TMI Blog2006 (5) TMI 159X X X X Extracts X X X X X X X X Extracts X X X X ..... hargeable to tax at Nil and along with that assessee also furnished a letter dated 27-5-1995 and a note stating that the assessee was filing the return under protest. Assessee also sought for various materials/evidences, which were relied upon by the Assessing Officer for invoking the provisions of section 16 of Gift-tax Act. 4. A letter dated 20-2-1998 along with notice under section 15(2) was issued to the assessee. By this letter the assessee was informed of the reasons for reopening the assessment under Gift-tax Act, though it was known to the assessee already by virtue of assessment order for the assessment year 1992-93 dated 16-4-1996. 5. Assessing Officer records the circumstances leading to the reopening of the assessment under the Gift-tax Act. Assessee, Shri S.K. Jain is the Managing Director of a company known as "M/s. Bhilai Engineering Corporation Ltd., Bhilai". Shri J.K. Jain is one of his employees, Manager. The residential premise of Shri J.K. Jain was searched by CBI on 3-5-1991 in connection with hawala transactions. During the course of search, besides other valuables, some incriminating documents were also seized. Copies of such seized documents were receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ether. It has been held that they may be used as corroborative evidence. There are scores of such evidences which are strewn all over the seized documents. There are verifiable entries in respect of farm land, investment in construction of immovable properties, acquisition of artifacts, amounts spent on travelling etc. There are on record statements of independent witnesses who have verified such entries. Further particulars regarding the expenses as recorded in the seized documents and the statements of various persons are available in orders of assessment passed in the assessee's own case in reassessment proceedings under the Income-tax and Wealth-tax Act. For the sake of brevity they are not repeated here. Suffice it to say that they are equally relevant to the assessment made under the Gift-tax Act also. As held in the said proceedings, there are reasonable ground to conclude that the assessee has, during the accounting period, made huge disbursements of money to several persons, the reason whereof has not yet been disclosed. The extent of such disbursements is available in several seized documents and more particularly in a Diary marked as MR-71/91. As could be gleaned therefr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts required to define it as "gift", as defined under section 2(xii) of the GT Act. Gift is a bilateral transaction, existence of donor and donee is a must, property must be transferred from one person to another voluntarily and without any consideration and the property under transaction must be an existing property. In the instant case of the assessee there is neither any cogent material available to this effect nor the Department has placed any material on record. Assessee again relied upon the decision of the Hon'ble Supreme Court in the case of Goli Eswariah v. CCT [1970] 76 ITR 675 and the decision of the Hon'ble Kerala High Court in the case of CGT v. R. Kesavan Nair [1974] 96 ITR 365. 11. Further, it was contended that the recipients have denied any receipt of such gifts, particularly the recipient, Shri P. Shiv Shankar, on examination by CBI on 10-6-1996 stated as follows:- "I had no dealings with any of the Jains of whatsoever nature so that I could receive the said money. If I or my wife and children have not gone abroad then why should I receive that money from any or all of them. The entries seem to be a cooked up one. It is false and baseless." Again, Shri Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral. To this act, there must be two or more persons involved. In the instant case of the assessee, the Assessing Officer has not mentioned as to who are the recipients/donees. In the very assessment order, Assessing Officer has not mentioned any person as direct recipient. There should be an identifiable donee. He has calculated the gift on the basis of a diary marked MR-71/91, where names of some persons have been mentioned in the said diary in code language. He has not specified the names of donees with complete names and addresses. Relying upon the decision of the Hon'ble Kerala High Court in the case of R. Keshavan Nair, wherein it was held "it, therefore, follows that there cannot be a gift in law without vesting of the property gifted in the transferee, and such vesting cannot take place without the consent or the concurrence of the donee", CGT(A) held that the consent or concurrence of the donee is a must to complete the gift. Nowhere Assessing Officer has mentioned that the donees have accepted the gift or they have given their consent or concurrence for acceptance of such gift. 15. Vide Para 15 of his order, the CGT(A) records that wherein some of the persons, who clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk, France