The ITO, Ward-2(3), PORBANDAR V. Shri Tulsibhai P. Ladani, RAJKOT-GUJARAT

ITA 251/RJT/2015

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 2941 (ITAT-RAJKOT)
• Duration Of Justice: 8 year(s) 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-04-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 07-04-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJEEV RANJAN
• Keywords: Principle of natural justice; Reassessment proceedings; Set aside
• Section: 148; 2; 143(3); 133(6); 69A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT (Conducted through E-Court at Ahmedabad) BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No s. 2 49 to 25 1/ R j t/2 01 5 ( A s s e s s me nt Y ea r s : 2 0 07 -0 8 to 2 00 9 - 1 0) The I n c o m e T a x O f f ic e r , War d- 2( 3 ) , JR , Po r b a n d ar V s.Sh r i Tu ls ib ha i P. L a da n i , 3 0 1, S a m p at i To we r - I I I , B / h. O d es se y To we r , K al a w ad R o a d, R a j ko t [P AN N o. A A R P L1 84 8 G ] (Appellant) .. (Respondent) Appellant by : Shri Dushyant Maharshi, A.R. Respondent by: Shri Sanjeev Ranjan, Sr. DR D a t e of H ea r i ng 08.04.2024 D a t e of P r o no u n ce me nt 17.04.2024 O R D E R PER SIDDHARTHA NAUTIYAL, J.M.: These are appeals filed by the Revenue against orders passed by Commissioner of Income Tax (Appeals), Jamnagar (in short “CIT(A)”), vide orders dated 31.03.2015 for A.Ys. 2007-08 to 2009-10. Since common facts and issues for consideration are before us for all the years under consideration, all the appeals are being disposed of by way of a common order. 2. The Revenue has taken the following grounds of appeals:- ITA No. 249/Rjt/2015 (A.Y. 2007-08) “1. The learned CIT(A) erred in law and facts in deletion the addition made on account of defrauded amount of Rs. 25,84,400/-. ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 2 - 2. On the basis of the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer. 3. That the revenue craves leaves to add, amend, alter or withdraw any ground of appeal. 4. It is therefore prayed that the order of the CIT(A), Jamnagar may kindly be set aside and that of Assessing Officer be restored.” 3. The brief facts of the case are that the assessee is an individual who was working as an assistant in State Bank of India, Kutiyana Branch, Porbandar for last several years. For the year under consideration, assessee had not filed his return of income. On account of departmental enquiry, it was alleged that the assessee used various modes to defraud the money of the customers of the bank. It was alleged that the assessee used to issue counterfoil containing the same bank signature, but the amount so received was never credited in the customer’s account and was siphoned off by the assessee. Further, the assessee was accused of making entries in the pass books in his own handwriting due to which the same entries were not updated in the books of the bank and the amount so received was misappropriated. The assessee was also alleged to have fraudulently withdrawn money from the demat accounts. In some cases were the customers of the bank’s gave money for issuance of term deposit receipts, the assessee is alleged to have issued them forged term deposits receipts on bank’s prescribed stationery without making entries in the system and he siphoned off the amount. In view of the above, it was alleged that the assessee had defrauded 259 bank account holders to the tune of Rs. 5.24 crores. Accordingly, the assessee was suspended from the bank and the CBI registered case against the assessee regarding misappropriation of ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 3 - money for an amount to approximately 5.24 crores by making fraudulent transactions in 259 bank accounts. 4. Thereafter, the Department issued notice under Section 148 of the Act dated 27.05.2011 for A.Ys. 2007-08 to 2009-10 and completed the assessment against the assessee with total additions amounting to Rs. 1,64,27,595/- for various years under consideration. 5. The assessee filed appeal against the aforesaid additions before Ld. CIT(A). On appreciation of the submissions made by the assessee, the CIT(A) deleted the additions made in the hands of the assessee, by way of a consolidated order for various years under consideration, on the ground that firstly that though the initial allegation against the assessee was misappropriation of funds amounting to Rs. 5.24 crores, however, in the assessment order, the addition was only to the tune of Rs. 1.64 crores. Therefore, even the Department was not clear as to the precise amount of income which was to be subject to tax in the hands of the assessee. Secondly, the Ld. CIT(A) observed that even as on date of appellate proceedings before him, the investigation against the assessee were in progress. The Ld. CIT(A) was of the view that a person is presumed to be innocent, unless proven guilty. Since the investigation against the assessee were still under progress the additions were not liable to be made in the hands of the assessee. Thirdly, the assessee had specifically asked the Assessing Officer as well as SBI to give year wise break-up of the amount he had defrauded and also on what basis the SBI / Assessing Officer had come to the conclusion that this was the precise amount which had been ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 4 - defrauded by the assessee. However, the Assessing Officer had simply stated that the additions was