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TMI Blog2015 (4) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... and set-aside for granting cross-examination of Shri Niranjan Shah. The ld. CIT(A) has thus rendered the whole purpose of setting aside the CIT(A)'s order as futile and has unnecessarily thrown the appellant once again into endless litigation after several rounds of appeals before the appellate authorities. 2. The ld. CIT(A) failed to take proper cognizance of the statement of Shri Niranjan Shah recorded during the cross-examination proceedings. That since Shri Niranjan Shah having categorically admitted in the said statement in no uncertain terms that he does not have any financial transactions with the appellant in cash and that such transactions appearing in A/c. No. 36 maintained by him and found from his possession are pertaining to him only and the appellant has nothing to do with the same, the impugned addition in the hands of the appellant based on such material is wholly unjustified and bad in law and accordingly requires to be deleted/quashed. 3. The ld. CIT(A) has further erred in relying upon the statements of the appellant recorded by the FEMA authorities for drawing adverse inference without considering the fact that the said statements in as much as transactio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years: AY 1985-86 Rs.38.10 lac AY 1986-87 Rs. 9.00 lac AY 1988-89 Rs. 5.55 lac AY 1989-90 Rs. 6.50 lac AY 1990-91 Rs. 5.30 lac AY 1991-92 Rs. 39.30 lac Rs.103.75 lac 3.2 The aforesaid disclosure was in respect of share holding in Patwa Investment & Finance Ltd., Lyka Leasing & Finance Ltd. and Dharnidhar Leasing & Finance Ltd. to the extent of Rs. 95.75 lacs and the balance disclosure of Rs. 8 lac was in respect of cash found during course of search. 3.3 Assessments for A.Y.1985-86 to A.Y.1990-91 and 1992-93 were reopened u/s.148 of the Act and were finalized vide assessment orders u/s. 143(3) r.w.s. 147 of the Act [A.Y.1986- 87 to 1990-91 and 1992-93] and u/s.143(3) of the Act [A.Y.1991-92], wherein various additions were made which included addition on account of alleged advances to Shri Niranjan Shah out of undisclosed sources on the basis of material seized from his possession i.e. Shri Niranjan Shah. The particulars of orders passed are as under: A.Y. Date of Order Assessed Income (Rs.) 1985-86 25-03-1994 1,56,20,100/- 1986-87 25-03-1994 3,52,22,720/- 1987-88 25-03-1994 1,63,84,320/- 1988-89 25-03-1994 1,51,79,560/- 1989 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer of Shri Niranjan Shah while completing his assessments had relied upon the seized material seized from premises of Shri Niranjan Shah at the time of searching his case on 30/04/1992 and during that process had procured cash flow statement as well as statement of Shri Niranjan Shah which have the effect on assessee's assessments. It is further observed from the records that at the initial stage, appellant's Assessing Officer had allowed Shri Niranjan Shah, but before Assessing Officer of Shri Niranjan Shah at Bombay and it is also an admitted fact that the Assessing Officer of Shri Niranjan Shah at Bombay did not allow the assessee an opportunity to cross examine Shri Niranjan Shah, rather directed him back to his Assessing Officer with the directions that cross examination will be allowed by appellant's Assessing Officer itself. It is further an admitted fact that when the assessee approached back to his own Assessing Officer, he was not allowed to cross examine Shri Niranjan Shah on the ground that copies of documents relied upon in the assessments have already been supplied to him. Having considered the totality of the facts and circumstances of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s confirmed as per direction given in appeal orders, perquisites added and confirmed in First Appeals and later not contested and the additions on account of alleged advances to Shri Niranjan Shah out of undisclosed sources. The addition, on account of alleged advances to Shri Niranjan Shah, out of undisclosed sources is main issue at relevant point of time. Regarding the main issue i.e. addition on account of alleged advances to Shri Niranjan Shah out of undisclosed sources and stand of assessee has been that the impugned addition was erroneous since same was based on material and found assessed from third party and not from the assessee. In this regard, relevant facts are as under: "8.1.1 During the course of an income-tax search on 30-5- 1992 at the premises of one Shri Niranjan j. Shah, a stock broker of Bombay and a close relative of the appellant, a computer floppy was seized which contained account no. 36 in the name of 'J.K.' The letters 