TMI Blog2018 (6) TMI 838X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. It was also not made clear to us by the Revenue authorities as to whether on account of statements recorded by the CBI, any criminal proceedings were initiated against the assessee and Shri. Navneet Kumar Singhania under any other Act and what was the result thereof. Except such statements, the AO has not brought anything on record to establish that assessee had made such investment in Jagati Publications through Shri. Navneet Kumar Singhania and the same was not declared in its return of income. In the light of these facts, we are of the considered opinion that addition cannot be made in the hands of the assessee in the absence of the relevant evidence - decided in favour of assessee. - ITA No.355/Bang/2017 - - - Dated:- 15-6-2018 - SHRI. SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER For The Assessee : Shri. V. Srinivasan, Advocate For The Revenue : Shri. Muzaffar Hussain, CIT ORDER Per Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of the CIT(A), inter alia, on the following grounds: 1. The orders of the authorities below in so far as they are again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.5 Without prejudice to the above, the learned CIT[A] ought to have appreciated that the materials available with the learned A.O. on the date of recording the reasons could not reasonably induce the belief that income has escaped assessment, especially when the A.O. who recorded the reasons has lot even cared to verify the correctness of the information shared by another authority prior to recording the reason and also the Joint Commissioner has also not applied his mind to proximate and pertinent matters relevant for the formation of the belief by the A.O. and relied upon farfetched and remote considerations and both of them have thus abdicated the duties cast on them as a matter of safeguard provided by the statute against abuse of the process of the extraordinary power of reopening to make an assessment under the facts and in the circumstances of the appellant's case. 3.1 Without prejudice to the above, the learned CIT[A] is not justified in sustaining the addition of ₹ 60,00,00,000/- in the hands of the appellant as unexplained income in respect of the alleged investment made by the appellant in M/s. Jagati Publications Ltd., under the facts and in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under mentioned additional grounds of appeal which were not urged specifically in the original grounds of appeal filed at the time of institution of appeal. These grounds do not involve any investigation of any facts otherwise on the record of the department and are also pure questions of law, which goes into the very root of the matter of jurisdiction and validity of assessment and therefore, it is prayed that the additional grounds may kindly be admitted and disposed off on merits for the advancement of substantial cause of justice. Reliance is placed on the decision of the Hon ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT, reported in 229 ITR 383 and on the decision of the Karnataka High Court in the case of Gundathur Thimmappa Sons vs. CIT, reported in 70 ITR 70. 1 The order of assessment is bad in law as the mandatary conditions for assumption of jurisdiction under section 148 of the Income Tax Act, 1961 (the Act) have not been complied with on the ground that: a. The action of initiating the proceedings under section 147 of the Act by the predecessor assessing officer based on the information received from the Central Bureau of Investigat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. 7. The learned assessing officer erred in making an addition of ₹ 60 crores in the hands of the appellant after having stated in the assessment order that the appellant was not capable of paying even ₹ 20 crores as his personal money and the CIT(A) erred in confirming the addition made of ₹ 60 crores under the facts and circumstances of the case. 3. Though the grounds raised in the form of additional grounds are already there in the original grounds of appeal, but in order to avoid any controversy, we prefer to adjudicate the additional grounds along with the original grounds. 4. Though various grounds are raised in the form of original grounds and additional grounds, but they all relate to only on 2 issues, one is the validity of the reopening of the assessment under section 147 of the Act and the second, addition of ₹ 60 crores sustained by the CIT(A) in the hands of the assessee. The other ground raised in this appeal is with regard to interest chargeable under section 234B and 234C and since this ground is consequential in nature it does not require independent adjudication. 