DCIT, New Delhi V. Late Dr. M.V. Rao, New Delhi

ITA 1914/DEL/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 1763 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2015
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 02-09-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 02-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAYANT MISHRA
• Assessee Lawyers: DR RAKESH GUPTA
• Keywords: Business income; Search and seizure; Loose papers; Double taxation relief; Document seized; Opportunity of being heard; Principle of natural justice; Opportunity of cross examination; Competent authority; Documents seized
• Section: 153A; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE SHRI A.T. VARKEY, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.1912/DEL./2013 (ASSESSMENT YEAR : 2002-03) ITA NO.1905/DEL./2013 (ASSESSMENT YEAR : 2003-04) ITA NO.1914/DEL./2013 (ASSESSMENT YEAR : 2004-05) ITA NO.2573/DEL./2013 (ASSESSMENT YEAR : 2005-06) ITA NO.2574/DEL./2013 (ASSESSMENT YEAR : 2006-07) DCIT, CENTRAL CIRCLE 13, VS. LATE DR. M.V. RAO, NEW DELHI. THROUGH WIFE & L/H SMT. SWARANLATHA, F 58, FIRST FLOOR, GREEN PARK MAIN, NEW DELHI 110 016. CO NOS.169, 170 & 171/DEL/2013 (IN ITA NOS.1912, 1905 & 1914/DEL./2013) (ASSESSMENT YEARS : 2002-03, 2003-04 & 2004-05) LATE DR. M.V. RAO, VS. DCIT, CENTRAL CIRCLE 13, THROUGH WIFE & L/H SMT. SWARANLATHA, NEW DELHI. F 58, FIRST FLOOR, GREEN PARK MAIN, NEW DELHI 110 016. (PAN : AAACS0318Q) (APPELLANT) (RESPONDENT) ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 2 ASSESSEE BY : DR. RAKESH GUPTA, ADVOCATE & SHRI SOMIL AGGARWAL, ADVOCATE REVENUE BY : SHRI JAYANT MISHRA, CIT DR DATE OF HEARING : 03.09.2015 DATE OF PRONOUNCEMENT : 30.11.2015 O R D E R PER BENCH : THESE ARE FIVE APPEALS FILED BY THE REVENUE AND THR EE CROSS OBJECTIONS FILED BY THE ASSESSEE RELATING TO ASSESSMENT YEARS 2002-03 TO 2006-07 WHICH ARISE FROM THE ORDERS DATED 28.01.2013 AND 01.02.20 13 PASSED BY THE CIT(A)- I, NEW DELHI. 2. SINCE THE FACTS AND GROUNDS OF APPEALS IN ALL TH E ASSESSMENT YEARS ARE COMMON, WE SHALL CONSIDER THE FACTS AND GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2002-03 AND THE DECISION ARRIVED FOR THE ASSES SMENT YEAR 2002-03 WOULD BE EQUALLY APPLICABLE TO OTHER ASSESSMENT YEARS FRO M 2002-03 TO 2006-07. 3. FIRST, WE TAKE UP APPEAL FOR ASSESSMENT YEAR 200 2-03 IN ITA NO.1912/DEL./2013 (DEPARTMENT) AND CO NO.169/DEL./2 013 (ASSESSEE). 4. THE GROUNDS RAISED IN REVENUES APPEAL IN ITA NO .1912/DEL /2013 (A.Y. 2002-03) ARE AS BELOW :- 1 THE ORDER OF THE LD. CIT(A) IS NOT CORRECT IN LA W AND ON FACTS. 2 ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 37,751/- AND ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 3 ALLOWED RELIEF OF RS. 48,000/- OUT OF ADDITION OF R S.85,000/- ON ACCOUNT OF DISALLOWANCE OF CONSULTANCY EXPENSES. 3 ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD . CIT(A) HAS ERRED IN LAW IN DELETING THE ADDITION OF RS. 2, 17,57,724/- MADE ON ACCOUNT OF COMMISSION INCOME EARNED IN DEFE NSE DEALS WITHOUT APPRECIATING THE FACT THAT ASSESSEE D ID NOT FURNISH ANY EXPLANATION IN R/O THE DOCUMENTS SEIZED FROM HI S PREMISES WHICH WERE DULY CONFRONTED TO HIM DURING ASSESSMENT AND REMAND PROCEEDINGS. 4 THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HE ARING OF THE APPEAL. 5. T HE GROUNDS RAISED IN ASSESSEES CROSS OBJECTION NO. 169/D/2013 (A.Y. 2002-03) ARE AS UNDER:- 1 THAT THE EXPENDITURE OF RS. 97,551/- CLAIMED AG AINST THE BUSINESS INCOME OF RS. 60,000/- WAS DISALLOWED ARBI TRARY WITHOUT ANY SPECIFIC FINDING AND RESTRICTED TO RS. 60,000/- WHICH MAY KINDLY BE ORDERED TO BE ALLOWED IN FULL. 2 THAT LD. CIT(A) HAS ERRED IN REMAND BACK THE CASE TO THE AO FOR ENQUIRY WHICH IS BEYOND HIS POWER BESIDE DIS CUSSING THE MATTER ON MERIT IN DETAILS. THE ORDER OF LD. C IT(A) MAY KINDLY BE CONFIRMED W.R.T. DELETION OF ADDITION ON MERIT AND AMEND TO THAT EFFECT. 3 ANY OTHER RELIEF WHICH DEEM PROPER AND FIT AND IN FAVOUR OF THE ASSESSEE MAY KINDLY BE ALLOWED. 6. THE FACTS IN BRIEF ARE THAT THE ORIGINAL RETURN IN THIS CASE WAS FILED ON 08.08.2002 DECLARING NET TAXABLE INCOME RS.5,06,830 /- . SUBSEQUENTLY, A SEARCH ACTION WAS CARRIED OUT BY DELHI POLICE AT TH E RESIDENTIAL PREMISES OF THE ASSESSEE AT F-58, GREEN PARK, NEW DELHI ON 22.02.20 07. DURING THE COURSE OF SEARCH CASH OF RS.2,00,23,700/- WAS FOUND AT THIS P REMISES. ON RECEIVING THE ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 4 ABOVE INFORMATION, THE IT DEPARTMENT CONDUCTED A SE ARCH AND WARRANT U/S 132 WAS EXECUTED ON 22.02.2007. SEARCH WAS ALSO CONDUC TED ON 27.02.2007 AT LOCKER NO. 12, BANK OF INDIA, SAFDARJUNG ENCLAVE, N EW DELHI. AFTER THE SEARCH, NOTICE UNDER SECTION 153A OF THE ACT AS ISS UED AND SERVED ON THE ASSESSEE ON 18.11.2008 REQUIRING TO FILE THE RETURN OF INCOME. IN RESPONSE THERETO, THE ASSESSEE HAS FILED RETURN DECLARING AN INCOME OF RS.5,21,005/- ON 06.10.2009. PURSUANT THERETO, ASSESSMENT WAS MADE AT AN INCOME OF RS.2,23,91,727/- U/S 153A/143(3) OF THE ACT VIDE AN ORDER DATED 29.12.2009. AGAINST THE AFORESAID ORDER OF THE ASSESSING OFFICE R, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 2 8.01.2013 HAS PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), NOW THE REVENUE IS IN APPEAL AND ASSESSEE H AS PREFERRED A CROSS- OBJECTION BEFORE THE TRIBUNAL. 