TMI Blog2005 (6) TMI 240X X X X Extracts X X X X X X X X Extracts X X X X ..... ered into an agreement with M/s. India Explosives Ltd. that the trading items of the principal company be supplied at Udaipur. The vans owned by the assessee were used for getting goods from Udaipur to Gomia in Bihar. The vans so used for delivering goods should be unloaded at Udaipur and empty vans should be sent to Bihar for obtaining the consignment. In short, the vans should not be used for getting other goods while sending and bringing the goods from Gomia to Udaipur. The principal company bore the cost of the whole transportation expenses to and fro. 4. Summons were issued under section 131 to the partners of the assessee-firm, namely Shri Pradeep J. Mashru and Shri Harilal T. Mashru. During the course of statement under section 131, Shri Harilal T. Mashru, being the Managing partner, admitted on 18-12-1998 that the assessee's vans were used for carrying goods to various places while sending it for bringing consignment goods. A chart as per Annexure A to the assessment order was prepared and brought to the notice of the assessee regarding the use of assessee's vans and amounts charged for such transportation. As per this chart, the assessee had charged a total sum of Rs. 5, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... have been placed in the PB. Statement of Shri Pradeep J. Mashru was recorded on 21-12-1998. In the exhaustive statement, it was agreed vide answer to Question No. 33 at PB page 86 that the perusal of the four books revealed that the vehicles belonged to the assessee. He expressed ignorance about details. In response to Question No. 46 at PB page 89, when the Assessing Officer invited the attention of the partner to the fact that the books indicted the assessee had received transportation charges at Rs. 5,98,440 in the assessment year 1996-97, Rs. 3,58,785 in the assessment year 1997-98, Rs. 4,06,513 in the assessment year 1998-99 and Rs. 28,715 for assessment year 1999-2000, it was conceded by the partner that he was ready to offer the amount of Rs. 5,98,440 in the assessment year 1996-97 as income, subject to no penalty under section 271(1)(c) of the Act and no prosecution. The statement of the other partner, namely, Shri Harilal T. Mashru was recorded on 17/18-12-1998. Vide Question No. 2 at PB page 105, he agreed to surrender the abovesaid sum for assessment year under consideration subject to no penalty and no prosecution. In response to Question No. 3, at page 106 of the PB, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusively prove that the statement was obtained by the authorities under coercion, it can justify retraction. But where the assessee agrees to an addition on factual aspects of the matter, the denial coming long thereafter cannot be accepted on mere assertion of the assessee. Reverting back to the facts of the present case, it is found that as an admitted position that the two partners of the assessee-firm agreed for surrender of the above referred sum on two different dates with the condition of non-imposition of penalty under section 271(1)(c) and non-initiation of any penalty proceedings. The assessment was completed accordingly. No objection was raised at any time either before the Assessing Officer or his superiors, namely Commissioner of Income-tax with regard to the extracted surrender, as alleged. It was only during the appellate proceedings before the first appellate authority that the assessee came out with a version of its non-liability to be taxed on the said sum. The ld. CIT(A) promptly acted to accept the assessee's stand and deleted the addition without considering that the retraction made in the appeal proceedings was not based on sound footing. At this juncture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the date of survey had not been mentioned anywhere, either in the assessment order or in the appellate order. 3. The undisputed facts of the case are that no statement as could have been recorded or would have been recorded by the department, of the partners of M/s. Pooja Roadlines, was ever brought on record. It is also an undisputed fact that the assessment records or assessment orders in the case of M/s. Pooja Roadlines for the year under consideration were the best available evidence on record, which could prove the allegations in question against the assessee have not been brought on record. The vans owned by the assessee were used for bringing the goods from Gomia in Bihar to Udaipur in Rajasthan. These vans were required to be unloaded at Udaipur and empty vans were to be sent to Bihar for obtaining the consignment. So, as per the assessee, these vans were not used for carrying other goods while sending or bringing the goods from Gomia to Udaipur. The statements of the two partners, namely, Shri Pradeep J. Mashru and Shri Harilal T. Mashru of the assessee-firm were recorded under section 131 of the Act on different dates. These partners surrendered a sum of Rs. 5,98, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of non-levy of penalty under section 271(1)(c) of the Act or of launching of any prosecution, this partner stated that the transportation charges of Rs. 5,98,440. Similarly, the other partner Shri Pradeep J. Mashru, in his statement dated 21-12-1998 never admitted any receipt from plying of vans through M/s. Pooja Roadlines and such an admission for offering of receipts for taxation was made almost under similar circumstances on the next day. It is evidently clear from the above that nowhere these partners have admitted about the receipts from transportation charges having been received by plying their vehicles through M/s. Pooja Roadlines. The conditional offer for taxation of income as above, cannot be stated to be with reference to specific material/evidence about transportation charges worked out by the Assessing Officer as per Annexure A to the assessment order. The statements of Shri Kataria of M/s. Pooja Roadlines and the details of vans allegedly used by the assessee were not placed or confronted to