and Hongkong was seized, also two diaries and files. The seized materials were received by the Officer on 24-3-1995 from CBI through DDI New Delhi, consisting of photocopies of diaries, registers, reports, etc. The materials were scrutinized. It belonged to Jain Group, assessed in Special Range, Bhilai, viz. Shri S.K. Jain, Shri B.R. Jain, Shri N.K. Jain, Smt. Poonam Jain and BEC. The assessee group is engaged in the business of manufacturing of engineering structures, steel, fertilizers, processing of foodstuff etc. The firm, viz. M/s. Bharat Industrial Works, Bhilai in which Jain brothers happen to be partners is engaged in executing contracts of construction of boilers for Thermal Power Plants throughout the country. CBI formed the opinion that they were indulged in hawala transactions for transferring money from abroad and were enjoying commission thereof. The seized diary consist information of such transactions of hawala for the period February 1989 to April 1991. The description of the diary is in the form of monthly summary of receipts and payments of money; whereas the source of receipts has been given by putting some code names and the payments are also mention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the hands of S/Shri S.K. Jain, B.R. Jain and N.K. Jain in equal proportion for want of correct bifurcation of it as per their memorandum of understanding, since no note found placed in the seized material and it is chargeable to tax for the assessment year 1991-92. Thus Rs. 64,97,900 is assessable in the hands of each". 23. Then it is recorded that Shri S.K. Jain vide letter dated 31-5-1994 addressed to the Enforcement Directorate explained how the foreign articles were received on behalf of Shri S.K. Jain and customs duties were paid. 24. After giving the details as briefly narrated above, it is concluded as follows: "Financial affairs of this group as seen through the seized material appears to be interwing bringing into fold the three brothers viz. S/Shri B.R. Jain, N.K Jain and S.K Jain and Smt. Poonam Jain, wife of S.K Jain and their company BEC Ltd. So far as the concealment of income wealth is concerned it involves the period from financial years 1985-86 to 1991-92 relevant to assessment years 1986-87 to 1992-93. In this connection, it is noticed that this group of assessees have utilised the black money in the investment by way of acquisition, renovation and modific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om salary, business and other sources during the relevant period. A search and seizure operation was carried out by the Central Bureau of Investigation (CBI) on 3-5-1991, at the residential premises of one Shri J.K. Jain at G-36, Saket, New Delhi, an employee of M/s. BEC Impex International Private Limited, a company in which the assessee was a Director. From the residential premises of Shri J.K. Jain, some loose sheets/documents and diaries were found, which were seized by CBI. The diaries so seized from the premises of Shri J.K. Jain included one spiral bound diary, which was in the handwriting of Shri J.K. Jain and the same was marked as MR-71/91 by CBI. 28. Pursuant to warrant of authorization issued under section 132A of the Income-tax Act, 1961, CBI handed over photocopies of the seized documents to the Directorate of Income-tax (Investigation), New Delhi on 7-2-1995. Photocopies of part of the seized documents, out of the documents so received by the Directorate of Income-tax (Investigation), New Delhi from CBI, were sent to the Assessing Officer, i.e. DCIT (Assessment), Special Range, Bhilai on 20-3-1995, which were received by the Assessing Officer on 24-3-1995. 29. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been filed against the order of the CGT(A) dated 3-8-1999. 33. With regard to Proposition No. (1), i.e. initiation of proceedings on the dictates of higher ups (Ground No.8), the learned counsel for the assessee submitted as under:- Reassessment proceedings were initiated after receipt of part of the seized documents along with letter dated 20-3-1995 from DDIT (In v.), New Delhi by the Assessing Officer on 24-3-1995 at 5.00 p.m. Prior to the receipt of the aforesaid letter by the Assessing Officer, DDIT (Inv.) had sent a letter dated 28-2-1995/1-3-1995 to CIT, Jabalpur which contained, inter alia, the following documents/statements: (i) Report of CBI; (ii) Statements of the assessee before CBI; and (iii) Report sent by DDIT, Unit I to DI appraising about the documents. 