DCIT, Aluva V. SMT Annie Varkey, Aluva

ITA 421/COCH/2005

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64902 (ITAT-COCHIN)
• Duration Of Justice: 7 year(s) 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-10-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Assessment Year: 1999-2000
• Appeal Filed On: 04-04-2005
• Court: TRIBUNAL
• Assessee Lawyers: K V TOLIN I T A NOS
• Keywords: Unexplained investment; Capital asset; Search and seizure; Principle of natural justice; Question of law; Tangible material; Onus to prove; Retraction; Reassessment proceedings
• Section: 143(3); 68; 69; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND B.R.BASKAR AN, AM I.T.A NOS. 617-622/COCH/2011 ASSESSMENT YEARS : 1996-97-2001-02 M/S. TOLIN RUBBERS PVT. LTD., 26/A/111, M.C.ROAD, MATTOOR, KALADY-683 574. [PAN: AABCT 4322L] VS. THE DEPUTY COMMISSIONER OF INCOME-TAX,CIRCLE-4(2), ERNAKULAM. (ASSESSEE-APPELLANT) (REVENUE- RESPONDENT) I.T.A NO. 457/COCH/2006 ASSESSMENT YEAR : 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. VS. M/S. TOLIN RUBBERS PVT. LTD., 26/A/111, M.C.ROAD, MATTOOR, KALADY-683 574. [PAN: AABCT 4322L] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) I.T.A NOS. 406-411/COCH/2005 ASSESSMENT YEARS : 1996-97-2001-02 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. VS. LATE SHRI K.P. VARKEY, REP. BY L/HR. SHRI K.V.TOLIN, PROP. M/S. TOLIN RUBBERS PVT. LTD., 26/A/111, M.C.ROAD, MATTOOR, KALADY-683 574. [PAN: ABMPV 2654G] (REVENUE-APPELLANT) (ASSESSEE - RESPONDENT) TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 2 I.T.A NOS. 412-417 & 418-423/COCH/2005 ASSESSMENT YEARS : 1996-97-2001-02 THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. VS. 1.SHRI K.V. TOLIN PROP. M/S. TOLIN RUBBERS PVT. LTD., 26/A/111, M.C.ROAD, MATTOOR, KALADY-683 574. [PAN: ABNPT 9804F] 2. SMT.ANNIE VARKEY, PROP. TOSHMA RUBBER PRODUCTS, MATTOOR, KALADY-683 574. [PAN: ABIPV 3994R] (REVENUE-APPELLANT) (ASSESSEE -RESPONDENT ) REVENUE BY SHRI S.PRAVEEN, JR. DR ASSESSEE BY SHRI JAYASANKAR NAMBIAR, ADV. DATE OF HEARING 23/08/2012 DATE OF PRONOUNCEMENT 25/10/2012 O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE APPEALS PREFERRED BY THE ASSESSEES AND THE R EVENUE ARE DIRECTED AGAINST THE RESPECTIVE ORDERS PASSED BY EITHER LD CIT(A)-II OR LD CIT(A)-V, KOCHI, AS THE CASE MAY BE, FOR THE YEARS MENTIONED AGAINST THEIR RESPE CTIVE NAMES IN THE CAPTION, SUPRA. AS THE ISSUES URGED IN ALL THESE APPEALS ARE ARISIN G OUT OF COMMON SET OF FACTS, THEY WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS CONSOLIDATED ORDER, FOR THE SAKE OF CONVENIENCE. 2. ALL THESE ASSESSEES BELONG TO A BUSINESS GROUP C ALLED TOLIN GROUP. THE TOLIN GROUP CONSISTED OF FOLLOWING CONCERNS/ENTITIES:- (A) M/S TOLIN RUBBERS PVT. LTD. (B) M/S TOJA TYRES & TREADS (P) LTD. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 3 (C) M/S TOLIN PRE-TREADS, PROP. CONCERN OF SHRI K.V.TOL IN (D) M/S TOLIN RUBBERS, PROP. CONCERN OF SHRI K.P.VARKEY (E) M/S TOSMA RUBBER PRODUCTS, PROP. CONCERN OF SMT. AN NIE VARKEY. M/S TOLIN RUBBERS (P) LTD., IS A PRIVATE LIMITED CO MPANY INCORPORATED IN THE YEAR 1995 AND IT IS STATED THAT THE FACTORY WAS SET UP WITH F INANCIAL ASSISTANCE OBTAINED FROM M/S KERALA STATE INDUSTRIAL CORPORATION AND THE STATE B ANK OF INDIA. THE CENTRAL EXCISE AUTHORITIES CARRIED OUT SEARCH AND SEIZURE OPERATIO NS ON 21.8.2001 IN THE HANDS OF THE TOLIN GROUP CONCERNS. DURING THE COURSE OF INVESTI GATION BY THE EXCISE OFFICIALS, IT WAS REVEALED THAT THIS GROUP WAS MAINTAINING BANK ACCOU NTS IN THE NAME OF THREE PERSONS WITH STATE BANK OF INDIA, ANGAMALI BRANCH. THE SAI D THREE PERSONS WERE CONSIDERED AS BENAMI OF THE TOLIN GROUP BY THE EXCISE AUTHORITIE S. THE SAID ACCOUNTS WERE FOUND TO HAVE BEEN OPENED IN THE NAME OF SHRI P.T.SUNNY, SHR I P.T.JOSE AND M/S BABU STORES. THE TOLIN GROUP WAS ALLEGED TO HAVE ROUTED THE UNAC COUNTED SALE PROCEEDS THROUGH THESE THREE BANK ACCOUNTS. 3. THE INCOME TAX DEPARTMENT CAME TO KNOW OF TH E CENTRAL EXCISE SEARCH PROCEEDINGS THROUGH THE NEWS PAPER REPORTS THAT APP EARED ON 16/02/2002 AND 17/02/2002 WITH THE NEWS THAT THE ASSESSEE HAD SUPP RESSED CENTRAL EXCISE DUTY TO THE TUNE OF THREE CRORES OF RUPEES. THE AO, AFTER RECO RDED REASONS, ISSUED NOTICES U/S 148 OF THE ACT ON 26-03-2002 TO M/S TOLIN RUBBERS (P) L TD FOR THE ASSESSMENT YEARS 1996- 97 TO 2001-02. THE ASSESSMENTS WERE INITIALLY COMP LETED ON 28-03-2003 U/S 143(3) OF THE ACT. HOWEVER, THE ASSESSEE FILED WRIT PETITION BEFORE THE HONBLE HIGH COURT OF KERALA WITH THE PLEA THAT THE ASSESSMENT PROCEEDING S FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 WERE INITIATED IN AN ARBITRARY MANNER AN D THE ASSESSMENT ORDERS WERE ALSO PASSED ON THE BASIS OF MATERIALS, WHICH WERE NOT PU T TO THE ASSESSEE. IN THE WRIT PROCEEDINGS, THE HONBLE HIGH COURT, VIDE ITS ORDER DATED 04-08-2003 IN W.A.NO.953 OF 2003, HELD THAT THE ASSESSEE WAS NOT GIVEN A DUE AN D REASONABLE OPPORTUNITY BY THE AO. ACCORDINGLY, THE HONBLE HIGH COURT SET ASIDE THE ASSESSMENT ORDERS AND REMITTED THE MATTERS TO THE FILE OF THE ASSESSING OFFICER FO R TAKING FRESH DECISIONS FOR ASSESSMENT YEARS 1996-97 TO 2001-02 IN ACCORDANCE WITH LAW. IN THE FRESH ASSESSMENT PROCEEDINGS, TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 4 THE ASSESSING OFFICER CONSIDERED THE AGGREGATE AMOU NT OF DEPOSITS FOUND IN THE THREE BANK ACCOUNTS REFERRED SUPRA, AS THE UNACCOUNTED TU RNOVER OF THE ASSESSEE M/S TOLIN RUBBERS (P) LTD FOR THE ASSESSMENT YEARS 1996-97 TO 2002-03 AND ESTIMATED THE PROFIT THEREON AT 15% AND ADDED THE SAME TO THE TOTAL INCO ME OF THE RESPECTIVE YEARS. THE DETAILS OF AMOUNT FOUND CREDITED IN THE THREE BANK ACCOUNTS AND THE PROFIT ESTIMATED BY THE AO ARE TABULATED BELOW:- ASST. YEAR AMOUNT FOUND CREDITED IN NET PROFIT @ 15% THE BANK ACCOUNTS 1996-97 RS. 81,86,750/- RS.12,28,012/- 1997-98 RS. 48,25,147/- RS. 7,23,772/- 1998-99 RS.1,06,05,130/- RS. 5,90,769/- 1999-2000 RS. 88,49,892/- RS.13,27,483/- 2000-2001 RS.1,61,43,122/- RS.24,21,468/- 2001-2002 RS.2,83,51,590/- RS.42,52,738/- 2002-2003 RS.2,39,55,605/- RS.35,93,340/- THE ASSESSEE M/S TOLIN RUBBERS PVT. LTD., CHALLENGE D THESE ADDITIONS IN THE APPEALS BEFORE LD CIT(A). THE FIRST APPELLATE AUTHORITY, W HO HEARD THE APPEALS RELATING TO THE ASSESSMENT YEARS 1996-97 TO 2001-02, CONFIRMED THE ADDITIONS. AGGRIEVED BY THE SAID ORDERS, THE ASSESSEE IS IN APPEAL BEFORE US. THE L D CIT(A), WHO HEARD THE APPEAL RELATING TO THE ASSESSMENT YEAR 2002-03, DELETED TH E ADDITION AND HENCE THE REVENUE IS IN APPEAL BEFORE US FOR THAT YEAR. 4. WE SHALL SET OUT THE BACK GROUND RELATING TO THE APPEALS FILED BY SHRI K.P.VARKEY, SHRI K.V.TOLIN AND SMT. ANNIE VARKEY FOR THE ASSESS MENT YEARS 1996-97 TO 2001-02. WHILE THE REASSESSMENT PROCEEDINGS WERE IN PROGRESS IN THE HANDS OF M/S TOLIN RUBBERS PVT. LTD, KALADY, THE SAID ASSESSEE APPROA CHED THE THEN ADDL. COMMISSIONER OF INCOME TAX, ALUVA RANGE, ALUVA U/S 144A OF THE A CT WITH A REQUEST TO GIVE CERTAIN DIRECTIONS TO THE ASSESSING OFFICER. BEFORE THE AD DL. CIT, THE ASSESSEE M/S TOLIN RUBBERS PVT LTD PRODUCED CERTAIN EVIDENCES REGARDIN G ITS MANUFACTURING ACTIVITIES, I.E., THEY HAVE TAKEN A PLEA THAT M/S TOLIN RUBBERS PVT L TD DID NOT CARRY OUT ANY MANUFACTURING ACTIVITY DURING THE PERIODS UNDER CON SIDERATION. BASED ON THE TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 5 INFORMATION SO FURNISHED BEFORE HIM, THE ADDL. CIT ISSUED FOLLOWING DIRECTIONS U/S 144A OF THE ACT, VIDE PROCEEDINGS NO. F.9/JCIT/ALY/RG/02 -03 DATED 03-03-2003:- THE SISTER CONCERNS OF THE ASSESSEE COMPANY SUCH A S TOSHMA RUBBBER PRODUCTS, TOJA TYRES P LTD, TOLIN PRE-TREADS ETC. WERE INVOLV ED IN MANUFACTURE OF TREAD RUBBER BEFORE THE ASSESSEE COMPANY STARTED ITS MANU FACTURING ACTIVITIES. THE PRODUCTS OF THE SISTER CONCERNS COULD HAVE BEEN SOL D IN THE NAME OF TOLIN RUBBERS P LTD RESULTING IN UNACCOUNTED SALES. 5. BASED ON THE SAID DIRECTIONS ISSUED BY THE AD DL. CIT, THE ASSESSING OFFICER REOPENED THE ASSESSMENTS OF THE FOLLOWING SISTER CO NCERNS OF M/S TOLIN RUBBERS (P) LTD AND THE INCOME ASSESSED IN THE HANDS OF M/S TOLIN R UBBERS (P) LTD, WHICH ARE EXTRACTED IN PARAGRAPH 3 SUPRA, WERE AGAIN ASSESSED IN THE HA NDS OF ALL THE FOLLOWING SISTER CONCERNS ON PROTECTIVE BASIS. (A) SHRI K.P.VARKEY, PROP. OF M/S TOLIN RUBBERS (B) SHRI K.V.TOLIN, PROP. OF M/S TOLIN PRE-TREADS (C) SMT. ANNIE VARKEY, PROPX. OF M/S TOSHMA RUBBER PRODUCTS THUS THE INCOME ESTIMATED BY THE AO FOR VARIOUS YEA RS AS MENTIONED IN PARAGRAPH 3 SUPRA WERE ASSESSED ON SUBSTANTIVE BASIS IN THE HAN DS OF M/S TOLIN RUBBERS (P) LTD AND PROTECTIVE BASIS IN THE HANDS OF THE THREE ASSESSEE S MENTIONED ABOVE. ALL THE THREE ASSESSEES MENTIONED ABOVE CHALLENGED THE PROTECTIVE ASSESSMENTS IN THE APPEALS FILED BEFORE THE LD CIT(A) AND THE FIRST APPELLATE AUTHOR ITY DELETED THE ADDITIONS MADE ON PROTECTIVE BASIS. AGGRIEVED BY THE ORDERS PASSED T HE LD CIT(A), THE REVENUE HAS FILED APPEALS BEFORE THE ITAT FOR ASSESSMENT YEARS 1996-9 7 TO 2001-02. THESE APPEALS WERE HEARD BY THE CO-ORDINATE BENCH EARLIER AND THE BENCH NOTICED THAT THE SUBSTANTIVE ASSESSMENTS MADE IN THE HANDS OF M/S TOLIN RUBBERS (P) LTD WERE SET ASIDE TO THE FILE OF THE AO BY THE HONBLE HIGH COURT OF KERALA FOR T AKING FRESH DECISIONS. ACCORDINGLY THE TRIBUNAL TOOK THE VIEW THAT THE PROTECTIVE ASSE SSMENTS MADE IN THE HANDS OF THE ABOVE SAID THREE