7. GROUND NOS.1 AND 4 OF THE APPEAL OF THE REVENUE AND GROUND NO.3 OF THE CROSS OBJECTION FILED BY THE ASSESSEE ARE GENER AL AND THEREFORE, NEED NO ADJUDICATION. 8. GROUND NO.2 OF THE APPEAL FILED BY THE REVENUE A ND GROUND NO.1 OF THE CROSS OBJECTION FILED BY THE ASSESSEE RELATE TO DIS ALLOWANCE OUT OF EXPENSES CLAIMED BY THE ASSESSEE FROM THE INCOME EARNED FROM CONSULTANCY. ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 5 9. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAS DECLARED INCOME OF RS.60,000/- FROM CONSULTANCY AND CLAIMED EXPENSE S OF RS.97,551/- RESULTING IN NET LOSS OF RS.37,551/-. THE ASSESSING OFFICER HELD THAT IN VIEW OF THE NATURE OF THE BUSINESS, IT IS HIGHLY IMPROBABLE THAT THE EXPENSES CLAIMED HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSE OF BUSINESS AND THEREFORE, CLAIM OF EXPENSES WAS AN ATTEMPT TO REDU CE TAX LIABILITY BY BOOKING PERSONAL EXPENSES AGAINST THE INCOME FROM CONSULTAN CY. IN VIEW OF THE ABOVE AND THE FACT THAT NO DETAILS WERE FILED IN SUPPORT OF THE EXPENSES, HE MADE AN ESTIMATE OF THE EXPENSES AT 20% OF THE GROSS RECEIP TS I.E. RS.12,000/- AND DISALLOWED THE REMAINING EXPENSES OF RS.85,551/- (R S.97,551-12,000). ON FURTHER APPEAL, THE CIT(A) HELD THAT IT WOULD SERVE THE INTEREST OF JUSTICE IF THE EXPENSES CLAIMED ARE RESTRICTED TO GROSS CONSULTANC Y INCOME DECLARED UNDER THE HEAD INCOME FROM BUSINESS OR PROFESSION AND AS SUCH, HE RESTRICTED THE EXPENDITURE CLAIMED TO RS.60,000/- AND THEREFORE, S USTAINED THE DISALLOWANCE AT RS.37,551/- AND GRANTED RELIEF OF RS.48,000/- WH ICH HAS BEEN CHALLENGED IN THE APPEAL. 10. HAVING CONSIDERED THE RIVAL SUBMISSIONS, IT IS APPARENT THAT NEITHER OF THE AUTHORITIES HAS EXAMINED THE ISSUE IN CORRECT P ERSPECTIVE. ALL WHAT HAS HAPPENED IS THAT BOTH THE AUTHORITIES PROCEEDED TO ALLOW THE EXPENSES IN PART ON ESTIMATE BASIS WITHOUT THERE BEING ANY BASIS OF THE SAID ESTIMATION. IT IS WELL SETTLED THAT NO ESTIMATE SHOULD BE MADE ON SUP POSITIONS AND IT IS ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 6 INCUMBENT UPON THE AUTHORITIES BELOW BEFORE MAKING A DISALLOWANCE OR SUSTAINING A DISALLOWANCE TO PROVIDE A BASIS FOR AN ESTIMATE. DURING THE COURSE OF HEARING, THE COUNSEL FOR THE ASSESSEE HAS POINTE D OUT THAT FOR ASSESSMENT YEAR 2001-02, IDENTICAL DISALLOWANCE HAD BEEN MADE BY THE ASSESSING OFFICER WHICH WAS DELETED ON APPEAL BY THE CIT(A) IN AN ORD ER DATED 23.2.2011 BY HOLDING THAT REGARDLESS OF THE DETAILS OF EVIDENCES FILED BY THE APPELLANT, AN ASSESSMENT ORDER WHICH DOES NOT PROVIDE ANY BASIS C ANNOT BE APPROVED. IN THE INSTANT YEAR TOO, THE ASSESSING OFFICER HAS PROCEED ED TO RESTRICT THE CLAIM OF EXPENDITURE ON PRESUMPTIVE BASIS WHICH IS NOT A VAL ID GROUND BUT AT THE SAME TIME IN ABSENCE OF DETAILS HAVING BEEN FURNISHED, I T WOULD BE INAPPROPRIATE TO ALLOW THE CLAIM OF THE ASSESSEE IN TOTO. IT IS THUS CONSIDERED APPROPRIATE AND IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER TO TH E FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AND AS SUCH, GROUND RAISED B OTH BY THE ASSESSEE AND REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 11. GROUND NO. 3 OF THE APPEAL FILED BY THE REVENUE AND GROUND NO. 2 OF THE CROSS OBJECTION FILED BY THE ASSESSEE PERTAINS TO AN ADDITION OF RS.2,17,57,725/- REPRESENTING THE COMMISSION INCOME EARNED IN DEFENCE DEAL. THE FACT AS EMERGING ON RECORD ARE THAT THE ASSESSE E IS CLOSE ASSOCIATE OF SHRI SURESH NANDA AND USED TO OFFICIATE FROM THE OFFICE BUILDING OF COMPANIES OF NANDA GROUP AT D-5, DEFENCE COLONY, NEW DELHI. HE W AS ALSO A DIRECTOR IN M/S. C-1 INDIA PVT. LTD. AND M/S TRANSCOM SERVICES PVT. LTD., BOTH ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 7 COMPANIES ARE CONTROLLED BY SHRI SURESH NANDA. IT H AS BEEN NOTED BY THE ASSESSING OFFICER THAT SHRI SURESH NANDA WAS SHAREH OLDER IN C-1 INDIA PVT. LTD. AND HOLDS STAKE THROUGH MAURITIUS BASED ENTITY Y2K SYSTEMS INTERNATIONAL LTD. IT HAS BEEN STATED THAT THE MAIN INVESTOR IN M/S. TRANSCOM INDIA PVT. LTD. IS INET COMMUNICATIONS PVT. LTD., A N ENTITY CONTROLLED BY SHRI BIPIN B. SHAH, WHO IS A CLOSE ASSOCIATE OF SHRI SUR ESH NANDA AND WAS DIRECTOR IN ALMOST ALL THE MAJOR COMPANIES OF THE GROUP. THE ASSESSING OFFICER HAS FURTHER STATED THAT ON 22.02.2007, DELHI POLICE INF ORMED THE DIRECTORATE OF INCOME TAX (INV.) THAT DURING THE COURSE OF SEARCH ACTION ON ONE DR. M.V. RAO, THEY HAVE FOUND CASH AMOUNTING TO RS. 2 CRORES LYING AT HIS GREEN PARK HOUSE. IN VIEW THEREOF, DIT ISSUED WARRANT OF AUTHO RIZATION UNDER SECTION 132 OF THE ACT FOR SEARCH AND SEIZURE ACTION AT THE PRE MISE OF DR. M.V. RAO. IT HAS BEEN NOTED THAT SAID SEARCH ACTION CONTINUED TILL 2 3.2.2007 AND RS. 2 CRORES WAS SEIZED FROM HIS PREMISES. IT HAS BEEN NOTED THA T THE BACKGROUND OF THE POLICE ACTION WAS THAT THE PRIME MINISTERS OFFICE HAD HELD A PRESS CONFERENCE ON 21.2.2007 INFORMING THAT ONE PERSON B Y NAME OF DR. M.V. RAO WAS IMPERSONATING AS SCIENTIFIC ADVISOR TO THE PRIM E MINISTER OF INDIA. THE SPOKESPERSON OF PMO STATED THAT IT HAS COME TO THE ATTENTION OF THE PRIME MINISTERS