TMI Blog2002 (5) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... 1993-94 1,39,087 1994-95 12,46,828 1995-96 10,72,091 1996-97 56,736 In ground No. 4 the assessee has objected the addition of Rs. 1,36,41,971 made as unexplained cash credits. In ground No. 5 the assessee objected the following additions on account of jewellery as unexplained: Rs. 1993-94 54,781 1994-95 5,396 1995-96 30,174 1997-98 2,48,602 In the sixth ground, the assessee has objected the addition of Rs. 1,15,000 on account various valuables as undisclosed. In last, the assessee has appealed for telescoping of the income earned in a particular year and the same should be telescoped in regard to another year's income. 3. Brief facts of the case are that a search and seizure operation was conducted on20-6-1996at the residential and business premises of Shri Sunil Agarwal and his associated persons/concerns which continued till30-7-1996, when the last warrant of authorisation of search was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tated by the assessee that his total undisclosed income is about Rs. 2,70,00,000 on which he is ready to pay tax under Chapter XIV-B. During the course of assessment proceedings the assessee retracted from his earlier stand that this cash amount of Rs. 86 lakhs was not out of his undisclosed income, as the same is from disclosed sources of trading activities. It was explained through letter that assessee and his associates are dealing in trading activity of Plastic dana and 70% of this sale are to M/s. Padmini Polymer Ltd. (M/s. PPL for short) and remaining 30% sales were made in cash in the market. But the purchaser who were not interested to take the bills, therefore, certain bank accounts were opened in the names of various other persons and the cash received out of cash sales were deposited in these accounts and then cheques/drafts were issued to the various parties from whom the material was purchased or to the customs authorities, on account of payment of custom duty which was made for the release of imported material as assessee also imports raw material from overseas. It was duly explained that all the purchases are vouched, parties from whom material was purchased are iden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued by these persons. They were duly deposited with the Sales-tax department. It was further explained that Rs. 86 lakhs, which was seized from the premises of Canara Bank, was to be deposited in these accounts and the same amount was out of cash sale proceeds. It was further stated that a further cash of about Rs. 37 lakhs, which was lying in the bank, was also seized. This amount of Rs. 37 lakhs was also deposited out of cash sales made to various other parties. It was strongly submitted that this amount of Rs. 37 lakhs was treated as out of cash sales and the addition on this account was not made by the Assessing Officer. Therefore, it is wrong to accept the contention of the assessee in half-way, whereas it should have been accepted in full. It was further argued that a sum of Rs. 1.23 crores was surrendered out of cash sales by the assessee. However, the addition is made only of Rs. 86 lakhs. It means that the Assessing Officer was satisfied for the remaining amount. Further it was argued if department people would have arrived five minutes late in the bank, then the amount would have deposited in bank account of various parties in the bank and for the same reasoning as was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person could not be brushed aside easily. However, in reply to a question from the Bench, it was fairly admitted by the learned Departmental Representative that if any statement given on initial stage is rebuttable with evidence, then of course the second statement can be admitted. it was further stated that there was no coercion from the people of the department, as there is no admission by the assessee till the date of14th July, 1997, neither there is any correspondence from the side of assessee that there was a coercion during the course of search proceedings. It was further stated that after a few days, the statement of the assessee was again recorded and he again admitted that the amount of Rs. 86 lakhs along with other amounts, was from his undisclosed sources of income. it was further stated that no return for assessment years 1995-96 and 1996-97 were filed. Therefore, these purchases and sales cannot be treated as regular purchases and sales as they were not shown by the assessee. It was also stated that the assessee deliberately did not cooperate with the Assessing Officer and started cooperation only at the fag end of the period, when the assessment has to be completed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onvenience is in favour of the assessee, as all the purchases and sales are tallied, which includes the amount of Rs. 86 lakhs also. 9. Regarding addition on account of commission on billing, the brief facts are that during the course of search proceedings at premises No. F-37, Mansarover Garden, New Delhi certain incriminating documents, accounts/loose papers were found and they were inventorised as Annexures A-1, A-30, AA-1. Statement of Shri Sunil Agarwal was also recorded on20-6-1996and in statement Shri Sunil Agarwal accepted that he had earned a commission of Rs. 26 lacs during last three years and the same was surrendered by him on the date of search. However, during the assessment proceedings the assessee retracted from his earlier stand that he has earned any commission on account of billing of job work made for M/s. PPL. In fact, on the basis of the papers seized during search proceedings it was noted that assessee indulged in bogus billing oil account of job work made for M/s. PPL. Various names of the parties were mentioned in the seized records. Dummy bank accounts were also found. These bank accounts were operated vide Serial Nos. 5825, 5826 and 5827 and various oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a search party was around the assessee and the statement given by assessee was under influence of fear. It was further stated that during the course of assessment proceedings and earlier also, the assessee has stated that he has to do nothing with the job work because he only coordinated with M/s. PPL because M/s. PPL was his main customer who was buying 70% of the total material sold by assessee and when he got complaint about the material from M/s. PPL then he coordinated with M/s. PPL and approached various jobbers in the unorganised sector and he approached Mr. Ramesh Minocha to issue bills because petty jobbers were not agree to issue bills. It was further stated that M/s. PPL has also confirmed that he has not paid any commission to Shri Sunil Agarwal. The statement of General Manager of M/s. PPL was also recorded who also admitted that Sunil Agarwal coordinated with them for the purpose of job work. Therefore, no adverse inference should be drawn on the basis of initial statement. All the presumptions are rebuttable. There is no direct evidence with the department which shows that assessee has earned commission of 2% for the purpose of billing on account of job work for M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rly indicates that the assessee indulged in the activity of billing of job work and earned a huge profit. Retraction after a gap of eight months cannot be relied upon as the retraction is self-serving. Affidavit filed by Shri Ramesh Minocha is also a self-serving document. Therefore, the order of the Assessing Officer is correct on this point. The reliance was placed on CIT v. Durga Prasad More [1971] 82 ITR 540 (SC); 64 ITD 10 and Sumati Dayal v. CIT [1995] 214 ITR 801 (SC). 12. In reply the learned counsel has stated that all the presumptions are rebuttable and accordingly the assessee has rebutted. The reliance was also placed on the decisions on which the reliance was placed earlier when the addition of Rs. 86 lakhs was discussed above. 13. Regarding the addition on account of billing of trading activities, it was noted by the Assessing Officer that at page Nos. 14 and 15 of Annexure A-1, as per Panchnama drawn at F-37, Mansarover Garden on 20-6-1996. The assessee is also involved in arranging the bills for transactions between M/s. PPL and various other concerns mentioned at page Nos. 14 and 15. These total billings were to the tune of Rs. 1,23,81,75,653 and by applying. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made any payment for purchasing the material for the purpose of export. From the statement of Shri Sant Kumar Sharma, the Assessing Officer drew an inference that assessee has done all the activities by purchasing raw material costing Rs. 78 lakhs and made payments from his undisclosed sources. Further expenses on account of customs etc. was also paid by Shri Sunil Agarwal and the receipts were received by Shri Sant Kumar Sharma on account of exports, the same were taken as loan from him, just to cover up his black money through Shri Sant Kumar Sharma. The total export receipts were received by Shri Sant Kumar Sharma at Rs. 1,36,41,971. The entire receipts were treated as black money of the assessee and the same was added as unexplained cash credit under section 68 of the Income-tax Act. 14.1 It was stated by the learned counsel that confirmation of loans were filed. Shri Sant Kumar Sharma is a regular income-tax payee. The assessment records of Shri Sant Kumar was also produced. The export receipts were received by Shri Sant Kumar Sharma directly. Therefore, there is no involvement of the assessee. The payments on account of loans were received through proper banking channels an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The same submissions were repeated here before us also, Alternative, it was stated that assessee had surrendered a sum of Rs. 24 lakhs during last three years. Therefore, benefit of telescoping should be given, as the amount was available with the assessee for making investment in the ewellery. On the other hand, the learned DR placed reliance on the orders of the Assessing Officer. 