ASSESSEES ARE ALSO REQUIRED TO BE SET ASIDE TO THE FILE OF THE AO. THE OPERATIVE PORTION OF THE ORDER DATED 18.05.2007 PAS SED BY THE TRIBUNAL READS AS UNDER:- IT IS NOT DISPUTED THAT SUBSTANTIVE ASSESSMENTS AR E MADE IN THE CASE OF TOLIN RUBBERS PVT LTD AND THOSE ASSESSMENTS WERE SUBJECT MATTER OF WRIT PETITION TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 6 BEING W.A.NO.953 OF 2003 (A). IT IS ALSO NOT DISPU TED THAT THE HONBLE HIGH COURT WAS PLEASED TO REMIT ALL THE SUBSTANTIVE ASSE SSMENTS TO THE FILE OF THE ASSESSING AUTHORITY FOR RE-DOING OR FRESH DECISION AS THE HONBLE HIGH COURT WAS OF THE OPINION THAT THE DOCUMENTS AND EVIDENCE WHIC H HAD BEEN USED BY THE SAID AUTHORITY HAVE NOT BEEN PUT TO IT AND, THEREFO RE, THE HONBLE HIGH COURT QUASHED THE IMPUGNED ORDERS IN THE CASE OF TOLIN RU BBERS PVT. LTD AND REMITTED THE MATTER BACK TO THE ASSESSING AUTHORITY. HENCE, IN THE CASE OF TOLIN RUBBERS PVT LTD, THE MATTERS HAVE BEEN RESTORED TO THE FILE OF THE AO AS THERE WAS GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUSTICE. MO REOVER, THOUGH THE HONBLE HIGH COURT WAS PLEASED TO QUASH THE ASSESSMENTS, ALL THE ASSESSMENTS WERE RESTORED TO THE FILE OF THE AO FOR FRESH DECISION. IN THE C ASES OF THESE THREE ASSESSEES, THOUGH PROTECTIVE ASSESSMENTS ARE MADE, IT IS NOT C ORRECT TO SAY THAT MERELY BECAUSE THE SUBSTANTIVE ASSESSMENTS HAVE BEEN QUASH ED AND RESTORED TO THE FILE OF THE ASSESSING AUTHORITY, THESE ASSESSMENTS DO NO T SURVIVE. AS THE SUBSTANTIVE ASSESSMENTS HAVE BEEN RESTORED TO THE FILE OF THE A O, WE CONSIDER IT FIT TO RESTORE THE ISSUE BEFORE US TAKEN BY THE REVENUE TO THE FIL E OF THE AO TO DECIDE THEM AFRESH AFTER FRAMING SUBSTANTIVE ASSESSMENTS IN THE CASE OF TOLIN RUBBERS PVT LTD AS PER THE DIRECTIONS OF THE HONBLE HIGH COURT OF KERALA IN WA NO.953 OF 2003(A) VIDE JUDGMENT DATED 4.8.2003. WE, THEREFOR E, SET ASIDE THE ORDERS OF CIT (APPEALS) ON THIS ISSUE WHICH ARE ARISING OUT O F THE GROUNDS TAKEN BY THE REVENUE AND RESTORE THE MATTERS TO THE FILE OF THE AO TO DECIDE THEM AFRESH. WE MAKE IT CLEAR THAT THE CIT (APPEALS) HAS GIVEN A CA TEGORICAL FINDING ON MERITS THAT THE CENTRAL EXCISE DEPARTMENT HAS GIVEN LETTER DATED 27.10.2004 IN THE CASE OF THESE THREE ASSESSEES WHEREIN IT IS MENTIONED TH AT NO CASE HAS BEEN REGISTERED AGAINST THESE ASSESSEES AND AO SHOULD TA KE INTO CONSIDERATION THE SAID ASPECT OF THE CASE ALSO. 6. THESE THREE ASSESSEES CHALLENGED THE COMMON ORDER DATED 18.05.2007 PASSED BY THE TRIBUNAL, BY FILING APPEALS BEFORE THE HIGH COU RT WITH THE FOLLOWING GROUNDS:- (I) WHETHER THE TRIBUNAL WAS RIGHT IN LAW AND ON F ACTS IN SETTING ASIDE THEE ORDER OF THE CIT(APPEALS) WHICH CLEARLY HELD THAT IN VIEW OF THE CENTRAL EXCISE AUTHORITIES CONFIRMING THAT NO CASE HAD BEEN REGIST ERED AGAINST THE APPELLANT, THERE WAS NO BASIS FOR THE CONTINUATION OF PROTECTI VE ASSESSMENTS AGAINST THE APPELLANT. (II) WHETHER THE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DECIDE THE MATTER AFRESH ESPECIALLY WHEN THE SUBSTANTIVE ASSESSMENT OF TOLIN RUBBERS (P) LIMITED WAS SET ASIDE BY THE HIGH COURT AND FURTHER, THE VERY BASIS FOR THE PROTECTIVE ASSESSMENT INITIATED AGAIN ST THE APPELLANT HAD BEEN TAKEN AWAY BY THE LETTER DATED 27.10.2004 (ANNEXURE H) OF THE CENTRAL EXCISE AUTHORITIES. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 7 (III) WHETHER THE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DECIDE THE PROTECTIVE ASSESSMENTS AFRESH ESPECIALLY WHEN THE ISSUE OF INITIATION OF A PROTECTIVE ASSESSMENT IS A MATTER W HICH HAS TO BE DECIDED BY THE ASSESSING OFFICER AT THE TIME OF CONDUCTING A REGUL AR ASSESSMENT AGAINST THE MAIN ASSESSEE (IN THIS CASE TOLIN RUBBERS (P) LIMIT ED) AND NOT PRIOR TO IT. (IV) WHETHER THE TRIBUNAL WAS RIGHT IN LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO DECIDE THE PROTECTIVE ASSESSMENTS AFRESH ESPECIALLY WHEN THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF LALJI H ARIDAS VS. ITO (1961)(43 ITR 387)(SC) CLEARLY INDICATES THAT THE FINALIZATION OF PROTECTIVE ASSESSMENTS MUST AWAIT THE OUTCOME OF THE SUBSTANTIVE ASSESSMENT. THE HONBLE HIGH COURT OF KERALA, IN ITS COMMON ORD ER DATED 01-11-2007, CONSIDERED THE CONCEPT OF PROTECTIVE ASSESSMENT AS EXPLAINED I N THE FOLLOWING CASE LAW AND, IN PRINCIPLE, UPHELD THE PROTECTIVE ASSESSMENTS:- (A) JAGANNATH HAUMANBUX VS. INCOME TAX OFFICER (1957)(3 1 ITR 603) (B) LALJI HARIDDAS VS. ITO, REFERRED SUPRA. (C) INCOME TAX OFFICER, A WARD, LUCKNOW VS. BACHU LAL KAPOOR (1966) (60 ITR 74). THE HIGH COURT THEN OBSERVED, I.E., THE HONBLE HIG H COURT FRAMED FOLLOWING SINGLE QUESTION FOR ITS CONSIDERATION ON THE BASIS OF THE FACTS PREVAILING IN THESE APPEALS:- MERELY BECAUSE A SUBSTANTIVE ASSESSMENT PASSED BY T HE INCOME TAX OFFICER / ASSESSING AUTHORITY IS SET ASIDE BY THE SUPERIOR FO RUM, WHETHER THE APPEALS FILED AGAINST THE PROTECTIVE ASSESSMENTS REQUIRE TO BE AL LOWED WITHOUT GOING INTO THE MERITS OR DEMERITS OF THE APPEALS?. THE HIGH COURT WENT ON TO ANSWER THE QUESTION IN TH E FOLLOWING WAY:- (28) IN OUR OPINION, IN A SITUATION OF THIS NATURE , AN EQUITABLE CONSIDERATION REQUIRES TO HAVE BEEN ADOPTED BY THE TRIBUNAL. IT COULD HAVE KEPT THE APPEALS FILED BY THE DEPARTMENT PENDING TILL A SUBSTANTIVE ASSESSMENT IS PASSED BY THE INCOME TAX OFFICER AS DIRECTED BY THIS COURT WHILE DISPOSING OF THE WRIT APPEAL OR IN THE ALTERNATIVE, IT COULD HAVE DECIDED THE APPEA LS FILED BY THE DEPARTMENT ON MERITS, SINCE THE ASSESSEES HAVE SUCCEEDED BEFORE T HE FIRST APPELLATE AUTHORITY. MERELY BECAUSE A SUBSTANTIVE ASSESSMENT HAS BEEN SE T ASIDE BY A BENCH OF THIS COURT, IT IS NOT PERMISSIBLE FOR THE TRIBUNAL TO HA VE ALLOWED THE DEPARTMENTS APPEALS BY SETTING ASIDE THE ORDERS PASSED BY THE F IRST APPELLATE AUTHORITY. (29) IN VIEW OF THE ABOVE, WE ARE OF THE OPINION; WE CANNOT SUSTAIN THE CONCLUSION REACHED BY THE TRIBUNAL WHILE ALLOWING T HE DEPARTMENTS APPEALS. THEREFORE, WE PASS THE FOLLOWING: TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 8 ORDER (I) THE APPEALS ARE ALLOWED. (II) THE MATTER IS NOW REMANDED BACK TO THE TRIBUNAL EIT HER TO WAIT TILL THE TAX OFFICER COMPLETES THE SUBSTANTIVE ASSESSMENTS I N THE CASE OF TOLIN RUBBERS PRIVATE LIMITED AS DIRECTED BY A DIVISION B ENCH OF THIS COURT OR IN THE ALTERNATIVE, TO DISPOSE OF THE APPEALS FILED BY THE DEPARTMENT AGAINST THE ORDERS PASSED BY THE FIRST APPELLATE AUTHORITY FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 ON MERITS. (III) IN OUR OPINION, THE TRIBUNAL, IF IT CHOOSES THE FIR ST ALTERNATIVE WHICH WE HAVE SUGGESTED, IT WOULD BE IN THE INTEREST OF BOTH THE DEPARTMENT AS WELL AS THE ASSESSEES, VIZ., K.P.VARKEY, PROPRIETOR M/S TOLIN RUBBERS, K.V.TOLINN, PROPRIETOR M/S TOLIN PRE-TREADS AND SMT . ANNIE VARKEY, PROPRIETOR M/S TOSHIMA RUBBER PRIDUCTS. (30) WITH THE ABOVE OBSERVATIONS AND DIRECTIONS, THESE APPEALS ARE DISPOSED OF. THUS THE HONBLE HIGH COURT RESTORED BACK THE APPEA LS FILED BY THESE THREE PERSONS BEFORE THE TRIBUNAL. ACCORDINGLY, THE APPEALS FILED BY THE ASSESSEES VIZ.,SHRI K.P.VARKEY, SHRI K.V.TOLIN AND SMT. ANNIE VARKEY FOR THE ASSESS MENT YEARS 1996-97 TO 2001-02 WERE HEARD BY US ALONG WITH THE APPEALS FILED BY M/ S TOLIN RUBBERS (P) LTD FOR THE ASSESSMENT YEARS 1996-97 AND 2001-02, IN WHOSE HAND S, THE AO COMPLETED THE ASSESSMENTS AGAIN ON SUBSTANTIVE BASIS AS PER THE D IRECTIONS ISSUED BY THE HONBLE HIGH COURT OF KERALA. AS STATED EARLIER, THE REVENUE HA S FILED APPEAL IN THE CASE OF M/S TOLIN RUBBERS (P) LTD FOR THE ASSESSMENT YEAR 2002-03. 7. HAVING DISCUSSED THE CHEQUERED HISTORY OF CAS ES, WE SHALL BRIEFLY SET OUT THE POINTS OF DISPUTE IN EACH OF THE APPEALS. IN THE APPEALS F ILED BY THE ASSESSEE NAMED M/S TOLIN RUBBERS (P) LTD FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02, IT HAS RAISED MANY GROUNDS NUMBERED AS (A) TO (O) RUNNING INTO NINE PA GES. THUS, THE GROUNDS TAKEN BY THE ASSESSEE ARE ARGUMENTATIVE IN NATURE, WHICH ARE AGAINST RULE 8 OF APPELLATE TRIBUNAL RULES, WHICH MANDATES THAT THE GROUNDS SHO ULD BE CONCISE WITHOUT ANY TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 9 ARGUMENT OR NARRATIVE. HOWEVER, ON A CAREFUL CONSI DERATION OF THE VARIOUS GROUNDS RAISED BY THE ASSESSEE AS WELL AS THE ARGUMENTS NOT E FILED ON ITS BEHALF, WE ARE OF THE VIEW THAT THEY GIVE RISE ONLY TO THE FOLLOWING SING LE QUESTION:- WHETHER THE LD CIT(A) IS RIGHT IN LAW IN CONFIRMIN G THE ADDITIONS IN THE ABSENCE OF ANY EVIDENCE TO LINK THE ASSESSEE WITH THE AMOUN TS FOUND IN THE BANK ACCOUNTS BELONGING TO SRI P.T.SUNNY, SRI P.T.JOSE A ND SRI P.K.BABU, BABU STORES WITH STATE BANK OF INDIA, ANGAMALY BRANCH?, SINCE I T IS TRITE THAT IN TAXATION, THE BURDEN OF PROOF IS ALWAYS ON THE DEPARTMENT TO ESTA BLISH THAT AN AMOUNT IS INCOME OF THE ASSESSEE FOR THE PURPOSES OF TAXATI ON. 8. IN THE APPEAL FILED BY THE DEPARTMENT FOR TH E ASSESSMENT YEAR 2002-03 IN THE CASE OF TOLIN RUBBERS (P) LTD, THE REVENUE IS ASSAILING THE DECISION OF LD CIT(A) IN DELETING THE ADDITION OF RS.35,93,340/- MADE IN THAT YEAR. 9. IN THE APPEALS FILED BY THE DEPARTMENTS FOR ASSESSMENT YEARS 1996-97 TO 2001-02 IN THE CASES OF SHRI K.P.VARKEY, SHRI K.V.TOLIN AND SMT. ANNIE VARKEY, FOLLOWING EFFECTIVE GROUNDS HAVE BEEN RAISED:- (A) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) ERRED IN DELETING THE ADDITION ON THE BASIS OF THE LETTER DATED 27.10.200 4 ISSUED BY THE CENTRAL EXCISE AUTHORITIES INTIMATING THAT NO CASE IS BEING REGIST ERED AGAINST THE ASSESSEE, OVERLOOKING THE FACT THAT THE DEPARTMENT HAD UNEART HED SPECIFIC FACTS TO PROVE THE EXISTENCE OF UNACCOUNTED MONEY AND THAT THE DEP ARTMENT HAD NOT MERELY DEPENDED ON THE REPORT OF CENTRAL EXCISE AUTHORITIES FOR MAKING THE ADDITION. (B) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) OUGHT TO HAVE UPHELD THE ADDITIONS MADE ON THE BASIS OF UNASSAILABLE LIN K BETWEEN THE ASSESSEE AND THE BENAMI ACCOUNTS. 