9911796707
TMI Blog2018 (6) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... he above, the learned CIT[A] has erred in law in upholding the "draft order" passed for disposal of the objections of the appellant on reopening of the assessment instead of unconditional "final order" required to be passed and thus, failed to notice that the draft order passed by the learned A.O. is not in conformity of the directions of the Hon'ble Supreme Court in the case of GKN DRIVESHAFT reported in 259 ITR 19 and consequently, there is no valid disposal of the objections of the appellant and hence, the impugned assessment order passed requires to be cancelled. 2.3 Without prejudice to the above, the learned CIT[A] failed to appreciate that, under the scheme of the Income-tax Act, the A.O. who recorded the reasons and issued the notice u/s. 148 of the Act, alone would be competent to uphold the validity of action, as it is essentially a case where the subjective satisfaction of the income escaping assessment derived by the A.O. who recorded the reasons and issued the notice is to be objectively demonstrated and defended with reference to the material that was available with him at the time the reasons were recorded, and since the A.O., who disposed off th objections wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by M/s. AVANT GARDE FASHION WEAR PRIVATE LIMITED [PAN : AAGCA 0657A], which is an Income-tax assessee and the same was reflected in the Balance Sheet, which is also filed, and therefore, holding that the appellant -Las made the investment and not explained the source thereof is arbitrary, based only on suspicion, surmise, assumptions, presumptions, without any an iota of evidence and infact, contrary to evidence and hence perverse and therefore, requires to be deleted. 3.4 The learned CIT[A] ought to have noticed that there is no material to show that the appellant has made investment in M/s. JAGATI PUBLICATIONS LIMITED, except the statement of the appellant before the CBI or Police authorities which is inadmissible and hence, the addition made is purely on hearsay without examining M/s. Jagati Publications Ltd., prima facie, to consider whether any addition has to be made on the belief and footing that the appellant has made the investment. 4. Without prejudice to the right to seek waiver with the Hon'ble CCIT/DG, the appellant denies himself liable to be charged to interest u/s.234-A, 234-B and 234-C of the Act, which under the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... btained, the copy of the same has not been provided to the appellant on the facts of the case. d. The action of the assessing officer in bringing to tax an amount of Rs. 60 crores merely on the basis of the oral statement of the appellant before the CBI/ Police authorities without any substantial evidence is impermissible and unsustainable in the eyes of law and thus the order of assessment needs to be quashed under the facts and circumstances of the case. 2. The order of assessment is bad in law as the statements made by Mr. Navneet Singhania were used against the appellant without providing an opportunity to the appellant to rebut the claims/ statements made against him. 3. The authorities below are not justified in law in not affording an opportunity to the appellant to cross-examine Mr. Navneet Singhania which is against the principles of natural justice. 4. The authorities below failed to appreciate that the investment in M/s. Jagati Publications Pvt Ltd was not made by the appellant but was in fact made by M/s. Sugam Commodeal Pvt Ltd and M/s. Chandelier Tracon Pvt Ltd under the facts of the case. 5. Without prejudice, the authorities below failed to appreciate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The CBI has recorded the statement of the appellant as well as of Mr. Navneet Kumar Singhania, a local cash carrier, in which it was deposed by the appellant that he has supplied cash of Rs. 60 crores through local cash carrier Shri. Navneet Kumar Singhania. The information collected by the CBI was forwarded to the AO. On the basis of the said information, the AO has reopened the assessment under section 147 of the Act, in the hands of the appellant by issuing notice under section 148 of the Act dated 26.03.2015. In response to notice, assessee has filed a letter date 09.04.2015 stating that the original return filed on 22.08.2009 be treated as return in response to notice under section 148 of the Act. The appellant also requested for copies of reasons recorded which was supplied to the assesse and on receipt of reasons, appellant filed objection before AO through letter dated 08.05.2015. The objection of the appellant was disposed off by the AO by draft order dated 01.12.2015 and thereafter the AO passed an assessment order dated 28.01.2016. In the final assessment order the AO has added a sum of Rs. 60 crore as income of the appellant. 