TaxTMI 
TaxTMI 
2005 (10) TMI 217
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....ts in the present case leading to the above issue are as follows: (i) The assessee is an individual and carries on business of share broker and dealer. The return of income was filed on 14-9-1998 declaring total income at Rs. Nil. During the course of assessment it was found by the Assessing Officer that as per capital account filed, the assessee credited Rs. 84,35,601 as income disclosed under VDIS, 1997. As per the Profit and Loss Account, the assessee credited Rs. 5,04,13,245 as sale proceeds of diamond, gold jewellery and silver utensils as per details given below: (a) Diamond ..... Rs. 2,21,95,200 (b) Gold ..... Rs. 30,80,000 (c) Silver utensils ..... Rs. 3,46,83,900 (ii) It was stated by the assessee that the assets declared under VDIS, 1997 have been sold in financial year 1997-98 relevant to assessment year 1998-99 and such sale proceeds have been credited in the books as above. From the details of sale of silver utensils filed, it was found by the Assessing Officer that silver utensils have been sold to various jewellers at Delhi as below: Name & address of buyer Quantity of silver sold Kg. Sale proceeds ....
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....ion was not accepted by the revenue authorities for various reasons recorded by the Assessing Officer in his assessment order including that the retraction was made after 42 days of admission and is nothing but an afterthought under the influence of the Dalmia family. B. Enquiries in the case of transporters: The assessee obtained consignment notes from two transporters, namely, M/s. Road Transport Corporation based at Bangalore and having booking offices at Kolkata and M/s. J.K. Carriers (proprietor Sri J.K. Sharma). A survey operation in the booking office of M/s. Road Transport Corporation, Kolkata reveals that M/s. Road Transport Corporation was under lock-out for the period 1-8-1997 to 28-2-1998, the period during which the consignment notes were issued to the Dalmias. The Tolly Register that contains consignment notes, place of destination along with lorry No. did not have entries of consignments belonging to Dalmias and the Tolly Register was impounded under section 131(3) of the Act. The Booking Registers showing all the booked consignment did not have any entry of the consignment of Dalmias. Sri Trilok Agarwal, General Manager of the aforesaid booking off....
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....ass through Naubatpur and Ghaziabad cheek-posts. As per the reports received from U.P. Trade Tax authorities, these lorry numbers were not found to be appearing in the relevant Registers maintained at Naubatpur check-post near Varanasi and Mohanpur check-post near Ghaziabad. A survey operation was also carried out at the office of M/s. J.K. Carriers, Kolkata at the given address but no trace of existence of M/s. J.K. Carriers was found therein. At the given address the business of M/s. M.P. Roadways is carried out and Sri R.C. Prasad, an employee of M/s. M.P. Roadways, Kolkata, in his statement recorded under section 133A, stated that no consignment pertaining to M/s. J.K Carriers is booked from the booking office of M/s. M.P. Roadways, Kolkata and the said M/s. J.K. Carriers is not having any booking office in Kolkata. The statement of one labourer Md. Kashim working in the booking office of M/s. M.P. Roadways was recorded wherein he stated that he did not know anything about M/s. J.K. Carriers and has not heard the name of this concern. The statement of Sri J.K. Sharma, proprietor of J.K. Carriers was recorded under section 133A on two different dates and he has stated t....
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....not furnish the particulars of the parties to whom the silver was sold and the sale proceeds were received in cash. They could not explain the mode of receipt of silver utensils and the person who carried the silver utensils. How the jewellers having small shop could accommodate so many tons of silver utensils, is not understandable. In these facts, the Assessing Officer was of the view that it has been established beyond doubt that the silver utensils have never been transported from Kolkata to Delhi. Evidence has been gathered to establish that the trucks allegedly carrying silver from Kolkata to Delhi did not move through Varanasi and Ghaziabad check-posts at which all the records of trucks passing through these check-posts are maintained by U.P. Trade Tax Authority. The statement of Shri Raj Kumar Kothari, the valuer, that he did not issue valuation report after physically seeing the entire silver-utensils is on record. The statement of Shri J.K. Sharma that he never transported silver utensils to Delhi and has charged Rs. 5 per Kg. to provide the paperwork to the Dalmias. Enquiries made in the case of M/s. Road Transport Corporation and M/s. South Eastern Roadways do ....