10. ON A CAREFUL CONSIDERATION OF THE VARIOUS GRO UNDS RAISED BY THE ASSESSEES AS WELL AS THE REVENUE, IN OUR VIEW, THEY GIVE RISE TO THE FOLLOWING ISSUES:- (A) WHETHER THERE IS ANY LINK BETWEEN THE ASSESSEE S HEREIN AND THE THREE BANK ACCOUNTS FOUND IN THE NAME OF M/S P.T.SUNNY, P.T.JO SE AND P.K.BABU, BABU STORES. (B) IF THE ANSWER TO QUESTION (A) IS YES, CAN IT BE SAID THAT THE DEPOSITS FOUND IN THE SAID BANK ACCOUNTS REPRESENT UNACCOUNTED SAL ES OF THE ASSESSEES HEREIN. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 10 (C) IF THE ANSWER TO QUESTION (B) IS YES, IS IT C ORRECT TO TREAT THE DEPOSITS AS THE UNACCOUNTED SALES OF M/S TOLIN RUBBER (P) LTD ? (D) IF THE ANSWER TO QUESTION (C) IS NO, THEN WHO SHOULD BE ASSESSED FOR THE SAID UNACCOUNTED SALES. 11. WITH REGARD TO THE FIRST QUESTION (A) STATE D IN PARAGRAPH 10, SUPRA, IT IS THE CONTENTION OF THE LD SENIOR COUNSEL FOR THE ASSESSE E SHRI JAYASANKARAN NAMBIAR THAT THE DEPARTMENT HAS FAILED TO BRING ON RECORD ANY RE LIABLE EVIDENCE TO SUBSTANTIATE THAT THE AMOUNTS FOUND DEPOSITED IN THE THREE BANK ACCOU NTS OF SHRI P.T.SUNNY, SHRI P.T.JOSE AND SRI P.K.BABU, BABU STORES MAINTAINED W ITH THE SBI PERTAIN TO THE ASSESSEES HEREIN. ACCORDING TO THE LD SENIOR COUNSE L, THE DEPARTMENT HAS DRAWN CONCLUSIONS ONLY ON SUSPICIONS AND INFERENCES. HE FURTHER SUBMITTED THAT IT IS TRITE LAW THAT, IN TAXATION, THE BURDEN OF PROOF IS ALWAYS ON THE DEPARTMENT TO ESTABLISH THAT AN AMOUNT IS INCOME OF THE ASSESSEE LIABLE TO TAXATI ON. HE SUBMITTED THAT SOME OF THE DEALERS FROM WHOM THE EXCISE OFFICIALS MADE ENQUIRIE S HAVE RETRACTED DURING THE COURSE OF CROSS EXAMINATION AND HENCE THE DEPARTMENT CANNO T PLACE RELIANCE ON THEIR STATEMENTS. THE LD A.R ALSO POINTED OUT THAT SHRI JOJO JOSEPH, WHO IS ALLEGED TO HAVE OPERATED THE THREE BANK ACCOUNTS, HAVE LATER CONFIR MED THAT HE HAS ACTED AS THE AGENT OF THE SAID THREE ACCOUNT HOLDERS AND HE HAS ALSO D ECLARED THE SERVICE CHARGES RECEIVED FROM THEM IN HIS RETURN OF INCOME. HE FURTHER SUBM ITTED THAT THE THREE PERSONS ARE REAL PERSONS AND THEY ARE DEALERS IN TYRE TREADS. HE FU RTHER POINTED OUT THAT THE DEALERS HAVE CONFIRMED THAT THE PRODUCTS SUPPLIED BY THESE THREE PERSONS DID NOT HAVE EMBOSSMENT OF TOLIN IN THE PRODUCTS. HE FURTHER P OINTED OUT THAT THE LD CIT(A), WHO HEARD THE CASES OF M/S TOLIN RUBBERS (P) LTD FOR TH E ASSESSMENT YEAR 2002-03, HAS HELD THAT THE EVIDENCES COLLECTED BY THE DEPARTMENT DO N OT SUBSTANTIATE THE ADDITION MADE IN THAT YEAR AND ACCORDINGLY DELETED THE ADDITION. HE FURTHER SUBMITTED THAT THE PROTECTIVE ASSESSMENTS WERE MADE FOR THE SAME AMOUN TS OF INCOME IN THE HANDS OF FOUR ASSESSEES VIZ., SHRI K.P.VARKEY, SHRI K.V.TOLI N, SMT. ANNIE VARKEY AND M/S TOJA TYRE AND TREADS (P) LTD. IN THE APPEALS FILED BY T HESE ASSESSEES, THE LD CIT(A) HELD TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 11 THAT THE EVIDENCES COLLECTED BY THE DEPARTMENT ARE INCOMPLETE AND FRACTURED AND ACCORDINGLY HE HAS DELETED THE ADDITIONS. HE FURTH ER SUBMITTED THAT THE DEPARTMENT HAS ACCEPTED THE DECISION OF LD CIT(A) IN THE CASE OF M /S TOJA TYRE AND TREADS P LTD AND DID NOT PREFER APPEAL BEFORE THE TRIBUNAL. 12. ON THE CONTRARY, THE LD D.R STRONGLY DEFEND ED THE ORDERS PASSED BY LD CIT(A) IN FAVOUR OF THE DEPARTMENT AND ALSO THAT OF THE AO. THE LD D.R PARTICULARLY POINTED OUT THAT THE ENQUIRIES CONDUCTED WITH THE DEALERS HAS C LEARLY REVEALED THE FACT THAT THE UNACCOUNTED SALES PROCEEDS WERE SENT BY WAY OF DEMA ND DRAFTS BY THOSE DEALERS AND THE SAID DEMAND DRAFTS WERE FOUND DEPOSITED IN THE THREE BANK ACCOUNTS CITED ABOVE. THE LD D.R FURTHER SUBMITTED THAT SHRI JOJO JOSEPH, WHO HAS OPERATED THE THREE BANK ACCOUNTS, HAS GIVEN CONTRADICTORY STATEMENTS TO SUI T HIS CONVENIENCE AND HENCE FULL RELIANCE COULD NOT BE PLACED ON HIS STATEMENT. THE EFFORT MADE BY THE DEPARTMENT TO LOCATE THE ACCOUNT HOLDERS OF THE IMPUGNED BANK ACC OUNTS FAILED AND HENCE THE AO HAS COME TO THE CONCLUSION THAT THOSE ACCOUNTS HAVE BEE N OPENED IN THE NAME OF FICTITIOUS PERSONS. THE LD D.R CONTENDED THAT, EVEN FOR A MOM ENT, IF IT IS ASSUMED THAT THE THREE PERSONS DO REALLY EXIST, IT WILL NOT MAKE ANY DIFFE RENCE, SINCE THE FACT THAT THE UNACCOUNTED SALE PROCEEDS WERE FOUND DEPOSITED IN T HOSE BANK ACCOUNTS HAS NOT BEEN DISPROVED. THE LD D.R POINTED OUT THAT THE ASSESSE E ALSO DID NOT TAKE ANY STEPS TO PRODUCE THOSE THREE PERSONS, BUT INSTEAD FINDING FA ULT WITH THE CONCLUSIONS REACHED BY THE DEPARTMENT. THOUGH IT IS CLAIMED THAT THE THREE PERSONS ARE THE DEALERS OF TYRE TREADS, NO MATERIAL WAS PLACED TO SUPPORT THE SAID CLAIM AND HENCE IT IS AN AFTER THOUGHT. HE FURTHER POINTED OUT THAT THE DEALERS, FROM WHOM THE EXCISE OFFICIALS MADE ENQUIRIES, HAVE CATEGORICALLY POINTED OUT THE LINK BETWEEN THESE THREE ACCOUNTS AND THE TOLIN GROUP. THE RETRACTION BY SOME OF THE DEALERS IS ONLY AN AFTERTHOUGHT, WHICH IS NOT SUPPORTED BY ANY TANGIBLE MATERIALS AND SUCH RETRAC TION CAN BE IGNORED IN THE INCOME TAX PROCEEDINGS. HE ALSO POINTED OUT THAT THE CL AIM OF RECEIPT OF SERVICE CHARGES FROM THE THREE ACCOUNT HOLDERS BY JOJO JOSEPH IS ALSO AN AFTERTHOUGHT AND THE SAID CLAIM IS NOT SUBSTANTIATED BY HIM BY PRODUCING THE THREE PER SONS BEFORE THE DEPARTMENT. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 12 13. WE HAVE HEARD THE RIVAL CONTENTIONS. THE M AIN CONTENTION OF THE LD COUNSEL FOR THE ASSESSEE IS THAT THE EVIDENCES OR MATERIALS ON RECORD ARE NOT SUFFICIENT TO PROVE THE NEXUS BETWEEN THE ASSESSEES HEREIN AND THE IMPUGNED THREE BANK ACCOUNTS. WE ALSO NOTICE THAT THE LD CIT(A) HAS ALSO ACCEPTED THE SAI D VIEW WHILE DECIDING THE APPEALS IN THE CASE OF TOJA TYRE AND TREADS LTD., SHRI K.P.VAR KEY, SHRI K.V.TOLIN, SMT. ANNIE VARKEY. IN THE CASE OF APPEAL FILED BY M/S TOLIN R UBBERS (P) LTD BEFORE HIM FOR THE ASSESSMENT YEAR 2002-03, THE LD CIT(A) HAS OBSERVED THAT THE AO HAS FAILED TO PROVE TO THE HILT THE ALLEGED NEXUS BETWEEN THE ASSESSEES AND THE THREE BANK ACCOUNTS. 14. NOW, AN IMPORTANT QUESTION THAT ARISES IS HOW FAR THE PROVISIONS OF INDIAN EVIDENCE ACT ARE RELEVANT FOR THE PROCEEDINGS DONE UNDER THE INCOME TAX ACT. THE DELHI BENCH OF THE ITAT, IN THE CASE OF SHRI JAI KA RAN SHARMA IN ITA 2940/DEL/11 & PAGE 50 OF 66 ITA 2812/DEL/2011, HAS DISCUSSED RELE VANCE OF INDIAN EVIDENCE ACT IN THE INCOME TAX PROCEEDINGS AS UNDER IN ITS ORDER DA TED 20-07-2012:- 8.7. IT IS TRITE LAW THAT EVIDENCE ACT IS NOT STRIC TLY APPLICABLE TO THE INCOME TAX PROCEEDINGS AS THE PROCEEDINGS BEING QUASI JUDICIAL PROCEEDINGS AS OPPOSED TO JUDICIAL PROCEEDINGS, THE A.O. NO DOUBT IS NOT FETT ERED BY TECHNICAL RULES OF EVIDENCE, HOWEVER LIKE ANY OTHER JUDICIAL PROCEEDIN GS EVEN IN THE INCOME TAX PROCEEDINGS THE ISSUES ARE DECIDED ON THE BASIS OF EVIDENCES. 8.8. THE LAW OF EVIDENCE GOVERNS THE MEANS AND THE MANNER IN WHICH A PARTY MAY SUBSTANTIATE HIS OWN CASE OR REFUTE THAT OF THE OPPONENTS. EVALUATION OF EVIDENCE IS THE MEASUREMENT OR THE DETERMINATION OF ITS PROBATIC VALUE. IN JUDICIAL PROCEEDINGS THE ACCURATE MEASUREMENT OF TH E EVIDENTIAL VALUE OF FACTS IS A CONDITION AND AN ENDEAVOUR TOWARDS THE GOAL OF TH E DISCOVERY OF TRUTH. 8.9. EVIDENCES IN INCOME TAX PROCEEDINGS LIKE JUDICI AL PROCEEDINGS INCLUDE BOTH ORAL AND DOCUMENTARY EVIDENCES. ORAL EVIDENCES, INT ER ALIA, INCLUDE STATEMENTS WHICH ARE MADE BEFORE THE INCOME TAX AUTHORITY IN R ELATION TO MATTER OF INQUIRY AND MAY INCLUDE EXAMINATION OF THE ASSESSEE HIMSELF . DOCUMENTARY EVIDENCES INCLUDE ALL DOCUMENTS PRODUCED BEFORE THE INCOME TA X AUTHORITY FOR HIS VERIFICATION/INSPECTION. ORAL EVIDENCES MAY INCLUDE ADMISSIONS MADE BY A PARTY. ADMISSION MADE BY A PARTY IF USED ADVERSELY AGAINST ANOTHER PERSON HAS, AS PER SETTLED LEGAL PRINCIPLES, TO BE CONFRONTED TO THE P ARTY WHO IS ADVERSELY AFFECTED AND NEEDS NO CASE LAW TO BE REFERRED TO HOLD THAT O PPORTUNITY TO CROSS EXAMINE THE PARTY IS NECESSARILY TO BE PROVIDED. THOUGH IN REFERENCE TO CRIMINAL TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 13 PROCEEDINGS, CONFESSION IS A FORM OF ADMISSION CONS ISTING OF DIRECT ACKNOWLEDGEMENT OF THE GUILT BUT IN INCOME TAX PROC EEDINGS THERE IS, AS SUCH, NO SUBSTANTIAL DIFFERENCE BETWEEN CONFESSIONS AND ADMI SSIONS. IN CIVIL PROCEEDINGS CONFESSION IS A FORMAL ADMISSION OF SOME ALLEGATION BY THE OTHER SIDE. ADMISSIONS IN THE INCOME TAX PROCEEDINGS ARE STATEMENTS BY A P ARTY OF THE EXISTENCE OF A FACT WHICH IS RELEVANT TO AN ISSUE IN DISPUTE. SECT ION 17 OF THE INDIAN EVIDENCE ACT, 1872 DEFINES ADMISSION AS AN ORAL OR DOCUMENTA RY STATEMENT WHICH SUGGESTS ANY INFERENCE AS TO ANY FACT IN ISSUE OR R ELEVANT FACT. AS PER SECTION 31 OF THE INDIAN EVIDENCE ACT ADMISSIONS ARE NOT CONCLU SIVE PROOF OF THE MATTERS ADMITTED, BUT THEY MAY OPERATE AS ESTOPPEL UNDER TH E PROVISIONS OF THE LAW AS CONTAINED. WHEN SECTION 31 OF THE EVIDENCE ACT SAYS THAT AN ADMISSION IS NOT A CONCLUSIVE PROOF, IT DOES NOT MEAN THAT AN ADMISSIO N IS NOT A SUFFICIENT PROOF WITHOUT CORROBORATION, IT ONLY STATES THE EFFECT OF THE CONCLUSIVENESS OF AN ADMISSION. 