9911796707
TMI Blog1985 (6) TMI 78X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Date Descrip- Consignor Consignee Amount Freight Weight No. tion of Rs. Rs. Qtl. goods ----------------------------------------------------------------------------------------- 1 2 3 4 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 15 Jodhpur Traders, Ahmedabad 420 29-9-1978 Titanium Sunder & Co., Anubhav 18,408 212 15 Jodhpur Traders, &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; Jodhpur Traders, Ahmedabad ----- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chemicals, Traders, Jodhpur 119, Spectrum Comm. Centre, Relief Road, &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; Comm. Centre, Relief Road, Ahmedabad864 7-2-1979 Titanium Indl. Anubhav 73,632 842 60 &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; Relief Road, Ahmedabad ----------------------------------------------------------------------------------------- The recipient was contacted through the department at Ahmedabad who vide his letter to ADI dated 8-5-1979 had accepted of having received the titanium dioxide of four consignments only relating to Bill Nos. 419, 420, 421 and 543. They further mentioned in the letter that the three parties had dealings with them only in 1978-79 and they did not deal with them either in 1977-78 or 1979-80. They also mentioned in the said letter of having sold caustic soda to Gulabdas Jagannath & Associates in the year. In the letter the party mentioned that Ram Lal Garg was personally known to them and that Ram Lal Garg used to represent Sunder & Co. In the letter it was further mentioned that the representative of Industrial Chemicals accompanied Ram Lal Garg fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tocopy of receipts issued was also taken by the department. This statement was later followed by an affidavit dated 1-1-1981. 2.2 From 23-8-1979 to 29-8-1979 the department conducted the survey of the premises of Gulabdas Jagannath & Associates, Gulabdas Jagannath and also the premises of their partners. The assessee is a partner in his individual capacity in Gulabdas Jagannath and a partner as a karta of his HUF in Gulabdas Jagannath & Associates. Gulabdas Jagannath deals with soap, soda, urea, BHC powder and other chemicals and Gulabdas Jagannath & Associates deals in the titanium dioxide. In the raid, the department seized the following documents: (a) a visiting card bearing the name Industrial Chemicals, Nakoda Bhawan Chopasini Road, Jodhpur, telex and telephone of the assessee-firms; (b) correspondence between Industrial Chemicals, Guj. Chem. Distilleries India Ltd., Billimora, Gujarat and Chemical & Ancillaries Services for the period February and March 1977 (Pages 2 to 5 of paper book). The assessee was asked to explain the above but no satisfactory explanation was given. Later the assessee vide letter dated 12-9-1979 in section 132(5) of the Income-tax Act, 1961 ('the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad given the statement. Question 28 : Did he also stated that Shyam Sunder Dhoot sent the goods ? Answer : I have no idea. Question 29 : Did you prepare the various bills as has been mentioned in your affidavit ? Answer : I did not prepare any of the bills. Questions 37 & 38 : Kindly tell as to when Shyam Sunder Dhoot contacted you in connection with the consignment transported ? Answer : He came to our Jodhpur office personally about 3-4 days prior to the first consignment and also spoke over the phone about two hours prior to the despatch of goods. Question 39 : Did Shyam Sunder Dhoot himself brought the goods ? Answer : No. The goods were sent through a messenger. Questions 40 & 41 : Kindly give the name of the office of Shyam Sunder Dhoot ? Answer : The only office name I had known was Gulabdas Jagannath & Associates. Examination by Manik Chand, ITO. Question 47 : Did you discuss about transportation request made by Shyam Sunder Dhoot with Madan Raj Mehta, your partner ? Answer : No. I did not discuss this matter with Madan Raj Mehta. Question 48 : Have you mentioned now to Madan Raj Mehta ? Answer : Yes. I have now mentioned it to him. Re-examination by P.R. Meh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be present while adjourning the case on 27-2-1982 without mentioning that he had called Mr. Ratan Lal for examination. On 6-3-1982 Shyam Sunder Dhoot did not attend as he was away to Gujarat Alkalies & Chemicals Ltd. Mr. Ratan Lal's statement was recorded in the presence of Mr. Mertia, the assessee's counsel. Mr. Mertia was asked to cross-examine him who refused to do so on the plea that his client away and that it is he who would like to cross-examine Ratan Lal. The statement of Mr. Ratan Lal is at page 65 of the paper book. Question 1 : Did you on behalf of Anubhav Traders purchased titanium dioxide and caustic soda from Sunder & Co., Amarchand Agarwal & Co. and Industrial Chemicals ? Answer: Yes, there were purchases from all the three firms. Question 3 : Who had contacted you on behalf of the three firms ? Answer : The person who contacted me mentioned his name as Ram Lal Garg. Question 4 : Where does he reside ? Answer : I know that he resides at Jodhpur but I don't know his address. Question 5 : Can you recognise Ram Lal Garg ? Answer : Yes, I can. I had 5-6 dealings with him. Question 6 : Is the photograph that is shown to you is that of Ram Lal Garg ? Answer : Y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Ahmedabad and despatches against the rest of the bills were sent to