TMI Blog1992 (12) TMI 82X X X X Extracts X X X X X X X X Extracts X X X X ..... and got it signed and sworn before some official of Consulate General of India, San Francisco, California, on 17th Sept., 1980. On this basis assessee's assessments for the above mentioned three years were reopened vide notices under s. 148, all dt. 12th Nov., 1981. It was gathered that on the basis of similar information from John Ashlyn regarding transactions with M/s Salas S.A. of Geneva, income-tax and wealth-tax assessments of several exporters of precious stones from Jaipur and their partners were reopened and substantial additions had been made by the Assessing Officer to their disclosed incomes and wealth. At this stage we may also mention that from the photo copy of the statement of John Ashlyn which has been filed before us, we are unable to gather clearly what was John Ashlyn's relationship with M/s Salas S.A. or a partner or a Director or Managing Director or merely some employee of Salas S.A. and in what capacity he had given that statement and information. 3. So far as the assessee before us is concerned, it is a registered firm which had four partners till asst. yr. 1973-74, out of whom one went out and thus for asst. yrs. 1974-75 and 1975-76 only three partners we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were vouched and that all the original assessments were completed after proper examination of accounts. He explained that all exports of precious stones of assessee, like other gem exporters of Jaipur, were only on consignment basis. The procedure involved was that when assessee wanted to export the goods, a PP Form was prepared giving complete details, valuation of goods was done by an appraiser of the customs Department to see that they were neither overvalued nor under-valued. Immediately thereafter they had to be handed over to the Foreign Post Office to ensure that the same goods were exported. When they reached abroad, the agent there took delivery of the goods and only the goods found fit for sale were sold and those not found to be saleable were returned. When the unsold goods were received in the Foreign Post Office in India an intimation was received by the assessee to produce the papers and prove that they were the same goods which were exported and only after proper verification they were handed over to the assessee. Further, in respect of those goods which had been found fit for sale abroad, remittances could be sent by the foreign agent only through the bank and af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at although not required as per the decision reported in Kishin chand Chellaram vs. CIT (1980) 19 CTR (SC) 360 : (1980) 125 ITR 713 (SC), yet assessee had discharged the negative burden placed on the assessee. He further stated that the same amount had also been considered for addition in the wealth-tax case of the partners of the assessee, viz., Smt. Lad Kanwar, but that was deleted by the Tribunal vide its order dt. 10th Aug., 1984 for wealth-tax asst. yr. 1977-78. That order has become final and thereafter in her wealth-tax assessment for asst. yr. 1978-79 the WTO himself excluded her share from this amount vide his order dt. 4th July, 1989. According to Shri Ranka this established that while the Revenue had failed to prove that document, the assessee had proved it to be fabricated and Revenue had accepted this. 6. Regarding the "Legalised documents" Shri Ranka submitted that assessee had althrough been claiming that the documents should be shown to the assessee and John Ashlyn and Salas S.A. should be allowed to be cross-examined by assessee or those documents should be excluded from consideration. He pointed out with reference to copies of assessee's letters filed in the pap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be produced. In particular he drew our attention to the case law cited by him p. 128 of his paper book which is relevant to the issue before us. With reference to the decisions of the Tribunal he submitted that assessee's case was different from the cases of other jewellers like H.C. Bader, etc., which were restored to lower authorities but was like that of R.Y. Durlabhji vs. ITO (1989) 76 CTR (Trib) (Jp) 98 which was decided in favour of that assessee because in that case the assessee had pointed out the falsifications and contradictions in the statements of John Ashlyn and documents of Salas S.A. 7. Coming to the merits of the case, Shri Ranka repeated that according to assessee's system of accounting, only when the sale amount was received by assessee it was treated as sale. But in assessee's case additions had been made by enhancing the valuation of the closing stock lying with the agent (Salas S.A.) on consignment basis, for which there was no justification. 