8.10. THUS EVEN THOUGH THE INDIAN EVIDENCE ACT IS NO T STRICTLY APPLICABLE TO THE INCOME TAX PROCEEDINGS, HOWEVER, IN THE FACTS OF ST ATEMENTS ON OATH AND RETRACTION OF THE SAME, EVIDENCE ACT NECESSARILY HAS TO BE TAKEN INTO CONSIDERATION. THE JUSTICE SYSTEM IN INDIA HAS VARI OUS INSTANCES WHERE WITNESSES MAY TURN HOSTILE OR UNRELIABLE AND S.154 OF THE IND IAN EVIDENCE ACT, 1872 DOES CONTEMPLATE THE SITUATION WHERE A WITNESS TURNS HOS TILE/ADVERSE OR UNFAVOURABLE. THE ACT PERMITS THE PARTY WHOSE WITNESS BECOMES ADV ERSE OR HOSTILE TO CROSS EXAMINE THE SAID WITNESS. THE POSITION IS NOT SO THAT THE EVIDENCE OF THE WIT NESS ON RECORD BEFORE HE TURNS HOSTILE/ADVERSE IS WASHED -OFF NOR WILL IT BE CORRECT THAT THE ADVERSE EVIDENCE OF THAT HOSTILE WITNESS IS TO BE IGNORED. EVEN IN SITUATIONS WHERE THE WITNESS PROVES AN UNRELIABLE WITNESS, THE PORTION OF THE STATEMENT OR EVIDENCE WHICH IS VERIFIED AND VERIFIABLE THAT PART OF THE TESTIMONY OF THE WITNESS IF FOUND CREDIT WORTHY CAN BE TAKEN COGNIZANCE OF B Y THE COURT. THE APEX COURT IN ITS VARIOUS JUDGEMENTS HAS HELD THAT A DECLARATI ON OF WITNESS TO BE HOSTILE DOES NOT IPSO FACTO REJECT THE EVIDENCE AND IT IS N OW WELL SETTLED THAT THE PORTION OF EVIDENCE BEING ADVANTAGEOUS TO BOTH THE PARTIES MAY BE TAKEN ADVANTAGE OF, BUT THE COURT BEFORE WHOM SUCH A RELIANCE IS PLACED SHALL HAVE TO BE EXTREMELY CAUTIOUS IN SUCH ACCEPTANCE. IT MAY BE WORTH REFERR ING TO THE JUDGEMENT OF THE APEX COURT IN THE CASE OF THE STATE OF UP VS RAMESH PRASAD MISHRA AND ANOTHER, AIR 1992 SC 2766 WHEREIN IT WAS LAID DOWN THAT IT IS EQUALLY SETTLED LAW THAT THE EVIDENCE OF A HOSTILE WITNESS WOULD NOT BE TOTALLY REJECTED IF SPOKEN IN FAVOUR OF THE PROSECUTION OR THE ACCUSED BUT IT CAN BE SUBJEC TED TO SCRUTINY AND THAT PORTION OF EVIDENCE WHICH IS CONSISTENT WITH THE CA SE OF THE PROSECUTION OR THE DEFENCE MAY BE ACCEPTED. 15. THE SAME QUESTION WAS DEALT WITH IN DETAIL BY THE DELHI BENCH OF THE ITAT IN THE CASE OF HERSH WINCHADHA VS. DDIT (2011)(49 DTR 345, 135 TTJ (DELHI) 513, 43 SOT 544) AND FOR THE SAKE OF CONVENIENCE, WE EXTRACT TH E RELEVANT OBSERVATIONS BELOW:- TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 14 NATURE OF INCOME TAX PROCEEDINGS AND POWERS OF AO 6.1 THE DISPUTE BEFORE US CONCERNS THE DETERMINATION OF THE INCOME TAX LIABILITY OF THE ASSESSEE RATHER THAN FIXING ANY CRIMINAL LIA BILITY OR ACCOUNTABILITY OF THE ASSESSEE FOR ANY OTHER LAW OR OBLIGATION. THE ADMIS SIBILITY OF DOCUMENTS, EVIDENCE OR MATERIAL DIFFERS GREATLY IN INCOME TAX PROCEEDINGS AND CRIMINAL PROCEEDINGS RESPECTIVELY. IN CRIMINAL PROCEEDINGS, THE CHARGE IS TO BE PROVED BY THE STATE AGAINST THE ACCUSED, ESTABLISHING IT BEYO ND DOUBT, WHEREAS AS PER THE SETTLED PROPOSITION OF LAW, THE INCOME TAX LIAB ILITY IS ASCERTAINED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, T HE SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT AND PREPONDERANCE OF P ROBABILITIES. 6.2 . THE PROCEEDINGS FOR ASSESSMENT BEFORE THE ASSESSI NG OFFICER HAVE BEEN DESCRIBED AS QUASI-JUDICIAL IN CHARACTER BY HON'BLE SUPREME COURT IN INDIAN & EASTERN NEWSPAPER SOCIETY V. CIT (1979) 119 ITR 996( SC). (I) IN THE CASE OF DHAKESHWARI COTTON MILLS LTD . VS. CIT (1954) 26 ITR 775(SC), THE SUPREME COURT HAS OBSERVED THAT ASSESS MENT PROCEEDINGS ARE PURELY ADMINISTRATIVE. AFTER THE RECEIPT OF THE RET URN ALSO THE ASSESSING OFFICER IS ENTITLED TO MAKE PRIVATE ENQUIRIES TO FIND OUT AS T O WHETHER THERE IS REASON TO SUSPECT THAT THE RETURN IS INCORRECT OR INCOMPLETE. NO OBJECTION CAN BE TAKEN TO SUCH ENQUIRIES MADE BEHIND THE BACK OF THE ASSESSEE AT THAT STAGE, AS THEY ARE ALL ADMINISTRATIVE INQUIRIES. THEY ASSUME A QUASI-J UDICIAL CHARACTER ONLY AFTER THE ISSUANCE OF NOTICES FOR ASSESSMENT. THIS IS SO, BEC AUSE THE ASSESSING OFFICER IS NOT A COURT. SIMILAR FINDINGS HAVE BEEN GIVEN IN OF FICIAL LIQUIDATOR & LIQUIDATOR OF THE COLABA LAND & MILLS CO. LTD. VS. DESHPANDE (VM) 1972 83 ITR 685 (SC). (II) IN MAHINDRA & MAHINDRA LTD. V. UNION OF INDIA AIR 1979 SC 798 IT HAS BEEN HELD THAT THOUGH THE AO HAS THE SAME POWERS AS ARE VESTED IN A COURT FOR THE LIMITED PURPOSES MENTIONED IN SECTION 131, THE PROCEEDINGS BEFORE HIM ARE NOT STRICTLY JUDICIAL PROCEEDINGS THOUGH THEY ARE D EEMED TO BE SUCH FOR LIMITED PURPOSES. (III) THE HON'BLE DELHI HIGH COURT IN CIT (ADDL ) V. JAY ENGINEERING WORKS LTD. (1978) 113 ITR 389 (DEL.) HELD THAT THE ASSESSING OFFICER HAS, NO DOUBT, TO HEAR 'EVIDENCE', BUT SUCH EVIDENCE MAY CONSIST OF M ATERIAL WHICH WOULD BE WHOLLY INADMISSIBLE IN A COURT OF LAW. (IV) IN VIMAL CHANDRA GOLECHA V. ITO (1982) 134 ITR 119 (RA J), SECONDARY EVIDENCE IN THE FORM OF PHOTO COPIES RECEIVED FROM THE INDIAN CONSULATE WAS HELD TO BE MATERIAL ON RECORD. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 15 (V) THE HON'BLE SUPREME COURT IN CIT V. EAST COA ST COMMERCIAL CO. LTD. (1967) 63 ITR 449(SC), HELD THAT EVEN INFORMATION C ONTAINED IN SOME JUDGMENT OR ADMISSIONS BEFORE A COMMISSION'S PROCEEDINGS, BE FORE THEY WERE DECLARED ULTRA VIRUS, WERE ALSO TO BE TREATED AS MATERIAL AV AILABLE ON RECORD. (VI) IN THE CASE OF BAGHAT HALWAI, IN RE (1928) 3 ITC 48 (ALL) IT HAS BEEN HELD THAT AOS PROCEEDINGS ARE, TO SOME EXTENT, IN THE NA TURE OF A PRIVATE INQUISITION; THEY ARE CONFIDENTIAL AND THEY ARE NOT OPEN TO THE PUBLIC. TO SOME EXTENT, HE IS A PARTY AND A JUDGE IN HIS OWN CAUSE. (VII) THE HON'BLE SUPREME COURT IN GADGIL (SS) V LAL & CO. (1964) 53 ITR 231 (SC), HELD THAT THE AO IS, NO DOUBT, AN AUTHORITY A PPOINTED BY THE STATE TO EXERCISE STATUTORY POWERS TO ASCERTAIN THE INCOME O F A SUBJECT AND THE TAX PAYABLE BY HIM TO THE STATE, BUT HIS POSITION CANNO T BE EQUATED TO THAT OF A JUDGE OR A COURT DECIDING A 'LIS' BETWEEN A CITIZEN AND THE STATE. HE IS NOT BOUND TO LEAD 'EVIDENCE' ON HIS OWN ACCOUNT WITH A VIEW T O REBUTTING THE EVIDENCE OF THE ASSESSEE. (VIII) IN CIT V. METAL PRODUCTS OF INDIA (1984) 150 ITR 714 ( P&H), IT WAS HELD THAT THE AO MAY GATHER INFORMATION IN ANY MANNER HE LIKES, BEHIND THE BACK OF THE ASSESSEE AND UTILIZE THE SAME AGAINST THE ASSES SEE, EVEN IF IT DOES NOT, IN ALL RESPECTS SATISFY THE REQUIREMENTS OF THE INDIAN EVID ENCE ACT. WHAT IS NECESSARY IS THAT HE SHOULD HAVE MATERIAL UPON WHICH TO BASE THE ASSESSMENT; 'MATERIAL' AS DISTINGUISHED FROM 'EVIDENCE' WHICH INCLUDES DIR ECT AND CIRCUMSTANTIAL EVIDENCE. (IX) IN GOPINATH NAIK V. CIT (1936) 4 ITR I (AL L.), THE HON'BLE ALLAHBAD HIGH COURT HELD THAT THE VERY NATURE OF THE PROCEEDINGS FOR ASSESSING THE INCOME TAX LIABILITY, NECESSITATES THE USE OF SUCH MEDIA AS TH E AO CHOOSES FOR COLLECTING INFORMATION WHICH HE MAY NOT LIKE TO DISCLOSE TO TH E ASSESSEE AND HE WOULD BE PERFECTLY WITHIN HIS RIGHTS TO REFUSE TO DISCLOSE T O THE ASSESSEE THE SOURCE OF HIS INFORMATION AND THE NAME OF THE INFORMANT. (X) IN DINSHAW DARABSHAW SHROFF V. CIT (1943) 1 1 ITR 172 (BOM.), THE HON'BLE BOMBAY HIGH COURT HELD THAT ALTHOUGH AN ASS ESSING OFFICER MAKING AN ASSESSMENT IS NOT STRICTLY ACTING AS A COURT OF LAW , IT IS CLEAR FROM SECTION 131, THAT HE IS ACTING IN QUASI-JUDICIAL CAPACITY, AND H E OUGHT TO CONFORM TO THE MORE ELEMENTARY RULES OF JUDICIAL PROCEDURE, AND IN PART ICULAR TO CONDUCT THE CASE HIMSELF, AND NOT ALLOW SOMEBODY ELSE, EVEN HIS SUPE RIOR OFFICER, TO INTERFERE IN THE CONDUCT OF THE CASE. IN OTHER WORDS, THE AUTHOR ITIES ACTING UNDER THE TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 16 INCOME-TAX ACT HAVE TO ACT JUDICIALLY AND ONE OF TH E REQUIREMENTS OF JUDICIAL ACTION IS TO GIVE A FAIR HEARING TO A PERSON BEFORE DECIDING AGAINST HIM. (XI) IN THE CASE OF S.S. GADGIL V. LAL & CO. (1 964) 53 ITR 231 (SC) HONIBLE SUPREME COURT HELD THAT PROCEEDINGS FOR ASSESSMENT IS NOT A SUIT FOR ADJUDICATION OF A CIVIL DISPUTE. THE ARGUMENT THAT INCOME-TAX PROCEEDING IS IN THE NATURE OF A JUDICIAL PROCEEDING BETWEEN THE CONTESTING PARTIES, IS A MATTER WHICH IS NOT CAPABLE OF EVEN A PLAUSIBLE A RGUMENT. THE INCOME- TAX AUTHORITIES WHO HAVE POWER TO ASSESS AND RECOVE R TAX ARE NOT ACTING AS JUDGES DECIDING LITIGATION BETWEEN THE CITIZEN AND THE STATE: THEY ARE ADMINISTRATIVE AUTHORITIES WHOSE PROCEEDINGS ARE RE GULATED BY STATUTE, BUT WHOSE FUNCTION IS TO ESTIMATE THE INCOME OF THE TAX PAYER AND TO ASSESS HIM TO TAX ON THE BASIS OF THAT ESTIMATE. TAX LEGISLATION NECESSITATES THE SETTING UP OF MACHINERY TO ASCERTAIN THE TAXABLE INCOME, AND TO A SSESS TAX ON THE INCOME, BUT THAT DOES NOT IMPRESS THE PROCEEDING WITH THE CHARA CTER OF AN ACTION BETWEEN THE CITIZEN AND THE STATE. (XII) IT HAS BEEN HELD BY THE HON'BLE ALLAHABAD HIGH COURT IN ITO V. JOTI PRASAD AGARWAL (1962) 44 ITR 574 (ALL.) THAT PROCEEDINGS F OR ASSESSMENT ARE NOT PROCEEDINGS RELATING TO A CIVIL RIGHTS. THE LIABILI TY TO INCOME-TAX IS NOT A CIVIL RIGHT ENFORCEABLE AS SUCH IN COURTS OF LAW. SUCH PROCEEDI NGS ARE OF THE NATURE OF REVENUE PROCEEDINGS 6.3 . RULES OF EVIDENCE DO NOT GOVERN THE INCOME TAX PR OCEEDINGS, AS THE PROCEEDINGS UNDER THE INCOME-TAX ACT ARE NOT JUDICI AL PROCEEDINGS IN THE SENSE IN WHICH THE PHRASE `JUDICIAL PROCEEDINGS' IS ORDIN ARILY USED. THE ASSESSING OFFICER IS NOT FETTERED OR BOUND BY TECHNICAL RULES ABOUT EVIDENCE CONTAINED IN THE INDIAN EVIDENCE ACT, AND HE IS ENTITLED TO ACT ON MATERIAL WHICH MAY NOT BE ACCEPTED AS EVIDENCE IN A COURT OF LAW . 