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....the statement recorded under section 132(4) admitted that he issued the valuation report without actually weighing or seeing all the silver utensils. He further submits that Sri R.K. Kothari, valuer has retracted his statement but the retraction was not accepted by the Assessing Officer as the same was made after 42 days of the admission and the same is nothing but an afterthought under the influence of Dalmia family. He further submits that on enquiry from the transporters it was found that the silver utensils have never been transported from Calcutta to Delhi. The evidence gathered by the Assessing Officer proved that the trucks allegedly carrying silver from Calcutta to Delhi did not move through Varanasi and Ghaziabad Check Posts where all the records of all trucks passing through these check posts are maintained by UP Trade Tax Authority. The statement of Sri J.K. Sharma, Proprietor of J.K. Camera shows that he never transported silver utensils to Delhi and the report of U.P. Trade Tax Authority that the trucks engaged by M/s. Road Transport Corporation (RTC) for carrying silver utensils to Delhi never passed through Naubatpur and Ghaziabad check posts, clearly established tha....
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....tage. Therefore, the alleged sale proceeds of silver is nothing but unexplained credit in the hands of the assessee. The Ld. Departmental Representative further submits that the Ld. CIT(A) without appreciating the evidences found and recorded by the Assessing Officer deleted the addition made by the Assessing Officer on the basis of the remand report and the Tribunal's orders in other cases of this group. He, therefore, submits that the addition made by the Assessing Officer of Rs. 3,46,83,900 be restored. 6. On the other hand, Ld. Senior Advocate Sri R.N. Bajoria appearing for the assessee submits that the assessee under the Voluntary Disclosure Scheme, 1997 made disclosure of undisclosed income amounting to Rs. 1,02,25,288 and paid a sum of Rs. 30,67,556 as tax thereon. The undisclosed income so declared was represented by silver utensils (5,155.700 kgs.), diamonds (1261.75 cts.), gold bars (7.585 kgs.) and household goods, appliances, watches, etc. The said voluntary disclosure was duly accepted and a certificate relating to the same was issued. It may be stated that more or less similar disclosures under the said Voluntary Disclosure Scheme were made by the three related....
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....utensils is allowable as capital loss. 6.3 The Assessing Officer rejected the claim of the assessee that the silver utensils disclosed by the assessee had been sold at Delhi and held that the amount credited in his accounts as sale proceeds of the silver utensils was in fact the undisclosed income of the assessee which found its way through Delhi silver merchants. The department made extensive searches at the premises of the assessee and his other connected relatives, transporters who had transported the silver utensils, the places of the silver merchants who had sold the silver utensils and paid the proceeds thereof to the assessee. Search was also made at the premises of the Valuer, who had made valuation of the silver utensils before the disclosure was made by the assessee. According to the department the Valuers never saw the silver utensils and only obliged the assessee by giving the valuation report; the goods were never transported to Delhi as records of one of the check posts did not show passage of the truck carrying the silver utensils; the shops of the silver merchants were too small to accommodate such huge quantity of the silver utensils; the quantity of such utensi....
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.... further urged by the Ld. Departmental Representative that the statement of Shri Kothari had been retracted after about 42 days and that such retraction should not be accepted. However, the fact that such statement was retracted by Shri Kothari within 6 days and not 42 days and that his brother Ram Prakash Kothari at the time of the search itself under section 132(4) had asserted that the silver utensils were physically seen and valued by them were not controverted. Furthermore, the remand report itself which was sent by the Assessing Officer through the Additional CIT to the Ld. CIT(A) accepted that the retraction of the statement by Shri R.K. Kothari was within 6 days and appears to be acceptable. Furthermore, the valuer had no role to play in the subsequent transportation of the disclosed silver utensils to Delhi or their sale at Delhi. The role of the valuer was confined only to the valuation made for making the declaration under the Voluntary Disclosure Scheme. As stated earlier the correctness of such disclosure has not been disputed and accordingly, apart from the fact that in the remand report the retraction statement of Shri Kothari is taken as acceptable there is nothing ....