8. Similarly regarding the additions made for alleged unrecorded or undervalued sales, he urged that there was no under-invoicing of sales as alleged by Revenue. He also claimed that for asst. yr. 1974-75 there was dou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to s. 69 the assessee is required to prove the source of investment, but from the document on which the Revenue was relying it is seen that debit precedes the credits and, hence, no additions could have been made in the income of assessee, on that basis Shri Ranka, who had separately and specifically challenged the authenticity of the documents particularly referred to the copy of document on p. 55 of the paper book referred to above on the basis of which addition of Rs. 2,55,318 had been made in asst. yr. 1974-75 and pointed out that it did not bear the name of any party much less Salas S.A. It did not bear the signatures of the party to whom it belonged, it did not specify clearly what was the currency mentioned therein, i.e., whether they were US Dollars or Swiss Francs and the dates mentioned in that statement were not in regular and chronological order. For these reasons also this document was not worthy of reliance and could not be the basis of rejecting assessee's books of account and the statement on oath of Shri P.C. Dhadda. He pointed out and filed a statement running into five pages in which it was claimed that there were those documents which were relied upon by Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... code words "Most selective goods" has been given to specify that the real value of such goods would be half of the PP Form value. He compared the invoice on p. 8 of the paper book with invoice on p. 19 of paper book and pointed out that each figure was double of the original invoice value. He argued that whereas invoice at p. 19 was submitted at the Indian Foreign Post Office, the invoice at p. 8 was submitted at the Geneva Post Office. He further referred to p. 22 with regard to John Ashlyn's statement on p. 2 of Revenue's paper book regarding lot Nos. 81, 91 and 92 for US $ 328, how this amount came was on p. 24 and that p. 10 of the paper book was duplicate of p. 22 (regarding remittances for goods sent by assessee). According to Shri Kundra regarding Lot No. 96 statement was on p. 23 by Salas S.A. and the remaining lots were returned. There was a return note on p. 20 of Department's paper book and the prices were real as found in the Switzerland invoice. He submitted that as per p. 26 the amount was paid to M/s Unigem and debited to assessee's account and two cheques were paid to Shri P.C. Dhadda as per pp. 4-5 of paper book for US $ 961.27 dt. 17th April, 1973 and for US $ 39 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d nothing ill against each other till that time. Shri Kundra suggested that in the year 1975 Emergency was imposed in India and on account of the strictness imposed during that period the relations between the two might have soured and that is why the last receipt is dt. 1977. According to Shri Kundra in this light it was not possible to accept the argument of the learned counsel for assessee that all those documents could have been fabricated by John Ashlyn. Shri Kundra posed questions to the effect as to who could have gained more by these transactions, who needed underinvoicing, who would undertake additional liability in their own books of account. According to Shri Kundra, Foreign Exchange restrictions were in India and not in Switzerland and, hence, it was the assessee who needed the foreign exchange and, hence, Shri P.C. Dhadda personally went to make arrangements regarding what code words could be used and how underinvoicing could be done. He referred to p. 11 of his paper book which is a photo copy of a letter written by Shri P.C. Dhadda from his hotel in Geneva to Salas S.A. asking them to send blank forms of assessee's invoices with them and also the past scrips requesti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been shown in invoice at page 51 of assessee's paper book. He submitted that so far as page 20 showing PP Form statement, the invoice in respect of which was on page 50 of assessee's paper book showing US $ 5974 on page 20 and US $ 11,948 on page 50 has not been fully dealt with in the assessment order for the asst. yr. 1975-76 (to which it pertained) because the goods sent through that invoice had been returned to the assessee. 14. Regarding the additions made on the basis of credits appearing in assessee's accounts in the books of Salas S.A. Shri Kundra submitted that the assessee had been provided copy of that account and had been asked to reconcile that account with his books of account. However, since the assessee had failed to explain satisfactorily those investments, they had been added to the income of the assessee under s. 69 of the IT Act. The learned Departmental Representative submitted that the origin of this evidence, namely, the legalised document was identifiable; these were like the books of account of any other assessee and if in the books of another assessee some discrepancies were to be found as compared to the books of account of the assessee before us, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (SC) and particularly to the observations on page 545 and 546-547 of the report. The learned Departmental Representative submitted that there might be some shortcomings in the evidence procured by Department yet the matter had to be judged in the light of the prevailing circumstances, namely, the involvement of a foreign party, passage of time, reasons for the differences in figures in assessee's books of account and foreign party's account, human conduct, etc. He also referred to the decision in the case of Kalwa Deva Duttam Ors. vs. Union of India (1963) 49 ITR 165 (SC) and submitted that when evidence itself was produced, the burden becomes immaterial and the evidence had to be examined on the basis of whatever it was worth. 