OFFICE THAT ONE DR. M.V. RAO HAS CIRCULA TED VISITING CARDS AND GREETING CARDS DESCRIBING HIMSELF AS ADVISER TO THE PRIME MINISTER OF INDIA. THIS IS TO STATE THAT THERE IS NO SUCH ADVISER TO T HE PRIME MINISTER. RELEVANT ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 8 GOVERNMENT AGENCIES HAVE BEEN INSTRUCTED TO IDENTIF Y AND TAKE NECESSARY ACTION AGAINST THIS GENTLEMAN. SUBSEQUENTLY, DELHI POLICE WAS REQUESTED TO HAND OVER PHOTOCOPIES OF THE DOCUMENTS SEIZED BY TH EM AS IT WAS FELT THAT THESE DOCUMENTS COULD BE RELEVANT FOR THE INCOME TA X PROCEEDINGS AS WELL. IT HAS BEEN STATED THAT ON ANALYSIS OF THESE DOCUMENTS , IT WAS FOUND THAT ALL THESE DOCUMENTS WERE RELATED TO DEFENCE PROCUREMENT AND S OME OF THEM ARE EVEN THE CONFIDENTIAL ORDER SHEET ENTRIES OF THE MINISTR Y OF DEFENCE. IT HAS BEEN STATED THAT SOME OF THESE PAPERS ARE RELATED TO M/S TADIRAN COMMUNICATION ISRAEL AND M/S TRANSCOM SERVICES LTD. IS REPRESENTI NG TADIRAN IN INDIA FOR THE SERVICING OF COMMUNICATION EQUIPMENT USED BY INDIAN ARMED FORCES. IT HAS BEEN STATED THAT AMONG THE PAPER RECEIVED FROM THE DELHI POLICE WERE PAGE NO. 58 AND 59 OF ANNEXURE A-10 WHICH DETAILS THE CA LCULATION OF COMMISSION ON CONTRACTS AND THE CORRESPONDING PAYMENTS. IT HAS BEEN STATED THAT A FOOT NOTE ON PAGE 59 STATES THAT PAGE NOS. 60 & 61 ARE A LSO ATTACHMENTS TO THIS STATEMENT AND THE CONTENTS OF PAGE 58 AND 59, AS HA VE BEEN REPRODUCED IN THE ORDER ARE AS BELOW: CONTRACTS B C D E CONTRACT NO. COMMISSION VALUE 79182208* 78433/5W&10W/GS/WE- 7/D 08% 63,34,576.64 118702718* 30(1)/2002/D(GS-IV)-I 10% 1,18,70,271.88 112566065* 30(1)/2002/D/(GS-IV)-2 08% 90,05,285.20 109153491* BHARAT 05% 54,57,674.55 OFFSET OF INSTALLATION/WARRANTY -9,28,758 ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 9 419604482 3,17,39,050.27 *FIGS ILLEGIBLE HENCE WORKED OUT ON THE BASIS OF FI GS. IN CO. E PAYMENT LIST A B C 1 2 PAYMENTS 3 DATE $PAID 4 30/5/01 10,973 5 1/6/01 2,60,280 6 19/10/01 1,9,310 7 18/2/02 1,55,292 8 7/4/02 1,90,489 9 9/4/02 12,56,915 10 27/5/02 1,66,823 11 5/6/02 3,25,516 12 8/7/02 38,952 13 5/8/02 1,30,785 14 13/9/02 23,47,054 15 13/10/02 1,43,238 16 19/11/02 2,46,112 17 25/12/02 81,359 18 29/3/03 4,15,180 19 29/3/03 2,18,178 20 29/3/03 3,00,000 21 3/4/02 5,04,625 22 19/5/03 4,42,335 23 8/7/03 11,39,007 24 21/8/03 7,90,056 25 16/11/03 15,68,630 26 28/1/04* 6,313,54* 27 30/3/04* 8,10,171* 28 4/5/04* 13,50,870* 29 19/5/04* 15,49,468* 30 20/7/048 11,33,416 31 7/9/04* 11,97,981 32 3/11/04* 7,80,327 33 20/12/04* 8,88,275 34 27/3/05 14,53,,496 35 27/3/05 12,47,784 36 4/5/05 12,88,720 37 7/27/05 8,33,056 ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 10 38 7/27/05 11,00,000 39 9/18/05 10,68,934 40 10/27/05 15,00,000 41 42 TOTAL PAID 2,76,02,960.24 43 TOTAL COMMISSION 3,17,39,050.27 44 BALANCE 41,36,090.03 *FIGURES AND DATES ILLEGIBLE HENCE, TAKEN FROM PAGE NO. 60 AND 61/A-10 THIS RECON DOES NOT SHOW PAYMENTS THAT WE ATTRIBUTE D TO TADIRAM FROM OLD BA STATEMENTS THAT WE HAD (SEE ATTACHED LISTING FROM OUR DATABASE IT HAS BEEN STATED THAT THE ABOVE MENTIONED DOCUMEN T DETAILS THE COMMISSION PAYMENTS RELATING TO CONTRACTS FOR RADIO SETS OF TH E INDIAN DEFENCE ESTABLISHMENT. IT HAS BEEN STATED THAT SHRI M.V. RA O HAS REFUSED TO FURNISH ANY EXPLANATION WITH REGARD TO THESE DOCUMENTS AND HAS TAKEN THE PLEA THAT SHRI M.V. RAO IS NOT IN A POSITION TO COMMENT UPON THE D OCUMENTS DUE TO HIS CRITICAL HEALTH CONDITION. THE CONTENTS OF PAGE NO. 1 OF ANNEXURE A-5, WHICH WAS ALSO SEIZED BY DELHI POLICE, HAS BEEN REPRODUCE D, WHICH IS AS BELOW: A CONTRACT 78433/5W&10W/GS/WE-7/D(PROC.) DATED MARC H, 2001 CONSIGNMENT NUMBER DATE OF SHIPMENT CONTRACTUAL WB EXPIRY DATE EXTENDED UPON RBI DEMANDS 1 27/3/07 27/6/05 +30 MONTHS (29/12/07) 2 29/5/03 29/5/03 +27 MONTHS (29/12/07) 3 4/8/03 4/12/05 +24 MONTHS (4/2/07) 4 11/10/03 9/2/06 +24 MONTHS (25/1/08) 5 30/11/03 1/4/06 +24 MONTHS (10/4/08) B) CONTRACT 30(1)2002/D(GS-IV) FOR 5 & 50 W RATIO S ETS DATED MARCH, 2004. ACCORDING TO THE CONTRACT (CLAUSES) THE PERFORMAN CE BOND (PB) AND ADVANCE PAYMENT BONDS ARE BEING REDUCED WITH EV ERY SHIPMENT. ACCORDING TO OUR BANK THAT WAS DONE ONLY IN THE CAS E OF ADVANCE. ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 11 CONSIGNMENT NUMBER DATE OF SHIPMENT CONTRACTUAL WB EXPIRY DATE EXTENDED UPON RBI DEMANDS 1 27/3/03 27/5/05 +12 MONTHS 2 29/4/03 29/6/05 +12 MONTHS 3 26/06/03 26/8/05 +12 MONTHS 4 2/09/2003 2/11/05 +9 MONTHS 5 2/11/03 2/1/06 +6 MONTHS 6 5/1/04 5/3/06 +3 MONTHS NOTE: THE BOLD LETTERS ARE TODAYS NEWS 13. FURTHER, IT HAS BEEN STATED THAT PRINTOUT OF A LETTER FROM M/S. TADIRAN COMMUNICATION LTD. FOUND AND SEIZED AS PAGE NO. 62, ANNEXURE A-1 ALSO INDICATES THAT THE ABOVE CONTRACTS ARE RELATED TO T HE INDIAN DEFENCE ESTABLISHMENT AND THE LEGIBLE PORTION OF THE LETTER , AS REPRODUCED IS AS BELOW: XXXXXXXA(L-16) LT. COL. VIBHOR SHARMA DD(R) WARRANTY BOND CONTRACT: 30(1)/2002/D(GS-IV) DATED JUNE 26 TH , 2002 1 WE ACKNOWLEDGE WITH THANKS YOUR LETTER DATED AUGU ST 2 ND , 2006 RELATED TO CONTRACT 78433/5W&20W/WE-7/D (PROC) DATED MARCH 26 TH 2002. 