16. Next addition is of Rs. 1,15,000 on account of various valuables. This addition was made on similar circumstances as in regard to jewellery. The similar arguments were put forward by the learned counsel and the learned DR. 17. Last ground is in regard to telescoping of the additions against the amount already surrendered by the assessee, which was available with the assessee for making investment etc. The learned counsel submitted that telescoping has to be allowed, as this is a set principle of law. Lastly it was argued that income should be assessed on a real income, as the premises of the assessee was searched and no assets other than declared, were found. Therefore, real income theory should be adopted and on this proposition, the reliance was placed on the cases which are already stated b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has also explained the sales made to various parties. In this letter it is clearly mentioned that assessee has applied for the copies of the seized material and the dates of letters given by the assessee are 15-7-1996, 9-9-1996 and 11-10-1996, but there is no whisper in the order of the Assessing Officer that why the request of the assessee was not acceded to for supplying the copies of the seized material. On the contrary the order of the Assessing Officer says that the assessee has not cooperated even hough the copies of the seized material were supplied to the assessee. It is further mentioned in the order of the Assessing Officer that the assessee has started pouring information only on14-7-1997; whereas the letter of the assessee, which is placed at page 25 of the paper book, is dated9-6-1997. There is another letter placed in the paper book at page 28, is dated 11-7-1997/14-7-1997 which is in regard to reply of letter No. 157 dated2-7-1997. Another letter is placed at page 55 in the paper book, which is dated15-7-1997and this letter addressed to the Assessing Officer which was in regard to queries raised on14-7-1997. In this letter it is clearly stated that the reply of let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in the premises of Canara Bank, where he was just to deposit the amount in the bank account belonged to the assessee, which is unrecorded money earned out of business. The order of the Assessing Officer says that in reply to question No. 11, this reply was given by the assessee. However, by going through the copy of the statement placed in the paper book at page 13, no such reply was there in question No. 11. The question No. 11 was in regard to information for Birbal and Bhanwar Singh and in reply it was admitted that Shri Birbal and Bhanwar Singh had no knowledge of instructions given to Shri Gopal Singh and brother of the assessee. However, on a latter stage the assessee had stated that during 2-3 years an income of Rs. 78 lakhs was earned in trading and the same was kept in cash. In reply to question No. 35 the assessee has stated as under:-- "Ans. Detailed break-up of the same is as under: though I would add that it is a broad narration, (a) Unexplained investment in construction at G-73, Kirti Nagar, Delhi 07.5 lakhs. (b) Fixed deposit kept in locker having key number which is in the name of my wife precise details of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t accepted and the impugned addition was made. 23. After considering the rival submissions of both the parties and perusing the material on record, we noted that assessee has surrendered a sum of Rs. 2.26 crores, which includes an amount of Rs. 86 lakhs on account of cash seized in the premises of Canara Bank. The detail on account of surrender, which was given in reply to question No. 35, has been given above. If we see those details, then we will find that there was an admission of unexplained investment in construction at G-73, Kirti Nagar, Delhi which was to the tune of Rs. 7.5 lakhs; Fixed deposits kept in locker as Rs. 2 lakhs; investment in personal car was Rs. 1.50 lakhs; loan to assessee's brother Shri Mohan Agrawal Rs. 15 lakhs; loan to M/s. Tarun Sales Rs. 5 lakhs; cash found, seized from Shri Gopal Singh as well as credited in C.A. Account Nos. 5825, 5826 and 5827 were to the tune of Rs. 1.23 crores and Sundry household and other expenses were to the tune of Rs. 5.50 lakhs. If we total all these amounts it comes to Rs. 1.59 crores; but if we see the addition on account of cash found and seized was made only of Rs. 86 lakhs. An amount of Rs. 37.56 lakhs seized from icc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sited in these three bank accounts; then some of the intermediary parties were located and in the names of those intermediary parties the bills were issued and the payments were shown to be received from these parties. The cheques were issued from the three bank accounts stated above in the name of these intermediary parties or directly to the parties from whom the material was purchased by the assessee. It was explained before the Assessing Officer that there was a reason to locate the intermediary parties because there was a requirement of Sales-tax Department, as the Sales-tax forms were to be furnished to the Sales-tax Department against the sales made by the assessee, otherwise the sales-tax liability could have been accrued. These intermediary parties issued S.T. forms and the same were deposited to the Sales-tax Department. Therefore, this method was adopted and the cash sales were routed through these three bank accounts and the bank accounts of the intermediary parties. A clarification was sought from the assessee in regard to these three bank accounts and other parties' accounts, the reply was given by the assessee on 14-7-1997 and again on 28-7-1997, wherein in following ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k to me in my business concerns through payment by cheques from Canara Bank account to the intermediary (debtors) firms and thereafter ultimately to me or sometimes to my creditors on my account as already explained. Copies of purchase account, bills, sales account and also the copies of the intermediary accounts shown as my debtors but for which actually sales are in cash are also enclosed to show that the funds have ultimately come back in the shape of cheques to me and thus no addition on this account should be made. Further to the submissions made in this letter, I wish to submit again that I have been making sales in cash and the said cash sale proceeds were channellised back in my business by depositing approximately 70% and 30% as cash in the three Canara Bank accounts and in the bank accounts of intermediary concerns in the name of which bills were issued by for which actually sales were made in cash in the open market. I did not have enough space for storage of the goods and, therefore, the sales in the open market was necessary besides being market conditions. Also that no stock belonging to any of the following concerns was found during the course of search. It, also thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above modus operandi by introducing his cash sale into his books of account through the above-mentioned three bank accounts and the fictitious debtors. 4. Moreover, the premises searched clearly showed that he was not having much space to keep such big inventory of stock, which proves that he was making the sale in cash and issuing the bills in the name of the debtors to complete the formalities of the Sales tax Department. 5. Perusal of the books of account/documents seized, three bank accounts No. 5825, 5826 and 5827 and the bank accounts of the debtors also indicate that payments were made directly on behalf of the supplier, to the Commissioner of Customs for payment of Custom Duties on import of raw materials, which established that he was controlling the three accounts and the debtors accounts and purchases were made from the suppliers. The cash deposited in these accounts are nothing but the sale realisation of the raw material. 5.14 Keeping in view the above facts and circumstances of the case and the modus operandi adopted by the assessee is reasonable and no addition on account of cash credit is called for out of these three accounts and the debtors accounts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ---------------------------------------------------------------------- The copies of statements of the above accounts were obtained from the bank and examined. The substantial cash was deposited only in the accounts mentioned at Sl. Nos. 1 to 3 and in the remaining bank accounts nominal cash was found deposited only for the purpose of opening the bank account. The assessee was asked to explain the source of deposits in these accounts vide this office letter dated23-7-1997. The assessee has submitted vide his letter dated28-7-1997, that, 'We have already pointed out that certain accounts of intermediary firms which have been used for bringing back the sale proceeds of cash in cheque back to our books and similarly cash was available with the assessee in the group companies, which otherwise has been shown as debts recoverable. This amount has also been brought back as deposits in the name of such intermediary accounts but actually it is assessee's own cash sale money.' 