the other places which are known only to the assessees. Therefore, for the purpose of computation of concealed income the inclusion of rest of the bills is justified. In this connection copies of some of the bills but covering all the three firms were given to the assessee asking him why not the rest of the bills should also be taken into consideration for the purpose of computation of income. The learned authorised representative through one of his messengers sent a letter the substance of which is that only the material on record could be relied upon, if at all the addition is made on account of business carried on by the fictitious concerns which the assessee disowns, the argument of the assessee is not convincing in the light of the above discussion and also for the reason that the authorised representative has not given any argument for not taking into consideration the rest of the bills relating to all the three fictitious concerns. The assessee has not co-operated with Income-tax Department, and also as the assessee has failed to disclose fully and truly all material facts of his income, I have no alternat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; ------- But keeping in view the various contingencies of business, which might have occurred, I take total number of effective bills at 5,000. Thus, sales through 5,000 bills on the estimate average of Rs. 15,000 per bill comes out to Rs. 7,50,00,000 and to this figure I add again on estimate basis Rs. 5 lakhs on account of bills which have been issued for higher amount. Looking to the facts and circumstances of the case, I apply a gross profit rate of 4 per cent which gives a total gross profit of Rs. 30,20,000. Out of this, a deduction to the extent of 25 per cent is allowed to the assessee for the items of profit and loss account. Thus, the net profit earned through these concerns is taken at Rs. 22,65,000. It may also be mentioned that the source of investment in purchase and sale of the goods is also not known and, therefore, on estimate basis I take the initial investment for carrying on the business through the above concerns at Rs. 1,50,000. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m. For the reasons mentioned in (vi) above, the evidence is rejected as irrelevant. I wish the assessee and his authorised representative had taken equal trouble in giving the true particulars to the department, so that the facts in the matter could have been easily established without the botheration of their estimation. (viii) The ITO's estimation of initial investment in the business of three concerns Rs. 1,50,000 is very reasonable and, therefore, no interference in the matter is being made'." 3. Aggrieved by this order the assessee preferred appeals to Commissioner (Appeals). The observation of the Commissioner (Appeals) was: (a) Regarding seizure of visiting cards and correspondence of Industrial Chemicals, assessee stating that he does not know anything about them, later correcting it by a letter and the address in the bills which were found to be bogus, adverse inference could be taken against the assessee: (b) The ITO should have given the assessee another opportunity to cross-examine Ratan Lal of Anubhav Traders; (c) Though all goods have been sent to Anubhav Traders only the following were found entered in the books of Anubhav Traders: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; entered (iii) Industrial Chemicals 5 Consignments Only two found &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further submitted that some photograph purported to be of Ram Lal Garg was shown to Ratan Lal which he had recognised but he was made to sign on the back of photograph of Shyam Sunder Dhoot. It is assessee's misfortune that he had to go to Ahmedabad on 6-3-1982, as otherwise on that day itself Ratan Lal would have clarified that Ram Lal Garg and Shyam Sunder Dhoot are two different persons. He made a reference to page 102 where the affidavit of the Branch Manager at Jodhpur Office of Anubhav Traders is provided wherein he has stated that Ratan Lal had known Shyam Sunder Dhoot for quite sometime as Shyam Sunder Dhoot used to come to their office. ITO waited almost over 20 days before he had made the assessment. He could have easily afforded another opportunity to the assessee. Even the IAC refused the opportunity to the assessee. 4.3 Mr. G.D. Gargieya then submitted out of 13 bills, the department had provided only six bills. He then by referring to the serial numbers of the bills submitted that Sunder & Co. issued bill No. 1048 on 30-9-1978 and is said to have issued bill No. 1013 on 26-10-1978 which bill number is very much earlier. Similarly, in the case of Industrial Chemicals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone any circumstantial evidence at all against the assessee. He then referred to pages 81-92 where the statement of various transporters are attached none of them had transported any goods of the three firms in the year under consideration. This point was made in connection with the observation of the ITO in estimating the sales at Rs. 7.5 crores. The department had carried out the search for over six days and could not point out any defect with the books of the firms of the assessee nor they had found any unaccounted stocks or any other evidence which could lead to the conclusion that assessee had done any dealings outside the books. Further, he submitted by reference to the copy of balance sheet of Travancore Titanium Products Ltd., a Government of India Enterprise (page 137), the only concern in India manufacturing the product titanium dioxide, its total sales all over India is about Rs. 8 crores, the estimate of ITO that the assessee had dealt in goods of a value of over Rs. 7.5 crores is thus clearly established to be totally baseless. Apart from the assessee the concern had dealers and consumers in Rajasthan. 