5. Now with regard to validity of reopening of assessment, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the explanation of the assessee but was not convinced with it and he accordingly confirmed the reopening of the assessment. The relevant observation of the CIT(A) is extracted hereunder for the sake of reference: 7.8 I have considered the submissions made. For purpose of reopening the assessment the requirement is that the A.O. must have a reason to believe that income has escaped assessment. The reasons recorded by the A.O. shows that based on information received from CBI in connection with providing accommodation entries to Y. S. Jagan Mohan Reddy Group of Companies, the appellant had provided ₹ 60 Crores to one Mr . Navneeth Kumar Singhania, whi ch was routed as share capi tal in Jagat i Publ i cat ions through two companies . In the statement of the appel lant before the CBI, the appellant had deposed that he had supplied ₹ 60 Crores in cash, which was also corroborated by Mr. Navneeth Kumar Singhania, in a statement recorded before the DCIT, Circle-2[3], Hyderabad. After considering the said information, the AO has examined the return of income filed by the appellant and noticed that the appellant s income consists of only salary and interest income. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the A.O. has followed the provisions of the Act in obtaining sanction for misuse of notice and he has communicated the reasons to the appellant and disposed of the objections raised by the appellant by passing a speaking order. Hence, the AO has complied with the judgement of the Hon'ble Supreme Court in the case of GE% Driveshafts reported in 259 ITR 19 [SC] also. The contentions and grounds raised by the appellant on this issue are therefore without merit and the same have to be rejected. These grounds are DISMISSED . 7. Now the assessee is before us and reiterated his contentions. We have carefully examined the order of the lower authority in this regard and we find that AO got the information from the CBI, the other investigating agency that certain investment was made by the appellant through Shri Navneet Kumar Singhania in Jagati Publications and the same was not disclosed by the assessee in his return of income. While forming a belief that income has escaped assessment, the AO is required to have some cogent information on the basis of which a belief can be formed. At the time of forming a belief, AO is not required to make any enquiry or investigations. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s never confronted to the assessee nor the AO collected any other evidence in support of his claim that assessee has given the aforesaid amount to Shri Navneet Kumar Singhania for its onward investment in Jagati Publications. It was also contended before the CIT(A) that assessee was neither a shareholder nor a director in the companies viz., M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., who ultimately invested the aforesaid alleged amount in share capital in Jagati Publications Ltd. The contention of the assessee were examined by the CIT(A) but he was not convinced with it and he confirmed the additions. 10. Now the assessee is before us. Besides reiterating its contentions, the learned Counsel for the assessee has contended that for making the addition, AO has simply relied upon the statement recorded by the CBI whereas the statement recorded by the police authorities is not a good piece of evidence and is not admissible under the law. Besides, AO has not made any effort to collect any information either from the aforesaid 2 companies i.e., M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., with regard to the investment of ₹ 60 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., for acquiring the shares in Jagati Publications Ltd. On the basis of this information, the AO could have re-opened the assessment or make an enquiry in the affairs of both the companies to find out as to whether such amount of ₹ 60 crores was ever invested or brought in the books of accounts of this company. If it was brought in those companies, source of the funds could have been examined by the AO but he did not do so. Before us, the copy of balance sheet of the companies of M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were filed and as per the schedule B, it is evident that M/s. Chandelier Tracon Pvt. Ltd., had acquired shares of ₹ 31,12,00,000/- of Jagati Publications Ltd., and M/s. Sugam Commodeal Pvt. Ltd., had also acquired 28,58,00,000/- shares at the face value of ₹ 10/-. Therefore, the total investment in shares by these companies in Jagati Publications Ltd., comes to ₹ 52 crores but not 60 crores as alleged by the Revenue. It is the responsibility of the AO to dig out the truth about the source of investment in Jagati Publications Ltd., by M/s. Chandelier Tracon Pvt. Ltd., and M/s. Sugam Commodeal Pvt. Ltd. It is also a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of law unless and until some corroborative independent evidence is collected by making necessary enquiry. 13. We have also carefully perused the various judicial pronouncements referred to by the assessee wherein it has been held that on the basis of the confessional statement during the course of search/survey, the addition cannot be sustained unless and until there is some corroborative evidence, if the assessee has retracted from the statements. In the case of Manoj Prabhakar Vs. Asst. CIT reported in 84 TTJ 625, the Tribunal has held that whether addition, made only on basis of figures noted on slip of paper found from possession of assessee and statement of P , could not be sustained because no direct evidence was available on record to corroborate fact regarding passing of consideration beyond and above consideration mentioned in sale deeds . Similarly in the case of Ajay Sharma Vs. ACIT 101 TTJ 1065 (Delhi), the Tribunal has also held that where no cogent evidence was collected during the search to show that the assessee was taking money for fixing cricket matches, the reports of the CBI and Madhavan Commission on match fixing could not be relied upon for making addi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere was no evidence against the assessee except diary, note book and loose sheet with regard to payment and it was held that evidence of such a nature could not be converted into legal evidence against the assessee. Therefore, the very foundation of initiation of reassessment proceedings disappeared in the instant case and, accordingly, the addition would also not survive. There was no recovery made at the instance or persistence of the assessee. The revenue relied only upon diary and charge-sheet framed by the CBI. The whole case of the revenue would collapse the moment assessee was discharged of the sole allegation of receipt of ₹ 17 lakhs. The abbreviated form allegedly recorded in diaries was not explained by any material. It could resemble to name of other person also who was having similarity in name. Unless it was proved through corroborative evidence that entries were having any nexus with the assessee, addition could not be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appeared that findings of the Assessing Officer were, based on suspicion which could not take place of legal proof ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng with order of the Commissioner (Appeals). It was to be accordingly, confirmed. 15. In the case of ITO Vs. Pukhraj N Jain reported at 95 ITD 281 (Mumbai), the Tribunal has held that AO being a quasi-judicial authority cannot base his conclusion/decision on the finding of any authority under any other Act/law and, thus, adopt the finding/conclusion of that authority; the decision to withdraw by the AO has to be his own and independent one. In that case, while on his way, the assessee s brother KNJ was intercepted by DRI officials and contraband gold bars were found in this possession, the Customs Collector confiscated gold as being improperly imported into India from abroad and imposed penalties under Customs Act, 1962 and Gold Act, 1968 on assessee and his brother KNJ. Based on the order of the Customs Collector as well as the statement of KNJ and the assessee recorded by DRI officials, the AO made addition under section 69A on account of value of unexplained valuable article being gold, not recorded in books of account of assessee. On appeal, the Commissioner deleted the addition finding that the AO merely relied on the orders of the Customs Collector having had conducted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... misunderstanding of the very basic concept of judicial/quasijudicial adjudication by a judicial or quasi-judicial authority. Although an Assessing Officer; while making an assessment, does not strictly act as a Court of law, but he acts in a quasi-judicial capacity and the proceedings before the Assessing Officer are, in general, in the nature of quasi-judicial, though for specific purpose, the same are 'deemed judicial proceedings' as provided in section 136. An Assessing Officer; being a quasi-judicial authority has to, while framing assessment, discharge his duty/function judicially and in that process, has to apply his own mind independently to the facts of the case, ascertained by him and then draw his own conclusion/ decision by appreciating the evidence/material brought/available on record before him; the Assessing Officer cannot base his conclusion/decision on the finding of any authority under any other Act/law and, thus, adopt the finding/conclusion of that authority. The decision to be drawn by the Assessing Officer has to be his own and independent one. It is clear from the provision of section 143(3) that the Assessing Officer could not base his decision on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stockbroking (P.) Ltd., Vs. ACIT 115 TTJ 173, the Tribunal has observed that simply on the basis of the statement of the third person to Enforcement Directorate that he had remitted funds to the assessee from abroad, it could not be held that amount had been remitted by assessee from undisclosed sources; more so, when an opportunity to cross-examine said person was not granted to assessee. In that case, the Enforcement Directorate has received the information that assessee had arranged 1,25,000 dollars, which was remitted to FGM Ltd., through hawala channel. In this connection, the Enforcement Directorate had recorded statement of one AS who in his statement had pointed out that he made the payment on behalf of the assessee. Addition to the assessee s income had been made on the ground that AS had arranged the remittance of 1,25,000 dollars to FGM Ltd., on behalf of the assessee. Having examined the facts in the light of legal propositions, the Tribunal has held that if some amount is remitted to foreign company by any person how it can lead the authority to believe that amount was remitted only by the assessee. The Department could not find out who contacted AS and how that perso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-exam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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