'J.K.' represent the initials of the first and the middle name of the appellant. With regard to the contents of the aforesaid account, the statement of the appellant was recorded on 10th July, 1992 under the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingapore Dollars 10000 provided by Shri Niranjan J.Shah to one Shri N.Babulal Shah in Singapore in June, 1990. The appellant had further explained that he had paid a sum of Rs. 20,000/- to one Shri Nirubhai on 29-12-1990, Rs. 1,15,000/- to one Nanda, Rs. 45,000/- to one Shri Parikh, Rs. 10,000/- to a person (name not given) on 31-5-1991, Rs. 40,000/- to one Shri Churchill on 1-7-1991 and Rs. 5,00,000/- to one Shri Pradip Shah on 5-10-1991, under instructions from Shri Niranjan J. Shah on behalf of one Anil of USA. This was submitted with regard to the clarification given in respect of the aforesaid entries for foreign exchange transactions, para l(e) of the memorandum dated 5-10-1994 issued by Enforcement Directorate, New Delhi to the appellant, Shri Niranjan J. Shah and others refers. 8.1.2. With regard to the entries appearing in account no.36, relating to transactions affected through cheques/demand drafts, the appellant in his statement recorded by the Assessing Officer of Shri Niranjan J. Shah on 7-2-1994 had stated that these must have been accounted for in the respective books. The Assessing Officer, who made the earlier order of assessment on 25-3- 1994 under section 143(3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t seized during a search in the case of the appellant in August, 1990. Pages 14 and 15 of the relevant assessment order refer. 8.1.4 On the basis of the aforesaid, the Assessing Officer who passed the earlier order under section 143(3) read with section 147 of the Income-tax Act dated 25-3-1994 for A. Y. 1986-87, made an addition of Rs. 1,89,61,000/- (similar additions of varying amounts were made with respect to other Ass. Years in appeal, now) to the total income of the appellant, representing the amounts advanced to Shri Niranjan j. Shah, his concerns and other persons on his (Shri Niranjan J. Shah's) behalf, other than by means of cheques, and credited in account no.36. While making the addition, the Assessing Officer has referred to the submission made by the appellant that the statement given by him before the FERA authorities was a relevant, significant and substantive piece of evidence, though not conclusive. 8.1.5 Against the aforesaid order, the appellant had filed an appeal before the CIT(A)-VI, Ahmedabad. The objections raised by the appellant against the additions made on the basis of the computer floppy account no.36 have been summed up by the then CIT(A)-VI, Ah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were various transactions by means of cheques, in this account, which did not pertain to the appellant and, therefore, such transactions had not been accounted for in the books of any concern of the appellant's group, it was contended that such transactions by means of cheques pertained to third parties and the appellant had nothing to do with these transactions. It was emphasised that on the basis of evidence and material which was available in the income-tax records of Shri Niranjan J.Shah with the Income-tax authorities at Bombay,-it could be easily established that several transactions did not pertain to the appellant My predecessor had examined the contentions raised by the appellant and had given his findings in para 3.11 of his aforesaid order. He stated that on the basis of the statements given by the appellant, the inescapable conclusion was that the account no.36 in the computer floppy contained the account of Shri Jayendra k. Doshi as maintained by Shri Niranjan J. Shah. Therefore, he held that the onus was very heavy on the appellant to explain properly each and every entry appearing in this account He observed that at the same time, the objections raised by the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant points. 8.1.6 In the order passed by the Assessing Officer under section 143(3) read with section 250 of the Income-tax Act, subsequently in 1998, the Assessing Officer observed that the statement furnished by the appellant to work out the peak credit in account no.36 did not give the correct working of the peak credit He stated that the appellant had not worked out the peak credit by considering each transaction as a separate transaction. He observed that in the account maintained in the computer, when any amount of cash was brought in at a particular time, the same was entered first. The cash brought in or taken out subsequently was entered only thereafter. He, therefore, held that the cash withdrawn by a latter entry could not be considered