TMI Blog2019 (8) TMI 1890X X X X Extracts X X X X X X X X Extracts X X X X ..... given by us at this stage. Hence, in our opinion, the CIT(A) is justified in holding that there is no necessity of providing opportunity of cross examination of Mr. Riyaz by these assessees. Whether AO has gone wrong in accepting the pen drive as a piece of evidence and making substantial additions to the income returned? - The assessees objected to consider the pen drive found with Mr. Riyaz as evidence for framing the assessments. The pen drives were unearthed from Mr. Riyaz and it is an admitted fact that the data contained therein belonged to the assessee. Being so, it was used for framing the assessments. Under section 2(12A) of the Act, books of accounts includes ledgers, day book, cash books, account books and other books kept in written form or printouts of data stored in a floppy, disc, tape or in other forms of electronic magnetic data storage device. Hence, pen drive forms part of the books of accounts and the data therein could be used for framing assessments. We do not find any infirmity in the order of the CIT(A) and the same is confirmed. Thus, this ground in all the appeals is dismissed. Assessee had produced expert opinion of cyber expert with regard to g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghunathan, Adv. Shri C.B.M. Warrier, FCA For the Respondent : Smt. A.S. Bindhu, Sr. DR Shri Shantam Bose, CIT(DR) ORDER Per CHANDRA POOJARI, AM: These appeals filed by different assessees are directed against the different orders of the CIT(A)-III, Kochi and pertain to the assessment years 2008-09 t0 2013-14. 2. The assessee's have raised the following common grounds of appeals except for variance in figures : 1. The order passed by the learned assessing Authority as well as Commissioner of Income Tax (Appeals) to the extent it upholds the assessing authority's findings are both against the law, facts and probabilities of the case. 2. The Assessing Officer has gone wrong in adopting the data in the pen drive for computing the total income of the Appellant for the following reasons: a) The pen drive is claimed to have been recovered from the residence of one Mr. Shareef in survey u/s 133A of the Act without cross examining Mr. Riyas. b) The Assessing Officer has gone wrong in accepting the pen drive as a piece of evidence and making substantial additions to the income returned. The pen drive is not having any evidential value as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d statements recorded from the Managing Director, some of the Employees and Customers. After more than seven months of the search, the Officers conducted a survey under Sec. 133A of the Act at the residence of one Sri Riyaz who was originally on the employment of the assessee on 14.07.2014 during the course of which, three pen drives were impounded. The assessment was thereafter completed by placing reliance on the pen drives claimed to have been recovered from Mr. Riyaz. Assessing Officer has included stock transfer to branches and sister concerns valued Rs. 2,99,77,239/- in the sales turnover. 4. Before the CIT(A), the assessee filed a revised working of computation of total income without prejudice to other grounds of Appeal. Income As per original Return Income As per filed u/s. 153 A Assessed Income Income Computed During Appellant Proceedings 47,67,320.00 78,67,320.00 7,31,36,150.00 1,70,55,478.00 CIT(A) observed that on 04.12.2013 a search and seizure operation was carried out at the premises of the appellant company, other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s been completed by the AO on the basis of data and evidences found during the course of search and the data found to be contained in the said Pen Drive. Ground of Appeal No. 2 is dismissed accordingly. b) On the basis of discussion above, it is clear that neither the search nor the survey conducted subsequently are bad-in-law, as there has been no legal or procedural infirmity in carrying out the same. There is no dispute that the data contained in the said Pen Drive belonged to the Appellant. Ground of Appeal No. 3 of the appellant is dismissed accordingly. c) Ground of Appeal No.4 also cannot be allowed as it is proved beyond doubt that the data contained in the Pen Drive belonged to the Appellant and its group concerns and the AO has correctly used such data in computing the income of the appellant. This ground of appeal of the appellant is dismissed. d) Grounds of Appeal Nos. 5, 6 and 7 relate to Principle of Natural justice and use of data contained in the Pen Drives. It has already been discussed earlier that there is no dispute about the fact that the data contained in the said pen drives belonged to the appellant group and copy of the data was provided to the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is an employee of the assessee-Company and after recording the statement of Shri Riyaz, the same was confronted to Shri V. Shareef on 04/08/2014 in reply to which Shri V. Shareef stated as follows: Q. No. 3 We are showing you a bunch of loose sheets marked as A-1 ,which was obtained and impounded from your office on the course of survey u/s l33A at the business premises of corporate office of M/s Hillwood group of cornpanies. Please comment on this this Ans. No. 3 I have examined this. This pertains to the actual income expenditure details of the three companies - M/s Hillwood Exports Imports ,M/s Hillwood Furniture, M/s Hillwood Makaraparamba on 24/07/2014 Page No.1,2,3 are prepared by Shri.Beeran, who is my staff. Page no.11 is prepared by my another staff Shri.Krishna Prasad. Further there are some more sheets which pertains to the sales on 24/07/2014. The accounts of all the three above concerns are included in these slips.lt is a daily