6.4 . THE HON'BLE SUPREME COURT IN THE CASE OF CHUHANNA L V. CIT (1988) 172 ITR 250 (SC), IN THIS CONTEXT HELD THAT - WHAT IS MEANT BY SAYING THAT THE EVIDENCE ACT DOES NOT APPLY TO PROCEEDINGS UNDER THE INCOME- TAX ACT IS THAT THE RIGOR OF THE RULES OF EVIDENCE CONTAINED IN THE EVIDENCE ACT ARE NOT APPLICABLE, BUT THAT DOES NOT MEAN THAT WHEN THE TAXING AUTHORITIES ARE DESIROUS OF INVOKING THE PRINCIPLES OF THE ACT IN PROCEEDINGS BEFORE THEM, T HEY ARE PREVENTED FROM DOING SO. ALL THAT IS REQUIRED IS THAT IF THEY WANT TO US E ANY MATERIAL COLLECTED BY THEM WHICH IS ADVERSE TO THE ASSESSEE, THEN THE ASSESSEE MUST BE GIVEN A CHANCE TO MAKE HIS SUBMISSIONS THEREON. THE PRINCIPLES OF NAT URAL JUSTICE ARE VIOLATED IF AN ADVERSE ORDER IS MADE ON AN ASSESSEE ON THE BASIS O F THE MATERIAL NOT BROUGHT TO HIS NOTICE. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 17 SUSPICIOUS AND DIBIOUS TRASANCTION HOW TO BE DEALT WITH: 6.11 . THE TAX LIABILITY IN THE CASES OF SUSPICIOUS TRAN SACTIONS IS TO BE ASSESSED ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD, SURR OUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATION/ EVIDENCE AVAILABLE WITH AO. 6.12 . IN THE CASE OF SUMATI DAYAL V. CIT (1995) 80 TAXM AN 89 (SC), THE HON'BLE SUPREME COURT HAS DEALT WITH THE RELEVANCE OF HUMAN CONDUCT, PREPONDERANCE OF PROBABILITIES AND SURROUNDING, CIRCUMSTANCE, BUR DEN OF PROOF AND ITS SHIFTING ON THE DEPARTMENT IN CASES OF SUSPICIOUS CIRCUMSTAN CES, BY FOLLOWING OBSERVATIONS: . . IT IS, NO DOUBT, TRUE THAT IN ALL CASES IN WHI CH A RECEIPT IS SOUGHT TO BE TAXED AS INCOME, THE BURDEN LIES ON THE DEPARTME NT TO PROVE THAT IT IS WITHIN THE TAXING, PROVISION AND IF A RECEIPT IS IN THE NATURE OF INCOME, THE BURDEN OF PROVING THAT IT IS NOT TAXABLE BECAUS E IT FALLS WITHIN EXEMPTION PROVIDED BY THE ACT LIES UPON THE ASSESSE E. BUT IN VIEW OF SECTION 68, WHERE ANY SUM IS FOUND CREDITED IN THE BOOKS OF THE ASSESSEE FOR ANY PREVIOUS YEAR, THE SAME MAY BE CHA RGED TO INCOME- TAX AS THE INCOME OF THE ASSESSEE OF THAT PREVIOUS YEAR IF THE EXPLANATION OFFERED BY THE ASSESSEE ABOUT THE NATUR E AND SOURCE THEREOF IS, IN THE OPINION OF THE ASSESSING OFFICER , NOT SATISFACTORY. IN SUCH CASE THERE IS PRIMA FACIE EVIDENCE AGAINST THE ASSESSEE, VIZ., THE RECEIPT OF MONEY, AND IF HE FAILS TO REBUT THE SAME , THE SAID EVIDENCE BEING UNREBUTTED, CAN BE USED AGAINST HIM BY HOLDIN G THAT IT IS A RECEIPT OF AN INCOME NATURE. WHILE CONSIDERING THE EXPLANATION OF THE ASSESSEE, THE DEPARTMENT CANNOT, HOWEVER, ACT UNREA SONABLY. HAVING REGARD TO THE CONDUCT OF THE APPELLANT AS D ISCLOSED IN HER SWORN STATEMENT AS WELL AS OTHER MATERIAL ON THE RE CORD, AN INFERENCE COULD REASONABLY BE DRAWN THAT THE WINNING, TICKETS WERE PURCHASED BY THE APPELLANT AFTER THE EVENT. THE MAJORITY OPINION AFTER CONSIDERING SURROUNDING CIRCUMSTANCES AND APPLYING THE TEST OF HUMAN PROBABILITIES HAD RIGHTLY CONCLUDED THAT THE APPELLANT'S CLAIM AB OUT THE AMOUNT BEING HER WINNING FROM RACES, WAS NOT GENUINE. IT COULD N OT BE SAID THAT THE EXPLANATION OFFERED BY THE APPELLANT IN RESPECT OF THE SAID AMOUNTS HAD BEEN REJECTED UNREASONABLY AND THAT THE FINDING THA T THE SAID AMOUNTS WERE INCOME OF THE APPELLANT FROM OTHER SOURCES WAS NOT BASED ON EVIDENCE.' TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 18 CIRCUMSTANTIAL EVIDENCE HOW TO BE USED 6.13. IT WOULD, AT THIS STAGE, BE RELEVANT TO CONSIDER T HE ADMISSIBILITY AND USE OF CIRCUMSTANTIAL EVIDENCE IN INCOME TAX PROCEEDINGS. CIRCUMSTANTIAL EVIDENCE IS EVIDENCE OF THE CIRCUMSTANCES, AS OPPOSED TO DIRECT EVIDENCE. IT MAY CONSIST OF EVIDENCE AFFORDED BY THE BEARING ON THE FACT TO BE PROVED, OF OTHER AND SUBSIDIARY FACTS, WHICH ARE RELIED ON AS INCONSISTE NT WITH ANY RESULT OTHER THAN THE TRUTH OF THE PRINCIPAL FACT. IT IS EVIDENCE OF VARIOUS FACTS, OTHER THAN THE FACT IN ISSUE WHICH ARE SO ASSOCIATED WITH THE FACT IN I SSUE, THAT TAKEN TOGETHER, THEY FORM A CHAIN OF CIRCUMSTANCES LEADING TO AN INFEREN CE OR PRESUMPTION OF THE EXISTENCE OF THE PRINCIPAL FACT. IN THE APPRECIATION OF CIRCUMSTANTIAL EVIDENCE, THE RELEVANT ASPECTS, AS LAID DOWN FROM TIME TO TIME ARE (1) THE CIRCUMSTANCES ALLEGED MUST BE ESTABLISHED BY SU CH EVIDENCE, AS IN THE CASE OF OTHER EVIDENCE ; (2) THE CIRCUMSTANCES PROVED MUST BE OF A CONCLUSIVE NA TURE AND NOT TOTALLY INCONSISTENT WITH THE CIRCUMSTANCES OR CONT RADICTORY TO OTHER EVIDENCE. (3) ALTHOUGH THERE SHOULD BE NO MISSING LINKS IN THE CA SE, YET IT IS NOT ESSENTIAL THAT EVERY ONE OF THE LINKS MUST APPEAR O N THE SURFACE OF THE EVIDENCE ADDUCED ; SOME OF THESE LINKS MAY HAVE TO BE INFERRED FROM THE PROVED FACTS ; (4) IN DRAWING THOSE INFERENCES OR PRESUMPTIONS, THE AU THORITIES MUST HAVE REGARD TO THE COMMON COURSE OF NATURAL EVENTS, TO HUMAN CONDUCT AND THEIR RELATION TO THE FACTS OF THE PART ICULAR CASE. (5)THE CIRCUMSTANTIAL EVIDENCE CAN, WITH EQUAL FACI LITY, BE RESORTED TO IN PROOF OF A FACT IN ISSUE WHICH ARISES IN PROCEEDING S FOR THE ASSESSMENT OF TAXES BOTH DIRECT AND INDIRECT, CIRCUMSTANTIAL EVID ENCE CAN BE MADE USE OF IN ORDER TO PROVE OR DISPROVE A FACT ALLEGED OR IN ISSUE. IN FACT, IN WHATEVER PROCEEDINGS OR CONTEXT INFERENCES ARE REQUIRED TO B E DRAWN FROM THE EVIDENCE OR MATERIALS AVAILABLE OR LACKING, CIRCUMS TANTIAL EVIDENCE HAS ITS PLACE TO ASSIST THE PROCESS OF ARRIVING AT THE TRUT H.' 6.14. IT WILL ALSO BE WORTHWHILE TO CONSIDER THE NATURE OF BURDEN OF PROOF ON THE AO FOR PROVING, A FACT OR CIRCUMSTANCE IN THE INCOM E TAX PROCEEDINGS. THE QUESTIONS RAISED ABOUT THE TAX LIABILITY BY THE AO ARE TO BE ANSWERED BY THE ASSESSEE BY FURNISHING REASONABLE AND PLAUSIBLE EXPLANATIONS. IF ASSESSEE IS NOT FORTHCOMING WITH PROPER OR COMPLETE FACTS OR HIS STATEMENT OR EXPLANATION IS CONTRADICTORY, DRAWING OF SUITABLE INFERENCES AND ESTIMATION OF FACTS IS INEVITABLE. COURTS GENERALLY WILL NOT INTERFERE WITH SUCH ESTIMATE OF FACTS, UNLESS THE I NFERENCES OR ESTIMATES ARE PERVERSE OR CAPRICIOUS. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 19 6.15 . THE ASSESSEE'S TECHNICAL CONTENTIONS ABOUT ADMISS IBILITY AND RELIANCE ON MATERIAL AVAILABLE ON THE AO'S RECORD ARE IN THE NA TURE OF CONTENTIONS CHALLENGING CRIMINAL OR CIVIL LIABILITIES IN A COURT OF LAW. WE ARE DEALING , WITH A PROCESS OF ADJUDICATION OF ASSESSES TAX LIABILITY I.E. ASSESSM ENT UNDER INCOME TAX ACT RATHER THAN CONDUCTING, CRIMINAL OR CIVIL COURT PROCEEDING S. AS HELD BY THE HON'BLE SUPREME COURT IN THE CASE OF S.S. GADGIL (SUPRA) NO 'LIS' IS INVOLVED IN ADJUDICATION OF TAX LIABILITY. THE ASSESSEE'S CONTE NTION THAT THERE WAS NO NEW MATERIAL BEFORE THE AO AFTER THE CIT(A)'S SETTING A SIDE ORDER CANNOT BE ACCEPTED. NEW INFORMATION AND MATERIAL DID INDEED COME ON REC ORD. IN OUR VIEW, IN A SENSITIVE MATTER LIKE THIS, EVEN A SINGLE CLUE OR R EVELATION CAN BE OF GREAT IMPORTANCE. TO REVERSE THE ORDER OF THE AO ON THIS TECHNICAL PLEA WILL AMOUNT TO TAKING A LOPSIDED VIEW OF THE PROCEEDINGS. BESIDES, THE JPC HAS UNDERLINED THE IMPORTANCE OF REPORTS OF INVESTIGATION AGENCIES LIK E CBI, DRI, ED WHOSE WERE IN THE OFFING, AS THE RELEVANT INVESTIGATIONS WERE IN PROCESS. IN VIEW OF THESE OBSERVATIONS, WE DO NOT ACCEDE TO THE ASSESSEE'S PL EAS IN THIS BEHALF. THE ASSESSEE'S CONTENTIONS AND OBJECTIONS IN THIS BEHAL F THAT THE MATERIAL AVAILABLE ON RECORD WAS NOT ADMISSIBLE AS EVIDENCE AND THAT IT C ANNOT BE RELIED ON BY THE AO, ARE DEVOID OF ANY MERIT AND ARE REJECTED OUTRIGHT. .. 6.43 . WE ARE CONSCIOUS OF THE FACT THAT THE I.T. DEPTT. WAS CARRYING OUT INVESTIGATIONS IN DIFFICULT CIRCUMSTANCES ASCRIBABL E TO THE SENSITIVE NATURE OF ENQUIRIES, THEIR RAMIFICATION ON NATIONAL POLITICS AND PUBLIC PERCEPTION. IT WAS VERY DIFFICULT TO GET INFORMATION AND DOCUMENTS AND TO E XAMINE CONCERNED LINKS DUE TO THE PREMEDITATED SURREPTITIOUS COVER UP OF TRANSACT IONS AND SMOKESCREEN CORPORATE JUGGLERY. THERE IS NO PRESUMPTION IN LAW THAT THE AO IS SUPPOSED TO DISCHARGE AN IMPOSSIBLE BURDEN TO ASSES S THE TAX LIABILITY BY DIRECT EVIDENCE ONLY AND TO ESTABLISH THE EVASIO N BEYOND DOUBT AS IN CRIMINAL PROCEEDINGS. THIS IS WHY HON'BLE COURTS BY WAY OF A CATENA OF BINDING JUDICIAL PRONOUNCEMENTS, HAVE HELD THAT TAX LIABILITIES CAN BE ASSESSED BY REVENUE AUTHORITIES ON CONSIDERATION OF MATERIAL AV AILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCT, PREPONDER ANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATION/ EVIDENCE AVAIL ABLE ON RECORD. 6.44 . IN SUCH CLANDESTINE OPERATIONS AND TRANSACTIONS , IT IS IMPOSSIBLE TO HAVE DIRECT EVIDENCE OR DEMONSTRATIVE PROOF OF EVERY MOV E. THE INCOME TAX LIABILITY IS TO BE ASSESSED ON THE BASIS OF THE ABO VE PARAMETERS AND WHEN THE WITNESS I.E. THE ASSESSEE IS NOT FORTHCOMI NG WITH PROPER FACTS AND CHOOSES TO BE ELUSIVE AND EVASIVE, THE AO HAS N O CHOICE BUT TO TAKE RECOURSE TO ESTIMATE. THE ONLY CAVEAT IS THAT IT SH OULD BE REASONABLE AND BASED ON MATERIAL AVAILABLE ON RECORD. IT SHOULD NOT BE PERVERSE OR BASED MERELY ON CONJECTURES. IN OUR VIEW, HEREIN TH E AO HAS CONSIDERED THE RELEVANT ASPECTS IN QUITE A REASONABLE AND TENABLE MANNER. IN OUR CONSIDERED TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 20 VIEW ALL THE ABOVE MATERIAL AVAILABLE ON RECORD AND THE FACTS AND CIRCUMSTANCES MAKE IT CLEAR THAT THIS INCOME IS TAXABLE IN THE HA NDS OF THE ASSESSEE. 