as having been used for making deposits which appeared prior to the withdrawal. He observed that in the statement prepared by the appellant, the first three entries were credit entries which showed investment made by the appellant out of his unaccounted income. The / appellant had, however, set off the aforesaid credit entries against the subsequent withdrawal on the same date. The Assessing Officer observed that in an account, maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount no.36, in the name of 'J.K.', was found during the course of an income-tax search at the premises of Shri Niranjan J.Shah on 30/5/1992, were with appellant only. (b) The contention of the appellant that Shri Niranjan J.Shah had admitted the credit entries in cash, appearing in account no.36, is not correct. He had admitted only the debit entries in cash and had explained the source thereof. (c) The then CIT, in his order dated 30-3-1995, in the case of the appellant for AY 1985-86, has stated that the claim of the appellant that several transactions in account no.36 which were by cheques and could be established as pertaining not to him (the appellant) but to various other parties, had to be considered on the basis of whatever evidence or material which could be produced by him or which was available in the incometax records of Shri Niranjan J.Shah with his Assessing Officer at Bombay. However, the appellant has not given instance of a single entry in respect of transactions by means of cheques which did not pertain to him or his concerns. (d) He held that the entries in account no.36 were in chronological order, as is evident from the entries in respect of transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agraphs. The following important observations and facts are culled out after consideration of all material and evidences on record, on the issue concerned: a) With regard to the contents of the account marked as 'J.K', the statement of the appellant was recorded on 10th July, 1992 under the provisions of the Foreign Exchange Regulation Act. In his aforesaid statement the appellant admitted that the credit entries appearing in the aforesaid account represented the amounts paid in Indian rupees by him or by his concerns or by certain persons on his behalf to Shri Niranjan J.Shah or his concerns or certain persons acting on his (Shri N.J.Shah's) behalf. Similarly, the appellant admitted that the debit entries appearing in the aforesaid account represented the amount in Indian rupees paid by Shri Niranjan J. Shah or his concerns to him (the appellant) or his concerns or other persons acting on his behalf. b) The appellant further admitted that the figures in the aforesaid accounts were written in a code and for finding out the exact amount the decimal sign was to be ignored. c) Not only this, the appellant was asked to explain a number of entries in the aforesaid account by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the appellant. g) Shri Niranjan J.Shah, in his statement under section 131 of the Income-tax Act recorded by his Assessing Officer on 27-10-1993, with regard to account no.36 had stated that this account was of Shri J.K.Doshi, as per the index. He further stated that this account represented transactions between him and Shri J.K.Doshi of Ahmedabad in Indian rupees. He also stated that most of the figures mentioned in this account were in code and to read those; the decimal point was to be ignored. However, at certain places, figures were written in full also. He had given details of such figures in the aforesaid statement. He had further stated that such discrepancies occurred in this account due to the fact that this account was never settled and checked between him and Shri J.K.Doshi. He stated that this account also reflected the transactions between concerns of his group and concerns of Shri Doshi's group. As regards entries of transactions through banking channel, these were reflected in the accounts of respective assessees of the two groups. He stated that the entries of cash transactions in the aforesaid account were between him and Shri J.K.Doshi He further state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue/DD are recorded. The attempt by Shri Niranjan Shah to help the appellant, wherein there were no further tax implications to him cannot be taken to dilute the overwhelming evidences which show the genuineness of the transaction beyond doubt. k) The bringing into taxation of the transactions from the end of Shri Niranjan Shah in his case does not entitle the appellant for any relief. There are always two ends to a transaction between two parties, and each has to explain and cater to its end of transaction. For instance, a seller of