TMI Blog2004 (7) TMI 20X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions: "1. Whether the existence of 'reason to believe' which is sine qua non for validity of initiating reassessment proceedings under section 147/148 of the Act, can be solely established by the testimony of a hostile witness examined at the back of the assessee which is contrary to the evidence on record? 2. Whether the finding that the appellant had no materials to lease is so contradictory to the accepted position that the appellant was actually assessed on rental income for five years derived from the leasing of the very material, that it stands vitiated by itself? 3. Whether the uncorroborated testimony of a person who persistently fails to substantiate his testimony and fails to get himself cross-examined or even adduce any independent evidence to rebut the statement of the party affected by such a statement, deserves to be rejected outright and cannot be used as evidence against the party affected by such an uncorroborated testimony? 4. Whether the statement of Shri Manish Mehrotra, the alleged proprietor of M/s. Longman Industrial Enterprises was admissible in evidence? 5. Whether the Income-tax Appellate Tribunal did not err in law in confirming the reassess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arding reopening of the assessment as well as the addition of Rs. 51,75,000 which was allowed earlier in the regular assessment under section 143(3) of the Income-tax Act. In appeal before the Tribunal, the Tribunal has also affirmed the view taken by the Commissioner of Income-tax (Appeals). Learned senior counsel for the assessee, Mr. Sharma, has submitted that there are sufficient evidences which are brought on record by the assessee to prove the genuineness of the transaction regarding purchase of shuttering material from M/s. Longman Industrial Traders by the assessee and the Assessing Officer has merely relied upon the statements of Shri Manish Mehrotra, who is the proprietor of M/s. Longman Industrial Traders. He further submits that no opportunity was given to the assessee to cross-examine Shri Manish Mehrotra, therefore, the reopening as well as the addition made on the basis of the statements of Shri Manish Mehrotra is not justified. On the other hand, learned counsel for the Department, Mr. Mathur, submits that when the Assessing Officer has information in his possession that income assessed in the case of this assessee for the assessment year 1992-93 has escaped a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct, the assessed income was reduced to Rs. 1,74,030 vide appeal effect order dated October 31, 1995. During the course of investigation in the case of M/s. HCL Finance and Investment Ltd., the Assistant Commissioner of Income-tax, Company Circle 1(4), New Delhi, noticed that the assessee-company purchased wooden shutterings of Rs. 60 lakhs from M/s. Longman Industrial Traders, Proprietor Manish Mehrotra, New Delhi. When the matter was further examined and search was conducted on the residential premises of Shri Manish Mehrotra by Deputy DIT (Investigation) Unit-II, New Delhi, he confessed that he was issuing bills only without actual delivery of goods and the sale consideration was subsequently refunded in cash to the purchasers. He was to get the commission for providing just the name through this firm for transactions. He also admitted that he has provided bills to M/s. Raunaq Finance Ltd. as under: S.No. Name of party Bill Date Amount 1. M/s. Raunaq Finance Ltd. 132 5-3-1992 Rs. 51,75,000 In the assessment order for the assessment year 1992-93, it is discussed that the assessee had purchased wooden shutterings of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ituted relevant material for formation of the belief that the assessee's income had escaped assessment and notice under section 147 read with section 148 for reopening of the assessment is valid. In the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) the facts before their Lordships are that after completion of the assessment, subsequent information has been received from the officer assessing that company that its managing director had confessed that the company had not advanced any loan to any person during the period covering the date of cash loan. At p. 477 their Lordships observed as under: "From a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Income-tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to Shri Manish Mehrotra, proprietor of M/s. Longman Industrial Traders, and that has been encashed by Shri Manish Mehrotra. The case of the assessee is that he has purchased the shuttering material from M/s. Longman Industrial Traders through M/s. Unitech Ltd. and M/s. Unitech Ltd. admits this fact that he has received shuttering material from M/s. Longman Industrial Traders. So far as the payment is concerned, Shri Manish Mehrotra has not denied the payment but he stated that the cheque was deposited and the same amount has been withdrawn on the same date and cash has been returned to M/s. Raunaq Finance Ltd. after deducting one per cent, commission on that amount. When the Assessing Officer has issued the summons to M/s. Raunaq Finance Ltd. and to M/s. Unitech Ltd., none of them have produced any additional material that on what date the material has been delivered by M/s. Longman Industrial Traders and at what place. At the same time, Shri Manish Mehrotra, proprietor of M/s. Longman Industrial Traders, failed to appear, he simply sent the letter in reply, stating the fact what he has admitted in the statements at the time of the search. One Shri Satyender P. Singh, managing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial, it should be found out whether Manish Mehrotra has any factory to manufacture the shuttering material. No steps have been taken by the Income-tax Officer. Shri Manish Mehrotra is not prepared to come for cross-examination as he is not affected if tax is not paid by the assessee. The other side has produced the evidence regarding payment of Rs. 51,75,000 against shuttering material to Shri Manish Mehrotra. To safeguard the interest of the Revenue, the Assessing Officer should at least try to find out whether there is any factory of Shri Manish Mehrotra in Bhiwadi. He can depute his inspector to find out if there is any factory owned by Shri Manish Mehrotra. In fact, there is no factory owned by Shri Manish Mehrotra. How it is possible that Manish Mehrotra has supplied the shuttering material to M/s. Unitech Ltd. for M/s. Raunaq Finance Ltd. When, on the one hand, Shri Manish Mehrotra, who is the supplier of the shuttering material has stated in his statement at the time of the search as well as reiterated the same thing in reply to the notice by the Department, it is not proper to allow the depreciation on shuttering material claimed to have been supplied by Shri Manish M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thdraw the depreciation allowed in the original assessment, i.e., assessment under section 143(3) of the Act. Shri Sharma, learned counsel for the assessee, also brought to our notice that the lease money received against the shuttering material has been offered to tax and that has been assessed in the hands of the assessee. In case the transaction of shuttering material is not found genuine and if any lease money on account of this shuttering material has been received, the liberty is given to the assessee to put up his case and submit the relevant material before the concerned Assessing Officer to the effect that if any lease money on account of shuttering material in question has been assessed and if on scrutiny by the Assessing Officer, it is found that some lease money, which has been assessed is in relation to this shuttering material which has been supplied by M/s. Longman Industrial Traders and found bogus, to that extent relief should be given to the assessee. In the result, we set aside the order of the Tribunal and remit the matter back to the Assessing Officer to pass a fresh order on the basis of the material already available on record and other material which t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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