2 WE APPRECIATE VERY MUCH THE EFFORTS EXERTED IN TH E RESOLVING OF THIS LONG STANDING ISSUE. HOWEVER, KI NDLY NOTE THAT THIS SOLVES ONLY ONE ISSUE. YOU MAY KINDLY REFER T O OUR LETTER TO JS (ACQUISITION & ADMINISTRATION) LAND SYSTEMS 1107 - 01/IND/VHF DATED JULY 11 TH WHICH HIGHLIGHTED, IN ADDITION TO THE CASE OF THE CONTRACT MENTIONED ABOVE, THE SAME PROBLEMS WITH UNJUSTIFIED WARRANTY BONDS EXTENSION DEMANDS I N CONTRACT 30(1)/2002/D(GS-IV) DATED JUNE 26 TH 2002 (ENCLOSED HEREWITH PLEASE FIND THE RELEVANT ANNEX TO THE SAID LETTER) 3 WE REQUEST YOU TO KINDLY INSTRUCT THE BANK THE CA NCEL THE SAID DEMANDS. SINCERELY YOURS SIGNATURE PNIEL FLEISHMAN DY VP MARKETING TADIRAN COMMUNICATIONS LTD. MARKETING 94 BM HAMOSHAVOT AZPRIM PARK BROSH BUILD ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 12 PETAH TIKVA ISRAEL NEW: TEL : [phone], FAX: [phone]. IN VIEW OF THE ABOVE, THE ASSESSING OFFICER HAS CONCLUDED THAT THE ASSESSEE IS ACTIVELY INVOLVED IN FACILITATING DEFEN CE DEALS FOR FOREIGN COMPANIES IN INDIA INCLUDING TADIRAN COMMUNICATION LTD. IT HAS BEEN FURTHER HELD THAT THE FOUR CONTRACTS MENTIONED IN THE PAGE NOS. 58 AND 59 OF ANNEXURE A-10 ARE CONTRACTS WITH INDIAN DEFENCE ESTABLISHMEN T GIVEN TO TADIRAN OF ISRAEL AND COMMISSION RANGING FROM 5 TO 10 PERCENT OF THE TOTAL VALUE OF THE CONTRACT HAS BEEN PAID. IT HAS BEEN HELD THAT IF TH E FOOT NOTE ON PAGE 59 MENTIONS THAT PAGE 58 AND 59 ARE RECONCILIATION STA TEMENT AND PAGE 60 AND 61 CONFIRMS THE RECEIPT OF THE AMOUNT MENTIONED AT PAG ES 58 AND 59 AND AS SUCH HE CONCLUDED THAT COMMISSION INCOME OF USD 4,45,855 RECEIVED DURING THE FINANCIAL YEAR 2001-02 IS ADDED TO THE TAXABLE INCO ME OF THE ASSESSEE. 15. ON APPEAL, THE CIT(A) HAS NOTED IN THE ORDER TH AT THE ASSESSING OFFICER HAS MADE ADDITIONS AGGREGATING TO RS. 123,27,60,955 /- FOR SALE OF RADIO WIRELESS SETS TO THE INDIAN DEFENCE ESTABLISHMENT F OR ASSESSMENT YEARS 2002- 03 TO 2006-07. HE HAS FURTHER NOTED THAT THE BASIC OBJECTION TAKEN BY THE ASSESSEE WAS THAT ASSESSEE WAS NOT AWARE OF THE DOC UMENTS RELIED UPON IN THE ORDER AND SUCH DOCUMENT DID NOT BELONG TO HIM AND H E HAS NOTHING TO DO WITH THOSE DOCUMENTS. IT WAS FURTHER CONTENDED THAT THE DOCUMENTS DID NOT CONTAIN SPECIFIC NAMES MUCH LESS NAMES OF THE ASSESSEE AND THEREFORE, DUMB DOCUMENT AND SHOULD NOT BE RELIED UPON TO REACH THE CONCLUSION THAT ANY ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 13 AMOUNT OF COMMISSION WAS TAXABLE IN THE HANDS OF TH E ASSESSEE. IN A REMAND REPORT, THE ASSESSING OFFICER INTIMATED THE CIT(A) THAT COPIES OF THE DOCUMENTS WERE PROVIDED TO THE ASSESSEE AND ONUS OF PROVING THAT THE DOCUMENTS DID NOT BELONG TO HIM WAS ON THE ASSESSEE AND NOT ON THE REVENUE. FURTHER ON THE DIRECTIONS OF THE CIT(A) UNDER SECTI ON 250 SUB SECTION (4), THE ASSE SSEE WAS ALSO EXAMINED BY THE ASSESSING OFFICER ON 5.4.2012 UNDER SECTION 131 OF THE ACT AND DURING THAT EXAMIN ATION, THE ASSESSEE DEPOSED THAT THE ISRAELI COMPANY M/S TADIRAN COMMUN ICATION LTD. WAS NO LONGER IN EXISTENCE AND THE WHEREABOUTS OF MR. PNIE L FLESHMAN, THE THEN DY. VP MARKETING OF THE SAID COMPANY WAS NOT KNOWN AND M/S TRANSCOM SERVICES INDIA (P) LTD. WAS NOT HAVING ANY BUSINESS DEALINGS WITH M/S TADIRAN COMMUNICATION LTD. FURTHER, A REPORT WAS AL SO CALLED FROM THE ASSESSING OFFICER ON 10.12.2012 WITH REGARD TO THE ISSUE OF REQUISITION OF DOCUMENTS SEIZED BY THE DELHI POLICE AS ALSO WHETHE R ANY OTHER RELEVANT MATERIAL TO THE CASE WAS AVAILABLE. THE ASSESSING OFFICER IN RESPONSE TO THE SAID COMMUNICATION REPLIED THAT THE DOCUMENTS HAD B EEN OFFICIALLY REQUISITIONED BY THE DEPARTMENT FROM THE DELHI POLI CE AND ALSO REFERRED TO A SUBSEQUENT SEARCH INITIATED BY THE DEPARTMENT ON 24 .2.2012 ON THE BASIS OF INFORMATION ABOUT THE APPELLANT MAINTAINING A FOREI GN ACCOUNT WITH HSBC, SWITZERLAND WHICH HAD NOT BEEN DISCLOSED TO THE DEP ARTMENT. IT HAS BEEN STATED THAT THE IN THE SUBSEQUENT SEARCH, CASH AMOU NTING TO RS. 7.5 CRORE WAS ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 14 FOUND FROM DIFFERENT BANK LOCKERS HELD IN THE NAME OF WIFE/NIECE OF THE ASSESSEE AND SEIZED. A COPY OF THE REPORT WAS FORWA RDED TO THE ASSESSEE AND ASSESSEE IN RESPONSE TO THE SAID REPORT INTER-ALIA STATED THAT THE PRESUMPTION UNDER SECTION 132(4A) OF THE ACT DOES NOT APPLY TO THE DOCUMENTS SEIZED BY THE DEPARTMENT AND AUTHENTICITY OF THE DOCUMENTS IS ITSELF QUESTIONABLE. IT WAS FURTHER CONTENDED BY THE ASSESSEE THAT THE SUBSEQUE NT SEARCH AND SEIZURE WAS NOT LINKED WITH THE EARLIER SEARCH ACTION. IT WAS F URTHER STATED THAT THE SAID INCOME WAS ASSESSED SUBSTANTIVELY IN THE HANDS OF T HE ASSESSEE AND SAME INCOME WAS ALSO ASSESSED SUBSTANTIVELY IN THE HANDS OF SH. SURESH NANDA ALSO IMPLYING THAT THE REVENUE WAS UNSURE IN WHOSE HANDS THE INCOME WAS TO BE TAXED. IT WAS STATED THAT M/S. TADIRAN COMMUNICATIO N LTD. HAS SINCE MERGED WITH M/S ELBIT SYSTEMS AND NECESSARY ENQUIRIES CAN BE MADE WITH THE NEW ENTITY. IT WAS STATED THAT THE CASE FILED BY THE DE LHI POLICE AGAINST THE ASSESSEE ABATED BY HIS DEATH AND TILL THE CLOSURE OF THE CAS E DELHI POLICE COULD NOT ESTABLISH THE ALLEGATION OF IMPERSONATION OR CHEATI NG AGAINST DR. P.N. RAO. HAVING REGARD TO THE ABOVE PROCEEDINGS, THE CIT(A) IN HIS ORDER CONCLUDED AS UNDER: 7.7 I HAVE CONSIDERED THE FACTS AND SURROUNDING CIRCUMSTANCES