34. It was submitted, the following pertinent observations/directions in the aforesaid letter dated 28-2-1995/1-3-1995 of the DDIT (Inv.) to CIT, Jabalpur supports the contention of the assessee that the proceedings were initiated on dictates: ---------------------------------------------------- Page 2 : You are requested to kindly direct the Assessing Officer of Bhilai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... DDIT (Inv.) decided what material was relevant and selectively furnished the same to the Assessing Officer. There was no reason/valid justification with the DDIT (Inv.) for keeping back other documents with him, when in law he ceased to exercise jurisdiction in the matter as discussed infra. The fact that the DDIT (Inv.) forwarded to the Assessing Officer, the documents requisitioned from CBI under section 132A much after the expiry of statutory period of 15 days provided under section 132(9A) of the Income-tax Act, further indicates that the DDIT (Inv.) wanted to investigate and be involved in the matter, without having the jurisdiction to do so. In this regard, reliance was placed upon the decision of the Hon'ble Supreme Court in the case of CIT v. K.V. Krishnaswamy Naidu Co. [2001] 249 ITR 794. 37. Learned counsel further submitted, the following important facts require specific mention/consideration: (a) letter dated 20-3-1995 of DDIT (Inv.) was received by the Assessing Officer on 24-3-1995 at 5.30 p.m.; (b) 25 and 26-3-1995, were holidays being Saturday Sunday; and (c) Assessing Officer, thus, had only 3 working days, i.e. 27th, 28th 29th March to go through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l held that there is nothing on record to suggest that directions contained in letter dated 1-3-1995 were ever conveyed to Assessing Officer either by the DDIT (Inv.) or CIT, Jabalpur; meaning thereby that the Tribunal did agree that this letter contained the directions for reopening the proceedings. (c) Tribunal followed the normal presumption that official acts must be presumed to have been properly done. 41. Learned counsel further submitted, the aforesaid finding/conclusion of the Tribunal cannot be applied to the present gift tax proceedings for the following reasons:- (a) Letter dated 29-3-1995 written by the Assessing Officer clearly refers to discussions on 27-3-1995 and 28-3-1995 with DDIT (Inv.) and DG and the fact that the guidelines contained in letter of DDIT (Inv.) and actions are in full swing. (b) The order sheet entry of April, 1995 states "reopening of the cases - reasons to work out" clearly suggesting that reasons were not worked out on 30-3-1995 and were worked out later on. (c) Notices issued were handed over to the DDIT (Inv.) for service on the assessee in April, 1995. It was further submitted, the aforesaid facts clearly establish dictates of hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al conspiracy among themselves, the object of which was to receive unaccounted money and to disburse the same to their companies, friends, close relatives and other persons including public servants and political leaders of India. In pursuance of the said conspiracy S.K Jain lobbied, with various public servants and Government organizations in the power and steel sectors of the Government of India to persuade them to award contracts to different foreign bidders with the motive of getting illegal kickbacks from them. During the aforesaid period the Jain brothers received Rs. 59.12,11,685, major portion of which came from foreign countries through hawala channels as kickbacks from the foreign bidders of certain projects of power sector undertakings and the balance from within the country. An account of receipts and disbursements of the monies was maintained by J.K Jain in the diaries and files recovered from his house and the Jain brothers authenticated the same." Learned counsel submitted, the above finding of the Hon'ble Supreme Court clearly shows that there is no evidence that the money is of assessee's own. It is of assessee's brothers and also belongs to other parties; why th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases there were no dictates and for reopening the gift tax cases there were dictates of higher authorities. It is clear from the finding of the Tribunal that there was no material on record to arrive at such a conclusion. Now the assessee cannot take such a plea before the Tribunal in this matter. This belief is liable to be dismissed in limine. Standing counsel further submitted that the belief that the findings of the Tribunal in income tax matters cannot be imported to gift tax is a belief without merit. The order and material available are one and the same. It cannot be held that one part of the order was on the dictates of the higher authorities but other part is not so. 47. In his rejoinder, learned counsel for the assessee submitted, the findings given by the Tribunal in the income tax matter are not applicable to the present gift tax proceedings. The sequence of events elaborated in the broad propositions on Pages 4 to 9 clearly establish that the gift tax proceedings were initiated by the Assessing Officer on the dictates of the higher authorities, without any independent application of mind. Learned counsel reiterated that the reassessment proceedings were initiated o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statements, decipher the notings in the diaries and to examine the assessment records for forming a prima facie link between the diary and Shri S.K Jain and this period was not sufficient to apply the mind