on the basis of information obtained from bank under Section 133(6) of the Act, however, the correspondence of the bank under Section 133(6) of the Act was not provided to the assessee, despite specific request. Further, even in the RTI application filed by the assessee, this information was denied to the assessee. Accordingly, Ld. CIT(A) was of the view that since the investigation is still under progress and in case on a conclusion of final enquiry, the assessee is found to be innocent, then it would be wholly erroneous to tax the aforesaid income in the hands of the assessee. Fourthly, the Ld. CIT(A) observed that various account holders, during the course of investigation have confessed and stated that there is no fraud which has been committed on them and such instances have been given by the assessee as well as recorded in the enquiry of CBI. Therefore, looking into the instant facts, the correct amount of income which could be attributable in the hands of the assessee was unknown. Fifthly, the Ld. CIT(A) also observed that it is a settled law that addition cannot be made on the basis of statement recorded and information collected, without giving an opportunity to cross-examine being given to the assessee. The Gujarat High Court in the case of Late Laxmanbhai S. Patel vs. CIT (2008) 327 ITR 290 (Gujarat) has held that the legal effect of statement recorded behind the back of the assessee and without furnishing copy thereof to the assessee or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of principles of natural justice. Accordingly, in view of the aforesaid reasons cited by the Ld. CIT(A), he deleted the addition in the hands of the assessee with the following observations:- ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 5 - “On the merits of the additions made I have carefully considered the reasons given by AO in assessment order as well as the arguments put forth by AR of the appellant. In this case appellant is a clerk employed with Kutiyana Branch of state bank of India. As stated he was employed at the same branch for so many years. On 5/10/2010 he was arrested by police on allegation of misappropriation of the money of accountholders of the bank. It was initially alleged that he has misappropriated an amount of Rs. 5.24 crores. Later on this amount was said to be Rs 1,64 crores for which the addition have bee n made in his hands from AY 2006-07 to 2009-10. On 28.12.2010 The Commissioner of Income tax Jamnagar received letter from honorable chief commissioner of Income tax Rajkot intimating that in the REIC meeting held on 10.12.2010Fomr No-1 has been submitted by Supdt of police ACB, Gandhinagar in which it is mentioned that a case is being registered was registered by CBI Gandhinagar against appellant as well as unknown officials of SBI alleging that appellant has misappropriated Rs 5.24 crores by making transactions in about 259 accounts of the a banks' account holders. It was also state d in the form in column no (5) that investigation is in progress. This was detecte d as mentioned in that form on 27.09.2010. Based on the communications dated 23.12.2010 AO reopened the cases of the appellant for AY 2007-08 to 2009-10 by issuing notice u/s 148 of the act. Thereafter on 30.9.2010 search was conducted at the residence of appellant by CBI and in panchanama nothing was found from him. Meanwhile appellant was arrested and jailed and later on released on bail till conclusion of inquiry and he was not enter Porbanadar district without permission of the court. It is pertinent to note here that appellant's assessment are framed in Porbanadar, For nonappearance by appellant for this reasons he has also been penalized u/s 271(1) (b) of Income tax Act. It is also interesting to note that SBI has filed complaint before the CBI for misappropriation of money originally of approximately Rs. 5.24 Crores or 5.33 Crores or 6.76 Crores or 4.27 Crores. Later on before C.B.I. Complaint was for misappropriation of total amount of approximately Rs. 5.24 Crores. It is pertinent to note that out of total alleged misappropriation of Rs. 5.24 Crores, total addition in 4 years viz. A.Y. 2006-07 to A.Y. 2009-10 is made of Rs. 1,64,27,595 /- only. Howeve r despite specifically asking by the appellant of these figures neither AO nor SBI has given the year wise break up of this figures and its basis. AO has simply stated that based on information obtained from bank u/s 133(6) of the act the amount of additions have been made in each year. The correspondence of the bank and U/s 133(6) of the act was not provided to the appellant despite specific request. Even in RTI these information's were denied. In RTI application made by appellant on 24.06.2014 and 16.7.2014 appellant asked for specifically all the formations received from various department including SBI regarding the case of the applicant. In this response at para no 2 of the order CPIO stated that the other information received from SBI and CBI cannot be provided due to pendency of vigilance matter and investigation at the level of CBI and SBI, This order u/s 7 (1) of the act is dated 5/8/2014. Therefore from the order under RTI act it is apparent and crystal clear that at present the investigation is going on and the holes assessment has been made on the preliminary inquiry. It is really a matter of great concern that what will happen in the event the final inquiry is ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 