TMI Blog2009 (3) TMI 86X X X X Extracts X X X X X X X X Extracts X X X X ..... s - matter remanded to AO - 373 OF 2005 - - - Dated:- 17-3-2009 - PINAKI CHANDRA GHOSE and SANKAR PRASAD MITRA, JJ. Mr. J. P. Khaitan, Sr. Advocate, for the Appellant. Mr. Nizamuddin, Advocate, for the Respondent. JUDGMENT This appeal was admitted on the following substantial questions of law :- (i) Whether the Tribunal was justified in law in upholding the addition of Rs.50 lacs made on the basis of materials seized from a third party, the veracity and genuineness of which was not established by summoning and examining the parties concerned inspite of the appellant's specific request and its purported findings in that behalf are arbitrary, unreasonable and perverse? (ii) Whether the Tribunal was justified in law in holding that the appellant was required to produce the concerned persons for examination and that the Assessing Officer had no obligation/duty in that behalf or to prove the genuineness and veracity of the materials seized from a third party on which the Department was seeking to rely? (iii) Whether and in any event, the Tribunal was justified in law in reversing the finding of the Commissioner of Income Tax (Appeal) that the said sum of Rs.50 la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Hon'ble Division Bench that if the workers' dues exceeded Rs.50 lacs, the sum would be met from the sale proceeds of the immoveable properties of the assessee. 8. On August 19, 1993 the search was conducted at the places of the assessee. The search was also carried on against one Thakur Prasad Jaiswal, father of Sunil Kumar Jaiswal. In course of such search, three letters were seized. The said three letters were exchanged between Sunil Kumar Jaiswal and one D.R. Khatau, the then Chief Executive of the assessee. 9. On the basis of the said three letters, the Assessing Officer held that in the assessment order dated March 30, 1994, the consideration for the sale of the moveable assets were raised from Rs.1 crore to Rs.1.50 crore by the parties. The assessee preferred an appeal from the said assessment order before the Commissioner of Income Tax (Appeals). By an order dated March 29, 1996 the Commissioner of Income Tax (Appeals) set aside the said assessment for reconsideration. The Assessing Officers were directed to allow the assessee an opportunity to examine the three letters. 10. It further appears that the assessee was provided with the copy of the said three letter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer was not justified in proceeding on the basis of the three letters without examining on oath the concerned parties such as, the buyer, the Chief Executive, the assessee and the Special Officer. He held that no corroborative evidence was found in course of the search against the assessese to prove the Department's case. He held that it was unbelievable that when M/s. Prasad Steel Traders was entitled to purchase the moveable assets for the price of Rs. One crore, it would increase the same by Rs.50 lacs for the mere asking. He also accepted the assessee's alternative contention that taxation of the sum of Rs. 50 lacs was required to be considered in the hands of D.R. Khatau as neither the assessee nor the Special Officer had received the said amount. 15. The appeal was preferred from the said order dated April 29, 2003 and the Tribunal by order dated March 28, 2005 reversed the order of the Commissioner of Income Tax (Appeals) and upheld the addition of Rs.50 lacs made by the Assessing Officer. 16. The Learned Counsel appearing on behalf of the appellant contended that from the facts it would be revealed that the approach of the Tribunal was entirely erroneou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not consider it necessary to cross-examine D.R. Khatau. It is submitted that in such circumstances, the revenue could not rely upon the seized letters and the Tribunal was not justified in basing its findings thereon. 19. The Learned Counsel appearing on behalf of the appellant relied on the decision reported in (1980) 125 ITR 713 (SC) [Kishinchand Chellaram Vs. CIT] and submitted that the Revenue sought to rely upon a letter addressed by the Manager of the bank to the ITO which was not even shown to the assessee. The Hon'ble Supreme Court held that the letter could not be taken into account for the purpose of arriving at a finding against the assessee. At page 720 of the Reports, the Hon'ble Supreme Court held as follows :- " It is true that the proceedings under the income-tax law are not governed by the strict rules of evidence and, therefore, it might be said that even without calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the I.T. authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgments of the Hon'ble Supreme Court, it is settled law that where the revenue seeks to rely upon evidence obtained from other parties, the assessee has to right to ask for cross-examination of such parties to show that such evidence is false, bogus, or manipulated and should not be accepted and that the revenue has to make the parties available for crossexamination by summoning them. As has been held by the Hon'ble Supreme Court, cross-examination is one of most efficacious methods of establishing truth and exposing falsehood. 