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....be stored in about 170 cubic feet i.e., an area of 6' X 6' X 5'. 6.8 With regard to one of the alleged statement of the transporter on which reliance was placed in the order of assessment and also at the hearing of the matter by the Learned Departmental Representative it was pointed out by the Ld. Counsel for the assessee that the transporter never stated in his statement that the goods were not transported and further the statement itself was obtained in course of search under threat and coercion to him and his family members. At the hearing, reliance was sought to be placed about retraction of the statement by one of the transporter namely Mr. Sharma. In the order of assessment the Assessing Officer had observed that Mr. Sharma had stated that he did not transport the silver utensils. However, Mr. Sharma denied having made such a statement and that fact was found to be correct by the Assessing Officer in the remand report. The further fact that in the order of assessment the Assessing Officer has not dealt with or referred to the statements which supported the case of the assessee is very much evident from the remand report. It was further pointed out that the mone....
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....t vide 5th new para appearing at internal page 4 of the remand report at page 167 of the assessee's paper book reproduced in para 8 of this order. 6.11 He further submits that the silver merchants were also examined, their places were searched, no incriminating document was found, they confirmed the purchase, the fact that they were not retailers having showrooms selling the silver utensils as such but were dealing in old silver-utensils as bullion after melting has all been accepted in the remand report. Vide eighth new para of page 6 of the remand report appearing at page 169 of the paper book it has also been accepted that there was nothing on record to show that any cash was paid by the assessee to the silver dealers. All the purchasers are income-tax assessees and their records were verified. Such transactions of purchase and sale were disclosed by such purchasers in their sales-tax assessments. Payments were made by them by bank drafts/cheques to the assessee. Since they are not retailers they do not have showrooms or big places for storing the articles and they deal in them as bullion after melting are on record and have not been controverted by the department. Transa....
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....dequate evidence. As would appear from the facts already submitted that the assessee has substantiated his claim and it has also been so accepted in the remand report sent by Assessing Officer through Addl. C.I.T. In the circumstances the mere reliance on the aforesaid decision bereft of the facts on record is entirely misplaced. 6.13 He, therefore, submits that the order passed by the Ld. CIT(A) relying on the remand report and the ITAT decisions in other group cases be upheld. 7. In the rejoinder, the Ld. Departmental Representative while relying on his earlier plea further submits that he does not want to say anything on the remand report and he still relying on the impugned assessment order and the additions made therein; 8. We have carefully considered the rival submissions of the parties and perused the material available on record. We find that, at the outset, it is necessary to mention that the Ld. CIT(A) while hearing the appeal has directed the Assessing Officer to submit the remand report on the written submissions filed by the assesses before the Ld. CIT(A). The Assessing Officer in pursuant to the Ld. CIT(A)'s letter dated 1-10-2001 has submitted the reman....
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....port for the balance without actually weighing or seeing the same. Shri Kothari filed a letter of retraction dated 29-2-2000 before the DDIT and the DDIT recorded his statement under section 131 on 14-3-2000 in which Shri Kothari stated that the earlier statement recorded on 18-1-2000 was under duress and coercion and that he had actually seen and weighed the entire silver utensils of about 30 tonnes. The Assessing Officer discussed this retraction before DDIT and came to the conclusion that the same was not acceptable because (i) Shri Kothari was closely associated with Dalmias, (ii) his statement under section 132(4) was recorded on oath in presence of Shri V.P. Garg C.A. and (iii) that the retraction was made after 42 days of the original statement. 10. The assessee has now pointed out that Shri Kothari retracted his statement by an affidavit affirmed before the Metropolitan Magistrate on 24-2-2000 i.e., only six days after the original statement and that the copy of the same was filed before the Assessing Officer at the time of another deposition under section 131 taken by the Assessing Officer on 8-2-2001 i.e., before the date of passing of the assessment order. It is....
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....nsils were not transported by RTC. The assessee has also referred to the affidavits dated 2-2-2000 affirmed by Shri Trilok Agarwal and his wife Smt. Reena Agarwal before the Metropolitan Magistrate, which were filed with the Assessing Officer on 22-2-2001 and claimed that the affidavits would show the manner in which the statements were obtained, enquiries were conducted and searches were made by the Investigation Wing. The assessee has also claimed that in its reply dated 9-3-2001 to notice under section 133(6) RTC confirmed having transported assessee's silver utensils in Delhi and that delivery charges receipts for Rs. 10 will conclusively prove that the silver utensils were delivered to the consignees. Copies of the delivery charges receipts have been filed in the paper book. 16. It is apparent from the assessment order that there is no discussion regarding these affidavits. Shri Trilok Agarwal in his affidavit stated that his reply was not properly recorded in the statement under section 132(4). However, it is apparent from that statement that Shri Trilok Agarwal did not state that the silver utensils had not been transported by RTC. On examination of the records ....