6 - concluded by SBI and CBI and appellant is found to be innocent. There are reasons to believe so because out of account-ticklers earlier alleged to be cheated fraudulently many have confessed and stated that there is no fraud committed on the m, such instance shave been given by appellant as well as recorded in the inquiry of CBI. The amount of fraud has also come down from 5.24 Cr to 1.65 Cr. allegedly and still there is no finality as investigation is going on. Under the Indian Law, the accused are presumed to be innocent till their guilt is finally established after a fair trial. Further in this case appellant was not information collected behind his back for making this additions. It is settled law that addition cannot be made on the basis of statement records and information collected without giving any opportunity to cross examine is given to the appellant.' Honorable Gujarat high court has held in case of Laxman bhai J Patel in 327 ITR 290 that the legal effect of the statement recorded behind the back of the assessee and without furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice. This is clearly stated by the Hon'ble Supreme Court in the case of Kishinchand Chellaram wherein it is stated that before the Income-tax 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 opportunity to cross-examine. Honorable Delhi High court in case 295 ITR 105 Dharampal Premchand has held that" There is no doubt that even if the strict rules of evidence may not apply, the basic principles of natural justice would apply to the facts of the case. The Assessing Officer placed reliance upon the report of the Shri Ram Institute for Industrial Research for deciding against the assessee. The report cannot be automatically accepted particularly since there is a challenge to it and the assessee had sought permission to cross-examine the analyst making the report. Since the Assessing Officer did not permit the correctness or otherwise of the report to be tested, there is a clear violation of the principles of natural justice committed by him in relying upon it to the detriment of the assessee. As observed by the Constitution Bench in C.B. Gautam v. Union of India [1993] 199 ITR 530 1 (SC) that, "The observance of principles of natural justice is the pragmatic requirement of fair play in action." Further hon. Delhi high court has in case of CIT v. Jindal Vegetables Products Ltd. [2009] 315 ITR 265 (Delhi) has also dealt with in similar manner. Therefore respectfully following that decision as well as of hon. Gujarat high court the addition in this cases cannot be. sustained in absence of opportunity of cross examination not given to the assessee. Most of the statement on which CBI and SBI has relied which were accepted by department without verification are contradictory and unreliable, no opportunity was given to the assessee by Assessing Officer to examine the those parties Assessing Officer, by solely relying upon the information received from the bankers that the amount has been defrauded without appreciating that the many account holder have stated that their money is intact as stated in written submission of appellant, I do not incline to uphold the addition made by AO. Therefore, I delete the addition of Rs. ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 7 - 12,77,360/- for AY 2006-07, Rs 25,84,400/- for AY 2007-08, Rs. 37,80,000/0- for AY 2008-09 and Rs. 87,85,835/- for AY 2009-10.” 6. The Department is in appeal before us against the order passed by Ld. CIT(A) deleting the addition in the hands of the assessee. 7. Before us, the Counsel for the assessee placed reliance on the observations made by Ld. CIT(A) in the appellate order. Before us, the Counsel for the assessee submitted that even as on date of hearing before ITAT, the investigation proceedings are still underway and the last date of hearing which was scheduled for this case is 09.04.2024. Further, the Counsel for the assessee submitted that it is a settled law that no addition can be made in the hands of the assessee on the basis of charge sheet filed by the CBI, since this is only a preliminary basis of initiating action against the assessee and the initial charge sheet filed by the assessee cannot be made the basis for making additions in the hands of the assessee. Accordingly, the arguments put forth by the assessee can be summed up as below:- (i) There is no finality of matter and till the date assessee has not been found to be guilty as the investigation is pending. (ii) The addition cannot be done without confronting the assessee with any evidence on which assessee has placed reliance. (iii) Additions have been made purely based on suspicion and bald statements in charge sheet. ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 8 - (iv) No assets / incriminating materials have been found during the course of search by CBI. (v) Additions are not sustainable merely on the basis of charge sheet filed by the CBI. (vi) The assessee has placed reliance on the decision of Videocon International in ITA No. 4579/Mum/2008 and Essar Oil Ltd. in ITA No. 5141/Mum/2003. 8. In response, Ld. D.R. placed reliance on observations made by the Ld. Assessing Officer. 9. We have heard the rival contentions and perused the material on records. 