2003 (12) TMI 271 - AT - Income Tax

Additions To Income - Validity of proceedings initiated u/s 147 - Fresh assessment without allowing cross-examination - difference between the two Hon ble Members - Third member Order - Whether the Ld. Judicial Member is justified to confirm the order of the CIT(A) in confirming the additions made by the Assessing Officer or the Ld. Accountant Member is justified to set aside the order of the Ld. CIT(A) and restoring the matter again to the file of the Assessing Officer. HELD THAT - The learned Judicial Member was of the view that addition is required to be confirmed as the same was based on books of account and loose sheets submitted by the ex-accountant of the assessee. Merely because the ex-accountant was not cross-examined by the assessee the addition could not be deleted. The learned Judicial Member further observed that no action was taken by the assessee against the said accountant by filing any complaint against her if it was a fact that books of account were fabricated to harass the assessee. The learned Judicial Member further held that the bona fide of the assessee could be established by establishing that the trial balance and the books of account are bogus by giving some positive evidences and the said entries could not be held to be in genuine merely on the basis of denial by the assessee. Thus the learned Judicial Member confirmed the addition as also validity of re-assessment proceedings challenged before the Tribunal. The learned Accountant Member did not agree with the view taken by the learned Judicial Member on addition on merits. He was of the view that ex-accountant had fabricated the books of account for harassment for reasons best known to him. According to the learned Accountant Member the learned CIT(Appeals) should have dealt with the issue raised before him in a more practical manner by trying to derive balance sheet or profit and loss account from the trial balance prepared by the Assessing Officer. The learned Accountant Member did not agree with the learned Judicial Member that the assessee was required to establish her bona fides by giving some positive evidence and that entries could not be held to be in-genuine merely on the basis of denial by the assessee. Thus the learned Accountant Member in the interest of justice set aside the order of CIT(Appeals) and restored the matter to the file of the Assessing Officer. Third member Order - The books of account were being relied upon and used by the Revenue against the assessee. It was revenue s evidence who wrote the books of account was well within knowledge of the revenue. If cross examination of the author or writer of the books was to be carried it was to be done by the assessee and so called witness was to be produced by the revenue. Above facts which are basic were rightly appreciated by the learned CIT(A) and appropriate directions issued. Inspite of finality of above directions these were not properly appreciated nor complied with. Having regard to above facts appellate authorities should have passed appropriate orders advancing cause of justice. Several opportunities having already been granted to the revenue to prove the case further opportunity was quite unnecessary. Yet granted again and again. As a Third Member my jurisdiction in the case is very limited. I have to agree with one of the proposed order of the Members so that there is a majority to dispose of the case in accordance with law in terms of section 255(4) of the Income-tax Act. Thus I agree with the course adopted by the learned Accountant Member. There is absolutely no question of holding that addition in this case made without establishing that assessee was carrying on drugs business or that it had business of such a high magnitude it is not possible to confirm the addition. The remand of the matter to the Assessing Officer has to be accepted in the circumstances stated above. Majority decision - The Hon ble President of ITAT as Third Member has in his order concurred with the conclusion of the Ld. Accountant Member to set aside the order of the Ld. CIT(A) and restore the matter to the file of the Assessing Officer. The appeal filed by the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Validity of proceedings initiated u/s 147.
2. Fresh assessment without allowing cross-examination.
3. Addition of Rs. 51,61,420 as unaccounted capital.
4. Addition of Rs. 21,11,392 as profit from Drug Account.
5. Addition of Rs. 1,74,741 as profit from Iron & Steel Company.
6. Interest charged u/s 139(8) and 217(1)(a).

Summary:

1. Validity of Proceedings Initiated u/s 147:
The Tribunal upheld the validity of the proceedings initiated u/s 147, stating that the Assessing Officer had prima facie reason to believe that there was an escapement of income based on the books of account and other information received from an ex-accountant of the assessee.

2. Fresh Assessment Without Allowing Cross-Examination:
The Tribunal noted that the ex-accountant who provided the books and loose sheets was not traceable, and thus, the assessee could not cross-examine him. However, it was held that the inability to cross-examine the ex-accountant was not sufficient ground to delete the additions made by the department.

3. Addition of Rs. 51,61,420 as Unaccounted Capital:
The Tribunal observed that the assessee failed to provide positive evidence to establish that the entries in the books of account were fabricated. The assessee did not take any action against the ex-accountant, which could have supported her claim. Therefore, the addition of Rs. 51,61,420 was confirmed.

4. Addition of Rs. 21,11,392 as Profit from Drug Account:
The Tribunal agreed with the CIT(A) that the existence of secret income was established based on the evidence received from the informant. The assessee's mere denial without any corroborative evidence was insufficient to challenge the addition. Thus, the addition of Rs. 21,11,392 was confirmed.

5. Addition of Rs. 1,74,741 as Profit from Iron & Steel Company:
Similar to the drug account, the Tribunal upheld the addition of Rs. 1,74,741 as the assessee failed to provide any positive evidence to disprove the entries in the books of account.

6. Interest Charged u/s 139(8) and 217(1)(a):
The assessee did not make any submissions regarding the interest charged u/s 139(8) and 217(1)(a). Therefore, this ground was rejected as not pressed for.

Separate Judgment by Accountant Member:
The Accountant Member disagreed with the Judicial Member, stating that the assessment was based on unverified facts and figures provided by the ex-accountant, leading to absurdity. He proposed setting aside the order of the CIT(A) and restoring the matter to the file of the Assessing Officer for a more thorough investigation.

Third Member Decision:
The Third Member concurred with the Accountant Member, emphasizing that the revenue failed to establish the authenticity of the books and documents. The matter was remanded to the Assessing Officer for further investigation, and the appeal was allowed for statistical purposes.