5.18 The nature of the cash deposit in these three accounts were the same as discussed above in para Nos. 4.3 to 4.3.14. The funds were further diverted in the accounts of debtors, which brought back to the books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer that cash amount of Rs. 86 lakhs received out of cash sale proceeds were invested somewhere else. If this amount was not invested somewhere else, then, of course it is the same cash which was found from the persons of the assessee who was going to deposit in the bank. The earlier amount deposited in the bank has been admitted by the Assessing Officer as explained. The amounts were not in small. The earlier amounts deposited in the bank were about Rs. 65 crores, out of which Rs. 55 crores has already been accepted as routed transactions through these bank accounts and the remaining amount of Rs. 9 crores or odd were to be received from the intermediary parties or to be deposited in the bank. Purchases are genuine; sales are tallied with the purchases, then where the amount of sales have gone. When there is no finding that where the sale amount has gone, then it should be admitted that the amount of Rs. 86 lakhs belongs to the sale proceeds and the sale proceeds are tallied. Therefore, in/our considered view, no addition could be made. 26. Though we have discussed all the facts of the case in regard to addition of Rs. 86 lakhs, however, for the sake of complete ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew, when the Assessing Officer has accepted the other explanation, then the explanation in regard to Rs. 86 lakhs should have also been considered as the same was verifiable from the sale statement filed before him and admittedly was before him. 27. There is one another letter which is of dated15-7-1997. In this letter also assesee clarifies his position in regard to surrender. In paragraph 3, the assessee has stated as under:-- "(iii) I am thankful to you for having enlightened me on the fact and on law that the department does not have the police powers. It was only this fear and also the presence of so many police constables and guards and there being no books of account or vouchers or evidence produced for verification and also since no assistance of a professional man or of the accounts man of my department was allowed and also it is but natural that as a human nature any one in a similar situation will like, to get rid of the grilling circumstances. Accrual or arising of the income is lot a matter of statement but is a matter of records and evidence." After that the assessee has again clarified the position of cash found and seized from the bank premises. Nowhere the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of Rs. 86 lakhs could not have been made. 30. Now we will see the legal position regarding the facts of the present case. The learned DR has placed reliance on Smt. Vasanti Sethi in the case of Sadhu Ram Gupta wherein the statement recorded at primary stage was admitted. In the case of Smt. Vasanti Sethi, the initial admission regarding ownership of the deposits was considered. The matter travelled up to the stage of Tribunal and therein it was held that sub-section (4) of section 132 was clearly attracted and, therefore, the initial admission regarding ownership of the deposits had to be treated as an evidence in the proceedings for assessment. Subsequent retracting from the earlier statement could not be called a statement made by such person during such examination, but the stand was revised long after the statements were recorded not only in 1987 but also in January, 1988 coupled with filing of return of income originally. The brief facts of this case were that there was a search operation under section 132 on10-12-1987. The Department found certain deposits in the name of the assessee. On the day of search the assessee admitted ownership of the deposits but in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut a particular state of affairs carries more weight and a subsequent statement made retracting from the earlier position should be on good ground, supported by cogent and relevant evidence. There is no dispute in these findings. If a person can support his retraction by a cogent and relevant evidences, then retraction has to be admitted and if he cannot support his retraction by a cogent and relevant evidence then primary evidence is a good evidence. 32. Now we will see the cases as relied upon by the learned counsel of assessee. In the case of S. Arjun Singh, the Hon'ble Delhi High Court has held that an admission is an important piece of evidence but it is not conclusive. 33. In the case of Pullangode Rubber Produce Co. Ltd., the Hon'ble Supreme Court has held that admission is an extremely important piece of evidence, but it cannot be said that it is conclusive. It is open to the assessee who made the admission to show that it is incorrect and the assessee should be given a proper opportunity to show that the books of account do not disclose the correct state of facts. The brief facts of this case were that entries made by the assessee in the account books treating a port ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess of law will be set at naught. The CIT(A) observed in his order that the assessee did not give any figures to support the declared income of Rs. 3 lakhs as done in the second statement. Both the declarations are ad hoc declarations. There is no material to accept that the assessee's first statement was not correct in the sense that the amount of Rs. 9,25,000 represented sales figure and not concealed income that the assessee's second statement is the correct one. Since neither of the two statements is supported by any evidence, there is no apparent choice between the two. However, since the first statement was made during the survey operation and since the figure of Rs. 9,25,000 as concealed income was given by the assessee spontaneously in a statement under oath, there is a preponderance of probability that this statement was the correct one rather than the second statement given later when the assessee had obviously time and scope to manipulate the book figures. It is not possible to accept this reasoning. As a matter of fact, no defect of any reckon was pointed out in the books. The addition was wholly on the basis of assessee's admission. There is absolutely nothing on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not in relation to income. Here in the case before us, as we have already stated, the situation is similar. In initial statement given on 20-6-1996 the assessee surrendered the amount seized in cash, but on a later stage it was stated that this amount is out of sale and not on account of any other unexplained income. The retraction was with cogent reason and evidence. The statement of the assessee was accepted by the Assessing Officer which was in regard to routed sale through the abovenoted three bank accounts. There was huge amount of about Rs. 65 crores which was deposited in these three bank a/cs. The Assessing Officer has admitted this amount by accepting the statement of the assessee. Therefore, the Assessing Officer should have also accepted the explanation in regard to Rs. 86 lakhs which was on a/c of cash sale proceeds as explained above. This is also not the case of the department which we have already stated that the Assessing Officer could not give any finding that if this amount of Rs. 86 lakhs is on account of unexplained income, then what happened about the amount of cash sales. The Assessing Officer is accepting all the purchases by holding that all the purchases a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e statement of Shri Rakesh Mahajan and Shri Ramesh Minocha. The fictitious bank accounts were opened in the name of Shri Ramesh Minocha, who was issuing job work bills to M/s. PPL as nobody was ready to issue the bills in unorganised sector. Accordingly he issued bills and charged commission. As per his statement the terms of commission were settled through Shri Sunil Agarwal who arranged the payments on account of commission on these bills. Again the reliance was placed on the statement of Shri Rakesh Mahajan,C.A., who admitted that these three bank accounts belonging to Mr. Ramesh Minocha were opened with his introduction as he was getting income-tax work through Shri Ramesh Minocha. It was also admitted by Rakesh Mahajan that Mr. Ramesh Minocha brought Mr. Gopal Singh to him who assured him to get more work of income-tax. Therefore, he introduced these persons to bank for opening the bank accounts. From the material and the statement gathered at the time of search, the Assessing Officer formed an opinion that assessee has earned commission income on job work billing. Accordingly he made the impugned addition by calculating 2% on job work payments. Again we found that Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation for the Block Assessment proceedings." 38. After perusing this reply we noted that assessee has admitted that he has earned a profit of around Rs. 26 lakhs in last 2-3 years on account of some liaison work. We further noted that assessee has already filed return for the block period for three years, whereby he surrendered about Rs. 24 lakhs and the tax has already been paid. There is no dispute about this. The copy of the return is placed at page 1 of the paper book. On going through this receipt of return, we noted that assessee has shown incomes of Rs. 91,430; Rs. 91,310; Rs. 1,03,180; Rs. 2,92,370; Rs. 10,28,910 and Rs. 9,11,820 from assessment years 1991-92 to 1996-97 respectively. We further noted that on total undisclosed income of Rs. 24,50,310, the assessee has shown tax paid at Rs. 14,70,190. We further noted that this income was disclosed by the assessee on account of statement of assets and balance-sheet placed at page 12 of paper book. The total capital is shown at Rs. 21,71,658.32 as on20-6-1996. The return under block period was filed upto this date i.e.,20-6-1996. After perusing the material and the assessment order of the Assessing Officer, we do not find an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion on account of job work. We further noted that a confirmatory letter dated24-7-1997was also filed before the Assessing Officer. This confirmatory letter was written and signed by one Shri Munesh Bhatia, General Manager(Accounts) of M/s. PPL. The contents of the letter, which is placed at page 158 of the paper book, are reproduced here as under:-- " Confirmation This is to confirm that Shri Sunil Agarwal son of Shri B.L. Agarwal, Resident of N-37, Kirti Nagar,New Delhihas not worked as our liaison/commission agent at any time during the last ten years. There was no contractual obligation in this regard as there was no such agreement also. We have not paid any commission or service charges to Shri Sunil Agarwal and his associates. He had supplied plastic raw material on principal to principal basis from his following companies/concerns of his group and all the purchases made by us are duly entered is our accounts as per copies of account already submitted to the Asstt. Commissioner of Income tax, Central Circle 10,New Delhiin response to notice under section 131 issued. 