10. On going through the facts of the instant case we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. In the instant case, the entire additions have been made by the Assessing Officer on the basis of charge sheet filed by CBI and the investigation against the assessee is still underway, in the Court of Law. Further, despite specific request, the assessee was never provided the basis for making additions for respective years in his hands either by CBI or the Assessing Officer. No opportunity of cross-examination was provided to the assessee, so as to afford any opportunity for challenging the basis of making the additions. Further, while as per the initial charge sheet, as per CBI, assessee had misappropriated a sum of Rs. 5.25 crores, but while framing the assessment, the addition in the hands of the assessee was restricted to Rs. 1.64 crores for ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 9 - various assessment year from A.Y. 2006-07 to 2009-10. Further, as per Ld. CIT(A) the addition has been made on the basis of fraud committed by the assessee in respect of 259 bank accounts held by various depositors. However, both the CBI has submitted that many of the account holders out of this aforesaid 259 accounts have confirmed that no money had not been siphoned from their bank accounts. The assessee has relied on various judicial precedents in support of it’s contention that no addition can be made on the basis preliminary investigation / charge sheet filed by CBI, especially in light of the fact that investigation on this issue is still underway and the assessee has not been implicated by the court of law. Further, even the precise quantum of addition cannot be identified since the investigation is still undergoing. We would like to reproduce the relevant extracts of the judgment of Shri Ratan Babulal Lath vs. DCIT in ITA No. 355/Bang/2017, in which the Tribunal held that additions made merely on the basis of treatment recorded by CBI is invalid. It would be useful to reproduce the relevant extracts of the ruling for ready reference:- “12. Having carefully examined the orders of authorities below in the light of rival submissions, we find that the sole basis for making an addition in the hands of the assessee is a statement of the assessee as well as Shri Navneet Kumar Singhania recorded by the CBI. It is a settled position of law that the statement recorded by the CBI or police authorities/investigating authorities cannot be made a sole basis for making additions. Moreover, the statement recorded by the police authorities are not admissible under evidence as per provisions of Section 25 of Indian Evidence Act, 1982 and also in the light of judgment of the Apex Court in the case of Zwinglee Ariel Vs. State of MP (supra). The information or the evidence collected from the CBI can be used by the AO for forming a belief that income chargeable to tax has escaped assessment in the hands of the assessee. But for making addition, some more efforts are to be required on the part of the AO. The stand of Revenue is that the assessee has given 60 crores to Shri Navneet Kumar Singhania for the investment in 2 companies, i.e., M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., for acquiring the shares in Jagati Publications Ltd. On the basis of this information, the AO could have re-opened the assessment or make an enquiry in the affairs of both the companies to find out as to whether such amount of Rs.60 crores ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 10 - was ever invested or brought in the books of accounts of this company. If it was brought in those companies, source of the funds could have been examined by the AO but he did not do so. Before us, the copy of balance sheet of the companies of M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were filed and as per the schedule B, it is evident that M/s. Chandelier Tracon Pvt. Ltd., had acquired shares of Rs.31,12,00,000/- of Jagati Publications Ltd., and M/s. Sugam Commodeal Pvt. Ltd., had also acquired 28,58,00,000/- shares at the face value of Rs.10/-. Therefore, the total investment in shares by these companies in Jagati Publications Ltd., comes to Rs.52 crores but not 60 crores as alleged by the Revenue. It is the responsibility of the AO to dig out the truth about the source of investment in Jagati Publications Ltd., by M/s. Chandelier Tracon Pvt. Ltd., and M/s. Sugam Commodeal Pvt. Ltd. It is also an undisputed fact that during assessment year 2009 10 relevant to financial year 2008-09 the assessee was neither a shareholder nor connected in any manner with these companies and to controvert the stand of the assessee nothing has been brought by the Revenue on record. They were simply harping upon the statement recorded by the CBI without bringing any evidence from any corner. The Revenue has also taken a stand that shares of Jagati Publications Ltd., were finally acquired by the M/s. Avant Garde Fashion Wear Pvt. Ltd., from these two companies. But from perusal of the balance sheets of M/s. Avant Garde Fashion Wear Pvt. Ltd., it is noticed that this company has acquired 16,58,322 shares of Jagati Publications Ltd., @ 360/- per each share for a sum of Rs.59,84,92,020/- meaning thereby the entire shareholding of Jagati Publications Ltd., held by the M/s. Sugam Commodeal Pvt. Ltd., and M/s. Chandelier Tracon Pvt. Ltd., were not acquired by M/s. Avant Garde Fashion Wear Pvt. Ltd., in which the assessee happened to be a Director. Therefore, AO has not brought any material on record to demonstrate that assessee has made the investment in Jagati Publications