TMI Blog2003 (12) TMI 271X X X X Extracts X X X X X X X X Extracts X X X X ..... Iron Steel Company. 6. That the Learned Commissioner of Income Tax (A) was not justified in confirming the interest charged under sections 139(8) and 217(1)(a), as the assessment was not regular assessment." 2. The relevant facts giving rise to this appeal are that the assessee filed the return on 18th August, 1987 showed total income of Rs. 28,730. The assessment was completed under section 143(1) on 8th February, 1988. 3. The Assessing Officer issued notice under section 148 of the Act on 13th February, 1996 based on certain information in his possession and stated that the Assessing Officer had reason to believe that there was escapement of income within the meaning of section 147 of the Act. The case was re-opened on the basis of a cash book ledger and loose sheets containing the details of transactions pertaining to the assessee. The said material was shown to the assessee's representative and he was asked to show cause why the material should not be used against the assessee. Since the assessee could not give satisfactory explanation, the Assessing Officer completed the assessment under section 143(3)/147 of the Act on 31st March, 1998 adding the following income to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer completed the assessment at Rs. 74,76,280 by making the following additions: (a) Capital as per,loose sheet Rs.51,61,420 (b) Profit derived from Drug account Rs.21,11,392 (c) Profit derived from Iron Steel account Rs. 1,74,741 ------------ Rs.74,47,553 Being aggrieved, the assessee filed appeal before the first Appellate Authority. 7. The Ld. CIT(A) while confirming the action of the Assessing Officer for initiating the proceedings under section 147 of the Act also confirmed the action of the Assessing Officer in making the aforesaid additions. 8. The Ld. CIT(A) has stated that the assessee had not adduced any evidence and merely denied the entries in the said books and the loose sheets. The Ld. CIT(A) has further stated that the revenue has established the existence of secret income based on valuable evidence received from the informant. That the assessee had not come up with any evidence other than repeating the facts that the books did not belong to her and praying for deletion of the additions made by the Assessing Officer. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of the authorities below by confirming the action of the Assessing Officer to initiate proceedings under section 147/148 of the Act. 12. In respect of the additions aggregating Rs. 74,47,553, the break up of which is mentioned hereinabove, we observe that the Assessing Officer has made the aforesaid additions on the basis of the books of account and the loose sheets submitted by an ex-accountant of the assessee. We do observe that the said accountant could not be cross-examined by the assessee as the said person was not traceable after furnishing the books of account to the department, but the said ground could not be a ground to delete the additions made by the department which are based on the basis of the books of account and the loose papers in possession of the department. The assessee has not made any attempts to establish that the entries mentioned in those books of account are not correct. However, some entries were found in the said books which were admittedly found to be correct. We agree with the observation of the Ld. CIT(A) that in a taxation case, the preponderance of probabilities backed by the circumstantial evidence would be enough to decide an issue. We obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome-tax (Inv.) V-II(a)/97-98/ Cal./842. The said materials were shown to the Authorised Representative of the assessee Mr. Nagesh Kumar together with the relative of the assessee Mr. Sajjan Kr. Kajaria. The assessee was asked to show cause as to why action as per the capital account as recorded in the loose sheet which shows that Smt. Sarita Devi has a capital of Rs. 51,61,470,should not be taken. 3. Further the assessee was asked to show cause as to why the profit derived from the "drug" account of Rs. 21,11,392 and that of Iron and Steel a/c of Rs. 1,74,741 should not be brought to tax. The assessee vide her letter dated 12-3-1998 as stated as under: "With reference to above, it is to state that the alleged books of account and loose papers, which are lying with you, do not belong to me. The accountant of the firm M/s. Jay Bharat Corporation, who had left our services, had some quarrel with us and he might have fabricated false books of account or loose papers to harass us. Some entries which were correct were also incorporated in the said books. I had no transactions in cash as shown in the said papers. As such question of capital of Rs. 51,61,420 shown in M/s. S.D. Enterp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,73,727.94 1. Capital 51,61,470.97 (Jai Bharati Corpn.) (S.C. Enter- prises) 2. B.S. 19,75,372.97 2. B.I. (Cash) 4,34,731.69 (Biseswarlal Ajoy (Biseswarlal) Kumar) 3. Piyush Kumar 5,58,304.00 3. P.D. (Cash) 23,63,628.48 (P.D. Udyog) 4. S.K. (Santi Kr. 34,32,952.32 4. D.M. (Dunmai) 44,400.00 Kejriwal) 5. Santi 5,34,706.86 5. Drug-Profit 21,11,392.00 6. C.D. 43,58,682.54 6. Iron-Profit 1,74,741.40 7. W.T. 914.00 7. S.T. (Sales Tax) 30,47,223.00 8. Sangita 7,65,000.00 (Collected but not paid) 9. Jyoti 7.31,662.48 (Heroin Smack Jai Bharat Corpn.) 