17. With reference to assessee's argument that the debit preceded credits, Shri Kundra pointed out that it was not a case of cash credits but it was a case of assessee's investment outside the books of account and, hence, the assessee had to prove the sources of those investment and if he could not explain it, it had to be treated as assessee's income. He submitted that alternatively it amounted to an admission to the effect that they were assessee's wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cheque issued to M/s Unigem Traders and below that written in hand "P.V. Jewellers given to Mr. Padam C. Dhadda in Geneva on 17th April, 1973"), Shri Ranka argued that the Revenue claimed that Salas S.A. kept regular accounts but there was no contemporaneous receipt for having given this document or cheque to Shri P.C. Dhadda. He further pointed out that these were photocopies of photocopied documents and these showed that the original was not available with him but it was some photocopy from which another photocopy was taken. He submitted that if it was obtained from the bank, certified copy should have been taken from the bank. These facts show that obviously this document had not come from the bank. He pointed out that even the attestations by the Indian Consulate made it clear that it was obtained from the bank, a certified copy should have been taken from the bank. These facts show that obviously this document had not come from the bank. He pointed out that even the attestations by the Indian Consulate made it clear that it was photocopy of a photocopy and not of original document. Shri Ranka submitted that Salas S.A. might have obtained a copy from the bank and given it to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ages 4, 5 and 26 of Revenue's paper book may be kept out of consideration. 19. Shri Ranka continued that page 7 was neither shown nor a copy was provided to assessee either by Assessing Officer or by CIT(A). Page 9 of Revenue's paper book was not supplied by the Assessing Officer but had been referred to by the CIT(A) in his order without confronting the assessee with it. Page 10 was neither referred not relied by any of the two lower authorities, page 11 was neither provided nor shown to the assessee at any level. Page 13 was shown to the assessee but copy was not provided and Shri P.C. Dhadda in his reply had specifically stated that he disowned the photocopies of invoice for US $ 10518 each because they were neither signed by him nor any partner of the firm nor were they on his proforma invoice which was used by the firm. He had also explained in detail the procedure involved in the export of his goods which involved several Government agencies and how the documents which were shown to him were forged documents. Regarding page 15, assessee's reply is in column Nos. 6 and 7 of the chart and on page 65 of assessee's paper book Shri P.C. Dhadda had disowned this account and had r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oned in the statment were not originals but photocopies of photocopies but John Ashlyn had stated that they were true copies of the originals. Moreover, it showed that the documents were being shown to John Ashlyn and his statement was being recorded. Shri Ranka further stated that the statements are normally recorded for verbal testimony without showing documents otherwise whatever emerges from the documents is somthing which is to be seen and examined. He submitted that in the instant case John Ashlyn could state only whatever energed from the documents. He further pointed out that what was John Ashlyn's relationship with Salas S.A. has not been spelt out anywhere. Shri Ranka further pointed out to para 3 of the statement from where it emerged that he had falsified the accounts of Salas S.A. Moreover, according to Shri Ranka, he appears to be an educated person and yet he had first stated that the assessee had been sending correct invoices until 1972 and then at the end of 1972 the assessee allegedly started falsfying its invoices. According to Shri Ranka this would mean that the alleged falsification should have started somewhere in November or December. But the relevant record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this letter there is a reference to a letter dt. 4th Dec., 1972 from Salas S.A. to the assessee. Shri Ranka claimed that if the Revenue and the Investigating Officers were relying on this letter claimed to be from the assessee, they should also have obtained a copy of letter dt. 4th Dec., 1972 from Salas S.A. and then only full and correct facts could have been known. Shri Ranka claimed that if the Investigating Officers had not done this, they had not acted judiciously or as quasi-judicial authorities. Shri Ranka further pointed out that on page 38 of assessee's paper book he had given a list of PP Forms and item No. 5 was regarding PP Form dt. 5th March, 1973 which is alleged to be referred in assessee's above mentioned letter. Shri Ranka