1. Polychem Traders Prop. Mr. Sunil Agarwal, 2. Petrochem Overseas (India) Prop. Mr. Sunil Agarwal. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and not on behalf of Shri Sunil Agarwal. Shri Sunil Agarwal was only a coordinator, who coordinated for getting the job work done in unorganised sector and proper billing was done through these parties who were ready to issue bills and they issued bills and got their commission after settling by Shri Sunil Agarwal. Shri Sunil Agarwal settled the account of job work, but it does not mean that Shri Sunil Agarwal have received some commission. Confirmation from M/s. PPL was also filed where they categorically denied having paid any commission to Shri Sunil Agarwal. The statements of two General Managers were recorded, who also not admitted making any payment; rather they admitted that Shri Sunil Agarwal coordinated in getting the job work done for their company. We have also seen that some papers were found and seized and they were shown to the assessee during the course of assessment proceedings, but nowhere the assessee had admitted that these papers belonged to him or he has earned some income. Some of the questions raised by the Search Party on6-8-1996and the reply given by the assessee, are part of the assessment order and for the sake of convenience and classification, we will ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of bills? Ans: I don't remember. Q. No. 11: On page 251, Annexure A47, Party No. 7, Account of New Era Plastic, Bhupinder Singh, JVS Enterprises, S.P. Singh Co. for year 1994-95 is given. The total is Rs. 10,54,37,339.20. The amount of commission for the first stage @ 7P = 73806 2/3A stage @ 7 + 12P (per Rs. 100) = 2,00,330 matches with the figures written on the page. Is the commission paid at various stages. Ans.: I don't remember anything. However, I can tell only after taking copies of seized material and reconciliation of my accounts if any of the transactions relates to me. Q. No. 12: I am showing you pages 14 and 15 of Annexure A1, Party 8, which gives names of number of concerns along with Dr./Cr. figures. Why these papers were maintained by you and what do these papers contain? Ans.: These papers were not maintained by me or they were found from me. However, I can further say only after examining all the seized material and reconciliation of my account. Q. No. 13: I am showing you pages 11 and 12 on which details of TDS deducted, details of place of assessment, date of filing of Return, TDS refund due, TDS refund received and Income-tax assessment portion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was further clarified that Shri Ramesh Minocha, who opened the bank accounts in his name or in the name of his associate concerns, issued bills and got commission. Therefore, he can be held responsible for the commission or billing commission and not the assessee. However, the Assessing Officer was not satisfied. The name of the assessee was taken. Therefore, the Assessing Officer drew inference that assessee got commission for getting job work done for M/s. PPL and after reconciling total of all the job work done, then he calculated the commission @ 2 per cent and made impugned addition in three years, as stated above. In our considered view, the addition is not sustainable. The facts of the case are very clear. No evidence was found that assessee has earned commission; rather evidence which was found, was in favour of the assessee. The statements of two General Managers of M/s. PPL were recorded and they confirmed to this extent only that the assessee has coordinated for getting the job work done for their company, but nowhere they have said that Shri Sunil Agarwal had earned any commission. Confirmatory letter was also filed by another General Manager, Accounts. The premises ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash of Rs. 86 lakhs was found and seized from the premises of Canara Bank,Arya Samaj Road. A separate addition was made on account of cash found, which we have already dealt with and disposed of. That cash amount cannot be considered as commission amount, as we have already held that the cash amount of Rs. 86 lakhs was belonging to cash sales made by the assessee. We have also seen the various letters filed by the assessee during the course of assessment proceedings, whereby he categorically denied having earned any commission on job work. He also requested to allow cross-examination of the persons who have given statement against him. It was also mentioned by him, if there is any beneficiary, that is Mr. Rakesh Mahajan or Mr. Ramesh Minocha, but not the assessee in any case. All these replies and all other facts we have already discussed above, clears that there was no evidence with the department that assessee has earned any commission on account of job work done for M/s. PPL. Therefore, in view of these facts and in the circumstances of the case no addition can be made on account of commission of job work. 41. Now we will like to see the legal position. Regarding retraction, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the sum of Rs. 1,07,350 was the undisclosed income of the assessee for the reason that the assessee could no show that the amount did not belong to it, which it could have done by examining the respective employees and the bank officers. On a reference, the High Court held that there was material before the Tribunal to justify the finding that the amount remitted by T to N was the undisclosed income of the assessee. On appeal to the Supreme Court: Held , reversing the decision of the High Court, (i) on the facts, that the two letters dated 18-2-1955 and 9-3-1957, did not constitute any material evidence which the Tribunal could take into account for the purpose of arriving a the finding that the sum of Rs. 1,07,350 was remitted by the assessee from Madras, and if these two letters were eliminated, there was no material evidence at all which could support its finding. The statements of the manager in those two letters were based on hearsay, as, in the absence of evidence, it could not be taken that he must have been in charge of theMadras office on16-10-1946, so as to have personal knowledge. The department ought to have called upon the manager to produce the documents and pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is any whisper in the order that they were called for cross examination. Only an ingerence was drawn that assessee has earned commission on job work; whereas the assessee from the day one is stating that he has not earned any income, However, he coordinated with M/s PPL was his main customer who was buying 70 per cent of the total turnover made by the assessee. The Assessing Officer has not discussed in his order in regard to reply filed by him. He just made the addition by drawing an adverse inference that assessee has surrendered while making initial statement at the time of search and again by drawing the adverse inference from the statements of two persons as mentioned above. The ratio of the decision of the Hon'ble Supreme Court directly helps the case of the assessee. 44. In the case of Hanuman Agarwal the Hon'ble Patna High Court has confirmed the order of the Tribunal that confession made in a third party's case cannot be used against the assessee. It was further observed that the confession made by the third party was not made available to the assessee. Therefore also there was no defect found in the order of the Tribunal. 45. In case of Gargi Din Jwala Prasad v. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count; neither any evidence was brought on record to controvert the reasoning given by the Assessing Officer or by the Commissioner (Appeals). Accordingly the addition was sustained. 49. Here in the present case the facts are entirely different. The information was received by the Assessing Officer, but the same was controverted successfully. No further evidence against assessee was brought on record except his primilary statement. Therefore, the facts in the above case are distinguishable and this is not helpful to the department. 50. In the case of CIT v. Durga Prasad More [1971] 82 ITR 540 it was held by the Supreme Court "that though an apparent statement must be considered real until it was shown that there were reasons to believe that the apparent was not the real, in a case where a party relied on self-serving recitals in documents, it was for that party to establish the truth of those recitals: the taxing authorities were entitled to look into the surrounding circumstances to find out the reality of such recitals." 51. Here in the present case again the position is reversed. Assessee made a surrender. On a later stage it was retracted with cogent reasons. The explanat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve said that Shri Sunil Agarwal has earned commission on job work. Therefore, human probabilities and surrounding circumstances were not against the assessee. In view of these legal propositions also, we are of the view that no addition can be sustained. Accordingly we delete this addition. 54. The second part of addition is on account of billing commission on trading activities. This addition was made of Rs. 25,11,742. This addition was also made on the basis of initial statement that assessee has surrendered the amount by confessing that he earned income out of billing business. We have already discussed the facts while disposing off the addition on account of job work commission. The facts are similar and the arguments were also similar. 