23. It is further submitted that both the Assessing Officer and the Tribunal went wrong in holding that it was for the assessee to produce the persons concerned for examination. As has been held by the Hon'ble Supreme Court, cross-examination is one of the most efficacious methods of establishing truth and exposing falsehood. 24. It is further submitted that both the Assessing Officer and the Tribunal went wrong in holding that it was for the assessee to produce the persons concerned for examination. As has been held by the Hon'ble Supreme Court in the aforesaid decisions, the assessee had to be granted the opportunity to cross-examine the persons co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of Rs. one crore in terms of the order passed by this Hon'ble Court. It did not stand to reason that the purchaser would part with even a rupee more than what it was required to pay in terms of the order passed by this Hon'ble Court. It is inconceivable that the consideration fixed by this Hon'ble Court for sale of the moveable assets by the Special Officer appointed by the Court to the named purchaser could be altered by anyone. 28. As submitted hereinbefore, the letters in question can not be relied upon by the revenue. Even otherwise, the letters speak of increase of the price on account of higher labour payment. The purchaser could not possibly have had any interest in the assessee's labour. That apart, though in terms of the order dated December 23, 1988 of the Learned Single Judge, the workers were entitled only to Rs.50 lacs out of the sale proceeds of the moveable assets, in terms of the order dated March 14, 1989 of the Division Bench, workers' dues if found to be in excess of Rs.50 lacs were to be met from the sale proceeds of the immoveable properties. The workers were thus fully protected. The improbability of the contents of the said letters is self-evident. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its appeal be allowed by setting aside the addition of Rs.50 lacs made in the assessment. 33. On the contrary Md. Nizamuddin, Learned Counsel appearing on behalf of the Department submitted that the scope of the instant appeal is very limited. He pointed out that from question No. 1 and 2 it would be evident that the grievance of the assessee is Tribunal's confirmation of addition of Rs.50 lacs made on the basis of the material seized from a third party and the genuineness of which had been challenged by the assessee. The further grievance of the assessee that the Assessing Officer did not summon and examine the parties to establish the genuineness of the said seized documents. He further submitted that the assessee company was not given an opportunity by the Assessing Officer to clarify on the issue as it would be evident from the order passed by the Assessing Officer (see page 63 second paragraph, page 65 second paragraph, page 66 of the Paper Book). 34. The third question relates to the taxability of the said amount. According to the Learned Counsel, the assessee company took the defense in response to the aforesaid opportunity provided by the Assessing Officer to clarify on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 478 (S.C.) (State of Kerarla Vs. Shadul Yusuff) which is a case under Sales Tax when the Officer afforded him opportunity to cross-examine another person whose books of accounts were relied upon by the Assessing Officer which was denied by the assessee and The Hon'ble Kerala High Court remanded the matter to the Sales Tax officer to make fresh assessment order after giving opportunity to the assesseee to cross-examine the person concerned. Such action of remand of The Hon'ble High Court was upheld/affirmed by the three Judges' Bench of The Hon'ble Supreme Court in the aforesaid decision. 38. The Learned Counsel further submitted that where two views are possible on the materials on record and the Learned Tribunal has taken one view, in such a case that even if this Hon'ble Court is not agreeable to the view taken by the Learned Tribunal being the last fact finding authority; should not reappreciate the evidence afresh and draw a conclusion different from those drawn by the Assessing Officer and upheld by the Learned Tribunal; at best this Hon'ble Court could remand the case to the Assessing Officer to consider afresh by giving opportunity to the assessee to cross-examine the per ..... X X X X Extracts X X X X X X X X Extracts X X X X
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