16. WE SHALL BRIEFLY DISCUSS ABOUT THE FACTS AN D ALSO RESULTS OF INVESTIGATION CARRIED OUT IN THIS CASE IN ORDER TO ANSWER THE QUESTION (A ) STATED IN PARAGRAPH 10, SUPRA. IT IS PERTINENT TO NOTE THAT THE AO HAS TAKEN NOTE OF THE FINDINGS GIVEN BY THE CENTRAL EXCISE OFFICIALS ALSO, SINCE CERTAIN PARTIES DID NOT RESPO ND TO THE NOTICES GIVEN BY THE AO. (I) THE INVESTIGATION CARRIED OUT BY THE CENTRAL EX CISE AUTHORITIES REVEALED THAT THE TOLIN GROUP IS MAINTAINING THREE BANK ACCOUNTS IN THE NAMES OF SHRI P.T.SUNNY, SHRI P.T.JOSE AND SHRI P.K.BABU OF BABU STORES WITH THE STATE BANK OF INDIA, ANGAMALY BRANCH. THESE THREE ACCOUNTS HAVE BEEN OPENED ON THE DATES MENTIONED AGAINST EACH OF THEIR NAME BELOW:- (A) P.T.SUNNY A/C NO. 0100050257 OPENED ON 2 1/3/1990 (B) P.T.JOSE - A/C NO.01090045425 OPENED ON 02/09/1992 (C) P.K.BABU - A/C NO.0150060571 - OPENED O N 05/01/2001 THE ACCOUNT OPENED IN THE NAME OF P.K.BABU WAS HAVI NG A PHOTOGRAPH OF THE ACCOUNT HOLDER AND THE OTHER TWO BANK ACCOUNTS DID NOT HAVE PHOTOGRAPHS OF THE ACCOUNT HOLDERS. HOWEVER, DURING THE COURSE OF INV ESTIGATIONS, IT WAS FOUND THAT THE PHOTOGRAPH ATTACHED WITH THE ACCOUNT OF P.K.BAB U WAS THAT OF SHRI BIJU JOSEPH, BROTHER OF SHRI JOJO JOSEPH. SHRI BIJU JOS EPH ALSO CONFIRMED THAT HIS BROTHER IS ALSO WORKING WITH SHRI K.P.VARKEY IN HIS BUSINESS. (II) IT WAS ALSO NOTICED THAT ABOVE SAID THREE BAN K ACCOUNTS WERE INTRODUCED BY A PERSON NAMED SHRI JOJO JOSEPH, WHO WAS FOUND TO B E THE NEPHEW OF SHRI K.P.VARKEY, ONE OF THE OWNERS OF TOLIN GROUP. (III) ON FURTHER ENQUIRY BY THE AO, IT WAS FOUND T HAT THE ADDRESSES GIVEN FOR OPENING THE THREE BANK ACCOUNTS WERE FOUND TO BE FA LSE. (IV) ALL THE THREE ACCOUNTS WERE FOUND CLOSED A FTER THE DATE OF SEARCH BY THE CENTRAL EXCISE AUTHORITIES. THE AMOUNTS WERE WITHD RAWN BY SHRI JOJO JOSEPH. (V) AS STATED EARLIER, THE BANK ACCOUNT IN THE NAME OF SHRI P.K. BABU HAD THE PHOTOGRAPH OF SHRI BIJU JOSEPH, THE BROTHER OF SHRI JOJO JOSEPH. THE SAID SHRI BIJJU JOSEPH WAS FOUND TO BE WORKING IN THE RICE MI LL OWNED BY SHRI K.P. VARKEY AND FURTHER HE HAS DENIED ANY CONNECTION WITH THE B ANK ACCOUNT MAINTAINED IN THE NAME OF P.K.BABU. SHRI K.P.VARKEY IS THE MATER NAL UNCLE OF SHRI BIJU JOSEPH AND ALSO SHRI JOJO JOSEPH. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 21 (VI) IN THE SWORN STATEMENT TAKEN FROM SHRI JOJ O JOSEPH, HE PLEADED IGNORANCE ABOUT THE PERSON FOUND IN THE PHOTOGRAPH ATTACHED WITH THE BANK ACCOUNT OF SHRI P.K.BABU. HOWEVER, IN THE SUBSEQUE NT PROCEEDINGS, HE CONFIRMED THAT THE PHOTOGRAPH WAS THAT OF HIS BROTH ER SHRI BIJU JOSEPH. (VII) THE TRANSACTIONS IN THE THREE ACCOUNTS WE RE FOUND TO BE CARRIED OUT BY THE FOLLOWING THREE PERSONS:- (A) SHRI JOJO JOSEPH (B) SHRI T.S. BASIL, WHO WAS ALSO DOING TRANSACTIONS IN THE BANK ACCOUNT BELONGING TO M/S TOJA TYRES AND TREADS (P) LTD. (C) SHRI SREENI P.N, WHO WAS ALSO DOING TRANSACTIONS IN THE BANK ACCOUNT BELONGING TO M/S TOJA TYRES AND M/S TOLIN R UBBERS. SHRI JOJO JOSEPH HAD DENIED HIS HANDWRITING IN THE BANK ACCOUNTS MAINTAINED IN THE NAME OF SHRI P.T.SUNNY AND SHRI P.T. JOSE. THE HANDWRITING OF THE ABOVE THREE PERSONS WERE REFERRED TO THE GOVERNMENT EXAM INER OF QUESTIONED DOCUMENTS, WHO CONFIRMED THAT THE SIGNATURES FOUND IN THE BANK ACCOUNTS OF SHRI P.T.SUNNY AND SHRI P.T.JOSE WERE THAT OF SHRI JOJO JOSEPH. HE ALSO CONFIRMED THAT HANDWRITING OF SHRI BASIL T.S AND SH RI SREENI P.N. ARE AVAILABLE IN THE THREE BANK ACCOUNTS AND THE GROUP CONCERNS REFE RRED ABOVE. THOUGH AN OPPORTUNITY TO CROSS EXAMINE THE GOVERNMENT EXAMINE R OF QUESTIONED DOCUMENTS, THE ASSESSEE DID NOT AVAIL THAT OPPORTU NITY. (VIII) THE FOLLOWING DEALERS, WITH WHOM THE CEN TRAL EXCISE AUTHORITIES CONDUCTED ENQUIRIES, CONFIRMED THAT THEY HAVE SENT THE DEMAND DRAFTS TOWARDS THE SALE PROCEEDS TO THE BANK ACCOUNTS MENTIONED AG AINST THEIR RESPECTIVE NAMES:- (A) SHRI T.P.RAJESH D.D SENT IN THE NAME OF SHRI P.T. SUNNY. (B) SHRI N.PRABHAKAR D.D.SENT IN THE NAME OF SHRI P.T .SUNNY. (C) SHRI AMAR KUTTY D.D. SENT IN THE NAME OF SHRI P.T .JOSE. (D) SHRI GURJIT SINGH SOHAL D.D. SENT IN THE NAME OF P.T.SUNNY. (E) SHRI H.OMAR BASHA D.D.SENT IN THE NAME OF P.T.SUN NY (XI) THE ABOVE SAID DEALERS HAVE ALSO STATED AB OUT THE LINK WITH TOLIN GROUP AS UNDER:- (A) SHRI T.P.RAJESH SAID THAT HE USED TO FAX THE COPY O F DEMAND DRAFT AND ALSO HIS REQUIREMENT TO FAX NO. 0484-4631 79, WHICH WAS FOUND TO BE THE FAX BELONGING TO M/S TOLIN RUBB ERS (P) LTD. (B) SHRI N.PRABHAKAR STATED THAT HE HAS VISITED THE FAC TORY OF TOLINS AND ALSO MET MT. TOLIN, WHO TOLD THAT THE GOODS SHA LL BE SUPPLIED ON RECEIPT OF DEMAND DRAFTS. (C) SHRI GURJIT SINGH SOHAL STATED THAT HE PURCHASED DE MAND DRAFTS IN ADVANCE AS PER THE ADVICE OF MR. K.V.TOLIN. (D) SHRI H. OMAR BASHA STATED THAT HE HAS MET SHRI K.V. TOLIN AND SHRI JOJO JOSEPH WAS PRESENT AT THE TIME HIS DISCUS SION WITH SHRI TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 22 K.V.TOLIN. HE FURTHER STATED THAT HE USED TO PLACE ORDERS OVER PHONE EITHER TO SHRI K.V.TOLIN OR TO SHRI JOJO JO SEPH IN PHONE NUMBER 0484-464622 OR IN JOJOS CELL NUMBER 98470-4 2418. HE HAS FURTHER CONFIRMED THAT THE GOODS WERE SENT WITH OUT BILLS. SOME OF THE DEALERS HAVE EXPLAINED ABOUT THE MODUS OPERANDI OF DISPATCHING THE GOODS WITHOUT BILLS. (XII) BEFORE THE AO, SHRI JOJO JOSEPH, SHRI BIJU J OSEPH AND THE BANK MANAGER SHRI VIJAYARAGHAVAN HAVE CONFIRMED THE CONTENTS OF THE STATEMENTS GIVEN BY THEM BEFORE THE CENTRAL EXCISE OFFICIALS. 17. THE VARIOUS FACTS NARRATED ABOVE DO INDICA TE THAT THE DEMAND DRAFTS DEPOSITED IN THE THREE BANK ACCOUNTS RELATE TO THE SALE PROCE EDS OF TOLIN BRAND PRODUCTS. THE FACT THAT SHRI JOJO JOSEPH WAS WORKING FOR THE TOLI N GROUP IS ESTABLISHED BY THE FACT THAT SOME OF THE DEALERS WERE PLACING ORDERS WITH HIM AN D FURTHER HIS BROTHER SHRI BIJU JOSEPH HAS CONFIRMED THAT SHRI JOJO JOSEPH WAS WORK ING WITH SHRI K.P.VARKEY. SOME OF THE DEALERS HAVE CONFIRMED THAT THEY HAVE MET SHRI K.V.TOLIN AND HAVE FURTHER STATED THAT SHRI K.V.TOLIN HAS EXPLAINED THE MODUS OPERAND I OF THE SALE. THE UNDISPUTED FACT REMAINS THAT THE GOODS WERE DISPATCHED FROM ANGAMAL Y RAILWAY STATION, WHICH IS THE NEAREST RAILWAY STATION NEAR THE PLACE KALADI, WHER E THE BUSINESS OPERATIONS OF THE ASSESSEE GROUP IS LOCATED. 18. THE LD COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE BANK ACCOUNTS ARE REQUIRED TO BE OPENED WITH PROPER INTRODUCTION, PHOTOGRAPH A ND ID PROOF AND ACCORDINGLY CONTENDED THAT THE INFERENCE DRAWN BY THE AO THAT T HE BANK ACCOUNTS HAVE BEEN OPENED UNDER FICTITIOUS NAMES IS NOT CORRECT. HO WEVER, WE NOTICE THAT THE DEPARTMENT CONDUCTED DUE ENQUIRIES THROUGH THE INSP ECTOR, BUT COULD NOT LOCATE THE THREE ACCOUNT HOLDERS. THE ASSESSEE HAS ALSO FAILE D TO PRODUCE THEM BEFORE THE TAX AUTHORITIES. HENCE, THE AO WAS CONSTRAINED TO TAKE THE VIEW THAT THE SAID BANK ACCOUNTS HAVE BEEN OPENED UNDER FICTITIOUS NAME. I N THIS REGARD, WE ARE INCLINED TO ACCEPT THE CONTENTIONS OF THE REVENUE. FIRST OF A LL, AS CONTENDED BY LD D.R, IT DOES NOT MAKE ANY DIFFERENCE IN THE FACTS AND CIRCUMSTANCES OF THE CASE IF THE SAID THREE PERSONS ARE FICTITIOUS PERSONS OR LIVE PERSONS, IN VIEW OF THE FACT THAT THE SALE PROCEEDS OF TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 23 UNACCOUNTED SALES WERE FOUND DEPOSITED IN THESE THR EE BANK ACCOUNTS. THE VERY FACT THAT THE BANK ACCOUNTS, WHICH WERE OPENED IN THE YE ARS 1990-1992, DID NOT HAVE PHOTOGRAPH INDICATE THAT THE KNOW YOUR CUSTOMER N ORMS CAME INTO FORCE SUBSEQUENT TO THAT PERIOD. INITIALLY, ONLY PHOTOGRAPH OF THE CUSTOMER WAS ASKED FOR OPENING A BANK ACCOUNT. ONLY IN THE RECENT PAST, THE ID PROOF OF THE CUSTOMER AND PHOTOGRAPH WERE MADE COMPULSORY. 19. SHRI JOJO JOSEPH HAS TAKEN A STAND, OF COURS E VERY LATE, THAT THE THREE BANK ACCOUNT HOLDERS ARE DEALERS IN THE TREAD RUBBER AND HE HAS ACTED AS THEIR AGENT AND GOT SERVICE CHARGES FROM THEM. IT WAS FURTHER SUBMITTE D THAT THE SAID SERVICE CHARGES WERE OFFERED BY HIM IN THE INCOME TAX RETURN FILED BY HI M. HOWEVER, BEFORE US, NO MATERIAL WAS PLACED TO SUPPORT THESE CONTENTIONS. IT IS SEE N THAT SHRI JOJO JOSEPH HAS TAKEN THIS STAND DURING THE COURSE OF CROSS EXAMINATION CONDUC TED BY THE COUNSEL OF THE ASSESSEE IN THE YEAR 2005, I.E., AFTER FOUR YEARS FROM THE S EARCH PERIOD. WE ALSO NOTICE THAT:- (A) NO MATERIAL OR RECORD WAS PRODUCED TO PROVE THA T THE THREE PERSONS ARE THE DEALERS. (B) THE DEALERS OF THE PRODUCTS HAVE SPECIFICALLY STATED THAT THEY HAVE RECEIVED TOLIN BRAND. IF SO, HOW THESE THREE PERSONS COUL D DEAL IN TOLIN BRAND WITHOUT GETTING THE PRODUCTS FROM THE ASSESSEE GROUP. (C) A CONTENTION WAS RAISED THAT THE PRODUCT S UPPLIED BY THESE THREE PERSONS DID NOT HAVE TOLIN BRAND EMBOSSMENT ON IT. WE AR E UNABLE TO UNDERSTAND AS TO HOW THIS CONTENTION HELPS THE CASE OF THE ASSESS EE. THERE COULD BE TWO POSSIBILITIES IN THIS KIND OF SITUATION VIZ., (A) T HE ASSESSEES THEMSELVES COULD HAVE PRODUCED THE PRODUCTS WITHOUT GETTING THE BRAND NAM E EMBOSSED ON THE PRODUCTS. IN THIS KIND OF SITUATION, IT MAKES NO D IFFERENCE, IF THE PRODUCTS CONTAIN THE BRAND NAME OR NOT. (B) THE SECOND SITUATION I S THAT SOMEONE ELSE COULD HAVE PRODUCED THE PRODUCT AND SOLD THEM UNDER TOLI N BRAND NAME. THE SECOND SITUATION COULD NOT BE TRUE BECAUSE:- (I) SHRI JOJO JOSEPH HAS CLAIMED THAT HE HAS RECEI VED SERVICE CHARGES FROM THE THREE PERSONS. IN THAT CASE HOW HE, BEING THE EMPLOYEE OF SHRI K.P.VARKEY, COULD ALLOW SALE OF DUPLICATE BRAND OF THE PRODUCTS OF HIS OWNER. (II) IT IS NOT KNOWN AS TO WHY THE TOLIN GROUP DI D NOT INITIATE CRIMINAL ACTION AGAINST THE THREE PERSONS FOR PRODUCING/MARK ETING DUPLICATE PRODUCT OF THEIR BRAND. IT IS IN THE COMMON KNOWLEDGE OF EVER YBODY THAT A COMPANY TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 24 OWNING WELL ESTABLISHED BRANDS LIKE TOLIN, WILL N OT ALLOW THE PRODUCTION OF DUPLICATE PRODUCTS IN THEIR BRAND NAME. (III)) CERTAIN DEALERS HAVE CONFESSED THAT THEY H AVE MET MR. K.V.TOLIN, ONE OF THE DIRECTORS BEFORE GETTING SUPPLY OF THE P RODUCTS. (D) WE HAVE CAREFULLY READ THE STATEMENTS GIVEN BY SHRI JOJO JOSEPH. WE COMPLETELY AGREE WITH THE CONTENTIONS OF THE LD D.R THAT HE HAS GIVEN ANSWERS TO SUIT HIS CONVENIENCE. SOME INSTANCES ARE THAT ( I) FIRST HE PLEADED IGNORANCE ABOUT HIS BROTHERS PHOTOGRAPH, BUT LATER CONFIRMED THE PHOTOGRAPH. (II) HE DENIED HIS SIGNATURES IN THE BANK ACCOUNTS OF THE T HREE PERSONS, BUT IT WAS PROVED TO BE FALSE BY THE GOVERNMENT EXAMINER (III) HE DENIED ANY LINK WITH TOLIN GROUP, BUT HE HIMSELF HAS MENTIONED IN THE LO AN APPLICATION GIVEN TO THE BANK THAT HE IS WORKING AS MANAGER WITH TOLIN GROUP . (IV) HIS BROTHER HAS CONFIRMED THAT SHRI JOJO JOSEPH IS WORKING WITH THE ASSESSEE GROUP. 