55. After perusing all the material and reply of the assessee we noted that nowhere the assessee has said that he has earned income out of billing of trading activity, except making a statement on 20-6-1996/6-8-1996 that he has earned income of about Rs. 26 lakhs out of liaison work and the same has already been surrendered by him by disclosing it in the return filed under section 158BC and paid tax. Except this surrender, at no stage the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be a tax, even though in book keeping an entry is made about a hypothetically income which does not materiallse. 56. Here in the present case, even there is no entry in the books of account, neither any cash or asset was found which can be said that assessee has earned out of the undisclosed sources, whether it is job work billing or trading billing. Therefore, in view of these facts and circumstances, this addition is also deleted. 57. Now we will discuss about the addition of Rs. 1,36,41,971 made on account of unexplained cash credit. Brief facts of the case have already been discussed above. After hearing rival submissions and considering the material on record, we are of the view that this addition has no legs to stand. The Assessing Officer on receipt of some information from DDI,Bombaymade an enquiry from the assessee that what is the source of loan taken from M/s Nice International, a proprietorship concern of Shri Sant Kumar Sharma ofBombay. Confirmation letter and relevant evidences were filed. However, the Assessing Officer was of the view that there is no loan, as all the transactions of export were made by assessee, though in the name of Shri Sant Kumar Sharma. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh proper banking channels atBombay. The licence for exports was obtained by Mr. Sant Kumar Sharma only atBombay. The orders were executed by Shri Sharma and none else. Of course the purchases were made fromDelhiand they were sent directly to theRussia. If purchases are only made from a third place and they were dispatched from that place directly to the destination then it does not prove that the party belonging to that place is the owner of export proceeds. Bill of lading is in the name of proprietary concern of Shri Sant Kumar Sharma and all the records were before him. The return filed by Shri Sant Kumar Sharma claiming deduction under section 80HHC was before the Assessing Officer. The statement of Shri Sunil Kumar Agarwal, the assessee, that export receipts have been accepted by the Income-tax Department of Bombay, it means the deduction under section 80HHC has been allowed in the hands of Shri Sant Kumar Sharma. Copies of all these informations are placed in the paper book filed before us and after examining all the evidences, we are of the view that all these details prove that the export was done by Shri Sant Kumar Sharma who has received the export proceeds. The return w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these jewelleries and valuables were purchased from the known sources. It was further argued that assessee has surrendered a sum of about Rs. 24 lakhs or odd and paid tax accordingly. This amount was available with the assessee to purchase these items of jewellery and other valuables. Therefore, there should not be any separate addition. 60.1 After perusing the material and the arguments of the parties, we restore these two grounds to the file of the Assessing Officer to examine the same afresh. If the Assessing Officer finds that these items are covered from the amount surrendered by the assessee, then there should not be any separate addition. Otherwise be can make these additions again if finds so. However, he is directed to allow an opportunity to the assessee to explain his case again. 61. The last argument was in regard to telescoping. We have already deleted the main additions and restored the two additions which were on account of jewellery and valuables, therefore, there is no need to give any finding on account of telescoping. 62. In the result, the appeal of the assessee is partly allowed. Per R.S. Syal, Accountant Member-- I have considered the order of my l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the concerns listed in the paper and M/s. PPL, for which he had earned undeclared profit of Rs. 26 lakhs at the rate of 2% being his commission. 4. However, during the block assessment proceedings, the assessee retracted from his earlier stand that he had earned any commission on account of billing of job work for M/s. PPL. When the assessee's statement was again recorded on6-8-1996, he stated that he supplied plastic raw materials to M/s. PP Land they got job work done from other parties. It was further submitted that he was getting complaints from M/s. PPL that the raw material supplied by him was not of good quality and their jobbers were complaining about the same. He, however, maintained that the quality of raw material was of good standard. He further stated that he feared that if action was not taken by him, he might lose the business from M/s. PPL. The assessee further stated that he coordinated with the jobbers in unorganised sectors from whom the goods were got manufactured for M/s. PPL. It was further stated by that in some cases he was not getting proper bills of the jobbers, who refused to accept the cheques for the work done by them, He also admitted that he procu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... books and income-tax records all in the premises of Shri Sunil Agarwal, the assessee in question. I ater on Shri Ramesh Minocha filed an affidavit before the Director of Income-tax (Investigation) on 29-8-1996 submitting that his statement on 12-7-1996 was recorded in a panic situation and he was not in his proper state of mind. In this affidavit he retracted from his earlier statement recorded on12-7-1996. 6. The statement of Shri Rakesh Mahajan, Chartered Accountant was recorded on26-8-1996and on2-6-1997. On 12-8-1996 a survey operation was carried out in the premises of M/s. PPL for pointing out its connection with Sunil Agarwal and the statements of General Manager (Commercial) and General Manager (Accounts) were also recorded in which it was confirmed that Shri Sunil Agarwal actually coordinated and assisted job work for M/s. PPL through a number of parties from outside. However, a confirmation was given by General Manager of Accounts of M/s. PPL that no commission or service charges had been paid to Shri Sunil Agarwal. 7. During the course of block assessment proceedings, the Assessing Officer confronted various Annexures and papers to the assessee on6-8-1996when the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd BOM. Please inform source of these deposits? Ans.: As I have already stated, I can explain only after verification of my accounts." 8. On the basis of these papers seized during the course of search and seizure operations and the statements recorded by the Assessing Officer of the assessee himself and Shri Ramesh Minocha and Shri Rakesh Mahajan, the Assessing Officer made party-wise details of billing work done by the assessee in the names of various concerns for transactions relating to M/s. PPL and worked out the total on which he applied the rate of 2% for calculating the gross total commission at Rs. 1,25,27,676 spread over in the year 1993-94, 1994-95 and 1995-96. 9. The assessee vide his letter dated28-7-1997addressed to the Assessing Officer stated as under:-- "Any addition which is being made on account of commission for Job Work on Mould Work done by Padmini Polymers Ltd. allegedly done through me, you are requested to allow deduction of expenditure @ 0.40%, 0.50% and 0.60% for the assessment years 1994-95, 1995-96, 1996-97 or thereafter respectively as the said evidence is available in the seized records Annexure A-47, Page Nos. 249, 250 and 251 and the rate be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m and the assessee had to co-ordinate in view of his apprehension that he may lose the customer if the job work was not got done, through people who do not make any complaints about the materials supplied by the assessee to M/s PPL. It was further stated that the General Manager of M/s PPL had also admitted that the assessee only co-ordinated the job work done on behalf of M/s PPL and no commission was paid to him. 14. The learned Counsel further submitted that Shri Ramesh Minocha had also furnished his affidavit on29-8-1996retracting from his statement recorded by the Assessing Officer, which was also given by him under coercion. He therefore, submitted that since the assessee as well as Shri Ramesh Minocha both have retracted from their statements, there was no question of relying on those statements and making addition on that basis. He contended that any person who had given his statement can successfully retract in view of the judgment in the case of Pullangode Rubber Produce Co. Ltd. For the same proposition he placed reliance on some other judgments also. 15. The learned counsel for the assessee also contended that the assessee during his statement on6-8-1996had no where ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han the one earned by the assessee himself in respect of billing commission on trading activities. 19. As regards the statement of the General Manager of M/s. PPL to the effect that no commission was paid to the assessee, the learned Departmental Representative contended that the commission can be paid either by the payer or by the payee i.e., either M/s. PPL could have made the payment of commission or those persons in unorganised sectors who did job work for M/s. PPL in respect of which the assessee was instrumental in procuring job work for them. Since the assessee had himself admitted at the time of search that he had earned commission at the rate of 2%, the learned Departmental Representative contended that there was no case for the assessee to retract from his statement. 