Ltd., by acquiring its shares during the impugned assessment year. The addition made by the Revenue authorities is only on the basis of the statement recorded by the CBI. It is also evident from the assessment order that the statement was not even confronted to the assessee during the course of assessment proceedings and assessee was also not even allowed to cross-examine Shri Navneet Kumar Singhania. From the careful examination of the assessment order we find that AO has made half- heartedly investigation on receipt of the information from the CBI. Once he got such a sensitive information from the CBI the onus of the AO is more and he should have examined the affair of all the three companies and if he finds anywhere that the substantial cash was introduced, that company should have been put on notice to explain the source of fund. If they failed to explain, the addition could have been made in their hands. But the AO did not make any efforts to investigate all these facts. By simply placing reliance upon the statement recorded by the CBI, he made an addition in the hands of the assessee knowing fully well that the statement recorded by the CBI cannot be held to be a good piece of evidence in the court of law unless and until some corroborative independent evidence is collected by making necessary enquiry. 13. We have also carefully perused the various judicial pronouncements referred to by the assessee wherein it has been held that on the basis of the confessional statement during the course of search/survey, the addition cannot be sustained unless and until there is some corroborative evidence, if the assessee has retracted from the statements. In the case of Manoj Prabhakar Vs. Asst. CIT reported in 84 TTJ 625, the Tribunal has held that “whether addition, made only ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 11 - on basis of figures noted on slip of paper found from possession of assessee and statement of ‘P’, could not be sustained because no direct evidence was available on record to corroborate fact regarding passing of consideration beyond and above consideration mentioned in sale deeds”. Similarly in the case of Ajay Sharma Vs. ACIT 101 TTJ 1065 (Delhi), the Tribunal has also held that where no cogent evidence was collected during the search to show that the assessee was taking money for fixing cricket matches, the reports of the CBI and Madhavan Commission on match fixing could not be relied upon for making additions as they were not evidence found during the search. 14. In the case of ITO Vs. Balram Jakhar, 8 SOT 1 (Amritsar), the reopening of the assessment on the basis of the CBI report was examined and the Tribunal has held that merely on the basis of the CBI report, the reopening is not possible, as in the criminal proceedings, the assessee was acquitted by the court. The facts of that case was that assessee filed his return upon which assessment was made and subsequently as a result of the search conducted by the CBI at the premises of one ‘J’ in which certain diaries were found which contained entries of payment made by ‘J’ to various persons, which were recorded in abbreviated forms. It revelas that assessee had received Rs.17 lakhs from ‘J’ and CBI launched criminal prosecution against assessee. Based on said materials, the AO initiated reassessment proceedings against the assessee on the ground that said amount had not been shown in the returns. The assessee explained on the basis of which proceedings were initiated. The AO however rejected the said explanations and held that income tax proceedings are independent proceedings and had nothing to do with the decision of the special bench. The assessee in reply requested the AO to produce ‘J’ before him for cross examination. The AO, however rejected the said request and based on the material available on record he made an addition of Rs.17 lakh in the hands of the assessee by treating the same as undisclosed income. On appeal, the CIT(A) set aside the findings of the AO and deleted the additions of Rs.17 lakhs. The matter went to the Tribunal. The Tribunal re-examined the entire issue and relying upon the various judicial pronouncements in which it has been held that evidence is to be judged by considering the surrounding circumstances and applying the test of human probabilities. The Tribunal finally concluded that Revenue has no sufficient material available on record to support the finding of the AO. The relevant observation of the Tribunal is extracted hereunder for the sake of reference: “Though the assessee was charge-sheeted on allegation of receipt of Rs. 17 lakhs but prosecution resulted into futility as the assessee was discharged of the offences by the Special Judge and the said decision was later on affirmed by the High Court and the Supreme Court on the ground that there was no evidence against the assessee except diary, note book and loose sheet with regard to payment and it was held that evidence of such a nature could not be converted into legal evidence against the assessee. Therefore, the very foundation of initiation of reassessment proceedings disappeared in the instant case and, accordingly, the addition would also not survive. There was no recovery made at the instance or persistence of the assessee. The revenue relied only upon diary and charge-sheet framed by the CBI. The whole case of the revenue would collapse the moment assessee was discharged of the sole