properly and to come to a right conclusion. Again, we are unable to agree with the above proposition. There is nothing on record to show that Assessing Officer has not applied his mind before recording the reasons. The mere doubt expressed by the Assessing Officer in the letter with regard to entity referred as "BECO" is not sufficient to hold that there was no application of mind. The correspondence between the officers is internal machinery process. The contention of the learned counsel that in the entire 10 pages of reasoning recorded by the Assessing Officer there is no valid reason for reopening the gift tax proceedings cannot be accepted. Assessing Officer came to a prima facie conclusion, which is possible. Sufficiency or insufficiency of that cannot be looked into by the Tribunal. 51. Now coming to the argument of the learned counsel that the decision of the Tribunal in income tax appeal cannot bind the Tribunal, we agree with the above proposition. But at the same time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere dropped. Income tax enquiry was conducted after 10 years and obtained report of officer on revaluation. The Hon'ble High Court held, this cannot be a basis for reopening the assessment. Hence this decision is not applicable. 54. The decision relied upon by the learned counsel in the case of Gujarat Gas Co. Ltd. is also distinguishable on facts. This was a case wherein Board's instructions to its subordinate authorities were challenged on the ground that independent power exercised by quasi-judicial authority has been curtailed by this instruction. Instruction directed the Assessing Officers that in scrutiny assessment, the assessment cannot be made at a figure lower than that returned. The Hon'ble High Court held, this is ultra vires because the independent power of the officer discharging with the quasi-judicial function has been curtailed. In the instant case of the assessee there is no evidence to show that the power of the Assessing Officer has been curtailed by a direction. 55. Coming to the decision relied upon by the assessee in the case of Yeshwant Talkies, this decision is also on facts identifiable. This was a case wherein the proceedings were initiated on the bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iable to gift tax. Accordingly ...." The rest of the reasons recorded are only around reopening of the income tax and wealth tax proceedings. 59. Learned counsel submitted, on the basis of the aforesaid reasons, it cannot be said that a reasonable/prudent person will come to a reasonable, prima facie belief that any gift chargeable to tax has escaped assessment in the hands of the assessee on the facts in the instant case of the assessee. In the aforesaid observations it is alleged that since the diary also reflects payments to the politicians, it would attract gift tax. The assessee is unable to appreciate, counsel submitted, as to how merely on the basis of some payment allegedly coming to the notice of the Assessing Officer he could directly come to a conclusion that the same would attract gift tax proceedings. Learned counsel further submitted, it is noticed that the main focus/allegation in the reason is that the assessee and his brothers are involved in hawala transactions as is evident from the following: --------------------------------------------------- Page References in the Prima facie indication No. reasons recorded that follows ------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rap the assessee B.R. Jain stated that black money of group companies. ------------------------------------------------ It was submitted, no part of the reasons recorded reflects any application of mind which will lead to a conclusion and to belief that gift of the assessee had escaped assessment. The allegations/observation in the reason that the payments were without consideration is de hors any material/information recorded to have been found by the Assessing Officer. Reliance placed on the statements before CBI could not, also have led to the conclusion of escapement of gift since the payments were allegedly stated to have been made for furthering business interests. Thus, a judicious comparison between the material allegedly available with the Assessing Officer and the inference drawn therefrom did not have live nexus/rational connection with the prima facie conclusion that gift chargeable to tax had escaped assessment. It could not, thus, be said that there was any "reason to believe" that the assessee's gift had escaped assessment. 61. Learned counsel further submitted that the order of the Tribunal in income tax proceedings upholding the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the belief required by the section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court". 