20. Insofar as the retraction by Shri Ramesh Minocha is concerned, the learned Departmental Representative submitted that it was not permissible to retract from one's own statement in such a light manner that one gets up one fine morning and states that his statement recorded on an earlier date was given under coercion. The learned Departmental Representative also relied on the orders of the Tribunal in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion earned by him in the last 2-3 years. Now if the assessee wants to come out of the clutches of his earlier admission, the onus heavily lies on him to establish that he has not received any such commission. As against this, the Assessing Officer on the strength of various papers found during the search applied the rate of 2%, being the commission on the total job work arranged by the assessee. In order to come out of his earlier statement, it was obligatory upon the assessee to establish that he had not arranged any billing work. In his earlier admission on20-6-1996he has nowhere stated that he has earned the commission from M/s PPL. When a sum is paid by one person to another and the third person is intermediary between the two who accepts that he has earned commission it is quite likely that he might have earned the commission either from the one who pays the amount or from the other who received the amount. There is no dispute about the fact that M/s PPL has given a certificate to the effect that they had not paid any commission. But there were many other people involved in the unorganised sectors, who at the instance of the assessee did the job work for M/s PPL. If the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... test laid down in the precedents cited in this connection. 26. The main argument of the learned counsel for the assessee for the deletion of additions in issue is that the statements of Shri Ramesh Minocha and Rakesh Mahajan were not confronted to the assessee and he was not afforded opportunity to cross-examine these two persons. 27. In the case of Kishinchand Chellaram it was held by their Lordships of the Hon'ble Supreme Court that the assessment was viatiated for violation of principles of natural justice as the permission given for cross-examination of witnesses was illusory. 28. The Hon'ble Supreme Court has dealt with the issue of opportunity of hearing to the assessee vis-a-vis setting aside of the order on several occasions. In the case of Guduthur Bros. v. ITO [1960] 40 ITR 298 (SC), the appellants failed to furnish return within the prescribed time, and the Income-tax Officer proceeded to impose penalty without affording a hearing. The Appellate Assistant Commissioner set aside the order imposing penalty and directed refund of any penalty that might have been recovered. On receipt of the AAC's order the ITO issued a further notice calling upon the appellants to ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foundation or the authority for the proceedings, whereas the nullity is a proceeding which is taken without any foundation. A proceeding is a nullity when the authority taking up the proceedings has no jurisdiction. The test to determine when the order passed is invalid or irregular, is to see whether there is lack of jurisdiction, any order passed by an authority could be null and void but when the jurisdiction is improperly or irregularly exercised, the order does not become void. The defect in procedures will not ordinarily amount to lack of jurisdiction. Any procedural omission or irregularity in observing those provisions in a given case, would not render the assessment void. The lapse or omission on the part of the Assessing Officer has no impact on his jurisdiction to pass a valid assessment order after correcting the infirmity and thereafter to effect the final assessment order. It is always open to the concerned authority to take up the matter at the point at the which the illegality supervened to correct those proceedings. Section 142(3) provides that the assessee shall be given an opportunity of being heard in respect of any material gathered on the basis of any enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to the assessee of being heard and also allowing cross-examination of these two persons on the statements, if he so desired by the assessee. 31. Ground No. 5 relates to the addition of Rs. 1,36,41,971 as unexplained cash credit holding the same as undisclosed income under section 158BC. So far as this ground is concerned, I agree with the decision of my learned brother, that no addition is called for on this count in the block assessment. However, I would like to add that since the Assessing Officer has included the amount of Rs. 1.36 crores and odd in the block assessment and we both are of the considered that it cannot be said to be the undisclosed income of the assessee, in my view, the Assessing Officer should be given the liberty to consider the taxability of this very sum in accordance with law. REFERENCE UNDER SECTION 255(4) OF THE INCOME-TAX ACT, TO THE HON'BLE PRESIDENT ON POINT OF DIFFERENCE. Since there is a difference of opinion between the Members of the Bench, we state following point of difference and refer the same to the Hon'ble President for further necessary action as envisaged under section 255(4):-- Q. 1 "Whether on the facts and in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 994-95 with the Income-tax Officer at Jaipur declaring nominal income, the sources being salary income and profits and gains of business and profession. The assessee had not filed any returns before and after the aforesaid 2 assessment years; (2) After the search the assessee did not co-operate with the department inasmuch as: (i) He retracted from his earlier statement recorded on oath wherein he admitted earning income not disclosed to the department and offered for tax i.e., Rs. 2.27 crores; (ii) Information was not provided by the assessee in response numerous letters sent by the Assessing Officer on one pretext or the other despite the fact that copies of seized material were provided; (iii) The assessee did not attend office on relevant dates to explain the transaction recorded in the seized material; (iv) The assessee started responding to the requirements of the Assessing Officer only from14-7-1997onwards. 5. The assessee during the proceedings claimed doing business in plastic raw material (plastic granules), software chemicals and mining equipment through the medium of two sole proprietorships and two companies. 6. At this stage I would like to refer to cert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Rajinder Singh 3813, David Street, Prop. M/s. Central Darya Ganj, N. Delhi. Plastic Syndicate. 2. 5826 Sh. Satyaveer Singh 711, Chawri Bazar, Prop. M/s. New Fashion New Delhi. Plastics. 3. 5827 Sh. Kishore Kumar, E-95, Amar Colony, Prop. M/s. India Lajpat Nagar-IV, Plastics. New Delhi. ----------------------------------------------------------------------------------------- 13. It transpired that one Shri Rakesh Mahajan,C.A.had "introduced" the aforesaid 3 accounts verifying the address shown in the a/c opening form. The following facts, however, came to light when said Shri Rakesh Mahajan was examined under section 131: (i) He did not know any of the three persons in whose names the accounts were opened; (ii) One Shri Gopal Singh who was known to him through one of his clients, Shri Ramesh Minocha, had brought these persons to him and got their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the department during the course of search and thereafter, the following facts emerge: 1. It is a fact that the raw materials, purchased by the assessee, have been duly accounted for in the books of account and purchases were made on credit and the alleged payments were made by cheques, by using the above three accounts and bank debtors account. 2. The account holders of 5825, 5826, 5827 and other accounts in the name of debtors have been used by Shri Sunil Agarwal is front concerns. Enquiries indicate that these were non-existent. Therefore, he generated fictitious debtors in his books of account and deposited the cash realized on sale of the raw material outside the books of account in those fictitious debtors, bank accounts. Through these bank accounts and the debtors, account the assessee has attempted to bring back the cash sales in his books through those fictitious debtors for onwards payment to his creditors. 3. Suppliers confirmations submitted by the assessee indicate that they have given the raw material on credit to the assessee. To make the payment to his creditors the assessee has adopted the above modus operandi by introducing his cash sale into his books ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all money lying therein belonging to him. Jt was also stated by him that the amounts lying deposited represented his undisclosed income not recorded in the regular books of account. The following items were indicated i.e., a sum of Rs. 86 lakhs seized from Shri Gopal Singh on 20th June, 1996 at the bank premises plus the sum of Rs. 37 lakhs lying in the aforesaid three bank accounts on the date of search plus an income of Rs. 78 lakhs stated to have been earned in the aforesaid business carried out for a period of two to three years plus profit of around Rs. 26 lakhs earned in the last 2 to 3 years. It was stated by the assessee that commission was earned for arranging business transactions "for indicated parties" and the total undisclosed income earned was Rupees two crores and twenty-six lakhs and the same was voluntarily being offered for taxation for the block period. I may mention that the total of the aforesaid four figures comes to Rs. 2.27 crores. 