allegation of receipt of Rs. 17 lakhs. The abbreviated form allegedly recorded in diaries was not explained by any material. It could resemble to ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 12 - name of other person also who was having similarity in name. Unless it was proved through corroborative evidence that entries were having any nexus with the assessee, addition could not be made in the hands of the assessee. Material on record was not enough to conclude findings against the assessee. It, therefore, appeared that findings of the Assessing Officer were, based on suspicion which could not take place of legal proof. The Assessing Officer admitted before the Commissioner (Appeals) that the Department had no other evidence except those diaries. Therefore, it was a case of no evidence against the assessee as whatever evidence was available was not considered by the High Court and the Supreme Court to have any evidentiary value. No corresponding entries in the books of account or in the form of accretion in assets were found or proved by the Assessing Officer. The Assessing Officer never produced 'J' before the assessee for cross examination. The assessee in his reply to the show cause notice before the Assessing Officer specifically requested to produce the persons who had made the statement against the assessee for cross-examination but no person was produced for cross-examination. Therefore, whatever material was collected at the back of the assessee could not be read in evidence against the assessee. It is settled law that if any material is collected by the income- tax authorities at the back of the assessee then opportunity to controvert the same should have been given to the assessee. Therefore, in the instant case, whatever material was collected by the Assessing Officer could not be read in evidence against the assessee. The fact was conceded by the Assessing Officer before the Commissioner (Appeals) that except the copies of the documents recovered by the CBI there was no other material found against the assessee. The Supreme Court in its various decisions has held that the evidence is to be judged by considering the surrounding circumstances and by applying the test of human probabilities. However, in the facts of the instant case, only diaries were recovered which were having only abbreviated forms without further explaining or mentioning anything and, therefore, it was not considered as evidence by the High Court and the Supreme Court. If the test of human probabilities was applied in favour of the assessee, then it could be inferred that 'X might have recorded the entries in abbreviated forms in diary without the knowledge of the assessee. Therefore, under such circumstances, the revenue would not be justified in making any addition against the assessee. Therefore, the revenue had no cogent or sufficient material evidence on record to support the findings of the Assessing Officer and, thus, there was no reason for interfering with order of the Commissioner (Appeals). It was to be accordingly, confirmed.” 15. In the case of ITO Vs. Pukhraj N Jain reported at 95 ITD 281 (Mumbai), the Tribunal has held that AO being a quasi-judicial authority cannot base his conclusion/decision on the finding of any authority under any other Act/law and, thus, adopt the finding/conclusion of that authority; the decision to withdraw by the AO has to be his own and independent one. In that case, while on his way, the assessee’s brother KNJ was intercepted by DRI officials and contraband gold bars were found in this possession, the Customs Collector confiscated gold as being improperly imported into India ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 13 - from abroad and imposed penalties under Customs Act, 1962 and Gold Act, 1968 on assessee and his brother KNJ. Based on the order of the Customs Collector as well as the statement of KNJ and the assessee recorded by DRI officials, the AO made addition under section 69A on account of value of unexplained valuable article being gold, not recorded in books of account of assessee. On appeal, the Commissioner deleted the addition finding that the AO merely relied on the orders of the Customs Collector having had conducted the inquiry and having ascertained the facts and having passed his order under the Customs Act, the AO for framing assessment under the Act and for that purpose for making addition under section 69A in the hands of the assessee in respect of value of gold seized by officials was not required to make any inquiry. The Tribunal had held that though the AO while making as assessment does not strictly act as a court of law but he acts in quasi judicial capacity and the proceedings before the AO are in general in the nature of quasi judicial though for specific purpose, the same are deemed judicial proceedings under section 136 of the Act. Thus the AO cannot base his conclusion/decision on the finding of any authority under any other Act/law and thus adopt the finding/conclusion of that authority. The relevant observation of the Tribunal is extracted hereunder for the sake of reference: “Section 112 of the Customs Act provides for the liability of penalty on any person who does not omit to do any act which would render such goods liable to confiscation under section 111, or who acquires possession of such goods or is in anyway concerned in the carrying, removing, deposing, keeping, concealing, selling or