the partners while recording their statements. So, the submission of ld. A.R. that this surrender was obtained under pressure assumes colossal importance in the light of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made and sustained merely on the basis of offer of such income for taxation wherein conditional statement was recorded under section 131 of the Act without making any reference to any specific source of income and their transactions as these statements cannot be equated with the statements recorded under section 132(4) of the Act. Moreover, any material gathered at the back of the assessee cannot be utilized against it without providing proper opportunity and without providing copies thereof. Reliance can be placed on the decision of the Hon'ble Rajasthan High Court in 134 ITR 19 (sic) wherein it has been held that any statement taken on the basis of papers which were not shown or copies which were not given could not be legal. In this case, the particulars of GH [Goods Received], etc. were not provided to the parlners/assessee. 7. One more important factor in this case is that vans used by the assessee are specifically manufactured which can transport explosives which are permitted to be used for such transportation only and not for any other goods. It would have been better if the department could have proved that M/s. Pooja Roadlines had transported such explosives and it h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifference of opinion under section 255(4) of the Income-tax Act, 1961 on the below given question: "Whether on the facts and in the circumstances of the case, the ld. CIT(A) was justified in deleting the agreed addition of Rs. 5,98,440 on the basis of subsequent retraction?" THIRD MEMBER ORDER Per M.A. Bakshi, Vice-President. - This appeal by the revenue for assessment year 1996-97 was heard by the Division Bench of the Tribunal. As a result of difference of opinion amongst the Members of the Bench, the Hon'ble President has nominated me for a decision on the point of difference, which was identified by the Bench as under:- "Whether on the facts and circumstances of the case, the Commissioner of Income-tax (Appeals) was justified in deleting the agreed addition of Rs. 5,98,440 on the basis of subsequent retraction." 2. I have heard the parties and perused the records. The assessee has filed an application for reframing the point of difference arising out of the respective orders of the Hon'ble Members of the Bench. According to the learned counsel for the assessee, the point of difference identified by the Hon'ble Members may not bring out the actual point of difference b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer, they had agreed to the addition on the basis of challans, notwithstanding the fact that they had specifically stated that no income was earned from M/s. Pooja Roadlines, Udaipur. It was pointed out that M/s. Pooja Roadlines, Udaipur is not authorized to deal with explosives. On the other hand, the assessee-firm is authorized to deal with explosives and the vehicles owned by them are specifically designed to transport the explosives, exclusively and that the said vehicles are not used for any other purpose. Since M/s. Pooja Roadlines, Udaipur was not authorized to deal in explosives, the assessee was not having any chance of having transported the explosives for M/s. Pooja Roadlines, Udaipur. Inviting my attention to the statement of the partners of the assessee-firm as well as the statement of one of the partners of M/s. Pooja Roadlines it was pointed out that they have denied any knowledge of transportation of goods by the vehicles owned by the assessee or the sister concern. The partner of M/s. Pooja Roadlines, Udaipur had also stated that they are not known to the partners of the assessee-firm and whatever goods had been transported were on account of contact w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... el relied upon the decision of the Jurisdictional High Court in the case of CTO v. Kewalram Sumnomal Cavanduspur [1994] 92 STC 629 (Raj.). 4. It was further contended that the basis for deleting the addition made by the learned Commissioner of Income-tax (Appeals) is that out of the five vehicles, three are not owned by the assessee. This has been verified from the records and the revenue has neither claimed nor furnished evidence to dispute the finding recorded by the Commissioner of Income-tax (Appeals). The two vehicles are owned by the assessee but as per the finding of the Commissioner of Income-tax (Appeals), such vehicles were leased out to sister concern, namely, M/s. Jagat Transport and they have reflected the income derived from the said vehicles in their books of account. The assessee has reflected the lease rent of Rs. 1,26,000 received from the sister concern in respect of two vehicles owned by the assessee. The income from lease rent has been assessed separately by the Assessing Officer in the hands of the assessee. It was further contended that the Assessing Officer has not found any entries in the books of account of M/s. Pooja Road Lines, Udaipur for having made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anduspur [1994] 92 STC 629 (Raj.) and that of the Jodhpur Bench of the Tribunal in the case of Maheshwari Industries. Asstt. CIT [2003] 81 TTJ (Jodh.) 914 to support the contention. 6. It was further contended that the addition based purely on the statement of the assessee is not binding insofar as the assessee has been able to establish that no such income was earned and the statement was retracted at the earliest opportunity, by way of appeal to the Commissioner of Income-tax (Appeals). It was further contended that the assessee had discharged the burden cast upon it and the finding of fact recorded by the Commissioner of Income-tax (Appeals) had not been rebutted by the revenue. On the other hand, the assessee had discharged the burden of establishing the fact that out of five vehicles, three are not owned by the assessee and the other two vehicles had been leased out and as such, there was no question of assessee having earned any income by way of transportation of material from M/s. Pooja Road Lines, Udaipur in the year under appeal. It was accordingly pleaded that the view expressed by the learned Judicial Member may be followed in preference to the view expressed by the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and his grandson, another partner of the firm, namely Shri Pradeep J. Masru had been called by the Assessing Officer together on 17-12-1998 for recording the statement. On 17-12-1998, the statement of Shri Harilal T. Masru was recorded but could not be completed. The recording of his statement was completed on 18-12-1998. 