practice we follow in maintaining accounts. Shri Beeran and Shri. Krishna Prasad daily prepare such reports and submit to me at the day end or on the next day. I generally give this slips to Shri.Hakim or Shri.Rajeev in accounts after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e showing you the P L Account statement. Balance Sheet and Debtor's/Creditor's list. This includes the actual accounts from 2006-07, various outstanding amounts etc. This was shown to Shri. Hakim for examination before. Please examine and comment on this A.7 I examined this. As I said I can comment on this after consulting Shri. Hakim or Shri.Rajeev. Please grant me time till 11/08/2014 for this explanation (However, assessee failed to give further explanation in this regard till date). Q.8 Do you have anything more to say? A.8 I have understood that I have failed in submitting actual accounts. I will submit the actual accounts before the department and shall pay the taxes accordingly. 1 am thinking of going to Settlement commission to resolve this issue. Kindly exclude me from Penalty/Prosecution. 5.1.1 The above reply shows that objection raised by the assessee is totally misplaced and the assessee was in the knowledge of the activities of Shri Riyaz in connection with the assessee s case. Shri Riyaz, being an employee of the assessee is under his control and non attending the cross examination of Shri Riyaz is only a last effort to save the assessee and it ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s ground shall have no merit and the same is dismissed since the pen drive forms part of the books of accounts and it could be considered for framing the assessments of the assesses. Thus, Ground No. 2(c) in all the appeals is dismissed. Admission of Additional Grounds 6. Before us, the Ld. AR filed petition for admission of additional ground in respect of all the assessees for all the assessment years under consideration with following application for admission of the same: I am filing herewith additional grounds in respect of these assessment years which may be considered and adjudicated in the appeal proceedings. The omission to file this grounds may be condoned and the grounds may be considered in the appeal proceedings. 6.1 The additional ground reads as under:- The assessment is completed on the basis of the data from the three pen drives impounded from the house of Mr. Riyaz at the time of survey u/s 133A of the Act. The pen drives are not subject to verification as per the mandatory prescription u/s 65A and 65B of the Evidence Act 1872 read with sec 93 and the 2nd schedule of the Information Technology Act 2000 before adopting this as an evidence again ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... casion and submitted that the additional ground is directly related to Ground Nos. 2(a), 2(b) and 2(c) which is with regard to applicability of provisions of section 65A and 65B of the Evidence Act, 1872 r.w.s. 93 and 2nd schedule of the Information Technology Act, 2000 before adopting the pen drives obtained from the assessee as evidence against the assessee. 6.5 The Ld. AR also submitted that the assessments were made based on recovery of pen drives without following basic principles of natural justice. Hence, it cannot be used as evidence to frame the assessments in these cases. It was submitted that even after accepting the demand for opportunity to cross examine Sri Riyaz, summons was issued for his appearance and the opportunity was thereafter denied when he did not turn-up for cross examination pursuant to the summons issued. It was submitted that the Assessing Officer had included stock transfer to branches and sister concerns valued Rs. 2,99,77,239/- in the sales turnover wrongly. It was submitted that the pen drives which were described as financial tool did not contain any entry regarding purchases and payment made through banking channels. The ld. AR submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer. In the case of National Thermal Power Corporation Ltd. vs. CIT (229 ITR 383), the Supreme Court observed that the power of the Tribunal is not confined to dealing with the issue which is arising out of the order of the authorities below. As long as the issue is relating to framing of correct assessment for the relevant assessment year, and particularly, when the relevant facts can be ascertained from the material already on record, it is open to the assessee and the Department to raise that issue provided the issue was raised as bona fide and the same should have been raised for good reasons. In our opinion, the Tribunal has the power to admit the additional ground of appeal which may not arise out the order of the lower authorities. There is no dispute or controversy about the power of the Tribunal to admit the additional ground of appeal. However, whether, in a particular situation the Tribunal should exercise such powers or not, would essentially depend upon the facts of such a case and as there cannot be any, and there is o straitjacket formula of universal application to decide the question of admission of additional ground or criteria for admission thereof, which op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessees have failed to explain the reason for not raising the additional ground on earlier occasion and also the reason given by the assessees is that only omission to raise the additional ground and they have not given any reason for such omission. Therefore, it is evident that the assessees adopted callous approach which demonstrated utter indifference in the matter. In such a situation, sufficient cause does not exist to raise the additional ground on earlier occasion which remains unexplained. In our opinion, there is complete negligence on the part of the assessees and complete