64. Relying upon the decision of the Hon'ble Supreme Court in the case of Ganga Saran Sons (P.) Ltd. v. ITO [1981] 130 ITR 1, learned counsel submitted, their Lordships observed as under:- "The important words under section 147(a) are 'has reason to believe' and these words are stronger than the words 'is satisfied'. The belief entertained by the ITO must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy of sufficiency of the reasons which have weighed with the ITO in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a hearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... R 332 (Bom.), learned counsel submitted that the reasons should not be vague and should be dear and unambiguous and should not suffer from any vagueness. The reasons are manifestation of the mind of the Assessing Officer. The reasons recorded must disclose mind of Assessing Officer. The opinion of the Assessing Officer must be in black and white. Relying upon the decision of the Hon'ble Patna High Court in the case of Shambhu Nath Sheo Prasad v. CIT [1993] 113 CTR (Pat.) 166, learned counsel submitted, it is well settled that reasons must disclose prima facie facts which would justify issuance of the notice and to any person perusing the reasons it should be obvious as to how the mind of the Assessing Officer worked when he issued the notice. Learned Counsel further submitted, it is also settled legal position that proceedings cannot be initiated to conduct further enquiry. For the above proposition, he relied upon the decision of the Hon'ble Patna High Court in the case of Chunnilal Surajmal v. CIT [1986] 160 ITR 141, wherein the Hon'ble High Court observed that "the question of investigation should have arisen before the initiation of the reassessment proceeding. The Department c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h a conclusion has been clearly reached by him on the basis of material available on record that there were certain payments which were made to politicians and bureaucrats which were without considerations and thus amounted to gifts chargeable to gift tax. It cannot be said that a reasonable person could not have, in the circumstances, reached a conclusion that these transactions were not gifts but were hawala transactions only. Assessing Officer had reached a belief that there were gifts which had escaped assessment and had rightly exercised the jurisdiction under section 16 of the Gift-tax Act for reopening the assessment, contended the standing counsel. 69. Standing counsel submitted, the contention of the assessee that the findings of the Tribunal while upholding the reopening of the income tax assessment are not applicable is also not correct. There existed materials to arrive at honest and bona fide belief entertained by the Assessing Officer about certain gifts having escaped assessment. The Assessing Officer had scrutinized the entire material received by him at the time of reopening of the assessment and from the record it was clearly seen that payments had been made to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing upon the statements purportedly recorded by CBI but distancing itself with the conclusions drawn by CBI based on such statement. The contention of the revenue that the Assessing Officer, in the gift tax proceedings, was not bound by the conclusions drawn by CBI is misplaced for further reason that the said conclusions were actually adopted by the Assessing Officer in the reasons recorded. In the reasons recorded, the Assessing Officer had time and again referred to the transactions recorded in the seized diary indicating towards hawala transactions. Therefore it is incorrect to contend that the Assessing Officer is not bound by the conclusions of CBI regarding the nature of the transaction in the diary to be hawala transactions when the Assessing Officer has in fact levelled similar allegations against the assessee in the reasons recorded. 72. Learned counsel further submitted, as regards the alleged statement of the assessee recorded by CBI, the assessee had never explained the contents of the diary before CBI, as alleged. In fact, not only in the return filed by the assessee in response to the notice issued by the Assessing Officer and also in the statement of the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liticians/bureaucrats etc. were either coming from abroad through hawala transactions or the income generated from assessee's factory; as such, according to the assessee, no prudent man will come to a conclusion that taxable gift has been escaped. It is also the case of the assessee that apparently none of the recipients had admitted the receipt. On the contrary, subsequent to the reopening in income tax proceedings, it is proved that all the recipients either denied the receipt or in the case of some like Shri Buta Singh, the revenue itself has treated the amount said to be received from the assessee as their income and assessed as such. Again, on the basis of above facts, it is the submission of the learned counsel that no prudent man will come to a conclusion that the assessee made any gift. All these are the points to be considered on merit. But the fact is that from the diary seized it was found that the assessee made certain gifts. On questioning the assessee also admitted that he made some gifts to politicians/bureaucrats etc. This itself indicates that there was reason to believe for the Assessing Officer to come to a conclusion that taxable gift has escaped the net. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee in the case of Hindustan Lever Ltd., cannot be applied in the instant case of the assessee. In this case the Hon'ble Bombay High Court held that unless any income chargeable to tax has escaped assessment for any assessment year by reason of assessee's failure to disclose material facts necessary for his assessment of that year, reopening cannot be done. The reasons recorded must be, the Hon'ble High Court held, based on evidence and the Assessing Officer must be able to justify the same from the material available on record. The Hon'ble High Court in this case found that in the reasons recorded by the Assessing Officer, nowhere he stated that there was failure on the part of the assessee to disclose fully and truly material facts necessary for assessment. Coming to the instant case of the assessee, we have already held that there was reason and materials before the Assessing Officer to come to such a conclusion. Again, the decision relied by the assessee in the case of Chunnilal Surajmal is also distinguishable on facts. In this case the Hon'ble High Court held that the Department cannot be allowed to initiate proceedings and then to conduct fishing enquiries. We fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ination and adjournment. Assessing Officer opined that the assessee should be allowed one month as requested. DDIT (Inv.), New Delhi, however directed the Assessing Officer not to allow further time to the assessee. As directed, Assessing Officer declined further opportunity to the assessee on 25-3-1996. Further, despite resistance, Assessing Officer, on the directions of CIT, Jabalpur, proceeded to Delhi to complete the assessment. These sequences of events clearly establish that Assessing Officer did not act independently. . Assessment orders were similar to notices issued by DDIT (Inv.). It was submitted, the Tribunal also took note of the order sheet entries which clearly establishes that at every stage, viz. issuing of notices, considering replies of assessee, request for adjournment, etc. Assessing Officer merely followed the directions. 79. Learned counsel submitted, the impugned gift tax assessment order dated 30-3-1998 was also completed as had been directed by the other authorities and therefore, in the order the Assessing Officer merely followed the findings/conclusions of the assessment order dated 16-4-1996. No independent finding/conclusion was arrived at by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... particulars of expenses recorded and discussed therein and thereafter observes: ".... Suffice it to say that they are equally relevant to the assessment made under the Gift-tax Act also. As held in the said proceedings, there are reasonable grounds to conclude that the assessee has....". Learned counsel submitted, it is pertinent to mention that the Assessing Officer, thus, relied upon the statements and enquiries conducted by DDIT (Inv.), who was held to be incompetent to do so and it is clearly noted in the gift tax assessment order that the findings in the income tax order are being followed. 80. Learned counsel further submitted, had the gift tax assessment been completed independently, without following the income tax assessment order, which was completed merely on directions/dictates of the higher authorities, the Assessing Officer would have - (a) independently conducted enquiries/investigations to connect the diary with the assessee; (b) allowed cross-examination to the assessee; (c) ignored the enquiries/investigations/ statements recorded by the DDIT (Inv.), which are nullity in the eyes of law; and (d) come to an independent conclusion as to how disbursements record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now been nullified by the Tribunal. Standing counsel submitted, this proposition is not correct. If the wordings of the assessment order are read, it will be clear that what has been relied upon by the Assessing Officer are statements of independent witnesses and the particulars regarding the expenses recorded in the seized documents and statements of various persons. The assessee is trying to give a picture that the Assessing Officer has merely followed the assessment in the income tax proceedings. This is not correct. What has been relied upon by the Assessing Officer is the material, which was available before the income tax Assessing Officer, and not the assessment order. This is clear from Para 5.2 of the assessment order. The contention of the assessee is not based on facts and is seeking to mislead the Tribunal. Merely because the assessment orders are set aside on certain grounds does not mean that the material on which income tax assessment orders were based is without substance or cannot be relied upon. In the instant case of the assessee