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....2-1-2000 i.e., the next day of search. The assessee has also referred to the replies of Shri Sharma against Question Nos. 10 & 11 of the statement under section 132(4) dated 21-1-2000 in support of claim of recording the statement under pressure. The assessee has also claimed that the statement was wrong and written by the officer himself. The assessee has further claimed that another statement of Shri Sharma was recorded on 15-2-2001 by the Assessing Officer himself and in that Statement he confirmed that he transported the Silver Utensils for the Dalmia Family and also that his earlier statement dated 21-1-2000 was wrong. 20. It is seen from the records that another statement of Shri Sharma was recorded on 15-2-2001 under section 131 by the Assessing Officer and in reply to question No. 5, Mr. Sharing confirmed having transported the silver utensils. He also stated that in his earlier statements dated 6-9-1999 and 9-9-1999 recorded under section 131, he confirmed the transportation and also stated that his statement on 21-1-2000 was taken after grilling and forcing him to sign the statement. It is also apparent from the Assessment Order that the matter of letter written ....
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....s drawn. 26. The assessee has further claimed that the purchase vouchers and receipts of Dharmakantas for weighing of silver at Delhi before sale vide paper book page Nos. 129 to 159 clearly prove that the silver utensils were in fact transported to Delhi and were received by the purchasers. It is seen from the records that Shri N.P. Dalmia in reply to question No. 9 in statement under section 131 dated 13-3-2001 before Assessing Officer stated as under: 'Yes. The goods were received by the silver dealers in Delhi who make the payment of delivery charges to transporter against each consignment. Some of the Xerox copies of money receipt are produced for your perusal. Further the silver utensils in Delhi were also weighed in "Dharmakanta" for which they issued receipt which has been impounded by our D.D.I.T. and might have reached you. Thereafter the silver utensils were sold and payments were made to us by cheque, demand draft which are credited in our account.' 27. It is apparent that no cross verification was made in respect of Dharmakanta receipts which were impounded by Assessing Officer. Shri N.P. Dalmia's statement in this regard was also....
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....o obtain the accommodation entries on the basis of observations made by him in the assessment order. The records were verified and no direct evidence in this respect is found. It may be mentioned in this connection that searches were also conducted in the cases of jewellers and no direct evidence in this regard was found. It is therefore, apparent that the Assessing Officer came to the conclusion on the basis of some statements and enquiries which have been mentioned in the assessment order itself. Regarding the assessee's claim that there was no direct evidence to show that the cash deposited was not the sale proceeds of silver utensils purchased by the jewellers from the assessee, there is nothing on records to show that their sales have been disproved. As mentioned above the assessee has already filed the copy of assessment order of Sri Shri Prakash Kabra, Proprietor of M/s. Shree Enterprises one of the purchaser and there is no adverse finding by the Assessing Officer concerned in this respect. 33. Facts uncontrovertible and uncontroverted: 33.1 The assessee has claimed 7 facts to be, uncontrovertible and uncontroverted. Those facts and comments against th....
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....nds (775.60 + 454.45 + 31.70 Cts.) Rs. 55,85,255 3. 1987-88 Gold Bars 24 Cts. 7.585 Kgs. Rs. 19,49,345 4. 1994-95 Household goods, appliances, watches, cosmetics Rs. 3,50,000 Total Rs.1,02,25,288 Tax Paid Rs. 30,67,586 The above declaration was accepted by the Ld. CIT vide certificate dated 18-8-1997 issued under section 68(2) of the VDIS, 1997. We further find that vide Circular No. 754, dated 10-6-1997 reported in (1997) 226 ITR 8 (Statutes) in answer to question No. 16 it has been clarified by the CBDT that in respect of jewellery if it has been acquired prior to 1-4-1987, the value will be taken as on 1-4-1987, as certified by valuer. Accordingly, the assessee got the valuation of jewellery from registered valuer Sri R.K. Kothari and filed the valuation report along with the VDIS declaration. The Ld. Commissioner after verifying the same has issued the certificate under section 68(2) of the VDIS, 1997. We further find that despite the fact that the Ld. CIT has issued certificate under section 68(2) of the VDIS, 1997 on the basis of the disclosure made by the assessee, supported by valu....