6. The appellant challenged the order befo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are sufficient materials before the AO to arrive at a prima facie belief that the income of the appellant has escaped assessment. It is also seen in the appellant's case that there is no scrutiny assessment under section 143[3] of the Act in the past. The Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd., reported in 291 ITR 500 [SC] has held as follows: "The expression "reason to believe" in section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. What is required is reason to believe" but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether Mere was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ason to believe" but not the established fact of escapement of income. At that stage, final outcome of proceedings is not relevant. The only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of the belief is within the realm of the subjective satisfaction of the Assessing Officer." 8. In the light of these observations of the Apex Court, we are of the view, that for reopening assessment, AO is required to form a prima facie belief that income chargeable to tax has escaped assessment. In the instant case, the AO has got the information from the CBI, the other investigating agency, that certain investment was made by the assesse through Shri Navneet Kumar Singhania, local cash carrier in the Jagati Publications and this investment was not declared by the assessee in the returned income. Therefore, the information received by the AO is sufficient to form a belief that income chargeable to tax has escaped assessment. Thus, we confirm the order of the CIT(A) upholding the validity of the reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Fashion Wear Pvt. Ltd., as admitted by the AO in response to query of the Tribunal raised during the course of hearing. Therefore, the impugned addition cannot be made in the hands of the assessee without any basis. 11. The learned DR placed reliance upon the order of the CIT(A). Besides it was also contended that the AO has got the information from the CBI and that information was confronted to the assessee and since he could not furnish the proper explanation, the AO has made the additions. 12. Having carefully examined the orders of authorities below in the light of rival submissions, we find that the sole basis for making an addition in the hands of the assessee is a statement of the assessee as well as Shri Navneet Kumar Singhania recorded by the CBI. It is a settled position of law that the statement recorded by the CBI or police authorities/investigating authorities cannot be made a sole basis for making additions. Moreover, the statement recorded by the police authorities are not admissible under evidence as per provisions of Section 25 of Indian Evidence Act, 1982 and also in the light of judgment of the Apex Court in the case of Zwinglee Ariel Vs. State of MP (supra). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... share for a sum of Rs. 59,84,92,020/- meaning thereby the entire shareholding of Jagati Publications Ltd., held by the M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were not acquired by M/s. Avant Garde Fashion Wear Pvt. Ltd., in which the assessee happened to be a Director. Therefore, AO has not brought any material on record to demonstrate that assessee has made the investment in Jagati Publications Ltd., by acquiring its shares during the impugned assessment year. The addition made by the Revenue authorities is only on the basis of the statement recorded by the CBI. It is also evident from the assessment order that the statement was not even confronted to the assessee during the course of assessment proceedings and assessee was also not even allowed to cross-examine Shri Navneet Kumar Singhania. From the careful examination of the assessment order we find that AO has made half-heartedly investigation on receipt of the information from the CBI. Once he got such a sensitive information from the CBI the onus of the AO is more and he should have examined the affair of all the three companies and if he finds anywhere that the substantial cash was introduced, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ' and CBI launched criminal prosecution against assessee. Based on said materials, the AO initiated reassessment proceedings against the assessee on the ground that said amount had not been shown in the returns. The assessee explained on the basis of which proceedings were initiated. The AO however rejected the said explanations and held that income tax proceedings are independent proceedings and had nothing to do with the decision of the special bench. The assessee in reply requested the AO to produce 'J' before him for crossexamination. The AO, however rejected the said request and based on the material available on record he made an addition of Rs. 17 lakh in the hands of the assessee by treating the same as undisclosed income. On appeal, the CIT(A) set aside the findings of the AO and deleted the additions of Rs. 17 lakhs. The matter went to the Tribunal. The Tribunal re-examined the entire issue and relying upon the various judicial pronouncements in which it has been held that evidence is to be judged by considering the surrounding circumstances and applying the test of human probabilities. The Tribunal finally concluded that Revenue has no sufficient material available on re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mination. Therefore, whatever