pointed out that from the language it was obvious that the last three shipments and not the first would be at the same price and hence PP Form dt. 28th Jan., 1972 was not underinvoiced. If this were so how had Salas S.A. credited items pertaining to PP Form dt. 28th Jan., 1972 at double the invoice price which is added by the Assessing Officer as discussed above on page 5 of the assessment order lot No. 25 alleged to be credited on 28th July ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yr. 1974-75. Shri Ranka also pointed out that at the end of statement of John Ashlyn it was not mentioned, which is normally mentioned while recording statements on oath, that it was read over and accepted to be correct. Further it showed that it was signed and sworn before the official of the Consulate General of India on 17th day of September, 1980 while it had been recorded on 12th Sept., 1980. Shri Ranka further argued that this deposition could not be said to be a statement on oath because it was supposed to be recorded by two officers and then carried to Consulate General who has certified it as signed and sworn "Before me". He further pointed out that normally in FERA and income-tax matters the statements are recorded in question and answer form rather than in the form of straight statements. But this statement was not in that form. He submitted that if it was taken as an affidavit then it was not stamped. Further up to the first part i.e. 12th Sept., 1980 it is not an affidavit. Moreover, at least identification of the person making this statement is required which is not there. Shri Ranka stated that all this showed that this was a very casual statement which was false and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal was. The learned counsel asserted that the falsification and fabrication and photocopying could not be ruled out; in fact it was very easy which could be seen when page 8 of Revenue's paper book is compared with page 13 of Revenue's paper book. Both are supposed to be the same except for "Consignment invoice" written in hand on right hand side top of page 13. However, the date "5.3" which is clear on page 8 appears to have disappeared on page 13 along with the printed words "so that in case of return they may" which are there on page 8 have disappeared on page 13 and yet page 13 has been attested as "attested true copy of original document". Regarding p. 20 of Revenue's paper book, Shri Ranka again stated that the attestation done by Consulate official was mechanical. On this page it is certified "Attested true copy of original document." Shri Ranka argued that since it was supposed to be the return note by Salas S.A. to assessee, dt. 18th Sept., 1973, the normal state of affairs would be that the original document would reach the assessee and only its copy would be with the sender. But if the original was with the sender, the question would be how the original was with the sen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the addition should be deleted. Referring to the decision in the case of C. Vasantlal relied upon by learned Departmental Representative, Shri Ranka pointed out that in that case the entries were in the books of account of the assessee. He had shown that payments were made to two persons. Opportunity to cross-examine was given to that assessee but it was not utilised. Opportunity to cross-examine was given before the AAC and he had cross-examined that persons. Finally that case was regarding s. 66(2) now s. 256(2) in IT Act, 1961. He submitted that none of those elements existed in assessee's case and, hence, that case was not relevant for assessee's case. Regarding the case of Vimal Chand Golecha on which the learned CIT(A) and learned Departmental Representative heavily relied, Shri Ranka clarified that case was a writ petition challenging vires of ss. 147/148 of IT Act. He submitted that s. 147/148 were held to be constitutionally valid. But on p. 130 of the report it was observed that s. 3 does not dispense with the proof of a document. 23. Shri Ranka conceded that in the "legalised documents" from the Consulate General, the seal and signatures had not to be proved, yet th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t even if he was found to be false, no harm could come to him. He repeated that pp. 4-30 of Revenue's paper book were not signed by the person/persons who had supplied those documents. In this context he further referred to cases reported in 72-STC-62 and 69-STC-229. 25. He finally summed up by saying that as per factual aspect there was no independent or reliable evidence of underinvoicing. There were double additions for same allegation once in asst. yr. 1973-74 and again in 1974-75. Regarding valuation of closing stock, as per assessee's method of account it was at cost and there was no evidence that the assessee had purchased the goods at higher price. There was nothing in John Ashlyn's statement why credit was given to assessee after first debiting assessee's account on the basis of which additions have been made. He claimed that even Revenue does not know what those entries are and yet assessee is required to explain those entries. 