19th 20th December, 1998 being Saturday and Sunday, on 21-12-1998, Shri Pradeep J. Masru had again been called and his statement was recorded but not completed. Recording of his statement was concluded on 22-12-1998. The Assessing Officer completed the assessment on 24-12-1998 i.e., just two days after the completion of the recording of the statements. The Assessing Officer had made an addition of Rs. 5,98,440 on the basis of evidence found in the course of survey in the case of M/s. Pooja Road Lines and on the basis of surrender made by two partners of the assessee-firm. On receipt of the assessment order after a gap of about 3 months, the assessee filed appeal to the Commissioner of Income-tax (Appeals) challenging the addition made by the Assessing Officer of Rs. 5,98,440. The Commissioner of Income-tax (Appeals) has deleted the addition by the impugned order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al that the statement of the appellant partner were made suo moto and there had been no inducement, threat or coercion at the time of making the disclosure under section 132(4) of the Income-tax Act is, however, affirmed." 12. In the case of Pullangode Rubber Produce Co. Ltd., Their Lordships of Supreme Court held that an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and that it is open to the person who made the admission to show that it is incorrect. 13. In the case of CIT v. M.R.P. Firm [1965] 56 ITR 67, Their Lordships of Supreme Court held as under:- "The doctrine of 'approbate and reprobate' is only a species of estoppels; it applies only to the conduct of parties. As in the case of estoppels, it cannot operate against the provisions of a statute. If a particular income is not taxable under the Income-tax Act, it cannot be taxed on the basis of estoppels or any other equitable doctrine. Equity is out of place in tax law; a particular income is either exigible to tax under the taxing statute or it is not. If it is not, the Income-tax Officer has no power to impose that on the said income." 14. In the case of Shri Kris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion made was on wrong premises or mistaken notion of law or facts. 18. Now, let me apply the above principle of law to the facts of this case. The basis for the addition of Rs. 5,98,440 made by the Assessing Officer is (a) Challan Books found from the premises of M/s. Pooja Road Lines which indicated that the goods belonging to M/s. Pooja Road Lines had been transported by five vehicles for which an aggregate amount of Rs. 5,98,440 was paid. Vehicle Numbers as per the challans areas under:- (i) RJ-27-G-0871 (ii) RJ-27-G-0781 (iii) RJ-27-G-0686 (iv) RJ-27-G-1890 (v) RJ-27-G-1871 The name of owner of vehicles is indicated as 'Jagat Explosive' i.e., the assessee. 19. Two of the partners of the firm in the course of recording of their statements were confronted with the information gathered from M/s. Pooja Road Lines in the course of survey at the latter's premises. The partners are stated to be Gujaratis and this claim has not been disputed by the Revenue Authorities. The statement of the partners had been recorded in Hindi. The questions put to the partners are about 50 in number. A perusal of the statement recorded by the Assessing Officer indicates that the partner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus in a particular case has been discharged or not. It all depends on the facts and circumstances of each case. In some cases, the onus may be heavy whereas, in others, it may be nominal. There is nothing rigid about it. Herein the assessee was receiving some income. He says that it is not his income but his wife's income. His wife is supposed to have had two lakhs of rupees neither deposited in banks nor advanced to others but safely kept in her father's safe. Assessee is unable to say from what, source she built up that amount. Two lakhs before the year 1940 was undoubtedly a big sum. It was said that the said amount was just left in the hands of the father-in-law of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that case. If he has failed to prove that case, as we think it to be so, and in the absence of any other alternative case pleaded by him, it follows as a matter of course that the consideration for the sale passed from him. Science has not yet invented any instrument to test the reliability of the evidence placed before a court or Tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. Human minds may differ as to the reliability of a piece of evidence. But in that sphere the decision of the final fact finding authority is made conclusive by law." 21. The said view has again been reiterated by the Hon'ble Supreme Court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801. We now proceed to consider the issue in the light of aforementioned principle of law laid down by the Hon'ble Supreme Court. It has already been pointed out that the statements of the partners were recorded between 17-12-1998 to 22-12-1998 and the assessment was completed on 24-12-1998. The assessee did not make any complaint to any Income-tax Authority against the surrender having been extracted by coercion or under duress. This is a str ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this. Q.12. What kind of work is being done by the partners and what salary is being received by the partners? Ans. My grand-father Shri Harilal T. Mashru is