TaxTMI 
TaxTMI 
2005 (6) TMI 208
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....tal income of Rs. 41,950 plus agriculture income of Rs. 2,11,820. Subsequently, as per information in possession of the Department, a sum of Rs. 17 lakhs was found to have been passed on to Shri Balram Jakhar during the financial year 1987-88 corresponding to the asst. yr. 1988-89 as one of the recipients of monies from Jain Brothers in Jain Hawala case. It was, however, noticed that the assessee did not disclose this amount in his IT return for the asst. yr. 1988-89 filed earlier, therefore, the AO proceeded under s. 148 of the IT Act by issuing notice and recording the reasons. 4. The relevant facts leading to the addition in this case were that on 3rd May, 1991, the CBI, New Delhi, searched the premises of Shri J.K. Jain at G-36, Saket, New Delhi, to work out an information received while investigating the RC case No. 5(S)/91-SIU.(B)/CBI, New Delhi. In the course of search, they recovered, besides other documents, two diaries, two small note books and two files containing details of receipts of various amounts from different sources recorded in abbreviate forms of digit and initials and details of payments to various persons recorded in the similar fashion. Preliminary inv....
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....assessee explained before the AO that the basis on which the proceedings were initiated in this case has become non-existent by virtue of the judgment passed by the Special Judge, Shri V.B. Gupta, New Delhi, in criminal proceedings under the Prevention of Corruption Act. However, the AO was of the view that the income-tax proceedings are independent proceedings and have nothing to do with the decision of the Special Judge, New Delhi. 8. The assessee filed various replies before the AO requesting for complete copies of the documents available with the Department which were supplied by the AO, namely, (1) Copies of two diaries seized by the CBI and two files from the residence of Shri J.K. Jain, New Delhi. (2) Copies of the statements of Shri S.K. Jain recorded by the CBI on 21st Sept., 1993 and 12th Dec., 1994. (3) Copy of the statement of Shri S.K. Jain recorded by the CBI on 3rd Jan., 1995. 9. The AO confronted the statements of Shri S.K. Jain and Shri J.K. Jain at the assessment stage with regard to the code-words mentioned in the diary and the AO has taken the code-words J.K.H. as Balram Jakhar. The AO issued show-cause notice against the assessee as to why the am....
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....t and one has to go by the surrounding circumstances of the circumstantial evidence as held by the Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 125 CTR (SC) 124 : (1995) 214 ITR 801 (SC). The AO ultimately made the addition of Rs. 17 lakhs in the hands of the assessee being income chargeable to tax as undisclosed income. The addition was challenged before the CIT(A) and it was submitted that the addition was made merely on surmises and suspicion on the basis of the report of CBI and without any corroborating evidence. It was also submitted that there was neither supporting documentary evidence to support the case. It was also submitted that the assessee explained all the queries before the AO and denied to have received any amount from Jain Brothers. It was also explained that IT authorities made enquiries from bank directly but no tangible material/unaccounted money came to their notice. It was also explained that only statement recorded by the DDI (Inv.), New Delhi, of Shri J.K. Jain was in connection with the case of Shri S.K. Jain in his personal case in which also he has not made any allegation against the assessee. It was also explained that the statement ....
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.... the order of Hon'ble Delhi High Court in criminal revision No. 473/97 was basis of order of Special Judge, New Delhi. It is also a fact that the Hon'ble Delhi High Court in the case of V.C. Shukla & Ors. had stated that the Jain diary do not contain any debits and credits and accordingly, cannot be termed as books of account. The CIT(A) also observed that the Hon'ble High Court formed the view that such evidences are of such a nature which cannot be converted into legal evidence against the petitioner as there is no finding in regard to the disbursement of the amount and the said order was affirmed by the Hon'ble Supreme Court in the case of CBI vs. V. C. Shukla & Ors. Similar view is taken by the Hon'ble Madhya Pradesh High Court in the case of Arjun Singh vs. Asstt. Director of IT & Ors. The CIT(A) further observed that the AO was present at the appellate stage and conceded through his written arguments dt. 19th Nov., 2001, that there appears to be no findings other than recorded in the Jain diary/file and there is no corresponding entry in the books of account or in the firm of accretion in assets were proved on record by the AO. The CIT(A) further observed that the CIT(A)-I, N....
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....e IT Act which is reported in (2000) 159 CTR (MP) 53 : (2000) 246 ITR 363 (MP). The learned counsel for the assessee submitted that only statement of Shri J.K. Jain was recorded in the income-tax proceedings by the DDI (Inv.) and the same was not confronted to the assessee. Therefore, such statement cannot be read against the assessee. He has referred to letters filed before the AO, copies of same are filed in the paper book at pp. 174 to 182 to show that the assessee made specific request to allow cross-examination of persons whose statements have been recorded at the back of the assessee. The learned counsel for the assessee submitted that the CIT(A) rightly deleted the addition in the matter. 16. We have considered the rival submissions and material available on record. Copies of the reasons initiating proceedings under s. 147/148 have been filed in the paper book in which it was recorded by the AO that the assessee allegedly received monies from Jain Brothers of Shri S.K. Jain Hawala scam and Shri Balram Jakhar is one of the persons against whom the CBI filed charge-sheet under the Prevention of Corruption Act. The AO on that basis had reasons to believe that income escaped ....
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.... 12,64,500 1988-89 1989-90. 21,66,300 1989-90 1990-91. It would show, that the assessee though charge-sheeted on allegation of receipt of Rs. 17 lakhs but prosecution resulted into futility and assessee was discharged of offences. Therefore, very basis of addition does not survive. There is no recovery made at the instance or possession of the assessee. The Revenue Department relied upon only on diary and charge-sheet framed by the CBI. The whole case of Revenue would collapse, the moment assessee is discharged of the sole allegation of receipt of Rs. 17 lakhs. 18. The abbreviated form allegedly recorded in diaries is not explained by any material. It could resemble to name of other person also who is having similarity in name. Unless it is proved through corroborative evidence that entries are having any nexus with the assessee, addition cannot be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appears that findings of AO are based on suspi....
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.... against the assessee and whatever statement was recorded by the DDI, Shri J.K. Jain has not named the assessee to be one of the recipients of the amount. He also refused to sign whatever statement was recorded by the DDI. Moreover, the AO never produced Shri J.K. Jain before the assessee for cross-examination. The assessee in his reply before the AO specifically requested to produce the persons who have made the statements against the assessee for cross-examination but no person was produced for cross-examination before the AO. Therefore, whatever material was collected at the back of the assessee cannot be read in evidence against the assessee. It is settled law that if any material is collected by the IT authorities at the back of the assessee then opportunity to controvert the same should have been given to the assessee. We are fortified in our view by the decision of the Hon'ble Supreme Court in the case of Kishan Chand Chellaram and the decision of the Hon'ble Punjab & Haryana High Court in the case of Chiranji La1 Steel Rolling Mills vs. CIT. Therefore, in the present case, whatever material was collected by the AO cannot be read in evidence against the assessee. The fact wa....