TMI Blog2006 (10) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... n the affirmative, i.e., in favour of the Revenue and against the assessee. There shall be no order as to costs. - R. K. Agrawal And Vikram Nath JJ. For the Assessee : Ravi Kant assisted by R. S. Agrawal For the Commissioner : Shambhoo Chopra JUDGMENT R. K. AGRAWAL J. 1. The Income-tax Appellate Tribunal has referred the following question of law under section 256(2) of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for opinion to this court : Whether, on the facts and in the circumstances of the case, the Tribunal was correct in law in refusing the assessee' s right to cross-examine the persons whose statements were relied on for making the addition of Rs. 1,18,799 and in not following the principles of natural justice and the Supreme Court judgment in Kishinchand Chellaram v. CIT [1980] 125 ITR 713 ? 2. The reference relates to the assessment year 1975-76. 3. Briefly stated, the facts giving rise to the present reference are as follows : 4. The assessee is a company. Besides other activities of business, it was also manufacturing vanaspati oil. It had been supplying vegetable oil to the traders including M/s. V ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all respects and even all the sales made by the assessee to M/s. Vishwakarma Oil Traders had not been accounted for therein. It was also contended that Gopal Das did not own this cash book nor Badri Prasad in whose name the licence in the name of M/s. Vishwakarma Oil Traders was issued, had explained all the entries appearing in the cash book. Thus, it was the case of the assessee that the material obtained from this cash book cannot be used to the disadvantage of the assessee unless and until these parties had affirmed the payment on money alleged to have been received by the assessee. The Income-tax Officer was not satisfied by the explanation offered by the assessee. He held the amount of Rs. 1,25,559 to be the part of the receipt of the sale price of vanaspati oil which was sold by the assessee and treated the same as its income. In coming to this conclusion, he had made the following observations : A perusal of the cash book which was found at the time of raid and cash entry written therein clearly shows that the payments of on money has been recorded with complete details and on money has also been calculated on the basis of tins which ranges between Rs. 14 to Rs. 16 p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r contended that payment of on money to the assessee cannot be disbelieved only for the reason that the account books of the assessee had been accepted in the past, inasmuch as the fact of receiving on money by the assessee had come to the knowledge of the Department only after the search was conducted at the premises of Gopal Das. The mere fact that the price of vanaspati oil was controlled by the Government could be of no assistance to the assessee for it is a hard fact that the charging of on money takes place only when an item becomes scarce and its supplies are controlled by the Government. 7. The assessee contended that vide letter dated June 13, 1977, the assessee had requested the Assessing Officer to summon the partners of M/s. Vishwakarma Oil Traders and provide an opportunity to the assessee to cross-examine each of them. According to him, no such opportunity had been provided to the assessee and as such the rough cash book and the statement of the said persons could not be used against the assessee. The relevant part of the said letter, which contained such prayer, reads as under : (c) Copies of the statements of the partners and employees of M/s. Vishwakarma Oil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that any evidence which is sought to be used against the applicant, which has not been recovered from the applicant' s premises, but instead is based on the statements given by a third person, can be used to the disadvantage of the applicant only when an opportunity to controvert the same is given to the applicant and not otherwise. The opportunity to controvert also includes an opportunity to cross-examine such person. As in the present case the opportunity of cross-examination was not afforded, the assessing authority was not justified in drawing an adverse inference against the applicant on the basis of the entries found in the account books and the statements of the partners of M/s. Vishwakarma Oil Traders. In support of his aforesaid plea, he has relied upon a decision of the apex court in the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713. 11. Sri Shambhoo Chopra, learned standing counsel, on the other hand, submitted that the applicant was having regular business transactions with M/s. Vishwakarma Oil Traders and, therefore, the entries made in the rough cash book of M/s. Vishwakarma Oil Traders could not have been disbelieved particularly when it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y been recorded with a request that they may be summoned and their statements on oath be recorded in their presence. This request was made in the event the statements had not already been recorded earlier. As the statement had already been recorded, the opportunity to cross-examine the said persons did not arise. The applicant had ample opportunity to explain the things. 14. In the case of Kishinchand Chellaram v. CIT [1980] 125 ITR 713 (SC) the facts were that the assessee therein had two offices one at Bombay and the other at Madras. Some information was received by the assessing authority that the assessee had remitted a sum of Rs. 1,07,350 by two telegraphic transfers from Madras to Bombay through bank. Enquiries were made vide letters dated January 14, 1955, and February 10, 1955. The manager of the bank, vide letter dated February 18, 1955, replied that the telegraphic transfer of Rs. 1,07,350 sent by the assessee from Madras was received by the bank at Bombay on October 16, 1946, and the amount was paid to an employee of the assessee on the same day. This letter was not disclosed to the assessee. The application for telegraphic transfer was signed by a person giving the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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