4.7 Mr. G.D. Gargieya further submitted that the department hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO to examine the issue and again in paragraph 22 he mentions that the statement of Parveen Kumar clearly establishes that it was Shyam Sunder Dhoot who had sent the goods to Ahmedabad. But with all that he sets aside the orders of ITO. He, therefore, pleaded that order of ITO needed to be restored. 6. We have heard the parties and considered all the materials that have been placed on record. The fact remains that the survey was conducted on the assessee on the basis of information collected at the time of similar operations on transport operators. From Nakoda Transport Co. the department had collected information that the three firms Sunder & Co., Amarchand Agarwal & Co. and Industrial Chemicals had sent goods vide 13 bills through them to Anubhav Traders, Ahmedabad. Anubhav Traders, accepted having received some goods through Nakoda Transport Co. from the three parties. Nowhere they had mentioned how and to whom the payment was made, i.e., by cash, cheque or banker's draft while they had mentioned that for the sales made to Gulabdas Jagannath on 19-10-1978, the price was paid by banker's draft. The department clearly failed to examine this part and had they done this exercise t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he transportation charges and this presumption he had based on the basis of time, i.e., within about two hours of the enquiry goods came to him for despatches. The presumption is also based in the similar nature of goods. Praveen Kumar admits that Shyam Sunder Dhoot never mentioned the names of the three firms but he concluded it to be belonging to him as the said firms dealt with similar goods whose goods were transported by his trucks. Another reason given by him for his conclusion that Shyam Sunder Dhoot was the owner of the three firms was that he was aware of a number of sister concerns of one firm. The department on the basis of this statement which is entirely a presumption and opinion or feeling of a person had held the assessee to be the owner of the three firms. Praveen Kumar's statement clearly reveals that his conclusions are not based on any facts or evidence and the department have not placed any evidence to lead us to conclusion that the statement is reliable to sustain any addition on the assessee. 6.3 Ratan Lal's statement on 6-3-1982 again cannot be held against the assessee. The reason being he had earlier on 8-5-1979 had given the sales tax numbers of the three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und. The only two aspects that are existing are : the similarity of name Industrial Chemicals and similar type of goods traded in. Are these sufficient to indict a person ? In our opinion, these are clearly not at all sufficient. 6.6 The department provided the assessee copies of only six bills out of the total 13. Even here, by referring to the serial numbers of these bills we find as pointed out by the assessee's counsel that in the ease of Sunder & Co. bill No. 1048 is dated 30-9-1978 while bill No. 1013 is dated 26-10-1978 and similar is the case with bills of Industrial Chemicals. Bill No. 1875 is dated 19-11-1978 while bill No. 1539 is dated 7-2-1979. Latter serial number of bills appears as issued earlier, while earlier serial numbers of bills are issued subsequently. When taking action under section 132, the ITO has a right to make all kinds of presumptions but while making an assessment additions, if any, or best judgment must be based on some reasonable evidence. As already pointed out, the department has not found any cash or investment of whatever sort which the assessee could not explain, but on the other hand, the ITO was thoroughly satisfied with the book results of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... han bare suspicion to support the assessment. They have further observed if the ITO's findings were based on mere guess and could not be supported, the same cannot be said to be material to sustain the findings. 6.7 The Supreme Court in the case of Kishinchand Chellaram have observed making an addition based on hearsay is not permitted. In that case there were telegraphic transfer by the employee of the assessee from one office to another. The ITO wrote two letters to the manager of the bank. The said letters were not provided to the assessee. The manager confirmed that the telegraphic transfer sent from Madras was received by Bombay office and the amount was paid to the employee of the assessee on the same date at Bombay. On the basis of the letters the Tribunal concluded that the amounts were transferred by the assessee and, therefore, was undisclosed income of the assessee. The Supreme Court observed that the two letters from the bank manager do not constitute any material evidence which the Tribunal could take into account for the purpose of arriving at the finding that the sum was remitted by the assessee and if these two letters were eliminated there was no material evidence ..... X X X X Extracts X X X X X X X X Extracts X X X X
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