10. T.M.B. 2,439.01 8. Dividend 9,345.55 11. U.Co. 43.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m" 8. In view of the above facts it clearly emerges that the taxing authorities had knowledge of interpolation made by the accountant inasmuch as, it is admitted fact that the return as shown by the assessee originally did contain those entries which formed part of the ledger cash book and loose sheets as were available to the ADIT who seized the material. The learned counsel for the assessee filed a paper book in which the capital account and the trading resulting in earning of some income has been filed from the assessment year 1981-82 onwards till the assessment year 1989-90. Therefore, simply because the accountant who had interpolated the trial balance leading to absurd profit and loss a/c and the balance sheet could not have confirmed the addition on the capital a/c, drug a/c and iron steel a/c. It is a simple case where the capital account could have been verified by verifying the same in the hands of the debtors, namely Jay Bharat Corporation, Bishesharlal Agarwal; Shanti Kumar Kejriwal. Any businessman would like to keep this capital for running the business either in the form of stock or bank balance which does not appear to have been made by the assessee as appears i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect to the absurdity reached by the lower authorities without any corresponding evidence which otherwise could have been brought on record by themselves on the basis of cross-checking the various items in the trial balance the authorities below did not rely simply on the denial for framing such assessment. Therefore, I am of the considered view that books of account and loose papers in the possession of the department should have been brought on surface and co-related with the assessments as against the assessee trying to justify the legitimate income which she had returned by way of past records and the bank statements and the bills and vouchers which should have been placed on record by the learned counsel for the assessee as in the paper book. In the interest of justice, therefore, the CIT(A), who was absolved of a duty of setting aside the order by amendment effective from 1-6-2001 who in the interest of justice should verify the basis of holding and bringing to tax capital and not disallowing sales tax paid under section 43B to justify the framing of assessment as per the provisions of the Income-tax Act. He should have filed the FIR with police for earning income from "Drug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cash book, ledger and some loose sheets, alleged to be belonging to the assessee to the Assessing Officer. On the basis of above material, the Assessing Officer reopened the assessment by issuing notice under section 148 of the IT. Act. In response to the above notice, the assessee submitted a return declaring the same income. During the course of these assessment proceedings, the Assessing Officer asked the assessee to show cause as to why profit of Rs. 21,11,392 from "Drugs" and of Rs. 1,74,741 from iron and, steel besides unexplained capital of Rs. 51,61,420 be not brought to tax as income of the assessee. As per her letter dated 12-3-1998, the assessee denied the alleged books of account or papers belong to her. She further denied that she had capital of Rs. 51,61,470 or income as alleged in the show-cause notice. Assessee's reply is as under: "With reference to above, it is to state that the alleged books of account and loose papers, which are lying with you, do not belong to me. The accountant of the firm M/s. Jay Bharat Corporation, who had left our services, had some quarrel with us and he might have fabricated false books of account or loose papers to harass us. Some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examined. It is observed that neither was the Inspector sent to examine and verify the records nor opportunity of cross-examination or rebuttal allowed to the assessee in terms of the decision of Gujarat High Court in CIT v. Chandra Vilas Hotel reported in 164 ITR 102. The assessment order is thus based on presumptions and assumptions instead of verifiable and established facts. It is clear from the foregoing that further investigation was called for to arrive at a conclusion regarding unexplained capital and profits from transactions in the following two grounds. Likewise estimation of profit from Drug a/c. and Iron and Steel a/c without indicating the basis thereof and apparently from the notings in the loose sheets is objected to the next two grounds. I find some merit