21. During the course of investigation the assessee was shown certain documents, which included a paper containing details of 23 cheques in the name of certain parties and which was found on the person of one Shri Om Prakash, h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a possibility that bills had been obtained from parties, who had not done any work and which in fact was done by persons in the unorganized sector. 24. As regards specific queries raised in questions beginning No. 9 and ending with No. 16 the assessee either did not give any reply or explanation on the ground that he could only do so after taking copies of seized materials or after reconciling his own accounts. 25. I would next refer to the statement of Shri Ramesh Minocha recorded on 12th July, 1996 wherein he was queried at length on the purpose of his visit to the office of Shri Rakesh Mahajan, C.A. located at E-95, Amar Colony, New Delhi, and what was the nature of business/work carried on by him. As regards the purpose of the visit, it was stated that there was a matter being dealt with by theC.A.in the Company Law Board in respect of a company belonging to the assessee and insofar as the nature of work was concerned, this was also explained, but the relevant answers bring out the following: (i) That the three concerns, namely, M/s Bhupinder Singh Co., of which Shri Ramesh Minocha was the proprietor, M/s. New Era Plastic Trading Company, whose proprietor was the wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esh Minocha he did not remember how the expenses had been shown since the accounts were prepared by and on behalf of the assessee and he i.e., Shri Ramesh Minocha only singed the relevant papers for income-tax assessment through Shri Rakesh Mahajan, C.A.; and (x) As regards the expenditure against the commission income, which was @ 40p. per hundred rupees, expenditure at 5p. per hundred rupees was deducted by the assessee on account of book writing as also fees to Chartered Accountant for income-tax assessments etc. That expenditure on printing of bills and conveyance was his own expenditure i.e., Shri Ramesh Minocha. That at present he was not doing any such work of preparing bills without undertaking job work for the assessee or anybody else. That what had already been done was not correct and that he was willing to pay the tax on the correct income for the various years. 26. It transpires from page 15 of the assessment order that Shri Ramesh Minocha categorically appended on the statement recorded on oath that it was without any coercion or pressure and that replies had been given voluntarily. 27. The said Shri Ramesh Minocha by a written communication dated15th July, 1996 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence to the opening of the bank accounts; (vii) That Shri Rakesh Mahajan merely filled up the "introduction" part of the bank account opening forms in Canara Bank, Karol Bagh, which included his name, account No. and address and the names of the parties, their occupations and addresses were left blank and filled up latter on; (viii) That addresses given by M/s India Plastics and M/s New Fashion Plastics were those of the firm of Chartered Accountants i.e., M/s R.K. Mahajan Co., whereas the third address was not of Shri Rakesh Mahajan, but of a relative of his; (ix) That the three parties in question were small and petty assessees and the addresses given by them for income-tax purposes were normally those of the C.As; (x) Fees for auditing of the three concerns etc. were stated to have been paid by Shri Gopal Singh; and (xi) That the fact of some concerns doing bogus billing business vis-a-vis the statement of Shri Ramesh Minocha recorded on 12-7-1996 in the office of Shri Rakesh Mahajan came to the latter's knowledge only after the search operation in June 1996. 29. Another statement of Shri Rakesh Mahajan was recorded on2-6-1997from which the following facts emerge: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons the Assessing Officer came to the conclusion that various concerns had not done any activities of alleged job work/moulding work or trading activities and these were found/alleged to have done billing work only. It also came forth that bank accounts of all these numerous parties had been introduced by the assessee and his associates and that the transactions of billing were also managed by him. The conclusion, in other words, was that the assessee was the real beneficiary of these accounts and which had been utilised for billing purposes of M/s Padmini Polymers Ltd. 31. At pages 23 and 24 of the assessment order the Assessing Officer vide para 6.15 set out the details of the parties, nature of work as also the quantum of billing for the period 1993-94, 1994-95 and 1995-96, the total thereof coming to a figure of Rs. 62,63,83,781, At the rate of 2 per cent of commission the Assessing Office arrived at a figure of Rs. 1,25,27,676. Considering the assessee's claim for deduction on account of expenditure set out in para 6.16 of the assessment order the Assessing Officer arrived at a net figure of Rs. 95,18,600 for the assessment years 1994-95 to 1996-97 and which was added. 32. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o direct evidence with the Department, which would show that the assessee had earned commission at 2 per cent for the purpose of billing on account of the job work for M/s PPL; (vi) Assessee's name was found nowhere in the papers found during the course of the search although the names of other parties were mentioned and which might have been kept by the assessee for getting the accounts settled with M/s PPL since the assessee had approached certain parties for the purpose of job work for M/s PPL.; (vii) That Shri Ramesh Minochia had also filed an affidavit before the Income-tax Officer wherein it had been clearly stated that he was under pressure at the time of recording of his statement; (viii) The assessee was not allowed to cross examine various persons whose statements were recorded behind his back and, therefore, what such persons had stated were mere allegations. 35. The main thrust of the arguments of the learned counsel was that presumptions and assumptions drawn by the Department were rebuttable and in this case there was ample material or the lack of it, which could cogently and validly rebut such allegations. 36. The learned Departmental Representative arguing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded to delete both additions amounting to Rs. 95,18,600 and Rs. 25,11,742 on the following facts and line of reasoning: (i) That the addition was made on the basis of documents found from the possession of one Shri Om Prakash as also the statements recorded of Shri Ramesh Minocha and Shri Rakesh Mahajan,C.A.; (ii) The assessee had admitted during the recording of his initial statement on 20th June, 1996 that he had earned a profit of Rs. 2.26 crores, which was not disclosed by him and he further admitted that the three bank accounts bearing Nos. 5825, 5826 and 5827 were opened in the Canara Bank and they were his benami accounts and all incomes, which were not recorded in the books of account were deposited in these three accounts; (iii) The Assessing Officer had gathered the impression that the assessee was indulging in arranging job work for M/s PPL and charging commission at 2 per cent on the entire job work payments and in doing so the Assessing Officer heavily relied upon the statements of Shri Rakesh Mahajan, C.A. and Shri Ramesh Minocha; (iv) That the fictitious bank accounts were opened "in the names of Shri Ramesh Minocha," who was issuing job work bills to M/s PPL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etor of M/s Arun Moulders in response to issue of summons under section 131 by the D.I. [Investigation] led to the conclusion that the job work was done on contract basis in the unorganized sector and the same was done on behalf of M/s PPL and the same was routed through certain parties, which were issuing bills and charging commission. That charging of commission was not disputed, but that it was only settled by the assessee; (xv) It was quite clear that payments were made on behalf of M/s PPL and not on behalf of the assessee, who only coordinated for getting the job work done for the unorganized sector and billing was done through certain parties, who had issued the bills got their commission after the supply was done by the assessee; and that settling did not mean that the assessee also received some commission; (xvi) That replies to certain questions asked from the assessee at the time of recording of his statement on 6th August, 1996 showed that nowhere had the assessee admitted that he had earned commission; (xvii) It also merited consideration that the assessee had sought time to reply on the ground that he could do so only after reconciling the papers. That this show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not the assessee. 41. In addition to the aforesaid facts and reasoning, the learned Judicial Member dealt at length with the "legal position" on the question of retraction and this spans paras 41 to 53 of his order. In para 42, the learned Judicial Member reiterated the request of the assessee for cross examining Shri Ramesh Minocha and Shri Rakesh Mahajan, which was not allowed and referred to the judgment of the Hon'ble Supreme Court in the case of Kishinchand Chellaram for the proposition that where such an opportunity is not allowed, then addition cannot be made. According to the learned Judicial Member, the situation in the assessee's case was more favourable, than the case before the Hon'ble Supreme Court since statements of Shri Ramesh Minocha and Shri Rakesh Mahajan were recorded behind the back of the assessee, and request for cross examination was not acceded to. The other decisions relied upon by the learned Judicial Member were as follows: (i) Hanuman Agarwal's case; (ii) Gargi Din Jwala Prasad's case; (iii) CIT v. Ashok Leyland Ltd. [1969] 72 ITR 137 (Mad.). 