purchasing, etc., of such goods. As such, the person, liable for imposition of penalty under section 112, may be the person being in any way concerned with the goods which are improperly imported into India from outside. The above provision, in no way; requires the concerned person to be the owner of the goods. Under section 138A of the Customs Act, there is a provision for presuming in any prosecution for an offence under the Customs Act, requiring the culpable mental state on the part of the accused, that such accused had the required culpable mental state though the accused could furnish defence to rebut the said presumption. [Para 18] The contention of the revenue that the Customs Collector having had conducted the inquiry and having marshaled/ascertained the facts and then having passed his order under the Customs Act, the Assessing Officer; for framing assessment under the Act and for that purpose for making an addition under section 69A in the hands of the assessee in respect of the value of gold seized from KNJ by Customs officials, was not required to make any inquiry, seemed to be misplaced/fallacious, reflective of a non- understanding or misunderstanding of the very basic concept of judicial/quasi- judicial adjudication by a judicial or quasi-judicial authority. Although an Assessing Officer; while making an assessment, does not strictly act as a Court of law, but he acts in a quasi-judicial capacity and the proceedings before the Assessing Officer are, in general, in the nature of quasi-judicial, though for specific purpose, the same are 'deemed judicial proceedings' as provided in section 136. An Assessing Officer; being a quasi- ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 14 - judicial authority has to, while framing assessment, discharge his duty/function judicially and in that process, has to apply his own mind independently to the facts of the case, ascertained by him and then draw his own conclusion/ decision by appreciating the evidence/material brought/available on record before him; the Assessing Officer cannot base his conclusion/decision on the finding of any authority under any other Act/law and, thus, adopt the finding/conclusion of that authority. The decision to be drawn by the Assessing Officer has to be his own and independent one. It is clear from the provision of section 143(3) that the Assessing Officer could not base his decision on the findings/conclusions of Customs Collector drawn in his order under the Customs Act. [Para 21] As regards the statement of KNJ: the same too was not recorded by the Assessing Officer during assessment proceedings but was recorded by the Customs officials. The said statement was recorded at the back of the assessee and the assessee had not been allowed an opportunity to cross examine 'KNJ' as regards the said statement. Besides, whatever be contained in the said statement of KNJ: the same had been retracted by KNJ' as was evident from his letters alleging that the same was recorded forcibly and under threat and under influence and that the same was not voluntary. Moreover; 'KNJ; being himself involved in the unlawful transaction of carrying contraband gold, was a tainted witness whose testimony, even otherwise, might not be worth reposing credence therein or placing reliance thereon. As against the said statement of KNJ, there was also the statement of the assessee denying totally his involvement in connection with the said gold transaction. [Para 22] 'KNJ' having been found in possession of gold, prima facie, it was he who was to be treated as owner of the possession (gold) unless this presumptive inference was rebutted by proper/convincing evidence. There being no 'evidence' worth the name, the 'other material' being the said statement of 'KNJ' and the order of Customs Collector, remained too feeble to entangle assessee as the owner of the said contraband gold, seized by the Customs officials from the possession of 'KNJ: [Para 23] For making an addition under section 69A, apart from ownership of the asset/valuable article, which is deemed to be the income of the assessee for that financial year; it is also a pre-requisite that such asset/valuable article 'is not recorded in the books of accounts' maintained by the assessee (if any). In the instant case, even if the department's factual allegations were assumed to be correct, the stage of recording the said seized gold in the books of account of the assessee could not be said to have arrived yet as the gold was stated to have been seized on the way when KNJ' as bringing the same and, thus, the valuable article had not yet been brought to the assessee. [Para 24]”. 