20. THE ASSESSEE IS ALSO HEAVILY RELYING ON THE S TATEMENTS GIVEN BY SHRI JOJO JOSEPH AND SOME OF THE DEALERS DURING THE CROSS EXAMINATIO N CARRIED OUT BY THE COUNSEL OF THE ASSESSEE IN 2005, I.E., ABOUT FOUR YEARS AFTER THE SEARCH BY THE EXCISE OFFICIALS. IN THE CROSS EXAMINATION, MANY PERSONS RETRACTED THE STATE MENTS MADE BY THEM EARLIER IN THE YEAR 2001. IT IS ALSO PERTINENT TO NOTE THAT THE M ANY DEALERS DID NOT RESPOND TO THE NOTICES ISSUED BY THE AO AND HENCE THE AO WAS CONST RAINED TO PLACE RELIANCE ON THE STATEMENTS GIVEN BY THEM IN THE CENTRAL EXCISE PROCE EDINGS. NOW THE QUESTION THAT ARISES IS WHETHER RETRACTION OF ORIGINAL STATEMENT, THAT TOO AFTER FOUR YEARS, SHALL HAVE ANY EFFECT IN THE INCOME TAX PROCEEDINGS OR NOT?. 21. THE SETTLED POSITION OF LAW ON THE EFFECT O F RETRACTION WAS DISCUSSED IN DETAIL BY THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF HIR ALAL MAGANLAL & CO. VS. DY. CIT (96 ITD 113) AS UNDER IN PARAGRAPHS 29 TO 34 OF THE ORD ER:- 29. THE VIEW THAT WE HAVE TAKEN ABOVE IS SUPPORTED BY SEVERAL JUDICIAL AUTHORITIES SOME OF WHICH ARE AS FOLLOWS. IN SURJEE T SINGH CHABRA VS. UNION OF INDIA (1997) (135 TAXATION 711 (SC)), IT HAS BEEN H ELD THAT THE CUSTOMS OFFICIALS ARE NOT POLICE OFFICERS AND THE CONFESSI ON, THOUGH RETRACTED, IS AN ADMISSION AND BINDS CONFESSOR. THE HONBLE COURT H AS HELD: SINCE THE DISPUTE CONCERNS THE CONFISCATION OF TH E JEWELLERY, WHETHER AT CONVEYOR BELT OR AT THE GREEN CHANNEL, PERHAPS THE WITNESSES WERE REQUIRED TO BE CALLED. BUT IN VIEW OF CONFESSIONS M ADE BY HIM, IT BINDS HIM TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 25 AND, THEREFORE, IN THE FACTS AND CIRCUMSTANCES OF T HIS CASE THE FAILURE TO GIVE HIM THE OPPORTUNITY TO CROSS-EXAMINE THE WITNE SS IS NOT VIOLATIVE OF PRINCIPLE OF NATURAL JUSTICE. IT IS CONTENDED THA T THE PETITIONER HAD RETRACTED WITHIN SIX DAYS FROM THE CONFESSION. TH EREFORE, HE IS ENTITLED TO CROSS-EXAMINE THE PANCH WITNESSES BEFORE THE AUTHO RITY TAKES A DECISION ON PROOF OF THE OFFENCE. WE FIND NO FORCE IN THIS CONTENTION. THE CUSTOM OFFICIALS ARE NOT POLICE OFFICERS. THE CONFESSION, THOUGH RETRACTED, IS AN ADMISSION AND BINDS THE PETITIONER . SO THERE IS NO NEED TO CALL PANCH WITNESSES FOR EXAMINATION AND CROSS-EXAMINATION BY THE PETITIONER. [EMPHASIS SUPPLIED] 30. FOLLOWING THE JUDGMENT IN SURJEET SINGH CHHAB RAS CASE (SUPRA), THE MADRAS BENCH OF THE TRIBUNAL HELD IN T.S.KUMARASWAMI . AS STT. CIT (1998) 65 ITD 188, AS UNDER: IT IS WELL KNOWN THAT THE INCOME-TAX OFFICERS ARE NOT POLICE OFFICERS AND THEY DO NOT USE OR RESORT TO UNFAIR MEANS OR THIRD DEGREE METHODS IN RECORDING OATH STATEMENTS AND THEREFORE WHATEVER IS CONFESSED AND ADMITTED BEFORE THEM DURING THE COURSE OF SEARCH OP ERATIONS OR DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM THEN WE THINK SUCH STATEMENTS, ADMISSIONS AND CONFESSIONS ARE BINDING AND CANNOT BE RETRACTED, UNLESS AND UNTIL, WE REPEAT, UNLESS A ND UNTIL IT IS PROVED BY LEGALLY ACCEPTABLE EVIDENCE THAT SUCH ADM ISSION, CONFESSION OR OATH STATEMENT WAS INVOLUNTARY OR TEN DERED UNDER COERCION OR DURESS. NO SUCH CIRCUMSTANCES EXISTED OR PROVED TO HAVE EXISTED. IN SAYING SO, WE ARE SUPPORTED BY THE OBSE RVATION OF THEIR LORDSHIPS OF THE SUPREME COURT IN THE CASE OF SURJE ET SINGH CHHABRA V. UNION OF INDIA (1977) 1 SCC 508 31. IN M.K. MUHAMMAD KUNHI V. CIT (1973) 92 ITR 34 1, THE HONBLE KERALA HIGH COURT HAS EXPLAINED THE POSITION THUS: .SIMILARLY, IF THE ASSESSEE MADE A REPRESENTATIO N OR A CONCESSION ON A POINT OF LAW, THE REVENUE ACCEPTED THE SAME AND THE TRIBUNAL ALSO APPROVED OF IT, EVEN THEN IF THAT POSITION WAS WRON G IN LAW, NOTHING PRECLUDES THE TRIBUNAL FROM APPLYING THE CORRECT LA W IN ANOTHER APPEAL AGAINST THE ORDER PASSED AFTER THE REMAND. ON THE OTHER HAND, IF THE REPRESENTATION WAS ONE OF FACT , THE TRUTH OF WHICH WAS ACCEPTED BY THE REVENUE AND ON THAT BASIS SUFFERED SOME PREJUDICE T OO, THE ASSESSEE WILL NOT, AT A SUBSEQUENT STAGE OF THE SAME ASSESSMENT, BE ALLOWED TO GO BACK ON HIS EARLIER REPRESENTATION; HE IS ESTOPPED FROM DOING THAT. WE MAY HOWEVER MAKE IT CLEAR THAT THIS APPLICATION OF ESTOPPEL DOES NOT APPLY TO CASES OF SUCCESSIVE ASSESSMENT; IT APPLIES ONLY TO THE SAME REPRESENTATION OF FACT AND WILL NOT BE ALLOWED TO GO BACK ON IT AT A SUBSEQUENT STAGE OF THE SAME ASSESSMENT. SIMILARLY, EVEN ON A WRONG TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 26 DECISION ON A POINT OF LAW IF THE TRIBUNAL PASSED A N ORDER OF REMAND AND THAT ORDER HAS BECOME FINAL SINCE NO REFERENCE WAS OBTAINED TO QUESTION ITS CORRECTNESS, THEN THE DECISION IS BINDING BETWE EN THE PARTIES IN THE SAID ASSESSMENT AND NEITHER OF THEM WILL BE ALLOWED TO QUESTION IT OR REOPEN IT IN ANOTHER APPEAL BEFORE THE TRIBUNAL [EM PHASIS SUPPLIED] 32. IN V. KUNHAMBU V. CIT (1996) 219 ITR 235 (KER. ) THE HONBLE HIGH COURT HAS HELD: IN RAMESHCHANDRA & CO. V. CIT (1987) 168 ITR 375, THE BOMBAY HIGH COURT OBSERVED THAT WHERE AN ASSESSEE HAS MADE A ST ATEMENT OF FACTS, HE CAN HAVE NO GRIEVANCE IF THE TAXING AUTHORITY TA XES HIM IN ACCORDANCE WITH THAT STATEMENT. IF HE CAN HAVE NO GRIEVANCE, H E CAN FILE NO APPEAL. THEREFORE, IT IS IMPERATIVE, IF THE ASSESSEES CASE IS THAT HIS STATEMENT HAS BEEN WRONGLY RECORDED OR THAT HE MADE IT UNDER A MI STAKEN BELIEF OF FACT OR LAW, THAT HE SHOULD MAKE AN APPLICATION FOR RECT IFICATION TO THE AUTHORITY WHICH PASSED THE ORDER BASED UPON THAT STATEMENT. UNTIL RECTIFICATION IS MADE AN APPEAL IS NOT COMPETENT. WE ARE IN AGREEME NT WITH THIS OBSERVATION. IN THIS CASE, THE ASSESSMENT HAS NOT BEEN MADE BASED ON THE STATEMENT OF THE ASSESSEE. SINCE NO CASE HAS BEEN MADE OUT THAT THE STATEMENT WAS MADE UNDER A MISTAKEN BELIEF OF FACT OR LAW, AND AS HAS BEEN HELD ABOVE, THE STATEMENT BEING A VOLUNTARY ON E, THERE IS NO SCOPE FOR THE ASSESSEE TO CHALLENGE THE CORRECTNESS OF TH E ASSESSMENT AS HAS BEEN DONE IN THIS CASE. [EMPHASIS SUPPLIED]. 33. IN HOTEL KIRAN V. ASSTT. CIT (2002) 82 ITD 4 53, THE PUNE BENCH OF THE TRIBUNAL HAS HELD AS UNDER: 8. HOWEVER, THERE ARE EXCEPTIONS TO SUCH ADMISSION WHERE THE ASSESSEE CAN RETRACT FROM SUCH ADMISSION. THE FIRST EXCEPTIO N EXISTS WHERE SUCH STATEMENT IS MADE INVOLUNTARILY, I.E., OBTAINED UN DER COERCION, THREAT, DURESS, UNDUE INFLUENCE ETC. BUT THE BURDEN LIES O N THE PERSON MAKING SUCH ALLEGATIONS TO PROVE THAT STATEMENT WAS OBTAIN ED BY THE AFORESAID MEANS. THE SECOND EXCEPTION IS WHERE THE STATEMEN T HAS BEEN GIVEN UNDER SOME MISTAKEN BELIEF EITHER OF FACT OR LAW. IT IS WELL SETTLED THAT THERE CANNOT BE ESTOPPED AGAINST THE LAW. IF A PER SON IS NOT LIABLE TO TAX IN RESPECT OF ANY RECEIPT, HE CANNOT BE MADE LIABLE TO PAY TAX MERELY BECAUSE HE HAS AGREED TO PAY THE TAX IN THE STATEME NT U/S. 132. HE CAN ALWAYS RETRACT IN SUCH SITUATIONS. FOR EXAMPLE THE ASSESSEE MIGHT HAVE SOLD HIS AGRICULTURAL LAND AND NOT DECLARED ITS SAL E PROCEEDS IN HIS INCOME- TAX RETURN. IF SUCH AGRICULTURAL LAND DOES NOT FAL L WITHIN THE AMBIT OF THE WORDS CAPITAL ASSET THEN NO TAX IS PAYABLE. IF T HE ASSESSEE HAD OFFERED TO PAY TAX ON THE PROFITS ON SUCH SALE UNDER SECTIO N 132(4), IN OUR OPINION, HE CAN ALWAYS RETRACT FROM SUCH STATEMENT. SIMILAR LY, IF THE ASSESSEE CAN TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 27 SHOW THAT THE STATEMENT HAS BEEN MADE ON MISTAKEN B ELIEF OF FACTS, HE CAN RETRACT FROM THE STATEMENT IF HE CAN SHOW THAT FACTS ON THE BASIS OF ADMISSION SO MADE WERE INCORRECT. THIS IS WHAT HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF PALLANGODE RUBBER & PRODUCE CO. LTD. . 