property has to pay the correct capital gains or profits and the purchaser to explain the source. Taxation in one hands cannot in any case entitle the other for relief. In fact, it is an evidence of the genuineness of the transaction. To sum up, it has to be seen that the accounts were confronted to the appellant by the FERA authorities; he has accepted all the credit and debit entries therein as representing his transactions or transactions on his behalf; although the transactions were not having dates and details, these were explained by the appellant himself to the FERA authorities, even the transactions in cash and foreign exchange in contraventio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in relying upon statement of assessee recorded by FEMA for drawing adverse inference without considering the fact that said statement in such transactions other than FEMA already stood reflected in his statement recorded by Income Tax Authorities. Regarding FEMA proceeding, learned Authorized Representative pointed out that in FEMA proceedings, findings are as under: "I have carefully considered all the materials and the facts of the case emanating from the records, the evidence adduced by the Department in support of the charges alleged in the SCN, the submissions both written as well as oral, made by/or on behalf of the noticees. The computer printout of Floppy I seized by the Income Tax Department from Sh. Niranjan Shah contain the accounts of various persons. Page Nos. 53 to 59 of the said floppy contained an account titled "36". As per the index on page 1 of the printout, the a/c titled "36' is in the name of "JK". Page No. 35 of the said printout is the a/c of one "Churchil" which interalia contained a debit entry viz. "De. 86 - A/c. JK to Vipul by JK -200 - 00", While explaining this entry, Sh. Vipul R. Shall, in his statement dtd. 25.6.92 interalia deposed that " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tries in the said document represented the amounts paid in Indian currency by him or through his concern to Sh. Niranjan Shah/his concern or to anybody on his behalf; that the figures written under the head 36 were expressed in Indian rupees and while reading the amounts decimals were to be omitted. Following entries incriminatory in nature from foreign exchange of view figured in the printout of the floppy 1 seized from the premises of Sh. Niranjan Shah: Explaining the various entries pertaining to him, appearing in A/c. No. 36 of the Computer print out F-l, Sh. J.K. Doshi, in his various statements explained that his account with Sh. Niranjan Shah was debited by Rs. 1,20,000 and Rs. 14,100/-against US $ 8,000 and Stg. Pnd. 660 arranged by Sh. Niranjan Shah in London for Parag Kirmar Pal Bhavnagari, his employee (i.e. Sh. J.K. Doshi); that the said account was debited by Rs. 2,05,000 against US $ 10,000 provided by Sh. Niranjan Shah to him at Singapore in May 1989; that his account was debited by Rs. 26,100 against US $ 1500 provided by Sh. Niranjan Shah in Hongkong to Nikil R. Parikh in July 1988; that he received the reimbursement of Rs. 26,100 from Nikhil R. Parikh; that his a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 1.6.9l, 14.6.91, 23.7.91, 9.8.91, 7.9.91, 13.9.91, 16.9.91,29:10.91, 29.1.92 and 30.1.92 were figuring on pages 500, 507, 512, 372, 140, 137, 136, 179 and 11 of A 11. The debit transactions dated 1.9.91, 25.10.91were reflected on pages 144 and 181 of A 11. Page 191 of A 11 contain an entry "5 JK to Pradip Shah A/c. Anil USA for 15150/- US D", regarding the transaction dtd. 5.10.91 on59/Fl. As already stated US D stands for US dollar. The accounts on pages 58 and 59 of Fl shall be read without the decimal. In his statement dtd. 6.10.93 he had stated that the debit entries dtd. 3.10,89 and 4.10.89 for R&. 5 Lacs each regarding DD for Boston were correlated with the debit entries in the current account of Romil Exports. In his statement dtd. 7.10.93 he had stated that RE herein stands for Romil Exports; RJ stands for RJ Finance and Consultancy Ltd., Ahmedabad; Deepakbhai Vadhani on 55/F1 is the brother of Nilesh J. Vadhani; Vipul is Vipul R. Shah; Lyka on 58/Fl is Lyka Leasing Ltd., Ahmedabad. In his statement dtd. 13.12.93 lie had stated that M/s. Ojas Leasing Ltd. have current account with bank of Baroda, Vile Parle. He was one of the Directors of the said company till 1989. In h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fl regarding Chandrakaut D. Charvada in London; that Sh. Niranjan Shah had provided Fr. 11,752/-through Sh. Nilesh Vadhani (Dubai) to Paresh Gheewala against payment of Rs. 52,000 through him (Vipul) to Sh. Niranjan Shah; that the account of the said transactions is in account No. 8 on page 87 Fl