the Assessing Officer has relied upon the material, which was available, and not upon the assessment orders in the income tax proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x assessment order, without any independent finding/conclusion in the impugned assessment. The findings/conclusions in the income tax assessment have been held to be that of higher authorities by the Tribunal in the income tax proceedings since the entire assessment was completed on dictates. Learned counsel submitted, the reason for delay in completing the impugned gift tax assessment, which is sought to be relied upon by the revenue, is also borne out from the record. The records clearly establish that even the delay in completing the impugned gift tax assessment was on account of directions to do so by the higher authorities. It was submitted, the contention of the revenue that in the impugned assessment the Assessing Officer merely followed the findings and material available at the time of income tax assessment and not the assessment order, is fallacious and deserves to be rejected. What has to be seen is whether while completing the impugned gift tax assessment, the Assessing Officer independently conducted enquiries and arrived at independent conclusion without being influenced by any directions of any higher authorities. The findings in the income tax assessment were on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the reopening itself is bad in law. Whether the enquiries conducted illegally or not, that will not affect the proceedings as such. To our mind, even if information is gathered illegally but if the information is correct, such information can always be used. It is the truth of the affair and not the manner of getting the materials that is to be taken note of. 88. Coming to assessee's next contention that even the delay in finalising the gift tax assessment was well planned strategy of higher authorities, so as not to weaken CBI case before the Hon'ble Supreme Court, we are afraid, cannot go against the assessment proceedings. That was an administrative decision and not interference with the independence of Assessing Officer's assessment proceedings as such. 89. Again, coming to assessee's contention that the gift tax proceedings were not independently completed and no independent enquiries/investigation made and cross-examinations were conducted or allowed etc., we are of the view, cannot be considered at this stage, where the assessee is only challenging the reasons recorded for reopening. 90. Coming to the next contention of the assessee that in the income tax proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se wherein the reopening was done on the ground that assessee had not filed the return and also on the ground that some of the income has not been disclosed. Hon'ble High Court found that material on record show that the return had been in fact filed by the assessee and also the revenue was not certain whether any income taxable has escaped assessment for the year under consideration. The Hon'ble High Court particularly noted an observation "to cover up that probability, protective addition was made in the assessment year 1992-93". The Hon'ble High Court held that the Assessing Officer was not certain whether the income taxable has escaped assessment or not. 94. Again, the decision relied upon by the assessee in the case of Somani Pilkington's Ltd, has no applicability. This was a case wherein additions were made on the basis of excise duty proceedings with regard to false sale price and the Hon'ble High Court set aside the order of the excise duty authorities. The Tribunal hence deleted the additions made on that ground in the income tax proceedings as well. The Hon'ble High Court held that the Tribunal was justified. This decision also does not further assessee's case. 95. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri J.K Jain recorded by DDIT (Inv.) and CBI; Shri B.R. Jain recorded by CBI and the Assessing Officer; and Shri Daniel P. Rambal/Shri P. Ghoshal Shri H.P. Guha Roy recorded by DDIT (Inv.). Learned counsel submitted, reliance placed on the aforesaid statements to hold that the entries in the diary relate to the assessee is not correct and proper since - (a) the statements were recorded by DDIT (Inv.), an authority not competent to do so; (b) the ex parte statements were relied upon without allowing opportunity of cross examination to the assessee and therefore be excluded from consideration; (c) the statements do not connect the diary exclusively with the assessee; and (d) credibility of various witnesses is in doubt. Relying upon the various decisions of the High Courts/Supreme Court, learned counsel submitted that the diary did not belong to the assessee and on this ground itself the CIT(A) should have deleted the additions made in the impugned gift tax assessment. 