material was collected at the back of the assessee could not be read in evidence against the assessee. It is settled law that if any material is collected by the income-tax authorities at the back of the assessee then opportunity to controvert the same should have been given to the assessee. Therefore, in the instant case, whatever material was collected by the Assessing Officer could not be read in evidence against the assessee. The fact was conceded by the Assessing Officer before the Commissioner (Appeals) that except the copies of the documents recovered by the CBI there was no other material found against the assessee. The Supreme Court in its various decisions has held that the evidence is to be judged by considering the surrounding circumstances and by applying the test of human probabilities. However, in the facts of the instant case, only diaries were recovered which were having only abbreviated forms without further explaining or mentioning anything and, therefore, it was not considered as evidence by the High Court and the Supreme Court. If the test of human probabilities was applied in favour of the assessee, then it could be inferred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity. The relevant observation of the Tribunal is extracted hereunder for the sake of reference: "Section 112 of the Customs Act provides for the liability of penalty on any person who does not omit to do any act which would render such goods liable to confiscation under section 111, or who acquires possession of such goods or is in anyway concerned in the carrying, removing, deposing, keeping, concealing, selling or purchasing, etc., of such goods. As such, the person, liable for imposition of penalty under section 112, may be the person being in any way concerned with the goods which are improperly imported into India from outside. The above provision, in no way; requires the concerned person to be the owner of the goods. Under section 138A of the Customs Act, there is a provision for presuming in any prosecution for an offence under the Customs Act, requiring the culpable mental state on the part of the accused, that such accused had the required culpable mental state though the accused could furnish defence to rebut the said presumption. [Para 18] The contention of the revenue that the Customs Collector having had conducted the inquiry and having marshaled/ascertained the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose testimony, even otherwise, might not be worth reposing credence therein or placing reliance thereon. As against the said statement of KNJ, there was also the statement of the assessee denying totally his involvement in connection with the said gold transaction. [Para 22] 'KNJ' having been found in possession of gold, prima facie, it was he who was to be treated as owner of the possession (gold) unless this presumptive inference was rebutted by proper/convincing evidence. There being no 'evidence' worth the name, the 'other material' being the said statement of 'KNJ' and the order of Customs Collector, remained too feeble to entangle assessee as the owner of the said contraband gold, seized by the Customs officials from the possession of 'KNJ: [Para 23] For making an addition under section 69A, apart from ownership of the asset/valuable article, which is deemed to be the income of the assessee for that financial year; it is also a pre-requisite that such asset/valuable article 'is not recorded in the books of accounts' maintained by the assessee (if any). In the instant case, even if the department's factual allegations were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o be used as basis for fastening makers of those statements with criminality of offences under section 193 and/or section 229 of the Indian Penal Code on the ground that deponents of those statements has retracted from their earlier statements in a subsequent proceeding which is deemed to be a 'judicial proceeding. Their Lordship has further observed while examining the scope of section 136 of the Income Tax Act, r.w.s. 39 of the FERA, 1973, that the incometax proceedings are entirely different from and dissimilar to proceedings under FERA. Therefore, the ITO in exercise of his power under section 136 cannot make use of statements recorded by Enforcement Directorate for prosecuring deponents of those statements in a separate and independent proceeding under Income-Tax Act, on ground that deponents had retracted their statements given before Enforcement Directorate. In the case of Andaman Timber Industries Vs. Commissioner of Central Excise, 281 CTR 0 241 (SC), the Hon'ble Apex Court has held that not allowing assessee to cross-examine witness by adjudicating authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice." 18. Turning to the facts of the case in hand we find that the entire addition is on the basis of the statements of the assessee and Shri. Navneet Kumar Singhania recorded by the CBI. Before the AO, assessee has specifically denied such statements recorded by the CBI and has sought cross-examination of Shri. Navneet Kumar Singhania wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
