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2015 (11) TMI 286 - DELHI HIGH COURT

2015 (11) TMI 286 - DELHI HIGH COURT - [2015] 379 ITR 367 (Del) - Addition on account of cash seized from one of the employees of the assessee - assessment completed under Section 158 BC (1) - Held that:- In the present case, the Assessee had an explanation for not retracting the statement earlier. He also furnished an explanation for the cash that was found in the hands of his employee and this was verifiable from the books of accounts. In the circumstances, it was unsafe for the AO to proceed .....

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d no opportunity was given to the Assessee to cross-examine Mr. Sant Kumar Sharma, whose statement was the principal basis for making the addition of ₹ 1,38,41,971.

The Court finds that in the present case the basis for making the addition of ₹ 1,38,41,971 was the statement of Mr. Sant Kumar Sharma. He had furnished various details which were incriminating as far as the Assessee was concerned. It was incumbent on the AO, in those circumstances, to afford the Assessee an op .....

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etition. In those circumstances, the Supreme Court held that the High Court ought to have required the Assessee to avail the remedy of a statutory appeal instead of quashing the assessment proceedings on the ground of violation of natural justice. The Supreme Court, in fact, permitted the Assessee to approach the CIT (A).

As almost two decades have elapsed since the date of the search. There must be some finality to proceedings that seek to cover a block period beginning 1st April 198 .....

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86 to 20th June 1996. 2. In the present appeal, the Respondent, despite service did not enter appearance and the case has proceeded ex parte. By order dated 7th February 2005, the following two questions were framed by the Court for consideration: (A) Whether on the facts and circumstances of the case, the Income Tax Appellate Tribunal was correct in law, in deleting the addition of ₹ 1,38,41,971? (B) Whether in the facts and circumstances of the case, the Income Tax Appellate Tribunal, wa .....

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4. A search and seizure operation was conducted on 20th June 1996 at the residential and business premises of the Assessee as well as his associate concerns and it continued till 30th July 1996. The case of the Revenue is that despite notice issued on 30th September 1996 to the Assessee under Section 158BC of the Act, requiring him to file a return of total income including the undisclosed income for the block period, the Assessee failed to do so. Ultimately, after a gap of eight months, he fil .....

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essee, one Mr. Gopal Singh. It was further recorded by the AO that a statement of the Assessee was recorded during the course of search under Section 132(4) of the Act. In response to question No.11, the Assessee is stated to have made a categorical admission that the said sum of ₹ 86 lakhs belonged to him; that it was being deposited by Mr. Gopal Singh in the Canara Bank account which was not the account of the Assessee; that routinely surplus cash was given to Mr. Gopal Singh to be depos .....

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etraction, the Assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law . He further stated that he had been compelled perturbed by events of search and wherein I had no opportunity either to consult my advocates, my staff or my books of accounts etc. The pressure of search was built so much that I had to make this surrender without having actual possession of the assets or unexplained investments or expenses incu .....

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above explanation offered by the Assessee. He was of the view that the statement given by the Assessee voluntarily during the course of search under Section 132(4) of the Act had evidentiary value and could be relied upon. It was held that the Assessee had introduced fictitious debtors in his books of accounts and had deposited the cash realized on sale of the raw material into the bank accounts of those fictitious debtors. However, the explanation of the Assessee for certain other cash deposits .....

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om M/s Ambica Agency of Delhi and M/s H.T. Avia of Delhi. The payments received from Russia were credited to the accounts of M/s Nice International and from the said account the said amount was deposited in the account of the Assessee and three other persons showing the amount as loan advanced to the said persons. The AO after setting out the entire statement of Mr. Sant Kumar Sharma concluded that the Assessee was the main person who arranged the said transactions and used Sant Kumar Sharma as .....

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rma, it was found that the total export realisation i.e.Rs.1,36,41,971 belonged to the Assessee was further disbursed in the form of loans in the name of the Assessee, his wife and a person known to him. The said sum was accordingly added to the income of the Assessee as unexplained cash credit under Section 68 of the Act. 9. In appeal filed before the ITAT, there was a concurrent view of the two Members comprising the Bench i.e. Mr. R.K. Gupta and Mr. R.S. Syal that the additions made in the su .....

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377; 86 lakhs also ought to have been accepted by the AO. The AO had not doubted the sales and purchase figures or the fact of cash sales having been made. It was accordingly held that the addition of ₹ 86 lakhs was not justified. 10. However, on the question of the addition of ₹ 1,36,41,971, there was a slight difference of opinion between the two Members comprising the Bench. In his opinion dated 21st July 2000, Mr. R.K. Gupta was of the view that the Assessee had not been afforded .....

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by Mr. Syal was superfluous and that once the two members had agreed that addition of ₹ 1.36 crores could not have been made, then there was no need to make any further observation . The resultant order was passed by the ITAT on 8th August 2002 allowing the appeal of the Assessee. 12. It was submitted by Mr. Raghvendra Singh, learned counsel for the Revenue, that the ITAT failed to appreciate that the evidentiary value of the statement on oath recorded by the Assessee under Section 132(4) .....

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cision of the Kerala High Court in Paul Mathews & Sons Vs. Commissioner of Income Tax (2003) 263 ITR 101 (Kerala). He further submitted that the Assessee had not chosen to retract his statement till ten months after the date of the search and therefore the retraction itself was not genuine. According to him, the said retraction did not dilute the evidentiary value of the categorical admission made by the Assessee in his statement under Section 132(4) of the Act. He submitted that the additio .....

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arration of facts hereinabove shows that the Assessee did not simply retract the statement made by him during the course of surrender. He also offered an explanation for the sum of ₹ 86 lakhs found in the hands of his employee, Mr. Gopal Singh. One feature that distinguishes the present case from that before the Punjab and Haryana High Court in Lekh Raj Dhunna (supra) is that in the latter case, the Assessee failed to discharge the onus on him through cogent material to rebut the presumpti .....

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the AO from examining the explanation offered by the Assessee with reference to the books of accounts produced before him. 14. Therefore, although the counsel for the Revenue may be right in his submission that a statement under Section 132(4) of the Act carries much greater weight than the statement made under Section 133A of the Act, a retracted statement under Section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such stat .....

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lanation for the cash that was found in the hands of his employee and this was verifiable from the books of accounts. In the circumstances, it was unsafe for the AO to proceed to make additions solely on the basis of the statement made under Section 132(4) of the Act, which was subsequently retracted. 16. Consequently, the Court is unable to find any legal infirmity in the conclusion reached by the ITAT that the addition of ₹ 86 lakhs to the income of the Assessee was not justified. Questi .....

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by itself could not vitiate the assessment proceedings particularly when the Assessee had not raised a demand to that effect before the AO. He submitted that in the present case, it was recorded by the AO himself that despite sufficient opportunities, the Assessee did not cooperate. It was also not recorded by the AO that the Assessee had asked for cross-examination of Mr. Sant Kumar Sharma and that such opportunity was being denied by the AO. 19. The Court finds that in the present case the bas .....

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