doing finance work and also doing policy determination matters. Myself is doing daily general work of office and also doing sales marketing work. My wife Smt. Gitanjali is a sleeping partner. My father Shri Jagat Mashru and my aunty Smt. Sheela R. Mashru both are non-working partners. What salary is being received by the partners, that was shown in the Balance Sheet by us. Q.14. What kind of business is doing by Jagat Explosive and from when? Ans. Right from the beginning, M/s. Jagat Explosive is doing trading work in Explosive and this is doing trading work from ICI (India) Ltd., Gomia (Bihar) right from the beginning. Goods is being order by M/s. Jagat Explosive from ICI (India) Ltd. and 2.5 per cent basis commission and additional commission is received by us and on being target completed, 5 per cent additional commission is also received by us on above amounts. Q.18. What kind of agreement is between you and company for supply of goods of ICI (India) Ltd. (licence holder) in market? Ans. Copy of this agreeme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the name of M/s. Jagat Explosive (M/s Pooja Road Lines), this amount is being offered by me for tax as income. This statement is being given by me on the condition of not being conducted any type of proceedings and to help of Income-tax Department and not being imposition of penalty under section 271(1)(c) and not being conducted the prosecution. Q.47. In which house you are residing, that house of M/s. Jagat Explosive and which expenditure incurred on account of electricity, water, telephone, etc. on the partners, in this amount, some amount has been incurred by M/s. Jagat Explosive and except this, you have got depreciation by total rate on building, do you want to say something in this regard? Ans. In this regard, I want to say that in the above question No. 46, what answer has been given, on those conditions, in assessment year 1996-97, Rs. 5,00,000 on account of household expenses is being offered for tax and for this, half of the depreciation may kindly be disallowed. Except this, I want to say that for assessment years 1997-98, 1998-99 and 1999-2000, I do not want to say anything at this time. Alter some time I tell you after seeing. The decision which will be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the conduct of the assessee does not demonstrate that the Assessing Officer was guilty of recording the statement of the partners of the firm under duress or under any sort of pressure. 23. In the light of above finding that the statement was not recorded under duress, the question that requires to be considered is as to whether the addition made by the Assessing Officer was valid in the eye of law. As pointed earlier, the Assessing Officer had collected the evidence from M/s. Pooja Road Lines in the form challan books in which the name of the assessee, particulars of vehicles and the names of the drivers were indicated alongwith payments made. After collection of the said evidence, the Assessing Officer had two options, one is to confront the assessee and find out the correctness of the evidence collected by the Assessing Officer. If the assessee admitted the correctness of the evidence or agreed to be assessed in respect of the income shown to have been paid, then no further-enquiry would be required to be made by the Assessing Officer. On the other hand, if the assessee had denied the receipt from M/s. Pooja Road Lines or had not agreed to pay income-tax in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n law be assessed in the hands of the assessee. The revenue has not disputed the ownership) of the vehicles by the sister concern of the assessee. The sister concern is owned by the family members. The constitution of the assessee firm and that of the sister concern has been indicated in para 3 of this order from which it is evident that there are no outsiders in the sister concern of the firm. So however, the sister concern being separately assessed to tax and the vehicles in respect of which the income is stated to have been derived could in law be assessed in the hands of the sister concern and not in the case of the assessee. Therefore, on that ground, the income referable to the vehicles owned by the sister concern and not by the assessee has got to be excluded from the assessment in the case of the assessee. To that extent I agree with the conclusion of the learned Judicial Member though on a different ground. 26. In regard to the income relating to two vehicles which are owned by the assessee, the claim was made for the first time before the Commissioner of Income-tax (Appeals) that these vehicles have been leased to the sister concern and, therefore, the assessee had no c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led with the surrender made by the partners of the firm. It may be pertinent to mention that the claim made by the assessee that the partners might have transported the goods without the knowledge of the assessee and appropriated the income has not been established by the assessee. The claim made by the assessee was required to be established as the drivers were under the control of the assessee and they could have been produced before the Assessing Officer to establish the claim. In the case of CIT v. Smt. Krishnaveni Ammal [1986] 158 ITR 826 at pages 829, 830 (Mad.), it was held "The law of evidence mandates that if the best evidence is not placed before the court, an adverse inference can be drawn as against the person who ought to have produced it." Therefore, in the light of the evidence collected by the Assessing Officer and surrender made by the partners of the firm, the income relating to the two vehicles owned by the assessee is assessable in the hands of the assessee. Though one of the partners, namely, Shri Pardeep is common in both firms and he had agreed to be assessed in respect of the three vehicles also, yet the income relating to the three vehicles not owned by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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