OF THE CASE AS EMERGING FROM THE ASSE SSMENT ORDER AND VARIOUS REPORTS OF THE AO, SUBMISSIONS AN D REPLIES FILED ON BEHALF OF THE APPELLANT, AND THE ORDER OF HONBLE ITAT CITED ABOVE. IT IS TO BE NOTED THAT STRICT RULES OF EVIDENCE ARE NOT APPLICABLE TO TAX PROCEEDINGS {CIT V EAST COAST COM MERCIAL CO. LTD. (1967) 63 ITR 449} AND AN INCOME TAX OFFIC ER (ITO) CAN ACT ON MATERIAL WHICH MAY NOT BE ACCEPTED AS EV IDENCE IN A ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 15 COURT OF LAW {DHAKESWARI COTTRON MILLS LTD. V. CIT [1954] 26 ITR 775; DHAKESWARI COTTON MILLS LTD. V. CIT [1955] 27 ITR 126 (SC)}. THE HONBLE SUPREME COURT HELD THAT THE PROVISIONS OF EVIDENCE ACT ARE NOT APPLICABLE TO THE INCOME TA X PROCEEDINGS {CHUHARMAL VS. CIT (1988) 172 ITR 250}, MEANING THAT THE RULES OF EVIDENCE CONTAINED IN IND IA EVIDENCE ACT, 1872 ARE NOT RIGOROUSLY APPLICABLE. IT IS OPEN TO THE ITO TO COLLECT MATERIAL TO FACILITATE ASSESSMENT EVEN BY P RIVATE ENQUIRY. BUT IF THE DESIRES TO USE THE MATERIAL SO COLLECTED , THE ASSESSEE MUST BE INFORMED OF THE MATERIAL AND MUST BE GIVEN AN ADEQUATE OPPORTUNITY OF EXPLAINING IT {C. VASANTLAL & CO. V. CIT [1962] 45 ITR 206 (SC)}. AS REGARDS THE ISSUE RAISED BY TH E APPELLANT THAT THE DOCUMENTS DO NOT BELONG TO HIM AND CANNOT BE HELD AGAINST HIM, AS NO LEGAL PRESUMPTION CAN BE MADE U/ S 132(4A)/292C, IT IS NOTED THAT THE DOCUMENTS WERE S EIZED FROM THE POSSESSION OF THE APPELLANT BY THE INCOME -TAX DEPARTMENT OR THE DELHI POLICE, WHICH FACT HAS NOT BEEN DISPUT ED. IT IS NOW UNDISPUTED THAT THE APPELLANT WAS GIVEN COPY OF THE RELEVANT DOCUMENTS ON 01.12.2009. IT IS A MATTER OF RECORD T HAT THE APPELLANT WAS ALSO EXAMINED WITH REGARD TO THESE DO CUMENTS DURING THE APPELLATE PROCEEDINGS AS PER THE DIRECTI ON OF CIT(A) U/S 250(4) OF THE ACT. THE REPORT OF THE AO CONTAIN ING COMMUNICATIONS WITH THE DELHI POLICE RELATING TO OF FICIAL REQUISITION OF THE DOCUMENTS WAS ALSO PUT TO THE AR S OF THE APPELLANT AND THEIR REPLIES THERETO TAKEN ON RECORD . THEREFORE, THE OBJECTIONS OF THE APPELLANT WITH REGARD TO PRIN CIPLES OF NATURAL JUSTICE NOT BEING FOLLOWED, OR THE REVENUE NOT BEING ENTITLED TO RAISE THE PRESUMPTION U/S 132(4A), HAVE BEEN MET TO THIS EXTENT. 7.8 SO FAR AS THE CLAIM THAT THE SAID DOCUMENTS DID NOT CONTAIN ANY SPECIFIC NAMES AND DUMB DOCUMENTS COULD NOT BE RELIED UPON TO REACH THE CONCLUSION OF ANY SUCH HUG E AMOUNTS OF COMMISSION INCOME IS CONCERNED, IT IS UNDISPUTED THAT M/S TRANSCOM SERVICES INDIA (P) LTD., IN WHICH THE APPE LLANT WAS A SHAREHOLDER DIRECTOR/ EMPLOYEE, DID HAVE BUSINESS D EALINGS WITH M/S TADIRAN COMMUNICATION LTD., THE ISRAELI COMPANY . M/D TRANSCOM SERVICES INDIA (P) LTD. WAS THE REPRESENTA TIVE OF M/S TADIRAN COMMUNICATION LTD. IN INDIA FOR MAINTENANCE OF THE RADIO WIRELESS SETS SUPPLIED TO THE INDIA DEFENCE E STABLISHMENT. THE SEIZED DOCUMENTS ITSELF MENTION DIFFERENT CONTR ACTS AND OFFICIAL COMMUNICATIONS, AMOUNTS OF CONTRACT AND/ O R ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 16 COMMISSION, RELATING TO THE CONTRACT OF SALE AND MA INTENANCE OF RADIO WIRELESS SETS TO THE INDIA DEFENCE ESTABLISHM ENT. A COMMUNICATION TO THE INDIAN MINISTRY OF DEFENCE FRO M MR. PNIEL FLESHMAN, THE THEN DY. VP MARKETING OF M/S TA DIRAN COMMUNICATION LTD. IS PART OF SEIZED DOCUMENTS AND REFERS TO THE ONGOING CONTRACTS. 7.9 IT IS FURTHER NOTED THAT AN AMOUNT OF RS. 2 CRO RE WAS FOUND IN CASH FROM THE RESIDENCE OF THE APPELLANT I N THE FIRST SEARCH CONDUCTED ON 22.02.2007. IT IS ALSO RELEVANT THAT IN A SUBSEQUENT SEARCH CONDUCTED BY THE DEPARTMENT ON 24 .02.2012, FURTHER CASH OF ABOUT RS. 7.69 CRORE WAS FOUND FROM FOUR LOCKERS HELD BY THE APPELLANTS WIFE OR HIS NIECE, JOINTLY OR SEVERALLY, OUT OF WHICH CASH OF RS. 7.60 CRORE WAS SEIZED. THE CASH WAS STATED TO HAVE BEEN KEPT IN THESE LOCKERS BY THE APPELLANT, HIS WIFE OR HIS NIECE, AT VARIOUS POINTS OF TIME DURING THE FYS 2006-07,2007-08, 2009-10 AND 2011-12. THE A PPELLANT WAS ALSO FOUND TO MAINTAIN A FOREIGN BANK ACCOUNT W ITH HSBC, GENEVA, NOT DISCLOSED TO THE DEPARTMENT, DURING THE PERIOD 2005-07. ONE OF THE ENTITIES LINKED TO THE BANK ACC OUNT IS M/S CLAIR CONSULTANTS LTD., A COMPANY INCORPORATED IN T HE BRITISH VIRGIN ISLANDS, A KNOWN TAX HAVEN. THERE IS A REMIT TANCE OF US $30,000 AT THE INSTANCE OF THIS COMPANY FROM DEUTSC HE BANK, SINGAPORE TO THE NRO/ NRE ACCOUNT OF SH. M VENU, SO N OF THE APPELLANT, WITH DEUTSCHE BANK, NEW DELHI. THUS, MAI NTENANCE OF AN UNDISCLOSED FOREIGN ACCOUNT AND SEIZURE OF LA RGE AMOUNT OF CASH (RS. 9.6 CRORE, I.E. RS. 2 CRORE IN 2007 AN D RS. 7.6 CRORES IN 2012), LEAD TO AN INESCAPABLE CONCLUSION THAT THE APPELLANT WAS BENEFICIARY OF SOME BUSINESS ACTIVITI ES TRANSACTION WHICH HE HAD NOT DISCLOSED IN THE TAX R ETURNS FILED WITH THE DEPARTMENT AND WAS ALSO AVOIDING PAYING DU E TAXES THEREON. THE TRUTH OF THE MATTER (I-) WHETHER THE SE AMOUNTS REPRESENT ANY COMMISSION PAID BY M/S TADIRAN COMMUN ICATION LTD.; (II) WHETHER THE TOTAL AMOUNT WAS INDEED US $ 27.603 MILLION OR RS. 123.27 CRORE AS HELD BY THE REVENUE ON THE BASIS OF DOCUMENTS SEIZED BY DELHI POLICE; (III) WHETHER THE APPELLANT WAS INDEED THE BENEFICIARY OF THE COMMISSIONS; (IV) WHETHER THE APPELLANT WAS THE SOLE BENEFICIARY OR THERE WERE OT HER BENEFICIARIES; (V) WHETHER SH. SURESH NANDA OR HIS COMPANIES WERE ALSO BENEFICIARIES AND TO WHAT EXTENT; CANNOT BE ASCERTAINED ON THE BASIS OF AVAILABLE DOCUMENTS AND ARE, THEREFORE, A MATTER OF FURTHER INVESTIGATION AND VE RIFICATION. ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 17 7.10 THE CLAIM THAT M/S TADIRAN COMMUNICATION LTD. WAS NO LONGER IN EXISTENCE MAY NOT BE CORRECT, AS IN EVERY COUNTRY WINDING UP OF INCORPORATED LEGAL ENTITIES FOLLOWS P ROCEDURE AS LAID DOWN BY LAW. THE DOCUMENTS AND PROPERTIES OWNE D BY THE ENTITY ARE ALSO RETAINED OR DISPOSED OF AS PER THE LEGAL PROCEDURE. THEREFORE, IT SHOULD BE POSSIBLE FOR THE REVENUE TO ASCERTAIN THE TRUTH OF THE MATTER BY TRACING AND EXAMINING, THROU GH THE GOVT. OF ISRAEL, THE DOCUMENTS/ TRANSACTION OF M/S TADIRA N COMMUNICATION LTD. FAIRLY, THE LD ARS OF THE APPEL LANT HAVE CONFIRMED IN THE FINAL SUBMISSIONS FILED ON 23.01.2 013 THAT M/S TADIRAN COMMUNICATION LTD. STANDS MERGED WITH M/S E LBIT SYSTEM LTD. OF ISRAEL. SIMILARLY, IT SHOULD BE POSS IBLE FOR THE GOVT. OF ISRAEL TO TRACE OUT MR. PNIEL FLESHMAN, TH E THEN DY. VP MARKETING OF THE SAID COMPANY, IF THE GENTLEMAN IS STILL ALIVE, AND EXAMINE HIM TO ASCERTAIN THE CORRECT FACTS. IF IT IS DIFFICULT FOR THE APPELLANT TO TRACE THE ISRAELI ENTITY/ PERS ON, AND IF THE APPELLANT HAS APPEALED TO THE REVENUE ACCORDINGLY, IT IS CERTAINLY POSSIBLE FOR THE REVENUE TO DO SO UNDER THE DTAA BE TWEEN GOVERNMENTS OF INDIA AND ISRAEL. THE REVENUE CANNOT SHIRK ITS RESPONSIBILITY OF ASCERTAINING THE TRUTH. THE HONB LE ITAT, VIDE PARA 11 OF ITS COMMON ORDER DATED 24.07.2012 IN THE CASE OF SH. SURESH NANDA (ITA NOS. 1428, 1429& 1430/ DEL/ 2012 FOR AYS 2001-02, 2002-03 & 2003-04), REGARDING THE SAME ADD ITIONS ALSO MADE IN THE HANDS OF SH. SURESH NAHDA, HELD TH AT INTEREST OF JUSTICE WILL BE SERVED IF THE ISSUES ABOUT INCOM E FROM COMMISSION/ BUSINESS OF DEALINGS IN ARMS ARE DECIDE D AFRESH BY AO. SINCE THE DIRECTIONS OF THE HONBLE ITAT IN TH E CASE OF SH. SURESH NANDA RELATE TO THE SAME ADDITIONS OF IN COME AS IN THE CASE OF APPELLANT, THE SAID DIRECTION WILL ALSO BE APPLICABLE IN THE CASE OF THIS APPELLANT. THERE IS NO NEED FOR THIS APPEAL ALSO TO TRAVEL TO HONBLE ITAT FOR SAME DIRECTIONS. IN MY CONSIDERED VIEW, THE TRUTH OF THE MATTER CANNOT BE ASCERTAINED WITHOUT MAKING A REFERENCE TO THE GOVT. OF ISRAEL T HROUGH THE COMPETENT AUTHORITY, FT & TR DIVISION OF THE CBDT, ON THE ISSUES RAISED IN PARA 7.9 OF THIS ORDER, WHICH ARE THE SAME AS, AND IN COMPLIANCE TO, THE ORDER OF HONBLE ITAT IN THE CASE OF SH. SURESH NANDA AND COMPLEMENTS THE AFORESAID ORDE RS BY SPECIFYING THE ISSUES TO BE FURTHER ENQUIRED INTO. THESE ISSUES WILL REACH FINALITY AFTER REFERENCE TO THE GOVT. OF ISRAEL UNDER THE DTAA AND RECEIPT OF REPORT THERE FROM. I DIRECT THE AO ACCORDINGLY. ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 18 7.11 THE HONBLE ITAT, VIDE PARA 11 OF ITS COMMON O RDER DATED 24.07.2012 IN ITA NOS. 1428,1429 & 1430/DEL/2 012 FOR AYS 2001-02, 2002-03 & 2003-04, ALLOWED THE GROUND OF APPEAL IN THE CASE OF SH. SURESH NANDA FOR STATISTI CAL PURPOSE. THE GROUND OF APPEAL HAS BEEN ALLOWED BY THE HONBL E ITAT IN THAT CASE ON THE SAME ADDITION, IN CONSONANCE WITH THAT ORDER IN THIS CASE ALSO THE GROUND OF APPEAL HAS TO BE ALLOW ED FOR STATISTICAL PURPOSES. ACCORDINGLY, THIS GROUND OF A PPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 16. BEFORE US, THE LEARNED DR CONTENDED THAT THE CO NCLUSION OF THE CIT(A) TO APPLY THE ORDER OF THE ITAT IN THE CASE OF SURES H NANDA TO THE CASE OF THE APPELLANT WAS NOT A CORRECT CONCLUSION. HE SUBMITTE D THAT THE ISSUE HAD TO BE EXAMINED INDEPENDENTLY IN THE CASE OF ASSESSEE. ONC E THE CIT(A) HAD FOUND THAT THE DOCUMENTS SEIZED FROM THE POSSESSION OF TH E ASSESSEE HAD BEEN CONFRONTED AND THE ASSESSEE HAS ALSO BEEN EXAMINED VIS--VIS THE DOCUMENTS DURING THE APPELLATE PROCEEDINGS, THERE WAS NO JUST IFICATION TO DELETE ADDITION BY FOLLOWING DECISION OF ITAT, AS ASSESSEE WAS A SH AREHOLDER, DIRECTOR, EMPLOYEE IN M/S. TRANSCOM SERVICES INDIA PVT. LTD. WHICH HAD BUSINESS DEALING WITH M/S. TADIRAN COMMUNICATION LTD. HE THU S PRAYED THAT THE ADDITION MADE BE SUSTAINED AND RELIED UPON THE DECI SION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. SWARUP VEGETABLE PRODUCTS INDUSTRIES LTD. REPORTED IN 96 ITD 468. ON THE OTHER HAND, THE LEAR NED COUNSEL FOR THE ASSESSEE SUPPORTED THE CONCLUSION OF THE CIT(A) BY RELYING UPON THE ORDER OF THE TRIBUNAL WHEREIN THE HONBLE TRIBUNAL BY A COMM ON ORDER DATED 24.7.2012 IN THE CASE OF SURESH NANDA HAD HELD THAT THE INTEREST OF JUSTICE ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 19 WOULD BE SERVED IF THE ISSUE REGARDING COMMISSION O F DISALLOWANCE ARE DECIDED AFRESH BY THE ASSESSING OFFICER. 17. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL ON RECORD. THE SHORT ISSUE WHICH REQUIRES CONSIDERATIO N IS IN RESPECT OF THE ADDITION MADE ON ACCOUNT OF COMMISSION RECEIVED BY THE ASSESSEE FROM M/S. TADIRAN COMMUNICATION LTD., ISRAEL. IT IS NOT IN DI SPUTE THAT M/S. TRANSCOM INDIA PVT. LTD. WAS REPRESENTING M/S. TADIRAN COMMU NICATION LTD. IN INDIA FOR SERVICING OF COMMUNICATION EQUIPMENTS USED BY I NDIAN ARMED FORCES. IT IS FURTHER NOT DISPUTED THAT THE ASSESSEE WAS A DIRECT OR OF M/S. TRANSCOM SERVICES PVT. LTD. IT IS ALSO APPARENT FROM THE FAC TS ON RECORD THAT THE ADDITIONS ARE BASED ON DOCUMENTS/EVIDENCES SEIZED A S A RESULT OF SEARCH AT THE PREMISES OF THE ASSESSEE. THESE DOCUMENTS HAVE BEEN CONFRONTED TO THE ASSESSEE AND STATEMENTS OF THE ASSESSEE HAVE BEEN R ECORDED DURING THE COURSE OF FIRST APPELLATE PROCEEDINGS. FROM THE PERUSAL OF THE ORDER OF THE CIT(A), IT IS NOTICED THAT THE CIT(A) HAS ALSO ACCEPTED THE AB OVE FACTUAL POSITION BUT YET DELETED THE ADDITION FOR FURTHER INVESTIGATION AND VERIFICATION. HE HAS RELIED UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF SURES H NANDA. AFTER HAVING CAREFUL CONSIDERATION IN THE MATTER, WE FEEL THAT T HE CIT(A) HAS NOT CONCLUDED THE ISSUE IN CORRECT PERSPECTIVE VIS--VIS THE POSI TION OF LAW. THE FUNDAMENTAL ISSUE WHICH REQUIRES CONSIDERATION WAS THAT IN VIEW OF THE DOCUMENTS, AN EVIDENCE FOUND AS A RESULT OF SEARCH AT THE RESIDEN TIAL PREMISES OF THE ASSESSEE ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 20 AND IN LIGHT OF THE EXPLANATION TENDERED WHETHER TH E ADDITION IS WARRANTED OR NOT. WE FIND THAT CIT(A) HAS NEITHER ADVERTED TO TH E DOCUMENTS AND NOR ADVERTED TO THE EXPLANATION OF THE ASSESSEE VIS--V IS THE SAID DOCUMENTS. IT APPEARS THAT THE CIT(A) SIDE TRACKED THE ISSUE BY S UGGESTING FURTHER INVESTIGATION ON THE MATTER WITHOUT HAVING ARRIVED AT A CONCLUSION BASED ON THE EVIDENCE ALREADY FOUND AS A RESULT OF SEARCH. THIS FINDING COULD HAVE ONLY BEEN ARRIVED ONLY WHEN CIT(A) HAD EXAMINED THE EVID ENCES AND EXPLANATION AND THEREAFTER COULD HAVE SUGGESTED ANY FURTHER INV ESTIGATION, IF HE DEEMS IT SO APPROPRIATE. HOWEVER, THIS CANNOT BE DONE AT TH E THRESHOLD AND THAT WOULD TANTAMOUNT TO THE EFFECTIVELY OVERLOOKING THE EVIDE NCES GATHERED AS A RESULT OF SEARCH AND SUGGESTING THAT THE ADDITION WOULD BE BA SED ONLY ON INVESTIGATION CARRIED OUT LATER. IN OTHER WORDS, THE EVIDENCES SO GATHERED ALONE DO NOT LEAD TO A CONCLUSION THAT THE COMMISSION INCOME WAS EARN ED BY THE APPELLANT. THIS IS ALSO CONTRARY TO HIS OWN FINDING THAT MAINTENANC E OF UNDISCLOSED FOREIGN ACCOUNT AND SEIZURE OF LARGE AMOUNTS OF CASH LEAD T O AN INESCAPABLE CONCLUSION THAT THE APPELLANT WAS BENEFICIARY OF SO ME BUSINESS ACTIVITIES/TRANSACTIONS WHICH HE HAD NOT DISCLOSED IN THE TAX RETURNS FILED WITH THE DEPARTMENT AND WAS ALSO AVOIDING PAYING DUE TAX ES THEREON. 18. THE FOLLOWING FINDING OF THE CIT (A) NEEDS TO B E NOTED :- 7.8 SO FAR AS THE CLAIM THAT THE SAID DOCUMENTS DI D NOT CONTAIN ANY SPECIFIC NAMES AND DUMB DOCUMENTS COULD NOT BE RELIED UPON TO REACH THE CONCLUSION OF ANY SUCH HUG E AMOUNTS OF COMMISSION INCOME IS CONCERNED, IT IS UNDISPUTED TH AT M/S ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 21 TRANSCOM SERVICES INDIA (P) LTD., IN WHICH THE APPE LLANT WAS A SHAREHOLDER DIRECTOR/ EMPLOYEE, DID HAVE BUSINESS D EALINGS WITH M/S TADIRAN COMMUNICATION LTD., THE ISRAELI COMPANY . M/D TRANSCOM SERVICES INDIA (P) LTD. WAS THE REPRESENTA TIVE OF M/S TADIRAN COMMUNICATION LTD. IN INDIA FOR MAINTENANCE OF THE RADIO WIRELESS SETS SUPPLIED TO THE INDIA DEFENCE E STABLISHMENT. THE SEIZED DOCUMENTS ITSELF MENTION DIFFERENT CONTR ACTS AND OFFICIAL COMMUNICATIONS, AMOUNTS OF CONTRACT AND/ O R COMMISSION, RELATING TO THE CONTRACT OF SALE AND MA INTENANCE OF RADIO WIRELESS SETS TO THE INDIA DEFENCE ESTABLISHM ENT. .. . 7.9 . THUS, MAINTENANCE OF AN UNDISCLOSED FOREIGN ACCOUNT AND SEIZURE OF LARGE AMOUNT OF CASH (RS. .I.E. R S. 2 CRORE IN 2007 AND ), LEAD TO AN INESCAPABLE CONCLUSION THAT THE APPELLANT WAS BENEFICIARY OF SOME BUSINESS ACTI VITIES TRANSACTION WHICH HE HAD NOT DISCLOSED IN THE TAX R ETURNS FILED WITH THE DEPARTMENT AND WAS ALSO AVOIDING PAYING DU E TAXES THEREON 19. IT SHOULD BE KEPT IN MIND THAT THE ONUS WAS ON THE ASSESSEE TO COME CLEAN ON THE SEIZED CASH AND HAD TO EXPLAIN THE DOC UMENTS FOUND IN HIS PREMISES. THE CIT (A) HAS CO-TERMINUS POWER AKIN T O THAT OF AO WHILE ADJUDICATING AN ISSUE BEFORE HIM; AND IN CASE THE A SSESSEE FAILS TO DISCHARGE THE ONUS ON THE CASH RECOVERED AND THE DOCUMENTS SE IZED FROM HIS PREMISES, THE CIT (A) HAS TO DECIDE WHETHER AO IS JUSTIFIED I N DRAWING THE INFERENCES FACILITATING THE ADDITION IMPUGNED BEFORE HIM. IT WAS THE ASSESSEE WHO SHOULD HAVE EXPLAINED THE CASH AMOUNT TO RS.2 CRORES SEIZE D ON 23.02.2007 VIS--VIS THE DOCUMENTS REVEALING COMMISSION PAYMENT TO CERTA IN TRANSACTION WITH MOD, AND AS TO WHETHER THE ENTIRE AMOUNT IS HIS CAS H OR ONLY A PART BELONGS TO HIM OR IT BELONGS TO SOMEBODY ELSE. THE APPAREN T IS NOT REAL IS UPON THE ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 22 PERSON WHO CLAIMS IT. WHAT IS HIS SHARE OF COMMISSI ON OR THE AMOUNT SEIZED BELONGS TO SOMEONE ELSE OR COULD HAVE BEEN ONLY EXP LAINED BY THE ASSESSEE AND TO SUBSTANTIATE THE SAME HE OUGHT TO HAVE PRODU CED DOCUMENTS TO REVEAL THE ARRANGEMENT BETWEEN HIM AND THE COMPANIES CONCE RNED. THERE WAS NOTHING PREVENTING THE ASSESSEE FROM EXPLAINING THE RS.2 CRORES SEIZED FROM HIS PREMISES AND THE DOCUMENTS SEIZED ON 22.02.2007 , BECAUSE IT WAS IN THE EXCLUSIVE KNOWLEDGE OF THE ASSESSEE AND THE COMPANI ES ASSOCIATED WITH HIM. SO BASED ON THE SEIZURE OF CASH AND DOCUMENTS AND T HE FAILURE OF THE ASSESSEE TO DISCHARGE THE ONUS CAST ON HIM, THE QUESTION BEF ORE THE LD. CIT(A) WAS AS TO WHETHER THE ADDITION MADE BY THE AO IS LEGALLY T ENABLE, WHICH HAS NOT BEEN DONE BY THE CIT (A). 