16. Similarly, in the case of First Global Stockbroking (P.) Ltd., Vs. ACIT 115 TTJ 173, the Tribunal has observed that simply on the basis of the statement of the third person to Enforcement Directorate that he had remitted funds to the assessee from abroad, it could not be held that amount had been remitted by assessee from undisclosed sources; more so, when an opportunity to cross-examine said person was not granted to assessee. In that case, the Enforcement Directorate has received ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 15 - the information that assessee had arranged 1,25,000 dollars, which was remitted to FGM Ltd., through hawala channel. In this connection, the Enforcement Directorate had recorded statement of one AS who in his statement had pointed out that he made the payment on behalf of the assessee. Addition to the assessee’s income had been made on the ground that AS had arranged the remittance of 1,25,000 dollars to FGM Ltd., on behalf of the assessee. Having examined the facts in the light of legal propositions, the Tribunal has held that if some amount is remitted to foreign company by any person how it can lead the authority to believe that amount was remitted only by the assessee. The Department could not find out who contacted AS and how that person was related to the assessee. There should be some more corroboration for putting the assessee under a burden of tax for the income of Rs.61,87,500/-. Simply on the basis of statement of a third person, it could not be held that the amount had been remitted by the assessee from undisclosed sources, more so when an opportunity to cross examine said person was not granted to the assessee. 17. In the case of K.T.M.S. Mohammed Vs. Union of India reported at 197 ITR 196 (SC), the Hon’ble Apex Court have examined the scope of section 193 r.w.s. 228 of the Indian Penal Code r.w.s. 39 of the Foreign Exchange Regulation Act, 1973 (FERA) with respect to the false evidence and the Apex Court has observed that the statement made under section 39 of the FERA cannot be treated as having been recorded in a ‘judicial proceedings’ so as to be used as basis for fastening makers of those statements with criminality of offences under section 193 and/or section 229 of the Indian Penal Code on the ground that deponents of those statements has retracted from their earlier statements in a subsequent proceeding which is deemed to be a ‘judicial proceeding. Their Lordship has further observed while examining the scope of section 136 of the Income Tax Act, r.w.s. 39 of the FERA, 1973, that the income tax proceedings are entirely different from and dissimilar to proceedings under FERA. Therefore, the ITO in exercise of his power under section 136 cannot make use of statements recorded by Enforcement Directorate for prosecuring deponents of those statements in a separate and independent proceeding under Income-Tax Act, on ground that deponents had retracted their statements given before Enforcement Directorate. In the case of Andaman Timber Industries Vs. Commissioner of Central Excise, 281 CTR 0 241 (SC), the Hon’ble Apex Court has held that not allowing assessee to cross-examine witness by adjudicating authority though statements of those witnesses were made as basis of impugned order, amounted in serious flaw which make impugned order nullity as it amounted to violation of principles of natural justice. The relevant observation of the Hon’ble Apex Court is extracted hereunder for the sake of reference: “4. Challenging the aforesaid order, the present appeal is preferred by the appellant-assessee. 5. We have heard Mr. Kavin Gulati, learned senior counsel appearing for the assessee, and Mr. K. Radhakrishnan, learned senior counsel who appeared for the Revenue. ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 16 - 6. According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross- examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause Notice.” 18. Turning to the facts of the case in hand we find that the entire addition is on the basis of the statements of the assessee and Shri. Navneet Kumar Singhania recorded by the CBI. Before the AO, assessee has specifically denied such statements recorded by the CBI and has sought cross-examination of Shri. Navneet Kumar Singhania which were not afforded to the assessee. It was also not made clear to us by the Revenue authorities as to whether on account of statements recorded by the ITA Nos. 249 to 251/Rjt/2015 ITO vs. Shri Tulsibhai P. Ladani Asst.Years –2007-08 to 2009-10 - 17 - CBI, any criminal proceedings were initiated against the assessee and Shri. Navneet Kumar Singhania under any other Act and what was the result thereof. Except such statements, the AO has not brought anything on record to establish that assessee had made such investment in Jagati Publications through Shri. Navneet Kumar Singhania and the same was not declared in its return of income. In the light of these facts, we are of the considered opinion that addition cannot be made in the hands of the assessee in the absence of the relevant evidence. We accordingly set aside the order of the CIT(A) and delete the additions. 19. In the result, appeal of the assessee is allowed. 11. Accordingly, in light of the above decision, and facts of the instant case, we find no infirmity in the order of Ld. CIT(A) so as to call for any interference. 12. In the result, the appeal of the Revenue is dismissed for all the assessment years before us. This Order pronounced in Open Court on 17/04/2024 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 17/04/2024 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार Dy./Asstt.Registrar) आयकर अपील य अ धकरण, राजोकट / ITAT, Rajkot 1. Date of dictation 09.04.2024 2. Date on which the typed draft is placed before the Dictating Member 09.04.2024 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 10.04.2024 5. Date on which the fair order is placed before the Dictating Member for pronouncement .04.2024 6. Date on which the fair order comes back to the Sr.P.S./P.S 17 .04.2024 7. Date on which the file goes to the Bench Clerk 17.04.2024 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Dispatch of the Order..........................................