absence of due diligence to pursue the matter in question. It cannot be said that the case of the assessees falls under the category which is beyond the control of the assessee. As discussed earlier, the assessee has failed to show sufficient cause for not raising the additional ground within the period of limitation without explaining the delay till the date of hearing of these appeals. In other words, the whole period of delay is not at all explained as held in the case of Ramlal and others v. Rewa Coalfields Ltd., [AIR 1962 SC 361] wherein it was held that it is not the case of the assessee wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24d00a8764bb63a96 Verification MD5 7176ffafba844724d00a8764bb63a96 GUID 35d955165c503843811fcd90745558f9 EnCase Version 6.19.2 System Version Windows Unknown Witnesses Forensic Expert Assessee A.O B Hash Value Report of Riyaz-M4GB Pendrive 1 Is Physical . Raid Stripe 0 Size Error 64 Granularity 0 Process ID 0 Index File C:\Program Files\EnCase6\lndex\Riyaz-M 4GB Pen drive PD 1-35d955165c503843811fcd90745558f9. Read Errors 0 Missing Sectors 0 CRC Errors 0 Compression good Total Size 4,004,511,744 Bytes (3.7GB) Total Sectors 7,821,312 Disk Signature 00000000 Partitions Valid Hash Properties Name Value Head Set ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndrive 2 Is Physical Raid Stripe Size 0 Error Granularity 64 Process ID 0 Index File C:\Program Files\EnCase6\lndex\Riyaz-M Pen drive-2 3556b083d16f1149892e232ace655b94 Read Errors 0 Missing Sectors 0 CRC Errors 0 Compression Good Total Size 4,004,511,744 Bytes (3.7GB) Total Sectors 7,821,312 Disk Signature 6F647134 Partitions Valid Hash Properties Name Value Head Set Hash category Partitions Name Id Type Start Sector Total Sectors Size Ob FAT32 0 7,821,312 3.7GB Witnesses Forensic Expert Assessee AO D Hash Value Report of Riyaz-M Pendrive 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Name Id Type Start Sector Total Sectors Size Ob FAT32 0 7,821,312 3.7GB Witnesses Forensic Expert Assessee AO 8.4 The Hon ble Supreme Court in the case of Anvar P.V. vs. P.K. Basheer Ors. held that if electronic record is being used as evidence, the conditions mentioned u/s. 65B(4) of the Evidence Act has to be complied with. The conditions that are to be satisfied are enumerated in para 15 of the judgment of the Supreme Court in the case of Anvar P.V. vs. P.K. Basheer Ors (10 Supreme Court Cases 473). The Hon ble Supreme Court in the case of T.K. Sanalkumar vs. CIT Cochin in SLP No.32635 of 2011 dated 04.07.2012 while disposing off SLP filed by the assessee had directed the Commissioner to consider a ground which is identical to the additional ground raised by the assessee. But, in the present cases, the Department actually followed the clear procedure and retrieved the hash value report which was duly acknowledged by the assesses. Now, the contention of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellants who are not computer-savy was not able to understand the significance of the term hash value , data integrity etc. etc. used in the reply. Therefore this deponent, through their Counsels, consulted an Expert in the field of Computer Systems/forensic Science in relation to computer data etc. Dr. VINOD BHATTATHIRIPAD M.Sc. [OR CA], M.Phil [Computer Sc.], Ph.D (cyber Forensics), Calicut an internationally acclaimed Expert in the field of Forensic Sciences on the implications of hash value reports ,, accessing data from storage media impounded, securing data integrity and other relevant matters which arise in the light of the specific statements made in the Reply. In consultation with the Counsels, specific questions were framed and the opinion sought. 5. The Expert - Dr Vinod Bhattathiripad - has now made available his opinion on the various questions framed as per his Opinion dated 15.06.2019. The said opinion would disclose that the claims and assertions made by the Assessing Authority in the assessment order with regard to the safe guards said to have been taken with respect to the pen-drives in the matter of accessing data etc. are not w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on Computer Science (Izmir, Turkey in 2012). He has been a technical committee member of several cyber crime conferences in Asia, Europe and the USA. He is a reviewer of several journals and conference proceedings on this topic, across the world. He has authored a reference book titled judiciary-friendly forensics of software copyright and this book has been published IGI Global, Pennsylvania, USA. This book is now being sold by leading distributors (including Amazon dot com) across the world and is a reference book in several western universities. This book is widely referred to in by judges and lawyers specialised in Intellectual Property crimes. Forensic feedback This forensic feedback is based only on the facts shared by Adv. Raghunath vide email dated 11-June-2019 and also after going through the records produced by him and is not a complete forensic report after going through the entire case records. All the available records are related to the search conducted on 04-2.2013 at the business premises of M/s. Hiliwood Group of Companies and also at the residential premises of its Director and others and also related to the survey conducted on 14.07.2014 at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, then the examiner is required to report that there have been suspicious attempts of accessing/tampering/modifying the contents of the devise between the date of seizure and date of the forensic evaluation. The above procedure is akin to the steps taken when material objects or samples which are required to be examined by experts (during the course of investigation into crimes and/or even food adulteration cases) where