99. Without prejudice to the aforesaid, learned counsel submitted, the CIT(A) erred in not deleting the additions without appreciating that the ingredients of gifts were not satisfied and no taxable gift ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be regarded as 'gift'. In the only show-cause notice dated 20-2-1998 issued by the Assessing Officer, the allegation of the Assessing Officer was that payments were made to politicians and bureaucrats to further business interest. If the payments were assumed for furthering business interest, then since consideration was involved, the payments cannot be regarded as 'gift'. In the hands of the various persons who allegedly received money, the amount so received was treated as income on account of work done/services rendered. In the assessments of Shri Buta Singh, Shri Ravi Chand Arya, Shri Motilal Vohra, Shri Vidya Charan Shukla, Shri Balram Jakhar, etc. the amount alleged received were treated as income by the Department. A 'gift' cannot be income in the hands of the recipient. In the case of Shri Prem Prakash Pandey, despite denial, income was assessed on account of work done. In the wealth tax assessment of the assessee, some of the amounts found recorded on the right hand side of the diary were treated as unexplained investment on farmland and investment in construction of farmhouse. Such amounts could not again have been treated as 'gift'. In the diary itself there ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of various amount and their disposal month-wise and this has been written on the instruction/direction of Shri S.K Jain, the Managing Director of Bhilai Engineering Corporation, the same were being shown to him regularly from time to time. The details as mentioned in coded words in abbreviated forms, have been written as per the instruction of Shri S.K Jain, aforesaid." Standing counsel further submitted, so also the assessee has in his statement before the CBI on 17-9-1993 stated as under:- "Today I have been shown two note books bearing Malkhana Nos. 208 and 209, 03 reported to have been impugned from the house of Shri J.K Jain. These note books have been written in the writing of Shri J.K Jain which I identified. There are details of credits of the debits in these diaries from the month of February 1998 to April 1991. In Alishaan Spiral Note Book, marked as M-209/93, there is an entry at page one on the both sides containing certain details beginning from April 1988 to April 1991. This entry relates to trading activities such as selling of scraps such as copper, zinc, coal, steel and prime materials and connected with certain purchases and sales. The entry at Sl. No.1 of Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment order is correct. Assuming, though not admitting that certain details are required for this purpose, if the Tribunal reaches such a conclusion, then the order of the CIT(A) in remanding the matter for reconsideration would also take care of the matter; as such no prejudice would be caused to the assessee in any case. 103. In his rejoinder, learned counsel submitted, it is incorrect to contend that no prejudice is caused to the assessee since the CGT(A) merely remanded the matter to the Assessing Officer for fresh consideration. The remand by CGT(A) proceeds on the basis that the diary and the entries recorded therein belonged to the assessee. The said basis of the remand, which is perverse, clearly causes prejudice to the assessee and therefore learned counsel submitted, the Tribunal should independently consider whether such remand was proper or not. It was further submitted, the contention that the assessee and Shri J.K. Jain in their statements before the CBI admitted that the diary belonged to the assessee is not correct. The assessee did not own the diary before the CBI. In fact, the assessee categorically denied ownership of the diary in the return filed pursuant to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the assessee was always been denied, as evidenced at Pages 11.5 to 118 and also Pages 238 to 240 of the Paper Book; and also the contention that the statements recorded by Officers [DDIT (Inv.) and CBI] cannot be used against the assessee since they were outside the jurisdiction of the Assessing Officer and no matter was pending before them and no opportunity was extended to the assessee to cross-examine the persons who had given statements against the assessee, such as Shri J.K. Jain, Shri B.R. Jain, Shri Daniel P. Rambal, Shri P. Ghoshal, Shri H.P. Ghua Roy etc., we are of the view that it is not necessary for us now, to decide the issue, at this juncture, for the reason that the CGT(A) remanded the matter back to the file of Assessing Officer without deciding the issue on merit. 107. Assessee has relied upon the decision in Surendra Kumar Jain's case [assessee's own case in income tax proceedings); Arjun Singh's case; in the case of Mukund V. Kapadia v. ITO [2002] 82 ITR 489 (Mum.) and catena of other cases for the proposition that reopening was bad in law for the reason that statement recorded by DDIT (Inv.) is invalid and cannot be used against the assessee. In the ins ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