26. We have carefully considered the very learned and forceful arguments advanced from both the sides and have also perused the evidence and material on record and the case law on the subject cited from both the sides. In our view the situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complice of the assessee in its irregular and illegal activities. He has also emphasised that while the foreign exchange restrictions in India should have deterred the assessee from showing true transactions, no such restrictions were there in Switzerland. We have carefully considered these contentions in the light of submissions made by Shri Ranka and the evidence on record. In our opinion, Shri Ranka has succeeded in demolishing the reliability of the evidences on the basis of which the Revenue has made the impugned additions. Without repeating in detail, since his arguments have already been given in great detail in the earlier part of this order, we may briefly mention that we find that it is true that the documents, photocopies of which or those documents which are photocopies of photocopies which have been filed before us in almost all the cases do not indicate as to how they were obtained or by whom they were supplied. The entries in the purported accounts of Salas S.A., copies of which have been filed on pages 15, 16, 17 and 18 of Revenue's paper book and on the basis of which additions for alleged undisclosed investments under s. 69 have been made in all the three years un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of that party which benefit we do not have in the case before us. Thirdly, in the case of a local party, if it had made similar entries, it might have become liable to perhaps civil action from the assessee as well as action from the Revenue Department which apprehension may not be there in the mind of Salas S.A. because they are in a foreign country. Although we find that the lower authorities have made a mention that the account of Salas S.A. were audited by reputed auditors and they were assessed to income-tax yet in the first instance we do not know if at all the accounts were audited and if the accounts were audited who are those auditors and even if the auditors were there how they are supposed to be reputed auditors when they are supposed to have passed the vouchers/invoices which are alleged to have been issued by the assessee-firm without signatures of any party, without stamp of the customs authorities of Switzerland and not in the case of one or two vouchers but in the cases of a large number of vouchers and invoices. We are unable to agree with the submissions of learned Departmental Representative that in Switzerland the assessee should have been more bothered about ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... axed, penalised and even prosecuted both under the income-tax law and criminal law if his statement on oath was found to be false, John Ashlyn had no stakes at all as he knew or should have known that those officers who were recording his statement would be able to do no harm to him. We agree with Shri Ranka that he has admitted that he was falsifying the accounts of Salas S.A. when he said that he had sent a gift of US $870 which in fact was not gift and when he admitted that he was passing entries for double the price in his accounts when the assessee was sending the goods according to him invoices prepared in India at exactly half the price. We have further taken note of the fact that as per the procedure explained by Shri P.C. Dhadda in his statements so also by Shri Ranka in his arguments, if we believe the statement of John Ashlyn, Shri P.C. Dhadda had to dupe and deceive every time not only the officials at the Foreign Post Office, the Customs Department, the official appraiser and the bank officials in respect of each consignment which he sent, this would mean that if we believe John Ashlyn the inference would be that so many official agencies were hands-in-glove with not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f which the additions have been made do not belong to him, who has a lot at stake to loose and suffer in case his statement is found to be false, who had succeeded in proving through the opinion of an old and renowned handwriting expert, namely, Prof. B.B. Kashyap who has given a definite opinion on pages 83 and 84 of assessee's paper book that the disputed signatures appeared to be different from admitted signatures of Shri P.C. Dhadda, who has shown that his dealings had got to be through Government offices and nationalised banks. In our opinion, when all these factors are compared with each other, the weight of evidence goes very far in favour of the assessee rather than in favour of the Revenue. In this view of the matter we would not indulge in going into the technicalities regarding admission of fresh papers or evidence which has been objected to by Shri Ranka very seriously in his arguments, which we have already referred to in this order. 27. At this state we may further mention that authenticity and truthfulness of the material collected in respect of Salas S.A., Geneva and the statement of John Ashlyn, which had been the basis of proceedings against several jewellers of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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