the material object/sample are wrapped, packed, tied and sealed with the monogram of the authority and thereafter sent to the Chemical Laboratory where the Analyst before taking up the sample / material object for examination - will record his satisfaction that the seal is not tampered with and the packing intact, before proceeding to analyse. B: Whether such steps have been taken in the present case given the facts detailed above? Answer: Absolutely no. From the facts as supplied to me by you, I find that the pen drives were impounded on 14/07/2014 under inventory prepared on 14/07/2014. The copy of the inventory available refers to three pen drives Sl. No. 9, 10 and 11 in the list Black coloured Sandisk Pen Drive (4 GB), Red colou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluded that the seizure of the pen-drives was generally following the related protocols? Answer: Absolutely no. The hashing process should have been performed by the officer ideally during the impounding on 14.07.2014 in the presence of the owner of the pen drives and then, the resulting hash values should have reported through the impounding report. These hash values (dated 14.07.2014) would have then uniquely represented the content of the pen drives as on 14.07,2014. Also the hashing process should have ideally been repeated by the forensic examiner on 22/23.07.2014 and the resulting hash values should have then been compared with the hash values generated on 14.07.2014. As things stand, the hash values, if any, generated on 14.07.2014 seem to be missing. Also, the hash values that were actually generated on 22.07.2014 do uniquely represent the 'content of the pen drive, as only on 22.07.2014 and DO NOT reflect the modifications, if any, done during the period 14.07.2014 to 22.07.2014 on the files residing in the pen drive. So, the seizure of the pen drives seems to have failed to follow the related protocols. E. What was the actual course of action that s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure the content of the storage device. That means, subsequent to this hashing process, the content of the pen drive remains completely open and accessible to anybody for any type of modifications. Also, the process of hashing is not intended to make any change in the content of the storage device. In short, by hashing a pen drive, the data residing in the pen drive DOES NOT get locked. DOES NOT get affected and DOES NOT get modified. Because of this feature, the hashing process is extensively recommended world over by Cyber Forensics Experts as a process to ensure the integrity of a confiscated electronic storage device. For example, hashing process is often recommended by cyber forensic experts in order to ensure the integrity of the content of a confiscated pen drive. The integrity of the data contained in the pen drive is ensured by ensuring that the hash value calculated at the time of confiscating the pen drive is same as the hash value re-calculated at the time of the subsequent forensic evaluation of the pen drive. Any variation in these two hash values is an indication to an attempt of modifying the contents of the pen drive in between the date of confiscation and dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from evidence. 11.3 The Ld. AR pleaded to admit the additional evidence, as these are very relevant to decide the issues in dispute. Further, it was submitted that due to non- availability of the additional evidence on earlier occasion, it was now made available before the Tribunal and requested to admit the same. 12. We have heard the rival submissions and perused the record. In our opinion, the Tribunal has discretion to receive and adjudicate additional evidence even if it is not an arbitrary one but it is a judicial one circumscribed by the limitation specified under Rule 29 of the Act. The Tribunal has the power to allow additional evidence if it requires such evidence to enable to pass orders, i.e. to say, when it finds that there is any lacunae or defect which is to be filled up so as to render justice. The Tribunal has the power to allow additional evidence also if it requires such evidence for any other substantial cause, i.e. to say, even in cases where the Tribunal finds that it is able to pass orders on the state of the record as it is, it may still allow additional evidence to be brought on record if it considers that in the interest of justice something which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atsoever. The sufficient cause in procuring the expert opinion from the cyber expert within the contemplation of the limitation provision must be a cause which is beyond the control of the party invoking the aid of the provisions. In our opinion, in the present case, there is no sufficient cause to procure such cyber expert opinion after such a long period after survey in this case. The seeker of justice must come with clean hands and should prove that there was no negligence whether in action or want of bona fides. We find that in the affidavit, the assesses were not able to understand the significance of the hash value report. There was delay in procuring the expert opinion and it was procured with such a delay so as to delay the proceedings under the Act. More so, the affidavits filed by the assesses herein were self serving documents so as to derive undue benefit. We are not convinced with the reason explained by the assessee in obtaining the cyber expert opinion after such a long period. Even if it is admitted as additional evidence, that cannot bind the Assessing Officer. The apprehension of the assesses is that the Department has tampered with the pen drives. In our opinion, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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