Properties Name Value Head Set Hash category Partitions Name Id Type Start Sector Total Sectors Size Ob FAT32 0 7,821,312 3.7GB Witnesses Forensic Expert Assessee AO 8.4 The Hon'ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer & Ors. held that if electronic record is being used as evidence, the conditions mentioned u/s. 65B(4) of the Evidence Act has to be complied with. The conditions that are to be satisfied are enumerated in para 15 of the judgment of the Supreme Court in the case of Anvar P.V. vs. P.K. Basheer & Ors (10 Supreme Court Cases 473). The Hon'ble Supreme Court in the case of T.K. Sanalkumar vs. CIT Cochin in SLP No.32635 of 2011 dated 04.07.2012 while disposing off SLP filed by the assessee had directed the Commissioner to consider a ground which is identical to ....
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.... generated for the pen drives on 22.23/07.2014 in the presence of this deponent as confirmed by his signature in the Hash Value Reports and therefore the "data integrity" of the contents of the pen drives have been properly secured. 4: The appellants who are not computer-savy was not able to understand the significance of the term "hash value", "data integrity" etc. etc. used in the reply. Therefore this deponent, through their Counsels, consulted an Expert in the field of Computer Systems/forensic Science in relation to computer data etc. - Dr. VINOD BHATTATHIRIPAD M.Sc. [OR & CA], M.Phil [Computer Sc.], Ph.D (cyber Forensics), Calicut - an internationally acclaimed Expert in the field of Forensic Sciences - on the implications of ""hash value reports",, accessing data from storage media impounded, "securing data integrity"and other relevant matters which arise in the light of the specific statements made in the Reply. In consultation with the Counsels, specific questions were framed and the opinion sought. 5. The Expert - Dr Vinod Bhattathiripad - has now made available his opinion on the various questions framed as per his Opinion dated 15.06.2019. The....
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.... forensics. These conferences include ICDF2C (Abu Dhabi in 2010 and New Haven, USA, in 2014), ADFSL (USA in 2011, 2012, 2015 and 2018). Also, he was the acting chairman of the workshop on Computer Forensics in Software Engineering as part of the IEEE world conference on Computer Science (Izmir, Turkey in 2012). He has been a technical committee member of several cyber crime conferences in Asia, Europe and the USA. He is a reviewer of several journals and conference proceedings on this topic, across the world. He has authored a reference book titled "judiciary-friendly forensics of software copyright and this book has been published IGI Global, Pennsylvania, USA. This book is now being sold by leading distributors (including Amazon dot com) across the world and is a reference book in several western universities. This book is widely referred to in by judges and lawyers specialised in Intellectual Property crimes. Forensic feedback This forensic feedback is based only on the facts shared by Adv. Raghunath vide email dated 11-June-2019 and also after going through the records produced by him and is not a complete forensic report after going through the entir....
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....ewly generated hash value with the one detailed in the Seizure Report: a. If the hash values are same, the examiner can assume that the integrity of the content of the devise stands intact and can then proceed with his / her forensic examination of the devise. b. If they are different, then the examiner is required to report that there have been suspicious attempts of accessing/tampering/modifying the contents of the devise between the date of seizure and date of the forensic evaluation. The above procedure is akin to the steps taken when material objects or samples which are required to be examined by experts (during the course of investigation into crimes and/or even food adulteration cases) where the material object/sample are wrapped, packed, tied and sealed with the monogram of the authority and thereafter sent to the Chemical Laboratory where the Analyst - before taking up the sample / material object for examination - will record his satisfaction that the seal is not tampered with and the packing intact, before proceeding to analyse. B: Whether such steps have been taken in the present case - given the facts detailed above? Answer....
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....er need not access any of the entire content of the pen drive. The officer's hashing tool itself will automatically access the entire content of the pen drive, calculate the hash value and finally, generate the hash value report. D. Whether in the facts and circumstances of the case highlighted above, can it be concluded that the seizure of the pen-drives was generally following the related protocols? Answer: Absolutely no. The hashing process should have been performed by the officer ideally during the impounding on 14.07.2014 in the presence of the owner of the pen drives and then, the resulting hash values should have reported through the impounding report. These hash values (dated 14.07.2014) would have then uniquely represented the content of the pen drives as on 14.07,2014. Also the hashing process should have ideally been repeated by the forensic examiner on 22/23.07.2014 and the resulting hash values should have then been compared with the hash values generated on 14.07.2014. As things stand, the hash values, if any, generated on 14.07.2014 seem to be missing. Also, the hash values that were actually generated on 22.07.2014 do uniquely represe....
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.... G. What is meant by "securing" data integrity of the pen drives and how does "generating hash value report" secure data integrity of the pen drives" ? Answer: The process of hashing of a storage device is only a calculation process with the sole objective of arriving at a hash value of the content of the storage device and is not intended to lock or secure the content of the storage device. That means, subsequent to this hashing process, the content of the pen drive remains completely open and accessible to anybody for any type of modifications. Also, the process of hashing is not intended to make any change in the content of the storage device. In short, by hashing a pen drive, the data residing in the pen drive DOES NOT get locked. DOES NOT get affected and DOES NOT get modified. Because of this feature, the hashing process is extensively recommended world over by Cyber Forensics Experts as a process to ensure the integrity of a confiscated electronic storage device. For example, hashing process is often recommended by cyber forensic experts in order to ensure the integrity of the content of a confiscated pen drive. The integrity of the data contained in t....
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....was therefore submitted that denial of opportunity to cross examine Shri Riyaz especially in view of the several loose ends highlighted above, totally vitiated the use of the pen drives for assessment purposes. It was therefore submitted that non-examination of Shri Riyaz also made the pen drives inadmissible. It was submitted that the three pen drives were therefore liable to be eschewed from evidence. 11.3 The Ld. AR pleaded to admit the additional evidence, as these are very relevant to decide the issues in dispute. Further, it was submitted that due to non- availability of the additional evidence on earlier occasion, it was now made available before the Tribunal and requested to admit the same. 12. We have heard the rival submissions and perused the record. In our opinion, the Tribunal has discretion to receive and adjudicate additional evidence even if it is not an arbitrary one but it is a judicial one circumscribed by the limitation specified under Rule 29 of the Act. The Tribunal has the power to allow additional evidence if it requires such evidence to enable to pass orders, i.e. to say, when it finds that there is any lacunae or defect which is to be filled up so as....
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....e benefit indirectly which cannot be done directly for which the Tribunal cannot be party. Further, the assessee herein, by way of additional evidence wants to change the complex and character of the case as originally brought out, which is not permissible at this stage. The assessee must prove beyond the shadow of doubt that the assessee was diligent and was not guilty of negligence whatsoever. The sufficient cause in procuring the expert opinion from the cyber expert within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of the provisions. In our opinion, in the present case, there is no sufficient cause to procure such cyber expert opinion after such a long period after survey in this case. The seeker of justice must come with clean hands and should prove that there was no negligence whether in action or want of bona fides. We find that in the affidavit, the assesses were not able to understand the significance of the hash value report. There was delay in procuring the expert opinion and it was procured with such a delay so as to delay the proceedings under the Act. More so, the affidavits filed by the asses....