20. AS AFORESTATED AND HAVING ARRIVED AT THE AFORES AID CONCLUSION AS POINTED OUT, THE CIT(A) OUGHT TO HAVE INDEPENDENTLY EXAMINE D THE EXPLANATION VIS-- VIS EVIDENCES GATHERED AND THEREAFTER ONLY TO CONCL UDE AS TO THE VALIDITY OF THE ADDITION. IN SUCH CIRCUMSTANCES, IT IS CONSIDERED E XPEDIENT THAT THE INSTANT ADDITION BE RESTORED TO THE CIT(A) FOR FRESH ADJUDI CATION IN LIGHT OF THE FACTS AND EVIDENCES ON RECORD AFTER GRANTING DUE OPPORTUN ITY OF BEING HEARD TO THE ASSESSEE/LEGAL HEIRS. WE MAKE IT CLEAR HERE THAT N EITHER OF THE PARTIES HAVE PLACED ON RECORD ANY COPY OF THE INVESTIGATION EITH ER CARRIED OUT BY THE AO OR BY THE CIT(A) FOR OUR CONSIDERATION AND THEREFORE, IN SUCH CIRCUMSTANCES, THE ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 23 ONLY COURSE AVAILABLE BEFORE US IS TO REMIT THE MAT TER BACK TO THE FILE OF THE CIT(A) FOR FRESH ADJUDICATION. 21. THE CIT(A) IN HIS CONCLUSION HAS REFERRED TO TH E ORDER OF ITAT IN THE CASE OF SURESH NANDA WHERE ITAT IN RESPECT OF IDENT ICAL ADDITION HAS HELD AS UNDER :- 11. APROPOS COMMON GROUND RAISED IN A.YS. 2002-03 & 2003-04 IN RESPECT OF ALLEGED INCOME FROM ARMS DEAL S MADE ON ACCOUNT OF SEARCHES IN THE CASE OF M.V. RAO AND MOH AN SAMBHA JI JAGTAP, THE RELEVANT STATEMENTS HAVE NEIT HER BEEN PROVIDED NOR THESE PERSONS HAVE BEEN ALLOWED TO BE CROSS EXAMINED BY ASSESSEE. IN THE PRESENCE OF THESE INFI RMITIES IN THE PROCEEDINGS, THESE ADDITIONS CANNOT BE MADE. TH E AO MAY BE DIRECTED TO DO THE NEEDFUL IN THIS BEHALF; CONSI DER THE OUTCOME OF ASSESSMENT PROCEEDINGS IN THEIR CASES PR OVIDE THE OPPORTUNITY FOR THE CROSS EXAMINATION AND DECIDE TH E ISSUE AFRESH IN ACCORDANCE WITH LAW. WE ARE OF THE VIEW T HAT THE ADDITION BASED ON DOCUMENTS FOUND FROM THIRD PARTIE S CANNOT BE MADE WITHOUT CONFRONTING THE MATERIAL AND ALLOWI NG THE OPPORTUNITY OF CROSS EXAMINATION TO THE ASSESSEE. T HIS PROPOSITION HAS BEEN REPEATEDLY LAID DOWN BY ALL TH E COURTS. BESIDES, THERE IS A PRESUMPTION IN LAW THAT THE PER SON FROM WHOM THE DOCUMENT IS FOUND IS THE OWNER OF THE DOCU MENT. THE DEPARTMENT SHOULD DISCHARGE THEIR BURDEN BEFORE SEEKING TO TAX THE ASSESSEE ON THE BASIS OF DOCUMENTS FOUND FROM DR. M.V. RAO OR SHRI MOHAN SAMBHAJI JAGTAP. SINCE THE A SSESSEE HAS NOT BEEN PROVIDED NECESSARY MATERIAL INCLUDING THEIR STATEMENTS, OPPORTUNITY OF CROSS EXAMINATION AND HE ARING BASED THEREON, INTEREST OF JUSTICE WILL BE SERVED I F THE ISSUES ABOUT INCOME FROM COMMISSION/ BUSINESS OF DEALINGS IN ARMS ARE DECIDED AFRESH BY AO IN THE LIGHT OF THESE OBSE RVATIONS. THESE GROUNDS RAISED BY THE ASSESSEE IN A.YRS. 2002 -03 & 2003-04 ARE ALLOWED FOR STATISTICAL PURPOSES. 22. HOWEVER, ON CAREFUL CONSIDERATION OF THE MATTER , WE FEEL THAT THE DECISION IN THE CASE OF SURESH NANDA IS CERTAINLY R ELEVANT BUT ITS RELIANCE IS TO ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 24 BE DETERMINED ONLY AFTER CONSIDERING THE DOCUMENTS AND EXPLANATION OF THE ASSESSEE VIS--VIS INSTANT ADDITION AND NOT IN A SU MMARY MANNER MORE PARTICULARLY WHEN THE ITAT ITSELF HAS RESTORED THE MATTER BACK TO AO WAS IN VIEW OF LACK OF EVIDENCE ON RECORD IN THAT CASE AND FOR VIOLATION OF PRINCIPLES OF NATURAL JUSTICE, WHICH IS DEFINITELY NOT SO IN T HE INSTANT CASE, LIKE RS.2 CRORES SEIZURE AND DOCUMENTS SEIZED FROM HIS PREMIS ES WHETHER JUSTIFIES THE AOS ADDITION OF RS.2,17,57,724/- COULD HAVE BEEN I NDEPENDENTLY ARRIVED AT BY THE CIT (A) FOR DOING SO, WE RESTORE THIS ISSUE BACK TO CIT (A) FOR ADJUDICATING THIS ISSUE AFRESH, NEEDLESS TO SAY THA T ASSESSEE/LEGAL HEIRS TO BE GIVEN OPPORTUNITY OF BEING HEARD. 23. IN THE RESULT, GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES AND CROSS OBJECTION BY THE ASSESSEE ARE DI SMISSED. 24. NOW, WE TAKE APPEALS IN ITA NOS.1905/DEL./2013, 1914/ DEL./2013, 2573/DEL./ 2013 & 2574/DEL./2013 FILED BY THE REVEN UE AND CROSS OBJECTION NOS.170/ DEL./2013 AND 171/ DEL./2013 FILED BY THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 TO 2006-07. THE SOLITARY ISSUE INVOLV ED RELATES TO ADDITION ON ACCOUNT OF COMMISSION INCOME AND SINCE WE HAVE ALRE ADY HELD IN RESPECT OF THE ABOVE ISSUE THAT MATTER REQUIRES FRESH ADJUDICA TION BY THE CIT(A) AND THEREFORE, FOLLOWING THE ABOVE CONCLUSION IN ALL TH ESE APPEALS TOO, IT IS HELD THAT THE ISSUE IS RESTORED TO THE FILE OF THE CIT(A ) FOR FRESH CONSIDERATION. AS A ITA NOS.1912, 1905, 1914, 2573 & 2574/DEL./2013 CO NOS.169 & 171/DEL./2013 25 RESULT, APPEALS OF THE REVENUE ARE ALLOWED FOR STAT ISTICAL PURPOSES AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. 25. TO SUM UP : IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES AND THE CROSS OBJECTIONS F ILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 30 TH DAY OF NOVEMBER, 2015. SD/- SD/- (O.P. KANT) (A.T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 30 TH DAY OF NOVEMBER, 2015 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.