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....the Assessing Officer that the trucks carrying silver from Calcutta to Delhi did not move through Varanasi and Ghaziabad check posts as there is no such record to show that such trucks were actually passed through these check posts, we find that in the remand report the Assessing Officer has examined the matter- again and observed that the trucks cannot reach from Calcutta to U.P. on the same day vide para 30 of the remand report reproduced in para 8 of this order. 13. With regard to the Assessing Officer's observations that the enquiries from the jewellers of Delhi to whom the alleged goods were stated to be sold revealed that they have given the accommodation entries to Dalmia group by showing fictitious purchases of silver utensils as huge amount of cash has been deposited on or just before the date of issue of the cheque, bank accounts were opened during the operation of VDIS to accommodate the Dalmia group, the turnover during the period was found to be unrealistically high, the jewellers could not furnish the particulars of parties to whom the silver were sold and the sale proceeds were received in cash and no details could be furnished as to the names and addresses of....
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....the above discussions, the following points emerged in favour of the assessee. (a) The silver utensils were properly disclosed under VDIS, 1997 and accepted by the Income-tax Department. (b) The silver utensils were handed over to Road Transport Corporation and J.K. Carriers in Calcutta. (c) Both the said Road Transport Corporation and J.K. Carriers are "Common Carrier" within the meaning of "The Carrier Act, 1865". (d) The silver was delivered by the said common carrier to the consignee at the destination in Delhi. (e) The consignee has confirmed having received the silver utensils through the said common carrier. (f) On search no silver utensils as disclosed in VDIS'97 were found with the appellant. (g) The appellant was not confronted with any evidence to establish that the cash deposited by jewellers at Delhi in their Bank Accounts belonged to Dalmia and in fact there is no evidence to show that the cash deposited was not the sale proceeds of the silver utensils." 16.1 The above order of the Tribunal has been followed in other two cases of this group as referred in para 15 of this order hereinabove. 17. As....
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....e Ld. Departmental Representative it has been held at page 808 as under: "...Having regard to the conduct of the appellant as disclosed in her sworn statement as well as other material on record an inference could reasonably be drawn that the winning tickets were purchased by the appellant after the event. We are, therefore, unable to agree with the view of the Chairman in his dissenting opinion. In our opinion, the majority opinion after considering the surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winnings from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably and that the finding that the said amounts are income of the appellant from other sources is not based on evidence." 19.1 Whereas in the case of the assessee no contrary material was brought on record by the revenue to show that the silver utensils were not existed or the certificate issued by the Ld. CIT under section 68(2) was cancelled or withdrawn or the findings given in the remand report by the Assessing Of....
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....eated as a device for avoidance of tax irrespective of legitimacy or genuineness of the act; an inference which unfortunately, in our opinion, the Tribunal apparently appears to have drawn from the enunciation made in McDowell's case (1958) 154 ITR 148 (SC). The ratio of any decision has to be understood in the context it has been made. The facts and circumstances which lead to McDowell's decision leave us in no doubt that the principle enunciated in the above case has not affected the freedom of the citizen to act in a manner according to his requirements, his wishes in the manner of doing; any trade, activity or planning his affairs with circumspection, within the framework of law, unless the same fall in the category of colourable device which may properly be called a device or a dubious method or a subterfuge clothed with apparent dignity.' Their Lordships have further observed at page 762 as under: "If the court finds that notwithstanding a series of legal steps taken by an assessee, the intended legal result has not been achieved, the court might be justified in overlooking the intermediate steps, but it would not be permissible for the court to ....
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....ourts have held that the assessee has to prove three conditions: (1) identity of the creditor, (2) capacity of such creditor to advance money, and (3) genuineness of the transactions. If all the aforesaid three conditions are proved, the burden would shift on the revenue to prove that the amount belonged to the assessee. It has been held by the various High Courts that the assessee cannot be asked to prove the source of source or the origin of origin of deposit". 27. In the case of CIT v. Orissa Corpn. (P.) Ltd. [1986] 159 ITR 78, the Hon'ble Apex Court observed as follows: "In this case, the assessee had given the names and addresses of the alleged creditors. It was in the knowledge of the revenue that the said creditors were income-tax assessee. Their index numbers were in the file of the revenue. The revenue, apart from issuing notices under section 131 at the instance of the assessee, did not pursue the matter further. The revenue did not examine the source of income of the said alleged creditors to find out whether they were creditworthy or were such who could advance the alleged loans. There was no effort made to pursue the so called alleged creditors. In thos....