regarding Nilesh Vadhani; that he received US $ 2000 in Hong Kong from K. Lalwani of M/s. Elkey International (Hong Kong) on 25.8.90 and the transaction is figuring in account No, 4 of Lalwani on page 66 of Fl. Kamlesh N. Soni vide his statement dtd. 16.7.92 had confirmed that he contacted Vipul R. Shah for foreign exchange worth Rs. 1.5 Lac for Dr. Khwaja Sharik who was to go to Ireland; that Vipul Shah told him that he could get the amount arranged through Sh. Niranjan Shah and that Dr. Sharik thereafter met Sh. Vipul Shah and made arrangements for Pounds 3.870/-. In his statement dtd. 29.6.92, Paresh C. Gheewala had admitted having paid Rs. 52,000 in India against payment of Fr. Fr. 11,7527-to one of his buyers in France. Shri Churchil R. Shah whose account No, 35 in US $ figuring on page 51 of Fl has admitted that he had received US $ 4500 in Singapore as arranged by Shri Niranjan S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eized floppies were restored on the computer in the office of the I.T. authorities in front of the panchas and the authorised representative of Shri Niranjan Shah, when printouts were taken in their presence, and copies of the same were given to them on 27.1.2000. After said inspection/action on 27.1.2000, Shri Shah has not contended that the printouts givers to him were not clear or that the printouts did not represent the contents of the floppies seized from him. The floppies and other documents seized from the residence of Shri Shah by the Income tax authorities were under panchanama duly drawn under proper authorisation under the IT. Act. Therefore, I find no reason why the said floppies and their contents and other documents cannot be used as evidence in these proceedings Shri Niranjan Shah has also disowned certain documents out of the seized files marked A-2 seized from his residence by the I. Tax authorities and has contended that those documents might have been planted by the officers of the search party of the I.Tax Department. Shri Niranjan Shah has raised this contention in the past, either in his various retraction letters to the Department or in his applications filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from his residence by the Income Tax authorities. By this SCN, Shri Niranjan Shah had been charged of otherwise acquiring the aforesaid foreign exchange without the permission of the RBI in violation of the provisions of Sec. 8(1) of FERA 1973. Thus, in this case, Shri Niranjan Shah has been accused of otherwise acquiring the foreign exchange seized from his residence without the requisite permission of RBI. On the other hand, as far as the transaction figuring in the document and floppies seized from the residence of Shri Niranjan Shah are concerned, he has not been charged with any offence, at the time of recording his statement with reference to the transactions figuring therein, In the circumstances, I reject the contention of Shri Shah that his statements recorded during the period from 3.9.93 to 23.2.94 could not be used as evidence in these proceedings. Shri Shah has retracted the said statements on the ground that it was recorded by use of force, coercion etc. However, no evidence to that effect has been brought on record. No medical report evidencing the use of any force on Sh. Shah has been produced before me in these proceedings. Whenever a statement is challenged as h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd fifty thousand only) Imposed on Sh. Niranjan Shah, Rs. 90,000/- (Rs, Ninety thousand only) imposed on Sh. J.K. Doshi, Rs. 8,500/- (Rs. Eight thousand five hundred only) imposed on Sh. Parag Kumar Pal B, Rs. 1,500/- (Rs. One thousand five hundred only) imposed on Sh. Nikhil R. Parikh and Rs. 10.000/-(Rs.Ten Thousand only) imposed on Sh. Nirish Babulal Shah should be deposited in the office of the Enforcement Directorate at Mittal Chambers, 2nd Floor, Nariman Point, Mumbai 21 either by Demand Draft or Pay Order drawn in favour of the Drawing & Disbursing Officer within forty five days from the date of receipt of this order. While depositing penalty, this Adjudication Order number and date should be quoted clearly. In this background, learned Authorized Representative pointed out that CIT(A) at relevant point of time was not having advantage of developments such as FEMA proceeding. Action is claimed to be taken in case of Niranjan Shah and others including assessee under relevant provision of FEMA and matter has to be reviewed in light of same. However, learned Authorized Representative is not in position to tell latest position in this regard. Even learned Departmental Representa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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