42. The decisions relied upon by the learned Departmental Representative were also adverted to by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are relevant and required to be referred to as under: On Behalf of the assessee:-- (i) That the initial statement of the assessee should not be considered as the same was given under pressure and coercion; (ii) The assessee had stated that he had coordinated with M/s PPL only because the said M/s PPL was buying 70 per cent of the material sold by the assessee and there was an apprehension that the assessee may lose the customer in case the job work was not done through people who did not make any complaints about the material supplied by the assessee to M/s PPL; (iii) That the General Manager of M/s PPL had admitted that the assessee only coordinated the job work done on behalf of M/s PPL and no commission was paid to him; (iv) That Shri Ramesh Minocha had furnished an affidavit on29th August, 1996retracting from his earlier statement recorded by the Assessing Officer and which was also given under coercion and pressure; (v) That since the assessee as also Shri Ramesh Minocha had retracted from their earlier statements, there was no question of relying on such statements and making an addition thereof; (vi) That a person who had given his statement could successfully ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent and there was, therefore, no case for the assessee to retract from his earlier statement; and (viii) As regards the retraction by Shri Ramesh Minocha, the submission was that it was not permissible in law to retract from one's own statement in such a light manner merely saying that the statement recorded earlier was under coercion. 46. The learned Departmental Representative on behalf of the Revenue relied on the judgment of the Chandigarh Bench of the Tribunal in the case of Sadhu Ram Gupta as also certain other decisions to the same effect. 47. In considering the aforesaid submission of the parties with reference to the facts of the case, the learned Accountant Member in para 21 at page 92 of the order set out two broad propositions, which were required to be examined and decided and these being: (i) Whether a person could retract from a statement given earlier, and if so, under what circumstances; and (ii) What was the effect of a situation where the Assessing Officer framed an assessment without confronting the assessee with the material gathered by him. 48. The learned Accountant Member then referred to certain reported decisions beginning with Pullangode R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommission from M/s PPL he might have received the same from such other persons; (vi) The assessee himself had made a claim for deduction on account of expenditure before the Assessing Officer and this would not have been done in case he had not earned any commission at all; (vii) The assessee had stated that he had to coordinate between M/s PPL and the persons employed in the unorganized sector apprehending that M/s PPL may stop dealing with him, but nothing was brought on record by the assessee to establish the genuineness of such a fear. 51. In view of the aforesaid facts, the learned Accountant Member opined that the retraction by the assessee from his earlier statement made at the time of search was not successful. 52. Coming to Shri Ramesh Minocha, the learned Accountant Member noticed that in his statement recorded on12-7-1996he had conceded that he was engaged in issuing the bogus bills in respect of which he was earning commission from the assessee in respect of his three concerns. 53. Further vide letter dated 15-7-1996 Shri Ramesh Minocha confirmed the aforesaid facts and further stated that Shri Jagvinay Singh and Shri Surinder Pal Singh, proprietors of two oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned counsel for the assessee vehemently supported the order passed by the learned Judicial Member in respect of the first point of difference, which contains the two additions discussed at length in the earlier part of the present order. I would like to go to the extent of saying that the learned counsel reiterated the submission made at the time of hearing before the Division Bench and which have been duly taken note of by the learned Members in their separate orders. It was emphasized that there was neither any unexplained cash or a bank account which remained to be explained. According to him, the additions in question had been made primarily on the basis of the statement recorded at the time of search and quite a few "additions" had not even been made by the Assessing Officer himself. According to the learned counsel, there was no material on record, which would show or prove that any income had been earned, more so, of the nature indicated by the Assessing Officer. Further according to him there was nothing to show that the assessee had received any money. The further submission was to the effect that the statement of Shri Ramesh Minocha recorded after the search did not rela ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing that proper and adequate opportunity had not been given by the Assessing Officer and the second being that the assessee had successfully rebutted all the adverse facts brought on rccord by the Assessing Officer. According to the learned Departmental Representative, there was a clear contradiction in the order of the learned Judicial Member in respect of the aforesaid two grounds inasmuch as on the one hand it was being held that proper opportunity was not given and on the other the assessee had rebutted all the adverse facts brought on record. It was the submission of the learned Departmental Representative that the latter was not possible without the former. It was also emphasized by the Departmental Representative that both the learned Members had agreed on a proper opportunity not having been given by the Assessing Officer and the learned counsel for the assessee was wrong in stating that such an opportunity was not asked for. A reference was made to page 63 of the order of the learned Judicial Member. The learned Departmental Representative in fact went on to state that the learned Judicial Member had devoted a good part of his order to the question of opportunity and his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer was on good grounds and he in fact agreed with the assessee's counsel when it was contended by the latter that the earlier statements of the assessee as also Shri Ramesh Minocha were given under pressure and coercion. As against this the learned Accountant Member took the view that the retraction was not on any good or valid ground and statements, which had been recorded on oath in the first instance could not be lightly brushed away. The learned Accountant Member also took into account the submissions of the assessee's counsel made before the Division Bench that the statements of Shri Ramesh Minocha and Shri Rakesh Mahajan were recorded behind the back of the assessee and no opportunity for cross-examination had been allowed. I may mention that the learned counsel in the present hearing before me categorically stated that no such opportunity had been asked for, but this is belied by the recording of the facts by both the learned Members of the Division Bench in their separate orders. 63. The learned Accountant Member, in my opinion, has tightly opined by taking into account the reported decisions that retraction by Shri Rakesh Mahajan and the assessee from their ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. It must be appreciated that this is a case in which there was a seizure of cash amounting to Rs. 86,00,000 and the assessee straightaway offered for taxation a sum of Rs. 2.27 crores. Three bank accounts in the name of three different persons were unearthed by the Department and the assessee in his initial statement accepted that these were his benami accounts. The huge amount of cash was seized from one Shri Gopal Singh, a trusted employee of the assessee; (iv) The aforesaid three bank accounts were introduced by Shri Rakesh Mahajan,C.A.and it clearly emerges that he did not know the three persons at all and he had probably put his signatures on blank introduction forms with the expectation that some professional work for the assessee Shri Gopal Singh would come his way. The said Shri Rakesh Mahajan in his statement did mention about some audit work being done and income-tax returns being prepared and books in respect of which were left at his office by Shri Gopal Singh; and (v) Coming to Shri Ramesh Minocha he also in his initial statement confirmed receiving commission on billing work and which according to him was received in cash from the assessee. He also referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be appreciated that this is a search and seizure case, where additions are made on the basis of the seized material and documents and an appellate authority would delete such additions only if it finds that there is lack of material or inadequacy thereto. The observations of the learned Judicial Member at pages 74 and 75 of his order are, therefore, not found to be relevant/applicable. 68. Coming to the second point of difference, both the learned Members of the Division Bench were of the view that the addition was required to be deleted, but the learned Accountant Member in conclusion observed that "the Assessing Officer should be given liberty to consider the taxability of this very sum in accordance with the law". 69. After hearing both the parties, I am of the view that this observation made by the learned Accountant Member is superfluous and not at all relevant to the point at issue. Once the learned members of the Division Bench had agreed between themselves that the addition of Rs. 1.36 crores and odd could not have been made in the block assessment, then there was no need to make any further observation. In this view of the matter, the aforesaid observation made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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