in the contention of the counsel. Neither was proper opportunity nor basis of estimate given by the DCIT in the assessment order. In the interest of justice and fair play, the order is set aside with the direction to do it afresh in the light of the foregoing and in accordance with law." 4. The aforesaid directions of the learned CIT(Appeals) attained finality as neither party challenged them before the Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in the regular books of account. The alleged unaccounted entries furnishing basis for addition were not accepted by any of the witnesses. The following trial balance was supplied to the CIT(Appeals) by the Assessing Officer in his remand report: Trial Balance Dr. Cr. (Application) 1. J.B.C. 6,73,727.94 1. Capital 51,61,470.97 (Jai Bharati Corpn.) (S.C. Enter- prises) 2. B.S. 19,75,372.97 2. B.I. (Cash) 4,34,731.69 (Biseswarlal Ajoy (Biseswarlal) Kumar) 3. Piyush Kumar 5,58,304.00 3. P.D. (Cash) 23,63,628.48 (P.D. Udyog) 4. S.K. (Santi Kr. 34,32,952.32 4. D.M. (Dunmai) 44,400.00 Kejriwal) 5. Santi 5,34,706.86 5. Drug-Profit 21,11,392.00 6. C.D. 43,58,682.54 6. Iron-Profit 1,74,741.40 7. W.T. 914.00 7. S.T. (Sales Tax) 30,47,223.00 8. Sangita ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch circumstances, hardly any interference is possible by this intermediate appellate forum." 9. The assessee then brought the issue in appeal before the Appellate Tribunal. The learned Members hearing the appeal differed in their approach. The learned Judicial Member was of the view that addition of Rs. 74,47,553 is required to be confirmed as the same was based on books of account and loose sheets submitted by the ex-accountant of the assessee. Merely because the ex-accountant was not cross-examined by the assessee, the addition could not be deleted. The learned Judicial Member further observed that no action was taken by the assessee against the said accountant by filing any complaint against her if it was a fact that books of account were fabricated to harass the assessee. The learned Judicial Member further held that "the bona fide of the assessee could be established by establishing that the trial balance and the books of account are bogus by giving some positive evidences and the said entries could not be held to be in genuine merely on the basis of denial by the assessee." With the above observation, the learned Judicial Member confirmed the addition as also validity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Having regard to the proposed orders, I cannot alter this most unfortunate situation. The facts involved are not that complicated, yet on account of their in- appreciation, the matter has been dragged on and would remain so, I do not know for how many years to come. 13. The assessment of the assessee on total income of Rs. 28,730 was made on 8-2-1988 under section 143(1) of Income-tax Act. Later on Assistant Director of Income-tax (ADI) (Inv.) handed over cash book, ledger and loose paper allegedly belonging to the assessee. It is not brought on record as to where from the above referred to books and documents came into possession of the ADI. The name of the informant is not mentioned nor it is stated by the revenue authorities that the ex-accountant handed over the books to the authority and thus these came from a proper custody. No attempt was made in the course of assessments to show that books were authentic and could be relied upon. The first assessment made was rightly set aside by the CIT(Appeals) as per his order dated 12-1-1999 with pertinent observations which attained finality. However, above observations were given a go by in the second assessment. The statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are basic were rightly appreciated by the learned CIT(A) and appropriate directions issued. Inspite of finality of above directions, these were not properly appreciated nor complied with. Having regard to above facts, appellate authorities should have passed appropriate orders advancing cause of justice. Several opportunities having already been granted to the revenue to prove the case, further opportunity was quite unnecessary. Yet granted again and again. 16. As a Third Member, my jurisdiction in the case is very limited. I have to agree with one of the proposed order of the Members so that there is a majority to dispose of the case in accordance with law in terms of section 255(4) of the Income-tax Act. In the circumstances narrated above, I agree with the course adopted by the learned Accountant Member. There is absolutely no question of holding that addition of Rs. 74,47,553 in this case made without establishing that assessee was carrying on drugs business or that it had business of such a high magnitude, it is not possible to confirm the addition. The remand of the matter to the Assessing Officer has to be accepted in the circumstances stated above. 17. The matter will ..... X X X X Extracts X X X X X X X X Extracts X X X X
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