9. IN VIEW OF THE ABOVE DISCUSSIONS, WE ARE OF THE VIEW THAT ADMISSION MADE IN STATEMENT U/S. 132(4) HAS GREAT EVIDENTIARY VALUE AND IS BINDING ON A PERSON WHO MAKES IT. THEREFORE, THE ADMISSION CAN BE MADE ON THE BASIS OF SUCH ADMISSION BY USING THE SAME IN EVIDEN CE. THE LEGISLATURE WAS WELL AWARE THAT UNDER THE GENERAL LAW MERE ADMI SSION MAY NOT BE CONCLUSIVE ONE. THE INCOME-TAX ACT IS A SPECIFIC A CT AND ASSESSMENT HAS TO BE MADE ON THE BASIS OF MATERIAL GATHERED BY THE ASSESSING OFFICER. FOR THIS PURPOSE, VAST POWERS HAVE BEEN CONFERRED O N THE INCOME-TAX AUTHORITIES FOR MAKING INVESTIGATION INCLUDING THE POWERS OF SEARCH. IF IN THE COURSE OF SUCH SEARCH, THE ASSESSEE MAKES SOME ADMISSION, HE DEBARS THE AUTHORISED OFFICER FROM MAKING FURTHER I NVESTIGATION. IN VIEW OF THIS, LEGISLATURE IN ITS WISDOM HAS PROVIDED THAT SUCH STATEMENT CAN BE USED IN EVIDENCE AND THE ASSESSMENT CAN BE MADE ON THE BASIS OF SUCH STATEMENT. THE SANCTITY OF SUCH PROVISION WOULD BE LOST IF THE ASSESSEE IS ALLOWED TO CONTEND THAT NO ADDITION CAN BE MADE ON THE BASIS OF SUCH ADMISSION. HOWEVER, SUCH ADMISSION CAN BE RETRACTE D BY THE ASSESSEE ONLY IF THE CIRCUMSTANCES AS MENTIONED IN THE EARLI ER PARAGRAPHS ARE ESTABLISHED BY THE ASSESSEE TO EXIST. [EMPHASIS SUP PLIED]. 34. IN DR. S.C. GUPTA V. CIT (2001) 248 ITR 782 ( ALL.), THE HONBLE HIGH COURT HAS HELD AS UNDER: AS REGARDS THE ASSESSEES CONTENTION THAT THE STAT EMENT HAVING BEEN RETRACTED THE ASSESSING OFFICER SHOULD HAVE INDEPEN DENTLY COME TO A CONCLUSION THAT THERE WAS ADDITIONAL INCOME AS SOUG HT TO BE ASSESSED AND THAT THERE WAS NO MATERIAL TO SUPPORT THAT THERE WA S SUCH INCOME, THIS CONTENTION IN OUR VIEW IS NOT CORRECT. AS HELD BY THE SUPREME COURT IN PALLANGODE RUBBER PRODUCE CO. LTD V. STATE OF KERA LA (1973) 91 ITR 18 AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVI DENCE THOUGH IT IS NOT CONCLUSIVE. THEREFORE, A STATEMENT MADE VOLUNTARIL Y BY THE ASSESSEE COULD FORM THE BASIS OF ASSESSMENT. THE MERE FACT T HAT THE ASSESSEE RETRACTED THE STATEMENT COULD NOT MAKE THE STATEMEN T UNACCEPTABLE. THE BURDEN LAY ON THE ASSESSEE TO ESTABLISH THAT THE AD MISSION MADE IN THE STATEMENT AT THE TIME OF SURVEY WAS WRONG AND IN FA CT THERE WAS NO ADDITIONAL INCOME. THIS BURDEN DOES NOT EVEN SEEM T O HAVE BEEN ATTEMPTED TO BE DISCHARGED. SIMILARLY, P.K. PALWANKAR V. CGT ( 1979) 117 ITR 768 (MP) AND CIT V. MRS. DORIS S. LUIZ (1974) 96 ITR 646 (KER.) ON WHICH ALSO LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE ARE OF NO HELP TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 28 TO THE ASSESSEE. THE TRIBUNALS ORDER IS CONCLUDED BY FINDINGS OF FACT AND IN OUR VIEW NO QUESTION OF LAW ARISES. 22. THE RETRACTION BY SOME OF THE DEALERS HAS BEE N MADE IN 2005, WHERE AS THE ORIGINAL STATEMENT FROM THEM WAS RECORDED IN 2001. IT IS A WELL SETTLED PROPOSITION OF LAW THAT TIME GAP BETWEEN STATEMENT AND RETRACTION OF STATEMENT IS ONE OF THE IMPORTANT POINTS TO BE TAKEN INTO ACCOUNT TO DECIDE AS TO WHETHER THE STATEMENT WAS GIVEN UNDER MISTAKEN BELIEF OF EITHER FACT OR LAW. FOR THIS PROPOSITION, A GAINFUL REFERENCE CAN BE MADE TO THE DECISION OF BANGALORE BENCH OF ITAT IN THE CASE OF CARPENTERS CLASSICS (P) LTD. VS. DCIT (229 ITR (AT) 124). NONE OF THE DEALERS OR ANY OTHER PERSON FROM WHOM THE STATEMENTS WERE TAKEN BY THE EXCISE OFFICIALS HAVE STATED THAT IT WAS OBTAINED UNDER COERCION OR THREAT. THE Y HAVE ALSO NOT STATED THAT THE STATEMENTS WERE ORIGINALLY GIVEN UNDER MISCONCEPTIO N OF FACTS. NONE OF THE PARTIES HAVE BROUGHT ON RECORD ANY RELIABLE MATERIAL OR EVI DENCE TO SHOW THAT THE STATEMENT GIVEN BY THEM ORIGINALLY WAS WRONG. DURING THE COU RSE OF ARGUMENTS, THE LD COUNSEL SUBMITTED THAT ONE OF DEALERS HAVE FILED POLICE CAS E AGAINST EXCISE OFFICIALS, HOWEVER, HE DID NOT DWELL UPON THE NATURE OF COMPLAINT, NOR DID HE FURNISH ANY MATERIAL IN SUPPORT OF THE SAID SUBMISSION. HENCE, WE ARE UNABLE TO CO NSIDER THE SAID CONTENTION AND ITS EFFECT ON THE ISSUE BEFORE US. IN VIEW OF THE FORE GOING DISCUSSIONS, THE RETRACTION OF THE ORIGINAL STATEMENTS BY THE DEALERS OR ANY OTHER PER SON CANNOT BE CONSIDERED AS VALID RETRACTION AND THEY HAVE TO BE BRUSHED ASIDE. 23. IN VIEW OF THE FOREGOING DISCUSSIONS AND THE F ACTS AND MATERIALS AVAILABLE ON RECORD, WE ANSWER THE QUESTION (A) IN THE AFFIRMATI VE, I.E., ON CONSIDERATION OF MATERIAL AVAILABLE ON RECORD, SURROUNDING CIRCUMSTANCES, HUM AN CONDUCT, PREPONDERANCE OF PROBABILITIES AND NATURE OF INCRIMINATING INFORMATI ON/ EVIDENCE AVAILABLE ON RECORD WE HOLD THAT THERE ARE ENOUGH MATERIALS AND EVIDENCES TO COME TO THE CONCLUSION THAT THE ASSESSEE GROUP IS THE ACTUAL OWNER OF THE IMPUGNED THREE BANK ACCOUNTS MAINTAINED IN THE NAMES OF P.T.SUNNY, P.T.JOSE AND P.K.BABU, BABU STORES. IN OUR VIEW, SHRI JOJO JOSEPH HAS OPERATED THE THREE BANK ACCOUNTS ON BEHA LF OF THE ASSESSEE GROUP ONLY, EITHER BY HIMSELF OR THROUGH THE OTHER EMPLOYEES OF THE ASSESSEE GROUP. TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 29 24. THE SECOND QUESTION (B) FRAMED BY US IS WHETH ER THE DEPOSITS MADE IN THE IMPUGNED THREE BANK ACCOUNTS REPRESENT UNACCOUNTED SALE PROCEEDS OF THE ASSESSEE GROUP. UNDER THE PROVISIONS OF SEC. 68 AND 69 OF TH E INCOME TAX ACT, A PERSON IS LIABLE TO EXPLAIN THE NATURE AND SOURCE OF THE CASH CREDIT OR UNEXPLAINED INVESTMENTS. THUS, THE RESPONSIBILITY IS PLACED UPON THE ASSESSEE UNDE R THESE PROVISIONS AND IT IS THE DUTY OF THE ASSESSEE TO EXPLAIN THE DEPOSITS MADE IN THE THREE BANK ACCOUNTS. IN THE ABSENCE OF SATISFACTORY EXPLANATIONS, THE AGGREGATE AMOUNT OF DEPOSITS COULD BE CONSIDERED AND TAXED AS THE INCOME OF THE ASSESSEE. SINCE THE ASSESSEE HAS DISOWNED THE SAID ACCOUNTS, THE AO WAS CONSTRAINED TO DRAW C ONCLUSIONS ABOUT THE DEPOSITS FOUND IN THESE ACCOUNTS. THE CENTRAL EXCISE OFFICI ALS HAVE TAKEN A STAND THAT THESE THREE BANK ACCOUNTS HAVE BEEN UTILISED TO ENCASH TH E UNACCOUNTED SALES AMOUNTS. THE DEALERS HAVE ALSO CONFIRMED IN THE STATEMENTS THAT THEY HAVE SENT DEMAND DRAFTS TO THE BANK IN WHICH THESE THREE BANK ACCOUNTS WERE MAINTA INED, VIZ., SBI, ANGAMALY BRANCH. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE AO WAS JUSTIFIED IN HOLDING THAT THE DEPOSITS FOUND IN THE THREE BANK ACCOUNTS REPRESENT UNACCOUNTED SALE PROCEEDS OF THE ASSESSEE GROUP, INSTEAD OF ASSESSING THE ENTIRE AMO UNT OF DEPOSITS AS THE INCOME OF THE ASSESSEE GROUP. 25. THE QUESTIONS (C) AND (D) ARE REQUIRED TO BE ANSWERED TOGETHER, I.E., WHETHER TO CONSIDER THE SALE PROCEEDS AS THAT OF M/S TOLIN RUB BERS (P) LTD (OR) AS THAT OF ANY OTHER PERSON. WE HAVE ALREADY NOTED THAT THE SUBSTANTIVE ASSESSMENTS WERE MADE IN THE HANDS OF M/S TOLIN RUBBERS (P) LTD AND PROTECTIVE A SSESSMENTS WERE MADE IN THE HANDS OF OTHER THREE ASSESSEES, IN VIEW OF THE DIRECTIONS GIVEN BY THE ADDITIONAL COMMISSIONER OF INCOME TAX U/S 144A OF THE ACT. THE ADDITIONAL COMMISSIONER GAVE THE SAID DIRECTIONS, SINCE THE ASSESSEE CONTENDED BEFORE HIM THAT THE ASSESSEE M/S TOLIN RUBBERS (P) LTD DID NOT CARRY ON PRODUCTION ACTIVIT IES DURING THE RELEVANT YEARS. ACCORDINGLY, THE ADDL. CIT EXPRESSED OPINION THAT T HE PRODUCTION OF THE OTHER GROUP CONCERNS COULD HAVE BEEN UTILISED FOR INDULGING IN UNACCOUNTED SALES. UNDER THESE FACTUAL CIRCUMSTANCES, WE ARE OF THE VIEW THAT IT M AY NOT BE CORRECT TO ASSESS THE TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 30 INCOME FROM UNDISCLOSED SALES RELATING TO THE ASSES SMENT YEARS 1996-97 TO 2001-02 IN THE HANDS OF M/S TOLIN RUBBERS (P) LTD. HOWEVER, S INCE THE OTHER GROUP CONCERNS, WHICH WERE OWNED BY SHRI K.P.VARKEY, SHRI K.V.TOLIN AND SMT. ANNIE VARKEY ARE HAVING PRODUCTION FACILITIES IN THEIR RESPECTIVE NAMES, IN OUR VIEW, IT WOULD BE JUSTIFIABLE TO PRESUME THAT THE UNACCOUNTED SALES RELATING TO THE ASSESSMENT YEARS 1996-97 TO 2001- 02 BELONG TO THESE THREE PERSONS EQUALLY. 26. ACCORDINGLY, WE SET ASIDE THE ASSESSMENT OF INCOME FROM UNACCOUNTED SALES MADE IN THE HANDS OF M/S TOLIN RUBBERS (P) LTD FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 AND DIRECT THE ASSESSING OFFICER TO ASSESS THE SAID INCOME EQUALLY IN THE HANDS OF SHRI K.P.VARKEY, SHRI K.V.TOLIN AND SMT. ANNIE V ARKEY. THE ORDERS PASSED BY LD CIT(A) IN THE HANDS OF ALL THE FOUR ASSESSEES FOR T HE ASSESSMENT YEARS 1996-97 TO 2001- 02 STANDS MODIFIED ACCORDINGLY. IT IS SEEN THAT M/S TOLIN RUBBERS (P) LTD HAS CARRIED ON PRODUCTION IN THE ASSESSMENT YEAR 2002-03. HENCE W E UPHOLD THE ASSESSMENT OF INCOME FROM UNACCOUNTED SALES IN ITS HANDS IN THE A SSESSMENT YEAR 2001-02. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CI T(A) FOR THE ASSESSMENT YEAR 2002-- 03 IN THE HANDS OF M/S TOLIN RUBBERS (P) LTD. 27. IN THE RESULT, THE APPEALS FILED BY M/S TOL IN RUBBERS (P) LTD FOR THE ASSESSMENT YEARS 1996-97 TO 2001-02 ARE ALLOWED. THE APPEAL F ILED BY THE REVENUE IN THE CASE OF M/S TOLIN RUBBERS (P) LTD IS ALLOWED. ALL OTHER AP PEALS FILED BY THE REVENUE ARE PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 25-10-2012 SD/- SD/- (N.R.S.GANESAN) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 25TH OCTOBER, 2012 GJ TOLIN RUBBERS (P) LTD., LATE K.P.VARKEY, ANNIE VARKEY.& K.V.TOLIN 31 COPY TO: 1. M/S. TOLIN RUBBERS PVT. LTD., 26/A/11, M.C.ROAD, MATTOOR, KALADY-683 574. 2. LATE SHRI K.P. VARKEY, REP. BY L/HR. SHRI K.V. T OLIN, PROP. M/S.TOLIN RUBBERS (P) LTD., 26/A/111, M.C.ROAD, MATTOOR, KALADY-683 574. 3. SMT.ANNIE VARKEY, PROP. TOSHMA RUBBER PRODUCTS, MATTOOR, KALADY-683 574. 4. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-4( 2), ERNAKULAM. 5. THE DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, ALUVA. 6. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCL E-1, ALUVA. 7. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I. 8. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. 9. THE COMMISSIONER OF INCOME-TAX, KOCHI. 10. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 11. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T., COCHIN